Revenue Segmentation - The Aviation segment accounted for 63% of consolidated revenues in 2023, up from 51% in 2021, indicating a significant growth trend [23]. - The Fleet segment contributed 37% to consolidated revenues in 2023, down from 49% in 2021, reflecting a shift in revenue distribution [24]. - The Aviation segment reported a 33% increase in annual revenue, totaling $544 million in 2023, driven by a 29% increase in distribution revenue and a 46% increase in repair revenue compared to the prior year [117]. - Fleet segment revenue from commercial customers increased by 45% in 2023, with commercial revenues accounting for 48% of total Fleet segment revenue, up from 40% in 2022 [119]. - Revenues increased by $191.0 million, or 29%, in 2023 compared to 2022, driven by growth in the Aviation segment ($135.9 million) and Fleet segment ($55.1 million) [120]. Financial Performance - Total revenues for 2023 reached $860,488,000, a 28.5% increase from $669,448,000 in 2022 [178]. - Net income for 2023 was $39,134,000, compared to $28,059,000 in 2022, reflecting a 39.5% growth [178]. - Basic earnings per share for continuing operations increased to $3.05 in 2023 from $2.09 in 2022, a rise of 46.4% [178]. - Operating income rose by $34.4 million, or 64%, in 2023, with the Aviation segment contributing $34.8 million and the Fleet segment $7.3 million [124]. - Comprehensive income for 2023 was $36,298,000, compared to $33,203,000 in 2022, indicating a 6.3% increase [180]. Debt and Cash Flow - The company had $429 million of total debt outstanding as of December 31, 2023, which may increase vulnerability to adverse economic conditions [80]. - Cash used in operating activities was $21.8 million in 2023, a decrease from cash provided of $8.1 million in 2022, mainly due to higher inventory purchases [137]. - Cash used in investing activities rose by $233.3 million in 2023, primarily due to cash paid for acquisitions totaling $218.6 million [138]. - Cash provided by financing activities was $265.0 million in 2023, significantly up from cash used of $5.7 million in 2022, largely due to a public offering generating $129.1 million [139]. - Interest expense increased by approximately $13.2 million, or 74%, in 2023, primarily due to higher debt facility borrowings and interest rates [125]. Acquisitions and Growth Strategy - The company completed the acquisition of Precision Fuel Components in February 2023 and Desser Aerospace in July 2023, enhancing its MRO services and international expansion capabilities [111]. - The company is focused on growth through acquisitions, aiming to add new products and capabilities, which presents both opportunities and risks [53]. - The company expects continued growth in the Aviation segment due to new initiatives and recent acquisitions, contributing to a favorable outlook for 2024 [118]. Operational Risks - Supply chain disruptions and geopolitical uncertainties pose risks to business operations and expenses, potentially impacting revenue and profits [51]. - Cybersecurity risks pose potential threats to operations and financial results, despite existing risk management programs [77]. - The company faces intense competition in the aviation and vehicle parts industries, which could harm its business [59]. - Global economic and political conditions may adversely affect revenues, particularly in foreign markets [62]. - Future environmental regulations may incur substantial costs, potentially affecting financial position and operations [75]. Employee and Workforce - Approximately 1,200 employees were employed as of December 31, 2023, highlighting the company's workforce size [32]. - The company emphasizes a commitment to inclusion and diversity, with initiatives such as the VSE Inclusion & Diversity Council formed in 2020 [38]. - The company has implemented a Health, Environmental and Safety Program to minimize risks of injury or illness to employees [33]. Asset Management - As of December 31, 2023, goodwill and intangible assets accounted for 28% and 9% of total assets, respectively [57]. - The company evaluates inventory carrying value periodically, considering physical condition, sales patterns, and expected future demand [155]. - Goodwill is assessed for impairment at least annually, with the fair value of reporting units significantly exceeding their carrying values as of the fourth quarter of 2023 [157]. Regulatory Environment - The company is subject to numerous government regulations, which could expose it to liabilities or work loss [69]. - The company’s Chief Information Security Officer (CISO) has over 20 years of experience in information technology and security, overseeing the company's cybersecurity risk management [87].

