OSIS - Earnings call transcript Q2 2025

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Operator

Hello, everyone, and welcome to the OSI Systems, Inc.

Second Quarter 2025 Conference Call. [Operator Instructions]. And please be advised that today's conference is being recorded.

to and call OSI, Chief pleasure Executive to Alan my President Vice Financial it's turn over the the Edrick. Now Officer of proceed. Please

Alan Edrick

you. President Systems, 'XX Call. and us. here for Systems today Vice thank Fiscal Mehra, morning, Second Welcome I'm and Alan OSI's to Ajay new OSI President OSI Edrick, Conference Executive CEO. Thank joining of CFO with Good and and Quarter I'm you the

and our are we financial We that review join you results. as us operational pleased can our

Earlier press 'XX today, announcing second release quarter issued we a our financial fiscal results.

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

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

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

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

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

were the the division and Opto results and financial solid with excellent quarter revenues at by record Security operating division. performance income second QX Our

are half the momentum across excited confident second well year. are by and are positioned fiscal of We for the that business our we the

results. 'XX So summary our with QX let's a high-level fiscal of start

by in divisions of revenues to $XXX the million, increased growth of highlighted a division. the revenue our increase year-over-year record in XX% with each Security First, XX% year-over-year X QX

non-GAAP adjusted strong Second, the revenue $X.XX. of share growth per earnings record QX to led

And X.X Third, of with of ratio significant. $X.X a the bookings we were the with quarter, book-to-bill quarter record billion. backlog more finished a than in

and fourth, visibility generated improvement of provide operating performance good strong fiscal cash we This same opportunities backlog the working million $XX by the and And last QX, million an year. a forward. flow going pipeline strong profits robust capital of quarter Our jump over metrics. was driven in $XX in in

expected operating 'XX. we mentioned our dynamics flow know, was return may cash our you had to in in strong As call previous that

financial call full Before deeply our to diving our will more into updated outlook over results turn I year, the the and Ajay. discussing fiscal for

Ajay Mehra

today. time and It the Thank strong you, X. for second for year-over-year pleased assuming growth representing fiscal quarter XXXX, CEO to XX% gratifying is for join as after joining I'm call thank January we earnings. this the of million, you, and $XXX everyone, a first achieved report revenues on role to Alan, us record-breaking where another

Manufacturing and by driven results Optoelectronics The excellent quarterly and execution security from division. was solid primarily in the performance

confidence Our well us pointed and growth the healthy provides pipeline Alan the continued for in an as future. half year positions a us for backlog, opportunity fiscal expanding and out, second robust

the with excellent we starting XX% a each revenues a Let also over were as year. representing Security. division growth me approximately discuss for of division's the of prior QX quarter. million book-to-bill performance, achieved ratio in $XXX Security delivered Bookings X.X The QX

airports, numerous and to locations, and During infrastructure. QX, programs deliver we including on critical borders ports, continued

we earlier In Uruguay, Rico, addition, last mentioned commenced are turnkey and our Puerto quarter. as performing well Guatemala projects in Albania, which before,

ended. received both wins quarter shortly a announced and of few and we quarter, aviation after orders for products the the During these significant cargo

baggage whole announced baggage; Orion we The systems. million screening our whole detection First, a screening provide to integrated return for for provided Rapiscan XXX with which and $XX an checkpoint explosive RTT to products systems include international airport. XXX, inspection CT checkpoint be trade products systems, award are

In and forward. string cargo. which for supply awards our trace screening past award in few latest in international is security other major the air revenues aviation product will of systems for growth received the addition, we a promising indicates airport quarters, This going our

applications. high-energy announced from an order Eagle and mobile for $XX for border million MXX inspection cargo Second, an security customer international systems vehicle we

Third, and from for we for international customer an announced million port support MXXs, including border applications. award a service and $XX security

broadens future aviation recurring base our only border hardware service and customers boosts but our our not base significantly revenues. Expanding installed among also security installed for potential

contracts aviation parts follow-up and to threat upgrades algorithms. maintenance, training, revenue avenues spare up automated our Our hardware open to for detection additional

