- Record Q4 Revenues of $287 Million
(14% year-over-year increase)
- Record Fiscal 2018 Revenues of
$1.089 Billion (13% year-over-year increase)
- Q4 Earnings Per Diluted Share
- GAAP EPS of $0.27
- Non-GAAP EPS of $1.02
- Backlog of $976 Million (32%
year-over-year increase)
- FY 2019 Guidance
- Sales Guidance of $1.125 Billion -
$1.165 Billion
- Non-GAAP Diluted EPS Guidance of
$3.80 - $4.00
OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ:
OSIS) today announced financial results for the fourth quarter and
fiscal year ended June 30, 2018.
Deepak Chopra, OSI Systems’ Chairman and Chief Executive
Officer, said, “We are pleased to announce a strong finish to
fiscal 2018 highlighted by impressive sales and bookings in the
Security division. We are proud to have surpassed $1 billion in
annual sales for the first time in our history. We enter fiscal
2019 with a strong backlog, an enhanced leadership team, and
heightened focus on our core strengths.”
The Company reported revenues of $287 million for the fourth
quarter of fiscal 2018, an increase of 14% from the $252 million
reported for the fourth quarter of fiscal 2017. Net income for the
fourth quarter of fiscal 2018 was $5.1 million, or $0.27 per
diluted share, compared to net income of $1.5 million, or $0.08 per
diluted share, for the fourth quarter of fiscal 2017. Non-GAAP net
income for the fourth quarter of fiscal 2018 was $19.1 million, or
$1.02 per diluted share, compared to non-GAAP net income for the
fourth quarter of fiscal 2017 of $19.9 million, or $1.02 per
diluted share.
For the fiscal year ended June 30, 2018, the Company reported
revenues of $1.089 billion, an increase of 13% over revenues in the
prior fiscal year. Net loss for fiscal 2018 was $29.1 million, or
$(1.57) per diluted share, compared to net income of $21.1 million,
or $1.07 per diluted share, in the prior fiscal year. Non-GAAP net
income for the fiscal year ended June 30, 2018 was $69.5 million,
or $3.61 per diluted share, compared to non-GAAP net income of
$58.8 million, or $2.99 per diluted share, for the 2017 fiscal
year.
During the three months ended June 30, 2018, the Company's
book-to-bill ratio for equipment and related services (non-turnkey)
was approximately 1.3. As of June 30, 2018, the Company's backlog
was $976 million, compared to $738 million as of June 30, 2017. For
the three months and fiscal year ended June 30, 2018, cash flow
from operations was $17 million and $133 million, respectively, as
compared to $11 million and $63 million for the three months and
fiscal year ended June 30, 2017.
Mr. Chopra stated, “Our Security division finished the year with
strong revenues and backlog. Fourth quarter revenues in the
division increased 26% to a record $185 million. Excluding $17.5
million of revenues from the trace detection business that we
acquired in July 2017, fourth quarter sales in our Security
division increased 14% over sales in the same prior-year fiscal
period. During the quarter, we won several notable orders with
overall Security division bookings of $198 million.”
Mr. Chopra further commented, “Our Optoelectronics and
Manufacturing division continued the steady performance seen
throughout fiscal 2018. Fourth quarter sales increased 9% on a
year-over-year basis. However, one of our businesses within this
division incurred an operating loss in the quarter contributing to
an overall year-over-year reduction in operating income. We have
taken steps to address the operational issues and expect improved
performance in fiscal 2019.”
Mr. Chopra continued, “Fourth quarter sales in our Healthcare
division decreased 11% as compared to the prior fiscal year.
Although we are disappointed with the second half results of our
Healthcare division, we are encouraged by the direction under new
leadership. We are increasing focus on patient monitoring,
diagnostic cardiology, and supplies and accessories and leveraging
our market positions in the U.S. and Europe, while de-emphasizing
our anesthesia products that lack scale. We anticipate these
actions should lead to increased margins in this division.”
Mr. Chopra concluded, “During fiscal 2018, we repurchased $63
million of common stock as part of our share repurchase program,
returning value to our shareholders, and now have approximately
851,000 shares available for future repurchases. Going forward, we
will continue to focus on creating long-term shareholder value by
pursuing various growth initiatives, targeting strategic
acquisitions, and exiting non-core lines of business.”
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 $55
million during the fiscal year ended June 30, 2018. The charge
includes 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.
The effective tax rate for fiscal 2018 was 179.0% primarily as a
result of the Tax Act. Excluding discrete items and the impact of
the Tax Act, the effective tax rate would have been approximately
27% for fiscal 2018. For the fourth quarter of fiscal 2018, the
effective tax rate was 10.7%. Excluding discrete items and the
impact of the Tax Act, the fourth quarter effective tax rate would
have been approximately 19.7%.
