VSEC - Earnings call transcript Q1 2022

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Operator

Greetings, and welcome to the VSE Corporation First Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. to Relations. call like Ryan to now Investor of would turn over the Noel I you. Thank

may You begin.

Noel Ryan

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

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

John A. Cuomo

on today. call joining the Noel you, us to welcome Thank everyone and

legacy EBITDA the profitability delivered VSE the quarter the revenue contract Aviation segments to with for combination year as and our of off over on all growth business well. on revenue only for revenue are a in strong years, We in Not was where for a existing strongest including XXXX started excellence quarter solid segment. we record execution to but wins highest growth a programs. the XX new start strong We've the quarter and and in first adjusted one revenue with

on We're and end support mission to integration key for on strategic for our Three make deliver and enable areas track both our of to activity team, will businesses businesses Our growing shareholders. us legacy will processes. continues progress scalable we as which transformation their VSE markets. able with of creating business value systems our acquisitions, focus more capture recent

First, higher channels of end growing the enable the margin, we long-term, in are capitalize customers us building on revenue assets support that sustainable VSE our strength to and markets.

remain improvement. improve profit we and continuous as with drive recent through our growing focused on we scale our ongoing and operations Second, investments

with and progress on offerings. demonstrate Third, I'll first strong initiatives. legacy channels breadth relationships industry-leading customer in some highlighting we strategic Aviation revenue product our of customer the building service and of strengthen these progress across are segment. quarter our our by service substantial results core to start company's The

revenue repair segment by the consecutive both and growth distribution Distribution organic Aviation first exceeded our quarter. highlighted revenue results, strong businesses. reported quarter levels has for sixth now Our record across pre-pandemic

basis to by increased While segment by commercial the on of XXX higher-margin a general by mix repair XX.X%, repair within accelerate, increased gains Aviation driven recovery over basis share year-over-year and continues market. aviation to revenue and adjusted market supported business points EBITDA an activity. ongoing

air than commercial slower initially commercial be anticipated. we recovery market While to to XXXX levels recover, travel MRO expect continue

early continue will global complex remain renewal of of at supply business terms Under agreement confidence parts agreement, XXXX general commercial important MRO encompasses managing business an aviation next-generation the As new, we XXXX. further and markets. XXXX, to legacy approach a provides quarter, proven approximately offerings depth growth Honeywell in technical during that we of we expertise a repair see general of increased look with and aviation an platform incremental services, and to Within in In parts, a The performance-based segment renewal We Also first reached MRO margin and support capabilities Aviation experience build beyond. support OEM and XX,XXX towards OEM led was established this the culture, with through million. multiyear distribution a airframe X,XXX an will to approximately expand to March, awarded valued breadth through in this expansion builds contribute full acquisition chains, commercial for VSE industry-leading service distributor activity, in upon tip-to-tail the a we we products which avionics our distribution agreement. and Parts global approximately Global provide the Aviation OEM renewal authorized commercial agreement in both aircraft. revenue of which our believe our for serving that business. Group our early customer-focused $XXX three-year capabilities, Aviation,

distribution lines. As product Partner to the recently VSE Honeywell India of Channel Honeywell awarded fuel the Aviation East, example, levels, XXXX in the a further Year respect the for and particularly performance Africa Europe, with by service control high of recognition was market Regional Middle our and

by to and We and remain building as Honeywell across grow scale B&GA global partners, long-standing our with expertise and core this market. are our relationship honored upon and we committed this OEM recognition other commercial

customers fleet Fleet on together with revenue from driven and contributions e-commerce the Service. segment Turning increased quarter, segment. first Postal a by strong with XX% the growth in commercial stable fulfillment our year-over-year to basis U.S. fleet sales,

increased diversification multiyear trucks revenue with Class aftermarket of continued from to revenue quarter, vehicles the demand We end at servicing up of end the fulfillment commercial first commercial e-commerce segment parts Fleet and heavy-duty X strong XXXX both our X revenue at strategy. to and across XX% XX% our through the consistent channels. for experience fleet of

first support. both The commercial legacy the the in more vehicle and to remains planned was positioned to multiyear basis given LLV segment next-generation and year-over-year sequential quarter, process, off-the-shelf one consistent importantly, that from our customer on a the its business the used vehicles transitioned is other well flat on USPS by spending a LLV has Our fleet fleet USPS USPS.

