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VSE Corporation Announces Third Quarter 2024 Results

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Record Revenue and Record Profitability for Aviation Segment

Raising Full Year 2024 Aviation Revenue Guidance

ALEXANDRIA, Va.--(BUSINESS WIRE)-- VSE Corporation (NASDAQ: VSEC, "VSE", or the "Company"), a leading provider of aftermarket distribution and repair services, announced today results for the third quarter 2024.

THIRD QUARTER 2024 RESULTS(1)

(As compared to the Third Quarter 2023)

  • Total Revenues of $273.6 million increased 18.3%
  • GAAP Net Income of $11.7 million decreased 3.8%
  • GAAP EPS (Diluted) of $0.63 decreased 21.3%
  • Adjusted EBITDA(2) of $33.2 million increased 2.6%
  • Adjusted Net Income(2) of $13.1 million decreased 5.3%
  • Adjusted EPS (Diluted)(2) of $0.71 decreased 22.8%
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1 From continuing operations

2 Non-GAAP measure. See additional information at the end of this release regarding non-GAAP financial measures

MANAGEMENT COMMENTARY

"We are very pleased to announce our third quarter 2024 results, marked by the strongest quarterly performance in our Aviation segment's history, achieving a revenue milestone of over $200 million," stated John Cuomo, President and CEO of VSE Corporation. "The 34% year-over-year revenue growth, combined with record profitability, reflects balanced contributions across our Aviation business units. The key drivers to our growth include the successful execution of new distribution awards, the expansion of our maintenance, repair, and overhaul ("MRO") capabilities, the launch of our new OEM-licensed manufacturing program, and contributions from our recent acquisition of Turbine Controls ("TCI")."

Mr. Cuomo continued, "Additionally, during the quarter, we completed the integration of Desser Aerospace's U.S. distribution business, launched a new Aviation e-commerce platform, made substantial progress in establishing our OEM-licensed manufacturing capabilities, and began distributing new products through our European Distribution Center of Excellence in Hamburg, Germany. The Aviation segment continues to perform successfully during a year of repositioning and focused execution.

"In our Fleet segment, we continue to advance our customer diversification strategy, with our commercial customers representing 64% of segment revenue as of the third quarter. Following a temporary reduction in activity with the United States Postal Service ("USPS") due to their system integration, activity levels have stabilized at the quarter's end, positioning us for improved revenue and profitability in the fourth quarter as compared to the third quarter," Mr. Cuomo concluded.

"Our third quarter 2024 results reflect our commitment to financial discipline," stated Adam Cohn, Chief Financial Officer of VSE Corporation. "During the quarter, we generated positive free cash flow, reduced our debt, and maintained an adjusted net leverage ratio within our target range of 3.0 to 3.5 times. Following our successful October 2024 equity offering, the Company has ample financial liquidity and flexibility to complete the acquisition of Kellstrom Aerospace in the fourth quarter and capitalize on the significant growth opportunities that lie ahead. As we look out to the fourth quarter, we expect to drive stronger free cash flow supported by ongoing operational execution on the strategic inventory investments made earlier this year. As I step into my role as CFO, I am excited to join such a dynamic team and look forward to building on VSE's impressive track record. In the months ahead, I am committed to enhancing shareholder value as we continue to execute on our strategic priorities."

STRATEGIC UPDATE

KELLSTROM AEROSPACE ACQUISITION:

  • On October 15, 2024, VSE announced it signed a definitive agreement to acquire Kellstrom Aerospace Group, Inc. ("Kellstrom Aerospace"), a leading full-service aftermarket solutions provider of value-added distribution and technical services for the commercial aerospace aftermarket. Kellstrom's portfolio of engine-focused products and MRO services, coupled with its technical advisory capabilities, expands VSE Aviation's portfolio of product and service solutions in the high-growth commercial aftermarket.
  • Kellstrom generated approximately $175 million of revenue for the trailing-twelve-month period ended September 2024. The Company expects to generate run-rate synergies of approximately $4 million within 18 months of close. The total consideration for the acquisition is approximately $200 million, comprised of approximately $185 million in cash and approximately $15 million of common shares of the Company, subject to working capital adjustments. The acquisition is expected to close in the fourth quarter of 2024, pending customary closing conditions, including regulatory review.

AVIATION NEW PROGRAM EXECUTION AND INTEGRATION UPDATE:

  • The Aviation segment continues to scale the new European distribution Center of Excellence in Hamburg, Germany, supporting the Pratt & Whitney Canada Europe, Middle East and Africa ("EMEA") aftermarket product support program. The program is expected to be at a full year run-rate by the end of the fourth quarter of 2024.
  • The OEM-licensed manufacturing fuel control program continues to outpace expectations and contribute to the segment's profitability. The Kansas facility expansion supporting the fuel control program is expected to be operational in the first quarter of 2025.
  • The integration of Desser Aerospace's U.S. distribution business was completed in the third quarter of 2024. Desser Aerospace's tire, tube, brake and battery product lines are now being sold under the VSE Aviation name, and tires are now being sold in Europe through the Company's new distribution facility in Hamburg, Germany.
  • VSE Aviation's new e-commerce site was successfully launched in the third quarter of 2024, focused on initial offerings including legacy Desser Aerospace products.