Fiscal Year 2019 Outlook
For fiscal year 2019, the Company anticipates revenues in the
range of $1.125 billion to $1.165 billion, and non-GAAP earnings
per diluted share in the range of $3.80 to $4.00. Actual sales and
non-GAAP diluted earnings per share could vary from this guidance
due to factors discussed under “Forward-Looking Statements” or
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 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, and complexity in accurately forecasting the timing
and 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 or cannot be reasonably predicted. For the same
reasons, the Company is unable to address the probable significance
of unavailable information. The amount of these deductions 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 twelve months ended June 30,
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
and 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 Company’s businesses, (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
over the Internet beginning at 1:30pm PT (4:30pm ET) today to
discuss its results for the fourth quarter of fiscal 2018 and the
full 2018 fiscal year. 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
September 6, 2018. 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 ‘3678868’ 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 and
growth in fiscal 2019. 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;; 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 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 in
connection with requirements under federal securities laws.
OSI SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share
data)
Three Months Ended
June 30,
Fiscal Year Ended
June 30,
2017 2018
2017 2018 Net revenues:
Products $ 167,555 $ 203,397 $ 655,840 $ 732,927 Services
84,847 83,929 305,111
356,359 Total net revenues 252,402 287,326 960,951 1,089,286
Cost of goods sold: Products 117,793 141,420 466,293 504,483
Services 47,818 44,740 171,157
193,151 Total cost of goods sold
165,611 186,160 637,450
697,634 Gross profit 86,791 101,166 323,501 391,652
Operating expenses: Selling, general and administrative 48,032
64,001 192,560 239,592 Research and development 11,140 15,067
50,951 61,189
Impairment, restructuring and other
charges, net
24,813 11,474 46,698
34,963 Total operating expenses 83,985
90,542 290,209 335,744
Income from operations 2,806 10,624 33,292 55,908 Interest expense,
net (3,913 ) (4,976 ) (9,629 ) (19,293 ) Other income, net -
78 2,088 239
Income (loss) before income taxes (1,107 ) 5,726 25,751 36,854
Provision for (benefit from) income taxes (2,654 )
612 4,675 65,981 Net income
(loss) $ 1,547 $ 5,114 $ 21,076 $ (29,127 )
Diluted earnings (loss) per share $ 0.08 $ 0.27
$ 1.07 $ (1.57 ) Weighted average shares outstanding
– diluted 19,479 18,680 19,689
18,592
UNAUDITED SEGMENT
INFORMATION
(in thousands)
Three Months Ended
June 30,
Fiscal Year Ended
June 30,
2017 2018
2017 2018 Revenues –
by Segment: Security division $ 147,160 $ 185,217 $ 555,197 $
690,001 Healthcare division 53,607 47,594 200,034 189,387
Optoelectronics and Manufacturing division (including intersegment
revenues) 60,236 65,461 236,100 254,485 Intersegment revenues
eliminations (8,601 ) (10,946 ) (30,380 )
(44,587 ) Total $ 252,402 $ 287,326 $ 960,951
$ 1,089,286
Operating income (loss) – by
Segment: Security division $ (1,511 ) $ 17,914 $ 35,256 $
84,106 Healthcare division 4,151 (7,634 ) 2,624 (14,609 )
Optoelectronics and Manufacturing division 7,643 5,800 23,792
22,024 Corporate (7,477 ) (6,429 ) (29,359 ) (35,030 ) Intersegment
eliminations - 973 979
(583 ) Total $ 2,806 $ 10,624 $ 33,292
$ 55,908
OSI SYSTEMS, INC. AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands) June 30,
2017 June 30, 2018 Assets Cash and cash
equivalents $ 169,650 $ 84,814 Accounts receivable, net 206,526
210,744 Inventories 248,510 313,552 Other current assets
28,314 41,587 Total current assets 653,000 650,697 Goodwill
242,129 292,213 Intangible assets 118,450 142,001 Other non-current
assets 216,508 170,780 Total Assets $ 1,230,087 $
1,255,691
Liabilities and Stockholders' Equity
Bank lines of credit $ 103,000 $ 113,000 Current portion of
long-term debt 2,396 2,262 Accounts payable and accrued expenses
137,559 194,815 Other current liabilities 103,179
133,245 Total current liabilities 346,134 443,322 Long-term debt
241,750 248,980 Deferred income taxes 20,681 15,002 Other long-term
liabilities 52,309 58,951 Total liabilities 660,874
766,255 Total stockholders’ equity 569,213 489,436
Total Liabilities and Stockholders’ Equity $ 1,230,087 $ 1,255,691
RECONCILIATION OF GAAP TO NON-GAAP NET
INCOME AND EARNINGS PER SHARE
(in thousands, except earnings per
share data)
Three Months Ended
June 30,
Fiscal Year Ended
June 30,
2017 2018 2017
2018 Net income EPS
Net income EPS Net income
EPS
Net income (loss)
EPS GAAP basis $ 1,547 $ 0.08 $ 5,114 $ 0.27 $ 21,076
$ 1.07 $ (29,127 ) $ (1.57 ) Impairment, restructuring and other
charges 24,813 1.27 11,474 0.61 46,698 2.37 34,963 1.88
Amortization of acquired intangible assets1 2,357 0.12 4,643 0.25
8,382 0.43 15,713 0.85 Non-cash interest expense 1,771 0.09 1,912
0.10 2,477 0.13 7,470 0.40 Gain from disposition of business - - -
- (2,110 ) (0.11 ) - - Tax effect of above adjustments (8,161 )
(0.42 ) (3,555 ) (0.19 ) (15,305 ) (0.78 ) (15,610 ) (0.84 )
Discrete tax items (2,433 ) (0.12 ) (517 ) (0.02 ) (2,433 ) (0.12 )
56,087 3.02 Impact of diluted shares 2 - -
- - - -
- (0.13 ) Non-GAAP basis $ 19,894
$ 1.02 $ 19,071 $ 1.02 $ 58,785
$ 2.99 $ 69,496 $ 3.61
1
Amortization is based in part on the preliminary fair value
of the acquired intangibles and is subject to change as purchase
accounting is finalized.
