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What changed in V2X, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of V2X, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+346 added−351 removedSource: 10-K (2025-02-24) vs 10-K (2024-03-05)

Top changes in V2X, Inc.'s 2024 10-K

346 paragraphs added · 351 removed · 258 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

56 edited+33 added−54 removed23 unchanged
Biggest changeThe percentage of our total revenue generated from each contract type for the periods presented was as follows: Year Ended December 31, 2023 2022 2021 Cost-plus and cost-reimbursable 56 % 56 % 71 % Firm-fixed-price 41 % 40 % 25 % Time-and-materials 3 % 4 % 4 % Total revenue 100 % 100 % 100 % Backlog For a discussion of our backlog, see Management’s Discussion and Analysis of Financial Condition and Results of Operations - Backlog in Item 7 of Part II of this Annual Report on Form 10-K . 8 Table of Contents Environmental, Health and Safety We are subject to federal, state, local, and foreign environmental protection laws and regulations, including those governing the management and disposal of hazardous substances, the cleanup of contaminated sites, and the maintenance of a safe and healthy workplace for our employees, contractors, and visitors.
Biggest changeAlthough the overall scope of work required under the contract may not change, profit may be adjusted as experience is gained and as efficiencies are realized or costs are incurred. 7 Table of Contents The percentage of our total revenue generated from each contract type for the periods presented was as follows: Year Ended December 31, 2024 2023 2022 Cost-plus and cost-reimbursable 58 % 56 % 56 % Firm-fixed-price 39 % 41 % 40 % Time-and-materials 3 % 3 % 4 % Total revenue 100 % 100 % 100 % Backlog For a discussion of our backlog, see Management’s Discussion and Analysis of Financial Condition and Results of Operations - Backlog in Item 7 of Part II of this Annual Report on Form 10-K .
On a cost-plus contract, we are paid our allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement, up to funding levels predetermined by our customers. On cost-plus contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts.
On a cost-plus contract, we are paid our allowable incurred costs plus a fee, which can be fixed or variable depending on the contract’s arrangement, up to funding levels predetermined by our customers. On cost-plus contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts.
Shreves served the Company as Senior Vice President, Global Mission Training & Sustainment from July 2022 to January 2024, as Senior Vice President, Organic Growth, Operational Enablement and Supply Chain from November 2021 to July 2022 and as Vice President of Business Development/Capture from October 2017 to November 2021.
Shreves served the Company as Senior Vice President, Global Mission Solutions from January 2024 to November 2024, as Senior Vice President, Global Mission Training & Sustainment from July 2022 to January 2024, as Senior Vice President, Organic Growth, Operational Enablement and Supply Chain from November 2021 to July 2022 and as Vice President of Business Development/Capture from October 2017 to November 2021.
We were the prime contractor on contracts representing 94%, 93% and 93% of our revenue for the three years ended December 31, 2023, 2022, and 2021, respectively. In other contracts, we team with the prime contractor as a subcontractor. The U.S. Congress usually appropriates funds on a fiscal year basis even though a program may extend across several fiscal years.
We were the prime contractor on contracts representing 94%, 94% and 93% of our revenue for the three years ended December 31, 2024, 2023, and 2022, respectively. In other contracts, we team with a prime contractor as a subcontractor. The U.S. Congress usually appropriates funds on a fiscal year basis even though a program may extend across several fiscal years.
We are committed to identifying and developing the talents of our next generation of leaders by providing knowledge to help early-in-career employees develop the skills needed to advance within the organization. We also provide training programs to keep our supervisors current on best practices and ensure they focus on the success of their people.
We are committed to identifying and developing the talents of our next generation of leaders by providing knowledge to help early-in-career employees develop the skills needed to advance within the organization. We also provide development programs to keep our supervisors current on best practices and ensure they focus on the success of their people.
Shreves graduated from the University of Florida where he received a Bachelor of Science degree in Business Administration – Finance, from Central Michigan University with a Master of Science in Administration, and from the National War College, Fort McNair, Washington DC with a Master of Science in National Security Studies. 12 Table of Contents Name Age Current Title(s) Business Experience Michael J.
Shreves graduated from the University of Florida where he received a Bachelor of Science degree in Business Administration – Finance, from Central Michigan University with a Master of Science in Administration, and from the National War College, Fort McNair, Washington DC with a Master of Science in National Security Studies. 11 Table of Contents Name Age Current Title(s) Business Experience Michael J.
Smith 43 Vice President of Treasury, Corporate Development, and Investor Relations Mr. Smith has served as the Company’s Vice President of Treasury, Corporate Development, and Investor Relations since 2014. He is responsible for the Company's inorganic activities, including merger & acquisition strategy and execution, global treasury and capital markets operations, and investor relations.
Smith 44 Corporate Vice President of Treasury, Investor Relations and Corporate Development Mr. Smith has served as the Company’s Corporate Vice President of Treasury, Investor Relations and Corporate Development since 2014. He is responsible for the Company's inorganic activities, including merger & acquisition strategy and execution, global treasury and capital markets operations, and investor relations.
This commitment is codified in our COC and our Supplier Code of Conduct. 10 Table of Contents V2X monitors its subcontractors to verify that they are maintaining compliance with CTIP and other provisions in their contracts.
This commitment is codified in our COC and our Supplier Code of Conduct. 9 Table of Contents V2X monitors its subcontractors to verify that they are maintaining compliance with CTIP and other provisions in their contracts.
To help ensure compliance with these complex laws and regulations, all of our employees are required to complete ethics and other compliance training relevant to their respective positions. 7 Table of Contents We are subject to other U.S. government laws, regulations and policies, including the International Traffic in Arms Regulations, the Export Administration Regulations, the Foreign Corrupt Practices Act and the False Claims Act.
To help ensure compliance with these complex laws and regulations, all of our employees are required to complete ethics and other compliance training relevant to their respective positions. We are subject to other U.S. government laws, regulations and policies, including the International Traffic in Arms Regulations, the Export Administration Regulations, the Foreign Corrupt Practices Act and the False Claims Act.
V2X conducts regularly scheduled audits and inspections of employee housing and transportation, interviews employees hired through our subcontractors, and reviews employment contracts and related documentation to further validate our subcontractors' compliance with FAR 52.222-50 and both country of origin and host nation labor laws.
V2X conducts routine audits and inspections of employee housing and transportation, interviews employees hired through our subcontractors, and reviews employment contracts and related documentation to further validate our subcontractors' compliance with FAR 52.222-50 and both country of origin and host nation labor laws.
Combating Trafficking in Persons (CTIP) and OCN Compliance V2X recognizes the risks of child labor, human trafficking and modern slavery associated with its global contracting activities and is committed to complying with internationally recognized human rights provisions and prohibitions against human trafficking and modern slavery established under the FAR CTIP and the laws and regulations of the countries in which it conducts business.
Combating Trafficking in Persons (CTIP) and Other Country National Compliance V2X recognizes the risks of child labor, human trafficking and modern slavery associated with its global contracting activities and is committed to complying with internationally recognized human rights provisions and prohibitions against human trafficking and modern slavery established under the FAR CTIP and the laws and regulations of the countries in which it conducts business.
V2X quickly investigates reported or suspected CTIP violations, which if verified, are reported immediately to our Senior Vice President, General Counsel, Chief Legal Officer and Secretary and the appropriate United States Government (USG) and program authorities. V2X requires that corrective actions (CA) be put in place by subcontractors or employees for confirmed CTIP violations.
V2X quickly investigates reported or suspected CTIP violations, which if verified, are reported immediately to our Senior Vice President, General Counsel and the appropriate United States Government (USG) and program authorities. V2X requires that corrective actions (CA) be put in place by subcontractors or employees for confirmed CTIP violations.
Learning and Development We provide learning and development opportunities to our employees to support a successful career at V2X. Our on-line V2X University gives employees access to more than 2,000 virtual courses that address such topics as leadership/management and information technology skills, along with the standard required compliance courses required for a defense contractor company.
Learning and Development We provide learning and development opportunities to our employees to support a successful career at V2X. Our on-line V2X University gives employees access to more than 4,000 virtual courses that address such topics as leadership/management and information technology skills, along with organizational and compliance courses required for a defense contractor.
He is responsible for base operations; logistics; high consequence training; aerospace and defense; modernization and sustainment and the national security program businesses as well as top and bottom line organic growth, strategy, and operational efficiency. Mr.
He is responsible for base operations; logistics; high consequence training; and the national security program businesses as well as top and bottom line organic growth, strategy, and operational efficiency. Mr.
Shreves served in the United States Army as a logistics officer, retiring after twenty-eight years, having commanded at every level through Brigade Command and culminating as the Army Chair at the National War College in Washington DC. Mr.
Prior to his commercial career, Mr. Shreves served in the United States Army as a logistics officer, retiring after twenty-eight years, having commanded at every level through Brigade Command and culminating as the Army Chair at the National War College in Washington DC. Mr.
Additionally, V2X maintains an active CTIP awareness campaign at each program location, to reinforce our protection of human rights and to empower all employees to confidently report suspected violations without fear of retaliation.
Additionally, V2X maintains an active CTIP awareness campaign at our Outside the Continental United States program location, to reinforce our protection of human rights and to empower all employees to confidently report suspected violations without fear of retaliation.
Responses to the 2023 employee engagement surveys indicated that V2X employees generally find the company culture to be inclusive, a great place to work, and that managers’ behaviors were consistent with the V2X Code of Conduct.
Responses to the 2024 employee engagement surveys indicated that V2X employees generally find the company culture to be collaborative of all perspectives, a great place to work, and that managers’ behaviors were consistent with the V2X Code of Conduct.
ITEM 1. BUSINESS Overview V2X , Inc. (V2X or the Company), an Indiana Corporation, formerly known as Vectrus, Inc. (Vectrus), is a leading provider of critical mission solutions primarily to defense clients in 322 locations and 51 countries and territories worldwide.
ITEM 1. BUSINESS Overview V2X , Inc. (V2X or the Company), an Indiana Corporation formed in February 2014, formerly known as Vectrus, Inc. (Vectrus), is a leading provider of critical mission solutions primarily to defense customers in 329 locations and 47 countries and territories worldwide.
Information about our Executive Officers The following table sets forth certain information regarding our executive officers, including a five-year employment history and any directorships held in public companies. Name Age Current Title(s) Business Experience Charles L. Prow 64 President and Chief Executive Officer (CEO), Director Mr. Prow has served as President, CEO and director of the Company since December 2016.
Information about our Executive Officers The following table sets forth certain information regarding our executive officers, including a five-year employment history and any directorships held in public companies. Name Age Current Title(s) Business Experience Jeremy C. Wensinger 61 President and Chief Executive Officer (CEO), Director Mr. Wensinger has served as President, CEO and director of the Company since June 2024.
Among other things, these laws and regulations: • Require compliance with government standards for contract administration, accounting and management internal control systems; • Define allowable and unallowable costs and otherwise govern our right to reimbursement under various flexibly priced U.S. government contracts; • Require certification and disclosure of cost and pricing data in connection with certain contract negotiations; • Require us not to compete for, or to divest ourselves of, work if an organizational conflict of interest exists related to such work that cannot be appropriately mitigated; and • Restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
Among other things, these laws and regulations: • Require compliance with government standards for contract administration, accounting and management internal control systems; • Define allowable and unallowable costs and otherwise govern our right to reimbursement under various flexibly priced U.S. government contracts; • Require certification and disclosure of cost and pricing data in connection with certain contract negotiations; • Require us not to compete for, or to divest ourselves of, work if an organizational conflict of interest exists related to such work that cannot be appropriately mitigated; and • Restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data. 6 Table of Contents U.S. government contracts generally are subject to the Federal Acquisition Regulation (FAR), which sets forth policies, procedures and requirements for the acquisition of goods and services by the U.S. government, agency-specific regulations that implement or supplement FAR, such as the DoD’s Federal Acquisition Regulation Supplement (DFARS), and other applicable laws and regulations.
There are typically fewer competitors in the overseas market for each of our services capabilities and they vary from region to region . 6 Table of Contents The U.S. government has implemented policies designed to protect small businesses and under-represented minority contractors.
There are typically fewer competitors in the overseas market for each of our services capabilities and they vary from region to region. The U.S. government has implemented policies designed to protect small businesses and under-represented minority contractors. From time to time, certain U.S. government work in the U.S. has been restricted to small businesses, including Alaskan native companies.
Revenue, primarily from U.S. government customers, for the periods presented below was as follows: Year Ended December 31, (In thousands) 2023 2022 2021 Army $ 1,633,525 $ 1,342,406 $ 1,134,849 Navy 1,233,463 713,732 224,407 Air Force 538,698 459,849 266,291 Other 557,440 374,873 158,118 Total revenue $ 3,963,126 $ 2,890,860 $ 1,783,665 5 Table of Contents Representative customer services contracts include the following: • The Logistics Civil Augmentation Program V (LOGCAP V) indefinite delivery and indefinite quantity (IDIQ) contract.
Revenue, primarily from U.S. government customers, for the periods presented below was as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Army $ 1,837,843 $ 1,633,525 $ 1,342,406 Navy 1,441,355 1,233,463 713,732 Air Force 481,265 538,698 459,849 Other 561,692 557,440 374,873 Total revenue $ 4,322,155 $ 3,963,126 $ 2,890,860 5 Table of Contents Key customer contracts include the following: • The Logistics Civil Augmentation Program V (LOGCAP V) indefinite delivery and indefinite quantity (IDIQ) contract.
In the ordinary course of business, a number of collective bargaining agreements will be subject to renegotiation in a given year. We do not expect that any of the contracts subject to renegotiation in 2024 (individually or as a whole) present a significant risk to our business. We believe that relations with our employees and union representatives are positive.
We do not expect that any of the contracts subject to renegotiation in 2025 (individually or as a whole) present a significant risk to our business. We believe that relations with our employees and union representatives are positive.
Regulatory Environment The U.S. government markets in which we serve are highly regulated. When working with U.S. agencies and entities, we are subject to laws and regulations relating to the creation, administration and performance of contracts.
When working with U.S. agencies and entities, we are subject to laws and regulations relating to the creation, administration and performance of contracts.
The U.S. government's fiscal year ends on September 30 of each year. While not certain, it is not uncommon for U.S. government agencies to award extra tasks or complete other contract actions in the weeks before the end of its fiscal year in order to avoid the loss of unexpended fiscal year funds.
While not certain, it is not uncommon for U.S. government agencies to award extra tasks or complete other contract actions in the weeks before the end of its fiscal year in order to avoid the loss of unexpended fiscal year funds. Regulatory Environment The U.S. government markets in which we serve are highly regulated.
Mural was with Raytheon and RTX for 24 years, has more than two decades of executive experience in the aerospace and defense industry, and has served in a number of financial and policy leadership roles. Mr.
