Q1 2024 Innovative Solutions and Support Inc Earnings Call
Operator: Good day, and welcome to the Innovative Solutions and Support First Quarter Fiscal 2024 Financial Results Conference Call. All participants will be in listen-only mode.
Good day and welcome to the innovative solutions and support first quarter fiscal 'twenty 'twenty four financial results Conference call. All participants will be in listen only mode did you need assistance. Please take the only conference specialist by pressing the star key followed by zero after too.
Operator: 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 touchtone phone.
Today's presentation, there will be an opportunity to ask questions to ask any question. You May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded.
Operator: 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 Dr. Sharam Eskapur, Chief Executive Officer and member of the Board of Directors. Please go ahead.
I would now like to turn the conference over to Dr. Sharon Basketball, Chief Executive Officer, and member of the Board of Directors. Please go ahead.
Shahram Asgharpour: Good morning. This is Shahram Asgharpour, Chief Executive Officer of Innovative Solutions and Support. Welcome to our conference call to discuss our performance for the first quarter of fiscal 2024 and current business conditions and outlook for the coming year. Before we begin, I'd like to provide a cautionary statement about forward-looking information. Thank you, Sharon, and good morning everyone.
Good morning. This is Sharon masker poor chief Executive officer of innovative solutions and support local.
Welcome to our conference call to discuss our performance for the first quarter of fiscal 'twenty to 'twenty four.
Current business conditions and outlook for the coming year.
Joining me is rather benign our CFO.
Before we begin I'd like to provide a cautionary statement about forward looking information.
Sure and good morning, everyone I would remind our listeners that certain statements made in matters discussed in the conference call today, including those about new products and operational and financial results for future periods contain forward looking information.
Val Vinant: I would remind our listeners that certain statements made in matters discussed in the conference call today, including those about new products and operational and financial results for future periods, contain forward-looking information. These forward-looking statements are subject to assumptions, risks, and uncertainties that could cause actual results to differ materially, either better or worse, from those discussed. I specifically call our listeners' attention to our disclaimer regarding forward-looking statements in our Form 10-Q filed yesterday. Which disclaimer, along with our public filings referenced in it, describes these assumptions, risks, and uncertainties? I also remind our listeners that the plans and expectations we express speak only as of today's date, and listeners should not place undue reliance on any forward-looking statements. Now, I'll turn the call back to Sharon. Thank you, Ralph.
These forward looking statements are subject to assumptions risks and uncertainties that could cause actual results to differ materially either better or worse from those discussed.
Specifically car listeners attention to our disclaimer regarding forward looking statements in our Form 10-K, 10-Q filed yesterday, which disclaimer along with our public filings represent it describe these assumptions risks and uncertainties I also remind our listeners that plans and expectations there.
Express speak only as of today's date and listeners should not place undue reliance on any forward looking statements now I will turn the call back to Sharon.
Thank you Ralph.
Shahram Asgharpour: I will begin today with remarks on our performance in the first quarter of fiscal 2024, followed by comments on our long-term growth plan and strategy, including the ongoing integration of the products acquired and licensed from HIPAA. I will then turn the call back to Raoul, who will take us through the financing. For the quarter, revenues were up 43%, with net income increasing 51% from a year ago. This increase has us on pace to meet our goal of increasing revenues by 40% of the organic fiscal 2023 revenues due to the addition of the Honeywell product. At this time, we expect full integration of the Honeywell product lines to be nearly completed this fiscal year. First quarter results were in line with the expectations expressed previously. That aside,
I will begin today with remarks on our performance in the first quarter of fiscal 2020 four.
Followed by comments on our long term growth plans and strategy, including the ongoing integration of the products acquired in licensed from Honeywell.
I will then turn the call back to Ralph Who'll take us through the financials.
For the quarter revenues were up 43% with net income increasing 51% from a year ago.
This increase has us on pace to meet our goal of increasing revenues by 40% after organic fiscal 2023 revenues.
