Slide 1: Investor Presentation: Fourth Quarter and Full-Year 2019
INVESTOR PRESENTATION Fourth Quarter and Full-Year 2019 28 February 2020
Slide 2: Disclaimer
DISCLAIMER Forward-Looking Statements and Non-GAAP Financial Measures This presentation 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
Slide 3: Overview
OVERVIEW Global Aftermarket Provider of Distribution/Repair Services For Land, Sea and Air Transportation Assets > Provides parts supply and distribution, supply chain solutions, component Aviation Group and engine accessory repair services for global aftermarket commercial, 30% of 2019 Revenue busi
Slide 4: Executive Summary – VSE Corporation
EXECUTIVE SUMMARY – VSE Corporation Fourth Quarter and Full-Year 2019 VSE CORPORATION Total Revenue +7.9% y/y in 4Q2019; § Broad-based growth in both services and +7.9% y/y for Full-Year 2019 products revenue in 4Q2019/2019 Net Income +8.1% y/y in 4Q2019; § 4Q19 diluted EPS of $0.90 +5.5% y/y for Fu
Slide 5: Executive Summary – VSE Business Groups
EXECUTIVE SUMMARY – VSE Business Groups Fourth Quarter and Full-Year 2019 VSE BUSINESS GROUPS § Excluding 1st Choice Aerospace acquisition, Aviation Group Revenue +42.3% y/y in 4Q2019; Aviation Group revenue organically increased 11% 54.4% for Full-Year 2019 y/y in 2019, supported by growth in globa
Slide 6: GAAP Financial Summary
GAAP FINANCIAL SUMMARY Fourth Quarter and Full-Year 2019 Total Revenue Operating Income ($MM) ($MM) Stable Revenue Growth $752.6 $697.2 $60.3 > Organic and acquisition revenue $54.2 growth in Aviation offset by decline in Federal Services $181.0 $195.3 $14.8 $13.1 4Q18 4Q19 2018 2019 4Q18 4Q19 2018
Slide 7: Non-GAAP Financial Summary
NON-GAAP FINANCIAL SUMMARY Fourth Quarter and Full-Year 2019 Total Adjusted EBITDA Adjusted EBITDA Margin ($MM) (1) (%) $91.0 11.8% 12.1% Improved Margin Capture $78.3 11.0% 11.2% > Adjusted EBITDA margin increased in 4Q19 and 2019, 80 bps and 90 bps, respectively $23.1 $19.9 4Q18 4Q19 2018 2019 4Q1
Slide 8: 4Q 2018 vs. 4Q 2019 Performance Bridge
4Q 2018 vs. 4Q 2019 PERFORMANCE BRIDGE Fourth Quarter and Full-Year 2019 Total Revenue Bridge ($MM) Core Business Remains Stable $18.1 $195.3 $181.0 $0.8 > Generated y/y revenue and EBITDA growth of 7.9% and 8.2%, ($4.6) respectively in 4Q2019 Aviation Drove Revenue Growth 4Q18 Total Revenue Supply
Slide 9: Full-Year 2018 vs. 2019 Performance Bridge
FULL-YEAR 2018 vs. 2019 PERFORMANCE BRIDGE Fourth Quarter and Full-Year 2019 Total Revenue Bridge ($MM) Mixed Revenue Performance $79.1 $752.6 $697.2 > Aviation drove growth, which ($23.4) was partially offset by 7% decline ($0.3) in Federal Services Supply Chain Was Flat 2018 Total Revenue Supply C
Slide 10: Aviation Group Performance Summary
AVIATION GROUP PERFORMANCE SUMMARY Fourth Quarter and Full-Year 2019 Aviation Group Revenue Aviation Group Operating Income 1st Choice Ahead of Plan ($MM) ($MM) $224.5 > Acquisition performing ahead of $17.9 plan on revenue, operating $145.4 $63.0* income and EBITDA $11.1 $42.9 $61.0 $161.5 $3.8 $3.
Slide 11: Supply Chain Group Performance Summary
SUPPLY CHAIN GROUP PERFORMANCE SUMMARY Fourth Quarter and Full-Year 2019 Supply Chain Group Revenue Supply Chain Group Operating Income ($MM) ($MM) USPS Update $214.8 $214.5 > USPS contract represented 78% of total Supply Chain Group revenue $30.6 $29.8 in 2019 compared to 82% in 2018 $52.8 $53.6 $7
Slide 12: Supply Chain Group Growing Non-USPS Revenue
SUPPLY CHAIN GROUP GROWING NON-USPS REVENUE Focus on Customer Diversification and Growing Group Revenue In Commercial Channels USPS as % of Total Supply Chain Group Revenue Supply Chain Group Revenue, Ex-USPS ($MM) ($MM) Replacing USPS Revenue 89% 2019 $47.1 > Significant gains replacing lost 88% US
Slide 13: Federal Services Performance Summary
FEDERAL SERVICES PERFORMANCE SUMMARY Fourth Quarter and Full-Year 2019 Federal Services Group Revenue Federal Services Group Operating Income ($MM) ($MM) Revenue Focus $337.0 $313.6 > Phase One: Prioritize strategic focus and new business development / revenue pipeline > Phase Two: Margin expansion
Slide 14: Disciplined Balance Sheet Management
DISCIPLINED BALANCE SHEET MANAGEMENT Maintaining Balance Sheet Optionality Total Cash & Unused Commitments on Net Debt / TTM Adjusted EBITDA (net leverage ratio) Term Loan and Revolving Credit Facility (%) (2) ($ MM) (1) $199 Jan. 2019: 1st Choice Acquisition for $113 million cash Significant Access
Slide 15: Strategic Priorities
STRATEGIC PRIORITIES Introducing Go-Forward Strategy on 1Q 2020 Earnings Call VSE Corporation CREATE LEAN CORPORATE STRUCTURE Support business groups with growth strategy and differentiated value propositions. Integrate acquired businesses within business groups to capture value and leverage synergi
Slide 16: Investment Opportunity
INVESTMENT OPPORTUNITY Increased Aftermarket Commercial Focus, Strong FCF Generation, Balance Sheet Optionality Customer / market segment shift from Re-focusing core business to support Focus on increasing free cash flow to traditional federal base to more growth markets where VSE has well- support
Slide 17: 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, 2019 2018 % Change 2019 2018 % Change Net Income $9,996 $9,243 8.1% $37,024 $35,080 5.5% Interest Expense 3,568 2,285 56.1% 13,830 8,982 54.0% Income Taxes 1,24
Slide 18: GAAP to Non-GAAP Reconciliations: Segment EBITDA
GAAP to NON-GAAP RECONCILIATIONS Segment EBITDA (in thousands) Three months ended December 31, For the years ended December 31, 2019 2018 % Change 2019 2018 % Change Aviation Group Operating Income $3,081 $3,785 (18.6)% $17,901 $11,076 61.6% Depreciation and Amortization 2,687 2,183 23.1% 12,385 8,6
Slide 19: GAAP to Non-GAAP Reconciliations: Net leverage ratio
GAAP to NON-GAAP RECONCILIATIONS Net leverage ratio (in thousands) December 31, 2019 2018 Principal amount of debt $272,800 $162,734 Less: Debt issuance costs (2,789) (2,135) Less: Cash and cash equivalents (734) (162) Net debt $269,277 $160,437 TTM Adjusted EBITDA(1) 91,019 78,323 Net leverage rati