OSI SYSTEMS INC - Quarter Report: 2025 March (Form 10-Q)

OSI SYSTEMS, INC.

INDEX

		PAGE

PART I — FINANCIAL INFORMATION		3

Item 1 —	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at June 30, 2024 and March 31, 2025	3
	Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2024 and 2025	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2024 and 2025	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2024 and 2025	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2024 and 2025	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3 —	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4 —	Controls and Procedures	32

PART II — OTHER INFORMATION		33
Item 1 —	Legal Proceedings	33
Item 1A —	Risk Factors	33
Item 2 —	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3 —	Defaults Upon Senior Securities	33
Item 4 —	Mine Safety Disclosures	33
Item 5 —	Other Information	33
Item 6 —	Exhibits	34
Signatures		35

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in thousands, except share amounts and par value)


	June 30,		March 31,
	2024		2025
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$		$
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Other assets
Total assets	$		$
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Bank lines of credit	$		$
Current portion of long-term debt
Accounts payable
Accrued payroll and related expenses
Advances from customers
Other accrued expenses and current liabilities
Total current liabilities
Long-term debt, net
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 10)
STOCKHOLDERS’ EQUITY:
Preferred stock, $ par value— shares authorized; shares issued or outstanding		—		—
Common stock, $ par value— shares authorized; issued and outstanding, shares at June 30, 2024 and shares at March 31, 2025
Retained earnings
Accumulated other comprehensive loss		()		()
Total stockholders’ equity
Total liabilities and stockholders’ equity	$		$

See accompanying notes to condensed consolidated financial statements.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except per share data)

Three Months Ended March 31,

Nine Months Ended March 31,

2024

2025

2024

2025

Net revenues:

Products

$

Services

Total net revenues

Cost of goods sold:

Products

Services

Total cost of goods sold

Gross profit

Operating expenses:

Selling, general and administrative

Research and development

Restructuring and other charges, net

Total operating expenses

Income from operations

Interest and other expense, net

()

Income before income taxes

Provision for income taxes

()

Net income

$

Earnings per share:

Basic

$

Diluted

$

Shares used in per share calculation:

Basic

Diluted

See accompanying notes to condensed consolidated financial statements.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(amounts in thousands)

Three Months Ended March 31,

Nine Months Ended March 31,

2024

2025

2024

2025

Net income

$

Other comprehensive income (loss):

Foreign currency translation adjustment, net of tax

()

Net unrealized gain (loss) on derivatives, net of tax

()

Other, net of tax

—

Other comprehensive income (loss)

()

Comprehensive income

$

See accompanying notes to condensed consolidated financial statements.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands, except share data)

Three Months Ended March 31, 2024

Accumulated

Common Stock

Other

Number of

Retained

Comprehensive

Shares

Amount

Earnings

Loss

Total

Balance—December 31, 2023

$

()

$

Exercise of stock options

—

Vesting of RSUs

—

Shares issued under employee stock purchase program

—

Stock-based compensation expense

—

Taxes paid related to net share settlement of equity awards

()

—

()

Net income

—

Other comprehensive loss

—

()

Balance—March 31, 2024

$

()

$

Three Months Ended March 31, 2025

Accumulated

Common Stock

Other

Number of

Retained

Comprehensive

Shares

Amount

Earnings

Loss

Total

Balance—December 31, 2024

$

()

$

Exercise of stock options

—

Vesting of RSUs

—

Shares issued under employee stock purchase program

—

Stock-based compensation expense

—

Taxes paid related to net share settlement of equity awards

()

—

()

Net income

—

Other comprehensive income

—

Balance—March 31, 2025

$

()

$

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands, except share data)

Nine Months Ended March 31, 2024

Accumulated

Common Stock

Other

Number of

Retained

Comprehensive

Shares

Amount

Earnings

Loss

Total

Balance—June 30, 2023

$

()

$

Exercise of stock options

—

Vesting of RSUs

—

Shares issued under employee stock purchase program

—

Stock-based compensation expense

—

Taxes paid related to net share settlement of equity awards

()

—

()

Net income

—

Other comprehensive loss

—

()

Balance—March 31, 2024

$

()

$

Nine Months Ended March 31, 2025

Accumulated

Common Stock

Other

Number of

Retained

Comprehensive

Shares

Amount

Earnings

Loss

Total

Balance—June 30, 2024

$

()

$

Exercise of stock options

—

Vesting of RSUs

—

Shares issued under employee stock purchase program

—

Stock-based compensation expense

—

Repurchase of common stock

()

—

()

Taxes paid related to net share settlement of equity awards

()

—

()

Net income

—

Other comprehensive loss

—

()

Balance—March 31, 2025

$

()

$

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)


	Nine Months Ended March 31,
	2024		2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$		$
Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of effects from acquisitions:
Depreciation and amortization
Stock-based compensation expense
Provision for (recovery of) losses on accounts receivable				()
Deferred income taxes		()
Amortization of debt discount and issuance costs		—
Other
Changes in operating assets and liabilities—net of business acquisitions:
Accounts receivable		()		()
Inventories		()		()
Prepaid expenses and other assets		()		()
Accounts payable				()
Accrued payroll and related expenses		()		()
Advances from customers
Deferred revenue
Other liabilities		()
Net cash provided by (used in) operating activities		()
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment		()		()
Proceeds from sale of property and equipment
Proceeds from maturities of certificates of deposit
Acquisition of business, net of cash acquired		()		()
Payments for intangible and other assets		()		()
Net cash used in investing activities		()		()
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) on bank lines of credit				()
Proceeds from long-term debt
Payments on long-term debt		()		()
Proceeds from exercise of stock options and employee stock purchase plan
Payment of contingent consideration		()		()
Repurchase of common stock		—		()
Taxes paid related to net share settlement of equity awards		()		()
Net cash provided by financing activities
Effect of exchange rate changes on cash		()		()
Net increase in cash and cash equivalents
Cash and cash equivalents—beginning of period
Cash and cash equivalents—end of period	$		$
Supplemental disclosure of cash flow information:
Cash paid, net during the period for:
Interest	$		$
Income taxes	$		$

See accompanying notes to condensed consolidated financial statements.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

% convertible senior notes due 2029 (the “2029 Notes”) discussed in Note 8 to the condensed consolidated financial statements will have a net impact on diluted earnings per share when the average price of our common stock exceeds the conversion price of $ because the principal amount of the 2029 Notes will be settled in cash upon conversion. There was no dilutive effect of the 2029 Notes for the three and nine months ended March 31, 2025 as the average price of our common stock was below the conversion price for each of the quarterly periods in fiscal year 2025.

