OSIS - Earnings call transcript Q1 2022

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the OSI Systems Inc.

First Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. advised, program be being Please Instructions] that is today’s recorded. [Operator Instructions]. [Operator would And Edrick, your host Chief to for introduce Officer. I like today’s Financial program, Alan Sir, you may begin.

Alan Edrick

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

results. our We and we Earlier are results. operational to and pleased announcing fiscal quarter financial today, you a fourth financial release with XXXX press issued our review our year

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

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

the fiscal Despite business. well from logistics financial company and finish more and as impacts challenges, of our regarding performance for to those with chain the first the For GAAP overview turn for COVID, discussion of reconciliation well results of financial call our our to then XXXX. and I XXXX, our of the the discussion Deepak supply detail of during earnings for results and first will non-GAAP will quantitative I information release. performed continuing figures, and a measures today's over company's as refer measures return of quarter. please then begin an the to fiscal the a with regarding quarter outlook

company position our while for our customers Our OSI on commitments our safety to of and deliver at partners preserving priority the to the and employees. long-term Systems remains success

cover let's Now some highlights.

organically all by and and First, Optoelectronics QX Manufacturing our security driven strengthen XX% revenues year-over-year, divisions. increased

record closures the leading $X.XX, QX non-GAAP the plant XX% of achieved short quarter. in a to And to in restrictions, third, The supply term X.X, despite first book increase to was were constraints. we backlog travel chain QX strong volatile per bill Second, X% beginning and up backdrop of share fiscal since from bookings earnings ’XX ratio the the QX of quarter.

backlog the billion exceeded for time. first $X.X Our

results. more diving our deeply into Before financial

Let me turn the call over to Deepak.

Deepak Chopra

morning to you. you, Alan. of all And good Thank

our bookings fiscal which supply XXXX disruption. and an navigate us We quarter pandemic in first on ongoing strong I environment challenges a to due We with included the first recovery showed which and shutdowns are plant the chain ongoing revenues, despite delivered these with performance, overseas am pleased execution strong that end partial and to quarter enabled disciplined of certain our our the pleased earnings. capitalize markets.

contract enhance the of Medium orders we Low Energy MEP and that announced Under U.S. customer we key end, the we positioned ratio protections security of the major of border wins book Talking infrastructure. with grew $XXX record As division the year-over-year. out Scanner, backlog IDIQs. for customers, border division a to performance with the about after that security revenues quarter, date, the the quarter received quarter LEP, bookings over with in billion each for totaling resulting largest approximately our the in XX% to division, well a we are Alan build mentioned X.X. future. during to With million. qX achieved starting significant $X.X one where Energy first CBP Shortly CBP, Scanners, of The

win. very, are September know the government this the that very quarter here, we also huge and you excited is As about

receive to under exercises potential these orders its the another the have if options. $XX million CBP We

the forward and target our backscatter We fiscal to border orders support couple years commencing of the expect PXX ZBX the in achieving We XXXX. CBP’s screening Z our of providing Eagle Systems late Portal over CarView at to scanners next in Inspection fulfill to look these lane scanner, XXX% crossings.

the a offering globe of addition, that as We for mentioned values integration order are scan CBP looking CertScan search In the before also software. we meaningful looking CertScan integration data and for standalone image inspection. platform at Software customers other our a CBP, platform potential software to in Besides and at are agnostic portion has believe the become marketplace. also proprietary analysis, the around

turnkey well operation rely on reinforce to and requirements. trade these to programs customers Rico, Puerto tariff Albania Our Guatemala do continue that service as our and

with the quarter, and infrastructure the we parcel and of systems. and from grow number for won baggage a year customers orders critical and systems prior explosive detection aviation successfully key During trace inspection revenues

announced for for products slowly. certain note pandemic related for product the Time also spares levels to know, that Tomography scheduling we quarter, globe. the our International you multiple Asia-Pacific travel have pre-pandemic process installations an Systems complicate an order of but restrictions the million in as air and demand should to and traffic returned XXX RTT Real passenger the service Airport. Detection I During Explosive levels site $XX parts acceptance improving, to the related thus new of continue units The those not is for are for approximately provide testing recovering

these in to expect We environment expect thereafter. QX going but the challenges to improve continue forward, and dealing with

‘XX. move our demand The backlog setting increasing look security into aviation, air we and critical customer base through global unpredictability logistics, for continue well some up products Although growing demonstrates infrastructure. in our fiscal to cargo ‘XX as we border services both and serving and And sustained remains. forward fiscal and

made ability with products. know, us in deliver previous and during very cargo. Express, very of the integrated you these successfully air and that we that and DHL, growing product expanding their security One has logistics to to want like period, comments much the very in our are for are the are again as areas the of emphasize Customers calls is one Federal this been people much

revenues Moving shortages bookings maintain to delivered the increases margins, as the and growth and record multiple in adjusted achieved we that chain and double among defense with record record equipment XX% given Opto and is cost digit ended exposure base with and others. faced representing QX division pandemic of exceeding results backlogs. division, care, year over Optoelectronic The health environment. which supply automotive, operating customer a Manufacturing again prior impressive this in in space Opto’s original manufacturing markets strong

us time these and have loyal collaborated remained markets critical delivery manage ability now to in customers proven and we to a lead serving schedules. challenge many have cases, environment, with pandemic As deliver in

diligently the working elements on execution. is team other Our focused and within remain to manage cost our control

slightly Finally, related we moving expected, a about QX lower year year. the to tailwinds, with dissipated. This was experienced ago sales X% as a finished the had healthcare down than that have we of said somewhat COVID that prior division. We some before,

in in region we EMEA Although our But demand the continues region. did and some revenue demand America strong softening largest see to be growing.

