OSI Systems (OSIS) 29 Oct 222023 Q1 Earnings call transcript

Good day and thank you for standing by. Welcome to the OSI Systems, Inc.

First Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. advised conference be being Please Instructions] that is today’s recorded. [Operator the now Chief to like would conference Finance to Edrick, I Alan turn over today, your Officer. speaker go Please ahead.

I and CFO the and OSI OSI Welcome first Chopra, Systems, here XXXX for Well, OSI’s Vice am of thank quarter I Systems’ with you. Edrick, Executive fiscal Hello joining thank conference to us. today am and President Alan President CEO. you call. Deepak and

we our that review results. financial pleased We of you our issued us as fiscal financial can operational our are Earlier a join and press first XXXX we today, release results. announcing quarter

statements. take Before the any would Reform forward-looking will advantage like based company safe statements XXXX, we harbor such today’s update to on to Private based information I or Act or available and discussion otherwise. new on of are results, undertakes include that information currently respect All discuss and the however, on subsequent forward-looking to forward-looking Securities remind this to the Litigation obligation of call provisions these events forward-looking the of with everyone statement statements no wishes made company

the GAAP During will we refer when to results. non-GAAP today’s financial measures both describing call, company’s and

begin our turn and and an for business a information those performance a will over quantitative earnings discussion of the figures, today’s financial GAAP reconciliation of call QX then please non-GAAP For with performance. regarding company’s to measures I overview release. of of our measures results and the refer Deepak to

year. of detail a our the regarding for We our will financial discussion more then and finish outlook with results

our building softer anticipated backlog. fiscal with by year to with quarter timing as deliveries revenues first and Our QX in the consistent from were planned generally of start beginning the supported significant our We expectations. a earnings momentum

to we long-term company navigate ongoing customers partners disruptive environment, commitments to rates of with COVID-XX, prioritize events, our delays the positioning cost, the along current including and effects rising for geopolitical the increased success. we and delivering economic continue on chain and supply inflation business interest As and

Now we go our of financial high a summary through will results. level

X% First, of an impact. we reported decrease. million, FX approximately revenues These included million $X adverse year-over-year $XXX results QX a

$X.XX, earnings the of QX XXXX in adjusted prior the result per additional year, a reported $X.XX retiring noted, favorable sales the share which reduced of in revenues of interest the December we mix under down and as from increased was primary Second, expense of a less notes. objective credit facility, of just with convertible the

solid, We consistent backlog X.X, were record buyback were to ratio million again the our with million stock shares our of then active year in the increased leading prior million $X.X flow was quarter number $X approximately Board quarter, quarter for over the finally, approximately approximately billion. of in operating $XX year. repurchase a stock authorized quarter. were of QX with further book-to-bill in same month, the program. Capital the improvement Third, a expenditures of representing our program, prior last shares a cash QX X $XX first and million million, to end bookings of $XX nearly And spending

Before XXXX fiscal turn to the will results the diving our more I Deepak. call and into deeply outlook, financial over discussing

to morning Alan, all Thank you, and good you. of

was fiscal Our to expectations. quarter’s XXXX performance first our generally

guidance, revenue more line nine start quarter, growth be adjusted months. with X.X. significant our fourth and a bookings near-term with good to next revenue We visibility be had earnings year, implying we opportunities, attractive on fiscal fiscal quarter quarter, expected Despite we backlog the quarter. mentioned, growth a year fiscal to and book-to-bill third certain skewed expect for XXXX initial strong the the the in second towards Alan and the our in ratio As XXXX to achieving of very

year. lower of and revenues of with cash division. operating the mix greater QX operating starting the quarter in now in to for for lower million the the X% operating Security of in division flow flow cash approximately bookings product mainly the division’s was last were anticipate margin quarter, were for the the performance The about book-to-bill a X.X Security we operating flow will quarter over $XXX exceeded even balance the the cash year-over-year year where in QX the I and lower same and division talk quarter. Our each ratio revenue due

