Innovative Solutions and Support (ISSC) 14 Feb 232023 Q1 Earnings call transcript

Greetings, and welcome to Innovative Solutions and Support, Inc.

First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Michael Linacre. Thank you. Mr. begin. may you Linacre,

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

turn Now Askarpour. over I'll it Shahram to our CEO,

who autothrottle, the STC FAA particularly Air type Underlying opened the XXXX strong, to our which markets first we flight remain platforms. builds Thank an announce growing everyone. with million, the us and customers. the GXXXX long-term stronger I with the fiscal for QX today and began the turn upcoming the OEM King call Air development by contracts. received you, in take of growth details for remarks decks STC Air the King I'm NXi strategy. engineering on quarter our with the Mike, Mike, our footing driven aircraft. additional followed $X.X XXXX, solid that to good aircraft This an I over revenues financials. will will of and then and or first of performance deliver comments end our XXX aftermarket by afternoon, on potential year during . We certificate our the through on volume King begin will with period, existing pleased OEM on year supplemental

more in the presence with winning XXX XXX rapidly stated with aviation. than platforms and in general is have by combined cockpit attractive supported we formula starts past excellent in our XXX upgrades This markets. effort XXX, growing products in a As quarters, growing

$X to prior mainly million first was year, mix. the Gross profit million quarter due in to $X.X compared in product the

XX.X% As sales, the prior a in of year. We our percentage in gross success to to these the innovative market reflect dedication was believe of for our customers. delivering products XX.X% in the compared our and excellence margin results

development that and in is Of engine these from products continue as our to we revenue. as XXX to alerting that additional development product invest with program and additional beginning help autothrottle, indication well. system upgrade benefit Turning well crew increased functionality platforms generate XXX, progressing trusted

additional successful to to XXX offering expect for We our years come. XXX, on platforms this solid revenue generate

the growth facility M&A. goal expand We mix strategic opportunity remain intend laser a of to through meaningfully and on short-term margins to better bolt-on this focused also utilization organic and through accomplish

an On sales in XX% the side, XX% of our to R&D to expansion from we organic XXXX of fiscal around continue in XXXX. fiscal program expect

below R&D and with The PC-XX for resources. as engineering a this are our demonstrated level development up autothrottle process as first focus our in Cockpit King remains for quarter, us, we ramping area the Eclipse. Air the ramp of the of automation

areas other operating are expanding our and customer throughout Beyond product to can specifically by that reducing safety enhancing autothrottle, we automation drive portfolio, value costs.

We product and further crew safety eventually operations, lead key flight technologies cockpit which significantly reduction. would and have to the automate enhance to lines

to I assembled as team of have In development business opportunities. December, pursue terms inorganic opportunities, have in we a noted

to existing have complement active on now type attractive our details, pipeline and first share too we the it and the that During quarter, an early product acquisitions ability portfolio. execute to identify any while line is we developed

million which fiscal fund be flows in to able expect We XXXX. cash acquisitions through and operations, exceeded on cash bolt-on the to free sheet balance $X from

to infrastructure our grow margin full to our meaningful we incremental overall and business. believe operating can we asset our increase results believe free we capacity, cash utilization generation. At support drive together, ourselves, Taken increase and total a can

To conclude, we upcoming our interest, new as on further details products with year quarters. in we we're updating to offerings. strong and the outlook the look to forward with good deliver and for your legacy and time a you start Thank a off you for

to I Now turn for closer Mike the will numbers. a at the call over look

you, I due in aftermarket by growth to versus which you commercial first all the is And $X.X declined fiscal revenue, $X.X partially our for decrease The first largely million in the of general results in OEM fiscal million quarter business. Thank quarter XXXX. first for of to XXXX. was by quarter offset Shahram. review lower joining thank financial X.X% Revenues our today. us will the slightly aviation

X The was in retrofit sales revenue received the when commercial transport the fluctuate during for may strong Demand short-term continue a business from were will to of organic while our orders that orders These trajectory. development Sales air sales growth the sales contracts, research commercial projects. quarter-to-quarter service business aftermarket development as of with was prior and from decrease primarily anticipate quarter. customers. year. function remained Customer result from or we a engineering EDC, improved support OEM consistent our from

one in the million chain include as that and KC-XXA in were backlog long-term December contract supply a Pilatus total was XXXX. XX, The from orders XXXX. backlog. order. programs hand backlog their general purchase includes the first locking our of in beyond December from million is $X.X current XX, of King only New up their quarter We normal approximately Air million the Textron as $X.X Backlog $X.X is in advanced aviation PC-XX, of with large and our OEMs orders

the increased remain anticipate production and should not a Given production decade about necessarily We in for programs in continue to to this add to backlog. already sales sales. included future will backlog total that these do increase, levels translate

along our that long-term production OEM of sales First quarter gross business, as a combination portion include a incurred of product that higher due adversely lower less slightly sales escalation versus margin quarter to was year profitable of result first a XX.X% increases clauses in increased the higher Note of cost passing all from of costs, for which XX.X% ago. impacted Cost direct leverage. inflationary pressures. and material the our contracts period operating the OEM provide

As we've model count. cost head operating mentioned a platform based employee is previous with calls, fixed on our relatively optimized lower on

long-term quarter. was We the professional compensation operating year. leverage the to compared profile year million quarter uptick remainder of improve administrative and expect returns million and to stock margin of and growth first operating expenses sales and the expenses legal the employee the quarter fees. first as in on prior over in general The mainly noncash Total account our $X.X in were $X.X in

rates and half higher of year. cash, higher growth generated from income the offset a the the the larger the funds second G&A amount into and same of by balance year. of investments reallocation Higher interest in higher moderate the into combination operating expenses of to costs in The compared prior into are to quarter was expected continue interest-yielding sheet part interest period second in the

