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OSI SYSTEMS INC

OSI SYSTEMS INCOSISEarnings & Financial Report

Nasdaq · Information Technology · Semiconductors & Related Devices

OSI Systems, Inc. is an American company based in California that develops and markets security and inspection systems such as airport security X-ray machines and metal detectors, medical monitoring and anesthesia systems, and optoelectronic devices. As of June 2010, the company employs approximately 3,180 personnel globally and includes subsidiary companies Spacelabs Healthcare, Rapiscan Systems and OSI Optoelectronics.

What changed in OSI SYSTEMS INC's 10-K — 2024 vs 2025

Top changes in OSI SYSTEMS INC's 2025 10-K

287 paragraphs added · 287 removed · 229 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

81 edited+5 added−21 removed137 unchanged
In the patient monitoring and connected care markets we face many large international players. Our competitive advantage in this market is via our solution delivery and workflow and communications software (SafeNSound) as well as our FDA cleared clinical decision support (Rothman Index). Our offering in this market in the USA uniquely addresses the needs of our customers.
In the patient monitoring and connected care markets we face many large international players. Our competitive advantage in this market is via our solution delivery and workflow and communications software (SafeNSound) as well as our FDA cleared clinical decision support (Rothman Index) software. Our offering in this market in the USA uniquely addresses the needs of our customers.
Department of Homeland Security has undertaken numerous initiatives to prevent terrorists from entering the country, hijacking airplanes, and obtaining and transporting explosives, weapons and their components, and to prevent human trafficking. Among other serious crimes. These initiatives, such as the Customs-Trade Partnership Against Terrorism, the U.S. Transportation Security Administration’s Air Cargo Screening Mandate and the U.S.
Department of Homeland Security has undertaken numerous initiatives to prevent terrorists from entering the country, hijacking airplanes, and obtaining and transporting explosives, weapons and their components, and to prevent drug and human trafficking, among other serious crimes. These initiatives, such as the Customs-Trade Partnership Against Terrorism, the U.S. Transportation Security Administration’s Air Cargo Screening Mandate and the U.S.
We seek to further enhance our research and development program and consider such program to be an important element of our business and operations. Manufacturing and Materials We currently manufacture our security and inspection systems domestically in California, Kentucky, Massachusetts, and Tennessee, and internationally in Germany, Malaysia and the United Kingdom.
We seek to further enhance our research and development program and consider such program to be an important element of our business and operations. Manufacturing and Materials We currently manufacture our security and inspection systems domestically in California, Massachusetts, and Tennessee, and internationally in Germany, Malaysia and the United Kingdom.
The principal raw materials and subcomponents used in producing our optoelectronic devices and electronic subsystems consist of silicon wafers, electronic components, light emitting diodes, scintillation crystals, passive optical components, printed circuit boards and packaging materials. The silicon-based optoelectronic devices we manufacture are critical components in most of our products and subsystems.
The principal raw materials and subcomponents used in producing our optoelectronic devices and electronic subsystems consist of semiconductor wafers, electronic components, light-emitting diodes, scintillation crystals, passive optical components, printed circuit boards, and packaging materials. The silicon-based optoelectronic devices we manufacture are critical components in most of our products and subsystems.
Also, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payer, in addition to items and services reimbursed under Medicaid and other state programs. 12 Table of Contents The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce or in return for the purchasing, leasing, ordering, or arranging for or recommending the purchase, lease or order of items or services for which payment may be made, in whole or in part, under Medicare, Medicaid or other federal healthcare programs.
Also, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payer, in addition to items and services reimbursed under Medicaid and other state programs. 11 Table of Contents The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce or in return for the purchasing, leasing, ordering, or arranging for or recommending the purchase, lease or order of items or services for which payment may be made, in whole or in part, under Medicare, Medicaid or other federal healthcare programs.
Research and Development Our security and inspection systems and software are primarily designed at our facilities in the United States and in the United Kingdom, Australia, Germany, Singapore, India, and Malaysia. These products include mechanical, electrical, analog and digital electronics, software, as well as other components and subsystems.
Research and Development Our security and inspection systems and software are primarily designed at our facilities in the United States and in the United Kingdom, Australia, Germany, Singapore, and India. These products include mechanical, electrical, analog and digital electronics, software, as well as other components and subsystems.
We believe that the market for security and inspection products will continue to be affected by the threat of terrorist incidents, drug and human trafficking, gun violence, and by new government mandates and appropriations for security and inspection products both in the United States and internationally.
We believe that the market for security and inspection products will continue to be affected by the threat of terrorist incidents, drug and human trafficking, border security, gun violence, and by new government mandates and appropriations for security and inspection products both in the United States and internationally.
We believe that our vertical integration differentiates us from many of our competitors and provides value to our customers who can rely on us to be an integrated supplier. Capitalizing on the Market for Security and Inspection Systems.
We believe that our vertical integration differentiates us from many of our competitors and provides value to our customers who can rely on us to be an integrated and comprehensive supplier. Capitalizing on the Market for Security and Inspection Systems.
Backlog as of any particular date should not be relied upon as indicative of our revenues for any future period and should not be considered a meaningful indicator of our performance on an annual or quarterly basis. 16 Table of Contents Human Capital The strength and talent of our workforce are critical to the success of our businesses, and we strive to attract, develop and retain personnel commensurate with the needs of our businesses.
Backlog as of any particular date should not be relied upon as indicative of our revenues for any future period and should not be considered a meaningful indicator of our performance on an annual or quarterly basis. 15 Table of Contents Human Capital The strength and talent of our workforce are critical to the success of our businesses, and we strive to attract, develop and retain personnel commensurate with the needs of our businesses.
If these organizations or authorities name us as having breached our obligations under their regulations, rules or standards, our reputation would suffer, and our business and financial condition could be adversely affected. 13 Table of Contents Other Foreign Healthcare Regulations We are also subject to regulation in the foreign countries in which we manufacture, market, and/or import our products.
If these organizations or authorities name us as having breached our obligations under their regulations, rules or standards, our reputation would suffer, and our business and financial condition could be adversely affected. 12 Table of Contents Other Foreign Healthcare Regulations We are also subject to regulation in the foreign countries in which we manufacture, market, and/or import our products.
To support our manufacturing operations, we outsource certain requirements, including sheet metal fabrication and molding of plastic components. 8 Table of Contents The principal raw materials and subcomponents used in producing our security and inspection systems consist of X-ray generators, linear accelerators, detectors, data acquisition and computer systems, conveyance systems, vehicles, and miscellaneous mechanical and electrical components.
To support our manufacturing operations, we outsource specific requirements, including sheet metal fabrication and molding of plastic components. 8 Table of Contents The principal raw materials and subcomponents used in producing our security and inspection systems consist of X-ray generators, linear accelerators, detectors, data acquisition and computer systems, conveyance systems, vehicles, and miscellaneous mechanical and electrical components.
We have a team dedicated to updating and revising key systems, processes, and product technical documentation to meet the EU MDR requirements. 14 Table of Contents Environmental Regulations We are subject to various environmental laws, directives, and regulations pertaining to the use, storage, handling and disposal of hazardous substances used, and hazardous wastes generated, in the manufacture of our products.
We have a team dedicated to updating and revising key systems, processes, and product technical documentation to meet the EU MDR requirements. 13 Table of Contents Environmental Regulations We are subject to various environmental laws, directives, and regulations pertaining to the use, storage, handling and disposal of hazardous substances used, and hazardous wastes generated, in the manufacture of our products.
Additionally, our Healthcare division manufactures multivendor compatible accessories for use with third-party devices. 6 Table of Contents Markets, Customers and Applications Security and Inspection Products . Many security and inspection products were developed originally in response to civilian airline hijackings. Consequently, certain of our security and inspection products have been and continue to be sold for use at airports.
Additionally, our Healthcare division manufactures multivendor compatible accessories for use with third-party devices. 6 Table of Contents Markets, Customers and Applications Security and Inspection Products . Some security and inspection products were developed originally in response to civilian airline hijackings. Consequently, certain of our security and inspection products have been and continue to be sold for use at airports.
Unless an exemption applies, federal law and FDA regulations require that all new or significantly modified medical devices introduced into the market be preceded either by a premarket notification clearance under section 510(k) of the Federal Food, Drug and Cosmetic Act (FDCA), or an approved premarket approval (PMA) application.
Unless an exemption applies, federal law and FDA regulations require that all new or significantly modified medical devices introduced into the market be preceded either by a premarket notification clearance under section 510(k) of the Federal Food, Drug and Cosmetic Act (FFDCA), or an approved premarket approval (PMA) application.
We believe that government agencies and commercial customers will increasingly rely on such SaaS offerings to review and adjudicate screening decisions remotely, over secure networks, as well as to communicate with and monitor the performance of their employees working on the ground at distant ports, border crossings and other checkpoints.
We believe that government agencies and commercial customers will continue to rely on such SaaS offerings to review and adjudicate screening decisions remotely, over secure networks, as well as to communicate with and monitor the performance of their employees working on the ground at distant ports, border crossings and other checkpoints.
Security and Inspection Systems. We design, manufacture and market security and inspection systems globally to end users primarily under the “Rapiscan” trade name. Our Security products are used to inspect baggage, parcels, cargo, people, vehicles and other objects for various contraband and prohibited items including weapons, explosives, drugs, and nuclear materials.
Security and Inspection Systems. We design, manufacture and market security and inspection systems globally to end users primarily under the “Rapiscan” trade name. Our Security products are used to inspect baggage, parcels, cargo, people, vehicles and other objects for various contraband and prohibited items including weapons, explosives, drugs, biosecurity threats, and nuclear materials.
