- Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the VSE Corporation Third Quarter 2022 Earnings Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then 0 on your telephone keypad.

As a reminder, this conference is being recorded. pleasure your my Noel now is to host, introduce Ryan. It sir. you, Thank

may You begin.

Noel Ryan

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

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

John Cuomo

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

across and to progress release, volatility. during transformation contributed to continues growth period strategic Recent of segments earnings business business third broader our a detailed quarter wins our market profitable As in gain momentum. our continued new of have each business

our of Let's Slide conference now X to material. call turn

$XXX.X on combination in year-over-year flow income, improved business history. their adjusted the Fleet program XX% of year-to-date of basis, the across revenue execution across each revenue, X growth all driven quarter, increased quarter, increased and driven EBITDA third a end key company third highest net free our the demand wins, and and new by segment cash a segments. materially million revenues recorded In year-over-year, by Total both markets. commercial Aviation During

was versus from both our million by $XX of EBITDA up adjusted prior year, driven the quarter XX% Fleet Aviation segment. and Third contributions

another quarter million, up adjusted with supported performance and e-commerce across Fleet Service. year-over-year Postal channels. in Fleet on Fleet EBITDA quarter. $XXX customers. Our the of This contributions XX% by growth U.S. with business outstanding by revenue strong segment's on our total segment both Fleet X% third segment XX% distribution third XX% driven up balanced the third and benefited improvement revenue from and was both a Fleet Aviation represents from and basis had commercial in and EBITDA commercial our Aviation and general fulfilment the EBITDA segment growth Revenue in now quarter. in MRO and increased year-on-year commercial customers growth, basis increased Commercial quarter, with increased revenue. the a The XX% XX% along steady revenue adjusted of segment

XX% U.S. military During Federal growth revenue with the the segment foreign by and the within increased year-over-year, sales Navy. quarter, driven Defense program

In million. by chain positive free for problems environment. successes quarter during flow Finally, the $XX.X our customers of highlight summary, supply generated challenging many the we for generated a cash complex third quarter results solving

value their successful growth in is foot sales Dassault agreement from to and sales once where commercial range Bombardier, strategy and exchange supporting in Antenna contract of India million next OEMs of to a sustainable business agreements business than include the duration. quarter, supports terms approximately servicing In with of in anticipated of they Last recurring in are CapEx, a Gulfstream growth a optimizing wins our more scheduled adjusted new spare an X-year have new investment commence building and product agreement e-commerce agreement new quarter square and Asia SKUs system and parts our customers; the expansion our operational. building revenue number and with Slide to region; progress XX exclusive a following: week, new base acts support customers strategic with business growth EBITDA of: steady accessory segment Fleet systems inertial to supporting XXXX investment with an support generating continued made more build spare diversification aircraft XXXX To partner on and in distribute of OEM, programs. distribution and with Middle This announced XXX,XXX number first on their begin area. agreements revenue. to in global an support engine a than Fuselage years the Textron, the of Whitney and $XXX general new their These a of our state-of-the-art global return represent beyond, Embraer as Pratt pipeline revenue; XX-year ensure X-year multi-year wide device important global to market. are facility Pacific in low priorities supporting reference to update distributor & line two, between and fully also consistent we legacy scale Tennessee organic a growth fulfilment segment. Canada, the new jet. platforms an in X supporting multiple third the and revenue high Africa within announced Aviation Aviation the Fleet recurring e-commerce VSE new Memphis, on-hand and channel to and our a XXXX. launching the as for the parts growth; early their business to customers Mounted distribution now engine key and will we and and new one, a a of quarter These distribution center agreement navigation three, ranging East, We European, building Turning growing XXX,XXX number goal OEM X maintenance This of combined XXX,XXX of inventory phase exclusive

is strategic next Our priority EBITDA. adjusted growing

distribution XX.X%, Fleet also level the achieved first since achieved The along XXX programs, basis U.S. Aviation contribution year-over-year Service. adjusted a points This grew record EBITDA quarter, scale During the growth was highest segment a the of our recently basis commercial increased adjusted on growth quarter. in third and stable to implementation businesses. XXXX. and Postal of with combination through by margin the successful of the quarter MRO awarded from and the increase segment Segment EBITDA within driven XX% sales execution

