VSE Corporation Price & Performance (VSEC)

At the conclusion of our prepared remarks, we will open the line for questions. With that, like to turn the call over to John. Good morning. Thank you for joining us today. For VSE's VSE quarter and full year twenty twenty four conference call. 2024 was a transformative year for BSE VSE. Driven by record revenue and profitability in our VSE the acquisition of two commercial aviation aftermarket businesses These strategic actions reinforce our commitment to becoming a pure play aviation aftermarket company streamlining our operations, to drive sustained growth. Before diving into our results, I want to highlight last week's announcement regarding the sale of our fleet segment business Wheeler Fleet Solutions to One Equity Partners. This divestiture marks the final step in our strategic transformation into a leading pure play aviation aftermarket parts and services provider. The transaction is valued at up to $230,000,000 including a $140,000,000 cash payment at closing a $25,000,000 seller note and up to $65,000,000 in additional earn out consideration. The earn out allows us to participate in fleet's expected revenue and margin recovery in 2025 VSE. The transaction is expected to close in the second quarter of twenty twenty five subject to customary closing conditions.

This divestiture and the strategic actions we've taken over the past five years demonstrate our commitment to becoming a pure play aviation aftermarket company.

With that, let's begin with an update on the current market environment for our Aviation segment. The aviation segment supports both the commercial and business in general aviation aftermarket. With each representing approximately 50% of twenty twenty five VSE segment forecasted revenue. The VSE Aftermarket is set for another year of expansion in 2025 VSE, with both the commercial and business aviation sectors experiencing continued growth. This momentum is driven by increased global passenger traffic rising demand for maintenance repair and overhaul services, and an uptick in business jet utilization.

The commercial aircraft aftermarket parts and services market is expected to maintain a strong growth trajectory in 2025 VSE. Revenue passenger mile forecast combined with ongoing supply chain and capacity constraints indicate another robust year for the sector. As a result, VSE anticipates commercial aftermarket growth for our parts and VSE. To range between 810% in 2025 VSE. The business aviation sector continues to unprecedented demand. With industry experts projecting that flight hours will remain steady or for more than 90% of operators in 2025 as compared to 2024. This outlook coupled with new market entrants VSE fractional ownership, leasing and jet card as well as a projected expansion of the total business aviation [indiscernible] supports VSE's forecast for our business in general aviation market. We anticipate growth of 5% in 2025 for our products and services in this segment. Therefore, we forecast our combined markets at 6.5% to 8% in 2025 VSE, with our plan to outperform these market assumptions. Let's now turn to Slide three, where I will provide an overview of our 2024 and year to date 2025 highlights. Starting with our recent strategic acquisitions in VSE. First, in December, we acquired TelstraM Aerospace.

A leading aftermarket solutions provider specializing in value added distribution and technical services to the commercial engine market. CalSTRAMLINES strongly with our OEM centric strategy. Expanding our presence in the commercial aerospace aftermarket. This acquisition brings new engine focused customers additional distribution product and enhanced MRO and technical service capabilities to VSE Aviation. Integration of Kelstrom's distribution business is underway and is expected to be completed over the next twelve to eighteen months. In April 2024, we acquired Turbine Controls, or TCI further increasing our exposure to the commercial aviation engine component MRO market. This acquisition expanded our repair capabilities and added new OEM relationships. This business performed exceptionally well in 2024, driving well above market revenue growth. As they supported their key OEM partners. We remain focused on scaling capacity and deepening partnerships with OEMs in the year ahead. Third, we successfully completed the integration of Desser's VSE U. S. Distribution business in 2024. Streamline processes, systems and organizations and launching a new go to market strategy under the BSE brand.