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$

Weighted average shares outstanding—basic

Dilutive effect of equity awards

Weighted average shares outstanding—diluted

Basic earnings per share

$

Diluted earnings per share

$

Shares excluded from diluted earnings per share due to their anti-dilutive effect

million at March 31, 2025. Of this amount, approximately % was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by our subsidiaries in India, the United Kingdom and to a lesser extent in Singapore, Canada, and Malaysia among other countries. We have cash holdings in financial institutions that exceed insured limits for such financial institutions; however, we mitigate this risk by utilizing international financial institutions which we believe to be of high credit quality.

$

—

$

—

$

—

$

Assets – Interest rate swap contract

$

—

$

—

$

—

$

—

$

Liabilities—Convertible debt

$

—

$

—

$

—

$

—

$

—

$

—

$

Liabilities—Contingent consideration

$

—

$

—

$

—

$

—

$

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million and $ million, respectively. Unrealized gains and losses from our foreign currency forward contracts as of June 30, 2024 and March 31, 2025 were not significant.

Our interest rate swap agreement was entered into to improve the predictability of cash flows from interest payments related to our variable, Secured Overnight Financing Rate (“SOFR”) based debt. The interest rate swap matures in December 2026. The interest rate swap is considered an effective cash flow hedge, and as a result, the net gains or losses on such instrument are reported as a component of other comprehensive income (loss) in our consolidated financial statements and are reclassified as net income when the underlying hedged interest impacts earnings. A qualitative and quantitative assessment of the interest rate swap hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate that the hedge may no longer be highly effective.

As of June 30, 2024 and March 31, 2025, the notional amount of the interest rate swap hedge derivative instrument was $ million. The fair value of the interest rate swap agreement as of June 30, 2024 and March 31, 2025 is recorded in Other assets within the consolidated balance sheet.

)

$

()

$

()

$

()

Gain (loss) recognized in other comprehensive income (loss), net of tax

$

()

$

()

$

()

Amount reclassified from accumulated other comprehensive income (loss) to interest expense, net

$

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% of the shares of common stock of a privately held provider of critical military, space and surveillance solutions to expand our customer base and offer additional products and services for existing customers, for approximately $ million, plus up to $ million in potential contingent consideration. We paid $ million in cash at the closing of the transaction and recorded a holdback liability of $ million which is expected to be released in November 2030. The cash paid for this acquisition was financed with borrowings from our credit facility. The acquisition date fair value of the contingent consideration was $ million, therefore, when combined with the amount of cash paid at close and the holdback amount, total purchase consideration was $ million which has been allocated to the preliminary fair value of assets acquired and liabilities assumed. The preliminary acquisition date fair value of total assets acquired, including measurement period adjustments, was $ million which comprised accounts receivable of $ million, inventory and other current assets of $ million, property and equipment of $ million, goodwill of $ million, other intangible assets of $ million and other noncurrent assets of $ million. Goodwill includes the value of the assembled workforce, new customers and other future economic benefits which do not qualify for separate recognition. The goodwill recognized for this business acquisition is not deductible for income tax purposes. Other intangible assets include amortizable intangible assets of $ million with amortization periods of to and an indefinite-lived intangible asset of $ million. The preliminary acquisition date fair value of total liabilities assumed, including measurement period adjustments, was $ million, which includes a deferred tax liability of $ million that was recognized primarily due to the acquisition of other intangible assets. The preliminary valuation of the assets acquired, liabilities assumed and contingent consideration in the acquisition is subject to revision. During the nine months ended March 31, 2025, we recorded measurement period adjustments which increased goodwill by $ million due to a decrease in net working capital of $ million and an increase in deferred income taxes of $ million, which were partially offset by an increase in intangible assets of $ million. The measurement period adjustments did not have a significant impact on the consolidated statement of operations. If additional information becomes available, we may further revise the preliminary purchase price allocation as soon as practical, but no later than one year from the acquisition date. Revenue from this acquired business was $ million from the acquisition date through March 31, 2025.

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million in cash. The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is deductible for income tax purposes.

In October 2023, we (through our Security division) acquired a privately held provider of radiation detection technology for approximately $ million in cash, plus up to $ million in potential contingent consideration. The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is not deductible for income tax purposes.

$

Less allowance for doubtful accounts

()

Total

$


	June 30,	March 31,
Inventories	2024	2025
Raw materials	$	$
Work-in-process
Finished goods
Total	$	$

The following tables set forth details of selected balance sheet accounts (in thousands):


	June 30,		March 31,
Property and equipment, net	2024		2025
Land	$		$
Buildings, civil works and improvements
Leasehold improvements
Equipment and tooling
Furniture and fixtures
Computer equipment
Computer software
Computer software implementation in process
Construction in process
Total
Less accumulated depreciation and amortization		()		()
Property and equipment, net	$		$

Depreciation and amortization expense for property and equipment was $ million and $ million for the three months ended March 31, 2024 and 2025, respectively, and $ million and $ million for each of the nine months ended March 31, 2024 and 2025.

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$

Goodwill acquired during the period (see Note 2)

—

Foreign currency translation adjustment

()

Balance as of March 31, 2025

$

()

$

()

$

Patents

()

Developed technology

()

Customer relationships

()

Total amortizable assets

()

Non-amortizable assets:

Trademarks

—

Total intangible assets

$

()

$

()

$

Amortization expense related to intangible assets was $ million and $ million for the three months ended March 31, 2024 and 2025, respectively. For each of the nine months ended March 31, 2024 and 2025, amortization expense related to intangible assets was $ million.

During the nine months ended March 31, 2025, intangible assets of $ million were from the business acquisition described in Note 2.

2026

2027

2028

2029

Thereafter

Total

$

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million and $ million, respectively. For the nine months ended March 31, 2024 and 2025, we capitalized software development costs in the amounts of $ million and $ million, respectively.

