Earnings Call: Q3 2022

Nov 8, 2022

You for joining us for the V2X Third Quarter 2022 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Keith, and I will be your operator for today's call. At this time, all participants have been placed in listen only mode. Following management's presentation, I will open the call for a Q and A session. Please note, this call is being recorded. I now would like to turn the conference over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at V2X. Thank you. Good afternoon, everyone. Welcome to the V2X Third Quarter 2022 Earnings Conference Call. Joining us today are Chuck Prow, President and Chief Executive Officer and Susan Lynch, Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on our Investor Relations website, investors. Spectris.com. Please turn to Slide 3. During today's presentation, management will be making forward looking statements Pursuant to the Safe Harbor provisions of the federal securities laws. Please review our Safe Harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward looking statements. The company assumes no obligation to update its forward looking statements. Additionally, I would like to point out that in addition to GAAP earnings, We will be discussing and reporting various adjusted non GAAP metrics, including pro form a revenue, adjusted operating income and margin, Adjusted EBITDA and margin, adjusted operating cash flow, adjusted net income and adjusted diluted earnings per share. The definition of these non GAAP measures can be found in our presentation materials, press release and Form 10 Q filed with the SEC. At this time, I'd like to turn the call over to Chuck Crow. Thank you, Mike, and good afternoon, everyone. Thank you for joining us on the call today. Please turn to Slide 4. I am pleased to report a strong start for V2X with 3rd quarter results that are demonstrative of our ability to grow, I'd like to thank all of our employees for their focus on delivering results and achieving significant progress on integration, while providing high quality uninterrupted service and support to our clients. We reported 3rd quarter pro form a revenue of $961,000,000 which is up 10% year over year Compared to Vectrus and Vertex Q3 2021 results, this growth was driven by continued expansion on existing business And the phase in of new awards. Notably, year over year organic growth for the legacy Vectrus was approximately 10% in the quarter, Driven by performance in EndoPaycom, growth on LOGCAP, contribution from Port Vending as well as volume associated with Rapid Response and contingency support. Adjusted EBITDA was $79,000,000 in the 3rd quarter, representing an 8.2% margin. Adjusted diluted earnings per share was $1.33 Results were ahead of our plan for the Q3 and driven by the Solid execution of our teams and delivering strong results, they were also earlier than anticipated. A significant achievement in the quarter was V2X's Solid adjusted operating cash flow of $121,000,000 Our cash generation reduced net debt by almost $90,000,000 since July 5 and demonstrates the strong cash flow characteristics of our business. Given our current momentum, significant progress on integration And Q3 performance, we are increasing the midpoint of our guidance range for revenue, adjusted EBITDA and adjusted operating cash flow. During the quarter, we seamlessly executed across all aspects of our business and successfully reached full operational capability On our new 7 year $850,000,000 Navy Test Wing Atlantic program, which included phasing in over 1,000 team members 35 different aircrafts. Importantly, our phase in included the implementation and deployment of our proprietary aircraft maintenance And Management Optimization, or AMMO, solution, which is a V2X differentiator. AMMO is designed to provide our And supply chain by leveraging technology and data analytics. This is a great representation of how the digital and physical merge Creating the converged environment and our V2X and search technology to improve outcomes. AMLO is just one example of the strong alignment of We believe the breadth of our capability provide meaningful future cross selling opportunities and revenue synergies that I'll discuss in greater detail shortly. I am also pleased to report that our integration activities are making significant progress. Please turn to Slide 5, where I'll elaborate on the integration timeline and goals. Last quarter, we stated that our priority for the remainder of the year We are executing on this plan and delivering solid performance, while meeting all major milestones. Our integration framework And strategy remains on track. Our teams are focused on the harmonization of processes, technology and applications, which is supporting our ability to generate Rapid outcomes and positioning us to achieve our previously committed to cost synergies. We remain excited about the potential opportunities that lie ahead for to lead in the converged environment and our teams have made great progress in building a foundational structure for future growth. For