Innovative Aerosystems (ISSC) Q1 2026 earnings summary

Executive summary

• Revenue grew 36.5% year-over-year to $21.8 million, driven by strong commercial aftermarket demand, service activity, and recent acquisitions.

• Net income reached $4.1 million ($0.22 per diluted share), up from $0.7 million, with adjusted net income at $4.5 million ($0.25 per diluted share).

• Adjusted EBITDA rose 140.9% to $7.4 million, reflecting improved revenue mix and operating leverage.

• Completed recertification and resumed full-scale production of the Digital Flight Control Computer for the F-16 program, with integration into the expanded Exton facility.

• Advanced next-generation flight deck (Liberty) and UMS platform, with test flights completed and production underway.

Financial highlights

• Gross profit increased 80% to $11.9 million; gross margin improved to 54.5% from 41.4% year-over-year.

• Operating income was $6.3 million, up from $1.3 million; operating expenses were $5.6 million, up slightly, but declined as a percentage of revenue.

• Free cash flow surged to $7 million, up from $1.6 million; cash flow from operations was $8.2 million, up from $1.8 million.

• Product sales were $13.6 million, up from $10 million; service revenue was $8.2 million, up from $6 million year-over-year.

• SG&A expenses were $4.3 million, up 2.5% year-over-year, but declined as a percentage of sales.

Outlook and guidance

• Organic revenue expected to be essentially flat year-over-year due to prior pull-forward of F-16 revenue; Q2 revenues projected between $20 million and $22 million, with sequential growth expected through the year.

• Long-term target of $250 million in revenue and Adjusted EBITDA margins of 25%-30%.

• Management expects continued revenue fluctuations in the near term due to the transition of Honeywell military display generator and flight control computer production.

• Approximately 51% of backlog is expected to be recognized as revenue over the next 12 months, and 93% over the next 24 months.

• Liquidity is expected to be sufficient for at least the next 12 months, supported by cash, operations, and available credit facilities.