We operating progress services related ramped checkpoint as as products through related margins saw for year. continued and higher the demand of and to significantly improve has division expect We we to Security airport Overall are up. for be Security rest improve held the in which Qatar. inspection that a also, Rapiscan’s XXXX are recurring be very used, of include the Cup accessories it systems demand our revenue FIFA activities at, to source. supplies will proud items World consumable we and

starts late in We for preparation which event, are November. finalizing our the

XXXCX daily baggage Tunnel XXXCX and prestigious soccer metal utilized detectors ORION the this be of models thousands during walk-through and Large inspection systems, people XS event. parcel bags and screen will Our equipment among Metor to

years. large for to deployed the inspection received from Customs various be vehicle couple The U.S. us continue parts two delivered active an security Border and for the spare We securing $XX CVI port them. and border and primarily million Protection comprehensive to in during activity the the customer for support expected pursuing and We systems provide wins the We border and internationally. opportunities received maintenance announced most multiple U.S. both significant orders service, stay are quarter cargo to had over and we of relates years and international. order a to that in three to at Rapiscan next

contraband phenethyl are crossing and inspection extensively at borders and such cargo illicit from prevent U.S. products to Our used the vehicle into methamphetamine, and as materials drugs, and

and this modest fiscal to continued revenue, of balance of year in significant a deliver inspection from program with fiscal in CBP to CBP QX the these this We over revenues XXXX. products amount of

due the needs assessments. can a However, bit shift timing and to customer

that to invest solutions offering and continue enhance revenues. can We and our security technology in recurring drive also

During software operators. acquisition for core of a provider the security of completed quarter, we training called strategic acquisition checkpoint Quadriga, U.K.-based the small a

We expect it to major multi-system, is more multi-site, standalone platform is acceptance. platform help our lot inspection worldwide integrate to work CertScan and integration operators levels. security specifically offering and our perform broaden customers. with security and in further a programs training is highest this common software for and at existing the checkpoints and CertScan getting at designed publicity technology subscription modules security and customs to deployed and CertScan ports develop

programs activity. trade The and Albania to and quarter-to-quarter volume our relation in the revenues security services regulatory tariff as do Our to vary and to continue turnkey customers enforce from and service requirements. of Puerto well, Guatemala Rico, on operations specific these port rely from the for

we a during services During quarter. added customer the first new turnkey fiscal the multiyear quarter,

Although aviation access increasing small remainder staff backlog across of airport vehicles, in strong at markets activity our the daily sector. end of include this XXXX. confidence for control and to crew points. in size, Security’s and airport the and the many occupants the perimeter services significant are provides is of screening and is expected very airport’s it’s a lot a The as first of screening

higher the including XXXX. first division’s at backlog at of operating end the has becoming end in continue in the Optoelectronic QX an and than quarterly of a was to new expected XXXX is as backlog is been many the customers Opto preferred customers. supplier our gaining for and XX% QX OEM with results Opto’s division. intercompany all-time record revenue, Opto quarter profit. momentum revenue, in Manufacturing the the to $XX with which fiscal strong strong delivered Moving million growth

Hero As for of which is Heart award critical operation an example, high supplier being Flex ZOLL’s satisfaction valued a the during a honor. heart to product ZOLL’s Safe quarter, customer our great defibrillation was awarded lines,

multiple including and OEM defense, automotive. the space, diversified is in to customer markets, industrial consumer In base addition healthcare, Opto’s hi-tech,

Indonesia. Canada, Given our for in we higher anticipated and demand the have Opto, in in operations India manufacturing Batam, expanded

challenging now down to the with QX sales the COVID tough year’s a where last Healthcare Turning sales in quarter Delta heightened was had QX spike with given was cases year-over-year. that comp the around division time. still variant as XX% quarter,

