Innovative Solutions & Support - Earnings Call - Q4 2025

Transcript

Operator (participant)

Welcome to the Innovative Aeroystems Fourth Quarter 2025 Results Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw the question, please press star then two. 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.

Paul Bartolai (Partner in the Investor Relations Practice)

Thank you. Good morning, everyone, and welcome to Innovative Solutions and Support Fourth Quarter and Full Year Fiscal 2025 Results Conference Call. Leading the call today are our CEO, Shahram Askarpour, and CFO, Jeff DiGiovanni. This morning, we issued a press release detailing our Fiscal 2025 Fourth Quarter and Full Year Operational and Financial Results. This release is publicly available in the Investor Relations section of our corporate website at www.iascorp.com. 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.

For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factor section of our latest report filed with the SEC. Additionally, please note that you can find reconciliations of all historical non-GAAP financial measures mentioned on this call and press release issued this morning. Today's call will begin with prepared remarks from Shahram, who will provide a review of our recent business performance and an update on our strategic framework, including our accomplishments during Fiscal 2025 and our key strategic priorities for Fiscal 2026, followed by a financial update from Jeff. 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.

Shahram Askarpour (President. CEO and Director)

Thank you, Paul, and good morning to everyone joining us on the call today. Fiscal 2025 was another transformational year for our entire organization, highlighted by continued discipline execution on our strategic priorities, culminating in outstanding fourth quarter and full year performance. In October, in connection with our ongoing transformation, we rebranded to Innovative Aerosystems, a move that better reflects our strategic focus on engineering, manufacturing, and supplying advanced avionics solutions for commercial, business, and military aviation markets. Our new brand identity underscores our unique capability to integrate next-generation avionics with intelligent system design, delivering innovative mission-critical aerospace solutions. At Innovative Aerosystems, we remain committed to powering progress across the industry's most prominent legacy fleets and emerging next-generation platforms.

Entering Fiscal 2026, we are executing against a clearly defined go-to-market strategy centered on integrating intelligent system design with advanced avionics to deliver differentiated solutions that improve performance, enhance safety, and reduce operational complexity for commercial and defense aerospace customers. We ended the year on a strong note, with fourth quarter revenue increasing 45% year-over-year to $22 million. The combined benefit of increased throughput from client programs, a more favorable sales mix, and improved operating leverage resulted in fourth quarter net income of $7.1 million or $0.39 per diluted share, Adjusted EBITDA of $9.6 million, an increase of 71% versus the prior year. For the full year, we generated revenue of $84 million, up nearly 80% from the previous year. Our Fiscal 2025 net income was $15.6 million or $0.88 per diluted share.

Adjusted EBITDA was $25 million, up just over 80% from last year, despite significant investments we made to position the company for its next phase of growth, including the expansion of our engineering team, enhancements to our sales organization, investments in infrastructure and systems to support our defense customers, and the integration of our F-16 platform production into our external facility. I will discuss each of these in more detail shortly. To that end, I will now provide an update on our progress on the IANEX, our long-term value creation strategy. Our IA Next strategy prioritizes profitable growth, sustained operational excellence, and disciplined capital allocation as key drivers of long-term value creation. This framework is the mechanism by which we intend to deliver on our long-term target of $250 million in revenue and adjusted EBITDA margins of between 25% and 30%, driven by a combination of organic and inorganic growth.

Our strong Fiscal 2025 results are a direct reflection of the execution on these key strategic initiatives. I will now discuss some of our key accomplishments during the year and highlight our focus priorities for the year ahead. Let's begin with a review of our growth initiatives, which focus on new product development, cross-selling of key solutions, expansion of our military capabilities, and enhancements to our integrated avionics cockpit solution. An important milestone we achieved during 2025 was the successful completion of the integration of the F-16 program production into our external facility. We have completed all required recertifications and resumed full-scale production of the Digital Flight Control Computer earlier this month. The recertification and resumption of production of the improved Programmable Display Generator is planned for the next month.

We have a strong backlog of demand for our new products used in the F-16 and are encouraged by the growth potential here. The F-16 remains a workhorse for our military as well as many of our allies around the world, and we are encouraged by the long-run growth we see ahead. In addition to the attractive growth opportunities related to this platform, during 2026, we plan to begin insourcing F-16 product line subassemblies. This initiative, combined with the elimination of the duplicative costs we incurred during 2025 as we migrated the F-16 program production into our facility, should lead to improved and more consistent margins related to these products moving forward. Capitalizing on our legacy of engineering excellence, new product development is a critical aspect of our growth strategy, so we were pleased by the significant progress we made during 2025.

