OSI SYSTEMS INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of June 30, 2023, the end of the period covered by this report, our management, including our Chief Executive Officer and our Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a15(e) or 15d15(e) of the Exchange Act). Based upon management’s review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) or 15d-15(f) of the Exchange Act) for the Company. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on that evaluation, management concluded that our internal control over financial reporting was effective as of June 30, 2023. The effectiveness of the Company’s internal control over financial reporting as of June 30, 2023 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in its report, which is included in Item 8 of this Annual Report on Form 10-K. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures In designing and evaluating our controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud within the Company have been detected. ​ ITEM 9B. OTHER INFORMATION N o n e . ​ ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. ​ 45 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2023. ​ ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2023. ​ ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 12 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2023. ​ ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Item 13 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2023. ​ ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by Item 14 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2023. ​ ​ 46 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: 1. Financial Statements. Please see the accompanying Index to Consolidated Financial Statements, which appears on page F-1 of the report. The Report of Independent Registered Public Accounting Firm, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements listed in the Index to Consolidated Financial Statements, which appear beginning on page F-2 of this report, are incorporated by reference into Item 8 above. 2. Financial Statement Schedules . Supplementary Data—Unaudited Quarterly Results No other financial statement schedules are presented as the required information is either not applicable or included in the Consolidated Financial Statements or Notes thereto. 3. Exhibits. Reference is made to item 15(b) below. (b) Exhibits. The exhibits listed on the accompanying Exhibit Index immediately preceding the signature page are filed as part of, or are incorporated by reference into, this report. (c) Financial Statement Schedules. Reference is made to Item 15(a)(2) above. ​ ITEM 16. FORM 10-K SUMMARY None. ​ ​ 47 Table of Contents OSI SYSTEMS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ Page Report of Independent Registered Public Accounting Firm (Grant Thornton LLP, Los Angeles, CA, PCAOB ID: 248 ) ​ F-2 Report of Independent Registered Public Accounting Firm (Grant Thornton LLP, Los Angeles, CA) ​ F-4 Report of Independent Registered Public Accounting Firm (Moss Adams LLP, Los Angeles, CA, PCAOB ID: 659 ) ​ F-5 Consolidated Balance Sheets ​ F-6 Consolidated Statements of Operations ​ F-7 Consolidated Statements of Comprehensive Income ​ F-8 Consolidated Statements of Stockholders’ Equity ​ F-9 Consolidated Statements of Cash Flows ​ F-10 Notes to Consolidated Financial Statements ​ F-11 Supplementary Data—Unaudited Quarterly Results ​ F-41 ​ ​ ​ F-1 Table of Contents Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders OSI Systems, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheet of OSI Systems, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year ended June 30, 2023, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023, and the results of its operations and its cash flows for the year ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated August 29, 2023 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Determination of standalone selling price - Security Segment Product Revenue As described in Note 1 to the consolidated financial statements, the Company’s revenue contracts in the security segment may include multiple performance obligations, which are accounted for separately when they are distinct. The Company derives revenues in the security segment mainly from sales of products, installation, project management and training services. The Company allocates the transaction price to the distinct performance obligations on a relative stand-alone selling price basis and recognizes revenue when control is transferred. Product revenues are recognized at the point in time when product has been delivered. Auditing the Company’s product revenue stand-alone selling price in the security segment was complex due to the subjectivity of the assumptions that were used in developing the stand-alone selling price of distinct performance obligations. Evaluating the appropriateness of these assumptions requires extensive audit effort due to the complexity of these contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures. F-2 Table of Contents We obtained an understanding, evaluated design and tested the operating effectiveness of internal controls related to the determination of the stand-alone selling prices related to the security segment. To test management’s determination of stand-alone selling price for each performance obligation, we performed procedures to evaluate the methodology applied. We evaluated the Company’s analysis of stand-alone selling price, including inspecting a sample of executed contracts. For the sample selected we evaluated the contracts to determine the appropriateness of the method used and the underlying data including cost details and margin percentages to estimate the stand-alone selling price. ​ ​ ​ /s/ Grant Thornton LLP ​ ​ ​ ​ We have served as the Company’s auditor since 2023. ​ ​ ​ ​ ​ Los Angeles, California ​ ​ August 29, 2023 ​ ​ ​ ​ F-3 Table of Contents Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders OSI Systems, Inc. ​ Opinion on internal control over financial reporting We have audited the internal control over financial reporting of OSI Systems, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended June 30, 2023, and our report dated August 29, 2023 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ /s/ Grant Thornton LLP ​ We have served as the Company’s auditor since 2023. ​ ​ Los Angeles, California ​ ​ August 29, 2023 ​ ​ ​ ​ ​ F-4 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of OSI Systems, Inc. Opinions on the Financial Statements We have audited the accompanying consolidated balance sheet of OSI Systems, Inc. and subsidiaries (the “Company”) as of June 30, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended June 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2022, and the consolidated results of its operations and its cash flows for each of the two years in the period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for its convertible notes as of July 1, 2021 due to the adoption of Accounting Standards Update No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . Basis for Opinions The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. /s/ Moss Adams LLP ​ ​ ​ ​ Los Angeles, California ​ ​ August 19, 2022 ​ ​ ​ ​ ​ We served as the Company’s auditor from 2006 to 2023. ​ ​ ​ ​ ​ F-5 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET S (amounts in thousands, except share amounts and par value) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ 2022 2023 ASSETS ​ ​ ​ ​ ​ ​ CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 64,202 ​ $ 76,750 Accounts receivable, net ​ 307,973 ​ 380,845 Inventories ​ 333,907 ​ 338,008 Prepaid expenses and other current assets ​ 40,062 ​ 44,300 Total current assets ​ 746,144 ​ 839,903 Property and equipment, net ​ 109,684 ​ 108,933 Goodwill ​ 336,357 ​ 349,505 Intangible assets, net ​ 138,370 ​ 140,857 Other assets ​ 112,595 ​ 116,488 Total assets ​ $ 1,443,150 ​ $ 1,555,686 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ Bank lines of credit ​ $ 60,000 ​ $ 215,000 Current portion of long-term debt ​ 244,575 ​ 8,076 Accounts payable ​ 125,204 ​ 139,011 Accrued payroll and related expenses ​ 46,379 ​ 51,243 Advances from customers ​ 19,917 ​ 21,250 Other accrued expenses and current liabilities ​ 117,879 ​ 137,114 Total current liabilities ​ 613,954 ​ 571,694 Long-term debt, net ​ 48,668 ​ 136,491 Deferred income taxes ​ 11,112 ​ 6,571 Other long-term liabilities ​ 130,992 ​ 114,765 Total liabilities ​ 804,726 ​ 829,521 Commitments and contingencies (Note 11) ​ ​ ​ ​ ​ ​ 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 and 16,755,772 shares at June 30, 2022 and 2023, respectively ​ 17 ​ 9,835 Retained earnings ​ 663,869 ​ 735,957 Accumulated other comprehensive loss ​ ( 25,462 ) ​ ( 19,627 ) Total stockholders’ equity ​ 638,424 ​ 726,165 Total liabilities and stockholders’ equity ​ $ 1,443,150 ​ $ 1,555,686 ​ See accompanying notes to Consolidated Financial Statements. ​ ​ F-6 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATION S (amounts in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ 2021 2022 2023 Net revenues: ​ ​ ​ ​ ​ ​ ​ ​ Products ​ $ 872,809 ​ $ 897,259 ​ $ 958,827 Services ​ 274,093 ​ 285,977 ​ 319,600 Total net revenues ​ 1,146,902 ​ 1,183,236 ​ 1,278,427 Cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​ Products ​ 586,935 ​ 608,990 ​ 676,772 Services ​ 140,049 ​ 149,819 ​ 171,145 Total cost of goods sold ​ 726,984 ​ 758,809 ​ 847,917 Gross profit ​ 419,918 ​ 424,427 ​ 430,510 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 240,747 ​ 235,553 ​ 228,313 Research and development ​ 53,696 ​ 59,583 ​ 59,352 Impairment, restructuring and other charges, net ​ 10,104 ​ 7,542 ​ 7,566 Total operating expenses ​ 304,547 ​ 302,678 ​ 295,231 Income from operations ​ 115,371 ​ 121,749 ​ 135,279 Interest and other expense, net ​ ( 16,731 ) ​ ( 8,962 ) ​ ( 20,041 ) Other income ​ ​ — ​ ​ 27,373 ​ ​ — Income before income taxes ​ 98,640 ​ 140,160 ​ 115,238 Provision for income taxes ​ ( 24,591 ) ​ ( 24,813 ) ​ ( 23,460 ) Net income ​ $ 74,049 ​ $ 115,347 ​ $ 91,778 Earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 4.12 ​ $ 6.57 ​ $ 5.45 Diluted ​ $ 4.03 ​ $ 6.45 ​ $ 5.34 Shares used in per share calculation: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 17,968 ​ 17,551 ​ 16,828 Diluted ​ 18,388 ​ 17,870 ​ 17,190 ​ See accompanying notes to Consolidated Financial Statements. ​ ​ F-7 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOM E (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ 2021 2022 2023 Net income ​ $ 74,049 ​ $ 115,347 ​ $ 91,778 Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment, net of tax ​ 10,186 ​ ( 10,202 ) ​ 267 Other, net of tax ​ ​ 262 ​ ​ ( 514 ) ​ ​ 5,568 Other comprehensive income (loss) ​ ​ 10,448 ​ ​ ( 10,716 ) ​ ​ 5,835 Comprehensive income ​ $ 84,497 ​ $ 104,631 ​ $ 97,613 ​ See accompanying notes to Consolidated Financial Statements. ​ ​ F-8 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUIT Y (amounts in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ Retained ​ Comprehensive ​ ​ ​ ​ Shares Amount Earnings Loss Total Balance-July 1, 2020 18,011,982 ​ $ 122,553 ​ $ 474,793 ​ $ ( 25,194 ) ​ $ 572,152 Exercise of stock options ​ 88,657 ​ 1,302 ​ — ​ — ​ 1,302 Vesting of restricted stock/RSUs ​ 313,892 ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued under employee stock purchase program ​ 68,180 ​ 4,215 ​ — ​ — ​ 4,215 Stock-based compensation ​ — ​ 26,771 ​ — ​ — ​ 26,771 Repurchase of common stock ​ ( 452,005 ) ​ ​ ( 37,468 ) ​ ​ — ​ ​ — ​ ​ ( 37,468 ) Taxes paid related to net share settlement of equity awards ​ ( 176,596 ) ​ ( 11,649 ) ​ — ​ — ​ ( 11,649 ) Net income ​ — ​ ​ — ​ ​ 74,049 ​ ​ — ​ ​ 74,049 Other comprehensive income — ​ — ​ — ​ 10,448 ​ 10,448 Balance-June 30, 2021 17,854,110 ​ $ 105,724 ​ $ 548,842 ​ $ ( 14,746 ) ​ $ 639,820 Exercise of stock options ​ 166,629 ​ 460 ​ — ​ — ​ 460 Vesting of RSUs ​ 337,442 ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued under employee stock purchase program ​ 60,065 ​ 4,297 ​ — ​ — ​ 4,297 Stock-based compensation ​ — ​ 28,072 ​ — ​ — ​ 28,072 Repurchase of common stock ​ ( 1,294,594 ) ​ ( 92,351 ) ​ ( 19,276 ) ​ — ​ ( 111,627 ) Taxes paid related to net share settlement of equity awards ​ ( 253,602 ) ​ ( 19,422 ) ​ — ​ — ​ ( 19,422 ) Adoption of ASU 2020-06 for convertible notes ​ — ​ ​ ( 26,763 ) ​ ​ 18,956 ​ ​ — ​ ​ ( 7,807 ) Net income ​ — ​ ​ — ​ ​ 115,347 ​ ​ — ​ ​ 115,347 Other comprehensive loss ​ — ​ — ​ — ​ ( 10,716 ) ​ ( 10,716 ) Balance-June 30, 2022 16,870,050 ​ $ 17 ​ $ 663,869 ​ $ ( 25,462 ) ​ $ 638,424 Exercise of stock options ​ 47,354 ​ ​ 3,666 ​ ​ — ​ ​ — ​ ​ 3,666 Vesting of RSUs ​ 313,862 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued under employee stock purchase program ​ 59,255 ​ ​ 4,041 ​ ​ — ​ ​ — ​ ​ 4,041 Stock-based compensation ​ — ​ ​ 29,124 ​ ​ — ​ ​ — ​ ​ 29,124 Repurchase of common stock ​ ( 400,230 ) ​ ​ ( 17,067 ) ​ ​ ( 17,682 ) ​ ​ — ​ ​ ( 34,749 ) Taxes paid related to net share settlement of equity awards ​ ( 134,519 ) ​ ​ ( 9,946 ) ​ ​ ( 2,008 ) ​ ​ — ​ ​ ( 11,954 ) Net income ​ — ​ ​ — ​ ​ 91,778 ​ ​ — ​ ​ 91,778 Other comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ 5,835 ​ ​ 5,835 Balance-June 30, 2023 16,755,772 ​ $ 9,835 ​ $ 735,957 ​ $ ( 19,627 ) ​ $ 726,165 ​ See accompanying notes to Consolidated Financial Statements . ​ ​ F-9 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW S (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ 2021 2022 2023 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 74,049 ​ $ 115,347 ​ $ 91,778 Adjustments to reconcile net income to net cash provided by operating activities, net of effects from acquisitions: ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 43,855 ​ 38,679 ​ 38,513 Stock-based compensation ​ 26,771 ​ 28,072 ​ 29,124 Provision for (recovery of) losses on accounts receivable ​ ​ 9,823 ​ ​ ( 5,978 ) ​ ​ ( 3,899 ) Deferred income taxes ​ ​ 432 ​ ​ 3,520 ​ ​ ( 3,978 ) Amortization of debt discount and issuance costs ​ 9,756 ​ 1,343 ​ 196 Impairment charges ​ ​ 552 ​ ​ 1,006 ​ ​ — Gain on sale of property and equipment ​ ​ — ​ ​ ( 27,373 ) ​ ​ — Other ​ ( 109 ) ​ ( 1,326 ) ​ 250 Changes in operating assets and liabilities—net of business acquisitions: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 28,955 ) ​ ( 13,710 ) ​ ( 66,088 ) Inventories ​ ( 47,768 ) ​ ( 44,662 ) ​ ( 115 ) Prepaid expenses and other assets ​ ( 34,430 ) ​ 22,323 ​ ( 5,422 ) Accounts payable ​ 55,601 ​ ( 15,055 ) ​ 10,756 Accrued payroll and related expenses ​ ​ 10,486 ​ ​ ( 1,998 ) ​ ​ 4,716 Advances from customers ​ 9,796 ​ ( 18,423 ) ​ 1,356 Other ​ 9,207 ​ ( 17,957 ) ​ ( 2,375 ) Net cash provided by operating activities ​ 139,066 ​ 63,808 ​ 94,812 CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ( 16,896 ) ​ ( 14,921 ) ​ ( 15,811 ) Proceeds from sale of property and equipment ​ ​ 1,136 ​ ​ 34,132 ​ ​ 347 Purchases of certificates of deposit ​ ​ ( 4,892 ) ​ ​ ( 2,243 ) ​ ​ ( 5,280 ) Proceeds from maturities of certificates of deposit ​ ​ 2,710 ​ ​ 56 ​ ​ 3,827 Acquisition of businesses, net of cash acquired ​ ( 3,000 ) ​ ( 14,132 ) ​ ( 7,101 ) Payments for intangible and other assets ​ ( 13,751 ) ​ ( 15,566 ) ​ ( 16,443 ) Net cash used in investing activities ​ ( 34,693 ) ​ ( 12,674 ) ​ ( 40,461 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ Net borrowings (repayments) on bank lines of credit ​ ( 59,000 ) ​ 60,000 ​ 155,000 Proceeds from long-term debt ​ 739 ​ 50,388 ​ 100,766 Payments on long-term debt ​ ( 1,057 ) ​ ( 46,074 ) ​ ( 249,842 ) Proceeds from exercise of stock options and employee stock purchase plan ​ 5,517 ​ 4,796 ​ 7,707 Payment of contingent consideration ​ ​ ( 1,007 ) ​ ​ ( 2,061 ) ​ ​ ( 4,103 ) Repurchase of common stock ​ ( 37,468 ) ​ ( 111,627 ) ​ ( 34,749 ) Taxes paid related to net share settlement of equity awards ​ ( 11,649 ) ​ ( 19,430 ) ​ ( 11,954 ) Net cash used in financing activities ​ ( 103,925 ) ​ ( 64,008 ) ​ ( 37,175 ) Effect of exchange rate changes on cash ​ 4,063 ​ ( 3,537 ) ​ ( 4,628 ) Net increase (decrease) in cash and cash equivalents ​ 4,511 ​ ( 16,411 ) ​ 12,548 Cash and cash equivalents—beginning of year ​ 76,102 ​ 80,613 ​ 64,202 Cash and cash equivalents—end of year ​ $ 80,613 ​ $ 64,202 ​ $ 76,750 Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest ​ $ 5,979 ​ $ 6,979 ​ $ 20,277 Income taxes ​ $ 12,778 ​ $ 16,658 ​ $ 19,439 ​ See accompanying notes to Consolidated Financial Statements. ​ ​ F-10 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business —OSI Systems, Inc., together with our subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products and provide related services in diversified markets, including homeland security, healthcare, defense and aerospace. We have three reporting segments: (i) Security, providing security and inspection systems and turnkey security screening solutions; (ii) Healthcare, providing patient monitoring, cardiology and remote monitoring, and connected care systems and associated accessories; and (iii) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for our Security and Healthcare divisions, as well as third parties for applications in the defense and aerospace markets, among others. Through our Security segment, we provide security screening products and related services globally. These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects for weapons, explosives, drugs, radioactive and nuclear materials and other contraband. In addition to these products, we also provide site design, installation, training and technical support services to our customers. We also provide turnkey security screening solutions, which can include the construction, staffing and long-term operation of security screening checkpoints for our customers. Through our Healthcare segment, we design, manufacture, market and service patient monitoring, cardiology and remote monitoring, and connected care systems and associated accessories globally. These products are used by care providers in critical care, emergency and perioperative areas within the hospital and provide information, through wired and wireless networks, to physicians and nurses who may be at the patient’s bedside, in another area of the hospital or even outside the hospital. Through our Optoelectronics and Manufacturing segment, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, telecommunications, office automation, computer peripherals, industrial automation and consumer products. This division provides products and services to OEM customers and to our own Security and Healthcare divisions. Consolidation —The consolidated financial statements include the accounts of OSI Systems, Inc. and our wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in joint ventures over which we have significant influence but do not have voting control are accounted for using the equity method. Investments over which we do not have significant influence or control are not material and are carried at cost as there is no readily determinable fair value for the equity interests. 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, contingent consideration, allowance for doubtful accounts, 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. 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. F-11 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 Our cash and cash equivalents totaled $ 76.8 million at June 30, 2023. Of this amount, approximately 97 % 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, Qatar, Singapore, India, Malaysia and Canada, and to a lesser extent in Indonesia, Australia, Germany 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. Accounts Receivable —We monitor collections and payments from our customers, and we maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We determine the allowance based on known troubled accounts, historical experience, current economic trends that might impact the level of credit losses in the future and other available information. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required. Inventories —Inventories are generally stated at the lower of cost or net realizable value. We write down inventory for slow-moving and obsolete inventory based on historical usage, orders on hand, assessments of future demands, market conditions among other items. If these factors are less favorable than those projected, additional inventory write-downs may be required. Property and Equipment —Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are charged while assets are used in service and are computed using the straight-line method over the estimated useful lives of the assets taking into consideration any estimated salvage value. Amortization of leasehold improvements is calculated on the straight-line method over the shorter of the useful life of the asset or the lease term. Right-of-use assets from finance leases are included in property and equipment. Amortization of property and equipment under finance leases is included with depreciation expense. In the event that property and equipment are idle, as a result of excess capacity or the early termination, non-renewal or reduction in scope of a turnkey screening operation, such assets are assessed for impairment on a periodic basis or if any indicators of impairment exist. Goodwill and Other Intangible Assets and Valuation of Long-Lived Assets —Goodwill represents the excess purchase price over the estimated fair value of the assets acquired and liabilities assumed in a business combination. Goodwill is allocated to our reporting units based on the nature of the product line of the acquired business. The carrying value of goodwill is not amortized but is annually tested for impairment as of the end of the second quarter and more frequently if there is an indicator of impairment. We assess qualitative factors of each of our three reporting units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The assessments conducted as of December 31, 2022 indicated that it is not more likely than not that the fair values of our three reporting units are less than their carrying amounts, including goodwill. There were no qualitative factors which would trigger impairment testing between measurement dates. Thus, we have determined that there is no goodwill impairment for any of the three reporting units. We evaluate long-lived assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. If impairment does exist, we measure the impairment loss and record it based on the discounted estimate of future cash flows. In estimating future cash flows, we group assets at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows from other asset groups. Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. Income Taxes —Deferred income taxes are provided for temporary differences between the financial statement and income tax basis of our assets and liabilities, based on enacted tax rates. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Income tax accounting standards prescribe a two-step process for the financial statement measurement and recognition of a tax position taken or expected to be taken in a tax return. The first step involves the determination of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination, based on the technical merits of the position. The second step requires that any tax position that meets the more likely than not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. See Note 10 for additional information. F-12 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 Fair Value of Financial Instruments —Our financial instruments consist primarily of cash and cash equivalents, insurance company contracts, accounts receivable, accounts payable, debt instruments, an interest rate swap contract and foreign currency forward contracts. The carrying values of financial instruments, other than long-term debt instruments and the 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, 2023. 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 at quoted prices in active markets for identical assets and liabilities. The “Level 2” category includes assets and liabilities from observable inputs other than quoted market prices. The “Level 3” category includes assets and liabilities for which valuation techniques are unobservable and significant to the fair value measurement. Our contingent payment obligations related to acquisitions, which are further discussed in Note 11 to the consolidated financial statements, are in the “Level 3” category for valuation purposes. The fair values of our financial assets and liabilities as of June 30, 2022 and 2023 are categorized as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 June 30, 2023 ​ Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets—Insurance company contracts ​ $ — ​ $ 40,284 ​ $ — ​ $ 40,284 ​ $ — ​ $ 47,181 ​ $ — ​ $ 47,181 Assets—Interest rate swap contract ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 5,369 ​ $ — ​ $ 5,369 Liabilities—Convertible debt ​ $ — ​ $ 242,302 ​ $ — ​ $ 242,302 ​ $ — ​ $ — ​ $ — ​ $ — Liabilities—Contingent consideration ​ $ — ​ $ — ​ $ 28,212 ​ $ 28,212 ​ $ — ​ $ — ​ $ 21,181 ​ $ 21,181 ​ Derivative Instruments and Hedging Activity —Our use of derivatives consists of foreign currency forward contracts and an interest rate swap contract. 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 using 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 investment hedge has been designated as a hedge instrument and accounted for under Accounting Standards Codification (“ASC”) 815 Derivatives and Hedging. Hedge effectiveness is assessed using the spot method, consistent with guidance in ASC 815 whereby the change in fair value of the forward contract is recorded in the same manner as the related currency translation adjustments, within other comprehensive income, as the hedging instrument is expected to be fully effective unless the amount hedged exceeds the net investment in the foreign operation, or the foreign operation is liquidated. We settled the net investment hedge during fiscal 2021, and the amount recorded in other comprehensive loss was not significant. There were no net investment hedges outstanding as of June 30, 2023. 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, and the amounts reported for the years ending June 30, 2021, 2022 and 2023 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 2023, we held foreign currency forward contracts with notional amounts totaling $ 22.9 million and $ 21.6 million, respectively. Unrealized gains and losses from our foreign currency forward contracts as of June 30, 2022 and 2023 were not significant. F-13 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 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 income in the consolidated financial statements and are reclassified as net income when the underlying hedged interest expense 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. As of June 30, 2022 and 2023, 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 June 30, 2023 was $ 5.4 million and is recorded in Other assets within the consolidated balance sheet. The effect of the cash flow hedges on other comprehensive income (loss) and earnings for the periods presented was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ 2022 2023 Total interest and other expense, net presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded ​ $ — ​ $ ( 20,041 ) Gain recognized in other comprehensive income ​ — ​ 3,892 Amount reclassified from accumulated other comprehensive income (loss) to interest expense, net ​ — ​ 1,343 ​ Revenue Recognition We recognize revenue under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), which superseded all prior revenue recognition methods and industry-specific guidance. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of control for promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue recognition principles, an entity is required to identify the contract(s) with a customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue as the performance obligations are satisfied (i.e., either over time or at a point in time). ASC 606 further requires that companies disclose sufficient information to enable readers of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Product Sales. We recognize revenue from sales of products upon shipment or delivery when control of the product transfers to the customer, depending on the terms of each sale, and when collection is probable. In the circumstance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until we have achieved the customer acceptance criteria unless such acceptance criteria are perfunctory or inconsequential. We generally offer customers payment terms of less than one year. In cases when payment terms extend beyond one year, we consider whether the contract has a significant financing component. Service Revenue. Revenue from services includes installation and implementation of products and turnkey security screening services and after-market services. Generally, revenue from services is recognized over time as the services are performed. Revenues from out of warranty service maintenance contracts are recognized ratably over the respective terms of such contracts. Deferred revenue for such services arises from payments received from customers for services not yet performed. Contract Revenue. Sales agreements with customers can be project specific, cover a period of time, and can be renewable periodically. The contracts may contain terms and conditions with respect to payment, delivery, installation, services, warranty and other rights. In certain instances, we consider an accepted customer order, governed by a master sales agreement, to be the contract with the customer when legal rights and obligations exist. Contracts with customers may include the sale of products and services, as discussed in the paragraphs above. In certain instances, contracts can contain multiple performance obligations as discussed in the paragraph below. According to the terms of a sale contract, we may receive consideration from a customer prior to transferring goods to the customer, and we record these prepayments as an advance receipt. We also record deferred revenue, typically related to service contacts, when consideration is received before the services have been performed. We recognize contract liabilities and deferred revenue as net sales after all revenue recognition criteria are met. F-14 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 When determining revenue recognition for contracts, we make judgments based on our understanding of the obligations in each contract. We determine whether or not customer acceptance criteria are perfunctory or inconsequential. The determination of whether or not customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognition. Judgments also include estimates of warranty reserves, which are established based on historical experience and knowledge of the product under warranty. Multiple Performance Obligations. Certain agreements with customers include the sale of capital equipment involving multiple elements that may include civil works to prepare a site for the installation of equipment, manufacture and delivery of equipment, installation and integration of equipment, training of customer personnel to operate the equipment and after-market service of the equipment. We generally assign multiple elements in a contract into separate performance obligations if those elements are distinct, both individually and in the context of the contract. If multiple promises comprise a series of distinct services which are substantially the same and have the same pattern of transfer, they are combined and accounted for as a single performance obligation. In cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct obligation or bundle of obligations has been met. The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is only one performance obligation associated with a contract, the entire sale value is attributed to that obligation. When a contract contains multiple performance obligations, the standalone selling price is first estimated using the observable price, which is generally a list price net of applicable discount, or the price used to sell the good or service in similar circumstances. In circumstances when a selling price is not directly observable, we will estimate the standalone selling price using information available to us including our market assessment and/or expected cost plus margin. The timetable for fulfilment of each of the distinct performance obligations can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The timing of revenue recognition for each performance obligation may be dependent upon several milestones, including physical delivery of equipment, completion of factory acceptance test, completion of site acceptance test, installation and connectivity of equipment, certification of training of personnel and, in the case of after-market service deliverables, the passage of time (typically evenly over the post-warranty period of the service deliverable). We often provide a guarantee to support our performance under multiple performance obligations. In the event that customers are permitted to terminate such arrangements, the underlying contract typically requires payment for deliverables and reimbursement of costs incurred through the date of termination. We disaggregate revenue by reporting segment (Security, Optoelectronics and Manufacturing, and Healthcare) to depict the nature of revenue in a manner consistent with our business operations and to be consistent with other communications and public filings. Refer to Note 14 for additional details of revenues by reporting segment. 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 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 sheet. We may also receive consideration, per the terms of a contract, from customers prior to transferring 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. We recognize these contract liabilities as sales after all revenue recognition criteria are met. F-15 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 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. Freight —We record shipping and handling fees that we charge to our customers as revenue and related costs as cost of goods sold. Research and Development Costs —Research and development costs are those costs related to the development of a new product, process or service, or significant improvement to an existing product, process or service. Such costs are charged to operations as incurred. Stock-Based Compensation —Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the employee’s requisite service period for all stock-based awards granted or modified. Certain restricted stock unit awards vest based on the achievement of pre-established performance criteria. The fair value of performance-based awards is estimated at the date of grant based upon the probability that the specified performance criteria will be met, adjusted for estimated forfeitures. Each quarter we update our assessment of the probability that the specified performance criteria will be achieved and adjust the estimate of the expenses of the performance-based awards if necessary. We amortize the fair value of performance-based awards over the requisite service period for each separately vesting tranche of the award. See Note 9 to the consolidated financial statements. Impairment, Restructuring and Other Charges —We account for certain charges related to restructuring activities, litigation, acquisition-related costs and other non-routine charges as Impairment, restructuring and other charges in the consolidated financial statements. See Note 7 for additional information about these charges. Credit Risk and Concentration — Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable. We restrict investments in cash equivalents to financial institutions with high credit standing. Credit risk on accounts receivable is minimized as a result of the large and diverse nature of our company’s worldwide customer base. As of June 30, 2022 and 2023, no customer accounted for greater than 10% of accounts receivable. In fiscal years 2021 and 2022, no customer accounted for greater than 10 % of revenues. In fiscal year 2023, one customer accounted for 11 % of revenues. We perform ongoing credit evaluations of our customers’ financial condition and maintain allowances for potential credit losses. Our cash and cash equivalents totaled $ 64.2 million and $ 76.8 million at June 30, 2022 and 2023, respectively. Of these amounts, approximately 78 % and 97 % was held by our foreign subsidiaries at June 30, 2022 and 2023, respectively. For cost, quality control, technological, and efficiency reasons, we purchase certain materials, parts, and components only from single vendors with whom we have ongoing relationships. We do, however, qualify second sources for many of our materials, parts, and components. While management believes that relying on key vendors improves the efficiency and reliability of business operations, relying on any one vendor for a significant aspect of business can have a significant negative impact on revenue and profitability if that vendor fails to perform at acceptable service levels for any reason, including financial difficulties of the vendor. F-16 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 Foreign Currency Translation and Transactions — We transact business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets. We also have subsidiaries where the United States dollar has been designated as the functional currency based on individual facts and circumstances. Remeasurement of non-United States dollar monetary assets and liabilities are translated using period-end exchange rates and associated gains and losses are recognized in the consolidated statements of operations. Non-monetary assets and liabilities are translated using historical exchange rates. Transaction gains and losses, which were included in our consolidated statement of operations, amounted to a net gain (loss) of approximately $ ( 1.3 ) million, $ 0.6 million and $ 2.0 million for the fiscal years ended June 30, 2021, 2022 and 2023, respectively. Business Combinations —Under ASC 805, the acquisition method of accounting requires us to record assets acquired and 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 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 until we have all the necessary information about the facts and circumstances that existed as of the acquisition date 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 provisional amounts initially recorded for assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are included in earnings. Earnings per Share —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. In periods where a net loss is reported, basic and diluted net loss per share are the same since the effect of potential common shares is antidilutive and therefore excluded. There was no dilutive effect of the senior convertible notes (See Note 8) for the fiscal years ended June 30, 2021, 2022 and 2023. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 Net income available to common stockholders ​ $ 74,049 ​ $ 115,347 ​ $ 91,778 Weighted average shares outstanding—basic ​ 17,968 ​ 17,551 ​ 16,828 Dilutive effect of equity awards ​ 420 ​ 319 ​ 362 Weighted average shares outstanding—diluted ​ 18,388 ​ 17,870 ​ 17,190 Basic earnings per share ​ $ 4.12 ​ $ 6.57 ​ $ 5.45 Diluted earnings per share ​ $ 4.03 ​ $ 6.45 ​ $ 5.34 Weighted average shares excluded from diluted earnings per share due to their anti-dilutive effect ​ ​ 47 ​ ​ 47 ​ ​ 49 ​ F-17 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 Warranty Provision —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, whose activity for each of the three fiscal years ended June 30, 2023 is summarized in the following table (in thousands): ​ ​ ​ ​ ​ Warranty provision as of June 30, 2020 $ 20,825 Warranty claims provided for/assumed in acquisition ​ 5,419 Settlements made ​ ( 6,508 ) Warranty provision as of June 30, 2021 ​ $ 19,736 Warranty claims provided for/assumed in acquisition ​ 3,474 Settlements made ​ ( 9,863 ) Warranty provision as of June 30, 2022 ​ $ 13,347 Warranty claims provided for/assumed in acquisition ​ 4,193 Settlements made ​ ( 6,391 ) Warranty provision as of June 30, 2023 ​ $ 11,149 ​ Leases —Right-of-use (“ROU”) assets represent our right to use an underlying asset during the reasonably certain lease terms, and lease liabilities represent our obligation to make lease payments arising from the leases. We recognize ROU lease assets and lease liabilities at lease commencement on our consolidated balance sheet based on the present value of lease payments over the lease term using a discount rate determined based on our incremental borrowing rate since the rate implicit in each lease is not readily determinable. We elected the package of practical expedients, which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification of any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component. We also elected the hindsight practical expedient, which allows us to use hindsight in determining the lease term. We do not record a ROU asset and corresponding lease liability for leases with an initial term of one year or less (“short-term leases”). The terms in our leases may include options to extend or terminate the lease. We recognize ROU assets and liabilities when it is reasonably certain that we will exercise those options. Judgment is required in our assessment as to whether renewal or termination options are reasonably certain to be exercised and factors such as contractual terms compared to current market rates and the importance of the facility and location to our operations, among others, are considered. Lease payments are made in accordance with the lease terms, and lease expense, including short-term lease expense, is recognized on a straight-line basis over the lease term. We lease facilities and certain equipment under various operating lease agreements. The majority of our lease arrangements are comprised of fixed payments while certain of our other leases provide for periodic rent increases. Our leases may contain escalation clauses and renewal options. Most of the leases require us to pay for certain other costs such as common area maintenance and property taxes. Rent expense for leases with periodic rent increases or escalation clauses is recognized on a straight-line basis over the minimum lease term. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. We also have finance leases for fleet vehicles that are not material to the consolidated financial statements. Subsequent Events — In accordance with ASC 855, our management evaluated material events after the balance sheet date through the date of the filing of this report with the SEC, and there are no disclosable subsequent events. ​ Recent Accounting Guidance From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our Consolidated Financial Statements upon adoption. ​ F-18 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 2. BUSINESS COMBINATIONS Fiscal Year 2023 Business Acquisitions In April 2023, we (through our Optoelectronics and Manufacturing division) acquired a privately held provider of engineering and contract manufacturing solutions for approximately $ 2.5 million plus up to $ 2.5 million in potential contingent consideration. The acquisition was financed with cash on hand. In February 2023, we (through our Healthcare division) acquired a privately held provider of software and solutions for approximately $ 2.1 million plus up to $ 5.0 million in potential contingent consideration. The acquisition was financed with cash on hand. Through our Security division, we acquired (i) in December 2022 certain assets of a provider of baggage and parcel inspection systems for approximately $ 1.6 million and (ii) in August 2022 a privately held provider of training software and solutions for approximately $ 1.9 million plus an immaterial amount of potential contingent consideration. These acquisitions were financed with cash on hand. The goodwill recognized for each of the fiscal year 2023 business acquisitions 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 $ 14.0 million, plus up to $ 25.0 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. ​ Fiscal Year 2021 Business Acquisition In fiscal 2021, we (through our Healthcare division) acquired a privately-held software development company for $ 3.0 million, plus up to $ 12.0 million in potential contingent consideration. This acquisition was financed with available cash on hand. The goodwill recognized for this business is deductible for income tax purposes. These business acquisitions in fiscal 2021, 2022 and 2023, 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. F-19 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 3. BALANCE SHEET DETAILS ​ The following tables provide details of selected balance sheet accounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, Accounts receivable, net 2022 2023 Accounts receivable ​ $ 326,849 $ 395,218 Less allowance for doubtful accounts ​ ( 18,876 ) ​ ( 14,373 ) Total ​ $ 307,973 ​ $ 380,845 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, Inventories 2022 2023 Raw materials ​ $ 213,290 $ 233,217 Work-in-process ​ 46,873 ​ 56,329 Finished goods ​ 73,744 ​ 48,462 Total ​ $ 333,907 ​ $ 338,008 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated ​ ​ ​ ​ ​ ​ ​ ​ Useful ​ June 30, Property and equipment, net Lives 2022 ​ 2023 Land ​ N/A ​ $ 15,028 $ 15,691 Buildings, civil works and improvements ​ 5 - 40 years ​ 47,309 ​ 49,166 Leasehold improvements ​ 1 - 13 years ​ 11,599 ​ 13,553 Equipment and tooling ​ 3 - 10 years ​ 128,425 ​ 135,703 Furniture and fixtures ​ 3 - 10 years ​ 3,592 ​ 3,632 Computer equipment ​ 3 - 5 years ​ 21,208 ​ 24,119 Computer software ​ 3 - 10 years ​ 25,153 ​ 26,981 Computer software implementation in process ​ N/A ​ ​ 9,422 ​ ​ 9,705 Construction in process ​ N/A ​ 5,283 ​ 4,108 Total ​ ​ ​ 267,019 ​ 282,658 Less accumulated depreciation and amortization ​ ​ ​ ( 157,335 ) ​ ( 173,725 ) Property and equipment, net ​ ​ ​ $ 109,684 ​ $ 108,933 ​ During fiscal 2021, 2022 and 2023, depreciation expense was approximately $ 22.4 million, $ 21.0 million and $ 19.5 million, respectively. ​ ​ F-20 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 4. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill by segment for fiscal 2022 and 2023 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ Division Division Division Consolidated Balance as of June 30, 2021 ​ $ 206,426 ​ $ 43,584 ​ $ 70,294 ​ $ 320,304 Goodwill acquired or adjusted during the period ​ 19,436 ​ — ​ — ​ 19,436 Foreign currency translation adjustment ​ ( 307 ) ​ ( 397 ) ​ ( 2,679 ) ​ ( 3,383 ) Balance as of June 30, 2022 ​ $ 225,555 ​ $ 43,187 ​ $ 67,615 ​ $ 336,357 Goodwill acquired or adjusted during the period ​ 5,021 ​ 5,161 ​ 2,574 ​ 12,756 Foreign currency translation adjustment ​ 86 ​ 107 ​ 199 ​ 392 Balance as of June 30, 2023 ​ $ 230,662 ​ $ 48,455 ​ $ 70,388 ​ $ 349,505 ​ Intangible assets consisted of the following (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ June 30, 2023 ​ ​ Weighted ​ Gross ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Carrying ​ Accumulated ​ Intangibles ​ Carrying ​ Accumulated ​ Intangibles ​ Lives Value Amortization Net Value Amortization Net Amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Software development costs 7 - 8 years ​ $ 64,096 ​ $ ( 18,934 ) ​ $ 45,162 ​ $ 77,844 ​ $ ( 20,285 ) ​ $ 57,559 Patents 19 years ​ 8,541 ​ ( 2,987 ) ​ 5,554 ​ 8,636 ​ ( 3,404 ) ​ 5,232 Developed technology 10 years ​ 66,901 ​ ( 31,071 ) ​ 35,830 ​ 68,274 ​ ( 38,353 ) ​ 29,921 Customer relationships 7 - 8 years ​ 53,736 ​ ( 32,785 ) ​ 20,951 ​ 55,780 ​ ( 39,101 ) ​ 16,679 Total amortizable assets ​ ​ ​ 193,274 ​ ( 85,777 ) ​ 107,497 ​ 210,534 ​ ( 101,143 ) ​ 109,391 Non-amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ In-process R&D ​ ​ ​ ​ 533 ​ ​ — ​ ​ 533 ​ ​ 533 ​ ​ — ​ ​ 533 Trademarks ​ ​ ​ 30,340 ​ — ​ 30,340 ​ 30,933 ​ — ​ 30,933 Total intangible assets ​ ​ ​ $ 224,147 ​ $ ( 85,777 ) ​ $ 138,370 ​ $ 242,000 ​ $ ( 101,143 ) ​ $ 140,857 ​ Amortization expense related to intangible assets was $ 21.5 million, $ 17.7 million and $ 19.0 million for fiscal 2021, 2022 and 2023, respectively. At June 30, 2023, the estimated future amortization expense was as follows (in thousands): ​ ​ ​ ​ ​ 2024 $ 18,758 2025 ​ 16,042 2026 ​ 13,112 2027 ​ 9,054 2028 ​ ​ 6,544 Thereafter ​ 45,881 Total ​ $ 109,391 ​ F-21 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 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. During fiscal 2021, 2022 and 2023, we capitalized software development costs in the amounts of $ 12.9 million, $ 15.2 million and $ 16.2 million, respectively. ​ 5. CONTRACT ASSETS AND LIABILITIES The table below shows the balance of contract assets and liabilities as of June 30, 2022 and 2023, including the change between the periods. There were no substantial non-current contract assets for the periods presented. Contract Assets (dollar amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ June 30, ​ ​ ​ ​ ​ ​ 2022 2023 Change % Change Unbilled revenue (included in accounts receivable, net) ​ $ 43,287 ​ $ 86,818 ​ $ 43,531 101 % ​ Contract Liabilities (dollar amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ June 30, ​ ​ ​ ​ ​ ​ 2022 2023 Change % Change ​ Advances from customers ​ $ 19,917 ​ $ 21,250 ​ $ 1,333 7 % Deferred revenue—current ​ 31,396 ​ 43,861 ​ 12,465 40 % Deferred revenue—long-term ​ 20,476 ​ 22,200 ​ 1,724 8 % ​ Contract Assets. Contract assets increased approximately $ 43.5 million as a result of unbilled revenue primarily from the timing and nature of milestones met in contracts for a number of customers in our Security Division, both within the United States and internationally, where we met the revenue recognition criteria under ASC 606 in advance of the time when contracts give us the right to invoice customers. 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 June 30, 2023, the aggregate portion of the transaction price allocated to remaining performance obligations was approximately $ 1,011.2 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 fiscal year ended June 30, 2023, we recognized revenue of $ 50.9 million from contract liabilities existing as of July 1, 2022. 