Osi Systems Inc 10-Q for FY2022 Q2

Osi Systems Inc (OSIS)

10-Q 2022-01-28 For: 2021-12-31

Added on April 10, 2026

About this 10-Q

Osi Systems Inc filed this 10-Q on January 28, 2022, covering the quarter ended December 31, 2021 (FY2022 Q2).

Headline figures

Quarter ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $276.68M; up 0.2% from $276.01M a year earlier
Diluted EPS: $1.09; down 0.9% from $1.10 a year earlier

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Delaware		33-0238801
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value		OSIS		The Nasdaq Global Select Market

Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

		Emerging growth company ☐


		PAGE

PART I — FINANCIAL INFORMATION		3

Item 1 —	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2020 and 2021	4
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended December 31, 2020 and 2021	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended December 31, 2020 and 2021	6
	Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2020 and 2021	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3 —	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4 —	Controls and Procedures	31

PART II — OTHER INFORMATION		33
Item 1 —	Legal Proceedings	33
Item 1A —	Risk Factors	33
Item 2 —	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3 —	Defaults Upon Senior Securities	33
Item 4 —	Mine Safety Disclosures	33
Item 5 —	Other Information	33
Item 6 —	Exhibits	34
Signatures		35


	June 30, 2021		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	80,613	$	86,332
Accounts receivable, net		290,653		288,037
Inventories		294,208		334,242
Prepaid expenses and other current assets		43,930		61,179
Total current assets		709,404		769,790
Property and equipment, net		118,004		116,115
Goodwill		320,304		320,319
Intangible assets, net		127,608		126,643
Other assets		109,047		110,239
Total assets	$	1,384,367	$	1,443,106
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Bank lines of credit	$	—	$	81,622
Current portion of long-term debt		846		287,247
Accounts payable		141,263		128,164
Accrued payroll and related expenses		50,816		37,518
Advances from customers		38,463		39,521
Other accrued expenses and current liabilities		113,379		120,383
Total current liabilities		344,767		694,455
Long-term debt		276,421		602
Deferred income taxes		7,157		4,526
Other long-term liabilities		116,202		123,375
Total liabilities		744,547		822,958
Commitments and contingencies (Note 9)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.001 par value— 10,000,000 shares authorized; no shares issued or outstanding		—		—
Common stock, $0.001 par value—100,000,000 shares authorized; issued and outstanding, 17,854,110 shares at June 30, 2021 and 17,643,903 shares at December 31, 2021		105,724		30,909
Retained earnings		548,842		606,647
Accumulated other comprehensive loss		(14,746)		(17,408)
Total stockholders’ equity		639,820		620,148
Total liabilities and stockholders’ equity	$	1,384,367	$	1,443,106


	Three Months Ended December 31,				Six Months Ended December 31,
	2020		2021		2020		2021
Net revenues:
Products	$	208,367	$	205,377	$	391,114	$	412,589
Services		67,642		71,304		139,803		143,349
Total net revenues		276,009		276,681		530,917		555,938
Cost of goods sold:
Products		139,893		139,060		264,734		281,966
Services		34,035		37,848		68,351		74,869
Total cost of goods sold		173,928		176,908		333,085		356,835
Gross profit		102,081		99,773		197,832		199,103
Operating expenses:
Selling, general and administrative		56,101		54,879		114,718		112,202
Research and development		13,784		14,977		25,866		29,794
Impairment, restructuring and other charges (benefit), net		(162)		831		8,197		3,341
Total operating expenses		69,723		70,687		148,781		145,337
Income from operations		32,358		29,086		49,051		53,766
Interest and other expense, net		(4,233)		(2,217)		(8,422)		(4,233)
Income before income taxes		28,125		26,869		40,629		49,533
Provision for income taxes		(8,087)		(7,072)		(11,247)		(10,684)
Net income	$	20,038	$	19,797	$	29,382	$	38,849
Earnings per share:
Basic	$	1.12	$	1.11	$	1.63	$	2.17
Diluted	$	1.10	$	1.09	$	1.61	$	2.13
Shares used in per share calculation:
Basic		17,924		17,838		17,988		17,892
Diluted		18,196		18,106		18,266		18,203


