V2X, Inc. (NYSE:VVX) Q4 2023 Earnings Conference Call March 5, 2024 8:00 AM ET Company Participants Mike Smith - Vice President of Treasury, Investor Relations and Corporate Development Chuck Prow - President and Chief Executive Officer Shawn Mural - Senior Vice President and Chief Financial Officer Conference Call Participants Tobey Sommer - Truist Securities Joe Gomes - Noble Capital Markets Trevor Walsh - Citizens JMP Stephen Strackhouse - RBC Capital Markets Sahej Singh - Stifel Operator Thank you for j ...

Financial Performance - FY'23 revenue increased by 8% year-over-year to $4.0 billion[13] - Q4'23 revenue increased by 6% year-over-year to $1.0 billion[13] - FY'23 Adjusted EBITDA was $294 million[13] - Q4'23 Adjusted EBITDA was $82 million[13] - YTD adjusted operating cash flow was strong at $159 million[13] Strategic Growth & Financial Health - Backlog reached approximately $12.8 billion, providing solid topline visibility[17] - Net Leverage Ratio improved to 3.3x, driven by a $137.1 million year-over-year reduction in net debt[13, 25] - The company is targeting a net leverage ratio of ≤ 3.0x in 2024[25] Future Outlook - 2024 Revenue guidance is between $4.1 billion and $4.2 billion[27] - 2024 Adjusted EBITDA guidance is between $300 million and $315 million[27]

FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of report (Date of earliest event reported): March 5, 2024 V2X, Inc. (Exact Name of Registrant as Specified in Its Charter) | Indiana | | --- | | (State or Other Jurisdiction of Incorporation) | 001-36341 38-3924636 (Commission (IRS Employer File Number) Identification No.) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ¨ Written communications pursuant to Rule 425 under the Securitie ...

Part I [Business Overview](index=4&type=section&id=ITEM%201.%20BUSINESS) V2X, Inc. is a leading critical mission solutions provider for global defense customers, formed by the 2022 merger of Vectrus and Vertex - V2X, Inc. is a leading global critical mission solutions provider, primarily serving defense customers, with approximately **16,000 employees** and **6,200 subcontractors**[15](index=15&type=chunk) - Company formed on **July 5, 2022**, through the merger of Vectrus and Vertex Aerospace Services Holding Corp., aiming to be a leader in the federal services market[17](index=17&type=chunk)[19](index=19&type=chunk) - V2X's business strategy includes: expanding its base (strengthening core capabilities), pursuing new markets (technology-enabled, international expansion), delivering excellence (improving client relationships, operational efficiency), and enhancing culture (ethics, employee support, DE&I)[19](index=19&type=chunk) - Company provides integrated solutions across aerospace, technology, operations & logistics, and training markets[21](index=21&type=chunk) 2021-2023 Revenue by Customer (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Army | $ 1,633,525 | $ 1,342,406 | $ 1,134,849 | | Navy | 1,233,463 | 713,732 | 224,407 | | Air Force | 538,698 | 459,849 | 266,291 | | Other | 557,440 | 374,873 | 158,118 | | **Total revenue** | **$ 3,963,126** | **$ 2,890,860** | **$ 1,783,665** | - Company faces intense competition from large firms like Amentum, Leidos Holdings, SAIC, KBR, Fluor, and small businesses, based on technical qualifications, experience, and price sensitivity[28](index=28&type=chunk)[30](index=30&type=chunk) - Company's business is subject to strict regulations like Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS), and routine audits and investigations by DCAA and DCMA[35](index=35&type=chunk) 2021-2023 Revenue Percentage by Contract Type | Contract Type | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Cost-plus and cost-reimbursable | 56 % | 56 % | 71 % | | Firm-fixed-price | 41 % | 40 % | 25 % | | Time-and-materials | 3 % | 4 % | 4 % | | **Total revenue** | **100 %** | **100 %** | **100 %** | - As of December 31, 2023, the company had approximately **16,000 full-time employees** and **6,200 subcontract workers**, with about **30% of employees** covered by 46 collective bargaining agreements[46](index=46&type=chunk) - Company focuses on attracting and retaining talent through annual employee engagement surveys, DE&I initiatives (**48% of U.S. employees have military backgrounds**), and the V2X University online learning platform[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Company implements an ISO 45001-compliant health and safety management system, requires all employees to adhere to the V2X Code of Conduct, conducts annual ethics and compliance training, and is committed to combating human trafficking[56](index=56&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) [Risk Factors](index=16&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces diverse risks across operations, government regulations, debt, financial markets, and securities - Company faces business risks including difficulties in talent acquisition and retention, failure to win contracts, termination or non-renewal of existing contracts, reliance on a few large contracts, and increased market competition[72](index=72&type=chunk)[74](index=74&type=chunk)[76](index=76&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk) - Contract mix (cost-plus, fixed-price, time-and-materials) and cost control capabilities may lead to fluctuations in profitability and margins, with fixed-price contracts posing cost overrun risks[83](index=83&type=chunk)[85](index=85&type=chunk)[88](index=88&type=chunk) - Uncertainty in U.S. government defense budgets, changes in procurement policies, government shutdowns, and delays in accounts receivable collection could severely impact the company's financial performance and growth prospects[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - Reputational damage, natural disasters, global conflicts, pandemics, cyberattacks, unsafe workplaces, high-risk international operating environments, labor disputes, international compliance risks, M&A integration difficulties, joint venture risks, and subcontractor performance issues can all adversely affect business[94](index=94&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[108](index=108&type=chunk)[113](index=113&type=chunk)[116](index=116&type=chunk)[120](index=120&type=chunk) - Company is subject to strict government procurement laws and regulations (e.g., FAR, DFARS, TINA, FCA, CTIP, CAS), non-compliance could result in fines, contract termination, or debarment from government contracts[135](index=135&type=chunk)[138](index=138&type=chunk) - Government audits, investigations, and cost adjustments may adversely affect profitability and cash position; changes in DoD procurement practices (e.g., increased fixed-price contracts) could impact future contracts and margins[139](index=139&type=chunk)[143](index=143&type=chunk) - Company relies on obtaining and maintaining facility and individual security clearances, and security restrictions on classified contracts may limit investor understanding of certain business segments[146](index=146&type=chunk)[147](index=147&type=chunk) - Failure to adequately protect intellectual property, comply with data privacy regulations (e.g., GDPR, NIST 800-171), and government withholding provisions (DFARS) could adversely affect business[148](index=148&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - As of December 31, 2023, total company debt was approximately **$1.1542 billion**, primarily