Innovative Aerosystems, Inc.

Good day and welcome to the innovative solutions and support second quarter 2025 results conference call and webcast. All participants will be in the listen only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Paul Bartolai, Head of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Innovative Solutions and Supports' second quarter 2025 results conference call. Leading the call today, our CEO, Sharam Askapur, and CFO, Jeff DiGiovanni. Yesterday, we issued a press release detailing our second quarter 2025 operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at www.innovative-ss.com. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest reports filed with the SEC. Additionally, please note that you can find reconciliations of all historical non-GAAP financial measures mentioned on this call in the press release issued yesterday. Today's call will begin with prepared remarks from SHRM We'll provide a review of our recent business performance and strategic outlook, followed by a financial update from Jeff. At the conclusion of these prepared remarks, we'll open the line for your questions. And with that, I'll turn the call over to Sharon.

Thank you, Paul, and good morning, everyone joining us on the call today. Let's begin with a high-level overview of our second quarter financial performance. During the second quarter, we delivered growth in revenue of just over 100%, driven by momentum from our new military programs, including significant growth from our F-16 program and contributions from our legacy platform. As we discussed last quarter, we have been seeing improved trends in our commercial business. As expected, this translated to improved results this quarter with notable strength in our air transport business. Our EBITDA increased by over 200% and profit by over 300% from last year, highlighting the significant operating leverage in our business as we continue to grow. We are building a platform of scale with meaningful opportunity for even the margin expansion as we grow the business. Our business momentum remains strong with a backlog of approximately 80 million as of March 31st, 2025. We were pleased with our strong second quarter results. The trends in our core business remain strong. we are successfully executing our strategy to build a significant growth business. To that end, I would like to shift the discussion to an update on our progress on the IS&S Next, our long-term value creation strategy. As a quick refresher, our strategy centers on a combination of targeted commercial growth within high-value markets, improving operating leverage, and a disciplined returns-driven approach to capital allocation. We continue to execute against our initiatives during the quarter, and I would like to take a moment to highlight just a few of the key achievements. As we have discussed, we have placed a priority on expanding our military business. In support of this objective, we've continued to make investments in both infrastructure and systems capabilities to support the high performance requirement of our defense customers. During the second quarter, we completed the integration of our ERP system, we further expanded our more robust IT infrastructure and strengthen our security and accounting services to make us compliant with defense federal acquisition regulation supplements or DFARs requirements. These are necessary investments as we continue to bid on larger DoD programs. We continue to expect at least 40% of our revenue to come from military customers during fiscal 2025, and we are excited by our progress and the opportunities that lie ahead of our military business. We also have made further progress on the expansion of our external Pennsylvania facility and remain on track for completion of the project by mid-2025. When complete, we will have doubled our footprint and increased our production capabilities by more than threefold. The building construction is near completion and the preparation for clean room production environment will commence by the end of May. As a reminder, we manufacture 100% of our products in our external facility. With the ongoing trade uncertainty and priorities of the current administration, we should be in an enviable position given the likely significant push for reshoring of manufacturing and an America-first mentality. During the second quarter, we continued with the integration of our most recent acquisition from Honeywell. As we discussed last quarter, much of the spending and the integration activities are being done ahead of the expected growth from these platforms. Integration is also resulting in some duplicative costs as we transition the manufacturing of products into our external facilities. Importantly, the integration is progressing, and we are excited by the opportunities from this acquisition. While we have spent a lot of effort on our military opportunities, we remain encouraged by the growth opportunities across our commercial air transport and business aviation markets. Our goal to achieve a larger percentage of our new production aircraft or OEM business is also being satisfied through organic product growth as well as our strategic acquisitions such as the F-16 product lines. Even though it has been a couple of quarters since we have announced the transaction, deploying capital for strategic acquisitions remain a key priority. Although our most recent acquisitions have been focused on complementary product lines from large avionics suppliers, we continue to evaluate opportunities to acquire small avionics manufacturers where we anticipate synergies will be realized by incorporating their outsourced production in our facility. We have demonstrated a track record of successfully scaling our business to a combination of organic growth and capital deployed for acquisitions. Since 2020, we have completed four acquisitions to complement our organic growth strategy. Over this period, we have grown our revenue and net income from $22 million and $3.3 million respectively during fiscal 2020, to well over $60 million in revenue and $9 million in net income during fiscal 2025, based on our stated forecast for greater than 30% growth. Given our capital light model and strong free cash flow generation, we have been able to generate this growth while maintaining modest leverage. We are proud of what we have accomplished and are positioning the company for continued growth going forward. Despite recent margin pressure due to acquisition-related costs and inventory adjustments, as well as inherent lower gross margins in defense products, we expect EBITDA and profit margins to grow steadily. We are further establishing our company as a premier systems integrator in flight navigation and precision instrumentation with cutting-edge technology. A vertically integrated US-based production provides a competitive advantage, fostering relationships with key aircraft manufacturers, operators, and defense organizations. In summary, we are encouraged by the progress we have made on our strategic priorities and remain committed to continuing to execute on our plan. During the quarter, we doubled our revenue, tripled our EBITDA, and quadrupled our profit from a year ago. As a result of our success, we will remain on track to deliver on our goal to generate both revenue and EBITDA growth of greater than 30% when compared to fiscal year 2024. We are excited by everything we have accomplished and are confident we are strategically positioned to continue generating profitable growth. With that, I'll turn the call over to Jeff for his prepared remarks.