Vse Corp Q1 FY2026 Earnings Call

Good day, and thank you for standing by. Welcome to the VSE Corporation First Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Michael Perlman. Please go ahead.

Thank you. Welcome to VSE Corporation's First Quarter 2026 Results Conference Call. We will begin with remarks from John Cuomo, President and CEO, followed by a financial update from Adam Cohn, our Chief Financial Officer. The presentation we are sharing today is on our website, and we encourage you to follow along accordingly. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including those described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. We are using non-GAAP financial measures in our presentation. Where available, the appropriate GAAP financial reconciliations are incorporated into our presentation and posted on our website. All percentages in today's discussion refer to year-over-year progress, except where noted. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'd like to turn the call over to John.

Good morning, everyone, and thank you for joining us today. We delivered a strong start to 2026 with record results in the first quarter and continued momentum across our business. Our performance was driven by balanced contributions from both our distribution and MRO channels, supported by strong execution, new program activity and continued market share gains. Engine-related aftermarket activity remains a key driver of our business and now represents more than half of our total revenue with continued strength across our core platforms. During the quarter, we advanced our OEM-aligned distribution programs, expanded our MRO capabilities, invested in targeted growth opportunities and made meaningful progress on our acquisition integrations. We remain focused on executing our strategy, scaling our platform and driving continued growth, margin expansion and long-term value creation. Let's begin on Slide 3, where I will highlight our recent developments. Let me start with the acquisition of PAG, which we closed this week on Tuesday, May 5. Together, VSE and PAG now form a scaled independent aviation aftermarket platform with 61 locations across 8 countries, including 48 repair facilities and 11 distribution centers of excellence. The combination significantly expands our capabilities across both distribution and MRO, enhances our technical depth and strengthens our ability to deliver more integrated end-to-end solutions with increased proprietary content to a broad and diversified customer base. The business will now serve a diverse customer base across commercial, business and general aviation, rotorcraft, OEM and defense markets. Strategically, this transaction accelerates our transition towards a more integrated, higher-margin aftermarket model with greater exposure to repair and engine-related activity. PAG's margin profile is immediately accretive and supports a clear path to exceeding 20% consolidated adjusted EBITDA margins over time, along with improved free cash flow generation. We funded the transaction through a combination of equity and new debt financing, which Adam will cover in more detail shortly. With the transaction now closed, our focus shifts to integration and execution. We see clear opportunities to drive synergies through cross-selling, repair in-sourcing and procurement efficiencies, and we are confident in our ability to deliver on those objectives. Let's move to Slide 4 and continue with our recent developments. On April 1, we acquired NorthStar Technologies, a provider of MRO and third-party logistics services supporting the engine aftermarket. This acquisition expands our engine service capabilities in the business and general aviation market, deepens our integration with OEM aftermarket supply chains and enhances our ability to capture growing demand for teardown and other labor-intensive services. The business operates under a capital-light model with strong demand visibility and a demonstrated resilience across market cycles, supporting both active fleet and increasing teardown and retirement activity. Let's now turn to Slide 5, where I will highlight a few business developments from the quarter. First, we previously announced a new globally exclusive life of program distribution agreement with Pratt & Whitney Canada for APU aftermarket components. This agreement spans more than 2,500 SKUs across more than 15 commercial, regional and business aviation platforms and meaningfully expands our OEM aligned portfolio while deepening our role in supporting these assets across their full life cycle. Second, we expanded our airline-focused asset management program through the acquisition of CFM56 engines for a major U.S. airline partner. By leveraging our in-house capabilities across asset management, teardown and component level repair, we're able to deliver a more integrated engine aftermarket solution. This program supports our organic growth and further strengthens our position across the engine life cycle. Third, we completed the integration of Turbine Weld into the VSE platform. With that integration now in place, the business is well positioned to continue to scale and contribute to our expanding engine-focused MRO capabilities. And finally, in connection with the PAG acquisition, we strengthened our capital structure through a combination of equity and debt financing, enhancing our financial flexibility to support future growth. Adam will cover this in more detail shortly. Let me briefly update you on the current aviation aftermarket environment. Despite near-term macroeconomic uncertainty, including elevated fuel prices driven by recent geopolitical developments, we have not seen a pullback in airline capacity, OEM production plans or operator behavior to date. Demand for engine maintenance and repair activity remains strong, supported by continued fleet utilization, aging assets and ongoing supply constraints. This continues to be a key driver of activity across our commercial and business aviation businesses. Specifically in the business and general aviation sector, demand also remains resilient. This segment has historically demonstrated lower sensitivity to fuel price volatility and continues to provide a stable and diversified source of revenue within our portfolio. Let's now move to Slide 6 and discuss our consolidated first quarter 2026 financial performance. In the first quarter of 2026, we delivered record revenue and profitability. Revenue growth was driven by balanced contributions from both our distribution and MRO businesses, along with contributions from recent acquisitions. Engine aftermarket activity remains a key driver of our performance and now represents more than 50% of our total revenue. We continue to see strong demand across this segment, supported by high fleet utilization and ongoing supply constraints. Our business also delivered record profitability in the quarter. Profitability in the quarter reflects disciplined execution across both new and existing programs, expanded product offerings and MRO capabilities, strong performance in our OEM licensing and manufacturing programs and early synergy realization from recent acquisitions. With that, I will now turn the call over to Adam to walk through our financial details.