floating-rate debt, exposing it to interest rate increase risks and restrictive covenants in debt agreements[156](index=156&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk) - As of December 31, 2023, goodwill was approximately **$1.7 billion**, representing **53.7% of total assets**, and any impairment could negatively impact operating results[162](index=162&type=chunk) - As of December 31, 2023, total company backlog was **$12.8 billion**, with **$2.8 billion** funded, but there is no guarantee that all backlog will convert to revenue[165](index=165&type=chunk) - Company is a "controlled company" and may be exempt from certain NYSE corporate governance standards; stock price may fluctuate; currently does not plan to pay common stock dividends, and debt may restrict future dividend payment ability[169](index=169&type=chunk)[172](index=172&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Unresolved Staff Comments](index=39&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) This report discloses no unresolved staff comments - No unresolved staff comments are disclosed in this report[184](index=184&type=chunk) [Cybersecurity](index=41&type=section&id=ITEM%201C.%20CYBERSECURITY) V2X's Board oversees a NIST-aligned cybersecurity program, managing threats and incident response with CISO leadership - Company's Board of Directors, through the Audit Committee, oversees cybersecurity risk management, aligning with NIST governance requirements and cybersecurity frameworks[186](index=186&type=chunk)[192](index=192&type=chunk) - Company has established cyber incident response procedures and a team (IRT) to assess, identify, and manage cyber threats, and comply with contractual obligations[187](index=187&type=chunk)[194](index=194&type=chunk) - Technical safeguards include firewalls, intrusion prevention systems, anti-malware, and access controls, enhanced through vulnerability assessments and external audits[188](index=188&type=chunk) - Company identifies and monitors cybersecurity threats from third-party vendors and engages external experts to assess and monitor risks[189](index=189&type=chunk)[190](index=190&type=chunk) - Chief Information Security Officer (CISO) is responsible for assessing, monitoring, and managing cybersecurity risks, reporting regularly to the Audit Committee[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - Primary cybersecurity threats include phishing, business email compromise, ransomware, system and human errors, but have not significantly impacted operations or financial performance to date[196](index=196&type=chunk) [Properties](index=42&type=section&id=ITEM%202.%20PROPERTIES) V2X operates in 322 global locations, primarily leasing headquarters and operational offices in four key US states - V2X operates in **322 locations** across **51 countries**, with most contract performance at government client facilities[197](index=197&type=chunk) - Company primarily leases headquarters and operational offices in McLean, Virginia; Colorado Springs, Colorado; Madison, Mississippi; and Indianapolis, Indiana[197](index=197&type=chunk) Key Leased Property Information | Location | Square Feet (approx.) | Lease Expiration | | :--- | :--- | :--- | | McLean, Virginia | 24,400 | 2032 | | Colorado Springs, Colorado | 65,000 | 2028 | | Madison, Mississippi | 164,000 | 2030 | | Indianapolis, Indiana | 900,000 | 2026 | [Legal Proceedings](index=42&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in various legal matters, which are not expected to materially impact its financial performance - Company is involved in various investigations, lawsuits, arbitrations, claims, and enforcement actions, including government investigations and claims related to employment, contract, and environmental laws[198](index=198&type=chunk) - Company believes that, as of now, these legal matters will not have a material adverse effect on its operating results, financial condition, or cash flows[198](index=198&type=chunk) [Mine Safety Disclosures](index=42&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Mine safety disclosures are not applicable to this report - Mine safety disclosures are not applicable to this report[200](index=200&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=43&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) V2X common stock trades on the NYSE, with no common stock dividends paid to date and no equity repurchases in 2023 - V2X common stock trades on the New York Stock Exchange under the symbol **"VVX"**[3](index=3&type=chunk) - As of February 26, 2024, there were approximately **3,629 record holders** and **31.32576 million shares** of common stock outstanding[9](index=9&type=chunk)[203](index=203&type=chunk) - Company has not paid common stock dividends to date, and future dividend payments will be determined by the Board based on financial condition, earnings, capital needs, debt covenants, and legal requirements[180](index=180&type=chunk)[204](index=204&type=chunk) - Company did not repurchase any equity securities in 2023[207](index=207&type=chunk) [Selected Financial Data](index=44&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section is reserved and contains no specific financial data - The "Selected Financial Data" section in this report is reserved and contains no specific content[210](index=210&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) V2X achieved significant 2023 revenue growth, driven by merger and organic expansion, while managing debt and maintaining liquidity - V2X is a leading global critical mission solutions provider, primarily serving defense customers, operating as one business segment[215](index=215&type=chunk) 2021-2023 Key Financial Data (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenue | $ 3,963,126 | $ 2,890,860 | $ 1,783,665 | | Cost of revenue | 3,628,271 | 2,595,848 | 1,623,245 | | Selling, general and administrative expenses | 210,439 | 239,241 | 98,400 | | Operating income | 124,416 | 55,771 | 62,020 | | Loss on extinguishment of debt | (22,298) | — | — | | Interest expense, net | (122,442) | (61,879) | (7,985) | | Other expense, net | (4,194) | — | — | | (Loss) income from operations before income taxes | (24,518) | (6,108) | 54,035 | | Income tax (benefit) expense | (1,945) | 8,222 | 8,307 | | Net (loss) income | $ (22,573) | $ (14,330) | $ 45,728 | - **2023 revenue increased by 37.1% ($1.1 billion)**, with **$877.7 million** from the Vertex merger and the remainder from organic growth in existing projects[217](index=217&type=chunk)[243](index=243&type=chunk) - **2023 operating income was $124.4 million**, a **123.1% year-over-year increase**, with an operating margin of **3.1%**[218](index=218&type=chunk)[246](index=246&type=chunk) - **2023 cost of revenue increased by 39.8% ($1.0 billion)**, primarily due to the merger and increased intangible asset amortization[244](index=244&type=chunk) - **2023 selling, general and administrative expenses decreased by 12.0% ($28.8 million)**, mainly due to reduced merger-related costs incurred in 2022[245](index=245&type=chunk) - **2023 recorded a $22.3 million loss on extinguishment of debt**, and net interest expense increased by **97.9% to $122.4 million** due to increased debt post-merger[248](index=248&type=chunk)[249](index=249&type=chunk) - **2023 recorded a $1.9 million income tax benefit**, with an effective tax rate of **7.9%**[220](index=220&type=chunk)[251](index=251&type=chunk) 