V2X, Inc 10-Q for FY2022 Q3

V2X, Inc. (VVX)

10-Q 2022-11-08 For: 2022-09-30

Added on April 07, 2026

About this 10-Q

V2X, Inc filed this 10-Q on November 8, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $958.16M; up 108.6% from $459.41M a year earlier
Net loss: $17.04M; compared with net income of $10.26M a year earlier
Diluted EPS: -$0.56; compared with $0.87 a year earlier

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Indiana		38-3924636
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2424 Garden of the Gods Road, Colorado Springs, Colorado 80919
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code:
(719)	591-3600


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01 Per Share	VVX	New York Stock Exchange


		Page No.
	PART I. FINANCIAL INFORMATION	4
Item 1.	Financial Statements	4
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Changes to Shareholders' Equity	8
	Note 1. Description of Business and Summary of Significant Accounting Policies	10
	Note 2. Recent Accounting Standards Update	11
	Note 3. Merger	12
	Note 4 . Revenue	14
	Note 5 . Receivables	16

	Note 6 . Goodwill and Intangible Assets	17
	Note 7 . Debt	17
	Note 8 . Derivative Instruments	21
	Note 9 . Leases	21
	Note 1 0 . Commitments and Contingencies	22
	Note 1 1 . Stock Based Compensation	24
	Note 1 2 . Income Taxes	25
	Note 1 3 . Earnings Per Share	26
	Note 1 4 . Deferred Employee Compensation	26
	Note 1 5 . Multi-employer Pension Plan	26
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	37
	PART II. OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
	Signatures	41


	Three Months Ended				Nine Months Ended
	September 30,		October 1,		September 30,		October 1,
(In thousands, except per share data)	2022		2021		2022		2021
Revenue	$	958,156	$	459,408	$	1,912,693	$	1,364,257
Cost of revenue	861,073		418,900		1,733,654		1,235,209
Selling, general, and administrative expenses	92,596		27,618		154,295		77,045

Operating income	4,487		12,890		24,744		52,003
Interest expense, net	(27,265)		(1,955)		(30,908)		(6,140)

(Loss) income from operations before income taxes	(22,778)		10,935		(6,164)		45,863
Income tax (benefit) expense	(5,739)		677		(2,453)		7,623
Net (loss) income	$	(17,039)	$	10,258	$	(3,711)	$	38,240

(Loss) earnings per share
Basic	$	(0.57)	$	0.87	$	(0.21)	$	3.27
Diluted	$	(0.56)	$	0.87	$	(0.21)	$	3.23
Weighted average common shares outstanding - basic	29,830		11,726		17,806		11,696
Weighted average common shares outstanding - diluted	30,172		11,849		18,020		11,830


	Three Months Ended				Nine Months Ended
	September 30,		October 1,		September 30,		October 1,
(In thousands)	2022		2021		2022		2021
Net (loss) income	$	(17,039)	$	10,258	$	(3,711)	$	38,240
Other comprehensive income (loss), net of tax
Changes in derivative instruments:
Net change in fair value of interest rate swaps	—		242		666		766
Net change in fair value of foreign currency forward contracts	—		(62)		31		(557)

Tax (expense) benefit	—		(3)		272		(30)
Net change in derivative instruments	—		177		969		179
Foreign currency translation adjustments, net of tax	(2,136)		(3,093)		(6,390)		(5,019)
Other comprehensive income (loss) net of tax	(2,136)		(2,916)		(5,421)		(4,840)
Total comprehensive (loss) income	$	(19,175)	$	7,342	$	(9,132)	$	33,400


	September 30,		December 31,
(In thousands, except per share information)	2022		2021
Assets
Current assets
Cash and cash equivalents	$	144,061	$	38,513
Restricted cash	3,312		—
Receivables	690,943		348,605

Prepaid expenses	74,483		21,160
Other current assets	12,398		15,062
Total current assets	925,197		423,340
Property, plant, and equipment, net	75,960		23,758
Goodwill	1,537,710		321,734


