VSEC - Earnings call transcript Q4 2021

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Operator

Greetings. Welcome to the VSE Corporation Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Noel Ryan.

You may begin.

Noel Ryan

you. Thank Corporation's full VSE conference XXXX quarter call. fourth to year and results Welcome today and our and the are Leading call President Officer, Griffin. Chief Steve CEO, Financial Cuomo; John we today The are accordingly. is encourage you on presentation to sharing our we along follow website, statements contains business future forward-looking and Today's expectations. about discussion financial today's reports uncertainties, results risks including Actual in described differ filed to due in from significantly statements may periodic with the SEC. the various projected our those forward-looking risks and to update law, by we obligation undertake required forward-looking as our no Except statements.

are open like for non-GAAP financial measures presentation I prepared We GAAP the with progress, posted percentages our financial that, where for which turn John to And line our year-over-year our to except All on conclusion the available, will noted. questions. in would into in appropriate using At refer call his presentation. today's our website. of Cuomo reconciliations over The are the where discussion remarks. to is incorporated we prepared remarks,

John Cuomo

Thank you, join you the Noel. taking Thank call today. our Welcome, everyone. time to for

the repair for Last complex year we market continue requirements. varied global on moved distribution, to customer support successfully execute user, develop company services transformation XXXX, multiyear creation. engineer leading full fourth business quarter to our a plan. to end the identifying aftermarket we long-term One During value positioned ways and and to and closer year, new

supplier X and also while new capabilities. We Tier existing our OEM partners, both diverse aligned ourselves of with expanding global portfolio products and

support, agreement terms aircraft. exclusive surplus XXXNG provider major parties. other airline this major and fleet During of this their the materials. used backlog the into Most retired spares dismantling continued we with brokers to a for building the aircraft airline Under domestic and and new U.S Aviation an wins. quarter, the sale notably, for third end-of-life the program segment OEMs, airline, we parts used allows the become fourth for of business entered of and of disposition to solutions will VSE our refurbishment The with agreement, support with

making management purchasing the limited will through agreement. program fourth the the aircraft. as to VSE not largest this is Most This of quarter, the we began agreement, of During importantly, now become support investments this VSE program builds any requires XXXNG capital launch in suppliers commitments, MRO infrastructure global a business general one of customers, aviation refurbished the we B&GA business. full capabilities building that established tip-to-tail of support that of to Aviation platform industry-leading A encompasses our our material. In parts and and products requirements are upon segment, breadth services. distribution a approach strategy a in Aviation

representing Our year remains contract, fully excess XX-year developed, our we Pratt first in billion this In B&GA million XXXX, annually. $XX contract we with million of Once to contract program $XX of revenue Canada anticipate of accessories Whitney from engine revenue contribution. & executed date. significant approximately agreement revenue most estimate full this $X the is

to strong share demand supported expect activity increased accelerate general year. to continue MRO, robust and business commercial market continue and recovery aviation component all gains, by XXXX, in recover. for B&GA market anticipate activity, and markets throughout flight within remain we aviation will and distribution Our markets, flight spares and repairs increased to we In hours. commercial the aviation Within

profitable for Looking of across avenues see growth segments. multiple ahead, we each our operating

opportunities. proposition, even on discipline our niche while market maintain as value markets. more our We streamlined placing we new enter bidding have We emphasis

focused strategy, Our specifically customer growth to Fleet with and successfully diversification in our continues upon e-commerce. success and execute growth commercial segment

continue pivot focus as to margin Entering is VSE to a Our as and leading and our niche long-term on the it continued capabilities Federal launched the we divisions technical Defense markets. accelerate our time MRO to and global and to segment brand. position in XXXX finished distribution history. MRO more aftermarket strong new for higher a build and first segment services XXXX growth a XXXX, capabilities, as largest strategies in support profitable Aviation to in distribution drive

we capital and of aviation our the continue long-term prioritize execute on business, company our the engine. increasingly to strategy, As growth across other deployment resources will become

