VSEC 10-K & 10-Q changes, risk factors and insider trading
Vse Corp. (also VSECU) · Nasdaq · Services-Engineering Services · CIK 102752 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Acquisitions, which are a part of the Company's business strategy, present certain risks.”
New heading “U.S. and foreign trade policies, including the assessment of tariffs and other impositions on imported goods, may have a material adverse impact on the Company’s business.”
New heading “The Company has material customer concentration within its business operations with a single customer group accounting for a material portion of its revenues.”
New heading “Intellectual property risks could affect the Company’s commercial relationships.”
New heading “Risks Related to the PAG Acquisition”
New heading “The PAG Acquisition may not occur at all or may not occur in the expected time frame, which may negatively affect the trading price of the Company's common stock and the Company's future business and financial results.”
New heading “The Company may not realize the strategic benefits and cost synergies that are anticipated from the planned PAG Acquisition.”
New heading “PAG may have liabilities that are not known to the Company.”
New heading “The Company has made certain assumptions relating to the PAG Acquisition, which may prove to be materially inaccurate.”
New heading “The Company has incurred and will continue to incur significant expenses in connection with the PAG Acquisition, regardless of whether the PAG Acquisition is completed.”
New heading “If the Company's due diligence investigation of PAG was inadequate or if risks related to PAG’s business materialize, it could have a material adverse effect on the Company's future business and financial results and may negatively affect the trading price of the Company's common stock.”
Removed heading “Acquisitions, which are a part of our business strategy, present certain risks.”
Removed heading “Certain customers comprise a material portion of our revenue. Our work on large government fleets present a risk to revenue growth and sustainability and profit margins.”
Removed heading “We face various risks related to health epidemics, pandemics and similar outbreaks, which could adversely affect our business.”
Largest changes
Revenues for work performedsee in full comparisoninin, or products deliveredtoto, foreign countries are subject to economic conditions inthesethose countries and to political risks posed by ongoing conditions or foreign conflicts, including theongoingcontinuing Russia-Ukraineconflictand Middle East conflicts,andpotential terroristactivity. Significant domesticactivity, andpoliticalevolvingunrestglobal trade tensions, including those involving China. The Company is also subject to U.S. and foreign export control laws and regulations, trade sanctions, and other compliance requirements, which may restrict the markets inclientwhichcountriesitcanmayconstrainoperateouror the parties with whom it may transact. Changes in export control regulations, sanctions regimes, licensing requirements, or their interpretation or enforcement could delay or prevent the Company from delivering or receiving products or services, result in fines or penalties, or otherwise adversely affect the Company’s business, financial condition, and results of operations. Changes in government policies or regimes in these regions may affect the Company's ability tomaintaincontinueconsistentongoingstaffing levels, resulting in a fluctuating level of services performed by our employees. We cannot predict when these conditions will occurwork ortheinitiateeffectnewitprojects.willPoliticalhaveandon our revenues. Regime changes in these countries can result in government restrictions upon the continuation of ongoing work. Economiceconomic conditions in both the United States andforeignabroad,countries,asandwell as global prices and availability of oil and othercommoditiescommodities, couldpotentiallyalsohave an adverse effect on theinfluence demand forsomecertain ofourtheservices,Company'sincludingproductsour aviationand services.
“The Company has material customer concentration within its business operations. A group of affiliated customers under common ownership (the “Customer Group”) collectively accounted for approximately 20% of the Company’s revenue for the year ended December 31, 2025. The Customer Group consists of multiple operating entities that are commonly controlled and managed as part of a single parent organization. …”see in full comparison
“If the Company's due diligence investigation of PAG was inadequate or if risks related to PAG’s business materialize, it could have a material adverse effect on the Company's future business and financial results and may negatively affect the trading price of the Company's common stock.”see in full comparison
“U.S. and foreign trade policies, including the assessment of tariffs and other impositions on imported goods, may have a material adverse impact on the Company’s business.”see in full comparison
“The Company has material customer concentration within its business operations with a single customer group accounting for a material portion of its revenues.”see in full comparison
“We face various risks related to health epidemics, pandemics and similar outbreaks, which could adversely affect our business.”see in full comparison
Full comparison: every changed paragraph (99)
OurThe Company's future results may differ materially from past results and from those projected in the forward-looking statements contained in this Form 10-K due to various uncertainties and risks, including those risks set forth below, nonrecurring events and other important factors disclosed previously and from time to time in ourthe Company's other reports filed with the SEC.
OurThe Company's success is highly dependent on the performance of the aviation aftermarket, which could be impacted by lower demand for business aviation and commercial air travel or airline fleet changes causing lower demand for ourthe Company's goods and services.
General global industry and economic conditions that affect the aviation industry may also affect ourthe Company's business. WeThe areCompany is subject to macroeconomic cycles, and when recessions occur, wethe Company may experience reduced orders, payment delays, supply chain disruptions or other factors as a result of the economic challenges faced by our customers, prospective customers and suppliers. Further, the aviation industry has historically, from time to time, been subject to downward cycles which reduce the overall demand for jet engine and aircraft component replacement parts and repair and overhaul services, and such downward cycles result in lower sales and greater credit risk. Demand for commercial air travel can be influenced by airline industry profitability, world trade policies, government-to-government relations, terrorism, political unrest, war (including the ongoing Russia-Ukraine conflict and Middle East conflicts), disease outbreaks, environmental constraints imposed upon aircraft operations, technological changes, price, and other competitive factors. These global industry and economic conditions may have a material adverse effect on ourthe Company's business, financial condition, and results of operations.
Acquisitions, which are a part of the Company's business strategy, present certain risks.
A key element of the Company's business strategy is growth through the acquisition of additional companies. The Company is focused on acquiring complementary assets that add new products, new customers, and new capabilities or new geographic and/or operational competitive advantages in both new and existing markets within the Company's core competencies. The Company's acquisition strategy is affected by a number of challenges and risks, including the availability of suitable acquisition candidates, availability of capital, diversion of management’s time and attention from the Company's core business, effective integration of the operations and personnel of acquired companies, potential write downs of acquired intangible assets, potential loss of key employees of acquired companies, use of a significant portion of available cash, compliance with debt covenants and consummation of acquisitions on terms satisfactory to the Company.
The Company may not be able to successfully execute its acquisition strategy, and the failure to do so could have a material adverse effect on the Company's business, financial condition, and results of operations.
Global economic conditions and political factors could adversely affect ourthe Company's revenues.
Revenues for work performed inin, or products delivered toto, foreign countries are subject to economic conditions in thesethose countries and to political risks posed by ongoing conditions or foreign conflicts, including the ongoingcontinuing Russia-Ukraine conflict and Middle East conflicts, and potential terrorist activity. Significant domesticactivity, and politicalevolving unrestglobal trade tensions, including those involving China. The Company is also subject to U.S. and foreign export control laws and regulations, trade sanctions, and other compliance requirements, which may restrict the markets in clientwhich countriesit canmay constrainoperate ouror the parties with whom it may transact. Changes in export control regulations, sanctions regimes, licensing requirements, or their interpretation or enforcement could delay or prevent the Company from delivering or receiving products or services, result in fines or penalties, or otherwise adversely affect the Company’s business, financial condition, and results of operations. Changes in government policies or regimes in these regions may affect the Company's ability to maintaincontinue consistentongoing staffing levels, resulting in a fluctuating level of services performed by our employees. We cannot predict when these conditions will occurwork or theinitiate effectnew itprojects. willPolitical haveand on our revenues. Regime changes in these countries can result in government restrictions upon the continuation of ongoing work. Economiceconomic conditions in both the United States and foreignabroad, countries,as andwell as global prices and availability of oil and other commoditiescommodities, could potentiallyalso have an adverse effect on theinfluence demand for somecertain of ourthe services,Company's includingproducts our aviationand services.
