VSE (VSEC) - 2025 Q2 - Quarterly Results

Q2 2025 Earnings Overview VSE Corporation reported record Q2 2025 revenue and profitability, driven by its aviation-focused strategy and successful strategic actions Financial Highlights VSE Corporation achieved record Q2 2025 revenue of $272.1 million and Adjusted EBITDA of $43.5 million, driven by strong year-over-year growth Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | % Change YoY | | :--- | :--- | :--- | | Total Revenues | $272.1 million | +41.1% | | GAAP Net Income | $13.6 million | NM | | GAAP EPS (Diluted) | $0.66 | NM | | Adjusted EBITDA | $43.5 million | +51.9% | | Adjusted Net Income | $20.1 million | +149.1% | | Adjusted EPS (Diluted) | $0.97 | +106.4% | Management Commentary Management attributed record Q2 performance to a successful aviation-focused strategy, including divestitures and acquisitions, with a future focus on free cash flow - The CEO highlighted the company's aviation-focused strategy, which is driving record revenue and profitability[2] - Key strategic moves in the quarter included the divestiture of the Fleet segment and the acquisition of Turbine Weld Industries, a specialized MRO service provider[2] - The CFO stated a forward-looking focus on driving improved free cash flow generation and optimizing the cost structure for the streamlined aviation platform[2] Financial Performance VSE demonstrated strong Q2 2025 financial performance with significant revenue and profit growth in its Aviation segment, improved liquidity, and raised full-year guidance Consolidated Financial Results For the second quarter of 2025, VSE's revenues from continuing operations increased 41.1% to $272.1 million compared to the prior year, with operating income rising 765.2% to $22.5 million Consolidated Results (Continuing Operations) | (in thousands, except EPS) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $272,139 | $192,828 | 41.1% | | Operating income | $22,513 | $2,602 | 765.2% | | Net income (loss) | $13,638 | $(5,288) | NM | | EPS (Diluted) | $0.66 | $(0.31) | NM | Segment Performance Following the divestiture of the Fleet segment, the company operates as a single Aviation segment, achieving record revenue of $272.1 million in Q2 2025, up 41.1% YoY - Aviation segment revenue grew 41.1% YoY to a record $272.1 million, with distribution revenue up 50.4% and MRO revenue up 27.3%[3] Aviation Segment Profitability (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Operating Income | $35,072 | $24,468 | 43.3% | | Adjusted EBITDA | $46,522 | $31,488 | 47.7% | | Adjusted EBITDA Margin | 17.1% | 16.3% | +80 bps | Financial Position and Liquidity VSE generated positive cash flow in Q2 2025, with $12 million from operations and $6 million in free cash flow, ending the quarter with strong liquidity and reduced net debt - The company generated $12 million of operating cash flow and $6 million of free cash flow in Q2 2025[5] Liquidity and Debt Position (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Cash & Unused Credit Availability | $333 million | | Total Net Debt | $362 million | | Adjusted Net Leverage | ~2.2x | 2025 Full-Year Guidance VSE reaffirmed its full-year 2025 revenue growth forecast of 35% to 40% and raised its Aviation segment's Adjusted EBITDA margin guidance to 16.5% to 17% - Full-year 2025 revenue growth guidance is reaffirmed at 35% to 40% year-over-year[6] - Aviation segment full-year 2025 Adjusted EBITDA margin guidance was increased to a new range of 16.5% to 17%[6] Non-GAAP Financial Measures Key non-GAAP reconciliations highlight VSE's improved adjusted profitability, positive free cash flow generation, and reduced net leverage in Q2 2025 Reconciliation of Net Income to Adjusted Net Income & Adjusted EPS The company's Adjusted Net Income from continuing operations for Q2 2025 was $20.1 million, a 149.1% increase from Q2 2024, after various adjustments Adjusted Net Income Reconciliation (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (loss) from continuing operations | $13,638 | $(5,288) | | Adjustments (Acquisition, Divestiture, Earn-out, etc.) | $8,655 | $17,817 | | Tax impact of adjusted items | $(2,159) | $(4,445) | | Adjusted net income from continuing operations | $20,134 | $8,084 | Reconciliation