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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36341
V2X, Inc.
(Exact name of registrant as specified in its charter)

Indiana |  |  | 38-3924636
(State or other jurisdiction of incorporation or organization) |  |  | (I.R.S. Employer Identification No.)
7901 Jones Branch Drive, Suite 700, McLean Virginia 22102
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code:
(571) | 481-2000 |  |

Securities Registered Under Section 12(b) of the Act:

Title of each class | Trading symbol(s) | Name of each exchange on which registered
Common Stock, Par Value $0.01 Per Share | VVX | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ | Accelerated filer | ☑ | Non-accelerated filer | ☐
Smaller reporting company | ☐ | Emerging growth company | ☐ |  |

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☑
As of May 1, 2023, there were 31,005,399 shares of common stock ($0.01 par value per share) outstanding.

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V2X, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

|  |  |  | Page No.
| PART I. FINANCIAL INFORMATION |  |  | 4
Item 1. | Financial Statements (Unaudited) |  |  | 4
| Condensed Consolidated Statements of (Loss) Income |  |  | 4
| Condensed Consolidated Statements of Comprehensive (L oss) Income |  |  | 5
| Condensed Consolidated Balance Sheets |  |  | 6
| Condensed Consolidated Statements of Cash Flows |  |  | 7
| Condensed Consolidated Statements of Changes to Shareholders' Equity |  |  | 8
| Note 1. Description of Business and Summary of Significant Accounting Policies |  |  | 9
| Note 2. Recent Accounting Standards Update |  |  | 10
| Note 3. Merger |  |  | 10
| Note 4. Revenue |  |  | 12
| Note 5. Receivables |  |  | 14
| Note 6. Debt |  |  | 14
| Note 7. Derivative Instruments |  |  | 18
| Note 8. Commitments and Contingencies |  |  | 18
| Note 9. Stock Based Compensation |  |  | 19
| Note 1 0. Income Taxes |  |  | 21
| Note 1 1. (Loss) Earnings Per Share |  |  | 21
| Note 1 2. Deferred Employee Compensation |  |  | 22
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |  |  | 22
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |  |  | 29
Item 4. | Controls and Procedures |  |  | 29
| PART II. OTHER INFORMATION |  |  | 30
Item 1. | Legal Proceedings |  |  | 30
Item 1A. | Risk Factors |  |  | 30
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |  |  | 30
Item 3. | Defaults U pon Senior Securities |  |  | 30
Item 4. | Mine Safety Disclosures |  |  | 30
Item 5. | Other Information |  |  | 30
Item 6. | Exhibits |  |  | 31
| Signatures |  |  | 31

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
V2X, INC.
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

|  | Three Months Ended |  |
|  | March 31, |  | April 1, |  |  |  |
(In thousands, except per share data) |  | 2023 |  | 2022 |  |  |  |
Revenue |  | $ | 943,460 |  |  | $ | 456,471 |  |  |  |  |
Cost of revenue |  | 864,630 |  |  | 419,275 |  |  |  |  |
Selling, general, and administrative expenses |  | 48,251 |  |  | 31,959 |  |  |  |  |
Operating income |  | 30,579 |  |  | 5,237 |  |  |  |  |
Loss on extinguishment of debt |  | (22,052) |  |  | — |  |  |  |  |
Interest expense, net |  | (31,744) |  |  | (1,681) |  |  |  |  |
(Loss) income from operations before income taxes |  | (23,217) |  |  | 3,556 |  |  |  |  |
Income tax (benefit) expense |  | (5,737) |  |  | 701 |  |  |  |  |
Net (loss) income |  | $ | (17,480) |  |  | $ | 2,855 |  |  |  |  |
(Loss) earnings per share |  |  |  |  |  |  |  |
Basic |  | $ | (0.57) |  |  | $ | 0.24 |  |  |  |  |
Diluted |  | $ | (0.57) |  |  | $ | 0.24 |  |  |  |  |
Weighted average common shares outstanding - basic |  | 30,927 |  |  | 11,759 |  |  |  |  |
Weighted average common shares outstanding - diluted |  | 30,927 |  |  | 11,902 |  |  |  |  |

The accompanying notes are an integral part of these financial statements.
4

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V2X, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

|  | Three Months Ended |  |
|  | March 31, |  | April 1, |  |  |  |
(In thousands) |  | 2023 |  | 2022 |  |  |  |
Net (loss) income |  | $ | (17,480) |  |  | $ | 2,855 |  |  |  |  |
Other comprehensive loss, net of tax |  |  |  |  |  |  |  |
Changes in derivative instruments: |  |  |  |  |  |  |  |
Net change in fair value of interest rate swaps |  | (2,347) |  |  | 439 |  |  |  |  |
Net change in fair value of foreign currency forward contracts |  | — |  |  | 30 |  |  |  |  |
Tax expense |  | 148 |  |  | (95) |  |  |  |  |
Net change in derivative instruments |  | (2,199) |  |  | 374 |  |  |  |  |
Foreign currency translation adjustments, net of tax |  | 1,806 |  |  | (616) |  |  |  |  |
Other comprehensive loss, net of tax |  | (393) |  |  | (242) |  |  |  |  |
Total comprehensive (loss) income |  | $ | (17,873) |  |  | $ | 2,613 |  |  |  |  |

The accompanying notes are an integral part of these financial statements.
5

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V2X, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

|  | March 31, |  | December 31,
(In thousands, except per share information) |  | 2023 |  | 2022
Assets |  |  |  |
Current assets |  |  |  |
Cash and cash equivalents |  | $ | 62,145 |  |  | $ | 116,067 |
Receivables |  | 759,813 |  |  | 728,582 |
Prepaid expenses |  | 78,218 |  |  | 74,234 |
Other current assets |  | 26,016 |  |  | 13,049 |
Total current assets |  | 926,192 |  |  | 931,932 |
Property, plant, and equipment, net |  | 82,311 |  |  | 78,715 |
Goodwill |  | 1,655,545 |  |  | 1,653,822 |
Intangible assets, net |  | 475,345 |  |  | 497,951 |
Right-of-use assets |  | 48,577 |  |  | 52,825 |
Other non-current assets |  | 21,370 |  |  | 17,858 |
Total non-current assets |  | 2,283,148 |  |  | 2,301,171 |
Total Assets |  | $ | 3,209,340 |  |  | $ | 3,233,103 |
Liabilities and Shareholders' Equity |  |  |  |
Current liabilities |  |  |  |
Accounts payable |  | $ | 402,655 |  |  | $ | 406,706 |
Compensation and other employee benefits |  | 143,937 |  |  | 168,038 |
Short-term debt |  | 15,500 |  |  | 11,850 |
Other accrued liabilities |  | 198,101 |  |  | 196,538 |
Total current liabilities |  | 760,193 |  |  | 783,132 |
Long-term debt, net |  | 1,291,969 |  |  | 1,262,811 |
Deferred tax liabilities |  | 9,927 |  |  | 15,813 |
Operating lease liabilities |  | 37,082 |  |  | 41,083 |
Other non-current liabilities |  | 131,698 |  |  | 133,185 |
Total non-current liabilities |  | 1,470,676 |  |  | 1,452,892 |
Total liabilities |  | 2,230,869 |  |  | 2,236,024 |
Commitments and contingencies (Note 8) |  |  |  |
Shareholders' Equity |  |  |  |
Preferred stock; $0.01 par value; 10,000 shares authorized; No shares issued and outstanding |  | — |  |  | — |
Common stock; $0.01 par value; 100,000 shares authorized; 31,005 and 30,470 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively |  | 310 |  |  | 305 |
Additional paid in capital |  | 748,137 |  |  | 748,877 |
Retained earnings |  | 235,944 |  |  | 253,424 |
Accumulated other comprehensive loss |  | (5,920) |  |  | (5,527) |
Total shareholders' equity |  | 978,471 |  |  | 997,079 |
Total Liabilities and Shareholders' Equity |  | $ | 3,209,340 |  |  | $ | 3,233,103 |

The accompanying notes are an integral part of these financial statements.
6

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V2X, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

|  | Three Months Ended
|  | March 31, |  | April 1,
(In thousands) |  | 2023 |  | 2022
Operating activities |  |  |  |
Net (loss) income |  | $ | (17,480) |  |  | $ | 2,855 |
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation expense |  | 5,412 |  |  | 1,591 |
Amortization of intangible assets |  | 22,606 |  |  | 2,301 |
Loss (gain) on disposal of property, plant, and equipment |  | 31 |  |  | (16) |
Stock-based compensation |  | 12,872 |  |  | 2,558 |
Amortization of debt issuance costs |  | 2,513 |  |  | 204 |
Loss on extinguishment of debt |  | 22,052 |  |  | — |
Changes in assets and liabilities: |  |  |  |
Receivables |  | (30,649) |  |  | (29,898) |
Prepaid expenses |  | (3,840) |  |  | (4,849) |
Other assets |  | (5,938) |  |  | 4,520 |
Accounts payable |  | (4,115) |  |  | 22,693 |
Deferred taxes |  | (6,034) |  |  | — |
Compensation and other employee benefits |  | (24,182) |  |  | (21,138) |
Other liabilities |  | (11,740) |  |  | (7,202) |
Net cash used in operating activities |  | (38,492) |  |  | (26,381) |
Investing activities |  |  |  |
Purchases of capital assets |  | (9,076) |  |  | (2,195) |
Proceeds from the disposition of assets |  | — |  |  | 17 |
Net cash used in investing activities |  | (9,076) |  |  | (2,178) |
Financing activities |  |  |  |
Proceeds from issuance of long-term debt |  | 250,000 |  |  | — |
Repayments of long-term debt |  | (421,013) |  |  | (2,600) |
Proceeds from revolver |  | 348,750 |  |  | 217,000 |
Repayments of revolver |  | (163,750) |  |  | (200,000) |
Proceeds from exercise of stock options |  | 5 |  |  | — |
Payment of debt issuance costs |  | (7,507) |  |  | (458) |
Prepayment premium on early redemption of debt |  | (1,600) |  |  | — |
Payments of employee withholding taxes on share-based compensation |  | (12,806) |  |  | (1,626) |
Net cash (used in) provided by financing activities |  | (7,921) |  |  | 12,316 |
Exchange rate effect on cash |  | 1,567 |  |  | 729 |
Net change in cash and cash equivalents |  | (53,922) |  |  | (15,514) |
Cash and cash equivalents - beginning of period |  | 116,067 |  |  | 38,513 |
Cash and cash equivalents - end of period |  | $ | 62,145 |  |  | $ | 22,999 |
Supplemental disclosure of cash flow information: |  |  |  |
Interest paid |  | $ | 29,066 |  |  | $ | 1,513 |
Income taxes paid |  | $ | 300 |  |  | $ | 66 |
Purchase of capital assets on account |  | $ | 494 |  |  | $ | 5 |

