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Innovative Solutions & Support, Inc. Announces Third Quarter Fiscal 2018 Financial Results

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Innovative Solutions & Support, Inc. ("IS&S" or the "Company") (ISSC)
today announced its financial results for the third quarter of fiscal
2018, ended June 30, 2018.

For the third quarter of fiscal 2018, the Company reported net sales of
$3.4 million, compared to third quarter fiscal 2017 sales of $4.5
million. The Company reported a net loss of $1.0 million, or ($0.06) per
share, for the third quarter of 2018 compared to net income of $19,000,
or $0.00 per share, in the third quarter a year ago. In the third
quarter a year ago, the Company recorded a $537,000 tax benefit related
to a change in the anticipated profitability in the year, while there
was no similar benefit in this year's third quarter.

Geoffrey Hedrick, Chairman and Chief Executive Officer of IS&S, said,
"In the third quarter we took action to more clearly focus the
organization on those programs that we believe to be critical and
represent the greatest sales potential. Among the programs in which we
have the greatest confidence, we believe, is our Autothrottle
technology, an innovative breakthrough in turboprop cockpit technology.
With PC-12 certification in hand, we are pursuing a second STC, for the
King Air. This quarter we purchased our own King Air aircraft, providing
unfettered access to an aircraft in an effort to help expedite
certification. To support these programs, we reorganized certain aspects
of the business and revamped our sales and marketing strategy. In
addition, the Company undertook a reduction in workforce. The goal of
these actions was to concentrate our resources around what we believe to
be our critical programs and reduce our operating expenses. We believe
that we are a stronger organization, more efficient, and more focused on
opportunities that have the greatest potential to unlock the value
inherent in our innovative technology."

At June 30, 2018, the Company had $20.9 million of cash on hand. The
Company used $2.4 million of cash to acquire a King Air airplane in the
quarter.

The Company recorded a $259,000 charge in the third quarter as a result
of a reduction in workforce/reorganization. Beginning in fiscal 2019,
the Company currently expects to realize a savings of $3.5 million on an
annual basis in payroll and related costs compared to historical levels
and currently expects research and development costs will decrease to
20% of current net sales which is approaching a more historical ratio
than the 30% of current net sales seen in recent periods.

New orders in the third quarter of fiscal 2018 were $3.6 million and
backlog as of June 30, 2018 was $4.0 million. Backlog excludes potential
future sole-source production orders from the Pilatus PC-24, and the
KC-46A, all of which the Company expects to remain in production for a
decade following completion of their respective development phases. The
Company expects that these contracts will add to production sales
already in backlog.

Shahram Askarpour, President of IS&S, added, "During the third quarter
we continued to advance our AutoThrottle technology for the King Air
aircraft, for which we are working on a new certification. A flight test
with the FAA is scheduled in August which we currently expect will
ultimately result in certification of our ThrustSense® AutoThrottle for
that platform. We believe IS&S is now a leaner and more focused
organization that boasts a portfolio of the some of the industry's best
price-for-performance technology that targets opportunities in the
commercial air transport, military and general aviation markets."

Nine Months Results

Total net sales for the nine months ended June 30, 2018 were $10.2
million, compared to $12.6 million for the nine months ended June 30,
2017. For the nine months ended June 30, 2018, the net loss was ($3.2)
million compared to net income of $4.8 million for the first nine months
of fiscal 2017. Nine month results for fiscal 2017 include the benefit
of a $3.6 million reduction to selling, general and administrative
expenses as well as $4.1 million of other income, both arising from the
settlement of a lawsuit.

Conference Call

The Company will be hosting a conference call on Thursday, August 9,
2018 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 8271296. 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.

TABLES TO FOLLOW

   
Innovative Solutions and Support, Inc.
Consolidated Balance Sheets
 
 
June 30, September 30,
2018 2017
(unaudited)

ASSETS

Current assets
Cash and cash equivalents $ 20,879,412 $ 24,680,301
Accounts receivable 1,780,829 2,748,597
Unbilled receivables 1,039,879 1,480,822
Inventories 4,685,652 4,179,654
Prepaid expenses and other current assets 874,375 1,092,064
   
Total current assets 29,260,147 34,181,438
 
Property and equipment, net 8,890,643 6,669,011
Other assets 184,026 187,315
   
Total assets $ 38,334,816   $ 41,037,764  
 

LIABILITIES AND SHAREHOLDERS' EQUITY

 
Current liabilities
Accounts payable $ 1,329,859 $ 1,321,251
Accrued expenses 1,899,774 1,760,037
Deferred revenue 406,748 280,354
   
Total current liabilities 3,636,381 3,361,642
 
Non-current deferred income taxes 129,587 67,742
   
Total liabilities   3,765,968     3,429,384  
 
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, 2018 and September
30, 2017

$ - $ -
 

Common stock, $.001 par value: 75,000,000 shares authorized,
18,937,050 and 18,879,580 issued at June 30, 2018 and September
30, 2017, respectively

18,937 18,880
 
Additional paid-in capital 51,783,779 51,583,841
Retained earnings 4,134,669 7,374,196

Treasury stock, at cost, 2,096,451 shares at June 30, 2018 and
September 30, 2017

(21,368,537 ) (21,368,537 )
   
Total shareholders' equity 34,568,848 37,608,380
   
Total liabilities and shareholders' equity $ 38,334,816   $ 41,037,764  
 
       
Innovative Solutions and Support, Inc.
Consolidated Statements of Operations
(unaudited)
 
Three months ended Nine months ended
June 30, June 30,
2018 2017 2018 2017
 
Gross sales $ 3,389,663 $ 4,541,421 $ 10,204,851 $ 13,117,200
Returns and allowances   -     -     -     (556,009 )
Net Sales 3,389,663 4,541,421 10,204,851 12,561,191
 
Cost of sales   1,806,980     2,164,140     5,482,596     6,294,623  
 
Gross profit 1,582,683 2,377,281 4,722,255 6,266,568
 
Operating expenses:
Research and development 1,028,271 1,236,184 2,983,614 3,391,181
Selling, general and administrative   1,626,640     1,682,286     5,005,941     2,025,952  
Total operating expenses 2,654,911 2,918,470 7,989,555 5,417,133
 
Operating (loss) income (1,072,228 ) (541,189 ) (3,267,300 ) 849,435
 
Interest income 15,164 7,682 36,469 27,505
Other income   16,128     15,628     53,224     4,174,953  
(Loss) income before income taxes (1,040,936 ) (517,879 ) (3,177,607 ) 5,051,893
 
Income tax expense (benefit)   101     (537,099 )   61,920     297,220  
 
Net (loss) income $ (1,041,037 ) $ 19,220   $ (3,239,527 ) $ 4,754,673  
 
Net (loss) income per common share:
Basic $ (0.06 ) $ 0.00   $ (0.19 ) $ 0.28  
Diluted $ (0.06 ) $ 0.00   $ (0.19 ) $ 0.28  
 
Weighted average shares outstanding:
Basic   16,816,838     16,755,082     16,800,070     16,735,533  
Diluted   16,816,838     16,870,404     16,800,070     16,847,305  
 

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