Thank you, John. Let's turn to Slide 7 of the conference call materials, where I will provide a detailed overview of our first quarter consolidated financial results. For the first quarter of 2026, we generated $325 million of revenue, an increase of 27% year-over-year. Both distribution and MRO delivered strong results with distribution revenue increasing 26% and MRO revenue increasing 28% year-over-year. The 26% increase in distribution revenue was driven by strong performance across new and existing programs, product line expansion, market share gains and contributions from the Aero 3 acquisition. The 28% increase in MRO revenue was driven by expanded repair capacity, new repair capabilities, sustained end market demand and contributions from the Aero 3 and Turbine Weld acquisitions. Growth across both segments continues to be supported by strong demand, specifically in the engine aftermarket. Excluding recent acquisitions, organic revenue increased about 15% year-over-year, reflecting strong underlying demand across the business. Consolidated adjusted EBITDA increased 37% to $55 million compared to the first quarter of 2025. Adjusted EBITDA margin was 17.1%, an increase of approximately 130 basis points versus the prior year period, driven primarily by greater mix of higher-margin product and repair activity, higher-margin OEM license manufacturing sales and continued synergy realization from recent acquisitions. Adjusted net income was $33 million and adjusted diluted earnings per share was $1.17 per share. Let's turn to Slide 8 and our balance sheet. At the end of the first quarter, total debt outstanding was $366 million. The company had approximately $1.24 billion of cash and cash equivalents on hand, of which a majority was used to fund the PAG acquisition at closing, which occurred on May 5. We had no borrowings under our $400 million revolving credit facility, which was recently upsized to $500 million. The upsized credit facility remains undrawn. During the first quarter, we used approximately $69 million of free cash flow, driven by part procurement seasonality and targeted strategic investments to support both the recently awarded APU program and the expanded airline-focused asset management program. We remain confident in our ability to generate strong free cash flow as these investments scale through the balance of the year. Pro forma for the acquisition, adjusted net leverage is estimated to be below 3x with a clear path to below 2.5x by year-end, driven by EBITDA growth and free cash flow generation. Let's turn to Slide 9 to review our updated consolidated company guidance for full year 2026, inclusive of the PAG acquisition. Starting with revenue. With the PAG acquisition now closed as of May 5, we are updating our full year 2026 revenue growth guidance to reflect the contribution of that business. Our new range, inclusive of PAG is 57% to 61% for the full year. Importantly, this update reflects the inclusion of PAG and no change in our expectations for the underlying business. The updated revenue guidance is presented net of intercompany eliminations. We are also updating our full year 2026 adjusted EBITDA margin outlook to reflect the addition of PAG, raising our range to 18.1% to 18.5%. As with our revenue guidance, this update is driven by the inclusion of PAG and does not reflect any change in our expectations for the underlying business. On a free cash flow basis, inclusive of our strategic investments executed in the first quarter and inclusive of the PAG acquisition, we expect to see improvement over the course of the year and on a year-over-year basis, driven by earnings growth and a reduction in working capital intensity. I would now like to provide an update on several additional modeling assumptions post PAG acquisition, which are also detailed in the appendix of the presentation. For the full year 2026, interest expense net of interest income is projected at approximately $37 million to $40 million. Depreciation and amortization is expected to be approximately $98 million to $103 million in aggregate. The effective tax rate is projected at approximately 25%. Stock-based compensation is expected to be approximately $18 million to $19 million, and capital expenditures are expected to be approximately 2% to 2.5% of revenue. Let's now move to Slide 10 and review our new capital structure. On May 5, we closed on a $900 million Term Loan B and upsized our revolving credit facility to $500 million. These new facilities replace our prior Term Loan A and the revolver structure. And together, they strengthen our balance sheet and give us flexibility to execute on our strategic priorities. With this refinancing, we extended our term loan maturity, expanded our borrowing capacity and improved our day-to-day operating flexibility. We were pleased with the level of institutional support and the pricing achieved. This refinancing positions us with significant available liquidity to support our strategic priorities and future growth initiatives. With that, I'll turn the call back over to John.