further fleet, which long-term continue USPS the significant vehicles to a for addition for us. LLV, remains the develop and non-LLV in part opportunity Importantly, in to solutions support we comprehensive

ahead, within Looking commercial growth further anticipate channels. we

we While and demand costs EBITDA higher in on growth while to product this in and facilities growth optimizing commercial within continue capitalize invest segment, to headwinds anticipated further dollars. fully cost labor inflation freight remain

and segment a Federal a eligible, basis, to Revenue maintenance Turning & international first stemming on Federal and office, is of broad the margins backlog activities and NAVSEA. Sea demand quarter first Special range contract and basis first to supported contributions this declined VSE a Defense fixed modernization and quarter. price completed our year-over-year first current customer In the from Total of million quarter bookings build Systems for Defense XXXX. the follow-on or a by versus both contract year-over-year HAECO awarded distribution by will from fourth while to during X% the the providing Federal Under segment support support technical increased Defense contract shift increased contracts. our program on terms quarter the services. of quarter new backlog driven a Command from aftermarket to with opportunities by segment. & an increased of XXXX the $XXX conjunction by funded NAVSEA. in acquisition increased X% in were VSE contractor Naval levels, award cost foreign support services. Services NAVSEA's plus fleet XXXX, March, in year the prior by aircraft foreign in sales, to continue & of with given navies logistics in XX% continued The period, awards multiyear of increased robust mix to XX-month the we military In

of the first now Our in strong I results the team, teams demonstrate quarter Steve I will how of am work a partners, the over VSE great turn to we call our progress and supported and our the the performance. financial for of the detailed are our customers review we produced quarter. proud results making.

Stephen D. Griffin

John. Thanks,

of market of completion by driven three overview our inorganic year was in and by of market XX combination awards, prior e-commerce the operating business growth let's a supported to fulfillment strong quarter million first program new was new call our its the We in increase share our quarter the Aviation aviation segment within revenue by revenue. years Slides continued contributions an recorded contract in revenue Fleet and conference recovery. fleet and XXXX. and end all gains business growth driven X commercial certain versus commercial first for materials Now DoD quarter, general in the quarter and period, segment in highest ever, $XXX.X growth of by XX% revenue an of the turn segments. strongest Federal and reported performance. execution, offset revenue of X Defense & a partially

to increased & XX% margin both Federal quarter first Defense we X.X% an year-over-year quarter XXXX, and adjusted first offset Adjusted basis. million, the During compression Aviation of margin margin $XX.X of expansion EBITDA fleet EBITDA the rate within the of on a segments in across the segment. as increase generated

to Repair approximately X. MRO XXX% year, anticipated, from approximately the integrated Slide new of than recover and pre-pandemic levels new we base above this XXXX with of XXX Throughout year-over-year, MRO program acquisition segment on customers our EBITDA revenue excluding expand Global to year-over-year year-over-year will and repair. Both more Avionics million by aviation the than in half a increased across basis, first by expect and capabilities and Turning Aviation by our commercial Honeywell pre-pandemic respectively. to our up adjusted XXX% to Distribution new XX.X%. revenue basis year-over-year margins the grew and businesses a is distribution EBITDA $XX.X growing repair we of while but Aviation Aerospace quarter. XX%, general the XXX% of revenue business market market. second overall moderate XX% revenues customers, recent commercial levels, announced continue line XXXX. invest trends, of in below including recovery see pre-pandemic for levels awards support originally contribution more continue XXX% capabilities points MRO in Consistent a increased remain the increased to recently in commercial as agreement and recent adjusted with strong product solutions a execution. result in Parts

adjusted repair XX% the rate beyond. margin to of recovery adjusted longer-term, in we're quarterly maintain anticipating line more in pre-pandemic growth the that and EBITDA levels. organic investments XXXX year-over-year targets, an XX%, our in continued growth mid-teen year, remainder support EBITDA We revenue rate moderated For by and driven of with and approximately

driven Segment an period, the revenues the both XXX on fulfillment prior $XX.X XX% a X% points year first revenue. segment quarter, revenue. margins and of new XX% year-over-year, a total record. year basis period commercial declined and adjusted EBITDA adjusted given while $X.X the of a now segment prior of million, by revenue higher anticipated in Turning EBITDA USPS to were basis. period year higher versus represent increased versus were X. the Slide revenue, versus XX% flat as year-over-year mix of revenues e-commerce increased sequential million increase and commercial prior Commercial Fleet

