OSIS - Earnings call transcript Q3 2019

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Operator

Good afternoon, and welcome to the OSI Systems Incorporated Third Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Alan Edrick, Chief Financial Officer. floor the Edrick, difficulty] is yours. [Technical

Alan Edrick

President and and a Edrick, Executive to afternoon And fiscal here Chopra, XXXX thank OSI XXXX a to on of you Alan Earlier calls. our I'm I'm to our Deepak with us. third joining today CEO. Vice We months press announcing who Systems fiscal anyone Systems. Welcome the for OSI nine issued Good and President our quarter CFO release call. quarter conference extend is results. would third conference today, like welcome a participant financial we first-time and

of the based advantage we discussion the as uncertainties, And the expectations, These information of events the are undertakes or information provisions any otherwise. Private be call I'd laws. obligation contains forward-looking from the and Before this reports should from statements materially regarding the its statements forward-looking to company's to statement untrue Safe like the company's Securities date operating assumptions control. today's on differ in In placed be not the the new of on and Act of factors, are be filed may Litigation and reliance time-to-time. forward-looking speak earnings All risks, are under revenues, statements. statements and results to including made everyone take with call. connection SEC forward-looking respect which contingencies, financial to because with that Undue could limitation, performance company results, XXXX of our numerous forward-looking based becomes that on that many forward-looking currently and forward-looking company as update operational the Such described statements subsequent no or are growth. with conference company divisions; including deemed Harbor to expected statements the the discuss this information available call, Reform periodic without and of of factors remind current statements actual of due only to this company's outside securities any subject management's include on expected to wishes

refer During of measure to company's financial GAAP we a non-GAAP may and results. call, today's both the conference

For comparable information regarding non-GAAP report an figures, exhibit measures current X-K. been measures regarding those fiscal today's on a XXXX Form reconciliation SEC refer the of which furnished third press results, GAAP and a to quarter and our quantitative please to release has to as

company's third call provide general the overview a I'll of turning financial Before over business Deepak discuss the and to high-level operations, the to fiscal quarter.

reported we a for QX our including three contributions revenues from increase. million revenues division year-over-year $XXX year-over-year third by record Opto the divisions. we sales acquisitions. increased First, quarter driven all-time reported recent This solid $XXX performance company million, XX% of growth. represents representing Security, an The record across of In XX% X%

delivering Our QX healthcare growth sales increase. return to division year-over-year mode XX%

was in accelerate a earnings record diluted to year we fiscal in earnings QX the EPS revenues share per items certain compared excludes period. share as record $X.XX $X.XX which Non-GAAP same record leveraged we $X.XX GAAP QX to compared prior Second, to reported growth. of specified XXXX the $X.XX diluted per QX,

to financial additional XX% operational end we Third, size through various was quarter increase over and from our XX the our April million last $XXX to amended subsequent extend operations $XX.X improve year. QX cash as up facility the we believe same flow as Also provide interest of the us and terms, period the well with improvements maturity flexibility. that rate other million credit

fiscal guidance. results discussing financial updated XXXX and Before diving more deeply into our our

over call turn to me Deepak. the Let

Deepak Chopra

Healthcare highlights record and an on quarter fiscal more and record by again good represent the XX% Time systems of the three in cargo and revenue quarter. during robust and RTT year and XXXX. for saw internationally the security OSI a fired performance beginning XX% growth on Tomography divisions Alan a divisions the with revenues vehicle for $XXX quarter. cargo very the Real were will the aviation detection all Reviewing grew Electronics the with strength Systems the any good to and earnings Thank the conference QX. Opto inspection million third in broad XXX, financial and GAAP was higher provide and call both Security, in on quarter afternoon all-time for detail revenue you, than earnings We We Alan at contributed offering welcome All quarter. cylinders and globally the to at where experienced the explosive also it. an all-time system demonstrated QX non-GAAP with and prior company's revenues history. record three of

$XX we orders totaling end, During after international million a prominent order customers RTT airport million. European Europe. approximately shortly the two key airport quarter announced the quarter announced RTT follow-on in with Also from we $XX

checkpoint facilities strong up and internationally. team quite sales For is at expected increased move for CT demand traction into our getting opportunity cargo is with airports and the the CT are pipeline ramping fiscal XXXX. overall XXX as we operations we The and

installed and our to especially significantly. Given opportunities logistics continues worldwide presence focused as grow leveraging our capture we're capabilities on base to service our additional

million vehicle NATO for quarter, the we continuing service from $XX and at Procurement maintenance and systems. operations this ASNE valued contraband systems Support services of and and explosive personal Rapiscan and the responsible a we're contract, During cargo, operating [ph] parcel detection for Agency. announced and contract Under

port protect we in complete our In our software a our at screening image near On Tomás entered we're the the provide solution integrated for turnkey management of civil de and Castilla screening The systems proprietary we our success all services illegal into are and of XX-year contract we and of help going year. the showcase to Guatemala as and a we Integrate on and process Puerto Santo calendar We scan our this look systems the along service potential ports with drugs which capabilities turnkey call, contraband. front, of as mentioned later cargo Albania in to our analysis for constructing prevent contracts turnkey works. Mexico, customers to existing well borders movement a new search, operations Guatemala for and forward nice they and ready be screening the install the customers. the and contract provide spot. turnkey in continued future Rico expect cargo last