A copy of this annual report on Form 10-K is available without charge upon written request addressed to: c/o Secretary, OSI Systems, Inc., 12525 Chadron Avenue, Hawthorne, CA 90250 or by calling telephone number (310) 978-0516. ​ ​ 17 Table of Contents ​
A copy of this annual report on Form 10-K is available without charge upon written request addressed to: c/o Secretary, OSI Systems, Inc., 12525 Chadron Avenue, Hawthorne, CA 90250 or by calling telephone number (310) 978-0516. ​ ​ 16 Table of Contents
This sales organization is supported by a service organization located in the same regions, as well as a global network of independent, authorized service providers. We market and sell our healthcare solutions globally through a direct sales and marketing staff located in North America, South America, Europe and Asia, in addition to a global network of independent distributors.
This sales organization is supported by a service organization located in the same region, as well as a global network of independent, authorized service providers. We market and sell our healthcare solutions globally through a direct sales and marketing staff located in North America, South America, Europe and Asia, in addition to a global network of independent distributors.
As of June 30, 2024, our consolidated backlog totaled approximately $1.7 billion, compared to $1.8 billion as of June 30, 2023. Sales orders underlying our backlog are firm orders, although, from time to time we may agree to permit a customer to cancel an order, or an order may be cancelled for other reasons.
As of June 30, 2025, our consolidated backlog totaled approximately $1.8 billion, compared to $1.7 billion as of June 30, 2024. Sales orders underlying our backlog are firm orders, although, from time to time we may agree to permit a customer to cancel an order, or an order may be cancelled for other reasons.
In recent years, security and inspection products have increasingly been used at a wide range of facilities in addition to airports, such as border crossings, railways, seaports, cruise line terminals, sports and entertain venues, freight forwarding operations, government and military installations and nuclear facilities.
In recent years, security and inspection products have increasingly been used at a wide range of facilities in addition to airports, such as border crossings, railways, seaports, cruise line terminals, sports and entertainment venues, freight forwarding operations, government and military installations and nuclear facilities.
We purchase silicon wafers and other electronic components from unaffiliated third-party providers. For cost, quality control, technological, and efficiency reasons, we purchase certain materials, parts, and components only from single vendors with whom we have ongoing relationships. We do, however, qualify alternative sources for many of our materials, parts, and components.
We purchase silicon wafers and other electronic components from unaffiliated third-party providers. For cost, quality control, technological, and efficiency reasons, we purchase specific materials, parts, and components only from single vendors with whom we have ongoing relationships. We do, however, qualify alternative sources for many of our materials, parts, and components.
This variety of technologies also permits us to offer unique hybrid systems to our customers that utilize two or more of these technologies, thereby optimizing flexibility, performance and cost to meet each customer’s unique application requirements. 15 Table of Contents In the patient monitoring, cardiology and remote monitoring, clinical monitoring and connected care markets, competition is also based on a variety of factors including product performance, functionality, value and breadth of sales and service organization.
This variety of technologies also permits us to offer unique combinations and hybrid systems to our customers that utilize two or more of these technologies, thereby optimizing flexibility, performance and cost to meet each customer’s unique application requirements. 14 Table of Contents In the patient monitoring, cardiology and remote monitoring, clinical monitoring and connected care markets, competition is also based on a variety of factors including product performance, functionality, value and breadth of sales and service organization.
Manufacturers of currently approved medical devices have a transition time to meet the requirements of the EU MDR with expiration of such transition time depending on the class of medical device. The EU MDR differs in several important ways from the EU’s directives for medical devices and active implantable medical devices replaced thereby.
Manufacturers of currently approved medical devices have a transition time to meet the requirements of the EU MDR with expiration of such transition time depending on the class of medical device being manufactured. The EU MDR differs in several important ways from the EU’s directives for medical devices and active implantable medical devices replaced thereby.
Industry Overview We sell our security and inspection solutions and healthcare products primarily to end‑users, while we design and manufacture our optoelectronic devices and value‑added subsystems and provide electronics manufacturing services primarily for original equipment manufacturer (OEM) customers. 1 Table of Contents Security Division.
We sell our security and inspection solutions and healthcare products primarily to end‑users, while we design and manufacture our optoelectronic devices and value‑added subsystems and provide electronics manufacturing services primarily for original equipment manufacturer (OEM) customers. 1 Table of Contents Security Division.
Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.
Under the FFDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.
The loss of some of our trademarks or patents might have a negative impact on our financial results and operations. Nevertheless, with the exception of the loss of the Rapiscan ® , AS&E ® or Spacelabs ® trademarks, the impact of the loss of any single trademark or patent would not likely have a material adverse effect on our business.
The loss of some of our trademarks or patents might have a negative impact on our financial results and operations. Nevertheless, with the exception of the loss of the Rapiscan ® or Spacelabs ® trademarks, the impact of the loss of any single trademark or patent would not likely have a material adverse effect on our business.
Our ISMS and GRC processes are designed to prioritize IT and cybersecurity risk areas, identify solutions that minimize such risks, pursue optimal outcomes, and maintain compliance with contractual obligations. We also maintain a global security operations center with real-time capability to investigate and trigger impact mitigation protocols. These capabilities allow us to reduce exposure should a security incident arise.
Our ISMS and GRC processes are designed to prioritize IT and cybersecurity risk areas, identify solutions that minimize such risks, pursue optimal outcomes, and maintain compliance with contractual obligations. We maintain a global security operations center with the capability to investigate and trigger impact mitigation protocols in real-time. These capabilities allow us to reduce exposure should a security incident arise.
As a result of the use of security and inspection products at additional facilities, we have diversified our portfolio of security and inspection products and our sales channels. 4 Table of Contents Many of our security and inspection systems utilize dual-energy X-ray imaging technology, in combination with software enhanced imaging methods and algorithms to facilitate the detection of contraband materials and items such as explosives, weapons, narcotics, and bulk currency.
As a result of the use of security and inspection products at additional facilities, we have diversified our portfolio of security and inspection products and our sales channels. 4 Table of Contents Many of our security and inspection systems utilize dual-energy X-ray imaging technology, in combination with software enhanced imaging methods and algorithms to facilitate the detection of contraband materials and items such as explosives, weapons, narcotics, and radioactive materials.
Security and inspection products are used at a wide range of facilities in addition to airports, such as border crossings, seaports, freight forwarding operations (to screen cargo before it is loaded onto airplanes and ships), government and military installations, sports and concert venues, correctional facilities, and other locations where the interdiction of criminal activities is paramount. The U.S.
Security and inspection products are used at a wide range of facilities such as airports, border crossings, seaports, freight forwarding operations (to screen cargo before it is loaded onto airplanes), government and military installations, sports and concert venues, correctional facilities, and other locations where the interdiction of criminal activities is paramount. The U.S.
In our experience, the OEM customers to whom we provide such services often prefer to engage companies that offer both local and lower-cost off-shore facilities. Along with a number of domestic competitors for these services, our high-volume, low-cost contract manufacturing locations in Southeast Asia compete with other manufacturers in the same region.
In our experience, the OEM customers to whom we provide such services often prefer to engage companies that offer both local and lower-cost offshore facilities. Along with a number of domestic competitors for these services, our high-volume, low-cost contract manufacturing locations in Southeast Asia compete with other manufacturers in the same region.
As a result, we will continue to leverage such expertise and capacity to gain price, performance and agility advantages over our competitors in the security, healthcare and optoelectronics fields, and to translate such advantages into profitable growth in those fields.
As a result, we will continue to leverage such expertise and capacity to gain price, performance and agility advantages over our competitors in the security, healthcare and optoelectronics fields, and to translate such advantages into profitable growth in these fields.
We possess rights to a number of U.S. and foreign patents relating to various aspects of our security and inspection products, healthcare products and optoelectronic devices and subsystems. Our current patents will expire at various times between 2024 and 2042.
We possess rights to a number of U.S. and foreign patents relating to various aspects of our security and inspection products, healthcare products and optoelectronic devices and subsystems. Our current patents will expire at various times between 2025 and 2042.
In addition to the manufacture of standard and OEM products, we also specialize in designing and manufacturing customized value-added subsystems for use in a wide range of products and equipment. An optoelectronic subsystem typically consists of one or more optoelectronic devices that are combined with other electronic components and packaging for use in an end product.
In addition to manufacturing standard and OEM products, we also specialize in designing and manufacturing customized, value-added subsystems for use in a wide range of products and equipment. An optoelectronic subsystem typically consists of one or more optoelectronic components that are combined with other electronic components and packaging for use in an end product.
Our optoelectronic devices and value-added subsystems are also used in a wide variety of measurement control, monitoring and industrial applications and are key components in telecommunications technologies. We also offer electronics manufacturing services to broader markets, as well as to our optoelectronics customers and to our Security and Healthcare divisions.
Our optoelectronic devices and value-added subsystems are also used in a wide range of measurement control, monitoring, and industrial applications, serving as key components in telecommunications technologies. We also offer electronics manufacturing services to broader markets, as well as to our optoelectronics customers and our Security and Healthcare divisions.
We sell products directly to end customers, as well as through integrated delivery networks and group purchasing organizations in the U.S., the NHS Supplies Organization in the United Kingdom, UGAP in France, and to various government funded hospitals in the Middle East and several parts of Asia.
We sell products directly to end customers, as well as through integrated delivery networks and group purchasing organizations in the U.S., the NHS Supplies Organization in the United Kingdom, UGAP in France, NUPCO in Saudi Arabia and to various government funded hospitals in the Middle East and several parts of Asia.
In addition, we see a trend among OEMs to outsource the design and manufacture of optoelectronic devices as well as value-added subsystems to fully-integrated, independent manufacturers, like us, that may have greater specialization, broader expertise and more flexibility to respond to short cycle times and quicker market expectations.
