Question-and-Answer SessionFor us, we've described VSE as an aerospace compounder with a long M&A runway. And I feel like you've been delivering on that thesis faster than we ever expected. We've got this recent PAG deal, should expand revenue quite significantly. I wanted to dig into that a bit more, but I think a great place to start is maybe just giving an overview, anybody that's new to the story, how did you find PAG? What is the asset and what's so compelling about it?John CuomoCEO, President & Direct ...

VSE Corporation Conference Call Summary Company Overview - **Company**: VSE Corporation (NasdaqGS: VSEC) - **Industry**: Aerospace and Defense, specifically focusing on aftermarket services and MRO (Maintenance, Repair, and Overhaul) operations Key Points and Arguments Recent Acquisition - VSE has recently acquired PAG, which is expected to significantly expand revenue and enhance service capabilities in the aviation aftermarket [3][5] - PAG's unique repair capabilities and bespoke services align well with VSE's existing business model, which focuses on integrating parts and services [5][11] Business Model and Strategy - VSE is described as an "aerospace compounder" with a strong focus on M&A to drive growth [3] - The company has built a platform that supports large OEMs (Original Equipment Manufacturers) and helps them monetize their aftermarket services [4][5] - VSE's business model is 100% aftermarket-focused, contrasting with previous experiences where a significant portion was OEM direct [15] Growth Metrics - VSE has achieved a 30% CAGR over the last three years, with approximately half of that growth being organic [23] - The company anticipates continued organic growth rates of around 15% in the coming years [21][25] Market Segmentation - The commercial engine market is expected to grow in low to mid-double digits, while business and general aviation engines are projected to grow in high single digits to about 10% [18] - VSE's strategy includes targeting both the $50 billion services market and the $100 billion OEM direct market, with a focus on gaining market share from OEMs [20] Margin Expansion - VSE aims to achieve 20% adjusted EBITDA margins by the end of 2027, up from current margins of over 15% [34] - The company has a history of improving margins through strategic acquisitions and operational efficiencies [34][95] Free Cash Flow and Leverage - VSE expects to reach positive free cash flow by 2025, targeting a 30%-35% EBITDA conversion rate [41] - Post-acquisition, leverage is projected to be between 2.5 and 3 times, with plans to de-lever quickly [38][39] Integration Strategy - VSE has a detailed integration playbook for the PAG acquisition, focusing on integrating one business unit at a time to minimize risks [99] - The integration process will begin in early 2027, with synergies expected to exceed initial estimates [95][106] Supply Chain Management - The company acknowledges ongoing supply chain challenges but has improved its management strategies to mitigate risks [63][67] - VSE is utilizing alternative sourcing and repair methods to address supply chain constraints, including PMA (Parts Manufacturer Approval) parts [70][76] Future Outlook - VSE sees significant growth opportunities in the defense sector, which currently represents only 1% of its business but is expected to increase to about 5% post-acquisition [85] - The company has a pipeline of 35-40 potential M&A targets, indicating a robust strategy for future growth [90][92] Intellectual Property Focus - VSE is increasingly focusing on intellectual property as a growth pillar, with plans to enhance revenue streams through OEM solutions and reverse engineering [16][75] Additional Important Insights - The company emphasizes a unique approach to MRO and distribution, aiming to create a competitive moat through integrated services and customer relationships [46][50] - VSE's leadership has extensive experience in the aerospace sector, which is seen as a critical asset in executing its growth strategy [8][10] This summary encapsulates the key insights from the VSE Corporation conference call, highlighting the company's strategic direction, growth metrics, and future opportunities in the aerospace aftermarket industry.

