VSEC 8-K
Vse Corp (VSEC)
8-K
2020-02-28
For: 2020-02-27
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July 04, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 27, 2020
VSE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware (State or Other Jurisdiction of Incorporation) | 0-3676 (Commission File Number) | 54-0649263 (IRS Employer Identification Number) | ||
6348 Walker Lane | ||
Alexandria, VA | 22310 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(703) 960-4600
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $.05 per share | VSEC | The NASDAQ Global Select Market | ||
Securities registered pursuant to Section 12(g) of the Act: None
VSE CORPORATION
Item 2.02. Results of Operations and Financial Condition
On February 27, 2020, VSE Corporation (the “Company”) issued a press release reporting its financial results for the fourth quarter and year ended December 31, 2019. Additionally, the Company made available related materials to be discussed during the Company’s webcast and conference call referred to in such press release. A copy of the press release and related conference call materials are being furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are hereby incorporated by reference.
The information in the preceding paragraph, as well as Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section. It may only be incorporated by reference into another filing under the Exchange Act or the Securities Act of 1933 (the “Securities Act”) if such subsequent filing specifically references this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit
Number
VSE CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
VSE CORPORATION | |||
(Registrant) | |||
Date: | February 27, 2020 | By: | /s/ Thomas R. Loftus |
Thomas R. Loftus | |||
Executive Vice President and Chief Financial Officer | |||
Exhibit 99.1
VSE Corporation Announces Fourth Quarter and Full-Year 2019 Results
ALEXANDRIA, VA, February 27, 2020 - VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and repair services for land, sea and air transportation assets in the public and private sectors, today announced results for the fourth quarter and full-year 2019.
FOURTH QUARTER 2019 HIGHLIGHTS AS COMPARED TO THE FOURTH QUARTER 2018
▪ | Total Revenues of $195.3 million increased +7.9% |
▪ | Total Net Income of $10.0 million increased +8.1% |
▪ | Total Adjusted EBITDA of $23.1 million increased +15.9% |
▪ | EPS (Diluted) of $0.90 per share increased +7.1% |
FULL-YEAR 2019 HIGHLIGHTS AS COMPARED TO FULL-YEAR 2018
▪ | Total Revenues of $752.6 million increased +7.9% |
▪ | Total Net Income of $37.0 million increased +5.5% |
▪ | Total Adjusted EBITDA of $91.0 million increased +16.2% |
▪ | EPS (Diluted) of $3.35 per share increased +4.4% |
For the three months ended December 31, 2019, the Company reported total revenue of $195.3 million, versus $181.0 million for the same period ended 2018. VSE reported net income of $10.0 million, or $0.90 per diluted share, compared to $9.2 million, or $0.84 per diluted share, in the fourth quarter 2018. Adjusted EBITDA increased to $23.1 million in fourth quarter 2019, versus $19.9 million for the same period ended 2018.
During the fourth quarter, growth in Aviation and Supply Chain Management Group revenue offset a decline in Federal Services Group revenue. Aviation Group revenue increased more than 54% on a year-over-year basis, due to contributions from the 1St Choice Aerospace acquisition completed in January 2019, together with organic growth in core existing business lines. Excluding contributions from the 1st Choice Aerospace acquisition, Aviation Group revenue increased organically more than 11% in the full-year 2019, when compared to the prior-year, driven by increased global distribution sales. Supply Chain Management Group revenue increased 2% on a year-over-year basis in the fourth quarter, as an increase in vehicle parts sales to commercial customers offset an anticipated decline in demand related to the Company’s managed inventory program with the United States Postal Service (“USPS”). Federal Services Group revenue declined 7% on a year-over-year basis, due to anticipated reduced demand for services on a U.S. Navy program.
MANAGEMENT COMMENTARY
“Our full-year performance reflects stable year-over-year growth in revenue, margin capture and profitability,” stated John Cuomo, President and CEO of VSE Corporation. “Early into my tenure as CEO, we’ve taken action to narrow the strategic focus of our business, while targeting higher-margin growth opportunities where we have a unique and differentiated value proposition supported by well-defined, sustainable competitive advantages. These actions are translating into increased focus on expanding organic market share in both new and existing channels, while realizing improved cost synergies throughout the organization.”
“Within our Aviation Group, we recently closed the divestiture of our Prime Turbines subsidiary, a move that will position us to focus on higher-growth component/accessory repair and parts distribution opportunities that serve the global commercial and general aviation markets,” continued Cuomo. “Our Supply Chain Management Group continues to diversify beyond the USPS managed inventory program, with non-USPS group revenue growing nearly 20% on a year-over-year basis in 2019, supported by increased activity in commercial parts distribution. Further, within our
Federal Services Group, we experienced an increase in activity with the Army and Air Force throughout the year, while continuing to transition into an increased volume of fixed-price contracts that, on balance, have resulted in improved margin realization for our business.”
“Looking ahead, we intend to formally introduce our multi-year strategic plan to the public when we report first quarter 2020 results,” continued Cuomo. “At that time, we will outline how we intend to redefine our presence in key markets, accelerate organic revenue growth and increase margins, all while generating free cash flow to support investments in new programs and bolt-on acquisitions.”
SEGMENT RESULTS
The following is a commentary of revenues and operating income for the fourth quarter and full year periods ended December 31, 2019 and December 31, 2018:
Aviation Group
VSE Aviation provides parts supply and distribution, supply chain solutions, component and engine accessory repair services supporting global aftermarket commercial, business and general aviation customers through product distribution and maintenance, repair and overhaul (MRO) services.
Aviation Group revenue increased 42% year-over-year to $61.0 million in the fourth quarter 2019, while full-year 2019 group revenue increased 54% year-over-year to $224.5 million. Excluding a $1.9 million earn-out expense attributable to the successful post-acquisition performance of 1st Choice Aerospace, operating income increased $1.2 million or 32% for the fourth quarter and the full year operating income increased 62% to $17.9 million. Aviation Group EBITDA declined 3% year-over-year in the fourth quarter to $5.8 million, due to product and customer mix, while full-year 2019 EBITDA increased 53% to $30.3 million. The year-over-year increase in full-year 2019 operating income was attributable to a combination of contributions resulting from the 1st Choice Aerospace acquisition in January 2019, together with organic growth in global aviation distribution sales.
Supply Chain Management Group
VSE’s Supply Chain Management Group provides parts supply, inventory management, e-commerce fulfillment, logistics, data management and other services to support the United States Postal Service (USPS), United States Department of Defense, and aftermarket commercial high duty-cycle truck and fleet customers.
Supply Chain Management Group revenue increased 2% year-over-year to $53.6 million in the fourth quarter 2019, while full-year 2019 group revenue was essentially flat year-over-year at $214.5 million. Operating income increased 5% year-over-year to $7.4 million in the fourth quarter 2019, while full-year 2019 operating income declined 3% to $29.8 million. Supply Chain Management EBITDA increased 2% year-over-year in the fourth quarter to $10.1 million, while full-year 2019 EBITDA declined 3% to $40.8 million. The decrease in full-year 2019 operating income was mainly attributable to a decline in demand related to the USPS.
Federal Services Group
VSE’s Federal Services Group provides aftermarket refurbishment and sustainment services to extend and maintain the life cycle of military vehicles, ships and aircraft for the U.S. Armed Forces, Federal Agencies and International Military and Defense customers, and provides energy consulting services, healthcare IT and IT data solutions.
Federal Services Group revenue declined 5% year-over-year to $80.6 million in the fourth quarter 2019, while full-year 2019 group revenue declined 7% year-over-year to $313.6 million. Operating income increased 47% year-over-year to $5.2 million in the fourth quarter 2019, while full-year 2019 operating income increased 15% to $18.1 million. Federal Services Group EBITDA increased 28% year-over-year in the fourth quarter to $5.9 million, while full-year 2019 EBITDA increased 5% to $21.1 million. The year-over-year increase in operating income for the fourth quarter and full-year 2019 was related to an improved sales mix resulting from more fixed-price work with government entities.
In 2019, total Federal Services Group bookings declined 29% year-over-year to $228 million, while total funded backlog declined 27% year-over-year to $213 million. The decline in booking and funded backlog was attributable to a combination of minimal new business development activities, together with the loss of a contract. The current management team increased business development staffing and activity in the fourth quarter, and is focused on revitalizing this business, with an emphasis on developing a channel of new customer activity in the current year.
SUBSEQUENT EVENTS
As previously announced on January 30, 2020, VSE entered into a definitive agreement to sell its subsidiary Prime Turbines, LLC to PTB Holdings USA, LLC for $21 million in cash, subject to customary adjustments. This transaction closed on February 26, 2020.
CONFERENCE CALL
A conference call will be held Friday, February 28, 2020 at 8:30 A.M. EST to review the Company’s financial results, discuss recent events and conduct a question-and-answer session.
A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of VSE’s website at https://ir.vsecorp.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.
To participate in the live teleconference:
Domestic Live: 877-407-0789
International Live: 201-689-8562
To listen to a replay of the teleconference, which will be available through March 13, 2020:
Domestic Replay: 844-512-2921
International Replay: 412-317-6671
Conference ID: 13697551
Fourth Quarter and Year-End Results
(in thousands, except per share data) | ||||||||||||||||||||||
Three months ended December 31, | For the years ended December 31, | |||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||||
Revenues | $ | 195,271 | $ | 180,996 | 7.9 | % | $ | 752,627 | $ | 697,218 | 7.9 | % | ||||||||||
Operating income | $ | 14,813 | $ | 13,085 | 13.2 | % | $ | 60,257 | $ | 54,230 | 11.1 | % | ||||||||||
Net income | $ | 9,996 | $ | 9,243 | 8.1 | % | $ | 37,024 | $ | 35,080 | 5.5 | % | ||||||||||
EPS (Diluted) | $ | 0.90 | $ | 0.84 | 7.1 | % | $ | 3.35 | $ | 3.21 | 4.4 | % | ||||||||||
SEGMENT RESULTS
Fourth Quarter Segment Results
The following is a summary of revenues and operating income for the three- and twelve-month periods ended December 31, 2019 and December 31, 2018:
Three months ended December 31, | For the years ended December 31, | |||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
Aviation Group | $ | 60,993 | $ | 42,869 | 42.3 | % | $ | 224,546 | $ | 145,423 | 54.4 | % | ||||||||||
Supply Chain Management Group | 53,642 | 52,848 | 1.5 | % | 214,520 | 214,809 | (0.1 | )% | ||||||||||||||
Federal Services Group | 80,636 | 85,279 | (5.4 | )% | 313,561 | 336,986 | (7.0 | )% | ||||||||||||||
Total revenues | $ | 195,271 | $ | 180,996 | 7.9 | % | $ | 752,627 | $ | 697,218 | 7.9 | % | ||||||||||
Operating Income: | ||||||||||||||||||||||
Aviation Group | $ | 3,081 | $ | 3,785 | (18.6 | )% | $ | 17,901 | $ | 11,076 | 61.6 | % | ||||||||||
Supply Chain Management Group | 7,431 | 7,079 | 5.0 | % | 29,819 | 30,626 | (2.6 | )% | ||||||||||||||
Federal Services Group | 5,176 | 3,527 | 46.8 | % | 18,144 | 15,797 | 14.9 | % | ||||||||||||||
Corporate/unallocated expenses | (875 | ) | (1,306 | ) | (33.0 | )% | (5,607 | ) | (3,269 | ) | 71.5 | % | ||||||||||
Operating Income | $ | 14,813 | $ | 13,085 | 13.2 | % | $ | 60,257 | $ | 54,230 | 11.1 | % | ||||||||||
Non-GAAP Financial Information
(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 | 1,249 | 1,557 | (19.8 | )% | 9,403 | 10,168 | (7.5 | )% | |||||||||||||||
Amortization of Intangible Assets | 4,332 | 4,004 | 8.2 | % | 19,317 | 16,017 | 20.6 | % | |||||||||||||||
Depreciation and Other Amortization | 1,759 | 2,236 | (21.3 | )% | 6,996 | 9,207 | (24.0 | )% | |||||||||||||||
EBITDA | 20,904 | 19,325 | 8.2 | % | 86,570 | 79,454 | 9.0 | % | |||||||||||||||
Earn-out adjustment | 1,900 | — | — | % | 1,900 | — | — | % | |||||||||||||||
Acquisition Related and Executive Succession Costs | 259 | 569 | — | % | 2,549 | 569 | — | % | |||||||||||||||
Gain on sale of IT Contract | — | — | — | % | — | (1,700 | ) | — | % | ||||||||||||||
Adjusted EBITDA | $ | 23,063 | $ | 19,894 | 15.9 | % | $ | 91,019 | $ | 78,323 | 16.2 | % | |||||||||||
The Company reported total capital expenditures in the fourth quarter and full-year 2019 of $2.0 million and $9.7 million, respectively.
Reconciliation of Segment EBITDA to Operating Income
(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 | 8,674 | 42.8 | % | |||||||||||||||
EBITDA | $ | 5,768 | $ | 5,968 | (3.4 | )% | $ | 30,286 | $ | 19,750 | 53.4 | % | |||||||||||
Supply Chain Group | |||||||||||||||||||||||
Operating Income | $ | 7,431 | $ | 7,079 | 5.0 | % | $ | 29,819 | $ | 30,626 | (2.6 | )% | |||||||||||
Depreciation and Amortization | 2,713 | 2,851 | (4.8 | )% | 10,947 | 11,494 | (4.8 | )% | |||||||||||||||
EBITDA | $ | 10,144 | $ | 9,930 | 2.2 | % | $ | 40,766 | $ | 42,120 | (3.2 | )% | |||||||||||
Federal Services Group | |||||||||||||||||||||||
Operating Income | $ | 5,176 | $ | 3,527 | 46.8 | % | $ | 18,144 | $ | 15,797 | 14.9 | % | |||||||||||
Depreciation and Amortization | 691 | 1,072 | (35.5 | )% | 2,981 | 4,364 | (31.7 | )% | |||||||||||||||
EBITDA | $ | 5,867 | $ | 4,599 | 27.6 | % | $ | 21,125 | $ | 20,161 | 4.8 | % | |||||||||||
NON-GAAP FINANCIAL INFORMATION
The non-GAAP Financial Information set forth in this press release is not calculated in accordance with U.S. generally accepted accounting principles ("GAAP") under SEC Regulation G. We consider EBITDA a non-GAAP financial measure and an important indicator of performance and useful metric for management and investors to evaluate our business' ongoing operating performance on a consistent basis across reporting periods. EBITDA, however, should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. EBITDA represents net income before interest expense, income taxes, amortization of intangible assets and depreciation and other amortization. Adjusted EBITDA represents EBITDA (as defined above) adjusted for executive succession costs, including our CEO and Federal Services Group President transitions and 1st Choice Aerospace acquisition-related costs, and the gain on the sale of an IT contract.
ABOUT VSE CORPORATION
VSE is a global provider of aftermarket distribution and repair services for land, sea and air transportation assets in the public and private sectors. VSE is a recognized leader in delivering innovative solutions for vehicle, ship, and aircraft sustainment, supply chain management, platform modernization, mission enhancement, and program management, and providing energy, IT, and consulting services. For additional information regarding VSE’s services and products, visit us at www.vsecorp.com.
FORWARD LOOKING STATEMENTS
This press release 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 other factors that may cause VSE’s actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this press release. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that actual results will not differ materially from these expectations. “Forward-looking” statements, as such term is defined by the Securities Exchange Commission in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “forecast,” “seek,” “plan,” “predict,” “project,” “could,” “estimate,” “might,” “continue,”
“seeking” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, those identified in our reports filed or expected to be filed with the Securities and Exchange Commission including our Annual Report on Form 10-K for the year ended December 31, 2019. All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.
INVESTOR CONTACT
Christine Kaineg
(703) 329-3263
INVESTOR PRESENTATION Fourth Quarter and Full-Year 2019 28 February 2020
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 known and unknown risks, uncertainties and other factors that may cause VSE’s actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this press release. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that actual results will not differ materially from these expectations. “Forward-looking” statements, as such term is defined by the Securities Exchange Commission in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “forecast,” “seek,” “plan,” “predict,” “project,” “could,” “estimate,” “might,” “continue,” “seeking” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, those identified in our reports filed with the Securities and Exchange Commission including our Annual Report on Form 10-K for the year ended December 31, 2019. All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Included in this presentation are certain non-GAAP financial measures, such as EBITDA, Adjusted EBITDA and net leverage ratio, designed to complement the financial information presented in accordance with U.S. GAAP because management believes such measures are useful to investors and management. Management believes these non-GAAP financial measures, when taken together with the corresponding GAAP measures, provide incremental insight into the underlying factors and trends affecting our performance. These non-GAAP financial measures should be considered only as supplemental to, and not superior to, financial measures provided in accordance with GAAP. Please refer to the appendix of this presentation for a reconciliation of the historical non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with GAAP. Reconciliations of the non-GAAP measures used in this presentation are included or described in the tables attached to the appendix. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures. For the same reasons we are unable to address the probable significance of the unavailable information, which could be material to future results. EBITDA represents net income before interest expense, income taxes, amortization of intangible assets and depreciation and other amortization. Adjusted EBITDA represents EBITDA (as defined above) adjusted for executive succession costs, including our CEO and Federal Services Group President transitions, 1st Choice Aerospace acquisition- related costs and the gain on sale of an IT contract. Net leverage ratio represents a ratio of Adjusted EBITDA to net debt (our total debt less cash and cash equivalents). 2 RAISE THE BAR
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 business and general aviation customers > Provides parts supply, inventory management, e-commerce fulfillment, Supply Chain Management Group logistics, data management and other services to support the United States 28% of 2019 Revenue Postal Service (USPS), United States Department of Defense, and commercial aftermarket high duty-cycle truck / fleet customers > Provides aftermarket refurbishment services to extend and maintain the Federal Services Group life cycle of military vehicles, ships and aircraft for the U.S. Armed Forces, 42% of 2019 Revenue Federal Agencies and International Military and Defense customers; and provides energy consulting services, healthcare IT and IT data solutions 3 RAISE THE BAR
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 Full-Year 2019 . Full-year 2019 diluted EPS of $3.35 . 4Q2019 and full-year 2019 EBITDA driven by Total Adjusted EBITDA +15.9% y/y in 4Q2019; organic and inorganic revenue/margin growth in Aviation and margin expansion in Federal +16.2% for Full-Year 2019 Services, offset by lower contributions from Supply Chain Management 4 RAISE THE BAR
EXECUTIVE SUMMARY – VSE Business Groups Fourth Quarter and Full-Year 2019 VSE BUSINESS GROUPS . Excluding 1st Choice Aerospace acquisition, Aviation Group Revenue +42.3% y/y in 4Q2019; Aviation Group revenue organically increased 11% 54.4% for Full-Year 2019 y/y in 2019, supported by growth in global distribution activity Supply Chain Group Revenue +1.5% y/y in 4Q2019; . Increased commercial market penetration offset Flat for Full-Year 2019 modest decline in USPS revenue Federal Services Group Revenue (5.4%) y/y in 4Q2019; . Decrease due to anticipated reduced demand for services on U.S. Navy program and intentional (7.0%) y/y for Full-Year 2019 shift toward less commoditized business 5 RAISE THE BAR
GAAP FINANCIAL SUMMARY Fourth Quarter and Full-Year 2019 Total Revenue Operating Income Stable Revenue Growth ($MM) ($MM) $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 $13.1 $14.8 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 Products Revenue Service Revenue Margin Expansion > Operating margin increased 20 bps y/y to 8.0% in 2019 Net Income Diluted Earnings Per Share ($MM) ($ Per Share) $35.1 $37.0 $3.35 Profitability $3.21 $9.2 $10.0 > Net income increased 5.5% y/y in $0.84 $0.90 2019 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 6 RAISE THE BAR
NON-GAAP FINANCIAL SUMMARY Fourth Quarter and Full-Year 2019 Total Adjusted EBITDA Adjusted EBITDA Margin ($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 $19.9 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 (1) Adjusted EBITDA defined as net income before interest expense, income taxes, amortization of intangible assets and depreciation and other amortization; adjusted for executive succession costs, including our CEO and Federal Services Group President transitions, 1st Choice Aerospace acquisition-related costs and the gain on sale of an IT contract. 7 RAISE THE BAR
4Q 2018 vs. 4Q 2019 PERFORMANCE BRIDGE Fourth Quarter and Full-Year 2019 Total Revenue Bridge Core Business Remains Stable ($MM) $18.1 $195.3 > Generated y/y revenue and $181.0 $0.8 EBITDA growth of 7.9% and 8.2%, ($4.6) respectively in 4Q2019 Aviation Drove Revenue Growth > 1st Choice Aerospace acquisition was the primary driver of y/y Total EBITDA Bridge revenue growth in 4Q2019 ($MM) $0.3 $20.9 $19.3 $0.2 $1.3 Federal Services Drove Margin ($0.2) > $1.3 million y/y improvement in Federal Services EBITDA 8 RAISE THE BAR
FULL-YEAR 2018 vs. 2019 PERFORMANCE BRIDGE Fourth Quarter and Full-Year 2019 Total Revenue Bridge ($MM) Mixed Revenue Performance $79.1 $752.6 $697.2 > Aviation drove growth, which ($23.4) was partially offset by 7% decline ($0.3) in Federal Services Supply Chain Was Flat > Gradual decline in USPS business being replaced with increased Total EBITDA Bridge commercial sector activity ($MM) $10.5 $1.0 $86.6 $79.5 ($3.0) ($1.4) Margin Expansion > EBIDTA margin improved 90 bps y/y to 12.1% in 2019 9 RAISE THE BAR
AVIATION GROUP PERFORMANCE SUMMARY Fourth Quarter and Full-Year 2019 Aviation Group Revenue 1st Choice Ahead of Plan Aviation Group Operating Income ($MM) ($MM) $224.5 > Acquisition performing ahead of $17.9 $63.0* plan on revenue, operating $145.4 income and EBITDA $11.1 $61.0 $161.5 $42.9 $3.8 $3.1 Organic Growth Continues 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 > Excluding 1st Choice, the Aviation Group generated 11% organic revenue growth in 2019 Aviation Group EBITDA Aviation Group EBITDA Margin ($MM) (%) Increased Commercial Activity $30.3 13.9% 13.6% 13.5% 9.5% $19.8 > Commercial aviation growth supported by growth in global $6.0 $5.8 parts distribution 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 (1) Reflects $63.0 million in revenue resulting from the acquisition of 1st Choice Aerospace in Jan. 2019. 10 RAISE THE BAR
SUPPLY CHAIN GROUP PERFORMANCE SUMMARY Fourth Quarter and Full-Year 2019 Supply Chain Group Revenue Supply Chain Group Operating Income USPS Update ($MM) ($MM) $214.8 $214.5 > USPS contract represented 78% of total Supply Chain Group revenue $30.6 in 2019 compared to 82% in 2018 $29.8 $52.8 $53.6 $7.1 $7.4 Strong Margin Capture 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 > Consistently generating stable EBITDA margins in the 19-20% Supply Chain Group EBITDA Supply Chain Group EBITDA Margin range ($MM) (%) 19.6% $42.1 $40.8 18.8% 18.9% 19.0% Growth Opportunities > Building the channel with aftermarket commercial fleets, $9.9 $10.1 positioning VSE as the truck parts distributor and supply chain partner 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 of choice 11 RAISE THE BAR
SUPPLY CHAIN GROUP GROWING NON-USPS REVENUE Focus on Customer Diversification and Growing Group Revenue In Commercial Channels USPS as % of Total Supply Chain Group Revenue Supply Chain Group Revenue, Ex-USPS ($MM) ($MM) Replacing USPS Revenue 89% 2019 > Significant gains replacing lost $47.1 USPS revenue since 2015 88% 84% 82% 2018 $38.7 78% Non-USPS Revenue Growing 2017 $33.3 > Generated 19% growth in non- USPS revenue in 2019 tied to 2016 $23.9 increased commercial activity 2015 $22.1 2015 2016 2017 2018 2019 12 RAISE THE BAR
FEDERAL SERVICES PERFORMANCE SUMMARY Fourth Quarter and Full-Year 2019 Federal Services Group Revenue Federal Services Group Operating Income ($MM) ($MM) Revenue Focus $337.0 $313.6 > Phase One: Prioritize strategic focus and new business development / revenue pipeline > Phase Two: Margin expansion $85.3 $80.6 $15.8 $18.1 $3.5 $5.2 Rebuilding Backlog 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 > In recent years, business Federal Services Group EBITDA Federal Services Group EBITDA Margin development was insufficient, ($MM) (%) resulting in lower Group revenue 7.3% 6.7% 6.0% Fixed-Price Contract Shift 5.4% $20.2 $21.1 > Transition from cost-plus contracts creates margin uplift $4.6 $5.9 opportunity 4Q18 4Q19 2018 2019 4Q18 4Q19 2018 2019 13 RAISE THE BAR
DISCIPLINED BALANCE SHEET MANAGEMENT Maintaining Balance Sheet Optionality Total Cash & Unused Commitments on Net Debt / TTM Adjusted EBITDA (net leverage ratio) Term Loan and Revolving Credit Facility (%) (2) ($ MM) (1) $199 Jan. 2019: 1st Choice Acquisition for $113 Significant Access to Liquidity million cash $102 $104 3.4x $86 $96 3.3x > Approximately ~$200 million of $64 $67 $68 3.0x cash and availability on lending 2.9x facilities 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 2.4x 2.2x 2.1x 2.0x Total Net Debt Reducing Net Leverage ($ MM) $274 $278 $267 $269 > Net leverage has declined for four consecutive quarters $181 $174 $162 $160 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 (1) On Dec. 2, 2019 we announced an amended loan agreement with our bank group. Under the terms of the amended agreement, our bank group increased total availability on the Company’s term loan and revolving credit facility by a combined $100 million. Following the close of the transaction, total committed capital under the amended loan agreement increased from $373 million to $473 million. (2) Net Debt is defined as total debt less cash and cash equivalents and TTM Adjusted EBITDA is defined as Adjusted EBITDA for the most recent twelve (12) calendar months. 14 RAISE THE BAR
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 synergies FEDERAL SERVICES GROUP AVIATION GROUP SUPPLY CHAIN MANAGEMENT GROUP IMPROVE CONTRACT MIX REFOCUS CORE OFFERINGS GROW COMMERCIAL REVENUE > Augment existing USPS business > Focus on high quality growth- > Build backlog, reweight business to with incremental revenue focused aftermarket repair and balanced fixed-price contract model opportunities within the distribution, providing strong (away from cost-plus); margin uplift commercial space growth markets and higher margin opportunity mix opportunity 15 RAISE THE BAR
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 strategic investments in balanced global, federal and defined and differentiated value growth commercial aftermarket customer mix proposition Conservative balance sheet Targeting complementary, accretive New CEO to introduce corporate management bolt-on acquisitions strategy mid-year 2020 16 RAISE THE BAR
GAAP to NON-GAAP RECONCILATIONS 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 1,249 1,557 (19.8)% 9,403 10,168 (7.5)% Amortization of Intangible Assets 4,332 4,004 8.2% 19,317 16,017 20.6% Depreciation and Other Amortization 1,759 2,236 (21.3)% 6,996 9,207 (24)% EBITDA 20,904 19,325 8.2% 86,570 79,454 9.0% Earn-out adjustment 1,900 — 1,900 — Acquisition Related and Executive Succession Costs 259 569 2,549 569 Gain on sale of IT Contract — — — (1,700) Adjusted EBITDA $23,063 $19,894 15.9% $91,019 $78,323 16.2% 17 RAISE THE BAR
GAAP to NON-GAAP RECONCILATIONS 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 8,674 42.8% EBITDA $5,768 $5,968 (3.4)% $30,286 $19,750 53.4% Supply Chain Group Operating Income $7,431 $7,079 5.0% $29,819 $30,626 (2.6)% Depreciation and Amortization 2,713 2,851 (4.8)% 10,947 11,494 (4.8)% EBITDA $10,144 $9,930 2.2% $40,766 $42,120 (3.2)% Federal Services Group Operating Income $5,176 $3,527 46.8% $18,144 $15,797 14.9% Depreciation and Amortization 691 1,072 (35.5)% 2,981 4,364 (31.7)% EBITDA $5,867 $4,599 27.6% $21,125 $20,161 4.8% 18 RAISE THE BAR
GAAP to NON-GAAP RECONCILATIONS 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 ratio 2.9x 2.0x (1) TTM Adjusted EBITDA is defined as Adjusted EBITDA for the most recent twelve (12) period ending December 31, 2019 and December 31,2018, respectively. 19 RAISE THE BAR