V2X Aktie

Thank you for joining us for the V2X First Quarter 2026 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Gary, and I'll be the operator for today's call. [Operator Instructions]

And now I'll pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to the V2X First Quarter 2026 Earnings Conference Call. Joining us today are Jeremy Wensinger, President and Chief Executive Officer; and Shawn Mural, Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on the Investor Relations section of our website, gov2x.com.

Please turn to Slide 2. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements.

The company assumes no obligation to update its forward-looking statements. In addition, in today's remarks, we will refer to certain non-GAAP financial measures because management believes such measures are useful to investors.

You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP on our slide presentation and in our earnings release filed with the SEC, both of which are available on the Investor Relations section of our website.

At this time, I would like to turn the call over to Jeremy.

Thank you, Mike, and good afternoon, everyone. We appreciate you all joining us today. Please turn to Slide 3. Today, we will be providing a recap of our first quarter results for 2026 and sharing more on our outlook for the year.

First, I want to acknowledge the talent of our team at V2X for their continued hard work and dedication to our company and our customers' mission success. With double-digit growth in revenue and earnings, we demonstrated how consistent strategic execution, paired with the close alignment with national security priorities results in enhanced financial performance.

The strength of our awards is further proof of the momentum underway and the continued demand for our capabilities we provide. With robust bookings of $4.1 billion in the quarter across all business areas, we achieved record backlog of $13.8 billion.

We continue to make progress on our Go Towards Tomorrow strategy, innovating across the enterprise. This in turn, strengthens our global operations and delivers differentiated outcomes for our customers who are operating in increasingly complex environments. As we advance this innovation forward strategy, we do so with the benefit of a healthy balance sheet and the flexibility to invest for growth.

Looking forward, we are confident in our position in the market and are increasing our guidance for 2026. We now expect revenue and adjusted EBITDA to increase approximately 9% year-over-year at the midpoint and adjusted diluted EPS to increase approximately 14% at the midpoint.

This is a testament to our ability in delivering enhanced value for both the customers and shareholders in the year ahead. With that, let's move to Slide 4, which summarizes the quarter's financial and operational highlights. In quarter 1, we achieved robust top line growth and delivered strong operational results across the organization.

Revenue increased 23% year-over-year to $1.25 billion, marking a record year-over-year organic growth rate for V2X. Adjusted net income for the quarter was $48.1 million, representing an increase of 53% year-over-year. Adjusted EBITDA was $85.6 million with margins of 6.8%. Meanwhile, adjusted diluted EPS was $1.53, representing a significant increase of 55% compared to the same period last year.

We believe our financial performance underscores our position as a leading provider of mission capabilities. I want to also recognize some of the key contract wins and highlights we delivered in the first quarter. We secured approximately 50 contract awards, representing approximately $4.1 billion in total awards. These awards were spread across all business areas.

We were awarded work to modernize critical components of the F/A-18 as well as integrate advanced infrared countermeasures for the KC-130J. These programs showcase our role in supporting long-term platform readiness. As it relates to global training, we captured multiple awards supporting customers across North America and Europe, reflecting both the reach of our training footprint and the demand for our capabilities.

In aerospace, we achieved full operational execution for T-6, which highlights our ability to transition large national priority programs. Additionally, we supported the Artemis II mission providing training, simulation and recovery operations. This is another example of how technical expertise supports complex, high-visibility national initiatives.

And finally, in mission readiness, we continue to support essential logistical requirements for national security customers across multiple geographic locations. These awards demonstrate the breadth and diversity of our opportunities and the ability to execute across capabilities to support our customers' most critical missions.

Moving to Slide 5. Our recent contract success is yielding record backlog, strengthening the foundation from which we are executing. As I mentioned, we delivered bookings in the quarter of approximately $4.1 billion, reflecting the strength of our portfolio and the demand for our diversified solutions.

This drove quarterly book-to-bill ratio of 3.2x and trailing 12 months book-to-bill ratio of 1.5x. As a result of increased awards, total backlog for the quarter was $13.8 billion, up from $11.1 billion at the end of quarter 4, providing strong visibility into future revenue.

And with a healthy pipeline, we remain on track to achieve 30% year-over-year increase in bid velocity in 2026. Overall, the expansion in backlog and robust pipeline and opportunities underscore the demand for our capabilities and reinforce our confidence in long-term growth outlook for the business.

Turning now to Slide 6. Last quarter, we introduced our efforts to invest in advanced capabilities and pursue best-in-class partnerships and drive innovation across the enterprise. In the first quarter, we made solid progress in executing the strategy.

In the last 6 months, we have introduced 3 artificial intelligence platforms, which are now operating on an enterprise IT infrastructure, and we are seeing a promising pace of adoption across our employee base. We are also seeing significant expansion in AI-enabled productivity, which is enhancing operational efficiency in our support functions across the organization and will drive lower cost over time.

At the customer level, the targeted investments we are making in innovation are creating new offerings to expand how we execute customer missions, enhancing our customer value proposition. One example of this strategy in action is aviation operations with our early prototype AI-enabled aerospace sustainment platform.

We are building this platform with Google, Tactile and NVIDIA products. Our goal is to capture unstructured data and turn it into predictive insights and automated decision support. We expect this in turn to improve aircraft availability, reduce delays and streamline sustainment operations.

I look forward to keeping you updated as we continue to invest in innovation to meet customers' evolving and complex requirements. With that, I'll turn the call over to Shawn for a more detailed review of the financials.

Thank you, Jeremy, and good afternoon, everyone. Please turn to Slide 7. As you've heard, we reported strong first quarter financial performance across all major metrics.

Revenue in the first quarter increased 23% to $1.254 billion. As Jeremy mentioned, this was a record organic growth rate for the company. It was driven primarily by the ramp-up of training, foreign military sales, rapid prototyping and engineering programs as well as some discrete activities to support a national security customer. This growth also reflects continued diversification of capabilities across our business, which is visible in our customer mix with approximately 21% of revenue in the first quarter coming from customers outside of the U.S. Army, Navy and Air Force.

This percentage is up from approximately 13% in the prior year period, reflecting expansion with national security customers. Adjusted EBITDA in the quarter was $85.6 million, increasing 28% from the same period in the prior year. Adjusted EBITDA margin was 6.8%, improving approximately 20 basis points year-over-year. The increase was driven by volume and mix changes. Interest expense in the first quarter was $18.1 million.

Cash interest expense was $16.5 million. Net income for the quarter was $18.9 million. Adjusted net income was $48.1 million, up 53% year-over-year. First quarter diluted EPS was $0.60 based on 31.5 million weighted average shares. Adjusted diluted EPS in the quarter increased approximately 55% year-over-year to $1.53.

Adjusted operating cash flow improved significantly year-over-year and was a $22.1 million use in the quarter. This performance reflects our solid cash collections and focus on enhancing quarterly cadence. Based on our progress to date, we expect our cash flow performance in the first half of 2026 to track more favorable relative to our historical profile.

Please turn to Slide 8. From a liquidity perspective, we are operating from a position of strength with approximately $200 million of cash on the balance sheet and a $500 million revolver that had a 0 balance at the end of the quarter.

Additionally, we expect another year of solid operating cash flow generation, which we anticipate will drive our net leverage ratio to less than 2x by the end of 2026. Our ongoing progress on this front is providing substantial flexibility and optionality to deploy capital for value creation.

We have established clear criteria as we actively evaluate deploying capital to invest for growth, whether organically or through M&A. This includes investments that accelerate our innovation strategy, expand our capabilities, provide access to incremental growth and enhance our overall margin profile.

We will continue to be disciplined in this regard with a focus on investing in growth opportunities that drive enhanced value for our customers and shareholders.

Please turn to Slide 9. Overall, our strategy is yielding positive results as demonstrated by our strong financial performance this quarter. We believe the combination of our global reach, proximity to mission, national security priorities and diverse capabilities position us well for the future.

Given our momentum in the first quarter and current trends, we are increasing our guidance ranges for 2026. Revenue is now expected to be between $4.825 billion and $4.975 billion. Adjusted EBITDA is expected to be between $345 million and $360 million. Adjusted diluted earnings per share is expected to be between $5.75 and $6.15. Adjusted net cash from operations is expected to be between $160 million and $180 million.

Overall, we are pleased with our performance across the business this quarter as our team continues to bring the best of V2X to meet our customers' critical mission requirements. Looking ahead, we believe this sets us up well for the rest of 2026.

With that, I'd like to turn the call back to Jeremy for some closing remarks.

Thanks, Shawn. As summarized on Slide 10, our fiscal year 2026 is off to a really strong start. We continue to accelerate our position as a leading mission capability provider.

Before we begin the Q&A, I'd like to recognize our more than 16,000 employees around the globe for their unwavering commitment to our company, each other and the customers we serve. They come to work day in and day out, focused on success of our customer, and it does not go unnoticed. Indeed, it's because of them that we are prepared for today to take on the missions of tomorrow. With that, I'll open it up for questions.

[Operator Instructions] Our first question today is from Andre Madrid with BTIG.

Looking across the scope of your business, the recent announcement of troops out of Germany, 5,000 troops there. I saw something in the Q about potential work scope change in Kuwait. I mean, what are the puts and takes that we should be looking out for across the regions right now?

It's a really good question. I think in Europe, I think what we do in terms of the missions we support are maybe not necessarily at risk because of the programs we operate. And so when I look at Europe, I look at COBRA DANE, I look at Ascension Island, I look at Thule, Greenland. I think we are well positioned with the missions we support. When I think about Kuwait, I think that is one that's going to be a TBD, but I don't see us changing our posture in the Middle East, at least that's not what we're hearing.

So I see us in a very good position in the Middle East. So when I look at the macro side of it, it really looks like we are well positioned because of the contracts we have, the work we do and the support we provide. And so when I think about the overall posture of the company, I think we're in a really, really good position, both in Europe and in the Middle East to support our customer long term.

Andre, I'll just amplify because you mentioned we did in our Q, have a disclosure of a subsequent event to the quarter relative to our Kuwait task order. And let me frame that a little bit for you for everybody else. So on Kuwait, we have about $500 million in backlog.

Our guide assumes that we continue at the levels that we performed at in the first quarter. So exactly to Jeremy's point, we're continuing to see demand signals. We're obviously working with our customer consistently on what that looks like, but we expect to be in the region and executing.

And so we did want to make sure that we brought that to everyone's attention. But we -- our guide and everything that we're hearing assumes that we'll be continuing to support our customers' missions.

Got it. Got it. No, that's really helpful. And I guess the guide increase, is all of that on the back of the new work won? Or is that a mix of some of the programs that you had previously been awarded and are just accelerating ahead of expectations?

I think it's a little bit of both. I think, one, we're getting T-6 stood up, and that's going to contribute, obviously. And then we had some announcements around a job in the Middle East and that will accelerate as well.

But again, I'm so proud of the team's ability to capture wins and capture work and very happy with our ability to support our customer. And on the back half of the year, we'll obviously accelerate based on those contract wins.

I guess just if I could just double-click real quick on the T-6. Is the $140 million to $160 million range still appropriate? Or should we assume maybe closer to $160 million now given the raise of the guide?

Yes. So you should think that's a little bit higher than the $160 million. We're seeing some very good -- the team did a wonderful job transitioning that in the first quarter. And so there's a little bit higher OPTEMPO that we're assuming as we're getting in working through everything.

We said there'd be an inherent lag in when we would execute and really get to a full run rate that's going. The team is doing a wonderful job. And so we're closer to the $175 million to $180 million type of number for the year on that program, Andre.

I mean, Andre, the team went IOC in Q1. And I could not be prouder of the team. They have done an outstanding job standing that program up. And program execution on that -- with that team and what they're doing with that customer, I couldn't be prouder of them.

The next question is from Joe Gomes with NOBLE Capital.

Congrats on the quarter. So we'll go from the Middle East to INDOPACOM. The Asia revenues were pretty flat year-over-year. Just wondering what you're expecting there for the rest of the year? Are you seeing any interest maybe exercise? I know normally, they're odd year, but just a little more color on what's going on in the INDOPACOM region.

It's a great question. I think with the budget that we're seeing, I think we are seeing the fact that all the work that the team has done in INDOPACOM to help our customer understand where they might want to help the mission is paying off.

I'm very proud of the team work with our customer to understand the priorities that we need to have in the INDOPACOM region. And I think, again, I say this all the time, presence is everything. I think the fact that we have presence, the fact that we understand what the mission requirements are, the fact that we're working shoulder to shoulder with the customer and helping them understand where -- if they have budget, how can we help them, I think it's paying off. So I'm excited about the INDOPACOM region. But again, I think it comes down to and I think our team being there means everything.

Okay. Great. And then just on the -- one of your answers to the last question, you said the back half should accelerate. I was just looking for a little clarity on that.

Last quarter, you're saying that this year should be more kind of like a 50-50 year first half versus second half. Are you changing that to more of the historic where it was 40-60, 45-55? Or were you talking about something different?

No, you're exactly right, Joe. We're going to be about 50-50 first half, second half from a revenue standpoint. You saw some of that play out with the strength in Q1. And so we're standing by what we said previously, same type of profile this year, which admittedly, as you rightly point out, is a little bit different than what we've seen historically.

Okay. Great. And one last one for me. SG&A expenses were a little bit higher than I think consensus and what we were looking for. Is there anything unusual in there?

Yes. Great point. Yes, we had some nonrecurring costs related to potential growth opportunities that the business undertook in the first quarter. And so that's why you saw a spike in the SG&A there.

The next question is from Peter Arment with Baird.

Nice results. Maybe just to circle back on kind of the comments you were talking about just kind of either whether it was INDOPACOM or Middle East, however you want to frame it up. But what's the best way to think about when we see an operational tempo increase while we see by the U.S. military, how quickly is there much of a historical lag effect of when you start seeing it impacted on your operations? Just curious on any insight because everyone obviously would be thinking that you would see an uptick in Middle East operation.

No, it's a really good question, and I appreciate you asking it. I think Steve Shapiro, who has our Mission Support business and our team in India who obviously have a role there as well. They do a really good job of reacting and responding real time.

I think there is a bit of a lag, but not as much as you think. I mean, when I think about the fact that we have people helping the Air Force in Israel, that was days. It wasn't months, and it wasn't weeks. I mean they're there and they're standing that up today.

When I think about what they did in India, the ability to get assets on the ground and deliver capability, that was weeks. So I'm very proud of the team's ability to respond quickly. We are very responsive to the customer. I like to think of us as scrappy because we are very capable of responding on a very quick basis. And I think the team responds very well to those requirements.

Got it. And then just a quick one, Shawn, on time and materials as a contract mix was up quite a bit this quarter. Was this just a one-off? Or is this something that's just a contract mix changing and we'll see more of this going forward?

Yes. In the prepared remarks, Peter, you would have heard me mention a discrete national security customer that we were supporting. And that activity set is time and materials. And so that's what that changes.

Got it. Is it something that repeats? Or is it just -- can you give any color on that? I appreciate it.

Yes, yes. There is -- so we are -- as part of the increase in our guide, Peter, this activity set will continue throughout the year. And so when we think about the raise that we did $150 million at the midpoint, about $70 million to $80 million of that is associated with this activity.

Important to note, it was contemplated when we put the guide out. So we had some of that already assumed. There's been an extension and continuation of those things. And so that's how to think about it based on everything that we know today.

What we've reflected in the guide is what we are under contract to perform. And so we'll continue to do those things and see how we can support our customers going forward to execute their mission.

Peter, what Shawn just said was being at the right -- being with the right contract vehicles and having proximity is everything. And executing to the strategy that we have put in place is what you're seeing.

The next question is from Tobey Sommer with Truist.

From a broad perspective, what's the duration of your book-to-bill in terms of number of years? As that oscillates, sometimes it's useful to add that context to be able to utilize that kind of figure for modeling.

Yes. So if you think about our backlog, typically, it's 5 to 7 years that we get out of contract durations. Obviously, in the quarter, we booked a large award in T-6.

That will be for 10 years. So that's a little bit longer that you're seeing go into the backlog for that discrete activity in Q1, Tobey. But on average, typically, it's 5 to 7 years.

Okay. The uptick in the quarter, like you said for guidance, $70 million, $80 million for the national security customer. You said that's expected to continue. How would you describe the sources of the remaining portion?

Yes. Great. So let me give you the walk from the midpoint prior. There's between $40 million and $50 million for additional support in the Middle East. The national security activities I mentioned is about $80 million and then T-6 is another, call it, $20 million to $25 million in there. So that bridges you to the midpoint of the new guide, those 3 kind of activities that we're performing.

Great. And then how big were the professional fees in 1Q so we can try to model accurately in 2Q? Or do those expenses continue into 2Q?

Yes, there'll be a little bit here in the quarter. You should think that it's about $12 million in the first quarter.

And has the -- have the growth opportunities sort of come and gone at this point? Or are those still out there as prospective potential?

Yes. So we evaluate a lot of different things, including -- and I think I said in the prepared remarks, both organic and inorganic activities. We are still pursuing a number of investments, both in ourselves as well as potential organic activities. And so that's what you see show up there. When we have something else to announce, we'll announce it.

But we're very focused on growth and delivering returns and value for our shareholders. And that's part of why we double-clicked a little bit on our capital allocation strategy this quarter as we went through things, Tobey. And so we'll continue to keep everyone updated as things progress.

Okay. And if we look at your -- last one for me. We looked at your customers, Army, Navy, the other category is that -- that was up 105% year-over-year. Is that primarily driven by the national security customer? Or are there any other customers to kind of highlight as helping to drive that growth?

Yes. It's mostly that national security customer.

The next question is from Ken Herbert with RBC Capital.

This is Steve Strackhouse on for Ken. Really nice growth in the quarter. I was hoping to maybe double-click on the bookings in the quarter. Can you discuss how much of an award the T-6 contributed to it and/or maybe what the book-to-bill would have been if we kind of normalize without that award?

Yes. So the T-6 was $3.3 billion in the quarter.

Okay. Great. And then maybe just 2 quick questions. In terms of revenue visibility for the full year, you guys had previously talked about, I think, 85% revenue visibility for '26. I'm assuming with all the strong bookings in the quarter, there's maybe a little bit of upside to that, that you may see maybe beyond 90%. Can you kind of level set us there?

