What changed in this filing

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Item 1. Financial Statements

2024-10-25 compared with 2024-04-30 · 179 added, 201 removed, 403 unchanged (49% of the section changed)

4 unchanged sentences

(amounts in thousands, except share amounts and par value)

September 30,

CURRENT ASSETS:

14 unchanged sentences

Total current liabilities

Long-term debt

Deferred income taxes

Long-term debt, net

Other long-term liabilities

5 unchanged sentences

Common stock, $ 0.001 par value— 100,000,000 shares authorized;

issued and outstanding , 16,755,772 shares at June 30, 2023 and 17,048,704 shares at March 31, 2024

issued and outstanding, 17,055,497 shares at June 30, 2024 and 16,710,749 shares at September 30, 2024

Retained earnings

7 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended March 31,

Nine Months Ended March 31,

Three Months Ended September 30,

Net revenues:

18 unchanged sentences

(amounts in thousands)

Three Months Ended March 31,

Nine Months Ended March 31,

Three Months Ended September 30,

Other comprehensive income (loss):

Foreign currency translation adjustment, net of tax

Net unrealized gain (loss) on investments and derivatives, net of tax

Net unrealized gain (loss) on derivatives, net of tax

Other, net of tax

Other comprehensive income (loss)

Other comprehensive loss

Comprehensive income

4 unchanged sentences

(amounts in thousands, except share data)

Three Months Ended March 31, 2023

Comprehensive

Balance—December 31, 2022

Exercise of stock options

Vesting of RSUs

Shares issued under employee stock purchase program

Stock-based compensation expense

Repurchase of common stock

Taxes paid related to net share settlement of equity awards

Other comprehensive income

Balance—March 31, 2023

Three Months Ended March 31, 2024

Comprehensive

Balance—December 31, 2023

Exercise of stock options

Vesting of RSUs

Shares issued under employee stock purchase program

Stock-based compensation expense

Taxes paid related to net share settlement of equity awards

Other comprehensive loss

Balance—March 31, 2024

OSI SYSTEMS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands, except share data)

Nine Months Ended March 31, 2023

Three Months Ended September 30, 2023

Comprehensive

2 unchanged sentences

Vesting of RSUs

Shares issued under employee stock purchase program

Shares issued under employee stock purchase plan

Stock-based compensation expense

Repurchase of common stock

Taxes paid related to net share settlement of equity awards

Other comprehensive loss

Balance—March 31, 2023

Nine Months Ended March 31, 2024

Balance—September 30, 2023

Three Months Ended September 30, 2024

Comprehensive

2 unchanged sentences

Vesting of RSUs

Shares issued under employee stock purchase program

Shares issued under employee stock purchase plan

Stock-based compensation expense

Repurchase of common stock

Taxes paid related to net share settlement of equity awards

Other comprehensive loss

Balance—March 31, 2024

Balance—September 30, 2024

OSI SYSTEMS, INC.

2 unchanged sentences

(amounts in thousands)

Nine Months Ended March 31,

Three Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

Stock-based compensation expense

Provision for (recovery of) losses on accounts receivable

Recovery of losses on accounts receivable

Deferred income taxes

13 unchanged sentences

Proceeds from maturities of certificates of deposit

Acquisition of businesses, net of cash acquired

Acquisition of business, net of cash acquired

Payments for intangible and other assets

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings on bank lines of credit

Net borrowings (repayments) on bank lines of credit

Proceeds from long-term debt

1 unchanged sentence

Proceeds from exercise of stock options and employee stock purchase plan

Payments of contingent consideration

Repurchases of common stock

Payment of contingent consideration

Repurchase of common stock

Taxes paid related to net share settlement of equity awards

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net change in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents—beginning of period

12 unchanged sentences

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 information and footnotes required by GAAP for audited annual financial statements.

In management’s opinion, 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.

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, 2024 filed with the SEC.

The results of operations for the three and nine months ended March 31, 2024 are not necessarily indicative of the operating results to be expected for the full 2024 fiscal year or any future periods.

The results of operations for the three months ended September 30, 2024 are not necessarily indicative of the operating results to be expected for the full 2025 fiscal year or any future periods.

