What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-05 compared with 2024-11-04 · 107 added, 152 removed, 191 unchanged (58% of the section changed)

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V2X 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 and critical service offerings across the operations and logistics, aerospace, training and technology markets to national security, defense, civilian and international clients.

The Company operates as one segment and offers a broad suite of capabilities including multi-domain high impact readiness, integrated supply chain management, mission solutions, and platform renewal and modernization to national security, defense, civilian and international customers.

Our primary customer is the U.S.

Department of Defense (DoD).

For the nine months ended September 27, 2024 and September 29, 2023, the Company had total revenue of $3.2 billion and $2.9 billion, respectively, the substantial majority of which was derived from U.S.

For both the three months ended March 28, 2025 and March 29, 2024, the Company had total revenue of $1.0 billion, the substantial majority of which was derived from U.S.

government customers.

For the nine months ended September 27, 2024 and September 29, 2023, we generated approximately 42% and 41%, respectively, of our total revenue from the U.S.

For the three months ended March 28, 2025 and March 29, 2024, the Company generated approximately 44% and 43%, respectively, of our total revenue from the U.S.

Executive Summary

Our revenue increased $80.1 million, or 8.0%, for the three months ended September 27, 2024 as compared to the three months ended September 29, 2023.

Revenue increased primarily due to organic growth on legacy programs and new program performance.

Revenue from our programs in the Middle East, the U.S., and Asia increased by $40.6 million, $33.5 million, and $19.6 million, respectively, partially offset by a decrease in revenue from our programs in Europe of $13.6 million, during the three months ended September 27, 2024 as compared to the three months ended September 29, 2023.

Our revenue increased $5.4 million, or 0.5%, for the three months ended March 28, 2025 as compared to the three months ended March 29, 2024, primarily due to organic growth.

Revenue from our programs in the U.S.

and Asia increased by $32.8 million and $7.2 million, respectively, partially offset by decreases in revenue from our programs in the Middle East and Europe of $25.0 million and $9.6 million, respectively.

Operating income for the three months ended March 28, 2025 was $34.3 million, an increase of $4.0 million or 13.1%, compared to the three months ended March 29, 2024.

Operating income increased primarily due to changes in aggregate cumulative adjustments, as further described below.

During the performance of long-term contracts, estimated final contract prices and costs are reviewed periodically, and revisions are made as required, which are recorded as changes in revenue and cost of revenue in the periods in which they are determined.

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These changes can increase or decrease operating income depending on the dynamics of each contract.

Further details related to consolidated financial results for the three and nine months ended September 27, 2024, compared to the three and nine months ended September 29, 2023, are contained in the "Discussion of Financial Results" section.

Further details related to consolidated financial results for the three months ended March 28, 2025, compared to the three months ended March 29, 2024, are contained in the "Discussion of Financial Results" section.

Significant Contracts

The following table reflects the contract that accounted for more than 10% of total revenue:

The following table reflects contracts that accounted for more than 10% of total revenue:

% of Total Revenue

Nine Months Ended

September 27, September 29,

Three Months Ended

March 28, March 29,

Contract Name 2025 2024

Logistics Civil Augmentation Program (LOGCAP) V - Kuwait Task Order 11.5% 11.0%

T-45 10.1% 7.9%

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.

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The task ord er 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 $328.8 million a nd $360.5 million of revenue for the nine months ended September 27, 2024 and September 29, 2023 , respectively.

The LOGCAP V - Kuwait Task Order contributed $116.9 million a nd $110.7 million of revenue for the three months ended March 28, 2025 and March 29, 2024 , respectively.

On April 17, 2025, the U.S.

Department of the Army announced that it will extend the current period of performance for the various task orders under the LOGCAP V, including the Kuwait Task Order, which is scheduled to extend through June 2030.

The T-45 contract is currently exercised through December 31, 2025, with three additional twelve-month options and one six-month option through June 30, 2029.

The contract provides services to support and maintain all Navy T-45 aircraft, aircraft systems, and related support equipment in support of flight, test and evaluation operations.

