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OSI Systems Reports Fiscal 2024 Second Quarter Financial Results

  • Record Q2 Revenues of $373 Million (26% growth year-over-year)
  • Record Q2 Earnings Per Diluted Share
    • GAAP EPS of $2.11
    • Non-GAAP Adjusted EPS of $2.21 (86% growth year-over-year)
  • Q2 Operating Income Growth of 105% Year-Over-Year
  • Q2-Ended Backlog of Approximately $1.8 Billion
  • Company Increases FY 2024 Revenue and Non-GAAP Adjusted Diluted EPS Guidance

OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ: OSIS) today announced its financial results for the three and six months ended December 31, 2023.

Deepak Chopra, OSI Systems’ Chairman and Chief Executive Officer, stated “We are pleased to report a record-breaking second quarter for revenues and earnings, led by strong execution in the Security division and solid performance in the Optoelectronics and Manufacturing division. Given our robust backlog and high visibility into our pipeline of opportunities, we anticipate a strong second half of fiscal 2024.”

For Q2 FY24, the Company reported revenues of $373.2 million, a 26% increase over the $295.6 million reported for the same quarter of the prior year. Net income for Q2 FY24 was $36.6 million, or $2.11 per diluted share, compared to net income of $16.4 million, or $0.96 per diluted share, for the same quarter of the prior year. Non-GAAP net income for Q2 FY24 was $38.3 million, or $2.21 per diluted share, compared to non-GAAP net income for the same quarter of the prior year of $20.4 million, or $1.19 per diluted share.

For the six months ended December 31, 2023, revenues were $652.4 million compared to $563.7 million in the same period a year ago. Net income for the six months ended December 31, 2023 was $49.4 million, or $2.87 per diluted share, compared to $27.6 million, or $1.61 per diluted share, for the same period a year ago. Non-GAAP net income for the six months ended December 31, 2023 was $53.8 million, or $3.12 per diluted share, compared to non-GAAP net income of $35.3 million, or $2.06 per diluted share, for the same prior-year period.

The Company's book-to-bill ratio was 1.0 for the second quarter of fiscal 2024. As of December 31, 2023, the Company's backlog was approximately $1.8 billion. For Q2 FY24, operating cash flow was negative $23.5 million driven by investments in working capital primarily to support recent business wins compared to negative $9.1 million for the same quarter of the prior year. Capital expenditures were $3.5 million and $3.7 million for Q2 FY24 and Q2 FY23, respectively.

Mr. Chopra commented, “The Security division results reflect our tremendous momentum given increasing demand for our product and service offerings as well as our superior competitive position. Our revenues increased 49% year-over-year, which we leveraged to deliver significant operating income growth. The adjusted operating margin expanded to 22.1% in the fiscal 2024 second quarter compared to 14.7% in the same quarter of the prior fiscal year. Bookings were solid and, importantly, despite the sizable conversion of backlog to revenue in the quarter, the overall Security division quarter-ended backlog remains comparable with the level of last quarter. This gives us significant confidence that the positive momentum in the Security division will continue in the second half of this fiscal year and into the future.”

Mr. Chopra continued, “Our Optoelectronics and Manufacturing division again delivered solid financial results with adjusted operating margin expansion on comparable year-over-year revenues as certain customers delayed the receipt of deliveries. This division continues to benefit from our vertically-integrated global manufacturing footprint, which further expanded into Mexico in December 2023. I am proud of the Optoelectronics and Manufacturing team’s focus on continuous improvement, and we are well-positioned to take advantage of future growth.”

Mr. Chopra concluded, “While general market conditions continued to pose challenges for our Healthcare division, and the division’s revenues and operating income decreased compared to the same quarter of the previous year, we are encouraged by the division’s strong bookings which generated a book-to-bill ratio over 1.1. We continue to focus on new product development, principally in our patient monitoring portfolio and anticipate stronger performance in the second half of the fiscal year compared to the first half of fiscal 2024.”

