VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a
leading provider of aftermarket distribution and repair services
for land, sea and air transportation assets in the public and
private sectors, today announced results for the fourth quarter and
full-year 2019.
FOURTH QUARTER 2019 HIGHLIGHTS AS COMPARED TO THE FOURTH
QUARTER 2018
- Total Revenues of $195.3 million increased +7.9%
- Total Net Income of $10.0 million increased +8.1%
- Total Adjusted EBITDA of $23.1 million increased +15.9%
- EPS (Diluted) of $0.90 per share increased +7.1%
FULL-YEAR 2019 HIGHLIGHTS AS COMPARED TO FULL-YEAR
2018
- Total Revenues of $752.6 million increased +7.9%
- Total Net Income of $37.0 million increased +5.5%
- Total Adjusted EBITDA of $91.0 million increased +16.2%
- EPS (Diluted) of $3.35 per share increased +4.4%
For the three months ended December 31, 2019, the Company
reported total revenue of $195.3 million, versus $181.0 million for
the same period ended 2018. VSE reported net income of $10.0
million, or $0.90 per diluted share, compared to $9.2 million, or
$0.84 per diluted share, in the fourth quarter 2018. Adjusted
EBITDA increased to $23.1 million in fourth quarter 2019, versus
$19.9 million for the same period ended 2018.
During the fourth quarter, growth in Aviation and Supply Chain
Management Group revenue offset a decline in Federal Services Group
revenue. Aviation Group revenue increased more than 54% on a
year-over-year basis, due to contributions from the 1st Choice
Aerospace acquisition completed in January 2019, together with
organic growth in core existing business lines. Excluding
contributions from the 1st Choice Aerospace acquisition, Aviation
Group revenue increased organically more than 11% in the full-year
2019, when compared to the prior-year, driven by increased global
distribution sales. Supply Chain Management Group revenue increased
2% on a year-over-year basis in the fourth quarter, as an increase
in vehicle parts sales to commercial customers offset an
anticipated decline in demand related to the Company’s managed
inventory program with the United States Postal Service (“USPS”).
Federal Services Group revenue declined 7% on a year-over-year
basis, due to anticipated reduced demand for services on a U.S.
Navy program.
MANAGEMENT COMMENTARY
“Our full-year performance reflects stable year-over-year
growth in revenue, margin capture and profitability,” stated John
Cuomo, President and CEO of VSE Corporation. “Early into my tenure
as CEO, we’ve taken action to narrow the strategic focus of our
business, while targeting higher-margin growth opportunities where
we have a unique and differentiated value proposition supported by
well-defined, sustainable competitive advantages. These actions are
translating into increased focus on expanding organic market share
in both new and existing channels, while realizing improved cost
synergies throughout the organization.”
“Within our Aviation Group, we recently closed the divestiture
of our Prime Turbines subsidiary, a move that will position us to
focus on higher-growth component/accessory repair and parts
distribution opportunities that serve the global commercial and
general aviation markets,” continued Cuomo. “Our Supply Chain
Management Group continues to diversify beyond the USPS managed
inventory program, with non-USPS group revenue growing nearly 20%
on a year-over-year basis in 2019, supported by increased activity
in commercial parts distribution. Further, within our Federal
Services Group, we experienced an increase in activity with the
Army and Air Force throughout the year, while continuing to
transition into an increased volume of fixed-price contracts that,
on balance, have resulted in improved margin realization for our
business.”
“Looking ahead, we intend to formally introduce our multi-year
strategic plan to the public when we report first quarter 2020
results,” continued Cuomo. “At that time, we will outline how we
intend to redefine our presence in key markets, accelerate organic
revenue growth and increase margins, all while generating free cash
flow to support investments in new programs and bolt-on
acquisitions.”
SEGMENT RESULTS
The following is a commentary of revenues and operating income
for the fourth quarter and full year periods ended December 31,
2019 and December 31, 2018:
Aviation Group
VSE Aviation provides parts supply and distribution, supply
chain solutions, component and engine accessory repair services
supporting global aftermarket commercial, business and general
aviation customers through product distribution and maintenance,
repair and overhaul (MRO) services.
Aviation Group revenue increased 42% year-over-year to $61.0
million in the fourth quarter 2019, while full-year 2019 group
revenue increased 54% year-over-year to $224.5 million. Excluding a
$1.9 million earn-out expense attributable to the successful
post-acquisition performance of 1st Choice Aerospace, operating
income increased $1.2 million or 32% for the fourth quarter and the
full year operating income increased 62% to $17.9 million. Aviation
Group EBITDA declined 3% year-over-year in the fourth quarter to
$5.8 million, due to product and customer mix, while full-year 2019
EBITDA increased 53% to $30.3 million. The year-over-year increase
in full-year 2019 operating income was attributable to a
combination of contributions resulting from the 1st Choice
Aerospace acquisition in January 2019, together with organic growth
in global aviation distribution sales.
