Osi Systems Inc 10-Q for FY2022 Q3

Osi Systems Inc (OSIS)

10-Q 2022-04-29 For: 2022-03-31

Added on April 10, 2026

About this 10-Q

Osi Systems Inc filed this 10-Q on April 29, 2022, covering the quarter ended March 31, 2022 (FY2022 Q3).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $290.48M; up 2.4% from $283.79M a year earlier
Diluted EPS: $2.41; up 134.0% from $1.03 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 March 31, 2022	3
	Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2021 and 2022	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2021 and 2022	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2021 and 2022	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2021 and 2022	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3 —	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4 —	Controls and Procedures	33

PART II — OTHER INFORMATION		34
Item 1 —	Legal Proceedings	34
Item 1A —	Risk Factors	34
Item 2 —	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3 —	Defaults Upon Senior Securities	34
Item 4 —	Mine Safety Disclosures	34
Item 5 —	Other Information	34
Item 6 —	Exhibits	35
Signatures		36


	June 30, 2021		March 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	80,613	$	83,279
Accounts receivable, net		290,653		282,872
Inventories		294,208		344,643
Prepaid expenses and other current assets		43,930		47,742
Total current assets		709,404		758,536
Property and equipment, net		118,004		112,755
Goodwill		320,304		336,655
Intangible assets, net		127,608		139,781
Other assets		109,047		111,364
Total assets	$	1,384,367	$	1,459,091
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Bank lines of credit	$	—	$	73,000
Current portion of long-term debt		846		249,315
Accounts payable		141,263		129,812
Accrued payroll and related expenses		50,816		40,469
Advances from customers		38,463		45,914
Other accrued expenses and current liabilities		113,379		107,326
Total current liabilities		344,767		645,836
Long-term debt		276,421		48,708
Deferred income taxes		7,157		4,658
Other long-term liabilities		116,202		141,395
Total liabilities		744,547		840,597
Commitments and contingencies (Note 10)
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 17,043,853 shares at March 31, 2022		105,724		17
Retained earnings		548,842		637,734
Accumulated other comprehensive loss		(14,746)		(19,257)
Total stockholders’ equity		639,820		618,494
Total liabilities and stockholders’ equity	$	1,384,367	$	1,459,091


	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2022		2021		2022
Net revenues:
Products	$	217,124	$	221,857	$	608,238	$	634,446
Services		66,663		68,620		206,466		211,969
Total net revenues		283,787		290,477		814,704		846,415
Cost of goods sold:
Products		144,958		150,311		409,692		432,277
Services		34,810		37,308		103,161		112,177
Total cost of goods sold		179,768		187,619		512,853		544,454
Gross profit		104,019		102,858		301,851		301,961
Operating expenses:
Selling, general and administrative		57,906		57,813		172,624		170,015
Research and development		13,932		15,150		39,798		44,944
Impairment, restructuring and other charges (benefit), net		(285)		1,469		7,912		4,810
Total operating expenses		71,553		74,432		220,334		219,769
Income from operations		32,466		28,426		81,517		82,192
Interest and other expense, net		(4,167)		(2,301)		(12,589)		(6,534)
Other income, net		—		27,373		—		27,373
Income before income taxes		28,299		53,498		68,928		103,031
Provision for income taxes		(9,526)		(10,763)		(20,773)		(21,447)
Net income	$	18,773	$	42,735	$	48,155	$	81,584
Earnings per share:
Basic	$	1.04	$	2.45	$	2.68	$	4.60
Diluted	$	1.03	$	2.41	$	2.63	$	4.52
Shares used in per share calculation:
Basic		17,969		17,417		17,981		17,734
Diluted		18,298		17,709		18,278		18,036


	Three Months Ended March 31, 2021
						Accumulated
	Common Stock					Other
	Number of			Retained		Comprehensive
	Shares	Amount		Earnings		Loss		Total
Balance—December 31, 2020	17,933,256	$	100,816	$	504,175	$	(17,355)	$	587,636
Exercise of stock options	9,703		624		—		—		624
Vesting of RSUs	6,519		—		—		—		—
Shares issued under employee stock purchase program	35,539		2,193		—		—		2,193
Stock-based compensation expense	—		7,565		—		—		7,565
Repurchase of common stock	(2,452)		(235)		—		—		(235)
Taxes paid related to net share settlement of equity awards	(2,358)		(219)		—		—		(219)
Net income	—		—		18,773		—		18,773
Other comprehensive loss	—		—		—		(444)		(444)
Balance—March 31, 2021	17,980,207	$	110,744	$	522,948	$	(17,799)	$	615,893


