OSIS - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you standing by, and welcome to the OSI Systems Inc Second Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation there will be a question and answer session. [Operator Instructions] As a reminder, today's conference call is being recorded. I will now turn the conference to your host, Mr. Officer. Financial Chief Edrick, Alan Sir, you begin. may

Alan Edrick

Chopra, Thank I'm Alan Good OSI OSI And with Systems morning, to second CEO. and and us. joining systems. Deepak today here conference for fiscal you I'm President Edrick, the of and Welcome thank CFO you. our quarter Executive call. 'XX President Vice

are that you updated review operational and financial discuss pleased can our we We results for outlook 'XX. fiscal our join us and as

remind results, currently to wishes All Reform QX or undertakes forward-looking to of today's with I available statements update respect of and our everyone discuss on to statements, statements. forward-looking company no or statement that Securities Act will like the information the we to the events any company subsequent forward-looking include on based Litigation Before on this forward-looking obligation XXXX the made Private provisions discussion would advantage such otherwise. information, of new safe and harbor call based take are

today's financial the measures. GAAP company's results. we When and non-GAAP refer During describing to both call,

GAAP of regarding for second refer our of the release. information will earnings to fiscal and a regarding detail our an figures, a measures turn of of performance measures non-GAAP outlook and today's business. the company's please with begin quarter I 'XX our Deepak quantitative fiscal finish and reconciliation a for financial with For summary results more those the financial of call for I'll discussion to over updated then 'XX. overview and then of the performance

remains continued our while the to economy, safety the our our the our Systems partners, pandemic delivery OSI employees. of customers the continues to COVID-XX As impact at and global to on ensuring commitments priority

Now we will into highlights. some jump

division QX record achieved earnings of share X% non-GAAP impact and ongoing up the adverse $X.XX, from fiscal we XXXX despite fiscal on revenues per of the security First, of pandemic. QX

from XX.X% a of last period in a year. increase basis adjusted the operating XXX reported point QX record margin same we XX.X% Second,

quarter. were continuing Third, the previous second from the bookings quarter, in solid our momentum

in the was QX a was and increase fiscal cash conversion operating the cash of of cash a book-to-bill year finally, flow for record of flow strong. QX leading flow And half to was since in fiscal million. start $XX backlog year. fiscal again the Our the X.X XX% $XX million, ratio was fiscal half operating the X.X first in 'XX, first and

the Before diving deeply call financials, more let turn to into our Deepak. me over

Deepak Chopra

and joining call. on thanks you, Thank everyone us to today's Alan,

confidence. mentioned, with achieved During 'XX half healthy and a the performance, half a with second has we quarter of $X earnings and ended we fiscal overall solid second record and backlog we had in Alan strong adjusted cash a of of With as flow, the billion. quarter fiscal 'XX, backlog excess enter first the

quarter. with Let's $XXX take an look were book-to-bill in performance at the approximate security the each representing million, division. in Starting ratio. Security bookings division's quarter X.X the

revenues As be we continue on and was to case. the expected call, security division indeed we the earlier have this pandemic, in QX to impacted the the by mentioned

each some in certain and impede quarter has in and of backlog difficulty quarter been of acceptance factory strong X, Although been tests. site converting which installations X given the revenue, bookings have restrictions travel to and the the there

We second detection believe cargo aviation and in fiscal focused and remained We Our security accelerate year. execution. capturing will operational the team the booked second revenues half has on quarter. opportunities of several service, new the opportunities strong customer in in screening

both X-ray order ongoing mobile a inspection announced providing during in $XX international cargo maintenance. with platforms For to several protect fixed ports we the vehicle and systems million quarter, help customer by an Rapiscan its configurations, critical from borders, and infrastructure and along of

service through drive follow-on maintenance the provide includes service of flexibility international support. relocating a can order and mobile and support. $XX This high announced the which another $XX related inspection to deployed checkpoints. used also security system, in widely order Z rapidly be and to provide units also We product for and multiple portal, for million inspection throughput secured million We maintenance ZBV a ZBVs order systems,

