Business Overview

We are a diversified aftermarket products and services company providing repair services, parts distribution, logistics, supply chain management and consulting services for land, sea and air transportation assets to government and commercial markets. We provide logistics and distribution services for legacy systems and equipment and professional and technical services to commercial customer and to the government, including federal and civilian agencies and the Department of Defense ("DoD"). Our operations include supply chain management solutions, parts supply and distribution, and maintenance, repair and overhaul ("MRO") services for vehicle fleet, aviation, and other customers. We also provide vehicle and equipment maintenance and refurbishment, logistics, engineering support, energy services, IT and health care IT solutions, and consulting services.

Our operations are conducted within three reportable segments aligned with our operating segments: (1) Aviation; (2) Fleet; and (3) Federal and Defense. We provide more information about each of these reportable segments under Item 1, "Business-History and Organization" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 ("2021 Form 10-K").

Recent Acquisitions

See Note (2) "Acquisitions" to our Consolidated Financial Statements included in Item 1 of this filing and our 2021 Form 10-K for additional information regarding our recent acquisitions.

Impact of the COVID-19 Pandemic

The coronavirus disease (COVID-19) pandemic continues to negatively affect the global economy, our business and operations, supply chains, and the industries in which we operate. However, we have seen continued improvement in our operating results during the nine months ended September 30, 2022, which we expect to continue through the remainder of 2022. All of our repair, distribution and base operations facilities remain open and operational, and we continue to deliver products and services to customers without interruption. We continue to closely monitor and address the pandemic and related developments, including the impact to our business, our employees, our customers, and our suppliers.

Business Trends

The following discussion provides a brief description of some of the key business factors impacting our results of operations detailed by segment.

Aviation Segment

The COVID-19 pandemic impacted our Aviation segment operations, particularly in 2020 and 2021. We have seen continued improvement in our quarterly revenue results due to the recovery in demand since the peak of the COVID-19 pandemic impact during the second quarter of 2020. Our Aviation segment results have benefited from strong performance following prior investments in growth initiatives that have produced positive results with quarterly revenue of $103 million, a 40% increase year-over-year.

Growth in our distribution services has been driven by several new distribution initiatives in providing "tip-to-tail" product-line management capabilities, while our repair business has benefited from a broader recovery in commercial market activity, together with share gains within the business & general aviation ("B&GA") market. Market recovery and our growth initiatives have resulted in a 105% and 38% year-over-year increase in distribution and repair revenue, respectively, during the first nine months of 2022 compared to the same period for the prior year.

We have recently secured key multi-year distribution agreements to both domestic and new international geographic markets. We believe the new distribution initiatives will provide sustainable and recurring revenue with growth potential that will enhance our future results. The acquisition of Global Parts, in July 2021, broadens our product lines and client base, and we see opportunities to strategically align offerings with both domestic and international markets.

We expect that the current market conditions will result in strategic opportunities for near and long-term growth. We intend to continue capitalizing on opportunities in those markets, which may require future investment.


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Fleet Segment

Our Fleet segment continues to increase revenue from commercial fleet customers and e-commerce fulfillment sales as the business continues to progress towards becoming a more diversified enterprise. We continue to execute on our revenue diversification strategy as we capture new customers and increase revenue within e-commerce fulfillment. To support continued e-commerce and e-commerce fulfillment growth, the Fleet segment announced plans to open a new distribution warehouse and e-commerce fulfillment center of excellence in Olive Branch, Mississippi (in the greater Memphis, Tennessee area). This new center of excellence will double the size of Fleet's current warehouse footprint while extending Fleet's geographic reach and expanding product offerings for customers. Operations are expected to commence at this new location in early 2023 and will enable Fleet to successfully meet the rapidly growing demand for the e-commerce fulfillment business. Commercial customer revenue continues to see a strong growth trend, increasing approximately 23% and 50% during the quarter and first nine months of 2022, respectively, compared to the same periods in the prior year. Commercial revenues were 40% of total Fleet segment revenue for the nine months ended September 30, 2022 compared to 30% for the same period in the prior year, demonstrating the continued success of our strategic multi-year diversification strategy.

Federal and Defense Segment

Our Federal and Defense segment continues to focus on building our contract backlog and optimizing legacy programs. We recently announced a transition of leadership for our Federal and Defense segment as we work to grow our business and mitigate the impacts of delays in both the timing of contract awards and the funding process. Strong revenue performance in U.S Navy work enabled us to successfully grow our third quarter revenue for this segment despite anticipated declines in our U.S. Army work due to program completions. We expect that our focused business development efforts will drive new revenue additions in subsequent years.

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