VSE (VSEC) Q4 2025 earnings summary

Executive summary

• Completed transformation to a pure-play aviation aftermarket company, surpassing $1 billion in annual aviation revenue for the first time, with record profitability and positive free cash flow in 2025.

• Achieved record financial performance in FY 2025, driven by organic growth, new business awards, strategic OEM partnerships, and advanced MRO capabilities.

• Completed sale of Fleet segment and acquisitions of Turbine Weld and Aero 3, expanding proprietary repair and MRO capabilities.

• Announced agreement to acquire Precision Aviation Group (PAG) for $2.025 billion, expected to close in Q2 2026, further scaling the business and targeting Adjusted EBITDA margins above 20% over the next several years.

• Secured new exclusive OEM agreements, including fuel pump manufacturing/distribution for Pratt & Whitney Canada PT6 and global APU components distribution, expanding proprietary content.

Financial highlights

• Full-year 2025 revenue reached $1.1 billion, up 41% from 2024; Adjusted EBITDA rose 56% to $183 million; Adjusted net income increased 121% to $83 million; Adjusted EPS up 87% to $3.92.

• Q4 2025 revenue grew 32% year-over-year to $301 million; Adjusted EBITDA up 55% to $52 million with a 17.2% margin.

• Free cash flow for 2025 totaled $6 million, a $57 million improvement year-over-year; operating cash flow was $27 million.

• Adjusted net leverage improved to 1.1x at year-end 2025; net debt was $223 million with $469 million in cash and revolver availability.

• Adjusted EBITDA margin for Q4 2025 was 18.3%, up 140 basis points year-over-year.

Outlook and guidance

• 2026 revenue expected to grow 19%-23% year-over-year, with 11%-13% from acquisitions and high single to low double-digit organic growth.

• Adjusted EBITDA margin guidance for 2026 is 16.8%-17.3%, with margin expansion from acquisitions and core business optimization.

• Free cash flow in 2026 will be impacted by a $45 million inventory investment for the new APU program, but is expected to improve excluding this item.

• Interest expense projected at $20 million, D&A at $52-$54 million, tax rate at 25%, and capex at 2% of revenue.

• Priorities include executing acquisition integrations, implementing new OEM programs, expanding MRO capacity, and closing the PAG acquisition.