March to ability to to of we July. grow We scale a Parts our in will strong our continue to upgrade represent and businesses of use and transactions as did HSS in systems, with facilities, approach acquisitions processes in XXXX drive disciplined we M&A the a XXXX capabilities Global as XXXX beyond. in talent, and

culture continue brand. and VSE focus We on to the

that and solutions, focused a a distribution, are develop brand. go-to-market leading We culture customer global building aftermarket single will to us allow exchange high-performance, repair,

performance increased revenues within related XXX% driven first distribution together Fleet supported to in both by growth on in income the increased EBITDA. aviation acquisition distribution sixth the from to by Wheeler contributions market, core fourth versus e-commerce both from growth and vehicle Solutions and while of become acquisition. programs, increased quarter, aviation a organic quarter with the contract year Parts period, MRO our leading strong strong driven the distribution year Global above the XXXX segment, fourth We revenue was $XX.X pre-pandemic revenue record distribution brand. from prior organic gains XX% Aviation specifically, capabilities, B&GA a revenue new prior and combination More XXX% XX% MRO increased market new to addition The levels finished a Within is -- contributions by of versus Additionally, contribution. by remain within distribution program adjusted execution and new revenue sequential This quarter contributing continuing of year-over-year revenue the platforms. a million. awards. consecutive wins, quarter share combination continued Aviation note, fourth new e-commerce by of the driven path improvement as its our net a and

continued growth of year-over-year a business. increased QX on basis in by XX% Federal driven revenue Fleet a XX% our segments. fulfillment of the and in revenue Turning by XXXX, year-over-year increased period. commercial fourth to review in the e-commerce now in on our quarter, representing revenue total basis Fleet Commercial XX%

increased product our proud up problems, with we we on by agreements and during improved basis, development other and transforming our our capabilities new of and team, excellence segment customer new of that ahead our playbook, recently summary, businesses systems, in acquisition. had portfolio, solving our offerings was revenue fourth internal add service VSE. the quarter product winning and accomplished additions supported continue activities. Services year expanded In and Our MRO service Federal year-over-year new by VSE and the processes, and solid product all quarter are and to backlog talent market and the finish contributions the year-over-year e-commerce as I support a solutions, Special to with business, culture of execute all on incredibly combination as XX% added distribution Federal two business products we solid VSE. growth for X% am transformational increased and completed that enhanced adding the centers technical strategy XXXX. offerings, capabilities customers. This building, year, to XXXX, winning a fourth will offerings expanding to to strong organic HAECO a Defense quarter to In a a was for acquired business driven

XXXX. multiyear transformation. to a the We exciting in to remain an strong are early start of off We phase

first Investor ever third to host Day. intend quarter our XXXX, of the During we

review outline and detailed tuned Steve roadmap event detail. on to coming greater growth call now During for of over this financial that, I months. information event, multiyear in a strategy additional for we performance. for will this in our the the With Stay turn our

Steve Griffin

John. Thanks,

for materials the of reported Now X% fourth a contributions Fleet XXXX. of Within was million prior X revenue the was awards new new conference gains the year by growth of wins, while from and generated driven Service overview by contracts fourth Global EBITDA Postal fleet in inorganic $XXX.X contributions fourth We growth by States let's segment and Federal our $XX.X offset revenue completion performance. flat in segment DoD and fulfillment by July certain supported business an year-over-year. increase quarter, commercial in growth program adjusted acquisition revenue the and turn combination period. to of our call year-over-year United partially was share basis. points Aviation, year-over-year quarter Slides in Federal within EBITDA was year-over-year e-commerce segment. XXXX. the offset significant Fleet in an Adjusted X.X% expansion the the revenue driven within rates Aviation margin of lesser million revenue, XXX margin XX% an basis Parts as declined increase margin a our X compression to on We within completed from from of and quarter, extent of to a

by driven Distribution on revenue Turning is end X. repair the and fourth above levels. the excluding XXX% basis, repair $XX.X contract with outperforming primarily distribution wins. increased Slide our Aviation in Parts new segment quarter. demand XX% distribution market our Both of grew approximately pre-pandemic Global revenue year-over-year million year-over-year a businesses to and from revenue, contributions acquisition improved

markets continue We repair in and increased as in see new we new top we continue new by solutions expand to to recover this integrated a capabilities segment, Delivering basis as X.X%. XXX revenue with year-over-year, aviation our further line EBITDA priority general more and revenue the and growing expand commercial increased customers. commercial the in to this EBITDA customers year-over-year market. year, business invest margins for scale overall Aviation growth drive implement anticipate We win recovery EBITDA and commercial points adjusted remains XXX% than recovery to awards across adjusted outsized throughout base repair margins. new while of as programs,

XX% segment was up the EBITDA For Aviation up total was prior and year, revenue year versus XX%. adjusted

of segment year-over-year flat X. down adjusted up XX% fulfillment the revenues revenues higher segment a to year decline Commercial grown on more of the Slide to year-over-year Segment versus Fleet e-commerce million basis. commercial year of year versus than a $X.X quarter, XX% an were period DoD in XX% points was revenue total $XX.X a Commercial versus million fourth revenues period. USPS increase in on revenue. and Turning XX prior prior EBITDA period. have increased were as offset basis. prior XX% the the revenue,

