Thank you for joining us for the Vectrus First Quarter 2022 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. And now I'll pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at Vectrus.

Thank you. Good afternoon, everyone. Welcome to the Vectrus First Quarter 2022 Earnings Conference Call. Joining us today are Chuck Prow, President and Chief Executive Officer, and Susan Lynch, Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on our Investor Relations website, investors.vectrus.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. Additionally, I'd like to point out that, in addition to GAAP earnings, we will be discussing and reporting adjusted non-GAAP metrics, including adjusted operating income and margin, adjusted EBITDA and margin, adjusted net income and adjusted diluted earnings per share. The definition of these non-GAAP measures can be found in our presentation materials, press release, and Form 10-Q. At this time, I'd like to turn the call over to Chuck Prow.

Thank you, Mike. Good afternoon everyone. Thank you for joining us on the call today. Before we get started, I would like to thank all of our employees and their continued commitment to our clients. Our team's demonstrated agility and outstanding performance in supporting several of the DoD's most critical and high-profile missions during the quarter. Please turn to Slide 4. We started 2022 on a strong note with revenue growth across several areas of our business. During the quarter, revenue grew 5% year-over-year and 9% sequentially to $456 million. Revenue growth was driven by the continued phasing of LOGCAP V, continued high OPTEMPO in the region we operate in support of ongoing world affairs, as well as the progress made in executing growth in our core programs. Adjusted EBITDA for the quarter was $18.2 million or a 4% margin as we work through program efficiencies in the early phases of LOGCAP V implementation. LOGCAP V is generating higher revenue volumes, with a greater amount of material and pass-through content that have a different margin complexion. I would like to point out that approximately 2/3 of our revenue is coming from contracts in the first 18 months of their life cycle, which provides substantial revenue visibility. As is standard in our business, operating margins tend to be lower at the beginning of the contract and generally improve over time as we execute our well-established process improvement and enterprise Vectrus initiatives. EPS for the quarter was $0.24, and adjusted diluted EPS was $1.01. Importantly, during the quarter, we continued to expand our geographic footprint through additional growth in INDOPACOM which now makes up 4% of revenue. We expect continued growth in the region and note that the DoD's recently released fiscal year 2023 budget calls for another major exercise in the region, which we believe could be similar in size to the tasks we performed in 2021. We also continued to expand and solidify our portfolio of work within the Army, the Navy, and the intelligence community through new wins and securing recompetes. Given our year-to-date results, we are reiterating our 2022 guidance and the non-GAAP guidance ranges. We believe our momentum will likely drive full-year revenue to be at the high end of our range, with margins at the low-to-mid given the aforementioned ramp in new programs and greater pass-through volumes. With that said, there is increasing opportunity to provide greater support to contingency events, which traditionally carry higher margins. Given our visibility momentum, adjusted EPS is expected to be above the low end of the guidance. Finally, on March 7, we announced our agreement to combine with Vertex in an all-stock merger, which I will cover later in the call. Please turn to Slide 5. In the first quarter, we continued to focus on the needs of our clients and supported several important missions and requirements. During the first quarter, Vectrus was selected to complete the final phases of the application development for 5G Naval Base Coronado Smart Warehouse, which is demonstrative of our ability to provide converged solutions and operational technologies to clients. Importantly, on April 29, Vectrus' leadership and DoD clients attended a ribbon-cutting ceremony and demonstration of the warehouse. The demonstration is focused on 5G radio access network and its optimization of warehouse operations via increased throughput of data, Internet of Things, and low latency. This is a major milestone for Vectrus and our client as Coronado was one of the first sites to test