Revenue Performance - Total revenues for Q2 2024 reached $266.0 million, a 29.6% increase compared to Q2 2023[1] - Aviation segment revenue grew 55% year-over-year to a record $192.8 million, driven by strong execution and contributions from recent acquisitions[4] - Product revenues increased to $188,579,000, up 13.6% from $165,997,000 year-over-year[25] - Service revenues surged to $77,380,000, compared to $39,226,000 in the same quarter last year, marking a 97.2% increase[25] - Total revenues for Q2 2024 reached $265,959,000, a 29.5% increase from $205,223,000 in Q2 2023[25] Profitability Metrics - Adjusted EBITDA for the Aviation segment increased by 61% to $31.0 million, with an adjusted EBITDA margin of 16.1%, up 70 basis points from the prior year[4] - Adjusted EBITDA for Q2 2024 was $31,312, an 18.4% increase compared to $26,450 in Q2 2023[14] - Operating income decreased to $6,132,000, down 70.3% from $20,637,000 year-over-year[25] - Adjusted net income from continuing operations for Q2 2024 was $11,034, a 4.5% increase from $10,558 in Q2 2023[11] - Adjusted EPS (Diluted) decreased to $0.64 in Q2 2024 from $0.82 in Q2 2023, representing a decline of 22.0%[11] Cash Flow and Debt Management - Free cash flow for Q2 2024 was $(21,473), compared to $(19,714) in Q2 2023, indicating a worsening cash flow situation[16] - Net debt increased to $444,515 as of June 30, 2024, up from $421,576 at the end of 2023[17] - The net leverage ratio improved slightly to 3.5x as of June 30, 2024, down from 3.7x at the end of 2023[18] - Interest expense for Q2 2024 was $9,826, a 33.4% increase from $7,366 in Q2 2023[13] - Net cash used in operating activities for the first half of 2024 was $96,588,000, compared to $65,091,000 in the same period last year[26] Asset and Liability Changes - Cash and cash equivalents of $18,993,000 as of June 30, 2024, compared to $7,768,000 on December 31, 2023, indicating a significant increase[24] - Receivables increased to $168,238,000 from $127,958,000, reflecting a growth of approximately 31.5%[24] - Contract assets rose to $28,575,000 from $8,049,000, marking an increase of over 255%[24] - Inventories increased to $532,371,000 from $500,864,000, showing a growth of about 6.3%[24] - Total current assets amounted to $796,375,000, up from $774,030,000, representing an increase of approximately 2.0%[24] - Current liabilities decreased to $225,646,000 from $286,886,000, a reduction of about 21.4%[24] - Long-term debt, less current portion, increased to $433,508,000 from $406,844,000, reflecting a rise of approximately 6.5%[24] - Total assets grew to $1,494,298,000 from $1,350,338,000, indicating an increase of about 10.6%[24] - Stockholders' equity increased to $781,316,000 from $616,725,000, representing a growth of approximately 26.7%[24] Strategic Initiatives - The company completed a follow-on equity offering in May 2024, raising approximately $162.0 million to reduce debt and support future acquisitions[4] - VSE is reaffirming full-year 2024 revenue growth guidance for the Aviation segment at 34% to 38% and Adjusted EBITDA margin guidance at 15.5% to 16.5%[7] - The Kansas facility expansion for the new OEM licensed manufacturing fuel control program is on track to be operational by the end of 2024[2] - The integration of Desser Aerospace is in process and expected to be completed within the next twelve months[2] - The company plans to relocate its corporate headquarters to one of its Aviation segment's operating facilities later in 2024[4] Cost and Expense Analysis - Total costs and operating expenses rose to $259,827,000, up 40.7% from $184,586,000 in Q2 2023[25] - Net loss from continuing operations for Q2 2024 was $(2,777), a significant decline of 127.5% from $10,089 in Q2 2023[13] - The company reported a significant increase in acquisition, integration, and restructuring costs, which rose by 170.2% to $1,689 in Q2 2024 from $625 in Q2 2023[13] - Capital expenditures for Q2 2024 were $(3,945), compared to $(3,297) in Q2 2023, reflecting increased investment[16] Regulatory and Reporting - The Company plans to file its Form 10-Q with the SEC on or about August 1, 2024, for further details on its financial results[22]

VSE Corporation (NASDAQ:VSEC) Q1 2024 Results Conference Call May 9, 2024 8:30 AM ET Company Participants Michael Perlman - Vice President, Investor Relations and Treasury John Cuomo - President & Chief Executive Officer Steve Griffin - Chief Financial Officer Tarang Sharma - Vice President, Controller and Head of Corporate Development Conference Call Participants Ken Herbert - RBC Capital Markets Jeff Van Sinderen - B. Riley Louie DiPalma - William Blair Josh Sullivan - The Benchmark Company Michael Ciarmo ...

