OSI SYSTEMS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS ​ OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (amounts in thousands, except share amounts and par value) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, ​ 2023 2023 ASSETS ​ ​ ​ ​ ​ ​ CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 76,750 ​ $ 82,591 Accounts receivable, net ​ 380,845 ​ ​ 323,769 Inventories ​ 338,008 ​ ​ 418,797 Prepaid expenses and other current assets ​ 44,300 ​ ​ 46,942 Total current assets ​ 839,903 ​ ​ 872,099 Property and equipment, net ​ 108,933 ​ ​ 109,174 Goodwill ​ 349,505 ​ ​ 348,411 Intangible assets, net ​ 140,857 ​ ​ 140,211 Other assets ​ 116,488 ​ ​ 118,557 Total assets ​ $ 1,555,686 ​ $ 1,588,452 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ Bank lines of credit ​ $ 215,000 ​ $ 235,000 Current portion of long-term debt ​ 8,076 ​ ​ 8,134 Accounts payable ​ 139,011 ​ ​ 164,422 Accrued payroll and related expenses ​ 51,243 ​ ​ 44,430 Advances from customers ​ 21,250 ​ ​ 31,949 Other accrued expenses and current liabilities ​ 137,114 ​ ​ 127,693 Total current liabilities ​ 571,694 ​ ​ 611,628 Long-term debt ​ 136,491 ​ ​ 134,746 Deferred income taxes ​ 6,571 ​ ​ 6,868 Other long-term liabilities ​ 114,765 ​ ​ 110,753 Total liabilities ​ 829,521 ​ ​ 863,995 Commitments and contingencies (Note 10) ​ ​ ​ ​ ​ ​ STOCKHOLDERS’ EQUITY: ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.001 par value— 10,000,000 shares authorized; no shares issued or outstanding ​ — ​ ​ — Common stock, $ 0.001 par value— 100,000,000 shares authorized; issued and outstanding , 16,755,772 shares at June 30, 2023 and 16,987,842 shares at September 30, 2023 ​ 9,835 ​ ​ 17 Retained earnings ​ 735,957 ​ ​ 745,955 Accumulated other comprehensive loss ​ ( 19,627 ) ​ ​ ( 21,515 ) Total stockholders’ equity ​ 726,165 ​ ​ 724,457 Total liabilities and stockholders’ equity ​ $ 1,555,686 ​ $ 1,588,452 ​ See accompanying notes to condensed consolidated financial statements. ​ 3 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (amounts in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2022 2023 Net revenues: ​ ​ ​ ​ ​ ​ Products ​ $ 196,954 ​ $ 199,709 Services ​ 71,117 ​ ​ 79,501 Total net revenues ​ 268,071 ​ ​ 279,210 Cost of goods sold: ​ ​ ​ ​ ​ ​ Products ​ 143,369 ​ ​ 136,983 Services ​ 37,205 ​ ​ 43,482 Total cost of goods sold ​ 180,574 ​ ​ 180,465 Gross profit ​ 87,497 ​ ​ 98,745 Operating expenses: ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 53,438 ​ ​ 59,798 Research and development ​ 14,540 ​ ​ 15,922 Impairment, restructuring and other charges, net ​ 1,219 ​ ​ 466 Total operating expenses ​ 69,197 ​ ​ 76,186 Income from operations ​ 18,300 ​ ​ 22,559 Interest and other expense, net ​ ( 3,432 ) ​ ​ ( 5,748 ) Income before income taxes ​ 14,868 ​ ​ 16,811 Provision for income taxes ​ ( 3,633 ) ​ ​ ( 3,932 ) Net income ​ $ 11,235 ​ $ 12,879 Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 0.66 ​ $ 0.77 Diluted ​ $ 0.65 ​ $ 0.75 Shares used in per share calculation: ​ ​ ​ ​ ​ ​ Basic ​ 16,924 ​ ​ 16,825 Diluted ​ 17,180 ​ ​ 17,175 ​ See accompanying notes to condensed consolidated financial statements. ​ 4 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED ) (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2022 2023 Net income ​ $ 11,235 ​ $ 12,879 Other comprehensive loss: ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment, net of tax ​ ( 9,792 ) ​ ​ ( 3,172 ) Net unrealized gain on derivatives, net of tax ​ ​ 3,540 ​ ​ 1,147 Other, net of tax ​ ​ 333 ​ ​ 137 Other comprehensive loss ​ ​ ( 5,919 ) ​ ​ ( 1,888 ) Comprehensive income ​ $ 5,316 ​ $ 10,991 ​ See accompanying notes to condensed consolidated financial statements. ​ 5 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ Other ​ ​ ​ ​ Number of ​ ​ Retained Comprehensive ​ ​ ​ Shares Amount Earnings Loss Total Balance—June 30, 2022 16,870,050 ​ $ 17 ​ $ 663,869 ​ $ ( 25,462 ) ​ $ 638,424 Exercise of stock options 2,919 ​ ​ 194 ​ ​ — ​ ​ — ​ ​ 194 Vesting of RSUs 286,119 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued under employee stock purchase program 28,603 ​ ​ 1,969 ​ ​ — ​ ​ — ​ ​ 1,969 Stock-based compensation expense — ​ ​ 7,177 ​ ​ — ​ ​ — ​ ​ 7,177 Repurchase of common stock ​ ( 208,427 ) ​ ​ ( 208 ) ​ ​ ( 17,079 ) ​ ​ — ​ ​ ( 17,287 ) Taxes paid related to net share settlement of equity awards ( 125,111 ) ​ ​ ( 9,132 ) ​ ​ ( 2,008 ) ​ ​ — ​ ​ ( 11,140 ) Net income — ​ ​ — ​ ​ 11,235 ​ ​ — ​ ​ 11,235 Other comprehensive loss — ​ ​ — ​ ​ — ​ ​ ( 5,919 ) ​ ​ ( 5,919 ) Balance—September 30, 2022 ​ 16,854,153 ​ $ 17 ​ $ 656,017 ​ $ ( 31,381 ) ​ $ 624,653 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ Other ​ ​ ​ ​ Number of ​ ​ Retained Comprehensive ​ ​ ​ Shares Amount Earnings Loss Total Balance—June 30, 2023 ​ 16,755,772 ​ $ 9,835 ​ $ 735,957 ​ $ ( 19,627 ) ​ $ 726,165 Exercise of stock options ​ 4,752 ​ ​ 420 ​ ​ — ​ ​ — ​ ​ 420 Vesting of RSUs ​ 363,820 