Innovative Solutions & Support, Inc. Announces Fourth Quarter and Full Year Fiscal 2023 Financial Results

Rhea-AI Summary

Innovative Solutions & Support, Inc. (ISSC) reported strong financial results for Q4 and full fiscal year 2023, with net sales of $13 million, up 79% from the previous year's Q4. The company reported net income of $2.6 million, or $0.15 per share, marking a 63% and 67% increase, respectively. The increase in sales and earnings is primarily due to the addition of product lines acquired from Honeywell International, Inc. The company expects annualized revenues to increase by approximately 40% from pre-acquisition levels once operations have been fully integrated in fiscal 2024. The company also generated $2.1 million of cash flow from operations in fiscal 2023 and had $3.1 million of cash on hand as of September 30, 2023, which has increased to over $8 million as of December 19, 2023. New orders in Q4 were approximately $12.7 million, with backlog as of September 30, 2023, at $13.5 million. Total revenues for fiscal 2023 were $34.8 million, up 26% from fiscal 2022, with a net income of $6.0 million, or $0.35 per share.

Insights

Financial Analyst

Innovative Solutions & Support, Inc.'s (IS&S) financial results for the fourth quarter and full fiscal year 2023 demonstrate significant growth. The reported 79% increase in net sales and the 63% rise in net income for the quarter are substantial when compared to the previous year. This performance is indicative of successful strategic moves, notably the acquisition of product lines from Honeywell. The financial data suggests an effective integration of these new product lines, which is expected to bolster annualized revenues by approximately 40% post-full integration in fiscal 2024.

The company's cash position has strengthened, with cash on hand increasing to over $8 million due to efficient receivables collection and asset sales. The solid order backlog, which includes long-term OEM customer programs, provides a predictable revenue stream for the coming decade. However, it is important to note that the Honeywell-licensed products do not typically enter into backlog, which may affect the predictability of future revenues from these sources.

Industry Analyst

The aviation and aerospace sector is characterized by long product lifecycles and high barriers to entry, which is reflected in IS&S's long-term programs with OEM customers. The company's focus on Air Transport, Military and Business Aviation Markets is strategic, as these segments often require sophisticated, high-margin products. The integration of Honeywell's product lines not only diversifies IS&S's offerings but also opens up new market opportunities through expanded customer relationships.

Investors should consider the potential for supply chain disruptions that could impact delivery schedules and the company's ability to meet demand. The mention of customer-directed accelerated shipments to mitigate potential delivery delays is a proactive measure, but it also hints at underlying challenges in the supply chain.

Economist

The company's performance must be contextualized within the broader economic environment, which includes factors such as fluctuating demand for air travel, defense spending and competition within the aerospace industry. The cash flow generation of $2.1 million from operations in fiscal 2023 indicates a healthy operational efficiency, which is crucial in an industry that requires significant capital investment.

Looking ahead, the company's growth trajectory and backlog suggest resilience in the face of economic headwinds. However, macroeconomic factors such as interest rate changes, inflation and global economic slowdowns could impact both the company's operational costs and its customers' purchasing power, potentially affecting future financial performance.

EXTON, Pa.--(BUSINESS WIRE)-- Innovative Solutions & Support, Inc. (“IS&S” or the “Company”) (NASDAQ: ISSC) today announced its financial results for the fourth quarter and full fiscal year 2023, which ended September 30, 2023.

For the fourth quarter of fiscal 2023, IS&S reported net sales of $13 million, up 79% from $7.3 million in the fourth quarter a year ago. The Company reported net income of $2.6 million, or $0.15 per share, increases of 63% and 67%, respectively, compared to $1.6 million, or $0.09 per share, in the fourth quarter of fiscal 2022.

Gross profit in the fourth quarter of 2023 was $8.1 million, or 62% of sales, compared to $4.5 million, also 62% of sales in the fourth quarter of 2022.

The increase in sales and earnings in the fourth quarter of 2023 primarily reflects the impact of the previously announced addition of the product lines acquired from Honeywell International, Inc. (“Honeywell”) pursuant to an exclusive license and asset acquisition that closed in the third quarter of 2023.

