V2X, Inc.

Thank you for joining us for the V2X First Quarter 2024 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Rob and I'll be the operator for today's call. At this time all participants have been placed in listen-only mode. Following management's presentation, I will open up the call for a Q&A session. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. And now I'll pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X.

Thank you. Good morning, everyone. Welcome to the V2X First Quarter 2024 Earnings Conference Call. Joining us today are Chuck Pro, President and Chief Executive Officer, and Sean Morrell, Senior Vice President and Chief Financial Officer. Today Chuck will highlight the company's recent awards as well as highlight some strategic initiatives and then Sean will walk us through the first quarter financial performance. Slides for today's presentation are available on the Investor Relations section of our website, gov2x.com. Please turn to slide two. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. The company assumes no obligation to update its forward-looking statements. Additionally, I'd like to point out that in addition to gap earnings, we will be discussing and reporting various adjusted non-gap metrics, including adjusted EBITDA and margin, adjusted operating cash flow, adjusted net income, and adjusted diluted earnings per share. The definition of these non-gap measures can be found in our presentation materials available on our Investor Relations website and in our press release filed with the FCC. At this time, I would like to turn the call over to Chuck Pro.

Thank you, Mike, and good morning, everyone. Thank you for joining us on the call today. Please turn to slide three. I'd like to thank our employees for all of their contributions and commitment to our clients' missions that resulted in a great start to the year. In particular, I'd like to take a moment to recognize our veteran workforce. V2x remains a leading participant in the veterans ecosystem with almost 50% of our 16,000 employees having prior military service. Our veteran talent base has been key to V2x's growth, and I am honored to announce that V2x has once again been recognized as a top military-friendly employer by Victory. On a similar note, this month will recognize Memorial Day. As we honor the brave men and women who gave their lives in the service of our country, I would like to thank all of those past and present who have served to protect our freedom. Please turn to slide four. V2x reported a great start to the year with revenue increasing 7% -over-year. Revenue in the first quarter was driven by a 22% -over-year growth in the Middle East and 7% in the Pacific. Our growth in the Middle East, or CENTCOM, was driven primarily by expansion in Qatar and our recent aviation support and training contract to support the Saudi Arabian Ministry of National Guard. This is a substantial four-military sales program valued at approximately $400 million over five years. I am pleased to report that phasing activities are well underway and the contract continues to ramp up. We anticipate the program to be operating at full run rate in the second half. As we have discussed previously, the demand signals from our clients in the region remain heightened. With the recent supplemental funding package, we are starting to see new requirements emerge. V2x is the top provider of services to the DoD in the region and we remain ready to support our clients' mission requirements. We continue to demonstrate growth in the Pacific, or Indo-Paycom, with revenue in the region increasing 7% -over-year. This growth highlights the successful execution of our strategy to expand offerings, utilizing our geographic footprint. Our teams continue to demonstrate outstanding performance in Indo-Paycom, which is leading to greater number of opportunities to support our clients' increasing mission requirements. For example, V2x has been asked to support a series of smaller exercises in 2024 under Balaketan Salekanit. This Indo-Paycom growth is particularly notable since 2023 included the more significant Pacific exercises scheduled that occurred in the odd-numbered years. Additionally, we are further expanding capabilities in the region and I am pleased to announce that just last week we were awarded a new $88 million contract with the U.S. Navy. Under the new five-year firm fixed price contract, V2x will provide IT O&M of Navy systems at the Naval Computer and Telecommunications Master Station Pacific. This win builds on our 40-year track record of providing cybersecurity, mission IT, and critical communications across the globe. I'll speak more on how we are expanding our offerings and existing business in the region shortly. Adjusted EBIT in the quarter was $69.1 million or .8% margin. Adjusted EPS increased 8% -over-year to 90 cents. V2x is differentiating its capability offering through converged solutions that sit at the intersection of technology and operations. This differentiation has led to a recent award valued at $75 million to provide technology solutions for the threat detection and response to chemical, biological, radiological, and nuclear hazards. I'll describe this award in more detail shortly. Our agility and ability to deliver mission critical capabilities on a global scale places V2x at a unique position to support our clients' evolving mission requirements and were demonstrated through recent notable awards. First, we were recently awarded over $140 million in task orders to continue providing support services to the U.S. Air Force in Jordan and Romania. The awards, which are firm fixed price, were made under the Air Force Contract Augmentation Program 5, which is a multiple award IDIQ contract that provides worldwide contingency and humanitarian