VSE (NasdaqGS:VSEC) Q4 2025 Earnings call February 26, 2026 08:30 AM ET Company ParticipantsAdam Cohn - CFOJohn Cuomo - President and CEOJonathan Siegmann - Managing Director and Equity ResearchMichael Perlman - VP of Investor Relations and CommunicationsConference Call ParticipantsJeff Van Sinderen - Senior Research AnalystJohn Godyn - Research AnalystKen Herbert - Managing Director and Senior Aerospace and Defense AnalystLouie DiPalma - Research AnalystLouis Raffetto - Senior VP and Equity Research Analys ...

VSE (NasdaqGS:VSEC) Q4 2025 Earnings call February 26, 2026 08:30 AM ET Company ParticipantsAdam Cohn - CFOJohn Cuomo - President and CEOJonathan Siegmann - Managing Director and Equity ResearchMichael Perlman - VP of Investor Relations and CommunicationsConference Call ParticipantsJeff Van Sinderen - Senior Research AnalystJohn Godyn - Research AnalystKen Herbert - Managing Director and Senior Aerospace and Defense AnalystLouie DiPalma - Research AnalystLouis Raffetto - Senior VP and Equity Research Analys ...

VSE (NasdaqGS:VSEC) Q4 2025 Earnings call February 26, 2026 08:30 AM ET Speaker10Good day. Thank you for standing by. Welcome to the VSE Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your quest ...

vsecorp.com Fourth Quarter & Full Year 2025 Results Conference Call February 26, 2026 vsecorp.com Introduction 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-looki ...

Core Viewpoint - VSE's acquisition of Precision Aviation Group (PAG) is seen as transformational, shifting the company's business mix towards higher free cash flow and enhanced repair capabilities [4][7]. Company Strategy - VSE aims to create a differentiated aviation aftermarket platform by integrating distribution, repair services, and intellectual property-driven revenue streams [4][8]. - The company is focused on bridging gaps in the aviation aftermarket by combining new parts, used parts, and repair services into a unified model [3][9]. Financial Projections - VSE expects post-acquisition leverage to be around 2.5x to 3x, with a conservative estimate of $15 million in cost synergies [5][15]. - The company targets adjusted EBITDA margins of over 20% by late 2027 to 2028, with a goal of achieving 30% to 35% EBITDA-to-free-cash-flow conversion and becoming free cash flow positive in 2025 [6][16]. Market Growth and Segmentation - VSE's revenue is expected to grow across four categories: commercial engines, commercial non-engines, business and general aviation (BGA) engines, and BGA non-engines, with growth rates varying from 5% to mid-double digits [10][11]. - The total aviation aftermarket is estimated at approximately $150 billion, with VSE targeting both service competitors and OEMs [11]. Integration and Synergies - VSE plans a phased, low-risk integration approach for PAG, focusing on validating operations early and integrating in smaller segments [19][20]. - The company acknowledges that the $15 million synergy estimate may be conservative, with potential for higher synergies from various initiatives [18][19]. Historical Performance - VSE has achieved approximately 15% organic growth over the past three years, with a compound annual growth rate (CAGR) of around 30% [12]. - The company has improved its margins from around 11.5% six years ago to "well north of 15%" currently [13].

Group 1 - The company is positioned as an aerospace compounder with significant potential for mergers and acquisitions (M&A), particularly highlighted by the recent PAG deal which is expected to substantially increase revenue [1] - The CEO has identified gaps in the aviation aftermarket, emphasizing the need for integrated services that combine new parts, used parts, and repairs, which are often not effectively addressed by competitors [2][3]

VSE Corporation Conference Call Summary Company Overview - **Company**: VSE Corporation (NasdaqGS: VSEC) - **Industry**: Aerospace and Defense, specifically focusing on aftermarket services and MRO (Maintenance, Repair, and Overhaul) operations Key Points and Arguments Recent Acquisition - VSE has recently acquired PAG, which is expected to significantly expand revenue and enhance service capabilities in the aviation aftermarket [3][5] - PAG's unique repair capabilities and bespoke services align well with VSE's existing business model, which focuses on integrating parts and services [5][11] Business Model and Strategy - VSE is described as an "aerospace compounder" with a strong focus on M&A to drive growth [3] - The company has built a platform that supports large OEMs (Original Equipment Manufacturers) and helps them monetize their aftermarket services [4][5] - VSE's business model is 100% aftermarket-focused, contrasting with previous experiences where a significant portion was OEM direct [15] Growth Metrics - VSE has achieved a 30% CAGR over the last three years, with approximately half of that growth being organic [23] - The company anticipates continued organic growth rates of around 15% in the coming years [21][25] Market Segmentation - The commercial engine market is expected to grow in low to mid-double digits, while business and general aviation engines are projected to grow in high single digits to about 10% [18] - VSE's strategy includes targeting both the $50 billion services market and the $100 billion OEM direct market, with a focus on gaining market share from OEMs [20] Margin Expansion - VSE aims to achieve 20% adjusted EBITDA margins by the end of 2027, up from current margins of over 15% [34] - The company has a history of improving margins through strategic acquisitions and operational efficiencies [34][95] Free Cash Flow and Leverage - VSE expects to reach positive free cash flow by 2025, targeting a 30%-35% EBITDA conversion rate [41] - Post-acquisition, leverage is projected to be between 2.5 and 3 times, with plans to de-lever quickly [38][39] Integration Strategy - VSE has a detailed integration playbook for the PAG acquisition, focusing on integrating one business unit at a time to minimize risks [99] - The integration process will begin in early 2027, with synergies expected to exceed initial estimates [95][106] Supply Chain Management - The company acknowledges ongoing supply chain challenges but has improved its management strategies to mitigate risks [63][67] - VSE is utilizing alternative sourcing and repair methods to address supply chain constraints, including PMA (Parts Manufacturer Approval) parts [70][76] Future Outlook - VSE sees significant growth opportunities in the defense sector, which currently represents only 1% of its business but is expected to increase to about 5% post-acquisition [85] - The company has a pipeline of 35-40 potential M&A targets, indicating a robust strategy for future growth [90][92] Intellectual Property Focus - VSE is increasingly focusing on intellectual property as a growth pillar, with plans to enhance revenue streams through OEM solutions and reverse engineering [16][75] Additional Important Insights - The company emphasizes a unique approach to MRO and distribution, aiming to create a competitive moat through integrated services and customer relationships [46][50] - VSE's leadership has extensive experience in the aerospace sector, which is seen as a critical asset in executing its growth strategy [8][10] This summary encapsulates the key insights from the VSE Corporation conference call, highlighting the company's strategic direction, growth metrics, and future opportunities in the aerospace aftermarket industry.

