Innovative Solutions & Support, Inc. Announces Second Quarter Fiscal 2024 Financial Results

Rhea-AI Summary

Innovative Solutions & Support, Inc. announced its financial results for the second quarter of fiscal 2024, reporting net sales of $10.7 million, a 46% increase compared to the same period last year. Net income was $1.2 million, with earnings per share of $0.07. The growth was driven by product lines acquired from Honeywell International, Inc. New orders were $6.6 million, and backlog stood at $10.4 million. The Company remains focused on organic growth, new product development, and acquisitions.

Positive

• Net sales increased by 46% to $10.7 million compared to the same period last year.

• Net income was $1.2 million, with earnings per share of $0.07.

• Profitability increased from the previous year's quarter when excluding one-time non-recurring costs related to the Honeywell acquisition.

• New orders in the second quarter were approximately $6.6 million.

• Backlog as of March 31, 2024, was $10.4 million, with expectations of continued production from long-term programs generating future sales.

• The Company remains focused on organic growth, new product development, and expansion through acquisitions.

Negative

• None.

Insights

Financial Analyst

In the recent announcement by Innovative Solutions & Support, Inc., the company reported a significant 46% increase in net sales year-over-year, a positive indicator of growth despite the relatively flat net income. Notably, the one-time amortization costs of $500,000 related to the Honeywell acquisition suggest a strategic investment that could potentially yield future benefits. The firm's ability to generate $4.4 million of positive cash flow in the face of one-time expenses reflects financial resilience and operational efficiency. On the other hand, the net income remaining consistent at $1.2 million, with no earnings per share (EPS) growth, raises questions about profit scalability and margins. The backlog of $10.4 million, while substantial, is also worth scrutinizing due to the exclusion of potential long-term OEM customer orders, which can obscure the visibility into future earnings. The integration of Honeywell's product lines and the company's organic growth strategies warrant attention to assess the long-term value creation potential. The financials offer a mixed perspective, suggesting careful consideration of growth prospects against the backdrop of the costs associated with strategic initiatives.

Market Research Analyst

The company's organic growth and expansion strategy, complemented by the acquisition of Honeywell's product lines, positions Innovative Solutions & Support, Inc. strategically within the niche market of flight guidance and cockpit display systems. The reported backlog does not include significant orders from long-term programs, which could misrepresent the potential stability and future income derived from OEM relationships. Investors should be mindful of the company's potential for sustained growth in light of these long-term partnerships, such as those with Pilatus PC-24, Textron King Air and Boeing. Additionally, the lack of backlog for the Honeywell licensed products implies a business model that may rely on consistent and recurring sales rather than just purchase orders. The company's presence in the retrofit market, alongside its OEM integration, diversifies its revenue sources, which could mitigate risk. However, the extent of future sales from these programs and the competitive landscape should be closely monitored to evaluate the company's market positioning and growth trajectory.

EXTON, Pa.--(BUSINESS WIRE)-- Innovative Solutions & Support, Inc. (“IS&S” or the “Company”) (NASDAQ: ISSC) today announced its financial results for the second quarter of fiscal 2024, which ended March 31, 2024.

For the second quarter of fiscal 2024, IS&S reported net sales of $10.7 million, up 46% from $7.3 million in the second quarter a year ago. The Company reported net income of $1.2 million, or $0.07 per share, compared to net income of $1.3 million, or $0.07 per share, in the second quarter of fiscal 2023.

Sales and earnings in the second quarter of 2024 continued to benefit from 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. Costs for the quarter included approximately $500,000 of amortization of customer relationship and one-time non-recurring items related to the Honeywell acquisition and other corporate matters. Excluding the one-time non-recurring costs of the Honeywell acquisition, profitability also increased from the year ago comparative quarter.

Shahram Askarpour, Chief Executive Officer of IS&S, said, “The momentum of our business continued as we delivered double-digit sales growth. The second-quarter results were consistent with our expectations and driven by our focused execution. I also want to welcome Jeff DiGiovanni, who joined us last month as CFO and will be a key contributor to our long-term planning and strategy. This past quarter featured a continuation of our plans to grow both organically, through new product development and expansion into related markets, as well as via acquisitions.”

Over the first half of fiscal 2024, the Company generated $4.4 million of positive cash flow despite all one-time expenses associated with the acquisition and integration.

New orders in the second quarter of fiscal 2024 were approximately $6.6 million, and backlog as of March 31, 2024, was $10.4 million. The backlog includes only purchase orders in hand and excludes orders from our OEM customers under long-term programs, such as 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 several years and anticipates they will continue to generate future sales. Further, due to their nature, the products licensed from Honeywell do not typically enter backlog.

