Q3 2024 V2X Inc Earnings Call
Thank you for joining us for the V2X 3rd Quarter, 2024 earnings conference call and webcast.
Dave: Today's call is being recorded. My name is Dave and I will be the operator for today's call.
Dave: At this time, all participants have been placed in a list and only mode, following management presentation I will open up the call for a Q&A session.
Dave: To ask a question, may press star, then one on each touch tone, found. Do withdraw your question, please press star, then two.
Speaker Change: and now I'll pass to call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at B2X.
Mike Smith: Thank you. Good afternoon everyone. Welcome to the V2X Third Quarter, 2024, earnings conference file.
Funding a Today or Jeremy Wensinger, President and Chief Executive Officer, and Sean Mural, Senior Vice President and Chief Financial Officer. Slide for today's presentation are available on the Investual Relations section of our website, Go v2x.com.
Mike Smith: We turn to slide one.
During today's presentation, Andrew will be making board-looking statements pursuant to the
Dave: Please, for you, our State Parvours Statements in our Press release and presentation materials for a description of some of the factors that make us actual results to different materialies from the results contemplated by these laws like the statements.
Dave: For Comprehensive News, no obligation to update us for our business statements.
Dave: In addition, in today's remarks, who refer to certain non-gapsian examesors because man's employees, such measures, are useful to investors.
You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAPs on our slide presentations and in our earnings really filed with the FCC both of which are available on the investigation of our website.
Speaker Change: This time I'll like to turn the call over to Jeremy.
Jeremy Wensinger: Thank you, Mike, and good afternoon everyone. Thank you for joining us today.
Jeremy: Before we get started in advance of Veterans Day next Monday, I'd like to recognize all veterans for their service to our nation, particularly the over 4,000 that are part of the B2X team.
Jeremy: and enabling critical missions across the globe. We thank you for all that you've done and continue to do for our nation and our company.
Jeremy: I'd also like to acknowledge the over 16,000 global employees at the T2X for their unwavering 24, 7, 365 dedication to ensuring our customer's mission success.
Jeremy: Please turn to slide 2.
Speaker Change: B2X reported strong 3rd quarter results with revenue of $1.08 billion representing 8% growth year over year.
Speaker Change: One of the primary differentiators of growth enablement is our global reach.
Speaker Change: Being in every single time zone with the ability to operate at scale across all environments
Speaker Change: We are positioned in key theaters where missions matter and are receiving strong funding support. This was demonstrated in the third quarter with Indo-Pacific revenue growing 31% year-over-year.
Speaker Change: Revenue growth is being driven by increased demand to support the DOD's priorities to enhance U.S. readiness in the region.
Speaker Change: We are also seeing additional opportunities for growth in the region via foreign military sales that align to improving the capacity and capabilities of our allies.
Speaker Change: We are investing to capture this growth and believe V2X is positioned exceptionally well as a trusted partner to deliver value-added solutions and further expand in the region.
Speaker Change: Adjusted EBITDA in the quarter was $82.7 million, up 28% year-over-year, with a 7.6% margin, reflecting higher volume and strong program performance.
Speaker Change: Adjusted diluted EPS was $1.29 up 77% year-over-year. Adjusted operating cash flow in the quarter was also strong at $130 million demonstrating the high cash flow yield expectations of our business.
Speaker Change: Our customer intimacy and ability to deliver full spectrum capabilities across the mission lifecycle has resulted in V2X securing approximately $5 billion of recent awards.
Speaker Change: We are making excellent progress ensuring these programs are set up for long-term success and sustainable performance.
Speaker Change: I am pleased to report the F-5 Adversarial Aircraft Program, our Navy Pacific IT and Communications Contract, or NICTAMSPAC, and our Saudi Arabia Aviation Support Training Program reach full operational capability in Quarter 3.
Speaker Change: In addition, our previously announced Warfighter Training Readiness Solutions, or WATERS, program supporting the U.S. Army has kicked off.
