UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36341

V2X, Inc.

(Exact name of registrant as specified in its charter)


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

7901 Jones Branch Drive, Suite 700, McLean Virginia 22102
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code:
(571)	481-2000

Securities Registered Under Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Table of Contents

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐

No ☑

As of ~~May~~August 1, 2023, there were ~~31,005,399~~31,185,422 shares of common stock ($0.01 par value per share) outstanding.

Table of Contents

V2X, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page No.
	PART I. FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Statements of Income (Loss) ~~Income~~	4
	Condensed Consolidated Statements of Comprehensive (L ~~oss)~~ Income (Loss)	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	9
	Note 2. Recent Accounting Standards Update	10
	Note 3. Merger	10
	Note 4. Revenue	12
	Note 5. Receivables	14
	Note 6 .6. Debt	14
	Note 7 .7. Derivative Instruments	18
	Note 8 .8. Commitments and Contingencies	18
	Note 9 ~~. Stock Based~~9. Stock-Based Compensation	19
	Note 1 0 .10. Income Taxes	21
	Note 1 1 . ~~(Loss)~~11. Earnings (Loss) Per Share	21
	Note 112. Post-Employment Benefit Plans	222
	~~. Deferred Employee Compensation~~Note 13. Sale of Receivables	22
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2223
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2931
Item 4.	Controls and Procedures	2931
	PART II. OTHER INFORMATION	3033
Item 1.	Legal Proceedings	3033
Item 1A.	Risk Factors	3033
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3033
Item 3.	Defaults U ~~pon~~Upon Senior Securities	3033
Item 4.	Mine Safety Disclosures	3033
Item 5.	Other Information	3033
Item 6.	Exhibits	3134
	Signatures	3134

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

V2X, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) ~~INCOME~~ (UNAUDITED)


		Three Months Ended				Three Months Ended				Six Months Ended
		March 31,		April 1,				June 30,		July 1,		June 30,		July 1,
(In thousands, except per share data)	(In thousands, except per share data)	2023		2022			(In thousands, except per share data)	2023		2022		2023		2022
Revenue	Revenue	$	943,460	$	456,471		Revenue	$	977,852	$	498,066	$	1,921,312	$	954,537
Cost of revenue	Cost of revenue	864,630		419,275			Cost of revenue	890,452		453,305		1,755,082		872,581
Selling, general, and administrative expenses	Selling, general, and administrative expenses	48,251		31,959			Selling, general, and administrative expenses	53,130		29,740		101,381		61,699

Operating income	Operating income	30,579		5,237			Operating income	34,270		15,021		64,849		20,257
Loss on extinguishment of debt	Loss on extinguishment of debt	(22,052)		—			Loss on extinguishment of debt	—		—		(22,052)		—
Interest expense, net	Interest expense, net	(31,744)		(1,681)			Interest expense, net	(31,950)		(1,963)		(63,694)		(3,643)
Other expense, net							Other expense, net	(311)		—		(311)		—
Income (loss) from operations before income taxes							Income (loss) from operations before income taxes	2,009		13,058		(21,208)		16,614
Income tax expense (benefit)							Income tax expense (benefit)	210		2,586		(5,527)		3,287
Net income (loss)							Net income (loss)	$	1,799	$	10,472	$	(15,681)	$	13,327

(Loss) income from operations before income taxes		(23,217)		3,556
Income tax (benefit) expense		(5,737)		701
Net (loss) income		$	(17,480)	$	2,855

(Loss) earnings per share
Earnings (loss) per share							Earnings (loss) per share
Basic	Basic	$	(0.57)	$	0.24		Basic	$	0.06	$	0.89	$	(0.51)	$	1.13
Diluted	Diluted	$	(0.57)	$	0.24		Diluted	$	0.06	$	0.88	$	(0.51)	$	1.12
Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	30,927		11,759			Weighted average common shares outstanding - basic	31,033		11,826		30,981		11,793
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	30,927		11,902			Weighted average common shares outstanding - diluted	31,605		11,954		30,981		11,917

The accompanying notes are an integral part of these financial statements.

Table of Contents

V2X, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~ (UNAUDITED)


		Three Months Ended				Three Months Ended				Six Months Ended
		March 31,		April 1,				June 30,		July 1,		June 30,		July 1,
(In thousands)	(In thousands)	2023		2022			(In thousands)	2023		2022		2023		2022
Net (loss) income		$	(17,480)	$	2,855
Other comprehensive loss, net of tax
Net income (loss)							Net income (loss)	$	1,799	$	10,472	$	(15,681)	$	13,327
Other comprehensive income (loss), net of tax							Other comprehensive income (loss), net of tax
Changes in derivative instruments:	Changes in derivative instruments:						Changes in derivative instruments:
Net change in fair value of interest rate swaps	Net change in fair value of interest rate swaps	(2,347)		439			Net change in fair value of interest rate swaps	7,658		227		5,311		667
Net change in fair value of foreign currency forward contracts	Net change in fair value of foreign currency forward contracts	—		30			Net change in fair value of foreign currency forward contracts	—		—		—		30

Tax expense		148		(95)
Tax (expense) benefit							Tax (expense) benefit	(1,444)		367		(1,296)		272
Net change in derivative instruments	Net change in derivative instruments	(2,199)		374			Net change in derivative instruments	6,214		594		4,015		969
Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	1,806		(616)			Foreign currency translation adjustments, net of tax	274		(3,637)		2,080		(4,254)
Other comprehensive loss, net of tax		(393)		(242)
Total comprehensive (loss) income		$	(17,873)	$	2,613
Other comprehensive income (loss), net of tax							Other comprehensive income (loss), net of tax	6,488		(3,043)		6,095		(3,285)
Total comprehensive income (loss)							Total comprehensive income (loss)	$	8,287	$	7,429	$	(9,586)	$	10,042

The accompanying notes are an integral part of these financial statements.

Table of Contents

V2X, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31, December 31,
(In thousands, except per share information) 2023 2022
Assets
Current assets
Cash and cash equivalents $ 62,145 $ 116,067
Receivables 759,813 728,582
Prepaid expenses 78,218 74,234
Other current assets 26,016 13,049
Total current assets 926,192 931,932
Property, plant, and equipment, net 82,311 78,715
Goodwill 1,655,545 1,653,822
Intangible assets, net 475,345 497,951
Right-of-use assets 48,577 52,825
Other non-current assets 21,370 17,858
Total non-current assets 2,283,148 2,301,171
Total Assets $ 3,209,340 $ 3,233,103
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 402,655 $ 406,706
Compensation and other employee benefits 143,937 168,038
Short-term debt 15,500 11,850
Other accrued liabilities 198,101 196,538
Total current liabilities 760,193 783,132
Long-term debt, net 1,291,969 1,262,811
Deferred tax liabilities 9,927 15,813
Operating lease liabilities 37,082 41,083
Other non-current liabilities 131,698 133,185
Total non-current liabilities 1,470,676 1,452,892
Total liabilities 2,230,869 2,236,024
Commitments and contingencies (Note 8)
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; 31,005 and 30,470 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively 310 305
Additional paid in capital 748,137 748,877
Retained earnings 235,944 253,424
Accumulated other comprehensive loss (5,920) (5,527)
Total shareholders' equity 978,471 997,079
Total Liabilities and Shareholders' Equity $ 3,209,340 $ 3,233,103


	June 30,		December 31,
(In thousands)	2023		2022
Assets
Current assets
Cash and cash equivalents	$	70,314	$	116,067

Receivables	746,562		728,582
Prepaid expenses	77,724		74,234
Other current assets	23,906		13,049
Total current assets	918,506		931,932
Property, plant, and equipment, net	82,284		78,715
Goodwill	1,656,965		1,653,822


Intangible assets, net	452,739		497,951
Right-of-use assets	46,017		52,825
Other non-current assets	22,245		17,858
Total non-current assets	2,260,250		2,301,171
Total Assets	$	3,178,756	$	3,233,103
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	416,424	$	406,706

Compensation and other employee benefits	145,000		168,038

Short-term debt	15,500		11,850
Other accrued liabilities	255,408		196,538
Total current liabilities	832,332		783,132


Long-term debt, net	1,190,023		1,262,811
Deferred tax liabilities	13,773		15,813
Operating lease liabilities	35,490		41,083
Other non-current liabilities	114,420		133,185
Total non-current liabilities	1,353,706		1,452,892
Total liabilities	2,186,038		2,236,024
Commitments and contingencies (Note 8)
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; 31,081 and 30,470 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	311		305
Additional paid in capital	754,096		748,877
Retained earnings	237,743		253,424
Accumulated other comprehensive income (loss)	568		(5,527)
Total shareholders' equity	992,718		997,079
Total Liabilities and Shareholders' Equity	$	3,178,756	$	3,233,103

The accompanying notes are an integral part of these financial statements.

Table of Contents

V2X, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended
March 31, April 1,
(In thousands) 2023 2022
Operating activities
Net (loss) income $ (17,480) $ 2,855
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation expense 5,412 1,591
Amortization of intangible assets 22,606 2,301
Loss (gain) on disposal of property, plant, and equipment 31 (16)
Stock-based compensation 12,872 2,558
Amortization of debt issuance costs 2,513 204
Loss on extinguishment of debt 22,052 —
Changes in assets and liabilities:
Receivables (30,649) (29,898)
Prepaid expenses (3,840) (4,849)
Other assets (5,938) 4,520
Accounts payable (4,115) 22,693
Deferred taxes (6,034) —
Compensation and other employee benefits (24,182) (21,138)
Other liabilities (11,740) (7,202)
Net cash used in operating activities (38,492) (26,381)
Investing activities
Purchases of capital assets (9,076) (2,195)
Proceeds from the disposition of assets — 17
Net cash used in investing activities (9,076) (2,178)
Financing activities
Proceeds from issuance of long-term debt 250,000 —
Repayments of long-term debt (421,013) (2,600)
Proceeds from revolver 348,750 217,000
Repayments of revolver (163,750) (200,000)
Proceeds from exercise of stock options 5 —
Payment of debt issuance costs (7,507) (458)
Prepayment premium on early redemption of debt (1,600) —
Payments of employee withholding taxes on share-based compensation (12,806) (1,626)
Net cash (used in) provided by financing activities (7,921) 12,316
Exchange rate effect on cash 1,567 729
Net change in cash and cash equivalents (53,922) (15,514)
Cash and cash equivalents - beginning of period 116,067 38,513
Cash and cash equivalents - end of period $ 62,145 $ 22,999
Supplemental disclosure of cash flow information:
Interest paid $ 29,066 $ 1,513
Income taxes paid $ 300 $ 66
Purchase of capital assets on account $ 494 $ 5


	Six Months Ended
	June 30,		July 1,
(In thousands)	2023		2022
Operating activities
Net (loss) income	$	(15,681)	$	13,327
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation expense	11,326		3,238
Amortization of intangible assets	45,211		4,423
Loss (gain) on disposal of property, plant, and equipment	522		(15)
Stock-based compensation	20,446		4,725
Amortization of debt issuance costs	4,692		388
Loss on extinguishment of debt	22,052		—
Changes in assets and liabilities:
Receivables	(20,404)		(29,302)
Prepaid expenses	(1,645)		(5,321)
Other assets	436		5,185
Accounts payable	7,647		32,470
Deferred taxes	(5,143)		—
Compensation and other employee benefits	(23,150)		2,507
Other liabilities	31,831		(11,989)
Net cash provided by operating activities	78,140		19,636
Investing activities
Purchases of capital assets	(11,543)		(3,492)
Proceeds from the disposition of assets	5		18
Contribution to joint venture	—		(2,113)
Net cash used in investing activities	(11,538)		(5,587)
Financing activities
Proceeds from issuance of long-term debt	250,000		—
Repayments of long-term debt	(424,888)		(5,200)
Proceeds from revolver	552,750		392,000
Repayments of revolver	(467,750)		(402,000)
Proceeds from exercise of stock options	6		370
Payment of debt issuance costs	(7,507)		(458)
Prepayment premium on early redemption of debt	(1,600)		—


Payments of employee withholding taxes on share-based compensation	(14,618)		(1,696)
Net cash used in financing activities	(113,607)		(16,984)
Exchange rate effect on cash	1,252		(507)
Net change in cash and cash equivalents	(45,753)		(3,442)
Cash and cash equivalents - beginning of period	116,067		38,513
Cash and cash equivalents - end of period	$	70,314	$	35,071

Supplemental disclosure of cash flow information:
Interest paid	$	58,300	$	3,409
Income taxes paid	$	2,707	$	6,112

Purchase of capital assets on account	$	1,813	$	13

The accompanying notes are an integral part of these financial statements.

