Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are based largely on current expectations and projections about future events and trends affecting the business, are not guarantees of future performance, and involve a number of risks, uncertainties and assumptions that are difficult to predict. In this report, the words “anticipates,” “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “forecasts,” “expects,” “plans,” “could,” “should,” “would,” “is likely”,” “ projected,” “might,” “potential,” “preliminary,” “provisionally,” and similar expressions, as they relate to the business or to its management, are intended to identify forward-looking statements, but they are not exclusive means of identifying them. Unless the context otherwise requires, all references herein to “IA,” the “Registrant,” the “Company,” “we,” “us” or “our” are to Innovative Solutions and Support, Inc. and its consolidated subsidiaries. ThrustSense® and COCKPIT/IP®, among others, are trademarks of the Company. All other trademarks appearing herein are held by their respective owners. Subsequent use of the Company’s trademarks in this report may occur without the applicable superscript symbol (® or TM) in order to facilitate the readability of this report and are not a waiver of rights that may be associated with the relevant trademarks.
All forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. The forward-looking statements in this report are only predictions and actual events or results may differ materially. In evaluating such statements, a number of risks, uncertainties and other factors could cause actual results, performance, financial condition, cash flows, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-looking statements. These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as the following factors:
● market acceptance of the Company’s ThrustSense® Autothrottle, Vmc a Mitigation, flight panel display systems, NextGen Flight Deck and COCKPIT/IP® or other planned products or product enhancements;
● continued market acceptance of the Company’s air data systems and products;
● the competitive environment and new product offerings from competitors;
● difficulties in developing, producing or improving the Company’s planned products or product enhancements;
● the deferral or termination of programs or contracts for convenience by customers;
● the ability to service the international market;
● the availability of government funding;
● the impact of general economic trends, including tariffs and other trade restrictions, on the Company’s business;
● disruptions in the Company’s supply chain, customer base and workforce;
● the ability to gain, drive and sustain regulatory approval, including domestic and international certifications, of products in a timely manner;
● delays in receiving components from third-party suppliers;
● the bankruptcy or insolvency of one or more key customers;
● protection of intellectual property rights, including via securing patents;
● the ability to respond to technological change;
● failure to recruit and retain key personnel;
● risks related to succession planning;
● a cybersecurity incident;
● risks related to our self-insurance program;
● potential future acquisitions and integration of prior and potential future acquisitions;
● the costs of compliance with present and future laws and regulations;
● changes in law, including changes to corporate tax laws in the United States and the availability of certain tax credits; and
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● other factors disclosed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”).
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report, or to reflect the occurrence of unanticipated events. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Sections 27A of the Securities Act of 1933, as amended (the “Securities Act”) and 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Investors should also be aware that while the Company, from time to time, communicates with securities analysts, it is against its policy to disclose any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Company has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.
Objective
The following discussion provides an analysis of the Company’s financial condition, cash flows and results of operations from management’s perspective and should be read in conjunction with “Selected Consolidated Financial Data” and the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025. Our objective is to also provide discussion of events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides understanding of our financial condition, cash flows and results of operations.
Company Overview
The Company was incorporated in Pennsylvania on February 12, 1988. The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services, air data equipment, engine display systems, standby equipment, primary flight guidance, autothrottles and cockpit display systems for retrofit applications and OEMs. The Company supplies integrated flight management systems, flat panel display systems, flat panel display systems with autothrottle, air data equipment, integrated standby units, integrated standby units with autothrottle and advanced GPS receivers that enable reduced carbon footprint navigation, communication and navigation products and inertial reference units.
The Company has continued to position itself as a system integrator, which provides the Company with the capability and potential to generate more substantive orders over a broader product base. This strategy, as both a manufacturer and integrator, has positioned the company to deliver cost-effective solutions for the general aviation, commercial air transport, and the DoD and governmental and foreign military markets. This approach, combined with the Company’s deep industry experience across OEMs and platforms is designed to enable the Company to develop high-quality products and systems, to reduce product time to market and to achieve cost advantages over products offered by its competitors.