quarter, revenue progress opportunities. and priority awarded during was Aviation quarter. increased both optimizing strategic legacy where in is X final providing all sustained the cross-selling segments contract segment renewals demonstrated the X Our programs, multi-year

new including materials VSE types. addition, a Fleet parts, agreement customer, stable quarter The MRO Lufthansa with USPS with Southwest also USPS Airlines. next-generation offerings In from solid X-year for with serviceable along a announced our with resulting Aviation expansion experienced legacy performance from product agreement of XXX Technik the support, segment our XXX program vehicle continued service for all

Defense program Finally, in our opportunities quarter. Federal revenue and the drove NAVSEA segment

and new strategy. XXXX business results financial next benefit on expected our incremental reflect months wins during $XXX U.S. in significant addition our our and the XX strong by business During million. existing anticipated the supporting contracts and generate military bridge transformation In to execution the quarter, third is backlog This XXXX. foreign sales performance, revenue with million summary, increased continued Navy to $XX quarter was multi-year bookings for

financial Steve, call turn long-term capabilities, host over program I share In and I an about supplier details details the few a VSE Investor platform our XXXX, to Before have business intends customer outlook. comments. to closing Day to more strategy,

We will confirm a details date more for and Investor XXXX the share soon. Day

milestone. recent our Earlier celebrated to XXth NASDAQ Finally, exchange. this a I month, on want the year honor VSE

As our momentum. we company, traded enter so fifth publicly with a we incredible decade as do

for with different our from propositions, an But in our thing customer-focused makes and We are robust service and market that the our strength market-leading us and of increasingly of value product team. new sets that is well competition truly, us business offerings future every positioned pipeline the our apart opportunities. the

meaningful customer I indicative their of this Our financial strong difference. to greatest of dedication now and performance to asset. Steve this And is detailed performance. our excellence quarter call and will over the a review is and that a for differentiator culture turn year people, our the

Steve Griffin

Thanks, John.

X revenue, versus together X all $XXX.X the year in strong for of segments. in overview programs, was prior third continued We our to implementation commercial the operating an Aviation driven revenue supported by was of new and driven third segment and U.S. quarter performance. Slides with Postal share turn aftermarket e-commerce end by and revenue, million, both markets. modestly by reported fulfillment fleet an commercial support materials Business General of of of and in recorded Navy services. increase sales now another our military wallet of Let's Federal by successful conference specifically quarter U.S. call market ongoing million of Defense growth growth growth higher quarter Fleet driven and expansion Aviation X XX% for end programs, period, from in over recovery Service. $XXX the the with the of segment contributions and

to across an quarter, was basis rate X.X% third expansion EBITDA compression of and margin offset we both the margin of During a points adjusted segments basis. the margin within segment. as XX% year-over-year Defense XX generated Federal Aviation Fleet adjusted decreased increase and the million, $XX on Consolidated by EBITDA

year-over-year a increased Margin scale expansion below third EBITDA MRO our XX% distribution programs, by cost levels. MRO Turning margin disciplined Aviation Aviation respectively. the than to increased adjusted across grew year-over-year, remains $XXX.X X. levels, improved EBITDA XX% adjusted offerings. MRO XXX on commercial mix continues results Both by XX.X%. and of points pre-pandemic basis, year-over-year XX% above our while was operate pre-pandemic to up Slide price of management to and while by on million businesses XX%, increased new segment and driven Distribution basis and more achieving revenue year-over-year quarter. in XX%

contribute programs ramp half maintain revenue our Aviation early year-over-year the of deals highlighted assumption as to newly through distribution first we The announced the the to fourth we the of will Within in beginning segment, look XXXX earlier quarter. the year. we as revenue growth

approximately We year for XX%, dynamics have stronger of the and and associated EBITDA acquisition. XXXX. This margin to the with business improvement dilution EBITDA aviation to updated market for full points to offset margins by adjusted XX our by MRO mid-teen expectations XX% adjusted a longer-term assumptions both prior for from our is XX We to our Aviation segment. XX% maintain driven XX% basis partially broader approximately general year recovery,

