OSI Systems — Fiscal 2027 First Quarter Earnings Summary

Financial Performance:

• Reported record Q1 revenues of $403.5 million, a 5% increase year-over-year from $384.6 million.
• GAAP diluted earnings per share (EPS) reached $1.51, representing 28% year-over-year growth from $1.18.
• Non-GAAP diluted EPS was $1.66, reflecting 17% year-over-year growth from $1.42.
• Operating cash flow for the quarter was $37.1 million, more than doubling from $17.1 million in the prior year period.
• Book-to-bill ratio was 1.4, up from 1.1 in the prior year, driving a record backlog of $2.1 billion compared to $1.9 billion as of June 30, 2026.
• Total net revenues were split between products ($289.8 million) and services ($113.6 million).
• Gross profit was $123.8 million, with total cost of goods sold at $279.7 million.
• Income from operations was $33.6 million, compared to $33.1 million in the prior year.
• Net income was $24.6 million, up from $20.6 million in the prior year.
• Cash, cash equivalents, and short-term investments totaled approximately $302 million as of September 30, 2026.
• Capital expenditures were $7.7 million, compared to $7.0 million in the prior year.
• Deferred revenue increased slightly to $91.1 million from $91.0 million.
• Long-term debt remained stable at approximately $998.3 million.

Guidance and Future Outlook:

• Reaffirmed fiscal 2027 revenue guidance of $1.875 billion to $1.930 billion, representing 5.0% to 8.1% year-over-year growth.
• Raised fiscal 2027 non-GAAP diluted EPS guidance to $11.28 to $11.64, representing 9.0% to 12.5% year-over-year growth (previously $11.13 to $11.49, or 7.5% to 11.0%).
• Management anticipates the Security division's operating margin to improve over the remainder of the fiscal year as revenue mix stabilizes and service revenues increase.
• The Healthcare division is expected to return to growth during fiscal 2027 following a soft quarter.
• The company remains focused on converting its expanding opportunity pipeline into long-term growth.

Business Segments and Product Lines:

• Security Division: Delivered a solid quarter despite geopolitical headwinds, achieving record divisional backlog driven by strong bookings and robust demand for security inspection, surveillance products, integrated solutions, and services.
• Optoelectronics and Manufacturing Division: Reported strong results with revenues increasing 9% year-over-year including intersegment sales, and 16% year-over-year from external customers. The division achieved adjusted operating margin expansion and recorded a record backlog.
• Healthcare Division: Performance was soft in the quarter, with non-GAAP operating income of $(0.6) million compared to a non-GAAP operating income of $2.4 million in the prior year.

Market and Competitive Landscape:

• The Security division benefits from robust customer demand for inspection and surveillance solutions.
• The Optoelectronics and Manufacturing division leverages vertically integrated capabilities, broad customer relationships, and a diversified manufacturing footprint.
• The company serves customers in over 170 countries with global sales, service, R&D, and manufacturing capabilities.

Risks and Challenges:

• Security division operating margins were impacted by a less favorable mix of revenues.
• Geopolitical headwinds continue to affect the Security division.
• Forward-looking statements note risks including delays in contract awards, government shutdowns, cybersecurity breaches, trade policy changes, and conflicts such as Russia-Ukraine or Middle East tensions.
• Risks also include supply chain disruptions, unfavorable currency exchange rates, and potential delays in revenue recognition due to customer acceptance timing.

Management Commentary and Tone:

• CEO Ajay Mehra expressed pleasure at beginning fiscal 2027 with record revenues and earnings, led by the Security and Optoelectronics and Manufacturing divisions.
• Mehra highlighted the record backlog of $2.1 billion as providing "meaningful visibility into future opportunities."
• Management emphasized a commitment to "disciplined execution and innovation."
• CFO Alan Edrick noted that operating cash flow more than doubled year-over-year.
• The tone regarding the Security division is enthusiastic about the outlook for the balance of fiscal 2027 and beyond.
• The tone regarding the Healthcare division acknowledges current softness but maintains confidence in a return to growth.

Other Key Points:

• The Board of Directors authorized an additional 1 million shares to the existing share repurchase program in August 2026.
• The company repurchased 305,559 shares during the first quarter of fiscal 2027, contributing to approximately $62 million in total capital returned to shareholders through repurchases.
• As of September 30, 2026, 773,172 shares remained available under the repurchase authorization.
• The company does not provide a reconciliation of forward-looking non-GAAP diluted EPS to GAAP diluted EPS due to the complexity of forecasting acquisition costs and other non-recurring items.
• A conference call and webcast were hosted on October 29, 2026, to discuss the results.