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, ​ 2024 2024 ASSETS ​ ​ ​ ​ ​ ​ CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 95,353 ​ $ 85,053 Accounts receivable, net ​ 648,155 ​ ​ 687,610 Inventories ​ 397,939 ​ ​ 456,030 Prepaid expenses and other current assets ​ 74,077 ​ ​ 81,310 Total current assets ​ 1,215,524 ​ ​ 1,310,003 Property and equipment, net ​ 113,967 ​ ​ 124,613 Goodwill ​ 351,480 ​ ​ 381,444 Intangible assets, net ​ 139,529 ​ ​ 183,222 Other assets ​ 115,508 ​ ​ 114,232 Total assets ​ $ 1,936,008 ​ $ 2,113,514 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ Bank lines of credit ​ $ 384,000 ​ $ 259,000 Current portion of long-term debt ​ 8,167 ​ ​ 8,217 Accounts payable ​ 191,149 ​ ​ 191,932 Accrued payroll and related expenses ​ 46,732 ​ ​ 41,048 Advances from customers ​ 53,431 ​ ​ 63,996 Other accrued expenses and current liabilities ​ 131,158 ​ ​ 148,343 Total current liabilities ​ 814,637 ​ ​ 712,536 Long-term debt, net ​ 129,383 ​ ​ 468,084 Other long-term liabilities ​ 128,505 ​ ​ 146,399 Total liabilities ​ 1,072,525 ​ ​ 1,327,019 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, 17,055,497 shares at June 30, 2024 and 16,710,749 shares at September 30, 2024 ​ 24,289 ​ ​ 17 Retained earnings ​ 861,230 ​ ​ 810,553 Accumulated other comprehensive loss ​ ( 22,036 ) ​ ​ ( 24,075 ) Total stockholders’ equity ​ 863,483 ​ ​ 786,495 Total liabilities and stockholders’ equity ​ $ 1,936,008 ​ $ 2,113,514 ​ 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, ​ 2023 2024 Net revenues: ​ ​ ​ ​ ​ ​ Products ​ $ 199,709 ​ $ 255,808 Services ​ 79,501 ​ ​ 88,199 Total net revenues ​ 279,210 ​ ​ 344,007 Cost of goods sold: ​ ​ ​ ​ ​ ​ Products ​ 136,983 ​ ​ 170,422 Services ​ 43,482 ​ ​ 52,083 Total cost of goods sold ​ 180,465 ​ ​ 222,505 Gross profit ​ 98,745 ​ ​ 121,502 Operating expenses: ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 59,798 ​ ​ 72,223 Research and development ​ 15,922 ​ ​ 17,773 Restructuring and other charges, net ​ 466 ​ ​ 1,178 Total operating expenses ​ 76,186 ​ ​ 91,174 Income from operations ​ 22,559 ​ ​ 30,328 Interest and other expense, net ​ ( 5,748 ) ​ ​ ( 7,359 ) Income before income taxes ​ 16,811 ​ ​ 22,969 Provision for income taxes ​ ( 3,932 ) ​ ​ ( 5,033 ) Net income ​ $ 12,879 ​ $ 17,936 Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 0.77 ​ $ 1.07 Diluted ​ $ 0.75 ​ $ 1.05 Shares used in per share calculation: ​ ​ ​ ​ ​ ​ Basic ​ 16,825 ​ ​ 16,742 Diluted ​ 17,175 ​ ​ 17,055 ​ 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, ​ 2023 2024 Net income ​ $ 12,879 ​ $ 17,936 Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment, net of tax ​ ( 3,172 ) ​ ​ 1,181 Net unrealized gain (loss) on derivatives, net of tax ​ ​ 1,147 ​ ​ ( 3,220 ) Other, net of tax ​ ​ 137 ​ ​ — Other comprehensive loss ​ ​ ( 1,888 ) ​ ​ ( 2,039 ) Comprehensive income ​ $ 10,991 ​ $ 15,897 ​ 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, 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 plan 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ Other ​ ​ ​ ​ Number of ​ ​ Retained Comprehensive ​ ​ ​ Shares Amount Earnings Loss Total Balance—June 30, 2024 ​ 17,055,497 ​ $ 24,289 ​ $ 861,230 ​ $ ( 22,036 ) ​ $ 863,483 Exercise of stock options ​ 957 ​ ​ 70 ​ ​ — ​ ​ — ​ ​ 70 Vesting of RSUs ​ 297,418 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares issued under employee stock purchase plan ​ 31,143 ​ ​ 2,329 ​ ​ — ​ ​ — ​ ​ 2,329 Stock-based compensation expense ​ — ​ ​ 6,422 ​ ​ — ​ ​ — ​ ​ 6,422 Repurchase of common stock ​ ( 531,314 ) ​ ​ ( 28,919 ) ​ ​ ( 51,524 ) ​ ​ — ​ ​ ( 80,443 ) Taxes paid related to net share settlement of equity awards ​ ( 142,952 ) ​ ​ ( 4,174 ) ​ ​ ( 17,089 ) ​ ​ — ​ ​ ( 21,263 ) Net income ​ — ​ ​ — ​ ​ 17,936 ​ ​ — ​ ​ 17,936 Other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ ( 2,039 ) ​ ​ ( 2,039 ) Balance—September 30, 2024 16,710,749 ​ $ 17 ​ $ 810,553 ​ $ ( 24,075 ) ​ $ 786,495 ​ ​ 6 Table of Contents OSI SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2023 2024 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ ​ ​ Net income ​ $ 12,879 ​ $ 17,936 Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of effects from acquisitions: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 9,568 ​ ​ 11,450 Stock-based compensation expense ​ 7,089 ​ ​ 6,422 Recovery of losses on accounts receivable ​ ​ ( 433 ) ​ ​ ( 427 ) Deferred income taxes ​ ​ 208 ​ ​ ( 851 ) Amortization of debt discount and issuance costs ​ — ​ ​ 354 Other ​ 42 ​ ​ ( 21 ) Changes in operating assets and liabilities—net of business acquisitions: ​ ​ ​ ​ ​ ​ Accounts receivable ​ 55,868 ​ ​ ( 30,187 ) Inventories ​ ( 82,035 ) ​ ​ ( 54,458 ) Prepaid expenses and other assets ​ ( 7,605 ) ​ ​ ( 23,325 ) Accounts payable ​ 25,851 ​ ​ ( 4,952 ) Accrued payroll and related expenses ​ ​ ( 6,606 ) ​ ​ ( 7,811 ) Advances from customers ​ 10,770 ​ ​ 10,267 Deferred revenue ​ ​ ( 7,142 ) ​ ​ 11,485 Other ​ ( 1,310 ) ​ ​ 26,958 Net cash provided by (used in) operating activities ​ 17,144 ​ ​ ( 37,160 ) CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ( 5,239 ) ​ ​ ( 7,705 ) Proceeds from sale of property and equipment ​ ​ 44 ​ ​ 85 Purchases of certificates of deposit ​ ​ ( 2,068 ) ​ ​ — Proceeds from maturities of certificates of deposit ​ ​ 1,839 ​ ​ — Acquisition of business, net of cash acquired ​ — ​ ​ ( 75,500 ) Payments for intangible and other assets ​ ( 4,154 ) ​ ​ ( 4,372 ) Net cash used in investing activities ​ ( 9,578 ) ​ ​ ( 87,492 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​ ​ Net borrowings (repayments) on bank lines of credit ​ 20,000 ​ ​ ( 125,000 ) Proceeds from long-term debt ​ 394 ​ ​ 340,475 Payments on long-term debt ​ ( 2,073 ) ​ ​ ( 2,078 ) Proceeds from exercise of stock options and employee stock purchase plan ​ 2,451 ​ ​ 2,399 Payment of contingent consideration ​ ​ ( 383 ) ​ ​ ( 331 ) Repurchase of common stock ​ — ​ ​ ( 80,443 ) Taxes paid related to net share settlement of equity awards ​ ( 22,239 ) ​ ​ ( 21,263 ) Net cash provided by (used in) financing activities ​ ( 1,850 ) ​ ​ 113,759 Effect of exchange rate changes on cash ​ 125 ​ ​ 593 Net increase (decrease) in cash and cash equivalents ​ 5,841 ​ ​ ( 10,300 ) Cash and cash equivalents—beginning of period ​ 76,750 ​ ​ 95,353 Cash and cash equivalents—end of period ​ $ 82,591 ​ $ 85,053 Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ Cash paid, net during the period for: ​ ​ ​ ​ ​ ​ Interest ​ $ 5,455 ​ $ 5,231 Income taxes ​ $ 6,795 ​ $ 13,540 ​ 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, 2024 filed with the SEC. 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 ​ 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 estimated amounts. ​ 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 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 September 30, ​ ​ 2023 2024 Net income available to common stockholders ​ $ 12,879 ​ $ 17,936 Weighted average shares outstanding—basic ​ 16,825 ​ ​ 16,742 Dilutive effect of equity awards ​ 350 ​ ​ 313 Weighted average shares outstanding—diluted ​ 17,175 ​ ​ 17,055 Basic earnings per share ​ $ 0.77 ​ $ 1.07 Diluted