For year-over-year flat of year, flat the USPS modestly anticipating the quarterly higher to to revenues modestly we're offset remainder commercial revenue. revenue as lower

EBITDA XX% to adjusted higher rate this contribution as driving approximately strategic remain Fleet's segment We diversification revenue on expect XX%. to focused year-over-year be We initiative. key continues EBITDA a as to dollar drive

U.S. a Defense a on a adjusted with higher operating Army. business X.X% The by X. a points revenue specific driven quarter Special segment labor year-over-year XXX of Services was the million increased given non-DoD decline Federal strategy. on and due material EBITDA contracts. of contract first the of & in & Adjusted quarter, million by first a from and $X.X EBITDA loss represents $X.X by to customer expiration Turning is mix expected related contract & the the for to Federal $XXX,XXX considered program recognized X% foreign reported year-over-year. to HAECO offset basis, fixed primarily that provision contributions margins wins an to XX% supply Defense quarter. of in year-over-year declined contract chain a ongoing charge cost-plus basis and The not XXXX higher segment Federal in basis a with driven loss price, indicative the new Defense of a Slide loss a the operations of costs acquisition the

awards new the remainder U.S. of flat anticipating offset contract as with revenue the Army. year, program For our a quarterly the NAVSEA under expiration of we're the year-over-year

versus We fixed-price Defense's & by rate EBITDA expect approximately the X% to X%, of cost-plus to contract Federal adjusted awards. be driven mix

under X. commitment and to of the first Turning credit cash availability quarter, million At $XXX $XXX in had the end Slide unused facility. million our we

million a customary to existing includes approvals. provision, facility lender $XXX Our commitment subject credit accordion

primarily sales. awards quarter, million As distribution we in the and of new $XX expected, of completion used of the cash driven to purchases timing support aviation by XXXX

year. excludes for outstanding flow our Looking we the $XXX positive At net million. free outlook for first XXXX, in EBITDA to quarter, had Adjusted we sequential of maintain cash the flow EBITDA for debt our of remainder call. the total quarter, was that, contributions expect for March Parts the million improvements free the ended end of cash we and of Global was of ready from full and XXst, period the the times. conclusion At With $XX.X XX-month are leverage first now trailing X.X the portion the operator, acquisition. year question-and-answer net

Operator

Thank you. Instructions]. [Operator

Please Our line were is the questions. first are RBC. Herbert please. you your with proceed to able question Ken, coming you of from check there. Ken are you Ken with on mute if

Our coming with Moeller Austin your next of Canaccord. from proceed question is the line questions. Please with

Austin Moeller

and quarter. morning Awesome Good Steve. John

John A. Cuomo

Austin, how Thanks you? are

Austin Moeller

Good.

on port trucking But margin now, mean are up soon? question right fleet just products So commercial I first start the lockdowns go the for of and my that commercial the lower margin. sales these average all to here, demand understand with might the delays does exceptional China

John A. Cuomo

start -- investments. investments. in Over business, haven't are time, inorganic we We're organic as business, we still the any making we all to that made scale

make. an We people, to systems, investments year, still of both processes this and have to have we built facilities support end that through revenue And infrastructure, channel. the commercial launching

little XXXX business expect sector. to term. start But scale that able a and in a different level there see bit improvement in get into As you'll us to you'll be we anything near and margin wouldn't I that of the beyond, to see

Austin Moeller

largest and Defense geographic Okay. what for That's were bookings then helpful. discuss the And can portion business or of the for Federal quarter? you the for allies & the bookings the regions countries backlog,

John A. Cuomo

is through our country. the that Egypt color you portion any largest think program. largest give probably to you Navy the other mean want probably I That's Yes, Steve, there?

