Innovative Aerosystems, Inc.

Solutions and Support, Inc. First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Linacre. Thank you, Mr. Linacre. You may begin.

Thank you, Operator, and good afternoon, everyone. I would remind our listeners that certain matters discussed in the conference call today, including information about new products and operational and financial results for future periods, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially and either better or worse from those discussed, including other risks and uncertainties reflected in our company's 10-K, which is on file with the SEC and other public filings. Now, I'll turn it over to our CEO, Shahram Askapur.

Thank you, Mark, and good afternoon, everyone. I will begin today with remarks on our performance in the fiscal first quarter of 2023. followed by comments on the upcoming year and our long-term growth strategy. I will then turn the call over to Mike, who will take us through the details of the financials. We began the year on solid footing with revenues of $6.5 million, driven by stronger OEM volume and engineering development contracts. Underlying end markets remain strong, particularly with OEM customers. I'm pleased to announce that during the Q1 2023 period, we received our FAA Supplemental Type Certificate, or STC, for the King Airs with the G1000 and NXI flight decks, and deliver our first aircraft. This STC opens an additional 700 potential aircraft for our King Air Aero throttle, which builds on the existing growing aftermarket King Air platforms. As we have stated in the past quarters, our winning formula starts with excellent products in attractive growing markets. This effort is supported by more than 500 cockpit upgrades in 757, 767 and 737 platforms, combined with a rapidly growing presence in general aviation. Gross profit in the first quarter was $3.7 million compared to $4 million in the prior year, mainly due to product mix. As a percentage of sales, gross margin was 57.1% compared to 59.3% in the prior year. We believe these results reflect the success of our innovative products in the market and our dedication to excellence in delivering for our customers. Turning to product development and beginning with autothrottle, we continue to invest in additional platforms that benefit from our ThrustSense products, as well as increased functionality that help generate additional revenue. Our B757-767 engine indication and crew alerting system upgrade development program is progressing well. We expect this additional offering on our successful 757-767 platforms to generate solid revenue for years to come. We also remain laser focused on the short-term opportunity to meaningfully expand margins through better facility utilization and intent to accomplish this goal through a mix of organic growth and strategic bolt-on M&A. On the organic side, we continue to expect an expansion of our R&D program in fiscal 2023 to around 13% of sales from 10% in fiscal 2022. The first quarter, our R&D ran below this level, as we are in the process of wrapping up our engineering resources. Cockpit automation remains a focus area for us, as demonstrated with the development of the autothrottle for King Air PC-12 and Eclipse. Beyond autothrottle, we are expanding automation throughout our product portfolio, specifically to other areas that can drive customer value by enhancing safety and reducing operating costs. We have the key product lines and technologies to further automate cockpit operations, which would significantly enhance flight safety and eventually lead to crew reduction. In terms of inorganic opportunities, as I had noted in December, we have assembled a business development team to pursue opportunities. During the first quarter, we developed an active pipeline, and while it is too early to share any details, we now have the ability to identify and execute on attractive product line type acquisitions that compliment our existing portfolio. We expect to be able to fund both acquisitions through cash on the balance sheet and free cash flows from operations, which exceeded $6 million in fiscal 2022. Taken together, we believe we can grow ourselves, increase our asset utilization, and drive incremental margin to overall business. At full capacity, we believe our infrastructure can support a meaningful increase to our operating results and total free cash generation. To conclude, we're off to a good start for the year with a strong outlook as we deliver on our legacy products and new offerings. Thank you for your time and interest. and we look forward to updating you with further details in the upcoming quarters. I will turn the call over to Mike for a closer look at the numbers.