OSI Systems(OSIS)2025-01-24 22:01Revenue and Profit Growth - Total net revenues increased to $763.8 million for the six months ended December 31, 2024, up from $652.4 million in the same period in 2023[11] - Net income rose to $55.8 million for the six months ended December 31, 2024, compared to $49.4 million in the same period in 2023[11] - Earnings per share (diluted) increased to $3.27 for the six months ended December 31, 2024, up from $2.87 in the same period in 2023[11] - Net income for the six months ended December 31, 2024 increased to $55.8 million from $49.4 million in the same period in 2023[18] - Basic earnings per share for the six months ended December 31, 2024 increased to $3.33 from $2.92 in the same period in 2023[22] - Diluted earnings per share for the six months ended December 31, 2024 increased to $3.27 from $2.87 in the same period in 2023[22] - Total consolidated revenues for the six months ended December 31, 2024, were $763.827 million, up from $652.445 million in the same period of 2023, a 17% increase[89] - Total net revenues for Q2 fiscal 2025 increased by $46.7 million (12.5%) compared to Q2 fiscal 2024, reaching $419.9 million[112] - Total net revenues for YTD Q2 fiscal 2025 increased by $111.5 million (17.1%) compared to YTD Q2 fiscal 2024, reaching $763.9 million[122] Cash and Liquidity - Cash and cash equivalents decreased to $95.4 million as of June 30, 2024, down from $101.6 million as of December 31, 2024[10] - Cash and cash equivalents totaled $101.6 million at December 31, 2024, with approximately 77% held by foreign subsidiaries[24] - Cash and cash equivalents totaled $101.6 million at December 31, 2024, an increase of $6.2 million (7%) from June 30, 2024[132] - Cash provided by operating activities for YTD Q2 fiscal 2025 was $15.4 million, compared to cash used in operations of $6.4 million in the prior-year period[135] - Net cash used in investing activities for YTD Q2 fiscal 2025 was $97.6 million, including $75.5 million for a business acquisition in September 2024[136] - Net cash provided by financing activities for YTD Q2 fiscal 2025 was $89.2 million, driven by $340.5 million net proceeds from the 2029 Notes[137] - Cash and cash equivalents totaled $101.6 million at December 31, 2024, with 77% held by foreign subsidiaries[139] Balance Sheet Changes - Accounts receivable, net decreased to $648.2 million as of June 30, 2024, down from $703.9 million as of December 31, 2024[10] - Inventories decreased to $397.9 million as of June 30, 2024, down from $441.8 million as of December 31, 2024[10] - Total current liabilities increased to $814.6 million as of June 30, 2024, up from $703.7 million as of December 31, 2024[10] - Long-term debt, net decreased to $129.4 million as of June 30, 2024, down from $466.6 million as of December 31, 2024[10] - Accounts receivable, net increased from $648,155 thousand as of June 30, 2024, to $703,933 thousand as of December 31, 2024[41] - Intangible assets increased from $139,529 thousand as of June 30, 2024, to $181,954 thousand as of December 31, 2024[43] - Contract assets decreased by $59.8 million due to a $85.2 million decrease in unbilled revenue, partially offset by a $25.4 million increase from a business acquisition[50] - Remaining performance obligations as of December 31, 2024, were approximately $776.1 million, with 61% expected to be recognized within the next 12 months[51] - Operating lease liabilities totaled $29.9 million as of December 31, 2024, with a weighted average remaining lease term of 3.6 years and a weighted average discount rate of 4.6%[54] Expenses and Costs - Research and development expenses increased to $36.0 million for the six months ended December 31, 2024, up from $32.3 million in the same period in 2023[11] - Comprehensive income decreased to $46.3 million for the six months ended December 31, 2024, down from $49.7 million in the same period in 2023[13] - Restructuring and other charges for the six months ended December 31, 2024, totaled $1.4 million, including $0.6 million for acquisition-related costs and $0.6 million for employee terminations[56] - Research and development expenses increased by $2.0 million (12.3%) in Q2 fiscal 2025, primarily due to new product development initiatives in the Security division[117] - Selling, general and administrative expenses increased by $11.5 million (8.8%) in YTD Q2 fiscal 2025, primarily due to increased employee compensation[126] - Gross profit increased by $5.8 million in Q2 fiscal 2025, but gross margin decreased to 35.0% from 37.9% in Q2 fiscal 2024[114] - Gross profit for YTD Q2 fiscal 2025 increased by $28.7 million, but gross margin decreased to 35.2% from 36.8% in YTD Q2 fiscal 2024[125] Debt and Financing - Long-term debt, net decreased to $129.4 million as of June 30, 2024, down from $466.6 million as of December 31, 2024[10] - The company had $236 million of borrowings outstanding under the revolving credit facility, $78.6 million under the letters of credit sub-facility, and $131.9 million under the term loan as of December 31, 2024[59] - In July 2024, the company issued $350.0 million principal amount of 2.25% convertible senior notes due in 2029, with net proceeds of $340.4 million[60] - The 2029 Notes have a principal amount of $350,000, with a net carrying amount of $341,245 and a fair value of $380,069 as of December 31, 2024[65] - Total interest expense for the 2029 Notes was $2.4 million for the three months ended December 31, 2024, consisting of $2.0 million in contractual interest and $0.4 million in amortization of debt discount and issuance costs[66] - Long-term debt as of December 31, 2024, totaled $474.8 million, with $341.3 million attributable to the 2029 Notes[68] - Credit facility includes a $600 