VSE (VSEC) 1 Aug 242024 Q2 Earnings call transcript

Good day, and welcome to the VSE Corporation Second Quarter 2024 Results Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to Michael Perlman, Vice President, Investor Relations and Treasury.Please go ahead.

Thank you. Welcome to VSE Corporation's Second Quarter 2024 Results Conference Call.

remarks Cuomo, with and begin will from President John CEO. We is the Financial Chief call on Tarang Officer. this Chief Also Interim morning Sharma, and Accounting Officer The contains forward-looking our about future is you presentation financial follow statements sharing expectations. and we to discussion and encourage on accordingly. Today's along business we are website, today SEC. significantly periodic projected risks may in including uncertainties, Actual reports and statements with described forward-looking differ those results our today's from those in filed the various due to no obligation Except update by as we undertake required statements. forward-looking to law, our

We appropriate line our non-GAAP progress, on year-over-year today's financial remarks, prepared questions. With presentation incorporated available, are in measures using open to of would I that, posted in GAAP into except turn we will presentation. Where where John. our like our and for are percentages to to refer the website. noted. All financial the over the At reconciliations discussion conclusion our call the

Thank I update remainder our both outlook call I quarter VSE's XXXX you environment second for then second Aviation Good to joining priorities and the the strategic and market our our financial conference of discussing an provide like for by the would year. will performance quarter for current morning. morning, on segment. This review today. begin

to next record are update levels. annually over airline the and exceeded, miles market. Global in to expected increase XX XXXX Let's robust begin with revenue a years. to market approximately traffic prepandemic forecasted passenger XXXX and are cases on be above many remains Aviation the levels Commercial continue has to, passenger X% returned and

by approximately in-service Fleet increased global expected X% passenger same expand accommodate period, to the the Over annually to demand. is

chain ramp-up attempting are production and demand, meet their efforts. Airbus impeded quality have to and Boeing constraints increased to While supply

and airlines solution, aging services on parts maintenance-related are driving interim aftermarket an delaying demand aircraft. retirements, for increased aircraft As

near compared to was business result, levels have shift the prior activity anticipate the the following single-digit recover the and when general as low jet more of pandemic historically term. a high first and the to market, structural in we've a in the following seen pandemic private stabilize and stability Within near Aviation and rates use we aircraft Business activity this seen growth cycles.

X, XXXX priorities, an will to beginning segment. provide with Aviation where strategic I on our Slide the update now Moving

will to performing of supports Germany, be and is The First, we year. the acquisition an full facility & continue of new distribution The aftermarket distribution in from XXXX. scale products, year. at Canada in including European tubes our our our with facility of in earlier tires, the by year line our support later expected Center Desser which the expansion Whitney expectations is Excellence program, this to launched Hamburg, additional batteries, end run rate and Pratt

expectations is early and Second, Manufacturing OEM-licensed to of Fuel profitability. Control new launch program outpacing the contributing segment our

expansion, Our of manufacturing the by which in new to the investment most expected growth in Kansas will for support this be operational second of year-end. expansion accounts facility this facility spent is quarter. product CapEx the line The

systems, integrating core months. recent includes of our this be building or is branding exceeded has Controls, finally, VSE that Desser Aviation new acquisition launched this Supporting integration, our e-commerce will Aviation will VSE and are And on organizations, strategy This expectations acquisition remains and are be processes, new site the track competency all in assumptions. to The year. integration. we Turbine over integration, in a Desser a of we acquisition Next, XX next completed site go-to-market developing support and legacy the which quarter and customers. initial third TCI, expected

partners. with engine capacity expanding OEM and for existing scope initial this focus adding Our business is our

process, of position and year-end. has and The the revenue transition both the USPS potential committed or which we we Fleet. segment are anticipated alternatives revenue segment caused segment. involving after by recovery review better explore new to this and is temporary to a by process Fleet initiatives and System. expect In ERP remain profitability a the additional growth, evaluate future divestiture. and for initiation announced to the We our several Management USPS we this the in to now to complete disruptions provide stabilized, a USPS Fleet near-term have Fleet interim, undergone managing transition through Moving Earlier both the strategic year, is updates to ERP of the progressing

to diversification in the we which in shares million to Fleet follow-on the and customer X.X our level, businesses, aggregate. At and completed offering offering focus borrowings commercial scaling Corporate including of repay a on our successful of outstanding e-commerce the XX% up our We year-to-date equity TCI. from facility, loan continue proceeds under May. are at borrowings used fund organically fulfillment share net $XX revolving The to acquisition per approximately were

