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OSI SYSTEMS INC (OSIS)·Q4 2025 Earnings Summary

Executive Summary

  • OSI Systems delivered record Q4 revenue ($505M) and record non-GAAP EPS ($3.24), with Security services strength and Optoelectronics growth driving improved adjusted operating margin; FY26 outlook guides to 5.4%–8.0% revenue growth and 8%–11% EPS growth . Versus S&P Global consensus, Q4 beat on revenue by ~$8.6M and on EPS by $0.05 (6 estimates each).
  • Book-to-bill rebounded to 1.0 in Q4, year-end backlog remained >$1.8B, and cash from operations turned positive after a working capital-heavy quarter, reinforcing visibility into FY26 .
  • Management expanded and extended the senior secured credit facility to $825M, maturing 2030, adding liquidity and flexibility to fund growth .
  • Key narratives: Security service revenue mix lifted margins; Opto margin temporarily pressured by a new facility ramp; Healthcare was weak in Q4 but expected to improve. Collections in Mexico began early in Q1 FY26, easing a Q4 receivables build .

What Went Well and What Went Wrong

What Went Well

  • Record Q4 revenue ($504.985M, +5% YoY) and record non-GAAP EPS ($3.24), with consolidated non-GAAP operating margin improving to 15.7% (from 14.8%) on higher Security services mix .
  • Security delivered higher adjusted operating margin (20.4% vs 18.5% LY) on a 28% YoY increase in services; Opto revenues grew ~10% YoY; management emphasized multi-year operating efficiency: SG&A+R&D down to 21.3% of sales in FY25 from 27.6% in FY17 .
  • Strengthened balance sheet flexibility: upsized/extended $825M credit facility to 2030 with improved pricing/covenants, positioning for FY26 cash generation and strategic investments .

Quote (CEO): “We are pleased to report record-breaking fourth quarter and 2025 fiscal year revenues and non-GAAP earnings per share, led by excellent execution in our Security division.”

What Went Wrong

  • Healthcare posted a GAAP operating loss in Q4 (−3.2% margin), pressuring consolidated mix; management expects improvement as plans take hold .
  • Optoelectronics adjusted margin dipped slightly (13.6% vs 13.9% LY) due to short-term inefficiencies while a new facility ramps; recovery expected with scale-up .
  • Working capital intensity elevated receivables in Q4 (A/R $838M at 6/30/25); notably included ~$40M Mexico revenue—with collections beginning in early Q1 FY26, mitigating risk but highlighting execution/collection timing sensitivity .

Financial Results

Headline Results vs Estimates (Q4 FY25)

MetricActualConsensus*Surprise
Revenue ($M)$504.985 $496.417*+$8.568M (Beat)*
Non-GAAP EPS ($)$3.24 $3.1897*+$0.05 (Beat)*

Values marked with * retrieved from S&P Global.

Quarterly Trend and YoY/Seq Comparison

MetricQ4 FY24Q2 FY25Q3 FY25Q4 FY25
Revenue ($M)$480.907 $419.820 $444.354 $504.985
GAAP Operating Income ($M)$62.818 $57.957 $56.217 $73.022
GAAP Op Margin (%)13.1% 13.8% 12.7% 14.5%
Non-GAAP Operating Income ($M)$71.211 $62.870 $63.133 $79.479
Non-GAAP Op Margin (%)14.8% 15.0% 14.2% 15.7%
GAAP EPS ($)$2.55 $2.22 $2.40 $3.03
Non-GAAP EPS ($)$2.84 $2.42 $2.44 $3.24
Book-to-Bill (x)0.8 1.2 >1.0 1.0
CFO ($M)−$29.041 $52.5 $81.6 $0.561
Capex ($M)$8.499 $5.5 $4.5 $6.119

Notes: CFO and Capex reflect period cash flows disclosed in press releases.

Segment Breakdown (Q4 FY25 vs Q4 FY24)

SegmentRevenue ($M) Q4 FY24GAAP Op Margin % Q4 FY24Non-GAAP Op Margin % Q4 FY24Revenue ($M) Q4 FY25GAAP Op Margin % Q4 FY25Non-GAAP Op Margin % Q4 FY25
Security$342.509 17.7% 18.5% $366.971 19.2% 20.4%
Optoelectronics & Manufacturing$102.069 10.1% 13.9% $112.667 13.3% 13.6%
Healthcare$50.305 7.7% 9.3% $42.684 −3.2% 0.9%
Corporate/Elimination$(13.976) N/AN/A$(17.337) N/AN/A
Total$480.907 13.1% 14.8% $504.985 14.5% 15.7%