U.S. and foreign trade policies, including the assessment of tariffs and other impositions on imported goods, may have a material adverse impact on the Company’s business.
The U.S. and certain foreign countries have recently announced new or increased tariffs on imported goods, and additional tariffs or increases in tariffs could be assessed in the future. If any such tariffs were to increase the Company’s costs of obtaining materials or products from suppliers or increase the costs of selling the Company’s products to its customers, and the Company were unable to mitigate the impacts of any such increased costs, it could have a material adverse impact on its business and results of operations.
Supply chain delays, disruptions, and potential geopolitical uncertainty could adversely affect ourthe Company's business operations and expenses.
Due to current economic and geopolitical uncertainty and supply chain disruptions, ourthe Company's business could be adversely impacted by delays or the inability to source products and services for our customers. If ourthe Company's suppliers experience increased disruptions to their operations as a result of these dynamics, they may be unable to fill ourthe Company's supply needs in a timely, compliant and cost-effective manner. WeThe haveCompany has incurred and may in the future incur additional costs and delays in our business,delays, including higher prices, schedule delays or the costs associated with identifying alternative suppliers. In instances where wethe Company may not be able to mitigate these consequences, ourthe Company's ability to perform on our contracts may be impacted, which could result in reduced revenues and profits.
Competition from existing and new competitors may harm ourthe Company's business.
The aviation and vehicle parts industriesindustry areis highly fragmented, havehas several highly visible leading companies, and areis characterized by intense competition. Some of ourthe Company's original equipment manufacturer ("OEM") competitors have greater name recognition than VSE or our subsidiaries,VSE, as well as complementary lines of business and financial, marketing and other resources that wethe doCompany does not have. In addition, OEMs, aircraft maintenance providers, leasing companies and U.S. FAA certificated repair facilities may attempt to bundle their services and product offerings in the supply industry, thereby significantly increasing industry competition.
WeThe haveCompany has made investments in inventory, facilities, and lease commitments to support specific business programs, work requirements, and service offerings. A slowing or disruption of these business programs, work requirements, or service offerings that results in operating below intended levels could cause usthe Company to suffer financial losses.
OurThe Company's business could be adversely affected by incidents that could cause an interruption in our operations or impose a significant financial liability on us.liability.
Disruption of ourthe Company's operations due to internal or external system or service failures, accidents or incidents involving employees or third parties working in high-risk locations, or other crises could adversely affect ourthe Company's financial performance and condition. A fire, flood, earthquake, other natural disaster, or other crisis at or affecting physical facilities, procurement systems, or contractual deliveries could potentially interrupt the revenues from ourthe Company's operations.
The Company has material customer concentration within its business operations with a single customer group accounting for a material portion of its revenues.
The Company has material customer concentration within its business operations. A group of affiliated customers under common ownership (the “Customer Group”) collectively accounted for approximately 20% of the Company’s revenue for the year ended December 31, 2025. The Customer Group consists of multiple operating entities that are commonly controlled and managed as part of a single parent organization. If the Customer Group were to (i) experience a prolonged period of reduced demand, depressed business activity, liquidity constraints, or financial distress, (ii) breach or seek relief from its contractual obligations under its agreements with the Company, or (iii) otherwise terminate or materially reduce its business relationships with the Company, and the Company were unable to timely replace the lost business on comparable terms, the Company’s financial position, results of operations, and cash flows could be materially adversely affected.
The nature of ourthe Company's operations and work performed by our employees presents certain challenges related to workforce management.
OurThe Company's financial performance is heavily dependent on the abilities of our operating and administrative staff with respect to technical skills, operating performance, pricing, cost management, safety, and administrative and compliance efforts. A wide diversity of contract types, nature of work, work locations, and legal and regulatory complexities challenge ourthe Company's administrative staff and skill sets. WeThe Company also facefaces challenges associated with our quality of workforce, quality of work, safety, and labor relations compliance. Our currentCurrent and projected work in foreign countries exposes usthe Company to challenges associated with export and ethics compliance, local laws and customs, workforce issues, extended supply chain, political unrest, and war zone threats. Failure to attract or retain an adequately skilled workforce, lack of knowledge or training in critical functions, or inadequate staffing levels, can result in lost work, reduced profit margins, losses from cost overruns, performance deficiencies, workplace accidents, and regulatory noncompliance.
Acquisitions, which are a part of our business strategy, present certain risks.
A key element of our business strategy is growth through the acquisition of additional companies. We are focused on acquiring complementary assets that add new products, new customers, and new capabilities or new geographic and/or operational competitive advantages in both new and existing markets within our core competencies. Our acquisition strategy is affected by, and poses a number of challenges and risks, including the availability of suitable acquisition candidates, availability of capital, diversion of management’s attention, effective integration of the operations and personnel of acquired companies, potential write downs of acquired intangible assets, potential loss of key employees of acquired companies, use of a significant portion of our available cash, compliance with debt covenants and consummation of acquisitions on satisfactory terms.
We may not be able to successfully execute our acquisition strategy, and the failure to do so could have a material adverse effect on our business, financial condition, and results of operations.
WeThe areCompany is dependent on access to and the performance of third-party package delivery companies.
OurThe Company's ability to provide efficient distribution of the products weit sellsells to our customers is an integral component of ourthe Company's overall business strategy, both domestic and international. WeThe doCompany predominantly does not maintain ourits own delivery networks, and instead relyrelies on third‑party package delivery companies. WeThe Company cannot guarantee that weit will always be able to ensure access to preferred shipping and delivery companies or that these companies will continue to meet ourthe Company's needs or provide reasonable pricing terms. In addition, if the package delivery companies on which wethe relyCompany relies experience delays resulting from inclement weather or other disruptions, wethe Company may be unable to maintain appropriate stock of inventory or deliver products to our customers on a timely basis, which may adversely affect ourthe Company's results of operations and financial condition.
Prolonged periods of inflation where wethe doCompany does not have adequate inflation protections in our customer contracts may adversely affect usthe Company by increasing costs beyond what weit can recover through price increases.
Inflation can adversely affect usthe Company by increasing the costs of labor, material and other costs. In addition, inflation is often accompanied by higher interest rates, which increases the cost associated with ourthe Company's variable rate outstanding debt obligations and could increase rates for any new debt obligations that we incur.obligations. In an inflationary environment, depending on economic conditions, wethe Company may be unable to raise prices enough to keep up with the rate of inflation, which would reduce our profit margins. WeThe haveCompany has experienced, and continuecontinues to experience, increases in the prices of labor, materials, and other costs of providing service. Continued inflationary pressures could impact ourthe Company's profitability.
Changes in future business conditions could cause business investments, recorded goodwill, and/or purchased intangible assets to become impaired, resulting in substantial losses and write-downs that would reduce ourthe Company's operating income.
As part of ourits business strategy, wethe makeCompany makes acquisitions and investments following careful analysis and due diligence processes designed to achieve a desired return or strategic objective. Business acquisitions involve estimates, assumptions, and judgments to determine acquisition prices, which are allocated among acquired assets, including goodwill, based upon fair market values. Notwithstanding ourthe Company's analyses, due diligence processes, and business integration efforts, actual operating results of acquired businesses may vary significantly from initial estimates. In such events, wethe Company may be required to write down ourthe carrying value of the related goodwill and/or purchased intangible assets. In addition, declines in the trading price of ourthe Company's common stock, par value $0.05 per share (the "common stock"), or the market as a whole could result in goodwill and/or purchased intangible asset impairment charges associated with our existing businesses.charges.