Corporate restructuring activities, previously corporate other of quarter. as connection Defense and relocation the second business and a recorded Additionally, In our to restructuring and we disclosed, charges expected initiatives and the million headquarters the of recognize the related these the with in finalization Federal $XX Federal to divestiture. Defense company segment supporting charge

We to Aviation relocate our the corporate of our decision made headquarters existing one segment's operating also later this facilities have to year.

quarter. next update detailed a provide will We

the permanent soon, expect Finally, third a is specifically of we our progressing before search CFO the and end to announce CFO quarter. plan well, onboarding and

move from contributions by driven will distribution expansion The of were X, second the of the OEM-licensed awards, revenue a both Slide execution existing row new contributions profitability of growth a to Desser This from record the XX%. new MRO revenue an Turbine acquisition solid capabilities, of I In provide manufacturing program performance. both the record update and results. on and and our we for balanced Aviation supported in profitability quarter quarter, included scaling awards, program where on and these performance, Aerospace record Let's delivered segment. on revenue second record Aviation QX Controls our

of end sales channel. With decline slowdown new Management partially Fleet The center offset to quarter. by implement and was financial transitioned now are our call existing update. The customers System, Information expanded distribution I performance remaining product will sales a the USPS X%, of to since by within in from parts the and continued a fulfillment our offerings, in in system quarter, over expansion resulting the discuss Tarang revenue have by performance. the volume increased Service the and to sites temporary the they XXX be customers supporting negative by Fleet the disciplined e-commerce maintenance-related Postal During volume our facilities versus details States third supported Memphis new driven from our migrated and Fleet XX new a usage. partners, at declined commercial United segment turn last as that, To-date, activities to XXX revenue expected

Thank you, John.

of per $XX the adjusted of Fleet. X and provide This million overview to and increased by $XX second of Adjusted by XX% XX% declined million the a drove to quarter, $X decline earnings increased decline the where in of conference increase or Fleet call per growth XX% Slides partially million year's $X million share. prior an a Aviation diluted by million compared Let's X% of compared share this partially materials, in second an million in income net quarter the offset X% revenue $XXX revenue. I'll EBITDA Adjusted was period. XXXX. a to generated turn quarter to the XX%, $X.XX to VSE in offset up of financial X $XX increase performance. revenue, led Aviation

driven a second Now $XXX strong the repair to of from the review million. revenue improved and share activity respectively, quarter market and Aviation OEM turning addition was MRO East our contributions businesses XX% year Aviation acquisitions. was were increased Pratt Whitney in existing capabilities, new record The second strong MRO up XX% of the contributors, our solid compared XXX% execution XX% of increase prior by and and from the programs, gains record end up The ramp across we'll acquisition. to market to and period. and segment including increase driven new to and strong in TCI XXXX end and Desser Slide revenue activity facilities X, segment's Desser Distribution Middle XXX%, Africa programs, throughput and quarter market Distribution Europe, contributions revenue by Both results. MRO the of & our compared agreement

launched Aviation by Aviation increased acquisitions, points a acquisitions. programs, and to driven margins existing by to was by record manufacturing million, by $XX organically share adjusted the EBITDA prior increased our XX% XX.X%. licensed increase XX XX% revenue program, recent gains adjusted OEM margin year. contributions compared The slightly approximately and while quarter in recent margins newly MRO to from new Excluding EBITDA segment lower from market distribution the increased by offset basis in

guidance margin revenue XXXX XX% we adjusted maintaining of segment, EBITDA XX.X%. of and are year Aviation to our XX.X% For growth XX% guidance to full

for to turning quarter discuss Now to segment. second X results Fleet Slide the

revenue, of quarter, million, by offset second prior-year to $XX.X sales to fleet fulfillment channel revenue USPS sales compared in to revenue XX% XX% X% quarter growth. last second government XX% driven lower segment XX% Fleet the the approximately now quarter, the declined of period. the USPS million During our included partially second an declined represents is Fleet was Commercial segment $XX revenue Commercial in prior of compared which year. the increase to compared revenue, within by and year. e-commerce commercial other

to XX% XX% quarter are for to guided, third previously down full sales year. As XX% down be USPS the XX% expected to in and the

