- Record Q3 Revenue of $215
million
- Q3 Earnings Per Diluted Share
- Record Non-GAAP EPS of $0.78 (11%
increase over prior year)
- GAAP EPS of $0.64 (176% increase
over prior year)
OSI Systems, Inc. (NASDAQ: OSIS) today announced financial
results for the fiscal quarter ended March 31, 2015.
“We are pleased to announce our third quarter financial
results,” said Deepak Chopra, OSI Systems’ Chairman and CEO. “We
achieved record third quarter sales and profitability, excluding
the impact of restructuring and other charges. While we are
encouraged by our performance this year, we expect to continue to
make appropriate business adjustments as the global macroeconomic
environment evolves.”
The Company reported revenues of $215.4 million for the third
quarter of fiscal 2015, an increase of 6% as compared to the same
period a year ago. Net income for the third quarter of fiscal 2015
was $13.2 million, or $0.64 per diluted share, compared to net
income of $4.8 million, or $0.23 per diluted share, for the third
quarter of fiscal 2014. On a non-GAAP basis, excluding the impact
of restructuring and other charges, and for fiscal 2014 the impact
of tax elections to accelerate depreciation in our turnkey program
in Mexico, net income for the third quarter of fiscal 2015 would
have been $15.9 million, or $0.78 per diluted share, compared to
net income of $14.3 million, or $0.70 per diluted share, for the
comparable quarter of the prior year.
For the nine months ended March 31, 2015, the Company reported
revenues of $691.6 million, an increase of 7% over the same period
a year ago. Net income in this period was $42.7 million, or $2.08
per diluted share, compared to net income of $25.8 million, or
$1.25 per diluted share, in the same period a year ago. On a
non-GAAP basis, excluding the impact of restructuring and other
charges, and for fiscal 2014 the impact of tax elections to
accelerate depreciation in our turnkey program in Mexico, net
income for the nine months ended March 31, 2015 would have been
$47.4 million, or $2.31 per diluted share, compared to net income
of $39.9 million, or $1.94 per diluted share, for the comparable
period in the prior year.
As of March 31, 2015, the Company’s backlog was approximately
$0.6 billion and the non-turnkey book to bill ratio for the three
months ended March 31, 2015 was 1.0. During the third quarter, the
Company generated $23.1 million of free cash flow, which
contributed to record free cash flow of $77.6 million for the nine
months ended March 31, 2015.
Mr. Chopra continued, “During the third quarter, our Security
division’s revenues rose modestly by 4% over the prior year third
quarter. We are pleased with the market’s reception of our new RTT™
110 (Real Time Tomography) explosives detection systems (EDS). We
have received several orders for this product, including a very
strategic win in Europe, the recently-announced $27 million order
from the Leonardo da Vinci – Fiumicino Airport in Rome. We believe
that the potential of RTT as European airports meet the latest
requirement for hold baggage screening, as well as a robust
pipeline of opportunities in both our product and turnkey screening
solutions businesses position this division well for the
future.”
Mr. Chopra further commented, “Third quarter sales in our
Healthcare division increased by 14% over the prior year third
quarter, driven by organic growth as well as the impact of an
acquisition completed in the first quarter. The launch of new
products and indications of a rebound in the North American market
provide an improving outlook about the performance of this
division.”
Mr. Chopra concluded, “In our Optoelectronics and Manufacturing
division, operational efficiencies coupled with a more favorable
product mix resulted in strong operating margin expansion. In
addition, we are taking advantage of an opportunity to consolidate
facilities within our Optoelectronics and Manufacturing division
and reducing costs in our Healthcare and Security divisions. These
actions have commenced and are expected to be largely completed
this fiscal year. We expect the benefit from these cost reductions
will be partially realized in our fourth quarter and more fully
thereafter.”