cube U.S. During solutions we announced an patient where order at and stations, Midwestern expression monitors, and to quarter, we patient patient to expect rental to the valued a provide monitors. exhibit monitoring accessories million Hospital, approximately related based $X provide

patient for we important As these in advantage information monitoring to our cardiology trends. access, become caring invest of of continue take portability increasingly connectivity, and patients, ease platforms advancing key in and to in product

before is the focus in as in group. grow us forward, highest Going business have a the cardiology margin we for said Spacelabs to that healthcare it's

to margins. I'm are of We team pandemic. the the Overall, double as adjusted the digit performance related of delivered pleased consecutive encouraged operating QX by despite our quarters the healthcare performance, it challenges has continued with

Our team on serving its remains global customer base. focused

We customer in to forefront base in security division that of have the a hospital the pandemic. record significant and backlog healthcare in is at backlog the been has fighting serve global a critical continuing Opto, the

the We normalize near cost the supply wide are will hopeful that chain increases disruptions and future. industry in

in in we the back and financial detail to the before remain Alan prepared environment However, ‘XX. questions. hand We to opportunities forward leveraging marketplace. I more the look rest to and our call about that, operating finding fiscal call presence the to performance you. our top global of and vigilant to With over in Thank talk will for in grow continue the operations line are this opening

Alan Edrick

Thank you, Deepak.

our results Now first detail. I review the quarter fiscal in for some greater will financial

the to Opto divisions. and earlier, and the leading As year-over-year, division vehicle our year-over-year, mentioned checkpoint up X.X, driven bill Opto revenues in mentioned security QX intercompany security each XX% driven momentum cargo sales revenues growth as throughout up increased XX% were over year by prior are solid XX% fiscal systems. we including ’XX. significant was Security the The growth saw inspection and of our booked by we that continuing products backlog in security qX the sales a Deepak division.

intercompany division. while growth XX%, in up were mentioned. in was booked XX% were Deepak healthcare X.X anticipated quarter X% first the in in bill was revenues a division, which sales by The as The security Opto year-over-year. was year-over-year quarter sales party backlog Opto record in Third reduction the for partially Opto the offset and a sales the resulting in up

team While be out including U.S. more fiscal patient in monitoring sales line, to challenged several cardiology surrounding building bit releases sales initiatives product are this are new to the expected a year, off. pay beginning our product

revenues Stronger driven and the quarter. these in margin prior growth revenue Opto increase component the growth in also comparable by the the a costs, impacted Opto related the Personally, mix reported a increased of to within basis healthcare primarily well. cardiology inherently of Like last less downward significantly higher were margin. lower tends driven in cardiology year-over-year. divisions, division, our than a on XX.X% sales margin, the division pressure margin freight which we in costs. compared divisions QX sales to sales, in margin QX security carries and in mix on certain an places many as and gross than our our XX.X% gross carry reductions and component gross within among offsetting and the gross in record the was gross experienced This For X other was contribution favorable of consolidated increasing which margin division divisions QX increases companies, The which was year. products consolidated by year's

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

operating Moving expenses. to

diligently to SG&A to of work improve efficiencies, structure. our continue We manage imprudently our each cost divisions across

efforts. year expenses XX.X% or expenses QX of development demonstrate were QX. results sales, or million, of SG&A success $XX.X XX%. in these year-over-year the were Research quarter's a $XX of of sales million $XX compared in XX% representing QX This to and increase million, the prior

charges We particularly businesses. million as QX In compared and to of to in healthcare. other product dedicate remain QX prior focused the of $X.X recorded as fiscal resources million development, of ‘XX, view on $X.X fiscal year. which R&D, security our the impairment innovative in to vital continue we considerable success to We restructuring long-term of and we

interest Moving in to decreased other also $X.X in fiscal same new in period, million taxes. $X year the accounting QX and of to interest adoption the primarily the due prior million expense of Net from to ’XX non-cash It ASU balance on standard discount, which our with the XXXX-XX, increases adoption. was associated by debt. the million the interest eliminating to unamortized debt eliminates prior which approximately convertible expense $XX sheet the

the of side, in our fiscal tax On fiscal Compared in discrete in QX period. million ‘XX year ‘XX. in effective the to tax recognize of excluding impact QX QX $X.X the compared prior million of tax $X.X XX.X% rate of benefits ‘XX items, year fiscal comparable XX.X% to discrete We was tax

in in reported in the year, compared a driven in the GAAP. effective in in of of our by reductions non-GAAP of XX.X% research prior XX.X% now divisions. fiscal ‘XX to adjusted compared factors to under QX Overall, QX fiscal and record result, operating year, previously ‘XX, the year security were discussed quarter. increase changes related a discussion margin I our other operating XX.X% to offset tax in a QX to Security XX.X% the our gross fiscal QX turn healthcare. from of the Division, We XX.X% last rate was discussed adjusted margin in previously expanded this will As QX the decreased ‘XX XX.X% increased margin. investment adjusted operating to pleased as margin, This development with in to in in record QX the the which was first X and margin by in of

costs a last XX.X% year, scale of was operating higher driven adjusted qX was to compared the increased quarter with by infrastructure division ‘XX boosted fiscal growth higher investments year for QX the pandemic in support fiscal that ‘XX in well ‘XX margin healthcare of prior in to variance environment downward economies of product in increased margin, sales towards in Our this put the and component XX.X% as development, first this year. pressure the challenging R&D on The of beginning healthcare. the of support the level future chain associated to in as new that fiscal supply margin

healthcare last from year, QX. for QX on from adjusted the XX.X% less of at division last in fiscal and Similarly, revenues customer to was Opto ‘XX year, fiscal in of Aside division’s a in record costs operating supply the margin operating adjusted mix ‘XX. decreased chain. for favorable primarily strongest the of fiscal XX.X% margin due to QX our rising QX

environment. collections inventory in challenges flow, $XX to decision by a the was was of the quarter to QX was million. amortization were and certain stock program. QX delaying active have from cash parties X.X We our in business chain while CapEx and to million. driven Moving some $X.X in to supply as operations in was payments depreciation by used million, cash in increase current and timing This vendors in fiscal the first part payments levels expense customers buyback mitigate been

deployed price under approximately of the During to $XX, fiscal current leaving repurchase available QX approximately ‘XX, of million to million X.X an program. XXX,XXX $XX shares at repurchase shares average approximately we

acquisitions Our and is with balance for solid, sheet stock capacity significant additional buybacks.

notes September mature thus current XXXX, liability. convertible a now are of reflected Our and as in

strength favorable guidance. And our general satisfy us available convertible through the are the Given obligations sheet of our the there we and notes. believe to credit turning balance the liquidity to under finally facilities, options various

of a acceptance in we seen, that and installation potentially opportunities other could pursuing security, number cognizant things have and challenges current we our division ‘XX associated supply fiscal chain. although of Deepak As the results, our simultaneously bolster we the are environment are testing headwinds with timing describes, product in which among

be pandemic fiscal non-GAAP we've we anticipate And guidance. supply believe estimates. we As currently EPS chain supply guidance challenges. while reiterating first stronger reasonable the included anticipated in We the chain the the managed that second and year upon XX of schedule, half backlog previously provided sales and such, than and earnings revenue non-GAAP half. the our ‘XX challenges projected and of Based COVID are to this we fiscal the guidance impact pandemic through our reflect delivery

innovative other to Given currently reflected the under results, is predict well guidance. may impact and and which our We continued and continue our to structure. our believe potential strategic we uncertainty first traction continue on areas results focused steadfastly strong duration discussed uncertainties its in per due scope as vary diluted and times, other will challenging from through while and our supply chain and of to cost of vary and of Actual gaining In revenues the the in as anticipated company could growth the remain earnings to providing anticipated solutions. enable estimates COVID-XX the to the the impact from SEC as investment and positioning to quarter each uncertainties and and face to and growth continue through navigate non-GAAP capitalize and however, to acquisitions, shares could these products key from efforts filings. the effectively businesses product strategic company and financial also leadership variables and improving delivered on extent OSI of markets. significantly risks development areas We these ranges our difficult management

global this open a to Systems our and would take the while like we'd like we OSI thank safety. creation value our to customers and its stakeholders this the continued questions. And of to firm time, to to to opportunity call the for supporting commitment dedication contributing maintaining at Finally, team for

Operator

from with comes [Operator Ruttenbur Brian you. first Capital. Instructions] Imperial Thank Our question

Your open. is line

Brian Ruttenbur

you Yes, very much. thank

-- CBP. big about talked on First the timing. you question order the with Can you

of think that we going I majority that start Deepak ‘XX. fiscal of to get ‘XX. you in the this shipping, mentioned will most $XXX end kind is of the expect Should shipped of them fiscal million

Deepak Chopra

said I Yes, here. Deepak that.

But could to I by right. the push do year, year that it depends that quarter year. it is start that it have It We Majority really of customer going you of a and little some? go to the earlier want will shift and sign that to want next expect And install into too. next it add again, shipping. following upon the a emphasize will the this the be Alan off. ability to little readiness might fourth

Alan Edrick

Yeah, Brian, And we ’XX. move into I exciting Very us the ‘XX. Large would up as could be well, ’XX sets even order end revenues there anticipate echo said. amount for what of us we Deepak order of a towards us. our modest fiscal fiscal just for

Deepak Chopra

to Deepak at add marketplace. we that the lot is since just did the I to all but of that know Brian, got you again. system emphasize I that want on say NII orders time, want a people largest on that, the who about this out I various that, to got order.

not It's proprietary very received. are it. very products also CertScan well software a with base. Our broad only integration the products, it a has but it's And

excited very forward that. want it. to we And about we're to So look

imagine can to the we'll in it forward, more watching you and And bigger. this goes but just this progresses. As bigger potential has be forth that places much for world not CBP, become other how only as

Brian Ruttenbur

backlog In backlog? million is that that Great. $XXX in your numbers,

Alan Edrick

the Brian, part XX Yes, of September backlog. it's it is.

Brian Ruttenbur

kind is already mean, of Opto? the stronger Opto a revenue about great. at gross really for then mix quarter, levels? first the period, -- that bit because in strong mix little came talked you on you Okay, we’re And margins maybe of Can shift where those the sustainable just I in

Alan Edrick

a though. it's question good Brian's

record had visibility going very it provide outlook is book with forward. revenues, division. Record ratio, don't bill strong. provides extremely for we Opto though believe so to the guidance we strong even great We Although backlog, by a

through in fantastic a going we such well, But quarter. and an we'll feel dollar year. rest because an as very revenues had basis, well. the have each very strong XX%-XX% more Opto fiscal basis, dollar an every We won't of anticipate Now, difficult Opto see that. course, type absolute growth. as year-over-year don't ’XX and Opto forward where good forward seeing absolute about on on of But going will the comps be very, We

Brian Ruttenbur

R&D. into just good down fourth there little is that Because in travel down? look couple year-over-year. or Is headcount it to coming other is it number Or is at? why SG&A this then SG&A and aberrations? any is on quarter travel is things that And calendar. related down going a Is it SG&A Great. back a appears first reduction quarter was

Alan Edrick

Yeah.

trying really our open to first in nothing we're up expect even a a and quarter begins great has as divisions, progresses, job. So particularly we unusual to There begin bit our significant regard. cost see manage We team even probably bit will year up did nicely a and of our a travel nature QX. our in structure to travel X to little was start as In tick up of in done the more. little further pick that all

that of to was super that period we'll unusual from But material QX. a see wasn't nature SG&A period. in there fluctuate So anything

Brian Ruttenbur

historicals, $XX.X Okay, new something R&D, appears that It your sequentially. this I'm high looking happened? pretty seasonally and there then back and historically at on? looks pretty Is it for Is just dramatically just quarter. first said year-over-year million going projects just even

Alan Edrick

Brian, again. Alan

we And security in our You're R&D a were a our on and investments global new on shareholder for invested will this going basis. accelerate R&D. for because first going look level more is out coming forward of that's healthcare a in exciting sequential significantly continue marketplace. at in important elevated first think a think quarter, forward, to we year, the but we can make. value wouldn't than high we And any a those a last to for in really future. to to demand in us the at but on focus so be right, projects We'll significant driving the a was quarter degree prudent We divisions, number it it it think make difference quite felt both fill to for division, typical in it to we

Deepak Chopra

Brian. Just to add on it,

them this $XXX Portal CarView with systems, some lane new from are CBP. And systems. are I some mentioned order the example, million These the products, of For the Z in the of PXXs.

margin investing has platform has R&D. to go it's So that basically into been quite is the patient we it go for focus product grow lot forward the the big into want platform Similarly monitoring. a Alan new products, And you in a business. us because increases new mentioned, new as healthcare, in and highest that as to cardiology we are focus the

products, it look Last people that year pandemic is and are travel thing and rewards before. platforms. Obviously, the big when an into continue when going year later. working people We're we to second technology And will innovation the it we're company. focus then a they we And the understand have interruptions, unusually years these relatively the come with new the back compare was are remote. to a The restriction, on disruptions, it, to company. low. at new the And in come

Brian Ruttenbur

real just cash highlighted you Last took quick up, question and inventory on flows. Obviously, you working good. already capital that. That's

If turn? you positive a for you that do second quarter. cash flows third to When see that's quarter, going expect would

Alan Edrick

it’s Good Brian, question. Alan.

Although for flow, we don't guidance generally. cash provide

of of kind me you directional. kind Let give

supply require for ’XX items. years. inventory a in past with fiscal have near We positive We'll the we've to payments pre-pandemic. cash and of timely the appropriately our flow to good little term which some some free Kind shown invest expect of as bit strong, that manage and prudently more continue than we'll in vendors chain of

on a us and a could a a we've flow But nice sheet, where such basis. affords for So, generating strong balance the that facility luxury do be and continue thing such free that strong credit opportunity cash and we overall perspective few things timing from company, the to is will a have vary expect an what's business to the a we quarter-to-quarter from always the good strong best basis. been we just have

Brian Ruttenbur

Right, thank you.

Operator

Thank you.

Partner. ROTH of line a from comes question Jeff Capital Martin next with Our

open. is line Your

Jeff Martin

Thanks. you? And are how Deepak. morning, Good Alan,

Deepak Chopra

you. Fine. Thank

Alan Edrick

Good, Jeff. Thanks.

Jeff Martin

of elaborate the other those that curious comment if maybe largely that contract. in CBP What the by on much about maybe you to specifically alluding end referring that I XXXX? your helpful? assume could front segment I are to you bolster are be Great. things we opportunities heard by you're can haven't or are market yet? you was But would

Deepak Chopra

Deepak well products And security, Jeff. in And, healthcare are is, question, one places. Definitely. very globally, entrenched and our here. Good other both uncertainty. and U.S. there's including

One the we of the already some calls, built, have that we in things mentioned Alan has previous delivered them. products just but have

when Same get ’XX it way product. be to be So off We conservative. to right. we our have are ability want opens as to a to a stuff say increase as product. want up we dying And Opto, going supply we things cautious, to Customers And better, install what be going our revenue. chain. and backlog that all open is we opportunities the to fiscal challenge. want But get in units the for the it's there's and just backlog as travel in up but sign manage the They and to think as security. our can

call a As that places of to material some able are even some my in and us helping been of with to even the mentioned get customers fact, we've us cost. collaborating matter more the pass in I

open open as as product. look more up this the not cargo CBP logistics at So want I but air things every people opens day. up as Automotive, opportunity, you'll hear up it just

begging they're And industry. the to automotive get the product. in involved much us very are We

Jeff Martin

to group, scan how fairly out we And standalone as about it how Encouraging. CertScan. going installed opportunity? that non-rapid base, product. a a about could I shape large question the as of base. retrofit already around it? equipment I Alluding into you're sell that's marketplace? should ask would you install existing to But in us this wanted outside your this to an Help kind think assume

Deepak Chopra

which are is the the the question. we equipment did The software, are used Good base is products that's image integration third central party to integration so other important. on we think and a but and and agnostic. make And data the Good for CertScan integrated the stuff. used this I it about as education focused program on developing standalone fast very it rapid that install agnostic products get can Yes, inspection, being a the new to platform and into of as to and scan focused doing by statement. to has is developing observation. be It software be possible, as have that can and or tested software. people's analysis, the we customers this obviously,

Jeff Martin

pressures in pressures? of necessarily what components for on need those about and fixed And back offset think existing just then adjustments some ask might may those there or of how where freight we have pricing your What's go Great. to mitigating process some assume around you pricing? when component pricing margin and can't wanted But ask thought question overlying setting some would I raising a conceding freight. you higher costs. should and behind to contracts versus strategically the and do already your

Deepak Chopra

the a then to fixed problem can And take me Alan, challenge. let There comment So go is is answer. going time away. saying is that no been you it. border We've this it. on This

this to a compared we are our position. better in The We I at is look well. what addressing And it. competitors, are we manufacturing mean working are that We multination is one plants. team by

world, Indonesia, We are U.S., all over the everywhere. Malaysia, India, England,

fixed costs we So But parts inventory depending cases, we world of and those Because than understand in into from freight take some integrated positioned also, can so a that. it if customers material on It's it. problem. competitors, do buying that. customer's have the increasing that. of been some not big a product and of can have to contract mentioned, a -- we can a before, the Alan big when And a better customer handle is it. vertically challenges you in gets to Alan? price you to our it think that the broader the are get and little the we Freight components and ability price, the we unpredictability person we've difficult need. Opto lots control of There in some the cases, we is but two the risk as And know the challenge. of freight able has very that of bit wants on receiving between it's In deliver pass the who it, the can Yes, intercompany better that's said it's order the needs. right. we are security Again, healthcare, company when that we we better. just

Alan Edrick

Jeff. to many customers, more Yeah, cost increased on time an them. would well, But on been in component other of for the books our In the cost pass of OEM customers, the understand Deepak end long there's particularly And stated particularly backlog, cases, order many we're and those where increases. those customers, a able where our difficult. be certainly to cases

we So and We company for balancing a customer, balancing most prudent it's do the act. it's the but what's act. a think

Jeff Martin

on Much balance with insights Great. good luck appreciate the you. the the Thank and of year.

Operator

you. Thank

comes question CJS of from Solow with line the Larry next Securities. Our

Your line is open.

Larry Solow

you Good out afternoon California. Couple good Great. to ups. morning guys follow or of

to be The first screening and I how that's over for screening this like one don't vehicles. know this not Patrol. XX%. on the large If of could much is Border many And I years just is believe sort from order it's I’m to today is get there's of mistaken goal. a below ultimate Not X% so on Customs the a borders, like

you well. opportunity, much it I that But hopefully seems seems just a there's adopt like fair? will multiyear other like opportunity CBP, the borders, more the lot U.S. So is as larger there's that a within U.S. just know Is that, and on countries the fair mentioned opportunities. a statement? within

Deepak Chopra

And expectations Very X%. think think there's a what it’s there don't inspection. XXX% I said/ I it. is well of Yes, need for lot wishful you answered it. call of I a

and of products. come think And it state-of-the-art besides it just emphasize They to I reporting the than integration nations equipment all more are the these integration more But it's And positioned. that, patrol we to think efficient. more the makes about need want It's ultimately all I all the products. we equipment, there definitely, systems new all for are is much besides can station centralize think these it tariff purposes. even opportunity. border more where the back better efficient. is the besides very kind that. more one we that central CertScan. on And well than But important the it the make think all a -- we we countries, as just right of to the that for the If

Larry Solow

Okay. switching the on And good side. healthcare just

the UK So historically that a or more some of mistaken, sort it And rollout lot like of sales think Europe, partially product a seems it of guess development been in and it's new -- more combination within cardiology. business the I'm on I maybe products most of cardiology. focused sounds was them if not were the too. and in I have Is overseas

way So think and Is is good it of a on product also that a expansion to geographical cardiology expansion? it the side?

Deepak Chopra

think we said it, it. of products, our for focused majority number a growth to opportunity. emphasize of development which But patient new on is and sales. our monitoring, they're just it Well, also smaller that has one, portion also doing And we that is better is a which cardiology,

So investing in both.

at our at, obviously, to We everybody's at that. that homecare, looking to And of what doing at development geographic it. more pandemic. continue looking is research call, kinds all The U.S. plus. can stuff especially we're in we Monitoring is to and monitoring, my remote the all it. products the of the look I did during being Regarding connectivity, is in mention suitable make thing, significant XX% look we're

in both to already cardiology look continue growth U.S. us. continue market, are And into at On the started definitely, believe also bigger a but the sector. we But also front, it. that European that primarily is Europe, we And more in it and have originally, of in we will we was it. focusing

to Alan, want in So both. something? comment on you it's

Alan Edrick

is future. we'll of the part the our for strength The nice well growth principally markets. monitoring, some in R&D cardiology Larry. team platforms new in But Deepak. sales up building through of We've cardiology and and been and of monitoring Germany Historically, this you're going for said, years saw a our be and growth but UK have patient the in increased the out that many U.S. Yeah, right, balance QX in US selected international has tremendous coming and year the the and other to continue year-over-year and expect will infrastructure. some We marketing investment patient in both that business been in forward.

Larry Solow

that over to of order before sequentially year automotive a recently, to areas. book trends more gears any the than areas a I one switching the seem is changed where of the And coming particular last on quarters. Opto to or seeing you're and lot lot seems called others? I or an to from seeing kind improved two so? strength? you've it bill, side of couple have the Are in you know know strength last anything the has be But

Alan Edrick

this So hey, is Larry, Alan.

been had in lot tremendous You're right. think business, company, division. to think And our automotive been while broad Opto number even quarters really diversified I our customer ratios based Yes, we've mean, and bookings which a the defense, now industrial really as has of to a we've operations, we seen it, strength of medical types our And of within book Asian great we're Opto part we technology. mix. and customers, a Asian for I sell what straight has to operations. X of bill other customers, seeing real aerospace, but dominate those of also

but our American a So our and Asian based, done North by have been UK bookings demand broad operations strong simultaneously. well led and it's extraordinarily operations,

Deepak Chopra

would that Larry Just even Besides been could demand been defense, it, we more Frankly, have to higher. Alan what on to we've said. that. supplied would healthcare, automotive, -- have always add to revenue in that aerospace, have if

we in it will and in stuff, We at to long-term that growth, as want factory supply point. automotive think aerospace, believe chain and is in the becomes new But freight our the in space time, Opto continue, grow. operation which continue a -- to the and anticipation OEM So same going to healthcare by logistics in business we we India. challenging of caution are that Asian and expanding a defense is and

Larry Solow

may level. know certainly for on cash -- macro worse guide solely Right. from bit it of With seemingly a like some think still And flow fair worse finish you full guys free I it refer this a year chain maybe flow you gotten think amazing an working just cash like you say that reaccelerate year-over-year? it's free some don't is supply I Last sounds you on said, obviously year basis, note, perhaps quarter. and had expect sort to then that you capital worse year, down but sounds to Do that to even stuff. if Alan, And benefit too. I like it little seem does

a cash year-over-year. changed at working of excess issues, generation doesn't offset supply to the of beginning this long-term in in the with some your like capital, least like seemed that be of it free So But, has really chain negative the down inventory just and year capabilities. will sound terms anything some flow we

Alan Edrick

Alan. Larry, think you that. be generation term I flow continues quite said to this Yeah, is strong for Long cash us.

some fiscal we're in at and Looking situation unique specifically, today. ’XX inventory the we're the the making the in that investments of growth top-line of in sort that in

DSOs of as turns I working be improves, for forward, inventory situation going an course APs cash capital regress nice as back the revert a and the more to flow flow on of year this could metrics mean. to overall of And, assessment think the there cash your is correct. some real bolus

great some there. So opportunities

Larry Solow

color appreciate guys, the Got I thanks. it. Great.

Operator

Thank you.

comes with Oppenheimer. question Glynn next Our Christopher line from the of

open. Your is line

Christopher Glynn

morning, Hey, good guys.

spend margin healthcare investment closer live inching the to start out on How range and on as over kind cardiology that questions, couple of do the see to of run-rate Sound about diagnostic more next continues segment the for cardiology Couple of years expansion you a you're as as, the in think great, Wanted years? kind higher job. is or a nice of really ramp, with now monitoring? bit goes mixed tailwind time on leverage little opportunity. we to the healthcare and will the and year of

Alan Edrick

term a to tail The said, this Alan. is in to some side contribution the provides for experience and think relative that winter -- the greater that as line. rate, margin being patient That to near the for diagnostic growth cardiology well. nice But leveraging highest the bottom contribution in gross healthcare on monitoring, margin within products remote provide cardiology has Good we the the us monitoring Chris, question. down do we division. do margins and patient as cardiology,

excited opportunities near the So monitoring. in growth longer the term, in the about term for we're those term and cardiology, medium and patient in in

Christopher Glynn

Okay.

And for cardiology patient opportunities monitoring. you some like those or highlighted is really last the GPOs, of it quarter too, different? with premiere Are your nice channel

Alan Edrick

cardiology And our out. the well. with with relationships manages GPOs. of expand the new We're looking Those those as to that them rest some and the in No. each represent with contract further come team real opportunities is in GPO contact on of nice as products

Deepak Chopra

the just want and between this to emphasize I to Cardiology ratio Chris, here. patient is relatively Deepak cardiology say monitoring side. is focused is the that patient small. very monitoring again, much towards

we to time some take the continue. might impact We platform, to the look the same happen. And at monitoring, a on wise. at enhancement features will focus which to it time, growth So for innovation significant and have the area that

sure monitoring. is a one XX% our quite product is from that make that lot So just to revenue want of realizes between X lines the ratio the of

Christopher Glynn

real of There's grab bag curious of security. you you But Yeah, would I activity kind how characterize the project smaller that? like highlighting appreciate And high-profile things on those been venues some to sort dynamics. of there. stuff

Deepak Chopra

Well, Again, But the question. order. think been have than good have world. XX,XXX of base we most the all more I on questions installed the large over

multimillion the many, sell range $X,XXX we ranges. products $XX,XXX So, many in in range to dollar

slowly growth, given counts it, So And you mentioned, remains sure up I'm and about have airports just contract. the as products. we are passenger still have is increasing, your but change it there one All we focus is or slow our globally. they on and not haven't activity read Pipeline robust very unpredictability. there's there big around travel of to strong,

of new carnival kinds line to go ones. all And the is caters prisons, There's it. They're that cruises, have which a to we of this. product all they to broad still courthouses, to very all there. get have So trying stuff

Christopher Glynn

Thanks again.

Alan Edrick

Thank you.

Operator

you. Thank

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

Your line is open.

Sheila Kahyaoglu

it any that? -- Was Does of good next think over two Hi, are about for And competitive? could any the do we guys. back question. we the offsets Thanks how -- include to we my years? million? go XXX Can $XXX there there we CBP that? Is taking million morning, to that order

Deepak Chopra

fall we then different we is We companies superior. up. And Number of integration, say question that what the which that orders. there think agnostic. multiple that Sheila it we're bids, thing got we We competitive is, share. Delivery, that these win. continue in very products came looking it's the it's are Quantity In bit largest product to the we're these what real one, going IDIQs, say uniqueness quarter, a proud second is all our are between developing, fourth also we $XXX hopefully not point. product got ones year And rail over. XXXX the scanners, And and go we be proud is There's this little called not goes The start, spread to and to your back make is great answer at the we end. And our are said, very are then is in software I'll some Indefinite proud this question answer is call to like input think ‘XX. got as good. over more. we other large we've This had parts to orders, million. But all is Indefinite Good and in also that into and The it. very it we

is think grow new we area a for a good us with to product. margin new endeavor that So a

Sheila Kahyaoglu

will Okay, cool. this be that that was No, the packed. quarter, is it lost new how one? anything the there or that's And is all that in offsets

Deepak Chopra

all it's add Well, lost. nothing on, is

got the pushed of orders are internationally Some other out.

logistics that continue that I say you emphasize and lost are companies. air again want we passenger companies at air this cargo have in hear our would and to air many logistics for and not all Because these has in and the again, area, increase benefit shipments We stuff about in calls, cargo used borders I And products any. look patrol. by area, to And us.

Sheila Kahyaoglu

That investment we on makes in higher, last How cycle? the should long R&D XX% for extensively your about sense. given How Margins around have quarters. think X talked And laying profitability? cardiology. about is then you been guys the being investment R&D that

Alan Edrick

on primarily the monitoring, come Alan. with out Sure. and well. And a as as platform. we is Sheila, is majority again, monitoring of the investment But R&D patient healthcare patient this it in in cardiology is new

balance certainly as So be will us look with health this the and care these exciting the fiscal spending to year products, next out roll we for through of into heightened new R&D

Deepak Chopra

we too. emphasize R&D that, that are about these just I on on are new it. security. patient coming R&D monitoring. on to doing we products innovations new add also it, Sheila that All cardiology, Everybody to has we say all to talks in also have up focus it. And the did continue with we

Sheila Kahyaoglu

that okay, Opto, lot about supply sense. a Yes, about on chain. pricing supply you And makes last maybe one or lot guys then talked and chain a

actually inflation price those you as hit Opto sensitive price benefiting Are think segment. most the in shortages? from is guys has I

Deepak Chopra

challenge. say that at everybody's I addressing I say have it than to looking positioned impact. the think our across can of on we side. to we're all it. I a some don't can how just the we And product better negative are But we benefit some whole is it. And on from that so going to competitors impact it, And want I have it the going that monitoring think say lines. thing, nobody's we in everybody's going minimize that everybody's this positive And at a what it, wouldn't It's to benefit. Well, look way.

