Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by. Welcome to OSI Systems, Inc.

Second Quarter 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Alan Edrick, Executive Vice President and Chief Financial Officer. ahead. go Please

Alan Edrick

President morning, Alan Good OSI you joining Chopra, for And Thank Executive and Vice I'm OSI's Deepak with Edrick, here of CEO. President us. I'm you. today thank and and Systems. CFO

Second Welcome Conference Fiscal Call. Quarter to Systems the OSI 'XX

and press financial pleased financial release second fiscal you 'XX announcing review that today, Earlier are join us our results. We we we results. as can our operational issued a quarter

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

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

results non-GAAP earnings regarding company's of release. the to of a please quantitative GAAP reconciliation measures information measures those today's and figures, For and refer

with call of performance QX of discussion then turn an and the I our our begin over will for a Deepak performance. to financial overview business

finish fiscal year. then our financial our overall the results detail will with We regarding of more for and a outlook discussion

environment, which inflation costs, be rates. financial were increased and navigated to results current solid continues quarter interest second economic by we rising Our events, delays supply as impacted geopolitical disruptive and chain the

during contracts, we very which quarter. significant were some book-to-bill this and were ratio And bookings last call. Our we will discuss awarded strong

summary with QX of start results. a our But high-level let's

divisions, a of unfavorable an of division were $X solid reported which sales Healthcare FX impact. $XXX driven Opto and in in our million. First, by revenues Security offset QX soft part year-over-year and increase by representing revenue growth approximate X%, we million

$X.XX anticipated, which record in our to were down of book-to-bill QX leading per result approximately expense. earnings less sales, third, year interest nearly backlog as quarter over of additional a a of QX reported of end million, was a we prior and share X.X, of bookings $XXX $X.X ratio of Second, billion. representing a the from QX $X.XX, And adjusted mix favorable

Before will results discussing diving into deeply more to and over fiscal our Deepak. the outlook, the financial 'XX call turn I

Deepak Chopra

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

line that Our QX performance fiscal environment while to in we 'XX operate a solid challenged successfully Alan top mentioned. grew was factors multiple of the as in macro the continuing by

very We entering well Security also record resulting were QX this well of end for fiscal half and 'XX. positions fiscal a bookings in quarter are 'XX, backlog. division, especially positioned the strong, the Our believe for we second really

revenues division QX of with division's discuss The starting million, each in than Security. year. XX% profitability, with performance, Security operating delivered higher our Let's $XXX to were XX.X%. QX pleased the margin expanding prior about the division's We

for for Our and book-to-bill half of division. the for 'XX and Security resulted fiscal a first QX were strong in ratio X.X of X.Xx this very bookings

U.S. CDP software existing and cargo utilizing solutions. CBP announced 'XX. inspection large on checkpoint fiscal customers in programs Search vehicle the programs on deliver Can platforms, These by control gatekeeper our border at to Security continue We borders U.S. improving integration lane vehicle protection, the focus we and

image making inspection inspection a data, comparable and the facilitate systems, to other streamline integrates proprietary with traffic, our systems checkpoints vehicle that Search Scan identification at with is helps option Scan in it software marketplace. third-party versatile Search is solution the inspection manage process. also and

happened anticipated. what from some to Based from upon CBP's previously current QX timing, has pushout was QX

international bookings up in were order highlighted item that was believe operating of $XXX-plus received the expanded, most notable the year-over-year division digits exceptional quarter December end million quarter and margin Security announced afterward and shortly revenues we QX an January. While double by in we a

and and and in our coming deliverables and a of number operator inspection vehicle ongoing the include products works providing civil to radiation the are training with years. portal expected maintenance Our cargo the monitors, managing along

not award significant any revenues We revenues. related fiscal forecasting into strong contract in are provides this 'XX, 'XX fiscal this to Security visibility but

We in we are to manufacturing on this start fiscal to with have will currently 'XX. the calls, share future the customer more production of working schedule and expect on some though

CX FIFA at the Security security and multiple utilized to of XXX ticket November our Cup primary and proud over During detectors Orion screening X.X event for systems as was MetorXX inspection we stadiums products. were belongings. holders walk-through the held World Doha, Qatar their in efforts metal December, around support and provide provider baggage and parcel detection successfully to and were at the This million