Additional KPIs

KPIQ4 FY24Q4 FY25
Backlog (period-end)>$1.8B >$1.8B
Effective Tax Rate (GAAP)18.3% 19.8%
Normalized Tax Rate (Non-GAAP)21.2% 21.9%
Net Interest & Other (Q4)$(8.158)M $(7.224)M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2025$1.685B–$1.710B (Q2) → $1.690B–$1.715B (Q3) N/A (FY25 completed)Raised twice during FY25
Non-GAAP Diluted EPSFY2025$9.10–$9.40 (Q2) → $9.15–$9.45 (Q3) N/A (FY25 completed)Raised twice during FY25
RevenueFY2026N/A$1.805B–$1.850B New
Non-GAAP Diluted EPSFY2026N/A$10.11–$10.39 New

Management did not provide a GAAP-to-non-GAAP EPS reconciliation for forward guidance due to unpredictability of certain items .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY25)Previous Mentions (Q3 FY25)Current Period (Q4 FY25)Trend
Security services mix/marginStrong bookings; Security adj op margin 19.9%, record backlog Strong Security; backlog >$1.8B; margin expansion Security adj margin 20.4%; services +28% YoY; supports consolidated margin lift Improving mix and margins
Opto growth and facility rampSolid growth; adj margin 12.8% 15% revenue growth; margin expansion Revenue +10%; margin slightly down (13.6% vs 13.9% LY) due to new facility ramp; recovery expected Temporary margin headwind
Healthcare performanceEncouraging sales growth; bookings momentum “Encouraged” by sales; leadership changes to drive improvement Disappointing Q4; planning for improvement Mixed; watch for recovery
Backlog/visibilityBacklog >$1.8B; book-to-bill 1.2 Backlog >$1.8B; book-to-bill >1.0 Backlog >$1.8B; book-to-bill 1.0 Stable high visibility
Mexico receivablesN/AN/A~$40M Q4 revenue; collections started in early Q1 FY26; more expected during quarter Collections improving
Operating efficiencyN/AN/ASG&A+R&D reduced to 21.3% of sales in FY25 from 27.6% in FY17 Structural efficiency gains
Capital structure/liquidityN/AN/ACredit facility upsized to $825M; extended to 2030; improved pricing/covenants Enhanced liquidity

Management Commentary

  • CEO Ajay Mehra (press release): “Fourth quarter performance was driven by strong growth in the Security division’s service revenues resulting from an increasing installed base of our products.”
  • CFO Alan Edrick (press release): “We expanded our credit facility to increase our total borrowing capacity to $825 million and extended the maturity to July 2030… well-positioned to invest in strategic initiatives.”
  • CFO (call): “Our adjusted operating margin for Q4 of fiscal ’25 was 15.7%… Security division’s adjusted operating margin was 20.4%… Opto’s adjusted operating margin was 13.6%, slightly down… as our new manufacturing facility is still ramping up.”
  • CFO (call): “SG&A and R&D expenses as a percentage of sales have decreased annually for the past 8 years from 27.6%… to 21.3% in fiscal ’25.”

Q&A Highlights

  • Mexico receivables and revenue timing: Management noted ~$40M of Q4 revenue tied to Mexico and confirmed collections began in early Q1 FY26 with expectations for more within the quarter, addressing A/R build concerns .
  • Opto margin trajectory: Slight Q4 adjusted margin dip attributed to ramp of a new facility; management expects margin to improve as operations scale .
  • Healthcare outlook: Despite disappointing Q4, management reiterated actions underway and expects stronger performance going forward .

Estimates Context

MetricPeriodActualConsensus*Delta
Non-GAAP EPS ($)Q4 FY25$3.24 $3.1897*+$0.05 (Beat)*
Revenue ($M)Q4 FY25$504.985 $496.417*+$8.568M (Beat)*
# of EstimatesQ4 FY25—EPS: 6*, Rev: 6*—

Values marked with * retrieved from S&P Global.

Implications: Consensus likely moves higher for FY26 given top-line strength, Security services mix, and raised multi-year margin confidence; monitor Healthcare revisions and Opto margin normalization cadence .

Key Takeaways for Investors

  • Mix tailwind: Security services growth (+28% YoY) drove consolidated margin expansion; sustaining service attach on installed base is a key EPS lever into FY26 .
  • Execution: Q4 revenue/EPS beats vs S&P consensus with improved adjusted margin to 15.7%; FY26 guide implies continued growth despite uneven Healthcare *.
  • Working capital dynamics: Elevated A/R (including Mexico) weighed on Q4 CFO; early-Q1 collections reduce risk into FY26 and support liquidity .
  • Opto margin watch: Temporary pressure from ramping a new facility should abate as scale builds; progress here adds upside to FY26 EPS trajectory .
  • Balance sheet firepower: $825M facility to 2030 (better pricing/covenants) supports organic and potential inorganic opportunities; lowers financing risk through the cycle .
  • Backlog and visibility: >$1.8B backlog and 1.0 book-to-bill underpin FY26 revenue outlook; order conversion cadence remains the primary swing factor .
  • Trading setup: Positive estimate revisions likely, with catalysts from large Security orders/services, Opto margin normalization, and Healthcare turnaround; watch quarterly cash flow and collections for sentiment inflections .

Footnotes: Values marked with * retrieved from S&P Global.