Looking ahead, we plan to integrate Dessa's remaining business units in 2025 VSE the Dessa Australia integration already completed in early twenty twenty five VSE. Moving on to new program implementations. We opened a new 45,000 square foot distribution center of excellence in Hamburg, Germany. Initially, this site supported Pratt Whitney Canada's Europe, Middle East and Africa distribution and support and has since expanded to include tires, tubes and battery product lines with additional product lines expected to be expanded in the future. We launched a new OEM light that combined with our distribution program supporting this product line allows us to manage the total lifecycle of these products. We also launched our new OEM license manufacturing capability and facility expansion following our acquisition of the Honeywell VSE Control program. The program exceeded our initial expectations and was a strong margin contributor in 2024. Plan to fully transition all OEM manufacturing capabilities to our facility in 2025 VSE. Now turning to our fleet segment. 2024 was a year of transition as we continue supporting the United States Postal Service following their migration to a new fleet management information After reaching a low point in Q3, we began seeing improved maintenance related repair activity We expect this momentum to continue through 2025 VSE.

With the fleet segment's commercial sales channel, we scaled our Memphis e commerce fulfillment diversified our customer base and added new exclusive brands. As a result, our commercial revenue growth continues to outpace the market. At the corporate level, we successfully completed the sale of our Federal and Defense segment in February 2024 marking a significant milestone in our transition to a pure play aviation business.

Finally, we relocated our corporate headquarters to South Florida co locating within our aviation segment headquarters and MRO Center of Excellence in Miramar, Florida. This move enhances collaboration with our business partners and employees. While also reducing corporate overhead costs. Let's now move to Slide four. Where I will provide an update on our business segment full year 2024 performance. For the full year 2024, we delivered both record revenue and record profitability for our Aviation segment. Revenue growth was driven by balanced strong execution on new and existing distribution programs, an expanded portfolio of MRO capabilities and contribution from recent acquisitions. The VSE segment also reported record profitability the optimization of existing distribution programs Increased throughput at our MRO facilities support from our new OEM license manufacturing programs and contributions from recent acquisitions. For our Fleet segment, the revenue decline was primarily driven by the USPS transition. To a new fleet management information system platform This resulted in decline in maintenance related activities and reduced part requirements. Maintenance related repair activity levels began to rebound in the fourth quarter and are expected to continue to improve in 2025 VSE.

This was partially offset by strong revenue contributions from our commercial customers VSE by growth in Bolt, [indiscernible] fleet sales and e commerce fulfillment sales. I will now turn the call over to Adam, to discuss the details of our financial performance. Thank you, John. Let's turn to Slides five and six of the conference call materials.

I will provide an overview of our fourth quarter financial performance.

Let's begin with our consolidated fourth quarter results.

VSE generated $299,000,000 of revenue in the quarter, an increase of 27% led by a 48% increase in VSE revenue partially offset by a 12% decline in fleet revenue. Adjusted EBITDA increased 26% to $40,000,000 compared to the fourth quarter of twenty twenty three.

Aviation drove this growth, up $13,000,000 compared to the same period in the prior year, partially offset by a $3,000,000 decline in adjusted EBITDA per fleet and a $2,000,000 increase in corporate admin expenses. Adjusted net income was $18,000,000 and adjusted diluted earnings per share was $0.9 per share. For the full year 2024, we recorded approximately $1,100,000,000 in consolidated VSE. Up 26% versus 2023 VSE, driven by record aviation growth Adjusted EBITDA for the year was $136,000,000 an increase of 20% or $22,000,000 as compared to 2023. Aviation contributed to a $41,000,000 year over year increase, partially offset by a $15,000,000 decline in fleet adjusted EBITDA and a $3,000,000 increase in corporate admin expenses.

Adjusted net income increased 20% to $56,000,000 Adjusted net income per diluted share declined 5% to $3.13 per diluted share. Driven by an increase in share count. Now turning to Slide where we'll cover Aviation segment's record fourth quarter results in more detail. Aviation revenue increased 48% to a record $227,000,000 as compared to the fourth quarter of twenty twenty three. Both distribution and MRO businesses were strong contributors.

Up 3287% VSE VSE.

The 32% increase contribution revenue was driven by strong execution of new and existing OEM programs, and twenty nine days of revenue and earnings contributions from the recent Kelstrom acquisition.

