Ajay Mehra
OSI SYSTEMSAbout Ajay Mehra
Ajay Mehra is President and Chief Executive Officer of OSI Systems and a member of the Board, appointed CEO effective January 1, 2025; age 63; he joined OSI in 1989 and previously served as Controller, CFO (1992–2002), Executive Vice President (since 2002), and President of the Security division . He holds a BA from the University of Massachusetts Amherst and an MBA from Pepperdine University . Under his and the team’s leadership, OSI delivered FY2025 revenue of ~$1.7B, EPS $8.71, and year-end backlog $1.8B, with 7,337 employees . Pay-versus-performance data show strong TSR, with $100 invested rising to $301.26 vs. $159.41 for the peer group by FY2025; FY2025 net income was $149.6M and operating income $217.5M . For long-term equity programs, FY2025 compound annual revenue growth was 7.49% and operating income growth 17.47% versus baselines, resulting in earned performance shares for Mehra .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| OSI Systems | Controller | 1989 | Early finance leadership for growth platform |
| OSI Systems | VP & Chief Financial Officer | 1992–2002 | Oversaw IPO and launch of Security division |
| OSI Systems | Executive Vice President | 2002–present | Senior corporate leadership across businesses |
| OSI Systems (Security Division) | President | –Dec 2024 | Grew Security to >$1B annual revenue; market leadership via Rapiscan brand |
| OSI Systems | President & CEO; Director | Jan 2025–present | Corporate strategy, innovation, growth |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Thermador/Waste King | Financial positions | Pre-1989 | Finance roles in consumer appliances |
| Presto Food Products, Inc. | Financial positions | Pre-1989 | Finance experience in food manufacturing |
| United Detector Technology | Financial positions | Pre-1989 | Industry exposure in electronics/opto |
Fixed Compensation
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Base Salary ($) | $477,721 | $492,340 | $621,448 |
| Target Annual Bonus (% of base) | N/A | N/A | 100% |
| Maximum Annual Bonus (% of base) | N/A | N/A | 200% |
| Actual Annual Incentive Paid ($) | $2,925,000 | $4,675,000 | $1,500,000 |
| Initial CEO Base (Approved 12/4/2024) ($) | — | — | $750,000 |
Notes:
- FY2025 annual incentive is driven by AROE formula; maximum payout equals 200% of base at ≥25.25% AROE . OSI achieved 25.31% AROE for FY2025, supporting the $1,500,000 payout .
- The Board approved Mehra’s initial CEO base at $750,000 on appointment (used for incentive calculations) .
Performance Compensation
Annual Incentive (AROE)
| Metric | Weighting | Target | Actual (FY2025) | Payout Level | Payout ($) |
|---|---|---|---|---|---|
| Adjusted Return on Equity (AROE) | 100% | 24.35% | 25.31% | 200% of base at ≥25.25% | $1,500,000 |
Performance RSUs (Long-Term)
| Component | Baseline | Weighting | FY2025 Actual | Earned/Vesting |
|---|---|---|---|---|
| Compound Annual Revenue Growth | FY2023 (GAAP) | 20% | 7.49% | Earned shares under program; see below |
| Compound Annual Operating Income (EBIT) Growth | FY2023 (GAAP) | 80% | 17.47% | Earned shares under program; see below |
| Additional Annual Metrics (Revenue CAGR/EBIT CAGR) | Annual within 3-year program | — | Rev 7.49%/EBIT 17.47% (FY2025) | Additional shares earned (see below) |
Earned shares (FY2025 performance period):
- Mehra earned 5,812 shares under the program .
- Mehra also earned 15,362 additional shares based on annual performance thresholds .
Equity Award Grants and Vesting
| Grant Date | Award Type | Target Shares | Max Shares | Grant Fair Value ($) | Vesting |
|---|---|---|---|---|---|
| 8/14/2024 | Performance RSUs (initial grant) | 4,071 | 11,399 | $565,950 | 3-year performance plus annual earnouts |
| 12/4/2024 | Performance RSUs (CEO appointment) | 11,427 | 31,996 | $2,057,888 | 3-year performance plus annual earnouts |
| 12/4/2024 | RSUs (CEO appointment; cliff vest subject to metrics) | 14,692 | — | $2,645,882 | Vests on one-year anniversary if performance metrics attained |
Program design:
- 100% performance-based for NEOs in FY2025 (except one time-based grant for retiring NEO) .
- Revenue CAGR vesting schedule: 0% at <2%, 25% at 2%, up to 100% at 5% .
- EBIT CAGR vesting schedule: 0% at <3%, 10% at 3%, up to 100% at 7% .
- Additional annual earnouts: Revenue 10–60% of initial grant for 5.5–8.0%; EBIT 10–60% for 7.5–10.0% .
Equity Ownership & Alignment
| Item | Value |
|---|---|
| Beneficial Ownership (Shares) | 57,673 (includes 6,683 in Mehra Family Trust) |
| Shares Outstanding (Record Date) | 16,977,595 |
| Ownership % of Class | "<1%" per proxy table |
| Unvested/Unearned RSUs (Number; Value) | 40,295; $9,060,734 (value at $224.86 on 6/30/2025) |
| Options (Exercisable/Unexercisable) | None disclosed for NEOs in FY2025 tables |
| Pledging/Hedging | Prohibited; no shares pledged by any NEO/director as of proxy date |
| Executive Ownership Guideline | 5x base salary; counted: unvested RSUs; not counted: unearned performance awards/options; executives meet/exceed guideline |
| Deferred Compensation (Balance as of FY2025) | $3,976,708; executive/company contributions $62,145 each; FY earnings $345,453 |
Employment Terms
| Provision | Summary |
|---|---|
| Agreement Term | One-year term with automatic one-year renewals unless non-renewal notice ≥30 days before end of term |
| Base Salary in Agreement (initial) | $750,000 (amended effective Jan 1, 2025 on CEO appointment) |
| Non-Solicit | 18 months post-termination (covers executives/supervisors/managers) |
| Clawback | Company clawback aligned with SEC/Nasdaq; agreements include clawback provisions |
| Severance (Good Reason/Without Cause) | 24 months’ base salary + 2x average of highest three annual bonuses in prior five years; 6 months car allowance; $6,000 outplacement; equity acceleration (time-based to full; performance-based to target; option exercise to 1-year post separation) |
| Change-in-Control (CIC) | If terminated without cause or for good reason within 90 days before/12 months after CIC: same as above but performance awards vest at maximum; or alternative 280G-based payment |
| Potential Payments (as of 6/30/2025 assumptions) | Good Reason/Without Cause: Salary $1,500,000; Bonus $6,566,666; Equity $9,060,734; Car $6,000; Outplacement $6,000; Total $17,139,400 . CIC: Salary $1,500,000; Bonus $6,566,666; Equity $17,276,219; Car $6,000; Outplacement $6,000; Total $25,354,885 |
Board Governance and Director Service
- Board Service: Director since January 2025; committees: none .
- Independence: Board determined Mehra (CEO) and Chopra (Executive Chairman) are not independent; others are independent; Lead Independent Director in place .
- Attendance: All directors attended >75% of Board/committee meetings in FY2025 .
- Family Relationship: Mehra is first cousin of Executive Chairman Deepak Chopra; related-party JV ECIL Rapiscan includes equity interests of OSI (36%), Mehra (4.5%), Chopra (10.5%); OSI’s share of JV earnings is immaterial .
- Director Compensation: Employee directors (Mehra, Chopra) received no director fees; non-employee director cash retainers/RSUs disclosed separately; director equity ownership guideline is 5x annual retainer and all directors meet/exceed it .
