Business Wire | Apr 29, 2021 09:01AM EDT

OSI Systems Reports Fiscal 2021 Third Quarter Financial Results

Apr. 29, 2021

HAWTHORNE, Calif.--(BUSINESS WIRE)--Apr. 29, 2021--OSI Systems, Inc. (the "Company" or "OSI Systems") (Nasdaq: OSIS) today announced financial results for the three and nine months ended March 31, 2021.

Deepak Chopra, OSI Systems' Chairman and Chief Executive Officer, stated, "We are pleased with our third quarter performance as we delivered another quarter of record adjusted earnings despite the ongoing impact of the COVID-19 pandemic on our Security division. With the strength of our backlog and momentum in our end markets, we expect to conclude fiscal 2021 with fourth quarter year-over-year sales growth of 11% - 20% and strong earnings."

For the third quarter of fiscal 2021, the Company reported revenues of $283.8 million compared to $292.9 million reported for the third quarter of fiscal 2020. Net income for the third quarter of fiscal 2021 was $18.8 million, or $1.03 per diluted share, compared to net income of $19.6 million, or $1.06 per diluted share, for the third quarter of fiscal 2020. Non-GAAP net income for the third quarter of fiscal 2021 was $25.3 million, or $1.38 per diluted share, compared to non-GAAP net income for the fiscal 2020 third quarter of $22.1 million, or $1.20 per diluted share.

For the nine months ended March 31, 2021, revenues were $814.7 million compared to $889.1 million in the same period a year ago. Net income for the nine months ended March 31, 2021 was $48.2 million, or $2.63 per diluted share, compared with $61.3 million, or $3.28 per diluted share, for the same period a year ago. Non-GAAP net income for the nine months ended March 31, 2021 was $69.3 million, or $3.79 per diluted share, compared with non-GAAP net income of $63.1 million, or $3.38 per diluted share, for the comparable prior-year period.

For the quarter ended March 31, 2021, the Company's book-to-bill ratio was 1.1. As of March 31, 2021, the Company's backlog was $1.063 billion compared to $861 million as of June 30, 2020. During the quarter ended March 31, 2021, operating cash flow was $41.6 million, and capital expenditures were $2.6 million.

Mr. Chopra commented, "Our Optoelectronics and Manufacturing division delivered excellent results with record third quarter sales and operating income. Bookings were also strong leading to a record Opto backlog positioning the division for a strong finish to fiscal 2021."

Mr. Chopra continued, "The Security division's solid operational performance contributed to adjusted operating margin expansion despite lower year-over-year revenues that were impacted by the pandemic, most notably in our aviation and cargo businesses. We continue to demonstrate our leadership in the global marketplace and are seeing signs of the Security business beginning to emerge from the pandemic-related challenges with numerous recent awards. We expect to resume sales growth during the fourth fiscal 2021 quarter."

Mr. Chopra concluded, "The Healthcare division reported another terrific quarter with an 18% increase in third quarter year-over-year revenue and significant operating income growth. We made significant investments in research and development as we continue our focus on enhancing core offerings and developing new products."

Fiscal Year 2021 Outlook

Current Updated Guidance Previous Guidance



Revenues $1.123 billion - $1.148 $1.110 billion - $1.145 billion billion



Non-GAAP Diluted Earnings $5.15 - $5.40 $5.00 - $5.35Per Share



For fiscal year 2021, the Company is raising its revenue guidance to a range of $1.123 billion to $1.148 billion and is raising its non-GAAP diluted earnings per share guidance to $5.15 to $5.40. Actual revenues and non-GAAP diluted earnings per share for fiscal 2021 could vary from this guidance due to factors discussed under "Forward-Looking Statements" or other factors, including uncertainties as to the duration and scope of the COVID-19 pandemic.