Fiscal Year 2024 Outlook

The Company is increasing its fiscal 2024 revenues guidance from anticipated growth in excess of 18% to anticipated growth in excess of 19% over revenues in fiscal 2023. The Company is also increasing its non-GAAP adjusted diluted earnings per share guidance from greater than 27% growth to greater than 29% growth compared to non-GAAP adjusted diluted earnings per share for fiscal year 2023. Actual revenues and adjusted diluted earnings per share could vary from this guidance due to factors discussed under “Forward-Looking Statements” or other factors.

The Company’s fiscal 2024 adjusted diluted earnings per share guidance is provided on a non-GAAP basis only. The Company does not provide a reconciliation of guidance for non-GAAP adjusted diluted EPS to GAAP diluted EPS (the most directly comparable GAAP measure) on a forward-looking basis because the Company is unable to provide a meaningful or accurate compilation of reconciling items and certain information is not available. This is due to the inherent difficulty and complexity in accurately forecasting the timing and amounts of various items included in the calculation of GAAP diluted EPS but excluded in the calculation of non-GAAP adjusted diluted EPS, such as acquisition costs and other non-recurring items that have not yet occurred, are out of the Company’s control or cannot otherwise reasonably be predicted. For the same reasons, the Company is unable to address the significance of unavailable information which may be material and therefore could result in GAAP diluted EPS, the most directly comparable GAAP financial measure, being materially different from projected non-GAAP adjusted diluted EPS.

Presentation of Non-GAAP Financial Measures

This earnings release includes a presentation of non-GAAP net income, non-GAAP adjusted diluted earnings per share, non-GAAP operating income (loss) by segment and non-GAAP operating margin, all of which are non-GAAP financial measures. The presentation of these non-GAAP figures for all fiscal periods is provided to allow for the comparison of the underlying performance of the Company, net of impairment, restructuring and other charges (including certain legal costs), amortization of intangible assets acquired through business acquisitions, non-cash interest expense, and their associated tax effects, and the impact of discrete income tax items. Although we exclude amortization of acquired intangible assets from our non-GAAP figures, revenue generated from such intangibles is included within revenue in determining non-GAAP financial performance of the Company. Management believes that the non-GAAP financial measures presented in this earnings release provide (i) enhanced insight into the ongoing operations of the Company, (ii) meaningful information regarding the Company’s financial results (excluding amounts management does not view as reflective of ongoing operating results) for purposes of planning, forecasting and assessing the performance of the Company’s businesses, (iii) a meaningful comparison of financial results of the current period against results of past periods and (iv) financial results that are generally more comparable to financial results of peer companies than are GAAP figures. Non-GAAP financial measures should not be assessed in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. These non-GAAP measures may not be the same as measures used by other companies due to possible differences in methods and in the items or events for which adjustments are made.

Reconciliations of GAAP financial information to non-GAAP financial information are provided in the accompanying tables. The financial results calculated in accordance with GAAP and reconciliations from those financial results should be carefully evaluated.

Conference Call Information

The Company will host a conference call and simultaneous webcast beginning at 9:00am PT (12:00pm ET) today to discuss its financial results for the periods presented in this earnings release. To listen, please visit the Investor Relations section of the OSI Systems website at http://investors.osi-systems.com/index.cfm and follow the link that will be posted on the front page. A replay of the webcast will be available beginning shortly after the conclusion of the conference call until February 8, 2024. The replay can be accessed through the Company’s website at www.osi-systems.com.

About OSI Systems

OSI Systems is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, healthcare, defense and aerospace industries. The Company combines more than 40 years of electronics engineering and manufacturing experience with offices and production facilities in more than a dozen countries to implement a strategy of expansion into selective end-product markets. For more information on OSI Systems and its subsidiary companies, visit www.osi-systems.com. News Filter: OSIS-E

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to the Company's current expectations, beliefs, and projections concerning matters that are not historical facts. Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions, and contingencies, many of which are outside the Company's control and which may cause actual results to differ materially from those described in or implied by any forward-looking statement. Forward-looking statements include, but are not limited to, information provided regarding expected revenues, earnings, growth, and operational performance in fiscal 2024 and beyond. The Company could be exposed to a variety of negative consequences as a result of delays related to the award of domestic and international contracts; failure to secure the renewal of key customer contracts; delays in customer programs; delays in revenue recognition related to the timing of customer acceptance; the impact of potential information technology, cybersecurity or data security breaches; changes in domestic and foreign government spending and budgetary, procurement and trade policies adverse to the Company's businesses; the impact of the Russia-Ukraine conflict, including the potential for broad economic disruption; global economic uncertainty; material delays and cancellations of orders or deliveries thereon, supply chain disruptions, plant closures, or other adverse impacts on the Company’s ability to execute business plans; unfavorable currency exchange rate fluctuations; unfavorable interest rate fluctuations; effect of changes in tax legislation; market acceptance of the Company's new and existing technologies, products, and services; the Company's ability to win new business and convert orders received to sales within the current fiscal year; contract and regulatory compliance matters, and actions which, if brought, could result in judgments, settlements, fines, injunctions, debarment, or penalties; and other risks and uncertainties, including, but not limited to, those detailed herein and from time to time in the Company's Securities and Exchange Commission filings, which could have a material and adverse impact on the Company's business, financial condition, and results of operations. For additional information on these and other factors that could cause the Company's future results to differ materially from those in any forward-looking statements, see the section titled "Risk Factors" in the Company's most recently filed Annual Report on Form 10-K and other risks described therein and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which are based on currently available information and speak only as of the date on which they are made. The Company assumes no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information, or otherwise, except to the extent required to do so under federal securities laws.

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

Three Months Ended

December 31,

 

Six Months Ended

December 31,

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

Products

$

216,885

 

 

$

290,179

 

 

$

413,839

 

 

$

489,888

 

Services

 

78,712

 

 

 

83,056

 

 

 

149,829

 

 

 

162,557

 

Total net revenues

 

295,597

 

 

 

373,235

 

 

 

563,668

 

 

 

652,445

 

Cost of goods sold:

 

 

 

 

 

 

 

Products

 

158,294

 

 

 

187,385

 

 

 

301,663

 

 

 

324,368

 

Services

 

41,096

 

 

 

44,549

 

 

 

78,301

 

 

 

88,031

 

Total cost of goods sold

 

199,390

 

 

 

231,934

 

 

 

379,964

 

 

 

412,399

 

Gross profit

 

96,207

 

 

 

141,301

 

 

 

183,704

 

 

 

240,046

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

54,003

 

 

 

71,604

 

 

 

107,441

 

 

 

131,402

 

Research and development

 

14,456

 

 

 

16,350

 

 

 

28,996

 

 

 

32,272

 

Restructuring and other charges, net

 

2,257

 

 

 

1,026

 

 

 

3,476

 

 

 

1,492

 

Total operating expenses

 

70,716

 

 

 

88,980

 

 

 

139,913

 

 

 

165,166

 

Income from operations

 

25,491

 

 

 

52,321

 

 

 

43,791

 

 

 

74,880

 

Interest and other expense, net

 

(5,180

)

 

 

(6,534

)

 

 

(8,612

)

 

 

(12,282

)

Income before income taxes

 

20,311

 

 

 

45,787

 

 

 

35,179

 

 

 

62,598

 

Provision for income taxes

 

(3,957

)

 

 

(9,234

)

 

 

(7,590

)

 

 

(13,166

)

Net income

$

16,354

 

 

$

36,553

 

 

$

27,589

 

 

$

49,432

 

 

 

 

 

 

 

 

 

Diluted earnings per share

$

0.96

 

 

$

2.11

 

 

$

1.61

 

 

$

2.87

 

Weighted average shares outstanding – diluted

 

17,103

 

 

 

17,302

 

 

 

17,140

 

 

 

17,238

 

UNAUDITED SEGMENT INFORMATION

(in thousands)

 

 

Three Months Ended

December 31,

 

Six Months Ended

December 31,

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

Revenues – by Segment:

 

 

 

 

 

 

 

Security division

$

167,444

 

 

$

249,975

 

 

$

312,436

 

 

$

414,604

 

Optoelectronics and Manufacturing division, including intersegment revenues

 

98,709

 

 

 

98,097

 

 

 

192,625

 

 

 

194,225

 

Healthcare division

 

43,520

 

 

 

41,850

 

 

 

87,083

 

 

 

79,637

 

Intersegment eliminations

 

(14,076

)

 

 

(16,687

)

 

 

(28,476

)

 

 

(36,021

)

Total

$

295,597

 

 

$

373,235

 

 

$

563,668

 

 

$

652,445

 

 

 

 

 

 

 

 

 

Operating income (loss) – by Segment:

 

 

 

 

 

 

 

Security division

$

21,593

 

 

$

51,856

 

 

$

36,518

 

 

$

72,465

 

Optoelectronics and Manufacturing division

 

12,212

 

 

 

11,621

 

 

 

23,470

 

 

 

23,058

 

Healthcare division

 

1,404

 

 

 

429

 

 

 

3,032

 

 

 

593

 

Corporate

 

(9,276

)

 

 

(11,183

)

 

 

(19,424

)

 

 

(21,099

)

Intersegment eliminations

 

(442

)

 

 

(402

)

 

 

195

 

 

 

(137

)

Total

$

25,491

 

 

$

52,321

 

 

$

43,791

 

 

$

74,880

 

 

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

June 30, 2023

 

December 31, 2023

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

76,750

 

$

127,258

Accounts receivable, net

 

380,845

 

 

370,168

Inventories

 

338,008

 

 

445,818

Prepaid expenses and other current assets

 

44,300

 

 

59,839

Total current assets

 

839,903

 

 

1,003,083

Property and equipment, net

 

108,933

 

 

110,188

Goodwill

 

349,505

 

 

352,911

Intangible assets, net

 

140,857

 

 

143,288

Other non-current assets

 

116,488

 

 

117,007

Total Assets

$

1,555,686

 

$

1,726,477

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Bank lines of credit

$

215,000

 

$

316,000

Current portion of long-term debt

 

8,076

 

 

8,120

Accounts payable and accrued expenses

 

208,786

 

 

234,506

Other current liabilities

 

139,832

 

 

141,765

Total current liabilities

 

571,694

 

 

700,391

Long-term debt

 

136,491

 

 

132,792

Other long-term liabilities

 

121,336

 

 

122,851

Total liabilities

 

829,521

 

 

956,034

Total stockholders’ equity

 

726,165

 

 

770,443

Total Liabilities and Stockholders’ Equity

$

1,555,686

 

$

1,726,477

 

RECONCILIATION OF GAAP TO NON-GAAP

NET INCOME AND EARNINGS PER SHARE

(in thousands, except earnings per share data)

 

 

Three Months Ended December 31,

 

Six Months Ended December 31,

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

Net income

 

EPS

 

Net income

 

EPS

 

Net income

 

EPS

 

Net income

 

EPS

GAAP basis

$

16,354

 

 

$

0.96

 

 

$

36,553

 

 

$

2.11

 

 

$

27,589

 

 

$

1.61

 

 

$

49,432

 

 

$

2.87

 

Restructuring and other charges, net

 

2,257

 

 

 

0.13

 

 

 

1,026

 

 

 

0.06

 

 

 

3,476

 

 

 

0.20

 

 

 

1,492

 

 

 

0.09

 

Amortization of acquired intangible assets

 

3,768

 

 

 

0.22

 

 

 

4,680

 

 

 

0.27

 

 

 

7,488

 

 

 

0.44

 

 

 

8,387

 

 

 

0.48

 

Non-cash interest expense

 

139

 

 

 

0.01

 

 

 

-

 

 

 

-

 

 

 

295

 

 

 

0.02

 

 

 

-

 

 

 

-

 

Tax benefit of above adjustments

 

(1,418

)

 

 

(0.09

)

 

 

(1,465

)

 

 

(0.08

)

 

 

(2,690

)

 

 

(0.16

)

 

 

(2,544

)

 

 

(0.15

)

Discrete tax benefit

 

(716

)

 

 

(0.04

)

 

 

(2,540

)

 

 

(0.15

)

 

 

(814

)

 

 

(0.05

)

 

 

(2,953

)

 

 

(0.17

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP basis

$

20,384

 

 

$

1.19

 

 

$

38,254

 

 

$

2.21

 

 

$

35,344

 

 

$

2.06

 

 

$

53,814

 

 

$

3.12

 

RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages)

 

Three Months Ended December 31, 2022

 

 

Security Division

 

Optoelectronics and Manufacturing Division

 

Healthcare Division

 

Corporate / Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

 

$

21,593

 

12.9

%

 

$

12,212

 

12.4

%

 

$

1,404

 

3.2

%

 

$

(9,718

)

 

$

25,491

 

8.6

%

Restructuring and other charges, net.