The accompanying notes are an integral part of these financial statements.
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V2X, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES TO SHAREHOLDERS' EQUITY (UNAUDITED)

|  | Common Stock Issued |  | Additional Paid-in Capital |  |  |  | Accumulated Other Comprehensive Loss |  | Total Shareholders' Equity
(In thousands) |  | Shares |  | Amount |  |  | Retained Earnings |  |
Balance at December 31, 2021 |  | 11,738 |  |  | $ | 117 |  |  | $ | 88,116 |  |  | $ | 267,754 |  |  | $ | (5,900) |  |  | $ | 350,087 |
Net income |  | — |  |  | — |  |  | — |  |  | 2,855 |  |  | — |  |  | 2,855 |
Foreign currency translation adjustments |  | — |  |  | — |  |  | — |  |  | — |  |  | (616) |  |  | (616) |
Unrealized gain on cash flow hedge |  | — |  |  | — |  |  | — |  |  | — |  |  | 374 |  |  | 374 |
Employee stock awards and stock options |  | 67 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | 1 |
Taxes withheld on stock compensation awards |  | — |  |  | — |  |  | (1,626) |  |  | — |  |  | — |  |  | (1,626) |
Stock-based compensation |  | — |  |  | — |  |  | 3,100 |  |  | — |  |  | — |  |  | 3,100 |
Balance at April 1, 2022 |  | 11,805 |  |  | $ | 118 |  |  | $ | 89,590 |  |  | $ | 270,609 |  |  | $ | (6,142) |  |  | $ | 354,175 |
Balance at December 31, 2022 |  | 30,470 |  |  | $ | 305 |  |  | $ | 748,877 |  |  | $ | 253,424 |  |  | $ | (5,527) |  |  | $ | 997,079 |
Net loss |  | — |  |  | — |  |  | — |  |  | (17,480) |  |  | — |  |  | (17,480) |
Foreign currency translation adjustments |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,806 |  |  | 1,806 |
Unrealized loss on cash flow hedge |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,199) |  |  | (2,199) |
Employee stock awards and stock options |  | 535 |  |  | 5 |  |  | — |  |  | — |  |  | — |  |  | 5 |
Taxes withheld on stock compensation awards |  | — |  |  | — |  |  | (12,806) |  |  | — |  |  | — |  |  | (12,806) |
Stock-based compensation |  | — |  |  | — |  |  | 12,066 |  |  | — |  |  | — |  |  | 12,066 |
Balance at March 31, 2023 |  | 31,005 |  |  | $ | 310 |  |  | $ | 748,137 |  |  | $ | 235,944 |  |  | $ | (5,920) |  |  | $ | 978,471 |

The accompanying notes are an integral part of these financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our Business
V2X, Inc., an Indiana Corporation, formerly known as Vectrus, Inc. (Vectrus), is a leading provider of critical mission solutions and support to defense clients globally. The Company operates as one segment and delivers a comprehensive suite of integrated solutions across the operations and logistics, aerospace, training and technology markets to national security, defense, civilian and international clients.
Vectrus was incorporated in the State of Indiana in February 2014. On September 27, 2014, Exelis Inc, an Indiana corporation, spun-off (the Spin-off) Vectrus and Vectrus became an independent, publicly traded company. References in these notes to "Exelis" or "Former Parent" refer to Exelis Inc. and its consolidated subsidiaries (other than Vectrus). Exelis was acquired by a predecessor entity of L3Harris Technologies, Inc. in May 2015.
On March 7, 2022, Vectrus entered into an Agreement and Plan of Merger (the Merger Agreement) with Vertex Aerospace Services Holding Corp., a Delaware corporation (Vertex), Andor Merger Sub Inc., a Delaware corporation (Merger Sub Inc.) and Andor Merger Sub LLC, a Delaware limited liability company (Merger Sub LLC). On July 5, 2022 (the Closing Date), Vectrus completed its merger (Merger) thereby forming V2X, Inc. For a description of the Merger, see Note 3, Merger.
Unless the context otherwise requires or unless stated otherwise, references in these notes to "V2X", "we," "us," "our," “combined company”, "the Company" and "our Company" refer to V2X, Inc. and all of its consolidated subsidiaries (including, subsequent to the Merger, Vertex and its consolidated subsidiaries), taken together as a whole.
Equity Investments
In 2011, we entered into a joint venture agreement with Shaw Environmental & Infrastructure, Inc., which is now APTIM Federal Services LLC. Pursuant to the joint venture agreement, High Desert Support Services, LLC (HDSS) was established to pursue and perform work on the Ft. Irwin Installation Support Services Contract, which was awarded to HDSS in October 2012. In 2018, we entered into a joint venture agreement with J&J Maintenance. Pursuant to the joint venture agreement, J&J Facilities Support, LLC (J&J) was established to pursue and perform work on various U.S. government contracts. In 2020, we entered into a joint venture agreement with Kuwait Resources House for Human Resources Management and Services Company (KRH). Pursuant to the joint venture agreement, ServCore Resources and Services Solutions, LLC. (ServCore) was established to operate and manage labor and life support services outside of the continental United States at designated locations serviced by V2X and others around the world.
We account for our investments in HDSS, J&J, and ServCore under the equity method as we have the ability to exercise significant influence, but do not hold a controlling interest. We record our proportionate 25%, 50%, and 40% shares, respectively, of income or losses from HDSS, J&J, and ServCore in selling, general and administrative expenses in the Condensed Consolidated Statements of (Loss) Income. Our investment in these joint ventures is recorded in other non-current assets in the Condensed Consolidated Balance Sheets.
When we receive cash distributions from our equity method investments, the cash distribution is compared to cumulative earnings and cumulative cash distributions. Cash distributions received are recorded as a return on investment in operating cash flows within the Condensed Consolidated Statements of Cash Flows to the extent cumulative cash distributions are less than cumulative earnings. Any cash distributions in excess of cumulative earnings are recorded as a return of investment in investing cash flows within the Condensed Consolidated Statements of Cash Flows. As of March 31, 2023 and December 31, 2022 our joint venture investment balance was $6.5 million and $7.0 million, respectively. Our proportionate share of income from the HDSS, J&J, and ServCore joint ventures was $1.8 million for the first quarter of 2023 and not material for the first quarter 2022.
Basis of Presentation
Our quarterly financial periods end on the Friday closest to the last day of the calendar quarter (March 31, 2023 for the first quarter of 2023 and April 1, 2022 for the first quarter of 2022), except for the last quarter of the fiscal year, which ends on December 31. For ease of presentation, the quarterly financial statements included herein are described as three months ended.
The unaudited interim Condensed Consolidated Financial Statements of V2X have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. have been omitted. These unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.
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It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position and operating results. Revenue and net income for any interim period are not necessarily indicative of future or annual results.
NOTE 2
RECENT AC COUNTING STANDARDS UPDATE
There have been no accounting standards issued or adopted during the first quarter of 2023 that are expected to have a material impact on the Company's financial statements.
NOTE 3
MERGER
In accordance with ASC Topic 805, Business Combinations, we accounted for the below transaction using the acquisition method. We conducted valuations of certain acquired assets and liabilities for inclusion in our Condensed Consolidated Balance Sheets as of the date of the Merger. Assets that normally would not be recorded in ordinary operations, such as intangibles related to contractual relationships, were recorded at their estimated fair values. The excess purchase price over the estimated fair value of the net assets acquired was recorded as goodwill.
On the Closing Date, Vectrus completed its previously announced Merger with Vertex, forming V2X by acquiring all of the outstanding shares of Vertex. On the Closing Date, Vertex and its consolidated subsidiaries became wholly-owned subsidiaries of the Company.
The combined V2X entity from the Merger is a larger and more diversified Company with the ability to compete for more integrated business opportunities and generate revenue across geographies, clients, and contract types in supporting the mission of our customers.
Purchase Price Allocation
The Merger is accounted for as a business combination. As such, the assets acquired and liabilities assumed are accounted for at fair value, with the excess of the purchase price over the fair value of the net identifiable assets acquired and liabilities assumed recorded as goodwill.
The Closing Date fair value of the consideration transferred totaled $634.0 million, which was comprised of the following:

(In thousands, except share and per share amounts) |  | Purchase Price
Shares of V2X common stock issued |  | 18,591,866 |
Market price per share of V2X as of Closing Date |  | $ | 33.92 |
Fair value of common shares issued |  | $ | 630,636 |
Fair value of cash consideration |  | 3,315 |
Total consideration transferred |  | $ | 633,951 |

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The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed in the Merger as of the Closing Date. The estimated fair value of Vertex’s assets acquired and liabilities assumed at the acquisition date are determined based on preliminary valuations and analyses. As of March 31, 2023, we considered these amounts to be preliminary because we are still in the process of gathering and reviewing information to support the details surrounding tax matters and assumptions underlying certain existing or potential reserves. The final determination could result in further adjustments.

(In thousands) |  | Preliminary Fair Value
Cash and cash equivalents |  | $ | 196,993 |
Receivables |  | 334,655 |
Prepaid expenses |  | 49,172 |
Property, plant, and equipment |  | 53,618 |
Intangible assets |  | 480,000 |
Other non-current assets |  | 18,895 |
Right-of-use assets |  | 21,062 |
Accounts payable |  | (121,515) |
Debt |  | (1,352,303) |
Compensation and other employee benefits |  | (45,968) |
Other current and non-current liabilities |  | (334,469) |
Total identifiable net assets |  | (699,860) |
Goodwill |  | 1,333,811 |
Total purchase consideration |  | $ | 633,951 |

As a result of the Merger, the Company recognized $1,333.8 million of goodwill. The goodwill recognized is attributable to operational and general and administrative cost synergies, expanded market opportunities and other benefits that do not qualify for separate recognition. None of the goodwill is expected to be deductible for tax purposes. In addition, we recognized two intangible assets related to backlog and customer contracts arising from the Merger. The fair value of backlog was $316.0 million, and the fair value of the customer contracts was $164.0 million with amortization periods of 4.5 years and 14.0 years, respectively. The receivables of $334.7 million represent fair value and are considered fully collectible.
As part of the Merger, V2X acquired certain contracts, including a Transition Services Agreement (TSA) with Crestview Aerospace LLC (Crestview), which was previously divested to American Industrial Partners Capital Fund VI, L.P. (AIP). As of March 31, 2023, the Company recorded $0.7 million of income related to the TSA with Crestview, which was recorded as a reduction in cost of sales. AIP held approximately 60.0% of V2X common stock as of March 31, 2023.
The following unaudited information shows the combined actual results of our operations for the three months ended March 31, 2023 and pro forma results for the three months ended April 1, 2022 as if the Merger had occurred on January 1, 2021. The unaudited pro forma information reflects the effects of applying our accounting policies and certain pro forma adjustments to the combined historical financial information of Vertex. The pro forma adjustments include: a) incremental amortization expense associated with identified intangible assets; b) incremental interest expense resulting from fair value adjustments applied to the Vertex debt that we assumed; and c) a reduction of revenues and operating expenses associated with fair value adjustments made to acquire assets and assumed liabilities, such as contract assets and contract liabilities.
This unaudited pro forma information is presented for informational purposes only and may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.

|  | Three Months Ended
|  | March 31, 2023 |  | April 1, 2022
(Unaudited, in thousands) |  | Actual |  | Pro forma
Revenue |  | $ | 943,460 |  |  | $ | 842,741 |
Net (loss) income |  | $ | (17,480) |  |  | $ | 11,953 |

