VSE Corporation

VSE reported second-quarter 2026 revenue of $449 million, up 65% year over year, including about 14% organic growth. Adjusted EBITDA was a record $86 million, up 98% year over year, and adjusted EBITDA margin expanded about 320 basis points to a record 19.2%. Adjusted net income was $55 million, up 101%, and adjusted diluted EPS was $1.75, up 33%. On the balance sheet, debt outstanding was $967 million, cash and cash equivalents were about $75 million, net debt was about $872 million, and adjusted net leverage was 2.4x. Free cash flow was about $19 million in the quarter, though that included about $10 million of PAG-related cash transaction expenses; excluding those expenses, free cash flow conversion was about 34% of adjusted EBITDA. For full-year 2026, management raised revenue growth guidance to 61%–64% and adjusted EBITDA margin guidance to 18.7%–19.0%. They also guided to interest expense net of interest income of about $36 million to $39 million, depreciation and amortization of about $96 million to $100 million, an effective tax rate of about 25%, stock-based compensation of about $18 million to $19 million, and capital expenditures of about 2% to 2.5% of revenue.

John Cuomo framed the quarter as a major step in VSE’s transformation, emphasizing record results, two strategic acquisitions, and the start of integration work across the combined aviation platform. He said the company is building toward becoming the world’s leading independent aviation aftermarket distribution and repair provider, while staying anchored in an OEM-centric strategy. His tone was notably confident, saying the core businesses are performing exceptionally well and that he has never been more confident in the long-term competitive position and value-creation opportunity.

Adam Cohn focused on the financial outperformance and balance-sheet actions. He cited $449 million of revenue, $86 million of adjusted EBITDA, 19.2% adjusted EBITDA margin, $55 million of adjusted net income, and $1.75 of adjusted diluted EPS, then walked through liquidity and leverage: $967 million of total debt, about $75 million of cash, no borrowings on the $500 million revolver, and 2.4x adjusted net leverage. He also highlighted roughly $19 million of free cash flow, stronger second-half cash generation expectations, and the updated full-year assumptions for interest expense, D&A, taxes, stock comp, and capex.

Analysts focused on why VSE raised guidance, how much of the margin improvement came from PAG versus the core business, and what to expect from synergies. Management said the higher revenue outlook was mostly driven by confidence in the core business, with acquisitions performing in line with expectations, and said PAG synergies will be more visible in 2027 than in 2026. They also said the initial PAG synergy target was about $15 million of run-rate synergies, and that the earn-out still looks achievable if 2026 EBITDA performance holds up. On cash flow, management said inventory was heavier in distribution than MRO, but they do not see obsolescence risk and expect free cash flow to improve in the second half as working capital needs ease.