V2X's Q3 2025 Earnings Call: Contradictions Emerge on T-6 Contract, Government Shutdown Impact, and Recompete Outlook

Date of Call: November 3, 2025

Financials Results

• Revenue: $1,167M, up 8% YOY
• EPS: $1.37 adjusted diluted EPS, up 6% YOY (GAAP diluted EPS $0.77)
• Operating Margin: Adjusted EBITDA margin 7.3% (Adjusted EBITDA $85.2M)

Guidance:

• Increased 2025 midpoint guidance to Revenue $4.5B, Adjusted EBITDA $316M and Adjusted EPS $4.95.
• Proactively lowered the midpoint of adjusted operating cash flow guidance by about $25M to reflect potential timing delays in collections due to the government shutdown (timing issue, not fundamental).
• Expect book-to-bill below 1 for full-year 2025, accelerating above 1 in FY2026; expect year-over-year revenue growth in 2026 with upside if the T-6 protest is resolved.

Business Commentary:

* Revenue Growth and Adjusted Profitability: - V2X reported record revenue of $1.17 billion for Q3, up 8% year-over-year. - The company delivered adjusted EPS of $1.37, aided by strong performance in programs like WTRS, F-5, and Iraq F-16. - The growth was driven by strategic execution and increased demand, with a solid 1.2x book-to-bill ratio.

• Backlog and Book-to-Bill Ratio:
• V2X's total backlog reached $11.6 billion at the end of Q3, with funded backlog being $2.3 billion.
• Despite the current government shutdown, the company achieved a book-to-bill ratio of 1.2x for the quarter.

• The strong backlog and book-to-bill ratio indicate a robust pipeline and continued customer demand.

• Cost Management and Capital Allocation:

• V2X repurchased $10 million worth of shares during the quarter, demonstrating value creation for shareholders.
• The company's adjusted operating cash flow was $35.8 million, reflecting a focus on operational performance and financial discipline.

• Effective cost management and strategic capital allocation have been key to maintaining profitability amidst a government shutdown.

• Award Wins and Market Position:

• V2X achieved two major captures worth over $1 billion each, including the T-6 and F-16 Iraq programs.
• The company's recent awards highlight differentiation in its offerings and demonstrate its strong market positioning in training, mission support, and modernization.
• These wins are validation of V2X's partnership with customers and disciplined execution of strategic plans.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted "record revenue and adjusted EPS" and execution ("1.2x book-to-bill"), raised 2025 midpoints to $4.5B revenue/$316M adjusted EBITDA/$4.95 adj. EPS, cited a >$50B pipeline and said the shutdown impact is largely timing-related (lowered cash-flow midpoint ~ $25M).

Q&A:

• Question from Peter Arment (Robert W. Baird & Co. Incorporated): Shawn, could you give more color on the reduction in the cash guidance? If the government reopens soon, does that change? How are you approaching that?
  Response: We trimmed the cash-flow midpoint by about $25M due to roughly 7-day elongation in payment timing from adjudication delays caused by the shutdown; it's a timing issue, not a credit or receipt risk.

• Question from Peter Arment (Robert W. Baird & Co. Incorporated): Jeremy, you've talked about a bigger qualified pipeline and ability to bid more — can you give more color on progress?
  Response: We're seeing maturation in the growth org (hired a Chief Growth Officer), have converted 2 of 5 major pursuits, and are leveraging the whole company on bids, which is increasing win rates and pipeline quality.

• Question from Jonathan Siegmann (Stifel, Nicolaus & Company): You did not include T-6 in backlog — is that your standard practice and not an indication of higher risk?
  Response: Yes — policy is to exclude protested awards from backlog; we only booked low single-digit millions for funded transition work; the main T-6 award is not in backlog and would start (if upheld) Feb 2026.

• Question from Jonathan Siegmann (Stifel, Nicolaus & Company): The other 3 of the 5 large pursuits — any sense of timing or are they delayed by the shutdown?
  Response: Timing is TBD; many contracting officers are unavailable, so adjudication and award timing remain uncertain until government operations resume.

• Question from Andre Madrid (BTIG, LLC): Does the shutdown just push your previously disclosed recompete holiday into 2026?
  Response: Potentially — we still expect ~7% recompetes next year and may see bridges/extensions; overall we're comfortable with backlog and growth prospects but timing could shift.