Similarly, integration user cargo licenses upgrades. multisite scan software some of security clients, new and from revenues types allows these utilize This of aside platform. a border seeking and also future mentioned, us to services increase through proprietary search our platform

life thereby service a XX system predictable Our recurring typical creating ongoing of have of cycle stream to inspection years, X revenues.

and Lastly, frequency support order integrating a deploying million critical we communication radio $XX systems. long-range to announced

As solutions global are business utilizing to for And and our enhance hardware communication recently optimistic Furthermore, part in U.S. reach RF technical excellent an regions. with we customers in can of that this Solutions strategic and in the the award, enhance the marketplace is critical critical we services to offering surveillance across security government's This us by we capabilities expected requirements. acquired win to provide region. a RF essential communication our business.

security we are new driven includes supporting of range administration's by security a role. key Moreover, enhanced would well positioned border national Our a pipeline political both internationally domestically. both opportunities, security, parties and play wide to major domestic policies. With the growth accelerate

margin. to higher security a a suited technologies overall expect critical while service been increase other revenue nonintrusive has airports, robust, ports, revenues Our points. growth to of as historically are bolster inspection and revenue product ideally borders at these percentage Overall, security infrastructure and have we

delivered revenues. This Opto's part Optoelectronics. in million in with quarter was contributor circuit that operation, by line quarterly flex consumer growth. and our QX Optoelectronics customers medical inventory forecast in record to recent serves on top and phase technology Based record key tempering another achieving driven modest $XXX on which mostly on a impressive Moving dialogues with to major we levels is our adjusting now the were a past. and the was customers where demand believe many OEMs, trends growth,

an health the we $XX long-standing order electronics critical subassemblies a announced During OEM quarter, to provide million care customer. for

established $X provide of of its care patient repeat division's for XX% the accounting this approximately for also exemplify kind from announced a These sensors revenue. from we consistently devices. total order We OEM for optical owners business an different million health to care customers, secure

We by are or international diversify value-added relocating with manufacturing away clients actively to working our facilities. looking from to China component

visibility, the in a Opto demand current the Given of the half anticipate division deliver our robust will second fiscal we performance year.

year-over-year solutions. less a finally, Healthcare care predictive in QX activity profitability, hospitals and revenues And workflow see. X% in pickup we from grew with strategy discuss of to although to sales improving execution where and division growth clinical a indicative It return built typically around was nice than health order analytics of the let's our see a solid

provide to supplies. $X the we from hospital During monitoring a million a order and patient solutions system announced U.S.-based quarter, related

solutions patient accessories a range to customer to others. this support and and monitoring of expect provide We

performance driving products, intently operating our our focused we next-generation including platform, division. and we While growth continue are developing in on the new to Security overall of improving invest

wellbeing. been note, community On talented of this company's and Having President begin the growth. forward of and a safety, journey, key who I the and been excited our mission I a potential the seen in and all to The have to individuals I'm continuing OSI's OSI. personal divisions at operational success. part have honored our has security CEO to global critical the company support role to look

Overall, the half look an we look first open even the financial will stronger to performance call before discuss now to our are half. questions. pleased in you. forward Alan with and further return the call to we second I for Thank performance OSI's

Alan Edrick

Thank Ajay. you,

for detail review quarter. will I fiscal 'XX the in financial second results the Now greater

of our This the As QX our division the previously increase were revenues in security. by primarily year. fiscal was with prior largest compared mentioned, XX% driven second up quarter revenues

Division growth fueled strong shipments The Sadana XX% continued revenues cargo sales, the ] system and also [ QX in sales. revenues million-plus product Mexico. contracts in included checkpoint from Security increase detection $XXX aviation in year-over-year trace contract including with from QX X growth in was by our

addition, fiscal business acquired the QX Security contributed In the to in inquired, is nicely. momentum division and gaining revenues

Flex delivering revenue Opto our the increase, sales business as driven growth Third-party division X% as growth is inventory rightsizing others. as we early mentioned, of Opto with anticipate in our levels, an from as of and as well complete acceleration largely opto The solid, were customers QX. Ajay by the rate a year-over-year

margin 'XX growth, to QX. returned division year-over-year solid. XX.X% of X% in was fiscal Healthcare a the gross The in increase And reporting sales QX

gross QX strongest last to a security. any quarter Our mix very in in product margin fiscal in the of was year of 'XX XX.X% favorable due

