Innovative Solutions and Support (ISSC) 11 Aug 182018 Q3 Earnings call transcript

Good morning, and welcome to the Innovative Solutions & Support Third Quarter 2018 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Hedrick. ahead. go Please

for is this This the I'd to and like quarter Good to Geoff our you outlook conditions business morning XXXX, discuss upcoming conference welcome year. fiscal morning. current Hedrick. the call third to

Askarpour, today Relland Winand, President; me Joining our CFO. and Shahram are our

safe I Before the I'd Rell? Relland like message. begin, read to harbor

actual financial conference risks SEC to you, results risks subject and and uncertainties and other certain XX-K, matters which that that Geoff, could from our remind listeners company's products are periods, including our materially, and Thank cause future worse, to new better in for public good other filings. call the forward-looking those is in discussed, would results or on operational the are including morning, either with reflected and everyone. I that uncertainties today, discussed and differ file statements

Now to back I Geoff. turn the will call

structure existing and potential our the -- our intently portfolio European granted focus U.S. of support patents the this Autothrottle, quarter, the second technologies, of patents XX% to backlog the quarter. and and actions business revenues better In in confidence In of while down Rell. the to compared evolving which streamlining cockpit the our implemented lower reduce and as Revenues opportunities, you, quarter. reflecting as market on well been beginning ThrustSense our has a strategy organizational year new backlog align quarter, we take third took that to Thank with of -- been a were these granted; opportunities, we've to we ago, the company were third because from costs. as increased down

the strategy many product-oriented structure organizational consistent competitors. to Importantly, with a market-oriented transitioned we've of our strategy, from

System pursue that now for in Autothrottle and markets opportunities. our will growth all all Utility Management instance dedicated So

of believe staff us new that it addressing these staffed have bring a customer the that'll We aid of of purchased markets. market with approach us development the access added will in of the other experience help Autothrottle years expertise, penetration we've and technical with improve King sales To the this because to tanner owning new We that By direct now our will further this and helps and product unrestricted development process. support to certification Air. Autothrottle, aircraft, we a development point Beechcraft contact. speed and

first another flight tested systems' will product successfully is our already certification. test, several FAA. unique we've majority existing month, This the with join obtaining aggressively can Air have PC-XX new the King first When Autothrottle this Autothrottle the that We our features. important step our of an certified target. in flight the dedicated planned to Later as large test conduct of team market,

solutions. of innovative Beyond a the interest to emerge for see Autothrottle, variety new other beginning we're

are We air the program. air to presently the is computer for in support contract demand data U.S. data new develop Navy their in expected NextGen This a find under broader to market. computer of

have modified provide upgrading future we system significant performance well-defined our are improvements. versatility strategy markets. focus and We and to our with these opportunities to existing utility on presently the management Consequently, customers

we result, As and costs, in narrowing of this efficiency lowering are a able to focus. expect breakeven our gain shed point heralding to

which impact the it's are even It too We we so process with process efforts. to concentrated may these these are changes, early -- perspective, quarter is historic quarter, soon a see we results before and third -- are of effect and in the long-term. consistent in our take the the eagerly which the of more in significant third show

we're and a prepared well remain period lowering Our and balance sheet investment undertake of continues with to expenses, strong change. to operating

we believe this growth. market will visibility reward technology proven us Over with and improved increased dedication the long-term, our of

for Rell to Rell? over it turn me on financials. Let discussion the

you for thank and morning. all us Geoff, joining this you, Thank

For or ended customer ship compared system contracts recent quarter revenues XX, either recognized from on $X.X last million including sales the revenue third quarters, production XXXX, and intra-quarter was with year. net million service, of the orders. book three $X.X months to in The the June were majority of

fiscal the overhead, For third our to to from costs revenue. to -- gross healthy XXXX, margins and margins, last margins, to stay have tend service the margin third square lower primarily due Despite adversely were material absorb thus higher quarter volumes, quarter of which would in XX% down XX%, customer year. managed lower we ability fixed sustain impact and

changes Total of as of continue to XXXX. the were of to I either than from see year costs expense during from should as quarter a However, proportion as expenses in expense reduction this caution workforce million, the Selling, the Research little volume. result approximately year $X.X product-mix the from of and in continue to million in downward revenues quarter quarter quarter general development down we committed a in lower and clear, measured and $X.X research change a $XXX,XXX investing a ago operating and is were that to administrative I'd third or vary million margins trend $X.X development. quarter, point remain a can third out result that as quarter. were in the ago. we

area. make SG&A reductions did we in expect workforce Going forward, do in this as lower we spending

loss sufficient a it, Beginning expense the the the basis payroll to of the used was purchase in annual anticipated and future. quarter did we due cash [indiscernible] lost in has was financial sales to operations income We an a cash year $XXX,XXX which At the King of quarter, position on in $XXX,XXX $X.X on believe company $XX,XXX, company quarter, net we million In for that inclusive $XXX,XXX used and in XXXX, ago only the to XX, benefit reflected a income the realize net costs. change related the $X.X with Air. to the fiscal we debt. profitability tax $X to Despite operations and during remains the in million quarter year. expect third strong due we but approximately cash of in fund a June workforce $XX million of to For nearly reported fiscal of million the XXXX reduction. believe foreseeable to no XXXX, hand