2022-2023 Major Contract Revenue Percentage | Contract Name | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | LOGCAP V - Kuwait Task Order | 12.0% | 16.4% | 11.8% | | LOGCAP V - Iraq Task Order | 7.5% | 9.8% | 11.7% | | K-BOSSS | —% | 0.7% | 15.8% | 2022-2023 Backlog (in millions) | (in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Funded backlog | $ 2,778 | $ 2,567 | | Unfunded backlog | 10,011 | 9,695 | | **Total backlog** | **$ 12,789** | **$ 12,262** | - **2023 total backlog increased by $0.5 billion to $12.8 billion**, with **$2.8 billion** funded backlog; **$4.2 billion** in funded orders received in 2023, an increase of **$1.6 billion** year-over-year[232](index=232&type=chunk) - Company expects to recognize approximately **76% of remaining performance obligations** as revenue in 2024 from the December 31, 2023 balance[433](index=433&type=chunk) - U.S. government fiscal and economic challenges and the political environment may impact defense budgets, but the company believes its core mission services remain a priority[233](index=233&type=chunk)[237](index=237&type=chunk) - The **Fiscal Responsibility Act (FRA) of 2023** suspended the debt ceiling until 2025 and capped defense spending for fiscal years 2024 and 2025[235](index=235&type=chunk) - Company maintains ample liquidity, with primary funding sources including operating cash flow, existing cash, and credit arrangements, expected to be sufficient for operations, capital expenditures, and debt repayment over the next 12 months[253](index=253&type=chunk)[272](index=272&type=chunk) 2021-2023 Cash Flows (in thousands) | (in thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Operating activities | $ 187,968 | $ 93,495 | $ 61,339 | | Investing activities | (22,649) | 175,958 | (12,643) | | Financing activities | (211,023) | (193,236) | (75,585) | | Foreign exchange | 2,288 | 1,337 | (3,325) | | **Net change in cash, cash equivalents and restricted cash** | **$ (43,416)** | **$ 77,554** | **$ (30,214)** | - **2023 net cash provided by operating activities was $188.0 million**, net cash used in investing activities was **$22.6 million**, and net cash used in financing activities was **$211.0 million**[265](index=265&type=chunk)[267](index=267&type=chunk)[270](index=270&type=chunk) - **2023 Days Sales Outstanding (DSO) decreased to 58 days** from 68 days in 2022[263](index=263&type=chunk) Contractual Obligations as of December 31, 2023 (in thousands) | (In thousands) | Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $ 54,341 | $ 15,489 | $ 19,478 | $ 11,309 | $ 8,065 | | Principal payments on Vertex First Lien Credit Agreement | 908,847 | 9,111 | 18,223 | 881,513 | — | | Principal payments on 2023 Credit Agreement | 245,313 | 6,250 | 23,438 | 215,625 | — | | Interest on Vertex First Lien and 2023 Credit Agreements | 475,197 | 102,787 | 200,358 | 172,052 | — | | **Total** | **$ 1,683,698** | **$ 133,637** | **$ 261,497** | **$ 1,280,499** | **$ 8,065** | - Key accounting estimates include revenue recognition, business combinations, goodwill impairment, intangible assets, and income taxes, involving significant judgment and uncertainty[275](index=275&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) V2X manages market risks from interest rate and foreign currency fluctuations, with most debt being floating-rate and partially hedged - V2X's earnings, cash flows, and financial condition are exposed to market risks from interest rate fluctuations and foreign currency exchange rate fluctuations[295](index=295&type=chunk) - As of December 31, 2023, approximately **$1.1542 billion of the company's debt was floating-rate**, with each one-percentage-point change in interest rates increasing annual cash interest expense by approximately **$8.2 million**[159](index=159&type=chunk)[296](index=296&type=chunk) - Company has entered into **$345.3 million** in interest rate swap contracts to hedge a portion of its interest rate risk, recognizing **$4.1 million** in net interest derivative gains in 2023[297](index=297&type=chunk)[490](index=490&type=chunk)[492](index=492&type=chunk) - Most of the company's business is conducted in U.S. dollars, but some contracts involve foreign currency transactions, leading to foreign exchange risk; as of December 31, 2023, the company held no foreign currency forward contracts[298](index=298&type=chunk)[494](index=494&type=chunk) [Financial Statements and Supplementary Data](index=59&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents V2X's audited consolidated financial statements and detailed notes for 2023 and 2022 [Report of Independent Registered Public Accounting Firm (PCAOB: ID 49)](index=70&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20(PCAOB:%20ID%2049)) RSM US LLP issued an unqualified opinion on financial statements but an adverse opinion on internal controls due to ITGC weaknesses - RSM US LLP issued an **unqualified opinion** on V2X, Inc.'s consolidated financial statements as of December 31, 2023[346](index=346&type=chunk) - Auditors issued an **adverse opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2023, due to a material weakness in user access for information technology general controls (ITGCs) at a Vertex Aerospace Services Holding Corp. subsidiary[314](index=314&type=chunk)[317](index=317&type=chunk)[347](index=347&type=chunk) [Report of Independent Registered Public Accounting Firm (PCAOB: ID 34)](index=73&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20(PCAOB:%20ID%2034)) Deloitte & Touche LLP issued an unqualified opinion on V2X's 2021 consolidated financial statements as the predecessor auditor - Deloitte & Touche LLP issued an **unqualified opinion** on V2X, Inc.'s consolidated financial statements as of December 31, 2021[357](index=357&type=chunk) - Deloitte & Touche LLP served as the company's auditor since **2013** and became the predecessor auditor in **2022**[360](index=360&type=chunk) [Consolidated Statements of (Loss) Income](index=74&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20(LOSS)%20INCOME) V2X reported increased revenue but a wider net loss in 2023, primarily due to debt extinguishment and higher interest expenses 2021-2023 Consolidated Statements of (Loss) Income Key Data (in thousands, except per share data) | (In thousands, except per share data) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenue | $ 3,963,126 | $ 2,890,860 | $ 1,783,665 | | Operating income | 124,416 | 55,771 | 62,020 | | Loss on extinguishment of debt | (22,298) | - | - | | Interest expense, net | (122,442) | (61,879) | (7,985) | | Net (loss) income | $ (22,573) | $ (14,330) | $ 45,728 | | Basic (Loss) earnings per share | $ (0.73) | $ (0.68) | $ 3.91 | | Diluted (Loss) earnings per share | $ (0.73) | $ (0.68) | $ 3.86 | [Consolidated Statements of Comprehensive (Loss) Income](index=75&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20(LOSS)%20INCOME) V2X recorded a net loss and comprehensive loss in 2023, influenced by foreign currency and derivative fair value changes 2021-2023 Consolidated Statements of Comprehensive (Loss) Income Key Data (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net (loss) income | $ (22,573) | $ (14,330) | $ 45,728 | | Other comprehensive income (loss), net of tax | 2,840 | 373 | (5,873) | | **Total comprehensive (loss) income** | **$ (19,733)** | **$ (13,957)** | **$ 39,855** | [Consolidated Balance Sheets](index=76&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of