Innovative Solutions & Support Inc 10-Q for FY2025 Q3

Innovative Solutions & Support Inc (IA)

10-Q 2025-08-14 For: 2025-06-30

Added on April 07, 2026

About this 10-Q

Innovative Solutions & Support Inc filed this 10-Q on August 14, 2025, covering the quarter ended June 30, 2025 (FY2025 Q3).

Headline figures

Quarter ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $24.14M; up 105.2% from $11.77M a year earlier
Net income: $2.44M; up 57.4% from net income of $1.55M a year earlier
Diluted EPS: $0.14; up 55.6% from $0.09 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, 2025 and September 30, 2024 (unaudited)	1

	Condensed Consolidated Statements of Operations - Three and Nine Months Ended June 30, 2025 and 2024 (unaudited)	2

	Condensed Consolidated Statements of Shareholders’ Equity - Three and Nine Months Ended June 30, 2025 and 2024 (unaudited)	3 - 4

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended June 30, 2025 and 2024 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6 - 25

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26 - 35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

SIGNATURES		39


	June 30,		September 30,
	2025		2024

ASSETS
Current assets
Cash and cash equivalents	$	601,759	$	538,977
Accounts receivable		11,536,254		12,612,482
Contract assets		1,135,671		1,680,060
Inventories		20,722,664		12,732,381
Prepaid inventory		3,872,279		5,960,404
Prepaid expenses and other current assets		1,942,806		1,161,394

Total current assets		39,811,433		34,685,698

Goodwill		6,703,104		5,213,104
Intangible assets, net		24,135,372		27,012,292
Property and equipment, net		18,153,271		13,372,298
Deferred income taxes		2,583,542		1,625,144
Other assets		397,866		473,725

Total assets	$	91,784,588	$	82,382,261

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable		5,109,191		2,315,479
Accrued expenses		3,639,396		4,609,294
Contract liability		2,529,533		340,481

Total current liabilities		11,278,120		7,265,254

Long-term debt		23,258,511		28,027,002
Other liabilities		459,131		451,350

Total liabilities		34,995,762		35,743,606

Commitments and contingencies (See Note 6)

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, 2025 and September 30, 2024		—		—
Common stock, $.001 par value: 75,000,000 shares authorized, 19,716,152 and 19,599,052 issued at June 30, 2025 and September 30, 2024, respectively		19,716		19,599
Additional paid-in capital		56,954,206		55,320,500
Retained earnings		21,183,441		12,667,093
Treasury stock, at cost, 2,096,451 shares at June 30, 2025 and at September 30, 2024, respectively		(21,368,537)		(21,368,537)

Total shareholders’ equity		56,788,826		46,638,655

Total liabilities and shareholders’ equity	$	91,784,588	$	82,382,261


	Three Months Ended June 30,				Nine Months Ended June 30,
	2025		2024		2025		2024
Net Sales:
Product	$	16,601,648	$	5,127,056	$	39,765,914	$	14,446,753
Services		7,543,184		6,638,579		22,283,861		17,366,461
Total net sales		24,144,832		11,765,635		62,049,775		31,813,214

Cost of sales:
Product		11,548,790		2,106,629		23,087,398		6,235,668
Services		4,013,807		3,379,185		12,502,462		8,192,200
Total cost of sales		15,562,597		5,485,814		35,589,860		14,427,868

Gross profit		8,582,235		6,279,821		26,459,915		17,385,346

Operating expenses:
Research and development		916,829		1,099,367		2,891,793		3,031,630
Selling, general and administrative		4,151,074		3,143,334		11,725,652		9,058,347
Total operating expenses		5,067,903		4,242,701		14,617,445		12,089,977

Operating income		3,514,332		2,037,120		11,842,470		5,295,369

Interest expense		(407,459)		(172,784)		(1,221,926)		(704,267)
Interest income		4,623		5,826		14,501		121,505
Other income		—		12,869		6		57,040
Income before income taxes		3,111,496		1,883,031		10,635,051		4,769,647

Income tax expense		667,682		330,511		2,118,703		951,461

Net income	$	2,443,814	$	1,552,520	$	8,516,348	$	3,818,186

Net income per common share:
Basic	$	0.14	$	0.09	$	0.49	$	0.22
Diluted	$	0.14	$	0.09	$	0.48	$	0.22

Weighted average shares outstanding:
Basic		17,601,814		17,461,652		17,554,824		17,455,903
Diluted		17,835,748		17,467,259		17,709,795		17,476,089



			Additional						Total
	Common		Paid-In		Retained		Treasury		shareholders’
	Stock		Capital		Earnings		Stock		equity
Balance, September 30, 2024	$	19,599	$	55,320,500	$	12,667,093	$	(21,368,537)	$	46,638,655

Share-based compensation		36		396,625		—		—		396,661
Net income		—		—		736,192		—		736,192

Balance, December 31, 2024	$	19,635	$	55,717,125	$	13,403,285	$	(21,368,537)	$	47,771,508

Share-based compensation		17		405,025		—		—		405,042
Net income		—		—		5,336,342		—		5,336,342

Balance, March 31, 2025	$	19,652	$	56,122,150	$	18,739,627	$	(21,368,537)	$	53,512,892

Share-based compensation		64		832,056		—		—		832,120
Net income		—		—		2,443,814		—		2,443,814

Balance, June 30, 2025	$	19,716	$	56,954,206	$	21,183,441	$	(21,368,537)	$	56,788,826