The T-45 contract contributed $103.0 million and $79.4 million of revenue for the three months ended March 28, 2025 and March 29, 2024, respectively.

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).

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The following is a summary of funded and unfunded backlog:

September 27, December 31,

March 28, December 31,

(In millions) 2025 2024

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Funded orders (different from funded backlog) represent orders for which funding was received during the period.

We received funded orders of $3.4 billion during the nine months ended September 27, 2024, which was a decrease of $0.1 billion compared to the nine months ended September 29, 2023.

We received funded orders of $984.4 million during the three months ended March 28, 2025, which was an increase of $124.0 million compared to the three months ended March 29, 2024.

Economic Opportunities, Challenges and Risks

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government will continue to place a high priority on national security and will continue to invest in affordable solutions.

V2X believes that its capabilities, particularly in operations and logistics, aerospace, training and technology, should help 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 the business.

V2X believes that its capabilities should help 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 the business.

Further, the DoD budget remains the largest in the world and management believes the Company's addressable portion of the DoD budget offers substantial opportunity for growth.

government's Fiscal Year (FY) begins on October 1 and ends on September 30.

On March 23, 2024, the President signed into law the Further Consolidated Appropriations Act for FY 2024, which provided $825 billion in funding for the DoD, through September 30, 2024.

On April 24, 2024, the President signed a bill providing $95 billion in additional supplemental funding for Ukraine, Israel and the Indo-Pacific region.

The Fiscal 2025 budget request was submitted to the U.S.

Congress on March 11, 2024, and requested $895 billion for National Defense, with $850 billion of the total allocated to the DoD.

The Fiscal 2025 budget has not yet been approved by Congress.

On September 26, 2024, the President signed into law a Continuing Resolution (CR) that funds U.S.

government operations in FY 2025 at FY 2024 levels through December 20, 2024.

The timing and approval of FY 2025 appropriations remains uncertain and over the coming months, Congress will need to approve or revise the Fiscal 2025 budget request through enactment of appropriations and other legislation, which would require final approval from the President to become law.

Government operations under an extended CR could have potential impacts on the timing and award of new programs and contracts.

We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, heightened political tensions and the 2024 elections, the global security environment, inflationary pressures, and macroeconomic conditions.

The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs.

In January 2023, the statutory debt ceiling limit of $31.4 trillion was reached and on June 3, 2023, the President 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 $886 billion and $895 billion, respectively.

The $95 billion in additional supplemental funding described above is not subject to the FRA caps.

We believe the federal and DoD budget will be shaped by many factors including economic, political, and security conditions.

The result may be shifting funding priorities, which could impact DoD spending and our programs.

While it is difficult to predict the specific course of future defense budgets, V2X believes the core functions the Company performs are mission-essential and spending to maintain readiness, improve performance, increase service life, lower cost, and modernize digital and physical environments will continue to be a U.S.

On March 15, 2025, the President signed into law the Full-Year Continuing Appropriations and Extensions Act 2025 to continue funding the government through FY 2025.

The FY 2025 Continuing Resolution (CR) is generally similar to the FY 2024 funding levels but includes a $6 billion increase in defense spending and certain reductions in non-defense spending compared to FY 2024.

The DoD FY 2025 base budget equals approximately $831.5 billion with the spending increase.

Additionally, the FY 2025 CR provides the DoD with the flexibility to allocate funding, including authority to start new programs, assuming certain requirements are met.

However, government operations under the FY 2025 CR could have potential impacts on the timing and award of new programs and contracts.

The Administration’s FY 2026 budget request is expected to be submitted to Congress in the coming months and will kick off the FY 2026 defense authorization and appropriations legislative process.

Congress will need to approve or revise the FY 2026 budget request through enactment of appropriations and other legislation, which would require final approval from the President to become law.

We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, heightened political tensions, Congress, the debt ceiling, the global security environment, inflationary pressures, and other macroeconomic conditions.

The result may shift funding priorities, which could have material impacts on our programs and defense spending broadly.

Additionally, the Administration is assessing government-wide procurement, staffing, and support activities, including the evaluation of mission priorities, acquisition methods, contract performance, and other factors, which could result in potential actions.

