OSI Systems(OSIS) - 2024 Q3 - Quarterly Results

Financial Performance Summary Third Quarter Fiscal 2024 Performance The company reported record third-quarter revenues of $405.4 million, a 34% year-over-year increase, and a 54% rise in GAAP Diluted EPS to $1.95, primarily driven by the Security division, maintaining a strong backlog of approximately $1.8 billion Q3 FY2024 vs Q3 FY2023 Financial Highlights | Metric | Q3 FY2024 | Q3 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $405.4M | $302.9M | +34% | | Net Income (GAAP) | $34.0M | $21.8M | +56% | | Diluted EPS (GAAP) | $1.95 | $1.27 | +54% | | Net Income (Non-GAAP) | $37.7M | $25.6M | +47% | | Diluted EPS (Non-GAAP) | $2.16 | $1.49 | +45% | - The company's backlog was approximately $1.8 billion as of March 31, 2024, with a book-to-bill ratio of 1.0 for the third quarter[5] Year-to-Date Fiscal 2024 Performance For the first nine months of fiscal 2024, revenues grew to $1.06 billion from $866.6 million in the prior-year period, with GAAP diluted EPS seeing a significant increase to $4.82 from $2.88 year-over-year Nine Months Ended March 31, 2024 vs 2023 Financial Highlights | Metric | Nine Months FY2024 | Nine Months FY2023 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $1.06B | $866.6M | +22% | | Net Income (GAAP) | $83.5M | $49.4M | +69% | | Diluted EPS (GAAP) | $4.82 | $2.88 | +67% | | Net Income (Non-GAAP) | $91.5M | $61.0M | +50% | | Diluted EPS (Non-GAAP) | $5.29 | $3.55 | +49% | Business Segment Performance The Security division was the primary growth driver with a 60% year-over-year revenue increase and significant operating income growth, while Optoelectronics and Manufacturing reported softer revenues due to customer inventory adjustments, and Healthcare continued to face challenges from the hospital spending environment - The Security division's revenues increased 60% year-over-year, driving significant operating income growth and adjusted operating margin expansion, with the quarter-end backlog remaining strong despite substantial revenue conversion[6] - The Optoelectronics and Manufacturing division experienced softer Q3 revenues as some customers adjusted inventory levels and delayed deliveries, with a solid fourth quarter anticipated[6] - The Healthcare division was challenged by the hospital spending environment, with the company focusing on new product development, particularly in its patient monitoring portfolio, to drive future growth[6] Fiscal Year 2024 Outlook OSI Systems reiterated its fiscal 2024 revenue growth guidance of over 19% and increased its non-GAAP adjusted diluted EPS growth guidance from greater than 29% to greater than 30% compared to fiscal 2023 - The company reiterates its fiscal 2024 revenue guidance, anticipating growth in excess of 19% over fiscal 2023[8] - The company increased its non-GAAP adjusted diluted EPS guidance for fiscal 2024 from over 29% growth to over 30% growth compared to the previous fiscal year[8] Financial Statements Unaudited Condensed Consolidated Statements of Operations The income statement for the three and nine months ended March 31, 2024, shows a significant year-over-year increase in total net revenues, gross profit, and income from operations, leading to a substantial rise in net income and diluted earnings per share Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended March 31, | Nine Months Ended March 31, | | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | Total net revenues | $405,406 | $302,889 | $1,057,851 | $866,557 | | Gross profit | $136,095 | $103,786 | $376,141 | $287,490 | | Income from operations | $51,363 | $34,337 | $126,243 | $78,128 | | Net income | $34,043 | $21,808 | $83,475 | $49,397 | | Diluted EPS | $1.95 | $1.27 | $4.82 | $2.88 | Unaudited Segment Information This section details revenues and operating income by division, highlighting that the Security division's substantial growth in both metrics for the three and nine-month periods more than compensated for the slight declines in the Optoelectronics and Healthcare divisions Segment Revenues (in thousands) | Segment | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Security | $285,960 | $178,752 | $700,564 | $491,188 | | Optoelectronics | $87,974 | $93,888 | $282,199 | $286,513 | | Healthcare | $41,493 | $43,911 | $121,130 | $130,994 | Segment Operating Income (in thousands) | Segment | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Security | $50,127 | $29,496 | $122,592 | $66,014 | | Optoelectronics | $9,435 | $12,493 | $32,493 | $35,963 | | Healthcare | $1,564 | $1,787 | $2,157 | $4,819 | Unaudited Condensed Consolidated Balance Sheets As of March 31, 2024, the company's balance sheet shows total assets of $1.83 billion, an increase from $1.56 billion at June 30, 2023, primarily driven by increases in accounts receivable and inventories, funded partly by an increase in bank lines of credit Condensed Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total current assets | $1,119,250 | $839,903 | | Total Assets | $1,831,075 | $1,555,686 | | Total current liabilities | $761,682 | $571,694 | | Total liabilities | $1,017,662 | $829,521 | | Total stockholders' equity | $813,413 | $726,165 | Non-GAAP Financial Measures and Reconciliations Presentation of Non-GAAP Financial Measures The company explains its use of non-GAAP financial measures to provide a clearer comparison of its underlying operational performance, excluding items like impairment, restructuring charges, amortization of acquired intangible assets, and certain tax effects not reflective of ongoing results - Management believes non-GAAP measures offer enhanced insight into ongoing operations and provide a more meaningful comparison of financial results across periods and against peer companies[10] - Adjustments to GAAP figures include impairment, restructuring charges, amortization of intangible assets from acquisitions, non-cash interest expense, and associated tax effects[10] Reconciliation of GAAP to Non-GAAP Net Income and EPS This section provides a detailed reconciliation from GAAP to non-GAAP net income and EPS, where for Q3 FY24, GAAP net income of $34.0 million was adjusted for items like restructuring charges ($1.0M) and amortization of intangibles ($3.9M) to arrive at a non-GAAP net income of $37.7 million Q3 FY2024 GAAP to Non-GAAP Reconciliation (in thousands, except EPS) | Description | Net Income | EPS | | :--- | :--- | :--- | | GAAP basis | $34,043 | $1.95 | | Restructuring and other charges | $1,004 | $0.06 | | Amortization of acquired intangible assets | $3,881 | $0.22 | | Tax effect of adjustments & discrete items | ($1,268) | ($0.07) | | Non-GAAP basis | $37,660 | $2.16 | Reconciliation of GAAP to Non-GAAP Operating Income by Segment These tables reconcile GAAP to non-GAAP operating income and margin for each business segment, showing that for Q3 FY24, the company's total non-GAAP operating margin was 13.9%, compared to a GAAP margin of 12.7%, with the Security division's non-GAAP operating margin at 18.6% Q3 FY2024 GAAP to Non-GAAP Operating Income Reconciliation (in thousands) | Segment | GAAP Operating Income | Adjustments | Non-GAAP Operating Income | | :--- | :--- | :--- | :--- | | Security | $50,127 | $2,985 | $53,112 | | Optoelectronics | $9,435 | $1,284 | $10,719 | | Healthcare | $1,564 | $612 | $2,176 | | Total | $51,363 | $4,885 | $56,248 | Nine Months FY2024 GAAP to Non-GAAP Operating Income Reconciliation (in thousands) | Segment | GAAP Operating Income | Adjustments | Non-GAAP Operating Income | | :--- | :--- | :--- | :--- | | Security | $122,592 | $9,387 | $131,979 | | Optoelectronics | $32,493 | $3,678 | $36,171 | | Healthcare | $2,157 | $1,215 | $3,372 | | Total | $126,243 | $14,764 | $141,007 | Other Information Conference Call Information The company announced it would host a conference call and simultaneous webcast on the morning of the earnings release to discuss the financial results - A conference call and webcast were scheduled for 9:00 am PT (12:00 pm ET) on April 25, 2024, to discuss the financial results[12] About OSI Systems OSI Systems is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, healthcare, defense, and aerospace industries - The company has over 40 years of experience in electronics engineering and manufacturing, with facilities in more than a dozen countries[14] Forward-Looking Statements This section contains a standard safe harbor statement, cautioning that forward-looking statements regarding future performance are subject to various risks and uncertainties that could cause actual results to differ materially from expectations - Forward-looking statements in the release relate to current expectations about revenues, earnings, and growth, and are not guarantees of future performance[15] - Risks include contract award delays, supply chain disruptions, global economic uncertainty, and other factors detailed in the company's SEC filings[15]