VSE Corporation

Good morning, and welcome to the VSE Corporation fourth quarter results conference call. At this time, all participants are in 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, then zero to signal one. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Noel Ryan, Investor Relations. Please go ahead, Phil.

Thank you, and welcome to VSE Corporation's fourth quarter 2022 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. 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 joining our call today. 2022 was a defining milestone year in VSE company history, one where we delivered record results and one in which we effectively advanced our multi-year business transformation strategy. During the year, We executed new business awards with industry leading customer service and strong revenue and profit contributions. We were awarded more than $450 million in new program wins. We added to our portfolio with both new market leading distribution products and new service and MRO capability offerings. We invested in our businesses with new and upgraded facilities and IT systems to support scalability for future growth. Also in 2022, we proudly celebrated our 40th year as a NASDAQ listed company. And most importantly, we continue to invest in and upgrade our talent and team to drive our company culture. I'm incredibly proud of the VSC team. In 2022, all of this culminated in significant year-over-year revenue and profit growth, and record full-year revenue for both our aviation and fleet segments. Let's now advance to slide three of our conference call presentation. We delivered record full-year 2022 results, highlighted by $949 million of revenue, or growth of 26% year-over-year, with 27% growth in adjusted EBITDA and 34% growth in adjusted net income. Our aviation segment posted an outstanding year with record segment revenues of $408 million or 65% growth over prior year. Adjusted EBITDA for the segment of $52 million increased 145% versus the prior year. Aviation segment adjusted EBITDA margin increased by 420 basis points year-over-year to 12.8%, giving a more favorable mix of higher margin repair revenue. Aviation segment adjusted EBITDA represented over 50% of total company 2022 adjusted EBITDA versus 29% in the prior year, supported by balanced growth across both commercial and business and general aviation customers and both distribution and MRO revenue channels. Our fleet segment also achieved record revenue results in 2022. Segment revenue of $261 million increased 12% compared to 2021, driven by growth within commercial and e-commerce fulfillment customers. Commercial fleet revenue increased 42% on a year-on-year basis and now represents 40% of total fleet segment revenue, a testimony to our successful segment customer diversification strategy. Fleet segment adjusted EBITDA increased 9% on a year-over-year basis. The EBITDA improvement was supported by both commercial fleet growth and contributions from the U.S. Postal Service. Finally, our federal and defense segment contributed $280 million of revenue, up 4% over prior year. Our strong performance in aviation and fleet was partially offset by a decline in federal and defense adjusted EBITDA. due primarily to the continued shift from fixed price to cost plus contracts, along with contract expiration. In summary, new commercial growth and operational excellence drove record revenue and earnings in 2022. Let's turn to slide four for a fourth quarter update on our key strategic priorities of building sustainable revenue, EBITDA growth, and optimizing legacy programs. We made steady progress on each in the fourth quarter. First, new business growth and building sustainable revenue. We recently acquired Precision Fuel Components, a leading MRO provider for engine accessories and fuel systems supporting the business and general aviation and rotorcraft markets. This transaction expands VSC Aviation's specialty distribution and MRO capabilities while positioning us to capitalize on higher margin technical service opportunities. During the quarter, our fleet segment opened a new e-commerce fulfillment and distribution center in the Memphis, Tennessee area to increase the speed and service quality for aftermarket parts delivery. This investment will support the growing present and future demand for our e-commerce fulfillment and commercial fleet customers. This new facility includes a successful implementation of new ERP and warehouse management systems. We have begun to ship product and expect this new facility to contribute more than $50 million in sales for the fleet segment in 2023. Finally, we are implementing strategies to ensure sustainable long-term growth in our federal and defense segment. The efforts of our new leadership and expanded business development teams resulted in an increase of 60% in our new business pipeline. to $1.5 billion in total bids submitted and now pending award. Our next strategic priority is growing profit. Our aviation segment fourth quarter performance resulted in $15.8 million, or an increase of 102% versus the prior year period. Aviation segment adjusted EBITDA represented 69% of total adjusted EBITDA in the fourth quarter versus 44% in the prior period. supported by both balanced growth across commercial and business and general aviation customers and both distribution and MRO revenue channels. In the fourth quarter, the aviation segment delivered the highest adjusted EBITDA margin in more than three years. The fleet segment also grew adjusted EBITDA in the quarter. The 4% increase was driven by commercial sales growth and stable contributions from the U.S. Postal Service. Our third strategic priority is optimizing legacy programs. During the fourth quarter, our aviation segment commenced deliveries on the previously announced expansion of our Pratt & Whitney Canada 15-year distribution agreement. As part of this expanded agreement, VSE Aviation now provides engine spare parts and exchange support for accessories to business and general aviation engine customers, operators, and maintenance providers in the Asia-Pacific region. The fleet segment also experienced solid legacy program performance from our USPS customer, including the continued expansion of product offerings supporting all USPS vehicle types. Our federal and defense segment continues to effectively support the Naval Sea Systems Command, or NAVSEA, with foreign military sales follow-on technical support, which has a funded backlog in excess of $125 million. Last week, we received a six-month extension on our existing bridge contract. Looking ahead, we await a second quarter final award determination related to a five-year renewal of this agreement. In summary, three years ago, we redefined our go-to-market value propositions and business strategies. The record revenue and margin expansion in 2022 validates and supports the opportunities that exist for VSE both today and into the future. I will now turn the call over to Steve for a detailed review of our financial performance.