Good morning, and welcome to the Innovative Solutions and Support first quarter 2018 earnings conference call. 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 press star, then one on your touch telephone keypad. To withdraw your question, please press star, then zero. Please note this event is being recorded. I now would like to turn the call over to Geoffrey Hedrick. Please go ahead.
Good morning. This is Jeff Hedrick. I'd like to welcome you this morning to our conference call to discuss the first quarter fiscal 2018 results, current business conditions, and our outlook for the upcoming year. Joining me today are Shahram Askarpour, our president, and Rel Winand, our CFO. Before I begin, I would like Rel to read the Safe Harbor message. Rel?
Thank you, Jeff, and good morning, everyone. I would remind our listeners that certain matters discussed in the conference call today, including new products and operational and financial results for future periods, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially, either better or worse than those discussed, including other risks and uncertainties reflected in our company's 10K, which is on file with the SEC and other public filings. Now I'll turn the call back to Jeff.
Thank you. The first quarter was challenging with revenues down 8%. However, improved margins mitigated operating losses and generated positive cash flow. We are looking ahead to the increase in this quarter's ending backlog, continued growth in the customer service revenue, and pick up in the bidding activity. We are concentrating on internal new product development, which allows us to better control our operations while eliminating the inherent risk of large engineering contracts. We are making steady progress by enlarging our product portfolio and expanding our distribution channels, primarily through the creation of a global MRO network. For instance, we remain committed to the internal research and development with newly implemented cost and efficiency controls. The heart of this new product strategy has over $900,000 or 30% of revenue invested this quarter.
With the success of our patent-pending fully integrated autothrottle, we are now in the process of certifying a new standalone PC-12 and King Air autothrottles. For owners and operators that have already upgraded their cockpits, our standalone autothrottle offers an economical solution to put this groundbreaking technology in their aircraft. We expect to add autothrottles for a number of other turboprop aircraft with, excuse me, much shorter time frame to development and certification. The King Air autothrottle is our next autothrottle product, which represents the largest single pool of autothrottle candidates with over 5,000 aircraft. Together with the anticipated receipt of broad-based intellectual property protection, we will enjoy a period as exclusive provider of the only FAA-certified autothrottle for a market of close to 10,000 aircraft. Our autothrottle is only the latest in the growing portfolio of products that meet the demanding specifications of impending next-gen candidates.
Having transitioned resources off of large engineering programs, we are now focused on growing a portfolio of internally developed feature-rich, and industry-leading price-performance products. We have also revamped our processes to reduce the time and cut the cost it takes to bring new products to market. To help drive sales, we have strengthened our sales and marketing organization and are growing our network of MRO distributors. Leading into the balance of fiscal 2018, we are also in a strong financial position with almost $25 million in cash. This adds extra flexibility to remain optimistic in this rapidly changing market. I would also like to comment that over the past several years, we have received some interest in purchasing ISSC. That interest has been generally fielded dynamically, but we can no longer chance ad-libbing responses to these expressions of interest.
I intend to talk to the board tomorrow on our scheduled board meeting to engage some professional counsel to deal with these responses so that we will have a uniform and a consistent and a well-trained response. I'd like to turn the call over to Rel Winand.
Thank you, Jeff, and thank you all for joining us this morning. For the three months ended December 31st, 2017, net revenues were $3.1 million, down slightly from $3.4 million in the first quarter of fiscal 2017. Since virtually all of our quarterly revenues were either production sales or customer service, we maintained strong gross margins, 48% for the quarter. The effect of this favorable mix of higher margin products sold in the quarter was partially offset by the impact of lower volumes that have to be spread across our fixed manufacturing costs. Total operating expenses in the first quarter were $2.5 million, down 19% from a year ago. Most of the reduction was in selling, general, and administrative expenses, which were reduced by over $400,000, or more than 20% from a year ago.
Our research and development investment was somewhat lower than a year ago, with nearly 30% of first quarter revenue, consistent with our strong commitment to internal new product development. For the first quarter of fiscal 2018, we reported a net loss of $882,000 or $0.05 per share. Even though revenues were down from a year ago, the net loss for the quarter was less than a year ago. This reflects our disciplined focus on high margin product sales, and improved cost discipline. The company remains in a stronger financial position. For the quarter, we generated positive operating cash flow and ended the quarter with $24.7 million of cash on hand and no debt. Working capital was over $30 million at December 31st, 2017. We believe the company has sufficient cash to fund operations in the foreseeable future. Now I'd like to turn the call over to Shahram.
Thank you, Rel. Good morning, everyone. It has been a short while from when we last spoke, let me quickly provide an update on the progress achieved during that period. I will begin with some comments regarding our financial performance in the first quarter. Revenues were slightly lower than the first quarter of fiscal 2017. Due to reduced costs, we experienced a better financial outcome. This cost reduction is the direct result of our recently implemented product development and organizational improvements. We ended the quarter with an increase of 10% in our backlog, in what we believe marks a turning point of our declining revenues. With upcoming new certifications, we expect to realize new order momentum heading into the rest of the year. Our focus is on developing new products to capture an increasing share of the demand for impending next-gen mandates.
We already have several products available to meet that need, As these products are a key to our future success, I would like to provide some additional insight. With imminent standalone single engine autothrottle certification for the over 1,400 PC-12s, we are amid twin-engine autothrottle certification in the King Air series. These certification clusters will increase our market opportunity by over 5,000 aircraft. We are experiencing increased interest in our standalone autothrottle for the PC-12, King Air, and other turboprop platforms due to our targeted marketing efforts and the recognition we have received from the industry experts in several aviation publications, such as the recent Business & Commercial Aviation cover article in February 2018 issue.
By designing our standalone autothrottle controlled via Integrated Standby Unit, we have the ability to quickly add certifications for other aircraft platforms beyond the approximate 10,000 turboprops in service by adding certifications for applicable turbofan powered aircraft. We continue to strengthen our internal sales and marketing capabilities, we carry on with our effort to pursue additional dealership agreements as they become our sales multipliers. The Pilatus PC-24 is now in commercial production, We are in full run production mode. This is a great long-term opportunity for us, being the sole source supplier of the Utilities Management System. We are also aggressively marketing our products internationally. For instance, we just returned from a strategic trip to China, where an increased growth in the air cargo market is creating unprecedented demand for Boeing 737, 757, and 767 aircraft upgrades.
This is another area where partnering with local MROs will provide opportunities in the Asian market. In summary, we continue with our strategy to focus on the sales and marketing aspects of our current and newly developed products as a key to creating value for our shareholders. Let me turn the call back to Jeff for some closing remarks.
Thanks, Shahram. Our fundamental strategy is to continue to introduce a broad portfolio of innovative products. We are shortening the time to market and reduce the cost of development, we have freed up resources to focus these efforts by eliminating low margin development contracts. We are also involved in
Evolving our marketing strategy from one that was highly technical to something that is more consumer-centric and friendly. Our entire company has been organized around the strategy which capitalizes on our competitive strengths. We believe that the first quarter results represents a trough in our business transition, and we should be able to return to a growth over the balance of the year. I appreciate your interest today, I'm open for questions. Thanks.
Thank you. At this time, we will open the floor for questions. At this time, if you'd like to ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble the roster. Once again, you may press star then one if you'd like to ask a question. Okay, one final time, as a reminder, you may press star then one if you'd like to ask a question. There is nothing at the present time, so I would like to turn the call to Geoffrey Hedrick for any closing comments.
Thank you. This is Geoffrey Hedrick. Thanks again for listening in. We're always open for answer any additional questions, contact Rel Winand and thank you again for today. Bye-bye.
Thank you. The conference call has concluded. Thank you for attending today's presentation. You may now disconnect.