XXX revenue. given EBITDA of points year-over-year, commercial basis adjusted While a mix higher margins declined

total the a XXXX, segment excluding revenue year the Fleet effect order of X% up For PPE XXXX. in was one-time

diversification opportunities up with over the demand continues and XX% For commercial which for the were market XXXX, combined end revenue XX%, strong in growth revenues the to segment. highlight the over full XXXX year

cost the and of year-over-year disruptions X. U.S to contract services by wins to the was effects year-over-year declined previous Navy on margins and as adjusted revenue the EBITDA $X.X by Federal new our to price the acquisition Army a increased adjusted some disruptions. the segment awards HAECO while offset the have related decline chain and quarter, EBITDA with and converted some basis, supply program Special broader segment mitigate a X.X year-over-year, of million Turning in Services U.S contributions from X.X% driven related XX% supply the Federal plus, to a programs. points of to of as Slide works business the expiration fixed chain XX% Defense

year up For up Federal was X% the full segment revenue X%. and backlog was XXXX,

cash XX. in our availability million Turning million we year-end, and $XXX At unused to commitment facility. Slide had credit under $XXX

credit commitment facility the million XXXX. approvals. flow existing $XX cash million subject fourth In of the in with accordion million which lender $XXX a cash customary $XX includes third half free Our puts us flow, generated second to quarter provision, results, at of we our free of quarter,

completed acquired flow the these have We with positive will all anticipate expect full for for XXXX that have cash line year free be our our we year-end, guidance. the and first quarter of XXXX distribution newest previous in programs. programs majority outflows cash of for aviation we'll inventory As the

be ready XXXX, of positive growth portion of million In call. net As and to year cash for $XX.X launched flow outstanding XX-month in had the At acquisitions. debt X.Xx. leverage as net question-and-answer the EBITDA. XX, full million. completed year of trailing from period and $XXX we EBITDA conclusion EBITDA quarter, support Global we recently positioned free December acquisitions fourth are Parts the contributions the contributions of was was we for from excludes Adjusted programs, now incremental our the full HSS total and Operator, are

Operator

is Truist [Operator proceed with from Ciarmoli your question. first Michael Please question with Instructions] Our Securities.

Michael Ciarmoli

guys. Hey, for good … Thanks morning,

John Cuomo

Good morning, Mike.

Michael Ciarmoli

don't I guys taking and quarter? missed in just if Did the it. the you … thanks growth the I the rate housekeeping, questions for detail. Maybe give organic know

John Cuomo

in the in give rate with think terms give within portfolio year-over-year Parts acquisition. the But specifics I gave growth the did Aviation XX% associated which organically. specifics organic the we We organic Global distribution was And the of up the we the business quarter. didn't of growth

Michael Ciarmoli

XX%, okay. Got it.

margin of the margins? there mix know drove on segments. across progression just all you called about out quarter Okay. how looked bit bit year-over-year the the gains, into little chain. be specifically should a and recovery But can thinking sequentially, significant what current maybe and it the nice I focus a sequential we here and And supply about like, I talked then we kind you maybe year? know pressure through was but declines

John Cuomo

Sure. Steve?

Steve Griffin

absolutely. year-over-year walk and X Yes, quarter pressure margin within basis the details which We fourth a a on segment, Defense highlighted what was materials. the bit And different of driven a by of the on we of the Federal saw specifically, for was things. couple Slide

the which fixed within within ability different to awards, record mix a And subsequently the supply our quarter. business the we material cost revenue. and price were of a secondly, off, shift get plus our versus saw First terms in chain customers cost to terms delinquencies, plus in of there of delayed disruptions our then towards more

some So, range. we past this single-digit be to the digits communicated it we've chain business. is related start to as that you time over we're the to those higher going unit recover working But disruptions be mid-single in in of should progressing the supply expect to business what through the

within And for towards we a work saw we business versus some mentioned, difference that related work then so, that And that the the do we're of to extent, between as that a is long-term. continuing commercial government performed there see we lesser mix Fleet our progress the customers. portfolio, to I

quarter, actual business very as helps expected. pressure a key improvement that segment, it overall margin businesses rate drive points portfolio look But from pleased to a basis diversification probably that fourth overall contribute help continued And that then importantly, of to revenue most that you Fleet overall to over specifically, rate within is margin continue But margin that's basis for the total portfolio. on to performance to is within the so long-term. margin if the as its mid-teens to And lastly, perspective you and level. at recover the expansion saw the as rate with something we're Aviation we the XXX the we year-over-year back to the over company expansion

Michael Ciarmoli

Right.