Yes. So in terms of the revenue that is in backlog today, it's about 94% that we have visibility into and that we are under contract to perform. So as we go through the year, that will continue to progress, obviously, with the strength in the bookings in the quarter, no surprise in terms of the notable uptick from where we began the year and feeling really good.

Jeremy mentioned a number of the things in his prepared remarks. We wanted to speak to the breadth and depth of the awards that we got, approximately 50 different awards covering everything in the portfolio. So that really speaks to the strength and the demand signals we're seeing from the broad customer base and the capabilities we're doing.

Yes. And I would -- this is Jeremy. I just highlight that bookings are interesting in the quarter, but TTM is where you need to earn your calories. And that's how we look at the business given the episodic nature of how awards come in.

And so that's why I'm so proud of the team. I mean, in the quarter, great. But on a TTM basis, for us to think about having something in the 1.4 to 1.5 range for the year, that's outstanding.

Sounds good. And maybe last one for me. I can appreciate the T-6 creates a bit of a margin overhang to kind of start the year. But with the 50 contract awards, can you maybe talk about the long-term margin opportunity within the business, maybe as you kind of get out into maybe I hate to say '27 already, but could we be thinking about mid-7% adjusted EBITDA margins?

Yes. Well -- so it's early in '26. We'll talk to you towards the back half of this year. One of the things to keep in mind, we've got a lot of contracts that are in the early stages of start-up. And so as we go through those things, margins tend to mature in the business. And so we don't expect them to peak early on.

We build that in, and that's specifically in our aero -- in our aero business as well as in our modernization and sustainment business. Those things tend to mature. So we'll talk about '27 at another time, but we're feeling very good about where we're positioned to deliver margin expansion in the future across the business.

The next question is from Trevor Walsh with Citizens.

Jeremy, you talked a little bit about some of the AI opportunities you guys are doing from a -- I think a case study was aviation operations call out, but I think there's other use cases or things that you guys can handle.

Can you -- and then obviously, a lot of great partnerships that you've announced in that effort as well. Do you have, I guess, line of sight on specific opportunities with customers for some of these AI-related things that you're working on specifically and then that opportunity to maybe get duplicated out?

I guess talk to us about how that looks from just a pipeline. Are there other discrete things you're chasing? Or is this more like kind of build it, we think they're going to come type of approach?

No, it's a really good question. No, we've partnered with some of the best in the industry, and I'm thrilled to have them as partners. They are core to some of the bids we have on the street today. They're also core to some of the things we're doing internally.

When I look at the adoption rate of the AI tools internally and the efficiencies we're getting out of that, it is just outstanding. When I look at the -- I was in Orlando for almost 2 months, bidding a job. And the team did an outstanding job of putting both our relationship with Google, our relationship with Amazon and NVIDIA in that bid to create a differentiated solution for our customers.

And the customer is going to benefit. That's the part that I'm most excited about. They're just going to benefit from this in the long run. And I think these relationships are enduring. And I look at the team and their ability to put us in a position to win.

This is not vaporware. This is really us putting our shoulder behind it and making sure that we're delivering this capability and the customer -- I think they're going to see the value of that because I'm seeing the value internally.

We are doing this -- it's one of those we are doing what we said we would do because I'm doing it internally. So I'm very excited about this. I'm excited about the prospects for our customer and their mission. And I think this is going to be the new norm for V2X.

Great. That's terrific color. I appreciate it. Maybe just one quick follow-up. You called out COBRA DANE earlier from one of the first questions. There was, I think, some commentary from Space Force about that getting included into an RFI that just modernization efforts for ground-based radar.

So just curious if that creates any risk at all around that or if you -- or if whatever kind of happens as far as COBRA DANE getting upgraded and modernized, you guys will be kind of in that party no matter kind of what's kind of the outcome is.

Well, as you know, we're part of the Golden Shield. So I think part of that is us being in a position to help the customer do that. And so -- I'm sorry, Golden Dome, excuse me. I think the part of us being part of that is location. We're on location. We're with them.

We're helping them. And so I don't see that as a risk. I see that as an opportunity personally to help the government put in the Golden Dome that they've said they would like to do. And I don't think there's anybody better than someone who's at the location to help support that.

The next question is from John Godyn with Citi.

This is Jeremy Jason on for John. You guys were just literally just talking about Golden Dome. I kind of wanted to ask, we recently got a request for $1.5 trillion budget. So I just kind of want to get your sense of what opportunities you see from this?

And what are you most excited for? And then as a follow-up, I kind of want to get a sense of does this outlook sort of change with a possible blue wave?

It's -- I can't answer the question on the blue wave, but I can tell you that the budget is something that we've looked at carefully. We have been helping the customer understand where we can support them in terms of modernizing and supporting their mission. We're on the ground. We're with them every day.

And I think that has given them enough insight to understand where -- if we were to modernize certain things like COBRA DANE, COBRA KING, you pick it. I think there are things that we've been able to provide them that say, hey, here's where we might think about helping you. And they've been very receptive.

And I'm excited about the budget. I think we're well positioned in the budget because modernization and sustainment is exactly what we do. We are -- that is exactly who we are.

That's awesome. That's good to hear. And as one final question, just kind of want to get your outlook on possible M&A activity considering that you guys have such a clear line of sight on leverage.

I have been very clear about this, which is we are very disciplined in how we look at how we deploy capital. Everything we do is going to be with a mindset on shareholder value. So as I look at our balance sheet, yes, we have optionality.

As I look at our balance sheet, it is something that is top of mind in terms of how we think about creating shareholder value. But we will be very, very disciplined in how we think about this going forward.

The next question is from Greg Parrish with Morgan Stanley.

Great to be on the call here with you. Congrats on the strong quarter. I want to ask the Trump administration put out an executive order last week on maximizing fixed price contracts. There's some carve-outs. It's kind of complex logistically to get some of these converted, and I suppose we'll see. But maybe can you talk about the puts and takes impact to you, obviously, maybe potentially opportunity on margin. But do you actually see contracts being converted due to this? Maybe just help us.

Thank you for the question because we've been talking to the government about this for several years. We welcome the opportunity to do fixed price work. I think we are in a market that should welcome fixed price work.

I think we can create a lot of value for our customer and save them money. And so we welcome it, and we have continuously talked to them about this. I think the executive order was perfect for the sustainment and modernization market.

But again, we'll see how it manifests itself. And so my comments to the administration to push in this direction because I think it is a perfect opportunity for them not only to save money but increase the value for the missions that we support and allow us to create the innovation that we do every day and give them better optionality as they move downstream.

Okay. Fantastic. That's very helpful. And then I wanted to maybe unpack the strength in the quarter a little bit more, particularly the U.S. business, up 40% year-over-year, a little over $800 million in revenue. Can you help contextualize how much of that was work on Operation Epic Fury?

Epic Fury, I'd be guessing, to be honest with you, associated with Epic Fury. I can tell you the strength that you saw in the quarter was domestic. So U.S.-based, obviously, as you point out, where the growth is, and that's largely supporting our national security customer that I mentioned earlier. In terms of the other regions, you saw a couple of puts and takes here and there.

But obviously, in the U.S. now -- we also had the ramp when I think year-over-year, we had the ramp of the F-16 ALCT work. We had the ramp in the war fighter training readiness support work as well. So those things all contributed to the strength in the quarter, pretty much consistent with what we expected when we started the year.

The next question is from Jon Siegmann with Stifel.

This is actually Sebastian on the line for Jon today. Congrats on the strong quarter. Sorry if I missed this, but can you maybe just flag some of your rapid prototyping capabilities you're most excited about and how you kind of envision some of your recent tech partnerships, augmenting those capabilities on the ATSP-5?

I think one of the things that we do very well is take concept to delivery in a very short time frame. These are not programs of record. They're programs of need. And I think the team does very well with that.

And I'm very proud of the fact that our engineers are able to turn something from a concept to fruition in a very short time period. And I think it benefits our customers immensely, the fact that we are not -- we're a very scrappy company, and the team does exceptionally well at that.

And I'm very proud of what they've been able to deliver, both in terms of concept, but more importantly, in terms of actually fielded systems that are delivering outcomes on a daily basis. And if you ever want to go to [indiscernible], it's a remarkable thing to watch.

Got it. That's very helpful. And then just one more quick one for me, kind of circling back on the budget requests, specifically around C-UAS. Can you maybe -- I know it's early days, but can you maybe just speak to your outlook for Tempest over the next sort of 1 to 3 years or so?

Yes, Sebastian, it would be speculation a bit, obviously, and you just heard Jeremy talk about the capabilities that we have to respond to customers' needs in a very compressed timetable. So we think that, that is a family of systems that will deliver very unique capability deployed from concept to fielded system very, very quickly.

We've seen excellent growth in that part of the portfolio with its offerings. But in terms of what does this look like, we think these are franchise-type programs and capabilities that we will deliver to multiple customers, right, as we think about the entirety that is a counter-UAS system and family of systems. Jeremy, anything else to?

No, I would agree. I mean I think it has a global reach. We'll see. We're trying not to get ahead of our skis here. But when I look at what we're doing today and where it would be applicable to other theaters, it's compelling. And so we're just trying to take one step at a time.

This concludes our question-and-answer session. I would like to turn the conference back over to Jeremy Wensinger for any closing remarks.

Thank you so much for joining us. Great first quarter. I appreciate you guys taking interest in us. So thank you for the questions. But more importantly, thank you to all of our employees, all 16,000 of them that care for each other every day. And so with that, I'll turn it back to the operator.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Thank you for joining us for the V2X Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Gary, and I'll be the operator for today's call. [Operator Instructions].

And now I'll pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to the V2X Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us today are Jeremy Wensinger, President and Chief Executive Officer; and Shawn Mural. Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on the Investor Relations section of our website, gov2x.com.

Please turn to Slide 2. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. The company assumes no obligation to update its forward-looking statements.

In addition, in today's remarks, we will refer to certain non-GAAP financial measures because management believes such measures are useful to investors. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP on our slide presentation and in our earnings release filed with the SEC, both of which are available on the Investor Relations section of our website.

At this time, I would like to turn the call over to Jeremy.

Thank you, Mike, and good afternoon, everyone. Thank you for joining us today.

Please turn to Slide 3. Today, we'll be providing a recap of our fourth quarter and full year financials for 2025. We will also share more on our positioning and expectations for 2026. I'm pleased with the team's execution and our financial performance, which underscores the strength of our strategy and alignment with national security priorities for readiness and modernization. Looking to the future, we are focused on leading with innovation. We are continuing to prioritize investments and expanded partnerships to deliver innovative solutions that anticipate and fulfill our customer requirements. These growth priorities are further supported by the strength of our capital structure.

We continue to see momentum across the business coming through contract wins in our key growth areas, and we are encouraged by the ongoing demand for our mission solutions. As we continue to execute our strategy and innovate the base, we are doing so from a strong position. Our focus on cash generation has yielded positive results. We have a strong capital structure and the flexibility to strategically deploy capital. We believe V2X is well positioned to continue delivering enhanced value for both customers and shareholders in 2026 as supported by the financial outlook we provided today.

With that, let's turn to Slide 4. We with more detail around the fourth quarter and full year 2025 results and the progress we've made. We reported solid top line growth and strong operating performance. In the fourth quarter, we drove record quarterly revenue, adjusted EBITDA and adjusted cash flow. This is a testament to our commitment to generate value. Revenue increased 5% year-over-year to a record $1.22 billion. For the full year, revenue grew 4% to $4.48 billion, hitting the upper end of our 2025 guidance range. Adjusted EBITDA was $88.7 million for the quarter, a record for the company. and exceeding our expectations, we delivered a full year adjusted EBITDA of $323.3 million with a margin of 7.2%.

Adjusted net income was $49.3 million and adjusted EPS was $1.56, both representing double-digit year-over-year growth. Adjusted net income was $166.8 million for the full year, representing a 20% increase year-over-year. Adjusted diluted EPS was $5.24 for 2025 and increasing 21% year-over-year. Our ongoing emphasis on reducing debt and generating cash allowed us to improve our net debt by $116 million compared to last year. As a result, our net leverage ratio now stands at 2.2x. Shawn will share more of our financials and our outlook later in the presentation.

Turning to Slide 5. The progress we have made this year exemplifies how our readiness enabled solutions continue to support our customers' evolving requirements and create tailwinds for continued growth. We have won a number of recent contracts across key growth areas, reflecting both the depth of our customer relationships and our ability to deliver at scale complex high-consequence missions. In 2025, we delivered 2 contract wins valued at more than $1 billion each and 10 awards each exceeding $100 million. In supporting mission readiness, the successful T6 aircraft award represents approximately $4.3 billion and underscores customer confidence in our execution and industry-leading readiness rates. Similarly, the F-16 modernization and services award reflects our ability to support fleet readiness through modernization, sustainment, integrated support and capabilities that remain essential to our customers' mission priorities.

We are also seeing continued traction in training and services. The more than $100 million General Motors training award demonstrates how our core competency translates effectively across both defense and commercial environments. In advanced capabilities, the MDA Shield IDIQ award positions us to extend our space domain awareness and emerging missile defense priorities. The advanced technology support program, IDIQ, reflects our growing role in rapid development and fielding of emerging technologies, an area where speed, integration and trust better deeply. For national security programs are classified awards across cyber operations and systems reinforce the relevance of our capabilities in highly sensitive mission-critical environments.

Looking ahead, our qualified pipeline stands at more than $60 billion, reflecting scale of opportunities and demand for our offerings. We talked through 2025 about an increase of 50% in bid velocity, and that's exactly what we did. Our continued investment in people, process and technology have allowed us to pursue expanded opportunities. In 2026, we are targeting an additional 30% increase as we further leverage investments to capture larger and more complex programs. We are confident in our momentum exiting 2025 and our ability to carry it forward. We are aligned with well-funded priorities, have secured long duration programs and are positioned with customers who value proven execution.

Before we move on, I want to note that this slide really represents a company that's winning. V2X excels in mission-critical work with long-term customers and areas aligned with national security priorities. As we look ahead, we believe this foundation positions V2X well for continued growth.

Turning to Slide 6. I'd like to discuss something that we are very excited about and the transformation it represents. We are continuing to build our technology first foundation, including targeted investment and best-in-class partnerships. These efforts are driving innovation across our base and improving outcomes for our customers.

Let me walk through how we think about this. Our investments are focused on high-growth opportunities where technology can accelerate modernization and strengthen our technical depth for customers. These investments are designed to use data to move us faster from concept to deployment while remaining tightly aligned with mission needs. Second, we are partnering with the best. We recognize that innovation at scale requires access to world-class platforms and capabilities. That's why we've established partnerships with leading technology companies that bring AI, data automation an advanced robotic capabilities to deliver mission outcomes.

Recently, we announced a partnership with Amazon Web Services to advance smart warehousing and global logistics automation. This partnership helps modernize supply chains, improve visibility and enhance resilience across distributed operations. We also recently partnered with Google public sector to deploy secure, responsible AI solutions in a way that meets the stringent security and compliance requirements of our customers. These partnerships allow our customers to benefit from proven scalable platforms. And V2X provides a mission context, integration experience and operational know-how needed to deploy them effectively at speed. These initiatives allow us to apply top-tier innovation across our base.

We will be able to innovate program execution through predictive data-enabled solutions to improve decision-making, increase speed and drive more consistent outcomes. Simply put, we are deepening our bias for innovation. We are transforming our global presence into a true global persistence through speed and execution, with operations expanding some of the most complex environments in the world, speed banners. By connecting data, systems and teams across geographies, we will be able to execute faster, respond quicker and deliver consistent performance at scale. We are turning our footprint into a strategic advantage. When we put it all together, you can see how our capabilities come to life. This is what we mean by technology first solutions, mission tested engineering and global persistent operations working together. No one is better positioned than V2X to meet the mission needs of our customers today and tomorrow.

Our recent progress reflects our strategy and as we continue to invest, partner and innovate with discipline, we believe V2X is uniquely positioned to extend that momentum, delivering greater value for our customers and creating sustainable long-term value for our shareholders. With that, I'll turn the call over to Shawn for a review of our financials.

Thank you, Jeremy. Good afternoon, everyone. Please turn to Slide 7. The value V2X delivers for its customers was clearly demonstrated in the fourth quarter, with notable top line growth and strong operating performance. Revenue in the fourth quarter increased 5% to $1.219 billion. Growth was primarily fueled by our training foreign military sales and rapid prototyping programs. Adjusted EBITDA in the quarter was $88.7 million, a record for the company. Adjusted EBITDA margin was 7.3%. Interest expense in the fourth quarter was $19.6 million. Cash interest expense was $18 million, improving $4.7 million year-over-year. Net income for the quarter was $22.8 million. Adjusted net income was $49.3 million, up 16% year-over-year.

Fourth quarter diluted EPS was $0.72 based on 31.6 million weighted average shares. Adjusted diluted EPS in the quarter increased approximately 17% year-over-year to a record $1.56. Adjusted operating cash flow in the fourth quarter was $172.4 million.

I feel an important to highlight that the extended government shutdown did not have a material effect on our financial results in the fourth quarter, further demonstrating the enduring and mission-aligned nature of our business.

Please turn to Slide 8, where I'll discuss our full year results. Revenue in 2025 increased 4% on a year-over-year basis to $4.480 billion. Adjusted EBITDA for the year was $323.3 million, exceeding the high end of our guidance range. Interest expense for the year was $79.9 million. Cash interest expense was $73.7 million, improving approximately $27 million compared to the prior year period, demonstrating our proactive repricing activities, debt pay down and cash flow generation. Net income for the year was $77.9 million. Adjusted net income was $166.8 million, increasing 20% year-over-year. Diluted EPS for the year was $2.45. Adjusted diluted EPS increased 21% year-over-year to $5.24 exceeding the high end of our range. Year-to-date net cash provided by operating activities was $182 million. Adjusted net cash provided by operating activities was $148.3 million. The ability to generate strong cash is an important characteristic of our business and is further highlighted on Slide 9.

In 2025, our solid cash flow generation drove a $116 million year-over-year improvement in net debt to $758 million. This positive performance yielded a net leverage ratio of 2.2x, representing over 1 full turn of improvement in just 24 months. We thought it important to highlight that we achieved this success while executing our capital allocation strategy which included deploying over $50 million in the second half of the year to accelerate value creation. The strength of our balance sheet and cash flow provides substantial flexibility and optionality and to deploy capital, including internal investments and to strategically acquire complementary capabilities, access to new channels and solutions that accelerate our growth strategy.