Use of Estimates

2 unchanged sentences

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.

Due to the inherent uncertainty involved in making estimates, our actual amounts reported in future periods could differ materially from estimated amounts.

Earnings Per Share Computations

2 unchanged sentences

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 underlying equity component of the 2.25 % convertible senior notes due 2029 (the “2029 Notes”) discussed in Note 8 to the condensed consolidated financial statements will have a net impact on diluted earnings per share when the average price of our common stock exceeds the conversion price of $ 191.98 because the principal amount of the 2029 Notes will be settled in cash upon conversion.

There was no dilutive effect of the 2029 Notes for the three months ended September 30, 2024.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

Three Months Ended March 31,

Nine Months Ended March 31,

Three Months Ended September 30,

Net income available to common stockholders

7 unchanged sentences

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 $ 101.4 million at March 31, 2024.

Our cash and cash equivalents totaled $ 85.1 million at September 30, 2024.

Of this amount, approximately 81 % was held by our foreign subsidiaries and subject to repatriation tax considerations.

These foreign funds were held primarily by our subsidiaries in India, the United Kingdom, Malaysia, Singapore, Australia, and Canada and to a lesser extent in Mexico, Albania, Indonesia and Germany, among other countries.

These foreign funds were held primarily by our subsidiaries in India, the United Kingdom, Singapore, Canada and Malaysia and to a lesser extent in Mexico, Egypt, Indonesia Albania and Australia, among other countries.

We have cash holdings in financial institutions that exceed insured limits for such financial institutions;

4 unchanged sentences

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 March 31, 2024.

The fair values of our foreign currency forward contracts were not significant as of June 30, 2024 and September 30, 2024.

Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The “Level 1” category comprises assets and liabilities measured at quoted prices in active markets for identical assets and liabilities.

The “Level 2” category comprises assets and liabilities measured from observable inputs other than quoted market prices.

The “Level 3” category comprises assets and liabilities for which valuation inputs are unobservable and significant to the fair value measurement.

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.

1 unchanged sentence

June 30, 2024

March 31, 2024

September 30, 2024

Assets—Insurance company contracts

Assets – Interest rate swap contract

Liabilities—Convertible debt

Liabilities—Contingent consideration

6 unchanged sentences

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 our consolidated statements of operations.

The amounts reported in the consolidated statements of operations for the three and nine months ended March 31, 2023 and 2024 were not significant.

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, 2023 and 2024 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 March 31, 2024, we held foreign currency forward contracts with notional amounts totaling $ 21.6 million and $ 57.3 million, respectively.

Unrealized gains and losses from our foreign currency forward contracts as of June 30, 2023 and March 31, 2024 were not significant.

The interest rate swap agreement was entered into to improve the predictability of cash flows from interest payments related to our variable, Secured Overnight Financing Rate (“SOFR”) based debt.

As of June 30, 2024 and September 30, 2024, we held foreign currency forward contracts with notional amounts totaling $ 96.4 million and $ 101.7 million, respectively.

Unrealized gains and losses from our foreign currency forward contracts as of June 30, 2024 and September 30, 2024 were not significant.

Our 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.

1 unchanged sentence

A qualitative and quantitative assessment of the interest rate swap 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 March 31, 2024, the notional amount of the interest rate swap hedge derivative instrument was $ 175 million.

The fair value of the interest rate swap contract as of June 30, 2023 and March 31, 2024 is recorded in Other assets within the consolidated balance sheet.

As of June 30, 2024 and September 30, 2024, 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, 2024 and September 30, 2024 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 March 31,

Nine Months Ended March 31,

Three Months Ended September 30,

Total interest and other expense, net presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded

2 unchanged sentences

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 below, management believes that the impact of recently issued standards, which are not yet effective for the Company, will not have a material impact on our Consolidated Financial Statements upon adoption.

There were no new pronouncements adopted in the third quarter of fiscal year 2024.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires disclosures of significant expenses by segment and interim disclosure of items that were previously required on an annual basis.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“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 2025.

In November 2023, the FASB issued Accounting Standards Update 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires disclosures of significant expenses by segment and interim disclosure of items that were previously required on an annual basis.