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. ​ F-22 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 6. LEASES The components of operating lease expense for the fiscal years ended June 30, 2022 and 2023 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ 2022 2023 Operating lease cost ​ $ 10,390 ​ $ 11,364 Variable lease cost ​ 856 ​ 1,323 Short-term lease cost ​ 1,061 ​ 923 ​ ​ $ 12,307 ​ $ 13,610 ​ Sale-leaseback Transaction. In March 2022, we completed a sale-leaseback transaction for our manufacturing facilities and corporate headquarters in Hawthorne, California (the “Hawthorne Property”). We sold the Hawthorne Property for $ 32 million and recognized a gain on sale of $ 27.4 million which is included in Other income on the statement of operations for the fiscal year ended June 30, 2022. We also entered into a 6-year lease agreement for the Hawthorne Property expiring in March 2028, with two 5-year renewal options. Supplemental balance sheet assets and liabilities related to operating leases were as follows (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance Sheet Category June 30, 2022 June 30, 2023 Operating lease ROU assets, net ​ Other assets ​ $ 39,461 ​ $ 32,618 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease liabilities, current portion ​ Other accrued expenses and current liabilities ​ $ 9,700 ​ $ 9,787 ​ Operating lease liabilities, long-term ​ Other long-term liabilities ​ 30,363 ​ 23,733 ​ Total operating lease liabilities ​ ​ ​ ​ $ 40,063 ​ $ 33,520 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average remaining lease term ​ ​ ​ ​ 4.2 years ​ Weighted average discount rate ​ ​ ​ ​ 3.7 % ​ Supplemental cash flow information related to operating leases for the year ended June 30, 2023 was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ 2022 2023 Cash paid for operating lease liabilities ​ $ 10,046 ​ $ 11,418 ROU assets obtained in exchange for new lease obligations ​ 27,402 ​ 14,574 ​ Maturities of operating lease liabilities at June 30, 2023 were as follows (in thousands): ​ ​ ​ ​ ​ June 30, 2023 Less than one year ​ $ 10,813 1 – 2 years ​ 8,596 2 – 3 years ​ 7,032 3 – 4 years ​ 6,101 4 – 5 years ​ 1,748 Thereafter ​ 1,966 ​ ​ 36,256 Less: Imputed interest ​ ( 2,736 ) Total lease liabilities ​ $ 33,520 ​ ​ ​ F-23 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 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 fiscal year ended June 30, 2023, we recognized $ 7.6 million in impairment, restructuring and other charges, which included $ 3.9 million in legal charges primarily related to class action litigation and government investigations, $ 1.7 million for employee terminations, $ 1.5 million for other facility closure costs for operational efficiency activities, and $ 0.4 million in acquisition related costs. During the fiscal year ended June 30, 2022, we recognized $ 7.5 million in impairment, restructuring and other charges, which included $ 5.1 million in legal charges primarily related to class action litigation and government investigations, $ 1.1 million for employee terminations, $ 1.0 million for impairment of software assets, $ 0.3 million in acquisition related costs, and a net benefit for facility closures activity of a nominal amount. During the fiscal year ended June 30, 2021, we incurred $ 7.2 million for exit activities associated with an expired turnkey contract in Mexico. Such exit costs include $ 2.8 million for employee terminations, $ 1.1 million for facility closure and other exit costs, direct transaction costs of $ 2.7 million, and $ 0.6 million for ROU asset impairment for a leased facility. We also incurred costs of $ 1.6 million for other employee terminations and $ 0.5 million for other facility closure costs for operational efficiency activities, $ 0.3 million for acquisition-related activities, and $ 0.5 million for certain legal charges, net of insurance reimbursements. The following tables summarize impairment, restructuring and other charges for the periods set forth below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2021 ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ Division Division Division Corporate Total Impairment charges ​ $ 552 ​ $ — ​ $ — ​ $ — ​ $ 552 Acquisition-related costs ​ ​ 249 ​ ​ 27 ​ ​ — ​ ​ — ​ ​ 276 Employee termination costs ​ 4,130 ​ — ​ 315 ​ — ​ 4,445 Mexico transaction costs ​ 2,691 ​ — ​ — ​ — ​ 2,691 Facility closures/consolidation ​ 1,675 ​ — ​ — ​ — ​ 1,675 Legal costs, net ​ — ​ ​ — ​ ​ — ​ ​ 465 ​ ​ 465 Total expensed ​ $ 9,297 ​ $ 27 ​ $ 315 ​ $ 465 ​ $ 10,104 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ Division Division Division Corporate Total Impairment charges ​ $ — ​ $ — ​ $ — ​ $ 1,006 ​ $ 1,006 Acquisition-related costs ​ ​ 232 ​ ​ — ​ ​ — ​ ​ 56 ​ ​ 288 Employee termination costs ​ 1,077 ​ — ​ 100 ​ — ​ 1,177 Facility closures/consolidation ​ ( 33 ) ​ — ​ — ​ — ​ ( 33 ) Legal costs, net ​ — ​ — ​ — ​ 5,104 ​ 5,104 Total expensed ​ $ 1,276 ​ $ — ​ $ 100 ​ $ 6,166 ​ $ 7,542 ​ F-24 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ Division Division Division Corporate Total Acquisition-related costs ​ $ 23 ​ $ 225 ​ $ 7 ​ $ 127 ​ $ 382 Employee termination costs ​ ​ 849 ​ ​ 355 ​ ​ 532 ​ ​ — ​ ​ 1,736 Facility closures/consolidation ​ ​ 35 ​ ​ — ​ ​ 1,504 ​ ​ — ​ ​ 1,539 Legal costs, net ​ ​ 808 ​ ​ 2,497 ​ ​ 464 ​ ​ 140 ​ ​ 3,909 Total expensed ​ $ 1,715 ​ $ 3,077 ​ $ 2,507 ​ $ 267 ​ $ 7,566 ​ The accrued liability for restructuring and other charges is included in other accrued expenses and current liabilities in the consolidated balance sheet. The changes in the accrued liability for restructuring and other charges for fiscal 2022 and 2023 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, 2021 ​ $ — ​ $ 250 ​ $ 386 ​ $ 2,772 ​ $ 3,408 Restructuring and other charges (benefit), net ​ ​ 288 ​ ​ 1,177 ​ ​ ( 33 ) ​ ​ 6,110 ​ ​ 7,542 Payments, adjustments and reimbursements, net ​ ​ ( 288 ) ​ ​ ( 1,246 ) ​ ​ ( 330 ) ​ ​ ( 7,102 ) ​ ​ ( 8,966 ) Balance as of June 30, 2022 ​ $ — ​ $ 181 ​ $ 23 ​ $ 1,780 ​ $ 1,984 Restructuring and other charges (benefit), net ​ 383 ​ 1,736 ​ 1,539 ​ 3,909 ​ 7,567 Payments, adjustments and reimbursements, net ​ ( 376 ) ​ ( 1,810 ) ​ 47 ​ ( 5,033 ) ​ ( 7,172 ) Balance as of June 30, 2023 ​ $ 7 ​ $ 107 ​ $ 1,609 ​ $ 656 ​ $ 2,379 ​ ​ ​ 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 can increase the revolving credit facility by $ 250 million plus such amount as would not cause our consolidated secured net leverage ratio to exceed a specified level. Borrowings under the amended facility bore interest at SOFR plus a margin of 1.0 % as of June 30, 2023 (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 June 30, 2023 (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 June 30, 2023, there were $ 215.0 million of borrowings outstanding under the revolving credit facility, $ 48.5 million outstanding under the letters of credit sub-facility, and $ 143.1 million outstanding under the term loan. As of June 30, 2023, the amount available to borrow under the revolving credit facility was $ 336.5 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 June 30, 2023, 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. F-25 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 1.25% Convertible Senior 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 date 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 then-remaining $ 242.3 million balance of the Notes utilizing proceeds from the senior secured credit facility. 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 year ended June 30, 2021 related to the Notes was $ 13.4 million, which consisted of $ 3.6 million of contractual interest expense, $ 8.6 million of debt discount amortization, and $ 1.2 million of amortization of debt issuance costs. Total interest expense for the year ended June 30, 2022 related to the Notes was $ 4.7 million, which consisted of $ 3.5 million of contractual interest expense and $ 1.2 million of amortization of debt issuance costs. Total interest expense for the year ended June 30, 2023 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 June 30, 2023, $ 51.7 million was outstanding under these letter-of-credit facilities. As of June 30, 2023, the total amount available under these credit facilities was $ 24.5 million. Long-term debt consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ ​ 2022 2023 1.25% convertible notes due September 1, 2022: ​ ​ ​ ​ ​ ​ Principal amount ​ $ 242,302 ​ $ — Unamortized debt issuance costs ​ ​ ( 196 ) ​ ​ — ​ ​ ​ 242,106 ​ ​ — Term loan ​ ​ 50,000 ​ ​ 143,125 Other long-term debt ​ 1,137 ​ 1,442 ​ ​ 293,243 ​ 144,567 Less current portion of long-term debt ​ ( 244,575 ) ​ ( 8,076 ) Long-term portion of debt ​ $ 48,668 ​ $ 136,491 ​ Fiscal year principal payments of long-term debt as of June 30, 2023 are as follows (in thousands): ​ ​ ​ ​ ​ 2024 $ 8,076 2025 ​ 7,992 2026 ​ 7,801 2027 ​ 120,698 2028 and thereafter ​ — Total ​ $ 144,567 ​ ​ F-26 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 9. STOCKHOLDERS’ EQUITY Stock-based Compensation As of June 30, 2023, we maintained 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 Cost of goods sold ​ $ 760 ​ $ 812 ​ $ 911 Selling, general and administrative ​ 25,457 ​ 26,749 ​ 27,716 Research and development ​ 554 ​ 511 ​ 497 Stock-based compensation expense ​ $ 26,771 ​ $ 28,072 ​ $ 29,124 ​ As of June 30, 2023, total unrecognized compensation cost related to stock-based compensation grants under the OSI Plan were estimated at $ 0.7 million for stock options and $ 13.9 million for restricted stock units (“RSUs”). We expect to recognize these costs over a weighted-average period of 2.0 years with respect to the stock options and 2.0 years for grants of RSUs. OSI Plan Awards are granted in the form of incentive options, nonqualified options, restricted stock awards, stock appreciation rights, RSUs, performance shares and stock bonuses, amongst other forms of equity, to qualified employees, directors and consultants. Under the OSI Plan, the exercise price of nonqualified options and incentive stock options may not be less than the fair market value of our Common Stock on the date of grant. The exercise price of nonqualified options and incentive stock options granted to individuals who own more than 10 % of our voting stock may not be less than 110 % of the fair market value of our Common Stock on the date of grant. Stock options granted under the OSI Plan typically vest over three years based on continued service. Restricted stock and RSUs typically vest over three to four years based on continued service. Certain restricted stock awards granted to senior management vest based on the achievement of pre-established performance criteria. Stock Option Fair Value Estimation Assumptions. We estimate the fair value of our stock options at the date of grant using the Black-Scholes option-pricing valuation model. Our valuation model is affected by our stock price as well as weighted average assumptions for a number of subjective variables described below. Expected Dividend. Expected dividend is based on historical patterns and our anticipated dividend payments over the expected holding period. Risk-Free Interest Rate. The risk-free interest rate for stock options is based on U.S. Treasuries for a maturity matching the expected holding period. Expected Volatility. Expected volatility is based on implied volatility and/or our historical share price volatility matching the expected holding period. No single method of estimating volatility is proper under all circumstances and to the extent that a company can derive implied volatility based on the trading of its financial instruments on a public market, it may be appropriate to use both implied and historical volatility in its assumptions. We have certain financial instruments that are publicly traded from which we can derive the implied volatility. Therefore, we use implied and historical volatility for valuing our stock options. We believe that implied and historical volatility is a better indicator of expected volatility because it is generally reflective of both historical volatility and expectations of how future volatility will differ from historical volatility. Expected Holding Period. We use historical stock option exercise data to estimate the expected holding period. F-27 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 Changes in assumptions can materially impact the estimated fair value of stock options. The weighted average assumptions used in the valuation model are presented in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 Expected dividend — ​ — ​ — ​ Risk-free interest rate 0.4 % 1.2 % 3.9 % Expected volatility 26.0 % 31.0 % 31.0 % Expected holding period (in years) 4.5 ​ 4.5 ​ 4.5 ​ ​ The following summarizes stock option activity for fiscal years 2021, 2022 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Weighted-Average ​ Aggregate ​ ​ Number of ​ Exercise ​ Remaining Contractual ​ Intrinsic Value ​ Options Price Term (in thousands) Outstanding at June 30, 2020 326,304 $ 44.41 ​ ​ ​ ​ ​ Granted 22,171 ​ 82.17 ​ ​ ​ ​ ​ Exercised ( 88,657 ) ​ 35.19 ​ ​ ​ ​ ​ Expired or forfeited ( 4,598 ) ​ 80.46 ​ ​ ​ ​ ​ Outstanding at June 30, 2021 255,220 $ 50.24 ​ ​ ​ ​ ​ Granted 22,954 ​ 96.38 ​ ​ ​ ​ ​ Exercised ( 166,629 ) ​ 35.09 ​ ​ ​ ​ ​ Expired or forfeited ( 900 ) ​ 73.99 ​ ​ ​ ​ ​ Outstanding at June 30, 2022 110,645 $ 82.43 ​ ​ ​ ​ Granted 23,351 ​ ​ 87.90 ​ ​ ​ ​ ​ Exercised ( 47,354 ) ​ ​ 77.42 ​ ​ ​ ​ ​ Expired or forfeited ( 2,965 ) ​ ​ 74.06 ​ ​ ​ ​ ​ Outstanding at June 30, 2023 83,677 ​ $ 87.09 ​ 7.1 years ​ $ 2,572 Exercisable at June 30, 2023 ​ 38,977 ​ $ 83.79 5.1 years ​ $ 1,327 ​ The per-share weighted-average grant-date fair value of stock options granted under the OSI Plan was $ 18.37 , $ 26.72 and $ 28.46 for fiscal 2021, 2022 and 2023, respectively. The total intrinsic value of options exercised during fiscal 2023 was $ 1.5 million. Restricted Stock Units —A summary of RSU activity for the periods indicated was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average ​ Shares Fair Value Nonvested at June 30, 2020 423,590 ​ $ 88.68 Granted 339,311 ​ 80.40 Vested ( 313,892 ) ​ 86.12 Forfeited ( 13,084 ) ​ 85.78 Nonvested at June 30, 2021 435,925 ​ $ 84.16 Granted 334,435 ​ 90.31 Vested ( 337,442 ) ​ 82.66 Forfeited ( 5,471 ) ​ 83.66 Nonvested at June 30, 2022 427,447 ​ $ 90.17 Granted 357,475 ​ ​ 87.90 Vested ( 313,862 ) ​ ​ 96.36 Forfeited ( 15,545 ) ​ ​ 88.42 Nonvested at June 30, 2023 455,515 ​ $ 85.15 ​ F-28 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 The per-share weighted average grant-date fair value of RSUs granted under the OSI Plan was $ 80.40 , $ 90.31 , and $ 87.90 for fiscal 2021, 2022 and 2023, respectively. The total fair value of shares vested during fiscal 2021, 2022 and 2023 was $ 27.0 million, $ 27.9 million, and $ 27.9 million, respectively. In December 2020, our shareholders authorized an increase of 1.65 million shares for the OSI Plan resulting in a maximum pool of 7.1 million shares. As of June 30, 2023, there were approximately 0.7 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 136,242 , 96,620 , and 110,811 performance-based awards during fiscal 2021, 2022 and 2023, 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. Employee Stock Purchase Plan We have an employee stock purchase plan under which eligible employees may purchase a limited number of shares of Common Stock at a discount of up to 15 % of the market value of such stock at pre-determined, plan-defined dates. During the years ended June 30, 2021, 2022 and 2023, employees purchased 63,499 , 60,708 , and 60,465 shares, respectively. As of June 30, 2023, there were 416,762 shares of our Common Stock available for issuance under the plan. ​ Stock Repurchase Program In September 2022, our Board of Directors increased the stock repurchase authorization to a total of two million shares of Common Stock. 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. During fiscal 2021, 2022 and 2023, we repurchased 452,005 shares, 1,294,594 shares and 400,230 shares, respectively, of common stock under our then current programs. As of June 30, 2023, there were 1,721,870 shares remaining available for repurchase under the authorized repurchase program. Dividends We have not paid any dividends since the consummation of our initial public offering in 1997 and we do not currently intend to pay any dividends in the foreseeable future. Our Board of Directors will determine the payment of future dividends, if any. Certain of our current bank credit facilities restrict the payment of dividends and future borrowings may contain similar restrictions. ​ F-29 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 10. INCOME TAXES The following is a geographical breakdown of income before the provision for income taxes (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 Pre-tax income: ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 34,323 ​ $ 51,295 ​ $ 7,114 Foreign ​ 64,317 ​ 88,865 ​ 108,124 Total pre-tax income ​ $ 98,640 ​ $ 140,160 ​ $ 115,238 ​ Our provision (benefit) for income taxes consists of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 Current: ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ $ 4,407 ​ $ 6,216 ​ $ 6,860 State ​ 1,190 ​ 1,964 ​ 861 Foreign ​ 18,562 ​ 13,113 ​ 19,717 Total current provision ​ 24,159 ​ 21,293 ​ 27,438 Deferred: ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ $ 679 ​ $ 3,915 ​ $ ( 2,547 ) State ​ 464 ​ 133 ​ ( 678 ) Foreign ​ ( 711 ) ​ ( 528 ) ​ ( 753 ) Total deferred provision (benefit) ​ 432 ​ 3,520 ​ ( 3,978 ) Total provision ​ $ 24,591 ​ $ 24,813 ​ $ 23,460 ​ As of June 30, 2022 and 2023, our liability for uncertain tax positions was $ 8.2 million and $ 12.0 million, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 12.0 million as of June 30, 2023. We recognize potential interest and penalties related to income tax matters in income tax expense. As of June 30, 2023, we have accrued $ 0.4 million for interest and penalties. Our uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. These include fiscal years after 2019 for federal purposes, fiscal years after 2018 for state purposes and fiscal years after 2015 for various foreign jurisdictions. Facts and circumstances could arise that could cause us to reduce the liability for unrecognized tax benefits, including, but not limited to, settlement of income tax positions or expiration of statutes of limitation. Since the ultimate resolution of uncertain tax positions depends on many factors and assumptions, we are not able to estimate the range of potential changes in the liability for unrecognized tax benefits or the timing of such changes. A summary of activity of unrecognized tax benefits for fiscal 2022 and 2023 is as follows (in thousands). ​ ​ ​ ​ ​ Balance at June 30, 2021 $ 19,677 Additions on tax positions for the current year ​ 3,084 Additions on tax positions from prior years ​ 1,479 Reduction in tax positions from prior year ​ ( 10,663 ) Balance at June 30, 2022 ​ $ 13,577 Additions on tax positions for the current year ​ 3,225 Additions on tax positions from prior years ​ 2,582 Reduction in tax positions from prior year ​ ( 4,406 ) Balance at June 30, 2023 ​ $ 14,978 ​ F-30 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 Deferred income tax assets (liabilities) consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ 2022 2023 Deferred income tax assets: ​ ​ ​ ​ ​ ​ Tax credit carryforwards ​ $ 13,130 ​ $ 5,934 Net operating loss carryforwards ​ 6,494 ​ 3,678 Customer advances ​ 2,848 ​ 3,443 Allowance for doubtful accounts ​ 4,471 ​ 2,994 Inventory reserve ​ 11,636 ​ 11,026 Inventory capitalization ​ 406 ​ 481 Accrued liabilities ​ 3,241 ​ 2,956 Operating lease liabilities ​ ​ 8,714 ​ ​ 8,043 Stock and deferred compensation ​ 10,601 ​ 12,224 Other assets ​ 1,446 ​ 1,164 Total deferred income tax assets ​ 62,987 ​ 51,943 Valuation allowance ​ ( 12,301 ) ​ ( 8,433 ) Net deferred income tax assets ​ 50,686 ​ 43,510 Deferred income tax liabilities: ​ ​ ​ ​ ​ ​ Depreciation ​ ( 7,604 ) ​ ( 5,860 ) Amortization of intangible assets ​ ( 31,518 ) ​ ( 21,617 ) Withholding tax on unrepatriated foreign earnings ​ ​ ( 6,851 ) ​ ​ ( 6,851 ) Operating lease ROU assets ​ ​ ( 8,480 ) ​ ​ ( 7,931 ) State transition tax ​ ​ ( 1,754 ) ​ ​ ( 1,754 ) Other liabilities ​ ( 1,750 ) ​ ( 1,824 ) Total deferred income tax liabilities ​ ( 57,957 ) ​ ( 45,837 ) Net deferred income tax liability ​ $ ( 7,271 ) ​ $ ( 2,327 ) ​ The components of the net deferred income tax liability are classified in the consolidated balance sheets as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ 2022 2023 Long term deferred income tax asset, included in other assets ​ $ 3,841 ​ $ 4,244 Long term deferred income tax liability ​ ( 11,112 ) ​ ( 6,571 ) Net deferred income tax liability ​ $ ( 7,271 ) ​ $ ( 2,327 ) ​ The components of current taxes receivable and payable and prepaid taxes are classified in the consolidated balance sheets as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ ​ 2022 2023 Current taxes receivable and prepaid taxes, included in prepaid expenses and other current assets ​ $ 7,843 ​ $ 7,216 Current taxes payable, included in other accrued expenses and current liabilities ​ ( 7,722 ) ​ ( 13,692 ) Net tax receivable (payable) ​ $ 121 ​ $ ( 6,476 ) ​ F-31 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 As of June 30, 2023, we had federal, state and foreign net operating losses carryforwards of approximately $ 1.1 million, $ 22.6 million and $ 7.9 million, respectively. Our net operating loss carryforwards will begin to expire in the tax year ending June 30, 2028. As of June 30, 2023, we had federal and state tax credit carryforwards of approximately $ 0.5 million and $ 8.1 million, respectively. Our credit carryforwards will begin to expire in the tax year ending June 30, 2026. We have established valuation allowances that relate to the net operating losses of certain subsidiaries, capital losses, and tax credits. During the year ended June 30, 2023, we recorded a net aggregated decrease of $ 3.9 million to these valuation allowances. We review the adequacy of individual valuation allowances and release such allowances when it is determined that it is more likely than not that the related benefits will be realized. We recognized all excess tax benefits and tax deficiencies as income tax expense or benefit in the current year. An income tax benefit of approximately $ 2.0 million and $ 0.6 million was recognized in fiscal 2022 and 2023, respectively. The consolidated effective income tax rate differs from the federal statutory income tax rate due primarily to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ 2021 2022 2023 Provision for income taxes at federal statutory rate ​ 21.0 % 21.0 % 21.0 % Research and development tax credits ​ ( 1.7 ) ​ ( 1.3 ) ​ ( 1.5 ) ​ Foreign income subject to tax at other than federal statutory rate ​ 0.6 ​ 0.2 ​ 0.2 ​ Stock compensation ​ ( 0.9 ) ​ ( 1.2 ) ​ ( 0.4 ) ​ Officers’ compensation ​ 5.8 ​ 4.3 ​ 5.5 ​ Change in valuation allowance ​ ( 5.9 ) ​ ( 4.0 ) ​ ( 0.5 ) ​ Unrecognized tax expense (benefit) ​ 4.2 ​ ( 1.4 ) ​ 0.3 ​ Tax on foreign currency gains and losses ​ ( 0.2 ) ​ — ​ ( 0.6 ) ​ State tax expense ​ 1.2 ​ 1.0 ​ 0.3 ​ U.S. tax on foreign earnings ​ ( 1.8 ) ​ 0.9 ​ 1.4 ​ Changes in prior year estimates ​ — ​ ( 0.6 ) ​ ( 1.1 ) ​ Global intangible low-taxed income, net of foreign tax credits ​ 0.5 ​ 0.3 ​ 0.8 ​ Foreign Derived Intangible Income Benefit ​ ( 1.3 ) ​ ( 1.3 ) ​ ( 1.8 ) ​ Non-taxable earnings from acquisitions ​ ( 0.4 ) ​ ( 0.6 ) ​ ( 2.1 ) ​ Patent box benefit ​ — ​ ( 0.3 ) ​ ( 1.9 ) ​ Withholding tax on foreign earnings ​ 3.4 ​ — ​ — ​ Other ​ 0.4 ​ 0.7 ​ 0.8 ​ Effective income tax rate ​ 24.9 % 17.7 % 20.4 % ​ The provision for income taxes consists of provisions for federal, state, and foreign income taxes. We operate in an international environment with significant operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates. ​ F-32 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 11. 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 caps, the remaining maximum amount of such potential future payments is $ 55.3 million as of June 30, 2023. 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 $ 1.0 million, $ 1.9 million and $ 3.4 million, respectively, during the fiscal years ended June 30, 2021, 2022 and 2023, respectively. 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 June 30, 2023 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 ​ ​ 5,506 Foreign currency translation adjustment ​ ​ 27 Changes in fair value for contingent earnout obligations ​ ( 11,901 ) Payments on contingent earnout obligations ​ ( 663 ) Ending fair value, June 30, 2023 ​ $ 21,181 ​ Advances from Customers —We receive advances from customers associated with certain contracts. These advances are paid in cash by customers, and we account for these as liabilities until our contractual obligations are complete. Environmental Contingencies —We are subject to various environmental laws. We often 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. 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 a breach 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 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 June 30, 2023. F-33 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 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 accrued payroll and related expenses at June 30, 2023 and in other long-term liabilities at June 30, 2022. Legal Proceedings — In February 2023, we received a subpoena from the U.S. Department of Justice (“DoJ”) relating to a former employee of an OSI Systems subsidiary. The DoJ is currently prosecuting the former employee for embezzlement and other conduct occurring before he was hired by our subsidiary and while he was employed by another company in the United States and Mexico. The subpoena requests documents and records relating to, among other things, the former employee and the Company’s business dealings in Mexico since 2020. We are working in coordination with the DoJ to identify and produce the relevant documents and records. We are involved in various other 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 non-ordinary course 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. 12. RELATED-PARTY TRANSACTIONS In 1994, we, together with an unrelated company, formed ECIL-Rapiscan Security Products Limited, a joint venture organized under the laws of India. We own a 36 % interest in the joint venture, our Chairman and Chief Executive Officer owns a 10.5 % interest, and one of our Executive Vice Presidents owns a 4.5 % ownership interest. Our initial investment in the joint venture was approximately $ 0.1 million. For each of the years ended June 30, 2021, 2022 and 2023 our equity earnings in the joint venture were less than $ 0.1 million. We, our Chairman and Chief Executive Officer and our Executive Vice President collectively control less than 50 % of the board of directors voting power in the joint venture. As a result, we account for the investment under the equity method of accounting. The joint venture was formed for the purpose of the manufacture, assembly, service and testing of security and inspection systems and other products. Some of our subsidiaries are suppliers to the joint venture partner, which in turn manufactures and sells the resulting products. Sales to the joint venture partner for fiscal 2021, 2022 and 2023 were approximately $ 2.4 million, $ 2.3 million and $ 6.9 million, respectively. Receivables from the joint venture were $ 0.6 million and $ 1.9 million as of June 30, 2022 and 2023, respectively. ​ F-34 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 13. EMPLOYEE BENEFIT PLANS Employee Retirement Savings Plans We have various qualified employee retirement savings plans. Participants can contribute certain amounts to the plans and we match a certain portion of employee contributions. We contributed approximately $ 6.7 million, $ 6.9 million and $ 7.2 million to the plans for the fiscal years ended June 30, 2021, 2022 and 2023, respectively. Deferred Compensation Plan We have a deferred compensation plan, which meets the requirements for deferred compensation under Section 409A of the Internal Revenue Code. The plan provides that selected employees are eligible to defer up to 80 % of their salaries and up to 100 % of their bonuses. We may also make employer contributions to participant accounts in certain circumstances. The benefits under this plan are unsecured. Participants are generally eligible to receive payment of their vested benefit at the end of their elected deferral period or after termination of their employment for any reason or at a later date to comply with the restrictions of Section 409A. Discretionary company contributions and the related earnings are subject to a vesting schedule dependent upon years of service to us and, also, vest completely upon the participant’s disability or death while employed by us or immediately prior to a change of control. We made contributions of $ 0.5 million, $ 0.5 million and $ 0.6 million for fiscal year 2021, 2022 and 2023, respectively. As of June 30, 2023, we held assets of $ 36.8 million and liabilities of $ 33.6 million related to this plan. Assets related to this plan are included in other assets and liabilities related to this plan are included in other long-term liabilities in the consolidated balance sheets. The plan liabilities include accrued employer contributions not yet funded to the plan. Employee Pension Plans We sponsor a number of qualified and nonqualified pension plans for our employees at certain locations. In accordance with accounting standards for employee pension and postretirement benefits, we fully recognize the overfunded or underfunded status of each of our defined benefit plans as an asset or liability in the consolidated balance sheets. The asset or liability equals the difference between the fair value of the plans’ assets and their benefit obligations. The liabilities associated with underfunded plans are classified as noncurrent, except to the extent the fair value of the plans’ assets is less than the plans’ estimated benefit payments over the next 12 months . We measure our pension and postretirement benefit plans’ assets and benefit obligations as of June 30. F-35 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 The following provides a reconciliation of the changes in the plans’ benefit obligations and fair value of assets for fiscal years 2022 and 2023, and a statement of the funded status as of June 30, 2022 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2023 Change in Benefit Obligation ​ ​ ​ ​ ​ ​ Benefit obligation at beginning of year ​ $ 18,434 ​ $ 18,464 Translation adjustment ​ ( 708 ) ​ 149 Interest costs ​ 464 ​ 624 Amendment ​ ​ 1,345 ​ ​ — Actuarial gain ​ ​ ( 900 ) ​ ​ ( 847 ) Benefits paid ​ ( 171 ) ​ ( 162 ) Benefit obligation at end of year ​ 18,464 ​ 18,228 Change in Plan Assets ​ ​ ​ ​ ​ ​ Fair value of plan assets at beginning of year ​ 7,010 ​ 5,977 Translation adjustment ​ ( 860 ) ​ 243 Actual return on plan assets ​ ( 47 ) ​ 413 Benefits paid ​ ( 126 ) ​ ( 120 ) Fair value of plan assets at end of year ​ 5,977 ​ 6,513 Funded status and net amount recognized ​ $ ( 12,487 ) ​ $ ( 11,715 ) Amount recognized in consolidated balance sheets consists of: ​ ​ ​ ​ ​ ​ Net benefit asset (included in other current assets) ​ $ 2,275 ​ $ 3,264 Current portion of net pension liability (included in other current liabilities) ​ ​ ( 180 ) ​ ​ ( 6,189 ) Net long term pension liability (included in other long-term liabilities) ​ ( 14,582 ) ​ ( 8,790 ) Accumulated other comprehensive income ​ 4,609 ​ 2,365 ​ One of our defined benefit pension plans is considered a nonqualified plan, therefore we have funded a separate rabbi trust which comprises insurance company contracts with fair values of $ 11.9 million and $ 13.6 million as of June 30, 2022 and 2023, respectively. These amounts are not included in the fair value of plan assets in the table above. ​ The following table provides the net periodic benefit costs for the fiscal years ended June 30, (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 Net Periodic Benefit Costs ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest costs ​ $ 477 ​ $ 464 ​ $ 624 Service costs ​ ​ — ​ ​ — ​ ​ — Expected return on plan assets ​ ( 242 ) ​ ( 279 ) ​ ( 340 ) Amortization of prior service costs ​ 668 ​ 1,115 ​ 1,330 Recognized actuarial loss ​ 75 ​ 41 ​ 83 Net periodic benefit cost ​ $ 978 ​ $ 1,341 ​ $ 1,697 ​ Plan Assumptions ​ ​ ​ ​ ​ ​ ​ ​ 2022 2023 Weighted average assumptions at year-end: ​ ​ ​ ​ ​ Discount rate 3.0 % 5.3 % Expected return on plan assets 4.2 % 5.8 % Rate of compensation increase — % — % ​ The long-term return on assets has been derived from the weighted average of assumed returns on each of the major asset categories. The weighted average is based on the actual proportion of each major asset class held, rather than a benchmark portfolio of assets. The expected returns for each major asset class have been derived from a combination of both historical market returns and current market data as well as the views of a range of investment managers. There is no assumed rate of compensation increase as most of the plan participants are retirees or no longer employed by OSI. F-36 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 Plan Assets and Investment Policy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ Fiscal year ended ​ ​ June 30, 2022 ​ June 30, 2023 ​ ​ Proportion of ​ Expected Rate ​ Proportion of ​ Expected Rate ​ Fair Value of Return Fair Value of Return Equity securities ​ 85 % 4.9 % 86 % 6.6 % Debt securities 14 % 0.8 % 13 % 0.8 % Cash 1 % 0.4 % 1 % 0.4 % Combined 100 % 4.2 % 100 % 5.8 % ​ The defined benefit plans’ assets are invested in a range of pooled investment funds that provide access to a diverse range of asset classes. The investment objective is to maximize the investment return over the long term without exposing the fund to an unnecessary level of risk. Within this objective, it is recognized that benefits will be secured by the purchase of annuities at the time of employee retirement. The benchmark is to hold assets in both equity and debt securities. The proportion in each investment class is not mandated and is allowed to fluctuate with market movements. The equity holdings are maintained in balanced funds under the control of investment managers. Day-to-day equities selection decisions are delegated to investment managers, although these are monitored against performance and risk targets. Due to the nature of the pooled funds, there are no significant holdings in any single company (greater than 5% of the total assets). The investment strategy is reviewed on a regular basis, based on the results of third-party liability studies. Projected Benefit Payments The following table reflects estimated benefits payments, based upon the same assumptions used to measure the benefit obligation and net pension cost, as of June 30, 2023 (in thousands): ​ ​ ​ ​ ​ ​ Pension Benefits July 1, 2023 to June 30, 2024 ​ $ 6,189 July 1, 2024 to June 30, 2025 ​ ​ 1,525 July 1, 2025 to June 30, 2026 ​ ​ 2,284 July 1, 2026 to June 30, 2027 ​ ​ 2,301 July 1, 2027 to June 30, 2028 ​ ​ 2,317 July 1, 2028 to June 30, 2033 ​ ​ 3,537 ​ Company Contribution There were no company contributions for the fiscal year ended June 30, 2023. ​ F-37 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 14. 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, Summary of Significant Accounting Policies. The following tables present our results of operations and identifiable assets by industry segment (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2021 ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Division Division Division Corporate Eliminations Consolidated Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ External customer revenue ​ $ 633,340 ​ $ 212,315 ​ $ 301,247 ​ $ — ​ $ — ​ $ 1,146,902 Revenue between product segments ​ — ​ — ​ 48,640 ​ — ​ ( 48,640 ) ​ — Total revenues ​ $ 633,340 ​ $ 212,315 ​ $ 349,887 ​ $ — ​ ( 48,640 ) ​ $ 1,146,902 Income (loss) from operations ​ $ 85,515 ​ $ 31,563 ​ $ 38,465 ​ $ ( 39,769 ) ​ $ ( 403 ) ​ $ 115,371 Segments assets ​ $ 798,192 ​ $ 220,411 ​ $ 282,039 ​ $ 121,293 ​ $ ( 37,568 ) ​ $ 1,384,367 Capital expenditures ​ $ 3,290 ​ $ 2,144 ​ $ 6,714 ​ $ 3,612 ​ $ — ​ $ 15,760 Depreciation and amortization ​ $ 26,572 ​ $ 5,364 ​ $ 9,325 ​ $ 2,594 ​ $ — ​ $ 43,855 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Division Division Division Corporate Eliminations Consolidated Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ External customer revenue ​ $ 663,159 ​ $ 205,658 ​ $ 314,419 ​ $ — ​ $ — ​ $ 1,183,236 Revenue between product segments ​ — ​ — ​ 52,242 ​ — ​ ( 52,242 ) ​ — Total revenues ​ $ 663,159 ​ $ 205,658 ​ $ 366,661 ​ $ — ​ ( 52,242 ) ​ $ 1,183,236 Income (loss) from operations ​ $ 98,784 ​ $ 24,696 ​ $ 45,030 ​ $ ( 46,950 ) ​ $ 189 ​ $ 121,749 Segments assets ​ $ 839,769 ​ $ 231,423 ​ $ 301,483 ​ $ 104,834 ​ $ ( 34,359 ) ​ $ 1,443,150 Capital expenditures ​ $ 5,513 ​ $ 2,295 ​ $ 4,533 ​ $ 2,580 ​ $ — ​ $ 14,921 Depreciation and amortization ​ $ 22,970 ​ $ 5,915 ​ $ 8,098 ​ $ 1,696 ​ $ — ​ $ 38,679 F-38 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Division Division Division Corporate Eliminations Consolidated Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ External customer revenue ​ $ 760,291 ​ $ 190,488 ​ $ 327,648 ​ $ — ​ $ — ​ $ 1,278,427 Revenue between product segments ​ — ​ — ​ 59,783 ​ — ​ ( 59,783 ) ​ — Total revenues ​ $ 760,291 ​ $ 190,488 ​ $ 387,431 ​ $ — ​ $ ( 59,783 ) ​ $ 1,278,427 Income (loss) from operations ​ $ 115,023 ​ $ 11,365 ​ $ 46,680 ​ $ ( 39,075 ) ​ $ 1,286 ​ $ 135,279 Segments assets ​ $ 948,126 ​ $ 245,856 ​ $ 310,930 ​ $ 94,678 ​ $ ( 43,904 ) ​ $ 1,555,686 Capital expenditures ​ $ 3,689 ​ $ 2,726 ​ $ 7,390 ​ $ 1,968 ​ $ 38 ​ $ 15,811 Depreciation and amortization ​ $ 23,504 ​ $ 5,757 ​ $ 7,582 ​ $ 1,670 ​ $ — ​ $ 38,513 ​ The following tables present the revenues and identifiable assets by geographical area (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2021 ​ ​ External ​ Intersegment ​ Total ​ Long-lived ​ Long-lived ​ revenues revenues Consolidated tangible assets assets Geographic region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 589,579 ​ $ 17,498 ​ $ 607,077 ​ $ 126,100 ​ $ 493,423 Mexico ​ 10,583 ​ — ​ 10,583 ​ 2,379 ​ 2,379 Other Americas ​ 66,732 ​ — ​ 66,732 ​ 8,055 ​ 29,960 Total Americas ​ 666,894 ​ 17,498 ​ 684,392 ​ 136,534 ​ ​ 525,762 United Kingdom ​ 221,423 ​ 874 ​ 222,297 ​ 25,183 ​ ​ 80,348 Other Europe, Middle East and Africa ​ 29,879 ​ — ​ 29,879 ​ 8,389 ​ ​ 8,389 Total EMEA ​ 251,302 ​ 874 ​ 252,176 ​ 33,572 ​ ​ 88,737 Asia-Pacific ​ 228,706 ​ 30,268 ​ 258,974 ​ 29,346 ​ ​ 32,865 Eliminations ​ — ​ ( 48,640 ) ​ ( 48,640 ) ​ — ​ — Total ​ $ 1,146,902 ​ $ — ​ $ 1,146,902 ​ $ 199,452 ​ $ 647,364 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ ​ External ​ Intersegment ​ Total ​ Long-lived ​ Long-lived ​ revenues revenues Consolidated tangible assets assets Geographic region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 569,601 ​ $ 16,322 ​ $ 585,923 ​ $ 117,622 ​ $ 514,489 Mexico ​ 8,109 ​ — ​ 8,109 ​ 261 ​ 261 Other Americas ​ 47,737 ​ — ​ 47,737 ​ 8,091 ​ 27,676 Total Americas ​ 625,447 ​ 16,322 ​ 641,769 ​ 125,974 ​ ​ 542,426 United Kingdom ​ 276,658 ​ 2,887 ​ 279,545 ​ 27,749 ​ ​ 80,758 Other Europe, Middle East and Africa ​ 52,952 ​ — ​ 52,952 ​ 4,837 ​ ​ 6,776 Total EMEA ​ 329,610 ​ 2,887 ​ 332,497 ​ 32,586 ​ ​ 87,534 Asia-Pacific ​ 228,179 ​ 33,002 ​ 261,181 ​ 20,589 ​ ​ 23,916 Eliminations ​ — ​ ( 52,211 ) ​ ( 52,211 ) ​ — ​ — Total ​ $ 1,183,236 ​ $ — ​ $ 1,183,236 ​ $ 179,149 ​ $ 653,876 ​ F-39 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FOR THE THREE YEARS ENDED JUNE 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 ​ ​ External ​ Intersegment ​ Total ​ Long-lived ​ Long-lived ​ revenues revenues Consolidated tangible assets Assets Geographic region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 653,127 ​ $ 17,461 ​ $ 670,588 ​ $ 126,388 ​ $ 534,417 Mexico ​ 23,467 ​ — ​ 23,467 ​ 609 ​ 609 Other Americas ​ 63,416 ​ — ​ 63,416 ​ 8,050 ​ 25,844 Total Americas ​ 740,010 ​ 17,461 ​ 757,471 ​ 135,047 ​ ​ 560,870 United Kingdom ​ 280,268 ​ 5,835 ​ 286,103 ​ 27,952 ​ ​ 87,289 Other Europe, Middle East and Africa ​ 44,498 ​ — ​ 44,498 ​ 4,233 ​ ​ 6,198 Total EMEA ​ 324,766 ​ 5,835 ​ 330,601 ​ 32,185 ​ ​ 93,487 Asia-Pacific ​ 213,651 ​ 36,487 ​ 250,138 ​ 21,478 ​ ​ 24,715 Eliminations ​ — ​ ( 59,783 ) ​ ( 59,783 ) ​ — ​ — Total ​ $ 1,278,427 ​ $ — ​ $ 1,278,427 ​ $ 188,710 ​ $ 679,072 ​ Pursuant to ASC 280 Segment Reporting, external revenues are attributed to individual countries based upon the location of our selling entity. * * * * * * ​ ​ F-40 Table of Contents ​ SUPPLEMENTARY DATA UNAUDITED QUARTERLY RESULTS The following tables present unaudited quarterly financial information for the four quarters in the fiscal years ended June 30, 2022 and 2023 (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarter Ended ​ ​ September 30, ​ December 31, ​ March 31, ​ June 30, ​ 2021 2021 2022 2022 ​ ​ (Unaudited) Net revenues ​ $ 279,257 ​ $ 276,681 ​ $ 290,477 ​ $ 336,821 Costs of goods sold ​ 179,927 ​ 176,908 ​ 187,619 ​ 214,355 Gross profit ​ 99,330 ​ 99,773 ​ 102,858 ​ 122,466 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 57,323 ​ 54,879 ​ 57,813 ​ 65,538 Research and development ​ 14,817 ​ 14,977 ​ 15,150 ​ 14,639 Impairment, restructuring and other charges, net ​ 2,510 ​ 831 ​ 1,469 ​ 2,732 Total operating expenses ​ 74,650 ​ 70,687 ​ 74,432 ​ 82,909 Income from operations ​ 24,680 ​ 29,086 ​ 28,426 ​ 39,557 Interest and other expense, net ​ ( 2,016 ) ​ ( 2,217 ) ​ ( 2,301 ) ​ ( 2,428 ) Other income ​ ​ — ​ ​ — ​ ​ 27,373 ​ ​ — Income before income taxes ​ 22,664 ​ 26,869 ​ 53,498 ​ 37,129 Provision for income taxes ​ ( 3,612 ) ​ ( 7,072 ) ​ ( 10,763 ) ​ ( 3,366 ) Net income ​ $ 19,052 ​ $ 19,797 ​ $ 42,735 ​ $ 33,763 Basic earnings per common share ​ $ 1.06 ​ $ 1.11 ​ $ 2.45 ​ $ 1.99 Diluted earnings per common share ​ $ 1.04 ​ $ 1.09 ​ $ 2.41 ​ $ 1.94 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarter Ended ​ ​ September 30, ​ December 31, ​ March 31, ​ June 30, ​ 2022 2022 2023 2023 ​ ​ (Unaudited) Net revenues ​ $ 268,071 ​ $ 295,597 ​ $ 302,889 ​ $ 411,870 Costs of goods sold ​ 180,574 ​ 199,390 ​ 199,103 ​ 268,850 Gross profit ​ 87,497 ​ 96,207 ​ 103,786 ​ 143,020 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 53,438 ​ 54,003 ​ 53,707 ​ 67,165 Research and development ​ 14,540 ​ 14,456 ​ 14,852 ​ 15,504 Impairment, restructuring and other charges, net ​ 1,219 ​ 2,257 ​ 890 ​ 3,200 Total operating expenses ​ 69,197 ​ 70,716 ​ 69,449 ​ 85,869 Income from operations ​ 18,300 ​ 25,491 ​ 34,337 ​ 57,151 Interest and other expense, net ​ ( 3,432 ) ​ ( 5,180 ) ​ ( 5,727 ) ​ ​ ( 5,702 ) Other income ​ ​ — ​ ​ — ​ ​ — ​ ​ — Income before income taxes ​ 14,868 ​ 20,311 ​ 28,610 ​ 51,449 Provision for income taxes ​ ( 3,633 ) ​ ( 3,957 ) ​ ( 6,802 ) ​ ( 9,068 ) Net income ​ $ 11,235 ​ $ 16,354 ​ $ 21,808 ​ $ 42,381 Basic earnings per common share ​ $ 0.66 ​ $ 0.97 ​ $ 1.30 ​ $ 2.53 Diluted earnings per common share ​ $ 0.65 ​ $ 0.96 ​ $ 1.27 ​ $ 2.46 ​ ​ F-41 Table of Contents ​ INDEX TO EXHIBITS ​ No. EXHIBIT DESCRIPTION ​ ​ ​ 3.1 ​ Certificate of Incorporation of OSI Systems, Inc. (1) 3.2 ​ Amended and Restated Bylaws of OSI Systems, Inc. (19) 4.1 ​ Form of Common Stock Certificate (1) 4.2 ​ Indenture (including the form of Note) related to the 1.25% Convertible Senior Notes due 2022, dated as of February 22, 2017, between OSI Systems, Inc. and Branch Banking and Trust Company, as trustee (13) 4.3 ​ Form of 1.25% Convertible Senior Note due 2022 (included in Exhibit 4.2) (13) 4.4* ​ Description of Capital Stock 10.1† ​ Amended and Restated OSI Systems, Inc. Deferred Compensation Plan (2) 10.2† ​ OSI Systems, Inc. Nonqualified Defined Benefit Plan (3) 10.3† ​ Amended and Restated OSI Systems, Inc. 2008 Employee Stock Purchase Plan (4) 10.4† ​ First Amendment to Amended and Restated OSI Systems, Inc. 2008 Employee Stock Purchase Plan (14) 10.5† ​ Form of Indemnification Agreement for Directors and Executive Officers of OSI Systems, Inc. (5) 10.6 ​ Eighth Amendment to Credit Agreement dated August 11, 2022 between Wells Fargo Bank, N.A. and OSI Systems, Inc. (18) 10.7† ​ Employment Agreement effective as of January 1, 2012 between Deepak Chopra and OSI Systems, Inc. (6) 10.8† ​ Amendment to Employment Agreement effective as of July 1, 2015 between Deepak Chopra and OSI Systems, Inc. (11) 10.9† ​ Second Amendment to Employment Agreement effective as of December 31, 2017 by and between Deepak Chopra and OSI Systems, Inc. (7) 10.10† ​ Employment Agreement effective as of January 1, 2012 between Alan Edrick and OSI Systems, Inc. (6) 10.11† ​ Amendment to Employment Agreement effective as of July 1, 2015 between Alan Edrick and OSI Systems, Inc. (11) 10.12† ​ Employment Agreement effective as of January 1, 2012 between Ajay Mehra and OSI Systems, Inc. (6) 10.13† ​ Amendment to Employment Agreement effective as of May 1, 2015 between Ajay Mehra and OSI Systems, Inc. (12) 10.14† ​ Second Amendment to Employment Agreement effective April 29, 2019 between Ajay Mehra and OSI Systems, Inc. (15) 10.15† ​ Employment Agreement effective as of January 1, 2012 between Victor Sze and OSI Systems, Inc. (6) 10.16† ​ Amendment to Employment Agreement effective as of July 1, 2015 between Victor Sze and OSI Systems, Inc. (11) 10.17† ​ Second Amendment to Employment Agreement effective April 29, 2019 between Victor Sze and OSI Systems, Inc. (15) 10.18† ​ Employment Agreement effective as of January 1, 2012 between Manoocher Mansouri and OSI Systems, Inc. (6) 10.19† ​ Amended and Restated Retirement Benefit Award Agreement effective as of December 31, 2017 by and between Deepak Chopra and OSI Systems, Inc. (7) 10.20† ​ First Amendment to Amended and Restated Retirement Benefit Award Agreement effective as of June 19, 2020 by and between Deepak Chopra and OSI Systems, Inc. (16) 10.21† ​ Second Amendment to Amended and Restated Retirement Benefit Award Agreement effective as of August 19, 2020 by and between Deepak Chopra and OSI Systems, Inc. (16) 10.22† ​ Third Amendment to Amended and Restated Retirement Benefit Award Agreement effective as of October 27, 2021 by and between Deepak Chopra and OSI Systems, Inc. (17) 10.23† ​ Amended and Restated OSI Systems, Inc. 2012 Incentive Award Plan (8) 10.24† ​ Form of Restricted Stock Award Agreement (9) 10.25† ​ Form of Restricted Stock Unit Award Agreement (9) 10.26† ​ Form of Stock Option Agreement (9) 14.1 ​ OSI Systems, Inc. Code of Ethics and Conduct effective May 23, 2016 (10) 21.1* ​ Subsidiaries of the Company 23.1* ​ Consent of Independent Registered Public Accounting Firm 23.2* ​ Consent of Independent Registered Public Accounting Firm 24.1* ​ Power of Attorney (included on the signature page of this Form 10-K) 31.1* ​ Certification Pursuant to Section 302 31.2* ​ Certification Pursuant to Section 302 32.1* ​ Certification Pursuant to Section 906 32.2* ​ Certification Pursuant to Section 906 101.1 ​ The following financial information from the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2023 formatted in XBRL (eXtensible Business Reporting Language) as follows: ​ ​ (i) the consolidated balance sheets ​ ​ (ii) the consolidated statements of operations ​ ​ (iii) the consolidated statements of comprehensive income ​ ​ (iv) the consolidated statements of stockholders’ equity ​ ​ (v) the consolidated statements of cash flows ​ Table of Contents ​ No. EXHIBIT DESCRIPTION ​ ​ ​ ​ ​ (vi) the notes to the consolidated financial statements, tagged in summary and detail 104 ​ Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) * Filed herewith † Denotes a management contract or compensatory plan or arrangement. (1) Previously filed with our Current Report on Form 8-K filed on March 8, 2010. (2) Previously filed with our Quarterly Report on Form 10-Q filed on May 2, 2014. (3) Previously filed with our Current Report on Form 8-K filed on October 10, 2008. (4) Previously filed with our Quarterly Report on Form 10-Q filed on October 24, 2014. (5) Previously filed with our Annual Report on Form 10-K filed on August 27, 2010. (6) Previously filed with our Current Report on Form 8-K filed on April 6, 2012. (7) Previously filed with our Current Report on Form 8-K filed on January 5, 2018. (8) Previously filed with our Proxy Statement on Schedule 14A filed on October 21, 2020. (9) Previously filed with our Registration Statement on Form S-8 filed on August 16, 2013. (10) Previously filed with our Current Report on Form 8-K filed on May 23, 2016. (11) Previously filed with our Quarterly Report on Form 10-Q filed on January 28, 2016. (12) Previously filed with our Quarterly Report on Form 10-Q filed on October 30, 2015. (13) Previously filed with our Current Report on Form 8-K filed on February 22, 2017. (14) Previously filed with our Proxy Statement on Schedule 14A filed on October 21, 2016. (15) Previously filed with our Quarterly Report on Form 10-Q filed on May 2, 2019. (16) Previously filed with our Annual Report on Form 10-K filed on August 21, 2020. (17) Previously filed with our Quarterly Report on Form 10-Q filed on October 29, 2021. (18) Previously filed with our Annual Report on Form 10-K filed on August 19, 2022. (19) Previously filed with our Quarterly Report on Form 10-Q filed on January 27, 2023. ​ ​ ​ ​ Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ ​ OSI SYSTEMS, INC. (Registrant) ​ Date: August 29, 2023 By: /s/ ALAN EDRICK Alan Edrick, Executive Vice President & Chief Financial Officer ​ POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Deepak Chopra, Alan Edrick and Victor Sze, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors to enable OSI Systems, Inc. to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission in connection therewith, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all amendments thereto. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. ​ ​ ​ Name Title Date ​ ​ ​ ​ ​ /s/ DEEPAK CHOPRA Deepak Chopra ​ Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) ​ August 29, 2023 ​ ​ ​ ​ ​ /s/ ALAN EDRICK Alan Edrick ​ Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) ​ August 29, 2023 ​ ​ ​ ​ ​ /s/ WILLIAM F. BALLHAUS, JR. William F. Ballhaus, Jr. ​ Director ​ August 29, 2023 ​ ​ ​ ​ ​ /s/ GERALD CHIZEVER Gerald Chizever ​ Director ​ August 29, 2023 ​ ​ ​ ​ ​ /s/ JAMES B. HAWKINS James B. Hawkins ​ Director ​ August 29, 2023 ​ ​ ​ ​ ​ /s/ MEYER LUSKIN Meyer Luskin ​ Director ​ August 29, 2023 ​ ​ ​ ​ ​ /s/ KELLI BERNARD Kelli Bernard ​ Director ​ August 29, 2023 ​ ​ II-2 ​