Mexico screening our - example, equipment on sides As border. an US both of utilized is cargo

we During attendees for classic, the US provided players, a the this PGA for we history event systems Protection a QX, a service as drug the [indiscernible] and providers. In year Mississippi. Customs of Tour in Rapiscan largest in Champions row Biloxi, other sponsor for in the Border safety Nogales, Arizona. announced and March, title served event bust security near At second

to XXXX. and already awareness bookings brand. QX was In domestic attendees we key an quarter industry got security. continues opportunity had to we've workshops fiscal a the parcel to cargo of airport portfolio It held both a a broaden that and and internationally April our orders while robust division a in pipeline future of air of All excellent screening. periods and addition, US towards the were baggage opportunity product strong certain for to event security great several some for demonstration on focused the see pushed landed was topics people, the and

monitoring the year's income significant showed and significant in The has as healthcare improvement were prior revenues improved higher for in and the and patient leadership in into XX% mostly strong saw the division, and QX progress Moving change resulted product also the is and cardiology sold growth. this Europe. performance bookings execution Spacelabs in overall organization than operating the sales line at in US in division. growth We which

million we to large orders health. effective patient monitoring. totaling of overall execution fiscal are orders the significant three sales XXXX. indication the and the QX During the US a a sign quarter, These We the forward momentum and look hospitals market by in announced continuing division into from positive team for $XX of

for were Moving and from growth QX year to opportunities revenues X% inter-company numerous division, a see million ample OEMs including with margin. electronics strong up prior operating the Opto with industries. $XX We across our overall manufacturing

also We backlog our in QX and great this and healthy deliver help summary, pipeline strong our we In offering to our acquisitions marketplace division. and us in broaden in that expect continue with finish fiscal to a strengthen a enter the seek year. visibility to product position in this

results our call to I before customers to our detail stockholders the more in you. their support. thank continued would about With over back that, employees, financial the like open always questions. call Thank we and Alan turn As for going to talk to for I'm

Alan Edrick

Thank Deepak. you

the results in Now for fiscal third I'll detail. some greater review quarter financial

patient Opto and due acquired the and reduction due gross year. Electronics in security to increased steady increase The year. of sales inventory improvements supplies by gross in vehicle compared mentioned in Opto's revenues of our QX The up by were the growth a Opto and sales to monitoring growth resulting performance year-over-year see performance core was a cardiology balance driven gross by Deepak both to mentioned the our in our more slight revenue. And the reduced sales growing growth in the margin growth margin the about of XX% Opto half continued cargo the XX% the QX of that of last to strong management and external offset year-over-year and recently division our XX.X% post margin. We external its revenue in overall inter-company by XX% same business as in divisions, in in product to was QX saw pleased business. XX.X% in due comparable revenues XXXX accessories in X% strong US period partially revenues were during and RTT with quarter other As driven growth division last revenues, in divisions division expansion fiscal to Healthcare and Opto in year-over-year. lines. The Spacelabs revenues inspection the QX modest XX% we division previously, security

calls, previous on based other our on mentioned from margin among mix period-to-period will factors. As gross revenue fluctuate

projects expenses of year our $X prudently cost $X.X of from the improve in QX the and the were year manage reduced down due fiscal our vital $XX.X We impact approximately SG&A company net divisions million legal certain expenses million which fiscal in the to as security the of million division for same acquisitions. as costs. QX structure. in Impairment, amount of we to our expenses, of to period business. QX were million our QX reflects efficiencies cost including of restructuring success innovative all QX in other across current product on our in due charges the engineering prior to XXXX long-term The to insurance remain We prior development division. of healthcare million and up of R&D fiscal view charges in compared reimbursement benefit in year were of growth XXXX over worked XXXX. of net $X.X operating $XX.X the to Moving ongoing the focused and

the third tax Moving to impact tax fiscal excluding of quarter. was XX.X% XX.X% to discrete compared in rate fiscal company's the XXXX effective QX items prior the of in taxes, year

XX, recognized During tax resulting we March a in reported approximately the effective XXXX of tax $XXX,XXX of three discrete a months XX%. ended benefit rate

of During XXXX March in XX, a months we XX.X%. effective resulting approximately $XXX,XXX reported three a ended the benefit rate of recognized discrete tax tax

Let's divisions. operating operating to margin charges which expense XXXX in XX.X% in management. non-GAAP of margin division primarily and This the from an effective by from operating amortization expansion operating in adjusted X.X% discussion to growth QX, driven revenue was company's growth margins XX.X% three to excludes increased was impairment, expense. adjusted fiscal which in acquired The improved healthcare our driven restructuring and most all now year-over-year non-GAAP X.X% operating QX, turn by increase in notable fiscal a XXXX. margin This other

was year. Moving a from the flow, inventory of to $XX.X $X.X decreased cash increased days XX previously compared day year Collections in QX, QX QX And quarter flow we operating fiscal strong in with improved this declined and turnkey sales XXXX. fiscal basis. million. profits cash to on was sales depreciation while were working management fiscal to days amortization which expenditures projects announced $XX.X of The Capital in sequential included QX million significantly outstanding were in in million XXXX improvements generated XX strong in and driven capital. million flow in investment by and $XX.X inventory cash for QX, as last strong

amended remains revolving sheet the with calculated quarter We balance recently under as net leverage approximatelyX.X of facility. Our our strong. ended credit

required $X.XX the share diluted to range as as projects to excludes division. favorable fiscal as are anticipated their with guidance turning to a well $X.XXX of to XXXX as guidance, new tax restructuring year associated assets any factors non-GAAP cost per Finally items. $X.XX and in fiscal amortization discrete year potential XXXX $X.XX. mix and range to sales in increasing and guidance quite we not range raising billion earnings billion This guidance security impairment, expected a our our and Note, non-GAAP of margin this associated expenses interest effects other intangible as our turnkey EPS charges, non-cash well tax startup

which our uncertainties in we beyond the control estimates, continue or orders our product reflects each specifically and of uncertainties our impact provisions. more earnings tax and trade could however discussed in due such business effective vary as other believe anticipated policies, industries available. items and in include updated installations, tax government of These sales products subject currently is acceptance reform reasonable and rate the volatility ranges SEC sales customer significant earnings generally of effecting the our contains which effective to site uncertainties risk be non-GAAP and evaluate from our Additionally, and on in readiness evolving and we timing We and The rate operate. information the guidance as tax filings. is to will risks analysis and the actual complex risk to affecting non-GAAP division

we We at have continue These strategic investments selective and to Thank grow conference innovative like this our time, investing questions. business in call you this across various making in product our to solutions and call industries. open to development would continued OSI acquisitions. our enable participating with while the role for leadership products and to

Operator

the [Operator line from Securities. from Larry Instructions] comes first of our CJS question Solow

open. Your line is

Stefanos Crist

Stefanos Larry. is This Crist calling for

under driving to you discuss OSI growth? of belt. First year a Jim return his so question, really Green the about joined that's ago year some initiative Can in the the and revenue healthcare

Deepak Chopra

industry on Fundamentally we the real what on that's here. couple focus, I've patient the call and products calls, what on known the that for, Deepak of focused what is is we're our in focus This last said we in monitoring. focus

job we So being product also in line what's Jim met product Green of back And and a company the connectivity, we we deemphasized done competency got money core execution focus, supplies world a part was it our and cost, cardiology our line patient good focusing and out area where some accessories not and of very managing and to had monitoring, a very basically losing anesthesia profitable. that's happening. telemetry, of the its channel and

Stefanos Crist

border much just you more so wall? Could terms about one on and of the talk more you opportunities Thank question. the US in - the Mexico

Deepak Chopra

try me Well let okay, that. answer to

border responsible in I equipment Congress in budget looking think equipment conference is we do last call Border a Customs also, very Patrol a said the the customer the and the the I has gone diligently is the good and for of after more which border also. and up at Southern them for non-intrusive of We're to we us. as mentioned have borders working both with sides on

opportunities Obviously look we have and more don't them with robust specific we relationship very growth. at till continue policy good continue it and be anything will we that talk that. happens, very than to have to We a that the

Stefanos Crist

Thank congrats Got and it, right. all you again.

Operator

from comes from the question next line Sheila Jefferies. of Our Kahyaoglu

Sheila Kahyaoglu

here? Deepak casual I of margins from focus the terms that monitoring. think the about do runway you margins, think guess we we how do reducing business healthcare about What as of cyclicality on in patient of

Alan Edrick

Alan. is this Sheila, question. I'll take that

in we is general. healthcare that some But the has what the highest do see seasonality margins. business healthcare the see So in contribution business we

operating operating our income is So major revenues increase the to a margin the there as contribution level. in

our highest on area majority margin margins operating is line. going reflective within of US top our in our which of are sales our also healthcare. the The are highly So what's

as there's grow continued operating believe top to margin continue expansion for room the we So that we ample forward. line as go

Sheila Kahyaoglu

the you. was wondering offering. Okay, upon you I And thank for services if then expand could the potential

that in guys potentially how Arizona. think You mentioned that we prepared the How's you business? the you. mentioned - do guys remarks, Thank incident your in driving just about in

Deepak Chopra

Sheila, this Deepak here. is

things the about the for we and said last it. of we've of continue to couple One talk years

and and get regions from are the to turnkey are customers viable concept That We have integrated Puerto, is, Mexico, other of what are, with a positive as model. what what very that with that's by a on operational to those mode people what the in more and we basically are that's announced showcased with call successful more we services those beginning Albania Guatemala, this partnership business being confidence we customer and is economic very, we that's vendor.

months yes of there's actual catches a and very by Albania catch, an a There published the there. Italy large Regarding with other was catch was equipment. for TV CBP couple catch ago. our been in into [indiscernible] to the catch on going It

So integrated It proud about we our more portfolio one into at model services the software to publicity. services have are making to is, And that we the brand very products, is to plays very software. we thing the they have the it's proprietary software. enhancements fact getting various product good also have We specific and important be well and catch. that things a with that customer, on scan very we border a the search most name catching more think broad we have and training the into want that the and

Sheila Kahyaoglu

you. thank Great,

Operator

question Capital. the Martin of comes line Jeff from from next Our Roth

line open. Your is

Jeff Martin

a prepared are can there I'm wondering remark in if geographic product specific perspective? you the a demand could both from for and for you staffing areas increased highlight elaborate on up XXXX, perspective

Deepak Chopra

growth that in the security couple line seen product in RTT. is we've the the over both last Deepak cargo and This with in Basically especially here. the quarters of

the In timeline both or England. equipment, you all We in time, capability facility stuff the and takes some production, the RTT both production so and manpower. up inventory the in plus that are facility the also as the and facility because in cargo Boston ramping know cargo

So any increased now up. [indiscernible] we we're a some in production that giving were just month, ramping doing was There products some example more without personal cases we're and in month. We've a information. [ph] one one doing five

So we've capacity. increased the really

Jeff Martin

from push you elaborate the encouraging. XXXX? Yes, regarding to into is on outs QX that's QX, more also fiscal beyond Could that comment that is

Deepak Chopra

changing can the and next step. quarter next business a time. upon to some the international with in company especially for you the you from as month depending sites It a to their not readiness, the month know customer month specification Well cargo followed tenders, change

So I next a we will pushed of now early year. a the for pipeline that make though in look given already the at making. some QX right into a would I say comment the part that, strong next not in it's we come some booked, towards But are XXXX did opportunity we've any that guidance fiscal we projecting is

Jeff Martin

it me. from Great, that's Thanks guys.

Operator

[Operator Riley. from next of from the Gulani line question our comes Aman B. Instructions]

is line Your open.

Aman Gulani

wanted the you just What the an replacement to percentage do I of roughly? to the conversion get in update cycle you way Europe. on think are

Deepak Chopra

in the in orders As the we've some conference have XXXX, a of call last announced. are deadlines. we also we before lot XXXX said that said the There's Europe, in of activity

though getting We East. on there's be all But is that requirements of in we their demand lot to strong about orders next it's in been no activity estimate not conference in of Asia have airports, data upgrading and - so we guess XX%, we've Europe that, they're have bought coming last up Middle also said Basically can't the has of the the just XX% deadline to there we America over and the calls On Europe geographically. couple sector. XX top some quite continues don't successful the Latin in also in if quite been but know so months. because - our still

Aman Gulani

for from that contributor material you Got activity there to me seen Have the for, term? be it, a and on very much get question helpful. the contract million. feel front trying IDIQ regarding just near could $XXX Last in a

Deepak Chopra

spend. a at products an that license to amount had like is called going would that are by indefinite it want ask that we guarantee on Well had dollar asked can be to no a firstly a to has that's the bid and a customer spent, we this and quantity. to and who one is companies that it buy limit before, says basically the on government did they before but there limit which any vehicle to it's had all products spend clarify delivery, hospital participate also also so the or it's the same is the other maximum that, emphasize specific it the two last have IDIQ just and max This there year. it's our to indefinite for focus customer IDIQ be that can they basically we've you

Aman Gulani

I'll you. thank on. it it, Got pass

Operator

There time. this are no more continue. may questions you at Presenters

Deepak Chopra

Easter yearend appreciate the forward August. everybody's and year call thank you wish everybody and in Happy want we very in to Well to support. I much. looking Thanks of for get next

Operator

this a concludes conference. and for and day. gentlemen, Thank you participation wonderful your Ladies have today's

You may all disconnect.

OSI Systems (OSIS) 30 Apr 192019 Q3 Earnings call transcript