Innovative Solutions & Support Inc 10-Q for FY2026 Q3

Innovative Solutions & Support Inc (IA)

10-Q 2026-08-13 For: 2026-06-30

Added on August 13, 2026

About this 10-Q

Innovative Solutions & Support Inc filed this 10-Q on August 13, 2026, covering the quarter ended June 30, 2026 (FY2026 Q3).

Headline figures

Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $26.73M; up 10.7% from $24.14M a year earlier
Net income: $4.49M; up 83.7% from net income of $2.44M a year earlier
Diluted EPS: $0.25; up 78.6% from $0.14 a year earlier

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PENNSYLVANIA		23-2507402
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

720 Pennsylvania Drive, Exton, Pennsylvania		19341
(Address of Principal Executive Offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		ISSC		Nasdaq Stock Market LLC

☐ Large accelerated filer	☐ Accelerated filer
☒ Non-accelerated filer	☒ Smaller reporting company
☐ Emerging growth company


		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets - June 30, 2026 and September 30, 2025 (unaudited)	1

	Condensed Consolidated Statements of Operations - Three and Nine Months Ended June 30, 2026 and 2025 (unaudited)	2

	Condensed Consolidated Statements of Shareholders’ Equity – Three and Nine Months Ended June 30, 2026 and 2025 (unaudited)	3 - 4

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended June 30, 2026 and 2025 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6 - 33

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35 - 43

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44

Item 4.	Controls and Procedures	44

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	46

SIGNATURES		47


		June 30,			September 30,
		2026			2025
ASSETS
Current assets
Cash and cash equivalents		$	10,694,977		$	2,693,595
Accounts receivable			15,984,217			12,956,476
Contract assets			1,735,266			5,320,353
Inventories			32,084,294			25,802,181
Prepaid inventory			—			2,562,297
Prepaid expenses and other current assets			3,931,931			1,392,398

Total current assets			64,430,685			50,727,300

Goodwill			15,773,104			6,703,104
Intangible assets, net			46,032,372			23,582,615
Property and equipment, net			20,682,675			18,804,536
Deferred income taxes			452,070			2,824,132
Other assets			586,248			718,466

Total assets		$	147,957,154		$	103,360,153

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt, net		$	5,642,850		$	2,438,802
Accounts payable			9,816,404			3,578,411
Accrued expenses			4,863,119			8,161,967
Contract liabilities			1,371,909			2,481,929

Total current liabilities			21,694,282			16,661,109

Long-term debt, net			48,669,107			21,700,005
Other liabilities			396,497			396,497

Total liabilities			70,759,886			38,757,611

Commitments and contingencies (See Note 7)

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 June 30, 2026 and September 30, 2025			—			—

Common stock, $.001 par value: 75,000,000 shares authorized, 18,237,353 and 17,970,453 issued at June 30, 2026 and September 30, 2025, respectively			17,898			17,631

Additional paid-in capital			40,363,111			39,751,130
Retained earnings			40,277,231			28,294,753
Treasury stock, at cost, 339,644 shares at June 30, 2026 and at September 30, 2025, respectively			(3,460,972)			(3,460,972)

Total shareholders’ equity			77,197,268			64,602,542

Total liabilities and shareholders’ equity		$	147,957,154		$	103,360,153


	Three Months Ended June 30,					Nine Months Ended June 30,
	2026			2025		2026			2025
Net sales:
Product	$	17,516,767		$	16,601,648	$	45,391,826		$	39,765,914
Services		9,215,214			7,543,184		25,512,267			22,283,861
Total net sales		26,731,981			24,144,832		70,904,093			62,049,775

Cost of sales:
Product		8,587,572			11,548,790		22,436,958			23,087,398
Services		4,336,843			4,013,807		11,340,314			12,502,462
Total cost of sales		12,924,415			15,562,597		33,777,272			35,589,860

Gross profit		13,807,566			8,582,235		37,126,821			26,459,915

Operating expenses:
Research and development		1,877,680			916,829		4,994,643			2,891,793
Selling, general and administrative		5,901,260			4,151,074		14,867,731			11,725,652
Total operating expenses		7,778,940			5,067,903		19,862,374			14,617,445