Due to the addition of the Honeywell products.
At this time, we expect full integration of <unk>.
The Honeywell product likes to be nearly completed this fiscal year.
First quarter results were in line with the expectations expressed previously.
The other side.
Shahram Asgharpour: Results once again demonstrate the strength of our strategy addressing the diversified military, commercial air transport, and business aviation. Although we have experienced an anticipated slowdown in commercial air transport and cargo markets, we have countered the slowdown by renewed strength in the military and the addition of the Honeywell product. An increasing proportion of our revenues are now recurring in nature, including our OEM production contracts with Boeing, Textron, and Pilatus. These production contracts provide a growing base of reliable revenue that generates strong margins and strong cash. Margins this quarter were 59.3%, an improvement from the First Quarter of Fiscal Year 2023. Cash flow was strong in the quarter, enabling us to reduce our debt position by nearly $9 million in the quarter. We expect the credit line balance will continue to be reduced throughout the fiscal year.
<unk> once again demonstrate the strength of our strategy.
We're seeing good diversified military commercial air transport and business aviation markets.
Although we have experienced an anticipated slowdown in commercial air transport our cargo markets.
We have counted the slowdown by renewed strength in the military market.
With the addition of the Honeywell product lines and the increasing proportion of our revenues are nonrecurring in nature, including our OEM production contracts with Boeing Textron and pillar.
These production contracts provide a growing base of reliable revenue that generates strong margin strong cash flow.
Margins this quarter were 59, 3%.
An improvement from the first quarter of fiscal year 2023.
Cash flow was strong in the quarter, enabling us to reduce our debt position by nearly $9 million in the quarter.
We expect our credit line balance will continue to be reduced.
The fiscal year.
Shahram Asgharpour: Barring another acquisition, we also maintain our commitment to research and development, as evidenced by the increase in R&D expenses. This increase includes our effort to develop new products and to add new capabilities to existing technology and to integrate the acquired Honeywell product. This work is directed at a long-term vision where we believe there is increasing demand for technology that reduces pilot workload and would ultimately lead to single pilot flights in air transport aircraft.
Barring another acquisition.
We also maintained our commitment to research and development as evidenced by the increase in R&D expense.
This increase includes our efforts to develop new products.
And to add new capabilities to existing technologies and to integrate the acquired Honeywell product lines.
This work is directed at our long term vision, where we believe there is increasing demand for technologies that reduce pilot workload.
Would ultimately lead to single pilot slides in air Transport aircraft.
Shahram Asgharpour: Our funded R&D represents a contract with Pilatus to develop a second-generation UMS, a product we expect to be extended into additional areas. This is further evidence of our strong value proposition and the confidence we have gained with our customers. Part of the increase in selling general and administration expense in the quarter was the increase in staffing, our sales organization. While we have always enjoyed a good reputation internationally, the Honeywell acquisition provided us with an experienced, established global sales footprint, which we believe opens large new markets, not only for the Honeywell product, but also for our legacy.
Our funded.
<unk> represents a contract with providers to develop a second generation U S. A.
Product, we expect to be extended into additional airframes.
This is further evidence of our strong value proposition and the confidence we gained with our customer mix.
Part of the increase in selling general and administration expense in the quarter was the increase in staffing.
Our sales organization.
Yeah.
While we have always enjoyed a good reputation internationally. The Honeywell acquisition provided us an experienced established global sales footprint.
Which we believe opens large new markets not only for the Honeywell.
But also our legacy drop.
Shahram Asgharpour: Many of the hundreds of customers that came along with the new products are new to IS&S, representing another new market we believe offers great promise. Quickly updating the status of the Honeywell product line, all the test equipment and inventory is arriving, and the Honeywell training associated with the products have been completed. You are now processing maintenance and repair of radios in-house.
Many of the hundreds of customers that came along with the new products are new to <unk>.
Representing another new market, we believe offers great promise.
Quickly updating the status of the Honeywell product line.
