- Record Fiscal Q3 Revenue of $267
Million (9% increase over prior year)
- Q3 Earnings Per Diluted Share
- GAAP EPS of $0.13
- Non-GAAP EPS of $0.86
- Backlog up 27% from June 30,
2017
- Company Raises Fiscal Year 2018
Guidance
OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ:
OSIS) today announced financial results for the third quarter and
nine months ended March 31, 2018.
Deepak Chopra, OSI Systems’ Chairman and CEO, stated, “Overall,
we are pleased with our performance this quarter. Our Security and
Optoelectronics and Manufacturing divisions delivered strong
results, which were offset to some degree by softness in our
Healthcare division. Our solid year-to-date performance coupled
with our backlog and pipeline of opportunities position us well for
a strong finish to fiscal 2018. During the quarter, we repurchased
about $60 million of OSI Systems common stock through our stock
buyback program.”
The Company reported record revenues of $267.3 million for the
third quarter of fiscal 2018, an increase of 9% from the $245.1
million reported for the third quarter of fiscal 2017. Net income
for the third quarter of fiscal 2018 was $2.6 million, or $0.13 per
diluted share, compared to net income of $14.0 million, or $0.72
per diluted share, for the third quarter of fiscal 2017. Non-GAAP
net income for the third quarter of fiscal 2018 was $16.5 million,
or $0.86 per diluted share, compared to non-GAAP net income for the
third quarter of fiscal 2017 of $16.6 million, or $0.85 per diluted
share.
During the quarter ended March 31, 2018, the Company's
book-to-bill ratio was 1.4. As of March 31, 2018, the Company's
backlog was approximately $938 million, compared with $738 million
as of June 30, 2017. Operating cash flow during the quarter ended
March 31, 2018 was $31.1 million, and capital expenditures were
$4.4 million. For the comparable period in the prior year,
operating cash flow was $33.9 million, and capital expenditures
were $7.7 million. Operating cash flow for the nine months ended
March 31, 2018 was $115.8 million, and capital expenditures were
$36.4 million, as compared to $52.2 million and $12.0 million,
respectively, for the comparable nine months in the prior year.
For the nine months ended March 31, 2018, revenues increased 13%
to $802.0 million compared with the same period a year ago. Net
loss in this nine-month period of fiscal 2018 was $34.2 million, or
$1.82 per diluted share, compared with net income of $19.5 million,
or $1.00 per diluted share, in the same period a year ago. Non-GAAP
net income for the nine months ended March 31, 2018 was $51.2
million, or $2.63 per diluted share, compared to non-GAAP net
income of $38.8 million, or $1.98 per diluted share, for the
comparable period in the prior year.
Commenting on the performance of each of the Company’s
divisions, Mr. Chopra stated, “Our Security division achieved
record third fiscal quarter revenues of $170 million, up 18%
compared to a year ago. This included $17.6 million of revenues
generated by our recently-acquired explosive trace detection
business. We saw strong Security bookings of approximately $270
million, $130 million of which was from our new two-year contract
to continue screening services in Mexico.”
Mr. Chopra continued, “Our Healthcare division faced some
headwinds this quarter, and year-over-year revenues were down
approximately $6 million. Excluding $1.9 million of revenues in Q3
of fiscal 2017 attributable to a non-core business divested in
February 2017, Healthcare division sales were down 8% in the fiscal
2018 third quarter as compared to sales in the same prior-year
period. ”
Mr. Chopra concluded, “Our Optoelectronics and Manufacturing
division performed well in the quarter as year-over-year sales grew
14% with solid growth in operating income. We saw benefits to this
division’s performance as increased demand from our Security
division as well as a product line acquisition that was completed
this quarter contributed to the growth. Overall, we are pleased
with the strong consistent performance of this division.”
As a result of the enactment of the Tax Cuts and Jobs Act (the
“Tax Act”) in December 2017, the Company recognized a charge of $56
million in the second quarter of fiscal 2018, and this charge is
reflected in the results for the nine months ended March 31, 2018.