Financial Data and Key Metrics Changes - In Q4 2023, VSE Corporation generated $235 million in revenue, a 37% increase year-over-year, with Aviation up 43% and Fleet up 26% [17] - For the full year 2023, total revenue reached $861 million, a 29% increase compared to 2022, primarily driven by a 33% increase in the Aviation segment [18] - Adjusted net income for Q4 increased 62% to $13 million, and adjusted diluted earnings per share rose 31% to $0.85 [18] - Full-year adjusted net income increased 60% to $47 million, with adjusted diluted earnings per share up 45% to $3.31 [19] Business Line Data and Key Metrics Changes - The Aviation segment reported record revenue of $544 million for 2023, a 33% year-over-year increase, with adjusted EBITDA increasing 68% to $87 million [24] - Fleet segment revenue for Q4 increased 26% to $82 million, driven by strong growth in e-commerce fulfillment and commercial fleet sales [27] - For the full year 2023, the Fleet segment generated record revenue of $317 million, with total adjusted EBITDA of $37 million, up 11% [31] Market Data and Key Metrics Changes - The Aviation segment's revenue growth was supported by new OEM programs and geographic expansion into Asia-Pacific [21] - The Fleet segment's commercial revenue increased 72% in Q4, now representing 52% of total fleet segment sales, marking a significant shift in customer mix [28] Company Strategy and Development Direction - VSE announced the acquisition of Turbine Controls for $120 million, enhancing its capabilities in aviation aftermarket services [8] - The company completed the sale of its Federal and Defense operating assets for $44 million, marking a significant milestone in its transformation strategy [9] - VSE is exploring strategic alternatives for its Fleet segment, indicating a focus on optimizing its portfolio [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue growth of 24% to 28% for 2024, driven by strong aviation markets and new business awards [25] - The company anticipates challenges in the Fleet segment due to expected declines in USPS revenue, projecting a decrease of 8% to 12% year-over-year [32] - Management emphasized a disciplined approach to financial performance and strategic transformation, aiming for continued above-market growth [44] Other Important Information - VSE expects to incur one-time transaction expenses of $6 million to $8 million related to the FDS divestiture in Q1 [38] - The company is considering a corporate restructuring plan that could result in adjustments to financial statements ranging from $18 million to $23 million throughout 2024 [39] Q&A Session Summary Question: Can you provide more details on the Turbine acquisition? - Management highlighted that the integration will focus on sales synergies with OEM partners rather than facility integration, expecting $85 million in revenue and $12 million in EBITDA for the acquired business [47][48] Question: What is the status of the Desser integration? - The integration is underway, with organizational integration nearly complete and a new e-commerce site expected to launch in Q2 [49] Question: How is the utilization of the Memphis facility? - Current utilization is below half capacity, with expectations for significant growth in 2024 [55][56] Question: What are the implications of Boeing's issues on the aftermarket industry? - Management noted that while price inflation has stabilized, they are focused on opportunities arising from changes in aircraft retirement plans and supply chain impacts [63][64] Question: What is the preliminary buyer interest for the Fleet business? - The strategic review process for the Fleet segment has been initiated, with an advisor retained to assist in the evaluation [66]

