OSI Systems, Inc.

Good day and thank you for standing by. Welcome to the OSI Systems Inc third quarter 2024 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 a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alan Edrick, Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining us. I'm Alan Edrick, Executive Vice President and CFO of OSI Systems, and I'm here today with Deepak Chopra, OSI's President and CEO. Welcome to the OSI Systems Fiscal 24 Third Quarter Conference Call. We are pleased that you can join us as we review our financial, and operational results. Earlier today, we issued a press release announcing our 2024 fiscal year third quarter financial results. Before we discuss our results, however, 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 further information regarding non-GAAP measures and comparable GAAP measures of the company's results and a quantitative reconciliation of those figures, please refer to today's earnings press release. I will begin with a high-level summary of our financial performance for the third quarter of fiscal 24 and then turn the call over to Deepak for a discussion of our business and our operational performance. We will then finish with more detail regarding our financial results and a discussion of our updated outlook for fiscal year 24. Following record revenues and non-GAAP EPS in Q2, Our third quarter financial results were very strong led by the security division, which delivered extraordinary revenue growth and a significant increase in year over year operating income and adjusted EPS. We are encouraged by the momentum in our overall business as evidenced by another quarter of strong bookings. Let's start with a high level summary of our fiscal 24 Q3 results. First, Revenues increased 34% year-over-year to a Q3 record of $405 million, driven by the performance in our security division where revenues were up 60% year-over-year. Second, the significant revenue growth led to record Q3 non-GAAP adjusted earnings per share of $2.16, up 45% from Q3 of the prior fiscal year. Third, Bookings were again strong with a book-to-bill of just over one, and we ended the quarter with a backlog of nearly $1.8 billion. The strong backlog provides good visibility for the balance of the fiscal year and into future years. Before diving more deeply into our financial results and discussing the Fiscal 24 outlook, I will turn the call over to Dibak.

Thank you, Alan, and welcome to the OSI Systems Earnings Call for the third quarter of fiscal 2024. We are very pleased with our fiscal third quarter performance in which revenues grew 34% to a record $405 million. We had a book to build of exceeding one and finished the quarter with a healthy backlog of about $1.8 billion. Our results were primarily driven by our security division which continues to perform well. I will now discuss some key highlights from our third quarter performance across each division before handing it back to Alan for a further discussion of our financial results. Beginning with the security division, where year-over-year revenues grew 60% in Q3, the division's bookings were approximately $300 million plus, achieving a book-to-bill exceeding one. During the quarter, we continue to deliver on the two major programs, the approximately $500 million contract with Sedena, which is Mexico's Department of National Defense for cargo and vehicle inspection systems and related services, and a 200-plus million cargo program with another international customer. Our cargo and solutions team has been relentless in its efforts and both programs are progressing well. In March, we announced a new $100 million contract for various cargo and vehicle inspection systems. As you may recall, we previously announced the receipt of a large award of $59 million at the end of Q2 for cargo and vehicle inspection systems from another international customer. These significant recent awards, in addition to the combined 7 million of contracts discussed earlier, provide great confidence in sustainable growth worldwide for cargo as a market leadership breadth of product and solution portfolio and our ability to deliver are being recognized and awarded going into Q4 and into fiscal 2025. We are spending a fair amount of time here talking about the programs and market traction, but let me take a moment to provide an example here to illustrate how we affect everyday life and wellbeing with our cargo security products. We learned during the quarter that U.S. Customs and Border Protection, CBP officers at the Camino Real International Bridge on the Texas-U.S.-Mexico border performed a secondary inspection on a suspicious truck manifesting a shipment of chemicals designated for agricultural use. The scans utilizing our company's Z portal cargo scanners revealed anomalies in the cargo and CBP officers subsequently discovered six and a half tons of methapatine which had a street value of 117 million. the largest ever meth seizure in the U.S. port of entry. We are proud to support the U.S. CBP and their critical homeland security mission in stopping illegal drugs and other contraband entering our nation. Moving on to the aviation and checkpoints business, continues to perform well with strong revenues and bookings. During Q3, we announced $21 million award from an international airport for checkpoint security infrastructure solutions, including our 920CT computerized tomography screening systems with automated tray return system, along with a multi-year service and support. We also announced a $27 million award from a leading European airport to provide the itemizer 5X explosive trace detection ETD systems for secondary screening of passengers and carry-on baggage. As a side comment, the ITMizer 5X, in addition to recurring service revenue like other products, also has an ongoing recurring revenue of consumables, which has a very healthy margin. And finally, we announced a $4 award from a leading global air cargo logistics customer to provide various screening systems, including the RTT-110 CT-based explosive detection system, the Orion 927DX, and the 937DX for large package screening, and the 920CX for smaller packages. As you can see from the different products mentioned, it helps to have a broad portfolio, which we are proud to say that we have the broadest portfolio compared to our competitors and utilizing these features and technology variations to provide optimized solutions for customers. We have seen over the last few quarters that airports and air cargo customers are making significant security infrastructure investments and our business has benefit and we believe that this trend will continue into fiscal 25 and beyond. Our T-turnkey projects in Albania, Puerto Rico, Guatemala, and the European airport have been performing as anticipated. In addition, we are also gearing up to begin our latest turnkey, Uruguay turnkey, which we expect to commence sometime in summer. In security, we look to finish the year strong Recent bookings activity and a significant opportunity pipeline suggest continued strong growth demand for 2025 and beyond. Moving up to electronics and manufacturing division, where it was an uncharacteristically softer quarter, which we think is a one-off, we continue to work with several major customers to sync with their inventory demand forecast, which has impacted revenues in the short term as we had anticipated. The Opto division achieved a book to bill exceeding one for the quarter, which bodes well for the business going forward. We announced a couple of Opto's key wins, including a $15 million order from a healthcare OEM to provide critical sub-assemblies that are used in its innovative and specialized solutions. We also announced a $3 million award from Major Defense Electronics OEM to provide sensors for advanced missile systems. During Q3, we began introducing prospective customers to a new operation in Mexico, Tecate, which has given us a significant capacity to help customers aspiring to shift work from Asia to near shore. Looking ahead, we expect Apto to return to form in Q4 and believe the division is well positioned for fiscal 25 as the inventory right sizing winds down with many of our customers. Finally, moving on to the healthcare division where revenues were approximately six percent lower than in the prior years Q3. This division continues to work through a challenging hospital capex environment. Despite that, healthcare had an active bookings quarter just before quarter end We want a $6 million order from a US-based hospital for our patient monitoring systems, including exhibit central stations, expression patient monitors, and cube patient monitors, which we expect to begin delivering in Q4. Our patient monitoring solutions allow customers to enhance their services by integrating features like the safe and sound digital health platform and mobile app. This addition enables real-time patient monitoring services. Additionally, customers can leverage the Rothman and predictive health analytics software to access advanced health analytics, further augmenting our comprehensive monitoring offerings. We continue to invest heavily in developing new products, primarily in our next generation platform for patient monitoring products and solutions. Overall, we are excited about a strong finish in fiscal 24 and continuing our momentum into the next fiscal year and beyond. As always, I would like to thank our employees, customers, and stockholders for their continued support. With that, I will turn the call back over to Alan to discuss our financial results and guidance in more detail before we open for questions. Thank you.