support. The contract extends through May of 2031 and was recently modified to increase the program ceiling value to $15 billion from $6.4 billion. Second, and building on AFCAP, during the first quarter, V2x was awarded a position on the U.S. Navy's Global Contingency Services Multiple Award Contract 3, or GCS MAC 3. The contract extends through April of 2032 and provides a similar scope of support services to AFCAP but is executed by the Navy. The total contract ceiling value of GCS MAC 3 is $2 billion and V2x is one of six awardees. This ceiling value was significantly increased from the last version, which reached a ceiling value of $900 million. Importantly, we were the leading provider of services under the prior iteration of the contract, securing $300 million in task orders. We are honored to continue our support for the Navy and look forward to building on our track record of success. Please turn to slide 5. V2x is creating more value in its core markets by inserting operational technologies into mission essential operations. This was recently exemplified through WIND valued at $75 million through operationalized next generation solutions for threat detection and response to chemical, biological, radiological, and nuclear, or CBRN hazards. Importantly, this work expanded from a prototype effort to a new sole source award for the production, upgrade, and fielding of cutting edge systems at overseas operational locations. As part of this effort, we are the lead systems integrator for the CBRN Support to Command and Control program. This program, known as CSC-2, is the program of record for the integration of CBRN, which will link sensors together to provide integrated situational awareness about potential hazard to inform end user decision making. In addition to CSC-2, V2x will modernize and re-architect the CBRN threat warning and notification application and predictive hazard propagation tools for enhanced operational decision support. These awards illustrate how we are harnessing technology-based solutions, operational expertise, and global footprint to address high consequence mission requirements. Please turn to slide six. One of our strategic comparatives includes enhancing value through technology expansion in our existing business. Our teams are demonstrating this through recent new awards to provide 5G, smart warehousing, and integrated electronic security solutions. As it relates to 5G and smart warehousing, we were awarded additional scope under our existing LogCap 5 contract to deploy an assured and protected private 5G communication solution and enable smart logistics in the Philippines. While currently small in value, we believe the solution is scalable across the DOPECOM region to provide protected and secure network infrastructure to support warehouse operations. Field appointments and exercises. This solution also aligns the type of investments the DOD is making as part of the Pacific Deterrence Initiative, or PDI. The DOD recently released its fiscal 2025 PDI budget, which requests $9.9 billion, a 9% increase from the prior year, and a 59% increase from 2023. Beyond LogCap, we also are supporting the design, implementation, testing, and operation of a private 5G cellular network and asset tracking support solution on Guam Naval Base. We continue to be optimistic about our ability to further expand these offerings on existing contracts. As it relates to electronic security, we remain a leader in providing integrated security solutions that protect thousands of facilities and assets. Historically, these solutions have generally been procured on a standalone basis. However, I am pleased to announce that our team received a new task order under an existing contract vehicle in the Middle East. This award establishes our solution in the region and displaces an incumbent. This further demonstrates our ability to insert technology solutions into operations and logistics programs. We believe we are positioned to grow from this initial step and deliver a modernized integrated solution that significantly improves our client's security posture. Building on the traction in the Middle East, we are also awarded a task to provide the initial establishment of this solution and capability in the Philippines. These two recent awards improve the install base of our solutions and also offer an ongoing operations and maintenance opportunity. These wins would not have been possible without our unified approach to growth and sell through business model that is inserting solutions through existing contracts. Please turn to slide seven. We believe our new business pipeline continues to support future backlog and revenue expansion. Our pipeline of nearer term opportunities for new business currently stands at approximately $25 billion, comprising $16 billion of bids expected to submit over the next 12 months and $9 billion of bids pending award. The pace of award activity was somewhat muted through the first quarter, but is increasing with several notable bids expected to award this year. Importantly, our strategy and company-wide focus on converged solutions is evident in our pipeline metrics, with higher value in technology solutions comprising an increasing percentage of the total. As can be seen on the slide, over 50% of the bids we expect to submit in the next 12 months are tied to operational technology, engineered solutions, and training versus 20% of bids pending award. This demonstrates the enhanced capability that V2X brings to the market across a more diversified client base. We believe our pipeline, strong backlog, limited recompense, and budgetary environment provides continued confidence and visibility to achieve our commitments. Now, I would like to turn the call over to Sean for a review of the financials. Sean?