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

QX SG&A were of XX.X% to and leveraging manage structure in diligently from $XX improve cost of million basis work point discipline sales sales We divisions to across on maintaining in each our cost of Moving costs. to and or compared resulted million such SG&A operating structure. our the improvement year. QX expenses prior expenses. $XX XXX The strong our XX.X% managing or fixed of efficiency

same and $XX 'XX in X.X% or the $XX revenues million million X.X% prior of of in of were expenses Research quarter. year or development to fiscal QX revenues compared

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

due buyback, sales partially which repay $X.X Net other completed impact QX interest working cost and fiscal capital for the Moving the of QX acquisition increased the in QX stock notes during of higher borrowings. amount growth expenses by the were to to borrowings convertible and a associated QX, and with higher million primarily fiscal offset favorable interest taxes. investment and $X.X to partially from issued 'XX in million in to in 'XX used

fiscal of of effective QX QX reported 'XX XX.X% year. under compared rate was GAAP in last in XX.X% to Our tax

However, rate in benefits, which our was EPS effective non-GAAP excluding tax compared normalized of 'XX of fiscal QX to in discrete in adjusted our QX tax XX.X% calculation is rate, 'XX. the impact of reflected the XX.X%

a up 'XX to XX.X% in from was our non-GAAP a the in sequentially QX. our of margin. of XX.X%, margin now quarter I'll second adjusted operating discussion Overall, turn adjusted fiscal operating solid

quarter of tough XX.X%, faced 'XX. adjusted which was fiscal the division comp Security XX.X%. adjusted The quarter margin QX 'XX FY the in in This was a as operating margin was strongest operating QX

Although last this Security down second year-over-year operations, operating adjusted in margin Opto the nice anticipate the due fiscal second was fiscal XX.X% division's operating of margin of operating ramp-up expansion Due second to this a represented history. the strongest newer tough Opto in to quarter 'XX to year's the in adjusted half QX. We compared division's the margin 'XX. Opto adjusted XX.X% of on comp, in

The margin, Healthcare points wider like, basis while still adjusted increased we than year-over-year. operating would XXX division's

saw was solid cash in from million, DSO QX provided second by of was while flow million. collections reduction quarter $XX.X fiscal nice as amortization QX a and DSO significant million. cash $X.X to depreciation flow. Moving marked QX. to return QX CapEx $XX and in with to in We XX% improvement a 'XX in cash led expense fiscal a the operations in

of and our billings both because timing DSO mentioned and significant are we mainly cargo quarter, collections of above the international typical security receivables As for last contracts. our levels

sign is For time these highly milestones, customers' building influenced are achievement the significant and by of off. triggered contracts, which the project by line

the historical are under versus GAAP, QX then for relative the of while significant of unbilled the the revenue XX% represent decreased the an recorded balance QX. unbilled to earned cash receivable bill source and levels, of the of end to flow, we elevated relevant cash at by and receivables achievement collect future a subsequent Note, and end So milestone.

cash We the continue 'XX. significant to be of flow anticipate second could operating in half fiscal

leverage net as with solid our under is agreement. sheet balance X.X calculated credit approximately of Our

at the 'XX. term Aside fiscal fiscal fixed our bulk We 'XX. principal $X.X of payments of our QX floating our under the required of XX% bank of debt matures over debt estimate loan, million from in end was versus bank annual of

And finally, guidance. to turning

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

to For our the we range billion a year, billion, revenue XX.X%. revenues of the increasing $X.XXX guidance full year-over-year fiscal anticipate growth to on to of $X.XXX in range X.X%

to 'XX XX.X% a range per $X.XX to are share $X.XX share, FY We to earnings guidance XX.X% of increasing growth. also non-GAAP per adjusted representing diluted

backlog EPS diluted effects amortization financial of items. as impairment, potential non-GAAP tax 'XX actual believe of assets their charges, nonrecurring guidance on impact timing and other our to associated from predict tax our SEC very other other fiscal could anticipated company's is difficult estimates. revenues acquired from This put filings. The guidance. reflected restructuring excludes reasonable risks guidance new and and this impact We also and well currently changes results intangible discrete conversion significantly indicated as the discussed bookings on in above the Actual and uncertainties reflects vary expected the diluted revenues non-GAAP per earnings to in share and due to and the guidance currently and

continue We believe efforts innovative and take and products this And will this in customers to the open the remain solutions. for businesses. time, continued We'd global dedication to OSI the supporting opportunity thank our to We team our on call we'd to OSI continue enable like partners. growth to like to of questions. its providing our focused at

Operator

line from the Josh with Riley. Instructions]. Nichols of It [Operator comes B.