In addition, we see a trend among OEMs to outsource the design and manufacture of optoelectronic devices as well as value-added subsystems to fully-integrated, independent manufacturers, like us, which may offer greater specialization, broader expertise, and more flexibility to respond to short cycle times and quicker market expectations.
Our manufacturing includes silicon wafer processing and fabrication, optoelectronic device assembly and screening, thin and thick film microelectronic hybrid assemblies, surface mounted and thru-hole printed circuit board electronic assemblies, cable and harness assemblies, LCD and TFT displays, box-build manufacturing, and flex and rigid - flex circuitry on a complete turnkey basis.
Our manufacturing includes semiconductor silicon and laser wafer processing and fabrication, optoelectronic device assembly and screening, thin and thick film microelectronic hybrid assemblies, surface mount and thru-hole printed circuit board electronic assemblies, cable and harness assemblies, LCD and TFT displays, box-build manufacturing, and flex and rigid - flex circuitry on a complete turnkey basis.
Our security and inspection products are also used for security and customs purposes at locations in addition to airports, such as border crossings, shipping ports, sports and entertainment venues, military and other government installations, freight forwarding facilities, high-profile locations such as U.K.
Our security and inspection products are also used for security and customs purposes at locations in addition to airports, such as border crossings, shipping ports, critical infrastructure facilities, international mail facilities, sports and entertainment venues, military and other government installations, freight forwarding facilities, high-profile locations such as U.K.
For the fiscal year ended June 30, 2024, our Security division’s direct sales to the U.S. Government were approximately $91.4 million. Additionally, certain of our contracts with foreign governments also contain provisions allowing the government to terminate a contract for convenience. For further discussion, please refer to Item 1A. “Risk Factors.” Optoelectronic Devices and Electronics Manufacturing Services.
For the fiscal year ended June 30, 2025, our Security division’s direct sales to the U.S. Government were approximately $182.8 million. Additionally, certain of our contracts with foreign governments also contain provisions allowing the government to terminate a contract for convenience. For further discussion, please refer to Item 1A. “Risk Factors.” Optoelectronic Devices and Electronics Manufacturing Services.
Although we believe that our patents have value, our patents, or any additional patents that may be issued in the future, may not be able to provide meaningful protection from competition. We believe that our trademarks and trade names and patents are important to our business.
Although we believe that our patents have value, our patents, or any additional patents that may be issued in the future, may not be able to provide meaningful protection from competition. 9 Table of Contents We believe that our trademarks and trade names and patents are important to our business.
Because our custom optoelectronic components and subsystems require a high degree of engineering expertise, there are very few competitors of any significant scale in United States, Europe or Asia. Competition in the extensive electronic manufacturing services market ranges from multinational corporations with sales in excess of several billion dollars, to large regional competitors and to small local assembly companies.
Because our custom optoelectronic components and subsystems require a high degree of engineering expertise, there are very few significant competitors in the United States, Europe, or Asia. The competition in the broader electronic manufacturing services market ranges from multinational corporations with sales exceeding several billion dollars to large regional competitors and small local assembly companies.
These advantages include reduced manufacturing and delivery times, lower costs due to our access to competitive international labor markets and direct sourcing of raw materials and sub components.
These advantages include reduced manufacturing and delivery times, lower costs due to our access to competitive international labor markets and direct sourcing of raw materials and subcomponents.
Our Security division also offers trace detection systems that are designed to detect trace amounts of explosives or narcotics and people screening products, such as walk-through metal detectors for use at security checkpoints at airports, government buildings, sports arenas and other venues. Optoelectronic Devices and Manufacturing Services .
Our Security division also offers trace detection systems that are designed to detect trace amounts of explosives and narcotics and people screening products, such as walk-through metal detectors for use at security checkpoints at airports, government buildings, sports arenas and other venues.
We design and manufacture optoelectronic devices and we provide electronics manufacturing services primarily in our facilities in the United States and internationally in the United Kingdom, Canada, India, Indonesia, Malaysia, and Mexico. We engineer and manufacture subsystems to solve the specific application needs of our OEM customers. In addition, we offer entire subsystem design and manufacturing solutions.
We design and manufacture optoelectronic devices, and we provide electronics manufacturing services primarily in our facilities in the United States and internationally in the United Kingdom, Canada, India, Indonesia, Malaysia, and Mexico. We engineer and manufacture subsystems to solve the specific application needs of our OEM customers. Additionally, we provide comprehensive subsystem design and manufacturing solutions.
We market and sell our optoelectronic devices and manufacturing services, through both our direct sales and marketing staff located in North America, Europe and Asia, and indirectly through a global network of independent sales representatives and distributors.
We market and sell our optoelectronic devices and manufacturing services through both our direct sales and marketing teams located in North America, Europe, and Asia, as well as indirectly through a global network of independent sales representatives and distributors.
Our Security products fall into the following categories: baggage and parcel inspection; cargo and vehicle inspection; hold (checked) baggage screening; people screening; radiation monitoring; explosive and narcotics trace detection; and optical inspection systems.
Our Security products fall into the following categories: baggage and parcel inspection; cargo and vehicle inspection; hold (checked) baggage screening; people screening; radiation monitoring; explosive and narcotics trace detection; optical inspection systems; and radio frequency (RF) equipment.
We and other medical device manufacturers are confronted with major changes in the EU’s decades-old regulatory framework governing market access to the EU. The EU’s Medical Devices Regulation (“EU MDR”) has replaced, effective as of May 26, 2021, the EU’s Medical Device Directive (93/42/EEC) and the EU’s Directive on active implantable medical devices (90/385/EEC).
We and other medical device manufacturers are confronted with major changes in the EU’s decades-old regulatory framework governing market access to the EU. The EU’s Medical Devices Regulation (“EU MDR”) has replaced the EU’s Medical Device Directive (93/42/EEC) and the EU’s Directive on active implantable medical devices (90/385/EEC).
Our patient monitoring, cardiology and remote monitoring, and connected care solutions are manufactured and distributed globally for use throughout the hospital, in areas such as critical care, emergency, perioperative and step down units. Our solutions are also utilized in physicians’ offices, medical clinics and ambulatory surgery centers. We also provide clinical monitoring solutions in select geographies for telemetry units.
Our patient monitoring, cardiology and remote monitoring, and connected care solutions are manufactured and distributed globally for use throughout the hospital, in areas such as critical care, emergency, perioperative and step down units. Our solutions are also utilized in physicians’ offices, medical clinics and ambulatory surgery centers.
We consider our engineering personnel to be an important extension of our core sales and marketing efforts. Our engineering teams also design and develop processes for fabricating our custom products from wafer level to complete products with the goal of having our technology and products meet the latest market trends.
We consider our engineering personnel to be an important extension of our core sales and marketing efforts. Our engineering teams also design and develop processes for fabricating our custom products, from semiconductor wafer-level to complete products, to ensure that our technology and products meet the latest market trends.
Third, our international manufacturing locations allow us to reduce delivery times to our global customer base. We intend to continue to enhance our international manufacturing and sales capabilities. Capitalizing on Vertical Integration. Our vertical integration provides several advantages in each of our divisions.
Third, our international manufacturing locations allow us to reduce delivery times to our global customer base. We intend to continue to enhance our international manufacturing and sales capabilities. Capitalizing on Vertical Integration. Our vertical integration provides several advantages across all our divisions.
For additional information regarding the risks associated with these matters, see Item 1A. “Risk Factors” and Item 1C. “Cybersecurity.” 9 Table of Contents Trademarks and Trade Names and Patents Trademarks and Trade Names.
For additional information regarding the risks associated with these matters, see Item 1A. “Risk Factors” and Item 1C. “Cybersecurity.” Trademarks and Trade Names and Patents Trademarks and Trade Names.
Of the total employees, 2,038 were employed in the Americas, 3,565 were employed in Asia and 1,078 were employed in Europe. Available Information We are subject to the informational requirements of the Exchange Act. Therefore, we file periodic reports, proxy statements and other information with the SEC.
Of the total employees, 2,344 were employed in the Americas, 3,876 were employed in Asia and 1,117 were employed in Europe. Available Information We are subject to the informational requirements of the Exchange Act. Therefore, we file periodic reports, proxy statements and other information with the SEC.
Most of our high-volume, labor-intensive manufacturing activities are performed at our facilities in Mexico, India, Indonesia and Malaysia. Our ability to manufacture products and provide follow-on service from offices located in these regions allows us to remain in close proximity to our customers, which is an important component of our global strategy.
Most of our high-volume, labor-intensive manufacturing activities are performed at our facilities in Mexico, India, Indonesia and Malaysia. Our ability to manufacture products and provide follow-on services from offices located in these regions enables us to remain in close proximity to our customers, which is a key component of our global strategy.
These products are manufactured in standard and customized configurations for specific applications and are offered either as components or as subsystems. Our optoelectronic products and services are provided primarily under the “OSI Optoelectronics,” “OSI LaserDiode,” “OSI Laserscan,” and “Advanced Photonix” trade names.
Passive components are responsible for amplifying, separating, and reflecting light. These products are manufactured in standard and customized configurations for specific applications and are offered either as components or as subsystems. Our optoelectronic products and services are provided primarily under the “OSI Optoelectronics,” “OSI LaserDiode,” and “Advanced Photonix” trade names.
Our global manufacturing organization has expertise in optoelectronic, microelectronic and integrated electronics for industrial and automation, medical, aerospace and defense industry applications.
Our global manufacturing organization has expertise in optoelectronics, microelectronics, and integrated electronics for industrial and automation, medical, aerospace and defense industry applications.