Financial Performance - Full Year 2023 - Total company revenue grew by 29% reaching $8605 million[7,9,11] - Adjusted EBITDA increased by 45% to $1138 million[9,11] - Adjusted net income increased by 60% to $47 million[9,47] - Adjusted diluted EPS increased by 45% to $331[9] Financial Performance - Q4 2023 - Revenue increased by 37% to $2353 million[9,10] - Adjusted EBITDA increased by 46% to $314 million[8,9,10] - Adjusted net income increased by 62%[9] - Aviation revenue increased 43% and Fleet revenue increased 26%[8] Segment Performance - Aviation - Aviation segment revenue increased by 33% for the full year, reaching $544 million[6,13] - Aviation segment adjusted EBITDA increased by 68% for the full year, reaching $874 million[13] - Aviation segment revenue increased by 43% to $1537 million in Q4[13,14] Segment Performance - Fleet - Fleet segment revenue increased by 21% for the full year, reaching $3165 million[7,22] - Fleet segment adjusted EBITDA increased by 11% for the full year, reaching $367 million[24] - Fleet segment revenue increased by 26% to $816 million in Q4[17,21]

Financial Performance - Total revenues for Q4 2023 reached $235.3 million, a 37% increase compared to Q4 2022[3] - GAAP net income for Q4 2023 was $12.8 million, reflecting a 62% increase year-over-year[3] - Adjusted EBITDA for the full year 2023 was $113.8 million, a 45% increase compared to 2022[4] - Net income from continuing operations for Q4 2023 was $12,834,000, a 62.1% increase from $7,916,000 in Q4 2022[16] - Adjusted EBITDA for Q4 2023 reached $31,444,000, reflecting a 45.7% increase compared to $21,582,000 in Q4 2022[16] - Free cash flow for Q4 2023 was $20,071,000, compared to $8,461,000 in Q4 2022[18] Segment Performance - The Aviation segment generated record revenue of $153.7 million in Q4 2023, up 43% from the previous year[6] - The Fleet segment reported revenue of $81.6 million in Q4 2023, a 26% increase year-over-year, with commercial revenue growing 72%[7] - Operating income in the Aviation segment for Q4 2023 was $18,771,000, a 52.3% increase from $12,327,000 in Q4 2022[17] - Adjusted EBITDA for the Aviation segment in Q4 2023 was $23,921,000, a 51.9% increase from $15,751,000 in Q4 2022[17] - The Fleet segment's operating income for Q4 2023 was $8,973,000, a 59.5% increase from $5,625,000 in Q4 2022[17] Cash Flow and Debt - The company generated $43 million of operating cash flow and $30 million of free cash flow in the second half of 2023[2] - As of December 31, 2023, VSE had $216 million in cash and total net debt outstanding of $422 million[10] - Total net debt as of December 31, 2023, was $421,576,000, up from $285,995,000 in 2022[21] - The company reported a net leverage ratio of 3.7x for both 2023 and 2022[21] Capital Expenditures and Guidance - Capital expenditures for the year 2023 totaled $18,666,000, compared to $11,212,000 in 2022[18] - VSE's 2024 guidance includes a 24% to 28% revenue growth for the Aviation segment and a 13% to 17% growth for the Fleet segment[11] Acquisitions and Sales - VSE announced the acquisition of Turbine Controls, Inc. for approximately $120 million, expected to close in Q2 2024[8] - The company completed the sale of its Federal and Defense segment assets for $44 million, with associated one-time transaction expenses expected between $6 million and $8 million[8] Reporting and Compliance - The company plans to file its Form 10-K with the SEC on or about March 7, 2024, detailing its fourth quarter and full year 2023 results[28]

VSE Corporation (NASDAQ:VSEC) Q3 2023 Earnings Conference Call November 2, 2023 8:30 AM ET Company Participants Michael Perlman - VP, IR and Communications John Cuomo - President and CEO Steve Griffin - CFO Conference Call Participants Louie DiPalma - William Blair Michael Ciarmoli - Truist Josh Sullivan - The Benchmark Company Jeff Van Sinderen - B. Riley Operator Good morning and welcome to the VSE Corporation Third Quarter 2023 Results Conference Call. All participants will be in listen-only mode. [Opera ...

V S E c o r p . c o mThird Quarter 2023 Results Conference Call November 2, 2023 Forward-Looking Statements This presentation contains statements that, to the extent they are not recitations of historical fact, constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act. All such statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in the ...