Table of Contents

V2X, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES TO SHAREHOLDERS' EQUITY (UNAUDITED)


		Common Stock Issued			Additional Paid-in Capital								Accumulated Other Comprehensive Loss				Total Shareholders' Equity					Common Stock Issued							Additional Paid-in Capital				Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
(In thousands)	(In thousands)	Shares	Amount				Retained Earnings								(In thousands)				Shares				Amount				Retained Earnings
Balance at December 31, 2021	Balance at December 31, 2021	11,738	$	117			$	88,116			$	267,754			$	(5,900)				$	350,087	Balance at December 31, 2021		11,738				$		117	$	88,116	$	267,754	$	(5,900)	$	350,087
Net income	Net income	—	—		—				2,855				—				2,855		Net income			—			—				—		2,855		—		2,855
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—				—				(616)				(616)		Foreign currency translation adjustments			—			—				—		—		(616)		(616)
Unrealized gain on cash flow hedge	Unrealized gain on cash flow hedge	—	—		—				—				374				374		Unrealized gain on cash flow hedge			—			—				—		—		374		374
Employee stock awards and stock options	Employee stock awards and stock options	67	1		—				—				—				1		Employee stock awards and stock options			67			1				—		—		—		1
Taxes withheld on stock compensation awards	Taxes withheld on stock compensation awards	—	—		(1,626)				—				—				(1,626)		Taxes withheld on stock compensation awards			—			—				(1,626)		—		—		(1,626)
Stock-based compensation	Stock-based compensation	—	—		3,100				—				—				3,100		Stock-based compensation			—			—				3,100		—		—		3,100
Balance at April 1, 2022	Balance at April 1, 2022	11,805	$	118	$	89,590			$	270,609			$	(6,142)			$	354,175	Balance at April 1, 2022			11,805			$	118			$	89,590	$	270,609	$	(6,142)	$	354,175

Net income																			Net income			—			—				—		10,472		—		10,472
Foreign currency translation adjustments																			Foreign currency translation adjustments			—			—				—		—		(3,637)		(3,637)
Unrealized gain on cash flow hedge																			Unrealized gain on cash flow hedge			—			—				—		—		594		594
Employee stock awards and stock options																			Employee stock awards and stock options			41			—				369		—		—		369
Taxes withheld on restricted stock unit compensation awards																			Taxes withheld on restricted stock unit compensation awards			—			—				(70)		—		—		(70)
Stock-based compensation																			Stock-based compensation			—			—				1,575		—		—		1,575
Balance at July 1, 2022																			Balance at July 1, 2022			11,846			$	118			$	91,464	$	281,081	$	(9,185)	$	363,478

Balance at December 31, 2022	Balance at December 31, 2022	30,470	$	305	$	748,877			$	253,424			$	(5,527)			$	997,079	Balance at December 31, 2022			30,470			$	305			$	748,877	$	253,424	$	(5,527)	$	997,079
Net loss	Net loss	—	—		—				(17,480)				—				(17,480)		Net loss			—			—				—		(17,480)		—		(17,480)
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—				—				1,806				1,806		Foreign currency translation adjustments			—			—				—		—		1,806		1,806
Unrealized loss on cash flow hedge	Unrealized loss on cash flow hedge	—	—		—				—				(2,199)				(2,199)		Unrealized loss on cash flow hedge			—			—				—		—		(2,199)		(2,199)
Employee stock awards and stock options	Employee stock awards and stock options	535	5		—				—				—				5		Employee stock awards and stock options			535			5				—		—		—		5
Taxes withheld on stock compensation awards	Taxes withheld on stock compensation awards	—	—		(12,806)				—				—				(12,806)		Taxes withheld on stock compensation awards			—			—				(12,806)		—		—		(12,806)
Stock-based compensation	Stock-based compensation	—	—		12,066				—				—				12,066		Stock-based compensation			—			—				12,066		—		—		12,066
Balance at March 31, 2023	Balance at March 31, 2023	31,005	$	310	$	748,137			$	235,944			$	(5,920)			$	978,471	Balance at March 31, 2023			31,005			$	310			$	748,137	$	235,944	$	(5,920)	$	978,471

Net income																			Net income			—			—				—		1,799		—		1,799
Foreign currency translation adjustments																			Foreign currency translation adjustments			—			—				—		—		274		274
Unrealized gain on cash flow hedge																			Unrealized gain on cash flow hedge			—			—				—		—		6,214		6,214
Employee stock awards and stock options																			Employee stock awards and stock options			76			1				—		—		—		1
Taxes withheld on restricted stock unit compensation awards																			Taxes withheld on restricted stock unit compensation awards			—			—				(1,812)		—		—		(1,812)
Stock-based compensation																			Stock-based compensation			—			—				7,771		—		—		7,771
Balance at June 30, 2023																			Balance at June 30, 2023			31,081			$	311			$	754,096	$	237,743	$	568	$	992,718

The accompanying notes are an integral part of these financial statements.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Our~~ Business

V2X, Inc., an Indiana Corporation, formerly known as Vectrus, Inc. (Vectrus), is a leading provider of critical mission solutions and support to defense clients globally. The Company operates as one segment and delivers a comprehensive suite of integrated solutions across the operations and logistics, aerospace, training and technology markets to national security, defense, civilian and international clients.

Vectrus was incorporated in the State of Indiana in February 2014. On September 27, 2014, Exelis Inc, an Indiana corporation, spun-off (the Spin-off) Vectrus and Vectrus became an independent, publicly traded company. References in these notes to "Exelis" or "Former Parent" refer to Exelis Inc. and its consolidated subsidiaries (other than Vectrus). Exelis was acquired by a predecessor entity of L3Harris Technologies, Inc. in May 2015.

On March 7, 2022, Vectrus entered into an Agreement and Plan of Merger (the Merger Agreement) with Vertex Aerospace Services Holding Corp., a Delaware corporation (Vertex), Andor Merger Sub Inc., a Delaware corporation (Merger Sub Inc.) and Andor Merger Sub LLC, a Delaware limited liability company (Merger Sub LLC). On July 5, 2022 (the Closing Date), Vectrus completed its merger (Merger) thereby forming V2X, Inc. For a description of the Merger, see Note 3, Merger.

Unless the context otherwise requires or unless stated otherwise, references in these notes to "V2X", "we," "us," "our," “combined company”, "the Company" and "our Company" refer to V2X, Inc. and all of its consolidated subsidiaries (including, subsequent to the Merger, Vertex and its consolidated subsidiaries), taken together as a whole.

Equity Investments

In 2011, wethe Company entered into a joint venture agreement with Shaw Environmental & Infrastructure, Inc., which is now APTIM Federal Services LLC. Pursuant to the joint venture agreement, High Desert Support Services, LLC (HDSS) was established to pursue and perform work on the Ft. Irwin Installation Support Services Contract, which was awarded to HDSS in October 2012. In 2018, wethe Company entered into a joint venture agreement with J&J Maintenance. Pursuant to the joint venture agreement, J&J Facilities Support, LLC (J&J) was established to pursue and perform work on various U.S. government contracts. In 2020, wethe Company entered into a joint venture agreement with Kuwait Resources House for Human Resources Management and Services Company ~~(KRH)~~. Pursuant to the joint venture agreement, ServCore Resources and Services Solutions, ~~LLC.~~LLC (ServCore) was established to operate and manage labor and life support services outside of the continental United States at designated locations serviced by V2X and others around the world.

~~We account~~The Company accounts for ~~our~~ investments in HDSS, J&J, and ServCore under the equity method ~~as we have~~and has the ability to exercise significant influence but dodoes not hold a controlling interest. ~~We record our~~The Company's proportionate 25%, 50%, and 40% shares, respectively, of income or losses from HDSS, J&J, and ServCore are recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Income (Loss) ~~Income. Our~~. The Company's investment in these joint ventures is recorded in other non-current assets in the Condensed Consolidated Balance Sheets.

When ~~we receive~~ cash distributions are received by the Company from ~~our~~its equity method investments, the cash distribution is compared to cumulative earnings and cumulative cash distributions. Cash distributions received are recorded as a return on investment in operating cash flows within the Condensed Consolidated Statements of Cash Flows to the extent cumulative cash distributions are less than cumulative earnings. Any cash distributions in excess of cumulative earnings are recorded as a return of investment in investing cash flows within the Condensed Consolidated Statements of Cash Flows. As of ~~March 31,~~June 30, 2023 and December 31, 2022 ~~our~~the Company's joint venture investment balance was ~~$6.5~~$6.3 million and $7.0 million, respectively. ~~Our~~The Company's proportionate share of income from the HDSS, J&J, and ServCore joint ventures was ~~$1.8~~$2.0 million and $3.8 million for the ~~first quarter of~~three and six months ended June 30, 2023, respectively, and not material for the first ~~quarter~~and second quarters of 2022.

Basis of Presentation

~~Our~~The Company's quarterly financial periods end on the Friday closest to the last day of the calendar quarter ~~(March 31,~~(June 30, 2023 for the ~~first~~second quarter of 2023 and ~~April~~July 1, 2022 for the ~~first~~second quarter of 2022), except for the last quarter of the fiscal year, which ends on December 31. For ease of presentation, the quarterly financial statements included herein are described as three months ended.

The unaudited interim Condensed Consolidated Financial Statements of V2X have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. have been omitted. These unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with ~~our~~the audited Consolidated Financial Statements and notes thereto included in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

~~Table of Contents~~

It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position and operating results. Revenue and net income for any interim period are not necessarily indicative of future or annual results.

Table of Contents

NOTE 2

RECENT ACCOUNTING STANDARDS UPDATE

There have been no accounting standards issued or adopted during the first ~~quarter~~or second quarters of 2023 that are expected to have a material impact on the Company's financial statements.

NOTE 3

MERGER

In accordance with ~~ASC~~Accounting Standards Codification (ASC) Topic 805, Business Combinations, wethe Company accounted for the below transaction using the acquisition method. WeThe Company conducted valuations of certain acquired assets and liabilities for inclusion in ~~our~~its Condensed Consolidated Balance Sheets as of the date of the Merger. Assets that normally would not be recorded in ordinary operations, such as intangibles related to contractual relationships, were recorded at their estimated fair values. The excess purchase price over the estimated fair value of the net assets acquired was recorded as goodwill.

On the Closing Date, Vectrus completed its previously announced Merger with Vertex, forming V2X by acquiring all of the outstanding shares of Vertex. On the Closing Date, Vertex and its consolidated subsidiaries became wholly-owned subsidiaries of the Company.

The combined V2X entity from the Merger is a larger and more diversified Company with the ability to compete for more integrated business opportunities and generate revenue across geographies, clients, and contract types in supporting the mission of ~~our~~its customers.

Purchase Price Allocation

The Merger is accounted for as a business combination. As such, the assets acquired and liabilities assumed are accounted for at fair value, with the excess of the purchase price over the fair value of the net identifiable assets acquired and liabilities assumed recorded as goodwill.

The Closing Date fair value of the consideration transferred totaled $634.0 million, which was comprised of the following:


(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

Table of Contents

The following table summarizes the ~~preliminary~~final fair values of the assets acquired and liabilities assumed in the Merger as of the Closing Date. ~~The estimated fair value of Vertex’s assets acquired and liabilities assumed at the acquisition date are determined based on preliminary valuations and analyses.~~ As of ~~March 31,~~June 30, 2023, wethe Company considered these amounts to be preliminary because we are still in the process of gathering and reviewing information to support the details surrounding tax matters and assumptions underlying certain existing or potential reserves. The final determination could result in further adjustments.final.


(In thousands)	~~Preliminary~~ Fair Value
Cash and cash equivalents	$	196,993
Receivables	~~334,655~~331,300
Prepaid expenses	~~49,172~~50,838
Property, plant, and equipment	~~53,618~~55,678
Intangible assets	480,000
Other non-current assets	~~18,895~~17,104
Right-of-use assets	21,062
Accounts payable	(121,515)
Debt	(1,352,303)
Compensation and other employee benefits	(45,968)
Other current and non-current liabilities	(334,469)
Total identifiable net assets	~~(699,860)~~(701,280)
Goodwill	~~1,333,811~~1,335,231
Total purchase consideration	$	633,951

As a result of the Merger, the Company recognized ~~$1,333.8~~$1,335.2 million of goodwill. The goodwill recognized is attributable to operational and general and administrative cost synergies, expanded market opportunities and other benefits that do not qualify for separate recognition. None of the goodwill is expected to be deductible for tax purposes. ~~In addition, we recognized two intangible~~Intangible assets related to backlog and customer contracts arising from the ~~Merger.~~Merger were also recognized. The fair value of backlog was $316.0 million, and the fair value of the customer contracts was $164.0 million with amortization periods of 4.5 years and 14.0 years, respectively. The receivables of ~~$334.7~~$331.3 million represent fair value and are considered fully collectible.

As part of the Merger, V2X acquired certain contracts, including a Transition Services Agreement (TSA) with Crestview Aerospace LLC (Crestview), which was previously divested to American Industrial Partners Capital Fund VI, L.P. (AIP). ~~As of March 31,~~For the three and six months ended June 30, 2023, the Company recorded $0.7 million and $1.4 million of income related to the TSA with Crestview, respectively, which was recorded as a reduction in cost of ~~sales.~~revenue. AIP indirectly held approximately ~~60.0%~~59.5% of ~~V2X~~V2X common stock through Vertex Aerospace Holdco LLC as of ~~March 31,~~June 30, 2023.

The following unaudited information shows the combined actual results of ~~our~~ operations for the three and six months ended ~~March 31,~~June 30, 2023 and pro forma results for the three and six months ended ~~April~~July 1, 2022 as if the Merger had occurred on January 1, 2021. The unaudited pro forma information reflects the effects of applying ~~our~~the Company's accounting policies and certain pro forma adjustments to the combined historical financial information of Vertex. The pro forma adjustments include: a) incremental amortization expense associated with identified intangible assets; b) incremental interest expense resulting from fair value adjustments applied to the Vertex debt that wewas assumed; and c) a reduction of revenues and operating expenses associated with fair value adjustments made to acquire assets and assumed liabilities, such as contract assets and contract liabilities.

This unaudited pro forma information is presented for informational purposes only and may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.


		Three Months Ended					Three Months Ended				Six Months Ended
		March 31, 2023		April 1, 2022			June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
(Unaudited, in thousands)	(Unaudited, in thousands)	Actual		Pro forma		(Unaudited, in thousands)	Actual		Pro forma		Actual		Pro forma
Revenue	Revenue	$	943,460	$	842,741	Revenue	$	977,852	$	887,377	$	1,921,312	$	1,730,118
Net (loss) income		$	(17,480)	$	11,953
Net income (loss)						Net income (loss)	$	1,799	$	4,004	$	(15,681)	$	15,897

Table of Contents

NOTE 4

REVENUE

Performance Obligations

Performance obligations represent firm orders by the customer and excludes potential orders under indefinite delivery and indefinite quantity (IDIQ) contracts, unexercised contract options and contracts awarded to us that are being protested by competitors with the U.S. Government Accountability Office (GAO) or in the U.S. Court of Federal Claims (COFC). The level of order activity related to programs can be affected by the timing of government funding authorizations and their project evaluation cycles. Year-over-year comparisons could, at times, be impacted by these factors, among others.

Contracts are often modified to account for changes in contract specifications and requirements. If the modification either creates new enforceable rights and obligations or changes the existing enforceable rights and obligations, the modification will be treated as a separate contract. ~~Our contract~~Contract modifications, except for those to exercise option years, have historically not been distinct from the existing contract and have been accounted for as if they were part of that existing contract.

The Company's performance obligations are satisfied over time as services are provided throughout the contract term. ~~We recognize revenue~~Revenue is recognized over time using the input method (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. ~~Our over-time~~Over-time recognition is reinforced by the fact that ~~our~~the Company's customers simultaneously receive and consume the benefits of ~~our~~its services as they are performed. For most U.S. government contracts, this continuous transfer of control to the customer is supported by contract terms that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. This continuous transfer of control requires that ~~we track~~ progress towards completion of performance obligations is tracked in order to measure and recognize revenue.

The Company's contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year (or less) option periods. The number of option periods varies by contract, and there is no guarantee that an option period will be exercised. The right to exercise an option period is at the sole discretion of the U.S. government when ~~we are~~the Company is the prime contractor or of the prime contractor when ~~we are~~the Company is a subcontractor. ~~We expect~~The Company expects to recognize a substantial portion of ~~our~~its performance obligations as revenue within the next 12 months. However, the U.S. government or the prime contractor may cancel any contract at any time through a termination for convenience or for cause. Substantially all of ~~our~~the Company's contracts have terms that would permit ~~us to recover~~recovery of all or a portion of ~~our~~the Company's incurred costs and fees for work performed in the event of a termination for convenience.

