OSI Systems [OSIS]

2Q19                      2Q18

Sales                      $303.2M               $277.5M

Net Inc.                 $19.1M, 1.03      ($47.0M, $2.47)

Sales increased 9% to a record primarily due to a 10% increase at the Rapiscan Systems division, which achieved a record $188.7 million in revenue, and a double-digit gain at the Optoelectronics and Manufacturing segment. Rapiscan benefited from higher sales of cargo and vehicle inspection systems, Real Time Tomography (RTT)explosives detection systems, and related maintenance, which more than offset an expected decline in the turnkey screening services program with Mexico. The company swung to positive net income on strength in security, Opto and strong results in the Healthcare segment. Operating profit at Rapiscan increased 16% to $26.1 million, on sales of higher margin products and lower research and development expenses. Overall orders in the quarter were 90 percent of sales and backlog at the end of December stood at $998 million. The backlog figure excludes expected work from the company’s turnkey security services, including a new win to provide these services to a port in Guatemala. Turnkey services revenue with the existing three customers, Albania, Mexico and Puerto Rico, represents just under 20 percent of overall security revenue and is expected to grow. Free cash flow was $38.9 million in the quarter. Officials on the company’s earnings call said the 35-day long shutdown of the Department of Homeland Security didn’t have an impact on the results. For all of FY ’19, OSI expects sales of $1.2 billion and adjusted earnings per share between $3.93 and $4.10, a 2 percent increase from the prior outlook.