The charge included management’s estimate of the tax on accumulated
overseas profits and the revaluation of deferred tax assets and
liabilities. The changes included in the Tax Act are broad and
complex. The final impacts of the Tax Act may differ materially
from the amounts estimated due to, among other things, changes in
interpretation of the Tax Act, any legislative action that may be
taken to address questions arising due to the Tax Act, and any
changes in accounting standards for income taxes or related
interpretations in response to the Tax Act. The Company currently
anticipates finalizing and recording any resulting adjustments by
the end of the 2018 calendar year.
Fiscal Year 2018 Outlook
The Company is raising its fiscal 2018 sales guidance to $1,065
million – $1,095 million, which would represent growth of 11% – 14%
compared to the prior fiscal year. The Company is also increasing
its non-GAAP earnings guidance to $3.50 – $3.69 per diluted share
for fiscal 2018. Actual sales and non-GAAP diluted earnings per
share could vary from this guidance.
The Company’s fiscal 2018 diluted earnings per share guidance is
provided on a non-GAAP basis only. The Company does not provide a
reconciliation of non-GAAP diluted EPS guidance 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, high
variability, complexity and low visibility of forecasting the
timing and/or amount of various items that would be excluded from
GAAP diluted EPS, including, for example, acquisition costs and
other non-recurring items that have not yet occurred, are out of
the Company’s control, and/or cannot be reasonably predicted. For
the same reasons, the Company is unable to address the probable
significance of the unavailable information. Forward-looking
non-GAAP financial measures provided without the most directly
comparable GAAP financial measures may vary materially from the
corresponding GAAP financial measures.
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 nine months ended March 31, 2017
and 2018 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, non-cash
interest expense related to convertible debt, gain from the
disposition of a business, and their associated tax effects, and
the impact from discrete income tax items including charges
resulting from the Tax Act. Management believes that these non-GAAP
financial measures provide (i) additional insight into the ongoing
operations of the Company, (ii) meaningful supplemental information
regarding the Company’s results (excluding amounts management does
not view as reflective of ongoing operating results) for purposes
of planning, forecasting and assessing the performance of the
business, (iii) a meaningful comparison of results of current
periods against results of past periods, and (iv) financial results
that are comparable to those of peer companies. 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 similar measures
used by other companies due to possible differences in method and
in the items or events being adjusted.
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 1:30 pm PT (4:30 pm ET) today to discuss its results
for the third quarter of fiscal 2018. 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 10,
2018. The replay can be accessed either through the Company’s
website, www.osi-systems.com, or by telephonic replay by calling
1-855-859-2056 and entering the conference call replay
identification code ‘4068336’.
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 and growth in fiscal 2018, as well as the
Company’s expectations regarding the effects of the Tax Act on the
Company’s business. 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; 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 of volatility in oil prices;
unfavorable currency exchange rate fluctuations; 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
ongoing investigations and compliance reviews; contract and
regulatory compliance matters, and actions, if brought, resulting
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. For additional
information on 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 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. 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