Mural worked in various capacities at RTX Corporation and its subsidiaries (RTX), including as Vice President of Finance and Chief Financial Officer of Raytheon. Mr. Mural was with Raytheon and RTX for 24 years, has more than two decades of executive experience in the aerospace and defense industry, and has served in a number of financial and policy leadership roles.
We differentiate ourselves through vertically integrated organic engineering, supply chain management, manufacturing, rapid prototyping and dedicated facilities including FAA Part 145 Repair Stations, and over 900,000 square feet of engineering, lab, manufacturing and repair and overhaul space. Comprehensive in-house testing capabilities including cyber, E 3 , environmental, AR/VR and development labs reside under one roof at our Indianapolis, Indiana facility.
With vertically integrated capabilities—including organic engineering, supply chain management, manufacturing, rapid prototyping, and FAA Part 145 Repair Stations—our operations span over 1,000,000 square feet of engineering, lab, manufacturing, and repair space. Comprehensive in-house testing, including cyber, E3, environmental, AR/VR, and development labs, is consolidated at our Indianapolis, Indiana facility.
Human Capital Management We believe our employees are among our most important resources and are critical to our continued success. On December 31, 2023, we employed approximately 16,000 full-time employees. We also utilized approximately 6,200 subcontract workers . As of December 31, 2023, approximat ely 30% of our employees were represented by 46 collective bargaining agreements with labor unions .
Human Capital Management We believe our employees are among our most important resources and are critical to our continued success. As of December 31, 2024, we employed approximately 16,100 full-time employees. We also utilized approximately 6,200 subcontract workers .
He is responsible for all finance and accounting functions, including controllership, finance operations, planning, tax, treasury, investor relations, and corporate development. Prior to joining the Company, Mr. Mural worked in various capacities at RTX Corporation and its subsidiaries (“RTX”), including as Vice President of Finance and Chief Financial Officer of Raytheon. Mr.
Mural has served as Senior Vice President and Chief Financial Officer since October 2023. He is responsible for all finance and accounting functions, including controllership, finance operations, planning, tax, treasury, investor relations, and corporate development. Prior to joining the Company, Mr.
However, various factors may affect the distribution of our revenue between accounting periods, including the timing of awards, product deliveries, customer acceptance of products and services, contract phase-in durations, contract completions, world events and the availability of customer funding. Weather and natural phenomena may also temporarily affect the performance of our services.
Seasonality Various factors may affect the distribution of our revenue between accounting periods, including the timing of awards, product deliveries, customer acceptance of products and services, contract phase-in durations, contract completions, world events and the availability of customer funding. The U.S. government's fiscal year ends on September 30 of each year.
Mural graduated from Canisius University where he received a Bachelor’s degree and from the University of Texas at Dallas with a Masters of Business Administration. Jo Ann Bjornson 48 Senior Vice President and Chief Human Resources Officer Ms. Bjornson has served as Senior Vice President and Chief Human Resources Officer since June 2023.
Mr. Mural graduated from Canisius University where he received a Bachelor’s degree and from the University of Texas at Dallas with a Masters of Business Administration. L. Roger Mason, Jr. 59 Senior Vice President and Chief Growth Officer Roger Mason has served as the Chief Growth Officer since January 2025.
The information provided on our website is not part of this report, and is therefore not incorporated by reference, unless such information is otherwise specifically referenced elsewhere in this report. Our reports filed with the SEC also may be found on the SEC's website at www.sec.gov.
Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the SEC. The information provided on our website is not part of this report, and is therefore not incorporated by reference, unless such information is otherwise specifically referenced elsewhere in this report.
Also, we offer additional development opportunities to select employees to attend training and mentoring sessions. Developing talent and ensuring a pipeline to leadership is a priority for the Company. To that end, the Company has a robust talent and succession planning process and has established a specialized program to support the development of our talent pipeline for critical roles.
Also, we offer additional development opportunities to select employees to attend learning and development, and mentoring sessions. Developing talent and ensuring a pipeline to leadership is a priority for the Company.
Smith is a CFA® charterholder and graduated from the University of South Florida where he received a Bachelor’s degree with a major in finance and a minor in economics. Available Information Our principal executive offices are located at 7901 Jones Branch Drive, McLean, Virginia, 22102. Our telephone number i s (571) 481-2000 and our website add ress is www.goV2X.com.
Smith is a CFA® charterholder and graduated from the University of South Florida where he received a Bachelor’s degree with a major in finance and a minor in economics. Available Information Our principal executive offices are located at 1875 Campus Commons Drive, Suite 305, Reston, Virginia, 20191.
In addition, we rely on our teaming relationships with other prime contractors and subcontractors for large procurements or other opportunities where we believe the combination of services will help us win and perform the contract. Our competitors may consolidate or establish teaming or other relationships among themselves or with third parties to increase their ability to address customers’ needs.
We participate with these small businesses as a subcontractor for select opportunities. In addition, we rely on our teaming relationships with other prime contractors and subcontractors for large procurements or other opportunities where we believe the combination of services will help us win and perform the contract.
Unless the context otherwise requires or unless stated otherwise, references to "V2X", "we," "us," "our," “combined company”, "the Company" and "our Company" refer to V2X and all of its consolidated subsidiaries. Our Business Strategies Our goal is to be a leader in the operational segment of the broader Federal services market.
We continue to operate under one reportable business segment post-Merger. Unless the context otherwise requires or unless stated otherwise, references to "V2X", "we," "us," "our," “combined company”, "the Company" and "our Company" refer to V2X and all of its consolidated subsidiaries.
These contracts offer awards to a pool of contractors, followed by competition within the pool for individual programs via task orders under each IDIQ over the period of performance. The period of performance under IDIQ contracts follows a traditional three-to-ten-year performance cycle. The governing IDIQ contracts often have multi-billion-dollar ceiling values.
Some U.S. government customers have shown a preference for multiple award IDIQ contracts. These contracts offer awards to a pool of contractors, followed by competition within the pool for individual programs via task orders under each IDIQ over the period of performance.
Our principal competitors in Aerospace Solutions include Amentum, IAP Worldwide Services, AAR, M-1 Support Services, Jacobs Technology, Marvin Engineering, divisions of Leidos Holdings, divisions of Northrop Grumman Services, and Akima Logistics Services, among others. Our principal competitors in Technology Solutions include divisions of Leidos Holdings, Inc., Science Applications International Corporation (SAIC), Peraton, and General Dynamics (GD) Technologies Segment.
Our principal competitors include Amentum Holdings, Inc., Valiant Integrated Services, divisions of Leidos Holdings, Inc., Science Applications International Corp., General Dynamics Corporation Technologies Segment., KBR, Inc., Fluor Corporation, Intrepid Global Solutions, AAR Corp., M1 Support Services, L.P., Marvin Engineering Co., and divisions of Northrop Grumman Corporation, among others.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports are available on our website as soon as reasonably practicable after electronically filed with the Securities and Exchange Commission (SEC). Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the SEC.
Our telephone number i s (571) 481-2000 and our website add ress is www.goV2X.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports are available on our website, without charge, as soon as reasonably practicable after electronically filed with the Securities and Exchange Commission (SEC).
Annually, ERGs evaluate their performance against these goals and report them to the DE&I Executive Council, which in turn reports at least annually to our Board of Directors. 9 Table of Contents We are a leading employer of veterans and veteran spouses with more than 48% of our U.S. employees voluntarily reporting a military background, and we have been recognized numerous times in recent years by veteran-focused organizations as a military-friendly employer, including by the National Organization on Disability as a Leading Disability Employer, by the Military Friendly Company as a Top 10 Diversity Supplier and as a Top 10 Military Spouse Employer, and by the Military Times as a Best for Vets Employer.
Culture and Engagement V2X remains committed to building and implementing global strategies which foster leadership and talent capabilities that will increase culture and engagement opportunities in attracting, retaining and leveraging competencies of our diverse workforce. 8 Table of Contents We are a leading employer of veterans and veteran spouses with more than 38% of our U.S. employees voluntarily reporting a military background, and we have been recognized numerous times in recent years by veteran-focused organizations as a military-friendly employer, including by the National Organization on Disability as a Leading Disability Employer, by the Military Friendly Company as a Top 10 Diversity Supplier and as a Top 10 Military Spouse Employer, and by the Military Times as a Best for Vets Employer.
Acquisition cycles are long (generally 12 to 24 months), and contracts are typically multi-year contracts that include an initial period of one-year or less with annual one-year (or less) option periods for the remaining contract period. Some U.S. government customers have shown a strong preference for multiple award IDIQ contracts.
While not every contract is procured via selection of the lowest priced bidder, customers are sensitive to cost based on their budget allocations. Acquisition cycles are long (generally 12 to 24 months), and contracts are typically multi-year contracts that include an initial period of one-year or less with annual one-year (or less) option periods for the remaining contract period.
Training Solutions: We deliver full life cycle innovative training solutions to government clients worldwide. We improve client outcomes through a holistic approach that packages training solutions with our Operations and Logistics Solutions ensuring readiness while at home station or while deployed.
V2X operates across 329 locations in 47 countries and territories, and our key service offerings include: High Impact Readiness: We deliver full life-cycle, innovative training solutions to government clients worldwide, improving outcomes through a holistic approach that combines training solutions with our Mission Solutions to ensure readiness both at home station and while deployed.
We also provide commercial training to both large U.S. companies and to foreign governments that leverage state of the art remote learning platforms.
We also provide military and commercial training solutions, including live training systems, technology-enabled augmented and virtual reality, and training aids, devices, simulators, and simulations, to large United States (U.S.) companies and foreign governments using state-of-the-art remote learning platforms.
The results of those surveys are anonymized and shared with V2X employees and with management. Additionally, the results of the surveys are scored to form a benchmark against which the results of future surveys will be evaluated.
The results of these confidential surveys are shared with V2X employees and with management. Additionally, the results of the surveys are scored to form a benchmark against which the results of future surveys will be evaluated. In 2024, V2X engaged our global workforce through structured surveys using a third-party platform to better understand concerns and expectations regarding ethics, and culture.
We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
Our reports filed with the SEC also may be found on the SEC's website at www.sec.gov. We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
The Merger created a larger and more diversified company with the ability to compete for more integrated business opportunities and generate revenue across geographies, clients, and contract-types. We continue to operate under one reportable business segment post-Merger.
For a description of the Merger, see Note 3, Merger in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K . The Merger created a larger and more diversified company with the ability to compete for more integrated business opportunities and generate revenue across geographies, clients, and contract-types.
Competitive bids for the work that V2X pursues are based on technical qualifications and corporate experience in performing contracts of similar size and scope and can be highly price sensitive. While not every contract is procured via selection of the lowest priced bidder, customers are sensitive to cost based on their budget allocations.
Our competitors may consolidate or establish teaming or other relationships among themselves or with third parties to increase their ability to address customers’ needs. Competitive bids for the work that V2X pursues are based on technical qualifications and corporate experience in performing contracts of similar size and scope and can be highly price sensitive.
Whether it is designing synthetic training environments, providing subject matter experts and trainers at the National Training Center in the U.S. or the Joint Multinational Readiness Center in Germany, our team is deployed with our clients and ensures they are ready to execute their mission set when called upon.
At the same facilities where we provide these operational solutions, we offer cutting-edge training to prepare the Warfighter for their mission. Whether designing synthetic training environments or providing subject matter experts, our team is deployed with our customers to ensure they are ready to execute the mission when called upon.
Operations and Logistics: Our capabilities provide government clients with full spectrum support for logistics, infrastructure sustainment and contingency operations, wherever needed. We differentiate ourselves by providing infrastructure operations and sustainment for fixed facilities worldwide that focuses on preventative, predictive and reliability-centered maintenance to deliver the greatest readiness at the lowest cost.
We differentiate ourselves by offering infrastructure operations and sustainment for fixed facilities worldwide, focusing on preventative, predictive, and reliability-centered maintenance to achieve readiness at the lowest cost. Once deployed, we are on the ground in theater to ensure customers receive logistical support.
We conduct periodic reviews of succession plans and the individual development plans of our emerging talent. These sessions focus on high potential talent, diverse talent, and the succession for our most critical roles, and are led by our Chief Human Resource Officer and our executive leadership team.
These sessions focus on high potential talent, diverse talent, and the succession for our most critical roles. We periodically hold senior leadership development events to continually develop leadership and management skills.
Ethics and Compliance All employees must adhere to the V2X Code of Conduct (COC) that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination, unethical behaviors, and unacceptable conduct.
This includes mandatory annual training on preventing, identifying, reporting, and stopping any form of unlawful discrimination, unethical behavior, and unacceptable conduct. The V2X COC, along with the incorporated standards of business conduct and ethics, applies to all employees, officers, and directors of V2X. The COC can be accessed via our website (www.goV2X.com) on the Governance Documents page.
Our global footprint and ability to deliver full lifecycle converged solutions across the world enables us to support the success of our clients' missions rapidly and with precision. As of December 31, 2023, we had approximately 16,000 employees and 6,200 subcontract personnel.
V2X enables its customers' most important missions by delivering end-to-end capabilities at scale across the world. This provides us with the expertise and ability to act as a trusted partner to bring differentiated integrated solutions that define mission success. As of December 31, 2024, we had approximately 16,100 employees and 6,200 subcontract personnel.
Bjornson graduated from the University of Virginia where she received a Bachelor's degree, from Marymount University with a Master’s degree in HR Management, and from the Robert H. Smith School of Business at the University of Maryland with an Executive MBA. 11 Table of Contents Name Age Current Title(s) Business Experience Kevin T.
Mason graduated from George Washington University where he received a Bachelor’s degree in physics, from the Kellogg School at Northwestern University with a Masters of Business Administration and from the University of Virginia where he earned a Ph.D. in Engineering Physics. 10 Table of Contents Name Age Current Title(s) Business Experience Richard "Vinny" Caputo 60 Senior Vice President, Aerospace Systems Mr.
More than 550 multi-disciplined engineers provide critical development, integration, production, repair and overhaul and sustainment expertise to contracts ranging from situational awareness products to production of missile launchers to repair and overhaul of tactical aircraft radar systems and components.
Supporting approximately 1,690 aircraft, our teams deliver full-spectrum maintenance from flight line to depot with a focus on safety and quality. Backed by multi-disciplined engineers, we specialize in development, integration, production, repair, and sustainment, covering situational awareness products, missile launchers, and tactical aircraft radar systems and components.
LOGCAP V augments theater sustainment, engineering, and base operations support forces with a capability that can rapidly respond to multiple global contingency and non-contingency missions across the entire continuum of military operations. V2X is one of four award recipients of the basic IDIQ contract and supports two geographic combatant commands, CENTCOM and INDOPACOM.
LOGCAP V provides scalability and flexibility that aligns with and supports military operational tempo. LOGCAP V is used by Army Service Component Commands to rapidly respond to multiple global missions across the entire continuum of military operations.
