OSI Systems (OSIS) 27 Apr 232023 Q3 Earnings call transcript

Thank you for standing by and welcome to the OSI Systems, Inc.

Third Quarter 2023 Conference Call. [Operator Instructions] As a reminder, today’s program is being recorded. And now I’d like to introduce your host for today’s program, Alan Edrick, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

you. Thank thank us. and for you morning joining Good I of OSI Edrick, Executive and CFO Vice President Systems. am Alan And I am and here today with Deepak CEO. Chopra, OSI’s President

call. Welcome third Systems OSI conference to fiscal the quarter ‘XX

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

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

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

For comparable quantitative information GAAP results today’s reconciliation refer of please regarding a earnings company’s the to figures, non-GAAP and measures those of measures release. and

I turn call to will QX for of discussion business Deepak our overview the an of over and performance begin performance. a financial with then our

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

and economic Our interest third delays quarter disruptive inflation continues cost, which environment, current be we were to by rates. solid the financial and chain increased results geopolitical navigated impacted supply as rising events,

are entering visibility strong excellent fiscal and about ‘XX fiscal solid the given year We with backlog. excited finishing

summary of high-level QX with start results. will a I our

approximate revenues and by million by revenue increase unfavorable rates. impact which in Opto of to growth division an QX in compared FX $X offset million, $XXX we year-over-year driven Security year representing solid Healthcare and part of prior divisions, was sales our soft X%, First, a reported

the interest this negative QX of expense of prior per year $X.XX impact from up last despite share reported to versus fiscal $X.XX of share additional per rates adjusted higher the year we in QX year approximately Second, earnings interest of $X.XX, due

of operating quarter that, million. our Third, quarter after notable the perhaps booking the that net third $XXX contracts million, contract start QX providing have one bookings is for we the of and just sound, of a an over QX we item executed industry, already the largest we generated flow fourth, strong representing fiscal end, And most strong to of ‘XX. bookings enhancing into greatly visibility in while excellent security cash were $XX

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

Thank welcome third earnings to you, and XXXX. the quarter Systems for fiscal the Alan, of call OSI again once

third a As operating operating period cash XX% flow and we fiscal in by Asim comparison performance by in are while our XX% income mentioned, quarter revenues adjusted grew QX ago, year X% pleased of we XXXX. same the from generating which with to more

but strong Our not well for robust confidence very us only a for QX also fiscal backlog positions instills XXXX.

expansion turning before touch where division grew third of for performance revenues XX% discussion QX more the to a operating key results, quarter. back in-depth briefly our financial will from in with across some year’s on significant highlights quarter I division, Security the binding call with the each Alan prior comparable margin our from

of inspection and Mexico’s and notification for which from tax vehicle Alan approximately XX% $XXX at end, our as the includes before mentioned, of announced National approximately a valued significant quarter services. million, systems contract related cargo we Defense, Just an award Department SEDENA, value-added

to portals, are back and buses car our software safety platform. inspect integration customs cargo Under borders. solutions high-energy of be Mexico’s systems and proprietary inspection care vehicle inspection inspection this to multiple vehicle we the CertScan PXX increasing award, utilized our expect and border integrity cars These of view provide and multi-site cargo trucks, checkpoints, Eagle systems, units at planned drive-through to

our We crucial facilitating solutions a are honored to role flow play for in of the trade. smooth

cargo I that though related SEDENA and were QX, QX. in the sizable we contract in XXXX. provide mention confidence that announced enhance competitive and note award approximately the reflected as million. bid $XXX QX clear Also various using QX, where very delivery received our expand deals and order announced executed that visibility million market year enter platform. on LEP in Throughout this deliver in end award border followed bookings QX early was $XXX or another Mexico even presence in the a we want QX to was we international These protection received supporting customs and we make vehicle potential QX which is to in contracts, the exciting award selected. $XXX focused it large key quantity continued approximately bolster we and our border also and I which of valued and orders at early backlog. awards, infrastructure the to MEP were wins not quarter thus we security want million U.S. had we This regions. in and combined approach These CertScan the initial U.S. CDP the These next indefinite our and value scanning a enhancement under fiscal of as are platforms integration

