Vse Corporation · NASDAQ:VSEC
Vse — Investor Day (November 2023)
80 slides from Vse's investor day presentation, Nov 14, 2023
Slide 1: VSE Corporation Investor Day 2023
VSE Corporation Investor Day 2023 November 14, 2023 vsecorp.com
Slide 2: VSE Investor Day Agenda
Introduction VSE Investor Day Agenda Michael Perlman Welcome and Introductions VP, Investor Relations & Communications 9:00 AM John Cuomo Introduction to VSE Corporation President and CEO Ben Thomas Business Segment Overview - Aviation Group President, Aviation Chad Wheeler Business Segment Overview
Slide 3: VSE Executive Leadership
Introduction VSE Executive Leadership Experienced and Proven Management Team Supporting Winning Culture Speakers Speakers Featured in Videos Pedro Gonzalez | VP, GM Aviation John Cuomo Steve Griffin Michael Prkic | Director of Operations- Aviation President & CEO SVP & CFO Joined in 2019 Joined in 2
Slide 4: Forward-Looking Statements
Introduction 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 o
Slide 5: Key Themes: VSE Repositioned and Ready to Scale
Introduction Key Themes 1 VSE Repositioned and Ready to Scale Business Transformation and Near-Term Results Validate Investment Thesis Pg.5 vsecorp.com
Slide 6: Key Themes: Robust & Fragmented End Markets
Introduction Key Themes 2 Robust & Fragmented End Markets Aviation and Fleet Aftermarkets Support Short and Long-Term Organic and Inorganic Growth Opportunities Pg.6 vsecorp.com
Slide 7: Key Themes: Differentiation
Introduction Key Themes 3 Differentiation Products, Technical Capabilities, Service and Industry-Leading Team and Culture Establish Unique Position in the Market Pg.7 vsecorp.com
Slide 8: Key Themes: Growth and Financial Performance
Introduction Key Themes 4 Growth and Financial Performance Commitment to Outpace Market Growth While Improving Profitability Pg.8 vsecorp.com
Slide 9: The VSE Transformation Story
The VSE Transformation Story John Cuomo – President and CEO vsecorp.com
Slide 10: VSE Transformation Story
VSE Corporation Overview VSE Transformation Story Phase 1 Phase 2 Phase Setting the 3 Foundation & Program Execution & Refocusing Strategy Strategy Two Distinct Validation Expansion End Markets a Driving Above- Market Growth Pg.10 vsecorp.com
Slide 11: Doing What We Said We Would Do
VSE Corporation Overview Doing What We Said We Would Do Strong Execution Across Both Aviation and Fleet Segments Strategic Improvement Expanded our customer and supplier base Accelerated market diversification and differentiation Built the VSE Brand and integrated all legacy assets Generated above m
Slide 12: Successful Transformation and Long-Term Value Creation
VSE Corporation Overview Successful Transformation and Long-Term Value Creation Organic and Inorganic Investments Leading to Successful Business Transformation 2020 2021 2022 to 2023 Divested two non- Acquired Global Parts Acquired Precision Plans to divest of Strategic core aviation (proprietary ai
Slide 13: Financial Impact of Transformational Initiatives
VSE Corporation Overview Financial Impact of Transformational Initiatives LTM Revenue(1)(2) LTM Adj. EBITDA(1)(2)(3) ($ in Millions) ($ in Millions) +36% +57% 2-year CAGR 2-year CAGR $114 $798 $641 $77 $430 $498 $46 $79 $384 $44 $204 $15 $226 $257 $300 $31 $33 $35 Q3'21 Q3'22 Q3'23 Q3'21 Q3'22 Q3'23
Slide 14: Aviation and Fleet Overview
VSE Corporation Overview Percentage Revenue Breakdown(1) 38% Aviation Fleet Fleet Aviation aftermarket parts distributor and Medium to heavy-duty vehicle parts maintenance, repair & overhaul (MRO) services distributor and provider of custom- provider of technical and proprietary parts engineered sol
