VSE boosts FY23 revenue & EBITDA guidance for Aviation segment

“VSE Aviation has a long history of supporting Honeywell fuel control systems and subcomponents as both a distributor and MRO service provider. We believe this new asset purchase and license agreement significantly strengthens our existing, long-term relationship with Honeywell and is a testament to the value of our differentiated OEM-focused value proposition. We expect this agreement to provide long-term, sustainable revenue and an improved mid-term EBITDA margin outlook for VSE Aviation from these critical and highly technical aircraft components and associated intellectual property,” stated John Cuomo, President and CEO of VSE Corporation. “We are incredibly excited to secure this licensing agreement with Honeywell because it enables VSE to help extend the life of several marquee engine platforms,” stated Ben Thomas, President of VSE Aviation. “We intend to drive improved performance for both the engine manufacturers and their operators, deliver more value from the engineering and supply chain of these components, and strengthen our partnership with Honeywell.” VSE acquired the perpetual license and asset for $105 million. The purchase price also included $12 million of existing inventory. The Company expects to lower its net working capital requirements by approximately $10 million ratably throughout 2024 through lower inventory costs. This more favorable product cost, offset partially by production expenses, is expected to contribute approximately $7 M and $14 M of additional EBITDA in 2024 and 2025 respectively, and is not expected to have a material effect in the fourth quarter of 2023. The Company funded the purchase through a drawdown on its existing credit facility. VSE anticipates its net leverage ratio to be below 4.0 times at the end of the third quarter and improving by the end of the year, when including the trailing twelve-month results from prior acquisitions and the recent purchase of the Honeywell fuel control license. The Company is also increasing full year 2023 revenue and Adjusted EBITDA guidance for its Aviation segment, reaffirming full year 2023 revenue and Adjusted EBITDA guidance for its Fleet segment, and maintaining second half 2023 free cash flow guidance: Aviation segment full year 2023 revenue guidance is increasing from 25 to 30% to 30 to 35% growth, as compared to the prior year Aviation segment full year 2023 Adjusted EBITDA margin guidance is increasing from 13 to 15% to 14 to 16% Fleet segment is maintaining its full year 2023 revenue guidance of 20 to 25% growth, as compared to the prior year …Fleet segment is maintaining its Adjusted EBITDA margin guidance of 11 to 13% ..The Company maintains its outlook of positive free cash flow in the second half of 2023