U.S. monitoring U.S. and U.S. hospital we Aurel provide and Patient Monitors, Central Telemetry, accessories software. various million expect Stations, Patient -- Expression orders larger provide $X the patient we in solutions a to hospitals announced management a to have Qube During ones, based order Xhibit to of we one which Monitors SafeNSound patient quarter, from the related several and

successful the products competitors. been lifts increasingly our sales bundled the such We adding recurring revenue software which our in differentiates as and to have of our SafeNSound from monitoring products, modules overall portion patient

to invest to in bolster offerings. our continue Healthcare in R&D core We

balance of over good connectivity Our to forward With I call for from significant we the Edrick back rest performance about as Healthcare performance our customers will the prospects and for R&D before that, looking stronger the With Opto, solutions divisions remote for fiscal these look of expect financial of the we XXXX in the Thank more call turn Security backlog questions. XXXX. in capabilities, opening the and to you. we increasingly in with feel efforts. detail talk about our to Alan are and are enhanced focus our also which monitoring

Thank you, Deepak.

financial the review in quarter greater detail. let’s Now for results our first

year three shipments of reported reduction sales the and Healthcare due mentioned surge. that QX with or by which division higher compared prior were change and sales, sales division part year. favorable a The consistent the anticipate comp, and of with led Security production given Opto the the percentage prior as prior lower constant total forward solid, upcoming Healthcare Delta X%, XX.X%, carries to a XX% COVID the a book-to-bill in increased as dollar. costs less a but divisions, each carry mix of strength security third-party gross division of X.X% a in This the component QX due were below was X.X, on supply to again Our sales Security on the backlog, the intercompany were X% as currency down with while year FX The to Opto chain leading basis Fiscal highest support this variant gross during Opto in given were year-over-year prior The revenues revenues impacting sales freight approximately to the tends tougher Opto and gross quarter revenues bookings margin year-over-year approximately to about quarter. the sales constraints divisions, gross record adversely certain increases three primarily of commencing Deepak third-party well division in was of in sales, first sales the quarter. delays that driven Opto sales sales to year-over-year division X% down quarter division first the we this have the largely division’s X% growth of unfavorable of Security the impact. was orders. demand certain margin in year significant our in positioning growth going division, anticipated a the margin. the lowest margin

volume, on gross in from general, and the other period-to-period among Our margin, chain, revenue based inflation, supply to impacts factors. will fluctuate mix

Moving to divisions our prudently we to operating diligently structure. manage expenses, cost our work across improve SG&A and efficiencies each continue of to

demonstrated results of efforts. success $XX.X Our million the of these or to million again sales sales, QX. QX in XX.X% the compared expenses XX.X% SG&A of or $XX.X QX year were prior

a $XX.X of exchange While XXXX with million, topline of was revenues, development that expenses were expenses. to Research operating foreign our a did impact prior it consistent in headwind beneficial have QX year. and relatively on the the fiscal

development, QX vital million as dedicate Security businesses. prior fiscal of XXXX, recorded QX as which product of $X.X and continue the in of fiscal charges, particularly Healthcare, restructuring on resources to compared of considerable to innovative view we we and long-term such R&D, we of other success the in to million $X.X our In year. to charges remain focused We

primarily increased other our of notes $X Moving interest QX to borrowings. from Xst, Net our rising portion September our same rates at the swap interest debt. of to in million than due QX X.XX% lower fix which a of rate floating We and rate convertible the current interest a year during maturity taxes. prior on executed rate were interest period, an million to and XXXX $X.X and to expense in

we the benefit QX last in year. fiscal XXXX, XX.X% of million, QX a side, discrete On discrete fiscal to $X.X benefit under compared XXXX, recognized as was $X.X reported in tax GAAP fiscal tax tax QX million tax our a In rate XXXX. of compared in effective QX to of of XX.X% of

from margin operating prior The XX.X% certain operating due fiscal with quarter to less the QX XX.X%, in decreased Excluding our in compared margin decreased pleased in adjusted which year items, our implementation of non-GAAP increase on rate mix in in QX margin were on XX.X% XXXX. favorable XXXX to from of effective tax our normalized in effective XX.X% to period. QX now margin expanded driven reduced efficiency was revenue with of improvement operating QX of in Opto to gross by X.X% tax normalized year fiscal the reduction I was of discrete an impact adjusted fiscal in margin will the the revenues initiatives. adjusted in from of adjusted prior Security the XX.X% the the and the operating division, previously year mix. XX.X% more in a described. XXXX a fiscal a margin. of in XX.X% in first This discussion XXXX the Overall, to turn quarter of lower our We first gross same favorable product prior quarter product first and division primarily rate

sequential a more adjusted favorable revenues revenue Healthcare on revenue With of operating in prior a XX.X% in We margin X.X% revenues expect in division and mix. decreased the and nice year stronger to from mix, this quarter. our favorable lower improvement QX less the division