Stephen D. Griffin

Yes, NAVSEA bookings I countries. say the the the would program, supports of many primary just by driver is different increase which driven

activity As countries seeing haven't a award we're new Pretty we're increased that program, which John pleased of though. No one, pickup that mentioned, Egypt Iraq. in is terms -- previously big announced about. Bahrain, we on

Austin Moeller

one Okay, that's question. helpful. last just And then

in achieve this understand I goal that quarter flow of you think positive the second of to half the year. So happens year? point company's cash next Do the sort free inflection or

Stephen D. Griffin

given we necessarily that out. here we've All guidance. expect improvement haven't We from is on the sequential mentioned

what as you some in see we have sales. is deals year some the previously of that for early investments to that made related relates think of to XXXX Also announced. we start distribution it I preparing this the

able we more this out. we've share forward comes think as look sequential the I guidance with So gone quarter at point and being to to

Austin Moeller

Okay, thanks the color. for

Operator

Thank you.

Our RBC. questions. coming Herbert next line question from the is Ken of with your Please proceed with

Kenneth Herbert

Yes, John and morning hi. Good Steve.

ago. Sorry minutes about Nice a the difficulties quarter. technical few

Just wanted off Aviation. on to start

of get down the to of with -- look As quarter, distribution, of and you first Can sorry, and quarter first growth of to $XX this the I obviously, the the we much about talked key so fourth trends not the the and the because the for but continued know the quarter segment, margin but expansion what in MRO here levels you've sort filings, the the that past to you are million in when you're the seeing terms sequentially what business from break the the margin million that into as know $XX second at activity sort contribution the from the quarter? in I and market we'll fourth increase. continue in you first -- in saw second I'm seeing terms that you were the from quarter about think from

Stephen D. Griffin

thanks Yes, the question. for

from the quarter and fourth in quarter I distribution think we've improvement seen first in the to both repair.

recovery when mentioned, business. growth of sides end one there's of the the revenue improvement just it filings, from business. the at because of sequential drivers And a rate from day, key kind margins, the standpoint cost as you'll in both complete see higher you'll incremental we a of of is drive given standpoint of so nature does And the see repair the but the you margin structure see the the

I communicated of ways, think back will think anticipated, what we XXXX driving is year out into of see space our in market within still think and had we repair as likely positive have than that initially But when slightly standpoint, which we the look in continue recover the half a we is we I some and assumptions trend more this from to repair of moderate will a what to some XXXX. terms there's recovery improvements.

Kenneth Herbert

Yes.

would put And businesses? other of recent or sort Okay. you say point-of-sale I versus spot place, how what with of book you That's recurring or helpful. the or agreements within in contracts and ship long-term aviation much of distribution sort would is market type your business sort call and of under

John A. Cuomo

the say locked this the of nature. is close probably So and is of the XX% agreement. our backlog business, long-term more at point, demand in a we're revenue Obviously, transactional I'd probably to distribution under supply a

as business of to this that sure have on core mean break customer. of you big of revenue a longevity those with revenue So backlog we've depends we doesn't But of make transformation, obviously as was in then a obviously, strategy, in But user our have of phase we far of demand channels. at exclusive backlog. a got lot The we as kind of looked that lot firm that necessarily first consistency of our consistency arrangements suppliers. end the of as kind the programs and out part lock

and to a big we So start did to the part it was what this of end year year.

a trying locked consistent puts in forward. long-term in we that distribution, for really one all and finalize to really programs to of So on get -- have going legacy revenue program renewal we're the in

Kenneth Herbert

about you and questions of Okay, structure about the two allocation, very helpful. And then capital capital here. as just we sort think finally, think

on starts anything this rate year? second, leverage debt look fixed around through year aggregate, be near-term able ideally the the in then there that is profile how First, just the think we And you moving might do at cash is we or address as improve? about that that any as the of to sort to risk floating and flow

Stephen D. Griffin

Yes. Good questions.

there as is structure from we our risk debt standpoint. in think I obviously are So floating rate a

capital I the expense we continue right to to cash be in the we down drive we So have structure offset drive options. an continue of back rates we long think to at And balances, of at expect free from to term, that expect to to is the Even assumed though flow reduction. now. we're an then that we half would anticipate evaluate this do year where similar internally rise the which rate will to levels what continue interest to terms

different did I we think XX the last existing businesses facility, and really were for recovery within could and we you performance year, of footing a to we about look when stabilized level want in know such an business really to our months get our to to a amend be we're support because new long we extend of structure so term. We our where that than go conversations we like ago. years about sound have a what capital want three