Thanks, Chuck, and thanks everyone for joining us here today. Please turn to slide eight. We started 2024 with strong performance, building on the momentum from 2023. Performance across our metrics was in line with our expectations for the quarter. Revenue of $1 billion, $11 million in the quarter represents growth of 7% year over year. Revenue growth in the quarter was achieved through continued expansion of existing business in the Middle East and Pacific regions, as well as new programs. This reflects the strong demand for our service offerings around the globe. Adjusted EBITDA in the quarter was $69.1 million, delivering a margin of 6.8%. As discussed previously, we expect revenue and adjusted EBITDA will ramp sequentially throughout the year. Adjusted diluted EPS was $0.90, up 8% from prior year. The growth reflects lower income tax and interest expense, partially offset by higher depreciation and other expense. Interest expense for the quarter was $27.6 million. Cash interest expense was $25.4 million. An important attribute of our business is the ability to generate strong cash flow with low capital expenditure requirements. We continue to expect adjusted net cash provided by operating activities to be in the range of $145 million to $165 million for the year, representing 120% adjusted net income conversion at the midpoint. During the quarter, net cash used by operating activities was $57.2 million, following our historical pattern and reflective of a receivable delay that collected shortly after the quarter closed. Adjusted net cash used by operating activities was $83.5 million, adding back M&A and integration costs and removing the contribution of the Master Accounts Receivable Purchase Agreement.

Regarding capital expenditures, capital expenditures, capex in the quarter was approximately

$8 million. We expect our capex profile to be more heavily weighted towards the first half of 2024 as we deploy some engineering and infrastructure tools to enhance capabilities and further streamline back office operations. Continue to expect capital expenditures of approximately $30 million for the year. Please turn to slide 9. We ended the quarter with $33.6 million of cash on the balance sheet, excluding $2.1 million of restricted cash. Net debt improved by $115.9 million compared to the prior year, demonstrating the strong cash flow nature of our business. At the end of the first quarter, net debt was ,000,000. The net debt to EBITDA leverage ratio was three and a half times at the end of the quarter. Which improved notably from approximately four times at merger close. Additionally, we continue to expect cash generation to follow the normal pattern of our business and build throughout the year, achieving a net leverage ratio at or below three times by the end of 2024. The company's balance sheet and liquidity position remains strong with over $460 million in capacity, which includes approximately $427 million of availability on our revolver. Please turn to slide 10. Total backlog was $12.6 billion in the first quarter, representing three times revenue at the guidance midpoint. This key metric and leading indicator is an important attribute of our business and provides excellent revenue visibility. The backlog increased 6% year over year and does not reflect the full value of the approximate $400 million FMS win or the $458 million F5 adversary aircraft program currently under protest. It also does not include the $88 million Navy contract Chuck mentioned earlier, as the award was made subsequent to the first quarter. Please turn to slide 11. The company is reaffirming our guidance for 2024, which at the midpoint reflects 5% revenue and adjusted EBITDA growth, 8% adjusted EPS growth, and 120% net income conversion to cash. In summary, we are pleased with the performance across the business and start of the year. Our teams continue to execute, driving expansion on existing programs, phasing in new programs, and further improving our functional and core business operations. With that, we'd like to open the call to questions. Operator?