Josh Nichols

great the Things on are congratulations off start. role. to a Ajay, new

doing You new on Any the of a currently security. it budgets provide while I versus if opportunity that the and but the think, you these years, it's boarder the you're doing context increased around days, an briefly, border over front ramp-up be in going there's few change anticipated presumably? what could focus for some border clearly U.S. of are that to next increased could touched an if has on allocations how lot agencies X-letter there's some increase the early potential security on to administration

Ajay Mehra

Ajay. is this Thank Josh, you.

is So in a think, movement been they the security substantially terms an been great even on the previously that question. is part, issue. Senate days. the to trying total there's -- as But lot are what you really bills, which by It's not know, and of both I on than And funding. border reconcile House of higher were X

with plus like for the coming that we that but emphasis not able just technology administration, which wrong the is really people of with provide in go believe to we're really We it's if think and and we software the to So the positive. in new the CertScan, new technology are drugs, look some see the a us.

go player And dominant our that from feel X We indications good And we'll are we over forward. and the we I positive. see months think very end but with X, as more CBP. more all are the next

Josh Nichols

the already. well. a have And recent RF acquired Solutions layering of bit seems noticed the what secured, you about it expand doing talk the base I mean, revenue some a doing a that then just was that kind business and you million a this pretty that, acquisition, the given is of to opportunity currently bit the be company that business? to much business see think, before deeper. opportunities OSI you I I global into $XX sales you already the little infrastructure award Could larger to Systems on the relative little

Ajay Mehra

world. of areas I muscle because, are think you all different the the as this has in answered your now as one over over is the that yes, question kind of that the financial company it's advantages OSI's got we well there

are going definitely we So to them. help

in they're and also integrating very interdiction. them, are mind, just crucial border over working the horizon defense drug closely. really sector, for it's mean, I keep the they're but radar, We on security

an zones defense. surveillance opportunity and aircraft, radars we traditional their feel of as these enables obviously, based broad designated And that Keep U.S. in we forward, around the mind surface drones, that's border. opportunities besides, go systems in that provide ships range tracking

we So a response. talking the we to customers, are and have had very positive

very from perspective, to customers. with we it's more into think is those customer an have them. got I discuss OSI to more, but us more have Also, which base, And deeper and theirs, similar we

we're border, but scanning, discussing example. how the just protect not we we're So for discussing overall

Operator

please. of Mariana Bank for the our from question, comes Mora next America. moment It with line One Perez of

Mariana Perez Mora

I details first we of is in of to contribution second orders. prepared how in gave quarter? see least at think strong about around year? was the the be remarks. was could really describe the quarter. that going year half going had in strong the I you the you a that start to forward, really also the you much and the one like book-to-bill And But with like Mexico, And should how please appreciate to So the Mexico a

So is offset of slowdown that to transition? that Or enough contracts? how like Sabina think in terms the we recognition like about should any of

Alan Edrick

Mexico is than half contract with a of and second it's strong in a the the Alan. contributor with the and that. opportunity year. pipeline half extremely, of effectively continue to replacing non-Mexico The we we second contributor, QX, a us to amount contracts, thereof year, this Good at half very portion lighter in saw had but the In a and in was the to QX a significant revenues first about question. Mexico we're of Mariana, anticipated feel that we be significant strong fiscal confident the 'XX robust extremely backlog the

positioned opportunity have So year, to robust really set but Mexico have a a year, for this a strong as are as shipping we such backlog said, of important we business and we a significant significant a But because amount we well. is opportunity last amount us. shipped the such really non-Mexico set. strong future well

