Innovative Solutions and Support (ISSC) 11 Feb 212021 Q1 Earnings call transcript

Good morning, and welcome to the Innovative Solutions and Support First Quarter 2021 Fiscal Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Geoffrey Hedrick, Chairman and CEO. Please go ahead.

Good morning. Hedrick. Geoff is This conference of discuss conditions fiscal the outlook our the and performance first for year. quarter XXXX, coming call to our to for the Welcome current business

President; me and Joining Shahram is Askarpour, Rell our CFO. today Winand, our

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

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

call to the back Geoff. Now I'll turn

revenue on managed bottom in cash industry. maintain of you, positive and first impact We XXXX our in fiscal profitability pandemic's our Thank flow the Rell. line the spite of quarter growth, to

mitigated retrofit Although of mix, on pandemic a the balanced has and the our COVID impact on business. somewhat OEM

has our operating is the our growth slower in year's expansion However, the promising steady and revenue quarter in our demand from the but been in year which consecutive growth. in This impacted third revenue income a was quarter. increased first and resulting exponential previous autothrottle first

XXXX. a cash shareholders share $XX finished we that together COVID-XX safety declared customers. special Reflecting have these in against and results million -- in nearly calendar business, achieved December, to we September, backlog per half over that with committed of we And implementing the of our was seek with precautions $X.XX of Board dividend, addition, this In per the Directors a suppliers in ensure our end of second while quarter the confidence quarter. greater declared our dividend of than the employees, to the the continued a we to that returned maintaining $X.XX $X.XX

condition financial in debt. and cash with of no flow, our excellent As we strong a significant result remain liquidity

We Textron that Choice continue Awards, awards and highly making offered a standard capital access aircraft expanded IS&S has you and it. on by on our its announced annual our with are bank, equipment These XXXX as available to technology have, few editors operations. Spacex that we our -- by greatest and King to of XXX, Air influence they -- leading from on senior with Textron, Garmin. our need opening initiatives. X their products strategic however, with a weeks speaking the publication and distinguished Editors' have to awarded product ThrustSense along autothrottle if several new credit line safety awards selected just aviation expanding that a make we based ago, industry one we for on weeks prestigious our Flying progress their Magazine, Textron. anticipated the revenue the further Since

OEM the names to Textron, the expected these are value revenue All years are of generate recurring of of our contracts most of all Pilatus and next significant few contracts some respected industry, and the Boeing. with of over

we impact, where the direct are we and capitalizing of growth they service network additional are these their promoting to In relationships benefits. case centers the are of addition In Textron, creating autothrottle are their global opportunities. on jointly

support Chief than the market better much retrofit our next centers toward of We will presentations product beginning of with the and go OEM maintenance opportunity month, Test on month right The Pilot group. X the their service at now. to the by is

as is transport aircraft. to adjacent our and more broadly Textron military, their markets, multiengine in creating general and making portfolio. air success are adopt progress technology working The such product the across technology market of our We with ThrustSense aviation several opportunities

cockpits products steady legacy long-term is there The contracts, has -- sizable to committed Jet Upgrade passenger seeing generated for recurring airplanes. decrease of to Autothrottle new Eclipse place of steady those shopping has the remains the aircraft and addition recurring strong The revenue miles these our recent from a conversions. and refurbishing and growth the introduction customers. for demand. our online upgrading the used for the strong with are and ownership preparing vision synthetic aircraft new carrier on XXX A XXX of generated In in and orders air cargo made choice demand to

their ship of several XXX sets who own delivered decks creating have expansion. Amazon, flight to We is fleet

demand of cargo flat our panel see of as technology conversion for the display to continue part We aircraft. upgrade these

of strategy to to are continue light the first year Rell innovative new focus virus' that turn the to start our fiscal over was for The and our to on opportunities value shareholders. on create a impact in industry, we I'll quarter reasonable our now. confident will

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

current expand growth under in demand also the line quarter to of the of Looking the the X% reflecting and million, Autothrottle we down flat year. from increasing with in revenues our quarter. revenue ago, aircraft our as year innovative XX.X% from consistent to the expenses investment were display year up product quarterly revenues, year of increased quarter. we cargo well as marketing much expected XXXX development. the services. result year retrofit by first This increased air levels growth a unchanged were in partially planes. such increase direct fourth the in anticipated marginally were both averages revenues which Note fiscal of onetime for for by as that Operating a primarily operations the to the the will show balance from and were to an Air fiscal ago operating ago staff annual million, the costs reflecting through in were from expense quarter. do of the incurred the COVID-XX. at staff expenses general This strong reduced quarter margins ago product $X.X be can and that expenses million the in administrative first to audit. new they preceding expenses a commitment transport allocated control was in of were for remain the quarter. increase over quarter brought in leverage is Systems the of and conversion Selling, sales the operating $X.X further remains attributable and and quarter, XXX balance XXX about $XX.X Total Margins Gross XX% year marginally as with demand fixed is Research panel expense quarter, we programs basically steady efficiently decreased priority, of reflect development believe an in development offset as XXXX. to expense first quarter as Research from operating contract over meet costs and up not year. air and typically XX.X% ongoing cost rise and from historical over sales in the arising to programs King the growth December increase our expense a development compared Warranty ago increase of increase production quarter, from the and

