- Record Fiscal Q2 Revenue of $278
Million (14% increase over prior year)
- Q2 Earnings (Loss) Per Diluted
Share
- GAAP EPS of ($2.47) - Includes a
charge of $56 million, or $2.96 per share, associated with U.S. tax
reform
- Non-GAAP EPS of $0.97 (43% increase
over prior year)
- Backlog up 12% since June 30,
2017
- Company Raises FY 2018
Guidance
OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ:
OSIS) today announced financial results for the quarter and six
months ended December 31, 2017.
Deepak Chopra, OSI Systems’ Chairman and CEO, stated, “We are
pleased to report an excellent second quarter as we achieved record
revenues, operating margin expansion and strong cash flow. We
executed on strategic initiatives and grew our backlog, positioning
the Company well for the remainder of fiscal 2018.”
The Company reported revenues of $277.5 million for the second
quarter of fiscal 2018, an increase of 14% from the $242.5 million
reported for the second quarter of fiscal 2017. Net loss for the
second quarter of fiscal 2018 was $47.0 million, or ($2.47) per
diluted share, compared to net income of $4.8 million, or $0.25 per
diluted share, for the second quarter of fiscal 2017. Non-GAAP net
income for the second quarter of fiscal 2018 was $19.1 million, or
$0.97 per diluted share, compared to non-GAAP net income for the
second quarter of fiscal 2017 of $13.4 million, or $0.68 per
diluted share.
As a result of the enactment of the Tax Cuts and Jobs Act (the
“Tax Act”) in December 2017, the Company recognized a charge of $56
million, or $2.96 per share, in the second quarter of fiscal 2018.
The charge included management’s current estimate of the tax on
accumulated overseas profits and the revaluation of deferred tax
assets and liabilities. As the Company has a June 30 fiscal year
end, the Tax Act’s lower corporate tax rate will be phased in, and
is expected to result in a U. S. statutory federal tax rate of
approximately 28% for the fiscal year ending June 30, 2018, which
is a reduction from 35%. The Company’s reported tax rate, which
includes the charge, was 465.0% for the second quarter of fiscal
2018, and 231.4% for the first half of the fiscal year. The
Company’s tax rate, excluding the Tax Act related charge and
certain discrete tax items, was 28.0% for the fiscal 2018 second
quarter and 28.2% for the first half of the fiscal year. The
provisional estimates are based on the Company's initial analysis
of the Tax Act. The changes included in the Tax Act are broad and
complex. The final impacts of the Tax Act may differ materially
from the amounts estimated above, due to, among other things,
changes in interpretation of the Tax Act, any legislative action
that may be taken to address questions arising due to the Tax Act,
and any changes in accounting standards for income taxes or related
interpretations in response to the Tax Act. The Company currently
anticipates finalizing and recording any resulting adjustments by
the end of the 2018 calendar year.
For the six months ended December 31, 2017, revenues rose 15% to
$534.7 million, compared with the same period a year ago. Net loss
in this period was $36.8 million, or ($1.95) per diluted share,
compared with net income of $5.5 million, or $0.28 per diluted
share, in the same period a year ago. Non-GAAP net income for the
six months ended December 31, 2017 was $34.6 million, or $1.76 per
diluted share, compared with non-GAAP net income of $22.1 million,
or $1.12 per diluted share, for the comparable prior-year
period.
During the quarter ended December 31, 2017, the Company's
book-to-bill ratio for equipment and related services (non-turnkey)
was 1.1. As of December 31, 2017, the Company's backlog was
approximately $830 million, compared with $738 million as of June
30, 2017. Operating cash flow during the quarter ended December 31,
2017 was $50 million, and capital expenditures were $8 million. For
the comparable period in the prior year, operating cash flow was
$20 million, and capital expenditures were $2 million.
Mr. Chopra commented, “Our Security division achieved record
second fiscal quarter revenues of $172 million, up 23% compared
with the prior-year period. This included approximately $20 million
of revenues generated by the explosive trace detection business we
acquired in July 2017. This business nicely complements our
pre-existing product portfolio, and we are progressing well with
our integration efforts. As we announced, shortly after the end of
the second quarter, we signed a new two-year agreement with
Mexico’s customs and tax authority to continue providing security
inspection services in a wide-ranging program utilizing cargo and
vehicle screening systems in Mexico. The anticipated sales from
this agreement are consistent with the expectations reflected in
our previous financial guidance for fiscal 2018.”
