Innovative Solutions and Support (ISSC) 21 Dec 232023 Q4 Earnings call transcript

Welcome to the Innovative Solutions & Support Fourth Quarter and Year-End Fiscal 2023 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Shahram Askarpour, CEO. Please go ahead.

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

Rell CFO. Joining me our is Winand,

I'd to provide begin, information. about cautionary Rell like we statements forward-looking Before

The including everyone. operational Thank and the in differ information. matters risks morning, from forward-looking statements better remind those contain are new listeners and could I assumptions, today, products about periods future you, financial Shahram, for and worse to that forward-looking and cause our subject results and or discussed. those discussed conference actual would good certain materially, made that call uncertainties statements results to either

disclaimer of a along the assumptions, regarding forward-looking I uncertainties. in call which filed filings specifically statements referred the included describes in release, it our end which Form was X-K other public disclaimer, yesterday, these our listeners' with to and earnings at risks attention

our listeners any forward-looking expectations and place on reliance also of we undue listeners should I date as only that statements. today's remind speak not express and plans

I'll call back to Shahram. Now turn the

us by quarter Thank full our performance call to products purchased fourth remarks will the turn you, year I begin then on through and take I the financials. Rell, long-term the fiscal back XXXX, the Rell. with in growth our recent Honeywell will today comments who followed plan including on and strategy, and will licensed.

increasing from the quarter, up ago. For a year net were with XX% revenues XX%, income

acquired sales, the sales as quarter the in driven end continued growth aftermarket of production XXXX at of which our June. contracts full were year and as results we by fiscal Honeywell product Our well organic

Honeywell margins, third up supported Products from ago. to similar which the the were a strong year anticipated, As quarter, and sequentially our

revenue strong and cash cash our in of strong another generate consecutive fifth the full to June growth, This year acquisitions. strong the flow for to continued reduce which flow, quarter also have led year earnings. fourth borrowings used contributed our We to increase

the hiring current expenses auditing technical and cash further Our acquired of also the the significant enabled fees, to has despite for and quarter our borrowings relation legal cost products. expenses, training new heavy in in personnel onetime paydown of incurred

to is been have and total to of a supportive growth our strategy. that of are with loan week, strong the line a integrating $XX as performance bank enabled agreement financial million the growth our the It quarter term reduce million. fortunate to PNC, bank great steady, noteworthy our over our that they our burdens substantive a $XX less these bylaws, relationship credit of from amending us to delivered than very the We This events, has profitable we Despite converted growth. as acquisition. despite have our million revolving debt fourth our results additional operated team negotiating nonrecurring on facilitating maintained track and the well achieved year we record which that past we by subsequently $XX

sustain is the acquisitions. momentum longer term goal through and both Our organically this and near to growth leverage now to this additional over

sustain Organically, to and of area in aircraft. level motion. to automation have in in plans innovation we continue will cockpit several have we end, ultimately that further especially transport pilot the our in that investment product to development, and To lead large operations plans research of high single

reduce pilot safety. to workload is and products improved proposition that value focus Our on to continue

our displays add as automated to we technologies, plan capabilities pilot alerting to systems. existing checklists and to flat instance, include such emergency For panel

will stepping help as We market stones single flights that technologies to prepare serve pilot for the aircraft. in air these expect transport

of generation awarded for recently contract were UMS a development Pilatus. We second the for

eventually be and expand this the can step we aircraft adopted will process, create along platforms will as anticipate autonomous path such flight. capabilities and improved technology new of to AI second-generation that the another the versatility UMS. constitute for that expect other We In

order new price, potential that and to the the market. adding face process to business, slowdowns of of business' overall increase retrofit in are cargo any cargo in protecting in products this in leadership content our we conversion our selling in expect revenue features we maintain In would allow the

Our domestically pursue autothrottle we the business OEM platforms business airline have to well and our to the group, in has development with sales increasing Textron grow we military working markets. and continued our by and Across continued regional internationally. do marketing activities to both board, additional and are

relationship our have of products. which to in us front products our of new can a we put buyers, to that of Honeywell acquired broader set them range The introduce team use believe sales

technologies we leverage our to offerings. Secondly, product acquired expand plan to and enhance

adjacent an buy products. Honeywell our to have technology to with capabilities. the had integrate own our lines, the example, and radios previously We on now into open product As market we

this such and develop product to achieve our ability needed Acquisitions new eventually as likely are accelerate our to autonomous flight. existing complementary portfolio will to technologies

believe top to we XX% on we annualized progress. Those result has pace growth that integration direct Honeywell fully a once line As are been are achieve this steady making acquisition, the completed. of integrations

than and September are the and Having expect training quarter the be purchased by some the the second accelerated and results quarters the of quarter the XXXX, anticipated next, in integration our we results to installing employees. the this in we moving requests, our of deliveries arising disruptions over the current planned, and of inventory, first quarter. and customer equipment the XXXX next As QX from the XXXX. weaker facility, into of we FY Consequently, some

the strategy, acquisitions opportunities to continue plan As and part acquisitions, arise. additional other these complementary we growth our execute opportunities second evaluate of as to

and time your for in you you quarters. interest, the updating upcoming to forward we look Thank