FLEET UPDATE:

  • The USPS transition to a new Fleet Management Information System ("FMIS") platform was completed in the third quarter of 2024. Post-implementation, the Company expects an increase in repair activity, and subsequently, an increase in the usage of parts.
  • The e-commerce fulfillment distribution center continues to scale and support above-market growth and additional market share opportunities.
  • The Fleet segment strategic review remains in process, and the Company expects to provide an update in the coming months.

CORPORATE UPDATE:

  • In October 2024, VSE completed a follow-on equity offering of 1,982,757 shares of common stock at $87.00 per share, resulting in net cash proceeds of approximately $163.8 million.
  • The net proceeds from the offering will be used to finance a portion of the Kellstrom Aerospace acquisition.

THIRD QUARTER SEGMENT RESULTS

Aviation segment revenue increased 34% year-over-year to a record $203.6 million in the third quarter of 2024. The year-over-year revenue improvement was attributable to strong program execution of new and existing distribution awards, an expanded portfolio of MRO capabilities, and contributions from the TCI acquisition. Aviation distribution and MRO revenue increased 12% and 86%, respectively, in the third quarter of 2024, versus the prior-year period. The Aviation segment reported operating income of $25.4 million in the third quarter, compared to $21.0 million in the same period of 2023. Segment Adjusted EBITDA increased by 29% in the third quarter to $32.6 million, versus $25.3 million in the prior-year period. Adjusted EBITDA margin was 16.0%, a decline of approximately 60 basis points versus the prior-year period, driven by lower margin contributions from the TCI acquisition.

Fleet segment revenue decreased 11% year-over-year to $70.0 million in the third quarter of 2024. Revenue from the USPS declined approximately 40% on a year-over-year basis. This revenue decline was primarily driven by USPS' transition to a new Fleet Management Information System ("FMIS") platform, which has resulted in a temporary reduction in maintenance related activities and reduced part requirements. The FMIS conversion was completed in the third quarter of 2024, supporting a modest recovery beginning in the fourth quarter of 2024. Revenue from commercial customers increased 20% on a year-over-year basis, driven by growth in e-commerce fulfillment and commercial fleet sales. Commercial, or non-USPS, revenue represented 64% of total Fleet segment revenue in the period. The Fleet segment reported operating income of $2.5 million in the third quarter, compared to $8.5 million in the same period of 2023. Segment Adjusted EBITDA decreased 59% year-over-year to $3.8 million, and Adjusted EBITDA margin declined approximately 620 basis points to 5.4%, primarily driven by the decline in USPS revenue.

FINANCIAL RESOURCES AND LIQUIDITY

As of September 30, 2024, the Company had $189 million in cash and unused commitment availability under its $350 million revolving credit facility maturing in 2026. The Company generated approximately $4 million of free cash flow in the third quarter of 2024. As of September 30, 2024, VSE had a total net debt outstanding of $442 million. Adjusted net leverage was approximately 3.3 times trailing-twelve-month Adjusted EBITDA as of the end of the third quarter.

GUIDANCE

VSE is increasing its full-year 2024 revenue growth and maintaining Adjusted EBITDA margin percentage guidance for its Aviation segment. The guidance is as follows:

  • Aviation segment full-year 2024 revenue guidance is increasing from 34% to 38% growth to 39% to 41%, as compared to the prior year revenue. Revenue contributions from the Kellstrom acquisition, which is expected to close in the in the fourth quarter of 2024, are not included in our updated guidance.
  • Aviation segment maintains full-year 2024 Adjusted EBITDA margin guidance of 15.5% to 16.5%.

VSE is revising its full-year 2024 revenue and maintaining Adjusted EBITDA margin guidance for its Fleet segment. The guidance is as follows:

  • Fleet segment full-year 2024 revenue guidance is decreasing from 0% to 5% to (5)% to (10)%, as compared to the prior year revenue.
  • Fleet segment maintains full-year 2024 Adjusted EBITDA margin guidance of 6% to 8%.

THIRD QUARTER RESULTS

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Three months ended September 30,

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Nine months ended September 30,

(in thousands, except per share data)

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2024

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2023

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% Change

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2024

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2023

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% Change

Revenues

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$

273,613

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$

231,353

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18.3

%

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$

781,111

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$

625,163

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24.9

%

Operating income

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$

23,698

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$

25,264

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(6.2

)%

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$

54,004

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$

62,677

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(13.8

)%

Net income from continuing operations

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$

11,650

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$

12,111

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(3.8

)%

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$

20,973

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$

30,318

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(30.8

)%

EPS (Diluted)

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$

0.63

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$

0.80

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(21.3

)%

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$

1.22

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$

2.22

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(45.0

)%

THIRD QUARTER SEGMENT RESULTS

The following is a summary of revenues and operating income for the three and nine months ended September 30, 2024 and September 30, 2023:

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Three months ended September 30,

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Nine months ended September 30,

(in thousands)

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2024

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2023

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% Change

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2024

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2023

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% Change

Revenues:

