Innovative Solutions and Support (ISSC) 14 May 222022 Q2 Earnings call transcript

Good day, and welcome to the Innovative Solutions & Support Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Shahram Askarpour. Please go ahead.

Good morning. Chief of Askarpour, Support. Solutions Shahram is Executive Innovative Officer & This and years. to discuss fiscal quarter conditions to conference XXXX, for performance business Welcome call second our our for the current outlook coming of

Joining me our Winand, is CFO. Rell

to Before the statement. safe read we 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 Shahram, 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 Shahram. Now I’ll turn

best we Together the our first we believe cash first of air up our quarter, business, years. growing in displays nearly excellent you, revenues with XXX% products flat autothrottle position. foundation have In markets, panel aftermarket of quarter, six attractive the $X is earnings million growth financial convergence. on six with the Thank for XX%, our our our we Rell. steady up award-winning of months cargo added one strong this to in including and continued At second

manufacturers, to by most and the domestically As being our operators continues highly the aircraft both popular OEM respected product equipment grow, aircraft is aftermarket and of our most base internationally. installed on world’s owners, some

is for price performance years, we so and We more. for remain have the XX our over success. been product plan for our formula known for This for through industry to compelling many

were XX%, six XX%, highest Revenues gross led discuss in which me our in and margins let recent of the second margins future. quarter up Now over years. our to results

Our as consistently achieve attractive margins generate scale. we model can

to we recurring for strong from air upgrades. where revenues our generate retrofit cargo Because our growth. be cargo believe straightforward. to to Resultingly, base extend years contracts are predictable shareholder market, for over of experiencing create is in air several contracts, demand we a and that OEM continue decrease production we solid any our both and does not growth have foundation we value quarter, a from production our OEM revenue strategy pace seem which our offer stable solid continue This the of and cockpit there convergence,

innovate which Air continue is King I’m development, products our will autothrottle We process reduce new One to to our products. enthusiastic develop about existing time new installation and on retrofits.

customers. We to the our receiving where process for the in are and this longer installation new Air is longer No King program FAA-certified their site, from flies possibly highly and our certification perform service King for of Essentially [indiscernible] a both Air the the ultimately saving installation. to hangers, the now to a owners owners, while our product completed at FAA introduce the part will technicians installation to time their or a money. the owners fly aircraft price week a [indiscernible] need and schedule to trained

adoption accelerate that of PC-XX King aftermarket research and results offering this marketing indicate Air the customers. would Our service rate

for product King our other aircraft and potential new aircraft, Air broadening just many such by also well. for fans We of market CJ variations developing technology, but are as other not table autothrottle as

including high period in continue relatively a that this maintained of level strategy, customer-sponsored dormant we that were invest part After this the development. level we As restrictions. a investment long will R&D. of to to we research and due quarter, R&D, pandemic Note in

that XX. months, picked trade face-to-face last more increase with compared We marketing to the and the backlog activity, up winter up meeting ended customers few world are quarter, the the This around for Consequently, flights. supply availability. militaries from I’m performing in an December of military’s and interest interest our are ambulance shows, in the more level with the and typical encouraged surveillance. rely has dependable manufacturers, test to sales we other we Like labor orders ramping on led challenges growing inflation, mentioned chain air also battling quarter customer intensity last and attending I Air after our and nicely King discussions risen. level slowdown, have many by and increasing to restore

We support our continue to customers.

We increases to overall growth. our have to added our while to safety managing inventory expense stock keep relative modest

conflict As in major in from disruption the to operations lockdown including factors, of the we our don’t of China. Ukraine foresee any today, any or the

we have the pandemic, earnings issues. and and strained other chains, fact, experienced through In many growing supply sales inflation

feel improve, pandemic-imposed our begin of We some we and financial success and continue end to are to build steady lifted. restrictions that this are As confident results. to markets generate positioned well

turn to our to financials Now details. in review to more over it like I’d Rell

you, And this for all morning. Thank Shahram. you joining thank us

contracts. cargo to and quarter ship OEM $X.X under our For commercial in have product aviation for Revenues a were been the $X.X PC-XX into let second revenues display continue In general panel we up XX% as convergence. there for term Air long systems transport, King in million, air Textron ago. flat from no the year the demand quarter up strong million remained air business our

from In to our contract. to our Boeing steady continue autothrottle addition OEM enjoy and programs, predictable PC-XX production Air KC-XXA King the we revenue production