Performance Snapshot (Context for pay-for-performance)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Total Shareholder Return ($100 initial) | $136.17 | $114.47 | $157.86 | $184.24 | $301.26 |
| Peer Group TSR ($100 initial) | $112.85 | $99.56 | $116.39 | $121.83 | $159.41 |
| Net Income ($) | $74,049,000 | $115,347,000 | $91,778,000 | $128,154,000 | $149,637,000 |
| Operating Income (EBIT) ($) | $115,371,000 | $121,749,000 | $135,279,000 | $189,061,000 | $217,524,000 |
Proxy summary highlights for FY2025:
- Sales $1.7B; EPS $8.71; Backlog $1.8B; Employees 7,337 .
Compensation Structure Analysis
- Equity Mix: 100% performance-based RSUs for NEOs in FY2025 (except one retirement-related grant), emphasizing CAGR revenue and EBIT targets; minimal use of stock options .
- Annual Plan Tightened: FY2025 AROE target increased to 24.35% from prior year; threshold and maximum also raised; actual AROE achieved 25.31%, hitting max .
- Clawback and No Gross-ups: Robust clawback policy; prohibition on hedging/pledging; no excise tax gross-ups on CIC; no option repricing .
- Peer Benchmarking: Committee uses Pearl Meyer and a multi-industry peer set (e.g., Cognex, Lumentum, Novanta, Vishay, Kratos, Varex) to inform decisions (no fixed percentile disclosed) .
Equity Ownership & Trading Signals
- Large unvested RSU balance ($9.06M) indicates continued equity alignment and possible periodic vesting-related selling needs; however, hedging and pledging are prohibited, and executives must meet 5x salary ownership guidelines (Mehra meets/exceeds) .
- Beneficial ownership less than 1% of outstanding shares; retention requirements apply until ownership guidelines are met (unvested RSUs count toward guidelines; unearned performance awards/options do not) .
- Section 16 compliance: company reports overall compliance for executives/directors, with noted late Form 4s for two directors; no indication of problematic selling patterns for Mehra in proxy .
Employment & Contracts (Retention Risk)
- Auto-renewing one-year agreement with robust severance and equity acceleration suggests moderate retention risk mitigation; CIC provisions that accelerate at maximum could increase pay certainty in transactions .
- Non-solicit for 18 months; no disclosed non-compete; clawback embedded .
Say-on-Pay & Shareholder Feedback
- 2024 say-on-pay support was ~64%, influenced by a $13.5M stay bonus to prior CEO; committee maintained approach for FY2025 and recommends FOR in 2025 .
Employment Benefits & Perquisites
| Item | FY2025 Amount ($) |
|---|---|
| Matching 401(k) & Deferred Comp | $75,552 |
| Car Benefit | $6,675 |
| Health Insurance & Medical Reimbursement | $27,283 |
| Life & Long-Term Disability Insurance | $11,463 |
| Total “All Other Compensation” | $120,973 |
Investment Implications
- Alignment: Heavy use of performance RSUs tied to multi-year revenue and EBIT growth, raised annual AROE targets, strong TSR outperformance, and five-times-salary ownership guidelines support pay-for-performance alignment and investor-friendly discipline .
- Retention & Transaction Dynamics: Severance with equity acceleration (target; max at CIC) reduces retention risk but elevates certainty of payout in strategic events, potentially influencing behavior around M&A or strategic reviews; no excise tax gross-ups mitigate shareholder concerns .
- Governance & Independence: Dual roles (CEO/Director) plus familial tie to the Executive Chairman (first cousins) warrant monitoring; presence of Lead Independent Director and independent committees offsets some independence concerns .
- Related Party/Conflicts: Small personal stake in ECIL Rapiscan JV (4.5% for Mehra) reported; OSI’s earnings share immaterial; continue monitoring transaction terms and governance oversight .
- Trading Signals: Significant unvested RSUs and program cadence could result in periodic vesting flows; hedging/pledging prohibitions and ownership requirements temper adverse alignment risks .