In summary, we are executing on the capital allocation strategy we outlined in the second quarter and see further opportunities in 2026 and beyond.

Please turn to Slide 10. Our backlog and recent wins provide a clear path to revenue growth as we look into 2026. Our backlog at the end of the year was $11.1 billion. Funded backlog improved slightly from the last quarter to $2.3 billion. Important to note that our backlog at the end of the year does not include the approximate $4 million T6 award. Subsequent to the fourth quarter, the award decision to V2X was upheld, and we expect to book this word to backlog in the first quarter. This is a great outcome for V2X, representing a milestone program that we expect to add positively to our backlog and revenue visibility. We look forward to delivering our industry-leading mission readiness rates for this important training platform.

Book-to-bill ratio for the trailing 12 months was 0.9, in line with our expectations and consistent with our commentary last quarter. Also, as previously mentioned, we expect book-to-bill will be above 1 in 2026.

Please turn to Slide 11. We made exceptional progress executing our strategy in 2025. Looking ahead, we believe our recent wins, backlog, limited recompetes and solutions that are transforming the speed with which our customers can achieve mission readiness positions us to continue this momentum. For 2026, revenue is expected to be $4.675 billion to $4.825 billion. We expect revenue growth to accelerate to 6% or $4.75 billion at the midpoint which compares favorably when taking into account 2025 revenue was at the upper end of our guidance range.

Revenue in 2026 incorporates the incremental contribution from our training foreign military sales and rapid prototyping programs as well as the initial ramp on T6 and completion of previously referenced certain mission support activities in the Middle East. Additionally, a percent of revenue expected to come from recompetes has improved going into 2026 and now represents approximately 3% of revenue at the midpoint of the guide. Adjusted EBITDA is estimated at $335 million to $350 million. Adjusted EBITDA contemplates the above-mentioned items as well as some internal investments.

Adjusted diluted earnings per share guidance is $5.50 to $5.90, representing 9% growth at the midpoint. We expect adjusted net cash provided by operating activities to be $150 million to $170 million. Cash flow in 2026 assumes one additional payroll in 2025, which is estimated at approximately $50 million. We believe cash flow should be in line with our normal seasonal pattern and cash generation occurring in the second half of the year. Cash interest expense is expected to be approximately $69 million with other expenses of $15 million. Capital expenditures for the year are estimated at approximately $25 million.

In summary, 2025 was a successful year on many fronts, in both supporting our customers' missions and achieving our commitments to our shareholders and employees. We are well positioned going into 2026 and look forward to discussing our progress with you throughout the year.

Jeremy, back over to you.

Thanks, Shawn. 2025 was a great year for V2X. We are accelerating our position as a leading provider of mission capabilities. Before I turn it over to Q&A, I'd like to take a moment of appreciation for over 16,000 employees across the globe. Their execution and commitment to our customers' mission propels V2X forward. and prepares us today to take on the missions of tomorrow.

With that, I'd like to open it up for questions.

[Operator Instructions]. Our first question today is from Tobey Sommer with Truist.

I was wondering if you could comment on what has been the trajectory of the company's revenue and activity in the Middle East region with the shifting of resources that direction towards a ramp? .

Yes. Good to hear from you, too. Thanks. Yes. So at this time, obviously, the situation is, I'll say, fluid. Our priority right now is to make sure everyone's safe. I'd like to think that we'll participate in whatever the outcome looks like eventually. But today, it's like I said, fairly fluid with ensuring the safety of all of our employees in the region that we have throughout that area. So we'll certainly see how things evolve as time progresses, but that's kind of where we are today.

Toby, it's Jeremy. I think the one thing I'd add to that is Shawn is right. We were highly concerned for our employees. And we have actually activity every day that allows us to understand wherever body is. But I do think presence matters. And we talk about that all the time. I think being in the region allowing and supporting our customer in terms of what they're going to do in the region is something that's very important. Whatever happens there, I think presence matters. But the single most important thing we're doing right now, and I think everybody needs to keep this in mind, is that our employee safety and our concern for them is number one. .

And how much contribution do you expect from the T6 contract? And is that -- do you think that the there will be additional legal hurdles to that transition? .

And I can't speculate on legal hurdles, Toby. I'll tell you the assumptions that we've made. So you heard what we said in the prepared remarks, we will effectively start that program on March 1, where transition will be complete. You may recall, we began executing that in the mid-third quarter through the fourth quarter, we were paused for a brief period after the first of the year. And so now we'll pick it up in March.

From a planning standpoint, here's a little bit about the assumption that we've made on that. There's an inherent lag. This is a largely material receipts job for us, at least at first. And there's a 90- to 120-day type of lag. So in the guide that we gave at the midpoint, you should think it's somewhere around $140 million to $160 million of revenue for us this year.

Okay. I appreciate that. And what are you seeing in your Intel business, which kind of the exposures are relatively new to you, but you had some classified work announced not too long ago. What's the trajectory of that in your guide. Is that area sort of a source of accretive growth there?

Yes. I think what we did with the Kinetic acquisition was positioning us well to augment what we do today. We're excited about what that business brings to us. I'm excited about the fact that it builds on a pipeline that is going to only grow. So I think that is a business that we're very tight about.

The next question is from Andre Madrid with BTIG.

So I know last year, we had -- you guys have called out 5 1-plus bill opportunities that you were targeting. And Slide 5, I know you called out $2 billion being awarded. Is there a status update that you can give on the remaining opportunities? Are those still stuff that you're actively bidding on? Or any color there?

I think the 2 that we retired, obviously, we're thrilled about. We obviously have that plus we've added to that portfolio this year in terms of where we're bidding when we talk about a 30% increase in overall bid velocity. But yes, we're waiting on adjudication on the remaining 3 that we feel very good about. But again, we got to wait for adjudication. But again, the fact that we were retired 2 of them. in the fiscal year, plus the $10 million plus $100 million one. I think bodes well for the business in terms of not only this velocity, but also our ability to win. So I think those bode well for the company.

Andre, too. To put a fine point on it. So 1 of those was bid in the fall. One of the 3 was bid in the fall, 2 were captured as exactly as Jeremy said and then there's 1 to be bid this year and 1 to be bid in '27. And there's about a year lag between the time the bid goes in and any award assumption that we would have on those things, not counting any protest periods or anything like that. So very modest to any impact in '26 as a result of any of those captures. We'll be talking about those for some time to come, I suspect, but remain very happy with where we're positioned on those. Teams worked extremely hard to put together wonderful offerings and teammates. .

Got it. Got it. That's very helpful. And then, I mean, pivoting -- it seems like everybody wants to talk about the Middle East, but I know you guys called out the endo Pacific as a growth area for you throughout much of 2025. Any updates that you could provide there as to how that market is materializing?

Yes. When you look at the breakdown in the details that we provided, it was flat to slightly down, and we're seeing that, I'll say, continue into '26. So folks may recall, 20 odd number years tends to be training years in the region. We didn't necessarily see that materialize to the volume that we had historically seen. Now we saw an increase in, I'll say, requests to put things in front of customers, they didn't necessarily materialize. So we'll see how things play out in '26. But as I sit here today thinking about where the growth will come from, how we're positioned.

There's very good ops tempo. We're really happy with the positioning. Jeremy consistently talks about presence and there's not a month that goes by that we don't talk about opportunity sets in the region. I don't know if there's anything imminent, as I sit here today, Andre, and we think about kind of early 2026. But we'll see. It's -- we're just starting with early innings.

The next question is from Peter Arment with Baird.

Jeremy, Shawn, Mike, nice results. Jeremy, On the -- you had a really strong year in kind of ramping up the bid velocity and you talk about a big pipeline. How should we think about -- are there more like opportunities the size of the T6 of the world? Or is this going to be more kind of the ones you mentioned where you had $100 million, $100-plus million awards. How should we think about just the pipeline and what you're bidding on?

No, it's a really good question, Peter, because I think we're trying to balance it. We're trying to balance what I call big game hunting with singles and doubles. And I think both of them sit in the portfolio very well. But clearly, the administration and prior administrations have kind of consolidated some of these buys under bigger buys, which at our scale allows us to compete. But again, I think the singles and doubles are just as important and I think they add to the overall value of the company. And so when I look at it, candidly, I look at big velocity as the metric. As long as I'm getting the bid volume out the door, it could be big ones, it could be small ones, it can be intermediate ones. And I think that's important to the company because I think that's what feeds the system. .

Got it. That's helpful. And then just also, there were some pursuits around that you guys have had a lot of opportunities to think about contracts, maybe moving to fixed price or things of that nature. Has there been any kind of further financing of that with the administration now kind of more, I guess, up and running with the Department of war. Are there opportunities you think you're pursuing on a fixed price basis.

Yes. I think we're seeing more fixed price opportunities than we have in the past. I don't know, Shawn, do you want to add to that. But I think it's clear to not having for us, which we're really good at.

Customers that have historically Bango type have approached us -- it hasn't translated into an award yet as fixed price Peter. But between, I'll call it, late -- mid- to late fourth quarter and as we sit here today, we've seen a higher ops tempo with customers asking and soliciting those type of offerings from us. So we'll see how that plays out. But encouraging to see, I'll say, some more traction around getting contracts and the appropriate parties that would make that happen engage. So it's gone from more than just talk to words on paper.

Got it. And just lastly, Shawn, on the net leverage. You guys have done an incredible job of obviously setting ourselves up. How are we thinking about kind of the go forward? Is it further reduction or -- or are you looking at other pursuits on an M&A perspective?

Yes. Listen, I think we've said -- we'll look at all options for value creation for the shareholders. And that remains the case, Peter, right? We're extremely happy with the leverage that the company is at. And Jeremy said consistently, that opens up optionality. I think I highlighted it in the remarks. -- really happy to deliver $2.2 billion while deploying $40 million, $50 million of capital last year to further enhance shareholder value. So we'll see how many plays out, but -- it's a good spot for us to be in to have those options in front of us. .

The next question is from Trevor Walsh with Citizens JMP.

I wanted to start with the AI partnerships with Google -- can you maybe just click in 1 level deeper around what those opportunities look like kind of broadly as you look at them going forward? Are they more technology-centric type of implementations with the smart warehousing? Or is it more just traditional IT system integrator type work? Just trying to get a sense of what that could look like? And then kind of relatedly, how does that maybe shift by opportunity around like what the margin contract kind of profile might be of those opportunities? .

No, it's a really good question, and I appreciate you asking it. I think AWS was an opportunity for us to look at somebody who does some of the smart -- the best smart warehouses around the globe and use them on things that we do every day. I mean if you think about everywhere we are around the globe, there's a warehouse. And I think AWS is 1 of the best in the world at the ability to manage a warehouse and put their smart warehouse and capability in play. We don't know the data. And what they own is the process. And so I think the combination between us and AWS and us and Google, who is clearly invested in AI is taking our data and using our data in a way that's going to make my customer to have better outcomes, faster outcomes, better outcomes and more efficient outcomes. .

So I wanted to put myself in a position where I was partnered with the best in the industry to deliver these capabilities because all the data I have and I own -- and so they're going to use my data to deliver better outcomes from my customer using their technology. And I think at the end, it ended up being a perfect partnership between them if you think about AWS, Google and IBM, it was a perfect partnership for us to go with.

And there's a speed-to-market aspect here, too, right, in terms of how quickly we can deploy things you've heard us talk about the global footprint, right? So don't think about it only from a pursuit standpoint, but capability that we have that we can deploy in a broad scale today, and we'll see how things evolve. But exactly, as Jeremy said, a wonderful partnership to go forward and deliver, we think, enhanced capability to our customers at speed and at scale.

I mean we're already doing on the WHRS program, where we're giving them capability that they've never had before, and I'm looking forward to extending that to other customers.

Great. That's fantastic. Shawn, maybe just a quick follow-up then for you. On the T-6 contract, appreciate that color that you day around the revenue. Can you maybe provide a little bit of color as well on how that's going to affect backlog? I realize the whole amount will go into backlog in Q1, as you mentioned. But could you maybe give us a sense of what would be funded or unfunded if you have like maybe a high level take just as we think about that?

I don't have the funding an unfunded portion yet. We're working through that with the customer. But if it's like other programs we have, it wouldn't shock me if it was funded annually or slightly less. In terms of the -- what we would get incrementally, that's not at all unusual in these type of programs. I do think the booking that we will take in Q4 will not be the entire value that we were awarded. There's options in there that cannot all be exercised. And I say that it's not 1 or the other from an optionality standpoint, Trevor, right?

So we'll -- the team is going through that right now from a bookings and backlog practice, you should all think of this as being tying our booking to what our performance obligations on the contract to include the options will be. And that's what we'll end up in our backlog here at the end of the quarter.

The next question is from Jonathan Sigman with Stifel.

This is actually Sebastian River on the line for Jon Sigman and congrats on the strong print here. I guess I just wanted to start with a broader question. There's kind of been some AI existential threat jitters recently to service names and I kind of wanted to just get your glass half full view, if you will, on how AI will be a lever for the company over the short to medium term and kind of perhaps in the context of some of your recent wins and partnership announcements.

Yes. I think Sebastian that's why we lean forward with partnerships that we have. We decided that we wanted to be on with partners whose critical path was the future of AI. And I think Google is that. And I think Google also recognized that we have the information that makes AI operate. And so when I look at the transformational aspect of AI in our business, I wanted to partner with somebody who brought a tool, and I brought the data and I brought to mission capability in the context and the contract that enable that AI to work. So it was a natural partnership that occurred -- and I'm thrilled to have that part of the team. I'm thrilled to have Amazon part of the team. I'm thrilled to have IBM part of the team.

I think our business is going to be enabled by this transformational technology. because we have all the mission know-how. I mean I'm the guy on the ground. I'm the guy doing all the work. And they're going to enable me to network much better, much faster and much more efficient and delivering a customer a much better outcome. So we're excited about that.

And so I'll say that think of this in increments, right? There's not a big bang here. There's incremental filtering, sorting, sourcing, those types of things that can be done to demonstrate speed and agility to our customers by using capabilities that already exist. And exactly as Jeremy again has set forth. We have data. We have presence. So let's leverage those things and make incremental progress on this -- the adoption of these tools and capabilities as we go forward. .

Got it. Yes. That's super helpful. And then on the back of the recent IDIQ. Can you maybe provide some more high-level color on kind of where you see the company kind of positioning with regard to Golden Dome requirements over time, I guess, kind of beyond the [indiscernible], if you have that visibility today.

I think that's going to be a long-term play. Again, I would call presence and also contract vehicles as the key to participating. Obviously, getting on the contract having the presence on the ground, having the presence at the local facilities is everything. So as this thing evolves, our goal was to get into the mix that allow us to be a participant to enable the government to deliver Golden Dom, and we think we're well positioned to do that.

The next question is from John Godin with Citi.

I wanted to follow up on the commentary about book-to-bill and just to make sure I understand it. The T6 award is hitting in the first quarter. Is that correct? .

Correct. Yes, we will look at the protest was resolved here in the first quarter, and so we will reflect it in our backlog at the end of Q1.

Okay. And the pipeline, some of the commentary around that, it seems very positive and optimistic. I was curious the guidance of being above a 1x book-to-bill for the full year. Is that -- would that still be the case if we excluded the T6 award -- or is the T6 award kind of critical in hitting the greater than 1x book-to-bill for the full year?

Yes, I'd say the T6 award we should certainly be above 1 with the T6. Like I said earlier, it's early innings in the year. we will see how some things played out, but we're confident that we'll be at one. There's opportunity to be well above 1, 1.4 1.5 or more, depending on how some other things play out. But we'll see the timing of certain awards as they play out in the year. We can never we can never pick those things perfectly and protest factors and such. But again, feel very comfortable where we sit today with the guide that we've put out.

I think, John, I would probably burn your calories on is we bid 50% more last year than we did the year before. We're projecting to mid 30% more this year than we did last year. Our win rates are -- I'll stand them up against anybody in the industry. That's an easy way for you to think about it. .

Okay. But it sounds like we need that PX award in the number to be above on net book to bill. Is that -- am I hearing that right?

Yes, that's a fair interpretation. .

Okay. And then if we just look at the full year guidance, just simple question about kind of the sensitivity or the range around kind of low end versus high end. Maybe you guys can talk a little bit about on the revenue and the margin side, what drives the sort of midpoint versus the high end of the guide. .

Yes, mostly timing of things, right? So I think we put out there we only -- we're down to about 3% of the revenue at the midpoint is up for recompete. And so timing of other new business activities or on-contract growth, things of that could sway it right relative to that ops tempo and when we might see some things materialize, we're feeling very good as we sit here today. for the line of sight we have to the total year, but specifically in the first half, and we'll see the timing of awards. But it's nothing more than that, really.

The next question is from Ken Herbert with RBC.

Just wanted to follow up maybe -- just wanted to follow up on the margin discussion. How do we think about with the T6 and incremental bookings you're seeing this year what's the potential to see better than sort of the flattish margins in '26? Or what are maybe the key puts and takes as we think about potential margin upside? .

Yes. So I'll go to the many of our programs that start out early, and we've got several this year that are contributing to growth. They start out at margins that are somewhat dilutive to the company composite, and then they grow. And so T6 in the early phases, we'll see. We're going to GEA here in Q1, and we'll see. But it wouldn't shock me if it follows the profile for most of our programs that are like that, that we tend to grow into the margins. It takes a little bit of time because what you do is you reengineer the process around delivering those industry-leading readiness rates that we have across the majority of the platforms that we have.

And so you've kind of got to tear things down and then build them back up. You've got the supply base. All of those things that go into it but we're really happy with the performance that we ultimately get. So I don't know that I look at that as being a real margin enhancement activity here in 2026. But I think we have full confidence that the team will deliver to the commitments 100%

Look, I think Shawn is right. I think every program kind of goes through its life cycle. But once my team gets in and they're able to get a hold of the supply chain, and they're able to get a hold of the employment base and they're able to understand what's the best-in-class way to do things, to deliver the readiness rates that we deliver. I have all confidence in that team's ability to do this. Does it take us a little bit of time to do it? Yes, because you're taking over someone else's preexisting program, but it takes us a moment to just conform it to the way we do business. And once we do, we do exceptionally well. .

