OSI Systems Reports Fiscal 2023 Fourth Quarter and Full Year Financial Results

  • Record Q4 Revenues of $412 Million (22% year-over-year growth)
  • Record Q4 Earnings Per Diluted Share
    • GAAP EPS of $2.46 (27% year-over-year increase)
    • Non-GAAP Adjusted EPS of $2.66 (36% year-over-year increase)
  • Record Quarter-End Backlog of $1.8 Billion (46% increase from June 30, 2022)
  • Company Provides Fiscal 2024 Guidance
    • Sales Growth Guidance of >18%
    • Non-GAAP Adjusted EPS Growth Guidance of >25%

OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ: OSIS) today announced its financial results for the fourth quarter and fiscal year ended June 30, 2023.

Deepak Chopra, OSI Systems’ Chairman and Chief Executive Officer, stated, “Our fourth quarter performance was stellar as revenues grew by 22% and non-GAAP adjusted earnings per share increased 36% year over year. Fourth quarter bookings were outstanding, leading to record backlog as we concluded a noteworthy fiscal year. We enter fiscal 2024 with great visibility and momentum, and we are enthusiastic about our prospects for this fiscal year.”

For the fourth quarter of fiscal 2023, the Company reported revenues of $411.9 million, a 22% increase compared to the $336.8 million reported for the fourth quarter of fiscal 2022. Net income for the fourth quarter of fiscal 2023 was $42.4 million, or $2.46 per diluted share, compared to net income in the fourth quarter of fiscal 2022 of $33.8 million, or $1.94 per diluted share. Non-GAAP net income for the fourth quarter of fiscal 2023 was $45.8 million, or $2.66 per diluted share, compared to non-GAAP net income for the fourth quarter of fiscal 2022 of $34.0 million, or $1.96 per diluted share.

For the fiscal year ended June 30, 2023, revenues increased 8% to $1.278 billion from $1.183 billion in the prior fiscal year. Net income for fiscal 2023 was $91.8 million, or $5.34 per diluted share, compared to net income for fiscal 2022 of $115.3 million, which included a gain on sale of $27.4 million for a sale-leaseback transaction, or $6.45 per diluted share. Non-GAAP net income for the fiscal year ended June 30, 2023 was $106.7 million, or $6.21 per diluted share, compared with non-GAAP net income of $103.8 million, or $5.81 per diluted share, for the 2022 fiscal year.

As of June 30, 2023, the Company's backlog was $1.8 billion, representing an increase of 46% from the Company’s backlog as of June 30, 2022. During the quarter ended June 30, 2023, operating cash flow was $22.1 million, compared to $22.0 million generated for the same quarter of the prior year. Capital expenditures were $3.1 million and $4.6 million for the three months ended June 30, 2023 and 2022, respectively.

Mr. Chopra commented, “We were pleased with our Security division’s fourth quarter performance, marked by strong revenues, operating income, and bookings. Revenues in the fourth quarter increased 29% year over year, with growth across several product lines, most significantly in our cargo and vehicle inspection products. Our book-to-bill ratio of 2.4 underscores our industry leadership position. With a record backlog and growing opportunity pipeline, we believe we are well-positioned in the Security division for fiscal 2024.”

Mr. Chopra continued, “Our Optoelectronics and Manufacturing division delivered record Q4 revenues, which increased 11% year over year, along with significant operating margin expansion. This division continues to capitalize on our vertically integrated structure and is well situated as we enter the new fiscal year.”

Mr. Chopra concluded, “Our Healthcare division reported a solid fourth quarter as revenues increased 18% leading to significant operating margin expansion. The strong performance provides momentum heading into fiscal 2024.”

Fiscal Year 2024 Outlook

For fiscal year 2024, the Company anticipates revenue growth in excess of 18% over revenues in fiscal 2023 and non-GAAP adjusted diluted earnings per share growth exceeding 25% compared to non-GAAP adjusted diluted earnings per share for fiscal year 2023. Actual revenues and adjusted diluted earnings per share could vary from this guidance due to factors discussed under “Forward-Looking Statements” or other factors.

The Company’s fiscal 2024 adjusted diluted earnings per share guidance is provided on a non-GAAP basis only. The Company does not provide a reconciliation of guidance for adjusted diluted EPS to GAAP diluted EPS (the most directly comparable GAAP measure) on a forward-looking basis because the Company is unable to provide a meaningful or accurate compilation of reconciling items and certain information is not available. This is due to the inherent difficulty and complexity in accurately forecasting the timing and amounts of various items included in the calculation of GAAP diluted EPS but excluded in the calculation of adjusted diluted EPS, such as acquisition costs and other non-recurring items that have not yet occurred, are out of the Company’s control or cannot otherwise reasonably be predicted. For the same reasons, the Company is unable to address the significance of unavailable information which may be material and therefore could result in GAAP diluted EPS, the most directly comparable GAAP financial measure, being materially different from projected adjusted diluted EPS.

