- Record Q3 Revenue of $245 Million
(16% increase over prior year)
- Q3 Earnings Per Diluted Share
- GAAP EPS of $0.72 (compared to $0.47
in same prior-year period)
- Non-GAAP EPS of $0.85 (29% increase
over prior year)
OSI Systems, Inc. (NASDAQ: OSIS) today announced financial
results for the quarter ended March 31, 2017.
“Once again driven by a solid performance in our Security
division, we are pleased to announce strong fiscal third quarter
results,” said Deepak Chopra, OSI Systems’ Chairman and Chief
Executive Officer. “The AS&E business, which we acquired during
our fiscal first quarter, has continued to deliver positive
results. In addition, during the third quarter we successfully
completed a convertible debt offering at attractive terms further
strengthening our balance sheet.”
The Company reported record revenues of $245.1 million for the
third quarter of fiscal 2017, an increase of 16% from the $210.8
million reported for the third quarter of fiscal 2016. Net income
for the third quarter of fiscal 2017 was $14.0 million, or $0.72
per diluted share, compared to net income of $9.3 million, or $0.47
per diluted share, for the third quarter of fiscal 2016. Non-GAAP
net income (excluding the impact of impairment, restructuring and
other charges, acquired intangible assets, non-cash interest
expense and gain from the disposition of a business, net of related
tax impact thereof) for the third quarter of fiscal 2017 was $16.6
million, or $0.85 per diluted share, compared to non-GAAP net
income for the third quarter of fiscal 2016 of $13.2 million, or
$0.66 per diluted share.
For the nine months ended March 31, 2017, the Company reported
revenues of $708.5 million, an increase of 17% as compared to the
same period a year ago. Net income in this nine-month period of
fiscal 2017 was $19.5 million, or $1.00 per diluted share, compared
to net income of $20.3 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, 2017 was $38.8 million, or $1.98 per diluted share,
compared to non-GAAP net income of $33.0 million, or $1.63 per
diluted share, for the comparable period in the prior year.
During the quarter ended March 31, 2017, the Company's
book-to-bill ratio for equipment and related services (non-turnkey)
was 1.0. As of March 31, 2017 the Company's backlog (measured as
quantifiable purchase orders or contracts for which revenues are
expected to be recognized within the next five years) was $686
million, compared to $623 million as of June 30, 2016. During the
third fiscal quarter, cash flow generated from operations was $33.9
million and capital expenditures were $7.7 million.
Mr. Chopra stated, “Our Security division revenues increased 31%
to a third quarter record of $145 million, of which $28 million was
generated by our recently acquired AS&E business. Excluding the
AS&E revenues, sales in our Security division increased 6% over
sales in the same prior-year quarter. We leveraged the growth and
achieved synergies from the AS&E acquisition to significantly
improve our third quarter year-over-year operating income.”
Mr. Chopra further commented, “Our Optoelectronics and
Manufacturing division continues to expand its profit margins due
to operational improvements, together with a more favorable product
mix and a migration to more profitable customers, resulted in third
quarter operating margin expansion.”
Mr. Chopra concluded, “Our Healthcare business is beginning to
emerge from previous new product launch difficulties and
challenging hospital spending environment that have hindered
performance during the past several quarters. Excluding the impact
of a non-core healthcare business divestiture, sales increased by
7% over the prior year. We are optimistic that our recently
strengthened management team and improved product portfolio in our
Healthcare division will deliver strong results.”
Fiscal Year 2017 Outlook
The Company is updating the fiscal 2017 sales guidance to $950
million - $970 million and narrowing its non-GAAP earnings guidance
to $2.85 - $3.05 per diluted share, which includes the impact of
the sale of a business in its Healthcare division. Actual sales and
non-GAAP diluted earnings per share could vary from this guidance
including as a result of the matters discussed under the
“Forward-Looking Statements” section.
The Company’s fiscal 2017 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 on a
forward-looking basis to GAAP diluted EPS, the most directly
comparable GAAP measure, because it is unable to provide a
meaningful or accurate compilation of reconciling items and certain
information is not available. This is due primarily to
year-over-year variability and the difficulty in making accurate
forecasts and projections of impairment, restructuring and other
charges and their related tax effects.