Aerospace and defense applications for our devices include satellite navigation sensors, laser guided munitions systems, range finders, weapons simulation systems, and other applications that require the conversion of optical signals into electrical signals. Homeland security applications for our devices include X-ray based and other detection systems.
Aerospace and defense applications for our devices include satellite navigation sensors, laser-guided munitions systems, range finders, and other applications that require the conversion of optical signals into electrical signals. Homeland security applications for our devices include X-ray imaging, chemical, biological, radiological, nuclear, and explosive-based detection systems.
Our broader diversity strategies include focus at all levels of our organization, including senior management and our Board of Directors. As of June 30, 2024, 43.9% of our global workforce was female and 53.6% of our U.S. workforce was ethnically diverse.
Our broader diversity strategies include focus at all levels of our organization, including senior management and our Board of Directors. As of June 30, 2025, 43.7% of our global workforce was female and 48.5% of our U.S. workforce was ethnically diverse.
The international market for non-intrusive inspection equipment and related services also continues to expand as nations choose to procure and operate equipment to meet their own security objectives, including to bolster security operations at their own borders and for their own transportation networks, facilities and at other venues. The U.S.
The international market for non-intrusive inspection equipment and related services also continues to expand as nations procure and operate equipment to meet their own security objectives and address evolving threats, including bolstering security operations at their own borders, transportation networks, critical infrastructure facilities, and other venues.
Our optoelectronic devices and the electronics we manufacture are used in a broad range of products by a variety of customers in the following market segments: defense, aerospace and avionics; analytical and medical imaging; healthcare; telecommunications; homeland security; toll and traffic management; and automotive. Patient Monitoring, Cardiology and Remote Monitoring, and Connected Care Solutions.
Our optoelectronic devices and electronics are used in a broad range of products for various customers across the following market segments: defense, aerospace, and avionics; medical and life sciences; healthcare; telecommunications; homeland security; toll and traffic management; automotive and industrial. Patient Monitoring, Cardiology and Remote Monitoring, and Connected Care Solutions.
Certain of our cargo and vehicle inspection systems may require more than a year of lead-time. We have experienced some significant delays associated with shipments of our cargo and vehicle inspection systems to certain customers.
We have experienced some significant delays associated with shipments of our cargo and vehicle inspection systems to certain customers.
Our optoelectronic devices are used in a wide variety of applications for diversified markets including aerospace and defense, automotive, medical imaging and diagnostics, biochemistry analysis, pharmaceutical, nanotechnology, telecommunications, construction and homeland security. Medical applications for our devices include diagnostic and imaging products, patient monitoring equipment, and glucose monitors.
Our optoelectronic devices are utilized in a wide range of applications across various markets, including aerospace and defense, automotive, medical imaging and diagnostics, life sciences and biotechnology, pharmaceuticals, nanotechnology, telecommunications, construction, and homeland security. Medical applications for our devices include diagnostic and imaging products, patient monitoring equipment, and glucose monitors.
Our Healthcare division designs, manufactures and markets products globally to end users primarily under the “Spacelabs Healthcare” trade name. Spacelabs products include patient monitors for use in perioperative, critical care, step down and emergency care environments with neonatal, pediatric and adult patients. Our patient monitoring systems include bedside monitors such as the Xprezzon and Qube as well as telemetry solutions.
Spacelabs products include patient monitors for use in perioperative, critical care, step down and emergency care environments with neonatal, pediatric and adult patients. Our patient monitoring systems include bedside monitors such as the Xprezzon and Qube as well as telemetry solutions.
In addition, large orders of security and inspection products and orders for our most complex systems typically require greater lead-times. Fulfillment of orders of our Rapiscan RTT hold (checked) baggage screening equipment generally requires longer lead times. Further, we provide turnkey screening services to certain customers for which we may recognize revenue over multi-year periods.
In addition, large orders of security and inspection products and orders for our most complex systems typically require greater lead-times. Further, we provide turnkey screening services to certain customers for which we may recognize revenue over multi-year periods. Certain of our cargo and vehicle inspection systems and our radio frequency transmission products may require more than a year of lead-time.
The composition of a subsystem can range from a simple assembly of various optoelectronic devices that are incorporated into other subsystems (for example, a printed circuit board containing our optoelectronic devices) to complete end products (for example, pulse oximetry equipment).
The composition of a subsystem can range from a simple assembly of various optoelectronic devices that are incorporated into other subsystems (for example, a printed circuit board containing our optoelectronic devices) to complete end products (for example, pulse oximetry equipment). 5 Table of Contents We provide electronics design and manufacturing services in North America, the United Kingdom, and the Asia Pacific region.
Our sales staff is supported by an applications engineering group whose members are available to provide technical support, which includes designing applications, providing custom tooling and process integration and developing products that meet customer defined specifications. 7 Table of Contents We consider our maintenance service operations to be an important element of our business.
Our sales staff is supported by a team of application engineers who provide technical assistance, including application design, custom tooling, process integration, and development of products that meet customer-defined specifications. 7 Table of Contents We consider our maintenance service operations to be an important element of our business.
Manufacturers of FDA-regulated products are subject to pervasive and continuing post-approval governmental regulation, including, but not limited to, the registration and listing regulation, which requires manufacturers to register all manufacturing facilities and list all medical devices placed into commercial distribution; Quality System (also known as Good Manufacturing Practices) Regulations, which requires manufacturers, including third-party manufacturers, to follow stringent design, risk management, validation, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during the manufacturing process; product and promotional labeling regulations; advertising and promotion requirements; restrictions on sale, distribution or use of a device; PMA annual reporting requirements; the FDA’s general prohibition against promoting products for unapproved or “off-label” uses; the Medical Device Reporting (MDR) regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to reoccur; medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and removals (“recalls”) if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; an order of repair, replacement or refund; device tracking requirements; and post-approval study and post-market surveillance requirements.
To date, all of the patient monitoring and cardiology and remote monitoring systems we manufacture and sell in the United States have required only 510(k) pre-market notification clearance. 10 Table of Contents We are subject to pervasive and continuing post-approval governmental regulation, including, but not limited to, the registration and listing regulation, which requires manufacturers to register all manufacturing facilities and list all medical devices placed into commercial distribution; Quality System (also known as Good Manufacturing Practices) Regulations, which requires manufacturers, including third-party manufacturers, to follow stringent design, risk management, validation, testing, production, control, supplier and contractor selection, complaint handling, documentation and other quality assurance procedures during the manufacturing process; product and promotional labeling regulations; advertising and promotion requirements; restrictions on sale, distribution or use of a device; and the Medical Device Reporting (MDR) regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to reoccur.
Class III devices include devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to those deemed not substantially equivalent following the 510(k) process. The safety and effectiveness of Class III devices cannot be reasonably assured solely by the General Controls and Special Controls described above.
Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process. Class III devices include devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to those deemed not substantially equivalent following the 510(k) process.
As of June 30, 2024, we employed 6,681 people, of whom 3,995 were employed in manufacturing, 584 were employed in engineering or research and development, 655 were employed in administration, 360 were employed in sales and marketing and 1,087 were employed in service capacities.
As of June 30, 2025, we employed 7,337 people, of whom 4,505 were employed in manufacturing, 617 were employed in engineering or research and development, 676 were employed in administration, 364 were employed in sales and marketing and 1,175 were employed in service capacities.
We purchase most materials, parts, and components pursuant to purchase orders placed from time to time in the ordinary course of business.
We purchase most materials, parts, and components pursuant to purchase orders placed from time to time in the ordinary course of business. Information Technology and Cybersecurity Risk Management We rely extensively on digital technology to conduct operations and engage with our customers and business partners.
Our Eclipse Pro Holter recorders provide up to 14 days of 3-channel recording or up to 72 hours of 12 lead with pacing.
Our Pathfinder SL ® and Lifescreen™ Pro analysis tools provide clinicians the ability to save Holter analysis time and to do detailed analysis when needed inside or outside the hospital. Our Eclipse Pro Holter recorders provide up to 14 days of 3-channel recording or up to 72 hours of 12 lead with pacing.
In cardiology and remote monitoring our competitors are more regionally based. Our differentiators in these markets are our best-in-class analyzer software solutions as well as our industry renowned ambulatory blood pressure monitors.
In cardiology and remote monitoring our competitors are more regionally based. Our differentiators in these markets are our analyzer software solutions as well as our ambulatory blood pressure monitors. In the markets where we operate, providing optoelectronic devices and electronics manufacturing services, our customers evaluate us and our competitors based on several key factors.
Our factories are equipped with automated surface mount technology lines and other cutting edge automated manufacturing equipment. We offer these services to OEM customers and end users for medical, automotive, defense, aerospace, industrial and consumer applications that are not primarily integrating optoelectronic devices.
We offer these services to OEM customers and end users in various sectors, including medical, automotive, defense, aerospace, industrial, and consumer electronics applications that are not primarily focused on integrating optoelectronic devices.
To counter these threats, we have implemented an information security management system (ISMS) focused on data confidentiality, integrity, and availability. Our ISMS has been certified as ISO/IEC 27001 compliant and is re-evaluated annually by our external auditors. Similarly, we conduct external cyber penetration testing annually to assess and improve our security posture and reduce cybersecurity risk.
Our ISMS has been certified as ISO/IEC 27001 compliant, and we engage independent third parties (auditors and security firms) to test and assess our cybersecurity controls annually. Similarly, we conduct external cyber-penetration testing annually to assess and improve our security posture and reduce cybersecurity risk.
Our cardiology and remote monitoring systems include Holter recorders and analyzers, ambulatory blood pressure monitors, resting and stress electrocardiography (ECG) devices, and ECG management software systems and related software and services.
