VSE Corporation

VSE Corporation distributes aircraft parts and repairs engines, components and accessories for commercial, business and general aviation customers. It now reports a single aviation aftermarket segment after selling its Fleet business in April 2025 and Federal and Defense operations in 2024. Its common shares trade as VSEC on Nasdaq.

Comparable quarterly results

Adjusted net income and EPS exclude acquisition and restructuring costs, acquired-intangible amortization, stock compensation, specified valuation and financing items and related tax effects. VSE introduced the amortization and stock-compensation exclusions in Q2 2026 and restated the comparative adjusted figures on that basis.

Current reported profit includes an $8.9 million gain from lowering the PAG seller earn-out liability, versus a $23.3 million earn-out valuation expense a year earlier. Adjusted earnings remove these effects.

Organic revenue growth was approximately 17% in Q3, compared with 14% in Q2. Acquisitions contributed about 74 percentage points of the reported Q3 revenue-growth rate. Organic growth excludes revenue from acquired businesses for their first twelve months.

Updated expectations

Management attributes the higher outlook to engine aftermarket demand, execution, acquisition contributions and integration benefits. It expects strong Q4 free cash flow to support debt reduction, without giving a numerical cash-flow target in the current release.

Completed acquisitions

VSE completed its purchase of Precision Aviation Group on May 5, 2026. The latest preliminary consideration totals approximately $2.02 billion: $1.748 billion of cash net of acquired cash, $238.0 million of exchangeable equity and $33.9 million of acquisition-date earn-out fair value.

The seller earn-out can reach $125 million, payable in cash, equity or both if the performance conditions are met. Its September fair value was $25.0 million, separate from $2.4 million of earn-outs assumed from PAG subsidiaries. PAG contributed $173.7 million of Q3 revenue.

NorthStar closed April 1 for $10.1 million net of acquired cash, adding engine-related repair and logistics. Atech Turbine Components closed August 31 for $64.1 million net of acquired cash, adding specialized turbine-component repairs. These purchase allocations remain preliminary.

On October 5, VSE completed its cash-funded purchase of Test Logic, expanding engine and transmission testing capabilities. The company describes the acquisition as immaterial and has not disclosed its price.

The December 23, 2025 acquisition of Aero 3 also contributes to year-over-year growth. Its latest preliminary net consideration is $346.1 million; the purchase was funded from an October 2025 equity offering.

Share financing and the per-share calculation

February's financing included approximately 4.59 million common shares and 9.2 million tangible equity units. Each unit combines a prepaid stock purchase contract with an amortizing debt instrument. The share contracts and PAG's exchangeable equity are included in the weighted share calculations.

At last year's diluted share count, current Q3 adjusted profit would equal approximately $3.07 a share, compared with the actual $2.01. This keeps current profit constant to isolate the larger denominator.

Cash generation and debt

Q3 operating cash flow was $56.0 million, with $9.4 million of property and equipment spending, producing $46.6 million of free cash flow. Nine-month operating cash flow was $21.3 million and capital spending was $24.7 million, leaving negative $3.4 million of free cash flow.

VSE's free-cash-flow calculation includes discontinued operations in the comparative periods and deducts property and equipment spending. Separate intangible purchases and acquisition payments are investing uses outside that definition.

Inventory used $148.4 million of cash over the first nine months, after separating acquisition effects. The inventory balance reached $893.0 million, compared with $553.8 million at year-end; that balance change also includes acquired inventory.

September debt principal totaled $978.8 million: $897.8 million of term loans, $20.0 million on the revolver and $61.0 million of amortizing notes. Total carrying debt after issuance costs was $959.9 million. Cash was $65.8 million, and the $500 million revolver had $479.2 million available after drawings and letters of credit.

The term loan matures May 5, 2033, the revolver May 2, 2030 and the amortizing notes February 1, 2029. The company was in compliance with its credit covenants at September 30.

Company-defined net debt deducts financing costs as well as cash from principal. It increased from $871.6 million in June to $894.2 million in September. The adjusted leverage ratio improved from 2.4 to 2.3 times because it also uses earnings from acquired businesses before ownership. The ratio based on actual trailing adjusted EBITDA was 3.0 times in September.

The regular quarterly common dividend remains $0.10 a share. The larger share base, inventory conversion and absolute debt balance remain useful measures of how the acquisition program is translating into shareholder results.