The 87% increase in MRO revenue was driven by the expansion of new repair capabilities, margin share gains in the commercial and business and general aviation markets support from our new OEM authorized avionics program, and MRO contributions from the TCI acquisition. Excluding the impact of all recent acquisitions, organic Aviation segment revenue increased by approximately 17% in the fourth quarter as compared to the prior year. Aviation adjusted EBITDA increased by 56 in the quarter to a record $37,000,000 or 16.4% of revenue. The increase in adjusted EBITDA was driven by strong execution on distribution programs, increased throughput at MRO facilities improved pricing and product mix, the launch of our new OEM license manufacturing program, and contributions from recent acquisitions. For the full year 2024, the Aviation segment generated record revenue of $786,000,000 increase of 45% year over year.

Adjusted EBITDA increased 47% to 129,000,000 and adjusted EBITDA margin increased 20 basis points to 16.3%, all record results for the segment. Let's now turn to Slide eight, a new slide in our earnings presentation to review our Aviation segment guidance for the full year 2025 VSE. The purpose of Slide eight is to walk you through the revenue and margin bridge of our Aviation segment with the impacts of our TCI and Kelstrom acquisitions. Let's start with revenue. John mentioned earlier that we forecast our combined commercial and business and general aviation markets to grow between 6.58% in 2025 VSE. We expect full year 2025 VSE segment revenue to increase between 35% to 40% VSE. Supporting this growth are full year revenue contributions of approximately 26% to 28%, from both the TCI and Telstrom acquisitions. In addition, we are forecasting to outperform market growth organically with high single digit to low double digit organic growth supported by market share gains, distribution program growth and repair capability expansion. 2025 full year adjusted EBITDA [indiscernible] are expected to be between 15.516.5% VSE. The near term margin dilution from TCI and Telstra is expected to have an approximate 90 basis point dilutive impact on VSE segment margins for the full year 2025 VSE.

This is expected to be offset by a 10 to 110 basis point improvement in core legacy aviation VSE. Driven by operating leverage, program optimization and MRO utilization. In addition, we expect to begin realizing integration synergies in the second half of twenty twenty five.

Synergy benefits will continue into 2026 until all activity is complete.

On a consolidated basis, interest expenses projected to be $31,000,000 to $33,000,000 The effective tax rate is expected to be 25% and depreciation and amortization in the aggregate is expected to be $36,000,000 to $38,000,000 for the full year 2025 VSE.

All figures are pre fleet divestiture. Now turning to Slide nine for our fleet segment's fourth quarter In the fourth quarter, fleet segment revenue declined 12% to $72,000,000 On a sequential quarterly basis, revenue was up 2% or $2,000,000 Revenue from commercial customers was $43,000,000 in the fourth quarter, Commercial revenue represented 59% of total fleet segment sales as compared to 52% in the prior year period. USPS revenue, which is included within our other government channel, declined approximately 25% compared to the fourth quarter of last year. The revenue decline was primarily driven by the USPS transition to a new fleet management information system platform.

Which resulted in a decline in maintenance related activities and therefore reduced part requirements.

Fleet segment adjusted EBITDA decreased 31% to approximately $7,000,000,000 decline in USPS sales volume.

Fleet segment adjusted EBITDA margin was 9.5% for the fourth quarter.

For the full year 2024, the fleet segment generated revenue of $294,000,000 driven by 18% growth in our commercial sales channel offset by a 30% decline in revenue from the USPS program. Total adjusted EBITDA of $21,000,000 declined 42% and for the full year adjusted EBITDA margin was 7.3% VSE.

