VSE Corporation Q4 FY2025 earnings call

• 2025 was transformational with record aviation revenue and profitability, surpassing $1 billion in annual revenue, completed fleet segment sale, and made acquisitions like Turban Weld and Aero3. • Advanced Kellstrom integration, increased MRO capacity, launched new programs in Europe, and advanced OEM solutions. • Announced acquisition of Precision Aviation Group (PAG), which is expected to generate ~$615 million in adjusted revenue for 2025 with adjusted EBITDA margins above 20%, and synergy initiatives expected to exceed $15 million annualized. • Entered into asset purchase agreement with OEM for fuel pumps and new APU components distribution agreement.

For the full year 2025, revenue was approximately $1.1 billion, an increase of 41% compared to 2024. Aviation segment revenue increased 41% to a record $1.1 billion. Adjusted EBITDA for the full year was $183 million, an increase of 56% compared to 2024. Aviation adjusted EBITDA increased 48% to $195 million, and adjusted EBITDA margin expanded 80 basis points to 17.6%. In the fourth quarter of 2025, revenue was $301 million, an increase of 32%. Aviation revenue increased 32% year-over-year to a record $301 million. Aviation adjusted EBITDA increased 43% to a record $55 million, representing 18.3% of revenue.

• 2026 revenue expected to increase between 19-23% y-o-y, with organic growth in high single to low double digit range above broader market growth. • Adjusted EBITDA margins for 2026 expected between 16.8-17.3%, with Arrow 3 and Turban Weld acquisitions accreted by ~40 basis points and core aviation business contributing up to 50 basis points of incremental margin expansion. • First quarter margins expected to decline sequentially from Q4 2025 but improve y-o-y. • Initial APU program will impact free cash flow in Q1 and full year 2026, but excluding this investment, stronger free cash flow expected in 2026 compared to 2025.

Q: Ken Herbert from RBC asked about run rate synergy captures on recent acquisitions and organic growth pipeline.

A: John responded on Arrow 3, Kellstrom, Turban Weld, and TCI synergies, and organic growth in commercial MRO areas.

Q: Sheila Kayoglu from Jefferies asked about revenue growth profile, share gains vs pricing, and growth in different markets.

A: John discussed growth in different market buckets and mix of price and volume.

Q: Louis DePalma from William Blair asked about origin of OEM licensing deals and margin expansion without M&A.

A: John and Adam discussed deal origins and organic margin expansion opportunities.

Q: Michael Tremoli from Truist asked about APU opportunity, margin drivers for 2026, and inventory build.

A: John and Adam discussed APU program timing, margin drivers, and inventory optimization.

Q: John Godden from Citi asked about margin guidance and shape of 20% margin target.

A: John discussed factors driving margin ranges and milestones for 20% margin.

Q: Jonathan Siegman from Stiefel asked about inventory build and sales process.

A: John discussed inventory optimization and sales process timeline.

Q: Jeff Van Cenderen from B. Reilly Securities asked about Pratt PT6 agreement and MRO capacity.

A: John discussed Pratt PT6 agreement details and MRO capacity efforts.

Q: Scott Deutschel from Deutsche Bank asked about working with Woodward and aero derivative engines.

A: John discussed working with Woodward and focus on core engine opportunities.

Q: Louis Ruffetto from Wolf Research asked about organic growth in MRO/distribution and interest expense/stock comp.

A: Adam responded on organic growth in MRO/distribution and details on interest expense and stock comp