VSE Corporation (NASDAQ:VSEC) Q2 2023 Earnings Conference Call July 27, 2023 8:30 AM ET Company Participants Michael Perlman - Vice President, Investor Relations and Communications John Cuomo - President and Chief Executive Officer Steve Griffin - Chief Financial Officer Conference Call Participants Ken Herbert - RBC Louie DiPalma - William Blair Jeff Van Sinderen - B. Riley Securities Peter Osterland - Truist Securities Operator Welcome to the VSE Corporation Second Quarter 2023 Results Conference Call. At ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for H1 2023 reflect significant revenue and income growth from continuing operations compared to the prior year [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$1.07 billion** and liabilities to **$604.3 million** by June 30, 2023, driven by inventories and debt Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $674,224 | $548,878 | | Inventories | $427,822 | $380,438 | | Current assets held-for-sale | $107,059 | $54,925 | | **Total assets** | **$1,073,471** | **$999,789** | | Long-term debt, less current portion | $365,110 | $276,300 | | Current liabilities held-for-sale | $64,070 | $52,929 | | **Total liabilities** | **$604,334** | **$550,263** | | **Total stockholders' equity** | **$469,137** | **$449,526** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Q2 2023 revenues from continuing operations increased **21%** to **$205.2 million**, with net income more than doubling to **$10.1 million** Q2 2023 vs Q2 2022 Performance (in thousands, except EPS) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $205,223 | $169,761 | 21.0% | | Operating Income | $20,637 | $10,535 | 95.9% | | Income from Continuing Operations | $10,089 | $4,755 | 112.2% | | Diluted EPS (Continuing Ops) | $0.78 | $0.37 | 110.8% | H1 2023 vs H1 2022 Performance (in thousands, except EPS) | Metric | H1 2023 | H1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $393,810 | $330,081 | 19.3% | | Operating Income | $37,415 | $22,552 | 65.9% | | Income from Continuing Operations | $18,209 | $11,044 | 64.9% | | Diluted EPS (Continuing Ops) | $1.42 | $0.87 | 63.2% | - The company reported a loss from discontinued operations of **$1.2 million** in Q2 2023, compared to an income of **$2.8 million** in Q2 2022, reflecting the performance of the Federal and Defense segment which is being sold[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$65.1 million** in H1 2023, primarily due to inventory investments, offset by financing activities Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(65,091) | $(20,138) | | Net cash (used in) provided by investing activities | $(16,291) | $327 | | Net cash provided by financing activities | $85,244 | $19,664 | | **Net increase (decrease) in cash** | **$3,862** | **$(147)** | - The primary drivers for the increased use of cash in operations were a **$45.6 million** increase in inventories and a **$27.4 million** decrease in accounts payable, partially offset by higher net income[24](index=24&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail the sale of the Federal and Defense segment, the acquisition of Precision Fuel Components, and significant subsequent events - On May 1, 2023, the company entered into a definitive agreement to sell its Federal and Defense segment for up to **$100.0 million**, consequently reporting this segment's results as discontinued operations[30](index=30&type=chunk)[37](index=37&type=chunk) - The Aviation segment acquired Precision Fuel Components, LLC on February 1, 2023, for **$11.7 million** to expand its MRO capabilities[33](index=33&type=chunk) - Subsequent to the quarter's end, in July 2023, the company completed the acquisition of Desser Aerospace for **$124.0 million**, amended its credit agreement to secure a new **$90.0 million** term loan, and raised **$112.7 million** in net proceeds from a public stock offering[67](index=67&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q2 2023 growth, strategic divestitures and acquisitions, and sufficient liquidity [Recent Developments and Business Trends](index=26&type=section&id=Recent%20Developments%20and%20Business%20Trends) The company is strategically transforming by divesting its Federal and Defense segment to focus on core Aviation and Fleet businesses, which are showing strong growth - The company entered an agreement to sell its Federal and Defense business for up to **$100 million** to sharpen its focus on aftermarket products and services[72](index=72&type=chunk) - Aviation segment revenue grew **19%** year-over-year in Q2 2023, driven by a **37%** increase in repair revenue and a **13%** increase in distribution revenue[76](index=76&type=chunk) - The Fleet segment's revenue diversification strategy is succeeding, with commercial revenues growing to **47%** of the segment's total in Q2 2023, up from **40%** in the prior year[77](index=77&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Consolidated revenues for Q2 2023 increased **21%**, with operating income rising **96%**, driven by strong Aviation and Fleet segment performance Consolidated Results of Operations (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $205,223 | $169,761 | 21% | | Operating Income | $20,637 | $10,535 | 96% | Aviation Segment Q2 Results (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $124,729 | $105,019 | 19% | | Operating Income | $15,783 | $6,450 | 145% | | Profit Percentage | 12.7% | 6.1% | - | Fleet Segment Q2 Results (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $80,494 | $64,742 | 24% | | Operating Income | $7,854 | $5,366 | 46% | | Profit Percentage | 9.8% | 8.3% | - | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by operating cash flows, an amended credit facility, and **$112.7 million** in net proceeds from a public stock offering - As of June 30, 2023, the company had **$95.0 million** outstanding on its term loan and **$282.0 million** on its revolving facility, with **$67.3 million** of unused commitments[99](index=99&type=chunk) - In July 2023, the credit agreement was amended, providing a new **$90.0 million** term loan and increasing the maximum Total Funded Debt to EBITDA Ratio to **5.00x** through September 2023[100](index=100&type=chunk) - A public stock offering in July 2023 raised net proceeds of **$112.7 million**, intended to repay outstanding borrowings under the revolving credit facility[101](index=101&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk from its variable-rate debt through interest rate swap agreements, including a new **$100.0 million** hedge - The company's primary market risk is interest rate risk from its variable-rate credit facility[110](index=110&type=chunk) - To manage interest rate risk, the company uses interest rate hedges, executing a new interest rate swap in July 2023 to hedge the variability on **$100.0 million** of floating-rate debt[110](index=110&type=chunk)[111](index=111&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective[117](index=117&type=chunk) - No changes occurred in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[118](index=118&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no material legal proceedings during the period - There are no legal proceedings to report[121](index=121&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor was added to address potential adverse effects from business divestitures, including disruption and financial losses - A new risk factor was added to address potential adverse effects from business divestitures, such as disruption, management distraction, and potential financial losses or ongoing liabilities[123](index=123&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not engage in any purchases of its own equity securities during the second quarter of 2023 - The company did not purchase any of its equity securities during the reporting period[124](index=124&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2023 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[125](index=125&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key agreements for the Federal and Defense segment sale and credit agreement amendment - Key exhibits filed include the Membership Interest Purchase Agreement for the sale of the Federal and Defense segment and the Fifth Amendment to the Business Loan and Security Agreement[127](index=127&type=chunk)

