VVX

• Overall Performance and Strategic Positioning

  • V2X delivered double-digit revenue growth in Q2 and the first half of 2026, driven by consistent execution, recent contract wins, and alignment to U.S. national security priorities.
  • Approximately $1 billion in post-quarter awards across modernization, global training, aerospace, and mission readiness have higher aggregate margins than the current portfolio, supporting the company's focus on profitable, margin-accretive growth.
  • The company has submitted over $8 billion in new bids that incorporate its AI capabilities, all targeting margin-accretive opportunities to improve backlog quality.
  • Total Q2 backlog was $12.7 billion, with funded backlog increasing 10% sequentially and 8% year-over-year to $2.5 billion. Trailing 12-month book-to-bill was 1.4x, with Q2 bookings at $600 million (0.5x quarterly book-to-bill, not including the $1 billion in post-quarter awards).

• Key Award Highlights

  • Modernization: Multi-year production award for carriage equipment enabling next-generation weapons for the U.S. strategic bomber fleet, transitioning from development to long-term full-rate production.
  • Global Training: Awards for UAS maintenance and operator training solutions, reflecting sustained demand for readiness-focused training.
  • Aerospace: Five-year re-compete win to continue supporting the U.S. Air Force C-12 fleet.
  • Mission Readiness: Awards to support U.S. Marine Corps assets and provide enhanced electronic security capabilities for a Middle East foreign military customer.

• AI Capability Expansion

  • Three AI platforms are currently operational across V2X's enterprise IT infrastructure, with strong internal adoption. The company is investing in employee training and expanding internal use cases to improve productivity and operational efficiency.
  • AI capabilities are embedded in customer-facing solutions focused on predictive readiness and operational efficiency, and are included in all new high-value bids to create differentiation against competitors.

• Financial and Capital Allocation Strategy

  • V2X maintains a low capital expenditure profile, averaging ~0.4% of revenue over the past three years, and generates strong durable cash flow. Net debt improved $71.4 million year-over-year, Moody's revised the company's credit outlook to positive, and management expects net leverage to fall to ~2x or below by the end of 2026.
  • Capital allocation priorities are: 1) Generate strong predictable cash flow targeting 100%+ adjusted net income conversion on average over time; 2) Maintain a low CapEx profile; 3) Strategically deploy capital for organic and inorganic margin-accretive growth. M&A targets are complementary capabilities aligned to national security priorities, including platform modernization, counter UAS, space domain awareness, and electronic warfare.

• Management increased full-year 2026 guidance for all core metrics compared to prior estimates:
  • Revenue is now guided to a range of $4.875 billion to $5.025 billion, representing approximately 10% year-over-year growth at the midpoint.
  • Adjusted EBITDA is now guided to a range of $347.5 million to $362.5 million, representing approximately 10% year-over-year growth at the midpoint.
  • Adjusted diluted EPS is now guided to a range of $5.90 to $6.30, representing 16% year-over-year growth at the midpoint.
  • Adjusted net cash from operating activities is guided to a range of $160 million to $180 million.
• Full-year 2026 guidance assumes ~49% of total revenue and ~49% of adjusted EBITDA will be generated in the first half, with ~51% of both generated in the second half, implying margin expansion in the second half of the year.
• 98% of the guided full-year 2026 revenue is already secured in backlog as of the end of Q2.
• Annual 2026 bookings are expected to produce a full-year book-to-bill ratio between 1.3x and 1.5x.
• Current customer demand signals indicate discrete national security activities that contributed $100 million in Q2 2026 will continue through the end of 2026 and into early 2027.

The transcript does not break out financial performance for separate product segments, it only reports overall company results. Overall Q2 2026 revenue was $1.257 billion, a 17% year-over-year increase. Revenue growth was driven by ramped up training and aerospace programs, and increased national security support activities, which contributed $100 million in Q2 revenue. By geography: U.S. revenue grew 26% year-over-year, Asia Pacific revenue grew 13% year-over-year, and Middle East revenue was slightly up year-over-year. Overall Q2 2026 adjusted EBITDA was $89.8 million (7.1% margin), a 9% year-over-year increase. Adjusted net income was $51.6 million, up 22% year-over-year. Adjusted diluted EPS was $1.64, up 23% year-over-year. Adjusted operating cash flow was $71.8 million, up 23% year-over-year. Year-to-date (first half 2026) total revenue was $2.511 billion, up 20% year-over-year. Year-to-date adjusted EBITDA was $175.4 million (7% margin), up 17% year-over-year. Adjusted net income was $99.7 million, up 35% year-over-year. Adjusted diluted EPS was $3.16, up 37% year-over-year.

• Geopolitical and regional market volatility: The Middle East operating environment is highly dynamic, with planned reductions in Kuwait logistics revenue (a $150 million sequential decline from the first half to the second half of 2026) baked into guidance, but unforeseen changes in conflict or customer requirements could create upside or downside surprises to regional results.
• Continuing resolution (CR) budget uncertainty: While management notes that mission-critical readiness work was largely unaffected by prior protracted CRs, unforeseen outcomes from federal budget processes could create unexpected impacts.
• Bid outcome uncertainty: While over $8 billion in AI-integrated margin-accretive bids have been submitted, bid win rates are not guaranteed, and award timing can be lumpy.
• Macro political uncertainty: Management notes that election outcomes do not change the core demand for national security readiness services, but policy shifts could create unforeseen changes to demand.

Q: The C-12 re-compete win was announced, and this year was previously noted as light for re-competes. What is the 2027 re-compete outlook, and how has high global operational tempo impacted the business?

A: Management does not discuss specific program details, but notes that V2X is currently in a "re-compete holiday", with the majority of new business investment focused on new growth not currently in the portfolio, rather than defending existing work. This focus on new growth has driven improved win rates and top-line growth. The company's diversified global portfolio allows it to quickly spin capabilities up or down to meet changing customer operational tempo requirements, and the team has delivered reliably on heightened requirements in the Middle East.

Q: What is the expected win rate for the $8 billion+ in new AI-integrated bids you have submitted, and do you see improved win odds compared to past periods?

A: V2X only submits bids for opportunities where the company already believes it has a strong competitive chance of winning. AI capabilities create meaningful differentiation for V2X, combined with deep customer intimacy and global ability to meet unique customer requirements, putting the company in a strong position to win a high share of the submitted pipeline.

Q: Can you discuss the current M&A market, how much acquisition-related spending occurred in Q2, and what drives the higher margin profile of your recent new awards?

A: V2X maintains a disciplined approach to M&A, only pursuing opportunities that align with its existing strategy to augment its national security portfolio in areas like platform modernization, counter UAS, and electronic warfare. Q2 acquisition-related spending was modest and down from prior quarters, with a solid pipeline of opportunities under review. Higher margins on new awards come from differentiation driven by AI, past performance, and proven readiness outcomes (not contract type), as customers recognize this differentiation delivers better mission outcomes and are willing to price accordingly.

Q: What is the T6 program ramp update for the second half of 2026, and what are the key assumptions behind the guidance increase?

A: The T6 program delivered $40 million in revenue in the first half of 2026, and is on track to deliver approximately $100 million in revenue in the second half, exactly as previously guided. The updated guidance assumes a large sequential decline in Kuwait revenue (from $180 million in H1 to $20-$30 million in H2), a slight decline in national security support revenue (from $200 million in H1 to ~$180 million in H2), and the $60 million incremental H2 contribution from the T6 ramp, with other core programs performing in line with original plans.