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued under employee stock purchase program ​ 29,813 ​ ​ 2,031 ​ ​ — ​ ​ — ​ ​ 2,031 Stock-based compensation expense ​ — ​ ​ 7,089 ​ ​ — ​ ​ — ​ ​ 7,089 Taxes paid related to net share settlement of equity awards ​ ( 166,315 ) ​ ​ ( 19,358 ) ​ ​ ( 2,881 ) ​ ​ — ​ ​ ( 22,239 ) Net income ​ — ​ ​ — ​ ​ 12,879 ​ ​ — ​ ​ 12,879 Other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ ( 1,888 ) ​ ​ ( 1,888 ) Balance—September 30, 2023 16,987,842 ​ $ 17 ​ $ 745,955 ​ $ ( 21,515 ) ​ $ 724,457 ​ ​ 6 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2022 2023 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ ​ ​ Net income ​ $ 11,235 ​ $ 12,879 Adjustments to reconcile net income to net cash provided by operating activities, net of effects from acquisitions: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 9,541 ​ ​ 9,568 Stock-based compensation expense ​ 7,177 ​ ​ 7,089 Recovery of losses on accounts receivable ​ ​ ( 1,675 ) ​ ​ ( 433 ) Deferred income taxes ​ ​ 121 ​ ​ 208 Amortization of debt discount and issuance costs ​ 196 ​ ​ — Other ​ 7 ​ ​ 42 Changes in operating assets and liabilities—net of business acquisitions: ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 5,376 ) ​ ​ 55,868 Inventories ​ ( 29,966 ) ​ ​ ( 82,035 ) Prepaid expenses and other assets ​ ( 8,587 ) ​ ​ ( 7,605 ) Accounts payable ​ 20,000 ​ ​ 25,851 Accrued payroll and related expenses ​ ​ ( 10,987 ) ​ ​ ( 6,606 ) Advances from customers ​ 10,133 ​ ​ 10,770 Deferred revenue ​ ​ 19,231 ​ ​ ( 7,142 ) Other ​ ( 3,808 ) ​ ​ ( 1,310 ) Net cash provided by operating activities ​ 17,242 ​ ​ 17,144 CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ( 3,281 ) ​ ​ ( 5,239 ) Proceeds from sale of property and equipment ​ ​ 92 ​ ​ 44 Purchases of certificates of deposit ​ ​ ( 73 ) ​ ​ ( 2,068 ) Proceeds from maturities of certificates of deposit ​ ​ — ​ ​ 1,839 Acquisition of businesses, net of cash acquired ​ ( 1,871 ) ​ ​ — Payments for intangible and other assets ​ ( 3,944 ) ​ ​ ( 4,154 ) Net cash used in investing activities ​ ( 9,077 ) ​ ​ ( 9,578 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​ ​ Net borrowings on bank lines of credit ​ 155,000 ​ ​ 20,000 Proceeds from long-term debt ​ 100,307 ​ ​ 394 Payments on long-term debt ​ ( 242,479 ) ​ ​ ( 2,073 ) Proceeds from exercise of stock options and employee stock purchase plan ​ 2,163 ​ ​ 2,451 Payments of contingent consideration ​ ​ ( 415 ) ​ ​ ( 383 ) Repurchases of common stock ​ ( 17,287 ) ​ ​ — Taxes paid related to net share settlement of equity awards ​ ( 11,140 ) ​ ​ ( 22,239 ) Net cash used in financing activities ​ ( 13,851 ) ​ ​ ( 1,850 ) Effect of exchange rate changes on cash ​ ( 4,526 ) ​ ​ 125 Net change in cash and cash equivalents ​ ( 10,212 ) ​ ​ 5,841 Cash and cash equivalents—beginning of period ​ 64,202 ​ ​ 76,750 Cash and cash equivalents—end of period ​ $ 53,990 ​ $ 82,591 Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ Cash paid, net during the period for: ​ ​ ​ ​ ​ ​ Interest ​ $ 3,856 ​ $ 5,455 Income taxes ​ $ 7,235 ​ $ 6,795 ​ See accompanying notes to condensed consolidated financial statements. ​ 7 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 1. Basis of Presentation The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded in accordance with SEC rules and regulations and GAAP applicable to interim unaudited financial statements. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for audited annual financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. These unaudited condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 filed with the SEC. The results of operations for the three months ended September 30, 2023 are not necessarily indicative of the operating results to be expected for the full 2024 fiscal year or any future periods. Use of Estimates ​ The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales, costs of sales and expenses during the reporting period. The most significant of these estimates and assumptions for our company relate to contract revenue, fair values of assets acquired and liabilities assumed in business combinations, values for inventories reported at lower of cost or net realizable value, stock-based compensation expense, income taxes, accrued warranty costs, 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. ​ Earnings Per Share Computations ​ We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. We compute diluted earnings per share by dividing net income available to common stockholders by the sum of the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares consist of the shares issuable upon the exercise of stock options and restricted stock unit awards under the treasury stock method. ​ The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2022 2023 Net income available to common stockholders ​ $ 11,235 ​ $ 12,879 Weighted average shares outstanding—basic ​ 16,924 ​ ​ 16,825 Dilutive effect of equity