Mariana Perez Mora

the like this mostly versus think the right, Second next should early product about quarter mix? you because the especially the in towards and were like products. And contract XX How trend probably we -- then months? services the this transition, about when think stages of

Ajay Mehra

Ajay. is this So

of we the at products getting to product leads ship that's the shipped, us recurring the service one that say that I things, that we revenue. you always think look if

So All for really beyond to example. risk. products 'XX we to going some and revenue see and these into have very Mexico, really recurring we're be feel 'XX for in that certain good serviced

that very that So has will revenue earlier, good mentioned And margins. service revenue continue. I as

expecting that. we're So fully

Alan Edrick

as Alan, and revenue now, significant of this And maybe revenue, described, service strong product early now had roll service higher we've And contribution over last as to beginning is to those the beginning the are we as expect as supplement this Ajay warranty that, years. off real to at QX. of products sort growth margins few see growth create revenue

So we put strong with revenue to moving there recurring it's that be out a this margin installed position higher nice position be a base at to in in. a to more nice is

Mariana Perez Mora

And that from acquired? award recompete like my portfolio is you one like frequency of is like much more more just the end. And this you much like a like what part of to radio I'm curious, got. the How how communications portfolio critical of was? that incremental existing

Ajay Mehra

one I forward. new there's is incremental Well, -- this business, we is think this as but always move

border we're the behind So but the side getting just able also business, into the but new and earlier, not we and new the we growth, focused being with us to get have, business defense actually not at incremental business, see can security on maybe muscle get as that looking get to where looking business the mentioned side, but opportunities. maintaining having very just OSI we're the I

Operator

our next Larry for moment CJS comes question Solow with that One from Securities.

Lawrence Solow

as I congratulate for well. new A.J. on welcome your you, question I role first Ajay, guess, you you,

of this maybe maybe about I and kind to like kind opportunity going to your sound question outsized like opportunities? seeing if will we've change opportunity or end the You real lot a mentioned verticals. administration it there, new Or those is, more a you a expand change. just where sound does -- expanding forward? I'm although borders, about lot and headlines verticals opportunity where of were mean, talked And pipeline. new the significant out, growth? markets maybe these not But administration does there's it bipartisan drive are a just you've of obviously, of curious ports and most expansion any for sort stand spoken

Ajay Mehra

So growth I all, Larry. first But of across think the thank border. you, is -- the

think in A get out, do. of of it's what just pointed that's not just security, border lot going we're about can about the we're starting. talk we but recurring to it software, we And we the Sure, growth. some Can about going else to yes, initial see revenues, get -- news. to CertScan Alan with is our it as service integrate it's we revenue. So product,

we opportunities. opportunities. checkpoint, of of Internationally, lot couple huge. don't cases, announced of are as the RTG. product is a We've lot orders, there who But -- their have a in. feel that's going check some you a on with Those Aviation in as had a administrator baggage they've and know, check new administration excellent years as TSA, some have coming we well the which old. in know to we We are, our be. changes an baggage, XX-plus there

replace So in they those X X, start. X, to they the when next have probably years

but lot we And manufacture Opto They're are we, tray as but in. in around and a situated talk the to to away Opto are companies the opportunities on these the as manufacturing, -- And a facilities world on unique the uniquely I the think of lot where side security, who huge security obviously opportunities, we providing a from not go systems large side, think where but internationally. the is you Opto with do and about we accommodate customers we business and look can company, on participate can international side. a as China side, we company really, the that U.S. merge the those moving I side, of have And we ability just that. in the we defense security with talk keep really

how at product just doing broaden investing for the products, like line medical, And that security. in money we're we're of lot next-generation in we looking us, a

very the opportunities. we growth feel about good So all

borders. pillar, one just So out a there. ports but significant it's lot That's very more on I there's would not just and say

Lawrence Solow

maybe feel do several I'm larger-sized the you've ports on a geographical today. lower international you is like now? opportunity and deals. the bigger that And seems Right. Is U.S., region, actually were it's ports of curious, proportion like but what's bigger Most like you them is me borders statement? borders your in announced fair Well, just to and got international. feels particular, driving on of it a obviously, a