this technology for the U.S. Military, which will help map 5G strategy, development, and deployment across the DoD. In addition, we demonstrated our ability to transition quickly and recently became fully operational on LOGCAP V Kwajalein approximately 1.5 months ahead of schedule. This was a significant accomplishment given the extreme travel and logistical challenges we faced as a result of the pandemic. The phasing of Kwajalein involved over 1,500 employees and partners of Vectrus that are now providing a full spectrum of services, including operating schools, commissaries, retail stores, and community centers. We are also providing healthcare, environmental management, facility support, transportation, and IT services across the island. Several of the functions being provided are additive to our core O&M offerings and will provide pathways for performance in pursuing adjacent and expanded opportunities with clients in the future. We also leverage our process-oriented phase-in systems and, in a short period, became fully operational at the Logistics Readiness Center at Fort Benning following our December 2021 $250 million award. We are proud of this achievement and look forward to providing world-class maintenance, transportation, and supply services for the U.S. Army's maneuver training center over the next 5 years. During the first quarter, our team demonstrated Vectrus' rapid response and global capabilities by assisting the DoD with the establishment of a water supply system and water remediation in Hawaii. This effort was accomplished by using granular carbon activation units that were utilized to flush over 100 water distribution points. I again want to thank our teams who have worked tirelessly on this critical contingency operation. Additionally, late in the first quarter, Vectrus was awarded a strategically important task order to provide support for the U.S. Air Force in Europe as part of the European deterrence initiative. While currently small in value, it's a contingency effort providing vital and mission-critical services to our Air Force client in Europe and positioned us well for additional support. This effort exemplifies our global positioning and rapid response capabilities supporting our clients' most challenging and critical missions. Please turn to Slide 6 where I will discuss some notable contract wins. Our growth-related activities continue to experience positive momentum. Several recent wins have helped lay the groundwork for continued revenue growth and demonstrate success in our campaign to diversify our portfolio. We are continuing our positive traction working with the Navy, and we're recently awarded a follow-on contract for Spectrum Management valued at $60 million over 5 years. The award continued our work that helps the Navy in solving afloat electromagnetic interference and compatibility challenges for the fleet while maintaining spectrum dominance. Vectrus ensures that all components, platforms, systems, and equipment on a ship or an aircraft can operate without interference. Our support for this program dates back to 1987 and the development of the original Spectrum Management tool. We also won an effort as a subcontractor to continue performing electromagnetic test and evaluation engineering that supports the mitigation of electromagnetic interference on airframes and aircraft instrumentation. Finally, we were awarded a position on a $250 million 5-year IDIQ vehicle that provides rapid deployment prototyping and systems integration to the Navy, joint, and coalition forces worldwide, utilizing numerous platforms and integrated capabilities. These key wins demonstrate our capabilities in engineering and operational technologies and our commitment to delivering a more integrated and comprehensive suite of solutions in support of the converged environment. Vectrus has worked diligently over the past several years to expand its presence in the intelligence community. And during the first quarter, our teams were successful in securing several wins that enhance our footprint. These awards continue our support of IT and integrated security services that protect physical assets, IP, and computer systems for the intelligence community. Our first quarter results are demonstrative of Vectrus' realization and execution to strengthen and grow the business through outstanding program execution, capability expansion, and diversification of our geographic and client footprint. Now I would like to turn the call over to our Chief Financial Officer, Susan Lynch, for a review of the financials.