Mr. Chopra continued, “Our Healthcare division revenues were up
3%. Excluding $4.5 million of revenues in Q2 of fiscal 2017
attributable to a non-core business that was divested in February
2017, Healthcare sales were up 13%, which marked the fourth
consecutive quarter of solid year-over-year organic growth.”
Mr. Chopra concluded, “Our Optoelectronics and Manufacturing
division performed well in the quarter as year-over-year sales grew
5%. We continually strive to find opportunities where our
technology, capabilities, and geographic presence differentiate us
among our peers.”
Fiscal Year 2018 Outlook
The Company is raising its fiscal 2018 sales guidance to $1,055
million - $1,090 million, representing growth of 10% - 13% compared
to the prior year. In addition, the Company is increasing its
non-GAAP earnings guidance to $3.45 - $3.67 per diluted share.
Actual sales and non-GAAP diluted earnings per share could vary
from this guidance.
The Company’s fiscal 2018 diluted earnings per share guidance is
provided on a non-GAAP basis only. The Company does not provide a
reconciliation of non-GAAP diluted EPS guidance to GAAP diluted EPS
(the most directly comparable GAAP measure) on a forward-looking
basis because it is unable to provide a meaningful or accurate
compilation of reconciling items and certain information is not
available.
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 and six months ended December 31,
2016 and 2017 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, non-cash interest expense related to convertible
debt, and their associated tax effects, and the impact from
discrete income tax items including charges resulting from the
implementation of the Tax Act. Management believes that these
non-GAAP financial measures provide (i) additional insight into the
ongoing operations of the Company, (ii) meaningful supplemental
information regarding the Company’s results (excluding amounts
management does not view as reflective of ongoing operating
results) for planning, forecasting and assessing the performance of
the business, (iii) a meaningful comparison of results of current
periods against results of past periods and (iv) comparable
financial results to those of peer companies. Non-GAAP financial
measures should not be assessed in isolation or as a substitute for
measures of financial performance prepared in accordance with
GAAP.
Reconciliations of GAAP 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 1:30 pm PT (4:30 pm ET) today to discuss its results
for the second quarter of fiscal 2018. To listen, please visit the
Investor Relations section of the OSI Systems website,
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 shortly after
the conclusion of the conference call until February 15, 2018. The
replay can be accessed either through the Company’s website,
www.osi-systems.com, or by telephonic replay by calling
1-855-859-2056 and entering the conference call replay
identification code ‘9091448’.
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 or 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 and
growth in fiscal 2018, as well as the Company’s expectations
regarding the effects of the Tax Act on the Company’s business. In
addition, 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;
unanticipated impacts of sequestration and other U.S. Government
budget control provisions; changes in domestic and foreign
government spending and budgetary, procurement and trade policies
adverse to the Company's businesses; global economic uncertainty;
impact of volatility in oil prices; unfavorable currency exchange
rate fluctuations; 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
fiscal year; enforcement actions in respect of any noncompliance
with laws and regulations including export control and
environmental regulations and the matters that are the subject of
some or all of the Company's ongoing investigations and compliance
reviews; contract and regulatory compliance matters, and actions,
if brought, resulting 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 any forward-looking statements, see the section entitled "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. All forward-looking statements
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 it is required to do so in
connection with requirements under federal securities laws.