December 31, 2023, V2X's total assets and liabilities decreased, with a slight reduction in shareholders' equity 2022-2023 Consolidated Balance Sheets Key Data (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | 874,869 | 931,932 | | Property, plant, and equipment, net | 85,429 | 78,715 | | Goodwill | 1,656,926 | 1,653,822 | | Intangible assets, net | 407,530 | 497,951 | | Total non-current assets | 2,207,031 | 2,301,171 | | **Total Assets** | **$ 3,081,900** | **$ 3,233,103** | | **Liabilities and Shareholders' Equity** | | | | Total current liabilities | 840,201 | 783,132 | | Long-term debt, net | 1,100,269 | 1,262,811 | | Total non-current liabilities | 1,250,899 | 1,452,892 | | **Total liabilities** | **$ 2,091,100** | **$ 2,236,024** | | **Total shareholders' equity** | **$ 990,800** | **$ 997,079** | [Consolidated Statements of Cash Flows](index=77&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) In 2023, V2X generated cash from operations but used more in investing and financing activities, leading to a net cash decrease 2021-2023 Consolidated Statements of Cash Flows Key Data (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $ 187,968 | $ 93,495 | $ 61,339 | | Net cash (used in) provided by investing activities | (22,649) | 175,958 | (12,643) | | Net cash used in financing activities | (211,023) | (193,236) | (75,585) | | Exchange rate effect on cash | 2,288 | 1,337 | (3,325) | | **Net change in cash, cash equivalents and restricted cash** | **$ (43,416)** | **$ 77,554** | **$ (30,214)** | - **2023 net cash provided by operating activities was $188.0 million**, primarily from non-cash income items and sale of receivables, partially offset by net loss and working capital needs[265](index=265&type=chunk) - **2023 net cash used in investing activities was $22.6 million**, primarily for capital expenditures, partially offset by proceeds from business dispositions and joint venture distributions[267](index=267&type=chunk) - **2023 net cash used in financing activities was $211.0 million**, primarily for long-term debt repayments, debt issuance cost payments, and stock-based compensation tax withholdings, partially offset by long-term debt proceeds[270](index=270&type=chunk) [Consolidated Statements of Shareholders' Equity](index=78&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS'%20EQUITY) V2X's shareholders' equity slightly decreased in 2023, primarily due to net loss, partially offset by stock compensation 2020-2023 Consolidated Statements of Shareholders' Equity Key Data (in thousands) | (In thousands) | 2023 | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | :--- | | Common Stock Issued (Shares) | 31,192 | 30,470 | 11,738 | 11,625 | | Common Stock Issued (Amount) | $ 312 | $ 305 | $ 117 | $ 116 | | Additional Paid-in Capital | 762,324 | 748,877 | 88,116 | 82,823 | | Retained Earnings | 230,851 | 253,424 | 267,754 | 222,026 | | Accumulated Other Comprehensive Loss | (2,687) | (5,527) | (5,900) | (27) | | **Total Shareholders' Equity** | **$ 990,800** | **$ 997,079** | **$ 350,087** | **$ 304,938** | [Description of Business and Summary of Significant Accounting Policies](index=79&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20BUSINESS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) V2X, formed by the 2022 Vectrus-Vertex merger, is a defense solutions provider with revenue primarily from the U.S. government - V2X, Inc. is a critical mission solutions provider for global defense customers, formed on **July 5, 2022**, through the merger of Vectrus and Vertex[378](index=378&type=chunk)[379](index=379&type=chunk) - Company operates as one business segment, with primary revenue from the U.S. government[387](index=387&type=chunk) - Company accounts for joint ventures like HDSS, J&J, and ServCore using the equity method, with **$4.0 million** in equity method investment income in 2023[381](index=381&type=chunk)[383](index=383&type=chunk) - Revenue recognition primarily uses the input method (e.g., costs incurred relative to total estimated costs to complete) to measure progress and recognize revenue over time[389](index=389&type=chunk) - Receivables are primarily from the U.S. government, and the company believes there is no significant credit risk exposure[396](index=396&type=chunk)[444](index=444&type=chunk) - Goodwill is not amortized and is tested for impairment annually; intangible assets (e.g., contract backlogs and customer contracts) are amortized over their estimated useful lives[403](index=403&type=chunk)[405](index=405&type=chunk) - Operating leases are recognized as right-of-use assets and lease liabilities on the consolidated balance sheets[406](index=406&type=chunk) - Income taxes are accounted for using the asset and liability method, with deferred tax assets and liabilities determined by temporary differences between financial reporting and tax bases[409](index=409&type=chunk) - Derivative instruments (e.g., interest rate swaps) are recognized at fair value as assets or liabilities and designated as cash flow hedges[411](index=411&type=chunk) [Recent Accounting Standards Updates](index=86&type=section&id=NOTE%202.%20RECENT%20ACCOUNTING%20STANDARDS%20UPDATES) FASB issued new ASUs on segment reporting and income taxes, which V2X is evaluating for future financial statement impact - FASB issued **ASU No. 2023-07 (Segment Reporting)**, requiring enhanced disclosures for significant segment expenses and interim disclosures of segment profit or loss and assets[417](index=417&type=chunk) - FASB issued **ASU No. 2023-09 (Income Taxes)**, aiming to improve income tax disclosures, particularly for rate reconciliation and income taxes paid information[418](index=418&type=chunk) - Both standards are effective for fiscal years beginning after **December 15, 2023**, and **December 15, 2024**, respectively, and the company is evaluating their impact[417](index=417&type=chunk)[418](index=418&type=chunk) [Merger](index=86&type=section&id=NOTE%203.%20MERGER) The 2022 Vectrus-Vertex merger formed V2X, creating a diversified company and generating significant goodwill and intangible assets - Vectrus completed its merger with Vertex on **July 5, 2022**, forming V2X, accounted for using the acquisition method[420](index=420&type=chunk) - Merger aimed to create a larger, more diversified company to compete for more integrated business opportunities and generate revenue[421](index=421&type=chunk) - Vertex contributed **$908.4 million in revenue** and a **net loss of $39.9 million** from the merger date through December 31, 2022[422](index=422&type=chunk) - Company recognized **$39.9 million** in merger-related expenses in 2022[423](index=423&type=chunk) Merger Consideration and Asset/Liability Allocation (in thousands) | (In thousands) | Fair Value | | :--- | :--- | | Total consideration transferred | $ 633,951 | | Cash and cash equivalents | 196,993 | | Receivables | 331,300 | | Intangible assets | 480,000 | | Debt | (1,352,303) | | **Goodwill** | **1,335,231** | | **Total purchase consideration** | **$ 633,951** | - Merger generated **$1.3352 billion in goodwill**, which is not tax-deductible, and recognized **$316.0 million** in contract backlog and **$164.0 million** in customer contract intangible assets[426](index=426&type=chunk) [Revenue](index=88&type=section&id=NOTE%204.