2
For the fiscal year ended June 30, 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 fiscal year ended June 30, 2018, the
weighted average diluted shares used to calculate EPS on a non-GAAP
basis were approximately 19,274,000 shares.
RECONCILIATION OF GAAP TO NON-GAAP OPERATING INCOME
(LOSS) AND OPERATING MARGIN BY SEGMENT
(in thousands, except
percentages)
Three Months Ended June 30, 2017 Security
Division Healthcare Division
Optoelectronics andManufacturing
Division
Corporate / Elimination Total % of % of
% of % of
Sales
Sales
Sales
Sales
GAAP basis – operating income (loss) $ (1,511 ) (1.0 )% $ 4,151 7.8
% $ 7,643 12.7 % $ (7,477 ) $ 2,806 1.1 % Impairment, restructuring
and other charges 21,849 14.9 % 967 1.8 % 473 0.8 % 1,524 24,813
9.8 % Amortization of acquired intangible assets 1,980
1.3 % 14 0.0 % 364 0.6 % -
2,358 1.0 % Non-GAAP basis– operating income (loss) $
22,318 15.2 % $ 5,132 9.6 % $ 8,480 14.1 % $ (5,953 )
$ 29,977 11.9 %
Three Months Ended June 30, 2018 Security Division
Healthcare Division
Optoelectronics andManufacturing
Division
Corporate / Elimination Total
% of
% of
% of
% of
Sales
Sales
Sales
Sales
GAAP basis – operating income (loss) $ 17,914 9.7 % $ (7,634 )
-16.0 % $ 5,800 8.9 % $ (5,456 ) $ 10,624 3.7 % Impairment,
restructuring and other charges, net 1,766 0.9 % 9,439 19.8 % 222
0.3 % 47 11,474 4.0 % Amortization of acquired intangible assets
3,697 2.0 % - - % 946 1.4 %
- 4,643 1.6 % Non-GAAP basis– operating income
(loss) $ 23,377 12.6 % $ 1,805 3.8 % $ 6,968 10.6 % $
(5,409 ) $ 26,741 9.3 %
RECONCILIATION OF GAAP TO
NON-GAAP OPERATING INCOME (LOSS) AND OPERATING MARGIN BY
SEGMENT
(in thousands, except
percentages)
Fiscal Year Ended June 30, 2017 Security
Division Healthcare Division
Optoelectronics andManufacturing
Division
Corporate / Elimination Total
% of
% of
% of
% of
Sales
Sales
Sales
Sales
GAAP basis – operating income (loss) $ 35,256 6.3 % $ 2,624 1.3 % $
23,792 10.1 % $ (28,380 ) $ 33,292 3.5 % Impairment, restructuring
and other charges 36,979 6.7 % 3,315 1.7 % 1,026 0.4 % 5,378 46,698
4.8 % Amortization of acquired intangible assets 6,558 1.2 %
373 0.2 % 1,451 0.6 % -
8,382 0.9 % Non-GAAP basis– operating income (loss) $ 78,793 14.2 %
$ 6,312 3.2 % $ 26,269 11.1 % $ (23,002 ) $ 88,372 9.2 %
Fiscal Year Ended June 30, 2018 Security Division Healthcare
Division
Optoelectronics andManufacturing
Division
Corporate / Elimination Total
% of
% of
% of
% of
Sales
Sales
Sales
Sales
GAAP basis – operating income (loss) $ 84,106 12.2 % $ (14,609 )
-7.7 % $ 22,024 8.7 % $ (35,613 ) $ 55,908 5.1 % Impairment,
restructuring and other charges, net 3,893 0.6 % 24,168 12.8 %
1,712 0.6 % 5,190 34,963 3.2 % Amortization of acquired intangible
assets 13,140 1.9 % 29 0.0 % 2,544 1.0
% - 15,713 1.5 % Non-GAAP basis– operating
income (loss) $ 101,139 14.7 % $ 9,588 5.1 % $ 26,280 10.3 %
$ (30,423 ) $ 106,584 9.8 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180823005716/en/
OSI Systems, Inc.Ajay VashishatVice President, Business
Development(310) 349-2237avashishat@osi-systems.com
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