Thanks, Adam. I'd like to conclude by briefly reviewing our 2026 priorities on Slide 11. First, we are focused on executing our recent acquisitions, accelerating integration and realizing synergies. We've made meaningful progress in the first quarter, including completing the integration of Turbine Weld. Second, we are implementing newly awarded OEM and distribution programs across our core platforms, including the Pratt & Whitney Canada APU agreement and our CFM engine initiatives, which we expect to contribute more meaningfully in the second half of the year. Third, we are expanding our MRO capacity and technical capabilities to capture continued demand across the engine aftermarket. Fourth, we are advancing and converting our organic growth pipeline into revenue and margin contribution. Fifth, we are continuing to enhance our systems and processes to support scale, integration and efficient growth, including the targeted use of AI and data-driven tools to improve operational efficiency and optimize workflows across the platform. And finally, with the PAG acquisition now closed, our focus moves to execution. We see clear opportunities to realize synergies through cross-selling, repair in-sourcing, procurement efficiencies and network optimization, and we are confident in our ability to deliver on those objectives. In closing, we delivered a strong start to 2026 with record results in the first quarter and continued momentum across our business as we begin the second quarter. During the first quarter, we advanced our OEM aligned distribution programs, expanded our MRO capabilities, invested in targeted growth opportunities and made meaningful progress on our acquisition integrations. While we are mindful of the current macro environment, including geopolitical developments and fuel price volatility, demand across our core end markets has remained resilient, and we have not seen a change in customer behavior to date. Overall, we believe the strength of our engine-focused aftermarket exposure, combined with our growing presence in business and general aviation, positions us well to navigate near-term uncertainty while continuing to execute on our long-term growth strategies. Thank you for your continued support and confidence in VSE. Operator, we are now ready to take questions.

And our first question will come from Ken Herbert from RBC Capital Markets.

John, Adam, and Michael, really nice results for the quarter. Maybe just to start the discussion, John. I can appreciate you've maintained the full year guide and not seeing any impact yet from the higher crude prices on airline or purchasing behavior. But some other engine companies like GE, in particular, have talked about a lag effect and have sort of lowered their expectations of cycles and utilization this year somewhat. Are you concerned at all that we see any sort of lag impact on your business, especially now with a greater focus on engine? Or maybe how can you talk about in your prior experiences, how this could potentially play out as you think about the portfolio today?

Yes. I appreciate the question. What I would add to the remarks I made earlier is April has also started out quite strong. Our bookings don't go out years, but they often extend months, specifically on our engine-related business. We are not seeing any outward impact on our engine bookings at this point in time. I'd also highlight the mix of the work that we have. We typically lag a bit on newer generation engines and have a mix of more legacy engines. So if you play downside scenarios and retirements accelerate a bit, that can cause an element of teardowns and such to accelerate, which creates additional demand inside our shops. The second point is our business is about 50% business and general aviation. We do more work on the workhorse aircraft than on the more expensive airplanes that don't fly as much. We tend to see that market slightly more resilient in the near term; when you see a blip from a macro perspective, you don't usually see an impact there. So at this point, we're holding to our guidance. If things change, we may even look at some upside potential toward the back end of the year.

That's great. And if I could, just a follow up. On PAG, congratulations on getting that done. How do we think about the pace of the synergy capture? Typically, you're going to take some time to get to know the business well, but you tend to move fairly quickly as you identify opportunities. How should we think about that as it impacts '26 and '27 on the synergy side?