opportunity across orders has customs one the also our unique able manage issue that additional CBP award to vehicle the is incorporating checkpoints, important at smoother ongoing to more image between trade It make as are as and these data, the to IDIQs on vendors these contracts. delivery Mexico SEDENA helps U.S. Americas, border our under integrated CBP to highlight of efforts more identification proprietary CertScan inspection that By at room U.S. well to and we clients. qualified to traffic that Mexico the agencies or the This offer and software, and platforms these are solution and needs cater solutions. of would software unify access comprehensive the

anticipated Guatemala as through projects operating Puerto Our capabilities demonstrate continue these in in programs. have and experience large-scale been Rico to handling our we and and turnkey projects Albania,

the knowledge contract industry especially was mentioned, anybody to Alan the [indiscernible] equipment. biggest As for this our in contract, to

aviation side, serve infrastructure other the we worldwide. public customers airport On to our critical customers and transportation and continue

In as ANA explosive order passengers checked to These systems. announced are Portugal to the Portugal. worth an we by at expected units baggage. from security installed QX, detection tomography million providing Airport screening our or The $XX real-time order airports multiple involves various enhance approximately across of RTT, units be

we deliver reliable the ensure ongoing operation. as of this Additionally, for installations a part these to are to system’s award, support geared and service maintenance

from maintenance at U.S. for million we checkpoint renewal airports. an OEM service quarter, the During also a received $XX contract

safety. see make continue and Looking prudent to improving investments upgrading infrastructure airport ahead, to that we activity anticipate for airport passenger authorities security capital will continue

Optoelectronics Moving margin on we reported in division and revenue accompanied of to where X% expansion. growth the third our Manufacturing strong operating by quarter,

actively some chain lessen smooth we components, specific strategies are implementing experience supply impact to for the and maintain but challenges continue We to operations.

Opto division customers, of Indonesia operations to continues subassemblies from in and a to India. and technology U.S., components base primarily our with broad provide UK, work OEMs Canada, Malaysia,

alternative an position we be seek customer manufacturing to that Our base, backlog and continue to strong a as diversified for offshore to option OEMs an as partners with ourselves OEM manufacturing. China-based continues

the approximately during lower several spending where elements, economic challenged revenues constrained of the hospital in and continues division, elevated year’s were spending disappointing. years the The by capital prior be the the finally, environment markets. than industry QX, including And on XX% in pandemic Healthcare to to current CapEx

win a $X During Canadian-based strategic the million patient hospital. quarter, provide we is a a services to solutions This region to us. critical monitoring in announced order for and support a

mortality, called a making alert transfers a drive the QX, we During ICU in-hospital company doctors timely clinicians PeraHealth, deterioration, optimized software completed to company to and predictive helping more acquisition the enterprise to reduce develops that small patient of patient care. decisions for and unplanned to

patient in help solution our The existing the sound management differentiate statement PeraHealth predictive marketplace. with allows along us

new the and the we quarter sales we to visibility on also certain QX on near-term seasonality U.S. added and marketing During the Spacelabs. in a strong believe is leadership Based quarter, of typically opportunities, better on that Spacelabs for to fiscal and our QX. next much track the has its into strong momentum finish are the we to Overall, continue recent year. perform in XXXX than performance QX talent potential

our their support. would customers continued like As thank for employees, I always, and stockholders to

am call for the call more to our over back to you. about talk that, we Alan Thank before to I detail in the open going guidance questions. turn over financial With results and

Thank you, Deepak.

the Now prior division were I anticipated support year. in greater by largely security customer QX financial of cargo related year-over-year, the inspection review Security bit in compared to third-party due strong revenue. sales with service modest results in the diversified will growth for and third a our sales QX X% supplemented fiscal products detail. up our growth. division base, that Opto to with X% XX%, were sales revenues up quarter Again, our intercompany vehicle to a growth increased and upcoming revenues

division, the year-over-year and QX. in of of highest Security approximately is of which three was our division, reduction mentioned, sales. sales gross representing business a XX.X% reported the as which a change by in year-over-year And that in margin carries Deepak smallest below divisions X-month year the XX% challenging our gross favorable division This our margin was XX% more approximately driven lower our The in of prior revenues Healthcare primarily less mix the a sales QX marketplace. X.X% Healthcare unit,

fluctuate from costs. increases margin gross supply our to cost period period revenue by and based in Our component In was chain mix and other also volume, general, will certain among on margin changes, impacts of gross inflation factors. impacted

expenses. operating to Moving

prudently We continue across work divisions our SG&A improve our of each to structure. efficiencies cost and to diligently manage

