Core Insights - Innovative Solutions and Support (NASDAQ: ISSC) has experienced high sales growth following the acquisition of Honeywell product lines, but this has negatively impacted profit margins [1]. Group 1 - The company develops avionics systems and has seen significant sales growth due to the recent acquisition [1]. - The acquisition of Honeywell product lines has led to both increased revenue and challenges in maintaining profit margins [1].

Group 1 - The aerospace and defense contractors are facing challenges due to President Trump's announcement of significant budget cuts to the defense budget [1] - The Trump Administration's objective is to reduce the defense budget, which has implications for contractors working with the U.S. Department of Defense [1] Group 2 - The article does not provide any additional relevant information regarding companies or industries beyond the defense sector [2][3]

Financial Performance - For the three months ended December 31, 2024, total net sales increased, with product sales at 62.5% and service sales at 37.5% compared to 47.5% and 52.5% respectively in 2023[150] - Gross profit margin decreased to 41.4% in 2024 from 59.3% in 2023, indicating a significant decline in profitability[150] - Operating income fell to 8.4% in 2024 from 17.4% in 2023, reflecting challenges in maintaining profitability[150] - Net income decreased to 4.5% in 2024 compared to 11.4% in 2023, highlighting a decline in overall financial performance[150] - Net income for the three months ended December 31, 2024 was $0.7 million, down from $1.1 million in the same period of 2023, with diluted net income per share decreasing to $0.04 from $0.06[160] Sales and Cost Analysis - The cost of sales for products rose to 39.2% from 19.1%, while service costs decreased slightly to 19.4% from 21.6%, leading to a total cost of sales of 58.6% in 2024 compared to 40.7% in 2023[150] - Cost of sales was $9.4 million, or 58.6% of net sales, for the three months ended December 31, 2024, compared to $3.8 million, or 40.7% of net sales, for the same period in 2023, resulting in a gross margin decrease to 41.4% from 59.3%[153] - Operating expenses as a percentage of net sales decreased to 33.0% in 2024 from 42.0% in 2023, with research and development expenses at 7.0% and selling, general and administrative expenses at 26.0%[150] - Selling, general, and administrative expenses rose by $1.2 million, or 38.3%, to $4.2 million, accounting for 26.0% of sales compared to 32.3% in the prior year[155] Acquisitions and Strategic Initiatives - The company completed the acquisition of certain assets from Honeywell for a total consideration of $35.9 million in June 2023, followed by additional acquisitions totaling $4.2 million in July 2024 and $14.2 million in September 2024[135][136][137] - The strategic acquisitions from Honeywell are expected to enhance the company's offerings in air transport, military, and business aviation markets, potentially leading to cost synergies[138] - The company announced a multi-million dollar production contract for its 19" Multifunction Display with Integrated Mission Computer, enhancing its commercial growth strategy[178] Research and Development - The company continues to focus on research and development, with plans to invest in new product development while expensing associated R&D costs as incurred[140] - Research and development expenses increased to $1.1 million for the three months ended December 31, 2024, representing 7.0% of net sales, down from 9.7% in the same period of 2023[154] Market and Operational Risks - The company operates in a competitive environment, facing risks related to market acceptance of its products and potential economic downturns affecting customer spending[124][143] - The Company is exposed to market risks primarily due to changes in interest rates, with a hypothetical 1% increase potentially affecting interest income and cash flows by approximately $5,030 for the three months ended December 31, 2024[180] Backlog and Revenue Recognition - The company's backlog at December 31, 2024 was $80.8 million, down from $89.2 million at September 30, 2024, with $74.3 million of acquired backlog from a recent acquisition[177] - The company expects to recognize approximately 65% of its backlog as revenue over the next 12 months and about 98% over the next 24 months[177] Financial Position and Controls - Cash and cash equivalents increased to $604,561 as of December 31, 2024, compared to $538,977 as of September 30, 2024, while net cash provided by operating activities was $1.8 million[161][171] - The Company has no off-balance sheet arrangements or relationships with unconsolidated entities[179] - The Company's disclosure controls and procedures were evaluated as effective as of December 31, 2024, ensuring timely and accurate reporting[181] - There were no changes in the Company's internal control over financial reporting that materially affected its operations during the fiscal quarter ended December 31, 2024[182] - The Company is subject to various legal proceedings, but does not believe any pending matters will materially affect its financial position[183]