$

()

%

Contract Liabilities (in thousands),

June 30,

March 31,

2024

2025

Change

% Change

Advances from customers

$

%

Deferred revenue—current

%

Deferred revenue—long-term

()

%

Contract Assets. Contract assets decreased by $ million due to decreases in unbilled revenue of $ million primarily from the achievement of certain milestones in our Security division which gives us the right to invoice customers, partially offset by an increase of $ million from the business acquisition described in Note 2.

Remaining Performance Obligations. Remaining performance obligations related to ASC 606 represent the portion of the transaction price allocated to performance obligations under an original contract with a term greater than one year which are fully or partially unsatisfied at the end of the period. As of March 31, 2025, the portion of the transaction price allocated to remaining performance obligations was approximately $ million. We expect to recognize revenue on approximately % of the remaining performance obligations over the next , and the remainder is expected to be recognized thereafter. During the nine months ended March 31, 2025, we recognized revenue of $ million from contract liabilities existing at the beginning of the period.

Practical Expedients. In cases where we are responsible for shipping after the customer has obtained control of the goods, we have elected to treat the shipping activities as fulfillment activities rather than as separate performance obligations. Additionally, we have elected to capitalize the cost to obtain a contract only if the period of would be longer than one year. We only give consideration to whether a customer agreement has a if the period of time between transfer of goods and services and customer payment is greater than one year.

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$

Variable lease cost

Short-term lease cost

$

Operating lease liabilities, current portion

Other accrued expenses and current liabilities

$

Operating lease liabilities, long-term

Other long-term liabilities

Total operating lease liabilities

$

Weighted average remaining lease term

years

Weighted average discount rate

%

$

ROU assets obtained in exchange for new lease obligations

1 – 2 years

2 – 3 years

3 – 4 years

4 – 5 years

Thereafter

Less: imputed interest

()

Total lease liabilities

$

million in restructuring and other charges, which included $ million in employee terminations and $ million for facility closure costs. During the nine months ended March 31, 2025, we recognized $ million in restructuring and other charges, which included $ million in acquisition related costs, $ million for facility closure costs for operational efficiency activities, and $ million for employee terminations.

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million in restructuring and other charges, which primarily included $ million for facility closure costs for operational efficiency activities, and $ million for employee terminations. During the nine months ended March 31, 2024, we recognized $ million in restructuring and other charges, which included $ million for facility closure costs for operational efficiency activities, $ million for employee terminations, $ million in acquisition related costs, and $ million in legal charges.

$

—

$

—

$

Employee termination costs

Facility closures/consolidation

—

Legal costs, net

—

Total

$

Three Months Ended March 31, 2025

Optoelectronics and

Manufacturing

Healthcare

Security Division

Division

Corporate

Total

Acquisition-related costs (recoveries), net

$

()

$

—

$

—

$

()

Employee termination costs

Facility closures/consolidation

—

Total

$

Nine Months Ended March 31, 2024

Optoelectronics and

Manufacturing

Healthcare

Security Division

Division

Corporate

Total

Acquisition-related costs

$

—

$

—

$

Employee termination costs

Facility closures/consolidation

—

Legal costs, net

—

Total

$

Nine Months Ended March 31, 2025

Optoelectronics and

Manufacturing

Healthcare

Security Division

Division

Corporate

Total

Acquisition-related costs

$

—

$

—

$

Employee termination costs

Facility closures/consolidation

—

Legal costs (reimbursements), net

—

()

—

()

Total

$

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$

Restructuring and other charges, net

()

Payments, adjustments and reimbursements, net

()

Balance as of March 31, 2025

$

—

$

million revolving credit facility which matures in December 2026. The revolving credit facility includes a $ million sub-limit for letters of credit. Under certain circumstances and subject to certain conditions, we have the ability to increase the revolving credit facility by the greater of $ million or such amount as would not cause our secured leverage ratio to exceed a specified level. Borrowings under the facility bear interest at SOFR plus a margin of % as of March 31, 2025 (which margin can range from % to % based on our consolidated net leverage ratio as defined in the credit facility). Letters of credit reduce the amount available to borrow under the credit facility by their face value amount. The unused portion of the facility bears a commitment fee of % as of March 31, 2025 (which fee can range from % to % based on our consolidated net leverage ratio as defined in the credit facility). Our borrowings under the credit agreement are guaranteed by certain of our U.S.-based subsidiaries and are secured by substantially all of our assets and substantially all the assets of certain of our subsidiaries. The credit facility contains various representations and warranties, affirmative, negative and financial covenants and events of default. As of March 31, 2025, there were $ million of borrowings outstanding under the revolving credit facility, $ million outstanding under the letters of credit sub-facility, and $ million outstanding under the term loan. As of March 31, 2025, the amount available to borrow under the revolving credit facility was $ million. Loan amounts under the revolving credit facility may be borrowed, repaid and re-borrowed during the term. The principal amount of each loan is due and payable in full on the maturity date. We have the right to repay each loan in whole or in part from time to time without penalty. It is our practice to routinely borrow and repay several times per year under the revolving facility and therefore, borrowings under the revolving credit facility are included in current liabilities. As of March 31, 2025, we were in compliance with all financial covenants under this credit facility. In September 2022, we entered into an interest rate swap agreement in order to mitigate the interest rate risk on a portion of the interest payments expected to be made on the borrowings outstanding under the revolving credit facility and term loan. Refer to Note 1 for details.

2.25% Convertible Senior Notes Due 2029 (“2029 Notes”)

In July 2024, we issued an aggregate of $ million principal amount of % convertible senior notes due in August 2029 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, at an issuance price equal to % of the principal amount. The 2029 Notes were issued pursuant to and are governed by an indenture dated July 19, 2024. The proceeds from the issuance of the 2029 Notes were $ million, net of the issuance discount and debt issuance costs.

The 2029 Notes are unsecured obligations which bear regular interest at % per annum payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2025. The 2029 Notes will mature on August 1, 2029, unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The 2029 Notes are convertible into a combination of cash and shares of our common stock, at an initial conversion rate of shares of common stock per $1,000 principal amount of 2029 Notes, which is equivalent to an initial conversion price of approximately $ per share of our common stock. The default settlement method is a combination settlement with a specified dollar amount of $ per $1,000 principal amount of notes. The conversion rate is subject to customary adjustments for certain dilutive events. We may redeem for cash all or any portion of the 2029 Notes, at our option, on or after August 6, 2027 if the last reported sale price of our common stock has been at least % of the conversion price then in effect for at least trading days at a redemption price equal to % of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest up to the day before the redemption date. The holders may require us to repurchase the 2029 Notes upon the occurrence of certain fundamental change transactions at a redemption price equal to % of the principal amount of the 2029 Notes redeemed, plus accrued and unpaid interest up to the day before the redemption date.