Presentation of Non-GAAP Financial Measures

This earnings release includes a presentation of non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP operating income (loss) by segment and non-GAAP operating margin, all of which are non-GAAP financial measures. The presentation of these non-GAAP figures for the three months and fiscal years ended June 30, 2022 and 2023 is provided to allow for the comparison of the underlying performance of the Company, net of impairment, restructuring and other charges (including certain legal costs), amortization of intangible assets acquired through business acquisitions, gain on sale of property in fiscal 2022, non-cash interest expense, and their associated tax effects, and the impact of discrete income tax items. Although we exclude amortization of acquired intangible assets from our non-GAAP figures, revenue generated from such intangibles is included within revenue in determining non-GAAP financial performance of the Company. Management believes that the non-GAAP financial measures presented in this earnings release provide (i) enhanced insight into the ongoing operations of the Company, (ii) meaningful information regarding the Company’s financial results (excluding amounts management does not view as reflective of ongoing operating results) for purposes of planning , forecasting and assessing the performance of the Company’s businesses, (iii) a meaningful comparison of financial results of the current period against results of past periods and (iv) financial results that are generally more comparable to financial results of peer companies than are GAAP figures. Non-GAAP financial measures should not be assessed in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. These non-GAAP measures may not be the same as measures used by other companies due to possible differences in methods and in the items or events for which adjustments are made.

Reconciliations of GAAP financial information to non-GAAP financial information are provided in the accompanying tables. The financial results calculated in accordance with GAAP and reconciliations from those financial results should be carefully evaluated.

Conference Call Information

The Company will host a conference call and simultaneous webcast beginning at 9:00am PT (12:00pm ET) today to discuss its results for the 2023 fourth quarter and fiscal year. To listen, please visit the Investor Relations section of the OSI Systems website at http://investors.osi-systems.com/index.cfm and follow the link that will be posted on the front page. A replay of the webcast will be available beginning shortly after the conclusion of the conference call until September 7, 2023. The replay can be accessed through the Company’s website at www.osi-systems.com.

About OSI Systems

OSI Systems is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, healthcare, defense and aerospace industries. The Company combines more than 40 years of electronics engineering and manufacturing experience with offices and production facilities in more than a dozen countries to implement a strategy of expansion into selective end-product markets. For more information on OSI Systems and its subsidiary companies, visit www.osi-systems.com. News Filter: OSIS-E

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to the Company's current expectations, beliefs, and projections concerning matters that are not historical facts. Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions, and contingencies, many of which are outside the Company's control and which may cause actual results to differ materially from those described in or implied by any forward-looking statement. Forward-looking statements include, but are not limited to, information provided regarding expected revenues, earnings, growth, and operational performance in fiscal 2024 and beyond. The Company could be exposed to a variety of negative consequences as a result of delays related to the award of domestic and international contracts; failure to secure the renewal of key customer contracts; delays in customer programs; delays in revenue recognition related to the timing of customer acceptance; the impact of potential information technology, cybersecurity or data security breaches; changes in domestic and foreign government spending and budgetary, procurement and trade policies adverse to the Company's businesses; the impact of the Russia-Ukraine conflict, including the potential for broad economic disruption; global economic uncertainty; material delays and cancellations of orders or deliveries thereon, supply chain disruptions, plant closures, or other adverse impacts on the Company’s ability to execute business plans; unfavorable currency exchange rate fluctuations; unfavorable interest rate fluctuations; effect of changes in tax legislation; market acceptance of the Company's new and existing technologies, products, and services; the Company's ability to win new business and convert orders received to sales within the current fiscal year; contract and regulatory compliance matters, and actions which, if brought, could result in judgments, settlements, fines, injunctions, debarment, or penalties; and other risks and uncertainties, including, but not limited to, those detailed herein and from time to time in the Company's Securities and Exchange Commission filings, which could have a material and adverse impact on the Company's business, financial condition, and results of operations. For additional information on these and other factors that could cause the Company's future results to differ materially from those in any forward-looking statements, see the section titled "Risk Factors" in the Company's most recently filed Annual Report on Form 10-K and other risks described therein and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which are based on currently available information and speak only as of the date on which they are made. The Company assumes no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information, or otherwise, except to the extent required to do so under federal securities laws.