USPS revenue began to rebound in the fourth quarter twenty twenty four and is expected to continue to improve heading into 2025 VSE. Turning to Slide 10. In the fourth quarter, we generated $55,000,000 of operating cash flow and $52,000,000 of free cash flow driven by disciplined working capital management and strong operating results. At the end of the fourth quarter, our total net debt outstanding was $4.00 $1,000,000 and VSE revolver availability was $194,000,000 Adjusted net leverage which includes the trailing twelve month results from prior acquisitions, was 2.5 times. I will turn it back over to John. Thank you, Adam. I would like to conclude our prepared remarks by looking forward and reviewing our 2025 priorities on Slide 11 VSE. We VSE made significant progress in simplifying our business and sharpening our go to market strategy. With the announced sale of our fleet segment, we are entering the final phase of our strategic transformation. Into a pure play aviation aftermarket parts and services provider. As one VSE. We expect to close the fleet transaction the second quarter we are working closely with One Equity Partners to ensure a smooth and successful transition. Following the divestiture, we will conduct a comprehensive review of our cost structure to ensure our corporate organization is streamlined to support our go forward aviation strategy.

Turning now to our aviation priorities. First, we are committed to driving organic growth expanding our market presence and strengthening partnerships We look forward to sharing updates on new partnerships Second, the integration of our OEM license manufacturing program remains on track. We expect to complete the transition of all OEM manufacturing capabilities from Honeywell by year end. Third, we continue to invest in expanding repair capabilities and adding incremental capacity across our MRO businesses to meet growing customer and market demand. And finally, we are focused on accelerating the integrations of Desser TCI and Kelstrom to drive operational efficiencies and enhance customer value. And finally, from a financial perspective, we are focused on capturing synergies from our recent acquisitions to support margin expansion this year and into 2026. We also plan to continue to improve core aviation segment margins through operating leverage program optimization, and enhanced MRO utilization. We will continue to leverage our strong financial foundation to optimize inventory and drive free cash flow improvement in 2025 VSE. In closing, I want to thank our global VSE team for their dedication and hard work. Their efforts are driving our successes and positioning us for a stronger future. Operator, we are now ready for the question and answer portion of our call.

Our first question comes from Sheila Cayoglu, from Jefferies.

Good morning guys and congrats. Good morning, John. Maybe my first question, John, for you with 35% to 40% VSE growth that implies high single digits to double digits organic growth this year. How do we think about the pace of that growth and the cadence between sorry, distribution and MRO?

Yes, it's a great question. We had a big debate on kind of how to guide for the year. When you look at our business now with and with CalSTRA, we're about 50% business in general aviation aftermarket. 50% commercial aftermarket. And candidly, we wanted to give us a little bit of cushion. We've talked since we acquired Telstra about the USM business.

And although we love the business and there's a place for that business inside of VSE, we definitely see ourselves pruning some of that business to be what we want it to be in terms of consistency of revenue and at the right margin profile. So, with that, between the balance of the two markets, and then the USM potentially like slightly VSE of refocused efforts there. That's where we kind of got the guidance on revenue. I'd say it's pretty evenly split We kind of laid out what our growth rates are. By segment and we're going to be slightly above those growth rates in both segments. I'd say as far as Michael, when you think about the year, you know, it's not heavily back ended, right?

No.

No, I think it's pretty consistent across the whole year. Yes.

Okay, great. Thank you. And then maybe my second question is on acquisitions. You're proving to be a great integrator with TCI. Coming in, I think, at $85,000,000 of contribution over the last eight point five versus 85,000,000 was a full annual contribution we initially expected. So what drove some of that PCI outperformance how do we think about the revenue synergies opportunity with CalSTRAM outside of the assets you'll prune off?

Yes. I mean, it's a great question. So each deal we look at both has its different strategic focus and then as we integrate it, what we expect out of it. TCI was all about creating capacity and working with our OEM partners to manage the opportunity set that's in front of us. And we've been able to grow that business fall north of 25% since we've owned the business. We We feel that those opportunities still exist to continue a heavy pace of growth. We're working with the team there. It's all about capacity expansion. When we look at Kelstrom, it's a combined kind of focus that's slightly different. There, because we plan to have a heavier hand in integration, there's a synergy capture element to it. Which is really important for us. We've got you I think we gave a little bit of that, but I think Michael and Adam did a good job at that bridge on the margin guidance, so we can walk you through it. But we obviously want to be in a position in 2026 to have the integration behind us and the margin back to kind of our core levels. So that's a bigger focus for us, I'd say, than the revenue growth.

That said, there in the engine aftermarket and you can continue to expect kind of double digit growth in 2025 for Telstra VSE.

Great. [indiscernible] Our next question comes from Ken Herbert of RBC Capital Markets.

Please go ahead. Yes. Hi, good morning. Hey, John, appreciate the the revenue and EBITDA bridge assumptions here as we think about $25,000,000 I wanted to ask maybe the growth question a different way. So the guidance implies about call it 500 basis points of outperformance relative to VSE of your market growth assumptions for VSCC VSE. Can you comment maybe how you see that breaking out by by you called out share gains, you called out obviously greater or [indiscernible] increased MRO capabilities. Is there one of those two or three areas that are disproportionately driving the outperformance for the business relative to the market.

I mean, to be honest, no, which is a good thing. VSE when I looked at the the we grew 17% organically in the fourth quarter. And my favorite part of VSE in the details of the financials is there's not just kind of one thing driving it. It's really a nice balance across geographic sectors, across markets, across programs. So what I love about actually where we're positioned today is, we're actually seeing growth in all of our areas. I'm not saying it's the same percentage growth, but it's not one thing that's kind of outweighing the other. So I know maybe it's a little harder to model, but Michael and Adam, right, it's pretty No, it's very evenly distributed.

And we and to John's point, we saw that in Q4 VSE balanced between MRO and distribution organic growth.

In that 17% to 18% VSE. Okay, perfect. Hey, and as we think about, give or take, 50 to 60 basis points of margin expansion on the core business in 2025 VSE. Is that a good way to think about the business sort of moving forward post 'twenty five VSE is there maybe some incremental opportunity on the core business just as you get further into VSE the TCI and Kelsum integration?

Yes, Ken, that's a good question. I think 50% to 60% is a good way to think about it. I think you're going to see more realization of synergies, especially with Kelstrom throughout 2025. So you'll see that realized in 2026 as well.

I think we're continuing to optimize our fuel control program as well as we transition to full light manufacturing capabilities. So there's some SG and A carry forward that we're carrying throughout this year that will be optimized as we get through the end of the year as we fully transition the program.

So those two elements will help the expansion as you go into 2026? Perfect.

Thanks, Adam. Thanks, John, Michael. Nice quarter. Thanks, Ken. Appreciate it.

Our next question comes from Michael Ciarmoli from Truist. Please go ahead.

Hey, good morning guys. Nice results. Good morning. Thanks for taking the question.

Hey, John, Adam, lots of good color on revenue and margins, but no mention on cash flow. Can we maybe talk about some of the building blocks for cash in 2025 VSE? Even 2026. And I know you've talked about new partnerships. So presumably there might still be some required investment and just how to think about working capital and just help level set us on what to expect with cash?

Yes, sure. So I think we'll provide more fleet transaction when you think about some of the larger elements $24,000,000 to '25 Obviously, in 2024, we had the big inventory provisioning around the Pratt program. So if we spelled that out, call it in the $35,000,000 VSE, We also had impact from the FDS transaction as well in the $15,000,000 So neither of those two will repeat. In 2025 VSE will provide a nice tailwind in 2025. VSE some offsetting elements to that. So we do have two payments to close out the Walker Lane real estate. So there's a $6,000,000 payment in $25,000,000 and another $6,000,000 payment in 2026 And then we also are ramping the Honeywell program in 2025. So you'll see some buildup in inventory as we transition to our manufacturing.