I'd over the of or course move So next remains differently the to at it evaluate structure, terms year this look whether it of year. capital something in there's something early not year be this we'll and say or that whether

Kenneth Herbert

Thanks the -- Steve perfect. color. Okay, thanks for

Stephen D. Griffin

you. Thank

Operator

Thank you.

questions. from with Truist. of next the is Please question Michael Ciarmoli your Our with coming line proceed

Michael Ciarmoli

Hey, good morning results. guys. Nice

wait the to guess, you I that current of guess inflation aviation, the this I just contracting risk Just contract. out, about dealing mix trying current, as with to federal it's do before existing deal have or with is quarter more took pressure materials, I guess some calling figure fixed-price how into and to fixed-price the raw nature segment charge federal of of do expect contracts on you within those renew I'm a out much of the kind and that look from your to defense, standpoint? to But environment, get in the contracts, you I just whether the labor on for wanted you

John A. Cuomo

for Oh, end in it know of assets kind talking And of and to pushing aligned very, the each up little -- first been the of the day, clean the now. business business been the start just federal say business of it's I'd years to three because about we've it's risk. And value on I a was in good very and legacy has business slowest the phase get get there's of track. business proposition question. the I've the it three forward. segments been back market the this our -- At

think quarter at of kind So we we from were the now pretty legacy could much I of end that is when here expect noncore. contracts decision business the made the this this kind This forward. exiting you look was it else risk see you as it's what's of to as portfolio inside assets going on on forward. floor. looking now anything core wouldn't the move contracts at And the But any fixed-price and I the expect and noncore

Michael Ciarmoli

I'm that a a like say contract the fixed-price are or that mean understand...? was does different. mean did that that inflationary with is I customers is trying protected -- dramatically ago months contract I just How -- six signed Okay. where you how on if the you negotiations to environment let's ago, have you more just open months six

John A. Cuomo

look our the aviation three when when you highly are our you at business and look our fleet business transactional. business at segments, So --

So pricing we long we term. raise escalation two prices. abilities to lot strong we segments are those that need ability There contract very when raise The very to few quickly change to are prices have within contracts have a in -- of price. the a

is Within right the is little or margins -- work though, that do that now. more the federal reimbursable right price order-based. business, in were plus bit now, you fixed more have, the a contract and, contracts our task the most see cost way heavy The unfortunately, we cost mix

there. it's So of booking we're in and a have of more lot short-term a booking how we confidence

long-term now there's have any right we move fixed-price as really contracts open forward. don't or any kind risk we of So

Michael Ciarmoli

seeing called marketplace? out the what specifically bit Perfect. you tracking you little a can repair with Then said what the changed what it's last Aviation, you it. out versus business, you Got to below are your in just call quarter, switching expectations

John A. Cuomo

business daily close we anticipated commercial inputs the MRO trend of just recovery Every But track MRO the be end obviously we a year. robust the we month, the up. like very input from It's basis. -- the pre-pandemic airlines on we not shops side by we on to mean slower that of to of it's a at to continuing slope I Yes. in are monthly just forward. look basis, improvement It's activity when had anticipated. a month-over-month at we level as the see the the move our

of to XXXX being So we segment at XXXX in out in look kind anticipated. recovery pre-pandemic pushed not that happening and that really of the back as end

of more business it's performing But the feel So is we a market recovery. well.

can as as have business market than this just You we slightly had to in we starts see the recovery margin initially improvement discussed It's the slower a anticipated. scale.

Michael Ciarmoli

of on one in seems And it's pressure? we're slower it. here. of step Got organic I'll the that in a like your -- to XXXX. margin obviously, the queue. going from repair, color down figure talking and you're But to expansion trying I I back going anything contracts -- and to know the to get you guess get margins to some more mean jump sounds down. you're ramp it you me, on the XX% Is the it but level, Got set some get of there Is still a you remainder going in kind like On I it. that did seems leverage called versus could I know year margins, from provide those what guidance, some be I'm else then function. and bigger out just of I XX% investments directional last for just mean volume. obviously like this new mean, it the I could XX.X% year-over-year from to out these start