Financial Performance - Total revenues for Q3 2023 reached $231.4 million, a 38.3% increase from $167.4 million in Q3 2022[14] - Operating income for Q3 2023 was $25.3 million, up 67.1% from $15.1 million in Q3 2022[14] - Net income for Q3 2023 was $9.6 million, slightly higher than $9.4 million in Q3 2022, resulting in earnings per share of $0.64 compared to $0.74 in Q3 2022[14] - Comprehensive income for Q3 2023 was $11.2 million, down from $14.8 million in Q3 2022[16] - Net income for the nine months ended September 30, 2023, was $27.5 million, an increase of 18.5% compared to $23.2 million for the same period in 2022[24] - Revenue for the three months ended September 30, 2023, was $231,353,000, representing a 21.4% increase from $190,710,000 in 2022[42] - Income from continuing operations for the nine months ended September 30, 2023, was $31,377,000, up 76.5% from $17,782,000 in 2022[42] - Revenues for the three months ended September 30, 2023, increased by 38% to $231.4 million compared to $167.4 million in the same period of 2022, driven by growth in the Aviation and Fleet segments[92] - The company reported a 26% increase in revenues for the nine months ended September 30, 2023, totaling $625.2 million, compared to $497.5 million in the same period of 2022[92] Assets and Liabilities - Cash and cash equivalents increased significantly to $20.7 million from $0.3 million as of September 30, 2022[13] - Total assets grew to $1.34 billion, up 34.3% from $999.8 million at the end of 2022[13] - Current liabilities increased to $252.1 million, compared to $224.6 million at the end of 2022, reflecting a rise in accounts payable and current portion of long-term debt[13] - Long-term debt rose to $441.8 million from $276.3 million at the end of 2022, indicating increased leverage[13] - Total stockholders' equity increased to $609.5 million as of September 30, 2023, up from $449.5 million at the end of 2022, representing a growth of 35.6%[21] - Long-term debt as of September 30, 2023, was $460,770,000, an increase from $286,300,000 at the end of 2022[59] - As of September 30, 2023, the company had outstanding borrowings of $182.5 million under its term loan and $281.0 million under its revolving facility, with total borrowings increasing by approximately $174.9 million for the nine months ended September 30, 2023[113] Acquisitions and Investments - The company completed the acquisition of Desser Aerospace for a preliminary cash consideration of $133.8 million, which included a working capital adjustment of $9.5 million[36] - Desser Aerospace contributed $25.1 million in revenue and $3.2 million in operating income for the three months ended September 30, 2023[41] - The acquisition of Precision Fuel Components, LLC was completed for $11.7 million, enhancing the company's MRO capabilities[34] - The acquisition of Honeywell Fuel Control Systems was completed for a purchase price of $105 million, funded by borrowings under the revolving credit facility[45] - The preliminary allocation of the purchase price for the Honeywell acquisition included $12 million in inventory and $73 million in goodwill[46] - Total liabilities assumed in the Desser Aerospace acquisition were valued at $34.8 million, resulting in net assets acquired of $99.1 million[39] - The company incurred $3.0 million in acquisition-related expenses for Desser Aerospace during the nine months ended September 30, 2023[40] - The company incurred $0.3 million in acquisition-related expenses during the three and nine months ended September 30, 2023[47] Cash Flow and Dividends - Cash flows from operating activities resulted in a net cash used of $49.8 million for the nine months ended September 30, 2023, compared to a net cash used of $4.2 million in the same period of 2022[24] - The company reported a decrease in cash and cash equivalents to $20.8 million at the end of the period, down from $478,000 at the beginning of the period[24] - The company paid cash dividends totaling $3.9 million or $0.30 per share during the nine months ending September 30, 2023[120] - The company believes its existing cash balances and cash flows from operations will provide sufficient liquidity for business operations and capital expenditures over the next twelve months[116] Segment Performance - Aviation segment revenue reached $152.4 million for the three months ended September 30, 2023, representing a 48% year-over-year increase[88] - Fleet segment revenue was $79.0 million for the three months ended September 30, 2023, up from $64.8 million in the same period of 2022, marking a 22% increase[72] - The Fleet segment's operating income increased by 30% to $8.5 million for the three months ended September 30, 2023, compared to $6.5 million in the prior year[105] - The Aviation segment reported revenues of $152.4 million for the three months ended September 30, 2023, a 48% increase from $102.6 million in the prior year, primarily due to contributions from the Desser Aerospace acquisition and strong demand in global commercial air travel[100] - The Fleet segment's