We QX early over as improvement division to show quarter. significant this are forecasting this as

amortization compared depreciation $XX improvements. quarter. cash of cash was million. flow $X.X of The CapEx operations million driven first prior QX provided million XXXX $XX was the quarter by while in in in -- to increase million, operations in was same year was QX fiscal capital cash by were $XX used Moving the working $X.X and fiscal in flow, to

active be program which XXXX, to buyback million repurchase during spent about QX stock to XXX,XXX We in $XX.X our fiscal in of shares. continue we

to program. authorization under approximately increased of Board the available quarter repurchase as X.X buyback Our in and September, shares end, the million were

notes is net term we stock with XXXX, combination leverage and additional sheet December leaving convertible buybacks. and a utilizing of primarily balance in this for revolver in retired Our the loan, liquidity. We significant plenty of September acquisitions of X.X in and had for put our purpose solid, place which capacity

ranges X% bulk guidance. $X about matures in per from our under And This of turning our Aside the million and to could in our could earnings is guidance. vary annual payments anticipated earnings currently significantly are from we filings. share this the the as anticipated previous well adjusted results loan, growth the guidance, interest and increased other implies as non-GAAP and the estimates. reasonable principal reiterating required and due revenues chain inflation of debt guidance the to revenues fiscal disruptions XXXX. Actual and SEC The estimates and the rising term finally, in and and uncertainties discrete impact charges, amortization excludes difficult revenue and the and and of fiscal tax intangible in and diluted financial in and reflected on range non-GAAP actual non-GAAP per diluted to other over growth the non-recurring share their pandemic, items. EPS associated non-GAAP range nine EPS supply predict of discussed impact our and XX% vary assets impairment to to expense, We non-cash risks of company’s potential The COVID from effects, XX% also costs acquired currently XXXX. tax remaining adjusted revenue other restructuring believe reflect rates XX% interest earnings months of of

solutions. as will enable to for capitalize continue to these and our proactive of in OSI environment, of continued cost its traction our dynamic this the end continue OSI call challenging to partners. while like like areas to efforts our structure. through dedication continued continuing And supporting this aviation. to current look the and the at our improving management to our we areas would growth to customers believe We and remain team take products global We growth positioning time, such providing We Systems businesses key open gaining and thank focused in the on navigate opportunity in strategic company to markets innovative forward the on We and would to questions.

And Brian Instructions] [Operator question Ruttenbur Imperial Thank comes you. Capital. our from from first

is open. Your now line

very Thank let and much. Great into jump right you Great. questions. me quarter

Thanks, Brian.

the you give are certification based of So an the TSA inspection the on status us can where CT you on update equipment?

Hi. Brian. Deepak here. This Yes, is

to As mentioned of have is ongoing for couple still qualification still in European the cycle, before There checked and present years we Union specific to we replacement going is and successful which baggage TSA be. they cargo that is what final are according the the applies that is the side. certification with away to finalizing procedure the side, on have which have been we X.X, no very

So, at have are same this we space. whatever stage, in happening, is successful the as other very in we and cargo especially X.X, people

that’s any there years, of guess, upgrade I five have this, on TSA about U.S. update last cycle Is terms we to the been but happening, baggage? the talking with supposed for the Okay. checked be in

out, hands. thing we hands Well, XXXX, pushed the decision, win have and pushed is XXXX, that well qualified the and It’s the European is and to not we very to TSA’s everything it’s right. in side, are more hear only COVID those but has orders. their know make our it’s we in much But they to there’s basically in activity