Speaker Change: We are currently on track to reach full operational capability of the Army Training Aids, Devices and Simulator Task Order in the second half of 2025.
Speaker Change: In total, these wins to support mission-critical programs validate our strong positioning in the marketplace and our franchise programs that are expected to contribute to our financial performance for years to come.
Speaker Change: Given our year-to-date performance and awards, we are raising the low end of our 2024 Revenue Guidance and Adjusted EPS. We are reaffirming Adjusted EBITDA and net cash flow from operation.
Speaker Change: Please turn to slide 3 where I will discuss how our unique positioning in the mission life cycle is yielding growth.
Speaker Change: Today, V2X enables some of the most important missions with end-to-end capabilities facilitated by our global reach.
Speaker Change: The fact that we are with our customers at every phase of the mission execution allows us to deliver best-of-breed, cost-effective technology solutions that enable successful outcomes.
Speaker Change: Starting at the top of the wheel with high-impact readiness and integrated supply chain management. Both of these represent opportunities for us to prepare the warfighter for the mission and then equip and deploy the warfighter for their mission.
Speaker Change: Both of them are critical to the soldier and allow us to be in a position to understand their unique requirements, whether it's training, equipping, or deploying.
Speaker Change: The recent $3.7 billion Waters program is illustrative of this capability. As I previously mentioned, we are currently transitioning the program and are currently assessing requirements to support training in Australia, the Netherlands, Lithuania, and Sweden.
Speaker Change: Another example of this capability is our recent award of the Defense Logistics Agency $11.9 billion JETS multiple award IDIQ contract.
Speaker Change: The JETS contract provides an opportunity for V2X to leverage its operational know-how and technology expertise to deliver mission-ready technologies such as 5G and smart warehousing that enhance DLA's ability to provide combat logistics support.
Speaker Change: Moving to the next capability, Assured Communications, we enable connectivity and communications throughout all aspects of the engagement. For example, V2X ensures our soldiers can communicate securely across the air, land, sea, and cyber domains.
Speaker Change: Several recent wins, which I'll discuss in greater detail shortly, are further examples of our assured communications capability.
Speaker Change: Not only do we connect, but we also protect and provide holistic support to our soldiers while deployed through our global mission solutions.
Speaker Change: For example, V2X provides situational awareness and command-and-control systems that protect thousands of critical assets. This is achieved through almost 100,000 alarm points operating 24-7, augmented by thousands of sensors.
Speaker Change: Further demonstrating this capability was our new eight-year, $100 million contract awarded during Quarter 3 to ensure the operations and readiness of an important overseas missile defense system.
Speaker Change: As you move up and to the left, this is where the assets have been deployed, returned from the field, and V2X resets them to zero hours and zero miles, extending the life or enhancing the platform effectiveness through system modernization and technology insertion.
Speaker Change: An example of these capabilities is the new $60 million contract awarded to V-2X during the third quarter to keep over 100 T-8 Poseidon aircraft ready for their next maritime patrol, anti-submarine warfare, or ISR mission.
Speaker Change: We see additional opportunities to support the fleet requirements of international allies.
Speaker Change: We're also seeing continued expansion in our platform modernization solutions that are solving problems on today's multidimensional and evolving battlefield.
Speaker Change: Our engineering and rapid prototyping capabilities are delivering new systems that are maximizing legacy platforms with new functionality at significant cost benefits to our customers.
Speaker Change: Our platform agnostic approach, engineering prowess, and knowledge from living in the mission
Speaker Change: allowing us to deliver differentiated cost-effective technology solutions that enable successful outcomes.
Speaker Change: As you can see, the depth and breadth of the V2X portfolio is differentiated, and I believe that we are in the early innings of what we can achieve. By harnessing our end-to-end capabilities, shoulder-to-shoulder intimacy, and global footprint, we are uniquely qualified to deliver on national security priorities.
Speaker Change: Please turn to slide four, where you will see how our capabilities and wins are enhancing assured communications for global missions.
Speaker Change: B2X remains focused on delivering technology solutions that solve mission gaps and enable seamless communications.
Speaker Change: This focus is yielding results, and some of you had the opportunity to see this firsthand at the AUSA Symposium with the GMR-1000.
Speaker Change: The GMR is facilitating real-time situational awareness across air and ground platforms. We believe the demand for this technology is growing and are investing to enhance size, weight, and power.
Speaker Change: Beyond the GMR, I am pleased to announce recent wins valued at $270 million that are extending V2X's reach for ensuring secure communications across key regions, including the United States, Europe, Indo-Pacific, and the Middle East.
Speaker Change: For example, in Europe, we were recently awarded a $32 million three-year contract ensuring the connectivity of the U.S. Army networks across the region.
Speaker Change: In the Indo-Pacific region, we just completed the phase-in of the NICTANSPAC program, which is the largest DoD communications hub in the Pacific, allowing secure communications across air, land, sea, and cyber domains.
Speaker Change: Additionally, our recent win of the $141 million Fleet System Engineering Teams contract is delivering end-to-end C4I system solutions to the U.S. Navy. This ensures that no U.S. Navy strike group deploys without V2X.
Speaker Change: In the United States, we secured a contract ensuring the integrity and availability of classified and unclassified networks for the Air National Guard.
Speaker Change: Finally, as a reminder, V2X continues to run the largest cyber center for the Army outside the United States. Located in the Middle East, this program provides 24-7, 365 connectivity for our soldiers to conduct their missions in that region.
Speaker Change: As you can see on the slide, V2X's capability and reach goes beyond the programs I just mentioned. Our comprehensive solutions and expertise spanning sensors, networks, and radars keeps our customers connected for all aspects of their multi-domain missions.
Speaker Change: Before I turn it over to Shawn, I'd like to briefly outline some of our optimization efforts to build on our success and drive sustainable growth for V2X.
Speaker Change: First, we continue to build and enhance the breadth and depth of our pipeline as a result of our collective capabilities. Waters is a great example of our solutions that leverage the collective capabilities.
Speaker Change: We are building on that success to expand our addressable markets in all areas of the company.
Speaker Change: We see great value in the markets we serve and the importance they have to enduring missions.
Speaker Change: Pipeline expansion is core to the first step of optimization.
Speaker Change: Second, we are investing in this expanded pipeline to ensure that we address opportunities with talent and solutions that will differentiate B2X offerings.
Speaker Change: Third, to support our pipeline, our offerings will leverage our deep engineering expertise throughout the lifecycle wheel I just talked about. This ensures differentiation and a value-added solution for our customers.
Speaker Change: Lastly, optimization of our tools and processes will continue V2X's ability to be cost-effective in our markets and drive overall mission performance, while ensuring our employees have the tools and capabilities they need to drive continuous improvements.
Shawn: Now I'd like to turn the call over to Shawn for a review of our financials. Shawn?
Shawn: Thanks, Jeremy. Thanks to everyone joining us this afternoon. Please turn to slide 5.
Shawn: Our performance in Q3 continued to be strong.
Shawn: Revenue increased 8% on a year-over-year basis to $1.08 billion, setting another record for the company.
Shawn: This growth continues to demonstrate our ability to be in the right place, at the right time, to execute high-priority missions.
Shawn: We continued our strong performance, delivering double-digit revenue growth in the Indo-Pacific and Middle East regions, with revenue increasing 31% and 13% year-over-year, respectively.
Shawn: Adjusted EBITDA in the quarter was $82.7 million, increasing 28% from prior year and delivering a margin of 7.6%.
Shawn: EBITDA was also up $10.4 million sequentially.
Shawn: This performance was driven by growth, productivity improvements, and program achievements consistent with our expectations.
Shawn: Interest expense for the quarter was $27.2 million.
Shawn: The cash interest expense was $25.6 million.
Shawn: Adjusted diluted EPS was $1.29, up 77% from the prior year.
Shawn: Third-quarter adjusted net cash provided by operating activities was $130.1 million, up 35% year-over-year.
