Core Viewpoint - OSI Systems, Inc. (Symbol: OSIS) shares have surpassed the average analyst 12-month target price of $194.00, currently trading at $199.87 per share, prompting analysts to consider either downgrading on valuation or raising their target prices based on the company's fundamental developments [1][3]. Analyst Target Summary - The average target price for OSI Systems, Inc. is derived from five different analysts, with the lowest target at $178.00 and the highest at $205.00, resulting in a standard deviation of $13.765 [2]. - The average target price serves as a collective assessment from multiple analysts, indicating a potential need for investors to evaluate whether the stock's current price is a precursor to further gains or if it has become overvalued [3]. Analyst Ratings Breakdown - The current analyst ratings for OSI Systems, Inc. show a consistent strong buy rating of 5 across the last four months, with no buy, hold, sell, or strong sell ratings reported [4]. - The average rating remains at 1.0, where 1 represents a strong buy and 5 represents a strong sell, indicating a strong consensus among analysts regarding the stock's potential [4].

PART I [Business Overview](index=3&type=section&id=Item%201.%20Business) OSI Systems, Inc. is a vertically integrated designer and manufacturer of specialized electronic systems and components for diverse markets including homeland security, healthcare, defense, and aerospace [General](index=3&type=section&id=General) - OSI Systems, Inc. is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications[8](index=8&type=chunk) - The company sells products and provides related services in diverse markets including homeland security, healthcare, defense, and aerospace[8](index=8&type=chunk) - The company operates through three divisions: Security, Optoelectronics and Manufacturing, and Healthcare[9](index=9&type=chunk) [Security Division](index=5&type=section&id=Security%20Division) - The security and inspection products market is influenced by terrorist incidents, drug and human trafficking, border security, gun violence, and new government mandates and appropriations[11](index=11&type=chunk) - Security and inspection products are used globally in airports, border crossings, seaports, cargo operations, government and military facilities, sports and concert venues, and correctional facilities[12](index=12&type=chunk) - Initiatives from the U.S. Department of Homeland Security and international regulators, such as C-TPAT, TSA air cargo screening mandates, CBP Container Security Initiative, and EU CCEI, drive demand for security and inspection products[12](index=12&type=chunk)[13](index=13&type=chunk) [Optoelectronics and Manufacturing Division](index=5&type=section&id=Optoelectronics%20and%20Manufacturing%20Division) - Technological advancements have expanded the optoelectronics market, with OEMs increasingly outsourcing the design and manufacturing of optoelectronic devices and value-added subsystems to specialized manufacturers[14](index=14&type=chunk) - Optoelectronic devices are widely used in aerospace and defense, automotive, medical imaging and diagnostics, life sciences and biotechnology, pharmaceuticals, nanotechnology, telecommunications, construction, and homeland security markets[15](index=15&type=chunk) - The division offers full turnkey solutions, printed circuit board assembly, cable harness assembly, LCD, and box build manufacturing services, including product design and development, supply chain management, and production manufacturing[15](index=15&type=chunk) [Healthcare Division](index=5&type=section&id=Healthcare%20Division) - The healthcare industry continues to grow globally, driven by infrastructure development in developing countries and aging populations in developed nations[16](index=16&type=chunk) - The industry faces inflationary pressures, labor shortages, and unfavorable payer mix shifts, increasing demand for remote monitoring and flexibly deployable products[17](index=17&type=chunk) - The company designs, manufactures, and sells patient monitoring, cardiology, remote monitoring, and connected care solutions for hospitals and clinics[18](index=18&type=chunk) [Growth Strategy](index=7&type=section&id=Growth%20Strategy) - Leveraging global presence and vertical integration to reduce manufacturing costs, shorten delivery times, and enhance sales and service capabilities[19](index=19&type=chunk)[20](index=20&type=chunk) - Capitalizing on security and inspection system market opportunities, including cargo inspection systems, turnkey security screening services, and SaaS platforms integrating security data with government databases[21](index=21&type=chunk)[22](index=22&type=chunk) - Continuously developing new products, enhancing existing ones through internal R&D and selective acquisitions, and strategically entering new markets and acquiring new technology companies[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) [Products and Technology](index=8&type=section&id=Products%20and%20Technology) - The Security division (Rapiscan) designs, manufactures, and sells security and inspection systems for screening baggage, parcels, cargo, people, and vehicles, detecting contraband such as weapons, explosives, narcotics, and radioactive materials[28](index=28&type=chunk) - Security systems utilize dual-energy X-ray imaging technology, combined with software-enhanced imaging methods and algorithms, to improve the probability of detecting threat items like explosives and weapons[30](index=30&type=chunk) - The Optoelectronics and Manufacturing division (OSI Optoelectronics, OSI LaserDiode, Advanced Photonix) designs, manufactures, and sells active and passive optoelectronic devices, and provides electronic manufacturing services[36](index=36&type=chunk)[38](index=38&type=chunk) - The Healthcare division (Spacelabs Healthcare) designs, manufactures, and sells patient monitoring, cardiology, remote monitoring, and connected care solutions, including bedside monitors, telemetry systems, SafeNSound™ workflow solutions, and the Rothman Index predictive analytics tool[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [Markets, Customers and Applications](index=13&type=section&id=Markets%2C%20Customers%20and%20Applications) - Security and inspection product customers include the U.S. Departments of Homeland Security, Defense, State, Commerce, and Justice, as well as numerous international government agencies[46](index=46&type=chunk) - Optoelectronic devices and electronic manufacturing services customers span defense, aerospace, medical, life sciences, telecommunications, homeland security, automotive, and industrial markets[47](index=47&type=chunk) - Patient monitoring, cardiology, remote monitoring, and connected care solutions are sold to hospitals, medical clinics, and outpatient surgery centers worldwide[48](index=48&type=chunk) [Marketing, Sales and Service](index=13&type=section&id=Marketing%2C%20Sales%20and%20Service) - The company sells security and inspection products, healthcare solutions, and optoelectronic devices and manufacturing services through a global direct sales force and an extensive network of independent distributors[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) - Maintenance services are a significant part of the business, offering post-warranty maintenance and providing healthcare customers with on-site repairs, telephone support, and spare parts exchange programs[53](index=53&type=chunk) [Research and Development](index=15&type=section&id=Research%20and%20Development) - Security and inspection systems and software are primarily designed in the U.S., UK, Australia, Germany, Singapore, and India[54](index=54&type=chunk) - Optoelectronic devices and electronic manufacturing services are primarily designed and manufactured at facilities in the U.S., UK, Canada, India, Indonesia, Malaysia, and Mexico[55](index=55&type=chunk) - Healthcare products are primarily designed in the U.S., UK, and India, with active participation in research projects to improve medical systems and expand product lines[56](index=56&type=chunk)[57](index=57&type=chunk) [Manufacturing and Materials](index=15&type=section&id=Manufacturing%20and%20Materials) - Security and inspection systems are manufactured in the U.S., Germany, Malaysia, and the UK; patient monitoring systems in Washington State; and optoelectronic devices and electronic manufacturing services in the U.S., Canada, Mexico, India, Indonesia, Malaysia, and the UK[58](index=58&type=chunk) - Most high-volume, labor-intensive manufacturing activities occur at facilities in Mexico, India, Indonesia, and Malaysia[58](index=58&type=chunk) - Key raw materials and sub-components include X-ray generators, detectors, data acquisition systems, semiconductor wafers, and electronic components, with some critical components manufactured in-house and others sourced from single suppliers[61](index=61&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) [Information Technology and Cybersecurity Risk Management](index=17&type=section&id=Information%20Technology%20and%20Cybersecurity%20Risk%20Management) - The company extensively relies on