Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- V2X Inc (VVX, Financial) reported strong third quarter results with revenue of $1.08 billion, representing an 8% growth year over year.
- The company achieved a 28% increase in adjusted EBITDA, reaching $82.7 million with a 7.6% margin.
- V2X Inc (VVX) secured approximately $5 billion in recent awards, indicating strong positioning in the marketplace.
- The company raised the low end of its 2024 revenue guidance and adjusted EPS, reflecting confidence in future performance.
- V2X Inc (VVX) demonstrated strong cash flow generation with adjusted operating cash flow of $130 million in the quarter.
Negative Points
- European revenues were down 22% in the quarter, indicating regional challenges.
- The company faces potential headwinds from program sunsets and the timing of new awards.
- Interest expense for the quarter was $27.2 million, which remains a significant cost.
- The company is experiencing a higher mix of cost-type work, which tends to be at lower margins.
- There is uncertainty regarding the impact of international dynamics and funding priorities on future performance.
Q & A Highlights
Q: With the strong contract awards, book-to-bill, and funded backlog growth, what kind of rate of organic growth do you think would be reasonable for the company to attain as we go into next year?
A: (Shawn Mural, CFO) We are in the middle of planning, but we expect to grow in 2025. We have some headwinds like program sunsets and high operational tempo in logistics support. However, we feel good about our backlog and visibility, though I can't provide specific numbers yet.
Q: Can you provide more color on the Indo-Pacific region's growth and its significance to the company?
A: (Shawn Mural, CFO) We did over $80 million in the quarter in the region, showing excellent growth. We expect continued growth due to planned exercises and strategic initiatives like the Pacific Deterrence Initiative. Our strong presence positions us well for future opportunities.
Q: Could you expand on the overseas opportunities you see, particularly in Europe and the Middle East?
A: (Jeremy Wensinger, CEO) We see expanding opportunities in Europe for assured communications and similar growth in the Middle East and Indo-Pacific. We react to evolving situations, such as those in the Middle East, and continue to support our allies in Europe, especially with the ongoing situation in Ukraine.
Q: What drove the sequential increase in EBITDA margins from the second to third quarter? Were there any one-time benefits?
A: (Shawn Mural, CFO) The increase was consistent with our expectations of being back-end weighted. We saw about $6 million in EAC improvements, driven by program deliveries and productivity improvements. Our team executed well, and we implemented a program management executive committee to share best practices.
Q: Can you discuss your expectations for leverage and interest rates as we move into 2025?
A: (Shawn Mural, CFO) Our current interest rate is around 8.1%. We are exploring options for the term loan A as we enter 2025, depending on market rates. We aim to end the year with a net leverage ratio at or below three times, consistent with our prior commitments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