Performance obligations as of ~~March 31,~~June 30, 2023 and December 31, 2022 are presented in the following table:


		March 31,		December 31,			June 30,		December 31,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022
Performance Obligations	Performance Obligations	$	3,425	$	2,997	Performance Obligations	$	3,696	$	2,997

~~We expect~~As of June 30, 2023, the Company expects to recognize approximately ~~62%~~43% and 57% of ~~the~~these performance obligations ~~as of March 31, 2023~~ as revenue in 2023 and ~~the remaining 38% during 2024.~~2024, respectively.

Contract Estimates

The impact of adjustments in contract estimates on ~~our~~the Company's operating income can be reflected in either revenue or cost of revenue. Cumulative catch-up adjustments for the three and six months ended ~~March 31,~~June 30, 2023 ~~and April 1, 2022~~ increased operating income by ~~$13.1~~$9.1 million and ~~$0.6~~$22.2 million, respectively. For the three and six months ended July 1, 2022, the adjustments increased operating income by $6.8 million and $7.4 million, respectively.

For the three and six months ended ~~March 31,~~June 30, 2023, the cumulative catch-up adjustments to operating income increased revenue by $9.6 million and ~~April~~$23.5 million, respectively. For the three and six months ended July 1, 2022, the cumulative catch-up adjustments to operating income increased revenue by ~~$13.9~~$6.8 million and ~~$0.6~~$7.4 million, respectively.

Revenue by Category

Generally, the sales price elements for ~~our~~the Company's contracts are cost-plus, cost-reimbursable or ~~firm-fixed-price. We~~firm-fixed-price, all of which are commonly ~~have elements of cost-plus, cost-reimbursable, time-and-materials and firm-fixed-price contracts on~~identified with a single contract. On a cost-plus contract, ~~we are~~the Company is paid ~~our~~ allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement, up to funding levels predetermined by ~~our~~the Company's customers.

On cost-plus contracts, ~~we do~~the Company does not bear the risks of unexpected cost overruns, provided that weincurred costs do not ~~incur costs that~~ exceed the predetermined funded amounts. Most of ~~our~~the Company's cost-plus contracts also contain a firm-fixed-price element. Cost-plus contracts with award and incentive fee provisions are ~~our~~ primary variable contract fee ~~arrangement.~~arrangements. Award fees provide for a fee based on actual performance relative to contractually specified performance criteria. Incentive fees ~~provide for a fee~~are based on the relationship between total allowable and target cost.

~~On most~~

Table of ~~our~~Contents

Most of the Company's contracts include a cost-reimbursable element ~~captures~~to capture costs of consumable materials required for the program. Typically, these costs do not bear fees.

~~Table of Contents~~

On a time-and-materials contract, ~~we are~~the Company is reimbursed for labor at fixed hourly rates and generally reimbursed separately for allowable materials, costs and expenses at cost. For this contract type, ~~we bear~~the Company bears the risk that ~~our~~ labor costs and allocable indirect expenses are greater than the fixed hourly rate defined within the contract.

On a firm-fixed-price contract, ~~we agree~~the Company agrees to perform the contractual statement of work for a predetermined contract price. A firm-fixed-price contract typically offers higher profit margin potential than a cost-plus contract, which is commensurate with the greater levels of risk ~~we assume~~assumed on a firm-fixed-price contract. Although a firm-fixed-price contract generally permits ~~us to retain~~retention of profits if the total actual contract costs are less than the estimated contract costs, ~~we bear~~the Company bears the risk that increased or unexpected costs may reduce ~~our~~ profit or cause usthe Company to sustain losses on the contract. Although the overall scope of work required under the contract may not change, profit may be adjusted as experience is gained and as efficiencies are realized or costs are incurred.

The following tables present various revenue disaggregations.

Revenue by contract type ~~for the three months ended March 31, 2023 and April 1, 2022~~ is as follows:


		Three Months Ended						Three Months Ended				Six Months Ended
		March 31,		April 1,		%				June 30,		July 1,		%		June 30,		July 1,		%
(In thousands)	(In thousands)	2023		2022		Change			(In thousands)	2023		2022		Change		2023		2022		Change
Cost-plus and cost-reimbursable	Cost-plus and cost-reimbursable	$	523,030	$	311,094	68.1	%		Cost-plus and cost-reimbursable	$	507,282	$	355,559	42.7	%	$	1,019,217	$	666,653	52.9	%
Firm-fixed-price	Firm-fixed-price	385,112		128,004		200.9	%		Firm-fixed-price	438,684		128,348		241.8	%	834,891		256,352		225.7	%
Time-and-materials	Time-and-materials	35,318		17,373		103.3	%		Time-and-materials	31,886		14,159		125.2	%	67,204		31,532		113.1	%
Total revenue	Total revenue	$	943,460	$	456,471				Total revenue	$	977,852	$	498,066			$	1,921,312	$	954,537

Revenue by geographic region in which the contract is performed ~~for the three months ended March 31, 2023 and April 1, 2022~~ is as follows:

Three Months Ended
March 31, April 1, %
(In thousands) 2023 2022 Change
United States $ 548,770 $ 167,980 226.7 %
Middle East 281,121 235,754 19.2 %
Asia 64,317 16,206 296.9 %
Europe 49,252 36,531 34.8 %
Total revenue $ 943,460 $ 456,471


	Three Months Ended						Six Months Ended
	June 30,		July 1,		%		June 30,		July 1,		%
(In thousands)	2023		2022		Change		2023		2022		Change
United States	$	578,514	$	158,719	264.5	%	$	1,127,284	$	325,454	246.4	%
Middle East	279,083		250,222		11.5	%	560,204		485,313		15.4	%
Asia	65,533		46,386		41.3	%	129,850		62,592		107.5	%
Europe	54,722		42,739		28.0	%	103,974		81,178		28.1	%
Total revenue	$	977,852	$	498,066			$	1,921,312	$	954,537

Revenue by contract relationship ~~for the three months ended March 31, 2023 and April 1, 2022~~ is as follows:

Three Months Ended
March 31, April 1, %
(In thousands) 2023 2022 Change
Prime contractor $ 879,179 $ 427,093 105.9 %
Subcontractor 64,281 29,378 118.8 %
Total revenue $ 943,460 $ 456,471


	Three Months Ended						Six Months Ended
	June 30,		July 1,		%		June 30,		July 1,		%
(In thousands)	2023		2022		Change		2023		2022		Change
Prime contractor	$	916,060	$	468,453	95.5	%	$	1,795,239	$	895,546	100.5	%
Subcontractor	61,792		29,613		108.7	%	126,073		58,991		113.7	%
Total revenue	$	977,852	$	498,066			$	1,921,312	$	954,537

Table of Contents

Revenue by customer ~~for the three months ended March 31, 2023 and April 1, 2022~~ is as follows:


		Three Months Ended						Three Months Ended				Six Months Ended
		March 31,		April 1,		%				June 30,		July 1,		%		June 30,		July 1,		%
(In thousands)	(In thousands)	2023		2022		Change			(In thousands)	2023		2022		Change		2023		2022		Change
Army	Army	$	390,503	$	280,113	39.4	%		Army	$	393,499	$	326,756	20.4	%	$	784,002	$	606,869	29.2	%
Navy	Navy	292,690		75,217		289.1	%		Navy	293,198		64,885		351.9	%	585,888		140,102		318.2	%
Air Force	Air Force	129,981		61,474		111.4	%		Air Force	154,001		68,457		125.0	%	283,982		129,930		118.6	%
Other	Other	130,286		39,667		228.4	%		Other	137,154		37,968		261.2	%	267,440		77,636		244.5	%
Total revenue	Total revenue	$	943,460	$	456,471				Total revenue	$	977,852	$	498,066			$	1,921,312	$	954,537

Contract Balances

The timing of revenue recognition, billings, and cash collections results in billed and unbilled accounts receivable (contract assets) and customer advances and deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, wethe Company may receive advances or deposits from ~~our~~its customers before revenue is recognized, resulting in contract liabilities. These advance billings and payments are not considered significant financing components because they are frequently intended to ensure that both parties are in conformance with the primary contract terms. These assets and liabilities are reported on the Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period.

As of ~~March 31,~~June 30, 2023 and December 31, 2022, wethe Company had contract assets of ~~$559.3~~$570.8 million and $487.8 million, respectively. Contract assets primarily consist of unbilled receivables which represent rights to consideration for work completed but not billed as of the reporting date. The balance of unbilled receivables consists of costs and fees that are: (i) billable immediately; (ii) billable on contract completion; or (iii) billable upon other specified events, such as the resolution of a request for equitable adjustment. Refer to Note 5, Receivables for additional information regarding the composition of ~~our~~the Company's receivable balances. As of ~~March 31,~~June 30, 2023 and December 31, 2022, ~~our~~ contract liabilities, included in other accrued liabilities in the Condensed Consolidated Balance Sheets, were ~~$73.1~~$62.6 million and $76.4 million, respectively.

NOTE 5

RECEIVABLES

Receivables were comprised of the following:


(In thousands)	(In thousands)	March 31, 2023		December 31, 2022		(In thousands)	June 30, 2023		December 31, 2022
Billed receivables	Billed receivables	$	189,247	$	227,718	Billed receivables	$	164,677	$	227,718
Unbilled receivables (contract assets)	Unbilled receivables (contract assets)	559,341		487,758		Unbilled receivables (contract assets)	570,785		487,758
Other	Other	11,225		13,106		Other	11,100		13,106
Total receivables	Total receivables	$	759,813	$	728,582	Total receivables	$	746,562	$	728,582

As of ~~March 31,~~June 30, 2023 and December 31, 2022, substantially all billed receivables are due from the U.S. government, either directly as prime contractor to the U.S. government or as subcontractor to another prime contractor to the U.S. government. Because the Company's billed receivables are with the U.S. government, the Company does not believe it has a material credit risk exposure.

Unbilled receivables are contract assets that represent revenue recognized on long-term contracts in excess of amounts billed as of the balance sheet date. ~~We expect~~The Company expects to bill customers for the majority of the ~~March 31,~~June 30, 2023 contract assets during 2023. C~~hanges~~Changes in the balance of unbilled receivables are primarily due to the timing differences between ~~our~~ performance and customers' payments.

NOTE 6

DEBT

Senior Secured Credit Facilities

In September 2014, Vectrus and its wholly-owned subsidiary, Vectrus Systems Corporation (VSC), entered into a senior secured credit agreement. The credit agreement was subsequently amended on December 24, 2020 and January 24, 2022 and is collectively referred to as the Prior Credit Agreement. The credit agreement consisted of a term loan (Amended Term Loan) and a $270.0 million revolving credit facility (Amended Revolver).

On the Closing Date, the outstanding debt from the Amended Term Loan and the Amended Revolver, $50.2 million and $40.0 million, respectively, was repaid and related guarantees and liens were discharged and released. Repayment was made using proceeds from the Vertex First Lien Credit Agreement described below.

Table of Contents

using proceeds from the Vertex First Lien Credit Agreement described below. As of December 31, 2021, the balance outstanding under the Amended Term Loan and the Amended Revolver, was $55.4 million and $50.0 million, respectively.

On the Closing Date, certain of ~~our~~the Company's subsidiaries, including VSC (and together with VSC, the Company Guarantor Subsidiaries), that became direct or indirect subsidiaries of Vertex Aerospace Service Corp., a Delaware corporation and wholly-owned indirect subsidiary of Vertex (Vertex Borrower), have provided guarantees of the indebtedness under each of:

i.the First Lien Credit Agreement, dated as of December 6, 2021 (as amended by the Amendment No. 1 to First Lien Credit Agreement, dated as of the Closing Date, and as further amended, restated, amended and restated, supplemented and otherwise modified from time to time, the Vertex First Lien Credit Agreement), by and among Vertex Borrower, as borrower, Vertex Aerospace Intermediate LLC, a Delaware limited liability company, direct parent entity of Vertex Borrower and wholly-owned indirect subsidiary of Vertex (Vertex Holdings), the lenders from time to time party thereto and Royal Bank of Canada, as administrative agent;

ii.the Second Lien Credit Agreement, dated as of December 6, 2021 (as amended, restated, amended and restated, supplemented and otherwise modified from time to time, the Vertex Second Lien Credit Agreement), Vertex Borrower, as borrower, Vertex Holdings, the lenders from time to time party thereto and Royal Bank of Canada, as administrative agent; and

iii.the 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 the Closing Date, and as further amended, restated, amended and restated, supplemented and otherwise modified from time to time, the Vertex ABL Credit Agreement), by and among Vertex Borrower, Vertex Holdings, 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 (in such capacity, the ABL Agent).

On February 28, 2023, Vertex Borrower entered into a credit agreement (the 2023 Credit Agreement) among the lenders identified therein and Bank of America, N.A., as administrative agent, collateral agent, swingline lender and letter of credit issuer. The 2023 Credit Agreement provides for $750.0 million in senior secured financing, with a first lien on substantially all the Borrower’s assets, consisting of a $500.0 million five-year Revolving Credit Facility (2023 Revolver) and a five-year $250.0 million Term Loan. The proceeds of these Credit Facilities were used to, among other things, (i) repay the First Lien Incremental Term Tranche (as defined below), (ii) repay the entire outstanding amount of the Second Lien Credit Agreement, and (iii) repay the entire outstanding ABL Credit Facility.

Vertex First Lien Credit Agreement

The Vertex First Lien Credit Agreement provides for senior secured first lien term loans in an aggregate principal amount of $1,185.0 million, consisting of a $925.0 million term loan “B” tranche, (the First Lien Initial Term Tranche) and a $260.0 million incremental term loan “B” tranche (the First Lien Incremental Term Tranche and, together with the First Lien Initial Term Tranche, collectively, the First Lien Term Facility). The entire amount of the proceeds from the (i) First Lien Initial Term Tranche were previously used to finance the acquisition of certain subsidiaries of Raytheon Company, a Delaware corporation, and related transaction costs (the Sky Acquisition in December 2021). As provided in the Merger Agreement, the proceeds of the First Incremental Term Tranche were used by the Vertex Borrower to redeem all of the shares of previously issued preferred stock on the Closing Date (but prior to the Merger). The remaining First Lien Incremental Term Tranche proceeds were used to repay in full all outstanding indebtedness under the Prior Credit Agreement, and other transaction costs. Approximately $54.0 million of cash remained after funding the preferred stock redemption, repayment of the Prior Credit Agreement and other transaction costs.

On February 28, 2023, the outstanding balance of the First Incremental Term Tranche of $258.7 million was repaid. The balance of unamortized deferred financing costs related to the First Incremental Term Tranche of $11.9 million was recorded as a loss on extinguishment of debt in the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2023.

