Le Lézard
Classified in: Transportation, Business
Subjects: EARNINGS, Conference Call, Webcast

VSE Corporation Announces Third Quarter 2023 Results


VSE Corporation (NASDAQ: VSEC, "VSE", or the "Company"), a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air and land transportation assets for commercial and government markets, announced today results for the third quarter 2023.

THIRD QUARTER 2023 RESULTS1

(As compared to the Third Quarter 2022; excludes discontinued operations of Federal & Defense segment)

1 From continuing operations

MANAGEMENT COMMENTARY

"Third quarter results reflected record financial performance in our Aviation segment and continued progress and disciplined revenue growth and customer diversification in our Fleet segment," said John Cuomo, President and CEO of VSE Corporation. "We delivered our fourth consecutive quarter of record revenue and profit in our Aviation segment, driven by strong program execution, continued market share gains, expansion of our product lines and service capabilities, and robust end-market activity. In our Fleet segment, we continue to grow and scale our commercial business with contributions from our newly opened Memphis distribution center of excellence, all while continuing to grow and support legacy fleets and customers."

Steve Griffin, CFO of VSE Corporation, commented, "We made strong progress against our financial and operating plans, which drove improved overall margins and cash flow in the third quarter. Our secondary equity offering in July, along with improved cash generation in the third quarter, allowed us to pay down debt and execute on two inorganic strategic growth initiatives, including a transformational investment with Honeywell. Our pro forma net leverage ratio was 3.7x at the end of the third quarter and is on track to improve to below 3.5x by the end of the year, driven by an acceleration in cash generation and strong operating and earnings performance."

STRATEGIC UPDATE

Acquisition of Honeywell Fuel Control Systems License Agreement

Acquisition of Desser Aerospace

Federal & Defense Segment

BALANCE SHEET OPTIMIZATION

THIRD QUARTER SEGMENT RESULTS

Aviation segment revenue increased 48% year-over-year to a record $152.4 million in the third quarter 2023. The year-over-year revenue improvement was attributable to strong program execution of new and existing distribution awards, increased MRO activity, the addition of Desser Aerospace, and robust end-market activity. Aviation distribution and repair revenue increased 46% and 54%, respectively, in the third quarter 2023, versus the prior-year period. The Aviation segment reported operating income of $21.0 million in the third quarter, compared to $10.0 million in the same period of 2022. Segment Adjusted EBITDA increased by 87% in the third quarter to $25.3 million, versus $13.6 million in the prior-year period. Adjusted EBITDA margin was 16.6%, an increase of approximately 340 basis points versus the prior-year period, driven primarily by favorable price and product mix, along with strong MRO revenue growth.

Fleet segment revenue increased 22% year-over-year to $79.0 million in the third quarter 2023. Revenue from commercial customers increased 47% on a year-over-year basis, driven by growth in e-commerce fulfillment and commercial fleet sales. Commercial revenue represented 47% of total Fleet segment revenue in the period, an approximate 800 basis point increase year-over-year. Revenue from the United States Postal Service (USPS) increased approximately 6% on a year-over-year basis, driven by growth of the installed base and increased support of legacy vehicle fleets. The Fleet segment reported operating income of $8.5 million in the third quarter, compared to $6.5 million in the same period of 2022. Segment Adjusted EBITDA increased 5% year-over-year to $9.2 million, and Adjusted EBITDA margin declined approximately 190 basis points to 11.6%, primarily impacted by customer and product mix and under-absorption of fixed costs at the newly launched distribution and e-commerce fulfillment facility.

FINANCIAL RESOURCES AND LIQUIDITY

As of September 30, 2023, the Company had $89 million in cash and unused commitment availability under its $350 million revolving credit facility maturing in 2025. As of September 30, 2023, VSE had total net debt outstanding of $440 million. Pro forma net leverage2 was approximately 3.7 times as of the end of the third quarter.

VSE anticipates the pro forma net leverage ratio to be below 3.5 times by the end of the fourth quarter 2023, following Adjusted EBITDA contribution and accelerated free cash flow generation in the fourth quarter.