Financial Performance - Total revenues for Q1 2024 were $241.5 million, a 28.1% increase from $188.6 million in Q1 2023[14] - Net income from continuing operations for Q1 2024 was $12.1 million, compared to $8.1 million in Q1 2023, reflecting a 49.1% increase[14] - The company reported a net loss of $6.6 million for Q1 2024, down from a net income of $9.1 million in Q1 2023[14] - Operating income for Q1 2024 was $24.2 million, up 44.1% from $16.8 million in Q1 2023[14] - Revenues for the three months ended March 31, 2024, increased by 28% to $241.5 million, driven by a $49.1 million increase in the Aviation segment and a $3.8 million increase in the Fleet segment[92] - The Aviation segment reported revenues of $162.4 million for the three months ended March 31, 2024, representing a 43% year-over-year increase, with repair revenue up 58% and distribution revenue up 38%[87] - The Fleet segment's revenues increased by 5% to $79.2 million, with commercial customer revenue growing by 37%, partially offset by a 19% decline in revenue from other government customers[100] - Operating income for the consolidated results increased by 44% to $24.2 million for the three months ended March 31, 2024, compared to $16.8 million in the prior year[92] Assets and Liabilities - Cash and cash equivalents increased to $10.6 million as of March 31, 2024, from $7.8 million at the end of 2023[13] - Total current assets decreased to $743.1 million as of March 31, 2024, from $774.0 million at the end of 2023[13] - The company’s long-term debt increased to $451.6 million as of March 31, 2024, compared to $406.8 million at the end of 2023[13] - The company’s total assets decreased to $1.34 billion as of March 31, 2024, from $1.35 billion at the end of 2023[13] - Long-term debt as of March 31, 2024, totaled $481.622 million, an increase from $429.344 million at the end of 2023, representing a 12.2% rise[57] Acquisitions and Impairments - The company completed the acquisition of Desser Aerospace for a preliminary cash consideration of $133.7 million, with a subsequent sale of part of its business for $31.8 million[33] - The acquisition of Precision Fuel Components, LLC was made for $11.7 million, with related acquisition expenses of $0.2 million incurred during the first quarter of 2023[29][30] - The company completed the acquisition of Turbine Controls, Inc. for approximately $120.0 million, consisting of $110.0 million in cash and $10.0 million in shares of common stock[78] - The acquisition of Honeywell Fuel Control Systems was completed for a purchase price of $105.0 million, funded by borrowings under the revolving credit facility[40] - The company experienced a significant impairment and loss on the sale of a business segment amounting to $16.9 million in Q1 2024[21] - The company recorded a pre-tax loss of $12.7 million on the sale of the Federal and Defense segment's operational assets, with transaction fees amounting to $2.5 million for the three months ended March 31, 2024[46] Cash Flow and Dividends - Cash used in operating activities increased by $30.4 million to $79.1 million for the three months ended March 31, 2024, primarily due to greater cash use for inventory purchases[106] - Cash provided by investing activities increased by $48.0 million for the three months ended March 31, 2024, compared to the same period of the prior year, primarily due to $41.1 million from the sale of the Federal and Defense segment[107] - Cash provided by financing activities decreased by $15.0 million for the three months ended March 31, 2024, mainly due to lower proceeds from net borrowings[108] - Cash dividends paid totaled $1.6 million or $0.10 per share during the three months ending March 31, 2024[109] - The company declared dividends of $0.10 per share for both Q1 2024 and Q1 2023[14] Shareholder Value and Strategic Alternatives - The company is exploring strategic alternatives for its Fleet segment to enhance shareholder value, which may include a potential sale[84] - The company has not purchased any of its equity securities during the period covered by this report[126] Tax and Accounting - The effective tax rate for continuing operations decreased to 19.3% for the three months ended March 31, 2024, compared to 24.8% for the same period in 2023, primarily due to excess stock compensation deductions[96] - There have been no significant changes in critical accounting estimates during the three months ended March 31, 2024[115] - The company continues to evaluate the need for additional internal controls over financial reporting following the acquisition[120] Market Risks - There have been no material changes to market risks from those discussed in the most recently filed Annual Report on Form 10-K[114] - The company has employed interest rate hedges to mitigate risks associated with future interest rate movements[113]