Ajay Mehra

I the to not is if just us. most U.S. that as think important important,

IDIQs at we've CBP, As it, I lot And but be are you for coming driven with these there going think internationally, have example. a look new we IDIQs to in.

have other with very we they're CBP new worked coming and We organizations closely develop where products, out.

have largest very next-generation the market the feel And talking the come U.S. closely we products the in as We share to of out, developed which we've customers. our

just So for with et and coming easier integrating out we're where software -- it the it for to the cetera. and hardware it's not something makes with look people contraband,

security the for a reasons, end coming it. competitive And at keep consumer day, And cheaper in to the of But when going as I'm at expense. for look people not at it overall products, into the end, in really some these the of but really it's specifics and lot the trade facilitates of through go borders. introduce the an end we mind, the just

So a but lot U.S. the going is important. on,

I a for good think there's the years. several next opportunity

Lawrence Solow

that I the, driver margin your just the on the were SG&A biggest Is -- guess, if squeeze margin for because we that driver? revenue? about look was like Is went leverage the looks mostly bps. XXX the mix. like you and in question said, your And predominant just a Got just year-over-year if on But down, the security. the up margin the may gross flat you. revenue on of or Like I you higher services sequentially, just but

Alan Edrick

Yes, economies Larry, is. scale as cost our we it The fixed of really structure. leverage

Systems kind really of is drove sequential for a that what on So overall. it OSI basis

exactly You're right.

Lawrence Solow

to lastly, the then Opto And half. the you. X% a in division, in nice quarter, return up just first the Got on growth

be You that of lot you a operating new of of the you that have a leverage? the margin the just things, expansion also of kind on Is qualitative color on any half in -- great. mentioned in obviously, of -- what's year. Or Mexico. onshoring. back What would know driver I mentioned sort facility

Alan Edrick

Larry, question, is this Good Alan.

I'd the going half year growth accelerated few really is behind the the is in levels a So fold. we what's largely say as the rightsizing in drive us. to second One of Opto the expect of kind is inventory

now book-to-bill our So north patterns. our in we're seeing in second one Opto quarter ordering their was in return customers fact, of as normal And to well.

that drive accelerated expect to growth. we So

certainly expected the mentioned operation Mexico. the is You gaining The to is mix will also, That for expansion. have help. second in be in some should drive favorable business which new which half, margin of momentum us that we also

all to see with for all, half division. some in the we margin in line So Opto growth, the operating top coupled expect second expansion nice

Operator

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

Christopher Glynn

kind innings Curious, I dive in hear And just global to the are of rating call on sort I but to maybe you and you Good replacement of aviation and total want versus international for that? lagging improving win call. seeing into would Ajay. the an little rates upgrade the cycle welcome, sector of bit you the the a the on Curious, is in aviation kind its aviation historical? early international, U.S. know days? the in global

Ajay Mehra

Chris. Thanks,

checkpoint you look checkpoints, at is you have you aviation, baggage within through, So an have question And such market. trace. have systems because your when you checkpoints, got you've you CT your put big interesting people a screening, it's aviation where

You then check have many so and products different your have obviously, you there, out baggage.

CT. the U.S., been the to checkpoint focused coming U.S. on has So

definitely player, move to starting a to leaders. one years at significant I we RTT couple look upgrading, we And they for going products is do have what baggage on are in big check us opportunity as of -- potentially the replacing to well. and a we of see some they think the very believe definitely are as I is of forward, going a feel TSA we that from Trace, which these now. which. have to look

we X that And from maybe position to that's feel we're that's but good participate. years is. the market in a So now, where

Internationally, we're orders. are big as lot well check baggage as winning a It's we well of a market. Obviously, as Trace. the as checkpoint in

it's keep places, another well. of some know get starts. in bundled the some And us starting, market middle. products. then the you Customers the very have as mind, some cycle in towards And end, in We places it's is,

continuing cycle, this going it's a fill to So go and away. it's just up you not it's

might to a almost car, what in remarks, be, going little years to cases, you're prepared in little a like believe, slower. on depending was XX my of X have I avation, It's for faster, some this some a was I in have a that car, thought equipment technology, is mentioned, there -- I even

get key revenue recurring over forward. So it's we into we move as thing business, is is as there service a the continuing business. And this there

no beginning it to really and middle. So a answer way is continuing really one best business, the -- it. answer It's there's

Christopher Glynn

for helpful you or debt 'XX. ahead not -- said timing of you due, what But understanding or interested you bulk I'm in then And How the calendar really are you for That's addressing are 'XX you anticipating fiscal coming that? if when that. you pricing mentioned redo Great. the far as sure that?

