V2X, Inc. (NYSE:VVX) Q2 2025 Earnings Call Transcript

V2X, Inc. (NYSE:VVX) Q2 2025 Earnings Call Transcript August 4, 2025

V2X, Inc. beats earnings expectations. Reported EPS is $1.33, expectations were $1.

Operator: Thank you for joining us for the V2X Second Quarter 2025 Earnings Conference Call and Webcast. Today’s call is being recorded. My name is Betsy, and I’ll be the operator for today’s call. [Operator Instructions] Please note this event is being recorded. And now I’ll pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X.

Michael J. Smith: Thank you. Good afternoon, everyone. Welcome to the V2X Second Quarter 2025 Earnings Conference Call. Joining us today are Jeremy Wensinger, President and Chief Executive Officer; and Shawn Mural, Senior Vice President and Chief Financial Officer. Slides for today’s presentation are available on the Investor Relations section of our website, gov2x.com. Please turn to Slide 2. During today’s presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements.

The company assumes no obligation to update its forward-looking statements. In addition, in today’s remarks, we will refer to certain non-GAAP financial measures because management believes such measures are useful to investors. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP on our slide presentation and in our earnings release filed with the SEC, both of which are available on the Investor Relations section of our website. At this time, I’d like to turn the call over to Jeremy.

Jeremy C. Wensinger: Thank you, Mike, and good afternoon, everyone. Thank you for joining us today. I’d like to start by thanking our entire team for their hard work, dedication and commitment to our customers’ mission. Please turn to Slide 3. During today’s call, I’m going to recap our second quarter results, talk about our strategic execution and why we are optimistic about our future. Starting with the second quarter results, revenue was $1.08 billion. Profitability was strong with adjusted EBITDA of $82 million or 7.6% margin and adjusted net income of $42 million. Adjusted EPS was $1.33, increasing 59% year-over-year. Our financial performance, cash generation and balance sheet strength is providing significant flexibility and optionality for V2X.

We are now positioned to enhance value creation through an active capital allocation strategy. As part of this strategy, we recently established a $100 million share repurchase authorization, which Shawn will discuss in more detail shortly. Given our year-to-date performance, we remain confident in our ability to achieve our 2025 commitments and are seeing additional positive uplift to earnings per share. As such, we are increasing our adjusted EPS guidance and reaffirming our revenue, adjusted EBITDA and cash flow guidance. Reflecting on our recent operational performance, we are delivering on our commitments, executing on our strategy and bringing innovation and new approaches to rapidly deploy solutions for improved readiness. Our dedication to execution excellence was demonstrated during my recent visits with our customers.

I witnessed firsthand the outcomes that our team is delivering. It is seamless support for the mission. Our customers have acknowledged our performance and my visit reaffirms our strategy for growth. Our strategy is clear, and it is evident to me that our teams are delivering on mission readiness outcomes. The takeaway from my engagements reinforces what V2X is bringing in performance, reliability and mission readiness. This is also reflected in our robust pipeline, which reflects the strategy we have put in place. Finally, our recent awards are validation of our customer intimacy and the commitment by the team to the execution of our strategy. Please turn to Slide 4. We are making excellent progress executing our strategic growth initiatives.

Starting with optimize the core, we are delivering proven performance excellence to strengthen the base. This is reflected by our ability to transition and support critical missions, such as recently reaching full operational capability on the Army’s largest training program. This program will ensure the delivery of training solutions to Army warfighters worldwide by infusing cutting-edge innovations to adapt to an ever-evolving mission. Next, growth in adjacencies. This is best described as a demand pull on our customers’ recognition of our ability to deliver. An exemplar of this is our growing presence in the U.S. Space Force at Ascension Island, which is a key space force tracking and instrumentation station. Another example, foreign military sales continue to represent a large and growing opportunity with international customers seeking out our performance, solutions, agility and value that V2X is delivering for our customers.

This was evidenced by the recent award of the Iraq F-16 program. Moving to extended offerings. This is demonstrated by our collaboration with Bell Helicopter to support the training of new generation of Army aviators. This pursuit is notable as it combines our capabilities in training, operational readiness with platform renewal. It also reflects an extension of a new customer in the aerospace domain. Lastly, strategic investments refer to the investments we are making in talent, capabilities that differentiate our offerings and the optimization of our tools and processes to deliver on our commitments and drive growth. The culmination of these initiatives was exemplified firsthand with the $4.3 billion 9-year T-6 award. This is fundamentally a V2X approach to customer engagement and demonstration of past performance as a differentiator for our customers.

