Jan 27, 2022

OSI Systems Reports Fiscal 2022 Second Quarter Financial Results

  • Q2 Revenues of $277 Million
  • Q2 Earnings Per Diluted Share
    • GAAP EPS of $1.09
    • Non-GAAP EPS of $1.28
  • Q2 Ending Backlog of $1.2 Billion (12% increase from June 30, 2021)
  • Company Increases FY 2022 Earnings Guidance and Reduces FY 2022 Revenues Guidance

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 billion

$1.160 billion - $1.195 billion

 

 

 

Non-GAAP Diluted Earnings Per Share

$5.72 - $6.00

$5.75 - $6.02

 

 

 

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

December 31,

 

Six Months Ended

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 administrative

 

 

56,101

 

 

 

54,879

 

 

 

114,718

 

 

 

112,202

 

Research and development

 

 

13,784

 

 

 

14,977

 

 

 

25,866

 

 

 

29,794

 

Impairment, restructuring and other charges (benefit), net

 

 

(162

)

 

 

831

 

 

 

8,197

 

 

 

3,341

 

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 expense, net

 

 

(4,233

)

 

 

(2,217

)

 

 

(8,422

)

 

 

(4,233

)

Income before income taxes

 

 

28,125

 

 

 

26,869

 

 

 

40,629

 

 

 

49,533

 

Provision for income taxes

 

 

(8,087

)

 

 

(7,072

)

 

 

(11,247

)

 

 

(10,684

)

                                 
Net income  

$

20,038

 

 

$

19,797

 

 

$

29,382

 

 

$

38,849

 

                 

Diluted earnings per share

 

$

1.10

 

 

$

1.09

 

 

$

1.61

 

 

$

2.13

 

Weighted average shares outstanding – diluted

 

 

18,196

 

 

 

18,106

 

 

 

18,266

 

 

 

18,203

 

                                 
 
OSI SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED SEGMENT INFORMATION

(in thousands)

         

 

 

Three Months Ended

December 31,

 

Six Months Ended

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 and Manufacturing division, including intersegment revenues

 

 

87,521

 

 

 

91,490

 

 

 

167,435

 

 

 

183,795

 

Intersegment eliminations

 

 

(11,643

)

 

 

(13,152

)

 

 

(22,927

)

 

 

(26,305

)

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 Manufacturing division

 

 

10,414

 

 

 

13,382

 

 

 

19,154

 

 

 

23,165

 

Corporate

 

 

(7,361

)

 

 

(9,663

)

 

 

(16,817

)

 

 

(22,126

)

Intersegment eliminations

 

 

206

 

 

 

166

 

 

 

(275

)

 

 

13

 

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

December 31,

 

Six Months Ended

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, restructuring and other charges (benefit), net

 

 

(162

)

 

 

(0.01

)

 

 

831

 

 

 

0.05

 

 

 

8,197

 

 

 

0.45

 

 

 

3,341

 

 

 

0.18

 

Amortization of acquired intangible assets

 

 

3,704

 

 

 

0.20

 

 

 

3,162

 

 

 

0.18

 

 

 

7,480

 

 

 

0.41

 

 

 

6,360

 

 

 

0.36

 

Non-cash interest expense

 

 

2,260

 

 

 

0.12

 

 

 

57

 

 

 

--

 

 

 

4,486

 

 

 

0.25

 

 

 

125

 

 

 

0.01

 

Tax benefit of above adjustments

 

 

(1,600

)

 

 

(0.08

)

 

 

(1,009

)

 

 

(0.06

)

 

 

(5,546

)

 

 

(0.31

)

 

 

(2,476

)

 

 

(0.14

)

Impact from discrete income tax items

 

 

347

 

 

 

0.02

 

 

 

347

 

 

 

0.02

 

 

 

71

 

 

 

--

 

 

 

(1,798

)

 

 

(0.10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP basis

 

$

24,587

 

 

$

1.35

 

 

$

23,185

 

 

$

1.28

 

 

$

44,070

 

 

$

2.41

 

 

$

44,401

 

 

$

2.44

 

                                 
 
RECONCILIATION OF GAAP TO NON-GAAP

OPERATING INCOME (LOSS) AND OPERATING MARGIN BY SEGMENT

(in thousands, except percentages)

 

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

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 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)

 

$

18,171

 

12.5

%

 

$

7,030

 

13.4

%

 

$

13,382

 

14.6

%

 

$

(9,497

)

 

$

29,086

 

 

10.5

%

Impairment, restructuring and other charges, net

 

 

353

 

0.2

 

 

 

-

 

-

 

 

 

-

 

-

 

 

 

478

 

 

 

831

 

 

0.3

%

Amortization of acquired intangible assets

 

 

2,251

 

1.5

 

 

 

201

 

0.4

 

 

 

710

 

0.8

 

 

 

-

 

 

 

3,162

 

 

1.2

%

Non-GAAP basis– operating income (loss)

 

$

20,775

 

14.2

%

 

$

7,231

 

13.8

%

 

$

14,092

 

15.4

%

 

$

(9,019

)

 

$

33,079

 

 

12.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended December 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)

 

$

39,764

 

13.5

%

 

$

12,950

 

12.6

%

 

$

23,165

 

12.6

%

 

$

(22,113

)

 

$

53,766

 

 

9.7

%

Impairment, restructuring and other charges, net

 

 

628

 

0.2

%

 

 

-

 

-

 

 

 

-

 

-

 

 

 

2,713

 

 

 

3,341

 

 

0.6

%

Amortization of acquired intangible assets

 

 

4,537

 

1.5

%

 

 

403

 

0.8

 

 

 

1,420

 

0.8

%

 

 

-

 

 

 

6,360

 

 

1.1

%

Non-GAAP basis– operating income (loss)

 

$

44,929

 

15.2

%

 

$

13,353

 

13.4

%

 

$

24,585

 

13.4

%

 

$

(19,400

)

 

$

63,467

 

 

11.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Source: OSI Systems, Inc.