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

from today. licensed will Honeywell. and XXXX. from quarter and Shahram, to thank you the and up Revenue our for financial fiscal the all XX%, joining due the fourth for products results was I you, in full Thank review the quarter of primarily year of fourth sales purchased contribution

the of products, noted, first As was XXXX. Work pull September the have production equipment as anticipated of of be the to movements other before slowed that and and included by in was to second disruptions revenues are which this meet integration quarter an quarters delivered the otherwise inventory delivery size been our fourth the Shahram undertaking and well quarter of in as in complexity. of would forward accelerated when typical some commitments Honeywell

As a and we the next in current results be the results than quarter result, XXXX. expect of QX weaker the to

from of the margins XX%, the better result Honeywell as growth quarter as a of improvement gross both the same a absorption third and fixed the Fourth the year sequential quarter ago. overhead a products. unchanged Margins quarter revenue of the reflect margin our was of impact well as from

of research quarter expense our commitment fourth the decreased and but In to sales. with terms increased consistent fiscal relative innovation, XXXX, development in absolute to

that we research our existing product base. continue mentioned, development works and previously increase features the Shahram to company will as to develop As capabilities to anticipate and new

we rate. product into the spring, somewhat expenses what normalized integration As see line remain the continues above Honeywell would expect we our to run as

XXXX quarter selling, fourth the expenses higher administrative associated of The and and costs professional expense. with reflect in general Honeywell fiscal amortization fees onetime increase including legal, accounting, transaction,

of due was quarter expense in gain general reduced the the aircraft. In sale a company's $X.X of XXXX fiscal fourth to administrative PC-XX and addition, by on million the selling,

to our due associated increase borrowings rates reflects up consummate interest deposits. Interest costs to income in the quarter quarter transaction. the on in an the used with cash in Interest interest-bearing was Honeywell the expense

only down, rates our expense facility. terms pay to of fall, We trend expect under these of the are interest also but interest not continued due to down as anticipated borrowings revolver to

was to of million of fourth expense from million XXXX in the XXXX. compared share million $X.X per of quarter $X.X fourth $X.X quarter net $X.XX per fiscal XXXX. quarter income share, $X.XX or quarter was fourth fiscal $X.XX or the in the Tax million in up Fourth

$XX.X fourth XX, quarter September was orders fiscal million at of new XXXX the million. were XXXX approximately and Backlog year $XX.X in

are due always, of orders all revenues included are meant and of provide a to ship the are indicator intra-quarter Virtually, As an not that future in can that backlog. quarterly revenues. Honeywell to book not the number orders vary from factors

June Cash million, about XXXX at from XX, $X.X September $XXX,XXX was XX. up

we our credit. our This million as was presents revolving expense. Over the million loan swept agreement, line reduced be of against flexibility will cash reducing to $XX terms is acquisition company's of also XX, thereby the the loan opportunity its the ended daily of balance credit debt interest combined $XX our converted of term by balance, credit line $XX expected the months when company it Under the million itself. company revolving term line next This the outstanding $XXX,XXX. with into greater the revolver X XXXX, week, revolving September allow

that so than of Air has current the and to the flow noted, cash been fiscal aircraft $XX the significant including previously quarter million. As to of has a improve less XXXX King into debt net company's collection $X.X reduced amount for of million receivables the sale position continued our

With from ready generated year, the the For operations. that, flow $X.X operator, of company we're for million questions. cash

Instructions]. [Operator

The today first Litchfield Theodore O'Neill comes question Hills Research. from from

A question the couple of first Honeywell business. the covered you this presentation announced you questions, and when in your acquisition may have of

the have looking for then what in acquisition I to the impact wasn't impact wondering more going on the combined operation As anything acquisition, impact was SG&A? And Honeywell is it's margins the I through of on And was integration forward? expense forma pro unaudited and going R&D there there statement R&D. broadly, for

impact initially for going It's R&D. the year the your on at So a to I'll first -- first is question. little get very least be

forward, run this, R&D, some of and R&D going will will these of require more we as to let of to some part our dollars. . we're make amount to our those not be modify with closely significant to are put it Going There programs that equipment -- we're that designs work going of some equipment. modify me we It the suitable

The G&A. Yes.

bit. be was audit but a relative yes. -- little little it a will the still up somewhat what it's in legal incurring still be fees not to elevated, it bit will G&A So fourth We're fees, quarter,

I accounts year-over-year? increase can Rell, from receivable read this anything in into Okay.

