Innovative Solutions and Support, Inc. Q1 FY2026 earnings call

• Shahram noted a strong start to fiscal 2026 with organic growth in revenue, net income, adjusted EBITDA, and free cash flow. - IA NEXT strategy focuses on profitable growth, operational excellence, and disciplined capital allocation. - Completed recertification and resumed full-scale production of digital flight control computer for F-16 program. - UMS platform completed test flights on Pilatus PC-24 and began unit production, with delivery to Pilatus expected mid-2026. - Focus on complementary, accretive acquisitions to expand capabilities and recurring revenue streams. - Jeffrey discussed net revenues, gross profit, operating expenses, backlog, cash flow, and liquidity, noting second quarter revenues expected to be $20,000,000 to $22,000,000.

First quarter revenue was $21,800,000, up 36.5% from the prior year. Product sales were $13,600,000, up from $10,000,000 in the same period last year. Service revenue was $8,200,000, up from $6,000,000. Gross profit was $11,900,000, up 80% from the prior year, with a gross margin of 54.5% compared to 41.4% last year. Adjusted EBITDA was $7,400,000, up 140.9% due to revenue growth and favorable revenue mix. Net income for the quarter was $4,100,000.

• Organic revenue expected to be essentially flat year over year. - Second quarter revenues projected to be in the range of $20,000,000 to $22,000,000, building sequentially throughout the year.

• Management's commentary includes forward-looking statements, and actual results could differ materially from expectations due to factors in the risk factors section of SEC reports.

Q: Could you discuss what products or specific aircraft retrofits drove the increase in commercial aftermarket demand and sales?

A: Mainly on the air transport side, including sales of products like the ICAS system for 757/767, LPV for 757/767, and software upgrades for magnetic variations.

Q: Any way to dig in further on what you saw the last few weeks and what surprised you to the upside?

A: Timing of shipments; POs came in sooner than expected from some customers as they were clearing their year-end.

Q: On the integration of the F-16 components at Exton, how has that come along?

A: The F-16 integration took longer than planned due to involvement of Lockheed Martin and the U.S. government requiring safety assurances, typically taking longer than originally anticipated