earnings per share ​ $ 0.75 ​ $ 1.05 Shares excluded from diluted earnings per share due to their anti-dilutive effect ​ ​ 8 ​ ​ 22 ​ 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 $ 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, 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; however, we mitigate this risk by utilizing international financial institutions which we believe to be 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 our 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, 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 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, 2024 September 30, 2024 ​ Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets—Insurance company contracts ​ $ — ​ $ 49,679 ​ $ — ​ $ 49,679 ​ $ — ​ $ 52,430 ​ $ — ​ $ 52,430 Assets – Interest rate swap contract ​ $ — ​ $ 4,735 ​ $ — ​ $ 4,735 ​ $ — ​ $ 676 ​ $ — ​ $ 676 Liabilities—Convertible debt ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 363,552 ​ $ — ​ $ 363,552 Liabilities—Contingent consideration ​ $ — ​ $ — ​ $ 15,375 ​ $ 15,375 ​ $ — ​ $ — ​ $ 24,246 ​ $ 24,246 ​ Derivative Instruments and Hedging Activity ​ Our use of derivatives consists of foreign currency forward contracts and an interest rate swap agreement. Our 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, 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, 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. 9 Table of Contents 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. 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 (loss) in our consolidated financial statements and are reclassified as net income when the underlying hedged interest impacts earnings. 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, 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 September 30, ​ ​ 2023 2024 Total interest and other expense, net presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded ​ $ ( 5,748 ) ​ $ ( 7,359 ) Gain (loss) recognized in other comprehensive income (loss), net of tax ​ ​ 1,147 ​ ​ ( 3,220 ) Amount reclassified from accumulated other comprehensive income (loss) to interest expense, net ​ ​ 872 ​ ​ 900 ​ Recent Accounting Pronouncements 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 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. ASU 2023-09 requires entities to annually disclose the income tax rate reconciliation using both amounts and percentages, considering several categories of reconciling items, including state and local income taxes, foreign tax effects, tax credits and nontaxable or nondeductible items, among others. 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 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 potential impact of ASU 2023-09 on disclosures in our Consolidated Financial Statements. ​ 10 Table of Contents 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 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 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. The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is deductible for income tax purposes. 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. 