Financial Performance - The company achieved over 70% year-over-year revenue growth in Q1 2025, driven by new military programs and contributions from legacy platforms [7][20] - Gross profit increased approximately 20%, although margins were impacted by significant investments in growth initiatives [8][22] - Net income for Q1 was $700,000, or $0.04 per share, compared to $1.1 million, or $0.06 per share, in the previous year [27] - EBITDA for Q1 was $2.7 million, a 28% increase from $2.1 million last year, with adjusted EBITDA at $3.1 million, up from $2.5 million [27][30] Business Line Performance - Product sales reached $10 million, more than double last year's levels, primarily due to the recently acquired Honeywell military product line [21] - Service revenue was $6 million, driven by customer service sales from the Honeywell product lines and increased NRE revenue [21] Market Performance - The backlog as of December 31, 2024, was approximately $81 million, significantly up from $14.6 million in the prior year [8][27] - The company expects continued growth in military markets, which are anticipated to remain strong [7][17] Company Strategy and Industry Competition - The company is focused on its long-term value creation strategy, ISSCnext, which emphasizes commercial growth in high-value markets and disciplined capital allocation [9] - Significant investments are being made in infrastructure and systems capabilities to support defense customer requirements, including a modern ERP system [10][12] - The company aims to remain a strategic acquirer, focusing on complementary product lines and smaller avionics manufacturers [18] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the growth opportunities across commercial air transportation, aviation, and military markets, with expectations for revenue and EBITDA growth of over 30% compared to fiscal year 2024 [19][17] - The company is optimistic about the integration of the Honeywell acquisition and the expected benefits from the new ERP system [19][86] Other Important Information - The company has increased its headcount by over 25% to support growth initiatives [14] - Capital expenditures were $300,000 in Q1, up from $200,000 in the same period last year [31] Q&A Session Summary Question: Strategies for gaining market share in military revenue - The company is working to become a Tier 1 supplier to the Department of Defense by ensuring compliance with DFARS and enhancing IT capabilities [38][39] Question: Margin profiles of foreign military engagements - Foreign military sales treated as commercial deals can yield better margins compared to domestic contracts [44][46] Question: Anticipated margin profile with military business mix - The company expects gross margins around 50% for military programs, focusing on EBITDA as a more relevant metric [52][100] Question: Balancing infrastructure investments with acquisitions - Current infrastructure and strategic initiatives are funded through operations and credit facilities, with a focus on maintaining a leverage ratio around three times [55] Question: Acquisition strategy and sourcing opportunities - The company utilizes a Business Development VP with M&A experience and maintains relationships with bankers to identify acquisition opportunities [62][66] Question: Transition of manufacturing from Honeywell - The transition is expected to occur in Q3, with potential revenue upticks anticipated from the Honeywell military product line [81][83] Question: Financial benefits from ERP implementation - The new ERP system is expected to improve data management and operational efficiencies, leading to better decision-making [86][88]

Revenue Performance - First quarter revenue was $16.0 million, an increase of 71.6% compared to the same period last year, driven by military programs and the Honeywell acquisition [4][8]. - Revenue from military customers increased to $8.0 million during the first quarter, up from $2.0 million in the prior-year period, representing over 40% of total revenue mix expected for full-year 2025 [5][6]. - Total net sales for Q4 2024 reached $15,968,729, a significant increase of 71.5% compared to $9,308,063 in Q4 2023 [28]. Profitability Metrics - Gross profit was $6.6 million, with a gross margin of 41.4%, down from 59.3% in the first quarter of 2024 due to lower margins from the Honeywell product line and increased expenses [6][9]. - Gross profit for the quarter was $6,610,457, up from $5,523,162 in the same period