```markdown [Q1 2024 Performance Overview](index=1&type=section&id=Q1%202024%20Performance%20Overview) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) VSE Corporation reported strong growth in the first quarter of 2024, with total revenues from continuing operations increasing by 28.1% year-over-year to $241.5 million, GAAP Net Income rising by 49.0% to $12.1 million, and Adjusted EBITDA growing by 36.7% to $32.3 million, reflecting robust performance, particularly in the Aviation segment | Metric | Q1 2024 | % Change (YoY) | | :--- | :--- | :--- | | Total Revenues | $241.5 million | +28.1% | | GAAP Net Income | $12.1 million | +49.0% | | GAAP EPS (Diluted) | $0.76 | +20.6% | | Adjusted EBITDA | $32.3 million | +36.7% | | Adjusted Net Income | $13.9 million | +50.2% | | Adjusted EPS (Diluted) | $0.87 | +22.5% | [Management Commentary](index=1&type=section&id=Management%20Commentary) The CEO highlighted record financial results driven by the Aviation segment's 43% revenue growth and record 17% Adjusted EBITDA margins, supported by new distribution and MRO agreements, while the Fleet segment's growth in commercial and e-commerce was offset by a temporary decrease in USPS maintenance activity, with a strategic focus for 2024 on program implementation and execution - The Aviation segment delivered record results, with **43% revenue growth** and record **Adjusted EBITDA margins of 17%** in Q1 2024[2](index=2&type=chunk) - The Fleet segment experienced strong growth in commercial and e-commerce customers, which was offset by a near-term decrease in maintenance activity from the United States Postal Service (USPS)[2](index=2&type=chunk) - The company's 2024 focus is on program implementation and execution, including the expansion of an agreement with Pratt & Whitney Canada for the EMEA region and integrating newly acquired businesses[2](index=2&type=chunk) [Strategic Update](index=1&type=section&id=Strategic%20Update) VSE is advancing its strategic focus on the aviation aftermarket, acquiring Turbine Controls, Inc. (TCI) for approximately $120 million in April 2024 to enhance MRO capabilities, successfully executing new programs, and completing the divestiture of its Federal and Defense segment for $44 million to sharpen its focus on core operations - Completed the acquisition of Turbine Controls, Inc. (TCI) for approximately **$120 million** (**$110M cash**, **$10M stock**) to expand OEM-authorized repair capabilities and increase exposure to the commercial aviation market[5](index=5&type=chunk) - New aviation programs are progressing well: the Pratt & Whitney Canada EMEA program began shipments, and the Honeywell Fuel Controls program is outpacing expectations[5](index=5&type=chunk)[6](index=6&type=chunk) - Completed the sale of the Federal and Defense segment for **$44.0 million** in cash, resulting in a Q1 recognized loss of **$18.7 million** (net of tax) but aligning with the strategy to focus on core aftermarket services[11](index=11&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) [Aviation Segment](index=2&type=section&id=Aviation%20Segment) The Aviation segment delivered record performance in Q1 2024, with revenue increasing 43% year-over-year to $162.4 million, reflecting 20% organic growth driven by strong execution of distribution awards, increased MRO activity, and contributions from acquisitions, while Segment Adjusted EBITDA grew 46% to $27.7 million, with margins expanding 30 basis points to 17.0% due to favorable mix and MRO growth | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $162.4 M | $113.2 M | +43% | | Organic Revenue Growth | ~20% | N/A | N/A | | Operating Income | $22.3 M | $15.7 M | +42% | | Adjusted EBITDA | $27.7 M | $18.9 M | +46% | | Adjusted EBITDA Margin | 17.0% | 16.7% | +30 bps | [Fleet Segment](index=2&type=section&id=Fleet%20Segment) The Fleet segment's revenue grew 5% year-over-year to $79.2 million in Q1 2024, with a 37% increase in revenue from commercial customers partially offset by a 19% decline from the USPS due to a temporary reduction in maintenance activity during their system transition, resulting in Adjusted EBITDA decreasing 7% to $7.5 million and margins contracting 130 basis points to 9.5% due to customer