Intangible assets, net	559,985		66,582
Right-of-use assets	51,968		43,651
Other non-current assets	17,632		10,394
Total non-current assets	2,243,255		466,119
Total Assets	$	3,168,452	$	889,459
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	385,936	$	212,533

Compensation and other employee benefits	147,870		80,284

Short-term debt	11,850		10,400
Other accrued liabilities	172,027		55,031
Total current liabilities	717,683		358,248


Long-term debt, net	1,286,985		94,246
Deferred tax liability	50,249		32,214
Operating lease liability	40,234		34,536
Other non-current liabilities	84,918		20,128
Total non-current liabilities	1,462,386		181,124
Total liabilities	2,180,069		539,372
Commitments and contingencies (Note 10)
Shareholders' Equity
Preferred stock; $0.01 par value; 10,000 shares authorized; No shares issued and outstanding	—		—
Common stock; $0.01 par value; 100,000 shares authorized; 30,460 and 11,738 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	305		117
Additional paid in capital	735,357		88,116
Retained earnings	264,042		267,754
Accumulated other comprehensive loss	(11,321)		(5,900)
Total shareholders' equity	988,383		350,087
Total Liabilities and Shareholders' Equity	$	3,168,452	$	889,459


	Common Stock Issued			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Total Shareholders' Equity
(In thousands)	Shares	Amount				Retained Earnings
Balance at December 31, 2020	11,625	$	116	$	82,823	$	222,026	$	(27)	$	304,938
Net income						12,048				12,048
Foreign currency translation adjustments								(2,356)		(2,356)
Unrealized loss on cash flow hedge								(77)		(77)
Employee stock awards and stock options	75	1		113						114
Taxes withheld on stock compensation awards				(2,184)						(2,184)
Stock-based compensation				1,983						1,983
Balance at April 2, 2021	11,700	$	117	$	82,735	$	234,074	$	(2,460)	$	314,466
Net income						15,934				15,934
Foreign currency translation adjustments								430		430
Unrealized gain on cash flow hedge								79		79
Employee stock awards and stock options	24	—		—						—
Taxes withheld on stock compensation awards				(88)						(88)
Stock-based compensation				2,003						2,003
Balance at July 2, 2021	11,724	$	117	$	84,650	$	250,008	$	(1,951)	$	332,824
Net income						10,258				10,258
Foreign currency translation adjustments								(3,093)		(3,093)
Unrealized gain on cash flow hedge								177		177
Employee stock awards and stock options	3	—		—						—
Conversion of liability-based stock compensation awards to equity-based stock compensation awards				405						405
Taxes withheld on stock compensation awards				(45)						(45)
Stock-based compensation				1,680						1,680
Balance at October 1, 2021	11,727	$	117	$	86,285	$	260,266	$	(4,867)	$	341,801

Balance at December 31, 2021	11,738	$	117	$	88,116	$	267,754	$	(5,900)	$	350,087
Net income						2,855				2,855
Foreign currency translation adjustments								(616)		(616)
Unrealized gain on cash flow hedge								374		374
Employee stock awards and stock options	67	1		—						1
Taxes withheld on stock compensation awards				(1,626)						(1,626)
Stock-based compensation				3,100						3,100
Balance at April 1, 2022	11,805	$	118	$	89,590	$	270,609	$	(6,142)	$	354,175


(In thousands)	September 30, 2022
Cash and cash equivalents	$	144,061
Restricted cash	3,312
Total cash, cash equivalents and restricted cash	$	147,373


($ in thousands, except share and per share amounts)	Purchase Price
Shares of V2X common stock issued	18,591,866
Market price per share of V2X as of Closing Date	$	33.92
Fair value of common shares issued	$	630,636
Fair value of cash consideration	3,315
Total consideration transferred	$	633,951


(In thousands)	Preliminary Fair Value
Cash and cash equivalents	$	197,747
Receivables	336,169

Prepaid expenses	49,531

Property, plant, and equipment, net	53,618

Intangibles assets, net	522,000
Other assets	18,670


Accounts payable	(122,269)
Net debt	(1,352,304)
Accrued payroll	(49,282)