Fourth Quarter Fiscal Year 2015 Outlook
Subject to the risks described herein, the Company is updating
its guidance and reducing its outlook for fiscal 2015 revenues and
non-GAAP earnings per diluted share. The Company currently
anticipates fiscal 2015 sales to be between $950 million and $975
million, and non-GAAP earnings per diluted share of $3.42 to $3.60,
excluding the impact of impairment, restructuring and other
charges. This revised guidance reflects lower than previously
expected sales due to the adverse impact of the strong dollar as
well as reduced sales volumes primarily in the Security division
due to timing issues with less favorable product mix.
Presentation of Non-GAAP Financial Measures; Non-GAAP
Figures
This earnings release includes a presentation of Adjusted
EBITDA, non-GAAP net income and diluted earnings per share, and
discussion of free cash flow, all of which are non-GAAP financial
measures. Adjusted EBITDA is defined as net income, plus net
interest expense, provision for income taxes and depreciation and
amortization, as further adjusted to eliminate the impact of
stock-based compensation, and restructuring and other charges. Not
all companies use identical calculations and, accordingly, the
Company's presentation of Adjusted EBITDA may not be comparable to
similarly titled measures of other companies. Adjusted EBITDA is
not a recognized term under accounting principles generally
accepted in the United States and does not purport to be a
substitute for net income as an indicator of operating performance
or cash flows from operating activities as a measure of liquidity.
Adjusted EBITDA is presented as a supplemental measure of the
Company's financial performance that we believe is useful to
investors because the excluded items may vary significantly in
timing or amounts and/or may obscure trends useful in evaluating
and comparing the Company's operating activities across reporting
periods. In addition, the Company uses Adjusted EBITDA to evaluate
the effectiveness of the Company's business strategies and because
the Company's credit agreements use measures similar to Adjusted
EBITDA to measure compliance with certain covenants.
Discussion of adjustments to arrive at non-GAAP net income and
diluted earnings per share figures and Adjusted EBITDA for the
three and nine month periods ended March 31, 2014 and 2015 is
provided to allow for the comparison of underlying earnings, net of
restructuring and other charges. We believe that these non-GAAP
figures provide additional insight into the ongoing operations of
the Company. Non-GAAP financial measures should not be considered
in isolation or as a substitute for measures of financial
performance prepared in accordance with GAAP. We also believe that
these non-GAAP financial measures provide meaningful supplemental
information regarding the Company’s results primarily because they
exclude amounts that we do not view as reflective of ongoing
operating results when planning and forecasting and when assessing
the performance of the Company’s business. We believe that our
non-GAAP financial measures also facilitate the comparison of
results for current periods and guidance for future periods with
results for past periods.
This earnings release also discusses Free Cash Flow, which the
Company defines as cash provided by operating activities less
capital expenditures for property and equipment. We believe that
this metric is useful to investors as a measure of cash generated
by business operations that can be used to repay debt obligations,
to invest in future growth through new business development
activities or acquisitions and to repurchase stock of the Company,
among other items. Reconciliations of GAAP to non-GAAP net income
and diluted earnings per share, net income to Adjusted EBITDA, and
cash provided by operating activities to Free Cash Flow are
provided in the accompanying tables.
Conference Call Information
OSI Systems, Inc. will host a conference call and simultaneous
webcast over the Internet beginning at 8:00 am PT (11:00 am ET)
today to discuss its results for the third quarter of fiscal 2015.
To listen, log on to the Company’s website at www.osi-systems.com
and follow the link in the Investor Relations section. A replay of
the webcast will be available shortly after the conclusion of the
conference call until May 11, 2015. The replay can either be
accessed through the Company’s website, www.osi-systems.com, or via
telephonic replay by calling 888-286-8010 and entering the
conference call identification number ‘38294880’ when prompted for
the replay code.
About OSI Systems, Inc.