and product mix shifts | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $79.2 M | $75.4 M | +5% | | Commercial Revenue | 56% of total | N/A | +37% YoY | | USPS Revenue | 44% of total | N/A | -19% YoY | | Operating Income | $6.6 M | $5.9 M | +12% | | Adjusted EBITDA | $7.5 M | $8.1 M | -7% | | Adjusted EBITDA Margin | 9.5% | 10.8% | -130 bps | [Financial Condition and Outlook](index=2&type=section&id=Financial%20Condition%20and%20Outlook) [Financial Resources and Liquidity](index=2&type=section&id=Financial%20Resources%20and%20Liquidity) As of March 31, 2024, VSE had $175 million in available liquidity under its revolving credit facility, with total net debt at $471 million and a pro forma net leverage ratio of approximately 3.7x EBITDA, expected to rise to about 4.1x post-TCI acquisition, with a target to reduce it to below 4.0x by year-end through free cash flow generation - As of March 31, 2024, the company had **$175 million** in cash and unused credit facility availability[9](index=9&type=chunk) - Total net debt was **$471 million**, with a pro forma net leverage of **3.7x EBITDA** at the end of Q1[9](index=9&type=chunk) - Post-acquisition of TCI, pro forma net leverage is expected to be **~4.1x**, with a goal to deleverage to **below 4.0x** by the end of 2024[10](index=10&type=chunk) [Full-Year 2024 Guidance](index=3&type=section&id=Full-Year%202024%20Guidance) VSE updated its full-year 2024 guidance, raising expectations for the Aviation segment with revenue growth guidance increased to 34-38% and Adjusted EBITDA margin guidance to 15.5-16.5%, while lowering Fleet segment guidance to 0-5% revenue growth and 6-8% margin, primarily due to a temporary decline in USPS activity | Aviation Segment FY2024 Guidance | New Guidance | Previous Guidance | | :--- | :--- | :--- | | Revenue Growth (YoY) | 34% to 38% | 24% to 28% | | Adjusted EBITDA Margin | 15.5% to 16.5% | 15% to 16% | | Fleet Segment FY2024 Guidance | New Guidance | Previous Guidance | | :--- | :--- | :--- | | Revenue Growth (YoY) | 0% to 5% | 13% to 17% | | Adjusted EBITDA Margin | 6% to 8% | Not specified | - The Fleet guidance revision is driven by an expected **30-35% full-year decline** in USPS revenue due to their system migration, which is anticipated to be offset by a **~40% increase** in commercial revenue[12](index=12&type=chunk) [Financial Statements and Reconciliations](index=4&type=section&id=Financial%20Statements%20and%20Reconciliations) [Consolidated Financial Results](index=4&type=section&id=Consolidated%20Financial%20Results) This section presents the unaudited consolidated financial statements for VSE Corporation as of and for the three months ended March 31, 2024, including the Consolidated Statements of Income, Balance Sheets, and Cash Flows, providing a detailed view of the company's financial performance and position [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) For Q1 2024, VSE's total revenues from continuing operations grew 28.1% to $241.5 million, operating income increased 44.1% to $24.2 million, and net income from continuing operations was $12.1 million, or $0.76 per diluted share, though a consolidated net loss of $6.6 million was reported due to an $18.7 million loss from discontinued operations related to the FDS sale | (in thousands, except per share data) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $241,539 | $188,587 | +28.1% | | Operating Income | $24,174 | $16,778 | +44.1% | | Net Income from Continuing Operations | $12,100 | $8,120 | +49.0% | | Diluted EPS from Continuing Operations | $0.76 | $0.63 | +20.6% | | Net (Loss) Income | $(6,611) | $9,117 | N/A | [Consolidated Balance Sheets](index=10&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2024, VSE's total assets were $1.34 billion, a slight decrease from $1.35 billion at year-end 2023 primarily due to the divestiture of the FDS segment, with total liabilities decreasing to $724.2 million from $733.6 million, and key asset components including $521.2 million in inventories and $351.1 million in goodwill | (in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $743,096 | $774,030 | | Total Assets | $1,336,924 | $1,350,338 | | Total Current Liabilities | $223,050 | $286,886 | | Total Liabilities | $724,186 | $733,613 | | Total Stockholders' Equity | $612,738 | $616,725 | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first three months of 2024, VSE used $79.1 million in cash from operating activities, largely due to changes in working capital, while investing activities provided $33.4 