Thanks, Chuck. And good afternoon, everyone. Turn with me now to Slide 7 to discuss our first quarter results. First quarter 2022 revenue was $456.5 million, up $23 million or 5.2% year-on-year. Our solid top line growth was boosted by the transition to full operational capability on LOGCAP V programs in Iraq and Kuwait late last year and Kwajalein this year. In addition, revenue benefited from transitioning the Fort Benning program and volume associated with rapid response and contingency efforts. Importantly, we were able to grow the top line despite the headwinds of the withdrawal of U.S. military from Afghanistan. Operating income was $5.2 million and was impacted by the incurrence of $9.1 million of M&A and integration-related cost. Adjusted EBITDA was $18.2 million or a 4% margin as compared to $20.7 million or 4.8% in the prior year. Adjusted EBITDA margin was influenced by the significant amount of revenue and contracts that are in the early stages of their life cycle. We believe margin on these contracts will improve over time as we apply our process improvement and enterprise Vectrus initiatives. Margin was also affected by our increased support of our clients' supply chain needs which is driving an increase in material and pass-through content that typically carries a lower margin. In aggregate, on average and over time, we expect to see improvement in the margin profile as we drive operational efficiencies and diversify into higher-margin scopes of work. Net income for the first quarter of 2022 was $2.9 million. The effective tax rate in the first quarter of 2022 was 19.7% compared to 17.5% in Q1 2021. The effective tax rate this quarter was higher than anticipated due primarily to the accounting treatment of certain M&A transaction costs related to the Vertex merger. Adjusted net income was $12 million compared to $14.2 million in the prior year. Fully diluted earnings per share for the first quarter of 2022 was $0.24. Adjusted EPS, which adds back merger, integration, and amortization of acquired intangible assets was $1.01 compared to $1.20 in the prior year. The change in adjusted EPS was primarily due to the aforementioned change in adjusted EBITDA. Turn now to Slide 8. Cash used in operating activities in the first quarter was $26.4 million compared to $21.7 million in the prior year. Cash used in operating activities includes an approximately $8 million repayment of CARES Act tax deferrals and a $2 million payment to support merger activities. Cash at quarter end was approximately $23 million. Total debt was $119.8 million, down $57.2 million from Q1 of 2021, as we continue to pay down the debt tied to the acquisitions of Zenetex and HHB. The company's total leverage ratio was 1.4x, down from 2.0x in Q1 2021. Please turn to Slide 9. Our backlog remains solid at $4.5 billion and is nearly 2.5x revenue, a unique attribute of our business, providing visibility into the remainder of the year and beyond. The amount of urgent rapid response and contingency task orders that Vectrus has been awarded over the past 12 to 18 months is higher than the levels we've witnessed over the past several years driven in part by LOGCAP V. We believe this pattern will continue for the next several years and are expecting a greater volume of task orders that could quickly materialize as revenue in the same period the order is booked. Turn with me now to Slide 10. In 2022, we are maintaining our focus on program execution while driving expansion associated with our campaigns and new business pipeline. In line with these efforts and our solid Q1 results, we are reiterating our full year 2022 guidance ranges for revenue, adjusted EBITDA, adjusted diluted EPS, and net cash provided by operating activities, excluding M&A-related activities. Revenue guidance remains at $1.82 billion to $1.86 billion, reflecting year-on-year growth of 2% to 4% with the accelerated phase-in of LOGCAP V and Kwajalein, successful start-up at Fort Benning, remediation efforts in Hawaii, and work supporting the Air Force in Europe, we are tracking towards the high end of guidance on revenue. As a result of the significant amount of contract wins and start-ups and the complexion of material and pass-through content, we expect adjusted EBITDA margin to be in the low to mid-range of our guidance of 4.5% to 4.7%. Given our visibility and momentum, adjusted EPS is likely to be above the low end of our guidance range of $4.57 to $4.93. Due to merger activities with Vertex, we are not providing GAAP guidance or a reconciliation due to the difficulty in forecasting the transaction timing and quantifying certain amounts that are necessary for the reconciliation. Excluding merger and integration-related payments, we expect net cash provided by operating activities to continue to be $50 million to $53.5 million. I'd like to now turn the call back over to Chuck.

