OSI Systems(OSIS) - 2021 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1 — Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for OSI Systems, Inc. as of March 31, 2021, and for the three and nine-month periods then ended Condensed Consolidated Financial Statements Presents unaudited financial statements showing asset growth to $1.33 billion and nine-month net income of $48.2 million Condensed Consolidated Balance Sheet Summary (in millions) | Balance Sheet Items | June 30, 2020 (in millions) | March 31, 2021 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $617.7 | $661.4 | | Total Assets | $1,268.5 | $1,326.0 | | Total Current Liabilities | $330.1 | $326.1 | | Total Liabilities | $696.4 | $710.1 | | Total Stockholders' Equity | $572.2 | $615.9 | Condensed Consolidated Statement of Operations Summary (in millions, except per share data) | Metric | Three Months Ended Mar 31, 2021 (in millions) | Nine Months Ended Mar 31, 2021 (in millions) | | :--- | :--- | :--- | | Total Net Revenues | $283.8 | $814.7 | | Gross Profit | $104.0 | $301.9 | | Income from Operations | $32.5 | $81.5 | | Net Income | $18.8 | $48.2 | | Diluted EPS | $1.03 | $2.63 | Condensed Consolidated Statement of Cash Flows Summary (Nine Months Ended Mar 31, in millions) | Cash Flow Activity | 2020 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $105.6 | $131.1 | | Net cash used in investing activities | ($28.3) | ($26.2) | | Net cash used in financing activities | ($68.5) | ($91.4) | | Net change in cash and cash equivalents | $4.7 | $16.4 | Notes to Condensed Consolidated Financial Statements Details accounting policies, business combinations, balance sheet components, and ongoing legal and government investigations - In July 2020, the Healthcare division acquired a privately-held software development company for $3.0 million in cash, plus up to $12.0 million in potential contingent consideration[41] - Goodwill increased to $319.2 million as of March 31, 2021, from $310.6 million at June 30, 2020, primarily due to a new acquisition and foreign currency translation adjustments[44] - The company has a $535 million revolving credit facility maturing in April 2024, with $468.3 million available to borrow as of March 31, 2021[60] - The company is involved in lawsuits and government (SEC and DOJ) investigations following a short-seller report in December 2017, with uncertain ultimate outcomes[84][85] Segment Revenues and Operating Income (Nine Months Ended Mar 31, in millions) | Segment | Revenues 2021 (in millions) | Operating Income 2021 (in millions) | | :--- | :--- | :--- | | Security | $431.4 | $52.7 | | Healthcare | $160.4 | $25.6 | | Optoelectronics and Manufacturing | $257.7 | $29.6 | Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Analyzes financial performance, liquidity, and capital resources, highlighting COVID-19's varied impact across segments Results of Operations Analyzes revenue and operating income trends, noting a 3% Q3 FY2021 revenue decrease driven by Security division declines Net Revenues by Segment - Q3 2021 vs Q3 2020 (in millions) | Segment | Q3 2020 (in millions) | Q3 2021 (in millions) | $ Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Security | $187.1 | $151.4 | ($35.7) | (19)% | | Healthcare | $45.7 | $54.0 | $8.3 | 18% | | Optoelectronics and Manufacturing | $60.1 | $78.4 | $18.3 | 30% | | Total | $292.9 | $283.8 | ($9.1) | (3)% | - For the nine months ended March 31, 2021, Security division revenues decreased 25% ($147.1 million) year-over-year, primarily due to COVID-19 related delays and a contract expiration in Mexico[124] - For the nine months ended March 31, 2021, Healthcare division revenues grew 25% ($32.5 million) and Optoelectronics and Manufacturing revenues grew 22% ($40.2 million) year-over-year[125][126] Liquidity and Capital Resources Assesses the company's strong liquidity position, with increased cash and cash equivalents and substantial available credit - Cash and cash equivalents increased by $16.4 million (21.5%) to $92.5 million at March 31, 2021, from June 30, 2020[134] - Net cash provided by operating activities was $131.1 million for the nine months ended March 31, 2021, up from $105.6 million in the prior-year period, driven by favorable changes in net working capital[136] - During the nine months ended March 31, 2021, the company repurchased 322,588 shares of its common stock[70] Trends and Uncertainties Identifies COVID-19, global economic instability, and regulatory changes as key factors influencing future operations - The COVID-19 pandemic has caused order delays and service revenue impacts in the Security division, while boosting demand for certain products in the Healthcare division[105] - The EU has extended the deadline for airports to comply with ECAC Standard 3 for hold baggage screening to March 2024, affecting the Security division's product deployment timeline[110] - Global macroeconomic factors, the U.S. political climate, and changes in global trade policies and tariffs create uncertainty that could negatively affect business operations and financial results[106][107] Item 3 — Quantitative and Qualitative Disclosures about Market Risk Reports no material changes in market risk exposure compared to the prior fiscal year's annual report - No material changes in market risk exposure were reported for the nine months ended March 31, 2021, compared to the disclosures in the last Annual Report[146] Item 4 — Controls and Procedures Confirms effective disclosure controls and procedures, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2021[147] - No material changes were identified in the company's internal control over financial reporting during the third quarter of fiscal 2021[148] PART II — OTHER INFORMATION Item 1 — Legal Proceedings Incorporates by reference detailed discussions of material legal proceedings from the financial statement notes - Material legal proceedings are detailed in Note 10, "Commitments and Contingencies," and are incorporated by reference[151] Item 1A —Risk Factors States no material changes to previously disclosed risk factors, noting potential amplification by the COVID-19 pandemic - There have been no material changes to the risk factors previously disclosed in the company's Form 10-K for the fiscal year ended June 30, 2020[152] Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds Refers to the MD&A section for information regarding the company's equity security repurchase activities - Information on equity security purchases is incorporated by reference from the MD&A section[153] Item 5 — Other Information Details the CEO's long-term incentive program amendment, extending it through FY2023 with increased share awards - The CEO's long-term incentive program was amended on April 28, 2021, to extend through FY2023 and increase potential share awards based on operating income growth metrics[154][155] Item 6 — Exhibits Lists all exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and XBRL data files - Lists certifications pursuant to the Sarbanes-Oxley Act and XBRL data files as exhibits filed with the report[156]