11 Table of Contents 3. Balance Sheet Details ​ The following tables set forth details of selected balance sheet accounts (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Accounts receivable, net 2024 2024 Accounts receivable ​ $ 667,227 ​ $ 706,844 Less allowance for doubtful accounts ​ ( 19,072 ) ​ ​ ( 19,234 ) Total ​ $ 648,155 ​ $ 687,610 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Inventories 2024 2024 Raw materials ​ $ 238,086 ​ $ 242,738 Work-in-process ​ 66,910 ​ ​ 86,425 Finished goods ​ 92,943 ​ ​ 126,867 Total ​ $ 397,939 ​ $ 456,030 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, Property and equipment, net 2024 2024 Land ​ $ 15,494 ​ $ 16,125 Buildings, civil works and improvements ​ 48,552 ​ ​ 53,166 Leasehold improvements ​ 13,573 ​ ​ 15,462 Equipment and tooling ​ 146,819 ​ ​ 150,072 Furniture and fixtures ​ 3,348 ​ ​ 3,409 Computer equipment ​ 22,597 ​ ​ 23,870 Computer software ​ 29,195 ​ ​ 29,710 Computer software implementation in process ​ ​ 6,514 ​ ​ 6,015 Construction in process ​ 6,986 ​ ​ 10,153 Total ​ 293,078 ​ ​ 307,982 Less accumulated depreciation and amortization ​ ( 179,111 ) ​ ​ ( 183,369 ) Property and equipment, net ​ $ 113,967 ​ $ 124,613 ​ 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. ​ 4. Goodwill and Intangible Assets ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ ​ ​ Security ​ Manufacturing ​ Healthcare ​ ​ ​ ​ Division Division Division Consolidated Balance as of June 30, 2024 ​ $ 232,215 ​ $ 70,807 ​ $ 48,458 ​ $ 351,480 Goodwill acquired during the period (see Note 2) ​ 28,372 ​ ​ — ​ ​ — ​ ​ 28,372 Foreign currency translation adjustment ​ 223 ​ ​ 1,201 ​ ​ 168 ​ ​ 1,592 Balance as of September 30, 2024 ​ $ 260,810 ​ $ 72,008 ​ $ 48,626 ​ $ 381,444 ​ 12 Table of Contents Intangible assets consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2024 ​ September 30, 2024 ​ ​ Gross ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Accumulated ​ Intangibles ​ Carrying ​ Accumulated ​ Intangibles ​ Value Amortization Net Value Amortization Net Amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Software development costs ​ $ 79,228 ​ $ ( 10,646 ) ​ $ 68,582 ​ $ 83,339 ​ $ ( 11,353 ) ​ $ 71,986 Patents ​ ​ 9,116 ​ ​ ( 3,861 ) ​ ​ 5,255 ​ ​ 9,265 ​ ​ ( 3,975 ) ​ ​ 5,290 Developed technology ​ ​ 70,186 ​ ​ ( 45,740 ) ​ ​ 24,446 ​ ​ 97,284 ​ ​ ( 47,801 ) ​ ​ 49,483 Customer relationships ​ ​ 51,113 ​ ​ ( 41,421 ) ​ ​ 9,692 ​ ​ 42,901 ​ ​ ( 26,051 ) ​ ​ 16,850 Total amortizable assets ​ 209,643 ​ ​ ( 101,668 ) ​ ​ 107,975 ​ ​ 232,789 ​ ​ ( 89,180 ) ​ ​ 143,609 Non-amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Trademarks ​ 31,554 ​ ​ — ​ ​ 31,554 ​ ​ 39,613 ​ ​ — ​ ​ 39,613 Total intangible assets ​ $ 241,197 ​ $ ( 101,668 ) ​ $ 139,529 ​ $ 272,402 ​ $ ( 89,180 ) ​ $ 183,222 ​ 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): ​ Fiscal Year ​ ​ ​ ​ ​ 2025 (remaining 9 months) $ 15,814 2026 ​ 17,965 2027 ​ 16,356 2028 ​ 15,532 2029 ​ ​ 13,533 Thereafter ​ 64,409 Total ​ $ 143,609 ​ 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, 2023 and 2024, we capitalized software development costs in the amounts of $ 4.0 million and $ 4.2 million, respectively. 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. ​ 13 Table of Contents 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ ​ ​ 2024 2024 Change % Change Unbilled revenue (included in accounts receivable, net) ​ $ 338,944 ​ $ 346,589 ​ $ 7,645 ​ 2 % Contract Liabilities (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ ​ 2024 2024 Change % Change ​ Advances from customers ​ $ 53,431 ​ $ 63,996 ​ $ 10,565 ​ 20 % Deferred revenue—current ​ 46,855 ​ ​ 56,880 ​ ​ 10,025 ​ 21 % Deferred revenue—long-term ​ 22,809 ​ ​ 23,750 ​ ​ 941 ​ 4 % ​ 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 period. 