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Innovative Solutions & Support, Inc. Announces Third Quarter Fiscal 2017 Financial Results

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Innovative Solutions & Support, Inc. ("IS&S" or the "Company") (NASDAQ: ISSC)
today announced its financial results for the third quarter of fiscal
2017 ended June 30, 2017.

For the third quarter of fiscal 2017, the Company reported net sales of
$4.5 million, compared to third quarter fiscal 2016 net sales of $6.5
million. Gross margins in the third quarter were 52% compared to 60% in
the third quarter of fiscal 2016. The Company reported net income of
$19,000, or approximately $0.00 per fully diluted share, for the third
quarter of 2017 compared to net income of $227,000, or $0.01 per fully
diluted share, for the third quarter of 2016.

Geoffrey Hedrick, Chairman and Chief Executive Officer of IS&S, said,
"Sales in the third quarter were consistent with the previous quarter,
with a concentration of revenues generated from more profitable product
sales resulting in an increase to gross margin compared to the second
fiscal quarter. More importantly, we continued to implement our strategy
to expand our product portfolio and grow our distribution network. We
are partnering with Blackhawk Modifications, Inc. (Blackhawk) as a
distributor and installation center for our NextGen Flight Deck and
Integrated Turboprop Autothrottle for the King Air 200 and 350
platforms. We'll be working with Blackhawk for flight testing and
product certification and expect to receive a Supplemental Type
Certification (STC) for the Autothrottle on these platforms in the next
few months. In June, the FAA issued to IS&S the first STC for a
Turboprop Autothrottle, (Patent Pending Design) for the PC-12. We
believe based on conversations with aviation experts and partners that
this first-of-its-kind technology should open a market that features at
least twenty-five different aircraft types and over 10,000 individual
aircraft opportunities. We plan to leverage the innovative functionality
of the Autothrottle to add additional value to our NextGen Flight Deck."

At June 30, 2017, the Company had $25.0 million of cash on hand, an
increase of $6.2 million compared to September 30, 2016, our last fiscal
year end.

New orders in the third quarter of fiscal 2017 were $3.0 million and
backlog, as of June 30, 2017, was $4.3 million. Backlog excludes
potential future sole-source production orders from products developed
under the Company's Pilatus PC-24 and Boeing KC-46A engineering
development contracts, both of which the Company expects to remain in
production for more than a decade. The Company expects that these
contracts will add to their production sales already in backlog.

Shahram Askarpour, President of IS&S, added, "This has been a year of
significant commitment to new product development and distribution
network expansion. Research and development expenses were 27% of
revenues through the first three quarters of this year as we continue to
invest in internal development of new products that can address broader
markets, not just individual manufacturers. Already this year, we have
been awarded two STCs that we believe will position us for meaningful
growth opportunities. In addition, we've increased our efforts to build
out our global MRO distribution network. By continually expanding our
product portfolio and enhancing our global distribution network, we are
striving to increase our addressable market and strengthen the value of
our franchise for shareholders."

Nine Months Results

Total net sales for the nine months ended June 30, 2017 were $12.6
million compared to $21.7 million for the first nine months of fiscal
2016. Gross margin for the first nine months of fiscal 2017 was 50%
compared to 60%(1) in the year ago period. Net income for the
nine months ended June 30, 2017 was $4.8 million, or $0.28 per fully
diluted share, compared to $1.6 million(1), or $0.09 per
fully diluted share(1), over the first three quarters of
fiscal 2016. In the second quarter of 2017, as a result the settlement
of the Delta Airlines, Inc. ("Delta") lawsuit, the Company recognized
$4.1 million of other income.

______________________________

(1) In January 2016, the Company renegotiated an agreement
with a customer whereby $1.3 million of unbilled receivables and our
obligations associated with certain product levels were canceled. The
bad debt expense related to the impairment of the unbilled receivable
was previously recognized in the Company's September 30, 2015 audited
financial statements. In addition, as a result of the changes to the
agreement, we recognized an approximately $1.2 million positive impact
to the statement of operations in the second quarter of fiscal 2016
resulting from a reversal of $1.2 million in associated liabilities
consisting of deferred revenue and a contract loss accrual.