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Aviation

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$

203,642

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$

152,355

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33.7

%

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$

558,853

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$

390,319

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43.2

%

Fleet

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69,971

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Ìý

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78,998

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(11.4

)%

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222,258

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234,844

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(5.4

)%

Total revenues

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$

273,613

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$

231,353

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18.3

%

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$

781,111

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$

625,163

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24.9

%

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Operating income:

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Aviation

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$

25,435

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$

20,951

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21.4

%

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$

72,214

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$

52,397

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37.8

%

Fleet

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2,471

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8,531

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(71.0

)%

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11,299

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22,284

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(49.3

)%

Corporate/unallocated expenses

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(4,208

)

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(4,218

)

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(0.2

)%

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(29,509

)

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(12,004

)

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145.8

%

Operating income

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$

23,698

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$

25,264

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(6.2

)%

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$

54,004

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$

62,677

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(13.8

)%

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The Company reported $5.8 million and $17.4 million of total capital expenditures for three and nine months ended September 30, 2024, respectively.

NON-GAAP MEASURES

In addition to the financial measures prepared in accordance with generally accepted accounting principles ("GAAP"), this earnings release also contains Non-GAAP financial measures. These measures provide useful information to investors, and a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these Non-GAAP measures is included in the supplemental schedules attached.

NON-GAAP FINANCIAL INFORMATION

Adjusted Net Income from Continuing Operations and Adjusted EPS

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Three months ended September 30,

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Nine months ended September 30,

(in thousands)

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2024

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2023

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% Change

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2024

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2023

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% Change

Net income from continuing operations

$

11,650

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$

12,111

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(3.8

)%

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$

20,973

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$

30,318

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(30.8

)%

Adjustments to income from continuing operations:

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Non-recurring professional fees

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�

Ìý

Ìý

Ìý

300

Ìý

Ìý

(100.0

)%

Ìý

Ìý

�

Ìý

Ìý

Ìý

300

Ìý

Ìý

(100.0

)%

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Debt issuance costs

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�

Ìý

Ìý

Ìý

266

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(100.0

)%

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Ìý

�

Ìý

Ìý

Ìý

266

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(100.0

)%

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Acquisition, integration and restructuring costs

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1,973

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Ìý

1,700

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16.1

%

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Ìý

6,010

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3,800

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58.2

%

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Severance costs

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372

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�

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�

%

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Ìý

372

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�

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�

%

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Lease abandonment and termination (benefits) costs (1)

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(612

)

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�

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�

%

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12,245

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Ìý

Ìý

�

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�

%

Ìý

Divestiture-related restructuring costs

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178

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�

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�

%

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4,039

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�

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�

%

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13,561

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14,377

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(5.7

)%

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43,639

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34,684

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25.8

%

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Tax impact of adjusted items

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(477

)

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(566

)

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(15.7

)%

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(5,655

)

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(1,090

)

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418.8

%

Adjusted net income from continuing operations

$

13,084

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$

13,811

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(5.3

)%

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$

37,984

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$

33,594

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13.1

%

Weighted average dilutive shares

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18,479

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15,050

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22.8

%

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17,212

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13,639

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26.2

%

Adjusted EPS (Diluted)

$

0.71

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$

0.92

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(22.8

)%

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$

2.21

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$

2.46

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(10.2

)%

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(1) Includes consulting costs incurred in conjunction with lease termination.

EBITDA and Adjusted EBITDA

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Three months ended September 30,

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Nine months ended September 30,

(in thousands)

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2024

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2023

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% Change

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2024

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2023

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% Change

Net income from continuing operations

$

11,650

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$

12,111

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(3.8

)%

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$

20,973

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$

30,318

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(30.8

)%

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Interest expense

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8,983

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8,459

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6.2

%

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27,996

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21,805

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28.4

%

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Income taxes

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3,065

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4,694

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(34.7

)%

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5,035

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10,554

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(52.3

)%

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Amortization of intangible assets

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4,809

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3,203

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50.1

%

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12,550

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10,743

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16.8

%

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Depreciation and other amortization

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2,734

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Ìý

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1,836

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48.9

%

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7,561

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4,869

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55.3

%

EBITDA

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31,241

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Ìý

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30,303

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3.1

%

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74,115

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78,289

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(5.3

)%

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Non-recurring professional fees

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�

Ìý

Ìý

Ìý

300

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(100.0

)%

Ìý

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�

Ìý

Ìý

300

Ìý

(100.0

)%

Ìý

Acquisition, integration and restructuring costs

Ìý

1,973

Ìý

Ìý

Ìý

1,700

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16.1

%

Ìý

Ìý

6,010

Ìý

Ìý

3,800

Ìý

58.2

%

Ìý

Severance costs

Ìý

372

Ìý

Ìý

Ìý

�

Ìý

�

%

Ìý

Ìý

372

Ìý

Ìý

�

Ìý

�

%

Ìý

Lease abandonment and termination (benefits) costs

Ìý

(612

)