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 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 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. ​ 6. Leases ​ The components of operating lease expense were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2023 2024 Operating lease cost ​ $ 2,805 ​ $ 2,813 Variable lease cost ​ ​ 265 ​ ​ 194 Short-term lease cost ​ ​ 325 ​ ​ 497 ​ ​ $ 3,395 ​ $ 3,504 ​ 14 Table of Contents Supplemental disclosures related to operating leases were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance Sheet Category June 30, 2024 September 30, 2024 ​ Operating lease right of use (“ROU”) assets, net Other assets ​ $ 30,040 ​ $ 28,994 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease liabilities, current portion Other accrued expenses and current liabilities ​ $ 9,706 ​ $ 9,745 ​ Operating lease liabilities, long-term Other long-term liabilities ​ ​ 21,127 ​ ​ 20,042 ​ Total operating lease liabilities ​ ​ ​ $ 30,833 ​ $ 29,787 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average remaining lease term ​ ​ ​ ​ ​ ​ ​ 3.6 years ​ Weighted average discount rate ​ ​ ​ ​ ​ ​ ​ 4.6 % ​ Supplemental cash flow information related to operating leases was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2023 2024 Cash paid for operating lease liabilities ​ $ 2,994 ​ $ 2,895 ROU assets obtained in exchange for new lease obligations ​ 1,791 ​ ​ 252 ​ Maturities of operating lease liabilities at September 30, 2024 were as follows (in thousands): ​ ​ ​ ​ ​ ​ September 30, 2024 Less than one year ​ $ 10,840 1 – 2 years ​ 9,407 2 – 3 years ​ 6,821 3 – 4 years ​ 2,533 4 – 5 years ​ 1,272 Thereafter ​ 1,432 ​ ​ 32,305 Less: imputed interest ​ ( 2,518 ) Total lease liabilities ​ $ 29,787 ​ ​ 7. Restructuring and Other Charges ​ 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. 15 Table of Contents The following tables summarize restructuring and other charges for the periods set forth below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 ​ ​ ​ Optoelectronics and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Manufacturing ​ Healthcare ​ ​ ​ ​ ​ ​ ​ Security Division Division Division Corporate Total Acquisition-related costs ​ $ 208 ​ $ — ​ $ — ​ $ — ​ $ 208 Employee termination costs ​ ​ 13 ​ ​ — ​ ​ — ​ ​ 110 ​ ​ 123 Facility closures/consolidation ​ — ​ ​ 51 ​ ​ — ​ ​ — ​ ​ 51 Legal costs, net ​ 52 ​ ​ — ​ ​ — ​ ​ 32 ​ ​ 84 Total ​ $ 273 ​ $ 51 ​ $ — ​ $ 142 ​ $ 466 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2024 ​ ​ ​ ​ ​ Optoelectronics and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Manufacturing ​ Healthcare ​ ​ ​ ​ ​ ​ ​ Security Division Division Division Corporate Total Acquisition-related costs ​ $ 350 ​ $ — ​ $ — ​ $ — ​ $ 350 Employee termination costs ​ ​ 123 ​ ​ 304 ​ ​ 152 ​ ​ — ​ ​ 579 Facility closures/consolidation ​ ​ 6 ​ ​ 243 ​ ​ — ​ ​ — ​ ​ 249 Total ​ $ 479 ​ $ 547 ​ $ 152 ​ $ — ​ $ 1,178 ​ 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, 2024 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, 2024 ​ $ 496 ​ $ 294 ​ $ 227 ​ $ 808 ​ $ 1,825 Restructuring and other charges, net ​ 350 ​ ​ 579 ​ ​ 249 ​ — ​ ​ 1,178 Payments, adjustments and reimbursements, net ​ ( 503 ) ​ ​ ( 762 ) ​ ​ ( 276 ) ​ ( 4 ) ​ ​ ( 1,545 ) Balance as of September 30, 2024 ​ $ 343 ​ $ 111 ​ $ 200 ​ $ 804 ​ $ 1,458 ​ ​ 8. Borrowings ​ Revolving Credit Facility ​ Our senior secured credit facility comprises a term loan and a $ 600 million revolving credit facility which mature in December 2026. 