vsec-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _____ to _____

Commission File Number: 000-03676

VSE CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware			54-0649263
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

3361 Enterprise Way

Miramar,

Florida

33025

(Address of Principal Executive Offices)

(Zip Code)

Registrant's Telephone Number, Including Area Code: (954) 430-6600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.05 per share

VSEC

The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of shares of Common Stock outstanding as of July 26, 2024: 18,420,008


	TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Unaudited Consolidated Balance Sheets as of June 3 0 , 2024 and December 31, 2023	4

	Unaudited Consolidated Statements of (Loss) Income for the three and six months ended June 30 , 2024 and 2023	5

	Unaudited Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 3 0 , 2024 and 2023	6

	Unaudited Consolidated Statements of Stockholders' Equity for the three and six months ended June 3 0 , 2024 and 2023	7

	Unaudited Consolidated Statements of Cash Flows for the six months ended June 30 , 2024 and 2023	9

	Notes to Unaudited Consolidated Financial Statements	10

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	29

ITEM 4.	Controls and Procedures	29

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	30

ITEM 1A.	Risk Factors	30

ITEM 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	30

ITEM 5.	Other Information	30

ITEM 6.	Exhibits	31

Signatures		32

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Forward-Looking Statements

This quarterly report on Form 10-Q (“Form 10-Q”) 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”). All such statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and this statement is included for purposes of such safe harbor provisions.

“Forward-looking” statements, as such term is defined by the Securities Exchange Commission (the “SEC”) in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, the impact of widespread health developments, the health and economic impact thereof and the governmental, commercial, consumer and other responses thereto, such as growth, acquisition and disposition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “forecast,” “seek,” “plan,” “predict,” “project,” “could,” “estimate,” “might,” “continue,” “seeking” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, those identified elsewhere in this document, including in Item 1A, Risk Factors, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 3, Quantitative and Qualitative Disclosures About Market Risk, as well as with respect to the risks described in Item 1A, Risk Factors, to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 8, 2024 (“2023 Form 10-K") and in Item 1A. Risk Factors of this report. All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that occur or arise after the date hereof.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VSE Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


	June 30,		December 31,
(in thousands, except share and per share amounts)	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	18,993	$	7,768
Receivables (net of allowance of $5.0 million and $3.4 million, respectively)	168,238		127,958
Contract assets	28,575		8,049
Inventories	532,371		500,864
Other current assets	48,198		36,389
Current assets held-for-sale	—		93,002
Total current assets	796,375		774,030
Property and equipment (net of accumulated depreciation of $42.6 million and $37.4 million, respectively)	72,571		58,076
Intangible assets (net of accumulated amortization of $74.0 million and $135.6 million, respectively)	165,389		114,130
Goodwill	390,135		351,781
Operating lease right-of-use assets	34,419		28,684
Other assets	35,409		23,637
Total assets	$	1,494,298	$	1,350,338
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt	$	30,000	$	22,500
Accounts payable	144,645		173,036
Accrued expenses and other current liabilities	49,159		36,383
Dividends payable	1,842		1,576
Current liabilities held-for-sale	—		53,391
Total current liabilities	225,646		286,886
Long-term debt, less current portion	433,508		406,844
Deferred compensation	7,561		7,939
Long-term operating lease obligations	36,515		24,959
Deferred tax liabilities	4,317		6,985
Other long-term liabilities	5,435		—
Total liabilities	712,982		733,613
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, par value $0.05 per share, authorized 23,000,000 shares; issued and outstanding 18,420,008 and 15,756,918, respectively	921		788
Additional paid-in capital	403,666		229,103
Retained earnings	371,872		384,702
Accumulated other comprehensive income	4,857		2,132
Total stockholders' equity	781,316		616,725
Total liabilities and stockholders' equity	$	1,494,298	$	1,350,338

The accompanying notes are an integral part of these consolidated financial statements.