Alan Edrick

Chris, Alan. this is

we'll the is we've Throughout So facility, calendar times likely of with which December past our yes, done of facility, our our matures banks facility. which fiscal is the 'XX, natural to credit sort numerous as be 'XX. the extend 'XX, amend course and working credit X-year the credit in in

credit an investment size, us. know, the As even though we quite as it comes you to our due not to so for investment-grade grade have may we're pricing company facility, favorable

Operator

question next Wells with Akers the Matt Our comes Fargo. of line from

Matthew Akers

Good cash continue mentioned Alan, capital some flow flow. on the know, I I for the reversing. And new in question the cash see the role. about positive you ask and to to wanted working good of Thanks see pretty to congrats, Ajay, half that cash. back quarter,

we Or some a kind the here Just international point big free going to now of these of should are the of that maybe lumpy products? kind that's some we curious, still where steadier see cash as of flow milestones around of forward?

Alan Edrick

This It in question. within much business. good always are of a Matt, quarters, sort Yes, likes steady stronger flow never bit will is of some quarters a some We'll have lighter. are little be cash they Alan. pace of that the our

in some to sort money working have income flow a rate a We basis continue of flow outperform an of sort given to with free strong opportunity capital. cash on up that we to net cash conversion tied have

receivables cash expect into in So 'XX does the as see we move flow second generation. fiscal opportunity inventory, normalize significant as to as forward. and there's to our for free half and And that begin we the

think going due be the our so never to contracts flow kind we perfectly and business continue to some rate, have So good smooth a international of of have. conversion we it's nature cash to that the we'll free of

Matthew Akers

Yes. Got it.

about Okay. new tariffs, of how that's given kind ask a topic administration. And the wanted I with to been

risk prices customers. Just curious either you to or about associated think how any tariffs due with

of kind for guys of around the lot have thinking business, you're how a just You that. about international risk Mexico, example,

Ajay Mehra

question a a people's It's is lot of obviously. on that minds,

we too little tell because manufacturing a to from situated But say early to it's facilities think perspective, we're well I will have what's going the an OSI happen. I U.S. in

around Asia. flexibility and have closely needs We have Europe, are we tariff our the with what to if And customers need in and facilities to turn manufacturing work address they things really situation. their on any

companies much it's wait-and-see but the a think more for I attitude, I the importing and outside think U.S. that at manufacturing this point, are only U.S. So into a of challenge it's

really more to I we have us, ability flexible, different to the For and much manufacturing switch it's locations. like said,

else we'll everybody just it So watch like watching is it.

Matthew Akers

maybe I QX strong. then squeeze way QX? as And year, you unusually last margins Great. think the seasonality and mentioned, I guess, of think, any could last one about if QX kind to in. one Yes. Alan, between I

about we to anything go Just as into the half? think back it

Ajay Mehra

tends quarter weighted We to QX be as Yes, question. at Matt, the good see do. our the to we fiscal end a would more bit strongest QX, of year. half back the typically

revenue mix expect perspective, than in QX to QX. we a result, in see margins we would see margin from operating would the our a there. stronger And stronger As

Operator

[Operator Instructions].

line follow-up of the We America. Perez Mariana of a Bank with from have

Mariana Perez Mora

have we follow-up the I forward to So When Matt's about should unbilled about think and we free balance? going especially and question. flow, think a balance receivables receivables sheet how cash

Alan Edrick

Mariana, it's Alan.

our we is So DSO improve forward. going would going to that expect

Of the course, we grow line. expect top to

DSO So unbilled respect pleased but down. receivables, is end the we we in of anticipating. are absolute to unbilled to receivables dollars, With see receivables to time in decrease XX% to our time, could to a what our from QX, we'd see are QX really grow from which expect

the of drive we'll that's where receivables as receivables significantly sort get those should to move unbilled they to year receivables June, see what cash collection, the well. cash outsized and I we And down fiscal we us the this of as unbilled today. flow believe billed in as from free are for therefore, end

be So us. position for in to a real nice

Mariana Perez Mora

on the one more measure how much And you contribution from acquisition. per the Have was it share?

