Innovative Solutions & Support Inc 10-Q for FY2025 Q2

Innovative Solutions & Support Inc (IA)

10-Q 2025-05-15 For: 2025-03-31

Added on April 07, 2026

About this 10-Q

Innovative Solutions & Support Inc filed this 10-Q on May 15, 2025, covering the quarter ended March 31, 2025 (FY2025 Q2).

Headline figures

Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $21.94M; up 104.3% from $10.74M a year earlier
Net income: $5.34M; up 341.6% from net income of $1.21M a year earlier
Diluted EPS: $0.30; up 328.6% from $0.07 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 - March 31, 2025 and September 30, 2024 (unaudited)	1

	Condensed Consolidated Statements of Operations - Three and Six Months Ended March 31, 2025 and 2024 (unaudited)	2

	Condensed Consolidated Statements of Shareholders’ Equity - Three and Six Months Ended March 31, 2025 and 2024 (unaudited)	3 - 4

	Condensed Consolidated Statements of Cash Flows - Six Months Ended March 31, 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	25 - 34

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

SIGNATURES		38


	March 31,		September 30,
	2025		2024

ASSETS
Current assets
Cash and cash equivalents	$	1,225,648	$	538,977
Accounts receivable		13,823,088		12,612,482
Contract assets		1,769,373		1,680,060
Inventories		18,853,112		12,732,381
Prepaid inventory		4,430,139		5,960,404
Prepaid expenses and other current assets		1,360,211		1,161,394

Total current assets		41,461,571		34,685,698

Goodwill		6,703,104		5,213,104
Intangible assets, net		24,688,129		27,012,292
Property and equipment, net		14,733,011		13,372,298
Deferred income taxes		2,134,839		1,625,144
Other assets		165,591		473,725

Total assets	$	89,886,245	$	82,382,261

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable		4,710,564		2,315,479
Accrued expenses		3,072,956		4,609,294
Contract liability		731,793		340,481

Total current liabilities		8,515,313		7,265,254

Long-term debt		27,401,323		28,027,002
Other liabilities		456,717		451,350

Total liabilities		36,373,353		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 March 31, 2025 and September 30, 2024		—		—
Common stock, $.001 par value: 75,000,000 shares authorized, 19,651,771 and 19,599,052 issued at March 31, 2025 and September 30, 2024, respectively		19,652		19,599
Additional paid-in capital		56,122,150		55,320,500
Retained earnings		18,739,627		12,667,093
Treasury stock, at cost, 2,096,451 shares at March 31, 2025 and at September 30, 2024, respectively		(21,368,537)		(21,368,537)

Total shareholders’ equity		53,512,892		46,638,655

Total liabilities and shareholders’ equity	$	89,886,245	$	82,382,261


	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024		2025		2024
Net Sales:
Product	$	13,180,032	$	4,895,589	$	23,164,266	$	9,319,697
Services		8,756,182		5,843,927		14,740,677		10,727,882
Total net sales		21,936,214		10,739,516		37,904,943		20,047,579

Cost of sales:
Product		5,275,918		2,347,695		11,538,608		4,129,040
Services		5,393,073		2,809,459		8,488,655		4,813,015
Total cost of sales		10,668,991		5,157,154		20,027,263		8,942,055

Gross profit		11,267,223		5,582,362		17,877,680		11,105,524

Operating expenses:
Research and development		867,228		1,031,119		1,974,964		1,932,263
Selling, general and administrative		3,415,675		2,908,193		7,574,578		5,915,012
Total operating expenses		4,282,903		3,939,312		9,549,542		7,847,275

Operating income		6,984,320		1,643,050		8,328,138		3,258,249

Interest expense		(387,318)		(171,470)		(814,467)		(531,483)
Interest income		4,628		36,200		9,878		115,679
Other income		—		26,472		6		44,171
Income before income taxes		6,601,630		1,534,252		7,523,555		2,886,616

Income tax expense		1,265,288		325,936		1,451,021		620,950

Net income	$	5,336,342	$	1,208,316	$	6,072,534	$	2,265,666

Net income per common share:
Basic	$	0.30	$	0.07	$	0.35	$	0.13
Diluted	$	0.30	$	0.07	$	0.34	$	0.13

Weighted average shares outstanding:
Basic		17,548,844		17,456,120		17,531,328		17,453,741
Diluted		17,643,994		17,487,527		17,613,686		17,481,217