Our cardiology and remote monitoring systems include Holter recorders and analyzers, ambulatory blood pressure monitors, resting and stress electrocardiography (ECG) devices, and ECG management software systems and related software and services. Growth Strategy We believe that one of our primary competitive strengths is our expertise in designing and manufacturing cost-effective specialized electronic systems and components for critical applications.
Optoelectronic devices designed, manufactured and sold through our Optoelectronics and Manufacturing division generally consist of both active and passive components. Active components sense light of varying wavelengths and convert the light detected into electrical signals, whereas passive components amplify, separate or reflect light.
Optoelectronic devices designed, manufactured, and sold through our Optoelectronics and Manufacturing division generally consist of both active and passive components. A collection of active components detects lights of different wavelengths and converts light into electrical signals. Meanwhile, another set of devices emits light in the form of lasers, transforming electricity into light.
Pricing for many of these items has remained elevated. Information Technology and Cybersecurity Risk Management We rely extensively on digital technology to conduct operations and engage with our customers and business partners. As the complexity of our engagements grows, so do the threats from cyber intrusion, ransomware, denial of service, phishing, account takeover, data manipulation and other cyber misconduct.
As the complexity of our engagements grows, so do the threats from cyber-intrusion, ransomware, denial of service, phishing, account takeover, data manipulation and other cyber-misconduct. To counter these threats, we have implemented an information security management system (ISMS) focused on data confidentiality, integrity, and availability.
We also manufacture and design custom LCD displays for medical, industrial and consumer electronics applications, and also design and fabricate flex circuits for OEM customers from the prototype stage to mass production. Our electronics manufacturing services are provided primarily under the “OSI Electronics,” “APlus Products,” “Altaflex,” and “PFC Flexible Circuits” trade names. Patient Monitoring and Cardiology and Remote Monitoring.
Additionally, we design and manufacture custom LCD displays for medical, industrial, and consumer electronics applications, as well as design and fabricate flex circuits for OEM customers ranging from the prototype stage to mass production.
In the markets in which we compete to provide optoelectronic devices and electronics manufacturing services, our customers evaluate us and our competitors based primarily on factors such as expertise in the design and development of optoelectronic devices, product quality, timeliness of delivery, price, technical support and the ability to provide fully integrated services from application development and design through production.
These include expertise in the design and development of optoelectronic devices, product quality, timely delivery, pricing, technical support, and the ability to offer fully integrated services that span application development and design through to production.
This has created uncertainty in the market, which could result in reduced demand for our products, additional pricing pressure, and increased demand for new and more flexible payment structures. Other Healthcare Laws. In addition to FDA restrictions on marketing and promotion of drugs and devices, other federal and state laws restrict our business practices.
These larger customers, due to their enhanced purchasing power, may attempt to increase the pressure on product pricing. Other Healthcare Laws. In addition to FDA restrictions on marketing and promotion of drugs and devices, other federal and state laws restrict our business practices.
Therefore, these devices are typically subject to the PMA application process, which is more costly and time consuming than the 510(k) process and requires substantial clinical data. To date, all of the patient monitoring and cardiology and remote monitoring systems we manufacture and sell in the United States have required only 510(k) pre-market notification clearance.
The safety and effectiveness of Class III devices cannot be reasonably assured solely by the General Controls and Special Controls described above. Therefore, these devices are typically subject to the PMA application process, which is more costly and time consuming than the 510(k) process and requires substantial clinical data.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Substantial additional expenditures may be required before or after a cyber attack to mitigate or alleviate problems caused by the unauthorized access, theft of data stored within our information systems, or the introduction of computer malware or ransomware to our environment.
Substantial additional expenditures may be required before or after a cyber-attack to mitigate or alleviate problems caused by unauthorized access, theft of data stored within our information systems, or the introduction of computer malware or ransomware to our environment.
Noteholders may, subject to a limited exception, require us to repurchase their Notes following a fundamental change (as defined in the Convertible Note Indenture) at a cash repurchase price generally equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the related fundamental change repurchase date.
Noteholders may, subject to a limited exception, require us to repurchase their 2029 Notes following a fundamental change (as defined in the Convertible Note Indenture) at a cash repurchase price generally equal to the principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the related fundamental change repurchase date.
If such a system were to fail to signal to an operator when an explosive, weapon or other contraband was present, resulting in loss of life or damage, we would be subject to risk of significant product liability claims. Security inspection by technological means is circumstance and application-specific.
If such a system were to fail to signal when an explosive, weapon or other contraband was present, resulting in loss of life or damage, we would be subject to risk of significant product liability claims. Security inspection by such technological means is circumstance and application-specific.
Our security and inspection systems offer significant capabilities, but also have performance limitations and cannot be designed to reveal or detect contraband under all circumstances, particularly if criminal actors successfully conceal such items. They can also malfunction or underperform, including if not properly maintained.
Our security and inspection systems offer significant capabilities, but also have performance limitations and cannot be designed to reveal or detect contraband under all circumstances, particularly if criminal actors successfully conceal such items. They can also malfunction or underperform, including if not properly maintained or repaired.
For example, if a takeover constitutes a fundamental change, then, subject to certain exceptions, noteholders will have the right to require us to repurchase their Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change, then we may be required to temporarily increase the conversion rate.
For example, if a takeover constitutes a fundamental change, then, subject to certain exceptions, noteholders will have the right to require us to repurchase their 2029 Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change, then we may be required to temporarily increase the conversion rate.
Such projects expose us to certain professional liability risks that are inherent in performing security inspection services for the purpose of detecting contraband items, including items that could be used in performing terrorist acts, mass casualty events or other crimes.
Such projects expose us to professional liability risks that are inherent in performing security inspection services for the purpose of detecting contraband items, including items that could be used in performing terrorist acts, mass casualty events or other crimes.
As a result of this amortization, the interest expense that we expect to recognize for the Notes for accounting purposes will be greater than the cash interest payments we will pay on the Notes, which will result in lower reported income.
As a result of this amortization, the interest expense that we expect to recognize for the 2029 Notes for accounting purposes will be greater than the cash interest payments we will pay on the 2029 Notes, which will result in lower reported income.
Furthermore, if any of the conditions to the convertibility of the Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than a long-term, liability.
Furthermore, if any of the conditions to the convertibility of the 2029 Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the 2029 Notes as a current, rather than a long-term, liability.
We may be unable to raise the funds necessary to repurchase the Notes for cash following a fundamental change, or to pay the cash amounts due upon conversion, and our other indebtedness may limit our ability to repurchase the Notes or pay cash upon their conversion.
We may be unable to raise the funds necessary to repurchase the 2029 Notes for cash following a fundamental change, or to pay the cash amounts due upon conversion, and our other indebtedness may limit our ability to repurchase the 2029 Notes or pay cash upon their conversion.
The loss or termination of a contract by such an institution, even if for reasons unrelated to the quality of our products or services, could therefore have a more wide-spread and potentially material adverse effect on our business, financial condition and results of operations. 18 Table of Contents Our acquisition and alliance activities could result in disruption of our ongoing business and other operational difficulties, unrecoverable costs, and other negative consequences, any of which could adversely impact our financial condition and results of operations.
The loss or termination of a contract by such an institution, even if for reasons unrelated to the quality of our products or services, could therefore have a more wide-spread and potentially material adverse effect on our business, financial condition and results of operations. 17 Table of Contents Our acquisition and alliance activities could result in disruption of our ongoing business and other operational difficulties, unrecoverable costs, and other negative consequences, any of which could adversely impact our financial condition and results of operations.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the Notes, and our cash needs may increase in the future.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the 2029 Notes, and our cash needs may increase in the future.
Experienced programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions, or cause shutdowns.
Experienced programmers and hackers may be able to penetrate our network and application security and misappropriate or compromise our confidential information or that of third parties, create system disruptions, or cause shutdowns.
In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the Notes or pay the cash amounts due upon conversion.
In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the 2029 Notes or pay the cash amounts due upon conversion.
In addition, the shares underlying the Notes will be reflected in our diluted earnings per share using the “if converted” method.
In addition, the shares underlying the 2029 Notes will be reflected in our diluted earnings per share using the “if converted” method.
Government contracts are dependent upon our employees obtaining and maintaining required security clearances, as well as our ability to obtain security clearances for the facilities in which we perform sensitive government work. Certain of our U.S. Government contracts require our employees to maintain various levels of security clearances, and we are required to maintain certain facility security clearances.
Certain of our government contracts are dependent upon our employees obtaining and maintaining required security clearances, as well as our ability to obtain security clearances for the facilities in which we perform sensitive government work. Certain of our government contracts require our employees to maintain various levels of security clearances, and we are required to maintain certain facility security clearances.
Consequently, a product liability claim, product recall or other claim could have a material adverse effect on our business, financial condition and results of operations. Our global operations expose us to legal compliance risks related to certain anti-bribery and anti-corruption laws. We are required to comply with the U.S.
Consequently, a product liability claim, product recall or other claim could have a material adverse effect on our business, financial condition and results of operations. 27 Table of Contents Our global operations expose us to legal compliance risks related to certain anti-bribery and anti-corruption laws. We are required to comply with the U.S.
While upgrading and implementing change to any one of our systems could present challenges, the age of our systems and architecture may present unique challenges that we have not previously encountered as we undertake these efforts.
While upgrading and implementing changes to any one of our systems could present challenges, the age of our systems and architecture may present unique challenges that we have not previously encountered as we undertake these efforts.