%20REVENUE) V2X's remaining performance obligations were $3.629 billion in 2023, with most expected to be recognized as revenue in 2024 2022-2023 Remaining Performance Obligations (in millions) | (In millions) | 2023 | 2022 | | :--- | :--- | :--- | | Performance Obligations | $ 3,629 | $ 2,997 | - Company expects approximately **76% of remaining performance obligations** as of December 31, 2023, to be recognized as revenue in 2024[433](index=433&type=chunk) - **2023 contract estimate adjustments had a favorable impact of $22.7 million** on operating income[247](index=247&type=chunk)[434](index=434&type=chunk) 2021-2023 Revenue by Contract Type (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Cost-plus and cost-reimbursable | $ 2,209,241 | $ 1,625,196 | $ 1,271,167 | | Firm-fixed-price | 1,626,262 | 1,159,743 | 452,112 | | Time-and-materials | 127,623 | 105,921 | 60,386 | | **Total revenue** | **$ 3,963,126** | **$ 2,890,860** | **$ 1,783,665** | 2021-2023 Revenue by Geographic Region (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | United States | $ 2,286,052 | $ 1,494,255 | $ 578,255 | | Middle East | 1,193,598 | 1,024,674 | 1,000,877 | | Asia | 264,346 | 167,629 | 61,927 | | Europe | 219,130 | 204,302 | 142,606 | | **Total revenue** | **$ 3,963,126** | **$ 2,890,860** | **$ 1,783,665** | 2021-2023 Revenue by Contract Relationship (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Prime contractor | $ 3,726,199 | $ 2,695,067 | $ 1,663,828 | | Subcontractor | 236,927 | 195,793 | 119,837 | | **Total revenue** | **$ 3,963,126** | **$ 2,890,860** | **$ 1,783,665** | 2021-2023 Revenue by Customer (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Army | $ 1,633,525 | $ 1,342,406 | $ 1,134,849 | | Navy | 1,233,463 | 713,732 | 224,407 | | Air Force | 538,698 | 459,849 | 266,291 | | Other | 557,440 | 374,873 | 158,118 | | **Total revenue** | **$ 3,963,126** | **$ 2,890,860** | **$ 1,783,665** | [Receivables](index=91&type=section&id=NOTE%205.%20RECEIVABLES) V2X's total receivables were $706.0 million in 2023, largely unbilled contract assets from the U.S. government 2022-2023 Receivables Composition (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Billed receivables | $ 109,318 | $ 227,718 | | Unbilled receivables (contract assets) | 561,862 | 487,758 | | Other | 34,815 | 13,106 | | **Total receivables** | **$ 705,995** | **$ 728,582** | - As of December 31, 2023, the vast majority of billed receivables were from the U.S. government, and the company believes there is no significant credit risk exposure[444](index=444&type=chunk) - Unbilled receivables (contract assets) represent revenue for work completed but not yet billed, with most expected to be billed in 2024[445](index=445&type=chunk) [(Loss) Earnings Per Share](index=92&type=section&id=NOTE%206.%20(LOSS)%20EARNINGS%20PER%20SHARE) V2X reported basic and diluted loss per share of $0.73 in 2023, with no dilutive instruments 2021-2023 (Loss) Earnings Per Share Calculation (in thousands, except per share data) | (In thousands, except per share data) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net (loss) income | $ (22,573) | $ (14,330) | $ 45,728 | | Weighted average common shares outstanding | 31,084 | 20,996 | 11,705 | | Diluted weighted average common shares outstanding | 31,084 | 20,996 | 11,836 | | Basic (Loss) earnings per share | $ (0.73) | $ (0.68) | $ 3.91 | | Diluted (Loss) earnings per share | $ (0.73) | $ (0.68) | $ 3.86 | - In 2023, the company had no dilutive stock options and restricted stock units[448](index=448&type=chunk)[449](index=449&type=chunk) [Property, Plant and Equipment, Net](index=92&type=section&id=NOTE%207.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) V2X's net property, plant, and equipment increased to $85.429 million in 2023, with higher depreciation expense 2022-2023 Property, Plant and Equipment, Net (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Buildings and improvements | $ 26,962 | $ 23,941 | | Machinery, equipment and vehicles | 48,009 | 42,874 | | Office furniture and equipment, computers and software | 64,504 | 44,150 | | Property, plant and equipment, gross | 139,475 | 110,965 | | Less: accumulated depreciation and amortization | (54,046) | (32,250) | | **Property, plant and equipment, net** | **$ 85,429** | **$ 78,715** | - **2023 depreciation expense was $22.408 million**, compared to **$13.5 million in 2022** and **$6.5 million in 2021**[450](index=450&type=chunk) [Goodwill and Intangible Assets](index=92&type=section&id=NOTE%208.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) V2X's goodwill remained stable at $1.6569 billion in 2023, with significant intangible asset amortization 2021-2023 Goodwill Net Carrying Value Changes (in thousands) | | Amount | | :--- | :--- | | Balance at December 31, 2021 | $ 321,734 | | Acquisition of Vertex | 1,332,088 | | Balance at December 31, 2022 | 1,653,822 | | Adjustments to preliminary purchase price allocation of Vertex and other | 3,104 | | **Balance at December 31, 2023** | **$ 1,656,926** | - No goodwill impairment occurred in **2023 or 2022**[451](index=451&type=chunk) 2022-2023 Other Identifiable Intangible Assets (in thousands) | (In thousands) | 2023 Gross Carrying Amount | 2023 Accumulated Amortization | 2023 Net Carrying Amount | 2022 Gross Carrying Amount | 2022 Accumulated Amortization | 2022 Net Carrying Amount | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Contract backlogs and recompetes | $ 393,300 | $ (133,235) | $ 260,065 | $ 393,300 | $ (56,210) | $ 337,090 | | Customer contracts | 171,200 | (23,902) | 147,298 | 171,200 | (10,748) | 160,452 | | Trade names and other | 1,260 | (1,093) | 167 | 1,260 | (851) | 409 | | **Total intangible assets** | **$ 565,760** | **$ (158,230)** | **$ 407,530** | **$ 565,760** | **$ (67,809)** | **$ 497,951** | - **2023 intangible asset amortization expense was $90.4 million**, with a weighted average amortization period of **7.1 years**[452](index=452&type=chunk) Estimated Future Annual Amortization Expense for Intangible Assets (in thousands) | (In thousands) | Amortization | | :--- | :--- | | 2024 | $ 89,316 | | 2025 | $ 88,518 | | 2026 | $ 88,048 | | 2027 | $ 18,666 | | 2028 | $ 17,120 | | After 2028 | $ 105,862 | [Composition of Certain Financial Statement Captions](index=93&type=section&id=NOTE%209.%20COMPOSITION%20OF%20CERTAIN%20FINANCIAL%20STATEMENT%20CAPTIONS) This note details the composition of various current and non-current assets and liabilities 2022-2023 Prepaid Expenses and Other Current Assets (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Prepaid expenses | $ 30,664 | $ 29,260 | | Prepaid taxes | 10,715 | 8,926 | | Other | 7,863 | 4,123 | | **Total** | **$ 49,242** | **$ 42,309** | 2022-2023 Compensation and Other Employee Benefits (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Accrued salaries and wages | $ 25,417 | $ 37,795 | | Accrued bonus | 27,135 | 23,484 | | Accrued employee benefits | 105,536 | 106,759 | | **Total** | **$ 158,088** | **$ 168,038** | 2022-2023 Other Accrued Liabilities (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Contract liabilities | $ 109,583 | $ 76,431 | | Contract and other reserves | 57,599 | 74,915 | | Current operating lease liabilities | 13,644 | 17,564 | | Workers' compensation, auto and general liability reserve | 5,717 | 2,799 | | Accrued non-payroll taxes | 3,728 | 4,145 | | Other | 23,429 | 20,684 | | **Total** | **$ 213,700** | **$ 196,538** | 2022-2023 Other Non-Current Liabilities (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Long-term contract-related reserves | $ 77,228 | $ 111,534 | | Income taxes payable | 7,894 | 9,202 | | Other | 19,054 | 12,449 | | **Total** | **$ 104,176** | **$ 133,185** | [Debt](index=94&type=section&id=NOTE%2010.