VSE Corporation

Welcome to the VEC Corporation second quarter 2023 results conference call. At this time, all participants are in a 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 and then zero on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the call over to Michael Perlman.

Please go ahead. Thank you. Welcome to VSC's Corporation's second quarter 2023 results conference call. Leading the call today are John Cuomo, President and CEO, and Steve Griffin, Chief Financial Officer. 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. As a reminder, beginning in the second quarter of 2023, our results exclude the federal defense business segment, which has been moved to discontinued operations due to the announced sale of the business segment. We look forward to welcoming you to our first investor day scheduled for November 14, 2023 in New York City and broadcast virtually. More details will be shared soon. Please contact me with any questions. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'd like to turn the call over to John.

Thank you, Michael. Welcome, everyone, and thank you for joining our call today. The second quarter was highlighted by record company revenue, which grew 21% in the quarter, driven by contributions and growth in both our aviation and fleet segments. Let's begin with slide three, where I will provide an update on the performance of our business segment. We delivered another record-setting performance in the second quarter. setting the stage for an exceptional year. Operational performance and attractive market conditions supported double-digit revenue growth and improved profitability in both our aviation and fleet segments. Aviation segment revenue increased 19% in the quarter. We continue to see robust end-market activity across all channels. The aviation distribution revenue increase was driven by new product additions, expansion of existing OEM partnerships, and improved pricing. Aviation MRO revenue increased 37% in the quarter. This increase was supported by strong commercial flight activity, market share gains, and an expanded portfolio of service capabilities. The fleet segment also experienced a record revenue quarter. Fleet segment revenue increased 24% in the second quarter. The growth was led by contributions from all revenue channels within the segment, including increased throughput at our recently launched Memphis distribution facility. The United States Postal Service revenue increase in the quarter was supported by demand from the growth in the total installed base of USPS vehicles and the continued investment of the legacy USPS fleet. We continue to see increased spend on both legacy and newer vehicles as the fleet segment expands product offerings for all vehicles in the USPS installed base. Moving now to slide four and recent announcements and strategic updates. It's been a productive quarter as we continue to advance our business transformation strategy. Last week, we completed an oversubscribed follow-on equity offering. optimizing our balance sheet, and improving the liquidity in our stock. The $113 million of net proceeds from the offering supports accelerating our deleveraging commitment and increases balance sheet flexibility to support current and future growth opportunities. Early in the second quarter, we announced the repositioning of our business by signing a definitive agreement to sell our federal and defense business segments. The total cash consideration for the transaction of $100 million includes an earn-out of up to $50 million, subject to the achievement of certain milestones. With this repositioning, VSC is now a 100% pure-play, two-segment aftermarket business, with focused distribution and MRO capabilities, serving high-growth and high-margin aviation and fleet aftermarkets. This creates a distinct and compelling aftermarket services investment profile, one which will drive long-term shareholder value and appeal to a broader and deeper investor base. The pre-closing and transition work related to the sale of FDS is progressing well, supporting the closing of this transaction in late 2023 or early 2024. Lastly, on July 3rd, we completed the acquisition of Dessert Aerospace, a global aftermarket solutions provider of specialty distribution and MRO services. Dessert Aerospace is the world's leading independent distributor of aircraft tires and tubes, a leading global distributor of brakes and batteries, and a component MRO services provider for capabilities like wheel and brake repair. Dessert's global locations in the U.S. the United Kingdom, and Australia serve a diverse and attractive aftermarket customer base across all aviation industry statements, including commercial, business and general aviation, and military aftermarket customers. The acquisition supports our tip-to-tail aircraft distribution and MRO service strategy in the highly fragmented aftermarket. Desser and their family of businesses also provide a platform for geographic expansion in high-growth international markets. This value-enhancing acquisition is consistent with VSE's capital allocation and return on investment priorities. We will begin integration activities immediately, starting with the U.S. operations, and look forward to sharing performance and growth updates in the quarters ahead. Let's now move to slide five. As mentioned, we delivered record quarterly results. highlighted by a 21% increase in revenue, a 112% increase in net income, and a 44% increase in adjusted EBITDA as compared to the prior year. Our aviation segment posted yet another record quarter with revenues of $125 million, a 19% year-over-year increase with balanced growth across both commercial and business and general aviation customers and through both distribution and MRO sales channels. Adjusted EBITDA for this segment of $19 million for the quarter increased by 61% versus the prior year, yet another record for this business segment. Aviation segment adjusted EBITDA margin increased by approximately 400 basis points year-over-year to 15.4%. Aviation segment adjusted EBITDA represented 72% of total company second quarter adjusted EBITDA versus 65% last year. Our fleet segment also recorded record revenue in the quarter, increasing 24% to $81 million, driven by growth across all end markets. Fleet segment adjusted EBITDA increased 24%, driven by commercial sales growth and solid contributions from the United States Postal Service. It's been an outstanding quarter. I'm very pleased to see the VSE transformation story really taking shape. We repositioned the company with the announcement of both a segment divestiture and a material aviation aftermarket acquisition. We optimized our balance sheet and accelerated our deleveraging efforts. And we recorded record revenue and earnings growth in the quarter and the first half of 2023, all while maintaining industry-leading levels of customer service and support. I will now turn the call over to Steve for a detailed review of our second quarter financial performance. Steve? Thanks, John.