Shawn: This performance reflects the strong cash generation capabilities of V2X and our normal cadence of cash flow being greater in the second half of the year.
Shawn: Please turn to slide 6, where I'll talk about our year-to-date results.
Shawn: Year-to-date revenue was $3,164,000,000, increasing 8% year-over-year.
Shawn: Just to even up for the first nine months of the year was $224.1 million, increasing 5.8% in the prior year and delivering a margin of 7.1%.
Shawn: Interest expense for the nine-month period was $83.5 million. Cash interest expense was $77.8 million, an improvement of $9.3 million compared to the prior period.
Shawn: This demonstrates our continued focus on improving our overall cost of debt and cash interest expense.
Shawn: Year-to-date adjusted diluted EPS was $3.01 based on approximately 32 million weighted average shares.
Shawn: Year-to-date adjusted net cash used by operating activities was $7.2 million, adding back approximately $25 million of M&A and integration costs, and removing the contribution of the Master Accounts Receivable Purchase, or Markup Facility, of $63.3 million.
Shawn: Turn to slide 7.
Shawn: During the quarter we continue to demonstrate progress deleveraging the company and that leverage on a sequential basis improved by a 0.29 turn to 3.27 times.
Shawn: We remain on track to reach a net leverage ratio at or below three times at the end of the year, consistent with our prior commitment.
Shawn: That debt improved by $61 million sequentially, and our liquidity position remains strong with a zero balance and a $500 million revolver at quarter end.
Speaker Change: You've made excellent progress enhancing the capital structure, the cost of our credit facilities, which combined with debt pay down is improving cash flow and earnings. We believe there is additional opportunity to further improve our cost of debt. Please turn to slide 8.
Speaker Change: Total backlog was $12.2 billion in the third quarter.
Speaker Change: Book to Bill in the Corridor was approximately one, and reflects only the initial $225 million startup funding for the Waters program.
Speaker Change: As a reminder, we expect to incrementally book activities associated with this contract as they are transitioned.
Speaker Change: As Jeremy mentioned, we reached full operational capability on the Saudi Arabia Aviation Training Support Services Program. That blog only reflects the initial phase-in of this program, which is modest compared to the approximate $400 million award.
Speaker Change: We've turned to slide nine.
Speaker Change: Given our strong year-to-date top line performance, we are raising the low end of our revenue guidance range to $4,225,000,000 to $4,275,000,000.
Speaker Change: Additionally, we are raising the low end of our adjusted EPS guidance range to $3.95 to $4.20 based on an improvement in our tax rate to 21% from 23%.
Speaker Change: We are reaffirming adjusted EBITDA and adjusted net cash from operating activities.
Speaker Change: We've had an exceptional year-to-date results, and Jeremy outlined some of the optimization efforts and near-term investments that we will build upon our success delivering strong technical capabilities while strengthening business and financial performance.
Speaker Change: C2X is aligned to well-funded areas of the budget and high-priority missions, and we believe our recent wins, backlog, and capabilities will continue to fuel growth and value for our shareholders.
Shawn: We are very pleased with our overall performance, proud of our teams, and well-positioned for the future.
Shawn: Now I'd like to open the call for your questions. Operator?
Speaker Change: We will now begin the question-and-answer session. To ask a question, you may press star and 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2.
Speaker Change: Our first question comes from Tobey Sommer with Truist. Please go ahead.
Tobey Sommer: Thank you.
Tobey Sommer: With the strong contract awards booked to bill and funded backlog growth, I'm curious
Tobey Sommer: What kind of rate of organic growth you think would be reasonable for the company to be able to attain as we get go into next year?
Tobey Sommer: Because the timing of how you're going to be ramping these new awards, you know, we could probably use some color to inform the modeling into 2025.
Shawn: Hey Tobey, this is Shawn. Good to hear from you.
Shawn: So, listen, we're in the middle of doing our planning, as you would expect. I think, obviously, in light of where we are, we're going to grow in 2025. You know, there are, I'll remind folks, we certainly have a couple of headwinds that
Shawn: You know, we're always dealing with, as a program, sunset.