digital technologies for operations and faces cyber threats such as intrusions, ransomware, and denial-of-service attacks[66](index=66&type=chunk) - An ISO/IEC 27001 certified Information Security Management System (ISMS) has been implemented, focusing on data confidentiality, integrity, and availability[66](index=66&type=chunk) - Governance, Risk, and Compliance (GRC) resources proactively monitor IT controls, conduct third-party risk assessments, ensure business function availability, develop incident response plans, and maintain cyber incident management and reporting procedures[66](index=66&type=chunk) [Trademarks and Trade Names and Patents](index=17&type=section&id=Trademarks%20and%20Trade%20Names%20and%20Patents) - The company holds numerous U.S. and foreign trademarks, service marks, and trade names, as well as U.S. and foreign patents related to security inspection products, healthcare products, and optoelectronic devices[67](index=67&type=chunk)[68](index=68&type=chunk) - While patents are valuable, the loss of Rapiscan® or Spacelabs® trademarks could materially adversely affect financial performance and operations[69](index=69&type=chunk) [Government Regulation of Medical Devices](index=19&type=section&id=Government%20Regulation%20of%20Medical%20Devices) - The company's medical device products are extensively regulated by the U.S. FDA and other domestic and international agencies, requiring stringent pre-market approvals (e.g., 510(k)) and post-market compliance (e.g., QSR, MDR)[70](index=70&type=chunk)[71](index=71&type=chunk)[74](index=74&type=chunk) - Healthcare cost containment measures and industry consolidation increase product pricing pressure and may impact product demand[75](index=75&type=chunk)[76](index=76&type=chunk) - The company must also comply with other healthcare laws such as HIPAA, anti-kickback statutes, false claims acts, and the Sunshine Act, with violations potentially leading to significant fines and sanctions[77](index=77&type=chunk)[78](index=78&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) - The international regulatory landscape is increasingly complex, including EU CE marking, ISO 13485 standards, MDSAP, and the more stringent EU Medical Device Regulation (EU MDR)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk) [Environmental Regulations](index=26&type=section&id=Environmental%20Regulations) - The company is subject to various environmental laws, directives, and regulations concerning the use, storage, handling, and disposal of hazardous materials and waste[91](index=91&type=chunk) - The company conducts environmental audits and surveys at its manufacturing facilities in North America, Asia Pacific, and Europe to ensure compliance with all environmental regulations and obtain necessary environmental permits[92](index=92&type=chunk) [Competition](index=26&type=section&id=Competition) - The markets in which the company operates are highly competitive, characterized by evolving customer needs and rapid technological changes[93](index=93&type=chunk) - Competition is primarily based on product performance, quality, reliability, government regulatory approvals, total cost-effectiveness of systems, customer relationships, technical capabilities, price, and the breadth of sales and service networks[94](index=94&type=chunk) - The company differentiates itself by offering a broad range of security inspection solutions, consistent user interfaces and connectivity for medical monitoring products, and specialized engineering expertise in optoelectronics[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) [Backlog](index=27&type=section&id=Backlog) Consolidated Backlog | Metric | June 30, 2024 | June 30, 2025 | | :--- | :--- | :--- | | Consolidated Backlog | **$1.7 billion** | **$1.8 billion** | - Backlog includes quantifiable purchase orders or contracts expected to be recognized as revenue within the next five years[98](index=98&type=chunk) - Shipments may be delayed due to supply chain disruptions, specific customer requirements, on-site construction, design changes, export license and letter of credit acquisition, among other reasons[99](index=99&type=chunk)[100](index=100&type=chunk) [Human Capital](index=29&type=section&id=Human%20Capital) - The company is committed to attracting, developing, and retaining talent, supporting employees through competitive compensation structures, employee stock purchase plans, retirement benefits, and health and well-being programs[102](index=102&type=chunk) - The company values a diverse workforce, is committed to maintaining a diverse, equitable, and inclusive culture, and pledges pay equity and protection of vulnerable groups' rights[103](index=103&type=chunk) Employee Composition (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Total Employees | **7,337** | | Global Female Employee Ratio | **43.7%** | | U.S. Ethnically Diverse Employee Ratio | **48.5%** | [Available Information](index=29&type=section&id=Available%20Information) - The company files periodic reports, proxy statements, and other information as required by the Securities Exchange Act, available free of charge on the SEC website and the company's website (www.osi-systems.com)[105](index=105&type=chunk)[106](index=106&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) The company faces multiple risks including product liability, government contract termination, acquisition integration, currency fluctuations, geopolitical conflicts, intense competition, healthcare cost pressures, technological obsolescence, supply chain disruptions, IT failures, cybersecurity threats, complex regulatory compliance, and financial impacts from inflation and rising interest rates - Failure of security and inspection system operators or algorithms to detect contraband could lead to product and professional liability claims[109](index=109&type=chunk)[110](index=110&type=chunk) - Government agency contracts may be terminated for convenience, and acquisition and alliance activities pose risks of integration difficulties, potential liabilities, and management distraction[112](index=112&type=chunk)[113](index=113&type=chunk) - Unfavorable currency exchange rate fluctuations, declining crude oil prices, disruptions in the U.S. budget process, and intense competition across divisions could negatively impact financial performance[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Healthcare cost containment pressures, industry consolidation, and technological advancements may lead to decreased product sales and pricing pressure[120](index=120&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Geopolitical events, such as the Russia-Ukraine conflict and Middle East conflicts, may cause supply chain disruptions, increased cyberattacks, and economic uncertainty[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - As a U.S. government contractor, the company must comply with strict procurement rules and may face contract termination, litigation, and administrative penalties[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Long and unpredictable product sales cycles, along with rising raw material and sub-component prices and supply disruptions, could impact profitability[134](index=134&type=chunk)[136](index=136&type=chunk) - Reliance on third-party suppliers, natural disasters, product recalls, and IT system failures and cybersecurity breaches could lead to operational disruptions and financial losses[137](index=137&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Complex international legal and regulatory compliance risks, including anti-bribery, data privacy, and medical device regulation, along with financial pressures from inflation and rising interest rates[168](index=168&type=chunk)[170](index=170&type=chunk)[172](index=172&type=chunk)[182](index=182&type=chunk) [Unresolved Staff Comments](index=57&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments in this report - There are no unresolved staff comments in this report[186](index=186&type=chunk) [Cybersecurity](index=57&type=section&id=Item%201C.