Yahoo Finanza OSI Systems Inc (OSIS) (Q3 2024) Earnings Call Transcript Highlights: Stellar Growth and ...
Revenue: Increased 34% year-over-year to $405 million.
Net Income: Not specifically mentioned, but significant growth indicated by EPS increase.
Earnings Per Share (EPS): Non-GAAP adjusted EPS of $2.16, up 45% from the previous year.
Book-to-Bill Ratio: Just over 1.0.
Backlog: Ended the quarter with nearly $1.8 billion.
Gross Margin: 33.6%, down from 34.3% the previous year.
Operating Expenses: SG&A expenses were $66.6 million or 16.4% of sales.
Research and Development Expenses: $17.1 million or 4.2% of sales.
Interest and Taxes: Effective tax rate under GAAP was 22.6%.
Adjusted Operating Margin: Increased to 13.9% from 12.9% in the previous year.
Cash Flow: Cash used in operations was $52 million, primarily due to increases in accounts receivable.
Capital Expenditures (CapEx): $4.9 million.
Guidance: Non-GAAP diluted EPS guidance increased to growth of over 30% from fiscal '23.
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you contextualize the $1.8 billion backlog and how much of that will be recognized next fiscal year? A: Alan Edrick, CFO of OSI Systems, explained that while specific guidance on the rollout of the backlog isn't provided, a significant portion is expected to be recognized in fiscal '25. This strong backlog visibility enhances confidence for the next fiscal year.
Q: What are the expectations for the healthcare division in Q4, given its historical higher margin contribution? A: Alan Edrick noted that while OSI Systems anticipates an improvement in healthcare revenues sequentially over Q3, they will not reach the level of Q4 of the previous year, which had benefited from significant bookings and shipments.
Q: How has the inventory rightsizing in the optoelectronics space affected the company, and what is the outlook for this division? A: Alan Edrick mentioned that the inventory rightsizing is largely behind the company, and they expect sequential improvement in Q4. The optoelectronics division is anticipated to return to form, positioned well for fiscal '25 as inventory adjustments with customers wind down.
Q: Can you provide insights into the pipeline of opportunities beyond fiscal '25 and the company's confidence in maintaining a book-to-bill ratio above 1.0? A: Deepak Chopra, CEO of OSI Systems, expressed strong confidence in the pipeline and the company's position. He highlighted the global increase in security concerns and OSI's broad product portfolio and reputation as key factors supporting sustained growth and opportunities well beyond fiscal '25.
Q: What are the expectations for capital allocation next year, especially considering potential significant free cash flow? A: Alan Edrick outlined that OSI Systems' capital allocation strategy might include strategic M&A, stock buybacks, and debt reduction. The focus will be on balancing these areas to support ongoing growth and shareholder value.
Q: How is the supply chain performing given the 60% growth in the security division, and what are the impacts on gross margin? A: Deepak Chopra acknowledged supply chain challenges but noted effective management and stabilization in costs such as freight. Alan Edrick added that gross margin impacts are mainly due to a higher mix of product revenues, which carry lower margins than services. He anticipates margin improvement as service revenues increase post-product delivery.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