Shawn: We've had an excellent ops tempo and some of our contingency support, logistics support around the globe.
Shawn: So, you know, I don't want to get ahead of things, but obviously we're going to grow. We're feeling good about the backlog, that visibility that it provides, but I don't want to give any numbers right now because we're deep in the middle of that planning with various assumptions.
Shawn: You know, obviously there's things that can change very quickly in terms of where we would expect to be.
Speaker Change: Okay if I could ask you to double-click in the IndoPay.com and how big a slice of the company does that geography represent and maybe could you give us some
Speaker Change: Do you have some color and commentary around incremental opportunities that you talked about?
Speaker Change: Yeah, so, you know, we did a little over 80 million in the quarter in the region. Excellent growth, as you've heard, and that's been a consistent theme, which is great. You know, we do expect to grow there next year. Obviously, there's exercises that are being planned.
Speaker Change: Bye.
Speaker Change: The timing of which and the value of which we don't know, but I think, you know, we saw good growth in Quaj and other places that were positioned, and I think we'll continue to see that as we go forward, but like I said, it's about $80 million in the quarter, and it's consistently built through, you know, the last year or so.
Jeremy Wensinger: Tobey, it's Jeremy. I would add to that that, you know, I think I mentioned in the last call the, you know, the specific deterrence initiative that they funded.
Speaker Change: I think the presence that we have in that area and the overall strategy by our government and our allies in that area.
Speaker Change: afford us opportunities to be in a position to be a recipient of some of those initiatives as they move forward. And like Shawn said, I think, you know, the exercises are one thing, but as they continue to build out their strategy into PACOM, obviously, with a strong presence there, it helps out quite a bit.
Speaker Change: Thanks. Last question for me. I was wondering if you could expand upon the overseas opportunities that you see in maybe
Speaker Change: You could help us narrow the subset of the kinds of things that you could eventually win from our partners around the globe.
Speaker Change: Yeah, I think if you listen to the call, you'll hear me talk about in Europe, expanding opportunities there.
Speaker Change: In terms of assured comms, same thing in the Middle East, same thing in Indo-Pecan, but again, we react to situations as they evolve, like in the Middle East.
Speaker Change: I think there's a long-term strategy in Endo-Paycom that we will be obviously benefiting from. But again, as items evolve in the Middle East, we always see ebbs and flows with regards to that activity.
Speaker Change: And again, obviously in Europe with Ukraine, there is always an opportunity there for us to continue to support our allies.
Speaker Change: Thank you very much.
Speaker Change: Thanks, Tobey.
Speaker Change: And the next question comes from Ken Herbert with RBC Capital Markets. Please go ahead.
Ken Herbert: Hi, good afternoon. Nice results this quarter.
Ken Herbert: Hey, um...
Ken Herbert: Yeah, Shawn or Jeremy, maybe. You had a really nice...
Ken Herbert: sequential step up from the second to third quarter adjusting even the margins can you provide any more sort of color or granularity on maybe what drove that increase and was there anything in terms of one time you know EACs or other benefits that might have contributed to the margin improvement sequentially
Speaker Change: EACs, as you mentioned, and improvements, and the team delivered, consistent with what they've said. So, yeah, we did see...
Speaker Change: You know, a few million dollars, maybe six million dollars or so of EAC improvements on that, you know, in the quarter, and I think it's a testament to the delivery of the products and services at or ahead of schedule to achieve the objectives.
Speaker Change: I think it's Jeremy. I think also...
Speaker Change: The team does an excellent job. They are very good executors. And we implemented early on this quarter the Program Management Executive Committee. That committee is for program managers to share best practices across the globe. And as that continues to take
Speaker Change: It's a maturation path. We're going to continue to see the best program managers of the company sharing those best practices with other program managers and we'll continue to drive continuous improvement.
Speaker Change: Thank you for watching. I'll see you next time.
Speaker Change: That's great, thank you. And Shawn, in your prepared remarks, you made a comment that you could see some...