%20Cybersecurity) The company integrates cybersecurity risk management into its enterprise risk management framework, adhering to NIST Cybersecurity Framework principles and holding ISO/IEC 27001 certification. Its risk management and strategy encompass preventative controls, 24/7 monitoring, vulnerability management, incident response plans, third-party risk management, and employee training. To date, no cybersecurity incidents have materially impacted business strategy, operating results, or financial condition [Risk Management and Strategy](index=57&type=section&id=Risk%20Management%20and%20Strategy) - The company integrates cybersecurity risk management into its enterprise risk management framework, overseen by the Information Security Officer (ISO) and adhering to NIST Cybersecurity Framework principles[187](index=187&type=chunk) - ISO/IEC 27001 certification has been obtained, and independent third-party auditors and security firms are engaged annually to test and assess cybersecurity controls[187](index=187&type=chunk) - Key elements include preventative controls and monitoring, vulnerability management and testing, incident response plans, third-party risk management, and employee training[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - To date, no cybersecurity threats, including incidents, have materially impacted the company's business strategy, operating results, or financial condition[190](index=190&type=chunk) [Governance and Oversight](index=59&type=section&id=Governance%20and%20Oversight) - The Board of Directors has delegated primary cybersecurity oversight responsibility to the Risk Management Committee (RMC)[191](index=191&type=chunk) - The Chief Information Officer (CIO) and Information Security Officer (ISO) report to the RMC at least quarterly on security posture and threat intelligence, and to the full Board when necessary[191](index=191&type=chunk) - The company maintains an interdisciplinary Cybersecurity Committee to coordinate cybersecurity risk management and incident response across the organization[192](index=192&type=chunk) - The leadership team, including the CIO and ISO, possesses deep expertise in technology and security, providing robust oversight for cybersecurity strategy[193](index=193&type=chunk) [Properties](index=60&type=section&id=Item%202.%20Properties) As of June 30, 2025, the company owns primary facilities in Massachusetts, Washington, Texas, Indonesia, and the UK, and leases facilities in Malaysia, California, Massachusetts, and Mexico. The company believes its current facilities are adequate for operations and expects to renew expiring leases on existing terms - As of June 30, 2025, the company owns primary facilities in Massachusetts, Washington, Texas, Indonesia, and the UK[194](index=194&type=chunk) - The company leases primary facilities in Malaysia, California, Massachusetts, and Mexico[194](index=194&type=chunk) - The company believes its current facilities are adequate for current operations and expects to renew expiring leases on existing terms or find suitable alternative space[195](index=195&type=chunk) [Legal Proceedings](index=60&type=section&id=Item%203.%20Legal%20Proceedings) The company faces various legal proceedings and claims, including a Department of Justice subpoena related to a former employee's alleged corrupt activities in Mexico. Despite potential adverse outcomes, management believes the ultimate disposition of these matters will not materially adversely affect the company's business, financial condition, operating results, or cash flows - The company is subject to various legal actions, proceedings, and claims that arise in the ordinary course of business[196](index=196&type=chunk) - The company received a subpoena from the U.S. Department of Justice (DoJ) concerning alleged corrupt and other activities by a former employee in Mexico, has provided documents, and plans to continue cooperating[477](index=477&type=chunk) - Management believes that, despite the possibility of adverse outcomes, the ultimate disposition of these matters is not likely to have a material adverse effect on the company's business, financial condition, operating results, or cash flows[478](index=478&type=chunk) [Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - This item is not applicable[197](index=197&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the Nasdaq Global Select Market under 'OSIS', with approximately 89 registered shareholders as of August 18, 2025. No dividends have been paid since the 1997 IPO, nor are any planned for the foreseeable future. While no unregistered equity securities were sold in fiscal 2025, **$350 million** in **2.25%** convertible senior notes were issued in July 2024. The company repurchased **531,314 shares** in Q1 FY2025, with **1,190,556 shares** remaining for repurchase as of June 30, 2025, and its stock performance has outperformed the Nasdaq Composite and peer group - The company's common stock trades on the Nasdaq Global Select Market under the ticker symbol **“OSIS”**[200](index=200&type=chunk) Shareholder Information (as of August 18, 2025) | Metric | Value | | :--- | :--- | | Number of Registered Shareholders | **Approximately 89** | - The company has not paid any dividends since its initial public offering in 1997 and does not intend to pay dividends in the foreseeable future[201](index=201&type=chunk) - No unregistered common stock was sold during fiscal year 2025[202](index=202&type=chunk) 2029 Convertible Senior Notes Issuance (July 2024) | Metric | Value | | :--- | :--- | | Aggregate Principal Amount | **$350 million** | | Interest Rate | **2.25%** | | Maturity Date | August 2029 | | Maximum Number of Common Shares Convertible | **2,324,490 shares** | Issuer Purchases of Equity Securities (Fiscal Year 2025) | Metric | Q1 Fiscal Year 2025 | As of June 30, 2025 | | :--- | :--- | :--- | | Number of Common Shares Repurchased | **531,314 shares** | N/A | | Remaining Shares Available for Repurchase Under Current Plan | N/A | **1,190,556 shares** | Securities Authorized for Issuance Under Equity Compensation Plans (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Number of Securities to be Issued Upon Exercise of Options, Warrants, and Rights | **60,253** | | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights | **$121.41** | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | **1,984,358** | | Note | Restricted stock units or other full value awards counted at a ratio of 1:1.87 | Cumulative Total Shareholder Return Performance (Indexed to $100 on June 30, 2020) | Year | OSI Systems, Inc. | Nasdaq Composite Index | Peer Group | | :--- | :---------------- | :----------------- | :----- | | 2020 | 100.00 | 100.00 | 100.00 | | 2021 | 136.17 | 145.23 | 112.85 | | 2022 | 114.47 | 111.21 | 99.56 | | 2023 | 157.86 | 140.28 | 116.39 | | 2024 | 184.24 | 181.81 | 121.83 | | 2025 | 301.26 | 210.31 | 159.41 | [RESERVED](index=64&type=section&id=Item%206.%20%5BRESERVED%5D) This item is reserved with no specific information - This item is reserved with no specific information[214](index=214&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal year 2025, consolidated net revenue grew by **11.3%** to **$1.7132 billion**, and operating income increased by **15%** to **$217.5 million**. Security division revenue rose by **14.7%**, Optoelectronics and Manufacturing by **7.5%**, while Healthcare declined by **1.8%**. Gross profit increased by **$56.7 million**, with gross margin maintained at **34.3%**. Total operating expenses grew by **8.3%**, with selling, general, and administrative expenses decreasing as a percentage of net revenue. R&D expenses increased by **$8.1 million**. Net interest and other expenses rose to **$31.4 million**. Income tax expense was **$36.5 million**, with an effective tax rate of **19.6%**. The company maintains ample liquidity with **$106.4 million** in cash and cash equivalents, revised and extended its credit facility in July 2025, and implemented a stock repurchase program - OSI Systems, Inc. is a vertically integrated designer and manufacturer of specialized electronic systems and components, serving homeland security, healthcare, defense, and aerospace markets[215](index=215&type=chunk) Fiscal Year 2025 Revenue Contribution by Segment | Segment | Percentage of Total Consolidated Revenue FY2025 | | :--- | :--- | | Security | **70%** | | Optoelectronics and Manufacturing | **20%** | | Healthcare | **10%** | Consolidated Performance (FY2025 vs. FY2024) | Metric | FY2024 (Millions USD) | FY2025 (Millions USD) | Change Rate | | :--- | :--- | :--- | :--- | | Net Revenue | **1,538.8** | **1,713.2** | **+11.3%** | | Operating Income | **189.1** | **217.5** | **+15.0%** | - The **$174.4 million** increase in net revenue and **$56.7 million** increase in gross profit primarily drove the operating income growth in fiscal year 2025, partially offset by a **$28.3 million** increase in operating expenses[220](index=220&type=chunk) - Two business acquisitions were completed in fiscal year 2025, and two in fiscal year 2024, none of which were material[221](index=221&type=chunk) - The company faces uncertainties from global macroeconomic factors (supply chain, inflation, rising interest rates, labor shortages) and geopolitical conflicts (U.S.