	Three Months Ended December 31, 2020
						Accumulated
	Common Stock					Other
	Number of			Retained		Comprehensive
	Shares	Amount		Earnings		Loss		Total
Balance—September 30, 2020	17,912,541	$	95,084	$	484,137	$	(21,681)	$	557,540
Exercise of stock options	8,337		483		—		—		483
Vesting of RSUs	17,719		—		—		—		—
Stock-based compensation expense	—		5,712		—		—		5,712
Taxes paid related to net share settlement of equity awards	(5,341)		(463)		—		—		(463)
Net income	—		—		20,038		—		20,038
Other comprehensive income	—		—		—		4,326		4,326
Balance—December 31, 2020	17,933,256	$	100,816	$	504,175	$	(17,355)	$	587,636


	Three Months Ended December 31, 2021
						Accumulated
	Common Stock					Other
	Number of			Retained		Comprehensive
	Shares	Amount		Earnings		Loss		Total
Balance—September 30, 2021	17,941,393	$	53,377	$	586,850	$	(16,915)	$	623,312
Exercise of stock options	2,219		156		—		—		156
Vesting of RSUs	18,995		—		—		—		—
Stock-based compensation expense	—		6,975		—		—		6,975
Repurchase of common stock	(312,790)		(29,049)						(29,049)
Taxes paid related to net share settlement of equity awards	(5,914)		(550)		—		—		(550)
Net income	—				19,797		—		19,797
Other comprehensive loss	—		—		—		(493)		(493)
Balance—December 31, 2021	17,643,903	$	30,909	$	606,647	$	(17,408)	$	620,148


	Six Months Ended December 31, 2020
						Accumulated
	Common Stock					Other
	Number of			Retained		Comprehensive
	Shares	Amount		Earnings		Loss		Total
Balance—June 30, 2020	18,011,982	$	122,553	$	474,793	$	(25,194)	$	572,152
Exercise of stock options	77,532		563		—		—		563
Vesting of RSUs	304,420		—		—		—		—
Shares issued under employee stock purchase program	32,641		2,022		—		—		2,022
Stock-based compensation expense	—		11,821		—		—		11,821
Repurchase of common stock	(320,136)		(24,816)						(24,816)
Taxes paid related to net share settlement of equity awards	(173,183)		(11,327)		—		—		(11,327)
Net income	—		—		29,382		—		29,382
Other comprehensive income	—		—		—		7,839		7,839
Balance—December 31, 2020	17,933,256	$	100,816	$	504,175	$	(17,355)	$	587,636


	Six Months Ended December 31, 2021
						Accumulated
	Common Stock					Other
	Number of			Retained		Comprehensive
	Shares	Amount		Earnings		Loss		Total
Balance—June 30, 2021	17,854,110	$	105,724	$	548,842	$	(14,746)	$	639,820
Exercise of stock options	164,612		311		—		—		311
Vesting of RSUs	329,072		—		—		—		—
Shares issued under employee stock purchase program	27,960		1,990		—		—		1,990
Stock-based compensation expense	—		14,088		—		—		14,088
Repurchase of common stock	(481,296)		(45,280)						(45,280)
Taxes paid related to net share settlement of equity awards	(250,555)		(19,161)		—		—		(19,161)
Adoption of ASU 2020-06 for convertible notes			(26,763)		18,956				(7,807)
Net income	—		—		38,849		—		38,849
Other comprehensive loss	—		—		—		(2,662)		(2,662)
Balance—December 31, 2021	17,643,903	$	30,909	$	606,647	$	(17,408)	$	620,148


	June 30, 2021								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets—Insurance company contracts	$	—	$	47,113	$	—	$	47,113	$	—	$	48,553	$	—	$	48,553
Liabilities—Contingent consideration	$	—	$	—	$	19,431	$	19,431	$	—	$	—	$	14,129	$	14,129


	June 30,		December 31,
Accounts receivable, net	2021		2021
Accounts receivable	$	315,926	$	309,262
Less allowance for doubtful accounts		(25,273)		(21,225)
Total	$	290,653	$	288,037


	June 30,		December 31,
Inventories	2021		2021
Raw materials	$	160,313	$	187,335
Work-in-process		59,594		68,446
Finished goods		74,301		78,461
Total	$	294,208	$	334,242


	June 30,		December 31,
Property and equipment, net	2021		2021
Land	$	16,357	$	16,287
Buildings, civil works and improvements		57,555		56,410
Leasehold improvements		8,874		9,520
Equipment and tooling		129,735		130,083
Furniture and fixtures		3,275		3,403
Computer equipment		19,349		20,871
Computer software		23,090		23,863
Computer software implementation in process		11,102		10,896
Construction in process		4,011		4,649
Total		273,348		275,982
Less accumulated depreciation and amortization		(155,344)		(159,867)
Property and equipment, net	$	118,004	$	116,115


					Optoelectronics
					And
	Security		Healthcare		Manufacturing
	Division		Division		Division		Consolidated
Balance as of June 30, 2021	$	206,426	$	43,584	$	70,294	$	320,304
Goodwill acquired or adjusted during the period		1,270		—		—		1,270
Foreign currency translation adjustment		(176)		(92)		(987)		(1,255)
Balance as of December 31, 2021	$	207,520	$	43,492	$	69,307	$	320,319


		June 30, 2021						December 31, 2021
	Weighted	Gross						Gross
	Average	Carrying		Accumulated		Intangibles		Carrying		Accumulated		Intangibles
	Lives	Value		Amortization		Net		Value		Amortization		Net
Amortizable assets:
Software development costs	8-9 years	$	49,183	$	(15,679)	$	33,504	$	56,653	$	(17,126)	$	39,527
Patents	19 years		8,753		(2,597)		6,156		8,514		(2,789)		5,725
Developed technology	10 years		60,665		(25,923)		34,742		60,604		(29,066)		31,538
Customer relationships	7 years		50,676		(26,588)		24,088		50,057		(29,321)		20,736
Total amortizable assets			169,277		(70,787)		98,490		175,828		(78,302)		97,526
Non-amortizable assets:
In-process R&D			533		—		533		533		—		533
Trademarks			28,585		—		28,585		28,584		—		28,584
Total intangible assets		$	198,395	$	(70,787)	$	127,608	$	204,945	$	(78,302)	$	126,643


2022 (remaining 6 months)	$	8,693
2023		19,983
2024		19,463
2025		16,062
2026		12,242
Thereafter		21,083
Total	$	97,526


	June 30,		December 31,
	2021		2021		Change		% Change
Unbilled revenue (included in accounts receivable, net)	$	40,853	$	38,706	$	(2,147)	(5)	%


	June 30,		December 31,
	2021		2021		Change		% Change
Advances from customers	$	38,463	$	39,521	$	1,058	3	%
Deferred revenue—current		32,689		32,674		(15)	(0)	%
Deferred revenue—long-term		14,898		19,817		4,919	33	%


	Balance Sheet Category	June 30, 2021		December 31, 2021
Operating lease ROU assets, net	Other assets	$	23,439	$	31,503

Operating lease liabilities, current portion	Other accrued expenses and current liabilities	$	7,499	$	7,771
Operating lease liabilities, long-term	Other long-term liabilities		16,317		24,048
Total operating lease liabilities		$	23,816	$	31,819

Weighted average remaining lease term					4.3 years
Weighted average discount rate					3.6 %


	December 31, 2021
Less than one year	$	8,705
1 – 2 years		7,961
2 – 3 years		6,361
3 – 4 years		4,666
4 – 5 years		4,065
Thereafter		2,684
		34,442
Less: imputed interest		(2,623)
Total lease liabilities	$	31,819


	Three Months Ended December 31, 2020
					Optoelectronics and
			Healthcare		Manufacturing
	Security Division		Division		Division		Corporate		Total
Acquisition-related costs	$	139	$	27	$	—	$	—	$	166
Employee termination costs		147		—		—		—		147
Facility closures/consolidation costs (benefit)		(17)		—		—		—		(17)
Legal recoveries, net		—		—		—		(458)		(458)
Total expensed (benefit), net	$	269	$	27	$	—	$	(458)	$	(162)


