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- **Revenue Surge**: 105% YoY growth to $24.1M, fueled by F-16 program and military contracts.
- **Gross Margin Strain**: 35.6% vs. 53.4% YoY due to F-16 safety stock costs, targeting mid-40s normalization.
- **Strategic Expansion**: $100M credit facility to accelerate Exton expansion and acquisitions, aiming for $250M+ revenue.
- **Near-Term Volatility**: F-16 revenues to dip in Q4/Q1 2026 before resuming growth post-transition.
- **Financial Strength**: $4.8M free cash flow, net leverage 1.1x, with disciplined capital allocation.

**【CEO Opening Remarks】**
- **Revenue Growth**: 105% YoY increase to $24.1M, driven by F-16 program ($12.6M) and other military contracts.
- **Backlog**: $72M as of Q3, including F-16 safety stock and long-term programs (e.g., Boeing T-7, KC-46A).
- **Gross Margin Challenges**: 35.6% vs. 53.4% YoY due to lower margins on F-16 safety stock and integration costs.
- **Exton Expansion**: 3x capacity increase expected in early fall, targeting $250M+ revenue by FY26.
- **Strategic Acquisitions**: New credit facility ($100M) to pursue Honeywell product lines and smaller avionics firms.

**【CFO Financial Update】**
- **Net Income**: $2.4M (14% EPS) vs. $1.6M (9% EPS) YoY, driven by revenue growth and operating leverage.
- **Gross Profit**: $8.6M (+37% YoY), offset by lower F-16 margins and $200K+ in acquisition-related costs.
- **Operating Expenses**: $5.1M (+21% YoY), but 21% of revenue vs. 36% YoY, reflecting scale benefits.
- **Cash Flow**: $10.3M from operations vs. $5.4M YoY, with $4.8M free cash flow despite $5.5M capex.
- **Debt**: $23.3M long-term debt, net leverage 1.1x, down $3.5M QoQ.

**【Q&A Highlights】**
- **Gross Margin Outlook**: Target mid-40s, but near-term volatility due to F-16 transition and military product mix.
- **Acquisition Strategy**: Pipeline includes Honeywell auctions and smaller avionics firms; comfortable with 3x net leverage.
- **F-16 Transition Impact**: Q4 and Q1 2026 revenues expected to dip before ramping up post-integration.
- **Defense Budget Risks**: Minimal direct impact, but potential short-term delays from customer production cuts.
- **Exton Utilization**: Organic growth (military programs) and acquisitions will fill expanded capacity.

Innovative Solutions and Support, Inc. (ISSC) Q3 2025 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

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Income Tax Expense

Current Income Tax

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Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

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Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

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Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

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Basic EPS from Discontinued Operations

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Diluted EPS from Discontinued Operations

ISSC

ISSC fundamentals

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