Core Points - The Chinese government has reactivated the "unreliable entity list" to impose sanctions on foreign entities, including Dedrone by Axon and TechInsights, due to their military technology cooperation with Taiwan and actions that undermine China's national sovereignty and security [1][4][5] - The Chinese government emphasizes that it handles the unreliable entity list cautiously and only targets a small number of foreign entities that pose a threat to national security, assuring compliant foreign businesses that they have nothing to worry about [1][4] Summary by Categories Government Actions - The Chinese government has implemented sanctions against specific foreign entities for their involvement in military technology cooperation with Taiwan and for making negative statements about China [1] - The sanctions are based on various Chinese laws, including the Foreign Trade Law and the National Security Law [1] Entities Listed - The following foreign entities have been included in the unreliable entity list: 1. Dedrone by Axon 2. DZYNE Technologies 3. Elbit Systems of America, LLC 4. Epirus, Inc. 5. AeroVironment, Inc. 6. Exelis Inc. 7. Alliant Techsystems Operations LLC 8. BAE Systems, Inc. 9. Teledyne FLIR, LLC 10. VSE Corporation 11. Cubic Global Defense 12. Recorded Future, Inc. 13. Halifax International Security Forum 14. TechInsights Inc. and its subsidiaries [4][5]

Core Viewpoint - The Ministry of Commerce of China has announced the inclusion of certain foreign entities, including anti-drone technology companies and TechInsights, in the unreliable entity list, which will restrict their activities related to China [1]. Group 1: Entities Listed - The following foreign entities have been included in the unreliable entity list: 1. Dedrone by Axon 2. DZYNE Technologies 3. Elbit Systems of America, LLC 4. Epirus, Inc. 5. AeroVironment, Inc. 6. Exelis Inc. 7. Alliant Techsystems Operations LLC 8. BAE Systems, Inc. 9. Teledyne FLIR, LLC 10. VSE Corporation 11. Cubic Global Defense 12. Recorded Future, Inc. 13. Halifax International Security Forum 14. TechInsights Inc. and its branches [4]. Group 2: Measures Taken - The measures taken against the listed entities include: 1. Prohibition of engaging in import and export activities related to China 2. Prohibition of new investments within China 3. Prohibition of transactions and cooperation with these entities by organizations and individuals in China, especially concerning data transmission and provision of sensitive information [1].

Core Viewpoint - The Ministry of Commerce has announced the inclusion of foreign entities, specifically anti-drone technology companies and TechInsights, in the unreliable entity list to protect national sovereignty, security, and development interests [2][5]. Group 1: Announcement Details - The announcement includes measures such as prohibiting the listed entities from engaging in import and export activities related to China, forbidding new investments in China, and restricting Chinese organizations and individuals from conducting transactions or cooperation with these entities [2][3]. - The entities listed in the unreliable entity list include Dedrone by Axon, DZYNE Technologies, Elbit Systems of America, Epirus, AeroVironment, Exelis, Alliant Techsystems Operations, BAE Systems, Teledyne FLIR, VSE Corporation, Cubic Global Defense, Recorded Future, Halifax International Security Forum, and TechInsights along with its various branches [4]. Group 2: Rationale Behind the Decision - The Ministry of Commerce stated that these foreign entities have engaged in military technology cooperation with Taiwan, made harmful statements regarding China, and assisted foreign governments in suppressing Chinese companies, which severely undermines China's national interests [5]. - The Chinese government emphasizes that it handles the unreliable entity list cautiously and only targets a small number of foreign entities that pose a threat to national security, assuring that compliant foreign entities have nothing to worry about [5].