The remaining loans under the First Lien Term Facility (consisting solely of the Initial Term Loan Tranche) amortize in an amount equal to approximately $2.3 million per quarter for the fiscal quarters ending ~~March 31,~~June 30, 2023, through September 30, 2028, with the balance of $864.9 million due on December 6, 2028.

The Vertex Borrower’s obligations under the First Lien Term Facility, which were assumed in the Merger, are guaranteed by Vertex Holdings and Vertex Borrower’s wholly-owned domestic subsidiaries (including the Company Guarantor Subsidiaries, collectively, the Guarantors), subject to customary exceptions and limitations. The Vertex Borrower’s obligations under the First Lien Term Facility and the Guarantors’ obligations under the related guarantees are secured by a first-lien on substantially all of the Vertex Borrower’s and the Guarantors’ assets which exists on a pari passu basis with the lien held by the 2023 Credit Agreement lenders.

Table of Contents

The borrowings under the First Lien Initial Term Tranche bear interest at rates that, at the Vertex Borrower’s option, can be either a base rate, determined by reference to the greater of (a) the federal funds rate plus 0.50%, (b) the prime lending

~~Table of Contents~~

rate, or (c) an adjusted Eurodollar rate plus 1.00%, plus a margin of 2.50% to 2.75% per annum, or a Eurodollar rate, determined by reference to ~~LIBOR,~~SOFR, plus a margin of 3.50% to 3.75% per annum, in each case, depending on the consolidated first lien net leverage ratio of the Vertex Borrower and its subsidiaries. As of ~~March 31,~~June 30, 2023, the effective interest rate for the First Lien Initial Term Tranche was ~~9.11%~~9.73%.

The Vertex First Lien Credit Agreement contains customary representations and warranties and affirmative covenants. The Vertex First Lien Credit Agreement also includes negative covenants that limit, among other things, additional indebtedness, additional liens, sales of assets, dividends, investments and advances, prepayments of debt and mergers and acquisitions.

The Vertex First Lien Credit Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the First Lien Term Facility to be in full force and effect, and a change of control. If an event of default occurs and is continuing, the Vertex Borrower may be required immediately to repay all amounts outstanding under the Vertex First Lien Credit Agreement.

As of ~~March 31,~~June 30, 2023, the carrying value of the First Lien Credit Agreement was ~~$915.8~~$913.4 million, excluding deferred discount and unamortized deferred financing costs of ~~$40.8~~$39.0 million. The estimated fair value of the First Lien Credit Agreement as of ~~March 31,~~June 30, 2023 was ~~$910.0~~$914.6 million. The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt (Level 2).

Vertex Second Lien Credit Agreement

The Vertex Second Lien Credit Agreement provided for senior secured second lien term loans in an aggregate principal amount of $185.0 million (the Second Lien Term Facility). The entire amount of the proceeds from the Second Lien Term Facility were previously used to finance the Sky Acquisition in December 2021. The Company voluntarily prepaid $25.0 million of the Second Lien Term Facility on December 30, 2022 (the Voluntary Prepayment). On February 28, 2023, the remaining Second Lien Term Facility balance of $160.0 million was repaid (the 2023 Payoff) and related guarantees and liens were discharged and released. The balance of unamortized deferred financing costs related to the Second Lien Term Facility of $7.1 million was recorded as a loss on extinguishment of debt in the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2023.

Under the terms of the Vertex Second Lien Credit Agreement, the Vertex Borrower was required to remit a prepayment premium of $1.6 million with the 2023 Payoff which was recorded as a loss on extinguishment of debt in the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2023.

Vertex ABL Credit Agreement

The Vertex ABL Credit Agreement provided for a senior secured revolving loan facility (the ABL Facility) of up to an aggregate amount of $200.0 million (the loans thereunder, the ABL Loans). The Vertex ABL Credit Agreement also provided for (i) a $30.0 million sublimit of availability for letters of credit, and (ii) a $10.0 million sublimit for short-term borrowings on a swingline basis. On February 28, 2023, the outstanding ABL Facility borrowings of $67.5 million were repaid and related guarantees and liens were discharged and released. The balance of unamortized deferred financing costs related to the Vertex ABL Credit Agreement of $1.5 million ~~which~~ was recorded as a loss on extinguishment of debt in the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2023.

2023 Credit Agreement

The 2023 Credit Agreement provides for $750.0 million in senior secured financing, with a first lien on substantially all the Borrower’s assets and consists of (a) ~~a $500.0 million five-year Revolving Credit Facility~~the 2023 Revolver (which includes (i) a $50.0 million sublimit of availability for letters of credit, and (ii) a $50.0 million sublimit for short-term borrowings on a swingline basis) and (b) a five-year $250.0 million Term Loan.

The Term Loan portion of the 2023 Credit Agreement amortizes at approximately $1.6 million per quarter for the fiscal quarters ending June 30, 2023 through March 31, 2025, increasing to $3.1 million per quarter for the fiscal quarters ending June 30, 2025 through December 31, 2027, with the balance of $203.1 million due on February 28, 2028.

The Vertex Borrower’s obligations under the 2023 Credit Agreement are guaranteed by the Guarantors, subject to customary exceptions and limitations. The Vertex Borrower’s obligations under the 2023 Credit Agreement and the Guarantors’ obligations under the related guarantees are secured by a first priority-lien on substantially all of the Vertex Borrower’s and the Guarantors’ assets (subject to customary exceptions and limitations) which exists on a pari passu basis with the lien held by the First Lien Credit Agreement lenders.

Table of Contents

The borrowings under the 2023 Credit Agreement bear interest at rates that, at the Vertex Borrower’s option, can be either a base rate, determined by reference to the greater of (a) the federal funds rate plus 0.50%, (b) the prime lending rate, or (c) an adjusted Eurodollar rate plus 1.00%, plus a margin of 1.00% to 2.25% per annum, or a Eurodollar rate, determined by reference to SOFR, plus a margin of 2.00% to 3.25% per annum, in each case, depending on the consolidated total net leverage ratio of the Vertex Borrower and its subsidiaries. As of ~~March 31,~~June 30, 2023, the effective interest rates for the 2023 Revolver and Term Loan portion of the 2023 Credit Agreement were ~~8.15%~~8.47% and ~~8.35%~~8.65%, respectively.

~~Table of Contents~~

Unutilized commitments under the 2023 Revolver are subject to a per annum fee ranging from 0.25% to 0.50% depending on the consolidated total net leverage ratio of the Vertex Borrower and its subsidiaries.

The Vertex Borrower is also required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125% per annum of the amount available to be drawn under each such letter of credit (or such other amount as may be mutually agreed by the Vertex Borrowers and the applicable letter of credit issuer), as well as a fee to all lenders equal to the applicable margin to SOFR of Revolving Credit loans times the average daily amount available to be drawn under all outstanding letters of credit.

The 2023 Credit Agreement contains customary representations and warranties, which must be accurate for the Vertex Borrower to borrow under the 2023 Credit Agreement, and affirmative covenants. The 2023 Credit Agreement also includes negative covenants that limit, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions.

The 2023 Credit Agreement contains financial covenants requiring (a) the consolidated total net leverage ratio not to exceed 5.00 to 1.00 for the reporting periods ending on or after June 30, 2023, and on or prior to June 30, 2024, with further step downs thereafter, and (b) the consolidated interest coverage ratio be at least 2.00 to 1.00 commencing with the reporting period ending on June 30, 2023.

The 2023 Credit Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the 2023 Credit Agreement to be in full force and effect, and a change of control. If an event of default occurs and is continuing, the Borrowers may be required immediately to repay all amounts outstanding under the 2023 Credit Agreement.

As of ~~March 31,~~June 30, 2023, there were ~~$185.0~~$85.0 million of outstanding borrowings and ~~$14.9~~$16.1 million of outstanding letters of credit under the 2023 Revolver. Availability under the 2023 Revolver was ~~$300.1~~$398.9 million as of ~~March 31,~~June 30, 2023. Unamortized deferred financing costs related to the 2023 Revolver of ~~$4.9~~$4.7 million are included in other non-current assets in the Condensed Consolidated Balance Sheets. As of ~~March 31,~~June 30, 2023, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.

As of ~~March 31,~~June 30, 2023, the carrying value of the Term Loan portion of the 2023 Credit Agreement was ~~$250.0~~$248.4 million, excluding unamortized deferred financing costs of ~~$2.5~~$2.3 million. The estimated fair value of the Term Loan portion of the 2023 Credit Agreement as of ~~March 31,~~June 30, 2023 was ~~$246.3~~$248.1 million. The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt (Level 2).

The aggregate scheduled maturities of the First Lien Credit Agreement and 2023 Credit Agreement as of ~~March 31,~~June 30, 2023 are as follows:


(In thousands)	(In thousands)	Payments due		(In thousands)	Payments due
2023 (remainder of the year)	2023 (remainder of the year)	$	11,625	2023 (remainder of the year)	$	7,750
2024	2024	15,500		2024	15,500
2025	2025	20,188		2025	20,188
2026	2026	21,750		2026	21,750
2027	2027	21,750		2027	21,750
After 2027	After 2027	1,259,937		After 2027	1,159,937
Total	Total	$	1,350,750	Total	$	1,246,875

As of ~~March 31,~~June 30, 2023 ~~we were~~the Company was in compliance with all covenants related to the First Lien Credit Agreement and the 2023 Credit Agreement.

Table of Contents

NOTE 7

DERIVATIVE INSTRUMENTS

During the periods covered by this report, ~~we have~~the Company has made no changes to ~~our~~its policies or strategies for the use of derivative instruments and there has been no change in ~~our~~ related accounting methods. ~~For our derivative~~Derivative instruments, which are designated as cash flow hedges, gains and losses are initially reported as a component of accumulated other comprehensive ~~loss~~income (loss) and subsequently recognized in earnings with the corresponding hedged item.

Interest Rate Derivative Instruments

The Company is exposed to the risk that the earnings and cash flows could be adversely impacted due to fluctuations in interest rates. To mitigate this risk, the Company entered into $350.0 million of interest rate swap contracts induring the ~~amount~~first six months of ~~$300~~2023. These contracts had a notional value of $348.4 million ~~in March~~as of June 30, 2023. These contracts are designated and qualify as effective cash flow hedges.

The following table summarizes the amount at fair value and location of the derivative instruments ~~in our balance sheet~~ for ~~our~~ interest rate hedges in the Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023:

(In thousands)

Fair Value (level 2)

Balance sheet caption

Amount

Interest rate swap designated as cash flow hedge

Other current assets

~~2,839~~5,381

Interest rate swap designated as cash flow hedge

Other non-current assets

269

Interest rate swap designated as cash flow hedge

Other non-current liabilities

~~5,186~~339

Interest rate swap designated as cash flow hedge

Accumulated other comprehensive income

5,311

There were no interest rate swaps designated as cash flow hedges for the period ended December 31, 2022.

WeThe Company regularly ~~assess~~assesses the creditworthiness of the counterparty. As of ~~March 31,~~June 30, 2023, the counterparty to the interest rate swaps had performed in accordance with its contractual obligations. Both the counterparty credit risk and ~~our~~the Company's credit risk were considered in the fair value determination.

Net interest rate derivative gains ~~and losses~~ of ~~a nominal amount and $0.2~~$1.2 million were recognized in interest expense, net, in ~~our~~the Condensed Consolidated Statements of Income (Loss) during the three and six months ended June 30, 2023. Net interest rate derivative losses of $0.4 million were recognized in the Condensed Consolidated Statements of Income (Loss) during the first ~~three~~six months of ~~2023 and 2022, respectively. We expect $2.8~~2022. The Company expects $5.4 million of existing interest rate swap gains reported in accumulated other comprehensive ~~loss~~income as of ~~March 31,~~June 30, 2023 to be recognized in earnings within the next 12 months.

NOTE 8

COMMITMENTS AND CONTINGENCIES

General

From time to time, ~~we are~~the Company is involved in various investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, including government investigations and claims, which are incidental to the operation of ~~our~~its business. Some of these proceedings seek remedies relating to employment matters, matters in connection with ~~our~~the Company's contracts and matters arising under laws relating to the protection of the environment. Additionally, U.S. government customers periodically advise the Company of claims and penalties concerning certain potential disallowed costs. When such findings are presented, V2X and the U.S. government representatives engage in discussions to enable V2X to evaluate the merits of these claims as well as to assess the amounts being claimed.

Where appropriate, provisions are made to reflect probable losses related to the matters raised by U.S. government representatives. Such assessments, along with any assessments regarding provisions for legal proceedings, are reviewed on a quarterly basis for sufficiency based on the ~~most recent~~latest information available to us.

The Company estimated and ~~accrue~~daccrued $28.6 million and $27.6 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, in other accrued liabilities in the Condensed Consolidated Balance Sheets for legal proceedings and for claims with respect to ~~our~~its U.S. government contracts as discussed below, including years where the U.S. government has not completed its incurred cost audits. Although the ultimate outcome of any legal matter or claim cannot be predicted with certainty, based on present information, including ~~our~~the assessment of the merits of ~~the~~a particular claim, ~~we do~~the Company does not expect that any asserted or unasserted legal or contractual claims or proceedings, individually or in the aggregate, including the lawsuit discussed below, will have a material adverse effect on ~~our~~its cash flows, results of operations or financial condition.

Table of Contents

U.S. Government Contracts, Investigations and Claims

~~We have~~The Company has U.S. government contracts that are funded incrementally on a year-to-year basis. Changes in government policies, priorities or funding levels through agency or program budget reductions by the U.S. Congress or executive agencies could have a material adverse effect on ~~our~~the Company's financial condition or results of operations. Furthermore, ~~our~~ contracts with the U.S. government may be terminated or suspended by the U.S. government at any time, with or without cause. Such contract suspensions or terminations could result in non-reimbursable expenses or charges or otherwise adversely ~~affect our~~affecting the Company's financial condition and results of operations.

~~Table of Contents~~

Departments and agencies of the U.S. government have the authority to investigate various transactions and operations of the Company, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory or treble damages. U.S. government regulations provide that certain findings against a contractor may lead to suspension or debarment from future U.S. government contracts or the loss of export privileges for a company or an operating division or subdivision. Suspension or debarment could have a material adverse effect on the Company because of its reliance on U.S. government contracts.

U.S. government agencies, including the Defense Contract Audit Agency, the Defense Contract Management Agency and others, routinely audit and review ~~our~~the Company's performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. Accordingly, costs billed or billable to U.S. government customers are subject to potential adjustment upon audit by such agencies. The U.S. government agencies also review the adequacy of ~~our~~ compliance with government standards for ~~our~~ business systems, including ~~our~~ accounting, earned value management, estimating, materials management and accounting, purchasing, and property management systems.

