- Q3 Revenues of $293 Million
- Record Q3 Earnings Per Diluted Share
- GAAP EPS of $1.06
- Non-GAAP EPS of $1.20
- Strong Balance Sheet and Liquidity Position
- Q3 Cash Flow from Operations of $46 Million
- Company Updates Fiscal Year 2020 Guidance
OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ:
OSIS) today announced financial results for the three and nine
months ended March 31, 2020.
Deepak Chopra, OSI Systems’ Chairman and Chief Executive
Officer, stated, “During this unprecedented time, we want to thank
all the healthcare professionals, first responders, and others who
are on the front lines fighting the COVID-19 pandemic. As
responsible global citizens, we are assisting this effort by
carrying out our mission to create solutions for a safer and
healthier world. Thank you to our employees and our business
network for their incredible efforts to maintain supply of our
critically important products around the globe. It is a unique time
and we are rising to meet the challenge while simultaneously
focusing on the safety of our employees.
“We are pleased with our third quarter performance as we
delivered record earnings per share and continue to have a strong
balance sheet with a robust pipeline of opportunities. Although
there has recently been increased demand for our healthcare
products as a result of the pandemic, we expect certain delays in
product deliveries and new orders in our other divisions as some of
our customers are being negatively impacted by COVID-19.”
For the third quarter of fiscal 2020, the Company reported
revenues of $292.9 million, compared to $304.3 million reported for
the third quarter of fiscal 2019. Net income for the third quarter
of fiscal 2020 was $19.6 million, or $1.06 per diluted share,
compared to net income of $19.6 million, or $1.05 per diluted
share, for the third quarter of fiscal 2019. Non-GAAP net income
for the third quarter of fiscal 2020 was $22.1 million, or $1.20
per diluted share, compared to non-GAAP net income for the fiscal
2019 third quarter of $21.8 million, or $1.17 per diluted
share.
For the nine months ended March 31, 2020, revenues increased 2%
to $889.1 million, compared with the same period a year ago. Net
income for this period was $61.3 million, or $3.28 per diluted
share, compared with $48.1 million, or $2.58 per diluted share, for
the same period a year ago. Non-GAAP net income for the nine months
ended March 31, 2020 was $63.1 million, or $3.38 per diluted share,
compared with non-GAAP net income of $59.1 million, or $3.17 per
diluted share, for the comparable prior-year period.
During the quarter ended March 31, 2020, the Company’s
book-to-bill ratio was 0.9x. As of March 31, 2020, the Company's
backlog was $863 million compared to $911 million as of June 30,
2019. Operating cash flow during the quarter ended March 31, 2020
was $45.9 million, and capital expenditures were $4.5 million.
Mr. Chopra commented, “Our Security division reported a 3% sales
decline, with third quarter revenues of $187 million. Towards the
end of the quarter, we began to feel the impact of the pandemic,
most notably with our aviation and cargo customers. We are well
positioned in the marketplace as we target significant
opportunities globally, although we do expect some continued
headwinds.”
Mr. Chopra continued, “Our Optoelectronics and Manufacturing
division continued its strong performance with year-over-year
operating margin expansion. We faced operational challenges
associated with COVID-19 in the latter part of the third fiscal
quarter and expect these challenges to continue as the world
battles coronavirus.”
Mr. Chopra concluded, “We are pleased with the important strides
made in our Healthcare division leading to a significant
improvement in the year-over-year adjusted operating margin. Our
Healthcare backlog continues to be solid, and with the increased
recent activity, we are expecting a strong fourth fiscal quarter in
this division. We are proud of the work our team is doing in
support of the pandemic response effort.”
Fiscal Year 2020 Financial Outlook
(in millions, except per share data)
Current Updated
Guidance
Previous Guidance
Sales
$1,165 - $1,185
$1,205 - $1,240
Non-GAAP Diluted Earnings Per
Share
$4.45 - $4.65
$4.63 - $4.85
The Company is revising its fiscal year 2020 non-GAAP earnings
guidance to $4.45 to $4.65 per diluted share and its fiscal year
2020 sales guidance to a range of $1.165 billion to $1.185 billion.
