Business Wire | Jan 27, 2022 09:00AM EST

OSI Systems Reports Fiscal 2022 Second Quarter Financial Results

Jan. 27, 2022

HAWTHORNE, Calif.--(BUSINESS WIRE)--Jan. 27, 2022--OSI Systems, Inc. (the "Company" or "OSI Systems") (NASDAQ: OSIS) today announced financial results for the three and six months ended December 31, 2021.

Deepak Chopra, OSI Systems' Chairman and Chief Executive Officer, stated, "We are pleased with our overall performance in the second quarter, during which we navigated a challenging general business environment, including a heightened impact from COVID with the emergence of the new Omicron variant, as well as increased supply chain and logistics challenges. We ended the quarter with a significant backlog, and we are pursuing various opportunities in attractive long-term markets, which positions us well for the future."

The Company reported revenues of $276.7 million for the second quarter of fiscal 2022, which is comparable to the $276.0 million reported for the second quarter of fiscal 2021. Net income for the second quarter of fiscal 2022 was $19.8 million, or $1.09 per diluted share, compared to net income of $20.0 million, or $1.10 per diluted share, for the second quarter of fiscal 2021. Non-GAAP net income for the second quarter of fiscal 2022 was $23.2 million, or $1.28 per diluted share, compared to non-GAAP net income for the fiscal 2021 second quarter of $24.6 million, or $1.35 per diluted share.

For the six months ended December 31, 2021, revenues were $555.9 million compared to $530.9 million in the same period a year ago. Net income for the six months ended December 31, 2021 was $38.8 million, or $2.13 per diluted share, compared with $29.4 million, or $1.61 per diluted share, for the same period a year ago. Non-GAAP net income for the six months ended December 31, 2021 was $44.4 million, or $2.44 per diluted share, compared with non-GAAP net income of $44.1 million, or $2.41 per diluted share, for the comparable prior-year period.

For the three and six months ended December 31, 2021, the Company's book-to-bill ratio was 0.9 and 1.2, respectively. As of December 31, 2021, the Company's backlog was over $1.2 billion, representing an increase of 12% from the Company's backlog as of June 30, 2021. The Company's cash generated from operations was $14.5 million during the quarter ended December 31, 2021. Net capital expenditures were $3.7 million during the three months ended December 31, 2021.

Mr. Chopra commented, "Given the challenging global backdrop, we were pleased with the Security division performance. The evolving pandemic as well as ongoing supply chain issues have adversely impacted the division. We continue to work through these related challenges with our customers and partners and are well positioned in the global marketplace to capitalize on future opportunities."

Mr. Chopra continued, "Our Optoelectronics and Manufacturing division again delivered outstanding results reporting record revenues and record operating income. Robust bookings in the quarter led to a record Q2 backlog for the division."

Mr. Chopra concluded, "Our Healthcare division continued to perform steadily with a solid second quarter. As anticipated because of increased revenues at the onset of the pandemic, we reported a small reduction in year-over-year revenues. During the quarter, we continued to focus on new product development to bolster our core offerings while simultaneously investing in strengthening our sales and marketing efforts."

During the second quarter of fiscal 2022, the Company refinanced its credit facility, expanding its borrowing capacity from $535 million to $750 million and extending the maturity to December 2026. The Company also repurchased 312,790 shares under its current stock buyback program, and, as of December 31, 2021, has the authority to repurchase approximately 2.1 million additional shares.

Fiscal Year 2022 Outlook

Previous Guidance Current Guidance



Revenues $1.190 billion - $1.225 $1.160 billion - $1.195 billion billion



Non-GAAP Diluted Earnings $5.72 - $6.00 $5.75 - $6.02Per Share



The Company is increasing its non-GAAP diluted earnings per share guidance given an anticipated stronger operating margin. The Company is adjusting its fiscal year 2022 revenues guidance as set forth above primarily as a result of the continued impacts stemming from the COVID pandemic. Actual revenues and non-GAAP diluted earnings per share could vary from this guidance due to factors discussed under "Forward-Looking Statements" or other factors, including uncertainties as to the duration and future scope of the COVID-19 pandemic.

