Jan 28, 2021

OSI Systems Reports Fiscal 2021 Second Quarter Financial Results

  • Q2 Revenues of $276 Million
  • Q2 Earnings Per Diluted Share
    • GAAP EPS of $1.10 
    • Record Non-GAAP EPS of $1.35
  • Backlog of $1.0 Billion as of December 31, 2020 (20% increase from June 30, 2020)
  • Company Raises Fiscal 2021 Guidance

 

HAWTHORNE, Calif.--(BUSINESS WIRE)--Jan. 28, 2021-- OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ: OSIS) today announced financial results for the three and six months ended December 31, 2020.

Deepak Chopra, OSI Systems’ Chairman and Chief Executive Officer, stated, “We are pleased with our second quarter performance as we delivered record adjusted earnings despite the continued impact of the COVID-19 pandemic. With a healthy backlog and robust pipeline of opportunities, we believe we are well positioned as we enter the second half of fiscal 2021.”

For the second quarter of fiscal 2021, the Company reported revenues of $276.0 million compared to $305.3 million reported for the second quarter of fiscal 2020. Net income for the second quarter of fiscal 2021 was $20.0 million, or $1.10 per diluted share, compared to net income of $21.0 million, or $1.12 per diluted share, for the second quarter of fiscal 2020. Non-GAAP net income for the second quarter of fiscal 2021 was $24.6 million, or $1.35 per diluted share, compared to non-GAAP net income for the fiscal 2020 second quarter of $23.8 million, or $1.27 per diluted share.

For the six months ended December 31, 2020, revenues were $530.9 million compared to $596.2 million in the same period a year ago. Net income for the six months ended December 31, 2020 was $29.4 million, or $1.61 per diluted share, compared with $41.7 million, or $2.22 per diluted share, for the same period a year ago. Non-GAAP net income for the six months ended December 31, 2020 was $44.1 million, or $2.41 per diluted share, compared with non-GAAP net income of $41.0 million, or $2.18 per diluted share, for the comparable prior-year period.

During the quarter ended December 31, 2020, the Company’s book-to-bill ratio was 1.1. As of December 31, 2020, the Company's backlog was $1,031 million compared to $861 million as of June 30, 2020. Operating cash flow during the quarter ended December 31, 2020 was $35.6 million, and capital expenditures were $4.7 million.

Mr. Chopra commented, “As expected, the Security division reported a reduction in year-over-year revenues as we continue to be impacted by the pandemic. However, with strong operational performance, we maintained our adjusted operating margin. We have captured multiple recent awards as we continue to exhibit our leadership in the global marketplace.”

Mr. Chopra continued, “Our Optoelectronics and Manufacturing division again delivered outstanding results with record second quarter sales and operating income. We continue to see strong global demand, and, with record Opto backlog, we expect the division to deliver strong results for the remainder of fiscal 2021.”

Mr. Chopra concluded, “We continued building on our positive momentum in the Healthcare division resulting in a 31% increase in second quarter year-over-year revenue and noteworthy operating income growth. This marks the fourth consecutive quarter of significant adjusted operating margin expansion in the division. Our Healthcare backlog is solid, and we will continue to focus on enhancing our core products and developing new products.”

Fiscal Year 2021 Outlook

 

Current Updated Guidance

 

Previous Guidance

 

 

 

 

Revenues

$1.110 billion - $1.145 billion

 

$1.100 billion - $1.142 billion

 

 

 

 

Non-GAAP Diluted Earnings Per Share

$5.00 - $5.35

 

$4.65 - $5.10

 

 

 

 

For fiscal year 2021, the Company is raising its revenue guidance to a range of $1.110 billion to $1.145 billion and is raising its non-GAAP diluted earnings per share guidance to $5.00 to $5.35. 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.

The Company’s fiscal 2021 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 be reasonably 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 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, 2019 and 2020 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 second 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 February 11, 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 8287891 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. 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

December 31,

 

Six Months Ended

December 31,

 

2019

 

2020

 

2019

 

2020

Revenue:

 

 

 

 

 

 

 

Products

$

223,772

 

$

208,367

 

$

433,533

 

$

391,114

Services

81,570

 

67,642

 

162,661

 

139,803

Total revenues

305,342

 

276,009

 

596,194

 

530,917

Cost of goods sold:

 

 

 

 

 

 

 

Products

148,709

 

139,893

 

295,051

 

264,734

Services

45,860

 

34,035

 

91,159

 

68,351

Total cost of goods sold

194,569

 

173,928

 

386,210

 

333,085

Gross profit

110,773

 

102,081

 

209,984

 

197,832

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

63,902

 

56,101

 

126,079

 

114,718

Research and development

14,881

 

13,784

 

29,127

 

25,866

Restructuring and other charges (benefit), net

(929)

 

(162)

 

(3,028)

 