Core Points - The announcement establishes a mechanism for an unreliable entity list to protect national sovereignty, security, and development interests [2][3] - Several foreign entities, including Dedrone and TechInsights, have been added to this list, which prohibits them from engaging in import and export activities related to China [2][5] - The measures also include a ban on new investments in China by these entities and restrict Chinese organizations and individuals from conducting transactions or cooperation with them [2][5] Summary by Categories - **Legal Framework** - The mechanism is based on laws such as the Foreign Trade Law, National Security Law, and Anti-Foreign Sanctions Law of the People's Republic of China [2] - **Entities Listed** - The following companies have been included in the unreliable entity list: - Dedrone by Axon - DZYNE Technologies - Elbit Systems of America, LLC - Epirus, Inc. - AeroVironment, Inc. - TechInsights Inc. and its subsidiaries [5][6] - **Implementation** - The announcement takes effect immediately upon publication [4]

PART I FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) The company presents its unaudited consolidated financial statements reflecting its recent strategic shift to an aviation focus [Unaudited Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) Total assets decreased to $1.60 billion, driven by the sale of the Fleet segment and a corresponding reduction in liabilities Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$1,602,027** | **$1,742,630** | | Total Current Assets | $753,619 | $965,347 | | Goodwill | $428,665 | $428,263 | | **Total Liabilities** | **$622,500** | **$754,444** | | Total Current Liabilities | $202,045 | $298,500 | | Long-term debt, less current portion | $371,656 | $400,173 | | **Total Stockholders' Equity** | **$979,527** | **$988,186** | - The balance sheet as of December 31, 2024, included **$282.8 million in 'Current assets held-for-sale'** and **$68.2 million in 'Current liabilities held-for-sale'** related to the Fleet segment, which were no longer present as of June 30, 2025, following the sale[13](index=13&type=chunk)[32](index=32&type=chunk) [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) Q2 2025 continuing operations saw a net income of $13.6 million, a significant turnaround from a prior-year loss Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenues | $272,139 | $192,828 | | Operating Income | $22,513 | $2,602 | | Net Income from Continuing Operations | $13,638 | $(5,288) | | (Loss) from Discontinued Operations | $(10,441) | $2,511 | | **Net Income (Loss)** | **$3,197** | **$(2,777)** | | Diluted EPS from Continuing Operations | $0.66 | $(0.31) | Six Months 2025 vs 2024 Performance (in thousands, except per share data) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Total Revenues | $528,184 | $355,211 | | Operating Income | $47,017 | $18,245 | | Net Income from Continuing Operations | $27,606 | $254 | | (Loss) from Discontinued Operations | $(33,382) | $(9,642) | | **Net (Loss)** | **$(5,776)** | **$(9,388)** | | Diluted EPS from Continuing Operations | $1.33 | $0.01 | [Unaudited Consolidated Statements of Cash Flows](index=12&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Cash from investing activities was positive due to asset sales, while operating activities used $34.7 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(34,741) | $(96,588) | | Net cash provided by (used in) investing activities | $82,613 | $(81,820) | | Net cash (used in) provided by financing activities | $(59,996) | $189,471 | | **Net (decrease) increase in cash** | **$(12,124)** | **$11,063** | - Investing activities in 2025 were positively impacted by **$138.8 million in proceeds from the sale of business segments**, net of cash divested[28](index=28&type=chunk) - Financing activities in 2024 were significantly boosted by **$161.7 million in proceeds from the issuance of common stock**[28](index=28&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail the company's transformation, including acquisitions, divestitures, and a new credit agreement - The company now operates in a **single reportable segment, Aviation**, providing aftermarket parts distribution and MRO services[30](index=30&type=chunk)[69](index=69&type=chunk) - On May 1, 2025, the company acquired Turbine Weld for **$49.9 million in cash** to strengthen its MRO service portfolio[36](index=36&type=chunk) - The sale of the Fleet segment was completed on April 1, 2025, for a total consideration of up to **$230 million**, including cash, a seller note, and a potential earn-out[50](index=50&type=chunk) - A new credit agreement was established on May 2, 2025, providing a **$300 million term loan** and a **$400 million revolving credit facility**, both