Conference Call

The Company will be hosting a conference call on Thursday, August 10,
2017 at 10:00 a.m. ET to discuss these results and its business outlook.
Please use the following dial in number to register your name and
company affiliation for the conference call: 877-883-0383 and enter the
PIN Number 0725903. 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) 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 and Support, Inc.
Consolidated Balance Sheets
 
 
June 30, September 30,
2017 2016
(unaudited)

ASSETS

Current assets
Cash and cash equivalents $ 24,981,341 $ 18,767,661
Accounts receivable 2,073,268 4,511,091
Unbilled receivables, net 1,600,034 1,597,672
Inventories 4,533,039 3,645,828
Prepaid expenses and other current assets 1,002,622 847,207
           
Total current assets 34,190,304 29,369,459
 
Property and equipment, net 6,762,897 6,962,562
Other assets 200,274 156,948
           
Total assets $ 41,153,475   $ 36,488,969  
 

LIABILITIES AND SHAREHOLDERS' EQUITY

 
Current liabilities
Accounts payable $ 1,021,572 $ 1,503,771
Accrued expenses 1,955,031 1,889,908
Deferred revenue 314,702 179,585
           
Total current liabilities 3,291,305 3,573,264
 
Non-current deferred income taxes 67,745 67,701
           
Total liabilities   3,359,050     3,640,965  
 

Commitments and contingencies

 
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, 2017 and September
30, 2016

$ - $ -
 

Common stock, $.001 par value: 75,000,000 shares authorized,
18,879,580 and 18,812,465 issued at June 30, 2017 and September
30, 2016

18,880 18,813
 
Additional paid-in capital 51,583,840 51,392,159
Retained earnings 7,560,242 2,805,569

Treasury stock, at cost, 2,096,451 shares at June 30, 2017 and
September 30, 2016

(21,368,537 ) (21,368,537 )
           
Total shareholders' equity 37,794,425 32,848,004
           
Total liabilities and shareholders' equity $ 41,153,475   $ 36,488,969  
 
 
Innovative Solutions and Support, Inc.
Consolidated Statements of Operations
(unaudited)
               
 
Three months ended Nine months ended
June 30, June 30,
2017 2016 2017 2016
 
Gross sales $ 4,541,421 $ 6,504,592 $ 13,117,200 $ 21,749,152
Returns and allowances   -     -   (556,009 )   -
Net Sales 4,541,421 6,504,592 12,561,191 21,749,152
 
Cost of sales   2,164,140     2,621,016   6,294,623     8,646,419
 
Gross profit 2,377,281 3,883,576 6,266,568 13,102,733
 
Operating expenses:
Research and development 1,236,184 1,405,158 3,391,181 3,674,374
Selling, general and administrative   1,682,286     2,246,074   2,025,952     7,531,633
Total operating expenses 2,918,470 3,651,232 5,417,133 11,206,007
 
Operating (loss) income (541,189 ) 232,344 849,435 1,896,726
 
Interest income 7,682 9,092 27,505 24,458
Other income   15,628     12,457   4,174,953     71,490
(Loss) income before income taxes (517,879 ) 253,893 5,051,893 1,992,674
 
Income tax (benefit) expense   (537,099 )   27,096   297,220     403,002
 
Net income $ 19,220   $ 226,797 $ 4,754,673   $ 1,589,672
 
Net income per common share:
Basic $ 0.00   $ 0.01 $ 0.28   $ 0.09
Diluted $ 0.00   $ 0.01 $ 0.28   $ 0.09
 
Weighted average shares outstanding:
Basic   16,755,082     16,941,707   16,735,533     16,925,688
Diluted   16,870,404     17,059,546   16,847,305     17,027,216
 

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