July 5 represented day one for the newly cast V2X after the merger of Vectrus and Vertex created a larger technical services provider in the government market.
One aspect of the thesis for transactions such as V2X goes like this: growth and enhanced profitability will happen faster and at greater rates after joining forces than would have happened separately.
During V2X’s third quarter earnings call with investors, CEO Chuck Prow said the new company will not have to recompete more than 2% of its revenue over the next two years.
For context: V2X pegs its expected revenue for 2022 at $3.6 billion on a pro forma basis accounting for sales from both Vectrus and Vertex.
A mere 2% of recompeted sales means much of the team’s focus can turn to pursuing the kind of new business it feels better positioned for as a larger entity.
“There’s always recompete in a portfolio that’s as broad as V2X is, it’s pretty smooth when it comes to the size and not being our largest opportunities,” Prow told analysts. “That’s going to free up some time and attention to really focus on and make progress on these net new opportunities that are so attractive to us.”
V2X’s leadership team including Prow knows of what they speak regarding the subject of no longer having a big recompete hurdle to worry about.
What was Vectrus kept the incumbent work that was recompeted in 2019 through the Army’s $82 billion LOGCAP V logistics vehicle. That win also expanded the scope of services on the program for Vectrus and now V2X.
The now McLean, Virginia-headquartered V2X reported a total backlog of $13.6 billion as of the third quarter’s end: a number representing around 3 times this year’s pro forma sales and showing the room given for focusing on new opportunities.
Regarding those new business pursuits in the short-term, Prow cited NASA and the intelligence community as showing opportunities “that are very interesting to us” over the next six-to-18 months.
The National Science Foundation, U.S. Agency for International Development and State Department are on V2X’s list of agencies with longer-term opportunities to watch out for. Prow said those are more in the 18-to-30 month horizon.
On the integration front: V2X plans to enter 2023 with three operational business units of advanced technology, aerospace, and global mission training and support services. January 2024 is when V2X expects to be fully integrated and have realized its goal of $20 million in cost synergies from the merger.