SOUTHAMPTON, PA — Environmental Tectonics Corporation (OTC Pink: ETCC) has reported a robust start to fiscal 2026, driven by strong Aircrew Training Systems (ATS) sales and tighter control over operating costs.
For the first fiscal quarter ended May 30, 2025, ETC posted net sales of $17.6 million, a 30.5% increase compared to $13.5 million in the same quarter last year. This surge was largely fueled by a $4.8 million, or 74.9%, rise in ATS sales, which included $3.9 million from the aeromedical center building revenue. However, Sterilizer Systems sales dipped by 14.2%.
Gross profit for the quarter reached $4.7 million, representing 26.5% of net sales, down from 33.6% a year ago. The decline in margin was primarily attributed to lower-margin construction revenue tied to the aeromedical center. Excluding this impact, ETC’s gross margin was 34.3%, slightly higher than the 33.9% reported in Q1 2025.
Operating income jumped 39.4% year-over-year to $2.2 million, reflecting higher ATS sales and a $0.5 million reduction in operating expenses. Total operating expenses came in at $2.5 million, down 16% from the previous year, due largely to reduced research and development spending at ETC-PZL.
Despite these gains, net income for the quarter slipped slightly to $1.3 million ($0.07 per diluted share) compared to $1.4 million ($0.08 per diluted share) a year earlier. The decrease was driven by a sharp rise in interest expense, which soared 385% to $0.6 million, and an income tax provision of $0.4 million due to the use of deferred tax assets.
CEO and President Robert L. Laurent, Jr. highlighted the company’s progress: “We are pleased with the 39% increase in ETC operating income versus the prior year, driven by an increase in ATS sales and a decrease in operating expenses, as well as our 34% gross profit margin excluding the impact of lower-margin construction sales.”
The company’s backlog stood at $73 million at the end of the quarter, signaling strong future demand.
On the cash flow front, ETC used $2.7 million in operating activities, a reversal from positive cash flow of $2.9 million in the prior-year period. The decline was primarily due to higher accounts receivable. Investing cash flows remained modest at $0.1 million, while financing activities added $1.0 million, reflecting borrowings on the company’s credit facility.
Looking ahead, ETC appears well-positioned, buoyed by its strong order backlog and a robust pipeline of opportunities, despite near-term challenges posed by rising costs and cash flow pressures.
This quarter’s performance underscores ETC’s ability to drive revenue growth and improve operating efficiency while navigating the complexities of its diverse business segments.
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