The Company's fiscal 2021 diluted earnings per share guidance is provided on a non-GAAP basis. The Company does not provide a reconciliation of guidance for non-GAAP diluted EPS to GAAP diluted EPS (the most directly comparable GAAP measure) on a forward-looking basis because the Company is unable to provide a meaningful or accurate compilation of reconciling items and certain information is not available. This is due to the inherent difficulty and complexity in accurately forecasting the timing and amounts of various items included in the calculation of GAAP diluted EPS but excluded in the calculation of non-GAAP diluted EPS, such as acquisition costs and other non-recurring items that have not yet occurred, are out of the Company's control, or cannot otherwise reasonably be predicted. For the same reasons, the Company is unable to address the significance of unavailable information which may be material and therefore could result in GAAP diluted EPS, the corresponding GAAP financial measure, being materially different from projected non-GAAP diluted EPS.

Presentation of Non-GAAP Financial Measures

This earnings release includes a presentation of non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP operating income (loss) by segment, non-GAAP operating margin and non-GAAP provision (benefit) for income taxes and non-GAAP effective tax rate, all of which are non-GAAP financial measures. The presentation of these non-GAAP figures for the three and nine months ended March 31, 2020 and 2021 is provided to allow for the comparison of the underlying performance of the Company, net of impairment, restructuring and other charges (including certain legal costs), amortization of intangible assets acquired through business acquisitions and non-cash interest expense primarily related to convertible debt, and their associated tax effects, and the impact of discrete income tax items. Although we exclude amortization of acquired intangible assets from our non-GAAP figures, we believe that it is important for investors to understand that revenue generated from such intangibles is included within revenue in determining non-GAAP financial measures of the Company. Management believes that these non-GAAP financial measures provide (i) enhanced insight into the ongoing operations of the Company, (ii) meaningful information regarding the Company's financial results (excluding amounts management does not view as reflective of ongoing operating results) for purposes of planning, forecasting, and assessing the performance of the Company's businesses, (iii) a meaningful comparison of financial results of the current period against results of past periods, and (iv) financial results that are generally more comparable to financial results of peer companies than are GAAP figures. Non-GAAP financial measures should not be assessed in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. These non-GAAP measures may not be the same as measures used by other companies due to possible differences in methods and in the items or events for which adjustments are made.

Reconciliations of GAAP to non-GAAP financial information are provided in the accompanying tables. The financial results calculated in accordance with GAAP and reconciliations from those financial results should be carefully evaluated.

Conference Call Information

The Company will host a conference call and simultaneous webcast beginning at 9:00am PT (12:00pm ET) today to discuss its results for the third quarter of fiscal 2021. To listen, please visit the Investor Relations section of the OSI Systems website, http://investors.osi-systems.com/index.cfm and follow the link that will be posted on the front page. A replay of the webcast will be available beginning shortly after the conclusion of the conference call until May 13, 2021. The replay can either be accessed through the Company's website, www.osi-systems.com, or by telephonic replay by calling 1-855-859-2056 and entering the conference call identification number 7855009 when prompted for the replay code.

About OSI Systems

OSI Systems is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, healthcare, defense and aerospace industries. The Company combines more than 40 years of electronics engineering and manufacturing experience with offices and production facilities in more than a dozen countries to implement a strategy of expansion into selective end-product markets. For more information on OSI Systems or its subsidiary companies, visit www.osi-systems.com. News Filter: OSIS-E