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principal amounts, only under the following circumstances (i) during any calendar quarter commencing after the quarter ended on September 30, 2024 (and only during such calendar quarter), if our common stock price exceeds % of the conversion price for at least 20 trading days during the consecutive trading days at the end of the prior calendar quarter; (ii) during the five consecutive business days immediately after any consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than % of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (iii) upon the occurrence of specified corporate events or certain distributions on our common stock; or (iv) if we call any or all 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the notes called for redemption.

On or after May 1, 2029, the 2029 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Holders of the 2029 Notes who convert the 2029 Notes in connection with a make-whole fundamental change, as defined in the indenture governing the 2029 Notes, or in connection with a redemption may be entitled to an increase in the conversion rate.

We accounted for the issuance of the 2029 Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

Unamortized debt discount and issuance costs

()

Net carrying amount

$

Fair value (Level 2)

$

The 2029 Notes were not eligible for conversion as of March 31, 2025. No sinking fund is provided for the 2029 Notes, which means that we are not required to redeem or retire them periodically. As of March 31, 2025 we were in compliance with applicable financial covenants under the indenture governing the 2029 Notes.

For the three months ended March 31, 2025, total interest expense for the 2029 Notes was $ million, which consisted of $ million of contractual interest expense and $ million of amortization of debt discount and issuance costs. For the nine months ended March 31, 2025, total interest expense for the 2029 Notes was $ million, which consisted of $ million of contractual interest expense and $ million of amortization of debt discount and issuance costs. The unamortized debt issuance cost is amortized on the effective interest method over the life of the 2029 Notes.

Other Borrowings

Several of our foreign subsidiaries maintain bank lines of credit, denominated in local currencies and U.S. dollars, primarily for the issuance of letters of credit. As of March 31, 2025, $ million was outstanding under these letter-of-credit facilities. As of March 31, 2025, the total amount available under these credit facilities was $ million.

$

2029 Notes, net

—

Other long-term debt

Less current portion of long-term debt

()

Long-term portion of debt

$

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2026

2027

2028

2029 and thereafter

Total

$

Selling, general and administrative

Research and development

Stock-based compensation expense

$

As of March 31, 2025, total unrecognized compensation cost related to share-based compensation grants under the OSI Plan were estimated at $ million for stock options and $ million for restricted stock units (“RSUs”). We expect to recognize these costs over a weighted average period of years with respect to the stock options and years with respect to the RSUs.

The following summarizes stock option activity during the nine months ended March 31, 2025:

$

Granted

Exercised

()

Expired or forfeited

()

$

Outstanding at March 31, 2025

$

years

$

Exercisable at March 31, 2025

$

years

$

The following summarizes RSU award activity during the nine months ended March 31, 2025:

$

Granted

Vested

()

Forfeited

()

Nonvested at March 31, 2025

$

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As of March 31, 2025, there were approximately million shares available for grant under the OSI Plan. Under the terms of the OSI Plan, RSUs and restricted stock granted from the pool of shares available for grant reduce the pool by shares for each award granted. RSUs and restricted stock forfeited and returned to the pool of shares available for grant increase the pool by shares for each award forfeited.

We granted and performance-based RSUs during the nine months ended March 31, 2024 and 2025, respectively. These performance-based RSU awards are contingent on the achievement of certain performance metrics. The payout related to these awards can range from to % of the original number of shares or units awarded. Compensation cost associated with these performance-based RSUs are recognized based on the estimated number of shares that we ultimately expect will vest. If the estimated number of shares to vest is revised in the future, then stock-based compensation expense will be adjusted accordingly.

Stock Repurchase Program

In September 2022, our Board of Directors increased the stock repurchase authorization to a total of million shares. This program does not expire unless our Board of Directors acts to terminate the program. The timing and actual numbers of shares purchased depend on a variety of factors, including stock price, general business and market conditions and other investment opportunities. Repurchases may be made from time to time under the program through open-market purchases or privately-negotiated transactions at our discretion. Upon repurchase, the shares are restored to the status of authorized but unissued shares, and we record them in our consolidated financial statements as a reduction in the number of shares of common stock issued and outstanding, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings.

During the nine months ended March 31, 2025, we repurchased shares of common stock for an aggregate purchase price of approximately $ million. As of March 31, 2025, there were shares remaining available for repurchase under the authorized repurchase program.

Dividends

We have not paid any cash dividends since the consummation of our initial public offering in 1997 and we do not currently intend to pay any cash dividends in the foreseeable future. Our Board of Directors will determine the payment of future cash dividends, if any. Certain of our current bank credit facilities restrict the payment of cash dividends and future borrowings may contain similar restrictions.

million as of March 31, 2025.

Projections and estimated probabilities are used to estimate future contingent earnout payments, which are discounted back to present value to compute contingent earnout liabilities.

Business acquisitions (Note 2)

Foreign currency translation adjustment

Changes in fair value for contingent earnout obligations

()

Payments on contingent earnout obligations

()

Ending fair value, March 31, 2025

$

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$

Additions

Reductions for warranty repair costs and adjustments

()

Balance at end of period

$

Legal Proceedings

In February 2023, one of our subsidiaries received a subpoena from the U.S. Department of Justice (“DoJ”). The subpoena was issued as part of a DoJ case against a former employee of an OSI Systems subsidiary for embezzlement and other conduct occurring before he was hired by our subsidiary and while he was employed by another company in the United States and Mexico. The subpoena requests documents and records relating to, among other things, the former employee and the Company’s business dealings in Mexico since 2020. In February 2024, we received a follow-up subpoena requesting the same categories of documents but extending the relevant time period through to the date of the second subpoena. We have produced documents in response to these subpoenas and intend to cooperate with any further subpoenas or other requests in connection with this or any ensuing investigation. In September 2024, we received a subpoena requesting records relating to certain entities in Honduras. Consistent with past practice, we intend to cooperate with requests arising from this most recent subpoena.

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% and %, respectively. During the three months ended March 31, 2024 and 2025, we recognized net discrete tax benefits of $ million and $ million, respectively, related to equity-based compensation under ASU 2016-09 and changes in prior year tax estimates and uncertain tax positions.

