Innovative Solutions & Support Reports Third Quarter 2024 Results
THIRD QUARTER 2024 HIGHLIGHTS
(all comparisons versus the prior year period unless otherwise noted)
-
Net revenue of
$11.8 million , +47.8% -
Gross profit of
$6.3 million , +32.6%; gross margin of 53.4% -
Net Income of
$1.6 million , or$0.09 per diluted share; Adjusted Net Income(1) of$1.9 million , or$0.11 per diluted share -
Adjusted EBITDA(2) of
$3.1 million , +61% -
Year-to-date free cash flow(3) of
$4.8 million , up from$0.8 million -
Net leverage of 0.8x as of
June 30, 2024
(1) |
Adjusted net income and adjusted diluted EPS are non-GAAP measures. Reconciliations of adjusted net income to net income and of adjusted diluted EPS to diluted earnings per share, the most directly comparable GAAP financial measures, are set forth in the reconciliation table accompanying this release. |
|
(2) |
Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures. Reconciliation of adjusted EBITDA and adjusted EBITDA margin to net income, the most directly comparable GAAP financial measure, is set forth in the reconciliation table accompanying this release. |
|
(3) |
Free cash flow is a non-GAAP measure. Reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measure, is set forth in the reconciliation table accompanying this release. |
MANAGEMENT COMMENTARY
“Our positive business momentum continued during the third quarter, as program execution on both new and existing platforms contributed to a 48% increase in total revenue from the third quarter last year,” stated
“We’ve demonstrated our ability to deliver growth in free cash flow over time while maintaining strict financial discipline,” stated
"We continue to execute at a high level and are well positioned as we look toward fiscal 2025,” noted Askarpour. “Our experienced management team, track record of execution, and favorable demand outlook across our general aviation, commercial air transport, and military verticals position
THIRD QUARTER 2024 PERFORMANCE
Third quarter revenue was
Gross profit was
Third quarter 2024 operating expenses were
Adjusted EBITDA was
New orders in the third quarter of fiscal 2024 were
BALANCE SHEET, LIQUIDITY AND FREE CASH FLOW
As of
Cash flow from operations was
THIRD QUARTER 2024 RESULTS CONFERENCE CALL
A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of the
To participate in the live teleconference:
Domestic Live: |
(877) 300-8521 |
|
International Live: |
(412) 317-6026 |
To listen to a replay of the teleconference, which will be available through
Domestic Replay: |
(844) 512-2921 |
|
International Replay: |
(412) 317-6671 |
|
Passcode: |
10191208 |
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted diluted earnings per share (“EPS”) and adjusted net cash provided by operating activities (“free cash flow”) are not measures of financial performance under GAAP and should not be considered substitutes for GAAP measures, net income (for adjusted EBITDA and adjusted EBITDA margin), diluted earnings per share (for adjusted diluted EPS) or net cash provided by operating activities (for free cash flow), which the Company considers to be the most directly comparable GAAP measures. These non-GAAP financial measures have limitations as analytical tools, and when assessing the Company’s operating performance, readers should not consider these non-GAAP financial measures in isolation or as substitutes for net income, diluted earnings per share, net cash provided by operating activities or other consolidated income statement data prepared in accordance with GAAP. Other companies in the Company’s industry may define or calculate these non-GAAP financial measures differently than the Company does, and accordingly, these measures may not be comparable to similarly titled measures used by other companies.
The Company defines adjusted EBITDA as net income before interest, taxes, depreciation, amortization, and certain items of income and expense, transaction-related acquisition and integration expenses, severance, and certain non-recurring items. The Company believes that adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of income and expenses that do not relate to ongoing business performance, and that the presentation of this measure enhances an investor’s understanding of its financial performance.
Adjusted EBITDA margin is adjusted EBITDA divided by total revenue. Adjusted EBITDA margin is a key metric used by management to assess the Company’s financial performance. The Company believes that adjusted EBITDA margin is an appropriate measure of operating performance because it eliminates the impact of income and expenses that do not relate to ongoing business performance, and that the presentation of this measure enhances an investor’s understanding of the Company’s financial performance. The Company believes that adjusted EBITDA margin is helpful in measuring profitability of operations on a consolidated level.
Adjusted EBITDA and adjusted EBITDA margin have important limitations as analytical tools. For example, adjusted EBITDA and adjusted EBITDA margin:
- do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;
- do not reflect changes in, or cash requirements for, the Company’s working capital needs;
- exclude the impact of certain cash charges resulting from matters the Company considers not to be indicative of its ongoing operations;
- do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on the Company’s debt; and
- exclude certain tax payments that may represent a reduction in available cash.
Adjusted diluted EPS measures the Company’s per share earnings excluding certain expenses as discussed above for adjusted net income. Adjusted diluted EPS is calculated as adjusted net income divided by adjusted diluted weighted-average shares outstanding. The Company believes adjusted diluted EPS is useful to investors because it enables them to better evaluate per share operating performance across reporting periods.