-China trade tensions, Russia-Ukraine conflict, Israel-Hamas conflict)[223](index=223&type=chunk)[226](index=226&type=chunk) - A weaker U.S. dollar positively impacted reported sales by approximately **0.4%** in fiscal year 2025[227](index=227&type=chunk) Revenue Recognition for Significant International Security Contracts | Fiscal Year | Revenue Recognized (Millions USD) | | :--- | :--- | | 2023 | **17** | | 2024 | **404** | | 2025 | **231** | - Key accounting policies and estimates include revenue recognition, inventory valuation, income taxes, business combinations, and legal and other contingencies[229](index=229&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) Net Revenue by Segment (FY2023-FY2025) | Segment | FY2023 (Millions USD) | FY2024 (Millions USD) | FY2025 (Millions USD) | 2023-2024 Change Rate | 2024-2025 Change Rate | | :------------------------ | :---------------- | :---------------- | :---------------- | :----------------- | :----------------- | | Security | **760.3** | **1,043.1** | **1,196.2** | **37.2%** | **14.7%** | | Optoelectronics and Manufacturing | **327.6** | **324.3** | **348.6** | **(1.0)%** | **7.5%** | | Healthcare | **190.5** | **171.4** | **168.4** | **(10.0)%** | **(1.8)%** | | **Total Net Revenue** | **1,278.4** | **1,538.8** | **1,713.2** | **20.4%** | **11.3%** | - Security division revenue growth was primarily driven by increased sales of cargo and vehicle inspection systems, trace detection systems, and checkpoint security, along with higher service revenue from an expanded installed product base[238](index=238&type=chunk) - Optoelectronics and Manufacturing division revenue growth was primarily due to a **$23.5 million** increase in contract manufacturing business[239](index=239&type=chunk) - Healthcare division revenue decline was primarily due to a **$4.8 million** decrease in cardiology sales and a **$1.8 million** decrease in patient monitoring sales, partially offset by increased service revenue and consumables and accessories revenue[240](index=240&type=chunk) Gross Profit (FY2023-FY2025) | Metric | FY2023 (Millions USD) | Percentage of Net Revenue | FY2024 (Millions USD) | Percentage of Net Revenue | FY2025 (Millions USD) | Percentage of Net Revenue | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gross Profit | **430.5** | **33.7%** | **530.5** | **34.5%** | **587.2** | **34.3%** | - Gross profit increased by **$56.7 million** in fiscal year 2025, with gross margin remaining largely consistent with the prior year[241](index=241&type=chunk) Operating Expenses (FY2023-FY2025) | Expense Category | FY2023 (Millions USD) | Percentage of Net Revenue | FY2024 (Millions USD) | Percentage of Net Revenue | FY2025 (Millions USD) | Percentage of Net Revenue | 2024-2025 Change Rate | | :-------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | :----------------- | | Selling, General and Administrative Expenses | **228.3** | **17.9%** | **269.7** | **17.5%** | **290.9** | **17.0%** | **7.9%** | | Research and Development Expenses | **59.4** | **4.7%** | **65.3** | **4.3%** | **73.4** | **4.3%** | **12.4%** | | Restructuring and Other Charges, Net | **7.6** | **0.5%** | **6.4** | **0.4%** | **5.3** | **0.3%** | **(17.2)%** | | **Total Operating Expenses** | **295.3** | **23.1%** | **341.4** | **22.2%** | **369.6** | **21.6%** | **8.3%** | - Selling, general, and administrative expenses increased by **$21.2 million** in fiscal year 2025, primarily due to compensation expenses, professional service fees, information technology costs, and unfavorable foreign currency impacts, but decreased as a percentage of net revenue from **17.5%** to **17.0%**[244](index=244&type=chunk) - Research and development expenses increased by **$8.1 million** in fiscal year 2025, primarily to support new product development initiatives, especially within the Security division[246](index=246&type=chunk) - Restructuring and other charges, net, totaled **$5.3 million** in fiscal year 2025, including facility closure costs, employee severance, acquisition-related costs, and legal fees[249](index=249&type=chunk) Interest and Other Expenses, Net (FY2023-FY2025) | Metric | FY2023 (Millions USD) | FY2024 (Millions USD) | FY2025 (Millions USD) | | :--- | :--- | :--- | :--- | | Interest and Other Expenses, Net | **20.0** | **27.8** | **31.4** | - The increase in net interest and other expenses in fiscal year 2025 was primarily due to higher average borrowing levels supporting revenue growth, business acquisition activities, and stock repurchases, partially offset by lower average borrowing rates from the 2029 Notes and interest rate swaps[250](index=250&type=chunk) Income Tax Expense and Effective Tax Rate (FY2023-FY2025) | Metric | FY2023 (Millions USD) | FY2024 (Millions USD) | FY2025 (Millions USD) | | :--- | :--- | :--- | :--- | | Income Tax Expense | **23.5** | **33.1** | **36.5** | | Effective Tax Rate | **20.4%** | **20.5%** | **19.6%** | - The effective tax rate decreased to **19.6%** in fiscal year 2025, primarily benefiting from **$6.7 million** in net discrete tax benefits, including equity compensation, foreign tax dispute resolution, and changes in uncertain tax positions[252](index=252&type=chunk) Cash and Cash Equivalents (as of June 30) | Metric | FY2024 (Millions USD) | FY2025 (Millions USD) | | :--- | :--- | :--- | | Cash and Cash Equivalents | **95.4** | **106.4** | Cash Flow from Operating Activities (FY2024-FY2025) | Fiscal Year | Cash Flow (Millions USD) | | :--- | :--- | | 2024 | **(87.5)** | | 2025 | **97.6** | - The positive change in cash flow from operating activities was primarily attributable to improved accounts receivable collections and enhanced inventory utilization driven by Security division revenue growth[256](index=256&type=chunk) Cash Flow from Investing Activities (FY2024-FY2025) | Fiscal Year | Cash Flow (Millions USD) | | :--- | :--- | | 2024 | **(37.6)** | | 2025 | **(117.9)** | - Investing activities in fiscal year 2025 primarily included **$76.7 million** for business acquisitions and **$23.8 million** in capital expenditures[257](index=257&type=chunk) Cash Flow from Financing Activities (FY2024-FY2025) | Fiscal Year | Cash Flow (Millions USD) | | :--- | :--- | | 2024 | **144.3** | | 2025 | **30.8** | - Financing activities in fiscal year 2025 included proceeds from the issuance of **$350 million** in senior convertible notes, partially offset by **$214.2 million** in net repayments on bank credit facilities and **$80.4 million** in stock repurchases[258](index=258&type=chunk) Key Cash Requirements (as of June 30, 2025) | Metric | Amount (Millions USD) | | :--- | :--- | | Total Borrowings | **649.6** | | Lease Payment Obligations | **32.7** | - The credit facility was amended and extended in July 2025, increasing the limit to **$725 million** and maturing in July 2030[255](index=255&type=chunk) Cash Held by Foreign Subsidiaries (as of June 30, 2025) | Metric | Amount (Millions USD) | Percentage of Total Cash | | :--- | :--- | :--- | | Cash and Cash Equivalents | **106.4** | N/A | | Percentage Held by Foreign Subsidiaries | N/A | **Approximately 78%** | - Cash held by foreign subsidiaries is primarily located in India, the UK, Canada, Singapore, and Malaysia, intended for permanent reinvestment, and not expected to fund U.S. operations[262](index=262&type=chunk) - The Board authorized the repurchase of up to **2 million** shares of common stock in September 2022. **531,314 shares** were repurchased in fiscal year 2025, with **1,190,556 shares** remaining available for repurchase as of June 30, 2025[264](index=264&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces inherent market risks from financial instruments, including interest rate risk on borrowings and foreign currency fluctuations. Derivative financial instruments like forward contracts and interest rate swaps are used to manage these risks, not for speculation. International markets offer growth opportunities but also present risks from economic downturns, trade policy changes, and political instability. In fiscal year 2025, a weaker U.S. dollar positively impacted foreign currency sales by **0.4%**, but net foreign currency transaction losses totaled **$12.7 million**. Inflation and rising interest rates may increase operating and borrowing costs and affect customer purchasing power - The company faces inherent market risks from financial instruments, including interest rate risk on borrowings and foreign currency fluctuation risk[266](index=266&type=chunk)[267](index=267&type=chunk) - The company uses derivative financial instruments, such as foreign currency forward contracts and interest rate swap agreements, to manage or reduce market risks, not for speculative purposes[266](index=266&type=chunk)[352](index=352&type=chunk) - International markets offer significant growth opportunities but also expose the company to risks from global economic downturns, changes in trade policies, civil unrest or military conflicts, and other political instabilities[268](index=268&type=chunk) - A weaker U.S. dollar positively impacted reported sales by approximately **0.4%** in fiscal year 2025[227](index=227&type=chunk)[269](index=269&type=chunk) Net Foreign Currency Transaction Gains (Losses) (FY2023-FY2025) | Fiscal Year | Net Gain (Loss) (Millions USD) | | :--- | :--- | | 2023 | **2.0** | | 2024 | **(5.1)** | | 2025 | **(12.7)** | - A **10%** appreciation/depreciation of the U.S. dollar relative to local currencies would result in an approximate **$11.5 million** net increase/decrease in operating income for fiscal year 2025[269](index=269&type=chunk) - High inflation and rising interest rates may increase material, manufacturing, and labor costs, thereby pressuring profits and margins, and potentially limiting customer purchasing power[270](index=270&type=chunk) Long-Term Debt Exposure (as of June 30, 2025) | Debt Type | Annual Interest Rate | Total Amount (Thousands USD) | Fair Value (Thousands USD) | | :--- | :--- | :--- | :--- | | Term Loan | **5.68%** | **128,125** | **128,125** | | Convertible Notes | **2.25%** | **350,000** | **472,770** | | Finance Lease Obligations | **6.1%** | **1,278** | **1,278** | - The credit facility was amended