The T-6 aircraft is widely used in a multi-service aviation training program that is critical to ensure new pilots are ready. This award is an example of the strategy we are executing, and it is an honor to have been selected to help ensure that every single pilot in the U.S. Air Force, Navy and Army will be trained and ready for their next mission. V2X will use commercial-based approaches to provide full spectrum supply chain management solutions to enable this essential training mission over 700 aircraft. Additionally, we believe the fixed price contract will allow V2X to leverage the power of data and decades of operational expertise to deliver enhanced readiness for our customer. In summary, we are executing these initiatives today. They are creating differentiation, driving value and fueling opportunities in the form of a robust pipeline.

Please turn to Slide 5. As mentioned, these initiatives on the prior page are driving significant opportunities for V2X, which is reflective in our 3-year pipeline valued at over $50 billion. This pipeline reflects large franchise programs and opportunities to deliver solutions across all domains. It also reflects a greater percentage of fixed price or outcome-based contracts, which is at the heart of the V2X execution excellence value proposition. We see this as beneficial in proving out our operational excellence and institutional knowledge from successfully supporting global missions at scale for over 70 years. Lastly, while the pipeline of opportunity focuses on leveraging all of V2X’s capability, it also reflects a greater balance of platform modernization and renewal capabilities.

We are optimistic in our ability to capture these opportunities, which we believe is supported by the progress we have demonstrated so far in converting key pursuits into long-term programs. V2X is capitalizing on our large and growing market opportunities while investing to be a leader in data-enabled mission solutions across all domains. Now I’d like to turn the call over to Shawn for a review of the financials.

Shawn M. Mural: Thank you, Jeremy. Please turn to Slide 6. We are exceptionally pleased with our second quarter and year-to-date results. Our results continue to demonstrate the focus on disciplined execution and the strategic positions of the business. We are proud of the accomplishments and excited about the future. Revenue in the second quarter was $1.078 billion. This reflects the expected growth in the WTRS and F5 programs as well as the sunsetting of the KC-10, T1A and the reduction of a task order in the Middle East. Adjusted EBITDA in the quarter was $82.4 million, increasing 14% year-over-year and delivering a margin of 7.6%. The strong EBITDA performance was driven primarily by the conclusion of a nonrecurring contractual commitment, which was contemplated in our full year guidance, but occurred earlier than anticipated.

Interest expense in the second quarter was $20.6 million. Cash interest expense was $19.1 million, improving $7.8 million or 29% year-over-year, driven by our successful repricing activities, debt paydown and cash generation. Net income for the quarter was $22.4 million. Adjusted net income was $42.3 million, increasing 61% year-over-year. Second quarter diluted EPS was $0.70 based on 31.9 million weighted average shares. Adjusted diluted EPS in the quarter was $1.33, increasing approximately 59% from the prior year. The ability to generate strong free cash flow with low capital expenditures remains a strength of the business. This was demonstrated in the second quarter with adjusted operating cash flow of $58.3 million. Total backlog at the end of the second quarter was $11.3 billion.

Funded backlog was $2.3 billion, which provides additional confidence in our ability to meet our 2025 commitments. It’s important to note that at the current time, total backlog does not reflect the $4.3 billion T-6 award. It also does not include any value associated with the recent CENTCOM and INDOPACOM extensions. Please turn to Slide 7, where I’ll discuss our year-to-date results. Year-to-date revenue was $2.94 billion, up slightly, reflecting new program starts and partially offset by sunsetting programs. Adjusted EBITDA for the first half of the year was $149.4 million, increasing approximately 6% year-over-year with a margin of 7.1%. Interest expense through June was $40.3 million. Cash interest expense was $37.3 million, improving approximately $15 million compared to the first half of 2024.

Year-to-date net income was $30.5 million. Adjusted net income was $73.8 million, increasing 34% year-over-year. Diluted EPS in the first half was $0.96. Adjusted diluted EPS was $2.31, up 34% compared to last year. Year-to-date net cash used by operating activities was $66.9 million. Adjusted net cash used by operating activities was $59.8 million, reflecting our normal seasonal patterns. Please turn to Slide 8. We have made significant progress improving our balance sheet, leverage ratio and capital structure. This successful evolution provides flexibility in how we can allocate capital and accelerate value creation. We thought it important to highlight how we are thinking about things as we move forward. Our capital allocation strategy centers on 3 key pillars: generate, deploy and maintain.

As it relates to the first pillar, we believe part of our value proposition is the company’s ability to deliver strong cash conversion. Our target is to generate strong adjusted net income to cash conversion that you can see in our trailing 12-month performance. This cash generation facilitates optionality as it relates to our second component, deploy. There are 4 methods by which we plan to deploy capital. The first is to strategically acquire complementary capabilities, access to new channels and solutions that accelerate our growth strategy. The second is increasing shareholder value by executing the recently authorized $100 million share repurchase plan. The third avenue consists of internal investments that would further advance our position as a differentiated provider of solutions.

The fourth avenue is utilizing cash to further reduce debt via accelerating payments of our term loans. The deployment of capital in these areas is connected to the third component of our strategy, maintain, which is to deploy capital while maintaining a target net leverage ratio of approximately 2x to 3x. We have started the next phase of our capital allocation journey and believe this strategy will yield strong returns for our shareholders. Please turn to Slide 9. We are pleased with our performance. As such, the company is reaffirming revenue, adjusted EBITDA and cash flow guidance for 2025 and increasing its adjusted EPS guidance due to previously executed debt refinancing and tax benefits. At the midpoint, this reflects revenue of $4.4 billion, adjusted EBITDA of $313 million, adjusted EPS of $4.80.

In summary, we are continuing to execute and believe V2X is well positioned to meet our customers’ critical mission requirements. Jeremy, I’ll throw it back to you for some closing comments and thoughts.

Jeremy C. Wensinger: Thank you, Shawn. The team’s performance has me excited. We are delivering on our commitments and executing with excellence. Our robust pipeline reflects the strategy of the company going forward, and our awards are validating that strategy. Our strategic intent is nothing more than mission excellence. My team is aligned and executing to our global strategy. It is an honor to be at V2X. Now let’s open it up for questions.

Q&A Session

Operator: [Operator Instructions] The first question today comes from Ken Herbert with RBC Capital Markets.

Kenneth George Herbert: Nice quarter. Jeremy, maybe just to kick off for Shawn, how do we think about the T-6 contract in terms of sort of incremental revenues this year and next year in particular? And how does that ramp? And how does that scale up?

Shawn M. Mural: Yes, we’re very excited about the award that was announced last week. We think it’s a franchise that the team clearly demonstrated the execution of the strategy that Jeremy has laid out for the company. From a revenue standpoint and impact, so we began transition. I expect no impact to the financials this year. That transition period goes until early 2026. And then I think when we look at the historicals, the program has been somewhere between $200 million, $300 million a year is kind of how we’re thinking about it going forward. But obviously, that’s subject to a lot of variables, funding profiles. We’ve got to get through the protest period, that sort of stuff. So we’ll see how things play out.

Jeremy C. Wensinger: I would add to his comments just that this team did exactly what we have laid out in terms of strategy. I could not be happier with that team and what they’ve been able to accomplish. And I think their past performance was the driver here. And so we’re excited about the opportunity to stand the program up. But it really goes down to the past performance this team has been able to demonstrate. And I think the customer recognized that, and we’re just honored to be a part of it.

Kenneth George Herbert: That’s great. And the full year guide implies sort of a bit of a step down at least off the second quarter into the second half EBITDA margins. Was there anything in particular in the second quarter? Or maybe how do we think about sort of the EBITDA margins in the second half and maybe upward potential to the guidance?

Shawn M. Mural: Yes. I said in the prepared remarks, there was a conclusion of a contractual commitment. That was worth about $6 million in the quarter, Ken. And so we had contemplated that previously. We did have it in the back half of the year. Team did a great job of closing on those actions and facilitating that. So that was realized in Q2. So that’s really why you see the jump to the 7.6%. Absent that, we’d have been at 7.1% for the quarter. But again, those things are — we knew it. The team did a great job of executing it. They happen — I’d say they’re nonrecurring, but somewhat reoccurring in nature. It’s just the types of contractual closeout activities, settlements, things of that nature that happen, and that happened in the second quarter. So really happy with being able to capture that early.

Operator: Our next question comes from Andre Madrid with BTIG.