Management’s current estimate of the impact of the COVID-19
pandemic is included in the guidance; however, given uncertainties
as to the duration and scope of the pandemic and other variables,
the extent to which COVID-19 may impact the Company’s financial
results is difficult to predict and could vary materially from
these estimates. Actual sales and non-GAAP diluted earnings per
share could also vary from this guidance due to other factors,
including those discussed under “Forward-Looking Statements”.
Alan Edrick, Executive Vice President and Chief Financial
Officer, stated, “We have a strong balance sheet with net leverage
of approximately 1.4 and a $535 million credit facility which
provides liquidity to meet our operational needs for the
foreseeable future. In this current environment, we are focused on
maintaining our financial flexibility to support long-term growth
and be in a nimble position to take advantage of strategic
opportunities.”
The Company’s fiscal 2020 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
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 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 nine months ended March 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. 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 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 1:30pm PT (4:30pm ET) today to discuss its results for
the third quarter of fiscal 2020. 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. 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 4634796 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 2020. 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 which 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
March 31,
Nine Months Ended
March 31,
2019
2020
2019
2020
Revenue:
Products
$
224,778
$
213,257
$
632,660
$
646,790
Services
79,506
79,626
241,078
242,287
Total revenues
304,284
292,883
873,738
889,077
Cost of goods sold:
Products
147,939
141,069
423,441
436,120
Services
45,029
42,707
132,724
133,866
Total cost of goods sold
192,968
183,776
556,165
569,986
Gross profit
111,316
109,107
317,573
319,091
Operating expenses:
Selling, general and administrative
67,278
65,576
196,082
191,655
Research and development
13,695
15,358
40,253
44,485
Impairment, restructuring and other
charges (benefit), net
(1,777
)
4,548
1,154
1,520
Total operating expenses
79,196
85,482
237,489
237,660
Income from operations
32,120
23,625
80,084
81,431
Interest expense and other, net
(5,595
)
(4,706
)
(16,546
)
(14,286
)
Income before income taxes
26,525
18,919
63,538
67,145
(Provision) benefit for income taxes
(6,899
)
639
(15,403
)
(5,858
)
Net income
$
19,626
$
19,558
$
48,135
$
61,287
Diluted earnings per share
$
1.05
$
1.06
$
2.58
$
3.28
Weighted average shares outstanding –
diluted
18,671
18,513
18,678
18,693
UNAUDITED SEGMENT
INFORMATION
(in thousands)
Three Months Ended
March 31,
Nine Months Ended
March 31,
2019
2020
2019
2020
Revenues – by Segment:
Security division
$
193,486
$
187,076
$
552,130
$
578,477
Healthcare division
48,865
45,662
138,697
127,862
Optoelectronics and Manufacturing division
(including intersegment revenues)
70,927
70,240
213,900
216,684
Intersegment revenues eliminations
(8,994
)
(10,095
)
(30,989
)
(33,946
)
Total
$
304,284
$
292,883
$
873,738
$
889,077
Operating income (loss) – by
Segment:
Security division
$
24,943
$
24,525
$
74,056
$
73,405
Healthcare division
5,418
1,682
5,752
5,793
Optoelectronics and Manufacturing
division
7,320
7,309
22,212
25,096
Corporate
(5,354