and extended in July 2025, with the new term loan maturing in July 2030[271](index=271&type=chunk) [Financial Statements and Supplementary Data](index=80&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item incorporates by reference the report of independent registered public accounting firm, consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of stockholders' equity, consolidated statements of cash flows, notes to consolidated financial statements, and unaudited quarterly financial information - This item incorporates by reference the report of independent registered public accounting firm, consolidated financial statements (including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows), notes to consolidated financial statements, and unaudited quarterly financial information[272](index=272&type=chunk)[295](index=295&type=chunk)[297](index=297&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=80&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There are no changes in or disagreements with accountants on accounting and financial disclosure for this item - There are no changes in or disagreements with accountants on accounting and financial disclosure for this item[273](index=273&type=chunk) [Controls and Procedures](index=80&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of June 30, 2025, management, including the CEO and CFO, assessed and concluded that the company's disclosure controls and procedures are effective, providing reasonable assurance that required information is timely recorded, processed, summarized, and reported. Management also assessed and concluded that internal control over financial reporting is effective based on the COSO 2013 framework, excluding a recently acquired subsidiary. No material changes occurred in internal control over financial reporting during the fourth quarter of fiscal year 2025. Management acknowledges the inherent limitations of control systems, which can only provide reasonable assurance - As of June 30, 2025, management, including the Chief Executive Officer and Chief Financial Officer, assessed and concluded that the company's disclosure controls and procedures are effective[274](index=274&type=chunk) - Management concluded that, as of June 30, 2025, the company's internal control over financial reporting was effective, based on the COSO 2013 framework[275](index=275&type=chunk) - In assessing the effectiveness of internal control over financial reporting, management excluded a recently acquired subsidiary, which represented **6.1%** of consolidated total assets and **4.7%** of net sales in the consolidated financial statements[276](index=276&type=chunk)[314](index=314&type=chunk) - No material changes occurred in internal control over financial reporting during the fourth quarter of fiscal year 2025[278](index=278&type=chunk) - Management acknowledges that any control and procedure, no matter how well designed and operated, can only provide reasonable assurance of achieving its control objectives, not absolute assurance[279](index=279&type=chunk) [Other Information](index=82&type=section&id=Item%209B.%20Other%20Information) During the fourth quarter of fiscal year 2025, no director or officer informed the company of the adoption, modification, or termination of any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - During the fourth quarter of fiscal year 2025, no director or officer informed the company of the adoption, modification, or termination of any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement[280](index=280&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=82&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable - This item is not applicable[281](index=281&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=83&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders. The company has adopted a Code of Ethics and Business Conduct and an Insider Trading Policy - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[284](index=284&type=chunk) - The company has adopted a Code of Ethics and Business Conduct and an Insider Trading Policy[284](index=284&type=chunk)[285](index=285&type=chunk) [Executive Compensation](index=83&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders - Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[286](index=286&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=83&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders - Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[287](index=287&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=83&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders - Information regarding certain relationships and related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[288](index=288&type=chunk) [Principal Accountant Fees and Services](index=83&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders - Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[289](index=289&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=84&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This item lists exhibits and financial statement schedules filed as part of the report, including financial statements, notes, and supplementary data, all incorporated by reference - This item lists exhibits and financial statement schedules filed as part of the report, including financial statements, notes, and supplementary data, all incorporated by reference[292](index=292&type=chunk)[295](index=295&type=chunk) [Form 10-K Summary](index=84&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - This item is not applicable[294](index=294&type=chunk)

Financial Performance - Revenues increased by 5% year over year in Q4, reaching $5 billion, driven by a 28% increase in security division service revenues and a 10% increase in optoelectronics division revenues [5][20] - Record Q4 non-GAAP adjusted earnings per share of $3.24, the highest quarterly adjusted EPS in company history [6][20] - Bookings in Q4 resulted in a book-to-bill ratio of approximately 1.0, with a year-end backlog of over $1.8 billion [6][9] Business Segment Performance - Security division revenues in Q4 were $367 million, up 7.1% year over year, with full-year revenue growth of 14.7% [9][20] - Optoelectronics division achieved a record $113 million in Q4 revenues, with a 10% increase in third-party opto sales [15][21] - Healthcare division's performance was disappointing, but plans are in place for improvement [17] Market Insights - The U.S. government's focus on enhancing security for major events like the 2026 FIFA World Cup and 2028 Summer Olympics is expected to drive demand for security solutions [13] - The Big Beautiful Bill Act provides significant funding for U.S. water security agencies, which is anticipated to benefit the company [12][14] Strategic Direction - The company is well-positioned for sustained success in the security division, with a growing opportunity pipeline and favorable market trends [12][15] - Plans for continued investment in R&D to advance key projects, including next-generation patient monitoring solutions [24][29] Management Commentary - Management expressed optimism about the operating environment and future prospects, highlighting strong organic demand across core businesses [5][18] - The company anticipates revenue growth of 5.4% to 8% for fiscal year 2026, with non-GAAP adjusted earnings per diluted share expected to grow by 8% to 11% [29][30] Other Important Information - Operating cash flow improved in Q4, but was lower than anticipated due to delayed payments from a major customer in Mexico [27][28] - The company amended its credit facility to extend the maturity date to July 2030 and increased borrowing capacity to $825 million, enhancing liquidity [28] Q&A Session Summary Question: Revenue guidance for fiscal year 2026 - Management indicated that excluding Mexico, the security division could see double-digit growth [35][36] Question: Concerns about security division growth - Management clarified that core security revenues grew over 50% when excluding Mexico and acquisitions [45][46] Question: Accounts receivable increase - Management explained that the increase was due to timing and record revenues, with expectations for significant cash flow in fiscal 2026 [51][55] Question: Strategic investments and M&A pipeline - Management is actively looking for opportunities but will not pursue acquisitions without clear strategic benefits [67] Question: Timing of funding from the Big Beautiful Bill - Management anticipates orders from the funding could start to materialize in the latter part of fiscal year 2026 [69]

