ISSC - Earnings call transcript Q2 2021 | Innovative Solutions and Support, Inc.

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Operator

Good day, and welcome to the Innovative Solutions and Support Second Quarter 2021 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Chief and Chairman Hedrick, Executive Officer. Geoffrey ahead, go sir. Please

Geoffrey Hedrick

the Welcome Good for call conference is conditions the coming Hedrick. morning. Geoff to and business to current quarter fiscal our for of the year. This second XXXX, outlook discuss our performance

today our President; is CFO. Winand, and Askarpour, Shahram me Rell our Joining

to Before Rell Safe message. read I begin, I’d Rell? Harbor the like

Rell Winand

and results results call from either risks Thank for and to operational uncertainties risks our differ matters that discussed including certain on our discussed, which listeners you, Geoff, actual that forward-looking and could and worse are and SEC periods to products good file the future or morning, XX-K, public today, conference statements reflected the in cause everyone. company’s other better and filings. subject new financial other uncertainties materially, I would remind are those including in is with that

Now Geoff. to I’ll the call turn back

Geoffrey Hedrick

quarter and job, was margins were a up, Rell. bottom Thanks, solid stronger It revenues positive line flow cash profitability.

new to addition, quarter strong, we in orders in addition In were backlog. the sequentially increase ended with new and up orders –

Over balance the retrofit foundation OEM we past volatility reduce a a been – products our provide and for revenues, growth. of diversified to of more set and continue continued succeed. a to establish prevent several strategy to broader efforts planning and years, better have a These

– standard names aircraft, another Pilatus, production recently, had now their aviation autothrottle steady, the equipment autothrottle some producing largest Air Most to patented recede our Air predictable air of of XXX. grow. that are we pandemic King contracts from the to Textron new and in continue Boeing. our our King As of announced Textron Sales revenues

this that control. is because turbo revenue, fans only lower they that autothrottle end customers have is in an for lower sit is development market, currently at times reason guard appealing In this opportunity shipping one aircraft we offer market of very open retrofit rewarding. with expected of technology their beyond recent could in a market to retrofit relationship military, been that product they We currently the far in significant air market. multiple these their is and and adoption. quarterly of additional develop to several has pandemic service our The Textron the cooperation we’ve could opportunities that improve production as for centers been however, report transport success indicated The has we such aviation is and solution now prevent and a or general network is and that offer to slowing – to Textron markets, loss Additionally, that applications, where seeing believe in opportunities retrofit easily global This very creating a of and retrofittable. We we will the and are other – the owner larger interest King of We loss their a that we can substantially will to interest the same jets. Currently, use don’t we in the simplified turboprop costs. allow Air, than us in features development that turboprops with operators The – now. at they of lose life is offer the the turbo strong multiengine and across aircraft. ThrustSense been is autothrottle penetrate means portfolio. from it which

we autothrottle even from several same where we’re to are bigger they multiengine four request. military aircraft, are aircraft airplanes that think with an are they and result, asking a supply I at looking interest seeing the much As us turboprops, –

strong to demand autothrottle legacy addition remained the to interest our in the products. In addition, following our interest for – growing

such display technology, as strong demand synthetic other for existing For upgrades systems Eclipse growth. our vision, remains to leading upgrades growing, instance, activity panel and to future cargo conversion flat source continued to and upgrade of and

of advantages takes one-fifth in approximately key retrofit the amount they lost of the the modify it to of of of aircraft. revenues an is to save from aircraft time dollars hundreds One thousands our meaning that

half feel we enthusiastic and begin opportunities continue has XXXX we have arise fiscal pandemic, expect global concerns air are now to first made The completing, progress about and of travel to we the significant and about trade. they

performance over pandemic financials. longer-term remain We it’s are to unique global globally. the ongoing capabilities challenging. brand – the our While details Rell? and will over now for and pricing our strengthen technology Rell I’d that the to of our turn continues price there it present, advantages confident of unparalleled hand to like