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 for you to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please, we'll be polled for questions. Thank you. Thank you, and our first question is from the line of Ken Herbert with RBC Capital Markets.

Please receive

your questions.

Hey, good morning everybody. Nice quarter. Thanks, Ken. How

are you? Pretty good. Hey, Chuck, maybe just to start off, the timing of the supplemental doesn't seem like it was able to impact your first quarter, but you still put up some nice revenue growth. Could you maybe just walk through some of the pieces of the supplemental and how you perhaps view that supporting the top line opportunity at least through the rest of fiscal 24?

Sure, we'll kind of walk around the globe to do that. So in the Middle East, you saw the nice -over-year revenue growth in the Middle East. You know, as we've talked about prior quarters, that really represents just the increased uptempo in addition to some nice new wins actually in the region. We are processing requests for additional requirements as we speak. None of those awards have actually occurred as of this morning, but we would expect to begin to execute new requirements in the region sometime this quarter. You saw the continued growth in the Pacific. The exercises are in fact occurring. They're much smaller in the even years as we've talked about in the past, but the military is really maintaining a balance between what's happening in Europe and the Middle East with the need to continue to enhance capabilities in the Pacific. As it relates to Europe, we are working with our clients on a couple of new requirements. They may take a bit longer to materialize, but they are important capabilities that align with some of our newer modernization and sustainment activities as well as logistics enhancements in the region as well. So, you know, we're seeing high uptempo across the globe and probably throughout this quarter and into the third quarter, we'll begin to process on that new requirements.

Great. Now, obviously you kept the guidance unchanged. Is it fair to assume that with the supplemental, I think it was largely as expected, but just gives maybe incremental confidence as we think about at least the top line through the remainder of the year?

It's earlier in the year, and as you're aware of our typical practices, as these opportunities turn into assigned task orders, we'll begin to think about the guidance. We feel very comfortable with the guidance that we had previously announced and that Sean reaffirmed here this morning.

Perfect. And if I could just finally for Sean, cash usage in the quarter a little greater than we'd expected. I understand the moving pieces. To get to the full year number, can you just walk through maybe the quarterly cadence, I guess, maybe cash usage in the second quarter with a strong second half, but how do we think about that cadence?

Yeah, that's exactly right. Ken, I think at the first half of the year will be a modest cash usage probably in aggregate and then cash flow generation in the second half. Again, very consistent with the cadence. We did in the first quarter and I mentioned it in the prepared remarks, we had a timing of some receivables that just missed the quarter close, nothing that's concerning to us or anything like that, but that did cause the cash to be a little bit lower than we've traditionally seen. But again, first half of the year, modest usage

and then add to the cash in the back half of the year. Great. Thanks, Sean. I'll pass it back there. Our next question is from

the line of Toby Summer with Trua Securities. Who's this here with your question?

Thank you. You described, I think, multiple vectors of growth in demand that you're seeing. I was wondering if you could comment about what the pipeline looks like from a margin perspective and also whether it embeds a uplift in margin in terms of the blended profitability of the pipeline as you see it.

Yeah, thanks. Hi, Toby. How you doing? So we have a new format that we talked about this year and it's portrayed on slide seven of the presentation. What you will see is that the training and the operational technology and engineering pipeline is what is the traditionally higher margin aspect of our business. In fact, demonstrated to be higher margin aspect of our business. I'm really pleased that the continued rate by which we've increased the pipeline of those two important capability sets. As you know, executing a pipeline in the federal services market is not an instantaneous thing, but I think the teams are doing a really nice job of very nicely balancing our traditional operational capabilities with the higher margin aspects of our technology, engineered solutions and training activities. Great.

That's what the answer I was hoping for. From a protest standpoint, could you update us on the timeline and milestones to think about for the most significant ones that we've sort of got our eyes on?