Those actions remain uncertain and could result in impacts to our current and future financial performance and business prospects.

government priority.

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.

The Company develops and inserts operational technologies across its solutions to improve efficiency and the outcomes of its clients' missions.

The Company believes this aligns with its clients' intent to utilize and harden existing equipment, infrastructure, and assets rather than executing new purchases.

The Company's focus is on providing integrated solutions across the mission lifecycle that encompass (i) high impact readiness;

(ii) integrated supply chain management;

(iii) assured communications;

(iv) mission solutions, including rapid response contingency efforts;

and (v) platform renewal and modernization.

The Company believes its capabilities enhance mission effectiveness, extend utility, lower cost, and improve security and mission outcomes.

While customers may reduce the level of services required from us, the Company does not currently anticipate the complete elimination of these services, and the Company continues to focus on contract expansion and capturing new business opportunities.

However, business conditions have become more challenging and uncertain due to macroeconomic conditions, including inflation and rising interest rates, as well as recent international events.

For example, global hostilities could create additional demand for our products and services, however, any such demand, and the timing and extent of any incremental contract activity resulting from that demand, remains uncertain.

For example, global hostilities could create additional demand for our products and services;

however, any such demand, and the timing and extent of any incremental contract activity resulting from that demand, remains uncertain.

Further, given the current level of inflation and geopolitical factors, the Company is monitoring the impact of rising costs on its active and future contracts and its financial results, and actively evaluating opportunities for cost reductions and deleveraging.

Continuing the 2023 trend, in 2024 the Company's cost-plus and cost reimbursable contracts as a percentage of total contract mix and revenue have increased as compared to the year ended 2023.

The Company’s earnings and profitability may vary materially depending on the total mix of contracts.

To date, the Company has not experienced broad-based increases from inflation or geopolitical hostilities in the costs of its fixed-price and time and materials contracts that are material to the business.

To date, the Company has not experienced broad-based increases from inflation or geopolitical hostilities, including as a result of tariffs, in the costs of its fixed-price and time and materials contracts that are material to the business.

However, if the geopolitical conditions worsen or if the Company experiences greater than expected inflation in its supply chain and labor costs, then profit margins, and in particular, the profit margin from fixed-price and time and materials contracts, which represent a substantial portion of its contracts, could be adversely affected.

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 the Company does not currently anticipate any impact on its business, evaluation of the Inflation Reduction Act of 2022 and its requirements continues, as well as any potential impact on its business in the future.

The information provided above does not represent a complete list of trends and uncertainties that could impact the Company's business in either the near or long-term and should be considered along with the risk factors identified in Part I, "Item 1A.

Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and updated, as necessary, on subsequent Quarterly Reports on Form 10-Q, and the matters identified under the caption “Forward-Looking Statement Information" herein.

Secondary Public Offering

On September 4, 2024, we entered into an underwriting agreement (the Underwriting Agreement), by and among the Company, Vertex Aerospace Holdco LLC (the Selling Stockholder) and Goldman Sachs & Co.

LLC, Morgan Stanley & Co.

LLC and Robert W.

Incorporated, as representatives to several underwriters named therein (the Underwriters), relating to the public offering of 2,000,000 shares of common stock by the Selling Stockholder (the Secondary Offering) and up to 300,000 additional shares of common stock (the Option Shares) by the Selling Stockholder at the Underwriters’ option at any time on or before the 30th day after the date of the Underwriting Agreement (the Option, and together with the Secondary Offering, the Offering).

The Secondary Offering closed on September 6, 2024.

The Company did not sell any securities in the Secondary Offering and did not receive any proceeds from the sale of the shares offered by the Selling Stockholder.

On September 11, 2024, the Underwriters notified the Company and the Selling Stockholder that they had elected to exercise the Option in full.

The offering of the Option Shares closed on September 12, 2024.

All of the Option Shares were sold by the Selling Stockholder.

The Company did not receive any of the proceeds from the sale of the Option Shares by the Selling Stockholder in the offering.

During the three months ended September 27, 2024, we incurred costs of $0.6 million in connection with the Offering.