maturing in 2030[59](index=59&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q2 2025 revenue growth driven by acquisitions and its focused aviation strategy - Q2 2025 revenue reached **$272.1 million, a 41% increase year-over-year**, driven by strong execution, expanded product lines, and contributions from recent acquisitions[90](index=90&type=chunk) - **Distribution revenue grew 50%** and **repair revenue grew 27%** in Q2 2025 compared to Q2 2024, fueled by new distribution agreements like the Pratt & Whitney Canada EMEA program and solid end-market activity[90](index=90&type=chunk)[93](index=93&type=chunk) - Operating income for Q2 2025 **increased by 765% to $22.5 million**, largely due to higher revenues and the absence of a $12.9 million lease abandonment charge recorded in Q2 2024[92](index=92&type=chunk)[95](index=95&type=chunk) - The company entered a new credit agreement in May 2025 with a **$300M term loan and $400M revolving facility**, enhancing liquidity and flexibility; as of June 30, 2025, VSE had **$316.4 million of unused commitments**[98](index=98&type=chunk)[101](index=101&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure from variable-rate debt, which is partially hedged - VSE's primary market risk is **interest rate risk** from its variable-rate credit facility[111](index=111&type=chunk) - The company uses **interest rate hedges (swaps)** to fix rates on a portion of its borrowings to mitigate the impact of interest rate fluctuations[111](index=111&type=chunk) [Controls and Procedures](index=33&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls were deemed effective, with internal control changes made to integrate recent acquisitions - The CEO and CFO concluded that as of June 30, 2025, the company's **disclosure controls and procedures were effective**[116](index=116&type=chunk) - Changes were made to internal controls to integrate the acquisitions of Kellstrom Aerospace and Turbine Weld, focusing on areas like entity-level controls, IT, inventory management, and revenue processing[117](index=117&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=34&type=section&id=ITEM%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - There are **no legal proceedings** to report[120](index=120&type=chunk) [Risk Factors](index=34&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes were reported to the risk factors previously disclosed in the company's Form 10-K - **No material changes** to previously disclosed risk factors were reported[121](index=121&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=34&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company did not repurchase its equity securities, except for shares withheld for employee tax liabilities - The company did not engage in any stock buybacks; the only equity purchases were **194 shares forfeited by employees** to cover tax liabilities on vesting stock awards[122](index=122&type=chunk) [Other Information](index=34&type=section&id=ITEM%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted, modified, or terminated any **Rule 10b5-1 trading plans** during the three months ended June 30, 2025[123](index=123&type=chunk) [Exhibits](index=35&type=section&id=ITEM%206.%20Exhibits) This section lists filed exhibits, including the new Credit Agreement and required CEO/CFO certifications - Key exhibits filed include the new **Credit Agreement dated May 2, 2025**, and required CEO/CFO certifications[125](index=125&type=chunk)

Financial Performance - VSE achieved record revenue of $272 million in Q2 2025, a 41% increase year-over-year, driven by strong performance in aviation distribution and MRO businesses [17][21] - Adjusted EBITDA rose 52% to $43 million, with an adjusted EBITDA margin of 16%, reflecting a 110 basis point improvement from the previous year [21][17] - Adjusted net income increased by 149% to $20 million, with adjusted diluted earnings per share rising to $0.97, a 106% increase [21][19] Business Segment Performance - The Aviation segment generated $272 million in revenue, a 41% increase, with distribution revenue up 50% and MRO revenue up 27% [22][21] - Organic revenue growth in the Aviation segment was approximately 13% when excluding recent acquisitions [22] - Adjusted EBITDA for the Aviation segment increased by 48% to $47 million, representing 17.1% of revenue, driven by favorable pricing and product mix [23][21] Market Environment - The second quarter began with softness in the aftermarket due to tariff uncertainties, but activity rebounded in May and June [15] - The aviation aftermarket, particularly in the engine segment, is expected to remain strong, with engine-related MRO and distribution revenue accounting for over 50% of total aviation revenue [16][17] Company Strategy and Industry Competition - VSE completed the sale of its fleet segment, focusing on higher growth and higher margin distribution and MRO services within the aviation aftermarket [7][6] - The company is prioritizing integration of recent acquisitions to unlock efficiencies and enhance customer value, with a focus on capturing synergies [29][30] - VSE is expanding repair capabilities and increasing capacity across operations to meet strong demand [28][30] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in continued strength in the aviation aftermarket, particularly in the engine segment, and highlighted targeted investments to capitalize on growth [16][28] - The company reaffirmed its full-year 2025 Aviation segment revenue growth guidance of 35% to 40% and raised adjusted EBITDA margin guidance to 16.5% to 17% [24][25] Other Important Information - VSE secured a new $700 million credit facility, providing financial flexibility to support growth initiatives [9] - The company generated approximately $6 million in free cash flow during the quarter, an improvement of $28 million year-over-year [26][27] Q&A Session Summary Question: Can you discuss organic growth expectations for the second half of the year? - Management indicated that organic growth is expected to continue, with engine markets outperforming component markets, particularly in commercial aviation [35][36] Question: What are the synergies expected from recent acquisitions? - Management noted that significant cost synergies have already been captured, with ongoing opportunities for margin expansion as integrations progress [68][70] Question: How sustainable is the free cash flow generation? - Management highlighted a strong cash generation in the first half and anticipated continued improvement in free cash flow in the second half, driven by better working capital management [44][45] Question: What is the outlook for the Honeywell fuel control program? - Management stated that the program is performing well, but further growth opportunities will be evaluated after achieving full implementation [72][73] Question: What is the strategy for the USM business moving forward? - The company plans to shift the USM business towards a used and repair model, focusing on margin expansion rather than transactional parts trading [46][50]

Financial Performance - VSE achieved record revenue of $272 million in Q2 2025, a 41% increase year-over-year, driven by strong performance in aviation distribution and MRO businesses [16][18] - Adjusted EBITDA increased by 52% to $43 million, with an adjusted EBITDA margin of 16%, reflecting a 110 basis point improvement from the prior year [16][18] - Adjusted net income reached $20 million, with adjusted net income per diluted share of $0.97, marking increases of 149% and 106% respectively [16][19] Business Segment Performance - Aviation segment revenue also increased by 41% to $272 million, with distribution revenue up 50% and MRO revenue up 27% [20] - Organic revenue growth in the aviation segment was approximately 13% when excluding recent acquisitions [20] - The company is focusing on higher margin product lines, leading to a reduction in less profitable used serviceable material (USM) revenue by about 20% on a run rate basis [11][20] Market Environment - The aviation aftermarket showed resilience, with a rebound in activity in May and June after initial softness due to tariff uncertainties [15] - Engine-related MRO and distribution revenue now represents over 50% of total aviation revenue, indicating strong demand in this segment [15] Company Strategy and Development Direction - VSE completed the sale of its fleet segment, transitioning to a pure play aviation aftermarket company, and is now focused on higher growth and higher margin opportunities [6][25] - The company is prioritizing integration of recent acquisitions, including Turbine Weld and Kaelstrom, to unlock efficiencies and enhance customer value [26] - VSE is also capturing cost synergies from acquisitions, with $4 million in identified cost savings already being realized [12][26] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in continued strength in the aviation aftermarket, particularly in the engine segment, and anticipates revenue growth of 35% to 40% for the full year 2025 [22][15] - The company is raising its full-year adjusted EBITDA margin guidance to 16.5% to 17%, reflecting a higher margin product mix [22] Other Important Information - VSE secured a new $700 million credit facility, providing financial flexibility to support growth initiatives [7] - The company generated approximately $6 million in free cash flow during the quarter, an improvement of about $28 million compared to the previous year [24] Q&A Session Summary Question: Can you discuss organic growth expectations