VSEC Third Quarter 2020 Conference Call
29 October 2020
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 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 document. 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 (the "SEC") in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, the impact of widespread health developments, such as the ongoing COVID-19 outbreak, the health and economic impact thereof, and the governmental, commercial, consumer and other responses thereto, 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, the uncertainty surrounding the ongoing COVID-19 outbreak and the other factors identified in our reports filed or expected to be filed with the SEC 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. Readers are cautioned not to place undue reliance on these forward looking-statements, which reflect management's analysis only as of the date hereof. 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.
Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this document also contains Non-GAAP financial measures. We consider Adjusted Net Income, Adjusted EPS (Diluted), EBITDA, Adjusted EBITDA, net leverage ratio, trailing-twelve month Adjusted EBITDA and free cash flow as non-GAAP financial measures and important indicators of performance and useful metrics for management and investors to evaluate our business's ongoing operating performance on a consistent basis across reporting periods. Adjusted Net Income represents Net Income adjusted for discrete items. Adjusted EPS (Diluted) is computed by dividing net income, adjusted for the discrete items and the related tax impacts, by the diluted weighted average number of common shares outstanding. EBITDA represents net income before interest expense, income taxes, amortization of intangible assets and depreciation and other amortization. Adjusted EBITDA represents EBITDA adjusted for discrete items, and free cash flow represents operating cash flow less capital expenditures. Net leverage ratio is calculated as net debt (total principal debt less cash) divided by trailing twelve month Adjusted EBITDA. The reasons why we believe these measures provide useful information to investors and a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these Non-GAAP measures are included in the supplemental schedules attached.
2
BUSINESS UPDATE
Focused on business improvement, new business development and long-term strategy execution
Business Development
- Aviation: $100 million, 5-year exclusive distribution agreement with major landing gear components manufacturer
- Federal & Defense: Contract bidding activity +46% y/y YTD 2020; won recompetes YTD 2020, in addition to new contract awards
- Fleet: Non-USPS revenue increased +54% y/y in 3Q20 and +48% on a TTM basis
ORGANIC GROWTH
Product Line Expansion
- Aviation: Launched Landing Gear Initiative:
- Comprehensive landing gear solution suite for global airline and MRO customers;
- Parts distribution of proprietary and specialty products;
- Services include: gear sales, exchanges, repair management, kitting, 24/7 AOG service
Change Management
- Incoming CFO: Announced Steve Griffin as Chief Financial Officer successor (Q4 2020)
- New Segment President: Appointed Ben Thomas as President of Aviation segment
- Aviation MRO system integration/migration and corporate standardization, system integrations and entity consolidations in process
- COVID-relatedcost reductions complete (announced April 2020)
INORGANIC GROWTH
Acquisition Focus
- Launched initiative seeking accretive, net leverage-neutralacquisition targets
- Targeting "bolt-on" integration of complementary assets into existing business segment structure
- Current focus on aviation and federal services, with concentration on capabilities and/or customer expansion
3
3Q20 CONSOLIDATED PERFORMANCE
Generated positive net income and free cash flow, while reducing debt outstanding
Sequential Revenue Growth
Sustained Profitability
Positive Free Cash Flow
Targeted Debt Reduction
- $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
- Commercial customer revenue of $49 million (22% y/y); Government customer revenue of $116.5 million (14% y/y)
- GAAP net income of $8.1 million, or $0.73 per diluted share
- Adjusted net income of $6.8 million, or $0.62, per diluted share
- Operating cash flow of $12.4 million (7.4% y/y); free cash flow of $11.3 million (6.3% y/y); TTM 3Q20 free cash flow of $30.9 million
- Total adjusted EBITDA of $18.0 million (26.5% y/y); Aviation: $2.4 (75.9% y/y); Fleet: $9.0 million
(15.0% y/y); FDS: $7.4 million, +40.6% y/y - Total cash and availability +3.3% q/q to $190.0 million
- Reduced total debt outstanding by $10.4 million q/q in 3Q20
- Net debt to TTM adjusted EBITDA as of 9/30/2020 was 3.1x
4
GAAP FINANCIAL SUMMARY
3Q20 and TTM(1) - Y/Y comparisons
Total Revenue | Operating Income (Loss)(2) |
• Y/Y revenue growth in Fleet | ($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 | $17.2 | $16.9 | ||||
segments, less non-recurring | $14.2 | ||||||||
items: Aviation +16.1%, Fleet | |||||||||
+9.5%, Federal & Defense +1% | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | |
• TTM 3Q20 results include $33.7 | Net Income (Loss)(2) | Diluted Earnings (Loss) Per Share(2) | |||||||
million non-cash impairment | |||||||||
($MM) | ($ Per Share) | ||||||||
taken in Aviation segment in | |||||||||
2Q20 | $36.3 | $3.29 | |||||||
• Maintained profitability during a | $10.5 | $8.1 | $0.95 | $0.73 | |||||
period of pandemic-related | |||||||||
disruption |
($1.3) | ($0.11) | ||||
3Q19 | 3Q20 | TTM 3Q19 TTM 3Q20 | 3Q19 | 3Q20 | TTM 3Q19 TTM 3Q20 |
- TTM is defined as the trailing twelve (12) month period ended September 30, 2020 and September 30, 2019, respectively.
- Includes $33.7 million non-cash impairment within the Aviation segment during the second quarter 2020.
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NON-GAAP FINANCIAL SUMMARY
3Q20 and TTM - Y/Y comparisons
• Adjusted net income (38%) y/y | Adjusted Net Income | Adjusted Diluted Earnings Per Share | ||||||
($MM) | ($ Per Share) | |||||||
in 3Q20; (9%) on a TTM 3Q20 | ||||||||
basis | $38.3 | $34.8 | $3.48 | $3.15 | ||||
• Adjusted EBITDA (27%) y/y in | $10.9 | $6.8 | $0.99 | $0.62 | ||||
3Q20 and (8%) on a TTM 3Q20 | ||||||||
basis | ||||||||
3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | |
• Adjusted EBITDA margin growth | Adjusted EBITDA | Adjusted EBITDA Margin | ||||||
in Federal & Defense offset by | ||||||||
($MM) | (%) | |||||||
margin contraction in both | ||||||||
$87.7 | ||||||||
Aviation and Fleet | $81.0 | 12.3% | ||||||
11.9% | ||||||||
11.5% | ||||||||
• 3Q20 adjusted net income | 10.9% | |||||||
results exclude $1.3 million of | $24.5 | |||||||
$18.0 | ||||||||
non-recurring tax adjusted | ||||||||
impact from the 1st Choice | ||||||||
Aerospace earnout | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 |
6
CONSOLIDATED PERFORMANCE BRIDGE
3Q19 vs. 3Q20 - Y/Y comparisons
- Aviation: Y/Y revenue decline attributable to the adverse impact of the COVID-19 pandemic on commercial air traffic, resulting in lower customer activity
- Federal & Defense: Y/Y revenue decline attributable to previously disclosed contract expiration with DoD customer in 1Q20
- Fleet: Y/Y revenue growth supported by higher sales from commercial fleet, eCommerce fulfillment and completion of non-recurring PPE order
Total Revenue Bridge
($MM)
$198.3
$8.4$165.5
($23.0)
($18.2)
Total Adjusted EBITDA Bridge
($MM)
$24.5
$0.5 | $2.1 | $18.0 |
($7.5)($1.6)
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AVIATION
Revenue declined due to COVID impact on air travel, but increased +16% q/q
- Strategic Focus: Build scalable foundation for growth; target share gains; new product and service introductions
- Sequential Growth: 3Q20 revenue, less divestitures, increased 16% q/q due to share gains in distribution business & recovery in B&GA
- Business Development: Announced $20 million distribution agreement w/ Honeywell in July; $100 million landing gear distribution agreement with major OEM in October
- New Leadership: Ben Thomas named new President of Aviation segment in October 2020
Aviation Segment Revenue | Aviation Segment Operating Income (Loss) | ||||||||||||||
($MM) | ($MM) | ||||||||||||||
$206.4 | $187.4 $169.9 | $6.6 | $6.0 | $18.6 | $17.8 | ||||||||||
$163.6 | $1.6 | $1.6 | ($31.6) | $0.4 | |||||||||||
$59.2 $48.9 | $36.2 $36.2 | ||||||||||||||
3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | ||||||||
Aviation Segment Revenue, as Reported | Aviation Operating Income, as Reported | ||||||||||||||
Aviation Segment Revenue, Less Prime Turbines & CT Aerospace | Aviation Op. Income, Less Prime Turbines, CT Aerospace & Impairment | ||||||||||||||
Aviation Segment Adjusted EBITDA | Aviation Segment Adjusted EBITDA Margin | |||||||||||||
($MM) | (%) | |||||||||||||
$30.6 $28.0 | 16.7% | 18.2% | 14.8% | 17.1% | ||||||||||
$9.9 | $8.9 | $17.1 $14.5 | 6.6% 6.6% | 9.1% 8.5% | ||||||||||
$2.4 | $2.4 | |||||||||||||
3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | |||||||||||
3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | |||||||||||
Aviation Adjusted EBITDA, as Reported | Aviation Adjusted EBITDA Margin, as Reported | |||||||||||||
Aviation Adjusted EBITDA, Less Prime Turbines & CT Aerospace | Aviation Adjusted EBITDA Margin, Less Prime Turbines & CT Aerospace | |||||||||||||
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FLEET
107% y/y growth in commercial (eCommerce fulfillment) offset lower USPS revenue in Q3
- Strategic Focus: Commercial fleet and e-commercefulfillment market expansion opportunity
- Shifting Sales Mix: Increased mix of lower margin commercial revenue
- Non-USPSRevenue Growth: Increased ~54% y/y, supported by commercial fleet and other government customers
- Rebranding Initiative: Wheeler Bros. rebranded to Wheeler Fleet Solutions - repositioned for commercial fleet market
Fleet Segment Revenue | Fleet Segment Operating Income | |||||||||||||||||||||||||
($MM)(1) | ($MM)(1) | |||||||||||||||||||||||||
$213.7 | $213.7 | $241.8 | $215.2 | $29.5 | $29.5 | $27.9 | $27.9 | |||||||||||||||||||
$55.4 | $55.4 | $63.7 | $56.6 | $7.8 | $7.8 | $6.6 | $6.6 | |||||||||||||||||||
3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | |||||||||||||||||||
Fleet Segment Revenue, as Reported | Fleet Segment Op Income, as Reported | |||||||||||||||||||||||||
Fleet Segment Revenue, less non-recurring PPE order impact | Fleet Segment Op Income, less non-recurring PPE order impact | |||||||||||||||||||||||||
Fleet Segment Adjusted EBITDA | Fleet Segment Adjusted EBITDA Margin | |||||||||||||||||||||||||
($MM)(1) | $40.7 | $40.7 | $38.4 | $38.4 | (%)(1) | |||||||||||||||||||||
19.1% | 19.1% | 14.1% | 15.9% | 19.0% | 19.0% | 15.9% | 17.8% | |||||||||||||||||||
$10.6 | $10.6 | $9.0 | $9.0 | |||||||||||||||||||||||
3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | |||||||||||||||||||||||
3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | |||||||||||||||||||||||
Fleet Segment Adjusted EBITDA, as Reported | Fleet Segment Adjusted EBITDA Margin, as Reported | |||||||||||||||||||||||||
Fleet Segment Adjusted EBITDA, less non-recurring PPE order impact | Fleet Segment Adjusted EBITDA Margin, less non-recurring PPE order impact | |||||||||||||||||||||||||
- Excludes non-recurring impact of PPE equipment order from a government customer; excludes revenue and corporate allocation impact.
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FEDERAL & DEFENSE
Y/Y improvement in both margin realization and Adjusted EBITDA in 3Q20
Federal & Defense Segment Revenue | Federal & Defense Segment Operating Income |
($MM) | $318.2 | ($MM) | ||||||
$277.6 | $23.6 | |||||||
• Strategic Focus: Expand market | ||||||||
focus; increase bidding activity; | $16.5 | |||||||
grow funded backlog; build | ||||||||
pipeline of new contract awards | ||||||||
and successful recompetes | $83.8 | $65.6 | $4.5 | $6.7 | ||||
• Increased Bidding Activity: Nine | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 |
months ended 2020, total |
contracts bids increased 46% | Federal & Defense Segment Adjusted EBITDA | Federal & Defense Segment Adjusted EBITDA Margin | |||||||
y/y | |||||||||
($MM) | (%) | ||||||||
11.3% | |||||||||
$26.5 | 9.5% | ||||||||
• | $19.9 | 6.3% | 6.3% | ||||||
Margin Expansion: Favorable | |||||||||
contract mix supported 500 bps | |||||||||
expansion in adjusted EBITDA | $5.3 | $7.4 | |||||||
margin | |||||||||
3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 |
10
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 | $35.5 | ||||||
below 3x; ROIC-driven capital | $30.9 | $267.4 | |||||
allocation strategy | $249.4 | ||||||
• Free Cash Flow: Despite lower | $12.0 | $11.3 | |||||
revenue base, free cash flow | |||||||
declined only marginally on a | |||||||
y/y basis in 3Q20 | |||||||
• | Debt Reduction: Reduced total | 3Q19 | 3Q20 | TTM 3Q19 | TTM 3Q20 | 3Q19 | 3Q20 |
outstanding debt by $10.4 |
million in 3Q20, driven by | Ratio of Net Debt to TTM | Unused Commitments on Term Loan |
positive free cash flow | Adjusted EBITDA(1) | and Revolving Credit Facility ($ MM) |
generation |
- Strong liquidity profile: Total availability on lending facilities increased $87 million y/y to approximately $190 million
3.1 x | 3.1 x | 2.5 x | $190.0 | ||||||
$103.0 | |||||||||
3Q19 | 3Q20 | Long-Term Target | 3Q19 | 3Q20 |
- Net Debt is defined as total debt less cash and cash equivalents; TTM Adjusted EBITDA is defined as Adjusted EBITDA for the most recent twelve (12) calendar months.
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APPENDIX
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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 adjusted items (1) | 423 | (126) | |||
Adjusted Net Income | $6,836 | $10,919 | (37)% | ||
Diluted weighted average shares | 11,100 | 11,060 | |||
Adjusted EPS (Diluted) | $0.62 | $0.99 | (37)% |
- Calculation uses an estimated statutory tax rate on non-GAAP tax deductible adjustments.
13
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 amortization | 1,351 | 1,739 | (22)% | ||
EBITDA | $19,694 | $23,968 | (18)% | ||
Acquisition and CEO transition costs | - | 518 | |||
Earn-out adjustment | (1,695) | - | |||
Adjusted EBITDA | $17,999 | $24,486 | (27)% |
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GAAP TO NON-GAAP RECONCILIATIONS
Segment EBITDA and Adjusted EBITDA (in thousands)
Aviation:
Operating Income
Depreciation and Amortization
EBITDA
Earn-out adjustment
Adjusted EBITDA
Fleet:
Operating Income
Depreciation and Amortization
EBITDA and Adjusted EBITDA
Federal & Defense:
Operating Income
Depreciation and Amortization
EBITDA and Adjusted EBITDA
Three Months Ended September 30,
2020 | 2019 | % Change | |||
$1,586 | $6,568 | (76)% | |||
2,493 | 3,314 | (25)% | |||
$4,079 | $9,882 | (59)% | |||
(1,695) | - | ||||
$2,384 | $9,882 | (76)% |
$6,589 | $7,843 | (16)% |
2,378 | 2,711 | (12)% |
$8,967 | $10,554 | (15)% |
$6,746 | $4,524 | 49% |
638 | 728 | (12)% |
$7,384 | $5,252 | 41% |
15
GAAP TO NON-GAAP RECONCILIATIONS
Net Leverage Ratio
(in thousands)
Principal amount of debt Less: Debt issuance costs Less: Cash and cash equivalents
Net Debt
TTM Adjusted EBITDA(1)
Net Leverage Ratio
September 30,
2020 2019
$252,685 $270,266
(2,664) (1,735)
(551) (1,095)
$249,470 $267,436
$81,036 $87,690
3.1x 3.1x
- TTM Adjusted EBITDA is defined as Adjusted EBITDA for the most recent twelve (12) month period ending September 30, 2020 and September 30, 2019, respectively.
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CORPORATE OVERVIEW
17
CORPORATE PROFILE
Pure-Play Aftermarket & MRO Services Company
Providing | 2019 | 2019 | ||||||||||||
Aftermarket | Revenue | |||||||||||||
Adj. EBITDA | ||||||||||||||
Services | ||||||||||||||
$750+M | ||||||||||||||
$90+M | ||||||||||||||
since 1959 | ||||||||||||||
Public Company | Active | Worldwide | Employees | |||||||||||||||||
NASDAQ: | Customers | Facilities | ||||||||||||||||||
~1,900 | ||||||||||||||||||||
VSEC | 6,200+ | 55+ | ||||||||||||||||||
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DIVERSIFIED REVENUE MIX
AVIATION
Distribution & MRO Services
- Aftermarket repair and distribution services to commercial, cargo, general aviation, military/defense and rotorcraft customers globally
- Supply chain and parts distribution
- Maintenance, repair and overhaul (MRO) services
- Component and engine accessory maintenance
- Rotable exchanges and sales
FLEET
Distribution & Fleet Services
- Aftermarket support, parts supply, inventory management, e-commerce fulfillment for medium- and heavy-duty truck/fleet owners
- Customized fleet logistics
- Parts distribution and warehousing
- Just-in-Timesupply chain management
- Kitting; alternative product sourcing
- Engineering and technical support
FEDERAL & DEFENSE
Logistics & Sustainment Services
- Aftermarket maintenance, repair and overhaul (MRO) and logistics for military vehicles, ships and aircraft for federal and defense agencies
- Base operations support (BOS)
- Procurement and supply chain management
- Aircraft, vehicle and marine sustainment services
- IT services and energy consulting
100% Aftermarket Services
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STRATEGIC OVERVIEW
Our Unique Value Proposition
Pure-Play Aftermarket
Independent, focused parts and services provider
Customer- & Supplier-Centric
Ability to offer bespoke offerings to support customers and suppliers
Experience
60+ year history of proven performance, aftermarket service excellence
Technical Expertise
Team of industry experts with technical and transportation asset repair experience
Agile
Lean operating model, empowered business units
Transportation Asset Experience
Support for land, sea and air transportation assets from new-generation to legacy and end-of-life assets
20
CORPORATE LEADERSHIP TEAM
John Cuomo
President and CEO
- 20+ years of aerospace distribution and services market industry experience
- Appointed Chief Executive Officer and President of VSE Corporation April 2019
- Previously served as Vice President and General Manager of Boeing Distribution Services
Tom Loftus
Chief Financial Officer
- 40+ years of aerospace, federal/ defense and supply chain distribution experience
- CFO of VSE Corporation since 2002; retiring Dec. 31, 2020
- Manages the financial and accounting operations for the consolidated corporation
Elizabeth Huggins
VP of Strategy,
Chief of Staff
- 17+ years of experience in business development, integration and aerospace consulting
- Joined VSE as Chief of Staff and Corporate Vice President of Strategy in 2019
- Leads strategic planning, growth and business development initiatives
Krista Stafford
Chief Human Resources
Officer
- 15+ years of experience in Human Resources, Learning and Organizational Development
- Joined VSE as the Chief Human Resources Officer January 2020
- Previously served as Vice President, Human Resources at Boeing Distribution Services
Robert Moore
President,
Federal & Defense
Services
- 25+ years of experience in the aerospace/ defense industry
- Joined VSE as President of Federal & Defense Services in 2019
- Extensive leadership experience with DoD and Federal agencies providing Engineering, Logistics and Sustainment solutions
Ben Thomas
President,
Aviation
- 11+ years experience in the aerospace aftermarket distribution & services sectors
- Appointed President of VSE Aviation October 2020
- Previously managed aftermarket growth strategies for Boeing Global Services and KLX Aerospace Solutions
Chad Wheeler
President,
Wheeler Fleet Solutions
- 30+ years of supply chain industry experience
- President of Fleet segment/Wheeler since 2013
- Executive management of operations, government contract administration, supply chain initiatives and business development
21
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 revenue | ||||||
80% recompete success rate on | Chairman is former Commander-in- | balanced with ~40% higher-margin | ||||||
multi-year government contracts | Chief, NORAD & U.S. Northern | potential commercial customers | ||||||
Command |
Agile | Focused | Well-Capitalized | ||||||
Entrepreneurial and decentralized | Shift toward leveraging core | Efficient capital structure and | ||||||
organization aligned to support | competencies to support customer, | liquidity to support growth; | ||||||
customers, suppliers and | product and service organic growth | targeting net leverage below 3x | ||||||
shareholders | opportunities |
22
GROWTH STRATEGY
23
STRATEGIC OVERVIEW
Roadmap for Growth
Organic Growth Factors
- Increase market penetration of new/existing accounts
- Geographic expansion outside North America
- Targeted growth of new product additions
- Expand repair, logistic and capability service offering
- Focus on select, higher margin offerings
Inorganic Growth Requirements
Focused, disciplined acquisition strategy targeting:
- Product, customer, service or geographic expansion
- Full integration into existing business segment
- Financially accretive approach and process
- Net leverage neutral acquisitions
24
AVIATION SEGMENT OVERVIEW
AVIATION
Providing aftermarket MRO and distribution services to commercial, cargo, business and general aviation, military/defense and rotorcraft customers globally.
Offerings include:
- Parts distribution and supply chain services
- Component and engine accessory maintenance
- Maintenance, repair and overhaul (MRO) services
- Rotable exchanges and sales
Key Customers
25
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
New proprietary OEM product additions to support aftermarket airframe, engine and interior platforms
- INTERNATIONAL EXPANSION
Expansion in core aerospace markets for MRO and distribution
- NEW CUSTOMERS
Market share gain for existing MRO and distribution capabilities with new Commercial and B&GA customers, and new market expansion into aerospace defense markets
GROWTH
FACTORS
26
FLEET SEGMENT OVERVIEW
FLEET (formerly Supply Chain Management Group)
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:
- High-dutycycle, medium- and heavy-duty vehicle parts distribution
- Just-in-Timesupply chain management
- Customized fleet logistics and IT solutions
- Technical support, engineering, sourcing, warehousing and kitting
Key Customers
27
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
- MAINTAIN THE CORE
Continue to support USPS fleet and DoD vehicle parts
- PRODUCT EXPANSION
Addition of both new product offerings and growth in private label product
- GEOGRAPHIC EXPANSION
Geographic expansion beyond Northeast United States
GROWTH
FACTORS
28
FEDERAL & DEFENSE SEGMENT OVERVIEW
FEDERAL & DEFENSE (formerly Federal Services Group)
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. armed forces, federal agencies and international defense customers.
Offerings include:
- Equipment maintenance, repair and overhaul services
- Base operations support
- Transportation and freight services
- Logistics, procurement and supply chain support
- Engineering and technical solutions
- IT and Energy consulting services
Key Customers
29
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
Increase military aviation services with product/supply chain and repair services; transition toward higher mix of fixed-price contracts
- CAPABILITY DEVELOPMENT
Broaden DoD logistics/supply chain offering to support market demand
- INTERNATIONAL GROWTH
Utilize success in foreign markets to support foreign military sales opportunities
- CONSULTING EXPANSION
IT and Energy consulting services growth
GROWTH
FACTORS
30
AVIATION SEGMENT
- INDEPENDENCE
Niche single-source aftermarket focus with only repair and distribution capabilities
- AGILITY
Organization structure provides rapid response, reliable support and bespoke support for customers and OEM supplier partners
- TECHNICAL EXPERTISE
Distribution and MRO product knowledge to support OEM product lines with application focus and repair with in-house testing and technical expertise
- INVENTORY & PLANNING
Right-sized inventory forecasting model to capture unplanned aftermarket demand for parts supply, rotables and repair
WHY WE
WIN
31
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
- PROPRIETARY INVENTORY MANAGEMENT
Just-in-Time inventory and fleet management software and systems
- TECHNICAL CAPABILITIES
Reverse engineering, design analysis, rapid prototyping, short-run production and in-house testing
- PRIVATE LABEL PARTS
Customized engineered solutions, alternatives for out of service product, and quality sourced at tier one level
WHY WE
WIN
32
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
- LEGACY ASSET SPECIALIST
Product sourcing, supply chain and logistics for legacy and end of lifecycle assets
- EXTENSIVE CAPBILITIES
Diverse capability offering to support programs from base operations support to supply chain and repair, IT and consulting
- CAPABLITIY CUSTOMIZATION
Partnering with customers for tailor-made solutions aligned with their specific mission needs
WHY WE
WIN
33
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VSE Corporation published this content on 29 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 October 2020 10:04:05 UTC