Speaker Change: There's some options to maybe do more on the leverage or interest in 25. It can perhaps be a little early, but can you talk at all about sort of level set us on where you expect?
Speaker Change: interest, you know, how much more deleveraging should we expect, you know, exiting this year and in 2025 and maybe what some of those options could be as you just think about sort of continuing to clean up the battle sheet.
Speaker Change: Yeah, I think, so the interest today is...
Speaker Change: And so I think we'll look here.
Speaker Change: You know, depending on how how rates are performing, we'll look at maybe the term loan aid.
Speaker Change: to see to see what options exist as we go into.
Speaker Change: 2025. But again, great progress on the part of the team. We recently redid the B that you heard us talk about previously. And so, you know, we're always looking at options and scenarios. We'll see how rates play out and what could be available for us. But feeling good about where we sit today.
Speaker Change: And Sha, just remind us, what's the guidance in terms of fourth quarter leverage in terms of where you expect to end the year?
Speaker Change: Yeah, so at or below three, so 3.27 today, you know, the team did a wonderful job from a receipt standpoint in Q3. We look to continue to do that, to end right around, like I said, at or below three by year end.
Speaker Change: Perfect. Thank you very much.
Speaker Change: Thank you.
Speaker Change: And the next question comes from Peter Arment with Baird. Please go ahead.
Peter Arment: Yeah, good afternoon Jeremy and Shawn. Nice results. Jeremy, you made some comments on the Indo-Paycom region up 31%, really impressive. Middle East, I guess, was up, you know, kind of mid-teens as well. Can you maybe give us a little more color on kind of the operations that you're seeing there, any any changes or any pickup in activity?
Peter Arment: Like I mentioned before, I think at the end of PAYCOM in 2025, we'll know what those exercises look like as the year progresses. It'll probably be closer to mid-year before we know exactly what they're going to do with those.
Peter Arment: exercises
Speaker Change: But again, I think, as I mentioned before, with the Pacific Deterrence Initiative that the government has funded, you'll continue to see efforts flow into that region, and so I'm very happy with the growth we have today.
Speaker Change: I'm excited about the future for that area for us, given the presence we have and capability that we've delivered to that customer.
Speaker Change: I think in the Middle East, that is 100% driven by what you read on the front page of the paper.
Speaker Change: That is a very difficult and dynamic environment there.
Speaker Change: But again, the presence that we have allows us to be quickly reacting to needs that they have, and obviously we have benefited from that in this year thus far.
Speaker Change: But again, it's a very dynamic situation, as you know, and so it would be difficult to say how that's going to play out. But again, I think I go back to, you know, we are part of Enduring Missions.
Speaker Change: Very important that we are shoulder-to-shoulder with our customer, making sure we're there to support them and any initiatives that they have to support the warfighter.
Speaker Change: I don't know it's helpful and then just back to kind of the some of the big awards that you you know booked this quarter in particular the warfighter training readiness contract just you know generally speaking you I think did you if I heard you correctly this should start to ramp up in the second half at 25 is that when does it hit kind of run rate?
Speaker Change: Yeah, I'd say exactly, Peter, the back half of $25 million. The initial booking that we took on the contract was $225 million. That'll really start, like I said, in, call it mid-2020.
Speaker Change: Mid-25 ramp from there, and the team's doing a great job of, you heard Jeremy talk a little bit about other opportunities that exist that the team's evaluating in other nations, so I think feeling really good about the start that the team has on the program and look forward to serving that customer here and delivering exceptional capabilities.
Speaker Change: Yeah, so those will come through in what we call TDLs. We're already putting together...
Speaker Change: PBL offerings for that customer like I referenced but
Speaker Change: The big one will come mid-year, as Shawn said, but I'm very pleased with the team, very pleased with the customer. The cooperation during startup review was extraordinary, and so I'm very confident and comfortable with where that program is as it heads towards full operational capacity.
Speaker Change: That's great. Thanks for all the color and great results.
