Innovative Solutions and Support(ISSC) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q1 2021 were $4.9 million, an increase of 8% from $4.5 million in the same quarter last year, driven by sales growth in King Air Autothrottle Systems and flat panel display revenues [11] - Gross margins decreased to 52.7% from 57.7% year-over-year, primarily due to increased direct costs and warranty expenses [11] - Operating income was $232,000, a slight increase from the previous year, while net income was $240,000 or $0.01 per share, down from $328,000 or $0.02 per share in the prior year [13] Business Line Data and Key Metrics Changes - The retrofit market is currently outperforming the OEM opportunity, with ongoing demand for legacy products and new technology such as ThrustSense autothrottle [8][19] - New orders in Q1 2021 reached $5.4 million, up $2 million sequentially from Q4 2020, with a backlog of $4.2 million at the end of the quarter, indicating growth [20] Market Data and Key Metrics Changes - The company is experiencing strong demand in the cargo conversion market, particularly for 757 and 767 aircraft, as online shopping increases and air passenger miles decrease [9][19] - The King Air market presents a significant retrofit opportunity, estimated at $300 million, with approximately 5,000 aircraft currently in service [17] Company Strategy and Development Direction - The company is focused on innovative opportunities, including expanding its product revenue through partnerships with major industry players like Textron, Pilatus, and Boeing [6][7] - The strategy includes leveraging existing relationships to promote autothrottle benefits and exploring growth potentials across commercial air transport, general aviation, and military markets [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining revenue growth and profitability despite the pandemic's impact, noting that the company remains in a strong financial position with significant liquidity and no debt [5][14] - The ongoing pandemic has limited personal interactions with customers and FAA, but management does not expect it to materially alter the overall growth strategy [21] Other Important Information - The company declared a special dividend of $0.50 per share in December 2020, returning nearly $20 million to shareholders over the second half of 2020 [6] - The company received recognition from Flying Magazine for its ThrustSense autothrottle, highlighting its influence on safety and technology in aircraft operations [18] Q&A Session Summary Question: Comments on the company's performance and future revenue expectations - Management acknowledged the challenges posed by the pandemic but expressed optimism for future profits and revenue growth [25][26] Question: Inquiry about battery-powered airplanes and market involvement - Management stated that they have not yet explored the battery-powered airplane market, preferring to wait for more definitive market developments [28][29] Question: Discussion on the twin jet market and ThrustSense application - Management confirmed that ThrustSense technology is applicable to other twin jet models and highlighted its unique features that enhance safety [32][33] Question: Update on FAA interactions and pending applications - Management reported that the FAA has been responsive despite work-from-home challenges, and they have several pending applications [35][38] Question: Clarification on COVID-19's impact on retrofit market rollout - Management noted that COVID-19 has affected customer interactions and the ability to conduct demonstrations, impacting demand for upgrades [39]