Thank you, Susan. Now I'd like to give you an update on the merger we announced on March 7 with Vertex. On April 27, 2022, we issued the special meeting proxy which provides shareholders with more information pertaining to the specifics of the transaction. Additionally, today, we filed a supplemental investor briefing with the SEC that contains information regarding the merger with Vertex, much of which was contained in the proxy. For the remainder of the call, we will cover several of the slides contained in this investor briefing. Please turn to Slide 12. The combination of Vectrus and Vertex creates a stronger, more diversified company and a leading global provider of mission essential solutions and technology to national security, defense, civilian, and international clients. The combination provides a significant value creation opportunity for our shareholders, broader and deeper capabilities to our clients, and greater opportunities for the people of the combined company. There are many benefits to this combination, several of which are being identified on this slide. Pro forma revenue and adjusted EBITDA for the combined business is approximately $3.6 billion and $290 million, which includes $20 million of previously disclosed run rate synergies. This equates to an adjusted EBITDA margin greater than 8%. This should not be construed as 2022 guidance. We plan to issue 2022 formal guidance after the merger closes. The visibility and long-term contracts of the combined company is an important attribute and differentiator. Inclusive of Vertex's recent $850 million Navy Test Wing Atlantic win, the combined business will have over $12 billion in backlog. Please turn to Slide 13. Many of you know that Vectrus has a proud history going back to 1945 at Federal Electric Corporation, which was a service arm of ITT. However, it is also worth noting that Vertex has a 45-plus year legacy stemming back to Beech Aerospace Services, which was originally formed from the Beech aircraft company that was founded in 1932. The Vertex business was acquired by Raytheon in 1980, and later by L3 until eventually being purchased by AIP in 2018. In December of 2021, Vertex acquired the technology and training solutions business from Raytheon, ultimately creating what is known today as the Vertex company. As can be seen on the page Vertex and Vectrus have decades of experience and history but also share a value-based and client-focused culture that is built on a shared mission and the key principles of integrity, respect, responsibility, and professionalism. Please turn to Slide 14. As mentioned, Vertex has a long legacy operating in the aerospace and defense market and a capability-rich portfolio that spans over 125 locations across the globe. Key capabilities of Vertex include engineering and logistics, Aerospace and Defense Services, modernization and sustainment, training solutions, sensor and platform integration, and mission support. Vertex' agility, rapid deployment capability, and client optimization have been key components in distinguishing the company from its competitors. With revenue approaching $1.8 billion and adjusted EBITDA margins of approximately 11%, Vertex is a leader in its markets. Please turn to Slide 15. The table on this page shows exactly how complementary Vectrus and Vertex are. As can be seen, the combination creates a truly unique comprehensive set of capabilities across the operations and logistics, aerospace, training, and technology markets. Please turn to Slide 16. The strategic benefits associated with the combined company's capabilities are significant. We see meaningful revenue synergies and opportunities to leverage the portfolio of technologies and solutions to better provide full lifecycle support services to critical and enduring missions. However, the diversification benefits of the combination are also material. As you can see on the right-hand side of the page, the combined business will have a much more balanced portfolio of clients and contract types across an expanded geographic footprint. We will not only balance our client portfolio with our concentration in the Army moving to 41% from 64% but also added several new clients that increase our route to market and cross-selling opportunities. Additionally, the diversification of our portfolio helps provide top-line resiliency through various economic and political cycles. From a contract perspective, the overall portfolio has much improved as we will have over 300 contracts with no task order estimated to make up more than 11% of revenue. Furthermore, both Vertex and Vectrus have been successful in winning significant new and recompete contracts that are in the early stages of their life cycle with notable periods of performance remaining. For example, in March, Vertex won a new $132 million 5-year task order to provide Air Force Global Strike Command with rotary wing maintenance. The Air Force Global Strike Command is responsible for providing combat-ready forces to conduct strategic nuclear deterrents and global strike operations. Moreover, in April, Vertex announced it was awarded a new $850 million 7-year contract to provide aircraft maintenance to the Naval Test Wing Atlantic which has 5 squadrons comprising a range of fixed wing, rotary, and unmanned aircraft. The aircraft supported by this contract performed a variety of test and evaluation missions. While the award is currently under protest, this is a significant win for Vertex that demonstrates the momentum of this business. The strong velocity of awards resulting in a total backlog for the combined company that is over $12 billion, including Naval Test Wing, equates to approximately 3.4x the combined companies' pro forma 2022 revenue. Please turn to Slide 17. The results from our previously mentioned wins are visible on this table, with both Vertex and Vectrus having many contracts that extend into 2025 and beyond. Several contracts represented in this table extend into and beyond 2028. Importantly, the contracts listed on this page comprise over 40% of the pro forma 2022 revenue and we believe provide substantial visibility over the next several years. With a significant portion of our recompete behind us and a solid amount of revenue under contract over the next several years, we believe the combined company is well positioned to aggressively focus on addressing new opportunities to further grow the business. Now I'd like to turn the call back over to Susan to discuss some of the financial attributes of the merger.