Other liabilities	(235,905)
Total identifiable net assets	(582,025)
Goodwill	1,215,976
Total purchase consideration	$	633,951



	September 30,		December 31,
(In millions)	2022		2021
Performance Obligations	$	3,362	$	1,398



(In thousands)	September 30, 2022		December 31, 2021
Billed receivables	$	190,358	$	104,074
Unbilled receivables (contract assets)	490,101		239,979
Other	10,484		4,552
Total receivables	$	690,943	$	348,605


Period	Amortization
2022 (remainder of the year)	$	25,165
2023	$	100,661
2024	$	99,554
2025	$	98,757
2026	$	98,286
After 2026	$	137,562


(In thousands)	Payments Due

2022 (remainder of the year)	$	2,962
2023	11,850
2024	11,850
2025	11,850
2026	11,850
After 2026	1,314,363
Total	$	1,364,725


	NQOs			RSUs
(In thousands, except per share data)	Shares	Weighted Average Exercise Price Per Share		Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding at January 1, 2022	59	$	23.19	245	$	51.18
Granted	—	$	—	236	$	35.83
Replacement awards	—	$	—	1,346	$	33.92
Exercised	(16)	$	24.43	—	$	—
Vested	—	$	—	(158)	$	42.29


Forfeited or expired	—	$	—	(27)	$	38.84
Outstanding at September 30, 2022	43	$	22.76	1,642	$	35.51


	Three Months Ended						Nine Months Ended
	September 30,		October 1,		%		September 30,		October 1,		%
(In thousands)	2022		2021		Change		2022		2021		Change
United States	$	582,817	$	139,357	318.2	%	$	908,271	$	435,717	108.5	%
Middle East	261,997		263,257		(0.5)	%	747,310		761,758		(1.9)	%
Europe	62,669		34,902		79.6	%	143,847		111,604		28.9	%
Asia	50,673		21,892		131.5	%	113,265		55,178		105.3	%
Total revenue	$	958,156	$	459,408			$	1,912,693	$	1,364,257


	Three Months Ended						Nine Months Ended
	September 30,		October 1,		%		September 30,		October 1,		%
(In thousands)	2022		2021		Change		2022		2021		Change
Army	$	352,923	$	304,341	16.0	%	$	959,792	$	869,690	10.4	%
Air Force	165,085		63,569		159.7	%	295,015		207,565		42.1	%
Navy	270,071		52,556		413.9	%	410,173		165,391		148.0	%
Other	170,077		38,942		336.7	%	247,713		121,611		103.7	%
Total revenue	$	958,156	$	459,408			$	1,912,693	$	1,364,257


	September 30, 2022						December 31, 2021
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Contract backlogs	$	441,300	$	(39,621)	$	401,679	$	77,300	$	(14,988)	$	62,312
Customer contracts	165,200		(7,353)		157,847		7,200		(3,572)		3,628
Trade names and other	1,249		(790)		459		1,249		(607)		642
Balance	$	607,749	$	(47,764)	$	559,985	$	85,749	$	(19,167)	$	66,582


	% of Total Revenue
	Nine Months Ended
Contract Name	September 30, 2022	October 1, 2021
Logistics Civil Augmentation Program (LOGCAP) V - Kuwait Task Order	17.5%	7.7%
Logistics Civil Augmentation Program (LOGCAP) V - Iraq Task Order	11.0%	10.3%

Kuwait Base Operations and Security Support Services (K-BOSSS)	0.9%	19.9%


	Three Months Ended						Change
(In thousands, except for percentages)	September 30, 2022			October 1, 2021			$		%
Revenue	$	958,156		$	459,408		$	498,748	108.6	%
Cost of revenue	861,073			418,900			442,173		105.6	%
% of revenue	89.9		%	91.2		%
Selling, general, and administrative expenses	92,596			27,618			64,978		235.3	%
% of revenue	9.7		%	6.0		%


Operating income	4,487			12,890			(8,403)		(65.2)	%
Operating margin	0.5		%	2.8		%
Interest expense, net	(27,265)			(1,955)			25,310		1,294.6	%

