The earnings decline is real and material — GAAP EPS fell 37% YoY and Adjusted EPS fell 19% YoY despite a revenue beat vs low consensus. The F-16 revenue headwind is explained as a one-time comp issue, but the company did not provide formal guidance, leaving uncertainty. The three acquisitions add $10M in annual revenue but also increased net debt to $48.4M (1.7x leverage). Monitor the Q3 call for F-16 normalization and acquisition integration updates; the stock may re-rate lower if the organic growth narrative weakens.
Price Chart
Executive Summary
ISSC reported fiscal Q2 2026 revenue of $22.4M (+2% YoY) and GAAP diluted EPS of $0.19, down from $0.30 in the prior year. Adjusted EPS was $0.26, also down from $0.32. Revenue growth was muted as strong commercial aftermarket growth (+69% ex-F-16) was offset by a $7M decline in F-16 revenue due to a tough comp from the prior year's manufacturing transition. Net income fell to $3.4M from $5.3M, and operating cash flow for the quarter was $2.3M. The company completed three acquisitions and guided for F-16 normalization in Q3, but the headline numbers show a clear earnings decline.
Key Financial Metrics
Key Facts
- Revenue of $22.4M, +2% YoY (consensus $21.1M, +6.2% beat)
- GAAP diluted EPS $0.19 vs $0.30 YoY (-36.7%)
- Adjusted diluted EPS $0.26 vs $0.32 YoY (-18.8%)
- Net income $3.4M vs $5.3M YoY (-35.6%)
- Adjusted EBITDA $6.8M vs $7.7M YoY (-11.7%)
- Operating cash flow $2.3M (Q2 only), +78% YoY from $1.3M
- Free cash flow $0.7M (Q2 only), improved from -$0.3M YoY
- Backlog $87.0M, up $7.4M YoY
- Net debt $48.4M, leverage ratio 1.7x (vs 1.4x a year ago)
- Completed three acquisitions (Moog autopilot, two Honeywell deals) projected to add $10M annual revenue at ~50% gross margin
Financial Impact
GAAP EPS declined 37% YoY; Adjusted EPS declined 19% YoY; revenue growth slowed to 2% from 37% in Q1
Risk Factors
- F-16 revenue normalization may not fully materialize in Q3 as expected
- Net debt increased $22.2M YoY to $48.4M, leverage at 1.7x
- Operating expenses rose to $6.5M from $4.3M YoY (+52%), pressuring margins
- No formal forward guidance provided, creating uncertainty
Market Snapshot
Investment Themes
Documents Analyzed
This report is based on 6 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| 8-K Filing (Primary) | 0001104659-26-060758 |
| Document: issc-20260514x8k.htm | 0001104659-26-060758 |
| Document: 0001104659-26-060758-index-headers.html | 0001104659-26-060758 |
| Document: 0001104659-26-060758-index.html | 0001104659-26-060758 |
| Document: 0001104659-26-060758.txt | 0001104659-26-060758 |
| 8-K Data (Synthetic) | 0001104659-26-060758 |
Track record builds as more directional reports settle.
Filters
| Type | Now | ||||
|---|---|---|---|---|---|
Oct 6, 2026 21d ago | 8-K/A | — | awaiting T+60 | — | — |
May 14, 2026 23w ago | 8-K | $17.41 $19.75 | ▼ −13.44% | ▼ −9.85% | — |
Apr 2, 2026 29w ago | 8-K | $22.52 $18.00 | ▼ −20.07% | ▼ −34.23% | — |
US Market Status
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