VSE Corporation Announces Strategic Actions to Expand Aviation Aftermarket and Enhance Growth and Profitability
Enters into a Definitive Agreement to
Completes the Divestiture of Substantially All of the Federal & Defense Segment
Initiates a Process to Explore and Evaluate Strategic Alternatives Involving the Fleet Segment
Pre-Announces Preliminary Fourth Quarter and Full-Year 2023 Financial Results and Provides Update on Full-Year 2024 Guidance
MANAGEMENT COMMENTARY
“Today marks another important milestone in the execution of VSE’s transformation,” said
ACQUISITION OF TURBINE CONTROLS, INC.
VSE announced today that it has signed a definitive agreement to acquire
FEDERAL AND DEFENSE DIVESTITURE UPDATE
VSE also announced today that the Company has completed the sale of substantially all of its Federal and Defense segment (“FDS”) operating assets. The FDS divestitures were completed in two transactions with two buyers for a total cash consideration of
REVIEW OF STRATEGIC ALTERNATIVES FOR THE FLEET SEGMENT
VSE has initiated a process to explore and evaluate strategic alternatives involving the Company’s Fleet segment with a view to enhance shareholder value (the “Strategic Process”). The Strategic Process could include, among other alternatives, a possible sale of the Fleet segment. The Company has not set a definitive timetable for the completion of the Strategic Process, and there can be no assurances that the process will result in a transaction. Any potential strategic alternative will be evaluated by the Board of Directors. The Company does not intend to discuss developments with respect to the evaluation process unless a transaction is approved, or disclosure becomes appropriate.
PRELIMINARY FOURTH QUARTER AND FULL YEAR 2023 RESULTS(1)
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4Q'23 (Preliminary -
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FY'23 (Preliminary -
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Revenue |
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GAAP Net Income |
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GAAP EPS (Diluted) |
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Adjusted EBITDA(2) |
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Adjusted EPS(2) |
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Free Cash Flow(2) |
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(1) |
From continuing operations |
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(2) |
Non-GAAP measures, see additional information at the end of this release regarding non-GAAP financial measures |
FULL YEAR 2024 GUIDANCE(3)
VSE estimates full year 2024 revenue growth and Adjusted EBITDA margin guidance for its Aviation segment. The guidance is as follows:
- Aviation segment full year 2024 revenue growth of 24% to 28%, as compared to the prior year.
- Aviation segment Adjusted EBITDA margin expected to be between 15% and 16%.
(3) |
VSE plans to update full year 2024 revenue growth and Adjusted EBITDA margin guidance in the second quarter after completing the acquisition of TCI. |
VSE estimates its full year 2024 revenue growth and Adjusted EBITDA margin guidance for its Fleet segment. The new guidance is as follows:
- Fleet segment full year 2024 revenue growth of 13% to 17%, as compared to the prior year.
- Fleet segment Adjusted EBITDA growth of 8% to 12%, as compared to the prior year.
ADVISORS
ABOUT
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 www.vsecorp.com.
FORWARD-LOOKING STATEMENTS
This press release 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 to vary materially from those indicated or anticipated by such statements. These forward-looking statements include, without limitation, the Company’s preliminary 2023 results, financial guidance for 2024 and the anticipated benefits the acquisition of Turbine Controls, the disposition of the Federal and Defense business and the strategic review with respect to the Fleet business. Many factors could cause actual results and performance to be materially different from any future results or performance, including, among others, the closing of our books for the fiscal year, our ability to execute on our strategic plan and realize the anticipated benefits of the acquisition of Turbine Controls, the disposition of the Federal and Defense business and the strategic review with respect to the Fleet business, and the other risk factors described in our reports filed or expected to be filed with the
PRELIMINARY RESULTS
Our actual operating results remain subject to the completion of our year-end closing process, which includes review by management and our audit committee. While carrying out such procedures, we may identify items that would require us to make adjustments to the preliminary estimates of our operating results set forth herein. As a result, our actual operating results could be outside of the ranges set forth herein and such differences could be material. The preliminary estimates of our financial results included herein have been prepared by, and are the responsibility of, our management. our independent registered public accountants have not completed their audit with respect to such preliminary estimates of our operating results. The information presented herein should not be considered a substitute for the financial information we file with the
NON-GAAP MEASURES
In addition to the financial measures prepared in accordance with
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, 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. 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.