awards ​ 256 ​ ​ 350 Weighted average shares outstanding—diluted ​ 17,180 ​ ​ 17,175 Basic earnings per share ​ $ 0.66 ​ $ 0.77 Diluted earnings per share ​ $ 0.65 ​ $ 0.75 Shares excluded from diluted earnings per share due to their anti-dilutive effect ​ ​ 26 ​ ​ 8 ​ 8 Table of Contents 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. Our cash and cash equivalents totaled $ 82.6 million at September 30, 2023. Of this amount, approximately 91 % 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, Mexico and Egypt among other countries. We have cash holdings in financial institutions that exceed insured limits for such financial institutions; however, we mitigate this risk by utilizing international financial institutions of high credit quality. ​ Fair Value of Financial Instruments ​ Our financial instruments consist primarily of cash and cash equivalents, insurance company contracts, accounts receivable, accounts payable, debt instruments, 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 and September 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 10 to the condensed consolidated financial statements, are in the “Level 3” category for valuation purposes. ​ The fair values of our financial assets and liabilities are categorized as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 September 30, 2023 ​ Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets—Insurance company contracts ​ $ — ​ $ 47,181 ​ $ — ​ $ 47,181 ​ $ — ​ $ 47,508 ​ $ — ​ $ 47,508 Assets – Interest rate swap contract ​ $ — ​ $ 5,369 ​ $ — ​ $ 5,369 ​ $ — ​ $ 6,826 ​ $ — ​ $ 6,826 Liabilities—Contingent consideration ​ $ — ​ $ — ​ $ 21,181 ​ $ 21,181 ​ $ — ​ $ — ​ $ 19,784 ​ $ 19,784 ​ 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 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 three months ended September 30, 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, 2023 and September 30, 2023, we held foreign currency forward contracts with notional amounts totaling $ 21.6 million and $ 25.6 million, respectively. Unrealized gains and losses from our foreign currency forward contracts as of June 30, 2023 and September 30, 2023 were not significant. 9 Table of Contents 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, 2023 and September 30, 2023, the notional amount of the derivative instruments designated as an interest rate swap hedge was $ 175 million. The fair value of the interest rate swap contract as of as of June 30, 2023 and September 30, 2023 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 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 ​ $ ( 3,432 ) ​ $ ( 5,748 ) Gain recognized in other comprehensive income, net of tax ​ 3,540 ​ 1,147 Benefit (expense) reclassified from accumulated other comprehensive income to interest expense, net ​ ( 120 ) ​ 872 ​ Recent Accounting Pronouncements 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. There were no new pronouncements adopted in the first quarter of fiscal year 2024. ​ 2. Business Combinations Under Accounting Standards Codification Topic 805, Business Combinations (“ASC 805"), the acquisition method of accounting requires us to record assets acquired less liabilities assumed from an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase price over the estimated fair value of the net assets acquired should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions which are believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is up to one year from the acquisition date, as additional information that existed at the acquisition date becomes available for preliminary estimates, we may record adjustments to the preliminary assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are included in earnings. Fiscal Year 2024 Business Acquisition In October 2023, we (through our Security Division) acquired a privately held provider of radiation detection technology for approximately $ 2.8 million, plus up to $ 3.6 million in potential contingent consideration. The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is not deductible for income tax purposes. 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. 10 Table of Contents 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. These business acquisitions in fiscal 2023 and 2024, individually and in the aggregate, were not material to our consolidated financial statements. Accordingly, pro-forma historical results of operations and other disclosures related to these businesses have not been presented. ​ 3. Balance Sheet Details ​ The following tables set forth details of selected balance sheet accounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Accounts receivable, net 2023 2023 Accounts receivable ​ $ 395,218 ​ $ 337,365 Less allowance for doubtful accounts ​ ( 14,373 ) ​ ( 13,596 ) Total ​ $ 380,845 ​ $ 323,769 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Inventories 2023 2023 Raw materials ​ $ 233,217 ​ $ 271,449 Work-in-process ​ 