Greetings. Welcome to the VSE Corporation Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Noel Ryan. You may begin.

Thank you. Welcome to VSE Corporation's fourth quarter and full year 2021 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, 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. Thank you for taking the time to join our call today. During the fourth quarter and full year 2021, we continue to successfully execute on our multiyear business transformation plan. One engineer to develop a market leading global aftermarket distribution, repair and services company positioned for long-term value creation. Last year, we moved closer to the end user, identifying new and varied ways to support complex customer requirements. We also aligned ourselves with both new and existing global Tier 1 OEM supplier partners, while expanding our diverse portfolio of products and capabilities. During the fourth quarter, our VSE Aviation segment continued building backlog with new business wins. Most notably, we entered into an agreement with a major U.S airline to become the exclusive end-of-life solutions provider for their 737NG aircraft and surplus materials. Under the terms of this agreement, we will support this major domestic airline with the dismantling and disposition of retired aircraft. The program allows for the refurbishment of used parts for fleet support, and the sale of used spares to airline, OEMs, brokers and other third parties. During the fourth quarter, we began making investments in the program management infrastructure to support the launch of this agreement. This program requires limited capital commitments, as VSE is not purchasing any aircraft. Most importantly, through this agreement, VSE Aviation will now become one of the largest global suppliers of refurbished 737NG material. In our Aviation segment, we are building a business in general aviation platform that encompasses a full breadth of products and services. A tip-to-tail approach to support the requirements of B&GA customers, a strategy that builds upon our established MRO capabilities and industry-leading parts distribution business. Our 15-year $1 billion engine accessories agreement with Pratt & Whitney Canada remains our most significant…

Thanks, John. Now let's turn to Slides 5 and 6 of the conference call materials for an overview of our fourth quarter performance. We reported $210.2 million in revenue in the fourth quarter, an increase of 40% from the prior year period. Within Aviation, year-over-year revenue growth was driven by a combination of new program wins, share gains and contributions from our Global Parts acquisition completed in July 2021. Fleet segment growth was supported by commercial fleet and e-commerce fulfillment revenue, while the revenue from the United States Postal Service was flat year-over-year. Federal segment revenue growth was driven by inorganic contributions and new business awards partially offset by the completion of certain DoD contracts in 2021. We generated adjusted EBITDA of $17.8 million in the fourth quarter, an increase of 3% on a year-over-year basis. Adjusted EBITDA margin rates declined 300 basis points year-over-year to 8.5% as margin compression within Federal and to a lesser extent within Fleet offset significant margin expansion within our Aviation segment. Turning to Slide 7. Aviation segment revenue increased 115% year-over-year in the fourth quarter. Both our distribution and repair businesses grew on a year-over-year basis, with distribution outperforming repair primarily driven by improved end market demand and new contract wins. Distribution revenue, excluding the $18.6 million of revenue contributions from our Global Parts acquisition is approximately 60% above pre-pandemic levels. We continue to see commercial repair recovery in line with the overall market. We anticipate further repair revenue recovery throughout this year, as we continue to invest in new capabilities and expand our integrated solutions across a growing base of business in general aviation customers and new commercial customers. Aviation adjusted EBITDA increased by more than 400% year-over-year, while adjusted EBITDA margins increased 580 basis points year-over-year to 9.4%. Delivering outsized revenue growth…

[Operator Instructions] Our first question is from Michael Ciarmoli with Truist Securities. Please proceed with your question.

Hey, good morning, guys. Thanks for …

Good morning, Mike.

… taking the questions and thanks for the detail. Maybe just housekeeping, I don't know if I missed it. Did you guys give the organic growth rate in the quarter?

We didn't give the organic growth rate in the quarter. But we did give specifics associated with the Global Parts acquisition. And I think we gave the specifics in terms of the organic growth of the distribution business within the Aviation portfolio which was up 60% year-over-year organically.

60%, okay. Got it. Okay. And then just can we maybe focus a bit on margins? I know you called out kind of the nice year-over-year gains, but it looked like, sequentially, there was significant pressure across all segments. I know you talked a little bit about mix and supply chain. But what specifically drove the sequential margin declines and how should we be thinking about recovery here into the current quarter and maybe progression through the year?

Sure. Steve?