 

 

77

 

0.0

%

 

 

-

 

-

 

 

 

2,152

 

4.9

%

 

 

28

 

 

 

2,257

 

0.8

%

Amortization of acquired intangible assets

 

 

2,883

 

1.8

%

 

 

684

 

0.7

%

 

 

201

 

0.5

%

 

 

-

 

 

 

3,768

 

1.3

%

Non-GAAP basis– operating income (loss)

 

$

24,553

 

14.7

%

 

$

12,896

 

13.1

%

 

$

3,757

 

8.6

%

 

$

(9,690

)

 

$

31,516

 

10.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2023

 

 

Security Division

 

Optoelectronics and Manufacturing Division

 

Healthcare Division

 

Corporate / Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

 

$

51,856

 

20.7

%

 

$

11,621

 

11.8

%

 

$

429

 

1.0

%

 

$

(11,585

)

 

$

52,321

 

14.0

%

Restructuring and other charges, net.

 

 

164

 

0.1

%

 

 

525

 

0.5

%

 

 

-

 

-

 

 

 

337

 

 

 

1,026

 

0.3

%

Amortization of acquired intangible assets

 

 

3,339

 

1.3

%

 

 

1,039

 

1.1

%

 

 

302

 

0.7

%

 

 

-

 

 

 

4,680

 

1.2

%

Non-GAAP basis– operating income (loss)

 

$

55,359

 

22.1

%

 

$

13,185

 

13.4

%

 

$

731

 

1.7

%

 

$

(11,248

)

 

$

58,027

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended December 31, 2022

 

 

Security Division

 

Optoelectronics and Manufacturing Division

 

Healthcare Division

 

Corporate / Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

 

$

36,518

 

11.7

%

 

$

23,470

 

12.2

%

 

$

3,032

 

3.5

%

 

$

(19,229

)

 

$

43,791

 

7.8

%

Restructuring and other charges, net.

 

 

865

 

0.3

%

 

 

15

 

0.0

%

 

 

2,446

 

2.8

%

 

 

150

 

 

 

3,476

 

0.6

%

Amortization of acquired intangible assets

 

 

5,703

 

1.8

%

 

 

1,382

 

0.7

%

 

 

403

 

0.5

%

 

 

-

 

 

 

7,488

 

1.3

%

Non-GAAP basis– operating income (loss)

 

$

43,086

 

13.8

%

 

$

24,867

 

12.9

%

 

$

5,881

 

6.8

%

 

$

(19,079

)

 

$

54,755

 

9.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended December 31, 2023

 

 

Security Division

 

Optoelectronics and Manufacturing Division

 

Healthcare Division

 

Corporate / Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

 

$

72,465

 

17.5

%

 

$

23,058

 

11.9

%

 

$

593

 

0.7

%

 

$

(21,236

)

 

$

74,880

 

11.5

%

Restructuring and other charges, net.

 

 

436

 

0.1

%

 

 

576

 

0.3

%

 

 

-

 

0.0

%

 

 

480

 

 

 

1,492

 

0.2

%

Amortization of acquired intangible assets

 

 

5,966

 

1.4

%

 

 

1,818

 

0.9

%

 

 

603

 

0.8

%

 

 

-

 

 

 

8,387

 

1.3

%

Non-GAAP basis– operating income (loss)

 

$

78,867

 

19.0

%

 

$

25,452

 

13.1

%

 

$

1,196

 

1.5

%

 

$

(20,756

)

 

$

84,759

 

13.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contacts

For Additional Information, Contact:

OSI Systems, Inc.

Ajay Vashishat

Vice President, Business Development

Tel: (310) 349-2237

avashishat@osi-systems.com

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