8-K
Innovative Solutions & Support Inc (ISSC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The SecuritiesExchange Act of 1934
Date of Report (Date of earliest event reported):
August 9, 2023
INNOVATIVE SOLUTIONS AND SUPPORT, INC.
(Exact name of registrant as specified in itscharter)
| Pennsylvania | 0-31157 | 23-2507402 |
|---|---|---|
| (State or Other Jurisdiction <br><br>of Incorporation) | (Commission<br><br><br>File Number) | (IRS Employer <br><br>Identification No.) |
720 Pennsylvania Drive
Exton, Pennsylvania 19341
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(610) 646-9800
| Not applicable |
|---|
| (Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title<br> of each class | Trading<br> Symbol(s) | Name<br> of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | ISSC | Nasdaq<br> Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company. ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On August 9, 2023, Innovative Solutions and Support, Inc. issued a press release announcing its financial results for its fiscal third quarter ended June 30, 2023. A copy of that press release is attached as Exhibit 99.1 to this report and incorporated herein by reference.
The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release, dated August 9, 2023, announcing financial results for the fiscal third quarter ended June 30, 2023. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INNOVATIVE SOLUTIONS AND SUPPORT, INC. | |||
|---|---|---|---|
| Date: | August 11, 2023 | By: | |
| Michael Linacre | |||
| Chief Financial Officer |
Exhibit 99.1
Innovative Solutions &Support, Inc. Announces Third Quarter Fiscal 2023 Financial Results
EXTON, Pa. – August 9, 2023 –Innovative Solutions & Support, Inc. (“IS&S” or the “Company”) (NASDAQ: ISSC) today announced its financial results for the third quarter of fiscal year 2023, which ended June 30, 2023.
For the third quarter of fiscal 2023, net sales increased 14.8% to $8.0 million compared to $6.9 million in the third quarter a year ago. Gross profit in the third quarter of 2023 was $4.7 million, or 59.5% of sales, compared to $4.1 million, or 58.5% of sales in the third quarter of 2022. The Company reported net income of $1.4 million, or $0.08 per share in the third quarter, which was flat to prior year third quarter. The net income reflects an increase in sales at a relatively consistent gross profit, with increases in general and administrative and research and development expenses reflecting the Company’s strategy to invest in and strengthen the organization to support future growth. The Company completed an exclusive license and asset acquisition of several Honeywell product lines on June 30, 2023. The Company did not recognize any revenues and net income related to the product lines in the third quarter of 2023.
Shahram Askarpour, Chief Executive Officer of IS&S, said, “In the third quarter we successfully executed on both our short- and long-term strategies while delivering attractive returns for our shareholders. Most significantly, we licensed several product lines from Honeywell Aerospace, enhancing our current offering with product lines that can be found on literally thousands of aircraft in our target air transport and business aviation markets, with potential to expand that market to the military platform. We expect this license and asset acquisition, together with continued strong organic revenue such as achieved in this quarter, to represent an important inflection point in our revenue growth rate, which we anticipate will have a one-time annual impact of 40%, with an even more significant impact on earnings, where we expect EBITDA to increase by approximately 75%, once operations have been fully integrated in 2024. In addition, it enables us to achieve our objective to better leverage our existing infrastructure, sustain our attractive margins, and be accretive to our earnings in 2024.”
Askarpour continued, “Core operations were also strong in the quarter, with 15% organic top line growth and a significant increase in gross profits. This profitability supports our long- term vision that the industry is headed toward more autonomous flight, which requires technology to reduce pilot workload while improving safety. We have undertaken a meaningful increase in our research and development budget to develop new technologies that will be responsive to the evolving market, and we are doing so while still delivering attractive returns for our shareholders. We are excited by the successes we’ve achieved so far this year – growing organically, completing an accretive licenses and asset acquisition, investing for the future – while continuing to generate strong earnings and cash flow.”
The Company had $2.6 million of cash on hand as of June 30, 2023, after utilizing the majority of its existing cash for the exclusive license and asset acquisition of the Honeywell product lines. Over the first nine months of the year, the company generated $6.4 million of cash flow from operations. In the fiscal third quarter, to further strengthen its financial position and provide additional liquidity, the Company secured a $20 million term loan. IS&S was able to maintain a strong financial condition with sufficient cash on hand to run the operations of the business with ample liquidity, with access to an increased borrowing capacity.
New orders in the third quarter of fiscal 2023 were approximately $6.9 million, and backlog as of June 30, 2023 was $13.8 million, compared to backlog of $12.6 million as of June 30, 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 Thursday, August 10, 2023 at 10:00 AM 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 InnovativeSolutions & 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.
In addition tothe historical information contained herein, this press release contains “forward-looking statements” within the meaningof, and intended to be covered by, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-lookingstatements are based on management’s current expectations and beliefs concerning future developments and their potential effectson the Company including, without limitation, statements about future revenue, financial performance and profitability, future businessopportunities, and the impact of licenses, including the Honeywell license. Forward-looking statements are subject to numerous assumptions,risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Because forward-lookingstatements are subject to assumptions, risks and uncertainties, actual results may differ materially from those expressed or impliedby such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-lookingstatements include, but are not limited to, the Company’s ability to efficiently integrate licensed product lines, including theHoneywell asset licensed products, into its operations; a reduction in anticipated orders; an economic downturn; changes in the competitivemarketplace and/or customer requirements; an inability to perform customer contracts at anticipated cost levels; and other factors thatgenerally affect the economic and business environments in which the Company operates. Such factors are detailed in the Company's AnnualReport on Form 10-K for the fiscal year ended December 31, 2022, and subsequent reports filed with the Securities and ExchangeCommission. Many of the factors that will determine the Company’s future results are beyond the ability of management to controlor predict. Readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to revise orupdate any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, futureevents or otherwise.