X. XX% shifting driven increased increased quarter, Service versus commercial by revenues XXXX on and a third year-over-year higher quarter the sales the period, margin versus were Turning commercial third prior year revenue. million the government offerings X% Fleet our Total were represents of basis, solutions scale quarter the grew versus which total modestly increase support. segment is an commercial adjusted of $XX.X the to within up drove million towards continues of in and scale XX% other Postal e-commerce fulfilment X% EBITDA of while revenue. to U.S. period and prior in included Fleet XX% business year revenue Slide segment the revenue. commercial EBITDA Adjusted lower-margin Segment as for as customers. revenues $X.X

fourth lower maintain seasonal USPS to to in higher the revenue full to flat the an between rate growth to anticipate of flat for commercial year continue revenues revenue. as XX% We XXXX. modestly assumption quarter, modestly Looking year-over-year our offset adjusted we EBITDA XX% quarterly to

on segment initiative. drive as as delivering year-over-year this diversification focused dollar higher remain to strategic continue revenue contribution EBITDA key to a continues We

first contribute the expect to expand new center excellence the facility to and towards ramp we and quarter XXXX, we progressively fully as Looking the operationalize Fleet the revenue throughout inventories. in commercial year of

expect on facility driven new there this out. with quarter EBITDA XXXX, progressive launch from adjusted margins the of first lower segment Fleet by We in improvements

and segment year-over-year Turning to Federal revenue in aftermarket U.S. a by driven Defense XX% Slide basis, Navy X. on growth services. increased

of the third segment basis Bahrain year-over-year with XXX Federal on naval the revenue declined foreign adjusted program. of sales XX% quarter, margins a was of year-over-year. contributions to Adjusted part military meaningful frigate our to saw EBITDA and quarter, $X.X This a in basis Defense million X.X%. associated transfer FDS points as the EBITDA decline

XX% third and business year. segment the fixed from to shift contracts potential a quarter. our impacted the this represent segment Cost-plus versus solid continued opportunities pipeline margin EBITDA we of government the adjusted Federal customers, develop revenue now last Defense and plus contracts While XX% rightsize continue the same period to with in of in negatively cost price

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

versus driven to by the continue fixed adjusted and We of price segment XXXX be Federal to to EBITDA the expect approximately mix Defense awards. rate cost-plus year contract X% full X% for

of our existing Turning benefits third and million ways. commitment we under to quarter, amended in end the completion quarter, $XXX Slide XX. of This facility. the unused cash agreement. After million successfully loan availability credit At $XX third and our the multiple in we had extended VSE amendment the

the First, of from it maturity XXXX. arrangement until our XXXX extends existing

Second, lastly, amendment This and it the availability invest it business transformation, reduces further flexibility M&A. opportunistic our business provides increases strategic anticipated for to opportunities under costs. credit And facility. borrowing new our in organically remain

from end $XX.X $XXX in the for free outstanding we by in in third down was million. line our expected, distribution positive and primarily flow XXXX, trailing flow we net As third full XXXX. $XX.X the net XX-month generated million. million quarter September Adjusted the recent ending year X.Xx to of quarter, total the with for of outlook awards. successful the communications, growth cash driven for prior quarter. was second of We revenue of At maintain the free execution the the quarter, In had leverage period X.Xx aviation the cash debt XX, EBITDA

proud for of full call. However, impact quarter now that, newly we our performance deals full strong Excellence may call. portion if of cash sharing announced investments positively With in margins expect before These of during can and forward to question-and-answer distribution we fourth in third could free revenue Center We're and and working support details affect such quarter to in the results operator, March. our Memphis to XXXX. year year-end to strategically and new flow, share ready of we strategic capital our are the choose our look it the invest year