requirements under federal securities laws.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
(in thousands, except per share
data)
Three Months Ended
March 31,
Nine Months Ended
March 31,
2017 2018
2017 2018 Revenues $
245,146 $ 267,299 $ 708,549 $ 801,960 Cost of goods sold
159,118 169,714 471,839
511,474 Gross profit 86,028 97,585 236,710 290,486 Operating
expenses: Selling, general and administrative 49,431 59,846 144,528
175,591 Research and development 14,395 15,934 39,811 46,122
Impairment, restructuring and other charges 2,508
14,062 21,885 23,489
Total operating expenses 66,334 89,842
206,224 245,202 Income from operations
19,694 7,743 30,486 45,284 Interest expense, net (2,583 ) (4,783 )
(5,716 ) (14,317 ) Other income, net 2,094 158
2,088 161 Income before income
taxes 19,205 3,118 26,858 31,128 Provision for income taxes
5,186 565 7,329 65,369
Net income (loss) $ 14,019 $ 2,553 $ 19,529
$ (34,241 ) Diluted earnings (loss) per share $ 0.72
$ 0.13 $ 1.00 $ (1.82 ) Weighted average
shares outstanding – diluted 19,515 19,146
19,585 18,773
SEGMENT INFORMATION (UNAUDITED)
(in thousands)
Three Months Ended March
31,
Nine Months Ended
March 31,
2017 2018
2017 2018 Revenues –
by Segment: Security division $ 144,824 $ 170,270 $ 408,037 $
504,784 Healthcare division 49,667 43,758 146,427 141,793
Optoelectronics and Manufacturing division (including intersegment
revenues) 58,309 66,212 175,864 189,024 Intersegment eliminations
(7,654 ) (12,941 ) (21,779 ) (33,641 )
Total $ 245,146 $ 267,299 $ 708,549 $ 801,960
Operating income (loss) – by Segment: Security
division $ 18,287 $ 21,028 $ 36,767 $ 66,192 Healthcare division
936 (8,425 ) (1,527 ) (6,975 ) Optoelectronics and Manufacturing
division 5,974 6,547 16,149 16,224 Corporate (6,067 ) (10,730 )
(21,882 ) (28,601 ) Intersegment eliminations 564
(677 ) 979 (1,556 ) Total $ 19,694
$ 7,743 $ 30,486 $ 45,284
OSI SYSTEMS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands)
June 30, 2017
March 31, 2018 Assets Cash and cash
equivalents $ 169,650 $ 194,001 Accounts receivable, net 206,526
216,680 Inventories 248,510 304,293 Other current assets
28,314 61,362 Total current assets 653,000 776,336 Goodwill
242,129 300,716 Intangible assets 118,450 147,057 Other non-current
assets 216,508 171,922 Total Assets $ 1,230,087 $
1,396,031
Liabilities and Stockholders' Equity
Bank lines of credit $ 103,000 $ 228,000 Current portion of
long-term debt 2,396 2,252 Accounts payable and accrued expenses
137,559 188,329 Other current liabilities 103,179
139,900 Total current liabilities 346,134 558,481 Long-term debt
241,750 247,029 Deferred income taxes 20,681 41,642 Other long-term
liabilities 52,309 66,493 Total liabilities 660,874
913,645 Total stockholders’ equity 569,213 482,386
Total Liabilities and Stockholders’ Equity $ 1,230,087 $ 1,396,031
RECONCILIATION OF GAAP TO
NON-GAAP
NET INCOME (LOSS) AND EARNINGS (LOSS)
PER SHARE
(in thousands, except share and
earnings per share data)
Three Months Ended March 31, Nine Months
Ended March 31, 2017 2018
2017 2018 Net income
EPS Net income EPS Net
income EPS Net income (loss)
EPS1 GAAP basis $ 14,019 $ 0.72 $ 2,553 $ 0.13 $
19,529 $ 1.00 $ (34,241 ) $ (1.82 ) Impairment, restructuring and
other charges 2,508 0.13 14,062 0.73 21,885 1.12 23,489 1.25
Amortization of acquired intangible assets 2,405 0.12 3,994 0.21
6,025 0.30 11,070 0.59 Non-cash interest 706 0.04 1,884 0.10 706
0.04 5,558 0.30 Gain from disposition of business (2,110 ) (0.11 )
-- -- (2,110 ) (0.11 ) -- -- - Tax benefit of above adjustments
(948 ) (0.05 ) (5,634 ) (0.29 ) (7,233 ) (0.37 ) (11,296 ) (0.60 )
Discrete tax items -- -- (316 ) (0.02 ) -- -- 56,604 3.01 Impact of
diluted shares 1 -- -- --
-- -- -- -
(0.10 ) Non-GAAP basis $ 16,580 $ 0.85 $
16,543 $ 0.86 $ 38,802 $ 1.98 $ 51,184
$ 2.63
1 For the nine months ended March 31, 2018, the weighted average
diluted shares used to calculate EPS on a GAAP basis exclude
potential common shares (stock options and restricted stock units)
due to their antidilutive effect resulting from the Company’s
reported net loss. For the nine months ended March 31, 2018, the
weighted average diluted shares used to calculate EPS on a non-GAAP
basis were approximately 19,473,000 shares.
