Business Overview VSE Corporation, through its subsidiaries (collectively, "VSE" or the "Company"), is a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air transportation assets for commercial and government markets. The Company operates as a single reportable segment aligned with the Company's operating segment. Recent Developments Acquisitions 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. On April 1, 2026, the Company acquired NorthStar Technologies, LLC ("NorthStar"), a provider of MRO services, third-party logistics, and kitting services supporting the engine aftermarket. The acquisition expands the Company’s engine service capabilities within business and general aviation and strengthens its OEM-focused strategy by enhancing integration within an engine OEM’s aftermarket supply chain and supporting growing demand for engine teardown and labor-intensive services. See Note (2) "Acquisitions" to the consolidated financial statements for further information. Credit Agreement Amendment 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. Underwritten Public Offerings In February 2026, the Company completed concurrent underwritten public offerings of (i) 4,587,766 shares of its common stock at a public offering price of $188.00 per share (the “Common Stock Offering”) and (ii) 9,200,000 5.750% tangible equity units, each with a stated value of $50.00 (the “Units Offering,” and together with the Common Stock Offering, the “Offerings”). The Common Stock Offering closed on February 4, 2026, and the Units Offering closed on February 5, 2026. Net proceeds of approximately $1.3 billion were received by the Company, which were used to finance a portion of the cash consideration for the PAG Acquisition. See Note (13) “Common Stock and Tangible Equity Unit Public Offerings” to the consolidated financial statements for further information. Business Trends 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 $449.1 million, representing a 65% increase year-over-year. Market growth and share gains drove increases in repair and distribution revenue of 149% and 17%, respectively, during the three months ended June 30, 2026, compared to the same period for the prior year. Growth was supported by several strategic initiatives, including the execution of newly awarded OEM distribution agreements, expansion of repair capabilities and capacity, the realization of synergies from recent acquisitions, and continued advancement of the Company’s OEM licensed manufacturing programs. These initiatives have further strengthened the Company’s position in the aviation aftermarket, while deeper OEM partnerships have expanded access to new markets and established customer bases. -24- Table of Contents Recent acquisitions, including Aero 3 in December 2025 and PAG in May 2026, are aligned with the Company’s core strategy and have increased exposure to the high-growth, higher-margin commercial and business and general aviation MRO and distribution aftermarkets. Results of Operations The following table summarizes the Company's consolidated results of operations (in thousands): Three months ended June 30, Six months ended June 30, 2026 2025 Change ($) Change (%) 2026 2025 Change ($) Change (%) Revenues $ 449,137 $ 272,139 $ 176,998 65 % $ 773,717 $ 528,184 $ 245,533 46 % Costs and operating expenses 400,179 249,626 150,553 60 % 692,011 481,167 210,844 44 % Operating income 48,958 22,513 26,445 117 % 81,706 47,017 34,689 74 % Interest expense, net 5,230 6,445 (1,215) (19) % 3,828 14,384 (10,556) (73) % Loss on debt extinguishment 4,473 — 4,473 — % 4,473 — 4,473 — % Income from continuing operations before income taxes 39,255 16,068 23,187 144 % 73,405 32,633 40,772 125 % Provision for income taxes 10,732 2,430 8,302 342 % 15,827 5,027 10,800 215 % Net income from continuing operations $ 28,523 $ 13,638 $ 14,885 109 % $ 57,578 $ 27,606 $ 29,972 109 % 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. 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. 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. 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. 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 -25- Table of Contents with increased acquisition costs during the current year, as well as a prior period valuation allowance reversal for certain tax attributes which lowered the provision for income taxes during the prior periods. Liquidity and Capital Resources Liquidity On May 5, 2026, the Company entered into a first amendment to its existing senior secured credit agreement, dated as of May 2, 2025 (the Credit Agreement), which provides for, among other things, a new senior secured term loan B facility in an aggregate principal amount of $900.0 million (the “New Term Facility”) and an upsize to the Company’s existing senior secured revolving credit facility from $400.0 million to $500.0 million (the “Revolving Facility”), maturing on May 5, 2033 and May 2, 2030, respectively. The Credit Agreement provides greater flexibility and increased borrowing capacity. The amendment replaced the Company's previous term loan. 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. The Company's primary sources of external financing are the capital markets and its Credit Agreement. The Company's internal sources of liquidity are primarily from operating activities, specifically from changes in the level of revenues and associated inventory, accounts receivable and accounts payable, and profitability. Significant increases or decreases in revenues and inventory, accounts receivable and accounts payable can affect the Company's liquidity. Inventory and accounts payable levels can be affected by the timing of large opportunistic inventory purchases and by distributor agreement requirements. Accounts receivable and accounts payable levels can be affected by changes in the level of work the Company performs and by the timing of large purchases. In addition to operating cash flows, other significant factors that affect the Company's overall management of liquidity include capital expenditures, divestitures, and investments in the acquisition of businesses. 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. 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. Cash Flows The following table summarizes the Company's cash flows (in thousands): Six months ended June 30, 2026 2025 Net cash used in operating activities $ (34,707) $ (34,741) Net cash (used in) provided by investing activities (1,796,118) 82,613 Net cash provided by (used in) financing activities 1,836,961 (59,996) Effect of exchange rate changes on cash and cash equivalents (134) — Net increase (decrease) in cash and cash equivalents $ 6,002 $ (12,124) 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. Cash used in investing activities increased $1.9 billion for the six months ended June 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 $1.7 billion, -26- Table of Contents 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. 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. 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. Other Obligations and Commitments There have not been any material changes to the Company's other obligations and commitments that were included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 Form 10-K"). Inflation and Pricing There have not been any material changes to this disclosure from those discussed in the Company's 2025 Form 10-K. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on its financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. Critical Accounting Policies, Estimates and Judgments 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. Recently Issued Accounting Pronouncements For a description of recently announced accounting standards, including the expected dates of adoption and estimated effects, if any, on the Company's consolidated financial statements, see Note (1) "Nature of Business and Summary of Significant Accounting Policies — Recently Adopted Accounting Pronouncements” to the Company's Consolidated Financial Statements included in its 2025 Form 10-K. -27- Table of Contents