ASU 2023-07 is to be applied on a retrospective basis and is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted.

We are evaluating the impact of ASU 2023-07 on disclosures in our Consolidated Financial Statements.

We are evaluating the potential impact of ASU 2023-07 on disclosures in our Consolidated Financial Statements.

In December 2023, the FASB issued Accounting Standards Update 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”), which provides for additional disclosures primarily related to the income tax rate reconciliations and income taxes paid.

1 unchanged sentence

Disclosure of the reconciling items is subject to a quantitative threshold and disaggregation by nature and jurisdiction.

ASU 2023-09 also requires entities to disclose net income taxes paid or received to federal, state and foreign jurisdictions, as well as by individual jurisdiction, subject to a five percent quantitative threshold.

ASU 2023-09 also requires entities to disclose net income taxes paid to or received from federal, state and foreign jurisdictions, as well as by individual jurisdiction, subject to a five percent quantitative threshold.

ASU 2023-09 may be adopted on a prospective or retrospective basis and is effective for fiscal years beginning after December 15, 2024 with early adoption permitted.

We are evaluating the impact of ASU 2023-09 on disclosures in our Consolidated Financial Statements.

We are evaluating the potential impact of ASU 2023-09 on disclosures in our Consolidated Financial Statements.

Business Combinations

4 unchanged sentences

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.

During the measurement period for fair value, which is up to one year from the acquisition date, as additional information that existed at the acquisition date becomes available, 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 Acquisitions

Fiscal Year 2025 Business Acquisition

In September 2024, we (through our Security division) acquired 100 % of the shares of common stock of a privately held provider of critical military, space and surveillance solutions for approximately $ 76.0 million, plus up to $ 24.0 million in potential contingent consideration.

We paid $ 75.5 million in cash at the closing of the transaction and recorded a holdback liability of $ 0.5 million which is expected to be paid before the end of the current fiscal year.

The cash paid for this acquisition was financed with borrowings from our credit facility.

The acquisition date fair value of the contingent consideration was $ 9.7 million, therefore, when combined with the amount of cash paid at close and the holdback amount, total purchase consideration was $ 85.7 million which has been allocated to the preliminary fair value of assets acquired and liabilities assumed.

The preliminary acquisition date fair value of total assets acquired was $ 115.0 million which comprised accounts receivable of $ 29.8 million, inventory and other current assets of $ 5.9 million, property and equipment of $ 7.0 million, goodwill of $ 28.4 million and other intangible assets of $ 43.9 million.

The goodwill recognized for this business acquisition is not deductible for income tax purposes.

Other intangible assets include amortizable intangible assets of $ 35.9 million with amortization periods of 7 to 10 years and an indefinite-lived intangible asset of $ 8.0 million.

The preliminary acquisition date fair value of total liabilities assumed was $ 29.3 million, which includes a deferred tax liability of $ 8.4 million that was recognized primarily due to the acquisition of other intangible assets.

The preliminary valuation of the assets acquired, liabilities assumed and contingent consideration in the acquisition is subject to revision.

If additional information becomes available, we may further revise the preliminary purchase price allocation as soon as practical, but no later than one year from the acquisition date.

Revenue from this acquired business was $ 4.0 million from the acquisition date through September 30, 2024.

Fiscal Year 2024 Business Acquisition

In December 2023, we (through our Optoelectronics and Manufacturing division) acquired a privately held contract manufacturer for approximately $ 6.3 million.

4 unchanged sentences

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.

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 we recognized for each of the fiscal year 2023 business acquisitions is not deductible for income tax purposes.

The acquisitions we completed 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.

Balance Sheet Details

The following tables set forth details of selected balance sheet accounts (in thousands):

September 30,

Accounts receivable, net

1 unchanged sentence

Less allowance for doubtful accounts

September 30,

Raw materials

1 unchanged sentence

Finished goods

September 30,

Property and equipment, net

9 unchanged sentences

Property and equipment, net

Depreciation and amortization expense for property and equipment was $ 4.9 million and $ 5.1 million for the three months ended March 31, 2023 and 2024, respectively, and $ 14.6 million for each of the nine months ended March 31, 2023 and 2024.