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 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 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 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 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. The principal amount of each loan is due and payable in full on the maturity date. We have the right to repay each loan in whole or in part from time to time without penalty. It is our practice to routinely borrow and repay several times per year under the revolving facility and therefore, borrowings under the revolving credit facility are included in current liabilities. As of September 30, 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. 16 Table of Contents 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, ​ ​ 2024 Principal amount ​ $ 350,000 Unamortized debt discount and issuance costs ​ ( 9,201 ) Net carrying amount ​ $ 340,799 ​ ​ ​ ​ Fair value (Level 2) ​ $ 363,552 ​ 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. 17 Table of Contents 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, 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, ​ 2024 2024 Term loan ​ $ 135,625 ​ $ 133,750 2029 Notes, net ​ ​ — ​ ​ 340,799 Other long-term debt ​ 1,925 ​ ​ 1,752 ​ ​ 137,550 ​ ​ 476,301 Less current portion of long-term debt ​ ( 8,167 ) ​ ​ ( 8,217 ) Long-term portion of debt ​ $ 129,383 ​ $ 468,084 ​ Future principal payments of long-term debt by fiscal year as of September 30, 2024 are as follows (in thousands): ​ ​ ​ ​ ​ 2025 (9 months remaining) $ 6,137 2026 ​ 8,157 2027 ​ 121,058 2028 ​ 147 2029 and thereafter ​ 340,802 Total ​ $ 476,301 ​ ​ 9. Stockholders’ Equity ​ Stock-based Compensation ​ 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 September 30, ​ 2023 2024 Cost of goods sold ​ $ 232 ​ $ 244 Selling, general and administrative ​ ​ 6,731 ​ ​ 6,024 Research and development ​ ​ 126 ​ ​ 154 Stock-based compensation expense ​ $ 7,089 ​ $ 6,422 ​ 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. ​ 18 Table of Contents The following summarizes stock option activity during the three months ended September 30, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Weighted-Average ​ Aggregate ​ ​ Number of ​ Exercise ​ Remaining Contractual ​ Intrinsic Value ​ Options Price Term (in thousands) Outstanding at June 30, 2024 78,958 $ 97.87 ​ ​ ​ ​ Granted — ​ ​ — ​ ​ ​ ​ ​ Exercised ( 957 ) ​ ​ 69.64 ​ ​ ​ ​ ​ Expired or forfeited — ​ ​ — ​ ​ ​ ​ ​ Outstanding at September 30, 2024 78,001 ​ $ 105.17 ​ 7.4 years ​ $ 4,182 Exercisable at September 30, 2024 ​ 33,690 ​ $ 89.06 6.0 years ​ $ 2,115 ​ The following summarizes RSU award activity during the three months ended September 30, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average ​ Shares Fair Value Nonvested at June 30, 2024 391,591 ​ $ 99.21 Granted 253,256 ​ ​ 95.41 Vested ( 297,418 ) ​ ​ 130.64 Forfeited ( 2,400 ) ​ ​ 98.75 Nonvested at September 30, 2024 345,029 ​ $ 106.76 ​ 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. 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, 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. ​ 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. ​ 19 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 $ 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, 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 $ 15,375 Business acquisition (Note 2) ​ ​ 9,730 Foreign currency translation adjustment ​ ​ 188 Changes in fair value for contingent earnout obligations ​ ( 716 ) Payments on contingent earnout obligations ​ ( 331 ) Ending fair value, September 30, 2024 ​ $ 24,246 ​ Environmental Contingencies ​ We are subject to various environmental laws. We conduct environmental investigations at our manufacturing facilities in North America, Asia-Pacific, and Europe, and, to the extent practicable, on all new