Conference Call

The Company will be hosting a conference call on Monday, May 13, 2024, 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. In this press release, the words “anticipates,” “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “forecasts,” “expects,” “plans,” “could,” “should,” “would,” “is likely”, “projected”, “might”, “potential”, “preliminary”, “provisionally” and similar expressions, as they relate to the business or to its management, are intended to identify forward-looking statements, but they are not exclusive means of identifying them. All 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 statements regarding the ongoing integration; expectations that our new CFO will be a key contributor to our long-term planning and strategy; our plans to grow organically through new product development and related market expansion, as well as via acquisitions; and the timing of our long-term programs remaining in production and continuing to generate future sales. 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, 2023, 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

		March 31,				September 30,
		2024				2023
ASSETS
Current assets
Cash and cash equivalents		$	574,079			$	3,097,193
Accounts receivable			6,061,185				9,743,714
Contract assets			1,230,607				487,139
Inventories			9,120,870				6,139,713
Prepaid inventory			6,775,822				12,069,114
Prepaid expenses and other current assets			711,772				1,073,012
Assets held for sale			—				2,063,818
Total current assets			24,474,335				34,673,703
Goodwill			3,557,886				3,557,886
Intangible assets, net			15,648,321				16,185,321
Property and equipment, net			12,450,425				7,892,427
Deferred income taxes			1,173,227				456,392
Other assets			319,704				191,722
Total assets		$	57,623,898			$	62,957,451
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt		$	10,642,885			$	2,000,000
Accounts payable			2,647,123				1,337,275
Accrued expenses			2,415,095				2,918,325
Contract liability			96,650				143,359
Total current liabilities			15,801,753				6,398,959
Long-term debt			—				17,500,000
Other liabilities			444,440				421,508
Total liabilities			16,246,193				24,320,467
Commitments and contingencies (See Note 6)
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 March 31, 2024 and September 30, 2023			—				—
Common stock, $.001 par value: 75,000,000 shares authorized, 19,556,434 and 19,543,441 issued at March 31, 2024 and September 30, 2023, respectively			19,556				19,543
Additional paid-in capital			54,792,307				54,317,265
Retained earnings			7,934,379				5,668,713
Treasury stock, at cost, 2,096,451 shares at March 31, 2024 and at September 30, 2023			(21,368,537	)			(21,368,537	)
Total shareholders’ equity			41,377,705				38,636,984
Total liabilities and shareholders’ equity		$	57,623,898			$	62,957,451

INNOVATIVE SOLUTIONS AND SUPPORT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

		Three Months Ended March 31,							Six Months Ended March 31,
		2024				2023			2024				2023
Net Sales:
Product		$	4,895,589			$	5,945,151		$	9,319,697			$	11,035,358
Customer service			5,098,222				1,395,303			9,325,469				2,454,452
Engineering development contracts			745,705				—			1,402,413				366,899
Total net sales			10,739,516				7,340,454			20,047,579				13,856,709
Cost of sales:
Product			2,347,695				2,202,750			4,129,040				4,618,694
Customer service			2,462,260				397,553			4,189,221				716,655
Engineering development contracts			347,199				—			623,794				57,406
Total cost of sales			5,157,154				2,600,303			8,942,055				5,392,755
Gross profit			5,582,362				4,740,151			11,105,524				8,463,954
Operating expenses:
Research and development			1,031,119				866,198			1,932,263				1,536,643
Selling, general and administrative			2,908,193				2,446,635			5,915,012				4,708,498
Total operating expenses			3,939,312				3,312,833			7,847,275				6,245,141
Operating income			1,643,050				1,427,318			3,258,249				2,218,813
Interest expense			(171,470	)			—			(531,483	)			—
Interest income			36,200				130,951			115,679				246,843
Other income			26,472				23,258			44,171				41,455
Income before income taxes			1,534,252				1,581,527			2,886,616				2,507,111
Income tax expense			325,936				310,424			620,950				537,357
Net income		$	1,208,316			$	1,271,103		$	2,265,666			$	1,969,754
Net income per common share:
Basic		$	0.07			$	0.07		$	0.13			$	0.11
Diluted		$	0.07			$	0.07		$	0.13			$	0.11
Weighted average shares outstanding:
Basic			17,456,120				17,352,340			17,453,741				17,334,553
Diluted			17,487,527				17,354,030			17,481,217				17,340,104

 

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Source: Innovative Solutions & Support, Inc.

FAQ

What were the net sales reported by Innovative Solutions & Support, Inc. for the second quarter of fiscal 2024?

Innovative Solutions & Support, Inc. reported net sales of $10.7 million for the second quarter of fiscal 2024.

What was the net income reported by Innovative Solutions & Support, Inc. for the second quarter of fiscal 2024?

Innovative Solutions & Support, Inc. reported net income of $1.2 million for the second quarter of fiscal 2024.

What was the percentage increase in net sales for Innovative Solutions & Support, Inc. in the second quarter of fiscal 2024 compared to the same period last year?

Innovative Solutions & Support, Inc. experienced a 46% increase in net sales for the second quarter of fiscal 2024 compared to the same period last year.

What was the company's earnings per share for the second quarter of fiscal 2024?

Innovative Solutions & Support, Inc. reported earnings per share of $0.07 for the second quarter of fiscal 2024.

What were the new orders in the second quarter of fiscal 2024 for Innovative Solutions & Support, Inc.?

Innovative Solutions & Support, Inc. received approximately $6.6 million in new orders in the second quarter of fiscal 2024.