Slide 1: VSEC Third Quarter 2020 Conference Call
VSEC Third Quarter 2020 Conference Call 29 October 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: Business Update
BUSINESS UPDATE Focused on business improvement, new business development and long-term strategy execution ORGANIC GROWTH INORGANIC GROWTH Business Development Product Line Expansion Change Management Acquisition Focus Aviation: $100 million, 5-year Aviation: Launched Landing Incoming CFO: Ann
Slide 4: 3Q20 Consolidated Performance
3Q20 CONSOLIDATED PERFORMANCE Generated positive net income and free cash flow, while reducing debt outstanding • $165.5 million (16.5% y/y); excluding Prime Turbines and CT Aerospace (12.0% y/y) • Q/Q revenue growth across all three segments in 3Q20, excluding non-recurring items Sequential Revenue
Slide 5: GAAP Financial Summary
GAAP FINANCIAL SUMMARY 3Q20 and TTM(1) – Y/Y comparisons Total Revenue Operating Income (Loss)(2) • Y/Y revenue growth in Fleet ($MM) ($MM) offset by declines in Aviation $738.4 $706.9 and Federal & Defense $58.5 • Q/Q growth across all $198.3 $165.5 segments, less non-recurring $17.2 $14.2 $16.9 it
Slide 6: Non-GAAP Financial Summary
NON-GAAP FINANCIAL SUMMARY 3Q20 and TTM – Y/Y comparisons Adjusted Net Income Adjusted Diluted Earnings Per Share • Adjusted net income (38%) y/y ($MM) ($ Per Share) in 3Q20; (9%) on a TTM 3Q20 basis $3.48 $38.3 $3.15 $34.8 • Adjusted EBITDA (27%) y/y in $10.9 $0.99 3Q20 and (8%) on a TTM 3Q20 $6.8
Slide 7: Consolidated Performance Bridge
CONSOLIDATED PERFORMANCE BRIDGE 3Q19 vs. 3Q20 – Y/Y comparisons Total Revenue Bridge • Aviation: Y/Y revenue decline ($MM) attributable to the adverse impact of the COVID-19 pandemic on commercial air $198.3 traffic, resulting in lower $8.4 $165.5 customer activity ($23.0) ($18.2) • Federal & Defens
Slide 8: Aviation
AVIATION Revenue declined due to COVID impact on air travel, but increased +16% q/q Aviation Segment Revenue Aviation Segment Operating Income (Loss) • Strategic Focus: Build scalable ($MM) ($MM) foundation for growth; target share gains; new product and $18.6 $17.8 service introductions $206.4 $187
Slide 9: Fleet
FLEET 107% y/y growth in commercial (eCommerce fulfillment) offset lower USPS revenue in Q3 Fleet Segment Revenue Fleet Segment Operating Income • Strategic Focus: Commercial ($MM)(1) ($MM)(1) fleet and e-commerce fulfillment market expansion $241.8 $213.7 $213.7 $215.2 $29.5 $29.5 $27.9 $27.9 oppor
Slide 10: Federal & Defense
FEDERAL & DEFENSE Y/Y improvement in both margin realization and Adjusted EBITDA in 3Q20 Federal & Defense Segment Revenue Federal & Defense Segment Operating Income ($MM) ($MM) $318.2 $23.6 • Strategic Focus: Expand market $277.6 focus; increase bidding activity; $16.5 grow funded backlog; build pi
Slide 11: Maintaining Balance Sheet Optionality
MAINTAINING BALANCE SHEET OPTIONALITY Second consecutive quarter of debt reduction; ~$190 million of excess availability on lending facilities Free Cash Flow Total Net Debt • Strategic Focus: Long term ($ MM) ($ MM) target to reduce net leverage to below 3x; ROIC-driven capital $35.5 allocation stra
Slide 12: Appendix
10 7 | VSE APPENDIX CORPORATION
Slide 13: GAAP to Non-GAAP Reconciliations
GAAP TO NON-GAAP RECONCILIATIONS Adjusted Net Income and Adjusted EPS (Diluted) (in thousands) Three Months Ended September 30, 2020 2019 % Change Net Income $8,108 $10,527 (23)% Adjustments to Net Income: Acquisition and CEO transition costs — 518 Earn-out adjustment (1,695) — Tax impact of adjuste
