Q4 2026 OSI Systems, Inc. Earnings Call Transcript
Key Points
- Record Q4 and annual non-GAAP EPS, with Q4 EPS up 17% year-over-year to $3.78 and annual EPS up 11% to $10.35.
- Record Q4 operating cash flow of $182 million and annual operating cash flow of $276 million, with expectations for fiscal 2027 free cash flow to exceed 100% of net income.
- Record backlog of approximately $1.9 billion, providing strong visibility into fiscal 2027 and beyond.
- Recent major contract wins, including two sole-awardee IDIQ contracts from CBP (totaling $285 million) and a $235 million RF award, positioning OSI Systems Inc (OSIS) for future growth.
- Strong performance in Opto Electronics (9% revenue growth) and healthcare (operating margin expansion from 1% to 10% in Q4), with overall adjusted operating margin expanding 200 basis points to 17.7%.
- Q4 revenues declined 4% year-over-year, and full-year revenues of $1.79 billion fell below guidance due to approximately $50 million in delayed security deliveries from Middle East conflicts.
- Security division revenues declined 7% in Q4, impacted by Middle East delivery delays and a difficult comparison against prior-year Mexico program revenues.
- Fiscal 2026 revenues were nearly $150 million lower due to Mexico security contracts, with an additional $25 million headwind expected in fiscal 2027, concentrated in the first half.
- Fiscal 2027 guidance is conservative, with revenue growth of 5%-8.1% and EPS growth of 7.5%-11%, reflecting cautious assumptions on Middle East timing and only a portion of new CBP orders included.
- The Middle East conflict continues to defer bookings and deliveries, with a substantial portion of expected revenue from new awards pushed to fiscal 2028 and beyond.
Thank you for standing by and welcome to the OSI Systems, Inc.'s fourth quarter 2026 conference call. (Operator Instructions) As a reminder, today's program is being recorded. And now I'd like to introduce your. For today's program, Alan Edrick, Chief Financial Officer. Please go ahead, sir.
Thank you. Good afternoon and thank you for joining us. I'm Alan Edrick, Executive Vice President and CFO of OSI Systems, and I'm here today with AJ Mehra, OSI's President and CEO. Welcome to the OSI Systems Fiscal 2026 fourth quarter and year-end conference call.
We are pleased that you can join us as we review our financial and our operational results. I'd like to remind everyone that today's discussion will include forward-looking statements, and the company wishes to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements.
All forward-looking statements made on this call are
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