The following are certain risks to operating in Mexico that could adversely impact our operations and have a material adverse effect on our business, financial condition and results of operations: (i) ability of key suppliers and subcontractors to fulfill obligations on a timely basis; (ii) cooperation of various departments of the Mexican government in issuing permits, and inspecting our operations on a timely basis; (iii) receipt of payments in a timely manner; (iv) significant penalties in the event of our late delivery or non-performance; (v) termination or change in scope of program at the election of the Mexican government; (vi) regional political and economic instability; (vii) high rate of crime in Mexico where we conduct operations; and (viii) change in the value of the Mexican peso.
The following are certain risks to operating in Mexico that could adversely impact our operations and have a material adverse effect on our business, financial condition and results of operations: (i) ability of key suppliers and subcontractors to fulfill obligations on a timely basis; (ii) cooperation of various departments of the Mexican government in issuing permits, and inspecting our operations on a timely basis; (iii) receipt of payments in a timely manner; (iv) significant penalties in the event of our late delivery or non-performance; (v) termination or change in scope of program at the election of the Mexican government; (vi) regional political and economic instability; (vii) high rate of crime in Mexico where we conduct operations; (viii) change in the value of the Mexican peso; and (ix) changes in administration of various departments in the Mexican government associated with our agreements.
Our business exposes us to potential product liability risks that are inherent in the development, manufacturing, sale and service of security and inspection systems, software and threat detection algorithms, as well as in the provision of training to our customers in the use and operation of such systems.
Our business exposes us to potential product liability risks that are inherent in the development, manufacturing, sale, maintenance and repair of security and inspection systems, software and threat detection algorithms, as well as in the provision of training to our customers in the use and operation of such systems.
We also use forward contracts which are intended to mitigate the impact of certain foreign currency exposures. These forward contracts may not completely offset foreign currency gains and losses. Our insurance coverage may be inadequate to cover all significant risk exposures.
We also use forward contracts which are intended to mitigate the impact of certain foreign currency exposures. These forward contracts may not completely offset foreign currency gains and losses. 30 Table of Contents Our insurance coverage may be inadequate to cover all significant risk exposures.
This reclassification could be required even if no noteholders convert their Notes and could materially reduce our reported working capital. 28 Table of Contents Legal and Regulatory Risks The Support Anti-terrorism by Fostering Effective Technologies Act of 2002 (SAFETY Act) may not shield us against legal claims we may face following an act of terrorism.
This reclassification could be required even if no noteholders convert their 2029 Notes and could materially reduce our reported working capital. Legal and Regulatory Risks The Support Anti-terrorism by Fostering Effective Technologies Act of 2002 (SAFETY Act) may not shield us against legal claims we may face following an act of terrorism.
Depending on severity, any of these penalties could have a material impact on our business, financial condition and results of operations. 29 Table of Contents Our business is subject to complex and evolving U.S. and international laws and regulation regarding privacy and data protection.
Depending on severity, any of these penalties could have a material impact on our business, financial condition and results of operations. Our business is subject to complex and evolving U.S. and international laws and regulation regarding privacy and data protection.
The accounting method for the Notes could adversely affect our reported financial condition and results. The accounting method for reflecting the Notes on our balance sheet, accruing interest expense for the Notes and potential inclusion of underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.
The accounting method for reflecting the 2029 Notes on our balance sheet, accruing interest expense for the 2029 Notes and potential inclusion of underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.
Any changes to the membership of the EU, such as the departure of the United Kingdom under Brexit, may impact the regulatory requirements for impacted countries and impair our business operations and our ability to market products in such countries.
Any changes to the membership of the EU, such as the departure of the United Kingdom under Brexit, may impact the regulatory requirements for 29 Table of Contents impacted countries and impair our business operations and our ability to market products in such countries.
Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital and may harm our reputation and financial results.
Any corrective action, whether 23 Table of Contents voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital and may harm our reputation and financial results.
The FDA can delay, limit or deny clearance or approval of a device for many reasons. 30 Table of Contents Our future products may not obtain FDA clearance on a timely basis, or at all.
The FDA can delay, limit or deny clearance or approval of a device for many reasons. Our future products may not obtain FDA clearance on a timely basis, or at all.
If an agency terminates a contract with us for default, we may be denied any recovery and may be liable for excess costs incurred by the agency in procuring undelivered items from an alternative source.
If an agency terminates a contract with us for default, we may be denied any recovery and may be liable for excess costs 20 Table of Contents incurred by the agency in procuring undelivered items from an alternative source.
In accordance with applicable accounting standards, the Notes will be reflected as a liability on our balance sheets, with the initial carrying amount equal to the principal amount of the Notes, net of issuance costs.
In accordance with applicable accounting standards, the 2029 Notes are reflected as a liability on our balance sheets, with the initial carrying amount equal to the principal amount of the 2029 Notes, net of issuance costs.
Such standards change as threat and risk assessments evolve and as new technology becomes available within the industry, which enables regulators to demand performance improvements. We may not ultimately be able to develop, or develop in a timely way, solutions that are ultimately able to meet the new standards. Certain of our U.S.
Such standards change as threat and risk assessments evolve and as new technology becomes available within the industry, which enables regulators to demand performance improvements. We may not ultimately be able to develop, or develop in a timely way, solutions that meet the new standards.
For more information about our litigation matters, see “Legal Proceedings” and Note 11 to the consolidated financial statements. ​ ​ 32 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None. ​
For more information about our litigation matters, see “Legal Proceedings” and Note 11 to the consolidated financial statements. ​ ITEM 1B. UNRESOLVED STAFF COMMENTS None. ​
In addition, all conversions of Notes are to be settled partially or entirely in cash. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Notes or pay the cash amounts due upon conversion.
In addition, all conversions of 2029 Notes require the principal amount to be settled in cash. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the 2029 Notes or pay the cash amounts due upon conversion.
The issuance costs will be treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the Notes.
The issuance costs are treated as a debt discount for accounting purposes, which are being amortized into interest expense over the term of the 2029 Notes.
If a contraband item were to pass through the security screening services that we perform for a customer and be used to perform a terrorist act, mass casualty event or other crime, we would be subject to risk of significant professional liability claims.
If a contraband item were to pass through the turnkey security services that we perform for a customer and be used to perform a terrorist act, mass casualty event or other crime, we would be subject to risk of significant professional liability claims for which adequate insurance coverage may not be available.
If we fail to accurately foresee our customers’ needs and future activities, we may invest heavily in research and development of products that do not lead to significant revenues. Interruptions in our ability to purchase raw materials and subcomponents may adversely affect our profitability. We purchase raw materials and certain subcomponents from third parties.
If we fail to accurately foresee our customers’ needs and future activities, we may invest heavily in research and development of products that do not lead to significant revenues. 21 Table of Contents Increased prices for, and interruptions in our ability to purchase, raw materials and subcomponents may adversely affect our profitability.
There are inherent risks associated with operations in Mexico. We are currently in the process of fulfilling agreements to provide cargo and vehicle inspection systems and related services to government customers in Mexico.
We are currently in the process of fulfilling agreements to provide cargo and vehicle inspection systems and related services to government customers in Mexico.
In either case, and in other cases, our obligations under the Notes and the Note Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
In either case, and in other cases, our obligations under the 2029 Notes and the Note Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable. 26 Table of Contents The accounting method for the 2029 Notes could adversely affect our reported financial condition and results.
We have certain research and development activities within Ukraine for our Healthcare division which have been somewhat impacted and while we expect the impacts of conflict between Russia and Ukraine to continue to have an effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time. 21 Table of Contents We cannot predict the consequences of current or future geopolitical events, but they may adversely affect the markets in which we operate and our results of operations.
We have certain research and development activities within Ukraine for our Healthcare division which have been somewhat impacted and while we expect the impacts of conflict between Russia and Ukraine to continue to have an effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time.
In addition, multi-award contracts require that we make sustained post-award efforts to obtain task orders under the contract. As a result, we may not be able to obtain these task orders or recognize revenues under these multi-award contracts.
In addition, multi-award contracts require that we make sustained post-award efforts to obtain task orders under the contract. As a result, we may not be able to obtain these task orders or recognize revenues under these multi-award contracts. Our failure to compete effectively in this procurement environment would adversely affect our revenues and profitability.
Any material delay caused by our construction firm subcontractors could therefore ultimately have a material adverse effect on our business, financial condition and results of operations. 23 Table of Contents We accumulate excess quantities or elevated inventory levels from time to time.
In any such circumstance, we could face the imposition of delay penalties and breach of contract claims by our customer. Any material delay caused by our construction firm subcontractors could therefore ultimately have a material adverse effect on our business, financial condition and results of operations. We accumulate excess quantities or elevated inventory levels from time to time.
We expect that market demand, governmental regulation, third-party reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances, which may exert further downward pressure on the prices of our products and could materially and adversely impact our business, financial condition, and results of operations. 20 Table of Contents Technological advances and evolving regulatory standards could reduce our future product sales, which could cause our revenues to grow more slowly or decline.
We expect that market demand, governmental regulation, third-party reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances, which may exert further downward pressure on the prices of our products and could materially and adversely impact our business, financial condition, and results of operations.
Given increasing cybersecurity threats, there can be no assurance that we will not experience business interruptions, data loss, ransom, misappropriation, or corruption or theft or misuse of proprietary information or related litigation and investigation, any of which could have a material adverse effect on our financial condition and results of operations and harm our business reputation. 26 Table of Contents Delays, costs, and disruptions that result from upgrading, integrating and maintaining the security of our information and technology networks and systems could materially and adversely affect us.
Given increasing cybersecurity threats, there can be no assurance that we will not experience business interruptions, data loss, ransom, misappropriation, or corruption or theft or misuse of proprietary information or related litigation and investigation, any of which could have a material adverse effect on our financial condition and results of operations and harm our business reputation.