All the test equipment and inventory is arriving.
And the Honeywell training associated with the products have been completed.
We are now processing maintenance and repair of radios in house.
Shahram Asgharpour: Meanwhile, the transfer of the IRU inventory is progressing, with a handoff of these products expected to occur by the end of the current quarter. We expect the top and bottom line benefits of these new products to begin to gradually ramp up. As I mentioned, we have increased our sales and marketing investment to support the sales of these products. As we begin to develop strategies to fully recognize the inherent synergies and potential of these products, we believe that we will realize growth from such synergies. For these reasons, we will continue to opportunistically evaluate and make plans to execute additional complementary acquisitions should appropriate opportunities arise. Our goal now is to leverage this momentum, to sustain this growth over both the near and longer term, organically and through additional acquisition. Finally, I want to update you on our ongoing search for a permanent CFA. We have retained an executive search firm.
Meanwhile, the transfer of the IRR you inventory is progressing with.
With the hand off of these products are expected to occur by the end of the current quarter.
We expect the top and bottom line benefit of these new products to begin to gradually ramp up.
As I mentioned, we have increased our sales and marketing investment to support the sales of these products.
As we begin to develop strategies to fully recognize the inherent synergies and potential of these products. We believe that we will realize growth from <unk> synergies.
Our strategies.
For these reasons, we will continue.
So opportunistically evaluate and make plans to execute additional complementary acquisitions should appropriate opportunities arise.
Our goal now is to leverage this momentum to sustain this growth over both near and long term longer term.
Organically and through additional acquisitions.
Finally, I want to update you on our ongoing search for a permanent CFO.
We have retained an executive search firm.
Shahram Asgharpour: And we have already completed a round of interviews that yielded several highly qualified candidates. Thank you for your time and interest, and we look forward to updating you in the upcoming quarter. I will turn the call over to Raoul for a closer look at... Thank you, Sharon, and thank you all for joining us today.
And we have already completed a round of interviews that yielded several highly qualified candidates.
Thank you for your time and interest and we look forward to updating you in the upcoming quarter.
Ill turn the call over to route for a closer look at numbers. Thank.
Thank you chairman and thank you all for joining today, let me quickly review the highlights of our financial results for the first quarter of fiscal 2024.
Val Vinant: Let me quickly review the highlights of our financial results for the first quarter of fiscal 2024. Revenue in the first quarter was up 43% due to the contribution of customer service sales of the product lines acquired and licensed from Honeywell. First quarter gross margin was 59.3%, up from a year ago, but down slightly on a sequential basis from the fourth quarter, primarily due to the impact of increased material costs and overhead absorption in customer service.
Revenue in the first quarter was up 43% due to the contribution of customer service sales of the product lines acquired in licensed from Honeywell.
First quarter gross margin was 59, 3% up from a year ago, but down slightly on a sequential basis from the fourth quarter, primarily due to the impact of increased material cost and overhead the overhead absorption and customer service.
Val Vinant: In the first quarter of fiscal 2024, research and development expense was approximately $900,000 or 9.7% of net sales. Note that research and development expense has increased in absolute terms but has decreased as a percentage of net sales. When the current engineering development contract is completed, the engineers working on that development contract will return to research and development efforts. This will result in increased research and development expense and subsequent.
In the first quarter of fiscal 2020 for research and development expense was approximately $900000 or nine 7% of net sales note that research and development expense has had.
<unk> increased in absolute terms, but it has decreased as a percentage of net sales.
Current engineering development contract just completed the engineers working on that development contract will returned to research and development efforts. This will result in increased research and development expense in subsequent quarters.
First quarter.
Val Vinant: Fiscal 2024 selling general and administrative expenses increased from a year ago, primarily due to an increase in sales and marketing expense, the quarterly amortization of the intangible asset associated with the Honeywell product line license and acquisition, and professional and consulting. I will note that we sold the King Air airplane in the quarter for $2.3 million, and the resultant gain on the sale was used to reduce total selling general and administrative expenses. The gain was approximately $162,000. Interest income was down in a quarter, consistent with our new PNC bank line of credit account that uses daily cash balances to reduce debt at the end of every day.
