OSI Systems, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to the OSI Systems, Inc. first quarter 2022 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to turn the conference over to your speaker for today, Alan Edrick, Chief Financial Officer. Sir, you may begin.

Well, thank you. Good morning, and thank you for joining us. I'm Alan Edrick, Executive Vice President and CFO of OSI Systems, and I am here today with Deepak Chopra, our President and CEO. Welcome to the OSI Systems Fiscal 22 First Quarter Conference Call. We are pleased that you can join us as we review our financial and our operational results. Earlier today, We issued a press release announcing our first quarter fiscal year 22 financial results. Before we discuss these results, I would like to remind everyone that today's discussion will include forward-looking statements and the company wishes to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. All forward-looking statements made on this call are based on currently available information. and the company undertakes no obligation to update any forward-looking statement based on subsequent events or new information or otherwise. During today's call, we will refer to both GAAP and non-GAAP financial measures when describing the company's results. For information regarding non-GAAP measures and GAAP measures of the company's results and a quantitative reconciliation of those figures, please refer to today's earnings release. I will begin with a discussion of our financial performance for the first quarter of fiscal 22, and then turn the call over to Deepak for an overview of the business. I will then finish with more detail regarding our financial results and a discussion of the outlook for fiscal 22. Despite the continuing impacts from COVID, as well as supply chain and logistics challenges, the company performed well during our first quarter. Our priority at OSI Systems remains to deliver on commitments to our customers and our partners and position the company for long-term success while preserving the safety of our employees. Now let's cover some highlights. First, Q1 revenues increased 10% year-over-year, all organically, driven by strength in our security and optoelectronics and manufacturing divisions. Second, We achieved record Q1 non-GAAP earnings per share of $1.16, up 9% from Q1 of fiscal 21, despite a volatile backdrop of travel restrictions, short-term plant closures, and supply chain constraints. And third, bookings were strong in the first quarter. The Q1 book-to-bill ratio was 1.6, leading to a 15% increase in backlog since the beginning of the quarter. Our backlog exceeded 1.2 billion for the first time. Before diving more deeply into our financial results, let me turn the call over to Dibak.

Thank you, Alan, and good morning to all of you. We are pleased with our fiscal 2022 first quarter performance, which showed strong revenues, bookings, and earnings. We delivered a strong first quarter, despite an environment that included overseas investments plant partial shutdowns due to the pandemic and the ongoing supply chain disruption. I am pleased with our disciplined execution, which enabled us to navigate these challenges and capitalize on the ongoing recovery in certain of our end markets. As Alan mentioned, with a record backlog of over $1.2 billion, we are well positioned for the future. talking about each division's performance in the quarter, starting with the security division, where the first quarter revenues grew 11% year over year. The division achieved significant bookings, resulting in a book-to-bill ratio of 1.9. Shortly after the quarter end, we announced key wins that we achieved during Q1 with one of our major customers, U.S. Customer Border and Protection, CBP, to enhance border security infrastructure. Under the contract for the LEP low energy scanners and MEP medium energy scanner IQs with CBP, we received out of that the largest orders to date totaling approximately $200 million. As you know, that The September quarter is also the government end year, and we are very, very excited about this huge win. We have the potential to receive another $65 million under these orders if the CBP exercises its options. We expect to fulfill these orders over the next couple of years, commencing in late fiscal 2022. We look forward to providing our CarView in-lane scanner, the ZPortal backscatter scanners, and our Eagle P60 ZBX inspection systems to support the CBP's target of achieving 100% screening at border crossings. In addition, a meaningful portion of our order values are also for our proprietary cert scan integration platform software for image analysis, data integration, and inspection. We believe that the cert scan software, as we mentioned before, has potential to become a standalone platform agnostic offering in the marketplace. Besides CBP, Other customers around the globe are also looking at the CertScan software. Our turnkey service operations in Puerto Rico, Albania, and Guatemala continue to do well as our customers rely on these programs to reinforce trade and tariff requirements. During the quarter, We successfully won orders with a number of key aviation and critical infrastructure customers and grew revenues from the prior year for baggage and parcel inspection systems and explosive trace detection systems. During the quarter, we announced an order for approximately $13 million to provide multiple units of our RTT-110 real-time tomography explosive detection systems for an Asia Pacific International Airport. The air passenger traffic levels are improving but have not returned to pre-pandemic levels, as you know, and thus the demand for related products, service and spares is recovering, though slowly. I should also note that the pandemic-related travel restrictions continue to complicate the process for scheduling site acceptance testing for new product installations in certain parts of the globe. We expect to continue dealing with these challenges in Q2 and going forward, but expect the environment to improve thereafter, although some unpredictability remains. The increasing security backlog demonstrates sustained and growing demand for our products and services, setting up well as we continue through fiscal 22 and move into fiscal 23. And we look forward to serving our global customer base in aviation, air cargo logistics, port border, and critical infrastructure. One of the comments I made in the previous calls, I want to emphasize again, that during this period, one of the areas in security that has been very successfully growing for us is the logistics and air cargo. Customers like DHL, Federal Express, and these people are very much expanding, as you know, their ability to deliver product, and we are very much integrated with our products. Moving to the optoelectronic and manufacturing division, Apto again delivered strong results with record Q1 revenues representing growth exceeding 15% over the prior year and maintained double-digit adjusted operating margins, which is impressive given that we face supply chain shortages and cost increases in this pandemic environment. The division achieved record bookings and ended with a record backlog. Opto's original equipment manufacturing customer base has exposure in multiple markets of healthcare, defense, space, and automotive, among others. As we now have a proven ability to deliver in a pandemic challenge environment, these customers serving critical markets have remained loyal and in many cases collaborated with us to manage lead time and delivery schedules. Our team is working diligently to manage the other cost elements with our control and remain focused on execution. Finally, moving to the healthcare division, we finished Q1 with the sales down slightly about 2% lower than prior year. This was expected. We had said that before as some of the COVID-related tailwinds that we experienced a year ago have somewhat dissipated. Although demand in America, our largest revenue region, continues to be strong and growing, but we did see some demand softening in the EMEA region. During the quarter, we announced an order valued at approximately $3 million to provide patient monitoring solutions and related accessories to a Midwestern U.S.-based hospital where we expect to provide exhibit central stations, expression patient monitors, and cube patient monitors. As information connectivity, ease of access, and portability become increasingly important in caring for patients, we continue to invest in advancing our key product platforms in patient monitoring and cardiology to take advantage of these trends. Going forward, we have said before that cardiology is a focus for us to grow as it's the highest margin business in space labs, in the healthcare group. We are encouraged by the performance of the healthcare team as it has delivered consecutive quarters of double-digit adjusted operating margins. Overall, I'm pleased with our Q1 performance. Despite the continued challenges related to the pandemic, our team remains focused on serving its global customer base. We have a significant backlog in security, a record backlog in opto, and the healthcare division has been critical in continuing to serve the hospital customer base that is at the forefront of fighting the global pandemic. We are hopeful that the industry-wide supply chain disruptions and cost increases will normalize in the near future. However, we are prepared to continue operating in this environment and remain vigilant in finding opportunities to grow the top line and leveraging our operations and global presence in the marketplace. We look forward to the rest of fiscal 22. With that, I will hand the call back over to Alan to talk in more detail about our financial performance before opening the call for questions. Thank you.