Innovative Aerosystems, Inc.

Good day and welcome to the Innovative Air Systems fourth quarter 2025 results conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a 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 a touch-tone phone. To withdraw the 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, partner at Valum Advisors. Please go ahead.

Thank you. Good morning, everyone, and welcome to Innovative AeroSystems' fourth quarter and full-year fiscal 2025 results conference call. Leading the call today are our CEO, Sharam Ashkapur, and CFO, Jeff DiGiovanni. This morning, we issued a press release detailing our fiscal 2025 fourth quarter and full year operational and financial results. This release is publicly available in the investor relations section of our corporate website at www.iascorp.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 factor section of our latest report filed with the SEC. Additionally, please note that you can find reconciliations of all historical non-GAAP financial measures mentioned on this call and press release issued this morning. Today's call will begin with prepared remarks from Sherram, who will provide a review of our recent business performance and an update on our strategic framework, including our accomplishments during fiscal 2025 and our key strategic priorities for fiscal 2026, followed by a financial update from Jeff. At the conclusion of these prepared remarks, we will open the line for your questions. With that, I'll turn the call over to Sherram.

Thank you, Paul, and good morning to everyone joining us on the call today. Fisco 2025 was another transformational year for our entire organization, highlighted by continued discipline execution on our strategic priorities, culminating in outstanding fourth quarter and full year performance. In October, in connection with our ongoing transformation, we rebranded to Innovative Aerosystems, a move that better reflects our strategic focus on engineering, manufacturing, and supplying advanced avionics solutions for commercial, business, and military aviation markets. Our new brand identity underscores our unique capability to integrate next-generation avionics with intelligent system design, delivering innovative mission-critical aerospace solutions. At Innovative Aerosystems, we remain committed to powering progress across the industry's most prominent legacy fleets and emerging next-generation platforms. Entering fiscal 2026, we are executing against a clearly defined go-to-market strategy centered on integrating intelligent system design in advanced avionics to deliver differentiated solutions that improve performance, enhance safety, and reduce operational complexity for commercial and defense aerospace customers. We ended the year on a strong note with fourth quarter revenue, increasing 45% year-over-year to $22 million. The combined benefit of increased throughput from client programs, a more favorable sales mix, and improved operating leverage resulted in fourth quarter net income of $7.1 million, or 39 cents. per diluted share, adjusted EBIT of 9.6 million, an increase of 71% versus the prior year. For the full year, we generated revenue of 84 million, up nearly 80% from the previous year. Our fiscal 2025 net income was 15.6 million, or 88 cents per diluted share. Adjusted EBITDA was 25 million, up just over 80% from last year, despite significant investments we made to position the company for its next phase of growth, including the expansion of our engineering team, enhancements to our sales organization, investments in infrastructure and systems to support our defense customers, and the integration of our F-16 platform production into our external facility. I will discuss each of these in more detail shortly. To that end, I will now provide an update on our progress on the IANext, our long-term value creation strategy. Our IANext strategy prioritizes profitable growth sustained operational excellence, and disciplined capital allocation as key drivers of long-term value creation. This framework is the mechanism by which we intend to deliver on our long-term target of $250 million in revenue and adjusted EBITDA margins of between 25% to 30%, driven by a combination of organic and inorganic growth. Our strong fiscal 2025 results are a direct reflection of the execution of these key strategic initiatives. I will now discuss some of our key accomplishments during the year and highlight our focus priorities for the year ahead. Let's begin with a review of our growth initiatives, which focus on new product development, cross-selling of key solutions, expansion of our military capabilities, and enhancements to our integrated avionics cockpit solution. An important milestone we achieved during 2025 was the successful completion of the integration of the F-16 program production into our external facility. We have completed all required recertifications and resume full-scale production of the digital flight control computer earlier this month. The recertification and resumption of production of the improved programmable display generator is planned for the next month. We have a strong backlog of demand for our new products used in the F-16 and are encouraged by the growth potential here. The F-16 remains a workhorse for our military, as well as many of our allies around the world, and we are encouraged by the long runway growth we see ahead. In addition to the attractive growth opportunities related to this platform, during 2026, we plan to begin insourcing F-16 product line services. This initiative, combined with the elimination of the duplicative costs we incurred during 2025 as we migrated the F-16 program production into our facility, should lead to improved and more consistent margins related to these products moving forward. Capitalizing on our legacy of engineering excellence, New product development is a critical aspect of our growth strategy, so we were pleased by the significant progress we made during 2025. In the year ahead, we intend to advance our progress towards autonomous flight within the business chip market through the next generation UMS2 platform. This re-engineered platform enables the integration of artificial intelligence in the cockpit, significantly enhancing level of cockpit automation. We have completed test flights on the Pilatus PC24, and we'll be delivering the new version to Pilatus in June 2026. Another important area of new product focus during 2025 has been our new Liberty Flight Deck. This is a customer-centric, customizable design that can be tailored for virtually any type of aircraft, including large passenger and cargo planes, business jets, and military aircraft. We unveiled the Liberty Flight Deck at the National Business Aviation Association show in October of this year, and the customer feedback was very positive. In the coming year, we will continue with our Liberty avionics certification activities with a goal of 2027 for first certification. A new Liberty offering can significantly reduce workload in