In July 2023, the Company amended its credit facility with its lending syndicate in connection with the Desser Aerospace acquisition. The amendment provided for an incremental $90 million Term Loan A and a revision of certain financial covenants of the existing facility.

2 Pro forma net leverage trailing-twelve-month Adjusted EBITDA includes contributions from prior acquisitions and the recent purchase of the Honeywell fuel control license

GUIDANCE

VSE increased its full year 2023 revenue growth and its Adjusted EBITDA margin guidance for its Aviation segment, reaffirmed its revenue growth and Adjusted EBITDA margin guidance for its Fleet segment, and expects positive free cash flow to accelerate in the fourth quarter. The guidance is as follows:

THIRD QUARTER RESULTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

(in thousands, except per share data)

 

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

Revenues

 

$

231,353

 

$

167,379

 

38.2

%

 

$

625,163

 

$

497,460

 

25.7

%

Operating income

 

$

25,264

 

$

15,109

 

67.2

%

 

$

62,677

 

$

37,663

 

66.4

%

Income from continuing operations

 

$

12,111

 

$

7,699

 

57.3

%

 

$

30,318

 

$

18,743

 

61.8

%

EPS (Diluted)

 

$

0.80

 

$

0.60

 

33.3

%

 

$

2.22

 

$

1.46

 

52.1

%

THIRD QUARTER SEGMENT RESULTS

The following is a summary of revenues and operating income (loss) for the three and nine months ended September 30, 2023 and September 30, 2022:

 

 

Three months ended September 30,

 

Nine months ended September 30,

(in thousands)

 

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

152,355

 

 

$

102,625

 

 

48.5

%

 

$

390,319

 

 

$

300,934

 

 

29.7

%

Fleet

 

 

78,998

 

 

 

64,754

 

 

22.0

%

 

 

234,844

 

 

 

196,526

 

 

19.5

%

Total revenues

 

$

231,353

 

 

$

167,379

 

 

38.2

%

 

$

625,163

 

 

$

497,460

 

 

25.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

20,951

 

 

$

10,017

 

 

109.2

%

 

$

52,397

 

 

$

24,089

 

 

117.5

%

Fleet

 

 

8,531

 

 

 

6,539

 

 

30.5

%

 

 

22,284

 

 

 

18,286

 

 

21.9

%

Corporate/unallocated expenses

 

 

(4,218

)

 

 

(1,447

)

 

191.5

%

 

 

(12,004

)

 

 

(4,712

)

 

154.8

%

Operating income

 

$

25,264

 

 

$

15,109

 

 

67.2

%

 

$

62,677

 

 

$

37,663

 

 

66.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company reported $4.7 million and $10.8 million of total capital expenditures for three and nine months ended September 30, 2023, 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

Reconciliation of Adjusted Income from Continuing Operations and Adjusted EPS to Income from Continuing Operations

 

 

Three months ended September 30,

 

Nine months ended September 30,

(in thousands)

 

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

Income from continuing operations

 

$

12,111

 

 

$

7,699

 

 

57.3

%

 

$

30,318

 

 

$

18,743

 

 

61.8

%

Adjustments to income from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

Non-recurring professional fees

 

 

300

 

 

 

?

 

 

?

%

 

 

300

 

 

 

?

 

 

?

%

Debt issuance costs

 

 

266

 

 

 

?

 

 

?

%

 

 

266

 

 

 

?

 

 

?

%

Acquisition, integration and restructuring costs

 

 

1,700

 

 

 

283

 

 

500.7

%

 

 

3,800

 

 

 

762

 

 

398.7

%

Russia/Ukraine conflict

 

 

?

 

 

 

?

 

 

?

%

 

 

?