)
(10,161
)
(21,265
)
(23,578
)
Intersegment eliminations
(207
)
270
(671
)
715
Total
$
32,120
$
23,625
$
80,084
$
81,431
OSI SYSTEMS, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2019
March 31, 2020
Assets
Cash and cash equivalents
$
96,316
$
101,026
Accounts receivable, net
238,440
257,505
Inventories
273,711
241,317
Other current assets
32,432
38,522
Total current assets
640,899
638,370
Property and equipment, net
127,385
128,518
Goodwill
307,108
308,639
Intangible assets, net
132,954
129,471
Other non-current assets
56,518
81,596
Total Assets
$
1,264,864
$
1,286,594
Liabilities and Stockholders'
Equity
Bank lines of credit
$
88,000
$
95,000
Current portion of long-term debt
804
903
Accounts payable and accrued expenses
169,718
170,650
Other current liabilities
123,486
109,409
Total current liabilities
382,008
375,962
Long-term debt
257,752
264,777
Other long-term liabilities
73,377
93,579
Total liabilities
713,137
734,318
Total stockholders’ equity
551,727
552,276
Total Liabilities and Stockholders’
Equity
$
1,264,864
$
1,286,594
RECONCILIATION OF GAAP TO
NON-GAAP
NET INCOME AND EARNINGS PER
SHARE
(in thousands, except per
share data)
Three Months Ended March
31,
Nine Months Ended March
31,
2019
2020
2019
2020
Net income
EPS
Net income
EPS
Net income
EPS
Net income
EPS
GAAP basis
$
19,626
$
1.05
$
19,558
$
1.06
$
48,135
$
2.58
$
61,287
$
3.28
Impairment, restructuring and other
charges (benefit), net
(1,777
)
(0.10
)
4,548
0.25
1,154
0.06
1,520
0.08
Amortization of acquired intangible
assets
3,822
0.21
3,638
0.20
12,012
0.65
10,802
0.58
Non-cash interest
1,970
0.11
2,192
0.12
5,851
0.31
6,593
0.35
Tax benefit of above adjustments
(1,148
)
(0.06
)
(2,668
)
(0.15
)
(5,394
)
(0.29
)
(5,041
)
(0.27
)
Discrete tax items
(683
)
(0.04
)
(5,127
)
(0.28
)
(2,616
)
(0.14
)
(12,037
)
(0.64
)
Non-GAAP basis
$
21,810
$
1.17
$
22,141
$
1.20
$
59,142
$
3.17
$
63,124
$
3.38
RECONCILIATION OF GAAP TO
NON-GAAP
OPERATING INCOME (LOSS) AND
OPERATING MARGIN BY SEGMENT
(in thousands, except
percentages)
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
%
Restructuring and other charges (benefit),
net
--
--
--
--
--
--
(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
%
Three Months Ended March 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)
$
24,525
13.1
%
$
1,682
3.7
%
$
7,309
10.4
%
$
(9,891
)
$
23,625
8.1
%
Impairment, restructuring and other
charges, net
465
0.2
%
3,724
8.1
%
300
0.4
%
59
4,548
1.6
%
Amortization of acquired intangible
assets
2,797
1.6
%
--
--
841
1.2
%
- -
3,638
1.2
%
Non-GAAP basis– operating income
(loss)
$
27,787
14.9
%
$
5,406
11.8
%
$
8,450
12.0
%
$
(9,832
)
$
31,811
10.9
%
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
%
Restructuring and other charges (benefit),
net
--
--
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
%
Nine Months Ended March 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)
$
73,405
12.7
%
$
5,793
4.5
%
$
25,096
11.6
%
$
(22,863
)
$
81,431
9.2
%
Impairment, restructuring and other
charges (benefit), net
871
0.2
%
3,724
2.9
%
318
0.1
%
(3,393
)
1,520
0.2
%
Amortization of acquired intangible
assets
8,391
1.4
%
--
--
2,411
1.1
%
--
10,802
1.1
%
Non-GAAP basis– operating income
(loss)
$
82,667
14.3
%
$
9,517
7.4
%
$
27,825
12.8
%
$
(26,256
)
$
93,753
10.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200430005951/en/
OSI Systems, Inc. Ajay Vashishat Vice President, Business
Development Tel: (310) 349-2237 avashishat@osi-systems.com
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