Slide 14: GAAP to Non-GAAP Reconciliations
GAAP TO NON-GAAP RECONCILIATIONS EBITDA and Adjusted EBITDA (in thousands) Three Months Ended September 30, 2020 2019 % Change Net Income $8,108 $10,527 (23)% Interest expense 3,530 3,706 (5)% Income taxes 2,547 2,982 (15)% Amortization of intangible assets 4,158 5,014 (17)% Depreciation and other a
Slide 15: GAAP to Non-GAAP Reconciliations
GAAP TO NON-GAAP RECONCILIATIONS Segment EBITDA and Adjusted EBITDA (in thousands) Three Months Ended September 30, 2020 2019 % Change Aviation: Operating Income $1,586 $6,568 (76)% Depreciation and Amortization 2,493 3,314 (25)% EBITDA $4,079 $9,882 (59)% Earn-out adjustment (1,695) — Adjusted EBIT
Slide 16: GAAP to Non-GAAP Reconciliations
GAAP TO NON-GAAP RECONCILIATIONS Net Leverage Ratio (in thousands) September 30, 2020 2019 Principal amount of debt $252,685 $270,266 Less: Debt issuance costs (2,664) (1,735) Less: Cash and cash equivalents (551) (1,095) Net Debt $249,470 $267,436 TTM Adjusted EBITDA(1) $81,036 $87,690 Net Leverage
Slide 17: Corporate Overview
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Slide 18: Corporate Profile
CORPORATE PROFILE Pure-Play Aftermarket & 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 ~1,900 VSEC 6,200+ 55+ 18 R A I S E T H E B A R
Slide 19: 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 20: Strategic Overview
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 21: Corporate Leadership Team
CORPORATE LEADERSHIP TEAM Robert Moore John Cuomo Tom Loftus Elizabeth Huggins Krista Stafford Ben Thomas Chad Wheeler President, President and CEO Chief Financial Officer VP of Strategy, Chief Human Resources President, President, Federal & Defense Chief of Staff Officer Aviation Wheeler Fleet Solu
Slide 22: Investment Opportunity
INVESTMENT OPPORTUNITY Diversified Aftermarket/MRO Play with Stable End-Market Exposure Experience Leadership Balance 60+ years of aftermarket experience CEO from KLX-Boeing, public- Stable, balanced customer mix; and service excellence supporting company experienced growth leader; ~60% government r
Slide 23: Growth Strategy
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Slide 24: 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 25: 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 26: Growth Factors: Aviation Segment
AVIATION SEGMENT >> 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 EXPANSION GR
Slide 27: 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 28: Growth Factors: Fleet Segment
FLEET SEGMENT >> CUSTOMER DIVERSIFICATION Expansion of commercial customer base to support new medium to large, high-duty cycle fleet customers >> SHARE OF WALLET EXPANSION Product expansion to existing Just-in-Time clients GROWTH >> MAINTAIN THE CORE FACTORS Continue to support USPS fleet and DoD v
Slide 29: 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 30: Growth Factors: Federal & Defense Segment
FEDERAL & DEFENSE SEGMENT >> 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 Increase mili
Slide 31: Why We Win: Aviation Segment
AVIATION SEGMENT >> 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 Distribution
Slide 32: Why We Win: Fleet Segment
FLEET SEGMENT >> 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 MANAGEMENT
Slide 33: Why We Win: Federal & Defense Segment
FEDERAL & DEFENSE SEGMENT >> 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 assets WHY
Slide 34: Vek
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