Innovative Solutions & Support dba Innovative Aerosystems Reports First Quarter Fiscal 2026 Results

Key Terms

ebitda financial

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It measures a company's profitability by focusing on the money it makes from its core operations, ignoring expenses like taxes and accounting adjustments. Investors use EBITDA to compare how well different companies are performing financially, as it provides a clearer picture of operational success without the influence of financial structure or accounting choices.

adjusted ebitda financial

Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.

free cash flow financial

Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.

net debt financial

Net debt is the total amount a company owes after subtracting the cash and assets it has that can be used to pay off that debt. It shows how much debt is truly a burden, helping investors understand if a company is financially healthy or heavily borrowed. Think of it like calculating how much money you owe after using your savings to pay part of it.

non-gaap financial

Non-GAAP refers to financial measures that companies use to show their earnings or performance without including certain expenses or income that are often added back to give a different picture. It matters because it can make a company's results look better or more favorable, but it may also hide important costs, so investors need to look at both GAAP (official rules) and non-GAAP numbers to get a full understanding.

gaap financial

GAAP, or Generally Accepted Accounting Principles, are a set of standardized rules and guidelines that companies follow when preparing their financial statements. They ensure consistency, transparency, and comparability across different companies, making it easier for investors to understand and compare financial information accurately. This helps investors make informed decisions based on trustworthy and uniform financial reports.

leverage ratio financial

Leverage ratio measures how much a company relies on borrowed money compared with its own funds or assets, typically expressed as debt relative to equity or total assets. Like a homeowner with a mortgage, higher leverage can amplify returns when business is strong but also raises the chance of big losses or default if revenue falls, so investors use it to judge financial risk and resilience.

EXTON, Pa.--(BUSINESS WIRE)-- Innovative Solutions & Support, Inc. (Nasdaq: ISSC) dba Innovative Aerosystems and its subsidiaries (“IA” or the "Company"), a leading provider of advanced avionic solutions for commercial, business, and military aviation markets, today announced its fiscal 2026 first quarter financial results for the three-month period ended December 31, 2025.

FIRST QUARTER FISCAL 2026 HIGHLIGHTS

(all comparisons versus the prior year period)

• Net sales of $21.8 million, +36.5%
• Gross profit of $11.9 million; gross margin of 54.5%
• Net Income of $4.1 million, or $0.22 per diluted share
• Adjusted Net Income⁽¹⁾ of $4.5 million, or $0.25 per diluted share
• EBITDA⁽¹⁾ of $7.4 million, +171.9%
• Adjusted EBITDA⁽¹⁾ of $7.4 million, +140.9 %
• Operating cash flow of $8.2 million, +343%
• Free cash flow⁽¹⁾ of $7.0 million, +346%
• Ratio of net debt to trailing twelve-month Adjusted EBITDA⁽¹⁾ of 0.5x as of December 31, 2025

(1)

This release includes non-GAAP financial measures, including Adjusted Net Income, Adjusted Net Income Per Share, EBITDA, Adjusted EBITDA, Free Cash Flow, and Net Debt. Descriptions of these measures and reconciliations of these measures to the most directly comparable GAAP financial measures are provided in the appendix of this release

MANAGEMENT COMMENTARY

“We delivered a strong start to the year, driven by significant organic growth in revenue, Adjusted EBITDA, and margins, supported by continued momentum within the commercial aviation market,” stated Shahram Askarpour, Chief Executive Officer of Innovative Aerosystems. “First quarter revenue grew 37% versus the prior-year period on increased commercial aftermarket demand and service activity, while Adjusted EBITDA grew 141%, reflecting a more favorable revenue mix and improved operating leverage.”

“We completed the integration of our F-16 component-related production into our recently expanded Exton facility during the first quarter, and we expect revenue related to this platform to scale as we move through the year,” continued Askarpour. “We continue to see strong growth opportunities for our F-16 platform and, with the insourcing of the product line assembly into our Exton facility, we expect to realize improved manufacturing efficiencies that should support improved margins from this program in fiscal 2026.

“After completing a period of elevated capital investment to support organic growth initiatives, including our Exton facility expansion, free cash flow generation increased significantly in the first quarter to $7.0 million, underscoring the increasingly cash-generative, capital-light nature of our business model. We ended the first quarter with a net leverage ratio of 0.5x, down from 1.8x at the end of the year-ago period, that, together with cash and availability under our credit facility of $83.3 million, provide us with significant liquidity with which to advance our strategic priorities.”