Yes. That's great. If I could, Jeremy, maybe just obviously, the scale of what you're bidding is up significantly, and I can appreciate then the tailwinds on the top line. Is it fair to say that the stuff you're bidding today to the extent to which you're successful on it would support sort of a structural step-up in margins over time, obviously, as the new work ramps?

I would say we're bidding work that's accretive to the overall business as a norm to do our posture going forward. That is our posture. Now to Shawn's point, well, we have programs that start out because of where we inherit something that is not accretive day 1, but it grows into itself, absolutely. But as a corporate policy and process, we are -- we have a strong conviction around growing margins.

Next question is from Noah Poponak with Goldman Sachs.

Last year and the year prior, the top line growth was stronger in the back half than the first half. I'm just curious if that holds this year or if with the much easier compares in the first half and then tougher compares in the back half if the shape of this year is different?

Yes, it is a little bit different. This year, I think it's more balanced. No, I think it's more 50-50 in terms of what that profile looks like on the revenue side.

Okay. Helpful. And Shawn, can you just walk us through the moving pieces on cash flow as you wrapped up '25, you had the you sort of flagged the possibility of collections related to government shutdown, ended up coming in fairly close to the low end of the original range. I guess I would have thought '26 would have maybe grown from the '25 original range and then also had that working capital catch up. Can you maybe just bridge us through that? Or just sort of where should we think of -- how should we think of converting the EBITDA to the free cash flow going forward?

Yes. Yes. So I think -- yes, you're right, '25 did come in a little bit, certainly higher than the midpoint of the guide that we gave at the $148 million having a couple of extra days, we saw significant receipts, I'll say, right at the end. And candidly, that's why we adjusted because there was timing that was, I'll call it, somewhat unpredictable.

In terms of 2026, I think when we look at -- we have an extra pay period in 2026 that is worth about $50 million. And I think when we think about net income conversion at the midpoint of the guide, we put out, we're about 115% net income conversion. So I think it's -- I think we're pretty good this year. There are some -- that we will be cash negative in the first half of the year. As always, the profile will look probably very similar to what played out in 2025.

Okay. And then just maybe zooming out and thinking about long-term growth, you have some new programs ramping this year that drives a pretty good looking growth rate relative to the industry. That has to keep growing. And then you've discussed a pretty healthy bid pipeline. Can you grow what you're forecasting this year for multiple years? Or do you start to hit just a higher base and tougher compares that drives it to decelerate from here?

No. I think we're sitting on a target-rich environment. When I look at the pipeline, we are very, very selective about what ends up in the pipeline. And it is all around our ability to capture and win and not burn unnecessary resources on something that a flyer. And so when I look at that pipeline that Roger has put together and I look at the win rates that are reflective of that, I feel very good about the fact that we can continue to grow. We are -- we have -- look, we're not touching the vast majority of what's the addressable market. And we have nothing but opportunity in front of us. We continue to build out Rogers organization in terms of growth -- we are continuing to hire new people all the time. That is the least of my concerns about having something to grow on is trying to make sure that we're prepared for that growth. That's where my focus is.

The next question is from Mariana Petersmorel with Bank of America.

So first one on '26 guidance, could you mind discussing for the midpoint. What kind of recompete risk you're thinking about? And then like what are the major programs like that are driving this growth? Like is TRS ramping that much or even within like you mentioned FMS and international MRS, IDIQ also expanding, like what are the main drivers for that midpoint.

Yes, sure. So I'll give you color around what I said in the prepared remarks. So from an FMS standpoint, we're growing from a range standpoint, think of $150 million to $170 million in that area. From a training standpoint, year-over-year, we're about $130 million to $150 million. I mentioned the TV. We do have, and I previously mentioned some Middle East mission support activities that are concluding and kind of ramping down. And so when you net all those things together, you get the midpoint year-over-year growth of about 6%.

You hit on recompetes. Recompetes are about 3% of the revenue projected revenue growth at the midpoint.

And then how should we think about like at the midpoint, how much is already covered by the funded backlog? And how much you guys have to still go on like get. And then as a linked to that, the context or the framework for this question is, we have seen a shutdown. We are getting into a year where we'll see midterm elections later in the year, like how is the award environment and how that could affect this range for '26?

Sure. So I'll answer your question on the backlog, the revenue in backlog, although I would distinguish its total. It's not necessarily funded at this time because funded has seasonality to it when contract performance is flipped in the middle of the year and that sort of stuff. But approximately 85% of the total year's revenue is backlog today. That, of course, excludes T6 that I mentioned earlier because we will book that in Q1.

From an award cadence standpoint, I think the fourth quarter played out almost exactly as we thought in terms of where we ended up. The first quarter is playing out kind of very, very similar. We'll see how this stuff progresses throughout the year. When I'll go back even a year ago, -- when we pay -- when 2025 played out, the booking cadence was by and large on plan. in terms of what we saw. Will that persist in for all the reasons that you just mentioned, Mariana, I don't know. But in terms of a cadence, in terms of an expectation and aligned with what our internal plans have been, I think it's been pretty consistent.

Yes. I think Mariana is the way you need to think about us is persistence at the mission level requires somebody to be there. And almost entirely what we did is keeping aircraft in the air, keeping the base running delivering technology and capability, those things. And yes, they could be influenced by an election that could be influenced by budgets, whatever you want to do. But candidly, we saw very little implications associated with the government shutdown associated with the fact that every -- people want to keep aircraft in the air. People want to keep bases running. People want to have technology delivered. We saw very few implications with that. And so do I think we could be impacted by politics, absolutely. Did we see it to Shawn's point, No, everything pretty much stayed on schedule, which we were pleasantly surprised by.

All right. And last 1 from me. You mentioned throughout the call how you want to use capital deployment and partnerships to be prepared to get to, I don't know, support is like more complex and larger programs and particularly around rapid development and fielding of these new technologies. Could you mind discussing number one, if you already -- how strong is the M&A pipeline? And number two, any particular efforts that you can highlight that you're doing internally to be able to support these things and to have the best in lodges. .

Yes. I think 1 of the things that we're really happy about from an investment standpoint and the way things have played out for us has been some of our rapid prototyping activities, right? We talked about that last year. the team's ability to field assets go from a paper design to field an asset in a very short period of time has just been remarkable. We measure that in months. or weeks in some cases, right? So that speaks to some of the investments that we've made internally as well as -- and people might not think of it this much, but we get co-investment from our customers or create dollars to help support those rapid prototyping, that development work, certainly low risk to us, which speaks to our ability to get things fielded in a very potently manner that we think distinguishes us in the marketplace.

I would agree with that. But I would also tell you on, we decided in August of '24 to May a fundamental shift in how we think about the next 3 to 5 years in the business. And I think when you saw the announcement that announced that we put out, it was because we made those investments. We made those investments in the future of the company. And those investments are going to pay dividends because we believe that our ability to be effective for our customer means that we are going to deliver technology into our mission. And that is the only way in which our customers are going to benefit long term is taking advantage of what is commercially available to everybody else, and we're leveraging it into what we do today.

The next question is from Joe Gomes with Noble Capital.

Most of which have already been asked, but I'll throw this one out there. So lot of positives. But as you look at '26, what do you see as kind of the biggest risks for the company through achieving the '26 guidance? .

John, it's a great question because I think it always comes down to -- we are a very responsive company. And if the customer tells us to move less, we move less if they tell us to move right, we move right. We don't always get to see like in the Middle East, what may or may not happen. So that is not always a benefit in terms of foresight for us. But I do think that it creates opportunity for us and has for a long time because we're so responsive. I don't view it as risks as much as it is being prepared to making sure our recruiting team is prepared, making sure that our team is prepared on the ground, making sure we're able to move when the customer needs us to move, building whatever they need to build, making sure the aircraft is in the air. Those are things that we are very good at. I don't see the risk in '26 as much as -- it keeps me up at night is making sure we're prepared for that customer when they move at that moment's notice. -- those mission requirements that we're there to support them at the time and the speed at which they need us to be. That's what keeps me up at night.

The next question is from Kristine Liwag with Morgan Stanley. .

Just following up on Noah's question earlier on cash flow. When we look at adjusting the operating cash divided by adjusted EBITDA, it looks like 2024 was a higher watermark 52% of that conversion versus 46% last year. And the midpoint of your guide for this year implies 47%. I guess I would have thought that this would have been trending higher, especially as the leverage comes down and you get some tailwind from interest expense. So how should we think about these metrics? Is this the right way to think about the cash generation of the business? Is there anything that's changing in the cash cycle or cash milestones that we should think about?

No, it's really just the additional payroll that we have this year, which is worth about $50 million. So if you adjust it for that on the midpoint of the guide, the conversion would be about 115% against net income. And so it's really nothing more than that.

Got you. And then does that mean for 2027 with the extra payroll for '26, you should see a higher number for that conversion for that following year. Would that be fair?

All that being equal, yes.

Great. And following up on what you said on the Middle East, you've got some contracts that are sunsetting this factored into your guidance. Depending on how we see Iran play out this year, is there potentially more upside to that opportunity set in the region? And how do you think about potential timing or magnitude, if anything does materialize?

No, no, no. It's very early. So our guide doesn't contemplate anything today because we don't have any requirements to react to, right? As we said earlier in the call, we're ensuring the safety of all of our employees in the region. Could things develop? Yes, they have in the past. And those things it would purely be a little bit at this point, Kristine, to think about what that could turn into. -- or where it might be. We know that there's a very large mobilization effort going on in the region. I think they said the highest amount since '20 or since 2003 in terms of assets in the region.

So could there be some space for us. Yes, we have not contemplated any of it today. No.

This concludes our question-and-answer session. I would like to turn the conference back over to Jeremy Wensinger for any closing remarks.

Thank you for joining us today. I really appreciate you taking the time to share with us what we did in 2025. I'm so proud of the team. I'm proud of the 16,000-plus employees and what they do for us every day. And I appreciate your interest in V2X. And I hope that we were fulsome in clear in our remarks. So thank you so much. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Okay. Hello, everyone. We'll keep forging ahead with our next presentation out of the aerospace and defense sector, which is from V2X. With me on the stage is Shawn Mural, who is the CFO of the company. So Shawn, thanks so much for being with us.

Great. Thanks for hosting us.

Shawn is going to kick off with a few slides that give a brief overview of the business, and then I'll jump into some questions I have, and we can take any questions from anybody here in the audience as well.

Awesome. Excellent. Well, thanks, everyone, for joining us today. I'll walk through a little bit of who we are and what we do. You should think of us as a pure-play government services provider supporting readiness around the globe. And readiness, we define that in a variety of ways with logistics, with trainings, with maintenance, repair and overhaul and with modernization and sustainment to a multitude of platforms.

So here's a little bit more about what we do and who we do it for. So our largest customer is the U.S. Army. We support that U.S. Army customer around the globe. We have a very heavy presence in the Middle East, you see as well as here domestically in the U.S. The majority of the business is cost reimbursable, meaning all of our costs are reimbursed with a fee associated with them. So about almost 60%, and that has been growing for the last couple of years. It was about 50%. It's growing, and we think it will continue to grow.

Last year, about $4.3 billion of revenue. The midpoint of our guide this year would suggest about 4% revenue. In the most recent quarter, we did 8% year-over-year revenue growth in Q3. About 16,000 employees, as I mentioned, most are fully deployed with our customers around the globe, executing the missions to support them and just a variety of locations.

Here's a couple of things that are, I'll say, notable in terms of where the business has been as we think about working on franchise enduring mission programs. So T-6, it's a training platform. We were awarded this contract. It's $4.3 billion. We were awarded the contract in August. It's currently under protest. We're awaiting that protest resolution. We are executing the transition on that contract today, and we expect that when the protest is resolved, that will be the successful offer and execute ramp-up of that contract.

F-16, this is another one that I'll highlight. This has been a contributor to our growth here in the back half of the year, Noah, when we talk about Q3's 8% top line growth and what we expect will be additional growth here in the fourth quarter. F-16 Iraq. So this is a foreign military sale contract that we were awarded in about the middle of this year, where we're supporting a base as well as the fleet of F-16s for the Iraqi customer.

A couple of other things down there that I'll mention in rapid prototyping, about $200 million. This is a little bit different, and we're really happy to have launched the Tempest family of products back at AUSA, for those of you that follow the industry back at AUSA a couple of months ago. And the Tempest family of products is a counter-UAS solution that incorporates a Hellfire missile with a radar and either a fixed or mobile platform.

I highlight it because it went from paper design to fielded asset in a very short period of time, meaning less than a year. And so our engineering capabilities at a facility we have in Indianapolis, Indiana certainly led our ability to go do that.

The other interesting aspect of it is you've heard me mention, I'll call it, field support, logistics. Not only are we developing that system, we're doing the depot support in various environments around the world. So what you're seeing as we're approaching the market and a lot of these opportunities is bringing the breadth of capability that the company has to offer. Okay. So that's a brief overview of where we are. Happy to take any of your questions. Noah.

That's great. Thank you for that.

Maybe at a high level, we've been in this world where there's been change in the actual administration. There's been change in prioritization within funding. And you and others in the industry have discussed that creating some choppiness in just the normal cadence of bookings. Then we had a government shutdown. But how close to normal are you, I guess? What is life like right now as a government contractor? How quickly are they recovering from the shutdown? Are the things that were going on before that still going on? Or are we normal yet?

It's interesting. The shutdown was more calm than I thought in terms of what we experienced. Customers were still paying their bills. People were moving funding around. That's not atypical. They do that all the time. But I didn't get a sense from the customers that there was a significant amount of panic. There were a couple of pockets here and there because I'll give you a brief example. we manage a number of training platforms. The T-45 is an asset that delivers training. If that platform is down for a day, it takes between 5 and 7 days to recover from a training schedule standpoint. So very meaningful and impactful to our customers. So they were moving money around to make sure that, that didn't happen. Now that we've emerged from the shutdown, I'm still seeing funding perturbations and changes. So it's not like there was a blitz that said, "Oh, okay, now we're open here, let's move all these money to you. So in some cases, we're still being funded on a weekly basis while they're adjudicating.

Important to note that funding on a contract might come from a variety of customers. It might not all just be U.S. Army. We see this, for example, in INDOPACOM, I know an area that we've talked to you about before, where we have a presence -- that funding stream comes from multiple parties. And so adjudicating that and ensuring that it gets on time to accomplish the mission has been some challenges.

The award environment, we talked previously, I can't remember, but on our third quarter call, we did move out our expectation in some awards this year as a result of the shutdown as a result of delays. We moved them into 2026 because we're not seeing those things being adjudicated. That hasn't changed. Nothing has been poked and left.

Okay. What's behind that? Is that -- is that still change in personnel? Or is that reprioritization and it sort of takes time to land all that and where they want it to land? Or why -- I guess, why is that still going on?

I think it's change in personnel more so than anything else. Interesting in one of the sessions we were having upstairs earlier, we haven't seen a change yet to prioritization of activities from an administration standpoint, meaning, all right, hey, you got the continuing resolution, you've gone through this reconciliation and now we're going to emphasize this and deemphasize that. I haven't necessarily seen that. What I've seen is administrative contractual delays in executing whatever the objective was, could be a funding modification, could be an award delay, something of that nature.

Okay. Interesting. You referenced the organic revenue growth acceleration in the third quarter compared to the first half, talked about F-16 Iraq. What else was behind that? It was pretty significant acceleration. How much should we think about that kind of growth rate as being possible on a longer-term basis versus that having some lumpiness in it?

Yes. So we were really happy. It's kind of funny when I step back and I think about the year in total, it's kind of played out very much in line with kind of what we expected, back half weighted for growth. The other contributing factor that we've had is -- so a program called WTRS for us was a $3.7 billion contract. We are the largest training provider for the U.S. Army. And so we took that contract over. We were awarded it in August of '24. We achieved FOC or full operational capability in August of '25. And so you had a pretty decent chunk of that activity in the third quarter as well, Noah, that contributed to that growth. So those 2 things, the F-16 Iraq activity that I mentioned as well as WTRS.

Now fast forwarding to your question about growth, where will that be? Those 2 things will be incrementals to the kind of the first half of '26, right, because we didn't have any of those. So we see those continuing to grow into next year. We did have a modest headwind in the quarter as well as we will have in the first half of '26. We do some contingency support operations around the globe. This happened to be in the Middle East, where we saw a wind down of some activities that we were supported. Not unusual, not atypical at all in our business. Those things happen.

That's sort of just like an off-the-shelf, we need some surge...

Yes, we need some surge. We need some capabilities that are less of an enduring mission capability, but more of exactly right, a surge. That went away. That started winding down in the -- probably in the second quarter, third quarter of this year. So that will create an incremental headwind when we think about going into 2026.

Is that -- the decline in that '26 versus '25, how does that compare in size to the ramp on the things that are ramping?

Yes. It will -- at least in the first half, it will offset growth in F-16 Iraq. It's in the Middle East. So what you'll see is, I think, in the Middle East, will be flattish to perhaps slightly down because of that.

But again, these things happen. Not worried about it. There's no fundamental change in the business. where we have a strong presence in the Middle East. That's evidenced by the F-16 award that we got. And folks may or may not know the degree of difficulty in acquiring an FMS contract. This is not something that just came about kind of earlier in '25. This has been being worked for years. And so our customers saw the value proposition that we have. Our presence in the region and what we've been able to do and so picked us to go do that.

So Waters was a takeaway?

It was.

And T-6 is a takeaway.

It is.

Can you talk about what you're doing in the business to drive the seemingly higher rates of takeaway?

Yes. I think a couple of things. The breadth of capabilities that the company has are being brought to bear in each of these examples. Let me be specific on them. When we're executing training for the U.S. Army, it's not just about getting people in a PowerPoint briefing or things like this. There is real-world simulated training environments that are created, usually in austere areas, we build villages, we build towns, things of this nature to simulate what conditions will look like and then you go through and conduct those exercises. Well, why is that important? Well, because we maintain a warehouse of capabilities. So this is the logistics side of it. Our warehouse of capabilities that within 24 hours, we can get any training device to any place on the planet to ensure that those training activities can take place.