Operating income		6,028,626			3,514,332		17,264,447			11,842,470

Interest expense		(1,017,073)			(407,459)		(2,022,004)			(1,221,926)
Interest income		5,585			4,623		13,408			14,501
Other income		—			—		64,100			6
Income before income taxes		5,017,138			3,111,496		15,319,951			10,635,051

Income tax expense		527,815			667,682		3,337,473			2,118,703

Net income	$	4,489,323		$	2,443,814	$	11,982,478		$	8,516,348

Net income per common share:
Basic	$	0.25		$	0.14	$	0.67		$	0.49
Diluted	$	0.25		$	0.14	$	0.66		$	0.48

Weighted average shares outstanding:
Basic		17,883,090			17,601,814		17,792,981			17,554,824
Diluted		18,270,332			17,835,748		18,212,038			17,709,795




					Additional									Total
		Common			Paid-In			Retained			Treasury			shareholders’
		Stock			Capital			Earnings			Stock			equity
Balance, September 30, 2025		$	17,631		$	39,751,130		$	28,294,753		$	(3,460,972)		$	64,602,542

Share-based compensation			—			915,924			—			—			915,924
Issuance of common stock, net of shares withheld for taxes			141			(833,253)			—			—			(833,112)
Net income			—			—			4,059,063			—			4,059,063

Balance, December 31, 2025		$	17,772		$	39,833,801		$	32,353,816		$	(3,460,972)		$	68,744,417

Share-based compensation			—			496,294			—			—			496,294
Issuance of common stock, net of shares withheld for taxes			57			(562,922)			—			—			(562,865)
Net income			—			—			3,434,092			—			3,434,092

Balance, March 31, 2026		$	17,829		$	39,767,173		$	35,787,908		$	(3,460,972)		$	72,111,938

Share-based compensation			—			654,471			—			—			654,471
Issuance of common stock, net of shares withheld for taxes			69			(58,533)			—			—			(58,464)
Net income			—			—			4,489,323			—			4,489,323

Balance, June 30, 2026		$	17,898		$	40,363,111		$	40,277,231		$	(3,460,972)		$	77,197,268


		For the Nine Months Ended June 30,
		2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	11,982,478		$	8,516,348
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			3,238,285			2,825,051
Share-based compensation			2,066,689			1,633,823
Amortization of loan fees			159,705			—
Deferred income taxes			2,372,062			(950,618)
(Increase) decrease in:
Accounts receivable			(3,027,741)			1,076,229
Contract assets			3,585,087			544,389
Inventories			(3,646,091)			(5,902,159)
Prepaid expenses and other current assets			(886,145)			(1,177,053)
Other non-current assets			20,663			(244,775)
Increase (decrease) in:
Accounts payable			6,237,993			2,793,712
Accrued expenses			(1,753,724)			(325,020)
Income taxes payable			(3,698,512)			(642,779)
Contract liabilities			(1,110,020)			2,189,052
Net cash provided by operating activities			15,540,729			10,336,200

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(3,209,906)			(5,504,928)
Acquisition of businesses			(33,000,000)			—
Net cash used in investing activities			(36,209,906)			(5,504,928)

CASH FLOWS FROM FINANCING ACTIVITIES:
Delayed Draw Term Loan proceeds			32,000,000			—
Repayments of line of credit note			—			(4,768,490)
Term Loan principal payments			(1,875,000)			—
Taxes paid related to net share settlement of equity awards			(1,454,441)			—
Net cash provided by (used in) financing activities			28,670,559			(4,768,490)

Net increase in cash and cash equivalents			8,001,382			62,782
Cash and cash equivalents, beginning of year			2,693,595			538,977

Cash and cash equivalents, end of year		$	10,694,977		$	601,759

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes		$	4,667,000		$	3,712,100
Cash paid for interest			1,512,560			1,187,398

SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION
Transfer from prepaid inventory to inventory		$	2,562,297		$	2,088,125
Transfer from prepaid expenses and other current assets to PP&E		$	—		$	119,647
Transfer from other assets to PP&E		$	—		$	318,534
Transfer from intangible assets to goodwill		$	—		$	1,490,000
Transfer from prepaid expenses to intangible assets		$	—		$	275,995


		Fair Value Measurement on June 30, 2026
		Quoted Price in			Significant Other			Significant
		Active Markets for			Observable			Unobservable
		Identical Assets			Inputs			Inputs
		(Level 1)			(Level 2)			(Level 3)
Assets
Cash and cash equivalents:
Money market funds		$	470,691		$	—		$	—


		Fair Value Measurement on September 30, 2025
		Quoted Price in			Significant Other			Significant
		Active Markets for			Observable			Unobservable
		Identical Assets			Inputs			Inputs
		(Level 1)			(Level 2)			(Level 3)
Assets
Cash and cash equivalents:
Money market funds		$	484,973		$	—		$	—



		Contract			Contract
		Assets			Liabilities
September 30, 2025		$	5,320,353		$	2,481,929
Amount transferred to receivables from contract assets			(5,039,611)			—
Contract asset additions			1,454,524			—
Performance obligations satisfied during the period that were included in the contract liabilities balance at the beginning of the period			—			(2,237,295)
Increases due to invoicing prior to satisfaction of performance obligations			—			1,127,275
June 30, 2026		$	1,735,266		$	1,371,909


		Contract			Contract
		Assets			Liabilities
September 30, 2024		$	1,680,060		$	340,481
Amount transferred to receivables from contract assets			(1,285,317)			—
Contract asset additions			740,928			—
Performance obligations satisfied during the period that were included in the contract liabilities balance at the beginning of the period			—			(280,322)
Increases due to invoicing prior to satisfaction of performance obligations			—			2,469,374
June 30, 2025		$	1,135,671		$	2,529,533


	As of June 30, 2026
	Gross Carrying			Accumulated			Accumulated			Net Carrying
	Value			Impairment			Amortization			Value
License agreements ^(a)	$	21,290,000		$	—		$	—		$	21,290,000
Customer relationships ^(a)		21,934,327			—			(3,650,470)			18,283,857
Backlog ^(b)		8,190,000			—			(2,000,973)			6,189,027
Trade name ^(c)		260,000			—			(4,333)			255,667
Licensing and certification rights ^(d)		696,506			(44,400)			(638,285)			13,821
Total	$	52,370,833		$	(44,400)		$	(6,294,061)		$	46,032,372


		As of September 30, 2025
		Gross Carrying			Accumulated			Accumulated			Net Carrying
		Value			Impairment			Amortization			Value
License agreements ^(a)		$	9,790,000		$	—		$	—		$	9,790,000
Customer relationships ^(a)			12,604,327			—			(2,705,533)			9,898,794
Backlog ^(b)			4,850,000			—			(970,000)			3,880,000
Licensing and certification rights ^(d)			696,506			(44,400)			(638,285)			13,821
Total		$	27,940,833		$	(44,400)		$	(4,313,818)		$	23,582,615


	Amortization Expense
2026 (three months remaining)	$	1,392,158
2027		5,935,555
2028		3,459,201
2029		2,714,618
2030		2,194,361
Thereafter		9,032,658
Total	$	24,728,551


	Goodwill
Balance at September 30, 2025	$	6,703,104
Fiscal 2026 Activity:
Business Combination - Honeywell Autopilot Agreement		3,810,000
Business Combination - Honeywell Generators Agreement		3,650,000
Business Combination - Other		1,610,000
Balance at June 30, 2026	$	15,773,104


		June 30,			September 30,
		2026			2025
Raw materials		$	25,672,948		$	22,445,837
Work-in-process			5,517,951			2,295,587
Finished goods			893,395			1,060,757
		$	32,084,294		$	25,802,181


		June 30,			September 30,
		2026			2025
Supplier deposits			649,416			486,763
Prepaid insurance and services			520,719			418,406
Prepaid income tax			1,653,389			—
Deferred engineering			279,527			—
Other receivable			357,230			—
Unamortized debt issuance costs			147,527			147,527
Other			324,123			339,702
		$	3,931,931		$	1,392,398


		June 30,			September 30,
		2026			2025
Computer equipment		$	3,555,949		$	3,169,835
Corporate R&D airplane			1,187,911			-
Furniture and office equipment			1,042,096			984,205
Buildings and improvements			12,527,693			11,598,890
Equipment other			16,496,658			15,958,271
Land			1,021,246			1,021,245
			35,831,553			32,732,446
Less accumulated depreciation and amortization			(15,148,878)			(13,927,910)
		$	20,682,675		$	18,804,536


	June 30,			September 30,
	2026			2025
Warranty	$	1,008,343	$	730,498
Salary, benefits and payroll taxes		967,766		1,234,246
Inventory in transit		—		1,097,222
Income tax payable		—		2,045,123
ERC related expenses		—		378,846
Bonus accruals		1,577,776		1,972,221
Other		1,309,234		703,811
	$	4,863,119	$	8,161,967


			Three Months Ending		Nine Months Ending
			June 30, 2026		June 30, 2026
Warranty accrual, beginning of period		$	953,488	$	730,498
Accrued expense (adjustment)			137,000		603,000
Warranty cost			(82,145)		(325,155)
Warranty accrual, end of period		$	1,008,343	$	1,008,343


	Preliminary
	Purchase Price
	Allocation
Total consideration	$	22,000,000

Intangible assets ^(a)		18,190,000
Goodwill ^(b)		3,810,000
Net assets acquired	$	22,000,000


Grant Date	2/18/2026
Grant Date Stock Price	$ 19.83
Expected Dividend Rate	0%
Expected Volatility	59%
Weighted average risk-free interest rate	3.72%
Contractual Term	3 years


Number of MSUs Granted	201,000
Grant Date	11/20/24
Grant Date Stock Price	$ 7.72
Expected Dividend Rate	0%
Expected Volatility	48%
Weighted average risk-free interest rate	4.27%
Contractual Term	4 years


Number of MSOs granted	105,321
Grant Date	02/18/25
Grant Date Stock Price	$ 8.27
Expected Dividend Rate	0%
Expected Volatility	47%
Weighted average risk-free interest rate	4.29%
Exercise price	$ 8.59
Contractual Term	10 years


Fiscal year	Annual payments*
2026 (Three months remaining)	$ 1,425,000
2027	5,700,000
2028	5,700,000
2029	5,700,000
2030	35,975,000
Total	$ 54,500,000


			As of			As of
			June 30,			September 30,
		2026			2025
Cash and cash equivalents		$	10,694,977		$	2,693,595
Accounts receivable		$	15,984,217		$	12,956,476
Current assets		$	64,430,685		$	50,727,300
Current liabilities		$	21,694,282		$	16,661,109
Contract liabilities		$	1,371,909		$	2,481,929
Other non-current liabilities		$	49,065,604		$	22,096,502
Quick ratio ⁽¹⁾			1.23			0.94
Current ratio ⁽²⁾			2.97			3.04


			Three Months Ended		Nine Months Ended
			June 30, 2026
Backlog, beginning of period		$	86,976,114	$	77,428,498
Plus: bookings during period, net			13,277,315		66,997,043
Plus: acquired through acquisition			9,386,136		9,386,136
Less: sales recognized during period			(26,731,981)		(70,904,093)
Backlog, end of period		$	82,907,584	$	82,907,584


31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a), filed herewith.

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a), filed herewith.

32.1*	Certification Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


	INNOVATIVE SOLUTIONS AND SUPPORT, INC.

Date: August 13, 2026	By:	/s/ Jeffrey DiGiovanni
		Jeffrey DiGiovanni
		Chief Financial Officer (on behalf of Registrant and as Principal Financial Officer and Principal Accounting Officer)


	By:	/s/ Shahram Askarpour
Date: August 13, 2026		Shahram Askarpour
		Chief Executive Officer (Principal Executive Officer)