V2X (VVX) risk factors, FY2024 10-K

RISKS RELATED TO OUR BUSINESS

1. 01We may not be successful in winning new contracts or recompeting our existing contracts, which could have an adverse impact on our business and prospects
2. 02If we are unable to win a particular new contract, we may be prevented from providing the customer the services that are purchased under that contract for a number of years
3. 03Our profitability or performance could suffer if we are unable to recruit and retain qualified personnel or if we are unable to maintain adequate staffing levels for our contracts
4. 04Termination, expiration or non-renewal of our existing U.S. government contracts may adversely affect our business
5. 05We derive a significant portion of our revenue from a concentrated number of large contracts, and the loss or material reduction of any of these contracts could have a material adverse effect on our results of operations and cash flows
6. 06We rely on internal and external information technology systems to conduct our business, and disruption or failure of these systems could adversely affect our business and results of operations
7. 07Competition within our markets may reduce our revenue and market share
8. 08Our earnings and margins may vary based on our performance, the mix of our contracts, and our ability to control costs
9. 09We use estimates in accounting for many of our programs, and changes in our estimates could adversely affect our future financial results
10. 10While firm-fixed-price contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns
11. 11Uncertainties in the U.S. government defense budget, changes in spending or budgetary priorities or delays in contract awards or collection of our receivables may significantly and adversely affect our financial performance and limit our growth prospects
12. 12Business disruptions caused by natural disasters, global hostilities, pandemics, and other crises could adversely affect our profitability and our overall financial position
13. 13We rely on our information and communications systems in our operations. Security breaches, cybersecurity attacks, and other disruptions could adversely affect our business and results of operations
14. 14We work in international locations where there are high security risks, which could result in harm to our employees and contractors and the incurrence of substantial costs
15. 15A significant portion of our workforce is represented by labor unions, and our business could be harmed in the event of a prolonged work stoppage
16. 16Integrating Vectrus and Vertex may be more difficult, costly or time-consuming than expected
17. 17We conduct a portion of our operations through joint ventures and other partnerships, exposing us to certain risks and uncertainties, many of which are outside of our control
18. 18We rely on third-party subcontractors to perform some of the services that we provide to our customers. Disruptions or performance problems caused by our subcontractors could have an adverse effect on our ability as a prime contractor or higher tier subcontractor to meet our commitments to customers
19. 19Our business could be adversely affected by bid protests
20. 20Misconduct of our employees, subcontractors, agents, prime contractors or business partners could cause us to lose customers and could have a material adverse impact on our business and reputation, adversely affecting our ability to obtain new contracts
21. 21Our success depends, in part, on our ability to work with and manage complex and rapidly changing technologies to meet the needs of our customers
22. 22We may pursue acquisitions and other investments that involve numerous risks and uncertainties
23. 23We depend on our teaming arrangements and relationships with other contractors. If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenue, profitability and growth prospects could be adversely affected
24. 24We may be required to contribute additional funds to meet any present or future underfunded benefit obligations associated with multiemployer pension plans in which we participate
25. 25Legal disputes could require us to pay potentially large damage awards and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation
26. 26Our insurance may be insufficient to protect us from claims or losses
27. 27Increasing scrutiny and changing expectations from governmental organizations, customers, and our employees with respect to our sustainability practices may impose additional costs or expose us to new or additional risks

RISKS RELATED TO GOVERNMENTAL REGULATIONS AND LAWS

1. 28Environmental, health and safety issues could have a material adverse effect on our business, financial position or results of operations
2. 29As a U.S. government contractor, we are subject to a number of procurement laws and regulations and could be adversely affected by changes in regulations or our failure to comply with these regulations
3. 30Our business is subject to audits, reviews, cost adjustments, and investigations by the U.S. government, which, if resolved unfavorably to us, could adversely affect our profitability, cash position or growth prospects
4. 31The DoD continues to modify its business practices, which could have a material effect on its overall procurement processes and adversely impact our current programs and potential new awards
5. 32Our business depends upon obtaining and maintaining required facility security clearance and individual security clearances
6. 33We are subject to legal and regulatory compliance risks associated with operating internationally
7. 34As a U.S. defense contractor, we are subject to security restrictions, which may limit investor insight into portions of our business
8. 35Our business may be negatively impacted if we are unable to adequately protect our intellectual property rights
9. 36Government withholding regulations could adversely affect our operating performance
10. 37We are subject to certain data privacy regulations, which expose us to certain risks if we do not comply with these requirements

RISKS RELATED TO OUR INDEBTEDNESS, FINANCIAL CONDITION AND MARKETS

1. 38In connection with the Merger, we assumed significantly more indebtedness than V2X's prior indebtedness. Our level of indebtedness and our ability to make payments on or service our indebtedness could adversely affect our business, financial condition, results of operations, cash flow and liquidity
2. 39As of December 31, 2024, we had approximately $1,138.8 million of aggregate debt outstanding, which consists of the First Lien Term Facility and the 2023 Revolver and Term Loan (See Note 10, Debt, in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K)
3. 40Our variable rate indebtedness may expose us to interest rate risks, which could cause our debt costs to increase significantly
4. 41Our debt agreements contain covenants with which we must comply or risk default, or that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our businesses
5. 42Goodwill represents a significant portion of our assets, and any impairment of these assets could negatively impact our results of operations
6. 43The effects of changes in worldwide economic and capital markets conditions may significantly affect our ability to maintain liquidity or procure capital
7. 44We may not realize as revenue the full amounts reflected in our backlog, which could adversely affect our future revenue and growth
8. 45Unanticipated changes in our tax provisions or exposure to additional U.S. and foreign tax liabilities could affect our profitability

RISKS RELATED TO OUR SECURITIES

1. 46Investment funds affiliated with American Industrial Partners (AIP) continue to have significant influence over us, which could limit your ability to influence the outcome of key transactions, including a change of control
2. 47Our stock price may be volatile
3. 48Any future offerings of securities, including debt or preferred stock, which would be senior to our common stock, or other equity securities may materially and adversely affect us or our shareholders, including the per share trading price of our common stock
4. 49During 2024, our significant shareholders who received shares of our common stock in connection with the Merger sold some of their shares. If they choose to sell a significant number of additional shares, such sales could have a material impact on the market price for our common stock
5. 50We do not currently plan to pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock in the future
6. 51Anti-takeover provisions in our organizational documents and Indiana law could delay or prevent a change in control