Thanks, Chuck. Please turn to Slide 18. The pro forma financial profile of the company remains compelling with improved scale, strong margins with significant cash generation. Revenue for the combined company is expected to be approximately double where Vectrus is today and provides enhanced scale and ability to compete. Additionally, pro forma adjusted EBITDA and margin is expected to improve markedly from the midpoint of Vectrus' 2022 guidance of 4.6%. Inclusive of $20 million in run rate synergies, EBITDA margin would exceed 8%. An important characteristic of both Vertex and Vectrus are the very low capital requirements to operate the business. We believe that normalized capital expenditures of the pro forma business would be less than 1% of revenue. As we mentioned during our last call, there are also several attractive tax attributes that lower the effective tax rate and generate cash tax savings for the combined company. The tax attributes are $1.1 billion in aggregate and are estimated to yield $18 million in annual cash savings over the next 12 years. Please turn to Slide 19. As Chuck mentioned, both companies have won a substantial amount of recompete and new business, which provides excellent visibility over the next several years with a solid platform for growth. We believe the combination of revenue growth, strong margin, and high cash generation will result in significant value creation for shareholders over the next several years. The left-hand side of the page shows our opportunity to potentially achieve materially higher revenue in the future. While revenue growth is subject to the timing of awards, protests, budgets, and other factors, we believe that looking ahead, top-line growth can yield strong adjusted EBITDA and margin. This is expected to be achieved through business mix, supply chain, contract and business efficiencies, the automation of core processes, technology insertion, and operating leverage from fixed cost. I'd like to point out that the 2022 adjusted EBITDA includes $20 million of run rate synergies, which are anticipated to be fully achieved in 2024. The associated costs to achieve synergies totaled $20 million over the next 3 years and are not included in adjusted EBITDA. Vertex also anticipates approximately $18 million of additional annual net cost savings tied to its 2021 acquisition of the technology and training solutions business from Raytheon. And with full run rate savings achieved by the end of 2023 partially phased in, in 2022 and 2023. These cost savings are incremental to the previously disclosed $20 million of synergies related to the combination of Vectrus and Vertex. The associated costs to achieve synergies totaled $18 million through 2023 and are not included in adjusted EBITDA. We anticipate total net synergies to make up approximately 1% of combined revenue, a conservative target when comparing to relevant transactions in our sector. Please turn to Page 20. We believe that our combined revenue growth and margin opportunities, in conjunction with our low CapEx requirements, will drive substantial cash flow generation. The cash generation capability of the combined company is illustrated in this pro forma walk from adjusted EBITDA. This illustrative bridge assumes adjusted EBITDA of $290 million, which includes $20 million of run rate synergies. Interest expense of $72 million is based on the capital structure outlined in the proxy. Cash taxes of $28 million assume an illustrative 23% tax rate and includes the previously mentioned $18 million cash tax benefit. Capital expenditures are currently estimated at $20 million. Working capital is estimated at $25 million, and stock-based compensation is $15 million in this illustrative scenario. Please note this scenario does not include one-time merger and integration costs. Please turn to Slide 21. We believe the powerful cash generation capability of the combined business will support the ability to rapidly delever from the anticipated 3.8x pro forma net leverage at close. We see a clear path to achieving a net leverage ratio of approximately 3x within 18 months of close. Now I'd like to turn the call back over to Chuck.