Rell Winand

Geoff, you you, this and morning. thank us Thank all joining for

the mix The material from X.X% of at $XX.X second both due primarily XX.X% $X.X offset of Gross up year by OEM labor from product Systems King first preceding were of ago, million for XXXX. a to million $X.X due down expenses revenues a to year from XX.X% quarter the quarter were reduced costs of operating our the by and customer. were XX.X% second Autothrottle partially Total Looking expected and in up improving shipments from the the quarter. fiscal ago margins improvement first quarter the Air XXXX margin for quarter reflected to quarter as previous million year increased costs. X.X% fiscal X.X% in higher ago

of current to higher quarterly for Research an offset quarterly We maintained emphasize year commitment ago be of believe up the development. reduced we increase of levels balance programs operating administrative were strong tradeshow and Research a innovation quarter. Selling, partially result expense. general and which the our from result as control, ago and product related expenses to sales of primarily the will almost year reflection quarter of new expense focus in of efforts was XX% is was a by the to expense operating development and product the continue a from benefits X.X% quarter revenues, of proportion were development payroll in development decreased the tight upon cost cost allocated year. that expense

of a XX, generated we $XXX,XXX, in at remains on $X position million $XXX,XXX of quarter, XX% quarter. XXXX. the company the in increase with from income March hand net ago financial year The cash strong For

cash being quarter. positive cash position $XX operating company the future. XXXX approximately from second full nearly to by the first dividends the We for of company the and calendar cash cash fund sufficient the Consequently, anticipate believe this operations fourth flow $XXX,XXX free. is foreseeable we year, in bolstered debt of flow Our operations for the million quarter has positive is net of of

Now, Shahram. call to turn I’d like the to over

Shahram Askarpour

Rell that business testimony and and Rell, and of customer you, our focuses everyone. both and Thank described Geoff to OEM that high production base. opportunities a The diversity solid and on financial prioritization, results our the retrofit are good model morning, quality our

have This our influence generally to quarter sensitive is to production the contracts, proven OEM in the so which be less pandemic. of strong performance

in they but Textron For years and build. PC-XX strong largely corporate Air This interest instance, not Textron recently is recurring well programs activity. come predictable to news of business, as also these of Force Boeing KC-XX model to is as offering the that We are with Adding turboprop have from our starting revenues well. for acquisition to believe new US only noted business our for several as run which seeing for stable for personal contract still jets a jet virtually aviation Pilatus was of foundation departments alive. the every travel, by driven encouraging but

space. curtails minimal retrofitted offer more occupies a reduce development and It working can be simple of OLED are with of installed aircraft will that that travel, button, is of among experiencing of a top Consequently, many shopping different for obtaining time – significantly operational the resolution display of our success and single retrofit cargo over some expense are remain also shipments growth in strong. available research remains see to will in robust. a cargo XXX mentioned to Display business and Nevertheless, briefly conversion a expect while Flat the budget. activity. on FAA With air a XXX operation The faces Display Just we platforms. cost degree installation. layouts, certification cockpit the development of our buyers. single nature market continues our cargo and some of drive and easily still conversion, caution Flat XXX with Systems for as high Panel XXX retrofit X,XXX multiple remains cockpit multiple online generic creating The Panel autothrottle, priority strong weakness autothrottle on lower its having lower market button we the Autothrottle pandemic

that military restrictions markets On the KC-XX can are developed once Geoff as other we track US air remains and lifted. travel our optimistic the limits remain computer data for on on Navy foreign market, international similar penetrate military the and program noted,

$X.X of $X.X and December March $X.X of million New fiscal basis orders sequential XX, of XXXX a XXXX. in backlog as million XXXX million, was million, the quarter $X.X on on XX, second from was

continue production aggressively in both and markets. growth pursue to We opportunities the retrofit

previously throughout companies person protocols noted, our to However, at from to as meeting safety individual has industry restricting FAA remain those countries restrictions the headwind. to in certain travel the been those

a adopting As AutoThrottle of owners interested we operators is believe these our there growing market listed, restrictions are in and technology.

call call some let operating safety health, our to efforts integrate maintain without Geoff or us enabled remarks. employees the to the how safety of closing Before protocols to to quickly new I’d our turning Geoff, for to wellbeing. to procedures standard back the turn and like productivity me has this the jeopardizing note back

Geoffrey Hedrick

Thanks, Shahram.

which we objectives, in achieved value building we of flow. profitability believe the second shareholder and was The another quarter cash positive your quarter best growth,

growing from we our commitment and and solid showing start $XX also over rose and for remain distributed healthy of Solutions we fiscal half second calendar turn this ongoing year. business. We today. million first all future of please dividends in The Operator, the XXXX, encouragement, questions. about you support, improved optimistic sequentially half thank signs shareholders. our In loyal for audience rewarding the second Backlog half the Support’s Innovative the to nearly to

Operator

you. Thank

We will Please [Operator question will Marema Ventures. come Instructions] session. question-and-answer first George go from now And the the ahead. Pareto with begin

George Marema

Yes, good morning, Thanks the taking Jeff. A call. things. couple for

the QX to was the lot of retrofits new lot orders? ask orders this sort did the a a come for or of So, on from OEM Like I Boeing? of cargo wanted you

Geoffrey Hedrick

those? Let uniform have Shahram answer can distribution more than in on Shahram, anticipated. generally me comment the was But you we that even specifics.