%20DEBT) V2X's debt structure includes two credit agreements, with $22.3 million loss on extinguishment in 2023, while remaining covenant compliant - Following the merger on **July 5, 2022**, Vectrus's existing debt (**$50.2 million term loan** and **$40.0 million revolving credit facility**) was repaid[460](index=460&type=chunk) - On **February 28, 2023**, Vertex borrowers entered into the 2023 Credit Agreement, providing **$750.0 million** in senior secured financing, including a **$500.0 million revolving credit facility** and a **$250.0 million term loan**, used to repay existing debt[463](index=463&type=chunk) - In 2023, the company recorded a **$22.3 million loss on extinguishment of debt** due to repayment of the First Lien Incremental Term Loan and Second Lien Term Loan, and related unamortized deferred financing costs[248](index=248&type=chunk)[465](index=465&type=chunk)[473](index=473&type=chunk)[474](index=474&type=chunk)[475](index=475&type=chunk) - On **October 3, 2023**, the Vertex First Lien Credit Agreement was amended, replacing existing term loans with a new **$911.1 million term loan** and reducing the interest rate by **0.25%**[466](index=466&type=chunk) - As of December 31, 2023, the Vertex First Lien Credit Agreement had a carrying value of **$908.8 million**, with an effective interest rate of **9.51%**[469](index=469&type=chunk)[472](index=472&type=chunk) - As of December 31, 2023, there were no outstanding borrowings under the **2023 revolving credit facility**, with **$482.5 million** available[485](index=485&type=chunk) - As of December 31, 2023, the term loan portion of the 2023 Credit Agreement had a carrying value of **$245.3 million**, with an effective interest rate of **8.41%**[479](index=479&type=chunk)[486](index=486&type=chunk) - Company was in compliance with all covenants related to the First Lien Credit Agreement and the 2023 Credit Agreement as of December 31, 2023[487](index=487&type=chunk) Debt Maturity Schedule as of December 31, 2023 (in thousands) | (In thousands) | Payments due | | :--- | :--- | | 2024 | $ 15,361 | | 2025 | 20,049 | | 2026 | 21,611 | | 2027 | 21,611 | | 2028 | 1,075,528 | | **Total** | **$ 1,154,160** | [Derivative Instruments](index=98&type=section&id=NOTE%2011.%20DERIVATIVE%20INSTRUMENTS) V2X uses interest rate swaps to manage interest rate risk, recognizing $4.1 million in net derivative gains in 2023 - Company manages interest rate risk through interest rate swap contracts, designated as cash flow hedges[488](index=488&type=chunk)[489](index=489&type=chunk) - As of December 31, 2023, the notional value of the company's interest rate swap contracts was **$345.3 million**[490](index=490&type=chunk) - In 2023, the company recognized **$4.1 million in net interest derivative gains**, with **$3.5 million** of existing interest rate swap gains expected to be recognized in earnings in 2024[492](index=492&type=chunk) - As of December 31, 2023, and 2022, the company had no outstanding foreign currency forward contracts[494](index=494&type=chunk) [Leases](index=98&type=section&id=NOTE%2012.%20LEASES) V2X's operating leases for various assets resulted in $105.8 million in expenses in 2023, with a weighted average lease term of 5.0 years - V2X's operating leases primarily involve office space, apartments, vehicles, and machinery, with lease terms ranging from less than one year to ten years[495](index=495&type=chunk) 2022-2023 Lease Expense Composition (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Operating lease expense | $ 20,064 | $ 17,167 | | Variable lease expense | 348 | 568 | | Short-term lease expense | 85,345 | 82,952 | | **Total lease expense** | **$ 105,757** | **$ 100,687** | 2022-2023 Operating Lease Supplemental Balance Sheet Information (in thousands) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Right-of-use assets | $ 41,215 | $ 52,825 | | Current lease liabilities | $ 13,644 | $ 17,564 | | Long-term operating lease liabilities | 34,691 | 41,083 | | **Total operating lease liabilities** | **$ 48,335** | **$ 58,647** | - As of December 31, 2023, the weighted average remaining lease term was **5.0 years**, with a discount rate of **4.7%**[498](index=498&type=chunk) Lease Liability Maturities as of December 31, 2023 (in thousands) | (In thousands) | Payments due | | :--- | :--- | | 2024 | $ 15,489 | | 2025 | 10,610 | | 2026 | 8,868 | | 2027 | 6,940 | | 2028 | 4,369 | | After 2028 | 8,065 | | **Total minimum lease payments** | **$ 54,341** | [Income Taxes](index=100&type=section&id=NOTE%2013.%20INCOME%20TAXES) V2X recorded a $1.9 million income tax benefit in 2023, with net deferred tax liabilities and unrecognized tax benefits 2021-2023 Pre-Tax (Loss) Income Sources and Income Tax Expense Composition (in thousands) | (in thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total pre-tax (loss) income | $ (24,518) | $ (6,108) | $ 54,035 | | Total current income tax provision | 5,080 | 6,037 | 14,077 | | Total deferred income tax (benefit) provision | (7,025) | 2,185 | (5,770) | | **Total income tax (benefit) expense** | **$ (1,945)** | **$ 8,222** | **$ 8,307** | | **Effective income tax rate** | **7.9 %** | **(134.6)%** | **15.4 %** | 2021-2023 Reconciliation of Income Tax Expense to U.S. Statutory Rate | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Tax provision at U.S. statutory rate | 21.0 % | 21.0 % | 21.0 % | | State and local income tax, net of federal benefit | (7.7)% | (38.1)% | 1.1 % | | Foreign taxes | (3.6)% | (24.6)% | 0.3 % | | Uncertain tax positions | 8.2 % | 16.3 % | 4.1 % | | Return to provision true-ups | (7.3)% | 8.6 % | (0.5)% | | Foreign derived intangible income deduction | — % | 11.3 % | (7.3)% | | Non-deductible compensation expense | (12.5)% | (79.0)% | 1.6 % | | Stock-based compensation | 3.9 % | (1.5)% | (1.1)% | | Non-deductible transaction expense | — % | (59.5)% | — % | | Tax credits | 9.4 % | 12.2 % | (3.8)% | | Meals and entertainment | (2.0)% | (0.3)% | — % | | Other | (1.5)% | (1.0)% | — % | | **Effective income tax rate** | **7.9 %** | **(134.6)%** | **15.4 %** | 2022-2023 Deferred Tax Assets and Liabilities (in thousands) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Total deferred tax assets | $ 123,420 | $ 111,911 | | Total deferred tax liabilities | (135,183) | (127,724) | | **Net deferred tax liabilities** | **$ (11,763)** | **$ (15,813)** | 2021-2023 Reconciliation of Unrecognized Tax Benefits (in thousands) | (in thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Unrecognized tax benefits-January 1, | $ 8,611 | $ 9,321 | $ 7,411 | | Additions for: Current year tax positions | 517 | 373 | 2,139 | | Additions for: Prior year tax positions | 28 | 613 | 251 | | Reductions for: Lapse of statute of limitations | (2,563) | (1,696) | (480) | | **Unrecognized tax benefits-December 31,** | **$ 6,593** | **$ 8,611** | **$ 9,321** | - As of December 31, 2023, unrecognized tax benefits were **$6.6 million**, with approximately **$3.0 million** expected to decrease within the next 12 months[502](index=502&type=chunk) - Company has not recognized deferred tax liabilities for undistributed earnings of certain foreign subsidiaries, as they are considered indefinitely reinvested[504](index=504&type=chunk) [Post-Employment Benefit Plans](index=103&type=section&id=NOTE%2014.