Thank you, Susan. Please turn to Slide 22. We remain confident that the merger with Vertex will create significant value for our shareholders while further exemplifying our leadership in the emerging converged market and creating larger, more balanced and differentiated business with greater growth opportunities for our people. In terms of timing, since announcing the intent to merge with Vertex on March 7, we have been working several actions required to close the transaction. Myself and the members of the senior leadership team have had several integration planning meetings with Vertex leadership. We are unanimous in our feeling that our cultures could not be more complementary, and we are eager to work together post-close. We remain on track to close this transaction in the third quarter, as noted on Slide 23. Now I'd like to turn the call open to questions.

Our first question is from Joe Gomes with NOBLE Capital.

So the first one I have here, revenues in the quarter were up 5.2% above the 2% to 4% guide. Just wondering, for the quarter, was that in line with your expectations, better than expectations? What kind of drove the, for lack of a better word, outperformance on the top line in the quarter?

There are a couple of items, Joe, and thanks for identifying that. We were very successful in the case of the INDOPACOM Kwajalein task of moving the full operational date to the left by about 6 weeks, as I noted in my remarks, which was a portion of that overperformance. Secondly, there were some aspects of an exercise in INDOPACOM again that were initially planned for later in the year that occurred earlier in the year. And finally, the water remediation effort in Hawaii actually went a bit longer at a slightly larger scope than we had anticipated.

You mentioned several times the potential for margin improvement as we are still in the early stages of many contracts. As these contracts develop, we expect to see better margins. Can you provide some insights on when this improvement might begin? You mentioned around 18 months, and I recall you stating that about two-thirds of revenues come from the first 18 months of the contract. Will we start to see margin improvements by 24 months, 36 months, or potentially longer? I'm looking for a clearer understanding of when we might expect to see an increase in margins.

I would say at the one-year mark of each contract. Typically, there is a base year, which has the lowest margin, and that is where the pricing reset occurs. After that, we usually see some margin improvement as we go into the first option year or the second year of the contract. Then, during the second and third option years, we start to fully realize the margins in those contracts. Looking back at some of our wins over the past 5 or 6 years, we see a similar ramp. Having two-thirds of our revenue in the first 18 months, which includes the base year and part of the option year, is quite unusual. It’s actually a great situation, and we feel fortunate to have it. Furthermore, I appreciate how our teams are collaborating with clients to transition work that could have originally been cost-type contracts to a more fixed-price model.

Okay. Switching gears a bit, three of the major contracts you are involved with—K-BOSSS, LOGCAP Iraq, and LOGCAP Kuwait—are coming up for renewal. I believe K-BOSSS expires in August, and the LOGCAP contracts are entering their first option year. Can you walk us through how this will unfold? K-BOSSS represented about a $280 million revenue opportunity in 2021. Will most of that revenue transition to the LOGCAP Kuwait contract model? Or could you provide some insights on how this will operate moving forward?

Yes, that's correct, Joe. We are continuing to phase out the historical K-BOSSS task, with most of that work transitioning to the Kuwait task under LOGCAP. As we've mentioned before, there are elements of the original K-BOSSS contract that are not included in LOGCAP, specifically the security part of K-BOSSS. We expect to reach a standard operating pace on the new Kuwait task without K-BOSSS in the second half of the year, which should be clear to everyone. Susan, do you have anything to add?

No, I think you're right on. The last 2 quarters, we've been at about $98 million to $105 million. So I think we're probably right in that range going forward.

If we could discuss the Vertex acquisition for a moment, you recently filed the proxy. Chuck, in your conversations with your stakeholders and shareholders, what feedback have you received regarding the acquisition? Have any major shareholders expressed concerns, and if so, how are you addressing those?

Yes. This is a transformational merger to be very clear. Early after the announcement, we had many conversations with our current investors, other analysts like yourself, and as the logic became clear, our investor base at that point in time became comfortable that the strategic objectives of the acquisition, such as the increased profitability of margins, the increased diversification of those contracts and geography, so the industrial logic becomes very clear. So while I certainly don't have a taste to predict the future, at this point in time, I feel that there is a general understanding of the strategic benefit of the acquisition and we look forward to moving into the shareholder vote.