Fleet profitability. driven adjusted compared segment sales year. XX% margin Fleet adjusted million, X.X% in the by was EBITDA to decreased prior EBITDA volume. $X decline on the XX.X% Fleet Moving USPS in to to

segment For our our compared the range the prior X%. to X% full maintained Fleet adjusted we X% growth of year of XXXX, range margin EBITDA revenue to year to X% and

and ranges. at revenue provided margins low the the end both expect We EBITDA of adjusted

used In supporting net new our $XX X.Xx. Capital strategic driven Total at quarter XX-month Aviation facility acquisitions quarter, million. of end leverage, the Slide net million, was from manufacturing new $X quarter and outstanding equipment inventory cash second to were $XXX primarily expenditures investments was forma program. includes Turning debt by supporting for flow, results prior OEM trailing Pro the we second awards. operating the licensed which X. million for

to in in capital. With are it driven and half generation inventory improve further flow free optimization net of our year, investments I'll over turn second to cash working position stronger that, the and John. leverage back of the by a We the

on Slide our priorities prepared you, I conclude XX. by like Thank Tarang. recapping would our to XXXX remarks

communicated, previously XXXX a of execution. As year is

with begin segment. our Let's Aviation

First, on our program prior is implementation schedule. [ ] Europe

positioned product lines Our of half new is center additional Germany support back the XXXX. now distribution Hamburg, being in to

Control to and operational facility is Fuel program expectations be program continues expected early this the to by expansion Next, supporting outpace launch the year-end. Kansas

TCI our the in launched and partners. the Third, be we of be third focused months. integration additional we Desser and the OEM Alongside supporting customers. And our finally, completed legacy integration, site for VSE capacity scope XX a expect increasing next will engine quarter, e-commerce with acquisition, Aviation to Desser over the both are adding on new existing

diversification organic Distribution to Fleet focused segment. Center. our customer to as on growth Moving new our commercial growth our strategy drive plan and we We Memphis continue remain Fulfillment to scale E-commerce and and

temporary and the the by near-term Fleet Within commercial We business remain brought new managing and new continue and temporary scaling we disruption to while to support challenges USPS. in Fleet, activity within through our USPS conversion. legacy vehicles, system on committed the their managing

stakeholders. our Finally, team we to the in cash generate thanking year, they balance. half debt flow improving VSE the our solid leverage free by flow daily would our and for net do like conclude to a support all lowering I of from cash to expect perspective, the second

We are question-and-answer really now something portion we the ready special our building of call. here. Operator, are for

our And Markets. question Ken RBC Herbert from comes Capital from Instructions] first [Operator

maybe just out. John, to start

sort Within see -- the the just anything Can half be whether of guidance year. the ramp you levels these implies integration lot any new through at things out? in progression these playing the of margins you've it'd a Aviation the acquisitions, margin particular of puts if as takes segment, risks of up. obviously, back facilities, sort around, the Can lot the And the and there's just the else? of walk of got of ideally a second some wrapping obviously you you half consistent Aviation activity,

a a Yes. I guidance the really think mix strong margin operating with been has we first mean, lower. posted and of then We've slightly the quarter bit acquisitions. got I the in a

slightly a We which posted that is have the first but a the -- XX%-plus than TCI, quarter. we business, low-margin not not in lower lower

little X migrated activities really to starting actually slowdown that happening in Desser We weeks we bit -- systems U.S. significant acquisition week for have have while a in next will a the the get of you'll the X

and about to -- it's So continue we all mix. ramp,

not was I we the the at guidance feel So guidance any of Tarang, If of would part probably you higher out. I be and end put that is takes at comfortable and With other of? that of TCI with or think this the think we guidance. be the we TCI expect to midrange we point. Michael think equation, the where puts

Yes. that. mean, half reiterate a is of I I we've right we'll holding for an will now, that think less we when margin variability so the on guidance the The so will impact than appropriate. have the TCI dilutive, the we're And update just back quarter, just the owned TCI plan. year. and certainly it's towards

either of you MRO on capacity air result spare or of coming the slowing and change as airlines terms some lower And maybe any the show, airline commentary a Perfect. Are some parts softness with the out of end seeing lot maybe at reductions. on sort or your of in spend their carriers? in of a low-cost purchasing of capacity customers some growth