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

beneficial in down foreign were $XX.X it prior have same this development $XX.X operating million, of year quarter. quarter. exchange for from QX million our QX in impact did a slightly Research on and the revenues, expenses headwind a again expenses fiscal created While ‘XX

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

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

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

in normalized the discrete fiscal XX.X% our was ‘XX fiscal impact to ‘XX. tax rate QX tax of Excluding effective of tax items, XX.X% QX of effective rate in compared of a normalized

and of adjusted operating non-GAAP I ‘XX will in now divisions. the division operating margin. margin higher margin increased of ‘XX in from XX.X% to in to to by turn adjusted expenses. quarter QX XX.X% to our fiscal of in last discussion adjusted due fiscal our Security of a Opto the increased XX.X% Overall, each third of operating driven non-GAAP strength and from the lower QX Security in revenue XX.X% operating QX year The ‘XX in of

increased by expansion operating which in were QX. XXXX quarter XX.X% We offset and a compared last to our partially from in to XX.X% less challenges Opto year’s to due X.X% the in with decreased in were where pleased Healthcare margin to division, also lower operating increases mix. favorable These adjusted fiscal revenue third adjusted division, the XX.X% in the sales of the the prior year margin

significant mentioned, As potentially both growth. QX division expect Healthcare we improvement, margin currently sequentially to due year-over-year the primarily and show revenue to Deepak operating

We operations for same deliveries $XX to year Moving during preparation strong the and two our spent buyback approximately amortization in to of prior program advances. collections to the building at large Cash repurchase XXX,XXX $XX announced by million shares. this under cash customer by ‘XX the again past million robust, in quarter. we fiscal $X.X flow. which in quarters in driven and active million quarter, security quarter, upcoming extremely fiscal XXXX anticipate was compared quarter We provided inventory in QX division was coming QX were third in contracts approximately was $XX during $X.X program while depreciation stock last expense million. CapEx in million,

repurchase buyback of Our fiscal Board program year. million as quarter earlier increased for the up a X.XX authorization end, allowed shares. to the of And this

net modest with solid is buybacks. leverage sheet and balance significant and Our acquisitions stock additional capacity for

diluted payments the of are their well associated EPS ‘XX from acquired as guidance. excludes fiscal principal our charges, restructuring non-GAAP Aside intangible of in revenues The non-recurring just fiscal $X And term and to and XXXX. debt non-cash over EPS and potential turning assets expense ‘XX and non-GAAP and bank other matures reiterating fiscal guidance, amortization required impairment, our finally, we bulk tax tax guidance loan, discrete interest effects under other as of our million annual items.

anticipated from guidance. this and disruptions and currently discussed to revenues impact predict from and and estimates significantly reflects and per supply non-GAAP revenue on due and the Actual The to chain vary the company’s risks financial results SEC We is in other inflation earnings our vary believe could rates in interest share the actual reasonable and in anticipated and earnings our non-GAAP guidance difficult uncertainties diluted impact filings. currently increased of also ranges estimates. costs could the reflected

on growth OSI our structure. We continue management of continue We and providing will our cost products to and areas to innovative remain in focused the these enable proactive our businesses solutions. efforts of believe

in global end to continue continued traction current partners. this through positioning And improving and strategic environment to customers supporting would questions. in to to to thank like Systems time, for and dedication at markets. key the capitalize the OSI on its navigate the call take company the gaining to we open opportunity to areas team growth would like this expect our We while We certain

question first of Riley. line our Nichols the [Operator Josh from Instructions] B. comes from And

question, please. Your

see for taking great to Thanks here. and Yes. backlog questions the my

So clarify just to here.