cockpits by using automation enhance safety and deliver substantial cost savings for part 25 aircraft operators the meaningful progress we achieved on new products is a direct result of the recent investments we have made in our engineering department and our core competencies of innovation and engineering expertise Our engineering organization is a vertically integrated, multidisciplinary team that brings mechanical, electrical, software, and systems engineering together under one roof. This structure enables agile decision-making, tight collaboration, and full control over every stage of product development. IA maintains an independent verification and validation group that ensures strong design integrity and compliance throughout the development cycle in compliance with certification requirements to meet the highest level of safety. Our engineering team uses modern, fully integrated development tools and employs state-of-the-art microprocessors and FPGA technology. The department has also invested and utilized an internal AI-based development infrastructure, which hosts a knowledge-based AI model that optimizes documentation, supports training initiatives, and facilitates cross-department product queries. We have expanded our engineering team by more than 50% in each of the last couple of years, with engineering personnel representing a third of our total headcounts at year-end. Management and the core engineering team have been with the company for over a decade on average, contributing to stability, deep product knowledge, and continuity. We view our R&D capabilities to be critical to achieving our long-term growth objectives. and we plan to make additional investments in our engineering headcount in fiscal 2026. Importantly, we maintain an excellent engineering retention rate, supported by an engaging and challenging work environment. Unique initiatives such as sponsoring private pilot training ensure engineers gain first-hand understanding of the pilot and avionics environment. Our engineering team has demonstrated its agility and innovation with programs like the new Liberty Flight Deck and consistently shows a willingness to take on ambitious projects and new technologies that strengthen the company's competitive position, like multi-core processing technology. With a strong talent pipeline on parallel vertical integration and a culture that embraces challenging projects and new technologies, our culture of innovation serves as a key driver of the company's continued growth and competitive advantage. We look forward to updating you on the continued progress on our UMS2 and Liberty platforms, as well as additional innovations and new technologies in the future as we continue to enhance our integrated cockpit avionics solution and move closer to autonomous flight. During 2025, we also laid groundwork for the expansion of our military business, which we view as an important future growth driver. We made important investments that strengthen our security and accounting services to become compliant with the Defense Federal Acquisition regulations, supplements, or DFARs required. These are necessary improvements as we continue to bid on larger DoD programs. And finally, as it relates to our growth strategy, all of this is supported by the recently completed expansion of our external facility. We triple the production capacity of our facility in 2025, positioning us to scale production over the coming years. Looking ahead, we now have the people, tools, and capabilities in place to execute on our growth strategy. Now turning to our pursuit of operational excellence, we made key investments during 2025 that should position the company for solid operating leverage. In the coming years, as we focus our goal of delivering adjusted EBITDA margins between 25% to 30% over the longer term. During 2025, we completed the integration of our NetSuite ERP system, which provides a platform to efficiently scale our business. This new system will allow us to utilize more robust data to support actionable business decisions. Additionally, we have made further investments in infrastructure and systems to support our growth aspirations. With the infrastructure already in place, we expect only modest increase in operating costs moving forward, allowing for operating leverage as we grow. And finally, as it relates to balance sheet optionality, we continue to add available liquidity to support both organic growth and strategic acquisitions in the years ahead. An important accomplishment in support of our growth strategy was the recent closing of our new five-year, $100 million committed credit agreement with a lending syndicate led and arranged by JPMorgan Chase. The new facility provides an additional $65 million in liquidity versus our previous $35 million facility and an option subject to certain conditions to request up to $25 million in additional loan commitments under an accordion feature in the agreement, bringing the total potential facility to $125 million. This facility provides the improved flexibility required to execute on a long-term growth strategy. In addition to the investments in organic growth I have already discussed, we remain focused on supplementing our growth strategy through strategic acquisitions. Our discipline acquisition strategy centers on acquiring aerospace and defense component product lines or businesses with significant aftermarket potential and proprietary content and processes. We are focused on acquisition of product lines and businesses that have above market growth potential, are strongly cash generative, and are profitable. The aerospace supply chain is highly fragmented with many components supplied by smaller privately owned businesses that in turn sell to system integrators, tier one or tier two manufacturers, or large OEM participants. We continue to see significant opportunities for further consolidation of this supply chain. Before I hand the call over to Jeff, I want to welcome Richard Selfon to our Board of Directors as an independent director. Richard is currently General Counsel of Hildreth Capital Management, a private equity firm that specializes in control-oriented transactions in lower middle market companies. Before joining Hildreth, Richard was a partner and co-chair of Mergers and acquisitions at Duane Morris, a multinational law firm. With Richard's appointment, the board has expanded to seven directors. In summary, as we enter fiscal 2026, we're well positioned to benefit from the foundation investments we've made across the organization during the last several years. Our team continues to execute at a high level and market trends remain favorable, and our financial position is solid, all of which position us to deliver another year of profitable growth. We are energized by the opportunities ahead of us and remain committed to advancing our long-term strategic initiatives while maintaining a focus on delivering value for our shareholders. With that, I'll turn the call over to Jeff for his prepared remarks.