OSI Systems, Inc. is a vertically integrated designer and
manufacturer of specialized electronic systems and components for
critical applications. The Company sells its products and provides
related services in diversified markets, including homeland
security, healthcare, defense and aerospace. The Company has more
than 30 years of experience in electronics engineering and
manufacturing and maintains offices and production facilities in
more than a dozen countries. The Company implements a strategy of
expansion by leveraging its electronics and contract manufacturing
capabilities into selective end product markets through organic
growth and acquisitions. For more information on OSI Systems, Inc.
or any of 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, projections and similar expressions
concerning matters that are not historical facts and are not
guarantees of future performance. Forward-looking statements
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. Such statements include,
but are not limited to, information provided regarding expected
revenues, earnings and growth in fiscal 2015. In addition, 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; delays in customer programs; delays in revenue
recognition related to the timing of customer acceptance;
unanticipated impacts of sequestration and other provisions of the
Budget Control Act of 2011 as modified by the Bipartisan Budget Act
of 2013; changes in domestic and foreign government spending,
budgetary, procurement and trade policies adverse to the Company’s
businesses; market acceptance of the Company’s new and existing
technologies, products and services; the Company’s ability to win
new business and convert any orders received to sales within the
fiscal year in accordance with the Company’s operating plan;
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 ongoing investigations and compliance reviews, contract
and regulatory compliance matters, and actions, if brought,
resulting in judgments, settlements, fines, injunctions, debarment
or penalties, as well as 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. For a further
discussion of these and other factors that could cause the
Company’s future results to differ materially from any
forward-looking statements, see the section entitled “Risk Factors”
in the Company’s Annual Report on Form 10-K for the fiscal year
ended June 30, 2014 and other risks described in documents
subsequently filed by the Company from time to time with the
Securities and Exchange Commission. All forward-looking statements
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 in
connection with its ongoing requirements under federal securities
laws.
OSI SYSTEMS, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
data)
(Unaudited)
Three Months Ended March 31, Nine Months Ended
March 31, 2014 2015
2014 2015 Revenues $ 203,956 $
215,375 $ 646,638 $ 691,601 Cost of goods sold 133,449
142,771 427,246 455,481
Gross profit 70,507 72,604 219,392 236,120 Operating
expenses: Selling, general and administrative expenses 39,399
37,970 127,169 130,046 Research and development 10,579 12,559
32,774 38,469 Restructuring and other charges 2,507
3,620 8,925 6,425 Total
operating expenses 52,485 54,149
168,868 174,940 Income from operations 18,022
18,455 50,524 61,180 Interest expense and other, net (1,370
) (812 ) (4,343 ) (2,508 ) Income before
income taxes 16,652 17,643 46,181 58,672 Provision for income taxes
11,851 4,415 20,413
15,954 Net income $ 4,801 $ 13,228
$ 25,768 $ 42,718 Diluted earnings per
share $ 0.23 $ 0.64 $ 1.25 $ 2.08
Weighted average shares outstanding - diluted 20,548
20,529 20,585 20,515
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2014 (Unaudited)
March 31, 2015
Assets Cash and cash equivalents $ 38,831 $ 49,041 Accounts
receivable, net 185,773 165,352 Inventories 234,138 265,415 Other
current assets 120,488 101,063 Total current assets
579,230 580,871 Non-current assets 444,956 425,059