Textron on largely and have rate. for of been Pilatus while sale quarter by lately the in with, aviation growth customer continued are run determined schedules continues any production to at these aircraft, high revenues production in Our reporting instance, this rise the schedules general a production one

revenues from at new the ago of margins of a strong that with is for we in the year. in end quarter sales up the backlog the from so in approximately compared last to calendar finished attributable ago. were In as continued as fixed $X.X our product XX.X% each at addition, six customer XX.X% Gross the margins a million, $X.X quarter. quarter from quarters, quarter of compared very last Margins a in were best XX% last with service $X.X which the at million, quarter historical XX% Total up been year of remained year XX.X% two to to quarter million the for quarter-to-quarter, trend revenue level. orders years see any This primarily were a with sequentially year mix, have the line up running leveraging that growth well as well can through costs revenues in as achieved over quarters fluctuation to you high growth. manufacturing better as the in ago outages than

XX% As year compared Research operating ago. we was ago. Shahram a $X.X the our of revenue second the model business. XXXX million or Total or to sustain revenue compared development as a fiscal expenses attractive down mentioned, to margins and million of scale were of XX% $X.X year for quarter can

We year and restrictions. continue revenue both for to quarter up R&D. were public from over target relaxation the Selling, XX% growth our in general the expenses to some year health due markedly ago past as to as XX% of well administrative

in-person We and spent on trade customer have remain We expenses marketing the shows, operating current delay. resuming believe range. quarterly been will visits in level

increase Net for have year. ago in $X.XX $XXX,XXX we quarter for income $XXX,XXX. from on the $XXX,XXX was strong million or triple per fully year last than a million the March line was we quarter last recorded operating sales more per in the recorded nearly The operating fiscal the in in rate of NOLs. income with and $X.X quarter XX, we anticipated $X.X the XXXX. million quarter hand. our XX% Return year, tax We company At of taxes the an second double or share, $X.X financial that year first XX.X% utilized had reflecting in $X.XX generated For generated quarter half cash share end, of We quarter. position. the flow all XX.X% $X.X million on million of of the in our and quarter and cash over of the $XX.X remains

a and due discussed December, company ongoing earnings result on chain challenges, level the previously the the believe the foreseeable debt continue measure cash normal we is precaution. free. a as company As future. call sufficient to added year of maintain will fund as fiscal higher the issues slightly an The of of pandemic, in and that We operations the inventory to has anticipates COVID-XX to company that than supply in

closing back for to like the some turn I’d Now call remarks. to Shahram

Rell. Thank you,

many has one first The of been profitable half years. of in most our XXXX

contract demand and cargo production up. autothrottle and We’ve our increased where efforts is air standard products market services aircraft are customers the equipment our for marketing Backlog new is experiencing and Our robust. strong convergence underway. are remains

operational the business. have team to as strong to We our a built continue grow and we innovation the creating strengthening plan dedicated organization value

technology to on execute We growth at team enthusiastic have platform. an arsenal dedicated of great and our energetic with an our disposal

We open questions. now the floor for will

go Davis ahead. first comes question from [Operator Campbell Co. you. Our with & please Thank Instructions] Thompson David

without little know the capacity concerned freight get for whether ask Congratulations come flight a company for or capacity Good China doing I what quarter. can air between market questions be lot of a aircraft the been just morning, in the that cargo a a cargo on, what couple capacity, and great it’s our the air very ready he’s but a of lack tell to concern, States that conversions I the – great Geoff sooner of but don’t – about because us conversions? right would later. job been on the cargo the you back United now, Hedrick, friend, there. for thank flat looking you’ve what the of that’s increase am types such you about I help new providing we’ll I likely immediate it’s found There’s market. everyone in been a producing. and by proud think, the are And no panels managing the you’ve to wanted boosted question – market you And and conversion and later,

comments any that? have you do all So on

so can orders, we seeing airlines on that is is that capabilities cargo add slowdown can more that our no heavy introducing that a new they services. is only on future, We least domestically. is it we cargo I – platforms various we cargo at and cargo limits the XXX. few look it a indications we’ve and Every seems airlines our platform. there’s And still orders get rate do convergence base. internationally actually quarter, those other to in constantly mean of adding world as at on capacity what we and foreseeable XX, existing what far, as activity. Obviously, reliance XXX from do places conversions. receive continue that there market what XXX There’s at the well But the And features seen the can conversion.