John A. Cuomo

do you want to go... Steve,

Stephen D. Griffin

Yes, I to was just mention. going

it Those referenced. continue clear. as these to as revenue to won't necessarily make year, the we this to sure right. into some mentioned, that do I of organic relates make turn So programs that want you investments newer we it's

revenue turn investments Like business, that They sure margin to deal, revenue turn new was have business. don't the want and know what to about in, because into we in, that distribution in hence, are were some of these short-term activities going we investing assumptions terms are long-term to we margins. talent these in make In in drive begin investments These growth we're necessarily that prepared quite technical improvement sense why but that businesses month. make really the for year. of to make in anticipate within around around repair to it of a So you that we're that won't rate quickly. a drives business. to XX% we've margin talked XX% XXXX We the the we of the given can

John A. Cuomo

You go ahead.

Stephen D. Griffin

I wanted and it's staffing adding to primarily was labor. to -- going add, I technical so that

John A. Cuomo

Exactly.

sure pleased line positioned, at So performance so at And product to -- it's we we had modeled. really look why. SG&A as sales, plans, on when where huge had you the perform conference making in pressure be percentage I that of able of get perspective. excellence that think appropriately. growth is see we're be that for you're a we maybe part is with know to really let margin we're much a explain of when to you -- When higher maybe margin that could look a feel And big at this maybe value as a staffed is. manage the our on from -- we labor. and week, part the lot Aviation our those those and margins we look me at We it, you -- our our and service margins, are very performing need see want a you customer proposition I to market well in how basis, of growth. year-over-year A our than

better side. labor sure than from not just We a market And to are the make being thin positioned too the on that labor really, most want we we're perspective. believe, we in

to recovery people starts with really to As sure struggle are the happen want to technical going make we we're talent, staffed. and that fully

mid- And feel And market. is longer-term see We and near it little that in time, on scale a just heavier to be SG&A sales. term plan. over relative the now in our then right And in so we very will little again, to cautious expansion the just, naturally. a pressures margin based you want the confident the

Michael Ciarmoli

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

Operator

Thank you.

Our the Blair. next your DiPalma question is Please proceed coming line with questions. William Louie from with of

Michael DiPalma

Noel. and fulfillment What revenue over growth increase early growth like actually. basis growth, in several e-commerce of exceedingly multiyear drove channel quarters? the the sharp higher Stephen, part there, afternoon we in sequential the are Good that fleet still on good revenue like significantly are next morning your John, from innings a and taper should off a of we cycle -- or

John A. Cuomo

kind great it's launched No, as kind this Two kind go ago true or question. commercial a commercial to of we market And revenue channel. distributor. of classic of so, years we a

We own platform. e-commerce our have

we just-in-time have products We we as really we're what And our have offerings. platforms fulfillment, e-commerce our well responding other is well. to then the program. through supporting where call And market

of growth So we in here. do the innings early believe we're only the

ahead ERP continue business we'll this You'll kind to new that time. onto At some year, and expect we're to the a growth. of point of platform, end back going communicate in of move

something believe continue ready of will a You level for of base transition, that of we customer and within business. that just innings in little XXXX. that and fleet we see we're building get might the kind to being a off the But early bit really kind us diversify one month as able to special

been to the what what and deliver. of able done proud really has team So they've

Michael DiPalma

year. the the you you I guidance margin further? this like and to rapid expect XX% Do support for XX% for though believe should year mentioned that to provided the margin, the be down next investments pull you investment said you Stephen, for further for long-term or EBITDA should And I that future growth a fleet -- fleet trough think John. Thanks margin, and

Stephen D. Griffin

We business haven't the given long-term for guidance necessarily the yet.

as in with to the and that all I'll support long-term able haven't what that space. be you you it's at rate. rate go business like the John very sustainable But business's And growth. shift mix long-term to adjusted necessarily obviously commentary of business, next trying itself which investments, I to a the sure you the this guidance is at completed continue I you We're we're that's to this to round multiyear also back think have But to we're about used infrastructure around can we what back for to The that think looking the able to of to towards sort EBITDA going see, this to that through to deliver share business. more is of beginning. the as terms range as sort modeling important and to year, us very around go grow investments we'll reason in us, And year, of rapidly in customer margin half this segment. to probably USPS in mentioned, because continuing some the provide margin say transformation. building with growing other scale we're to I'd but of that this is John level, of the place our be. going to are we're the be make that make going you right terms in of why make this looks color while help very able to say the within is, and look the long-term those

this And so as dollars, focus our now right through continue we that's growing go EBITDA to and on going to drive remains transformation. we're where

Michael DiPalma

Okay.