The effective tax rates for the nine months ended March 31, 2024 and 2025 were % and %, respectively. During the nine months ended March 31, 2024 and 2025, we recognized net discrete tax benefits of $ million and $ million, respectively, related to equity-based compensation under ASU 2016-09 and $ million and $ million, respectively, for changes in prior year tax estimates and uncertain tax positions.

identifiable industry segments: (a) security and inspection systems (Security division), (b) optoelectronic devices and manufacturing (Optoelectronics and Manufacturing division) and (c) medical monitoring systems (Healthcare division). We also have a corporate segment (Corporate) that includes executive compensation and certain other general and administrative expenses, expenses related to stock issuances and legal, audit and other professional service fees not allocated to industry segments. Both the Security and Healthcare divisions comprise primarily end-product businesses, whereas the Optoelectronics and Manufacturing division primarily supplies components and subsystems to external OEM customers, as well as to the Security and Healthcare divisions. Sales between divisions are at transfer prices that approximate market values. All other accounting policies of the segments are the same as described in Note 1, Basis of Presentation.

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$

Optoelectronics and Manufacturing division, including intersegment revenues

Healthcare division

Intersegment revenues elimination

()

Total

$

Income (loss) from operations —by Segment:

Security division

$

Optoelectronics and Manufacturing division

Healthcare division

Corporate

()

Intersegment eliminations

()

Total

$


	June 30,		March 31,
	2024		2025
Assets (3) —by Segment:
Security division	$		$
Optoelectronics and Manufacturing division
Healthcare division
Corporate
Eliminations (4)		()		()
Total	$		$

(1)For the three months ended March 31, 2024, Security division customer accounted for % of net revenues. For the nine months ended March 31, 2024, Security division customers accounted for % and % of consolidated net revenues, respectively.

(2)For the three and nine-month periods ended March 31, 2025, customer in the Security division accounted for % and %, respectively, of consolidated net revenues.

(3)As of June 30, 2024, customers in the Security division accounted for % and %, respectively, of accounts receivable, net. As of March 31, 2025, customer in the Security division accounted for % of accounts receivable, net.

(4)Eliminations in assets reflect the amount of inter-segment profits in inventory and inter-segment ROU assets under ASC 842 as of the balance sheet date. Such inter-segment profit will be realized when inventory is shipped to the external customers of the Security and Healthcare divisions.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this report, “OSI”, the “Company”, “we”, “us”, “our” and similar terms refer to OSI Systems, Inc. together with our wholly-owned subsidiaries.

This management’s discussion and analysis of financial condition as of March 31, 2025 and results of operations for the three and nine months ended March 31, 2025 should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 filed with the SEC.

Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to our current expectations, beliefs, and projections concerning matters that are not historical facts. Words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “intend,” “may,” “should,” “will,” “would,” and similar words and expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions and contingencies, many of which are outside our control. Assumptions upon which our forward-looking statements are based could prove to be inaccurate, and actual results may differ materially from those expressed in or implied by such forward-looking statements. Important factors that could cause our actual results to differ materially from our expectations are disclosed in this report, our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (including Part I, Item 1, “Business,” Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and other documents filed by us from time to time with the SEC. Such factors, of course, do not include all factors that might affect our business and financial condition. We could be exposed to a variety of negative consequences as a result of delays related to the award of domestic and international contracts; failure to secure the renewal of key customer contracts; delays in customer programs; delays in revenue recognition related to the timing of customer acceptance; the impact of potential information technology, cybersecurity or data security breaches; changes in domestic and foreign government spending, budgetary, procurement and trade policies adverse to our businesses; the impact of the Russia-Ukraine conflict or conflicts in the Middle East, including the potential for broad economic disruption; global economic uncertainty, including the impact of tariffs; material delays and cancellations of orders or deliveries thereon, supply chain disruptions, plant closures, or other adverse impacts on our ability to execute business plans; unfavorable currency exchange rate fluctuations; effect of changes in tax legislation; market acceptance of our new and existing technologies, products and services; our ability to win new business and convert any orders received to sales within the fiscal year; contract and regulatory compliance matters, and actions, which if brought, could result in judgments, settlements, fines, injunctions, debarment or penalties; as well as other risks and uncertainties, including but not limited to those factors described in our other SEC filings. All forward-looking statements contained in this report are qualified in their entirety by this Section. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation other than as may be required under securities laws to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Executive Summary

We are a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products and provide related services in diversified markets, including homeland security, healthcare, defense and aerospace. We have three operating divisions: (a) Security, providing security and inspection systems and turnkey security screening solutions; (b) Optoelectronics and Manufacturing, providing specialized electronic components for our Security and Healthcare divisions, as well as to third parties for applications in the defense and aerospace markets, among others; and (c) Healthcare, providing patient monitoring, cardiology and remote monitoring, and connected care systems and associated accessories.

Security Division. Through our Security division, we provide security screening products and services globally, as well as turnkey security screening solutions. These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects for weapons, explosives, drugs, radioactive and nuclear materials and other contraband. Revenues from our Security division accounted for 66% and 69% of our total consolidated revenues for the nine months ended March 31, 2024 and 2025, respectively.

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Optoelectronics and Manufacturing Division. Through our Optoelectronics and Manufacturing division, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, telecommunications, office automation, computer peripherals, industrial automation and consumer products. We also provide our optoelectronic devices and electronics manufacturing services to OEM customers and to our own Security and Healthcare divisions. Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 22% and 21% of our total consolidated revenues for the nine months ended March 31, 2024 and 2025, respectively.

Healthcare Division. Through our Healthcare division, we design, manufacture, market and service patient monitoring, cardiology and remote monitoring, and connected care systems globally for sale primarily to hospitals and medical centers. Our products monitor patients in critical, emergency and perioperative care areas of the hospital and provide information, through wired and wireless networks, to physicians and nurses who may be at the patient’s bedside, in another area of the hospital or even outside the hospital. Revenues from our Healthcare division accounted for 12% and 10% of our total consolidated revenues for the nine months ended March 31, 2024 and 2025, respectively.

Trends and Uncertainties

The following is a discussion of certain trends and uncertainties that we believe have influenced, and may continue to influence, our results of operations.