Summary of VSE Corporation FY Conference Call Company Overview - **Company**: VSE Corporation (NasdaqGS: VSEC) - **Industry**: Aerospace and Defense - **Focus**: Transitioned from a defense contractor to a commercial and business aviation aftermarket-focused business over the last five years, with revenue growth from under $150 million to over $1.1 billion in 2025 [3][4] Key Points and Arguments Transformation and Growth - VSE has undergone a significant transformation, focusing on commercial and business aviation, which has led to substantial revenue growth [3] - The company announced a major acquisition of PAG, which is expected to enhance its MRO (Maintenance, Repair, and Overhaul) capabilities and expand margins to over 20% within 24 months [4] Acquisition Strategy - The PAG acquisition was pursued proactively, with extensive pre-diligence conducted over nearly a year [5][6] - The integration of PAG is expected to create synergies, particularly in cost management, with a clear plan for integration over the next 24 months [28][29] Competitive Landscape - VSE competes with large companies like Boeing, Airbus, HEICO, and AerSale in the distribution segment, and various OEMs in the MRO segment [12][13] - The company has a competitive advantage in the business and general aviation sector, particularly in rotorcraft, due to its extensive capabilities [14] Proprietary Solutions and IP - VSE is developing proprietary content and IP-related work, including OEM solutions and DER (Designated Engineering Representative) repairs, to enhance its service offerings [17][18] - The company aims to support OEMs by providing aftermarket solutions that help them monetize their products effectively [15][21] Market Dynamics - The business and general aviation market is seen as attractive due to its steady growth and the ability to create competitive moats through technical capabilities [36][37] - VSE is focused on building long-term relationships with OEMs, with over 80% of new business wins coming directly from them [16] Supply Chain and Labor Challenges - The company faces ongoing supply chain challenges and a labor shortage in the technical servicing sector, which could impact growth rates [46][47] - VSE is actively managing these challenges by finding alternatives and ensuring efficient operations [46] Financial Outlook - VSE aims to maintain a leverage ratio under 3.5x and expects to be free cash flow positive by 2025, with improved cash flow profiles due to the less working capital-intensive nature of MRO compared to distribution [53][54] - The company is open to pursuing additional acquisitions post-PAG integration, particularly smaller MRO shops that can be integrated quickly [57] Additional Important Insights - Customer reactions to the PAG acquisition have been positive, with excitement around the expanded capabilities and investments in assets [30] - VSE's operational efficiency and technical expertise in distribution are highlighted as key competitive advantages [38][39] - The company is focused on creating a cohesive aftermarket service model that integrates new parts, used parts, and repair services [22][23]

Core Viewpoint - VSE Corporation (VSEC) has successfully priced its public offerings, indicating strong market demand and confidence in the company's financial strategy [1] Group 1: Public Offerings - The company is selling 3.99 million common shares at a price of $188 each, aiming to raise approximately $750 million [1] - Additionally, VSEC is offering 8 million of its 5.750% tangible equity units, which will total $400 million [1] - Both offerings were upsized from earlier plans, reflecting an increase in investor interest [1]

Core Viewpoint - VSE Corporation has initiated concurrent public offerings totaling $650 million in common stock and $350 million in tangible equity units to finance the acquisition of Precision Aviation Group, Inc. [1][2] Group 1: Offerings Details - The offerings consist of $650 million of common stock and $350 million of tangible equity units, with an option for underwriters to purchase an additional 15% of the shares [1] - Each Unit includes a prepaid stock purchase contract and a senior amortizing note due February 1, 2029, with quarterly cash installments for interest and principal repayment [3] - The common stock and Units offerings are independent and not contingent on the completion of the PAG Acquisition or any debt financing [4] Group 2: Use of Proceeds - The net proceeds from the offerings will primarily fund the acquisition of Precision Aviation Group, Inc. [2] - If the PAG Acquisition does not occur, the proceeds will be used for general corporate purposes, including potential redemption of the Units [4] Group 3: Company Overview - VSE Corporation is a leading provider of aviation aftermarket distribution and repair services, focusing on enhancing the productivity and longevity of high-value assets [7] - The company supports engine component and airframe accessory part distribution and repair services for commercial and business aviation operators [8]

Core Viewpoint - VSE Corporation has announced a definitive agreement to acquire Precision Aviation Group (PAG) for approximately $2.025 billion, which is expected to significantly enhance VSE's aviation aftermarket strategy and profitability over the coming years [2][6]. Deal Rationale: Scale, Footprint, and Capabilities - The acquisition is projected to increase VSE's revenue by about 50% on a pro forma basis and aims for more than 20% consolidated adjusted EBITDA margins in the next few years as integration and synergies are realized [3][6]. - Management anticipates approximately $15 million in annualized synergies from the acquisition, driven by procurement, network optimization, and cross-selling opportunities [6]. - The combination of VSE and PAG is described as complementary, with minimal overlap in capabilities, enhancing VSE's global footprint and improving customer service metrics such as turnaround times and supply chain responsiveness [3][5]. Operational Expansion - Post-acquisition, the combined company will operate 60 locations globally, which includes 47 repair facilities and 11 distribution centers of excellence [4]. - PAG is recognized as a global provider of aviation aftermarket MRO services, distribution, and supply chain solutions across various aviation sectors, including commercial, business, general aviation, rotorcraft, and defense [5]. Financial Details - The deal structure includes $1.75 billion in cash, approximately $275 million in equity to GenNx360, and up to $125 million in earnout, valuing PAG at about 13.5 times projected 2025 adjusted EBITDA [6]. - PAG is expected to contribute approximately $615 million in pro forma revenue for 2025, with adjusted EBITDA margins exceeding 20% [6].