Shahram Askarpour, Chief Executive Officer of IS&S, said, “I am pleased to report our fifth consecutive year of both top and bottom-line growth as a result of one of the best quarters in the Company’s recent history. The results include some customer-directed accelerated shipments of the acquired Honeywell products to mitigate any impacts from potential delivery delays over the next two quarters as equipment and inventory are transferred to IS&S. The ongoing integration of the Honeywell product lines is proceeding well, and we remain confident that annualized revenues will increase by approximately 40% from pre-acquisition levels once operations have been fully integrated in fiscal 2024. The integration of the Honeywell product lines enhances our current product offerings in the Air Transport, Military and Business Aviation Markets and has provided us with an introduction to numerous operators with whom we did not previously have relationships, thereby opening a large new market opportunity for our other products.”

For the fiscal year 2023, the Company generated $2.1 million of cash flow from operations. The Company had $3.1 million of cash on hand as of September 30, 2023, which has increased during the quarter ended December 31, 2023 because of the collection of receivables and the sale of the Company’s King Air aircraft. As of December 19, 2023 the Company’s cash on hand is currently over $8 million.

New orders in the fourth quarter of fiscal 2023 were approximately $12.7 million and were $36.5 million for the full fiscal 2023 year. Backlog as of September 30, 2023, was $13.5 million. Only purchase orders in hand are included in our sales backlog, which primarily consists of orders from our OEM customers that have long-term programs-- Pilatus PC-24, Textron King Air, Boeing T-7 Red Hawk and the Boeing KC-46A. IS&S expects these programs to remain in production for approximately a decade and anticipates that they will continue to generate future sales. Due to their nature, the products licensed from Honeywell do not typically enter into backlog.

Full Year Fiscal 2023 Results

Total revenues for the fiscal year ended September 30, 2023, were $34.8 million, up 26% from $27.7 million for the fiscal year ended September 30, 2022. Net income for fiscal 2023 was $6.0 million, or $0.35 per share, compared to $5.5 million, or $0.32 per share, in fiscal 2022. Net income in fiscal 2022 included a $1.1 million gain on the sale of an asset.

Conference Call

The Company will be hosting a conference call on Thursday, December 21, 2023 at 10:00 AM ET to discuss these results and the Company’s business outlook and product development. Please use the following dial-in number to register your name and Company affiliation for the conference call: 844-739-3798 and ask to join the Innovative Solutions & Support call. The call will also be carried live on the Investor Relations page of the Company web site at www.innovative-ss.com.

About Innovative Solutions & Support, Inc.

Headquartered in Exton, Pa., Innovative Solutions & Support, Inc. (www.innovative-ss.com) is a systems integrator that designs and manufactures flight guidance and cockpit display systems for Original Equipment Manufacturers (OEMs) and retrofit applications. The Company supplies integrated Flight Management Systems (FMS), Auto-Throttle Systems and advanced GPS receivers for precision low carbon footprint navigation.

FORWARD LOOKING STATEMENT DISCLAIMER

In addition to the historical information contained herein, this press release contains “forward-looking statements” within the meaning of, and intended to be covered by, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, statements about future revenue, financial performance and profitability, future business opportunities, , the integration of the Honeywell product lines, including how the product lines enhance our current product offerings in the Air Transport, Military and Business Aviation Markets and have provided us with an introduction to numerous operators with whom we did not previously have a relationship, creating a large new market for many of our other products, the impact of licenses, including the Honeywell license, and the timing of our long-term programs remaining in production and expectations regarding a large new market opportunity for our other products. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Because forward-looking statements are subject to assumptions, risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the Company’s ability to efficiently integrate acquired and licensed product lines, including the Honeywell product lines, into its operations; a reduction in anticipated orders; an economic downturn; changes in the competitive marketplace and/or customer requirements; an inability to perform customer contracts at anticipated cost levels; and other factors that generally affect the economic and business environments in which the Company operates. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2022, and subsequent reports filed with the Securities and Exchange Commission. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

