VSE Corporation

Greetings and welcome to the BSE Corporation's second quarter 2021 earnings 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, Investor Relations. Thank you. You may begin.

Thank you. Welcome to VSE Corporation's second quarter 2021 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 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, and 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. Let's begin on slide three of our conference call materials. We continue to advance our business transformation and revenue growth and diversification strategies during the quarter. We continue to take share in focused high-margin verticals while capitalizing on gaps within underserved fragmented markets. where our differentiated technical expertise and integrated suite of products and services remain key competitive advantages. Excluding non-recurring items, total revenue increased by 18% year-over-year, adjusted EBITDA increased by 10% year-over-year, and adjusted net income increased by 16% versus the prior year period. Further, all business segments had sequential quarter-over-quarter revenue growth. Within our aviation segment, a combination of new contract wins and share gains within the business and general aviation market, distribution product expansions and new program launches, MRO service capability expansion, and a gradual ongoing recovery in air travel supported strong organic growth throughout the business. Aviation segment revenue, excluding the CT divestiture, increased by 52% on a year-over-year basis, representing the fourth consecutive quarter of sequential revenue improvement. Adjusted distribution revenue increased by more than 90% on a year-over-year basis, while repair improved 16% when compared to the prior year period. On balance, aviation generated adjusted EBITDA of $4 million versus $1.2 million in the prior year period. As we've indicated on prior calls, the business and general aviation market remains a key growth opportunity and focus area for VSE. The market is fragmented, creating complexity for the large number of owner-operators who want an integrated solution provider capable of supplying a comprehensive array of aftermarket parts and MRO services. During the last year, our team focused on creating a business and general aviation platform that encompasses the full breadth of nose-to-tail products and services required by BusinessJet customers. One that builds upon our well-established MRO capabilities and parts distribution business. Last quarter, we announced a major engine accessories and distribution agreement in this market. A brief update, we have progressed quickly with program implementation, and began successfully supporting customers under this agreement from our Kansas and Miami Centers of Excellence in the month of June. Earlier this week, we announced the acquisition of Kansas-based Global Parts Group, a fully integrated aftermarket distribution and MRO service provider supporting this market. Stocking more than 95,000 part numbers, Global Parts distribution focuses on supporting airframe components, while its repair capabilities extend to hydraulics and pneumatics. From a strategic perspective, this acquisition achieves several important objectives. First, it significantly expands product distribution offerings and repair capabilities across a diverse base of global business and general aviation customers, including Airframe, serving to round out our B&GA solutions portfolio. Global Parts currently serves more than 3,000 small and medium-sized business jet customers across more than 100 platforms, very few of whom are currently BSE customers. Second, this acquisition is expected to generate significant revenue synergies as both new and existing business jet customers leverage the full breadth of our combined repair and distribution capabilities. Finally, This transaction further positions VSE as a consolidator of high-quality, complementary business and general aviation assets. Given the fragmented nature of the B&GA services industry, we see opportunity to continue to add higher-quality, complementary assets to our portfolio as we build a best-in-class solution for BusinessJet customers. In 2020, GlobalParts generated approximately $65 million in revenue. While the EBITDA margin profile of this business is below our long-term aviation segment average, we see opportunities to bring the margin profile in line with the segment average as the business is integrated. Turning to a review of our fleet segment. Excluding a non-recurring pandemic-related PPP order in the prior year period, fleet revenue increased 12% on a year-over-year basis in the second quarter, driven by continued growth in our e-commerce fulfillment business. Commercial revenue increased by more than 100% on a year-over-year basis in the second quarter, representing 30% of total segment revenue in the period. Given the considerable growth evidenced in the commercial fleet business, we have and will continue to invest in expanded distribution capabilities to support further scale. Given supply chain-related challenges caused by the pandemic, Many fleet customers have turned to our Wheeler Fleet solutions as their solution, given our large on-hand inventory selection and industry-leading service. In our federal business, revenue increased 7% on a year-over-year basis in the second quarter, driven by a combination of organic growth and contributions from the recent HACO Special Services or HSS acquisitions. Both bookings and funded backlog improved materially versus the prior year period, driven by maritime services and the contributions from HSS. The HSS integration has been seamless, with the business performing on plan during the first several months post-acquisition. Within Federal and Defense, our strategic focus remains on developing higher-value services and capabilities in support of both on- and off-base maintenance. To that end, we recently leveraged the capabilities and expertise gained through the HSS acquisition to develop what we now refer to as the Aircraft Maintenance and Modernization Division within our federal segment. This division is currently supporting government customers with maintenance and modification services, including scheduled and unscheduled maintenance checks, avionic and structural modifications, and upgrades and conversions for government and military aircraft. Again, similar to our approach within the aviation segment, we are developing bundled, niche market solutions that support margins above historical average, while positioning VSC higher on the value chain. Over the last 60 days, we added two new contract field team programs to this division, supporting the Navy's E-2D aircraft and the Navy's MH-60 helicopter maintenance, both in southern Virginia. In summary, our second quarter results reflect continued progress on our business transformation strategy. We delivered another consecutive quarter of profitable growth, completed our second acquisition in the last six months, and continued to add strong, experienced industry talent to our team, with plans to announce our chief legal officer appointment shortly. We have made significant strides in recent quarters, successfully navigating through a global pandemic, growing our product distribution and services capabilities while building our presence within growing higher margin adjacent markets. As we look to the second half of the year, we intend to build on this momentum with a strong focus on program execution and new business integration and realizing the results of both. With that, I'll hand it over to Steve for a review of our financials.