million, driven by $41.1 million proceeds from the FDS segment sale, and financing activities provided $48.3 million, resulting in a net cash increase of $2.6 million for the period | (in thousands) | Three months ended March 31, 2024 | | :--- | :--- | | Net cash used in operating activities | $(79,060) | | Net cash provided by investing activities | $33,408 | | Net cash provided by financing activities | $48,291 | | Net increase in cash and cash equivalents | $2,639 | [Segment Financial Results (Table)](index=4&type=section&id=Segment%20Financial%20Results%20%28Table%29) This table provides a detailed breakdown of revenues and operating income for the Aviation and Fleet segments for the first quarter of 2024 compared to the same period in 2023, highlighting the significant revenue and profit growth in the Aviation segment that drove the company's overall performance | (in thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | **Revenues:** | | | | | Aviation | $162,383 | $113,235 | +43.4% | | Fleet | $79,156 | $75,352 | +5.0% | | **Total revenues** | **$241,539** | **$188,587** | **+28.1%** | | **Operating income:** | | | | | Aviation | $22,310 | $15,664 | +42.4% | | Fleet | $6,617 | $5,899 | +12.2% | [Non-GAAP Financial Measures and Reconciliations](index=5&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section provides reconciliations of GAAP financial measures to non-GAAP measures, which management believes are important indicators of ongoing performance, showing Adjusted Net Income of $13.9 million (up 50.2% YoY) and Adjusted EBITDA of $32.3 million (up 36.7% YoY) for Q1 2024, with tables detailing adjustments for items like acquisition costs and restructuring charges | (in thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Net income from continuing operations | $12,100 | $8,120 | +49.0% | | **Adjusted net income from continuing operations** | **$13,862** | **$9,227** | **+50.2%** | | **Adjusted EPS (Diluted)** | **$0.87** | **$0.71** | **+22.5%** | | (in thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Net income from continuing operations | $12,100 | $8,120 | +49.0% | | EBITDA | $29,969 | $22,164 | +35.2% | | **Adjusted EBITDA** | **$32,317** | **$23,639** | **+36.7%** | | (in thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Aviation Adj. EBITDA | $27,678 | $18,918 | +46.3% | | Fleet Adj. EBITDA | $7,536 | $8,144 | -7.5% | [Other Information](index=8&type=section&id=Other%20Information) [Conference Call Information](index=8&type=section&id=Conference%20Call%20Information) VSE scheduled a conference call for Thursday, May 9, 2024, at 8:30 A.M. ET to discuss its first-quarter financial results, with details for accessing the live webcast and teleconference, as well as replay information, provided in the announcement - A conference call to review Q1 2024 financial results was scheduled for Thursday, May 9, 2024, at 8:30 A.M. ET[26](index=26&type=chunk) - Webcast and presentation materials are available on the Investor Relations section of VSE's website[27](index=27&type=chunk) [About VSE Corporation](index=8&type=section&id=About%20VSE%20Corporation) VSE Corporation is a leading provider of aftermarket distribution and repair services, operating through its Aviation segment, which offers parts distribution and MRO services for various aircraft operators, and its Fleet segment, which provides parts, engineering, and supply chain services for the medium and heavy-duty fleet market - VSE operates through two key segments: Aviation (aftermarket parts distribution and MRO) and Fleet (parts distribution and supply chain services for medium/heavy-duty fleets)[29](index=29&type=chunk) [Forward-Looking Statements](index=9&type=section&id=Forward-Looking%20Statements) This section contains a standard safe harbor statement, advising that the report includes forward-looking statements involving risks and uncertainties, cautioning readers that actual results may differ materially from those projected and that the company does not undertake any obligation to update these statements - The document contains forward-looking statements subject to known and unknown risks, as per the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[31](index=31&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which are based on management's analysis only as of the date of the report[31](index=31&type=chunk) ```

