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1. Company Snapshot

1.a. Company Description

Innovative Solutions and Support, Inc., a systems integrator, designs, develops, manufactures, sells, and services flight guidance, autothrottle, and cockpit display systems in the United States and internationally.It offers flat panel display systems that replicate the display of analog or digital displays on one screen and replace existing displays in legacy aircraft, as well as used for security monitoring on-board aircraft and as tactical workstations on military aircraft; and flight management systems that complement the flat panel display system upgrade for commercial air transport aircraft.The company also provides integrated standby units, which incorporate the measurement and display of attitude, altitude, airspeed, and navigation data into a single standby/backup navigation instrument for military, commercial air transport, and corporate/general aviation applications.


In addition, it offers digital air data computers that calculate various air data parameters, such as altitude, airspeed, vertical speed, angle of attack, and other information; integrated air data computers and display units, which calculate and convey air data information; altitude displays that convey aircraft altitude measurements; airspeed displays that convey various airspeed measurements; and altitude alerters.Further, the company offers the engine and fuel displays that convey information related to fuel and oil levels, and engine activity, including oil and hydraulic pressure and temperature; integrated global navigation systems; ThrustSense, a full regime autothrottle; and utility management systems.It serves commercial air transport carriers and corporate/general aviation companies, the Department of Defense and its commercial contractors, aircraft operators, aircraft modification centers, government agencies, and foreign militaries, as well as original equipment manufacturers.


Innovative Solutions and Support, Inc.was incorporated in 1988 and is based in Exton, Pennsylvania.

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1.b. Last Insights on ISSC

Recent highlights for Innovative Solutions and Support, Inc. include: * 18.4% year-over-year revenue growth in Q4 2024, driven by net revenue of $15.4 million. * Selection of the company's patented ThrustSense Autothrottle system by the US Army for installation on their C-12 (B200) aircraft, providing full flight envelope protection and enhanced safety and efficiency. * Upcoming Q4 2024 earnings release and conference call on December 19, 2024, which will review the company's financial results and recent events. * Continued growth in the commercial, business aviation, and military markets, driven by the company's advanced avionic solutions.

1.c. Company Highlights

2. Innovative Solutions' Q3 FY2025: A Strong Beat on Revenue

Innovative Solutions & Support (IS&S) reported a robust third quarter fiscal 2025, with revenue more than doubling year-over-year to $24.1 million, primarily driven by the recently acquired F-16 product line. While gross profit increased 37% to $8.6 million, gross margin contracted to 35.6% from 53.4% in the same period last year, mainly due to lower margins on the F-16 product line and increased depreciation expense. Adjusted EBITDA grew 62.7% to $4.3 million, largely attributed to revenue growth and strong operating expense leverage. Earnings per share (EPS) came in at $0.14, slightly below estimates of $0.16.

Publication Date: Aug -31

📋 Highlights
  • Revenue Surge: Q3 FY2025 revenue hit $24.1M, +100% YoY, driven by F-16 acquisition.
  • Gross Profit Expansion: Gross profit rose 37% to $8.6M, but margin dipped to 35.6% due to F-16 lower margins and depreciation.
  • EBITDA Growth: Adjusted EBITDA surged 62.7% to $4.3M from operational leverage and revenue gains.
  • Backlog Strength: $72M backlog as of June 30, 2025, signals strong future revenue visibility.
  • Liquidity & Acquisition Focus: $100M credit facility funds growth, with target net leverage ratio of ~3 and focus on Honeywell-related and avionics acquisitions.

Operational Highlights and Guidance

The company's backlog stood at $72 million as of June 30, 2025, providing a solid foundation for future growth. IS&S expects a temporary dip in F-16 revenues in the fourth quarter and first quarter of fiscal 2026 as it completes the transition of production to its Exton facility. The company anticipates normalized gross margins in the mid-40% range in the future, with a target net leverage ratio of around 3. As Shahram Askarpour noted, "Organic growth is a key part of our growth strategy. Acquisitions provide quick results, but organic growth is a long-term objective."

Growth Strategy and Valuation

IS&S is actively pursuing acquisitions, focusing on both Honeywell-related opportunities and smaller avionics companies. The new $100 million credit facility provides ample liquidity and flexibility to execute on its growth strategy. Analysts estimate next year's revenue growth at 15.4%. With a current P/E Ratio of 19.49, P/S Ratio of 2.95, and EV/EBITDA of 12.77, the market appears to have priced in a significant amount of growth. The company's Return on Invested Capital (ROIC) stands at 16.0%, while Return on Equity (ROE) is at 22.85%, indicating efficient capital allocation.