example, we recently conducted our 1st Industry Solutions Summit at our Indianapolis Engineering, Production and Technology facility. During these sessions, the combined VQX team from across the globe showcased their representative solutions. These solutions included virtual reality training, Mobile Sensors, rapid prototyping, engineering, digital integration, environmental effects, Cyber hardening, the 0 Trust architecture and electronic security to name a few. This provided an opportunity for our teams to further capitalize on the to both new and existing clients. This immersive session has already yielded additional opportunities for growth, Including the potential to leverage Vectrus' engineering capabilities within the Navy to a Vertex Air Force contract. As you can see, our integration efforts so far are enabling us to deliver solid performance, while aligning and engaging for future growth as 1v2x. Looking ahead, we will enter 2023 with 3 operational business units We anticipate all major integration work streams to be completed in 2023. We also believe that the combined organization will be able to leverage its enhanced scale and more efficient cost structure to benefit our pipeline of current new business opportunities, recompetes as well as existing contracts. Furthermore, we expect to be well underway in executing incremental new business opportunities that neither company was pursuing previously. By January 2024, our organization will be fully integrated and is on track to achieve the full run rate cost synergies from the Vertex merger. Please turn to Slide 6. We believe our key leading indicators support our expectations for long term growth. Our current near term pipeline New business of $20,000,000,000 which increased 16% from last quarter. This includes current bids submitted pending awards of $2,700,000,000 And bids expected to be submitted over the next 12 months of $17,200,000,000 Our bids submitted pending award have more than doubled from last quarter, which reflects a robust proposal environment, but also a notable delay in the rate and pace of awards. While it is difficult to forecast the timing of contract awards And ultimately, the contribution to revenue, we believe V2X is well positioned to win its fair share of these opportunities. Even though award activity has slowed, our teams have been able to increase work scope on existing programs, which results in additional orders and backlog. For example, we were recently awarded a $58,000,000 contract to provide cockpit upgrades on 48 KC-130J aircraft. This important win leveraged our existing work installing infrared countermeasures on the aircraft. This work increases V2X's content on the KC-one hundred and thirty J and expands our current revenue base with the Marine Corps. Additionally, B2X also won a 4 year task order with the U. S. Space Command to provide upgrades and engineering on the Cobre Dane radar system. These upgrades will ultimately increase the radar's capability and useful life. This award leveraged our sensor and platform integration capabilities that are focused on inserting technology and upgrades into complex airborne and ground systems. Expansion on current contracts has Historically, we've been a key growth driver for the legacy Vectrus, and we believe with a larger contract base, there is an opportunity to further expand our existing business as our sales teams bring innovation and technology to complex challenges throughout the mission lifecycle. As we have discussed previously, B2X has won several significant contracts that are in the early stages of their life cycle with notable periods of performance remaining. These wins are partially reflected in the trailing 12 months award in excess of $6,000,000,000 and our $13,000,000,000 backlog. Our total backlog covers approximately 3.5 times of our previously communicated 2022 Pro form a revenue of $3,600,000,000 This is an important attribute of our business and provides a significant portion of its recompete contracts, which is reflected in our awards and backlog. By successfully defending our recompete And with a solid amount of revenue under contract over the next several years, we believe V2X is well positioned to focus on addressing new opportunities And revenue synergies to further grow the business. As a combined company, V2X has access to expanding and higher margin markets at the intersection of technology and operations that we believe will enable differentiation and drive growth. We believe our unique and comprehensive set of capabilities will accelerate V2X's ability to lead and meet the mission essential requirements of our clients, while delivering cost savings, increased security and resiliency. The V2X strategy is designed to drive growth We will leverage our core mission and operational strengths to create more value in core markets by inserting technology and enhanced capabilities, Increase market share and domain to our operational knowledge and past performance is differentiable and expand our mission and capability footprint .Specific to our