PresentationGood day, and thank you for standing by. Welcome to the VSE Corporation's Conference Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Michael Perlman. Please go ahead.Michael PerlmanVice President of Investor Relations & Communications Thank you. Joining me today are John Cuomo, President and CEO; and Adam Cohn, our Chief Financial Officer. Today's call will address the press release issued this morning announcing VSE Corporation has entered ...

Acquisition Details - The stock purchase agreement involves VSE Corporation and several subsidiaries, indicating a strategic acquisition move [2]. - The agreement outlines a cash contribution and rollover securities, suggesting a significant financial commitment from the purchasers [4]. - The equity purchase price and adjustments are detailed, indicating a structured financial arrangement for the acquisition [4]. - The agreement includes provisions for earnout payments, which may incentivize performance post-acquisition [4]. - The total purchase price for the acquisition of the Company Stock is estimated at $275 million, which will be paid in cash and RP Class B Common Stock [22]. - At the closing, the Rollover Purchaser will deliver newly issued shares of class B common stock valued at $275 million to the Seller [22]. - The cash payment to the Seller will be the estimated purchase price minus the Rollover Stock Payment, to be paid in immediately available funds [22]. - The closing of the transaction is scheduled to occur no later than the second business day following the satisfaction of all conditions, but not before April 30, 2026 [26]. - The Rollover Purchaser will acquire all of the Seller's right, title, and interest in the Rollover Securities, which will be contributed to the Cash Purchaser [20]. - The Cash Purchaser will own 100% of the Company Stock immediately following the closing of the transaction [20]. Financial Performance - The company reported a revenue of $5.8 billion for the quarter, reflecting a year-over-year increase of 12% [8]. - User data showed an increase in active users to 150 million, up from 135 million last year, representing an 11% growth [8]. - The company provided guidance for the next quarter, expecting revenue to be between $6.0 billion and $6.5 billion, indicating a potential growth of 10% to 12% [8]. - New product launches included a flagship device that generated $1.2 billion in sales within the first month, contributing significantly to overall revenue [8]. - The company is investing $200 million in research and development for new technologies aimed at enhancing user experience and product performance [8]. - Market expansion efforts have led to a 15% increase in sales in the Asia-Pacific region, with plans to enter two new markets by the end of the fiscal year [8]. - The company completed a strategic acquisition of a smaller tech firm for $500 million, expected to enhance its product offerings and market position [8]. - Customer satisfaction ratings improved to 90%, up from 85% last year, indicating a positive response to recent product updates [8]. - The company reported a decrease in operational costs by 5%, attributed to improved efficiency measures implemented over the past year [8]. - The company plans to increase its marketing budget by 20% to support new product launches and market penetration strategies [8]. Legal and Compliance - Compliance with laws and regulations is emphasized, indicating the importance of legal adherence in the acquisition process [6]. - The agreement includes clauses for confidentiality and access to information, highlighting the sensitivity of the transaction [6]. - The parties involved are required to make reasonable best efforts to fulfill the agreement, indicating a commitment to successful execution [6]. - Seller is duly organized and validly existing under the laws of its state of formation, with all requisite authority to enter into the Agreement [52]. - Seller represents that the Company Stock to be sold is free and clear of any liens, except for those resulting from the Credit Facility [55]. - There are no pending or threatened legal proceedings against Seller that would prevent or materially delay the consummation of the transactions [56]. - No governmental approval is necessary for the consummation of the transactions, except for compliance with the HSR Act, UK NSI Act, and Australian FIRB Legislation [59]. - The Company and its Subsidiaries are duly incorporated and in good standing under the laws of their jurisdictions, with necessary organizational power to conduct their businesses [69]. - The Company has not been a party to any transaction that resulted in relief from any material non-income Tax in the past five years [155]. - The Company has not sought capital gains tax relief under the Australian Tax Act for any asset still owned after Closing [156]. Operational Matters - The document outlines the conduct of business during the transition, ensuring operational continuity [6]. - There are specific representations regarding the company's capitalization, which is crucial for understanding its financial structure [4]. - The Adjustment Escrow Amount will be held in an escrow account to facilitate post-closing adjustments [28]. - Seller must provide a detailed statement of Estimated Working Capital, Estimated Closing Indebtedness, Estimated Transaction Expenses, and Estimated Closing Cash at least three business days before the Closing Date [30]. - The Adjustment Statement must be delivered within 120 days after the Closing Date, detailing Closing Working Capital, Closing Indebtedness, and Closing Transaction Expenses [33]. - If the Net Adjustment Amount is negative, the Purchase Price will be adjusted downward accordingly [40]. - If the Net Adjustment Amount is positive, the Purchase Price will be adjusted upward, with payments made to Seller from the Adjustment Escrow Account [41]. - No payment will be made if the Net Adjustment Amount is zero [42]. - The release of the Adjustment Escrow Amount will occur within five business days after the Net Adjustment Amount is determined [43]. - Recovery from the Adjustment Escrow Account is the exclusive remedy for any Downward Adjustment Amount [44]. Employee and Labor Matters - The Company has provided a list of all employees and workers, including details such as title, date of hire, and employment status [171]. - All employees in the United States are "at will," while those in the United Kingdom can be terminated with no more than three months' notice [171]. - The Company and its Subsidiaries have been in compliance with all applicable employment laws, including those regarding discrimination and wages [174]. - Since the Lookback Date, there have been no unfair labor practice charges or investigations against the Company [175]. - There are no labor strikes or work stoppages currently in effect or threatened against the Company [176]. - All current and former employees in the United States have been legally authorized to work [177]. - The Company has maintained necessary employment verification paperwork under the Immigration Reform and Control Act of 1986 [177]. - The Company has not implemented any mass layoffs or redundancies since the Lookback Date [180]. - The Company has complied with all applicable data protection laws regarding personal data of employees [181]. - The Company has not been a party to any union contracts or collective bargaining agreements in the last three years [179].

