OSIS OSI Systems Inc

• Q3 Revenues of $290 Million
• Q3 Earnings Per Diluted Share
  • GAAP EPS of $2.41
  • Non-GAAP EPS of $1.43
• Q3 Book-to-Bill Ratio of 1.1
• Q3 Ending Backlog of $1.2 Billion (14% increase from June 30, 2021)
• Company Reiterates FY 2022 Guidance

OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ: OSIS) today announced financial results for the three and nine months ended March 31, 2022.

Deepak Chopra, OSI Systems’ Chairman and Chief Executive Officer, stated, “We are pleased with our overall performance in the third quarter, during which we continued to profitably grow our business in a difficult general economic environment that included heightened supply chain and logistics challenges. We believe that with the strength of our backlog and near-term pipeline of opportunities we are well positioned to finish the fiscal year with a strong fourth quarter.”

The Company reported revenues of $290.5 million for the third quarter of fiscal 2022, an increase of 2.4% over the $283.8 million reported for the third quarter of fiscal 2021. Net income for the third quarter of fiscal 2022 was $42.7 million, or $2.41 per diluted share, compared to net income of $18.8 million, or $1.03 per diluted share, for the third quarter of fiscal 2021. Non-GAAP net income for the third quarter of fiscal 2022 was $25.5 million, or $1.43 per diluted share, compared to non-GAAP net income for the fiscal 2021 third quarter of $25.3 million, or $1.38 per diluted share.

For the nine months ended March 31, 2022, revenues were $846.4 million compared to $814.7 million in the same period a year ago. Net income for the nine months ended March 31, 2022 was $81.6 million, or $4.52 per diluted share, compared with $48.2 million, or $2.63 per diluted share, for the same period a year ago. Non-GAAP net income for the nine months ended March 31, 2022 was $69.9 million, or $3.87 per diluted share, compared with non-GAAP net income of $69.3 million, or $3.79 per diluted share, for the comparable prior-year period.

For the three and nine months ended March 31, 2022, the Company's book-to-bill ratio was 1.1 and 1.2, respectively. As of March 31, 2022, the Company's backlog was over $1.2 billion, representing an increase of 14% from the Company’s backlog as of the end of the last fiscal year. The Company’s cash generated from operations was $38.4 million and capital expenditures were $2.9 million during the quarter ended March 31, 2022.

Mr. Chopra commented, “The Security division revenues increased in Q3 as compared to the prior year while operating income was impacted by higher supply chain and logistics costs, the mix of revenue, and the cost of certain promotional activities, which were not incurred in the prior year due to the pandemic. With our significant Security backlog, we are expecting solid growth in the fourth quarter.”

Mr. Chopra continued, “Our Optoelectronics and Manufacturing division again delivered solid financial results along with record bookings leading to a record backlog for the division. The division has benefitted from our vertically integrated manufacturing global footprint and is consistently viewed as a trusted partner by leading OEMs.”

Mr. Chopra concluded, “Our Healthcare division continued to perform well and delivered a strong operating margin. As anticipated, we reported a small reduction in revenues for the third quarter of fiscal 2022 in comparison to the same prior-year period, which had been bolstered during the COVID pandemic. During the quarter, we continued to focus on new product development principally in our patient monitoring portfolio to enhance our core offerings.”

During the third quarter of fiscal 2022, the Company executed a sale-leaseback transaction for its facilities in Hawthorne, California. The Company sold the property for $32 million and recognized a gain on sale of $27.4 million.

Alan Edrick, Executive Vice President and Chief Financial Officer, stated, “In addition to the solid operating results, we were pleased with the continued improvements to our capital structure as we generated significant proceeds from the sale of our Hawthorne facility and continued to repurchase shares.”

Mr. Edrick continued, “The sale-leaseback of our Hawthorne facility was completed at a very attractive sale price with favorable leaseback terms unlocking the value in this asset. Further, we were active in our stock repurchase program, acquiring 635,962 shares. We have retired approximately 6% of our outstanding shares during the first nine months of fiscal 2022 as part of our capital allocation strategy leaving us with the ability to repurchase approximately 1.4 million additional shares under our current buyback program. We also completed two small strategic acquisitions in our Security division which are expected to strengthen our direct presence in certain regions and broaden our technology portfolio.”