Yeah, the F5 adversary is a big one out there. It is now back in to GAO. You can't predict the future on these things, but I think what you can predict is this will probably be the last run at GAO. I know our client is ready to get started. We're ready to get started. In we've had some modest preparation activities before the new protest happened again. We're in the midway point of this next GAO protest and we're hoping to be able to move forward once this is done. That's of the protest. That's the most significant one. Sean, anything else?

No, that's the big one and we'll

see

how it plays out. Could you comment on the competitive landscape in maybe bifurcated in two areas, the logistics and overseas logistics area as well as the aircraft maintenance and sustainments and maybe even a third area if you could talk about that training which seems to be growing in the next few

weeks. The operational aspects of our business and I'll include that the overseas face and logistics operations as well as contingency support. There is the op tempo and the level of stress that both the DOD and the State Department are under are still very significant. Our role in supporting those important clients overseas will continue to be a tailwind for us because I think those activities, the rate and pace of the activities that we all see on the news will continue for a while. It's kind of point one. Point two, specific to the aircraft O&M business, we continue to see our clients extending the life cycles of existing platforms and increasing the amount of pressure on themselves and then ultimately ourselves to keep planes in the air, especially as it relates to training. One of the major mission requirements of both the Navy and the Air Force is trained pilots and they can't train enough pilots so we see good op tempo support in addition to net new requirements across those two parts of our business and as you know that aspect of our business has continued to consolidate over the last three years. With regard to modernization and sustainment and what we're now beginning to call engineered solutions, frankly the large scale O&Ms are running at capacity and we see a real opportunity for us to provide quick and agile solutions to integrate disparate platforms, point one, and then point two, extend the usefulness of existing platforms like you've seen with the F-16 central display unit. So that's how I would kind of view the demand profile of our major capabilities.

Thank you very much. Appreciate the answer. Our next question is from the line of Trevor Walsh

with CitizensJMP. Please receive your questions.

Great. Good morning gentlemen. Thanks for taking my questions. I wanted to just maybe dig in again on that pipeline slide for slide seven. Appreciate kind of the breakout there. Chuck or Sean really but maybe just Chuck for some of your comments. As far as the OTME business kind of growing or kind of becoming a larger part of the contribution of Total, how much of that is driven by kind of engineering kind of paces that need to go with that or is it more just that's how the opportunities are developing? I just can you give us a flavor of is it kind of R&D that needs to happen and that's why that that kind of piece of the pie kind of gets gets larger over time or is there some other thing that I'm maybe not picking up? I think the I'm

sorry enough to thank thanks for question Trevor. The we are aggressively marketing, selling, experimenting with our clients in the operational technology and the engineering component of our business. So this is a it's a very purposeful approach to sell directly to those clients. In some cases those clients are OEMs as well as to sell through our existing contract set and we've had good examples of those that we talked about in our prepared remarks. The CBRN opportunity not opportunity more the CBRN contract is like it's the perfect example. It started off with experimentation with our clients. We proved a contract we I'm sorry we proved the concept the clients then moved directly from there into a sole source contract and it doesn't always happen that way when it happens that way it's really nice. So Sean anything to add?

Yeah no the only thing I'd offer up is you know to to ensure that the teams you know have everything that they need. You know we talked a little bit about some engineering tools and that's where stuff in in the CAPEX. We started that last year because as Chuck said we we see the opportunities and we want to ensure that we're that we're well prepared to to to capture that to capture that work. So again I feel very good about the ability to address everything in that in that pipeline.

Great terrific super helpful and good good segue because I wanted to ask a question around that CBRN contract. Is it is it base or location kind of specific in terms of footprint whereas it where where it can sort of expand into maybe other GOs or is it fairly broad base in terms of

its geography independent. It's happened to be being deployed overseas right now but some of the earlier use cases were actually around events here in the United States. So it's a it's a it's a it's a capability set that is you know very focused toward those types of but is is geographically independent.