last year, reflecting a gross margin improvement [28]. - Adjusted EBITDA was $3.1 million, up 24% from $2.5 million in the prior-year period, with a net income of $0.7 million or $0.04 per diluted share [6][11][12]. - Adjusted EBITDA for Q4 2024 was $3,078,676, representing a 23.5% increase from $2,491,098 in Q4 2023, with an adjusted EBITDA margin of 19.3% [29]. - Net income for Q4 2024 was $736,192, down from $1,057,350 in Q4 2023, resulting in a diluted net income per share of $0.04 [28]. Operating Expenses and Efficiency - Operating expenses were $5.3 million, representing 33.0% of revenue, down from 42.0% in the prior-year period, reflecting improved operating leverage [10]. - Research and development expenses rose to $1,107,736, up from $901,144 in Q4 2023, highlighting a focus on innovation [28]. - Capital expenditures for the quarter were $261,364, compared to $182,918 in Q4 2023, reflecting ongoing investment in growth initiatives [30]. Cash Flow and Debt Management - Cash flow provided by operations was $1.8 million during the first quarter, compared to $4.2 million in the same period last year, with free cash flow of $1.6 million [14]. - Free cash flow for the quarter was $1,580,094, a decrease from $4,032,817 in Q4 2023, indicating a shift in cash generation [30]. - As of December 31, 2024, total debt was $26.5 million, with cash and cash equivalents of $0.6 million, resulting in net debt of $25.9 million [13]. - Net debt increased to $25,907,930 in Q4 2024, up from $10,144,180 in Q4 2023, with a leverage ratio of 1.8x compared to 0.9x last year [31]. Future Outlook and Capacity Expansion - New orders in the first quarter of fiscal 2025 were $7.5 million, with a backlog of $81 million as of December 31, 2024 [12]. - The company plans to expand production capacity at its Exton facility by more than three-fold by mid-calendar year 2025 to support increased demand [5]. - The company anticipates overall gross margins to improve by mid-2025 as it completes the integration of F-16 products into its facility [5]. Asset and Liability Management - Total assets decreased to $81,253,935 as of December 31, 2024, from $82,382,261 at the end of Q3 2024 [26]. - Total liabilities decreased to $33,482,427 from $35,743,606 in the previous quarter, indicating improved financial stability [26].

Financial Performance - Net sales for fiscal year 2024 were $47,198,020, with a gross profit of $25,913,591[4] - Operating income for fiscal year 2024 was $9,661,537, compared to $7,359,048 in fiscal year 2023[4] - Net income for fiscal year 2024 was $6,998,380, with a basic net income per common share of $0.40[4] - Company reported net sales of $47.2 million in fiscal year 2024, a 35.6% increase from $34.8 million in fiscal year 2023[140] - Net income increased to $7.0 million in fiscal year 2024, up 16.1% from $6.0 million in fiscal year 2023[140] - The company's net income for fiscal year 2023 was $6.0 million, compared to $5.5 million in fiscal year 2022, with fully diluted net income per share of $0.35 in 2023 versus $0.32 in 2022[108] Expenses and Costs - R&D expenses were $3.1 million in fiscal year 2023, decreasing to 9.0% of Net sales from 9.8% in fiscal year 2022[14] - Cost of sales was $13.5 million, or 38.7% of Net sales, in fiscal year 2023, with a gross margin of 61.3% compared to 60.1% in fiscal year 2022[18] - Income tax expense was $1.6 million in fiscal year 2023, with an effective tax rate of 21.1% compared to 24.8% in fiscal year 2022[15] Cash Flow and Financing - Net cash provided by financing activities was $8.5 million for fiscal year 2024, consisting of $43.8 million in payments against the line of credit offset by $52.3 million in additional borrowings[23] - Cash used in investing activities was $16.8 million for fiscal year 2024, primarily due to the $14.2 million acquisition of military display generators and flight control computers[22] Assets and Liabilities - Total assets as of September 30, 2024, were $82,382,261, compared to $62,957,451 in 2023[4] - Total assets increased to $82.38 million in 2024 from $62.96 million in 2023[74] - Accounts receivable rose to $12.61 million in 2024 compared to $9.74 million in 2023[74] - Inventories grew to $12.73 million in 2024 from $6.14 million in 2023[74] - Long-term debt increased to $28.03 million in 2024 from $17.50 million in 2023[74] - Retained earnings improved to $12.67 million in 2024 from $5.67 million in 2023[74] Revenue and Sales - The company's net sales outside the United States were $22.8 million in fiscal year 2024, $15.5 million in 2023, and $11.1 million in 2022[45] - Customer service sales were $11.1 million in 2023, down from $4.9 million in 2022[83] - Engineering and development contracts net sales were $1.1 million in 2023, down from $0.4 million in 2022[83] - Top five customers accounted