In the performance of ~~our~~its contracts, wethe Company routinely ~~request~~requests contract modifications that require additional funding from U.S. government customers. Most often, these requests are due to customer-directed changes in the scope of work. While ~~we are~~the Company is entitled to recovery of these costs under ~~our~~its contracts, the administrative process with ~~our~~the U.S. government customer may be protracted. Based on the circumstances, wethe Company periodically ~~file~~files requests for equitable adjustments (REAs) that are sometimes converted into claims. In some cases, these requests are disputed by ~~our~~the U.S. government customer. ~~We believe our~~The Company believes its outstanding modifications, REAs and other claims will be resolved without material adverse impact to ~~our~~its results of operations, financial condition or cash flows.

As a result of final indirect rate negotiations between the U.S. government and our Former Parent, we were subject to adjustments to costs previously allocated by our Former Parent to our business from 2007 through 2014. On July 7, 2022, we accepted an offer by the U.S. government to settle this legal matter involving our payment of an insignificant amount, thereby bringing closure to the matter. With respect to our Former Parent, we believe we are fully indemnified under our distribution agreement and recently reached a final settlement with them on this matter.

NOTE 9

STOCK-BASED COMPENSATION

The Company maintains an equity incentive plan, the 2014 Omnibus Incentive Plan, as amended and restated effective as of October 27, 2022 (the 2014 Omnibus Plan), to govern awards granted to V2X employees and directors, including nonqualified stock options (NQOs), restricted stock units (RSUs), total shareholder return (TSR) awards, performance share units (PSUs) and other awards. ~~We account~~The Company accounts for NQOs, stock-settled RSUs and PSUs as equity-based compensation awards. TSR awards, described below, are accounted for as liability-based compensation awards. Liability-based awards are revalued at the end of each reporting period to reflect changes in fair value.

Stock-based compensation expense and the associated tax benefits impacting ~~our~~the Company's Condensed Consolidated Statements of Income (Loss) ~~Income~~ were as follows:


		Three Months Ended				Three Months Ended				Six Months Ended
(In thousands)	(In thousands)	March 31, 2023		April 1, 2022			(In thousands)	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Compensation costs for equity-based awards	Compensation costs for equity-based awards	$	12,066	$	3,100		Compensation costs for equity-based awards	$	7,771	$	1,575	$	19,837	$	4,676
Compensation costs for liability-based awards	Compensation costs for liability-based awards	806		(542)			Compensation costs for liability-based awards	304		592		609		50
Total compensation costs, pre-tax	Total compensation costs, pre-tax	$	12,872	$	2,558		Total compensation costs, pre-tax	$	8,075	$	2,167	$	20,446	$	4,725
Future tax benefit	Future tax benefit	$	2,971	$	555		Future tax benefit	$	1,756	$	466	$	4,445	$	1,017

Compensation costs for equity-based awards for the ~~three~~six months ended ~~March 31,~~June 30, 2023, included ~~$5.6~~$10.8 million related to RSUs issued in connection with the Merger.

As of ~~March 31,~~June 30, 2023, total unrecognized compensation costs related to equity-based awards and liability-based awards were ~~$34.4~~$28.0 million and ~~$1.7~~$1.4 million, respectively, which are expected to be recognized ratably over a weighted average period of ~~1.85~~1.75 years and ~~1.59~~1.37 years, respectively. Total unrecognized compensation costs included $15.6 million of expense related to RSUs granted in connection with the Merger.

Table of Contents

The following table provides a summary of the activities for NQOs, RSUs and PSUs for the ~~three~~six months ended ~~March 31,~~June 30, 2023:


		NQOs			RSUs			PSUs				NQOs			RSUs			PSUs
(In thousands, except per share data)	(In thousands, except per share data)	Shares	Weighted Average Exercise Price Per Share		Shares	Weighted Average Grant Date Fair Value Per Share		Shares	Weighted Average Grant Date Fair Value Per Share		(In thousands, except per share data)	Shares	Weighted Average Exercise Price Per Share		Shares	Weighted Average Grant Date Fair Value Per Share		Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding at January 1, 2023	Outstanding at January 1, 2023	42	$	22.86	1,628	$	35.47	—	$	—	Outstanding at January 1, 2023	42	$	22.86	1,628	$	35.47	—	$	—
Granted	Granted	—	$	—	278	$	39.39	254	$	35.86	Granted	—	$	—	301	$	39.70	265	$	35.66
Exercised	Exercised	—	$	—	—	$	—	—	$	—	Exercised	—	$	—	—	$	—	—	$	—
Vested	Vested	—	$	—	(839)	$	41.86	—	$	—	Vested	—	$	—	(957)	$	41.95	—	$	—

Forfeited or expired	Forfeited or expired	—	$	—	(6)	$	40.59	—	$	—	Forfeited or expired	—	$	—	(6)	$	40.59	—	$	—
Outstanding at March 31, 2023		42	$	22.86	1,061	$	36.41	254	$	35.86
Outstanding at June 30, 2023											Outstanding at June 30, 2023	42	$	22.86	966	$	36.82	265	$	35.66

Restricted Stock Units

On July 5, 2022, pursuant to the terms of the Merger Agreement, the Company issued an additional 1,346,089 RSUs, with a grant date fair value of $33.92 per share, to certain employees of Vertex. The RSUs have been or will be settled in shares of the Company's common stock, with 517,918 RSUs vesting on the six-month anniversary following the grant date and a quarter of the remaining 828,171 RSUs vesting or having vested on each of four six-month anniversary dates following the grant date. The fair value of each RSU grant to employees and directors was determined based on the closing price of V2X common stock on the date of grant. Stock compensation expense will be recognized ratably over the vesting period of the awards.

RSUs awarded to employees, excluding the RSU awards awarded under the Merger Agreement, discussed above, vest in one-third increments on each of the three anniversary dates following the grant date subject to continued employment. Director RSUs are granted on the date of an annual meeting of shareholders and vest on the business day immediately prior to the next annual meeting or the one-year anniversary of the grant date, if earlier. The fair value of each RSU grant was determined based on the closing price of V2X common stock on the date of grant. Stock compensation expense will be recognized ratably over the requisite service period of the RSU awards.

As of ~~March 31,~~June 30, 2023, there was ~~$27.8~~$21.8 million of unrecognized RSU related compensation expense.

Total Shareholder Return Awards

TSR awards are performance-based cash awards that are subject to a three-year performance period. Any payments earned are made in cash following completion of the performance period according to the achievement of specified performance goals. As a result of the Merger and pursuant to the terms of the TSR awards, performance achievement fair value was measured at July 4, 2022 at $4.6 million and the aggregate future award payouts were fixed at that value. There were no cash-based TSR awards granted in the first ~~quarter~~or second quarters of 2023.

As of ~~March 31,~~June 30, 2023, there was ~~$1.7~~$1.4 million of unrecognized TSR related compensation expense.

Performance Share Units

During the first ~~quarter~~and second quarters of 2023, the Company granted two types of performance-based awards with market conditions. The first award will vest and the stock will be issued at the end of a three-year period based on the attainment of certain total shareholder return performance measures relative to Aerospace and Defense companies in the S&P 1500 Index and the employee's continued service through the ~~vest~~vesting date. The number of shares ultimately awarded, if any, can range up to 200% of the specified target awards. If performance is below the threshold level of performance, no shares will be issued.

The second award will vest and stock will be issued at the end of a three-year period based on achievement of certain stock price targets, shareholder return performance measures relative to certain Aerospace and Defense companies in the S&P 1500 Index and the employee's continued service through the vest date. The numbers of shares ultimately awarded, if any, can range up to the specified target awards.

As of ~~March 31,~~June 30, 2023, there was ~~$6.5~~$6.2 million of unrecognized PSU related compensation expense.

Table of Contents

NOTE 10

INCOME TAXES

Effective Tax Rate

Income tax expense during interim periods is based on an estimated annual effective income tax rate, plus discrete items that may occur in any given interim periods. The computation of the estimated effective income tax rate at each interim period requires certain estimates and judgment including, but not limited to, forecasted operating income for the year, projections of the income earned and taxed in various jurisdictions, newly enacted tax rate and legislative changes, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year.

For the three months ended ~~March 31,~~June 30, 2023 and ~~April~~July 1, 2022, wethe Company recorded an income tax ~~benefit~~provision of ~~$5.7~~$0.2 million and ~~a provision of $0.7~~$2.6 million, respectively, representing effective income tax rates of ~~24.7%~~10.5% and ~~19.7%~~19.8%, respectively. For the six months ended June 30, 2023 and July 1, 2022, the Company recorded an income tax benefit of $5.5 million and a provision of $3.3 million, respectively, representing effective income tax rates of 26.1% and 19.8%, respectively. The effective income tax rates vary from the federal statutory rate of 21.0% mainly due to state and foreign taxes, disallowed compensation deduction under Internal Revenue Code Section 162(m), available deductions not reflected in book income, and income tax credits.

Uncertain Tax Positions

As of ~~March 31,~~June 30, 2023 and December 31, 2022, unrecognized tax benefits from uncertain tax positions were ~~$8.4~~$8.4 million and $8.6 million, respectively. The decrease in uncertain tax positions was principally the result of the release of a position for lapse of statute of limitation.

NOTE 11

EARNINGS (LOSS) ~~EARNINGS~~ PER SHARE

Basic earnings per share (EPS) is computed by dividing net income, or loss, by the weighted average number of common shares outstanding for the period. Diluted EPS reflects potential dilution that could occur if securities to issue common stock were exercised or converted into common stock. Diluted EPS includes the dilutive effect of stock-based compensation outstanding after application of the treasury stock method.


		Three Months Ended				Three Months Ended				Six Months Ended
		March 31,		April 1,				June 30,		July 1,		June 30,		July 1,
(In thousands, except per share data)	(In thousands, except per share data)	2023		2022			(In thousands, except per share data)	2023		2022		2023		2022
Net (loss) income		$	(17,480)	$	2,855
Net income (loss)							Net income (loss)	$	1,799	$	10,472	$	(15,681)	$	13,327

Weighted average common shares outstanding	Weighted average common shares outstanding	30,927		11,759			Weighted average common shares outstanding	31,033		11,826		30,981		11,793
Add: Dilutive impact of stock options	Add: Dilutive impact of stock options	—		27			Add: Dilutive impact of stock options	18		18		—		22
Add: Dilutive impact of restricted stock units	Add: Dilutive impact of restricted stock units	—		116			Add: Dilutive impact of restricted stock units	554		110		—		102
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	30,927		11,902			Diluted weighted average common shares outstanding	31,605		11,954		30,981		11,917

(Loss) earnings per share
Earnings (loss) per share							Earnings (loss) per share
Basic	Basic	$	(0.57)	$	0.24		Basic	$	0.06	$	0.89	$	(0.51)	$	1.13
Diluted	Diluted	$	(0.57)	$	0.24		Diluted	$	0.06	$	0.88	$	(0.51)	$	1.12

The following table summarizes the weighted average of anti-dilutive securities excluded from the diluted earnings per share calculation.


		Three Months Ended		Three Months Ended			Six Months Ended
		March 31,	April 1,			June 30,	July 1,	June 30,	July 1,
(In thousands)	(In thousands)	2023	2022		(In thousands)	2023	2022	2023	2022

Anti-dilutive restricted stock units	Anti-dilutive restricted stock units	—	5		Anti-dilutive restricted stock units	2	25	2	15

Table of Contents

NOTE 12

POST-EMPLOYMENT BENEFIT PLANS

Deferred Employee Compensation

The Company sponsors two non-qualified deferred compensation plans. Under these plans, participants are eligible to defer a portion of their compensation on a tax deferred basis. Plan investments and obligations were recorded in other non-current assets and other non-current liabilities, respectively, in the Condensed Consolidated Balance Sheets, representing the fair value related to the deferred compensation ~~plan.~~plans. Adjustments to the fair value of the plan investments and obligations are recorded in ~~operating~~selling, general, and administrative expenses. The ~~plan~~plans assets and liabilities were ~~$2.4~~$2.8 million and $1.5 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

Multi-Employer Pension Plans

~~Certain~~Certain Company employees who perform work on contracts within the continental United States participate in multi-employer pension plans of which the Company is not the sponsor. Company expenses related to these plans were ~~$3.3~~$4.9 million and ~~$0.2~~$8.2 million for the three and six months ended ~~March 31,~~June 30, 2023, respectively, and ~~April~~$0.3 million and $0.5 million for the three and six months ended July 1, 2022, respectively.

NOTE 13

SALE OF RECEIVABLES

On June 27, 2023, the Company entered into a Master Accounts Receivable Purchase Agreement (MARPA Facility) with MUFG Bank, Ltd. (MUFG) for the sale of certain designated eligible receivables with the U.S. government. Under the MARPA Facility, the Company can sell eligible receivables up to a maximum amount of $150.0 million. The receivables sold under the MARPA Facility are without recourse for any U.S. government credit risk.

The Company accounts for these receivable transfers under the MARPA Facility as sales under ASC Topic 860, Transfers and Servicing, and removes the sold receivables from its balance sheet. The fair value of the sold receivables approximated their book value due to their short-term nature.

The Company does not retain an ongoing financial interest in the transferred receivables other than cash collection and administrative services. The Company estimated that its servicing fee was at fair value and therefore has not recognized a servicing asset or liability as of June 30, 2023. Proceeds from the sale of receivables are reflected as cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.

MARPA Facility activity consisted of sales of $113.0 million of receivables representing an increase to cash flows provided by operating activities for the six months ended June 30, 2023. Cash collected, but not remitted to MUFG, of $69.7 million is included in other accrued liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2023. As of June 30, 2023, remaining receivables sold were $43.3 million.

During the three months ended June 30, 2023, the Company incurred purchase discount fees, net of servicing fees, of $0.2 million, which are presented in other expense, net on the Condensed Consolidated Statements of Income (Loss).

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of ~~our~~the Company's financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q as well as the audited Consolidated Financial Statements and notes thereto and the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, 2022. This Quarterly Report provides additional information regarding the Company, ~~our~~its services, industry outlook and forward-looking statements that involve risks and uncertainties, including those related to economic conditions ~~including~~such as inflation and rising interest rates, and the impact on ~~us, our~~the Company, its operations or ~~our~~ future financial or operational results. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about ~~our~~the Company's industry, business and future financial results. ~~Our actual~~Actual results could differ materially from the results contemplated by these forward-looking statements. Refer to "Forward-Looking Information" for further information regarding forward-looking statements. Amounts presented in and throughout this Item 2 are rounded and, as such, any rounding differences could occur in period over period changes and percentages reported.