we XXX new We well customers. efforts, additional existing as features we the at cockpits XX And our over as look provide have the customers well that as and as XXX. in XXX existing platforms our can product with development customers

from conversions? seen the you Have demand for any models Airbus XXXs and

a right have as do don’t for We their our we We of get solution Currently, procurement a Airbus solution fleet. existing for the from some some they’re be now, the customers of future there equipment. from mainly the But indications have that of growing conversions. of we majority what see and XX we XXX. models. see will XX And

interest All increasing be right. There in to Airbus right. All seems conversion.

that something to just there that is business? you the Do from So develop getting keeps have product? you into

the platform. when the And need. And that, look Yes. resources at like engineering a something whether we competition market, our we towards again, and become deploy is that feasible, that we going continually then to see that there is

these profit Well, are Right. XX%. margins

high, do as any margins down? why are reason see this those long revenues go should As you

this stuff, see to only that hopefully, I mean, a the be be quote well. I any but handling would the thing kind we cost, way affect seem the that. don’t it of very won’t and material we

see It’s mix XX%, what product the be XX% a lately range. don’t I been range, fine. XX%, on bit. you think yes, can’t We’ve that in I why the hold, sales So in little stay depends we’ll

about the year? you tax XX%? rest And of the Do what say the rate

XX%. Well,

XX%.

you XX.X% XX%, the bit, it picture, It’s some state if want the but tax it’s up ballpark I Or XX.X% was think XX% a little big But quarter on before. effect. to works.

it get getting you’ve Air it to Well, more faster, now conversions. for it? you’ll way do those that fast, that’s Is you’ve Air look King great. got King the And the do probably conversions, been orders I to assume And orders. at can

remote That’s do marketing from – we there right that what that the Once we base get to seeking we what And own the that approvals that now once is to we’ve we’re installation that, from from anticipated. remotely. again, FAA customer capabilities allow get have. us we efforts interest we our seen will did reasonable this utilize that installation

We like it. convenience the of

sales new growing or you All where or adding is the speed demand And last employees right. it the Are increasing. is – as question with or to services as engineering company along? are in in help in fast that you

as basis. just on to but more add we I think – the do that We in spend looking do we candidates. lot it’s people. that effort we judiciously grow of steadily, and do a people But important potential And base the continue on as-needed to employee to at – right our well interview as find process revenues grow. that we see an on as And add

someone Thanks. else ask I’ll let All right. questions.

David. Thanks,

[Operator a Private Michael Instructions] from Investor. Friedrich, go comes The question next Please ahead.

you we we I attempts to on you the morning, done maybe conversion also about to be of an the more but some been will feedback give little the quickly And this month, speed wanted us on even potential had take idea been of little hearing how amount call, talked new talked are keeping retrofit on kits how of more was the process. of Good for idea and time back everyone. the uptake the place? this. take will about up be more idea from – can – it get I there customers to quickly the give information feedback information you’ve process, folks us on last last Can a a other some believe to the hand on on just you’ve and the

Sure.

installation, process internal do to we’re the week at a our one So looking installation.

at looking at We’re that customers’ facility. doing

and is where – train don’t a their go going their location the back have one back it’s by that It’s experts there come go that actually level be Number They through of there’s right over third-party they back and the then the we customer. so go to home get to installers. somewhere. airplane their their well convenience in And the then the factory and of at have down done provides other to facility. to done putting as inconvenience don’t fly airplane airplane installation as is

to do installation the So them. for go those people going are

this of XX% that we like directly would approached that that something about increase decision-making indicated and the of would survey convenience. there think I a did the because the – people on process be