Depreciation and amortization expense for property and equipment was $ 4.9 million and $ 6.7 million , respectively, for the three months ended September 30, 2023 and 2024.

Goodwill and Intangible Assets

The changes in the carrying value of goodwill by segment for the nine-month period ended March 31, 2024 were as follows (in thousands):

The changes in the carrying value of goodwill by segment for the three-month period ended September 30, 2024 were as follows (in thousands):

Optoelectronics

1 unchanged sentence

Balance as of June 30, 2024

Goodwill acquired

Goodwill acquired during the period (see Note 2)

Foreign currency translation adjustment

Balance as of March 31, 2024

Balance as of September 30, 2024

Intangible assets consisted of the following (in thousands):

June 30, 2024

March 31, 2024

September 30, 2024

Amortizable assets:

4 unchanged sentences

Non-amortizable assets:

In-process R&D

Total intangible assets

Amortization expense related to intangible assets was $ 4.8 million and $ 5.5 million for the three months ended March 31, 2023 and 2024, respectively.

For the nine months ended March 31, 2023 and 2024, amortization expense related to intangible assets was $ 14.2 million and $ 15.9 million, respectively.

At March 31, 2024, the estimated future amortization expense for intangible assets was as follows (in thousands):

During the three months ended September 30, 2024 intangible assets of $ 43.9 million were included in the business acquisition described in Note 2.

Amortization expense related to intangible assets was $ 4.7 and $ 4.8 million for the three months ended September 30, 2023 and 2024, respectively.

At September 30, 2024, the estimated future amortization expense for amortizable intangible assets was as follows (in thousands):

2025 (remaining 9 months)

1 unchanged sentence

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 of current revenues for a product compared to the total current and anticipated future revenues for that product.

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 March 31, 2023 and 2024, we capitalized software development costs in the amounts of $ 4.1 million and $ 4.3 million, respectively.

For the nine months ended March 31, 2023 and 2024, we capitalized software development costs in the amounts of $ 12.0 million and $ 12.3 million, respectively.

For the three months ended September 30, 2023 and 2024, we capitalized software development costs in the amounts of $ 4.0 million and $ 4.2 million, respectively.

Contract Assets and Liabilities

4 unchanged sentences

We record customer deposits as contract liabilities.

Additionally, we may receive payments, most typically under service and warranty contracts, at the onset of a contract and before services have been performed.

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 March 31, 2024, including the change between the periods.

The table below shows the balance of contract assets and liabilities as of June 30, 2024 and September 30, 2024, including the change between the periods.

There were no substantial non-current contract assets for the periods presented.

Contract Assets (in thousands)

September 30,

Unbilled revenue (included in accounts receivable, net)

Contract Liabilities (in thousands)

September 30,

Advances from customers

1 unchanged sentence

Deferred revenue—long-term

Contract assets increased during the nine months ended March 31, 2024, 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.

The net increase in contract liabilities was primarily due to activity in our Security division for deposits received on contracts, partially offset by recognition of revenue on service contracts included in deferred revenue.

Contract Assets.

Contract assets increased by approximately $ 7.6 million due to $ 27.9 million from the business acquisition described in Note 2, partially offset by decreases in unbilled revenue primarily from the achievement of certain milestones in our Security division which gives 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 applicable period.

As of March 31, 2024, the portion of the transaction price allocated to remaining performance obligations was approximately $ 925.1 million.

As of September 30, 2024, the portion of the transaction price allocated to remaining performance obligations was approximately $ 805.2 million.

We expect to recognize revenue on approximately of the remaining performance obligations over the next 12 months , and the remainder is expected to be recognized thereafter.

During the nine months ended March 31, 2024, we recognized revenue of $ 53.6 million from contract liabilities existing at the beginning of the period.

During the three months ended September 30, 2024, we recognized revenue of $ 32.5 million from contract liabilities existing at the beginning of the period.

Practical Expedients.

In cases where we are responsible for shipping after the customer has obtained control of the goods, we have elected to treat the shipping activity as a fulfillment activity 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 is longer than one year.

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 separate performance obligations.

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.