Global Economic Considerations. Our products and services are sold in numerous countries worldwide, with a large percentage of our sales generated outside the United States. We are exposed to and impacted by global macroeconomic factors, U.S. and foreign government policies and foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by supply chain disruptions, inflationary pressure, and labor shortages. Increasing diplomatic and trade friction between the U.S. and China has also created significant uncertainty in the global economy. These global macroeconomic factors, coupled with political unrest internationally and the volatile U.S. political climate, resulting from the recent U.S. presidential election and congressional seat changes, have increased economic uncertainty and impacted demand for certain of our products and services. Conflicts in Gaza and nearby regions have created political and economic uncertainty in the Middle East. Also, the continued conflict between Russia and Ukraine and the sanctions imposed in response to this conflict have increased global economic and political uncertainty. We do not know how long this uncertainty will continue. These factors could have a material adverse effect on our business, results of operations and financial condition.

Global Trade. The current domestic and international political environment, including in relation to recent and further potential changes by the U.S. and other countries in policies on global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy and global trade. This uncertainty is exacerbated by sanctions imposed by the U.S. government against certain businesses and individuals in select countries. Continued or increased uncertainty regarding global trade due to these or other factors may require us to modify our current business practices and could have a material adverse effect on our business, results of operations and financial condition.

The U.S. has recently imposed tariffs on global imports and certain foreign countries have increased tariffs as a result. Based on these recently announced and implemented global tariffs, and assuming such tariffs remain in place, this is expected to result in additional costs for us. While the ultimate impact of changes to tariffs will depend on various factors, including the timing, amount, scope, and nature of any tariffs that are implemented, we are evaluating measures to mitigate the impact of tariffs.

Healthcare Considerations. Our Healthcare division experienced some increased demand for its patient monitoring products as a result of the COVID-19 pandemic during the earlier stages of the pandemic. Certain hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, and higher interest rates make access to credit more expensive. Continuation of these macroeconomic conditions would likely have an adverse impact on hospitals’ spend on capital equipment and thereby could have a material adverse effect on our business, results of operations and financial condition.

Government Policies. Our results of operations and cash flows could be materially affected by changes in U.S. or foreign government legislative, regulatory or enforcement policies.

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Russia’s Invasion of Ukraine. The invasion of Ukraine by Russia and the sanctions imposed in response to this conflict have increased global economic and political uncertainty. This has the potential to indirectly disrupt our supply chain and access to certain resources. While we have not experienced significant adverse impacts to date and will continue to monitor for any impacts and seek to mitigate disruption that may arise, we have certain research and development activities within Ukraine for our Healthcare division which have been somewhat impacted. The conflict also has increased the threat of malicious cyber activity from nation states and other actors.

Currency Exchange Rates. On a year-over-year basis, currency exchange rates positively impacted reported sales by approximately 0.7% for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024, primarily due to the weakening of the U.S. dollar against other foreign currencies in 2024. Any strengthening of the U.S. dollar against foreign currencies would adversely impact our sales for the remainder of the fiscal year, and any further weakening of the U.S. dollar against foreign currencies would positively impact our sales for the remainder of the fiscal year.

Results of Operations for the Three Months Ended March 31, 2024 (Q3 Fiscal 2024) Compared to the Three Months Ended March 31, 2025 (Q3 Fiscal 2025) (amounts in millions)

Net Revenues

The table below and the discussion that follows are based upon the way in which we analyze our business. See Note 12 to the condensed consolidated financial statements for additional information about our business segments.


	Q3		% of		Q3		% of
	Fiscal 2024		Net Revenues		Fiscal 2025		Net Revenues		$ Change		% Change
Security	$	286.0	70.6	%	$	314.9	70.9	%	$	28.9	10.1	%
Optoelectronics and Manufacturing		77.9	19.2			85.7	19.3			7.7	9.9
Healthcare		41.5	10.2			43.7	9.8			2.2	5.3
Total net revenues	$	405.4	100.0	%	$	444.3	100	%	$	38.8	9.6	%

Revenues for the Security division during Q3 fiscal 2025 increased year-over-year due to increases in product and service revenues of approximately $5.2 million and $23.7 million, respectively. The increase in product revenues was primarily driven by the acquired business further described in Note 2 to the condensed consolidated financial statements. The increase in service revenue was due primarily to an increase in the installed base of products.

Revenues for the Optoelectronics and Manufacturing division during Q3 fiscal 2025 increased year-over-year as a result of an increase in revenues in our contract manufacturing business.

Revenues for the Healthcare division during Q3 fiscal 2025 increased year-over-year primarily due to an increase in patient monitoring sales.

Gross Profit


	Q3		% of		Q3		% of
	Fiscal 2024		Net Revenues		Fiscal 2025		Net Revenues
Gross profit	$	136.1	33.6	%	$	150.3	33.8	%

Gross profit is impacted by sales volume and changes in overall manufacturing-related costs, such as raw materials and component costs, warranty expense, provision for inventory, freight, and logistics. Gross profit increased approximately $14.2 million in Q3 fiscal 2025 as compared to the prior year driven by the increase in sales. The gross margin in Q3 fiscal year 2025 was comparable to Q3 fiscal year 2024.

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Operating Expenses


	Q3		% of		Q3		% of
	Fiscal 2024		Net Revenues		Fiscal 2025		Net Revenues		$ Change		% Change
Selling, general and administrative	$	66.6	16.4	%	$	73.3	16.5	%	$	6.7	10.1	%
Research and development		17.1	4.2			18.6	4.2			1.5	8.8
Restructuring and other charges, net		1.0	0.2			2.3	0.5			1.3	130.0
Total operating expenses	$	84.7	20.8	%	$	94.2	21.2	%	$	9.5	11.2	%

Selling, general and administrative. Our significant selling, general and administrative (“SG&A”) expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, foreign currency translation, and depreciation and amortization expense. SG&A expense increased in Q3 fiscal 2025 compared to the same prior-year period primarily due to employee compensation, professional fees and information technology costs.

Research and development. Research and development (“R&D”) expenses include research related to new product development and product enhancements. R&D expenses increased $1.5 million in Q3 fiscal 2025 as compared to Q3 fiscal 2024 driven by increased compensation costs to support new product development initiatives primarily in our Security division.