Innovative Solutions and Support, Inc.
Consolidated Balance Sheets
(unaudited)
		September 30,				September 30,
			2023				2022
ASSETS
Current assets
Cash and cash equivalents		$	3,097,193			$	17,250,546
Accounts receivable			9,743,714				4,297,457
Contract asset			487,139				162,742
Inventories			6,139,713				5,349,104
Prepaid inventory			12,069,114				-
Prepaid expenses and other current assets			1,073,012				1,142,470
Asset held for sale			2,063,818				-
Total current assets			34,673,703				28,202,319
Goodwill			3,557,886				-
Intangible assets, net			16,185,321				60,348
Property and equipment, net			7,892,427				6,292,189
Deferred income taxes			456,392				46,487
Other assets			191,722				103,980
Total assets		$	62,957,451			$	34,705,323
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt		$	2,000,000			$	-
Accounts payable			1,337,275				708,845
Accrued expenses			2,918,325				2,972,275
Contract liability			143,359				259,183
Total current liabilities			6,398,959				3,940,303
Long-term debt			17,500,000				-
Other liabilities			421,508				15,065
Total liabilities			24,320,467				3,955,368
Commitments and contingencies			-				-
Shareholders' equity
Preferred stock, 10,000,000 shares authorized, $.001 par value, of which 200,000 shares are authorized as Class A Convertible stock. No shares issued and outstanding at September 30, 2021 and 2020			-				-
Common stock, $.001 par value: 75,000,000 shares authorized, 19,543,441 and 19,412,664 issued at September 30, 2023 and 2022, respectively			19,543				19,413
Additional paid-in capital			54,317,265				52,458,121
Retained earnings (accumulated deficit)			5,668,713				(359,042	)
Treasury stock, at cost, 2,096,451 shares at September 30, 2023 and at September 30, 2022			(21,368,537	)			(21,368,537	)
Total shareholders' equity			38,636,984				30,749,955
Total liabilities and shareholders' equity		$	62,957,451			$	34,705,323

Innovative Solutions and Support, Inc.
Consolidated Statements of Operations
(unaudited)
				Three months ended							Twelve months ended
				September 30,							September 30,
					2023				2022			2023				2022
Sales				$	12,992,596			$	7,263,121		$	34,808,513			$	27,740,695
Cost of sales					4,880,125				2,795,585			13,497,442				11,066,314
Gross profit					8,112,471				4,467,536			21,311,071				16,674,381
Operating expenses:
	Research and development				741,579				642,303			3,129,518				2,705,140
	Selling, general and administrative				3,718,293				1,527,900			10,822,505				6,753,915
		Total operating expenses			4,459,872				2,170,203			13,952,023				9,459,055
Operating income					3,652,599				2,297,333			7,359,048				7,215,326
Interest (expense)					(393,281	)			-			(393,281	)			-
Interest income					85,693				50,179			518,188				61,051
Other income					19,813				15,931			151,317				65,232
Income before income taxes					3,364,824				2,363,443			7,635,272				7,341,609
Income tax expense					730,202				761,468			1,607,517				1,817,831
Net income				$	2,634,622			$	1,601,975		$	6,027,755			$	5,523,778
Net income per common share:
	Basic			$	0.15			$	0.09		$	0.35			$	0.32
	Diluted			$	0.15			$	0.09		$	0.35			$	0.32
Weighted average shares outstanding:
	Basic				17,400,659				17,256,750			17,411,684				17,256,750
	Diluted				17,451,314				17,257,871			17,427,278				17,257,871

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231220435820/en/

Rell Winand – CFO

610-646-9800 X550

Source: Innovative Solutions & Support, Inc.

FAQ

What are the financial results reported by Innovative Solutions & Support, Inc. (ISSC) for Q4 and full fiscal year 2023?

The company reported net sales of $13 million for Q4, up 79% from the previous year's Q4. The company reported net income of $2.6 million, or $0.15 per share, marking a 63% and 67% increase, respectively.

What led to the increase in sales and earnings for Innovative Solutions & Support, Inc. (ISSC) in Q4 of 2023?

The increase in sales and earnings is primarily due to the addition of product lines acquired from Honeywell International, Inc.

What are the expected annualized revenue increases for Innovative Solutions & Support, Inc. (ISSC) once operations have been fully integrated in fiscal 2024?

The company expects annualized revenues to increase by approximately 40% from pre-acquisition levels once operations have been fully integrated in fiscal 2024.

What were the total revenues and net income for fiscal 2023 for Innovative Solutions & Support, Inc. (ISSC)?

Total revenues for fiscal 2023 were $34.8 million, up 26% from fiscal 2022, with a net income of $6.0 million, or $0.35 per share.