• Question from Andre Madrid (BTIG, LLC): Which branches and geographies do you expect to grow fastest into 2026?
  Response: We expect cost-type work to grow as a percent of the portfolio and U.S. region to grow faster (e.g., WTRS); funding variability from the shutdown remains a key wildcard.

• Question from Kenneth Herbert (RBC Capital Markets): Can you parse the 8% Q3 growth drivers (F-16, F-5, WTRS)? Any were better than expected?
  Response: No material surprises — growth came as expected from F-16, F-5 and WTRS, with only modest timing of some materials; program execution is tracking to plan.

• Question from Kenneth Herbert (RBC Capital Markets): The revised guide implies lower margins in Q4 — is that conservatism or anything else to note?
  Response: Mainly timing of expenses and some incremental Q4 expenses; we've raised midpoints and see only modest margin impacts tied to timing, not program issues.

• Question from Tobey Sommer (Truist Securities): What does opportunity look like for sales outside the U.S. to avoid shutdown constraints?
  Response: FMS is a channel (e.g., Iraq F-16); customers abroad see our U.S. work and want modernization/support, so FMS and regional presence create incremental opportunities.

• Question from Tobey Sommer (Truist Securities): In 2–3 years, will you have a wider array of FMS contracts?
  Response: FMS deals have long dwell time so timing is uncertain, but demand pull exists from allies seeing our U.S. work, so it's an emerging growth channel.

• Question from Tobey Sommer (Truist Securities): Is the elongation of DSO widespread due to the shutdown or discrete to certain payment offices?
  Response: We've seen payments take ~7 days longer on average due to adjudication/funding actions being delayed; it's largely a timing effect related to contract adjudication, not aggregate payment risk.

• Question from Joseph Gomes (NOBLE Capital Markets): Update on INDOPACOM efforts in Q3 and outlook for Q4?
  Response: We remain confident in INDOPACOM positioning—regional presence drives participation and demand, though some training activity was lighter than expected this year.

• Question from Joseph Gomes (NOBLE Capital Markets): On the T-6 protest, how far could the expected Feb start be pushed out?
  Response: Timing is unpredictable (federal claims court); we're treating T‑6 as a binary event for 2026 planning — upside if upheld, but we won't rely on it until resolved.

• Question from Trevor Walsh (Citizens JMP Securities): Tempest was developed and fielded fast — what other unmanned/UAS opportunities should we think about?
  Response: UAVs present opportunities across MRO, modernization, flightline support and upgrades; Tempest showcases rapid-prototyping capabilities that can be applied broadly to UAS markets.

• Question from Trevor Walsh (Citizens JMP Securities): The recent acquisition — how much pipeline/ramp is required for customer access and is it reflected in the $50B pipeline?
  Response: The acquisition is modest and not yet in the $50B pipeline; it primarily provides customer access and integration is ongoing to demonstrate V2X capabilities to that customer set.

• Question from Kristine Liwag (Morgan Stanley): Was the 1.2x book-to-bill a pull-forward due to funding uncertainty?
  Response: No — quarter bookings reflected normal timing and expected awards; any Q4 adjudication uncertainty is tied to the shutdown, not Q3 pull-forward.

• Question from Kristine Liwag (Morgan Stanley): Was the U.S. decision to withdraw troops from Romania a surprise and any incremental headwinds in Europe?
  Response: We were not affected; work like Aegis Ashore remains strategically important and we don't see those programs going away absent policy changes.

• Question from Noah Poponak (Goldman Sachs): The updated full-year range implies Q4 growth variance — is the low end shutdown related or other factors?
  Response: The range reflects funding volatility from the shutdown and potential reductions or timing shifts on current contracts; teams are monitoring and the variability drove the range.

• Question from Noah Poponak (Goldman Sachs): With WTRS and F-16 Iraq ramping, is 2026 likely to track the exit rate of 2025 for top-line growth?
  Response: WTRS and F-16 Iraq should continue to ramp and support growth, but contingency support that wound down in 2025 will be a headwind early in 2026; overall trajectory is growth but timing/funding remain variables.

• Question from Noah Poponak (Goldman Sachs): Should we view V2X as a multiyear margin expansion opportunity or top-line growth with stable margins?
  Response: We expect multiyear margin expansion as long-term franchise programs ramp and improve sequentially; new programs often start lower and improve over time.

