Summary of ISSC Q3 2026 Earnings Call

1Key Financial Results and Metrics

Revenue: $20.7 million, an 11% increase year-over-year.

Net Income: $4.5 million, or $0.25 per diluted share, up from $2.4 million or $0.14 per share a year ago.

Gross Margin: Approximately 51.7%, significantly improved from 35.6% in the previous year.

Adjusted EBITDA: $7.7 million, a 75% increase from $4.4 million year-over-year.

Backlog: Approximately $83 million, up by $5.5 million compared to the prior year.

Free Cash Flow: $12.3 million for the first nine months of the year, up from $4.8 million in the previous year.

2Strategic Updates and Business Highlights

Acquisition: Completed the acquisition of Aiden Displays, enhancing capabilities in rugged display technologies and expanding into new markets, including medical instruments.

New Contracts: Secured a significant contract with a Japanese developer for an electric vertical takeoff and landing (eVTOL) aircraft, marking the first major award for the Liberty flight deck.

Product Development: Production of the UMS2 began in June, contributing to revenue growth in Q3. The company is also progressing on contracts with L3 and Boeing.

Rebranding: Transitioned to the Nasdaq ticker symbol "IA" from "ISSC" to align with the new corporate name.

3Forward Guidance and Outlook

Q4 Revenue Expectations: Projected revenue between $28 million and $30 million, driven by organic growth and contributions from recent acquisitions.

Long-term Revenue Target: The company remains on track to achieve a long-term revenue target of $250 million.

4Bad News, Challenges, or Points of Concern

F-16 Revenue Comparison: Revenue from the F-16 program was lower this quarter ($5.7 million) compared to the previous year ($12.6 million), impacting overall growth metrics.

Increased Operating Expenses: Operating expenses rose to $7.8 million from $5.1 million, primarily due to increased R&D investments.

Supply Chain Risks: Although the company has a robust in-house manufacturing strategy, broader supply chain issues affecting the aerospace industry could pose risks.

5Notable Q&A Insights

eVTOL Program: The sales process for the eVTOL contract took about a year, with a potential contract value of $50 million based on 400 orders. The company expects to be a sole source for the program.

Supply Chain Resilience: Management emphasized their strategy of in-house production and multiple sourcing for components to mitigate supply chain risks.

Market Opportunities: Management highlighted significant growth potential in the air mobility sector, indicating a strategic focus on this emerging market. Overall, ISSC reported strong financial performance in Q3 2026, driven by organic growth and strategic acquisitions, while also navigating challenges related to specific product lines and industry-wide supply chain issues. The outlook remains positive, with expectations for continued growth and expansion into new markets.