%20POST-EMPLOYMENT%20BENEFIT%20PLANS) V2X sponsors defined contribution plans and participates in multi-employer pension plans, with significant company contributions - Company sponsors two defined contribution savings plans, with company matching contributions of **$30.8 million in 2023**, **$17.4 million in 2022**, and **$8.7 million in 2021**[506](index=506&type=chunk) - Company participates in multi-employer pension plans, contributing **$12.9 million in 2023**, **$6.3 million in 2022**, and **$1.1 million in 2021**[507](index=507&type=chunk) - Company has two non-qualified deferred compensation plans, with assets and liabilities of **$3.2 million** and **$1.5 million**, respectively, as of December 31, 2023[508](index=508&type=chunk) - Company maintains the Vectrus Systems Corporation Excess Savings Plan, with employees **100% vested** at all times; accrued contributions were **$0.1 million** as of December 31, 2023[509](index=509&type=chunk) - Company also has an amended severance plan for senior executives, but no severance obligation has been accrued due to the inability to reliably estimate the likelihood and amount of benefit payments[510](index=510&type=chunk) [Commitments and Contingencies](index=104&type=section&id=NOTE%2015.%20COMMITMENTS%20AND%20CONTINGENCIES) V2X accrues for various legal and government contract claims, not expecting a material adverse financial impact - Company is involved in various investigations, lawsuits, arbitrations, claims, and enforcement actions, including government investigations and claims[511](index=511&type=chunk) - As of December 31, 2023, the company had accrued **$12.1 million** for legal proceedings and U.S. government contract claims (**$27.6 million in 2022**)[513](index=513&type=chunk) - Company believes that, based on available information, these legal or contractual claims or litigation will not have a material adverse effect on its cash flows, operating results, or financial condition[513](index=513&type=chunk) - U.S. government contracts may be terminated or suspended due to changes in government policy, priorities, or funding levels, and the company faces risks from government audits and investigations[514](index=514&type=chunk)[515](index=515&type=chunk)[516](index=516&type=chunk) [Stock-Based Compensation](index=105&type=section&id=NOTE%2016.%20STOCK-BASED%20COMPENSATION) V2X granted various equity incentives in 2023, resulting in $32.843 million in compensation costs - Company grants Non-Qualified Stock Options (NQOs), Restricted Stock Units (RSUs), Total Shareholder Return (TSR) awards, and Performance Stock Units (PSUs) to employees and directors through the **2014 Omnibus Incentive Plan**[518](index=518&type=chunk) 2021-2023 Stock-Based Compensation Costs (in thousands) | (In thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Compensation costs for equity-based awards | $ 31,456 | $ 31,897 | $ 7,261 | | Compensation costs for liability-based awards | 1,387 | 839 | 1,070 | | **Total compensation costs, pre-tax** | **$ 32,843** | **$ 32,736** | **$ 8,331** | - As of December 31, 2023, total unrecognized compensation cost was **$18.7 million**, expected to be recognized over **1.00 to 1.51 years**[520](index=520&type=chunk) 2021-2023 Non-Qualified Stock Options (NQOs) Status (in thousands of shares, except per share data) | (In thousands, except per share data) | 2023 Shares | 2023 Avg. Exercise Price | 2022 Shares | 2022 Avg. Exercise Price | 2021 Shares | 2021 Avg. Exercise Price | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Outstanding at January 1, | 42 | $ 22.86 | 59 | $ 23.19 | 74 | $ 23.37 | | Exercised | (2) | $ 20.62 | (17) | $ 24.02 | (15) | $ 24.04 | | **Outstanding and exercisable at December 31,** | **40** | **$ 22.93** | **42** | **$ 22.86** | **59** | **$ 23.19** | - On **July 5, 2022**, the company issued **1,346,089 Restricted Stock Units (RSUs)** to Vertex employees under the merger agreement[524](index=524&type=chunk) 2021-2023 Restricted Stock Units (RSUs) Activity (in thousands of shares, except per share data) | (In thousands, except per share data) | 2023 Shares | 2023 Avg. Grant Date Fair Value | 2022 Shares | 2022 Avg. Grant Date Fair Value | 2021 Shares | 2021 Avg. Grant Date Fair Value | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Outstanding at January 1, | 1,628 | $ 35.47 | 245 | $ 51.18 | 253 | $ 41.67 | | Granted | 318 | $ 40.50 | 236 | $ 35.83 | 155 | $ 56.43 | | Replacement awards | — | $ — | 1,346 | $ 33.92 | — | $ — | | Vested | (1,136) | $ 43.07 | (171) | $ 44.85 | (137) | $ 40.04 | | Forfeited or canceled | (10) | $ 42.81 | (28) | $ 44.12 | (26) | $ 48.73 | | **Outstanding at December 31,** | **800** | **$ 37.29** | **1,628** | **$ 35.47** | **245** | **$ 51.18** | - In 2023, compensation expense for Total Shareholder Return (TSR) awards was **$1.4 million**; in 2023 and 2022, the company paid **$1.5 million** and **$2.9 million**, respectively, for liability-based compensation awards[519](index=519&type=chunk)[529](index=529&type=chunk) - In 2023, the company granted two types of Performance Stock Units (PSUs) based on Total Shareholder Return and stock price targets; as of December 31, 2023, unrecognized PSU-related compensation expense was **$5.2 million**[530](index=530&type=chunk)[531](index=531&type=chunk)[532](index=532&type=chunk) [Shareholders' Equity](index=107&type=section&id=NOTE%2017.%20SHAREHOLDERS'%20EQUITY) V2X's authorized capital includes common and preferred stock, with 31.192 million common shares outstanding in 2023 - As of December 31, 2023, V2X's authorized capital included **100 million shares of common stock** and **10 million shares of preferred stock**[533](index=533&type=chunk) - As of December 31, 2023, there were **31.192 million shares of common stock** issued and outstanding, and no preferred stock[533](index=533&type=chunk) - The **2014 Omnibus Incentive Plan** authorized **3.5 million shares of common stock** for issuance, with **0.9 million shares** remaining available for future grants as of December 31, 2023[534](index=534&type=chunk) [Sale of Receivables](index=108&type=section&id=NOTE%2018.%20SALE%20OF%20RECEIVABLES) In 2023, V2X sold $200 million of U.S. government receivables, generating $72.7 million net cash and $4.0 million in fees - In 2023, the company entered into a **Master Accounts Receivable Purchase Agreement (MARPA Facility)** with MUFG Bank, Ltd. to sell certain eligible U.S. government receivables, up to a maximum of **$200.0 million**[535](index=535&type=chunk) - Company treats these transfers of receivables as sales and removes them from the balance sheet, with no recourse for U.S. government credit risk[536](index=536&type=chunk) - In 2023, the company generated **$72.7 million in net cash proceeds** from the sale of receivables and incurred **$4.0 million in purchase discount fees**[537](index=537&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=59&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) This report discloses no changes in or disagreements with accountants - No changes in or disagreements with accountants on accounting and financial disclosure are disclosed in this report[301](index=301&type=chunk) [Controls and Procedures](index=59&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) V2X's disclosure controls were ineffective