Debt Profile and Cash Flow

The company's Net Debt / EBITDA ratio stands at 1.15, indicating a manageable debt burden. With a Free Cash Flow Yield of 2.25%, IS&S generates sufficient cash to service its debt and invest in growth initiatives. The absence of dividend yield suggests that the company is prioritizing growth over shareholder returns.

3. NewsRoom

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Head-To-Head Review: Innovative Solutions and Support (NASDAQ:ISSC) and CAE (NYSE:CAE)

Dec -03

Source: defenseworld.net

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Connor Clark & Lunn Investment Management Ltd. Purchases 88,442 Shares of Innovative Solutions and Support, Inc. $ISSC

Nov -17

Source: defenseworld.net

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Innovative Solutions & Support, Inc. d/b/a Innovative Aerosystems Appoints New Board Member

Oct -28

Source: businesswire.com

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INVESTOR ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of Innovative Solutions and Support, Inc. - ISSC

Oct -18

Source: prnewswire.com

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IS&S Rebrands to Innovative Aerosystems

Oct -14

Source: businesswire.com

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INVESTOR ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of Innovative Solutions and Support, Inc. - ISSC

Oct -13

Source: prnewswire.com

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Innovative Solutions and Support Gains Soared 90%; Why It's Not Too Late To Buy

Oct -10

Source: seekingalpha.com

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INVESTOR ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of Innovative Solutions and Support, Inc. - ISSC

Oct -08

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.50%)

6. Segments

Flat Panel Display Systems

Expected Growth: 8.5%

The 8.5% growth of Flat Panel Display Systems from Innovative Solutions and Support, Inc. is driven by increasing demand for advanced avionics and cockpit displays in the aerospace industry, coupled with the need for modernization and upgrade of existing fleets. Additionally, growing adoption of digital displays in military and commercial aircraft, as well as rising investments in research and development, contribute to this growth.

Air Data Systems and Components

Expected Growth: 6.17%

The 6.17% growth in Air Data Systems and Components from Innovative Solutions and Support, Inc. is driven by increasing demand for advanced avionics, rising adoption of unmanned aerial vehicles (UAVs), and growing need for real-time data analytics in the aerospace industry.

7. Detailed Products

Flight VUE

A comprehensive flight test instrumentation system that provides real-time data acquisition, recording, and display capabilities.

Test VUE

A modular, scalable, and customizable test and measurement system for a wide range of applications.

DIADEMS

A data acquisition and analysis software that provides advanced data processing, visualization, and reporting capabilities.

TSIM

A simulation and modeling software that provides a realistic and dynamic simulation environment for testing and training.

Engineering Services

A range of engineering services including system design, development, integration, and testing.

8. Innovative Solutions and Support, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes is moderate due to the availability of alternative solutions in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the presence of a large number of customers with significant purchasing power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the presence of multiple suppliers in the market.

Threat Of New Entrants

The threat of new entrants is moderate due to the presence of barriers to entry and the need for significant investment in technology and infrastructure.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of a large number of competitors in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 33.54%
Debt Cost 3.95%
Equity Weight 66.46%
Equity Cost 9.19%
WACC 7.43%
Leverage 50.47%

11. Quality Control: Innovative Solutions and Support, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Sturm Ruger

A-Score: 5.6/10

Value: 2.9

Growth: 2.8

Quality: 5.0

Yield: 8.0

Momentum: 7.5

Volatility: 7.7

1-Year Total Return ->

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Stock-Card
Innovative Solutions and Support

A-Score: 5.3/10

Value: 4.3

Growth: 7.7

Quality: 7.2

Yield: 1.0

Momentum: 9.5

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
AMMO

A-Score: 4.1/10

Value: 7.8

Growth: 2.3

Quality: 4.9

Yield: 0.0

Momentum: 7.0

Volatility: 2.7

1-Year Total Return ->

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Stock-Card
Smith & Wesson Brands

A-Score: 4.0/10

Value: 4.1

Growth: 1.9

Quality: 4.3

Yield: 7.0

Momentum: 1.5

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Redwire

A-Score: 3.8/10

Value: 8.0

Growth: 4.1

Quality: 3.4

Yield: 0.0

Momentum: 6.5

Volatility: 0.7

1-Year Total Return ->

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Stock-Card
VSE

A-Score: 3.7/10

Value: 1.2

Growth: 2.4

Quality: 4.9

Yield: 0.0

Momentum: 9.5

Volatility: 4.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

10.22$

Current Price

10.22$

Potential

-0.00%

Expected Cash-Flows