Financial Performance - OSI Systems reported a 5% year-over-year increase in revenues for Q4, reaching $500 million, driven by a 28% increase in security division service revenues and a 10% increase in optoelectronics division revenues [5][20] - The company achieved record non-GAAP adjusted earnings per share of $3.24 for Q4, marking the highest quarterly adjusted EPS in its history [6][20] - The year-end backlog reached over $1.8 billion, with a book-to-bill ratio of approximately 1.0 in Q4, indicating strong future revenue visibility [6][8] Business Segment Performance - The Security division's Q4 revenues increased by 7.1% year-over-year, with full-year revenue growth of 14.7%, driven by demand from airport and international border security customers [8][20] - Optoelectronics division achieved a record Q4 revenue of $113 million, with a 10% increase in third-party opto sales year-over-year [14][21] - The Healthcare division experienced disappointing financial performance in Q4, but management anticipates stronger results moving forward due to ongoing investments in next-generation patient monitoring solutions [16][21] Market Dynamics - The U.S. government's focus on enhancing security for major events like the 2026 FIFA World Cup and 2028 Summer Olympics is expected to drive demand for OSI's solutions [12][14] - The Big Beautiful Bill Act provides significant funding for U.S. water security agencies, which is anticipated to create procurement opportunities for OSI's non-intrusive inspection equipment [11][12] Strategic Direction - OSI Systems is focused on organic growth and strategic acquisitions, leveraging a robust balance sheet to support growth initiatives [17][30] - The company is actively exploring M&A opportunities in security and complementary technologies, emphasizing that any acquisition must create significant value [68] Management Commentary - Management expressed confidence in the company's ability to overcome challenges posed by declining revenues from Mexico contracts, highlighting strong core business growth [45][50] - The anticipated cash inflow from accounts receivable is expected to bolster operating cash flow in fiscal '26, with a focus on maintaining strong free cash flow conversion [28][56] Other Important Information - The gross margin for Q4 was 33.3%, an increase from 32.1% in the prior year, attributed to a favorable revenue mix and improved efficiencies [22] - Operating expenses were well-controlled, with SG&A expenses at 14.8% of sales, reflecting ongoing efforts to manage costs efficiently [23] Q&A Session Summary Question: Revenue guidance for fiscal year '26 and growth expectations - Management indicated that excluding Mexico, the overall growth rate for OSI Systems could be double digits in fiscal '26 [36] Question: Service revenue growth and margin implications - Management confirmed that strong service revenue growth is expected to continue, potentially outpacing product revenue growth, which should positively impact gross margins [38] Question: Concerns about security division growth in the back half of the year - Management clarified that core security revenues, excluding Mexico, grew over 50% in the last quarter, indicating strong underlying demand [45] Question: Accounts receivable increase and cash flow expectations - Management explained that the increase in accounts receivable was primarily due to timing and strong revenue performance, with expectations for significant cash collections in fiscal '26 [52][56] Question: Update on M&A pipeline and strategic investments - Management emphasized a strong balance sheet and ongoing exploration of M&A opportunities, while maintaining a focus on organic growth [68]

Group 1 - OSI Systems reported revenue of $504.99 million for the quarter ended June 2025, reflecting a 5% increase year-over-year and a surprise of +2.34% over the Zacks Consensus Estimate of $493.43 million [1] - The earnings per share (EPS) for the quarter was $3.24, compared to $2.84 in the same quarter last year, resulting in an EPS surprise of +1.57% against the consensus estimate of $3.19 [1] - The stock has returned -1.4% over the past month, while the Zacks S&P 500 composite has changed by +1.7%, with a Zacks Rank 2 (Buy) indicating potential outperformance in the near term [3] Group 2 - Revenue from the Healthcare division was $42.68 million, which is -15.2% lower than the estimated $50.9 million [4] - Intersegment eliminations reported revenue of $-17.34 million, showing a +24.1% change compared to the year-ago quarter [4] - The Optoelectronics and Manufacturing division generated $112.67 million in revenue, exceeding the average estimate of $107.37 million, representing a +10.4% year-over-year change [4] - The Security division reported revenue of $366.97 million, surpassing the average estimate of $349.95 million, with a +7.1% change year-over-year [4] - Non-GAAP operating income for the Security Division was $74.71 million, above the average estimate of $71.57 million [4] - Non-GAAP operating income for the Healthcare Division was $0.37 million, below the average estimate of $4.31 million [4] - Non-GAAP operating income for the Optoelectronics and Manufacturing Division was $15.33 million, slightly above the average estimate of $15.32 million [4]

Group 1 - OSI Systems reported quarterly earnings of $3.24 per share, exceeding the Zacks Consensus Estimate of $3.19 per share, and up from $2.84 per share a year ago, representing an earnings surprise of +1.57% [1] - The company achieved revenues of $504.99 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.34% and increasing from $480.91 million year-over-year [2] - OSI has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Group 2 - The stock has gained approximately 33.4% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.7% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to those expectations [4] - The Zacks Rank for OSI is currently 2 (Buy), indicating expectations for the stock to outperform the market in the near future [6] Group 3 - The current consensus EPS estimate for the upcoming quarter is $1.44 on revenues of $369.05 million, and for the current fiscal year, it is $10.02 on revenues of $1.78 billion [7] - The Electronics - Miscellaneous Components industry, to which OSI belongs, is currently ranked in the top 29% of over 250 Zacks industries, suggesting a favorable outlook for the sector [8]

[Executive Summary & Company Overview](index=1&type=section&id=Executive%20Summary%20%26%20Company%20Overview) OSI Systems achieved record revenues and non-GAAP EPS in Q4 and FY2025, driven by Security and service growth, expanding its credit facility [Management Commentary](index=1&type=section&id=Management%20Commentary) OSI Systems' CEO reported record Q4 and FY2025 revenues and non-GAAP EPS, with the CFO highlighting an expanded credit facility for strategic investments - OSI Systems achieved **record-breaking fourth quarter and 2025 fiscal year revenues** and **non-GAAP earnings per share**, led by excellent execution in the Security division[3](index=3&type=chunk) - Fourth quarter performance was driven by **strong growth in the Security division's service revenues** resulting from an increasing installed base of products[3](index=3&type=chunk) - Subsequent to fiscal year end, the credit facility was expanded to **$825 million** with maturity extended to July 2030, enhancing capacity for strategic investments and long-term value[4](index=4&type=chunk) [Key Financial Highlights (Q4 & FY2025)](index=1&type=section&id=Key%20Financial%20Highlights) OSI Systems reported record revenues and non-GAAP EPS for Q4 and FY2025, with full-year revenues reaching $1.713 billion and a robust backlog Key Financial Highlights (Q4 & FY2025) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | % Growth (QoQ) | Fiscal Years Ended June 30, 2024 | Fiscal Years Ended June 30, 2025 | % Growth (YoY) | | :------------------------- | :------------------------------- | :------------------------------- | :------------- | :------------------------------- | :------------------------------- | :------------- | | Revenues (in thousands) | $480,907 | $504,985 | 5% | $1,538,758 | $1,713,166 | 11% | | Operating income - GAAP (in thousands) | $62,818 | $73,022 | 16% | $189,061 | $217,524 | 15% | | Operating income - non-GAAP (in thousands) | $71,211 | $79,479 | 12% | $212,218 | $240,855 | 13% | | Earnings per share - GAAP | $2.55 | $3.03 | 19% | $7.38 | $8.71 | 18% | | Earnings per share - non-GAAP | $2.84 | $3.24 | 14% | $8.13 | $9.36 | 15% | | Book to Bill Ratio | 0.8 | 1.0 | - | 0.9 | 1.1 | - | | Cash flow provided by (used in) operating activities (in thousands) | $(29,041) | $561 | - | $(87,501) | $97,592 | - | - **Record Q4 Revenues of $505 million** and **Record Fiscal Year Revenues of $1.713 billion** (up **11% YoY**)[5](index=5&type=chunk) - **Record Non-GAAP EPS of $3.24 for Q4** and **$9.36 for Fiscal Year** (up **15% YoY**)[5](index=5&type=chunk) - Year-End Backlog of **over $1.8 billion**[5](index=5&type=chunk) [About OSI Systems](index=2&type=section&id=About%20OSI%20Systems) OSI Systems designs and manufactures specialized electronic systems across Security, Optoelectronics, and Healthcare, serving over 170 countries - OSI Systems designs and manufactures specialized electronic systems and components for critical applications[9](index=9&type=chunk) - The Company operates through three key segments: **Security, Optoelectronics and Manufacturing, and Healthcare**[9](index=9&type=chunk) - OSI Systems serves over **170 countries**, strategically positioning its sales, service, R&D, and manufacturing capabilities worldwide[9](index=9&type=chunk) [Fiscal Year 2025 Financial Performance](index=4&type=section&id=Fiscal%20Year%202025%20Financial%20Performance) OSI