If we cannot maintain or obtain the required security clearances for our facilities and our employees, or obtain these clearances in a timely manner, we may be unable to perform certain U.S. Government contracts. Further, loss of a facility clearance, or an employee’s failure to obtain or maintain a security clearance, could result in a U.S.
If we cannot maintain or obtain the required security clearances for our facilities and our employees, or obtain these clearances in a timely manner, we may be unable to perform certain government contracts.
Our existing credit facility contains certain limitations on cash payments for the conversion, redemption or repurchase of the Notes, including compliance with certain leverage ratios on a pro forma basis after giving effect to such cash payments. Our failure to repurchase Notes or pay the cash amounts due upon conversion when required will constitute a default under the Note Indenture.
Our existing credit facility contains certain limitations on cash payments for the conversion, redemption or repurchase of the 2029 Notes, including compliance with certain leverage ratios on a pro forma basis after giving effect to such cash payments.
Any similar natural or manmade disaster that affects a key supplier or customer could lead to a similar disruption in our business. 24 Table of Contents Any recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our products that leads to corrective actions, could have a material adverse impact on us.
Any recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our products that leads to corrective actions, could have a material adverse impact on us.
Healthcare cost containment pressures and legislative or regulatory reforms may affect our ability to sell our products profitably. Third-party payers globally are developing increasingly sophisticated methods of controlling healthcare costs which can limit the amount that healthcare providers may be willing to pay for medical devices.
Third-party payers globally are developing increasingly sophisticated methods of controlling healthcare costs which can limit the amount that healthcare providers may be willing to pay for medical devices.
In addition, any products or processes that we currently offer or plan to develop may become obsolete or uneconomical before we recover all or any of the expenses incurred in connection with their development.
The emergence of new industry or regulatory standards and certification requirements may adversely affect the demand for our current products. In addition, any products or processes that we currently offer or plan to develop may become obsolete or uneconomical before we recover all or any of the expenses incurred in connection with their development.
We are dependent on information technology networks and systems, including Internet and Internet-based or “cloud” computing services, to collect, process, transmit, and store electronic information. We are currently modernizing and upgrading our information technology systems while also simultaneously integrating systems from our various acquisitions, including making changes to legacy systems, and replacing some legacy systems with new and advanced functionality.
We are currently modernizing and upgrading our information technology systems while also simultaneously integrating systems from our various acquisitions, including making changes to legacy systems, and replacing some legacy systems with new and advanced functionality.
Provisions in the Note Indenture could delay or prevent an otherwise beneficial takeover of us. Certain provisions in the Notes and the Note Indenture could make a third-party attempt to acquire us more difficult or expensive.
We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the 2029 Notes. Provisions in the Note Indenture could delay or prevent an otherwise beneficial takeover of us. Certain provisions in the 2029 Notes and the Note Indenture could make a third-party attempt to acquire us more difficult or expensive.
We also offer various turnkey security screening solutions under which we perform some or all of the security screening tasks that have historically been performed by our customers.
We also offer various turnkey security screening solutions under which we perform some or all of the security screening tasks that have historically been performed by our customers, including the development, administration and performance of security screening procedures; operation of the security inspection systems; and analysis of images and information generated by such systems.
Our failure to compete effectively in this procurement environment would adversely affect our revenues and profitability. 22 Table of Contents Our revenues are dependent on orders of security and inspection systems, turnkey security screening solutions and patient monitoring and cardiology and remote monitoring systems, which may have lengthy and unpredictable sales cycles.
Our revenues are dependent on orders of security and inspection systems, turnkey security screening solutions and patient monitoring and cardiology and remote monitoring systems, which may have lengthy and unpredictable sales cycles.
A default under the Note Indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the Notes.
Our failure to repurchase 2029 Notes or pay the cash amounts due upon conversion when required will constitute a default under the Note Indenture. A default under the Note Indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full.
If we elect to settle our conversion obligation by a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
Under that method, if the conversion value of the Notes exceeds their principal amount for a reporting period, then we will calculate our diluted earnings per share assuming that all of the Notes were converted at the beginning of the reporting period and that we issued shares of our common stock to settle the excess.
Under that method, the underlying equity component of the 2029 Notes 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,, then we will calculate our diluted earnings per share assuming that all of the 2029 Notes were converted at the beginning of the reporting period and that we issued shares of our common stock to settle the excess.
If the systems on which we rely are damaged or cease to function properly due to any number of causes, ranging from failures of our third-party service providers to catastrophic events, to power outages, to security breaches, we may suffer interruptions in our ability to manage operations which may adversely impact our business, results of operations and/or financial condition. 25 Table of Contents We could suffer a loss of revenue and increased costs, exposure to significant liability, reputational harm, and other serious negative consequences if we sustain cyber attacks or other data security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us or our customers, suppliers, or other third parties; our products and services may be subject to potential cyber attacks or other information technology vulnerabilities.
We could suffer a loss of revenue and increased costs, exposure to significant liability, reputational harm, and other serious negative consequences if we sustain cyber-attacks or other data security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us or our customers, suppliers, or other third parties; our products and services may be subject to potential cyber-attacks or other information technology vulnerabilities.
In addition, new competitors may emerge and entire product lines or service offerings may be threatened by new technologies or market trends that reduce the value of these product lines or service offerings. Our failure to compete effectively could have a material adverse effect on our business, financial condition and results of operations.
In addition, new competitors may emerge and entire product lines or service offerings may be threatened by new technologies or market trends that reduce the value of these product lines or service offerings.
The after-tax interest expense associated with the Notes will not be added back to the numerator of the diluted earnings per share calculation for these purposes. The application of the if-converted method may reduce our reported diluted earnings per share, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share.
The application of the if-converted method may reduce our reported diluted earnings per share, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share.
We generally do not have guaranteed long-term supply arrangements with our suppliers. In addition, for certain raw materials and subcomponents that we use, there are a limited number of potential suppliers that we have qualified or that we are currently able to qualify.
In addition, for certain raw materials and subcomponents that we use, there are a limited number of potential suppliers that we have qualified or that we are currently able to qualify. Consequently, some of the key raw materials and subcomponents that we use are currently available to us only from a single vendor.
Shares of our common stock issuable upon conversion of the 2.25% Convertible Senior Notes due 2029 (the “Notes”) may dilute the ownership interest of our stockholders or may adversely affect the market price of our common stock. The conversion of the Notes may dilute the ownership interests of our stockholders.
As further discussed in Note 8, we amended and extended our credit facility in July 2025. 25 Table of Contents Shares of our common stock issuable upon conversion of the 2.25% Convertible Senior Notes due 2029 (the “2029 Notes”) may dilute the ownership interest of our stockholders or may adversely affect the market price of our common stock.
A significant actual or perceived (whether or not valid) theft, loss, fraudulent use or misuse of customer, employee, or other personally identifiable data, whether by us, our partners and vendors, or other third parties, or as a result of employee error or malfeasance or otherwise, non-compliance with applicable industry standards or our contractual or other legal obligations regarding such data, or a violation of our privacy and information security policies with respect to such data, could result in costs, fines, litigation, or regulatory actions against us.
While we design and build security measures into our products and services, once installed and implemented at customer sites those measures may not prevent all cybersecurity attacks targeted against their networks and datacenters, such as the unauthorized access, capture, or alteration of information; the exposure or exploitation of potential security vulnerabilities; distributed denial of service attacks; the installation of malware or ransomware; acts of vandalism; computer viruses; or misplaced data or data loss. 24 Table of Contents A significant actual or perceived (whether or not valid) theft, loss, fraudulent use or misuse of customer, employee, or other personally identifiable data, whether by us, our partners and vendors, or other third parties, or as a result of employee error or malfeasance or otherwise, non-compliance with applicable industry standards or our contractual or other legal obligations regarding such data, or a violation of our privacy and information security policies with respect to such data, could result in costs, fines, litigation, or regulatory actions against us.
We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. We are subject to taxes in the U.S. and numerous foreign jurisdictions. Tax rates in various jurisdictions may be subject to significant change due to economic and political conditions or otherwise.
This could damage our reputation and adversely affect our business, financial condition and results of operations. 19 Table of Contents We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. We are subject to taxes in the U.S. and numerous foreign jurisdictions.
Also the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock. 27 Table of Contents Our indebtedness (including the Notes) could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our debt obligations, including the Notes.
Our indebtedness (including the 2029 Notes) could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our debt obligations, including the 2029 Notes.
Consequently, some of the key raw materials and subcomponents that we use are currently available to us only from a single vendor. The reliance on a single qualified vendor could result in delays in delivering products or increases in the cost of manufacturing the affected products.
The reliance on a single qualified vendor could result in delays in delivering products or increases in the cost of manufacturing the affected products.
We are facing an increasingly complex international regulatory environment which is constantly changing and if we fail to comply with international regulatory requirements, or are unable to comply with changes to such requirements, our financial performance may be harmed.
GDPR creates a range of compliance obligations, including stringent technical and security controls surrounding the storage, use, and disclosure of personal information, and significantly increases financial penalties for noncompliance. 28 Table of Contents We are facing an increasingly complex international regulatory environment which is constantly changing and if we fail to comply with international regulatory requirements, or are unable to comply with changes to such requirements, our financial performance may be harmed.
Others use algorithms to signal to the operator that further investigation is required. In addition, the training, reliability and competence of the customer’s operator are often crucial to the detection of suspicious items. Security inspection systems that signal to the operator that further investigation is required are sometimes referred to in the security industry as “automatic” detection systems.
Security inspection systems that rely on threat detection algorithms or that use such algorithms to signal to the operator that further investigation is recommended are sometimes referred to in the security industry as “automatic” detection systems.