revenues increased by 22% to $79.0 million for the three months ended September 30, 2023, compared to $64.8 million in the same period of 2022, with commercial customer revenue growing by 47%[105] Tax and Interest - The effective tax rate for continued operations was 27.9% for the three months ended September 30, 2023, compared to 25.2% for the same period in 2022[80] - Interest expense for the three months ended September 30, 2023, increased by 75% to $8.5 million, primarily due to higher debt facility borrowings and interest rates[98] - The effective tax rate for continuing operations was 27.9% for the three months ended September 30, 2023, compared to 25.2% for the same period in 2022, influenced by transaction costs related to the Desser Aerospace acquisition[99] Future Outlook - The company plans to pursue the divestiture of its Federal and Defense segment to focus on long-term strategic growth areas[83] - The maximum Total Funded Debt to EBITDA Ratio is set to decrease to 4.75x by December 31, 2023, and further to 4.00x by June 30, 2025[115] - The estimated future annual amortization expense related to intangible assets is projected to total $118.9 million[75] - The company has not experienced any material changes to its other obligations and commitments since its last Annual Report[121] - There are no off-balance sheet arrangements that are likely to materially affect the company's financial condition[123]

VSE Corporation (NASDAQ:VSEC) Q2 2023 Earnings Conference Call July 27, 2023 8:30 AM ET Company Participants Michael Perlman - Vice President, Investor Relations and Communications John Cuomo - President and Chief Executive Officer Steve Griffin - Chief Financial Officer Conference Call Participants Ken Herbert - RBC Louie DiPalma - William Blair Jeff Van Sinderen - B. Riley Securities Peter Osterland - Truist Securities Operator Welcome to the VSE Corporation Second Quarter 2023 Results Conference Call. At ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for H1 2023 reflect significant revenue and income growth from continuing operations compared to the prior year [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$1.07 billion** and liabilities to **$604.3 million** by June 30, 2023, driven by inventories and debt Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $674,224 | $548,878 | | Inventories | $427,822 | $380,438 | | Current assets held-for-sale | $107,059 | $54,925 | | **Total assets** | **$1,073,471** | **$999,789** | | Long-term debt, less current portion | $365,110 | $276,300 | | Current liabilities held-for-sale | $64,070 | $52,929 | | **Total liabilities** | **$604,334** | **$550,263** | | **Total stockholders' equity** | **$469,137** | **$449,526** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Q2 2023 revenues from continuing operations increased **21%** to **$205.2 million**, with net income more than doubling to **$10.1 million** Q2 2023 vs Q2 2022 Performance (in thousands, except EPS) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $205,223 | $169,761 | 21.0% | | Operating Income | $20,637 | $10,535 | 95.9% | | Income from Continuing Operations | $10,089 | $4,755 | 112.2% | | Diluted EPS (Continuing Ops) | $0.78 | $0.37 | 110.8% | H1 2023 vs H1 2022 Performance (in thousands, except EPS) | Metric | H1 2023 | H1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $393,810 | $330,081 | 19.3% | | Operating Income | $37,415 | $22,552 | 65.9% | | Income from Continuing Operations | $18,209 | $11,044 | 64.9% | | Diluted EPS (Continuing Ops) | $1.42 | $0.87 | 63.2% | - The company reported a loss from discontinued operations of **$1.2 million** in Q2 2023, compared to an income of **$2.8 million** in Q2 2022, reflecting the performance of the Federal and Defense segment which is being sold[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$65.1 million** in H1 2023, primarily due to inventory investments, offset by financing activities Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(65,091) | $(20,138) | | Net cash (used in) provided by investing activities | $(16,291) | $327 | | Net cash provided by financing activities | $85,244 | $19,664 | | **Net increase (decrease) in cash** | **$3,862** | **$(147)** | - The primary drivers for the increased use of cash in operations were a **$45.6 million** increase in inventories and a **$27.4 million** decrease in accounts payable, partially offset by higher net income[24](index=24&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail the sale of the Federal and Defense segment, the acquisition of Precision Fuel Components, and significant subsequent events - On May 1, 2023, the company entered into a definitive agreement to sell its Federal and Defense segment for up to **$100.0 million**, consequently reporting this segment's results as discontinued operations[30](index=30&type=chunk)[37](index=37&type=chunk) - The Aviation segment acquired Precision Fuel Components, LLC on February 1, 2023, for **$11.7 million** to expand its MRO capabilities[33](index=33&type=chunk) - Subsequent to the quarter's