Systems reported significant revenue and net income growth in FY2025, with total net revenues reaching $1.713 billion and diluted EPS at $8.71 [Consolidated Statements of Operations (GAAP)](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20(GAAP)) For FY2025, total net revenues increased to $1.713 billion, and net income rose to $149.6 million, resulting in diluted EPS of $8.71 Consolidated Statements of Operations (GAAP) | Metric (in thousands, except per share data) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Fiscal Year Ended June 30, 2024 | Fiscal Year Ended June 30, 2025 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Products Revenues | $390,342 | $392,633 | $1,207,590 | $1,323,291 | | Services Revenues | $90,565 | $112,352 | $331,168 | $389,875 | | Total net revenues | $480,907 | $504,985 | $1,538,758 | $1,713,166 | | Gross profit | $154,317 | $168,238 | $530,458 | $587,182 | | Income from operations | $62,818 | $73,022 | $189,061 | $217,524 | | Net income | $44,679 | $52,748 | $128,154 | $149,637 | | Diluted earnings per share | $2.55 | $3.03 | $7.38 | $8.71 | | Weighted average shares outstanding – diluted | 17,504 | 17,412 | 17,354 | 17,178 | - Total net revenues increased by **11.3% year-over-year**, from **$1,538,758 thousand in FY2024 to $1,713,166 thousand in FY2025**[14](index=14&type=chunk) - Net income increased by **16.8% year-over-year**, from **$128,154 thousand in FY2024 to $149,637 thousand in FY2025**[14](index=14&type=chunk) [Consolidated Balance Sheets (GAAP)](index=5&type=section&id=Consolidated%20Balance%20Sheets%20(GAAP)) As of June 30, 2025, total assets grew to $2.241 billion, driven by receivables and goodwill, while long-term debt significantly increased Consolidated Balance Sheets (GAAP) | Metric (in thousands) | June 30, 2024 | June 30, 2025 | | :-------------------------------- | :------------ | :------------ | | Cash and cash equivalents | $95,353 | $106,405 | | Accounts receivable, net | $648,155 | $837,743 | | Inventories | $397,939 | $407,174 | | Total current assets | $1,215,524 | $1,422,861 | | Property and equipment, net | $113,967 | $126,747 | | Goodwill | $351,480 | $387,393 | | Intangible assets, net | $139,529 | $183,290 | | Total Assets | $1,936,008 | $2,241,257 | | Bank lines of credit | $384,000 | $178,000 | | Long-term debt | $129,383 | $463,504 | | Total liabilities | $1,072,525 | $1,290,173 | | Total stockholders' equity | $863,483 | $951,084 | - Accounts receivable, net, increased by **29.2%** from **$648,155 thousand in 2024 to $837,743 thousand in 2025**[16](index=16&type=chunk) - Long-term debt significantly increased from **$129,383 thousand in 2024 to $463,504 thousand in 2025**, while bank lines of credit decreased from **$384,000 thousand to $178,000 thousand**[16](index=16&type=chunk) [Non-GAAP Financial Measures & Reconciliation (Consolidated)](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliation%20(Consolidated)) OSI Systems provides non-GAAP measures to clarify underlying performance by excluding specific items, enhancing comparability and insight - Non-GAAP figures exclude restructuring and other charges, amortization of intangible assets acquired through business acquisitions, and associated tax effects, and discrete income tax items[10](index=10&type=chunk) - Management believes non-GAAP measures provide **enhanced insight into ongoing operations**, meaningful information for planning, and better comparability to peer companies[10](index=10&type=chunk) [Q4 2025 Consolidated Non-GAAP Reconciliation](index=6&type=section&id=Q4%202025%20Consolidated%20Non-GAAP%20Reconciliation) This section reconciles Q4 2025 GAAP to non-GAAP figures, adjusting for restructuring, amortization, and tax effects for clearer performance | Metric (in thousands, except per-share amounts) | GAAP Basis (Q4 2025) | Adjustments (Q4 2025) | Non-GAAP Basis (Q4 2025) | | :---------------------------------------------- | :------------------- | :-------------------- | :----------------------- | | Operating Income | $73,022 | $1,687 (Restructuring) + $4,770 (Amortization) | $79,479 | | % of Revenues | 14.5% | 0.3% + 0.9% | 15.7% | | Net Income | $52,748 | $1,687 (Restructuring) + $4,770 (Amortization) - $1,380 (Tax benefit) - $1,373 (Discrete tax) | $56,452 | | EPS | $3.03 | $0.10 (Restructuring) + $0.27 (Amortization) - $0.08 (Tax benefit) - $0.08 (Discrete tax) | $3.24 | [FY 2025 Consolidated Non-GAAP Reconciliation](index=7&type=section&id=FY%202025%20Consolidated%20Non-GAAP%20Reconciliation) This section reconciles FY 2025 GAAP to non-GAAP figures, adjusting for restructuring, amortization, and tax effects for clearer performance | Metric (in thousands, except per-share amounts) | GAAP Basis (FY 2025) | Adjustments (FY 2025) | Non-GAAP Basis (FY 2025) | | :---------------------------------------------- | :------------------- | :-------------------- | :----------------------- | | Operating Income | $217,524 | $5,335 (Restructuring) + $17,996 (Amortization) | $240,855 | | % of Revenues | 12.7% | 0.3% + 1.1% | 14.1% | | Net Income | $149,637 | $5,335 (Restructuring) + $17,996 (Amortization) - $5,413 (Tax benefit) - $6,717 (Discrete tax) | $160,838 | | EPS | $8.71 | $0.31 (Restructuring) + $1.05 (Amortization) - $0.32 (Tax benefit) - $0.39 (Discrete tax) | $9.36 | [Segment Performance Analysis](index=6&type=section&id=Segment%20Performance%20Analysis) Security consistently drove strong performance in Q4 and FY2025, Optoelectronics & Manufacturing maintained profitability, while Healthcare declined [Q4 2025 Segment Performance (Non-GAAP)](index=6&type=section&id=Q4%202025%20Segment%20Performance%20(Non-GAAP)) In Q4 2025, Security led with a 20.4% non-GAAP operating margin, Optoelectronics & Manufacturing maintained 13.6%, while Healthcare declined [Security Segment (Q4)](index=6&type=section&id=Security%20Segment%20(Q4)) The Security segment's non-GAAP operating income increased to $74.7 million in Q4 2025, with its operating margin improving to 20.4% | Metric (in thousands) | Q4 2024 | Q4 2025 | | :-------------------- | :-------- | :-------- | | GAAP Revenues | $342,509 | $366,971 | | GAAP Operating Income | $60,678 | $70,538 | | Non-GAAP Operating Income | $63,533 | $74,712 | | Non-GAAP % of Revenues | 18.5% | 20.4% | - Security segment's non-GAAP operating income increased from **$63,533 thousand in Q4 2024 to $74,712 thousand in Q4 2025**, with its non-GAAP operating margin improving from **18.5% to 20.4%**[18](index=18&type=chunk) [Optoelectronics & Manufacturing Segment (Q4)](index=6&type=section&id=Optoelectronics%20%26%20Manufacturing%20Segment%20(Q4)) Optoelectronics & Manufacturing segment's non-GAAP operating income rose to $15.3 million in Q4 2025, maintaining a strong 13.6% operating margin | Metric (in thousands) | Q4 2024 | Q4 2025 | | :-------------------- | :-------- | :-------- | | GAAP Revenues | $102,069 | $112,667 | | GAAP Operating Income | $10,321 | $14,999 | | Non-GAAP Operating Income | $14,185 | $15,326 | | Non-GAAP % of Revenues | 13.9% | 13.6% | - Optoelectronics & Manufacturing segment's non-GAAP operating income increased from **$14,185 thousand in Q4 2024 to $15,326 thousand in Q4 2025**, maintaining a strong non-GAAP operating margin of **13.6%**[18](index=18&type=chunk) [Healthcare Segment (Q4)](index=6&type=section&id=Healthcare%20Segment%20(Q4)) Healthcare segment's non-GAAP operating income significantly decreased to $0.4 million in Q4 2025, with its operating margin falling to 0.9% | Metric (in thousands) | Q4 2024 | Q4 2025 | | :-------------------- | :-------- | :-------- | | GAAP Revenues | $50,305 | $42,684 | | GAAP Operating Income | $3,856 | $(1,368) | | Non-GAAP Operating Income | $4,656 | $368 | | Non-GAAP % of Revenues | 9.3% | 0.9% | - Healthcare segment's non-GAAP operating income significantly decreased from **$4,656 thousand in Q4 2024 to $368 thousand in Q4 2025**, with its non-GAAP operating margin falling from **9.3% to 0.9%**[18](index=18&type=chunk) [FY 2025 Segment Performance (Non-GAAP)](index=7&type=section&id=FY%202025%20Segment%20Performance%20(Non-GAAP)) For FY2025, Security showed robust growth, Optoelectronics & Manufacturing increased profitability, while Healthcare experienced a decline [Security Segment (FY)](index=7&type=section&id=Security%20Segment%20(FY)) The Security segment's non-GAAP operating income increased to $221.7 million in FY2025, maintaining a strong 18.5% operating margin | Metric (in thousands) | FY 2024 | FY 2025 | | :-------------------- | :-------- | :-------- | | GAAP Revenues | $1,043,073 | $1,196,180 | | GAAP Operating Income | $183,270 | $204,952 | | Non-GAAP Operating Income | $195,512 | $221,716 | | Non-GAAP % of Revenues | 18.7% | 18.5% | - Security segment's non-GAAP operating income increased from **$195,512 thousand in FY2024 to $221,716 thousand in FY2025**, with a non-GAAP operating margin of **18.5%**[20](index=20&type=chunk) [Optoelectronics & Manufacturing Segment (FY)](index=7&type=section&id=Optoelectronics%20%26%20Manufacturing%20Segment%20(FY)) Optoelectronics & Manufacturing segment's non-GAAP operating income increased to $54.0 million in FY2025, maintaining a 