Got it great and maybe just one last one you mentioned just the the DOD need to kind of balance all the different requirements across the kind of major kind of things going on for region whether it's Europe, Ukraine, Middle East and then you know Indo-Paycom. How how are how are you I guess balancing that or getting the read from that customer in terms of I mean is there is there a lag I suppose in terms of that balancing act and in terms of where you guys kind of put resources and whatnot and how does that I guess play out in terms of how things are how things are moving. I imagine it's dynamics I'm just curious how you guys can how you keep up with that as well in the same way.

Yeah as you as again you see back yeah we in the prepared remarks and on slide seven the the bid submitted at nine billion and the next 12 months bid to be submitted 16 billion that's 25 billion dollars of activities there of proposals there. As we've talked about in the last couple of quarters and kind of reaffirmed here the the pace by which those awards have been made have been a bit muted but we actually believe particularly with regards to overseas logistics for the army as well as the major training activity that has been now we actually believe that some of those awards will actually be forthcoming here in the not too distant future. So kind of the answer to your question is as well things continue to be a bit muted the the contents of the nine billion dollars in bid submitted or to the point where they're going to have to be they're going to have to be awarded here sometime again like I say in the not too distant future.

Great appreciate it thanks.

Our next question comes from the line of Bert Suman with CIFL. Please just use your questions.

Thank you good morning. Chuck maybe just following up on that question like if I look at those bids submitted of nine billion about five billion of that is for your aerospace solutions. I mean I think we've heard for a while that there's there's demand there there's a lot of bids going out but there's sort of this slowness and that's things actually being awarded and then when they're awarded there's the protest phase. I guess can you give us some detail on maybe how your aerospace solutions business has been growing. I guess there's been a balance of and then the the new Navy test wing Atlantic and Pacific awards and do you think the sort of the cadence we've seen is starting to improve imminently or is sort of your hope that it'll improve in coming quarters.

I think we've had actually a nice run in organic growth in the in the aerospace aspect of our business. F5 adversary is the big one that needs to now be communicated but our pipeline across both our core aerospace and our core global mission support businesses remain tied and again as we've talked about as again this is a bit of commentary but given the current budget realities that the nation faces there's going to be increasing pressure to keep assets and facilities operating longer because the reality is that bringing new things to market will become it is becoming increasingly more difficult given the budgetary realities. So not a direct answer to your question but the demand profile on both aerospace and global mission support is not the issue. It's just it's working with our clients to continue to prosecute the bids that have been submitted so that they can come out and be awarded and we can begin them.

I guess maybe just to clarify there is there a you know you have obviously the large awarding test and that's holding up you know another growth driver but have you seen success maybe in smaller endeavors logistics other things within that aerospace solution side and it's just the large awards are getting held up?

No actually we have I think the on contract growth in our aerospace business has been strong and continues to be strong and the modernization sustainment the engineered solutions aspects of the pipeline that you see in many cases are going back to improve capabilities on those platforms that you know that were privileged to support.

Okay thanks Chuck. I guess a follow-up for Sean on the margin side it seems like started the year maybe like in line-ish with expectations and you made the comment sort of sequential improvement through the year. I guess as we think about you know going back almost two years to when the deal between Vectors and Vertex was done and then like eight percent plus margin profile what's it going to take to get there? Is that just a function of better mix or are there specific things you think you do on the cost side to get there faster?

Yeah I'll start with you know I want to reiterate you know we are off to the start of the year like we expected right so 69 million dollars I think we said you know when we released the guide the profile gave up 45 percent of the adjusted EBITDA in the first half that remains the case for you know you know no change we're feeling good about you know where we stand and the opportunity sets that we see. From a you know from a margin growth standpoint you know you see us and I talked about a little bit we're streamlining operations a bit putting processes tools things like that in place that's not going to be you know huge incremental margin enhancements it does of course a couple of things also you know that are that are that are happening to us and again consistent with what we said 60 percent of the revenue in the quarter was on cost type programs right so that we said we were trending higher in the back half of last year you know we continue to see to see that that's supporting our clients and customers with the demands that that they have. Part of what you see on page seven back to the the earlier question on I'll say mixed changes there are certainly higher margins in some of the things that are that are on there again we feel good about our ability to go address those things but the team is doing an exceptional job of consistent improvement in programmable performance and ensuring that we can address everything you know and capture them that's a problem. Chuck any any other comments you want to?