John Cuomo

one MRO thing of at I little slower-than-anticipated. business will is commercial if the business, add higher look you is a is, the which Mike, Aviation, portfolio margin in there MRO recovery business, And, a the the

that and expect level in the we just seeing month-over-month, and other do of So we that seen at anticipate business. would quarter-over-quarter the to parts the we're recovery continue we’ve not of robustness Aviation

margin So back that will scale and that will incremental improvement. drive

from the thing other is, pressure I other you're supply of The hearing companies margins. out there amount want to chain add on

you expenses not business and to margin, as services the more in and drop that product the in nature. pressure business just see -- and rate that I XXXX service in in and But just our get we're tremendous business, deliveries, to anticipate was put year, in amount growth amount We've really revenue the at scale in push in, about are invested see we on rate get business a outs than scale. the of in incremental a Defense of of are total now of organically much more mean, the margin Aviation end the a to to infrastructure you're it's ready terms the and line. have We expenses the higher that that to we're because scale. being tremendous back added in business, that to Federal some business and that operating growth which distribution we on we the where that sales seeing sales [indiscernible] the we're distribution start year-over-year margin and adding to year-over-year the bottom to this as starting do or we there

Michael Ciarmoli

in was I sequential Got from steep margins? guess, XQ. margin of the about it. a Federal the the nice of year-over-year, get to like looking sequentially XX%. too, like had it growth I weak Aviation in the lot XQ but as incrementals you at XQ slip, And The to to off what XQ those contracts though. I guess pressure well. I from more XQ EBITDA and XQ, fall were had sounds to and sequentially happens declined aviation you

John Cuomo

ahead. Go

Steve Griffin

I'd rates. combined say, operates The we've slightly see, Parts can first that a Global Global sure. in Yes, lower you Parts now as business. business and at the foremost, margin

the margin quarter We make first And of when acquired we full have as as communicated we then, growth. contribution. And John business. a of we've mentioned, part to investments that the continue

we the dip scale little earlier continue So, to to drive but I see a know in generally we investment. it on as But next speaking, bit to drive scale the opportunity we mentioned, he John continue referenced make year. continue as grow to that call, in investments to

Michael Ciarmoli

Got it.

John Cuomo

shift the speakers] [multiple Within in the was the contracts. mix

Michael Ciarmoli

it. Got

I mean, thoughts get in in John, we And -- morning's ability will me what what on what keep Okay. presumably I how pricing and will then, power you've of jump I on then thoughts aviation. there. business inflation speakers]? can back you number, kind one and saw out just to X%, price and I the Any more the queue. the guess, let But, can got of pushing just this you think there pace, ask the [multiple are you pricing,

John Cuomo

we contracts price of within long-term business. Yes, small have fixed very -- our we a level have

do as have an predominantly power highly are the -- in transactional we the inflation. in have And pricing see aftermarket we So, that’s ability business nature. we market we pricing do to

force to do long-term our see do we as we ability end. So business, the for a to on that risk the not see because that pricing

Michael Ciarmoli

Okay.

think and that's do little I speakers]? really challenging? it more you Federal too, guess In a Defense bit Okay. that [multiple

John Cuomo

thing No, it’s the business. same that for

Michael Ciarmoli

Thanks.

Michael Ciarmoli

Okay.

John Cuomo

now. right issue timing a really just That's

Michael Ciarmoli

Yes.

John Cuomo

Federal just amount mid-year. QX, from we -- more product, the in seeing to we're one QX there like probably new to and our [indiscernible] that seeing the Defense significant just distribution of a closer was push delays some of orders to we're and is business That and probably --

Michael Ciarmoli

will it. in it. Got jump queue. I the guys. Got Perfect. back Thanks,

John Cuomo

Mike. Thanks,

Operator

you. Thank

Herbert is Capital Our Ken RBC your proceed question. from with with question next Markets. Please

John Cuomo

Good morning, Ken.

