Exhibit

VSE Reports Financial Results for Third Quarter 2019

VSE Delivers 17.4% Revenue and 9.7% Operating Income Growth

Alexandria, Virginia, October 29, 2019 - VSE Corporation (Nasdaq: VSEC), a leading provider of repair services, supply chain management support and consulting services for land, sea and air transportation assets in the public and private sectors, reported the following unaudited consolidated financial results for the third quarter of 2019.

Third Quarter Updates


•	Revenues were $198 million, up 17.4% as compared to the third quarter 2018.


•	Operating income was $17 million, up 9.7% as compared to the third quarter of 2018.


•	Net income was $11 million, up 4.9% as compared to the third quarter of 2018.


•	Earnings per share (diluted) was $0.95, up 3.3% as compared to the third quarter of 2018.


•	Adjusted EBITDA (non-GAAP, as described below) was $24.7 million, up 22.0% as compared to the third quarter of 2018.


•	Debt repayment for the quarter was approximately $10.7 million.


•	In September, Rob Moore joined VSE as President of our Federal Services Group.

John Cuomo, VSE President and Chief Executive Officer, commented, “Our third quarter growth was balanced and diverse, representing strong performance from our legacy Aviation businesses as well as our recent 1^st Choice acquisition. We successfully executed on growth initiatives and the results reflect strong third quarter increases in both our Aviation and Supply Chain Management Groups. During the quarter, our Aviation Group expanded repair capabilities with new offerings and was awarded new distribution partnerships; additionally, Aviation won new repair work on strong platforms, supporting both near-term results and future backlog. Our Supply Chain Management Group continued its customer, product and service diversification strategy with success in the quarter. Both businesses have clearly defined strategies for growth and proven success in test markets.”

Mr. Cuomo continued, “We are pleased to welcome Rob Moore as President of our Federal Services Group. Rob brings broad federal experience and a proven track record in business development and market expansion that will drive a renewed focus on near and long-term growth opportunities in our federal and defense segment. We are focused on the future of this business group, redefining VSE in the federal marketplace, and aggressively building backlog.”

Third Quarter Results (unaudited)



(in thousands, except per share data)
	Three months ended September 30,						Nine months ended September 30,
	2019		2018		% Change		2019		2018		% Change
Revenues	$	198,326	$	168,931	17.4	%	$	557,356	$	516,222	8.0	%
Operating income	$	17,215	$	15,697	9.7	%	$	45,444	$	41,145	10.4	%
Net income	$	10,527	$	10,034	4.9	%	$	27,028	$	25,837	4.6	%
EPS (Diluted)	$	0.95	$	0.92	3.3	%	$	2.45	$	2.37	3.4	%

VSE reported improved operating results for the third quarter of 2019 with increases in revenues and operating income over the third quarter of 2018. As previously reported, our operating income in the third quarter of 2018 included a one-time gain of $1.7 million for the sale of a contract recorded within our Federal Services Group.

Non-GAAP Financial Information

The non-GAAP Financial Information (unaudited) set forth below is not calculated in accordance with U.S. generally accepted accounting principles ("GAAP") under SEC Regulation G. We consider EBITDA a non-GAAP financial measure and an important indicator of performance and useful metric for management and investors to evaluate our business' ongoing operating performance on a consistent basis across reporting periods. EBITDA, however, should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. EBITDA represents net income before interest expense, income taxes, amortization of intangible assets and depreciation and other amortization. Adjusted EBITDA represents EBITDA (as defined above) adjusted for executive succession costs, including our CEO and Federal Services Group President transitions and 1st Choice Aerospace acquisition-related costs.

Non-GAAP Financial Information (unaudited)



(in thousands)		Three Month Results ended September 30,							Nine Month Results ended September 30,
		2019		2018			% Change		2019		2018			% Change
Net Income		$	10,527	$	10,034		4.9	%	$	27,028	$	25,837		4.6	%
	Interest Expense	3,706		2,340			58.4	%	10,262		6,697			53.2	%
	Income Taxes	2,982		3,323			(10.3	)%	8,154		8,611			(5.3	)%
	Amortization of Intangible Assets	5,014		4,005			25.2	%	14,985		12,013			24.7	%
	Depreciation and Other Amortization	1,971		2,256			(12.6	)%	5,637		6,971			(19.1	)%
EBITDA		24,200		21,958			10.2	%	66,066		60,129			9.9	%
	Acquisition Related and Executive Succession Costs	518		—			—	%	2,290		—			—	%
	Gain on sale of IT Contract	—		(1,700		)	—	%	—		(1,700		)	—	%
Adjusted EBITDA		$	24,718	$	20,258		22.0	%	$	68,356	$	58,429		17.0	%

Capital Expenditures

Purchases of property and equipment totaled $7.7 million for the first nine months of 2019 compared to $2.5 million for the same period of 2018. We purchased a new facility for one of our 1st Choice Aerospace locations for $5 million in the second quarter of 2019.