As of December 31, 2024,2025, goodwill and intangible assets, net of amortization, accounted for 28%32% and 11%,15%, respectively, of ourthe Company's total assets. WeThe testCompany ourevaluates goodwill for impairment at least annually inon the first day of the fourth quarterquarter, or whenwhenever evidenceevents ofor potentialother impairmentchanges exists.in Wecircumstances testindicate that the carrying value may not be fully recoverable. The Company assesses acquired intangible assets for impairment whenever events or changes in circumstances indicate theirthat the carrying value may not be impaired.recoverable. The impairment testsassessments are based on several factors requiring judgments.judgment. As a general matter, a significant decrease in expected cash flows or changes in market conditions may indicate potential impairment of recorded goodwill or intangible assets.
Adverse equity market conditions that result in a decline in market multiples and the trading price of ourthe Company's common stock, or other events, such as reductions in future contract awards or significant adverse changes in ourthe Company's operating margins or the operating results of acquired businesses that vary significantly from projected results on which purchase prices are based, could result in an impairment of goodwill or other intangible assets. Any such impairments that result in usthe Company recording goodwill or intangible asset impairment charges could have a material adverse effect on ourthe Company's financial position or results of operations.
WeThe Company may periodically divest or seek to divest certain businesses that are no longer a part of ourthe Company's ongoing strategic plan. A decision to divest or discontinue assets, businesses, or product lines may result in asset impairments, including those related to goodwill and other intangible assets, and losses upon disposition, both of which could have adverse effects on ourthe Company's results of operations and financial condition. In addition, wethe Company may encounter difficulty in finding buyers or executing alternative exit strategies at acceptable prices and terms in a timely manner and prospective buyers may have difficulty obtaining financing. These divestitures may require a significant investment of time and resources and may disrupt ourthe business, distract management from other responsibilities, and may involve the retention of certain current or future liabilities in order to induce a buyer to complete a divestiture or may otherwise result in losses on disposal or continued financial involvement in the divested business, including through indemnification or other arrangements, for a period of time following the transaction, which could adversely affect ourthe Company's financial results. WeThe Company may not be successful in managing these or any other significant risks that weit may encounter in divesting or discontinuing a business or product line, which could have a material adverse effect on ourthe business.
Intellectual property risks could affect the Company’s commercial relationships.
The Company utilizes intellectual property and proprietary information owned by third parties, including suppliers, customers and OEMs, and must comply with applicable contractual, legal and regulatory requirements governing the use and protection of such information. Any failure to appropriately use or safeguard third-party intellectual property, or any dispute regarding such use, could result in increased costs, restrictions, or loss of commercial relationships.
Risks Related to the PAG Acquisition
The PAG Acquisition may not occur at all or may not occur in the expected time frame, which may negatively affect the trading price of the Company's common stock and the Company's future business and financial results.
No assurance can be provided that the PAG Acquisition will be completed in the manner and within the time frame currently anticipated, or at all. Completion of the PAG Acquisition is subject to the satisfaction or waiver of a number of conditions beyond the Company's control that may prevent, delay or otherwise materially adversely affect its completion. If the PAG Acquisition is not completed or if there are significant delays in completing the PAG Acquisition, it could negatively affect the trading price of the Company's common stock and the Company's future business and financial results.
The Company may not realize the strategic benefits and cost synergies that are anticipated from the planned PAG Acquisition.
The benefits that are expected to result from the PAG Acquisition will depend, in part, on the Company's ability to consummate the PAG Acquisition within the anticipated time period, or at all, and to integrate and realize the anticipated cost synergies of the PAG Acquisition. There is a significant degree of difficulty and management distraction inherent in the process of integrating an acquisition. Some members of the Company's management may be required to devote considerable time to this integration process, which will decrease the time they will have to manage the Company, service existing customers, attract new customers and develop new products or strategies. The risks and uncertainties relating to integrating PAG include, among other things:
•the challenge of integrating complex organizations, systems, operating procedures, internal controls over financial reporting, compliance programs, technology, networks and other assets of PAG, including addressing potential differences between PAG’s private-company control environment and public company Sarbanes-Oxley requirements;
•the inability to successfully integrate the Company's respective businesses in a manner that permits the Company to achieve the cost savings and other anticipated benefits from the PAG Acquisition;
•the inability to minimize the diversion of management attention from ongoing business concerns during the process of integrating PAG into the Company's businesses;
•the inability to resolve potential conflicts that may arise relating to customer, supplier and other important relationships of the Company's business and PAG;
•difficulties in retaining key management and other key employees; and
•the challenge of managing the expanded operations of a significantly larger and more complex company and coordinating geographically separate organizations.
If management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, the Company's business, financial condition and results of operations could suffer. The Company also cannot guarantee that the benefits and cost synergies that it currently expects to realize as a result of the PAG Acquisition will be achieved within the anticipated time frames or at all.
Following the PAG Acquisition, the Company expects to realize certain synergies and cost savings. Any synergies and cost savings that the Company realizes may differ materially from the Company's estimates. These are the Company's current estimates and assumptions, but they involve risks, uncertainties, assumptions and other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such estimates. This information is speculative in nature, and some or all of the assumptions underlying the estimated synergies and cost savings may not materialize or may vary from actual results. The Company's ability to realize these anticipated synergies and savings is subject to significant uncertainties and you should not place undue reliance on the adjustments in evaluating the Company's anticipated results.
The Company will incur substantial expenses to consummate the PAG Acquisition but may not realize the anticipated benefits. In addition, even if the Company is able to integrate PAG successfully, the anticipated benefits of the pending PAG Acquisition may not be realized fully, or at all, or may take longer to realize than expected. Given the size and significance of the PAG Acquisition, the Company may encounter difficulties in the integration of the operations of PAG and may fail to realize the full benefits and synergies of the PAG Acquisition, which could adversely impact the Company's business, results of operations and financial condition.
PAG may have liabilities that are not known to the Company.
PAG may have liabilities that the Company failed, or was unable, to discover in the course of performing due diligence investigations of PAG. The Company cannot assure you that the indemnification available to the Company under the Purchase Agreement in respect of the PAG Acquisition will be sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business of PAG or property that the Company will assume upon consummation of the PAG Acquisition. The Company may learn additional information about PAG that materially adversely affects the Company, such as unknown or contingent liabilities and liabilities related to compliance with applicable laws. Any such liabilities, individually or in the aggregate, could have a material adverse effect on the Company's business, financial condition and results of operations.
The Company has made certain assumptions relating to the PAG Acquisition, which may prove to be materially inaccurate.