Alan Edrick

$XX quarter. revenues share. roughly per We in did the of Not million

performed it nicely quite So us. for

Operator

the line Martin Jeff Capital Partners. Instructions]. [Operator with of comes ROTH from It

Jeff Martin

the that into dive little business wanted acquired September I in you more. to surveillance a

portfolio, and that be? things it do it R&D acquire In can to that product complementary there significantly portfolio terms existing product invest offering? future of might that? your should need to are in the in in enhance the look you products to you where that security to either or enhance are Do Is other you

Ajay Mehra

I with U.S. Jeff, to one, they little went expand to I just into talk we're customers and offering. why and really was, base with this obviously, in DoD our number customer but we're So think something really that familiar very those go sense and bit, it is a the made the and reemphasize able to internationally that have

cruise are and drones And go missiles ballistic radar I would what's everybody some through. causing mentioned that at is Obviously, the looks as and of satellites where over-the-horizon just Ukraine, You the over-the-horizon what on drones like up. and was damage. products missiles have, for they going at pick look everybody missiles in looking much coming at radar. But that's

over-the-horizon traditional So for big there. a there's radar be to opportunity

the very drones carrying and can is ships, drugs bigger. border, be really across mentioned, closely, these security I to drones and capabilities coming vehicles, bigger because Having said than the for applies all used like going is of radars payload what a that, from to we anything kinds get it of else do more

going to that's definitely think I So become and a a more of -- more threat.

there and But some -- with when and with that communication there. ULF, the which traditionally, other really is of is from then for others. key reach defense underwater, capabilities larger companies, working of defense they financial communication which areas opportunity a that's providing only ultra for the low space the standpoint in from in much closer opportunities form really out is them like for standpoint, are submarines a they're their us frequency, of And really, really out have. And contractors there the

spend R&D, that on As on a R&D of far lot as is your funded R&D, money they question but by customers. their

good we the So good we'll about keep the but definitely it's you several and next we think very opportunities quarters, fit, it. there, and feel informed are over a

Jeff Martin

that. Appreciate helpful. That's

have and Opto security pretty the covered the extensively. been So

division that that's also the a platform care at system health where you on you've monitoring patient be the out can I And throughout give rollout if there. which looks next-generation been working monitoring the on the leasing now. years all know kind line just question time in pending that within past new industry, mentioned that's maybe you the So if a for model of you give point if several or an patient can have what evaluating like? of of traction Are you And much could a launch you're more platform. gained update the new differentiator.

Ajay Mehra

reasons you our about considerable that exact we're and So I'm resources give feel that platform timing more making on beyond, else. anything good that we're we we're going not But progress but for an from I what think 'XX actually team. it's think competitive we've what with R&D new than -- spending hearing, the to we standpoint.

that items not whether of the it's platform, whether analysis, besides our cetera. it's predictive et remote and it's some over able And but products we're to other offer there, monitoring, next-generation really, just other

we'll So you color is I introducing that. start we on a all objective give we standpoint, more as down the road. become And together. a well as from that from boost good But sales a timing, exact goes that as us it gives the technology really said, like the products,

Jeff Martin

you me you are Great. the offering? base to turnkey happy. question seeing much well within on the customers there. existing for turnkey expand opportunity side, mentioned going And then are Are Things customer solutions last

Ajay Mehra

a is basically months. answer In happen yes, through the you on you not we're with opportunities some several have working short process. to whole these them The go the and have work know, international in are governments, Like that on cases, of to you opportunities. educate couple

but we on to a working opportunities through it, So while get are actively now. quite it right takes several

Operator

in And queue. I to the Back any do not further guys. see questions you

Ajay Mehra

you. call, at thank thank to again, we earnings speaking forward our in Once for with call. our conference look and Well, next participating you you

Operator

in today's program. you, everyone, for thank And participating

may disconnect. You now

OSI Systems (OSIS) 23 Jan 252025 Q2 Earnings call transcript