These costs are included within selling, general, and administrative expenses on our Condensed Consolidated Statement of Income (Loss).

DISCUSSION OF FINANCIAL RESULTS

Three months ended September 27, 2024, compared to three months ended September 29, 2023

Three months ended March 28, 2025, compared to three months ended March 29, 2024

Selected financial highlights are presented in the following table:

Three Months Ended Change

September 27, September 29,

(In thousands, except for percentages) 2024 2023 $ %

Revenue $ 1,081,656 $ 1,001,507 $ 80,149 8.0 %

Cost of revenue 990,220 930,828 59,392 6.4 %

% of revenue 91.5 % 92.9 %

Selling, general, and administrative expenses 41,549 49,640 (8,091) (16.3) %

% of revenue 3.8 % 5.0 %

Operating income 49,887 21,039 28,848 137.1 %

Operating margin 4.6 % 2.1 %

Interest expense, net (27,152) (30,252) 3,100 (10.2) %

Other expense, net (3,198) (2,024) (1,174) 58.0 %

Income (loss) from operations before income taxes 19,537 (11,237) 30,774 (273.9) %

% of revenue 1.8 % (1.1) %

Income tax expense (benefit) 4,486 (4,837) 9,323 (192.7) %

Effective income tax rate 23.0 % 43.0 %

Net income (loss) $ 15,051 $ (6,400) $ 21,451 (335.2) %

Revenue increased $80.1 million, or 8.0%, for the three months ended September 27, 2024 as compared to the three months ended September 29, 2023.

Revenue increased primarily due to organic growth on legacy programs and new program performance.

Revenue from our programs in the Middle East, the U.S., and Asia, increased by $40.6 million, $33.5 million, and $19.6 million, respectively, partially offset by a decrease in revenue from our programs in Europe of $13.6 million.

Cost of Revenue

Cost of revenue increased $59.4 million, or 6.4%, for the three months ended September 27, 2024 as compared to the three months ended September 29, 2023, primarily driven by increases in revenue and changes in contract mix.

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

SG&A expenses decreased $8.1 million, or 16.3%, for the three months ended September 27, 2024 as compared to the three months ended September 29, 2023, primarily due to cost optimization and lower integration-related costs.

Operating Income

Operating income increased $28.8 million, or 137.1%, for the three months ended September 27, 2024 as compared to the three months ended September 29, 2023.

Operating income as a percentage of revenue was 4.6% for the three months ended September 27, 2024, compared to 2.1% for the three months ended September 29, 2023, primarily driven by changes in aggregate cumulative adjustments, along with decreased SG&A expenses.

Aggregate cumulative adjustments increased operating income by $17.3 million and $5.0 million for the three months ended September 27, 2024 and September 29, 2023, respectively.

The aggregate cumulative adjustments for the three months ended September 27, 2024 and September 29, 2023 related to changes in contract terms, program performance, customer changes in scope of work and changes to estimates in the reported period.

Nine months ended September 27, 2024, compared to nine months ended September 29, 2023

Selected financial highlights are presented in the following table:

Nine Months Ended Change

September 27, September 29,

March 28, March 29,

(In thousands, except for percentages) 2025 2024 $ %

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Other expense, net (2,295) (1,633) (662) 40.5 %

Income (loss) from operations before income taxes 12,547 (32,445) 44,992 (138.7) %

Income from operations before income taxes 10,070 1,124 8,946 795.9 %

% of revenue 1.0 % 0.1 %

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Effective income tax rate 19.5 % (1.8) %

Net income (loss) $ 9,651 $ (22,081) $ 31,732 (143.7) %

Revenue increased $241.6 million, or 8.3%, for the nine months ended September 27, 2024 as compared to the nine months ended September 29, 2023.

Revenue increased primarily due to organic growth on legacy programs and new program performance.

Revenue from programs located in the Middle East, Asia, and the U.S.

increased by $184.8 million, $43.2 million, and $29.8 million, respectively, partially offset by a decrease in revenue from programs located in Europe of $16.2 million.

Net income $ 8,107 $ 1,144 $ 6,963 608.7 %

*Percentage change is not meaningful.