for 42% of total sales in 2024, down from 54% in 2023[77] - In fiscal year 2024, the company's three largest customers, Pilatus, Textron, and Honeywell, accounted for 23%, 7%, and 7% of total revenue, respectively[125] Acquisitions and Agreements - The company acquired additional key assets and entered into an exclusive license agreement with Honeywell in July 2024 for $4.2 million in cash[144] - Company entered into a $14.2 million agreement with Honeywell for military display generators and flight control computers in September 2024[145] - Company entered into a $35.9 million agreement with Honeywell for inertial, communication, and navigation product lines in June 2023[143] - The Company entered into the September 2024 Honeywell Agreement for $14.2 million in cash, acquiring assets related to military display generators and flight control computers[337] - The exclusive licensing from Honeywell enhances the Company's offerings in air transport, military, and business aviation markets[338] Backlog and Contracts - Backlog at September 30, 2024 was $89.2 million, including $74.3 million from a recent acquisition, with 65% expected to be recognized as revenue over the next 12 months and 98% over the next 24 months[141] - Company secured a multi-million dollar production contract for 19'' Multifunction Display with Integrated Mission Computer in August 2024[142] - The company's backlog at September 30, 2023 was $13.5 million, significantly lower than the $89.2 million backlog at September 30, 2024[141] Market Risk and Interest Rates - A hypothetical 1% increase in variable interest rates would affect interest expense by approximately $0.3 million based on $28.0 million of variable rate debt as of September 30, 2024[46] - The company's exposure to market risk primarily relates to changes in interest rates, particularly from its revolving credit facility[46] - The company's cash equivalents consist of funds invested in money market funds with variable interest rates, and a 1% increase in rates would not materially impact operations[47] Inventory and Suppliers - Inventory write-downs are recorded when the net realizable value is below cost or future demand is lower than current inventory levels[44] - Four suppliers accounted for 63.1% of total inventory purchases in 2024, up from 49.0% in 2023[79] - The company's manufacturing relies on four key suppliers: Honeywell, FilConn, APCT Inc, and Brandywine Precision Inc, which accounted for most of the company's inventory-related purchases in fiscal year 2024[123] Revenue Recognition and Accounting Policies - Revenue recognition for EDC contracts is measured over time using an input measure, such as costs incurred to date relative to total estimated costs at completion[37] - The company's accounting policies require significant judgment and estimates due to inherent uncertainty or complexity[30] - The company uses the relief from royalty method to estimate the fair value of acquired license agreements, considering future expected revenues, royalty rates, and discount rates[59] Intangible Assets and Goodwill - The fair value of acquired license agreements in the September 2024 Honeywell Agreement was estimated at $2,300,000[58] - The company's identifiable intangible assets primarily consist of license agreements, customer relationships, and backlog, recognized at fair value in business combinations[100] - The company's goodwill impairment test is performed annually or in interim periods if certain changes indicate potential impairment, with factors including macroeconomic conditions and financial performance[104] Business Strategy and Operations - The company plans to continue investing in capital equipment to support engineering development efforts and operations[22] - The company operates in one business segment, focusing on flight guidance and cockpit display systems for OEMs and retrofit applications[45] - The company's multi-channel sales strategy targets various aviation sectors, including passenger and cargo aircraft operators, general aviation, MRO dealer networks, and the Department of Defense[119] - Potential cost synergies are expected from better utilization of the Company's engineering team and operational capacity[338] Facilities and Expansion - The company is expanding its Exton facility by 40,000 square feet at an expected cost of $6 million to support commercial growth and recent transactions with Honeywell[118] - Company operates a 45,000 square foot design, manufacturing, and office facility in Exton, Pennsylvania[155] Patents and Employees - Company held over 120 U.S. and international patents as of September 30, 2024[154] - 27% of full-time employees were in engineering-related roles as of September 30, 2024[154] - Company employed 133 full-time employees as of September 30, 2024, up from 98 in September 2023[137] Cybersecurity - The Company has not identified material risks from known cybersecurity threats affecting its operations or financial condition[321] Stock and Market Value - The aggregate market value of common stock held by non-affiliates was $112.2 million as of March 31, 2024[69] Product and Technology - ThrustSense® Autothrottle system selected by US Army for C-12 (B200) aircraft, with deliveries starting in September 2024[142]