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 months and nine months ended March
31, 2016 and 2017 is provided to allow for the comparison of the
underlying performance of the Company, net of impairment,
restructuring and other charges, 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. 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 planning and forecasting and for assessing the
performance of the business, and (iii) a meaningful comparison
against results for past periods of results for current periods and
guidance for future periods. Management also believes that these
non-GAAP financial measures provide useful information to investors
and others in understanding and evaluating the Company’s operating
results and future prospects in the same manner as the Company’s
management and in comparing financial results across accounting
periods and to those of peer companies. Non-GAAP financial measures
should not be considered in isolation or as a substitute for
measures of financial performance prepared in accordance with
GAAP.
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
OSI Systems, Inc. will host a conference call and simultaneous
webcast over the Internet beginning at 1:30pm PT (4:30pm ET) today
to discuss its results for the third quarter of fiscal 2017. 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 9, 2017. The replay can either be
accessed through the Company’s website, www.osi-systems.com, or via
telephonic replay by calling 1-855-859-2056 and entering the
conference call identification number '10705080' 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 in the homeland security, healthcare,
defense, and aerospace industries. OSI 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, Inc. 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 and similar expressions
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 regarding expected revenues,
earnings and growth in fiscal 2017. 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 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; AS&E integration and other
AS&E-related risks; 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 Annual Report on Form 10-K for the fiscal year
ended June 30, 2016 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.
OSI SYSTEMS, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(in thousands)
June 30, 2016
March 31, 2017 Assets Cash and cash
equivalents $ 104,370 $ 158,472 Accounts receivable, net 141,716
183,838 Inventories 273,288 267,191 Other current assets
35,944 47,066 Total current assets 555,318 656,567 Goodwill
122,819 241,727 Intangible assets 56,283 120,575 Other non-current
assets 257,303 216,868 Total Assets $ 991,723 $
1,235,737
Liabilities and Stockholders' Equity
Bank lines of credit $ 125,000 $ 93,000 Current portion of
long-term debt 2,759 2,410 Accounts payable and accrued expenses
117,455 139,665 Other current liabilities 122,621
113,151 Total current liabilities 367,835 348,226 Long-term debt
6,054 240,018 Deferred income taxes 29,160 28,600 Other long-term
liabilities 47,828 64,581 Total liabilities 450,877
682,425 Total stockholders’ equity 540,846 554,312
Total Liabilities and Stockholders’ Equity $ 991,723 $ 1,235,737
OSI SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share
data)
Three Months Ended Nine Months
Ended March 31, March 31, 2016
2017 2016
2017 Revenues $ 210,804 $ 245,146 $
608,193 $ 708,549 Cost of goods sold 140,745
159,118 402,099 471,839 Gross
profit 70,059 86,028 206,094 236,710 Operating expenses: Selling,
general and administrative 39,233 49,431 122,767 144,528 Research
and development 12,945 14,395 37,871 39,811 Impairment,
restructuring and other charges 4,537 2,508
15,634 21,885 Total operating
expenses 56,715 66,334 176,272
206,224 Income from operations 13,344 19,694
29,822 30,486 Interest expense, net (680 ) (2,583 ) (2,025 ) (5,716
) Other income (expense), net 14 2,094
(58 ) 2,088 Income before income taxes 12,678
19,205 27,739 26,858 Provision for income taxes 3,335
