OSI Systems, Inc. (NASDAQ:OSIS) Q1 2024 Earnings Call Transcript

Deepak Chopra: Just to add on to it, this is Deepak here. Basically, in the supply chain issue, we are handling it well. And again, I’ve said in the last conference call, too, we are well positioned compared to other competitors because we have intercompany resources also. But definitely, we cannot ignore the fact that when you ramp up so significantly so fast that there are definitely challenges in the supply chain. We are addressing it. And as Alan has mentioned that we will start seeing big growth from both these contracts in Q2, almost into Q3 and Q4.

Jeffrey Martin: Great. And then my other question is with the unrest in the Middle East, does that create potential opportunities for you? Are you seeing increased inquiries from countries and surrounding area for stepping up their port and border equipment inspection capabilities or other areas?

Deepak Chopra: Well, first, I would like to say that we are very saddened what what’s happened there. We continue to pray it for everybody’s well-being. I haven’t seen any changes on this Middle East thing because, obviously, this is something new. But on the Ukraine project and stuff, definitely as things mature in that area, common sense is that countries around that area are all going to need more security equipment. And we continue to look at opportunities. We’re working with it. At the same time, funding is very important. And as you know that the U.S. has been in a tough situation with what’s happening in Washington. As that opens up both for the Middle East challenges and in Ukraine-Russia challenges, we are very well positioned for any equipment to be procured.

Operator: And our next question comes from the line of Larry Solow from CJS Securities.

Lawrence Solow: Just, I guess, a follow-up to the last question just on how the contracts are ramping. And just specifically, Alan, just in terms of the increase in guidance, I know you don’t guide, but to the sectors or the segments. But, I guess, it’s sort of the increase, I feel like is that coming from Security? Is that just increased confidence there? Or what typically drives you to increase your EPS outlook this year?

Alan Edrick: Yes. Great question, Larry. And your hunch is correct. The growth in the EPS guidance is coming from our Security business. You saw in our Q1 that we just reported, we saw some nice operating margin expansion, which led to some stronger earnings. And as we look out through the balance of the year and some of the strength in that business, that is really what’s driven us to increase the overall EPS guidance. We expect Opto to continue to perform well in addition to that, but Security that’s leading to the growth in the EPS guidance.

Lawrence Solow: Okay. And I don’t know if you gave — you quantified the book-to-bill for Security. But if you have that, that would be great. But just also just kind of qualitatively, obviously, the world is not getting to be a safer place, but opportunities in terms of your opportunities, your funnel of opportunities, I think you usually like to refer that, both within vehicle inspection borders and outside of that and other areas, how are those trending? And if you had the book-to-bill for the quarter, that would be great?

Alan Edrick: Yes. So Larry, this is Alan. The book-to-bill in security was 1.1, positions us in a record backlog. So our highest backlog of all time for our Security Division. The visibility is strong. The funnel of opportunities is real strong and robust throughout the — really throughout the world and the nature of our product lines. Maybe Deepak, do you want to add to that?

Deepak Chopra: Yes. I just want to emphasize on to it. The opportunities are growing, both in the border area, air cargo and also in the aviation sector. That had been on pretty much hold during the COVID time. And as it’s coming out, the traffic is increasing. And there is a lot of interest to upgrade to new products in technology, both in the Itemiser and the RTT checkpoint and checked baggage area. And we continue to look at it, and we are very optimistic about the funnel.