	Three Months Ended March 31, 2022
						Accumulated
	Common Stock					Other
	Number of			Retained		Comprehensive
	Shares	Amount		Earnings		Loss		Total
Balance—December 31, 2021	17,643,903	$	30,909	$	606,647	$	(17,408)	$	620,148
Vesting of RSUs	6,027		—		—		—		—
Shares issued under employee stock purchase program	32,105		2,307		—		—		2,307
Stock-based compensation expense	—		6,898		—		—		6,898
Repurchase of common stock	(635,962)		(39,904)		(11,648)		—		(51,552)
Taxes paid related to net share settlement of equity awards	(2,220)		(193)		—		—		(193)
Net income	—		—		42,735		—		42,735
Other comprehensive loss	—		—		—		(1,849)		(1,849)
Balance—March 31, 2022	17,043,853	$	17	$	637,734	$	(19,257)	$	618,494


	Nine Months Ended March 31, 2021
						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	87,235		1,187		—		—		1,187
Vesting of RSUs	310,939		—		—		—		—
Shares issued under employee stock purchase program	68,180		4,215		—		—		4,215
Stock-based compensation expense	—		19,386		—		—		19,386
Repurchase of common stock	(322,588)		(25,051)		—		—		(25,051)
Taxes paid related to net share settlement of equity awards	(175,541)		(11,546)		—		—		(11,546)
Net income	—		—		48,155		—		48,155
Other comprehensive income	—		—		—		7,395		7,395
Balance—March 31, 2021	17,980,207	$	110,744	$	522,948	$	(17,799)	$	615,893


	Nine Months Ended March 31, 2022
						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	335,099		—		—		—		—
Shares issued under employee stock purchase program	60,065		4,297		—		—		4,297
Stock-based compensation expense	—		20,986		—		—		20,986
Repurchase of common stock	(1,117,258)		(85,184)		(11,648)		—		(96,832)
Taxes paid related to net share settlement of equity awards	(252,775)		(19,354)		—		—		(19,354)
Adoption of ASU 2020-06 for convertible notes	—		(26,763)		18,956		—		(7,807)
Net income	—		—		81,584		—		81,584
Other comprehensive loss	—		—		—		(4,511)		(4,511)
Balance—March 31, 2022	17,043,853	$	17	$	637,734	$	(19,257)	$	618,494


	June 30, 2021								March 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets—Insurance company contracts	$	—	$	47,113	$	—	$	47,113	$	—	$	47,162	$	—	$	47,162
Liabilities—Contingent consideration	$	—	$	—	$	19,431	$	19,431	$	—	$	—	$	28,266	$	28,266


	June 30,		March 31,
Accounts receivable, net	2021		2022
Accounts receivable	$	315,926	$	304,042
Less allowance for doubtful accounts		(25,273)		(21,170)
Total	$	290,653	$	282,872


	June 30,		March 31,
Inventories	2021		2022
Raw materials	$	160,313	$	194,643
Work-in-process		59,594		72,135
Finished goods		74,301		77,865
Total	$	294,208	$	344,643


	June 30,		March 31,
Property and equipment, net	2021		2022
Land	$	16,357	$	15,029
Buildings, civil works and improvements		57,555		47,438
Leasehold improvements		8,874		11,643
Equipment and tooling		129,735		131,222
Furniture and fixtures		3,275		3,726
Computer equipment		19,349		20,713
Computer software		23,090		24,506
Computer software implementation in process		11,102		10,550
Construction in process		4,011		4,771
Total		273,348		269,598
Less accumulated depreciation and amortization		(155,344)		(156,843)
Property and equipment, net	$	118,004	$	112,755


					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		17,703		—		—		17,703
Foreign currency translation adjustment		(20)		(181)		(1,151)		(1,352)
Balance as of March 31, 2022	$	224,109	$	43,403	$	69,143	$	336,655


		June 30, 2021						March 31, 2022
	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	$	60,652	$	(18,032)	$	42,620
Patents	19 years		8,753		(2,597)		6,156		8,515		(2,875)		5,640
Developed technology	10 years		60,665		(25,923)		34,742		68,390		(30,741)		37,649
Customer relationships	7 years		50,676		(26,588)		24,088		54,021		(31,042)		22,979
Total amortizable assets			169,277		(70,787)		98,490		191,578		(82,690)		108,888
Non-amortizable assets:
In-process R&D			533		—		533		533		—		533
Trademarks			28,585		—		28,585		30,360		—		30,360
Total intangible assets		$	198,395	$	(70,787)	$	127,608	$	222,471	$	(82,690)	$	139,781


2022 (remaining 3 months)	$	4,779
2023		18,981
2024		21,448
2025		19,826
2026		13,979
Thereafter		29,875
Total	$	108,888