“As we look ahead to the remainder of fiscal 2026, we remain confident in the growth trajectory of our business, supported by strength within the commercial aviation market, an anticipated ramp in defense-related revenue, and growing backlog across our end-markets. Our strategy remains focused on maximizing long-term shareholder value through a balanced approach of accretive acquisitions and organic growth investments, and we remain confident in our long-term revenue target of $250 million.”

FIRST QUARTER FISCAL 2026 PERFORMANCE

First quarter revenue was $21.8 million, an increase of 36.5% compared to the same period last year, driven by growth in aftermarket products for commercial customers and higher services revenues. This performance was partially offset by lower revenue on the F-16 platform as a result of the transition of product line manufacturing to the Company’s Exton facility that was completed during the first quarter, in addition to the timing of customer shipments.

Gross profit was $11.9 million during the first quarter of 2026, an increase of 79.8% when compared to the first quarter of last year. The improvement was driven by strong revenue growth and a more favorable revenue mix within our commercial aftermarket business. First quarter 2026 gross margin was 54.5%, an increase from 41.4% during the first quarter last year.

First quarter 2026 operating expenses were $5.6 million, compared to $5.3 million in the first quarter of last year, with selling, general and administrative expense as a percentage of total revenue declining to 19.5% in the first quarter, down from 26.0% in the year-ago period due to disciplined expense management.

Net income was $4.1 million, or $0.22 per diluted share during the first quarter, compared to net income of $0.7 million, or $0.04 per share in the first quarter of last year.

Adjusted Net income was $4.5 million, or $0.25 per diluted share during the first quarter, compared to adjusted net income of $1.6 million, or $0.09 per share in the first quarter of last year.

EBITDA was $7.4 million during the first quarter, up from $2.7 million in the first quarter of last year. Adjusted EBITDA was $7.4 million during the first quarter, up from $3.1 million in the first quarter of last year, due to improved revenue mix and expense management.

New orders in the first quarter of fiscal 2026 were approximately $19 million and backlog as of December 31, 2025 was approximately $75 million. Backlog represents the value of contracts and purchase orders, less the revenue recognized to date on those contracts and purchase orders. The backlog includes committed purchases and excludes potential future sole-source production orders from products developed under the Company’s engineering development contracts programs.

BALANCE SHEET, LIQUIDITY AND FREE CASH FLOW

As of December 31, 2025, Innovative Aerosystems had total debt of $23.8 million. Cash and cash equivalents as of December 31, 2025, were $8.3 million, resulting in net debt of $15.5 million. Net debt declined $10.4 million from the year-ago period, reflecting strong operating results as well as continued disciplined financial management. As of December 31, 2025, Innovative Aerosystems had total available liquidity of $83.3 million, including cash of $8.3 million and availability of $75.0 million under its credit line.

Cash flow provided by operations was $8.2 million during the first quarter 2026, compared to $1.8 million in the first fiscal quarter last year. Capital expenditures during the first quarter fiscal 2026 were $1.1 million, versus $0.3 million in the year-ago period. As a result, free cash flow was $7.0 million during first quarter 2026 versus $1.6 million last year.

FIRST QUARTER FISCAL 2026 RESULTS CONFERENCE CALL

Innovative Aerosystems will host a conference call at 10:00 AM ET on Thursday, February 12, 2026, to discuss the Company’s fiscal 2026 first quarter results.

A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of the Company’s website at https://iascorp.com/investor-relations/events-presentation/ and a replay of the webcast will be available at the same time shortly after the webcast is complete.

To participate in the live teleconference:

Domestic Live:	1-844-739-3798
International Live:	1-412-317-5714

To listen to a replay of the teleconference, which subsequently will be available through February 26, 2026:

Domestic Replay:	1-844-512-2921
International Replay:	1-412-317-6671
Conference ID:	10206126