And again, that's mission success for us is ensuring that the assets are where they need to be. So you couple that with the training expertise of actually being the adjudicator and administering those things, you're seeing the breadth of capabilities that the company brings together. T-6 is an example as well where we're, again, leveraging readiness rates. And we define readiness is, as I mentioned earlier, availability of assets and platforms consistently. We think we have some of the highest readiness rates for platforms in the industry. And that means that we revamp the workforce. We revamp the tooling. We revamp everything that is necessary to ensure a very high ops tempo to support the customer's mission. And those are examples of kind of what we're doing across the enterprise.

Okay. That's great. And the T-6 award number is a pretty large number relative to just the revenue base of the company. I guess, is it -- has any of that gone into backlog or you're holding off given the protest?

We're holding off. Yes. So we don't book anything that's in protest. It's over $4 billion. Important to note. So we are doing transition today. So a very modest amount, low single millions of dollars went into backlog that will be sold this year. As we're doing that transition, we'll wait the adjudication and just again to put some color on it, think of that as an incremental $250 million to $300 million a year of revenue should that protest resolve favorably.

Okay. And presumably it will take a year or 2 to ramp to that?

No, actually, I don't expect that. I expect it to be -- because we're doing the transition today, and this is also a little bit different in terms of what we saw from this. Typically, a customer when there's a protest might issue a stop work. They haven't done that in this case. We're continuing to execute that. That contract, as we were awarded it, is expected to begin, I think, it's February 1, '26. I do expect that to push while the protest is being resolved, but it would be pretty much transition -- transition will have been completed, and we're kind of up and running.

Interesting. And then can you speak to Waters similarly? Where is that in the ramp to full rate? And what does it look like when it gets to full rate?

Yes. So we're there now. So as of August, we're at full rate. We think that the customer is delighted with the work that we're doing to support them. It will be an incremental in the first half of next year, if you will, probably less -- slightly less than $100 million or so in the first half from an incremental standpoint. But it's reached its full rate now. Team is doing a great job, and we're really happy with the support there.

It's up $100 million in the first half.

Yes.

'26 [ versus ] '25.

Yes.

Okay. And so is it correct that T-6, Waters and F-16 are the 3 largest kind of new program growth drivers in '26?

They are. I want to -- I do want to -- so they are, yes. However, I want to mention the -- we call it city states. It's -- what I -- when I mentioned that Tempest family of products, that is also growing in an area that we think is, again, demonstrating some real engineering prowess and capability for us with those customers. They're smaller numbers, of course. But I think from a differentiation standpoint, I also think from a longer term, those contracts are fixed price. We're very excited about what that capability offers us, not just in '26, but beyond from an addressable market.

Can you elaborate more on what you do in the counter-UAS process?

Yes. So it's Tempest. It's the -- so it's the integration of a Hellfire missile to prosecute a drone. Now they're not the quadcopter drones, right? They're -- you're not going to use a Hellfire on that. But I want to highlight a little bit, again, the engineering. So a Hellfire missile is not typically designed to be a ground air missile. Our team did that and took it, repurposed it, took a -- I won't call a radar a couch product, but a radar that is readily available in the market, integrated a fire control system and put it on a mobile platform for deployment and did that in months. And so as you can picture environments where there's a lot of counter-UAS -- UAS activity and these fulfill a mission for that customer. And they're not -- no, they're probably never -- we're probably never going to build 5,000 of these. I think that the key for us that it demonstrates is our ability to take things that were never intended for that type of mission, engineer them, put them together in a manner that is filling a niche for our customer and driving value for the corporation. And so that's a continuum for us, which is why I want to highlight it.

Is that -- will that sell into a specific program of record? Or is the customer now just buying many C-UAS systems?

They're buying many C-UAS systems. And I think not just the U.S. customer, we're getting interest from international customers for these products, right, because of, again, some of that capability that -- the key to our success there is speed. Its speed to go from a paper design to deployment and measured in months. That's what was the successful offering here, and we're continuing to demonstrate that with different capabilities to those customers, but we see addressable markets with -- in the international community as well. Again, very -- because it's -- like I said, it's not quite cuts, but there's not ITAR restrictions on them either.

Right. Okay. That's interesting. And then I guess these new wins make me think, are there other things you are bidding on that you can discuss as the next large new program opportunities? Or is there like a little wave here that you got through?

No.

Not so little, but a wave.

One of the things that we've talked about in both '24 and '25, the customer -- or we have a very low amount of recompetes, okay? So our revenue going into 2026, about 7% of our revenue in '26 is up for recompete. So we refer to it as kind of a bit of a recompete holiday. That is atypical, and it has to do with the procurement cycle that folks that are...

What would be an average year?

20-plus percent.

Right. Basically 5-year contracts every...

So we're very low. Why is that important? We're taking advantage of that. And in our Q3 call, we talked about a $50 billion addressable pipeline over a 3-year period. So we're focused on takeaways because we're not going into new-new. When you think about us, we're not doing the DARPA programs that are going to go develop the next whatever capability. We're playing in mostly O&M dollars for our customer, which means someone is already doing it, and we're probably working to go and see somebody.

And so we highlighted -- we didn't give the names of them, but we highlighted 5 things in excess of $1 billion. Two of them, we have been successfully awarded. I already mentioned them, T-6 and the F-16 Iraq. Both of those are in excess of -- the F-16 Iraq, we think, will be greater than $1 billion over the next 5 years. The other 3, one of them was bid going into the customer in November, probably be adjudicated a year from now, roughly. That's a typical time frame. Another one is being bid next year and another one in '27. So why do we even bring these up because some of them are further out? Because we're doing the shaping today to go improve our probability of success and deliver the capability that we think we're able to deliver value to the customer. So that's where we stand, and we've talked about 5 big pursuits on our calls. Those are the 5. I won't go into exactly what they are or what they're named, but that's where we stand.

Okay. How long will you have recompetes well under 20% of revenue?

You'll see a tick up in '27 and '28. So this, call it, 24-month type of period, it will -- now it won't go from 7% to 25%. It's not that dramatic. It will ramp, but you'll see probably mid-teens, something like that in kind of the '26 time -- '27 time frame, and it will rise to get on a more normal cadence.

Okay. That's super helpful. Maybe going to margins. Your margins have been relatively flat for the last several quarters. I think it's a pretty consistent margin model business. But are there -- how are you all as a team thinking about margins? Do you think there's a right to higher margins? Are there margin expansion initiatives? Or are you more focused on top line growth, hold the margin?

No, it's great. Yes, as a matter of fact, so I've been with the firm now 2 years, and margins have actually come down during that time, mostly as a result of what's in backlog. Those backlog margins because of exactly what you highlighted, you have 5 or 7 years' worth of activity. I can't accelerate that revenue and burn through it faster. It's just not the way our contracts work. So it's going to take some time to get through it. That's also why you see that cost type revenue. Our cost type margins are definitely dilutive typically to where we are.

Now there are a couple of exceptions. The F-16 that I mentioned in Iraq, that's a cost-type contract and the WTRS contract. They will get to the point where they are accretive. We are not there yet. We're kind of just getting there. I just mentioned Waters ramped up and F-16 will be. So yes, we are looking at -- and again, the reason that we're focused on that pipeline, pursuing things that are incremental margin improvement. The margins, I do expect to improve. I don't expect it to be today, if we're 7.1, 7.2, it won't go from 7.1, 7.2 to 7.8. It will be an incremental 10, 20 bps a year type of thing. It won't be dramatic.

Margins got you choked up.

Yes, I guess so.

Feel free to jump into that water. Okay. That's interesting. So if I'm hearing you correctly, as you've come into the role, you want to focus more on margins, you see an opportunity to improve margins.

I do.

It's really a matter of -- I mean, one, you got to go do it, but also just from a timing perspective, you have things in backlog in a long-cycle business. You need to have enough turnover before you really have those things start to flow in.

Absolutely.

Okay.

Absolutely.

And when you described F-16 and Waters as cost plus, but eventually accretive to the margin, does that mean that despite being cost plus, they can eventually have a higher than 7.5% EBITDA margin?

Correct.

Okay.

Correct.

And then how much opportunity or maybe opportunity is not the right word. How do you think about the fixed price mix? Because when I think about the nature of your business, I'm hearing you describe a lot of things where you have decades of expertise and a lot of legacy and you know what you're doing, and it's not insanely new technology that's really complex and hard to do and susceptible to cost overrun. So that would seem like it could be done on a fixed price basis and have a higher margin. But I don't know if maybe those are the famous last words and then you do that and then there's just -- you forgot one thing that overruns cost. I don't know. How do you think about that?

We put in front of customers ideas to take things fixed price all the time. I don't -- we don't shy away from it.

They don't want to do it?

Correct. I've gotten resist, which -- yes, exactly. We found it very interesting, especially in this environment, right? Because a year ago, we were...

[ Their staff may want to do it. ]

Exactly. We haven't seen it showed up. Now we've seen customers say, yes, hey, we'll listen. Now why don't customers want to do it? Well, it won't work on the front end, right? Because -- and if I want to take a job fixed price, it's really incumbent on the customer to know, well, what's the condition of the various assets that they have? How many buildings do they have, what condition are they in? What -- they have to have a very good set of understandings. If they're not, I'm going to submit a change order. That's a lot of upfront work.

It's actually just easier for them to say, just go do it and send us a bill.

That's right. It is. And so we will not shy away from our desire to convert things from cost type to fixed price.

Would you say that you're still submitting that -- those ideas at the same rate as you were 12, 18 months ago? Or have you started to kind of give up a little bit? Give up is the wrong word, but...

I wouldn't say give up. I would say there's a couple of customers that it has resonated with, but it has taken 6 or 8 months to get an audience with a broader group within that customer community. So Yes, we're still doing it. We talk about it daily regularly with the customers, but it hasn't taken foot.

Okay. And then from top line to margin to cash flow, how should we think about your conversion from either net income or EBITDA, however you look at it to free cash flow? And talk about how '25 and '26 are tracking to that. I know you -- coming out of the shutdown, there's a bit of a race to collections for everybody, how is that going?

Yes. Yes, we did lower the guide on the cash flow for the year in '25, mostly because in order to go from costs incurred to receipt, sometimes I need contract actions. And with the shutdown, I don't have contract administrators to do that. So the reason that we lowered the guide was the timetable within which to adjudicate those contract actions. It's not a matter of when or if the cash shows up, it's just a matter of when.

So it's literally you need the people back in the seats.

To give me the mod to authorize me to invoice the cost or to move the money or whatever the case may be. So I don't worry about it at all. But as a result, back to your question on conversion, I look at us being between 95% and 110% per year conversion against net income. We'll be less this year because of where we are and what we lowered the guide to. But then that will imply we'll be higher next year. And so I think the underlying thing that we've done from a cash standpoint, really, really happy with the progress that the company has made with delevering. I think if I go back a couple of years, we were I won't say well over 3x levered, but certainly over. And we're certainly less today, about 2.85x. We're comfortable between 2x and 3x. And so we're putting that cash to work, put all the mechanisms in place and the team has done a wonderful job of it. That's the value of this type of business. Because of that cost type nature, that 60%, I can turn that cash in 14 days in many cases. So it might not be the most -- the highest margin work that I have, but there's value to that cash flow that we can then put to work in a variety of ways.

Yes. Okay. So the leverage in the high 2s, are you then done incrementally paying down debt? Or do you have maturities sometime soon that you'll be doing either way? How should we expect that to progress from here?

So I think we're comfortable between 2 and 3. The answer is yes, we've got some maturities coming up in the next couple of years. But I think from a -- we think about generating value for the shareholders, we think about share buybacks. We were authorized for $100 million share buyback in May. We've done $30 million of that $100 million so far. And then M&A. And we did a modest M&A activity earlier this year back in August. So I think you're seeing us put those things in place to continue to generate that shareholder value.

Okay. So we can think of you kind of hold the line on leverage, give or take, half a turn here or there. And as you generate free cash flow, we'll see that now go more into share repurchase and M&A.

Yes. We're going to put it to work. We're comfortable between 2 and 3 because I'm confident in what I know of the characteristics of the contracts, the nature our customers pay, that sort of stuff. So we're going to work to drive additional value.

What did you buy in August? And what else is there to buy?

Yes. We bought a modest -- a small set of activities from QinetiQ. And what was very attractive to us about this is that, one, it was a customer base that we did not have access to. And two, it was one of one from a capability standpoint for the customer. It's not a customer I can name, but I can tell you that, that customer and both Jeremy, our CEO, myself and Roger Mason have experience with this customer, they buy everything that V2X offers. And so that entry point was extremely valuable to us. It was less than $30 million acquisition. So pretty small, but we think we'll bring the breadth of, again, everything that we can do with that entry point and to have, again, one of one asset we thought was -- made it desirable for us.

Interesting. And as you look at further possible acquisitions, is that the model you'll want to pursue? Or is there an opportunity to buy actual capability that you do not currently have?

Yes, there's opportunity to buy capability that we don't have or supplement, I should say, right? And I think specifically in engineering, part of the reason that I brought up that Tempest product a couple of times and that engineering capability is that is an extremely attractive area for us. Now I'll say, you asked from a model standpoint, I'm very sensitive to that leverage ratio. So I'm comfortable with where it's at, but I also don't really feel like taking investors on that roller coaster of levering way up and then coming back down and way up and back down. So staying in that 2 to 3 range is pretty important to me. Now we might average maybe do we get us a little bit over 3, okay. That could be a timing of a quarter thing as opposed to an average over a period.

Okay. We just have about a minute left. If anybody in the room had a question for Shawn. Anything at all? Don't be shy. Okay.

Okay.

Well, that was great. It was very thorough. I really appreciate your time. So we can wrap up there. Shawn, thanks so much for being with us.

Thanks for hosting us. Appreciate it. Thank you.

Thanks.

Thank you for joining us for the V2X Third Quarter 2025 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Steve, and I'll be the operator for today's call. [Operator Instructions]

And now I'll pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X.

Thank you. Good afternoon, everyone. Welcome to the V2X Third Quarter 2025 Earnings Conference Call. Joining us today are Jeremy Wensinger, President and Chief Executive Officer; and Shawn Mural, Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on the Investor Relations section of our website, gov2x.com.

Please turn to Slide 2. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. The company assumes no obligation to update its forward-looking statements.

In addition, in today's remarks, we will refer to certain non-GAAP financial measures because management believes such measures are useful to investors. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP on our slide presentation and in our earnings release filed with the SEC, both of which are available on the Investor Relations section of our website.

At this time, I would like to turn the call over to Jeremy.

Thank you, Mike, and good afternoon, everyone. Thank you for joining us today. I am proud to share the results from this quarter. The dedication of our team continues to drive outstanding execution.

Please turn to Slide 3. During today's call, I'm going to recap our third quarter results, discuss our positioning and how our strategic execution has created tailwinds for growth. Let's start with our quarter 3 results. Performance was strong, yielding both record revenue and adjusted EPS in the third quarter. Revenue increased 8% year-over-year to $1.17 billion, delivering adjusted EPS of $1.37. Adjusted EBITDA was $85 million in the quarter or 7.3% margin. Importantly, to date, we have not seen a material impact on our business from the current government shutdown. And if anything, this event has reinforced just how essential our services are to the government.

Last quarter, Shawn and I described our capital allocation strategy to you. Since then, we've been executing on this strategy. During the quarter, we completed an acquisition that brings new capabilities and increases access to customers in the intelligence community. This customer access cannot be understated, and we believe it will add to our already robust pipeline.

Additionally, we repurchased $10 million worth of shares in the quarter, further driving value for our shareholders.

Our strategic execution is paying off. This quarter, we delivered a solid 1.2x book-to-bill ratio, which speaks to the strong demand we are seeing.

We also recently achieved 2 of the 5 major captures we've been pursuing that I discussed in prior calls. This includes the T-6 and F-16 Iraq program, each worth over $1 billion demonstrates the momentum we are building. We remain optimistic about what's ahead.

Given our performance to date and the trends in our business, we're increasing the midpoint of our revenue, adjusted EBITDA and adjusted EPS ranges. Although we have not seen a material impact from the government shutdown, we are proactively lowering the midpoint of our cash flow guidance to account for possible temporary delays in collections. I want to emphasize, this is only a timing related and not reflective of the underlying changes in our business.

Please turn to Slide 4. Our customers are seeing differentiation in our solutions and offerings and the programs on this slide showcase those examples. From start to finish, we work alongside our customers, delivering a full spectrum of capabilities that maintain readiness around the globe. In the last 18 months, we've won 3 strategic awards greater than $1 billion using the breadth of the company and execution. The cumulative value of these awards exceeded $9 billion. An example is the previously announced T-6 award. This is a cornerstone award and critical to the readiness by ensuring that every single Navy, Air Force and Army pilot will be trained by V2X. This ties into the theme you're seeing in the training, mission support and modernization that are foundational to everything we provide. While this award is under protest, we're confident in our solution and continue to execute the transition activities to support our customer.

We've been awarded what we expect to be a $1 billion foreign military sales for the Iraq's F-16 program. This, coupled with our $425 million cockpit modernization contract with the U.S. Air Force showcases our expertise in supporting the F-16 fleet for multiple customers.

And finally, we were awarded approximately $275 million for rapid prototyping, engineering, integration and follow-on support for platforms like Tempest, our counter-UAS solution and our Gateway Mission Router family of systems. There's a strong demand for our technology, and I'll touch on that later. These awards are validation of our partnership with our customers and disciplined execution of our strategy.

Please turn to Slide 5. V2X is capitalizing on large and growing market opportunities while investing in technologies that will shape our future and our industry. We see data and AI as a powerful tools that can deliver mission success. These tools help us enhance readiness, drive efficiencies and even change the way the marketplace operates.

Combined with our operational experience and close relationships with our customers, we are in a strong position to turn data into real decision advantages.

On the readiness front, we continue to expand our training portfolio and a good example is that of our support of the Army's Saber Junction training exercise in Germany, which simulated chemical attacks. This demonstrates how the scope of our training portfolio continues to expand.

Additionally, our focus areas on readiness and modernization continue to align with our customers' mission and budgetary priorities. Our counter-UAS platform has demonstrated our capabilities to deliver rapid prototyping and hardware integration to support customers. In the near future, we are expecting orders from new customers looking to deploy the platforms in various theaters around the globe. We are now leveraging the core capabilities of that system to adapt it for use across other operational environments and emerging threat landscapes, positioning us for continued growth.

