SOUTHAMPTON, PA — Environmental Tectonics Corp. (OTCID: ETCC) reported sharply lower first-quarter fiscal 2027 earnings as project-related margin pressure weighed on results, although a surge in new contract awards lifted backlog to a record level that could support future revenue.
The company posted net income of $200,000, or $0.01 per diluted share, for the quarter ended May 29, down from $1.3 million, or $0.07 per diluted share, a year earlier. Revenue declined 8.0% to $16.2 million from $17.6 million.
The earnings decline reflected lower gross profit, higher operating expenses and increased other expenses, the company announced. Gross profit fell to $3.9 million from $4.7 million, while gross margin narrowed to 24.1% from 26.5%.
Operating income dropped 53.6% to $1.0 million from $2.2 million a year earlier.
The revenue decline was largely driven by lower sales in the company’s Aircrew Training Systems segment related to construction of an aeromedical center building and weaker Sterilizer Systems sales. Those declines were partially offset by significant growth in Environmental Testing and Simulation Systems revenue.
Excluding aeromedical center building construction revenue, quarterly sales increased 2.5% to $13.9 million from $13.6 million, indicating relatively stable performance in the company’s core operations.
Gross margin also remained under pressure after two Aircrew Training Systems projects required negative cost revisions during the quarter. By comparison, one project had provided an unusually favorable margin contribution in the prior-year period.
Operating expenses increased 15.8% to $2.9 million, primarily because of higher selling, general and administrative costs.
Despite weaker earnings, Environmental Tectonics reported $39.5 million in new contract awards during the quarter, increasing backlog 17% from a year earlier to $85 million.
“We once again generated positive operating results and are especially pleased with the 17% increase in backlog vs. prior year driven by $39.5 million in contract awards during the 2027 first fiscal quarter,” Chief Executive Officer and President Robert L. Laurent Jr. stated. “We are well positioned for continued positive results as we exit the quarter with a sales backlog of $85 million.”
Cash flow from operations improved substantially, generating $1.2 million compared with a $2.9 million operating cash outflow in the prior-year quarter. The improvement reflected lower accounts receivable and higher accounts payable and accrued liabilities.
Investing activity remained unchanged at approximately $100,000, primarily for equipment purchases and software development.
Financing activities used $1.6 million during the quarter as the company repaid borrowings under its credit facility, compared with $1.0 million in borrowings during the same period last year.
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