Andre Madrid: To stay on T6 for a bit, I guess, looking at it, was this one of the 5 different $1 bill plus opportunities that you called out for ’25 that you were bidding on? And maybe just, I guess, more broadly, a status update on how we are across those 5.

Jeremy C. Wensinger: It was, and we’re honored to have the opportunity to have it awarded right now. We continue to make progress on the other ones. Again, I think the team has aligned itself around the ones I’ve laid out before, and they continue to execute to the strategy. And this is just a proof point on that strategy in terms of being able to capture award. So again, I think I’m excited about what the business development team is doing. I’m really excited about what the execution team is doing to provide that past performance that customers are recognizing. So again, I think we are — we continue to be excited about the pipeline that I’ve shared with you and also those major pursuits that are kind of near term in nature.

Andre Madrid: Got it. Got it. And then obviously, you also called out strategic acquisitions in the cap deployment strategy. It was the top point actually. And a peer of yours did — it was reported that earlier this quarter or this past quarter that they were looking to possibly sell their aircraft maintenance business. I mean, how are you thinking about the legacy Vertex business? And is this something that you are looking to build out further inorganically? Would this be something of interest?

Jeremy C. Wensinger: No. I mean we have — we love our aircraft maintenance business. I think we’ll continue to look at building out the MRO and mission modernization side and renewal side of the business. But again, I think where we’re positioned right now, I like what we’re doing. I like the awards we have. And whatever capital allocation strategy we put forward is going to be in the best interest of the shareholder.

Shawn M. Mural: Think of it, Andre, I think the way we view things a bit is complementary components that enable solutions for our customers. I think those are the things that we would initially start to look at from an M&A. And again, I think I said in the remarks, we have a target ratio of staying between approximately 2 and 3. I think Jeremy has used the word optionality since he’s been here. And to do things beyond that, I think, constrain some of that optionality to do other things from an investment standpoint, either in the business or other things.

Jeremy C. Wensinger: Yes. I mean, again, I think keeping that optionality on the table is important to me. I think whatever we do is going to be very thoughtfully done to add to the overall value of what we’re offering. And again, I’m not trying to use words that sound somewhat flowery, but you kind of get where I’m going in terms of I like having optionality on the table. I like the idea of doing — if we were to do any acquisitions that are going to add to the value that we offer to a customer today or extend to customers that we desire. So again, I look at the capital allocation strategy as one that keeps us within, as Shawn said, that 2% to 3% range, but also adds value, like I said, either what we’re doing today or things that we want to do for someone going forward.

Operator: The next question comes from Jonathan Siegmann with Stifel.

Jonathan Siegmann:

Stifel Financial Corp.: So just back on the T-6 contract, congratulations, a great takeaway win. Ken asked about how the revenue ramps. Can you talk about how you’re thinking about managing the risk? It is a new program, not new type of work, of course. But how does — how do margins kind of flow relative to the company as a whole?

Jeremy C. Wensinger: I’ll let Shawn talk to the margin side. I will tell you, this team does this exceptionally well. One of the things that I have come to appreciate about this company is our ability to manage the execution of programs from really cradle to grave. And they have a tremendous ability on a global basis to support these programs, whether it’s supply chain, whether it’s the deployment of people. If you think about just what we’ve hired in the last, I want to say, 30 days, we’ve hired almost 1,200 people in the last 30 days in terms of standing up various programs. This team does an amazing job at this. And I am greatly impressed by their ability to manage the program start-up, the execution of the program and deliver on customer commitments.

And that was what we were talking about with regards to the war fighter training program. They went FOC in July. And that customer couldn’t be any happier with that team’s performance. And I think what Aileen and that team are doing is a demonstration of our ability to stand up these larger programs flawlessly. And so I’m expecting nothing less than that on the T-6 program.

Shawn M. Mural: When we think about the margin specifically, Jon, so they will ramp. Traditionally, what we see on a program of this nature is they will start at less than the company’s composite average and grow over time. And by time, I would bound that in 18 to 24 months. And why do I say that? It takes some time to establish, and we’ve seen it in a program that we set up late last year like F5, get on the ground, understand how the supply chains work, understand the workflow, understand the schedules to maintain aircraft availability. And that’s absolutely what we’re about bringing to our customers. And so it will take some time to go do those things. We expect nothing less on T-6. And I can tell you that Jeremy, myself, Roger Mason personally went down, worked with the team on that proposal and engaged and the team has got a very good plan that they’ll begin executing exactly like Jeremy stated.