8,197

Total operating expenses

77,854

 

69,723

 

152,178

 

148,781

Income from operations

32,919

 

32,358

 

57,806

 

49,051

Interest expense and other, net

(4,844)

 

(4,233)

 

(9,580)

 

(8,422)

Income before income taxes

28,075

 

28,125

 

48,226

 

40,629

Provision for income taxes

(7,089)

 

(8,087)

 

(6,497)

 

(11,247)

Net income

$

20,986

 

$

20,038

 

$

41,729

 

$

29,382

 

 

 

 

 

 

 

 

Diluted earnings per share

$

1.12

 

$

1.10

 

$ 2.22

 

$

1.61

Weighted average shares outstanding – diluted

18,682

 

18,196

 

18,783

 

18,266

UNAUDITED SEGMENT INFORMATION

(in thousands)

 

 

Three Months Ended
December 31,

 

Six Months Ended

December 31,

 

2019

 

2020

 

2019

 

2020

Revenues – by Segment:

 

 

 

 

 

 

 

Security division

$

202,437

 

 

$

145,236

 

 

$

391,401

 

 

$

280,011

 

Healthcare division

 

41,992

 

 

 

54,895

 

 

 

82,200

 

 

 

106,398

 

Optoelectronics and Manufacturing division (including intersegment revenues)

 

72,806

 

 

 

87,521

 

 

 

146,444

 

 

 

167,435

 

Intersegment revenues eliminations

 

(11,893

)

 

 

(11,643

)

 

 

(23,851

)

 

 

(22,927

)

Total

$

305,342

 

 

$

276,009

 

 

$

596,194

 

 

$

530,917

 

 

 

 

 

 

 

 

 

Operating income (loss) – by Segment:

 

 

 

 

 

 

 

Security division

$

28,562

 

 

$

19,776

 

 

$

48,880

 

 

$

28,682

 

Healthcare division

 

1,294

 

 

 

9,323

 

 

 

4,111

 

 

 

18,307

 

Optoelectronics and Manufacturing division

 

9,018

 

 

 

10,414

 

 

 

17,787

 

 

 

19,154

 

Corporate

 

(6,080

)

 

 

(7,361

)

 

 

(13,417

)

 

 

(16,817

)

Intersegment eliminations

 

125

 

 

 

206

 

 

 

445

 

 

 

(275

)

Total

$

32,919

 

 

$

32,358

 

 

$

57,806

 

 

$

49,051

 

OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

June 30, 2020

 

December 31, 2020

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

76,102

 

$

72,575

Accounts receivable, net

269,840

 

263,071

Inventories

241,226

 

266,190

Other current assets

30,541

 

32,588

Total current assets

617,709

 

634,424

Property and equipment, net

127,936

 

127,875

Goodwill

310,627

 

318,287

Intangible assets, net

128,279

 

132,076

Other non-current assets

83,990

 

88,141

Total Assets

$

1,268,541

 

$

1,300,803

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Bank lines of credit

$

59,000

 

$

18,000

Current portion of long-term debt

926

 

947

Accounts payable and accrued expenses

154,487

 

162,595

Other current liabilities

115,688

 

151,851

Total current liabilities

330,101

 

333,393

Long-term debt

267,072

 

271,667

Other long-term liabilities

99,216

 

108,107

Total liabilities

696,389

 

713,167

Total stockholders’ equity

572,152

 

587,636

Total Liabilities and Stockholders’ Equity

$

1,268,541

 

$

1,300,803

RECONCILIATION OF GAAP TO NON-GAAP

NET INCOME AND EARNINGS PER SHARE

(in thousands, except earnings per share data)

 

Three Months Ended December 31,

 

Six Months Ended December 31,

 

2019

 

2020

 

2019

 

2020

 

Net income

 

EPS

 

Net income

 

EPS

 

Net income

 

EPS

 

Net income

 

EPS

GAAP basis

$

20,986

 

 

$

1.12

 

 

$

20,038

 

 

$

1.10

 

 

$

41,729

 

 

$

2.22

 

 

$

29,382

 

 

$

1.61

 

Restructuring and other charges (benefit), net

 

(929

)

 

 

(0.05

)

 

 

(162

)

 

 

(0.01

)

 

 

(3,028

)

 

 

(0.16

)

 

 

8,197

 

 

 

0.45

 

Amortization of acquired intangible assets

 

3,566

 

 

 

0.19

 

 

 

3,704

 

 

 

0.20

 

 

 

7,163

 

 

 

0.38

 

 

 

7,480

 

 

 

0.41

 

Non-cash interest

 

2,239

 

 

 

0.12

 

 

 

2,260

 

 

 

0.12

 

 

 

4,402

 

 

 

0.23

 

 

 

4,486

 

 

 

0.25

 

Tax benefit of above adjustments

 

(1,352

)

 

 