With the combination of our investments in technology, our ability to convert opportunities into success and our over $50 billion pipeline, our path forward looks strong.

With that, I'll turn the call over to Shawn for a review of our financials. Thank

you, Jeremy, and good afternoon, everyone. Please turn to Slide 6. Our momentum continued in the third quarter, reflecting focus on operational performance. Revenue in the third quarter increased 8% to $1,167 million. Growth was fueled by the WTRS, F-5 and Iraq F-16 programs.

Adjusted EBITDA in the quarter was $85.2 million, delivering a margin of 7.3%. Interest expense in the third quarter was $20 million. Cash interest expense was $18.4 million, improving $7.2 million year-over-year.

Net income for the quarter was $24.6 million. Adjusted net income was $43.7 million, up 6% year-over-year.

Third quarter diluted EPS was $0.77 based on 31.9 million weighted average shares. Adjusted diluted EPS in the quarter increased approximately 6% to $1.37 from the prior year.

Adjusted operating cash flow in the quarter was $35.8 million. We are leveraging our strong balance sheet. And during Q3, we made notable progress executing our capital allocation strategy.

As Jeremy mentioned, we completed a small acquisition that provides additional market opportunity and repurchased $10 million worth of shares. These activities clearly demonstrate our focus on delivering value for our shareholders.

Please turn to Slide 7, where I'll discuss our year-to-date results. Year-to-date revenue was $3,261 million, up 3% year-over-year.

Adjusted EBITDA increased 5% for the first 9 months of the year to $234.6 million, reflecting a 10 basis point increase in margin to 7.2%.

Year-to-date interest expense was $60.3 million. Cash interest expense was $55.7 million, improving approximately $22 million compared to the prior year period.

Year-to-date net income was $55.1 million. Adjusted net income was $117.5 million, increasing 22% year-over-year.

Diluted EPS in the first 9 months was $1.73. Adjusted diluted EPS was $3.68, up 22% compared to last year.

Year-to-date net cash used by operating activities was $27.5 million. Adjusted net cash used by operating activities was $24.1 million.

Please turn to Slide 8. Our strategy and the continued demand for our solutions is yielding awards that support future growth and value creation. This was reflected in third quarter net bookings of $1.4 billion and sequential backlog growth of approximately $240 million. Total backlog at the end of the third quarter was $11.6 billion. Funded backlog was $2.3 billion.

With respect to the current government shutdown, the impact on the funding or operations of the current contracts has been modest to date. We feel it important to note that backlog does not include the approximate $4 billion T-6 award as it is currently under protest. We continue to execute the transition activities supporting the customer at this time.

Additionally, as it relates to the F-16 Iraq program, backlog does not reflect any value beyond the transition amount initially awarded in Q2 of this year. The contract is currently being definitized and we [Audio Gap] these programs will add substantially to our backlog and ability to continue our growth.

Book-to-bill ratio for the trailing 12 months was 0.9x. Looking ahead, based on potential slippage of awards to the shutdown, we believe book-to-bill will be below 1 for the full year and accelerate to above 1 in fiscal year 2026. With that said, I want to be clear that we believe the company is in an excellent position to demonstrate top-line growth heading into 2026.

Let's move to Slide 9 for our updated guidance. We continue our focus on execution. And given our solid performance, we are increasing the midpoint of our 2025 guidance for revenue, adjusted EBITDA and adjusted EPS to $4.5 billion, $316 million and $4.95, respectively. We're proactively lowering the midpoint of our adjusted operating cash flow guidance to account for potential timing delays and collections related to the government shutdown. These adjustments reflect potential near-term payments or contract actions that we had contemplated being completed by year-end 2025, which may now slip into 2026. Again, this is purely a timing adjustment and doesn't reflect any changes to the fundamentals of the business.

Overall, we're very pleased with the execution of our strategic priorities, ability to deliver differentiated technology solutions and strong program performance. We are confident in a strong close to 2025 and continued momentum into 2026.

Jeremy, back to you.

Thanks, Shawn. Please turn to Slide 10. We want to provide some additional color about 2026. With solid awards secured and minimal recompete exposure, we're confident of our future growth. In addition to our continued success in training programs like the WTRS, recent wins like our rapid prototyping awards and the Iraq F-16 program support top line growth next year. The completion of contingency task orders is partially offsetting this growth.

Overall, the net of these items are expected to drive year-over-year revenue growth in 2026. A successful outcome of the T-6 protest would have incremental improvements in 2026. While we're keeping an eye on potential impacts from the ongoing government shutdown, our essential mission-critical work gives us confidence in the strength of demand.

The maturity of the company is becoming increasingly apparent in our ability to capture and win new business. We continue to deliver on our commitments. We are proud of our third quarter performance. Our teams continue to bring the full spectrum of V2X to meet our customers' critical mission requirements.

And with that, I'd like to open the call to questions. Operator?

[Operator Instructions] The first question comes from Peter Arment with Baird.

Nice results. Shawn, could you just give us a little more color on the reduction in the cash? You said it's sort of being more cautious just given the government environment. But if the government reopens here relatively soon, does that change? Or how are we approaching that?

Yes. Thank you. Good to hear from you, Peter. Yes. So in our guide, we've assumed that there are certain contract actions, and this is a normal course of the business, Peter, that we get change orders, things of that nature that routinely happen. They may not occur even if the government were to open tomorrow, the backlog of things and what we're seeing a little bit, Peter, is while we're still getting paid, that payment has been elongated a bit, on average, about 7 days difference between what we experienced in the first half of the year and what we're experiencing today. And so the adjudication of those contract items and then the ability to get paid, we felt it appropriate to bring down the midpoint about $25 million. Again, purely timing. We have -- we don't think there's risk to the receipts or anything like that. It's whether or not they slip into 2026. That's how we're thinking about it.

Got it. I appreciate that. And then just, Jeremy, you've talked a little bit about this year about just a much bigger qualified pipeline and ability to bid more. Maybe you could just give us a little more color on how you're doing and making progress there.

Well, I think I've talked in the past that we hired Roger Mason as the Chief Growth Officer. I think -- and I mentioned in the script that we're seeing the maturity of the company come to bear. And I feel really good about the fact that we've retired 2 of the 5 major pursuits that we had talked about previously as success. And again, we'll see where T-6 kind of rolls out. But again, I think the maturity of the company, along with the maturity in the growth organization is starting to come to bear on our ability to win, our ability to build a pipeline and our ability to pursue a multitude of things. I'm most excited about the fact the bids I'm seeing are bringing the entire company to bear on these pursuits. It is really making a difference, and that's the part I'm most excited about.

The next question comes from Jon Siegmann with Stifel.

Just real quickly, a simple one for you. So you're very clear that you did not include T-6 award in the backlog. But just because there is some companies in the public arena that do include protested contracts in the backlog, I just wanted to confirm this is your standard practice and not an indication of any higher risk associated with this decision.

Yes, absolutely. It's our policy that we have. Anything in protest, we would not take a booking on. There is a modest amount of work that we are doing today, to be very clear, on transition. We did book that, but it's low single-digit millions. The main award should it stick to the schedule that it was awarded under would have us begin work in February of 2026 and then go on for the period of 10 years. None of that work is in backlog, and that's our standard practice, Jon.

And John, just to be clear, that modest transition that we're doing was funded.

Yes.

That's real helpful. And then the other 3 of the 5 contracts that you're elephant hunting there, is there any sense of when the timing of those could be? Is that probably all delayed with government shutdown as well?

It's a great question. I think it's still TBD and -- but we're actively bidding a few of those. So we'll see what transpires with the government shutdown and the timing of awards. But again, it's all a little bit of TBD at this point to see because, again, a lot of our contracting officers are not at work. Things are kind of, as Shawn said, in terms of the cash side of it, waiting for them to do the adjudication of contract modifications. So I think it's an unknown at this point. But again, I think it will -- once we have certainty around the standup of the government again, we'll know more because they'll be back to work and we can ask those questions.

The next question comes from Andre Madrid with BTIG.

Not to harp on the shutdown, but it is the elephant in the room here. I mean, how should we think about this weighing on the potential benefit of your previously disclosed recompete holiday? Does this kind of just get pushed out into '26, like what you guys teased on the 10 slide there?

Well, yes, candidly, that's a lot of why we wanted to talk a little bit and give some color around '26. So I think we say, right, 7% recompetes next year. As we sit here today, one, that's a great spot to be in, of course. We'll see how those recompetes play out. I mean there's always the opportunity to do a bridge or exercise an extension or something, I don't know. But again, I think we feel good in terms of where we sit today, what we have in backlog and our ability to continue to grow.

Got it. Got it. And I guess on that point, looking at '26, I feel like each quarter, it looks like growth could be kind of lumpy based on the service branch based on the geography. But I guess, as we look ahead into the new year, what do you really expect to be the fastest-growing branches and geographies and...

Well, I think -- so a couple of things. Thanks for the question. I'll give a little bit of color. I think we'll see cost type revenue grow faster, I should say. And when we think about things, we see that becoming a greater percentage of the portfolio. I think we see from a region standpoint, the U.S. growing faster than some other areas. And that's, again, things like we've seen WTRS, things of that nature. So that's a little bit of additional color as we sit here today.

There's a lot to go relative to funding, right? So again, we're trying to provide a little bit of color and context for '26. Funding, as you can imagine, in light of the shutdown is a significant variable, right? And we're seeing customers make changes and stuff like that to do as much as they possibly can. So I am certain that, obviously, we will provide additional clarity and visibility to you as we report Q4, but felt it very important because we're seeing good demand. I think you saw a very good book-to-bill in the quarter. That had been a question previously. And so I wanted to highlight a couple of those things. So hopefully, that gives you a little bit more color.

The next question comes from Ken Herbert with RBC Capital Markets.

When we look at the strong growth in the third quarter, you called out specifically F-16, F-5 and WTRS driving the 8% growth. Is it possible to parse that out a bit? And were any of those maybe a little better than expected or better performance on contracts in the quarter?

Not really. I think things are playing out kind of as we expected. We did get some modest material that had previously been planned to come in, in Q3 came in, but it wasn't really significant, to be honest with you, Ken. I think we're, again, happy with where we sit. We see sequential growth continuing as we go into Q4. And obviously, you saw us bring up the low end of the range as a result of that. Still some variables out there, of course. But yes, I think, again, the strength of those 3 programs continues, and we expect that trajectory to continue into Q4.

Yes. And Ken, I would just add, I think Shawn has been very clear all year long. The second half of the year was going to be the opportunity for us based on program execution on F-5 and on the WTRS program. So again, I don't think anything we saw in the quarter was really unexpected. Program team is executing the way they should execute. They're doing great, and we're just bringing these programs online.

That's great. And as we look at the revised guide, it implies a bit of a sequential step down in margins into the fourth quarter. Is that maybe just conservatism? Or is there anything else we should keep in mind on that?

There's always some timing of expenses. And so we have some incremental expense in Q4. By the way, not -- again, not unanticipated per se. The teams have done a wonderful job of risk mitigation. You've heard us talk about that earlier in the year, specifically the first half. So nothing, I'd say, terribly significant, to be honest with you, Ken. It's how we see things playing out. We're happy with raising the midpoint of the guide, call it, $3.5 million, $4 million at the midpoint from where we were before and about 10 basis points in incremental margin. So again, from the prior midpoints that we have established. So mostly timing of expenses is the way that I'd frame it up.

That's great. Nice results, you guys.

The next question comes from Tobey Sommer with Truist.

What does the opportunity look like for sales ongoing and new sales outside the U.S., maybe just to push it outside the constraints of a shutdown?

Well, I think the one we announced on the F-16 with Iraq is an emerging opportunity for us on the FMS side. I think that is an opportunity that customers see what we're doing for our primary set of customers and those country customers are really saying, "Hey, I want that kind of support and I need that kind of modernization." So that part has been an opportunity for us to look at how do we take what we do for the U.S. government and take it to these other countries that are -- need our support and are allies of the U.S. So I think outside the country, that's a channel for us. But inside the country, it has been really the modernization side of it, along with the work that we're doing in the aero business.

If we fast forward 2 or 3 years from now, do you think you'll be -- you'll have a wider array of foreign military sales contracts that you'll be working on?

It's -- the foreign military sales take a lot of dwell time. So it's hard for me to tell you exactly what that would look like 3 years from now. We've been working the F-16 FMS deal for quite a while. So again, it's hard for me to say when a country will decide and what's the timing of that. But again, what I like is I like the demand pull. I guess that's where I would put it. They were looking at what we were doing for the U.S. government said, I want that. We are in region, and that's one of the things we talk about all the time.

Being in region creates demand pull for us. So having logistics and everything in that region gives them the easy button to pull us through. So again, it's hard for me to look 3 years out and say what that looks like. All I can tell you is being shoulder to shoulder with our customer in region and our allies seeing that support has created some demand pull that I'm very happy with.

I think a great example of that to amplify it is our Tempest product, right, that was highlighted at the recent AUSA. When we think about global demand for a product like that, that has applications around the globe and the team is sensing some strong demand pull. Jeremy mentioned it, I think, in his prepared remarks. So could those things go FMS? Could they go DCS? I don't know. We'll see. It's an emerging market for us. We're really happy with the rapid prototyping and our ability to deliver that capability in a very short period of time, and it's getting some good traction from customers.

Appreciate it. And then with respect to the timing of payments and the elongation of DSO, is that a widespread phenomenon with the shutdown? Or is it a, a discrete impact of some payment offices that just happen to be to matter for the company?

Yes. It's interesting. There's a payment -- as I think I said earlier when Peter asked, there was a -- we're seeing payments take longer, roughly 7 days than what we saw earlier in the year. The knock down a bit here is there are sometimes contract actions that we need to be adjudicated, to get funding moved around whatever to the appropriate claims, things of this nature. That's kind of the -- this is the secondary effect of the inability to have those things occur today.

So will they be done by the end of the year? Potentially. There's -- we don't see risk to them in aggregate, obviously. This is, like I said, purely timing in terms of the ability for if it's funding on a certain clin, for example, Tobey, to be moved, not issued, then issue the invoice and then pay in what are now elongated terms from what we've experienced previously. It's nothing more than that, if that helps give some color.

It does.

Next question comes from Joe Gomes with NOBLE Capital.

Congrats on the quarter. I was wondering, maybe you can give us a little update on the efforts in the INDOPACOM and how that transpired in the third quarter and what you're seeing here for the fourth quarter?

I mean we continue to be very confident in our position in INDOPACOM. I mean, obviously, with being present in the region has given us an opportunity to participate with the customer, both directly and indirectly. So again, I think INDOPACOM is going to be and has been an emerging market for -- even think what Shawn just mentioned about the Tempest unit. I think there is an opportunity for us to continue to expand our presence in that region.

A little disappointed that some of the training activities were a little less than what we anticipated for the year. But I think overall, I think the positioning is something that we're exceptionally proud of and look forward to a long relationship with that customer in that region.

Okay. Great. And then just don't want to beat a dead horse, but -- and I know it's difficult to answer completely here, but we've talked about the government shutdown, things getting pushed out. On the T-6 with under protest, I mean, how far can we get that pushed out where maybe that February, end of February expected start date gets pushed out significantly as opposed to maybe with some of the other things here we're talking about that might turn faster. I don't know if you got any sense of that? Or can you give any more color or detail on that?

Yes. That one is a hard one. Obviously, as you know, that's in the court of federal claims. So it's a hard one to predict. the exact timing on it. We continue to monitor it, and I know they're making progress. But again, that's going to be a hard one for us to predict if that will or will not slide.

I think, Joe, that's a little bit why, again, the materials that Jeremy walked through at the conclusion of the prepared remarks, we wanted to give color around we're treating T-6 as kind of a binary event for '26 for exactly the reasons that Jeremy mentioned, and we're going to grow. Again, we're not issuing guidance for '26. But because of the nature of how that could play out, if it stays according to schedule, fantastic. If it slips, we'll see irrespective, this company is going to grow and continue to do that, like I said, in 2026.

The next question comes from Trevor Walsh with Citizens JMP.

On the Tempest piece, really impressive just to see or understand the time to development to getting that system fielded. Just more broadly, I guess, within counter-UAS or even just training support around UAS generally, what things or opportunities might be out there that we're not necessarily thinking about? That Tempest just seem to come along very, very fast and ferocious. So what kind of things might there be within the realm of unmanned systems that we could be thinking about for you guys?

I think Tempest is a good example of what this evolving landscape of threat is showing us as a country. But I'll highlight something that we've talked about before. On the unmanned system side, when you think about an unmanned aerial vehicle, it has an airframe. It has many of the same characteristics that we support today on -- with the MRO front. And I look at modernization and upgrades and our ability to support those aircraft no differently than I do what we're doing on an F-16 or C-130.

So when I think about the emerging market on UAVs, it can be what we're doing today with Tempest or it can go extend all the way down to flight line support, all the way down to modernization and upgrades of those aircraft. So I think it's an opportunity for us. I think we've shown that as an opportunity with Tempest, and I think we'll continue to demonstrate our toehold in the UAS market.

The underlying capability is the engineering prowess and capability that the corporation has to move with speed and agility and deliver that rapid prototyping. That's what you saw. It has a variety of applications, as Jeremy just walked through. And so we're continuing to add to that capability set across the organization with delivering technology, infusing it into a variety of platforms and ways that, again, Jeremy mentioned.

Great. Maybe just one quick one or one last one. With respect to the acquisition that you closed, I understand it's probably kind of smaller in terms of kind of material contribution to '25. But can you maybe tell us about how the '26 pipeline or even beyond associated kind of with the opening up of that customer around that acquisition, if that's reflected in, I think, the $50 billion or so pipeline that you threw out there today in the slides? Or is there -- I guess, how much kind of ramp is required to sort of get that really going from kind of the broader opportunity that's kind of offered there?

Yes. No, thank you. It's a good question. It is not in the pipeline. We're just working our way through integration now. But again, there is nothing different on -- I've come from that side of the world. There is nothing different on that side of the world that isn't being done at V2X today. We just did not have access from a customer standpoint to demonstrate that capability to them. So this is more about customer access and not size. The size of the acquisition was modest, but to be able to get back to that customer set and be able to show them the things that we do as a core company and give them the confidence and the access to our talent was 100% why we did that deal.