Revenue increased $5.4 million, or 0.5%, for the three months ended March 28, 2025 as compared to the three months ended March 29, 2024 primarily due to organic growth.

Revenue from our programs in the U.S.

Cost of Revenue

Cost of revenue increased $242.9 million, or 9.0%, for the nine months ended September 27, 2024 as compared to the nine months ended September 29, 2023, primarily driven by increases in revenue and changes in contract mix.

Cost of revenue decreased $2.5 million, or 0.3%, for the three months ended March 28, 2025 as compared to the three months ended March 29, 2024, primarily driven by changes in contract mix.

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

SG&A expenses decreased $23.1 million, or 15.3%, for the nine months ended September 27, 2024 as compared to the nine months ended September 29, 2023 primarily due to cost optimization and lower integration-related costs.

SG&A expenses increased $3.9 million, or 9.7%, for the three months ended March 28, 2025 as compared to the three months ended March 29, 2024, primarily due to timing of expenses.

Operating Income

Operating income increased $21.8 million, or 25.3%, for the nine months ended September 27, 2024 as compared to the nine months ended September 29, 2023.

Operating income as a percentage of revenue was 3.4% for the nine months ended September 27, 2024, compared to 2.9% for the nine months ended September 29, 2023.

The increase in operating income was primarily driven by decreased SG&A expenses.

Aggregate cumulative adjustments increased operating income by $18.5 million and $27.2 million for the nine months ended September 27, 2024 and September 29, 2023, respectively.

The aggregate cumulative adjustments for the nine months ended September 27, 2024 and September 29, 2023 related to changes in contract terms, program performance, customer changes in scope of work and changes to estimates in the reported period.

Operating income increased $4.0 million, or 13.1%, for the three months ended March 28, 2025 as compared to the three months ended March 29, 2024.

Operating income as a percentage of revenue was 3.4% for the three months ended March 28, 2025, compared to 3.0% for the three months ended March 29, 2024 primarily driven by changes in aggregate cumulative adjustments.

Aggregate cumulative catch-up adjustments increased operating income by $4.2 million and $0.5 million for the three months ended March 28, 2025 and March 29, 2024, respectively.

The aggregate cumulative catch-up adjustments for the three months ended March 28, 2025 and March 29, 2024 related to changes in contract terms, program performance, customer changes in scope of work and changes to estimates in the reported period.

Loss on Extinguishment of Debt

The Company recorded a $2.2 million loss on extinguishment of debt for the three months ended March 28, 2025.

For further discussion see Note 5, Debt , in the Notes to Condensed Consolidated Financial Statements.

Interest Expense, Net

Interest expense, net for the three and nine months ended September 27, 2024 and September 29, 2023 was as follows:

Three Months Ended Change Nine Months Ended Change

September 27, September 29, September 27, September 29,

Interest expense, net for the three months ended March 28, 2025 and March 29, 2024 was as follows:

Three Months Ended Change

March 28, March 29,

(In thousands, except for percentages) 2025 2024 $ %

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Interest expense is related to borrowings under our senior secured credit facilities, with the amortization of debt issuance costs, and derivative instruments used to hedge a portion of exposure to interest rate risk.

Interest expense, net decreased $10.4 million for the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023 due to both a decrease in our debt balance, and our interest rate swap contracts.

Interest expense, net decreased $7.9 million for the three months ended March 28, 2025 compared to the three months ended March 29, 2024 primarily due to a decrease in our debt balance and reduced interest rates resulting from the January 2, 2025 Amendment to the First Lien Credit Agreement.

For further discussion of the Amendment see Note 5, Debt , in the Notes to Condensed Consolidated Financial Statements.

Other Expense, Net

During the three and nine months ended September 27, 2024, we incurred purchase discount fees and other expenses of $3.2 million and $7.4 million, respectively, related to the sale of accounts receivable through the MARPA Facility.

In addition, during the nine months ended September 27, 2024, we incurred a $2.2 million impairment charge on a non-operating, long-lived asset, primarily due to a decreased fair market value.