The components of operating lease expense were as follows (in thousands):

Three Months Ended March 31,

Nine Months Ended March 31,

Three Months Ended September 30,

Operating lease cost

4 unchanged sentences

June 30, 2024

March 31, 2024

Operating lease ROU assets, net

September 30, 2024

Operating lease right of use (“ROU”) assets, net

Operating lease liabilities, current portion

6 unchanged sentences

Supplemental cash flow information related to operating leases was as follows (in thousands):

Nine Months Ended March 31,

Three Months Ended September 30,

Cash paid for operating lease liabilities

ROU assets obtained in exchange for new lease obligations

Maturities of operating lease liabilities at March 31, 2024 were as follows (in thousands):

March 31, 2024

Maturities of operating lease liabilities at September 30, 2024 were as follows (in thousands):

September 30, 2024

Less than one year

2 unchanged sentences

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 March 31, 2024, we recognized $ 1.0 million in restructuring and other charges, which primarily included $ 0.5 million for facility closure costs for operational efficiency activities, and $ 0.5 million for employee terminations.

During the nine months ended March 31, 2024, we recognized $ 2.5 million in restructuring and other charges, which included $ 0.8 million for facility closure costs for operational efficiency activities , $ 0.8 million for employee terminations, $ 0.4 million in acquisition related costs, and $ 0.4 million in legal charges.

During the three months ended March 31, 2023, we recognized $ 0.9 million in restructuring and other charges, which included $ 0.5 million for employee terminations, $ 0.3 million in legal charges primarily related to government investigations, and $ 0.1 million in acquisition - related costs and facility closure costs.

During the nine months ended March 31, 2023, we recognized $ 4.4 million in restructuring and other charges, which included $ 3.2 million in legal charges primarily related to class action litigation and government investigations, $ 1.0 million for employee terminations, and $ 0.2 million in acquisition-related costs and facility closure costs.

The following tables summarize restructuring and other charges (benefits), net for the periods set forth below (in thousands):

Three Months Ended March 31, 2023

Optoelectronics and

Manufacturing

Security Division

Acquisition-related costs

Employee termination costs

Facility closures/consolidation

Legal costs, net

Three Months Ended March 31, 2024

Optoelectronics and

Manufacturing

Security Division

Acquisition-related costs

Employee termination costs

Facility closures/consolidation

Legal costs, net

Nine Months Ended March 31, 2023

We endeavor to align our global capacity and infrastructure with demand by our customers and to effectively integrate acquisitions and thereby improve our operational efficiency.

During the three months ended September 30, 2024, we recognized $ 1.2 million in restructuring and other charges, which included $ 0.6 million for employee terminations, $ 0.2 million for facility closure costs for operational efficiency activities, and $ 0.4 million in acquisition related costs.

During the three months ended September 30, 2023, we recognized $ 0.5 million in restructuring and other charges, which included $ 0.1 million in legal charges, $ 0.1 million for employee terminations, $ 0.1 million for facility closure costs for operational efficiency activities, and $ 0.2 million in acquisition related costs.

The following tables summarize restructuring and other charges for the periods set forth below (in thousands):

Three Months Ended September 30, 2023

Optoelectronics and

5 unchanged sentences

Legal costs, net

Nine Months Ended March 31, 2024

Three Months Ended September 30, 2024

Optoelectronics and

4 unchanged sentences

Facility closures/consolidation

Legal costs, net

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 nine-month period ended March 31, 2024 were as follows (in thousands):

The changes in the accrued liability for restructuring and other charges for the three-month period ended September 30, 2024 were as follows (in thousands):

Consolidation

2 unchanged sentences

Payments, adjustments and reimbursements, net

Balance as of March 31, 2024

Balance as of September 30, 2024

Revolving Credit Facility

2 unchanged sentences

Under certain circumstances and subject to certain conditions, we have the ability to increase the revolving credit facility by an amount equal to the greater of $ 250 million or such amount as would not cause our secured leverage ratio to exceed a specified level.

Borrowings under the facility bear interest at SOFR plus a margin of 1.0 % as of March 31, 2024 (which margin can range from 1.0 % to 1.75 % based on our consolidated net leverage ratio as defined in the credit facility).