Prow graduated from Northwest Missouri State University where he received a Bachelor of Science degree in Management and Data Processing. Shawn Mural 53 Senior Vice President and Chief Financial Officer (CFO) Mr. Mural has served as Senior Vice President and Chief Financial Officer since October 2023.
Wensinger graduated from Bowling Green State University where he received Bachelor’s degree and from University of South Florida with a Masters of Business Administration and completed The General Managers Program at the Harvard Business School. Shawn M. Mural 54 Senior Vice President and Chief Financial Officer (CFO) Mr.
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V2X offers clients around the world a broad suite of technology and services capabilities to support readiness and modernization initiatives. The Company delivers a comprehensive set 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.
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The Company offers a broad suite of capabilities including multi-domain high impact readiness, integrated supply chain management, assured communications, mission solutions, and platform renewal and modernization to national security, defense, civilian and international customers. On July 5, 2022 (the Closing Date), Vectrus completed its merger (Merger) with Vertex Aerospace Services Holding Corp., a Delaware corporation (Vertex), thereby forming V2X .
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Vectrus was incorporated in the State of Indiana in February 2014. On September 27, 2014, Exelis Inc, an Indiana corporation, spun-off (the Spin-off) Vectrus and Vectrus became an independent, publicly traded company. References herein to "Exelis" or "Former Parent" refer to Exelis Inc. and its consolidated subsidiaries (other than Vectrus).
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Our Business Strategies Our overarching strategy is to deliver full lifecycle capabilities in support of national security priorities that enhance mission effectiveness, extend utility, lower cost, and improve security and mission outcomes. Our k ey to enabling this strategy are: • Drive performance excellence in execution: V2X delivers operational excellence by maintaining high standards of quality, efficiency, and reliability.
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Exelis was acquired by a predecessor entity of L3Harris Technologies, Inc. in May 2015. On July 5, 2022 (the Closing Date), Vectrus completed its merger (Merger) with Vertex Aerospace Services Holding Corp., a Delaware corporation (Vertex), thereby forming V2X . For a description of the Merger, see Note 3, Merger .
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Our approach increases the likelihood projects are completed on time and within budget, exceeding customer expectations. • Leverage innovation for differentiated solutions: V2X integrates technologies like 5G and advanced simulation systems to create solutions that address evolving threats and mission requirements.
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The execution of our strategic framework, which consists of the following business strategies: Expand the Base, Capture New Markets, Deliver with Excellence, and Enhance Culture supports achievement of this goal. Key components of these strategies include: • Expand the Base.
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We foster a culture of continuous innovation that provides our customers with capabilities that give them a decisive edge. • Expand global presence and markets: With a footprint spanning six continents , V2X is focused on growing our reach in emerging markets, expanding partnerships, and extending our expertise into new domains. • Build on our culture of mission success: Rooted in our commitment to national security, V2X encourages a spirit that empowers our employees to deliver results.
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We strive to enhance our business by strengthening our methods and approaches to deliver higher value, high-impact services to our clients, while growing our strong foundation in our core capabilities across the mission lifecycle.
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Through a focus on teamwork, integrity, and customer trust, we operate in an environment where every team member is dedicated to the success of our customers and the safety of those we serve. Our Service Offerings V2X is a leading national security solutions provider.
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The expansion of scope on existing business, execution of our solution sell-through model, and client engagement initiatives are key components of this strategy. • Capture New Markets. We are focused on creating a higher-value, technology-enabled and differentiated platform by strengthening our technology competencies and fusing the physical and digital aspects of our clients' missions.
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We provide customers worldwide with a broad range of technology and service capabilities, supporting national security readiness and modernization efforts.
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This strategy focuses on capturing new markets, organically and inorganically, introducing new clients, new capabilities, and new products / solutions, as well as international client expansion and targeted growth campaigns that leverage our strong foundation in aerospace solutions, advanced technology, and global mission training and sustainment.
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Integrated Supply Chain Management: Our Integrated Supply Chain Management capabilities include rapid response and deployment at scale, Supply Chain as a Service, smart warehouse management and distribution, and integrated and automated logistics, ensuring efficient and seamless operations. 4 Table of Contents Assured Communications : Our Assured Communications capabilities include full lifecycle network management, network systems installation and activation, and information assurance.
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Additionally, we plan to build off of V2X’s enhanced capability set that includes rapid prototyping, platform modernization, 5G, predictive maintenance, software development, cyber asset hardening, and virtual reality training solutions to access new business opportunities, funding streams, and markets that are expected to drive incremental growth. • Deliver with Excellence.
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In the area of situational awareness software and hardware, we specialize in deploying, integrating, and maintaining sensors and complex systems in austere environments. With unmatched expertise, we deliver tailored technologies to meet unique mission requirements, ensuring outcomes and mission effectiveness. Our services include system upgrades, obsolescence management, and DevSecOps to extend service life and enhance performance.
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Our initiatives focused on delivery excellence are designed to improve client relationships and improve business performance. As part of this strategy, we are standardizing, improving, and automating our core operational capabilities through enterprise systems excellence, as well as technology insertion and enablement.
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We design, integrate, and install multi-sensor systems for border security and critical infrastructure protection worldwide. Additionally, we provide expertise in spectrum deconfliction, digital integration, Smart X engineering, and 5G development. Mission Solutions: Our capabilities provide customers with full-spectrum support for logistics, infrastructure sustainment, and contingency operations around the globe.
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For example, we are leveraging our enhanced scale and footprint to further enable global supply chain as a core competency. This core competency is expected to drive efficiencies to both external clients and our core internal operations. Additionally, we incorporate continuous improvement and delivery excellence processes throughout all aspects of our business.
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Our team of professionals delivers worldwide support, critical infrastructure and logistics for intelligence operations, classified IT, intelligence services, and cybersecurity. Our expertise includes infrastructure engineering, operations and maintenance; life support and emergency services; airfield management; civil engineering; and integrated electronic surveillance. Platform Renewal and Modernization: We provide the engineering, facilities, and skilled workforce required to sustain systems and platforms worldwide.
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Our initiatives, processes, and technology within Delivery Excellence also integrate into our Expand the Base, Capture New Markets, and Enhance Culture strategies, which further drives value creation and differentiation. • Enhance Culture. Our culture is foundational in our ability to connect people, technology, and capabilities globally across the mission lifecycle.
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Our capabilities include Aircraft Maintenance & Management; Aviation and Ground Platform Maintenance & Repair; End-to-End Organizational, Intermediate, and Depot-Level Capabilities; four FAA Part 145 Repair Stations; and an AS-9100/9110 Certified Quality Management System (QMS).
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Our ethical culture and people are the foundation for providing long-term value to our stakeholders. We strive to support our people to ensure they can bring their best selves to work. We will continue to build and leverage an inclusive business environment by developing leadership competency, increasing employee engagement, and building organizational capacity.
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V2X is one of four award recipients of the basic IDIQ contract and has several task orders, including the Kuwait Task Order, Iraq Task Order, INDOPACOM Task Order, among others. ◦ Naval Test Wing Atlantic (NTWL).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe use estimates in accounting for many of our programs, and changes in our estimates could adversely affect our future financial results. Revenue from our contracts is recognized primarily using the input method (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress towards completion.
Biggest changeWe recognize revenue from our contracts primarily using the input method (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress towards completion. This methodology requires estimates of total contract revenue, total costs at completion, and fees earned on the contract. Contract estimates are based on various assumptions to project the outcome of future events.
Our earnings and margins may vary based on the mix of our contracts, our performance, and our ability to control costs. We generate revenue under various types of contracts, which include cost-plus, cost-reimbursable (including non-fee-bearing costs), firm-fixed-price and time-and-materials.
Our earnings and margins may vary based on our performance, the mix of our contracts, and our ability to control costs. We generate revenue under various types of contracts, which include cost-plus, cost-reimbursable (including non-fee-bearing costs), firm-fixed-price and time-and-materials.
If our insurance and other risk mitigation mechanisms are not sufficient to recover all costs, including loss of revenue from sales to customers, we could experience a material adverse effect on our financial position and results of operations. There is also an increasing concern over the risks of climate change and related environmental sustainability matters.
If our insurance and other risk mitigation mechanisms are not sufficient to recover all costs, including loss of revenue from sales to customers, we could experience a material adverse effect on our financial position and results of operations. There is also an increasing concern over the risks of climate-related change and related environmental sustainability matters.
Past business practices at companies that we have acquired may also expose us to future unknown environmental, health and safety liabilities. We are subject to laws and regulations related to climate change. The State of California has enacted new climate change disclosure requirements, including emissions requirements.
Past business practices at companies that we have acquired may also expose us to future unknown environmental, health and safety liabilities. We are subject to laws and regulations related to climate-related change. The State of California has enacted new climate change disclosure requirements, including emissions requirements.
We are subject to federal, state, local, and foreign environmental, health and safety laws and regulations, including those governing: climate change; air emissions; discharges to water; the management, storage, transportation and disposal of hazardous wastes, petroleum, and other regulated substances; the investigation and cleanup of contaminated property; and the maintenance of a safe and healthy workplace for our employees, contractors, and visitors.
We are subject to federal, state, local, and foreign environmental, health and safety laws and regulations, including those governing: climate-related change; air emissions; discharges to water; the management, storage, transportation and disposal of hazardous wastes, petroleum, and other regulated substances; the investigation and cleanup of contaminated property; and the maintenance of a safe and healthy workplace for our employees, contractors, and visitors.
As a result, our failure to maintain adequate safety standards and equipment, as well as the nature of the environment in which we conduct business, could result in employee deaths or injuries, environmental disasters, reduced profitability, or the loss of projects or customers, any of which could have a material adverse impact on our business, financial condition, results of operations and reputation.
As a result, our failure to maintain adequate safety standards and equipment, as well as the nature of the environment in which we conduct business, could result in employee exposures, injuries, or deaths, environmental disasters, reduced profitability, or the loss of projects or customers, any of which could have a material adverse impact on our business, financial condition, results of operations and reputation.
The market price of our common stock has been, and is likely to continue to be, highly volatile due to a number of factors, including the volatility of the stock market in general, uncertainty related to major contract awards, the budgetary and political climate, and overall trading liquidity.
Our stock price may be volatile. The market price of our common stock has been, and is likely to continue to be, highly volatile due to a number of factors, including the volatility of the stock market in general, uncertainty related to major contract awards, the budgetary and political climate, and overall trading liquidity.
If our partners do not meet their contractual obligations, the joint venture may be unable to adequately perform and deliver its contracted services, requiring us to make additional investments or perform additional services to ensure the adequate performance and delivery of services to the customer.
If our partners do not meet their contractual obligations, the joint venture or partnership may be unable to adequately perform and deliver its contracted services, requiring us to make additional investments or perform additional services to ensure the adequate performance and delivery of services to the customer.
Failure to maintain safe work sites and equipment or effectively respond to the impacts of pandemics in our workplaces could result in employee deaths or injuries, environmental disasters, reduced profitability, the loss of projects or customers and possible exposure to litigation.
Failure to maintain safe work sites and equipment or effectively respond to the impacts of pandemics in our workplaces could result in employee exposures, injuries, or deaths, environmental disasters, reduced profitability, the loss of projects or customers and possible exposure to litigation.
Our success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers. We design and develop technologically advanced and innovative products and services applied by our customers in various environments.
Our success depends, in part, on our ability to work with and manage complex and rapidly changing technologies to meet the needs of our customers. We design and develop technologically advanced and innovative products and services applied by our customers in various environments.
Although we have implemented policies, procedures, controls and training that are designed to prevent and detect these activities, these precautions may not prevent all misconduct and as a result, we could face unknown risks or losses.
Although we have implemented internal policies, procedures, controls and training that are designed to prevent and detect these activities, these precautions may not prevent all misconduct and as a result, we could face unknown risks or losses.
This competitive bidding process presents a number of risks, including the following: • We may bid on programs for which the work activities, deliverables, and timelines are vague or for which the solicitation incompletely describes the actual work, which may result in inaccurate pricing assumptions; • We may incur substantial costs and spend a significant amount of managerial time and effort preparing bids and proposals; and • We may realize the lost opportunity cost of not bidding on and winning other contracts that we may have pursued otherwise.
This competitive bidding process presents several risks, including the following: • We may bid on programs for which the work activities, deliverables, and timelines are vague or for which the solicitation incompletely describes the actual work, which may result in inaccurate pricing assumptions; • We may incur substantial costs and spend a significant amount of managerial time and effort preparing bids and proposals; and • We may realize the lost opportunity cost of not bidding on and winning other contracts that we may have pursued otherwise.
In addition to physical risks, climate change risk includes longer-term shifts in climate patterns, such as extreme heat, sea level rise, and more frequent and prolonged drought.
In addition to physical risks, climate-related change risk includes longer-term shifts in climate patterns, such as extreme heat, sea level rise, and more frequent and prolonged drought.
Our systems reside within cloud service environments which presents various risks, including platform and software as a service providers’ inability to identify or quantify, in a timely manner, specific problems that affect the business functions which impact V2X. 17 Table of Contents Integration and sustainment of existing or new information technology systems, carry a high risk of delays or integration failures.
Our systems reside within cloud service environments which presents various risks, including platform and software as a service providers’ inability to identify or quantify, in a timely manner, specific problems that affect the business functions which impact V2X. 18 Table of Contents Integration and sustainment of existing or new information technology systems, carry a high risk of delays or integration failures.
The impact on our stock price of sales of shares by such shareholders could be positive or negative, whether in the immediate term or in the future, and could be material.
The impact on our stock price of additional sales of shares by such shareholders could be positive or negative, whether in the immediate term or in the future, and could be material.
We may be required to qualify or continue to qualify under multiple award task orders, and it may be more difficult for us to win future task orders.
We may be required to qualify or continue to qualify under multiple award contracts, and it may be more difficult for us to win future task orders.
To varying degrees, each of our contract types involves risk that we could underestimate the costs and resources necessary to fulfill the contract. In addition, our failure to satisfy customer expectations or contract requirements may result in reduced fees or claims made against us by our customers and may affect our financial performance.
To varying degrees, each of our contract types involves risk that we could underestimate the costs and resources necessary to fulfill the contract. In addition, our failure to satisfy customer expectations or contract requirements may result in reduced fees or claims made against us by our customers and may affect our financial performance and our relationship with our customers.
Our business operations are also subject to additional risks associated with conducting business internationally, including, without limitation: • Political instability in foreign countries; • Terrorist activity by various groups in the areas in which we operate; • Imposition of inconsistent foreign laws, regulations or policies or changes in or interpretations of such laws, regulations or policies; 18 Table of Contents • Currency exchange controls, fluctuations of currency and foreign exchange rates, and currency revaluations; • Conducting business in places where laws, business practices and customs are unfamiliar or unknown; and • Imposition of limitations on or increases in withholding and other taxes on payments by foreign operations.