• Question from Noah Poponak (Goldman Sachs): If there's a $20–30M cash-flow slide from timing, will '26 recapture that and reach typical conversion?
  Response: Yes — if revenue holds to expectations, the $20–30M is a timing issue and we expect to be at or above 100% adjusted net income to free cash flow conversion in 2026.

Contradiction Point 1

T-6 Contract Inclusion in Backlog

It impacts expectations regarding the company's financial outlook and the predictability of its backlog, which are critical elements for investors and stakeholders.

Why wasn't the T-6 award included in your backlog, and does this indicate higher risk? - Jonathan Siegmann(Stifel, Nicolaus & Company, Incorporated)

2025Q3: We do not include protested contracts in our backlog. We have only funded transition activities related to T-6, which is modest. The main award would begin in February 2026, lasting 10 years. This is our standard practice, not signaling higher risk. - Shawn Mural(CFO), Jeremy Wensinger(CEO)

How should we assess the T-6 contract's incremental revenue impact for this and next year, and how will it ramp? - Kenneth George Herbert(RBC Capital Markets)

2025Q2: We are excited about the T-6 award. We expect no financial impact this year as the transition period goes until early 2026. Historically, the program has been between $200 million to $300 million annually. However, this is subject to variables such as funding profiles and protest periods. - Shawn Mural(CFO)

Contradiction Point 2

Government Shutdown Impact on Contracts

It affects the company's ability to predict and manage its financial performance during periods of government uncertainty, which is crucial for investors and stakeholders.

Can you update the timing of other major pursuits due to the government shutdown? - Jonathan Siegmann(Stifel, Nicolaus & Company, Incorporated)

2025Q3: The timing of other major pursuits is still uncertain, as contracting officers are not at work. We'll know more once there's clarity on the government shutdown. - Jeremy Wensinger(CEO)

Can you comment on the budget environment and potential frictions? - Jonathan Siegmann(Stifel Financial Corp.)

2025Q2: Our strategy aligns well with the administration's focus on readiness. Our fixed assets deliver some of the best readiness rates, enhancing our value proposition. - Shawn Mural(CFO)

Contradiction Point 3

Recompete Percentage and Growth Opportunities

It involves the expectations for the percentage of recompetes and the impact on growth opportunities, which are crucial for forecasting revenue and market positioning.

What impact will the shutdown have on the recompete holiday, and will it delay into 2026? - Andre Madrid(BTIG, LLC)

2025Q3: We're in a good position with 7% recompetes in 2026. If the shutdown affects recompetes, there's potential for extensions or bridges. - Shawn Mural(CFO)

What percentage of recompetes remain for this year? - Andre Madrid(BTIG)

2025Q1: The percentage of recompetes expected for this year is now between 1% and 2%. - Shawn Mural(CFO)

Contradiction Point 4

Book-to-Bill Ratio and Award Timing

It involves the interpretation of the book-to-bill ratio and the timing of awards, which are indicators of future growth and market momentum.

好的，我需要处理用户提供的这个任务。首先，用户希望我作为专业的金融文章作者，总结并精简来自美股上市公司财报电话会议的问答环节的问题。用户给出的例子是：“Was the strong book-to-bill a pull-forward due to funding uncertainty?” 需要简化成更简洁、精准的问题，同时保持原意，符合美式英语习惯，并且只输出问题，保留问号。首先，我要分析原问题的结构。原问题问的是强劲的book-to-bill（预定与发货比率）是否是由于资金不确定性导致的提前。这里的“pull-forward”指的是客户提前下单以应对可能的融资问题。我需要确保简化后的句子去掉冗长的表达，同时保留关键信息。原句中的“Was the strong book-to-bill a pull-forward due to funding uncertainty?”可以拆解为几个部分：主语是“strong book-to-bill”，谓语是“was...a pull-forward”，原因状语是“due to funding uncertainty”。需要简化的是“a pull-forward due to”，可能可以替换为更直接的表达，比如“caused by”或者“due to”。可能的简化方式：“Was the strong book-to-bill ratio caused by funding uncertainty?” 这里将“a pull-forward due to”替换为“caused by”，更直接，同时保持了原意。检查是否符合美式英语习惯，这里没有问题。另外，是否保留“ratio”可能需要考虑，但原问题中的“book-to-bill”通常可以作为名词短语使用，加上“ratio”可能更明确，但原问题没有，所以可能可以省略。例如：“Was the strong book-to-bill a result of funding uncertainty?” 这样更简洁，但可能稍微改变原意，因为“a pull-forward”暗示了提前行为，而“a result of”可能更广泛。需要确保不改变原意。再考虑用户的要求：不改变原意，所以必须保留“pull-forward”所表达的提前行为。因此，可能需要保留“pull-forward”这个词。例如：“Was the strong book-to-bill a pull-forward caused by funding uncertainty?” 这样可能更准确，但用户希望更简洁。原问题中的“a pull-forward due to”可以简化为“due to”或者“caused by”，但需要保持“pull-forward”作为名词。例如：“Was the strong book-to-bill a pull-forward due to funding uncertainty?” 这样已经比较简洁，但用户可能希望进一步缩短。例如，将“a pull-forward due to”改为“due to”，但可能需要调整结构。例如：“Was the strong book-to-bill due to a pull-forward caused by funding uncertainty?” 但这样可能更冗长。或者，考虑是否可以将“pull-forward”作为形容词使用，但通常“pull-forward”是名词。所以可能需要保留名词形式。因此，可能最简洁的方式是保持原结构，但去掉不必要的词。例如，原问题中的“Was the strong book-to-bill a pull-forward due to funding uncertainty?” 已经比较简洁，但用户可能希望更简短。例如，去掉“a”和“due to”之间的冗余，比如：“Was the strong book-to-bill a pull-forward from funding uncertainty?” 但“from”可能不如“due to”准确。或者“Was the strong book-to-bill a pull-forward because of funding uncertainty?” 但可能还是不够简洁。另一个角度是，是否可以将“pull-forward”作为动词使用，但原问题中的结构是名词短语。例如，“Was the strong book-to-bill pulled forward due to funding uncertainty?” 这样动词化可能更直接，但改变了原结构。原问题中的“a pull-forward”是名词，表示一种情况，而动词化可能更强调动作，但可能更简洁。例如：“Was the strong book-to-bill pulled forward due to funding uncertainty?” 这可能更符合用户的要求，但需要确认是否改变了原意。原问题询问的是是否发生了提前，而动词化可能更直接。不过，用户提供的示例输出是：“Was the strong book-to-bill a pull-forward due to funding uncertainty?” 这说明可能用户希望保留“pull-forward”作为名词，而简化其他部分。但原问题已经比较简洁，可能用户希望更进一步简化，比如去掉“a”，但可能不符合语法。例如：“Was the strong book-to-bill pull-forward due to funding uncertainty?” 这样去掉“a”，但可能更简洁，同时保持原意。或者可能用户接受原问题的结构，因为已经很简洁了，但根据用户提供的示例输出，他们可能希望保持原结构，但可能用户希望更简化。可能需要再仔细分析用户的示例。用户给出的示例输入是：“Was the strong book-to-b - Kristine Liwag(Morgan Stanley)

2025Q3: The book-to-bill was normal timing, not pulled forward due to funding uncertainty. - Jeremy Wensinger(CEO)

Were there unexpected factors in Q1 bookings that affected the book-to-bill ratio and the final outcome? - Kenneth Herbert(RBC Capital Markets)

2025Q1: We are seeing significant back half-weighted bookings, with fixed-price activities expected to contribute more, aligning with our efforts to secure larger opportunities. - Shawn Mural(CFO)

Contradiction Point 5

Government Funding and Shutdown Impact

It involves the company's perspective on the impact of government funding and shutdown on its operations and cash flow, which are critical for financial planning and investor expectations.

Why wasn't the T-6 award included in your backlog, and does this indicate higher risk? - Jonathan Siegmann(Stifel, Nicolaus & Company, Incorporated)

2025Q3: The boat has been pushed off the pier, so to speak, and we think fundamentally we'll own that contract when the time comes. We've been assured that we'll get a fair chance as a protest is adjudicated. We don't know how long, but we have the capability to see that through. We've funded transition activities related to T-6, which are modest. - Shawn Mural(CFO), Jeremy Wensinger(CEO)

How will outcome-based contracting evolve with your cost-plus contracts? Can you transition to fixed-price contracts and what are the potential opportunities? - Peter Arment(Baird)

2024Q4: Our government operations, contracts have the option that requires that we do not knowingly submit a claim for payment on a progress payment until that contract is awarded. - Jeremy Wensinger(CEO)