Fiscal 2020 for selling general and administrative expenses increased from a year ago, primarily due an increase in sales and marketing expense the quarterly amortization of the intangible asset associated with the Honeywell product line license and acquisition and professional and consulting fees.
You'll note that we sold the King air airplane in the quarter for $2 3 million and the resulting gain on the sale was used to reduce total selling general and administrative expenses the gain was approximately $162000.
Interest income was down in the quarter consistent with our new PNC Bank line of credit account that uses daily cash balance to reduce debt at the end of every day.
Val Vinant: Interest expense in the quarter was up from zero a year ago, although we do not expect interest expense to trend down, not only as interest rates are anticipated to fall, but also because we plan to use the majority of our cash flow to pay down debt. Taxes are being accrued at a rate of 20.8% versus the statutory rate of 21%, reflecting increased state tax expense due to the gain on the sale of the King Air airplane. Net income for the quarter was $1.1 million or $0.06 per share, up from $700,000 or $0.04 per share a year ago.
Interest expense in the quarter was up from zero a year ago, Although we do not expect interest expense. Although we do expect interest expense to trend down not only as interest rates are anticipated to fall, but also because we are planning to use the majority of our cash flow to pay down debt.
Taxes are being accrued at a rate of 28% versus the statutory rate of 21%, reflecting increased state tax expense due to the gain on the sale of the King Air airplane.
Net income for the quarter was $1 1 million or <unk> <unk> per share up from 700000 or four cents per share in the year ago quarter.
Val Vinant: New orders in the quarter were approximately 10.4 million, so we ended the quarter with a backlog of approximately 14.6 million. As always, quarterly orders can vary due to a number of factors and are not meant to provide an indicator of future revenues. Virtually all Honeywell revenues are from intra-quarter book and ship orders that are not included in the backlog. For the first quarter of fiscal 2024, the company generated $4.2 million in cash flow from operations. The company's debt on December 31, 2023 was $10.6 million, down $8.9 million from $19.5 million as of September 30, 2023.
New orders in the quarter were approximately $10 4 million. So that we ended the quarter with a backlog of approximately $14 6 million.
As always quarterly orders can vary due to a number of factors and are not meant to provide an indicator of future revenues virtually all of the Honeywell revenues are from intra quarter book and ship orders that are not included in the backlog.
For the first quarter of fiscal 2024, the company generated $4 $2 million of cash flow from operations. The Companys debt on December 31 2023.
$10 6 million down $8 9 million from $19 5 million as of September 32023.
Operator: As a result of the daily cash balance sweep, a component of the company's line of credit is required to be classified as a current liability on the balance sheet. During the three months ended December 31st, 2023, cash also benefited from the sale of our King Air aircraft for $2.3 million. With that, operator, we're ready for questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.
As a result of the daily cash balanced sweep component of.
The company's line of credit is required to be classified as a current liability on the balance sheet.
During the three months ended December 31, 2023 cash also benefited from the sale of our King our aircrafts for $2 $3 million with that operator, we're ready for questions.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
Operator: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Again, it is star then one to ask a question. At this time, we will pause momentarily to assemble our roster for the first question.
If youre using a speakerphone please pick up your handset before.
We're pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question.
Please press Star then two.
Again it is star then one.
To ask a question.
At this time, we will pause momentarily to.
Assemble our roster.
The first question.
Comes from the.
<unk> Oneil with Litchfield Hills research.
Theodore O'Neill: Please go ahead. Thank you very much. I just have two questions.
Please go ahead.
Thank you very much.
Shahram Asgharpour: The first one is about on the sales side. The reduced shipments of displays for the retrofit in the commercial market. Do you have a view on if and when that might change and what would be the driver for it?