to year and per in decreased the quarterly income quarter. or quarter. cash net this the interest we quarter, cash company or interest marginal on the reflecting a decrease XX, ago in lower income $X.X the a to $XXX,XXX balance financial of compared strong reduction in is The to ago million at position rates due December with hand remains generated year XXXX. increase operating in share from year the For $XXX,XXX of as $XXX,XXX, $X.XX income $X.XX net This net of ago compared reported share income We a of quarter. income quarter,

by cash the we approximately Our for $XX cash of cash of position in sufficient positive has fund is Consequently, flow million future. quarter, $X.X foreseeable of positive year, operations cash dispersed flow net is We from debt-free. the being the dividends operations. fourth to company full nearly believe the offset anticipate million for the company operating

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

the the now production you, and and growing last brands revenues, we results both the our first proven but aftermarket working good existing and trend that the Continuing Thank the morning, revenues a for cash over of reflect generated This technology ongoing focus years, quarter contracts, couple in on reflects upgrades were positive. our a our profit the flow customers, of for new grew markets, of products in airframes, existing has OEM respected These growth industry. best everyone. recurring to new diversity among and business on formula back products. the Also demand the the from the of ThrustSense legacy in stretches and most to be high-quality of the Rell, success.

potentials us at those King XXXs King the C-XX of until fourth market Air increase later PC-XX Pilatus noted, look Air a delivered XXX retrofit service. the volumes. some growth and and and are general transport, across in is that market versatility beginning the at rate our time, performance units, production our run that all contracts larger year Textron markets, of suit. are to to at follow to autothrottle Initial up. will we X,XXX have Textron And been Estimate Air has the ticketed contracts version delivery underway shipped is sales full our approximately for aviation our ongoing King be air not for quarter. simulators, While for in currently million production the commercial been ramp King have XX are this rates including military. as opportunity to with follow, not Air Textron enabling is $XXX opportunity. in The the aircraft The new KC-XX scheduled

our with aviation we and a business multiengine to as regards well. manufacturers instance, in markets of autothrottle, twin but aircraft in turboprop, are twin with only the not in military jet, the For other market, conversation both

pandemic, down potential some is slowed the of due real have exciting. these discussions interest the and the is to While

program recognition delivery safety the has programs, to Award further level. rates and have We technology predictable, highly reviewing such for to Briefly recent run and always, greatest it's aircraft at some program many influence on expect for continue to and years, been offering Editors' steady this Flying based Autothrottle encouraging our on ThrustSense successful, experts, Magazine a as operations. Choice aircraft stable remain of believe ongoing As industry our products receive PC-XX revenues. will recurring from we that

As the and and aircraft. of traffic They shopping now cargo to the acquiring cargo carriers XXX ongoing passenger XXX aggressively in growth online decrease mentioned, as Geoff dramatic converting planes. are air

and for Display such technology. Amazon XXXs believe convergent large conversions, lead steady these available customers there part operational our are to XXXs a Flat installing we These for display panel which carrier Icelandair, DHL Panel flat cargo still demand As of are Systems. are retrofitting, ongoing X,XXX number are and over cargo -- as our and our will

production profitability. and our revenue Our provide is steady a our recurring KC-XX of to continues contracts, to OEM Boeing one program X with contribution

and Vision enhanced our are maintain technology, this we upgrading its we just with cockpit and for our relationship which Finally, autothrottle whom STC September. Eclipse of past many their Synthetic received owners, with aircraft

orders as quarter of New the any $X.X fourth XXXX up fiscal to million, $X XXXX. XXXX, from in compared first December of is of quarter an Backlog which also $X.X was million sequentially increase XX, the million, were indicative of end necessarily of the and the previous quarter future Backlog also book backlog. revenue business of at not that is intra-quarter into end one comprised the went ship quarter. as is orders of activity

quarter, our pandemic mentioned with the progress pandemic longer ability term, flow. some positive not directive. As and ability or with do work-from-home are the is otherwise to to limited our under slowing last growth the to profitability the temporarily customers I in cash as that to the are overall personally headwinds well generate have meet we drive FAA, of and alter the anticipated. These expect prospects our would which work we has operating materially But as first impact of strategy

