Innovative Solutions and Support Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sergey Golunov - Freedom Finance Global PLC - Analyst : Hello, everyone. First of all, my congratulations about the Honeywell transaction. As far as the concerns regarding the previous deal, you had to complete the movement of the equipment to the IS&S facility in August, right? Is it completed?

Question: Sergey Golunov - Freedom Finance Global PLC - Analyst : As far as the concerns regarding the previous deal, you had to complete the movement of the equipment to the IS&S facility in August. Is it completed or you are in the process of that deal?

Question: Sergey Golunov - Freedom Finance Global PLC - Analyst : Okay. And will it affect margin, October and next quarter?

Question: Sergey Golunov - Freedom Finance Global PLC - Analyst : Okay. And during the call regarding the new Honeywell transaction, you mentioned that IS&S has great opportunities to further net income growth after 2024 fiscal year. Do you have any thoughts about base of sales organic growth?

Question: Sergey Golunov - Freedom Finance Global PLC - Analyst : Great. How additional acquisition could be reflect in CapEx?

Question: Sergey Golunov - Freedom Finance Global PLC - Analyst : Yes.

Question: Sergey Golunov - Freedom Finance Global PLC - Analyst : Yes, great. Great. And last question. Any decline in product sales could turn into a growth pass, could it happen in the next or first quarter of the next financial year?

Question: Sergey Golunov - Freedom Finance Global PLC - Analyst : Okay. Thanks a lot.

Question: Doug Ruth - Lenox Financial Services, Inc. - Analyst : Hi, good morning. I want to offer my congratulations on the order that you announced yesterday. I was wondering if you could provide some more details tell us or tell us more about it.

Question: Doug Ruth - Lenox Financial Services, Inc. - Analyst : Alright. Is there any way to suggest how much might flow in the fourth quarter, for example?

Question: Doug Ruth - Lenox Financial Services, Inc. - Analyst : Okay.

Question: Doug Ruth - Lenox Financial Services, Inc. - Analyst : Okay. One of the other parts of the Honeywell acquisition was that you had acquired quite a bit of inventory. And how is that going possibly? It seemed like you indicated that maybe it was more inventory than maybe you desired to have. How are you doing with -- what was acquired and how are you doing with, in effect, using it in your operations? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2024 / 1:00PM, ISSC.OQ - Q3 2024 Innovative Solutions and Support Inc Earnings Call

Question: Doug Ruth - Lenox Financial Services, Inc. - Analyst : That sounds positive. Now, you deserve a lot of credit for the sequential improvement in the margins. Do you have some internal goals for what might happen in the fourth quarter?

Question: Doug Ruth - Lenox Financial Services, Inc. - Analyst : Well, you also had talked about that there was this new product development and that was affecting the gross margins. So are some of these products that were developed, are they being marketed for sale? So that would seem to help the margins going forward as well?

Question: Doug Ruth - Lenox Financial Services, Inc. - Analyst : Okay. I think you deserve a lot of credit. There's material improvement in the one quarter results, and I appreciate you answering my questions, and I'm excited to see what happens in the next quarter.

Question: Andrew Rem - Odinson Partners, LLC - Analyst : Good morning, gentlemen, I really appreciate the additional color on the gross margin. That's kind of where I was going, but I did want to ask maybe just one follow up to beat the gross margin, of course. So you've got three test units in, and you have all the technicians you need for those three. Is that correct?

Question: Andrew Rem - Odinson Partners, LLC - Analyst : Okay. So then when you get the fourth test unit, can we assume that you'll have the technicians necessary to staff that one as well? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2024 / 1:00PM, ISSC.OQ - Q3 2024 Innovative Solutions and Support Inc Earnings Call

Question: Andrew Rem - Odinson Partners, LLC - Analyst : Okay. And then looks like on the prepaid inventory that's come down nicely from the beginning of the year and will that go up with the recent Honeywell acquisition or is that heading to zero?

Question: Andrew Rem - Odinson Partners, LLC - Analyst : And then if I was understanding your commentary correctly, Shahram, you basically have a rental fleet, and that part of that is what's considered inventory, is that correct?

Question: Andrew Rem - Odinson Partners, LLC - Analyst : All right. And then on the multi-million dollar military contract, what is the duration of that?

Question: Andrew Rem - Odinson Partners, LLC - Analyst : Okay. So several million dollars over two to three years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2024 / 1:00PM, ISSC.OQ - Q3 2024 Innovative Solutions and Support Inc Earnings Call

Question: Andrew Rem - Odinson Partners, LLC - Analyst : Okay. And then in fourth quarter last year you guys did basically $13 million in revenue because that was the first quarter you got Honeywell, Honeywell came in much stronger than expected. Is it fair to assume that that will be a difficult comp. And as a result, we shouldn't look for kind

Question: Andrew Rem - Odinson Partners, LLC - Analyst : Okay.

Question: Gowshihan Sriharan - Singular Research - Analyst : Good morning. Thank you for taking my questions. The first question is regarding the military retrofit opportunities. Could you provide insight into whether the margin profile for these contracts are comparable to those in the commercial sector? I know you've talked about the kind of initial investments you've made in terms of hiring and staffing. And also, if the new administration decides to scale back on its commitment to NATO, would that have any impact on your near term operations.

Question: Gowshihan Sriharan - Singular Research - Analyst : Okay. And I know you mentioned on your last call about some delayed information from Honeywell. Could you give us an update on the status of the drawings and design information from Honeywell, and how is that affecting your timeline for initiating in-house assembly production? And is that fiscal '25 timeline still kind of the realistic time frame for transition?

Question: Gowshihan Sriharan - Singular Research - Analyst : Okay. And I know in the past, one of the interesting or the more exciting part of your work story is the autonomous flight opportunity. Would you outline the kind of key industry milestones that investors should be aware of along with the timelines for those milestones to for this opportunity to transform into a significant growth engine?

Question: Gowshihan Sriharan - Singular Research - Analyst : Okay. Thank you guys, and that's all I had.