largest client, the DoD, our solutions will allow V2X to address a larger part of the DoD's Importantly, our capability set will now position V2X to address additional markets not historically available to the legacy companies. For example, we believe our rapid prototyping, engineering, platform modernization, 5 gs, predictive maintenance, software development, cyber asset hardening, integrated electronic security and virtual reality training solutions We'll allow V2X to grow within the DoD's $116,000,000,000 research, development, test and evaluation RDT and E budget. This portion of the DoD budget presents an opportunity to access additional spending Now would like to turn the call over to our Chief Financial Officer, Susan Lynch, to discuss our Q3 results. Thanks, Chuck, and good afternoon, everyone. Turn with me now to Slide 8. The results we will be discussing today reflect the Contributions of Vectrus from July 1 through September 30, 2022 and Vertex from July 5, the close date, through September 30, 2022, unless otherwise noted. Our Q3 financial results We're strong and a great start for V2X. 3rd quarter 2022 revenue was $958,200,000 Pro form a revenue was $961,300,000 representing an increase of 10% year over year We compared to revenue of $876,300,000 for Vectrus and Vertex in the Q3 of 2021. Organic revenue growth was 10% for legacy Vectrus and was driven by continued strong performance on LOGCAP V, Growth associated with the Fort Benning Eagle contract award and volume associated with rapid response and contingency efforts in Europe as well as EndoPaycom. Organic revenue from EndoPaycom increased 113% year over year, which is a noteworthy achievement, especially given the revenue contribution from the Pacific Defender exercise during the prior year period. V2X is continuing to increase its footprint in the region, positioning us well for growth to support our clients' mission and strategic initiatives in Endo Paycom. Pro form a revenue growth was driven by the previously mentioned items in addition to the ramp of new business wins, including E6B, Advanced Helicopter Training Systems, Navy Test Wing Atlantic and Global Strike Command. Today, V2X has a more diversified portfolio from a client, capability, contract and geographic perspective when compared to The legacy Vectrus. This diversification also helps provide top line resiliency through various economic and political cycles. The improvement in V2X's portfolio composition is demonstrated in our 3rd quarter revenue metrics. Our revenue with the Army in the 3rd quarter now makes up 37% of total revenue compared to 66% for legacy Vectrus last year. Our revenue with the Air Force now makes up 70% of revenue compared to 14% last year. And the revenue from the Navy now comprises 28% of total revenue compared to 11% last year. Finally, our revenue from civilian and other clients, including the intelligence community, NASA, the Drug Enforcement Agency, the U. K. Rural Navy, Commercial comprises 18% of revenue compared to 8% last year. From a contract mix perspective, our portfolio is now much more balanced. Our cost plus mix as a percentage of revenue in the Q3 was 53% compared to 74% for legacy Vectrus last year. Our fixed price contract mix is now 43% compared to 23% last year. Regarding inflation, To date, we have not experienced broad based increases due to inflation in the cost of our fixed price and timing materials contracts that are material to the business as a whole. We are continuing to monitor the impact of rising costs on our active and future government contracts, but currently do not see a material impact to the business. Operating income was $4,500,000 including $44,900,000 of merger and integration related costs as well as the amortization of acquired intangible assets of $24,200,000 Adjusted EBITDA was $79,000,000 For 8.2 percent margin compared to $20,500,000 for legacy Vectrus in the same time last year. Adjusted EBITDA was higher than our estimate in the Q3 and was driven by our team's successful efforts in delivering solid results Approximately unchanged due to a large contribution in Q3 2021 for programs that were in their final phases of completion. Fully diluted earnings per share for the Q3 of 2022 was minus $0.56 Adjusted EPS, which adds back merger, integration and amortization of acquired intangible assets and debt issuance costs was $1.33 compared to 1 point $0.13 for legacy Vectrus in the same period last year. Please note that because of the merger, the calculation of adjusted EPS now adds back Non cash amortization of debt issuance and related costs, which equated to roughly $0.09 and $0.02 in the Q3 of 2022 2021, respectively. Turn with me now to Slide 9 to discuss cash and liquidity. Our focus on cash collections and process improvement in the quarter yielded strong results with significant cash generated for operating activities of $80,100,000 Excluding merger related payments of $41,000,000 Adjusted cash from operations in the quarter was $121,000,000 This noteworthy performance resulted in a $87,000,000 reduction in