During the three and nine months ended September 29, 2023, we incurred purchase discount fees and other expenses of $2.0 million and $2.1 million, respectively, related to the sale of accounts receivable through the MARPA Facility.

During the three months ended March 28, 2025, we incurred purchase discount fees and other expenses of $2.5 million, related to the sale of accounts receivable through the MARPA Facility.

For a discussion of the MARPA Facility, see Note 12, Sale of Receivables , in the Notes to Condensed Consolidated Financial Statements.

Income Tax Expense (Benefit)

We recorded an income tax provision of $4.5 million and income tax benefits of $4.8 million for the three months ended September 27, 2024 and September 29, 2023, respectively.

Our effective income tax rates for the three months ended September 27, 2024 and September 29, 2023, were 23.0% and 43.0%, respectively.

For the nine months ended September 27, 2024 and September 29, 2023, the Company recorded an income tax provision of $2.9 million and income tax benefits of $10.4 million, representing effective income tax rates of 23.1% and 31.9%, respectively.

We recorded income tax expense of $2.0 million and income tax benefits which were not material for the three months ended March 28, 2025 and March 29, 2024, respectively.

Our effective income tax rates for the three months ended March 28, 2025 and March 29, 2024, were 19.5% and (1.8)%, 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), offset by available deductions not reflected in book income, and income tax credits.

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We believe we have sufficient liquidity to fund operations, acquisitions, capital expenditures and scheduled debt repayments.

We expect to fund our 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, its credit facilities, and access to capital markets.

When necessary, the 2023 Revolver and MARPA Facility are available to satisfy short-term working capital requirements.

If cash flows from operations are less than expected, we may need to access the long-term or short-term capital markets.

Although we believe our current financing arrangements will permit financing of our operations on acceptable terms and conditions, access to and the availability of financing on acceptable terms and conditions in the future will be impacted by many factors, including:

(i) our credit ratings, (ii) the liquidity of the overall capital markets, and (iii) the current state of the economy.

We cannot provide assurance that such financing will be available on acceptable terms or that such financing will be available at all.

As of September 27, 2024, there were $15.9 million of outstanding letters of credit under the 2023 Revolver.

On January 2, 2025, the First Lien Credit Agreement was amended to provide, among other things, a new tranche of term loans in an aggregate original principal amount of $899.8 million (the New Term Loans), in which the New Term Loans replace or refinance in full all the existing term loans outstanding under the First Lien Term Tranche as in effect immediately prior to the amendment (the Existing Term Loans).

See Note 5, Debt , in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further discussion.

As of March 28, 2025, the carrying value of the First Lien Credit Agreement was $899.8 million, excluding deferred discount and unamortized deferred financing costs of $27.7 million.

The estimated fair value of the First Lien Credit Agreement as of March 28, 2025 was $887.4 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).

As of March 28, 2025, there were no outstanding borrowings and $22.3 million of outstanding letters of credit under the 2023 Revolver.

Availability under the 2023 Revolver was $477.7 million as of March 28, 2025.

Unamortized deferred financing costs related to the 2023 Revolver of $2.9 million are included in other non-current assets in the Condensed Consolidated Balance Sheets.

As of September 27, 2024, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.

As of September 27, 2024, the carrying value of the 2023 Term Loan portion was $242.2 million, excluding unamortized deferred financing costs of $1.7 million.

The estimated fair value of the 2023 Term Loan as of September 27, 2024 was $242.3 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.

As of September 27, 2024, the carrying value of the First Lien Credit Agreement was $904.3 million, excluding deferred discount and unamortized deferred financing costs of $31.0 million.

The estimated fair value of the First Lien Credit Agreement as of September 27, 2024 was $903.2 million.

As of March 28, 2025, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.

As of March 28, 2025, the carrying value of the 2023 Term Loan was $239.1 million, excluding unamortized deferred financing costs of $1.5 million.

The estimated fair value of the 2023 Term Loan as of March 28, 2025 was $235.8 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).

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and international cash from wholly owned subsidiaries.

Approximately $19.8 million of our $59.9 million in cash, cash equivalents and restricted cash as of September 27, 2024 is held by foreign subsidiaries and is not available to fund U.S.