 

 

 

2,335

 

 

(100.0

)%

 

 

 

14,377

 

 

 

7,982

 

 

80.1

%

 

 

34,684

 

 

 

21,840

 

 

58.8

%

Tax impact of adjusted items

 

 

(566

)

 

 

(71

)

 

697.2

%

 

 

(1,090

)

 

 

(773

)

 

41.0

%

Adjusted income from continuing operations

 

$

13,811

 

 

$

7,911

 

 

74.6

%

 

$

33,594

 

 

$

21,067

 

 

59.5

%

Weighted average dilutive shares

 

 

15,050

 

 

 

12,834

 

 

17.3

%

 

 

13,639

 

 

 

12,816

 

 

6.4

%

Adjusted EPS (Diluted)

 

$

0.92

 

 

$

0.62

 

 

48.4

%

 

$

2.46

 

 

$

1.64

 

 

50.0

%

Reconciliation of Consolidated EBITDA and Adjusted EBITDA to Income from Continuing Operations

 

 

Three months ended September 30,

 

Nine months ended September 30,

(in thousands)

 

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

Income from continuing operations

 

$

12,111

 

$

7,699

 

57.3

%

 

$

30,318

 

$

18,743

 

61.8

%

Interest expense

 

 

8,459

 

 

4,821

 

75.5

%

 

 

21,805

 

 

12,305

 

77.2

%

Income taxes

 

 

4,694

 

 

2,589

 

81.3

%

 

 

10,554

 

 

6,615

 

59.5

%

Amortization of intangible assets

 

 

3,203

 

 

3,813

 

(16.0

)%

 

 

10,743

 

 

11,923

 

(9.9

)%

Depreciation and other amortization

 

 

1,836

 

 

1,551

 

18.4

%

 

 

4,869

 

 

3,978

 

22.4

%

EBITDA

 

 

30,303

 

 

20,473

 

48.0

%

 

 

78,289

 

 

53,564

 

46.2

%

Non-recurring professional fees

 

 

300

 

 

?

 

?

%

 

 

300

 

 

?

 

?

%

Acquisition, integration and restructuring costs

 

 

1,700

 

 

283

 

500.7

%

 

 

3,800

 

 

762

 

398.7

%

Russia/Ukraine conflict

 

 

?

 

 

?

 

?

%

 

 

?

 

 

2,335

 

(100.0

)%

Adjusted EBITDA

 

$

32,303

 

$

20,756

 

55.6

%

 

$

82,389

 

$

56,661

 

45.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Summary

(in thousands)

Three months ended September 30,

 

Nine months ended September 30,

 

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

Aviation

$

25,320

 

 

$

13,570

 

 

86.6

%

 

$

63,453

 

 

$

36,369

 

 

74.5

%

Fleet

 

9,193

 

 

 

8,719

 

 

5.4

%

 

 

26,894

 

 

 

25,251

 

 

6.5

%

Adjusted Corporate expenses (1)

 

(2,210

)

 

 

(1,533

)

 

44.2

%

 

 

(7,958

)

 

 

(4,959

)

 

60.5

%

Adjusted EBITDA

$

32,303

 

 

$

20,756

 

 

55.6

%

 

$

82,389

 

 

$

56,661

 

 

45.4

%

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

Reconciliation of Segment EBITDA and Adjusted EBITDA to Operating Income

 

 

Three months ended September 30,

 

Nine months ended September 30,

(in thousands)

 

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

Aviation

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

20,951

 

$

10,017

 

109.2

%

 

$

52,397

 

$

24,089

 

117.5

%

Depreciation and amortization

 

 

4,329

 

 

3,413

 

26.8

%

 

 

11,016

 

 

9,558

 

15.3

%

EBITDA

 

 

25,280

 

 

13,430

 

88.2

%

 

 

63,413

 

 

33,647

 

88.5

%

Acquisition, integration and restructuring costs

 

 

40

 

 

140

 

(71.4

)%

 

 

40

 

 

387

 

(89.7

)%

Russia/Ukraine conflict

 

 

?

 

 

?

 

?

%

 

 

?

 

 

2,335

 

(100.0

)%

Adjusted EBITDA

 

$

25,320

 

$

13,570

 

86.6

%

 

$

63,453

 

$

36,369

 

74.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Fleet

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

8,531

 

$

6,539

 

30.5

%

 

$

22,284

 

$

18,286

 

21.9

%

Depreciation and amortization

 

 

662

 

 

2,037

 

(67.5

)%

 

 

4,452

 

 

6,611

 

(32.7

)%

EBITDA

 

$

9,193

 

$

8,576

 

7.2

%

 

 

26,736

 

 

24,897

 

7.4

%

Acquisition, integration and restructuring costs

 

 

?