Financial Data and Key Metrics Changes - The company reported a net income of $7 million, up 16% year-over-year, and total EBITDA of approximately $12 million, which represents a 36% increase from the prior year [8] - Revenue for the fourth quarter grew by more than 18% year-over-year, driven by new military programs and recently acquired platforms [9] - Gross profit for the fourth quarter was $8.5 million, an increase from $8.1 million in the same period last year [30] Business Line Data and Key Metrics Changes - Product sales increased to $9.8 million during the fourth quarter, driven by contributions from commercial air transport programs [29] - Customer service revenue was $5.5 million, largely due to sales from the product lines acquired from Honeywell [29] - New orders in the fourth quarter totaled $95.4 million, including $74.3 million of backlog from the Honeywell acquisition [36] Market Data and Key Metrics Changes - The air transport market showed continued stabilization with sequential growth compared to the first half of the year [29] - Military end markets experienced strong demand, supported by orders from the US Department of Defense and allied foreign militaries [9] Company Strategy and Development Direction - The company introduced "IS&S Next," a long-term value creation strategy focusing on targeted commercial growth, improving operating leverage, and disciplined capital allocation [11] - The strategy includes expanding existing platforms, new OEM and retrofit programs, and strategic product line acquisitions [12] - The company aims to increase manufacturing capacity by over 100% through a $6 million facility expansion [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in military markets, anticipating significant contributions from new contracts and acquisitions [15][19] - The company expects to maintain a mid-50% gross margin in the long term, despite challenges from recent acquisitions [33] - Management highlighted the importance of integrating AI capabilities into new products to enhance competitiveness in both military and commercial sectors [19][96] Other Important Information - Cash flow from operations was $5.8 million, up from $3.7 million in the previous year, with free cash flow for the full year reaching $5.1 million [37] - Total net debt increased to $27.5 million, reflecting incremental debt from recent acquisitions [38] - The company amended its credit agreement to expand the facility to $35 million, providing financial flexibility [39] Q&A Session Summary Question: Impact of Honeywell acquisition on revenue and EBITDA for FY25 - Management indicated that the acquisition added approximately $74 million to backlog, which will contribute to revenue over the next three to four years [44] Question: Clarification on gross and EBITDA margins - Management stated that while gross margins may be lower due to military sales, EBITDA margins are expected to remain comparable to current levels [47] Question: Projections for Q1 revenue - Management refrained from providing specific forward-looking statements for Q1 [64] Question: Priorities for fiscal 2025 - Key priorities include product development with AI capabilities, increasing in-sourcing of sub-assemblies, and continued capital allocation for strategic acquisitions [73][75] Question: Military market share and competitive strategies - Management discussed a strategic shift towards military business development, resulting in recent contract wins and a focus on enhancing infrastructure for defense contracts [80][88] Question: Potential lift from Boeing issues - Management noted that challenges faced by Boeing could lead to increased retrofit opportunities, benefiting the company [101]

