OSI Systems ((OSIS)) has held its Q4 earnings call. Read on for the main highlights of the call.
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OSI Systems, Inc. recently held its earnings call, revealing a strong performance in fiscal year 2025. The company reported record revenues and growth across its key divisions, despite facing challenges in its Healthcare division and a significant decrease in revenues from Mexico contracts. OSI Systems showcased an impressive backlog and bookings, improved margins, and a robust financial position. The outlook for fiscal year 2026 remains positive, with significant opportunities anticipated from new legislation and continued global demand.
Record-Breaking Revenue and Growth
OSI Systems achieved a record-breaking revenue performance in the fourth quarter, with a 5% year-over-year increase. Excluding the impact of Mexico contracts and fiscal year 2025 acquisitions, the company’s revenues grew approximately 30% in Q4, highlighting strong organic demand.
Security Division Success
The Security division experienced remarkable success, with revenues growing by 7.1% year-over-year in Q4 and 14.7% for the full fiscal year. This growth was driven by broad-based demand and significant contracts worldwide, underscoring the division’s pivotal role in the company’s overall performance.
Optoelectronics Division Performance
The Optoelectronics division set a new Q4 record with $113 million in revenue, reflecting strong demand and stabilization in OEM customer inventories. This performance indicates a robust market presence and a solid contribution to the company’s financial health.
Strong Bookings and Backlog
OSI Systems reported a record year-end backlog exceeding $1.8 billion, with a book-to-bill ratio of approximately 1.0 in Q4. This strong backlog provides excellent visibility into the new fiscal year, ensuring sustained momentum and growth.
Improved Margins and Cost Management
The company achieved an increase in gross margin to 33.3%, up 120 basis points from the previous year. This improvement was attributed to a favorable revenue mix and operational efficiencies. Additionally, OSI Systems has successfully reduced SG&A and R&D expenses as a percentage of sales annually for the past eight years.
Healthcare Division Underperformance
Despite the overall strong performance, the Healthcare division experienced disappointing financial results, impacting consolidated growth. However, there are expectations for improvement in this division moving forward.
Significant Decrease in Mexico Revenues
Revenues from large Mexico security contracts saw a significant decrease, dropping to $40 million in Q4 from $145 million in the same quarter of the previous fiscal year. This decline impacted the company’s overall growth rates.
Challenges with Accounts Receivable
Accounts receivable increased to approximately $837 million due to delayed payments from Mexico, affecting cash flow. However, the company expects strong collections in fiscal year 2026, which should alleviate this issue.
Forward-Looking Guidance
Looking ahead to fiscal year 2026, OSI Systems projects revenues between $1.805 billion and $1.85 billion, reflecting a growth rate of 5.4% to 8%. The company also anticipates a non-GAAP adjusted EPS in the range of $10.11 to $10.39, representing an 8% to 11% increase. This optimistic outlook is supported by robust demand across the Security and Optoelectronics divisions, significant service revenue growth, and substantial opportunities arising from recent U.S. legislation.
In summary, OSI Systems’ earnings call highlighted a strong fiscal year 2025 performance, with record revenues and growth across key divisions. Despite some challenges, the company is well-positioned for continued success in fiscal year 2026, driven by strong demand, improved margins, and favorable legislative opportunities.