• Quarterly Revenue: $1.16 billion, an 11% increase year over year.
• Full Year Revenue: $4.3 billion, a 9% increase year over year.
• Adjusted EBITDA (Q4): $86.2 million, a 5% year over year growth.
• Adjusted EBITDA (Full Year): $310 million, a 6% year over year growth.
• Adjusted EPS (Q4): $1.33, a 9% year over year growth.
• Adjusted EPS (Full Year): $4.34, a 16% year over year growth.
• Net Debt Improvement: $210 million year over year, resulting in a 2.6 times net leverage ratio.
• Total Backlog: $12.5 billion, with a 1.2 times book to bill ratio in the quarter.
• Contract Wins: Over $5.5 billion in 2024.
• Cash Flow from Operations (Full Year): $161 million, representing 116% adjusted net income conversion.
• Cash Interest Expense (Full Year): $100.5 million, an 11% improvement year over year.
• 2025 Revenue Guidance: $4.375 to $4.5 billion, approximately 3% growth at the midpoint.
• 2025 Adjusted EBITDA Guidance: $305 to $320 million.
• 2025 Adjusted EPS Guidance: $4.45 to $4.85, representing 7% growth at midpoint.
• 2025 Cash Flow from Operations Guidance: $150 to $170 million.
• 2025 Capital Expenditures: Approximately $30 million.

• Warning! GuruFocus has detected 4 Warning Signs with VVX.

Release Date: February 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• V2X Inc (NYSE:VVX) reported record quarterly revenue, adjusted EBITDA, and cash flow for the fourth quarter of 2024.
• Revenue increased by 11% year over year to $1.16 billion in Q4, with a notable 27% growth in the Pacific region.
• The company achieved a net debt improvement of $210 million year over year, resulting in a 2.6 times net leverage ratio.
• V2X Inc (NYSE:VVX) secured contract wins totaling over $5.5 billion in 2024, setting a record for the company.
• The company announced the appointment of Roger Mason as Chief Growth Officer, enhancing its growth strategy.

Negative Points

• The completion of the KC-10 and T1A programs, which contributed approximately $80 million to 2024 revenue, poses a headwind for 2025.
• The implied EBITDA margin for 2025 is expected to be lower than in 2024 due to the loss of mature programs.
• There is uncertainty regarding the impact of potential 8% budget cuts across the Department of Defense.
• Foreign military sales are progressing slower than U.S. procurements, affecting the pace of revenue growth.
• The transition of new contracts to higher margins may take time, impacting short-term profitability.

Q & A Highlights

Q: Can you elaborate on the transition from cost-plus to fixed-price contracts and the potential benefits? A: Jeremy C. Wensinger, President and CEO, explained that V2X has successfully converted contracts to fixed-price in the past, demonstrating savings for customers. The company continually proposes performance-based contracting to improve readiness and efficiency, aligning with the current administration's focus on outcomes.

Q: How does the guidance account for potential impacts from a Continuing Resolution (CR)? A: Shawn Mural, CFO, stated that the guidance assumes business as usual, with modest impacts from a CR. Most of V2X's work is on existing contracts, which are less affected by CRs. The company expects the CR to be resolved without significant disruption.

Q: Can you provide more details on the Indo-Pacific region's growth and opportunities? A: Shawn Mural clarified that the 27% growth includes Indo-Paycom activities. The region presents opportunities through exercises and contracts, with V2X's presence and contract vehicles positioning them well for future growth.

Q: What factors contributed to the 9% revenue growth in 2024, and how does this impact 2025 expectations? A: Shawn Mural noted that the growth was predominantly from on-contract growth, which tends to convert to revenue quickly. This sets a strong foundation for 2025, with continued opportunities for on-contract growth and new business.

Q: How does V2X view potential defense budget cuts and their impact on operations? A: Jeremy C. Wensinger stated that while the company cannot predict specific budget cuts, V2X's focus on enduring missions and alignment with national security priorities positions it well to weather potential changes. The company remains cautious but optimistic about its strategic positioning.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.