Restructuring and other charges Restructuring and other charges generally consist of costs relating to reductions in our workforce, facilities consolidation, costs related to acquisition activity, and other non-recurring charges. During Q3 fiscal 2025, restructuring and other charges were $2.3 million, which included $1.8 million in employee terminations, and $0.5 million for facility closure costs. During Q3 fiscal 2024, restructuring and other charges primarily consisted of $0.5 million for facility closure costs for operational efficiency activities, and $0.5 million for employee terminations.

Interest and Other Expense, Net


	Q3		% of		Q3		% of
	Fiscal 2024		Net Revenues		Fiscal 2025		Net Revenues
Interest and other expense, net	$	7.4	1.8	%	$	8.2	1.8	%

Interest and other expense, net. For Q3 fiscal 2025, interest and other expense, net was $8.2 million as compared to $7.4 million in the same prior-year period. This increase was driven by higher average levels of borrowings primarily to support the increase in working capital associated with the growth in revenues, business acquisition activity, and for the repurchase of approximately $80 million of shares of common stock in July 2024. Interest expense in Q3 fiscal 2025 and Q3 fiscal 2024 includes a benefit from the interest rate swap of $0.4 million and $0.9 million, respectively.

Income taxes. The effective tax rate for a particular period varies depending on a number of factors, including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections (v) tax holidays granted to certain of our international subsidiaries and (vi) discrete tax items. For Q3 fiscal 2025 and 2024, the provision for income taxes was $6.9 million and $9.9 million, respectively. The effective tax rates for Q3 fiscal 2025 and 2024 were 14.3% and 22.6%, respectively. During Q3 fiscal 2025 we recognized net discrete tax benefits of $4.5 million related to equity-based compensation under ASU 2016- 09 and changes in prior year tax estimates and uncertain tax benefits. During Q3 fiscal 2024 we recognized net discrete tax benefits of $0.2 million related to equity-based compensation under ASU 2016-09 and changes in prior year tax estimates.

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Results of Operations for the Nine Months Ended March 31, 2024 (YTD Q3 Fiscal 2024) Compared to the Nine Months Ended March 31, 2025 (YTD Q3 Fiscal 2025) (amounts in millions)

Net Revenues

The table below and the discussion that follows are based upon the way in which we analyze our business. See Note 12 to the condensed consolidated financial statements for additional information about our business segments.


	YTD Q3		% of		YTD Q3		% of
	Fiscal 2024		Net Revenues		Fiscal 2025		Net Revenues		$Change		% Change
Security	$	700.6	66.2	%	$	829.2	68.6	%	$	128.6	18.4	%
Optoelectronics and Manufacturing	$	236.2	22.3	%		253.3	21.0			17.1	7.2
Healthcare	$	121.1	11.5	%		125.7	10.4			4.6	3.8
Total net revenues	$	1,057.9	100.0	%	$	1,208.2	100.0	%	$	150.3	14.2	%

Revenues for the Security division during YTD Q3 fiscal 2025 increased year-over-year due to an increase in product and service revenues of approximately $94.0 million and $34.6 million, respectively. The increase in product revenues was primarily driven by growth in cargo and vehicle inspection systems, checkpoint screening systems, trace detection systems, and the acquired business further described in Note 2 to the condensed consolidated financial statements. The increase in service revenue was due primarily to an increase in the installed base of products.

Revenues for the Optoelectronics and Manufacturing division during YTD Q3 fiscal 2025 increased year-over year as a result of an increase in revenue in our contract manufacturing business.

Revenues for the Healthcare division during YTD Q3 fiscal 2025 increased year-over-year due to an increase in patient monitoring sales and related service revenue.

Gross Profit


	YTD Q3		% of		YTD Q3		% of
	Fiscal 2024		Net Revenues		Fiscal 2025		Net Revenues
Gross profit	$	376.1	35.6	%	$	418.9	34.7	%

Gross profit increased approximately $42.8 million in YTD Q3 fiscal 2025 as compared to the prior year driven by the increase in sales. The gross margin decreased as compared to the prior year comparable period as the prior year period had a favorable mix of Security division revenues, resulting in a higher gross margin.

Operating Expenses


	YTD Q3		% of		YTD Q3		% of
	Fiscal 2024		Net Revenues		Fiscal 2025		Net Revenues		$Change	% Change
Selling, general and administrative	$	198.0	18.7	%	$	216.2	17.9	%	18.2	9.2	%
Research and development		49.4	4.7			54.6	4.5		5.2	10.5
Restructuring and other charges, net		2.5	0.2			3.6	0.3		1.1	44.0
Total operating expenses	$	249.9	23.6	%	$	274.4	22.7	%	24.5	9.8	%

Selling, general and administrative. SG&A expense for YTD Q3 fiscal 2025 was $18.2 million higher than in the same prior-year period, primarily due to increased employee compensation and unfavorable impact of foreign currency exchange rates in YTD Q3 fiscal 2025 compared to the same prior-year period.

Research and development. R&D expenses for YTD Q3 fiscal 2025 increased $5.2 million over the same prior-year period driven by increased compensation costs to support new product development initiatives primarily in our Security division.

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Restructuring and other charges. Restructuring and other charges for YTD Q3 fiscal 2025 were $3.6 million, which included $0.6 million in acquisition related costs, $0.8 million for facility closure costs for operational efficiency activities, and $2.3 million for employee terminations.

Interest and Other Expense, Net


	YTD Q3		% of		YTD Q3		% of
	Fiscal 2024		Net Revenues		Fiscal 2025		Net Revenues
Interest and other expense, net	$	19.7	1.9	%	$	24.2	2.0	%

Interest and other expense, net. The increase in interest and other expense, net was driven by higher average levels of borrowings primarily to support the increase in working capital associated with the growth in revenues, business acquisition activity, and for the repurchase of approximately $80 million of shares of common stock in July 2024. Interest expense for YTD Q3 fiscal 2025 and 2024 included a benefit of $2.0 million and $2.7 million, respectively, from the interest rate swap.