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VSE Corporation and Subsidiaries

Consolidated Statements of (Loss) Income

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
(in thousands, except share and per share amounts)	2024		2023		2024		2023
Revenues:
Products	$	188,579	$	165,997	$	375,758	$	320,443
Services	77,380		39,226		131,740		73,367
Total revenues	265,959		205,223		507,498		393,810

Costs and operating expenses:
Products	166,055		147,139		329,038		282,388
Services	72,438		32,327		120,440		62,903
Selling, general and administrative expenses	4,117		1,519		7,116		3,564
Lease abandonment costs	12,857		—		12,857		—
Amortization of intangible assets	4,360		3,601		7,741		7,540
Total costs and operating expenses	259,827		184,586		477,192		356,395
Operating income	6,132		20,637		30,306		37,415

Interest expense, net	9,826		7,366		19,013		13,346
(Loss) income from continuing operations before income taxes	(3,694)		13,271		11,293		24,069
(Benefit) provision for income taxes	(917)		3,182		1,970		5,860
Net (loss) income from continuing operations	(2,777)		10,089		9,323		18,209
Loss from discontinued operations, net of tax	—		(1,234)		(18,711)		(237)
Net (loss) income	$	(2,777)	$	8,855	$	(9,388)	$	17,972

(Loss) earnings per share:
Basic
Continuing operations	$	(0.16)	$	0.78	$	0.57	$	1.42
Discontinued operations	—		(0.10)		(1.14)		(0.02)
	$	(0.16)	$	0.68	$	(0.57)	$	1.40
Diluted
Continuing operations	$	(0.16)	$	0.78	$	0.56	$	1.42
Discontinued operations	—		(0.10)		(1.13)		(0.02)
	$	(0.16)	$	0.68	$	(0.57)	$	1.40

Weighted average shares outstanding:
Basic	17,152,661		12,886,100		16,468,288		12,865,394
Diluted	17,202,115		12,916,998		16,571,033		12,921,826

Dividends declared per share	$	0.10	$	0.10	$	0.20	$	0.20

The accompanying notes are an integral part of these consolidated financial statements.

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VSE Corporation and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023
Net (loss) income	$	(2,777)	$	8,855	$	(9,388)	$	17,972
Other comprehensive income, net of tax:
Change in fair value of interest rate swap agreements, net of tax	221		2,361		2,725		363
Total other comprehensive income, net of tax	221		2,361		2,725		363
Comprehensive (loss) income	$	(2,556)	$	11,216	$	(6,663)	$	18,335

The accompanying notes are an integral part of these consolidated financial statements.

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VSE Corporation and Subsidiaries

Consolidated Statements of Stockholders' Equity

(Unaudited)


	Three Months Ended June 30, 2024
				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Common Stock
(in thousands, except per share data)	Shares	Amount
Balance at March 31, 2024	15,834	$	792	$	230,805	$	376,505	$	4,636	$	612,738
Net loss	—	—		—		(2,777)		—		(2,777)
Issuance of common stock	2,430	122		161,571		—		—		161,693
Stock issuance in connection with acquisition	127	6		9,994		—		—		10,000
Stock-based compensation	29	1		1,296		—		—		1,297
Other comprehensive income, net of tax	—	—		—		—		221		221
Dividends declared (0.10 per share)	—	—		—		(1,856)		—		(1,856)
Balance at June 30, 2024	18,420	$	921	$	403,666	$	371,872	$	4,857	$	781,316


	Three Months Ended June 30, 2023
				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Common Stock
(in thousands, except per share data)	Shares	Amount
Balance at March 31, 2023	12,886	$	644	$	94,577	$	359,124	$	2,970	$	457,315
Net income	—	—		—		8,855		—		8,855
Stock-based compensation	12	1		1,894		—		—		1,895
Other comprehensive income, net of tax	—	—		—		—		2,361		2,361
Dividends declared (0.10 per share)	—	—		—		(1,289)		—		(1,289)
Balance at June 30, 2023	12,898	$	645	$	96,471	$	366,690	$	5,331	$	469,137

The accompanying notes are an integral part of these consolidated financial statements.

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VSE Corporation and Subsidiaries

Consolidated Statements of Stockholders' Equity (continued)

(Unaudited)

Six months ended June 30, 2024