VSE CORP
For the period ended Mar 31, 2026. Filed May 8, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 8, 2026
VSEC$172.81+4.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-10-27.
0000102752-25-000085
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0000102752-26-000049
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 48 previous paragraphs and 43 current paragraphs.
20 unchanged; 6 reworded; 17 added; 22 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
VSE Corporation, through its subsidiaries (collectively, "VSE" or the "Company"), is a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air transportation assets for commercial and government markets. The Company operates as a single reportable segment aligned with the Company's operating segment.
Current report
PAG Acquisition
Current report
On May 5, 2026, the Company completed its previously announced acquisition of Precision Aviation Group (“PAG”), a portfolio company of GenNx360 Capital Partners. PAG is a leading global provider of aviation aftermarket MRO, distribution, and supply chain services supporting commercial, business and general aviation (“B&GA”), rotorcraft, and defense markets, with a diversified customer base and broad component and engine service capabilities (such acquisition, the “PAG Acquisition”). See Note (5) "Debt" and (14) “Subsequent Events” to the consolidated financial statements for further information.
Current report
Credit Agreement Amendment
Current report
In connection with the completed stock purchase agreement to acquire PAG, the Company entered into an amended agreement with certain financial institutions on May 5, 2026 to provide new senior secured financing, which consists of a $900.0 million term loan B facility and an upsize of the Company's existing revolving facility from $400.0 million to $500.0 million. As part of the amended agreement, the Company paid off its existing Term Loan A Facility in full. See Note (5) “Debt” to the consolidated financial statements for further information.
Current report
Underwritten Public Offerings
Current report
In February 2026, the Company completed concurrent underwritten public offerings of (i) 4,587,766 shares of its common stock at a public offering price of $188.00 per share (the “Common Stock Offering”) and (ii) 9,200,000 5.750% tangible equity units, each with a stated value of $50.00 (the “Units Offering,” and together with the Common Stock Offering, the “Offerings”). The Common Stock Offering closed on February 4, 2026, and the Units Offering closed on February 5, 2026. Net proceeds of approximately $1.3 billion were received by the Company, which were used to finance a portion of the cash consideration for the PAG Acquisition. See Note (13) “Common Stock and Tangible Equity Unit Public Offerings” to the consolidated financial statements for further information.
Current report
During the first quarter of 2026, the Company delivered record results driven by strong execution on new and existing distribution awards, expansion of product offerings and MRO capabilities, increased end-market demand, and contributions from recent acquisitions. Revenue for the three months ended March 31, 2026 was $324.6 million, representing a 27% increase year-over-year.
Current report
Market growth and share gains drove increases in repair and distribution revenue of 28% and 26%, respectively, compared to the prior-year period. Growth was supported by several strategic initiatives, including the execution of newly awarded distribution agreements, expansion of repair capabilities through increased capacity, and continued advancement of the Company’s OEM licensed manufacturing program. These initiatives have further strengthened the Company’s position in the aviation aftermarket, while deeper OEM partnerships have expanded access to new markets and established customer bases.
Current report
Recent acquisitions, including Turbine Weld in May 2025 and Aero 3 in December 2025, are aligned with the Company’s core strategy and have increased exposure to the high-growth, higher-margin commercial MRO and distribution aftermarket.
Current report
Operating Income. Operating income increased for the three months ended March 31, 2026, compared to the same period of the prior year, primarily driven by revenue growth and a favorable shift in sales mix and pricing. The increase was partially offset by increased costs and operating expenses driven by higher revenue and an increase in amortization of intangible assets of $2.9 million for the three months ended March 31, 2026, compared to the same period in the prior year.
Current report
Interest (Income) Expense, net. Net interest income increased for the three months ended March 31, 2026, compared to the same period in the prior year, primarily due to interest income earned on excess cash proceeds from the February 2026 underwritten public offerings and on a note receivable. The increase was further driven by lower borrowings under the Company's debt facilities and a reduction in the average interest rate on borrowings outstanding, which together decreased interest expense.
Current report
The Company's primary external financing sources are the capital markets and its credit agreement, which includes a $300.0 million term loan and a revolving facility with an aggregate maximum borrowing capacity of $400.0 million as of March 31, 2026, both maturing on May 2, 2030. For the three months ended March 31, 2026, outstanding borrowings under the credit
Current report
-21- agreement decreased $1.9 million. As of March 31, 2026, the Company had $294.4 million outstanding under the term loan, $0.7 million in outstanding letters of credit, and $399.3 million in unused commitments.
Current report
In February 2026, the Company completed the Common Stock Offering and the Units Offering that resulted in net proceeds of approximately $1.3 billion, which were used to finance a portion of the cash consideration for the PAG Acquisition. See Note (13) “Common Stock and Tangible Equity Unit Public Offerings” to the consolidated financial statements for further information. As of March 31, 2026, the Company had $72.0 million in outstanding principal obligations related to the tangible equity units.
Current report
Cash used in investing activities increased $27.0 million for the three months ended March 31, 2026, as compared to the same period of the prior year, primarily driven by $16.0 million in purchases of intangible assets, $5.4 million in cash paid for acquisitions, net of cash acquired, a $3.6 million increase in purchases of property and equipment, and $2.7 million in prior year proceeds from the sale of the Federal and Defense segment. Refer to Note (2) "Acquisitions", Note (3) "Discontinued Operations", and Note (10) "Goodwill and Intangible Assets" to the consolidated financial statements for further information.
Current report
Cash provided by financing activities increased $1.2 billion for the three months ended March 31, 2026, as compared to the same period of the prior year, primarily due to $1.3 billion of net proceeds received from the Company's February 2026 Common Stock Offering and Units Offering, partially offset by higher net repayments of the Company's credit facilities of $36.4 million during the current period and higher tax payments for equity transactions of $4.7 million.
Removed paragraphs (22)
Previous report
VSE is a diversified aviation aftermarket products and services company providing maintenance, repair and overhaul ("MRO") services, parts distribution, logistics, supply chain management and consulting services for transportation assets to commercial and government markets.
Previous report
Sale of Fleet Segment
Previous report
In April 2025, the Company completed the previously announced sale of its Fleet segment. See Note (3) "Discontinued Operations" to the consolidated financial statements for further information.
Previous report
Acquisition of Turbine Weld Industries, LLC
Previous report
In May 2025, the Company completed the acquisition of Turbine Weld Industries, LLC ("Turbine Weld"), a specialized MRO provider of complex technical and proprietary engine components for business and general aviation platforms. See Note (2) "Acquisitions" for further information.
Previous report
New Credit Agreement
Previous report
In May 2025, the Company entered into a new credit agreement, which fully replaced its previous credit agreement. See Note (5) "Debt" to the consolidated financial statements for further information
Previous report
During the third quarter of 2025, the Company's strong execution of new and existing distribution awards, the expansion of product line and repair capabilities, and contributions from recent acquisitions generated strong results, with quarterly revenue reaching $282.9 million for the three months ended September 30, 2025, representing a 39% increase year-over-year. Market growth, share gains and contributions from the recent acquisitions of Kellstrom Aerospace and Turbine Weld have resulted in increased repair and distribution revenue of 25% and 49%, respectively, during the three months ended September 30, 2025, compared to the same period for the prior year. The Company's growth has been driven by several strategic initiatives, including executing on newly awarded distribution agreements, the introduction of new products and repair capabilities, including its Original Equipment Manufacturers ("OEM") licensed manufacturing program, and investments to increase capacity and the addition of new capabilities supporting recent acquisitions.
Previous report
The Company believes the acquisitions of TCI in April 2024, Kellstrom Aerospace in December 2024 and Turbine Weld in May 2025 are strongly aligned with VSE's core business and increase its exposure to the high-growth, higher-margin engine aftermarket. Furthermore, the Company believes that the Honeywell FCS acquisition in September 2023 to exclusively manufacture, sell, market, distribute, and repair certain fuel control systems, expands the Company's existing capabilities and provides access to new customers and end markets while strengthening the Company's partnership with Honeywell.
Previous report
Costs and Operating Expenses. Costs and operating expenses increased for the three and nine months ended September 30, 2025, compared to the same periods in the prior year primarily due to increases in revenue. Included in costs and operating expenses is the amortization of intangible assets related to acquisitions, which was $6.7 million for the three months ended September 30, 2025, compared to $4.8 million for the same period in the prior year. Amortization of intangible assets was $19.3 million for the nine months ended September 30, 2025, compared to $12.5 million for the same period in the prior year. Additionally, for the three and nine months ended September 30, 2025, the Company recognized a $23.3 million and a $29.2 million charge, respectively, on the fair value of the earn-out receivable from the Fleet Sale.
Previous report
Operating Income. Operating income decreased for the three months ended September 30, 2025, compared to the same period of the prior year primarily due to the $23.3 million valuation adjustment charge on the earn-out receivable from the Fleet Sale and increased intangible asset amortization, partially offset by the previously mentioned increased revenues. Operating income increased for the nine months ended September 30, 2025, compared to the same period of the prior year primarily due to increased revenues as well as one-time prior year charges, including a lease abandonment charge of $12.2 million and corporate restructuring charges of $4.0 million. The operating income increase was partially offset by the previously mentioned increased amortization of intangible assets, earn-out valuation adjustment charges, and an increase in corporate acquisition and integration costs incurred during the current period.
Previous report
Interest Expense. Interest expense decreased for the three and nine months ended September 30, 2025, as compared to the same periods in the prior year primarily due to a decrease in the Company's debt facility borrowings and a lower average interest rate on borrowings outstanding. The Company also recognized interest income on the note receivable of $1.3 million during the three and nine months ended September 30, 2025.
Previous report
On May 2, 2025, the Company entered into a new credit agreement, which provides for a $300 million term loan facility and a $400 million revolving credit facility, both maturing on May 2, 2030. The new debt agreement provides a lower interest rate, greater flexibility and increased borrowing capacity. The new credit agreement replaced the Company's previous term loan and revolving credit facility, which were scheduled to mature in October 2026.
Previous report
Borrowings under the new credit agreement will accrue interest at either the term SOFR rate plus the SOFR margin or ABR plus the ABR margin. The Company, at its option may select between one, three or six month Term SOFR Rates. The applicable SOFR margin or ABR margin will be determined based on the Company’s Total Net Leverage Ratio.
Previous report
The Company's outstanding borrowings under the credit agreement decreased approximately $72.8 million for the nine months ended September 30, 2025. As of September 30, 2025, the Company had borrowings outstanding under its term loan of $298.1 million, borrowings outstanding under its revolving facility of $61.6 million, outstanding letters of credit of $0.6 million, and $337.8 million of unused commitments under the credit agreement.
Previous report
Cash provided by investing activities increased $164.1 million for the nine months ended September 30, 2025, as compared to the same period of the prior year. The increase was primarily due to cash provided during the current period of $138.8 million related to the Fleet and FDS sales, net of cash divested, offset by cash provided in the prior period of $42.1 million related to the FDS sale. The increase was also driven by higher cash paid for the prior year TCI acquisition, net of cash acquired, of $112.3 million, as compared to cash paid for the current year Turbine Weld acquisition, net of cash acquired, of $49.9 million. See Note (2) "Acquisitions" and Note (3) "Discontinued Operations" to the consolidated financial statements for further information.
Previous report
Cash used in financing activities increased $260.1 million for the nine months ended September 30, 2025, as compared to the same period of the prior year. The increase was primarily due to net repayments of debt during the current period of $72.8 million,
Previous report
-25- as compared to net borrowings of debt during the prior period of $20.0 million. The increase was also driven by the prior period receipt of $161.7 million in proceeds related to the Company's public underwritten offering of its common stock in May 2024.
Previous report
Disclosures About Market Risk
Previous report
Interest Rate Risk
Previous report
The Company's credit agreement provides available borrowing at variable interest rates. The Company's interest expense is impacted by the overall global economic and interest rate environment. Accordingly, future interest rate changes could potentially put the Company at risk for a material adverse impact on future earnings and cash flows. To mitigate this risk, the Company has employed interest rate hedges to fix rates on a portion of its outstanding borrowings for specified periods. For additional information related to the Company's debt and interest rate swaps, see Note (5) and Note (6), respectively, to the Consolidated Financial Statements.
Previous report
The Company believes there have been no material changes in market risks from those discussed in the Company's 2024 Form 10-K.
Reworded paragraphs (6)
Previous wording
Revenues. Revenues increased for the three and nine months ended September 30, 2025, compared to the same periods in the prior year primarily driven by contributions from the acquisitions of Kellstrom Aerospace and Turbine Weld, new distribution contract wins and improved demand for the Company's commercial aerospace and business and general aviation products and services resulting from solid end market activity in global commercial air travel. The revenue increase during the nine months ended September 30, 2025 was also driven by contributions from the acquisition of TCI. Aviation distribution revenue increased $57.7 million, or 49%, and repair revenue increased $21.6 million or 25%, for the three months ended September 30, 2025, compared to the same period in the prior year. Aviation distribution revenue increased $168.4 million, or 49%, and repair revenue increased $83.9 million, or 39%, for the nine months ended September 30, 2025, compared to the same period in the prior year.
Current wording
Revenues. Revenues increased for the three months ended March 31, 2026, compared to the same period in the prior year primarily driven by contributions from the acquisitions of Turbine Weld and Aero 3, recently initiated distribution contract wins and improved demand for the Company's commercial aerospace products and services resulting from strong end market activity in global commercial air travel. Distribution revenue increased $41.8 million, or 26%, and repair revenue increased $26.7 million, or 28%, for the three months ended March 31, 2026, compared to the same period in the prior year.
Previous wording
Provision for Income Taxes. The Company's effective tax rate for continuing operations was 37.5% and 18.7% for the three and nine months ended September 30, 2025 respectively, and 21.1% and 12.8% for the three and nine months ended September 30, 2024 respectively. The Company's tax rate is affected by discrete items that may occur in any given year but may not be consistent from year to year. Permanent differences such as foreign derived intangible income deduction, Section 162(m) limitation, capital gains tax treatment, state income taxes, certain federal and state tax credits and other items caused differences between the Company's statutory U.S. federal income tax rate and its effective tax rate. The higher effective tax rates for the three and nine months ended September 30, 2025 is primarily due to the recognition of an accrual for a potential tax dispute associated with the dissolution of a foreign subsidiary. Additionally, higher pre-tax book income in the nine months ended September 30, 2025 compared to the same period in 2024 reduced the favorable tax rate impact arising from various discrete tax adjustments in 2025.
Current wording
Provision for Income Taxes. The Company's effective tax rate for continuing operations was 14.9% and 15.7% for the three months ended March 31, 2026 and 2025, respectively. The Company's tax rate is affected by discrete items that may occur in any given year but may not be consistent from year to year. Permanent differences such as foreign derived intangible income deduction, Section 162(m) limitation, capital gains tax treatment, state income taxes, certain federal and state tax credits and other items caused differences between the Company's statutory U.S. federal income tax rate and its effective tax rate. The lower effective tax rate for the three months ended March 31, 2026 was primarily driven by a higher impact from the excess stock compensation deduction on the current year's rate.
Previous wording
The Company's primary sources of external financing are the capital markets and its credit agreement. The Company's internal sources of liquidity are primarily from operating activities, specifically from changes in the level of revenues and associated inventory, accounts receivable and accounts payable, and profitability. Significant increases or decreases in revenues and inventory, accounts receivable and accounts payable can affect the Company's liquidity. Inventory and accounts payable levels can be affected by the timing of large opportunistic inventory purchases and by distributor agreement requirements. Accounts receivable and accounts payable levels can be affected by changes in the level of work the Company performs and by the timing of large purchases. In addition to operating cash flows, other significant factors that affect the Company's overall management of liquidity include capital expenditures, divestitures, and investments in the acquisition of businesses.
Current wording
The Company's internal sources of liquidity are primarily from operating activities, specifically from changes in the level of revenues and associated inventory, accounts receivable and accounts payable, and from profitability. Significant increases or decreases in revenues and inventory, accounts receivable and accounts payable can affect liquidity. Inventory and accounts payable levels can be affected by the timing of large opportunistic inventory purchases and by distributor agreement requirements. Accounts receivable and accounts payable levels can be affected by changes in the level of work performed and by the timing of large purchases. In addition to operating cash flows, other significant factors that affect the Company's overall management of liquidity include capital expenditures and investments in the acquisition of businesses.
Previous wording
Cash used in operating activities decreased $75.8 million for the nine months ended September 30, 2025, as compared to the same period of the prior year. The decrease was primarily due to an increase in net income from continuing operations, after adjusting for non-cash expenses, and improved working capital management.
Current wording
Cash used in operating activities increased $15.6 million for the three months ended March 31, 2026, compared to the same period of the prior year, primarily due to a greater use of cash for inventory purchases, partially offset by higher net income from continuing operations, adjusted for non-cash expenses.
Previous wording
The Company paid cash dividends totaling $6.2 million or $0.30 per share during the nine months ending September 30, 2025. Pursuant to the Company's credit agreement, the payment of cash dividends is subject to annual restrictions. The Company has paid cash dividends each year since 1973.
Current wording
The Company paid cash dividends totaling $2.3 million or $0.10 per share during the three months ended March 31, 2026. Pursuant to the terms of the credit agreement, payment of cash dividends are subject to annual restrictions. The Company has paid cash dividends annually since 1973.
Previous wording
The Company's consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP"), which requires the Company to make estimates and assumptions. Certain critical accounting policies affect the more significant accounts, particularly those that involve judgments, estimates and assumptions used in the preparation of the Company's consolidated financial statements, including revenue recognition, inventory valuation, business combinations, goodwill and intangible assets, and income taxes. If any of these estimates, assumptions or judgments prove to be incorrect, the Company's reported results could be materially affected. Actual results may differ significantly from the Company's estimates under different assumptions or conditions. See "Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations" and Note (1) "Nature of Business and Summary of Significant Accounting Policies" in the Company's 2024 Annual Report on Form 10-K for further discussions of the Company's significant accounting policies and estimates. There have been no significant changes in the Company's critical accounting estimates during the nine months ended September 30, 2025, from those disclosed in the Company's 2024 Form 10-K.
Current wording
The Company's consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP"), which requires the Company to make estimates and assumptions. Certain critical accounting policies affect the more significant accounts, particularly those that involve judgments, estimates and assumptions used in the preparation of the Company's consolidated financial statements, including revenue recognition, inventory valuation, business combinations, goodwill and intangible assets, and income taxes. If any of these estimates, assumptions or judgments prove to be incorrect, the Company's reported results could be materially affected. Actual results may differ significantly from the Company's estimates under different assumptions or conditions. See "Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations" and Note (1) "Nature of Business and Summary of Significant Accounting Policies" in the Company's 2025 Annual Report on Form 10-K for further discussions of the Company's significant accounting policies and estimates. There have been no significant changes in the Company's critical accounting estimates during the three months ended March 31, 2026, from those disclosed in the Company's 2025 Form 10-K.