Overview

V2X, Inc. is a leading provider of critical mission solutions primarily to defense clients globally. The Company operates as one segment and provides a comprehensive suite of integrated solutions across the operations and logistics, aerospace, training and technology markets to national security, defense, civilian and international clients.

~~Our~~The Company's primary customer is the U.S. Department of Defense (DoD). For the ~~three~~six months ended ~~March 31,~~June 30, 2023 and ~~April~~July 1, 2022, wethe Company had total revenue of ~~$943.5~~$1,921.3 million and ~~$456.5~~$954.5 million, respectively, substantially all of which was derived from U.S. government customers. For the ~~three~~six months ended ~~March 31,~~June 30, 2023 and ~~April~~July 1, 2022, wethe Company generated approximately 41% and ~~61%~~64%, respectively, of ~~our~~its total revenue from the U.S. Army.

Executive Summary

~~Our revenue~~Revenue increased ~~$487.0~~$479.8 million, or ~~106.7%~~96.3%, for the three months ended ~~March 31,~~June 30, 2023 compared to the three months ended ~~April~~July 1, 2022. Revenue increased ~~$412.5~~$442.6 million due to the Merger and the remaining increase was from organic growth for legacy programs. Revenue from ~~our~~programs in the U.S., ~~Asia,~~ Middle East, Asia and Europe ~~programs~~increased by $~~380.8~~419.8 million, ~~$48.1~~$28.9 million, ~~$45.4~~$19.1 million and ~~$12.7~~$12.0 million, respectively.

Operating income for the three months ended ~~March 31,~~June 30, 2023, was ~~$30.6~~$34.3 million, an increase of ~~$25.3~~$19.2 million, or ~~483.9%~~128.1%, compared to the three months ended ~~April~~July 1, 2022. The increase was due to the Merger and improved performance of legacy programs.

During the performance of ~~our~~ long-term contracts, ~~we periodically review~~ estimated final contract prices and costs are reviewed periodically, and ~~make~~ revisions are made as required, which are recorded as changes in revenue and cost of revenue in the periods in which they are determined. Additionally, the fees under certain contracts may be increased or decreased in accordance with cost or performance incentive provisions which measure actual performance against established targets or other criteria. ~~Such~~These incentive ~~fee awards~~fees or penalties are included in revenue when there is sufficient information to reasonably assess anticipated contract performance. Amounts representing contract change orders or limitations in funding on contracts are recorded only if it is probable ~~the~~a claim will result in additional contract revenue and the amounts can be reliably estimated. Changes in estimated revenue, cost of revenue and the related effect to operating income are recognized using cumulative adjustments, which recognize in the current period the cumulative effect of the changes on current and prior periods based on a contract's percentage of completion. Cumulative adjustments are driven by changes in contract terms, program performance, customer scope changes and changes to estimates in the reported period. These changes can increase or decrease operating income depending on the dynamics of each contract.

~~Table of Contents~~

Further details related to ~~our~~consolidated financial results for the three and six months ended ~~March 31,~~June 30, 2023, compared to the three and six months ended ~~April~~July 1, 2022, are contained in the "Discussion of Financial Results" section.

Merger with Vertex

For a discussion of ~~our~~the Merger and related debt and stock-based compensation obligations, see Note 3, Merger, Note 6, Debt, and Note 9, Stock-Based Compensation, in the Notes to Condensed Consolidated Financial Statements.

Table of Contents

Significant Contracts

The following table reflects contracts that accounted for more than 10% of ~~our~~ total ~~revenue for the three months ended March 31, 2023 or April 1, 2022:~~revenue:

% of Total Revenue

Three Months Ended

Six Months Ended

Contract Name

March 31, 2023

April 1, 2022

Contract Name

June 30, 2023

July 1, 2022

Logistics Civil Augmentation Program (LOGCAP) V - Kuwait Task Order

13.6%

21.6%

Logistics Civil Augmentation Program (LOGCAP) V - Kuwait Task Order

13.4%

22.2%

Logistics Civil Augmentation Program (LOGCAP) V - Iraq Task Order

8.1%

15.7%

Logistics Civil Augmentation Program (LOGCAP) V - Iraq Task Order

7.8%

15.2%

Revenue associated with a contract will fluctuate based on increases or decreases in the work being performed on the contract, award fee payment assumptions, and other contract modifications within the term of the contract resulting in changes to the total contract value.

The LOGCAP V - Kuwait Task Order is currently exercised through June 30, ~~2023,~~2024, with ~~three~~two additional twelve-month options and one six-month option through December 31, 2026. The task ~~order~~order provides services to support the Geographical Combatant Commands and Army Service Component Commands throughout the full range of military operations in the Kuwait region. The LOGCAP V - Kuwait Task Order contributed $257.1 million a~~$127.9 million~~ ~~and $98.4~~nd $212.2 million of revenue for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and ~~April~~July 1, 2022, respectively.

The LOGCAP V - Iraq Task Order is currently exercised through June 21, ~~2023,~~2024, with ~~three~~two additional twelve-month options and one six-month option through December 21, 2026. The task order provides services to support the Geographical Combatant Commands and Army Service Component Commands throughout the full range of military operations in the Iraq region. The LOGCAP V - Iraq Task Order contributed~~$76.5~~ $150.5 million and $~~71.5~~144.9 million of revenue for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and~~April~~July 1, 2022, respectively.

Backlog

Total backlog includes remaining performance obligations, consisting of both funded backlog (firm orders for which funding is contractually authorized and appropriated by the customer) and unfunded backlog (firm orders for which funding is not currently contractually obligated by the customer and unexercised contract options). Total backlog excludes potential orders under IDIQ contracts and contracts awarded to us that are being protested by competitors with the GAO or in the COFC. The value of the backlog is based on anticipated revenue levels over the anticipated life of the contract. Actual values may be greater or less than anticipated. Total backlog is converted into revenue as work is performed. The level of order activity related to programs can be affected by the timing of U.S. government funding authorizations and their project evaluation cycles. Year-over-year comparisons could, at times, be impacted by these factors, among others.

~~Our~~The Company's contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year or less option periods for the remaining contract period. The number of option periods vary by contract, and there is no guarantee that an option period will be exercised. The right to exercise an option period is at the sole discretion of the U.S. government when ~~we are~~the Company is the prime contractor or of the prime contractor when ~~we are~~the Company is a subcontractor. The U.S. government may also extend the term of a program by issuing extensions or bridge contracts, typically for periods of one year or less.

~~We expect~~The Company expects to recognize a substantial portion of ~~our~~its funded backlog as revenue within the next 12 months. However, the U.S. government or the prime contractor may cancel any contract at any time through a termination for convenience. Substantially all of ~~our~~the Company's contracts have terms that would permit ~~us to recover~~recovery of all or a portion of ~~our~~ incurred costs and fees for work performed in the event of a termination for convenience.

~~For the three months ended March 31,~~As of June 30, 2023, total backlog was ~~$11.8~~$13.0 billion as compared to $12.3 billion at December 31, 2022. The following is a summary of ~~our backlog as of March 31, 2023~~funded and ~~December 31, 2022:~~unfunded backlog:

March 31, December 31,
(In millions) 2023 2022
Funded backlog $ 2,603 $ 2,567
Unfunded backlog 9,226 9,695
Total backlog $ 11,829 $ 12,262

~~Table of Contents~~


	June 30,		December 31,
(In millions)	2023		2022
Funded backlog	$	3,067	$	2,567
Unfunded backlog	9,916		9,695
Total backlog	$	12,983	$	12,262

Funded orders (different from funded backlog) represent orders for which funding was received during the period. WeThe Company received funded orders of ~~$982.0 million~~$2.4 billion during the ~~three~~six months ended ~~March 31,~~June 30, 2023, which was an increase of ~~$732.1 million~~$1.3 billion compared to the ~~three~~six months ended ~~April~~July 1, 2022.

Table of Contents

Economic Opportunities, Challenges and Risks

The U.S. government’s investment in services and capabilities in response to changing security challenges creates a complex and fluid business environment for V2X and other firms in this market. However, the U.S. continues to face substantial fiscal and economic challenges in addition to a varying political environment which could affect funding. The pace and depth of U.S. government acquisition reform and cost savings initiatives, combined with increased industry competitiveness to win long-term positions on key programs, could add pressure to revenue levels and profit margins. However, ~~we expect~~the Company expects the U.S. government will continue to place a high priority on national security and will continue to invest in affordable solutions. ~~We believe~~V2X believes that ~~our~~its capabilities, particularly in operations and logistics, aerospace, training and technology, should help ~~our~~its clients increase efficiency, reduce costs, improve readiness, and strengthen national security and, as a result, continue to allow for long-term profitable growth in ~~our~~the business. Further, the DoD budget remains the largest in the world and ~~management~~management believes ~~our~~the Company's addressable portion of the DoD budget offers substantial opportunity for growth.

The U.S. government's Fiscal Year (FY) begins on October 1 and ends on September 30. On December 29, 2022, the FY 2023 Omnibus Appropriations Act was signed into law by the President, providing $817 billion to the Defense ~~Department.~~Department (and $886 billion for National Defense). This reflects a $44 billion increase over the President’s FY 2023 budget request. The Fiscal 2024 budget request was submitted to the U.S. Congress on March 9, 2023, and requested $842 billion for the Department of Defense.

~~Past congressional actions have suspended and increased the debt ceiling at various times but in~~In January 2023, the ~~current~~ statutory debt ceiling limit of $31.4 trillion was ~~reached. As a result,~~reached and on June 3, 2023, the Treasury Department began taking accounting measures to continue financing the U.S. government while avoiding a breach. However, it is expected the U.S. government will exhaust these measures and that statutory action will be needed to increase or suspend the debt ceiling. There could be a material disruption to discretionary budgets and programs ifPresident signed “The Fiscal Responsibility Act” (FRA) into law, which suspends the debt ceiling until January 1, 2025. The FRA places caps on defense and non-defense discretionary spending in FY 2024 and FY 2025. The FRA cap on discretionary spending for National Defense in FY 2024 and FY 2025 is ~~not raised as~~$886 billion and $895 billion, respectively. Additionally, the ~~U.S. government may not be able~~FRA mandates cuts to ~~satisfy its funding obligations. If this scenario materializes,~~discretionary spending by one percent below the ~~effect~~current-year level if a continuing resolution is in place on ~~individual programs~~January 1, 2024 or ~~the Company cannot be predicted at this time. The debt ceiling as well as the overall federal budget are expected to remain major focus points for debate by the U.S. Congress.~~2025.

While it is difficult to predict the specific course of future defense budgets, ~~we believe many of~~V2X believes the core functions ~~we perform~~the Company performs are mission-essential and ~~that~~ spending to maintain readiness, improve performance, increase service life, lower cost, and modernize digital and physical environments will continue to be a U.S. government priority. ~~Our~~The Company's focus is on providing integrated solutions across the mission lifecycle that encompass (i) high consequence training; (ii) readiness/logistics/deployment; (iii) mission and infrastructure support, including rapid response contingency efforts; (iv) battlefield connectivity and communications; (v) maintenance, modification, repair, and overhaul of assets and aircraft; (vi) and upgrades and modernization across digital and physical environments. ~~We develop~~The Company develops and ~~insert~~inserts operational technologies across ~~our~~its solutions to improve efficiency and the outcomes of ~~our~~its clients' missions. ~~We believe~~The Company believes this aligns with ~~our~~its clients' intent to utilize and harden existing equipment, infrastructure, and assets rather than executing new purchases. While customers may reduce the level of services required from us, ~~we do~~the Company does not currently anticipate the complete elimination of these services.

However, business conditions have become more challenging due to macroeconomic conditions, including inflation and rising interest rates. Given the current pace of inflation and other geopolitical factors, ~~we are~~the Company is monitoring the impact of rising costs on ~~our~~its active and future contracts. To date, ~~we have~~the Company has not experienced broad-based increases due to inflation in the costs of ~~our~~ fixed-price and time and materials contracts that are material to the business as a whole; however, if ~~we begin~~the Company begins to experience greater than expected inflation in ~~our~~its supply chain and labor costs, ~~our~~ profit margins, and in particular, ~~our~~the profit margin from fixed-price and time and materials contracts, which represent a substantial portion of ~~our~~its contracts, the Company could be adversely affected. See Item 1A, "Risk Factors".

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which includes, among other provisions, changes to the U.S. corporate income tax system. While ~~we do~~the Company does not currently anticipate any impact on ~~our~~its business, ~~we are continuing to evaluate~~evaluation of the Inflation Reduction Act of 2022 and its requirements continues, as well as any potential impact on ~~our~~its business in the future.

The information provided above does not represent a complete list of trends and uncertainties that could impact ~~our~~the Company's business in either the near or long-term and should be considered along with the risk factors identified under the caption “Risk Factors” identified in Part 1, Item 1A in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, 2022 and the matters identified under the caption “Forward-Looking Statement Information" herein.

2425

Table of Contents

DISCUSSION OF FINANCIAL RESULTS

Three months ended ~~March 31,~~June 30, 2023, compared to three months ended ~~April~~July 1, 2022

Selected financial highlights are presented in the following table:


		Three Months Ended						Change					Three Months Ended						Change
(In thousands, except for percentages)	(In thousands, except for percentages)	March 31, 2023			April 1, 2022			$		%		(In thousands, except for percentages)	June 30, 2023			July 1, 2022			$		%
Revenue	Revenue	$	943,460		$	456,471		$	486,989	106.7	%	Revenue	$	977,852		$	498,066		$	479,786	96.3	%
Cost of revenue	Cost of revenue	864,630			419,275			445,355		106.2	%	Cost of revenue	890,452			453,305			437,147		96.4	%
% of revenue	% of revenue	91.6		%	91.9		%					% of revenue	91.1		%	91.0		%
Selling, general, and administrative expenses	Selling, general, and administrative expenses	48,251			31,959			16,292		51.0	%	Selling, general, and administrative expenses	53,130			29,740			23,390		78.6	%
% of revenue	% of revenue	5.1		%	7.0		%					% of revenue	5.4		%	6.0		%

Operating income	Operating income	30,579			5,237			25,342		483.9	%	Operating income	34,270			15,021			19,249		128.1	%
Operating margin	Operating margin	3.2		%	1.1		%					Operating margin	3.5		%	3.0		%
Loss on extinguishment of debt		(22,052)			—			(22,052)		*

Interest expense, net	Interest expense, net	(31,744)			(1,681)			(30,063)		1,788.4	%	Interest expense, net	(31,950)			(1,963)			(29,987)		1,527.6	%

(Loss) income from operations before income taxes		(23,217)			3,556			(26,773)		(752.9)	%
Other expense, net												Other expense, net	(311)			—			(311)		*
Income (loss) from operations before income taxes												Income (loss) from operations before income taxes	2,009			13,058			(11,049)		(84.6)	%
% of revenue	% of revenue	(2.5)		%	0.8		%					% of revenue	0.2		%	2.6		%
Income tax (benefit) expense		(5,737)			701			(6,438)		(918.4)	%
Income tax expense (benefit)												Income tax expense (benefit)	210			2,586			(2,376)		(91.9)	%
Effective income tax rate	Effective income tax rate	24.7		%	19.7		%					Effective income tax rate	10.5		%	19.8		%
Net (loss) income		$	(17,480)		$	2,855		$	(20,335)	(712.3)	%
Net income (loss)												Net income (loss)	$	1,799		$	10,472		$	(8,673)	(82.8)	%
*Percentage change is not meaningful.	*Percentage change is not meaningful.											*Percentage change is not meaningful.

