OSI SYSTEMS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS ​ OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (amounts in thousands, except share amounts and par value) ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 September 30, 2022 ASSETS ​ ​ ​ ​ ​ ​ CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 64,202 ​ $ 53,990 Accounts receivable, net ​ 307,973 ​ 313,506 Inventories ​ 333,907 ​ 361,949 Prepaid expenses and other current assets ​ 40,062 ​ 41,599 Total current assets ​ 746,144 ​ 771,044 Property and equipment, net ​ 109,684 ​ 107,976 Goodwill ​ 336,357 ​ 335,825 Intangible assets, net ​ 138,370 ​ 138,202 Other assets ​ 112,595 ​ 114,720 Total assets ​ $ 1,443,150 ​ $ 1,467,767 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ Bank lines of credit ​ $ 60,000 ​ $ 215,000 Current portion of long-term debt ​ 244,575 ​ 8,110 Accounts payable ​ 125,204 ​ 144,420 Accrued payroll and related expenses ​ 46,379 ​ 34,967 Advances from customers ​ 19,917 ​ 29,973 Other accrued expenses and current liabilities ​ 117,879 ​ 130,011 Total current liabilities ​ 613,954 ​ 562,481 Long-term debt ​ 48,668 ​ 143,150 Deferred income taxes ​ 11,112 ​ 11,115 Other long-term liabilities ​ 130,992 ​ 126,368 Total liabilities ​ 804,726 ​ 843,114 Commitments and contingencies (Note 10) ​ ​ ​ ​ ​ ​ STOCKHOLDERS' EQUITY: ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.001 par value— 10,000,000 shares authorized; no shares issued or outstanding ​ — ​ — Common stock, $ 0.001 par value— 100,000,000 shares authorized; issued and outstanding, 16,870,050 shares at June 30, 2022 and 16,854,153 shares at September 30, 2022 ​ 17 ​ 17 Retained earnings ​ 663,869 ​ 656,017 Accumulated other comprehensive loss ​ ( 25,462 ) ​ ( 31,381 ) Total stockholders’ equity ​ 638,424 ​ 624,653 Total liabilities and stockholders’ equity ​ $ 1,443,150 ​ $ 1,467,767 ​ See accompanying notes to condensed consolidated financial statements. ​ 3 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (amounts in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 Net revenues: ​ ​ ​ ​ ​ ​ Products ​ $ 207,212 ​ $ 196,954 Services ​ 72,045 ​ 71,117 Total net revenues ​ 279,257 ​ 268,071 Cost of goods sold: ​ ​ ​ ​ ​ ​ Products ​ 142,906 ​ 143,369 Services ​ 37,021 ​ 37,205 Total cost of goods sold ​ 179,927 ​ 180,574 Gross profit ​ 99,330 ​ 87,497 Operating expenses: ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 57,323 ​ 53,438 Research and development ​ 14,817 ​ 14,540 Impairment, restructuring and other charges, net ​ 2,510 ​ 1,219 Total operating expenses ​ 74,650 ​ 69,197 Income from operations ​ 24,680 ​ 18,300 Interest and other expense, net ​ ( 2,016 ) ​ ( 3,432 ) Income before income taxes ​ 22,664 ​ 14,868 Provision for income taxes ​ ( 3,612 ) ​ ( 3,633 ) Net income ​ $ 19,052 ​ $ 11,235 Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 1.06 ​ $ 0.66 Diluted ​ $ 1.04 ​ $ 0.65 Shares used in per share calculation: ​ ​ ​ ​ ​ ​ Basic ​ 17,947 ​ 16,924 Diluted ​ 18,306 ​ 17,180 ​ See accompanying notes to condensed consolidated financial statements. ​ 4 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED ) (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 Net income ​ $ 19,052 ​ $ 11,235 Other comprehensive loss: ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment, net of tax ​ ( 2,302 ) ​ ( 9,792 ) Net unrealized gain on investments and derivatives, net of tax ​ ​ — ​ ​ 3,540 Other, net of tax ​ ​ 133 ​ ​ 333 Other comprehensive loss ​ ​ ( 2,169 ) ​ ​ ( 5,919 ) Comprehensive income ​ $ 16,883 ​ $ 5,316 ​ See accompanying notes to condensed consolidated financial statements. ​ 5 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ Other ​ ​ ​ ​ Number of ​ ​ Retained Comprehensive ​ ​ ​ Shares Amount Earnings Loss Total Balance—June 30, 2021 17,854,110 ​ $ 105,724 ​ $ 548,842 ​ $ ( 14,746 ) ​ $ 639,820 Exercise of stock options 162,393 ​ 155 ​ — ​ — ​ 155 Vesting of RSUs 310,077 ​ — ​ — ​ — ​ — Shares issued under employee stock purchase program 27,960 ​ 1,990 ​ — ​ — ​ 1,990 Stock-based compensation expense — ​ 7,113 ​ — ​ — ​ 7,113 Repurchase of common stock ​ ( 168,506 ) ​ ​ ( 16,231 ) ​ ​ — ​ ​ — ​ ​ ( 16,231 ) Taxes paid related to net share settlement of equity awards ( 244,641 ) ​ ( 18,611 ) ​ — ​ — ​ ( 18,611 ) Adoption of ASU 2020-06 for convertible notes ​ — ​ ​ ( 26,763 ) ​ ​ 18,956 ​ ​ — ​ ​ ( 7,807 ) Net income — ​ — ​ 19,052 ​ — ​ 19,052 Other comprehensive loss — ​ — ​ — ​ ( 2,169 ) ​ ( 2,169 ) Balance—September 30, 2021 ​ 17,941,393 ​ $ 53,377 ​ $ 586,850 ​ $ ( 16,915 ) ​ $ 623,312 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ Other ​ ​ ​ ​ Number of ​ ​ Retained Comprehensive ​ ​ ​ Shares Amount Earnings Loss Total Balance—June 30, 2022 16,870,050 ​ $ 17 ​ $ 663,869 ​ $ ( 25,462 ) ​ $ 638,424 Exercise of stock options 2,919 ​ ​ 194 ​ ​ — ​ ​ — ​ ​ 194 Vesting of RSUs 286,119 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued under employee stock purchase program 28,603 ​ ​ 1,969 ​ ​ — ​ ​ — ​ ​ 1,969 Stock-based compensation expense — ​ ​ 7,177 ​ ​ — ​ ​ — ​ ​ 7,177 Repurchase of common stock ​ ( 208,427 ) ​ ​ ( 208 ) ​ ​ ( 17,079 ) ​ ​ — ​ ​ ( 17,287 ) Taxes paid related to net share settlement of equity awards ( 125,111 ) ​ ​ ( 9,132 ) ​ ​ ( 2,008 ) ​ ​ — ​ ​ ( 11,140 ) Net income — ​ ​ — ​ ​ 11,235 ​ ​ — ​ ​ 11,235 Other comprehensive loss — ​ ​ — ​ ​ — ​ ​ ( 5,919 ) ​ ​ ( 5,919 ) Balance—September 30, 2022 ​ 16,854,153 ​ $ 17 ​ $ 656,017 ​ $ ( 31,381 ) ​ $ 624,653 ​ ​ ​ ​ 6 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ ​ Net income ​ $ 19,052 ​ $ 11,235 Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of effects from acquisitions: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 9,697 ​ 9,541 Stock-based compensation expense ​ 7,113 ​ 7,177 Provision for (recovery of) losses on accounts receivable ​ ​ ( 1,365 ) ​ ​ ( 1,675 ) Deferred income taxes ​ ​ 82 ​ 121 Amortization of debt discount and issuance costs ​ 348 ​ ​ 196 Other ​ 68 ​ 7 Changes in operating assets and liabilities—net of business acquisitions: ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 850 ) ​ ( 5,376 ) Inventories ​ ( 27,764 ) ​ ( 29,966 ) Prepaid expenses and other assets ​ ( 17,611 ) ​ ( 8,587 ) Accounts payable ​ ( 408 ) ​ 20,000 Accrued payroll and related expenses ​ ​ ( 13,579 ) ​ ​ ( 10,987 ) Advances from customers ​ ( 3,813 ) ​ 10,133 Deferred revenue ​ ​ 6,280 ​ ​ 19,231 Other ​ 11,731 ​ ( 3,808 ) Net cash provided by (used in) operating activities ​ ( 11,019 ) ​ 17,242 CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ( 3,474 ) ​ ( 3,281 ) Proceeds from sale of property and equipment ​ ​ — ​ ​ 92 Purchases of certificates of deposit ​ ​ ( 106 ) ​ ​ ( 73 ) Acquisition of businesses, net of cash acquired ​ — ​ ( 1,871 ) Payments for intangible and other assets ​ ( 4,254 ) ​ ( 3,944 ) Net cash used in investing activities ​ ( 7,834 ) ​ ( 9,077 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​ ​ Net borrowings on bank lines of credit ​ 26,000 ​ 155,000 Proceeds from long-term debt ​ 82 ​ 100,307 Payments on long-term debt ​ ( 286 ) ​ ( 242,479 ) Proceeds from exercise of stock options and employee stock purchase plan ​ 2,145 ​ 2,163 Payments of contingent consideration ​ ​ ( 304 ) ​ ​ ( 415 ) Repurchases of common stock ​ ( 16,231 ) ​ ( 17,287 ) Taxes paid related to net share settlement of equity awards ​ ( 18,611 ) ​ ( 11,140 ) Net cash used in financing activities ​ ( 7,205 ) ​ ( 13,851 ) Effect of exchange rate changes on cash ​ 108 ​ ( 4,526 ) Net change in cash and cash equivalents ​ ( 25,950 ) ​ ( 10,212 ) Cash and cash equivalents—beginning of period ​ 80,613 ​ 64,202 Cash and cash equivalents—end of period ​ $ 54,663 ​ $ 53,990 Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ Cash paid, net during the period for: ​ ​ ​ ​ ​ ​ Interest ​ $ 2,400 ​ $ 3,856 Income taxes ​ $ 4,800 ​ $ 7,235 ​ See accompanying notes to condensed consolidated financial statements. ​ 7 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 1. Basis of Presentation ​ The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded in accordance with SEC rules and regulations and GAAP applicable to interim unaudited financial statements. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for audited annual financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. These unaudited condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 filed with the SEC. The results of operations for the three months ended September 30, 2022 are not necessarily indicative of the operating results to be expected for the full 2023 fiscal year or any future periods. ​ Use of Estimates ​ The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales, costs of sales and expenses during the reporting period. The most significant of these estimates and assumptions for our company relate to contract revenue, fair values of assets acquired and liabilities assumed in business combinations, values for inventories reported at lower of cost or net realizable value, stock-based compensation expense, income taxes, accrued warranty costs, and the recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Due to the inherent uncertainty involved in making estimates, our actual amounts reported in future periods could differ materially from these estimates. ​ Earnings Per Share Computations ​ We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. We compute diluted earnings per share by dividing net income available to common stockholders by the sum of the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares consist of the shares issuable upon the exercise of stock options and restricted stock unit awards under the treasury stock method. ​ The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 Net income available to common stockholders ​ $ 19,052 ​ $ 11,235 Weighted average shares outstanding—basic ​ 17,947 ​ 16,924 Dilutive effect of equity awards ​ 359 ​ 256 Weighted average shares outstanding—diluted ​ 18,306 ​ 17,180 Basic earnings per share ​ $ 1.06 ​ $ 0.66 Diluted earnings per share ​ $ 1.04 ​ $ 0.65 Shares excluded from diluted earnings per share due to their anti-dilutive effect ​ ​ 20 ​ ​ 26 ​ Cash and Cash Equivalents ​ We consider all highly liquid investments with maturities of three months or less as of the acquisition date to be cash equivalents. ​ 8 Table of Contents Our cash and cash equivalents totaled $ 54.0 million at September 30, 2022. Of this amount, approximately 86 % was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by our subsidiaries in the United Kingdom, Singapore, Malaysia, Canada and India, and to a lesser extent in Australia, Albania, Indonesia and Mexico among other countries. We have cash holdings in financial institutions that exceed insured limits for such financial institutions; however, we mitigate this risk by utilizing international financial institutions of high credit quality. ​ Fair Value of Financial Instruments ​ Our financial instruments consist primarily of cash and cash equivalents, insurance company contracts, accounts receivable, accounts payable, debt instruments, interest rate swap contract and foreign currency forward contracts. The carrying values of financial instruments, other than long term debt instruments and interest rate swap contract, are representative of their fair values due to their short-term maturities. The carrying values of our long-term debt instruments are considered to approximate their fair values because the interest rates of these instruments are variable or comparable to current rates for financing available to us. The fair values of our foreign currency forward contracts were not significant as of June 30, 2022 and September 30, 2022. ​ Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Level 1 category includes assets and liabilities measured at quoted prices in active markets for identical assets and liabilities. The Level 2 category includes assets and liabilities measured from observable inputs other than quoted market prices. The Level 3 category includes assets and liabilities for which valuation inputs are unobservable and significant to the fair value measurement. Our contingent payment obligations related to acquisitions, which are further discussed in Note 10 to the condensed consolidated financial statements, are in the Level 3 category for valuation purposes. ​ The fair values of our financial assets and liabilities are categorized as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 September 30, 2022 ​ Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets—Insurance company contracts ​ $ — ​ $ 40,284 ​ $ — ​ $ 40,284 ​ $ — ​ $ 41,419 ​ $ — ​ $ 41,419 Assets – Interest rate swap contract ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 3,540 ​ $ — ​ $ 3,540 Liabilities—Convertible debt ​ $ — ​ $ 242,302 ​ $ — ​ $ 242,302 ​ $ — ​ $ — ​ $ — ​ $ — Liabilities—Contingent consideration ​ $ — ​ $ — ​ $ 28,212 ​ $ 28,212 ​ $ — ​ $ — ​ $ 25,853 ​ $ 25,853 ​ Derivative Instruments and Hedging Activity ​ Our use of derivatives consists of foreign currency forward contracts and an interest rate swap agreement. The foreign currency forward contracts are utilized to partially mitigate certain balance sheet exposures or used as a net investment hedge to protect against potential changes resulting from short-term foreign currency fluctuations. These contracts have original maturities of up to three months. We also manage our risk to changes in interest rates through the use of derivative instruments. We use fixed interest rate swaps to effectively convert a portion of the variable interest rate payments to fixed interest rate payments. We do not use hedging instruments for speculative purposes. ​ The net gains or losses from our foreign currency forward contracts, which are not designated as hedge instruments, are reported in the consolidated statements of operations. The amounts reported in the consolidated statements of operations for the three months ended September 30, 2021 and 2022 were not significant. The fair value of our foreign currency forward contracts is estimated using a standard valuation model and market-based observable inputs over the contractual term. Unrealized gains are recognized as assets and unrealized losses are recognized as liabilities. As of June 30, 2022 and September 30, 2022, we held foreign currency forward contracts with notional amounts totaling $ 22.9 million and $ 17.6 million, respectively. Unrealized gains and losses from our foreign currency forward contracts as of September 30, 2021 and 2022 were not significant. The interest rate swap agreement was entered into to improve the predictability of cash flows from interest payments related to our variable, Secured Overnight Financing Rate (“SOFR”) based debt. The interest rate swap matures in December 2026. The interest rate swap is considered an effective cash flow hedge, and as a result, the net gains or losses on such instrument are reported as a component of Other comprehensive loss in the consolidated financial statements and are reclassified as net income when the underlying hedged interest impacts earnings. A qualitative and quantitative assessment over the hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate that the hedge may no longer be highly effective. 9 Table of Contents As of June 30, 2022 and September 30, 2022, the notional amount of the derivative instruments designated as an interest rate swap hedge was $ 0 and $ 175 million, respectively. The fair value of the interest rate swap contract as of September 30, 2022 was $ 3.5 million and recorded in Other assets within the condensed consolidated balance sheet. The effect of the cash flow hedges on other comprehensive loss and earnings for the periods presented was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2021 ​ 2022 Total interest and other expense, net presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded ​ $ ( 2,016 ) ​ $ ( 3,432 ) Amount recognized in other comprehensive loss ​ — ​ 3,540 Amount reclassified from accumulated other comprehensive loss to interest expense, net ​ — ​ 120 ​ Recently Adopted Accounting Pronouncements Contract Assets and Contract Liabilities from Revenue Contracts with Customers in a Business Combination In October 2021, the FASB issued Accounting Standards Update 2021-08, an accounting standard update to improve the accounting for contract assets and contract liabilities from revenue contracts with customers in a business combination (Topic 805). This amendment improves comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. This authoritative guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. We early adopted the new guidance effective January 1, 2022 using the prospective approach and applied the amendments to both business combinations that occurred during the year ended June 30, 2022 and the business combination that occurred during the quarter ended September 30, 2022. The adoption of ASU 2021-08 did not have a material impact on our consolidated financial statements. ​ 2. Business Combinations Under Accounting Standards Codification Topic 805, Business Combinations (“ASC 805"), the acquisition method of accounting requires us to record assets acquired less liabilities assumed from an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase price over the estimated fair value of the net assets acquired should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions which are believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is up to one year from the acquisition date, as additional information that existed at the acquisition date becomes available for preliminary estimates, we may record adjustments to the preliminary assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are included in earnings. Fiscal Year 2023 Business Acquisition In August 2022, we (through our Security division) acquired a privately held provider of training software and solutions for approximately $ 1.9 million, plus up to $ 0.5 million in potential contingent consideration. The acquisition was financed with cash on hand. The goodwill recognized for this business is not deductible for income tax purposes. Fiscal Year 2022 Business Acquisitions ​ In February 2022, we (through our Security division) acquired a privately held provider of intelligent inspection, sensory, and recognition solutions for approximately $ 14 million, plus up to $ 25 million in potential contingent consideration. The acquisition was financed with cash on hand and borrowings under our revolving bank line of credit. The goodwill recognized for this business is not deductible for income tax purposes. ​ In February 2022, we (through our Security division) acquired a privately held sales and services company for approximately $ 1.1 million, plus an immaterial amount of potential contingent consideration. The acquisition was financed with cash on hand. The goodwill recognized for this transaction is deductible for income tax purposes. ​ 10 Table of Contents These business acquisitions, individually and in the aggregate, were not material to our consolidated financial statements. Accordingly, pro-forma historical results of operations and other disclosures related to these businesses have not been presented. ​ 3. Balance Sheet Details ​ The following tables set forth details of selected balance sheet accounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Accounts receivable, net 2022 2022 Accounts receivable ​ $ 326,849 $ 330,759 Less allowance for doubtful accounts ​ ( 18,876 ) ​ ( 17,253 ) Total ​ $ 307,973 ​ $ 313,506 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Inventories 2022 2022 Raw materials ​ $ 213,290 $ 225,559 Work-in-process ​ 46,873 ​ 72,041 Finished goods ​ 73,744 ​ 64,349 Total ​ $ 333,907 ​ $ 361,949 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Property and equipment, net 2022 2022 Land ​ $ 15,028 $ 15,028 Buildings, civil works and improvements ​ 47,309 ​ 47,255 Leasehold improvements ​ 11,599 ​ 12,081 Equipment and tooling ​ 128,425 ​ 128,518 Furniture and fixtures ​ 3,592 ​ 3,454 Computer equipment ​ 21,208 ​ 21,230 Computer software ​ 25,153 ​ 25,344 Computer software implementation in process ​ ​ 9,422 ​ ​ 9,676 Construction in process ​ 5,283 ​ 5,563 Total ​ 267,019 ​ 268,149 Less accumulated depreciation and amortization ​ ( 157,335 ) ​ ( 160,173 ) Property and equipment, net ​ $ 109,684 ​ $ 107,976 ​ Depreciation and amortization expense for property and equipment was $ 5.3 million and $ 4.9 million for the three months ended September 30, 2021 and 2022, respectively. ​ 11 Table of Contents 4. Goodwill and Intangible Assets ​ The changes in the carrying value of goodwill by segment for the three-month period ended September 30, 2022 were as follows (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ And ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ Division Division Division Consolidated Balance as of June 30, 2022 ​ $ 225,555 ​ $ 43,187 ​ $ 67,615 ​ $ 336,357 Goodwill acquired or adjusted during the period ​ 2,240 ​ — ​ — ​ 2,240 Foreign currency translation adjustment ​ ( 217 ) ​ ( 281 ) ​ ( 2,274 ) ​ ( 2,772 ) Balance as of September 30, 2022 ​ $ 227,578 ​ $ 42,906 ​ $ 65,341 ​ $ 335,825 ​ Intangible assets consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ September 30, 2022 ​ ​ Weighted ​ Gross ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Carrying ​ Accumulated ​ Intangibles ​ Carrying ​ Accumulated ​ Intangibles ​ Lives Value Amortization Net Value Amortization Net Amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Software development costs 8 - 9 years ​ $ 64,096 ​ $ ( 18,934 ) ​ $ 45,162 ​ $ 65,667 ​ $ ( 17,472 ) ​ $ 48,195 Patents 19 years ​ 8,541 ​ ( 2,987 ) ​ 5,554 ​ 8,598 ​ ( 3,098 ) ​ 5,500 Developed technology 10 years ​ 66,901 ​ ( 31,071 ) ​ 35,830 ​ 66,916 ​ ( 32,833 ) ​ 34,083 Customer relationships 7 years ​ 53,736 ​ ( 32,785 ) ​ 20,951 ​ 53,721 ​ ( 34,129 ) ​ 19,592 Total amortizable assets ​ ​ ​ 193,274 ​ ( 85,777 ) ​ 107,497 ​ 194,902 ​ ( 87,532 ) ​ 107,370 Non-amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ In-process R&D ​ ​ ​ ​ 533 ​ ​ — ​ ​ 533 ​ ​ 533 ​ ​ — ​ ​ 533 Trademarks ​ ​ ​ 30,340 ​ — ​ 30,340 ​ 30,299 ​ — ​ 30,299 Total intangible assets ​ ​ ​ $ 224,147 ​ $ ( 85,777 ) ​ $ 138,370 ​ $ 225,734 ​ $ ( 87,532 ) ​ $ 138,202 ​ Amortization expense related to intangible assets was $ 4.4 million and $ 4.7 million for the three months ended September 30, 2021 and 2022, respectively. ​ At September 30, 2022, the estimated future amortization expense for intangible assets was as follows (in thousands): ​ Fiscal Year ​ ​ ​ ​ ​ 2023 (remaining 9 months) $ 14,084 2024 ​ 17,732 2025 ​ 17,332 2026 ​ 15,870 2027 ​ ​ 11,742 Thereafter ​ 30,610 Total ​ $ 107,370 ​ Software development costs for software products incurred before establishing technological feasibility are charged to operations. Software development costs incurred after establishing technological feasibility are capitalized on a product-by-product basis until the product is available for general release to customers at which time amortization begins. Annual amortization, charged to cost of goods sold, is the amount computed using the ratio that current revenues for a product bear to the total current and anticipated future revenues for that product. In the event that future revenues are not estimable, such costs are amortized on a straight-line basis over the remaining estimated economic life of the product. Amortizable assets that have not yet begun to be amortized are included in Thereafter in the table above. For the three months ended September 30, 2021 and 2022, we capitalized software development costs in the amounts of $ 4.1 million and $ 3.9 million, respectively. ​ 12 Table of Contents 5. Contract Assets and Liabilities ​ We enter into contracts to sell products and provide services, and we recognize contract assets and liabilities that arise from these transactions. We recognize revenue and corresponding accounts receivable according to ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). When we recognize revenue in advance of the point in time at which contracts give us the right to invoice a customer, we record this as unbilled revenue, which is included in accounts receivable, net, on the consolidated balance sheets. We may also receive consideration, per the terms of a contract, from customers prior to transferring control of goods to the customer. We record customer deposits as contract liabilities. Additionally, we may receive payments, most typically under service and warranty contracts, at the onset of the contract and before services have been performed. In such instances, we record a deferred revenue liability in either Other accrued expenses and current liabilities or Other long-term liabilities. We recognize these contract liabilities as sales after all revenue recognition criteria are met. ​ The table below shows the balance of contract assets and liabilities as of June 30, 2022 and September 30, 2022, including the change between the periods. There were no substantial non-current contract assets for the periods presented. Contract Assets (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ ​ ​ 2022 2022 Change % Change Unbilled revenue (included in accounts receivable, net) ​ $ 43,287 ​ $ 45,245 ​ $ 1,958 5 % Contract Liabilities (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ ​ 2022 2022 Change % Change ​ Advances from customers ​ $ 19,917 ​ $ 29,973 ​ $ 10,056 ​ 50 % Deferred revenue—current ​ 31,396 ​ 50,179 ​ 18,783 ​ 60 % Deferred revenue—long-term ​ 20,476 ​ 20,652 ​ 176 ​ 1 % ​ Contract assets increased during the three months ended September 30, 2022 primarily due to satisfaction of performance obligations for aviation, cargo and vehicle inspection customers in our Security division which have not yet been billed. The overall increase in contract liabilities was primarily due to receipt of upfront deposits from customers and deferred revenue from receipt of payments under service and warranty contracts primarily in our Security division. ​ Remaining Performance Obligations . Remaining performance obligations related to ASC 606 represent the portion of the transaction price allocated to performance obligations under an original contract with a term greater than one year which are fully or partially unsatisfied at the end of the period. As of September 30, 2022, the portion of the transaction price allocated to remaining performance obligations was approximately $ 404.0 million. We expect to recognize revenue on approximately 55 % of the remaining performance obligations over the next 12 months , and the remainder is expected to be recognized thereafter. During the three months ended September 30, 2022, we recognized revenue of $ 16.5 million from contract liabilities existing at the beginning of the period. ​ Practical Expedients. In cases where we are responsible for shipping after the customer has obtained control of the goods, we have elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation. Additionally, we have elected to capitalize the cost to obtain a contract only if the period of amortization would be longer than one year. We only give consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater than one year. ​ 13 Table of Contents 6. Leases ​ The components of operating lease expense were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 Operating lease cost ​ $ 2,275 ​ $ 2,826 Variable lease cost ​ ​ 184 ​ ​ 406 Short-term lease cost ​ ​ 279 ​ ​ 223 ​ ​ $ 2,738 ​ $ 3,455 ​ Supplemental disclosures related to operating leases were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance Sheet Category June 30, 2022 September 30, 2022 ​ Operating lease ROU assets, net Other assets ​ $ 39,461 ​ $ 37,698 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease liabilities, current portion Other accrued expenses and current liabilities ​ $ 9,700 ​ $ 9,664 ​ Operating lease liabilities, long-term Other long-term liabilities ​ 30,363 ​ 28,684 ​ Total operating lease liabilities ​ ​ ​ $ 40,063 ​ $ 38,348 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average remaining lease term ​ ​ ​ ​ ​ 4.7 years ​ Weighted average discount rate ​ ​ ​ ​ ​ 3.5 % ​ Supplemental cash flow information related to operating leases was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 Cash paid for operating lease liabilities ​ $ 2,327 ​ $ 2,685 ROU assets obtained in exchange for new lease obligations ​ 1,643 ​ 413 ​ Maturities of operating lease liabilities at September 30, 2022 were as follows (in thousands): ​ ​ ​ ​ ​ ​ September 30, 2022 Less than one year ​ $ 10,529 1 – 2 years ​ 9,742 2 – 3 years ​ 7,903 3 – 4 years ​ 6,283 4 – 5 years ​ 5,424 Thereafter ​ 1,700 ​ ​ 41,581 Less: imputed interest ​ ( 3,233 ) Total lease liabilities ​ $ 38,348 ​ ​ 7. Impairment, Restructuring and Other Charges ​ We endeavor to align our global capacity and infrastructure with demand by our customers as well as fully integrate acquisitions and thereby improve operational efficiency. ​ During the three months ended September 30, 2022, we recognized $ 1.2 million in restructuring and other charges, which included $ 0.9 million in legal charges and $ 0.3 million for employee terminations. ​ During the three months ended September 30, 2021, we recognized $ 2.5 million in restructuring and other charges which included $ 2.2 million in legal charges net of insurance recoveries, $ 0.3 million for employee terminations, and an insignificant net benefit for facility closure and operational efficiency activities. ​ 14 Table of Contents The following tables summarize impairment, restructuring and other charges (benefits), net for the periods set forth below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2021 ​ ​ ​ ​ ​ Optoelectronics and ​ ​ ​ ​ ​ ​ ​ ​ ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ Security Division Division Division Corporate Total Employee termination costs ​ $ 336 ​ $ — ​ $ — ​ $ — ​ $ 336 Facility closures/consolidation ​ ​ ( 61 ) ​ ​ — ​ — ​ ​ — ​ ​ ( 61 ) Legal costs, net ​ — ​ — ​ — ​ 2,235 ​ 2,235 Total ​ $ 275 ​ $ — ​ $ — ​ $ 2,235 ​ $ 2,510 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2022 ​ ​ ​ ​ ​ Optoelectronics and ​ ​ ​ ​ ​ ​ ​ ​ ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ Security Division Division Division Corporate Total Acquisition-related costs ​ $ 23 ​ $ — ​ $ — ​ $ — ​ $ 23 Employee termination costs ​ ​ 241 ​ ​ — ​ ​ 15 ​ ​ — ​ ​ 256 Legal costs, net ​ 524 ​ 294 ​ — ​ 122 ​ 940 Total ​ $ 788 ​ $ 294 ​ $ 15 ​ $ 122 ​ $ 1,219 ​ The accrued liability for restructuring and other charges is included in other accrued expenses and current liabilities in the condensed consolidated balance sheets. The changes in the accrued liability for restructuring and other charges for the three-month period ended September 30, 2022 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Facility ​ ​ ​ ​ ​ ​ ​ Acquisition- ​ Employee ​ Closure / ​ Legal ​ ​ ​ ​ ​ Related ​ Termination ​ Consolidation ​ Costs and ​ ​ ​ ​ Costs Costs Cost Settlements Total Balance as of June 30, 2022 ​ $ — ​ $ 181 ​ $ 23 ​ $ 1,780 ​ $ 1,984 Restructuring and other charges, net ​ 23 ​ 256 ​ — ​ 940 ​ 1,219 Payments, adjustments and reimbursements, net ​ ( 23 ) ​ ( 59 ) ​ ( 10 ) ​ ( 1,680 ) ​ ( 1,772 ) Balance as of September 30, 2022 ​ $ — ​ $ 378 ​ $ 13 ​ $ 1,040 ​ $ 1,431 ​ ​ 8. Borrowings ​ Revolving Credit Facility ​ In December 2021, we entered into an amendment to the senior secured credit facility that increased the aggregate amount available to borrow from $ 535 million to $ 750 million. The amended facility matures in December 2026 and is comprised of a $ 600 million revolving credit facility and a $ 150 million delayed draw term loan. The revolving credit facility includes a $ 300 million sub-limit for letters of credit. Under certain circumstances and subject to certain conditions, we have the ability to increase the revolving credit facility by the greater of $ 250 million or such amount as would not cause our secured leverage ratio to exceed a specified level. Borrowings under the amended facility bore interest at SOFR plus a margin of 1.0 % as of September 30, 2022 (which margin can range from 1.0 % to 1.75 % based on our consolidated net leverage ratio as defined in the credit facility). Letters of credit reduce the amount available to borrow under the credit facility by their face value amount. The unused portion of the facility bore a commitment fee of 0.10 % as of September 30, 2022 (which fee can range from 0.10 % to 0.25 % based on our consolidated net leverage ratio as defined in the credit facility). Our borrowings under the credit agreement are guaranteed by certain of our U.S.-based subsidiaries and are secured by substantially all of our assets and substantially all the assets of certain of our subsidiaries. The credit facility contains various representations and warranties, affirmative, negative and financial covenants and events of default. As of September 30, 2022, there were $ 215 million of borrowings outstanding under the revolving credit facility, $ 67.2 million outstanding under the letters of credit sub-facility, and $ 150 million outstanding under the term loan. As of September 30, 2022, the amount available to borrow under the revolving credit facility was $ 317.8 million. Loan amounts under the revolving credit facility may be borrowed, repaid and re-borrowed during the term. The principal amount of each loan is due and payable in full on the maturity date. We have the right to repay each loan in whole or in part from time to time without penalty. It is our practice to routinely borrow and repay several times per year under the revolving facility and therefore, borrowings under the revolving credit facility are included in current liabilities. As of September 30, 2022, we were in compliance with all financial covenants under this credit facility. In September 2022, we entered into an interest rate swap in order to mitigate the interest rate risk on a portion of the interest payments expected to be made on the borrowings outstanding under the revolving credit facility and term loan. Refer to Note 1 for details. 15 Table of Contents 1.25% Convertible Senior Notes (“Notes”) Due 2022 ​ In February 2017, we issued $ 287.5 million of the Notes in a private offering. The Notes were governed by an indenture dated February 22, 2017. The maturity for the payment of principal was September 1, 2022. The Notes bore interest at the rate of 1.25 % and were payable in cash semiannually in arrears on each March 1 and September 1. On September 1, 2022, we repurchased and cancelled the remaining $ 242.3 million balance of the Notes. ​ Issuance costs of $ 7.7 million were allocated between debt ($ 6.5 million) and equity ($ 1.2 million) components with the portion allocated to the debt presented as an offset against long-term debt in the consolidated balance sheet and was being amortized as interest expense over the life of the Notes using the effective interest method. Total interest expense recognized for the three months ended September 30, 2021 related to the Notes was $ 1.2 million, which consisted of $ 0.9 million of contractual interest expense and $ 0.3 million of amortization of debt issuance costs. Total interest expense recognized for the three months ended September 30, 2022 related to the Notes was $ 0.7 million, which consisted of $ 0.5 million of contractual interest expense, and $ 0.2 million of amortization of debt issuance costs. Other Borrowings ​ Several of our foreign subsidiaries maintain bank lines of credit, denominated in local currencies and U.S. dollars, primarily for the issuance of letters of credit. As of September 30, 2022, $ 58.8 million was outstanding under these letter-of-credit facilities. As of September 30, 2022, the total amount available under these credit facilities was $ 5.9 million. ​ Long-term debt consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, ​ 2022 2022 1.25% convertible notes due September 1, 2022: ​ ​ ​ ​ ​ ​ Principal amount ​ $ 242,302 ​ $ — Unamortized debt issuance costs ​ ​ ( 196 ) ​ ​ — ​ ​ ​ 242,106 ​ ​ — Term loan ​ ​ 50,000 ​ ​ 150,000 Other long-term debt ​ 1,137 ​ 1,260 ​ ​ 293,243 ​ 151,260 Less current portion of long-term debt ​ ( 244,575 ) ​ ( 8,110 ) Long-term portion of debt ​ $ 48,668 ​ $ 143,150 ​ ​ 9. Stockholders’ Equity ​ Stock-based Compensation ​ As of September 30, 2022, we maintained the Amended and Restated 2012 Incentive Award Plan (the “OSI Plan”) as a stock-based employee compensation plan. ​ We recorded stock-based compensation expense in the consolidated statements of operations as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 Cost of goods sold ​ $ 206 ​ $ 216 Selling, general and administrative ​ ​ 6,767 ​ ​ 6,840 Research and development ​ ​ 140 ​ ​ 121 Stock-based compensation expense ​ $ 7,113 ​ $ 7,177 ​ As of September 30, 2022, total unrecognized compensation cost related to share-based compensation grants under the OSI Plan were estimated at $ 0.5 million for stock options and $ 31.9 million for restricted stock units (“RSUs”). We expect to recognize these costs over a weighted average period of 1.8 years with respect to the stock options and 1.6 years with respect to the RSUs. ​ 16 Table of Contents The following summarizes stock option activity during the three months ended September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Weighted-Average ​ Aggregate ​ ​ Number of ​ Exercise ​ Remaining Contractual ​ Intrinsic Value ​ Options Price Term (in thousands) Outstanding at June 30, 2022 110,645 $ 82.43 ​ ​ ​ ​ Granted — ​ ​ — ​ ​ ​ ​ ​ Exercised ( 2,919 ) ​ ​ 66.46 ​ ​ ​ ​ ​ Expired