Ìý

Ìý

�

Ìý

�

%

Ìý

Ìý

12,245

Ìý

Ìý

�

Ìý

�

%

Ìý

Divestiture-related restructuring costs

Ìý

178

Ìý

Ìý

Ìý

�

Ìý

�

%

Ìý

Ìý

4,039

Ìý

Ìý

�

Ìý

�

%

Adjusted EBITDA

$

33,152

Ìý

Ìý

$

32,303

Ìý

2.6

%

Ìý

$

96,781

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$

82,389

Ìý

17.5

%

Adjusted EBITDA Summary

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(in thousands)

Three months ended September 30,

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Nine months ended September 30,

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Ìý

Ìý

2024

Ìý

Ìý

Ìý

2023

Ìý

Ìý

% Change

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Ìý

2024

Ìý

Ìý

Ìý

2023

Ìý

Ìý

% Change

Ìý

Aviation

$

32,594

Ìý

Ìý

$

25,320

Ìý

Ìý

28.7

%

Ìý

$

91,250

Ìý

Ìý

$

63,453

Ìý

Ìý

43.8

%

Ìý

Fleet

Ìý

3,786

Ìý

Ìý

Ìý

9,193

Ìý

Ìý

(58.8

)%

Ìý

Ìý

14,596

Ìý

Ìý

Ìý

26,894

Ìý

Ìý

(45.7

)%

Ìý

Adjusted Corporate expenses (1)

Ìý

(3,228

)

Ìý

Ìý

(2,210

)

Ìý

46.1

%

Ìý

Ìý

(9,065

)

Ìý

Ìý

(7,958

)

Ìý

13.9

%

Adjusted EBITDA

$

33,152

Ìý

Ìý

$

32,303

Ìý

Ìý

2.6

%

Ìý

$

96,781

Ìý

Ìý

$

82,389

Ìý

Ìý

17.5

%

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Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

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Ìý

(1) Includes certain adjustments not directly attributable to any of our segments.

Segment EBITDA and Adjusted EBITDA

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Three months ended September 30,

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Nine months ended September 30,

(in thousands)

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2024

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Ìý

2023

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% Change

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Ìý

2024

Ìý

Ìý

2023

Ìý

% Change

Aviation

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Operating income

Ìý

$

25,435

Ìý

$

20,951

Ìý

21.4

%

Ìý

$

72,214

Ìý

$

52,397

Ìý

37.8

%

Ìý

Depreciation and amortization

Ìý

Ìý

6,951

Ìý

Ìý

4,329

Ìý

60.6

%

Ìý

Ìý

17,919

Ìý

Ìý

11,016

Ìý

62.7

%

EBITDA

Ìý

Ìý

32,386

Ìý

Ìý

25,280

Ìý

28.1

%

Ìý

Ìý

90,133

Ìý

Ìý

63,413

Ìý

42.1

%

Ìý

Acquisition, integration and restructuring costs

Ìý

Ìý

150

Ìý

Ìý

40

Ìý

275.0

%

Ìý

Ìý

1,059

Ìý

Ìý

40

Ìý

2,547.5

%

Ìý

Severance costs

Ìý

Ìý

58

Ìý

Ìý

�

Ìý

�

%

Ìý

Ìý

58

Ìý

Ìý

�

Ìý

�

%

Adjusted EBITDA

Ìý

$

32,594

Ìý

$

25,320

Ìý

28.7

%

Ìý

$

91,250

Ìý

$

63,453

Ìý

43.8

%

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Fleet

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Operating income

Ìý

$

2,471

Ìý

$

8,531

Ìý

(71.0

)%

Ìý

$

11,299

Ìý

$

22,284

Ìý

(49.3

)%

Ìý

Depreciation and amortization

Ìý

Ìý

710

Ìý

Ìý

662

Ìý

7.3

%

Ìý

Ìý

2,188

Ìý

Ìý

4,452

Ìý

(50.9

)%

EBITDA

Ìý

Ìý

3,181

Ìý

Ìý

9,193

Ìý

(65.4

)%

Ìý

Ìý

13,487

Ìý

Ìý

26,736

Ìý

(49.6

)%

Ìý

Acquisition, integration and restructuring costs

Ìý

Ìý

291

Ìý

Ìý

�

Ìý

�

%

Ìý

Ìý

795

Ìý

Ìý

158

Ìý

403.2

%

Ìý

Severance costs

Ìý

Ìý

314

Ìý

Ìý

�

Ìý

�

%

Ìý

Ìý

314

Ìý

Ìý

�

Ìý

�

%

Adjusted EBITDA

Ìý

$

3,786

Ìý

$

9,193

Ìý

(58.8

)%

Ìý

$

14,596

Ìý

$

26,894

Ìý

(45.7

)%

Free Cash Flow

Ìý

Ìý

Three months ended September 30,

Ìý

Nine months ended September 30,

(in thousands)

Ìý

Ìý

2024

Ìý

Ìý

Ìý

2023

Ìý

Ìý

Ìý

2024

Ìý

Ìý

Ìý

2023

Ìý

Net cash provided by (used in) operating activities

Ìý

$

10,176

Ìý

Ìý

$

15,320

Ìý

Ìý

$

(86,412

)

Ìý

$

(49,771

)

Capital expenditures

Ìý

Ìý

(5,765

)

Ìý

Ìý

(4,658

)

Ìý

Ìý

(17,439

)