Stephen Strackhouse

morning. morning, for Good Good morning. Good on guys. Strackhouse is Ken Herbert. This Steve actually

little can program small. of could contribution how this that be to know XXXX? XXXNG be ranks? if I could be For detail for detail a you the further, great. requirements recent you And what provide the you agreement, investment revenue this kind that'd detailed on more then, going you in if And program those could But were -- the

John Cuomo

Yes, let to will high the you over then level, it me just on at financials. start and I turn Steve, a

in highlighted of this not a the we are So, kind helping And are then to we're total traditional of earlier buying aircraft. aircraft. that want a script kind process my the where we partnership, of transparent selling of that assets manage very of and aircraft, associated that. light dismantling asset deal to is USM on I with It's where the be the

to the that's of kind that highlight. first want So I thing the

we that the that that look in team really that's when at going to the it's added So, tear fourth going program, doing expenses outside labor to building then we and the contracting downs. with is be the quarter, manage

as and there's if XXXX color. as I much start there to really forecasts, far to financial the going give XXXX. we Steve, any jump not more know in But you As up want in look ramp to more at don't

Steve Griffin

wouldn't much of Yes, expect say, in I would contribution a material just this from program too XXXX. I

now. John launched the just program getting right As we're mentioned,

as to belt. able dynamic what some for we quarter terms you for the our of with to to we deep more head probably repair our our experience to get commercial in as standpoint But the guidance first expand a with investments, the I opportunities underneath be partnership actually to from opportunity both and for generally of we'll and as into well revenue associated probably relationships, important the as look this expect ourselves So, capabilities. continue most is continue us deal embed think speaking, provide

help So, it's within within them. networks and the us further establishing to continue to services our customers provide

Stephen Strackhouse

may. just HAECO performing for one That's are so and your the expectations? And follow-up, perfect. Global the color. Parts if How relative I Thank then XXXX you with acquisitions to much

John Cuomo

or They're performing at above expectations.

forecast with equity multiples raise two we those pleased So their integration underway are the put capital a the to that of accelerated segments. the -- last really performing favorable And that did from see respective integrations our -- businesses or very and at small into business year, to timeline. and of are are above deals businesses to well both us

both businesses. The we acquisitions. that that So as the very, capabilities the as team well acquired on very pleased came board with with

Stephen Strackhouse

so Thank Perfect. you in queue. the I much. back hop will

John Cuomo

Right.

Operator

Blair. next question. Please from Louie your Our proceed is question De with William with Palma

Louis De Palma

and morning, Good John, Steve Noel.

John Cuomo

morning. Good

Steve Griffin

morning. Good

Louis De Palma

able for new the that? XXXNG with an U.S new you Is logo for existing you? like program a is Are Or disclose to airlines it Boeing customer?

John Cuomo

customer I existing airlines an distribution support commercial both virtually all mean that MRO -- those It's we business. businesses supporting MRO our in our we're and in today.

in going now publicly we to the not to market. probably the a program airline the are announced we're We until position launch right where

announcement we'll more a So, have type probably in the marketing coming month.

Louis De Palma

Steve, be that for of a margin there program, XXXX. I how you up in And Great. much program? ramp as the But contribution will mentioned revenue you be impact a think, there won't negative

Steve Griffin

there associated mean, wouldn't -- some program. not it material. the call I But overly in with slight are investments I impacts it's

some it it'll As pays probably and we continue John program point the through quarter a management team, mentioned, to that or into at which get team, second will first and then the the investments we into what about itself. we're -- 'XX up XXXX that excited it end opportunity for then us and for cross-selling XXXX. I is into as think period to of And the continues open made head

Louis De Palma

programs announced generally to & yet for when fully that, of Canada Great. with of outflows that end you your the towards X,XXX? targeted Steve, partnership, of you And deal, end the April, that think know scaling I last we X,XXX for Pratt accessories. all inventory in Are March. associated said some there large you terms the I engine announced I distributing, believe you you over Whitney and

the be mean in few be this the for we that around fully that margin next program? weeks, And And that profitability scaled should will for program like the so, program? should for I guess peak [indiscernible]

John Cuomo

that one? Steve, you want to

Steve Griffin

take it. to happy I'm Yes,

think first. -- material talk from I So, let's

this Obviously, yes, a quarter material scale full For of then the the but you and into say terms terms look are speaking, the could with as generally larger all there's on relates year-end year, communicated it guidance business, we're things of margin that this yes. the of to piece to year, to expectations performance this towards as completion scale. program we in year just would that And be think that into at in program. million $XX But really on the of of midway the I parts, than we've I get yes, acquisition, it future. through of as through ramping remaining rate, for continues working I'd the the couple the we'll say first optimize and full

you is referenced like year, last business really think we As if acquisition a full it. about this

we've internally. to on we year, looking us point up both new customers that for we're for able scale new representatives, partner, which drive service into this we'll set sales folks, the customer really as be at and optimize So, and head the to