Our business operations are also subject to additional risks associated with conducting business internationally, including, without limitation: • Political instability in foreign countries; • Terrorist activity by various groups in the areas in which we operate; • Imposition of inconsistent foreign laws, regulations or policies or changes in or interpretations of such laws, regulations or policies; • Currency exchange controls, fluctuations of currency and foreign exchange rates, and currency revaluations; • Conducting business in places where laws, business practices and customs are unfamiliar or unknown; and • Imposition of limitations on or increases in withholding and other taxes on payments by foreign operations.
Some significant statutes and regulations that affect us include: • The FAR and department or agency-specific regulations that implement or supplement the FAR, such as the DoD’s DFARS, which regulate the formation, administration and performance of U.S. government contracts; 22 Table of Contents • The Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations; • The Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information, and our ability to provide compensation to certain former government officials; • The Civil False Claims Act, which provides for substantial civil penalties, including claims for treble damages, for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; • The CTIP Act, which ensures that government contractors and others are fully trained to combat human trafficking pursuant to the National Security Presidential Directive 22; and • The U.S.
Some significant statutes and regulations that affect us include: • The FAR and department or agency-specific regulations that implement or supplement the FAR, such as the DoD’s DFARS, which regulate the formation, administration and performance of U.S. government contracts; • The Truthful Cost or Pricing Data Statute, previously known as the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations; • The Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information, and our ability to provide compensation to certain former government officials; • The Civil False Claims Act, which provides for substantial civil penalties, including claims for treble damages, for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; 23 Table of Contents • The CTIP Act, which ensures that government contractors and others are fully trained to combat human trafficking pursuant to the National Security Presidential Directive 22; and • The U.S.
Cybersecurity risks continue to increase as various threat actors including nation states and hackers, focus efforts to compromise our operational and developmental information technology infrastructure. These threat actors attempt to gain access to sensitive, confidential, proprietary or controlled unclassified information, and may pose threats to physical security.
Cybersecurity risks continue to increase as various threat actors including nation states, cyber terrorists and hackers, focus efforts to compromise our operational and developmental information technology infrastructure. These threat actors attempt to gain access to sensitive, confidential, proprietary or controlled unclassified information, and may pose threats to physical security.
A reduction in U.S. government defense spending, changing defense spending priorities or delays in contract or task order awards could potentially reduce our future revenue, earnings and cash flow and have a material impact on our business. We depend on the collection of our receivables to generate cash flow, provide working capital, pay debt and continue our business operations.
A reduction in U.S. government defense spending, changing defense spending priorities or delays in contract or task order awards could potentially reduce our future revenue, earnings and cash flow and have a material impact on our business. 17 Table of Contents We depend on the collection of our receivables to generate cash flow, provide working capital, pay debt and continue our business operations.
We conduct a portion of our operations through joint ventures, exposing us to certain risks and uncertainties, many of which are outside of our control. We conduct a portion of our operations through joint ventures where control may be shared with unaffiliated third parties.
We conduct a portion of our operations through joint ventures and other partnerships, exposing us to certain risks and uncertainties, many of which are outside of our control. We conduct a portion of our operations through joint ventures and other partnerships where control may be shared with unaffiliated third parties.
U.S. government agencies, including the DCAA, the DCMA and others, routinely audit and review our performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards.
U.S. government agencies, including the DCAA, the DCMA and others, routinely audit and review our performance on government contracts, indirect rates and pricing practices, compliance with applicable contracting and procurement laws, regulations and standards, and compliance with applicable cybersecurity requirements.
DoD budget, which is subject to the congressional budget authorization and appropriations process and is difficult to predict. The U.S. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract periods of performance may extend over many years.
DoD budget, which is subject to the congressional budget authorization and appropriations process and is difficult to predict. The U.S. Congress usually appropriates funds for a given program on an October 1 to September 30 fiscal year basis, even though contract periods of performance may extend over many years.
Changes in the underlying assumptions, circumstances or estimates could result in adjustments that may adversely affect our future financial results. 15 Table of Contents While firm-fixed-price contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns .
Changes in the underlying assumptions, circumstances or estimates could result in adjustments that may adversely affect our future financial results. While firm-fixed-price contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns .
Foreign Corrupt Practices Act. We also employ international personnel and engage with foreign subcontractors and labor brokers, which requires compliance with numerous foreign laws and regulations related to labor, benefits, taxes, insurance and reporting requirements, among others, such as the European Union (EU) General Data Protection Regulation (GDPR).
We also employ international personnel and engage with foreign subcontractors and labor brokers, which requires compliance with numerous foreign laws and regulations related to labor, benefits, taxes, insurance and reporting requirements, among others, such as the European Union (EU) General Data Protection Regulation (GDPR).
Adverse changes to financial conditions also could jeopardize certain counterparty obligations, including those of our insurers and financial institutions and other third parties. We may not realize as revenue the full amounts reflected in our backlog, which could adversely affect our future revenue and growth.
Adverse changes to financial conditions also could jeopardize certain counterparty obligations, including those of our insurers and financial institutions and other third parties. 27 Table of Contents We may not realize as revenue the full amounts reflected in our backlog, which could adversely affect our future revenue and growth.
Our business could also be disrupted by national or international crises or hostilities and pandemics, such as COVID-19. Although preventative measures may help mitigate the damage from such occurrences, impacts on our supply chain and the damage and disruption to our business resulting from any of these events may be significant.
Our business could also be disrupted by national or international crises or hostilities and pandemics. Although preventative measures may help mitigate the damage from such occurrences, impacts on our supply chain and the damage and disruption to our business resulting from any of these events may be significant.
Misconduct by any of our employees, subcontractors, agents, prime contractors or business partners or our failure to comply with applicable laws or regulations could subject us to fines and penalties, loss of security clearance, loss of current and future customer contracts and suspension or debarment from contracting with federal, state or local government agencies, any of which would adversely affect our business, our reputation and our future financial results.
Misconduct by any of our employees, subcontractors, agents, prime contractors or business partners or our failure to comply with applicable laws or regulations or with applicable internal policies, procedures and controls could subject us to fines and penalties, loss of security clearance, loss of current and future customer contracts and suspension or debarment from contracting with federal, state or local government agencies, any of which would adversely affect our business, our reputation and our future financial results.
Although our joint venture operations are currently not significant, we are exposed to risks and uncertainties from them. As with any joint venture arrangement, differences in views among the joint venture participants may result in delayed decisions or in failures to agree on major issues.
Although these operations are currently not significant, we are exposed to risks and uncertainties from them. As with any joint venture arrangement or partnership, differences in views among the participants may result in delayed decisions or in failures to agree on major issues.
Security breaches, cybersecurity attacks, and other disruptions could adversely affect our business and results of operations. As a U.S. defense contractor, various privacy and security laws require us to protect sensitive, confidential, and controlled unclassified information from disclosure both for us and others.
Security breaches, cybersecurity attacks, and other disruptions could adversely affect our business and results of operations. As a U.S. defense contractor, various privacy and security laws require us to protect sensitive, confidential, and controlled unclassified information from disclosure.
In addition, the terms of the agreements governing our current debt limit the payment of dividends and debt that we may incur in the future may also limit the payment of dividends. Anti-takeover provisions in our organizational documents and Indiana law could delay or prevent a change in control.
In addition, the terms of the agreements governing our current debt limit the payment of dividends and debt that we may incur in the future may also limit the payment of dividends. 29 Table of Contents Anti-takeover provisions in our organizational documents and Indiana law could delay or prevent a change in control.
We also cannot control the actions of our joint venture partners, including any failure to comply with applicable laws or regulations, nonperformance, default or bankruptcy of our joint venture partners.
We also cannot control the actions of our partners, including any failure to comply with applicable laws or regulations, nonperformance, default or bankruptcy of our partners.
To reduce interest expense volatility, we entered into $350.0 million of interest rate swaps during 2023. We may in the future enter into additional interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce future interest rate volatility of our variable rate indebtedness.
To reduce interest expense volatility, we entered into $350.0 million of interest rate swaps during 2023 and $100.0 million of interest rate swaps during 2024. We may in the future enter into additional interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce future interest rate volatility of our variable rate indebtedness.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, 27 Table of Contents timing, or nature of future offerings.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of future offerings.
Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. 21 Table of Contents Our insurance may be insufficient to protect us from claims or losses.
Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. Our insurance may be insufficient to protect us from claims or losses.
Revenue derived from firm-fixed-price contracts represented approximately 41% of our total revenue for the year ended December 31, 2023. We monitor the impact of rising costs on our active and future government contracts given the current pace of inflation and other geopolitical factors.
Revenue derived from firm-fixed-price contracts represented approximately 39% of our total revenue for the year ended December 31, 2024. We monitor the impact of rising costs on our active and future government contracts given the current pace of inflation and other geopolitical factors.
Any new contracting requirements or procurement methods could be costly or administratively difficult for us to implement and could adversely affect our future revenue, profitability and prospects. 23 Table of Contents Our business depends upon obtaining and maintaining required facility security clearance and individual security clearances.
Any new contracting requirements or procurement methods could be costly or administratively difficult for us to implement and could adversely affect our future revenue, profitability and prospects. Our business depends upon obtaining and maintaining required facility security clearance and individual security clearances.
Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations. Goodwill represents a significant portion of our assets, and any impairment of these assets could negatively impact our results of operations. As of December 31, 2023, our goodwill was approximately $1.7 billion, which represented approximately 53.7% of our total assets.
Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations. Goodwill represents a significant portion of our assets, and any impairment of these assets could negatively impact our results of operations. As of December 31, 2024, our goodwill was approximately $1.7 billion, which represented approximately 51.3% of our total assets.
Some of our services, including those using subcontractors, are performed in high-risk locations, including but not limited to the Middle East and certain parts of Africa, where the country, region or surrounding areas may have unstable governments, or in areas of military conflict, or hostile and unstable environments, including war zones, or at military installations.
Some of our services, including those using subcontractors, are performed in high to moderate risk locations, including but not limited to the Middle East and certain parts of Asia and South America, where the country, region or surrounding areas may have unstable governments, or in areas of military conflict, or hostile and unstable environments, including war zones, or at military installations.
We rely on a combination of patents, confidentiality agreements and other contractual arrangements, as well as copyright, trademark, patent and trade secret laws, to protect our intellectual property rights and interests. However, these methods only provide a limited amount of protection and may not adequately protect our intellectual property rights and interests.
We rely on a combination of patents, confidentiality agreements and other contractual arrangements, as well as copyright, trademark, patent and trade secret laws and data rights under the FAR and DFARS, to protect our intellectual property rights and interests. However, these methods only provide a limited amount of protection and may not adequately protect our intellectual property rights and interests.
As of December 31, 2023, we had approximately $1,154.2 million of aggregate debt outstanding, which consists of the First Lien Term Facility and the 2023 Revolver and Term Loan (See Note 10, Debt, in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K).
As of December 31, 2024, we had approximately $1,138.8 million of aggregate debt outstanding, which consists of the First Lien Term Facility and the 2023 Revolver and Term Loan (See Note 10, Debt, in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K).
As of December 31, 2023, our total backlog was $12.8 billion, which included $2.8 billion in funded backlog. We may not realize the full amount of our backlog as revenue, particularly unfunded backlog and future services where the customer has an option to decline our continued services under a contract.
As of December 31, 2024, our total backlog was $12.5 billion, which included $2.3 billion in funded backlog. We may not realize the full amount of our backlog as revenue, particularly unfunded backlog and future services where the customer has an option to decline our continued services under a contract.
Some of our existing contracts must be recompeted when their original period of performance ends. Recompetes represent opportunities for competitors to take market share away from us. Recompetes also represent opportunities for our customers to obtain more favorable terms and discounts from us.
Some of our existing contracts must be recompeted when the original period of performance ends. Recompetes represent opportunities for competitors to take market share away from us. Recompetes also represent opportunities for our customers to obtain more favorable terms from us.
Our project sites often put our employees and others in close proximity with mechanized equipment, moving vehicles, and highly regulated materials. Additionally, global pandemics, such as COVID-19, could introduce additional risks to our worksites requiring additional policies and procedures.
Our project sites often put our employees and others in close proximity with mechanized equipment, moving vehicles, and highly regulated materials. Additionally, global pandemics could introduce additional risks to our worksites requiring additional policies and procedures.
As of the date of this Form 10-K, approximately 59.1% of the outstanding shares of our common stock are held by the shareholders party to the Shareholders Agreement. Such shareholders may decide not to hold the shares of our common stock they received upon completion of the Merger.
As of the date of this Form 10-K, approximately 45% of the outstanding shares of our common stock are held by the shareholders party to the Shareholders Agreement. Such shareholders may decide not to hold the remaining shares of our common stock they received upon completion of the Merger.
Such misconduct could include the failure to comply with federal, state, local or foreign government procurement regulations, regulations regarding the protection of classified or personal information, legislation regarding the pricing of labor and other costs in government contracts, laws and regulations relating to environmental matters, bribery of foreign government officials, lobbying or similar activities, boycotts, antitrust and any other applicable laws or regulations.
Such misconduct could include the failure to comply with federal, state, local or foreign government procurement regulations, regulations regarding the protection of classified or personal information, legislation regarding the pricing of labor and other costs in government contracts, regulations pertaining to the internal controls over financial reporting, laws and regulations relating to environmental matters, bribery of foreign government officials, lobbying or similar activities, boycotts, antitrust and any other applicable laws or regulations.
Our variable rate indebtedness may expose us to interest rate risks, which could cause our debt costs to increase significantly. Borrowing under the secured credit facilities are at variable rates of interest and will expose us to interest rate risk. As of December 31, 2023, we had approximately $1,154.2 million of aggregate debt outstanding under our secured credit facility.
Our variable rate indebtedness may expose us to interest rate risks, which could cause our debt costs to increase significantly. Borrowing under the secured credit facilities are at variable rates of interest and will expose us to interest rate risk. As of December 31, 2024, we had approximately $1,138.8 million of aggregate debt outstanding under our secured credit facility.
The 2024 United States presidential election may introduce further uncertainties to congressional spending and budgetary priorities that may materially affect our business. Any of these factors could result in a significant redirection of current and future DoD budgets and impact our future operations and cash flows.
The January 2025 presidential and administration transition in the United States may introduce further uncertainties to congressional spending and budgetary priorities that may materially affect our business. Any of these factors could result in a significant redirection of current and future DoD budgets and impact our future operations and cash flows.
Furthermore, the actual receipt of revenue from contracts included in our backlog may never occur or may be delayed because: • a program schedule could change, or the program could be canceled; a contract’s funding or scope could be reduced, modified, delayed, or terminated early, including as a result of a lack of appropriated funds or as a result of cost cutting initiatives and other efforts to reduce U.S. government spending or the automatic federal defense spending cuts required by sequestration; • in the case of funded backlog, the period of performance for the contract has expired; or • in the case of unfunded backlog, funding may not be available; or, in the case of priced options, our clients may not exercise their options. 26 Table of Contents Unanticipated changes in our tax provisions or exposure to additional U.S. and foreign tax liabilities could affect our profitability.