56,329 ​ 82,969 Finished goods ​ 48,462 ​ 64,379 Total ​ $ 338,008 ​ $ 418,797 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Property and equipment, net 2023 2023 Land ​ $ 15,691 ​ $ 15,663 Buildings, civil works and improvements ​ 49,166 ​ 48,564 Leasehold improvements ​ 13,553 ​ 13,533 Equipment and tooling ​ 135,703 ​ 136,399 Furniture and fixtures ​ 3,632 ​ 3,241 Computer equipment ​ 24,119 ​ 21,229 Computer software ​ 26,981 ​ 27,487 Computer software implementation in process ​ ​ 9,705 ​ ​ 9,544 Construction in process ​ 4,108 ​ 5,806 Total ​ 282,658 ​ 281,466 Less accumulated depreciation and amortization ​ ( 173,725 ) ​ ( 172,292 ) Property and equipment, net ​ $ 108,933 ​ $ 109,174 ​ Depreciation and amortization expense for property and equipment was $ 4.9 million in each of the three months ended September 30, 2022 and 2023. ​ 11 Table of Contents 4. Goodwill and Intangible Assets ​ The changes in the carrying value of goodwill by segment for the three-month period ended September 30, 2023 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ And ​ ​ ​ ​ ​ Security ​ Healthcare ​ Manufacturing ​ ​ ​ ​ Division Division Division Consolidated Balance as of June 30, 2023 ​ $ 230,662 ​ $ 48,455 ​ $ 70,388 ​ $ 349,505 Foreign currency translation adjustment ​ ( 132 ) ​ ​ ( 103 ) ​ ​ ( 859 ) ​ ​ ( 1,094 ) Balance as of September 30, 2023 ​ $ 230,530 ​ ​ 48,352 ​ ​ 69,529 ​ ​ 348,411 ​ Intangible assets consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ September 30, 2023 ​ ​ Weighted ​ Gross ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Carrying ​ Accumulated ​ Intangibles ​ Carrying ​ Accumulated ​ Intangibles ​ Lives Value Amortization Net Value Amortization Net Amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Software development costs 8 - 9 years ​ $ 77,844 ​ $ ( 20,285 ) ​ $ 57,559 ​ ​ 81,845 ​ ​ ( 21,145 ) ​ ​ 60,700 Patents 19 years ​ 8,636 ​ ( 3,404 ) ​ 5,232 ​ ​ 8,742 ​ ​ ( 3,515 ) ​ ​ 5,227 Developed technology 10 years ​ 68,274 ​ ( 38,353 ) ​ 29,921 ​ ​ 68,246 ​ ​ ( 40,186 ) ​ ​ 28,060 Customer relationships 7 years ​ 55,780 ​ ( 39,101 ) ​ 16,679 ​ ​ 55,570 ​ ​ ( 40,833 ) ​ ​ 14,737 Total amortizable assets ​ ​ ​ 210,534 ​ ​ ( 101,143 ) ​ ​ 109,391 ​ ​ 214,403 ​ ​ ( 105,679 ) ​ ​ 108,724 Non-amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ In-process R&D ​ ​ ​ ​ 533 ​ ​ — ​ ​ 533 ​ ​ 533 ​ ​ — ​ ​ 533 Trademarks ​ ​ ​ 30,933 ​ ​ — ​ ​ 30,933 ​ ​ 30,954 ​ ​ — ​ ​ 30,954 Total intangible assets ​ ​ ​ $ 242,000 ​ $ ( 101,143 ) ​ $ 140,857 ​ ​ 245,890 ​ ​ ( 105,679 ) ​ ​ 140,211 ​ Amortization expense related to intangible assets was $ 4.7 million in each of the three months ended September 30, 2022 and 2023. ​ At September 30, 2023, the estimated future amortization expense for amortizable intangible assets was as follows (in thousands): ​ Fiscal Year ​ ​ ​ ​ ​ 2024 (remaining 9 months) $ 14,187 2025 ​ 15,879 2026 ​ 12,705 2027 ​ ​ 8,741 2028 ​ ​ 5,953 Thereafter ​ 51,259 Total ​ $ 108,724 ​ Software development costs for software products incurred before establishing technological feasibility are charged to operations. Software development costs incurred after establishing technological feasibility are capitalized on a product-by-product basis until the product is available for general release to customers at which time amortization begins. Annual amortization, charged to cost of goods sold, is the amount computed using the ratio that current revenues for a product bear to the total current and anticipated future revenues for that product. In the event that future revenues are not estimable, such costs are amortized on a straight-line basis over the remaining estimated economic life of the product. Amortizable assets that have not yet begun to be amortized are included in Thereafter in the table above. For the three months ended September 30, 2022 and 2023, we capitalized software development costs in the amounts of $ 3.9 million and $ 4.0 million, respectively. 12 Table of Contents 5. Contract Assets and Liabilities ​ We enter into contracts to sell products and provide services, and we recognize contract assets and liabilities that arise from these transactions. We recognize revenue and corresponding accounts receivable according to ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). When we recognize revenue in advance of the point in time at which contracts give us the right to invoice a customer, we record this as unbilled revenue, which is included in accounts receivable, net, on the consolidated balance sheets. We may also receive consideration, per the terms of a contract, from customers prior to transferring control of goods to the customer. We record customer deposits as contract liabilities. Additionally, we may receive payments, most typically under service and warranty contracts, at the onset of the contract and before services have been performed. In such instances, we record a deferred revenue liability in either Other accrued