Jonathan Siegmann:

Stifel Financial Corp.: Excellent. And maybe if I could ask just on the budget environment. The big beautiful bill had quite a few things that seemed right on line with readiness in areas that you could benefit from. Just any comments on that. And we’re hearing some other companies in the space talk about some frictions around contracting actions and anything like that. So is there anything that you’re seeing pause in the environment that you would flag for us?

Shawn M. Mural: It’s a great question. I think what we have talked about, which is our focus on readiness whether it’s aircraft or whether it’s mission support side that we do. We have seen that what we have as a strategy and what we have as capability aligns well with this administration’s goal on readiness. We’re excited on T-6. Look, we deliver some of the best readiness rates in the industry. We’re excited to deliver those readiness rates to this customer. And so we think this budget aligns well with what we do. We have not seen friction to date on what we do because, again, what we do aligns exceptionally well to this administration’s goal, and we’re all aligned with it.

Operator: The next question comes from Peter Arment with Baird.

Peter J. Arment: Jeremy, Shawn, Mike, nice results, good to chat with you. So just to follow up on Jon’s kind of comment around the budget. Jeremy, you’ve made it kind of a point to bid on a lot more, and you’ve kind of highlighted that on a much bigger pipeline. Maybe and T-6 is a great example. But what are — what else are you seeing that’s kind of that you think is in V2X’s wheelhouse? Are you getting a lot more opportunities?

Shawn M. Mural: Well, I think we’re seeing very good demand pull, and we referenced it in the comments in the earnings call from FMS. We’re seeing customers want to — for us to deliver what we do for the U.S. government to them. And so we’re seeing nice demand pull there. I think we’re seeing good demand pull from renewal and modernization. I think those are areas where we are — from a budgetary standpoint, we’re a good value proposition. We’re extending the life of these assets. We are giving them optionality on the extension of these assets. And I think that is something that has resonated well with the customers. So again, when I look at the overall portfolio, we are well positioned, but I am seeing certain customers that are, like I said, on the FMS side, wanting more of what we do for the — in terms of, hey, you’re delivering these type of readiness rates, you’re delivering this type of capability.

We see that and we want that. And so they’re pulling that through us. And again, I think on the renewal and modernization front, this is just something that extends life of assets and gives them modernization of those assets and better lethality. So again, I think everything we’re doing is aligned very well with this administration to give them value for the dollars they’re spending and giving them better outcomes as a result of that.

Peter J. Arment: Got it. That’s helpful. And then is — should we think of FMS as a margin enhancer? Or have we — you’re still dealing with kind of past history of the way customers are buying from you?

Shawn M. Mural: Yes, I’d say it’s a little bit of both that the recent award for the F-16 that we announced earlier is an example of, again, that pull that Jeremy mentioned from customers. There are opportunities for margin enhancement, absolutely. We think it’s a big lever for us going forward from like a global capability and that stickiness of kind of land and expand, Peter, there. And this is, again, a great demonstrated capability for the team that leverages CLS support for our platform as well as base support. You’re seeing the breadth of capability that is V2X brought to these customers and the ability to deliver. We think it’s a good economic case for the company as well as for the customers.

Jeremy C. Wensinger: And Shawn makes a good point. They’re not pulling one side of this business. They’re pulling the entire company. So the entire company was on that F-16 award. And so I think it’s important to realize — that doesn’t happen unless V2X is who it is today. We are bringing the entire solution to the customer, and the customers recognize that and are asking for that.

Operator: The next question comes from Tobey Sommer with Truist.

Tobey O’Brien Sommer: Could you speak to your expectations for a seasonally strong contract award quarter in calendar 3Q from here? And I understand we’ve already got the T-6 award. So I kind of mean above and beyond that. Do you think we’re in store for a strong seasonal quarter? Or are there puts and takes?

Shawn M. Mural: Our awards tend to be fairly episodic. Again, we’re thrilled T-6 came out when it did. But again, in terms of the other ones that we’re pursuing, we’re always going to be a little lumpy when it comes to our book-to-bill just because of the episodic nature of these awards. We’ll always have a steady flow of on-contract growth and some smaller awards. But again, as we pursue these larger and more franchise-based programs, they’re going to be more episodic. And so I don’t worry about the current quarter book-to-bill. I look more at the TTM because I think that’s a better reflection of who we are and the type of business we’re in. So I hope that’s helpful because, again, in any given quarter, we may see very, very limited amount of new awards that are of any size.