Third Quarter Segment Results

The following is a summary and commentary of revenues and operating income for the three- and nine-month periods ended September 30, 2019 and September 30, 2018:



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Revenues:
Supply Chain Management Group	$	55,369		$	51,834		$	160,878		$	161,961
Aviation Group	59,186			34,000			163,553			102,554
Federal Services Group	83,771			83,097			232,925			251,707
Total revenues	$	198,326		$	168,931		$	557,356		$	516,222

Operating Income:
Supply Chain Management Group	$	7,843		$	7,783		$	22,388		$	23,547
Aviation Group	6,568			2,184			14,820			7,291
Federal Services Group	4,524			6,186			12,968			12,270
Corporate/unallocated expenses	(1,720		)	(456		)	(4,732		)	(1,963		)
Operating income	$	17,215		$	15,697		$	45,444		$	41,145

Supply Chain Management Group

Revenues for our Supply Chain Management Group increased approximately $3.5 million or 6.8% for the third quarter of 2019 and decreased approximately $1.1 million or 0.7% for the first nine months of 2019 compared to the same periods of 2018.

Operating income was substantially unchanged for the third quarter and decreased approximately $1.2 million or 4.9% for the nine months. The decrease in operating income was primarily attributable to an increase in administrative and growth-focused expenses.

Aviation Group

Revenues for our Aviation Group increased approximately $25.2 million, or 74.1% for the third quarter and approximately $61.0 million or 59.5% for the first nine months of 2019, compared to the same periods of 2018. The revenue increase was primarily driven by the addition of revenues from organic growth in both our distribution and repair businesses and results in our 1st Choice Aerospace acquisition from early January 2019.

Operating income increased approximately $4.4 million or 200.7% for the third quarter and approximately $7.5 million or 103.3% for the nine months. The increases in operating income were attributable primarily to our 1st Choice Aerospace acquisition and the increases in revenues from our legacy repair and distribution businesses.

Federal Services Group

Revenues for our Federal Services Group were substantially unchanged for the third quarter of 2019 and decreased approximately $18.8 million or 7.5% for the first nine months of 2019 as compared to the same periods of 2018.

Operating income decreased approximately $1.7 million or 26.9% for the third quarter and increased approximately $698 thousand or 5.7% for the nine months. The decrease in operating income for the quarter was primarily attributable to the gain on sale of a contract in 2018. Revenue declines for the nine months occurred in our lower margin work, resulting in minimal loss of operating income. We have increased operating income for this group through margin improvements on our other work.

Bookings in our Federal Services Group were $190 million for the first nine months of 2019 compared to revenue for this group of $233 million. Funded contract backlog on September 30, 2019 was $252 million, compared to $269 million on June 30, 2019 and $345 million on September 30, 2018.

About VSE

VSE maintains, extends and enhances legacy and next-generation systems and assets for our federal, defense and commercial clients by delivering solutions for fleet vehicle, ship, and aircraft sustainment, supply chain management, platform modernization, mission enhancement, and program management since 1959. VSE also provides Energy, IT, and Consulting services. For additional information regarding VSE services and products, please see the Company's web site at www.vsecorp.com or contact Christine Kaineg, VSE Investor Relations, at (703) 329-3263.

Please refer to the Form 10-Q that will be filed with the Securities and Exchange Commission (SEC) on or about October 31, 2019 for more details on our 2019 third quarter results. Also, refer to VSE’s Annual Report on Form 10-K for the year ended December 31, 2018 for further information and analysis of VSE’s financial condition and results of operations. VSE encourages investors and others to review the detailed reporting and disclosures contained in VSE’s public filings for additional discussion about the status of customer programs and contract awards, risks, revenue sources and funding, dependence on material customers, and management’s discussion of short- and long-term business challenges and opportunities.

Safe Harbor

This news release contains statements that to the extent they are not recitations of historical fact, constitute “forward-looking statements” under federal securities laws. All such statements are intended to be subject to the safe harbor protection provided by applicable securities laws. For discussions identifying some important factors that could cause actual VSE results to differ materially from those anticipated in the forward-looking statements in this news release, see VSE’s public filings with the SEC.

VSE Financial News Contact: Christine Kaineg -- (703) 329-3263.