	June 30,		March 31,
	2021		2022		Change		% Change
Unbilled revenue (included in accounts receivable, net)	$	40,853	$	44,483	$	3,630	9	%


	June 30,		March 31,
	2021		2022		Change		% Change
Advances from customers	$	38,463	$	45,914	$	7,451	19	%
Deferred revenue—current		32,689		32,465		(224)	(1)	%
Deferred revenue—long-term		14,898		19,813		4,915	33	%


	Balance Sheet Category	June 30, 2021		March 31, 2022
Operating lease ROU assets, net	Other assets	$	23,439	$	36,718

Operating lease liabilities, current portion	Other accrued expenses and current liabilities	$	7,499	$	8,977
Operating lease liabilities, long-term	Other long-term liabilities		16,317		28,521
Total operating lease liabilities		$	23,816	$	37,498

Weighted average remaining lease term					5.1 years
Weighted average discount rate					3.5 %


	March 31, 2022
Less than one year	$	10,101
1 – 2 years		9,383
2 – 3 years		7,438
3 – 4 years		6,016
4 – 5 years		5,437
Thereafter		2,314
		40,689
Less: imputed interest		(3,191)
Total lease liabilities	$	37,498


	Three Months Ended March 31, 2021
					Optoelectronics and
			Healthcare		Manufacturing
	Security Division		Division		Division		Corporate		Total
Acquisition-related costs	$	22	$	—	$	—	$	—	$	22
Employee termination costs		213		—		—		—		213
Facility closures/consolidation costs		166		—		—		—		166
Legal costs (recoveries), net		—		—		—		(686)		(686)
Total expensed (benefit), net	$	401	$	—	$	—	$	(686)	$	(285)


					Facility
	Acquisition-		Employee		Closure/		Legal
	Related		Termination		Consolidation		Costs and
	Costs		Costs		Cost		Settlements		Total
Balance as of June 30, 2021	$	—	$	250	$	386	$	2,772	$	3,408
Restructuring and other charges (benefits), net		277		1,077		(37)		3,493		4,810
Payments, adjustments and reimbursements, net		(119)		(1,160)		(241)		(3,263)		(4,783)
Balance as of March 31, 2022	$	158	$	167	$	108	$	3,002	$	3,435


	June 30, 2021		March 31, 2022
1.25% convertible notes due September 1, 2022:
Principal amount	$	287,500	$	247,302
Unamortized discount		(10,494)		—
Unamortized debt issuance costs		(1,372)		(500)
		275,634		246,802
Term loan		—		50,000
Other long-term debt		1,633		1,221
		277,267		298,023
Less current portion of long-term debt		(846)		(249,315)
Long-term portion of debt	$	276,421	$	48,708


		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 March 31, 2022	112,728		82.30	6.4 years	$	816
Exercisable at March 31, 2022	72,371		76.69	4.9 years		780


		Weighted-
		Average
	Shares	Fair Value
Nonvested at June 30, 2021	435,925	$	84.16
Granted	334,435		90.31
Vested	(335,099)		82.66
Forfeited	(4,542)		84.21
Nonvested at March 31, 2022	430,719	$	90.11


Beginning fair value, June 30, 2021	$	19,431
Addition of contingent earnout obligations		14,609
Foreign currency translation adjustment		(243)
Changes in fair value for contingent earnout obligations		(5,363)
Payments on contingent earnout obligations		(168)
Ending fair value, March 31, 2022	$	28,266


	Q3		% of		Q3		% of
	Fiscal 2021		Net Revenues		Fiscal 2022		Net Revenues		$Change		% Change
Security	$	151.4	53	%	$	158.6	54	%	$	7.2	4.8	%
Healthcare		54.0	19			52.2	18			(1.8)	(3.3)
Optoelectronics and Manufacturing		78.4	28			79.7	28			1.3	1.7
Total net revenues	$	283.8	100	%	$	290.5	100	%	$	6.7	2.4	%


	YTD Q3		% Net of		YTD Q3		% Net of
	Fiscal 2021		Revenues		Fiscal 2022		Revenues		$Change		% Change
Security	$	431.4	53	%	$	454.1	53	%	$	22.7	5.3	%
Healthcare		160.4	20			155.2	19			(5.2)	(3.2)
Optoelectronics and Manufacturing		222.9	27			237.1	28			14.2	6.4
Total net revenues	$	814.7	100	%	$	846.4	100	%	$	31.7	3.9	%


					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)
January 1 to January 31, 2022	24,000	$	82.49	24,000	2,042,699
February 1 to February 28, 2022	405,130		80.94	405,130	1,637,569
March 1 to March 31, 2022	206,832		81.14	206,832	1,430,737
	635,962			635,962


Exhibit Number		Description

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)


Date: April 29, 2022

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