end, in July 2023, the company completed the acquisition of Desser Aerospace for **$124.0 million**, amended its credit agreement to secure a new **$90.0 million** term loan, and raised **$112.7 million** in net proceeds from a public stock offering[67](index=67&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q2 2023 growth, strategic divestitures and acquisitions, and sufficient liquidity [Recent Developments and Business Trends](index=26&type=section&id=Recent%20Developments%20and%20Business%20Trends) The company is strategically transforming by divesting its Federal and Defense segment to focus on core Aviation and Fleet businesses, which are showing strong growth - The company entered an agreement to sell its Federal and Defense business for up to **$100 million** to sharpen its focus on aftermarket products and services[72](index=72&type=chunk) - Aviation segment revenue grew **19%** year-over-year in Q2 2023, driven by a **37%** increase in repair revenue and a **13%** increase in distribution revenue[76](index=76&type=chunk) - The Fleet segment's revenue diversification strategy is succeeding, with commercial revenues growing to **47%** of the segment's total in Q2 2023, up from **40%** in the prior year[77](index=77&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Consolidated revenues for Q2 2023 increased **21%**, with operating income rising **96%**, driven by strong Aviation and Fleet segment performance Consolidated Results of Operations (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $205,223 | $169,761 | 21% | | Operating Income | $20,637 | $10,535 | 96% | Aviation Segment Q2 Results (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $124,729 | $105,019 | 19% | | Operating Income | $15,783 | $6,450 | 145% | | Profit Percentage | 12.7% | 6.1% | - | Fleet Segment Q2 Results (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $80,494 | $64,742 | 24% | | Operating Income | $7,854 | $5,366 | 46% | | Profit Percentage | 9.8% | 8.3% | - | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by operating cash flows, an amended credit facility, and **$112.7 million** in net proceeds from a public stock offering - As of June 30, 2023, the company had **$95.0 million** outstanding on its term loan and **$282.0 million** on its revolving facility, with **$67.3 million** of unused commitments[99](index=99&type=chunk) - In July 2023, the credit agreement was amended, providing a new **$90.0 million** term loan and increasing the maximum Total Funded Debt to EBITDA Ratio to **5.00x** through September 2023[100](index=100&type=chunk) - A public stock offering in July 2023 raised net proceeds of **$112.7 million**, intended to repay outstanding borrowings under the revolving credit facility[101](index=101&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk from its variable-rate debt through interest rate swap agreements, including a new **$100.0 million** hedge - The company's primary market risk is interest rate risk from its variable-rate credit facility[110](index=110&type=chunk) - To manage interest rate risk, the company uses interest rate hedges, executing a new interest rate swap in July 2023 to hedge the variability on **$100.0 million** of floating-rate debt[110](index=110&type=chunk)[111](index=111&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective[117](index=117&type=chunk) - No changes occurred in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[118](index=118&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no material legal proceedings during the period - There are no legal proceedings to report[121](index=121&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor was added to address potential adverse effects from business divestitures, including disruption and financial losses - A new risk factor was added to address potential adverse effects from business divestitures, such as disruption, management distraction, and potential financial losses or ongoing liabilities[123](index=123&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not engage in any purchases of its own equity securities during the second quarter of 2023 - The company did not purchase any of its equity securities during the reporting period[124](index=124&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2023 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[125](index=125&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key agreements for the Federal and Defense segment sale and credit agreement amendment - Key exhibits filed include the Membership Interest Purchase Agreement for the sale of the Federal and Defense segment and the Fifth Amendment to the Business Loan and Security Agreement[127](index=127&type=chunk)

V S E c o r p . c o mSecond Quarter 2023 Results Conference Call July 2023 Forward-Looking Statements This presentation contains statements that, to the extent they are not recitations of historical fact, constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act. All such statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Priva ...