NON-GAAP FINANCIAL MEASURES

EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Share (“Adjusted EPS”), Adjusted Net Cash provided by operating activities (“free cash flow”) and net debt are not measures of financial performance under U.S. Generally Accepted Accounting Principles (“GAAP”) and should not be considered substitutes for the GAAP measures net income (for EBITDA, Adjusted EBITDA and Adjusted Net income), net income per share (for Adjusted 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 EBITDA as net income before interest, taxes, depreciation, and amortization. The Company believes EBITDA to be relevant and useful information to its investors because it provides additional information in assessing the Company’s financial operating results. The Company’s management uses EBITDA in evaluating operating performance, ability to service debt, and ability to fund capital expenditures and pay dividends. However, EBITDA has certain limitations in that it does not reflect the impact of certain expenses on the Company’s consolidated statements of income, including interest expense, which is a necessary element of the Company’s costs because the Company has borrowed money in order to finance operations, income tax expense, which is a necessary element of costs because taxes are imposed by law, and depreciation and amortization, which are necessary elements of costs because the Company uses capital assets to generate income. EBITDA should be considered in addition to, and not as a substitute for, or superior to, operating income, net income or other measures of financial performance prepared in accordance with GAAP. Furthermore, the Company’s definition of EBITDA may not be comparable to similarly titled measures reported by other companies.

The Company defines Adjusted EBITDA as net income before interest, taxes, depreciation, amortization, transaction-related acquisition and integration expenses, and non-recurring items.The Company believes that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of 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 has important limitations as analytical tools. For example, Adjusted EBITDA:

• does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized, which assets may have to be replaced in the future;
• does not reflect changes in, or cash requirements for, the Company’s working capital needs;
• excludes the impact of certain cash charges resulting from matters the Company considers not to be indicative of its ongoing operations;
• does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on the Company’s debt; and
• excludes certain tax payments that may represent a reduction in available cash.

Adjusted Net Income and Adjusted EPS: We believe Adjusted Net Income and Adjusted EPS are important measures of our recurring operations as they exclude items that may not be indicative of our core operating results. These measures represent GAAP net income and diluted net income per share adjusted for the impact of certain items directly related to acquisitions and other non-recurring items. These adjustments include : (i) the amortization of acquired intangibles; (ii) acquisition and integration charges and other non-recurring items; and (iii) the related tax effect. We specifically exclude amortization of acquired intangibles because it is generally a fixed non-cash expense that can be significantly impacted by the timing and/or size of acquisitions and management does not use this measure to evaluate the Company’s core operating results. Although the Company excludes the amortization of acquired intangibles from Adjusted Net Income and Adjusted EPS, management believes that it is important for investors to understand that such intangible assets were recorded as part of acquisition accounting and contribute to revenue generation.

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.

Net debt is calculated as total debt, excluding debt issuance costs minus cash and cash equivalents, and Leverage Ratio is calculated as Net Debt divided by trailing 12 months Adjusted EBITDA. The Company believes that Net debt and Leverage Ratio are important financial measures for use in measuring the Company’s financial performance relative to its level of debt.

A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure is set forth below.

ABOUT INNOVATIVE AEROSYSTEMS

Headquartered in Exton, Pa., Innovative Aerosystems is a U.S.-based company specializing in the engineering, manufacturing, and supply of advanced avionic solutions. Its extensive global product reach and customer base span commercial, business, and military aviation markets, catering to both airframe manufacturers and aftermarket services for fixed-wing and rotorcraft applications. IA offers cutting-edge, cost-effective solutions while maintaining legacy product lines. The company is poised to leverage its experience to create growth opportunities in next-generation navigation systems, advanced flight deck and special mission displays, precise air data instrumentation, autothrottles, flight control computers, mission computers and software based situational awareness targeting autonomous flight. Supported by a robust portfolio of patents and the highest aircraft certification standards, IA is at the forefront of meeting the aerospace industry's demand for more sophisticated and technologically advanced products. For more information, please visit us at www.iascorp.com.

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 year 2026,” “guidance” “positioning” or “drivers” for fiscal 2026 and thereafter and “long term” or “longer-term” targets and “next phase of growth” information, 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; the expansion of the Exton facility; 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; market acceptance and demand for our products and programs; 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 September 30, 2025, as amended, and subsequent reports filed with the Securities and Exchange Commission. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

INNOVATIVE SOLUTIONS AND SUPPORT, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
		December 31,			September 30,
		2025			2025
ASSETS
Current assets
Cash and cash equivalents		$	8,285,185		$	2,693,595
Accounts receivable			14,500,225			12,956,476
Contract assets			3,205,322			5,320,353
Inventories			28,273,798			25,802,181
Prepaid inventory			2,097,884			2,562,297
Prepaid expenses and other current assets			2,000,862			1,392,398
Total current assets			58,363,276			50,727,300
Goodwill			6,703,104			6,703,104
Intangible assets, net			22,952,864			23,582,615
Property and equipment, net			19,518,802			18,804,536
Deferred income taxes			1,688,769			2,824,132
Other assets			708,686			718,466
Total assets		$	109,935,501		$	103,360,153
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt		$	2,440,151		$	2,438,802
Accounts payable			7,508,611			3,578,411
Accrued expenses			6,236,788			8,161,967
Contract liability			3,519,331			2,481,929
Total current liabilities			19,704,881			16,661,109
Long-term debt			21,089,706			21,700,005
Other liabilities			396,497			396,497
Total liabilities			41,191,084			38,757,611
Total shareholders’ equity			68,744,417			64,602,542
Total liabilities and shareholders’ equity		$	109,935,501		$	103,360,153