Operator

Thank you.

conducting The Kenneth be session. now from will [Operator first answer Herbert RBC Capital We a and is question Instructions] Markets. we question from have

Kenneth Herbert

John, How morning Good you? are

John Cuomo

Good John. morning

Kenneth Herbert

cost the Good then more inflation a the when are think full better about the incremental upside? question, the sounds My segment. provide the suppliers move little moving able you pass wondered obviously distribution on guidance there increased the bit if up side? can but you've most you us how for EBITDA. on in that nudged And where I just the first you through? detail MRO understand on seeing year you're Aviation help like inflation. increased pieces of just It or handling it, from costs your Are you to side within specifically,

John Cuomo

aftermarket the with and a piece inflation let inflation, I'll talk business. EBITDA -- XXX% we guidance. to transactional focused. the with The start Steve in about predominantly I'll Yes, regard are Being

as So to price we have do see for ability, price the part, most the to push down the we end-user increases. customer

the impact to impact. has inflationary seeing So address but there, not we're improvement? want seeing are margins. on material labor margin do -- costs that we pressure costs Steve, on Obviously, you play our the negative have slight not the material a

Steve Griffin

Yes.

improvements business has quite this business. initially I that's think expectations the year of versus business anticipated, helped think the remained of in robust improve the what our I half terms general aviation and second for we in

it the of on side. improved general and commercial that's aviation on business the side is half both an and and The second MRO recovery,

about So through for pre-COVID placed in sort expect versus which investments in in businesses we've and We're the recovery throughout expectations contributed commercial to in repair change. accelerate commercial overall year has we all the of terms our continues of quarter then expecting general XX% lot talked what think, And the at to has those we and pace aviation I second market of business, now levels continued that, business line our to with repair a below recovery. improved about the businesses.

Kenneth Herbert

potential of come that opportunity can That's in or more we revenue of should the for in how Memphis, Or with great. accretive Excellence as that Fleet you the the if from contribute as of could, in margins? what's Center think that? increase investments more opening about Tennessee business And I the the out to

John Cuomo

revenue be to want will little it do but Steve, color? give you Both, first. a

Steve Griffin

sure. Yes,

it incremental million commercial We say, So at now, this towards commercial an we think million look for us potentially contribute take rate I'd we pivot expect it's will important Ken, And revenue facility, right that to you business us is think United as $XXX ramp Service we obviously, at the of going to the point. revenue, States Postal about be the that this up business let's think look step overall point important Commercial. building run $XX ramp our if call business. our fleet as this we the next which year, about within for time can our capabilities, to some an as diversification our of and roughly from and

by we driven making the it As revenues the this facility a it we've as that we're well rate. ramp to to investments as with see effects fact come made margins, up dilutive will relates margin lower reference and but do commercial the to margin some earlier, build the the

bullish opportunity it EBITDA we very dollars. the diversification on well this opportunity However, as has to effect for are long-term our as grow

Kenneth Herbert

That's help XXXX first great. we year or segment? how at And or fleet can the about us to bracket out you think the impact of come potential relative of how in should sequentially, you quarter least the this margin quantify

Steve Griffin

I ready to the yet guidance. don't we're give think specific

say to provide don't estimate I any this at hiring give I around our us going the production first we think and ramp We've this to to terms into of our expect get which revenue. range. to that specific best point, we're individuals point, of it's in going translate at quarter. in And how dilutive the arms think it's exactly to be to it to tried time some new really is able the take in

Kenneth Herbert

nice Hey, quarter. Alright.

