V2X, Inc. Q3 FY2025 earnings call

• Strong Q3 results with record revenue and adjusted EPS. Revenue up 8% YoY to $1.17 billion, adjusted EPS $1.37, adjusted EBITDA $85 million (7.3% margin).
• Completed an acquisition to access customers in the intelligence community and repurchased $10 million worth of shares.
• Achieved a 1.2x book-to-bill ratio, indicating strong demand. Secured 2 of 5 major captures, including T-6 and F-16 Iraq programs.
• Focus on data and AI to enhance readiness and drive efficiencies. Expanded training portfolio, with support for Army's Saber Junction exercise. Counter-UAS platform showing progress with expected orders from new customers.
• Over $50 billion pipeline, positioning the company for continued growth.

In the third quarter, revenue increased 8% year-over-year to $1.17 billion. Adjusted EBITDA was $85 million, representing a 7.3% margin. Year-to-date revenue was $3.261 billion, up 3% year-over-year. Adjusted EBITDA for the first 9 months was $234.6 million, with a 7.2% margin. Third quarter net bookings were $1.4 billion, and total backlog at the end of the third quarter was $11.6 billion, with funded backlog at $2.3 billion.

• Increased the midpoint of 2025 revenue guidance to $4.5 billion, adjusted EBITDA to $316 million, and adjusted EPS to $4.95.
• Lowered the midpoint of adjusted operating cash flow guidance due to potential timing delays in collections related to the government shutdown. This is a timing adjustment, not reflecting changes in business fundamentals.

• Impact of government shutdown on collections timing, potentially delaying payments and contract actions.
• Uncertainty around the T-6 award under protest, which could affect its start date and inclusion in backlog.
• Potential delays in award adjudications due to the government shutdown affecting the book-to-bill ratio.

Q: Could you give more color on the reduction in cash due to the government environment?

A: Payment has been elongated by about 7 days on average compared to the first half of the year, and we brought down the midpoint of adjusted operating cash flow guidance by about $25 million due to timing of contract items.

Q: You didn't include the T-6 award in backlog. Is this standard practice?

A: Yes, it's our policy not to include protested contracts in backlog. There is modest transition work in low single-digit millions, but the main award's work isn't in backlog.

Q: What's the opportunity for sales outside the U.S.?

A: The F-16 with Iraq is an emerging opportunity on the foreign military sales side, leveraging support for U.S. allies. Tempest product is showing strong demand in global markets.

Q: How does the government shutdown affect T-6's start date?

A: It's hard to predict as it's in the court of federal claims; we continue to monitor but can't precisely forecast the timing.

Q: What about margins in Q4?

A: There are incremental expenses in Q4, mostly due to timing of expenses, but teams have mitigated risks, and we're happy with raising the midpoint of the guidance.