Revenue

Revenue increased ~~$487.0~~$479.8 million, or ~~106.7%~~96.3%, for the three months ended ~~March 31,~~June 30, 2023 as compared to the three months ended ~~April~~July 1, 2022. Revenue increased ~~$412.5~~$442.6 million due to the Merger and the remaining increase was from organic growth for legacy programs. Revenue from ~~our~~programs located in the U.S., ~~Asia,~~ Middle East, Asia and Europe ~~programs~~increased by $~~380.8~~419.8 million, ~~$48.1~~$28.9 million, ~~$45.4~~$19.1 million and ~~$12.7~~$12.0 million, respectively.

Cost of Revenue

Cost of revenue increased ~~$445.4~~$437.1 million, or ~~106.2%~~96.4%, for the three months ended ~~March 31,~~June 30, 2023 as compared to the three months ended ~~April~~July 1, 2022, primarily due to the increased revenue from the Merger and increased amortization of intangible assets.

Selling, General, & Administrative (SG&A) Expenses

SG&A expenses increased ~~$16.3~~$23.4 million, or ~~51.0%~~78.6%, for the three months ended ~~March 31,~~June 30, 2023 as compared to the three months ended ~~April~~July 1, 2022, primarily due to the Merger.

Operating Income

Operating income increased ~~$25.3~~$19.2 million, or ~~483.9%~~128.1%, for the three months ended ~~March 31,~~June 30, 2023 as compared to the three months ended ~~April~~July 1, 2022. Operating income as a percentage of revenue was ~~3.2%~~3.5% for the three months ended ~~March 31,~~June 30, 2023, compared to ~~1.1%~~3.0% for the three months ended ~~April~~July 1, 2022. The increase was due to the Merger and improved performance of legacy programs.

Aggregate cumulative catch-up adjustments increased operating income by ~~$13.1~~$9.1 million and ~~$0.6~~$6.8 million for the three months ended ~~March 31,~~June 30, 2023 and ~~April~~July 1, 2022, respectively. The aggregate cumulative catch-up adjustments for the three months ended ~~March 31,~~June 30, 2023 and ~~April~~July 1, 2022 related to changes in contract terms, program performance, customer changes in scope of work and changes to estimates in the reported period. Operating income was also impacted by the mix of labor ~~mix~~and cost differential between internal resources and subcontractors as well as the volume of other direct cost purchases.

Table of Contents

Six months ended June 30, 2023, compared to six months ended July 1, 2022

Selected financial highlights are presented in the following table:


	Six Months Ended						Change
(In thousands, except for percentages)	June 30, 2023			July 1, 2022			$		%
Revenue	$	1,921,312		$	954,537		$	966,775	101.3	%
Cost of revenue	1,755,082			872,581			882,501		101.1	%
% of revenue	91.3		%	91.4		%
Selling, general, and administrative expenses	101,381			61,699			39,682		64.3	%
% of revenue	5.3		%	6.5		%


Operating income	64,849			20,257			44,592		220.1	%
Operating margin	3.4		%	2.1		%
Loss on extinguishment of debt	(22,052)			—			(22,052)		*
Interest expense, net	(63,694)			(3,643)			(60,051)		1,648.4	%
Other expense, net	(311)			—			(311)		*
Income (loss) from operations before income taxes	(21,208)			16,614			(37,822)		(227.7)	%
% of revenue	(1.1)		%	1.7		%
Income tax (benefit) expense	(5,527)			3,287			(8,814)		(268.1)	%
Effective income tax rate	26.1		%	19.8		%
Net (loss) income	$	(15,681)		$	13,327		$	(29,008)	(217.7)	%
*Percentage change is not meaningful.

Revenue

Revenue increased $966.8 million, or 101.3%, for the six months ended June 30, 2023 as compared to the six months ended July 1, 2022. Revenue increased $855.1 million due to the Merger and the remaining increase was from organic growth for legacy programs. Revenue from programs located in the U.S., Middle East, Asia and Europe increasedby$801.8 million, $74.9 million, $67.3 million and $22.8 million, respectively.

Cost of Revenue

Cost of revenue increased $882.5 million, or 101.1%, for the six months ended June 30, 2023 as compared to the six months ended July 1, 2022, primarily due to the increased revenue from the Merger and increased amortization of intangible assets.

Selling, General, & Administrative (SG&A) Expenses

SG&A expenses increased $39.7 million, or 64.3%, for the six months ended June 30, 2023 as compared to the six months ended July 1, 2022, primarily due to the Merger.

Operating Income

Operating income increased $44.6 million, or 220.1%, for the six months ended June 30, 2023 as compared to the six months ended July 1, 2022. Operating income as a percentage of revenue was 3.4% for the six months ended June 30, 2023, compared to 2.1% for the six months ended July 1, 2022. The increase was due to the Merger and improved performance of legacy programs.

Aggregate cumulative catch-up adjustments increased operating income by $22.2 million and $7.4 million for the six months ended June 30, 2023 and July 1, 2022, respectively. The aggregate cumulative catch-up adjustments for the six months ended June 30, 2023 and July 1, 2022 related to changes in contract terms, program performance, customer changes in scope of work and changes to estimates in the reported period. Operating income was also impacted by the mix of labor and cost differential between internal resources and subcontractors as well as the volume of other direct cost purchases.

Loss on Extinguishment of Debt

The Company recorded a $22.1 million loss on extinguishment of debt for the ~~three~~six months ended ~~March 31,~~June 30, 2023. For a discussion of the loss on extinguishment see Note 6, Debt, in the Notes to Condensed Consolidated Financial Statements.

2527

Table of Contents

Interest (Expense) Income, Net

Interest (expense) income, net for the three and six months ended ~~March 31,~~June 30, 2023 and ~~April~~July 1, 2022 was as follows:


		Three Months Ended				Change					Three Months Ended				Change				Six Months Ended				Change
(In thousands, except for percentages)	(In thousands, except for percentages)	March 31, 2023		April 1, 2022		$		%		(In thousands, except for percentages)	June 30, 2023		July 1, 2022		$		%		June 30, 2023		July 1, 2022		$		%
Interest income	Interest income	$	208	$	43	$	165	383.7	%	Interest income	$	141	$	6	$	135	2,250	%	$	349	$	50	$	299	598	%
Interest expense	Interest expense	(31,952)		(1,724)		(30,228)		1,753.4	%	Interest expense	(32,091)		(1,969)		(30,122)		1,530	%	(64,043)		(3,693)		(60,350)		1,634	%
Interest expense, net	Interest expense, net	$	(31,744)	$	(1,681)	$	(30,063)	1,788.4	%	Interest expense, net	$	(31,950)	$	(1,963)	$	(29,987)	1,528	%	$	(63,694)	$	(3,643)	$	(60,051)	1,648	%

Interest income is directly related to interest earned on ~~our~~ cash and cash equivalents. Interest expense is directly related to borrowings under ~~our~~the Company's senior secured credit facilities, with the amortization of debt issuance costs, and derivative instruments used to hedge a portion of ~~our~~ exposure to interest rate risk. Interest expense, net increased ~~$30.1~~$60.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2023 compared to the ~~three~~six months ended ~~April~~July 1, 2022 due to increased debt assumed with the Merger.

Other expense, net

During the three months and six months ended June 30, 2023, the Company incurred purchase discount fees and other expenses of $0.2 million and $0.1 million, respectively, related to the sale of accounts receivable through the MARPA Facility.

Income Tax (Benefit) Provision

WeThe Company recorded income tax ~~benefit~~provisions of ~~$5.7~~$0.2 million and ~~provision of $0.7~~$2.6 million for the three months ended ~~March 31,~~June 30, 2023 and ~~April~~July 1, 2022, respectively, representing effective income tax rates of ~~24.7%~~10.5% and ~~19.7%~~19.8%, respectively. For the six months ended June 30, 2023 and July 1, 2022, the Company recorded income tax benefit of $5.5 million and provision of $3.3 million, representing effective income tax rates of 26.1% and 19.8%, respectively. The effective income tax rates vary from the federal statutory rate of 21.0% mainly due to state and foreign taxes, disallowed compensation deduction under Internal Revenue Code Section 162(m), available deductions not reflected in book income, and income tax credits.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

~~We have~~The Company has generated operating cash flows sufficient to fund ~~our~~its working capital, capital expenditures, and financing requirements. ~~We expect~~The Company expects to fund ~~our~~its ongoing working capital, capital expenditure and financing requirements and pursue additional growth through new business development and potential acquisition opportunities by using cash flows from operations, cash on hand, ~~our~~its credit facilities, and access to capital markets. When necessary, ~~we will utilize our revolving credit facility~~the 2023 Revolver and MARPA Facility are available to satisfy short-term working capital requirements.

If ~~our~~ cash flows from operations are less than ~~what we expect, we~~expected, the Company may need to access the long-term or short-term capital markets. Although ~~we believe that our~~the Company believes its current financing arrangements will permit ~~us to finance our~~financing of its operations on acceptable terms and conditions, ~~our~~ access to and the availability of financing on acceptable terms and conditions in the future will be impacted by many factors, including: (i) ~~our~~its credit ratings, (ii) the liquidity of the overall capital markets, and (iii) the current state of the economy. WeThe Company cannot provide assurance that such financing will be available ~~to us~~ on acceptable terms or that such financing will be available at all.

As of ~~March 31,~~June 30, 2023, there were ~~$185.0~~$85.0 million of outstanding borrowings and ~~$14.9~~$16.1 million of outstanding letters of credit under the 2023 Revolver. Unamortized deferred financing costs related to the 2023 Revolver of ~~$4.9~~$4.7 million are included in other non-current assets in the Condensed Consolidated Balance Sheets. As of ~~March 31,~~June 30, 2023, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.

The cash presented on ~~our~~the Condensed Consolidated Balance Sheets consists of U.S. and international cash from wholly owned subsidiaries. Approximately ~~$25.4~~$26.7 million of ~~our total $62.1~~the Company's $70.3 million in cash and cash equivalents at ~~March 31,~~June 30, 2023 is held by ~~our~~ foreign subsidiaries and is not available to fund U.S. operations unless repatriated. ~~We do~~The Company does not currently expect ~~that we will be required~~ to repatriate undistributed earnings of foreign subsidiaries. ~~We expect our~~The Company expects its U.S. domestic cash resources will be sufficient to fund ~~our~~its U.S. operating activities and cash commitments for financing activities.

Table of Contents

Dividends

~~We do~~The Company does not currently plan to pay a regular dividend on ~~our~~its common stock. The declaration of any future cash dividends and the amount of any such dividends, if declared, will depend upon ~~our~~the Company's financial condition, earnings, capital requirements, financial covenants and other contractual restrictions and the discretion of ~~our~~its Board of Directors. In deciding whether to pay future dividends on ~~our~~ common stock, ~~our~~the Board of Directors may take into account such matters as general business conditions, industry practice, ~~our~~the Company's financial condition and performance, ~~our~~its future prospects, ~~our~~ cash needs and capital investment plans, income tax consequences, applicable law and such other factors as ~~our~~the Board of Directors may deem relevant.

~~Table of Contents~~

Sources and Uses of Liquidity

Cash, accounts receivable, unbilled receivables, and accounts payable are the principal components of ~~our~~the Company's working capital and are generally driven by ~~our level of~~ revenue with other short-term fluctuations related to payment practices by ~~our~~ customers, sales of accounts receivable through the MARPA Facility and the timing of ~~our~~ billings. ~~Our~~The Company's receivables reflect amounts billed to ~~our~~ customers, as well as the revenue that was recognized in the preceding month, which is normally billed the month following each balance sheet date.

Accounts receivable balances can vary significantly over time and are impacted by revenue levels and the timing of payments received from customers. Days sales outstanding (DSO) is a metric used to monitor accounts receivable levels. The Company determines its DSO by calculating the number of days necessary to exhaust its ending accounts receivable balance based on its most recent historical revenue. ~~Our~~ DSO ~~was 70 and~~was 68 ~~days~~days as of ~~March 31,~~June 30, 2023 and December 31, ~~2022, respectively.~~2022.

The following table sets forth net cash used in operating activities, investing activities and financing activities:


		Three Months Ended					Six Months Ended
(In thousands)	(In thousands)	March 31, 2023		April 1, 2022		(In thousands)	June 30, 2023		July 1, 2022
Operating activities	Operating activities	$	(38,492)	$	(26,381)	Operating activities	$	78,140	$	19,636
Investing activities	Investing activities	(9,076)		(2,178)		Investing activities	(11,538)		(5,587)
Financing activities	Financing activities	(7,921)		12,316		Financing activities	(113,607)		(16,984)
Foreign exchange1	Foreign exchange1	1,567		729		Foreign exchange1	1,252		(507)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	(53,922)	$	(15,514)	Net change in cash and cash equivalents	$	(45,753)	$	(3,442)
1 Impact on cash balances due to changes in foreign exchange rates.	1 Impact on cash balances due to changes in foreign exchange rates.					1 Impact on cash balances due to changes in foreign exchange rates.

Net cash ~~used in~~provided by operating activities ~~increased~~ for the ~~three~~six months ended ~~March 31,~~June 30, 2023, ~~as compared to~~primarily consisted of cash inflows from non-cash net income items of $104.3 million and sales of accounts receivable through the ~~three months ended April 1, 2022, primarily due to~~MARPA Facility of $113.0 million, partially offset by net cash outflows in working capital accounts of ~~$68.7 million, other long-term assets and liabilities of $17.8~~$123.5 million and a net ~~operating~~ loss of ~~$17.5 million, partially offset by cash inflows from non-cash net income items of $65.5~~$15.7 million.