Fiscal Year 2022 Outlook

 

Guidance

 

 

Revenues

$1.160 billion - $1.195 billion

 

 

Non-GAAP Diluted Earnings Per Share

$5.75 - $6.02

 

 

The Company is reiterating its fiscal year 2022 revenues and non-GAAP diluted earnings per share guidance. Actual revenues and non-GAAP diluted earnings per share could vary from this guidance due to factors discussed under “Forward-Looking Statements” or other factors, including uncertainties as to the duration and future scope of the COVID-19 pandemic and supply chain and logistics challenges.

The Company’s fiscal 2022 diluted earnings per share guidance is provided on a non-GAAP basis only. The Company does not provide a reconciliation of guidance for non-GAAP 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 non-GAAP 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 non-GAAP 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 and nine months ended March 31, 2021 and 2022 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, and non-cash interest expense primarily related to convertible debt in fiscal 2021, 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, we believe that it is important for investors to understand that revenue generated from such intangibles is included within revenue in determining non-GAAP financial measures of the Company. Management believes that these non-GAAP financial measures 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 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 1:30pm PT (4:30pm ET) today to discuss its results for the third quarter of fiscal 2022. 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 beginning shortly after the conclusion of the conference call until May 12, 2022. The replay can either be accessed through the Company’s website, www.osi-systems.com, or by telephonic replay by calling 1-855-859-2056 and entering the conference call identification number 6362535 when prompted for the replay code.

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, growth, and operational performance in fiscal 2022 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; changes in domestic and foreign government spending and budgetary, procurement and trade policies adverse to the Company's businesses; global economic uncertainty; impact on the Company’s business related to or resulting from the COVID-19 pandemic such as 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; 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; 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 investigations and compliance reviews; 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. Many of the referenced risks could be amplified by the magnitude and duration of the COVID-19 pandemic. 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 it is 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 March 31,

 

Nine Months Ended March 31,

 

2021

 

2022

 

2021

 

2022

Revenues:

 

 

 

 

 

Products

$

217,124

 

$

221,857

 

$

608,238

$

634,446

 

Services

66,663

 

68,620

 

 

206,466

211,969

 

Total revenues

283,787

 

290,477

 

814,704

 

846,415

 

Cost of goods sold:

 

 

 

Products

144,958

 

150,311

 

409,692

 

432,277

 

Services

34,810

 

37,308

 

103,161

 

112,177

 

Total cost of goods sold

179,768

 

187,619

 

512,853

 

544,454

 

Gross profit

104,019

 

102,858

 

301,851

 

301,961

 

Operating expenses:

 

 

 

Selling, general and administrative

57,906

 

57,813

 

 

172,624

 

170,015

 

Research and development

13,932

 

15,150

 

39,798

 

44,944

 

Impairment, restructuring and other charges (benefit), net

(285

)

1,469

 

7,912

 

4,810

 

Total operating expenses

71,553

 

74,432

 

220,334

 

219,769

 

Income from operations

32,466

 

28,426

 

81,517

 

82,192

 

Interest and other expense, net

(4,167

)

(2,301

)

(12,589

)

(6,534

)

Other income, net

--

 

27,373

 

--

 

27,373

 

Income before income taxes

28,299

 

53,498

 

68,928

 

103,031

 

Provision for income taxes

(9,526

)

(10,763

)

(20,773

)

(21,447

)

Net income

$

18,773

 

$

42,735

 

$

48,155

$

81,584

 

 

 

 

 

Diluted earnings per share

$

1.03

 

$

2.41

 

$

2.63

 

$

4.52

 

Weighted average shares outstanding – diluted

18,298

 

17,709

 

18,278

 

18,036

 

 

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED SEGMENT INFORMATION

(in thousands)

 

 

Three Months Ended March 31,

 

Nine Months Ended March 31,

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

Revenues – by Segment:

 

 

 

 

 

 

 

Security division

$

151,409

 

 

$

158,644

 

 

$

431,420

 

 

$

454,079

 

Healthcare division

 

54,023

 

 

 

52,178

 

 

 

160,421

 

 

 

155,191

 

Optoelectronics and Manufacturing division, including intersegment revenues

 

90,278

 

 

 

92,122

 

 

 

257,713

 

 

 

275,917

 

Intersegment eliminations

 

(11,923

)

 

 

(12,467

)

 

 

(34,850

)

 

 

(38,772

)

Total

$

283,787

 

 

$

290,477

 

 

$

814,704

 

 

$

846,415

 

 

 

 

 

 

 

 

 

Operating income (loss) – by Segment:

 

 

 

 

 

 

 

Security division

$

23,969

 

 

$

20,559

 

 

$

52,651

 

 

$

60,323

 

Healthcare division

 

7,333

 

 

 

7,480

 

 

 

25,640

 

 

 

20,430

 

Optoelectronics and Manufacturing division

 

10,484

 

 

 

11,177

 

 

 

29,638

 

 

 

34,342

 

Corporate

 

(9,078

)

 

 

(10,729

)

 

 

(25,895

)

 

 

(32,855

)

Intersegment eliminations

 

(242

)

 

 

(61

)

 

 

(517

)

 

 

(48

)

Total

$

32,466

 

 

$

28,426

 

 

$

81,517

 

 

$

82,192

 

  OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

June 30, 2021

 

March 31, 2022

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

80,613

 

$

83,279

Accounts receivable, net

290,653

 

282,872

Inventories

294,208

 

344,643

Other current assets

43,930

 

47,742

Total current assets

709,404

 

758,536

Property and equipment, net

118,004

 

112,755

Goodwill

320,304

 

336,655

Intangible assets, net

127,608

 

139,781

Other non-current assets

109,047

 

111,364

Total Assets

$

1,384,367

 

$

1,459,091

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Bank lines of credit

$

--

 

$

73,000

Current portion of long-term debt

846

 

249,315

Accounts payable and accrued expenses

210,077

 

190,466

Other current liabilities

133,844

 

133,055

Total current liabilities

344,767

 

645,836

Long-term debt

276,421

 

48,708

Other long-term liabilities

123,359

 

146,053

Total liabilities

744,547

 

840,597

Total stockholders’ equity

639,820

 

618,494

Total Liabilities and Stockholders’ Equity

$

1,384,367

 

$

1,459,091

  OSI SYSTEMS, INC. AND SUBSIDIARIES

 

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND EARNINGS PER SHARE (in thousands, except earnings per share data)

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

2021

 

2022

 

 

2021

 

2022

 

Net income

 

EPS

 

Net income

 

EPS

 

 

Net income

 

EPS

 

Net income

 

EPS

GAAP basis

$

18,773

 

 

$

1.03

 

 

$

42,735

 

 

$

2.41

 

 

$

48,155

 

 

$

2.63

 

 

$

81,584

 

 

$

4.52

 

Impairment, restructuring and other charges (benefit), net

 

(285

)

 

 

(0.02

)

 

 

1,469

 

 

 

0.08

 

 

 

7,912

 

 

 

0.43

 

 

 

4,810

 

 

 

0.27

 

Amortization of acquired intangible assets

 

3,639

 

 

 

0.20

 

 

 

3,357

 

 

 

0.19

 

 

 

11,119

 

 

 

0.61

 

 

 

9,717

 

 

 

0.54

 

Non-cash interest expense

 

2,233

 

 

 

0.12

 

 

 

188

 

 

 

0.01

 

 

 

6,719

 

 

 

0.37

 

 

 

313

 

 

 

0.02

 

Gain on sale of property

 

--

 

 

 

--

 

 

 

(27,368

)

 

 

(1.55

)

 

 

--

 

 

 

--

 

 

 

(27,368

)

 

 

(1.52

)

Tax effect of above adjustments

 

(1,348

)

 

 

(0.07

)

 

 

5,330

 

