OSI Systems [OSIS]
1Q17 1Q16
Sales $220.9M $200.1
Net Inc. $677K, 0.53 $22.4M, 0.03
Net income dove precipitously on a swing to a loss in the Healthcare division and various restructuring and impairment charges while sales increased 10% to a record on a jump in revenue at the Rapiscan Systems security segment. Sales at Rapiscan rose 28% to a record $123.7 million with half of the gain organic and the other half related to the acquisition of American Science & Engineering in early September. The organic growth stems from sales of Real Time Tomography (RTT) explosive detection systems for checked baggage screening. The company also disclosed on its earnings call that in August it acquired Britain’s Herbert System, a developer and manufacturer of automated tray return systems deployed at 200 checkpoint lanes at airports in the Middle East, Asia and U.K. Deepak Chopra, OSI’s chairman and CEO, says the Herbert acquisition “fits into our strategy of becoming a total solutions provider as it enhances our ability to offer an integrated solution to airports worldwide seeking a more efficient architecture and logistics for higher throughput at checkpoints.” Chopra says the RTT 110 system has been delivered to the Department of Homeland Security Transportation Security Lab to begin testing for certification to meet Transportation Security Administration requirements with the hope that the certification comes in 2017. OSI raised its sales guidance to between $955M to $990M from the prior outlook of $865M to $895M based on the AS&E acquisition, partially offset by continued weakness in healthcare. OSI is projecting that AS&E’s sales over the next year are flat. Earnings in FY ’17 are expected to range between $2.80 and $3.20 EPS, excluding restructuring and other charges, versus prior guidance of between $2.60 and $2.90 EPS. The earnings guidance reflects the addition of AS&E with conservatism built in for softness in healthcare. Rapiscan’s operating income in the quarter was $9.4M, down 35% on restructuring and acquisition costs, and a charge to terminate a product line. OSI says two recent contracts that AS&E won from Customs and Border Protection for ZBV and Z Portal Systems tallied $45m in initial orders in the quarter with deliveries expected in FY ’18. The company’s backlog stood at $725M and orders in the quarter exceeded sales by a factor of 1.1.