I be our any know our be outlook, to of work in seeing on we robust changes very with there we're market change. you seen more could tend MROs, And around But of -- I really working be centered demand. lot as OEMs large offloaded at with side aren't distribution today, OEM-centric. opportunities of them to in conservative different our work any in shop a very of We meetings activity opportunities. or mean back Farnborough have model impact and terms yet. for to continues not us, any is not the that but the And

for free year? second half, on more how the -- much cash of specifics we you finally, or think in free generate about sort expect could Perfect. cash where just to the any should And provide Okay. we sort full where of

for half anticipate new we generate FDS that divestiture-related and the year. the to also impacted free of of execution certainly, to program cash revenue certainly first year. cash on free of been has half. by mean, the flow I'd sale the the mean, Fleet's say I our and I in cash declines. we've flow year track Then second we're -- generate strong half got just costs and in the the the expect the in back

Ciarmoli from Truist. question Michael The next from comes

Is Just cash maybe to second could cash. that right pick you for year? or cash positive up be full on think guys positive that you half the

positive second half. in the cash I think

Yes, good question.

The second half.

flow I the the predominant more expect in more so third the would quarter. fourth quarter Mike, Okay. quarter the And in fourth in and versus third quarter. cash free generation

you Okay. then, Perfect. And TCI John, I think said is outperforming expectations.

still $XX for I to Is think million right the ] that above $XX you end? year? that million originally maybe said in high coming full that bogey contribution. truly is the [ revenue Or

of... you'll follow $XX X it that the it's months coming XX-Q, we Again, high for mark TCI them. and end for own ] on the exceeded is mean, above the $XX time certainly this months in for million the [ you I the to period. see expectations closer that million,

to that put have I are us right because end. We're caution still of solid I they want it's now, learning a in but at think as actually the days, we hard just but a XX lot week, higher Yes. feel now. little for learning. a right Connecticut of to It's at this forecast after we're

lower midpoint at it. a the at the I kind revenues mean, guess here assumes it the this I always I Got low appreciate high-end the Aviation contemplated revenues read the XQ conservatism, to some basis. of reaffirmed it. kind think or kind in of, just And a XQ What end, kind down But but low-end of airlines. kind of slight go of Got the then, that kind guidance. we've of uptick, I sort John, stall million run there? make knowing anything cost of maybe seen and into $XXX guide would even with what on sequential of rate on sequentially

the through Number system Desser of will is integration would quarter have markets, year-over-year the seasonality to a conservative I important element rather say going No. side look on is the two because in comps. it's more to go one. we in sequential the we're an at There U.S. third the number really the comps than

on that revenue an And starts impact all about positive for got the where end feel you get based weeks days. it's X say integration of as obviously posting we'll growth we in as confident -- XX in see So synergies realize year-over-year we into a that we as to integrate, back the you've We're quarter-over-quarter I seasonality. the work of still -- read would year. But nothing literally we to in but will it there's and from and perspective.

for Okay. Last one me.

lot lot less going with of say have could program opportunities? Does opportunities changes. more there, current directional there? Just on them? a color your you kind this for obviously any Or just a create Southwest, of about they've Anything you,

strong we a partnership Yes. with have I them. mean

the We won't period XXX-plus because new receive dependent on I'd able contributions. is program they're earnings itself. are It's ability I them, to teardowns managing to deliver say it a all for on of XXX-XXX the Southwest of program acceleration with aircraft over. and solid all strong define Boeing's than more aircraft. that aircraft revenue when them depends to on the

anticipate growth strong, now, we and kind build of So rates. strong based right current on Boeing it's don't stable MAX XXX but the any

question from Louis Louie (sic) comes William Blair. DiPalma [ DiPalma from next The ]

market share when the BG&A in what growth are industry start mirror you gains to from? coming low of growth gains the with remained XX%, market John, single decelerated your solid -digits. that shows has continued Tarang growth industry the And able and commercial will growth? that organic view Michael, the Are where BG&A Aviation at view and categorize terms to these your share to is

problems coming conversations from are to both we're we in distribution, more actually is balanced the across and quite in it from general aftermarket, some about combination More it's of Yes. taking parts partners a capabilities, winning it I'd talk solve share seeing them way. business that type from MRO both it's battle needs. first, distribution. them work than OEM MRO work business across and and or to whether mean, as with we say the how is and I support and to gains, And markets, services between of those for over share interesting. new commercial across with regard competition aviation

was Your about specifically question second

Commercial...