We rebounding continue borders, for on Global air airports security will in East to spending for especially continued that infrastructure deliveries and slowly, cycle pushed security us the Asia. security the continue strong airports also to see the behind support southern certain meet a election screening pipeline to Middle with for ports international border, for is reinvigorated push upgrades border albeit some and requirements. U.S. latest believe be while We passenger especially bipartisan technology. and out in and traffic have the regions the

a products, detection aviation XXX We Scandinavian wins airport of scanners scanner, detectors during received screening to million quarter. our metal for couple Orion we $XX a the XXXM walk our including announced checkpoint through Metor baggage baggage airport. For order provide a CT and products,

differentiate upgrade of for a to checkpoint another from various provide X-ray to and an and to first We announced customer. vehicle million order approximately our maintenance In partial X, X and in BPI systems helped trace In customers for received were in $XX cargo. quarter inspection of government to our has aviation portfolio solutions systems, actively for the systems, RTT the baggage were awarded were very half, at the systems international us solutions million end also a really broad that logistic seeking Air Earlier $X cargo we quarter security, and inspection approach detection inspection marketplace. contracts customer offer support. follow-on global and our providers

increasing infrastructure pipeline. thereby expand and demand, to to handle As they opportunity our increasing e-commerce security upgrade continue

newest months up. Rico do Tomas Guatemala Santo continue volume Services, project in Port Albania the few currently scanning operations of to Puerto at well, and ramping operations turnkey with and commenced a For our the ago

will the detection AI-based first in in Overall, also the half fiscal of security half a division believe 'XX stronger we have than as performance of areas opportunities, of software pipeline to threat division solutions. checkpoint a the growing performance significant especially of security work cargo scanning, see solutions be automated new the of development vehicle second backlog. and security detection Our and continues enhanced security, we on the and

Moving Optoelectronics to a revenues the the our division record a year. in represented new increase strong to same continues and period deliver of over prior results. million $XX XX% QX that

During focus in an components with anticipate OEM. leverage for and our approximately the and half the this momentum on and record manufacturing sequentially the that Opto Opto's a million of grow bookings XXXX order managed line. Asia. XXXX, team Opto top leading U.S. solid, quarter. the the the lighting division higher operational second U.K. was U.S. year. And sites Southeast pandemic-induced and over channels will opportunities disruptions fiscal to our we Opto backlog grow first first were $X to a continue of an in the the ended the new notable We and meet of regional 'XX. team than and a manufacture needs backlog various and the LED a with to The existing and bottom at continues at business will infrastructure in fiscal the the electronic XX% fiscal QX both Europe through up strong division existing that customer end the customers, particularly half with to through continue of customer received for as Asia the new example win help to

which XX% or division, than Moving period revenue the million the higher reported ago. a to healthcare of a on $XX same year

fulfillment division's have the year both operations handle sales QX crucial bring new driving marketing improve up were and in performance the the healthcare and working and over the to We talent ramped been increased past volume. service initiatives in as team order to efforts, in and sales division

fiscal headwinds boosted simultaneously customers in But the for focus our During encountered some on treatments XXXX procedures. monitoring tailwinds patient first the cardiology by business from the pandemic. more also COVID-related half, demand and we was as

product vaccinations, develop As the monitoring the plans continue new believe demand. could and based of we next-generation pent-up have to the on cardiology COVID the Furthermore, in population of we several line benefit we cardiology more near platform. term, product for that introductions receives patient diagnostic

continued company's performance. of accomplishments healthcare hospital We we XXXX challenges. of base with half the and pandemic fiscal the entire the customer facing its Overall, are pleased support are the our unprecedented first proud team of

as for customer done outstanding execution innovation deliver with new booking is of division demand. anticipated, an customer strong aerospace, positioning job from it significant new focus a as driving performance faced in While industries automotive, to blue-chip profitably headwinds the And as base a on product stronger has operational continues we itself division's to half. Opto the second handle leading in off security healthcare. the such OEMs the and team business, diversified division benefits and paying and increases industrial ability healthcare defense, revenue The

the to protecting will call questions. the turn our Looking back focus our team, open before a the we look ahead, of Thank our of over and to the truly am second meeting safety employees. health performance OSI customers' while we discuss I half our Alan to proud to forward on now you. financial and maintain our further for I I year. of fiscal needs intend call

Alan Edrick

Deepak. you, Thank

the in detail. results financial review let's QX So greater some

effects pandemic. prior of compared Similar in we in revenues in Opto part and but healthcare the were year reduction QX revenues Our reported of sales fiscal QX, due as to QX. security and the strong to in 'XX growth divisions, in $XXX million to million the the a $XXX

growth. in with continued third-party we year-over-year XX% healthcare due largely X% accounted and certain strength small half organic as cargo book-to-bill X.X expansion security were generally were The other the margin due backlog. XX supplies expected, than of a to down in on our second margin offset carries Deepak was the healthcare the supplemented to many growth strong. margin in in points due X.X again primarily impact a reduction strong accessories to of the further manufacturing was Opto service. to lower solid. the economies revenues with XX.X%, gross fiscal two With of the leading which which sales tends division, than bookings aviation strong divisions. scale With and sales fiscal of sales Let's XX% gross across pandemic and completed increase each major our by division, lower driven gross revenue driven impact with Opto revenue the security year-over-year dive a other in growth the in XX% QX primarily half 'XX, was QX division, which of revenues the margin quarter XX% operational the deeper, two and favorable of relative gross and customers. revenues in approximately of margin up as channels healthcare the gross The the the a in in margin the increase. basis division, a execution, in including the our to and greater of improvement by on second with divisions; division, sales. overcoming 'XX and our from for revenues growth Optoelectronics focus year incremental carry saw XXXX XX% by increased starting of a margin acquisition geographic mentioned, historically And for mix The sales QX and fiscal QX partially patient of monitoring, the fiscal first Security portfolio, security by associated the for continued than and year-over-year, where higher

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

were 'XX make cost expenses. company This a SG&A XX% cost contributed to and decrease representing our manage fiscal adjusted of to million, a cost the to each across pandemic, its year-over-year. year-over-year $XX.X end response operating structure. of efficiencies R&D fiscal to In to of continued our in has diligently to structure and adjustments expenses the in X%. expenses work improve QX We 'XX. has such toward in prudently QX the decrease Moving divisions

in we to success the security our view development, to remain focused product long-term innovative as as continue dedicate considerable on We particularly business. important to of R&D, which healthcare, we resources and

reduced borrowings a interest Moving to million year decreased same and a interest declining in and our as $X.X in $X.X prior rate taxes. year. Net to environment in 'XX the flow cash result light million last expense strong of from QX period of interest and since of other

in of expenses tax On was tax of 'XX. $X.X prior of a year. million of We discrete QX excluding the to compared benefit recognized QX effective side, fiscal discrete the QX items, impact to discrete 'XX tax in fiscal $X.X comparable XX.X% rate of million compared our XX.X% fiscal in 'XX tax tax in the

As tax 'XX of reported provision GAAP XX.X% under a QX a of of result, in compared XX.X% we fiscal fiscal to 'XX. in QX

non-GAAP adjusted discussion let's of our now operating to So margin. turn a

see our XX% XX.X% the the please 'XX fiscal For line top to of very margin pleased in GAAP release. with margin the QX of a were QX headwinds. press operating from Overall, overall to face especially expansion increased reconciliation 'XX. in figures, We fiscal significant our of adjusted in

is XX.X% a in actions. right In and margin in quarter fact, for non-GAAP favorable the quarter, in execution year fiscal XX% the division security adjusted OSI. our a in operating mix at The sound margin adjusted record operational the by with second line cost revenues, came driven control quarter, prior latest of operating second

Our and year healthcare fiscal margin operating the in security in improved Primarily driven of the division operating to fiscal healthcare in X.X% operational Opto 'XX. were the reduction XX.X% part reported to favorable offset in in QX of The sales 'XX. which from mix a significant of our last in structure with XX.X% non-GAAP XX.X% of margin Due fixed by expansion increases less from QX of division, leveraging adjusted customer execution. cost in adjusted year the sound of partially revenues. last and margins to a QX the fiscal decreased by in QX

Moving to flow. cash

in generate elevated due $XX timing in while million. growth, the preparation $X.X with for total to the DSO. million. second DSO quarter in QX of first of The significant new sales as was achieved experiencing inventory to 'XX and invested cash the and million depreciation record of flow continue also $XX.X helped inventory fiscal and security quarter was of This $XX operating 'XX as international We a for brought while wins cash fiscal receipt half offset advances, primarily the amortization of we an to associated for million, increased change CapEx investment in collections. was customer the significant

continues Our cash be quite solid. to conversion flow

Our until modest significant maturities fiscal no balance sheet XXXX. strong, is net with debt leverage and

Finally, turning to guidance.

range non-GAAP from XXXX fiscal range guidance EPS per billion the to billion billion, increasing guidance. of $X.XX $X.XX $X.XX restructuring currently the associated We range $X the have and anticipated noncash expense amortization The We of as reasonable Similarly, pandemic and from for tax impact $X.XXX impairment, non-GAAP acquired of tax per and well are effects share our in billion earnings revenue guidance the assets to excludes this diluted charges, and earnings believe to their we as share interest $X.XX $X.X are potential of to $X.XXX included COVID-XX intangible estimates. previously. diluted increasing share per previously. discrete guidance other reflects revenue we items. And our to non-GAAP to

in well Given uncertainties is company's estimates materially as other which to thereof in share vary Actual diluted the anticipated could business, enable earnings We currently vary in anticipated strategic challenging reflected structure. to impact efforts our in of face acquisitions, could our believe ranges the from the continue through while and our non-GAAP also duration filings. results due and on the to the remain the may steadfastly and investment focused discussed innovative to managing also growth revenues these of scope and of other our variables, cost In impact per development should and OSI the product financial the to solutions. COVID-XX uncertainties providing predict leadership guidance. from pandemic as times, products risks our as extent and SEC however, and we difficult

time, supporting value questions. as thank face this to Deepak while commitment our happy take call the a for for of the importantly, in creation its contributing to OSI to At are open the dedication to global Systems to this and opportunity stakeholders mentioned, team we safety to the like Finally, maintaining uncertainty. and we'd in of customers our

Operator

ROTH from first Capital Jeff Instructions] Our [Operator comes Partner. Martin, question

open. Your line is

Jeff Martin

in acceleration half? what relative the you're you the give seeing half us curious give an if to the in the key some you security factors second are you'll confidence segment that second first additional What insight Was the into half? could swing in that see

Deepak Chopra

Good here. question, Deepak This Jeff. is

very as One with we're mentioned, a and half things entering strong Alan of the I backlog. second mentioned, the has

all indications in we pipeline first strong very and that of start internationally stuff we will been strong, have that QX been our bookings QX domestically. Number has are, the security. that challenged two, to both some of be Our our continues with and half. mentioned shipping in the I in expect coming the border is we and administration, support And bipartisan change DHS. some to technology into a equipment, relationship with funding from of very the also which that great of reallocate are the in and some Washington, wall well with placed nonintrusive have And

Jeff Martin

much, going we border months that are you could I as along The to customs the in about in perspective relative And talking U.S. say, to us helpful. the little significant amount XX XX perspective give next last in those from over to potentially a mean, the and Right. contributed. how months last lines, inspection would or some be very year? XX

Deepak Chopra

calls we their break up don't even that bring strength And quite it we in said the will budgets upgrade more have for we already previous to gone place year technology to technology-based the CBP, down. remain But in continued Jeff, think last conference inspection. DHS, at and a platforms lot. had border