Supply Chain Management Group
VSE’s Supply Chain Management Group provides parts supply,
inventory management, e-commerce fulfillment, logistics, data
management and other services to support the United States Postal
Service (USPS), United States Department of Defense, and
aftermarket commercial high duty-cycle truck and fleet
customers.
Supply Chain Management Group revenue increased 2%
year-over-year to $53.6 million in the fourth quarter 2019, while
full-year 2019 group revenue was essentially flat year-over-year at
$214.5 million. Operating income increased 5% year-over-year to
$7.4 million in the fourth quarter 2019, while full-year 2019
operating income declined 3% to $29.8 million. Supply Chain
Management EBITDA increased 2% year-over-year in the fourth quarter
to $10.1 million, while full-year 2019 EBITDA declined 3% to $40.8
million. The decrease in full-year 2019 operating income was mainly
attributable to a decline in demand related to the USPS.
Federal Services Group
VSE’s Federal Services Group provides aftermarket refurbishment
and sustainment services to extend and maintain the life cycle of
military vehicles, ships and aircraft for the U.S. Armed Forces,
Federal Agencies and International Military and Defense customers,
and provides energy consulting services, healthcare IT and IT data
solutions.
Federal Services Group revenue declined 5% year-over-year to
$80.6 million in the fourth quarter 2019, while full-year 2019
group revenue declined 7% year-over-year to $313.6 million.
Operating income increased 47% year-over-year to $5.2 million in
the fourth quarter 2019, while full-year 2019 operating income
increased 15% to $18.1 million. Federal Services Group EBITDA
increased 28% year-over-year in the fourth quarter to $5.9 million,
while full-year 2019 EBITDA increased 5% to $21.1 million. The
year-over-year increase in operating income for the fourth quarter
and full-year 2019 was related to an improved sales mix resulting
from more fixed-price work with government entities.
In 2019, total Federal Services Group bookings declined 29%
year-over-year to $228 million, while total funded backlog declined
27% year-over-year to $213 million. The decline in booking and
funded backlog was attributable to a combination of minimal new
business development activities, together with the loss of a
contract. The current management team increased business
development staffing and activity in the fourth quarter, and is
focused on revitalizing this business, with an emphasis on
developing a channel of new customer activity in the current
year.
SUBSEQUENT EVENTS
As previously announced on January 30, 2020, VSE entered into a
definitive agreement to sell its subsidiary Prime Turbines, LLC to
PTB Holdings USA, LLC for $21 million in cash, subject to customary
adjustments. This transaction closed on February 26, 2020.
CONFERENCE CALL
A conference call will be held Friday, February 28, 2020 at 8:30
A.M. EST 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 a 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: 877-407-0789 International Live: 201-689-8562
To listen to a replay of the teleconference, which will be
available through March 13, 2020:
Domestic Replay: 844-512-2921 International Replay: 412-317-6671
Conference ID: 13697551
Fourth Quarter and Year-End Results
(in thousands, except per share data)
Three months ended December
31,
For the years ended December
31,
2019
2018
% Change
2019
2018
% Change
Revenues
$
195,271
$
180,996
7.9%
$
752,627
$
697,218
7.9%
Operating income
$
14,813
$
13,085
13.2%
$
60,257
$
54,230
11.1%
Net income
$
9,996
$
9,243
8.1%
$
37,024
$
35,080
5.5%
EPS (Diluted)
$
0.90
$
0.84
7.1%
$
3.35
$
3.21
4.4%
SEGMENT RESULTS
Fourth Quarter Segment Results
The following is a summary of revenues and operating income for
the three- and twelve-month periods ended December 31, 2019 and
December 31, 2018:
Three months ended December
31,
For the years ended December
31,
2019
2018
% Change
2019
2018
% Change
Revenues:
Aviation Group
$
60,993
$
42,869
42.3
%
$
224,546
$
145,423
54.4
%
Supply Chain Management Group
53,642
52,848
1.5
%
214,520
214,809
(0.1
)%
Federal Services Group
80,636
85,279
(5.4
)%
313,561
336,986
(7.0
)%