Think about '26 as more in-sourcing and cross-selling and '27 as more of the cost synergies. During diligence and our pre-closing work, we highlighted a number of synergies. If you look at the embedded organic growth for that business, it will grow naturally high single digits. We've conservatized it slightly because some of that will move towards intercompany as we drive synergies, which is where we'll get some near-term margin improvement. The second phase of synergies will roll out through 2027 as we execute on our cost initiatives.

Our next question will come from Sheila Kahyaoglu from Jefferies.

I wanted to ask just the organic growth in Q1 of 15% is ahead of schedule. Maybe, John, on your comments, specifically honing in on that 28% MRO expansion. How much of that was organic? And you mentioned it was increase in repair capability, increase in parts, I guess. Can you maybe expand on how you're doing that and how you think about the MRO business growing?

Sheila, for the first quarter, distribution actually outpaced MRO in terms of growth. We saw our distribution businesses, both on the commercial and on the business and general aviation side, quite strong. More of our engine-focused product led that growth, with MRO showing slightly lower organic growth in comparison. What's encouraging about the quarterly results is the balance — contributions from new programs we implemented or are implementing, contributions from businesses we've acquired that are now organic and growing above market, and contributions from internal investments to support expanded repair capabilities. April has started off quite strong on both sides of the business, MRO and distribution.

Great. And then maybe if I could ask another one: given your relatively high business aviation exposure, how are you thinking about, or what are you seeing in terms of, fleet activity given higher jet fuel, and how are you thinking about the business aviation side of both repair and distribution growing in that channel?

We see business aviation more resilient than the commercial side. As I mentioned earlier, the workhorse aircraft — PT6 engines, Citations, Learjets, King Airs and Pilatus — are the core of what we focus on, both airframe and engines and components. Sometimes people downgrade to those aircraft when they're flying the more expensive jets less. That side of the business tends to be more resilient. We haven't seen any concern, and the data has been quite strong for the first quarter and leading into the second quarter as well.

Our next question will come from Louie DiPalma from William Blair.

Your organic growth in the first quarter of 15% was — it appears that it will be faster than the industry growth that you estimated was going to be in the high singles for this year. Should your new Pratt & Whitney Canada APU global distribution deal and the other deal that you announced, the CFM56 deal, should that lead to an acceleration in the organic growth in the second half because that likely wasn't a contributor in the first quarter, right? And what are some of the other moving parts in terms of the organic growth for this year?

You're correct — the Pratt & Whitney Canada agreement will scale throughout the year. The CFM56 announcement could contribute in late '26 or even in 2027. From a modeling perspective, Adam?

I would say it's already embedded into our guidance. As you know, we had a program that's ending this year. So the Pratt APU program is replacing that revenue.

Great. That makes sense. And secondly, in the prior question, you were just discussing the dynamic between business aviation and commercial. In your recent 10-K disclosure, you revealed that a group of affiliated customers now represents 20% of revenue, and it would seem that affiliated group is RTX, since you have such a strong relationship with Pratt & Whitney Canada. But I was wondering how has business grown with Pratt & Whitney Commercial since you've acquired TCI? And how is the TCI business done? And is there more room for growth on the commercial side there, not only for Pratt & Whitney, but for your other partners?

RTX is an important partner to us. You also have the Collins business, which includes several businesses with multiple contracting arms. We see all of our OEM partners as continued opportunities for share-of-wallet expansion. If you look back from all of our acquisitions, the organic growth we've achieved inside our core acquisitions and the programs they support is well above market. I don't want to give an exact percentage, but we've grown the business north of 20% since we've owned it.

Great. And one final one. If the price of oil were to stay elevated, and that might not happen, but if it were, would you expect that PMA and USM would start to become more competitive to OEM parts? And I know in the past, you've described how you work with the OEMs on pricing strategies to help protect their businesses from competition related to PMA and USM. So would you expect to play a significant role there? And would that help offset any weakness?

That's a good question. I tend to think that PMA, DER repairs and our proprietary solutions are driven more by supply chain than by cost to start. You're solving problems for customers when they can't access products or services in the market. That's the biggest driver. In some instances, the economics around a repair or certain aircraft will lead customers to pursue different parts and repair options, but for commercial airlines, one part here or there won't dramatically change the overall dynamics. Engineering and supply chain will be the biggest drivers of PMA/DER transitions, even with higher fuel prices. We're prepared and are working with OEM partners and suppliers. We have reverse engineering and engineering teams that can support PMA parts, DERs on staff, and the ability to support proprietary solutions. If OEMs want to reallocate capital during any disruption, our OEM solutions business can buy IP as well. So we have three avenues and levers to pull, and we're responsive to what customers want.

Our next question will come from Scott Deuschle from Deutsche Bank.

John, can you clarify what exactly the CFM56 asset management program is and then what work scope is for VSE?

We typically are not a traditional used serviceable material (USM) player. Everyone has USM as part of their portfolio. We tend to tie new parts, rotables, exchanges and repair together as much as possible and look at our USM business as an asset management business where we're supporting major airline customers. Often it's asset-light — we're not buying the asset, we're helping them monetize a used asset. That could be selling it on their behalf, tearing it down and repairing pieces, which drives revenue in our MRO shops and potentially profit sharing. In this case, a major airline wanted to exit some engines and didn't have a program set up today, so we did buy the engines. We'll be tearing them down, utilizing our MRO capabilities. This is more of a traditional USM model than we typically deploy; it's what this airline needed, and we wanted to show our nimbleness and agility to acquire engines at a good valuation when the market needed them.

Okay. And was this the main driver of the inventory build we saw in the quarter? Or was that more related to the new distribution agreement?

It's really two reasons, Scott. It was partially the engine purchases and also the inventory build on the new APU program. That was most of the cash usage in the quarter and the inventory build.

That's why we felt confident saying expect cash to change dramatically throughout the year because you had two kind of one-off, non-repeatable items.

Okay. And then, John, can you share your latest thinking as to when you think the business can get to 20% EBITDA margins? It seems like it could be relatively soon given the outperformance in the quarter, the accretion from PAG and the PAG cost synergies, but just curious for your perspective there.

Ask me that next quarter. You do all the diligence and then you have to see it play in reality; the devil is in the detail when you start to operate the business. We never put an exact timeline on it because of financing dynamics, but we were hoping to be in the 20% range more like the end of 2027 in our initial plans. The question is whether we can accelerate that. I'm not 100% ready to commit to accelerating it yet. We are doing everything in our power to try to accelerate; it's an important milestone. I'll keep you updated as I get my arms around the synergies and operating the business. We've owned the business for, I think, 25 hours.

Right. Okay. And then last question, Adam, can you just offer any detail on NorthStar's revenue and margins? Just trying to think through the modeling implications of that acquisition.

I would say it's immaterial. It's a few million of revenue contribution for the year.

From a strategic perspective, this acquisition was done to support one of our OEM partners. They need aftermarket logistics support and repair capacity where they don't have it today, and they have engines coming off lease that need teardown and repair. This was a fast way to build the business plan around an OEM partner's need.

Our next question will come from John Godyn from Citi.

There were a few earlier questions about aftermarket resiliency. And sometimes you're referring to trends in 1Q and other times you're talking about forward bookings and having multi-month visibility. I just want to be crystal clear. Is it fair to say that not only did you not see anything this quarter negatively impact the aftermarket, but you see nothing in any of the leading indicators that you have access to that suggests there's softness? Is that the message?

That's a good question. At this point, we have not seen any softness in our business. April was a strong month — I don't have the final numbers yet, but the flash shows another strong month. Our outward bookings are quite strong. From our indicators and the data we have on hand today, we are not seeing any demand degradation at this point.

Our next question will come from Louis Raffetto from Wolfe Research.

John, maybe can you provide an update on the fuel control systems manufacturing? I think you kind of referenced it a few times in the release and this morning. So just curious how that is going? Are we fully up to speed now?

Essentially, all the revenue and earnings are in the business at this point. We have a few transition items to complete to make us officially the manufacturer of record for that product line, but from a modeling perspective it's embedded. What we've learned is we're building a deep portfolio around the engines that the fuel control program supports. The share-of-wallet opportunity around the fuel control has been exciting. We have fuel pumps and other repair capabilities we're supporting. It's turned out to be a strong revenue and margin driver and has created organic opportunities around it as well.

Great. And then Adam, I know the slide deck mentioned attractive pricing on the refinancing. I think on the old stuff, you were like SOFR plus 175. Do you have an idea what the new items are?

On the Term Loan B, we're SOFR plus 200 with scale downs depending on leverage. Our prior Term Loan A was at 175; currently we are at a low leverage level due to cash from equity raises. It's a similar grid where at this leverage level you'll be in that S plus 200-ish range. There's more flexibility, fewer covenants and easier borrowing requirements going forward. We feel it is a very good outcome.

And our next question will come from Jeffrey Van Sinderen from B. Riley Securities.

And let me add my congratulations on closing PAG. I feel like that was pretty fast.

Yes. For the size of the transaction, we feel good about the pace and getting that over the finish line.

So now that you're 25 whole hours in, I won't ask you to jump too far ahead, but maybe any more color you can share on what the first 90 days focus on integration looks like for PAG? And then also, maybe you can touch on how you're thinking about PAG's ability to reverse engineer and do you further develop that?

Candidly, the first 30 to 45 days is about physically visiting the sites and meeting the people. The first element of integration will be by capability set, market segment and customer base — getting those teams together to work on cross-selling and in-sourcing opportunities. That could mean bringing things in-house, offering customers a broader offering, or utilizing proprietary solutions from both businesses. We'll have five or six key people develop actions, and we have a synergy capture leader focused on driving benefits in the market. From an organization and systems perspective, we have a framework for how the business should come together. The CEO, David Mast, and I worked on it a lot during diligence, and we will validate it before making any substantive changes; most substantive changes would come in 2027. For now, picture synergy capture focused on in-sourcing and sales synergies and actions focused there. Adam will handle internal controls and treasury items that won't show up in the P&L.

Okay. That's helpful. And then any thoughts on kind of the reverse engineering capabilities there?

Their stronger capabilities are actually more on DER repairs than reverse engineering. I think we bring more reverse engineering capability to them. They did acquire a couple of businesses in the last 18 months that have some reverse engineering capability; I didn't spend a lot of time with those during diligence and look forward to the site visits next week to dive into that. I'll have a better answer when I see you at the end of the month.

Fair enough. And then it may seem like a small detail at this moment, but how are you planning to apply AI to your businesses?

We have a number of AI initiatives. We're starting bottom-up rather than top-down: we want business units to identify problems and work with IT and our AI initiatives to solve them. Some MRO leaders have launched programs and we're measuring productivity improvements and ROI. We're trying to build as much in-house as possible to avoid becoming dependent on external providers. Use cases include improving shop floor workflows — part intake, teardown, quoting and repair processes — aggregating data for supply chain demand planning and pricing, and improving customer service and quote quality. We're at an early stage and expect real productivity gains in 2027 and beyond.

And our next question will come from Jonathan Siegmann from Stifel.

So on the Pratt & Whitney Canada agreement, congratulations on that. I think by our count, there were five or six other agreements and expansions and geographies of that particular customer. So just — I know you said you didn't want to quantify how much opportunity there was at specific customers. But given the great success here with this one, is it fair to say that you're in the late innings of expansion? Or is there further opportunity here in Pratt?

When you look at any Tier 1 OEM partner, it's not late innings. They still manage 75% to 80% of the aftermarket on their own, so there's share gain opportunity. They touch many aircraft types and product categories; an APU program on a regional jet is very different from an engine program on a light business jet or a gearbox program on a Gulfstream. It's early to mid-innings with these partners because there are many distinct opportunities. For us, each program often looks like a separate opportunity rather than the same account.

Great. And then with NorthStar, I appreciate that small, but glad to see the acquisition flywheel continuing after Precision Aviation. I'm just wondering if we should consider this a one-off or if there are other potential small bite-size opportunities for you?

NorthStar was intended to support an OEM partner, and we want to show our OEM partner that we can still be nimble and support them quickly. Our M&A pipeline remains robust. Smaller, self-sourced deals depend on owner timing, which can be unpredictable. We will likely play in that space in the back half of the year. For anything more material, I look more to the end of the year into 2027 before we'd consider larger deals.

I am showing no further questions from our phone lines. I'd now like to turn the conference back over to John Cuomo for any closing remarks.

I just want to offer a quick thank you to everybody for your continued support. Thanks for the time this morning, and have a great rest of your week. Take care.

Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.