The Company has made certain assumptions relating to the PAG Acquisition, which assumptions involve significant judgment and may not reflect the full range of uncertainties and unpredictable outcomes inherent in the PAG Acquisition, and may be materially inaccurate. These assumptions relate to numerous matters, including:
•the Company's ability to realize the expected benefits of the PAG Acquisition, including cost and other synergies it expects to realize;
•the Company's expectations of future revenue and earnings of the PAG business and the Company's expectations with respect to the margin profile of the Company's business following the PAG Acquisition;
•the Company's ability to retain key employees from PAG, and maintain, develop and deepen relationships with these employees;
•the Company's ability to retain and maintain relationships with key brokers, suppliers and customers associated with PAG;
•the Company's ability to issue equity and debt or any other financing, or to generate and maintain needed cash from operations, to complete the PAG Acquisition on acceptable terms or at all and the impact of such financing on the Company's operating results or financial condition;
•projections of future expenses and expense allocation relating to the PAG Acquisition and PAG;
•unknown or contingent liabilities associated with the PAG Acquisition and PAG;
Management's Discussion & Analysis (MD&A)
New heading “New Credit Agreement”
New heading “PAG Acquisition”
New heading “PAG Financing Transactions”
Removed heading “Sale of Federal and Defense Segment”
Removed heading “Aviation Segment”
Removed heading “Segment Operating Results”
Removed heading “Aviation Segment Results”
Removed heading “Fleet Segment Results”
Largest changes
Goodwill represents the excess of fair value of consideration paid for an acquisition over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.see in full comparisonWeTherecognizeCompany recognizes purchased intangible assets in connection withourbusiness acquisitions at fair value on the acquisition date.WeTheevaluateCompany evaluates goodwillfor our reporting unitsfor impairment at least annually on the first day of the fourth quarter, or whenever events or other changes in circumstances indicate that the carrying value may not be fully recoverable. When testing goodwill for impairment,wethe Company may initially qualitatively assess whether it is necessary to perform a quantitative goodwill impairment test, which is only required ifwetheconcludeCompany concludes that it is more likely than not that a reporting unit's fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount,wethe Company considered the totality of all relevant events and circumstances that affect the fair value or carrying amount of a reporting unit in accordance with ASC350-20-35-3C.Topic 350, Intangibles - Goodwill and Other. In the eventwethedeemCompany deems a quantitative impairment test necessary,wetheestimateCompany estimates andcomparecompares the reporting unit fair valueof each reporting unitto its respective carrying value including goodwill.WeTheestimateCompany estimates the reporting unit fair valueof our reporting unitsusing a weighting of fair values derived from the income approach and market approach. The analysis relies on significantjudgementsjudgments and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, and financial measures derived from observable market data of comparable public companies.Based on the annual goodwill impairment test performed during the fourth quarter of 2024, our qualitative impairment test determined that it was more likely than not that each reporting unit's fair value exceeded its carrying value.
“Operating Income. Operating income decreased $6.6 million, or 7%, in 2024 compared to 2023 primarily attributable to an increase in corporate costs, including net lease abandonment and termination charges of $12.2 million, corporate restructuring charges of $4.2 million, and acquisition-related expenses incurred in connection with current year acquisitions, and a decrease in operating income for our Fleet segment of $14.2 million. These operating income decreases were partially offset by an increase of $30.2 million for our Aviation segment. …”see in full comparison
“Operating Income. Operating income increased primarily attributable to revenue growth and the non-recurrence of certain one-time charges incurred in the prior year, including net lease abandonment charges of $12.2 million and corporate restructuring charges of $4.2 million. The operating income increase was partially offset by higher intangible asset amortization expense, a charge related to the fair value remeasurement of the earn-out receivable, and increased corporate acquisition and integration costs incurred during the current period.”see in full comparison
Full comparison: every changed paragraph (76)
The following discussion and analysis should be read in conjunction with ourthe Company's consolidated statements and related notes included in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. The following generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found under Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in ourthe Company's Annual Report on Form 10-K for fiscal year ended December 31, 2023,2024, filed with the SEC on March 8,3, 2024.2025.
VSE Corporation, through its subsidiaries (collectively, "VSE,VSE" or the "Company," "we," "us," or "ourCompany"), is a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air and land transportation assets for commercial and government markets. OurThe operationsCompany areoperates conductedas withina twosingle reportable segmentssegment aligned with ourthe Company's operating segmentssegment: Aviation and Fleet.Aviation.
Sale of Federal and Defense Segment
In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets ("FDS Sale"). We have reported the results of operations for the Federal and Defense segment as discontinued operations for all periods presented. See Note (3) "Discontinued Operations" to our Consolidated Financial Statements for further information.
In FebruaryApril 2025, wethe enteredCompany into an agreement to sellcompleted the sale of its Fleet segment. See Note (193) "SubsequentDiscontinued EventOperations" to the consolidated financial statements for further information.
New Credit Agreement
In May 2025, the Company entered into a new credit agreement, which fully replaced its previous credit agreement. See Note (7) "Debt" to the consolidated financial statements for further information.
In AprilMay 2024,2025, wethe Company completed the acquisition of Turbine Controls,Weld Inc.Industries, LLC ("TCITurbine Weld"), a leadingspecialized MRO provider of aftermarketcomplex MROtechnical supportand servicesproprietary engine components for complex engine components, as well as enginebusiness and airframegeneral accessories,aviation across commercial and military applications.platforms.
In December 2025, the Company entered into an Asset Purchase and License Agreement with an original equipment manufacturer to exclusively manufacture, sell, market, and distribute certain fuel pumps for use on the Pratt & Whitney PT6 engine series.
In December 2024,2025, wethe Company completed the acquisition of KellstromGenNx/AeroRepair AerospaceIntermediateCo Group,Inc., the parent company of Aero 3, Inc. ("KellstromAero Aerospace3"), a diversified global distributor andMRO service provider and distributor supporting the commercialwheel aerospaceand enginebrake aftermarket.
PAG Acquisition
In January 2026, the Company entered into a stock purchase agreement (the “Purchase Agreement”) to acquire 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 B&GA, rotorcraft, and defense markets (such acquisition, the “PAG Acquisition”). See Note (19) “Subsequent Events” to the consolidated financial statements for further information.
PAG Financing Transactions
In connection with and pursuant to the Purchase Agreement, concurrently with the signing of the Purchase Agreement, the Company entered into a debt commitment letter (the “Debt Commitment Letter”) with one or more financial institutions (collectively, the “Commitment Parties”). Subject to the terms of the Debt Commitment Letter, the Commitment Parties have committed to provide new senior secured financing, which currently consists of, (i) a term loan B facility (the “New Term Loan B Facility”), (ii) an upsize of the Company's existing revolving facility (as amended, the “New Revolving Facility”), and (iii) an upsize of the Company's $300.0 million senior secured term loan A facility from $296.25 million (as amended, the “New Term Loan A Facility”. Following the satisfaction of certain conditions under the Debt Commitment Letter, certain commitments within the Debt Commitment Letter to provide a bridge loan facility and a backstop facility were reduced to $0, and the New Term Loan A Facility and the New Term Loan B Facility commitments may also be reduced. See Note (19) “Subsequent Events” to the Consolidated Financial Statements for further information.
In May 2024, we initiated a public offering of the Company's common stock relating to the issuance and sale of 2,429,577 shares at a public offering price of $71.00 per share. The offering closed in two transactions, and net proceeds of $162.0 million were received by the Company, which were used to repay outstanding borrowings under our revolving credit facility, including amounts borrowed to pay the purchase price of the TCI acquisition and for general corporate purposes.
In October 2024,2025, wethe Company initiated a public offering of the Company'sits common stock relating to the issuance and sale of 1,982,7572,705,882 shares at a public offering price of $87.00$170.00 per share. The offering closed on October 17,29, 2024,2025, and net proceeds of $163.8$441.6 million were received by the Company, which were used to finance a portion of the cash consideration for the KellstromAero Aerospace3 acquisition and repaygeneral corporate purposes, including repaying outstanding borrowings under ourthe Company's revolving facility. See Note (15) "Capital Stock" to the consolidated financial statements for further information.
In February 2026, the Company initiated concurrent public offerings of (1) 4,587,766 shares of its common stock at a public offering price of $188.00 per share (the “Common Stock Offering”) and (2) 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. The net proceeds of approximately $1.3 billion were received by the Company, which are expected to be used to finance a portion of the cash consideration for the PAG Acquisition. If for any reason the PAG Acquisition is not consummated, the Company intends to use the net proceeds from the Offerings, after payment of any cash redemption amount and repurchase price, for general corporate purposes, which may include repayment of outstanding indebtedness. See Note (19) “Subsequent Events” to the consolidated financial statements for further information.
See Note (15) "Capital Stock" to the consolidated financial statements for further information.