Sheila Kahyaoglu

Okay.

so Thanks much. helpful. that's Now,

Operator

line Josh Thank the Nichols comes Our of question from B. you. Instructions] with next Riley. [Operator

line is Your open.

Josh Nichols

of little hi. just clarification. wanted I Yeah, How to going? a bit get it’s

You has been little gross navigating But of margin well. pretty company overall, the impact. mentioned that bit a

back of or to the the seasonally we some should XX% year be have of about would plus the XQ how that company's expectation revenue slower, Opto thinking the also, that for range gross some the thought that You kind we through work gets the should base Given I expenses, like year? potentially remainder there? assume, but that. as of offset like help higher the what's Is there margin

Alan Edrick

you're depending the the absolutely It'll is X But quarter within divisions upon divisions. this right. vary certainly X quarter, question. and to Alan. Josh, from products the those Good mix between

you're As a half healthcare where to half higher we then waited again, particularly we second healthcare margin more experience And the second we we levels the There's half, of to a scale, future periods, to first gross revenues growth margins gross among in that that than economies highest divisions. about. revenues. the the talking to expect take bit opportunities carries those begin as get X indicated

have together, all you when it on can our So consolidated favorable wait impact gross a margin. that

Josh Nichols

CBP just awards. on Thanks. the hitting And then

the like on secure So or later we $XXX we're I opportunity you that orders? out $XXX there Is those fiscal upside opportunity. million were at X that what's million that in Or IDIQs mean, so today? opportunity this like follow another $XXX $XXX those could million could close year, to But like of million, -- beyond aggregate. another $XX

Deepak Chopra

similar MEPs, Very it. opportunity there the good and that Department. And They are question. they have the And There's The you We for There that. LEPs all released areas kind look talking That's $XXX other And about very not to the $ true. got. data the government $XXX go State X our good DoD, IDIQs million. share. by, in who also of as more close the years the at got equipment. look million use products, is CBP. or million at they we biggest the XXX keep

as that going as they for at fine and emphasize and got to it, they says progress their opportunity to units to some continue the and as is grow install orders, what into was what So companies not CBP these And I'm who more sure there and deployed, this want. fine them. I they're these they ask look is other changes Ultimately, they will tune people can basically that tuning base DoD it.

opportunity. more there's So

Josh Nichols

then Got last question for me. it? And

the M&A, continued talked about decrease. like to company's leverage You've and has

key Like, to a able criteria it balance do far your to ask have as of process are the convertible guys or now been do might a a do? think what's there's refi stock. I'd to lot also the back your you And on acquisition large recurring that at capital assets the I But higher been deploying A considering like, it's they company's revenue But You're accelerate thought sheet profitability? have does I been probably acquisition, bit the right? priced a guess the to like notes. once ago. two as of buy thoughts of looking valuation like, while growth, you little have year be you're what's since to than least a framework that

Deepak Chopra

you said God, My it.

You couldn't it be words. already in better answered put Exactly. yourself. mean, I

the above. of All

acquisition We just done are for product do very innovation focused. A, either its said many strategic there. It it our our time, technology or strategic be make the a we we out But sense. have acquisitions. must to should an sake the We've it just acquisition, of same don't portfolio, times. at an that's

you aspects want to you looking sense at we Alan, there on the overpriced right But just no makes it? stupid to said what at add which are asset, We you're to not do are are. anything acquisition. an all do something also to one going buy

Alan Edrick

I mean. Yeah,

right, absolutely You're Josh.

were. a We sheet. at channel that need growth And a they look or different new will and out have rightly available our We're for a new and technology with or take at multiples technology accretive strong you that will our direction. to looking lot historically powder accelerate to, in balance stuff valuations dry our us fill always are disposal earnings. than acquisitions a be do levels a to a We could point need as

of good sheet growth. to of with to some strong that to able growth hopeful balanced are stock cash flow not being and acquisition supplementing just balance we So our organic deploy all but and buyback, some

Josh Nichols

Great, thanks.

Operator

in I'm closing the questions to for showing no I Thank over like back queue. remarks. to will turn you. call further now Deepak the

Deepak Chopra

the exceptionally them, your thank again and of for of times. much. needs. again, during them want I I challenging the OSI and Thank time thank to a Systems I to for And you satisfying worked this all much. at very They same the And betterment thank to support. customer's of company, have the want you employees want thank all very to emphasize globally

to rest the QX. much. in And Looking on of we'll you to the you Thank the late-January talk forward year. very

Operator

this Thank gentlemen, Ladies for conference and you call. your participation. concludes today's

may You disconnect. now

OSI Systems (OSIS) 28 Oct 212022 Q1 Earnings call transcript