The Company sells to both the OEM and the retrofit markets. Customers include various OEMs, commercial air transport carriers and corporate/general aviation companies, the DoD and its commercial contractors, aircraft operators, aircraft modification centers, government agencies and foreign militaries. Occasionally, the Company sells its products directly to the DoD; however, the Company sells its products primarily to commercial customers for end use in DoD programs. Sales to defense contractors are generally made on commercial terms, although some of the termination and other provisions of government contracts are applicable to these contracts. The Company’s retrofit projects are generally pursuant to either a direct contract with a customer or a subcontract with a general contractor to a customer (including government agencies).
In June 2023, the Company entered into an agreement with Honeywell (“The June 2023 Honeywell Agreement”) pursuant to which Honeywell sold, assigned or licensed certain assets related to its inertial, communication and navigation product lines, including a sale of certain inventory, equipment and customer-related documents, an assignment of certain contracts and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to
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repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for cash consideration of $35.9 million.
In July 2024, the Company entered into an exclusive license agreement and acquired additional key assets for certain communication and navigation product lines from Honeywell (the “July 2024 Honeywell Asset Acquisition”). Total consideration was $4.2 million in cash.
On September 27, 2024, the Company entered into a further agreement with Honeywell (the “September 2024 Honeywell Agreement”), pursuant to which Honeywell sold, assigned or licensed certain assets related to its various generations of military display generators and flight control computers, including a sale of certain inventory, equipment and customer-related documents; an assignment of certain contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its various generations of military display generators and flight control computers to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for consideration of $14.2 million in cash.
Following the acquisition of Honeywell’s military display generators and flight control computers business, Honeywell has continued to manufacture these products and maintain related inventory at its facilities under the September 2024 Honeywell Agreement. Revenue and costs from this production are attributed to and reported by the Company; however, the Company relies on Honeywell for access to the operational and financial data needed to prepare its financial statements. The Company has limited ability to oversee the operations or verify the data received from Honeywell, making it difficult to predict revenues and gross margins. Over the coming months, the production of the military display generators and flight control computers business will cease at Honeywell facilities and transition to the Company’s facilities. During this transition process, production will be temporarily halted while the Company ramps up its production and inventory at its facilities. In anticipation of the transition, Honeywell is expected to accelerate its production of these products in the short term. We anticipate this will lead to a spike in revenues in the short term followed by a temporary dip in revenues before revenues are normalized.
As a result, the Company anticipates revenues related to the September 2024 Honeywell Agreement will continue to fluctuate significantly over the next few quarters. The transition from Honeywell to Company facilities will involve certain risks that may impact operational performance and reported results. While the Company cannot assure that the transition will not adversely affect operations and reported results, it is committed to closely monitoring the integration process. The Company remains confident in the long-term benefits of the Honeywell acquisitions.
Cost of sales related to product and service sales comprises materials, components and third-party avionics purchased from suppliers, direct labor and overhead costs. Many of the components are standard, although certain parts are manufactured to meet the Company’s specifications. The overhead portion of Cost of sales are primarily comprised of salaries and benefits, building occupancy costs, supplies and outside service costs related to production, purchasing, material control and quality control. Cost of sales also includes warranty costs.
Cost of sales related to EDC sales comprises engineering labor, consulting services and other costs associated with specific design and development projects. These costs are incurred pursuant to contractual arrangements and are accounted for typically as contract costs within Cost of sales, with reimbursement accounted for as a sale in accordance with the percentage-of-completion method or completed contract method of accounting. Company funded R&D expenditures relate to internally funded efforts for the development of new products and the improvement of existing products. These costs are expensed as incurred and reported as R&D expenses. The Company intends to continue investing in the development of new products that complement current product offerings and to expense associated R&D costs as they are incurred.
Selling, general and administrative (“SG&A”) expenses consist of sales, marketing, business development, professional services, salaries and benefits for executive and administrative personnel, facility costs, recruiting, legal, accounting and other general corporate expenses.