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NOTE 4
REVENUE
Performance Obligations
Performance obligations represent firm orders by the customer and excludes potential orders under indefinite delivery and indefinite quantity (IDIQ) contracts, unexercised contract options and contracts awarded to us that are being protested by competitors with the U.S. Government Accountability Office (GAO) or in the U.S. Court of Federal Claims (COFC). The level of order activity related to programs can be affected by the timing of government funding authorizations and their project evaluation cycles. Year-over-year comparisons could, at times, be impacted by these factors, among others.
Contracts are often modified to account for changes in contract specifications and requirements. If the modification either creates new enforceable rights and obligations or changes the existing enforceable rights and obligations, the modification will be treated as a separate contract. Our contract modifications, except for those to exercise option years, have historically not been distinct from the existing contract and have been accounted for as if they were part of that existing contract.
The Company's performance obligations are satisfied over time as services are provided throughout the contract term. We recognize revenue over time using the input method (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Our over-time recognition is reinforced by the fact that our customers simultaneously receive and consume the benefits of our services as they are performed. For most U.S. government contracts, this continuous transfer of control to the customer is supported by contract terms that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. This continuous transfer of control requires that we track progress towards completion of performance obligations in order to measure and recognize revenue.
The Company's contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year (or less) option periods. The number of option periods varies by contract, and there is no guarantee that an option period will be exercised. The right to exercise an option period is at the sole discretion of the U.S. government when we are the prime contractor or of the prime contractor when we are a subcontractor. We expect to recognize a substantial portion of our performance obligations as revenue within the next 12 months. However, the U.S. government or the prime contractor may cancel any contract at any time through a termination for convenience or for cause. Substantially all of our contracts have terms that would permit us to recover all or a portion of our incurred costs and fees for work performed in the event of a termination for convenience.
Performance obligations as of March 31, 2023 and December 31, 2022 are presented in the following table:

|  | March 31, |  | December 31,
(In millions) |  | 2023 |  | 2022
Performance Obligations |  | $ | 3,425 |  |  | $ | 2,997 |

We expect to recognize approximately 62% of the performance obligations as of March 31, 2023 as revenue in 2023 and the remaining 38% during 2024.
Contract Estimates
The impact of adjustments in contract estimates on our operating income can be reflected in either revenue or cost of revenue. Cumulative catch-up adjustments for the three months ended March 31, 2023 and April 1, 2022 increased operating income by $13.1 million and $0.6 million, respectively.
For the three months ended March 31, 2023 and April 1, 2022, the cumulative catch-up adjustments to operating income increased revenue by $13.9 million and $0.6 million, respectively.
Revenue by Category
Generally, the sales price elements for our contracts are cost-plus, cost-reimbursable or firm-fixed-price. We commonly have elements of cost-plus, cost-reimbursable, time-and-materials and firm-fixed-price contracts on a single contract. On a cost-plus contract, we are paid our allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement, up to funding levels predetermined by our customers.
On cost-plus contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts. Most of our cost-plus contracts also contain a firm-fixed-price element. Cost-plus contracts with award and incentive fee provisions are our primary variable contract fee arrangement. Award fees provide for a fee based on actual performance relative to contractually specified performance criteria. Incentive fees provide for a fee based on the relationship between total allowable and target cost.
On most of our contracts, a cost-reimbursable element captures consumable materials required for the program. Typically, these costs do not bear fees.
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On a time-and-materials contract, we are reimbursed for labor at fixed hourly rates and generally reimbursed separately for allowable materials, costs and expenses at cost. For this contract type, we bear the risk that our labor costs and allocable indirect expenses are greater than the fixed hourly rate defined within the contract.
On a firm-fixed-price contract, we agree to perform the contractual statement of work for a predetermined contract price. A firm-fixed-price contract typically offers higher profit margin potential than a cost-plus contract, which is commensurate with the greater levels of risk we assume on a firm-fixed-price contract. Although a firm-fixed-price contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract. Although the overall scope of work required under the contract may not change, profit may be adjusted as experience is gained and as efficiencies are realized or costs are incurred.
The following tables present various revenue disaggregations.
Revenue by contract type for the three months ended March 31, 2023 and April 1, 2022 is as follows:

|  | Three Months Ended |  |
|  | March 31, |  | April 1, |  | % |  |  |  |  |  |
(In thousands) |  | 2023 |  | 2022 |  | Change |  |  |  |  |  |
Cost-plus and cost-reimbursable |  | $ | 523,030 |  |  | $ | 311,094 |  |  | 68.1 | % |  |  |  |  |  |
Firm-fixed-price |  | 385,112 |  |  | 128,004 |  |  | 200.9 | % |  |  |  |  |  |
Time-and-materials |  | 35,318 |  |  | 17,373 |  |  | 103.3 | % |  |  |  |  |  |
Total revenue |  | $ | 943,460 |  |  | $ | 456,471 |  |  |  |  |  |  |  |  |

Revenue by geographic region in which the contract is performed for the three months ended March 31, 2023 and April 1, 2022 is as follows:

|  | Three Months Ended |  |
|  | March 31, |  | April 1, |  | % |  |  |  |  |  |
(In thousands) |  | 2023 |  | 2022 |  | Change |  |  |  |  |  |
United States |  | $ | 548,770 |  |  | $ | 167,980 |  |  | 226.7 | % |  |  |  |  |  |
Middle East |  | 281,121 |  |  | 235,754 |  |  | 19.2 | % |  |  |  |  |  |
Asia |  | 64,317 |  |  | 16,206 |  |  | 296.9 | % |  |  |  |  |  |
Europe |  | 49,252 |  |  | 36,531 |  |  | 34.8 | % |  |  |  |  |  |
Total revenue |  | $ | 943,460 |  |  | $ | 456,471 |  |  |  |  |  |  |  |  |

Revenue by contract relationship for the three months ended March 31, 2023 and April 1, 2022 is as follows:

|  | Three Months Ended |  |
|  | March 31, |  | April 1, |  | % |  |  |  |  |  |
(In thousands) |  | 2023 |  | 2022 |  | Change |  |  |  |  |  |
Prime contractor |  | $ | 879,179 |  |  | $ | 427,093 |  |  | 105.9 | % |  |  |  |  |  |
Subcontractor |  | 64,281 |  |  | 29,378 |  |  | 118.8 | % |  |  |  |  |  |
Total revenue |  | $ | 943,460 |  |  | $ | 456,471 |  |  |  |  |  |  |  |  |

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Revenue by customer for the three months ended March 31, 2023 and April 1, 2022 is as follows:

|  | Three Months Ended |  |
|  | March 31, |  | April 1, |  | % |  |  |  |  |  |
(In thousands) |  | 2023 |  | 2022 |  | Change |  |  |  |  |  |
Army |  | $ | 390,503 |  |  | $ | 280,113 |  |  | 39.4 | % |  |  |  |  |  |
Navy |  | 292,690 |  |  | 75,217 |  |  | 289.1 | % |  |  |  |  |  |
Air Force |  | 129,981 |  |  | 61,474 |  |  | 111.4 | % |  |  |  |  |  |
Other |  | 130,286 |  |  | 39,667 |  |  | 228.4 | % |  |  |  |  |  |
Total revenue |  | $ | 943,460 |  |  | $ | 456,471 |  |  |  |  |  |  |  |  |

Contract Balances
The timing of revenue recognition, billings, and cash collections results in billed and unbilled accounts receivable (contract assets) and customer advances and deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we may receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities. These advance billings and payments are not considered significant financing components because they are frequently intended to ensure that both parties are in conformance with the primary contract terms. These assets and liabilities are reported on the Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period.
As of March 31, 2023 and December 31, 2022, we had contract assets of $559.3 million and $487.8 million, respectively. Contract assets primarily consist of unbilled receivables which represent rights to consideration for work completed but not billed as of the reporting date. The balance of unbilled receivables consists of costs and fees that are: (i) billable immediately; (ii) billable on contract completion; or (iii) billable upon other specified events, such as the resolution of a request for equitable adjustment. Refer to Note 5, Receivables for additional information regarding the composition of our receivable balances. As of March 31, 2023 and December 31, 2022, our contract liabilities, included in other accrued liabilities in the Condensed Consolidated Balance Sheets, were $73.1 million and $76.4 million, respectively.
NOTE 5
RECEIVABLES
Receivables were comprised of the following:

(In thousands) |  | March 31, 2023 |  | December 31, 2022
Billed receivables |  | $ | 189,247 |  |  | $ | 227,718 |
Unbilled receivables (contract assets) |  | 559,341 |  |  | 487,758 |
Other |  | 11,225 |  |  | 13,106 |
Total receivables |  | $ | 759,813 |  |  | $ | 728,582 |