Yes, absolutely. We highlighted a bit of the margin walk details on Slide 6 of the materials. And specifically, what we saw on a year-over-year basis for the fourth quarter was pressure within the Federal and Defense segment, which was driven by a couple of different things. First off, a different mix in terms of our fixed price versus cost plus awards, we saw more of a shift towards cost plus within the quarter. And then secondly, there were disruptions within the business in terms of supply chain delinquencies, which delayed our ability to get the material to our customers and subsequently record revenue. So, we're going to be working through some of those supply chain related disruptions as we start to recover the business. But what we've communicated in the past is that this business unit you should expect it to be in the mid-single digits over time progressing to the higher single-digit range. And so, we're continuing to see that business progress towards that long-term. And then we saw to a lesser extent, as I mentioned, within the Fleet portfolio, there is a mix difference between the commercial work that we do versus the work that we performed for some of our government related customers. And so that pressure is something that's continued as we expected. But we're very pleased with the overall performance of the Fleet business as revenue diversification is key to that portfolio. And then lastly, and probably most importantly, you saw the margin expansion on a year-over-year basis within the Aviation portfolio that helps to contribute actual overall expansion from a margin rate perspective to the total company level. But if you look at it for the fourth quarter, specifically, to help to drive over 500 basis points improvement within the segment, as we continue to recover that businesses overall margin rate back to its mid-teens margin rate over the long-term.

Right.

And, Mike, one thing I will add there is, if you look at the MRO business, the commercial MRO business, which is a higher margin business in the portfolio of Aviation, the recovery is a little slower-than-anticipated. So we do continue to expect and we’ve seen month-over-month, quarter-over-quarter recovery just not at the level of robustness that we would anticipate and that we're seeing in the other parts of the Aviation business. So that will scale back and that will drive incremental margin improvement. The other thing I want to add is, you're hearing from other companies out there the amount of supply chain pressure on margins. We have that pressure on our Federal and Defense business really because we're seeing push outs in terms of deliveries, and the distribution and sales are at a higher margin than some of the services sales which are more [indiscernible] in nature. But on the Aviation business, it's much more about the infrastructure that we put in, and we're now being ready to scale. We've invested a tremendous amount in that business in 2021 to get that business to scale. I mean, you see the year-over-year growth rate in distribution and the year-over-year growth rate in total organically in that business, there was a tremendous amount of expenses that we added and we do anticipate as we get to the back end of this year, just -- as to start to that business scale where we're not adding operating expenses and you're starting to see the incremental revenue in the product margin, or the service margin just drop to the bottom line.

Got it. I guess, too, though. I was looking more at 3Q to 4Q. I get the year-over-year, but you had nice sequential aviation growth of about 13%. The incrementals were weak and the EBITDA margin declined from 3Q to 4Q, and you had the steep fall off in Federal sequentially as well. And it sounds like I guess a lot of those contracts slip, like what happens sequentially from 3Q to 4Q in Aviation to pressure the margins?

Go ahead.

Yes, sure. I'd say, first and foremost, as you can see, that we've combined in now the Global Parts business. The Global Parts business operates at a slightly lower margin rates. We have a first full quarter of margin contribution. And we've communicated that when we acquired the business. And then, as John mentioned, we continue to make investments as part of the growth. So, I know he referenced it a little bit earlier in the call, but generally speaking, we continue to make investments to drive the scale as we continue to grow next year. But as John mentioned, we continue to see dip in opportunity to drive scale on that investment.

Got it.

Within the [multiple speakers] was the mix shift in the contracts.

Got it. Okay. And then, I will -- let me ask one more and then I will jump back in the queue. But, John, I guess, what are the thoughts on pricing, and what you think you can get out there. I mean, we just saw this morning's inflation number, pushing 8%, presumably you've got the ability to price in aviation. Any thoughts there on just how you can kind of keep pace, and what the pricing power of business [multiple speakers]?

Yes, we have -- we have a very small level of long-term fixed price contracts within our business. So, we are predominantly an aftermarket business that’s highly transactional in nature. And we do have the ability to -- we do have pricing power in the market as we see pricing inflation. So we do not see that as a long-term risk for our business, because we do see the ability to force that pricing on to the end.

Okay. Okay. In Federal and Defense too, do you think that that's a little bit more challenging? I guess it really [multiple speakers]?

No, it’s the same thing for that business.

Thanks.

Okay.

That's just really a timing issue right now.

Yes.

That business is the one we're seeing just -- there was just a significant amount of push from Q4 to probably more like Q2, and in some of our Federal and Defense distribution orders that -- we [indiscernible] product, and we're seeing the new delays to probably closer to mid-year.

Got it. Got it. Perfect. Thanks, guys. I will jump back in the queue.

Thanks, Mike.

Thank you. Our next question is from Ken Herbert with RBC Capital Markets. Please proceed with your question.

Good morning, Ken.

Good morning. Good morning. This is actually Steve Strackhouse on for Ken Herbert. Good morning, guys. For the recent 737NG agreement, can you provide more detail on how this program ranks? And what could be the revenue contribution for this program in 2022? And then, if you could kind of -- I know you detailed that the investment requirements were going to be small. But if you could detail those a little further, that'd be great.

Yes, let me start just at a high level, and then Steve, I will turn it over to you on the financials. So, we highlighted kind of earlier in my script that this is not a traditional USM deal where we're buying aircraft. And I want to be transparent on that. It's a very asset light kind of partnership, where we are helping to manage the total process of dismantling of the aircraft, and then selling of the assets that are associated with the aircraft. So that's the kind of the first thing that I want to highlight. So, when we look at expenses that we added in the fourth quarter, it's really building the team that is going to manage that program, and then contracting with the outside labor that's going to be doing the tear downs. As far as financial forecasts, there's not much in 2022 as we start to look at the ramp up really going more to 2023. But Steve, I don't know if you want to jump in there and give any more color.

Yes, I would just say, I wouldn't expect too much of a material contribution from this program in 2022. As John mentioned, we're just getting the program launched right now. So, we'll be able to provide more guidance for you in terms of both what to expect from a revenue standpoint as well as investments, as we head into probably the first quarter and actually get some of the experience underneath our belt. But generally speaking, I think probably the most important dynamic associated with this deal is the opportunity for us to continue to embed ourselves with our deep commercial relationships, and look for partnership opportunities as we continue to expand our repair capabilities. So, it's further establishing us within the networks within our customers and continue to help provide services to them.

That's perfect. Thank you so much for the color. And then just one follow-up, if I may. How are the 2021 acquisitions with Global Parts and HAECO performing relative to your expectations?

They're performing at or above expectations. So really pleased to see -- we did a small equity raise last year, put that capital to us with two deals that very favorable multiples to the business -- are well underway and the integration of both of those businesses into their respective segments. And the businesses are performing at or above forecast and integrations are accelerated from our timeline. So very, very pleased with both acquisitions. The capabilities that came on board as well as the team that we acquired with the businesses.

Perfect. Thank you so much. I will hop back in the queue.

Right.

Our next question is from Louie De Palma with William Blair. Please proceed with your question.

Good morning, John, Steve and Noel.

Good morning.

Good morning.

Is the new Boeing 737NG program with an existing U.S airlines customer? Are you able to disclose that? Or is it for like a new logo for you?

It's an existing customer that we support in both our distribution and our MRO -- commercial MRO business. I mean we're supporting virtually all airlines in those businesses today. We are not in a position right now where we're going to publicly announced the airline until we probably launch the program to the market. So, we'll have a more marketing type announcement probably in the coming month.

Great. And for that program, I think, Steve, you mentioned how there won't be much of a revenue contribution in 2022. But will there be a negative margin impact as you ramp up the program?

I mean, there are some slight impacts associated with investments in the program. But it's not -- I wouldn't call it overly material. As John mentioned, we made some investments into the team, the program management team, and that will continue probably through the first or second quarter and then it'll get to a point at which it pays for itself. And then I think what we're excited about is it continues to open up that cross-selling opportunity for us as we head into '20 -- end of the 2022 period and into 2023.

Great. And for the Pratt & Whitney Canada partnership, I believe you announced that last April, and when you announced the deal, you targeted distributing, I think over 6,000 engine accessories. Are we there yet in terms of you fully scaling to all 6,000? I know that, Steve, you said that outflows associated with inventory for some of your large programs generally end towards the end of March. And so, I guess in the next few weeks, should we be fully scaled for this program? And should that mean that like for [indiscernible] program that will be around the peak profitability margin for the program?

Steve, you want to that one?

Yes, I'm happy to take it. So, I think from -- let's talk material first. For the material acquisition, I'd say yes, we are at full scale in terms of ramping on the program. Obviously, there's a couple of things we're just working through towards year-end and into the first quarter for the completion of all remaining piece parts, but generally speaking, yes. And then I would say in terms of as you look to this year, we've communicated guidance of $45 million this year with expectations that the program could be larger than that as it continues on into the future. But as it relates to the margin rate, the performance of the business, yes, midway through this year, I think we'll optimize and really get to that full scale. As we referenced last year, this is like a full business acquisition if you really think about it. So, we've set up new sales folks, new customer service representatives, and we're looking to drive scale on that as we head into this year, at which point we'll be able to really optimize the partner, both for the customers and for us internally.

Great. And you recently announced an extension for your NAVSEA contract? Do you have any visibility in terms of the timing of the long-term -- the potential long-term contract work?

I'm going to give you a guess. My guess would be end of Q3 would be kind of an announcement on the longer-term contract. Pleased to get the $100 million Bridge contract in place. We do have a task orders and backlog on our legacy contracts, plus now another $100 million commitment through next year. And then our anticipation is an award, I'd say end of Q3.

Okay. And I know you didn't provide formal financial guidance, but are you able to provide any color on how we should think about in terms of margins trending across your Aviation, Fleet and Federal savings. I know you do spoke about how [technical difficulty] like the peak margin for the Pratt & Whitney Canada program in the summer, and there's been the supply chain impact on the Federal side and there's the mix shift with the Fleet side. Is there like any high-level guidance that you can provide on like, what -- how we should be modeling the margin trends for 2022?

Yes, sure. I’m going to start with -- little bit of background noise. Let me start with the Federal business. So, I communicated a little bit ago that mid-single-digits where this business is, and we've communicated in the past, that's where the business is working to go from mid-single-digits to high-single-digits. I would say mid-single-digits is the right place for it to be right now, as we continue to drive scale and work through some of the supply chain related disruptions that we talked about. I would say for the Fleet segment, you saw some margin compression last year, as the business continues to make shift. There'll be some continuation of that. But we are looking to the back half of this year to really drive scale within the business. As we mentioned, last year, we've made big investments into the commercial growth avenues, both with the sales teams, et cetera, and we're looking forward to that in the back half of this year. And then I'd say from an Aviation perspective, we just communicated that, look, we're going to expect continued improvement as we try and drive the business to scale. I mentioned some of the dynamics associated with 3Q to 4Q with the Global Parts business. But as we look towards this year, we're going to continue that long-term target of around mid-teens margin rate, and will continue to get there. But it is going to be predicated upon the commercial repair business getting back to its pre-COVID levels, and that is longer term. So, I think everybody in the market has continued to see some slowness or some delays associated with that repair business getting back. And so, we're going to continue to pace in line with the market. So, I think you should just model out of the expectation from an aviation perspective that it's going to take a while, as it relates back to the market for the commercial MRO. But as we mentioned, in the distribution side, we're back to pre-pandemic levels.

Thanks for the color, Steve and thanks, John and Noel.

Thanks, Louis.

That’s it for me.

Our next question is from Josh Sullivan with The Benchmark Company. Please proceed with your question.

Hey, good morning.

Good morning, Josh.

Just to kind of follow-up on that a little bit. On the commercial narrowbody activity, I know you said it's obviously going to take a while to recover here. But in the Spring of '21 there was a lot of optimism for summer travel by the airlines. [Indiscernible] if you could just compare how that '21 activity or behavior contrast with what you're seeing here in '22 heading into the summer.

My anticipation is we're going to continue to see month-over-month improvement in the commercial MRO business and our parts trading business that's connected to that business. So, each month we do see a level of increased activity, a level of increased backlog and a level of increased work in our MRO shops. Is it as robust as any of us anticipated? No. I think when you look at the initial market studies that were done when COVID hit talking about getting back to 2019 levels, sometime in late 2023 to early 2024, [indiscernible] includes international travel. I think that those statistics are probably going to come out to be quite accurate in the end. So, it's the slowest part to recover. But that said, month-over-month, we are seeing continual improvement in that business. And that will drive the margin improvement because again, we've got kind of a base of fixed costs that we can scale from as that recovers.

Got it. And just on the end-of-life service supplier agreement you've got here, what are your thoughts on commercial airline fleet retirements going forward? Has the recent spike in energy caused any change in thinking by your customers? And then just curious what pricing looks like for USM?

Yes, we don't see any change. And I think we saw that that fleet shift during COVID, parking of 767s and people hoping they were going to be able to accelerate their 787 deliveries, which hasn't happened, but we don't see a major shift in retirements or how our airline customers are using their fleet. I think with regard to pricing on USM, that's why we haven't given any clear guidance on the program. We're just doing the first kind of and a tear down as we speak, getting our arms around the inventory. And then we'll do an analysis kind of on what we think pricing will look like and model this business out a bit more, and we'll share color on that as kind of midway through the year.

And then, just on that contract you mentioned it's not typical contract, but with an existing customer. So, does that change your exposure to any particular service schedule A, B, C, or D? Does it include the engine? Just curious on what types of new verticals you might are focusing over time?

Yes. It's great, it does not include the engine. Steve, I don't know you're far more technical than I am on or if you want to dive into kind of how we look at the products. But what I would say, Josh, is that from our perspective, we look at both the -- to be one of the largest, we can't say we're the largest [indiscernible] all the details in the market. But we believe we could be the largest supplier of these NG products in the market. There is an overlap -- a significant percentage of overlap on some of these parts on the NG to the Max. So, it gives us that ability as well. These NG aircraft are going to continue to fly in other markets, and it gives us the ability to sell in those markets. And with continued supply chain disruption, we see this as being even more lucrative probably than we thought when we had the initial dialogue. Steve, do you want to give any more color on the product?

Yes, I would just say it includes the whole aircraft, excluding the engines, but does include the QVC kit. And so, we'll be working with our partners to make sure that we optimize all the opportunities to see where that inventory can go and find the best possible place for the customers, brokers and repair shops.

Got it. Thank you for the time.

Thanks, Josh.

Thank you.

Our next question is from Jeff Van Sinderen with B. Riley. Please proceed with your question.

Good morning, everyone. Just to clarify earlier comments, were you saying that we should see second half year-over-year inflection in the Fleet segment. And that also wasn't clear, if you were suggesting similar timing for year-over-year inflection on the Fed and Defense segment?

I think within the Fleet segment, we continue to see the top line growth accelerate within the commercial side of the business offset by the USPS, as we've mentioned. But as I was referring to the margin rate, my point was specifically that we've brought a point now where we've seen that mix shift take place, we're going to continue to see that mix shift take place. But as we drive scale towards the second half of the year, we do expect to be able to drive growth there. Within the Federal and Defense space, we haven't necessarily give -- given specific guidance associated with where we expect to see the margin rates trends ratably throughout the year. What John mentioned, though, is we do expect some of the supply chain related delinquencies that have affected both the first quarter and last quarter to potentially start to free up towards the back half of this year.

Okay. And then realize it's early on the new 737 contract, but any sense of expectations for margins around that particular contract. I know it's not going to be much this year, but …

The short answer is no. I wouldn't say it's going to be materially different from where we'd given the guidance for the Aviation business. And as we get our arms wrapped around it, we'll be able to share more details with you in terms of magnitude and impact. But right now, I wouldn't expect it to be some things substantially different than what we've communicated for the overall segment.

Okay. And then just kind of turning back to the general inflationary cost pressures out there, it seems like everybody's experiencing. Any particular areas that you feel are more vulnerable than others for that, you just see that as something that's going to probably just impact everything, and you'll take up prices where you need to, or just, I guess, anything else to call out around that?

Yes, I mean, we're staying very close to labor, watching our labor markets. And they're very different geographically, very different by kind of work type and we're staying close to that. But we feel we've got our arms around it and a level of control and stability in our workforce. And the other side of it is on product costs. And again, we do feel you may see a lag from --we get a price increase from vendors. And we do have some backlog with customers where we're locked in for one quarter on a price and we have some inflationary pressure. But we do feel by the next quarter we're in a position where we can quickly adapt, so we do not see long-term impact. So, we see a short blip, maybe one quarter or another in a product-based situation sure, but we don't see a significant long-term impact, again, because of the pricing power that we have, the lack of long-term fixed price contracts with our customers, which is just the nature of the business.

Okay. Thanks for taking my questions, and best of luck.

Thank you for your time.

Thank you.

Our next question is from Michael Ciarmoli with Truist Securities. Please proceed with your question.

Hey, guys. Thanks for taking the follow-up. John, just maybe can you comment on kind of what you're seeing real time from some of your airline customers, as they kind of get ready here on prep for summer flying. Any -- I guess maybe quarter intake, maybe bookings color and then any issues that you're seeing, or you may run into with access to raw materials or turn times just kind of dovetailing in what you -- what you've talked about with kind of labor and just supply chain?

Sure. Steve, you want to kind of kick it off, and then I'll give some color at the end.

Yes, sure. I mean, I think from an overall market standpoint, we continue to see order intake being high, but I think there is some uncertainty as we receive customer orders for repairs and the like around need and readiness levels for the summer. So, I think it's hard to predict at this point, just given some of the overall market uncertainty as for access to raw materials, and the impact as to our supply chain. At this point with the stocking levels that we had last year, I think we're in a pretty healthy position from an inventory perspective. Turn times are a little bit longer than probably what they've been historically. But I wouldn't necessarily to be back to something for VSE tied to specific raw material. It's probably just more tied to just general supply chain delays. And then from a labor perspective, I think we're in a good spot from a labor perspective. We've invested in the teams, I think we've got a really good culture and brand of teams are excited about. We feel like we're well-positioned to capitalize as the market recovers.

Yes, and if I break it down a little further in the revenue streams, if you look at the kind of pure distribution, we're seeing relatively consistent revenue, nice month-over-month improvement in the commercial backlog and customer activity. We are not seeing aggressive stocking from airlines. So, we're not seeing them go make deep purchases. We're seeing kind of consistent order flow. Many of our products are a little expensive, so we don't see them just -- it's not the kind of consumable expandable with overstocking. On the repair side, again, we're seeing consistent a month-over-month improvement on input. What we are seeing is, an airline will give us a repair unit to quote and then they're saying, okay, hold it, rather than accelerate a repair and deliver it. So, we're seeing a little slow. There's not necessarily as much exceeded I would have anticipated and the desire to get their products back. And then the third piece of the revenue stream, that's kind of the [indiscernible] pool, that exists within our repair businesses. I'd say that one's the slowest to recover. So, we are -- but in my opinion, that one is as the market starts to pick up, you're going to see that recovery happen pretty quickly at the back end of the year.

Okay. And maybe this is too early and a bit real time, but are you seeing any behavioral changes yet as a result of rising oil prices and fuel costs? You kind of mentioned airlines giving you units quote, hold it, rather than accelerated. I mean, is it too soon to see those behavioral changes or how you guys thinking about oil?

Yes, I mean, remember -- we are very domestic focused. We do have an international base, but the domestic U.S airlines are and business general aviation customers do represent a significant portion of our revenue. We are not seeing any behavioral changes in that customer mix. And internationally again, they've been quieter, but again, no material changes at this point.

Okay, got it. Thanks, guys.

[Operator Instructions] Our next question is from Chris McGinnis with Sidoti & Company. Please proceed with your question.

Good morning. Thanks for taking my questions. And I was jumping in and out, so if this has already been asked, I apologize. Just on capital allocation, obviously, you raised the dividend recently. Just wanted to ask about that. Is that more of a change in strategy or just confidence in the ability to execute? And then maybe if you could just discuss the M&A landscape, in 2022, and the opportunities there. Thank you.

Sure. Thanks, Chris. It's -- the dividend here at the company is -- has historically paid a dividend and historically increased it. I would not anticipate us on a rapid path to increase the dividend at this point. We do want to put the capital to use and put it back into the business and invest in the business. But on the flip side, we have a ton of loyal shareholders, that dividend has been important, I want to show them the competence in our free cash flow forecasts for 2022. Our M&A pipeline is filling up. We've got -- continuing to look at capability expansions in our services business and potential distribution opportunities in our parts distribution businesses, predominantly in the Aviation business and we do have a nice pipeline of deals. We remained very, very, very disciplined in our role. So, very much around, it's got to meet the capability or the product requirement. It's got to be a cultural and business that can be fully integrated, and one that will truly add value. So, we've got a good pipeline, and we'll continue to keep a disciplined approach to M&A.

Great, I appreciate it. Thanks and good luck in Q1.

Thank you.

We have reached the end of the question-and-answer session. And I will now turn the call over to John Cuomo, President and CEO for closing remarks.

Thanks for the time and interest today. We appreciate all the continued support to VSE. We really have an exciting year ahead, look forward to connecting with you all in late April to discuss our first quarter results. Have a great rest of your Thursday.

This concludes today's conference, and you may disconnect our lines at this time. Thank you for your participation.