So those are the two the couple VSE large elements. And obviously, we're we're growing earnings and there's a working capital requirement in our business as well. And then as you think to 2026, I think we're continuing to focus on on optimizing our working capital efficiency, especially on the inventory side. And I think the other element is some of the recent acquisitions we've made TCI, Telestream, they're actually less working capital intensive VSE our core business. So you're going to see some natural improvement as we get through the year. Got it. Helpful. And then maybe John, just pivoting back on top line growth. When you laid out your your kind of 26 targets, I think that was '23. I think the framework called for high single digit organic. Obviously, the market continues to be strong, but you've got low double digit potential. What's kind of driving that subtle upward shift in the organic growth? And I know you've got the licensing deals and broaden the portfolio, but any noticeable changes that as you guys look at the portfolio has driven that slight uptick. It's interesting because I Similar to like the last question, what we're seeing in terms VSE our opportunities is quite balanced across the business.

So you haven't seen us put out a ton of splashy headlines in terms of organic growth rates.

The the blocking and tackle growth. Our model is again very OEM centric and what's happening is as we're embedded in working with our OEM partners, where our normal cadence of natural market growth is happening. And then there's additional kind of share of wallet or other [indiscernible] both market segments, B and G and A and commercial.

And both of our capabilities, distribution and MRO. So it's given us a little bit more confidence in our ability to outpace. The other thing that I'd add, Mike, is the end of exposure from the commercial side from TCI and Kelstrom. So when you look at again just the stuff that we do that it's hard and you want to get credit, you want to follow the good market markets, the commercial engine market natural pace is at the higher end of the market growth.

Yes, got it. All right. Good stuff. Thanks guys. I'll jump back in the queue.

Thank you.

Thanks. Our next question comes from Louis DePalma of William Blair. Please go ahead. John, Adam and Mike, good morning.

Congrats on the fleet deal. And related to the fleet deal, When that closes, will there be some trapped corporate costs I was wondering when taking into account some potential corporate costs What do you view as the the pro form a margin for this year.

Yes, I can take that. So we are expecting some amount of trapped corporate costs We're still doing the work to to we'll give more precise guidance. But I think if you look back when we announced the FBS transaction, we said around $3,000,000 to $4,000,000 and we're probably at the higher end of that range, but we will give you some additional guidance around that next quarter. Think when you look at pro form a margins, we're not going to give specifics, but we are expecting some improvement 100 basis points plus just looking year on year VSE the lower margin contributions from the from the Wheeler business. So once we close that transaction and come up with a more precise number around stranded costs, we'll update you on pro form a margins.

Great. Thanks, Adam. And sticking to the topic of margins, John, I think you mentioned that you should finish the Honeywell OEM Solutions integration this year How much of like a margin uplift, should that like contribute For the twenty twenty six year in terms of the remaining synergies, there? Very little in 2026 VSE we've been able to capture even though we're implementing it, but we're capturing the margin improvement as we implement it. So we were ahead of plan last year in terms of implementation and margin capture. So the remainder of it will be in 2025 VSE then you'll see 2026. I mean, I'm going to give directional guide and kind of way to look at it and then we can give clarity towards the back end of the But as you look at, let's say, the third and the fourth quarter, that should start to mirror what '26 margins will look like. So it's a good note, Michael, to take as we kind of get to that point, we can give maybe a little clarity to the market on it. Great. And one final one, I'm almost subject N and A. Many investors VSE investors VSE that Boeing will put Avial on the market as it would seem to be an excellent fit with VSE.

It's unclear if that is going to happen. But for John, do you view It could be a win win situation either way such that Boeing keeps Avial, you will continue to take their market share, but if they eventually put it on the market and if something makes sense that it would be a good strategic bid Yes. I mean, I think I don't personally see the asset necessarily coming to market. I think when we look at Boeing in general, I think the whole market looks to them and is all supporting them in their recovery efforts on the OEM side. With regard to the aftermarket, we continue to drive differentiation and to drive our market niche. If assets come to market VSE all sizes, we definitely are active in determining if that's the right fit for us. And with the fleet business kind of exiting in the second quarter, and our team being able to kind of lack of better word, play above their weight class. I think we can look at assets larger than we typically have as they come to market. But I would not say there's any necessity [indiscernible] kind of more known and kind of our market positions.

Great. Thanks, John. Thanks for having Mike.

Thank you. Our next question comes from Jeff Van Sinderen of B. Riley.