As of March 31, 2023 and December 31, 2022, substantially all billed receivables are due from the U.S. government, either directly as prime contractor to the U.S. government or as subcontractor to another prime contractor to the U.S. government. Because the Company's billed receivables are with the U.S. government, the Company does not believe it has a material credit risk exposure.
Unbilled receivables are contract assets that represent revenue recognized on long-term contracts in excess of amounts billed as of the balance sheet date. We expect to bill customers for the majority of the March 31, 2023 contract assets during 2023. C hanges in the balance of receivables are primarily due to the timing differences between our performance and customers' payments.
NOTE 6
DEBT
Senior Secured Credit Facilities
In September 2014, Vectrus and its wholly-owned subsidiary, Vectrus Systems Corporation (VSC), entered into a senior secured credit agreement. The credit agreement was subsequently amended on December 24, 2020 and January 24, 2022 and is collectively referred to as the Prior Credit Agreement. The credit agreement consisted of a term loan (Amended Term Loan) and a $270.0 million revolving credit facility (Amended Revolver).
On the Closing Date, the outstanding debt from the Amended Term Loan and the Amended Revolver, $50.2 million and $40.0 million, respectively, was repaid and related guarantees and liens were discharged and released. Repayment was made
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using proceeds from the Vertex First Lien Credit Agreement described below. As of December 31, 2021, the balance outstanding under the Amended Term Loan and the Amended Revolver, was $55.4 million and $50.0 million, respectively.
On the Closing Date, certain of our subsidiaries, including VSC (and together with VSC, the Company Guarantor Subsidiaries), that became direct or indirect subsidiaries of Vertex Aerospace Service Corp., a Delaware corporation and wholly-owned indirect subsidiary of Vertex (Vertex Borrower), have provided guarantees of the indebtedness under each of:
i.the First Lien Credit Agreement, dated as of December 6, 2021 (as amended by the Amendment No. 1 to First Lien Credit Agreement, dated as of the Closing Date, and as further amended, restated, amended and restated, supplemented and otherwise modified from time to time, the Vertex First Lien Credit Agreement), by and among Vertex Borrower, as borrower, Vertex Aerospace Intermediate LLC, a Delaware limited liability company, direct parent entity of Vertex Borrower and wholly-owned indirect subsidiary of Vertex (Vertex Holdings), the lenders from time to time party thereto and Royal Bank of Canada, as administrative agent;
ii.the Second Lien Credit Agreement, dated as of December 6, 2021 (as amended, restated, amended and restated, supplemented and otherwise modified from time to time, the Vertex Second Lien Credit Agreement), Vertex Borrower, as borrower, Vertex Holdings, the lenders from time to time party thereto and Royal Bank of Canada, as administrative agent; and
iii.the ABL Credit Agreement, dated as of June 29, 2018 (as amended by the First Amendment to ABL Credit Agreement, dated as of May 17, 2019, as further amended by the Second Amendment to ABL Credit Agreement, dated as of May 17, 2021, and as further amended by the Third Amendment to ABL Credit Agreement, dated as of December 6, 2021, as further amended by the Fourth Amendment to ABL Credit Agreement, dated as of the Closing Date, and as further amended, restated, amended and restated, supplemented and otherwise modified from time to time, the Vertex ABL Credit Agreement), by and among Vertex Borrower, Vertex Holdings, certain other subsidiaries of Vertex Borrower from time to time party thereto as co-borrowers, the lenders from time to time party thereto and Ally Bank, as administrative agent (in such capacity, the ABL Agent).
On February 28, 2023, Vertex Borrower entered into a credit agreement (the 2023 Credit Agreement) among the lenders identified therein and Bank of America, N.A., as administrative agent, collateral agent, swingline lender and letter of credit issuer. The 2023 Credit Agreement provides for $750.0 million in senior secured financing, with a first lien on substantially all the Borrower’s assets, consisting of a $500.0 million five-year Revolving Credit Facility (2023 Revolver) and a five-year $250.0 million Term Loan. The proceeds of these Credit Facilities were used to, among other things, (i) repay the First Lien Incremental Term Tranche (as defined below), (ii) repay the entire outstanding amount of the Second Lien Credit Agreement, and (iii) repay the entire outstanding ABL Credit Facility.
Vertex First Lien Credit Agreement
The Vertex First Lien Credit Agreement provides for senior secured first lien term loans in an aggregate principal amount of $1,185.0 million, consisting of a $925.0 million term loan “B” tranche, (the First Lien Initial Term Tranche) and a $260.0 million incremental term loan “B” tranche (the First Lien Incremental Term Tranche and, together with the First Lien Initial Term Tranche, collectively, the First Lien Term Facility). The entire amount of the proceeds from the (i) First Lien Initial Term Tranche were previously used to finance the acquisition of certain subsidiaries of Raytheon Company, a Delaware corporation, and related transaction costs (the Sky Acquisition in December 2021). As provided in the Merger Agreement, the proceeds of the First Incremental Term Tranche were used by the Vertex Borrower to redeem all of the shares of previously issued preferred stock on the Closing Date (but prior to the Merger). The remaining First Lien Incremental Term Tranche proceeds were used to repay in full all outstanding indebtedness under the Prior Credit Agreement, and other transaction costs. Approximately $54.0 million of cash remained after funding the preferred stock redemption, repayment of the Prior Credit Agreement and other transaction costs.
On February 28, 2023, the outstanding balance of the First Incremental Term Tranche of $258.7 million was repaid. The balance of unamortized deferred financing costs related to the First Incremental Term Tranche of $11.9 million was recorded as a loss on extinguishment of debt in the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2023.
The remaining loans under the First Lien Term Facility (consisting solely of the Initial Term Loan Tranche) amortize in an amount equal to approximately $2.3 million per quarter for the fiscal quarters ending March 31, 2023, through September 30, 2028, with the balance of $864.9 million due on December 6, 2028.
The Vertex Borrower’s obligations under the First Lien Term Facility, which were assumed in the Merger, are guaranteed by Vertex Holdings and Vertex Borrower’s wholly-owned domestic subsidiaries (including the Company Guarantor Subsidiaries, collectively, the Guarantors), subject to customary exceptions and limitations. The Vertex Borrower’s obligations under the First Lien Term Facility and the Guarantors’ obligations under the related guarantees are secured by a first-lien on substantially all of the Vertex Borrower’s and the Guarantors’ assets which exists on a pari passu basis with the lien held by the 2023 Credit Agreement lenders.
The borrowings under the First Lien Initial Term Tranche bear interest at rates that, at the Vertex Borrower’s option, can be either a base rate, determined by reference to the greater of (a) the federal funds rate plus 0.50%, (b) the prime lending
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rate, or (c) an adjusted Eurodollar rate plus 1.00%, plus a margin of 2.50% to 2.75% per annum, or a Eurodollar rate, determined by reference to LIBOR, plus a margin of 3.50% to 3.75% per annum, in each case, depending on the consolidated first lien net leverage ratio of the Vertex Borrower and its subsidiaries. As of March 31, 2023, the effective interest rate for the First Lien Initial Term Tranche was 9.11%.
The Vertex First Lien Credit Agreement contains customary representations and warranties and affirmative covenants. The Vertex First Lien Credit Agreement also includes negative covenants that limit, among other things, additional indebtedness, additional liens, sales of assets, dividends, investments and advances, prepayments of debt and mergers and acquisitions.
The Vertex First Lien Credit Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the First Lien Term Facility to be in full force and effect, and a change of control. If an event of default occurs and is continuing, the Vertex Borrower may be required immediately to repay all amounts outstanding under the Vertex First Lien Credit Agreement.
As of March 31, 2023, the carrying value of the First Lien Credit Agreement was $915.8 million, excluding deferred discount and unamortized deferred financing costs of $40.8 million. The estimated fair value of the First Lien Credit Agreement as of March 31, 2023 was $910.0 million. The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt (Level 2).
Vertex Second Lien Credit Agreement
The Vertex Second Lien Credit Agreement provided for senior secured second lien term loans in an aggregate principal amount of $185.0 million (the Second Lien Term Facility). The entire amount of the proceeds from the Second Lien Term Facility were previously used to finance the Sky Acquisition in December 2021. The Company voluntarily prepaid $25.0 million of the Second Lien Term Facility on December 30, 2022 (the Voluntary Prepayment). On February 28, 2023, the remaining Second Lien Term Facility balance of $160.0 million was repaid (the 2023 Payoff) and related guarantees and liens were discharged and released. The balance of unamortized deferred financing costs related to the Second Lien Term Facility of $7.1 million was recorded as a loss on extinguishment of debt in the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2023.
Under the terms of the Vertex Second Lien Credit Agreement, the Vertex Borrower was required to remit a prepayment premium of $1.6 million with the 2023 Payoff which was recorded as a loss on extinguishment of debt in the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2023.
Vertex ABL Credit Agreement
The Vertex ABL Credit Agreement provided for a senior secured revolving loan facility (the ABL Facility) of up to an aggregate amount of $200.0 million (the loans thereunder, the ABL Loans). The Vertex ABL Credit Agreement also provided for (i) a $30.0 million sublimit of availability for letters of credit, and (ii) a $10.0 million sublimit for short-term borrowings on a swingline basis. On February 28, 2023, the outstanding ABL Facility borrowings of $67.5 million were repaid and related guarantees and liens were discharged and released. The balance of unamortized deferred financing costs related to the Vertex ABL Credit Agreement of $1.5 million which was recorded as a loss on extinguishment of debt in the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2023.
2023 Credit Agreement
The 2023 Credit Agreement provides for $750.0 million in senior secured financing, with a first lien on substantially all the Borrower’s assets and consists of (a) a $500.0 million five-year Revolving Credit Facility (which includes (i) a $50.0 million sublimit of availability for letters of credit, and (ii) a $50.0 million sublimit for short-term borrowings on a swingline basis) and (b) a five-year $250.0 million Term Loan.
The Term Loan portion of the 2023 Credit Agreement amortizes at approximately $1.6 million per quarter for the fiscal quarters ending June 30, 2023 through March 31, 2025, increasing to $3.1 million per quarter for the fiscal quarters ending June 30, 2025 through December 31, 2027, with the balance of $203.1 million due on February 28, 2028.
The Vertex Borrower’s obligations under the 2023 Credit Agreement are guaranteed by the Guarantors, subject to customary exceptions and limitations. The Vertex Borrower’s obligations under the 2023 Credit Agreement and the Guarantors’ obligations under the related guarantees are secured by a first priority-lien on substantially all of the Vertex Borrower’s and the Guarantors’ assets (subject to customary exceptions and limitations) which exists on a pari passu basis with the lien held by the First Lien Credit Agreement lenders.
The borrowings under the 2023 Credit Agreement bear interest at rates that, at the Vertex Borrower’s option, can be either a base rate, determined by reference to the greater of (a) the federal funds rate plus 0.50%, (b) the prime lending rate, or (c) an adjusted Eurodollar rate plus 1.00%, plus a margin of 1.00% to 2.25% per annum, or a Eurodollar rate, determined by reference to SOFR, plus a margin of 2.00% to 3.25% per annum, in each case, depending on the consolidated total net leverage ratio of the Vertex Borrower and its subsidiaries. As of March 31, 2023, the effective interest rates for the 2023 Revolver and Term Loan portion of the 2023 Credit Agreement were 8.15% and 8.35%, respectively.
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Unutilized commitments under the 2023 Revolver are subject to a per annum fee ranging from 0.25% to 0.50% depending on the consolidated total net leverage ratio of the Vertex Borrower and its subsidiaries.
The Vertex Borrower is also required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125% per annum of the amount available to be drawn under each such letter of credit (or such other amount as may be mutually agreed by the Vertex Borrowers and the applicable letter of credit issuer), as well as a fee to all lenders equal to the applicable margin to SOFR of Revolving Credit loans times the average daily amount available to be drawn under all outstanding letters of credit.
The 2023 Credit Agreement contains customary representations and warranties, which must be accurate for the Vertex Borrower to borrow under the 2023 Credit Agreement, and affirmative covenants. The 2023 Credit Agreement also includes negative covenants that limit, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions.
The 2023 Credit Agreement contains financial covenants requiring (a) the consolidated total net leverage ratio not to exceed 5.00 to 1.00 for the reporting periods ending on or after June 30, 2023, and on or prior to June 30, 2024, with further step downs thereafter, and (b) the consolidated interest coverage ratio be at least 2.00 to 1.00 commencing with the reporting period ending on June 30, 2023.
The 2023 Credit Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the 2023 Credit Agreement to be in full force and effect, and a change of control. If an event of default occurs and is continuing, the Borrowers may be required immediately to repay all amounts outstanding under the 2023 Credit Agreement.
As of March 31, 2023, there were $185.0 million of outstanding borrowings and $14.9 million of outstanding letters of credit under the 2023 Revolver. Availability under the 2023 Revolver was $300.1 million as of March 31, 2023. Unamortized deferred financing costs related to the 2023 Revolver of $4.9 million are included in other non-current assets in the Condensed Consolidated Balance Sheets. As of March 31, 2023, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.
As of March 31, 2023, the carrying value of the Term Loan portion of the 2023 Credit Agreement was $250.0 million, excluding unamortized deferred financing costs of $2.5 million. The estimated fair value of the Term Loan portion of the 2023 Credit Agreement as of March 31, 2023 was $246.3 million. The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt (Level 2).
The aggregate scheduled maturities of the First Lien Credit Agreement and 2023 Credit Agreement as of March 31, 2023 are as follows:

