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Jun 30, 2020
VSE Q2 2020 Earnings Report
VSE Corporation reported a net loss for Q2 2020, with revenue declining due to the impact of COVID-19, but took strategic actions to adapt to the environment.
Key Takeaways
VSE Corporation reported a decrease in total revenue by 10.8% compared to Q2 2019, with a GAAP net loss of $22.6 million. The company faced challenges due to the COVID-19 pandemic, particularly impacting the Aviation segment. However, strategic actions, including cost reductions and new business development, are expected to contribute to positive adjusted net income and free cash flow for the full year.
Total revenues decreased by 10.8% year-over-year, impacted by the COVID-19 pandemic and the divestiture of Prime Turbines.
GAAP net loss was $22.6 million, influenced by non-cash impairment charges related to the Aviation segment.
The Fleet segment revenue increased by 32.4%, driven by a large order for COVID-19 related PPE supplies.
VSE is implementing cost reduction measures and focusing on new business development to enhance profitability.
VSE
VSE
Forward Guidance
VSE anticipates sequential growth in Aviation segment revenue and earnings during the third quarter of 2020 and expects to generate positive adjusted net income and free cash flow for the full-year 2020.
Positive Outlook
- Sequential growth in Aviation segment revenue and earnings is anticipated during the third quarter of 2020.
- Ongoing program to integrate business units will reduce go-to-market Aviation entities from seven to two.
- Exiting of three Aviation site locations.
- New business development remains a top management priority across each reporting segment.
- Cash and liquidity increased on both a sequential and year-over-year basis in the second quarter.
Challenges Ahead
- The pace of recovery in the Aviation segment will be gradual and uncertain.
- Decline in funded backlog was attributable to the expiration of a contract in January 2020 and delay of new business awards.
- COVID-19 pandemic presents a unique set of near-term challenges for the business.
- Aviation segment revenue, excluding Prime Turbines, declined 31% year-over-year due to lower demand for aftermarket supply and MRO services.
- Federal & Defense segment revenue declined 18.7% year-over-year primarily due to the completion of DoD program work in January 2020.