Middle In order city. This Rapiscan products and the East to these time at used other also the addition, was hotels be airport, and in venues were primary a come. great for for throughout showcase products will

multiyear in Albania, Rico Guatemala to is perform planning received The new services projects the our services, Puerto we which turnkey in turnkey earlier In and contract, XXXX. for airport well. phase initial continued underwear fiscal

to As and services European airline at expect staff, contract, for airport this manage at entry part crews perimeter a screening points. vehicles the of we

it's before, the said small Initially in space. though, a as first is aviation but we a this have contract,

key fiscal Security positioned a well that is visibility into Looking beyond. the second the and strong other XXXX and for in pipeline half ahead, opportunities we with backlog believe of

of quarterly pressures $XX great which as division. the chain QX Shifting operating million, achieved revenues division, solid another a division supply quarter had This in to a third-party that extra. new represented Optoelectronics record cost for were spite continued margin

among in chains to serves their are consumer reduce to regions the OEM and In seeking East. health care defense, others. China these their other markets, base viable in diversified technology, further and to exposure customer OEMs by derisk certain aerospace, manufacturing transitioning Opto sourcing a supply

benefit Malaysia, given global Indonesia, our this we India, footprint the believe could and We Kingdom significantly U.S. manufacturing United from covering

positioned. backlog ending almost strong Opto last is XX% that higher is time a this with QX ahead, than Looking well year,

was expect quarter, believe year to disappointing we and fiscal This but Healthcare second a division. Moving stronger of half division. the this in the

our further monitoring portfolio. developing strengthen We significantly products new cardiology patient continue to invest and to in

Subsequent to leadership and we results sales the talent believe the U.S. stronger thrive. in quarter will we that business with bolstered position help to the drive end,

Going forward, while innovation and flexible operational to maintain on as focus to our handle execution plan we change opportunities staying quickly. can markets the

as have Overall, the pleased significant that backlog. company's performance in with quarter achieved record XXXX we are fiscal second top bookings grew a line, our resulted we

the 'XX. a of XXXX for are with and backlog and we believe of addition, positioned strong opportunities, fiscal In second half well pipeline we record the

to the call back employees, you. shareholders will to I turn performance the discuss to like would and for Alan open customers Thank financial now half. thank we I our the second questions. to over before call further look Edrick and forward our

Alan Edrick

you, Deepak. Well, thank

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

said, prior As the year fiscal that our QX of were revenues X% compared QX. up with

to Security and X.X%, division largely XX%, growth division's cargo strong the due fiscal into was vehicle well were of book-to-bill half 'XX. revenues fiscal ratio our second QX up and positioning in revenue and the Security division 'XX approximately revenue. products for the inspection in service The related growth

Opto Opto were support division. X% base as the third-party year-over-year Opto customer growth. bookings record solid, sales as to QX a again to division diversified revenue sales sales leading well anticipated intercompany in for with upcoming the a Security to strength increased backlog

during first unit, demand about representing given the sales, our XX% smallest in in XX% prior is overall year tougher the revenues reported mentioned, Omicron variant business year-over-year challenging reduction the division, comp Healthcare Deepak elevated half due to our a marketplace As of a which more surge. and a in part year-over-year COVID

sales and of that gross the below division, X.X% margin consistent which lower that This was gross QX in was The three percentage of was driven division sales. which, a lowest sales, Healthcare with of primarily the sales as year the divisions; margin QX, carries year-over-year which margin three by prior carries highest while our less of XX.X%, favorable mix change the Opto QX. gross of security in about total the higher a divisions;

other also to half impacts in and we gross will gross In of was first conversion Based compared and revenue the year. volume, to increases forecasted supply pipeline revenue in stronger general, based from impacted opportunities, on mix costs. margin component by of among gross period and inflation second period certain our 'XX chain, margin a this fluctuate margin to our fiscal factors. of of upon of half the backlog anticipate Our

expenses. to operating Moving

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

results XX.X% of reflected $XX $XX.X XX.X% the efforts. QX prior in million year sales were expenses of or Our QX. compared these sales or million QX to SG&A

did foreign for operating created quarter. headwind QX have again a impact While a revenues, this our exchange on expenses it beneficial