13.1% operating margin | Metric (in thousands) | FY 2024 | FY 2025 | | :-------------------- | :-------- | :-------- | | GAAP Revenues | $384,268 | $412,065 | | GAAP Operating Income | $42,814 | $51,540 | | Non-GAAP Operating Income | $50,356 | $54,021 | | Non-GAAP % of Revenues | 13.1% | 13.1% | - Optoelectronics & Manufacturing segment's non-GAAP operating income increased from **$50,356 thousand in FY2024 to $54,021 thousand in FY2025**, maintaining a non-GAAP operating margin of **13.1%**[20](index=20&type=chunk) [Healthcare Segment (FY)](index=7&type=section&id=Healthcare%20Segment%20(FY)) Healthcare segment's non-GAAP operating income decreased to $6.0 million in FY2025, with its operating margin declining to 3.5% | Metric (in thousands) | FY 2024 | FY 2025 | | :-------------------- | :-------- | :-------- | | GAAP Revenues | $171,435 | $168,362 | | GAAP Operating Income | $6,013 | $2,462 | | Non-GAAP Operating Income | $8,028 | $5,960 | | Non-GAAP % of Revenues | 4.7% | 3.5% | - Healthcare segment's non-GAAP operating income decreased from **$8,028 thousand in FY2024 to $5,960 thousand in FY2025**, with its non-GAAP operating margin declining from **4.7% to 3.5%**[20](index=20&type=chunk) [Fiscal Year 2026 Outlook](index=2&type=section&id=Fiscal%20Year%202026%20Outlook) OSI Systems projects FY2026 revenues between $1.805 billion and $1.850 billion, with non-GAAP diluted EPS expected to range from $10.11 to $10.39 [FY 2026 Financial Guidance](index=2&type=section&id=FY%202026%20Financial%20Guidance) OSI Systems forecasts FY2026 revenues between $1.805 billion and $1.850 billion, with non-GAAP diluted EPS projected from $10.11 to $10.39 FY 2026 Financial Guidance | Metric | Guidance (FY 2026) | | :-------------------------- | :----------------------- | | Revenues | $1.805 billion - $1.850 billion | | YoY Growth Rate (Revenues) | 5.4% - 8.0% | | Non-GAAP Diluted Earnings Per Share | $10.11 - $10.39 | | YoY Growth Rate (Non-GAAP EPS) | 8.0% - 11.0% | [Non-GAAP Guidance Explanation](index=2&type=section&id=Non-GAAP%20Guidance%20Explanation) The company provides FY2026 diluted EPS guidance solely on a non-GAAP basis, as reconciliation to GAAP is impractical due to unpredictability - Fiscal 2026 diluted earnings per share guidance is provided on a **non-GAAP basis only**[7](index=7&type=chunk) - No reconciliation to GAAP diluted EPS is provided for forward-looking guidance due to the inherent difficulty in forecasting timing and amounts of reconciling items (e.g., acquisition costs, non-recurring items) that are outside the Company's control or unpredictable[7](index=7&type=chunk) [Additional Information & Disclosures](index=2&type=section&id=Additional%20Information%20%26%20Disclosures) This section details non-GAAP methodology, outlines forward-looking statement risks, and provides conference call and contact information [Presentation of Non-GAAP Financial Measures (Methodology)](index=3&type=section&id=Presentation%20of%20Non-GAAP%20Financial%20Measures%20(Methodology)) This section explains the rationale for non-GAAP measures, which exclude specific charges and amortization for clearer operational performance - Non-GAAP financial measures are presented to allow for the comparison of the underlying performance of the Company, excluding the impact of restructuring and other charges, amortization of intangible assets acquired through business acquisitions, and associated tax effects, and discrete income tax items[10](index=10&type=chunk) - Management believes non-GAAP measures provide **enhanced insight into ongoing operations**, meaningful information for planning and assessment, and financial results generally more comparable to peer companies[10](index=10&type=chunk) - Non-GAAP financial measures should not be assessed in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP[10](index=10&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section highlights that forward-looking statements are subject to significant uncertainties and risks, which may cause actual results to differ materially - Forward-looking statements relate to the Company's current expectations, beliefs, and projections concerning matters that are not historical facts, including expected revenues, earnings, growth, cash flow generation, and operational performance in fiscal 2026 and beyond[12](index=12&type=chunk) - 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[12](index=12&type=chunk) - Potential negative consequences include **delays in contract awards**, failure to renew key customer contracts, delays in customer programs, cybersecurity breaches, changes in government policies, global economic uncertainty, supply chain disruptions, and unfavorable currency exchange rate fluctuations[12](index=12&type=chunk) [Conference Call & Contact Information](index=2&type=section&id=Conference%20Call%20%26%20Contact%20Information) Details for the August 21, 2025, conference call and webcast replay are provided, along with contact information for investor inquiries - The Company hosted a conference call and simultaneous webcast on **August 21, 2025, at 9:00 am PT (12:00 pm ET)** to discuss financial results[8](index=8&type=chunk) - A replay of the webcast will be available for approximately three months via the Investor Relations section of the OSI Systems website[8](index=8&type=chunk) - For additional information, contact **Ajay Vashishat, Vice President, OSI Systems, Inc. at (310) 349-2237 or avashishat@osi-systems.com**[13](index=13&type=chunk)

Core Viewpoint - OSI Systems (OSIS) is highlighted as a strong candidate for investors due to its consistent performance in beating earnings estimates and its favorable positioning for future earnings reports [1]. Earnings Performance - OSI has demonstrated a strong track record of surpassing earnings estimates, averaging a 2.75% beat over the last two quarters [2]. - In the most recent quarter, OSI reported earnings of $2.38 per share against an expectation of $2.44, resulting in a surprise of 2.52%. In the previous quarter, the company reported $2.42 per share against an estimate of $2.35, achieving a surprise of 2.98% [3]. Earnings Estimates and Predictions - Estimates for OSI have been trending higher, influenced by its history of earnings surprises. The stock currently has a positive Zacks Earnings ESP (Expected Surprise Prediction), indicating a strong likelihood of future earnings beats, especially with its solid Zacks Rank [6]. - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [7]. Earnings ESP and Analyst Sentiment - OSI currently has an Earnings ESP of +4.39%, suggesting increased analyst optimism regarding its near-term earnings potential. This positive Earnings ESP, combined with a Zacks Rank of 2 (Buy), indicates a strong possibility of another earnings beat [9]. - The Earnings ESP metric is crucial as it compares the Most Accurate Estimate to the Zacks Consensus Estimate, reflecting the latest analyst revisions prior to earnings releases [8].

Core Insights - TDK Corp. (TTDKY) and OSI Systems (OSIS) are both attractive options for value investors, with both companies currently holding a Zacks Rank of 2 (Buy) indicating positive earnings estimate revisions [3][7] Valuation Metrics - TDKY has a forward P/E ratio of 17.16, while OSIS has a forward P/E of 21.66, suggesting TDKY may be undervalued compared to OSIS [5] - TDKY's PEG ratio is 1.34, compared to OSIS's PEG ratio of 1.84, indicating TDKY has a more favorable valuation when considering expected earnings growth [5] - TDKY's P/B ratio is 1.9, significantly lower than OSIS's P/B of 4.14, further supporting TDKY's position as the superior value option [6] Value Grades - TDKY has earned a Value grade of A, while OSIS has a Value grade of C, highlighting TDKY's stronger valuation metrics [6]

Financial Performance & Guidance - OSI Systems reported revenue of $1.5 billion for the fiscal year ended June 30, 2024[8] - The company provides FY25 revenue guidance of $1.690 - $1.715 billion, representing 9.8% - 11.5% growth[12] - FY25 Non-GAAP Adjusted EPS guidance is $9.15 - $9.45, indicating 12.5% - 16.2% growth[12] - The company's year-end backlog is $1.7 billion[12] Business Segments & Geography - Security division accounts for 68% of OSI Systems' revenue[8, 30] - Optoelectronics division contributes 21% of the company's revenue[8, 93] - Healthcare division represents 11% of the company's revenue[8, 114] - 33% of the company's net sales are from the U S market[9] Recurring Revenue & Backlog - Security segment has recurring revenue of approximately 30%[16] - Healthcare segment has recurring revenue of over 40%[16] - Optoelectronics segment has repeat revenue of over 80%[16] - The company's backlog has grown at a CAGR of 19% from FYE20 to FYE24[16] Growth Drivers & Opportunities - Heightened global demand for high-performance threat detection screening solutions is a key market tailwind for the security division[18] - Strong demand for specialized optoelectronics is driven by the electrification and digitization of various products and solutions[18] - Increasing demand for efficient healthcare solutions to serve the aging population is a growth driver for the healthcare division[18]