OSI Systems Reports Fiscal 2025 Second Quarter Financial Results

HAWTHORNE, Calif.--(BUSINESS WIRE)--OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ: OSIS) today announced its financial results for the three and six months ended December 31, 2024. Ajay Mehra, OSI Systems’ President and Chief Executive Officer, stated, “We are pleased to report a record-breaking second quarter for revenues and earnings, led by continued strong execution in the Security division and solid performance in the Optoelectronics and Manufacturing division. Given our robust backlog and high visibility into our opportunity pipeline, we anticipate a strong second half of fiscal 2025.” For Q2 FY25, the Company reported revenues of $419.8 million, a 12% increase over the $373.2 million reported for the same quarter of the prior year. Net income for Q2 FY25 was $37.8 million, or $2.22 per diluted share, compared to net income of $36.6 million, or $2.11 per diluted share, for the same quarter of the prior fiscal year. Non-GAAP net income for Q2 FY25 was $41.2 million, or $2.42 per diluted share, compared to non-GAAP net income for the same quarter of the prior year of $38.3 million, or $2.21 per diluted share. For the six months ended December 31, 2024, revenues were $763.8 million, compared to $652.4 million in the same period a year ago. Net income for the six months ended December 31, 2024 was $55.8 million, or $3.27 per diluted share, compared to $49.4 million, or $2.87 per diluted share, for the same prior-year period. Non-GAAP net income for the six months ended December 31, 2024 was $62.5 million, or $3.67 per diluted share, compared to non-GAAP net income of $53.8 million, or $3.12 per diluted share, for the same prior-year period. The Company's book-to-bill ratio was 1.2 for the second quarter of fiscal 2025. As of December 31, 2024, the Company's backlog was over $1.8 billion. For Q2 FY25, the Company generated cash from operations of $52.5 million, a significant improvement from cash used in operations of $23.5 million for the same quarter of the prior year. Capital expenditures were $5.5 million and $3.5 million for Q2 FY25 and Q2 FY24, respectively. Mr. Mehra commented, “The results from our Security division highlight our substantial achievements, where revenues increased 16% year-over-year leading to operating income growth, despite facing a challenging comparison with the previous year's quarter. This performance was driven by the growing demand for our products and services across multiple regions. The adjusted operating margin for the division was 19.9% in the fiscal 2025 second quarter representing the second strongest adjusted operation margin in our history. Bookings were strong and despite the sizable conversion of backlog to revenue in the quarter, the Security division quarter-ended backlog increased to a record high. This gives us significant confidence that the positive momentum in the Security division will continue.” Mr. Mehra continued, “Our Optoelectronics and Manufacturing division again delivered solid financial results in the fiscal 2025 second quarter with year-over-year growth in revenues and operating income. This division continues to benefit from our vertically-integrated global manufacturing footprint and is well-positioned to take advantage of future growth opportunities.” Mr. Mehra concluded, “We are encouraged by the Q2 sales growth and bookings momentum in our Healthcare division and continue to focus on new product development, principally in our patient monitoring portfolio.” Fiscal Year 2025 Outlook Current Updated Guidance Previous Guidance Revenues $1.685 billion - $1.710 billion $1.670 billion - $1.695 billion Growth Rate 9.5% - 11.1% 8.5% - 10.2% Non-GAAP Diluted Earnings Per Share $9.10 - $9.40 $9.00 - $9.30 Growth Rate 11.9% - 15.6% 10.7% - 14.4% The Company is increasing its fiscal 2025 revenues and non-GAAP diluted earnings per share guidance, as reflected above. 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 2025 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 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, 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 7, 2025. 