Furthermore, the actual receipt of revenue from contracts included in our backlog may never occur or may be delayed because: • a program schedule could change, or the program could be canceled; a contract’s funding or scope could be reduced, modified, delayed, or terminated early, including as a result of a lack of appropriated funds or as a result of cost cutting initiatives and other efforts to reduce U.S. government spending or the automatic federal defense spending cuts required by sequestration; • in the case of funded backlog, the period of performance for the contract has expired; or • in the case of unfunded backlog, funding may not be available; or, in the case of priced options, our clients may not exercise their options.
We derive a substantial majority of our revenue from work performed under U.S. government contracts, primarily the DoD, either as a prime contractor or as a subcontractor to other contractors engaged in work for the U.S. government. For the year ended December 31, 2023, we generated approximately 41% of our total revenue from the U.S. Army.
We derive 96% of our revenue from work performed under U.S. government contracts, primarily the DoD, either as a prime contractor or as a subcontractor to other contractors engaged in work for the U.S. government. For the year ended December 31, 2024, we generated approximately 43% of our total revenue from the U.S. Army.
A significant portion of our workforce is represented by labor unions, and our business could be harmed in the event of a prolonged work stoppage. As of December 31, 2023, approximately 4,700 of our employees, or approximately 30% of our employee base were unionized. We have 46 collective bargaining agreements with labo r unions.
A significant portion of our workforce is represented by labor unions, and our business could be harmed in the event of a prolonged work stoppage. As of December 31, 2024, approximately 4,500 of our employees, or approximately 28% of our employee base were unionized. We have 45 collective bargaining agreements with labo r unions.
Indiana law also imposes restrictions on mergers and other business combinations between any beneficial holder of 10% or more of our outstanding common stock and us.
Indiana law also imposes restrictions on mergers and other business combinations between any beneficial holder of 10% or more of our outstanding common stock and us. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We are currently assessing our obligations under these laws and regulations, but we expect that compliance with these laws and regulations could result in substantial compliance costs, including monitoring and reporting costs. Noncompliance with these laws or regulations may result in potential cost increases, litigation, fines, penalties, brand or reputational damage, and higher investor activism activities.
We are currently monitoring our obligations under the California law, but we expect that any required compliance with climate-related or other sustainability-related laws and regulations could result in substantial compliance costs, including monitoring and reporting costs. Noncompliance with these laws or regulations may result in potential cost increases, litigation, fines, penalties, brand or reputational damage, and higher investor activism activities.
A significant portion of our revenue is derived from a few large contracts, and the loss or material reduction of any of these contracts could have a material adverse effect on our results of operations and cash flows.
We derive a significant portion of our revenue from a concentrated number of large contracts, and the loss or material reduction of any of these contracts could have a material adverse effect on our results of operations and cash flows.
Certain collective bargaining agreements require us to contribute to their various multiemployer pension plans. For the year ended December 31, 2023, we contributed $12.9 million to multiemployer pension plans.
Certain collective bargaining agreements require us to contribute to their various multiemployer pension plans. For the year ended December 31, 2024, we contributed $18.1 million to multiemployer pension plans.
If our significant shareholders who received shares of our common stock in the Merger sell their shares, the price of our common stock could be materially affected.
If our significant shareholders who received shares of our common stock in the Merger sell their shares, the price of our common stock could be materially affected. During 2024, our significant shareholders who received shares of our common stock in connection with the Merger sold some of their shares.
We are subject to legal and regulatory compliance risks associated with operating internationally. Our U.S. government contracts operating internationally represented approximately 42% of total revenue for the year ended December 31, 2023. We are subject to a variety of U.S. and foreign laws and regulations, including, without limitation, business compliance, tax and anti-corruption laws, including the U.S.
Our U.S. government contracts operating internationally represented approximately 45% of total revenue for the year ended December 31, 2024. We are subject to a variety of U.S. and foreign laws and regulations, including, without limitation, business compliance, tax and anti-corruption laws, including the U.S. Foreign Corrupt Practices Act.
Our success also depends on our continued access to suppliers of important technologies and components. If we are unable to develop and implement these initiatives in a cost-effective, timely manner or at all, it could damage our relationships with our customers and negatively impact our financial condition and results of operations.
If we are unable to develop, implement and manage these initiatives in a cost-effective, timely manner or at all, it could damage our relationships with our customers and negatively impact our financial condition and results of operations.
Failure to adequately protect, maintain or enforce our intellectual property rights may adversely limit our competitive position. We cannot provide assurances that others will not independently develop technology substantially similar to our protected technology or that we can successfully preserve our intellectual property rights in the future. Our intellectual property rights could be invalidated, circumvented, challenged, misappropriated or infringed upon.
Failure to adequately protect, maintain or enforce our intellectual property rights may adversely limit our competitive position. 25 Table of Contents We cannot provide assurances that others will not independently develop technology substantially similar to our protected technology or that we can successfully preserve our intellectual property rights in the future.
The Company’s earnings and profitability may vary materially depending on significant changes to the total mix of contracts. Our profitability is adversely affected when we incur contract costs that we cannot bill to our customers. Profitability also may be adversely affected during the start of a new contract due to initial spending necessary to successfully complete phase-in requirements.
Our profitability is adversely affected when we incur contract costs that we cannot bill to our customers. Profitability also may be adversely affected during the start of a new contract due to initial spending necessary to successfully complete phase-in requirements.
If our significant shareholders who received shares of our common stock in connection with the Merger choose to sell a significant number of our shares, such sales could have a material impact on the market price for our common stock.
If they choose to sell a significant number of additional shares, such sales could have a material impact on the market price for our common stock.
In addition, the actual cost savings of the Merger could be less than anticipated. Our future results may be adversely impacted if the Company does not effectively manage its expanded operations. There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Merger.
Our future results may be adversely impacted if the Company does not effectively manage its expanded operations. We may not be successful or may not realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Merger.
A significant deficiency as defined by the DoD is a “shortcoming in the system that materially affects the ability of officials of the DoD to rely upon information produced by the system that is needed for management purposes.” If we have significant deficiencies and contract payments are withheld, our revenue and financial position may be adversely affected. 24 Table of Contents We are subject to certain data privacy regulations, which expose us to certain risks if we do not comply with these requirements.
A significant deficiency as defined by the DoD is a “shortcoming in the system that materially affects the ability of officials of the DoD to rely upon information produced by the system that is needed for management purposes.” If we have significant deficiencies and contract payments are withheld, our revenue and financial position may be adversely affected.
In addition, our profitability is affected by how efficiently we utilize our workforce, including our ability to transition employees from completed contracts to new assignments; to hire and assimilate new employees; to hire personnel in or timely deploy expatriates to foreign countries; to manage attrition and a subcontractor workforce; and to devote time and resources to training, business development, professional development and other non-chargeable activities. 13 Table of Contents We may not be successful in winning new contracts or recompeting our existing contracts, which could have an adverse impact on our business and prospects.
In addition, our profitability is affected by how efficiently we utilize our workforce, including our ability to transition employees from completed contracts to new assignments; to hire and assimilate new employees; to hire personnel in or timely deploy expatriates to foreign countries; to manage attrition and a subcontractor workforce; and to devote time and resources to training, business development, professional development and other non-chargeable activities.
The termination, expiration or non-renewal of our existing U.S. government contracts could result in a loss of anticipated future revenue attributable to that program, which could have an adverse impact on our operations. The U.S. government may terminate any of our government contracts, in whole or in part, at any time at its convenience with little or no notice.
The termination, expiration or non-renewal of our existing U.S. government contracts could result in a loss of anticipated future revenue attributable to that program, which could have an adverse impact on our operations.
We may have disputes with our subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, proper invoicing, cost reasonableness, allocability, allowability, adjustments to the scope of the subcontractor’s work, or the subcontractor’s failure to comply with applicable law or regulations.
Disruptions or performance problems caused by our subcontractors could have an adverse effect on our ability as a prime contractor or higher tier subcontractor to meet our commitments to customers. 20 Table of Contents We may have disputes with our subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, proper invoicing, cost reasonableness, allocability, allowability, adjustments to the scope of the subcontractor’s work, or the subcontractor’s failure to comply with applicable law or regulations.
It is possible that the integration process could result in material challenges, including, without limitation: • managing a larger combined company; • the creation of a new executive management team; • the possibility of faulty assumptions underlying expectations regarding the integration process including unforeseen expenses; • retaining existing business and operational relationships and attracting new business and operational relationships; • consolidating corporate and administrative infrastructures and eliminating duplicative operations and inconsistencies in standards, controls, procedures and policies; • integrating the companies’ financial reporting and internal control systems, including the Company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the rules promulgated thereunder by the SEC; and • unanticipated issues in integrating information technology, communications and other systems.
It is possible that the integration process could result in material challenges, including, without limitation: • consolidating corporate and administrative infrastructures and eliminating duplicative operations and inconsistencies in standards, controls, procedures and policies; • integrating the companies’ financial reporting and internal control systems, including the Company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the rules promulgated thereunder by the SEC; and • unanticipated issues in integrating information technology, implementing a new enterprise resource planning (ERP) system, communications and other business systems.
The government may fail to pay outstanding invoices for a number of reasons, including lack of appropriated funds, lack of an approved budget or changes in spending levels or budgetary priorities, which may materially and adversely affect our future revenue and limit our growth prospects. 16 Table of Contents We are dependent on the U.S. government and, if our reputation or relationship with the U.S. government was harmed, our revenue and growth prospects could be adversely affected.
The government may fail to pay outstanding invoices for a number of reasons, including lack of appropriated funds, lack of an approved budget or changes in spending levels or budgetary priorities, which may materially and adversely affect our future revenue and limit our growth prospects.
Our failure to adapt to or mitigate these risks could affect our ability to conduct our business internationally and adversely affect our financial position, results of operations or cash flows. We may not realize the anticipated benefits and cost savings of the Merger and integrating the two companies may be more difficult, costly or time-consuming than expected.
Our failure to adapt to or mitigate these risks could affect our ability to conduct our business internationally and adversely affect our financial position, results of operations or cash flows. 19 Table of Contents Integrating Vectrus and Vertex may be more difficult, costly or time-consuming than expected.
Any infringement, misappropriation or related claims, whether meritorious or not, are time consuming, divert technical and management personnel, are expensive to resolve, and the outcome is unpredictable.
Our intellectual property rights could be invalidated, circumvented, challenged, misappropriated or infringed upon. Any infringement, misappropriation or related claims, whether meritorious or not, are time consuming, divert technical and management personnel, are expensive to resolve, and the outcome is unpredictable.
We are also subject to the requirements of the Defense Base Act (DBA), which generally requires insurance coverage to be provided to persons employed at U.S. military bases outside of the U.S. Failure to obtain DBA insurance may result in fines or other sanctions, including the loss of a particular contract.
We are also subject to the requirements of the Defense Base Act (DBA), which generally requires insurance coverage to be provided to persons employed at U.S. military bases outside of the U.S.
The loss or material reduction of any of these contracts could have a material adverse effect on our revenue, results of operations and cash flows. See "Item 7.
We expect the Kuwait Task Order under LOGCAP V will continue to have a significant contribution to our revenue. The loss or material reduction of any of these contracts could have a material adverse effect on our revenue, results of operations and cash flows. See "Item 7.
A termination for default may also negatively affect our reputation, performance ratings and our ability to win new government contracts, particularly for contracts covering the same or similar types of services.
The expiration, non-renewal or termination of any government contracts, whether for convenience or default, would adversely affect our current programs and reduce our revenue, earnings and cash flows. A termination for default may also negatively affect our reputation, performance ratings and our ability to win new government contracts, particularly for contracts covering the same or similar types of services.
These transactions require significant investment of time and resources and may disrupt our business and distract our management from other responsibilities.
We have and may in the future selectively pursue strategic acquisitions and other investments. These transactions require significant investment of time and resources and may disrupt our business and distract our management from other responsibilities.
Cost-reimbursable contracts generally have lower profitability than firm-fixed-price contracts. Given the current pace of inflation and other geopolitical factors, we are monitoring the impact of rising costs on our active and future government contracts. For example, global hostilities could change the total mix of our contracts.
Cost-plus contracts generally have lower profitability than firm-fixed-price contracts. Inflation and other geopolitical factors may impact our costs on our active and future government contracts. For example, global hostilities could change the total mix of our contracts. The Company’s earnings and profitability may vary materially depending on significant changes to the total mix of contracts.
We are subject to various taxes, including but not limited to income, gross receipts and payroll withholding taxes in the U.S. and many foreign jurisdictions. Significant judgment is required in determining our worldwide provision or benefit for taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain.
Unanticipated changes in our tax provisions or exposure to additional U.S. and foreign tax liabilities could affect our profitability. We are subject to various taxes, including but not limited to income, gross receipts and payroll withholding taxes in the U.S. and many foreign jurisdictions. Significant judgment is required in determining our worldwide provision or benefit for taxes.
We could be liable for both our obligations and those of our partners, which may result in reduced profits or, in some cases, significant losses on the project.
We could be liable for both our obligations and those of our partners, which may result in reduced profits or, in some cases, significant losses on the project. Additionally, these factors could have a material adverse effect on the business operations of the joint venture or partnership and, in turn, our business operations and reputation.
In addition, the European Union Corporate Sustainability Reporting Directive became effective in 2023 and requires expansive disclosures on various sustainability topics, and the SEC has issued proposed climate change rules.
In addition, while not currently applicable to V2X, the European Union Corporate Sustainability Reporting Directive requires expansive disclosures on various sustainability topics, and the SEC has issued proposed climate change rules that could impact the Company in the future.
Outside of the U.S., many countries have privacy and data security laws and regulations concerning the collection and use of personal data, including but not limited to, the EU’s GDPR. These laws and regulations are complex, constantly evolving, and may be subject to significant change in the future.
The collection and use or integration of personal data is subject to various U.S. federal and state privacy and data security laws and regulations. Outside of the U.S., many countries have privacy and data security laws and regulations concerning the collection and use of personal data, including but not limited to, the EU’s GDPR.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWith over 23 years of experience in the field of information technology and cybersecurity, the CISO brings a wealth of expertise to his role. His background includes experience as a military cybersecurity officer and system security engineer, resulting in extensive knowledge and experience in developing and executing cybersecurity strategies.
Biggest changeHis background includes experience as a cybersecurity professional and system security engineer at the Pentagon, the State Department, and several other Federal agencies, as well as serving as Chief Information Officer (CIO) for international federal contractors and a Maryland state agency, resulting in extensive knowledge and experience in developing and executing cybersecurity strategies.