And then again, you get something like T-6 and some other awards that come through in any given quarter that make a quarter kind of pop. But again, I think on a TTM basis, that’s the way I kind of look at the business.

Tobey O’Brien Sommer: It’s nice to see the Army training contract ramp. But clearly, there are some headwinds in sunsetting and a task order reduction that you cited. Are there any known incremental drags to ’26 revenue growth? Just kind of want to get your sense now for what those other things on the other side of the ledger might look like.

Jeremy C. Wensinger: Yes. Great question. The — yes, a couple of, call it, headwinds sunsetting. I’ll remind folks, we do participate in contingency support operations, and those things can be episodic in nature. That’s exactly what we have today in the Middle East. You will have noticed that the Middle East is down slightly year-over-year. Beyond that, the headwinds that we’ve previously talked about, KC-10, [indiscernible], there’s a modest amount of that in the remaining of this year. For next year, we just kicked off the planning cycle where we’re going through those details. There’s nothing that gives me tremendous pause or concern right now about ’26. I think there’s better visibility in light of the T-6 award, the F-16 award, how those things will play out. We’re going through the planning phases because they are just now obviously ramping up and award notifications within the last 30 days.

Tobey O’Brien Sommer: And if I could sneak 2 in. You mentioned a shift to fixed price. How is that occurring? Because it could happen because the customer is converting a cost plus to a fixed price or you could simply be bidding on different kind of work that’s contracted differently or maybe a blend of the 2. And then with respect to your share repurchase, do you anticipate that being open market? Or would the company participate should there be any future secondary offerings?

Shawn M. Mural: I’ll start with the fixed price question. So it’s a little bit of both, right? We have said previously and the team continues to put what are today cost type contracts in front of customers to convert to fixed price. We get mixed reactions to that. I’m encouraged by some of the things that I’m hearing, but it hasn’t resulted in contractual actions yet. And then I think to Jeremy’s point on the — that he made in the prepared remarks on that pipeline, I think we’re seeing more of a shift of the programs that we are pursuing that are fixed price in nature. Would you agree?

Jeremy C. Wensinger: Absolutely. And again, we welcome it. I’ve said that before. I have the utmost confidence in our team’s ability to deliver. And I think when you get to outcome-based contracts, this is what this company does best. We are — we love contracts where it is entirely outcome-based because our performance demonstrates to a customer that they can trust us, they can rely on us and we’ll deliver.

Shawn M. Mural: And then your question on the share repurchase, I think it could be both. We’ll see. We’ll do, again, what’s in the best interest of the shareholders. Very happy to have the plan in place. We talk about these things regularly. We think it’s the next evolution for the company. And again, we think we’re extremely well positioned. We’re very excited about the growth, and we’ll take advantage of what we can.

Operator: The next question comes from Joe Gomes with NOBLE Capital.

Joseph Anthony Gomes: Congrats on the quarter. First question is looking at the release, it looked like revenues in the Asia Pacific sector declined about 10%, a little over 9%, I guess, in the quarter. Just wondering, is that due to an absence of exercises? Or is there something else going on there?

Jeremy C. Wensinger: I’d say there’s been some delays in some of those exercises. So when we think about the contracting environment, it’s — there have been some delays in initiating some actions on the part of our customers. The team has wonderful opportunity sets in front of us. Not all of them have been acted on. I think they will be at some point, but we have seen, you’re exactly right, a little bit of decline. I’m not worried about it. really for when I think longer term and as I think about 2026. But yes, this quarter, we did experience a modest amount of reduction.

Joseph Anthony Gomes: Okay. And then on the backlog, I wonder if you could just kind of provide some more color here. So in the first quarter backlog was approximately $12 billion. That did not include LOGCAP, Ascension Island or the full value of the training. I think you mentioned this quarter, it’s $11.3 billion, does not include LOGCAP, but you didn’t mention Ascension or the full value of training. So I just wonder if you could kind of walk me through that would be a fairly substantial decline in the backlog quarter-over-quarter.