Commercial...

approach. more Yes. I'm I thinking Again, take slowing down, I'm it. so about conservative a

growth to more think going of to be that going you to I into just range. we're in to single-digit think what market 'XX, That's in And going it, of mid XXXX. of year another communications. you're think tend 'XX, larger, start see I out. my see in it's get as the is flatten you kind see perspective it slightly lower market to which macro more in than I

these relative sizable to -- it's XX% organic have very Do growth, industry for for can you growth. the that a spread that you spread? maintain confidence And

going in it is quarter the as -- every say terms well. how We've exactly look depends won't to of growth. I mean, on organic I ramp same programs

flow So continue terms in possible revenue transparency guidance win will to and we the that new on the much then as as winning to deploy to I we'll business, P&L. and business. execute of and we you see cost think that when any if business the there's And earnings give clarity upfront through start as new

to give each implement just it's execute So answer differently. program generic does a hard because and

the that XXXX, XXX and is gain Aviation viable the of you forecast expansion efficiencies Hamburg XXXX as Day, At fuel and target a as And relative John for That still utilization assets? the to you increases and Analyst basis makes Tarang, margin one sense. points of control the your more. facility of in

of a the bring mean we're the we we margin kind that that factors. Yes. that cost up it's burn as down X on the had Fuel really at It's of where manufacturer and initially, the lower inventory and higher Honeywell inventory pick I Control there.

we of we as continue that the to is, our second business, leveraging we're platform costs and kind built. grow The operational the

integration and will a little activities happening uplift. year starting through are there we're third provide activities, some integration back So XXXX, end opportunity. And margin those with the got the some is, and of which involved provide synergies sales in a bit SG&A of decline to as margin we've -- the of percentage the

Sounds to of good. they system, to And recovered one were that back have USPS transition? have volumes more, to sites where the the the new IT transitioned the prior

No.

live So the sites went the first went first live, that in few quarter.

happen, remainder of in this you'll and quarter, that you'll see really the that's gone have in postal seen live have out, have going not those live revenue We the slow going a bottom they and rates in pre recovery this and are guidance no the XXXX. quarter revenue but seen there fourth have where at bottom we've are then we sites to a that quarter at And uptick kind anticipate terms that the V-shaped run of -- this of and start given see sites point. earnings of why we -- decline and into the go-live

Van Sinderen Riley. next The Jeff from question comes B. from

realize I you a seeing early that to far? you it's as back there you're to So based for we it circle on I there's just could TCI, margin so what potential see expansion wanted on think grow minute. but if Do

there Yes. kind has different each financial model. I -- mean, of a deal

Some deals from -- the we cost are takeout. and synergies integrated come fully

the And or amount margins grow then on of where where we margin expand about Our see situation tremendous opportunities a service there. to because we market I'd we product level -- do say, expand not is and potential. have the we the with TCI. business how TCI that have, is

to talk into of on plans and the in back sure typically a you'll to comfortable XXXX. expansion. about year the on approach make place. in plans more we is new margin we much end Our we'll this any expansion And we A And see learn, start as more first feel is growth an focus capacity XX put be asset, days, bring watch, before position programs, especially in us in

remaining it to like the are the guess, Desser to the system What And execute. of on next key enough. things you're you're integration, then about integration Fair complete focused year? over near-term sounds of Okay. next kind I the

a a is because mean, business. I complicated integration was Desser nonintegrated it Yes.

entities. are all then X separate MRO that systems somewhat of operating and operating And businesses think, I under X that legal you kind were have, So separate distribution you shops have independently.

almost those we've there thing. good -- So like a points we're we're mini our and e-commerce of taking It's with mix, commoditized products more the new which in it's there's a X e-commerce site together with site in -- quarter of touch lot third Coupled enhancing year. integrations. And their and fourth bringing is a this that, customers. and live

So throughout it processes MRO this what you'll is the integration. We've integration see integration. already we the then be remainder organizational as payroll distribution And done of year. U.S. HR and happened year, stuff, get into will benefits, the next systems

it's about now we all So how to systems and go market.

Okay. Great. one I if just squeeze then in more. And could

you're more give color what any Honeywell you in Just business? us on can seeing the

Yes. we've robust that, in feel communicated. still it's on or that guidance already still the confident pretty I scaling deliver and given than margin expansion feel better mean And performance anticipated. our around very XXXX we've ability exactly we including to in

rest the take I'll Great. offline. Okay.

from question comes Sullivan Benchmark. from Josh next The

historically your the went office when versus similar cycle? to back As what is tracking far USPS actions, metrics the as through post this or you that historical experience if changeover, look -- similar a

tracking I It's in guidance, our because feel we similar. it's what point, would any guidance. the a this very And additional above at opportunity be I very say good And but don't see to comfortable we cautious question. want

kind demand think at a the we see is in what pent saw up point. and of certain difference did we pent released that the up I past demand, in

seen haven't that We yet.

we the but particularly at kind seeing. and for point, see in we're of deal And we'll recovery decline pent-up that, demand this of right then any revenue. that are in V-shaped that them, We than just potentially, of yield seeing with -- no. now, not XXXX above ] [ So XXXX, indication kind other kind will don't any

then Got of a understand that OEMs inbound versus too mentioned a been think from now not And any How the focus. then, those a engine of TCI, capacity investments we been it's you time lines? and at but had weeks, deep, you've it. the should certification And look expansion you couple just took ownership? since what's deeper has I

it's first. as provide military to doing stability I We've strong from the partners OEMs such they're capacity that I'll how Yes. seen you of back terms mean X we with large such X X not public interest a scale but tremendous out. and as their a shop back and company, looking -- even engine. full second engine work. in I year OEM-centric business or outstanding own question our with a are start a in mean overhaul commercial relationships and lot on a I work amount maintenance, of repair mean of support to additional out, shop sometimes longer We OEM and grow just an years

new there I'd can conversations within around capability I'd have have the our OEM can capacity into far our the yet revenue capacity, like. we're to were that then regard Farnborough -- is are we're do we and expansion relationships. With at I'd another say how kind there as we capabilities say ideas of Airshow quick OEMs, of what our not. to the or just centered X. -- to say not capability step that activity be So some capability very much adjacent And these at with -- today. a quick those as turn I we -- there is earnings, these to able growth next say we the determine and looks have an give or me -- quarter it or

Got last it. on one And then just Desser. one

this in core a that way a e-commerce that? And to you website, approach is then approach on your market about e-commerce acquisition in was? new expand talked integration. the a fleet just You commercial Can competency

to now, in approach wanted the and I differentiate most built next and initially sales differentiate for place of where of support. of, markets, build much service around was the level is at which way for to a support we counterintuitive with in points kind Yes. almost touch accelerate and mean, us, X of inside I know base. of site customer it sounds that capabilities the to and now years grow is. these our with been to our wanted we that's our stabilization, a anti understand We're business happening the we and e-commerce we in semi-customized We -- a how I've e-commerce, but customers lot teams technical believe where what's that designed those products product. terms the are, we how know and terms services

get website share of a kind launched, it what's another XX%-plus sites with once and sales you give feel get us But So with commoditized as excited But and different. our you to other opportunity that kind is more site for as same launched. I'll the to about it expand exclusive. of we can we're of the channel. that product where add we also commoditized remember, products, more products, have it's

And question comes Stifel. Bert Subin our next from from

guess question I little do Day. sustained you your earlier of The XX% Louie's from targets XX% Investor at you're off see you from here? now, Or to that a the better? jumping getting incrementally just XX% do maybe that think on it's

equipment fully by new their different. and inventory of kind some you've program, is to of is do that I OEMs term, like work. guidance are sustained a on it's into long roll get new to won that how I've those more get of it won we you give and on think be kind because as and and near of out. market give XXXX, implemented distribution MRO going we authorized clarity kind board. executed. got get the testing how have the can bit program a transitions sometimes that. in and Every We It's does feeling programs And program take we a outlook. We got depends the OEM-authorized How little

program, see this to But I'll do as bit kind at layer been thus that. is point, can the we we've more accelerate So program by what new I'd little of say are a around we to in able guidance new clarity to if able give far.

helpful. That's Yes.

we're lap as remember, And significant starting pretty to comps well.