NON-GAAP FINANCIAL INFORMATION
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Three months ended |
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For the years ended |
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($ in millions - unaudited) |
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2023 |
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2022 |
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2023 |
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2022 |
||||||||
Net income from continuing operations |
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$ |
12.8 |
|
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$ |
7.9 |
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|
$ |
43.2 |
|
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$ |
26.7 |
|
Adjustments to net income from continuing operations: |
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|
|
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||||||||
Non-recurring professional fees |
|
|
— |
|
|
|
— |
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|
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0.3 |
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|
— |
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Debt issuance costs |
|
|
0.2 |
|
|
|
— |
|
|
|
0.4 |
|
|
|
— |
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Acquisition, integration and restructuring costs |
|
|
0.6 |
|
|
|
0.5 |
|
|
|
4.4 |
|
|
|
1.3 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
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2.3 |
|
|
|
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13.6 |
|
|
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8.4 |
|
|
|
48.3 |
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|
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30.3 |
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Tax impact of adjusted items |
|
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(0.2 |
) |
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(0.1 |
) |
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(1.3 |
) |
|
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(0.9 |
) |
Adjusted net income from continuing operations |
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$ |
13.4 |
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$ |
8.3 |
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$ |
47.0 |
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$ |
29.4 |
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Weighted average dilutive shares |
|
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15.8 |
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|
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12.9 |
|
|
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14.2 |
|
|
|
12.8 |
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Adjusted EPS (Diluted) |
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$ |
0.85 |
|
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$ |
0.64 |
|
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$ |
3.31 |
|
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$ |
2.30 |
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(2) |
Adjustment represents a non-cash charge recorded to reduce the carrying amount of accounts receivable and inventory related to the |
Reconciliation of Approximate Consolidated EBITDA and Approximate Adjusted EBITDA to Approximate Net Income
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Three months ended |
For the years ended |
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($ in millions - unaudited) |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income from continuing operations |
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$ |
12.8 |
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$ |
7.9 |
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$ |
43.2 |
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$ |
26.7 |
Interest expense |
|
|
9.3 |
|
|
5.6 |
|
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31.1 |
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17.9 |
Income taxes |
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3.2 |
|
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2.4 |
|
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13.8 |
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9.1 |
Amortization of intangible assets |
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3.6 |
|
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3.8 |
|
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14.4 |
|
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15.7 |
Depreciation and amortization |
|
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1.9 |
|
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1.3 |
|
|
6.7 |
|
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5.3 |
EBITDA |
|
|
30.8 |
|
|
21.0 |
|
|
109.2 |
|
|
74.7 |
Non-recurring professional fees |
|
|
— |
|
|
— |
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0.3 |
|
|
— |
Acquisition, integration and restructuring costs |
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0.6 |
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0.5 |
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4.4 |
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1.3 |
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— |
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— |
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— |
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2.3 |
Adjusted EBITDA |
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$ |
31.4 |
|
$ |
21.5 |
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$ |
113.9 |
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$ |
78.3 |
(1) |
Adjustment represents a non-cash charge recorded to reduce the carrying amount of accounts receivable and inventory related to the |
Reconciliation of Operating Cash to Free Cash Flow |
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Three months ended
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For the years ended
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($ in millions - unaudited) |
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2023 |
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2022 |
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2023 |
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2022 |
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Net cash provided by (used in) operating activities |
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$ |
27.9 |
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$ |
12.3 |
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$ |
(21.8 |
) |
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$ |
8.1 |
|
Capital expenditures |
|
|
(7.9 |
) |
|
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(3.8 |
) |
|
|
(18.7 |
) |
|
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(11.2 |
) |
Free cash flow |
|
$ |
20.1 |
|
|
$ |
8.5 |
|
|
$ |
(40.5 |
) |
|
$ |
(3.1 |
) |
CONFERENCE CALL
A conference call will be held
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 to register, download and install any necessary audio software.
To participate in the live teleconference:
Domestic Live: |
(844) 826-3035 |
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International Live: |
(412) 317-5195 |
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Audio Webcast: |
https://viavid.webcasts.com/starthere.jsp?ei=1654757&tp_key=69cc389df7 |
To listen to a replay of the teleconference through
Domestic Replay: |
(844) 512-2921 |
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International Replay: |
(412) 317-6671 |
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Replay PIN Number: |
10186239 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240229846723/en/
VP, Investor Relations &
T: (954) 547-0480 M: (561) 281-0247
investors@vsecorp.com
Source: