VSE CORP

Previous wording

On May 5, 2026, the Company completed the acquisition of Precision Aviation Group, Inc. ("PAG" or "PAG Acquisition"). PAG is a leading global provider of aviation aftermarket MRO and supply chain services delivering technical expertise across engines, components, avionics, and proprietary repair solutions. The acquisition enhances the Company's global reach, technical capabilities, and integrated MRO services and distribution offerings to a diverse customer base across commercial, business and general aviation, rotorcraft, original equipment manufacturer (“OEM”), and defense markets.

Current wording

On May 5, 2026, the Company completed the acquisition of Precision Aviation Group, Inc. ("PAG" or "PAG Acquisition"), a leading global provider of aviation aftermarket MRO and supply chain services delivering technical expertise across engines, components, avionics, and proprietary repair solutions. The acquisition enhances the Company's global reach, technical capabilities, and integrated MRO services and distribution offerings to a diverse customer base across commercial, business and general aviation, rotorcraft, original equipment manufacturer (“OEM”), and defense markets.

Previous wording

In connection with the completed stock purchase agreement to acquire PAG, the Company entered into an amended agreement with certain financial institutions on May 5, 2026 to provide new senior secured financing, consisting of a $900.0 million term loan B facility and an upsize of the Company's existing revolving facility from $400.0 million to $500.0 million (as amended and restated, supplemented or otherwise modified, the "Credit Agreement"). In connection with the Credit Agreement, the Company paid off its existing Term Loan A Facility in full. See Note (5) “Debt” to the consolidated financial statements for further information.

Current wording

In connection with the completed stock purchase agreement to acquire PAG, the Company entered into an amended agreement with certain financial institutions on May 5, 2026 to provide new senior secured financing, consisting of a $900.0 million term loan B facility and an upsize of the Company's existing revolving facility from $400.0 million to $500.0 million (as amended and restated, supplemented or otherwise modified, the "Credit Agreement"). In connection with the Credit Agreement, the Company paid off its prior term loan facility in full. See Note (5) “Debt” to the consolidated financial statements for further information.

Previous wording

During the second quarter of 2026, the Company delivered record results driven by strong execution on new and existing distribution awards, expansion of product offerings and MRO capabilities, increased end-market demand, and contributions from recent acquisitions. Revenue for the three months ended June 30, 2026 was $449.1 million, representing a 65% increase year-over-year.

Current wording

During the third quarter of 2026, the Company delivered record results driven by strong core business performance and contributions from recent acquisitions. Revenue for the three months ended September 30, 2026 was $541.0 million, representing a 91% increase year-over-year.

Previous wording

Market growth and share gains drove increases in repair and distribution revenue of 149% and 17%, respectively, during the three months ended June 30, 2026, compared to the same period for the prior year. Growth was supported by several strategic initiatives, including the execution of newly awarded OEM distribution agreements, expansion of repair capabilities and capacity, the realization of synergies from recent acquisitions, and continued advancement of the Company’s OEM licensed manufacturing programs. These initiatives have further strengthened the Company’s position in the aviation aftermarket, while deeper OEM partnerships have expanded access to new markets and established customer bases.

Current wording

-25- by strong aftermarket engine activity, execution on newly awarded OEM distribution agreements, and expansion of repair capabilities and capacity. Deeper OEM partnerships have expanded the Company's access to new markets and established customer bases.

Previous wording

Revenues. Revenues increased for the three and six months ended June 30, 2026, compared to the same periods of the prior year primarily driven by contributions from the acquisitions of PAG, NorthStar, Aero 3 and Turbine Weld. PAG contributed $104.5 million of revenue during the three and six months ended June 30, 2026. Revenue growth also reflected recently initiated distribution contract wins and improved demand for the Company's commercial aerospace products and services resulting from strong end market activity in global commercial air travel. Distribution revenue increased $29.8 million, or 17%, and repair revenue increased $147.2 million, or 149%, for the three months ended June 30, 2026, compared to the same period in the prior year. Distribution revenue increased $71.6 million, or 21%, and repair revenue increased $173.9 million, or 90%, for the six months ended June 30, 2026, compared to the same period in the prior year.

Current wording

Revenues. Revenues increased for the three and nine months ended September 30, 2026, compared to the same periods of the prior year, primarily driven by contributions from recent acquisitions, including PAG and Aero 3. PAG contributed $173.7 million and $278.2 million of revenue during the three and nine months ended September 30, 2026, respectively. Revenue growth also reflected newly awarded OEM distribution agreements and sustained demand for aviation aftermarket parts and services across the Company's business and general aviation and commercial end markets. Distribution revenue increased $46.9 million, or 27%, and repair revenue increased $211.2 million, or 198%, for the three months ended September 30, 2026, compared to the same period in the prior year. Distribution revenue increased $118.6 million, or 23%, and repair revenue increased $385.1 million, or 128%, for the nine months ended September 30, 2026, compared to the same period in the prior year.

Previous wording

Operating Income. Operating income increased for the three and six months ended June 30, 2026, compared to the same periods of the prior year, primarily due to the previously discussed increase in revenues and a $5.9 million earn-out receivable fair value adjustment charge recognized in the prior year in connection with the Fleet Sale. These increases were partially offset by higher costs and operating expenses associated with increased revenue, increased amortization of intangible assets of $12.0 million and $14.9 million for the three and six month periods, respectively, and higher acquisition, integration and restructuring costs of $7.2 million and $9.7 million for the three and six month periods, respectively.

Current wording

Operating Income. Operating income increased for the three and nine months ended September 30, 2026, compared to the same periods of the prior year, primarily due to the previously discussed increase in revenues and net changes in earn-out fair value adjustments of $32.2 million and $38.1 million, respectively. These increases were partially offset by higher costs and operating expenses associated with increased revenue, increases in amortization of intangible assets of $16.4 million and $31.3 million, and higher acquisition, integration and restructuring costs of $3.3 million and $13.0 million, for the three and nine month periods, respectively.

Previous wording

Interest Expense, net. Interest expense, net decreased for the three and six months ended June 30, 2026, as compared to the same periods of the prior year. The decrease was primarily due to (i) interest income earned on excess cash proceeds from the Company's February 2026 underwritten public offerings prior to the use of such proceeds to fund the PAG Acquisition, (ii) interest income earned on a note receivable, (iii) lower average borrowings outstanding under the Company's debt facilities prior to the PAG Acquisition, and (iv) a decrease in the average interest rate on outstanding borrowings. The decrease was partially offset by higher average borrowings outstanding under the Company's debt facilities following the PAG Acquisition and interest expense incurred on the amortizing notes issued in connection with the Company's February 2026 Units Offering.

Current wording

Interest Expense, net. Interest expense, net increased for the three months ended September 30, 2026, as compared to the same period of the prior year. The increase was primarily due to higher average borrowings outstanding under the Company's debt facilities and interest expense incurred on the amortizing notes issued in connection with the Company's February 2026 Units Offering to finance a portion of the PAG Acquisition. Interest expense, net decreased for the nine months ended September 30, 2026, as compared to the same period of the prior year. The decrease was primarily due to (i) interest income earned on excess cash proceeds from the Company's February 2026 underwritten public offerings prior to the use of such proceeds to fund the PAG Acquisition, (ii) interest income earned on a note receivable, and (iii) lower average borrowings outstanding under the Company's debt facilities prior to the PAG Acquisition, partially offset by the factors driving the increase in interest expense, net during the three months ended September 30, 2026.

Previous wording

Loss on debt extinguishment. The Company recorded a loss on debt extinguishment of $4.5 million during the three and six months ended June 30, 2026 in connection with its amended Credit Agreement, which resulted in the extinguishment of its previous term loan. See Note (5) “Debt” to the consolidated financial statements for further information.

Current wording

Loss on debt extinguishment. The Company recorded a loss on debt extinguishment of $4.5 million during the nine months ended September 30, 2026 in connection with its amended Credit Agreement, which resulted in the extinguishment of its previous term loan. See Note (5) “Debt” to the consolidated financial statements for further information.

Previous wording

Provision for Income Taxes. The Company's effective tax rate for continuing operations was 27.3% and 21.6% for the three and six months ended June 30, 2026 respectively, and 15.1% and 15.4% for the three and six months ended June 30, 2025, respectively. The Company's tax rate is affected by discrete items that may occur in any given year but may not be consistent from year to year. Permanent differences such as foreign derived intangible income deduction, Section 162(m) limitation, capital gains tax treatment, state income taxes, certain federal and state tax credits and other items caused differences between the Company's statutory U.S. federal income tax rate and its effective tax rate. The higher effective tax rate for the three and six months ended June 30, 2026 compared to the same periods of the prior year was primarily due to unfavorable permanent differences associated

Current wording

Provision for Income Taxes. The Company's effective tax rate for continuing operations was 25.4% and 23.3% for the three and nine months ended September 30, 2026, respectively, and 37.5% and 18.7% for the three and nine months ended September 30, 2025, respectively. The Company's tax rate is affected by discrete items that may occur in any given year but may not be consistent from year to year. Permanent differences such as foreign-derived deduction eligible income, Section 162(m) limitation, state income taxes, certain federal and state tax credits and other items caused differences between the Company's statutory U.S. federal income tax rate and its effective tax rate. The effective tax rate was lower for the three months ended September 30, 2026 as compared to the same period of the prior year primarily due to the prior year recognition of an accrual for a potential tax dispute associated with the dissolution of a foreign subsidiary. The effective tax rate was higher for the nine months ended September 30, 2026 as compared to the same period of the prior year primarily due to unfavorable permanent differences associated with increased acquisition-related expenses during the current year, as well as higher pre-tax book income in the current period compared to the prior period which reduced the favorable tax impact arising from various discrete tax adjustments in the current period.

Previous wording

Borrowings under the Credit Agreement will accrue interest at either the Term SOFR or ABR (as defined in the Credit Agreement), plus in each case an applicable margin, based on the Company's Net Leverage Ratio (as defined in the Credit Agreement). The Company, at its option may select between one, three or six month Term SOFR Rates.

Current wording

Borrowings under the Credit Agreement will accrue interest at either Term SOFR or ABR (as defined in the Credit Agreement), plus in each case an applicable margin, based on the Company's Total Net Leverage Ratio (as defined in the Credit Agreement). At its option, the Company may select between one, three or six month Term SOFR Rates.

Previous wording

The Company's outstanding borrowings under the Credit Agreement and amortizing notes increased approximately $670.4 million for the six months ended June 30, 2026. As of June 30, 2026, the Company had outstanding borrowings under the New Term Facility of $900.0 million, principal obligations from the amortizing notes of $66.7 million, outstanding letters of credit of $0.7 million, and $499.3 million of unused commitments under the Credit Agreement.

Current wording

The Company's outstanding principal borrowings under the Credit Agreement and amortizing notes increased approximately $682.5 million for the nine months ended September 30, 2026. As of September 30, 2026, the Company had outstanding principal borrowings under the New Term Facility and Revolving Facility of $897.8 million and $20.0 million, respectively, outstanding principal obligations from the amortizing notes of $61.0 million, outstanding letters of credit of $0.8 million, and $479.2 million of unused commitments under the Credit Agreement.

Previous wording

The Company believes its existing balances of cash and cash equivalents, along with its cash flows from operations and debt instruments under its Credit Agreement mentioned above, will provide sufficient liquidity for business operations as well as capital expenditures, dividends, and other capital requirements associated with its business operations over the next twelve months and thereafter for the foreseeable future.

Current wording

The Company believes its existing balances of cash and cash equivalents, along with its cash flows from operations and borrowing capacity under its Credit Agreement mentioned above, will provide sufficient liquidity for business operations as well as capital expenditures, dividends, and other capital requirements associated with its business operations over the next twelve months and thereafter for the foreseeable future.

Previous wording

Cash used in operating activities was flat for the six months ended June 30, 2026, as compared to the same period of the prior year primarily due to an increase in net income from continuing operations, adjusted for non-cash expenses, offset by a greater use of cash for strategic inventory purchases.

Current wording

Cash provided by operating activities increased $31.9 million for the nine months ended September 30, 2026, as compared to the same period of the prior year primarily due to an increase in net income from continuing operations, adjusted for noncash expenses, partially offset by a greater use of cash for strategic inventory investments, including in support of a new OEM auxiliary power unit program and engine initiatives.

Previous wording

-26- primarily related to the acquisition of PAG in May 2026. The increase was also driven by cash provided in the prior period of $138.8 million from the Fleet Sale and FDS Sales, net of cash divested. See Note (2) "Acquisitions" and Note (3) "Discontinued Operations" to the consolidated financial statements for further information.

Current wording

Cash used in investing activities increased $1.9 billion for the nine months ended September 30, 2026, as compared to the same period of the prior year. The increase was driven by higher cash paid, net of cash acquired, for current year acquisitions of $1.8 billion, primarily related to the acquisition of PAG in May 2026. The increase was also driven by cash provided in the prior period of $138.8 million from the Fleet Sale and FDS Sale, net of cash divested. See Note (2) "Acquisitions" and Note (3) "Discontinued Operations" to the consolidated financial statements for further information.

Previous wording

Cash provided by financing activities increased $1.9 billion for the six months ended June 30, 2026, as compared to the same period of the prior year, primarily due to $1.3 billion of net proceeds from the Company's February 2026 Common Stock Offering and Units Offering. The increase was also driven by $701.7 million of higher borrowings of debt during the current period including the amortizing notes portion of the tangible equity units, net of repayments and debt financing costs, as compared to the prior period.

Current wording

Cash provided by financing activities increased $1.9 billion for the nine months ended September 30, 2026, as compared to the same period of the prior year, primarily due to $1.3 billion of net proceeds from the Company's February 2026 Common Stock Offering and Units Offering. The increase was also driven by $734.7 million of higher borrowings on the Company's credit facilities during the current period, including the amortizing notes portion of the tangible equity units, net of repayments and debt financing costs, as compared to the prior period.

Previous wording

The Company paid cash dividends totaling $5.1 million or $0.20 per share during the six months ended June 30, 2026. Pursuant to the Company's Credit Agreement, the payment of cash dividends is subject to annual restrictions. The Company has paid cash dividends annually since 1973.

Current wording

The Company paid cash dividends totaling $8.0 million, or $0.30 per share, during the nine months ended September 30, 2026. Pursuant to the Company's Credit Agreement, the payment of cash dividends is subject to annual restrictions. The Company has paid cash dividends annually since 1973.

Previous wording

The Company's consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP"), which requires the Company to make estimates and assumptions. Certain critical accounting policies affect the more significant accounts, particularly those that involve judgments, estimates and assumptions used in the preparation of the Company's consolidated financial statements, including revenue recognition, inventory valuation, business combinations, goodwill and intangible assets, and income taxes. If any of these estimates, assumptions or judgments prove to be incorrect, the Company's reported results could be materially affected. Actual results may differ significantly from the Company's estimates under different assumptions or conditions. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note (1) "Nature of Business and Summary of Significant Accounting Policies" in the Company's 2025 Annual Report on Form 10-K for further discussions of the Company's significant accounting policies and estimates. There have been no significant changes in the Company's critical accounting estimates during the six months ended June 30, 2026 from those disclosed in the Company's 2025 Form 10-K.

Current wording

The Company's consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP"), which requires the Company to make estimates and assumptions. Certain critical accounting policies affect the more significant accounts, particularly those that involve judgments, estimates and assumptions used in the preparation of the Company's consolidated financial statements, including revenue recognition, inventory valuation, business combinations, goodwill and intangible assets, earn-out obligations and income taxes. If any of these estimates, assumptions or judgments prove to be incorrect, the Company's reported results could be materially affected. Actual results may differ significantly from the