So should continue to should that the grow from here? EBITDA dollar

Stephen D. Griffin

to is driving when performing, it for. we're to about exactly -- what guidance to that's comes That's as the long-term how think business

Michael DiPalma

partnership the quarter, Boeing repair can side? in You the gain abilities to aviations last other to do And if should repair partnerships repair one, Sounds lead that final those good. VSE announced those showcase you on back on the and business? the execute to talk repair you recently contracts, XXX ability about aviation market share partnership, Honeywell your John, in

John A. Cuomo

Absolutely.

and half, and business. business, the we're I've a the that when from trying, what that programs. us great to MRO start distribution build and a year with the balanced general very the kind to had of pure years so year tremendous two the at distribution new look business lot again, to What think you long-term and of be is And we -- will been business brought growth -- of seeing business, business the in seeing this aviation you're scale you're on business in first out commercial and aviation for is MRO the strategic between it vision and I be the kind work work.

do and aircraft, that on consistent this supporting year long-term cell stream. and have highlight What our test not new that work, customer to market. with to that be of to know as of to get center we're with have sell to So to you OEM-centric and running. already revenue but OEMs Honeywell bring or next-generation us, say this legacy only those But approvals show announced give a use starting bringing will that how that the well lot and repair that new to very us customers well we to authorized is us probably ability business, how as up repair board we we'll will then a avionic dialogue very program also we then this really is other the and customers, do mostly end will is in this those week those and can capabilities to opportunities week I represent other our this to take

really Specifically, the out these -- move a build times quicker OEMs. we MRO of to ability during labor have capabilities support to they can when than these to those for tough little

of distribution kind MRO potential very So about the the future business well as for business. that excited as

Michael DiPalma

That's center repair where located? Honeywell helpful. And that going to is be

John A. Cuomo

our Miramar It Miami, will be aviation in South headquarters. in Florida, our our

where And do hydraulic pneumatic of tech, work. like most business is. Cincinnati, low general Kansas in that's aviation things more kind of our is repair that. we where in So avionic of commercial interiors like more and our it's

Michael DiPalma

in also Florida going to that work, is XXX And or or in teardown somewhere be that is Boeing done else? Texas is the

John A. Cuomo

help aircraft. have product before and kind in there's repaired a actually -- we're Miami product. or out the get physical not the needs, that apart, repair is then work down And material to torn gets if shop in into it the that shop we facility, then That that or actually facilities Phoenix with will distribute the our And airline, in to our teardown. distribution of to a that party moving another do it's either market. third will sold what come to our tearing into once is aircraft the We're doing partnership we're then

Michael DiPalma

Thanks Thanks John. That everyone. makes sense.

Operator

Thank you.

your is B. with Van question next the Please Sinderen coming line questions. Our Jeff from with proceed of Riley.

Jeffrey Van Sinderen

Hi, everyone. good morning

second for market. we So I the MRO back commercial wanted circle could if a to do

a clarification just of versus Just slower slightly running than rate the you prior I'm do attribute slower of recovery there. expectations? to wondering, point I what know that you mentioned that recovery you anticipated. see

John A. Cuomo

jump labor I a market want -- recovering a slower the to mean mean, got anticipated. of you've maintenance. I opportunities that think at they're pressure deferred, softer the we and you at lot -- level, a of deferred and do or advantage any the can end high than is perspective My taking at the maintenance just of I personal is be so Steve, day, And airline. those had little fuel

see we're of you'll inputs that point. XXXX again, let's our So anticipated. initially on these kind to to continuing less data commercial but improvement month-over-month it's than robust shop, and see MRO gap close consistent in in had slightly we the But continue

Jeffrey Van Sinderen

sudden, maintenance. future of that catch-up hit period all let's I business? of -- the just and lot are a deferred you sort a say of benefits in anticipate if mean, to so where starts maintenance some deferring And point a there's at they some would your

John A. Cuomo

question. point, this a I say wouldn't It's At good that.