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to the Company's current expectations, beliefs, and projections concerning matters that are not historical facts. Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions, and contingencies, many of which are outside the Company's control and which may cause actual results to differ materially from those described in or implied by any forward-looking statement. Forward-looking statements include, but are not limited to, information provided regarding expected revenues, earnings, growth, operational performance and impact of the COVID-19 pandemic in fiscal 2021 and beyond. The Company could be exposed to a variety of negative consequences as a result of delays related to the award of domestic and international contracts; failure to secure the renewal of key customer contracts; delays in customer programs; delays in revenue recognition related to the timing of customer acceptance; unanticipated impacts of sequestration and other U.S. Government budget control provisions; changes in domestic and foreign government spending and budgetary, procurement and trade policies adverse to the Company's businesses; global economic uncertainty; impact on the Company's business related to or resulting from the COVID-19 pandemic such as material delays and cancellations of orders or deliveries thereon, supply chain disruptions, plant closures, or other adverse impacts on the Company's ability to execute business plans; unfavorable currency exchange rate fluctuations; effect of changes in tax legislation; market acceptance of the Company's new and existing technologies, products, and services; the Company's ability to win new business and convert orders received to sales within the fiscal year; enforcement actions in respect of any noncompliance with laws and regulations, including export control and environmental regulations and the matters that are the subject of some or all of the Company's investigations and compliance reviews; contract and regulatory compliance matters, and actions which, if brought, could result in judgments, settlements, fines, injunctions, debarment, or penalties; and other risks and uncertainties, including, but not limited to, those detailed herein and from time to time in the Company's Securities and Exchange Commission filings, which could have a material and adverse impact on the Company's business, financial condition, and results of operations. Many of the referenced risks could be amplified by the magnitude and duration of the COVID-19 pandemic. For additional information on these and other factors that could cause the Company's future results to differ materially from those in any forward-looking statements, see the section titled "Risk Factors" in the Company's most recently filed Annual Report on Form 10-K and other risks described therein and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which are based on currently available information and speak only as of the date on which they are made. The Company assumes no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information, or otherwise, except to the extent it is required to do so under federal securities laws.

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended Nine Months Ended March 31, March 31,

2020 2021 2020 2021

Revenues:

Products $ 213,257 $ 217,124 $ 646,790 $ 608,238

Services 79,626 66,663 242,287 206,466

Total net revenues 292,883 283,787 889,077 814,704

Cost of goods sold:

Products 141,069 144,958 436,120 409,692

Services 42,707 34,810 133,866 103,161

Total cost of goods sold 183,776 179,768 569,986 512,853

Gross profit 109,107 104,019 319,091 301,851

Operating expenses:

Selling, general and administrative 65,576 57,906 191,655 172,624

Research and development 15,358 13,932 44,485 39,798

Restructuring and other charges 4,548 (285) 1,520 7,912(benefit), net

Total operating expenses 85,482 71,553 237,660 220,334

Income from operations 23,625 32,466 81,431 81,517

Interest expense and other, net (4,706) (4,167) (14,286) (12,589)

Income before income taxes 18,919 28,299 67,145 68,928

Benefit (provision) for income 639 (9,526) (5,858) (20,773)taxes

Net income $ 19,558 $ 18,773 $ 61,287 $ 48,155



Diluted earnings per share $ 1.06 $ 1.03 $ 3.28 $ 2.63

Weighted average shares outstanding 18,513 18,298 18,693 18,278- diluted

UNAUDITED SEGMENT INFORMATION

(in thousands)

Three Months Ended

March 31,

Nine Months Ended

March 31,

2020

2021

2020

2021

Revenues - by Segment:

Security division

$ 187,076

$ 151,409

$ 578,477

$ 431,420

Healthcare division

45,662

54,023

127,862

160,421

Optoelectronics and Manufacturing division (including intersegment revenues)

70,240

90,278

216,684

257,713

Intersegment revenues eliminations

(10,095)

(11,923)

(33,946)

(34,850)

Total

$ 292,883

$ 283,787

$ 889,077

$ 814,704

Operating income (loss) - by Segment:

Security division

$ 24,525

$ 23,969

$ 73,405

$ 52,651

Healthcare division

1,682

7,333

5,793

25,640

Optoelectronics and Manufacturing division

7,309

10,484

25,096

29,638

Corporate

(10,161)

(9,078)

(23,578)

(25,895)

Intersegment eliminations

270

(242)

715

(517)

Total

$ 23,625

$ 32,466

$ 81,431

$ 81,517

UNAUDITED SEGMENT INFORMATION

(in thousands)

Three Months Ended Nine Months Ended March 31, March 31,

2020 2021 2020 2021

Revenues - by Segment:

Security division $ $ $ $ 187,076 151,409 578,477 431,420

Healthcare division 45,662 54,023 127,862 160,421

Optoelectronics and Manufacturingdivision (including intersegment 70,240 90,278 216,684 257,713revenues)

Intersegment revenues eliminations (10,095) (11,923) (33,946) (34,850)

Total $ $ $ $ 292,883 283,787 889,077 814,704



Operating income (loss) - by Segment:

Security division $ 24,525 $ 23,969 $ 73,405 $ 52,651

Healthcare division 1,682 7,333 5,793 25,640

Optoelectronics and Manufacturing 7,309 10,484 25,096 29,638division

Corporate (10,161) (9,078) (23,578) (25,895)

Intersegment eliminations 270 (242) 715 (517)

Total $ 23,625 $ 32,466 $ 81,431 $ 81,517

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

June 30, 2020 March 31, 2021

Assets



Cash and cash equivalents $ 76,102 $ 92,465

Accounts receivable, net 269,840 258,594

Inventories 241,226 283,523

Other current assets 30,541 26,828

Total current assets 617,709 661,410

Property and equipment, net 127,936 125,477

Goodwill 310,627 319,211

Intangible assets, net 128,279 130,058

Other non-current assets 83,990 89,804

Total Assets $ 1,268,541 $ 1,325,960



Liabilities and Stockholders' Equity



Bank lines of credit $ 59,000 $ --

Current portion of long-term debt 926 925

Accounts payable and accrued expenses 154,487 188,518

Other current liabilities 115,688 136,626

Total current liabilities 330,101 326,069

Long-term debt 267,072 273,997

Other long-term liabilities 99,216 110,001

Total liabilities 696,389 710,067

Total stockholders' equity 572,152 615,893

Total Liabilities and Stockholders' Equity $ 1,268,541 $ 1,325,960

RECONCILIATION OF GAAP TO NON-GAAP

NET INCOME AND EARNINGS PER SHARE

(in thousands, except earnings per share data)

Three Months Ended March 31, Nine Months Ended March 31,

2020 2021 2020 2021

Net EPS Net EPS Net EPS Net EPS income income income income

GAAP basis $ $ 1.06 $ $ 1.03 $ 61,287 $ 3.28 $ $ 2.63 19,558 18,773 48,155

Restructuringand othercharges 4,548 0.25 (285) (0.02) 1,520 0.08 7,912 0.43(benefit),net

Amortizationof acquired 3,638 0.20 3,639 0.20 10,802 0.58 11,119 0.61intangibleassets

Non-cash 2,192 0.12 2,233 0.12 6,593 0.35 6,719 0.37interest

Tax benefitof above (2,668) (0.15) (1,348) (0.07) (5,041) (0.27) (6,894) (0.38)adjustments

Discrete tax (5,127) (0.28) 2,248 0.12 (12,037) (0.64) 2,319 0.13items



Non-GAAP $ $ 1.20 $ $ 1.38 $ 63,124 $ 3.38 $ $ 3.79basis 22,141 25,260 69,330

RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages)

Three Months Ended March 31, 2020

Security Division

Healthcare Division

Optoelectronics and Manufacturing Division

Corporate / Elimination

Total

% of Sales

% of Sales

% of Sales

% of Sales

GAAP basis - operating income (loss)

$ 24,525

13.1%

$ 1,682

3.7%

$ 7,309

10.4%

$ (9,891)

$ 23,625

8.1%

Restructuring and other charges, net

465

0.2%

3,724

8.1%

300

0.4%

59

4,548

1.6%

Amortization of acquired intangible assets

2,797

1.6%

--

--

841

1.2%

--

3,638

1.2%

Non-GAAP basis- operating income (loss)

$27,787

14.9%

$ 5,406

11.8%

$ 8,450

12.0%

$ (9,832)

$ 31,811

10.9%

Three Months Ended March 31, 2021

Security Division

Healthcare Division

Optoelectronics and Manufacturing Division

Corporate / Elimination

Total

% of Sales

% of Sales

% of Sales

% of Sales

GAAP basis - operating income (loss)

$ 23,969

15.8%

$ 7,333

13.6%

$ 10,484

11.6%

$ (9,320)

$ 32,466

11.4%

Restructuring and other charges (benefit), net

401

0.3%

--

--

--

--

(686)

(285)

(0.1%)

Amortization of acquired intangible assets

2,664

1.8%

202

0.3%

773

0.9%

- -

3,639

1.3%

Non-GAAP basis- operating income (loss)