of Net Income to EBITDA & Adjusted EBITDA Adjusted EBITDA for Q2 2025 increased 51.9% year-over-year to $43.5 million, calculated by adjusting GAAP net income for interest, taxes, D&A, and other items Adjusted EBITDA Reconciliation (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (loss) from continuing operations | $13,638 | $(5,288) | | Interest, Taxes, D&A | $18,509 | $13,972 | | EBITDA | $32,147 | $8,684 | | Other Adjustments (Stock Comp, Earn-out, etc.) | $11,305 | $19,928 | | Adjusted EBITDA | $43,452 | $28,612 | Reconciliation of Free Cash Flow The company generated $6.3 million in free cash flow in Q2 2025, a significant improvement from a negative free cash flow of $21.5 million in the same period last year Free Cash Flow (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $11,891 | $(17,528) | | Capital expenditures | $(5,589) | $(3,945) | | Free cash flow | $6,302 | $(21,473) | Net Debt and Leverage Ratio As of June 30, 2025, VSE's net debt stood at $362.3 million, a decrease from $401.1 million at the end of 2024, improving the Adjusted Net Leverage Ratio to 2.2x Net Debt and Leverage | (in thousands, except ratio) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Net Debt | $362,250 | $401,143 | | Adjusted Net Leverage Ratio | 2.2x | 2.5x | Consolidated Financial Statements (Unaudited) The unaudited financial statements reflect VSE's financial position and performance, including the impact of the Fleet segment divestiture on assets and liabilities Consolidated Balance Sheets As of June 30, 2025, VSE's total assets were $1,602.0 million, decreasing from $1,742.6 million at year-end 2024, primarily due to the Fleet segment divestiture Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $753,619 | $965,347 | | Total assets | $1,602,027 | $1,742,630 | | Total current liabilities | $202,045 | $298,500 | | Total liabilities | $622,500 | $754,444 | | Total stockholders' equity | $979,527 | $988,186 | Consolidated Statements of Operations For the three months ended June 30, 2025, VSE generated total revenues of $272.1 million, leading to an operating income of $22.5 million and a consolidated net income of $3.2 million Key Income Statement Items (Q2 2025, in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenues | $272,139 | $192,828 | | Operating income | $22,513 | $2,602 | | Net income (loss) from continuing operations | $13,638 | $(5,288) | | (Loss) income from discontinued operations | $(10,441) | $2,511 | | Net income (loss) | $3,197 | $(2,777) | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $34.7 million, with investing activities providing $82.6 million, resulting in a net decrease in cash of $12.1 million Cash Flow Summary (Six Months Ended June 30, in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(34,741) | $(96,588) | | Net cash provided by (used in) investing activities | $82,613 | $(81,820) | | Net cash (used in) provided by financing activities | $(59,996) | $189,471 | | Net (decrease) increase in cash | $(12,124) | $11,063 | Additional Information This section provides supplementary details including investor conference call information, a company overview, and cautionary forward-looking statements Conference Call Information VSE will host a conference call on Thursday, July 31, 2025, at 8:30 A.M. ET to review its second-quarter financial results, with webcast and presentation materials available online - A conference call to discuss Q2 2025 results is scheduled for Thursday, July 31, 2025, at 8:30 A.M. ET[22] About VSE Corporation VSE Corporation is a leading provider of aftermarket distribution and MRO services for the commercial and business & general aviation markets, specializing in engine components and airframe accessories - VSE is a leading provider of Aviation distribution and repair services for the commercial and business & general aviation (BG&A) aftermarkets[24] Forward-Looking Statements This earnings release contains forward-looking statements subject to various risks and uncertainties, reflecting management's current expectations, and actual results may differ materially - The document includes forward-looking statements involving known and unknown risks that may cause actual results to differ materially from expectations[26]