Financial Performance - Fourth quarter net revenue was $15.4 million, an increase of 18.4% year-over-year[3] - Full year net revenue reached $47.2 million, representing a 35.6% increase compared to the previous year[4] - Fourth quarter gross profit was $8.5 million, with a gross margin of 55.4%[3] - Full year adjusted EBITDA was $13.7 million, up 42.5% from the prior year[4] - Total net sales for the three months ended September 30, 2024, reached $15,384,806, a 18.4% increase from $12,992,596 in the same period of 2023[30] - Gross profit for the three months ended September 30, 2024, was $8,528,245, compared to $8,112,471 for the same period in 2023, reflecting a gross margin improvement[30] - Operating income increased to $4,366,168 for the three months ended September 30, 2024, up from $3,652,599 in the prior year, indicating a 19.5% growth[30] - Net income for the three months ended September 30, 2024, was $3,180,194, compared to $2,634,622 in the same period of 2023, representing a 20.7% increase[30] - Adjusted EBITDA for the twelve months ended September 30, 2024, was $13,672,080, compared to $9,593,262 for the same period in 2023, indicating a 42.5% increase[31] Cash Flow and Debt - Cash flow from operations for fiscal 2024 was $5.8 million, compared to $2.1 million in the previous year[15] - Free cash flow increased to $5.1 million during fiscal 2024, up from $1.8 million in the same period last year[15] - Total debt as of September 30, 2024, was $28.0 million, with net debt of $27.5 million[14] - Long-term debt increased to $28,027,002 as of September 30, 2024, compared to $17,500,000 in the previous year, reflecting a 60.0% rise[29] - The leverage ratio improved to 1.3x as of September 30, 2024, down from 2.0x in the previous year, indicating a stronger balance sheet[31] Orders and Growth Strategy - New orders in the fourth quarter totaled $95.4 million, including $74.3 million of backlog from recent acquisitions[13] - The company aims to continue growth in retrofit markets and pursue strategic acquisitions to enhance its advanced avionics capabilities[5] Research and Development - Research and development expenses for the three months ended September 30, 2024, were $1,106,355, up from $741,579 in the same period of 2023, showing a 49.2% increase[30] - The company plans to launch the next generation Utility Management System (UMS2) in 2025, which will feature AI capabilities[7]

Acquisition and Partnerships - The Company reported a cash consideration of $35.9 million for the acquisition of certain assets from Honeywell International, Inc. related to inertial, communication, and navigation product lines [103]. - The Company has signed a multi-year agreement with Textron to supply ThrustSense® Autothrottle on the King Air 360 and King Air 260, enhancing its product offerings in the retrofit market [101]. Product Development and Innovation - The FAA has certified the Company's ThrustSense® Autothrottle for retrofit in the King Air, which automates power management and increases safety during all phases of flight [101]. - The Company aims to continue investing in research and development (R&D) for new products, expensing associated R&D costs as incurred [106]. - The Company has developed a Flight Management System (FMS) that optimizes in-flight fuel savings and complies with regulatory requirements, addressing market demand for aging aircraft upgrades [99]. - The Company’s NextGen Flight Deck features advanced avionics, including dual flight management systems and synthetic vision, available for integration into various business aircraft [100]. - The Company’s strategy as a systems integrator allows for broader product offerings and potential for more substantive orders in the aviation market [97]. - The Company’s products are designed to meet the needs of both OEM and retrofit markets, serving a diverse customer base including government agencies and foreign militaries [102]. Financial Performance - Net sales for the three months ended June 30, 2024, were $11,765,635, an increase of 47.8% compared to $7,959,208 for the same period in 2023 [114]. - Customer service sales increased by $5,090,747, or 386.2%, while product sales decreased by $1,448,355, or 22.0% for the three months ended June 30, 2024 [114]. - Cost of sales increased by $2,261,252, or 70.1%, to $5,485,814, representing 46.6% of net sales for the three months ended June 30, 2024 [115]. - Gross margin decreased to 53.4% for the three months ended June 30, 2024, down from 59.5% in the same period of 2023 [115]. - R&D expenses increased by $248,071, or 29.1%, to $1,099,367 for the three months ended June 30, 2024, but decreased as a percentage of net sales to 9.3% [116]. - Selling, general and administrative expenses rose by $747,620, or 31.2%, to $3,143,334 for the three months ended June 30, 2024, with a percentage of net sales at 26.7% [117]. - Net income for the three months ended June 30, 2024, was $1,552,520, compared to $1,423,379 for the same period in 2023, resulting in diluted net income per share of $0.09 [119]. - For the nine months ended June 30, 2024, net sales were $31,813,214, an increase of 45.8% compared to $21,815,917 for the same period in 2023 [121]. - Cost of sales for the nine months ended June 30, 2024, increased by $5,810,551, or 67.4%, to $14,427,868, representing 45.4% of net sales [122]. - The effective tax rate for the nine-month period ended June 30, 2024, was 19.9%, compared to 20.5% for the same period in 2023 [126]. - The