Operator

we question Truist Michael Securities. The is Ciarmoli next have from from

Michael Ciarmoli

from aviation. a pretty little favorable, from Or demand? just noticeable could customers us is any downtick like anything taking down can thanks mean to bit on just revenue Nice revenues. of John, a questions, for provide different but Steve. the John, bit Did are sounds on XQ you Anything sequential color it give I you sequentially. the Hey, in any trends color in changes -- XQ? results. the

John Cuomo

seasonality. slower Global No, nothing Yes. little slightly material. bit business, going But a a -- little We're with through of I say Parts our so an there. just sales anything integration wouldn't

the very On distribution in in and in month-over-month, on seeing be the to tends bit Business just focused. our improvement aviation commercial by business activity MRO driven consistent nice we is inputs side our general bookings business, business. and more are engine very gradual little a of

nothing bit in little So onetime would a but nothing there. a say more quarter, -- few the orders, in I special -- cyclical nature But not

Michael Ciarmoli

Got I if material is called like just get you to program seems getting I guess, Lufthansa morning, it. sort looking slower Got this at sounds an us their what's the natural just ability the at -- there. to that's jets it. sort with want And I then to you think And that with on it now access on -- planes? Southwest and with your older a expectation of those you've if like a the there's out agreement deal. impacting know pace. the headlines channel update Southwest of sales having happening? got give Can It that

John Cuomo

we'll very things get service XXX torn supporting not initial to used coming had forecasting We in, the to assume our aircraft. than they're position because think nice internal get -- in. supplier and than we a there's to in with a more those partnering we different Yes, with activity more we're just we comfortable out little pulled material proposal XXXs pipeline that seeing are going largest -- going XXX, as conservative was in I put XXXs get feel But geographies to to I pushed bit start But think were continue with for and aircraft across be product. down. the that's get inventory ourselves the Southwest

Michael Ciarmoli

same. just it. And maybe the to Okay. Got tie then

enter them mentioned capital, extensions, other might potential facility some additional or even should a of and be drag costs are potentially of got announced. you've as You deals them also are into investing XXXX. a Memphis bit investment, to cash that that be but working about of also there in some you've going think we new, we the start-up investment any inventory range working these of but Are on little -- capital

John Cuomo

do getting and from Steve want is kind it. I'll investments seeing is revenue to going inventory Yes. does on return of a X in generation address like? let next that little and the turn you it on to inventory The fleet quick within very that that happen. and what give looks investments or quarters color the because X the Steve,

Steve Griffin

sure. Yes,

inventory are new are definitely As if quarter of but fourth mentioned probably announcements, some potentially support Memphis to on to the facility, you that and revenue upon as elements there's things the then extensions. the programs, then to play we'll strategically are earlier, $XX John into there But all in aggregate, say make mentioned, to you including customers, investment thereafter. I'd opportunities. that we about know, the there's capital element of look Michael, referenced, of next some working I shortly But some at the depending in know we to million out. that growth it the that into we're be year, revenue coming this our especially to X million and year. part in bring with to there's begin through about or that we working support next months the remainder the think $XX expect, X/X we're I'd say as turn partnerships for OEMs, $XX as business so we all of if million investment this probably see play uncertainty could maybe there's there's and towards it year CapEx of look the of over I in capital, as experiencing. as of up it that of how the -- going

Michael Ciarmoli

not here. in the operational, and of that's and million you're everything saying revenue up of is out of think On I million one, you way Got $XX you. once Last revenue $XX mentioned Memphis, XXXX. I'll get running

tilt run it You're rate sort full will and that a going generate million? of facility on saying once full is $XX mature

John Cuomo

a through I the constrained. ramp of just give Yes. capacity mean what's up you $XX to year. so mean we're feel today, in we're No, XXXX. I it will obviously happening saying million

can’t So we SKUs. add

So to support I e-commerce this through that the our e-commerce expansion talked add own can’t site our about at SKUs or customers We point facility. SKU in fulfilment time. at

we execute ready. the facility plan. on and a to and the the team done the We've infrastructure just are So work, needs go

So there. I on investment quick the pretty that's what return is was the saying,

Michael Ciarmoli

it. Got

Okay.

comfortable So year so -- fleet us kind to growth million? modeling XX% in $XX with upper we're going then you're teens, see with that next of revenue