the current $XXX included So VAT of in backlog. not net million the is award the

right? you’ve that there of Is $XXX of is So CBP assessment? All top expansion a implying received. your end equal for backlog out should awards opportunity and additional with the plus, still be billion on $X already the fair million

there you well. that that besides to opportunities it look deeper said we continue just CBP it are just care, have want to very add-ons, Absolutely, to on I add at. other

talked pretty Thanks. maintained I you to wanted what’s significant this about higher And year then a other interest the from mean I been little Alan, expense. headwind environment. rising you’ve EPS bit EPS a despite thing on, guidance the hit the rate

we’ve here, about look those the and guidance year up or so, around you headwinds from probably higher If previously. that of rates $X.XX for is excludes like that EPS $X.XX talked

which X% these guidance that large from maybe you’re given this expect also I seen growth just assessment? similar that share without materially if if that next we So just into you you’ve extrapolate were guidance for around $X giving of that were margin really would for also fair year to apply a alone accelerate have but in factor fiscal and know in all year, you would that that to growth orders any Is trajectory ‘XX, the also, I that additional expansion, is not probably likely. implies kind and year doesn’t a EPS to a next assume,

sit our which things Yes, X tremendous about. start excited into nicely. the year next we’re we summarized we months you’ve of visibility Josh, fiscal before as extremely here have ‘XX, Well, fiscal quite

headwind You’re increased a in It fiscal compared also rates ‘XX, right what out to time came even throughout year. we about expense. was a expected year-over-year headwind as the at steadily guidance fiscal with for the we the have given August interest significant ‘XX

earnings next call, leverage bottom as year of do there we at premature to growth the strong line following anticipate will growth. it’s our typically into point tremendous is or headwinds. on higher QX, anticipate performance that you’re those right, QX which our this guidance And sales while overall we for the be the with so next will pleased give call following us really our we we’re So in do opportunity to light for

CBP question of or Last award million Thanks. to Is all recognized delivered the $XXX one that be in the fiscal to also rolling been that much going case? year? totally effectively know other you for million was almost me, quarter next be mentioned the versus is last still this I $XXX the of how going ‘XX. announced like from is delivered into orders it has year

is This Alan. Josh.

to couple slower a we little there. certain acceptance of deliveries as On this of had the fiscal CBP, in So delayed you a off start half as the tests. year and got know, first customer questions

seeing up. that We’re really pick

QX are revenues into nicely Our to revenues we probably and ‘XX were or but anticipated QX the much And CBP stronger CBP as only to well. not well. as as expect think for two, in be in we call said fiscal ‘XX on into continue I last

of those large fiscal with to at that haven’t of what With yet in announced say, be do But timing that positions it also respect last the quarter, nicely. the customer international year. revenues the significant to revenues order next work suffice million $XXX beginning contract quite to the we the said as will we So we it from very that. continue expect on us we

and Well, a backlog. visibility Deepak fiscal forward take really someone out I’ll things given shake how turn. year, to great, unprecedented next let Alan for and the see looking else

Thank you.

Thank you.

Thank you. Brian question from line Capital. Imperial next from comes And of [Operator the Instructions] our Ruttenbur

Your please. question,

Great Great. quarter.

First flows of inventory probably then question you you’re for last where big the the in year? contracts, build-out cash I contracts. in you cash some was XXXX? the little bit flows can with a kind for big strong don’t going these And is given And see to as to have all is going how this period. have know you I of that stockpile long very maybe these cash build-out remainder about talk the doing It flow.

with as over And Great large quarters the Alan. the exceptionally Brian, contract. we going extremely to contracts, next contract and cash the free this out, the Yes, several delivered we’re building inventory pleased contracts, this for two be large strong is you that other with international correctly were QX. we these SEDENA question. point in flow

So have. it’s a issue good to

maybe So we we early But as a basis. cash anticipating then necessarily flow amount as any and there’ll product, a fiscal begin for of cash significant overall result, flow QX not expect ‘XX. very an we’re the deliver on rich in into us to be

very So excited about that.

