OSI Systems, Inc. (NASDAQ:OSIS) Q1 2019 Earnings Conference Call Transcript

Oct 25, 2018 • 04:30 pm ET

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OSI Systems, Inc. (NASDAQ:OSIS) Q1 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen. Welcome to the OSI Systems, Inc. First Quarter 2019 Conference Call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call may be recorded.

I would now like to introduce your host for today's conference, Alan Edrick, CFO. Please go ahead, sir.

Executive
Alan Edrick

Well, thank you. Good afternoon, and thank you for joining us. I am Alan Edrick, EVP and CFO of OSI Systems. And I'm here today with Deepak Chopra, our President and CEO. Welcome to the OSI Systems Fiscal 2019 First Quarter Conference Call. We would like to extend a warm welcome to anyone who is a first-time participant on our conference calls. Earlier today, we issued a press release announcing our fiscal 2019 first quarter financial results.

(Forward-Looking Cautionary Statements)

During today's conference call, we may refer to both GAAP and non-GAAP financial measures of the company's operating results. For information regarding non-GAAP measures and comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's press release regarding our fiscal 2019 first quarter results, which has been furnished to the SEC as an exhibit to a current report on form 8K.

Before turning the call over to Deepak to discuss the company's general business and operations, I will provide a high-level financial overview of the first fiscal quarter. First, we reported record first quarter revenues of 266 million, a 4% year-over-year increase. This increase was driven by the performance of our Security and Opto divisions. In Security, we reported record Q1 revenues of 170 million, driven primarily by growth in cargo equipment sales and service revenues, which were partially offset by the expected reduction in year-over-year turnkey revenue from our current Mexico SAT contract. Revenues in the Opto division increased 20% year-over-year with a combination of organic, acquisition-related, and inter-company sales growth. The Security and Opto division revenue growth was partially offset by a 16% year-over-year decrease in our Healthcare division revenues.

Second, we reported Q1 fiscal 2019 GAAP diluted earnings per share of $0.50 compared to diluted earnings per share of $0.52 in the same prior-year period. On a non-GAAP basis, Q1 EPS was $0.81 per diluted share compared to $0.79 in Q1 of fiscal '18. Earnings were especially strong in light of the difficult comparison with the prior year as a result of the changes in the Mexico contract and the prior-year benefit to explosive trace detection sales from the Department of Homeland Security last point of departure program, as well as a softer quarter in Healthcare. Q1 non-GAAP EPS excluded the impact of restructuring and other charges, including certain legal costs, amortization of acquired intangible assets, and non-cash interest expense, all net of related tax effects. It also excluded discrete tax items.

Third, gross margin in the quarter improved to 36%, the highest first quarter gross margin in eight years. And finally, the fiscal Q1 2019