The Company's fiscal 2022 diluted earnings per share guidance is provided on a non-GAAP basis only. 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 most directly comparable 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 and non-GAAP operating margin, all of which are non-GAAP financial measures. The presentation of these non-GAAP figures for the three and six months ended December 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 in fiscal 2021, 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 second quarter of fiscal 2022. 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 February 10, 2022. 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 3496347 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 2022 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; 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 current 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 Six Months Ended December 31, December 31,

2020 2021 2020 2021

Revenues:

Products $ 208,367 $ 205,377 $ 391,114 $ 412,589

Services 67,642 71,304 139,803 143,349

Total revenues 276,009 276,681 530,917 555,938

Cost of goods sold:

Products 139,893 139,060 264,734 281,966

Services 34,035 37,848 68,351 74,869

Total cost of goods sold 173,928 176,908 333,085 356,835

Gross profit 102,081 99,773 197,832 199,103

Operating expenses:

Selling, general and 56,101 54,879 114,718 112,202 administrative

Research and development 13,784 14,977 25,866 29,794

Impairment, restructuringand other charges (162 ) 831 8,197 3,341 (benefit), net

Total operating expenses 69,723 70,687 148,781 145,337

Income from operations 32,358 29,086 49,051 53,766

Interest and other (4,233 ) (2,217 ) (8,422 ) (4,233 )expense, net

Income before income 28,125 26,869 40,629 49,533 taxes

Provision for income (8,087 ) (7,072 ) (11,247 ) (10,684 )taxes

Net income $ 20,038 $ 19,797 $ 29,382 $ 38,849

Diluted earnings per $ 1.10 $ 1.09 $ 1.61 $ 2.13 share

Weighted average shares 18,196 18,106 18,266 18,203 outstanding - diluted

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED SEGMENT INFORMATION

(in thousands)

Three Months Ended Six Months Ended December 31, December 31,

2020 2021 2020 2021

Revenues - by Segment:

Security division $ 145,236 $ 145,918 $ 280,011 $ 295,435

Healthcare division 54,895 52,425 106,398 103,013

Optoelectronics andManufacturing division, 87,521 91,490 167,435 183,795 including intersegment revenues

Intersegment (11,643 ) (13,152 ) (22,927 ) (26,305 )eliminations

Total $ 276,009 $ 276,681 $ 530,917 $ 555,938



Operating income (loss) - by Segment:

Security division $ 19,776 $ 18,171 $ 28,682 $ 39,764

Healthcare division 9,323 7,030 18,307 12,950

Optoelectronics and 10,414 13,382 19,154 23,165 Manufacturing division

Corporate (7,361 ) (9,663 ) (16,817 ) (22,126 )

Intersegment 206 166 (275 ) 13 eliminations

Total $ 32,358 $ 29,086 $ 49,051 $ 53,766

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

June 30, 2021 December 31, 2021

Assets



Cash and cash equivalents $ 80,613 $ 86,332

Accounts receivable, net 290,653 288,037

Inventories 294,208 334,242

Other current assets 43,930 61,179

Total current assets 709,404 769,790

Property and equipment, net 118,004 116,115

Goodwill 320,304 320,319

Intangible assets, net 127,608 126,643

Other non-current assets 109,047 110,239

Total Assets $ 1,384,367 $ 1,443,106



Liabilities and Stockholders' Equity



Bank lines of credit $ -- $ 81,622

Current portion of long-term debt 846 287,247

Accounts payable and accrued expenses 210,077 200,964

Other current liabilities 133,844 124,622

Total current liabilities 344,767 694,455

Long-term debt 276,421 602

Other long-term liabilities 123,359 127,901

Total liabilities 744,547 822,958

Total stockholders' equity 639,820 620,148

Total Liabilities and Stockholders' Equity $ 1,384,367 $ 1,443,106

OSI SYSTEMS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

NET INCOME AND EARNINGS PER SHARE

(in thousands, except earnings per share data)