Louis De Palma

in of your announced Great. contract? the for recently long-term timing And long-term work? potential of terms any extension -- visibility an Do you the NAVSEA have you contract the

Steve Griffin

My would million to Bridge of year. We end award, the would commitment contracts, $XXX backlog on another say orders I'd our our plus next an do the anticipation through I'm is in have get and end a place. longer-term of QX. announcement then million QX task now And give a of going guess. be contract. you contract Pleased be to an on $XXX kind guess legacy

Louis De Palma

but in peak the program color to Okay. mix there in financial of like Canada on should margins Whitney on that for high-level on there's been should didn't any you side the guidance impact any you And for terms provide the margin Fleet supply and the provide chain you -- trends and the Federal your Federal be like, formal how about Is guidance, difficulty] can how [technical modeling there's we able you Fleet Pratt savings. what are provide across side. with trending XXXX? how think I the & summer, margin Aviation, the and the shift like I about know know do spoke we

Steve Griffin

Yes, sure. of with -- going bit I’m little noise. to start background

Federal business. the with start me Let

So, business the right I we've related communicated is for mid-single-digits say high-single-digits. the that last I this is we continue working that business the we to and looking in chain go of mid-single-digits it say bit scale where year, that. communicated disruptions to make to business. really to that's the some as the compression work talked the is, be little and through mid-single-digits be a would are to year continues right from now, where ago some I would drive within some segment, place drive back shift. we margin about. Fleet half to for continuation saw you There'll this of of the as business But supply the to scale past,

that business. But half we're pre-COVID longer try of that looking I'd as year. big both levels, investments as that to XQ back to the going mentioned, to we forward there. commercial and just we rate, we year, and mentioned in this of year, continue dynamics to Global the growth its we're we've be to As the it But target sales associated continue Parts upon around this business continued an business perspective, towards that, look will I long-term communicated term. and margin mid-teens with going getting expect the is the to XQ get then And look, predicated repair some going commercial with to of back made is into last drive and Aviation avenues, say with we the teams, scale. from to improvement cetera, we're the et

in back. I see think slowness everybody or business some to So, continued market with has some repair getting the delays that associated

continue in pace to going with we're the so, line to And market.

expectation to pre-pandemic from model as as should MRO. levels. going it's a the while, to relates out side, distribution the of mentioned, to But in for So, that just back think take I market you aviation commercial the the an back we're it we perspective

Louis De Palma

Thanks Noel. for thanks, the and Steve John color, and

John Cuomo

Louis. Thanks,

Louis De Palma

That’s it for me.

Operator

Our Sullivan question. next Josh proceed your Please question is from Benchmark with Company. The with

Josh Sullivan

Hey, good morning.

John Cuomo

Good morning, Josh.

Josh Sullivan

of on follow-up that a little kind bit. to Just

But lot here. [Indiscernible] take just you activity, narrowbody contrast you're travel you 'XX heading commercial there the with the what could a the how going recover activity was to into 'XX know the summer seeing 'XX obviously to that in said for optimism On here if it's behavior by a airlines. summer. or of I Spring of while compare in

John Cuomo

in is anticipation commercial business. business that's to our going month-over-month we're business parts see connected that and trading continue improvement MRO to My the to

activity, we us of our So, a increased and each of level shops. a do Is see anticipated? robust as of work a of level as No. MRO backlog it increased any month increased in level

COVID studies getting I think when [indiscernible] market back in early XXXX initial XXXX when levels, were international done to hit you sometime the travel. that to XXXX, talking look includes at late about

I think be the accurate those in out going statistics to are that quite come probably to end.

So, got month-over-month, to But fixed drive are part said, scale it's slowest seeing we because as improvement costs that continual from the a improvement that the And of we margin that will that recovers. kind we've business. again, can that base in recover. of

Josh Sullivan

just then for forward? spike it. just you've your thinking what going curious energy Has commercial by what end-of-life the recent on Got thoughts like fleet the agreement And USM? pricing any your looks service on are customers? supplier in caused airline in got here, change retirements And

John Cuomo

are major in be saw we how that parking to we And Yes, fleet. we deliveries, or see accelerate XXX hoping airline see going and of which a I during using COVID, but they shift change. to shift their don't customers retirements hasn't our that were don't XXXs people happened, any think fleet able their

look the pricing that first our model of with on I this midway we given regard USM, of and why clear on will inventory. tear program. we any the arms down like and We're haven't kind just a think bit getting around guidance color And as through speak, the that's doing do of a out and to think kind analysis what as we we'll pricing the then kind more, we'll an share business on year. on