And guess Yes. I distro Correct. you the deals. mentioned

the be You've those billion mean, at I months? How have won those just -- just XX announced XX publicly maybe... maybe to should over over And or least I How ramping over ramping? $X 'XX. been over think next since billion $X

Go ahead.

all add new on does -- how that just to I I Well, that's going like work. was that realize not

how renewed your considering foresee But well, we is aftermarket come work. is whatever a matter, weaker between leverage or does that other do in OEM if expansion, for your that levers on there? margins aftermarket, or of that Some split of your operating ramp those some affect that as

the ramping of are Yes. fully ramped. from a some I mean perspective, programs

programs the be -- as see most say, half the of let's get ramped. kind but 'XX I should ramp. have we of to by relatively back of quarter fully are we even of announced, end Some of this first year, what

and but other first that, the that I most perspective, throughout should of program Honeywell by aftermarket, a quarter. With aviation. ramped and Control XX% which is will a mix, from regard business not Fuel fully solely than commercial XXXX, program, general be the we're think it supporting margin distribution ramp to essentially

we're and the demand the continue selling. There's of not product to we watch markets. exclusive, seeing. our the expensive that most product So in on those of of is not our it's ton again, most that of more the -- a inventory And on market side you're products in

kind pretty our commoditized Our a at exclusive or market of different it's at MROs or But FBOs. products, for is a of much products, how terms in it's inventory airlines tight story.

So like we control pretty we have working kind feel a spend. of over inventory and good capital

And -- only into I'd the our just ramp mix Yes. is that built add and thing dynamics mentioned. John built guidance the in the

we're So that's why holding up.

maybe then inventory on And Helpful. Okay. just as well.

million lower-margin part rate what's Like burn talking attributed 'XX. you've is that say, about like in on $XXX fuel into Honeywell the of you driving let's is anything sitting How historically also replenishing on, And are Is inventory. to that high that? talked there about Or the at that to into much you're as how your the second the main reason? your quarters. DSOs levels what over burn are at last sitting And the rate, systems? that, that? else X a You're guess, ramp looking 'XX? I

to Certainly, rate I'll inventory. So -- Honeywell converting previously about of question. at your I had are track worth cover that on we noted. we year's we the mean, take inventory just a

new ramp that move And agreement. burnout happens, I is the to building that's And the think as built we under continuing. we'll on then up inventory what out.

programs impact Europe the of second DSOs piece, impact launching ramping up on new far new in inventory As the mix and and is as fleet between the of decline well. also a that programs as the us we're revenue the as again,

anticipate the year. challenge John coming that of now. we as bit the of a got and right creating pathway So that's the again, certainly USPS the recovery back a for in But we've half mentioned,

inventory model Yes. XXXX end to position don't plan of mean, inventory Control, in to And specifically program. lower replenished. to how the been a each much I with the regard to higher kind be But we Honeywell Fuel be have out the have share -- utilized, cost cost of the or than kind inventory for we later we through and for of no by

was inventory. If the I the So it's in XXXX. a burn that, and buildup of XX-month depends profile modeling we kind of totality, our It demand kind on it chance just that it new down full mean, kind have accelerate of take of in to an a like XX-month of won't year. --

Our the parts. ability get to

back here. Maybe just the last to and But around I'll one, to distribution jumping commentary. the here. back one jump to back queue jump jumping sorry But deal in --

the win a you Whitney you or & where sort margins of you essentially the drive operating that on. Germany were have well If deal leverage Pratt facility expansion, through your and it's then a should geographic just Does mentioning that going deal, as earlier? that like

Yes.

great a So it's question.

a when who So like X billion which here not When arrived, business. about the the kind of COVID aviation $X infrastructure Ben, I period, million said, is of kind for, and business, look $XXX been the kind of does business you and I've I looking years at or support business you're so. at the runs like platform time

infrastructure. platform have built and that we out So

and we lower it for a margins that does that's as I'd contribution a as it sales you'll totality. a say programs and looking mean percentage of No. very think see the they scale and historically of tremendous at grow? a cost teams, part, it's add you share model higher because that But you're kind something to we'll program, unique those on the any at that So so were facilities, in don't leverage than right that an different out But point. it opportunity expand opportunity margin of CapEx SG&A and I way. there's most the basis, that to total generalized statement. there's any or If to a systems, have processes,

session. would question-and-answer turn I over John our like back concludes to the closing This remarks. conference to Cuomo for any

continued Yes. third day. quarter late-October joining to the quarter. Thank speaking our after great second and and a conference with have Thank I we our you, in for call. look forward VSE, confidence in you you appreciate

The you conference concluded. for now today's has attending Thank presentation.

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