- Record Revenue of $304 Million (14%
increase over prior year)
- Record Q3 Earnings Per Diluted
Share
- GAAP EPS of $1.05
- Non-GAAP EPS of $1.17 (36% increase
over prior year)
- Company Raises Fiscal Year 2019
Guidance
OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ:
OSIS) today announced financial results for the three and nine
months ended March 31, 2019.
Deepak Chopra, OSI Systems’ Chairman and Chief Executive
Officer, stated, “We are pleased to report excellent third quarter
revenues, earnings and cash flow. This quarter was marked by
strength in each of our three divisions, positioning the Company
for a strong fiscal 2019.”
The Company reported revenues of $304.3 million for the third
quarter of fiscal 2019, an increase of 14% from the $267.3 million
reported for the third quarter of fiscal 2018. Net income for the
third quarter of fiscal 2019 was $19.6 million, or $1.05 per
diluted share, compared to net income of $2.6 million, or $0.13 per
diluted share, for the third quarter of fiscal 2018. Non-GAAP net
income for the third quarter of fiscal 2019 was $21.8 million, or
$1.17 per diluted share, compared to non-GAAP net income for the
third quarter of fiscal 2018 of $16.5 million, or $0.86 per diluted
share.
For the nine months ended March 31, 2019, revenues increased 9%
to $873.7 million, compared to $802.0 million for the same period
in the prior year. Net income for this period was $48.1 million, or
$2.58 per diluted share, compared with net loss of $34.2 million,
or ($1.82) per diluted share, for the same period a year ago.
Non-GAAP net income for the nine months ended March 31, 2019 was
$59.1 million, or $3.17 per diluted share, compared with non-GAAP
net income of $51.2 million, or $2.63 per diluted share, for the
comparable prior-year period.
The Company's backlog was $936 million as of March 31, 2019.
Operating cash flow during the quarter ended March 31, 2019 was
$46.9 million, and capital expenditures were $8.3 million, compared
to $31.1 million and $4.4 million, respectively, for the comparable
prior year period.
Mr. Chopra commented, “Our Security division delivered record
third quarter revenues of $193 million, or a 14% increase compared
with the prior-year period. This led to strong profits and
year-over-year operating margin expansion. This increase in sales
was driven by outstanding growth in cargo scanning equipment
sales.”
“As we noted last quarter, we are building positive momentum in
the Healthcare division. Led by the performance in the United
States, our Healthcare division revenues increased 12%
year-over-year with significant improvement in operating income.
With our enhanced focus and leadership, we believe we are well
positioned for further operating margin expansion,” Mr. Chopra
continued.
Mr. Chopra concluded, “Our Optoelectronics and Manufacturing
division continued to perform well, delivering 7% year-over-year
sales growth and a strong operating margin.”
The Company’s effective tax rate for the three and nine months
ended March 31, 2019 was 26.0% and 24.2%, respectively. Excluding
the benefit of certain discrete tax items, the Company’s tax rate
for the three and nine months ended March 31, 2019 was 28.6% and
28.4%, respectively. The Company’s reported tax rate was 18.1% and
210.0% for the three and nine months ended March 31, 2018.
Excluding a $56 million charge recorded in the second quarter of
fiscal 2018 resulting from the enactment of the Tax Cuts and Jobs
Act (the “Tax Act”) in December 2017 and certain discrete tax
items, the Company’s effective tax rate was 28.2% for the three and
nine months ended March 31, 2018.
Fiscal Year 2019 Outlook
The Company is raising its fiscal 2019 sales guidance from the
previous range of $1.150 billion - $1.185 billion to a range of
$1.165 billion - $1.190 billion. In addition, the Company is
increasing its non-GAAP earnings guidance from the previous range
of $3.93 - $4.10 to a range of $4.10 - $4.30 per diluted share for
fiscal 2019. Actual sales and non-GAAP diluted earnings per share
could vary from this guidance due to factors discussed under
“Forward-Looking Statements” and other factors.