INNOVATIVE SOLUTIONS AND SUPPORT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
		Three Months Ended December 31,
		2025				2024
Net Sales:
Product		$	13,564,131			$	9,984,234
Services			8,242,952				5,984,495
Total net sales			21,807,083				15,968,729
Cost of sales:
Product			6,633,373				6,262,690
Services			3,289,440				3,095,582
Total cost of sales			9,922,813				9,358,272
Gross profit			11,884,270				6,610,457
Operating expenses:
Research and development			1,327,615				1,107,736
Selling, general and administrative			4,264,249				4,158,903
Total operating expenses			5,591,864				5,266,639
Operating income			6,292,406				1,343,818
Interest expense			(496,071	)			(427,149	)
Interest income			4,118				5,250
Other income			64,100				6
Income before income taxes			5,864,553				921,925
Income tax expense			1,805,490				185,733
Net income		$	4,059,063			$	736,192
Net income per common share:
Basic		$	0.23			$	0.04
Diluted		$	0.22			$	0.04
Weighted average shares outstanding:
Basic			17,694,152				17,514,193
Diluted			18,063,484				17,584,037

Reconciliation of Net Income to EBITDA and Adjusted EBITDA
	Three Months Ended December 31,
	2025			2024
Net Income	$	4,059,063		$	736,192
Income tax expense		1,805,490			185,733
Interest expense		496,071			427,149
Depreciation and amortization		1,025,375			1,367,075
EBITDA	$	7,385,999		$	2,716,149
Acquisition related costs		23,304			257,550
ERTC income and other strategic initiatives		8,348			104,977
Adjusted EBITDA	$	7,417,651		$	3,078,676

	Three Months ended December 31,
	2025			2024
EBITDA Margin *	34	%		17	%
Adjusted EBITDA Margin **	34	%		19	%
* EBITDA Margin is defined as EBITDA divided by total revenue ** Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenue

Reconciliation - GAAP Net Income and GAAP income per share to Adjusted Net Income and Adjusted EPS		Three Months Ended December  31,
		2025						2024
(Unaudited)		Amount			Per Share			Amount			Per Share
GAAP net income  and EPS	$	4,059,063		$	0.22		$	736,192		$	0.04
Amortization of acquired Intangibles		629,751			0.04			744,276			0.04
Acquisition related costs		23,304			-			257,550			0.02
ERTC income and other strategic initiatives		8,348			-			104,977			0.00
Tax impact of adjustments*		(203,623	)		(0.01	)		(222,977	)		(0.01	)
Adjusted Net Income and Adjusted EPS*	$	4,516,843		$	0.25		$	1,620,018		$	0.09
*The blended effective tax rates were approximately 30.8% and 20.1% for the three months ended December 31, 2025 and 2024, respectively.
		Three Months Ended December 31,
		2025					2024
Weighted average shares outstanding
Basic		17,694,152						17,514,193
Diluted		18,063,484						17,584,037

Free Cash Flow
		Three Months Ended
		December 31,
		2025			2024
Operating Cash flow		$	8,159,592		$	1,841,458
Capital Expenditures			1,109,890			261,364
Free Cash flow		$	7,049,702		$	1,580,094

Net Debt
		As of December 31,
		2025			2024
Total Debt*		$	23,750,000		$	26,512,491
Cash			8,285,185			604,561
Net Debt*		$	15,464,815		$	25,907,930
* Excludes capitalized debt fees
Leverage Ratio		As of December 31,
			2025			2024
Net Debt		$	15,464,815		$	25,907,930
Divided by trailing twelve months Adjusted EBITDA			29,173,937			14,198,437
Leverage Ratio**		0.5x			1.8x
** Leverage Ratio is calculated as Net Debt divided by trailing 12 months Adjusted EBITDA

 

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Source: Innovative Aerosystems