Steve Griffin

offsetting Yes, get me which I to this there's mean U.S. obviously that, Service, anticipate there's it let the we yes, the is way. Postal -- offset which the haven't to be -- -- put

the We tried going that next guidance it's the the there's continue a certainly, likely we full full but going that to rate But of time to take what it see to some ramp dynamic channel declines as to year. getting mix bigger on And Service. revenue versus relates we on expect -- the articulate kind get mentioned, and haven't then to -- And impact Postal articulate. some dilution. will first as margin is as given I U.S. back us some take see there's quarter for on a to it's margins, there commercial year some progressively the to us we shift

Operator

Canaccord. The Austin from is Moeller have next we from question

Austin Moeller

John Good here. Great Steve. and morning, quarter

now we're the driven commercial So largely first that maintenance within deferred -- side, you on of airlines with by question, some seeing that that to they put my being aviation is off? coming the

John Cuomo

maintenance. of bit deferred little think I it's Yes, a

the to well. to as continue RPKs improve XXXX levels I -- think compared it's revenue

to our airline it's demand in a customers. improvement across balanced again, the probably improvement distribution we commercial on that think consistent commercial see I MRO side. just And and kind of in continue both So

Austin Moeller

it we just the segment, revenue any margin in are just on sales? of the higher Great. USPS the Or commercial in mix? is fleet the And improvement then seeing primarily

Steve Griffin

I'd some to business. say see the it overall improvements mix on the remains beginning of to the side, dilutive we're but commercial still

say your dilutive. to about I but side, there's element of to X% improvements remains some an with being Postal commercial still then would States also United X%. But improvements on the up the there's point, it So Service

Austin Moeller

Okay. we QX, then wins that but we new half, that early you XXXX, said think in about the announced, phasing the And about in? first contract What's of just late timing think that there when QX? like know should the multiple were I on sort phase-in as sort of within

Steve Griffin

say that it's going over time in Yes, period. phase I'd to

it's So not for quarter. first to affected the going be fully

and But updates get more it, incremental for is some you If announced, XQ the actually of of at we're the and quarter transitions million revenue say, to the call at I'd year upon that of $XX us we've for opportunities customers, to more next million continue timing look maybe, to and depending couple $XX implementation looking approximation, with in fair like. when the the inventory aviation over transition deals next that months. the but share a get probably to through we'll time we the fourth period, call of we phases support

Operator

William is Blair. we The have Michael from from DiPalma Louie next question

Michael Louie DiPalma

Congrats I facility? the great of wondering capacity is new Memphis increase facility. facility new versus a was of existing the on launch the how your

John Cuomo

About existing from XXX% our footprint. increase

Michael Louie DiPalma

it standpoint features Great. types of does what And to facility, technology related have margins? and increase new productivity to ultimately a this from

John Cuomo

new management system. warehouse system ERP mean the the with we're live and new a Yes. in site I going

going weeks next we're in few that with live So the new system.

more a robotic move of XXXX will We warehousing in system. to

productivity launch will we well. We other ERP that to because the But sure up WMS and not do each the as the pipeline will the get end drive as in to the of accuracy. queue that's we and on start help the and to robotic running to we improvements the XXXX, as talking to well are want get order and warehousing implement in make more some back site

Michael Louie DiPalma

you facility? operate shut both are simultaneously? Or down will the And existing going you to

John Cuomo

No.

-- center remain the of USPS that supported So solely business. out still sales maintain Pittsburgh, outside the direct traditional in facility. commercial our and Memphis will through will and existing essentially, will and the facility fleet the partners. for e-commerce, And be corporate sales fulfilment fulfilment Pennsylvania, of support just distribution headquarters distribution that as our e-commerce

Michael Louie DiPalma

support agreement, the I antenna Awesome. the expansion Whitney have primarily your the -- opportunity you Pacific the Do like in of East? for Asia believe, And Pratt overall, Middle tail-mounted and to distribution with I also announced international an Asia cost? it's this partnership already distribution domestic infrastructure East. Canada incremental believe for their a now, you describe & the Middle JetWave And and Honeywell business to also you you is for aviation, but switching right as to distribution can Or an announced your