The next question comes from Mariana Perez with Bank of America. The current line has been disconnected. We'll move on to the next question. It's from the line of Kristine Liwag with Morgan Stanley.

Jeremy, you called out funding as the uncertainty with the government shutdown. And when you look at the strong book-to-bill of 1.2x in the quarter, was that a pull forward of contract awards for the customers anticipating this funding uncertainty and try to get those awards out the door?

I don't -- it was mostly just normal timing. I mean I didn't see anybody move anything around. Even -- I think we talked about in the past, even with some of the initiatives the government had in the first half of the year, we've seen awards basically occur on schedule. And so these were not unexpected. They weren't moved forward. They were all awards that we expected to happen.

What I don't know is in quarter 4, whether the items that we thought were going to be adjudicated because there's no contracting officers around to do it, whether those will happen or not. So I feel confident about what we have in terms of our bid velocity. I feel confident about what the bids we've submitted. They just -- I just don't know whether they're going to get adjudicated with the government shutdown.

I see. And look, if I could squeeze a second question. The U.S. decision to withdraw some troops out of Romania was a surprise to many. So I was wondering, was that a surprise to you? Or was that anticipated? I know you don't have direct revenue from that specific base. But when you look at regional priorities, I mean, how do you think about potential incremental headwinds from Europe? And how does that balance with the stronger demand signals from INDOPACOM?

I think the work we do in Romania is an extremely important part of our, what I should say, defense strategy. And so we were not affected by that, and I cannot believe that, that would -- that work we're doing would go away anytime soon. It is extremely important and in terms of defense. So that's all I'm going to say. But it is -- the Aegis Ashore program is a very important program, and I don't see a strategic move off that unless there's a policy change in the government.

The next question comes from Noah Poponak with Goldman Sachs.

If I take the updated full year revenue guidance with just the last quarter of the year remaining, it implies -- the range implies 4Q either flat all the way up to up 7% at the high end. Can you -- is that just government shutdown related at the low end? Or are there other pieces that would move you around within that range?

Yes. No, great question. So as you can imagine, funding is a dynamic situation, and we've got a wonderful cadence within the organization that looks at a typical contracts waterfall based on how funding may change or not. To date, we've had very modest impact, as I think we said in the prepared remarks. But if I look out through the end of the quarter, there could be more impacts in terms of reductions on current contracts we have. And hence, kind of the range of the guide, nothing more than that. We wanted to make sure that we took that into account because it's a variable. The teams are like I said, all over it. And to date, we have seen customers move funding to ensure that capability persists and remains. I think that speaks to the underlying critical nature of how our customers look at the services we provide. So that -- hence, the basis for the distribution on the range.

Okay. And Shawn, I guess, if I kind of look at the progression through the year, close to flat in the first half. Now you have this up 8% midpoint of the range for 4Q, up mid-single. You guys had talked about needing WTRS to ramp to get to that higher growth rate in the back half. As we -- as I keep flowing through the model into 2026 with WTRS continuing to ramp, easy compares in the first half, I guess why wouldn't -- is it reasonable to think of '26 is looking like the exit rate of '25 in terms of top line growth? Or is it more complicated than that?

Yes. There's a couple of things. I'll give a little bit of color, like I said, we wanted to make sure we talked about '26 because it's top of mind for obviously, everyone. So when I think about it, WTRS will continue to ramp next year, the F-16 Iraq award will ramp next year from an incremental standpoint. There is the contingency support activities, specifically in the Middle East that have largely ramped down throughout 2025. We've seen that. That will present rather a headwind going into kind of the first 3 quarters, if you will, of 2026. So I won't talk numbers specifically because funding is so variable right now, to be honest with you. But yes, WTRS and F-16 Iraq should continue to ramp at the exit rate that they conclude at in '26.

Okay. That's really helpful. On margins, should we think of V2X as a multiyear margin expansion opportunity? Or should we think of it as top-line growth and hold the margins and convert it to cash flow?

Listen, I think over time, we certainly see margin expansion opportunities. I mean that's the nature of what we're here to help generate and our program teams do it consistently. We're burning through what's in the backlog as you would expect. As new programs have come on, they -- and I've said this before, I think they typically start lower and then they ramp and improve sequentially. The great news in some of the awards that we have today is that these are long-term franchise programs when you think 5-plus years in just between WTRS, F-16 Iraq and then depending on what happens with T-6, that's up to a 10-year program. So good stability there, opportunity to go work margin expansion here, but it is -- I think you're thinking about it exactly right. It's a multiyear.

Okay. Last one for me. If you do, in fact, have the $20 million to $30 million of cash flow slide from payment timing given the shutdown, should we then think of '26 as your normal 100% conversion from the adjusted net income to free cash flow plus getting that $20 million to $30 million back? Or is it the type of thing that kind of ends up being recaptured over a longer window of time and you never really quite see it in a shorter window of conversion?

No, we're thinking of '26 exactly as you are as I sit here today. It's dependent on the revenue, of course, right? So as long as the revenue holds to, like I said, kind of the midpoint of the guide, then it would purely be a function of timing, and we wouldn't have -- we would be incremental and at or above 100% in '26. That's exactly the way to think about it.

This concludes our question-and-answer session. I would like to turn the conference back over to Jeremy Wensinger for any closing remarks.

Thank you so much for the time today. I appreciate everyone taking the opportunity to share with us our quarter results. And again, just much appreciated for everything that you guys are doing in terms of showing interest in V2X. So thank you, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.

Thank you for joining us for the V2X Second Quarter 2025 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Betsy, and I'll be the operator for today's call. [Operator Instructions] Please note this event is being recorded. And now I'll pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X.

Thank you. Good afternoon, everyone. Welcome to the V2X Second Quarter 2025 Earnings Conference Call. Joining us today are Jeremy Wensinger, President and Chief Executive Officer; and Shawn Mural, Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on the Investor Relations section of our website, gov2x.com.

Please turn to Slide 2. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. The company assumes no obligation to update its forward-looking statements. In addition, in today's remarks, we will refer to certain non-GAAP financial measures because management believes such measures are useful to investors.

You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP on our slide presentation and in our earnings release filed with the SEC, both of which are available on the Investor Relations section of our website. At this time, I'd like to turn the call over to Jeremy.

Thank you, Mike, and good afternoon, everyone. Thank you for joining us today. I'd like to start by thanking our entire team for their hard work, dedication and commitment to our customers' mission. Please turn to Slide 3. During today's call, I'm going to recap our second quarter results, talk about our strategic execution and why we are optimistic about our future. Starting with the second quarter results, revenue was $1.08 billion. Profitability was strong with adjusted EBITDA of $82 million or 7.6% margin and adjusted net income of $42 million.

Adjusted EPS was $1.33, increasing 59% year-over-year. Our financial performance, cash generation and balance sheet strength is providing significant flexibility and optionality for V2X. We are now positioned to enhance value creation through an active capital allocation strategy. As part of this strategy, we recently established a $100 million share repurchase authorization, which Shawn will discuss in more detail shortly. Given our year-to-date performance, we remain confident in our ability to achieve our 2025 commitments and are seeing additional positive uplift to earnings per share.

As such, we are increasing our adjusted EPS guidance and reaffirming our revenue, adjusted EBITDA and cash flow guidance. Reflecting on our recent operational performance, we are delivering on our commitments, executing on our strategy and bringing innovation and new approaches to rapidly deploy solutions for improved readiness. Our dedication to execution excellence was demonstrated during my recent visits with our customers. I witnessed firsthand the outcomes that our team is delivering. It is seamless support for the mission.

Our customers have acknowledged our performance and my visit reaffirms our strategy for growth. Our strategy is clear, and it is evident to me that our teams are delivering on mission readiness outcomes. The takeaway from my engagements reinforces what V2X is bringing in performance, reliability and mission readiness. This is also reflected in our robust pipeline, which reflects the strategy we have put in place. Finally, our recent awards are validation of our customer intimacy and the commitment by the team to the execution of our strategy.

Please turn to Slide 4. We are making excellent progress executing our strategic growth initiatives. Starting with optimize the core, we are delivering proven performance excellence to strengthen the base. This is reflected by our ability to transition and support critical missions, such as recently reaching full operational capability on the Army's largest training program. This program will ensure the delivery of training solutions to Army warfighters worldwide by infusing cutting-edge innovations to adapt to an ever-evolving mission.

Next, growth in adjacencies. This is best described as a demand pull on our customers' recognition of our ability to deliver. An exemplar of this is our growing presence in the U.S. Space Force at Ascension Island, which is a key space force tracking and instrumentation station. Another example, foreign military sales continue to represent a large and growing opportunity with international customers seeking out our performance, solutions, agility and value that V2X is delivering for our customers. This was evidenced by the recent award of the Iraq F-16 program.

Moving to extended offerings. This is demonstrated by our collaboration with Bell Helicopter to support the training of new generation of Army aviators. This pursuit is notable as it combines our capabilities in training, operational readiness with platform renewal. It also reflects an extension of a new customer in the aerospace domain. Lastly, strategic investments refer to the investments we are making in talent, capabilities that differentiate our offerings and the optimization of our tools and processes to deliver on our commitments and drive growth. The culmination of these initiatives was exemplified firsthand with the $4.3 billion 9-year T-6 award.

This is fundamentally a V2X approach to customer engagement and demonstration of past performance as a differentiator for our customers. The T-6 aircraft is widely used in a multi-service aviation training program that is critical to ensure new pilots are ready. This award is an example of the strategy we are executing, and it is an honor to have been selected to help ensure that every single pilot in the U.S. Air Force, Navy and Army will be trained and ready for their next mission. V2X will use commercial-based approaches to provide full spectrum supply chain management solutions to enable this essential training mission over 700 aircraft.

Additionally, we believe the fixed price contract will allow V2X to leverage the power of data and decades of operational expertise to deliver enhanced readiness for our customer. In summary, we are executing these initiatives today. They are creating differentiation, driving value and fueling opportunities in the form of a robust pipeline.

Please turn to Slide 5. As mentioned, these initiatives on the prior page are driving significant opportunities for V2X, which is reflective in our 3-year pipeline valued at over $50 billion. This pipeline reflects large franchise programs and opportunities to deliver solutions across all domains. It also reflects a greater percentage of fixed price or outcome-based contracts, which is at the heart of the V2X execution excellence value proposition. We see this as beneficial in proving out our operational excellence and institutional knowledge from successfully supporting global missions at scale for over 70 years.

Lastly, while the pipeline of opportunity focuses on leveraging all of V2X's capability, it also reflects a greater balance of platform modernization and renewal capabilities. We are optimistic in our ability to capture these opportunities, which we believe is supported by the progress we have demonstrated so far in converting key pursuits into long-term programs. V2X is capitalizing on our large and growing market opportunities while investing to be a leader in data-enabled mission solutions across all domains. Now I'd like to turn the call over to Shawn for a review of the financials.

Thank you, Jeremy. Please turn to Slide 6. We are exceptionally pleased with our second quarter and year-to-date results. Our results continue to demonstrate the focus on disciplined execution and the strategic positions of the business. We are proud of the accomplishments and excited about the future. Revenue in the second quarter was $1.078 billion. This reflects the expected growth in the WTRS and F5 programs as well as the sunsetting of the KC-10, T1A and the reduction of a task order in the Middle East. Adjusted EBITDA in the quarter was $82.4 million, increasing 14% year-over-year and delivering a margin of 7.6%. The strong EBITDA performance was driven primarily by the conclusion of a nonrecurring contractual commitment, which was contemplated in our full year guidance, but occurred earlier than anticipated.

Interest expense in the second quarter was $20.6 million. Cash interest expense was $19.1 million, improving $7.8 million or 29% year-over-year, driven by our successful repricing activities, debt paydown and cash generation. Net income for the quarter was $22.4 million. Adjusted net income was $42.3 million, increasing 61% year-over-year. Second quarter diluted EPS was $0.70 based on 31.9 million weighted average shares. Adjusted diluted EPS in the quarter was $1.33, increasing approximately 59% from the prior year. The ability to generate strong free cash flow with low capital expenditures remains a strength of the business.

This was demonstrated in the second quarter with adjusted operating cash flow of $58.3 million. Total backlog at the end of the second quarter was $11.3 billion. Funded backlog was $2.3 billion, which provides additional confidence in our ability to meet our 2025 commitments. It's important to note that at the current time, total backlog does not reflect the $4.3 billion T-6 award. It also does not include any value associated with the recent CENTCOM and INDOPACOM extensions.

Please turn to Slide 7, where I'll discuss our year-to-date results. Year-to-date revenue was $2.94 billion, up slightly, reflecting new program starts and partially offset by sunsetting programs. Adjusted EBITDA for the first half of the year was $149.4 million, increasing approximately 6% year-over-year with a margin of 7.1%. Interest expense through June was $40.3 million. Cash interest expense was $37.3 million, improving approximately $15 million compared to the first half of 2024. Year-to-date net income was $30.5 million. Adjusted net income was $73.8 million, increasing 34% year-over-year. Diluted EPS in the first half was $0.96.

Adjusted diluted EPS was $2.31, up 34% compared to last year. Year-to-date net cash used by operating activities was $66.9 million. Adjusted net cash used by operating activities was $59.8 million, reflecting our normal seasonal patterns. Please turn to Slide 8. We have made significant progress improving our balance sheet, leverage ratio and capital structure. This successful evolution provides flexibility in how we can allocate capital and accelerate value creation. We thought it important to highlight how we are thinking about things as we move forward.

Our capital allocation strategy centers on 3 key pillars: generate, deploy and maintain. As it relates to the first pillar, we believe part of our value proposition is the company's ability to deliver strong cash conversion. Our target is to generate strong adjusted net income to cash conversion that you can see in our trailing 12-month performance. This cash generation facilitates optionality as it relates to our second component, deploy. There are 4 methods by which we plan to deploy capital.

The first is to strategically acquire complementary capabilities, access to new channels and solutions that accelerate our growth strategy. The second is increasing shareholder value by executing the recently authorized $100 million share repurchase plan. The third avenue consists of internal investments that would further advance our position as a differentiated provider of solutions. The fourth avenue is utilizing cash to further reduce debt via accelerating payments of our term loans. The deployment of capital in these areas is connected to the third component of our strategy, maintain, which is to deploy capital while maintaining a target net leverage ratio of approximately 2x to 3x.

We have started the next phase of our capital allocation journey and believe this strategy will yield strong returns for our shareholders. Please turn to Slide 9. We are pleased with our performance. As such, the company is reaffirming revenue, adjusted EBITDA and cash flow guidance for 2025 and increasing its adjusted EPS guidance due to previously executed debt refinancing and tax benefits. At the midpoint, this reflects revenue of $4.4 billion, adjusted EBITDA of $313 million, adjusted EPS of $4.80.

In summary, we are continuing to execute and believe V2X is well positioned to meet our customers' critical mission requirements. Jeremy, I'll throw it back to you for some closing comments and thoughts.

Thank you, Shawn. The team's performance has me excited. We are delivering on our commitments and executing with excellence. Our robust pipeline reflects the strategy of the company going forward, and our awards are validating that strategy. Our strategic intent is nothing more than mission excellence. My team is aligned and executing to our global strategy. It is an honor to be at V2X. Now let's open it up for questions.

[Operator Instructions] The first question today comes from Ken Herbert with RBC Capital Markets.

Nice quarter. Jeremy, maybe just to kick off for Shawn, how do we think about the T-6 contract in terms of sort of incremental revenues this year and next year in particular? And how does that ramp? And how does that scale up?

Yes, we're very excited about the award that was announced last week. We think it's a franchise that the team clearly demonstrated the execution of the strategy that Jeremy has laid out for the company. From a revenue standpoint and impact, so we began transition. I expect no impact to the financials this year. That transition period goes until early 2026. And then I think when we look at the historicals, the program has been somewhere between $200 million, $300 million a year is kind of how we're thinking about it going forward. But obviously, that's subject to a lot of variables, funding profiles. We've got to get through the protest period, that sort of stuff. So we'll see how things play out.

I would add to his comments just that this team did exactly what we have laid out in terms of strategy. I could not be happier with that team and what they've been able to accomplish. And I think their past performance was the driver here. And so we're excited about the opportunity to stand the program up. But it really goes down to the past performance this team has been able to demonstrate. And I think the customer recognized that, and we're just honored to be a part of it.

That's great. And the full year guide implies sort of a bit of a step down at least off the second quarter into the second half EBITDA margins. Was there anything in particular in the second quarter? Or maybe how do we think about sort of the EBITDA margins in the second half and maybe upward potential to the guidance?

Yes. I said in the prepared remarks, there was a conclusion of a contractual commitment. That was worth about $6 million in the quarter, Ken. And so we had contemplated that previously. We did have it in the back half of the year. Team did a great job of closing on those actions and facilitating that. So that was realized in Q2. So that's really why you see the jump to the 7.6%. Absent that, we'd have been at 7.1% for the quarter. But again, those things are -- we knew it. The team did a great job of executing it. They happen -- I'd say they're nonrecurring, but somewhat reoccurring in nature. It's just the types of contractual closeout activities, settlements, things of that nature that happen, and that happened in the second quarter. So really happy with being able to capture that early.

Our next question comes from Andre Madrid with BTIG.

To stay on T6 for a bit, I guess, looking at it, was this one of the 5 different $1 bill plus opportunities that you called out for '25 that you were bidding on? And maybe just, I guess, more broadly, a status update on how we are across those 5.

It was, and we're honored to have the opportunity to have it awarded right now. We continue to make progress on the other ones. Again, I think the team has aligned itself around the ones I've laid out before, and they continue to execute to the strategy. And this is just a proof point on that strategy in terms of being able to capture award. So again, I think I'm excited about what the business development team is doing. I'm really excited about what the execution team is doing to provide that past performance that customers are recognizing. So again, I think we are -- we continue to be excited about the pipeline that I've shared with you and also those major pursuits that are kind of near term in nature.

Got it. Got it. And then obviously, you also called out strategic acquisitions in the cap deployment strategy. It was the top point actually. And a peer of yours did -- it was reported that earlier this quarter or this past quarter that they were looking to possibly sell their aircraft maintenance business. I mean, how are you thinking about the legacy Vertex business? And is this something that you are looking to build out further inorganically? Would this be something of interest?