Contributions from recent acquisitions, the Company's strong program execution of new and existing business awards with original equipment manufacturer ("OEM") distribution and repair partners, and expansion of product line and repair capabilities and capacity resulted in record revenue of $1.1 billion for the year ended December 31, 2025, representing a 41% increase compared to the prior year. Distribution and repair revenue increased by 46% and 35%, respectively, for the year ended December 31, 2025, compared to the prior year period. The Company believes its 2025 acquisitions are strongly aligned with its core business and increases its exposure to the higher-growth, higher-margin aviation aftermarket.
The following discussion provides a brief description of some of the key business factors impacting our results of operations detailed by segment.
Aviation Segment
Our strong program execution of new and existing distribution awards, our expanded portfolio of MRO capabilities and contributions from recent acquisitions resulted in record revenue of $786 million for the year ended December 31, 2024, a 45% increase year-over-year. Distribution and repair revenue increased 27% and 86%, respectively, during the year ended December 31, 2024, compared to the same period in the prior year. Growth of our distribution business was driven by strong execution of new and existing programs, and contributions from recent acquisitions. Our repair business's growth was driven by the expansion of new repair capabilities, market share gains in the commercial and business and general aviation ("B&GA") markets, improved throughput across our MRO facilities, and contributions from the TCI acquisition. In 2024, we ramped up several multi-year distribution and repair programs for both domestic and new international markets, including an expansion of our flagship distribution agreement with Pratt & Whitney Canada supporting Europe, the Middle East, and Africa. These new programs are expected to drive sustainable and recurring revenue with growth opportunities, contributing to future positive results.
Investments in the Aviation segment are focused on businesses and programs that broaden our portfolio of products, expand our repair capabilities and reach new customers and geographies. The April 2024 acquisition of TCI strengthens our position in the commercial aviation engine MRO aftermarket, while providing additional opportunities for organic growth. The December 2024 acquisition of Kellstrom Aerospace improves our position in the commercial aviation engine aftermarket, expands our aftermarket product and capability offerings, and broadens our global footprint. The Aviation segment is expected to see continued growth due to progress on new and existing programs, an expansion of repair capabilities, and synergies from recent acquisitions.
Fleet Segment
Our Fleet segment continues to see growth in revenue from commercial fleet customers and e-commerce fulfillment, as the segment moves towards revenue diversification. Fleet is executing its revenue diversification strategy by continuing to scale our Olive Branch, MS, e-commerce fulfillment distribution facility, acquiring new customers, and expanding product options for our commercial business. Commercial customer revenue continues to experience strong growth, increasing 18% in 2024 compared to the prior year. We anticipate continued growth as we extend our reach to meet the increasing demand from the commercial market. In 2024, commercial revenues were 61% of total Fleet segment revenue compared to 48% in 2023, demonstrating the continued success of our revenue diversification strategy. The United States Postal Services ("USPS") revenue in 2024 decreased 30%, as compared to the prior year. During 2024, USPS elected to migrate all of their vehicle maintenance facilities ("VMFs") to a new Fleet Management Information System ("FMIS"), resulting in a temporary decline in maintenance activity. The transition to the new FMIS was completed in the third quarter of 2024. As of the fourth quarter of 2024, maintenance activity has begun to improve, which has resulted in increased demand for our parts. We remain committed to supporting the USPS as they emerge from their FMIS conversion.
The following table summarizes ourthe Company's consolidated results of operations (in thousands):
Revenues. Revenues increased driven by contributions from recent acquisitions, recently initiated distribution contract wins and improved demand for the Company's commercial aerospace and business and general aviation products and services. Increased revenues were supported by strong end market conditions, reflecting sustained activity in air travel. Aviation distribution revenue increased $221.1 million or 46% and repair revenue increased $104.9 million or 35%.
Costs and Operating Expenses. Costs and operating expenses increased primarily as a result of increased revenues. Costs and operating expenses include intangible asset amortization expense, which increased to $26.0 million for the year ended December 31, 2025, as compared to $17.6 million for prior year period, due to recent acquisitions. In addition, during the year ended December 31, 2025, the Company recognized a $29.2 million charge related to the fair value remeasurement of the earn-out receivable associated with the Fleet Sale.
Operating Income. Operating income increased primarily attributable to revenue growth and the non-recurrence of certain one-time charges incurred in the prior year, including net lease abandonment charges of $12.2 million and corporate restructuring charges of $4.2 million. The operating income increase was partially offset by higher intangible asset amortization expense, a charge related to the fair value remeasurement of the earn-out receivable, and increased corporate acquisition and integration costs incurred during the current period.
Interest Expense, Net. Interest expense decreased primarily due to a reduction in the Company's average borrowings under its debt facilities and a lower average interest rate on outstanding borrowings during the period. In addition, interest income earned on the utilization of excess cash proceeds from the October 2025 underwritten public offering and on the note receivable further contributed to the overall decrease in interest expense.
Revenues. Revenues increased $219.6 million, or 26%, in 2024 compared to 2023 due to revenue growth in our Aviation segment of $242.2 million, partially offset by a decline in our Fleet segment of $22.6 million. See "Segment Operating Results" section below for further discussion of revenues by segment.
Costs and Operating Expenses. Costs and operating expenses increased $226.2 million, or 29%, in 2024 compared to 2023. Costs and operating expenses for our operating segments increase and decrease in conjunction with the level of business activity and revenues generated by each segment. See "Segment Operating Results" section below for further discussion of costs and operating expenses by segment.
Operating Income. Operating income decreased $6.6 million, or 7%, in 2024 compared to 2023 primarily attributable to an increase in corporate costs, including net lease abandonment and termination charges of $12.2 million, corporate restructuring charges of $4.2 million, and acquisition-related expenses incurred in connection with current year acquisitions, and a decrease in operating income for our Fleet segment of $14.2 million. These operating income decreases were partially offset by an increase of $30.2 million for our Aviation segment. See "Segment Operating Results" section below for further discussion of operating income by segment.
Interest Expense. Interest expense increased approximately $3.9 million, or 12% in 2024 compared to 2023 primarily due to an increase in our average debt facility borrowings during the current period.
Provision for Income Taxes. The effective tax rate for continued operations was 21.5%22.5% in 20242025 compared to 24.2%18.5% in 2023.2024. The decrease in our effectivehigher tax rate in 2025 was primarily resultedattributable to the reduced impact from afavorable favorablepermanent adjustments, such as foreign derived intangible income ("FDII") and excess stock tax deductionbenefits, anddue lowerto higher pre-tax book income in 2024.2025, as well as adjustments to a tax settlement payment associated with a foreign subsidiary that is in the process of dissolution.
OurThe Company's tax rate is also affected by discrete items that may occur in any given year but may not be consistent from year to year. In addition to state income taxes, certain federal and state tax credits and permanent book-tax differences such as foreign derived intangible income ("FDII") deduction, I.R.C. Section 162(m) executive compensation limitation and unrealized investment income or loss from ourthe Company's COLI plan caused differences between the statutory U.S. federal income tax rate and ourthe effective tax rate.
Segment Operating Results
Aviation Segment Results
The results of operations for our Aviation segment were as follows (in thousands):
Revenues. Revenues increased $242.2 million, or 45%, in 2024 compared to 2023. Distribution revenue increased $106.3 million, or 27%, driven by strong program execution on new and existing distribution programs and contributions from the acquisitions of Desser Aerospace (July 2023) and Kellstrom Aerospace (December 2024). Repair revenue increased $135.9 million, or 86%, driven by an expansion of repair capabilities, improved end market demand, share gains with commercial and B&GA customers, and contributions from the acquisition of TCI (April 2024).
