ISSC delivered a transformative QQ4 2024 performance characterized by meaningful top-line expansion, stronger operational leverage, and a strategic shift toward high-value avionics solutions. In Q4, revenue rose 18% year-over-year to $15.38 million, with backlog at $89.2 million as of September 30, 2024 and new orders totaling $95.4 million, including $74.3 million of backlog acquired via the Honeywell transaction. Management attributes much of the growth to expanded military programs, cross-selling from Honeywell platforms, and the ramp of legacy commercial platforms. For the full year, ISSC reported revenue growth exceeding 30% and adjusted EBITDA growth of similar magnitude, underscoring operating leverage as volumes scale.
The company outlined a clear growth framework labeled IS&S Next, emphasizing targeted commercial growth in core avionics verticals, improved fixed-cost absorption, and disciplined capital allocation. Notable strategic moves include Honeywell-related acquisitions that broaden capabilities and customer reach, and a plan to expand manufacturing capacity by more than 100% with a $6 million facility expansion in 2025 to support higher volumes and in-sourcing of sub-assemblies. Management also highlighted advances in product development, notably AI-enabled cockpit automation (UMS and UMS II) and a multi-year pipeline with DoD and allied militaries. While gross margins are expected to normalize toward the mid-50% range due to mix shift toward higher-margin military programs and incremental amortization from acquisitions, ISSC targets higher adjusted EBITDA margins as top-line growth accelerates.
Key risks include execution of integration milestones, cadence of backlog realization from military programs, and potential variability in DoD spending. Nevertheless, with a net leverage of about 2.0x and ample liquidity after expanding the revolver to $35 million, ISSC remains well-positioned to sustain growth, advance strategic product lines, and capture cross-selling opportunities across the commercial and military aviation ecosystems.