ITEM 1C. CYBERSECURITY The Company’s Board of Directors (the “Board”) through its audit committee (Audit Committee) is responsible for overseeing the Company’s risk management program. The Company integrates cybersecurity risk management into its broader risk management framework to ensure that cybersecurity considerations form an integral part of our risk management program.
ITEM 1C. CYBERSECURITY The Company’s Board of Directors (the Board) through its audit committee (Audit Committee) is responsible for overseeing the Company’s risk management program. The Company integrates cybersecurity risk management into its broader risk management framework to ensure that cybersecurity considerations form an integral part of our risk management program.
Through ongoing communications between the CISO, IRT and other members of senior management (including the CEO), senior management stays informed about and monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and reports significant threats and incidents to the Audit Committee, when appropriate. 29 Table of Contents Management provides comprehensive briefings to the Audit Committee on a regular basis.
Through ongoing communications between the CISO, IRT and other members of senior management (including the CEO), senior management stays informed about and monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and reports significant threats and incidents to the Audit Committee, when appropriate.
These briefings may include topics such as the current cybersecurity landscape and emerging threats, reports on significant incidents and breaches, and compliance with new regulatory requirements. Risks from Cybersecurity Threats Our top cybersecurity threats include phishing, smishing, business email compromise, ransomware, system & human errors, and malware. These types of attacks could have a material impact on the Company.
Management provides comprehensive briefings to the Audit Committee on a regular basis. These briefings may include topics such as the current cybersecurity landscape and emerging threats, reports on significant incidents and breaches, and compliance with new regulatory requirements. Risks from Cybersecurity Threats Our top cybersecurity threats include phishing, smishing, business email compromise, ransomware, system & human errors, and malware.
To date, we have not encountered cybersecurity challenges that have materially impacted our operations or results of operations.
These types of attacks could have a material impact on the Company. To date, we have not encountered cybersecurity challenges that have materially impacted our operations or results of operations.
The Audit Committee reviews the Company’s cybersecurity program, including the review of reports on cyber incident response processes, emerging cybersecurity developments and threats, and cyber risk assessment. The Audit Committee meets regularly with management to discuss our cybersecurity program. Management’s Role: Our Chief Information Security Officer (CISO) is primarily responsible for assessing, monitoring and managing our cybersecurity risks.
The Audit Committee reviews the Company’s cybersecurity program, including the review of reports on cyber incident response processes, emerging cybersecurity developments and threats, and cyber risk assessment.
The CISO holds a graduate degree in Information Resource Management from the Air Force Institute of Technology, Wright-Patterson, Air Force Base, Ohio and holds a Certified Information Systems Security Professional certification, awarded and maintained since 2010.
The CISO holds a Doctorate degree in Information Assurance and a Master's degree in Computer Systems Management from the University of Maryland, and holds a Certified Information Security Manager (CISM) and Certified Information Systems Security Professional (CISSP) certification, awarded and maintained since 2010 and 2015, respectively.
Added
The Audit Committee meets regularly with management to discuss our cybersecurity program. 30 Table of Contents Management’s Role: Our Chief Information Security Officer (CISO) is primarily responsible for assessing, monitoring and managing our cybersecurity risks. With over 30 years of experience in the field of information technology and cybersecurity, the CISO brings a wealth of expertise to his role.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur McLean, Colorado Springs, Madison and Indianapolis locations are leased and have approximately 24,400, 65,000 164,000, and 900,000 square feet, respectively. The leases for our McLean, Colorado Springs, Madison, and Indianapolis locations expire in 2032, 2028, 2030 and 2026, respectively.
Biggest changeOur Reston, Colorado Springs, Madison and Indianapolis leased locations have approximately 8,656, 64,335 164,000, and 900,000 square feet, and expire in 2032, 2028, 2030 and 2026, respectively. We consider the properties that we lease to be in good condition and generally suitable for the purposes for which they are used. ITEM 3 .
ITEM 2. PROPERTIES We have 322 locations in 51 countries and territories on six continents. Our contract performance typically occurs on the government customer’s facility.
ITEM 2. PROPERTIES We have 329 locations in 47 countries and territories on six continents. Our contract performance typically occurs on the government customer’s facility.
Our material locations are the corporate headquarters office located at 7901 Jones Branch Drive, McLean, Virginia and operations offices located at: 2424 Garden of the Gods Road, Colorado Springs, Colorado; 555 Industrial Drive, Madison, Mississippi; and 6125 East 21st Street, Indianapolis, Indiana. These properties are used by our sole operating segment.
Our material locations are the corporate headquarters office located at 1875 Campus Commons Drive, Suite 305, Reston, Virginia and operations offices located at: 2424 Garden of the Gods Road, Colorado Springs, Colorado; 555 Industrial Drive, Madison, Mississippi; and 6125 East 21st Street, Indianapolis, Indiana. These properties are used by our sole operating segment.
We believe the outcome of such ongoing government audits and investigations will not have a material impact on our results of operations, financial condition or cash flows.
As a government contractor, we are also subject to U.S. government audits and investigations relating to our operations, including claims for fines, penalties, and repayments, compensatory or treble damages. We believe the outcome of such ongoing government audits and investigations will not have a material impact on our results of operations, financial condition or cash flows.
Some of these proceedings seek remedies relating to employment matters, matters in connection with our contracts and matters arising under laws relating to the protection of the environment. As a government contractor, we are also subject to U.S. government audits and investigations relating to our operations, including claims for fines, penalties, and repayments, compensatory or treble damages.
Some of these proceedings seek remedies relating to employment matters, matters relating to injuries to people or property damage, matters in connection with our contracts and matters arising under laws relating to the protection of the environment.
Removed
We consider the properties that we lease to be in good condition and generally suitable for the purposes for which they are used. ITEM 3 .

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of February 26, 2024, there were approximately 3,629 s tockholders of record an d 31.3 million outstanding shares of common stock. To date, we have not declared or paid any dividends on our common stock.
Biggest changeAs of February 19, 2025, there were approximately 3,404 s tockholders of record an d 31.6 million outstanding shares of common stock. To date, we have not declared or paid any dividends on our common stock.
EQUITY COMPENSATION PLAN INFORMATION For a discussion of the securities authorized under our equity compensation plans, see Item 12 of this Annual Report on Form 10-K, which incorporates by reference the information to be disclosed in our definitive proxy statement for our 2024 Annual Meeting of Shareholders. RECENT SALES OF UNREGISTERED SECURITIES None.
EQUITY COMPENSATION PLAN INFORMATION For a discussion of the securities authorized under our equity compensation plans, see Item 12 of this Annual Report on Form 10-K, which incorporates by reference the information to be disclosed in our definitive proxy statement for our 2025 Annual Meeting of Shareholders. RECENT SALES OF UNREGISTERED SECURITIES None.
The graph assumes that $100 had been invested in V2X common stock, the Russell 2000 Index and the S&P Aerospace & Defense Select Industry Index on December 31, 2018 and that all dividends were reinvested. ITEM 6. SELECTED FINANCIAL DATA Reserved.
The graph assumes that $100 had been invested in V2X common stock, the Russell 2000 Index and the S&P Aerospace & Defense Select Industry Index on December 31, 2019 and that all dividends were reinvested. ITEM 6. SELECTED FINANCIAL DATA Reserved.
STOCK PERFORMANCE GRAPH The following graph provides a comparison of the cumulative total shareholder return of our common stock to the returns of the Russell 2000 Index and the S&P Aerospace & Defense Select Industry Index from December 31, 2018 through December 31, 2023 with data points as of December 31 for the years shown.
STOCK PERFORMANCE GRAPH The following graph provides a comparison of the cumulative total shareholder return of our common stock to the returns of the Russell 2000 Index and the S&P Aerospace & Defense Select Industry Index from December 31, 2019 through December 31, 2024 with data points as of December 31 for the years shown.
ISSUER PURCHASES OF EQUITY SECURITIES We did not repurchase any of our equity securities for the year ended December 31, 2023.
ISSUER PURCHASES OF EQUITY SECURITIES We did not repurchase any of our equity securities for the year ended December 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe information provided above does not represent a complete list of trends and uncertainties that could impact our business in either the near or long-term and should be considered along with the risk factors identified under the caption “Risk Factors” identified in Part 1, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023 and the matters identified under the caption “Forward-Looking Statement Information" herein. 35 Table of Contents DISCUSSION OF FINANCIAL RESULTS Selected financial highlights are presented in the table below: Year Ended December 31, Change (In thousands) 2023 2022 $ % Revenue $ 3,963,126 $ 2,890,860 $ 1,072,266 37.1 % Cost of revenue 3,628,271 2,595,848 1,032,423 39.8 % % of revenue 91.6 % 89.8 % Selling, general and administrative expenses 210,439 239,241 (28,802) (12.0) % % of revenue 5.3 % 8.3 % Operating income 124,416 55,771 68,645 123.1 % Operating margin 3.1 % 1.9 % Loss on extinguishment of debt (22,298) — (22,298) * Interest expense, net (122,442) (61,879) (60,563) 97.9 % Other expense, net (4,194) — (4,194) * Loss before taxes (24,518) (6,108) (18,410) 301.4 % % of revenue (0.6) % (0.2) % Income tax (benefit) expense (1,945) 8,222 (10,167) (123.7) % Effective income tax rate 7.9 % (134.6) % Net loss $ (22,573) $ (14,330) $ (8,243) 57.5 % *Percentage change is not meaningful.
Biggest changeThese costs are included within selling, general, and administrative expenses on our Consolidated Statement of Income (Loss). 36 Table of Co ntents DISCUSSION OF FINANCIAL RESULTS Selected financial highlights are presented in the table below: Year Ended December 31, Change (In thousands) 2024 2023 $ % Revenue $ 4,322,155 $ 3,963,126 $ 359,029 9.1 % Cost of revenue 3,979,193 3,628,271 350,922 9.7 % % of revenue 92.1 % 91.6 % Selling, general and administrative expenses 183,758 210,439 (26,681) (12.7) % % of revenue 4.3 % 5.3 % Operating income 159,204 124,416 34,788 28.0 % Operating margin 3.7 % 3.1 % Loss on extinguishment of debt (1,998) (22,298) 20,300 * Interest expense, net (107,900) (122,442) 14,542 (11.9) % Other expense, net (10,465) (4,194) (6,271) * Income (loss) before taxes 38,841 (24,518) 63,359 (258.4) % % of revenue 0.9 % (0.6) % Income tax expense (benefit) 4,157 (1,945) 6,102 (313.7) % Effective income tax rate 10.7 % 7.9 % Net income (loss) $ 34,684 $ (22,573) $ 57,257 (253.7) % *Percentage change is not meaningful.
For additional discussion of the Company’s indebtedness, see Note 10, Debt , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. The cash presented on our Consolidated Balance Sheets consists of U.S. and international cash from wholly-owned subsidiaries.
For additional discussion of the Company’s indebtedness, see Note 10, Debt , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. The cash presented on the Consolidated Balance Sheets consists of U.S. and international cash from wholly-owned subsidiaries.
New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. 31 Table of Contents We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. 32 Table of Contents We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Interest expense is directly related to borrowings under our senior secured credit facilities, the amortization of debt issuance costs, and derivative instruments used to hedge a portion of our exposure to interest rate risk.
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.
In addition, other than items discussed, there are no known material trends, favorable or unfavorable, in our capital resources and no expected material changes in the mix of such resources. Our major sources of funding will be our operating cash flow, our existing balances of cash and cash equivalents and proceeds from any issuances of debt.
In addition, other than items discussed, there are no known material trends, favorable or unfavorable, in our capital resources and no expected material changes in the mix of such resources. Our major sources of funding for 2025 and beyond will be our operating cash flow, our existing balances of cash and cash equivalents and proceeds from any issuances of debt.
We believe that our cash, cash equivalents and restricted cash as of December 31, 2023, 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.
We believe that our cash, cash equivalents and restricted cash as of December 31, 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 December 31, 2023, under the 2023 Revolver there were no outstanding borrowings and $17.5 million of outstanding letters of credit. Unamortized deferred financing costs related to the 2023 Revolver of $4.2 million are included in other non-current assets in the Consolidated Balance Sheets.
As of December 31, 2024, under the 2023 Revolver there were no outstanding borrowings and $17.5 million of outstanding letters of credit. Unamortized deferred financing costs related to the 2023 Revolver of $3.2 million are included in other non-current assets in the Consolidated Balance Sheets.
See Note 1, Description of Business and Summary of Significant Accounting Policies, and Note 4, Revenue , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion. 40 Table of Contents Business Combinations, Goodwill and Other Intangible Assets The purchase price of an acquired business is allocated to the tangible assets, financial assets and separately recognized intangible assets acquired less liabilities assumed based upon their respective fair values, with the excess recorded as goodwill.
See Note 1, Description of Business and Summary of Significant Accounting Policies, and Note 4, Revenue , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion. 41 Table of Co ntents Business Combinations, Goodwill and Other Intangible Assets The purchase price of an acquired business is allocated to the tangible assets, financial assets and separately recognized intangible assets acquired less liabilities assumed based upon their respective fair values, with the excess recorded as goodwill.
The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. 41 Table of Contents We adjust our liability for unrecognized tax benefits in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities.
The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. 42 Table of Co ntents We adjust our liability for unrecognized tax benefits in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities.
These risks and uncertainties include, but are not limited to: our ability to submit proposals for and/or win all potential opportunities in our pipeline; our ability to retain and renew our existing contracts; our ability to compete with other companies in our market; security breaches, cyber-attacks or cyber intrusions, and other disruptions to our information technology and operation; our mix of cost-plus, cost-reimbursable, firm-fixed-price and time-and-materials contracts; maintaining our reputation and relationship with the U.S. government; protests of new awards; economic, political and social conditions in the countries in which we conduct our businesses; changes in U.S. or international government defense budgets; government regulations and compliance therewith, including changes to the DoD procurement process; changes in technology; our ability to protect our intellectual property rights; governmental investigations, reviews, audits and cost adjustments; contingencies related to actual or alleged environmental contamination, claims and concerns; delays in completion of the U.S. government budget; our success in extending, deepening, and enhancing our technical capabilities; our success in expanding our geographic footprint or broadening our customer base; our ability to realize the full amounts reflected in our backlog; impairment of goodwill; misconduct of our employees, subcontractors, agents, prime contractors and business partners; our ability to control costs; our level of indebtedness; terms of our credit agreement; inflation and interest rate risk; geopolitical risk, including as a result of recent global hostilities; our subcontractors' performance; economic and capital markets conditions; our ability to maintain safe work sites and equipment; our ability to retain and recruit qualified personnel; our ability to maintain good relationships with our workforce; our teaming relationships with other contractors; changes in our accounting estimates; the adequacy of our insurance coverage; volatility in our stock price; changes in our tax provisions or exposure to additional income tax liabilities; risks and uncertainties relating to the post-Merger integration efforts; changes in U.S. generally accepted accounting principles (GAAP); and other factors described in Item 1A, “Risk Factors,” and elsewhere in this report and described from time to time in our future reports filed with the SEC.