Free cash flow is calculated as net cash provided by operating activities less capital expenditures. The Company believes that free cash flow is an important financial measure for use in evaluating financial performance because it measures the Company’s ability to generate additional cash from its business operations.
A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure is set forth below.
ABOUT
Headquartered in
FORWARD-LOOKING STATEMENTS
In addition to the historical information contained herein, this press release contains “forward-looking statements” within the meaning of, and intended to be covered by, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In this press release, the words “anticipates,” “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “forecasts,” “expects,” “plans,” “could,” “should,” “would,” “is likely”, “projected”, “might”, “potential”, “preliminary”, “provisionally”, references to “fiscal 2025”, and similar expressions, as they relate to the business or to its management, are intended to identify forward-looking statements, but they are not exclusive means of identifying them. All forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, statements about: future revenue; financial performance and profitability; future business opportunities; the integration of the Honeywell product lines, including statements regarding the ongoing integration; plans to grow organically through new product development and related market expansion, as well as via acquisitions; and the timing of long-term programs remaining in production and continuing to generate future sales. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Because forward-looking statements are subject to assumptions, 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, the Company’s ability to efficiently integrate acquired and licensed product lines, including the Honeywell product lines, into its operations; a reduction in anticipated orders; an economic downturn; changes in the competitive marketplace and/or customer requirements; an inability to perform customer contracts at anticipated cost levels; and other factors that generally affect the economic and business environments in which the Company operates. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
||||||
|
|
|
|
|||
2024 |
2023 |
|||||
ASSETS |
|
|
|
|
|
|
Current assets |
||||||
Cash and cash equivalents |
|
$ |
521,041 |
|
$ |
3,097,193 |
Accounts receivable |
|
7,329,662 |
|
9,743,714 |
||
Contract assets |
|
|
1,098,301 |
|
|
487,139 |
Inventories |
14,540,172 |
|
6,139,713 |
|||
Prepaid inventory |
|
|
1,899,013 |
|
|
12,069,114 |
Prepaid expenses and other current assets |
|
984,684 |
|
1,073,012 |
||
Assets held for sale |
|
|
— |
|
|
2,063,818 |
Total current assets |
|
|
26,372,873 |
|
|
34,673,703 |
|
|
|
4,074,466 |
|
|
3,557,886 |
Intangible assets, net |
16,089,821 |
16,185,321 |
||||
Property and equipment, net |
|
|
11,590,207 |
|
|
7,892,427 |
Deferred income taxes |
1,109,598 |
456,392 |
||||
Other assets |
|
|
545,980 |
|
|
191,722 |
Total assets |
|
$ |
59,782,945 |
|
$ |
62,957,451 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Current portion of long-term debt |
$ |
9,859,074 |
$ |
2,000,000 |
||
Accounts payable |
|
|
3,343,876 |
|
|
1,337,275 |
Accrued expenses |
|
2,818,405 |
|
2,918,325 |
||
Contract liability |
|
|
131,534 |
|
|
143,359 |
|
|
|
|
|||
Total current liabilities |
|
|
16,152,889 |
|
|
6,398,959 |
Long-term debt |
|
|
— |
|
|
17,500,000 |
Other liabilities |
|
448,931 |
|
421,508 |
||
|
|
|
|
|
|
|
Total liabilities |
|
16,601,820 |
|
24,320,467 |
||
|
|
|
|
|
|
|
Commitments and contingencies |
||||||
|
|
|
|
|
|
|
Shareholders’ equity |
||||||
|
|
|
|
|
|
|
Preferred stock, 10,000,000 shares authorized,
authorized as Class A Convertible stock. No shares issued and outstanding at
|
|
— |
|
— |
||
Common stock,
|
|
|
19,589 |
|
|
19,543 |
Additional paid-in capital |
|
55,043,174 |
|
54,317,265 |
||
Retained earnings |
|
|
9,486,899 |
|
|
5,668,713 |
|
|
(21,368,537) |
|
(21,368,537) |
||
Total shareholders’ equity |
|
|
43,181,125 |
|
|
38,636,984 |
Total liabilities and shareholders’ equity |