Borrowings under the facility bore interest at SOFR plus a margin of 1.25 % as of September 30, 2024 (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 bears a commitment fee of 0.10 % as of March 31, 2024 (which fee can range from 0.10 % to 0.25 % based on our consolidated net leverage ratio as defined in the credit facility).

The unused portion of the facility bore a commitment fee of 0.15 % as of September 30, 2024 (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 March 31, 2024, there were $ 349.0 million of borrowings outstanding under the revolving credit facility, $ 74.7 million outstanding under the letters of credit sub-facility, and $ 137.5 million outstanding under the term loan.

As of March 31, 2024, the amount available to borrow under the revolving credit facility was $ 176.3 million.

As of September 30, 2024, there were $ 259.0 million of borrowings outstanding under the revolving credit facility, $ 77.1 million outstanding under the letters of credit sub-facility, and $ 133.8 million outstanding under the term loan.

As of September 30, 2024, the amount available to borrow under the revolving credit facility was $ 263.9 million.

Loan amounts under the revolving credit facility may be borrowed, repaid and re-borrowed during the term.

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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 March 31, 2024, we were in compliance with all financial covenants under this credit facility.

As of September 30, 2024, 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 $ 5.9 million and $ 8.1 million for the three months ended March 31, 2023 and 2024, respectively, and $ 12.9 million and $ 21.5 million for the nine months ended March 31, 2023 and 2024, respectively.

1.25% Convertible Senior Notes (“Notes”) Due 2022

In February 2017, we issued $ 287.5 million of the Notes in a private offering.

On September 1, 2022, we repurchased and cancelled the then - remaining $ 242.3 million balance of the Notes.

Total interest expense recognized, through the cancellation date, during the nine months ended March 31, 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.

2.25% Convertible Senior Notes Due 2029

In July 2024, we issued an aggregate of $ 350.0 million principal amount of 2.25 % convertible senior notes due in August 2029 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, at an issuance price equal to 97.5 % of the principal amount.

The 2029 Notes were issued pursuant to and are governed by an indenture dated July 19, 2024 The proceeds from the issuance of the 2029 Notes were $ 340.4 million, net of the issuance discount and debt issuance costs.

The 2029 Notes are unsecured obligations which bear regular interest at 2.25 % per annum payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2025.

The 2029 Notes will mature on August 1, 2029, unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The 2029 Notes are convertible into a combination of cash and shares of our common stock, at an initial conversion rate of 5.2090 shares of common stock per $1,000 principal amount of 2029 Notes, which is equivalent to an initial conversion price of approximately $ 191.98 per share of our common stock.

The default settlement method is a combination settlement with a specified dollar amount of $ 1,000 per $1,000 principal amount of notes.

The conversion rate is subject to customary adjustments for certain dilutive events.

We may redeem for cash all or any portion of the 2029 Notes, at our option, on or after August 6, 2027 if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days at a redemption price equal to 100 % of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest up to the day before the redemption date.

The holders may require us to repurchase the 2029 Notes upon the occurrence of certain fundamental change transactions at a redemption price equal to 100 % of the principal amount of the 2029 Notes redeemed, plus accrued and unpaid interest up to the day before the redemption date.

Holders of the 2029 Notes may convert all or a portion of their 2029 Notes at their option prior to May 1, 2029, in multiples of $ 1,000 principal amounts, only under the following circumstances (i) during any calendar quarter commencing after the quarter ended on September 30, 2024 (and only during such calendar quarter), if our common stock price exceeds 130 % of the conversion price for at least 20 trading days during the 30 consecutive trading days at the end of the prior calendar quarter;

(ii) during the five consecutive business days immediately after any 10 consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(iii) upon the occurrence of specified corporate events or certain distributions on our common stock;

or (iv) if we call any or all 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the notes called for redemption.

On or after May 1, 2029, the 2029 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

Holders of the 2029 Notes who convert the 2029 Notes in connection with a make-whole fundamental change, as defined in the indenture governing the 2029 Notes, or in connection with a redemption may be entitled to an increase in the conversion rate.