Josh Sullivan

existing And you but mentioned then, contract with typical it's just contract, that on not customer. an

to it curious time? or are that new Does over does focusing service change include might the schedule of particular A, exposure verticals B, So, D? on you what Just any C, engine? your types

John Cuomo

believe on in more percentage if on the one I in or details all of to you're overlap know to the to largest the the kind say, largest, include supplier the look than you [indiscernible] at our It's of NG -- we does engine. would we from But the Josh, Yes. these market. great, of parts perspective, significant dive look an we're But the how am want be market. could these what both Max. There of some technical products. NG that it into products largest of we not the I at Steve, can't we be the I is -- the say the we a don't on overlap is far

sell well. So, when are to those These us lucrative and we NG more ability aircraft markets, probably initial give being us gives supply that as markets. any it continue it more Steve, chain dialogue. want than color even with do the this we gives see as product? fly in we disruption, the on thought had to you ability going the to other in continued to And

Steve Griffin

the the say just include would engines, the excluding whole I it Yes, aircraft, kit. QVC but does includes

And can be for where that brokers opportunities optimize we'll working possible see best repair with and we to inventory go shops. all to that our partners and the place customers, find make sure the so, the

Josh Sullivan

for the time. it. you Got Thank

John Cuomo

Josh. Thanks,

Steve Griffin

you. Thank

Operator

question from with question. Sinderen next Riley. Van Our B. Please is proceed with your Jeff

Jeff Van Sinderen

morning, Good everyone.

inflection you on also that timing earlier if segment. we Just half saying should Fed Fleet for the to similar second and And clarify in Defense year-over-year wasn't were suggesting that segment? the comments, you clear, year-over-year were inflection see

Steve Griffin

that line growth the we've that to we see was offset the But point within I to take brought where shift specifically as place, was year, to we're continue continue my take point towards of USPS, the able we've think to mentioned. to I accelerate as But seen half mix within be going we drive we the the business shift margin see mix the rate, referring the the there. second to side that a expect place. of Fleet growth by commercial we've do now segment, top as scale drive

margin do towards free half and guidance the year. we both up back haven't start mentioned, quarter where throughout supply potentially last that expect and affected the Within see rates quarter some space, -- related What the we of to the we trends have to John necessarily though, ratably Defense the year. expect give with given to associated is this delinquencies specific the Federal chain first of

Jeff Van Sinderen

the of Okay. contract. but be particular margins much And XXX new early contract, … I this realize going any not around sense on for but it's expectations to it's then that know year,

John Cuomo

substantially it, short than we more arms be from to our wouldn't wrapped guidance for overall communicated as different of with get is the around for And be in no. be details answer you now, the business. impact. right magnitude I The we've it I segment. we'd But to wouldn't it's materially things expect some different say terms given we'll the what and able share going Aviation where to

Jeff Van Sinderen

general or you turning And to the particular more you inflationary take Okay. just it something to than that others there, you'll going need Any pressures up back that anything to else seems impact that, you around everybody's call probably as just, feel out everything, that? prices and experiencing. cost like see just to, where for that's out vulnerable of kind then areas I just are guess,

John Cuomo

have But Yes, And I is our labor increase we got by costs. close position And to we pressure. with labor, so different in very to product you we a a do side where a have inflationary close type on some our impact. do very from that. we price and we're on stability again, some staying backlog one feel price mean, control of long-term of a the and do staying of customers kind markets. feel geographically, next our it very quarter other the we're in --we where arms And see for get vendors. do it we've we're they're and and But different work we adapt, not around quarter quickly And feel level in workforce. see we're lag a from can we locked by we watching may

blip, a fixed we see which but product-based power don't we a situation sure, or the quarter of that nature contracts business. pricing the with long-term the of lack because the have, we customers, So, our another of price just is a in one see maybe short significant long-term again, impact,

Jeff Van Sinderen

for my and Thanks luck. questions, best taking Okay. of

John Cuomo

your for you time. Thank

Steve Griffin

you. Thank

Operator

Ciarmoli from next Michael with proceed Please Truist Securities. with question. is question Our your

Michael Ciarmoli

color turn real comment follow-up. Thanks you're any customers, of seeing to that seeing, materials just on about the just prep on of for maybe airline kind ready with may from intake, of you into your access or with guys. or taking of just what as raw issues Hey, and time times in what then can run summer you John, kind they dovetailing I labor -- Any you're maybe and bookings quarter here maybe -- what chain? for guess talked some flying. get kind kind you've you supply of

