SOUTHAMPTON, PA — Environmental Tectonics Corporation (OTCID: ETCC) reported sharply lower third-quarter revenue as several large contracts neared completion, but pointed to a surging backlog and robust order activity as signs of strengthening momentum heading into the rest of fiscal 2026.
The company said sales declined during the thirteen-week period ended November 28, 2025, as work progressed on major contracts in their final phases. Even so, ETC’s sales backlog climbed 12% sequentially to $69.7 million, up from $62.3 million at the end of the prior quarter, driven by $20.0 million in new contract awards.
“Sales declined in the third fiscal quarter as we have been executing against several large contracts, which are in the final phase of completion,” said Robert L. Laurent Jr., ETC’s chief executive officer and president. “However, we are pleased with the increase in ETC sales backlog and the large pipeline of opportunities, which positions ETC for continued success.”
For the fiscal third quarter, ETC posted net income of $0.2 million, or essentially breakeven on a diluted per-share basis, down from $2.4 million, or $0.14 per share, a year earlier. The decline reflected lower sales, margin compression, higher operating costs, and a sharp rise in interest expense.
Net sales fell 22% to $12.7 million from $16.3 million in the year-ago quarter, driven by steep declines in sterilizer systems, environmental testing and simulation systems, and service and spare parts revenue. Those declines were partially offset by a 5.6% increase in aeromedical training solutions sales. Quarterly bookings more than doubled year over year to $20.0 million, led by aerospace solutions and environmental testing orders.
Gross profit slid nearly 30% to $3.6 million, with gross margin narrowing to 28.2%. The company said margins were pressured by lower-margin construction work tied to an aeromedical center project. Excluding that work, gross margin improved to 35.1%, reflecting favorable job cost revisions in aerospace and simulation segments.
Operating expenses rose 12.4% to $2.7 million, largely due to higher research and development spending. Net interest expense surged to $0.6 million, reflecting increased borrowing tied to prior leaseback transactions.
For the first nine months of fiscal 2026, ETC reported net income of $2.9 million, or $0.16 per share, down from $5.5 million, or $0.30 per share, a year earlier. Net sales for the period increased 7.8% to $47.3 million, driven primarily by a 35.7% jump in aeromedical training solutions revenue.
Gross profit for the nine-month period slipped 4.3% to $13.2 million, while operating expenses remained largely flat. Interest expense nearly tripled year over year, weighing on overall profitability.
Cash flow also showed improvement. The company used $0.7 million in operating cash during the first three quarters of fiscal 2026, compared with $4.5 million a year earlier, reflecting better working capital management despite higher receivables.
Management said the expanding backlog, strong bookings, and improving cash dynamics provide a foundation for growth as major contracts move toward completion and new programs ramp up.
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