We accounted for the issuance of the 2029 Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

The following table is a summary of the 2029 Notes as of September 30, 2024 (in thousands):

September 30,

Principal amount

Unamortized debt discount and issuance costs

Net carrying amount

Fair value (Level 2)

The 2029 Notes were not eligible for conversion as of September 30, 2024.

No sinking fund is provided for the 2029 Notes, which means that we are not required to redeem or retire them periodically.

As of September 30, 2024 we were in compliance with applicable covenants under the indenture governing the 2029 Notes.

For the three months ended September 30, 2024, total interest expense for the 2029 Notes was $ 1.9 million, which consisted of $ 1.6 million of contractual interest expense and $ 0.3 million of amortization of debt discount and issuance costs.

The unamortized debt issuance cost is amortized on the effective interest method over the life of the 2029 Notes.

Other Borrowings

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dollars, primarily for the issuance of letters of credit.

As of March 31, 2024, $ 54.5 million was outstanding under these letter-of-credit facilities.

As of March 31, 2024, the total amount available under these credit facilities was $ 21.4 million.

As of September 30, 2024, $ 55.9 million was outstanding under these letter-of-credit facilities.

As of September 30, 2024, the total amount available under these credit facilities was $ 30.3 million.

Long-term debt consisted of the following (in thousands):

September 30,

2029 Notes, net

Other long-term debt

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Long-term portion of debt

Future principal payments of long-term debt by fiscal year as of September 30, 2024 are as follows (in thousands):

2025 (9 months remaining)

2029 and thereafter

Stockholders’ Equity

Stock-based Compensation

As of March 31, 2024, we maintained the Amended and Restated 2012 Incentive Award Plan (the “OSI Plan”) as a stock-based employee compensation plan.

As of September 30, 2024, 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 March 31,

Nine Months Ended March 31,

Three Months Ended September 30,

Cost of goods sold

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Stock-based compensation expense

As of March 31, 2024, total unrecognized compensation cost related to share-based compensation grants under the OSI Plan were estimated at $ 1.0 million for stock options and $ 15.6 million for restricted stock units (“RSUs”).

As of September 30, 2024, total unrecognized compensation cost related to share-based compensation grants under the OSI Plan were estimated at $ 0.7 million for stock options and $ 18.4 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.

The following summarizes stock option activity during the nine months ended March 31, 2024:

The following summarizes stock option activity during the three months ended September 30, 2024:

Weighted-Average

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Expired or forfeited

Outstanding at March 31, 2024

Exercisable at March 31, 2024

The following summarizes RSU award activity during the nine months ended March 31, 2024:

Outstanding at September 30, 2024

Exercisable at September 30, 2024

The following summarizes RSU award activity during the three months ended September 30, 2024:

Nonvested at June 30, 2024

Nonvested at March 31, 2024

In December 2023, our shareholders approved an amendment to the OSI Plan, which increased the shares available under the OSI Plan by 2.4 million shares.

As of March 31, 2024, there were approximately 2.5 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 110,811 and 75,988 performance-based RSUs during the nine months ended March 31, 2023 and 2024, respectively.

Nonvested at September 30, 2024

As of September 30, 2024, there were approximately 2.1 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 75,988 and 54,563 performance-based RSUs during the three months ended September 30, 2023 and 2024, respectively.

These performance-based RSU awards are contingent on the achievement of certain performance metrics.

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This program does not expire unless our Board of Directors acts to terminate the program.

The timing and actual numbers of shares purchased depend on a variety of factors, including stock price, general business and market conditions and other investment opportunities.

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.

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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 nine months ended March 31, 2024, we did not repurchase shares of our common stock.

As of March 31, 2024, there were 1,721,870 shares remaining available for repurchase under the authorized repurchase program.

We have not paid any cash dividends since the consummation of our initial public offering in 1997 and we do not currently intend to pay any cash dividends in the foreseeable future.

Our Board of Directors will determine the payment of future cash dividends, if any.

Certain of our current bank credit facilities restrict the payment of cash dividends and future borrowings may contain similar restrictions.

During the three months ended September 30, 2024, we repurchased 531,314 shares of common stock for an aggregate purchase price of approximately $ 80 million.

As of September 30, 2024, there were 1,190,556 shares remaining available for repurchase under the authorized repurchase program.