 

 

0.30

 

 

 

(6,894

)

 

 

(0.38

)

 

 

2,854

 

 

 

0.15

 

Impact from discrete income tax items

 

2,248

 

 

 

0.12

 

 

 

(225

)

 

 

(0.01

)

 

 

2,319

 

 

 

0.13

 

 

 

(2,023

)

 

 

(0.11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP basis

$

25,260

 

 

$

1.38

 

 

$

25,486

 

 

$

1.43

 

 

$

69,330

 

 

$

3.79

 

 

$

69,887

 

 

$

3.87

 

  RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages)

Three Months Ended March 31, 2021

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and Manufacturing Division

 

Corporate / Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

 

$ 23,969

 

15.8%

 

$ 7,333

 

13.6%

 

$ 10,484

 

11.6%

 

$ (9,320)

 

$ 32,466

 

11.4%

Restructuring and other charges (benefit), net

 

401

 

0.3%

 

--

 

--

 

--

 

--

 

(686)

 

(285)

 

(0.1%)

Amortization of acquired intangible assets

 

2,664

 

1.8%

 

202

 

0.3%

 

773

 

0.9%

 

--

 

3,639

 

1.3%

Non-GAAP basis– operating income (loss)

 

$ 27,034

 

17.9%

 

$ 7,535

 

13.9%

 

$ 11,257

 

12.5%

 

$ (10,006)

 

$ 35,820

 

12.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 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)

 

$ 20,559

 

13.0%

 

$ 7,480

 

14.3%

 

$ 11,177

 

12.1%

 

$ (10,790)

 

$ 28,426

 

9.8%

Impairment, restructuring and other charges, net

 

633

 

0.4%

 

-

 

-

 

-

 

-

 

836

 

1,469

 

0.5%

Amortization of acquired intangible assets

 

2,448

 

1.5%

 

202

 

0.4%

 

707

 

0.8%

 

-

 

3,357

 

1.1%

Non-GAAP basis– operating income (loss)

 

$ 23,640

 

14.9%

 

$ 7,682

 

14.7%

 

$ 11,884

 

12.9%

 

$ (9,954)

 

$ 33,252

 

11.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended March 31, 2021

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and Manufacturing Division

 

Corporate / Elimination

 

Total

 

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

% of Sales

 

 

 

 

 

% of Sales

GAAP basis – operating income (loss)

 

$ 52,651

 

12.2%

 

$ 25,640

 

16.0%

 

$ 29,638

 

11.5%

 

$ (26,412)

 

$ 81,517

 

10.0%

Restructuring and other charges (benefit), net.

 

8,923

 

2.1%

 

27

 

--

 

146

 

0.1%

 

(1,184)

 

7,912

 

1.0%

Amortization of acquired intangible assets

 

8,209

 

1.9%

 

605

 

0.4%

 

2,305

 

0.9%

 

--

 

11,119

 

1.3%

Non-GAAP basis– operating income (loss)

 

$ 69,783

 

16.2%

 

$ 26,272

 

16.4%

 

$ 32,089

 

12.5%

 

$ (27,596)

 

$ 100,548

 

12.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended March 31, 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)

 

$ 60,323

 

13.3%

 

$ 20,430

 

13.2%

 

$ 34,342

 

12.4%

 

$ (32,903)

 

$ 82,192

 

9.7%

Impairment, restructuring and other charges, net

 

1,261

 

0.3%

 

-

 

-

 

-

 

-

 

3,549

 

4,810

 

0.6%

Amortization of acquired intangible assets

 

6,985

 

1.5%

 

605

 

0.4%

 

2,127

 

0.8%

 

-

 

9,717

 

1.1%

Non-GAAP basis– operating income (loss)

 

$ 68,569

 

15.1%

 

$ 21,035

 

13.6%

 

$ 36,469

 

13.2%

 

$ (29,354)

 

$ 96,719

 

11.4%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220428005957/en/

OSI Systems, Inc. Ajay Vashishat Vice President, Business Development Tel: (310) 349-2237 avashishat@osi-systems.com