RECONCILIATION OF GAAP TO
NON-GAAP
OPERATING INCOME (LOSS) AND OPERATING
MARGIN BY SEGMENT
(in thousands, except
percentages)
Three Months Ended March 31, 2017 Security
Division Healthcare Division
Optoelectronics and
Manufacturing Division
Corporate / Elimination
Total % of
Sales % of
Sales % of
Sales % of
Sales GAAP basis – operating income (loss) $ 18,287
12.6 % $ 936 1.9 % $ 5,974 10.2 % $ (5,503 ) $ 19,694 8.0 %
Impairment, restructuring and other charges 995 0.7 % 1,113 2.2 %
265 0.5 % 135 2,508 1.0 % Amortization of acquired intangible
assets 1,989 1.4 % 55 0.1 % 360 0.6 %
- - 2,404 1.0 % Non-GAAP basis– operating
income (loss) $ 21,271 14.7 % $ 2,104 4.2 % $ 6,599 11.3 % $
(5,368 ) $ 24,606 10.0 %
Three Months Ended March
31, 2018 Security Division Healthcare Division
Optoelectronics and
Manufacturing Division
Corporate / Elimination
Total % of Sales % of Sales
% of Sales % of Sales GAAP basis –
operating income (loss) $ 21,028 12.4 % $ (8,425 ) -19.3 % $ 6,547
9.9 % $ (11,407 ) $ 7,743 2.9 % Impairment, restructuring and other
charges 226 0.1 % 9,707 22.2 % 269 0.4 % 3,860 14,062 5.3 %
Amortization of acquired intangible assets 3,129 1.8 %
- - 865 1.3 % -
3,994 1.5 % Non-GAAP basis– operating income (loss) $ 24,383 14.3 %
$ 1,282 2.9 % $ 7,681 11.6 % $ (7,547 ) $ 25,799 9.7 %
Nine Months Ended March 31, 2017 Security
Division Healthcare Division
Optoelectronics and
Manufacturing Division
Corporate / Elimination
Total % of
Sales % of
Sales % of
Sales % of
Sales GAAP basis – operating income (loss) $ 36,767
9.0 % $ (1,527 ) -1.0 % $ 16,149 9.2 % $ (20,903 ) $ 30,486 4.3 %
Impairment, restructuring and other charges 15,130 3.7 % 2,348 1.6
% 553 0.3 % 3,854 21,885 3.1 % Amortization of acquired intangible
assets 4,578 1.1 % 359 0.2 % 1,087 0.6
% - 6,024 0.8 % Non-GAAP basis– operating
income (loss) $ 56,475 13.8 % $ 1,180 0.8 % $ 17,789 10.1 %
$ (17,049 ) $ 58,395 8.2 %
Nine Months Ended March 31,
2018
Security Division Healthcare Division
Optoelectronics and
Manufacturing Division
Corporate / Elimination
Total % of Sales % of Sales
% of Sales % of Sales GAAP basis –
operating income (loss) $ 66,192 13.1 % $ (6,975 ) -4.9 % $ 16,224
8.6 % $ (30,157 ) $ 45,284 5.7 % Impairment, restructuring and
other charges 2,127 0.4 % 14,729 10.4 % 1,490 0.8 % 5,143 23,489
2.9 % Amortization of acquired intangible assets 9,443 1.9 %
29 0.0 % 1,598 0.8 % -
11,070 1.4 % Non-GAAP basis– operating income (loss) $ 77,762 15.4
% $ 7,783 5.5 % $ 19,312 10.2 % $ (25,014 ) $ 79,843 10.0 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180426006603/en/
OSI Systems, Inc.Ajay VashishatVice President, Business
Development(310) 349-2237avashishat@osi-systems.com
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