Now, I'd call turn like over to Shahram. the call to

and you, Thank good morning, Rell, everyone.

for Air King King This our model we and has aircraft greatest believe represents Geoff have initial serve PC-XX We platform aircraft. King effort to We certified model prime on mentioned, to focus. will we hold the Air. As BXXX remains the newer investment Cockpit already secure general working for Autothrottle best the the AutoThrottle certification. significant second aviation Air, and as NextGen Beechcraft purchase our the the King are made Air a on the this value GT the

safety We operational significantly a expect us capabilities in this space turboprop our Autothrottle, benefit with certification of Blackhawk that partnership our allowing demonstrate platform. modifications the by to twin will and from

test have performed We designated successfully company with already flight and our have flights installed Autothrottle our King test FAA in pilots. Air

Next evaluated of an a next stalled flight significant our certification week, we've as our development, system. we the Since delay rather is quarters availability. best we of our progress we than have primarily and revenue progress aircraft of be aircraft, somewhat King in of scheduled over Geoff suggest will reasons couple the of with result of terms This investment on growth. performance acquired the may the Autothrottle one Air previously based in had test that the been experience believe FAA that made

speed. why has aircraft provides constant such features, that innovative through protection believe buzz. fuel while Let a savings me envelop protection, and of quickly created including of Autothrottle set optimization remind a everyone safety We the engine significant aircraft Autothrottle yielding

mandate that such also of Autothrottle, in We for will The Autothrottle a believe line. harnessing an company ADS-B be of as RNP. trademark and ThrustSense product in key addition, received the has on received benefits Autothrottle element NextGen we patent system the approval our

NextGen Autothrottle the innovative to products, offering. recently industry. and manufacturers significant with have both publication We opinion Flight in most aircraft potential from have Most Autothrottle The the interest in received and characterized experts. industry in ThrustSense of have Deck OEMs received interest and Turboprop customers engine the aviation integrated experts ThrustSense has one as expressed various our from increased experts our Autothrottle our seen

from mentioned, seasoned recently our Autothrottle to Development Manager, a who added Business -- the have focus. capitalize This have product on Geoff Autothrottle market. business the the we this in market to have by well was initiative, we new recognized [indiscernible] a As we transitioning opportunity reorganized focus

for We have already PC-XX Autothrottle. shortly systems orders anticipate received We the this delivery our several of additional expect initial orders, year. fiscal

Based programs, a year million the Looking over with over at ongoing of from may orders third other statements well, industry in the on going the some experts PC-XX long our PC-XXs quarter. in term. XX program sell is new $X.X Pilatus

UMS features platform, to are support enhancement product on UMS Pilatus as PC-XX as engineering aircraft applicability well of -- additional the performance efforts the types. We in for product to other line investing for

on air which markets. we Finally, have the a strategy. continue have shareholders. building that our key in value this key In summary, legacy We we control to approach growth for our military better products is long ship performance us the centered term, over tenants believe in and our the we believe of enable to to will taken the transport our disciplined

turn me closing Let some for call the remarks. back to Geoff

now and to Thank the of many the efforts focus our we we the highest believe programs. that distracted proving be things In narrowing successful to few our focus in -- focused and the probability We business past, to you, we arrived are those of tactical on on opportunities return. decision pursued, Shahram. have can our very resources

Our Autothrottle XX the is Autothrottle. certified Turboprop first Part only FAA and

as by tremendous concentrate Autothrottle European patents. and panel line displays long-term Autothrottle, drive ThrustSense areas. that before, UMS that need addition our well that U.S. and technologies will on we efforts effects. As have our manager these it's covered are our The new as the mentioned flat of and believe product both to those We potential

While be may a our of can that believe market see and I interest shareholders. opportunity new Air be over create we root our today, markets questions. answer the your let take to play for your we Operator, and out the bumpy, new or to please. term and the I'll penetrate it and time and appreciate value and these strategy huge we the brings, King happy longer core certification

no time. And at I'm this showing questions

like I'd lines. We your And conclude now question well may and to as disconnect our today's for conference. as session, So you you today's attending answer presentation. thank