No no I think you summarized it perfectly it's just continuing to work on mix and then you know our team's continuing to kind of lean out the operations maybe maybe the last point that we didn't talk about was just the the seasoning of the backlog you know our 12 billion dollars in backlog continues to be very front-end loaded i.e. in the first couple three years of the execution and historically and the progress that we're seeing in the case that as that backlog continues to season will drive higher margins.

That's great thank you. I guess last question I got another one for you Sean on the leverage side it seems like that's ticking lower sort of as expected and you have here that you're sort of targeting three turns or less by the end of the year which is encouraging. I guess as you think about your position one what's the current variable split is that still roughly 70-30 and then two from the cash interest expect standpoint seems like the first quarter benefit a little bit I think you said 25 million but you're looking for 116 for the year just some commentary on why that steps back up.

Yeah so yeah it is still the variable split is still 70-30 you know again I think for for interest expense for the quarter yeah we had a we had a little bit of timing I think we feel fine with again the the guide at about 116 and and you know there are things that come up we just want to make sure that we're that we're covering everything but so nothing particular there and the guide that

sticks out at 116. Thanks Sean thanks Sean. Our next question is from the line of Joe Gomez with Noble Capital

please

just use your questions.

Good morning thanks for taking my questions.

Thank you Joe. Morning. Joe how you doing?

Doing well so

the first one kind of just wanted to ask the SG&A line look like it looks like it took a step down in the quarter just wondering if there's anything particular behind that and if that is a good level going forward here or should we see that expect to see that to go back up?

Yeah so you know as I mentioned a little bit Joe we you know we continue to work on our back office operations and that sort of stuff we did a modest amount of realignment and restructuring as we closed out 2023 so you do see a little bit of an impact you know with with lower SG&A here in Q1. The other thing I'll say is that there's always some seasonality to it right one of the elements there in the SG&A is our bids and proposals and and pursuit pursuit activities and so there's some there's always some seasonality to how those things play out but I think we feel good about you know where where our cost structure is today. It's very well aligned to to meet the needs of the business. We have more work to do. We're putting those tools and processes in place all the things you would expect us to

do. Okay great thanks for that one and then Chuck maybe talk a little bit more about the the Air Force augmentation program. You know the DOD announced that you guys are one of the awardees and as you mentioned it's now a 15 billion dollar program up from 6.4 billion when it was last put out. Similar to the the the other program that we talked about it was a 900 million and Vectris was awarded about 300 million. Do you have similar type of numbers here that 6.4 what V2X end up getting under this Air Force program and how do you see the opportunities on the Air Force program playing out from there?

Yeah I think under the last version of AFCAP Mike we're at 250 million.

From 2021 on this one.

From 21 to today it's about 250 million dollars. That that that AFCAP program has really been a good program for us. We've done a really nice job of expanding into new tasks. The margin profile has done a very very they've done a very nice job on the margin profile and as I've mentioned the the demands around the world are not diminishing. Point one. Point two existing assets quite assets in the military and sometimes even as a state department require extension and the last point I'll make is that the the prior version of AFCAP had many more awardees but you know the consolidation of DINE and PAE into a Mentum etc. have really continued to neck down if you will the competitive set to the four or five players that you know. So it's a it's a nice contract for us. I really like the operational capabilities that we've been able to develop internally in support of the Air Force client and I look for the team to do a really nice job against the requirements that are going to be issued here in the near term.

Great thanks for that. I appreciate you taking the questions.

Thanks a lot Joe.

Thank you. At this time we've reached the end of the question answer session and I'll turn the call over to Chuck Pro for closing remarks.

Thank you Rob and I appreciate everybody joining us on the call today. I think we've had a very nice quarter and we're we'll be looking forward to updating you at the end of the second quarter. Have a good day.

This will conclude today's conference. May disconnect your lines of assignment. Thank you for your participation.