V S E c o r p . c o mSecond Quarter 2023 Results Conference Call July 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 Priva ...

PART I - Financial Information This section presents the company's unaudited financial statements and management's analysis of its financial performance and condition [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Q1 2023, highlighting significant year-over-year increases in revenue and net income Financial Metric | Financial Metric | March 31, 2023 | March 31, 2022 | | :--- | :--- | :--- | | **Total Revenues** | $255.4 million | $231.2 million | | **Operating Income** | $17.9 million | $11.9 million | | **Net Income** | $9.1 million | $6.2 million | | **Diluted EPS** | $0.71 | $0.49 | Balance Sheet Item | Balance Sheet Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | $1,044.4 million | $999.8 million | | **Total Liabilities** | $587.1 million | $550.3 million | | **Total Stockholders' Equity** | $457.3 million | $449.5 million | - The company operates through three segments: Aviation, Fleet, and Federal and Defense, providing aftermarket products and services for transportation assets to commercial and government markets[24](index=24&type=chunk) - On February 1, 2023, the Aviation segment acquired Precision Fuel Components, LLC for a preliminary cash purchase price of **$11.8 million** to expand its MRO service capabilities[28](index=28&type=chunk) - Subsequent to the quarter end, on May 1, 2023, VSE entered into a definitive agreement to sell its Federal and Defense Segment for up to **$100 million**[58](index=58&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management provides an analysis of the company's financial condition and operational results for Q1 2023, detailing revenue and income drivers [Consolidated Results of Operations](index=20&type=section&id=Consolidated%20Results%20of%20Operations) This section details the company's consolidated financial performance, highlighting key revenue and income trends Consolidated Financial Performance (in thousands) | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $255,433 | $231,239 | $24,194 | 10.5% | | **Operating Income** | $17,933 | $11,914 | $6,019 | 50.5% | | **Net Income** | $9,117 | $6,244 | $2,873 | 46.0% | - The increase in revenue was primarily driven by growth in the Aviation segment (**$19.9 million**) and Fleet segment (**$8.3 million**), partially offset by a decrease in the Federal and Defense segment (**$4.1 million**)[68](index=68&type=chunk) - Interest expense increased by **65.6%** to **$6.0 million** due to higher average interest rates on outstanding borrowings[68](index=68&type=chunk)[71](index=71&type=chunk) [Segment Operating Results](index=20&type=section&id=Segment%20Operating%20Results) This section provides a detailed breakdown of revenue and operating income across the company's business segments Segment Revenue | Segment | Q1 2023 Revenue | Q1 2022 Revenue | % Change | | :--- | :--- | :--- | :--- | | Aviation | $113.2M | $93.3M | 21% | | Fleet | $75.4M | $67.0M | 12% | | Federal and Defense | $66.8M | $70.9M | (6)% | Segment Operating Income (Loss) | Segment | Q1 2023 Operating Income (Loss) | Q1 2022 Operating Income (Loss) | % Change | | :--- | :--- | :--- | :--- | | Aviation | $15.7M | $7.6M | 105% | | Fleet | $5.9M | $6.4M | (8)% | | Federal and Defense | ($0.6M) | ($0.7M) | (16)% | - Aviation segment growth was driven by a **14%** increase in distribution revenue and a **43%** increase in repair revenue, benefiting from the recovery in global commercial air travel[74](index=74&type=chunk) - Fleet segment operating income decreased primarily due to costs associated with a newly launched e-commerce fulfillment and distribution center[79](index=79&type=chunk) [Bookings and Funded Backlog](index=24&type=section&id=Bookings%20and%20Funded%20Backlog) This section details the Federal and Defense segment's bookings and funded contract backlog Federal and Defense Segment (in millions) | Federal and Defense Segment (in millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Bookings** | $61 | $92 | | **Funded Contract Backlog** | $185 | $198 | - For the three months ended March 31, 2023, Federal and