the company's net debt in less than 3 months, Exemplifying V2X's ability to generate strong cash flow with low capital requirements. Net debt is $1,200,000,000 A reduction of 7% since the close of the merger on July 5. I would like to thank our operations, Contracts and Finance teams for their commitment to our all hands on deck, cash approach and overall priority To deleveraging the company's balance sheet, we have a clear path to rapidly reduce the company's debt, which is supported by our strong fundamentals, including a robust backlog supported by long term contracts, limited recompete risk And solid revenue visibility. Slide 10 further demonstrates our deleveraging approach and mindset. We have been able to reduce our net debt leverage ratio from 4 times at close to 3.7 times as of September 30. Importantly, we have been able to reduce our leverage ahead of plan, which was previously expected to be 3.7x at the end of Q4. Given our current momentum, we believe our net debt will show further improvement in Q4. Debt reduction remains a primary goal for our management team, and we continue to target a net leverage ratio of 2 to 3 times in the midterm. Let's turn now to Slide 11. Given our current pace of integration and Q3 2022 results, We are increasing the midpoint of our second half guidance for revenue, adjusted EBITDA and adjusted operating cash flow. Revenue is now expected to be in the range of $1,920,000,000 to $1,940,000,000 Adjusted EBITDA is now expected to be $145,000,000 to $150,000,000 Adjusted diluted EPS is expected to be in the range of $2.14 to $2.28 Adjusted EPS guidance for the second half now reflects The add back for non cash amortization of debt issuance and related costs of $6,000,000 or $0.15 of EPS Adjusted net cash provided from operating activities, excluding merger payments, is now expected to be in the range of $140,000,000 to $150,000,000 With that, I'll turn the call back to Chuck. Thank you, Susan. We have taken a great first step in our journey at V2X and are excited about the path in front of us to continue driving results, enhancing shareholder value And delivering converged solution throughout the mission lifecycle. Now I'd like to open the call up to questions. Thank you. At this time, we will begin the question and answer session. At this time, we will pause momentarily to assemble the roster. And the first question comes from Tobey Sommer with Truist. Curious that you could pursue together that you weren't able to pursue kind of separately very effectively. You Had a list of those. Is there one you would highlight as sort of a near term opportunity and one that might excite you the most over a medium one to So, Tobey, you cut out a bit in the early part of your question. I think the question was of the $20,000,000,000 of New opportunities we're pursuing, which ones of those are most interesting in the near and longer term? That's right. Thank you. Okay. Well, thank you and hello, Toby. How are you doing? Yes. We talked about retail in our last discussion that We have opportunities that are emerging in both NASA as well as the intelligence community That are very interesting to us in the shorter term. As we've mentioned in the prepared remarks that we've looked at approximately $20,000,000,000 of net new That will be evaluated to be pursued and those are 2 categories of opportunities that Again, I would put her in the put in the shorter term horizon, say, the next, say, 6 to 18 months. And then longer term, there are opportunities, like the Arctic Opportunities and the National Science Foundation, and there are also other Also larger opportunities in both USAID and the Department of State that would be out probably closer Any other question on that, Tobey? No, no, I think you addressed that well. From the performance was good in the quarter and then you did adjust guidance. Would you say that you have improving visibility into financial performance as you enter into 2023? And If so, what are the main drivers? Yes. I think I was very, very pleased with the performance Our teams in this really our Q1. As we talked about in the prepared remarks, we were very fortunate to Move both revenue and EBITDA to the left and it was one of the drivers for our Q3 performance. I will say that we continue to see pressures in the marketplace in terms of slowing awards. Having said that, we do have very good visibility into the 4th quarter. We feel like we understand 2023 reasonably well now and we look forward to providing our guidance for 2023 Thank you. And the next question comes from Brian Guisebois with Raymond James. Hey, good evening and thanks for taking my questions. Wanted to talk about free cash flow. It really outperformed what we were looking for. Can you talk maybe about what the rate of debt pay down might be over the Few quarters, and really what we can think of is kind of from a cash flow perspective as well as you kind of integrated the businesses. I'm assuming there's some big improvements on DSOs, maybe talk about where the combined organization was In July, which wasn't very long ago, where it is today and where you might be 6 or 9 months down the road? Thank you. Brian, thanks for the question. We had a really good cash flow quarter from All the time, if you haven't, when you go into a merger and you're kind of figuring out how to forecast cash, The team just did an excellent job and really exceeded our expectations and was able to pull a couple of things into About our interest expense forecast, we are a low cash taxpayer And we've got low CapEx. And so we're going to be working to pay down debt as quickly as possible. We'll be taking a look probably in the first half of next year at refinancing our debt and getting something with a little bit lower Cost of capital, and so just stay tuned to hear more about that going forward, but outstanding quarter from a cash flow That's great. I appreciate the color. Wanted to maybe talk about it. The integration Sounds like it's going really well. We think the fit is a really good one between all the companies as well. Can you maybe Talk about any synergies that you saw from this quarter from the mergers, but which is probably very few. And then really talk about the milestone to unlocking some of the key synergies that you've previously outlined. Thank you. Yes. So I've been very pleased with the kind of initial operation of the combined company. As you remember, the legacy Vertex company was integrating a merger from Raytheon earlier in the year, we saw very, very strong execution and continue to see strong execution And that aspect of our synergy case, with regard to the combined operations of the full B2X, We're very closely aligned in processes. We're closely aligned now in kind of our technology. In a very short amount of time, we found a way to consolidate our kind of financial operations so that our operators can receive insights into their financial performance. And we're on track, as I mentioned in the prepared remarks, to meet the synergy commitments that we have previously communicated. On top of all of that operational color, just the cultures couldn't be more aligned. The focus of both Legacy teams now one combined V2X is very mission oriented. And given the complementary nature The missions that we supported, it's really been fun to watch the teams come together. We talked about the Industry Solutions Summit That we had in Indianapolis and to me that just brought to life all the possibilities for future revenue synergies In addition to the cost synergies we've already discussed. That's great. And if I could just sneak one last one in Before I jump back into the queue, it looked like EBITDA margins were really healthy. Is this the way we should think about the run rate going forward, Kind of pre synergies, or was there something that kind of produced some of that incremental strength in this quarter that might be non recurring? Yes. We were very pleased as both Susan and I mentioned in our remarks about the EBITDA performance in the quarter. The quarter was aided by a couple of transactions that the team did a really great job of pulling into the quarter. We did set and raise our EBITDA guidance for the remainder of the year and we look forward to providing 2023 guidance with Regarding the EBITDA when we get together again in February, but net net, a very, very strong performance in the quarter driven My great execution from teams that have now come together. Fantastic. Congratulations. I'll jump in the queue. Thank you. Good talking to you. Thank you. And the next question comes from Robert Connors with Stifel. Hey, Chuck. Hey, Susan. Thanks for taking my question. Hi, Rob. How are you? Hey, doing well. Hey, Rob. How are you doing? Thanks for the call. I'm doing well. I think you guys gave a pretty good breakdown of what sort of drove the revenue there. And just doing the back of the envelope calc, I think the Vertex portion in the quarter was about $453,000,000 of revenue. Just wondering sort of what the Flavor of that was year over year and what drove that from the legacy Vertex? Yes. As we mentioned, the combined growth rate was pretty well split about 10% per legacy And I would say the complexion is very similar. We had really healthy on contract growth. And as we mentioned in the time where we You have slowing awards. That's important, but it's also important to note that the legacy Vertex part of our Now combined B2X Company was coming off a very, very strong first half of this In terms of new awards with Navy Test, Wing Atlantic and Global Strike. So the Vertex component of the business Again, was really aided by new startups, which I've just described as well as on contract growth. Okay, great. Thank you. And sort of a follow-up for Susan. Of the about $90,000,000 debt pay down, When I look at the 3 sort of tranches of debt, where was the majority of that pay down? Was it on The higher cost of capital debt? Yes. It was all on the ABL. We have not yet paid down any of the second lien, And that will be our focus going forward. Okay, great. I'll jump back in queue and congrats on the quarter. Thank you. Appreciate it. Thanks for the phone call. Yes. Thank you. And the next question comes from Joe Gomez with Noble Capital. Good afternoon. Congrats on the quarter. Thank you, Joe. How are you? Doing well. So I wanted to start off, circle back. Susie, you made a comment that you're monitoring inflation, but You're not seeing a material impact yet. A number of the other companies that I follow in the defense space have all Identified inflation as a real headwind. I'm wondering maybe you could just give a little more insight as to why At this point in time, inflation has not really been impacting you guys? Yes. There's actually two things. So most of our labor is, controlled by labor unions, and I Our labor cost is controlled by the labor unions. So as we go through negotiations with the unions, we're also working with our customers to make Sure that those changes get included in our contracts via contract change order. And then conversely, on Almost all of our contracts except for 1 or 2, the materials are on cost recovery And so we do the best that we can to negotiate with our suppliers to keep the cost low for our customers. But in the case that we cannot, that cost is paid by our customers. And we have seen, our customers and we've not had To do this quite yet, but we will consider it, is that the our customers are becoming more Open to having an EPA or economic price adjustment clause in the contracts. And so it's It's a global issue with inflation. It's not one that we are loner facing and we'll be working with our customers when we do encounter a problem. We'll be doing that In our bidding process to include that contract clause in our contracts And if we start to see an issue, we will be going back and negotiating with our customers. Okay. Thank you for that. You mentioned on the guidance in the last quarter when we talked, we're Talking about kind of the guidance split in revenue for the back half of the year, you guys were kind of talking about 40five-fifty 5 split between the 3rd and the 4th quarter. Pardon me, given the performance In the quarter, it looks like it's going to be much closer to a 48, 52 type of A split and you mentioned that you were able to pull some business forward into the quarter. I was wondering if you could talk a little bit more about the You're able to pull into the quarter, and maybe even just highlight some of that as to where it came from and why you're able to pull it forward? Yes. Thank you. So there was actually 2 events. One was a large revenue item that working with our customers, we were able to With our customers, we were able to or one of our customers, we were able to meet their need. And so we were able to pull That effort forward into the quarter and that I would say was I'll characterize it as an average margin item. And then there was a second item that we actually had in our Q4 forecast as well that Working with the customers, they were actually very motivated to get that into the Q3 and we accommodated them and that was a very High margin type of situation. And so we will actually be collecting that In the within our second half and fourth quarter forecast that we've been able to confirm that we will be able So really two items and the underlying business Performed very, very well and within our forecast. So that was the main driver and you're exactly right, a 48 to 52 split, A little bit more of the EBITDA came into the Q3 from the Q4. So you're exactly right on, Joe. Okay. Thank you. And then Chuck, you mentioned about somewhat of a slowing award Environment, maybe give us a little more color and detail on that and kind of your thoughts here On the continuing resolution, which runs through mid December and what kind of impact You see that having on the business here in the short term? Yes. I'll start with the later part of your question, Joe. As you know, we're Predominantly funded across our business through the O and M budget, which is a bit more stable when it comes to continuing resolutions. And you also know we're heavily optimally driven and given what's happening in Europe and there's still Afghan and Neo operations as well as activity and Endo Paycom, we're seeing a good deal of activity That what I like to think about is kind of on contract growth, if you will. With regard to our Pipeline, as I indicated in my prepared remarks, we are seeing a slowdown. You saw that in the $2,700,000,000 Worth of pipeline that has already been submitted, which was up 16% over last quarter. So we're continuing to see the bids submitted grow. We're continuing to see a very strong pipeline growth as represented in the 20 dollars of the pipeline, dollars 20,000,000,000 of pipeline, I should say. But it is it has flown down. I wouldn't necessarily attribute it to the continuing resolution, but it's something that we're going to continue to work closely with our clients on. Okay. Great. And one more, if I may. You talked, Susan, about the potential the next year of looking at Refinancing the current debt out there, any thoughts? I know it's really early, but are you just