of the just $XX in expenses consistent first Research million, below prior and year the amount fiscal of quarter QX and with 'XX of were development million. $XX.X that

as continue on We long-term which to our and R&D, product innovative success dedicate the we businesses. in focused to considerable to Security view remain we particularly development, of resources as vital Healthcare,

of QX $X 'XX, year. fiscal fiscal charges restructuring charges just million of we recorded of under and the million prior $X.X to QX other in compared of In such

our maturity bank rate portion of due picks bank and net fiscal X.XX% current a period, rate swap from to same We rates 'XX interest $X.X year convertible interest the QX, lower September our during executed of carried notes Moving X, to an which of our other rate on million borrowings. increased than primarily debt. prior rising taxes; and QX a the floating expense interest interest and to $X.X in in million

reported of last On in 'XX of side, a we million XX.X% GAAP In QX million XX.X% tax rate benefits our this fiscal of $X.X $X.X QX QX in as the 'XX. of compared fiscal the discrete tax compared tax year, to to tax effective QX year. recognized discrete of at expense was in

fiscal in rate impact Excluding normalized of compared of effective effective normalized tax discrete XX% QX 'XX items, QX tax the was rate XX% in our of a fiscal to tax 'XX. of

Healthcare the fiscal non-GAAP decreased Overall, now margin. will our from XX.X% This in in adjusted QX discussion period. revenue primarily year margin weakness Opto non-GAAP of to contribution prior operating division, in driven to of the turn carries margin was of year I a operating comp. same highest 'XX to prior due our XX.X% difficult adjusted with a our in margin operating which X the coupled reduction the by the the in divisions,

to XX.X% in the OpEx quarter, management. prior The Security the QX disciplined increased from in and revenue second division year operating higher by driven adjusted XX.X% in fiscal margin

QX improvement more division in sequential and this a revenues to We favorable revenue in in stronger mix. see QX on expect and

representing Opto of also XX.X% pleased the historically quarter adjusted were in with the margin is We margin adjusted division 'XX, result this Opto year-over-year for We poised second division. of second half operating our expansion. believe operating best fiscal our second in for

QX significant less X.X% the from expect adjusted margin We to over Healthcare decreased the primarily Healthcare With revenue and division revenue to favorable operating mix, show currently by XX.X% lower growth. division a year. revenues operating our of in margin prior improvement driven QX the

to of flow provided Moving flow; prior to operations in in year QX by the 'XX cash cash million $XX used cash operations quarter. $X same of fiscal in compared million was

For we That being first our first is stronger of were ahead half cash fiscal for of the 'XX. deliver we where half operating cash flow. 'XX, flow fiscal of operating the said, typically much

first mitigate this to as In anticipated risks. the of inventory the well half to we sales support year, have supply increased chain fiscal growth as

In addition, of and the slower DSO due payments have we working level elevated capital other uses, payments. have an of including customer to timing

quarter in $X.X amortization was and expense fiscal while $X.X second the in million. depreciation million, was QX CapEx

XX,XXX spent be during quarter. shares about which continue program, buyback we to in to active our repurchase past this approximately stock $X.X million We

buyback of available to the the X.XX year. earlier shares increased program. were million Board under this Our end, repurchase as authorization And quarter fiscal

is annual of buybacks. acquisitions matures our stock north loan, additional $X size significant in net for our from The the little balance of of bulk bank leverage required debt X.X 'XX. capacity and with Our principal solid under payments and sheet fiscal million of a term

by 'XX guidance division Finally, guidance; attributable million end, the top this $XX primarily at our past are saw the to the turning in fiscal we to tightening we revenues Healthcare softness quarter. range

growth EPS However, XX% growth 'XX. guidance. range XX% per and months in XX% X% adjusted over guidance implies reiterating share This revenue fiscal the our of of are earnings previous of non-GAAP non-GAAP six to the remaining we diluted to

their The excludes non-GAAP and impairment, nonrecurring restructuring expense items. range well tax charges; assets; as associated diluted discrete noncash effects; of amortization acquired as and EPS and potential intangible other other tax and interest

inflation guidance financial and supply disruptions We and company's the reasonable in estimates. currently other from and actual believe and significantly difficult risks also earnings estimates and due vary revenue predict vary the filings. impact earnings impact and in non-GAAP the rates from revenues anticipated this cost could share and in Actual and could is reflected on results per to our increased the diluted of The interest our ranges currently uncertainties chain anticipated to SEC non-GAAP guidance. discussed reflects

growth efforts to areas innovative of on remain the of and businesses OSI and cost focused proactive continue our in continue our We providing We these solutions. enable our to believe products structure. management will

continue We expect like to the traction environment areas in through team on and opportunity challenging this would to supporting dedication in to the the end to positioning continued gaining and Systems company thank customers navigate improving while its key current take for to We global partners. dynamic strategic and capitalize markets. OSI growth our certain

this the to call at would And time, open questions. to we like

Operator

our comes Brian of from Instructions] question [Operator Capital. first Ruttenbur line And Imperial the with

Your open. line is

Brian Ruttenbur

Yes.

what little talked -- international you on on $XXX How order. that the and timing, a about bit in all Can fiscal And timing. -- is produced in a can it But little going you question Security million-plus first large get the talk So large plus the the Is to bit side, mean? maintenance on contract this -- fiscal the is XXXX? get? does side? big all the about delivered

Deepak Chopra

this say maintenance. contract million rest $XXX-plus And that some said is that regarding revenue is equipment. insignificant Deepak All speech, the of civil all in or of our can and focused I a on 'XX. and portion Brian, the works significant majority we manufacturing the XXXX. It's in some it is delivery, is There there's here.

stuff. answered of cycle, could potential yes, Definitely, X-, thing Second and more be plus service is, has you that term, life long support. there This upgrades XX-year and kind equipment add-ons.

and we very it, and a excited business. this the we're about an the also, was majority significant international got this And is competition, of win. So

Brian Ruttenbur

I it one or correct? the your I your and Was -- heard business between first that's the competitors. largest time Is that of assume you was largest split that

Deepak Chopra

the competitors, the was got what I can't significant We business. international it majority talk of but competition. about other

Brian Ruttenbur

on. the discuss couple side. such ones Okay. million you you're of other as that out what's were was of there? hundred a very or so in was moving awards million large Because you This award And Are then on there pipeline Are little Can significant. pipeline? other on a large your bidding that bit aware like Security $XXX-plus on? wasn't to I the that this working there in

Deepak Chopra

only yourself. It's you I don't Brian, the talk about not is Well, you any that but international. got This know specifics, answer think the we already one.

all a is which very Our equipment marketplace It's globe, the much including desired. U.S. security looks at over

side. the And pipeline. cargo is and So side, also the this areas we in have are others in there in the aviation

So the be quite continues to pipeline strong.

Brian Ruttenbur

questions weak. a anticipate Great. weak. do bit products Then the other of out Healthcare of a little up seasonally quick areas? you Healthcare What what divisions. coming just do couple What new -- and on was you anticipate

Deepak Chopra

innovative monitoring, our we've products monitoring of new products though, focus mentioned our and lot Well, developed. cardiology. to also primarily before, you, is Alan being are that talked patient Patient have and a we

It takes time.

'XX, to it's We late basically kind whole and new a line, product are 'XX line. think we developing time

monitoring. also much home focused much very remote are care, connectivity on -- We

of of doing our and investment So and like kelly the on stuff lot a in in and patient call in patches expanding a reach cardiology we wireless thing. monitoring that what we're kind

Brian Ruttenbur

chain produce Okay. Very that you you forward? just the It that normalized there there's good. supply supply Is had on Or be that in enough supply slowdown question chain can't And doesn't or moving chain for proper things normalized demand. Opto last you then are side. a any producing? guys you'd the appear if a

Alan Edrick

accelerated if while still improvement, that components revenue missing be certain supply chain-challenged. this question. a you're chain basis, we right, on those there's for able see Brian, an that there's backlog of still supply Good Alan. final challenges. some not convert signs that to we'd we to are is have And certain And the

issues see of So up, yes, as backlog. we We've to a heck help still And nice demand. chain well. as strong a got ease that supply the should begin

Deepak Chopra

this Brian, is Deepak.

from the success. customers in big team. add very is OEM to call on Kudos Just trying there dependence good a who said on the the what are to also, get last focus to a it's been Alan China. said on away to October But I that

Batam, us a them. of our for have can facilities that Indonesia; work growth our our India, to customer be opportunity We're And in happy and there confident feel longer and with new expansion big we lot with we story, That's that a -- facilities, in base. think continue. will Malaysia; been term we that's been and

Operator

Larry our And next question from with Securities. CJS comes Solow

Larry Solow

follow-ups. of Just, guess, a I couple

visibility the just pretty sound the large few part. great quarter it will timing you have at On XXX% curious at the but of I'm like of all, deal, a maintenance be doesn't it it sound delivery. much service type does on part like

a look service piece, total like of range? second XX% that the question, part Any to Is would to like this like revenue that? suppose, How just a type in be like recurring But XX% today then think revenue. is I of or that? your we XX% know is way more private? customer, at kind -- should I government this that is of And

Alan Edrick

questions. Alan. working so of we is it. customer with the Good a like sovereign that time feel, it the better a our aspect to this we'll anticipated like. fiscal and have that timing, begin Larry, expect customer, to currently We're substantial. on This is in call look conference be probably as But 'XX by rollout and what will it may the next of

is sales recurring period service mentioned the always warranty product Deepak service civil ends parts with it, a works, element spare While and service and thereafter. as And right, comes predominantly too. nice initial there there's revenue that of ends, and that it's you're contract a

we base to us. nice be that looking for a revenue are for So recurring

Larry Solow

a missing we normal product your know it is of is of There sales? margin I than -- somewhat sort sort quasi better not assume and aspects -- are full Okay. But that could And it's this turnkey. this is turnkey.

Alan Edrick

Yes.

So would a sort turnkey. Larry, on a except this of not product a large is scale. be typical This quite sale,

margins but like volume, our do As beneficial to that's usually you go know, get the specific into so we produce when economies we that we we of and don't products programs, margins. on and benefits scale

Larry Solow

just Okay. service revenue And topic. That's the on speaking fair. on that

You had bump a little nice this quarter.

revenue think than look eight And high. maybe XX% like certainly grew didn't the back, like have it's close I quarters, more to that. but last I and service

what something -- -- up than a specific anything was maybe more of there ramping know have. there you're So Guatemala sort was bit little in that? driven Or I you

Alan Edrick

Really, to accelerated some came off we of service as and the they of products for maintainable. on service rolled that's some warranty contracts, think our and of revenue us,

So as service we continued revenues. look strong have forward, we expect to

Larry Solow

Okay. Fair -- enough. security. then on And just on

You mentioned margins -- there. good was performance and said thought pleased, you were were you guys you

So clarify, sequentially a the a to back year-over-year. and look half I couple margins just were year? if quite bit of expect up like But I just it's it of issue of back last the I last predominantly want -- kind there. feels you little of seems same mix that you they're like know same that year, -- even stronger. in it this kind know cadence

Alan Edrick

this margins operating first expect for much stronger half. the in security half to be saw Yes, is than we Larry, the We do Alan. second in the

would a in bit pushouts. mentioned, operating margins more QX quarters. QX, and we weighted few to little expect Deepak As than those of each a strong We're

Larry Solow

would would 'XX, be follow up the swap on Or of to whole a is out? just any partial? the next-generation, more monitor And question just like that be the a side. Healthcare, 'XX, Brian's that -- patient on on Okay. that that? Or color on sort hold

Deepak Chopra

It's Well, overall of a not kind an here. it's pushout thing. Deepak like

connectivity, better more more to products features. on more results, applications, add You and that's reliability more your

it 'XX. coming be will and 'XX will late it that start So -- in

investment. we next what But next we you a the there's why you significant generation the and it, next whole for system. do call, are significant, R&D It's the what basically generation years, call to that, of XX that's at upgrade when the looking

Larry Solow

cash little Okay. basically the front first half close you little mentioned on front half in think the usually, it a but for I Great. to flat was bit flow. years on pretty up better half. is Last last free X year-over-year, you question, bit just historically. And guys a the Alan,

sort of a even thoughts the few high forward half next back this for of year your then what's the flow in and years? So just from going level cash over

Alan Edrick

free really would into flow robust. opportunity -- In we're contract, strong for we And about fiscal this Larry. the 'XX, question, large move half would excited cash extremely fiscal of second the we operating Great outside in say be new Yes. 'XX. and

inventory manufacture contract being and and to a said, for likely products. as begin to That in this large fiscal there's going prepping with be 'XX, substantial these we investment produce

So 'XX, flow strong historically little see muted probably opportunity we've cash for in 'XX/'XX. a a very fiscal with in the than seen bit we'll fiscal cash more flow

Operator

comes Christopher And Glynn with our from Oppenheimer. next question

Christopher Glynn

in win, addressed of couple a of $X.XX curious this programs and But your about of $XX also large of you just I'm bills? projects, questions nice cash 'XX, X flow be on the these convergence to had fiscal any both on new side. set kind you walking as these the margin, large active kind I free execute to So curious, materially And one CBP from pieces away X of on have are business capacity. the international

Deepak Chopra

not. is Deepak here. this Well, Absolutely

We have capacity. the

We have England. facilities in

We in U.S. the have facilities

to along that We have thing our we've saying competitors. all been help. us that differentiates this facilities is a from And

we also relationship. call We intercompany what have

the areas. expand ability to manufacturing key product vendor componentry Optoelectronics us, product in line go Rapiscan, that of detection cargo to that's friendly base want to to these intercompany to own we expand which or our the line have So supplies plus the the when we division,

you Yes, to anything? a inventory that and not This are Alan said these it. business Alan, 'XX we're this going capable production of in that's do are but we the to we're no, increase. there XX%, So more be before. start any just very one is And And focused, want significant but towards things add yes, for the fiscal this. planned. pressure manufacturing. going things we've pass win, we will handled was And much there's to that of

Alan Edrick

that's No, nicely. I think summarized quite

Christopher Glynn

the to segment. On and my electronics destocking. starting a around was It's lot We're see of kind in area. agree. O&M of follow-up on I

your you're scope fulfillment with new consistently and capabilities noted adding of because existing presence. global You've great and expanding

view, end Just from I of curious. an was point market

is I insulated of two defense. of kind from cyclical a certainly care automotive business thirds Health and you're think your hasn't there, overshot maybe too, perspective.

you so-called that's in the you're from some kind clearly electronic feel do of rolling So cycle areas? insulated

Deepak Chopra

very we so are Well, question. is diversified. The good good for us news

a that have no us base area customer one industry broad We no up one or such specific affects down. and

We broad. are very

Our very medical, you defense, a and And our mentioned, broad well success been that's that marketplace, as automotive, aerospace, done. has very it's story, portfolio. been

the have the time, plus I've long-term the this And at ability we looking time keep long-term investment same with we talk emphasized again a vendor, their a on relationship to and can if on vendors. customer to customers. China base and are our our to again to And get focus dependent big for expanding, we to come, good less have the that makes big

a a us that, want and manufacture story, been can specific market? big the We in dependent all or Indian very industrial. manufacturer India you Do that's Do as we to plus and to thing customer that any or broad-based for look Malaysia, one you Indonesia? do not want at in on

Operator

question Martin Partners. with Capital next ROTH And Jeff from your comes

Jeff Martin

you the Wanted to ultimately factors order was to Curious, carbon competitive large vehicle get believe a you what inspection international limit award? bid. sense led a as do

Deepak Chopra

understand don't the I question.

Alan Edrick

million-plus to the The deal. led win were the that $XXX us question was factors what competitive

Deepak Chopra

rely Customers said Sorry, clear. not in one before, cargo we space. consider on performers have of ourselves us. the Basically, very that the top we

as being good CBP plus very to And a reference. a supplier a big reputation. a also have is good a and good vendor We

And We So invited. that that, party, the we dance, definitely is get all we be going invited. to there's considered. over -- each that if our we a our always software don't we is there And dinner scan world, get then it a say are steps proud If Search is other. And dancing about technology over good. feel are we thing. trip unique good. we a

the have is call to backscatter to portfolio we transmissive very combination. the product broadest base customer, broad product Our we offer what

we well all a our say to very we have Alan? competition So reputation that and product to and base, long regarded, that the the our have are can maintain good I advantage deliver product is credibility we is term.