FAA So ahead we decided, service. go that, get to from approval we offer this and so can based on the

doing the – the they you will a people Or employees? install Okay. vendor? said And they be installation will be the be who would third-party ISSC

Right now, we ISSC plan being on employees. them

how get – many a like time? can how of you these how many we be ready to crews needed? are approximately talking are then teams many or at as with Or a of And go many hire Okay. about you to done here? couple Will or how

team market one with then grow start team see always the We we and demand, as demand. market

And for an King then on bit approximately Can touched a marketplace you me of that how military give quick, large you the little the real is? Okay. Airs. end had idea

service, internationally, X,XXX it think there to I probably you if operations. out close at look the King in military there’s Airs government various

this special to for their for They’re we guess I a our out autothrottle. attractive. in we airplane, government. fleet They of quarter, the operator, leased it. very last mission of it fleet, features I as makes And the QX, functionality bought the installing actually in believe, had U.S. which our process their bought autothrottle of they provide Some part in

to in And want so long There’s we’re then everything and it. they’re for put approve to – budget. they’ve it, the course, going see, they they to on military takes for of got got in beginning got – to a to side, And put time. the

doesn’t So takes it overnight. it – happen

Right. use able in these you country? I’m to use every to FAA get And other have able Or are be approvals – approvals in able do Sure. you countries? upgrades to provide you sure. to to are

for we’ve got approvals But So country. it right on XX countries. now, I depends about think the

That’s Okay. great.

own. some all FAA, depends their country. on have take It They the

accept approval. them of some And the

mean, nice those run on bit. most top kick Great. and very Well, line, you’re that on little income sales to the congratulations Great. the see about coming part guys. numbers efficiently at question that no by of it when is in being I bottom. there’s straight go company to nice is statement looking a hopefully, will that the the But back

going, guys, keep and So congratulations.

much. so you Thank

much. very you Thank

Private comes from next Instructions] ahead. Roger Goldman, question Please [Operator go The a Investor.

Good morning well done and guys.

the my my and investing inherited company, feels you and that in dad and in inherited systems will also XX I the the As about have company like go. all know, started it and years belief sister

So is nice and rewarded. being patience our job,

that a as a into just we So couple rising particularly you questions. with the is a hope actively of future acquisitions rapidly And I’m Also, and particularly have and for cash. that recession are your would Obviously, of distribution. more real value very a obviously, lot bright. I looking guys the not And use has expanding And necessarily interest of cash rates. go am lobbying cash. maybe actually you for dividend. lobbying a I at good

margins, worth really of location. I again, take frankly, with think like in would have with to of money rather the this but And And this fortune and you in no – of certainly real the of debt, bold. you’re great and encourage worth to environment be favors I see position you use I’d assume cash care to mix and would in faster. the product kind expand months a dividend, months bank a six just you five – I

on Sorry, that. to you want comment

of I’m on at the We is making the plan judiciously. comments any use do to there too I much any doing cash moment. cash. out use regards that. with plans your camp don’t Without on in believe But dividends to

buybacks necessarily call, have million to expand you says in $X.X I’d if idea. idea money, spend a are But network think months balance hey, a distribution is we’re for or I expanded Yes. R&D think going $X something because the don’t don’t stock million and I I idea either. it or whatever. plans vote our dividends next six worth to don’t no a to you mean bank of are in good invest frankly, growth that said the no company better on think that. good good nothing I on cash the a do sheet, public to with debt and to

somebody his – who career spent So I’m speaking and to banking. in

I’d I’d encourage without guys I want I’m guess, a like aggressive be to you think lot I see is have I of you what to So to really be And to – aggressive, And really company. like to more the you that. saying. room betting guys just see

much. you you. very Thank Thank

remember mean, everybody I be where more. lot that’s job on condition nothing running competitors. are you to I have And And a Yes. And economic that. to no, we’re but opportunity now just is run And away, am with going going people and else when a can speak you when for doing great very guys been should in towards. you that nimble for of just get I sister, small, my scared. creates an

it. All thank and the in Well, your right. appreciate us. confidence for you I company

much. you Thank very

And disconnect. attending the also This has there concludes nothing Thank conference you now is now at time. today’s The session. you the presentation, concluded. may present question-and-answer for