Slide 1: VSE Corporation Earnings Presentation First Quarter 2020
VSE Corporation Earnings Presentation First Quarter 2020 1 May 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements This document contains certain forward-looking statements. These forward-looking statements, which are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and oth
Slide 3: 1Q20 Consolidated Performance
1Q20 CONSOLIDATED PERFORMANCE Y/Y Growth in Revenue, Adjusted Net Income, Adjusted EBITDA, Free Cash Flow, Adjusted EPS Total Revenue > Total Commercial Customer Revenue: $67.3 million or 38% of sales +4.4% y/y > Total Government Customer Revenue: $110.1 million or 62% of sales Adjusted Net Income >
Slide 4: COVID-19 Business Update
COVID-19 BUSINESS UPDATE All Segments Remain Operational; Cost Reduction Plan in Effect EMPLOYEE SAFETY COST REDUCTIONS BUSINESS OPERATIONS Operating expense and reduction in VSE operations are “critical and Health & Safety of our employees Q1/Q2: ~$13M annualized essential” infrastructure per
Slide 5: GAAP Financial Summary
GAAP FINANCIAL SUMMARY 1Q20 and TTM(1) – Y/Y Comparisons Market Share Gain Drives Growth Total Revenue Operating Income ($MM) ($MM) > Aviation repair and Fleet $760.1 $54.5 $58.2 $690.2 commercial customer gains; sales from new product offerings drove strong organic $177.4 $169.9 $11.8 $9.7 revenue
Slide 6: Non-GAAP Financial Summary
NON-GAAP FINANCIAL SUMMARY 1Q20 and TTM – Y/Y Comparisons Adjusted Net Income Adjusted Diluted Earnings Per Share Broad-Based Y/Y Improvement ($MM) ($ Per Share) $3.84 > Adjusted Net Income +32% $42.5 $3.16 $34.6 > Adjusted EPS +30.9% > Adjusted EBITDA +15.4% $7.4 $9.8 $0.68 $0.89 > Strong performan
Slide 7: 1Q19 vs. 1Q20 Performance Bridge
1Q19 vs. 1Q20 PERFORMANCE BRIDGE Y/Y Comparisons Revenue Drivers Total Revenue Bridge > Aviation distribution and ($MM) repair revenue increased $169.9 $8.7 $1.5 ($2.7) $177.4 $8.7M or 18% > Fleet revenue increased $1.5M or 3%, led by commercial customer growth > Federal & Defense revenue decreased
Slide 8: Aviation
AVIATION 1Q20 and TTM – Y/Y Comparisons Revenue +18% Y/Y Aviation Segment Revenue Aviation Segment Operating Income > Revenue growth across all ($MM) ($MM) aviation revenue streams $233.3 > Balanced growth both in $162.0 distribution product sales $11.9 $12.9 and MRO services revenue $58.1 $3.0 $49.
Slide 9: Fleet
FLEET 1Q20 and TTM – Y/Y Comparisons Fleet Segment Revenue Fleet Segment Operating Income ($MM) ($MM) Revenue +3% Y/Y > Revenue increase due to $210.6 $216.0 strategic commercial customer growth of +$4.8M $30.0 $29.7 or 122% $51.7 $53.2 $7.0 $6.9 Adjusted EBITDA (2%) Y/Y 1Q19 1Q20 TTM 1Q19 TTM 1Q20
Slide 10: Federal & Defense
FEDERAL & DEFENSE 1Q20 and TTM – Y/Y Comparisons Federal & Defense Segment Revenue Federal & Defense Segment Operating Income Revenue (4%) Y/Y ($MM) ($MM) > Revenue decline due to $317.5 $310.8 expiration of US Army contract in early Q1 partially offset by growth in Naval $19.7 $16.7 customers $68.8
Slide 11: Maintaining Balance Sheet Optionality
MAINTAINING BALANCE SHEET OPTIONALITY $176M Availability on Lending Facilities; 2.9x Net Leverage Ratio Unused Commitments on Term Loan and Ratio of Net Debt to TTM Adjusted EBITDA Access to Liquidity (31 Mar 2020) Revolving Credit Facility (1) ($ MM) > $176M cash and unused commitment availability
Slide 12: GAAP to Non-GAAP Reconciliations: Adjusted Net Income and EPS
GAAP TO NON-GAAP RECONCILIATIONS Adjusted Net Income and Adjusted EPS (Diluted) (in thousands) Three Months Ended March 31, 2020 2019 % Change Net Income $3,332 $6,603 (49.5)% Adjustments to Net Income: Acquisition and CEO transition costs — 1,121 Earn-out adjustment 301 — Loss on sale of a business
Slide 13: GAAP to Non-GAAP Reconciliations: EBITDA and Adjusted EBITDA
GAAP TO NON-GAAP RECONCILIATIONS EBITDA and Adjusted EBITDA (in thousands) Three Months Ended March 31, 2020 2019 % Change Net Income $3,332 $6,603 (49.5)% Interest expense 3,486 3,158 10.4% Income taxes 2,916 2,052 42.1% Amortization of intangible assets 4,723 4,991 (5.4)% Depreciation and other am
Slide 14: GAAP to Non-GAAP Reconciliations: Segment EBITDA
GAAP TO NON-GAAP RECONCILIATIONS Segment EBITDA and Adjusted EBITDA (in thousands) Three Months Ended March 31, 2020 2019 % Change Aviation: Operating Income ($1,880) $3,048 (161.7)% Depreciation and Amortization 3,066 3,230 (5.1)% EBITDA $1,186 $6,278 (81.1)% Loss on sale of a business entity and c
Slide 15: GAAP to Non-GAAP Reconciliations: Net Leverage Ratio
GAAP TO NON-GAAP RECONCILIATIONS Net Leverage Ratio (in thousands) March 31, 2020 2019 Principal amount of debt $276,256 $277,148 Less: Debt issuance costs (2,556) (2,001) Less: Cash and cash equivalents (543) (829) Net Debt $273,157 $274,318 TTM Adjusted EBITDA(1) 93,646 79,946 Net Leverage Ratio 2
Slide 16: VSE Corporation Investor Presentation April 2020