Yes.

all a customers and vendors later out So XX days. depends big quarter right? cash or it So is things shipments. of went had and on lot We a the out, had are the -- when you we receivable ship later some shipments

collecting all. So it we've been

So atypical really, as I matter but little for helped . a it's it's that's timing. quarter, a this of but said, us, in

And is change year, for going the sense. much then makes concentration it customer Yes, the acquisition? that Okay. with the to

customers? the of Concentration

your like customers. X Yes, top

extent, it Yes. some will. To

a partners we're be channel to that going get it major are customers all approved. the there's being going that -- to of couple going think to I

So it will change.

John question comes from Moran with Co. & The Robotti next

debt The up question and net going the size that down... Or acquisitions? is relative new that the that a to any is of level just to is your absent you're first the reporting business, in around number And sustainable quarter.

and It profitable come cash, hopefully down down. we're depends. going it's generate Yes, as go to it continue more to will

now. But lower cash, relatively we So borrow I just become sweep to are net-net-net generate going snapshot again. lower of more the as if and and time. just our you gave our a account, we all to we where it's cash But

expect it we to keep decreasing. So

we still..... Yes. I mean

So cash oversimplifying to I the that into am since deal? generated it in $X of the closing million read you've it

now, this now. sold When a quarter receivables, we recollected I Mostly this plane.

you're -- really the it's now. from So X/XX taking it into

we're money is Honeywell's [indiscernible] and lawyers Honeywell [indiscernible] years company on Meanwhile, a account X of books. like big spending on [indiscernible].

the does in up what in had in legacy down. it's year, seem something I and The around were just you're That the up there business. that's a that, But reporting and you that is know driving dramatically other fairly quarter particular? was there gone I from the where -- orders question for the been backlog

the previous kind years XX mean, which big have -- lines, we've different Pilatus, yet for a got another I a actually XX, contract of year, product of the us from guarantees on new to organic this they our platform... kind

give POs they advance. And some OEMs, us of in the

us gave they And PO.

this it's this it So what is quarter. was

I'm sorry. Yes.

I but So right number, that don't for me. it have

was were $XX I remember orders backlog mostly that. related million X%. to at or new million. That's So I that X%, something $XX X%, running what's they and Pilatus? like can't and mean

A is. lot it of

A it lot is. of

it's Textron. combination, got a You mean but I volume modest. is

question Odinson comes Partners. from next with Andrew Rem The

was break the kind provide of detail the on the out legacy a revenue? little versus How you bit contribution. guys kind much Honeywell of on just Gentlemen, can or more

that now. It's right on call of do this to hard kind

I think our.....

Yes, break to up. we'll have it

will There contribution to note the exact be Honeywell. as of within that

that? You guys XX-K. can that break Is out in the

to going it's where That's go...

it you I going I the have we -- one. then believe have be to all this And ending XX-K, think Yes, forward, year. will to

still on Believe are it auditors working not, or it. the

So be that I hard. will never it imagine

is Everything hard.

will R&D Last XX%, guidance. wanted reframe Perfect. maybe said can the you guys year, of R&D, to updated necessarily Okay. given push maybe On Honeywell, of think guys it about resources. R&D? you're kind give you lot a you XX%. to doesn't But like just R&D consume just thinking But it kind I sound how you of can

Yes.

is million $XX-odd of I XX% guess So million. still XX% than of less [indiscernible]

increasing our R&D of growth the percentage So Honeywell size in as that of is our which these our terms department down, of going internal some to a of and revenue, come percentage strategy. from value, using the further products revenues dollar go to engineering

Yes.

absolute than So be it but you in that's a increase terms, going will sales go of percentage higher to the faster than see. growing, would as

relationship see that you'll down. go So

-- in break out will then what And related kind of guys fourth Okay. in guess also the of or Q, the specifically? I items, either like you these term sounds both in short some quarter onetime

more a will it's of comparison, be yes, Well, kind detail. in the yes. but it little addressed here, there, bit In the said MD&A, what I

of in million onetime QX QX. think I $X over the expenses this was just

the back add difference, look at you -- that's really If if and as you it, at the..... million look $X.X it

It's we not are to better quarter going imagine is $X in million. be And either. that the any I can

It than sitting [indiscernible]. high be of will here but be it any will as more [indiscernible]

left And do? can kind in what Okay. completed then update have of is and to you integration, the give you what of terms guys on an

Sure.

radio of the we are completely the here. and our We've product side. got So actually that's And performing one train people on. is lines on