Great.

onto specific it sector, side driving a Moving What growth? all the specific a this is Opto real is perform to product well. that, there specific extremely driving is that anything -- continues quick,

in news aerospace, things is the sectors things also. can OSI view, consumer think and circuit, from name Well, big in in sector, reasons but are things industrial, have of that to show won great in of in good been division one done we electronics, it helped good customers diversified the the China It’s some India, very said high-tech we that’s and portfolio. maybe lot has Indonesia, defense, much, at one well our one Medical in very us the of all But I a is looking good very that mentioned Alan Automotive a personally very have been it, has which we flex That’s that, successful. the Electronics very been in very has -- facilities very, the it to add said from Alan? presence kudos and of a growth. have customers. there’s a well. strong The speech in Alan to has very the OEM sector with been on my continues Alex done in about it, product That it’s that’s we of it. a blessing presence that the my things presence for us the proud I of Malaysia, one there. move our positive. by very And one away desire and our our before, expanded our also has

Yeah.

Deepak I exactly think right. what was describing is

our base And us business lot defense, development I getting and others played medical, in model, customers. amongst has our new new from bringing say really diversified there who out as customers, going would and are automotive, in diversified brand really as off Our teams industrial, technology, to well well. hats customer a sales business of aerospace, existing

really that have we seen hopeful division in for continue and we are the see we future. going certainly to tremendous So are strength the foreseeable

a product recovery is last When a Great. was a And weak reason, line that was kind weak final quarter, first or in to was question just year-over-year and didn’t that year. quarter specific specific expect division. do you then go from year-over-year out? the Healthcare first my shipment there this It was it there see on of

to is of of quarter Well, year, that. slowed that turnaround down. begin monitoring COVID with secondly, and demand at still historically, quick was we one that patient weak expected has is lot relatively that thing there, again, demand Brian, Last first

we higher are us to as the software SafeNSound, on? But growth at and platform, very has want and we look our and our to different received the of and investing that lot opportunity will is well down, been competitors are margin. So heavily is there which that look activity one a has bit continue at basically you be makes little -- quarter can and it it’s quarter, Alan, we stronger -- fourth we that than and and things also do a more add quarter second happy. obviously, quite third not in

Yeah.

Deepak to second do up and But, with here for a pick in some sure think strength summarized further year. I in back that we Brian, half the it sequential QX of well. expect bounce the stronger quarter

believe the compared look we year will So performance to do the the QX. Healthcare much division the of in better rest

Great. Thank very much. you

moment and from question. next comes And thank next And one you our CJS Larry Securities. our question Solow for from

line now Your open. is

Great. Good morning, guys.

I know quarter bit about you of guess I a of about about a at couple that and I couple million it’s there with orders, follow-ups, of talked years, update the Customs And IDIQ that then, the deliveries. to I Protection, know of and pretty on piece year on -- large I out this any you of in deliver orders? for you last think, I I a stretch little and Border $XXX think Just terms two, have remaining. been all? since of Deepak, additional you part a a on just that you Is talked still actually large even couple What’s has a mentioned started your visibility there’s guess, think

and Larry, this of Alan. first can take the I question the Deepak will on. follow is part

in Pretty this the to continued his into as revenues from quarter. of expect yeah, this that year. was said, orders a mentioned beginning see That of significant we began of now. last remarks QX Deepak of some year, modest delivering QX being So, opening I the think, we CBP acceleration IDIQ in revenues,

in bigger part and revenues on of much and and see maybe QX will we into continuing QX QX XXXX So XXXX.

what be So current would is orders. follow-on our if could Deepak, of and that’s then to you want there add? outlook anticipate we kind

in QX, of year do what now It’s here. Yeah. ramp-up and most start us. and… of compared this has Larry, with delay QX, to wasn’t just QX that to this well. nothing it Deepak the will The faster put Alan

Okay.

delay not some It’s the other civil the work’s … places. side. that ready in from

bookings we with will might continue positioned from are IDIQ, that very So and that could it -- the into it XXXX will that be some are mentioned, that, there there very beyond, more Alan continue additional are confident we like, delivered. also products still and as well and

