Oct 4th, 2023VSE News

VSE Announces License Agreement with Honeywell and Increases 2023 Aviation Segment Guidance

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ALEXANDRIA, Va.–(BUSINESS WIRE)– VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and maintenance, repair and overhaul (“MRO”) services for air and land transportation assets for commercial and government markets, announced today that it has entered into an asset purchase and perpetual license agreement with Honeywell International Inc. (“Honeywell”) to …

ALEXANDRIA, Va.–(BUSINESS WIRE)– VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and maintenance, repair and overhaul (“MRO”) services for air and land transportation assets for commercial and government markets, announced today that it has entered into an asset purchase and perpetual license agreement with Honeywell International Inc. (“Honeywell”) to exclusively manufacture and support certain of Honeywell’s fuel control systems on four key engine platforms through its VSE Aviation business.

Under the terms of the agreement, VSE Aviation acquired certain contracts, equipment, and inventory from Honeywell and will utilize the acquired assets and the license to exclusively manufacture, manage aftermarket distribution, and repair more than 340 unique Honeywell fuel control systems. VSE Aviation will support three in-production engine platforms manufactured by Rolls Royce and Pratt & Whitney Canada (P&WC), including P&WC PT-6 engine variants. These systems and subcomponents will support more than 20,000 in-service aircraft powered by these engines, spanning over 120 platforms in the business and general aviation (B&GA) and rotorcraft markets.

This new agreement expands VSE Aviation’s existing capabilities supporting Honeywell’s fuel control systems and associated subcomponents. Since 2015, VSE Aviation has served as the exclusive distributor of these products. In addition, VSE Aviation has a long-established and successful history as an MRO provider to support these fuel control systems. Through this new agreement, VSE expands the relationship to become the licensed manufacturer with perpetual rights to the intellectual property of these components.


“VSE Aviation has a long history of supporting Honeywell fuel control systems and subcomponents as both a distributor and MRO service provider. We believe this new asset purchase and license agreement significantly strengthens our existing, long-term relationship with Honeywell and is a testament to the value of our differentiated OEM-focused value proposition. We expect this agreement to provide long-term, sustainable revenue and an improved mid-term EBITDA margin outlook for VSE Aviation from these critical and highly technical aircraft components and associated intellectual property,” stated John Cuomo, President and CEO of VSE Corporation.

“We are incredibly excited to secure this licensing agreement with Honeywell because it enables VSE to help extend the life of several marquee engine platforms,” stated Ben Thomas, President of VSE Aviation. “We intend to drive improved performance for both the engine manufacturers and their operators, deliver more value from the engineering and supply chain of these components, and strengthen our partnership with Honeywell.”


VSE acquired the perpetual license and asset for $105 million. The purchase price also included $12 million of existing inventory. The Company expects to lower its net working capital requirements by approximately $10 million ratably throughout 2024 through lower inventory costs. This more favorable product cost, offset partially by production expenses, is expected to contribute approximately $7 million and $14 million of additional EBITDA in 2024 and 2025 respectively, and is not expected to have a material effect in the fourth quarter of 2023.

The Company funded the purchase through a drawdown on its existing credit facility. VSE anticipates its net leverage ratio to be below 4.0 times at the end of the third quarter and improving by the end of the year, when including the trailing twelve-month results from prior acquisitions and the recent purchase of the Honeywell fuel control license.

The Company is also increasing full year 2023 revenue and Adjusted EBITDA guidance for its Aviation segment, reaffirming full year 2023 revenue and Adjusted EBITDA guidance for its Fleet segment, and maintaining second half 2023 free cash flow guidance:

  • Aviation segment full year 2023 revenue guidance is increasing from 25 to 30% to 30 to 35% growth, as compared to the prior year
  • Aviation segment full year 2023 Adjusted EBITDA margin guidance is increasing from 13 to 15% to 14 to 16%
  • Fleet segment is maintaining its full year 2023 revenue guidance of 20 to 25% growth, as compared to the prior year
  • Fleet segment is maintaining its Adjusted EBITDA margin guidance of 11 to 13%
  • The Company maintains its outlook of positive free cash flow in the second half of 2023


Jones Day served as legal advisor to VSE Corporation.


This document contains certain forward-looking statements. These forward-looking statements, which are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and other factors that may cause VSE’s actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this document. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that actual results will not differ materially from these expectations. “Forward-looking” statements, as such term is defined by the SEC in its rules, regulations, and releases, represent our expectations or beliefs, including, but not limited to, statements concerning the expected benefits of the agreement with Honeywell, including the anticipated impact on VSE’s operations, economic performance and financial condition. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “forecast,” “seek,” “plan,” “predict,” “project,” “could,” “estimate,” “might,” “continue,” “seeking” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, VSE’s ability to achieve the expected benefits of the agreement with Honeywell and the factors identified in our reports filed or expected to be filed with the SEC including our Annual Report on Form 10-K for the year ended December 31, 2022. All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events, or developments referenced herein will occur or be realized. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.


VSE has presented forward-looking statements regarding net leverage. This non-GAAP financial measure is calculated as net debt divided by adjusted EBITDA, which represents net income before interest expense, income taxes, amortization of intangible assets and depreciation and other amortization, as adjusted for discrete items, including acquisition, integration and restructuring costs, inventory reserve, non-recurring professional fees, contract loss, Russia/Ukraine conflict, earn-out adjustment, loss on sale of business entity and certain assets, gain on sale of property, severance, and goodwill and intangible impairment. The determination of the amounts that are excluded from this non-GAAP financial measure is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period in reliance on the exception provided by item 10(e)(1)(i)(B) of Regulation S-K. VSE is unable to present a quantitative reconciliation of forward-looking net leverage to its most directly comparable forward-looking GAAP financial measure because such information is not available, and management cannot reliably predict all of the necessary components of such GAAP measure without unreasonable effort or expense. In addition, VSE believes such reconciliation would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on VSE’s future financial results. This non-GAAP financial measure is a preliminary estimate and is subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between VSE’s actual results and the forward-looking financial data set forth above may be material.

Michael Perlman
VP, Investor Relations & Communications
T: (954) 547-0480
[email protected]

Source: VSE Corporation

Released October 4, 2023

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