EXTON, PA — Innovative Solutions & Support (Nasdaq: ISSC), operating as Innovative Aerosystems, reported modest quarterly revenue growth as expanding commercial aviation and aftermarket demand offset a sharp decline in F-16 program revenue tied to manufacturing transition timing.
The company reported fiscal second-quarter revenue of $22.4 million for the period ended March 31, up 2% from a year earlier, while net income fell to $3.4 million, or $0.19 per diluted share, from $5.3 million, or $0.30 per share, in the prior-year quarter.
The results reflect a broader operational shift underway at the company as it increases exposure to commercial aerospace and recurring aftermarket business while integrating newly acquired avionics and flight systems assets.
Revenue outside the F-16 program rose 69% year over year to $18.9 million during the quarter, helping offset a roughly $7 million decline in F-16-related sales compared with the unusually elevated prior-year period.
The company said F-16 manufacturing levels were temporarily affected by the transition of production from Honeywell facilities to its Exton operations. Management indicated certifications and testing tied to the transition have now been completed and shipments are expected to normalize during the third quarter.
Gross margin remained elevated at 51.1%, compared with 51.4% a year earlier, supported by a more favorable mix of commercial aftermarket business.
Operating expenses increased to $6.5 million from $4.3 million, reflecting acquisition-related costs and higher research and development spending tied to growth initiatives.
The company recently completed three acquisitions, including an autopilot product line purchase from Moog and two avionics-related asset and licensing agreements with Honeywell.
Management projected the acquisitions would contribute approximately $10 million in annual revenue with gross margins near 50%.
“In recent months, we’ve completed three acquisitions that, in combination, further expand our base of recurring, high-value aftermarket revenue across legacy and next-generation aviation platforms,” Chief Executive Shahram Askarpour said.
The company continues targeting annual revenue of $250 million as it expands its commercial aerospace, defense, and avionics portfolio.
New orders during the quarter totaled approximately $24.7 million, while backlog increased to about $87 million, up $7.4 million from the prior-year period.
Innovative Aerosystems generated $10.5 million in operating cash flow during the first six months of fiscal 2026, compared with $3.1 million during the same period a year earlier.
Net debt rose to $48.3 million as of March 31 following more than $30 million in acquisition spending and elevated capital expenditures, though the company reported total available liquidity of $49.8 million, including borrowing capacity under its credit facility.
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