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Innovative Solutions and Support(ISSC) - 2024 Q2 - Quarterly Report
ISSCInnovative Solutions and Support(ISSC)2024-05-14 20:36
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Acquisition and Agreements - The Company entered into an Asset Purchase and License Agreement with Honeywell for 35.9million,acquiringcertainassetsrelatedtoinertial,communication,andnavigationproductlines[131].−TheHoneywellAgreementisexpectedtoenhancetheCompany′sofferingsandaccelerategrowththroughpotentialcostsynergies[132].ProductDevelopmentandInnovation−TheFAA−certifiedThrustSense®Autothrottleisdesignedtoautomatepowermanagementforspeedandpowercontrol,enhancingsafetyandreducingpilotworkload[129].−TheCompanyhasdevelopedaFlightManagementSystem(FMS)thatoptimizesin−flightfuelsavingsandcomplieswithregulatoryenvironments,addressingmarketdemandforagingaircraftupgrades[126].−TheNextGenFlightDeckfeaturesThrustSense®IntegratedPT6Autothrottleandisavailableforretrofitinvariousaircraft,enhancingavionicscapabilities[127].−TheCompanycontinuestoinvestinresearchanddevelopmentfornewproducts,expensingassociatedcostsasincurred[134].−TheCompanyaimstoenhanceitsfocusonenvironmentalimpactandsustainabilitythroughitsproductofferingsandoperationalpractices[141].FinancialPerformance−NetsalesforthethreemonthsendedMarch31,2024were35.9 million, acquiring certain assets related to inertial, communication, and navigation product lines [131]. - The Honeywell Agreement is expected to enhance the Company's offerings and accelerate growth through potential cost synergies [132]. Product Development and Innovation - The FAA-certified ThrustSense® Autothrottle is designed to automate power management for speed and power control, enhancing safety and reducing pilot workload [129]. - The Company has developed a Flight Management System (FMS) that optimizes in-flight fuel savings and complies with regulatory environments, addressing market demand for aging aircraft upgrades [126]. - The NextGen Flight Deck features ThrustSense® Integrated PT6 Autothrottle and is available for retrofit in various aircraft, enhancing avionics capabilities [127]. - The Company continues to invest in research and development for new products, expensing associated costs as incurred [134]. - The Company aims to enhance its focus on environmental impact and sustainability through its product offerings and operational practices [141]. Financial Performance - Net sales for the three months ended March 31, 2024 were 10,739,516, an increase of 46.3% compared to 7,340,454forthesameperiodin2023[146].−ForthesixmonthsendedMarch31,2024,netsaleswere7,340,454 for the same period in 2023 [146]. - For the six months ended March 31, 2024, net sales were 20,047,579, an increase of 44.7% compared to 13,856,709forthesameperiodin2023[157].−Customerservicesalesincreasedby13,856,709 for the same period in 2023 [157]. - Customer service sales increased by 3,702,919 or 265.4%, while product sales decreased by 1,049,562or17.71,049,562 or 17.7% compared to the prior year quarter [146]. - Cost of sales increased by 2,556,851 or 98.3% to 5,157,154,representing48.05,157,154, representing 48.0% of net sales for the three months ended March 31, 2024 [147]. - Gross profit margin decreased to 52.0% for the three months ended March 31, 2024, down from 64.6% in the same period of 2023 [147]. - Research and development expenses increased by 164,921 or 19.0% to 1,031,119,representing9.61,031,119, representing 9.6% of net sales for the three months ended March 31, 2024 [150]. - Selling, general and administrative expenses rose by 461,558 or 18.9% to 2,908,193,accountingfor27.12,908,193, accounting for 27.1% of net sales for the three months ended March 31, 2024 [151]. - Net income for the three months ended March 31, 2024 was 1,208,316, compared to 1,271,103forthesameperiodin2023[156].CashFlowandFinancing−Cashandcashequivalentsdecreasedto1,271,103 for the same period in 2023 [156]. Cash Flow and Financing - Cash and cash equivalents decreased to 574,079 as of March 31, 2024, down from 3,097,193asofSeptember30,2023[168].−TheCompanyincreaseditsseniorsecuredrevolvinglineofcreditfrom3,097,193 as of September 30, 2023 [168]. - The Company increased its senior secured revolving line of credit from 10 million to 30million,extendingthematuritydatetoDecember19,2028[170].−Netcashprovidedbyoperatingactivitieswas30 million, extending the maturity date to December 19, 2028 [170]. - Net cash provided by operating activities was 4.4 million for the six-month period ended March 31, 2024, compared to 2.2millionforthesameperiodin2023[175].−Netcashprovidedbyinvestingactivitieswas2.2 million for the same period in 2023 [175]. - Net cash provided by investing activities was 1.9 million for the six-month period ended March 31, 2024, primarily from the sale of the Company's King Air aircraft [176]. - Net cash used in financing activities was 8.9millionforthesix−monthperiodendedMarch31,2024,duetoloanrepaymentsandlineofcreditrepayments[177].−TheCompany′sbacklogattheendofthesix−monthperiodwas8.9 million for the six-month period ended March 31, 2024, due to loan repayments and line of credit repayments [177]. - The Company's backlog at the end of the six-month period was 10,432,682, with expectations to fill the majority within the next twelve months [180]. - The Company anticipates that its cash and cash equivalents will be sufficient to fund operations for at least the next twelve months [179]. - The Company has no off-balance sheet arrangements with unconsolidated entities or financial partnerships [181]. Economic and Market Conditions - The Company’s products are affected by economic conditions, which may lead to customer spending delays or reductions [136]. - A hypothetical 1% increase in variable interest rates would have affected interest income by approximately 10,416forthesix−monthperiodendedMarch31,2024[182].−Theeffectivetaxrateforthesix−monthperiodendedMarch31,2024was21.510,416 for the six-month period ended March 31, 2024 [182]. - The effective tax rate for the six-month period ended March 31, 2024 was 21.5%, compared to 21.4% for the same period in 2023 [165]. - The interest rate on the Restated Line of Credit ranges from 1.5% to 2.5% based on the Company's funded debt to EBITDA ratio [171]. - The Company has not sold any shares under the ATM Sales Agreement, which allows for the sale of up to 40 million of common stock [174].