Jeremy C. Wensinger: Sure. Yes. So for Q2, the net bookings were $517 million for the quarter. That’s a book-to-bill of 0.5 and the backlog, as you rightly point out, at 11.3. Ascension Island is in that bookings number. And the award for the next year of WTRS will fall into — the order for that will fall into Q3. So not really, I’ll say, surprised where we are when we think about the bookings for the year. It’s played out almost exactly to where we thought it would in terms of its weight distribution, kind of 70-30 back half first half. So yes, there’s plenty of things that are not in it, as we pointed out, but I think we’ll see that pick up here in the back half of the year.

Operator: The next question comes from Mariana Perez Mora with Bank of America.

Unidentified Analyst: [Technical Difficulty] on for Mariana today. I was wondering if you could talk about the protest environment a little more broadly with the 45-55, 1 half, 2 half split we discussed last quarter, how do we think about the risks of new awards being pushed to the right and slipping into 2026?

Jeremy C. Wensinger: Well, it’s always a risk, right? We manage those risks quite well. But again, we don’t control the outcome of those protests. But again, we follow the process. We support our customers. Again, I’m not surprised by protests when they happen, but I think the team does a very good job in supporting protests as they get adjudicated. But again, it’s the nature of this business. And like I said, I think the team does a good job in terms of supporting whatever is required in support of those protests.

Shawn M. Mural: What’s encouraging is the cadence of the new awards that we expected has held from a timing standpoint, which has been very encouraging in terms of when you would expect to see new awards itself. Whether or not folks protest, I don’t know, they’ll make their own decisions on those things. We think our offerings stand on their own and believe we offer great value to our customers.

Unidentified Analyst: And then switching gears a little bit. You highlighted using more of a commercial-based approach on this latest T-6 award. Can you kind of dive into that and what that looks like?

Jeremy C. Wensinger: Well, I mean, the supply chain side of this business is a fairly significant part of the overall business that we run. I think the procurement team again, I don’t want to overemphasize the commercial aspect of it as much as it is commercial by nature. What they procure on a global basis and their ability to deliver that — those goods and services on a global basis, I’ll stand up against anybody. So when I look at what we have in front of us on T-6 and the number of aircraft that we need to continue to fly, it will just leverage what we do best already, which is a commercial-based approach to procurement.

Operator: The next question comes from Kristine Liwag with Morgan Stanley.

Kristine T. Liwag: A quick follow-on question on the T-6. So I mean, this is an IDIQ award. You gave the revenue waterfall earlier. But I was wondering, with the IDIQ, like what’s a sure revenue waterfall versus where could you potentially see plus ups or downside risk to the numbers that you gave?

Shawn M. Mural: Yes. So think of it as — it’s listed as an IDIQ. We a lot of it will be dependent on funding availability, right? So obviously, Jeremy mentioned the [ fleet 700 ]. There are always things to go do on these platforms to maintain readiness. I think it will come down to the funding availability. It is — we are the only contractor that has been selected to execute this. So it’s not like you’re competing for task orders or things of that nature. It will be — do the customers have the funding to improve availability, maintain it. That’s what this will be. I only go off of what the program has historically executed. We’ll see what the priorities are in a more defined budget. And once we get beyond the transition, which was announced last week.

Jeremy C. Wensinger: Yes. I kind of view it the way if you think about the war fighter training, that was a single award IDIQ. There are dozens and dozens of task orders that we bid. It has to do with individual tasks that you go after in terms of supporting various aspects of the program. I would envision this one to be the same way. And I think Shawn is right. They’re spending between $200 million to $300 million a year on this program today. I would envision that those same task orders would manifest itself again in the new award.

Kristine T. Liwag: Great. That’s really helpful. And maybe following on what you guys said about the contract award pace, it seems to be progressing as you had expected. But if we look at book-to-bill, book-to-bill was 0.4 in 1Q and 0.5 this quarter, and this is taking aside the T-6 order. But it seems like outside of T-6, the book-to-bill continues to be below 1. Can you provide some context regarding what your expectations are for book-to-bill for the second half of the year? And if there are holdups in those contract structures, where are those? And does the big beautiful bill address some of those uncertainties? Because ultimately, when we look at your full year outlook for revenue and EBITDA, they didn’t change for the full year, even though you’ve had a very strong second quarter. So I just want to understand the movers and shakers for your full year outlook.

Jeremy C. Wensinger: I think publishing the pipeline gave you a line of sight on the size of things that we are pursuing, which is pretty impressive. I think when I look at, like I said, book-to-bill, I look at the TTM on book-to-bill because of the episodic nature of our awards. I don’t think any one quarter is truly reflective of the business as much as it is on a 12-month basis. Our goal is to be obviously well over 1 in a book-to-bill in any 12-month period. And that’s what we’re tracking to. And when I look at the number of major pursuits that I have in front of me, it supports that. So again, I think a quarter is interesting, but I think the TTM is much more reflective of a business like this.

Shawn M. Mural: I think you mentioned, I’ll call it, a muted environment from a book-to-bill in the first 2 quarters. It’s not dissimilar to what we thought when we came into the year, to be very candid with you. We forecast bookings, revenue, profitability, all those things, and it’s played out kind of in line with what we thought. As Jeremy said, by the end of this year, at or above 1. There’s lots of variables that will go into that. But we’re not seeing anything as we sit here right now, I think that changes our perspective on being there at the end of the year.

Kristine T. Liwag: Great. And to get to that 1 or above 1 for the full year, you’d have to have a pretty chunky order activity in the second half. Are there particular programs we should monitor or milestones that we should track?

Shawn M. Mural: Well, I mean, one obviously was the T-6, how that plays out. That is a — what I would consider kind of a binary event, right, when we think about that we’ll see how it plays out and what that would look like. The other one that I mentioned earlier that would happen here in the quarter would be the WTRS next year or the second year of it, and we’re off in that transition. So I would expect something there as well.

Jeremy C. Wensinger: Yes. And there’s some other ones that obviously, we wouldn’t share because they’re competitive sensitive, but there are some other awards that we’re expecting in the second half of the year. But again, when I look at the business on a 12-month basis, it is performing exactly where I would expect it to be.

Operator: The next question comes from Noah Poponak with Goldman Sachs.

Noah Poponak: Maybe just staying on that, I think you said you expected the bookings split first half, second half to be 30%, 70%. And I guess the specific math on that would imply $2 billion of bookings in the back half, which would keep the book-to-bill below 1. Is that more of a very directional statement? And as you mentioned, there’s some sort of binary-ish things that could make it better than that? I guess to have book-to-bill at 1 for the year, it has to be 1.5 in the back half.

Jeremy C. Wensinger: Yes. Yes, it was more of a directional comment, Noah, but I think we have line of sight to a book-to-bill that is greater than 1. between now and the end of the year. There are some variables that will come into play that I would consider somewhat binary. But again, we have line of sight into those things. I think the back half of the year will play out such that we end at or above 1.

Noah Poponak: Okay. Will the T-6 award likely have a protest? Or is there a scenario where that goes clean without a protest?

Jeremy C. Wensinger: I don’t know. Yes, I don’t think we know. Like I said, we were awarded. The team has begun transition, and that transition ends in January of 2026. So we’ll see how some things play out.

Noah Poponak: Okay. Can you remind us the drivers behind the pickup in top line organic revenue growth in the back half versus the first half?

Jeremy C. Wensinger: Sure. So F5, the contract that we had a year ago has some modest growth. Think of that as $20 million-ish or so. The WTRS award from a year ago, think of that as $140 million, $125 million in that range depending on how some things go. So those are some of the big ones and the F-16 award that we had that we mentioned earlier. So those are some of the bigger awards here in the back half of the year that we’re under contract, we’re executing, and we expect to — we expect to deliver on.

Shawn M. Mural: And I think, Noah, of note, which I highlighted earlier, we hired about almost 1,200 people in the last 30 days in support of those programs. So we’re off and running on those programs.

Noah Poponak: Okay. Excellent. And then last one, what are the mechanics behind raising the EPS guidance, but not the EBITDA or cash flow? Just it didn’t look like interest expense or tax rate or [Technical Difficulty] the normal below the operating line things were unusual year- to-date.

Jeremy C. Wensinger: Yes. It’s the interest expense from earlier in the year when we did some refinancing. It was about $0.15 that contributed there and a very modest maybe $0.01 or so of tax benefit. So that was the basis for the raise from some refinancing that we did kind of back in Q1 that we now flowed through to the total year.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks.

Jeremy C. Wensinger: Great quarter. Thank you for your support. Thank you for taking the time to take the call. We’re excited about the second half of the year, and we look forward to talking to you further. Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.