Approximately $35.8 million of our $169.1 million in cash, cash equivalents and restricted cash as of March 28, 2025 is held by foreign subsidiaries and is not available to fund U.S.

operations unless repatriated.

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We determine our DSO by calculating the number of days necessary to exhaust our ending accounts receivable balance based on our most recent historical revenue.

DSO was 61 and 58 days as of September 27, 2024 and December 31, 2023, respectively.

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

Nine Months Ended

September 27, September 29,

DSO wa s 58 and 57 d ays as of March 28, 2025 and December 31, 2024, respectively.

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

Three Months Ended

March 28, March 29,

(in thousands) 2025 2024

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Foreign exchange 1

2,613 (1,519)

Net change in cash, cash equivalents and restricted cash $ (99,259) $ (36,993)

1 Impact on cash balances due to changes in foreign exchange rates.

Net cash provided by operating activities for the nine months ended September 27, 2024 primarily consisted of cash inflows from non-cash net income items of $110.8 million, cash inflows from the sale of receivables through the MARPA Facility of $70.7 million and net income of $9.7 million, partially offset by net cash outflows in working capital accounts of $119.7 million and net cash outflows in other long-term assets and liabilities of $40.3 million.

Net cash provided by operating activities for the nine months ended September 29, 2023 , primarily consisted of cash inflows from non-cash net income items of $140.7 million , cash inflows from the sale of receivables through the MARPA Facility of $87.9 million, partially offset by net cash outflows in working capital accounts of $44.1 million, net cash outflows in other long-term assets and liabilities of $25.8 million, and a net loss of $22.1 million.

Net cash used in investing activities for the nine months ended September 27, 2024 consisted of $16.9 million for the acquisition of businesses and $10.7 million 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 nine months ended September 29, 2023 consisted of $16.6 million of capital expenditures for the purchase of software and hardware, vehicles and equipment related to ongoing operations.

Net cash used in financing activities during the nine months ended September 27, 2024 consisted of revolver repayments of $1.0 billion, payments for employee withholding taxes on share-based compensation of $8.0 million, repayments of long-term debt of $7.7 million, and payments for debt issuance costs of $1.2 million, partially offset by proceeds from the revolver of $1.0 billion.

Net cash used in financing activities during the nine months ended September 29, 2023 consisted of repayments of long-term debt of $428.8 million, revolver repayments of $669.8 million, payments for employee withholding taxes on share-based compensation of $17.9 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 $719.8 million, respectively.

Net cash used in operating activities for the three months ended March 28, 2025 consisted of net cash outflows in working capital accounts of $159.6 million and net cash outflows in other long-term assets and liabilities of $3.5 million, partially offset by cash inflows from non-cash net income items of $31.4 million, cash inflows from the sale of receivables through the MARPA Facility of $28.2 million, and net income of $8.1 million.

Net cash used in operating activities for the three months ended March 29, 2024 primarily consisted of net cash outflows in working capital accounts of $119.8 million and net cash outflows in other long-term assets and liabilities of $8.0 million, partially offset by cash inflows from non-cash net income items of $35.8 million, cash inflows from the sale of receivables through the MARPA Facility of $33.7 million and net income of $1.1 million.

Net cash used in investing activities for the three months ended March 28, 2025 consisted of $2.6 million of net capital expenditures for the purchase of software and hardware, vehicles and equipment related to ongoing operations.

Net cash used in investing activities for the three months ended March 29, 2024 consisted of $16.9 million for the acquisition of businesses and $7.8 million of capital expenditures for the purchase of software and hardware, vehicles and equipment related to ongoing operations.

Net cash used in financing activities during the three months ended March 28, 2025 consisted of revolver repayments of $141.0 million, payments for employee withholding taxes on stock-based compensation of $2.7 million, and payments for debt issuance costs of $1.2 million, partially offset by proceeds from the revolver of $141.0 million.

Net cash provided by financing activities during the three months ended March 29, 2024 consisted of proceeds from the revolver of $375.3 million, partially offset by revolver repayments of $319.3 million, payments for employee withholding taxes on stock-based compensation of $5.7 million, and repayments of long-term debt of $3.8 million.