properties in order to identify, as of the date of such investigation, potential areas of environmental concern related to past and present activities or from nearby operations. In certain cases, we have conducted further environmental assessments consisting of soil and groundwater testing and other investigations deemed appropriate by independent environmental consultants. ​ We have not accrued for loss contingencies relating to environmental matters because we believe that, although unfavorable outcomes are possible, they are not considered by our management to be probable and reasonably estimable. If one or more of these environmental matters are resolved in a manner adverse to us, the impact on our business, financial condition, results of operations and cash flow could be material. ​ Indemnifications and Certain Employment-Related Contingencies ​ In the normal course of business, we have agreed to indemnify certain parties with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations, warranties or covenants, or intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our directors and certain of our officers. It is not possible to determine the maximum potential amount under these indemnification agreements due to, 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 ​ 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. ​ 20 Table of Contents The following table presents changes in warranty provisions (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2023 2024 Balance at beginning of period ​ $ 11,149 ​ $ 11,089 Additions ​ ​ 312 ​ ​ 988 Reductions for warranty repair costs and adjustments ​ ( 902 ) ​ ​ ( 719 ) Balance at end of period ​ $ 10,559 ​ $ 11,358 ​ Legal Proceedings In February 2023, one of our subsidiaries received a subpoena from the U.S. Department of Justice (“DoJ”). The subpoena was issued as part of a DoJ case against a former employee of an OSI Systems subsidiary 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. In February 2024, we received a follow-up subpoena requesting the same categories of documents but extending the relevant time period through to the date of the second subpoena. 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. 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, 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. ​ ​ 21 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, ​ 2023 2024 Revenues (1) —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 164,629 ​ $ 224,314 Optoelectronics and Manufacturing division, including intersegment revenues ​ ​ 96,128 ​ ​ 97,795 Healthcare division ​ ​ 37,787 ​ ​ 37,102 Intersegment revenues elimination ​ ​ ( 19,334 ) ​ ​ ( 15,204 ) Total ​ $ 279,210 ​ $ 344,007 ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 20,609 ​ $ 28,856 Optoelectronics and Manufacturing division ​ ​ 11,437 ​ ​ 10,609 Healthcare division ​ ​ 164 ​ ​ 800 Corporate ​ ​ ( 9,916 ) ​ ​ ( 9,510 ) Intersegment Eliminations ​ ​ 265 ​ ​ ( 427 ) Total ​ $ 22,559 ​ $ 30,328 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ September 30, ​ 2024 2024 Assets (2) —by Segment: ​ ​ ​ ​ ​ ​ Security division ​ $ 1,333,259 ​ $ 1,514,264 Optoelectronics and Manufacturing division ​ 288,629 ​ ​ 289,302 Healthcare division ​ ​ 255,093 ​ ​ 255,639 Corporate ​ 106,078 ​ ​ 100,958 Eliminations (3) ​ ( 47,051 ) ​ ​ ( 46,649 ) Total ​ $ 1,936,008 ​ $ 2,113,514 (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. Such inter-segment profit will be realized when inventory is shipped to the external customers of the Security and Healthcare divisions. ​ 22 Table of Contents