			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


	For the Six Months Ended March 31,
	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,072,534	$	2,265,666
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,004,641		826,077
Share-based compensation expense
Stock options		71,614		230,535
Restricted stock awards, MSOs and MSUs		730,089		244,520
(Gain) / Loss on disposal of property and equipment		—		(160,577)
Deferred income taxes		(504,329)		(691,803)
(Increase) decrease in:
Accounts receivable		(1,210,605)		3,682,529
Contract assets		(89,313)		(743,468)
Inventories		(4,590,467)		(2,227,708)
Prepaid expenses and other current assets		(594,459)		393,246
Other non-current assets		(12,500)		(134,544)
Increase (decrease) in:
Accounts payable		2,395,085		1,309,848
Accrued expenses		(568,588)		(382,070)
Income taxes payable		(965,650)		(148,703)
Contract liabilities		391,312		(46,709)
Net cash provided by operating activities		3,129,364		4,416,839

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1,817,015)		(308,648)
Proceeds from the sale of property and equipment		—		2,225,810
Net cash (used in) provided by investing activities		(1,817,015)		1,917,162

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of term note		—		(19,500,000)
Proceeds from line of credit note		—		24,491,634
Repayments of line of credit note		(625,678)		(13,848,749)
Net cash used in financing activities		(625,678)		(8,857,115)

Net increase (decrease) in cash and cash equivalents		686,671		(2,523,114)
Cash and cash equivalents, beginning of year		538,977		3,097,193

Cash and cash equivalents, end of year	$	1,225,648	$	574,079

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes	$	2,921,000	$	1,461,456
Cash paid for interest		767,820		493,078

SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION
Transfer from prepaid inventory to inventory	$	1,530,265	$	753,449
Transfer from prepaid inventory to purchases of property and equipment	$	—	$	4,539,843
Transfer from prepaid expenses and other current assets to PP&E	$	119,647	$	—
Transfer from intangible assets to goodwill	$	1,490,000	$	—
Transfer from prepaid expenses to other assets	$	275,995	$	—


	Fair Value Measurement on March 31, 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	$	504,927	$	—	$	—


	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		(754,432)		—
Contract asset additions		843,745		—
Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period		—		(268,502)
Increases due to invoicing prior to satisfaction of performance obligations		—		659,814
March 31, 2025	$	1,769,373	$	731,793


	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 March 31, 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		—		(2,085,019)		10,519,308
Backlog ^(b)		4,850,000		—		(485,000)		4,365,000
Licensing and certification rights ^(c)		696,506		(44,400)		(638,285)		13,821
Total	$	27,940,833	$	(44,400)	$	(3,208,304)	$	24,688,129


	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 (six months remaining)	$	1,105,514
2026		2,211,027
2027		2,211,027
2028		2,211,027
2029		2,211,027
Thereafter		4,934,686
Total	$	14,884,308


	March 31,		September 30,
	2025		2024
Raw materials	$	15,496,589	$	9,862,591
Work-in-process		1,999,270		1,357,504
Finished goods		1,357,253		1,512,286
	$	18,853,112	$	12,732,381


		Three Months Ending		Six Months Ending
		March 31, 2025		March 31, 2025
Warranty accrual, beginning of period	$	522,724	$	596,538
Accrued expense (Adjustment)		67,000		47,000
Warranty cost		(24,691)		(78,505)
Warranty accrual, end of period	$	565,033	$	565,033


Number of MSUs Granted	201,000
Grant Date	November 20, 2024
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
		March 31,		September 30,
	2025		2024
Cash and cash equivalents	$	1,225,648	$	538,977
Accounts receivable	$	13,823,088	$	12,612,482
Current assets	$	41,461,571	$	34,685,698
Current liabilities	$	8,515,313	$	7,265,254
Contract liability	$	731,793	$	340,481
Other non-current liabilities	$	27,858,040	$	28,478,352
Quick ratio ⁽¹⁾		1.77		1.81
Current ratio ⁽²⁾		4.87		4.77


		Three Months Ended		Six Months Ended
		March 31, 2025
Backlog, beginning of period	$	80,756,933	$	89,232,576
Plus: bookings during period, net		20,777,796		28,270,882
Less: sales recognized during period		(21,936,214)		(37,904,943)
Backlog, end of period	$	79,598,515	$	79,598,515




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: May 15, 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: May 15, 2025		Shahram Askarpour
		Chief Executive Officer (Principal Executive Officer)