 

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

 

Three Months Ended

June 30,

Fiscal Year Ended

June 30,

 

2022

2023

2022

2023

Net revenues:

 

 

 

 

Products

$

262,813

 

$

321,264

 

$

897,259

 

$

958,827

 

Services

74,008

 

90,606

 

 

285,977

 

319,600

 

Total net revenues

336,821

 

411,870

 

 

1,183,236

 

1,278,427

 

Cost of goods sold:

 

 

 

 

 

 

Products

176,713

 

218,575

 

 

608,990

 

676,772

 

Services

37,642

 

50,275

 

 

149,819

 

171,145

 

Total cost of goods sold

214,355

 

268,850

 

 

758,809

 

847,917

 

Gross profit

122,466

 

143,020

 

 

424,427

 

430,510

 

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative

65,538

 

67,165

 

 

235,553

 

228,313

 

Research and development

14,639

 

15,504

 

 

59,583

 

59,352

 

Impairment, restructuring and other charges, net

2,732

 

3,200

 

 

7,542

 

7,566

 

Total operating expenses

82,909

 

85,869

 

 

302,678

 

295,231

 

Income from operations

39,557

 

57,151

 

 

121,749

 

135,279

 

Interest and other expense, net

(2,428

)

(5,702

)

 

(8,962

)

(20,041

)

Other income, net

--

 

--

 

 

27,373

 

--

 

Income before income taxes

37,129

 

51,449

 

 

140,160

 

115,238

 

Provision for income taxes

(3,366

)

(9,068

)

 

(24,813

)

(23,460

)

 

Net income

$

33,763

 

$

42,381

 

$

115,347

 

$

91,778

 

 

 

 

 

 

 

 

Diluted earnings per share

$

1.94

 

$

2.46

 

$

6.45

 

$

5.34

 

Weighted average shares outstanding – diluted

17,383

 

17,249

 

 

17,870

 

17,190

 

 

UNAUDITED SEGMENT INFORMATION

(in thousands)

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

Fiscal Year Ended

June 30,

 

 

2022

 

2023

 

2022

 

2023

Net revenues – by Segment:

 

 

 

 

 

 

 

Security division

$

209,081

 

 

$

269,103

 

 

$

663,160

 

 

$

760,291

 

Healthcare division

 

50,467

 

 

 

59,494

 

 

 

205,658

 

 

 

190,488

 

Optoelectronics and Manufacturing division, including intersegment revenues

 

90,742

 

 

 

100,918

 

 

 

366,659

 

 

 

387,431

 

Intersegment eliminations

 

(13,469

)

 

 

(17,645

)

 

 

(52,241

)

 

 

(59,783

)

Total

$

336,821

 

 

$

411,870

 

 

$

1,183,236

 

 

$

1,278,427

 

 

 

 

 

 

 

 

 

Operating income (loss) – by Segment:

 

 

 

 

 

 

 

Security division

$

38,461

 

 

$

49,009

 

 

$

98,784

 

 

$

115,023

 

Healthcare division

 

4,266

 

 

 

6,546

 

 

 

24,696

 

 

 

11,365

 

Optoelectronics and Manufacturing division

 

10,688

 

 

 

10,717

 

 

 

45,030

 

 

 

46,680

 

Corporate

 

(14,095

)

 

 

(9,503

)

 

 

(46,950

)

 

 

(39,075

)

Intersegment eliminations

 

237

 

 

 

382

 

 

 

189

 

 

 

1,286

 

Total

$

39,557

 

 

$

57,151

 

 

$

121,749

 

 

$

135,279

 

 
OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

 

 

 

 

June 30, 2022

 

June 30, 2023

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

64,202

 

$

76,750

Accounts receivable, net

 

307,973

 

 

 

380,845

 

Inventories

 

333,907

 

 

 

338,008

 

Other current assets

 

40,062

 

 

 

44,300

 

Total current assets

 

746,144

 

 

 

839,903

 

Property and equipment, net

 

109,684

 

 

 

108,933

 

Goodwill

 

336,357

 

 

 

349,505

 

Intangible assets, net

 

138,370

 

 

 

140,857

 

Other non-current assets

 

112,595

 

 

 

116,488

 

Total assets

$

1,443,150

 

 

$

1,555,686

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Bank lines of credit

$

60,000

 

 

$

215,000

 

Current portion of long-term debt

 

244,575

 

 

 

8,076

 

Accounts payable and accrued expenses

 

194,266

 

 

 

202,777

 

Other current liabilities

 

115,113

 

 

 

145,841

 

Total current liabilities

 

613,954

 

 

 

571,694

 

Long-term debt

 

48,668

 

 

 

136,491

 

Other long-term liabilities

 

142,104

 

 

 

121,336

 

Total liabilities

 

804,726

 

 

 

829,521

 

Total stockholders’ equity

 

638,424

 

 

 

726,165

 

Total liabilities and stockholders’ equity

$

1,443,150

 

 

$

1,555,686

 

 
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP

NET INCOME AND EARNINGS PER SHARE

(in thousands, except earnings per share data)

 

 

 

 