In the year ahead, we intend to advance our progress towards autonomous flight within the business jet market through the next-generation UMS-2 platform. This re-engineered platform enables the integration of artificial intelligence in the cockpit, significantly enhancing the level of cockpit automation. We have completed test flights on the Pilatus PC-24, and we'll be delivering the new version to Pilatus in June 2026. Another important area of new product focus during 2025 has been our new Liberty Flight Deck. This is a customer-centric, customizable design that can be tailored for virtually any type of aircraft, including large passenger and cargo planes, business jets, and military aircraft. We unveiled the Liberty Flight Deck at the National Business Aviation Association show in October of this year, and the customer feedback was very positive.

In the coming year, we will continue with our Liberty avionics certification activities with a goal of 2027 for first certification. Our new Liberty offering can significantly reduce workload in cockpits by using automation to enhance safety and deliver substantial cost savings for Part 25 aircraft operators. The meaningful progress we achieved on new products is a direct result of the recent investments we have made in our engineering department and our core competencies of innovation and engineering expertise. Our engineering organization is a vertically integrated, multidisciplinary team that brings mechanical, electrical, software, and systems engineering together under one roof. This structure enables agile decision-making, tight collaboration, and full control over every stage of product development. IA maintains an independent verification and validation group that ensures strong design integrity and compliance throughout the development cycle, in compliance with certification requirements to meet the highest level of safety.

Our engineering team uses modern, fully integrated development tools and employs state-of-the-art microprocessors and FPGA technology. The department has also invested and utilizes an internal AI-based development infrastructure, which hosts a knowledge-based AI model that optimizes documentation, supports training initiatives, and facilitates cross-department product queries. We have expanded our engineering team by more than 50% in each of the last couple of years, with engineering personnel representing a third of our total headcount at year-end. Management and the core engineering team have been with the company for over a decade on average, contributing to stability, deep product knowledge, and continuity. We view our R&D capabilities to be critical to achieving our long-term growth objectives, and we plan to make additional investments in our engineering headcount in Fiscal 2026. Importantly, we maintain an excellent engineering retention rate, supported by an engaging and challenging work environment.

Unique initiatives such as sponsoring private pilot training ensure engineers gain firsthand understanding of the pilot and avionics environment. Our engineering team has demonstrated this agility and innovation with programs like the new Liberty Flight Deck and consistently shows a willingness to take on ambitious projects and new technologies that strengthen the company's competitive position, like multicore processing technology. With a strong talent pipeline on parallel vertical integration and a culture that embraces challenging projects and new technologies, our culture of innovation serves as a key driver of the company's continued growth and competitive advantage. We look forward to updating you on the continued progress on our UMS-2 and Liberty platforms, as well as additional innovations and new technologies in the future as we continue to enhance our integrated cockpit avionics solutions and move closer to autonomous flight.

During 2025, we also laid groundwork for the expansion of our military business, which we view as an important future growth driver. We made important investments that strengthen our security and accounting services to become compliant with the Defense Federal Acquisition Regulation Supplement or DFARS requirements. These are necessary improvements as we continue to bid on larger DoD programs. And finally, as it relates to our growth strategy, all of this is supported by the recently completed expansion of our external facility. We tripled the production capacity of our facility in 2025, positioning us to scale production over the coming years. Looking ahead, we now have the people, tools, and capabilities in place to execute on our growth strategy.

Now, tending to our pursuit of operational excellence, we made key investments during 2025 that should position the company for solid operating leverage in the coming years as we focus on the goal of delivering Adjusted EBITDA margins between 25%-30% over the longer term. During 2025, we completed the integration of our NetSuite ERP system, which provides a platform to efficiently scale our business. This new system will allow us to utilize more robust data to support actionable business decisions. Additionally, we have made further investments in infrastructure and systems to support our growth aspirations. With the infrastructure already in place, we expect only modest increases in operating costs moving forward, allowing for operating leverage as we grow. Finally, as it relates to balance sheet optionality, we continue to add available liquidity to support both organic growth and strategic acquisitions in the years ahead.

An important accomplishment in support of our growth strategy was the recent closing of our new five-year $100 million committed credit agreement with a lending syndicate led and arranged by JPMorgan Chase. The new facility provides an additional $65 million in liquidity versus our previous $35 million facility and an option subject to certain conditions to request up to $25 million in additional loan commitments under an accordion feature in the agreement, bringing the total potential facility to $125 million. This facility provides the improved flexibility required to execute on a long-term growth strategy. In addition to the investments in organic growth I have already discussed, we remain focused on supplementing our growth strategy through strategic acquisition. Our discipline acquisition strategy centers on acquiring aerospace and defense component product lines or businesses with significant aftermarket potential and proprietary content and processes.

We are focused on acquisition of product lines and businesses that have above-market growth potential, are strongly cash-generative, and are profitable. Aerospace supply chain is highly fragmented, with many components supplied by smaller, privately owned businesses that in turn sell to system integrators, Tier 1 or Tier 2 manufacturers, or large OEM participants. We continue to see significant opportunities for further consolidation of this supply chain. Before I hand the call over to Jeff, I want to welcome Richard Silfen to our Board of Directors as an independent director. Richard is currently General Counsel of Hildred Capital Management, a private equity firm that specializes in control-oriented transactions in lower-middle market companies. Before joining Hildred, Richard was a partner and co-chair of mergers and acquisitions at Duane Morris, a multinational law firm. With Richard's appointment, the board has expanded to seven directors.

In summary, as we enter Fiscal 2026, we're well positioned to benefit from the foundation investments we've made across the organization during the last several years. Our team continues to execute at a high level, end-market trends remain favorable, and our financial position is solid, all of which position us to deliver another year of profitable growth. We are energized by the opportunities ahead of us and remain committed to advancing our long-term strategic initiatives while maintaining a focus on delivering value for our shareholders. With that, I'll turn the call over to Jeff for his prepared remarks.

Jeff DiGiovanni (CFO)

Thank you, Shahram, and good morning to all those joining us. Today, I will provide a high-level overview of our fourth-quarter performance, including a discussion of our working capital, balance sheet, and liquidity profile at quarter end, and wrap up with some comments on our outlook for the new fiscal year.

We generated net revenues of $22.2 million in the fourth quarter, up 45% from the fourth quarter last year. The strong growth came despite the expected pause in F-16 production we discussed last quarter as we completed the transition of this production into our Exton facility. Consistent with our prior expectations, production related to the F-16 began to ramp back up during December, and we expect to return to normal production levels in the first half of Fiscal 2026. Revenues during the fourth quarter benefited from increased volumes in the air transport market and business aviation. Product sales were $14.3 million during the fourth quarter, up from $9.8 million during the same period last year, driven primarily by strong demand in the air transport sector.

Service revenue was $7.9 million, owing largely to customer service sales from the Honeywell product lines, including $300,000 associated with the F-16 program and an increase of $1.3 million in non-recurring engineering services. Gross profit was $14.1 million during the fourth quarter, up from $8.5 million reported in the same period last year, an increase of 65%. The strong growth was driven by the increases in revenue and a more favorable revenue mix, including the benefit of high-margin sales in the air transport market. As a result of the favorable sales mix, our fourth-quarter gross margin was 63.2%, up from 55.4% in the same period last year. As we have stated in recent quarters, we continue to expect our gross margins in the future to be in the mid-40% range, given our expected mix of revenue going forward.

With the integration of the Honeywell product line into our facilities, we expect less volatility in our gross margins relative to what we saw in 2025. We could still see some quarterly variation based on our revenue mix, especially as we continue to grow our military and OEM businesses, but we still expect full-year gross margins to be within our targeted range. As a quick reminder, military sales carry a lower average gross margin compared to commercial contracts. However, importantly, there is minimal operating expense associated with these contracts, resulting in incremental EBITDA margins. Operating expense during the fourth quarter of 2025 was $5.8 million, an increase from $4.2 million during the same period last year. The increase in operating expense was driven by investments to support growth, including additional headcount and engineering sales and services.

Net income for the quarter was $7.1 million as compared to $3.2 million last year. GAAP earnings per diluted share of $0.39 increased from $0.18 last year. Adjusted EBITDA was $9.6 million during the fourth quarter, up from $5.6 million last year, an increase of 71%, largely due to our revenue growth and the more favorable revenue mix. During the fourth quarter, we recognized a $1.8 million gross benefit related to the Employee Retention Tax Credit, a refundable payroll tax credit enacted under the CARES Act and subsequent legislation. The benefit relates primarily to qualifying wages paid during the periods and was recognized during the quarter upon confirmation of eligibility. Moving on to backlog, new orders in the fourth quarter of Fiscal 2025 were approximately $27 million, and backlog as of September 30th was approximately $77 million.

The backlog includes only purchase orders in hand and excludes additional orders from the company's OEM customers under long-term programs, including Pilatus PC-24, Textron King Air, Boeing T-7 Red Hawk, and the Boeing KC-46A, and the F-16 with Lockheed Martin. We expect these programs to remain in production for several years and anticipate they will continue to generate future sales. Further, due to their nature, the customer service lines do not typically enter backlog. Now, turning to cash flow. For the full year ended September 30th, 2025, cash flow from operations was $13.3 million compared to $5.8 million in a year-ago comparable period due to our solid operating results. Capital expenditures during the Fiscal 2025 were $6.5 million versus a little over $600,000 in a year-ago period. The increase in our capital expenditures related primarily to the cash outlays for the expansion of our Exton facility.

Despite the increase in capital spending compared to last year, we were still able to generate free cash flow of $6.8 million during Fiscal 2025, up from $5.1 million in the previous year. As of September 30th, 2025, we had total debt of $24.4 million and cash and cash equivalents of $2.7 million, resulting in net debt of $21.7 million. As of September 30th, 2025, we had total cash and availability under our line of credit of approximately $77.7 million. Our leverage at the end of the quarter was 0.9x. Our modest leverage combined with availability under our expanded credit facility gives us significant financial flexibility to execute on our strategic initiatives. Before we move into Q&A session, I'd like to provide our thoughts around the outlook for our business entering 2026.

As we have discussed during Fiscal 2025, our results benefited from the pull forward of revenues related to the F-16 platform as we prepared for the transfer of production into our Exton facility. Additionally, our Fiscal 2025 results also included some service revenues for the F-16 platform that we do not expect to repeat in Fiscal 2026. Excluding these factors, we estimate IA generated high single-digit year-over-year organic revenue growth in Fiscal 2025 and believe this to be a reasonable annual organic growth run rate for the business on a normalized basis over time. However, when we look at Fiscal 2026, we expect organic revenue to grow more modestly relative to our longer-term target, given the pull forward of revenue related to the F-16 production and service revenue from Fiscal 2026 into Fiscal 2025, which was expected.

Looking ahead as we build off a higher base of revenue, we intend to drive the next phase of growth through a combination of market share gains, new product development, expanded capabilities, and discipline in organic growth. When we think about the cadence of Fiscal 2026, we expect first-quarter revenues to be in the range of $18 million-$20 million, building steadily on a sequential basis as we move throughout the year. That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our next question comes from Bobby Brooks with Northland Capital Markets. Please go ahead.

Bobby Brooks (Senior Equity Research Analyst)

Hey, good morning, guys. Thank you for taking my question. Hey, good morning. So terrific fourth quarter results, and you had mentioned that the strength in sales is driven by some momentum in the military programs. Is it right to assume that when you're referencing that, it's really all related to the work with the F-16s, or is there something else? No, it's not just the F-16. There's also we do work with the C-130 and other Boeing products programs, so that's kind of where we saw some of the fourth-quarter impact. Okay. So it was not just the F-16. Could you maybe help frame what was non-F-16 for the military results, what was non-F-16 net positive?

Jeff DiGiovanni (CFO)

Yeah. It was probably $2 million in there for the C-130 and Boeing platforms in the military programs. The F-16 really had nominal revenues in for the fourth quarter. There was probably about close to a little over $300,000 in service revenue that hit this period on the F-16. As we expected, we didn't expect any revenue in production for the F-16 in Q4.

Bobby Brooks (Senior Equity Research Analyst)

Got it. It was great to see you guys put out those 2029 targets. I was curious to hear, and I'm sorry if I missed this early in the call, but was curious to hear your assumptions underpinning that outlook.

Jeff DiGiovanni (CFO)

Yeah. Our $250 million revenue target assumes we're able to generate organic growth in high single-digits range with a balance really driven by discipline acquisition strategy. It's important to note that we believe our acquisition strategy could be accretive to our longer-term organic growth expectations given our expanded cockpit aviation solution, which will allow us to increase cross-selling and the broader market opportunities.

Bobby Brooks (Senior Equity Research Analyst)

Got it. And then any comments, assumptions on the margin outlook there?

Jeff DiGiovanni (CFO)

Yeah. So we're projecting margins in the range of EBITDA margins, 25%-30% in that target range.

Bobby Brooks (Senior Equity Research Analyst)

Yeah. But just curious what the assumptions are underpinning you guys hitting that target.

Jeff DiGiovanni (CFO)

Yeah. A lot of the platforms and a lot of the, I would say, the operating expenses we have here today. So a lot of it, we're going to be driving through the growth in EBITDA margins with that future growth. And we're looking to invest in R&D. So you'll see revenue go up and some of the R&D go up for these programs. That's why we're in the 25%-30% EBITDA margin range.

Bobby Brooks (Senior Equity Research Analyst)

All right. I appreciate that. And just last question for me. You had mentioned the Liberty Flight Deck was really well received by both current and potential customers. I was just curious to hear what did they like most about it? Is it maybe lower cost than the alternatives out there, or is there some type of proprietary tech embedded that gives you an edge? Just curious to hear that.

Shahram Askarpour (President. CEO and Director)

So I think talking in general, where the avionics market has gone is now being dominated, especially on the business aviation, is being dominated by Garmin and to some extent Honeywell and Rockwell Collins, all of which will give you a solution that they have. Our solution, we provide the solution to the customer of what they want, not what we have. That was very well received because we also demonstrated that we can do that without significant NRE requirements. That was very well received. I think we did have an agreement put in place with one new customer that it was a memorandum of agreement that we're going to be negotiating the details of the contract. We've also seen additional customers that have shown good interest. We're in negotiations with two or three of those customers with regards to the Liberty Flight Deck.

What we see in the market is that the trend of industry going towards new OEMs coming along with the new engine technologies being a lot of hybrid engines for carbon emission reduction. That's driving a whole few groups of aircraft OEMs coming into the market, which they need customization because of the special needs of their airplanes. And we see an opportunity for us to grab that bull by the horn and dominate that market.

Bobby Brooks (Senior Equity Research Analyst)

Really appreciate the color, Jeff, and Shahram. And congrats on the strong Q4.

Operator (participant)

Our next question comes from Greg Palm with Craig-Hallum Capital Group. Please go ahead.

Greg Palm (Senior Research Analyst)

Yeah. Thanks, Morgan, everyone. And congrats on a good way to close out the year. Maybe we can start with. I just wanted to dig into the fiscal Q4 results just a little bit more. I mean, I think you mentioned air cargo, business jet, but was there specific product lines that contributed to the upside relative to maybe your prior expectations?

Jeff DiGiovanni (CFO)

So our prior expectations, a couple of things. One, when we look at what occurred over the quarter, as we mentioned before, we always have a lot of volatility, I think, when we're in these transitional periods with Honeywell. When we got their revenue reports and things like that, my team digs through them, challenges those questions. And margins, we knew Q3 looked a little off. We got that resolved by the end of this year, fiscal year. And that was probably about another $1.5 million, roughly $2 million there, which went right to margins. So when you look at overall margin, kind of I would say for the fourth fiscal year, you're in that 45% margin. But Q4 was high and Q3 was low. You had a little bit there.

And in terms of the air transport, we just saw more demand in the retrofit market, which typically has higher margins. And we saw a comeback in business aviation as well.

Greg Palm (Senior Research Analyst)

Got it. Okay. And then in terms of the orders number, I mean, that was a really good number in the quarter as well. Book to bill well over one. Anything to necessarily or specifically call out there?

Jeff DiGiovanni (CFO)

No. I think as we make investments in our sales teams, we're starting to see some of the fruits of those labors, where the sales folks are now out there trying to generate these sales for us. It just takes these kinds of sales, it's a longer lead time. So we went from having one person back in 2023 to about a sales team of about six today.

Greg Palm (Senior Research Analyst)

Got it. Okay. And then I want to spend a minute on this targeted organic growth rate. I think you said high single digit, sort of on a normalized basis. I mean, how much of Liberty Flight Deck and UMS-2 is built into that? Because both of these seem like pretty significant opportunities that could contribute a lot more than high single-digit growth, and I guess we're probably talking about a few years, but I just wanted to kind of get your sense on the contribution potential of that.

Shahram Askarpour (President. CEO and Director)

Yeah. So on the OEM side of the Liberty Flight Deck, which includes the UMS-2 as part of it, we're looking at 2030, 2031 for those new platforms to get into production. On the aftermarket side of it, we're going to see things hopefully as early as 2027, where we will have our initial certifications in the aftermarket side of the business jet side of things. Organic growth, at least in the next few years, is going to come from several platforms that we've already seen growth in those.

Being on the air transport side, on the aftermarket side, we're beginning to see some of our product lines taking further legs into other platforms. For example, we were never that successful on the 737 business with our cockpit solutions, but we're seeing an uptick in that on the 737 side, on the C-130 side, on the military side. We're seeing a lot of increased interest, mainly because the competitors we had in the past in those platforms, mainly being Collins and Honeywell, Honeywell kind of doesn't have much to offer on that platform anymore. And Rockwell Collins hasn't done the investments. So we're seeing a lot of the countries which don't have the kind of budgets to spend on Rockwell Collins solutions that they sell to the U.S. Air Force coming and looking at lower-cost solutions like we have.

And so we're seeing an uptick in a lot of areas that's going to drive our organic growth. Now, prior to doing these acquisitions, we were growing somewhere in double-digits, mid-teens organic growth. When you do $26 million in revenue, growing it organically by 15% doesn't require a lot of additional revenue to come in. When you're doing $100 million in revenue, obviously, that organic growth becomes harder to achieve in double digits. That's why we're seeing that long-term single-digit organic growth is high single-digit organic growth is what we're striving for.

Greg Palm (Senior Research Analyst)

Yeah. Makes sense. All right. Appreciate all the color.

Jeff DiGiovanni (CFO)

Thanks, Gregg.

Operator (participant)

Our next question comes from Sergey Glinyanov with Freedom Broker. Please go ahead.

Sergey Glinyanov (Senior Equity Research Analyst)

Good morning, gentlemen. Shahram, Jeff, Paul. So my congratulations on a really successful quarter and year. And my question is, gross margin is much better than expected. You have achieved such a low product cost level, which is the same as a year ago. Whether it's only due to sales mix or there is anything else, should we expect any substantial changes in next year?

Jeff DiGiovanni (CFO)

So when we look at gross margins, as we said before, there's a lot of volatility, especially when you're doing transitions, product mix, especially with the governmental programs. That's kind of why we look at from a whole year basis versus quarter over quarter because it's timing of also product wins and production. So when you look at the full year, we're in the mid-40%s, and that's kind of what we projected a few months ago to say we're in the mid-40%s. Q4 was over 60%, and Q3 was under 40%.

There was a little bit, I would say, of a shift in terms of when we got the revenue and the information on the F-16, the margins were lower. Again, my team challenges them. We go back and forth, but that takes time. And sometimes there's nothing there. This time, we had a resolution, and we worked through that with Honeywell. And there's probably about close to almost $2 million in changes there, which affects the margin quarter over quarter. So when you take that out, it's kind of, I would say, consistent between those quarters, but again, blended on the mid-40s.

Sergey Glinyanov (Senior Equity Research Analyst)

Okay. Got it. Thank you. And what should we expect in revenue in the next four quarters? I mean, will it be smoother and even a trajectory than a year ago in terms of previous acquisitions, etc.?

Jeff DiGiovanni (CFO)

Yeah. Unfortunately, we don't give that forward-looking guidance. We're trying to stay on the target of focusing on the $250 million revenue growth for the next few years to get there.

Sergey Glinyanov (Senior Equity Research Analyst)

Okay. Maybe you can share your thoughts about capital expenditures in the next year after Exton facility expansion is finalized.

Jeff DiGiovanni (CFO)

So I mean, the Exton facility has been finalized. That spend's all done. We're not expecting major shifts in capital expenditures in 2026.

Sergey Glinyanov (Senior Equity Research Analyst)

Okay. And I think the last question is, you emphasized the Employee Retention Tax Credit was a question. Is it one-time benefits, or we can expect it next year?

Jeff DiGiovanni (CFO)

No. That was a one-time benefit. So the company filed under the Employee Retention Tax Credit a few years ago, I guess, with some changes in the government and the process. We got those checks, the money back in during this period. And that's when you take credit for it. That's why we called it out because it's a one-time event that's not going to occur again.

Sergey Glinyanov (Senior Equity Research Analyst)

Okay. Thank you. That's all from me.

Operator (participant)

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

Shahram Askarpour (President. CEO and Director)

Thank you very much for everybody for attending our conference call. Have nice holidays and enjoy the season. Thank you.

Operator (participant)

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