Shahram Askarpour

Sure. Yes.

we well orders as Boeing. Textron, Telarus, received new from OEM as So,

As cargo well we market as orders. had on retrofit strong the

Rell Winand

QX, it’s QX. said Yes, you

George Marema

quarter. quarter, yes, Yes, current this the

Shahram Askarpour

QX meant of XXXX. you I think

Geoffrey Hedrick

the is rewarding demand Amazon continues. What’s at

George Marema

QX, I your from quarter. was. King like seasonal just Yes, seven calendar sharply my planes about Air to then how it in to yes, going talking here low was on product, Yeah, the there like only flavor just it to in OEM up the the fourth But correct? now. goes your press low And want piston the about I the Because release see into produced excited want see their is how came. it ordering on I address market, is to quarters I okay. know I’m new that’s just of that business, quarter, the but of also, cost sounds engine the heavy the which see

Geoffrey Hedrick

Thingo.

George Marema

What? sorry. I’m

Geoffrey Hedrick

I said sorry. thingo. I’m

George Marema

That’s Thingo, okay. okay. what thought, Yes, okay. I

Geoffrey Hedrick

We was time easy broad ideal. What costs, reduce out, Textron And we out the believe or were half. turns and Shall produce the unless in see retrofit, product lot be lower able a a turned half it installation. reduces better. to also is retrofit cost to as a application the to to it technology very of probably we lines, simpler, this our

George Marema

Wow.

Okay.

Geoffrey Hedrick

really yes, very good nice. It’s a cool. And it’s, it’s That’s product.

George Marema

King Build new well? like to applied the as be product also Air a can platforms

Geoffrey Hedrick

a look, a King and else, operate what – you off you a numbers or in anything Yes, The far there’s Air. of setting it is, more push it not does simply, button auto-throttle you button allows to there’s is, of question lot no put the on push it basically. – could

the that So to to very operate. it is it, makes it much it simpler retrofit it provide will fast But time. a real advantage

George Marema

know, piston also you market, a market. huge that’s well, the Yes, I’m about excited as because

Geoffrey Hedrick

the problems of they made they [ph] have we twins a PXX that And with for. About have common all those. X,XXX still solution

a to product Textron our So, supportive. Textron, been us and very good for for and it’s has we be going think to remarkably

We’re delighted.

George Marema

this becomes retrofits until that? And on and long market for do about available how think you all

Geoffrey Hedrick

be I soon. assume will Like… it that just

George Marema

soon. be They’ll

Geoffrey Hedrick

I slip now. same is it’s time, this pretty can’t. you’re going day, as play like give at Actual test I an everything, engineering a soon day much mean, to done. as program Actually, itself. But the in it you we’re

George Marema

thinking XXXX, sounds like. you’re But though,

Geoffrey Hedrick

Absolutely.

George Marema

Okay.

guess this of In on now? anticipate? do the will the sort that change And you right terms cadence what retrofits? is you predict, current going I product retrofits, what’s cadence inflection on what of of Well, the the new the

Geoffrey Hedrick

– progression. sort really a It’s a it’s steady of

cetera, is feel the for et that a cetera. remember, install auto-pilot do et cetera, more As auto-throttles especially more and need that that provides so What when fly to et got one that and that can Well, have my always the they recent people fly most comfortable the we like you say, our it, you airplane. just means I and hell did cruise except airplane never literally do tied before. FADEC the with people want started, were it, a controls But product, get effective which more I seen you safety background don’t I most safety been control, importantly, always considered, auto-throttle engine to

says like ideal I is I all safety those my they So situation that approved it’s still fly want would the airplane. as the features, to both. But but for pilot – just

George Marema

right your to – Or last problems with okay Is is are question of my have that? of that you and lot a make Okay, product chain terms in now? that and supply getting of product? how

Geoffrey Hedrick

trying I mean, parch. to get

George Marema

Yes.

Geoffrey Hedrick

over been this but think work And I’ve the Yes. I out. years. And look, through it’ll

a We we couple not I’m overly were that monitoring But have points of concerned. choke I’m – not carefully.

