OSI Systems, Inc.

Thank you for standing by and welcome to the OSI Systems first quarter 2025 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Alan Edrick, Executive Vice President and Chief Financial Officer of OSI. Please go ahead, sir.

Well, thank you. Good morning, and thank you for joining us. As said, 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 25 first 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 fiscal 25 first quarter 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 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 first quarter of fiscal 2025 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 25. following our fiscal 24 financial performance, featuring record revenues and non gap EPS. We started fiscal 25 by posting record q1 financial results, led by the security division, resulting in robust year over year revenue growth, and a significant increase in year over year operating income. We are encouraged by the momentum reflected in our q1 financial performance. So I'll start with a high level summary of our fiscal 25 q1 results. First, revenues increased 23% year over year to a Q1 record of $344 million, driven by the performance in our security division, where Q1 revenues were up 36% year over year. Second, the significant revenue growth led to record Q1 non-GAAP adjusted earnings per share of $1.25. Third, bookings were again solid, and we ended the quarter with a backlog of approximately $1.8 billion. Our healthcare backlog, excuse me, our healthy backlog and robust pipeline of opportunities provide good visibility going forward. Fourth, we completed a convertible debt financing in July, raising gross proceeds of $350 million, which reduced our weighted average cost of borrowings and was immediately accretive. Concurrent with this transaction, we repurchased approximately 531,000 shares of our common stock. And finally, in September, we completed a strategic bolt-on acquisition in our security division. While the acquired business did not significantly enhance our Q1 revenues, this deal is expected to be accretive to fiscal 25 non-GAAP earnings per share. Before diving more deeply into our financial results and discussing the updated fiscal 25 outlook, I will turn the call over to Deepak.

Thank you, Alan, and good morning to everybody and afternoon. I'm pleased with the company's robust fiscal 2025 first quarter performance. As Alan mentioned, we achieved an impressive 23% revenue growth, leading to a higher year-over-year operating margin. We closed the quarter with a backlog near all-time high of $1.8 billion and are optimistic about the remainder of fiscal 2025 and beyond. So let's dive into the performance and highlights of each of our three divisions for the first quarter. Beginning with the security division, their Q1 revenues were up 36% year-over-year, resulting in increased operating profits. Also, security bookings were solid. During the quarter, we continued to deliver on port and border security initiatives with Mexico's defense agency, CEDENA. on the $500 million plus contract and with the other international customer on the $200 million contract. In addition, shortly after the quarter end, we announced the commencement of operations of our turnkey screening services in Uruguay utilizing our cargo and vehicle inspection systems along with our proprietary search scan integration platform. We will also provide on this contract ongoing management training, equipment maintenance, and support as part of the Uruguay contract. The Uruguay program now joins a list of our longstanding successful multi-year turnkey projects in Puerto Rico, Albania, and Guatemala, and serves as further evidence for potential customers of the breadth of our capabilities to manage large-scale security programs in various parts of the world. During Q1, we had several wins in security and announced these during the quarter. First, a $17 million international order to provide Eagle P60 high-energy drive-through cargo and vehicle inspection systems. and T-60 trailer-mounted vehicle inspection systems, including maintenance, service, and support. Second, a $26 million services order from an international customer to maintain and service its existing installed base of cargo and vehicle inspection systems. Third, a $10 million order from yet another international customer to provide the Z-backscatter van, ZBV, mobile cargo and vehicle inspection systems including training service and support and finally domestically we announced a contract of order of about 27 million dollars for maintenance services and technology support for its install base of wrapper scan cargo and vehicle inspection systems The agreement contains potential options for orders totaling up to $117 million over a three-year period. In aviation, we continue to make progress on our existing international airport project awards as airports expand and upgrade existing infrastructure, especially in Europe, Middle East, and Latin America. Our overall activity at airports and air cargo facilities continues to be robust. We have a good pipeline. We are also focused on developing new offerings for airport and air cargo customers, such as providing employee screening solutions for these customers. In some instances, this could be opportunities for complete turnkey services or hardware sales with remote monitoring services possibility. As Alan mentioned, during the first quarter of fiscal 25, we acquired a US based company that provides high power radio frequency based transmission and amplification solutions for critical military communication communications navigation and surveillance applications both in the US and international customers like our company's legacy offerings these products help provide security and safety for people and critical infrastructure we work with numerous defense and security agencies that utilize this technology in communication and surveillance solutions in summary This acquisition adds proven radio frequency-based technology and products to our portfolio, allowing us to leverage further our global manufacturing sales and service support infrastructure. Overall, the security division had a strong start in fiscal 2025, and we look forward to security again achieving a high level of performance to the balance of 25 and beyond. Moving to the Opto Electronics and Manufacturing Division, Opto reported revenues of 98 million, including intra-company sales, to reach a new first quarter record while delivering solid profitability. We saw notable strength and growth in our Flex Circuits product line. Many of our customers for Flex Circuits are from consumer tech and advanced medical device industries. We also have many customers who are leading OEMs in defense electronics. To that end, we announced a $5 million order for advanced optical sensors that the customer will integrate into its complex navigation and guidance systems. I should note here that an order of this size is relatively large for this division. Our operations in Mexico, which we began at the end of Q2 last year, are ramping up as we continue to introduce our existing and potential customer base to its capabilities and the net benefits of nearshoring. The uncertainty and risk for OEMs with China centric supply chains have never been more significant and our global manufacturing presence in US, Mexico, UK, India, Indonesia, and Malaysia provides a viable alternative to reducing these risks. Finally, onto the healthcare division. Q1 sales were down slightly year over year due to challenging marketing conditions, as we mentioned before. Still, the division delivered improved profitability, in part due to a more streamlined infrastructure. To support our customers, this division continues to offer innovative solutions and market its differentiation offerings like the Rothman Index-based predictive analytics software, and safe and sound patient alarm management software. We are focused on developing the next generation of patient monitoring solutions and continue to progress accordingly with an improved cost structure and a growing opportunity pipeline. We expect healthcare's performance to improve over the balance of fiscal 25. In summary, With a significant backlog and a clear path to near-term opportunities, we are increasingly confident about our prospects for fiscal 2025 and beyond. Our strategy of being a vertically integrated supplier with a flexible and responsive global footprint that meets its customers' needs while we continue to invest in and acquire strategic technologies and capabilities has created a robust business with a long-term sustainable growth potential. Finally, as you know, I have announced my retirement from my position as chief executive officer of the company at the end of calendar 2024, though I will remain as executive chairman of the board. In 1987, we laid the foundation for what would become OSI Systems, starting as an OptoSensors Inc. company and embarked on a new chapter by going public in 1997. From the beginning, our mission has been unwavering to deliver essential components and systems that enhance the safety and health of society. With the seasoned expertise of our current OSI management team, I'm confident in our ability to ascend to even more significant achievements. We expect to announce a successor before the end of the quarter. As such, this is expected to be my last earnings call as CEO, and it has been my privilege to lead the company over the past years, and I look forward to supporting OSI's journey ahead. With that, I turn the call over to Alan to talk in more detail about our financial performance and updated guidance before opening the call for questions. Thank you.