(In thousands) |  | Payments due
2023 (remainder of the year) |  | $ | 11,625 |
2024 |  | 15,500 |
2025 |  | 20,188 |
2026 |  | 21,750 |
2027 |  | 21,750 |
After 2027 |  | 1,259,937 |
Total |  | $ | 1,350,750 |

As of March 31, 2023 we were in compliance with all covenants related to the First Lien Credit Agreement and the 2023 Credit Agreement.
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NOTE 7
DERIVATIVE INSTRUMENTS
During the periods covered by this report, we have made no changes to our policies or strategies for the use of derivative instruments and there has been no change in our related accounting methods. For our derivative instruments, which are designated as cash flow hedges, gains and losses are initially reported as a component of accumulated other comprehensive loss and subsequently recognized in earnings with the corresponding hedged item.
Interest Rate Derivative Instruments
The Company is exposed to the risk that the earnings and cash flows could be adversely impacted due to fluctuations in interest rates. To mitigate this risk, the Company entered into interest rate swap contracts in the amount of $300 million in March 2023. These contracts are designated and qualify as effective cash flow hedges.
The following table summarizes the amount at fair value and location of the derivative instruments in our balance sheet for our interest rate hedges in the Condensed Consolidated Balance Sheets as of March 31, 2023:

(In thousands) |  | Fair Value (level 2)
|  | Balance sheet caption |  | Amount
Interest rate swap designated as cash flow hedge |  | Other current assets |  | $ | 2,839 |
Interest rate swap designated as cash flow hedge |  | Other non-current liabilities |  | $ | 5,186 |

There were no interest rate swaps designated as cash flow hedges for the period ended December 31, 2022.
We regularly assess the creditworthiness of the counterparty. As of March 31, 2023, the counterparty to the interest rate swaps had performed in accordance with its contractual obligations. Both the counterparty credit risk and our credit risk were considered in the fair value determination.
Net interest rate derivative gains and losses of a nominal amount and $0.2 million were recognized in interest expense, net, in our Condensed Consolidated Statements of (Loss) Income during the first three months of 2023 and 2022, respectively. We expect $2.8 million of existing interest rate swap gains reported in accumulated other comprehensive loss as of March 31, 2023 to be recognized in earnings within the next 12 months.
NOTE 8
COMMITMENTS AND CONTINGENCIES
General
From time to time, we are involved in various investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, including government investigations and claims, which are incidental to the operation of our business. Some of these proceedings seek remedies relating to employment matters, matters in connection with our contracts and matters arising under laws relating to the protection of the environment. Additionally, U.S. government customers periodically advise the Company of claims and penalties concerning certain potential disallowed costs. When such findings are presented, V2X and the U.S. government representatives engage in discussions to enable V2X to evaluate the merits of these claims as well as to assess the amounts being claimed.
Where appropriate, provisions are made to reflect probable losses related to the matters raised by U.S. government representatives. Such assessments, along with any assessments regarding provisions for legal proceedings, are reviewed on a quarterly basis for sufficiency based on the most recent information available to us.
The Company estimated and accrue d $27.6 million as of March 31, 2023 and December 31, 2022 in other accrued liabilities in the Condensed Consolidated Balance Sheets for legal proceedings and for claims with respect to our U.S. government contracts as discussed below, including years where the U.S. government has not completed its incurred cost audits. Although the ultimate outcome of any legal matter or claim cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claim, we do not expect that any asserted or unasserted legal or contractual claims or proceedings, individually or in the aggregate, including the lawsuit discussed below, will have a material adverse effect on our cash flows, results of operations or financial condition.
U.S. Government Contracts, Investigations and Claims
We have U.S. government contracts that are funded incrementally on a year-to-year basis. Changes in government policies, priorities or funding levels through agency or program budget reductions by the U.S. Congress or executive agencies could have a material adverse effect on our financial condition or results of operations. Furthermore, our contracts with the U.S. government may be terminated or suspended by the U.S. government at any time, with or without cause. Such contract suspensions or terminations could result in non-reimbursable expenses or charges or otherwise adversely affect our financial condition and results of operations.
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Departments and agencies of the U.S. government have the authority to investigate various transactions and operations of the Company, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory or treble damages. U.S. government regulations provide that certain findings against a contractor may lead to suspension or debarment from future U.S. government contracts or the loss of export privileges for a company or an operating division or subdivision. Suspension or debarment could have a material adverse effect on the Company because of its reliance on U.S. government contracts.
U.S. government agencies, including the Defense Contract Audit Agency, the Defense Contract Management Agency and others, routinely audit and review our performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. Accordingly, costs billed or billable to U.S. government customers are subject to potential adjustment upon audit by such agencies. The U.S. government agencies also review the adequacy of our compliance with government standards for our business systems, including our accounting, earned value management, estimating, materials management and accounting, purchasing, and property management systems.
In the performance of our contracts, we routinely request contract modifications that require additional funding from U.S. government customers. Most often, these requests are due to customer-directed changes in the scope of work. While we are entitled to recovery of these costs under our contracts, the administrative process with our U.S. government customer may be protracted. Based on the circumstances, we periodically file requests for equitable adjustments (REAs) that are sometimes converted into claims. In some cases, these requests are disputed by our U.S. government customer. We believe our outstanding modifications, REAs and other claims will be resolved without material adverse impact to our results of operations, financial condition or cash flows.
As a result of final indirect rate negotiations between the U.S. government and our Former Parent, we were subject to adjustments to costs previously allocated by our Former Parent to our business from 2007 through 2014. On July 7, 2022, we accepted an offer by the U.S. government to settle this legal matter involving our payment of an insignificant amount, thereby bringing closure to the matter. With respect to our Former Parent, we believe we are fully indemnified under our distribution agreement and recently reached a final settlement with them on this matter.
NOTE 9
STOCK-BASED COMPENSATION
The Company maintains an equity incentive plan, the 2014 Omnibus Incentive Plan, as amended and restated effective as of October 27, 2022 (the 2014 Omnibus Plan), to govern awards granted to V2X employees and directors, including nonqualified stock options (NQOs), restricted stock units (RSUs), total shareholder return (TSR) awards, performance share units (PSUs) and other awards. We account for NQOs, stock-settled RSUs and PSUs as equity-based compensation awards. TSR awards, described below, are accounted for as liability-based compensation awards. Liability-based awards are revalued at the end of each reporting period to reflect changes in fair value.
Stock-based compensation expense and the associated tax benefits impacting our Condensed Consolidated Statements of (Loss) Income were as follows:

|  | Three Months Ended |  |
(In thousands) |  | March 31, 2023 |  | April 1, 2022 |  |  |  |
Compensation costs for equity-based awards |  | $ | 12,066 |  |  | $ | 3,100 |  |  |  |  |
Compensation costs for liability-based awards |  | 806 |  |  | (542) |  |  |  |  |
Total compensation costs, pre-tax |  | $ | 12,872 |  |  | $ | 2,558 |  |  |  |  |
Future tax benefit |  | $ | 2,971 |  |  | $ | 555 |  |  |  |  |

Compensation costs for equity-based awards for the three months ended March 31, 2023, included $5.6 million related to RSUs issued in connection with the Merger.
As of March 31, 2023, total unrecognized compensation costs related to equity-based awards and liability-based awards were $34.4 million and $1.7 million, respectively, which are expected to be recognized ratably over a weighted average period of 1.85 years and 1.59 years, respectively. Total unrecognized compensation costs included $15.6 million of expense related to RSUs granted in connection with the Merger.
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The following table provides a summary of the activities for NQOs, RSUs and PSUs for the three months ended March 31, 2023:

|  | NQOs |  | RSUs |  | PSUs
(In thousands, except per share data) |  | Shares |  | Weighted Average Exercise Price Per Share |  | Shares |  | Weighted Average Grant Date Fair Value Per Share |  | Shares |  | Weighted Average Grant Date Fair Value Per Share
Outstanding at January 1, 2023 |  | 42 |  |  | $ | 22.86 |  |  | 1,628 |  |  | $ | 35.47 |  |  | — |  |  | $ | — |
Granted |  | — |  |  | $ | — |  |  | 278 |  |  | $ | 39.39 |  |  | 254 |  |  | $ | 35.86 |
Exercised |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Vested |  | — |  |  | $ | — |  |  | (839) |  |  | $ | 41.86 |  |  | — |  |  | $ | — |
Forfeited or expired |  | — |  |  | $ | — |  |  | (6) |  |  | $ | 40.59 |  |  | — |  |  | $ | — |
Outstanding at March 31, 2023 |  | 42 |  |  | $ | 22.86 |  |  | 1,061 |  |  | $ | 36.41 |  |  | 254 |  |  | $ | 35.86 |

Restricted Stock Units
On July 5, 2022, pursuant to the terms of the Merger Agreement, the Company issued an additional 1,346,089 RSUs, with a grant date fair value of $33.92 per share, to certain employees of Vertex. The RSUs have been or will be settled in shares of the Company's common stock, with 517,918 RSUs vesting on the six-month anniversary following the grant date and a quarter of the remaining 828,171 RSUs vesting or having vested on each of four six-month anniversary dates following the grant date. The fair value of each RSU grant to employees and directors was determined based on the closing price of V2X common stock on the date of grant. Stock compensation expense will be recognized ratably over the vesting period of the awards.
RSUs awarded to employees, excluding the RSU awards awarded under the Merger Agreement, discussed above, vest in one-third increments on each of the three anniversary dates following the grant date subject to continued employment. Director RSUs are granted on the date of an annual meeting of shareholders and vest on the business day immediately prior to the next annual meeting or the one-year anniversary of the grant date, if earlier. The fair value of each RSU grant was determined based on the closing price of V2X common stock on the date of grant. Stock compensation expense will be recognized ratably over the requisite service period of the RSU awards.
As of March 31, 2023, there was $27.8 million of unrecognized RSU related compensation expense.
Total Shareholder Return Awards
TSR awards are performance-based cash awards that are subject to a three-year performance period. Any payments earned are made in cash following completion of the performance period according to the achievement of specified performance goals. As a result of the Merger and pursuant to the terms of the TSR awards, performance achievement fair value was measured at July 4, 2022 at $4.6 million and the aggregate future award payouts were fixed at that value. There were no cash-based TSR awards granted in the first quarter of 2023.
As of March 31, 2023, there was $1.7 million of unrecognized TSR related compensation expense.
Performance Share Units
During the first quarter of 2023, the Company granted two types of performance-based awards with market conditions. The first award will vest and the stock will be issued at the end of a three-year period based on the attainment of certain total shareholder return performance measures relative to Aerospace and Defense companies in the S&P 1500 Index and the employee's continued service through the vest date. The number of shares ultimately awarded, if any, can range up to 200% of the specified target awards. If performance is below the threshold level of performance, no shares will be issued.
The second award will vest and stock will be issued at the end of a three-year period based on achievement of certain stock price targets, shareholder return performance measures relative to certain Aerospace and Defense companies in the S&P 1500 Index and the employee's continued service through the vest date. The numbers of shares ultimately awarded, if any, can range up to the specified target awards.
As of March 31, 2023, there was $6.5 million of unrecognized PSU related compensation expense.
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NOTE 10
INCOME TAXES
Effective Tax Rate
Income tax expense during interim periods is based on an estimated annual effective income tax rate, plus discrete items that may occur in any given interim periods. The computation of the estimated effective income tax rate at each interim period requires certain estimates and judgment including, but not limited to, forecasted operating income for the year, projections of the income earned and taxed in various jurisdictions, newly enacted tax rate and legislative changes, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year.
For the three months ended March 31, 2023 and April 1, 2022, we recorded an income tax benefit of $5.7 million and a provision of $0.7 million, respectively, representing effective income tax rates of 24.7% and 19.7%, respectively. The effective income tax rates vary from the federal statutory rate of 21.0% mainly due to state and foreign taxes, disallowed compensation deduction under Internal Revenue Code Section 162(m), available deductions not reflected in book income, and income tax credits.
Uncertain Tax Positions
As of March 31, 2023 and December 31, 2022, unrecognized tax benefits from uncertain tax positions were $8.4 million and $8.6 million, respectively. The decrease in uncertain tax positions was principally the result of the release of a position for lapse of statute of limitation.
NOTE 11
(LOSS) EARNINGS PER SHARE
Basic earnings per share (EPS) is computed by dividing net income, or loss, by the weighted average number of common shares outstanding for the period. Diluted EPS reflects potential dilution that could occur if securities to issue common stock were exercised or converted into common stock. Diluted EPS includes the dilutive effect of stock-based compensation outstanding after application of the treasury stock method.