Net cash used in operating activities for the ~~three~~six months ended ~~April~~July 1, 2022 consisted of cash inflows from net income of $13.3 million and non-cash net income items of $12.7 million, partially offset by cash outflows for ~~working capital requirements of $29.4 million and~~ other long-term assets and liabilities of ~~$6.5 million. This was partially offset by cash inflows from net income of $2.9~~$3.2 million and ~~the favorable impact~~net working capital requirements of ~~non-cash net income items of $6.6~~$3.2 million. The net working capital ~~outflows~~inflows were largely from increases in accounts payable offset by increases in accounts receivable and decreases in other accrued ~~compensation,~~liabilities, which included an $8.1 million payment of deferred CARES Act payroll ~~taxes, partially offset by increases in accounts payable.~~taxes.

Net cash used in investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2023 ~~and April 1, 2022~~ consisted of ~~$9.1~~$11.5 million ~~and $2.2 million, respectively,~~ of capital expenditures for the purchase of software and hardware, vehicles and equipment related to ongoing operations.

Net cash used in investing activities for the six months ended July 1, 2022 consisted of $3.5 million of capital expenditures for the purchase of software and hardware, and vehicles and equipment related to ongoing operations and $ 2.1 million for a joint venture contribution.

Net cash used in financing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2023 consisted of repayments of long-term debt of ~~$421.0~~$424.9 million, revolver repayments of ~~$163.8~~$467.8 million, payments for employee withholding taxes on share-based compensation of ~~$12.8~~$14.6 million, and payments for debt issuance costs of $7.5 million, partially offset by proceeds from long term debt and the revolver of $250.0 million and ~~$348.7~~$552.8 million, respectively.

Net cash ~~provided by~~used in financing activities during the ~~three~~six months ended ~~April~~July 1, 2022 consisted of repayments of long-term debt of ~~$2.6~~$5.2 million, payments of ~~$1.6~~$1.7 million for employee withholding taxes on share-based compensation and payments $0.5 million for debt issuance costs. During the ~~three~~six months ended ~~April~~July 1, 2022, ~~we also~~the Company borrowed and repaid ~~$217.0~~$392.0 million and ~~$200.0~~$402.0 million, respectively, on the Amended Revolver. These cash outflows were partially offset by $0.4 million received from the exercise of stock options.

Table of Contents

Capital Resources

At ~~March 31,~~June 30, 2023, wethe Company held cash and cash equivalents of ~~$62.1~~$70.3 million, which included ~~$25.4~~$26.7 million held by foreign subsidiaries, and had ~~$300.1~~$398.9 million of available borrowing capacity under the 2023 Revolver, which expires on February 25, 2028. ~~We believe~~The Company believes that ~~our~~its cash and cash equivalents at ~~March 31,~~June 30, 2023, as supplemented by cash flows from operations, ~~and~~ the 2023 Revolver, and the MARPA Facility will be sufficient to fund ~~our~~its anticipated operating costs, capital expenditures, and current debt repayment obligations for at least the next 12 months.

~~Table of Contents~~

Contractual Obligations

As of ~~March 31,~~June 30, 2023, ~~our~~ commitments to make future payments under long-term contractual obligations were as follows:


		Payments Due by Period																			Payments Due by Period
				Less than 1 year												More than 5 Years									Less than 1 year						More than 5 Years
(In thousands)	(In thousands)	Total				1 - 3 Years				3 - 5 Years				(In thousands)				Total					1 - 3 Years				3 - 5 Years
Operating leases	Operating leases	$	61,125			$	18,431			$	20,710			$	12,930				$	9,054	Operating leases			$		58,750	$	17,002	$	20,533	$	14,275	$	6,940
Principal payments on Vertex First Lien Credit Agreement¹	Principal payments on Vertex First Lien Credit Agreement¹	915,750		9,250				18,500				18,500				869,500		Principal payments on Vertex First Lien Credit Agreement¹			913,437				9,250		18,500		18,500		867,187
Principal payments on 2023 Credit Agreement¹	Principal payments on 2023 Credit Agreement¹	435,000		6,250				18,750				410,000				—		Principal payments on 2023 Credit Agreement¹			333,438				6,250		20,313		306,875		—
Interest on Vertex First Lien and 2023 Credit Agreements	Interest on Vertex First Lien and 2023 Credit Agreements	608,378		115,739				226,134				216,382				50,123		Interest on Vertex First Lien and 2023 Credit Agreements			595,323				114,165		227,697		217,521		35,940
Total	Total	$	2,020,253	$	149,670			$	284,094			$	657,812			$	928,677	Total			$	1,900,948			$	146,667	$	287,043	$	557,171	$	910,067
¹ Includes unused funds fee and is based on the March 31, 2023 interest rate and outstanding Credit Agreement balance
¹ Includes unused funds fee and is based on the June 30, 2023 interest rate and outstanding balance.																		¹ Includes unused funds fee and is based on the June 30, 2023 interest rate and outstanding balance.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results in these areas could differ from management's estimates under different assumptions or conditions.

~~We believe~~The Company believes that the assumptions and estimates associated with revenue recognition, business combinations, goodwill and other intangible assets, and income taxes have the greatest potential impact on ~~our~~its financial statements. Therefore, ~~we consider~~the Company considers these to be ~~our~~its critical accounting policies and estimates. There have been no material changes in ~~our~~the critical accounting policies and estimates from those discussed in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

New Accounting Pronouncements

Refer to Part I, Item 1, Note 2, Recent Accounting Standards Update in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding accounting pronouncements and accounting standards updates.

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the Securities Act of 1933, as amended (the Securities Act), and the Private Securities Litigation Reform Act of 1995 and, as such, may involve risks and uncertainties. All statements included or incorporated by reference in this report, other than statements that are purely historical, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “could,” “potential,” “continue” or similar terminology. These statements are based on the beliefs and assumptions of the management of the Company based on information currently available to management. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements.

~~We undertake~~

Table of Contents

The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company's historical experience and ~~our~~its present expectations or projections. These risks and uncertainties include, but are not limited to: the ~~continued impact of COVID-19 and any variant strains thereof on the global economy; our~~Company's ability to submit proposals for and/or win all potential opportunities in ~~our~~the pipeline; ~~our~~the Company's ability to retain and renew ~~our~~ existing contracts; ~~our~~the Company's ability to compete with other companies in ~~our~~the market; security breaches and other disruptions to ~~our~~ information technology and operation; ~~our~~the mix of cost-plus, cost-reimbursable, and firm-fixed-price contracts; maintaining ~~our~~the Company's reputation and relationship with the U.S. government; protests of new awards; economic, political and social conditions in the countries in which ~~we conduct our businesses;~~the Company conducts business; changes in U.S. or international government defense budgets; government regulations and compliance therewith, including changes to the DoD procurement process; changes in technology; intellectual property matters; governmental investigations, reviews, audits and cost adjustments; contingencies related to actual or alleged environmental contamination, claims and concerns; delays in completion of the U.S. ~~government's~~government budget; ~~our~~the Company's success in extending, deepening, and enhancing ~~our~~its technical capabilities; ~~our~~ success in expanding ~~our~~the Company's geographic footprint or broadening ~~our~~its customer base; ~~our~~the Company's ability to realize the full amounts

~~Table of Contents~~

reflected in ~~our~~the Company's backlog; impairment of goodwill; misconduct of ~~our~~ employees, subcontractors, agents, prime contractors and business partners; ~~our~~the Company's ability to control costs; ~~our~~ level of indebtedness; terms of ~~our~~ credit ~~agreement;~~agreements; inflation and interest rate risk; subcontractor performance; economic and capital markets conditions; ~~our~~the Company's ability to maintain safe work sites and equipment; ~~our~~the Company's ability to retain and recruit qualified personnel; ~~our~~the Company's ability to maintain good relationships with ~~our workforce; our~~employees and contractors; teaming relationships with other contractors; changes in ~~our~~ accounting estimates; the adequacy of ~~our~~the Company's insurance coverage; volatility in ~~our~~the Company's stock price; changes in ~~our~~ tax provisions or exposure to additional income tax liabilities; risks and uncertainties relating to the Merger; risks and uncertainties relating to the Spin-off; changes in GAAP; and other factors described in Item 1A, “Risk Factors” and elsewhere in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, 2022 and described from time to time in ~~our~~ future reports filed with the SEC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Our earnings,~~Earnings, cash flows and financial position are exposed to market risks relating to fluctuations in interest rates and foreign currency exchange rates. All ~~of the~~ potential changes noted below are based on information available at ~~March 31,~~June 30, 2023.

Interest Rate Risk

Each one percentage point change associated with the variable rate Vertex First Lien Credit Agreement and would result in a ~~$8.8~~$8.2 million change in ~~our~~the related annual cash interest expenses.

Assuming ~~our~~the 2023 Revolver was fully drawn to a principal amount equal to $500.0 million, each one percentage point change in interest rates would result in a $5.1 million change in ~~our~~ annual cash interest expense.

As of ~~March 31,~~June 30, 2023, the notional value of ~~our~~the Company's interest rate swap agreements totaled ~~$300.0~~$348.4 million. The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt in the period incurred. Changes in the variable interest rates to be paid pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows. Refer to Note 8,7, Derivative Instruments in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding ~~our~~the Company's interest rate swaps.

Foreign Currency Exchange Risk

The majority of ~~our~~the Company's business is conducted in U.S. dollars. However, ~~we are~~the Company is required to transact in foreign currencies for some of ~~our~~its contracts, resulting in some assets and liabilities denominated in foreign currencies. As a result, ~~our~~ earnings may experience volatility related to movements in foreign currency exchange rates. In the past, wethe Company entered into forward foreign exchange contracts to buy or sell various foreign currencies to selectively protect against volatility in the value of non-functional currency denominated monetary assets and liabilities. The impact of the related contracts on ~~our~~the Condensed Consolidated Statements of Income (Loss) ~~Income~~ and ~~our~~ Condensed Consolidated Balance Sheets was ~~immaterial~~not material and related hedging was discontinued. ~~Our~~The Company's forward contracts expired in January 2022 and no such contracts are outstanding as of ~~March 31,~~June 30, 2023.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~March 31,~~June 30, 2023. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of ~~March 31,~~June 30, 2023, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in reports the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to management to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Table of Contents

Changes in Internal Control over Financial Reporting

As discussed in Note 3, Merger in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, the Company completed the Merger with Vertex on July 5, 2022. As permitted by interpretive guidance for newly acquired businesses issued by the SEC Staff, management has excluded the internal control over financial reporting (ICFR) of Vertex and its consolidated subsidiaries from the evaluation of the Company's effectiveness of its disclosure controls and procedures as of ~~March 31,~~June 30, 2023. Since the date of Merger, Vertex's financial results are included in the Company's Consolidated Financial Statements. As part of ~~our~~the post-closing integration activities, ~~we are~~the Company is engaged in the process of assessing the internal controls. The Company has begun to integrate policies, processes, people, technology and operations for the post-acquisition combined company, and it will continue to evaluate the impact of any related changes to ICFR.

Other than the items discussed above, there were no changes in ~~our~~the Company's ICFR that occurred during the ~~three~~six months ended ~~March 31,~~June 30, 2023, that materially affected, or are reasonably likely to materially affect, ~~our~~its ICFR.

2932

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, ~~we are~~the Company is involved in legal proceedings that are incidental to the operation of ~~our~~its business. Some of these proceedings seek remedies relating to employment matters, matters in connection with ~~our~~ contracts and matters arising under laws relating to the protection of the environment.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including ~~our~~the Company's assessment of the merits of the particular claim, ~~we do~~the Company does not expect that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse effect on ~~our~~its cash flows, results of operations or financial condition.

Refer to Note 8, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information.

ITEM 1A. RISK FACTORS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

3033

Table of Contents

ITEM 6. EXHIBITS


10.1			Credit Agreement, Dated as of February 28, 2023, among Vertex Aerospace Services Corp., as the Borrower, Vertex Aerospace Intermediate LLC, as Holdings, the Lenders Party Hereto, and Bank of America, N.A., as Administrative Agent, Swingline Lender, Collateral Agent and L/C Issuer (incorporated by reference to Exhibit 10.1 to V2X, Inc.’s Current Report on Form 8-K filed March 2, 2023).
~~10.2~~			~~Separation Agreement and Release of Claims, dated April 1, 2023, by and between Richard Mendoza and V2X, Inc. *+~~
~~10.3~~			Form of V2X, Inc. Second Amendment and Restatement of the V2X, Inc. 2014 Omnibus Incentive Plan – Restricted Stock Unit Award Agreement ~~(Stock Settled) *+~~
~~10.4~~			~~Form of V2X, Inc. Second Amendment and Restatement of 2014 Omnibus Incentive Plan – Special Performance Stock Unit – 2023 Stock Price Award Agreement *+~~
~~10.5~~			~~Form of V2X, Inc. Second Amendment and Restatement of 2014 Omnibus Incentive Plan – Performance Stock Unit – 2023 TSR Award Agreement +~~(Non-employee Director)+
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 ~~March 31,~~June 30, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statements of Income (Loss) ~~Income,~~, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) ~~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) #

* Indicates management contract or compensatory plan or arrangement.

+ Indicates this document is filed as an exhibit herewith.

# Submitted electronically with this report.

The Company’s Commission File Number for Reports on Form 10-K, Form 10-Q and Form 8-K is 001-36341.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


V2X, INC.
/s/ William B. Noon
By: William B. Noon
Corporate Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: ~~May 9,~~August 8, 2023

3134


	March 31,		December 31,
(In thousands, except per share information)	2023		2022
Assets
Current assets
Cash and cash equivalents	$	62,145	$	116,067

Receivables	759,813		728,582
Prepaid expenses	78,218		74,234
Other current assets	26,016		13,049
Total current assets	926,192		931,932
Property, plant, and equipment, net	82,311		78,715
Goodwill	1,655,545		1,653,822


Intangible assets, net	475,345		497,951
Right-of-use assets	48,577		52,825
Other non-current assets	21,370		17,858
Total non-current assets	2,283,148		2,301,171
Total Assets	$	3,209,340	$	3,233,103
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	402,655	$	406,706

Compensation and other employee benefits	143,937		168,038

Short-term debt	15,500		11,850
Other accrued liabilities	198,101		196,538
Total current liabilities	760,193		783,132


Long-term debt, net	1,291,969		1,262,811
Deferred tax liabilities	9,927		15,813
Operating lease liabilities	37,082		41,083
Other non-current liabilities	131,698		133,185
Total non-current liabilities	1,470,676		1,452,892
Total liabilities	2,230,869		2,236,024
Commitments and contingencies (Note 8)
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; 31,005 and 30,470 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	310		305
Additional paid in capital	748,137		748,877
Retained earnings	235,944		253,424
Accumulated other comprehensive loss	(5,920)		(5,527)
Total shareholders' equity	978,471		997,079
Total Liabilities and Shareholders' Equity	$	3,209,340	$	3,233,103