John Cuomo

Yes. I definitely a perspective, we're strategic highly mean, Louie, domestic. from

a Southeast with XXXX plans, there. infrastructure be have great other and is do opportunity grow out in to Singapore in a supporting opportunity. in Asia Pratt plans to team continue Brisbane We that. have the We both Europe of existing & to But Singapore. and support support Canada have to We'll Witney

with need amount work the of will program to -- in get -- cost and will initially of third-party our well. tremendous We so costs Honeywell up support be for it's and Brisbane, that out don't then not And running. that a infrastructure existing as logistics the start-up JetWave we program,

not in we're lot do cross-selling business lot customers supporting these we and upfront of that there's a opportunities on regions we So specifically general cost. as of aviation But the today, bring not see a in new market.

Michael Louie DiPalma

have contracts the impact expansion What program one. the on final of one long-term your the And does NAVSEA renewal contract? of Great.

John Cuomo

our support to essentially is expansion Egypt the So customer.

of work support customers wants program we that program, foreign do to NAVSEA our the but sales Egypt scope U.S.-based it. So with we military their get completed. through essentially have a is And military the for through

to predominantly that was and the So that's support ceiling Egypt. we increase on program, increased

We are and complete XXXX. in award an early the anticipating recompete renewal for

Michael Louie DiPalma

there's headwind over is a Okay. most of, for non-recurring. such XXXX you Will revenue is of slides, will be non-recurring XXXX? the think, in frigate that in portion I how growth the mentioned -- there that -- contract a in the And XXXX Or Bahrain

John Cuomo

There is.

So large access to transfer U.S. programs. strong and they're does a ability a we revenue and are not ship support through -- to consistent program. have great non-repeatable. They NAVSEA it's have programs when a contract, to a for in are and transfer, ship large the that that us our programs, Those one-off opportunity

we've a revenue revenue So line the more in will program NAVSEA in have will not the in with much consistent -- had prior years. lower XXXX,

Michael Louie DiPalma

been it's past million a rate. around I And the think Okay. XX-K, think in said I $XXX years, for your it run few

John Cuomo

should that the say haven't program, We but for finished at I'd it. is range you looking in forecast that be how yet

Michael Louie DiPalma

how And was XXXX? in it much in generating revenue

Steve Griffin

specifically necessarily within the drove transfer Bahrain and approximation. NAVSEA say majority the I'd in so that shared haven't of the the should up about is XX%. increase XX% NAVSEA some helped X/X about quarter of We ship program, it, was -- give us the business, but That the help that

Operator

next Company. The from Instructions] from is Sullivan question [Operator Benchmark the we Joshua have

JoshSullivan

which that Just that operate for was the in opportunistic? the driving aimed larger But the great might was location business. potential be had fleet goal? maybe much customers are facility, the curious I larger Memphis input, location guess, area? who Or on have the might decision organic some capturing choosing at may new of customers $XX there how million

John Cuomo

and possible get based day the It's transactional. the as obviously on for as wasn't same-day it highly on as take as late business based actually We possible. No, to e-commerce really be late ability them that. shipment. out in able want to get parts orders out is That to

be warehouse in a put and position city boxes. want and look to number check infrastructure of reasonable on city facilities labor in like But those all reasonable a existing just and that a also that, has happened us where did Memphis we we've cost We lease the got at to of rates a a in locations.

Josh Sullivan

on continue to need you into hire you much to needs the the what Got aviation growth? before the to And are then it. your technicians excess capacity Got built expand? current how side, maybe do have Or it. infrastructure

John Cuomo

we in I'd at look scale and continue expect little as to to to MRO say have that we pre-pandemic to they when need close do levels, start do would to business don't recover need to position still where we we add a a distribution, we SG&A, to say able faster. I are to dollar definitely but in businesses built work. expand, for capacity be technicians we we'll have the the -- dollar of