|  | Three Months Ended |  |
|  | March 31, |  | April 1, |  |  |  |
(In thousands, except per share data) |  | 2023 |  | 2022 |  |  |  |
Net (loss) income |  | $ | (17,480) |  |  | $ | 2,855 |  |  |  |  |
Weighted average common shares outstanding |  | 30,927 |  |  | 11,759 |  |  |  |  |
Add: Dilutive impact of stock options |  | — |  |  | 27 |  |  |  |  |
Add: Dilutive impact of restricted stock units |  | — |  |  | 116 |  |  |  |  |
Diluted weighted average common shares outstanding |  | 30,927 |  |  | 11,902 |  |  |  |  |
(Loss) earnings per share |  |  |  |  |  |  |  |
Basic |  | $ | (0.57) |  |  | $ | 0.24 |  |  |  |  |
Diluted |  | $ | (0.57) |  |  | $ | 0.24 |  |  |  |  |

The following table summarizes the weighted average of anti-dilutive securities excluded from the diluted earnings per share calculation.

|  | Three Months Ended |  |
|  | March 31, |  | April 1, |  |  |  |
(In thousands) |  | 2023 |  | 2022 |  |  |  |
Anti-dilutive restricted stock units |  | — |  |  | 5 |  |  |  |  |

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NOTE 12
POST-EMPLOYMENT BENEFIT PLANS
Deferred Employee Compensation
The Company sponsors two non-qualified deferred compensation plans. Under these plans, participants are eligible to defer a portion of their compensation on a tax deferred basis. Plan investments and obligations were recorded in other non-current assets and other non-current liabilities, respectively, in the Condensed Consolidated Balance Sheets, representing the fair value related to the deferred compensation plan. Adjustments to the fair value of the plan investments and obligations are recorded in operating expenses. The plan assets and liabilities were $2.4 million and $1.5 million as of March 31, 2023 and December 31, 2022, respectively.
Multi-Employer Pension Plans
Certain Company employees who perform work on contracts within the continental United States participate in multi-employer pension plans of which the Company is not the sponsor. Company expenses related to these plans were $3.3 million and $0.2 million for the three months ended March 31, 2023 and April 1, 2022, respectively.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q as well as the audited Consolidated Financial Statements and notes thereto and the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2022. This Quarterly Report provides additional information regarding the Company, our services, industry outlook and forward-looking statements that involve risks and uncertainties, including those related to economic conditions including inflation and rising interest rates, and the impact on us, our operations or our future financial or operational results. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements. Refer to "Forward-Looking Information" for further information regarding forward-looking statements. Amounts presented in and throughout this Item 2 are rounded and, as such, any rounding differences could occur in period over period changes and percentages reported.
Overview
V2X, Inc. is a leading provider of critical mission solutions primarily to defense clients globally. The Company operates as one segment and provides a comprehensive suite of integrated solutions across the operations and logistics, aerospace, training and technology markets to national security, defense, civilian and international clients.
Our primary customer is the U.S. Department of Defense (DoD). For the three months ended March 31, 2023 and April 1, 2022, we had total revenue of $943.5 million and $456.5 million, respectively, substantially all of which was derived from U.S. government customers. For the three months ended March 31, 2023 and April 1, 2022, we generated approximately 41% and 61%, respectively, of our total revenue from the U.S. Army.
Executive Summary
Our revenue increased $487.0 million, or 106.7%, for the three months ended March 31, 2023 compared to the three months ended April 1, 2022. Revenue increased $412.5 million due to the Merger and the remaining increase was from organic growth for legacy programs. Revenue from our U.S., Asia, Middle East and Europe programs increased by $380.8 million, $48.1 million, $45.4 million and $12.7 million, respectively.
Operating income for the three months ended March 31, 2023, was $30.6 million, an increase of $25.3 million, or 483.9%, compared to the three months ended April 1, 2022. The increase was due to the Merger and improved performance of legacy programs.
During the performance of our long-term contracts, we periodically review estimated final contract prices and costs and make revisions as required, which are recorded as changes in revenue and cost of revenue in the periods in which they are determined. Additionally, the fees under certain contracts may be increased or decreased in accordance with cost or performance incentive provisions which measure actual performance against established targets or other criteria. Such incentive fee awards or penalties are included in revenue when there is sufficient information to reasonably assess anticipated contract performance. Amounts representing contract change orders or limitations in funding on contracts are recorded only if it is probable the claim will result in additional contract revenue and the amounts can be reliably estimated. Changes in estimated revenue, cost of revenue and the related effect to operating income are recognized using cumulative adjustments, which recognize in the current period the cumulative effect of the changes on current and prior periods based on a contract's percentage of completion. Cumulative adjustments are driven by changes in contract terms, program performance, customer scope changes and changes to estimates in the reported period. These changes can increase or decrease operating income depending on the dynamics of each contract.
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Further details related to our financial results for the three months ended March 31, 2023, compared to the three months ended April 1, 2022, are contained in the "Discussion of Financial Results" section.
Merger with Vertex
For a discussion of our Merger and related debt and stock-based compensation obligations, see Note 3, Merger, Note 6, Debt, and Note 9, Stock-Based Compensation, in the Notes to Condensed Consolidated Financial Statements.
Significant Contracts
The following table reflects contracts that accounted for more than 10% of our total revenue for the three months ended March 31, 2023 or April 1, 2022:

|  | % of Total Revenue |  |
|  | Three Months Ended |  |
Contract Name |  | March 31, 2023 |  | April 1, 2022 |  |
Logistics Civil Augmentation Program (LOGCAP) V - Kuwait Task Order |  | 13.6% |  | 21.6% |  |
Logistics Civil Augmentation Program (LOGCAP) V - Iraq Task Order |  | 8.1% |  | 15.7% |  |

Revenue associated with a contract will fluctuate based on increases or decreases in the work being performed on the contract, award fee payment assumptions, and other contract modifications within the term of the contract resulting in changes to the total contract value.
The LOGCAP V - Kuwait Task Order is currently exercised through June 30, 2023, with three additional twelve-month options and one six-month option through December 31, 2026. The task order provides services to support the Geographical Combatant Commands and Army Service Component Commands throughout the full range of military operations in the Kuwait region. The LOGCAP V - Kuwait Task Order contributed $127.9 million and $98.4 million of revenue for the three months ended March 31, 2023 and April 1, 2022, respectively.
The LOGCAP V - Iraq Task Order is currently exercised through June 21, 2023, with three additional twelve-month options and one six-month option through December 21, 2026. The task order provides services to support the Geographical Combatant Commands and Army Service Component Commands throughout the full range of military operations in the Iraq region. The LOGCAP V - Iraq Task Order contributed $76.5 million and $71.5 million of revenue for the three months ended March 31, 2023 and April 1, 2022, respectively.
Backlog
Total backlog includes remaining performance obligations, consisting of both funded backlog (firm orders for which funding is contractually authorized and appropriated by the customer) and unfunded backlog (firm orders for which funding is not currently contractually obligated by the customer and unexercised contract options). Total backlog excludes potential orders under IDIQ contracts and contracts awarded to us that are being protested by competitors with the GAO or in the COFC. The value of the backlog is based on anticipated revenue levels over the anticipated life of the contract. Actual values may be greater or less than anticipated. Total backlog is converted into revenue as work is performed. The level of order activity related to programs can be affected by the timing of U.S. government funding authorizations and their project evaluation cycles. Year-over-year comparisons could, at times, be impacted by these factors, among others.
Our contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year or less option periods for the remaining contract period. The number of option periods vary by contract, and there is no guarantee that an option period will be exercised. The right to exercise an option period is at the sole discretion of the U.S. government when we are the prime contractor or of the prime contractor when we are a subcontractor. The U.S. government may also extend the term of a program by issuing extensions or bridge contracts, typically for periods of one year or less.
We expect to recognize a substantial portion of our funded backlog as revenue within the next 12 months. However, the U.S. government or the prime contractor may cancel any contract at any time through a termination for convenience. Substantially all of our contracts have terms that would permit us to recover all or a portion of our incurred costs and fees for work performed in the event of a termination for convenience.
For the three months ended March 31, 2023, total backlog was $11.8 billion as compared to $12.3 billion at December 31, 2022. The following is a summary of our backlog as of March 31, 2023 and December 31, 2022:

|  | March 31, |  | December 31,
(In millions) |  | 2023 |  | 2022
Funded backlog |  | $ | 2,603 |  |  | $ | 2,567 |
Unfunded backlog |  | 9,226 |  |  | 9,695 |
Total backlog |  | $ | 11,829 |  |  | $ | 12,262 |