			Facility
	Employee		Closure/		Legal
	Termination		Consolidation		Costs and
	Costs		Cost		Settlements		Total
Balance as of June 30, 2021	$	250	$	386	$	2,772	$	3,408
Restructuring and other charges (benefits), net		668		(40)		2,713		3,341
Payments, adjustments and reimbursements, net		(837)		(346)		(2,913)		(4,096)
Balance as of December 31, 2021	$	81	$	—	$	2,572	$	2,653


	June 30, 2021		December 31, 2021
1.25% convertible notes due September 1, 2022:
Principal amount	$	287,500	$	287,500
Unamortized discount		(10,494)		—
Unamortized debt issuance costs		(1,372)		(930)
		275,634		286,570
Other long-term debt		1,633		1,279
		277,267		287,849
Less current portion of long-term debt		(846)		(287,247)
Long-term portion of debt	$	276,421	$	602


		Weighted
		Average		Weighted-Average	Aggregate
	Number of	Exercise		Remaining Contractual	Intrinsic Value
	Options	Price		Term	(in thousands)
Outstanding at June 30, 2021	255,220	$	50.24
Granted	22,954		96.38
Exercised	(164,612)		34.61
Expired or forfeited	(834)		71.83
Outstanding at December 31, 2021	112,728		82.30	6.7 years	$	1,408
Exercisable at December 31, 2021	68,063		75.13	5.0 years		1,265


		Weighted-
		Average
	Shares	Fair Value
Nonvested at June 30, 2021	435,925	$	84.16
Granted	333,897		90.44
Vested	(329,072)		82.49
Forfeited	(3,233)		82.53
Nonvested at December 31, 2021	437,517	$	90.22


Beginning fair value, June 30, 2021	$	19,431
Addition of contingent earnout obligations		—
Foreign currency translation adjustment		(133)
Changes in fair value for contingent earnout obligations		(5,001)
Payments on contingent earnout obligations		(168)
Ending fair value, December 31, 2021	$	14,129


	Q2		% of		Q2		% of
	Fiscal 2021		Net Revenues		Fiscal 2022		Net Revenues		$ Change		% Change
Security	$	145.2	53	%	$	145.9	53	%	$	0.7	0.5	%
Healthcare		54.9	20			52.4	19			(2.5)	(4.5)
Optoelectronics and Manufacturing		75.9	27			78.4	28			2.5	3.3
Total net revenues	$	276.0	100	%	$	276.7	100	%	$	0.7	0.3	%


	YTD Q2		% of		YTD Q2		% of
	Fiscal 2021		Net Revenues		Fiscal 2022		Net Revenues		$Change		% Change
Security	$	280.0	53	%	$	295.4	53	%	$	15.4	6	%
Healthcare		106.4	20			103.0	19			(3.4)	(3)
Optoelectronics and Manufacturing		144.5	27			157.5	28			13.0	9
Total net revenues	$	530.9	100	%	$	555.9	100	%	$	25.0	5	%


					Maximum number (or
					approximate dollar
					value) of
				Total number of	shares (or
				shares (or units)	units)
				purchased as	that may
	Total number of	Average price		part of publicly	yet be purchased
	shares (or units)	paid per share (or		announced plans or	under the plans or
	purchased	unit)		programs	programs (1)
October 1 to October 31, 2021	—	$	—	—	2,379,489
November 1 to November 30, 2021	174,770		93.84	174,770	2,204,719
December 1 to December 31, 2021	138,020		91.64	138,020	2,066,699
	312,790			312,790


Exhibit Number		Description
10.1		Seventh Amendment to Credit Agreement dated December 22, 2021 between Wells Fargo Bank, N.A. and OSI Systems, Inc. (1)

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)


	OSI SYSTEMS, INC.

	By:	/s/ Deepak Chopra
		Deepak Chopra
		President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Alan Edrick
		Alan Edrick
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)


	/s/ Deepak Chopra
	Deepak Chopra
	Chief Executive Officer
	(Principal Executive Officer)


	/s/ Alan Edrick
	Alan Edrick
	Chief Financial Officer
	(Principal Financial and Accounting Officer)