December On going transfer reason going airlines time in move the market. line the all training felt in were because the of impact that, and product and the their that period it November, that is the the to to And holidays. for that do may IRU side, after doing they that in that And air that, busy period. it's nervous for very occur mainly the equipment we're is of the transport

had daily on make when final it, unpack disruptions the team. this here, basis no a customers integration works, people, equipment, them right? happens. Obviously, requests operation. slowdown pack doing stage So base here, the come during one in were that they about this we there's a occurred work the shift them There I'm evaluate sure with think radio these -- to here. we be Honeywell each side, of on because our on test -- team And on team of from all make of they then during sure all works the that make period, to sure these the a daily to quarter nothing inventory you has [indiscernible] everything right, training

QX. Which is why the pull forward in

and January same have the happen to quarter process. going the stuff, quarter, And to next the That's is March up IRU in again, with the thing where, set here. they to be act over

All Well, quarter, Thanks lot. Okay. a gentlemen. right. great

Next question from Services. with Ruth comes Doug Financial Lenox

Congratulations X strong is now What with family? questions. Hendrick I on quarter. company's the the have the relationship

all and people. owns are, the And family have are but managed Hendrick's the also on dependent to have enough number by different within of below that them, the state that they by trusts owns reporting guess, each they're the significant managed They of shares. people threshold some requirement some them shares, none I different

the is. that's it way So

much no point they're the member a Directors, too on Board then? any relationship not of at this representation family with There's and of

No, the from be represented Geoff already on the [indiscernible] or passed Board.

question then relationship and the All the shareholder, involved? a with asking with there interaction right. Board is the large seat? he second Christopher entity? company Or the Herborne, he any is And his for Is is

we [indiscernible] conversation [indiscernible] ever always I hasn't. with to it it's the regards [indiscernible]. business have said if whether relationship supplier companies, but No, [indiscernible] any

in final some management are then period? Maybe you there? a buy eligible and you Or this members at could the And in Okay. offer time? question, stock advice the point blackout to Board are folks team, the are you

the you business -- before can is third until.... period blackout a the days begin period, and earnings period blackout the lifted of then get the so quarter the you blackout and is [indiscernible] On day end XX don't anything

question comes Private next with Roger from Goldman Your Investor.

with surprises done. good First news? of so go. either or exactly the any bad This all, the according connection, well far really way told going it you like And integration, seems that it's to in us congratulations, news would

knew communications it's internal company it's a Surprises, end, going from of be challenge, Honeywell. the but within level to large a my it [indiscernible]. and navigating was I

group you're their what at have we down a to But talking people You're is. the there it of and with the getting some from information and then that signed agreement understand day, guys own some all you an end of they opinion.

a levels, of of layers… lot lot A

smoothly. little these of that harder. a around they've of But bit Honeywell Having folks smoothest far that, told at the time a of done transition this making [indiscernible] ways been by we've we're lot by this better I that of happen with think this learned lessons [indiscernible]. any this has here that out in said

of lot inherent corporate, doing of you're people doing, lot I a big from a structure made money small but the all companies what division a a all say which corporate and division Well, don't company. being to want in just is nonsense, have unencumbering of the a

And bad, sometimes, And walk level nonetheless, more contract got say shocking. we've But it's we've but of to sometimes they're to difficult to good, the what managerially, -- financially, sometimes away. kind or you there are financial got rise that right the hearing it's redo surprises, don't is target. on I'm of

had have the on We [ negative ]. not surprises any finance

I way say good hear a That's you. it. to

using bank again and I It debt financing. ask generating a question up the acquisition, sounds the like down made The just that cash a going bank you ton would substantially. a about cooperative if I debt. you're Secondly, it was of ton bank of to you and to you're be pay went think -- another

we can us to we on loan them the that later that convert they that of on, [indiscernible] [indiscernible]. refine the Yes. would Actually, conversation the next for EBITDA business with happy very based then be provide EBITDA

been So very they've supportive.

year. million save to million $X.X going to you're in And this $X probably interest Right.

management the to And job feel acquisition the So that you year? next another that. make you in about have do good

do. Yes, we

was a for is, there question I know know anything like Mike we I last answer that. really hoping left, should And simple or?

company, think a to it decision. personal I the was related

Good. stepping I know, thanks this time for back the years and I've what by want been been for company. critical sister for Critical, is you this longtime saying, to end and and my have right. All shareholders, And my guys been for, in, just Anyway, Okay. we've and hoping I time. years. a critical is dad now as first,

just done, a on here. guys you building something fabulous way So are Well to done. company well your really

support. your for you Thank

you Thank much. very

Happy Have a holidays. good one.

presentation. question-and-answer our for concludes concludes This attending today's you session conference Thank the call. and

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