Slide 1: Fourth Quarter & Full-Year 2020 Results Conference Call
Fo u r t h Q u a r te r & F u l l - Ye a r 2 0 2 0 Re s u l t s C o n fe re n c e C a l l 5 March 2021
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements 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 Exchang
Slide 3: Executive Summary
EXECUTIVE SUMMARY 4Q20 and Full-Year 2020 Financial Performance Business Transformation Update 4Q20 Results Full-Year 2020 Results As of March 4, 2021 Financial Performance Financial Performance Aviation Maintained Profitability, Despite Pandemic Sustained Profitability Awarded exclusive life-of-pro
Slide 4: VSE Acquires HAECO Special Services
VSE ACQUIRES HAECO SPECIAL SERVICES US Airforce Depot Maintenance ▪ Depot maintenance supporting US Air Force’s KC-10 fleet ▪ Strong backlog and contract revenue visibility into 2025 Strategic Fit & Opportunities for Growth ▪ Expands VSE Federal & Defense segment existing Aircraft MRO capabilities w
Slide 5: GAAP Financial Summary
GAAP FINANCIAL SUMMARY 4Q20 and Full-Year 2020 – Y/Y Comparisons Total Revenue Operating Income (Loss)(1) • 4Q20 revenue growth in Fleet, ($MM) ($MM) offset by declines in Aviation $752.6 $661.7 and Federal & Defense $60.3 • Second consecutive quarter of sequential revenue growth in $195.3 Aviation;
Slide 6: Non-GAAP Financial Summary
NON-GAAP FINANCIAL SUMMARY 4Q20 and Full-Year 2020 – Y/Y Comparisons Adjusted Net Income Adjusted Diluted Earnings Per Share • Maintained profitability in both ($MM) ($ Per Share) 4Q and full-year 2020, despite $3.64 $40.2 pandemic-related disruptions; $2.63 Adjusted net income (50%) y/y $29.1 in 4Q
Slide 7: Consolidated Performance Bridge
CONSOLIDATED PERFORMANCE BRIDGE Revenue Adj. EBITDA Adj. EBITDA % 4Q19 $195.3 $23.1 11.8% Fourth Quarter 2020 Aviation ($22.4) ($6.3) (2.1) pts • Aviation revenue and profit lower driven by COVID-19 impact on global revenue passenger miles FDS ($23.2) $2.6 +3.2 pts • Federal and Defense revenue lowe
Slide 8: Aviation
AVIATION Second consecutive quarter of revenue growth and market share gains; well-positioned for recovery Aviation Segment Revenue Aviation Segment Operating Income (Loss) • 4Q20 revenue increased +6.5% ($MM) ($MM) sequentially, driven by share $224.5 $187.0 $17.9 $16.6 gains in distribution busine
Slide 9: Fleet
FLEET Sustained growth in commercial fleet revenue partially offset by lower USPS activity Fleet Segment Revenue Fleet Segment Operating Income • Diversifying sales mix to include ($MM)(1) ($MM)(1) a larger proportion of commercial fleet and e- $242.2 $214.5 $214.5 $215.6 $29.8 $29.8 commerce fulfil
Slide 10: Federal & Defense
FEDERAL & DEFENSE 4Q20 Bookings +97% vs. 4Q19; focused on driving segment profitability Federal & Defense Segment Revenue Federal & Defense Segment Operating Income • Diversifying services offerings to ($MM) $313.6 ($MM) optimize portfolio profitability $26.3 $254.4 • Segment bookings increased $18.
Slide 11: Maintaining Balance Sheet Optionality
MAINTAINING BALANCE SHEET OPTIONALITY $19 million of debt reduction; ~$175 million of excess availability on lending facilities Free Cash Flow Total Net Debt • ($0.9) million FCF in 4Q20 ($ MM) ($ MM) includes acquisition of $10.7 $269.3 $31.3 million inventory to support new Pratt & Whitney Canada
Slide 12: Investment Priorities
INVESTMENT PRIORITIES Market dynamics create both organic and inorganic opportunities for capital deployment Process & Criteria Opportunities Aviation Distribution Organic Working capital requirements to support organic • Commercial landing gear growth: • Business/regional jet APU and Engine Investm
Slide 13: Keys to Success for VSE in 2021
KEYS TO SUCCESS FOR VSE IN 2021 AVIATION ▪ Continue to outpace market recovery and expand operating margins ▪ Execute on recently awarded distribution agreements ▪ Expand MRO capabilities and partnerships to capture incremental share FLEET ▪ Drive above-market commercial growth from fleet customers,
Slide 14: Investment Opportunity
INVESTMENT OPPORTUNITY Unique pure-play independent aftermarket services company poised for growth WELL BALANCED BUSINESS SEGMENTS MISSION-CRITICAL STRONG CUSTOMER AFTERMARKET SERVICES RELATIONSHIPS FRAGMENTED CULTURAL TRANSFORMATION END-MARKETS DRIVING GROWTH NEW EXPERIENCED MANAGEMENT TEAM Strateg
Slide 15: Investor Presentation
) 7 ee YG | INVESTOR PRESENTATION CORPORATION
Slide 16: Investment Highlights
INVESTMENT HIGHLIGHTS Pure-play independent aftermarket service provider with strong organic and inorganic growth opportunities Global provider of aftermarket distribution, maintenance, repair, and overhaul (“MRO”) and other services 60+ Years Aftermarket 3 Distinct ~1,900 Services End Markets Emplo
Slide 17: 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 18: Balanced Aftermarket Business Segments
BALANCED AFTERMARKET BUSINESS SEGMENTS 100% aftermarket services supporting critical link between OEMs and end-users Diverse End Markets Deliver Tailwinds for Growth ( $ and % 2020 Revenue) Federal & Defense Logistics & Sustainment Services $254.4M 39% Aviation Distribution & MRO Services $165.1M 25
Slide 19: Unique Value Proposition
UNIQUE VALUE PROPOSITION Differentiation drives market share gains, long-term sustainable revenue and margin expansion Pure-Play Aftermarket Transportation Asset Experience Uniquely positioned in the market as Support for land, sea, and air transportation assets independent parts and services provid
Slide 20: Aviation Segment Overview
AVIATION SEGMENT OVERVIEW Refocused Strategy: Higher growth, higher margin commercial and B&GA distribution and MRO Key Capabilities Growth Drivers Representative Customers ✓ Commercial and business & MRO Capability Development general aviation proprietary • New MRO offerings to support range of com
Slide 21: Fleet Segment Overview
FLEET SEGMENT OVERVIEW Refocused Strategy: High growth, market disrupting Class 4-8 commercial distribution and e-commerce Key Capabilities Growth Drivers Representative Customers ✓ High-duty cycle, Class 4-8 Commercial Customer Diversification (medium to heavy) vehicle parts • Expansion of commerci
Slide 22: Federal & Defense Segment Overview
FEDERAL & DEFENSE SEGMENT OVERVIEW Refocused Strategy: Higher margin, differentiated supply chain, MRO and technical services Key Capabilities Growth Drivers Representative Customers ✓ Transportation asset MRO Market Expansion services • Increase military aviation services with products, supply chai
Slide 23: VSE Executive Team
VSE Executive Team Background & Responsibilities Background & Responsibilities • 18+ years of aerospace distribution and • 10+ years of senior finance leadership, services market industry experience most recently as CFO for GE Aviation Engine Services • Appointed Chief Executive Officer and Presiden
Slide 24: Appendix
10 7 | VSE APPENDIX CORPORATION
Slide 25: 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 December 31, For the years ended December 31, 2020 2019 % Change 2020 2019 % Change Net Income (Loss) $ 6,013 $ 9,996 (39.8) % $ (5,171) $ 37,024 (114.0)% Adjustments to Net Income (Loss
Slide 26: GAAP to Non-GAAP Reconciliations: EBITDA and Adjusted EBITDA
GAAP TO NON-GAAP RECONCILIATIONS EBITDA and Adjusted EBITDA (in thousands) Three months ended December 31, For the years ended December 31, 2020 2019 % Change 2020 2019 % Change Net Income (Loss) $ 6,013 $ 9,996 (39.8) % $ (5,171) $ 37,024 (114.0) % Interest Expense 3,408 3,568 (4.5)% 13,496 13,830
Slide 27: GAAP to Non-GAAP Reconciliations: Segment EBITDA
GAAP TO NON-GAAP RECONCILIATIONS Segment EBITDA and Adjusted EBITDA (in thousands) Three months ended December 31, For the years ended December 31, 2020 2019 % Change 2020 2019 % Change Aviation Operating Income (Loss) $ (833) $ 3,081 (127.0)% $ (35,513) $ 17,901 (298.4)% Depreciation and Amortizati
Slide 28: GAAP to Non-GAAP Reconciliations: Free Cash Flow
GAAP TO NON-GAAP RECONCILIATIONS Free Cash Flow (in thousands) Three months ended December 31, For the years ended December 31, 2020 2019 2020 2019 Net cash provided by operating activities $ 526 $ 555 $ 35,761 $ 17,994 Capital expenditures (1,471) (1,941) (4,427) (9,630) Free cash flow $ (945) $ (1
Slide 29: GAAP to Non-GAAP Reconciliations: Net Leverage Ratio
GAAP TO NON-GAAP RECONCILIATIONS Net Leverage Ratio (in thousands) December 31, 2020 2019 Principal amount of debt $253,461 $272,800 Less: Debt issuance costs (2,368) (2,789) Less: Cash and cash equivalents (378) (734) Net Debt $250,715 $269,277 TTM Adjusted EBITDA(1) $75,198 $90,874 Net Leverage Ra