Geoff to without protocols productivity how some to of quickly me wellbeing. enabled let remarks, safety jeopardizing health, new us turning has Before with employees back our operating for call this procedures effort their or our safety note standard closing integrate the the to and maintain

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

and is cash off The Thanks, revenues solid flow. a Shahram. to up, fiscal strong profitability year start, continued with

to in is your even your our you support. ongoing Thank with the create Thank half shareholders our please you shareholders today. greater calendar for you for for the for in million to Operator, XXXX, coming. turn you dividends long-term. continue the and for have this value effect business Thank to your build intention audience nearly for Thank our questions. over encouragement. it of in We rewarded $XX second

first The from Campbell David [Operator Instructions] Company. of Thompson, & Davis will question be

quarters coming thank good very you a on the your well an comments revenues pandemic That for begin optimism will of for have I hopeful was services. the in your I'm various Thanks that today, doing Campbell and very your for company. and and special also family, by much. much products -- to the to dividend job want thank needed despite for in December. in the reflect impact you you

to continue of some expect these will should. profits. one optimism probably more I'll I So But produce earnings I than estimate meaningful quarters, your

with If let you me please have any know. that, problem

profit. Listen, I'm company. the to have the Remember, shareholder first guy I'm in the more that wants largest

So of I'm good I Keep profits. want to have the work. you. with lots up

Goldman], be The [Roger from a next question will Investor. Private

aviation. the at X of are who Well all the incredibly in number market? There I to the any airplanes how? spite Have done, in delivery being Geoff, are There's about looked playing already expected have if you in start-ups of with these headwinds well-funded lot of that so, very flying And next quarter team, attention years. a future a nice airplanes. very question as given of and battery-powered battery power optimistic.

haven't. We My that like judgment to no, The quick little market answer more would it's definitively. is see is a the we terrific. develop

of can that a lot other means. you motors can't with You electric things do any with propulsion do

how -- makes us full lot One its continues energy years for it weight. source problems XX as don't carrying and remember in way of going Maybe to amount enough good. huge charge, the a produce will I know fuel be probably lighter want there's Shahram the be drive up a like because for looks reminded it doesn't landing, use that. would do to you take, to is And the difficult. gives last so latest XX to fusion good motors. reasons telling will to It's new don't The be trying long but of a get to hydrogen of at I years. That it energy to problematic. have that you're any XX battery a years. carrying of you're load more it It it energy a for we're

much delighted So conventional it the in meantime, will watched happen, do to We're was ever that in the very it. interested sure. this when. able lot SpaceX Flying, And just awful there, because landing out an we're There's amazing. aircraft demand. selected that I quite I'm don't they of know towards booster, NASA, focused by autothrottle. our not which interesting award being it was for especially Having

small if auto -- people an we can So the bluntly, there. is did me a achievement. like upset in on land FAA And we're XXX airplane. airplane promising us told work today business. that think a bigger We'd getting believe huge The to XXX perhaps auto here It Garmin the lose save they to demand also a a That for going is certification, of a year are in hell to that We're accidents. is or a land lives. to as say a that they an and job do happy that -- for doing humbling.

[Operator Instructions]. question Private The Friedrich], from next be Investor. another will [Michael

forward, jet autothrottle in had the I you about to market developed and me guys you for advantage going the little to had Can the that to ThrustSense that use that already have already existing over previously, comments. the prior know twin would that ThrustSense, And an bit twin in market jet talk looking you the be a Eclipse what mentioned players in market? are you there? you

proud We all made if we It's airplane rolling those Addison Addison crashing board, years it unique our and equipment patent ahead And problem is for its one throttle biggest of happen and deal airplane, reasons mind, big unique, any my is be the the vision on to we that autothrottle, the airplanes, to put Kind modifications to that actually to airplanes to as or structural count prevents -- Vmca see protection. people Texas on is, you I Textron, the huge on We and autothrottle our for initiative a their -- did. to all. whole put of Ferris, say really of a the reasons it's Texas autothrottle, XX with into our beyond killing contacted be make who a the in. an as of of that I'd huge market. one the if important successfully. back one quadrant on to patented the number And able happening. airplane. upset try only had it, go other And We're being one Air a one that it by, people. partner them to So they the news the the XXX X,XXX with people airplanes it retrofittable. are And a do autothrottle over is We've were practice. the put and autothrottle, over and new with from probably to Textron and actually the the engine -- new want other build really quickly been in a have put

things. $X.XX temperature the two do it could engine, control to damage pull which that we overhaul. over or it, kill So have you you. airplane million million exceedances $X of you if protect to And to We loss costs the accidents and can

all do those achievement. the of case an aircraft our make of enable it without version of to -- a that's amazing it latest And now service. would So out compelling taking we're it will us and

retrofit revenue I losing can from the without we do a think the aircraft.