Slide 15: Aviation
Aviation 5E CORPORATION VSECORP.COM
Slide 16: The Aviation Market
The Aviation Market Steve Griffin – Chief Financial Officer vsecorp.com
Slide 17: Steadily Growing Commercial & Business Aviation Fleets
Aviation Segment Steadily Growing Commercial & Business Aviation Fleets Commercial Fleets Growing 2.9%/year (1) Business Jet Fleets Growing through 2033(2) +21% +33% 40,900 USA Fleet 36,300 33,900 ~70% of global fleet 27,400 2023 2033 2023 2033 ▪ Record new aircraft production rates ▪ Growing popula
Slide 18: Aftermarket Maintenance Strength and Resiliency
Aviation Segment Strength and Resiliency of Aftermarket Maintenance will Differentiate Airlines and OEMs Over the Next Decade $92bn(1) 2033 CAGR Maintenance Events Drive Highly Predictable Growth Line 12% 3% ▪ Older fleets and increased work scopes Component 20% 2% Airframe 21% 1% + New Aircraft Pro
Slide 19: VSE Aviation Segment Overview
Aviation Segment VSE Aviation Segment Overview | 62% of LTM Revenues Revenue(1) Adjusted EBITDA(1) Distribution vs. MRO(1) ($ in millions) ($ in millions) +56% +133% 2-year CAGR 2-year CAGR $498 $384 $143 $97 Revenue $204 $355 $79 $72 $287 $44 $132 $15 Q3'21 Q3'22 Q3'23 Q3'21 Q3'22 Q3'23 ~30% ~70% D
Slide 20: VSE Aviation
VSE Aviation Ben Thomas – Group President of VSE Aviation vsecorp.com
Slide 21: Unique Fully Integrated Aftermarket Solutions Provider
Aviation Segment Unique Fully Integrated Aftermarket Solutions Provider Combining Distribution Technical Sales and MRO Repair Capabilities Distribution MRO Services Unique Solutions New Parts Manufacturing Rotables Repair Pg.21 vsecorp.com vsecorp.com Pg.21
Slide 22: VSE Aviation MRO Services
Aviation Segment VSE Aviation MRO Services LTM Revenue ($ in millions) Component and Engine $143 $127 Accessory Repairs $108 $117 $97 $80 $87 $72 $76 Value Added Services Rotable Component Sales Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Q2 '23 Q3 '23 Capabilities Representative Customers ▪ Pn
Slide 23: VSE MRO: Why We Win
Aviation Segment VSE MRO: Why We Win Quality Turnaround Cost Time Pg.23 vsecorp.com
Slide 24: VSE Aviation Distribution
Aviation Segment VSE Aviation Distribution LTM Revenue ($ in millions) +64% 2-year CAGR Proprietary OEM products represent $355 75%+ of portfolio $311 $321 $287 $301 $268 100% commercial, B&GA, and $217 military aftermarket customers $172 $132 Dedicated technical product line management team support
Slide 25: Why Distribution Matters and Why VSE Aviation Wins
Aviation Segment Why Distribution Matters and Why VSE Aviation Wins Why Distribution Why We Matters Win ▪ OEMs lack the capacity to support the ▪ Industry leading technical product line large number of aftermarket end- management and service teams drive users customer and supplier-obsessed culture ▪
Slide 26: Distribution Product Line Management As A Differentiator
Aviation Segment VSE Distribution Product Line Management As A Differentiator Drives Superior Service and Expanded Margins Key Customers Open Actions Monthly Budget Cost of Capital Sales Results Service Fill Rates Inventory Health Pg.26 vsecorp.com
Slide 27: VSE Value to Both Supplier and Customer
Aviation Segment VSE Value to Both Supplier and Customer 5-year exclusive OEM Benefits Customer Benefits distribution agreement; $100 million value ▪ Penetrate new vertical markets ▪ Unique offering includes bundled ▪ Identify pricing opportunities solutions comprising product $100 million ▪ Reduced
Slide 28: Creating Distinctive Value for OEM Partner
Aviation Segment Creating Distinctive Value for OEM Partner via Distribution & MRO Integration Customer Benefits OEM Engine Maintenance Program ▪ 57% reduction in order turnaround time ▪ 95% in-region fill rate ▪ 42% reduction in average delivery hours Faster Response 99% On-Time 24/7/365 Delivery i
Slide 29: Growth Opportunities
Aviation Segment Growth Opportunities Ben Thomas – Group President of VSE Aviation John Cuomo – President and CEO vsecorp.com
Slide 30: Honeywell Fuel Controls
Aviation Segment Honeywell Fuel Controls Perpetual License Agreement Opportunity Highlights ▪ Exclusive rights to manufacture, repair, and control the intellectual property for Honeywell in-production and aftermarket fuel controls and subcomponents +340 3 ~20k In-Production Unique Fuel Engine In-Ser
Slide 31: Aviation Centers of Excellence Ready to Scale
Aviation Segment Aviation Centers of Excellence Ready to Scale Doral, FL Miramar, FL Independence, KS Hamburg, Germany 50k square foot facility Facility and infrastructure 40k square foot facility 45k square foot facility with ability to increase ready to double volume and additional 28k square Open
Slide 32: Aviation Growth Opportunities
Aviation Segment Aviation Growth Opportunities Leading to Low-Double-Digit Revenue Growth & EBITDA Margin Expansion Distribution ▪ Product line expansion ▪ New OEM partners ▪ Expanded offerings – Rotables Pg.32 vsecorp.com
Slide 33: Aviation Growth Opportunities
Aviation Segment Aviation Growth Opportunities Leading to Low-Double-Digit Revenue Growth & EBITDA Margin Expansion Distribution MRO ▪ Product line ▪ Capability expansion expansion ▪ New OEM-authorized ▪ New OEM partners repairs ▪ Expanded offerings – Rotables Pg.33 vsecorp.com
Slide 34: Aviation Growth Opportunities
Aviation Segment Aviation Growth Opportunities Leading to Low-Double-Digit Revenue Growth & EBITDA Margin Expansion Distribution MRO International Expansion ▪ Product line ▪ Capability expansion ▪ New European facility expansion ▪ New OEM-authorized ▪ P&WC Agreement ▪ New OEM partners repairs Expans
Slide 35: Aviation Growth Opportunities
Aviation Segment Aviation Growth Opportunities Leading to Low-Double-Digit Revenue Growth & EBITDA Margin Expansion Distribution MRO International M&A Expansion ▪ Product line ▪ Capability expansion ▪ New European facility ▪ New customers, new expansion ▪ New OEM-authorized ▪ P&WC Agreement products
Slide 36: Aviation Growth Opportunities
Aviation Segment Aviation Growth Opportunities Leading to Low-Double-Digit Revenue Growth & EBITDA Margin Expansion Distribution MRO International M&A Total Expansion Product Line Management ▪ Product line ▪ Capability expansion ▪ New European facility ▪ New customers, new ▪ Licensing expansion ▪ Ne
Slide 37: Aviation Segment Key Takeaways
Aviation Segment Aviation Segment Key Takeaways VSE product line management, culture Aviation aftermarket is strong and 1 resilient 4 and processes drive superior service and expanded margins Business transformation resulted in Extensive growth opportunities: products, above market revenue growth an
Slide 38: Fleet
Fleet =)3 CORPORATION VSECORP.COM
Slide 39: The Fleet Market
The Fleet Market Steve Griffin – Chief Financial Officer vsecorp.com
Slide 40: Consumer Shift to E-Commerce Supported by Aging Delivery Fleet
Fleet Segment Consumer Shift to E-Commerce Supported by Large and Aging Fleet of Delivery Vehicles +50% +7% +7% Increase in consumer Annual Growth in US Annual Growth in online purchases vs. 2018(1) Packages Shipped(2) Truck Sales(3) ‘000s 250 Trucks /year 200 150 15% 100 E-Commerce 9% 25bn 7 % of T
Slide 41: $400 Billion Automotive Aftermarket Shifting Online
Fleet Segment $400 Billion Automotive Aftermarket Shifting Online and Disrupting Traditional Distribution Fragmented Automotive Aftermarket Distribution $400bn +63% Growth PASSENGER VEHICLES in Auto E-Commerce OEM Dealers Top 2 20% Distributors $300bn 50% 25% $41bn $67bn 80% All Others MEDIUM/HEAVY
Slide 42: Fleet Segment At A Glance
Fleet Segment Fleet Segment At A Glance | 38% of LTM Revenues Revenue(1) Adjusted EBITDA(1) Commercial vs. USPS(2) ($ in millions) ($ in millions) +15% +6% 2-year CAGR 2-year CAGR $300 $257 $227 $5 $14 $133 Revenue $66 $100 $35 $147 $152 $167 $33 $31 Q3'21 Q3'22 Q3'23 Q3'21 Q3'22 Q3'23 56% 44% USPS
Slide 43: Wheeler Fleet Solutions
Fleet Segment Wheeler Fleet Solutions Chad Wheeler – Group President of Wheeler Fleet Solutions vsecorp.com
Slide 44: Wheeler Fleet Solutions – At A Glance
Fleet Segment Wheeler Fleet Solutions – At A Glance Focused on underserved high growth Class 4-8 commercial distribution and e-commerce Customers We Support Vehicles We Serve Products We Sell Capabilities We Offer ▪ United States Postal Service ▪ Class 4-8 commercial ▪ Product catalog of more ▪ Part
Slide 45: Fleet Revenue Channels
Fleet Segment Fleet Revenue Channels United States Commercial E-Commerce / Postal Service Fleet Sales Fulfillment Pg.45 vsecorp.com vsecorp.com
Slide 46: Wheeler Transformation Story
Fleet Segment Wheeler Transformation Story Successfully Executing Customer and Revenue Diversification Strategy $300 $215 $133 44% Commercial $23 11% Commercial $25 12% Defense $167 77% USPS $167 56% USPS ($ in millions) FY 2019 Q3 2023(1) (1)TTM Q3’23 performance Pg.46 vsecorp.com
Slide 47: USPS Continues as Anchor Customer into the Future
Fleet Segment United States Postal Service Continues as Anchor Customer into the Future New Vehicles Additions Fleet Size 213K 250K 260K Existing Fleet Past Growth Present Growth Future Growth ▪ 1989 Awarded National Ordering ▪ Support all USPS vehicle platforms ▪ Continued support for legacy fleet
Slide 48: Commercial Fleet Sales
Fleet Segment Commercial Fleet Sales Revenue WHO we serve +23% ▪ Amerit ▪ Republic Services 3-yr CAGR ▪ Penske ▪ UPS ▪ Waste Management ▪ Avis / Budget WHAT we sell +36% 3-yr CAGR ▪ Aftermarket products ▪ WheelerFit (PMA) ▪ Expansive portfolio of name- brand OEM products WHY we are different ▪ Inven
Slide 49: E-Commerce / Fulfillment
Fleet Segment E-Commerce / Fulfillment Revenue +25% WHO we serve 3-yr CAGR ▪ Amazon ▪ WheelerFleet.com ▪ FinditParts ▪ Long tail of retail customers WHAT we sell +67% ▪ 320,000+ aftermarket parts ▪ WheelerFit (PMA) 3-yr CAGR ▪ Expansive portfolio of name- brand OEM products WHY we are different ▪ 30
Slide 50: The Wheeler Fleet Solutions Difference
Fleet Segment The Wheeler Fleet Solutions Difference vsecorp.com
Slide 51: Engineering Solutions
Fleet Segment Engineering Solutions CAD Software/Data Wheeler Fleet Solutions has a 60- Management year history of fleet engineering to support our customers’ unique needs. Reverse Engineering Data Logging 700+ Reverse Engineered Rapid Prototyping & Parts and Solutions 3D Printing Pg.51 vsecorp.com
Slide 52: Engineered Solutions Case Study
Fleet Segment Engineered Solutions Case Study WheelerFit High Performance Silicone Hoses Aftermarket Solution That Outperforms OEM 6-PLY woven Aramid .260” Wall thickness fiber construction (OEM is .190” ) Temperature range of All hoses include 2 spring -65° F to 500° F loaded T-bolt clamps Pg.52 vs
Slide 53: Growth Opportunities
Fleet Segment Growth Opportunities John Cuomo – President and CEO vsecorp.com
Slide 54: Fleet Centers of Excellence Ready to Scale
Fleet Segment Fleet Centers of Excellence Ready to Scale Somerset, PA Olive Branch, MS Grand Prairie, TX Over 300k square feet of ~450k square foot 58k square foot facility warehouse space, distribution facility operating at 25% engineering, and supporting e-commerce utilization administrative suppo
Slide 55: Fleet Growth Opportunities
Fleet Segment Fleet Growth Opportunities E-Commerce ▪ Expand Product Offerings – SKU Expansion ▪ Expand E-Commerce Partners ▪ Expand WheelerFleet.com Pg.55 vsecorp.com
Slide 56: Fleet Growth Opportunities
Fleet Segment Fleet Growth Opportunities E-Commerce Commercial ▪ New Fleet Customers ▪ Share of Wallet Expansion Pg.56 vsecorp.com
Slide 57: Fleet Growth Opportunities
Fleet Segment Fleet Growth Opportunities E-Commerce Commercial Private Label Products ▪ New Product Development to Support ALL Market Channels Pg.57 vsecorp.com
Slide 58: Fleet Segment Key Takeaways
Fleet Segment Fleet Segment Key Takeaways Shift towards eCommerce and disruption Commercial Fleet and E-commerce 1 of legacy distribution will drive next 4 channels provide greatest opportunity decade of end market growth for above-market growth Customer diversification strategy Engineered product s
Slide 59: People & Culture
People & Culture Krista Stafford – Chief Human Resources Officer vsecorp.com
Slide 60: The VSE Team As A Differentiator
People & Culture The VSE Team As A Differentiator Attraction Development Talent & Culture Retention Pg.60 Pg.60 vsecorp.com
Slide 61: DNA - VSE Culture Traits
People & Culture DNA - VSE Culture Traits Who I Am: How I Win: Mindset: Passionate Make it FUN Growth Disciplined How I Lead: Winning Attitude How I Operate: Strategic Curious Think BIG Service Values Others Conviction Resilient Competitive Closer Inspire Adaptable Data Driven Goal Oriented Career A
Slide 62: Mergers & Acquisitions
Mergers & Acquisitions vsecorp.com
Slide 63: M&A Framework
M&A M&A Framework Disciplined Growth Plan by Experienced Team Drives Synergies and High Returns 2. Full Integration by 1. 2. Experienced Team 1. Strategic and Cultural Fit Drives Process 3. 3. Price Discipline and Accretive Returns Pg.63 vsecorp.com vsecorp.com
Slide 64: M&A As A Core Competency
M&A M&A As A Core Competency Case Study of Global Parts 2021 Acquisition Self-sourced deal in 2021 <6X below market multiple IS NOW Expanded anchor OEM partnership Full systems, ERP & people integration Synergies improved margins and transaction multiple Integration delivering comprehensive offering
Slide 65: Financial Overview and Capital Allocation
Financial Overview and Capital Allocation vsecorp.com
Slide 66: Reaffirming Full-Year 2023 Assumptions and Guidance
Financial Overview and Capital Allocation Reaffirming Full-Year 2023 Assumptions and Guidance Aviation Fleet Total On track to deliver strong 2023 ▪ Revenue +29% vs. 2022 $845 – 877 Revenue $530 – 550 $315 – 327 ▪ Delivering strong profitability after Mid-point: +30-35% Y/Y +20-25% Y/Y $860MM recent
Slide 67: Aviation Segment: Accelerating Revenue and Margins
Financial Overview and Capital Allocation Aviation Segment: Accelerating Revenue and Margins Revenue(1) 10-13% Adjusted EBITDA % 2-year CAGR +24-28% +50 bps HSD +100 bps $530- 10-12% 14-16% 15-16% 550M HSD B&GA MSD Comm’l LDD 2023 Full Year Market VSE 2024 2026 2023 2024 2025 2026 of Recent Growth G
