Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the V2X Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Michael Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X.

Michael Smith

Thank you. Good afternoon, everyone. Second Earnings VXX Call. the to Quarter Conference XXXX Welcome

Slides and Chuck Officer; President Joining our are website, Officer. section are Investor President on and today's Chief the available Financial www.govXx.com. Vice us today of Senior Prow, Executive Relations presentation Lynch, and Chief for Susan

Please turn to X. Slide

description for harbor making and During the Please laws. federal be pursuant statements our the the from release actual results statements. a of statements. results to forward-looking safe obligation contemplated forward-looking press cause in some that may forward-looking presentation, materials no of today's will safe factors to these presentation securities review update assumes statements management harbor differ of the The our its to provisions materially company by

definition like GAAP diluted flow, our point addition these pro and to be net discussing Investor adjusted on forma press in that, income and found margin, measures Relations earnings, cash adjusted available can and release of various EBITDA non-GAAP website will and the adjusted would in earnings our materials SEC. adjusted metrics, to reporting with be our out share. operating revenue, in Additionally, presentation non-GAAP filed including we I per The adjusted

to like Chuck Officer of would I the and VXX. time, Chief this call over to turn President At Prow, Executive

Chuck Prow

a to on Thank X. you This Thank afternoon, on and second you turn will everyone. today. VXX. you, update Please Slide Good the afternoon, Mike. for quarter joining call us I for Susan strong

marketplace. growth, our and key opportunities of near-term XX% momentum organic and revenue the in are Our bookings significant awards, and over differentiation representative

clients' complex are and commitment bringing missions. innovation, Our future to our that value results talented reflect continued employees most our the

recognized more and I a XX% senior the second of than a participant our as the is one VXX was With of VXX background, extremely leading during are like to VXX again the foundational proud am once U.S. our reporting aspect of. I'd employees a that employer VETS highlight of quarter, leadership announce veteran to I that, veterans Indexes. team and business in a ecosystem. leading military pleased

for business to Our are our clients. outcomes our success XX,XXX enable employees, culture while over and and employees diversity our positive improving global thank across that for I'd helping results VXX, drive like

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growth strong demonstrated double-digit XX.X% and share per million for due the was Our $X.XX. $XX.X margin in year-over-year contribution is new on or a awards, X.X% quarter Adjusted continued wins. and further securing as existing earnings as performance revenue was expansion well continues from last diluted to recompete programs, success quarter adjusted EBITDA

and long-term in year-over-year VXX. and in debt-to-EBITDA efforts second during our net driver requirements Talisman The the to be by the is mission region. continues new on the continue to driven region, Importantly, ratio existing growth X.Xx. a programs, leverage expansion Pacific Revenue including increased Sabre. quarter, for key INDOPACOM improved The now exercises, or below region XX% increase

couple defense of weeks posture, week-long integration. and of trip industrial-based the Defense a force visiting cooperation regional conducted Just region, allies capability enhanced Secretary with in to discuss development, ago, security the a

more service and exercise important this to military American Talisman exercise in with allies. member The the Sabre is biannual visited overseas, While participating strengthening that XXXX privileged among support than XX also from exercise. involved is VXX Secretary partnerships key the nations. personnel XX,XXX interoperability

region. support Looking clients' priorities opportunities our initiatives further to ahead, and see the we numerous in

XX% awards, sequentially. Naval in awards to book-to-bill activity Recent was a resulting $XX.X billion billion, a Wing to Pacific growing of total $X.X in This of X.Xx. strong in would at including backlog $XX quarter VXX, Bookings over Test the drive ratio yielded backlog billion.

capturing win with was and of X-year targeted strategic several support success internationally. logistics culmination $XXX State a provide client pursuits, task with is a and to State Department XXXX. the Contributing in into represents campaign. leading of engagement substantive notable bookings Department momentum million the positive and growth order including of for VXX position business backlog new Our This most to multiyear our a

We evaluation model in Wing enhanced to leveraging of the phase-in is are testing engineering, Naval capabilities. activities the results development, production VXX solutions, VXX pleased software end, allowing that Pacific its win years. has new over the our to next Navy test detail market greater X also subsequent to that million award, its and executing discuss began quarter shortly. supporting our that I Test $XXX the announce sell-through breadth am successful addressable the business I'll the critical seeing VXX of and differentiated for work with

XXXX in momentum per the we increasing EBITDA adjusted revenue, are the guidance our and Given share. our business, for earnings midpoint of adjusted

harnessing VXX is its winning Please has X. and securing programs, Slide turn core business. converged growing new its capabilities and to recompetes

provide our won of million the During Systems $XXX includes solutions. This infrastructure the X-year including quarter, an our contract we recompetes, business. with further extending of unique to strong over the of application Naval sustainment, Facilities million foundation converged Command $XXX

secured a NAVAIR million Center X-year services. depot-level support Southwest Fleet also We Readiness contract $XXX maintenance with for

million awarded engaging state are competencies Middle operational East of Department teams. supported the to clients I A task our to State is and a and to last also was by our V effort. referenced win slide. critical of our with new the This business X-year in core order was LOGCAP clients logistics the how teams life leveraging is the team, region support on Department which provide compelling $XXX mission being week our State new win of example prior with

and clients of Department a agility requirements for the LOGCAP Our differentiator recognized level of in VXX and awards. readiness our with State to mission support strategic high was evident, and by

significant support global Department leveraging the contingency our to State, see logistics further geographic missions Looking of of the while VXX's with opportunity ahead, global we capabilities and footprint.

leveraging our and space, results in production over manufacturing successful square our seeing deliver XXX,XXX business by support to of engineering, engineering of development, sustainment testing software facility allowing and are We unique This solutions feet efforts. and center model executing excellence. sell-through provides of VXX modernization

cycle to a differentiator concept provide is to significant is sustainment from new ability that driving solutions awards. full Our life

capabilities. during engineering, is our integration increased the example, of efforts true the and opportunities successfully that is a finalized representation it clients pipeline merger. utilize three the to new due manufacturing This because For important and quarter, work note VXX to separate with

VXX. development opportunity be effort awarded We engineering new with with an and client brand-new and a enduring expected a new are designed, products sustained prototyping to This proprietary also that that lead product follow-on is business. to produced, by will represents

Our market approach the of capture program. enabled successful merger this the and

was the see previously we pursue. and while the markets term cutting-edge fully with or solution GMR-XXXX, proprietary awareness. see multi-domain to We which cyber-hardened able pilots. that developed One is for turn modernization significant provides is Gateway Please originally opportunities was solution Slide helicopter a and and GMR unlocking awareness not to The router across nearer to drive opportunity situational sustainment deployed core opportunities provide with that Mission company situational XXXX our X. Router growth to additional enhanced ruggedized

yielded data the is multiple fully Our of of unclassified from classified and across converged environment the integrating GMR-XXXX, which the continued on sources advancement have connections, battlefield. capable technology enabling a

platforms. GMR-XXXX systems, air leak the across and has technologies to successfully and its land demonstrating year, integrated been Over information ability tested and various on past the

X,XXX an sole-source it stating issue VXX outcome to issued a of that demonstration, intends Army GMRs. up notice a to to As the a to contract recently successful produce

applicability multiplying of benefits potential can platform on agnostic Command of the the broad effort. support be near-term force in Joint numerous we opportunity, this and Control or have the All Beyond GMR-XXXX JADCX believe DoD's Domain integrated platforms and

tomorrow's its significantly legacy of combine VXX capabilities deep useful of solutions Please their perfect expertise of improving a is VXX battlefield. platforms, mission a able turn developing to cutting-edge use the example innovative had to technologies modernize on Slide rich how that X. to insert also develop GMR to for is and capabilities history solutions life.

VXX is the and Display Falcon minimal the enhancing inserting the original provide advanced expand at pilots new modernizing OEM technology to in work. the today, effectiveness allowed and us CDU and the is or Force capabilities has example, our important with Center It's cost our F-XX its of note upgrading For that Air helping CDU. success technology the of by to new Unit VXX and Fighting aircraft

is are is F-XX. We team currently X,XXX continue decades. F-XX, this of associated our Force We modernization extending Longer-term, to technology expected grow work and focused its efforts of was our over which fleet CDUs. the to Air couple XXX VXX to backbone to at Nearer-term, award program aircraft. of to the continuously next we contract of upgrade the approximately that's on new now the expected positioned flying entire this Force Air for well digital with incorporating believe a across important enhance stands aircraft

results. I'd discuss over Financial Chief our to Officer, quarter call turn our Now, the to Susan to Lynch, like second

Susan Lynch

turn and Chuck, Slide Please good Thanks, to everyone. X. afternoon,

of to increased existing the achieved recompete the board across Pro Our results growth half momentum million. securing in $XXX.X second core our was award Revenue in and of backlog revenue Thus XXXX programs, from reflect financial programs excellent wins year-over-year INDOPACOM. second were originally commitments. be we to protecting to to through its VXX its in acceleration delivering in and witnessed is XXXX. Advancing growth the the year, addition an the fundamental deliverables pursuit that business. on expansion the forma key in XXXX, were in business our in quarter late of and far, recognized contemplated on and new continued half first including new XX.X% contribution wins by exercises growing

results, strong in significant our a which During of up hard X.Xx resulted driving on This XX% total $X.X and basis, yielded was bookings of coverage. representing dedication over a revenue the team's backlog billion. $XX billion, quarter, work sequential

the is center million cybersecurity million the contract the Naval contract U.S. which visibility for the win. and include largest of supports Pacific Our cybersecurity provides is the under still award and the does total solid or U.S. $XXX outside beyond, The Test over sister X-year our protest Army to work, not and cyber backlog Wing XXXX for OMDAC $XXX award

Cash U.S., deliver on contribution margin. been earlier XX.X back back in of milestones was cost have $XX in amortization to performance, debt in incumbent $X.XX. transition the Continental integration adjusted enhanced client Adjusted merger that occurred was and adds and for year cost EBITDA are shares programs shares. from amortization diluted cost which X.X% quarter by expense million, $XX.X program the were adds EPS, million issuance than assets, and value back intangible INDOPACOM recognition was in XXXX the which Diluted expense, our issuance $XX.X and begin debt of specific which exercises million the excited interest driven integration-related on or Interest was of and We outstanding for adds OMDAC million. quarter was EBITDA, adjusted the second since anticipated.

our net our to improved debt At improvement $XXX $X.XXX improved normal Net show indebtedness end curve. on million EBITDA million, net the leverage as and expense seasonality. end was sheet will This in recent turn billion. the in from interest of grid continue to quarter. and and of the Slide forward the now balance quarter, the second lowers ratio the operating our approximately believe was to on $XX.X ratio X.XXx net the position XX. lower cash on a sequentially flow ratio term at further X.X helping consolidated quarter. second half increases was quarter debt loan, Cash pricing yield ramps Moving in year, the and to net or leverage debt with of leverage offset last XXXX We improvement in consistent

sheet our $XXX.X to needs of revolver and from quarter the accounts and available payments company enhances excludes M&A of million the of for MARPA. $X.X Cash receivable of liquidity in million Adjusted was for VXX's second $XXX establishment benefit and agreement of and customers. the a operations million MARPA sheet, the $XX.X $XXX our the integration million flow $XX purchase nearly facility in capacity was on liquidity the the of growth and related This future strong. previously-mentioned and the million With the quarter balance benefited facility cash quarter. under balance operating further cash remain million for of flow has fundamentals and flexibility. master over from approximately the support

equity to rapidly Our revenue cash solid ability further and enhancing support long-term value generation, delever, flow for visibility our shareholders. excellent backlog, free our

excellent creating a XX. our the services clients, to with leader the this priority drive pleased spending all of broader segment year, first Please opportunities am across our VXX strategy for and on our is for results the I results highly areas tailwinds operational aspects Slide market. to executing quarter, teams the of in half key board, to of turn for aligned excellent a to be remains federal well-funded and and our which the growth. continue

adjusted the raising we Given year in visibility, the EBITDA, guidance. our positive momentum, revenue, solid full are and adjusted trends midpoint our EPS and of business, diluted

the Operator? I'd open Now, questions. to like call to

Operator

will Capital of from Ken [Operator Herbert Instructions] RBC come today Markets. Our question first

Stephen Strackhouse

Susan, Ken this Herbert. This on is Steve quarter. Strackhouse and Mike, on Chuck, congrats for

like question quarter a Vectrus you the First book-to-bill. on discuss would profile and in you quarter. revenue with that helping bookings guys had Vertex significant the maybe Can the how the looks combination and the of It really be maybe generate is margin nice synergies? really backlog of