looking Lower rates? Are you looking at maybe kind of getting a different type of debt structure out there? Any thoughts you might have? And again, I understand it's you're probably really early in Process here. Good question. So the biggest thing is to lower the rates. The Rate on the 2nd lien is quite costly. So that is thing 1. Thing 2 is the labor intensity On the ABL, I think Mike Smith and I and Chuck would really like to get into just more of a traditional revolver where We have access to it and don't have to file a borrowing base every month. But that being said, we really do appreciate The support and help that we get from our lenders. Great. Thanks. We'll get back in queue. Thank you, Joe. Appreciate it. Thank you. And the next question is a follow-up from Tobey Sommer with Truist. Thanks. I was wondering if you could give us some color for what the recompete percentage of the book of business looks like over the You already talked about how you don't have anything chunky over the next two and a half years, but to what extent kind of can you be outward facing rather than defending the Yes. We are really fortunate and that many of our largest 3 competes are now behind us. And as I stated in last quarter's remarks and also In the discussion today as well, we really don't have any recompete more than 2% of revenue for the next couple of years actually. And Toby, what that is going to allow us to do, it's going to allow us to free up some business development resources to focus on This net new combined opportunity set that we've talked about. So while there's always recompete in a portfolio That's as broad as V2X is. It's pretty smooth when it comes to the size and not being Our largest opportunities and as I've indicated that's going to free up some time and attention To really focus on and make progress on these net new opportunities that are so attractive to us. Just to drill into that, would you describe it as sort of moderately lower than average In addition to not having anything of scale or would you call it substantially? I would say, I mean, just I think just mathematically in the early year, just moderately lower than average. And if you can think about the way I have the 7 year contracts go. It's you understand the math of anybody. It will be lower in the 1st couple of years, More average in the middle and then higher at the end obviously. Thank you very much. Appreciate it. Good talking to you. Thank you. And we also have a follow-up from Robert Connors with Stifel. Just to touch on the Endo Paycom revenues, which was pretty strong in the quarter. Can you give any just sort of comments as far as like initial discussions you're having with regards to future off tempo in the region and You know whether we can still see some sort of sequential growth out of that? Sure. Yes. We couldn't be more Pleased with the connection we have with our clients in EndoPaycom. We're now at full operational capability on Coagulant. As you know, We have been for a while. There actually have been some exercise support activity this year in EndoPaycom as well. The work that we're doing in the Philippines is now at full operational capability as well. And as you may or may not know, every other year in Indo Paycom, there is a large exercise it was Pacific Defender in 2021 and in 2023, the name of the exercise is Alison Sabre. Thank you. I skipped my mind. So we're looking at another Large exercise in the EndoPaycom region next year as well. The last point I'll make on this is that we really see an opportunity To actually add on to Toby's earlier point, with regard to our Aerospace business and our training business, With regards to extending the capabilities we have and to augment the former Vectrus capabilities and end of Paycom as well. And we're closely looking at a number of opportunities that would provide that type of revenue synergy into the future as well. Okay, great. That's very helpful. And then if I remember, 1Q has sort of traditionally been the letter of the cash flow quarters under the old Vectrus. I was just wondering If seasonality of just cash flows has changed with the combined entities? Great question. It's almost identical to our cash flows. It's when you pay all your I could view the suit of your management bonuses, etcetera. The and even through, I would say, the first Half of the year, that's where we really push to go cash flow positive. And then we typically have That's when we generate all of our operating cash flows is in the second half of the year. So unfortunately, it's almost identical. Okay, great. Thanks for the help and thanks for taking my question again. Thank you. Thank you. And this concludes the question and answer session. I would like to turn the floor to Chuck Prow for any closing comments. Thank you and thank you all for joining us on the call today. We really enjoy these discussions and we look forward to continuing to talk with you and We'll talk to you on our Q4 and year end call next time. Talk to you soon. Thank you. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.