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Funded orders (different from funded backlog) represent orders for which funding was received during the period. We received funded orders of $982.0 million during the three months ended March 31, 2023, which was an increase of $732.1 million compared to the three months ended April 1, 2022.
Economic Opportunities, Challenges and Risks
The U.S. government’s investment in services and capabilities in response to changing security challenges creates a complex and fluid business environment for V2X and other firms in this market. However, the U.S. continues to face substantial fiscal and economic challenges in addition to a varying political environment which could affect funding. The pace and depth of U.S. government acquisition reform and cost savings initiatives, combined with increased industry competitiveness to win long-term positions on key programs, could add pressure to revenue levels and profit margins. However, we expect the U.S. government will continue to place a high priority on national security and will continue to invest in affordable solutions. We believe that our capabilities, particularly in operations and logistics, aerospace, training and technology, should help our clients increase efficiency, reduce costs, improve readiness, and strengthen national security and, as a result, continue to allow for long-term profitable growth in our business. Further, the DoD budget remains the largest in the world and manag ement believes our addressable portion of the DoD budget offers substantial opportunity for growth.
The U.S. government's Fiscal Year (FY) begins on October 1 and ends on September 30. On December 29, 2022, the FY 2023 Omnibus Appropriations Act was signed into law by the President, providing $817 billion to the Defense Department. This reflects a $44 billion increase over the President’s FY 2023 budget request. The Fiscal 2024 budget request was submitted to the U.S. Congress on March 9, 2023, and requested $842 billion for the Department of Defense.
Past congressional actions have suspended and increased the debt ceiling at various times but in January 2023, the current statutory debt ceiling limit of $31.4 trillion was reached. As a result, the Treasury Department began taking accounting measures to continue financing the U.S. government while avoiding a breach. However, it is expected the U.S. government will exhaust these measures and that statutory action will be needed to increase or suspend the debt ceiling. There could be a material disruption to discretionary budgets and programs if the debt ceiling is not raised as the U.S. government may not be able to satisfy its funding obligations. If this scenario materializes, the effect on individual programs or the Company cannot be predicted at this time. The debt ceiling as well as the overall federal budget are expected to remain major focus points for debate by the U.S. Congress.
While it is difficult to predict the specific course of future defense budgets, we believe many of the core functions we perform are mission-essential and that spending to maintain readiness, improve performance, increase service life, lower cost, and modernize digital and physical environments will continue to be a U.S. government priority. Our focus is on providing integrated solutions across the mission lifecycle that encompass (i) high consequence training; (ii) readiness/logistics/deployment; (iii) mission and infrastructure support, including rapid response contingency efforts; (iv) battlefield connectivity and communications; (v) maintenance, modification, repair, and overhaul of assets and aircraft; (vi) and upgrades and modernization across digital and physical environments. We develop and insert operational technologies across our solutions to improve efficiency and the outcomes of our clients' missions. We believe this aligns with our clients' intent to utilize and harden existing equipment, infrastructure, and assets rather than executing new purchases. While customers may reduce the level of services required from us, we do not currently anticipate the complete elimination of these services.
However, business conditions have become more challenging due to macroeconomic conditions, including inflation and rising interest rates. Given the current pace of inflation and other geopolitical factors, we are monitoring the impact of rising costs on our active and future contracts. To date, we have not experienced broad-based increases due to inflation in the costs of our fixed-price and time and materials contracts that are material to the business as a whole; however, if we begin to experience greater than expected inflation in our supply chain and labor costs, our profit margins, and in particular, our profit margin from fixed-price and time and materials contracts, which represent a substantial portion of our contracts, could be adversely affected. See Item 1A, "Risk Factors".
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which includes, among other provisions, changes to the U.S. corporate income tax system. While we do not currently anticipate any impact on our business, we are continuing to evaluate the Inflation Reduction Act of 2022 and its requirements, as well as any potential impact on our business in future.
The information provided above does not represent a complete list of trends and unc ertainties that could impact our business in either the near or long-term and should be considered along with the risk factors identified under the caption “Risk Factors” identified in Part 1, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2022 and the matters identified under the caption “Forward-Looking Statement Information" herein.
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DISCUSSION OF FINANCIAL RESULTS
Three months ended March 31, 2023, compared to three months ended April 1, 2022
Selected financial highlights are presented in the following table:

|  | Three Months Ended |  | Change
(In thousands, except for percentages) |  | March 31, 2023 |  | April 1, 2022 |  | $ |  | %
Revenue |  | $ | 943,460 |  |  | $ | 456,471 |  |  | $ | 486,989 |  |  | 106.7 | %
Cost of revenue |  | 864,630 |  |  | 419,275 |  |  | 445,355 |  |  | 106.2 | %
% of revenue |  | 91.6 | % |  | 91.9 | % |  |  |  |
Selling, general, and administrative expenses |  | 48,251 |  |  | 31,959 |  |  | 16,292 |  |  | 51.0 | %
% of revenue |  | 5.1 | % |  | 7.0 | % |  |  |  |
Operating income |  | 30,579 |  |  | 5,237 |  |  | 25,342 |  |  | 483.9 | %
Operating margin |  | 3.2 | % |  | 1.1 | % |  |  |  |
Loss on extinguishment of debt |  | (22,052) |  |  | — |  |  | (22,052) |  |  | *
Interest expense, net |  | (31,744) |  |  | (1,681) |  |  | (30,063) |  |  | 1,788.4 | %
(Loss) income from operations before income taxes |  | (23,217) |  |  | 3,556 |  |  | (26,773) |  |  | (752.9) | %
% of revenue |  | (2.5) | % |  | 0.8 | % |  |  |  |
Income tax (benefit) expense |  | (5,737) |  |  | 701 |  |  | (6,438) |  |  | (918.4) | %
Effective income tax rate |  | 24.7 | % |  | 19.7 | % |  |  |  |
Net (loss) income |  | $ | (17,480) |  |  | $ | 2,855 |  |  | $ | (20,335) |  |  | (712.3) | %
*Percentage change is not meaningful. |  |  |  |  |  |  |  |

Revenue
Revenue increased $487.0 million, or 106.7%, for the three months ended March 31, 2023 as compared to the three months ended April 1, 2022. Revenue increased $412.5 million due to the Merger and the remaining increase was from organic growth for legacy programs. Revenue from our U.S., Asia, Middle East and Europe programs increased by $380.8 million, $48.1 million, $45.4 million and $12.7 million, respectively.
Cost of Revenue
Cost of revenue increased $445.4 million, or 106.2%, for the three months ended March 31, 2023 as compared to the three months ended April 1, 2022, primarily due to the increased revenue from the Merger and increased amortization of intangible assets.
Selling, General, & Administrative (SG&A) Expenses
SG&A expenses increased $16.3 million, or 51.0%, for the three months ended March 31, 2023 as compared to the three months ended April 1, 2022, primarily due to the Merger.
Operating Income
Operating income increased $25.3 million, or 483.9%, for the three months ended March 31, 2023 as compared to the three months ended April 1, 2022. Operating income as a percentage of revenue was 3.2% for the three months ended March 31, 2023, compared to 1.1% for the three months ended April 1, 2022. The increase was due to the Merger and improved performance of legacy programs.
Aggregate cumulative catch-up adjustments increased operating income by $13.1 million and $0.6 million for the three months ended March 31, 2023 and April 1, 2022, respectively. The aggregate cumulative catch-up adjustments for the three months ended March 31, 2023 and April 1, 2022 related to changes in contract terms, program performance, customer changes in scope of work and changes to estimates in the reported period. Operating income was also impacted by labor mix and the cost differential between internal resources and subcontractors as well as the volume of other direct cost purchases.
Loss on Extinguishment of Debt
The Company recorded a $22.1 million loss on extinguishment of debt for the three months ended March 31, 2023. For a discussion of the loss on extinguishment see Note 6, Debt, in the Notes to Condensed Consolidated Financial Statements.
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Interest (Expense) Income, Net
Interest (expense) income, net for the three months ended March 31, 2023 and April 1, 2022 was as follows:

|  | Three Months Ended |  | Change
(In thousands, except for percentages) |  | March 31, 2023 |  | April 1, 2022 |  | $ |  | %
Interest income |  | $ | 208 |  |  | $ | 43 |  |  | $ | 165 |  |  | 383.7 | %
Interest expense |  | (31,952) |  |  | (1,724) |  |  | (30,228) |  |  | 1,753.4 | %
Interest expense, net |  | $ | (31,744) |  |  | $ | (1,681) |  |  | $ | (30,063) |  |  | 1,788.4 | %

Interest income is directly related to interest earned on our cash and cash equivalents. Interest expense is directly related to borrowings under our senior secured credit facilities, with the amortization of debt issuance costs, and derivative instruments used to hedge a portion of our exposure to interest rate risk. Interest expense, net increased $30.1 million for the three months ended March 31, 2023 compared to the three months ended April 1, 2022 due to increased debt assumed with the Merger.
Income Tax (Benefit) Provision
We recorded income tax benefit of $5.7 million and provision of $0.7 million for the three months ended March 31, 2023 and April 1, 2022, respectively, representing effective income tax rates of 24.7% and 19.7%, respectively. The effective income tax rates vary from the federal statutory rate of 21.0% mainly due to state and foreign taxes, disallowed compensation deduction under Internal Revenue Code Section 162(m), available deductions not reflected in book income, and income tax credits.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
We have generated operating cash flows sufficient to fund our working capital, capital expenditures, and financing requirements. We expect to fund our ongoing working capital, capital expenditure and financing requirements and pursue additional growth through new business development and potential acquisition opportunities by using cash flows from operations, cash on hand, our credit facilities, and access to capital markets. When necessary, we will utilize our revolving credit facility to satisfy short-term working capital requirements.
If our cash flows from operations are less than what we expect, we may need to access the long-term or short-term capital markets. Although we believe that our current financing arrangements will permit us to finance our operations on acceptable terms and conditions, our access to and the availability of financing on acceptable terms and conditions in the future will be impacted by many factors, including: (i) our credit ratings, (ii) the liquidity of the overall capital markets, and (iii) the current state of the economy. We cannot provide assurance that such financing will be available to us on acceptable terms or that such financing will be available at all.
As of March 31, 2023, there were $185.0 million of outstanding borrowings and $14.9 million of outstanding letters of credit under the 2023 Revolver. Unamortized deferred financing costs related to the 2023 Revolver of $4.9 million are included in other non-current assets in the Condensed Consolidated Balance Sheets. As of March 31, 2023, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.
As of March 31, 2023, the carrying value of the Term Loan portion of the 2023 Credit Agreement was $250.0 million, excluding unamortized deferred financing costs of $2.5 million. The estimated fair value of the Term Loan portion of the 2023 Credit Agreement as of March 31, 2023 was $246.3 million. The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt.
The cash presented on our Condensed Consolidated Balance Sheets consists of U.S. and international cash from wholly owned subsidiaries. Approximately $25.4 million of our total $62.1 million in cash and cash equivalents at March 31, 2023 is held by our foreign subsidiaries and is not available to fund U.S. operations unless repatriated. We do not currently expect that we will be required to repatriate undistributed earnings of foreign subsidiaries. We expect our U.S. domestic cash resources will be sufficient to fund our U.S. operating activities and cash commitments for financing activities.
Dividends
We do not currently plan to pay a regular dividend on our common stock. The declaration of any future cash dividends and the amount of any such dividends, if declared, will depend upon our financial condition, earnings, capital requirements, financial covenants and other contractual restrictions and the discretion of our Board of Directors. In deciding whether to pay future dividends on our common stock, our Board of Directors may take into account such matters as general business conditions, industry practice, our financial condition and performance, our future prospects, our cash needs and capital investment plans, income tax consequences, applicable law and such other factors as our Board of Directors may deem relevant.
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Sources and Uses of Liquidity
Cash, accounts receivable, unbilled receivables, and accounts payable are the principal components of our working capital and are generally driven by our level of revenue with other short-term fluctuations related to payment practices by our customers and the timing of our billings. Our receivables reflect amounts billed to our customers, as well as the revenue that was recognized in the preceding month, which is normally billed the month following each balance sheet date.
Accounts receivable balances can vary significantly over time and are impacted by revenue levels and the timing of payments received from customers. Days sales outstanding (DSO) is a metric used to monitor accounts receivable levels. The Company determines its DSO by calculating the number of days necessary to exhaust its ending accounts receivable balance based on its most recent historical revenue. Our DSO was 70 and 68 days as of March 31, 2023 and December 31, 2022, respectively.
The following table sets forth net cash used in operating activities, investing activities and financing activities:

|  | Three Months Ended |
(In thousands) |  | March 31, 2023 |  | April 1, 2022 |
Operating activities |  | $ | (38,492) |  |  | $ | (26,381) |  |
Investing activities |  | (9,076) |  |  | (2,178) |  |
Financing activities |  | (7,921) |  |  | 12,316 |  |
Foreign exchange 1 |  | 1,567 |  |  | 729 |  |
Net change in cash and cash equivalents |  | $ | (53,922) |  |  | $ | (15,514) |  |
1 Impact on cash balances due to changes in foreign exchange rates. |  |  |  |  |