 

 

143

 

(100.0

)%

 

 

158

 

 

354

 

(55.4

)%

Adjusted EBITDA

 

$

9,193

 

$

8,719

 

5.4

%

 

$

26,894

 

$

25,251

 

6.5

%

Reconciliation of Operating Cash to Free Cash Flow

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

(in thousands)

 

2023

 

2022

 

2023

 

2022

Net cash used in operating activities

 

$

15,320

 

 

$

15,932

 

 

$

(49,771

)

 

$

(4,206

)

Capital expenditures

 

 

(4,658

)

 

 

(4,670

)

 

 

(10,795

)

 

 

(7,416

)

Free cash flow

 

$

10,662

 

 

$

11,262

 

 

$

(60,566

)

 

$

(11,622

)

Reconciliation of Debt to Net Debt

 

Three months ended

(in thousands)

March 31, 2023

 

June 30, 2023

 

September 30, 2023

Principal amount of debt

$

353,998

 

 

$

377,000

 

 

$

463,500

 

Debt issuance costs

 

(2,143

)

 

 

(1,890

)

 

 

(2,730

)

Cash and cash equivalents

 

(532

)

 

 

(4,163

)

 

 

(20,667

)

Net Debt

$

351,323

 

 

$

370,947

 

 

$

440,103

 

Net Leverage Ratio

 

Three months ended

($ in thousands)

March 31, 2023

 

June 30, 2023

 

September 30, 2023

Net Debt

$

351,323

 

$

370,947

 

$

440,103

TTM Adjusted EBITDA (1)

$

96,160

 

$

99,735

 

$

105,329

Net Leverage Ratio

3.7 x

 

3.7 x

 

4.2 x

 

 

 

 

 

 

TTM Adjusted EBITDA Proforma (2)

$

97,372

 

$

100,531

 

$

120,080

Pro forma Net Leverage Ratio

3.6 x

 

3.7 x

 

3.7 x

(1) TTM Adjusted EBITDA is defined as Adjusted EBITDA for the most recent twelve (12) month period and includes contributions from FDS.

(2) TTM Pro Forma Adjusted EBITDA includes pre-acquisition portion of EBITDA for the trailing twelve months that is 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, net debt 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 including any earn-out adjustments, loss on sale of a business entity and certain assets, gain on sale of property, 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. Net debt is defined as total debt less cash and cash equivalents. Free cash flow represents operating cash flow less capital expenditures.

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 Thursday, November 2, 2023 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 https://ir.vsecorp.com. 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:

https://viavid.webcasts.com/starthere.jsp?ei=1634643&tp_key=a94e85f508

To listen to a replay of the teleconference through November 16, 2023:

Domestic Replay:

(844) 512-2921

International Replay:

(412) 317-6671

Replay PIN Number:

10182410

ABOUT VSE CORPORATION

VSE is a leading provider of aftermarket distribution and repair services for land, sea and air transportation assets for government and commercial markets. Core services include MRO services, parts distribution, supply chain management and logistics, engineering support, and consulting and training services for global commercial, federal, military and defense customers. VSE also provides information technology and energy consulting services. For additional information regarding VSE's services and products, visit www.vsecorp.com.

AVIATION

Distribution & MRO Services

VSE's Aviation segment provides aftermarket MRO and distribution services to commercial, business and general aviation, cargo, military/defense and rotorcraft customers globally. Core services include parts distribution, component and engine accessory MRO services, rotable exchange and supply chain services.

FLEET

Distribution & Fleet Services

VSE's Fleet segment provides parts, inventory management, e-commerce fulfillment, logistics, supply chain support and other services to the commercial aftermarket medium- and heavy-duty truck market, the United States Postal Service (USPS), and the United States Department of Defense. Core services include parts distribution, sourcing, IT solutions, customized fleet logistics, warehousing, kitting, just-in-time supply chain management, alternative product sourcing, engineering and technical support.