for the second half of the year? - Management indicated that organic growth is expected to be in the low to mid-teens, with engine markets outperforming component markets [32][34] Question: What are the synergies from recent acquisitions? - Management noted that synergies from Kaelstrom are being realized ahead of schedule, contributing to strong margins [36][62] Question: How sustainable is the free cash flow generation? - Management expects strong improvement in free cash flow in the second half of the year, driven by better working capital management [42] Question: What is the strategy for the USM business? - The company is shifting the USM business to focus on higher margin product lines and integrating it with repair capabilities [45][84] Question: What are the opportunities in the hydraulics market? - Management sees potential in the hydraulics market, emphasizing faster turnaround times and quality in supporting OEM authorized work [73] Question: What is the outlook for engine aftermarket demand? - Management believes that engine aftermarket demand will continue to outpace component demand in the near to mid-term due to supply chain constraints [77]

Financial Performance Highlights - Second quarter 2025 revenue reached $272 million, a 41% increase driven by growth in Aviation distribution and MRO businesses, as well as contributions from recent acquisitions[11] - Adjusted EBITDA for the second quarter 2025 was $43 million, representing 16% of revenue, a 52% increase due to distribution program execution, increased MRO activity, strong OEM licensed manufacturing program performance, and acquisitions[11] - Adjusted Net Income for the second quarter 2025 was $20 million, and Adjusted diluted earnings per share was $0.97, representing increases of 149% and 106% respectively[11] Business Developments - The company completed the sale of the Fleet segment, repositioning itself as a pure-play Aviation Aftermarket business[6] - Turbine Weld Industries ("Turbine Weld") was acquired, expanding MRO engine component capabilities[6] - A new 5-year authorized services center agreement was signed with Eaton to support aftermarket MRO for Eaton hydraulics across the Americas[6] Balance Sheet and Capital Structure - Adjusted Net Leverage was 2.2x, including the Fleet sale and acquisition of Turbine Weld[11, 23] - Net Debt outstanding was $362 million, while cash and revolver availability was $333 million[23] - Second quarter 2025 Free Cash Flow was $6 million, driven by disciplined working capital management and record profitability[23] FY 2025 Guidance - Revenue Guidance: Reaffirming 35% to 40% year-over-year growth[20] - Aviation Adjusted EBITDA Margin Guidance: Increasing to 16.5% to 17%, the high-end of previously provided range[20]

[Q2 2025 Earnings Overview](index=1&type=section&id=Q2%202025%20Earnings%20Overview) VSE Corporation reported record Q2 2025 revenue and profitability, driven by its aviation-focused strategy and successful strategic actions [Financial Highlights](index=1&type=section&id=Financial%20Highlights) VSE Corporation achieved record Q2 2025 revenue of $272.1 million and Adjusted EBITDA of $43.5 million, driven by strong year-over-year growth Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | % Change YoY | | :--- | :--- | :--- | | Total Revenues | $272.1 million | +41.1% | | GAAP Net Income | $13.6 million | NM | | GAAP EPS (Diluted) | $0.66 | NM | | Adjusted EBITDA | $43.5 million | +51.9% | | Adjusted Net Income | $20.1 million | +149.1% | | Adjusted EPS (Diluted) | $0.97 | +106.4% | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributed record Q2 performance to a successful aviation-focused strategy, including divestitures and acquisitions, with a future focus on free cash flow - The CEO highlighted the company's aviation-focused strategy, which is driving **record revenue and profitability**[2](index=2&type=chunk) - Key strategic moves in the quarter included the divestiture of the Fleet segment and the acquisition of Turbine Weld Industries, a specialized MRO service provider[2](index=2&type=chunk) - The CFO stated a forward-looking focus on driving improved free cash flow generation and optimizing the cost structure for the streamlined aviation platform[2](index=2&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) VSE demonstrated strong Q2 2025 financial performance with significant revenue and profit growth in its Aviation segment, improved liquidity, and raised full-year guidance [Consolidated Financial Results](index=3&type=section&id=Consolidated%20Financial%20Results) For the second quarter of 2025, VSE's revenues from continuing operations increased 41.1% to $272.1 million compared to the prior year, with operating income rising 765.2% to $22.5 million Consolidated Results (Continuing Operations) | (in thousands, except EPS) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $272,139 | $192,828 | 41.1% | | Operating income | $22,513 | $2,602 | 765.2% | | Net income (loss) | $13,638 | $(5,288) | NM | | EPS (Diluted) | $0.66 | $(0.31) | NM | [Segment Performance](index=1&type=section&id=Segment%20Performance) Following the divestiture of the Fleet segment, the company operates as a single Aviation segment, achieving record revenue of $272.1 million in Q2 2025, up 41.1% YoY - Aviation segment revenue grew **41.1% YoY to a record $272.1 million**, with distribution revenue up **50.4%** and MRO revenue up **27.3%**[3](index=3&type=chunk) Aviation Segment Profitability (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Operating Income | $35,072 | $24,468 | 43.3% | | Adjusted EBITDA | $46,522 | $31,488 | 47.7% | | Adjusted EBITDA Margin | 17.1% | 16.3% | +80 bps | [Financial Position and Liquidity](index=2&type=section&id=Financial%20Position%20and%20Liquidity) VSE generated positive cash flow in Q2 2025, with $12 million from operations and $6 million in free cash flow, ending the quarter with strong liquidity and reduced net debt - The company generated **$12 million of operating cash flow** and **$6 million of free cash flow** in Q2 2025[5](index=5&type=chunk) Liquidity and Debt Position (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Cash & Unused Credit Availability | $333 million | | Total Net Debt | $362 million | | Adjusted Net Leverage | ~2.2x | [2025 Full-Year Guidance](index=2&type=section&id=2025%20Full-Year%20Guidance) VSE reaffirmed its full-year 2025 revenue growth forecast of 35% to 40% and raised its Aviation segment's Adjusted EBITDA margin guidance to 16.5% to 17% - Full-year 2025 revenue growth guidance is reaffirmed at **35% to 40% year-over-year**[6](index=6&type=chunk) - Aviation segment full-year 2025 Adjusted EBITDA margin guidance was increased to a new range of **16.5% to 17%**[6](index=6&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) Key non-GAAP reconciliations highlight VSE's improved adjusted profitability, positive free cash flow generation, and reduced net leverage in Q2 2025 [Reconciliation of Net Income to Adjusted Net Income & Adjusted EPS](index=4&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income%20%26%20Adjusted%20EPS) The company's Adjusted Net Income from continuing operations for Q2 2025 was $20.1 million, a 149.1% increase from Q2 2024, after various adjustments Adjusted Net Income Reconciliation (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (loss) from continuing operations | $13,638 | $(5,288) | | Adjustments (Acquisition, Divestiture, Earn-out, etc.) | $8,655 | $17,817 | | Tax impact of adjusted items | $(2,159) | $(4,445) | | **Adjusted net income from continuing operations** | **$20,134** | **$8,084** | [Reconciliation of Net Income to EBITDA & Adjusted EBITDA](index=4&type=section&id=Reconciliation%20of%20Net%20Income%20to%20EBITDA%20%26%20Adjusted%20EBITDA) Adjusted EBITDA for Q2 2025 increased 51.9% year-over-year to $43.5 million, calculated by adjusting GAAP net income for interest, taxes, D&A, and other items Adjusted EBITDA Reconciliation (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (loss) from continuing operations | $13,638 | $(5,288) | | Interest, Taxes, D&A | $18,509 | $13,972 | | **EBITDA** | **$32,147** | **$8,684** | | Other Adjustments (Stock Comp, Earn-out, etc.) | $11,305 | $19,928 | | **Adjusted EBITDA** | **$43,452** | **$28,612** | [Reconciliation of Free Cash Flow](index=5&type=section&id=Reconciliation%20of%20Free%20Cash%20Flow) The company generated $6.3 million in free cash flow in Q2 2025, a significant improvement from a negative free cash flow of $21.5 million in the same period last year Free Cash Flow (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $11,891 | $(17,528) | | Capital expenditures | $(5,589) | $(3,945) | | **Free cash flow** | **$6,302** | **$(21,473)** | [Net Debt and Leverage Ratio](index=6&type=section&id=Net%20Debt%20and%20Leverage%20Ratio) As of June 30, 2025, VSE's net debt stood at $362.3 million, a decrease from $401.1 million at the end of 2024, improving the Adjusted Net Leverage Ratio to 2.2x Net Debt and Leverage | (in thousands, except ratio) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Net Debt | $362,250 | $401,143 | | Adjusted Net Leverage Ratio | 2.2x | 2.5x | [Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Consolidated%20Financial%20Statements%20%28Unaudited%29) The unaudited financial statements reflect VSE's financial position and performance, including the impact of the Fleet segment divestiture on assets and liabilities [Consolidated Balance Sheets](index=10&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, VSE's total