OSI SYSTEMS, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(in thousands)
June 30, 2017
December 31, 2017
Assets
Cash and cash equivalents $ 169,650 $ 211,973 Accounts
receivable, net 206,526 208,454 Inventories 248,510 281,033 Other
current assets 28,314 31,051 Total current assets
653,000 732,511 Goodwill 242,129 285,880 Intangible assets 118,450
139,104 Other non-current assets 216,508 189,264
Total Assets $ 1,230,087 $ 1,346,759
Liabilities and
Stockholders' Equity Bank lines of credit $ 103,000 $
195,000 Current portion of long-term debt 2,396 2,279 Accounts
payable and accrued expenses 137,559 143,931 Other current
liabilities 103,179 129,970 Total current liabilities
346,134 471,180 Long-term debt 241,750 245,181 Deferred income
taxes 20,681 38,381 Other long-term liabilities 52,309
61,943 Total liabilities 660,874 816,685 Total stockholders’
equity 569,213 530,074 Total Liabilities and
Stockholders’ Equity $ 1,230,087 $ 1,346,759
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per share
data)
Three Months Ended
December 31,
Six Months Ended
December 31,
2016 2017
2016 2017 Revenues $
242,548 $ 277,528 $ 463,403 $ 534,661 Cost of goods sold
159,953 175,898 312,721
341,760 Gross profit 82,595 101,630 150,682 192,901
Operating expenses: Selling, general and administrative 51,544
60,098 95,097 115,745 Research and development 12,938 15,088 25,416
30,188 Impairment, restructuring and other charges 9,420
8,297 19,377 9,427
Total operating expenses 73,902 83,483
139,890 155,360 Income from operations
8,693 18,147 10,792 37,541 Interest expense and other, net
(1,981 ) (5,282 ) (3,139 ) (9,531 ) Income
before income taxes 6,712 12,865 7,653 28,010 Provision for income
taxes 1,879 59,816 2,143
64,804 Net income (loss) $ 4,833 $ (46,951 ) $
5,510 $ (36,794 ) Diluted earnings (loss) per share $
0.25 $ (2.47 ) $ 0.28 $ (1.95 ) Weighted average
shares outstanding – diluted 19,653 18,971
19,620 18,874
UNAUDITED SEGMENT INFORMATION
(in thousands)
Three Months Ended December
31,
Six Months Ended
December 31,
2016 2017
2016 2017 Revenues –
by Segment: Security division $ 139,504 $ 172,269 $ 263,213 $
334,514 Healthcare division 51,110 52,506 96,760 98,035
Optoelectronics and Manufacturing division (including intersegment
revenues) 60,601 63,886 117,556 122,812 Intersegment revenues
eliminations (8,667 ) (11,133 ) (14,126 )
(20,700 ) Total $ 242,548 $ 277,528 $ 463,403
$ 534,661
Operating income (loss) – by
Segment: Security division $ 9,130 $ 22,471 $ 18,480 $ 45,164
Healthcare division 801 603 (2,463 ) 1,450 Optoelectronics and
Manufacturing division 5,525 4,502 10,175 9,677 Corporate (6,802 )
(9,118 ) (15,815 ) (17,871 ) Eliminations 39
(311 ) 415 (879 ) Total $ 8,693 $
18,147 $ 10,792 $ 37,541
RECONCILIATION OF GAAP TO
NON-GAAP
NET INCOME (LOSS) AND EARNINGS (LOSS)
PER SHARE
(in thousands, except share and
earnings per share data)
Three Months Ended December 31, Six Months
Ended December 31, 2016 2017
2016 2017 Net income
EPS Net income (loss) EPS Net
income EPS Net income (loss)
EPS GAAP basis $ 4,833 $ 0.25 $ (46,951 ) $ (2.47 ) $ 5,510
$ 0.28 $ (36,794 ) $ (1.95 ) Impairment, restructuring and other
charges 9,420 0.48 8,297 0.44 19,377 0.99 9,427 0.50 Amortization
of acquired intangible assets 2,489 0.12 3,533 0.19 3,620 0.18
7,076 0.37 Non-cash interest -- -- 1,870 0.10 -- -- 3,674 0.19 Tax
benefit of above adjustments (3,334 ) (0.17 ) (3,838 ) (0.20 )
(6,440 ) (0.33 ) (5,680 ) (0.30 ) Discrete tax items -- -- 56,212
2.96 -- -- 56,919 3.02 Impact of diluted shares 1 --
-- -- (0.05 ) --
-- -- (0.07 ) Non-GAAP basis $
13,408 $ 0.68 $ 19,123 $ 0.97 $ 22,067
$ 1.12 $ 34,622 $ 1.76
1 For the three and six months ended December 31, 2017, the
weighted average diluted shares used to calculate EPS on a GAAP
basis exclude potential common shares (stock options and restricted
stock units) due to their antidilutive effect resulting from the
Company’s reported net loss. For the three and six months ended
December 31, 2017, the weighted average diluted shares used to
calculate EPS on a non-GAAP basis were approximately 19,655,000
shares and 19,628,000 shares, respectively.