probably some generation. So flow flow cash medium- near-term significant long-term some and headwinds and cash

that Thank was a previous to interest you some about by analysts. rates? bit also little debt current noticed plans of your is some to debt? maybe your brought are expense much. to in down the lock up the paid continue And long-term you cost that you talk plans are period. going there? Can very Okay. what I down pay you capital? The Or What the in

Yes. is Good This Alan again. questions, Brian.

we So last majority the in of did lock – of debt year. our in last QX

an in through the frame rate So at swap. September August, was That X.XXX%. swap interest time

of So we And as expect about we’re good cash flow we opportunities, to always we cash flow although feel do at past that. would as alternative that as down uses debt did this be quarter. pay well. generate We looking other

So we feel overall. about good that position

in And about you been where going, question. talk of and one several But had fourth and the can they Where see maybe for for expect It’s then bit quarter. years the And that you do Healthcare a the healthcare. Okay. about since see maybe back the you it’s Alan, asked it is instead. But healthcare I’ve to Deepak. a future little little division? in last if come Deepak? blip It’s please here you you chime

about quite healthcare business. are confident we Brian, Well, the

before, in it mentioned, has said As highest mind, the keep business. just margin Alan it’s we’ve

call a confident for it’s to for it. that do years that meantime, to We platform whole do change that the going heavily, It’s said In platform. remain we’re to before are the to our take can compare and we have of new were it the couple which the tailwinds. Alan previous, investing we going related developing, specifically, R&D continue what expecting significant the time, this size on contracts, disappointing with delayed. when But I it, it, at especially comment QX, same maybe QX some got quarter, COVID which also and for we you

imminently will happen. We are that told

quarters we stronger QX QX than in we quite believe confident. quarter are mind ago, a stronger PeraHealth have believe platform. bought couple of in it. a QX we keep that for normally also we seasonally, bought is that we will that be anyway. SafeNSound, So, And And The

at looking monitoring, patient are besides the in We at connectivity cardiology. are it story, we looking

services products. company way trying a are it make some We in in to a

as have margin yes, want it made all-in-all, ship you So as is, disappointing. delayed, so it’s these to But it quarter excited are management it. we looking we get it And the sales quite from the Alan, add to at, America, of with contracts we and It’s North have said the the before, very are with the the with of we changes Spacelabs. into are book we a something? one confident about that other. future it, of do team connectivity new change in that

said we was quarter. a you I Well, – think that were well. Yes, QX challenging

two place a QX programs platforms financial we cardiology anticipating contract with or therefore, QX. we were are And feel it than monitoring that As picture the – is we some outlook. for will to be strong in, that And much division. the been saw picture the going Deepak anticipating the we different cautiously we products, think overall taking and have very patient in for would future we in mentioned, bright had new in that And are of R&D a different that a come see QX. confident

you. Thank Great.

And Instructions] [Operator the comes Capital. Jeff question of Roth line from next you. Thank our from Martin

morning and doing Deepak. Good well. Hope are Alan Thanks. you

Joe. Hi

likely are we to ‘XX, – know here, curious these is to again really business the evaluating are acceleration the going observation see I growth this significant with an SG&A because in the declined start larger just respect expand extrapolate are revenue just tied contracts. over see to we end you to fiscal to constantly going it to last it you over years, of efficiencies. the year. X through But Alan, if was year, SG&A fiscal

quite monitor judiciously. have do Jeff, question good and our really we yes, – we costs

that consistent but would move of As as we SG&A sales decline, with come with costs percentage on and the a into revenues some to to an increase, absolute basis growth variable seeing we that. expect of ‘XX, fiscal dollar significant

in increase an would our we dollar yes, So absolute year. fiscal SG&A next in anticipate

CBP Okay. of you ‘XX, be interest contract? will contract to U.S. or Great. that are seeing top activity we do order, the orders? or respect against in follow-on you with as of on orders or delivery you that, And tackle exit on where percentage think then And fiscal in currently terms

but Jeff, and really break can What down in has Alan I what am start, little that We more been it, seen shipments said answer. a to be can’t going specifics it CP going this answer portion year. also QX it into of to is but Alan next a into was it’s percentage year, slow than QX. two present QX to only take range But contract a out the – out total $XXX to contracts million was will and vendors $XXX also programs, mentioned other more, million IDIQ, emphasize it as putting portion that in of it. want the big us of to about and before, we us, for ‘XX. the let XXXX to that I

And at and IDIQs, orders very for not happy looked there term to there put into on on and trade we as U.S., two And continue there work, rest between the countries equipment, to a software, point will to challenges very for to focused very people the the top room we it it we new selling that, big and for between duplicate said which it. is borders the positioned at is thing it. very Sedana have make are we lot which selling against the it the we ‘XX, So, that forward those to cooperation we plus happy with ‘XX is contract Mexico, as before, continue said are the a one are of us we world it excited still from and go move And to Mexico trade simpler of and is CBP wherever of which but we This this are point things that it, have say with the the are with and the thing, northern good CertScan continue much that’s it. and about the is same beyond. longer faster. just into well a customers of

very about are excited we So, it.

That’s in a And part the And segue. to Sedena was question, of plan, already or go integration decision a and with that the Deepak, big coordination to is initial my discussion? stages and between the final great the just Mexico that in of process is for U.S. Rapiscan?

we them Rico have whole we have the can’t all in other in it the and Puerto and help in said on and trade, they of know is could it – are have very very could happy. while what with is the very, not just it helped. the the before, successful, was price. have based the this have very before Well, way plan And and I all have information we and based I have with the It at trade, one performance help. been to is I Guatemala doing do say that this as say was the it customer But to what governments it keep bid. was competitive and anything they experience. we programs do on does number that It about look think I and will at the said of to whatever the that a depends I But in that to looking politically. world between way do. But complementary CBP they future, in how that don’t it at look shared and do way the have on countries. what But But can’t they efficient they it has Albania,

forward the you. to Thank next fiscal guidance it. quarter. ‘XX Got Look

[Operator next line Instructions] the question our Securities. from of And comes Larry Solow CJS from

question Your please.

on Mexico. mentioned And competitive What getting. like bidding couple a question, guys the just in Quick you you been large do of morning. you Good was Great. follow-ups awards have a maybe it of share, think inspection? sort What the vehicle is most and your – cargo your think not fair this is if newer do do and think differentiator CertScan you there? of you inspection driving leader process

multi-energy can Good cargo provider of and call that portals I of world. other. the preeminent but presence. with confidently question. to to We is of integration, would it, say to backscatter, We be say is provider, ourselves interact a them, license one in in customer service size happiness the interact leaders, consider technology radiation with its there CertScan lot the global our I ability the

So, play. the factors and all play the those factors that do come come important history is into execution. And of into performance most of one

the wouldn’t to be upgrade it’s demand. this that? CertScan, do for perform to of say combination add products, be flexible to innovation, want customer just So, to technology, Alan, something all and able you I of a but new ability

I think that summarized it very well.

the Got it. on And just you clarification. then can

had they million, or total, can we that? $XXX million. of on there three million, number, $XXX if $XXX I they So, actually reoccurring a contracts of billion, that your – million, $XXX $XXX of like these a portion Is are to is expect all today? like three I close don’t Would of XX% like $XXX like reoccurring portion service that? kind million, think what of is portion be kind which the this reoccurring whatever, million, them. $X there color you Any sort know, is contracts of

than stuff happy. they XX of Customers which add service And And include said in contract $XXX CBP well some are can go most that, it. the other are contract – trying the you are the the add do these XX not do is contracts you IDIQ, trying going part us, million very to them years, we of question, when an the these is side and you but are is is want, contract, that years. it life equipments you the anyway. are to span But to of they this of Sedena, $XXX what XX more keep whatever when add to and mind, into the you one, of Number and years, million together international do all up, maintenance and CBP positioned. but

from So, a mind, the contract and the $XXX rest out upgrading follow-on contract. services. big we of large say, that and continues, a not there years are on couple long-term yes, in and potential contracts is a continues. there doesn’t service but maintenance, of top want I stuff to these mean are that, that that other But contracts, MSAT ago, [ph] million had that’s big Keep of Mexico Puerto Rico in world.

able at for the these to other look Alan? are well work to to together, very of the we great a big opportunities. manage stone and as stepping that and customer. other us equipped things parts there So, these support We are convince world are to be