John Cuomo

kick Sure. kind Steve, end. some at then to give of color you and I'll want off, the it

Steve Griffin

an to but Yes, some sure. we the the being overall I for standpoint, levels and there mean, continue I like summer. need repairs think market order see from receive readiness for orders high, we I around uncertainty as think and is customer intake

recovers. with a we're from from as of healthy point culture invested teams a and are they've to in historically. stocking market as some little about. raw supply something just at And So, spot supply in I overall had are materials, this excited last We've It's more of good I feel to hard in bit capitalize to point, I good uncertainty our raw for an for the think well-positioned that But just given longer we're position this access predict general to we're from At perspective. teams, a think what perspective. VSE chain back I year, a pretty we inventory impact brand be delays. chain. the wouldn't perspective, think specific been tied to the got we've I a to the times think labor it's than and as Turn probably a really then to labor probably We material. tied necessarily to just like market the levels

John Cuomo

if commercial I revenue seeing the and kind revenue, relatively further down nice consistent and if you the pure of in distribution, customer backlog improvement break at a we're the in streams, little month-over-month Yes, look it activity.

seeing not stocking are airlines. aggressive We from

order So, our seeing see of not we're kind flow. just seeing products them deep consistent expandable not We're are so it's of purchases. go consumable we with overstocking. Many don't them kind of little a make the -- expensive,

than an and a unit hold accelerate month-over-month quote side, seeing consistent On repair saying, What we're and seeing will is, us the to repair repair airline on improvement give again, rather deliver we then are input. a a they're okay, it. it,

products I the repair necessarily say pool, exceeded seeing then back. There's of exists not [indiscernible] we're within piece stream, much as revenue anticipated slow. the that would that So, and kind desire to have that's I'd the to recover. the their businesses. slowest And get the a little one's our third of

that you're recovery So, we back as market up, pretty in year. the the are happen see opinion, to but is -- to my the one starts going that pick end of at quickly

Michael Ciarmoli

fuel I costs? quote, real is early changes but accelerated. prices You you yet see as it it, oil to changes mean, rising are and seeing of hold too is a you about result units guys how this giving oil? behavioral soon rather and any kind maybe And time, you mentioned than too those thinking a behavioral bit airlines Okay. of or

John Cuomo

an we U.S our portion have are remember of aviation do very the -- I general and airlines We business focused. Yes, domestic significant do domestic but are customers represent revenue. base, mean, international a

not at seeing material behavioral are again, changes And they've internationally quieter, been but We no that in point. any mix. again, customer this changes

Michael Ciarmoli

guys. Thanks, it. got Okay,

Operator

[Operator is from with Company. Instructions] Chris your Our next Sidoti question McGinnis with question. Please & proceed

Chris McGinnis

out, questions. I if asked, morning. Good taking I apologize. jumping been in this And and for so has already Thanks my was

allocation, recently. capital you obviously, on raised the Just dividend

the Thank in there. in you. strategy Is of then change you maybe that. Just more a and discuss wanted to about could the And or M&A confidence just XXXX, that execute? in ability opportunities to just ask landscape, if the

Steve Griffin

is rapid the been dividend show the use loyal important, point. Sure. have the our dividend the company historically I anticipate XXXX. and not dividend that do in paid business business. Thanks, forecasts the invest at into flip to -- has here the ton I a the Chris. has would It's for on increased shareholders, to -- a at want free competence path of it them it. back flow put capital this a increase cash on dividend us side, But and we put to the in We want to historically and

businesses, got to We've up. -- potential our in We very, look do distribution and at role. business in capability Aviation in disciplined nice parts filling is in the our have remained expansions opportunities we pipeline distribution M&A continuing our of pipeline business deals. predominantly very services Our and very, a

got to integrated, So, got requirement. one truly the capability cultural that much and a the be product or to value. fully it's add It's can very around, will that meet business be and

a a approach got to continue M&A. keep disciplined we'll pipeline, So, we've and to good

Chris McGinnis

Great, Thanks luck QX. and it. appreciate in good I

Steve Griffin

you. Thank

Operator

will the reached turn to John question-and-answer of have closing the and end the session. now And remarks. President over I We call CEO Cuomo, for

John Cuomo

your results. and an appreciate Thanks connecting a Have interest to for discuss VSE. We forward exciting today. year We all great continued to ahead, April look rest to have all time quarter really of late the our the first with support in you Thursday.

Operator

you today's our conference, may you lines disconnect concludes and participation. this at This time. for your Thank

VSE (VSEC) 10 Mar 222021 Q4 Earnings call transcript