Innovative Aerosystems, Inc.

Third-quarter net revenues were $20.7 million, up approximately 11% year over year, with product sales of $17.5 million versus $16.6 million and service revenues of $9.2 million versus $7.5 million. Gross profit was $13.8 million, gross margin was 51.7% versus 35.6% last year, net income was $4.5 million versus $2.4 million, and diluted EPS was $0.25 versus $0.14. Adjusted net income was $6 million versus $2.9 million, adjusted EPS was $0.33 versus $0.16, and adjusted EBITDA was $7.7 million versus $4.4 million. Backlog was approximately $83 million, new orders were $22.7 million, and the company ended the quarter with $54.5 million of debt, $10.7 million of cash and cash equivalents, $43.8 million of net debt, and about $53.7 million of cash and availability under its credit line. For the first nine months, operating cash flow was $15.5 million, capex was $3.2 million, and free cash flow was $12.3 million. Management expects fourth-quarter revenue of about $28 million to $30 million, including organic growth and contributions from recent acquisitions.

Shahram Askarpour framed the quarter as evidence that the company is executing on its long-term value-creation plan through organic growth, margin improvement, and disciplined capital allocation. He highlighted the Aiden Displays acquisition, the new eVTOL contract, the launch of UMS2 production, and continued progress on the L3 and Boeing programs as strategic milestones. His tone was upbeat and confident, emphasizing that the company is well positioned for a solid finish to fiscal 26 and momentum into fiscal 27.

Jeffrey DiGiovanni focused on the operating results and balance sheet, pointing to $20.7 million of revenue, 51.7% gross margin, $7.7 million of adjusted EBITDA, and $12.3 million of free cash flow in the first nine months. He said operating cash flow for the first nine months was $15.5 million, capex was $3.2 million, and the company ended with $54.5 million of debt, $10.7 million of cash, and $53.7 million of cash plus credit availability. He also said net leverage was 1.4x and described the balance sheet as giving the company financial flexibility to keep executing on strategic initiatives.

Analysts pressed on the new eVTOL win, asking about the sales cycle, the quoted $50 million contract value, and whether the program could expand if the customer scales beyond 400 aircraft; management said the relationship has been developing for about a year, the $50 million figure is a nominal estimate tied to the initial 400-plus units, and they expect to become sole source once the baseline is certified. Questions also focused on gross margin sustainability, with management reiterating a 45% to 50% gross margin guide and saying the long-term EBITDA margin goal remains 25% to 30%. On supply chain, management said it does not see Honeywell-style issues because it builds circuit cards in-house and qualifies multiple sources for key components. Analysts also asked what is driving organic growth, and management cited commercial aftermarket strength, business aviation recovery, UMS2 shipments, and a more stable F-16 production run-rate around $5 million per quarter.