Slide 68: Fleet Segment: Above Market Revenue and Profit Growth
Financial Overview and Capital Allocation Fleet Segment: Above Market Revenue and Profit $ Growth Revenue(1) Adjusted EBITDA $ 3-year CAGR: 10% +5-10% 2-year CAGR 3-year CAGR: 10% +15-20% +5-10% +5-10% +15-20% LDD $315- $35- 327M HSD 43M (LSD) 2023 USPS Full-Year Further 2024 2026 2023 2024 2025 202
Slide 69: Core Business Driving Strong Free Cash Flow
Financial Overview and Capital Allocation Core Business Driving Strong Free Cash Flow 2024-2026 Priorities Free Cash Flow (2020-2023 Est.) ($43) ($ millions) ✓ Generate positive free cash flow before new Aviation New Program Initial Provisioning program investments - OEM 1 $96 ▪ Increased sales - OE
Slide 70: Recent Aviation Investments Delivering for Shareholders
Financial Overview and Capital Allocation Recent Aviation Investments Delivering for Shareholders Results of organic and inorganic investments from 2020 through 1H’23 ~$170M Investment Type 2023 ROIC A Organic - Inventory 21% B Organic - Inventory 24% C Organic - Inventory 19% D Inorganic – M&A 20%
Slide 71: Capital Allocation Priorities
Financial Overview and Capital Allocation Capital Allocation Priorities Priorities 2020-3Q’23 2024-2026 Outlook Return to Shareholders $17m ✓ Maintain existing dividend level Organic Reinvestment ✓ Invest in New Aviation Distribution & Repairs in Business(1) ~$190m ✓ Geographic Expansion – CAPEX 1.0
Slide 72: Balance Sheet Management While Supporting Business Growth
Financial Overview and Capital Allocation Balance Sheet Management While Supporting Business Growth Projected Net Debt / Adjusted EBITDA ✓ Expect to continue to deliver strong 3.9X Free Cash Flow excluding new <3.5X 3.00 – 3.4X 3.1X 3.25X inventory investments 3.25 Target 3.00 ✓ Net Leverage Reducti
Slide 73: Key Themes and Investment Highlights
Key Themes and Investment Highlights vsecorp.com
Slide 74: Key Themes
Key Themes Key Themes 1 Repositioned and Ready to Scale 2 Robust & Fragmented End Markets Business Transformation and Near-Term Aviation and Fleet Aftermarkets Support Results Validate Investment Thesis Short and Long-Term Growth Opportunities 3 Differentiation 4 Growth & Financial Performance Produ
Slide 75: Investment Highlights
Investment Highlights Investment Highlights Aftermarket Service Leader With Strong Growth Opportunities Favorable and Robust End Markets Business Transformation Creates Foundation for Growth Stable Anchor Customers & Programs Serve as Annuity for Future Proven Teams and Culture that Delivers for All
Slide 76: Q&A
Q&A =) = CORPORATION VSECORP.COM
Slide 77: Thank You
THANK YOU! VSE CORPORATION
Slide 78: Appendix
VSE Corporation Investor Day 2023 Appendix vsecorp.com
Slide 79: GAAP to Non-GAAP Reconciliations
Appendix GAAP to Non-GAAP Reconciliations Segment EBITDA and Adjusted EBITDA – Q1’20 – Q4’21 (in thousands) 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q2021 Aviation Operating income (loss) $ (1,880) $ (34,387) $ 1,586 $ (833) $ (332) $ (22,272) $ 3,719 $ 4,512 Depreciation and amortiz
Slide 80: GAAP to Non-GAAP Reconciliations
Appendix GAAP to Non-GAAP Reconciliations Segment EBITDA and Adjusted EBITDA – Q1’22 – Q3’23 (in thousands) 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 3Q 2023 Aviation Operating income $ 7,622 $ 6,450 $ 10,017 $ 12,327 $ 15,663 $ 15,783 $ 20,951 Depreciation and amortization 3,035 3,110 3,413 3