$ 27,034

17.9%

$ 7,535

13.9%

$ 11,257

12.5%

$ (10,006)

$ 35,820

12.6%

RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages)

Three Months Ended March 31, 2020

Optoelectronics Security Healthcare and Corporate / Total Division Division Manufacturing Elimination Division

% of % of % of % of Sales Sales Sales Sales

GAAP basis - $ $ $ $operating 24,525 13.1% 1,682 3.7% 7,309 10.4% $ (9,891) 23,625 8.1%income (loss)

Restructuringand other 465 0.2% 3,724 8.1% 300 0.4% 59 4,548 1.6%charges, net

Amortizationof acquired 2,797 1.6% -- -- 841 1.2% -- 3,638 1.2%intangibleassets

Non-GAAPbasis- $27,787 14.9% $ 11.8% $ 12.0% $ (9,832) $ 10.9%operating 5,406 8,450 31,811income (loss)

Three Months Ended March 31, 2021

Optoelectronics Security Healthcare and Corporate / Total Division Division Manufacturing Elimination Division

% of % of % of % of Sales Sales Sales Sales

GAAP basis - $ $ $ $operating 23,969 15.8% 7,333 13.6% 10,484 11.6% $ (9,320) 32,466 11.4%income (loss)

Restructuringand othercharges 401 0.3% -- -- -- -- (686) (285) (0.1%)(benefit),net

Amortizationof acquired 2,664 1.8% 202 0.3% 773 0.9% - - 3,639 1.3%intangibleassets

Non-GAAPbasis- $ 17.9% $ 13.9% $ 12.5% $ (10,006) $ 12.6%operating 27,034 7,535 11,257 35,820income (loss)

Nine Months Ended March 31, 2020

Optoelectronics Security Healthcare and Corporate / Total Division Division Manufacturing Elimination Division

% of % of % of % of Sales Sales Sales Sales

GAAP basis - $ $ $ $operating 73,405 12.7% 5,793 4.5% 25,096 11.6% $ (22,863) 81,431 9.2%income (loss)

Restructuringand othercharges 871 0.2% 3,724 2.9% 318 0.1% (3,393) 1,520 0.2%(benefit),net

Amortizationof acquired 8,391 1.4% -- -- 2,411 1.1% -- 10,802 1.1%intangibleassets

Non-GAAPbasis- $ 14.3% $ 7.4% $ 12.8% $ (26,256) $ 10.5%operating 82,667 9,517 27,825 93,753income (loss)

Nine Months Ended March 31, 2021

Optoelectronics Security Healthcare and Corporate / Total Division Division Manufacturing Elimination Division

% of % of % of % of Sales Sales Sales Sales

GAAP basis - $ $ $ $operating 52,651 12.2% 25,640 16.0% 29,638 11.5% $ (26,412) 81,517 10.0%income (loss)

Restructuringand othercharges 8,923 2.1% 27 -- 146 0.1% (1,184) 7,912 1.0%(benefit),net

Amortizationof acquired 8,209 1.9% 605 0.4% 2,305 0.9% -- 11,119 1.3%intangibleassets

Non-GAAPbasis- $ 16.2% $ 16.4% $ 12.5% $ (27,596) $ 12.3%operating 69,783 26,272 32,089 100,548income (loss)

RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED BASIS

PROVISION (BENEFIT) FOR INCOME TAXES AND NON-GAAP EFFECTIVE TAX RATE

Three Months Ended

March 31,

Nine Months Ended

March 31,

2020

2021

2020

2021

Income before income taxes:

GAAP basis

$ 18,919

$ 28,299

$ 67,145

$ 68,928

Provision (benefit) for income taxes:

GAAP basis

$ (639)

$ 9,526

$ 5,858

$ 20,773

Discrete tax items

5,127

(2,248)

12,037

(2,319)

Non-GAAP adjusted basis

$ 4,488

$ 7,278

$ 17,895

$ 18,454

Effective tax rate:

GAAP basis

(3.4%)

33.7%

8.7%

30.1%

Non-GAAP adjusted basis

23.7%

25.7%

26.7%

26.8%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005415/en/

CONTACT: For Additional Information, Contact:

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