I have a couple more quick questions. You mentioned the cost synergies, Susan, referring to the $20 million announced during the call and the $290 million adjusted EBITDA. Today, you're stating there are an additional $18 million in cost synergies from the Vertex acquisition. How does that relate to the $290 million? Is it additive?

Yes. Thanks for the question. So there is a small portion of the $18 million that is already in that $290 million or the $193 million specific to Vertex, but it kind of ramps in 2023 and then it is all in the 2024 numbers and beyond that you see in the proxy. So it's already kind of tethered into the plans that you have in the proxy.

And two more quick ones, if I may. In the last couple of years, you have had a lot of base restrictions due to COVID. Is any of that remained or left, or are they all pretty much gone? And two, obviously, one of the key items that's brought up here in the entire earnings season has been employee attraction and retention. Just wondering how you guys are faring in that area.

I believe that most of the operational challenges related to COVID are behind us, but we still face staffing pressures globally as you might expect. Therefore, I wouldn't solely blame our current staffing issues on COVID, although it certainly created a situation that we need to keep improving over time. Additionally, there are ongoing supply chain challenges that can be traced back to COVID, but operationally, I think we have navigated past most of those difficulties.

The next question is from Tobey Sommer with Truist Securities.

With respect to the merger, I was wondering if you could comment on the revenue synergy opportunities. And I have in mind one of the slides you have that has the checks of capabilities on one side versus the other and where there isn't overlap, where do you see the best opportunities?

Thank you, Tobey. One of the great things about this acquisition that we've talked about on several occasions is that we are 2 very complementary businesses. And we do not see much, what we call, revenue dyssynergies at all because of the fact that we are focused on different segments within the operational aspects of the federal services marketplace. Having said that, we do believe strongly that there will be revenue synergies that our combined capabilities and our combined scale will be able to address, and we see this in areas that have not been in our traditional markets, such as at the international markets and certain foreign military sales markets as well as within our core markets, where, as I've already stated, the combined capabilities just make, I'd say, a larger, more capable offering to our clients. So we do believe strongly that there will be revenue synergies. And as we get through the vote and into operating as a combined company, we fully expect to update you and the investor base in general about where we see those opportunities.

Could you maybe give us a sense of the cadence within the corridor and then in here so far in 2Q about maybe OPTEMPO and what that's been like as we clearly have a major conflict in the world, and some of your customers may be responding to that from a pure budgetary standpoint. We then got a budget midmonth in March, and I'm curious what it was like sort of before and after from an award perspective.

I would say that the first quarter or the first four months of the year have traditionally been a bit slower for us from an award perspective. However, regarding the operational tempo around our existing program base and the contingency contracts we've discussed, that tempo has been very high and strong globally for obvious reasons. We talked about the European activities, but there are also ongoing activities in the Middle East related to the changes in Afghanistan. Additionally, we mentioned in our prepared remarks that activities in INDOPACOM have actually increased in exercise support. So, to answer your question, the operational tempo around our current installed program base and contingency contracts has positively impacted us in the first quarter of the year. As you know, we've maintained our guidance, leaning toward the top end of the revenue range. I believe we’ll be able to provide more clarity on this as we progress through the first half of the year and during our next discussion in August.

My last question is also kind of a budgetary one. But what are you hearing from contacts on Capitol Hill with respect to President Biden's budget request, which is kind of a marker in the different branches of military and their sort of budget outlook as we look into fiscal '23? And I know we just got a budget for fiscal '22, but it's always onto the next thing.

Our focus has historically been on the operations and maintenance lines of the budget. We continue to experience strong demand for maintaining the infrastructures and operations that we support. I should also point out that while not part of the combined business, the older platforms in the aerospace market are included in this category. Given the significant investment in various national security operations globally, there is consistent pressure on that funding. However, this situation is favorable for the operations and maintenance components of the budget. It is now our responsibility to collaborate with our clients in ways that add value and demonstrate how we can enhance the operations and maintenance practices, ultimately ensuring they last longer and providing greater value over the entire life cycle of the operations and platforms we support.

