Innovative Solutions and Support Inc (ISSC) 2024 Q3 法說會逐字稿

Good day, and welcome to the Innovative Solutions and Support third quarter fiscal year 2024 financial results conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Paul Bartolai partner at Vallum Advisors. Please go ahead.

美好的一天，歡迎參加創新解決方案和支援 2024 財年第三季財務業績電話會議。（操作員說明）請注意此事件正在被記錄。我現在想將會議轉交給 Vallum Advisors 的合夥人 Paul Bartolai。請繼續。

Thank you. Good morning, everyone, and welcome to Innovative Solutions and Supports third quarter 2024 results conference call. Leading the call today are CEO, Shahram Askarpour; and CFO, Jeffrey DiGiovanni. Earlier today, we issued a press release detailing our third quarter 2024 operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at www.innovative-ss.com.

謝謝。大家早安，歡迎參加創新解決方案和支援 2024 年第三季業績電話會議。今天主持會議的是執行長 Shahram Askarpour；財務長傑弗瑞‧迪喬瓦尼 (Jeffrey DiGiovanni)。今天早些時候，我們發布了一份新聞稿，詳細介紹了 2024 年第三季的營運和財務表現。本新聞稿可在我們公司網站 www.innovative-ss.com 的投資者關係部分公開取得。

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.

我想提醒您，管理層在今天的電話會議上的評論和對問題的回答可能包括前瞻性陳述，這些陳述本質上是不確定的，超出了公司的控制範圍。儘管這些前瞻性陳述是基於管理階層目前的預期和信念，但實際結果可能存在重大差異。

For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest filings with the SEC. Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the press release issued earlier today. Today's call will begin with prepared remarks from CEO, Shahram Askarpour, who will provide a review of our recent business performance and an update on the progress we have made on our strategic initiatives, including the ongoing integration of the products acquired from Honeywell last year and some detail on our recent acquisition from Honeywell.

有關可能導致實際結果不同的一些因素的討論，請參閱我們向 SEC 提交的最新文件中的風險因素部分。此外，請注意，您可以在今天早些時候發布的新聞稿中找到歷史非公認會計準則財務指標的調整表。今天的電話會議將由執行長Shahram Askarpour 準備好的演講開始，他將回顧我們最近的業務業績，並介紹我們在戰略舉措方面取得的最新進展，包括去年從霍尼韋爾收購的產品的持續整合以及有關我們最近從霍尼韋爾收購的一些詳細資訊。

This will be followed by a financial update from our CFO, Jeff DiGiovanni. At the conclusion of these prepared remarks, we will open the line for your questions. With that, I'll turn the call over to Shahram.

隨後，我們的財務長 Jeff DiGiovanni 將發布最新財務資訊。在準備好的發言結束後，我們將開通您的提問專線。這樣，我會將電話轉給 Shahram。

Thank you, Paul, and good morning everyone joining us on the call today. We are pleased that our recent positive business momentum continued during the third quarter as growth from our existing platforms and execution under our Honeywell product lines contributed to 48% year over year revenue growth during the third quarter.

謝謝保羅，早安，今天參加我們電話會議的大家。我們很高興看到我們最近的積極業務勢頭在第三季度得以延續，霍尼韋爾產品線現有平台和執行的增長為第三季度收入同比增長了 48%。

It has been just over a year since we completed our initial transaction with Honeywell. At that time, we laid out our expectation that once fully integrated we expected these new products combined with our legacy business to drive consolidated revenue growth of approximately 40%, with an even more significant impact on EBITDA, where we expected EBITDA to increase by 75% with accretive EPS.

距離我們完成與霍尼韋爾的首次交易已經過去了一年多的時間。當時，我們提出了我們的預期，一旦完全整合，我們預計這些新產品與我們的傳統業務相結合將推動綜合收入增長約 40%，對 EBITDA 產生更顯著的影響，我們預計 EBITDA 將增長 75% % 增加EPS。

Today, based on our financial results over the trailing 12 months compared with the prior period, we generated 54% growth in consolidated revenue, 75% in adjusted EBITDA, and roughly 28% in EPS. These results demonstrate our success in the integration of the Honeywell assets combined with the benefits of our strategic organic growth initiatives.

今天，根據我們過去 12 個月的財務業績，與上一期相比，我們的合併收入增長了 54%，調整後 EBITDA 增長了 75%，每股收益增長了約 28%。這些結果證明了我們在整合霍尼韋爾資產方面的成功以及我們策略性有機成長計畫的優勢。

But we have more opportunities ahead in regards to our Honeywell product lines, and we continue to further execute on our integration plan. We made progress during the quarter, which should drive additional benefits in the coming quarters. We continue to increase the proportion of maintenance and repair work that is being handled in our Exton facility, which was a nice contributor to growth in the quarter.

但我們的霍尼韋爾產品線未來還有更多機會，我們將繼續進一步執行我們的整合計畫。我們在本季度取得了進展，這應該會在未來幾季帶來更多收益。我們繼續增加埃克斯頓工廠處理的維護和維修工作的比例，這對本季的成長做出了很好的貢獻。

Another important aspect of the Honeywell transaction is the opportunity to leverage the customer base of these acquired products. The transaction brought us several new relationships with key customers. We are focused on cross selling opportunities with these new relationships, particularly with some international customers and end markets where we did not have a strong presence previously.

霍尼韋爾交易的另一個重要面向是有機會利用這些所收購產品的客戶群。此次交易為我們帶來了與主要客戶的一些新關係。我們專注於與這些新關係的交叉銷售機會，特別是與我們以前沒有強大影響力的一些國際客戶和終端市場。

As an example, we recently completed some radio sales to a European customer during the quarter. We are also happy to report that the majority of the test equipment and inventory has been delivered and we expect the balance to be delivered in calendar 2024. At the end of July, we announced the acquisition of additional product lines from Honeywell.

例如，我們最近在本季完成了對歐洲客戶的一些收音機銷售。我們也很高興地報告，大部分測試設備和庫存已交付，我們預計餘額將在 2024 年交付。7 月底，我們宣布從霍尼韋爾收購更多產品線。

This most recent transaction builds on our deal from last year and includes communication and navigation radio product lines from Honeywell. While this deal was smaller than the initial transaction, the acquisition will help strengthen our offerings in key military and business aviation markets, establish new relationships with new key customers, and importantly enables us to further leverage the capacity in our Exton facility.

這項最新交易建立在我們去年交易的基礎上，其中包括霍尼韋爾的通訊和導航無線電產品線。雖然這筆交易比最初的交易規模要小，但此次收購將有助於加強我們在主要軍事和公務航空市場的產品，與新的主要客戶建立新的關係，重要的是使我們能夠進一步利用埃克斯頓工廠的產能。

We are pleased with the progress we have achieved thus far under our Honeywell product lines and we are looking forward to realizing additional synergy benefits and incremental growth opportunities in the coming quarters.

我們對霍尼韋爾產品線迄今所取得的進展感到滿意，並期待在未來幾季實現額外的協同效益和增量成長機會。

We continued to generate stable revenues and margins from our large OEM contracts, including Telarus for Utility Management System or UMS, Textron for our standby instrument and our Autothrottle, and Boeing for the KC-46 and the T-7 product. Further to our focus on the military market, we were recently awarded the multi-million dollar contract on a foreign military platform from a major aerospace company.

我們繼續從大型 OEM 合約中獲得穩定的收入和利潤，包括 Telarus 的公用事業管理系統或 UMS、Textron 的備用儀表和 Autothrottle 以及波音的 KC-46 和 T-7 產品。為了進一步關注軍事市場，我們最近從一家大型航空航太公司獲得了價值數百萬美元的外國軍事平台合約。

We will supply multifunction displays with an integrated mission computer for a foreign military platform. This further validates our strategy to focus on business development efforts in the military market. I would now like to provide a quick overview of our strategic growth priorities and highlight some of our key accomplishments during the quarter.

我們將為外國軍事平台提供具有整合任務計算機的多功能顯示器。這進一步驗證了我們專注於軍工市場業務發展的策略。我現在想快速概述我們的策略成長重點，並重點介紹我們在本季取得的一些主要成就。

A long-term growth strategy is focused on generating sustained revenue growth through the following five initiatives: expansion of our existing platforms, new OEM and retrofit programs, pipeline opportunity growth, new market opportunities, and acquisitions. Our existing platforms provide meaningful growth opportunities through unit expansion on several key platforms.

長期成長策略的重點是透過以下五項措施實現持續的收入成長：現有平台的擴展、新的 OEM 和改造計劃、管道機會成長、新的市場機會和收購。我們現有的平台透過在幾個關鍵平台上的單位擴張提供了有意義的成長機會。

This is a highly predictable growth driver and is driven by scheduled unit growth at key customer platforms. For example, the PC-24 aircraft has been and will continue to grow providing growth opportunities for IS&S. Building on our history of innovation, new potential OEM and retrofit programs provide a significant long-term growth opportunity. In particular, we are focused on growing our OEM business given the more stable and predictable nature of these contracts.

這是一個高度可預測的成長動力，由關鍵客戶平台的預定單位成長所推動。例如，PC-24 飛機已經並將繼續發展，為 IS&S 提供成長機會。基於我們的創新歷史，新的潛在 OEM 和改造計劃提供了重要的長期成長機會。鑑於這些合約更加穩定和可預測，我們尤其專注於發展我們的 OEM 業務。

We benefit from deep customer relationships which have further strengthened following the Honeywell transactions. This gives us the opportunity to cross-sell our broad portfolio of existing products to customers. As an example, some of the radio products recently acquired from Honeywell were coupled nicely with our cockpit offerings in the C-130 platform.

我們受益於深厚的客戶關係，這種關係在霍尼韋爾交易後進一步加強。這使我們有機會向客戶交叉銷售我們廣泛的現有產品組合。例如，最近從霍尼韋爾購買的一些無線電產品與我們 C-130 平台中的駕駛艙產品完美結合。

A significant growth opportunity in the coming years will come from the potential to expand into adjacent markets. One market we are particularly excited about is the military market which is a market we are under-penetrated in today but is a tremendous long-term opportunity. We have several product platforms that are ideally situated in the military market.

未來幾年的重大成長機會將來自於擴展到鄰近市場的潛力。我們特別興奮的一個市場是軍事市場，這是一個我們目前尚未滲透的市場，但卻是一個巨大的長期機會。我們擁有多個非常適合軍事市場的產品平台。

As we already discussed, our recent contract award highlights this opportunity. Additionally, our increased focus on cockpit automation that helps enhance safety and reduce pilot workload represents a significant market opportunity for IS&S in both military and air transport applications.

正如我們已經討論過的，我們最近授予的合約凸顯了這一機會。此外，我們更加關注有助於提高安全性並減少飛行員工作量的駕駛艙自動化，這為 IS&S 在軍事和航空運輸應用中帶來了巨大的市場機會。

We continue to generate incremental revenue by adding automation features to our military and air transport cockpit solutions. We believe cockpit automation represents a multi-billion dollar addressable market opportunity. Finally, an area of increasing focus is growth through strategic acquisitions.

我們透過在軍事和航空運輸駕駛艙解決方案中添加自動化功能，繼續創造增量收入。我們相信駕駛艙自動化代表著一個價值數十億美元的市場機會。最後，一個日益受到關注的領域是透過策略性收購來實現成長。

We are ideally positioned to pursue acquisitions given we have developed a growing base of recurring revenue, have strong cash flow generated from business, and have a strong financial profile. Our acquisition strategy remains focused on product lines in the electronic and electro-mechanical space with a similar margin profile to our existing business, which enable us to leverage our manufacturing capacity. We look forward to updating you on our progress and our strategic growth initiatives in the coming quarters.

鑑於我們已經建立了不斷增長的經常性收入基礎、業務產生的強勁現金流以及強勁的財務狀況，我們處於進行收購的理想位置。我們的收購策略仍然專注於電子和機電領域的產品線，其利潤狀況與我們現有業務相似，這使我們能夠利用我們的製造能力。我們期待在未來幾季向您通報我們的最新進展和策略成長計劃。

Before I turn it over to Jeff, I would just like to conclude with a few final thoughts. Overall, we are pleased with our third quarter results and our growth in our existing platforms and contributions from the Honeywell product enabled us to generate growth in revenue and EBITDA. We continue to execute at a high level and based on our results during the first three quarters, together with our continued business momentum, we remain well-positioned as we look towards 2025.

在我把它交給傑夫之前，我想總結一些最後的想法。總體而言，我們對第三季度的業績感到滿意，我們現有平台的成長以及霍尼韋爾產品的貢獻使我們能夠實現收入和 EBITDA 的成長。我們繼續高水準執行，根據前三個季度的業績，加上我們持續的業務勢頭，展望 2025 年，我們仍然處於有利地位。

With that, I turn it over to Jeff who will provide a more detailed review of our third quarter results and our financial outlook. Jeff?

接下來，我將其交給傑夫，他將對我們第三季的業績和財務前景進行更詳細的審查。傑夫？

Thank you, Shahram, and good morning, everyone. I will provide some additional details on the quarter, give an update on our working capital and free cash flow, and conclude with commentary on our balance sheet and liquidity.

謝謝沙赫拉姆，大家早安。我將提供有關本季度的一些其他詳細信息，提供有關我們的營運資金和自由現金流的最新信息，並以對我們的資產負債表和流動性的評論作為結束。

Before we begin, I would like to remind everyone we will be discussing non-GAAP measures and you are encouraged to refer to the earnings release which includes the definitions, the rationale for using them, and the reconciliations to GAAP in it. Looking at the third quarter, total net revenues were $11.8 million representing a 48% increase when compared to the third quarter last year.

在我們開始之前，我想提醒大家，我們將討論非公認會計原則措施，鼓勵您參考收益發布，其中包括定義、使用它們的理由以及與公認會計原則的調節。第三季淨收入總額為 1,180 萬美元，較去年第三季成長 48%。

The increase was driven by contributions from the acquired Honeywell product lines as well as growth in existing lines. We continue to see some weakness in the cargo market, but trends appear to be stabilizing and we saw some sequential growth in this market relative to the second quarter. Product sales decreased to $5.1 million during the third quarter, primarily attributed to a large order from a year ago to the commercial air transport customers.

這一增長得益於收購的霍尼韋爾產品線以及現有產品線的成長。我們繼續看到貨運市場出現一些疲軟，但趨勢似乎正在穩定，我們看到該市場相對於第二季度出現了一些連續增長。第三季產品銷售額下降至 510 萬美元，主要歸因於去年向商業航空運輸客戶的大量訂單。

This was partially offset by an increase in shipments to general aviation and military customers. Customer support revenue was $6.4 million, an increase from $1.3 million last year owing largely to the customer service sales from the product lines acquired from Honeywell. Gross profit was $6.3 million during the third quarter, up 33% from $4.7 million in the same period last year, driven by the contribution from the Honeywell products.

這被通用航空和軍事客戶出貨量的增加部分抵消。客戶支援收入為 640 萬美元，較去年的 130 萬美元有所增加，這主要歸功於從霍尼韋爾收購的產品線的客戶服務銷售。第三季毛利為 630 萬美元，比去年同期的 470 萬美元成長 33%，主要得益於霍尼韋爾產品的貢獻。

Overall, gross margin was 53.4% during the third quarter, up sequentially from 52% last quarter, as we continue to make progress on our Honeywell integration initiatives and further gain operating efficiencies, which will continue to improve our margins. As a reminder, typically our customer funded engineering programs erode our gross margins given this is largely a pass through item and this quarter it was roughly a 150 basis points headwind.

總體而言，第三季的毛利率為53.4%，比上季的52% 有所上升，因為我們繼續在霍尼韋爾整合計劃上取得進展，並進一步提高營運效率，這將繼續提高我們的利潤率。提醒一下，通常我們的客戶資助的工程項目會侵蝕我們的毛利率，因為這在很大程度上是一個轉嫁項目，而本季度大約有 150 個基點的逆風。

As Shahram discussed, we continue to make progress on the Honeywell integration and we did see some improvements sequentially from the second quarter with less of a drag from delays in inventory and testing equipment shipments.

正如 Shahram 所討論的那樣，我們在霍尼韋爾整合方面繼續取得進展，並且我們確實看到了第二季度以來的一些改進，庫存和測試設備發貨延遲的拖累較小。

We are looking to gain additional efficiencies as we continue the integration of the Honeywell products, including the additional recently acquired lines and we are targeting a return to the gross margin levels witnessed prior to the Honeywell acquisition. Research and development expense during the third quarter of 2024 was $1.1 million, an increase from 850,000 in the comparable period last year.

隨著我們繼續整合霍尼韋爾產品（包括最近收購的其他產品線），我們希望獲得更高的效率，我們的目標是恢復到霍尼韋爾收購之前的毛利率水準。2024年第三季的研發費用為110萬美元，較去年同期的85萬美元增加。

This increase was driven by headcount growth to support our product development efforts. As a percentage of net sales R&D expense during the third quarter decreased to 9.3% of net sales versus 10.7% last year as we gained scale benefits. Third quarter 2024 selling, general and administrative expenses were $3.1 million, an increase from $2.4 million last year.

這一增長是由員工人數增長推動的，以支持我們的產品開發工作。由於我們獲得了規模效益，第三季研發費用佔淨銷售額的百分比下降至 9.3%，而去年為 10.7%。2024 年第三季銷售、一般和管理費用為 310 萬美元，較去年的 240 萬美元增加。

The increase in SG&A expense in the quarter was primarily the result of one time expenses related to the acquisition and CFO transition costs of approximately $400,000 along with amortization expense related to the customer tangible as a result of the acquired Honeywell product lines of approximately $600,000.

本季 SG&A 費用的增加主要是由於與收購相關的一次性費用和約 40 萬美元的 CFO 過渡成本，以及與收購霍尼韋爾產品線而產生的有形客戶相關的約 60 萬美元的攤銷費用。

Adjusted EBITDA was $3.1 million during the third quarter, up from $1.9 million last year due to the contribution from the Honeywell products and operating expense leverage. Adjusted EBITDA margin was 26.1% during the third quarter of 2024, up from 24% in the same period last year owing to the operating expense leverage partially offset by lower gross margins.

由於霍尼韋爾產品和營運費用槓桿的貢獻，第三季調整後 EBITDA 為 310 萬美元，高於去年的 190 萬美元。2024 年第三季調整後 EBITDA 利潤率為 26.1%，高於去年同期的 24%，原因是營業費用槓桿被較低的毛利率部分抵銷。

The third quarter net income was $1.6 million or $0.09 per share compared to net income of $1.4 million or $0.08 per share in the year ago quarter. Moving on to backlog, new orders in the third quarter of fiscal 2024 were approximately $10.6 million and our backlog as of June 30, 2024 was $9.3 million. As a reminder, backlog includes only purchase orders in hand and excludes orders from our OEM customers under long-term programs such as Pilatus PC-24, Textron King Air, [Boeing T-7A Red Hawk], and Boeing KC-46A.

第三季淨利為 160 萬美元，即每股 0.09 美元，而去年同期淨利為 140 萬美元，即每股 0.08 美元。接下來是積壓訂單，2024 財年第三季的新訂單約為 1,060 萬美元，截至 2024 年 6 月 30 日，我們的積壓訂單為 930 萬美元。請注意，積壓訂單僅包括手頭採購訂單，不包括皮拉圖斯 PC-24、德事隆國王航空、[波音 T-7A 紅鷹] 和波音 KC-46A 等長期計劃下的 OEM 客戶的訂單。

IS&S expects these programs to remain in production for several years and anticipates they will continue to generate future sales. Further, due to their nature, the product lines from Honeywell do not typically enter backlog.

IS&S 預計這些項目將繼續生產數年，並預計未來將繼續產生銷售。此外，由於其性質，霍尼韋爾的產品線通常不會進入積壓狀態。

Now turning to cash flow. In the first nine months of 2024, cash flow from operations was $5.4 million, up from $900,000 in the year ago comparable period. The improvement was driven by higher cash earnings and improved working capital efficiencies. Capital expenditures were $500,000 in the first nine months of 2024 versus $200,000 in the same period last year.

現在轉向現金流。2024 年前 9 個月，營運現金流為 540 萬美元，高於去年同期的 90 萬美元。這項改善是由現金收入增加和營運資金效率提高所推動的。2024 年前 9 個月的資本支出為 50 萬美元，而去年同期為 20 萬美元。

As a result of these factors, free cash flow during the first three quarters of 2024 was $4.8 million, up from $800,000 last year. Total net debt as of June 30, 2024 was $9.3 million, down from $16.4 million at the end of '23 as we utilized our strong free cash flow to quickly de-lever following the acquisition position from Honeywell.

由於這些因素，2024 年前三季的自由現金流為 480 萬美元，高於去年的 80 萬美元。截至 2024 年 6 月 30 日，淨債務總額為 930 萬美元，低於 2023 年底的 1,640 萬美元，因為我們利用強大的自由現金流在收購霍尼韋爾後迅速去槓桿化。

Our net leverage at the end of the third quarter declined to 0.8 times, down from 2.1 times at the end of '23, and a peak of 2.9 times immediately following the Honeywell transaction. Our total cash and availability under our credit line was $20.7 million at the end of the third quarter, which provides us ample financial flexibility to support our ongoing operations and strategic initiatives. That completes our prepared remarks. Operator, we are now ready for the question and answer portion of our call.

我們第三季末的淨槓桿率從 2023 年末的 2.1 倍下降至 0.8 倍，在霍尼韋爾交易後達到 2.9 倍。截至第三季末，我們的信貸額度下的現金和可用資金總額為 2,070 萬美元，這為我們提供了充足的財務靈活性來支持我們持續的營運和策略舉措。我們準備好的發言就到此結束了。接線員，我們現在已準備好進行通話的問答部分。

We will now begin the question-and-answer session. (Operator Instructions)

我們現在開始問答環節。（操作員說明）

Sergey Golunov, Freedom Broker.

謝爾蓋‧戈盧諾夫，自由掮客。

Hello, everyone. First of all, my congratulations about the Honeywell transaction. As far as the concerns regarding the previous deal, you had to complete the movement of the equipment to the IS&S facility in August, right? Is it completed?

大家好。首先，我對霍尼韋爾交易表示祝賀。至於先前交易的問題，你們必須在八月完成設備到 IS&S 設施的轉移，對嗎？完成了嗎？

I'm sorry, can you repeat that? I apologize.

抱歉，您能再說一次嗎？我道歉。

As far as the concerns regarding the previous deal, you had to complete the movement of the equipment to the IS&S facility in August. Is it completed or you are in the process of that deal?

至於對先前交易的擔憂，你們必須在 8 月完成將設備轉移到 IS&S 設施的工作。該交易已完成還是正在進行中？

So it is substantially completed. I think in one instance, we were destined to get four identical stations. You have three of them completed and there is one that's going to -- now it's going to come in November. These are new test equipments that are being built for us. So I would say substantially we are there as well as substantially the inventory that we need to perform on.

這樣就基本完成了。我認為在一個例子中，我們注定會得到四個相同的電台。其中三項已經完成，還有一項即將完成——現在它將在 11 月完成。這些是我們正在建造的新測試設備。所以我想說的是，我們基本上已經在那裡，我們需要執行的庫存也很大。

Okay. And will it affect margin, October and next quarter?

好的。它會影響十月和下一季的利潤率嗎？

It really shouldn't impact us because we are also training more technicians and building on them. So just having this equipment here without having trained people to run it doesn't necessarily help you that much either. We continue increasing the team as we plan on bringing more and more of these projects in house. As we talked before, Honeywell had a lot of channel partners. They did a lot of outsourcing of their business to third parties. We plan on bringing all of that in-house to help increase revenue and profitability. So right now we've got enough test equipment to deal with the matter in hand and the other one would help us for future growth.

它確實不應該影響我們，因為我們也在培訓更多的技術人員並在他們的基礎上繼續發展。因此，僅僅擁有此設備而沒有經過培訓的人員來運行它也不一定對您有多大幫助。隨著我們計劃將越來越多的此類專案引入內部，我們將繼續擴大團隊規模。正如我們之前所說，霍尼韋爾有很多通路合作夥伴。他們將許多業務外包給第三方。我們計劃將所有這些都納入內部，以幫助增加收入和盈利能力。所以現在我們有足夠的測試設備來處理手邊的問題，而另一台設備將幫助我們未來的發展。

Okay. And during the call regarding the new Honeywell transaction, you mentioned that IS&S has great opportunities to further net income growth after 2024 fiscal year. Do you have any thoughts about base of sales organic growth?

好的。在有關霍尼韋爾新交易的電話會議中，您提到 IS&S 在 2024 財年之後有很大機會進一步實現淨利潤增長。您對銷售基礎有機成長有什麼想法嗎？

We're going to continue with our organic growth. We were prior to acquisition. I think we were running at about a CAGR of 15%. Definitely we're going to be in double digits. We've had some rough air ahead of us with the air cargo slowing down. We're kind of recovering from that through the military initiatives that we put together. This is the game that we've been playing for 35 years.

我們將繼續有機成長。我們是在收購之前。我認為我們的複合年增長率約為 15%。我們肯定會達到兩位數。前方空氣惡劣，航空貨運速度減慢。透過我們共同採取的軍事舉措，我們正在從這種情況中恢復過來。這是我們玩了 35 年的遊戲。

When one market suffers, we put our focus on another market to recover from it. So going forward, we're going to continue growing organically in double digits. Going beyond this third quarter, we consider the Honeywell acquisitions that we've done as part of our organic programs as well. Because they get intermingled with our own initiatives as well as the growth is going to come from the combination of both product lines.

當一個市場遭受損失時，我們會將注意力轉向另一個市場以從中恢復過來。因此，展望未來，我們將繼續以兩位數的有機成長。在第三季之後，我們也將對霍尼韋爾的收購視為我們有機計劃的一部分。因為它們與我們自己的計劃相結合，並且增長將來自兩條產品線的結合。

And definitely we're going to continue to grow the business without doing any more acquisitions as well. We're constantly evaluating other acquisitions and we're going to move forward with that. In terms of product development initiatives, we're focused on that part of the business as you saw. We saw an increase in R&D expenses, not as a percentage of sales but in materiality.

當然，我們將繼續發展業務，而無需進行更多收購。我們正在不斷評估其他收購，並將繼續進行。在產品開發計劃方面，我們專注於您所看到的這部分業務。我們看到研發費用的增加，不是佔銷售額的百分比，而是重要性的增加。

And we continue growing our team to allow us to develop further new products. Again, as I mentioned, cockpit automation is a significant market that we're looking at over the next several years. And there's incremental revenues to gain from that. We continue to develop products that would help us get there to that goal. That gives us further organic growth.

我們不斷壯大我們的團隊，以便我們能夠開發更多新產品。正如我所提到的，駕駛艙自動化是我們未來幾年關注的重要市場。並且可以從中獲得增量收入。我們將繼續開發有助於我們實現這一目標的產品。這給我們帶來了進一步的有機成長。

Great. How additional acquisition could be reflect in CapEx?

偉大的。額外的收購如何反映在資本支出？

How would additional acquisitions, impact CapEx?

額外的收購將如何影響資本支出？

Yes.

是的。

If you look beyond where we are and the matter at hand on maybe the next acquisition we do, to do further acquisitions beyond that, we would have to increase the size of our factory floor, which we've been putting plans together. We have planning permissions here to build another 40,000 square foot of factory space. We're looking at doing that in order to get us beyond the $100 million revenue in the next several years.

如果你超越我們所處的位置以及手頭上的問題，也許我們會進行下一次收購，為了進一步進行收購，我們將不得不擴大我們工廠的規模，我們一直在製定計劃。我們已獲得規劃許可在此建造另外 40,000 平方英尺的工廠空間。我們正在考慮這樣做，以便在未來幾年內將我們的收入突破 1 億美元。

Yes, great. Great. And last question. Any decline in product sales could turn into a growth pass, could it happen in the next or first quarter of the next financial year?

是的，太好了。偉大的。最後一個問題。產品銷售的任何下降都可能轉變為成長關口，這會發生在下一個財政年度的下一個季度或第一季嗎？

So, it's hard to predict the future. As you know, we're in a funny year this year with all the elections going on and several things that are happening internationally. We've managed to navigate those waters year after year. We've developed new products that haven't hit the market yet. And we believe that the cargo market, we're seeing signs of that. It picking up a little bit as well. So, I mean, last quarter we had -- we actually shipped products in air transport. And so we're optimistic that things would continue on the path of recovery, but it's hard to predict the future.

所以，很難預測未來。如你所知，今年我們經歷了有趣的一年，所有選舉都在進行，國際上也發生了一些事情。我們年復一年地在這些水域中航行。我們開發了尚未推出市場的新產品。我們相信，在貨運市場上，我們已經看到了這個跡象。它也有所回升。所以，我的意思是，上個季度我們實際上透過航空運輸運輸了產品。因此，我們樂觀地認為事情將繼續走上復甦的道路，但很難預測未來。

Okay. Thanks a lot.

好的。多謝。

Doug Ruth, Lenox Financial Services.

道格‧魯斯 (Doug Ruth)，萊諾克斯金融服務公司。

Hi, good morning. I want to offer my congratulations on the order that you announced yesterday. I was wondering if you could provide some more details tell us or tell us more about it.

嗨，早安。我想對你們昨天宣布的訂單表示祝賀。我想知道您是否可以提供更多詳細資訊或告訴我們更多相關資訊。

So, I guess the announcement we made, we were going to put a lot more in that announcement. Obviously, our customer was reluctant to agree to ask for a lot more color into it, and it's because they haven't announced the program themselves. But it is a very large aerospace company.

所以，我想在我們發布的公告中，我們將在該公告中添加更多內容。顯然，我們的客戶不願意同意要求提供更多的顏色，這是因為他們自己還沒有宣布該計劃。但它是一家非常大的航空航天公司。

We've got the contract. It's a military product. It's a mission display integrated with a mission computer in one unit. I guess the award value is another thing that they didn't want us to announce. But it's well into the several million dollars.

我們已經拿到合約了。這是軍工產品。它是一種與任務計算機整合在一個單元中的任務顯示器。我想獎勵價值是他們不希望我們宣布的另一件事。但這已經有幾百萬美元了。

Alright. Is there any way to suggest how much might flow in the fourth quarter, for example?

好吧。例如，有什麼方法可以顯示第四季可能有多少流量？

We intend to deliver on some of it in the fourth quarter, but I guess you will see that number. It will reflect in our backlog because once we've booked it now, so now it's in our backlog.

我們打算在第四季度實現其中一些目標，但我想您會看到這個數字。它將反映在我們的積壓中，因為一旦我們現在預訂了它，現在它就在我們的積壓中。

Right. So Doug, we booked it this period being Q4, so when we put out the [K], it would be disclosed in the backlog period.

正確的。所以道格，我們在第四季度預訂了它，所以當我們推出 [K] 時，它將在積壓期間披露。

Okay.

好的。

Unfortunately, our customers generally want us to put too much details around it.

不幸的是，我們的客戶通常希望我們提供太多細節。

I think they're still negotiating with their customers, I guess.

我想他們仍在與客戶談判。

Okay. One of the other parts of the Honeywell acquisition was that you had acquired quite a bit of inventory. And how is that going possibly? It seemed like you indicated that maybe it was more inventory than maybe you desired to have. How are you doing with -- what was acquired and how are you doing with, in effect, using it in your operations?

好的。霍尼韋爾收購的其他部分之一是您獲得了相當多的庫存。這怎麼可能？您似乎表示庫存可能比您想要的更多。您如何使用所獲得的內容以及您實際上如何在營運中使用它？

So I don't know why you think that we indicated we have more inventory than we desired to have. So the second acquisition that we did has about $2.5 million worth of inventory in it as well. A lot of the inventory that we get on these programs is what they call the specs units, which are units that we would own. But when things fail in an aircraft, we will rent it out as a loaner and we get the income for it.

所以我不知道你為什麼認為我們表明我們的庫存比我們想要的多。因此，我們進行的第二次收購中也有價值約 250 萬美元的庫存。我們在這些計劃中獲得的許多庫存都是他們所說的規格單位，這些單位是我們擁有的單位。但當飛機出現故障時，我們會將其作為貸款人出租，並獲得收入。

So you can look at it like you're the Hertz renter car and we rent out these units and we get the revenue for it. And some of it is inventory that we can go ahead and sell. For example, in the Q2, we sold some of that inventory to a European customer. We sold some radio inventory to them. And we've got an international sales team that's supporting all of these activities.

因此，您可以將其視為赫茲租車公司，我們出租這些單位並從中獲得收入。其中一些是我們可以繼續出售的庫存。例如，在第二季度，我們將部分庫存出售給歐洲客戶。我們向他們出售了一些收音機庫存。我們擁有一支國際銷售團隊來支援所有這些活動。

That sounds positive. Now, you deserve a lot of credit for the sequential improvement in the margins. Do you have some internal goals for what might happen in the fourth quarter?

這聽起來很正面。現在，您應該因利潤率的連續改善而獲得很大的讚譽。您對第四季可能發生的事情有一些內部目標嗎？

Yes, so Doug, we're always constantly looking at the margins, how to increase it. I would say a couple of things, what happened in the margin we talked about the little headwind around the NRA. So that's about 150 basis points. Also, when you look at our margins quarter or year over year, what was impacting it was our increase in depreciation expense because of our PP&E went up and also with the Honeywell transaction. So there was another, I would say roughly 150 to 200 basis points there.

是的，所以道格，我們總是不斷地關注利潤，以及如何增加它。我想說幾件事，在邊緣發生的事情我們談到了全國步槍協會周圍的小逆風。所以這大約是 150 個基點。此外，當你查看我們的季度或年比利潤率時，會發現影響它的是我們折舊費用的增加，因為我們的財產、設備和設備的增加以及霍尼韋爾的交易也導致了折舊費用的增加。所以還有另一個，我想說大約 150 到 200 個基點。

So when you look at those two factors, the NRA and that, our margins are getting to 56% to 57% margins. And keep in mind, as now the test equipment's here, the efficiencies will start coming in to further with our workforce to repair and fix these units more efficiently, effectively. So our goal is to always look to increase those margins (multiple speakers)

因此，當你考慮 NRA 和這兩個因素時，我們的利潤率將達到 56% 至 57%。請記住，由於現在測試設備已經到位，我們的員工將能夠更有效率、更有效地維修和修復這些設備，效率將開始進一步提高。所以我們的目標是始終尋求增加這些利潤（多個發言者）

When you're hiring new technicians and training them to become effective. And these are the equipment that we acquired from Honeywell. Very sophisticated equipment, like the initial reference units are like, they're as sophisticated as you can get in the aerospace area. It's not like you're going to get technicians off the street and they're going to hit the ground running. And you'll have some, you do your hiring, some of them you get rid of within the next couple of months because they don't hack it. So there's inefficiencies that all of that reflects in our gross margins.

當您僱用新技術人員並培訓他們提高效率時。這些是我們從霍尼韋爾購買的設備。非常複雜的設備，就像最初的參考設備一樣，它們是航空航太領域最先進的設備。這並不是說你要讓技術人員離開街道，他們就會立即開始工作。你會擁有一些，你進行招聘，其中一些你會在接下來的幾個月內被解僱，因為他們不會破解它。因此，所有這些都反映在我們的毛利率上，效率低下。

Well, you also had talked about that there was this new product development and that was affecting the gross margins. So are some of these products that were developed, are they being marketed for sale? So that would seem to help the margins going forward as well?

嗯，您還談到了新產品的開發，這正在影響毛利率。那麼，其中一些已開發的產品是否正在上市銷售？那麼這似乎也有助於提高利潤率？

Yes. Now, what Jeff was referring to, and I'll be a little bit more specific. For example, we're developing a second generation of our flight control computer or what we call the UMS for the PC-24 aircraft. That would establish us for the next 30 years of developing the next generation of these computers to Pilatus. In a lot of instances, we would go ahead and do that development in house because we're investing into the future. In this case, the Pilatus, they were nice enough to actually give us some funding to help with the development of it.

是的。現在，傑夫所指的是什麼，我會更具體一些。例如，我們正在為 PC-24 飛機開發第二代飛行控制計算機或我們所說的 UMS。這將為我們在未來 30 年開發下一代皮拉圖斯電腦奠定基礎。在很多情況下，我們會繼續在內部進行開發，因為我們正在投資未來。在這個例子中，皮拉圖斯山，他們非常友善地為我們提供了一些資金來幫助其開發。

And then when it comes to the minute you get some funding from a customer, you get into revenue recognition. And if the engineering cost ends up going a little bit more than what you had estimated, then it starts getting into eroding your margins. If we weren't getting paid from the customer, you would have seen all of those in our IR&D and it wouldn't have affected our margins. So I'd still rather get some money from the customer if we can.

然後，當您從客戶那裡獲得一些資金時，您就進入了收入確認階段。如果工程成本最終超出您的估計，那麼它就會開始侵蝕您的利潤。如果我們沒有從客戶那裡得到報酬，你會在我們的 IR&D 中看到所有這些，這不會影響我們的利潤。所以如果可以的話我還是寧願從客戶那裡拿點錢。

So, Doug, it's really the way we recognize the NRA contracts, to Shahram's point. You look at your cost to complete, and if any changes in terms of sometimes you might hit a snag, the engineer might hit a snag, and the estimate changes, you kind of have to look at the contract and revalue it, and that's what happened this quarter.

所以，Doug，就 Shahram 的觀點而言，這確實是我們承認 NRA 合約的方式。你看看你的完成成本，如果有任何變化，有時你可能會遇到障礙，工程師可能會遇到障礙，並且估算發生變化，你必須查看合約並重新評估它，這就是發生在本季度。

Okay. I think you deserve a lot of credit. There's material improvement in the one quarter results, and I appreciate you answering my questions, and I'm excited to see what happens in the next quarter.

好的。我認為你值得高度讚揚。一季度的業績有了實質的改善，我感謝您回答我的問題，我很高興看到下一季會發生什麼。

Thank you, Doug.

謝謝你，道格。

Thank you.

謝謝。

Andrew Rem, Odinson Partners.

安德魯雷姆，奧丁森合夥人。

Good morning, gentlemen, I really appreciate the additional color on the gross margin. That's kind of where I was going, but I did want to ask maybe just one follow up to beat the gross margin, of course. So you've got three test units in, and you have all the technicians you need for those three. Is that correct?

早安，先生們，我真的很欣賞毛利率上的額外色彩。這就是我要去的地方，但當然，我確實想問也許只是一項後續行動以超越毛利率。因此，您擁有三個測試單元，並且擁有這三個測試單元所需的所有技術人員。這是正確的嗎？

Yes, I mean, continue hiring more technicians and training them, as well as putting in a second shift.

是的，我的意思是，繼續僱用更多的技術人員並培訓他們，並進行第二輪班。

Yes, our goal is for 2024 to have the second shift up and running. we have to have a supervisor, we have to have a quality person on that second shift, so they have to really be trained during the first shift to move over, which is take some time.

是的，我們的目標是在 2024 年啟動並運行第二班次。我們必須有一名主管，我們必須在第二班有一個高素質的人員，所以他們必須在第一班時接受真正的培訓才能轉移，這需要一些時間。

Okay. So then when you get the fourth test unit, can we assume that you'll have the technicians necessary to staff that one as well?

好的。那麼，當您獲得第四個測試單元時，我們是否可以假設您也將擁有必要的技術人員來配備該單元？

Yes, that's our goal.

是的，這就是我們的目標。

Okay. And then looks like on the prepaid inventory that's come down nicely from the beginning of the year and will that go up with the recent Honeywell acquisition or is that heading to zero?

好的。然後看起來預付庫存從年初開始就已經大幅下降，這會隨著最近霍尼韋爾的收購而上升還是會趨向於零？

No, so a couple things what's in prepaid. It's really the inventory that we paid, and we're still waiting to get back, and that's where you see it went down, because we got a lot of that inventory in today from when the quarter closed. So our goal is really to keep working with Honeywell to get the new contract in that inventory before September 30, but if it doesn't happen, you'll see some of that amount in prepaid inventory.

不，所以有幾件事是預付費的。這實際上是我們支付的庫存，我們仍在等待收回，這就是你看到它下降的地方，因為從季度結束時我們今天得到了很多庫存。因此，我們的目標實際上是繼續與霍尼韋爾合作，在 9 月 30 日之前在該庫存中獲得新合同，但如果沒有實現，您將在預付庫存中看到其中的部分金額。

And then if I was understanding your commentary correctly, Shahram, you basically have a rental fleet, and that part of that is what's considered inventory, is that correct?

然後，如果我正確理解你的評論，Shahram，你基本上有一支租賃車隊，而其中的一部分被認為是庫存，這是正確的嗎？

So we have some of the units that, I would say a good size of the units that we receive the finished good units, are used in the kind of specs pool, where if somebody's equipment fails on the airplane, we will send them alone while that unit comes back and gets repaired. And that's typically something that you charge for that service, and so that's kind of, that's what I was describing

因此，我們有一些單位，我想說的是，我們收到的成品單位的單位尺寸很大，用於規格池，如果某人的設備在飛機上出現故障，我們將單獨發送它們，同時該裝置回來並得到修復。這通常是您為該服務收取的費用，所以這就是我所描述的

Yes. So Andrew, so we typically always have those units, they're in fixed assets, they get depreciated, what we call retables. So right now, too, we're also assessing the amount of volume we need with these customers so we can have the efficient number of units on hand. We don't want to have too many and not too little, so if there's excess in some part numbers, they're the ones we're going to try to sell in the marketplace with our international sales teams, so more to come as we learn more and assess these units.

是的。安德魯，我們通常總是擁有這些單位，它們屬於固定資產，會折舊，我們稱之為可重計。因此，現在我們也在評估這些客戶所需的數量，以便我們能夠擁有有效數量的庫存。我們不想擁有太多，也不想太少，因此，如果某些零件數量過多，我們將嘗試與我們的國際銷售團隊在市場上銷售這些零件，因此還會有更多零件我們了解更多並評估這些單元。

All right. And then on the multi-million dollar military contract, what is the duration of that?

好的。那麼價值數百萬美元的軍事合約的期限是多長？

That's another thing. We were told not to, but it's somewhere between two and three years.

那是另一回事了。我們被告知不要這樣​​做，但大約有兩到三年的時間。

Okay. So several million dollars over two to three years?

好的。兩到三年內要花幾百萬美元？

Sounds about right.

聽起來不錯。

Okay. And then in fourth quarter last year you guys did basically $13 million in revenue because that was the first quarter you got Honeywell, Honeywell came in much stronger than expected. Is it fair to assume that that will be a difficult comp. And as a result, we shouldn't look for kind of year-over-year growth in the in the fourth quarter?

好的。去年第四季度，你們的收入基本上為 1300 萬美元，因為那是你們收購霍尼韋爾的第一個季度，霍尼韋爾的收入比預期要強得多。可以公平地假設這將是一場困難的比賽嗎？因此，我們不應該期待第四季的年成長嗎？

So it's again, as we talked about this every quarter. That fourth quarter had a lot of pull-ins in it from a Honeywell. I mean, we got about -- I would say roughly $6 million revenue in a quarter from Honeywell, because of the anticipation of the transition period. They pulled in and delivered a lot to the customers. So I wouldn't want to set any expectations that, there's nothing else to pull in.

正如我們每個季度都會討論的那樣，又是這樣。第四季有很多來自霍尼韋爾的拉動。我的意思是，由於對過渡期的預期，我們在一個季度內從霍尼韋爾獲得了大約 600 萬美元的收入。他們拉進來並向客戶交付了很多東西。所以我不想設定任何期望，因為沒有其他可以吸引的東西。

Okay.

好的。

Chip (inaudible) Ruby Asset Management. Please go ahead.

晶片（聽不清楚）紅寶石資產管理。請繼續。

Good morning and thanks for taking my call. Congratulations on the execution in the cash flow and the deleveraging. It does really set you guys up for growth, which is where my two questions, and I'll ask them both. And then you can address them. One, the military is encouraging to see, especially the contract that you got and I'm just curious. Typically, military takes a long time. It takes qualification. Maybe it's designed in.

早上好，感謝您接聽我的電話。恭喜現金流和去槓桿的執行。這確實讓你們為成長做好了準備，這就是我的兩個問題，我會問他們兩個。然後你就可以解決它們。第一，軍方令人鼓舞，尤其是你獲得的合同，我只是很好奇。通常，軍事需要很長時間。這需要資格。也許是設計出來的吧

So maybe you could talk about is this order that you got more of a one offer? Do you think you can take some takeover business like this as you look to grow military and we could see significant growth from other deals in the military? Or will it be longer kind of designed in business? And so that's one, the military. Two, you mentioned more M&A and you've been successful.

那麼也許您可以談談您收到的這個訂單是否更像是一個報價？您認為當您希望發展軍事業務時，您可以接受一些這樣的收購業務嗎？或者它會在商業中設計得更長一些嗎？這就是其中之一，軍隊。第二，你提到了更多的併購，而且你已經成功了。

So just wondering what criteria you might look at for as far as size of deals. Do you think you'll buy product lines like you did with Honeywell or whole companies? And will you maintain the accretive nature of deals like you did with Honeywell, the significant accretion? And I'll leave it at those two things. Thanks.

所以只是想知道就交易規模而言您可能會考慮什麼標準。您認為您會像購買霍尼韋爾或整個公司一樣購買產品線嗎？您會像與霍尼韋爾一樣保持交易的增值性質，即重大增值嗎？我將把它留在這兩件事上。謝謝。

So with regards to the military, we put the focus on about -- I guess it was about the time where I took over from as CEO. I started putting a lot more focus into the military market. We actually went and hired a retired Marine, US Marine pilot to help us to help us sell. And then as we moved on, we kept on additionally strengthening the sales and marketing efforts on the military platforms that we've got a lot of focus in that fire. So this was the first one that bear fruits.

因此，就軍隊而言，我們將重點放在——我想那是我接任執行長的時候。我開始更加關注軍事市場。實際上，我們聘請了一位退休的美國海軍陸戰隊飛行員來幫助我們銷售。然後，隨著我們繼續前進，我們繼續加強軍事平台的銷售和行銷工作，我們在這場火災中得到了很多關注。所以這是第一個結出果實的。

I'm hopeful that we will be getting additional. I mean, there's a lot of spending internationally on the military market. And hopefully we get our fair share of that. With regards to the strategy for acquisition is articulated earlier. Our preference is to get product lines in the similar product lines in the electronics or electro mechanical field that we can integrate here in our factory floor, not necessarily just from Honeywell, but from other large company.

我希望我們能得到更多。我的意思是，國際上在軍事市場上有很多支出。希望我們能得到公平的份額。關於收購策略，之前已闡述。我們的首選是獲得電子或機電領域類似產品線的產品線，我們可以將這些產品線整合到我們的工廠車間，不一定只是來自霍尼韋爾，而是來自其他大公司。

They tend to be less risky and more predictable. However, we also do look at whole businesses, kind of smaller businesses. I like to see an accredited business. I don't like to buy into speculation. So that's my view of it. And if we can find small bolt on businesses that would generate immediately generate revenue EBITDA, we will move on with them and with their integration. They're just harder to come by.

它們往往風險較小且更可預測。然而，我們也會關注整個企業，甚至是小型企業。我喜歡看到經過認證的企業。我不喜歡相信投機。這就是我的看法。如果我們能在業務上找到可以立即產生收入 EBITDA 的小螺栓，我們將繼續與它們合作並進行整合。他們只是更難獲得。

Yes, we're being very disciplined on our capital what we're using to make sure that any kind of product acquisition or business is accretive. So that's really our goal. So it's a very diligent process.

是的，我們對我們所使用的資本非常嚴格，以確保任何類型的產品收購或業務都能增值。這確實是我們的目標。所以這是一個非常勤奮的過程。

Yes, I like the sound of that. So, then the last question you talk about bringing more lines into your existing facilities and then maybe putting some CapEx out in the future. Do you have or how do you think about where you are in capacity utilization today? How much can revenue grow with your current footprint? I know you're talking about doing a second shift in some of your lines. How far can we grow before you really need to put more brick and mortar in the ground?

是的，我喜歡這個聲音。那麼，您談到的最後一個問題是在現有設施中引入更多線路，然後可能在未來投入一些資本支出。您是否了解或如何看待目前的產能利用率？以您目前的足跡，收入可以成長多少？我知道您正在談論對某些線路進行第二輪班。在您真正需要在地面上放置更多磚塊和砂漿之前，我們能發展到什麼程度？

I think in terms of so there is two ways of looking at growing. If we do bring in product lines, which are completely new, we did two completely new product line acquisitions from Honeywell. That takes footprint. So we can probably bring in one more product line, brand new product line and handle it with our existing footprint.

我認為，有兩種看待成長的方式。如果我們確實引進全新的產品線，我們從霍尼韋爾收購了兩條全新的產品線。這需要足跡。因此，我們可能可以再引入一條產品線，全新的產品線，並用我們現有的足跡來處理它。

But we can grow our existing product lines that we have. And even if we do an acquisition of a product line of cockpit displays, which is similar to cockpit displays that we have, I don't necessarily need a lot more footprint. So the answer is it really depends. And because of that, we've put in planning permission to expand the building, both in terms of holding larger amount of inventory and as well as expanding the factory floor where we could bring brand new product lines in here.

但我們可以擴大現有的產品線。即使我們收購了駕駛艙顯示器產品線（與我們現有的駕駛艙顯示器類似），我也不一定需要更多的佔地面積。所以答案是這確實取決於。正因為如此，我們已經獲得了擴建大樓的規劃許可，既可以保留更多的庫存，也可以擴大工廠車間，以便在這裡引入全新的產品線。

And if we move ahead with that, it's about probably about a year before we can have the addition here up and running. The CapEx requirement for that is roughly is going to be around $5 million, and we will get some we will get some help from the state of Pennsylvania as well as our local government to help towards that. Nothing significant, but there's stuff that we've been talking to. So we were seriously looking at that in order to help us grow. I mean, I like to grow this over the next several years well beyond the $100 million in revenue. So we need that expansion.

如果我們繼續這樣做，我們可能需要大約一年的時間才能在這裡添加並運行。對此的資本支出要求約為 500 萬美元左右，我們將從賓州以及地方政府獲得一些幫助來實現這一目標。沒什麼重要的，但我們一直在談論一些事情。因此，我們正在認真考慮這一點，以幫助我們成長。我的意思是，我希望在未來幾年內將其收入遠遠超出 1 億美元。所以我們需要這種擴充。

Yes. The way we even looked at the expansion, too, is we have some redundancies out and various facilities we can consolidate them into one place. When I see those redundancy storage units and things like that to kind of get the cost reductions down, and when you look at this, the money spent, how do we finance it? We're working with the state and locals to get preferable financing in our in our current bank to work with.

是的。我們甚至考慮擴張的方式也是，我們有一些裁員和各種設施，我們可以將它們整合到一個地方。當我看到那些冗餘儲存單元和類似的東西可以降低成本時，當你看到這個，花的錢，我們如何融資？我們正在與州和當地人合作，以便在我們現有的銀行中獲得更好的融資。

Great. Sounds good, guys. Thank you.

偉大的。聽起來不錯，夥計們。謝謝。

(Operator Instructions)

（操作員說明）

Gowshihan Sriharan Singular Research.

Gowshihan Sriharan 奇異研究。

Good morning. Thank you for taking my questions. The first question is regarding the military retrofit opportunities. Could you provide insight into whether the margin profile for these contracts are comparable to those in the commercial sector? I know you've talked about the kind of initial investments you've made in terms of hiring and staffing. And also, if the new administration decides to scale back on its commitment to NATO, would that have any impact on your near term operations.

早安.感謝您回答我的問題。第一個問題是關於軍事改造機會。您能否深入了解這些合約的保證金狀況是否與商業部門的保證金相當？我知道您已經談到了您在招聘和人員配備方面所做的初始投資。此外，如果新政府決定減少對北約的承諾，這會對你們的近期行動產生任何影響嗎？

So in terms of margin profiles, they are similar to our existing product margin profile. With regards to a changing administration, I mean, I don't foresee a reduction in military spending based on what you see is happening around the world. But we also have tapped into a lot of foreign military organizations with the new again we hired we hired a sales team from Honeywell that dealt with their international business. And we're seeing a lot of opportunities coming in from foreign militaries as well. So I am optimistic on the military side.

因此，就利潤率而言，它們與我們現有的產品利潤率相似。關於更換政府，我的意思是，根據您所看到的世界各地正在發生的情況，我預計不會減少軍事開支。但我們也利用了許多外國軍事組織，我們又聘請了霍尼韋爾的銷售團隊來處理他們的國際業務。我們也看到很多來自外國軍隊的機會。所以我對軍事方面持樂觀態度。

Okay. And I know you mentioned on your last call about some delayed information from Honeywell. Could you give us an update on the status of the drawings and design information from Honeywell, and how is that affecting your timeline for initiating in-house assembly production? And is that fiscal '25 timeline still kind of the realistic time frame for transition?

好的。我知道您在上次通話中提到了霍尼韋爾提供的一些延遲資訊。您能否向我們介紹霍尼韋爾圖紙和設計資訊的最新狀態，以及這對您啟動內部組裝生產的時間表有何影響？25 財年的時間表仍然是現實的過渡時間表嗎？

I believe so. Yes. I think all the transition is going to happen in calendar '24 and based on what I've seen so far. And so, we should be able to in calendar '25 be able to be fully operational and be able to take care of all the advantages we can?

我相信是這樣。是的。根據我迄今為止所看到的情況，我認為所有轉變都將在 24 日曆年發生。那麼，我們應該能夠在 25 年曆中全面運作並能夠利用我們所能提供的所有優勢？

Okay. And I know in the past, one of the interesting or the more exciting part of your work story is the autonomous flight opportunity. Would you outline the kind of key industry milestones that investors should be aware of along with the timelines for those milestones to for this opportunity to transform into a significant growth engine?

好的。我知道在過去，你的工作故事中最有趣或更令人興奮的部分之一就是自主飛行機會。您能否概述投資者應了解的關鍵行業里程碑以及這些里程碑的時間表，以便將這一機會轉變為重要的成長引擎？

Well, I think right now in terms of industry, as always, (inaudible) is the head of the FAA with these things. And there were whispers that maybe by 2030 that they would go into the first phase of autonomy on the air transport side of it.

嗯，我認為現在就產業而言，一如既往（聽不清楚）是聯邦航空局負責這些事情的負責人。有傳言稱，也許到 2030 年，他們將在航空運輸方面進入自主化的第一階段。

So that's kind of where we're really looking at potential over the next five or six years that we'll see some of that materializing. In terms of IS&S, the opportunities that we have, which are kind of closer in terms of the vision is one is on the military side because there is movements and developments within the military side of things where they could benefit from some of these.

因此，這就是我們真正關注未來五到六年潛力的地方，我們將看到其中一些實現。就 IS&S 而言，我們擁有的機會，就願景而言更接近的是軍事方面，因為軍事方面存在一些運動和發展，他們可以從其中的一些中受益。

And we continue communicating and putting our with those folks to be able to utilize some of these capabilities in some of the aircraft. As well as I said, the road map to getting there includes a lot of small steps of incremental automations in the cockpit. And those features as we develop, we offer them to our baseline of customers and that brings in revenue for us.

我們繼續與這些人溝通並讓他們能夠在某些飛機上利用其中一些功能。正如我所說，實現這一目標的路線圖包括駕駛艙中增量自動化的許多小步驟。隨著我們開發這些功能，我們將它們提供給我們的客戶基線，這為我們帶來了收入。

Okay. Thank you guys, and that's all I had.

好的。謝謝你們，這就是我所擁有的一切。

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

我們的問答環節到此結束。我想將會議轉交管理層發表閉幕詞。

Thank you, operator. And thank you all for your time and interest in IS&S. If you don't speak during the quarter, we look forward to speaking to you again on our next quarterly call. Have a good day.

謝謝你，接線生。感謝大家花時間關注 IS&S。如果您在本季度沒有發言，我們期待在下一個季度電話會議上再次與您交談。祝你有美好的一天。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連線。