The Company’s fiscal 2019 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 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, or cannot be reasonably predicted. For the same
reasons, the Company is unable to address the probable significance
of unavailable information which may be material and therefore
could result in GAAP diluted EPS, the corresponding GAAP financial
measure, being materially less than 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 nine month periods ended March
31, 2018 and 2019 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 related to convertible
debt, and their associated tax effects, and the impact of discrete
income tax items including charges resulting from the
implementation of the Tax Act. Management believes that these
non-GAAP financial measures provide (i) enhanced insight into the
ongoing operations of the Company, (ii) meaningful supplemental
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
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 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 1:30pm PT (4:30pm ET) today to discuss its results for
the third quarter of fiscal 2019. 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 shortly after the conclusion of the conference call until
May 14, 2019. 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 '9587236’ 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, and operational performance in fiscal
2019. 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;
unfavorable currency exchange rate fluctuations; effect of changes
in tax legislation, including the Tax Act; 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 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.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
(in thousands, except per share
data)
Three Months Ended
March 31,
Nine Months Ended
March 31,
2018 2019
2018 2019 Revenues $
267,299 $ 304,284 $ 801,960 $ 873,738 Cost of goods sold
169,714 192,968 511,474
556,165 Gross profit 97,585 111,316 290,486 317,573
Operating expenses: Selling, general and administrative 59,846
67,278 175,591 196,082 Research and development 15,934 13,695
46,122 40,253 Impairment, restructuring and other charges
14,062 (1,777 ) 23,489 1,154
Total operating expenses 89,842 79,196
245,202 237,489 Income from
operations 7,743 32,120 45,284 80,084 Interest expense, net (4,783
) (5,603 ) (14,317 ) (16,546 ) Other income, net 158
8 161 - Income before
income taxes 3,118 26,525 31,128 63,538 Provision for income taxes
(565 ) (6,899 ) (65,369 ) (15,403 ) Net
income (loss) $ 2,553 $ 19,626 $ (34,241 ) $ 48,135
Diluted earnings (loss) per share $ 0.13 $
1.05 $ (1.82 ) $ 2.58 Weighted average shares
outstanding – diluted 19,146 18,671
18,773 18,678
SEGMENT INFORMATION (UNAUDITED)
(in thousands)
Three Months Ended March
31,
Nine Months Ended
March 31,
2018 2019
2018 2019 Revenues –
by Segment: Security division $ 170,270 $ 193,486 $ 504,784 $
552,130 Healthcare division 43,758 48,865 141,793 138,697
Optoelectronics and Manufacturing division (including intersegment
revenues) 66,212 70,927 189,024 213,900 Intersegment eliminations
(12,941 ) (8,994 ) (33,641 ) (30,989 )
Total $ 267,299 $ 304,284 $ 801,960 $ 873,738
Operating income (loss) – by Segment: Security
division $ 21,028 $ 24,943 $ 66,192 $ 74,056 Healthcare division
(8,425 ) 5,418 (6,975 ) 5,752 Optoelectronics and Manufacturing
division 6,547 7,320 16,224 22,212 Corporate (10,730 ) (5,354 )
(28,601 ) (21,265 ) Intersegment eliminations (677 )
(207 ) (1,556 ) (671 ) Total $ 7,743 $ 32,120
$ 45,284 $ 80,084
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands) June 30, 2018
March 31, 2019 Assets Cash and cash
equivalents $ 84,814 $ 107,649 Accounts receivable, net 210,744
218,433 Inventories 313,552 297,704 Other current assets 41,587
35,050 Total current assets 650,697 658,836 Property and equipment,
net 115,524 124,916 Goodwill 292,213 307,461 Intangible assets, net
142,001 136,432 Other non-current assets 55,256 56,470 Total Assets
$ 1,255,691 $ 1,284,115
Liabilities and Stockholders'
Equity Bank lines of credit $ 113,000 $ 124,000 Current
portion of long-term debt 2,262 1,702 Accounts payable and accrued
expenses 194,815 168,853 Other current liabilities 133,245 130,945
Total current liabilities 443,322 425,500 Long-term debt 248,980
255,411 Other long-term liabilities 73,953 77,396 Total liabilities
766,255 758,307 Total stockholders’ equity 489,436 525,808 Total
Liabilities and Stockholders’ Equity $ 1,255,691 $ 1,284,115
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, 2018 2019
2018 2019
Net income
EPS
Net income
EPS
Net income (loss)
EPS
Net income
EPS GAAP basis $ 2,553 $ 0.13 $ 19,626 $ 1.05 $
(34,241 ) $ (1.82 ) $ 48,135 $ 2.58 Impairment, restructuring and
other charges 14,062 0.73 (1,777 ) (0.10 ) 23,489 1.25 1,154 0.06
Amortization of acquired intangible assets 3,994 0.21 3,822 0.21
11,070 0.59 12,012 0.65 Non-cash interest 1,884 0.10 1,970 0.11
5,558 0.30 5,851 0.31 Tax benefit of above adjustments (5,634 )
(0.29 ) (1,148 ) (0.06 ) (11,296 ) (0.60 ) (5,394 ) (0.29 )
Discrete tax items (316 ) (0.02 ) (683 ) (0.04 ) 56,604 3.01 (2,616
) (0.14 ) Impact of diluted shares 1 -- --
-- -- --
(0.10 ) -- -- Non-GAAP basis $ 16,543
$ 0.86 $ 21,810 $ 1.17 $ 51,184
$ 2.63 $ 59,142 $ 3.17
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, 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 %
Three Months Ended
March 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) $ 24,943 12.9 % $ 5,418 11.1 % $ 7,320 10.3
% $ (5,561 ) $ 32,120 10.5 % Impairment, restructuring and other
charges - - - - - - (1,777 ) (1,777 ) -0.6 % Amortization of
acquired intangible assets 2,848 1.5 % - -
973 1.4 % - 3,821 1.3 %
Non-GAAP basis– operating income (loss) $ 27,791 14.4 % $ 5,418
11.1 % $ 8,293 11.7 % $ (7,338 ) $ 34,164 11.2 %
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 %
Nine
Months Ended March 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) $ 74,056 13.4 % $ 5,752 4.2 % $ 22,212 10.4
% $ (21,936 ) $ 80,084 9.2 % Impairment, restructuring and other
charges - - 3,526 2.5 % 420 0.2 % (2,792 ) 1,154 0.1 % Amortization
of acquired intangible assets 8,765 1.6 % - -
3,247 1.5 % - 12,012 1.4 %
Non-GAAP basis– operating income (loss) $ 82,821 15.0 % $ 9,278
6.7 % $ 25,879 12.1 % $ (24,728 ) $ 93,250 10.7 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190430006177/en/
For Additional Information,
Contact:OSI Systems, Inc.Ajay VashishatVice
President, Business DevelopmentTel: (310)
349-2237avashishat@osi-systems.com
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