Speaker Change: Thanks, Trina.
Speaker Change: And the next question comes from Joe Gomes with Noble Capital. Please go ahead.
Speaker Change: Joe Gomes, thanks for taking my questions. Really nice quarter.
Speaker Change: Thanks Joe. Thank you Jeremy.
Joe Gomes: So I wanted to start on the 8% quarterly revenue growth, you know, what percent of that was from, you know, organic growth, expansion of on-contract versus new program performance?
Speaker Change: I'd say it's a mix Joe, right? So certainly the timing of some of the things, you heard us talk a little bit about the full transition on the Saudi job, that certainly contributed growth in the quarter, but by and large it's on contract activities, specifically in, as we said, in both Qajar, I'm sorry, in Indo-Pecan and the Middle East.
Joe: Thank you.
Joe: You know, that's obviously what's driven a lot. We have excellent presence in those in those regions and are able to meet our customers' needs. And so that's really what contributed to a lot of that growth in the quarter.
Joe: OK.
Speaker Change: And one of the markets and geographic areas that was down was the European revenues were down 22% in the quarter, down about 10% year-to-date, and just trying to get a little more color on.
Speaker Change: on what is driving the weakness, at least through the first, you know, couple quarters here in 24 in the European market.
Speaker Change: So there's one program specifically that is down, and it's admittedly a modest number.
Speaker Change: So, you know, I think the important thing is that we maintain a strong presence in Europe.
Speaker Change: The U.S. government. We're excited to be there. It's a long-term contract. That's a lot of ceiling on it. And we will continue to drive performance on that contract. And like I said, it is a key asset for the U.S. government.
Speaker Change: Okay, and then try one other way on 2025. I know it's early and you guys mentioned you're in the process, but if we look at the midpoint of the Revenue Guidance, it suggests revenues would be up 7% year-over-year, 24 over 25.
Speaker Change: I'm wondering, one, can you repeat that type of performance in 2025, and two, if I'm looking at the adjusted EBITDA margin, again, at the midpoint, it's about 7.2%.
Speaker Change: Where do you think that margin could grow to?
Speaker Change: Yeah, for 25 specifically, you're talking? Yes.
Speaker Change: So listen, I don't want to get into absolute values from a top-line standpoint. I'll say, you know, as we're doing our planning, 25 is not different than other years, right? There's always...
Speaker Change: We feel very good about the volume of re-competes we have in there, and I'll remind folks we've said previously...
Speaker Change: It's fairly modest, 5-ish type percent as we go into the year. There's always the timing of what we would call Joe sells from new bookings. And, you know, you heard us talk earlier this year about muted award environments, things like that.
Speaker Change: It's hard to say how some of those things will play out, so I'll stand by what I said earlier which is we will grow in 2025 and we feel good about our positioning.
Speaker Change: Relative to the margin, you know, when I think about 25, I look at the stuff that's in the backlog, you know, I see it probably similar to how we're seeing 2024 from an overall margin stamp. Plus or minus, obviously, right? But, you know, the backlog is strong.
Speaker Change: We have pretty good visibility into those things. We know the recent awards, what we expect them to contribute. I'll remind folks that when we start new contracts, they tend to start at lower margins than where we end up. And so we'll be going through some of that, you know, obviously in 2025.
Speaker Change: Okay, great. Thanks for taking my questions again, really, this quarter.
Speaker Change: Thank you. Thank you.
Speaker Change: And the next question comes from Trevor Walsh with Citizens GMP. Please go ahead.
Trevor Walsh: Great. Thanks, team, for taking the questions. Appreciate the time. On the $5 billion of new awards that you have phasing in that you mentioned,
Speaker Change: F5, Saudi Arabia, aviation support, et cetera. Is there any, I understand they're fully operational. Is there anything kind of heading into 2025 that could be a gotcha around any of those, either in particular or more broadly speaking as to where that revenue might not flow in or things just might not go to plan, whether that's just kind of external forces that we should think about or just to avoid surprises next year?
Speaker Change: Thank you.