Please refer to the Form 10-Q that will be filed with the Securities and Exchange Commission (SEC) on or about November 2, 2023 for more details on our third quarter 2023 results. Also, refer to VSE's Annual Report on Form 10-K for the year ended December 31, 2022 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, 2022. 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)

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2023

 

2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

20,667

 

$

305

Receivables (net of allowance of $3.5 million and $2.0 million, respectively)

 

 

129,113

 

 

90,599

Unbilled receivables

 

 

6,257

 

 

7,409

Inventories

 

 

494,368

 

 

380,438

Other current assets

 

 

21,937

 

 

15,202

Current assets held-for-sale

 

 

98,021

 

 

54,925

Total current assets

 

 

770,363

 

 

548,878

Property and equipment (net of accumulated depreciation of $35.4 million and $30.7 million, respectively)

 

 

53,269

 

 

40,501

Intangible assets (net of accumulated amortization of $132.0 million and $121.3 million, respectively)

 

 

118,865

 

 

86,558

Goodwill

 

 

345,726

 

 

217,262

Operating lease right-of-use asset

 

 

25,166

 

 

21,558

Other assets

 

 

29,591

 

 

29,019

Non-current assets held-for-sale

 

$

?

 

$

56,013

Total assets

 

$

1,342,980

 

$

999,789

 

 

 

 

 

Liabilities and Stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

19,000

 

$

10,000

Accounts payable

 

 

137,788

 

 

128,504

Accrued expenses and other current liabilities

 

 

33,387

 

 

31,889

Dividends payable

 

 

1,575

 

 

1,282

Current liabilities held-for-sale

 

 

60,398

 

 

52,929

Total current liabilities

 

 

252,148

 

 

224,604

Long-term debt, less current portion

 

 

441,770

 

 

276,300

Deferred compensation

 

 

7,470

 

 

7,398

Long-term lease obligations under operating leases

 

 

21,961

 

 

19,154

Deferred tax liabilities

 

 

9,671

 

 

4,986

Other long-term liabilities

 

 

440

 

 

?

Non-current liabilities held-for-sale

 

 

?

 

 

17,821

Total liabilities

 

 

733,460

 

 

550,263

Commitments and contingencies

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock, par value $0.05 per share, authorized 23,000,000 shares; issued and outstanding 15,747,289 and 12,816,613, respectively

 

 

787

 

 

641

Additional paid-in capital

 

 

227,083

 

 

92,620

Retained earnings

 

 

374,672

 

 

351,297

Accumulated other comprehensive loss

 

 

6,978

 

 

4,968

Total stockholders' equity

 

 

609,520

 

 

449,526

Total liabilities and stockholders' equity

 

$

1,342,980

 

$

999,789

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Income

(in thousands except share and per share amounts)

 

 

 

 

 

 

 

For the three months
ended September 30,

 

For the nine months
ended September 30,

 

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Products

 

$

184,691

 

 

$

136,333

 

$

505,135

 

 

$

414,505

Services

 

 

46,662

 

 

 

31,046

 

 

120,028

 

 

 

82,955

Total revenues

 

 

231,353

 

 

 

167,379

 

 

625,163

 

 

 

497,460

 

 

 

 

 

 

 

 

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

Products

 

 

160,326

 

 

 

121,620

 

 

442,714

 

 

 

372,334

Services

 

 

40,004

 

 

 

26,243

 

 

102,908

 

 

 

73,768

Selling, general and administrative expenses

 

 

2,556

 

 

 

594

 

 

6,121

 

 

 

1,772

Amortization of intangible assets

 

 

3,203

 

 

 

3,813

 

 

10,743

 

 

 

11,923

Total costs and operating expenses

 

 

206,089

 

 

 

152,270

 

 

562,486

 

 

 

459,797

Operating income

 

 

25,264

 

 

 

15,109

 

 

62,677

 

 

 

37,663

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

8,459

 

 

 

4,821

 

 

21,805

 

 

 

12,305

Income from continuing operations before income taxes

 

 

16,805

 

 