assets were $1,602.0 million, decreasing from $1,742.6 million at year-end 2024, primarily due to the Fleet segment divestiture Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $753,619 | $965,347 | | Total assets | $1,602,027 | $1,742,630 | | Total current liabilities | $202,045 | $298,500 | | Total liabilities | $622,500 | $754,444 | | Total stockholders' equity | $979,527 | $988,186 | [Consolidated Statements of Operations](index=11&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, VSE generated total revenues of $272.1 million, leading to an operating income of $22.5 million and a consolidated net income of $3.2 million Key Income Statement Items (Q2 2025, in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenues | $272,139 | $192,828 | | Operating income | $22,513 | $2,602 | | Net income (loss) from continuing operations | $13,638 | $(5,288) | | (Loss) income from discontinued operations | $(10,441) | $2,511 | | **Net income (loss)** | **$3,197** | **$(2,777)** | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities was $34.7 million, with investing activities providing $82.6 million, resulting in a net decrease in cash of $12.1 million Cash Flow Summary (Six Months Ended June 30, in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(34,741) | $(96,588) | | Net cash provided by (used in) investing activities | $82,613 | $(81,820) | | Net cash (used in) provided by financing activities | $(59,996) | $189,471 | | **Net (decrease) increase in cash** | **$(12,124)** | **$11,063** | [Additional Information](index=8&type=section&id=Additional%20Information) This section provides supplementary details including investor conference call information, a company overview, and cautionary forward-looking statements [Conference Call Information](index=8&type=section&id=Conference%20Call%20Information) VSE will host a conference call on Thursday, July 31, 2025, at 8:30 A.M. ET to review its second-quarter financial results, with webcast and presentation materials available online - A conference call to discuss Q2 2025 results is scheduled for **Thursday, July 31, 2025, at 8:30 A.M. ET**[22](index=22&type=chunk) [About VSE Corporation](index=8&type=section&id=About%20VSE%20Corporation) VSE Corporation is a leading provider of aftermarket distribution and MRO services for the commercial and business & general aviation markets, specializing in engine components and airframe accessories - VSE is a leading provider of Aviation distribution and repair services for the commercial and business & general aviation (BG&A) aftermarkets[24](index=24&type=chunk) [Forward-Looking Statements](index=9&type=section&id=Forward-Looking%20Statements) This earnings release contains forward-looking statements subject to various risks and uncertainties, reflecting management's current expectations, and actual results may differ materially - The document includes forward-looking statements involving known and unknown risks that may cause actual results to differ materially from expectations[26](index=26&type=chunk)

Core Insights - The industrials sector has been a top performer in 2025, with the Industrial Select Sector SPDR Fund (XLI) returning nearly 9% year-to-date, significantly outperforming the S&P 500 [1] - The Trump administration's focus on boosting domestic manufacturing is contributing to a positive outlook for industrial companies [1] Company Summaries Nordson Corporation (NASDAQ: NDSN) - Nordson's stock has a 12-month price forecast of $253.17, indicating a potential upside of 19.24% from the current price of $212.31 [3][6] - The company reported adjusted earnings per share of $2.42, exceeding analyst expectations by $0.06, with revenue increasing by 5% year-over-year to $683 million [4] - Nordson's strong performance is supported by a 5% growth in backlog and positive forecasts for the third quarter, with expected adjusted EPS between $2.55 and $2.75 [5] VSE Corporation (NASDAQ: VSEC) - VSE's stock forecast suggests a 12-month price target of $125.17, reflecting a downside of 4.72% from the current price of $131.37 [8] - The company has transitioned to focus solely on aviation, recently acquiring Turbine Weld Industries to enhance its maintenance, repair, and overhaul services [9][10] - VSE's shares have surged 40% year-to-date, driven by strategic repositioning in the high-demand aviation sector [8] Cimpress plc (NASDAQ: CMPR) - Cimpress has a 12-month stock price forecast of $62.50, indicating a potential upside of 40.29% from the current price of $44.55 [12] - The company is shifting towards "elevated products" such as apparel and packaging, which aligns with recent sales growth trends [13] - Despite a nearly 38% decline year-to-date, Cimpress has seen a 9% increase in the last month, suggesting potential recovery [12]