Chuck Prow

Yes.

it's -- two-part answer have a great it. and think really I a question to

due nice we into -- base from both And normally to organizations were sales, that privileged a the amount produce we will a of the our very as the sales missions and see prior significant contracts largely however, in sales what also capabilities with are other much we're, the driving again, that mix existing we had the actually quarter. call, expansion as, So happened, expansion, to of were what that pretty contracts of those as I today. say, clients both with that results new there support. those well line you

we're set of it of our And really So I'm something is a we win happen. that combination. seeing lot revenue which obviously sure rates a pre-merger really have would from making their levels, thrilled spend maintained nice time synergies also the

Stephen Strackhouse

full ask then maybe like leverage sooner to little of quarter a one have debt flow if it. anticipated? was positive. you Got initially I your pay discuss X.X%. back for net availability ratio cash think about just And Can the to maybe It the was goal can I initial than in more. a quite free bit year the looks

You guys that. ahead certainly of are

just well. any So around that as commentary

Susan Lynch

Right.

with net targeted, master year. by to leverage hard paid get $X.XXX our X.XXx billion of for down quarter, $X.X of to which be of million put about the million end services ratio revolver, of implemented improve we we're previously the about generated us X.Xx cash continue that debt. had leverage Steve, flow the yes, in to quarter now, that account about We work So took to below at agreement the billion at $XXX hopefully and to which Right the incremental the going $XXX and ratio. and debt

Operator

will Our Raymond of come Gesuale from next James. Brian question

Brian Gesuale

opportunities. to I the on job that maybe wanted Nice into quarter. peel of pipeline

numbers. a the of $X got where and another, you is billion pending you're State opportunities bit the maybe as lie by of broader it and Can about You've the broadening business in win as adjudication with customer integration what are said sets? together That think you I really was talk the base the $XX impressive, Department it, like seems here. billion Those little huge some pipeline. of well entities are coming

Chuck Prow

what is very from is my pipeline. to perspective that see And really a is great broad-based pipeline Sure.

opportunities. in state have opportunities We additional significant

as additional We and exercises have opportunities, obviously, to with opportunities with clients well as our regard potential contingency operations. LOGCAP

sell today bit working. clients. the into we that of posted were which that existing And revenue services what combination posted synergies we strategy, the technology to like continue to talked continues aerospace that by business advanced emphasize of those business quarter. additional Our really but to The I'd of all very to really, of healthy this springboard robust. about And through we are evident our to becoming our a quarter apparent solutions us we a our solutions that very results advanced and have very, numbers this the also really pipeline, include really the be can

Brian Gesuale

of imagine quite business, speaking? products a some just because accretive of a margin profile Maybe the like And mix that Can follow-up you remind starting part it the to then of maybe just the is sound well. did as some really traction. generally gain us the I Fantastic. are as

Chuck Prow

are The business, sub-XX% is themselves that solutions that quite business grow, say, in a and would our I up of the at say yet, of aspect technology probably The also thrilled we're very our with. much to but not we'll accretive fact, from advanced all. profile margin is material. And continues overall

over applying the really awards operational federal So the services to these think actual we're three, marketplace that talking and And of bearing terms strategy of here broader this converged new would solutions that about. on that through terms the next like been new and the strategy to specific scale in we've out we convert and the segment of get four transition of is couple, quarters, work. broader in more may I profitability

Brian Gesuale

Great.

me for jump Can Sometimes in thrown year the the little be then be more of the have things back half of first a year? for of I'll kind second maybe really one and INDOPACOM's into can Just half to bit ambitious and there. continue the us and views we help with longer-term. you queue. strong, shape that the lumpy exercises it other and

Chuck Prow

Yes.