Ìý

Ìý

(10,795

)

Free cash flow

Ìý

$

4,411

Ìý

Ìý

$

10,662

Ìý

Ìý

$

(103,851

)

Ìý

$

(60,566

)

Net Debt

(in thousands)

September 30, 2024

Ìý

December 31, 2023

Principal amount of debt

$

453,000

Ìý

Ìý

$

433,000

Ìý

Debt issuance costs

Ìý

(2,659

)

Ìý

Ìý

(3,656

)

Cash and cash equivalents

Ìý

(7,907

)

Ìý

Ìý

(7,768

)

Net Debt

$

442,434

Ìý

Ìý

$

421,576

Ìý

Net Leverage Ratio

($ in thousands)

September 30, 2024

Ìý

December 31, 2023

Net Debt

$

442,434

Ìý

$

421,576

TTM Adjusted EBITDA (1)

$

128,225

Ìý

$

113,833

Net Leverage Ratio

3.5 x

Ìý

3.7 x

Ìý

Ìý

Ìý

Ìý

TTM Acquisition Adjusted EBITDA (2)

$

134,970

Ìý

$

124,304

Adjusted Net Leverage Ratio

3.3 x

Ìý

3.4 x

Ìý

(1) TTM Adjusted EBITDA is defined as Adjusted EBITDA for the most recent twelve (12) month period.

(2) TTM Acquisition Adjusted EBITDA includes Turbine Controls EBITDA for the trailing twelve months that are not included in historical results.

The non-GAAP Financial Information set forth in this document is not calculated in accordance with GAAP under SEC Regulation G. We consider Adjusted Net Income, Adjusted EPS (Diluted), EBITDA, Adjusted EBITDA, Acquisition Adjusted EBITDA, net debt, adjusted net leverage ratio and free cash flow as non-GAAP financial measures and important indicators of performance and useful metrics for management and investors to evaluate our business' ongoing operating performance on a consistent basis across reporting periods. These non-GAAP financial measures, however, should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Adjusted Net Income represents Net Income adjusted for acquisition-related costs, other discrete items, and related tax impact. Adjusted EPS (Diluted) is computed by dividing net income, adjusted for the discrete items as identified above and the related tax impacts, by the diluted weighted average number of common shares outstanding. EBITDA represents net income before interest expense, income taxes, amortization of intangible assets and depreciation and other amortization. Adjusted EBITDA represents EBITDA (as defined above) adjusted for discrete items as identified above. Acquisition Adjusted EBITDA represents Adjusted EBITDA plus the pre-acquisition portion of EBITDA for the trailing twelve months. Net debt is defined as principal amount of debt less debt issuance costs and less cash and cash equivalents. Free cash flow represents operating cash flow less capital expenditures. Adjusted net leverage ratio is calculated as net debt divided by trailing twelve month Acquisition Adjusted EBITDA.

The Company has presented forward-looking statements regarding Adjusted EBITDA margin. This non-GAAP financial measure is derived by excluding certain amounts, expenses or income, from the corresponding financial measure determined in accordance with GAAP. The determination of the amounts that are excluded from this non-GAAP financial measure is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period in reliance on the exception provided by item 10(e)(1)(i)(B) of Regulation S-K. We are unable to present a quantitative reconciliation of forward-looking Adjusted EBITDA margin to its most directly comparable forward-looking GAAP financial measure because such information is not available, and management cannot reliably predict all of the necessary components of such GAAP measure without unreasonable effort or expense. In addition, we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on the company's future financial results. This non-GAAP financial measure is a preliminary estimate and is subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between the company's actual results and preliminary financial data set forth above may be material.

CONFERENCE CALL

A conference call will be held Wednesday, November 6, 2024 at 8:30 A.M. ET to review the Company’s financial results, discuss recent events and conduct a question-and-answer session.

A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of VSE’s website at . To listen to the live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software.

To participate in the live teleconference:

Domestic Live:

(844) 826-3035

International Live:

(412) 317-5195

Audio Webcast:

To listen to a replay of the teleconference through November 20, 2024:

Domestic Replay:

(844) 512-2921

International Replay:

(412) 317-6671

Replay PIN Number:

10189934

ABOUT VSE CORPORATION

VSE is a leading provider of aftermarket distribution and repair services. Operating through its two key segments, VSE significantly enhances the productivity and longevity of its customers' high-value, business-critical assets. The Aviation segment is a leading provider of aftermarket parts distribution and maintenance, repair, and overhaul ("MRO") services for components and engine accessories to commercial, business, and general aviation operators. The Fleet segment specializes in part distribution, engineering solutions, and supply chain management services catered to the medium and heavy-duty fleet market. For more detailed information, please visit VSE's website at .

Please refer to the Form 10-Q that will be filed with the Securities and Exchange Commission ("SEC") on or about November 6, 2024 for more details on our third quarter 2024 results. Also, refer to VSE’s Annual Report on Form 10-K for the year ended December 31, 2023 for further information and analysis of VSE’s financial condition and results of operations. VSE encourages investors and others to review the detailed reporting and disclosures contained in VSE’s public filings for additional discussion about the status of customer programs and contract awards, risks, revenue sources and funding, dependence on material customers, and management’s discussion of short- and long-term business challenges and opportunities.

