OSI Systems Q4 Earnings Call Highlights

OSI Systems reported record fiscal 2026 revenue, earnings and operating cash flow, while fourth-quarter sales fell short of expectations after conflict-related delays in the Middle East pushed roughly $50 million of planned Security division deliveries beyond the company’s June 30 fiscal year-end.

Chief Financial Officer Alan Edrick said the delayed revenue represented deferred deliveries rather than lost orders. The affected projects remain in backlog and are expected to be completed on a later schedule, he said.

For the fiscal year ended June 30, OSI reported record revenue of $1.79 billion, up 4% from the prior year, and record non-GAAP earnings per share of $10.35, up 11%. Fourth-quarter revenue was $484 million, down about 4% year over year, while non-GAAP EPS rose 17% to a record $3.78.

The company ended fiscal 2026 with approximately $1.9 billion in backlog, its highest level to date. Edrick said full-year book-to-bill was “a little bit north of one,” while fourth-quarter book-to-bill was just below one. He described bookings as particularly strong in Optoelectronics and solid in Security and Healthcare.

President and CEO Ajay Mehra said demand remained strong across the company’s portfolio despite near-term disruptions in the Middle East. He said the Security division faced delivery headwinds during the quarter, while Optoelectronics posted broad-based growth and Healthcare improved.

“The security-related deliveries that were pushed out remain in backlog and are expected to be completed in future quarters,” Mehra said.

Management said the delayed deliveries were primarily to customers in the Middle East. Edrick said that, after the third-quarter report, the company had expected a significant portion of those orders to be delivered in the fourth quarter. OSI now expects a substantial portion, though not all, to be delivered in the second half of fiscal 2027.

Since the fiscal year-end, U.S. Customs and Border Protection has awarded OSI two five-year indefinite-delivery, indefinite-quantity contracts. One has a ceiling of approximately $200 million for relocatable Rapiscan passenger vehicle inspection systems, while the other has a ceiling of roughly $85 million for van-mounted mobile X-ray inspection systems. The company has received delivery orders under both contracts, including a task order valued at about $21 million.

Mehra said OSI is the sole awardee under both IDIQ contracts. Management expects a portion of the orders already in hand to contribute to fiscal 2027 revenue, but said the larger contribution is expected in fiscal 2028 and beyond. Edrick noted that the ceiling values of the IDIQ contracts do not immediately enter backlog. Instead, firm delivery o...