Net cash used in operating activities increased for the three months ended March 31, 2023, as compared to the three months ended April 1, 2022, primarily due to net cash outflows in working capital accounts of $68.7 million, other long-term assets and liabilities of $17.8 million, and a net operating loss of $17.5 million, partially offset by cash inflows from non-cash net income items of $65.5 million.
Net cash used in operating activities for the three months ended April 1, 2022 consisted of cash outflows for working capital requirements of $29.4 million and other long-term assets and liabilities of $6.5 million. This was partially offset by cash inflows from net income of $2.9 million and the favorable impact of non-cash net income items of $6.6 million. The net working capital outflows were largely from increases in accounts receivable and decreases in accrued compensation, which included an $8.1 million payment of deferred CARES Act payroll taxes, partially offset by increases in accounts payable.
Net cash used in investing activities for the three months ended March 31, 2023 and April 1, 2022 consisted of $9.1 million and $2.2 million, respectively, of capital expenditures for the purchase of software and hardware, vehicles and equipment related to ongoing operations.
Net cash used in financing activities during the three months ended March 31, 2023 consisted of repayments of long-term debt of $421.0 million, revolver repayments of $163.8 million, payments for employee withholding taxes on share-based compensation of $12.8 million, and payments for debt issuance costs of $7.5 million, partially offset by proceeds from long term debt and the revolver of $250.0 million and $348.7 million, respectively.
Net cash provided by financing activities during the three months ended April 1, 2022 consisted of repayments of long-term debt of $2.6 million, payments of $1.6 million for employee withholding taxes on share-based compensation and payments $0.5 million for debt issuance costs. During the three months ended April 1, 2022, we also borrowed and repaid $217.0 million and $200.0 million, respectively, on the Amended Revolver.
Capital Resources
At March 31, 2023, we held cash and cash equivalents of $62.1 million, which included $25.4 million held by foreign subsidiaries, and had $300.1 million of available borrowing capacity under the 2023 Revolver, which expires on February 25, 2028. We believe that our cash and cash equivalents at March 31, 2023, as supplemented by cash flows from operations and the 2023 Revolver, will be sufficient to fund our anticipated operating costs, capital expenditures, and current debt repayment obligations for at least the next 12 months.
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Contractual Obligations
As of March 31, 2023, our commitments to make future payments under long-term contractual obligations were as follows:

|  | Payments Due by Period
|  |  |  | Less than 1 year |  |  |  |  |  | More than 5 Years
(In thousands) |  | Total |  |  | 1 - 3 Years |  | 3 - 5 Years |
Operating leases |  | $ | 61,125 |  |  | $ | 18,431 |  |  | $ | 20,710 |  |  | $ | 12,930 |  |  | $ | 9,054 |
Principal payments on Vertex First Lien Credit Agreement¹ |  | 915,750 |  |  | 9,250 |  |  | 18,500 |  |  | 18,500 |  |  | 869,500 |
Principal payments on 2023 Credit Agreement¹ |  | 435,000 |  |  | 6,250 |  |  | 18,750 |  |  | 410,000 |  |  | — |
Interest on Vertex First Lien and 2023 Credit Agreements |  | 608,378 |  |  | 115,739 |  |  | 226,134 |  |  | 216,382 |  |  | 50,123 |
Total |  | $ | 2,020,253 |  |  | $ | 149,670 |  |  | $ | 284,094 |  |  | $ | 657,812 |  |  | $ | 928,677 |
¹ Includes unused funds fee and is based on the March 31, 2023 interest rate and outstanding Credit Agreement balance

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results in these areas could differ from management's estimates under different assumptions or conditions.
We believe that the assumptions and estimates associated with revenue recognition, business combinations, goodwill and other intangible assets, and income taxes have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting policies and estimates. There have been no material changes in our critical accounting policies and estimates from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2022.
New Accounting Pronouncements
Refer to Part I, Item 1, Note 2, Recent Accounting Standards Update in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding accounting pronouncements and accounting standards updates.
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the Securities Act of 1933, as amended (the Securities Act), and the Private Securities Litigation Reform Act of 1995 and, as such, may involve risks and uncertainties. All statements included or incorporated by reference in this report, other than statements that are purely historical, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “could,” “potential,” “continue” or similar terminology. These statements are based on the beliefs and assumptions of the management of the Company based on information currently available to management. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements.
We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to: the continued impact of COVID-19 and any variant strains thereof on the global economy; our ability to submit proposals for and/or win all potential opportunities in our pipeline; our ability to retain and renew our existing contracts; our ability to compete with other companies in our market; security breaches and other disruptions to our information technology and operation; our mix of cost-plus, cost-reimbursable, and firm-fixed-price contracts; maintaining our reputation and relationship with the U.S. government; protests of new awards; economic, political and social conditions in the countries in which we conduct our businesses; changes in U.S. or international government defense budgets; government regulations and compliance therewith, including changes to the DoD procurement process; changes in technology; intellectual property matters; governmental investigations, reviews, audits and cost adjustments; contingencies related to actual or alleged environmental contamination, claims and concerns; delays in completion of the U.S. government's budget; our success in extending, deepening, and enhancing our technical capabilities; our success in expanding our geographic footprint or broadening our customer base; our ability to realize the full amounts
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reflected in our backlog; impairment of goodwill; misconduct of our employees, subcontractors, agents, prime contractors and business partners; our ability to control costs; our level of indebtedness; terms of our credit agreement; inflation and interest rate risk; subcontractor performance; economic and capital markets conditions; our ability to maintain safe work sites and equipment; our ability to retain and recruit qualified personnel; our ability to maintain good relationships with our workforce; our teaming relationships with other contractors; changes in our accounting estimates; the adequacy of our insurance coverage; volatility in our stock price; changes in our tax provisions or exposure to additional income tax liabilities; risks and uncertainties relating to the Merger; risks and uncertainties relating to the Spin-off; changes in GAAP; and other factors described in Item 1A, “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022 and described from time to time in our future reports filed with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our earnings, cash flows and financial position are exposed to market risks relating to fluctuations in interest rates and foreign currency exchange rates. All of the potential changes noted below are based on information available at March 31, 2023.
Interest Rate Risk
Each one percentage point change associated with the variable rate Vertex First Lien Credit Agreement and would result in a $8.8 million change in our related annual cash interest expenses.
Assuming our 2023 Revolver was fully drawn to a principal amount equal to $500.0 million, each one percentage point change in interest rates would result in a $5.1 million change in our annual cash interest expense.
As of March 31, 2023, the notional value of our interest rate swap agreements totaled $300.0 million. The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt in the period incurred. Changes in the variable interest rates to be paid pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows. Refer to Note 8, Derivative Instruments in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding our interest rate swaps.
Foreign Currency Exchange Risk
The majority of our business is conducted in U.S. dollars. However, we are required to transact in foreign currencies for some of our contracts, resulting in some assets and liabilities denominated in foreign currencies. As a result, our earnings may experience volatility related to movements in foreign currency exchange rates. In the past, we entered into forward foreign exchange contracts to buy or sell various foreign currencies to selectively protect against volatility in the value of non-functional currency denominated monetary assets and liabilities. The impact of the related contracts on our Condensed Consolidated Statements of (Loss) Income and our Condensed Consolidated Balance Sheets was immaterial and related hedging was discontinued. Our forward contracts expired in January 2022 and no such contracts are outstanding as of March 31, 2023.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2023. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2023, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in reports the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to management to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Changes in Internal Control over Financial Reporting
As discussed in Note 3, Merger in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, the Company completed the Merger with Vertex on July 5, 2022. As permitted by interpretive guidance for newly acquired businesses issued by the SEC Staff, management has excluded the internal control over financial reporting (ICFR) of Vertex and its consolidated subsidiaries from the evaluation of the Company's effectiveness of its disclosure controls and procedures as of March 31, 2023. Since the date of Merger, Vertex's financial results are included in the Company's Consolidated Financial Statements. As part of our post-closing integration activities, we are engaged in the process of assessing the internal controls. The Company has begun to integrate policies, processes, people, technology and operations for the post-acquisition combined company, and it will continue to evaluate the impact of any related changes to ICFR.
Other than the items discussed above, there were no changes in our ICFR that occurred during the three months ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, our ICFR.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are involved in legal proceedings that are incidental to the operation of our business. Some of these proceedings seek remedies relating to employment matters, matters in connection with our contracts and matters arising under laws relating to the protection of the environment.
Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claim, we do not expect that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse effect on our cash flows, results of operations or financial condition.
Refer to Note 8, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information.
ITEM 1A. RISK FACTORS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS

10.1 | Credit Agreement, Dated as of February 28, 2023, among Vertex Aerospace Services Corp., as the Borrower, Vertex Aerospace Intermediate LLC, as Holdings, the Lenders Party Hereto, and Bank of America, N.A., as Administrative Agent, Swingline Lender, Collateral Agent and L/C Issuer (incorporated by reference to Exhibit 10.1 to V2X, Inc.’s Current Report on Form 8-K filed March 2, 2023).
10.2 | Separation Agreement and Release of Claims, dated April 1, 2023, by and between Richard Mendoza and V2X, Inc. *+
10.3 | Form of V2X, Inc. Second Amendment and Restatement of 2014 Omnibus Incentive Plan – Restricted Stock Unit Award Agreement (Stock Settled) *+
10.4 | Form of V2X, Inc. Second Amendment and Restatement of 2014 Omnibus Incentive Plan – Special Performance Stock Unit – 2023 Stock Price Award Agreement *+
10.5 | Form of V2X, Inc. Second Amendment and Restatement of 2014 Omnibus Incentive Plan – Performance Stock Unit – 2023 TSR Award Agreement *+
31.1 | Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +
31.2 | Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +
32.1 | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference. +
32.2 | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference. +
101 | The following materials from V2X, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statements of (Loss) Income, (ii) Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income, (iii) Unaudited Condensed Consolidated Balance Sheets, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, (v) Unaudited Condensed Consolidated Statements of Changes to Shareholders' Equity and (vi) Notes to Condensed Consolidated Financial Statements. #
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) #

* Indicates management contract or compensatory plan or arrangement.
+ Indicates this document is filed as an exhibit herewith.
# Submitted electronically with this report.
The Company’s Commission File Number for Reports on Form 10-K, Form 10-Q and Form 8-K is 001-36341.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

V2X, INC. |
/s/ William B. Noon |
By: William B. Noon |
Corporate Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: May 9, 2023

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