FORWARD LOOKING STATEMENTS

This document contains certain forward-looking statements. These forward-looking statements, which are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and other factors that may cause VSE’s actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this document. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that actual results will not differ materially from these expectations. “Forward-looking� statements, as such term is defined by the SEC in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as “may,� “will,� “expect,� “believe,� “anticipate,� “intend,� “forecast,� “seek,� “plan,� “predict,� “project,� “could,� “estimate,� “might,� “continue,� “seeking� or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, factors identified in our reports filed or expected to be filed with the SEC including our Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent filings made with the SEC. All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Readers are cautioned not to place undue reliance on these forward looking-statements, which reflect management's analysis only as of the date hereof. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

VSE Corporation and Subsidiaries

Unaudited Consolidated Balance Sheets

(in thousands except share and per share amounts)

Ìý

Ìý

Ìý

September 30,

Ìý

December 31,

Ìý

Ìý

2024

Ìý

2023

Assets

Ìý

Ìý

Ìý

Ìý

Current assets:

Ìý

Ìý

Ìý

Ìý

Cash and cash equivalents

Ìý

$

7,907

Ìý

$

7,768

Receivables (net of allowance of $6.8 million and $3.4 million, respectively)

Ìý

Ìý

162,665

Ìý

Ìý

127,958

Contract assets

Ìý

Ìý

29,549

Ìý

Ìý

8,049

Inventories

Ìý

Ìý

533,773

Ìý

Ìý

500,864

Other current assets

Ìý

Ìý

41,403

Ìý

Ìý

36,389

Current assets held-for-sale

Ìý

Ìý

�

Ìý

Ìý

93,002

Total current assets

Ìý

Ìý

775,297

Ìý

Ìý

774,030

Property and equipment (net of accumulated depreciation of $45.4 million and $37.4 million, respectively)

Ìý

Ìý

74,631

Ìý

Ìý

58,076

Intangible assets (net of accumulated amortization of $78.8 million and $135.6 million, respectively)

Ìý

Ìý

160,580

Ìý

Ìý

114,130

Goodwill

Ìý

Ìý

390,636

Ìý

Ìý

351,781

Operating lease right-of-use asset

Ìý

Ìý

33,549

Ìý

Ìý

28,684

Other assets

Ìý

Ìý

29,306

Ìý

Ìý

23,637

Total assets

Ìý

$

1,463,999

Ìý

$

1,350,338

Ìý

Ìý

Ìý

Ìý

Ìý

Liabilities and Stockholders' equity

Ìý

Ìý

Ìý

Ìý

Current liabilities:

Ìý

Ìý

Ìý

Ìý

Current portion of long-term debt

Ìý

$

30,000

Ìý

$

22,500

Accounts payable

Ìý

Ìý

122,740

Ìý

Ìý

173,036

Accrued expenses and other current liabilities

Ìý

Ìý

55,524

Ìý

Ìý

36,383

Dividends payable

Ìý

Ìý

1,843

Ìý

Ìý

1,576

Current liabilities held-for-sale

Ìý

Ìý

�

Ìý

Ìý

53,391

Total current liabilities

Ìý

Ìý

210,107

Ìý

Ìý

286,886

Long-term debt, less current portion

Ìý

Ìý

420,341

Ìý

Ìý

406,844

Deferred compensation

Ìý

Ìý

7,683

Ìý

Ìý

7,939

Long-term operating lease obligations

Ìý

Ìý

29,061

Ìý

Ìý

24,959

Deferred tax liabilities

Ìý

Ìý

�

Ìý

Ìý

6,985

Other long-term liabilities

Ìý

Ìý

9,011

Ìý

Ìý

�

Total liabilities

Ìý

Ìý

676,203

Ìý

Ìý

733,613

Commitments and contingencies

Ìý

Ìý

Ìý

Ìý

Stockholders' equity:

Ìý

Ìý

Ìý

Ìý

Common stock, par value $0.05 per share; authorized 23,000,000 shares; issued and outstanding 18,428,955 and 15,756,918, respectively

Ìý

Ìý

921

Ìý

Ìý

788

Additional paid-in capital

Ìý

Ìý

404,983

Ìý

Ìý

229,103

Retained earnings

Ìý

Ìý

381,680

Ìý

Ìý

384,702

Accumulated other comprehensive loss

Ìý

Ìý

212

Ìý

Ìý

2,132

Total stockholders' equity

Ìý

Ìý

787,796

Ìý

Ìý

616,725

Total liabilities and stockholders' equity

Ìý

$

1,463,999

Ìý

$

1,350,338

VSE Corporation and Subsidiaries

Ìý

Unaudited Consolidated Statements of (Loss) Income

(in thousands except share and per share amounts)

Ìý

Ìý

Ìý

Three months ended September 30,

Ìý

Nine months ended September 30,

Ìý

Ìý

Ìý

2024

Ìý

Ìý

Ìý

2023

Ìý

Ìý

Ìý

2024

Ìý

Ìý

Ìý

2023

Ìý

Revenues:

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Products

Ìý

$

188,334

Ìý

Ìý

$

184,691

Ìý

Ìý

$

564,092

Ìý

Ìý

$

505,135

Ìý

Services

Ìý

Ìý

85,279

Ìý

Ìý

Ìý

46,662

Ìý

Ìý

Ìý

217,019

Ìý

Ìý

Ìý

120,028

Ìý

Total revenues

Ìý

Ìý

273,613

Ìý

Ìý

Ìý

231,353

Ìý

Ìý

Ìý

781,111

Ìý

Ìý

Ìý

625,163

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Costs and operating expenses:

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Products

Ìý

Ìý

166,139

Ìý

Ìý

Ìý

160,326

Ìý

Ìý

Ìý

495,177

Ìý

Ìý

Ìý

442,714

Ìý

Services

Ìý

Ìý

77,014

Ìý

Ìý

Ìý

40,004

Ìý

Ìý

Ìý

197,454

Ìý

Ìý

Ìý

102,908

Ìý

Selling, general and administrative expenses

Ìý

Ìý

2,605

Ìý

Ìý

Ìý

2,556

Ìý

Ìý

Ìý

9,721

Ìý

Ìý

Ìý

6,121

Ìý

Lease abandonment and termination (benefits) costs

Ìý

Ìý

(652

)

Ìý

Ìý

�

Ìý

Ìý

Ìý

12,205

Ìý

Ìý

Ìý

�

Ìý

Amortization of intangible assets

Ìý

Ìý

4,809

Ìý

Ìý

Ìý

3,203

Ìý

Ìý

Ìý

12,550

Ìý

Ìý

Ìý

10,743

Ìý

Total costs and operating expenses

Ìý

Ìý

249,915

Ìý

Ìý

Ìý

206,089

Ìý

Ìý

Ìý

727,107

Ìý

Ìý

Ìý

562,486

Ìý

Operating income

Ìý

Ìý

23,698

Ìý

Ìý

Ìý

25,264

Ìý

Ìý

Ìý

54,004

Ìý

Ìý

Ìý

62,677

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Interest expense, net

Ìý

Ìý

8,983

Ìý

Ìý

Ìý

8,459

Ìý

Ìý

Ìý

27,996

Ìý

Ìý

Ìý

21,805

Ìý

Income from continuing operations before income taxes

Ìý

Ìý

14,715

Ìý

Ìý

Ìý

16,805

Ìý

Ìý

Ìý

26,008

Ìý

Ìý

Ìý

40,872

Ìý

Provision for income taxes

Ìý

Ìý

3,065

Ìý

Ìý

Ìý

4,694

Ìý

Ìý

Ìý

5,035

Ìý

Ìý

Ìý

10,554

Ìý

Net income from continuing operations

Ìý

Ìý

11,650

Ìý

Ìý

Ìý

12,111

Ìý

Ìý

Ìý

20,973

Ìý

Ìý

Ìý

30,318

Ìý

Loss from discontinued operations, net of tax

Ìý

Ìý

�

Ìý

Ìý

Ìý

(2,554

)

Ìý

Ìý

(18,711

)

Ìý

Ìý

(2,789

)

Net income

Ìý

$

11,650

Ìý

Ìý

$

9,557

Ìý

Ìý

$

2,262

Ìý

Ìý

$

27,529

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Earnings per share:

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Basic

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Continuing operations

Ìý

$

0.63

Ìý

Ìý

$

0.81

Ìý

Ìý

$

1.22

Ìý

Ìý

$

2.23

Ìý

Discontinued operations

Ìý

Ìý

�

Ìý

Ìý

Ìý

(0.17

)

Ìý

Ìý

(1.09

)

Ìý

Ìý

(0.20

)

Ìý

Ìý

$

0.63

Ìý

Ìý

$

0.64

Ìý

Ìý

$

0.13

Ìý

Ìý

$

2.03

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Diluted

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Continuing operations

Ìý

$

0.63

Ìý

Ìý

$

0.80

Ìý

Ìý

$

1.22

Ìý

Ìý

$

2.22

Ìý

Discontinued operations

Ìý

Ìý

�

Ìý

Ìý

Ìý

(0.17

)

Ìý

Ìý

(1.09

)

Ìý

Ìý

(0.20

)

Ìý

Ìý

$

0.63

Ìý

Ìý

$

0.63

Ìý

Ìý

$

0.13

Ìý

Ìý

$

2.02

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Weighted average shares outstanding:

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Basic

Ìý

Ìý

18,425,643

Ìý

Ìý

Ìý

15,001,908

Ìý

Ìý

Ìý

17,125,502

Ìý

Ìý

Ìý

13,585,391

Ìý

Diluted

Ìý

Ìý

18,479,123

Ìý

Ìý

Ìý

15,050,062

Ìý

Ìý

Ìý

17,211,825

Ìý

Ìý

Ìý

13,639,064

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Dividends declared per share

Ìý

$

0.10

Ìý

Ìý

$

0.10

Ìý

Ìý

$

0.30

Ìý

Ìý

$

0.30

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

VSE Corporation and Subsidiaries

Ìý

Unaudited Consolidated Statements of Cash Flows

(in thousands)

