VSE (NASDAQ:VSEC) raised its 2026 revenue growth and profitability outlook after reporting record third-quarter results, driven by demand for aircraft engine repairs, acquisition contributions and margin gains in its core aviation business.
Revenue rose 91% year over year to $541 million, including approximately 17% organic growth. Adjusted EBITDA increased 126% to $107 million, while adjusted EBITDA margin expanded by approximately 310 basis points to 19.8%. Adjusted net income rose 128% to $64 million, and adjusted diluted earnings per share increased 49% to $2.01.
Higher outlook accounts for seasonal slowdown
VSE now expects full-year revenue growth of 65% to 66.5%, up from its previous forecast of 61% to 64%. The company also raised its adjusted EBITDA margin outlook to 18.9% to 19.1%, from 18.7% to 19%.
Management expects fourth-quarter revenue to decline sequentially from the third quarter. CFO Adam Cohn said the forecast reflects seasonality and quarterly variability rather than a change in demand. PAG and Aero 3 tend to be more seasonal, he said, while VSE’s shift toward repair activity has also changed the mix of its business.
Cuomo noted that December 2025 was unusually strong, creating a difficult year-over-year comparison. He said the outlook included “a little bit of conservatism” but that he had no concerns about fourth-quarter organic growth.
Engine demand and acquisitions drive growth
Maintenance, repair and overhaul revenue rose 198% year over year, including acquisition contributions, while distribution revenue increased 27%. Cohn said organic growth was similar across both activities. PAG was the largest acquisition contributor to overall revenue growth.
Cuomo said commercial engine aftermarket growth exceeded the company’s overall organic growth rate, while business and general aviation engine growth was slightly below that rate but remained in the double digits. Non-engine core businesses generally grew at high-single-digit to low-double-digit rates, depending on the capability.
Cohn said most of the adjusted EBITDA margin expansion came from the core business, including growth in higher-margin engine aftermarket activities and integration of earlier acquisitions. Insourcing and PAG also contributed, he said, though PAG accounted for less than a majority of the year-over-year margin increase.
During the quarter, VSE acquired Atech Turbine Components, which specializes in hot-section repairs for aircraft turbine engines, primarily on Pratt & Whitney Canada platforms. Cuomo said Atech adds OEM-approved repairs covering more than 300 part numbers. He described its margin profile as well above VSE’s current performance, without providing a specific figure.
VSE expects benefits from joint commercial opportunities, insourcing and operating efficiencies involving PAG to build through 2027. Cuomo said the company plans to launch its complete integration plan in the first quarter of that year.
Cash flow improves as leverage falls
Third-quarter operating cash flow was $56 million and free cash flow was approximately $47 million, up from $18 million a year earlier. Cohn attributed the improvement to record profitability, a greater mix of repair revenue and better working capital performance.
Adjusted net leverage fell to 2.3 times from 2.4 times at the end of the second quarter, even as VSE completed the Atech acquisition. Net debt stood at approximately $894 million, with $66 million in cash and $479 million available under the revolving credit facility.
Cohn said VSE expects another strong quarter of free cash flow but declined to predict that it would exceed the third-quarter result. He said inventory could be flat or a slight use of cash in the fourth quarter, a smaller use than in earlier quarters.
Demand holds despite fuel and supply concerns
Cuomo said higher oil prices had not meaningfully affected customer demand or order patterns. He also said VSE was not seeing signs of inventory destocking across the market, though he cautioned that sustained high fuel prices and inflation could eventually affect consumer decisions.
Supply constraints remain uneven. Cuomo said the company had seen improvement in some product pipelines but not an overall improvement in the supply chain. Bearings remain a recurring concern, particularly in VSE’s repair shops.
VSE plans to discuss its 2027 guidance and longer-term outlook at its Dec. 9 investor day in New York City.
About VSE (NASDAQ:VSEC)
VSE Corporation is a diversified provider of aftermarket distribution, maintenance, repair, overhaul, engineering, logistics and other sustainment services for government and commercial customers. The company supports complex assets and supply chains, with activities spanning aviation, defense, transportation and fleet markets.
Through its aviation businesses, VSE distributes aircraft parts and provides maintenance, repair and overhaul services for commercial, general aviation, business and government aircraft.
