OSI Systems Reports Fiscal 2023 Second Quarter Financial Results

Q2 Revenues of $296 Million

Q2 Earnings Per Diluted Share

GAAP EPS of $0.96

Adjusted EPS of $1.19

Q2 Book-to-Bill Ratio of 1.7

Record Q2 Ended Backlog of $1.5 Billion (21% increase from June 30, 2022)

Company Reiterates FY 2023 Adjusted EPS Guidance and Narrows Range of Revenue Guidance

H2 Year-Over-Year Revenue Growth of 8% – 12%

H2 Year-Over-Year Adjusted EPS Growth of 17% – 23%

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, 2022.

Deepak Chopra, OSI Systems’ Chairman and Chief Executive Officer, stated: “Overall, our second quarter performance was solid in an economy that continues to be challenged by supply chain constraints, inflationary pressures, and rising interest rates. Our Q2 bookings were outstanding as we were awarded multiple significant new contracts leading to record backlog. Given our significant backlog and pipeline of opportunities, we anticipate strong revenue and adjusted earnings growth for the balance of fiscal 2023.”

For the second quarter of fiscal 2023, the Company reported revenues of $295.6 million, a 7% increase compared to the $276.7 million reported for the second quarter of fiscal 2022. Net income for the second quarter of fiscal 2023 was $16.4 million, or $0.96 per diluted share, compared to net income of $19.8 million, or $1.09 per diluted share, for the second quarter of fiscal 2022. Non-GAAP net income for the second quarter of fiscal 2023 was $20.4 million, or $1.19 per diluted share, compared to non-GAAP net income for the second quarter of fiscal 2022 of $23.2 million, or $1.28 per diluted share.

For the six months ended December 31, 2022, revenues were $563.7 million compared to $555.9 million in the same period a year ago. Net income for the six months ended December 31, 2022 was $27.6 million, or $1.61 per diluted share, compared with $38.8 million, or $2.13 per diluted share, for the same period a year ago. Non-GAAP net income for the six months ended December 31, 2022 was $35.3 million, or $2.06 per diluted share, compared with non-GAAP net income of $44.4 million, or $2.44 per diluted share, for the comparable prior-year period.

For the three months ended December 31, 2022, the Company’s book-to-bill ratio was 1.7. As of December 31, 2022, the Company’s backlog was $1.5 billion, representing an increase of 21% from the Company’s backlog as of June 30, 2022. During the quarter ended December 31, 2022, operating cash flow was negative $9.1 million due to changes in working capital compared to operating cash flow of $14.5 million for the same quarter of the prior year. Capital expenditures were $3.6 million and $3.7 million for the three months ended December 31, 2022 and 2021, respectively.

Mr. Chopra commented, “The Security division’s revenues for the second quarter increased 15% year-over-year, which contributed to operating margin expansion. Bookings were again very strong, leading to a record quarter-end backlog. A major win during the quarter was our recently announced $200 million+ international award that highlights our leadership position in the industry. We anticipate that our strong backlog will drive significant revenue growth and higher operating margins for the second half of the fiscal year.”

Mr. Chopra continued, “Our Optoelectronics and Manufacturing division delivered record Q2 revenue along with a solid operating margin and bookings. This division continues to see robust global demand from existing customers and from new customers that we believe are drawn to suppliers with a proven global manufacturing and fulfillment footprint.”

Mr. Chopra concluded, “Our Healthcare division continued to be impacted during the second fiscal quarter by general market conditions, leading to lower year-over-year revenues and operating income. We have recently bolstered the management team with new talent and expect to strengthen the division’s offerings with new product development, principally in our patient monitoring portfolio.”

Fiscal Year 2023 Outlook

The Company is reiterating its fiscal 2023 non-GAAP diluted earnings per share guidance of $6.02 – $6.25 and narrowing the range of its fiscal 2023 revenues guidance from $1.240 billion – $1.275 billion to $1.240 billion – $1.265 billion. 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 2023 diluted earnings per share guidance is provided on a non-GAAP basis only. The Company does not provide a reconciliation of guidance for 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 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 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 the three and six months ended December 31, 2021 and 2022 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 results for the second quarter of fiscal 2023. 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 9, 2023. 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 2023 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; 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; impact on the Company’s business related to or resulting from the COVID-19 pandemic such as 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; 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; enforcement actions in respect of any noncompliance with laws and regulations, including export controls and environmental regulations and the matters that are the subject of some or all of the Company’s investigations and compliance reviews; 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. Many of the referenced risks could be amplified by the magnitude and duration of the COVID-19 pandemic. 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,

2021

 

2022

 

2021

 

2022

Revenues:

 

Products

$

205,377

 

$

216,885

 

$

412,589

 

$

413,839

 

Services

 

71,304

 

 

78,712

 

 

143,349

 

 

149,829

 

Total net revenues

 

276,681

 

 

 

295,597

 

 

 

555,938

 

 

 

563,668

 

Cost of goods sold:

 

 

 

 

 

 

 

Products

 

139,060

 

 

 

158,294

 

 

 

281,966

 

 

 

301,663

 

Services

 

37,848

 

 

 

41,096

 

 

 

74,869

 

 

 

78,301

 

Total cost of goods sold

 

176,908

 

 

 

199,390

 

 

 

356,835

 

 

 

379,964

 

Gross profit

 

99,773

 

 

 

96,207

 

 

 

199,103

 

 

 

183,704

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

54,879

 

 

 

54,003

 

 

 

112,202

 

 

 

107,441

 

Research and development

 

14,977

 

 

 

14,456

 

 

 

29,794

 

 

 

28,996

 

Impairment, restructuring and other charges, net.

 

831

 

 

 

2,257

 

 

 

3,341

 

 

 

3,476

 

Total operating expenses

 

70,687

 

 

 

70,716

 

 

 

145,337

 

 

 

139,913

 

Income from operations

 

29,086

 

 

 

25,491

 

 

 

53,766

 

 

 

43,791

 

Interest and other expense, net

 

(2,217

)

 

 

(5,180

)

 

 

(4,233

)

 

 

(8,612

)

Income before income taxes

 

26,869

 

 

 

20,311

 

 

 

49,533

 

 

 

35,179

 

Provision for income taxes

 

(7,072

)

 

 

(3,957

)

 

 

(10,684

)

 

 

(7,590

)

Net income

$

 

19,797

 

 

$

 

16,354

 

 

$

 

38,849

 

 

$

 

27,589

 

 

 

 

 

 

 

 

 

Diluted earnings per share

$

 

1.09

 

 

$

 

0.96

 

 

$

2.13

 

 

$

 

1.61

 

Weighted average shares outstanding – diluted

 

18,106

 

 

 

17,103

 

 

 

18,203

 

 

 

17,140

 

UNAUDITED SEGMENT INFORMATION

(in thousands) 

 

Three Months Ended

December 31,

 

Six Months Ended

December 31,

 

2021

 

2022

 

2021

 

2022

Revenues – by Segment:

 

 

 

 

 

 

 

Security division

$

145,918

 

 

$

167,443

 

 

$

295,435

 

 

$

312,436

 

Healthcare division

 

52,425

 

 

 

43,520

 

 

 

103,013

 

 

 

87,083

 

Optoelectronics and Manufacturing division, including intersegment revenues

 

91,490

 

 

 

98,710

 

 

 

183,795

 

 

 

192,625

 

Intersegment eliminations

 

(13,152

)

 

 

(14,076

)

 

 

(26,305

)

 

 

(28,476

)

Total

$

276,681

 

 

$

295,597

 

 

$

555,938

 

 

$

563,668

 

 

 

 

 

 

 

 

 

Operating income (loss) – by Segment:

 

 

 

 

 

 

 

Security division

$

18,171

 

 

$

21,593

 

 