 

10,288

 

 

40,872

 

 

 

25,358

Provision for income taxes

 

 

4,694

 

 

 

2,589

 

 

10,554

 

 

 

6,615

Income from continuing operations

 

$

12,111

 

 

$

7,699

 

$

30,318

 

 

$

18,743

(Loss) income from discontinued operations, net of tax

 

$

(2,554

)

 

$

1,720

 

$

(2,789

)

 

$

4,468

Net income

 

$

9,557

 

 

$

9,419

 

$

27,529

 

 

$

23,211

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.81

 

 

$

0.61

 

$

2.23

 

 

$

1.47

Discontinued operations

 

 

(0.17

)

 

 

0.13

 

 

(0.20

)

 

 

0.35

 

 

$

0.64

 

 

$

0.74

 

$

2.03

 

 

$

1.82

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.80

 

 

$

0.60

 

$

2.22

 

 

$

1.46

Discontinued operations

 

 

(0.17

)

 

 

0.13

 

 

(0.20

)

 

 

0.35

 

 

$

0.63

 

 

$

0.73

 

$

2.02

 

 

$

1.81

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

15,001,908

 

 

 

12,797,727

 

 

13,585,391

 

 

 

12,772,731

Diluted

 

 

15,050,062

 

 

 

12,834,084

 

 

13,639,064

 

 

 

12,816,319

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.10

 

 

$

0.10

 

$

0.30

 

 

$

0.30

 

 

 

 

 

 

 

 

 

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

 

 

 

 

For the nine months ended
September 30,

 

 

2023

 

2022

 

 

(a)

 

(a)

Cash flows from operating activities:

 

 

 

 

Net income

 

$

27,529

 

 

$

23,211

 

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

 

 

 

 

Depreciation and amortization

 

 

17,461

 

 

 

18,648

 

Amortization of debt issuance cost

 

 

1,028

 

 

 

629

 

Deferred taxes

 

 

(1,179

)

 

 

(779

)

Stock-based compensation

 

 

5,811

 

 

 

3,597

 

Provision for inventory

 

 

742

 

 

 

1,094

 

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

 

 

 

 

Receivables, net

 

 

(25,304

)

 

 

(14,506

)

Unbilled Receivables, net

 

 

5,409

 

 

 

(12,202

)

Inventories, net

 

 

(60,867

)

 

 

(28,309

)

Other current assets and other assets

 

 

2,122

 

 

 

2,812

 

Operating lease assets and liabilities, net

 

 

(262

)

 

 

(844

)

Accounts payable and deferred compensation

 

 

(16,717

)

 

 

(171

)

Accrued expenses and other current and noncurrent liabilities

 

 

(5,544

)

 

 

2,614

 

Net cash used in operating activities

 

 

(49,771

)

 

 

(4,206

)

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(10,795

)

 

 

(7,416

)

Proceeds from the payment on notes receivable

 

 

1,557

 

 

 

4,235

 

Cash paid for acquisitions, net of cash acquired

 

 

(218,674

)

 

 

?

 

Net cash used in investing activities

 

 

(227,912

)

 

 

(3,181

)

Cash flows from financing activities:

 

 

 

 

Borrowings on bank credit facilities

 

 

610,188

 

 

 

358,051

 

Repayments on bank credit facilities

 

 

(435,298

)

 

 

(345,554

)

Proceeds from issuance of common stock

 

 

129,566

 

 

 

486

 

Earn-out obligation payments

 

 

?

 

 

 

(1,250

)

Payment of debt financing costs

 

 

(1,448

)

 

 

?

 

Payment of taxes for equity transactions

 

 

(1,113

)

 

 

(942

)

Dividends paid

 

 

(3,861

)

 

 

(3,832

)

Net cash provided by financing activities

 

 

298,034

 

 

 

6,959

 

Net increase (decrease) in cash and cash equivalents

 

 

20,351

 

 

 

(428

)

Cash and cash equivalents, beginning of period

 

 

478

 

 

 

518

 

Cash and cash equivalents, end of period

 

$

20,829

 

 

$

90

 

(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.

 


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