The next question is from Bert Subin with Stifel. Please go ahead.

Chuck. If we strip out LOGCAP V, what's the best way to think about organic growth for the rest of the business? And maybe just a follow-up to that, what should we expect the full run rate for LOGCAP to be as a percentage of Vectrus' revenue?

I think that what we have talked about here publicly is that LOGCAP as a vehicle is significant to our business. I will indicate very clearly that the exercises and so forth that we continue to perform on and win were not a part of the original award. So LOGCAP, as a route to market for us is significant and will continue to be significant. With regard to very specifically the Kwajalein task which, as you know, was not new to Vectrus and the Kuwait task which was protective of our base. We see the Kuwait task very similar, less the security scope as we encountered in the prior K-BOSSS activity. Kwajalein, we see looking not dissimilar to the prior incumbent that was in Kwajalein. And with regard to Iraq, Iraq's current run rate, as you can see in the prepared materials, is much more significant in terms of dollar run rate than we had originally bid and announced initially. So not an exact answer to your question, but LOGCAP as a route to market is substantial, and we continue to leverage with new wins activities under the LOGCAP contract. I can move to other contracts like the spectrum work that we had just talked about today, like the AFCAP work which is addressing additional contingency operations globally as well as the continued string of wins we've had in the Navy as a way to demonstrate that we continue, I believe, to be very successful in both the protection of our base and new wins in not only LOGCAP but across the various areas in the operational space that we support.

Would you say it's fair to say that outside of LOGCAP, just excluding that contract vehicle, the underlying business is organically growing? I know you've highlighted several...

The short answer to your question is yes.

And then maybe just digging deeper on the non-LOGCAP stuff, you noted in the release increased activity during the quarter that was coming from EDI, European Deterrence Initiatives. The funding there, if we go back a few years, has been cut and seems to be growing again. It looks like the budget request there is getting better. Can you help us frame what opportunity you have as a company there, maybe this year or next?

Regarding our operations in Europe, the primary demand we’ve observed so far has largely come from the Air Force and certain client segments that we can't discuss extensively at this time. Nevertheless, the developments in Europe, along with the increased operational tempo in INDOPACOM, are noteworthy. We mentioned in our prepared remarks that the launch at Fort Benning was executed quickly and smoothly, without any protests related to the contract. The ability to bring on new contracts like this efficiently and within the anticipated cost framework is significant. We continue to show our capacity not only to competitively acquire new scope in the market but also to transition that scope into full operational capability in a very efficient manner.

Just to clarify, I know you mentioned the Air Force, and it seems there are some classified customers in Europe. You indicated in the release that the Air Force is currently not a significant factor. Do you anticipate that changing, or is it difficult to predict at this time?

It's difficult to predict, but based on my experience, when you support a mission and perform exceptionally well, there is a strong chance that mission will expand. As we usually do, our teams showcased in Hawaii at the end of last year how we can execute seamlessly and with agility to support various missions.

But just one last question from me. Have you noticed any change in the competitive environment for the contracts you're bidding on? It seems like your largest historical competitor has started to focus more on higher-tech areas, but they still handle operations and logistics work, though it appears they are doing less of it now. I'm curious if you're seeing any changes among contractors in the competitive landscape.

I believe we have observed significant consolidation in the operational aspect of the federal services marketplace. Vertex has notably experienced this in the aerospace sector as well. This consolidation does not reduce competition; rather, it enhances the focus and coordination among our competitors. We are committed to executing our go-to-market strategy and remain focused on the key campaigns. When an industry consolidates, it creates both opportunities and challenges, and we are keenly aware of both in this evolving marketplace.

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

Thank you very much, everyone, and thank you for joining us on the call today. We look forward to reporting back to you both on the status and progress on the merger as we move through this quarter and to the next time we talk in August. Thank you very much, and we'll talk to you soon. Goodbye.

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