V2X, Inc. 2026 Q2 Earnings Call

Good afternoon, everyone. Welcome to the V2X second 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 view 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. Please turn to slide 3. Today, I'll be providing a recap of our second quarter results for 2026 and sharing more of our outlook for the rest of the year. Before I go through some of the highlights, I want to thank our team at V2X for their continued focus and dedication to delivering our customers' mission. In the second quarter and first half, our consistent execution, recent contract wins, and continued alignment to national security priorities drove double-digit revenue growth. The value of our end-to-end solutions was reinforced by approximately $1 billion in recent awards across modernization, global training, aerospace, and mission readiness. These awards are expected to improve the composite margin of our backlog as we continue to prioritize profitable growth.

We continued to pursue new bids throughout the quarter, leveraging our AI solutions that deliver differentiated customer outcomes. With more than $8 billion in bids submitted that incorporate these solutions, our focus remains on margin-accretive opportunities that further enhance the quality of our backlog. Supported by our strong cash generation and healthy balance sheet, we also continue to evaluate growth opportunities that allow us to further our Go Towards Tomorrow strategy. As we enter the second half of 2026, we are confident in our market position and are increasing our full year guidance for revenue, adjusted EBITDA, and adjusted diluted EPS. We expect revenue and adjusted EBITDA to increase approximately 10% year-over-year at the midpoint and adjusted diluted EPS to increase 16% at the midpoint. Our results to date and momentum underway underscores our continued ability to deliver for our customers and shareholders.

Let's move to slide four, which summarizes the financial operating highlights of the second quarter and the first half of 2026. In the second quarter, revenue increased 17% year-over-year to $1.26 billion. Adjusted net income was $51.6 million, representing an increase of 22% year-over-year. Adjusted EBITDA was $89.8 million, with a margin of 7.1%. Adjusted diluted EPS was $1.64, representing an increase of 23% compared to the same period last year. Our solid financial and operating performance reflects the progress we've made delivering on our strategic priorities and our position as a leading provider of mission capabilities. Turning now to slide five. We have received approximately $1 billion in recent awards, demonstrating the breadth of our portfolio and its close alignment with our customers' priorities.

As it relates to modernization, we were selected to provide multi-year production of carriage equipment, enabling next-generation weapons for the strategic bomber fleet. In global training, we captured awards to deliver solutions for enhanced UAS maintenance and operator training. This reflects the sustained demand we are seeing for training solutions that improve readiness and operational effectiveness. With respect to aerospace, we continue to support essential requirements, securing a five-year recompete to continue delivering proven readiness for the U.S. Air Force C-12 fleet. In mission readiness, we received awards to support operations for U.S. Marine Corps assets and enhanced electronic security capabilities for a foreign military customer in the Middle East. With an aggregate margin that is accretive to our current portfolio, these recent awards reinforce our continued pursuit of high-quality, profitable growth opportunities and our team's focus on disciplined execution.

It underscores the diversity of our offerings across markets and capabilities. This is a great sample of differentiated, high-value work that our team is pursuing. While we recognize that not all our awards will have this margin profile, these awards exemplify the progress we have made in our strategic focus looking towards future opportunities. As an end-to-end mission provider, we are proud of our proven ability to support our customers wherever and however they need. Moving to slide six. Our robust backlog, funding, and pipeline of high-quality awards support our positioning and outlook for the remainder of this year. Bookings were $600 million in the quarter, yielding a quarterly book-to-bill ratio of 0.5 times and a trailing 12-month book-to-bill of 1.4 times. I'd like to note that our bookings do not reflect approximately $1 billion in recent awards as they came in shortly after the quarter.

Total backlog for the quarter was $12.7 billion, which includes the modified scope of our LOGCAP work in Kuwait. Importantly, funded backlog increased 10% sequentially and 8% year-over-year to $2.5 billion. This further supports the confidence we have in our 2026 outlook and demonstrates the strong funding environment for the solutions we provide. We are also continuing to see increased activity and funding in the Asia-Pacific region and are optimistic about the growth prospects. Altogether, our diverse portfolio, strong backlog, and continued demand position us well to drive value and deliver for our customers over the long term. Turning to slide seven. As we highlighted in the first quarter, we continue to advance our Go Towards Tomorrow strategy, including expanding our AI capabilities. We are currently operating three AI platforms across our enterprise IT infrastructure, and we see strong adoption across the business.

To further employee education, productivity, and operational efficiency, we're investing in ongoing training and continuing to expand internal use cases. At the same time, our AI capabilities are embedded into our pursuit of new bids. Last quarter, we introduced early customer-facing applications focused on predictive readiness and operational efficiency. We are expanding our AI opportunities across a wide range of customer solutions, further diversifying our bid portfolio. This is reflected in more than $8 billion of margin-accretive new bids we recently submitted that include V2X's AI solutions. By investing in AI capabilities that enhance both internal operations and customer solutions, we are strengthening our ability to deliver more efficient, innovative, and mission-relevant outcomes for our customers while driving more value for our shareholders. I look forward to sharing more on these strategic pursuits in the coming quarter.

I will now turn the call over to Shawn for a more detailed review of our financials.

Thank you, Jeremy, and good afternoon, everyone. Please turn to slide eight. We reported exceptional second quarter financial performance across the business. Revenue in the second quarter increased 17% year-over-year to $1,257,000,000. Revenue growth was driven primarily by the ramp-up of training and aerospace programs and continued support for national security activities. Our ability to rapidly scale and support customer requirements by leveraging capabilities, contracts, and global presence remains a key differentiator of our business. We are seeing continued demand to support discrete national security activities, which contributed approximately $100 million of revenue in the second quarter. Based on the demand signals from our customers, we currently see these requirements continuing through 2026 and into the early part of 2027. From a geographic perspective, I'd like to note the growth we're seeing in Asia-Pacific, which increased 13% year-over-year in the second quarter.

As Jeremy discussed, we are seeing a step-up in activities and funding in the region as compared to last year. Our revenue associated with the U.S. also continues to grow, increasing 26% year-over-year, driven primarily by new program starts and national security support. As it relates to the Middle East, revenue was up slightly year-over-year, reflecting contributions from foreign military sales. For the year, we expect revenue in the region to be flat to down as support for logistics-related contracts shift within the region. Overall, we are well-positioned with differentiated solutions across multiple geographies with our diversified portfolio, global presence, and operational excellence, we have the flexibility necessary to ramp our presence to adjust to our customers' needs in real time.

For example, we are ramping up to support additional activities in Israel, as well as national security requirements in the U.S. while responding to evolving customer requirements in Kuwait. This demonstrates our strategy in action, supporting critical mission requirements across multiple fronts and meeting our customers wherever they are. We are proud of our team's accomplishments in the second quarter, which reflect our ability to deliver integrated solutions across geographies by leveraging capabilities, technology, past performance, and access to the right contracts. Turning back to our performance for the quarter. Adjusted EBITDA in the quarter was $89.8 million, increasing 9% from the same period in the prior year. Adjusted EBITDA margin was 7.1%. Interest expense in the second quarter was $16.7 million. Cash interest expense was $15.1 million, reflecting a 21% improvement year-over-year. Net income for the quarter was $25.5 million.