Operator

question from next The Van we Jeff Sinderen is Securities. B. have from Riley

Jeff Van Sinderen

Sinderen from B. Securities. is Jeffrey Riley have Van next we from The question

strong add metrics. me Let congratulations my continued on overall

wondering follow to there anything wanted notable in contracts regarding you Just announced relevant $XXX if to up the million margins? there's

John Cuomo

want that? you do Steve, to address

Steve Griffin

that Yes. margin I that announced maintain deals change business think No, expectations. mid-teens would terms we've our don't being projections that of in longer-term rate our I that the of think a business. we

Jeff Van Sinderen

some new you of the mentioned Okay. and picked Great. I you the think that. around then why And considerations facility Memphis

around most generally, labor can seeing for you Just overall guess, touch how And on wondering that facility, working recently I on you're then, if that. you're front? what the labor

John Cuomo

Yes. I say, see we're labor. starting to mean, terms in a of little bit I'd stabilization, of

a onboard we've process for support for retained hired -- and get right the local through do But our to has QX we we and And comfortable we're are location. have to very going now staff a for leadership recruiting do great we're ourselves of feel a able amount start. going and essentially to We us. ramped be great area that up the Memphis tremendous team the facility provided -- been

Jeff Van Sinderen

provide then pipeline, Okay. your maybe Great. seeing you acquisition wondering, just any that And in the latest update can you're there? terms of

John Cuomo

pipeline focus that still now see in announcement there. on pipeline and the our strong, wasn’t Obviously, mostly the with we’ve business we’ve shared M&A you mean, I organic area, Yes. aviation why fleet could tremendous got looks business. a the

at on forward, So if And forward focused And terms anticipated, say, looking organically strong. criteria still we very move -- in to comes markets growing but distribution both deal as right us look the all than and meets expect inorganically. can it we pipeline remain we're the deal that MRO businesses. flow probably slower a little and are continuing is of I'd both The to

Jeff Van Sinderen

offline. I'll QX. of right. in All the take luck rest Best

Operator

Truist a is next The have Ciarmoli Securities. we follow-up Michael from question of

Michael Ciarmoli

just -- is multi-year, mean, all-time lot mean, I I these maybe realize negative I flowing mean John, low. are margins like through? anything one are a here contracts -- looked federal quarter. the an still I the bad even the just of maybe cost are a guess, there in plus. I The EBITDA

John Cuomo

No.

the Mike, for program. is So biggest the contract driver of the that bridge actually NAVSEA

when flips cost through a $XX at came million program year $XXX contract bridge and at lower the last now margin. million contract to a So reimbursable the immediately that addition, essentially,

go orders coming get a early work essentially margin difficult contract task you to move a time plan. it contracting can to out XXXX, improvement that over through is time, a very With Now in process. to to officers on fixed price new and work

where cost are reimbursable. entire all program essentially reimbursable So we're program -- biggest where cost balanced it. of the almost in of that a now That's has fixed to moved a and we position from price driver right essentially

Michael Ciarmoli

I'm presumably, guess And still I cost for plus. pass inflation. surprised. all I through mean, can you your low of that's really a

So Is contract? just great I fee? just it not a -- it's mean hard it a seems it low I -- it just is mean, -- just is

John Cuomo

outstanding an It's contract.

seeing those them to But If of put technically have market, perform the essentially look ability to than where for you're that a X% below at -- acceptable That's the margin. its lot one risk, again, well fixed contracts you out low traditionally these low-cost they're margin does tend to trade. is operating pressure a -- in many of very without [ask move, bids segment they some that. better price, This on it to sure. owners] but

Operator

and floor John President Thank CEO, you, no questions, there the sir. turn for would Cuomo, over this I are to comments. further to closing back stage, At like

John Cuomo

third full a speaking call look rest and XXXX. XXXX our early the our Thanks with day. to for and about you talk year in of for quarter your attending outlook Have great to forward today,

Operator

then conference. gentlemen, Thank us. that today's joining you, Ladies concludes and you sir. Thank for

now lines. your may You disconnect

VSE (VSEC) 28 Oct 222022 Q3 Earnings call transcript