I when So that first the of of the on our from remains had presence the work though, excellent emphasis an in specifically clients. job into year the tell for about that pulled strengthening And the the the teams fact, region was, you, will did half in with we're year. working across XXXX, talking capabilities the planned significant. exercise much INDOPACOM our and we clients

profit the pipeline both in We as terms in teams year have the last you've opportunities nicely in pulling of and in our And XXXX. very, executed very couple of the and have half early to left. quarters, revenue of seen second the the

of 'XX focus going team half We I'm the to to of revenue second can year, this into as are with a anticipating year. continue good much and as on the this back half we expediting

Susan Lynch

XXXX. could that. LOGCAP add I transitioned We to if on And Kwajalein, April just V

is I now And found be that's first from it close note coming So apples-to-apples. for from have the to is go where revenue the pretty coming than the time to Europe we the third VXX, you to thing revenue which interesting. greater be this Asia interesting comparison, into quarter, is will other as the year-over-year a

Operator

of Sommer from Securities. Our Truist next question is Tobey

Tobey Sommer

the up pivot And company order in more there now all participate the customers? are that you left right region, are customer INDOPACOM with where in fully to And like with strategic say, contract off. relationships I'll vehicles the and would direction? and basically the any new right I'm establish you saying, even positioned to kind focus of the pick

Chuck Prow

Absolutely. I points as have profit islands mean, amongst as locations. is of and now from quantitative what I that presence and more INDOPACOM the the revenue across, it's equally XX believe seeing we important than the we're region, that

bases So we with in addition have for a various LOGCAP region. very pipeline Navy robust the the throughout to

LOGCAP of of outside opportunities as have include we again, We the opportunities about may opportunities talked well. state some department And the with Army.

like point thoughtful that, addition to operate the because So that we've points in et that it's necessary the I'd really really the is presence a emphasize of infrastructure, to lean way and country us cetera, to seamlessly very established very, such capabilities, tax that bid kind as very and already in revenue to of region. in profit, registrations, allow the

Tobey Sommer

would it there Are customers' Wing perspective that on for operationally to Test geographies significant from you that additional that sense from some your things smooth make under the perspective belt? customers' got now geographies out Naval and bid that the you've could

Chuck Prow

back we'd campaigns of opportunities. is East we Wing we Pacific in our up we Test Yes. additional as broadening our the have with We of that client in The in But Special clients that have is about of Aerospace Forces teams client our the scope have Middle the that and work avenues a big Atlantic opened get both the well the that Army come then to have Again, all focus and both those of Air across pursue for INDOPACOM entire new the the to the as presence and Force. depth talk geographies. perspective. is to often, these that business obviously when our is the and in aerospace concept a relationships will the we having clients, Navy work Navy points way like set but the operation that deal something replicate Navy in with from

Tobey Sommer

where be the if I based to perspective? in. on will When and a acquisitions entertain one do for from you're material you one leverage me, poised debt again Last could sneak company your repayment comfortable scheduled think

Chuck Prow

ways take that done conditions want speed, X to we to grow to are to and it grow again, talked new new we've always as below X.X We current that Well, We've I ways inorganically. looking But always this in the plus at we if to clear probably get really about you But when range. market be X.Xx. now. like and -- are wanted you be creative pay to right. would after the there growth and our say inorganically know, are year. course down, creative very

Operator

of Gomes Joe from Noble is question next Capital. Our

Joseph Gomes

Great quarter.

we bit changed. about award call. the labored Chuck, quarter little were in that on a It they said talked you last of talked, we last a and the So the bit have little pace when looks like might had

that in into what here half year? the would the wanted get pace of you're second awards of kind insight second, in Just the to your seeing of expect this the you

Chuck Prow

quarter, Well, the and for for the for sure, that. thankful floodgates we're broke

press now the both it $XX have are We under pipe As comments, quarter. it release. currently but in and was evaluation, a which up not prepared substantially wasn't last billion $X from of total billion

that that the slowing we're responding there make is that at So not the I and is point to pace all. the of RFPs rate down would

the months over, saw think was let's is that has it historically that may last be pace the just significantly fair say, I a case over that lumpy, here couple of improved is bit the but say we awards the XXXX. to As been

Joseph Gomes

quarter, And missed good second that were the given position on out thought any awards in to out were any in you that you you -- that win?

Chuck Prow

from average. both Atlantic our want said, Pacific base, as Navy And data from to both in Wing wins. take the Navy we're too -- it dig past. terms doing But I've Well, up much I from high Test to traditional excellent I you competitors, remember, and comes run you away as but Wing think will. Test recompetes a if I again, met we've with taking think pretty job or rates, and don't always away think decade an multiple might we incumbents, give the our protecting of of out across I don't new the we're portfolio, When business

that's believe winning think to well. but way perspective, do than them more a continuing share, I marketplace win again, I again, win We don't the all, from we're fair works. rate Joe. we're But the So our

Joseph Gomes

the the if I business about couple It looking strong and going about -- split may. year And what accurate? between first looks the half kind half. times pulling been, and Is XX-XX that some half Historically, XX-XX second a has we've of one you've the more, split very talked half talked and first and like to second second of first the of into a this the is more between half. that first be

Chuck Prow

about That's of what pulling and And I'll the for of the the like for continue based execution this XX-XX. year, the indicate. half upon And XX-XX results been Yes, normal happen. business on more think and the But just last anyway our because our of the of split X team. guidance year, would is short full that again, looking have left. attribute to doesn't more posture execution quarters deliverables, I years. we've the going couple our I'm last that transactions to X guidance to I team the first -- really the bet teams nothing it's our for That talked outstanding, or always milestones that to the

Operator

Our Singh Sahej from of come next will Stifel. question

Sahej Singh

your specific view opportunities towards of now Bert the the medium-term near-term? coming MRO. for through to be I'll was on then MRO? Sahej maybe into in what the the also is headwind that we're changed? Subin. terms And And I year. how has MRO touch And is halfway expected year, maybe guess, This to on that headwind a

Chuck Prow

Yes.

phenomenal First this the continue XXXX into again, all, They'll of these through business they're the actually to regard With they but that of will to with does all we are retirements the are plan. various more bit -- a moderate over our business year, of MRO business. the time. and planned move And nothing place that as planned. is platforms natural to half progressing look there, a But 'XX. occurred out were as retirements, elongation begin they second pace on promising in the

in positive for their to enormous actually But an MRO them be think us. of life. platforms that That some side. useful fact, bit a again, again, of continue the opportunity is elongated about In to business, as slowed terms

sustainment, realized point -- with Indianapolis other to The of to XXX,XXX square its encumbered that, own. when The that feet facility part manufacturing benefits have longer capabilities of -- life regard acquisition with really one has the the that the and of is of Indianapolis beginning that they OCI had on no that by is reality that owned and Vertex through demonstrate kind fact make were that facility they our modification we been I'll the Raytheon.

come. so of good early we're but really, a to of that. say, early as long facility benefit is positive within innings, stages, I'll seeing facility going And some capability really we're the that the It's signs be time seeing that and for to

Sahej Singh

Okay. well. That's logistics I'll then helpful. And maybe on touch really quick as

demand And across the the Deterrence Just as how strong to spend line then that as different Pacific branches? generally, is Initiative, the correlating buckets what do example? within Army, you top various maybe see as the staying is demand, power like of simple and it for logistics

Chuck Prow

base at or yes the exercising or regions. Yes. underlying advantage that would industrial kind is and a that, good conducting CENTCOM other OCONUS activities, essential that signal types in would INDOPACOM AFCAP that's that look have frame the would of the and is is it, that capability. either a commands when -- we part of the an matter, I of also it. I for And at LOGCAP But it to through significant I look demand way

VXX storms, or activities to we're today activities all logistics, a increases natural industry. that increased -- with either both in our Eastern seeing in Europe, like a like is through OPTEMPO as so OPTEMPO demand And again, exercises signal for

as that we enough, Department being intimacy can't State the have the important same to the I'll it as do well That's there. I can that the do to our point bodes all, was last time. first organization If make, and million that just mission as intend Department activity we emphasize support life of win model, the remarks humanitarian all of The for, to will model that for an by supported million to -- $XXX over within and activity. an conduct prepared revenue growth task State $XXX well replicate logistics we do, future fully which currently

Operator

we session. conference to I'd over the conclude like time, any closing this At turn to remarks. the will back Prow question-and-answer for Chuck

Chuck Prow

analysts next you, talk today. their and the questions. day. drive I'll look on Have thank a being to forward thank everyone we'll to good We to here our you results, great Well, for for continuing quarter. call

Operator

now today's presentation. for Thank conference concluded. has The you attending

may lines. disconnect You your now

V2X (VVX) 8 Aug 232023 Q2 Earnings call transcript