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.

Commitments and Contingencies

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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 $ 48.6 million as of March 31, 2024.

For agreements that contain contingent consideration obligations that are capped, the remaining maximum amount of such potential future payments is $ 56.8 million as of September 30, 2024.

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 March 31, 2024 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):

The following table provides a roll-forward from June 30, 2024 to September 30, 2024 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, 2024

Addition of contingent earnout obligations

Business acquisition (Note 2)

Foreign currency translation adjustment

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Payments on contingent earnout obligations

Ending fair value, March 31, 2024

Ending fair value, September 30, 2024

Environmental Contingencies

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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.

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 liability amount under these indemnification agreements due to, among other things, 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 March 31, 2024.

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, provided for a $ 13.5 million bonus payment to Mr.

Chopra on or within 45 days of January 1, 2024.

This amount was included in accrued payroll and related expenses as of December 31, 2023 and was paid in full in February 2024.

It is not possible to determine the maximum potential amount under these indemnification agreements due to, among other factors, 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, 2024.

Product Warranties

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The following table presents changes in warranty provisions (in thousands):

Nine Months Ended March 31,

Three Months Ended September 30,

Balance at beginning of period

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We have produced documents in response to these subpoenas and intend to cooperate with any further subpoenas or other requests in connection with this or any ensuing investigation.

In September 2024, we received a subpoena requesting records relating to certain entities in Honduras.

Consistent with past practice, we intend to cooperate with requests arising from this most recent subpoena.

We are involved in various other potential or actual claims and legal proceedings arising in the ordinary course of business.

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As such, there can be significant volatility in interim tax provisions.

The effective tax rates for the three months ended March 31, 2023 and 2024 were 23.8 % and 22.6 %, respectively.

During the three months ended March 31, 2024, we recognized a net discrete tax benefit of $ 0.2 million related to equity-based compensation under ASU 2016-09 and changes in prior year tax estimates.

During the three-month period ended March 31, 2023, we recognized a net discrete tax expense of $ 0.2 million related to equity-based compensation under ASU 2016 - 09 and changes in prior year tax estimates.

The effective tax rates for the nine months ended March 31, 2023 and 2024 were 22.6 % and 21.7 %, respectively.

During the nine months ended March 31, 2024, we recognized net discrete tax benefits of $ 0.8 million related to equity-based compensation under ASU 2016-09 and $ 2.3 million for changes in prior year tax estimates.

During the nine months ended March 31, 2023, we recognized a net discrete tax benefit of $ 0.6 million related to equity-based compensation under ASU 2016-09 and changes in prior year tax estimates.

The effective tax rates for the three months ended September 30, 2023 and 2024 were 23.4 % and 21.9 %, respectively.

During the three months ended September 30, 2023 and 2024, we recognized a net discrete tax benefit of $ 0.4 million and $ 0.5 million, respectively, related to equity-based compensation under ASU 2016-09.

Segment Information

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Three Months Ended

Nine Months Ended

September 30,

Revenues (1) —by Segment:

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Intersegment Eliminations

September 30,

Assets (2) —by Segment:

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Eliminations (3)

(1) For the three months ended March 31, 2023, one Security division customer accounted for 13 % of net revenues while no customers represented over 10 % of net revenues for the nine months ended March 31, 2023.

For the three months ended March 31, 2024, one Security division customer accounted for 26 % of net revenues.

For the nine months ended March 31, 2024, two Security division customers accounted for 13 % and 12 % of net revenues, respectively.

(2) As of June 30, 2023, no customer accounted for greater than 10 % of accounts receivable, net.

As of March 31, 2024, two customers in the Security division accounted for 27 % and 14 %, respectively, of accounts receivable, net.

(1) For the three months ended September 30, 2023, no customer accounted for greater than 10 % of total net revenues.

For the three months ended September 30, 2024, one Security division customer accounted for 14 % of net revenues.

(2) As of June 30, 2024, two customers in the Security division accounted for 39 % and 10 %, respectively, of accounts receivable, net.

As of September 30, 2024, two customers in the Security division accounted for 37 % and 12 %, respectively, of accounts receivable, net.

(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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements