ETC Announces Fiscal 2026 Second Quarter Results
SOUTHAMPTON, PA, USA, October 14, 2025 – Environmental Tectonics Corporation (OTCID: ETCC) (“ETC” or the “Company”) today reported its financial results for the thirteen week period ended August 29, 2025 (the “2026 second fiscal quarter”).
Robert L. Laurent, Jr., ETC’s Chief Executive Officer and President stated, “We are pleased with the 21% and 26% increase in ETC sales and operating income, respectively vs. prior year driven by an increase in sales of Aircrew Training Systems (“ATS”) and Sterilizers Systems during the 2026 second fiscal quarter. We exit the quarter with a sales backlog of $62 million and a large pipeline of opportunities”.
Fiscal 2026 Second Quarter Results of Operations
Net Income
Net income was $1.5 million, or $0.08 diluted earnings per share in the 2026 fiscal second quarter, compared to net income of $1.7 million during the 2025 fiscal second quarter, equating to $0.09 diluted earnings per share. The $0.2 million decrease is a result of a $0.2 million increase in income before income tax being more than offset by a $0.4 million non-cash tax expense attributable to the partial utilization of our Net Operating Loss (NOL). The $0.2 million increase in income before income tax is attributable to a $2.9 million or 20.5% increase in net sales slightly offset by a 0.4% decrease in gross profit margin and a $0.3 million or 12.3% increase in operating expenses in fiscal second quarter 2026 as compared to fiscal second quarter 2025.
Net Sales
Net sales in the 2026 fiscal second quarter were $17.0 million, an increase of $2.9 million, or 20.5%, compared to 2025 fiscal second quarter net sales of $14.1 million. The increase in net sales was driven by a $2.7 million or 30.9% increase in ATS and a $0.9 million or 26.9% increase in Sterilizer Systems net sales in 2026 fiscal second quarter compared to 2025 fiscal second quarter net sales partially offset by a $0.7 million or 59.2% decrease in ADMS sales.
Gross Profit
Gross profit for the 2026 fiscal first half of $9.6 million increased from $8.7 million in the 2025 fiscal first half, an increase of $0.9 million or 10.6%. Gross profit margin of 27.9% decreased 3.7% in the 2026 fiscal first half compared to 31.6% in the 2025 fiscal first half. The decrease in gross profit margin as a percentage of sales was a direct result of the increase in revenue related to the construction of an aeromedical center building within the ATS business unit, which yields a lower margin than ETC’s core businesses as the work is being performed by a sub-contracted construction firm. Excluding the impact of the lower margins realized from the aeromedical center building revenue, gross profit margin was 35.0% for fiscal 2026 first half as compared to 32.4% for 2025 fiscal first half. The increase in gross profit margin, excluding the aeromedical center building revenue, is attributable to positive job cost revisions in both the Aerospace and CIS business segments in the 2026 fiscal first half.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2026 fiscal second quarter were $2.5 million, an increase of $0.3 million, or 12.3%, compared to $2.2 million for the 2025 fiscal second quarter, attributable to an increase in selling and marketing expenses on higher sales.
Operating Income
Operating income for the 2026 fiscal second quarter was $2.5 million, an increase of $0.5 million, or 26.0%, compared to $2.0 million for the 2025 fiscal second quarter. The increase in operating income in 2026 fiscal second quarter as compared to 2025 fiscal second quarter is attributable to a $2.9 million or 20.5% increase in net sales slightly offset by a 0.4% decrease in gross profit margin and a $0.3 million or 12.3% increase in operating expenses in fiscal quarter 2026 as compared to fiscal second quarter 2025.
Interest Expense, Net
Interest expense, net, for the 2026 fiscal second quarter was $0.5 million compared to $0.2 million in the 2025 fiscal second quarter, an increase of $0.3 million, or 132.6%, reflecting increased borrowing attributable to the leaseback of the demonstration equipment and inventory in fiscal 2025 fourth quarter and fiscal 2026 second quarter, respectively.
Income Tax Provision
Income tax provision for the 2026 fiscal second quarter was $0.4 million compared to $0.0 million in the 2025 fiscal second quarter, an increase of $0.4 million, or 2140.0%. The increase relates to a non-cash tax expense attributable to the utilization of our Net Operating Loss (NOL) carryforward for which a deferred tax asset was established in the fourth quarter of fiscal 2025.
2026 Fiscal First Half Results of Operations
Net Income
Net income was $2.8 million, or $0.15 earnings per diluted share, in the 2026 fiscal first half, compared to net income of $3.1 million during the 2025 fiscal first half, equating to $0.17 earnings per diluted share. The $0.3 million decrease is a result of a $0.5 million increase in income before income tax being more than offset by a $0.8 million non-cash tax expense attributable to the utilization of our Net Operating Loss (NOL) carryforward. The $0.5 million increase in income before income tax is attributable to a $7.0 million or 25.4% increase in sales and a $0.2 million or 3.9% decrease in operating expenses slightly offset by a 3.7% decrease in gross profit margin in 2026 fiscal first half as compared to 2025 fiscal first half.
Net Sales
Net sales in the 2026 fiscal first half were $34.6 million, an increase of $7.0 million, or 25.4%, compared to 2025 fiscal first half net sales of $27.6 million. The increase in net sales was driven by a $7.4 million or 49.6% increase in ATS in 2026 fiscal first half compared to 2025 fiscal first half net sales partially offset by a $0.6 million or 32.1% decrease in ADMS sales.
Gross Profit
Gross profit for the 2026 fiscal first half of $9.6 million increased from $8.7 million in the 2025 fiscal first half, an increase of $0.9 million or 10.6%. Gross profit margin of 27.9% decreased 3.7% in the 2026 fiscal first half compared to 31.6% in the 2025 fiscal first half. The decrease in gross profit margin as a percentage of sales was a direct result of the increase in revenue related to the construction of an aeromedical center building within the ATS business unit, which yields a lower margin than ETC’s core businesses as the work is being performed by a sub-contracted construction firm. Excluding the impact of the lower margins realized from the aeromedical center building revenue, gross profit margin was 35.0% for fiscal 2026 first half as compared to 32.4% for 2025 fiscal first half. The increase in gross profit margin, excluding the aeromedical center building revenue, is attributable to positive job cost revisions in both the Aerospace and CIS business segments in the 2026 fiscal first half.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2026 fiscal first half were $5.0 million, a decrease of $0.2 million, or 3.9%, compared to $5.2 million for the 2025 fiscal first half. The decrease in operating expenses was primarily due to decreased research and development expenses slightly offset by higher sales and marketing expense.
Operating Income
Operating income for the 2026 fiscal first half was $4.7 million, an increase of $1.1 million, or 31.9%, compared to $3.5 million for the 2025 fiscal first half. The increase in operating income in 2026 fiscal first half as compared to 2025 fiscal first half is attributable to a $7.0 million or 25.4% increase in net sales and a $0.2 million or 3.9% decrease in operating expenses slightly offset by a 3.7% decrease in gross profit margin in 2026 fiscal first half as compared to 2025 fiscal first half.
Interest Expense, Net
Interest expense, net for the 2026 fiscal first half was $1.1 million compared to interest expense, net of $0.3 million for the 2025 fiscal first half, an unfavorable variance of $0.8 million. The unfavorable variance was primarily attributable to an increase in borrowing attributable to the leaseback of the demonstration equipment in 2025 fiscal fourth quarter and inventory in the 2026 fiscal second quarter.
Cash Flows from Operating, Investing, and Financing Activities
During the 2026 fiscal first half, the Company used $0.4 million of cash from operating activities, due primarily to an increase in contract assets and reduction in accounts payable slightly offset by an increase in net income, an increase in contract liabilities and a decrease in accounts receivable as compared to using $2.1 million during the 2025 fiscal first half.
Cash used for investing activities was $0.3 and $0.2 million during the 2026 and 2025 fiscal first half, respectively, primarily relates to funds used for capital expenditures on equipment and software development.
The Company’s financing activities used $1.6 million during the first half of fiscal 2026 included repayments of $1.7 million during the first half of fiscal 2026 under the Company’s credit facility slightly offset by $0.1 received related to the net purchase of common stock as compared to borrowing $1.6 million of cash during the 2025 fiscal first half under the Company’s credit facilities.
Financial Table Follows
Forward-looking Statements
This news release contains forward-looking statements, which are based on management's expectations and are subject to uncertainties and changes in circumstances. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements, and these statements may include terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "future", "predict", "potential", "intend", or "continue", and similar expressions. We base our forward-looking statements on our current expectations and projections about future events or future financial performance. Our forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about ETC and its subsidiaries that may cause actual results to be materially different from any future results implied by these forward-looking statements. We caution you not to place undue reliance on these forward-looking statements.