Defense segment bookings decreased **34%** year-over-year, and total funded backlog decreased **7%** year-over-year[84](index=84&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's cash flows, debt, and available credit, detailing its liquidity and capital structure Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,674) | $(18,174) | | Net cash (used in) provided by investing activities | $(14,594) | $1,393 | | Net cash provided by financing activities | $63,322 | $16,761 | - The increase in cash used in operating activities was primarily due to greater use of cash for inventory purchases[88](index=88&type=chunk) - As of March 31, 2023, the company had **$97.5 million** in term loan borrowings, **$256.5 million** in revolving loan borrowings, and **$93 million** of unused bank loan commitments[86](index=86&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) The company's primary market risk is interest rate risk associated with its variable-rate bank loan agreement, mitigated by interest rate hedges - The company's main market risk exposure is to variable interest rates on its bank loan agreement[96](index=96&type=chunk) - VSE utilizes interest rate hedges to fix the rate on a portion of its outstanding borrowings to mitigate risks from interest rate movements[96](index=96&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were deemed effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[102](index=102&type=chunk) - No changes were made during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[103](index=103&type=chunk) PART II - Other Information This section provides other essential information, including legal proceedings, updated risk factors, and regulatory exhibits [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no material legal proceedings during the period - The company reports no legal proceedings for the quarter[105](index=105&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the 2022 Annual Report on Form 10-K by adding a new risk related to business divestitures - A new risk factor was added regarding the potential adverse effects of business divestitures, which may require significant time and resources, disrupt business, and result in losses or continued financial involvement[107](index=107&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not purchase any of its own equity securities during the quarter ended March 31, 2023 - The company did not purchase any of its equity securities during the period covered by the report[108](index=108&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed with the report include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL instance documents[110](index=110&type=chunk)

VSE Corporation (NASDAQ:VSEC) Q1 2023 Earnings Conference Call May 2, 2023 8:30 AM ET Company Participants Michael Perlman - VP of Investor Relations and Communications John Cuomo - President and Chief Executive Officer Steve Griffin - Chief Financial Officer Conference Call Participants Michael Ciarmoli - Truist Securities Ken Herbert - RBC Capital Markets Louie DiPalma - William Blair Jeff Van Sinderen - B. Riley Securities Josh Sullivan - The Benchmark Company Operator Greetings, and welcome to the VSE C ...

V S E c o r p . c o m First Quarter 2023 Results Conference Call May 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 Privat ...

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number: 000-3676 VSE CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 54-0649263 (State or Other Jurisdictio ...

VSE Corporation (NASDAQ:VSEC) Q4 2022 Earnings Conference Call March 9, 2023 8:30 AM ET Company Participants Noel Ryan - IRC John Cuomo - Chief Executive Officer and President Steve Griffin - Senior Vice President and Chief Financial Officer Conference Call Participants Louie DiPalma - William Blair Austin Moeller - Canaccord Jeff Sinderen - B. Riley Securities Joshua Sullivan - the Benchmark Company Operator Good morning. And welcome to the VSE Corporation Fourth Quarter Results Conference Call. At this ti ...

VSEC Fourth Quarter and Full-Year 2022 Results Conference Call March 2023 V S E c o r p . c o m 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 c ...