\nVSE Corporation (NASDAQ: VSEC, VSE, or the Company), a leading provider of aftermarket distribution and maintenance, repair and overhaul (MRO) services for land, sea and air transportation assets supporting government and commercial markets, today announced results for the first quarter 2021.\n<\/p>\n
FIRST QUARTER 2021 RESULTS \nFor the three months ended March 31, 2021, the Company reported total revenue of $165.0 million, versus $177.4 million for the same period ended 2020. The Company reported adjusted net income of $5.3 million or $0.44 per adjusted diluted share, compared to $9.8 million or $0.89 per adjusted diluted share in the prior-year period. Adjusted EBITDA declined to $15.6 million in the first quarter 2021, versus $22.7 million for the same period in 2020.\n<\/p>\n \nFleet segment revenue increased 2.9% on a year-over-year basis, as growth in commercial fleet and e-commerce fulfillment offset a slight decline in U.S. Postal Service-related revenue. For the first quarter, Federal and Defense segment revenue was essentially flat on a year-over-year basis, as new contract wins offset the previously announced completion of a DoD program. Aviation segment revenue, excluding the previously divested Prime Turbines and CT Aerospace assets, declined 12.0% on a year-over-year basis in first quarter 2021, as lower airline revenue passenger miles resulted in reduced commercial MRO activity. During the first quarter, Aviation segment revenue increased 15.1% when compared to fourth quarter 2020, representing the third consecutive quarter of sequential segment growth. Aviation segment performance was driven by continued market share gains within the Company\u2019s parts distribution business, together with improved business and general aviation (B&GA) customer demand. VSE Aviation distribution revenue returned to pre-pandemic levels during first quarter 2021, up 13.1% as compared to fourth quarter 2020. VSE Aviation MRO revenue increased 18.1%, compared to fourth quarter 2020.\n<\/p>\n \nVSE invested nearly $35 million in new inventory during first quarter 2021 to support recent aviation program wins. These program wins include previously announced distribution agreements with global OEMs to support engine auxiliary power unit (APU), avionics, landing gear and telecommunications products.\n<\/p>\n STRATEGY UPDATE <\/b><\/p>\n \nVSE continued to execute on its multi-year business transformation plan during the first quarter. The management team remains focused on accelerating business transformation with new development initiatives, product and service line expansions, bolt-on acquisitions, and disciplined balance sheet management.\n<\/p>\n MANAGEMENT COMMENTARY <\/b><\/p>\n \n\u201cWe continued to leverage our unique value proposition across niche, high-value market verticals during the first quarter of 2021, while advancing our business transformation strategy through a combination of both organic and inorganic growth,\u201d stated John Cuomo, President and CEO of VSE Corporation. \u201cOur change management and business transformation initiatives have begun to yield tangible results, as evidenced by new business wins, expanded relationships with commercial and government customers, and improved organizational efficiency.\u201d\n<\/p>\n \n\u201cWe remain highly focused on growing a backlog of higher-margin, multi-year contracts that position us to cross-sell our products and services into new and existing markets,\u201d continued Cuomo. \u201cWithin our Aviation segment, we recently announced a $1 billion, 15-year agreement with a major engine manufacturer with the potential to generate approximately $60 million in annual revenue upon full implementation. This transaction significantly expands our customer base across more than 100 B&GA and regional aviation engine platforms, while providing stable, long-term contract revenue. Within our Federal and Defense segment, we recently announced more than $37 million in new contract awards with the both the U.S. Air Force and a U.S. Government foreign ally. In our Fleet segment, we continue to generate strong organic growth in commercial revenue. Collectively, these new wins reflect a sharpened organizational focus on new business development, while further validating our go-to-market strategies.\u201d\n<\/p>\n \n\u201cAviation segment revenue within distribution returned to pre-pandemic levels during the first quarter, ahead of our market peers, supporting our third quarter of sequential revenue growth in the segment,\u201d continued Cuomo. \u201cWhile revenue passenger miles remain below historical levels, we anticipate that an increase in B&GA and commercial domestic travel will lead the recovery, creating new opportunities for our business as traffic levels improve into 2022.