The Company sells its products to agencies of the United States and foreign governments, aircraft operators, aircraft modification centers and OEMs. Customers have been and may continue to be affected by changes in economic conditions both in the United States and abroad. Such changes may cause customers to curtail or delay their spending on both new and existing aircraft. Factors that can impact general economic conditions and the level of spending by customers include, but are not limited to, general levels of consumer spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, inflation, public health crises and pandemics and other macroeconomic factors that affect spending
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behavior. Furthermore, spending by government agencies may be reduced in the future. If customers curtail or delay their spending or are forced to declare bankruptcy or liquidate their operations because of adverse economic conditions, the Company’s revenues and results of operations would be affected adversely. For example, in the fiscal year ended September 30, 2025, changes in U.S. administrative tariff policy, have led to increases in tariffs for imported goods. Thus far, the impact to Company has been nominal.
Environmental, Social and Governance Considerations
In recent years, environmental, social and governance (“ESG”) issues have become an increasing area of focus for some of our shareholders, customers and suppliers. Management and the Company’s Board are committed to identifying, assessing and understanding the potential impact of ESG issues and related risks on the Company’s business model, as well as potential areas of improvement.
We are committed to recruiting, motivating and developing a diversity of talent. We are an equal opportunity employer and a Vietnam Era Veterans’ Readjustment Assistance Act federal contractor. All qualified applicants receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability status, protected veteran status, or any other characteristic protected by law.
The nature of our business also supports long-term sustainability. Historically, a majority of the Company’s sales have come from the retrofit market, in which the Company, by making upgrades to improve the functionality and safety of existing machinery, facilitates the re-use and recycling of aircraft and equipment that might otherwise be scrapped as obsolete. The Company’s GPS receivers also facilitate reduced carbon footprint navigation. The Company also plans to enhance its focus on the environmental impact of its operations.
Critical Accounting Policies and Estimates
The discussion and analysis of financial condition and consolidated results of operations are based upon the Company’s condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses and related disclosure of contingent assets and liabilities. Management has determined that the most critical accounting policies and estimates are those related to revenue recognition, inventory valuation and valuation of tangible and intangible assets acquired. On an ongoing basis, the Company’s management evaluates its estimates based upon historical experience and various other assumptions that it believes to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The Company believes that its critical accounting policies affect its more significant estimates and judgments used in the preparation of its condensed consolidated financial statements. The Annual Report on Form 10-K for the fiscal year ended September 30, 2025 contains a discussion of these critical accounting policies. See also Note 1 to the unaudited condensed consolidated financial statements for the three months ended December 31, 2025 included in this Quarterly Report on Form 10-Q.
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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
DECEMBER 31, 2025 AND 2024
The following table sets forth the statements of operations data expressed as a percentage of total net sales for the periods indicated (some items may not add due to rounding):
Three Months Ended December 31,
2025
2024
Net sales:
Product
62.2
%
62.5
%
Services
37.8
%
37.5
%
Total net sales
100.0
%
100.0
%
Cost of sales:
Product
30.4
%
39.2
%
Services
15.1
%
19.4
%
Total cost of sales
45.5
%
58.6
%
Gross profit
54.5
%
41.4
%
Operating expenses:
Research and development
6.1
%
7.0
%
Selling, general and administrative
19.5
%
26.0
%
Total operating expenses
25.6
%
33.0
%
Operating income
28.9
%
8.4
%
Interest expense
(2.3)
%
(2.7)
%
Interest income
0.0
%
0.0
%
Other income
0.3
%
0.0
%
Income before income taxes
26.9
%
5.7
%
Income tax expense
8.3
%
1.2
%
Net income
18.6
%
4.5
%
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Three Months Ended December 31, 2025 Compared to the Three Months Ended December 31, 2024
Historically, the Company presented Customer service and Engineering and development contracts Net Sales and Cost of sales separately on the Consolidated Statements of Operations. For the fiscal year ended September 30, 2024, the Company has aggregated these items into one category, “Services.” Consequently, Services revenues and cost of sales primarily comprise Customer Service, EDC and Royalties.
Net sales . Net sales for the three months ended December 31, 2025, increased by 36.5% to $21.8 million, up from net sales of $16.0 million for the three months ended December 31, 2024. The increase in net sales principally reflects an increase of $5.5 million in commercial aftermarket product sales, partially offset by a decrease of $1.5 million in military product sales, primarily due to the transition of the F-16 production into the Exton facility and a decrease of $0.5 million in business aviation. Services sales for the three months ended December 31, 2025, increased $2.3 million, or 37.7%, compared to Services sales for the three months ended December 31, 2024, of $6.0 million. The increase in Services sales primarily reflects growth in service volumes related to the IRUs and radio product lines acquired in 2023 and 2024 of $2.6 million, partially offset by a $0.3 million decrease in legacy customer service revenue.
Cost of sales . Cost of sales was $9.9 million, or 45.5% of Net sales, for the three months ended December 31, 2025 compared to $9.4 million, or 58.6 % of Net sales, for the three months ended December 31, 2024. The increase in cost of sales for the three months ended December 31, 2025 compared to the three months ended December 31, 2024, principally reflects the previously mentioned net sales growth of $2.3 million within services product line and $5.5 million in commercial aftermarket sales while OEM and miliary net sales decreased by $2.0 million. Gross profit was $11.9 million, or 54.5% of Net sales, for the three months ended December 31, 2025 compared to $6.6 million, or 41.4% of Net sales, for the three months ended December 31, 2024. The increase in gross margin principally reflects the previously mentioned net sales growth, a more favorable product mix within our commercial aftermarket product line, and a higher mix of commercial aftermarket revenue, which by nature has higher gross margins as compared to military and OEM businesses.
Research and development . R&D expense increased $0.2 million, or 19.9 %, to $1.3 million for the three months ended December 31, 2025 from $1.1 million for the three months ended December 31, 2024. As a percentage of net sales, R&D expenses decreased to 6.1% of net sales for the three months ended December 31, 2025 from 7.0% of net sales for the three months ended December 31, 2024. The decrease in R&D expenses as a percentage of revenues in the quarter was primarily the result of additional revenues for the three months ended December 31, 2025 compared to the same period last year. For the three months ended December 31, 2025 and 2024, $0.5 million of R&D expense was recharacterized as Cost of sales related to the EDC sales, which was offset by $0.3 million in additional engineering staffing to support the Company’s development programs.
SG&A . SG&A expenses increased $0.1 million or 2.5%, to $4.3 million for the three months ended December 31, 2025 from $4.2 million for the three months ended December 31, 2024. The increase in SG&A expense for the three months ended December 31, 2025 was primarily the result of increases in employee-related costs of $0.5 million, offset by lower professional services fees and other related fees of $0.4 million. As a percentage of Net sales, SG&A expenses were 19.5% for the three months ended December 31, 2025 compared to 26.0% for the three months ended December 31, 2024.
Interest expense. Interest expense was $0.5 million for the three months ended December 31, 2025, an increase of $0.1 million from $0.4 million for the three months ended December 31, 2024. The change was due to a 50 basis point increase in the effective interest rate and approximately $53,000 in amortization of deferred financing fees.
Interest income. Interest income was negligible for the three months ended December 31, 2025 and 2024, respectively.
Other income. Other income was $64,000 for the three months ended December 31, 2025 which was the result of a reduction of a third-party consulting fee compared to $6,000 for the three months ended December 31, 2024.
Income taxes. Income tax expense was $1.8 million for the three months ended December 31, 2025 as compared to income tax expense of $0.2 million for the three months ended December 31, 2024. The effective tax rate for the three months ended December 31, 2025 was 30.8% as compared to 20.1% for the three months ended December 31, 2024. The increase in income tax expense was primarily due to an increase in income before income taxes as well as the unfavorable effects of state income taxes, tax credits, temporary and permanent tax differences related to stock-based compensation and certain non-deductible expenses for the three months ended December 31, 2025, compared to the three months ended December 31, 2024.
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Net income. As a result of the factors described above, the Company’s net income for the three months ended December 31, 2025 was $4.1 million compared to net income of $0.7 million for the three months ended December 31, 2024. On a fully diluted basis, net income per share was $0.22 for the three months ended December 31, 2025, compared to a net income of $0.04 per for the three months ended December 31, 2024.
Liquidity and Capital Resources
The following table highlights key financial measures of the Company:
As of
As of
December 31,
September 30,
2025
2025
Cash and cash equivalents
$
8,285,185
$
2,693,595
Accounts receivable
$
14,500,225
$
12,956,476
Current assets
$
58,363,276
$
50,727,300
Current liabilities
$
19,704,881
$
16,661,109
Contract liability
$
3,519,331
$
2,481,929
Other non-current liabilities
$
21,486,203
$
22,096,502
Quick ratio (1)
1.16
0.94
Current ratio (2)
2.96
3.04
Three Months Ended December 31,
2025
2024
Cash flow activities:
Net cash provided by operating activities
$
8,159,592
$
1,841,458
Net cash provided by (used in) investing activities
(1,109,890)
(261,364)
Net cash (used in) provided by financing activities
(1,458,112)
(1,514,510)
(1) Calculated as: the sum of cash and cash equivalents plus accounts receivable, net, divided by current liabilities.
(2) Calculated as: current assets divided by current liabilities.
The Company’s principal source of liquidity has been cash flows from current period operations and cash accumulated from prior periods’ operations, supplemented with our revolving credit facility. Cash is used principally to finance inventory, accounts receivable, contract assets, payroll, debt service and acquisitions, as well as the Company’s known contractual and other commitments. The Company’s existing cash balances and anticipated cash flows from operations, together with borrowings under our revolving credit facility, are expected to be adequate to satisfy the Company’s liquidity needs for at least the next 12 months. Apart from what has been disclosed in this Management’s Discussion and Analysis, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.
2025 Credit Agreement
On July 18, 2025, the Company, its wholly-owned subsidiary Innovative Solutions and Support, LLC (“Borrower”) and certain domestic subsidiaries entered into a Credit Agreement (the “2025 Credit Agreement”) with J.P. Morgan Chase Bank, N.A. (the “Bank”) and the other lender parties thereto, which Credit Agreement provides for the Bank to extend to the Borrower credit facilities in an aggregate principal amount of up to $100.0 million (the “JPM Facility”), consisting of the following:
1) a $25,000,000 initial term loan facility (the “Initial Term Loan”);
2) a $30,000,000 revolving credit facility (the “Revolving Facility”); and
3) a $45,000,000 delayed draw term loan facility (the “Delayed Draw Term Loan”).
The JPM Facility replaced the A&R Revolving Line of Credit with PNC described below under the heading “Prior Debt Facility.”
See footnote 8. Loan Agreement to the unaudited condensed consolidated financial statements for the three months ended December 31, 2025 included in this Quarterly Report on Form 10-Q for additional disclosures related to the 2025 Credit Agreement.
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Stifel Sales Agreement
On September 22, 2023, the Company entered into an at-the-market equity offering Sales Agreement (the “ATM Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (the “Sales Agent”), pursuant to which the Company may offer and sell from time to time through the Sales Agent up to $40 million of shares of its common stock. The shares are offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-267595), which was declared effective by the SEC on October 14, 2022 and the accompanying prospectus supplement, dated September 22, 2023. Subject to the terms and conditions of the ATM Sales Agreement, the Sales Agent is required to use commercially reasonable efforts to sell shares of the Company’s common stock from time to time, based upon the Company’s instructions. The Company is not obligated to sell any shares under the ATM Sales Agreement, and the Company or the Sales Agent may at any time suspend solicitation and offers under the ATM Sales Agreement or terminate the ATM Sales Agreement. The Company has provided the Sales Agent with customary indemnification rights, and the Sales Agent will be entitled to compensation for its services of up to 3.0% of the gross sales price per share of the shares of the Company’s common stock sold through the Sales Agent. Sales of the shares of the Company’s common stock, if any, under the ATM Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act, including sales made directly on or through Nasdaq or any other existing trading market for the Company’s common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices and/or any other method permitted by law.
During the fiscal years ended September 30, 2024 and September 30, 2025, and during the fiscal quarter ended December 31, 2025, we did not sell any shares of common stock under the ATM Sales Agreement.
Future Funding Requirements
The Company’s existing cash balances, anticipated cash flows from operations and current banking facility are expected to be adequate to satisfy the Company’s liquidity needs for at least the next 12 months.
Apart from what has been disclosed above, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.
The Company did not pay cash dividends in fiscal years 2024 or 2025, or in the quarter ended December 31, 2025. The Company intends to retain future earnings, if any, to finance the development and growth of its business and does not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board of Directors and will depend on then-existing conditions, including our operating results, financial condition, business prospects and other factors the Board may deem relevant.
Operating activities
Net cash provided by operating activities was $8.2 million for the three months ended December 31, 2025 and consisted primarily of funding from net income of $4.1 million and changes in working capital.
Net cash provided by operating activities was $1.8 million for the three months ended December 31, 2024 and consisted primarily of funding from net income of $0.7 million and changes in working capital.
Investing activities
Net cash used in investing activities was $1.1 million for three months ended December 31, 2025 and consisted of expenditures related to additions and improvements in the Company’s facilities and the purchases of equipment.
Net cash used in investing activities was $0.3 million for the three months ended December 31, 2024 and consisted of expenditures related to additions and improvements in the Company’s facilities and purchases of equipment and computer hardware.
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Financing activities
Net cash used in financing activities was $1.5 million for the three months ended December 31, 2025 and consisted of payments against the Company’s line of credit and the tax payments of vested equity award shares withheld for taxes.
Net cash used in financing activities was $1.5 million for the three months ended December 31, 2024 and consisted of payments against the Company’s line of credit.
Summary
Future capital requirements depend upon numerous factors, including market acceptance of the Company’s products, the timing and rate of expansion of business, acquisitions, joint ventures and other factors. IA has experienced increases in expenditures since its inception and anticipates that expenditures will continue in the foreseeable future. The Company believes that its cash and cash equivalents will provide sufficient capital to fund operations for at least the next twelve months. However, the Company may need to develop and introduce new or enhanced products, respond to competitive pressures, invest in or acquire businesses or technologies, or respond to unanticipated requirements or developments. If insufficient funds are available, the Company may not be able to introduce new products or compete effectively.
Backlog
Three months ended December 31,
2025
2024
Backlog, beginning of period
$
77,428,498
$
89,232,576
Plus: bookings during period, net
19,657,212
7,493,086
Less: sales recognized during period
(21,807,083)
(15,968,729)
Backlog, end of period
$
75,278,627
$
80,756,933
Backlog represents the value of contracts and purchase orders, less the revenue recognized to date on those contracts and purchase orders. The backlog includes committed purchases and excludes potential future sole-source production orders from products developed under the Company’s engineering development contracts (“EDC”) programs, including the Pilatus PC-24, the KC-46A and the Textron King Air 360 and King Air 260 ThrustSense® Autothrottle programs.
At December 31, 2025, our backlog was $75.3 million compared with $80.8 million at December 31, 2024. Backlog is converted into sales in future periods as work is performed or deliveries are made. Our backlog does not include additional future orders that may be received under our current OEM contracts. We expect to recognize approximately 51% of our backlog over the next 12 months and approximately 93% over the next 24 months as revenue, with the remainder recognized thereafter.
Off-Balance Sheet Arrangements
The Company has no relationships with unconsolidated entities or financial partnerships, such as Special Purpose Entities or Variable Interest Entities, established for the purpose of facilitating off-balance sheet arrangements or other limited purposes.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.