(0.07

)

 

 

(1,600

)

 

 

(0.08

)

 

 

(2,373

)

 

 

(0.13

)

 

 

(5,546

)

 

 

(0.31

)

Discrete tax items

 

(696

)

 

 

(0.04

)

 

 

347

 

 

 

0.02

 

 

 

(6,910

)

 

 

(0.36

)

 

 

71

 

 

 

--

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP basis

$

23,814

 

 

$

1.27

 

 

$

24,587

 

 

$

1.35

 

 

$

40,983

 

 

$

2.18

 

 

$

44,070

 

 

$

2.41

 

RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages)

Three Months Ended December 31, 2019

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and
Manufacturing
Division

 

Corporate /
Elimination

 

Total

 

 

 

 

% of
Sales

 

 

 

% of
Sales

 

 

 

% of
Sales

 

 

 

 

 

% of
Sales

GAAP basis – operating income (loss)

 

$

28,562

 

14.1

%

 

$

1,294

 

3.1

%

 

$

9,018

 

12.4

%

 

$

(5,955

)

 

$

32,919

 

 

10.8

%

Restructuring and other charges (benefit), net

 

 

405

 

0.2

%

 

 

--

 

--

 

 

 

30

 

--

 

 

 

(1,364

)

 

 

(929

)

 

(0.4

%)

Amortization of acquired intangible assets

 

 

2,792

 

1.4

%

 

 

--

 

--

 

 

 

774

 

1.1

%

 

 

- -

 

 

 

3,566

 

 

1.2

%

Non-GAAP basis– operating income (loss)

 

$

31,759

 

15.7

%

 

$

1,294

 

3.1

%

 

$

9,822

 

13.5

%

 

$

(7,319

)

 

$

35,556

 

 

11.6

%

 

Three Months Ended December 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)

 

$

19,776

 

13.6

%

 

$

9,323

 

17.0

%

 

$

10,414

 

11.9

%

 

$

(7,155

)

 

$

32,358

 

 

11.7

%

Restructuring and other charges (benefit), net

 

 

269

 

0.2

%

 

 

27

 

--

 

 

 

--

 

--

 

 

 

(458

)

 

 

(162

)

 

(0.1

%)

Amortization of acquired intangible assets

 

 

2,732

 

1.9

%

 

 

201

 

0.4

%

 

 

771

 

0.9

%

 

 

- -

 

 

 

3,704

 

 

1.4

%

Non-GAAP basis– operating income (loss)

 

$

22,777

 

15.7

%

 

$

9,551

 

17.4

%

 

$

11,185

 

12.8

%

 

$

(7,613

)

 

$

35,900

 

 

13.0

%

Six Months Ended December 31, 2019

 

 

Security Division

 

Healthcare Division

 

Optoelectronics and
Manufacturing
Division

 

Corporate /
Elimination

 

Total

 

 

 

 

% of
Sales

 

 

 

% of
Sales

 

 

 

% of
Sales

 

 

 

 

 

% of
Sales

GAAP basis – operating income (loss)

 

$

48,880

 

12.5

%

 

$

4,111

 

5.0

%

 

$

17,787

 

12.1

%

 

$

(12,972

)

 

$

57,806

 

 

9.7

%

Restructuring and other charges (benefit), net

 

 

405

 

0.1

%

 

 

--

 

--

 

 

 

17

 

--

 

 

 

(3,450

)

 

 

(3,028

)

 

(0.5

%)

Amortization of acquired intangible assets

 

 

5,592

 

1.4

%

 

 

--

 

--

 

 

 

1,571

 

1.1

%

 

 

--

 

 

 

7,163

 

 

1.2

%

Non-GAAP basis– operating income (loss)

 

$

54,877

 

14.0

%

 

$

4,111

 

5.0

%

 

$

19,375

 

13.2

%

 

$

(16,422

)

 

$

61,941

 

 

10.4

%

 

Six Months Ended December 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)

 

$

28,682

 

10.2

%

 

$

18,307

 

17.2

%

 

$

19,154

 

11.4

%

 

$

(17,092

)

 

$

49,051

 

 

9.2

%

Restructuring and other charges (benefit), net

 

 

8,522

 

3.1

%

 

 

27

 

--

 

 

 

146

 

0.1

%

 

 

(498

)

 

 

8,197

 

 

1.6

%

Amortization of acquired intangible assets

 

 

5,545

 

2.0

%

 

 

403

 

0.4

%

 

 

1,532

 

0.9

%

 

 

--

 

 

 

7,480

 

 

1.4

%

Non-GAAP basis– operating income (loss)

 

$

42,749

 

15.3

%

 

$

18,737

 

17.6

%

 

$

20,832

 

12.4

%

 

$

(17,590

)

 

$

64,728

 

 

12.2

%

 

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

Source: OSI Systems, Inc