Slide 1: First Quarter 2023 Results Conference Call
V S E c o r p .c o m First Quarter 2023 Results Conference Call May 2023
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
This presentation contains statements that, to the extent they are not recitations of historical fact, constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. All such statements
Slide 3: Strategic Repositioning and Sale of Federal & Defense business segment
Transaction Overview: ▪ VSE entered into a definitive agreement to sell its Federal & Defense business segment to Bernhard Capital Partners ▪ Total cash consideration of up to $100 million, including a $50 million cash payment and up to $50 million in an earn- out, subject to the achievement of cert
Slide 4: Q1 Business Update
Q1 Business Update Strong Macro Tailwinds Combined with Steady Program Execution Driving Robust Financial Performance Operational Excellence, Favorable Market Tailwinds and Market Share Gains Driving Record Revenue Quarters for Aviation and Fleet Segments 4 Aviation Fleet • MRO market share gains an
Slide 5: Q1 2023 Overview
Q1 2023 Overview Total VSE > Total Revenue: $255.4M, +10% Y/Y > Net Income: $9.1M, +46% Y/Y > Adjusted EBITDA: $26.3M, +18% Y/Y Aviation > Revenue: $113.2M +21% Y/Y; record quarter > Operating Income: $15.7M, +105% Y/Y > Adjusted EBITDA: $19.0M, +75% Y/Y; record quarter Federal & Defense > Revenue:
Slide 6: VSE Financial Summary Q1 2023
VSE Financial Summary Q1 2023 Revenue +10%, Adjusted EBITDA +18%, Adjusted Net Income +16% year-over-year; Aviation and Fleet key growth drivers for 2023 ($ in millions except EPS) Quarter-to-Date 1Q'23 1Q’22 vs. 1Q’22 Revenue $255.4 $231.2 +10% Net Income $9.1 $6.2 +46% Adjusted EBITDA $26.3 $22.2
Slide 7: Consolidated Performance Bridge
Consolidated Performance Bridge Strong progress in building long-term profitable revenue; Aviation segment driving Adjusted EBITDA growth ▪ Aviation segment revenue and profit growth supported by successful program execution, improved customer demand, expansion in both distribution and MRO capabilit
Slide 8: Aviation Segment
Aviation Segment New distribution programs, expanded MRO capabilities and strong end-markets drive sustainable profitable growth ($ in millions) Quarter-to-Date 1Q'23 1Q'22 vs. 1Q'22 Revenue $113.2 $93.3 +21% Operating income (loss) $15.7 $7.6 +105% Adjusted EBITDA $19.0 $10.9 +75% Adjusted EBITDA %
Slide 9: Fleet Segment
Fleet Segment Execution of commercial revenue diversification strategy continues to deliver above-market growth ($ in millions) Quarter-to-Date 1Q'23 1Q'22 vs 1Q’22 Revenue $75.4 $67.0 +12% Operating income $5.9 $6.4 (8)% Adjusted EBITDA $8.2 $8.8 (7)% Adjusted EBITDA % 10.9% 13.1% (2.2) pts Revenue
Slide 10: Federal & Defense Segment
Federal & Defense Segment ($ in millions) Quarter-to-Date 1Q'23 1Q'22 vs 1Q’22 Revenue $66.8 $70.9 (6)% Operating income (loss) $(0.6) $(0.7) (16)% Adjusted EBITDA $0.6 $3.8 (83)% Adjusted EBITDA % 1.0% 5.3% (4.3)pts Contract Backlog: Bookings $61 $92 (33)% Backlog $185 $198 (7)% Y/Y Comparisons: ▪
Slide 11: Balance Sheet Optionality
Balance Sheet Optionality Net leverage expected to decline in by 2H 2023 through increased Adj. EBITDA & disciplined cash management ▪ Cash and unused commitment availability of $93M ▪ Operating and free cash flow in 1Q’23 includes the acquisition of ~$30M in inventory to support new aviation awards
Slide 12: Entering Next Phase of VSE's Transformation
Entering Next Phase of VSE’s Transformation 12 Complete Sale of FDS Reposition Business Expand Aviation Aftermarket Offerings Integrate Acquisitions Drive Commercial Fleet Growth Deliver 2H’23 FCF > Complete the sale of the Federal & Defense Services business > Ensure a smooth and successful transit
Slide 13: Appendix
VSE CORPORATION 2 APPENDIX