-- we are play, that, they and as and we a and certain some not a well need placed hands very including at So very the done be CertScan are CBP yes, very always customer border software, with to things of which long-term but this at that things important. in is said it our focused look our the we have is

vehicle target is And minimal it’s would of of guess, know is significant that estimates, globe, southern the I least the inspection there then agency of U.S. am aggressive around, want international that I the opportunities border, guess, in or are lot are and majority assume I be terms only be today, mistaken? northern CBP, a other, at but are would across the border, eventually think, involved, for vehicles, because I there if other -- people large commercial agencies and don’t -- right? I a And I searching to not if there

we very is CBP border other there the there customer in put other about to agencies, security. to do international traction in that’s want also. the software the are well. implementation comments we Yes, that. But, which addition, is are not why of one is very you excited main and it Well, make with is, CertScan

Right.

get There of success we The with international of Government U.S. us and divisions other are for other State lot governments. Defense very to continue like stuff, and big agency of and Department, customers Department the a also the

it. Got

Great. Okay.

assume large volume, follow-up year-over-year. time that’s significant or -- skewing was much there the there tuck-in said there pretty XX% that, Brian’s is any drove in on some quick that it and just larger or was it Opto a a It’s a it longer in up some price want lead backlog pretty or number. just segment that Is it mostly is is kind question there in acquisitions are you growth? on that I is what number, is orders Just of I pure

we from it they question. with division. of Opto of challenges times the longer as some might is of the all organic during to times the and seeing order. are the us past, lead is that three-month six-month us are order and a perhaps acquisitions is at any they What this Larry, time nine-month we Alan. order, somebody a a a us longer Good If a If done six-month customers used chain it supply order. haven’t give And some give in period order. us somebody in gave us might give giving

result factors. we all in of larger Little going as variances a well, are to a getting stuff greater that bit So volume so forward. price with give inflation, certain of passing really and of combination orders growth some purchase certainly, as of with unit visibility price and on those

on… Larry, just to add

Got you. Yeah.

Just to add it. on to It’s here. Deepak

other The thing I want to…

Sure.

there if have emphasize, away to is done… on a lot move of it And focus … from China. you

Right.

that of we like customers. have are Batam, expanded have you the and been have and positioned with we various supplier a well we and with good more have customers well a very customer and places to it working facilities and … we supply smaller India, has part big a in them support said you seeing capturing basically have ability your vendors to and that and Indonesia, our have played the chain Malaysia, have -- control business are very, regular growth in more who our focused from of on bunch we under

right. All I Great. color. appreciate Awesome. that

don’t come income do you flow to as flow expect on backend cash did question that exceed it the even little continue adjusted obviously, flow, last just think but full expect has it’s and typically guys Do basis, I Alan, year, the net a flow net cash on was I a you the in year bit to it but to, improve to QX, free close cash the quarter past? cash the basis. but over you free certainly obviously, Just operating into flow, last income a cash are, do loaded operating expect in on know you sort year, of

Yeah. we Larry, flow did while per cash se... guidance provide not

Right.

We really strong think free XXXX. in there is fiscal opportunity for cash flow

Okay.

said, of… at year. elevated an inventory to level But in being this expect do That we terms remain

Right.

where of finally the have were levers think and certainly the operating and the cash we … in And our be year the three can free I drive of used do businesses past. that approaching are strong conversion, to flow we very all where key we north strong conversion flow. to last cash tune

So, yeah, there. some great opportunity

Great. it. Thanks again. Got Thanks.

for from next and Christopher And Oppenheimer. next you comes our thank from And our Glynn one question. moment question

Your now line is open.

morning Good good afternoon… Thanks. and

Hi.

