VSE Corp. (NASDAQ: VSEC) reported Q3 EPS of $0.62, $0.03 better than the analyst estimate of $0.59. Revenue for the quarter came in at $165.5 million versus the consensus estimate of $163.03 million.

THIRD QUARTER 2020 RESULTS
(as compared to the third quarter 2019)

• Total Revenues of $165.5 million declined 16.5%
• Total Revenues, excluding divestitures, declined 12.0% (1)
• GAAP Net Income of $8.1 million declined $2.4 million
• Adjusted Net Income of $6.8 million declined $4.1 million
• Total Adjusted EBITDA of $18.0 million declined $6.5 million
• GAAP EPS (Diluted) of $0.73/share declined $0.22/share
• Adjusted EPS (Diluted) of $0.62/share declined $0.37/share
• Operating Cash Flow of $12.4 million during the third quarter 2020
• Free Cash Flow of $11.3 million during the third quarter 2020 (2)
• Total Debt reduced by $10.4 million during the third quarter 2020

MANAGEMENT COMMENTARY

“During the third quarter, we further advanced a multi-year business transformation plan in support of our long-term strategy, while effectively navigating the near-term, pandemic-related disruption to the global aviation market,” stated John Cuomo, President and CEO of VSE Corporation. “In recent months, we streamlined our organizational structure, improved systems and processes to support business expansion, won multiple new customer awards and recompetes, introduced new product and service lines within underserved niche markets, and removed fixed overhead from operations, consistent with cost reductions announced earlier this year.”

“Our Aviation, Federal & Defense and Fleet segments each reported sequential revenue growth in the third quarter, as compared to the second quarter, excluding the previously announced divestitures and a non-recurring PPE order from a government customer,” continued Cuomo. “We generated positive free cash flow from operations for the third consecutive quarter, supporting a $10.4 million reduction in our debt outstanding. With more than $190 million in cash and excess availability on our credit facilities, we believe we are well-capitalized to support the growth of the business.”

“While our team is intensely focused on repositioning the business for long-term growth, we’ve continued to execute against near-term performance objectives, as reflected by our strong third quarter results. Fleet segment commercial sales increased by more than 100% on a year-over-year basis in the third quarter, providing further validation for our commercial market expansion strategy, while in the Federal & Defense segment, we won new contracts and recompete awards, supported by increased bidding and business development activities.”

“Within our Aviation segment, the introduction of new product and service lines in niche markets remains an integral part of our long-term organic growth strategy,” continued Cuomo. “We launched a landing gear solution pilot program for global airline and MRO customers earlier this year, and we enhanced this offering with a recently announced five-year exclusive distribution agreement with a leading global manufacturer of landing gear parts and components. The agreement, which is scheduled to commence during the first quarter of 2021, has a total estimated value of approximately $100 million over five years. We look forward to this new partnership and to providing a full solution suite of landing gear products and service solutions for our global customers.”

“Looking ahead to the fourth quarter, we expect to generate sequential revenue growth within our Aviation segment, as continued market share gains and a continued gradual recovery within our business and general aviation markets serve to offset lower repair activity with commercial airline customers,” continued Cuomo. “During a period of market disruption and uncertainty, our aviation customers continue to focus on reducing fixed overhead and working capital requirements. As a trusted, well-capitalized partner with proven global supply chain and MRO solutions, customers are turning to VSE to help them better compete with next-level operating efficiency. Looking forward, our aviation team remains focused on achieving margin expansion and above-market organic growth through targeted share gains.”

“In October, we announced the appointment of two new senior executives to our leadership team,” continued Cuomo. “We are excited to welcome Steve Griffin, our incoming CFO, and Ben Thomas, our new President of the Aviation segment, as they join a world-class team committed to building market-leading positions in both new and existing markets.”

For earnings history and earnings-related data on VSE Corp. (VSEC) click here.