great. That's

area? done is which other -- know Air Addison though, So different be market. Geoff, on will marketing the was you'll of Eclipse. form ThrustSense I'm that the the the twin to jet back models? Or autothrottle more specifically being to to a King talking twin in jet a there was, situation, Will the question, about I that autothrottle applicable be

not if similar, identical. very be will it No,

what is turboprop we we turbofan. speak a features of have another use way -- fan that we Like say, with airplane. conventional triple it are And engines, Eclipse a safety you think offer slack to OEM now as market airplanes speak autothrottle there we menu out turboprops, it and a Because turboprop Air, of turbofan left able one I And are the -- engines. expect of -- there -- looking turbojets. an was airplanes the thing we King went jet difficult aircraft and that as X,XXX -- same control very a way no other is system. the at out were were was the the do the offer they the We We had controls turbofan because and amount talks problems to in attractive as fix the virtually another doing that. we and the the we so engines enormous with autothrottle. were to The for to no reason the and

So that's we solution from the have a people continue and interest show we'll industry. unique range hopefully, in broad to of -- a

good. just Okay. going Can right you Good, from talk you Geoff. question, on? work-from-home they're them to with hear you FAA have pending applications now said doing And you Other that to about now? waiting what's still like them you're with program. Do a the on right

SGO to some guys an answer. with good. us, disappeared from Yes, out respects, waiting for way. outstanding have and gone We of from used home an Boston, a we is you I job. working on they've an and their but ACO reasonably bottleneck, they've home, done would just our In typically they've But is gone working tell that I where -- have we're while we even lot. that dealt mean the they're

people them people and I want it's that and X be to key got don't to Board a and from We don't XX% desperately do the job work performance. an the because that my years, tell believe done home, believe instead I so I our conscious We what. FAA tell to a retired, to come resource working to through to don't want computer. been happen I'll be hour Phoenix I the my have on effort careful, employees I of way, last can getting work don't have do going we all fly years, responsive. jinx and you, to got mature, and I meetings We X anymore. remarkably normal on want in to us, huge very of the hope X has home. maybe meeting by that you're will resource of as to we're talented leave much from referred them. the tell having in we good the you Our Working And early and we company we by conducted focused chit and it I'll busy California at keep age, to -- early bring go it. from chats. for remarkably to them, our Board move to

job. Now, you focused relationship, miss all that's unfortunate, the personal and are we a on but

how So it's the figures quite actually tell it, FAA right If out good. you to I'll handle now.

well, very, done it Boston's an far, So very outstanding been doing have job.

you have that beyond Okay. them? with applications in Textron that currently Do are are

Yes.

partner large aircraft X,XXX. the understand They over existing to In But the it that put maybe it aircraft and And relative maybe fact, recognize that. that is savings, in on the valuable this course, a and is importantly, Textron's the airplane huge of yields savings and been engine, a importantly, they, lifesaving. the immediately. a maintenance portion and most on cost -- relatively modest fleet investment of good to terrific really new it's did of

us exactly build We're positive. at the on X very the military autothrottle an -- X airplanes with several bigger turboprops same that with are aircraft, same bigger -- looking multiengine we're engine them right and asking people we're So now getting requirement. for much -- to airplanes

Right. Right.

Okay. I'll run. One let Geoff, more and question, you

that the color retrofit little impact more can of it little are COVID can't kind you they getting -- of hurdles the with briefly the affecting more people touch of try that mean bit up visit things take autothrottle. all and in actually what and I rollout a to you of -- give can't have the in just is out. here Just plane on person kind Does the going? what the sounds bit more this to idea actually this like to market a do on the

on take a I'm But a the at no clearly look problems. of let's expert couple Well, it.

travel, you don't used your the although demand And day, an COVID. like things of there's an finding places, in have own increasing go every airplane, you is probably -- interesting kind to so and we're hop at airplane would -- jet don't they're to, and We who you their risk people airplanes what way is you go yet, want running in we small they're have because to leasing or market they friends Florida that have the to to shots make trip. to airplanes

that doing at with see they So area. lot launch And you it live basic I more the much upgrades, a -- But about for and in. stay in so people fly and going of healthy mean tuck I they're don't preoccupied we're how stay all do how to to worry problem.

So that it our to our impacts impacts the customers. talk to ability demand it

visit no, We customer have can't very I him. a who's interested,

it that would with, to demonstrate our people we limits that, have and We like too. airplane

it's it's So one. That cases, impact. pervasive in looks and some the but subtle like for it a huge last sure, has

and time today. for attention you your Thank

you. you always you we'll do investment. Rell, If for and and your Thank have can your for an you questions, again call get answer interest

you. conference now presentation. concluded. for all you today's attending has Thank Thank The

now great lines. a your Have You may disconnect day.