Total assets $ 1,024,186 $ 1,005,930
Liabilities and
Stockholders' Equity Bank lines of credit $ 24,000 $ 6,000
Current portion of long-term debt 2,819 2,814 Accounts payable and
accrued expenses 130,437 144,418 Deferred revenues 60,677 48,997
Other current liabilities 92,046 83,185 Total current
liabilities 309,979 285,414 Long-term debt 10,436 9,028 Advances
from customers 50,000 31,250 Deferred income taxes 73,161 68,280
Other long-term liabilities 48,397 54,696 Total
liabilities 491,973 448,668 Total stockholders’ equity
532,213 557,262 Total liabilities and stockholders’ equity $
1,024,186 $ 1,005,930
SEGMENT INFORMATION
(in thousands)
(Unaudited)
Three Months Ended
March 31,
Nine Months Ended
March 31,
2014 2015 2014 2015
Revenues – by Segment: Security division $ 95,007 $ 99,164 $
298,748 $ 349,608 Healthcare division 52,188 59,383 161,081 176,710
Optoelectronics and Manufacturing division including intersegment
revenues 66,331 65,291 214,000 199,912 Intersegment revenues
elimination (9,570 ) (8,463 ) (27,191 )
(34,629 ) Total $ 203,956 $ 215,375 $ 646,638
$ 691,601
Operating income (loss) – by
Segment:
Security division(1)
$ 14,213 $ 13,266 $ 40,984 $ 50,926
Healthcare division(2)
4,084 3,707 11,312 11,258
Optoelectronics and Manufacturing
division(3)
3,414 5,008 10,300 13,701
Corporate(4)
(3,488 ) (3,498 ) (11,888 ) (13,748 ) Eliminations (201 )
(28 ) (184 ) (957 ) Total $ 18,022 $
18,455 $ 50,524 $ 61,180 (1)
Includes restructuring and other charges of $2.1 million and
$3.9 million for the three and nine months ended March 31, 2015,
respectively; and $1.8 million and $5.1 million for the three and
nine months ended March 31, 2014, respectively. (2) Includes
restructuring and other charges of $1.0 million and $1.1 million
for the three and nine months ended March 31, 2015, respectively;
and $2.0 million for the nine months ended March 31, 2014.
(3) Includes restructuring and other charges of $0.5 million and
$0.7 million for the three and nine months ended March 31, 2015,
respectively; and $0.3 million and $1.4 million for the three and
nine months ended March 31, 2014, respectively. (4) Includes
restructuring and other charges of $ $0.7 million for the nine
months ended March 31, 2015; and $0.4 million for each of the three
and nine months ended March 31, 2014.
Reconciliation of GAAP to Non-GAAP Net
Income and Earnings Per Share
(in thousands, except earnings per
share data)
(Unaudited)
Three Months Ended March 31, Nine Months Ended
March 31, 2014 2015
2014 2015
Net
income
EPS
Net
income
EPS
Net
income
EPS
Net
income
EPS GAAP basis $ 4,801 $ 0.23 $
13,228 $ 0.64 $ 25,768 $ 1.25 $ 42,718 $ 2.08 Restructuring
and other charges, net of tax 1,873 0.10 2,714 0.14 6,456 0.32
4,678 0.23 Impact from election to accelerate depreciation for tax
purposes 7,638 0.37 - - 7,638 0.37 - -
Non-GAAP basis $ 14,312 $ 0.70 $ 15,942
$ 0.78 $ 39,862 $ 1.94 $ 47,396 $ 2.31
Reconciliation of Net Income to
Adjusted EBITDA
(in thousands)
(Unaudited)
Three Months Ended March 31, Nine Months Ended
March 31, 2014 2015
2014 2015 Net income $
4,801 $ 13,228 $ 25,768 $ 42,718 Interest expense, net 1,370
812 4,343 2,514 Provision for income taxes 11,851 4,415 20,413
15,954 Depreciation and amortization 13,608 13,366 40,024 45,448
EBITDA 31,630 31,821 90,548 106,634
Stock-based compensation 3,254 6,057 13,975 18,135 Restructuring
and other charges 2,507 3,620 8,925 6,425
Adjusted EBITDA $ 37,391 $ 41,498 $ 113,448 $ 131,194
Reconciliation of Cash Provided by
Operating Activities to Free Cash Flow
(in thousands)
(Unaudited)
Three Months Ended
March 31, 2015
Nine Months Ended
March 31, 2015
Cash provided by operating activities $ 26,746 $ 87,696
Less acquisition of property and equipment (3,664 ) (10,113
) Free cash flow $ 23,082 $ 77,583
OSI Systems, Inc.Ajay VashishatVice President, Business
Development12525 Chadron AveHawthorne, CA 90250Tel:
310-349-2237avashishat@osi-systems.com
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