Alan Edrick

product mentioned. The all organization, those Deepak the addition in all really reputation, in, service of areas factored to Sure. quality, that the the

Jeff Martin

then of your there in of the that that internal the is half much And to Great. the market external are do first you versus any with year, specific Okay. division factors the half, factors And had Healthcare think is improvement play second market there? come respect anticipated challenges the for -- in into how factors? you've

Alan Edrick

this is Jeff, Alan.

So good questions.

of have confidence Some at. the is second in this opportunities that on a the we reasons weren't first the based we as the in really more first half sizable half that some we're QX We're half. available to of pipeline why looking compared enter bit seeing more opportunities

it financials self-inflicted indeed softer timing of some on from market first our then Part You was talked The little bit their was half. as marketplace. of in about as a a hospitals. it And why perspective were well. we own of some the at a the hospital has been well products bit challenged, more

half this better and bit little a strong do for we a but a very contribution margins. It's for of second combination feel both, the with

a you up go QX, margin. income in operating revenues big there's operating pull-through and saw what our to As from

Jeff Martin

Yes.

me the then been display, has on the question And with it for Okay. to is last equipment card. event FIFA

the East near-term that's You if there's mentioned show that equipment. opportunities in and expectation. or Curious a opportunities longer-term Middle with thinking if

Deepak Chopra

been there all showcase. it's over been Lot comment the I say, it, It's opportunities are meant exposure don't we well a received. Deepak very opportunity. a world. would What great Well, on East in lot here. East. a and Middle has various people always of Middle kudos, to I pipeline was of strong

but successful that very application. us to there, what it's And just a and comment It's on it, anything do feel continue for I broader look event. want very there. to good be to specific a a it's And showcase as Alan? we at out that's it's And happened. we

Operator

Josh Instructions] [Operator with question And Nichols comes next B. from Riley. our

Josh Nichols

order Just kind and further. little second backlog the with Clearly, a strong what extrapolate of is bit pretty seeing given half company flow. a we're the to the positioned for

and year, XX% that of half margin last gross targeting I achievable margin. doing half? kind that's percent of the in of growth second the think XX%, line back gross top this expect year, that, in you're On front, given were Do the kind you you XX-ish

Alan Edrick

A and alluded Josh, the very half means. stronger any first good in question. by And Alan. we this to second numbers gross to are not I the unreasonable is you do margins the expect see half, think than

Josh Nichols

cadence fiscal right? And just to maybe it be, big lot $XXX-or-so million these some is that for comparable upfront as like of Yes. understandable, flow in you're through to of then going year of assume be the cash like last to year, a revenue of be flow, next likely orders, investment year. kind you've next the coming seems let's free for going achieved excess Fair the cash to historically but some which it, There's to call materializes.

Alan Edrick

what said, perhaps today fiscal there's some. as and for I well strong yes, Josh, upon that cash other to in for getting being a opportunity for based big that see for well. and new, 'XX 'XX large cash we opportunities But opportunities think kind flow That flow. factor as could into Yes, next of back historical then fantastic there's levels year 'XX 'XX and extremely

Josh Nichols

then for last And Perfect. question me.

timing the out to bit. little trying Just a figure

much on you orders, that million I majority in would that. be how in, helpful. So it or CBP next Is any be But come year? is will year, is I left? assume half of next but been on coming the -- delivering so provide could like versus back how know the clarity like to that the like $XXX And of much you've of going

Alan Edrick

amount, and in substantial CBP is year, revenues the Sure, we Yes, half, the Alan. than do more Josh. second expect in this half This of significant half we we by but 'XX fiscal expect fiscal CBP the second saw do we as first happening quantify We well. as 'XX revenues dollar a uptick do and here the well. in into in big don't see fiscal

Operator

this And at time, no I'm questions showing further

Deepak Chopra

you stockholders Thank to participating for employees again our our specifically conference and want thank all supporting call. in us. I our

we Bye. with to you Have focus earnings chain at much. working Thank call. forward customers' on line, next We very And manufacturing, our the challenges continue a good with with our to you and supply day. product look speaking needs.

Operator

Thank you conference This participating. call. concludes today's for

disconnect. now may You

OSI Systems (OSIS) 26 Jan 232023 Q2 Earnings call transcript