Company reported net income of $3,818,186 for the nine months ended June 30, 2024, compared to $3,393,133 for the same period in 2023, representing an increase of approximately 12.5% [128]. Cash Flow and Financing - Net cash provided by operating activities was $5,350,891 for the nine months ended June 30, 2024, a significant increase from $937,925 for the same period in 2023 [129]. - The Company experienced net cash provided by investing activities of $1,713,883 for the nine months ended June 30, 2024, compared to a net cash used of $36,025,084 in the same period of 2023 [129]. - The Company has increased its senior secured revolving line of credit from $10,000,000 to $30,000,000, with a maturity date extended to December 19, 2028 [132]. - Net cash used in financing activities was $9,600,000 for the nine months ended June 30, 2024, primarily due to payments against the Company's line of credit [139]. - The interest rate applicable to loans under the Restated Line of Credit ranges from 1.5% to 2.5% depending on the Company's funded debt to EBITDA ratio [133]. Market Conditions and Outlook - The Company is focused on enhancing its global reputation for delivering competitive price-for-performance value propositions through strategic acquisitions and product development [104]. - The Company’s sales have historically been affected by economic conditions, with potential impacts from factors such as consumer spending and government agency budgets [108]. - The backlog at the end of the nine-month period ended June 30, 2024, was $9,266,552, with the majority expected to be filled within the next twelve months [141]. - A hypothetical 1% increase in variable interest rates would have affected interest income by approximately $15,618 for the nine-month period ended June 30, 2024 [143]. - The Company anticipates that its cash and cash equivalents will be sufficient to fund operations for at least the next twelve months [140]. - The Company did not sell any shares of common stock under the ATM Sales Agreement during the year ended September 30, 2023, and the three- and nine-month periods ended June 30, 2024 [136].

Financial Performance - Net revenue for Q3 2024 was $11.8 million, representing a 47.8% increase year-over-year[2] - Gross profit reached $6.3 million, up 32.6%, with a gross margin of 53.4%[2][5] - Net income was $1.6 million, or $0.09 per diluted share; adjusted net income was $1.9 million, or $0.11 per diluted share[2] - Adjusted EBITDA for Q3 2024 was $3.1 million, a 61% increase from the previous year, with an adjusted EBITDA margin of 26.1%[2][6] - Total net sales for the three months ended June 30, 2024, were $11,765,635, a 47.5% increase from $7,959,208 in the same period last year[20] - Adjusted EBITDA for the three months ended June 30, 2024, was $3,075,926, representing a 73.5% increase from $1,911,387 in the same period last year[21] - Net income for the nine months ended June 30, 2024, was $3,818,186, up from $3,393,133 in the same period last year, indicating a 12.5% growth[20] - Basic net income per common share for the three months ended June 30, 2024, was $0.09, up from $0.08 in the same period last year[20] Cash Flow and Debt - Year-to-date free cash flow increased to $4.8 million, up from $0.8 million in the same period last year[2][8] - Total debt as of June 30, 2024, was $9.9 million, with net leverage reduced to 0.8x from 2.1x at the end of Q4 2023[8] - Cash and availability under the credit line increased to approximately $21 million as of June 30, 2024[4][8] - The company reported a net leverage ratio of 0.8x for the three months ended June 30, 2024, down from 2.6x in the same period last year[24] - Operating cash flow for the nine months ended June 30, 2024, was $5,350,891, compared to $937,925 in the same period last year[23] Operating Expenses and R&D - Operating expenses were $4.2 million, representing 36.1% of revenue, down from 40.8% in the same period last year[6] - Research and development expenses for the three months ended June 30, 2024, increased to $1,099,367 from $851,296 in the same period last year, a rise of 29.1%[20] Shareholder Equity and Liabilities - Total shareholders' equity increased to $43,181,125 as of June 30, 2024, from $38,636,984 as of September 30, 2023[19] - The company’s total current liabilities as of June 30, 2024, were $16,152,889, compared to $6,398,959 as of September 30, 2023[18] Future Outlook - The company anticipates continued growth opportunities in fiscal 2025 from the integration of Honeywell product lines[4][16] Orders and Backlog - New orders in Q3 2024 totaled $10.6 million, with a backlog of $9.3 million as of June 30, 2024[7] Gross Profit - Gross profit for the nine months ended June 30, 2024, was $17,385,346, compared to $13,198,600 for the same period in 2023, reflecting a 31.5% increase[20]