OSI Systems, Inc.

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, 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 A.J. Mehra, OSI's President and CEO. Welcome to the OSI Systems Fiscal 25 Fourth Quarter and Year-End 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 fiscal 24th quarter and full year financial results. Before we discuss these results, 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 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 Q4 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 outlook for fiscal year 26. Our fourth quarter financial results were strong with multiple Q4 records across key metrics and a strong finish capped off an exceptional year for OSI Systems. We are excited by the momentum across our businesses as we kick off fiscal 26. Now for the high-level summary of our fiscal 2025 Q4 results. First, revenues increased 5% year-over-year against a difficult comparison to a Q4 record of $505 million, driven primarily by a 28% increase in security division service revenues and a 10% increase in optoelectronics division revenues, including intercompany sales. This top line growth is particularly noteworthy given that the prior year Q4 included exceptionally large revenues from major security programs in Mexico. Excluding contributions from those Mexico contracts and fiscal 25 acquisitions, OSI revenues grew roughly 30% in Q4, demonstrating the strong organic demand across our core businesses. Second, the solid revenue growth along with effective cost management led to record Q4 non-GAAP adjusted earnings per share of $3.24. This is the highest quarterly adjusted EPS in our history. And third, bookings were significant in the quarter. It was a book-to-bill ratio of approximately 1.0 in Q4 we finished with a record year-end backlog of over $1.8 billion. This robust backlog, coupled with a strong pipeline of opportunities, provides excellent visibility as we head into the new fiscal year. Before diving more deeply into our financial results and discussing our outlook for fiscal 26, I'll turn the call over to AJ.

Thanks, Alan. Good morning, everyone, and welcome to OSI Systems' earnings call. I am pleased to share our strong results for the fourth quarter and full fiscal year, underscoring the unwavering strength, relentless execution and innovation in our business. As Alan mentioned, we delivered record revenues and adjusted EPS for both Q4 and fiscal 25, driven by our security and optoelectronics divisions. During the quarter, the Security Division maintained strong momentum in core markets like ports, borders, aviation, and critical infrastructure, with OptoElectronics achieved double-digit revenue growth. We closed Q4 with robust bookings and a book-to-bill ratio of approximately 1, culminating in a year-end backlog of approximately $1.8 billion. Let's dive into some key highlights. Our security division delivered impressive growth once again, with Q4 revenues up 7.1% year over year on a tough comp and a full year revenues surging 14.7%. This was driven by broad-based demand across our portfolio, especially from airport and international border security customers. We advanced several major programs in the quarter, including our large-scale contracts in Mexico. As Mexico-related revenues became a lower percentage of our total revenues throughout 25, we balanced the portfolio with revenue gains from a diverse base of global clients. Our turnkey projects worldwide are performing well, generating reliable and recurring revenues, and showcasing our expertise in developing novel, customized solutions for our customers. Several of these programs utilize our CertScan platform, which integrates multi-site operations and is being increasingly adopted by customs authorities at ports and borders globally. Security book to bill in approximately 1.0 in Q4 fostered by major awards in aviation, ports, borders, and infrastructures. Recent examples of security orders include a $56 million order from an international customer for an Eagle M60 ZBX multi-energy inspection systems and ZBVZ backscatter vehicle screening systems targeted for port and border security. A $36 million contract to supply our Orion 920CT checkpoint screening solution and 935DX air cargo pallet screening to a Middle East international airport. $50 million in awards from U.S. customer for new developments of rapid scan inspection systems, as well as a $47 million service contract from a U.S. customer for ongoing maintenance of installed systems. The sheer volume, diversity, and quality of orders in fiscal 25, combined with a growing opportunity pipeline, particularly in the U.S., which I will discuss further, and favorable marketing trends, position us for sustained success in the security division. Now, let's discuss the significant security opportunities that have been unlocked by the big, beautiful Bill Act. also known as the reconciliation bill enacted just last month. This land back legislation provides extensive funding in domains for which our solutions and capabilities are well suited. At the forefront, the act allocates significant funds for U.S. water security agencies, especially for CBP. These funds are deployable over multiple years, and we anticipate that over $1 billion will be used for procurement and integration of new non-intrusive inspection equipment and associated civil works, encompassing AI, machine learning, innovative technologies, and mission support to combat narcotic smuggling at ports of entry. Security isn't just about borders. It's about protecting the nation's biggest stages. The U.S. government's focus on enhancing people and infrastructure security becomes increasingly important as a country hosts the 2026 FIFA World Cup and 2028 Summer Olympics. And significant amounts for security have been budgeted in this act. As you may be aware, we serve as a security provider for the 2022 FIFA World Cup in Qatar. and the 2024 Summer Olympics in France. So we are a compelling fit to play a meaningful role in these upcoming events. The beautiful, big beautiful bill also contains significant funds for Golden Dome Program, which will be a complex system of sensor networks, weapons platforms, and command and control networks. We expect the program to seek to incorporate RF sensors such as ground-based radar that can be fused with data from other sensors to provide operators with a comprehensive view of the continental U.S. threat landscape. We are well positioned with our RF products for ground-based or over-the-horizon radar applications. These U.S. budget commitments in defense and security have expanded our existing pipeline. And these new opportunities, alongside robust international demand from the Middle East and other dynamic regions for cargo and aviation inspection systems, and a growing recurring revenue stream solidify our long-term outlook. Now let's turn to Optoelectronics. The Optoelectronics Division has set yet another Q4 record achieving an impressive $113 million, including intercompany sales. We believe that most of the OEM customers have stabilized their inventories over the last 12 to 18 months, and thus we are now on firmer ground for more predictable demand. During the quarter, we announced a $7 billion opto order from a leading healthcare innovator, specializing in patient diagnostic and care applications. In 2025, our Mexico operations continue to gain traction, offering near-show production optionality as we expand our order book with existing and new customers seeking to minimize the U.S. tariff impact. Tariffs aside, our key markets appear as poised for continued growth, as many OEMs in aerospace, defense, security, consumer technology, telecommunications, and test and measurement sectors continue to forecast positive momentum in the marketplace. Overall, we're pleased with Opto's performance and expect continued strength in fiscal 26. Finally, let's discuss healthcare. While its financial performance was disappointing in the quarter, The plans put in place are beginning to show results, and we anticipate stronger performance going forward. We're continuing to make investments to advance our next-generation patient monitoring platform, paired with predictive health and alarm management solutions to differentiate ourselves from our competitors. Moving forward, we'll sustain product innovation while implementing operational efficiencies to improve profitability. In summary, OSI Systems enters fiscal 26 with tremendous momentum. We have a thriving business, diverse and substantial backlog, and a robust balance sheet that can drive both organic growth and strategic acquisitions. We're poised to build on fiscal 25's success to deliver further value. I want to thank our dedicated employees valued customers, and stockholders for making OSI Systems' achievements possible. With that, I'll hand it back to Alan for a deeper dive into our financials and Fiscal 26 guidance before we take questions. Thank you.