or forfeited ( 1,408 ) ​ ​ 80.45 ​ ​ ​ ​ ​ Outstanding at September 30, 2022 106,318 ​ ​ 82.90 ​ 6.1 years ​ $ 162 Exercisable at September 30, 2022 ​ 66,027 ​ ​ 77.14 4.5 years ​ $ 162 ​ The following summarizes RSU award activity during the nine months ended September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average ​ Shares Fair Value Nonvested at June 30, 2022 427,447 ​ $ 90.17 Granted 324,224 ​ ​ 89.25 Vested ( 286,119 ) ​ ​ 97.22 Forfeited ( 11,420 ) ​ ​ 88.87 Nonvested at September 30, 2022 454,132 ​ $ 85.10 ​ As of September 30, 2022, there were approximately 0.8 million shares available for grant under the OSI Plan. Under the terms of the OSI Plan, RSUs and restricted stock granted from the pool of shares available for grant reduce the pool by 1.87 shares for each award granted. RSUs and restricted stock forfeited and returned to the pool of shares available for grant increase the pool by 1.87 shares for each award forfeited. ​ We granted 96,620 and 109,594 performance-based RSUs during the three months ended September 30, 2021 and 2022, respectively. These performance-based RSU awards are contingent on the achievement of certain performance metrics. The payout related to these awards can range from zero to 376 % of the original number of shares or units awarded. Compensation cost associated with these performance based RSUs are recognized based on the estimated number of shares that we ultimately expect will vest. If the estimated number of shares to vest is revised in the future, then stock-based compensation expense will be adjusted accordingly. ​ Stock Repurchase Program ​ In September 2022, our Board of Directors increased the stock repurchase authorization to a total of 2 million shares. This program does not expire unless our Board of Directors acts to terminate the program. The timing and actual numbers of shares purchased depends on a variety of factors, including stock price, general business and market conditions and other investment opportunities. Repurchases may be made from time to time under the program through open-market purchases or privately-negotiated transactions at our discretion. Upon repurchase, the shares are restored to the status of authorized but unissued shares and we record them in our consolidated financial statements as a reduction in the number of shares of common stock issued and outstanding, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings. ​ During the three months ended September 30, 2022, we repurchased 208,427 shares of our common stock. As of September 30, 2022, there were 1,913,673 shares remaining available for repurchase under the authorized repurchase program. ​ Dividends ​ We have not paid any cash dividends since the consummation of our initial public offering in 1997 and we do not currently intend to pay any cash dividends in the foreseeable future. Our Board of Directors will determine the payment of future cash dividends, if any. Certain of our current bank credit facilities restrict the payment of cash dividends and future borrowings may contain similar restrictions. ​ 17 Table of Contents 10. Commitments and Contingencies ​ Acquisition-Related Contingent Obligations ​ Under the terms and conditions of the purchase agreements associated with certain acquisitions, we may be obligated to make additional payments based on the achievement of certain sales or profitability milestones through the acquired operations. For agreements that contain contingent consideration obligations that are capped, the remaining maximum amount of such potential future payments is $ 51.2 million as of September 30, 2022. ​ We account for such contingent payments for acquisitions which occurred through the end of fiscal year 2009 as additions to the purchase price of the acquired business. We made contingent payments relating to such acquisitions of $ 0.3 million and $ 0.4 million, during the three months ended September 30, 2021 and 2022. ​ For acquisitions completed after fiscal 2009, pursuant to ASC 805, the estimated fair value of these obligations is recorded as a liability at the time of the acquisition with subsequent revisions recorded in Selling, general and administrative expense in the consolidated financial statements. The estimated fair value measurements of contingent earnout obligations are primarily based on unobservable inputs, which may include projected revenues, gross margins, operating income and the estimated probability of achieving the earnouts. ​ These projections and probabilities are used to estimate future contingent earnout payments, which are discounted back to present value to compute contingent earnout liabilities. The following table provides a roll-forward from June 30, 2022 to September 30, 2022 of the contingent consideration liability, which is included in other accrued expenses and current liabilities and other long-term liabilities in our consolidated balance sheets (in thousands): ​ ​ ​ ​ ​ Beginning fair value, June 30, 2022 $ 28,212 Addition of contingent earnout obligations ​ ​ 567 Foreign currency translation adjustment ​ ​ ( 382 ) Changes in fair value for contingent earnout obligations ​ ( 2,314 ) Payments on contingent earnout obligations ​ ( 230 ) Ending fair value, September 30, 2022 ​ $ 25,853 ​ Environmental Contingencies ​ We are subject to various environmental laws. We conduct environmental investigations at our manufacturing facilities in North America, Asia-Pacific, and Europe, and, to the extent practicable, on all new properties in order to identify, as of the date of such investigation, potential areas of environmental concern related to past and present activities or from nearby operations. In certain cases, we have conducted further environmental assessments consisting of soil and groundwater testing and other investigations deemed appropriate by independent environmental consultants. ​ We have not accrued for loss contingencies relating to environmental matters because we believe that, although unfavorable outcomes are possible, they are not considered by our management to be probable and reasonably estimable. If one or more of these environmental matters are resolved in a manner adverse to us, the impact on our business, financial condition, results of operations and cash flow could be material. ​ Indemnifications and Certain Employment-Related Contingencies ​ In the normal course of business, we have agreed to indemnify certain parties with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from breaches of representations, warranties or covenants, or intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our directors and certain of our officers. It is not possible to determine the maximum potential liability amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. We have not recorded any liability for costs related to contingent indemnification obligations as of September 30, 2022. ​ 18 Table of Contents On December 31, 2017, we and Deepak Chopra, our Chief Executive Officer, entered into an amendment to Mr. Chopra’s employment agreement that, among other things, provides for a $ 13.5 million bonus payment to Mr. Chopra on or within 45 days of January 1, 2024 contingent upon Mr. Chopra’s continued employment with us through that date, subject to accelerated payout terms in the event of Mr. Chopra’s death or disability. The bonus is recorded in the financial statements over the remaining term of the employment agreement and is included in other long-term liabilities. ​ Product Warranties ​ We offer our customers warranties on many of the products that we sell. These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, we record a provision for estimated warranty expenses with a corresponding increase in cost of goods sold. We periodically adjust this provision based on historical experience and anticipated expenses. We charge actual expenses of repairs under warranty, including parts and labor, to this provision when incurred. The current obligation for warranty provision is included in other accrued expenses and current liabilities and the noncurrent portion is included in other long-term liabilities in the consolidated balance sheets. ​ The following table presents changes in warranty provisions (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 Balance at beginning of period ​ $ 19,736 ​ $ 13,347 Additions ​ ​ 1,004 ​ ​ 884 Reductions for warranty repair costs and adjustments ​ ( 2,376 ) ​ ( 1,972 ) Balance at end of period ​ $ 18,364 ​ $ 12,259 ​ Legal Proceedings ​ We are involved in various claims and legal proceedings arising in the ordinary course of business. In our opinion after consultation with legal counsel, the ultimate disposition of such proceedings is not likely to have a material adverse effect on our business, financial condition, results of operations or cash flows. We have not accrued for loss contingencies relating to any such matters because we believe that, although unfavorable outcomes in the proceedings are possible, they are not considered by management to be probable and reasonably estimable. If one or more of these matters are resolved in a manner adverse to our company, the impact on our business, financial condition, results of operations and cash flows could be material. ​ 11. Income Taxes ​ The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the development of tax planning strategies during the year. In addition, as a global commercial enterprise, our tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions. ​ The effective tax rates for the three months ended September 30, 2021 and 2022 were 15.9 % and 24.4 %, respectively. During the three month period ended September 30, 2021 and 2022, we recognized a net discrete tax benefit of $ 2.1 million and $ 0.1 million, respectively, related to equity-based compensation under ASU 2016-09. ​ ​ 12. Segment Information ​ We have determined that we operate in three identifiable industry segments: (a) security and inspection systems (Security division), (b) medical monitoring systems (Healthcare division) and (c) optoelectronic devices and manufacturing (Optoelectronics and Manufacturing division). We also have a corporate segment (Corporate) that includes executive compensation and certain other general and administrative expenses, expenses related to stock issuances and legal, audit and other professional service fees not allocated to industry segments. Both the Security and Healthcare divisions comprise primarily end-product businesses, whereas the Optoelectronics and Manufacturing division primarily supplies components and subsystems to external OEM customers, as well as to the Security and Healthcare divisions. Sales between divisions are at transfer prices that approximate market values. All other accounting policies of the segments are the same as described in Note 1, Basis of Presentation. ​ 19 Table of Contents The following tables present our results of operations and identifiable assets by industry segment (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2022 Revenues (1) —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 149,517 ​ $ 144,992 Healthcare division ​ ​ 50,588 ​ ​ 43,563 Optoelectronics and Manufacturing division, including intersegment revenues ​ ​ 92,305 ​ ​ 93,915 Intersegment revenues elimination ​ ​ ( 13,153 ) ​ ​ ( 14,399 ) Total ​ $ 279,257 ​ $ 268,071 ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 21,593 ​ $ 14,924 Healthcare division ​ ​ 5,920 ​ ​ 1,628 Optoelectronics and Manufacturing division ​ ​ 9,783 ​ ​ 11,258 Corporate ​ ​ ( 12,463 ) ​ ​ ( 10,178 ) Intersegment Eliminations ​ ​ ( 153 ) ​ ​ 668 Total ​ $ 24,680 ​ $ 18,300 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, ​ 2022 2022 Assets (2) —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 839,769 ​ $ 866,652 Healthcare division ​ 231,423 ​ 225,182 Optoelectronics and Manufacturing division ​ 301,483 ​ 315,029 Corporate ​ 104,834 ​ 96,071 Eliminations (3) ​ ( 34,359 ) ​ ( 35,167 ) Total ​ $ 1,443,150 ​ $ 1,467,767 (1) For each of the three month periods ended September 30, 2021 and 2022, no customer accounted for greater than 10 % of total net revenues. (2) As of June 30, 2022 and September 30, 2022, no customer accounted for greater than 10 % of accounts receivable. (3) Eliminations in assets reflect the amount of inter-segment profits in inventory and inter-segment ROU assets under ASC 842 as of the balance sheet date. Such inter-segment profit will be realized when inventory is shipped to the external customers of the Security and Healthcare divisions. ​ 20 Table of Contents