Income taxes. The effective tax rate for a particular period varies depending on a number of factors, including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections (v) tax holidays granted to certain of our international subsidiaries and (vi) discrete tax items. For YTD Q3 fiscal 2025 and 2024, the provision for income taxes was $23.4 million and $23.1 million, respectively. The effective tax rates for YTD Q3 fiscal 2025 and 2024 were 19.5% and 21.7%, respectively. For YTD Q3 fiscal 2025, we recognized a discrete tax benefit of $1.3 million related to equity-based compensation under ASU 2016-09 and a benefit of $4.0 million from changes in prior year tax estimates and uncertain tax benefits. For YTD Q3 fiscal 2024, we recognized a discrete tax benefit of $0.8 million related to equity-based compensation under ASU 2016-09 and a benefit of $2.3 million from changes in prior year tax estimates.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents, cash generated from operations and our credit facilities. Cash and cash equivalents totaled $95.8 million at March 31, 2025, an increase of $0.4 million, or 0.5%, from $95.4 million at June 30, 2024. We currently anticipate that our available funds, credit facilities and cash flow from operations will be sufficient to meet our operational cash needs for the next 12 months and the foreseeable future beyond that. In addition, we anticipate that cash generated from operations, without repatriating earnings from our non-U.S. subsidiaries, and our credit facilities will be sufficient to satisfy our obligations in the U.S.

In July 2024, we issued an aggregate of $350.0 million principal amount of 2.25% convertible senior notes due in August 2029. In connection with the issuance of the 2029 Notes, we repurchased 531,314 shares of our common stock for approximately $80 million.

Our credit facility comprises a term loan and a $600 million revolving credit facility, which includes a $300 million sub-facility for letters of credit. As of March 31, 2025, there was $130.0 million outstanding under the term loan, $156.0 million outstanding under our revolving credit facility and $75.1 million of outstanding letters of credit. As of March 31, 2025, the total amount available under our revolving credit facility was $368.9 million. See Note 8 to the consolidated financial statements for further discussion.

Cash Provided by (Used in) Operating Activities. Cash flows from operating activities can fluctuate significantly from period to period, as net income, adjusted for non-cash items, and working capital fluctuations impact cash flows. For YTD Q3 fiscal 2025, cash provided by operations was $97.0 million compared to cash used in operations of $58.5 million in the comparable prior-year period. The net change in cash flows from operating activities was due primarily to favorable changes in net working capital compared to the prior-year period and higher net income for YTD Q3 fiscal 2025 over the comparable prior-year period.

Cash Used in Investing Activities. Net cash used in investing activities was $106.4 million for YTD Q3 fiscal 2025 as compared to $24.9 million in the same prior year period. We used $75.5 million for a business acquisition in September 2024, compared to $9.0 million in the first nine months of fiscal year 2024. Capital expenditures for YTD Q3 fiscal year 2025 were $17.7 million compared to $13.6 million in the same prior-year period. Expenditures for intangible and other assets for YTD Q3 fiscal year 2025 were $13.5 million compared to $12.9 million in the same prior-year period.

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Cash Provided by Financing Activities. Net cash provided by financing activities was $10.4 million for YTD Q3 fiscal 2025, compared to $110.7 million during the same prior-year period. The decrease in cash flows from financing activities was primarily due to net proceeds of $340.6 million from issuance of the 2029 Notes, partially offset by (1) net repayment of $228.0 million on our credit facility and (2) repurchase of shares of common stock of $80.4 million. Taxes paid related to net share settlement of equity awards were $22.6 million during YTD Q3 fiscal 2025 compared to $23.2 million in the same prior-year period.

Borrowings

See Note 8 to the condensed consolidated financial statements for a detailed discussion regarding our revolving credit facility and other borrowings.

Cash Held by Foreign Subsidiaries

Our cash and cash equivalents totaled $95.8 million at March 31, 2025. Of this amount, approximately 83% was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by our subsidiaries in India, the United Kingdom, and to a lesser extent in Singapore, Canada, and Malaysia among other countries. We intend to permanently reinvest certain earnings from foreign operations, and we currently do not anticipate that we will need this cash in foreign countries to fund our U.S. operations. In the event we repatriate cash from certain foreign operations and if taxes have not previously been withheld on the related earnings, we would provide for withholding taxes at the time we change our intention with regard to the reinvestment of those earnings.

Issuer Purchases of Equity Securities

We did not repurchase any shares of common stock during the third quarter of fiscal year 2025.

Contractual Obligations

During the nine months ended March 31, 2025, there were no material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. See Notes 1, 6, 8 and 10 to the condensed consolidated financial statements for additional information regarding our contractual obligations.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our Consolidated Financial Statements upon adoption. As discussed in Note 1, we are currently evaluating the potential impact on financial statement disclosures upon future adoption of ASU 2023 - 07 and ASU 2023 - 09. There were no new pronouncements adopted in the third quarter of fiscal year 2025.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of our exposure to market risk, refer to our market risk disclosures set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. There have been no material changes in our exposure to market risk during the nine months ended March 31, 2025 from that described in the Annual Report.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2025, the end of the period covered by this report, our management, including our Chief Executive Officer and our Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Exchange Act). Based upon management’s review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the third quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud within the Company have been detected.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to legal proceedings, claims, and litigation arising in the ordinary course of our business or otherwise. More information regarding legal proceedings in which we are involved can be found under Note 10, “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements in Part I, Item 1 of this Report, which is incorporated by reference into this Item 1.

ITEM 1A. RISK FACTORS

The discussion of our business, financial condition and results of operations in this Quarterly Report on Form 10-Q for the period ended March 31, 2025 should be read together with the risk factors contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed with the SEC on August 29, 2024, which describe various risks and uncertainties that could materially affect our business, financial condition and results of operations in the future. There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

Rule 10b5 - 1 Trading Plans

, , our , - 1 trading arrangement intended to satisfy the affirmative defense of Rule 10b5 - 1 (c) for the sale of up to shares of our common stock until . None of our other directors or officers informed us during the quarter ended March 31, 2025 of the adoption, modification or termination of a Rule 10b5 - 1 trading arrangement or non - Rule 10b5 - 1 trading arrangement, as those terms are defined in Regulation S - K, Item 408.

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ITEM 6. EXHIBITS


Exhibit Number		Description

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Hawthorne, State of California on the 2nd day of May, 2025.


	OSI SYSTEMS, INC.

	By:	/s/ Ajay Mehra
		Ajay Mehra
		President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Alan Edrick
		Alan Edrick
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

	By:	/s/ Cary Okawa
		Cary Okawa
		Chief Accounting Officer
		(Principal Accounting Officer)

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OSI SYSTEMS INC - Quarter Report: 2025 March (Form 10-Q)

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