And carries Larry, think revenue the service, there, out of recurring and with get nice as the about we get I base to bigger installed alluding you as associated service things you it as nice revenue margin is, this are one through a this this nice healthy well. bigger generally is and

of recurring stream years come. it a for many, So, revenue to steady many provides

expect that know Mexico, you do fiscal you will Yes, in kind will am the exactly. little for has get begin in contract that, I portion you upcoming don’t few clarification, And a jumped whether helpful. – you international like But service start definitely sounds a revenue – that’s over ‘XX. of clarifying in fiscal kind quarters, or not up you It And just think contributions of good are is bit also your to this of said of year? last majority the I terms which the there. driving I really not.

Larry, this is Alan.

yes. So, customer timing we to the the fiscal in Mexico ‘XX. working is the the commence revenues expect do contract are answer that yes, deliveries Sedena on for revenue. But for in with We of

on ‘XX. expect revenues do next will at call. we fiscal timing But We our have in yes, more clarity

And Great. just Opto. just then lastly, on

quarter this think I at – little we line. slower on a top the this growth

backlog in I kind think expected. up. been just going has general, of was that But

up but it’s it quarter, What’s XX% most quarter, won’t longer of that sort – or think color what and I – at up, these orders I updated term, related, be think the would disconnect it just Is XX% it sales? the backlog of any in as of year-over-year. are between it this the last of be sort is flattish timing rise was great? there least or

hand and Good a issues backlog observation. with the so that, what year, that taking business area. customers business. into Keep their especially put mind, like call have to that that we during question, in placed And just supply in chain a different good COVID orders the is and I longer that, last term

it in. ones are before it. now large and come bit push and next contracts you call And maybe as But stuff what then of some little the see time it term more. a and I is shove needs the a their It’s at clarify and what have backlog play. customers and looked it into Alan, longer that takes some can

have role Yes. that’s general components That’s missing on the that own components, XX% primary delayed some to thing, chain of some have in But might them customers, just that the requirements. certain Supply but we inventory continues timing area. of deliveries the to too, the of shipments. where might be we are play their who hand a small adjusting

productivity which yes, Revenue very Opto a So operating have really, is revenue conversion has the really be strong. the nice. lot margin expansion. noteworthy, backlog And had generated the will the of gains they to in been –

say little speech. And thing, broader bit more just I to little bit add a in to on and a maybe what my broader did of

U.S., One it’s it’s have presence. OEM orders. Opto that global lot of Manufacturing, it’s is about That Malaysia, a things India. whether in whether Indonesia, Canada, the because we place will that it’s the big business England, in customers helps our in

a other and and and to looking very China. chain different to products, That’s supply The world continue been the use we supply point focus work different an issue can effectively. that long-term, towards alternate big is is parts that the plus and everybody of

just Great. question. mentioned And one just you slip I supply, could more if

years? keep about order make in your any or concern up in this Just X ability up deliveries coming years, that supply X with years, significant of to X next to ability with is the pace kind there chain the security, these over ramp

well into to And we I that it. same basically at and feel are very equipped, not supplying between look much Again, big we But a also have focused we are which that’s are I time, we don’t Opto much that we our it. definitely. big very the have at Well, internal won’t challenge. But is we mean product, that’s the competitors positioned. ramp-up. it. a asset continue a intercompany say the

with working are We the customer.

We are to supply working Also what issues. chain with continue our vendors look as that but Alan mentioned we at strength that that’s are our is. definitely it, cost issues, there

We to on it. focus continue

the Thanks. color. Great. Appreciate all

today’s for any to further Deepak session would you. Thank to Chopra the like back remarks. hand I question-and-answer the of program. does This conclude program

our Thank confidence I employees, It’s And our conference you all us, our over. want worldwide all for in thank a call. their employees again once stockholders our very for attending again to exciting time.

I a for talk We looks the next year-end and it. very and much. billion for like. feeling we call better very on again the in about excited to do year are focused we much are to And conference backlog, will what a the $X you With have August you when it. focused Thank

conclude This and you, Thank gentlemen the ladies for today’s does program. in your participation conference.

disconnect. now day. Good may You