\u201d\n<\/p>\n \n\u201cVSE remains well-capitalized to support the ongoing growth of the business,\u201d stated Stephen Griffin, CFO of VSE Corporation. \u201cWhile our recently announced business wins will require working capital investments in new inventory during 2021, we anticipate significant returns on these investments in 2022 and beyond. Disciplined balance sheet management remains a priority for us and we anticipate that we will end 2021 in a similar leverage position as compared to 2020. We are targeting a long-term net leverage ratio of 2.5x.\u201d\n<\/p>\n SEGMENT RESULTS <\/b><\/p>\n AVIATION \nVSE\u2019s Aviation<\/b> segment provides aftermarket MRO and distribution services to commercial, cargo, business and general aviation, military\/defense and rotorcraft customers globally. Core services include parts distribution, component and engine accessory MRO services, rotable exchange and supply chain services.\n<\/p>\n \nVSE Aviation segment revenue, less contributions from Prime Turbines (divested February 2020) and CT Aerospace (divested June 2020), decreased 12.0% year-over-year to $44.4 million in the first quarter 2021. The year-over-year revenue decline was attributable to the adverse impact of the COVID-19 pandemic on commercial air traffic, resulting in lower customer demand. The Aviation segment recorded an operating loss of $0.3 million in the first quarter, versus an operating loss of $1.9 million in the prior-year period. Segment Adjusted EBITDA decreased to $2.2 million in the first quarter 2021, versus $7.9 million in the prior-year period.\n<\/p>\n FLEET \nVSE’s Fleet<\/b> segmentprovides parts, inventory management, e-commerce fulfillment, logistics, supply chain support and other services to support the commercial aftermarket medium- and heavy-duty truck market, the United States Postal Service (USPS), and the United States Department of Defense. Core services include parts distribution, sourcing, IT solutions, customized fleet logistics, warehousing, kitting, just-in-time supply chain management, alternative product sourcing, engineering and technical support.\n<\/p>\n \nVSE Fleet segment revenue increased 2.9% year-over-year to $54.7 million in the first quarter 2021. Revenues from commercial customers increased approximately $5.6 million or 63.6%, driven by growth in commercial fleet demand and our e-commerce fulfillment business. Operating income declined 16.9% year-over-year to $5.7 million in the first quarter 2021 due to sales mix and related factors. Segment Adjusted EBITDA declined 15.6% year-over-year in the first quarter 2021 to $8.1 million.\n<\/p>\n FEDERAL & DEFENSE \nVSE’s Federal and Defense <\/b>segmentprovides aftermarket MRO and logistics services to improve operational readiness and to extend the life cycle of military vehicles, ships and aircraft for the U.S. Armed Forces, federal agencies and international defense customers. Core services include base operations support, procurement, supply chain management, vehicle, maritime and aircraft sustainment services, IT services and energy consulting.\n<\/p>\n \nVSE Federal and Defense segment revenue declined 0.4% year-over-year to $65.9 million in the first quarter 2021, as new contract awards served to offset previously announced contract expirations. Operating income increased 2.1% year-over-year to $5.0 million in the first quarter, while Adjusted EBITDA increased 2.0% year-over-year to $5.8 million in the period, due to a less favorable contract mix.\n<\/p>\n \nVSE Federal and Defense segment first quarter bookings declined 6.0% year-over-year to $63 million. Funded backlog declined 6.5% year-over-year to $188 million. The decline in funded backlog was attributable to the expiration of a contract in the first quarter 2020 and the delay of new business awards. The Company continues to focus on revitalizing this business by leveraging its improved technical competencies to capitalize on higher margin growth as evidenced in recent wins announced in April 2021.\n<\/p>\n FINANCIAL RESOURCES AND LIQUIDITY<\/b><\/p>\n \nAs of March 31, 2021, the Company had $167 million in cash and unused commitment availability under its $350 million revolving credit facility maturing in 2023. The Company\u2019s existing credit facility includes a $100 million accordion provision, subject to customary lender commitment approvals. As of March 31, 2021, VSE had total net debt outstanding of $254 million and $68.1 million of trailing-twelve months Adjusted EBITDA.\n<\/p>\n FIRST QUARTER RESULTS<\/b><\/p>\n
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<\/b>Distribution & MRO Services<\/i><\/p>\n
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<\/b>Distribution & Fleet Services<\/i><\/p>\n
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<\/b>Logistics & Sustainment Services <\/i><\/p>\n
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