expenses and current liabilities or Other long-term liabilities. We recognize these contract liabilities as sales after all revenue recognition criteria are met. ​ The table below shows the balance of contract assets and liabilities as of June 30, 2023 and September 30, 2023, including the change between the periods. There were no substantial non-current contract assets for the periods presented. Contract Assets (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ ​ ​ 2023 2023 Change % Change Unbilled revenue (included in accounts receivable, net) ​ $ 86,818 ​ $ 103,663 ​ $ 16,845 ​ 19 % Contract Liabilities (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ ​ 2023 2023 Change % Change ​ Advances from customers ​ $ 21,250 ​ $ 31,949 ​ $ 10,699 ​ 50 % Deferred revenue—current ​ 43,861 ​ ​ 39,000 ​ ​ ( 4,861 ) ​ ( 11 ) % Deferred revenue—long-term ​ 22,200 ​ ​ 19,733 ​ ​ ( 2,467 ) ​ ( 11 ) % ​ Contract assets increased during the three months ended September 30, 2023 primarily from the timing and nature of milestones met in contracts for a number of customers in our Security Division 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 September 30, 2023, the portion of the transaction price allocated to remaining performance obligations was approximately $ 906.2 million. We expect to recognize revenue on approximately 67 % of the remaining performance obligations over the next 12 months , and the remainder is expected to be recognized thereafter. During the three months ended September 30, 2023, we recognized revenue of $ 29.7 million from contract liabilities existing at the beginning of the period. ​ Practical Expedients. In cases where we are responsible for shipping after the customer has obtained control of the goods, we have elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation. Additionally, we have elected to capitalize the cost to obtain a contract only if the period of amortization would be longer than one year. We only give consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater than one year. ​ 13 Table of Contents 6. Leases ​ The components of operating lease expense were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2022 2023 Operating lease cost ​ $ 2,826 ​ $ 2,805 Variable lease cost ​ ​ 406 ​ ​ 265 Short-term lease cost ​ ​ 223 ​ ​ 325 ​ ​ $ 3,455 ​ $ 3,395 ​ Supplemental disclosures related to operating leases were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance Sheet Category June 30, 2023 September 30, 2023 ​ Operating lease right of use (“ROU”) assets, net Other assets ​ $ 32,618 ​ $ 32,534 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease liabilities, current portion Other accrued expenses and current liabilities ​ $ 9,787 ​ $ 9,929 ​ Operating lease liabilities, long-term Other long-term liabilities ​ 23,733 ​ 23,472 ​ Total operating lease liabilities ​ ​ ​ $ 33,520 ​ $ 33,401 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average remaining lease term ​ ​ ​ ​ ​ 4.0 years ​ Weighted average discount rate ​ ​ ​ ​ ​ 3.9 % ​ Supplemental cash flow information related to operating leases was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2022 2023 Cash paid for operating lease liabilities ​ $ 2,685 ​ $ 2,994 ROU assets obtained in exchange for new lease obligations ​ 413 ​ ​ 1,791 ​ Maturities of operating lease liabilities at September 30, 2023 were as follows (in thousands): ​ ​ ​ ​ ​ ​ September 30, 2023 Less than one year ​ $ 11,008 1 – 2 years ​ 8,845 2 – 3 years ​ 7,664 3 – 4 years ​ 5,357 4 – 5 years ​ 1,282 Thereafter ​ 1,969 ​ ​ 36,125 Less: imputed interest ​ ( 2,724 ) Total lease liabilities ​ $ 33,401 ​ ​ 7. Impairment, Restructuring and Other Charges ​ We endeavor to align our global capacity and infrastructure with demand by our customers as well as fully integrate acquisitions and thereby improve operational efficiency. ​ During the three months ended September 30, 2023, we recognized $ 0.5 million in impairment, restructuring and other charges, which included $ 0.1 million in legal charges, $ 0.1 million for employee terminations, $ 0.1 million for other facility closure costs for operational efficiency activities, and $ 0.2 million in acquisition related costs. ​ 14 Table of Contents During the three months ended September 30, 2022, we recognized $ 1.2 million in restructuring and other charges, which included $ 0.9 million in legal charges and $ 0.3 million for employee terminations. The following tables summarize impairment, restructuring and other charges (benefits), net for the periods set forth below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2022 ​ ​ ​ ​ ​ Optoelectronics and ​ ​ ​ ​ ​ ​ ​ ​ ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ Security Division Division Division Corporate Total Employee termination costs ​ $ 23 ​ $ — ​ $ — ​ $ — ​ $ 23 Facility closures/consolidation ​ ​ 241 ​ ​ — ​ ​ 15 ​ ​ — ​ ​ 256 Legal costs, net ​ 524 ​ ​ 294 ​ ​ — ​ ​ 122 ​ ​ 940 Total ​ $ 788 ​ $ 294 ​ $ 15 ​ $ 122 ​ $ 1,219 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ Optoelectronics and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Healthcare ​ Manufacturing ​ ​ ​ ​ ​ ​ ​ Security Division Division Division Corporate Total Employee termination costs ​ $ 13 ​ $ — ​ $ — ​ $ 110 ​ $ 123 Facility closures/consolidation ​ ​ — ​ ​ — ​ ​ 51 ​ ​ — ​ ​ 51 Acquisition-related costs ​ ​ 208 ​ ​ — ​ ​ — ​ ​ — ​ ​ 208 Legal costs, net ​ 52 ​ ​ — ​ ​ — ​ ​ 32 ​ ​ 84 Total ​ $ 273 ​ $ — ​ $ 51 ​ $ 142 ​ $ 466 ​ The accrued liability for restructuring and other charges is included in other accrued expenses and current liabilities in the condensed consolidated balance sheets. The changes in the accrued liability for restructuring and other charges for the three-month period ended September 30, 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, 2023 ​ $ 7 ​ $ 107 ​ $ 1,609 ​ $ 656 ​ $ 2,379 Restructuring and other charges, net ​ 208 ​ 123 ​ 51 ​ 84 ​ 466 Payments, adjustments and reimbursements, net ​ ( 208 ) ​ 72 ​ ( 716 ) ​ ( 228 ) ​ ( 1,080 ) Balance as of September 30, 2023 ​ $ 7 ​ $ 302 ​ $ 944 ​ $ 512 ​ $ 1,765 ​ ​ 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 term loan. The revolving credit facility includes a $ 300 million sub-limit for letters of credit. Under certain circumstances and subject to certain conditions, we have the ability to increase the revolving credit facility by the greater of $ 250 million or such amount as would not cause our secured leverage ratio to exceed a specified level. Borrowings under the amended facility bore interest at SOFR plus a margin of 1.0 % as of September 30, 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 September 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 September 30, 2023, there were $ 235 million of borrowings outstanding under the revolving credit facility, $ 37.7 million outstanding under the letters of credit sub-facility, and $ 141.3 million outstanding under the term loan. As of September 30, 2023, the amount available to borrow under the revolving credit facility was $ 327.3 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 15 Table of Contents without penalty. It is our practice to routinely borrow and repay several times per year under the revolving facility and therefore, borrowings under the revolving credit facility are included in current liabilities. As of September 30, 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. Interest expense related to the credit facility and term loan was $ 2.1 million and $ 6.3 million for the three months ended September 30, 2022 and 2023, respectively. 1.25% Convertible Senior Notes (“Notes”) ​ In February 2017, we issued $ 287.5 million of the Notes in a private offering. On September 1, 2022, we repurchased and cancelled the remaining $ 242.3 million balance of the Notes. Total interest expense recognized for the three months ended September 30, 2022 related to the Notes was $ 0.7 million, which consisted of $ 0.5 million of contractual interest expense and $ 0.2 million of amortization of debt issuance costs. Other Borrowings ​ Several of our foreign subsidiaries maintain bank lines of credit, denominated in local currencies and U.S. dollars, primarily for the issuance of letters of credit. As of September 30, 2023, $ 56.8 million was outstanding under these letter-of-credit facilities. As of September 30, 2023, the total amount available under these credit facilities was $ 17.6 million. ​ Long-term debt consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, ​ 2023 2023 Term loan ​ $ 143,125 ​ $ 141,250 Other long-term debt ​ 1,442 ​ ​ 1,630 ​ ​ 144,567 ​ ​ 142,880 Less current portion of long-term debt ​ ( 8,076 ) ​ ​ ( 8,134 ) Long-term portion of debt ​ $ 136,491 ​ $ 134,746 ​ ​ 9. Stockholders’ Equity ​ Stock-based Compensation ​ As of September 30, 2023, we maintained the Amended and Restated 2012 Incentive Award Plan (the “OSI Plan”) as a stock-based employee compensation plan. ​ We recorded stock-based compensation expense in the consolidated statements of operations as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2022 2023 Cost of goods sold ​ $ 216 ​ $ 232 Selling, general and administrative ​ ​ 6,840 ​ ​ 6,731 Research and development ​ ​ 121 ​ ​ 126 Stock-based compensation expense ​ $ 7,177 ​ $ 7,089 ​ As of September 30, 2023, total unrecognized compensation cost related to share-based compensation grants under the OSI Plan were estimated at $ 0.6 million for stock options and $ 19.6 million for restricted stock units (“RSUs”). We expect to recognize these costs over a weighted average period of 1.8 years with respect to the stock options and 2.3 years with respect to the RSUs. ​ 16 Table of Contents The following summarizes stock option activity during the three months ended September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Weighted-Average ​ Aggregate ​ ​ Number of ​ Exercise ​ Remaining Contractual ​ Intrinsic Value ​ Options Price Term (in thousands) Outstanding at June 30, 2023 83,677 $ 87.09 ​ ​ ​ ​ Granted — ​ ​ — ​ ​ ​ ​ ​ Exercised ( 4,752 ) ​ ​ 88.39 ​ ​ ​ ​ ​ Expired or forfeited — ​ ​ — ​ ​ ​ ​ ​ Outstanding at September 30, 2023 78,925 ​ $ 87.01 ​ 6.9 years ​ $ 2,449 Exercisable at September 30, 2023 ​ 34,225 ​ $ 83.15 4.8 years ​ $ 1,194 ​ The following summarizes RSU award activity during the nine months ended September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average ​ Shares Fair Value Nonvested at June 30, 2023 455,515 ​ $ 85.15 Granted 307,506 ​ ​ 93.35 Vested ( 363,820 ) ​ ​ 79.00 Forfeited ( 1,890 ) ​ ​ 74.15 Nonvested at September 30, 2023 397,311 ​ $ 97.19 ​ As of September 30, 2023, there were approximately 0.2 million shares available for grant under the OSI Plan. Under the terms of the OSI Plan, RSUs granted from the pool of shares available for grant reduce the pool by 1.87 shares for each award granted. RSUs forfeited and returned to the pool of shares available for grant increase the pool by 1.87 shares for each award forfeited. ​ We granted 109,594 and 75,988 performance-based RSUs during the three months ended September 30, 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. ​ Stock Repurchase Program ​ In September 2022, our Board of Directors increased the stock repurchase authorization to a total of 2 million shares. This program does not expire unless our Board of Directors acts to terminate the program. The timing and actual numbers of shares purchased depends on a variety of factors, including stock price, general business and market conditions and other investment opportunities. Repurchases may be made from time to time under the program through open-market purchases or privately-negotiated transactions at our discretion. Upon repurchase, the shares are restored to the status of authorized but unissued shares, and we record them in our consolidated financial statements as a reduction in the number of shares of common stock issued and outstanding, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings. ​ During the three months ended September 30, 2023, we did not repurchase shares of our common stock. As of September 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. ​ 17 Table of Contents 10. Commitments and Contingencies ​ Acquisition-Related Contingent Obligations ​ Under the terms and conditions of the purchase agreements associated with certain acquisitions, we may be obligated to make additional payments based on the achievement of certain sales or profitability milestones through the acquired operations. For agreements that contain contingent consideration obligations that are capped, the remaining maximum amount of such potential future payments is $ 45.0 million as of September 30, 2023. ​ Projections and estimated 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, 2023 to September 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, 2023 $ 21,181 Foreign currency translation adjustment ​ ​ ( 150 ) Changes in fair value for contingent earnout obligations ​ ( 864 ) Payments on contingent earnout obligations ​ ( 383 ) Ending fair value, September 30, 2023 ​ $ 19,784 ​ 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. In certain cases, we have conducted further environmental assessments consisting of soil and groundwater testing and other investigations deemed appropriate by independent environmental consultants. ​ We have not accrued for loss contingencies relating to environmental matters because we believe that, although unfavorable outcomes are possible, they are not considered by our management to be probable and reasonably estimable. If one or more of these environmental matters are resolved in a manner adverse to us, the impact on our business, financial condition, results of operations and cash flow could be material. ​ Indemnifications and Certain Employment-Related Contingencies ​ In the normal course of business, we have agreed to indemnify certain parties with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from breaches of representations, warranties or covenants, or intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our directors and certain of our officers. It is not possible to determine the maximum potential liability amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. We have not recorded any liability for costs related to contingent indemnification obligations as of September 30, 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. ​ ​ 18 Table of Contents Product Warranties ​ We offer our customers warranties on many of the products that we sell. These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, we record a provision for estimated warranty expenses with a corresponding increase in cost of goods sold. We periodically adjust this provision based on historical experience and anticipated expenses. We charge actual expenses of repairs under warranty, including parts