Revenue Segmentation - The Aviation segment accounted for 63% of consolidated revenues in 2023, up from 51% in 2021, indicating a significant growth trend [23]. - The Fleet segment contributed 37% to consolidated revenues in 2023, down from 49% in 2021, reflecting a shift in revenue distribution [24]. - The Aviation segment reported a 33% increase in annual revenue, totaling $544 million in 2023, driven by a 29% increase in distribution revenue and a 46% increase in repair revenue compared to the prior year [117]. - Fleet segment revenue from commercial customers increased by 45% in 2023, with commercial revenues accounting for 48% of total Fleet segment revenue, up from 40% in 2022 [119]. - Revenues increased by $191.0 million, or 29%, in 2023 compared to 2022, driven by growth in the Aviation segment ($135.9 million) and Fleet segment ($55.1 million) [120]. Financial Performance - Total revenues for 2023 reached $860,488,000, a 28.5% increase from $669,448,000 in 2022 [178]. - Net income for 2023 was $39,134,000, compared to $28,059,000 in 2022, reflecting a 39.5% growth [178]. - Basic earnings per share for continuing operations increased to $3.05 in 2023 from $2.09 in 2022, a rise of 46.4% [178]. - Operating income rose by $34.4 million, or 64%, in 2023, with the Aviation segment contributing $34.8 million and the Fleet segment $7.3 million [124]. - Comprehensive income for 2023 was $36,298,000, compared to $33,203,000 in 2022, indicating a 6.3% increase [180]. Debt and Cash Flow - The company had $429 million of total debt outstanding as of December 31, 2023, which may increase vulnerability to adverse economic conditions [80]. - Cash used in operating activities was $21.8 million in 2023, a decrease from cash provided of $8.1 million in 2022, mainly due to higher inventory purchases [137]. - Cash used in investing activities rose by $233.3 million in 2023, primarily due to cash paid for acquisitions totaling $218.6 million [138]. - Cash provided by financing activities was $265.0 million in 2023, significantly up from cash used of $5.7 million in 2022, largely due to a public offering generating $129.1 million [139]. - Interest expense increased by approximately $13.2 million, or 74%, in 2023, primarily due to higher debt facility borrowings and interest rates [125]. Acquisitions and Growth Strategy - The company completed the acquisition of Precision Fuel Components in February 2023 and Desser Aerospace in July 2023, enhancing its MRO services and international expansion capabilities [111]. - The company is focused on growth through acquisitions, aiming to add new products and capabilities, which presents both opportunities and risks [53]. - The company expects continued growth in the Aviation segment due to new initiatives and recent acquisitions, contributing to a favorable outlook for 2024 [118]. Operational Risks - Supply chain disruptions and geopolitical uncertainties pose risks to business operations and expenses, potentially impacting revenue and profits [51]. - Cybersecurity risks pose potential threats to operations and financial results, despite existing risk management programs [77]. - The company faces intense competition in the aviation and vehicle parts industries, which could harm its business [59]. - Global economic and political conditions may adversely affect revenues, particularly in foreign markets [62]. - Future environmental regulations may incur substantial costs, potentially affecting financial position and operations [75]. Employee and Workforce - Approximately 1,200 employees were employed as of December 31, 2023, highlighting the company's workforce size [32]. - The company emphasizes a commitment to inclusion and diversity, with initiatives such as the VSE Inclusion & Diversity Council formed in 2020 [38]. - The company has implemented a Health, Environmental and Safety Program to minimize risks of injury or illness to employees [33]. Asset Management - As of December 31, 2023, goodwill and intangible assets accounted for 28% and 9% of total assets, respectively [57]. - The company evaluates inventory carrying value periodically, considering physical condition, sales patterns, and expected future demand [155]. - Goodwill is assessed for impairment at least annually, with the fair value of reporting units significantly exceeding their carrying values as of the fourth quarter of 2023 [157]. Regulatory Environment - The company is subject to numerous government regulations, which could expose it to liabilities or work loss [69]. - The company’s Chief Information Security Officer (CISO) has over 20 years of experience in information technology and security, overseeing the company's cybersecurity risk management [87].

Financial Data and Key Metrics Changes - In Q4 2023, VSE Corporation generated $235 million in revenue, a 37% increase year-over-year, with Aviation up 43% and Fleet up 26% [17] - For the full year 2023, total revenue reached $861 million, a 29% increase compared to 2022, primarily driven by a 33% increase in the Aviation segment [18] - Adjusted net income for Q4 increased 62% to $13 million, and adjusted diluted earnings per share rose 31% to $0.85 [18] - Full-year adjusted net income increased 60% to $47 million, with adjusted diluted earnings per share up 45% to $3.31 [19] Business Line Data and Key Metrics Changes - The Aviation segment reported record revenue of $544 million for 2023, a 33% year-over-year increase, with adjusted EBITDA increasing 68% to $87 million [24] - Fleet segment revenue for Q4 increased 26% to $82 million, driven by strong growth in e-commerce fulfillment and commercial fleet sales [27] - For the full year 2023, the Fleet segment generated record revenue of $317 million, with total adjusted EBITDA of $37 million, up 11% [31] Market Data and Key Metrics Changes - The Aviation segment's revenue growth was supported by new OEM programs and geographic expansion into Asia-Pacific [21] - The Fleet segment's commercial revenue increased 72% in Q4, now representing 52% of total fleet segment sales, marking a significant shift in customer mix [28] Company Strategy and Development Direction - VSE announced the acquisition of Turbine Controls for $120 million, enhancing its capabilities in aviation aftermarket services [8] - The company completed the sale of its Federal and Defense operating assets for $44 million, marking a significant milestone in its transformation strategy [9] - VSE is exploring strategic alternatives for its Fleet segment, indicating a focus on optimizing its portfolio [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue growth of 24% to 28% for 2024, driven by strong aviation markets and new business awards [25] - The company anticipates challenges in the Fleet segment due to expected declines in USPS revenue, projecting a decrease of 8% to 12% year-over-year [32] - Management emphasized a disciplined approach to financial performance and strategic transformation, aiming for continued above-market growth [44] Other Important Information - VSE expects to incur one-time transaction expenses of $6 million to $8 million related to the FDS divestiture in Q1 [38] - The company is considering a corporate restructuring plan that could result in adjustments to financial statements ranging from $18 million to $23 million throughout 2024 [39] Q&A Session Summary Question: Can you provide more details on the Turbine acquisition? - Management highlighted that the integration will focus on sales synergies with OEM partners rather than facility integration, expecting $85 million in revenue and $12 million in EBITDA for the acquired business [47][48] Question: What is the status of the Desser integration? - The integration is underway, with organizational integration nearly complete and a new e-commerce site expected to launch in Q2 [49] Question: How is the utilization of the Memphis facility? - Current utilization is below half capacity, with expectations for significant growth in 2024 [55][56] Question: What are the implications of Boeing's issues on the aftermarket industry? - Management noted that while price inflation has stabilized, they are focused on opportunities arising from changes in aircraft retirement plans and supply chain impacts [63][64] Question: What is the preliminary buyer interest for the Fleet business? - The strategic review process for the Fleet segment has been initiated, with an advisor retained to assist in the evaluation [66]

Financial Performance - Full Year 2023 - Total company revenue grew by 29% reaching $8605 million[7,9,11] - Adjusted EBITDA increased by 45% to $1138 million[9,11] - Adjusted net income increased by 60% to $47 million[9,47] - Adjusted diluted EPS increased by 45% to $331[9] Financial Performance - Q4 2023 - Revenue increased by 37% to $2353 million[9,10] - Adjusted EBITDA increased by 46% to $314 million[8,9,10] - Adjusted net income increased by 62%[9] - Aviation revenue increased 43% and Fleet revenue increased 26%[8] Segment Performance - Aviation - Aviation segment revenue increased by 33% for the full year, reaching $544 million[6,13] - Aviation segment adjusted EBITDA increased by 68% for the full year, reaching $874 million[13] - Aviation segment revenue increased by 43% to $1537 million in Q4[13,14] Segment Performance - Fleet - Fleet segment revenue increased by 21% for the full year, reaching $3165 million[7,22] - Fleet segment adjusted EBITDA increased by 11% for the full year, reaching $367 million[24] - Fleet segment revenue increased by 26% to $816 million in Q4[17,21]

Financial Performance - Total revenues for Q4 2023 reached $235.3 million, a 37% increase compared to Q4 2022[3] - GAAP net income for Q4 2023 was $12.8 million, reflecting a 62% increase year-over-year[3] - Adjusted EBITDA for the full year 2023 was $113.8 million, a 45% increase compared to 2022[4] - Net income from continuing operations for Q4 2023 was $12,834,000, a 62.1% increase from $7,916,000 in Q4 2022[16] - Adjusted EBITDA for Q4 2023 reached $31,444,000, reflecting a 45.7% increase compared to $21,582,000 in Q4 2022[16] - Free cash flow for Q4 2023 was $20,071,000, compared to $8,461,000 in Q4 2022[18] Segment Performance - The Aviation segment generated record revenue of $153.7 million in Q4 2023, up 43% from the previous year[6] - The Fleet segment reported revenue of $81.6 million in Q4 2023, a 26% increase year-over-year, with commercial revenue growing 72%[7] - Operating income in the Aviation segment for Q4 2023 was $18,771,000, a 52.3% increase from $12,327,000 in Q4 2022[17] - Adjusted EBITDA for the Aviation segment in Q4 2023 was $23,921,000, a 51.9% increase from $15,751,000 in Q4 2022[17] - The Fleet segment's operating income for Q4 2023 was $8,973,000, a 59.5% increase from $5,625,000 in Q4 2022[17] Cash Flow and Debt - The company generated $43 million of operating cash flow and $30 million of free cash flow in the second half of 2023[2] - As of December 31, 2023, VSE had $216 million in cash and total net debt outstanding of $422 million[10] - Total net debt as of December 31, 2023, was $421,576,000, up from $285,995,000 in 2022[21] - The company reported a net leverage ratio of 3.7x for both 2023 and 2022[21] Capital Expenditures and Guidance - Capital expenditures for the year 2023 totaled $18,666,000, compared to $11,212,000 in 2022[18] - VSE's 2024 guidance includes a 24% to 28% revenue growth for the Aviation segment and a 13% to 17% growth for the Fleet segment[11] Acquisitions and Sales - VSE announced the acquisition of Turbine Controls, Inc. for approximately $120 million, expected to close in Q2 2024[8] - The company completed the sale of its Federal and Defense segment assets for $44 million, with associated one-time transaction expenses expected between $6 million and $8 million[8] Reporting and Compliance - The company plans to file its Form 10-K with the SEC on or about March 7, 2024, detailing its fourth quarter and full year 2023 results[28]

VSE Corporation (NASDAQ:VSEC) Q3 2023 Earnings Conference Call November 2, 2023 8:30 AM ET Company Participants Michael Perlman - VP, IR and Communications John Cuomo - President and CEO Steve Griffin - CFO Conference Call Participants Louie DiPalma - William Blair Michael Ciarmoli - Truist Josh Sullivan - The Benchmark Company Jeff Van Sinderen - B. Riley Operator Good morning and welcome to the VSE Corporation Third Quarter 2023 Results Conference Call. All participants will be in listen-only mode. [Opera ...

V S E c o r p . c o mThird Quarter 2023 Results Conference Call November 2, 2023 Forward-Looking Statements This presentation contains statements that, to the extent they are not recitations of historical fact, constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act. All such statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in the ...