Capital Resources

As of September 27, 2024, we held cash, cash equivalents and restricted cash of $59.9 million, which included $19.8 million held by foreign subsidiaries, and had $484.1 million of available borrowing capacity under the 2023 Revolver, which expires on February 25, 2028.

We believe that our cash, cash equivalents and restricted cash as of September 27, 2024, as supplemented by operating cash flows, the 2023 Revolver, and the MARPA Facility will be sufficient to fund our anticipated operating costs, capital expenditures, and current debt repayment obligations for at least the next 12 months.

As of March 28, 2025, we held cash, cash equivalents and restricted cash of $169.1 million, which included $35.8 million held by foreign subsidiaries, and had $477.7 million of available borrowing capacity under the 2023 Revolver.

We believe that our cash, cash equivalents and restricted cash as of March 28, 2025, as supplemented by cash flows from operations, the 2023 Revolver, and the MARPA Facility will be sufficient to fund our anticipated operating costs, capital expenditures, and current debt repayment obligations for at least the next 12 months.

Contractual Obligations

As of September 27, 2024, commitments to make future payments under long-term contractual obligations were as follows:

As of March 28, 2025, commitments to make future payments under long-term contractual obligations were as follows:

Payments Due by Period

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(In thousands) Total 1 - 3 Years 3 - 5 Years

Operating leases $ 44,728 $ 3,190 $ 20,777 $ 12,466 $ 8,295

Principal payments on Vertex First Lien Credit Agreement¹ 904,303 9,066 18,131 18,131 858,975

Leases $ 48,912 $ 9,938 $ 21,422 $ 11,548 $ 6,004

Principal payments on First Lien Credit Agreement¹ 899,770 8,997 17,996 17,996 854,781

Principal payments on 2023 Credit Agreement¹ 239,063 10,938 25,000 203,125 —

Interest on Vertex First Lien and 2023 Credit Agreements 488,668 91,892 177,299 141,840 77,637

Interest on First Lien and 2023 Credit Agreements 383,292 78,782 150,576 115,189 38,745

Total $ 1,571,037 $ 108,655 $ 214,994 $ 347,858 $ 899,530

¹ Includes unused funds fee and is based on the September 27, 2024 interest rate and outstanding balance.

¹ Includes unused funds fee and is based on the March 28, 2025 interest rate and outstanding balance.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

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however, actual results in these areas could differ from management's estimates under different assumptions or conditions.

We believe that the assumptions and estimates associated with revenue recognition, business combinations, goodwill impairment, intangible assets, and income taxes have the greatest potential impact on our financial statements.

Therefore, we consider these to be our critical accounting policies and estimates.

We believe that the assumptions and estimates associated with revenue recognition, goodwill impairment, intangible assets and income taxes have the greatest potential impact on our financial statements because they are inherently uncertain, involve significant judgments, and include areas where different estimates reasonably could materially impact the financial statements.

There have been no material changes in the critical accounting policies and estimates from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2024.

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protests of new awards;

economic, political and social conditions in the countries in which we conduct our business;

economic, political and social conditions in the countries in which we conduct our businesses;

changes in U.S.

or international government defense budgets;

or international government defense budgets, including potential changes from the U.S.

president and administration;

government regulations and compliance therewith, including changes to the DoD procurement process;

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inflation and interest rate risk;

geopolitical risk, including as a result of recent global hostilities;

geopolitical risk, including as a result of recent global hostilities and tariffs;

our subcontractors' performance;

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our ability to retain and recruit qualified personnel;

our ability to maintain good relationships with our workforce;

our ability to maintain good relationships with our workforce and unions;

our teaming relationships with other contractors;

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changes in our tax provisions or exposure to additional income tax liabilities;

risks and uncertainties relating to integrating and refining internal control systems post-merger;

risks and uncertainties relating to integrating and refining internal control systems, including enterprise resource planning and business systems, post-merger;

changes in GAAP;

the impact of the U.S.

November 2024 presidential and congressional elections;

and other factors described in Part I, "Item 1A.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis