OSIS - Earnings call 1 2024 | OSI Systems, Inc.

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Operator

Thank you for standing by, and welcome to the OSI Systems First Quarter 2024 Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Alan Edrick, Chief Financial Officer. Please go ahead, sir.

Alan Edrick

Good morning, and thank you for joining us. Vice today CFO President with Executive and OSI and Edrick, here I'm Deepak Alan President of and Systems, CEO. I'm Chopra, OSI's Conference the to OSI Fiscal First Welcome Systems Quarter XXXX Call.

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

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

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

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

I will financial of for the performance. our 'XX summary begin high-level quarter discussion turn Deepak first call business a and then to for and operational of fiscal over the a performance our with of

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

Security margin quarter. double-digit Healthcare division the performing Our first expansion, a well, division generating the Opto year-over-year were experienced challenging quarter the very again with division results growth solid and and financial revenue generally significant operating while

balance and We significant earnings are of enthusiastic for revenue overall the the growth 'XX. fiscal about anticipated

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

and a of in XX% of offset in in revenue X% division. by partially the $XXX driven revenues division a the in XX% million, QX by First, our division, Opto Healthcare were year-over-year Security reported which increase representing growth of decrease X%, we revenue

up per approximately $X.XX, with rates results of prior share interest non-GAAP of earnings associated additional the in strong QX of Second, we X% adjusted fiscal borrowings. $X.XX from year, share per interest of our impact reported operating the higher expense as QX overcame

Third, backlog the year. billion. outstanding fiscal a provides with $X.X the we of backlog strong for full The visibility ended quarter nearly

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

Deepak Chopra

Thank you revenue revenue report opportunity XXXX adjusted share X% beyond. to with to first fiscal significant I'm our awards that performance expect we coupled significant with very adjusting backlog, pipeline, Alan. into strong margins. much, increased aligned a Good morning with and earnings recent our -- fiscal the pleased We 'XX quarter a With expectations. high everyone. achieved per and and visibility through growth growth

the Security saw and and increase QX division bookings highlights XX% So X.X. book-to-bill of had $XXX which let's of and in revenues performance dive of of division, with division during the during resulting into in begin ratio margin the the quarter, quarter a each operating an The million expansion.

Agency progress quarter, our port SEDENA border with and the and initiatives for the made Defense awarded other recently we security considerable Mexico's During customers. the international on ramp-ups

substantial both fiscal year. programs revenues contribute We anticipate that will in this

During in opportunities internationally. several customer and border QX, we U.S. and captured port the security successfully

integration from vehicle the installation and Eagle PXX a the inspection our and drive-through $XX of radiation proprietary provide monitors an CertScan portal maintenance front, and and for customer handheld MINI devices, Z and along VMXXX On announced with the international system. award support. software training to units Also, we million service America-based our multiple high-energy backscatter Latin cargo

U.S. shortly the Ministry turnkey integration of $XX customs solution up analysis vehicle wrapping in systems. In Finance. to million U.S., energy high-energy, provide CertScan image to the to the end, and XX-year installation it system announced borders, agency of existing including security a we award civil provide X-ray support. cargo customer that vehicle our and received a platform. Uruguay's from we screening In the million addition, we and and dual trailer-mounted ports inspection and quarter And contract cargo Economics an to service Eagle will an multiyear works be inspection after a we and support vehicle also to perform contract The announced solution, a international in $XX utilizing inspection PXX maintenance award QX and for remote provide announced proprietary from used an screening

required Rico, is we existing program facilities. supporting planning and with initiatives, a construction CertScan just will a solution We bit centers. Furthermore, I operator systems which on-site helps in our new involved to that often Uruguay for data data, and we image of as when more traffic our Along with traditional these data utilization will handling we CertScan are solution, The hardware service managed customs talk a little support. as cetera, in and software manage the and programs is join integrate want software, also specific critical provide infrastructure turnkey program communication large-scale about maintenance, successful our training, customers CertScan's like checkpoints. have et ongoing turnkey and proprietary increasingly screening inspection for projects and protection border vehicle utilize demonstrated our experience installations frequently Albania, long-standing Puerto piece agencies. where at on in capabilities identification

value $XXX total CBP X delivery, to of has potential that The quantity IDIQs Border We CBP, date received through U.S. orders Customs indefinite have indefinite efforts about equipment and $XXX active the security a are that recent Protection, with have supporting where million. presence for border room and an the service million. United we extensive about award actively in States under have combined

law. continuing the could are is be 'XX resolution, additional we once into U.S. that U.S. signed and is orders currently government's hopeful under government Although operating a issued passed the budget

in products Our government transportation, related facilities base security services other customer support to continues infrastructures. its checkpoint critical and and team airports,

air by the the qualified European approved for cargo at Union latest Our now Authority, airports European or by for ETD, certified explosive Aviation at airports. use TSA, the detection is Itemiser and ACSTL China CAC, trace for system, use XX, by

liabilities, The and Itemiser advanced for XX it of other optimize ideal and narcotics making detection an the algorithms compounds. tool harmful explosives, has some most identifying software

backlog, with for remainder backlog. great the it collaborating have about and with better continued airports a Itemiser healthy have together area, enhancements diligently regarding standards. expect of And do optimistic had significantly division we with XX CT international regulatory fiscal in baggage We We a screening potential remain good the checked a projects latest align in and the the to baggage the been Overall, expansion strong 'XX. with the and passenger technology start checkpoint will aviation fiscal Security 'XX.

the impressive $XX during revenue results quarter million first division. with delivered and Manufacturing including another all-time Moving Opto revenue, the generating Optoelectronics quarterly profitability. in and intercompany strong to record, achieving

to test devices, vital a continues serve consumer and our divisions, its Security medical and being in to electronics. to aerospace, Healthcare OEM measurement, customer diverse defense solutions Opto various addition In automotive provides electronics, base supplier that and

combined strong seeking continued manufacturing, manufacturing opportunities our we new to of base customer global With robust covering with new alternate and the capturing customers and existing to forward manufacturing with presence with Indonesia China a U.S., India, trend customers. our Malaysia, England, look

due growth division, quarter in lining by to as where capital launched backed has services. Healthcare the delays in tough been where year-over-year European went a which, was XX% hospital a U.S., products down sales turn, to expenditures. the especially The was QX the has hampered, profitability silver in in challenging and region, on marketing recently conditions, caused Finally, cardiology

leasing for adoption hospitals constraints capital reduced and before as and develop management actually increase can business monitoring Rothman outlays. index-based that patient good to the capital new that market also helping new existing save analytics and -- we models significant software are are of The tools examples talked business need the predictive patient hospitals safe efficiency at of alarm drive help division of infrastructure. model such programs. solutions to This continues and The subscription that a sound their have innovative software

We R&D significantly and new innovations. in products continue invest to

Although in are in to these in the the Healthcare of expect start In we improve performance summary, and quarter, rest 'XX. Opto, didn't significant confident first with about security divisions. year during backlog our prospects well we its

also Healthcare look of robust to rest performance forward as from We fiscal 'XX. more expect we the

back performance that, financial Alan turn Thank call about questions. for detail I'll you. talk more call in the over the opening our to to before With Edrick

Alan Edrick

you, thank Deepak. Well,

XX%, included fiscal modest Security largely that of with review vehicle service up the detail to results will from greater I division cargo compared revenues Again, prior announced financial cargo in first were quarter. million our the inspection January. first our X% This quarter contract our revenue. in plus in and $XXX 'XX growth for products the the Now and were QX up in revenues year. QX shipments due related the fiscal

intercompany in backlog partially Security the or Security was year-over-year, as was by rightsizing increased a driven increased to delayed. offset QX which revenues as levels record reduced customers sales programs this growth, to The well. Aviation-related revenues X.X, support division sales division. anticipated ratio primarily strong inventory certain by in Opto are had X% leading third-party for Opto book-to-bill division

with over with 'XX Deepak a up quarter by Healthcare, gross X which monitoring margin The the of down fiscal of primarily execution sales is of the gross XX.X% in margin Healthcare first XX%, patient certain which division, divisions. despite improvements. in significantly margin reduced a our The sales, product year-over-year was the the revenues is had last the challenging the The mix driven as reduction favorable division, mentioned, margin which XX.X% along led by among was gross experienced highest QX in division sales. operational expansion QX year, gross Security

will impacts on in costs, changes margin and to period volume, supply among gross of mix generally based period Our factors. and other fluctuate inflation from revenue chain

operating to Moving expenses.

divisions 'XX, of a annual $XX.X QX compared to a in and of manage prior expected fiscal representing do 'XX structure. our recoveries favorable the over our our for where SG&A of debt efficiency prudently work level sales QX across leverage the expenses an increase cost year, diligently SG&A bad full on the driven SG&A continue less by expect fiscal as basis. were We FX improve a each expenses are of lower year. to to prior percentage We and XX% year decline such to million, to to

and $XX.X of were expenses year $XX.X from million in prior same million, 'XX Research up development quarter. the QX in fiscal

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

fix to Net interest in our our rates and and borrowings. 'XX, debt. portion to fiscal during 'XX swap $X.X in bank Moving a primarily interest fiscal in increased million executed increased other expenses We $X.X interest QX interest rate of in fiscal 'XX to from million rate to of taxes. floating QX due an

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

in fiscal the and non-GAAP XX.X% in the 'XX. QX fiscal of QX from by adjusted tax rate Excluding non-GAAP items, quarter a in driven Security normalized tax 'XX, in of X.X% turn X.X% compared of XX.X% Overall, our Opto fiscal tax now was to effective increased of impact adjusted our of to 'XX divisions. fiscal the operating our operating will of of normalized effective I 'XX discussion to in a margin. discrete strength first margin QX rate

the The Security due margin in improvements. year, to the our expanded year division operational last from Opto the QX. was segment's increasing year's operating this solid, from adjusted of margin reduction in and to XX.X% mix in fiscal first the The in this Healthcare last in to margin of And of QX of sales was QX XX.X% in in operating negligible. XX.X% 'XX operating the in primarily division non-GAAP adjusted again XX.X% division, quarter with sales

build $X.X 'XX, program preparation the depreciation was of cash Security inventory was in QX $X.X quarter, the earnings to fiscal under for while million. announced $XX prior mentioned contracts fiscal in XXXX million, that in in despite first deliveries to large flow. we the was operations occur million the quarter last amortization division which fiscal in 'XX. QX and would CapEx call X significant comparable on the of by was year Cash Moving provided first

and Our stock net modest leverage capacity and of acquisitions for X.X under balance sheet is with investments, solid, significant buybacks.

Aside matures principal our from of annual term 'XX. the bulk required bank million of loan, in our $X.X under repayments fiscal debt

And finally, guidance. turning to

EPS diluted our We we fiscal are revenues, reiterating our non-GAAP and guidance. are 'XX increasing

more increase than 'XX We continue over our revenues XX% to revenues 'XX. fiscal fiscal expect to in

fiscal diluted We non-GAAP more EPS non-GAAP EPS items. assets charges, XX% as their acquired and diluted associated diluted as nonrecurring in amortization expect our intangible and excludes restructuring guidance 'XX effects our other discrete tax over impairment, other 'XX non-GAAP and This expense fiscal interest potential fiscal to of tax grow 'XX. EPS well than and noncash

We cost impact difficult reflected financial currently and actual and interest in this on and The chain believe increased guidance to predict the reasonable inflation expected estimates timing rates results changes and impact reflects from vary significantly estimates. and of revenues, anticipated supply is disruptions on guidance. the currently could our the in company's

risks filings. non-GAAP Actual vary also diluted to per and earnings in anticipated due uncertainties from our could revenues above guidance SEC other share the and discussed

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

like team for we And OSI at the the continued to in would take and would like our to We opportunity dedication to customers Systems this questions. global this open its supporting to thank partners. time, call

Operator

Instructions] of Josh first from [Operator the line question B. Nichols Our from comes Riley.

Josh Nichols

really turnkey of potential award this and new give A a to Security for One, for it's good historically been there. you high-margin of company do any expect the couple company. These have context the awards see Uruguay. questions in of could the terms long size you up award? ramp with how us in And the to here

Deepak Chopra

for get proud it it things large Europe. And in Deepak turnkey it's the about of will And we about the not North we a And center Uruguay area kind have. of it. very about This these it contracts helps going. other X the or in become it it the of to to is point of we contract, similar say very X, to at the basically, different that This turnkey all months a here. sizes between example, areas, piece that as the trade very, rest are when us is get they because making contracts, we take contracts and basically, for look one very excited like this are these and, America kind we're

successes look it of Alan, at forward. it? these to want to continue we So something big going add do at to kind of you

Alan Edrick

deals, north don't turnkey contracts speaking, talk I while about the know I that average. on think corporate was margins on Josh, specific overall margins good. And our our we nicely of generally are

Josh Nichols

the company out that really has building confirming for Security its thanks Well, been portfolio.

specifically You've we ETD been granted TSA the approval the for about and with and up? the think to now should opportunities ramp to, that could XX next, timing over how months ETD for like, how XX

Deepak Chopra

Again, on for even in And we We are a air big the do sector, we will international there's product. are certification. come cargo, And great growth technology. the that new we going think In about faster. proud revamp the it's think definitely for know poised well that a very very we it.

and products we go we And in it. about excited there, get units of these existing back lot very continue a the that the as compared and of to we'll success to are this. present we performance So think look at

Operator

from the And Jeff our of line from next ROTH Partners. Capital question comes Martin

Jeff Martin

also in components able I of I were wanted has know you the -- chain on sense than the QX these terms orders that significantly. over that to if here ramping you're you supply of more timing since normal. to How going terms pretty get X significantly And wanted get visibility I much the be timing in a call? improved last on are your well, to ordering need? up ask large to

and be on helpful. there those time update would an lines experiences both Just

Alan Edrick

I'll is this of that Alan. first part question. take the Jeff,

anticipate starting believe, go to revenue some contracts. revenues really on X growth, really quarter improve month in these we changes, contracts often in which now large as about we to balance significant see on fiscal a There QX, these would as Our ramp-up generate on we're are, real of is the month beginning by do you large visibility 'XX. this it. to going excited contracts, over in imagine, continues evolving but We

schedule. some changes continues and the the industry, is visibility we timing expect nature and in that this but the to be the to the ramp-up of the beast happening as we always will there So speak. That's improve

Deepak Chopra

ignore so you compared so the intercompany fact ramp in definitely, to this have also. And in on issue, here. to But Deepak definitely it, other well. when supply we we supply are Just handling again, competitors conference I've we to cannot Basically, up is because significantly that in chain add fast challenges the too, there chain. it are we last the positioned well that the are said call, resources

has We QX in seeing Alan big are and from QX, will mentioned almost as growth addressing start both contracts it. QX. these that we And into

Jeff Martin

my countries and potential Are Middle with Great. And for increased unrest you does East, that inspection and areas? the equipment port create stepping in area border other then opportunities capabilities question for seeing is you? or their up the other from inquiries surrounding

Deepak Chopra

saddened that I are would what happened what's like there. first, to say very Well, we

well-being. going that haven't is this obviously, with We definitely continue for stuff, that as project because, something new. need equipment. it. to at countries to and working Middle And to pray I look more is any changes thing sense But are on things it everybody's all the on East we opportunities. this seen mature in We're area, continue around common security that area Ukraine

is At in important. what's that the same been very know U.S. the with And a situation in happening as has time, you funding tough Washington.

in for very any Middle be for to positioned both opens are Ukraine-Russia that and procured. equipment As East challenges the well up challenges, we

Operator

And comes Solow the CJS from of question from Larry line our next Securities.