Three Months Ended Six Months Ended December 31, December 31,

2020 2021 2020 2021

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

GAAP basis $ 20,038 $ 1.10 $ 19,797 $ 1.09 $ 29,382 $ 1.61 $ 38,849 $ 2.13

Impairment,restructuringand other (162 ) (0.01 ) 831 0.05 8,197 0.45 3,341 0.18 charges (benefit),net

Amortizationof acquired 3,704 0.20 3,162 0.18 7,480 0.41 6,360 0.36 intangible assets

Non-cashinterest 2,260 0.12 57 -- 4,486 0.25 125 0.01 expense

Tax benefitof above (1,600 ) (0.08 ) (1,009 ) (0.06 ) (5,546 ) (0.31 ) (2,476 ) (0.14 )adjustments

Impact fromdiscrete 347 0.02 347 0.02 71 -- (1,798 ) (0.10 )income tax items



Non-GAAP $ 24,587 $ 1.35 $ 23,185 $ 1.28 $ 44,070 $ 2.41 $ 44,401 $ 2.44 basis

RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages)

Three Months Ended December 31, 2020

Optoelectronics

Security Healthcare and Corporate / Total Division Division Manufacturing Elimination

Division

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

GAAP basis -operating $ 19,776 13.6 % $ 9,323 17.0 % $ 10,414 11.9 % $ (7,155 ) $ 32,358 11.7 %income (loss)

Restructuringand othercharges 269 0.2 % 27 -- -- -- (458 ) (162 ) (0.1 %)(benefit),net

Amortizationof acquired 2,732 1.9 % 201 0.4 % 771 0.9 % - - 3,704 1.4 %intangibleassets

Non-GAAPbasis- $ 22,777 15.7 % $ 9,551 17.4 % $ 11,185 12.8 % $ (7,613 ) $ 35,900 13.0 %operatingincome (loss)





Three Months Ended December 31, 2021

Optoelectronics

Security Healthcare and Corporate / Total Division Division Manufacturing Elimination

Division

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

GAAP basis -operating $ 18,171 12.5 % $ 7,030 13.4 % $ 13,382 14.6 % $ (9,497 ) $ 29,086 10.5 %income (loss)

Impairment,restructuring 353 0.2 - - - - 478 831 0.3 %and othercharges, net

Amortizationof acquired 2,251 1.5 201 0.4 710 0.8 - 3,162 1.2 %intangibleassets

Non-GAAPbasis- $ 20,775 14.2 % $ 7,231 13.8 % $ 14,092 15.4 % $ (9,019 ) $ 33,079 12.0 %operatingincome (loss)



Six Months Ended December 31, 2020

Optoelectronics

Security Healthcare and Corporate / Total Division Division Manufacturing Elimination

Division

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

GAAP basis -operating $ 28,682 10.2 % $ 18,307 17.2 % $ 19,154 11.4 % $ (17,092 ) $ 49,051 9.2 %income (loss)

Restructuringand othercharges 8,522 3.1 % 27 -- 146 0.1 % (498 ) 8,197 1.6 %(benefit),net

Amortizationof acquired 5,545 2.0 % 403 0.4 % 1,532 0.9 % -- 7,480 1.4 %intangibleassets

Non-GAAPbasis- $ 42,749 15.3 % $ 18,737 17.6 % $ 20,832 12.4 % $ (17,590 ) $ 64,728 12.2 %operatingincome (loss)





Six Months Ended December 31, 2021

Optoelectronics

Security Healthcare and Corporate / Total Division Division Manufacturing Elimination

Division

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

GAAP basis -operating $ 39,764 13.5 % $ 12,950 12.6 % $ 23,165 12.6 % $ (22,113 ) $ 53,766 9.7 %income (loss)

Impairment,restructuring 628 0.2 % - - - - 2,713 3,341 0.6 %and othercharges, net

Amortizationof acquired 4,537 1.5 % 403 0.8 1,420 0.8 % - 6,360 1.1 %intangibleassets

Non-GAAPbasis- $ 44,929 15.2 % $ 13,353 13.4 % $ 24,585 13.4 % $ (19,400 ) $ 63,467 11.4 %operatingincome (loss)



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