Total revenues
$
195,271
$
180,996
7.9
%
$
752,627
$
697,218
7.9
%
Operating Income:
Aviation Group
$
3,081
$
3,785
(18.6
)%
$
17,901
$
11,076
61.6
%
Supply Chain Management Group
7,431
7,079
5.0
%
29,819
30,626
(2.6
)%
Federal Services Group
5,176
3,527
46.8
%
18,144
15,797
14.9
%
Corporate/unallocated expenses
(875
)
(1,306
)
(33.0
)%
(5,607
)
(3,269
)
71.5
%
Operating Income
$
14,813
$
13,085
13.2
%
$
60,257
$
54,230
11.1
%
Non-GAAP Financial Information
(in thousands)
Three months ended December
31,
For the years ended December
31,
2019
2018
% Change
2019
2018
% Change
Net Income
$
9,996
$
9,243
8.1
%
$
37,024
$
35,080
5.5
%
Interest Expense
3,568
2,285
56.1
%
13,830
8,982
54.0
%
Income Taxes
1,249
1,557
(19.8
)%
9,403
10,168
(7.5
)%
Amortization of Intangible Assets
4,332
4,004
8.2
%
19,317
16,017
20.6
%
Depreciation and Other Amortization
1,759
2,236
(21.3
)%
6,996
9,207
(24.0
)%
EBITDA
20,904
19,325
8.2
%
86,570
79,454
9.0
%
Earn-out adjustment
1,900
—
—
%
1,900
—
—
%
Acquisition Related and Executive
Succession Costs
259
569
—
%
2,549
569
—
%
Gain on sale of IT Contract
—
—
—
%
—
(1,700
)
—
%
Adjusted EBITDA
$
23,063
$
19,894
15.9
%
$
91,019
$
78,323
16.2
%
The Company reported total capital expenditures in the fourth
quarter and full-year 2019 of $2.0 million and $9.7 million,
respectively.
Reconciliation of Segment EBITDA to Operating Income
(in thousands)
Three months ended December
31,
For the years ended December
31,
2019
2018
% Change
2019
2018
% Change
Aviation Group
Operating Income
$
3,081
$
3,785
(18.6
)%
$
17,901
$
11,076
61.6
%
Depreciation and Amortization
2,687
2,183
23.1
%
12,385
8,674
42.8
%
EBITDA
$
5,768
$
5,968
(3.4
)%
$
30,286
$
19,750
53.4
%
Supply Chain Group
Operating Income
$
7,431
$
7,079
5.0
%
$
29,819
$
30,626
(2.6
)%
Depreciation and Amortization
2,713
2,851
(4.8
)%
10,947
11,494
(4.8
)%
EBITDA
$
10,144
$
9,930
2.2
%
$
40,766
$
42,120
(3.2
)%
Federal Services Group
Operating Income
$
5,176
$
3,527
46.8
%
$
18,144
$
15,797
14.9
%
Depreciation and Amortization
691
1,072
(35.5
)%
2,981
4,364
(31.7
)%
EBITDA
$
5,867
$
4,599
27.6
%
$
21,125
$
20,161
4.8
%
NON-GAAP FINANCIAL INFORMATION
The non-GAAP Financial Information set forth in this press
release is not calculated in accordance with U.S. generally
accepted accounting principles ("GAAP") under SEC Regulation G. We
consider EBITDA a non-GAAP financial measure and an important
indicator of performance and useful metric for management and
investors to evaluate our business' ongoing operating performance
on a consistent basis across reporting periods. EBITDA, however,
should not be considered in isolation or as a substitute for
performance measures prepared in accordance with GAAP. 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 executive succession costs, including our CEO and
Federal Services Group President transitions and 1st Choice
Aerospace acquisition-related costs, and the gain on the sale of an
IT contract.
ABOUT VSE CORPORATION
VSE is a global provider of aftermarket distribution and repair
services for land, sea and air transportation assets in the public
and private sectors. VSE is a recognized leader in delivering
innovative solutions for vehicle, ship, and aircraft sustainment,
supply chain management, platform modernization, mission
enhancement, and program management, and providing energy, IT, and
consulting services. For additional information regarding VSE’s
services and products, visit us 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
and performance in future periods to be materially different from
any future results or performance suggested by the forward-looking
statements in this press release. 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
Securities Exchange Commission 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, those identified
in our reports filed or expected to be filed with the Securities
and Exchange Commission including our Annual Report on Form 10-K
for the year ended December 31, 2019. 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. 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20200227006050/en/
Christine Kaineg (703) 329-3263
VSE (NASDAQ:VSEC)
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