RECONCILIATION OF GAAP TO
NON-GAAP
OPERATING INCOME (LOSS) AND OPERATING
MARGIN BY SEGMENT
(in thousands, except
percentages)
Three Months Ended December 31, 2016
Security Division Healthcare Division
Optoelectronics and
Manufacturing Division
Corporate / Elimination
Total
% of Sales
% of Sales
% of Sales
% of Sales
GAAP basis – operating income (loss) $ 9,130 6.5 % $ 801 1.6 % $
5,525 9.1 % $ (6,763 ) $ 8,693 3.6 % Impairment, restructuring and
other charges 7,745 5.6 % 893 1.7 % 223 0.4 % 559 9,420 3.9 %
Amortization of acquired intangible assets 1,989 1.4 %
139 0.3 % 361 0.6 % - 2,489 1.0
% Non-GAAP basis– operating income (loss) $ 18,864 13.5 % $ 1,833
3.6 % $ 6,109 10.1 % $ (6,204 ) $ 20,602 8.5 %
Three Months Ended December 31, 2017 Security
Division Healthcare Division
Optoelectronics and
Manufacturing Division
Corporate / Elimination
Total
% of Sales
% of Sales
% of Sales
% of Sales
GAAP basis – operating income (loss) $ 22,471 13.0 % $ 603 1.1 % $
4,502 7.0 % $ (9,429 ) $ 18,147 6.5 % Impairment, restructuring and
other charges 1,591 0.9 % 5,022 9.6 % 1,221 1.9 % 463 8,297 3.0 %
Amortization of acquired intangible assets 3,152 1.9 %
14 0.0 % 367 0.6 % - 3,533 1.3 %
Non-GAAP basis– operating income (loss) $ 27,214 15.8 % $ 5,639
10.7 % $ 6,090 9.5 % $ (8,966 ) $ 29,977 10.8 %
Six
Months Ended December 31, 2016 Security Division
Healthcare Division
Optoelectronics and
Manufacturing Division
Corporate / Elimination
Total % of
Sales % of
Sales % of
Sales % of
Sales GAAP basis – operating income (loss) $ 18,480
7.0 % $ (2,463 ) (2.5 %) $ 10,175 8.7 % $ (15,400 ) $ 10,792 2.3 %
Impairment, restructuring and other charges 14,135 5.4 % 1,235 1.2
% 288 0.2 % 3,719 19,377 4.2 % Amortization of acquired intangible
assets 2,589 1.0 % 304 0.3 % 727 0.6 %
- 3,620 0.8 % Non-GAAP basis– operating income
(loss) $ 35,204 13.4 % $ (924 ) (1.0 %) $ 11,190 9.5 % $ (11,681 )
$ 33,789 7.3 %
Six Months Ended December 31,
2017 Security Division Healthcare Division
Optoelectronics and
Manufacturing Division
Corporate / Elimination
Total % of Sales % of Sales
% of Sales % of Sales GAAP basis –
operating income (loss) $ 45,164 13.5 % $ 1,450 1.5 % $ 9,677 7.9 %
$ (18,750 ) $ 37,541 7.0 % Impairment, restructuring and other
charges 1,901 0.6 % 5,022 5.1 % 1,221 1.0 % 1,283 9,427 1.8 %
Amortization of acquired intangible assets 6,314 1.9 %
29 0.0 % 733 0.6 % -
7,076 1.3 % Non-GAAP basis– operating income (loss) $ 53,379 16.0 %
$ 6,501 6.6 % $ 11,631 9.5 % $ (17,467 ) $ 54,044 10.1 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180201006403/en/
OSI Systems, Inc.Ajay VashishatVice President, Business
Development(310) 349-2237avashishat@osi-systems.com
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