Ìý

Ìý

Ìý

Nine months ended September 30,

Ìý

Ìý

Ìý

2024

Ìý

Ìý

Ìý

2023

Ìý

Ìý

Ìý

(a)

Ìý

(a)

Cash flows from operating activities:

Ìý

Ìý

Ìý

Ìý

Net income

Ìý

$

2,262

Ìý

Ìý

$

27,529

Ìý

Adjustments to reconcile net income to net cash used in operating activities:

Ìý

Ìý

Ìý

Ìý

Depreciation and amortization

Ìý

Ìý

20,411

Ìý

Ìý

Ìý

17,461

Ìý

Amortization of debt issuance cost

Ìý

Ìý

997

Ìý

Ìý

Ìý

1,028

Ìý

Deferred taxes

Ìý

Ìý

(9,840

)

Ìý

Ìý

(1,179

)

Stock-based compensation

Ìý

Ìý

6,497

Ìý

Ìý

Ìý

5,811

Ìý

Provision for inventory

Ìý

Ìý

�

Ìý

Ìý

Ìý

742

Ìý

Impairment and loss on sale of business segment

Ìý

Ìý

16,867

Ìý

Ìý

Ìý

�

Ìý

Loss on sale of property and equipment

Ìý

Ìý

421

Ìý

Ìý

Ìý

�

Ìý

Lease abandonment and termination costs

Ìý

Ìý

12,205

Ìý

Ìý

Ìý

�

Ìý

Changes in operating assets and liabilities, net of impact of acquisitions:

Ìý

Ìý

Ìý

Ìý

Receivables

Ìý

Ìý

(32,720

)

Ìý

Ìý

(25,304

)

Contract assets

Ìý

Ìý

5,267

Ìý

Ìý

Ìý

5,409

Ìý

Inventories

Ìý

Ìý

(26,808

)

Ìý

Ìý

(60,867

)

Other current assets and other assets

Ìý

Ìý

(8,232

)

Ìý

Ìý

2,122

Ìý

Operating lease assets and liabilities, net

Ìý

Ìý

(10,442

)

Ìý

Ìý

(262

)

Accounts payable and deferred compensation

Ìý

Ìý

(67,860

)

Ìý

Ìý

(16,717

)

Accrued expenses and other liabilities

Ìý

Ìý

4,563

Ìý

Ìý

Ìý

(5,544

)

Net cash used in operating activities

Ìý

Ìý

(86,412

)

Ìý

Ìý

(49,771

)

Cash flows from investing activities:

Ìý

Ìý

Ìý

Ìý

Purchases of property and equipment

Ìý

Ìý

(17,439

)

Ìý

Ìý

(10,795

)

Proceeds from the sale of business segment

Ìý

Ìý

42,118

Ìý

Ìý

Ìý

�

Ìý

Proceeds from the payment on notes receivable

Ìý

Ìý

�

Ìý

Ìý

Ìý

1,557

Ìý

Cash paid for acquisitions, net of cash acquired

Ìý

Ìý

(112,206

)

Ìý

Ìý

(218,674

)

Net cash used in investing activities

Ìý

Ìý

(87,527

)

Ìý

Ìý

(227,912

)

Cash flows from financing activities:

Ìý

Ìý

Ìý

Ìý

Borrowings on bank credit facilities

Ìý

Ìý

527,165

Ìý

Ìý

Ìý

610,188

Ìý

Repayments on bank credit facilities

Ìý

Ìý

(507,165

)

Ìý

Ìý

(435,298

)

Proceeds from issuance of common stock

Ìý

Ìý

161,693

Ìý

Ìý

Ìý

129,566

Ìý

Payment of debt financing costs

Ìý

Ìý

�

Ìý

Ìý

Ìý

(1,448

)

Payment of taxes for equity transactions

Ìý

Ìý

(2,758

)

Ìý

Ìý

(1,113

)

Dividends paid

Ìý

Ìý

(5,019

)

Ìý

Ìý

(3,861

)

Net cash provided by financing activities

Ìý

Ìý

173,916

Ìý

Ìý

Ìý

298,034

Ìý

Net (decrease) increase in cash and cash equivalents

Ìý

Ìý

(23

)

Ìý

Ìý

20,351

Ìý

Cash and cash equivalents, beginning of period

Ìý

Ìý

7,930

Ìý

Ìý

Ìý

478

Ìý

Cash and cash equivalents, end of period

Ìý

$

7,907

Ìý

Ìý

$

20,829

Ìý

Ìý

(a) The cash flows related to discontinued operations and held-for-sale assets and liabilities have not been segregated, and remain included in the major classes of assets and liabilities. Accordingly, the Consolidated Statements of Cash Flows include the results of continuing and discontinued operations.

Ìý

INVESTOR CONTACT

Michael Perlman

VP, Investor Relations & Treasury

T: (954) 547-0480 M: (561) 281-0247

[email protected]

Source: VSE Corporation

Vse Corp

NASDAQ:VSEC

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2.92B
20.07M
2.3%
111.47%
10.43%
Aerospace & Defense
Services-engineering Services
United States
MIRAMAR