in 2023 due to a material weakness in ITGCs at a Vertex subsidiary - As of December 31, 2023, company disclosure controls and procedures were deemed **ineffective** due to a material weakness in internal control over financial reporting at a Vertex subsidiary (representing approximately **25% of 2023 total revenue**)[302](index=302&type=chunk)[306](index=306&type=chunk) - Specific weakness was the subsidiary's failure to design and operate user access for information technology general controls (ITGCs) supporting its financial reporting processes[306](index=306&type=chunk) - Despite the material weakness, management believes the consolidated financial statements are fairly presented in all material respects[302](index=302&type=chunk) - Company has implemented a remediation plan to strengthen the subsidiary's risk assessment processes and ITGC design, expected to be completed by the end of fiscal year 2024[309](index=309&type=chunk) - Independent registered public accounting firm (RSM US LLP) issued an **adverse opinion** on the effectiveness of the company's internal control[307](index=307&type=chunk)[314](index=314&type=chunk) [Other Information](index=65&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) No other information is disclosed in this report - No other information is disclosed in this report[325](index=325&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=65&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This disclosure is not applicable to the report - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable to this report[326](index=326&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=65&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section's information is incorporated by reference from the 2024 Proxy Statement - This section's information is incorporated by reference from the company's **2024 Annual Meeting of Shareholders definitive proxy statement**[328](index=328&type=chunk) - Executive officer information is already listed in Part I, "Business Overview"[328](index=328&type=chunk) [Executive Compensation](index=65&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Executive compensation information is incorporated by reference from the 2024 Proxy Statement - This section's executive compensation information is incorporated by reference from the company's **2024 Annual Meeting of Shareholders definitive proxy statement**[329](index=329&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=65&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Security ownership information is incorporated by reference from the 2024 Proxy Statement - This section's information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the company's **2024 Annual Meeting of Shareholders definitive proxy statement**[330](index=330&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=65&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%20AND%20DIRECTOR%20INDEPENDENCE) Related transactions and director independence information is incorporated by reference from the 2024 Proxy Statement - This section's information regarding certain relationships and related transactions and director independence is incorporated by reference from the company's **2024 Annual Meeting of Shareholders definitive proxy statement**[331](index=331&type=chunk) [Principal Accountant Fees and Services](index=65&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Principal accountant fees and services information is incorporated by reference from the 2024 Proxy Statement - This section's information regarding principal accountant fees and services is incorporated by reference from the company's **2024 Annual Meeting of Shareholders definitive proxy statement**[332](index=332&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=66&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists all exhibits filed as part of the report, including financial statements and various agreements - This section lists exhibits filed as part of the report, including the consolidated financial statements index, merger agreement, articles of incorporation, bylaws, shareholder agreement, registration rights agreement, management services agreement, multiple credit agreements, indemnification agreements, executive employment agreements, compensation plans, equity incentive plans, non-employee director compensation description, list of subsidiaries, auditor consent letters, executive certifications, and XBRL data files[336](index=336&type=chunk)[338](index=338&type=chunk)[341](index=341&type=chunk) [Form 10-K Summary](index=109&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) No Form 10-K summary is provided in this report - No Form 10-K summary is provided in this report[540](index=540&type=chunk) [Signatures](index=110&type=section&id=SIGNATURES) The report was signed by V2X's Chief Accounting Officer, CEO, CFO, and other directors on March 5, 2024 - This report was signed by **William B. Noon, Chief Accounting Officer** of V2X, Inc., on behalf of the company[542](index=542&type=chunk) - **Charles L. Prow, President and Chief Executive Officer**, **Shawn Mural, Chief Financial Officer**, and other directors signed this report on **March 5, 2024**[543](index=543&type=chunk)

V2X, Inc. (NYSE:VVX) Q3 2023 Earnings Conference Call November 6, 2023 8:00 AM ET Company Participants Michael Smith - VP, Treasury, IR and Corporate Development Chuck Prow - President and CEO Shawn Mural - SVP and CFO Conference Call Participants Joe Gomes - Noble Capital Markets Ken Herbert - RBC Capital Markets Bert Subin - Stifel Tobey Sommer - Truist Securities Operator Thank you for joining us for V2X Third Quarter 2023 Earnings Conference Call and Webcast. Today's call is being recorded. My name is S ...

| --- | --- | --- | |-------------------------------------------------------------|-------|-------| | | | | | | | | | | | | | | | | | | | | | Third Quarter 2023 Results | | | | | | | | T R U S T E D W H E R E V E R T H E M I S S I O N L E A D S | | | | N o v e m b e r 6 , 2 0 2 3 | | | Disclaimers FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the Secu ...

V2X, Inc. (NYSE:VVX) Q2 2023 Earnings Conference Call August 8, 2023 4:30 PM ET Company Participants Michael Smith - Vice President, Treasury, Investor Relations and Corporate Development Chuck Prow - President and Chief Executive Officer Susan Lynch - Senior Vice President and Chief Financial Officer Conference Call Participants Stephen Strackhouse - RBC Capital Markets Brian Gesuale - Raymond James Tobey Sommer - Truist Securities Joseph Gomes - NOBLE Capital Markets Sahej Singh - Stifel Operator Good da ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36341 V2X, Inc. (Exact name of registrant as specified in its charter) Indiana 38-3924636 (State or other juri ...

V2X, Inc. (NYSE:VVX) Q1 2023 Results Conference Call May 9, 2023 4:30 PM ET Company Participants Mike Smith - VP, Treasury, IR and Corporate Development Chuck Prow - President and CEO Susan Lynch - SVP and CFO Conference Call Participants Joe Gomes - NOBLE Capital Jasper Bibb - Truist Securities Robert Connors - Stifel Steve Strackhouse - RBC Capital Markets Operator Thank you for joining us for the V2X First Quarter 2023 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Joann ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36341 V2X, Inc. (Exact name of registrant as specified in its charter) Indiana 38-3924636 (State or other jur ...