5,186 7,483 7,329 Net
income $ 9,343 $ 14,019 $ 20,256 $ 19,529
Diluted earnings per share $ 0.47 $ 0.72
$ 1.00 $ 1.00 Weighted average shares
outstanding – diluted 19,941 19,515
20,261 19,585
UNAUDITED
SEGMENT INFORMATION
(in thousands)
Three Months Ended Nine Months
Ended March 31, March 31, 2016
2017 2016
2017 Revenues – by Segment:
Security division $ 110,550 $ 144,824 $ 300,680 $ 408,037
Healthcare division 49,113 49,667 156,126 146,427 Optoelectronics
and Manufacturing division (including intersegment revenues) 61,306
58,309 184,414 175,864 Intersegment revenues eliminations
(10,165 ) (7,654 ) (33,027 ) (21,779 ) Total $
210,804 $ 245,146 $ 608,193 $ 708,549
Operating income (loss) – by Segment: Security
division $ 14,554 $ 18,287 $ 29,723 $ 36,767 Healthcare division
(188 ) 936 6,130 (1,527 ) Optoelectronics and Manufacturing
division 5,325 5,974 14,078 16,149 Corporate (6,077 ) (6,067 )
(19,182 ) (21,882 ) Eliminations (270 ) 564
(927 ) 979 Total $ 13,344 $ 19,694
$ 29,822 $ 30,486
RECONCILIATION OF
GAAP TO NON-GAAP NET INCOME AND EARNINGS PER SHARE
(in thousands, except earnings per
share data)
Three Months Ended March 31, Nine
Months Ended March 31, 2016 2017
2016 2017 Net Net
Net Net income EPS
income EPS income EPS income
EPS GAAP basis $ 9,343 $ 0.47 $ 14,019 $ 0.72 $ 20,256 $
1.00 $ 19,529 $ 1.00 Impairment, restructuring and other charges
4,537 0.23 2,508 0.13 15,634 0.77 21,885 1.12 Amortization of
acquired intangible assets 713 0.03 2,405 0.12 1,837 0.09 6,025
0.30 Non-cash interest expense -- -- 706 0.04 -- -- 706 0.04 Gain
from disposition of business -- -- (2,110 ) (0.11 ) -- -- (2,110 )
(0.11 ) Tax effect of above adjustments (1,381 )
(0.07 ) (948 ) (0.05 ) (4,713 ) (0.23 )
(7,233 ) (0.37 ) Non-GAAP basis $ 13,212 $
0.66 $ 16,580 $ 0.85 $ 33,014 $ 1.63
$ 38,802 $ 1.98
RECONCILIATION OF
GAAP TO NON-GAAP OPERATING INCOME (LOSS) AND OPERATING
MARGIN BY SEGMENT
(in thousands, except
percentages)
Three Months Ended March 31, 2016
Optoelectronics and Corporate / Security
Division Healthcare Division Manufacturing Division Elimination
Total
% of
% of
% of
% of
Sales
Sales
Sales
Sales
GAAP basis – operating income (loss) $ 14,554 13.2% $ (188 ) -0.4%
$ 5,325 8.7% $ (6,347 ) $ 13,344 6.3% Impairment, restructuring and
other charges 1,243 1.1% 1,683 3.4% 557 0.9% 1,054 4,537 2.2%
Amortization of acquired intangible assets 202 0.2%
163 0.4% 348 0.6% - 713 0.3%
Non-GAAP basis– operating income (loss) $ 15,999 14.5% $ 1,658
3.4% $ 6,230 10.2% $ (5,293 ) $ 18,594 8.8%
Three Months Ended March 31, 2017 Optoelectronics and
Corporate / Security Division Healthcare Division Manufacturing
Division Elimination Total
% of
% of
% of
% of
Sales
Sales
Sales
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%
RECONCILIATION OF GAAP TO NON-GAAP OPERATING INCOME
(LOSS) AND OPERATING MARGIN BY SEGMENT
(in thousands, except
percentages)
Nine Months Ended March 31, 2016
Optoelectronics and Corporate / Security Division
Healthcare Division Manufacturing Division Elimination Total
% of
% of
% of
% of
Sales
Sales
Sales
Sales
GAAP basis – operating income (loss) $ 29,723 9.9% $ 6,130 3.9% $
14,078 7.6% $ (20,109 ) $ 29,822 4.9% Impairment, restructuring and
other charges 7,543 2.5% 1,683 1.1% 3,054 1.7% 3,354 15,634 2.6%
Amortization of acquired intangible assets 611 0.2%
489 0.3% 736 0.4% - 1,836 0.3%
Non-GAAP basis– operating income (loss) $ 37,877 12.6% $ 8,302
5.3% $ 17,868 9.7% $ (16,755 ) $ 47,292 7.8%
Nine Months Ended March 31, 2017 Optoelectronics and
Corporate / Security Division Healthcare Division Manufacturing
Division Elimination Total
% of
% of
% of
% of
Sales
Sales
Sales
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%
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version on businesswire.com: http://www.businesswire.com/news/home/20170426006483/en/
OSI Systems, Inc.Ajay VashishatVice President, Business
Development12525 Chadron Ave.Hawthorne, CA 90250(310)
349-2237avashishat@osi-systems.com
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