$ |
59,782,945 |
$ |
62,957,451 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
$ |
5,127,056 |
$ |
6,575,411 |
$ |
14,446,753 |
$ |
17,608,769 |
||||
Customer service |
|
|
6,408,961 |
|
|
1,318,214 |
|
|
15,734,430 |
|
|
3,774,666 |
Engineering development contracts |
|
229,618 |
|
65,583 |
|
1,632,031 |
|
432,482 |
||||
Total net sales |
|
|
11,765,635 |
|
|
7,959,208 |
|
|
31,813,214 |
|
|
21,815,917 |
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
2,106,629 |
|
2,831,511 |
|
6,235,668 |
|
7,450,205 |
||||
Customer service |
|
|
3,101,875 |
|
|
371,359 |
|
|
7,291,096 |
|
|
1,088,014 |
Engineering development contracts |
|
277,310 |
|
21,692 |
|
901,104 |
|
79,098 |
||||
Total cost of sales |
|
|
5,485,814 |
|
|
3,224,562 |
|
|
14,427,868 |
|
|
8,617,317 |
Gross profit |
|
|
6,279,821 |
|
|
4,734,646 |
|
|
17,385,346 |
|
|
13,198,600 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
1,099,367 |
|
851,296 |
|
3,031,630 |
|
2,387,939 |
||||
Selling, general and administrative |
|
|
3,143,334 |
|
|
2,395,714 |
|
|
9,058,347 |
|
|
7,104,212 |
Total operating expenses |
|
4,242,701 |
|
3,247,010 |
|
12,089,977 |
|
9,492,151 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
2,037,120 |
|
1,487,636 |
|
5,295,369 |
|
3,706,449 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(172,784) |
|
— |
|
(704,267) |
|
— |
||||
Interest income |
|
|
5,826 |
|
|
185,652 |
|
|
121,505 |
|
|
432,495 |
Other income |
|
12,869 |
|
90,049 |
|
57,040 |
|
131,504 |
||||
Income before income taxes |
|
|
1,883,031 |
|
|
1,763,337 |
|
|
4,769,647 |
|
|
4,270,448 |
Income tax expense |
|
|
330,511 |
|
|
339,958 |
|
|
951,461 |
|
|
877,315 |
|
|
|
|
|||||||||
Net income |
|
$ |
1,552,520 |
|
$ |
1,423,379 |
|
$ |
3,818,186 |
|
$ |
3,393,133 |
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.09 |
$ |
0.08 |
$ |
0.22 |
$ |
0.19 |
||||
Diluted |
|
$ |
0.09 |
|
$ |
0.08 |
|
$ |
0.22 |
|
$ |
0.19 |
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
17,461,652 |
|
7,576,969 |
|
17,455,903 |
|
17,415,358 |
||||
Diluted |
|
|
17,467,259 |
|
|
17,577,588 |
|
|
17,476,089 |
|
|
17,419,265 |
Reconciliation of Net Income to Adjusted EBITDA |
|||||||
|
|
|
|||||
Three Months Ended June |
Nine Months Ended June |
||||||
2023 |
|
2024 |
|
2023 |
|
2024 |
|
Net Income |
|
|
|
|
|
|
|
Income tax expense |
339,958 |
330,511 |
877,315 |
951,461 |
|||
Interest expense |
(185,652) |
|
172,784 |
|
(432,495) |
|
588,588 |
Depreciation and amortization |
87,503 |
611,155 |
258,892 |
1,437,232 |
|||
EBITDA |
|
|
|
|
|
|
|
|
|||||||
Acquisition related costs |
246,199 |
175,278 |
246,199 |
517,352 |
|||
CFO transition, ATM Costs and other strategic initiatives |
- |
233,678 |
- |
|
612,907 |
||
Adjusted EBITDA |
|
|
|
|
|
|
|
Adjusted EBITDA margin |
24.0% |
26.1% |
19.9% |
24.9% |
Reconciliation of Net Income to Adjusted Net Income |
|||||||
Three Months Ended June |
Nine Months Ended June |
||||||
2023 |
|
2024 |
|
2023 |
|
2024 |
|
Net Income |
|
|
|
|
|
|
|
Acquisition related costs |
246,199 |
175,278 |
246,199 |
517,352 |
|||
CFO transition, ATM Costs and other strategic initiatives |
- |
|
233,678 |
|
- |
|
612,907 |
Tax impact |
51,702 |
85,881 |
51,702 |
237,354 |
|||
Adjusted Net Income |
|
|
|
|
|
|
|
Diluted shares outstanding |
17,577,588 |
|
17,467,259 |
|
17,419,265 |
|
17,476,089 |
Diluted earnings per share as reported |
|
|
|
|
|
|
|
Total EPS effect |
|
|
|
|
|||
Adjusted diluted earnings per share |
|
|
|
|
|
|
|
Free Cash Flow |
|||||||||
Three Months Ended June |
Nine Months Ended June |
||||||||
2023 |
2024 |
2023 |
2024 |
||||||
Operating Cashflow |
|
|
|
|
|
|
|
|
|
Capital Expenditures |
84,933 |
203,279 |
165,084 |
511,927 |
|||||
Free Cash Flow |
|
|
|
|
|
|
|
|
|
Net Debt and Net Debt Leverage Ratio |
|||||||
Three Months Ended June |
|||||||
|
2023 |
|
|
2024 |
|||
Total Debt |
|
|
$ |
20,000,000 |
|
$ |
9,859,074 |
Cash |
$ |
2,572,233 |
$ |
521,041 |
|||
Net Debt |
|
|
$ |
17,427,767 |
|
$ |
9,338,033 |
Net Leverage Ratio |
2.6x |
0.8x |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240809270913/en/
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