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Innovative Solutions & Support, Inc. Announces Second Quarter Fiscal 2023 Financial Results

Innovative Solutions & Support, Inc. (“IS&S” or the “Company”) (NASDAQ: ISSC) today announced its financial results for the second quarter of fiscal year 2023, which ended March 31, 2023.

For the second quarter of fiscal 2023, net sales increased 7.2% to $7.3 million compared to $6.8 million in the second quarter a year ago. Gross profit in the second quarter of 2023 was $4.7 million, or 64.6% of sales, compared to $4.2 million, or 61.1% of sales in the second quarter of 2022. The Company reported net income of $1.3 million, or $0.07 per share in the second quarter, compared to $1.4 million, or $0.08 per share in the second quarter of fiscal 2022. The modest decrease in net income was driven by an increase in general and administrative expenses, attributable to an expansion of the Company’s sales and business development teams, and non-cash long-term incentive compensation. R&D spending also climbed due to the addition of resources to enhance product development. The impact of additional expenses was offset by increased sales and operating leverage. Tax expense in the second quarter of fiscal 2023 was $0.3 million compared to $0.4 million in the second quarter of fiscal 2022.

Shahram Askarpour, Chief Executive Officer of IS&S, said, “We reported a strong second quarter with growth driven by higher sales in our aftermarket portfolio. This was one of our strongest quarters in recent years and demonstrates a continuation of demand for our innovative products.”

Askarpour continued, “Going forward we see significant opportunities to invest organically and inorganically in order to drive higher production capacity utilization rates to enhance our gross margin. Important to these efforts, I am pleased to report that we successfully updated our Articles of Incorporation at our recent Annual Meeting on April 13, 2023. This update meaningfully improves our ability to execute on our inorganic growth objectives and strengthens access to growth capital to execute our long-term plan.”

The Company’s cash on hand increased to $19.8 million as of March 31, 2022, with $0.4 million generated from operating activities during the three months ended March 31, 2023. IS&S continues to maintain its strong financial condition and flexibility with significant liquidity and no debt.

New orders in the second quarter of fiscal 2023 were approximately $13.6 million, and backlog as of March 31, 2023 was $14.8 million, compared to backlog of $7.5 million as of March 31, 2022. Only purchase orders in hand are included in our sales backlog, which primarily consist of orders from our OEM customers that have long-term programs-- Pilatus PC-24, Textron King Air, Boeing T-7 Red Hawk and the Boeing KC-46A. IS&S expects these programs to remain in production for approximately a decade and anticipates that they will continue to add to the total backlog.

Conference Call

The Company will be hosting a conference call on Monday May 8, 2023 at 4:30 PM ET to discuss these results and the Company’s business outlook and product development. Please use the following dial in number to register your name and company affiliation for the conference call: 877-451-6152 and ask to join the Innovative Solutions & Support call. The call will also be carried live on the Investor Relations page of the Company web site at www.innovative-ss.com.

About Innovative Solutions & Support, Inc.

Headquartered in Exton, Pa., Innovative Solutions & Support, Inc. (www.innovative-ss.com) is a systems integrator that designs and manufactures flight guidance and cockpit display systems for Original Equipment Manufacturers (OEMs) and retrofit applications. The company supplies integrated Flight Management Systems (FMS), Auto-Throttle Systems and advanced GPS receivers for precision low carbon footprint navigation.

Certain matters contained herein that are not descriptions of historical facts are “forward-looking” (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the Company with the Securities and Exchange Commission. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

Innovative Solutions & Support, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

 
Three Months March 31,

2023

2022

Net Sales:
Product

$

7,340,454

$

6,647,617

Engineering development contracts

 

198,203

Returns and allowances

 

-

 

-

Total net sales

 

7,340,454

 

6,845,820

 
Cost of sales:
Product

 

2,600,303

 

2,646,462

Engineering development contracts

 

16,748

Total cost of sales

 

2,600,303

 

2,663,210

 
Gross profit

 

4,740,151

 

4,182,610

 
Operating expenses:
Research and development

 

866,198

 

650,031

Selling, general and administrative

 

2,446,635

 

1,724,800

Total operating expenses

 

3,312,833

 

2,374,831

 
Operating income

 

1,427,318

 

1,807,780

 
Interest income

 

130,951

 

346

Interest (expense)
Other income

 

23,258

 

11,555

Income before income taxes

 

1,581,527

 

1,819,680

 
Income tax expense

 

310,424

 

390,110

 
Net income

$

1,271,103

$

1,429,570

 
Net income per common share:
Basic

$

0.07

$

0.08

Diluted

$

0.07

$

0.08

 
Cash dividends per share:

$

-

$

-

 
Weighted average shares outstanding:
Basic

 

17,352,340

 

17,253,746

Diluted

 

17,354,030

 

 

Innovative Solutions and Support, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 
March 31, December 31,

2023

 

2022

 

ASSETS
Current assets
Cash and cash equivalents

$

19,803,110

 

$

19,443,231

 

Restricted cash

 

-

 

 

-

 

Accounts receivable

 

3,973,848

 

 

3,316,519

 

Contract asset

 

162,742

 

 

162,742

 

Inventories

 

5,981,692

 

 

5,252,295

 

Prepaid expenses and other current assets

 

1,950,400

 

 

1,049,206

 

 
Total current assets

 

31,871,792

 

 

29,223,993

 

 
Property and equipment, net

 

6,229,664

 

 

6,239,496

 

Deferred income taxes

 

592,857

 

 

331,176

 

Other assets

 

205,210

 

 

160,862

 

 
Total assets

$

38,899,523

 

$

35,955,527

 

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of capitalized lease obligations

$

-

 

$

-

 

Accounts payable

$

1,499,181

 

$

842,262

 

Dividends payable

 

-

 

 

-

 

Accrued expenses

 

2,018,895

 

 

2,508,971

 

Contract liability

 

191,731

 

 

83,221

 

Contract liability - related party

 

8,558

 

 
Total current liabilities

 

3,709,807

 

 

3,443,012

 

 
Long-term portion of capitalized lease obligations

 

-

 

 

-

 

Deferred revenue

 

-

 

 

-

 

Deferred income taxes

 

-

 

 

-

 

Other liabilities

 

418,677

 

 

421,938

 

 
Total liabilities

 

4,128,485

 

 

3,864,950

 

 
 
Shareholders' equity
 
Preferred stock, 10,000,000 shares authorized, $.001 par value, of which
200,000 shares are authorized as Class A Convertible stock. No shares
issued and outstanding at December 31, 2022 and September 30, 2022

 

-

 

 

-

 

 
Common stock, $.001 par value: 75,000,000 shares authorized,
19,470,248 and 19,412,664 issued at December 31, 2022 and September 30, 2022

 

19,518

 

 

19,470

 

 
Additional paid-in capital

 

53,883,433

 

 

53,100,035

 

Retained Earnings (accumulated deficit)

 

1,974,943

 

 

339,609

 

Treasury stock, at cost, 2,096,451 shares at December 31, 2022
and September 30, 2022

 

(21,368,538

)

 

(21,368,537

)

 
 
Total shareholders' equity

 

34,509,357

 

 

32,090,577

 

 
Total liabilities and shareholders' equity

$

38,637,842

 

$

35,955,527

 

Innovative Solutions and Support, Inc.

Consolidated Statements of Cash Flows

(unaudited)

 
For the Three Months Ended March 31 ,

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

1,271,103

 

$

1,429,570

 

Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization

 

85,980

 

 

95,764

 

Share-based compensation expense
Stock options

 

536,142

 

 

44,594

 

Stock awards

 

197,234

 

 

159,995

 

Deferred income taxes

 

(261,681

)

 

295,843

 

(Increase) decrease in:
Accounts receivable

 

(650,127

)

 

(334,476

)

Inventories

 

(647,540

)

 

(82,785

)

Prepaid expenses and other current assets

 

(170,456

)

 

3,447

 

Other non-current assets

 

(107,228

)

Income taxes receivable

 

-

 

 

-

 

Increase (decrease) in:
Accounts payable

 

656,919

 

 

244,228

 

Accrued expenses

 

(121,947

)

 

139,017

 

Income taxes payable

 

(492,801

)

 

(16,214

)

Contract liability

 

99,952

 

 

(59,125

)

Net cash provided by operating activities

 

395,551

 

 

1,919,857

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment

 

(47,435

)

 

(7,010

)

Proceeds from the sale of property and equipment

 

-

 

Net cash used in investing activities

 

(47,435

)

 

(7,010

)

 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options

 

-

 

Net cash provided by financing activities

 

-

 

 

-

 

 
Net increase in cash and cash equivalents

 

348,116

 

 

1,912,847

 

Cash and cash equivalents, beginning of quarter

 

19,443,231

 

 

9,705,993

 

 
Cash and cash equivalents, end of quarter

$

19,791,346

 

$

11,618,840

 

 

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