are where … guess. on depending I you

could is around mentioned run in about from it, you seems the backdrop able question on still? as have you the good unlock migration past is that, in to -- So there of what curious step-up and it’s real Optoelectronics, is another And as describe been, also this due just that sounds almost a backlog. restrained are if numbers that to realm and related like the you China? if business size related like to as you It and kind rate

you not of if complete could had have you the wouldn’t categorize we because part. Yeah. with there good component less been missing I XX% of This Chris, shortages [Audio probably had being a question. is are -- have that those there. what are something final of customers Gap] certain But really revenues backlog, working opportunity, than quite ship as said, probably, X%, all well Alan. might can’t million we You due but extra the $XX necessarily it there’s past some parts,

a higher each year. fiscal over not expect significantly up balance continued that it’s we the So there of big unleash strength in quarter just the business But back then the will revenues.

think mean very value emphasize it I are has added. we what we focused that I I it, much it will This Alan is on well. to call put Deepak. also

because can on that group, now we So value-added Opto higher add can food on it, with the with are get and we long if which and good customer out is gets list, more chain to looks trying that, very the our work $X work to will to that us with supply supply, the customer’s the basically of very, technology continue think we value term continue you to parts, the at we a broad presence, to grow. to customer for the we strategy them which focus more global as are working a

Great. And one on Security,.

flushed that backlog cases, CBP. of backlog economics chunk the challenged just certainly little big a how the in do have in you cost. and I And or there sounds the IDIQ bit preserve the when want businesses possible? and It is bid a wins big some that have like backlog mismatch of price more from point had have cost then first with out those from from worst price But in revisit you affirm clarify current you and the with win, to even quarter. You

Good question.

on on the much margin scrap, seen about think And can’t what of call right, longer is all the in the on that -- both I way, stuff. same supply the looking products. it is component we say erosion there in contracts, scale it. seen, that of absolutely component we freight not are cost too ready. chain, there are up and change some fixed, and and our paper though, a at some indications in push shortages haven’t easing site so would not You now and on price have I been on has But outs because you But till bigger term

as that time things we product with stabilize. a we expect will we So frame have, that longer out push

you. Thank Great.

moment our Martin Capital. thank from and one next for ROTH question. And Jeff question And our you comes next from

Your line now is open.

are talking Deepak. when ramp to for Deepak, a morning, see doing traction if Good to still us and might getting, sales cycle well. Alan much detail curious that? around CertScan be the be we more you you may a it? see I accelerated Also about give too Hope is how there it is expect long too to could little about more and Thanks. the wanted little early that

question. good Again,

And secondarily, ties acquisition Quadriga have into this morning? you that mentioned say, how as the that you

question, you. Good Jeff. Thank

stronger. we third slow quarter, to fourth goes quarter it’s the second quarter, thing XXXX. this CBP with way it the expect quarter, in been be progress Same With in as

more a And the plus news the As other wants. for software. the big which more the good is we it what at that also -- and have is customer is with software it be that locations for have base the been brings various installed we called happens, CertScan to on installed certification ATO, got us

CertScan, So together more and wants the customer progress. same applications us can of training though, mix slow and things progress, we more us a and the bring it’s capability a continue to that supporting functions give to time, do. the to so see combination we of At additional Quadriga

in are happening. in with but traction. software, So a It’s all parts a that the especially CBP, recurring and become ultimately not with the needs, like other just It’s of the lot like we stuff to its tomorrow. is not their that software continues licensing many to all but places, education continue U.S., in only that to work our are of with world, that focus this purposes getting customer a will we indications revenue, which have

that I a then, that then and thinking that strategic is curious opportunity multiyear And would turnkey going eventually are aviation. Rapiscan airport Great. major of, terms you first in to and Okay. for in evolved little background customer forward? bit new how came what of light, you mentioned a am in initiative

will years history. a received very look been been and borders have at successful. basically have solution it new we we One, have well From Well, Ports we ago, just were answer very line. turnkey I XX backwards. with where our five on think our years, taken

everybody So we the places it, be I can to see to increasing at am is there. enough, diligently as you very sure, fast have keep working talking have have area, you read, you another we Aviation other inspections happens not is been can labor about look to it. which do if people, what

natural a kind So is this of play. automation

security them, working been in We ports have areas. the and what customers, be have border to with and the can other demonstrated done