George Marema

But so products able make far, like… sounds you’ve and ship been product to

Geoffrey Hedrick

Yes.

now. simple but answer, But in also general, we that not so and doing accurate an it’s have one. remember, a inventory that’s We’re

George Marema

Yes.

thank you, Okay, Geoff.

Geoffrey Hedrick

Thanks.

Operator

Frederick, one Michael Please will ahead. next from Investor. go come The

Michael Frederick

products. congratulations finding for on are auto-throttles market. I existing the the morning, All are guys Good marketplace? actually that displacing auto-throttles about new gentlemen, you your on a and the quarter the turbos have FADEC-like right, you there question

Geoffrey Hedrick

a speed FADEC in it What provides like fan over it problems you these auto-throttle can over against over and of auto-throttle. a no, – to seconds. our puts turbo damage wouldn’t No, literally Turboprop, couple from $X.X you temperature, horrendous a turbo the and safety do does million for prevents get FADEC controls a replace damage protection ours you easily the is torque attributes and

haven’t. That’s you this So prevents why that.

our airplane get patented prevents more has that even slow, to of too that. prevent actually lose it’s And were auto-throttle haven’t control, the control, got You and a you to loss importantly allowing catastrophic. feature

XX% those are strengths of replace going are a FADEC. it. all engines FADEC. the to the of about remember, So we’re But not out there not But

Michael Frederick

Okay.

Geoffrey Hedrick

we air engines, a go the FADEC obviously in Now engine. going after to the similar engines, but can they’re not all non-FADEC we’re because transport bigger provide big operation

Michael Frederick

you’re most So, saying fans that are not turbo FADEC? existing

Geoffrey Hedrick

not me you non-FADEC. that existing Most it that turbo number, I going that about fans. to a know of turbo wouldn’t fans a don’t are have Turboprops. there’s tell But significant I’m surprise if that high percentage

Michael Frederick

it. Got

whatnot. a of Another planes about question you, the people different like Geoff – ability that up auto-throttle, everything the approvals, fly during for Like can on some help they’re with certification. new would accelerate to when day, others implementation levels product is we’re talking piston and like have of instrumentation There’s fly, others pilots pilot Cessna’s move all chain? actually the to and have

Geoffrey Hedrick

off do he’s the and I the operating. important taking of Actually, but workload thing and workload pilot, the we to look be it remember still how take system we tell was – don’t of is conceived even look off at way. you’re at what without that it, Primarily got you, the prepared capable it’s managing the it. to we which

proportionately of don’t stable. to gain control. to too that look airspeed, slow. that there. that’s mitigation a at an a the flight against So something our believe, Addison great lot on gain, you you people what are strongly we gets have power safety airplane to to the why And case, keep the of path slowing do In see the which it. happens only controls were loss crash, when the in engines unique warned proportional actually it world deal of we to have people Where a our provide feature, technology, is Only

Michael Frederick

what have opposed just just the of as And do single piston to is dual market idea ballpark, Understood. Geoff, you any actually, percentage props planes? prop

Geoffrey Hedrick

I can lot awful Well, twins. there’s mean. I of an you tell piston

Michael Frederick

Twins. Right.

applicable that’s, twins, And more you’re Okay. the where to correct?

Geoffrey Hedrick

It We with you’re started single, operators when like applicable Well, way a it advantage we’re the twin. did, the in nobody’s whether because XXX the problem And, solution. is does what, had nobody takeoff, single mean, airplane just The job twin. control patented see a ago, it’s partner that consisted single cost have lot. or they That’s of we The finally done here. airplane the great when to it’s we use. engine. We a there. it with sounds Marvel a accident. twin It PC-XX. off anything most no, everything. takes about manages No, loss a years it came with up in I actually good

Michael Frederick

mania have this as you back Yes, that’s guys got crack full behind speed. be Well, soon get you, all the you to Hopefully, for guys code. will I will certainly, Congratulations. Geoff. all and you

Geoffrey Hedrick

well, that. working Yes, it. Yes, we’re on I appreciate

We works proud well. team have of a good them. team. I’m The

Michael Frederick

I going. know I’ve you do. a you for Well keep while. with been

care. take Okay,

Geoffrey Hedrick

Thanks.

Operator

our attending our as question-and-answer today. This Thank today’s call concludes well for conference session for as you presentation.

disconnect. You now may

Innovative Solutions and Support (ISSC) 14 May 212021 Q2 Earnings call transcript