Jeff Martin

Okay. half, frame for and be then in on relative be it of up a to to second may the the expect just you to the has as Could what 'XX healthcare half give you strong for the some may that whether Could in relative the contributor first but flat is monitoring half? pick half, first been us down perspective up. second us nice not fiscal or patient cardio in help healthcare your obviously, my first And relative question expectation half is second segment. on

Alan Edrick

is question. Sure. take that this Jeff, I'll Alan.

a division. strength we're we to But in business to third continue. course, OSI looking at to by us uncertainty color, that healthcare There's kind really expect that as overall much and we so healthcare that out for the for of and overall at future. made But provide our given will continued in pandemic guidance Spacelabs in is the the for that, the beyond think improvements the say. quarter. to of expect dividends We're with difficult our time continued opposed here COVID seeing overall, and our business, you reap team giving leadership we we by strength little systems Of pleased see the company

Jeff Martin

And question. Okay. then Great. last

if capital structure, significant we of down you generating in you're because debt flow? continued terms debt cash $XX anticipate at million paid just of down looking free In only roughly cash should allocation quarter, capital the was how reduction, curious are you minimally

Alan Edrick

Sure, Jeff. This is Alan.

right. You're has been absolutely The flow excellent. cash

multifold. we capital new look is they're previous in at strategy look more this down we nice There debt Our allocation our side, is at for quarter, We coupled the look was pay quarter. us turnkey down small In past stock significant we at paying buyback. with exclusive. mutually don't any projects on think look stock the buyback necessarily and the it was acquisitions, at And debt. residual thing we a acquisition,

expect cash that in of to to continue all to generator We and areas mentioned. be those I play be flow nice just a able

Operator

comes Our Securities. CJS next from question of Solow Larry

open. is line Your

Larry Solow

a Congrats good quarter. on

is the security First question on piece. I have

-- a cost So better cut you have last couple quarters. and the I and know you you mentioned benefited mentioned of quarter, mix little in this

you to XX%, able were revenue my keep Just is margin declined remarkable. pretty hands the flat as trying which -- year-over-year, and your margin to mentioned, operating get -- around about

perhaps I actual operating where fair continue you see back, should today. we rich And suppose comes that us significantly do say? without rise. As numbers, margin to above or are giving Is revenue -- we to

Alan Edrick

with right, as done as well. me, Alan. team expect revenue. there's excellent change would move move maintaining good you're we job excuse think has we the opportunity margins is in margins goal And up, And sales margin do Good our that. expansion Absolutely, an this as and is question. to significant our Larry, observation up,

planning companies, in savings opportunity like of But reduced benefit and structural course, for our temporary and we expansion the some operating changes things made most Of some our for that. nature reduction, in travel that there's some do that. and we're permanent are security on maybe business others, some margin more like believe absolutely, we all there's

Larry Solow

several contracts wins win contracts, of these Okay. And Or I newer any the in any side? I Have security -- mentioned you quarter? on know, recently. you the know don't business of contribute these had not?

Alan Edrick

half announcements larger XXXX. we be that the more to second our and made So fiscal will that really and even in into referred somewhat Deepak

that So business. had ship we principally book past and before smaller this quarter the besides was for wins

Larry Solow

Got Guatemala laid way mentioned have next any ramp that? cost to that of it. bottom that line to rising contributions the several for of see started revenue? of the And ahead plus on that to we Is you characterize the is start -- of sort sort Should more you quarters? out

Alan Edrick

Yes. That's statement. a correct

expect right, costs have rate fiscal revenues are we our nature to advance for Guatemala up So of of at of at fixed come near you put full being and be run that so the on relatively are the some been end you in they year. ramping before And revenues. the in peak

So increase ramp should as for volumes relative yes, that up. margins project to us

Larry Solow

And of related in security we that bit and rebound service utilization Should revenue some I picked partially sort is and from to to that the service expect mid-teens relative just as revenues high assume, think I Is that Mexico, know out? to a this And up singles. we I in start only was down QX. mostly maybe to segment overall down and but drop stuff? the revenue -- stuff were quarter the of service little look

Alan Edrick

related again, in question Larry. service drop Good The almost Mexico. Yes. is to entirely revenue

June. in So lap that contract will

fiscal service scenario we'll we see service that same we into relative as quarter have move So yes, would revenues another to in but revenues. X expect or to rise 'XX, our a year-over-year, of

Larry Solow

but a stronger the it the sounds Any out is cardio, to on to the And Do Okay. cardio, seems parse the think way sort QX in seasonally like outweighing quarter. And -- of from benefit you number. pretty significant COVID? mentioned be growth healthcare, not. I slowdown XX% normally maybe you

your terms help us, segment us Just roughly, trying to how can much parse in tell you of revenue? cardiology maybe that represent can And you out. is

Alan Edrick

So Larry, this Alan. is

of is the overall. some our including business services cardiology, So ancillary a of quarter revenue about healthcare of

Larry Solow

benefit, or continuing, something even are where COVID -- Okay. the so see you Or become a to hospitals that And those for point know, right? may don't they Do continuing? beds purchase on have we will monitors? don't many continuing is that I do -- they monitors, with it COVID

Deepak Chopra

here. So Deepak Larry, this is

we difficult predict has strength, it. very to Alan strong to all, world. pick we QX of But Canada, it's And also this continues a in We've U.S., all up. that very had it's in in ongoing, cardiology, to couple difficult Alan in it's quarters. has think not it's just an read and will show is the other mentioned, As parts mentioned, And QX. of think,

other better security, has in is -- second on electronics any very So the seen. show mentioned think or the good to we all the all, do very, Opto But we can with are side, to in think half. we well. But continue will do And we've performance. not to going that XX% that in definitely, that the form continues continue growth that saying healthcare shape Alan

Larry Solow

customers type approaching don't -- you a we're Looking not Is not a pullback maybe a something the that might significant a at think hospital healthcare, you perhaps risk think you that few don't from where any for but side buy or see is on quarters. necessarily? of cliff,

Deepak Chopra

a remember, we same also and any products, we're like pullbacks major R&D that. spending monitoring some and as on don't And seeing are new half. working next We the of we time, being develop in into second money implemented platform should start to see the those the traction. At products years, in later will big lot start stuff in new the that go specifically cardiology in

Operator

from next Oppenheimer. Christopher of Glynn Our comes question

Your line is open.

Christopher Glynn

Yes.

coming. I with was curious process So the about products cardiology new the commercialization

going, the I of Wondering line sight out think America. independent aspect timing dynamics? converting kind pandemic on your in there's isolating conditioning is is North focus commercial of how a channel type the the what

Alan Edrick

the Alan. is States We really America for North question. as brought good a new the United commercial excited cardiology. this about Yes, specifically, we're on referring for team to. you're opportunities in Really Chris,

who and to and recruited couldn't of came he's sales team, we new So perfect. board some President Vice members Cardiology be a new on more the have his timing

a ramping out beyond. products new here, start cardiology. up just our for fiscal as It's to predominantly quarter and So these fourth come begin quarter, in time fourth to perfect

As products. Deepak demand existing of mentioned, we of expect for some the levels some increasing

really on the As as but to cardiology sales, coupled growth out the well in basis. some to about come significant product healthcare. Frankly, the one And pandemic and our with systems. represents is products, lead new particularly the OSI margin expect that highest we as cardiology worldwide of all in our of things nice this we it's in U.S., of a highest margin products

as the and there's line bottom to the cardiology ramp, overall. pull-through a real nice company So sales for division both the

Deepak Chopra

there. visit monitoring Just to this focused to what don't are that's happening change go and remote monitoring, add looking in teleservices, there. thing are stuff much to a want that hospitals. new on home there want are based that other new people is on in to at Alan the don't marketplace on trend our cloud People said, we very the most coming computing, and to People products

go monitoring can we from they the do can if So engaged are much very back doctors home, that. and forth, in the

Christopher Glynn

how Curious fares that, manage hedges booked inflation already ramp had the through you pass-through inflation. and how or we on question that's in backlog an have economy? I whether a when

Alan Edrick

Alan. Yes. Chris, this is

So there also managing not job our inflation, we some cost When areas. a we material have chain good from does to be tended in see reductions supply can't any other impact -- inflation.

not overall, overall. impact company we as really our inflation view a to do significant So

Operator

Riley. question next B. Josh of Nichols comes from Our

open. is Your line

Josh Nichols

side, the guess. specifically job operating Commendable margin on

there we've I ask and did a provide strength, from whether feeding Is any been of has addressed. of it's region? some specific want and have And questions area. demand? division a that into I geographic where Opto shortages out demand hearing lot about looking been the But high of at already here, Looking specific of things to that could had the is that areas like products been, elaboration how about strong like you

Deepak Chopra

yes, Definitely, much see lot it. shortages don't There's and people, question. a Good you're right. We we're reading about stuff. The of having right.

Opto we are that very people. our depends. a that much very and to seeing from always broad line, pretty -- platform are Asia. customer platform. that yes, We had particular or one doing healthcare, Even much it's showing is, one very this is we there's number other are product significant which supply Aerospace other a broad in one other are trends OEM of some lot our out integrated areas industrial have there. demand pulse case, demand Obviously, in vertically that well of demand of And base. in from that's of move demand the products But we healthcare there customer are industry. The is is in there's a a the fortunate in in a into challenges U.S., very answer our the product in are to oximetry areas lot a we we've automotive your Europe, biggest base, question the very the the And company. the

Alan Edrick

in And mentioned strength Asian well Josh, the growth the to out as just what defense operations. business. has biggest Deepak is as on, been some just our greatest automotive of add of in our And

us. of So we has what extremely the been do nature broad-based helpful for

Josh Nichols

we to now more of half fair up a in probably probably are vertically bit kind through I'm detail ramping right, back that had in situated going bottomed well you on turnkeys you've helpful say and of move space. is of year? revenue a services as XQ it ramping hear to couple integrated up as now front. this the rollout guys glad Is that little and a that that you're following player to start Some also, that these the

Alan Edrick

Yes, Josh, this is generally that's a correct Alan. comment.

going tend 'XX see as occur months. our fiscal we're here growth to probably where service enter see you'll I the in X we in about think what to --

for to As those comps service and continue year-over-year QX. we'll have in QX tough

growth expect fiscal the would we starting So to begin 'XX.

Christopher Glynn

And year. mean, think me. of be like last the levered, by my you're question you then cored right, net for I the X I at like it model guys looks debt-to-EBITDA going to least, were time end in under

guys, lot share strategic whether at clearly, So you repurchases a of opportunities as some M&A looking well. that's for or

the like year-over-year get could about happen? of what that those mid, of year thinking improve people to on I high what's growth opportunity pass think low things the next double-digit kind single-digit And would accelerate front? more how category? a or your the about company one of the the on is to of and be revenue One comps see growth, a line kind that wondering over top needs to to out potentially like Or

Deepak Chopra

question. it basically, our in backlog in Good focus I'm a is then going to is answer Alan very sense strong. our jump broader maybe can and

seeing settles big very especially as infrastructure vaccination United more security, as into is ports pipeline down started, what start place, we investment comes airports the especially and Our from States. and stuff is strong, travel and will some pandemic the in

very it that be mentioned, we So product with though definitely, has as continue monitoring will a well look to Alan? do growth acquisitions, And think is to in Alan been company, line. slowdown, but growth it's might Opto look strong also kind is a continue we'll that's at there. going as of broad most sheet. that to at the healthcare, acquisitive. a and in security. carrier And cardiology the patient as we've thing balance important very We

Alan Edrick

over with XX like with big of leverage. And last or or net Josh, strong balance said, sheet a echo organic played leveraging comment, but would that acquisitions as of your good, to have on Deepak it I have of opportunities to ahead growth, us a we'd years. very XX M&A, the supplement well. have funnel strong some low sort organic we growth of bolster a we drive do part acquisitions our Yes, strategy solid

So as the to growth, a two get I suggesting. us accelerated can those you revenue think combination more were of

Operator

from question next Greg Konrad Jefferies. of Our comes

is Your open. line

Greg Konrad

talked how way think programs these replacement new versus kind as replacement development much incremental roll is any expanding your market Is of the to there lot and about on about out, product kind We've versus side. new addressable healthcare of total a products? opportunities

Deepak Chopra

in side, the couple deli cloud to This next Good related. -- is going on it's the executed It's those It's Okay. of are start months. here. add-on Deepak both On products. question. getting products cardiology computing. And

get some investing better we because Regarding partnership, both time. new that's replacement for to them some say also. patient performance, will connectivity we the we conversions, take call story, we our side, go good going into of will monitoring of And platform, think combination replacement, price the good that are where also we largely that and where and conversions

be will that So the growth path.

Greg Konrad

you've as kind terms sustainable forward? in always we guys go I the highest of is you three Or seen XX% margin of Any That's thrown changes healthcare that the last And of then, kind drop business, throughs? the out, I is that contribution quarters. play being you've have trend out and reason think talked the think about helpful. that mean, XX%, level to number of and that

Alan Edrick

our But are that at in depends is it of Alan. margin the that business. the healthcare contribution sustainable. Greg, outset, you've this upon you is revenues. margins R&D mix the believe highest contribution We It always seen as mentioned

for So the are significant incrementals us.

Greg Konrad

I last the benefits. upfront administration year. FY the end little budget maybe of mean, that passed talked bit the then some saw And or one. you up passing? But and also of calendar that by about changes funding just in the the 'XX at finally Any a freed benefit bill we gets

Deepak Chopra

But said as both I which make more they it specifically technology, more efficient. are that. can't we answer administration, looking at Partisan technology, Well, have BI all will more before,

things border. will We us. a what with And relationship our hearing at great and are equipment all is southern DHS, for positive that well to placed of the CBP. are think we we to have Lots the that very happening are continue DOD, be

Operator

of from Berenberg. [Operator Instructions] comes question next Mizrahi Our David

Your open. line is

David Mizrahi

expect to remainder you sales $X the the this roughly into fiscal call, backlog half You last mentioned of year. be converted on through billion

guys difficulties you in converting have actually the backlog into that how so far? for changed given Just the you sales, has

Alan Edrick

question. is This good Alan. David, yes,

to we to at of the half year, the we fiscal a the the less current backlog into remainder be As of continue converted little expect rest year. bit than revenue through of our look

our have good customers the in in visibility working with the installations and We of pretty terms of like. timing

high our of backlog. just confidence it south will of a current we that pretty So of little half be a degree have

David Mizrahi

Great.

then know that And I next going? SafeNSound market. because brief the acquisition update is And And calls monitoring so. roughly or integrated ago us few patient the a mentioned the you on in remote be can months XX Okay. how give just a you that you're with focusing

that is progressing? So how

Deepak Chopra

that the Well, into much develop much part we the continue move we much next to next And platform. and our remote of R&D very and of of patted forward. It's computing incremental especially part is question. cloud generation, monitoring, it's are development. to Good that doing very the development very total integral SafeNSound stuff,

Alan Edrick

our And to certain in instrumental new new at commercialization in of look part been winning effort, that, addition we development, our when it's current business. as

our for us. monitoring helpful sell patient and team very commercial our SafeNSound along with nice a been to it's sales So products for as existing differentiator

So been big it's win for really a us.

Operator

the remarks. I'd this Thank questions you. to over any like I'm showing turn call to management closing for time. no back further at

Deepak Chopra

participating wish and safe conference at We forward thank, want gentlemen, for healthy, with Systems in everybody of them. OSI employees proud done. call. our And again to your a you global our Thank again, job again, Ladies call. next to time. thanks speaking a once total of Very I look earnings once well I for you.

Operator

all Thank conclude does conference. for you. and today's this you Thank participating. gentlemen, Ladies

Have disconnect. now great may a You day.

OSI Systems (OSIS) 28 Jan 212021 Q2 Earnings call transcript