Slide 14: GAAP to Non-GAAP Reconciliations: Adjusted Net Income and Adjusted EPS
GAAP to Non-GAAP Reconciliations Adjusted Net Income and Adjusted EPS (Diluted) Calculation uses an estimated statutory tax rate on non-GAAP tax deductible adjustments. (in thousands, except per share data) 1Q2022 2Q2022 3Q2022 4Q2022 1Q2023 Net income $ 6,244 $ 7,548 $ 9,419 $ 4,848 $ 9,117 Adjustm
Slide 15: GAAP to Non-GAAP Reconciliations: EBITDA and Adjusted EBITDA
GAAP to Non-GAAP Reconciliations EBITDA and Adjusted EBITDA (in thousands, except per share data) 1Q2022 2Q2022 3Q2022 4Q2022 1Q2023 Net income $ 6,244 $ 7,548 $ 9,419 $ 4,848 $ 9,117 Interest expense, net 3,609 3,872 4,818 5,586 5,977 Income taxes 2,061 2,731 3,035 1,360 2,839 Amortization of intan
Slide 16: GAAP to Non-GAAP Reconciliations: Segment EBITDA and Adjusted EBITDA
GAAP to Non-GAAP Reconciliations Segment EBITDA and Adjusted EBITDA (in thousands) 1Q2022 2Q2022 3Q2022 4Q2022 1Q 2023 Aviation Operating income $ 7,622 $ 6,450 $ 10,017 $ 12,327 $ 15,663 Depreciation and amortization 3,035 3,110 3,413 3,143 3,322 EBITDA 10,657 9,560 13,430 15,470 18,985 Acquisition
Slide 17: GAAP to Non-GAAP Reconciliations: Balance Sheet
GAAP to Non-GAAP Reconciliations Balance Sheet (1) TTM Adjusted EBITDA is defined as Adjusted EBITDA for the most recent twelve (12) month period Reconciliation of Operating Cash Flow to Free Cash Flows Three Months Ended (in thousands) 31-Mar-22 30-Jun-22 30-Sep-22 31-Dec-22 31-Mar-23 Net cash (use
Slide 18: Investment Highlights
V S E c o r p .c o m Pure-play independent aftermarket service provider with strong organic & inorganic growth opportunities Investment Highlights 3 Distinct End Markets $39M Adj. Net Income ~2,000 Employees $974M Revenue 63+ Years Aftermarket Services $96M Adj. EBITDA Global provider of aftermarket
Slide 19: VSE Executive Team
V S E c o r p .c o m VSE Executive Team VSE Senior Leadership John Cuomo President and CEO ▪ 22+ years of aerospace distribution and services market industry experience ▪ Appointed Chief Executive Officer and President of VSE Corporation in 2019 ▪ Previously served as Vice President and General Mana
Slide 20: Aviation Segment Overview
Aviation Segment Overview Refocused Strategy: Higher growth, higher-margin commercial and B&GA distribution and MRO MRO Capability Development ▪ New MRO offerings to support range of components and engine accessory repairs including: fuel and hydraulics, engine components and accessories, interiors,
Slide 21: Fleet Segment Overview
Fleet Segment Overview Refocused Strategy: High growth Class 4-8 commercial distribution and e-commerce Commercial Customer Diversification ▪ Expansion of commercial customer base to support new medium to large, high-duty cycle fleet customers Wallet Share Expansion ▪ Product expansion to existing j
Slide 22: Federal & Defense Segment Overview
Federal & Defense Segment Overview Refocused Strategy: Higher margin, differentiated supply chain, MRO and technical services Market Expansion ▪ Increase military aviation services with products, supply chain and repair services Capability Development ▪ Broaden DoD logistics and supply chain offerin
Slide 23: Unique Value Proposition
Unique Value Proposition Differentiation drives market share gains, long-term sustainable revenue & margin expansion End-User and OEM-Centric Ability to offer bespoke solutions to support critical link between end-users and Original Equipment Manufacturers (“OEMs”) Agility Lean operating model and d
Slide 24: Investment Opportunity
Investment Opportunity Unique, pure-play independent aftermarket services company poised for growth Strategic Market Positioning, Strong Growth Strategy, Proven Execution Experience Mission-critical Aftermarket Services Cultural Transformation Driving Growth Strong Customer Relationships New Experie