V2X(VVX) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue in Q2 2020 increased by $4.5 million, a growth rate of 1.3% year-on-year, despite an estimated $22 million revenue impact from COVID-19 [36][8] - Adjusted EBITDA margin was 2%, adversely impacted by 240 basis points due to contract adjustments and COVID-19 [10][38] - Adjusted EPS was $0.24, negatively affected by $0.54 from contract adjustments and $0.14 from COVID-19 impacts [11][38] - Operating cash flow increased over 50% from the previous year, resulting in nearly zero net debt [8] Business Line Data and Key Metrics Changes - The K-BOSSS contract contributed $109 million to total revenue in Q2 2020 [37] - The backlog grew 18% year-over-year to $3.8 billion, with a pro forma backlog of $4 billion post-quarter [11][25] - Significant new business wins included a $210 million contract for base operations support at Isa Air Base and a $190 million contract for Naval Station Patuxent River, although these awards are currently under protest [20][22] Market Data and Key Metrics Changes - The company’s pipeline of new business opportunities is approaching $11 billion, with $1.1 billion in bids submitted and awaiting award [29] - Over 90% of the work performed is funded from the DoD operations and maintenance budget, which remains resilient [32][33] Company Strategy and Development Direction - The company is focused on seamless LOGCAP V transition and expanding its pipeline of opportunities while pursuing strategic M&A [14][48] - Investments are being made to enhance talent, processes, and systems to support future growth, including a modernized IT platform [18] - The company aims to expand into the converged infrastructure market, which is seen as a significant growth opportunity [34] Management's Comments on Operating Environment and Future Outlook - Management expects meaningful EPS growth in the second half of the year despite COVID-19 challenges [7] - The company anticipates a $40 million impact from COVID-19 on revenue and EPS in the second half [15][41] - Management remains confident in the company’s strong backlog and pipeline, indicating a solid position for future growth [50] Other Important Information - The company has been awarded a $529 million modification to the K-BOSSS program, extending the contract to support LOGCAP V [14] - The revised full-year revenue guidance is between $1.385 billion and $1.405 billion, reflecting an estimated $65 million impact from COVID-19 [43] Q&A Session Summary Question: Can you talk about the contract charge and its influence on future earnings? - The European contract charge was due to a disconnect between volume and cost, and it is expected to be the final charge related to this contract [52][53] Question: What is the magnitude of the opportunity from LOGCAP? - There is significant interest from other clients in using LOGCAP, with task orders being received, although they are not material for 2020 [55] Question: Are there larger contracts in the pipeline? - There are bids pending evaluation in the $1 billion to $2 billion range, with a good cadence for contract awards expected [56][57] Question: Is there a slowdown in RFPs due to COVID? - The pace of RFPs remains strong, but some awards are slipping due to COVID-19 [59][60] Question: How is the M&A pipeline looking? - The M&A pipeline has refilled, and the company is looking at several targets closely [62]