OSI Systems, Inc.

Thank you for standing by. Hello, and welcome to the OSI Systems Inc. Third Quarter 2025 Conference Call. I would now like to turn the call over to our Executive Vice President and Chief Financial Officer, Alan Edrick. Mr. Edrick, please go ahead.

Thank you very much. Good morning, and thank you for joining us today. I'm Alan Edrick, Executive Vice President and CFO of OSI Systems, and I'm here today with A.J. Merrow. OSI's President and CEO. Welcome to the OSI Systems Fiscal 25 Third Quarter Conference Call. We are pleased that you can join us as we review our financial and operational results. Please excuse my voice today as I am a bit under the weather. Earlier today, we issued a press release announcing our Fiscal 25 Third Quarter financial results. Before we discuss these results, however, I'd 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'll 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 25, and then turn the call over to AJ 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. Our third quarter financial results were strong with multiple Q3 records across different financial metrics. We are excited by the momentum across our businesses as we conclude fiscal 25 over the next two months and get ready to kick off fiscal 26. Now for the high-level summary of our Q3 results. First, revenues increased 10 percent year-over-year to a Q3 record of $444 million, with growth in each of the three divisions highlighted by a 10 percent year-over-year revenue increase in our security division and a 15 percent year-over-year increase in our opto division, including intercompany sales. The strong revenue growth led to record Q3 non-GAAP adjusted earnings per share of $2.44. Third, bookings were significant. And with a book-to-bill ratio exceeding 1.0 in Q3, we finished the quarter with a record backlog of more than $1.8 billion. This backlog and robust pipeline of opportunities provides good visibility going forward. And fourth, we generated record Q3 operating cash flow of 82 million, representing a $134 million jump over the negative cash flow of 52 million in the same quarter in the last fiscal year. This performance was driven by strong profits and an improvement in working capital metrics. Before diving more deeply into our financial results and discussing our updated outlook for the full fiscal year 25 year, I will turn the call over to Ajay.

Thank you, Alan, and welcome to the OSI Systems Earning Call for the third quarter of fiscal 2025. We are pleased to report another record-breaking quarter with numerous financial metrics, as Alan described. With a quarter-end record backlog of over $1.8 billion, we are focused on finishing fiscal 25 strong and continuing to build the foundation for fiscal 26. Before we dive into our divisional highlights and outlook, I want to address the evolving global trade environment, particularly the recent U.S. tariff policies that have introduced uncertainty across industries. With significant revenue generated from international markets, we're not immune to these challenges. However, while instability surrounding international trade regulation is a continuing concern, our team is taking action to mitigate the impact of rising trade frictions that may affect our business. We're actively pursuing cost optimization and engaging in strategic pricing discussions with customers and suppliers. These efforts, combined with a diversified portfolio and strong customer relationships, position us to navigate the landscape while continuing to drive value for our shareholders. As we speak, we do not anticipate any meaningful P&L impact from tariffs on our Q4 results. Given the ongoing volatility in this area, it is difficult at this time to assess impacts on periods further out on the calendar. We will update you further on our earnings call next quarter. This quarter performance was fueled by exceptional execution in the security division and robust growth in the optoelectronics and manufacturing division. In healthcare, we are encouraged by the positive momentum positioning us well for long-term growth. Let's discuss each division in more detail, starting with security, where revenues increased 10 percent year over year. This top-line performance was particularly notable since we had a challenging comparison with last year's record results. Demand for our products and services continues to be strong across multiple regions. with robust bookings. Even with a sizable backlog conversion to revenue, the division ended the quarter with a record backlog, reinforcing our confidence in sustained positive momentum. Our performance at ports and borders was powerful this quarter with significant new orders, and we announced a few of them, including a $12 million order for Eagle M60BX systems with advanced imaging capabilities, a $17 million order from a North American customer for Eagle M60 systems under a multi-year framework, and a $24 million order for ZPortal high-throughput drive-through inspection systems for scanning large vehicles and cargo containers. Recently, we announced another award received during Q3 for orders totaling $50 million from an existing U.S. customer to support the ongoing deployment of our cargo inspection systems. These awards highlight the global demand for our innovative and high-performance inspection solutions designed to secure borders and critical infrastructure. Our aviation and checkpoints business remains robust as ongoing investments continue to be funded by airport and air cargo customers upgrading or expanding security infrastructure. During the quarter, we announced a $76 million order for a major international airport to deploy RTT-110 explosive detection systems and Itemizer 5X for hull baggage and trace detection. This is the largest award for a major airport in the history of the company. Our broad portfolio and technology leadership continue to be recognized by customers worldwide. Our security services business, including turnkey operations, continues to perform as anticipated, demonstrating our experience and capability to deliver highly customized solutions. Earlier in the fiscal year, we further expanded our engineering and manufacturing capabilities for defense and security markets through a strategic acquisition of an RF-based solutions business principally serving defense customers. During Q3, we secured a $32 million order, international order, for long-range secure communication systems with integration and deployment support. This business is building nice momentum, and we are pleased with the early successes. We are proud of our growing role in supporting secure, long-range communications worldwide for military and government applications. Overall, we anticipate the global focus funding and funding for defense and security will continue to trend in our favor over the long run. Moving on to the Optoelectronics and Manufacturing Division, which delivered a standout quarter with revenues growing 15 percent year over year, surpassing 100 million in sales for another quarter and achieving record nine-month sales. The division saw strong operating margin expansion. Growth was driven by sales to multiple OEMs across industries, including medical and consumer technology, with flexible circuit products performing exceptionally well. Opto continues to benefit from a vertically integrated structure and is well positioned for future growth opportunities. Although bookings remain steady in the face of global tariff uncertainties, we will remain vigilant to address any potential challenges in the upcoming months. A global manufacturing footprint in Malaysia, Indonesia, India, Canada, Mexico, and of course the U.S. positions us to help existing and new customers adjust their value chains to minimize tariff impacts potentially enabling the division to gain market share. We expect Opto to maintain its momentum into Q4. Now let's move to the healthcare division, which had encouraging sales growth in the quarter. In Q3, we welcome the new president, Wilson Constantine, an industry veteran to lead the healthcare division. We have already seen a positive impact on the team's focus and energy in the brief time he has been here. Shortly after quarter end, we announced a significant award we received during Q3 for approximately $4 million to provide patient monitoring solutions and related supplies and accessories to a US-based hospital. We acknowledge the substantial work ahead and are confident that the business is now guided by strong, capable leadership. In summary, OSI is poised for continued success as we leverage our global footprint, innovative technologies, and strategic acquisitions like the RF-based solutions business to deliver exceptional value to customers worldwide. With anticipated growing attention and funding for defense and security, we are well positioned to size emerging opportunities. Although the tariff environment is currently unstable, we will proactively work to mitigate negative impacts from international trade frictions. We've had a strong three quarters and look forward to finishing the year strong. As always, I would like to thank our employees, customers, and stockholders for the continued support and dedication. With that, I will turn the call over to Alan to discuss our financial results and guidance in more detail before we open the call for questions. Thank you.