R&D approximately were expenses year line XX% the first of levels. in and with ago quarter revenue

XX% Our for R&D expenses and revenue is expectation targeting the R&D rise quarters. unchanged, XXXX in to we, coming over of of gradually therefore, expect

the to was $X.X the prior Tax quarter. $X.X in million compared quarter first expense year million in

of or was million or versus $X.XX First fiscal quarter $X.X $X.XX the XXXX. million quarter first income per $X.X share share in net per

financing million and generated on from from $X.X net received during up the very inorganic of at XXXX, on end well opportunities. as flexibility $X.X company cash $XX.X cash of organic quarter. million driven sheet, activities positioned IS&S XXXX. XX, be fiscal of balance liquidity and $XX.X from from debt-free million to of by maintains to had the million We The of which of December significant us capitalize ample flows cash options hand a exercise stock operations and the enables

drive flows maintenance cost strong current We and margin of remainder the to of fiscal and the levels control. at the to inorganic of continue through on increasing with we organic anticipate Looking expanding capacity operating revenue growth the year. expect and capitalizing as opportunities XXXX, leverage by remainder our gross utilization generate we cash

With operator, are ready any that, questions. we for

question first David Campbell comes Davis. Our Thompson from Instructions] with [Operator

general solid And so million the different that quarter. your creation a -- million, was look to with surprised the Does you may will I acquire. I quarter. that reflect it generate every in team quarter? $X.X on continue administration or opportunities expense, additional Congratulations was you believe $X.X for that this the products to and of

And part a our of Thanks That's the last actual the mentioned. the what expenses yes, for of founder. operating came passing question, David. as But of this were the year. increase lot you $X.X was million of Yes. is direct result added a versus $X.X million really, up

our long-term not before. had forward, will compensation line we that put more in the have plan have peers a we and place and in bonus us Going That industry. with a

lot a are this having expenses of -- that, lot in a And of stock. these said

a there's cash So impact. not

generated flows. in we free that $X.X see You can of quarter the cash million

with some to corporate the not onetime that as there, the legal fees in temporary Also nature. affecting ability in So other in line far are governance bringing peers costs -- and or company's temporary as cash. generate company

some and the that in options year. related not rest other like expenses may sounds a stock the was of cost It the temporary related to this have to you of

were anticipate should first we expenses where quarter? in should So trucking, that go the administrative down from general they and

well based new the will the what but as the in into bonuses costs growth. run quarter. long-term say they well some But are we investing future team on as just rate will incentive than there, in will generally, think and I run historic be be ran I costs, compensation -- as temporary lower some from up be rates would onetime they first our as for there

dying impact? from a an Yes. And is impact ago. founders you mentioned How the that an year

own we of that issue was -- to our is dividends XX% Well, did from compensation our and time, plan. long-term founder special time former effectively shares, did,

management needed offer item. that incentive So shares, percentage increase long-term executives of don't our to own that team current replace kind of we and to a plan, that we and G&A

it, up why of up interest happened realize Is a nonrecurring much are least at it of your and this anything all that to surprised that? much about was rates sudden. a higher, was amount. that's interest substantial but And I'm -- this some that income I

If million. the doubled our cash We you over year-to-year, more look year. ended at our at $XX year than cash, from last

over have the million the had first $XX $X in million last at only We We of XXXX fiscal quarter. year-end. end

funds also cash. now well. a to accounts the higher also combination they a Interest year reallocate more it's some higher-yielding a as lot of rates are we interest than So having of ago. And did were

Have their passenger converted plan had relationship? Airbus Right. company's your to has from developing is equipment any you Do which contracts. cargo. benefited you same Boeing cargoes, converting their More any Airbus, of see the being from impact in

have continue as conversion cargo Airbus cockpit well fleet looking their -- our they're upgrade being don't we operators We to on cockpits other converted system as upgrade for to delivering as upgrade for cargo. cockpits. XXX XXX, currently system But the XXX, airline

to continue now system also that had we general. we've which augment that demand for indication upgrade. replacement steady And of together a and chunk is a take well the XXX of cockpits we're there in in EICAS kind an out as crew that are and see this, engine alerting, we opportunity offer go So additional those should putting them those to airplanes the as

and aircraft, seen tells any aircrafts, customers I've seen on impact several down. your where that capacity UPS for that -- demand is FedEx grounding their me older from you their Is which that their trend? are of have

of up see Not to has XX, that some and of to be don't few kind the between, us million I of been anytime to going always $X years out some years be the a It's year. getting it kind years XX We going aftermarket down it mean -- significantly. get then to I cyclic. are less. guess, more, going it been million I range have $X varies -- this soon. a on goes always for and has

jumped years but levels. freight Well, to rates air down X now normal they're ago,

So as the same the they But airlines think... I aren't demand had. factors experiencing

But the significantly. up passenger's Yes.

It's our So the XXX our is cockpit applicable. into not tied on cockpit Icelandair mean for is one provide and customers, necessarily the XXX, passenger. we of operations. a cargo again, I

We Instructions] have time. This concludes teleconference. today's questions, no [Operator further at this

participation. time. at your lines this your disconnect you Thank for may You