and labor, to this provision when incurred. The current obligation for warranty provision is included in other accrued expenses and current liabilities and the noncurrent portion is included in other long-term liabilities in the consolidated balance sheets. ​ The following table presents changes in warranty provisions (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2022 2023 Balance at beginning of period ​ $ 13,347 ​ $ 11,149 Additions ​ ​ 884 ​ ​ 312 Reductions for warranty repair costs and adjustments ​ ( 1,972 ) ​ ​ ( 902 ) Balance at end of period ​ $ 12,259 ​ $ 10,559 ​ Legal Proceedings In February 2023, one of our subsidiaries received a subpoena from the U.S. Department of Justice (“DoJ”) relating to a federal investigation involving 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 have produced documents in response to this subpoena and intend to cooperate with any further subpoenas or other requests in connection with this or any ensuing investigation. In September 2023, an employee demanded a $4 million payment claiming that he was retaliated against for internally reporting that a Mexican government official solicited a payment in connection with a $35 million opportunity. The opportunity has not been awarded, no payment was actually made, and we have reported the employee’s allegations to the U.S. Department of Justice. We have denied the employee’s claim of retaliation and intend to vigorously contest any potential lawsuit that may be filed as lacking in credibility and merit. We are involved in various other potential or actual 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. ​ 11. Income Taxes ​ The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the development of tax planning strategies during the year. In addition, as a global commercial enterprise, our tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions. ​ The effective tax rates for the three months ended September 30, 2022 and 2023 were 24.4 % and 23.4 %, respectively. During the three months ended September 30, 2022 and 2023, we recognized a net discrete tax benefit of $ 0.1 million and $ 0.4 million, respectively, related to equity-based compensation under ASU 2016-09. ​ 19 Table of Contents 12. Segment Information ​ We have determined that we operate in three identifiable industry segments: (a) security and inspection systems (Security division), (b) optoelectronic devices and manufacturing (Optoelectronics and Manufacturing division) and (c) medical monitoring systems (Healthcare division). We also have a corporate segment (Corporate) that includes executive compensation and certain other general and administrative expenses, expenses related to stock issuances and legal, audit and other professional service fees not allocated to industry segments. Both the Security and Healthcare divisions comprise primarily end-product businesses, whereas the Optoelectronics and Manufacturing division primarily supplies components and subsystems to external OEM customers, as well as to the Security and Healthcare divisions. Sales between divisions are at transfer prices that approximate market values. All other accounting policies of the segments are the same as described in Note 1, Basis of Presentation. The following tables present our results of operations and identifiable assets by industry segment (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ September 30, ​ 2022 2023 Revenues (1) —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 144,992 ​ $ 164,629 Optoelectronics and Manufacturing division, including intersegment revenues ​ ​ 93,915 ​ ​ 96,128 Healthcare division ​ ​ 43,563 ​ ​ 37,787 Intersegment revenues elimination ​ ​ ( 14,399 ) ​ ​ ( 19,334 ) Total ​ $ 268,071 ​ $ 279,210 ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 14,924 ​ $ 20,609 Optoelectronics and Manufacturing division ​ ​ 11,258 ​ ​ 11,437 Healthcare division ​ ​ 1,628 ​ ​ 164 Corporate ​ ​ ( 10,178 ) ​ ​ ( 9,916 ) Intersegment Eliminations ​ ​ 668 ​ ​ 265 Total ​ $ 18,300 ​ $ 22,559 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, ​ 2023 2023 Assets (2) —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 948,126 ​ $ 987,134 Optoelectronics and Manufacturing division ​ 310,930 ​ ​ 296,328 Healthcare division ​ ​ 245,856 ​ ​ 238,897 Corporate ​ 94,678 ​ ​ 113,252 Eliminations (3) ​ ( 43,904 ) ​ ​ ( 47,159 ) Total ​ $ 1,555,686 ​ $ 1,588,452 (1) For the three-month period ended September 30, 2022 and 2023, no customer accounted for greater than 10 % of total net revenues. (2) As of June 30, 2023 and September 30, 2023, no customer accounted for greater than 10 % of accounts receivable. (3) Eliminations in assets reflect the amount of inter-segment profits in inventory and inter-segment ROU assets under ASC 842 as of the balance sheet date. Such inter-segment profit will be realized when inventory is shipped to the external customers of the Security and Healthcare divisions. ​ ​ ​ 20 Table of Contents