Please go ahead.

Good morning, VSE, and let me add my congratulations Just going to follow-up on the last Just want to follow-up on the last question there around Bowen Just wondering maybe you don't necessarily go after acquiring the assets, but are there opportunities you potentially could go after around them kind of exiting some of their businesses? I mean, there's one business that's kind of publicly sort of ish in the market. I say publicly ish because everything is confidential when you're doing a deal, but I read same things you read. That's the only business I'm aware of that's in the market. And it's not an asset that we are looking at. It's not the type of asset that fits our portfolio and it's I say we can do a larger deal, it's well above a deal that we would consider ourselves right now. So from what we understand, that's the only asset in the market at this time. So we've got a pretty robust pipeline of small and medium sized deals of our own. And obviously, we look at them as a partner and in some instances as a competitor. And we continue to approach it that way.

Okay, fair enough.

And then just wanted to clarify on the March overall Aviation margin progression this year. Wasn't clear if you were saying that it would kind of ramp throughout the year. I think that's what you were saying, but just wanted to clarify that.

Yes, we do expect some ramp throughout the year.

Which is what you've seen Obviously, fourth quarter was very strong for us on a margin standpoint. I think you'll expect to see that in 2025 as well. Okay. And then just one final one. Any Any thoughts on kind of the remaining hurdles you need to get through to close the fleet sale?

We've got normal HSR that should expire in the month of March.

I'm trying to remember what month we're in here. And then the closing conditions are quite light other than that. So we are expecting a second quarter closure at this point.

Okay, great to hear. Thanks for taking my questions.

No, thank you. Our next question comes from Josh Sullivan of The Benchmark Company.

Please go ahead. Hey, good morning. Good morning, Josh.

Just a broader question, I guess, on the aftermarket.

How should we think of the SEC as OEM rates stabilize and ramp I guess two parts. What are your general thoughts on the cycle? And then separately, how is VSCC now exposed with so many transformative actions in '24 VSE TCI, CalSTRAM, etcetera?

Yes, it's a good question. I think that Michael, what do you think? How do you want to answer this one?

Yes. So in terms of OEM rates, production, I think we're pretty confident in 2025 VSE 2026 in terms of our line of sight. [indiscernible] I would say that we are uniquely positioned with the OEMs based on our differentiated value proposition. So as they pivot, we can pivot to potentially work that they're trying to offload. So I think that positions us extremely well as their priorities change In terms of PCI and CalSTREAM opportunities that I guess we mentioned earlier that these two companies are in the the largest, the fastest growing portion of the commercial aviation VSE. So we continue to take advantage of existing opportunities with existing customers while working through the integration. So we're confident in the outlook for 2025.

Yes.

I think to Michael's point, 2025 and 2026, we feel very, very good about it. As you look at '27, I'd say we still feel this growth opportunities. It's how do you pivot to new platforms and where do you find more offloading work from OEMs? So the revenue may come the organic growth may come from different channels. Than just a double digit kind of natural market decline. But I mean market growth, but we do not expect a market decline over the next three years at this point.

Got it.

And then I guess just to that end, on TCI, you mentioned in the comments there that it's all about capacity expansion. How do we think of where capacity was when you first acquired the asset to maybe where it will be in '26 once we're done integrating? Yes. It was and is an amazing asset. It is a private I think that you continue to invest to a certain level and I think OEM partners will invest with you to a certain level. I think when you have a long term stable public company approach like we do, it creates both different opportunities on both sides of the table. So for us, we're looking at how do we double capacity in in the total facility. And if we need expansion, we'll look at that as well. So I'd say it's a multiyear plan to kind of double capacity.

And that's where a lot of our investment dollars are focused, especially in 2025 VSE expanding MRO capacity, TCI and really across the board.

Great. You for your time.

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

Thank you. Thanks VSE for the time today. Look forward to speaking with you in May to report our first quarter VSE twenty twenty five.

Thanks and have a great day. The conference has now concluded. Thank you for attending today's presentation.