Speaker Change: I don't think there's any sitting here right now, Trevor. I don't, I don't.
Speaker Change: I don't see anything that would tell me that, but, you know, listen, obviously it's a dynamic environment, funding priorities, things like that can certainly shift.
Speaker Change: Any time we're dealing with international customers, which we are on the Saudi job, like you just mentioned, things can change. But as we sit here today, there's nothing that I can think of that impacts our line of sight to those backlog programs. I would just add that I think we need to get through tomorrow.
Speaker Change: and find what the sitting president's priorities are.
Speaker Change: But again, I think because we are part of enduring missions that are, you know, mission critical, I don't see any material change to, you know, who sits in the chair. But again, it's always nice to know what their priorities are and making sure they're aligned with, you know, our global footprint.
Speaker Change: Great, terrific, appreciate the color on that. I also noted in one of the slides there was a reference to a pending contract for the F-16 contract cockpit upgrade.
Speaker Change: Just curious if that'll take, obviously it's pending, I get it, so probably can't provide...
Speaker Change: I don't have any specific details yet, but just curious if you can maybe give us a little bit of perspective if it's similar to GMR where it's going to be something kind of a more of an initial kind of smaller footprint of assets and then with a potential to expand or kind of how that how that's shaping up from just kind of a quantity perspective.
Speaker Change: I think it looks a lot like GMR in the sense that, you know, we are moving from the development phase and into a phase where we are going to see an opportunity for that program to grow, obviously. There's a lot of F-16s out there.
Speaker Change: And so I view it as in the same breath, you know, you kind of go through that development phase, you go into LRIP, and then obviously you move it into production. So, again, I'm very bullish about this program. I like the technology. I like what the team at Indy has done. I think they have created an opportunity for our customer that is differentiated.
Speaker Change: And so I'm looking forward to that program as it grows and matures. The only thing I'd add there is, you know, I think as we sit here today, that'll look like an IDIQ contract probably. And so I don't know that you'll see, you know, a huge...
Speaker Change: You know, booking and order straight away, you know, we'll see depending on how many they end up putting on contract, but that's what we're seeing right now.
Speaker Change: Got it, okay, thanks, perfect, super helpful. Last one for me, for Shawn, can you just, maybe you just walk us through your thinking around...
Speaker Change: I appreciate the revenue kind of narrowing up in the upward fashion on the full year guide. And then same for EPS. Understand that there's some interest kind of affecting that EPS or at least putting a, you know, has a good contribution there.
Speaker Change: But notice that the adjusted EBITDA numbers just kind of stayed kind of consistent. So just maybe walk us through kind of the dynamics there and how you're thinking about kind of why that number stayed the same versus the other ones shifting up somewhat.
Speaker Change: Yeah, yeah, so consistent with what we said, we've seen our cost type work, you know, increase throughout the year. So we were at 60% in the quarter.
Speaker Change: You know, obviously, based on what we've experienced, what we have on backlog, that tends to be at a little bit lower margin, and so, you know, you see a lot of that top-line growth coming from some of those types of programs.
Speaker Change: in the guy for the second time this year. And then, you know, we're very happy with the overall program performance. Like I said,
Speaker Change: The productivity that we saw in Q3, we think we're well positioned to meet our commitments here in Q4, but you are seeing some of that mix play out, I'll say, again, consistent with what we thought it would be in the back half of this year.
Speaker Change: Great, thanks, appreciate it.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Jeremy Wensinger for any closing remarks.
Jeremy Wensinger: One, thank you for joining the call. We had a wonderful corner. I'm thrilled with the team. We have great executors running our lines of business in terms of Ken Treves and Vinny Caputo.
Speaker Change: You know, they are great leaders and they're doing a wonderful job in terms of execution. We're focused, obviously, on finishing the year and making our commitments, but again, I'm proud of the team for the quarter they delivered, and I look forward to talking to you again real soon. Operator, back to you.
Speaker Change: The conference has now been concluded. Thank you for attending today's presentation. You may now disconnect.