I just have two questions. The first one is about on the sales side the.
The reduced shipments.
Plays for the retrofit in the commercial market.
Do you have a view on if and when that might change and what would be the driver for it.
Hello.
Shahram Asgharpour: It's. Some of it is seasonal. Some of it is we're introducing a new product line in that market, which should begin, should begin, will finish its certification this quarter, and we should begin to see some revenues from it next quarter. But we've anticipated that on the cargo market, as these airplanes get older and older, and that eventually we will see a slowdown in these, Share. And because of that, we developed some additional products and put a larger emphasis on our military efforts, which were, kind of not, not, not. In some ways, they were not a priority before. We were focusing on the oral throughout the product line.
It's.
Some of it is seasonal some of it is we're introducing a new product line in that market.
Sure.
It should begin.
Should begin.
I'll finish this certification this quarter.
And we should begin to see some revenues from that from next quarter, but we've anticipated.
On the cargo market.
As these airplanes get older and older.
And eventually you will see a slowdown in these upgrades.
Sure.
And because of that we develop some additional products.
And further larger emphasis on our military efforts which were.
Kind of not.
Not.
Yeah.
In some ways. They are another priority before we were focusing on the oral <unk> product lines.
Shahram Asgharpour: So we've put an emphasis on the military side of things over the last couple of years. On the military side of things, we got a new OEM contract from Boeing for the T7 training, and we continue to work on a lot of new opportunities that are coming, both OEM as well as the aftermarket on the Military side. So we're looking at that over the next few years to essentially be a larger driver than the air transport side. On the air transport side, what we're doing is that we're offering a lot. Upgrades, which, as we talked before, led to more automation within the cockpit and eventually to the single pilot operation for these Part 25F. The single pilot operation is a longer-term strategy.
So we've put an emphasis over the last couple of years on the military side of things, we got bigger the OEM, new OEM contract from Boeing.
On the year.
<unk> seven training, we continue to work on a lot of.
New opportunities that are coming both OEM as well as the aftermarket on the military side. So so we're looking at that over the next few years too.
Essentially be a larger driver.
Than the than the air transport side on the Air Transport side, what we're doing is offering hello.
Upgrades, which.
As we talked before leads to more more automation within the cockpit and eventually to the add to the single pilot operation for these top 25 airplanes.
The single pilot operation as the longer term strategy.
Val Vinant: Meanwhile, we will be seeing some revenue from some of these additional features that we are offering on these cockpits. But the big ticket items of completely retrofitting a cockpit of a 5-7-6-7 aircraft have slowed down, and as I said, we anticipated that. Okay, yeah that makes sense. And on the SG&A expense, the amortization of the customer relationships that were in the SGA in the quarter, is that a significant part of the increase and does it continue on for many more quarters? Yeah, it's a 10-year amortization.
Meanwhile, we will be seeing some revenues from some of these.
Additional features that we are offering on these cockpits.
But the big ticket items of completely retrofitting, a cockpit or a $5 767 aircraft.
That has slowed down and.
Like I said, we had anticipated.
Okay, yes that makes sense.
On the SG&A expense, the amortization of customer relationships.
The FCA in the quarter is it significant.
It's part of the increase and does it continue on for.
For many more quarters.
Yes.
It's a 10 year amortization.
Val Vinant: It's about $268,000 quarterly, and it will continue obviously, so that's a big driver of the increase. And of course, as Sharon mentioned, they hired additional salespeople, so that's a big piece of it too. Okay, thanks very much. Legal fees have been higher. No, quarter to quarter they were fine.
About $268000 quarterly it will continue obviously, so thats a big driver of the increase and of course as Sharon mentioned the.
We've hired.
Additionally.
Salespeople, so that's a big piece of it too.
Okay. Thanks very much.
Generally our auditing fees.
Legal fees have been.
Quarter to quarter and they were all they were fine.
Val Vinant: As the acquisition is falling. Yeah, grinds down, yep. Okay, thanks guys. Thank you. The next question comes from Andrew Rem with Odinson Partners. Please go ahead.
The acquisition.
Good morning, Sarah.
Okay. Thanks, guys alright.
Great.
The next question comes from Andrew Ross with <unk> Partners. Please go ahead.
Andrew Rem: Morning, gentlemen. I just had a question to start with. How should we think about gross margins within the customer service segment? Well, in what way?
Good morning, gentlemen.
Just had a question to start with.
How should we think about gross margin within the customer service segment.
Sure.
Andrew Rem: Typically, it's been higher. Right, so if we look at the fourth quarter, right, 68.5%, and in fiscal 23, year-to-date, it has been running 71%. And so, you know, I don't know if, I mean, you mentioned some under-absorption, but you had much higher revenue this quarter than the first, second, or third quarter of last year. Right, so it's, go ahead, sorry. No, I'm just trying to understand the nuance.
Typically it was it's been higher.
Right.
Fourth quarter rate, 68%.
Brian fiscal Q3 year to date and it had been running 71%.
And so.
I don't know I mean, you mentioned under absorption.
You had much higher revenue. This quarter, then first second or third quarter of last year.
So go ahead sorry.
I'm just trying to understand the nuances.
Yeah, well you got.
Val Vinant: Yeah, well, you got to repeat that, please. We have gross margins of 71%. Well, if the year to date through the first three quarters of fiscal three was running 70, 71%, then the fourth quarter was 68 and a half. And then now you have 59.
Can you repeat that please.
We have gross margins of 71%.
Well year to date through the first three quarters of fiscal <unk> was running 70, 71%.
Fourth quarter was 68 and a half.
And then.
Okay.
Val Vinant: So I'm just trying to understand the nuance, what moves the gross margin around, and this quarter's revenue from customer service was higher than the revenue run rate in the first three quarters of last year. Okay, but the customer service revenue is a bigger piece of the whole. So it's going to end up with more overhead absorption into it, as well as we've seen material. As you can understand, the cost of material, the price, has increased. So we have to keep increasing our standards.
So I'm just trying to understand the nuance what moves the gross margin around and this quarter's revenue and customer service was higher than the revenue run rate in the first three quarters of last year.
Right, but the customer service revenue is a bigger piece of the whole so it's going to end up with more.
Overhead absorption into it as well as we've seen material as you can understand has caused a material. The price has increased so we have to keep increasing our standards.
Val Vinant: So it's, and it's mixed, depends on what you're, you're, you're repairing. But yeah, it is down from previous, but like I say, you, you're. Half of your sales, almost, is customer service, so that's going to get a bigger piece of everything, if that makes sense. Okay, and then on the cost material side, how long does it take you to kind of get some price recovery there? To get some what?
And it's mixed depends on what youre repairing but yeah. It is down.
Uh huh.
From previous but like I say you are.
Half of your sales are almost as is customer service. So I just want to get a bigger piece of everything if that makes any sense to you. Okay and then on the cost materials side, how long does it take you to kind of get some price recovery there.
Andrew Rem: Can you repeat that? I missed that. But on costs, on the cost of materials, how long does it take you to get recovery? It doesn't take, on the customer service side, not too much because a lot of what we do, other than warranty, is cost-based. So, as we've been increasing those, it's going to flow through to what we charge the customer. Okay, and then on inventories, obviously, you had a pickup in the fourth quarter due to Honeywell, but you also had another pickup this quarter of about 1.7 million. Can you just help us understand what's going on and is this related to accessing inventory as you make these product transitions? Is that what's driving it?
So it gets somewhat can you repeat that I missed that.
On costs.
The cost of materials.
How long does it take you to get recovery.
Ah Okay.
And it doesn't take too on the customer service side not too much because a lot of what we do other than warranty cost up so as we have been increasing knows where it's going to flow through.
So to the sort of.
What we charge the customer.
So.
Okay, and then on inventory, obviously, you had a pickup in the fourth quarter due to Honeywell, but you also had another pickup this quarter about $1 7 million.
Can you just help us understand what's going on is this related to our U S excess inventory as you make these product transitions is that's what's driving it.
Val Vinant: Yeah, you have a couple things. So you have the Honeywell inventory coming in. Right, so that's going up from the prepaid. You can see the movement there into inventory.
Yes, you have a couple of things so yes, the honeywell inventory coming in.
Alright, so thats going up from the prepaid you can see the movement there in to inventory.
Val Vinant: And we have some last-minute buys. We have items in flow. You know, we're going to need the inventory in flow, meaning production. I'm going to produce ahead a little bit, so all that's going to increase. And obviously, as we dig more honey wells, you're going to see that grow and grow and grow because... The prepaid Honeywell inventory was $12 million.
And we have some last time buys we have items in flow.
The.
We're going to need the inventory inflow meeting production.
And to produce that had a little bit.
All of that.
Okay.
Honestly as we more hunting youre going to see that grow and grow and grow because.
The prepaid Honeywell inventory was $12 million as you receive that it comes out of there and comes into your normal inventory if that makes sense.
Val Vinant: As you receive that, it comes out of there and goes into your normal inventory, if that makes sense. Did we expect in the second half of the year, kind of, inventory kind of normalizes, you get the product transition, you get that behind you, you bring in all the Honeywell inventory? Is that reasonable? Yeah, but it'll be a big number. I mean, because you got it's gonna be a big number, but it's gonna should level off. Okay, and then on CapEx. And you're going to order, you know, that kind of thing, right? All right, on CapEx, can you just comment on how it was pretty high this quarter. What should we think about that for the full year? I'm, let me look.
Could we expect in the second half of the year kind of inventory kind of normalizes.
Product transition you get that behind you brought in all of the.
The Honeywell inventory.
Is that reasonable.
Yes, but it will be a big number.
Because it's going to.
A big number.
It should level off should level off.
Okay, and then on <unk>.
Capex go.
Go ahead, and you're going to order and all that.
Right.
Alright on Capex can.
Can you just comment on it was pretty high this quarter.
How should we think about that for the full year.
Yeah.
Hello.
I mean look.
Val Vinant: We've extended the building. We've done some work in the building, things like that, so that's going to be a part of it. Well, I'm just looking at $182,000 versus $300,000 for the full year, Fiscal 23. Yeah, well, we've probably bought some machinery. Now we're working on having it usually. Yeah, I bought a lot of stuff for the Honeywell. So, fitting that out as well as making and upgrading a part of the building, the plant for that.
Great.
Capex, we've increased the building you've done some work in the building things like that so that's going to be a part of it.
Okay.
And I'm just looking at 182000 versus 300000 for the full year fiscal 'twenty three.
Yeah, well we've.
Probably bought some machinery now we're working on hasn't it usually.
<unk>.
What a lot of stuff for the Honeywell so.
Feathering that out as well as making a.
<unk> is a part of the building the plant for that so all of that's adding into it a little higher than normal winter in a period of time that signal.
Val Vinant: So all that's adding up to a little higher than normal in a period of time. Yeah, that should all stabilize. Typically, we don't have. We do 300,000 generally a year. It's always not a big number.
Actual level still.
Stabilized.
Typically we don't have.
Between 300000 generally year, it's always not a big number right.
Val Vinant: Right. Yep. No, on investment in our IT structure as well. Because, as you know, this cyber security is now becoming a thing, and yeah. So, so, so we're doing some server upgrading, a lot of upgrades, as well as increasing our Cybersecurity Practices. And I think, long term, it saves us money because that reduces our insurance costs as well.
Yes.
No.
On the investment.
Structure is walk us through some because as you know this cyber security.
Yes.
And.
So so.
We're doing some.
Upgrading a lot of upgrades.
Yes.
These include increasing our.
Cyber security practices.
And I think long term it saves us money because that reduces your insurance costs as well.
Val Vinant: Can you guys comment then on, like, if we just think about CapEx and what the incremental components are, so you mentioned IT infrastructure would be incremental for this year and then some incremental CapEx related to everything that you're doing around Honeywell, can you kind of, so if you've got a base CapEx spend, a couple hundred thousand, and then how much incremental from that is IT and Honeywell related? InnovativeSolutions.com has pretty much done that, if you will, www.innovative-solutions.com. The air conditioning system is 20 years old, and it's a whole different thing.
Can you guys comment then.
If we just think of Capex and what the incremental component. So you mentioned it infra.
Infrastructure would be incremental for this year and then some incremental capex related to everything that you're doing around Honeywell can you kind of look.
If you've got a base capex spend a couple of hundred thousand and then how much incremental from these.
Hum.
Honeywell related.
Not a lot of 100 K case, I am 100, 100 150, maybe.
We're pretty much.
<unk> pretty much done that if you will.
Okay I can say.
Alright.
Some more another $2 50, maybe.
On average I guess going forward also.
Sure.
Air conditioning system, which is 20 years old.
Yes.
That's our hope.
Andrew Rem: We're going to be addressing them. All right. Well, I guess that's it for me, but I did want to say that you guys have done a pretty amazing job. You've generated good cash flow here. You've taken a turn and a half out of your debt. I had speculated that maybe you guys could exit this fiscal year below one times. I think it looks like if you maintain the current trajectory, you guys are going to blow right through that.
Different.
Central we're going to be addressing.
Yes.
Alright.
That's it for me, but I did want to say that you guys got done pretty amazing job.
<unk> generated good cash flow here, we've taken a turn and a half of out of your debt.
Thank you okay.
Maybe you guys could exit this fiscal year below one times I think it looks like you maintained the current trajectory you guys are going to blow right through that so kudos to you guys on the team for doing a great job improving the balance sheet. So quickly.
Andrew Rem: So kudos to you guys and the team for doing a great job improving the balance sheet so quickly. So anyway, thanks a lot. I appreciate it. Thank you, Andrew. The next question comes from Doug Ruth with Linux Financial Services. Please go ahead. I want to start off by congratulating you on a really strong quarter. You've done a wonderful job. I had a question. As a management team and as a board of directors, do you now have the ability to buy stock? Well, when the window's open, yes.
So anyway, thanks, a lot I appreciate it.
Thanks, Paul.
The next question.
Question comes from Doug Ruth with Lenox Financial services. Please go ahead.
I wanted to start off by congratulating you on a really strong quarter, you've done a wonderful job.
I had a question.
As a management team and the board of directors to.
Can you folks now have the ability to buy stock.
Well when the Windows open window the window opens actually on for US is the third business day after earnings Monday.
Val Vinant: The window opens actually on, for us, it's the third business day after earnings Monday. And it closes a couple weeks before the end of the quarter. So, as of Monday, there is an open window, yes.
So there's and it's and it closes a couple of weeks before the end of the quarter. So.
So as of Monday, there is an open window, yes.
Val Vinant: Okay. I think the investment community would really appreciate it if the board and some of the managers could buy some stock. I think it would really make a significant difference.
I think the investment community, we'd really appreciate it if the board and some of the managers could buy some stock I think it would really make a significant difference and again I want to congratulate you on they're on a really strong quarter. Thank you for what you're doing for the shareholders.
Doug Ruth: And, again, I want to congratulate you on a really strong quarter. Thank you for what you're doing for the shareholders. Thank you. Thank you for your support. And this concludes the question and answer session and the Innovative Solutions and Support Conference. Thank you for attending today's presentation. You may now disconnect, www.InnovativeSolutions.com
Thank you. Thank you for your support.
And this concludes the question and answer session and the innovative solutions and support conference. Thank you for attending today's presentation. You may now disconnect.
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Sure.
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