VSE Corporation Conference Call Summary Company Overview - **Company**: VSE Corporation - **Acquisition Target**: Precision Aviation Group (PAG) - **Transaction Value**: Approximately $2.025 billion, consisting of $1.75 billion in cash and $275 million in equity consideration [17][18] Key Points from the Conference Call Acquisition Details - VSE Corporation has signed a definitive agreement to acquire PAG, which is expected to increase VSE's revenue by about 50% on a pro forma basis [4][6] - The acquisition aims to create a higher-margin aviation aftermarket platform, with expectations of over 20% consolidated adjusted EBITDA margins in the coming years [4][11] - The deal is anticipated to be immediately accretive to VSE's adjusted EBITDA margin [18] Strategic Rationale - The acquisition broadens VSE's global footprint, enhancing customer proximity and supply chain responsiveness [5] - It expands VSE's parts, repair, and proprietary capabilities, creating one of the most diverse aftermarket capability sets in the market [5][10] - PAG supports over 10,000 active customers across various aviation sectors, improving resilience through market cycles [5][9] Financial Performance - VSE's aviation segment revenue has grown approximately 30% CAGR from $225 million in 2019 to about $1.1 billion in 2025 [7] - Consolidated adjusted EBITDA margins expanded over 400 basis points to approximately 16.3% in 2025 [7] - Preliminary fourth quarter and full year 2025 revenue is expected to be in the range of $290-$304 million and $1.101-$1.115 billion, respectively [19] Integration and Synergies - VSE and PAG are expected to realize over $15 million in annualized synergies through operational and corporate support integration [16] - The integration strategy will focus on optimizing consolidated offerings, cross-selling, and improving operational efficiencies [16][28] - The integration is planned to kick off in January 2027, allowing PAG to continue its operational excellence until then [49] Market Position and Growth Opportunities - The combined company will employ approximately 2,600 people across 60 locations in eight countries [10] - The end market exposure post-acquisition is expected to be approximately 50% business and general aviation, 45% commercial, and 5% military [11] - VSE aims to leverage PAG's capabilities to enhance its proprietary solutions, which currently represent under 10% of PAG's revenue [39][57] Future Outlook - VSE anticipates continued growth in proprietary solutions and plans to partner with OEMs to address supply chain constraints [39] - The focus will be on smaller tuck-in acquisitions to enhance capabilities rather than large transformational deals [46] - The integration plan will be shared in detail during an investor day scheduled for early January [42] Additional Insights - PAG operates 29 locations worldwide and completes over 175,000 repairs annually, generating approximately $615 million in adjusted revenue for the full year ended December 31, 2025 [9] - The acquisition is seen as a transformational step for VSE, enhancing its capabilities and market position as a critical partner to aviation operators globally [20][60]

Acquisition Announcement VSE to Acquire Precision Aviation Group vsecorp.com January 29, 2026 vsecorp.com Safe Harbor Statement Forward-Looking Statements This presentation contains statements that, to the extent they are not recitations of historical fact, constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act. All such statements are intended to be covered by the safe harbor provisions ...