Lawrence Solow

how increase, increase on sort sectors year? to in the feel in guidance, you the the Just, terms coming of just follow-up increased know outlook Or And last guess, specifically, segments. this like guide, there? are that I just I EPS contracts the increase of don't Alan, but just a But, what ramping. the from question guess, Is Security? the that just drives to I or typically is I your confidence you it's to

Alan Edrick

Larry. correct. Security from our in question, hunch business. is EPS coming The the Great And growth Yes. is guidance your

out You of guidance. the expansion, driven to we saw in in margin stronger And increase business, balance that reported, we really of and our some QX nice we EPS year earnings. the some to some operating look strength overall which as led that the what's just the saw is that us through

We expect growth that's perform EPS in the that, addition in to Opto to the continue guidance. to to leading Security but well

Lawrence Solow

opportunities, you I not quantified book-to-bill for And you your borders terms a are Okay. I trending? don't safer would and But have in great? Security. be know would if book-to-bill that, that both you think great. like qualitatively, -- is gave your to funnel usually be that getting And that refer the also quarter, vehicle but outside within had obviously, to kind world the if place, the But just be of of that, other of opportunities, if areas, you just for inspection opportunities and the of how you those

Alan Edrick

Yes.

book-to-bill in backlog. us is positions a this record Alan. Larry, in So X.X, security was The

of the product backlog the The strong time is and throughout all and you is throughout that? real do highest nature for opportunities the Deepak, of funnel our Maybe to our world So want strong. -- our to add really of The lines. Security division. visibility robust

Deepak Chopra

area, much products pretty cargo out, growing, in on the both during the the and and both baggage is of and the in upgrade it's And RTT funnel. opportunities interest And aviation been Yes. continue border look it. lot are optimistic hold we to checkpoint coming we on and I COVID The technology, in at the also time. the And very about to had there Itemiser is to sector. the a air are just to to it, checked That want traffic as area. emphasize new in increasing.

Lawrence Solow

you I just think feel a segment with that had I lastly, the your both know shifting expected. questions. the profit on gears if like don't just Do be to thoughts. basis. full And Healthcare, start share year still you And slower can had on year us than and I maybe I But guess that's attainable? on Okay. again, two the thought revenue basis know an a you would operating you up

then perhaps a with is, you would correlate that soon And That And planning like you're out its in kind coincide more at product one years. sort of great on your all of think another? equipment. of leasing couple of that. to that a for small that that second and over of does next-generation those on shift part that of infancy? color the Is versus today? still coming sale mentioned Is upfront the any question Is kind pretty be I next two with of

Deepak Chopra

done. Well, good question. Good analysis you've

especially equipment side, disappointed, definitely, equipment sale. the On we in U.S. the with were

things model. is and have on. model, But something are the know, what do sure, time. two is There this that going is At different SaaS a the started, I'm investment this that that to you, asked. patient platform it's There's a R&D time, in we the we develop continue interest, monitoring. One we thing the in new a As model, the of through a the infancy that infancy catching model are is, though, lot little to subscription doing. hospitals interestingly, new new the you it's tough other are of the same software the

the think of in thing doing side. just been this it, But Security we've

So at building side, know we now least to the do Healthcare blocks. the that in

is to are new turnkey the educate we to them. question the model to But we term, want have the about be revenue, think call customers of do this model like on to quite I Alan, Now add you and able something? the excited how how Security we what ongoing prove to side. longer that

Alan Edrick

'XX, think the And full they're nicely line that coming those in division are year and their infancy, to expectation the our top Healthcare for -- over questions, line. to team's Sure. the grow going is And years. the we bottom the yes, your expectation growing will new be on models fiscal in Larry, both and the

Operator

line Oppenheimer. of Our next question the comes Instructions] Glynn Christopher from [Operator from

Christopher Glynn

asked. follow-up. One been has lot A

first for you first It Healthcare, think to the guard in nice I bit little really quarter relative a off like expect some quarter. sequentially starting some the of the after sounds fourth on were balance strength. quarter improvement you you year caught said the

wondering So you the there? pickup describe visibility how expected the to

Deepak Chopra

Well, mind backlog the it's and booked in yes, first the area, a in growth years, It's that shipped. we are keep a driven. quarter. it's not firstly, disappointed over single-digit But and

orders So in we In some, didn't some QX. came it QX, expecting were happen.

So it a software little disappointing, what going very focused the significant team and new but remainder is onto in that that would that's of doing product model the not will much the the get innovation have And of we the are bit better. feels year it call impact to development the continued SaaS XXXX. both our a portfolio, I in

to the for work to with Focus is hospitals making them a to accounts the have that be to now and of of longer more be It's capture able efficient. we Alan? years. right alternates able them

Alan Edrick

I describes it that No, think well.

Christopher Glynn

and Okay. this in positive Security. a And it seasonal of the was in nice ahead at free just quarter. significant It's quarter particular, often challenging year, to see first flow ramps cash

this some could you color around for sort if metrics range, be on wondering what cash flow So should looking give free of year? we levels,

Alan Edrick

Alan. this question. Chris, Good is

we operating was still provide while contracts generating million our with so free million agree inventory the in statement large don't by flow support So cash $XX in to flow growing of light your we cash QX. quite of strong guidance, would or $XX Security

real, the there'll flow continued beyond. driven in buildup fiscal 'XX fiscal As we and be 'XX, could look where real for free in cash think significant some is we these be out, inventory contracts

year. very year, think we flow as expectation. begin been historically flow in cash strength will a our this generator the fiscal subsequent the current to free do increase generate fiscal real that the we've We strong cash mean free cash We nice is strength in this free of I will but beyond move year only flow. expect

Christopher Glynn

cadence And wallet Okay. sturdy, there you names. seeing your And distribution that out you're looking a and lot of a they as externals on customers bit little volatility very OEMs if then regular from short-cycle supply a about so describe try just share performed? a impacting of could particularly just with what's stability, chain? if Opto additions lot and curious one really derisk manufacturing, to And how global giving of

Deepak Chopra

in at it, Well, again, is base. continue customer predictable different a with going through Basically, we it. look go inventory increase, work and very marketplace. good cases, We some longer basically But the a term. OEMs, stop It's they're a also to question. very

thing to customer So matter. compared medical, a very really name broad we're aerospace, competitors, one our good consumer, that us base very, it's a all it, The makes very defense, from continuing is, in evolving automotive, to spaces.

everywhere customers. in to manufacture a to in about some advantage. the it, and it of products group, as that and manufacturing global And again, from lot big said those is alternate thing are the saying that Europe it I've and keep lately, So a talk we China. you've weak, a heard U.S. And our are some presence strong. And of before, have second there's we said in all ability, I areas, it both Asia our and

business this look a business, we like this I well at the out focus So very a predictable is Alan? customer business. depending thought our But base. said, on business as of

Alan Edrick

says that think well. I No, it

Operator

program. like to I'd program question-and-answer the today's of remarks. to back further management for the conclude does any session hand This

Deepak Chopra

the very all and to the thank the customers stockholders want much, Well, you and employees not to the again of else, and all thank and forget including we analysts. company everybody the

starting QX to lot of we Talk of QX there that very into the year. QX, are we of the support think in Backlog at January. to strong. be opportunities. very year And you the is looking it. excited will We very other a much. balance Thank And about the in rest are you

Operator

participation This does conclude your the today's ladies in gentlemen, conference. and program. Thank you, for

You may now disconnect. Good day.

OSI Systems (OSIS) 26 Oct 232024 Q1 Earnings call transcript