No. I mean we have -- we love our aircraft maintenance business. I think we'll continue to look at building out the MRO and mission modernization side and renewal side of the business. But again, I think where we're positioned right now, I like what we're doing. I like the awards we have. And whatever capital allocation strategy we put forward is going to be in the best interest of the shareholder.

Think of it, Andre, I think the way we view things a bit is complementary components that enable solutions for our customers. I think those are the things that we would initially start to look at from an M&A. And again, I think I said in the remarks, we have a target ratio of staying between approximately 2 and 3. I think Jeremy has used the word optionality since he's been here. And to do things beyond that, I think, constrain some of that optionality to do other things from an investment standpoint, either in the business or other things.

Yes. I mean, again, I think keeping that optionality on the table is important to me. I think whatever we do is going to be very thoughtfully done to add to the overall value of what we're offering. And again, I'm not trying to use words that sound somewhat flowery, but you kind of get where I'm going in terms of I like having optionality on the table. I like the idea of doing -- if we were to do any acquisitions that are going to add to the value that we offer to a customer today or extend to customers that we desire. So again, I look at the capital allocation strategy as one that keeps us within, as Shawn said, that 2% to 3% range, but also adds value, like I said, either what we're doing today or things that we want to do for someone going forward.

The next question comes from Jonathan Siegmann with Stifel.

So just back on the T-6 contract, congratulations, a great takeaway win. Ken asked about how the revenue ramps. Can you talk about how you're thinking about managing the risk? It is a new program, not new type of work, of course. But how does -- how do margins kind of flow relative to the company as a whole?

I'll let Shawn talk to the margin side. I will tell you, this team does this exceptionally well. One of the things that I have come to appreciate about this company is our ability to manage the execution of programs from really cradle to grave. And they have a tremendous ability on a global basis to support these programs, whether it's supply chain, whether it's the deployment of people. If you think about just what we've hired in the last, I want to say, 30 days, we've hired almost 1,200 people in the last 30 days in terms of standing up various programs. This team does an amazing job at this. And I am greatly impressed by their ability to manage the program start-up, the execution of the program and deliver on customer commitments. And that was what we were talking about with regards to the war fighter training program.

They went FOC in July. And that customer couldn't be any happier with that team's performance. And I think what Aileen and that team are doing is a demonstration of our ability to stand up these larger programs flawlessly. And so I'm expecting nothing less than that on the T-6 program.

When we think about the margin specifically, Jon, so they will ramp. Traditionally, what we see on a program of this nature is they will start at less than the company's composite average and grow over time. And by time, I would bound that in 18 to 24 months. And why do I say that? It takes some time to establish, and we've seen it in a program that we set up late last year like F5, get on the ground, understand how the supply chains work, understand the workflow, understand the schedules to maintain aircraft availability. And that's absolutely what we're about bringing to our customers. And so it will take some time to go do those things.

We expect nothing less on T-6. And I can tell you that Jeremy, myself, Roger Mason personally went down, worked with the team on that proposal and engaged and the team has got a very good plan that they'll begin executing exactly like Jeremy stated.

Excellent. And maybe if I could ask just on the budget environment. The big beautiful bill had quite a few things that seemed right on line with readiness in areas that you could benefit from. Just any comments on that. And we're hearing some other companies in the space talk about some frictions around contracting actions and anything like that. So is there anything that you're seeing pause in the environment that you would flag for us?

It's a great question. I think what we have talked about, which is our focus on readiness whether it's aircraft or whether it's mission support side that we do. We have seen that what we have as a strategy and what we have as capability aligns well with this administration's goal on readiness. We're excited on T-6. Look, we deliver some of the best readiness rates in the industry. We're excited to deliver those readiness rates to this customer. And so we think this budget aligns well with what we do. We have not seen friction to date on what we do because, again, what we do aligns exceptionally well to this administration's goal, and we're all aligned with it.

The next question comes from Peter Arment with Baird.

Jeremy, Shawn, Mike, nice results, good to chat with you. So just to follow up on Jon's kind of comment around the budget. Jeremy, you've made it kind of a point to bid on a lot more, and you've kind of highlighted that on a much bigger pipeline. Maybe and T-6 is a great example. But what are -- what else are you seeing that's kind of that you think is in V2X's wheelhouse? Are you getting a lot more opportunities?

Well, I think we're seeing very good demand pull, and we referenced it in the comments in the earnings call from FMS. We're seeing customers want to -- for us to deliver what we do for the U.S. government to them. And so we're seeing nice demand pull there. I think we're seeing good demand pull from renewal and modernization. I think those are areas where we are -- from a budgetary standpoint, we're a good value proposition. We're extending the life of these assets. We are giving them optionality on the extension of these assets. And I think that is something that has resonated well with the customers.

So again, when I look at the overall portfolio, we are well positioned, but I am seeing certain customers that are, like I said, on the FMS side, wanting more of what we do for the -- in terms of, hey, you're delivering these type of readiness rates, you're delivering this type of capability. We see that and we want that. And so they're pulling that through us. And again, I think on the renewal and modernization front, this is just something that extends life of assets and gives them modernization of those assets and better lethality. So again, I think everything we're doing is aligned very well with this administration to give them value for the dollars they're spending and giving them better outcomes as a result of that.

Got it. That's helpful. And then is -- should we think of FMS as a margin enhancer? Or have we -- you're still dealing with kind of past history of the way customers are buying from you?

Yes, I'd say it's a little bit of both that the recent award for the F-16 that we announced earlier is an example of, again, that pull that Jeremy mentioned from customers. There are opportunities for margin enhancement, absolutely. We think it's a big lever for us going forward from like a global capability and that stickiness of kind of land and expand, Peter, there. And this is, again, a great demonstrated capability for the team that leverages CLS support for our platform as well as base support. You're seeing the breadth of capability that is V2X brought to these customers and the ability to deliver. We think it's a good economic case for the company as well as for the customers.

And Shawn makes a good point. They're not pulling one side of this business. They're pulling the entire company. So the entire company was on that F-16 award. And so I think it's important to realize -- that doesn't happen unless V2X is who it is today. We are bringing the entire solution to the customer, and the customers recognize that and are asking for that.

The next question comes from Tobey Sommer with Truist.

Could you speak to your expectations for a seasonally strong contract award quarter in calendar 3Q from here? And I understand we've already got the T-6 award. So I kind of mean above and beyond that. Do you think we're in store for a strong seasonal quarter? Or are there puts and takes?

Our awards tend to be fairly episodic. Again, we're thrilled T-6 came out when it did. But again, in terms of the other ones that we're pursuing, we're always going to be a little lumpy when it comes to our book-to-bill just because of the episodic nature of these awards. We'll always have a steady flow of on-contract growth and some smaller awards. But again, as we pursue these larger and more franchise-based programs, they're going to be more episodic. And so I don't worry about the current quarter book-to-bill. I look more at the TTM because I think that's a better reflection of who we are and the type of business we're in. So I hope that's helpful because, again, in any given quarter, we may see very, very limited amount of new awards that are of any size. And then again, you get something like T-6 and some other awards that come through in any given quarter that make a quarter kind of pop. But again, I think on a TTM basis, that's the way I kind of look at the business.

It's nice to see the Army training contract ramp. But clearly, there are some headwinds in sunsetting and a task order reduction that you cited. Are there any known incremental drags to '26 revenue growth? Just kind of want to get your sense now for what those other things on the other side of the ledger might look like.

Yes. Great question. The -- yes, a couple of, call it, headwinds sunsetting. I'll remind folks, we do participate in contingency support operations, and those things can be episodic in nature. That's exactly what we have today in the Middle East. You will have noticed that the Middle East is down slightly year-over-year. Beyond that, the headwinds that we've previously talked about, KC-10, [indiscernible], there's a modest amount of that in the remaining of this year. For next year, we just kicked off the planning cycle where we're going through those details. There's nothing that gives me tremendous pause or concern right now about '26. I think there's better visibility in light of the T-6 award, the F-16 award, how those things will play out.

We're going through the planning phases because they are just now obviously ramping up and award notifications within the last 30 days.

And if I could sneak 2 in. You mentioned a shift to fixed price. How is that occurring? Because it could happen because the customer is converting a cost plus to a fixed price or you could simply be bidding on different kind of work that's contracted differently or maybe a blend of the 2. And then with respect to your share repurchase, do you anticipate that being open market? Or would the company participate should there be any future secondary offerings?

I'll start with the fixed price question. So it's a little bit of both, right? We have said previously and the team continues to put what are today cost type contracts in front of customers to convert to fixed price. We get mixed reactions to that. I'm encouraged by some of the things that I'm hearing, but it hasn't resulted in contractual actions yet. And then I think to Jeremy's point on the -- that he made in the prepared remarks on that pipeline, I think we're seeing more of a shift of the programs that we are pursuing that are fixed price in nature. Would you agree?

Absolutely. And again, we welcome it. I've said that before. I have the utmost confidence in our team's ability to deliver. And I think when you get to outcome-based contracts, this is what this company does best. We are -- we love contracts where it is entirely outcome-based because our performance demonstrates to a customer that they can trust us, they can rely on us and we'll deliver.

And then your question on the share repurchase, I think it could be both. We'll see. We'll do, again, what's in the best interest of the shareholders. Very happy to have the plan in place. We talk about these things regularly. We think it's the next evolution for the company. And again, we think we're extremely well positioned. We're very excited about the growth, and we'll take advantage of what we can.

The next question comes from Joe Gomes with NOBLE Capital.

Congrats on the quarter. First question is looking at the release, it looked like revenues in the Asia Pacific sector declined about 10%, a little over 9%, I guess, in the quarter. Just wondering, is that due to an absence of exercises? Or is there something else going on there?

I'd say there's been some delays in some of those exercises. So when we think about the contracting environment, it's -- there have been some delays in initiating some actions on the part of our customers. The team has wonderful opportunity sets in front of us. Not all of them have been acted on. I think they will be at some point, but we have seen, you're exactly right, a little bit of decline. I'm not worried about it. really for when I think longer term and as I think about 2026. But yes, this quarter, we did experience a modest amount of reduction.

Okay. And then on the backlog, I wonder if you could just kind of provide some more color here. So in the first quarter backlog was approximately $12 billion. That did not include LOGCAP, Ascension Island or the full value of the training. I think you mentioned this quarter, it's $11.3 billion, does not include LOGCAP, but you didn't mention Ascension or the full value of training. So I just wonder if you could kind of walk me through that would be a fairly substantial decline in the backlog quarter-over-quarter.

Sure. Yes. So for Q2, the net bookings were $517 million for the quarter. That's a book-to-bill of 0.5 and the backlog, as you rightly point out, at 11.3. Ascension Island is in that bookings number. And the award for the next year of WTRS will fall into -- the order for that will fall into Q3. So not really, I'll say, surprised where we are when we think about the bookings for the year. It's played out almost exactly to where we thought it would in terms of its weight distribution, kind of 70-30 back half first half. So yes, there's plenty of things that are not in it, as we pointed out, but I think we'll see that pick up here in the back half of the year.

The next question comes from Mariana Perez Mora with Bank of America.

[Technical Difficulty] on for Mariana today. I was wondering if you could talk about the protest environment a little more broadly with the 45-55, 1 half, 2 half split we discussed last quarter, how do we think about the risks of new awards being pushed to the right and slipping into 2026?

Well, it's always a risk, right? We manage those risks quite well. But again, we don't control the outcome of those protests. But again, we follow the process. We support our customers. Again, I'm not surprised by protests when they happen, but I think the team does a very good job in supporting protests as they get adjudicated. But again, it's the nature of this business. And like I said, I think the team does a good job in terms of supporting whatever is required in support of those protests.

What's encouraging is the cadence of the new awards that we expected has held from a timing standpoint, which has been very encouraging in terms of when you would expect to see new awards itself. Whether or not folks protest, I don't know, they'll make their own decisions on those things. We think our offerings stand on their own and believe we offer great value to our customers.

And then switching gears a little bit. You highlighted using more of a commercial-based approach on this latest T-6 award. Can you kind of dive into that and what that looks like?

Well, I mean, the supply chain side of this business is a fairly significant part of the overall business that we run. I think the procurement team again, I don't want to overemphasize the commercial aspect of it as much as it is commercial by nature. What they procure on a global basis and their ability to deliver that -- those goods and services on a global basis, I'll stand up against anybody. So when I look at what we have in front of us on T-6 and the number of aircraft that we need to continue to fly, it will just leverage what we do best already, which is a commercial-based approach to procurement.

The next question comes from Kristine Liwag with Morgan Stanley.

A quick follow-on question on the T-6. So I mean, this is an IDIQ award. You gave the revenue waterfall earlier. But I was wondering, with the IDIQ, like what's a sure revenue waterfall versus where could you potentially see plus ups or downside risk to the numbers that you gave?

Yes. So think of it as -- it's listed as an IDIQ. We a lot of it will be dependent on funding availability, right? So obviously, Jeremy mentioned the [ fleet 700 ]. There are always things to go do on these platforms to maintain readiness. I think it will come down to the funding availability. It is -- we are the only contractor that has been selected to execute this. So it's not like you're competing for task orders or things of that nature. It will be -- do the customers have the funding to improve availability, maintain it. That's what this will be. I only go off of what the program has historically executed. We'll see what the priorities are in a more defined budget. And once we get beyond the transition, which was announced last week.

Yes. I kind of view it the way if you think about the war fighter training, that was a single award IDIQ. There are dozens and dozens of task orders that we bid. It has to do with individual tasks that you go after in terms of supporting various aspects of the program. I would envision this one to be the same way. And I think Shawn is right. They're spending between $200 million to $300 million a year on this program today. I would envision that those same task orders would manifest itself again in the new award.

Great. That's really helpful. And maybe following on what you guys said about the contract award pace, it seems to be progressing as you had expected. But if we look at book-to-bill, book-to-bill was 0.4 in 1Q and 0.5 this quarter, and this is taking aside the T-6 order. But it seems like outside of T-6, the book-to-bill continues to be below 1. Can you provide some context regarding what your expectations are for book-to-bill for the second half of the year? And if there are holdups in those contract structures, where are those? And does the big beautiful bill address some of those uncertainties? Because ultimately, when we look at your full year outlook for revenue and EBITDA, they didn't change for the full year, even though you've had a very strong second quarter. So I just want to understand the movers and shakers for your full year outlook.

I think publishing the pipeline gave you a line of sight on the size of things that we are pursuing, which is pretty impressive. I think when I look at, like I said, book-to-bill, I look at the TTM on book-to-bill because of the episodic nature of our awards. I don't think any one quarter is truly reflective of the business as much as it is on a 12-month basis. Our goal is to be obviously well over 1 in a book-to-bill in any 12-month period. And that's what we're tracking to. And when I look at the number of major pursuits that I have in front of me, it supports that. So again, I think a quarter is interesting, but I think the TTM is much more reflective of a business like this.

I think you mentioned, I'll call it, a muted environment from a book-to-bill in the first 2 quarters. It's not dissimilar to what we thought when we came into the year, to be very candid with you. We forecast bookings, revenue, profitability, all those things, and it's played out kind of in line with what we thought. As Jeremy said, by the end of this year, at or above 1. There's lots of variables that will go into that. But we're not seeing anything as we sit here right now, I think that changes our perspective on being there at the end of the year.

Great. And to get to that 1 or above 1 for the full year, you'd have to have a pretty chunky order activity in the second half. Are there particular programs we should monitor or milestones that we should track?

Well, I mean, one obviously was the T-6, how that plays out. That is a -- what I would consider kind of a binary event, right, when we think about that we'll see how it plays out and what that would look like. The other one that I mentioned earlier that would happen here in the quarter would be the WTRS next year or the second year of it, and we're off in that transition. So I would expect something there as well.

Yes. And there's some other ones that obviously, we wouldn't share because they're competitive sensitive, but there are some other awards that we're expecting in the second half of the year. But again, when I look at the business on a 12-month basis, it is performing exactly where I would expect it to be.

The next question comes from Noah Poponak with Goldman Sachs.

Maybe just staying on that, I think you said you expected the bookings split first half, second half to be 30%, 70%. And I guess the specific math on that would imply $2 billion of bookings in the back half, which would keep the book-to-bill below 1. Is that more of a very directional statement? And as you mentioned, there's some sort of binary-ish things that could make it better than that? I guess to have book-to-bill at 1 for the year, it has to be 1.5 in the back half.

Yes. Yes, it was more of a directional comment, Noah, but I think we have line of sight to a book-to-bill that is greater than 1. between now and the end of the year. There are some variables that will come into play that I would consider somewhat binary. But again, we have line of sight into those things. I think the back half of the year will play out such that we end at or above 1.

Okay. Will the T-6 award likely have a protest? Or is there a scenario where that goes clean without a protest?

I don't know. Yes, I don't think we know. Like I said, we were awarded. The team has begun transition, and that transition ends in January of 2026. So we'll see how some things play out.

Okay. Can you remind us the drivers behind the pickup in top line organic revenue growth in the back half versus the first half?

Sure. So F5, the contract that we had a year ago has some modest growth. Think of that as $20 million-ish or so. The WTRS award from a year ago, think of that as $140 million, $125 million in that range depending on how some things go. So those are some of the big ones and the F-16 award that we had that we mentioned earlier. So those are some of the bigger awards here in the back half of the year that we're under contract, we're executing, and we expect to -- we expect to deliver on.

And I think, Noah, of note, which I highlighted earlier, we hired about almost 1,200 people in the last 30 days in support of those programs. So we're off and running on those programs.

Okay. Excellent. And then last one, what are the mechanics behind raising the EPS guidance, but not the EBITDA or cash flow? Just it didn't look like interest expense or tax rate or [Technical Difficulty] the normal below the operating line things were unusual year-to-date.

Yes. It's the interest expense from earlier in the year when we did some refinancing. It was about $0.15 that contributed there and a very modest maybe $0.01 or so of tax benefit. So that was the basis for the raise from some refinancing that we did kind of back in Q1 that we now flowed through to the total year.

This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks.

Great quarter. Thank you for your support. Thank you for taking the time to take the call. We're excited about the second half of the year, and we look forward to talking to you further. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.