InnovativeSolutions & Support, Inc.
CondensedConsolidated Statements of Operations
(unaudited)
| Three Months Ended<br> June 30, | Nine Months Ended<br> June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||
| Net Sales: | ||||||||
| Product | $ | 7,893,624 | $ | 6,935,976 | $ | 21,383,435 | $ | 20,279,371 |
| Engineering development contracts | 65,583 | 432,482 | 198,203 | |||||
| Returns and allowances | - | - | - | - | ||||
| Total net sales | 7,959,208 | 6,935,976 | 21,815,917 | 20,477,574 | ||||
| Cost of sales: | ||||||||
| Product | 3,202,870 | 2,879,462 | 8,538,219 | 8,253,982 | ||||
| Engineering development contracts | 21,692 | 79,098 | 16,748 | |||||
| Total cost of sales | 3,224,562 | 2,879,462 | 8,617,317 | 8,270,729 | ||||
| Gross profit | 4,734,645 | 4,056,514 | 13,198,600 | 12,206,845 | ||||
| Operating expenses: | ||||||||
| Research and development | 851,296 | 676,381 | 2,387,939 | 2,062,937 | ||||
| Selling, general and administrative | 2,395,714 | 1,694,233 | 7,104,212 | 5,226,015 | ||||
| Total operating expenses | 3,247,010 | 2,370,614 | 9,492,151 | 7,288,952 | ||||
| Operating income | 1,487,635 | 1,685,900 | 3,706,449 | 4,917,893 | ||||
| Interest income | 185,651 | 10,429 | 432,495 | 10,871 | ||||
| Interest (expense) | ||||||||
| Other income | 90,050 | 21,608 | 131,504 | 49,401 | ||||
| Income before income taxes | 1,763,337 | 1,717,937 | 4,270,448 | 4,978,165 | ||||
| Income tax expense | 339,958 | 358,763 | 877,315 | 1,056,363 | ||||
| Net income | $ | 1,423,379 | $ | 1,359,174 | $ | 3,393,133 | $ | 3,921,802 |
| Net income per common share: | ||||||||
| Basic | $ | 0.08 | $ | 0.08 | $ | 0.20 | $ | 0.23 |
| Diluted | $ | 0.08 | $ | 0.08 | $ | 0.20 | $ | 0.23 |
| Cash dividends per share: | $ | - | $ | - | $ | - | $ | - |
| Weighted average shares outstanding: | ||||||||
| Basic | 17,383,815 | 17,261,349 | 17,383,815 | 17,261,349 | ||||
| Diluted | 17,383,815 | 17,261,349 | 17,383,815 | 17,261,349 |
InnovativeSolutions and Support, Inc.
ConsolidatedStatements of Cash Flows
(unaudited)
| For<br> the Three Months Ended June 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net income | $ | 1,423,379 | $ | 1,359,174 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 87,503 | 90,028 | ||||
| Share-based compensation expense | ||||||
| Stock options | 110,029 | 45,089 | ||||
| Stock awards | 104,054 | 13,331 | ||||
| Loss on disposal of property and equipment | 357 | |||||
| Impairment of long-lived aassets | 44,400 | |||||
| Deferred income taxes | (50,851 | ) | 258,596 | |||
| (Increase) decrease in: | ||||||
| Accounts receivable | (1,977,368 | ) | 1,052,330 | |||
| Unbilled Receivables | (89,420 | ) | ||||
| Inventories | 157,223 | (120,920 | ) | |||
| Prepaid expenses and other current assets | 5,513 | 114,298 | ||||
| Other non-current assets | 2,601 | |||||
| Income taxes receivable | - | - | ||||
| Increase (decrease) in: | ||||||
| Accounts payable | (732,085 | ) | 7,788 | |||
| Accrued expenses | (118,189 | ) | 290,153 | |||
| Income taxes payable | (152,191 | ) | (179,833 | ) | ||
| Contract liability | (88,778 | ) | 52,388 | |||
| Net cash provided by operating activities | (1,274,181 | ) | 2,982,779 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchases of property and equipment | (84,933 | ) | (76,872 | ) | ||
| Proceeds from the sale of property and equipment | - | |||||
| Acquisition of a business | (35,860,000 | ) | ||||
| Net cash used in investing activities | (35,944,933 | ) | (76,872 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | - | 17,154 | ||||
| Proceeds from exercise of stock options | - | |||||
| Debt proceeds | 20,000,000 | |||||
| Net cash provided by financing activities | 20,000,000 | 17,154 | ||||
| Net increase in cash and cash equivalents | (17,219,114 | ) | 2,923,061 | |||
| Cash and cash equivalents, beginning of quarter | 19,791,346 | 11,618,840 | ||||
| Cash and cash equivalents, end of quarter | $ | 2,572,233 | $ | 14,541,901 |