These risks and uncertainties include, but are not limited to: our ability to submit proposals for and/or win all potential opportunities in our pipeline; our ability to retain and renew our existing contracts; our ability to compete with other companies in our market; security breaches, cyber-attacks or cyber intrusions, and other disruptions to our information technology and operation; our mix of cost-plus, cost-reimbursable, firm-fixed-price and time-and-materials contracts; maintaining our reputation and relationship with the U.S. government; protests of new awards; economic, political and social conditions in the countries in which we conduct our businesses; changes in U.S. or international government defense budgets, including potential changes from the January 2025 presidential and administration transition in the United States; government regulations and compliance therewith, including changes to the DoD procurement process; changes in technology; our ability to protect our intellectual property rights; governmental investigations, reviews, audits and cost adjustments; contingencies related to actual or alleged environmental contamination, claims and concerns; delays in completion of the U.S. government budget; our success in extending, deepening, and enhancing our technical capabilities; our success in expanding our geographic footprint or broadening our customer base; our ability to realize the full amounts reflected in our backlog; impairment of goodwill; misconduct of our employees, subcontractors, agents, prime contractors and business partners; our ability to control costs; our level of indebtedness; terms of our credit agreement; inflation and interest rate risk; geopolitical risk, including as a result of recent global hostilities; our subcontractors' performance; economic and capital markets conditions; our ability to maintain safe work sites and equipment; our ability to retain and recruit qualified personnel; our ability to maintain good relationships with our workforce and unions; our teaming relationships with other contractors; changes in our accounting estimates; the adequacy of our insurance coverage; volatility in our stock price; changes in our tax provisions or exposure to additional income tax liabilities; risks and uncertainties relating to integrating and refining internal control systems, including ERP and business systems, post-merger; changes in GAAP; and other factors described in Item 1A, “Risk Factors,” and elsewhere in this report and described from time to time in our future reports filed with the SEC.
The effective income tax rate for the year ended December 31, 2023 was due to increased non-deductible compensation, foreign tax expenses, and state income tax expense which were partially offset by the release of prior year uncertain tax position and credits.
The effective income tax rate for the year ended December 31, 2023 was due to increased non-deductible compensation, foreign tax expenses, and state income tax expenses which were partially offset by the release of prior year uncertain tax positions and credits.
The LOGCAP V - Kuwait Task Order is currently exercised through June 30, 2024, with two additional twelve-month options and one six-month option through December 31, 2026. The task order provides services to support the Geographical Combatant Commands and Army Service Component Commands throughout the full range of military operations in the Kuwait region.
The LOGCAP V - Kuwait Task Order is currently exercised through June 30, 2025, with one additional twelve-month option and one six-month option through December 31, 2026. The task order provides services to support the Geographical Combatant Commands and Army Service Component Commands throughout the full range of military operations in the Kuwait region.
Days sales outstanding (DSO) is a metric used to monitor accounts receivable levels. The Company determines its DSO by calculating the number of days necessary to exhaust its ending accounts receivable balance based on its most recent historical revenue. DSO was 58 and 68 as of December 31, 2023 and 2022, respectively.
Days sales outstanding (DSO) is a metric used to monitor accounts receivable levels. The Company determines its DSO by calculating the number of days necessary to exhaust its ending accounts receivable balance based on its most recent historical revenue. DSO was 57 and 58 days as of December 31, 2024 and 2023, respectively.
For 2023 and 2022, we used the qualitative approach to assess goodwill for impairment. No impairment charges related to goodwill were recorded during 2023 and 2022.
For 2024 and 2023, we used the qualitative approach to assess goodwill for impairment. No impairment charges related to goodwill were recorded during 2024 and 2023.
Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results in these areas could differ from management's estimates under different assumptions or conditions. 39 Table of Contents Revenue Recognition We account for revenue following the guidance in Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606).
Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results in these areas could differ from management's estimates under different assumptions or conditions. 40 Table of Co ntents Revenue Recognition We account for revenue following the guidance in Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606).
We believe we have sufficient liquidity to fund operations, acquisitions, capital expenditures and scheduled debt repayments. The Company expects to fund its ongoing working capital, capital expenditure and financing requirements and pursue additional growth through new business development and potential acquisition opportunities by using cash flows from operations, cash on hand, its credit facilities, and access to capital markets.
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.
The estimated fair value of the Term Loan portion of the 2023 Credit Agreement as of December 31, 2023 was $245.6 million. The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt (Level 2).
The estimated fair value of the Term Loan portion of the 2023 Credit Agreement as of December 31, 2024 was $239.7 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).
Management's Discussion and Analysis of Financial Condition and Results of Operation - Discussion of Financial Results" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, electronically filed with the SEC on EDGAR on March 2, 2023.
Management's Discussion and Analysis of Financial Condition and Results of Operation - Discussion of Financial Results" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, electronically filed with the SEC on EDGAR on March 5, 2024.
LIQUIDITY AND CAPITAL RESOURCES Liquidity The Company is not aware of any known trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, a material decrease in our liquidity.
LIQUIDITY AND CAPITAL RESOURCES Liquidity We are not aware of any known trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, a material decrease in our liquidity.
Although the Company believes its current financing arrangements will permit financing of its 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 but not limited to: (i) its credit ratings, (ii) the liquidity of the overall capital markets, and (iii) the current state of the economy.
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 but not limited to: (i) our credit ratings, (ii) the liquidity of the overall capital markets, and (iii) the current state of the economy.
The estimated fair value of the New Term Loans as of December 31, 2023 was $908.8 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).
The estimated fair value of the New Term Loans as of December 31, 2024 was $900.9 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).
Significant Contracts The following table reflects contracts that accounted for more than 10% of total revenue: % of Total Revenue Years Ended December 31, Contract Name 2023 2022 2021 LOGCAP V - Kuwait Task Order 12.0% 16.4% 11.8% LOGCAP V - Iraq Task Order 7.5% 9.8% 11.7% K-BOSSS —% 0.7% 15.8% 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.
Significant Contracts The following table reflects contracts that accounted for more than 10% of total revenue: % of Total Revenue Years Ended December 31, Contract Name 2024 2023 2022 LOGCAP V - Kuwait Task Order 10.4% 12.0% 16.4% 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.
As of December 31, 2023, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate. As of December 31, 2023, the carrying value of the Term Loan portion of the 2023 Credit Agreement was $245.3 million, excluding unamortized deferred financing costs of $2.1 million.
As of December 31, 2024, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate. As of December 31, 2024, the carrying value of the Term Loan portion of the 2023 Credit Agreement was $239.1 million, excluding unamortized deferred financing costs of $1.6 million.
For the years ended December 31, 2023, 2022 and 2021, we had total revenue of $4.0 billion, $2.9 billion and $1.8 billion, respectively, the substantial majority of which was derived from U.S. government customers. For the years ended December 31, 2023, 2022 and 2021, we generated approximately 41% , 46% and 64%, respectively, of our total revenue from the U.S.
For the years ended December 31, 2024, 2023 and 2022, we had total revenue of $4.3 billion, $4.0 billion and $2.9 billion, respectively, the substantial majority of which was derived from U.S. government customers. For the years ended December 31, 2024, 2023 and 2022, we generated approximately 43% , 41% and 46%, respectively, of our total revenue from the U.S.
The Company cannot provide assurance that such financing will be available on acceptable terms or that such financing will be available at all.
We cannot provide assurance that such financing will be available on acceptable terms or that such financing will be available at all.
Other Expense, Net During the year ended December 31, 2023, the Company incurred purchase discount fees and other expenses of $4.0 million related to the sale of accounts receivable through the Master Accounts Receivable Purchase Agreement (MARPA Facility). For a discussion of the MARPA Facility, see Note 18, Sale of Receivables, in the Notes to Consolidated Financial Statements.
Other Expense, Net During the year ended December 31, 2024, we incurred purchase discount fees and other expenses of $10.5 million related to the sale of accounts receivable through the Master Accounts Receivable Purchase Agreement (MARPA Facility). For a discussion of the MARPA Facility, see Note 18, Sale of Receivables, in the Notes to Consolidated Financial Statements.
Loss on Extinguishment of Debt The Company recorded a $22.3 million loss on extinguishment of debt for the year ended December 31, 2023.
Loss on Extinguishment of Debt The Company recorded a $2.0 million loss on extinguishment of debt for the year ended December 31, 2024 and a $22.3 million loss on extinguishment of debt for the year ended December 31, 2023.
The following is a summary of funded and unfunded backlog: As of December 31, (in millions) 2023 2022 Funded backlog $ 2,778 $ 2,567 Unfunded backlog 10,011 9,695 Total backlog $ 12,789 $ 12,262 Funded orders (different from funded backlog) represent orders for which funding was received during the period.
The following is a summary of funded and unfunded backlog: As of December 31, (in millions) 2024 2023 Funded backlog $ 2,251 $ 2,778 Unfunded backlog 10,251 10,011 Total backlog $ 12,502 $ 12,789 Funded orders (different from funded backlog) represent orders for which funding was received during the period.
See Note 13, Income Taxes , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further information. 32 Table of Contents Further details related to our financial performance for the year ended December 31, 2023, compared to the year ended December 31, 2022, are contained in the "Discussion of Financial Results" below.
See Note 13, Income Taxes , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further information. Further details related to consolidated financial results for the year ended December 31, 2024, compared to the year ended December 31, 2023, are contained in the "Discussion of Financial Results" section.
Income Tax (Benefit) Expense We recorded income tax benefit of $1.9 million and income tax expense of $8.2 million for the years ended December 31, 2023 and 2022, respectively, which represented effective income tax expense rates of 7.9% and (134.6)%, for the respective years.
Income Tax Expense (Benefit) We recorded income tax expense of $4.2 million and income tax benefit of $1.9 million for the years ended December 31, 2024 and 2023, respectively, which represented effective income tax expense rates of 10.7% and 7.9%, for the respective years.
Net cash used in investing activities for the year ended December 31, 2023 consisted of $25.0 million of net capital expenditures for the purchase of computer hardware and software and equipment related to ongoing operations, partially offset by $1.3 million of cash received in a business disposition and $1.0 million of cash received in joint venture distributions.
Net cash used in investing activities for the year ended December 31, 2024 consisted of $16.9 million for the acquisition of businesses and $11.7 million of net capital expenditures for the purchase of software and hardware, vehicles and equipment related to ongoing operations. 39 Table of Co ntents Net cash used in investing activities for the year ended December 31, 2023 consisted of $25.0 million of net capital expenditures for the purchase of computer hardware and software and equipment related to ongoing operations, partially offset by $1.3 million of cash received in a business disposition and $1.0 million of cash received in joint venture distributions.
Actual values may be greater or less than anticipated. Total backlog is converted into revenue as work is performed. The level of order activity related to programs can be affected by the timing of government funding authorizations and their project evaluation cycles.
Actual values may be greater or less than anticipated. Total backlog is converted into revenue as work is performed. The level of order activity related to programs can be affected by the timing of government funding authorizations and their project evaluation cycles. Year-over-year comparisons could, at times, be impacted by these factors, among others.
Details related to our financial performance for the year ended December 31, 2022, compared to the year ended December 31, 2021 are contained in "Item 7.
Details related to consolidated financial results for the year ended December 31, 2023, compared to the year ended December 31, 2022 are contained in "Item 7.
In recent quarters of 2023, the Company’s cost-plus and cost-reimbursable contracts have been increasing sequentially as a percentage of total contract mix and revenue. The Company’s earnings and profitability may vary materially depending on the total mix of contracts.
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.
Year Ended December 31, (in thousands) 2023 2022 2021 Operating activities $ 187,968 $ 93,495 $ 61,339 Investing activities (22,649) 175,958 (12,643) Financing activities (211,023) (193,236) (75,585) Foreign exchange 1 2,288 1,337 (3,325) Net change in cash, cash equivalents and restricted cash $ (43,416) $ 77,554 $ (30,214) 1 Impact on cash balances due to changes in foreign exchange rates.
Year Ended December 31, (in thousands) 2024 2023 2022 Operating activities $ 254,237 $ 187,968 $ 93,495 Investing activities (28,650) (22,649) 175,958 Financing activities (24,499) (211,023) (193,236) Foreign exchange 1 (5,418) 2,288 1,337 Net change in cash, cash equivalents and restricted cash $ 195,670 $ (43,416) $ 77,554 1 Impact on cash balances due to changes in foreign exchange rates.
Depending on the length and nature of a potential shutdown, companies that are reliant on U.S. government funding, could be significantly impacted. 34 Table of Contents 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. government priority.
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 capabilities will continue to be a U.S. government priority.
This was partially offset by $12.4 million of net capital expenditures for the purchase of computer hardware and software, and equipment related to ongoing operations and $5.3 million of cash disbursed in a business disposition. 38 Table of Contents Net cash used in financing activities during the year ended December 31, 2023 consisted of repayments of long-term debt of $432.6 million, payment of debt issuance costs of $8.8 million, prepayment penalty of $1.6 million, and payments of $18.0 million for employee withholding taxes on share-based compensation, partially offset by proceeds from long-term debt of $250.0 million.
Net cash used in financing activities during the year ended December 31, 2023 consisted of repayments of long-term debt of $432.6 million, payment of debt issuance costs of $8.8 million, prepayment penalty of $1.6 million, and payments of $18.0 million for employee withholding taxes on share-based compensation, partially offset by proceeds from long-term debt of $250.0 million.
These cash outflows were partially offset by $0.4 million received from the exercise of stock options. Capital Resources As of December 31, 2023, we held cash, cash equivalents and restricted cash of $72.7 million, which included $43.6 million held by foreign subsidiaries and had $482.5 million of available borrowing capacity under the 2023 Revolver, which expires on February 25, 2028.
Capital Resources As of December 31, 2024, we held cash, cash equivalents and restricted cash of $268.3 million, which included $35.7 million held by foreign subsidiaries and had $482.5 million of available borrowing capacity under the 2023 Revolver, which expires on February 25, 2028.
We received funded orders of $4.2 billion during the year ended December 31, 2023, which was an increase of $1.6 billion compared to the year ended December 31, 2022. The increase was due to timing of awards.
We received funded orders of $3.8 billion during the year ended December 31, 2024, which was a decrease of $0.4 billion compared to the year ended December 31, 2023. The decrease was due to timing of awards.
When necessary, our revolving credit facility and MARPA Facility are available to satisfy short-term working capital requirements. If cash flows from operations are less than expected, the Company may need to access the long-term or short-term capital markets.
If cash flows from operations are less than expected, the Company may need to access the long-term or short-term capital markets.