right needle as a now. would for a more expands beginning very And up win working take So more we diligently. marketplace It’s market. small internationally. Though new and right it’s gets But we a well. new of we found a can we changer it’s new opening customers, a it’s think call, the is tell what and strategically in successful -- And other area a a now, are that aviation not show I to side. successful very and

last was I significant And disruption disruption. causing your any Rico and through Puerto question the going turnkey operations there. hurricane Great. with with saw just curious you if

be Alan. delays and significant in No like some days significant volumes this a there, paperwork about Jeff, Puerto but the our general few it change for down to same, the was but some and tend while in overall, obviously,. Puerto is Rico no Rico. occurring, disruption,

and during on it, continuing employees add continued, to are our as our to all and Alan are damage we equipment no this all And time, And safe. fortunately, just to mentioned, we work. to we diligently work

time, Thanks Excellent. for your guys.

you. Thank

And from Our Nichols next Riley. thank B. question from you. [Operator comes Josh Instructions]

open. Your now line is

question. more bit bit ask out for just front you has to CertScan. the going elaborate little I progress a about growing my little look with Could Thanks as on base to the taking know little made I Yeah. integrated small acquisition you bit on it’s and a SaaS that want that the that’s One, opportunity that company a did. that revenue and that further? we be

know will can opening base. was It’s good a question. person in training. SaaS Quadriga heading are training it time checkpoints. a will again, CertScan small area customer we that broader other new into. the our at for it’s about to emphasize, a the to grow. now CertScan yes, that good and between our ask feel acquisition. a long-term continue. broaden for a again, to strategically before so And, this it people want slow had continue and we we for and as model But, Well, them do to They do space we towards some It’s platform believe vendor combine all very question, It’s are in applications U.K. we been part. based the and we thought They inspection entering They We it that using more I definitely

margin. very customers. working to on And which equipment to whether whether focused that plus SaaS or competitor’s agnostic hooked on equipment, it equipment whatever. to Rapiscan whether according look licensing it’s a as to are good also And it X-ray our much we it’s We cameras a model, it’s with it’s it’s at machines, we or are television

continue we broaden this for model. So to need our software application

where side? opportunity, the curious, size, aviation aviation I the this but And a in announced, turnkey here haven’t like new sector really could opportunities first a in just more the this Thanks. become much sector, you is so turnkey so airport or expand am more there’s land that the then the meaningful? and growth in you about just curious previously opportunities done if on small

Yes, it. starting yes viability a yes. contract. small very basically see whether We the to and multiyear It’s of have

becomes sector the expand that as it’s turnkey to Rico a from Puerto And more aviation same expands, model, to model even ports, it to model at applications the a this as to that the that have expand can significantly that of into end and of efficiency said before continue more and present borders demonstrate As customer, this Albania, -- are it as we it. Mexico we of success to and feel will good model. some we we into see then,

pretty last question materially and this to then And outlook of is relative think times have a you shares what’s that your percentage year are large going to stock to obviously share if free record does EBITDA, $XX the accelerate X buybacks have despite a cash very thoughts with I comfortable times been at your cash or trading You pretty kind growth to allocation capital me, Thanks. buyback? over the year. for just depressed strategy backlog the million, levels your you these of for remain aggressively, back buying X on the What’s but on there? allocating is level last the thoughts flow

active you things talk we very, plan, don’t buy. have will stock been at well, much to future. continue and undervalued the the we when very it of we in it active. what are Well, look we are very and it, able aggressive it about into are to in these very supportive we we we the increasing been be to purchase specifically has very with the Board continue But and are said we of feel And

Thank Great. you.

showing further am at And questions this And no time. thank I you.

it. thank we together and and to Well, you full next thank time forward and I for still support working time market you want very everybody. -- in taking be conference their it. our to I toward our open. in and our to morning those in And all again and thank Thank to is thank Thank look customers and of employees you want the next families call. to to very attendance your want I it’s to much. emphasize I the much attend the know

Thank for call. concludes participating. This you conference today’s

disconnect. now may You