Costs and Operating Expenses. Costs and operating expenses increased $212.0 million, or 45%, in 2024 compared to 2023 primarily due to increased revenues as discussed above. In addition, costs and operating expenses for this segment included expenses for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets increased $5.9 million in 2024 to $17.6 million from $11.7 million in 2023 driven by newly acquired intangibles in connection with acquisitions completed in the current year. Expense for allocated corporate costs was $18.5 million for 2024 as compared to $12.9 million for 2023.
Operating Income. Operating income increased $30.2 million, or 42%, in 2024 compared to 2023 primarily due to revenue growth and a favorable shift in sales mix and pricing, partially offset by an increase in intangible amortization and allocated corporate costs.
Fleet Segment Results
The results of operations for our Fleet segment were as follows (in thousands):
Revenues. Revenues decreased $22.6 million, or 7%, in 2024 compared to 2023. The decrease was primarily driven by a decline in revenues from other government customers of $50.1 million, or 30%, partially offset by an increase in revenues from commercial customers of $27.7 million, or 18%. Revenues from other government customers decreased primarily due to lower maintenance activity within the USPS vehicle fleet program driven by USPS' transition to a new FMIS. Commercial customer revenue growth was driven by our commercial fleet and e-commerce fulfillment business.
Costs and Operating Expenses. Costs and operating expenses decreased $8.4 million, or 3%, primarily due to decreased revenues. In addition, costs and operating expenses for this segment included expense for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets decreased $2.5 million in 2024 to $0.1 million from $2.6 million in 2023 driven by substantially all intangibles becoming fully amortized during the prior year. Expense for allocated corporate costs was $7.2 million for 2024 as compared to $7.8 million for 2023.
Operating Income. Operating income decreased $14.2 million, or 46%, in 2024 compared to 2023, primarily driven by a shift in sales mix, the result of decreased revenues from our USPS vehicle fleet program, partially offset by decreased amortization expense and allocated corporate costs.
There has been no material adverse change in ourthe Company's financial condition in 2024.2025. OurThe Company's outstanding borrowings under ourthe Company's term loan and revolving facility decreased $0.5$136.3 million, and wethe Company had $194$399.4 million of unused commitments under the credit agreement as of December 31, 2024. In May and October 2024, we completed underwritten public offerings of the Company's common stock, generating proceeds, net of issuance costs, of $162.0 million and $163.8 million, respectively.2025. Changes to other asset and liability accounts were primarily due to ourthe Company's earnings; ourthe level of business activity; the sale of the Fleet segment; the timing and level of inventory purchases to support new distribution programs, and vendor payments required to perform our work; and collections from our customers.
The following table summarizes ourthe Company's cash flows (in thousands):
Cash usedprovided inby operating activities increased $9.2by $58.0 million in 2024 compared to 2023 primarily due to thehigher workingnet capitalincome impactfrom ofcontinuing theoperations, FDSadjusted Salefor andnon-cash related expenses incurred.expenses.
Cash used in investing activities increased $28.0by $12.8 million in 2024 compared to 2023 primarily duereflecting to an increase of $64.5 million inhigher net cash paid for current year acquisitions completedof $111.0 million, partially offset by an increase in net cash proceeds from the currentsale periodof asbusiness discussedsegments inof $98.8 million. See Note (2) "Acquisitions" to the consolidated financial statements, partially offset by cash provided of $40.2 million related to the FDS sale as discussed inand Note (3) "Discontinued Operations" to the consolidated financial statements.statement for further information.
Cash provided by financing activities decreased by $26.0 million primarily due to higher net repayments of the Company's debt during the current period of $135.8 million, partially offset by increased proceeds of $116.2 million from the issuance of common stock compared to the prior year.
Cash provided by financing activities increased $50.8 million in 2024 compared to 2023 primarily due to an increase of $196.0 million in proceeds related to our public underwritten offerings of our common stock in the current period as compared to the prior year, partially offset by a decrease in net borrowings of our debt during the current period of $144.9 million.
WeThe Company paid cash dividends totaling approximately $7.1$8.3 million, or $0.40 per share, in 2024.2025. Pursuant to ourthe Company's credit agreement, our payment of cash dividends is subject to annual restrictions. WeThe haveCompany has paid cash dividends each year since 1973.
OurThe Company's internal sources of liquidity are primarily from operating activities, specifically from changes in ourthe Company's level of revenues and associated inventory, accounts receivable and accounts payable, and from profitability. Significant increases or decreases in these operating activities can affect ourthe Company's liquidity. Our inventoryInventory and accounts payable levels can be affected by the timing of large opportunistic inventory purchases and by distributor agreement requirements. Our accountsAccounts receivable and accounts payable levels can be affected by changes in the level of work wethe performCompany performs and by the timing of large purchases. In addition to operating cash flows, other significant factors that affect ourthe Company's overall management of liquidity include capital expenditures;expenditures, investments in expansion; improvement and maintenance of our operational and administrative facilities;divestitures, and investments in the acquisition of businesses.
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. See Note (7) “Debt” to the consolidated financial statements for further information.
The Company's outstanding borrowings under the credit agreement decreased approximately $136.3 million for the year ended December 31, 2025. The decrease was driven by the repayment of all outstanding borrowings under the revolving facility, principally from the utilization of proceeds from the Fleet Sale and the Company's October 2025 underwritten public offering. See Note (3) "Discontinued Operations" and Note (15) "Capital Stock", respectively, for further information. As of December 31, 2025, the Company had outstanding borrowings under its term loan of $296.3 million, outstanding letters of credit of $0.6 million, and $399.4 million of unused commitments under the credit agreement.
In October 2025, the Company initiated a public offering of its common stock that resulted in net proceeds of $441.6 million, which were used to finance the cash consideration for the Aero 3 acquisition and general corporate purposes, including repaying outstanding borrowings under the Company's revolving facility. See Note (15) "Capital Stock" to the consolidated financial statements for further information.
Our primary source of external financing is our credit agreement. Our credit agreement is with a bank group and includes a term loan and revolving facility, with an aggregate maximum borrowing capacity under our revolving facility of $350.0 million. Under the credit agreement we may elect to increase the maximum availability of the term loan, the revolving facility, or a combination of both, subject to customary lender commitment approvals. The aggregate limit of increases is $25.0 million.
WeThe believeCompany ourbelieves its existing balances of cash and cash equivalents, along with ourits cash flows from operations and debt instruments under ourits credit agreement mentioned above, will provide sufficient liquidity for our business operations as well as capital expenditures, dividends, and other capital requirements associated with ourits business operations over the next twelve months and thereafter for the foreseeable future.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the previously disclosed risk factors in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 ("2025 Form 10-K”). The risk factors disclosed in the Company's 2025 Form 10-K should be considered together with information included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, and under "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Full comparison: every changed paragraph (1)
There have been no material changes to the previously disclosed risk factors in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 ("2025 Form 10-K”). The risk factors disclosed in the Company's 2025 Form 10-K should be considered together with information included in this Quarterly Report on Form 10-Q for the quarter ended MarchJune 31,30, 2026, and under "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Management's Discussion & Analysis (MD&A)
Largest changes
“On April 1, 2026, the Company acquired NorthStar Technologies, LLC ("NorthStar"), a provider of MRO services, third-party logistics, and kitting services supporting the engine aftermarket. The acquisition expands the Company’s engine service capabilities within business and general aviation and strengthens its OEM-focused strategy by enhancing integration within an engine OEM’s aftermarket supply chain and supporting growing demand for engine teardown and labor-intensive services.”see in full comparison
Operating Income. Operating income increased for the three and six months endedsee in full comparisonMarchJune31,30, 2026, compared to the sameperiodperiods of the prior year, primarilydrivenduebytorevenuethegrowthpreviously discussed increase in revenues and afavorable$5.9shiftmillion earn-out receivable fair value adjustment charge recognized insalesthemixpriorandyearpricing.inTheconnectionincreasewithwasthe Fleet Sale. These increases were partially offset byincreasedhigher costs and operating expensesdrivenassociatedbywithhigherincreasedrevenuerevenue,and an increase inincreased amortization of intangible assets of$2.9$12.0 million and $14.9 million for the threemonthsandendedsixMarchmonth31,periods,2026,respectively,comparedandtohigher acquisition, integration and restructuring costs of $7.2 million and $9.7 million for thesamethreeperiodandinsixthemonthpriorperiods,year.respectively.
Cash used in investing activities increasedsee in full comparison$27.0$1.9millionbillion for thethreesix months endedMarchJune31,30, 2026, as compared to the same period of the prioryear,year.primarilyThe increase was driven by$16.0 million in purchases of intangible assets, $5.4 million inhigher cashpaid for acquisitions,paid, net of cash acquired,afor$3.6currentmillionyear acquisitions of $1.7 billion, primarily related to the acquisition of PAG in May 2026. The increase was also driven by cash provided inpurchasesthe prior period ofproperty and equipment, and $2.7$138.8 millionin prior year proceedsfrom thesaleFleet Sale and FDS Sales, net ofthecashFederaldivested.and Defense segment. Refer toSee Note (2) "Acquisitions",and Note (3) "Discontinued Operations", and Note (10) "Goodwill and Intangible Assets" to the consolidated financial statements for further information.
“Borrowings under the Credit Agreement will accrue interest at either the Term SOFR or ABR (as defined in the Credit Agreement), plus in each case an applicable margin, based on the Company's Net Leverage Ratio (as defined in the Credit Agreement). The Company, at its option may select between one, three or six month Term SOFR Rates.”see in full comparison
“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 in full comparison
“On May 5, 2026, the Company completed the acquisition of Precision Aviation Group, Inc. ("PAG" or "PAG Acquisition"). PAG is a leading global provider of aviation aftermarket MRO and supply chain services delivering technical expertise across engines, components, avionics, and proprietary repair solutions. The acquisition enhances the Company's global reach, technical capabilities, and integrated MRO services and distribution offerings to a diverse customer base across commercial, business and general aviation, rotorcraft, original equipment manufacturer (“OEM”), and defense markets.”see in full comparison
Full comparison: every changed paragraph (26)
PAG AcquisitionAcquisitions
On May 5, 2026, the Company completed the acquisition of Precision Aviation Group, Inc. ("PAG" or "PAG Acquisition"). PAG is a leading global provider of aviation aftermarket MRO and supply chain services delivering technical expertise across engines, components, avionics, and proprietary repair solutions. The acquisition enhances the Company's global reach, technical capabilities, and integrated MRO services and distribution offerings to a diverse customer base across commercial, business and general aviation, rotorcraft, original equipment manufacturer (“OEM”), and defense markets.
On April 1, 2026, the Company acquired NorthStar Technologies, LLC ("NorthStar"), a provider of MRO services, third-party logistics, and kitting services supporting the engine aftermarket. The acquisition expands the Company’s engine service capabilities within business and general aviation and strengthens its OEM-focused strategy by enhancing integration within an engine OEM’s aftermarket supply chain and supporting growing demand for engine teardown and labor-intensive services.
See Note (2) "Acquisitions" to the consolidated financial statements for further information.
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.
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 consistsconsisting 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.million As(as partamended ofand restated, supplemented or otherwise modified, the amended"Credit agreement,Agreement"). In connection with the Credit 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.
During the firstsecond 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 MarchJune 31,30, 2026 was $324.6$449.1 million, representing a 27%65% increase year-over-year.
Market growth and share gains drove increases in repair and distribution revenue of 28%149% and 26%,17%, respectively, during the three months ended June 30, 2026, compared to the prior-yearsame period.period for the prior year. Growth was supported by several strategic initiatives, including the execution of newly awarded OEM distribution agreements, expansion of repair capabilities through increasedand capacity, the realization of synergies from recent acquisitions, and continued advancement of the Company’s OEM licensed manufacturing program.programs. 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.
Recent acquisitions, including Turbine Weld in May 2025 and Aero 3 in December 2025,2025 and PAG in May 2026, are aligned with the Company’s core strategy and have increased exposure to the high-growth, higher-margin commercial and business and general aviation MRO and distribution aftermarket.aftermarkets.
Revenues. Revenues increased for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods inof the prior year primarily driven by contributions from the acquisitions of TurbinePAG, WeldNorthStar, Aero 3 and AeroTurbine 3,Weld. PAG contributed $104.5 million of revenue during the three and six months ended June 30, 2026. Revenue growth also reflected 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$29.8 million, or 26%,17%, and repair revenue increased $26.7$147.2 million, or 28%,149%, for the three months ended MarchJune 31,30, 2026, compared to the same period in the prior year. Distribution revenue increased $71.6 million, or 21%, and repair revenue increased $173.9 million, or 90%, for the six months ended June 30, 2026, compared to the same period in the prior year.
Operating Income. Operating income increased for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods of the prior year, primarily drivendue byto revenuethe growthpreviously discussed increase in revenues and a favorable$5.9 shiftmillion earn-out receivable fair value adjustment charge recognized in salesthe mixprior andyear pricing.in Theconnection increasewith wasthe Fleet Sale. These increases were partially offset by increasedhigher costs and operating expenses drivenassociated bywith higherincreased revenuerevenue, and an increase inincreased amortization of intangible assets of $2.9$12.0 million and $14.9 million for the three monthsand endedsix Marchmonth 31,periods, 2026,respectively, comparedand tohigher acquisition, integration and restructuring costs of $7.2 million and $9.7 million for the samethree periodand insix themonth priorperiods, year.respectively.
Interest (Income) Expense, net. NetInterest interestexpense, incomenet increaseddecreased for the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods inof the prior year,year. The decrease was primarily due to (i) interest income earned on excess cash proceeds from the Company's February 2026 underwritten public offerings andprior to the use of such proceeds to fund the PAG Acquisition, (ii) interest income earned on a note receivable.receivable, The increase was further driven by(iii) lower average borrowings outstanding under the Company's debt facilities prior to the PAG Acquisition, and (iv) a reductiondecrease in the average interest rate on outstanding borrowings. The decrease was partially offset by higher average borrowings outstanding,outstanding whichunder togetherthe decreasedCompany's debt facilities following the PAG Acquisition and interest expense.expense incurred on the amortizing notes issued in connection with the Company's February 2026 Units Offering.
Loss on debt extinguishment. The Company recorded a loss on debt extinguishment of $4.5 million during the three and six months ended June 30, 2026 in connection with its amended Credit Agreement, which resulted in the extinguishment of its previous term loan. See Note (5) “Debt” to the consolidated financial statements for further information.
Provision for Income Taxes. The Company's effective tax rate for continuing operations was 14.9%27.3% and 15.7%21.6% for the three and six months ended MarchJune 31,30, 2026 respectively, and 15.1% and 15.4% for the three and six months ended June 30, 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 lowerhigher effective tax rate for the three and six months ended MarchJune 31,30, 2026 compared to the same periods of the prior year was primarily drivendue byto aunfavorable higherpermanent impactdifferences fromassociated thewith excessincreased stockacquisition compensationcosts deduction onduring the current year'syear, rate.as well as a prior period valuation allowance reversal for certain tax attributes which lowered the provision for income taxes during the prior periods.
On May 5, 2026, the Company entered into a first amendment to its existing senior secured credit agreement, dated as of May 2, 2025 (the Credit Agreement), which provides for, among other things, a new senior secured term loan B facility in an aggregate principal amount of $900.0 million (the “New Term Facility”) and an upsize to the Company’s existing senior secured revolving credit facility from $400.0 million to $500.0 million (the “Revolving Facility”), maturing on May 5, 2033 and May 2, 2030, respectively. The Credit Agreement provides greater flexibility and increased borrowing capacity. The amendment replaced the Company's previous term loan.
Borrowings under the Credit Agreement will accrue interest at either the Term SOFR or ABR (as defined in the Credit Agreement), plus in each case an applicable margin, based on the Company's Net Leverage Ratio (as defined in the Credit Agreement). The Company, at its option may select between one, three or six month Term SOFR Rates.
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 from 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 performedthe 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 expendituresexpenditures, divestitures, and investments in the acquisition of businesses.
The Company's outstanding borrowings under the Credit Agreement and amortizing notes increased approximately $670.4 million for the six months ended June 30, 2026. As of June 30, 2026, the Company had outstanding borrowings under the New Term Facility of $900.0 million, principal obligations from the amortizing notes of $66.7 million, outstanding letters of credit of $0.7 million, and $499.3 million of unused commitments under the Credit Agreement.
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 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.
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.
Cash used in operating activities increasedwas $15.6 millionflat for the threesix months ended MarchJune 31,30, 2026, as compared to the same period of the prior year,year primarily due to aan greaterincrease use of cash for inventory purchases, partially offset by higherin net income from continuing operations, adjusted for non-cash expenses.expenses, offset by a greater use of cash for strategic inventory purchases.
Cash used in investing activities increased $27.0$1.9 millionbillion for the threesix months ended MarchJune 31,30, 2026, as compared to the same period of the prior year,year. primarilyThe increase was driven by $16.0 million in purchases of intangible assets, $5.4 million inhigher cash paid for acquisitions,paid, net of cash acquired, afor $3.6current millionyear acquisitions of $1.7 billion, primarily related to the acquisition of PAG in May 2026. The increase was also driven by cash provided in purchasesthe prior period of property and equipment, and $2.7$138.8 million in prior year proceeds from the saleFleet Sale and FDS Sales, net of thecash Federaldivested. and Defense segment. Refer toSee Note (2) "Acquisitions", and Note (3) "Discontinued Operations", and Note (10) "Goodwill and Intangible Assets" to the consolidated financial statements for further information.
Cash provided by financing activities increased $1.2$1.9 billion for the threesix months ended MarchJune 31,30, 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,Offering. partiallyThe offsetincrease was also driven by higher$701.7 net repaymentsmillion of thehigher Company's credit facilitiesborrowings of $36.4 milliondebt during the current period andincluding higherthe taxamortizing paymentsnotes forportion of the tangible equity transactionsunits, net of $4.7repayments million.and debt financing costs, as compared to the prior period.
The Company paid cash dividends totaling $2.3$5.1 million or $0.10$0.20 per share during the threesix months ended MarchJune 31,30, 2026. Pursuant to the termsCompany's ofCredit Agreement, the credit agreement, payment of cash dividends areis subject to annual restrictions. The Company has paid cash dividends annually since 1973.
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. ManagementManagement's 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 threesix months ended MarchJune 31,30, 2026,2026 from those disclosed in the Company's 2025 Form 10-K.
For a description of recently announced accounting standards, including the expected dates of adoption and estimated effects, if any, on the Company's consolidated financial statements, see Note (1) "Nature of Business and Summary of Significant Accounting Policies — RecentRecently Adopted Accounting Pronouncements” to the Company's Consolidated Financial Statements included in its 2025 Form 10-K.
VSEC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 3 filings (2 insiders, 3 trade dates, 25,566 shares, about $5.8M; 2 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -25,566 (purchases minus sales); net value about -$5.8M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-15 | Ferguson Iii Mark E |
Grant/award |
148 | $178.08 | $26.4K |
| 2026-09-15 | Eberhart Ralph E |
Grant/award |
67 | $178.08 | $11.9K |
| 2026-09-14 | Cuomo John A |
Open-market sale |
402 | $188.22 | $75.7K |
| 2026-09-14 | Cuomo John A |
Open-market sale |
18 | $188.88 | $3.4K |
| 2026-09-14 | Cuomo John A |
Open-market sale |
912 | $187.42 | $170.9K |
| 2026-09-14 | Cuomo John A |
Open-market sale |
234 | $186.42 | $43.6K |
| 2026-09-11 | Cohn Adam Robert |
Shares withheld for tax |
2,624 | $194.98 | $511.6K |
| 2026-09-11 | Cohn Adam Robert |
Option exercise |
5,998 | — | — |
| 2026-08-17 | Cuomo John A |
Open-market sale |
454 | $239.40 | $108.7K |
| 2026-08-17 | Cuomo John A |
Open-market sale |
905 | $240.58 | $217.7K |
| 2026-08-17 | Cuomo John A |
Open-market sale |
2,147 | $241.58 | $518.7K |
| 2026-08-17 | Cuomo John A |
Open-market sale |
1 | $245.05 | $245 |
| 2026-08-17 | Cuomo John A |
Open-market sale |
5,492 | $243.37 | $1.3M |
| 2026-08-17 | Cuomo John A |
Open-market sale |
2,794 | $244.42 | $682.9K |
| 2026-08-17 | Cuomo John A |
Open-market sale |
1,492 | $238.66 | $356.1K |
| 2026-08-17 | Cuomo John A |
Open-market sale |
4,215 | $242.62 | $1.0M |
| 2026-08-11 | Ferguson Iii Mark E |
Gift |
350 | — | — |
| 2026-08-11 | Ferguson Iii Mark E |
Gift |
350 | — | — |
| 2026-07-20 | Ferguson Iii Mark E |
Gift |
133 | — | — |
| 2026-07-20 | Ferguson Iii Mark E |
Gift |
133 | — | — |
| 2026-06-30 | Thomas Benjamin E. |
Grant/award |
69 | $159.56 | $11.0K |
| 2026-06-15 | Eberhart Ralph E |
Grant/award |
60 | $198.55 | $11.9K |
| 2026-06-15 | Ferguson Iii Mark E |
Grant/award |
133 | $198.55 | $26.4K |
| 2026-06-12 | Thomas Benjamin E. |
Open-market sale | 6,500 | $196.82 | $1.3M |
| 2026-05-20 | Ferguson Iii Mark E |
Gift |
136 | — | — |
| 2026-05-20 | Ferguson Iii Mark E |
Gift |
136 | — | — |
Well-known investors holding VSEC (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Durable Capital Partners (Henry Ellenbogen) | 2026-06-30 | 980,310 | $224.0M | 2.18% | Reduced 30% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 191,729 | $43.8M | 0.03% | Reduced 65% |
| Millennium Management (Israel Englander) | 2026-06-30 | 127,022 | $29.0M | 0.02% | Added 2608% |
| Soros Fund Management | 2026-06-30 | 120,327 | $27.5M | 0.36% | Reduced 23% |
| Soros Fund Management | 2026-06-30 | 336,856 | $16.6M | — | Sold out |
| PRIMECAP Management | 2026-06-30 | 52,500 | $12.0M | 0.01% | Reduced 29% |
| First Eagle Investment Management | 2026-06-30 | 45,422 | $10.4M | 0.02% | Added 140% |
| Polen Capital Management | 2026-06-30 | 29,853 | $6.8M | 0.06% | Reduced 29% |
| D. E. Shaw & Co. | 2026-06-30 | 50,000 | $2.5M | — | Sold out |
| Millennium Management (Israel Englander) | 2026-06-30 | 29,073 | $1.7M | 0.0% | Reduced 32% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 4,527 | $1.0M | 0.0% | Reduced 4% |