Summary of VSE Corporation FY Conference Call Company Overview - **Company**: VSE Corporation (NasdaqGS: VSEC) - **Industry**: Aerospace and Defense - **Focus**: Transitioned from a defense contractor to a commercial and business aviation aftermarket-focused business over the last five years, with revenue growth from under $150 million to over $1.1 billion in 2025 [3][4] Key Points and Arguments Transformation and Growth - VSE has undergone a significant transformation, focusing on commercial and business aviation, which has led to substantial revenue growth [3] - The company announced a major acquisition of PAG, which is expected to enhance its MRO (Maintenance, Repair, and Overhaul) capabilities and expand margins to over 20% within 24 months [4] Acquisition Strategy - The PAG acquisition was pursued proactively, with extensive pre-diligence conducted over nearly a year [5][6] - The integration of PAG is expected to create synergies, particularly in cost management, with a clear plan for integration over the next 24 months [28][29] Competitive Landscape - VSE competes with large companies like Boeing, Airbus, HEICO, and AerSale in the distribution segment, and various OEMs in the MRO segment [12][13] - The company has a competitive advantage in the business and general aviation sector, particularly in rotorcraft, due to its extensive capabilities [14] Proprietary Solutions and IP - VSE is developing proprietary content and IP-related work, including OEM solutions and DER (Designated Engineering Representative) repairs, to enhance its service offerings [17][18] - The company aims to support OEMs by providing aftermarket solutions that help them monetize their products effectively [15][21] Market Dynamics - The business and general aviation market is seen as attractive due to its steady growth and the ability to create competitive moats through technical capabilities [36][37] - VSE is focused on building long-term relationships with OEMs, with over 80% of new business wins coming directly from them [16] Supply Chain and Labor Challenges - The company faces ongoing supply chain challenges and a labor shortage in the technical servicing sector, which could impact growth rates [46][47] - VSE is actively managing these challenges by finding alternatives and ensuring efficient operations [46] Financial Outlook - VSE aims to maintain a leverage ratio under 3.5x and expects to be free cash flow positive by 2025, with improved cash flow profiles due to the less working capital-intensive nature of MRO compared to distribution [53][54] - The company is open to pursuing additional acquisitions post-PAG integration, particularly smaller MRO shops that can be integrated quickly [57] Additional Important Insights - Customer reactions to the PAG acquisition have been positive, with excitement around the expanded capabilities and investments in assets [30] - VSE's operational efficiency and technical expertise in distribution are highlighted as key competitive advantages [38][39] - The company is focused on creating a cohesive aftermarket service model that integrates new parts, used parts, and repair services [22][23]

Core Viewpoint - VSE Corporation (VSEC) has successfully priced its public offerings, indicating strong market demand and confidence in the company's financial strategy [1] Group 1: Public Offerings - The company is selling 3.99 million common shares at a price of $188 each, aiming to raise approximately $750 million [1] - Additionally, VSEC is offering 8 million of its 5.750% tangible equity units, which will total $400 million [1] - Both offerings were upsized from earlier plans, reflecting an increase in investor interest [1]

Core Viewpoint - VSE Corporation has initiated concurrent public offerings totaling $650 million in common stock and $350 million in tangible equity units to finance the acquisition of Precision Aviation Group, Inc. [1][2] Group 1: Offerings Details - The offerings consist of $650 million of common stock and $350 million of tangible equity units, with an option for underwriters to purchase an additional 15% of the shares [1] - Each Unit includes a prepaid stock purchase contract and a senior amortizing note due February 1, 2029, with quarterly cash installments for interest and principal repayment [3] - The common stock and Units offerings are independent and not contingent on the completion of the PAG Acquisition or any debt financing [4] Group 2: Use of Proceeds - The net proceeds from the offerings will primarily fund the acquisition of Precision Aviation Group, Inc. [2] - If the PAG Acquisition does not occur, the proceeds will be used for general corporate purposes, including potential redemption of the Units [4] Group 3: Company Overview - VSE Corporation is a leading provider of aviation aftermarket distribution and repair services, focusing on enhancing the productivity and longevity of high-value assets [7] - The company supports engine component and airframe accessory part distribution and repair services for commercial and business aviation operators [8]