VSE Corporation and Subsidiaries

Unaudited Consolidated Balance Sheets

(in thousands except share and per share amounts)



	September 30,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	1,095		$	162
Receivables, net	69,793			60,004
Unbilled receivables, net	54,151			41,255
Inventories, net	202,811			166,392
Other current assets	12,652			13,407
Total current assets	340,502			281,220

Property and equipment, net	43,792			49,606
Intangible assets, net	142,907			94,892
Goodwill	259,212			198,622
Operating lease right-of-use assets	24,375			—
Other assets	16,845			14,488
Total assets	$	827,633		$	638,828

Liabilities and Stockholders' equity
Current liabilities:
Current portion of long-term debt	$	10,716		$	9,466
Accounts payable	71,668			57,408
Current portion of earn-out obligation	10,700			—
Accrued expenses and other current liabilities	45,314			37,133
Dividends payable	987			871
Total current liabilities	139,385			104,878

Long-term debt, less current portion	257,815			151,133
Deferred compensation	17,417			17,027
Long-term lease obligations, less current portion	—			18,913
Long-term operating lease liabilities	25,124			—
Earn-out obligation	14,300			—
Deferred tax liabilities	17,732			18,482
Total liabilities	471,773			310,433

Commitments and contingencies

Stockholders' equity:
Common stock, par value $0.05 per share, authorized 15,000,000 shares; issued and outstanding 10,970,123 and 10,886,036, respectively	549			544
Additional paid-in capital	29,411			26,632
Retained earnings	327,191			301,073
Accumulated other comprehensive (loss) income	(1,291		)	146
Total stockholders' equity	355,860			328,395
Total liabilities and stockholders' equity	$	827,633		$	638,828

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Income

(in thousands except share and per share amounts)



	For the three months ended September 30,				For the nine months ended September 30,
	2019		2018		2019		2018
Revenues:
Products	$	96,832	$	85,886	$	279,608	$	264,678
Services	101,494		83,045		277,748		251,544
Total revenues	198,326		168,931		557,356		516,222

Costs and operating expenses:
Products	81,988		72,256		237,661		222,816
Services	93,568		77,810		256,355		239,536
Selling, general and administrative expenses	541		863		2,911		2,412
Amortization of intangible assets	5,014		4,005		14,985		12,013
Total costs and operating expenses	181,111		154,934		511,912		476,777

Gain on sale of contract	—		1,700		—		1,700

Operating income	17,215		15,697		45,444		41,145

Interest expense, net	3,706		2,340		10,262		6,697

Income before income taxes	13,509		13,357		35,182		34,448

Provision for income taxes	2,982		3,323		8,154		8,611

Net income	$	10,527	$	10,034	$	27,028	$	25,837

Basic earnings per share	$	0.96	$	0.92	$	2.47	$	2.38

Basic weighted average shares outstanding	10,970,123		10,881,106		10,953,581		10,874,331

Diluted earnings per share	$	0.95	$	0.92	$	2.45	$	2.37

Diluted weighted average shares outstanding	11,060,081		10,935,112		11,035,951		10,916,989

Dividends declared per share	$	0.09	$	0.08	$	0.26	$	0.23

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

(in thousands)



	For the nine months ended September 30,
	2019			2018
Cash flows from operating activities:
Net income	$	27,028		$	25,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	20,622			18,984
Deferred taxes	(1,230		)	(1,733		)
Stock-based compensation	2,592			2,146
Gain on sale of contract	—			(1,700		)
Changes in operating assets and liabilities, net of impact of acquisitions:
Receivables, net	(2,380		)	738
Unbilled receivables, net	(12,896		)	11,298
Inventories, net	(29,540		)	(36,448		)
Other current assets and noncurrent assets	(481		)	3,518
Accounts payable and deferred compensation	11,793			(14,972		)
Accrued expenses and other current and noncurrent liabilities	1,931			(3,010		)
Long-term lease obligations	—			(1,237		)

Net cash provided by operating activities	17,439			3,421

Cash flows from investing activities:
Purchases of property and equipment	(7,689		)	(2,522		)
Proceeds from the sale of property and equipment	4			51
Proceeds from the sale of contract	—			1,700
Cash paid for acquisitions, net of cash acquired	(112,660		)	—

Net cash used in investing activities	(120,345		)	(771		)

Cash flows from financing activities:
Borrowings on loan agreement	382,501			468,949
Repayments on loan agreement	(274,969		)	(465,521		)
Payment of debt financing costs	—			(1,702		)
Payments on capital lease obligations	—			(1,077		)
Payments of taxes for equity transactions	(955		)	(641		)
Dividends paid	(2,738		)	(2,393		)

Net cash provided by (used in) financing activities	103,839			(2,385		)

Net increase in cash and cash equivalents	933			265
Cash and cash equivalents at beginning of period	162			624
Cash and cash equivalents at end of period	$	1,095		$	889