VSE Corporation

Greetings, and welcome to the VSE Corporation first quarter 2024 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 zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Perlman, Vice President, Investor Relations and Treasury. Thank you, Michael. You may begin.

Thank you, Devin. Welcome to VSC Corporation's first quarter 2024 results conference call. We will begin with remarks from John Cuomo, President and CEO. Also on the call this morning are Steve Griffin, Chief Financial Officer, and Tarang Sharma, VP, Controller, and Head of Corporate Development. 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 those 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. Where available, the appropriate GAAP financial reconciliations are incorporated into our presentation and 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. With that, I would like to turn the call over to John.

Good morning. Thank you for being a part of today's first quarter conference call. Today, we share not only the exceptional performance of our first quarter, but also the remarkable strides our teams are making in executing our operational and strategic plans. As I mark my fifth year with VSE, it's truly exciting to witness our story and vision translating into such strong results. Let's begin on slide three, where I will provide an update on our Q1 performance. In the first quarter, we delivered company-wide revenue growth of 28%. This included both record revenue and record profitability for our aviation segment. The strong aviation revenue growth was driven by balanced results from both our distribution and MRO revenue channels. Distribution revenue growth was driven by expansion of existing OEM partnerships and strong execution of both new and existing programs. MRO revenue growth was driven by market share gains and expanded repair capabilities and product offerings, both supported by strong and market activity. The aviation segment's record profitability and 17% adjusted EBITDA margins was driven by contributions from new distribution programs, MRO market share gains, and our new fuel control program. During the quarter, fleet segment revenue is up 5%, driven by increased sales volume from e-commerce customers and fulfillment partners, supported by disciplined volume expansion at our Memphis Distribution Center, and expanded product offerings, supporting new and existing customers within our commercial sales channel. This growth was partially offset by a decline in revenue from the United States Postal Service, driven by their implementation of a new fleet management information system, which has resulted in a temporary slowdown in maintenance-related activities, and therefore, parts usage. Now let's move to slide three, where I will provide an update on our strategic initiatives and program implementation. First, in April, we announced the closing of our previously announced acquisition of Turbine Controls, or TCI, a leading provider of aviation aftermarket maintenance, repair, and overhaul services, specifically supporting complex engine components and engine and airframe accessories. The acquisition of TCI is a strategic win for VSE and highly complementary to our existing MRO business. DCI's 45-year track record of excellence in customer service, industry-leading MRO capabilities, and focus on OEM partnerships is 100% aligned with VSE's commitment and long-term strategy to provide world-class OEM support. Their partnership with industry-leading Tier 1 OEMs provides both near and long-term growth opportunities. We welcome them to the VSE family and look forward to immediate contributions from the team. Second, I'd like to provide an update on aviation program execution and recent acquisitions. In the fourth quarter, we announced the expansion of our Pratt & Whitney Canada Distribution Agreement to now support Europe, Middle East, and Africa. The program launch remains on track, with the recent opening of a new distribution facility in Hamburg, Germany, and the initial shipments to cut to local customers have happened in the first quarter. The launch of our new fuel control program, also announced in the fourth quarter, is outpacing early expectations and is expected to drive incremental margin opportunities. This is a new revenue channel and capability for VSE. The leadership team managing this program continues to deliver outstanding work as they transition this program from Honeywell and work closely with the engine OEMs and aftermarket customers on the program implementation. Additionally, The expansion of our existing Kansas facility will become the future center of excellence for this fuel control program and is on track to be operational before year end. The integration of DESR Aerospace is in process, remains on track to be completed over the next 12 months, and it's expected to drive additional revenue and margin expansion. In addition to the execution and implementation work above, During the quarter, we were awarded new business by entering a renewal and significant expansion of a 10-year, $175 million agreement supporting an engine accessories OEM. Finally, in February, we entered into multiple agreements to sell the federal and defense segment assets. This transition work is on schedule to be completed in the second quarter. Before I turn the call over to Steve for an update on our financial performance, I'd like to address our leadership team transition. Steve Griffin, our CFO, will be leaving VSE to pursue an opportunity outside of the aerospace industry. He will remain with the company through the end of the month and then serve as a consultant and advisor to ensure a seamless transition of his responsibilities. I want to take a moment to express my personal gratitude to Steve. He is a partner to me in every sense of the word during this first transition of this VSE transformation story. His contributions, exceptional leadership, strong business, and market expertise have been invaluable to me. It's funny sitting in front of him while I talk about this. I wish him, his wife, and their three children all the best as they move to Boston and embark on their next journey. Tarang Sharma, VSE's current Vice President Controller and Head of Corporate Development, has been appointed Interim CFO, effective May 27th. Terang joined VSE in 2015 and has been instrumental in all aspects of our business transformation. Terang has been by my side since day one when I joined five years ago. The VSE board and I have full confidence in Terang and his ability to lead VSE's financial operations. With that, I now turn the call over to you, Steve, to discuss our financial performance.