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 2025 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 or conflicts in the Middle East, 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, 2023 2024 2023 2024 Revenues: Products $ 290,179 $ 333,671 $ 489,888 $ 589,479 Services 83,056 86,149 162,557 174,348 Total net revenues 373,235 419,820 652,445 763,827 Cost of goods sold: Products 187,385 224,087 324,368 394,509 Services 44,549 48,582 88,031 100,665 Total cost of goods sold 231,934 272,669 412,399 495,174 Gross profit 141,301 147,151 240,046 268,653 Operating expenses: Selling, general and administrative 71,604 70,722 131,402 142,945 Research and development 16,350 18,257 32,272 36,030 Restructuring and other charges, net 1,026 215 1,492 1,393 Total operating expenses 88,980 89,194 165,166 180,368 Income from operations 52,321 57,957 74,880 88,285 Interest and other expense, net (6,534 ) (8,619 ) (12,282 ) (15,978 ) Income before income taxes 45,787 49,338 62,598 72,307 Provision for income taxes (9,234 ) (11,519 ) (13,166 ) (16,552 ) Net income $ 36,553 $ 37,819 $ 49,432 $ 55,755 Diluted earnings per share $ 2.11 $ 2.22 $ 2.87 $ 3.27 Weighted average shares outstanding – diluted 17,302 17,040 17,238 17,048 UNAUDITED SEGMENT INFORMATION (in thousands) Three Months Ended December 31, Six Months Ended December 31, 2023 2024 2023 2024 Revenues – by Segment: Security division $ 249,975 $ 289,987 $ 414,604 $ 514,301 Optoelectronics and Manufacturing division, including intersegment revenues 98,097 100,743 194,225 198,538 Healthcare division 41,850 44,854 79,637 81,956 Intersegment eliminations (16,687 ) (15,764 ) (36,021 ) (30,968 ) Total $ 373,235 $ 419,820 $ 652,445 $ 763,827 Operating income (loss) – by Segment: Security division $ 51,856 $ 54,053 $ 72,465 $ 82,909 Optoelectronics and Manufacturing division 11,621 12,282 23,058 22,891 Healthcare division 429 1,722 593 2,522 Corporate (11,183 ) (9,670 ) (21,099 ) (19,180 ) Intersegment eliminations (402 ) (430 ) (137 ) (857 ) Total $ 52,321 $ 57,957 $ 74,880 $ 88,285 OSI SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, 2024 December 31, 2024 Assets Cash and cash equivalents $ 95,353 $ 101,633 Accounts receivable, net 648,155 703,933 Inventories 397,939 441,795 Prepaid expenses and other current assets 74,077 77,208 Total current assets 1,215,524 1,324,569 Property and equipment, net 113,967 124,023 Goodwill 351,480 382,166 Intangible assets, net 139,529 181,954 Other non-current assets 115,508 118,202 Total Assets $ 1,936,008 $ 2,130,914 Liabilities and Stockholders' Equity Bank lines of credit $ 384,000 $ 236,000 Current portion of long-term debt 8,167 8,200 Accounts payable and accrued expenses 248,427 261,960 Other current liabilities 174,043 197,558 Total current liabilities 814,637 703,718 Long-term debt 129,383 466,560 Other long-term liabilities 128,505 134,806 Total liabilities 1,072,525 1,305,084 Total stockholders’ equity 863,483 825,830 Total Liabilities and Stockholders’ Equity $ 1,936,008 $ 2,130,914 RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND DILUTED EARNINGS PER SHARE (in thousands, except earnings per share data) Three Months Ended December 31, Six Months Ended December 31, 2023 2024 2023 2024 Net income EPS Net income EPS Net income EPS Net income EPS GAAP basis $ 36,553 $ 2.11 $ 37,819 $ 2.22 $ 49,432 $ 2.87 $ 55,755 $ 3.27 Restructuring and other charges, net 1,026 0.06 215 0.01 1,492 0.09 1,393 0.09 Amortization of acquired intangible assets 4,680 0.27 4,698 0.28 8,387 0.48 8,565 0.50 Tax benefit of above adjustments (1,465 ) (0.08 ) (1,179 ) (0.07 ) (2,544 ) (0.15 ) (2,390 ) (0.14 ) Discrete tax benefit (2,540 ) (0.15 ) (320 ) (0.02 ) (2,953 ) (0.17 ) (802 ) (0.05 ) Non-GAAP basis $ 38,254 $ 2.21 $ 41,233 $ 2.42 $ 53,814 $ 3.12 $ 62,521 $ 3.67 RECONCILIATION OF GAAP TO NON-GAAP OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT (in thousands, except percentages) 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 % Three Months Ended December 31, 2024 Security Division Optoelectronics and Manufacturing Division Healthcare Division Corporate / Elimination Total % of Sales % of Sales % of Sales % of Sales GAAP basis – operating income (loss) $ 54,053 18.6 % $ 12,282 12.2 % $ 1,722 3.8 % $ (10,100 ) $ 57,957 13.8 % Restructuring and other charges, net. - - - - - - 215 215 0.1 % Amortization of acquired intangible assets 3,722 1.3 % 590 0.6 % 386 0.9 % - 4,698 1.1 % Non-GAAP basis– operating income (loss) $ 57,775 19.9 % $ 12,872 12.8 % $ 2,108 4.7 % $ (9,885 ) $ 62,870 15.0 % 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 % Six Months Ended December 31, 2024 Security Division Optoelectronics and Manufacturing Division Healthcare Division Corporate / Elimination Total % of Sales % of Sales % of Sales % of Sales GAAP basis – operating income (loss) $ 82,909 16.1 % $ 22,891 11.5 % $ 2,522 3.1 % $ (20,037 ) $ 88,285 11.6 % Restructuring and other charges, net. 479 0.1 % 547 0.3 % 152 0.2 % 215 1,393 0.2 % Amortization of acquired intangible assets 6,708 1.3 % 1,170 0.6 % 687 0.8 % - 8,565 1.1 % Non-GAAP basis– operating income (loss) $ 90,096 17.5 % $ 24,608 12.4 % $ 3,361 4.1 % $ (19,822 ) $ 98,243 12.9 %

OSI Systems Reports Fiscal 2025 Second Quarter Financial Results

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