VSE Corporation Investor Presentation May 2020 30 April 2020
Slide 17: Corporate Profile
CORPORATE PROFILE Pure-Play Aftermarket and MRO Services Company Providing 2019 2019 Aftermarket Revenue Adj. EBITDA Services $750+M since 1959 $90+M Public Company Active Worldwide Employees NASDAQ: Customers Facilities ~2,100 VSEC 6,200+ 55+ 17 R A I S E T H E B A R
Slide 18: Diversified Revenue Mix
DIVERSIFIED REVENUE MIX AVIATION FLEET FEDERAL & DEFENSE Distribution & MRO Services Distribution & Fleet Services Logistics & Sustainment Services » Aftermarket repair and distribution » Aftermarket support, parts supply, » Aftermarket maintenance, repair and services to commercial, cargo, inventor
Slide 19: Strategic Overview: Our Unique Value Proposition
STRATEGIC OVERVIEW Our Unique Value Proposition Pure-Play Aftermarket Technical Expertise Independent, focused parts and Team of industry experts with technical and services provider transportation asset repair experience Customer- & Supplier-Centric Agile Ability to offer bespoke offerings to Lean
Slide 20: Strategic Overview: Roadmap for Growth
STRATEGIC OVERVIEW Roadmap for Growth Organic Growth Factors Inorganic Growth Requirements Increase market penetration of new/existing accounts Focused, disciplined acquisition strategy targeting: Geographic expansion outside North America Product, customer, service or geographic expansion T
Slide 21: Aviation Segment Overview
AVIATION SEGMENT OVERVIEW AVIATION Key Customers Providing aftermarket MRO and distribution services to commercial, cargo, business and general aviation, military/defense and rotorcraft customers globally. Offerings include: 1. Parts distribution and supply chain services 2. Component and engine acc
Slide 22: Aviation Segment Strategy: Why We Win
AVIATION SEGMENT STRATEGY >> INDEPENDENCE Niche single-source aftermarket focus with only repair and distribution capabilities >> AGILITY Organization structure provides rapid response, reliable support and bespoke WHY WE support for customers and OEM supplier partners WIN >> TECHNICAL EXPERTISE Dis
Slide 23: Aviation Segment Strategy: Growth Factors
AVIATION SEGMENT STRATEGY >> MRO CAPABILITY DEVELOPMENT New MRO offerings to support broadest range of aircraft components and engine accessory repair; specifically in fuel and hydraulics, engine components and accessories, interiors, auxiliary power units (APU), avionics >> DISTRIBUTION PRODUCT EXP
Slide 24: Fleet Segment Overview
FLEET SEGMENT OVERVIEW FLEET (formerly Supply Chain Management Group) Key Customers Providing parts, sourcing, inventory management, e-commerce fulfillment, logistics, supply chain management and other services to federal and commercial aftermarket truck and fleet owners. Offerings include: 1. High-
Slide 25: Fleet Segment Strategy: Why We Win
FLEET SEGMENT STRATEGY >> UNIQUE MARKET OFFERING Stocking Distributor + Technology Solutions + Consigned Parts Provider >> NICHE CUSTOMER FOCUS Medium to large, high-duty cycle, delivery and vocational fleets; 500,000 stocking SKUs and 700+ manufacturers represented WHY WE >> PROPRIETARY INVENTORY M
Slide 26: Fleet Segment Strategy: Growth Factors
FLEET SEGMENT STRATEGY >> CUSTOMER DIVERSIFICATION Expansion of commercial customer base to support new medium to large, high-duty cycle fleet customers GROWTH >> SHARE OF WALLET EXPANSION Product expansion to existing Just-in-Time clients >> MAINTAIN THE CORE FACTORS Continue to support USPS fleet
Slide 27: Federal & Defense Segment Overview
FEDERAL & DEFENSE SEGMENT OVERVIEW FEDERAL & DEFENSE (formerly Federal Services Group) Key Customers Providing aftermarket maintenance, repair and overhaul (MRO) and logistics services to improve operational readiness and the useful life of military vehicles, marine vessels and aircraft for the U.S.
Slide 28: Federal & Defense Segment Strategy: Why We Win
FEDERAL & DEFENSE SEGMENT STRATEGY >> PAST PERFORMANCE 60+ year history of program execution and past performance across all land, sea and air transportation platforms >> INDUSTRY EXPERTISE Technical, subject matter-experienced team with extensive repair knowledge to support difficult-to-maintain as
Slide 29: Federal & Defense Segment Strategy: Growth Factors
FEDERAL & DEFENSE SEGMENT STRATEGY >> INVESTMENT Expand core business development and contracting solutions to increase share of budget with current and new customers >> LEVERAGE CORE COMPETENCY Expand base operations support for U.S. Air Force, U.S. Army and U.S Navy >> MARKET EXPANSION GROWTH Incr
Slide 30: Investment Opportunity
INVESTMENT OPPORTUNITY Diversified Aftermarket/MRO Play with Stable End-Market Exposure Experience Leadership Balance 60+ years of aftermarket experience New CEO from KLX-Boeing, public- Stable, balanced customer mix; and service excellence supporting company experienced growth leader; ~60% stable g
Slide 31: Vee
Vee CORPORATION A