$

39,764

 

 

$

36,518

 

Healthcare division

 

7,030

 

 

 

1,404

 

 

 

12,950

 

 

 

3,032

 

Optoelectronics and Manufacturing division

 

13,382

 

 

 

12,212

 

 

 

23,165

 

 

 

23,470

 

Corporate

 

(9,663

)

 

 

(9,276

)

 

 

(22,126

)

 

 

(19,424

)

Intersegment eliminations

 

166

 

 

 

(442

)

 

 

13

 

 

 

195

 

Total

$

29,086

 

 

$

25,491

 

 

$

53,766

 

 

$

43,791

 

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) 

 

 

June 30, 2022

 

December 31, 2022

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

64,202

 

$

45,600

Accounts receivable, net

 

307,973

 

 

322,756

Inventories

 

333,907

 

 

361,376

Other current assets

 

40,062

 

 

37,703

Total current assets

 

746,144

 

 

767,435

Property and equipment, net

 

109,684

 

 

107,763

Goodwill

 

336,357

 

 

339,185

Intangible assets, net

 

138,370

 

 

138,040

Other non-current assets

 

112,595

 

 

113,807

Total Assets

$

1,443,150

 

$

1,466,230

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Bank lines of credit

$

60,000

 

$

235,000

Current portion of long-term debt

 

244,575

 

 

8,100

Accounts payable and accrued expenses

 

194,266

 

 

189,438

Other current liabilities

 

115,113

 

 

105,704

Total current liabilities

 

613,954

 

 

538,242

Long-term debt

 

48,668

 

 

140,057

Other long-term liabilities

 

142,104

 

 

140,177

Total liabilities

 

804,726

 

 

818,476

Total stockholders’ equity

 

638,424

 

 

647,754

Total Liabilities and Stockholders’ Equity

$

1,443,150

 

$

1,466,230

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,

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

Net income

 

EPS

 

Net income

 

EPS

 

Net income

 

EPS

 

Net income

 

EPS

GAAP basis

$

19,797

 

 

$

1.09

 

 

$

16,354

 

 

$

0.96

 

 

$

38,849

 

 

$

2.13

 

 

$

27,589

 

 

$

1.61

 

Impairment, restructuring and other charges, net

 

831

 

 

 

0.05

 

 

 

2,257

 

 

 

0.13

 

 

 

3,341

 

 

 

0.18

 

 

 

3,476

 

 

 

0.20

 

Amortization of acquired intangible assets

 

3,162

 

 

 

0.18

 

 

 

3,768

 

 

 

0.22

 

 

 

6,360

 

 

 

0.36

 

 

 

7,488

 

 

 

0.44

 

Non-cash interest expense

 

57

 

 

 

 

 

 

139

 

 

 

0.01

 

 

 

125

 

 

 

0.01

 

 

 

295

 

 

 

0.02

 

Tax benefit of above adjustments

 

(1,009

)

 

 

(0.06

)

 

 

(1,418

)

 

 

(0.09

)

 

 

(2,476

)

 

 

(0.14

)

 

 

(2,690

)

 

 

(0.16

)

Discrete tax items

 

347

 

 

 

0.02

 

 

 

(716

)

 

 

(0.04

)

 

 

(1,798

)

 

 

(0.10

)

 

 

(814

)

 

 

(0.05

)

 

Non-GAAP basis

$

23,185

 

 

$

1.28

 

 

$

20,384

 

 

$

1.19

 

 

$

44,401

 

 

$

2.44

 

 

$

35,344

 

 

$

2.06

 

RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages) 

 

Three Months Ended December 31, 2021

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and

Manufacturing Division

 

Corporate /

Elimination

 

Total

 

 

 

 

% of

Sales

 

 

 

% of

ales

 

 

 

% of

Sales

 

 

 

 

 

% of

Sales

GAAP basis – operating income (loss)

 

$

18,871

 

12.5

%

 

$

7,030

 

13.4

%

 

$

13,382

 

14.6

%

 

$

(9,497

)

 

$

29,086

 

10.5

%

Impairment, restructuring and other charges, net

 

 

353

 

0.2

%

 

 

 

 

 

 

 

 

 

 

478

 

 

 

831

 

0.3

%

Amortization of acquired intangible assets

 

 

2,251

 

1.5

%

 

 

201

 

0.4

%

 

 

710

 

0.8

%

 

 

 

 

 

3,162

 

1.2

%

Non-GAAP basis– operating income (loss)

 

$

20,775

 

14.2

%

 

$

7,231

 

13.8

%

 

$

14,092

 

15.4

%

 

$

(9,019

)

 

$

33,079

 

12.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2022

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and

Manufacturing Division

 

Corporate /

Elimination

 

Total

 

 

 

 

% of

Sales

 

 

 

% of

Sales

 

 

 

% of

Sales

 

 

 

 

 

% of

Sales

GAAP basis – operating income (loss)

 

$

21,593

 

12.9

%

 

$

1,404

 

3.2

%

 

$

12,212

 

12.4

%

 

$

(9,718

)

 

$

25,491

 

8.6

%

Impairment, 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

%

 

 

201

 

0.5

%

 

 

684

 

0.7

%

 

 

 

 

 

3,768

 

1.3

%

Non-GAAP basis– operating income (loss)

 

$

24,553

 

14.7

%

 

$

3,757

 

8.6

%

 

$

12,896

 

13.1

%

 

$

(9,690

)

 

$

31,516

 

10.7

%

Six Months Ended December 31, 2021

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and

Manufacturing Division

 

Corporate /

Elimination

 

Total

 

 

 

 

% of

Sales

 

 

 

% of

Sales

 

 

 

% of

Sales

 

 

 

 

 

% of

Sales

GAAP basis – operating income (loss)

 

$

39,764

 

14.5

%

 

$

12,950

 

12.6

%

 

$

23,165

 

12.6

%

 

$

(22,113

)

 

$

53,766

 

9.7

%

Impairment, restructuring and other charges, net

 

 

628

 

0.2

%

 

 

 

 

 

 

 

 

 

 

2,713

 

 

 

3,341

 

0.6

%

Amortization of acquired intangible assets

 

 

4,537

 

1.5

%

 

 

403

 

0.8

%

 

 

1,420

 

0.8

%

 

 

 

 

 

6,360

 

1.1

%

Non-GAAP basis– operating income (loss)

 

$

44,929

 

15.2

%

 

$

13,353

 

13.4

%

 

$

24,585

 

13.4

%

 

$

(19,400

)

 

$

63,467

 

11.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended December 31, 2022

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and

Manufacturing Division

 

Corporate /

Elimination

 

Total

 

 

 

 

% of

Sales

 

 

 

% of

Sales

 

 

 

% of

Sales

 

 

 

 

 

% of

Sales

GAAP basis – operating income (loss)

 

$

36,518

 

11.7

%

 

$

3,032

 

3.5

%

 

$

23,470

 

12.2

%

 

$

(19,229

)

 

$

43,791

 

7.8

%

Impairment, restructuring and other charges, net

 

 

865

 

0.3

%

 

 

2,446

 

2.8

%

 

 

15

 

0.0

%

 

 

150

 

 

 

3,476

 

0.6

%

Amortization of acquired intangible assets

 

 

5,703

 

1.8

%

 

 

403

 

0.5

%

 

 

1,382

 

0.7

%

 

 

 

 

 

7,488

 

1.3

%

Non-GAAP basis– operating income (loss)

 

$

43,086

 

13.8

%

 

$

5,881

 

6.8

%

 

$

24,867

 

12.9

%

 

$

(19,079

)

 

$

54,755

 

9.7

%

 

Contacts

OSI Systems, Inc.
Ajay Vashishat

Vice President, Business Development

Tel: (310) 349-2237

[email protected]

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