Three Months Ended June 30,

Fiscal Year Ended June 30,

 

2022

2023

2022

2023

 

Net income

EPS

Net income

EPS

Net income

EPS

Net income

EPS

GAAP basis

$

33,763

 

$

1.94

 

$

42,381

 

$

2.46

 

$

115,347

 

$

6.45

 

$

91,778

 

$

5.34

 

Impairment, restructuring and other charges, net

 

2,732

 

 

0.16

 

 

3,200

 

 

0.19

 

 

7,542

 

 

0.42

 

 

7,566

 

 

0.44

 

Amortization of acquired intangible assets

 

3,700

 

 

0.21

 

 

3,706

 

 

0.21

 

 

13,417

 

 

0.75

 

 

14,932

 

 

0.87

 

Non-cash interest expense

 

217

 

 

0.01

 

 

159

 

 

0.01

 

 

530

 

 

0.03

 

 

577

 

 

0.03

 

Gain on sale of property

 

--

 

 

--

 

 

--

 

 

--

 

 

(27,368

)

 

(1.53

)

 

--

 

 

--

 

Tax benefit of above adjustments

 

(1,485

)

 

(0.08

)

 

(1,425

)

 

(0.08

)

 

1,333

 

 

0.08

 

 

(5,267

)

 

(0.30

)

Discrete tax items

 

(4,942

)

 

(0.28

)

 

(2,198

)

 

(0.13

)

 

(6,965

)

 

(0.39

)

 

(2,844

)

 

(0.17

)

 

 

 

 

 

 

 

 

 

Non-GAAP basis

$

33,985

 

$

1.96

 

$

45,823

 

$

2.66

 

$

103,836

 

$

5.81

 

$

106,742

 

$

6.21

 

 

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages)

 

 

 

Three Months Ended June 30, 2022

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and Manufacturing Division

 

Corporate /

Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

$

38,461

18.4

%

$

4,266

8.5

%

$

10,688

11.8

%

$

(13,858

)

 

$

 

39,557

11.7

%

Impairment, restructuring and other charges, net

 

14

0.0

%

 

-

-

 

 

100

0.2

%

 

2,618

 

 

2,732

0.8

%

Amortization of acquired intangible assets

 

2,793

1.3

%

 

201

0.4

%

 

706

0.7

%

 

-

 

 

3,700

1.2

%

Non-GAAP basis– operating income (loss)

$

41,268

19.7

%

$

4,467

8.9

%

$

11,494

12.7

%

$

(11,240

)

$

45,989

13.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2023

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and Manufacturing Division

 

Corporate /

Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

$

49,009

18.2

%

$

6,546

11.0

%

$

10,717

10.6

%

$

(9,121

)

$

57,151

13.9

%

Impairment, restructuring and other charges, net

 

357

0.1

%

 

324

0.6

%

 

2,460

2.4

%

 

59

 

 

3,200

0.8

%

Amortization of acquired intangible assets

 

2,627

1.0

%

 

302

0.5

%

 

777

0.8

%

 

-

 

 

3,706

0.9

%

Non-GAAP basis– operating income (loss)

$

51,993

19.3

%

$

7,172

12.1

%

$

13,954

13.8

%

$

(9,062

)

$

64,057

15.6

%

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended June 30, 2022

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and Manufacturing Division

 

Corporate /

Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

 

$

 

98,784

14.9

%

$

24,696

12.0

%

$

45,030

12.3

%

$

(46,761

)

 

$

 

121,749

10.3

%

Impairment, restructuring and other charges, net

 

1,275

0.2

%

 

-

-

 

 

100

0.0

%

 

6,167

 

 

7,542

0.7

%

Amortization of acquired intangible assets

 

9,778

1.5

%

 

806

0.4

%

 

2,833

0.8

%

 

-

 

 

13,417

1.1

%

Non-GAAP basis– operating income (loss)

 

$

 

109,837

16.6

%

$

25,502

12.4

%

$

47,963

13.1

%

$

(40,594

)

 

$

 

142,708

12.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended June 30, 2023

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and Manufacturing Division

 

Corporate /

Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

$

115,023

15.1

%

$

11,365

6.0

%

$

46,680

12.0

%

$

(37,789

)

$

135,279

10.6

%

Impairment, restructuring and other charges, net

 

1,715

0.2

%

 

3,077

1.6

%

 

2,507

0.7

%

 

267

 

 

7,566

0.5

%

Amortization of acquired intangible assets

 

11,114

1.5

%

 

973

0.5

%

 

2,845

0.7

%

 

-

 

 

14,932

1.2

%

Non-GAAP basis– operating income (loss)

$

127,852

16.8

%

$

15,415

8.1

%

$

52,032

13.4

%

$

(37,522

)

$

157,777

12.3

%

 

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