million revolving credit facility with $300 million sub-facility for letters of credit, with $131.9 million outstanding under the term loan and $236.0 million under the revolving credit facility as of December 31, 2024[134] Acquisitions and Investments - The company acquired a provider of critical military, space, and surveillance solutions for approximately $76.0 million, plus up to $24.0 million in potential contingent consideration in September 2024[38] - The preliminary acquisition date fair value of total assets acquired was $114.0 million, including goodwill of $31.7 million and other intangible assets of $43.9 million[38] - Revenue from the acquired business was $21.7 million from the acquisition date through December 31, 2024[38] - The company acquired a contract manufacturer for approximately $6.3 million in cash in December 2023[39] - The company acquired a provider of radiation detection technology for approximately $2.8 million in cash, plus up to $3.6 million in potential contingent consideration in October 2023[40] - Capital expenditures for YTD Q2 fiscal 2025 were $13.2 million, up from $8.7 million in the prior-year period[136] - Expenditures for intangible and other assets for YTD Q2 fiscal 2025 were $9.1 million, compared to $8.4 million in the prior-year period[136] Stock and Equity - The company repurchased 531,314 shares of common stock for approximately $80 million during the six months ended December 31, 2024, with 1,190,556 shares remaining available for repurchase[74] - Stock-based compensation expense for the six months ended December 31, 2024, was $14.9 million, with $20.6 million in unrecognized compensation cost related to restricted stock units (RSUs)[70] - The company granted 80,682 performance-based RSUs during the six months ended December 31, 2024, with potential payouts ranging from zero to 376% of the original award[72] - Repurchase of common stock during YTD Q2 fiscal 2025 totaled $80.4 million[137] - Taxes paid related to net share settlement of equity awards were $22.6 million during YTD Q2 fiscal 2025[137] - No shares of common stock were repurchased during the second quarter of fiscal year 2025[140] Contingent Liabilities and Warranty - The company's contingent consideration liabilities were $23.6 million as of December 31, 2024[27] - The company has a contingent consideration liability of $23.6 million as of December 31, 2024, related to acquisition-related earnout obligations[77] - Warranty provisions increased to $11.4 million as of December 31, 2024, up from $10.5 million at the end of 2023[82] - The company has a remaining maximum potential payment of $56.5 million for capped contingent consideration obligations related to acquisitions as of December 31, 2024[76] Division Performance - Security division revenues increased to $289.987 million in Q4 2024, up from $249.975 million in Q4 2023, representing a 16% growth[89] - Optoelectronics and Manufacturing division revenues grew slightly to $100.743 million in Q4 2024, compared to $98.097 million in Q4 2023[89] - Healthcare division revenues rose to $44.854 million in Q4 2024, up from $41.850 million in Q4 2023, a 7.2% increase[89] - Security division accounted for 67% of total consolidated revenues for the six months ended December 31, 2024, up from 64% in the same period of 2023[100] - Optoelectronics and Manufacturing division accounted for 22% of total consolidated revenues for the six months ended December 31, 2024, down from 24% in the same period of 2023[101] - Healthcare division accounted for 11% of total consolidated revenues for the six months ended December 31, 2024, down from 12% in the same period of 2023[102] - Security division revenues increased by $40.0 million (16.0%) in Q2 fiscal 2025, driven by growth in checkpoint screening systems and trace detection systems[112] Tax and Currency Impact - The effective tax rate for the six months ended December 31, 2024, was 22.9%, up from 21.0% in the same period of 2023[87] - Currency exchange rates negatively impacted reported sales by approximately 0.8% for the six months ended December 31, 2024, due to the strengthening of the U.S. dollar[110] Customer Concentration - One customer in the Security division accounted for 12% of consolidated net revenues for the six months ended December 31, 2024[91] - Two customers in the Security division accounted for 37% and 13% of accounts receivable, net as of December 31, 2024[91] Derivatives and Hedging - The company held foreign currency forward contracts with notional amounts totaling $79.4 million as of December 31, 2024[29] - The fair value of the company's interest rate swap contract was $2.7 million as of December 31, 2024[27] - The company's interest rate swap agreement matures in December 2026 and is considered an effective cash flow hedge[30] - The notional amount of derivative instruments designated as an interest rate swap hedge was $175 million as of June 30, 2024, and December 31, 2024[31] - The fair value of the interest rate swap contract was recorded in Other assets within the consolidated balance sheet as of June 30, 2024, and December 31, 2024[31] - The effect of cash flow hedges on other comprehensive income (loss) and earnings for the six months ended December 31, 2024, was a loss of $15,978 thousand[31] Credit Facilities and Letters of Credit - The company has $68.0 million outstanding under letter-of-credit facilities, with $22.8 million available under these credit facilities as of December 31, 2024[67] - Credit facility includes a $600 million revolving credit facility with $300 million sub-facility for letters of credit, with $131.9 million outstanding under the term loan and $236.0 million under the revolving credit facility as of December 31, 2024[134]