(Loss) Income from operations before income taxes	(22,778)			10,935			(33,713)		(308.3)	%
% of revenue	(2.4)		%	2.4		%
Income tax (benefit) expense	(5,739)			677			(6,416)		(947.7)	%
Effective income tax rate	25.2		%	6.2		%
Net (loss) income	$	(17,039)		$	10,258		$	(27,297)	(266.1)	%


	Payments Due by Period
			Less than 1 year						More than 5 Years
(In thousands)	Total				1 - 3 Years		3 - 5 Years
Operating leases	$	62,253	$	17,008	$	18,372	$	13,115	$	13,758
Principal payments on Vertex First and Second Lien Credit Agreements	1,364,725		11,850		23,700		23,700		1,305,475

Interest on Vertex First and Second Lien Credit Agreements ¹	638,440		103,682		206,648		206,777		121,333
Total	$	2,065,418	$	132,540	$	248,720	$	243,592	$	1,440,566
¹ Includes unused funds fee and is based on the September 30, 2022 interest rates.




3.1			Second Amended and Restated Articles of Incorporation of V2X, Inc. (incorporated by reference to Exhibit 3.1 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)
3.2			Second Amended and Restated Bylaws of V2X, Inc. (incorporated by reference to Exhibit 3.2 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)
4.1			Shareholders Agreement, dated as of July 5, 2022, by and among Vectrus, Inc. and the shareholders that are party thereto (incorporated by reference to Exhibit 4.1 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)*
4.2			Registration Rights Agreement, dated as of July 5, 2022, by and among Vectrus, Inc. and the shareholders that are party thereto (incorporated by reference to Exhibit 4.2 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)*
10.1			Management Services Agreement, dated as of July 5, 2022, by and between Vectrus, Inc. and AIP, LLC (incorporated by reference to Exhibit 10.1 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)
10.2			Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)
10.3			First Lien Credit Agreement, dated as of the December 6, 2021 (as amended by Amendment No 1., dated as of July 5, 2022), by and among Vertex Aerospace Service Corp., Vertex Aerospace Intermediate LLC, the lenders from time to time party thereto and Royal Bank of Canada, as administrative agent (incorporated by reference to Exhibit 10.3 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)
10.4			Second Lien Credit Agreement, dated as of December 6, 2021, by and among Vertex Aerospace Service Corp., Vertex Aerospace Intermediate LLC, the lenders from time to time party thereto and Royal Bank of Canada, as administrative agent (incorporated by reference to Exhibit 10.4 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)
10.5			ABL Credit Agreement, dated as of June 29, 2018 (as amended by the First Amendment to ABL Credit Agreement, dated as of May 17, 2019, as further amended by the Second Amendment to ABL Credit Agreement, dated as of May 17, 2021, and as further amended by the Third Amendment to ABL Credit Agreement, dated as of December 6, 2021, as further amended by the Fourth Amendment to ABL Credit Agreement, dated as of July 5, 2022), by and among Vertex Aerospace Service Corp., Vertex Aerospace Intermediate LLC, certain other subsidiaries of Vertex Borrower from time to time party thereto as co-borrowers, the lenders from time to time party thereto and Ally Bank, as administrative agent (incorporated by reference to Exhibit 10.5 to V2X, Inc.’s Current Report on Form 8-K filed July 5, 2022)
10.6			V2X, Inc. Second Amended and Restated 2014 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on September 13, 2022).
31.1			Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +
31.2			Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +
32.1			Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.
32.2			Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.
101			The following materials from V2X, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statements of Income, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income, (iii) Unaudited Condensed Consolidated Balance Sheets, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, (v) Unaudited Condensed Consolidated Statements of Changes to Shareholders' Equity and (vi) Notes to Condensed Consolidated Financial Statements. #

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) #


V2X, INC.
/s/ William B. Noon
By: William B. Noon
Corporate Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: November 8, 2022


Date: November 8, 2022

/s/ Charles L. Prow
Charles L. Prow
President and Chief Executive Officer


Date: November 8, 2022

/s/ Susan D. Lynch
Susan D. Lynch
Senior Vice President and Chief Financial Officer