VSE Corporation

Greetings and welcome to the VSE Corporation fourth quarter and full year 2020 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Noel Ryan of Investor Relations. Thank you. You may begin.

Thank you. Welcome to VSE Corporation's fourth quarter and full year 2020 results conference call. Leading the call today are our President and CEO John Cuomo and Chief Financial Officer Steve Griffin. The presentation we are sharing today is on our website, and we encourage you to follow along accordingly. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ materially. and significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. We are using non-GAAP financial measures in our presentation. The appropriate GAAP financial reconciliations are incorporated into our presentation where available, which is posted on our website. All percentages in today's discussion refer to year-over-year progress, except where noted. At the conclusion of our prepared remarks, we will open the line for questions. And with that, I would like to turn the call over to John Cuomo for his prepared remarks.

Thank you, Noel. Welcome, everyone, and thank you for taking the time to join our call today. During 2020, VSE successfully navigated pandemic-related disruptions for the global aviation market while continuing to execute on our multi-year business transformation plan. We refined our strategic focus while introducing differentiated value proposition to the market with an emphasis on higher margin product and service offering. During the year, we won new multi-year contracts, increased our presence within existing markets, expanded our product and service capabilities, and grew our contract bidding activity and backlog. Additionally, we divested of non-core assets, reduced overhead costs to align with current demand conditions, and built a new leadership team capable of driving our strategy forward and generating above-market returns. In 2020, we generated $29.5 million of adjusted net income, while growing free cash flow by more than $24 million on a year-over-year basis. We also continued to pay our quarterly dividend and reduce debt by $19 million. At a business segment level, our balanced, stable military and government customers and contracts offset the pandemic-related impact to our commercial markets. We continue to see a recovery within our aviation markets during the fourth quarter, with the revenues increasing sequentially in the fourth quarter as compared to the third quarter, supported by improved business and general aviation and narrow body activity together with market share gains. Although revenue passenger miles remain below historic levels, we believe the markets we serve have bottomed and are poised for recovery during the second half of 2021. Our business continues to outpace the recovery supported by a balanced commercial and business and general aviation customer mix, and new business wins to offset the market decline. In our federal and defense segment, bidding activity increased 37% versus the prior year. This growth in bidding activity and bookings reflect our more aggressive focus on business development and our higher margin technical services focus strategy. In our fleet segment, commercial fleet and e-commerce fulfillment demand remain strong. providing a complement to our core USPS business, which remains a stable source of earnings and free cash flow. The diversification strategy for this segment is taking shape. In 2020, non-USPS revenue grew 93% compared to 2019. Turning now to slide three in our presentation materials. Before we share our thoughts on where we're taking the business in 2021, it's important to highlight the progress we've made during the last 12 months. including those specific actions taken to advance our business transformation and corporate strategy. New business and key account growth was a major area of focus last year and remains so in 2021. Our Honeywell awards announced in July, our exclusive landing gear distribution agreement with Triumph announced in October, together with our recently announced exclusive life of program APU distribution agreement with Pratt & Whitney Canada, were all major wins for the team that validate our value proposition to the market and set the stage for both segment revenue and margin expansion in 2021. Another achievement in 2020 was within service and capability expansion, where we expanded avionic MRO capabilities in our aviation segment, launched new commercial fleet and e-commerce fulfillment business units within our fleet segment, and introduced the new logistics and supply chain management division within our federal and defense segments. We took action to streamline operations during the past year, close nonessential operations, and reduce costs throughout the business. We divested of two non-core aviation assets, closed three facilities, and consolidated operations into strategically located centers of excellence, while removing $13 million of annualized costs from the business. At the leadership level, we made several important organizational changes. Since I joined VSE just under two years ago, we've brought aboard a new group president of aviation, a new group president of federal and defense services, a chief human resource officer, and most recently, Steve Griffin, our new chief financial officer, who I'm pleased to have joining me for his first VSE earnings call today. At the same time, we realigned our incentive structure to ensure a pay for performance model in keeping with our commitment to attracting top talent and supporting short and long-term shareholder interests. Moving now to slide four. Earlier this week, we announced the acquisition of HACO Special Services, or HSS. HSS is a military aircraft maintenance organization providing heavy checks for the United States Air Force KC-10 fleet with strong backlog and contract revenue visibility into 2025. These capabilities expand VSC's existing U.S. Air Force program and contract field team programs. This transaction provides VSD with access to new capabilities, technical expertise, and contract past performance required to provide end-to-end support for government aircraft fleet. This acquisition will help support growth with new contract opportunities, including targeted prime and subcontractor roles on various aircraft sustainment and modification programs. This transaction, which had a total purchase price under $20 million, is a blueprint for the types of bolt-on transactions we are evaluating. The transaction was funded with cash proceeds from our heavily subscribed underwritten public offering of common stock completed earlier in January of this year, which resulted in net proceeds of $52 million. We are very excited to welcome the 275 HSS team members to the BSE family. With that, I will now turn it over to Steve Griffin, our CFO, to introduce himself and comment on our fourth quarter and full year 2020 financials. Steve?