OSI Systems, Inc.

Hello, and thank you for standing by. Welcome to OSI Systems, Inc. Fourth Quarter and Fiscal Year 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 the question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the call over to Alan Edrick, Executive Vice President and Chief Financial Officer of OSI. 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'm here today with Deepak Chopra, OSI's President and CEO. Welcome to the OSI Systems Fiscal 24 Fourth Quarter and Year End Conference Call. We are pleased that you can join us as we review both our financial and our operational results. Earlier today, we issued a press release announcing our fiscal 24 fourth quarter and full year financial results. Before we discuss these 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 upon 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 gap 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 fourth quarter of fiscal 24 and then turn the call over to Deepak for a discussion of our business and operational highlights. We will then finish with more detail regarding our financial results and a discussion of our outlook for fiscal year 2025. Following record revenues and non-GAAP EPS in each of Q2 and Q3, we again saw record financial results in the fourth quarter, led by the Security Division, resulting in outstanding revenue growth and a significant increase in year-over-year operating income. We are encouraged by the momentum in our business. Let's start with a high-level summary of our fiscal 2024 Q4 and full-year results. First, revenues increased 17% year-over-year to a Q4 record of $481 million, driven by the performance in our security division, where Q4 revenues were up 27% year-over-year. For the full year, fiscal 24 revenues were a record $1.54 billion, a 20% increase over fiscal 23. Second, the significant revenue growth led to record Q4 non-GAAP adjusted earnings per share of $2.84. For the full year, fiscal 24 non-GAAP adjusted EPS was a record $8.13, a 31% increase over the prior fiscal year. Third, bookings were again solid, and we ended the quarter with a backlog of approximately $1.7 billion. Our healthy backlog and robust pipeline of opportunities provide good visibility as we enter fiscal year 2025. Before diving more deeply into our financial results and discussing the fiscal 25 outlook, I will turn the call over to Deepak.

Thank you, Alan. Good morning, everyone. Thank you for joining us today as we discuss OSI Systems' strong performance for the 2024 fourth quarter and the full fiscal year. As Alan mentioned, I'm proud to say our revenues grew year over year by 17% in Q4 and 20% for the full fiscal year, resulting in record revenues for both of these periods. We ended the fiscal year with a significant backlog of approximately $1.7 billion, which combined with the strength of our very robust pipeline gives us tremendous confidence for fiscal 2025 and beyond. Diving into the highlights, the Security Division again delivered fantastic results with year-over-year revenues increasing 27% in Q4 and 37% for the full fiscal year. This growth was spread across many of our offerings in geographic regions, but was particularly notable in Latin America, Middle East, and Asia-Pac regions. During Q4, We continue to successfully execute on our major program with Mexico's Department of National Defense, known as SEDANA, which is expected to generate more than $500 million in total revenue over the length of the contract. For SEDANA, we provide a range of inspection systems, including the Eagle high-energy and low-energy cargo inspection portals, the Carview Vehicle Inspection System, and the CertScan Multisite Integration Platform for inspecting trucks, buses, and cars at Mexico's northern and southern border checkpoints. We also continue to successfully deliver on another major cargo program, the $200 million contract with an international customer. We are performing well with these programs and they are expected to be nice contributors again in fiscal 25. The additional program we won from Sedana valued at over 100 million is well underway also with revenues expected to commence in mid fiscal 2025. Our turnkey projects in Albania, Puerto Rico, Guatemala, and a European airport continue to perform seamlessly providing strong recurring revenues and serving as great reference points on further opportunities. Our latest cargo turnkey project in Uruguay is expected to commence operations before the end of the calendar year. These successful projects, each with their unique security requirements, demonstrate our ability to deliver highly customized solutions to meet our customers' needs. Many of our turnkey and hardware projects also utilize CertScan, our multi-site integration platform that is increasingly adopted by port and border customs agencies worldwide. CertScan sets us apart from competitors enhancing the value of our offerings beside our broad product portfolio. We were active throughout fiscal 2024 with aviation customers also as passenger traffic continued to increase. We expect this general trend to continue as our aviation-related bookings were particularly strong in the second half of fiscal 2024. To that end, during Q4, we announced orders totaling approximately 52 million from two international airports to furnish a comprehensive array of security solutions, including the RTT-110 for whole baggage screening and the Orion 920CT for checkpoint security, with extensive service and support commitments and recurring revenue. For ports and border security applications in Q4, We announced two awards from international customers totaling about $20 million for the Eagle M60 mobile cargo and vehicle inspection systems, including follow-on maintenance and support. These M60 platforms enable efficient and flexible relocation of security checkpoints to optimize security for borders and critical infrastructure. We also announced an award from an international border security customer of approximately $11 million for radiation monitoring solutions and related services and support. This has been a breakthrough year for the Security Division. In addition to robust revenue and profit growth, our continued success in securing major projects in ports, borders, and aviation security reinforces our confidence in our strategy of offering a comprehensive range of products and services in order to provide our customers with the flexibility to meet their specific security needs effectively and efficiently. This approach ensures that we deliver solutions that offer the best value, further solidifying our position as a leader in the industry. With a strong backlog, and strong pipeline, we are enthusiastic about the division's long-term growth prospects in fiscal 2025 and beyond. Moving on to the opto group, the optoelectronics manufacturing division achieved a significant milestone with record Q4 revenues, including intercompany sales of 102 million. Throughout fiscal 2024, including the fourth quarter, We continue to work with our customers to adjust to their demand forecast, and we believe we have made progress in right-sizing to this demand, putting this activity behind us in the coming months. We announced a couple of nice wins during the quarter. We announced a $7 million repeat order from a leading healthcare OEM customer for portable device assemblies. We also received another $7 million order to provide electronic subassemblies to an advanced engineering solutions OEM. In fiscal 2025, we believe that our recent expansion into Mexico, the Tecate operation, will benefit us for nearshoring customer activity along with our favorable position globally in South Asia PAC region, and in UK as large OEMs are seeking to establish or expand their supply chain to de-risk their exposure to China-centric supply chains. Based on the ability of our Opto division to effectively adjust to market trends and changes in customer demand, we believe Opto will continue to achieve profitable growth. Now let's turn our attention to the healthcare division. where Q4 revenues were the strongest for the fiscal year 2024, though down year over year on a tough comparison. Fiscal 2024 brought significant challenges for patient monitoring in the U.S., primarily as hospitals continued to defer capital purchases. Despite these hurdles, during the quarter, we secured a $6 million award from a U.S.-based hospital to provide patient monitoring solutions and related accessories, including exhibit, central stations, expression, patient monitors, and cue patient monitors. Additionally, our Rothman Index predictive and analytic solution is seeing increased success. Our clinical services offerings also continue to be well received by our clients. We are committed to advancing our next generation patient monitoring solutions enhancing the innovative features of our products to help doctors and clinicians deliver improved healthcare treatment. We adjusted the healthcare division cost structure in the quarter also, the benefits of which are expected to primarily start realizing in fiscal 2025. To sum it up, we are confident about our company's future and excited to build on our stellar fiscal 2024 performance. We are extremely excited and confident about fiscal 25 and beyond. I will close this portion of the discussion by thanking all our employees, customers, and stakeholders who have played a part in OSI system success. With that, I will turn the call back over to Alan to discuss our financial results and fiscal 2025 guidance in more detail before we open the call to questions. Thank you very much.