	For the Nine Months Ended June 30,
	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,516,348	$	3,818,186
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,825,051		1,437,232
Share-based compensation expense
Stock options		107,450		265,024
Restricted stock awards, MSOs and MSUs		1,526,373		460,931
Gain on disposal of property and equipment		—		(160,577)
Deferred income taxes		(950,618)		(623,683)
(Increase) decrease in:
Accounts receivable		1,076,229		2,414,052
Contract assets		544,389		(611,162)
Inventories		(5,902,159)		(3,275,938)
Prepaid expenses and other current assets		(1,177,053)		309,943
Other non-current assets		(244,775)		(364,041)
Increase (decrease) in:
Accounts payable		2,793,712		2,006,601
Accrued expenses		(325,020)		(92,237)
Income taxes payable		(642,779)		(221,615)
Contract liabilities		2,189,052		(11,825)
Net cash provided by operating activities		10,336,200		5,350,891

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(5,504,928)		(511,927)
Proceeds from the sale of property and equipment		—		2,225,810
Net cash (used in) provided by investing activities		(5,504,928)		1,713,883

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of term note		—		(19,500,000)
Proceeds from line of credit note		—		29,044,688
Repayments of line of credit note		(4,768,490)		(19,185,614)
Net cash used in financing activities		(4,768,490)		(9,640,926)

Net increase (decrease) in cash and cash equivalents		62,782		(2,576,152)
Cash and cash equivalents, beginning of year		538,977		3,097,193

Cash and cash equivalents, end of year	$	601,759	$	521,041

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes	$	3,712,100	$	1,913,456
Cash paid for interest		1,187,398		649,265

SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION
Transfer from prepaid inventory to inventory	$	2,088,125	$	5,124,521
Transfer from prepaid inventory to purchases of property and equipment	$	—	$	3,729,000
Transfer from prepaid inventory to goodwill	$	—	$	516,580
Transfer from prepaid inventory to intangible assets, net	$	—	$	800,000
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 other assets	$	275,995	$	—


	Fair Value Measurement on June 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	$	487,041	$	—	$	—


	Fair Value Measurement on September 30, 2024
	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	$	504,104	$	—	$	—


	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 liability 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


	Amounts Recognized as of
	Acquisition Date		Measurement		Purchase Price
	(as previously reported)		Period Adjustments		Allocation
Total consideration	$	14,060,000	$	—	$	14,060,000

Prepaid inventory ^(a)	$	3,191,000	$	—	$	3,191,000
Prepaid equipment and other current assets		160,000		—		160,000
Intangible assets ^{(b), (d)}		9,570,000		(1,490,000)		8,080,000
Goodwill ^(c),(d)		1,139,000		1,490,000		2,629,000
Net assets acquired	$	14,060,000	$	—	$	14,060,000


	As of June 30, 2025
	Gross Carrying		Accumulated		Accumulated		Net Carrying
	Value		Impairment		Amortization		Value
License agreement ^(a)	$	9,790,000	$	—	$	—	$	9,790,000
Customer relationships ^(a)		12,604,327		—		(2,395,276)		10,209,051
Backlog ^(b)		4,850,000		—		(727,500)		4,122,500
Licensing and certification rights ^(c)		696,506		(44,400)		(638,285)		13,821
Total	$	27,940,833	$	(44,400)	$	(3,761,061)	$	24,135,372


	As of September 30, 2024
	Gross Carrying		Accumulated		Accumulated		Net Carrying
	Value		Impairment		Amortization		Value
License agreement ^(a)	$	9,140,000	$	—	$	—	$	9,140,000
Customer relationships ^(a)		13,008,332		—		(1,459,861)		11,548,471
Backlog ^(b)		6,310,000		—		—		6,310,000
Licensing and certification rights ^(c)		696,506		(44,400)		(638,285)		13,821
Total	$	29,154,838	$	(44,400)	$	(2,098,146)	$	27,012,292


		Amortization Expense
2025 (three months remaining)	$	552,757
2026		2,211,027
2027		2,211,027
2028		2,211,027
2029		2,211,027
Thereafter		4,934,686
Total	$	14,331,551


	June 30,		September 30,
	2025		2024
Raw materials	$	15,696,418	$	9,862,591
Work-in-process		3,637,500		1,357,504
Finished goods		1,388,746		1,512,286
	$	20,722,664	$	12,732,381


		Three Months Ending		Nine Months Ending
		June 30, 2025		June 30, 2025
Warranty accrual, beginning of period	$	565,033	$	596,538
Accrued expense (Adjustment)		187,000		234,000
Warranty cost		(169,323)		(247,828)
Warranty accrual, end of period	$	582,710	$	582,710


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


		As of		As of
		June 30,		September 30,
	2025		2024
Cash and cash equivalents	$	601,759	$	538,977
Accounts receivable	$	11,536,254	$	12,612,482
Current assets	$	39,811,433	$	34,685,698
Current liabilities	$	11,278,120	$	7,265,254
Contract liability	$	2,529,533	$	340,481
Other non-current liabilities	$	23,717,642	$	28,478,352
Quick ratio ⁽¹⁾		1.08		1.81
Current ratio ⁽²⁾		3.53		4.77


		Three Months Ended		Nine Months Ended
		June 30, 2025
Backlog, beginning of period	$	79,598,515	$	89,232,576
Plus: bookings during period, net		16,940,971		45,211,853
Less: sales recognized during period		(24,144,832)		(62,049,775)
Backlog, end of period	$	72,394,654	$	72,394,654



10.1	Credit Agreement, dated as of July 18, 2025, among Innovative Solutions and Support, Inc., Innovative Solutions and Support, LLC, the other loan parties party thereto, the lenders party thereto, and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of Form 8-K, filed by the registrant on July 22, 2025)

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 14, 2025	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 14, 2025		Shahram Askarpour
		Chief Executive Officer (Principal Executive Officer)