The aggregate cumulative adjustments for the years ended December 31, 2023 and 2022 related to changes in contract terms, program performance, customer changes in scope of work and changes to estimates in the reported period. Operating income was also impacted by labor mix and other direct cost purchases.
For the years ended December 31, 2024 and 2023, aggregate cumulative adjustments increased operating income by $24.8 million and $22.7 million, respectively. The aggregate cumulative adjustments for the years ended December 31, 2024 and 2023 related to changes in contract terms, program performance, customer changes in scope of work and changes to estimates in the reported period.
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.
Cumulative adjustments are driven by changes in contract terms, program performance, customer scope changes and changes to estimates in the reported period. These changes can increase or decrease operating income depending on the dynamics of each contract.
Cumulative adjustments are driven by changes in contract terms, program performance, customer scope changes and changes to estimates in the reported period.
The effective income tax rate for the year ended December 31, 2022 was due to increased non-deductible compensation, non-deductible transaction costs, foreign tax expenses, and state income tax expense which were partially offset by the release of prior year uncertain tax position and current year Foreign Derived Intangible Income (FDII) deduction.
The effective income tax rate for the year ended December 31, 2024 was due to increased non-deductible compensation, global intangible low taxed income (GILTI), foreign tax expenses, and state income tax expense which were partially offset by the release of prior year uncertain tax positions, non-taxable income, taxes on gain from acquisitions, and credits.
Selling, General & Administrative (SG&A) Expenses SG&A expenses decreased by $28.8 million, or 12.0%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to $39.9 million of acquisition-related costs that were incurred during 2022.
Selling, General & Administrative Expenses SG&A expenses decreased by $26.7 million, or 12.7%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to lower integration-related costs.
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.
Net cash used in financing activities during the year ended December 31, 2022 consisted of repayments of long-term debt of $108.4 million, payment of debt issuance costs of $2.3 million, and payments of $2.0 million for employee withholding taxes on share-based compensation. During 2022, we also borrowed and repaid $392.0 million and $472.9 million, respectively, on the Amended Revolver.
Net cash used in financing activities during the year ended December 31, 2024 consisted of revolver repayments of $1.3 billion, repayments of long-term debt of $15.3 million, payments for employee withholding taxes on share-based compensation of $8.1 million, and payments for debt issuance costs of $1.2 million, partially offset by proceeds from the revolver of $1.3 billion.
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.
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. 35 Table of Co ntents 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.
Army. Executive Summary Our revenue increased by $1.1 billion, or 37.1%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. Revenue increased $877.7 million due to the Merger and the remaining increase was from organic growth of our legacy programs.
Army. Executive Summary Our revenue increased by $359.0 million, or 9.1%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. Revenue increased primarily due to organic growth on legacy programs and new program performance.
Revenue Revenue increased by $1.1 billion, or 37.1%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022. Revenue increased $877.7 million due to the Merger and the remaining increase was from organic growth for legacy programs.
Revenue Revenue increased by $359.0 million, or 9.1%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. Revenue increased primarily due to organic growth for legacy programs and new program performance.
Year-over-year comparisons could, at times, be impacted by these factors, among others. 33 Table of Contents Our contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year (or less) option periods for the remaining contract period.
Our contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year or less option periods for the remaining contract period. The number of option periods vary by contract, and there is no guarantee that an option period will be exercised.
We recorded a n income tax benefit of $1.9 million and an income tax expense of $8.2 million for the years ended December 31, 2023 and 2022, respectively, which represent effective income tax rates of 7.9% and (134.6)%, respectively.
These changes can increase or decrease operating income depending on the dynamics of each contract. 33 Table of Contents We recorded an income tax expense of $4.2 million and an income tax benefit of $1.9 million for the years ended December 31, 2024 and 2023, respectively, which represent effective income tax rates of 10.7% and 7.9%, respectively.
Net cash provided by operating activities for the year ended December 31, 2022 consisted of cash inflows from non-cash income items of $100.6 million and a decrease in net working capital requirements of $47.7 million, partially offset by a net loss of $14.3 million and cash outflows for other non-current assets and liabilities of $40.5 million.
Net cash provided by operating activities for the year ended December 31, 2024 consisted of cash inflows from non-cash net income items of $149.4 million, cash inflows from the sale of receivables through the MARPA Facility of $146.2 million, and net income of $34.7 million, partially offset by net cash outflows in other long-term assets and liabilities of $54.2 million and net cash outflows in working capital accounts of $21.9 million.
The LOGCAP V - Kuwait Task Order contributed $474.3 million and $472.9 million of revenue for the years ended December 31, 2023 and 2022, respectively . The LOGCAP V - Iraq Task Order is currently exercised through June 21, 2024, with two additional twelve-month options and one six-month option through December 21, 2026.
The LOGCAP V - Kuwait Task Order contributed $450.3 million and $474.3 million of revenue for the years ended December 31, 2024 and 2023, respectively .
The number of option periods vary by contract, and there is no guarantee that an option period will be exercised. The right to exercise an option period is at the sole discretion of the U.S. government when we are the prime contractor or of the prime contractor when we are a subcontractor.
The right to exercise an option period is at the sole discretion of the U.S. government when we are the prime contractor or of the prime contractor when we are a subcontractor. The U.S. government may also extend the term of a program by issuing extensions of bridge contracts, typically for periods of one year or less.
The U.S. government may also extend the term of a program by issuing extensions of bridge contracts, typically for periods of one year or less. We expect to recognize a substantial portion of our funded backlog as revenue within the next 12 months.
We expect to recognize a substantial portion of our funded backlog as revenue within the next 12 months. However, the U.S. government or the prime contractor may cancel any contract at any time through a termination for convenience.
For a discussion of the loss on extinguishment see Note 10, Debt, in the Notes to Consolidated Financial Statements. 36 Table of Contents Interest (Expense) Income, Net Interest (expense) income, net was as follows: Year Ended December 31, Change (In thousands) 2023 2022 $ % Interest income $ 966 $ 165 $ 801 485.5 % Interest expense (123,408) (62,044) (61,364) 98.9 % Interest expense, net $ (122,442) $ (61,879) $ (60,563) 97.9 % Interest income is directly related to interest earned on our cash.
For further discussion see Note 10, Debt, in the Notes to Consolidated Financial Statements. 37 Table of Co ntents Interest Expense, Net Interest expense, net for the years ended December 31, 2024 and 2023 was as follows: Year Ended December 31, Change (In thousands, except for percentages) 2024 2023 $ % Interest income $ 1,260 $ 966 $ 294 30.4 % Interest expense (109,160) (123,408) 14,248 (11.5) % Interest expense, net $ (107,900) $ (122,442) $ 14,542 (11.9) % Interest income is related to interest earned on cash and cash equivalents.
Revenue from programs in the U.S, Middle East, Asia, and Europe increased by $791.8 million, $168.9 million, $96.7 million, and $14.8 million, respectively.
Revenue from our programs in the Middle East, the U.S., and Asia, increased by $205.8 million, $102.6 million, and $62.6 million, respectively, partially offset by a decrease in revenue from our programs in Europe of $12.0 million.
Revenue from programs in the U.S, Middle East, Asia, and Europe increased by $791.8 million, $168.9 million, $96.7 million, and $14.8 million, respectively. Operating income for the year ended December 31, 2023 was $124.4 million, an increase of $68.6 million or 123.1%, compared to the year ended December 31, 2022.
Revenue from our programs in the Middle East, the U.S., and Asia, increased by $205.8 million, $102.6 million, and $62.6 million, respectively, partially offset by a decrease in revenue from our programs in Europe of $12.0 million, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Cost of Revenue Cost of revenue increased by $1.0 billion, or 39.8%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to increased revenue from the Merger and increased amortization of intangible assets.
Cost of Revenue Cost of revenue increased by 350.9 million, or 9.7%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to increases in revenue and changes in contract mix.
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. The U.S. government's Fiscal Year (FY) begins on October 1 and ends on September 30. The Fiscal 2024 budget request was submitted to the U.S.
The U.S. government's Fiscal Year (FY) begins on October 1 and ends on September 30. 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.
Operating Income Operating income increased by $68.6 million, or 123.1%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022. Operating margin (income as a percentage of revenue) was 3.1% for the year ended December 31, 2023, compared to 1.9% for the year ended December 31, 2022.
Operating Income Operating income increased by $34.8 million, or 28.0%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
See Note 10, Debt, in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion. During the fourth quarter of 2023, we amended our senior secured first lien term loans (Vertex First Lien Credit Agreement).
When necessary, our revolving credit facility and MARPA Facility are available to satisfy short-term working capital requirements. See Note 10, Debt , and Note 18, Sale of Receivable , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion.
As of December 31, 2023, the Company held cash, cash equivalents and restricted cash of $72.7 million, which included $43.6 million held by foreign subsidiaries. We do not currently expect that we will be required to repatriate undistributed earnings of foreign subsidiaries.
Approximately $35.7 million of our $268.3 million in cash, cash equivalents and restricted cash as of December 31, 2024 is held by foreign subsidiaries and is not available to fund U.S. operations unless repatriated. We do not currently expect to repatriate undistributed earnings of foreign subsidiaries.
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'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.
Contractual Obligations As of December 31, 2023, commitments to make future payments under long-term contractual obligations were as follows: Payments Due in Period (In thousands) Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Operating leases $ 54,341 $ 15,489 $ 19,478 $ 11,309 $ 8,065 Principal payments on Vertex First Lien Credit Agreement¹ 908,847 9,111 18,223 881,513 — Principal payments on 2023 Credit Agreement¹ 245,313 6,250 23,438 215,625 — Interest on Vertex First Lien and 2023 Credit Agreements 475,197 102,787 200,358 172,052 — Total $ 1,683,698 $ 133,637 $ 261,497 $ 1,280,499 $ 8,065 ¹ Includes unused funds fee and is based on the December 31, 2023 interest rate and outstanding balance.
Contractual Obligations As of December 31, 2024, commitments to make future payments under long-term contractual obligations were as follows: Payments Due in Period (In thousands) Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Leases $ 50,627 $ 13,167 $ 20,044 $ 11,429 $ 5,987 Principal payments on Vertex First Lien Credit Agreement¹ 899,771 9,066 18,132 18,132 854,441 Principal payments on 2023 Credit Agreement¹ 239,062 10,937 25,000 203,125 — Interest on Vertex First Lien and 2023 Credit Agreements 432,757 84,175 163,705 127,784 57,093 Total $ 1,622,217 $ 117,345 $ 226,881 $ 360,470 $ 917,521 ¹ Includes unused funds fee and is based on the December 31, 2024 interest rate and outstanding balance.
Total backlog increased by $0.5 billion in the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to new business awards offset by recognition of revenue.
Most of our contracts have terms that would permit recovery of all or a portion of our incurred costs and fees for work performed in the event of a termination for convenience. 34 Table of Contents Total backlog decreased by $0.3 billion in the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to the timing of new awards offset by recognition of revenue.
The amendment provided for a new tranche of term loans under the Vertex First Lien Credit Agreement in an aggregate original principal amount of $911.1 million (the New Term Loans), in which the New Term Loans replaced or refinanced in full all the existing term loans outstanding under the Vertex First Lien Credit Agreement. 37 Table of Contents As of December 31, 2023, the carrying value of the New Term Loans was $908.8 million, excluding deferred discount and unamortized deferred financing costs of $36.4 million.
On May 30, 2024, 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 $906.6 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).
The increase in interest expense of $61.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 was due to increased debt assumed with the Merger.
Interest expense, net decreased $14.5 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to both a decrease in our debt balance and our interest rate swap contracts.
Removed
Operating income increased $34.8 million due to the Merger and the remaining increase was from organic growth for legacy programs, partially offset by acquisition-related costs incurred during 2022.
Added
Operating income for the year ended December 31, 2024 was $159.2 million, an increase of $34.8 million or 28.0%, compared to the year ended December 31, 2023. Operating income increased primarily due to increases in revenue, along with changes in aggregate cumulative adjustments and decreased selling, general and administrative (SG&A) expenses.
Removed
The task order provides services to support the Geographical Combatant Commands and Army Service Component Commands throughout the full range of military operations in the Iraq region. The LOGCAP V - Iraq Task Order contributed $296.9 million and $282.5 million of revenue for the years ended December 31, 2023 and 2022, respectively .
Added
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.
Removed
The K-BOSSS contract ended on August 28, 2023. Components of the K-BOSSS contract were re-competed as a task order under the LOGCAP V contract vehicle and were awarded to us in 2019. The K-BOSSS contract contributed $1.9 million and $18.9 million of revenue for the years ended December 31, 2023 and 2022 , respectively.
Added
The Fiscal 2025 budget has not yet been approved and Congress continues to pass short-term continuing resolutions (CR) that funds U.S. government operations in FY 2025 at FY 2024 levels. The most recent CR passed extends current funding levels until March 14, 2025.
Removed
However, the U.S. government or the prime contractor may cancel any contract at any time through a termination for convenience. Most of our contracts have terms that would permit us to recover all or a portion of our incurred costs and fees for work performed in the event of a termination for convenience.
Added
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.
Removed
Congress on March 9, 2023, and requested $886 billion for National Defense, with $842 billion of the total allocated to the Department of Defense.
Added
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, the new Administration and Congress, the debt ceiling, the global security environment, inflationary pressures, and macroeconomic conditions.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAssuming the 2023 Revolver was fully drawn to a principal amount equal to $500.0 million, each one percentage point change in interest rates would result in a $5.1 million change in our annual cash interest expense. As of December 31, 2023, the notional value of the Company's interest rate swap agreements totaled $345.3 million.
Biggest changeAssuming the 2023 Revolver was fully drawn to a principal amount equal to $500.0 million , each one percentage point change in interest rates would result in a $5.1 million change in annual cash interest expense. As of December 31, 2024, the notional value of the Company's interest rate swap agreements totaled $439.1 million .
Our forward contracts expired in January 2022 and no such contracts are outstanding as of December 31, 2023. For additional information on our interest rate and foreign currency hedge contracts, refer to Note 11, Derivative Instruments , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. ITEM 8.
Our forward contracts expired in January 2022 and no such contracts are outstanding as of December 31, 2024. For additional information on our interest rate and foreign currency hedge contracts, refer to Note 11, Derivative Instruments , in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. ITEM 8.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our earnings, cash flows and financial position are exposed to market risks relating to fluctuations in interest rates and foreign currency exchange rates. All of the potential changes noted below are based on information available as of December 31, 2023.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Earnings, cash flows and financial position are exposed to market risks relating to fluctuations in interest rates and foreign currency exchange rates. All potential changes noted below are based on information available at December 31, 2024.
Interest Rate Risk Each one percentage point change associated with the variable rate Vertex First Lien Credit Agreement would result in an $8.2 million change in our related annual cash interest expenses.
Interest Rate Risk Each one percentage point change associated with the variable rate Vertex First Lien Credit Agreement would result in a $7.1 million change in the related annual cash interest expenses.

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