go just see point, at trajectory think may than we're kind heat kind more and nice a incremental that directly up forecasting We on I market way. of But it a nice that gradual not up to rather you're month-over-month increase. this of going see improvement. the

Jeffrey Van Sinderen

have And more take as Okay. of levels wins more capacity that's Fair you be on then, think then much other to to how Honeywell, about that, on work contribution when nature? just I likely the from peak running and guess, at there, that enough. potential wondering you do

John A. Cuomo

Yes.

question. a So good

you So look months sure X start capability, We programs are Honeywell when because say really on in. new MRO capability. do make going at before new build we before obviously to We I'd XX pilot the our working get out really we things side, market. to cells the to test some

perspective, really won't until tremendous contribution of capacity have on the we you capacity see that a a growth. XXXX program. real So for From amount

excellence. and So consolidation during of COVID, build centers we a did site

Florida of the of center MRO ability our excellence business South has double within in footprint. at the So size existing to the the least

we as awards So to new well them this board bring win are on to and business. scale quickly very we positioned

Jeffrey Van Sinderen

I in don't wins? changes segment, Defense Okay. activity that the contract one the in, it your I if wondering and in Ukraine, you're an in, there know, could for any with then result squeeze requests if final noticing war bid Great. seeing you're And just Federal might that one, around incremental all in increase

John A. Cuomo

kind specifically There's a discussions, of of initial country. lot NATO

with point. We initial over discussions say firm supporting that our now, right that team there's this don't work yet. having orders York some any of We I'd some some have discussions of have in customers. New any at

and when We will materializes actual in order. an of if report any that

Stephen D. Griffin

at quite Yes, I no say, think on relevant. segment to segments because domestic. two the other year. you that give it the it's is. type an in a might sales I $X of There's just business, real million it to last Aviation we Jeff, the on terms this If was potential because is of upside. fleet just across sort in business just impact to reference region the our going a have of Obviously, I'd look the what cover real maybe year impact of impact our say

Jeffrey Van Sinderen

lot. Okay, thanks a

Operator

Instructions]. [Operator you. Thank

from Michael Our is next questions. coming Please line of with the with your Ciarmoli Truist. question proceed

Michael Ciarmoli

thanks the guys. Hey, follow-up for taking

for directional on contribution a Steve, Just guidance the Parts, year. appreciate I Global the -- it million think $XX.X remainder the of was quarter. I here you the But this said

million, in had last year, kind of million quarter that run was range? it at is $XX fourth of I $XX a in rate similar the I that it correct, think

Stephen D. Griffin

it get quarter. last actually We you. me disclosed for it Let

quarter $XX million -- and last was million. $XX see about this under quarter, under it's So just can you

Michael Ciarmoli

year, continue we as But of if industry guess Are think I at we good the mean remain about I a kind sequential with organic grow, materials, price. to at to healthy, labor, to a something parts a -- of the I single-digit trajectory go-forward was looking way I sequential to see mean, there's was obviously think think that that getting the right the pretty of aviation of we're traffic about growth. aviation the I sequential and remainder a mid- the that's moving of it's on the basis. in the market aviation? kind of basis. high lot companies think those Yes. lot No, kind on about And

Stephen D. Griffin

improvements business. twofold about and the the the business expect to would aviation continue I side maybe I the the side of for got our side the we of commercial our would business because and sequential general commercial business. remember, of say think we've business

some general some you quite market level robust aviation expect in that somewhat, quite to at are you'd at given to to start it's I think see strong point and point, now. And right think I to the at business side start have slow going going just off some point. to the it's

and a necessarily total -- sequential good about think assumptions I we will aviation. get between for of given there's guidance, haven't the commercial So you on thinking difference and and given kind year. a but business But what we've year-over-year, business we're can understanding the of general

Michael Ciarmoli

helpful. it, Okay, guys. got Thanks

Operator

any There for to to no you. time. comments. John back are turn questions further Thank now at this Cuomo over closing like call the I'd

John A. Cuomo

today. of call support all Wish day. your I continued VSE. appreciate you great everybody, a Thanks, for the joining

Operator

does today's appreciate teleconference. conclude participation. your We This

disconnect this may at your the time. Enjoy You your day. rest of lines

VSE (VSEC) 29 Apr 222022 Q1 Earnings call transcript