We encounter aggressive competition from numerous competitors in each of our divisions.
We face aggressive competition in each of our operating divisions. If we do not compete effectively, our business will be harmed. We encounter aggressive competition from numerous competitors in each of our divisions.
Government customer terminating an existing contract or choosing not to renew a contract. Lack of required clearances could also impede our ability to bid on or win new U.S. Government contracts. This could damage our reputation and adversely affect our business, financial condition and results of operations.
Further, loss of a facility clearance, or an employee’s failure to obtain or maintain a security clearance, could result in a government customer terminating an existing contract or choosing not to renew a contract. Lack of required clearances could also impede our ability to bid on or win new government contracts.
In addition, the Affordable Care Act provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. 31 Table of Contents Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under such laws, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
In addition, the Affordable Care Act provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
The markets for our products are characterized by rapidly changing technology, changing customer needs, evolving industry or regulatory standards and certifications and frequent new product introductions and enhancements. The emergence of new industry or regulatory standards and certification requirements in related fields may adversely affect the demand for our products.
Technological advances and evolving regulatory standards could reduce our future product sales, which could cause our revenues to grow more slowly or decline. The markets for our products are characterized by rapidly changing technology, changing customer needs, evolving industry or regulatory standards and certifications and frequent new product introductions and enhancements.
This delay could be lengthy and we could incur significant expenses to repair or replace the facilities.
This delay could be lengthy and we could incur significant expenses to repair or replace the facilities. Any similar natural or manmade disaster that affects a key supplier or customer could lead to a similar disruption in our business.
In recent years, the budgeting process has often not been completed by October 1st, which has required the temporary extension of funding authority.
In recent years, the budgeting process has often not been completed by October 1st, which has required the temporary extension of funding authority. Because the provision of appropriated funds is undertaken on an annual basis and subject to budgetary rules and requirements, there can be disruptions to federal funding of current and future procurements.
Upon conversion of the Notes, we have the option to pay or deliver, as the case may be, cash or a combination of cash and shares of our common stock as described in Note 8.
The conversion of the 2029 Notes may dilute the ownership interests of our stockholders. Upon conversion of the 2029 Notes, the default settlement method is a combination settlement with a specified dollar amount of $1,000 per $1,000 principal amount of notes and shares of our common stock as described in Note 8.
Removed
Because the provision of appropriated funds is undertaken on an annual basis and subject to budgetary rules and requirements, there can be disruptions to federal funding of current and future procurements. 19 Table of Contents We face aggressive competition in each of our operating divisions. If we do not compete effectively, our business will be harmed.
Added
Others rely on threat detection algorithms, or use such algorithms to signal to the operator that further investigation is recommended. The selection, training, supervision, reliability and competence of such operators are often crucial to the detection of suspicious items.
Removed
In any such circumstance, we could face the imposition of delay penalties and breach of contract claims by our customer.
Added
Our failure to compete effectively could have a material adverse effect on our business, financial condition and results of operations. 18 Table of Contents Healthcare cost containment pressures and legislative or regulatory reforms may affect our ability to sell our products profitably.
Removed
While we design and build security measures into our products and services, once installed and implemented at customer sites those measures may not prevent all cybersecurity attacks targeted against their networks and datacenters, such as the unauthorized access, capture, or alteration of information; the exposure or exploitation of potential security vulnerabilities; distributed denial of service attacks; the installation of malware or ransomware; acts of vandalism; computer viruses; or misplaced data or data loss.
Added
Tax rates in various jurisdictions may be subject to significant change due to economic and political conditions or otherwise.
Removed
GDPR creates a range of compliance obligations, including stringent technical and security controls surrounding the storage, use, and disclosure of personal information, and significantly increases financial penalties for noncompliance.
Added
We cannot predict the consequences of current or future geopolitical events, but they may adversely affect the markets in which we operate and our results of operations.
Added
In recent years, inflation and supply chain constraints have resulted in increases in the prices we pay third parties for many of the subcomponents and raw materials used in our products. We generally do not have guaranteed long-term supply arrangements with our suppliers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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However, despite our efforts to identify and respond to cybersecurity threats, we cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced an undetected cybersecurity incident or will not experience a cybersecurity incident in the future. For additional information on cybersecurity related risks, see “Item 1A. Risk Factors” of this Annual Report on Form 10-K.
Despite our efforts to identify and respond to cybersecurity threats, we cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced an undetected cybersecurity incident, that we will not experience a cybersecurity incident in the future, or that a past cybersecurity incident will not result in a future material impact.
Governance Several members of the Board comprise the Risk Management Committee (RMC), which is responsible, among other things, for oversight of cybersecurity risks based on the authority given by our Board of Directors.
The Board of Directors has delegated primary oversight responsibility for cybersecurity to the Risk Management Committee (RMC) of the Board , which is composed of several Board members.
We have not identified any cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial situation.
However, to date, no cybersecurity threats (including incidents) have resulted in a material impact on our business strategy, results of operations, or financial condition .
Removed
ITEM 1C. CYBERSECURITY ​ Risk Management and Strategy We maintain high standards with respect to cybersecurity, in accordance with regulatory guidelines, contractual requirements and industry practices. Our cybersecurity strategy is aimed to anticipate, detect, and respond to threats, ensuring the resilience and integrity of our operations.
Added
ITEM 1C. CYBERSECURITY ​ Risk Management and Strategy We maintain high standards with respect to cybersecurity and our cybersecurity risk management program is integrated into our enterprise risk management framework, overseen by our Information Security Officer (“ISO”), meaning that cyber-risks are identified, evaluated, and managed with the same rigor as other strategic, operational, and financial risks.
Removed
We use a risk management process, overseen by our Information Security Officer (“ISO”), that encompasses technical security controls, policy compliance mechanisms, monitoring systems, contractual agreements, and governance.
Added
We have adopted the National Institute of Standards and Technology (NIST) Cybersecurity Framework principles as a guide for our security controls and processes, helping us structure our activities around identifying potential threats, protecting systems, detecting incidents, responding to events, and recovering operations.
Removed
Our cybersecurity risk management process is integrated with our overall enterprise risk management process and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management process to other legal, compliance, strategic, operational and financial risk areas.
Added
We engage independent third-party cybersecurity auditors and testers annually to review our Information Security Management (ISMS) and renew our ISO/IEC 27001 certification.
Removed
Key elements of our cybersecurity risk management program include a cybersecurity incident response plan with procedures for responding to cybersecurity incidents and annual data protection and cybersecurity awareness training of our employees who have access to information systems.
Added
Key elements of our program include: ● Preventive Controls and Monitoring : We employ multiple layers of technical controls (firewalls, intrusion detection systems, encryption, and multi-factor authentication) to proactively monitor IT controls to ensure compliance with security policies, legal regulations, contractual obligations and industry best practices.
Removed
We have implemented security control principles that follow the National Institute of Standards and Technology (NIST) Cybersecurity Framework with the main goal of our cybersecurity risk management process being to protect the confidentiality, integrity, and availability of our information assets. Our external auditors annually review our information security management system, which has an ISO/IEC 27001 certification.
Added
Our Global Security Operations Center operates 24/7 with real-time monitoring capabilities to rapidly investigate alerts and trigger containment measures, which helps us minimize exposure or damage if a cybersecurity incident occurs. ● Vulnerability Management and Testing : We conduct regular vulnerability assessments and annual external penetration testing of our systems and applications to probe for weaknesses.
Removed
We monitor our environment for cybersecurity threats with real-time ability to activate measures to minimize impact, respond to incidents, and investigate issues. We routinely conduct security assessments of our applications, manage vulnerabilities, and perform penetration testing as well as exercises that mimic cybersecurity incidents to evaluate and enhance our security posture and lower cybersecurity risk.
Added
We also perform periodic exercises simulating cybersecurity incidents to test our defenses and response procedures. Findings from these tests are used to strengthen our security posture on an ongoing basis. ● Incident Response Planning : We maintain a cybersecurity incident response plan that defines procedures for addressing security events.
Removed
In addition to our own systems and technology, we rely on third-party service providers for certain software, technology and cloud-based systems and services that support a variety of critical business operations. We have policies and processes designed to identify, assess and manage cybersecurity risk relating to these third-party service providers.
Added
This plan is updated and tested regularly (including through tabletop drills and simulated breach exercises) so that our teams remain practiced in incident handling.
Removed
When contracting with these providers, the procurement function works closely with the compliance and legal teams to conduct diligence and help appropriately manage risk, including cybersecurity risk, throughout the life cycle of the contract. We have developed, and seek to incorporate, standard contractual security requirements into our service provider agreements.
Added
In the event of an incident, our aim is to respond swiftly to contain the issue, notify appropriate stakeholders, investigate the root cause, and recover normal operations as soon as practicable. ● Third-Party Risk Management : We carefully manage cybersecurity risks arising from our use of third-party software, cloud services, and suppliers.
Removed
We also perform cybersecurity assessments of third-party service providers where we deem appropriate given the nature of the engagement and the data and systems expected to be accessed.
Added
We perform due diligence and security risk assessments on critical third-party service providers, both at onboarding and periodically during the relationship. Our procurement and legal teams work together to incorporate robust cybersecurity requirements into contracts with vendors (for example, data protection standards and incident notification obligations).
Removed
The RMC receives regular updates at least quarterly from management, including our Chief Information Officer (CIO) and our Information Security Officer (ISO) with evaluations of cyber risk, the threat environment, updates on incidents, and advancements on investments in cybersecurity risk reduction. Our CIO has been with the Company since January 2021 and has over 25 years of global experience.
Added
Where appropriate, we require suppliers to adhere to our security policies or industry standards, and we conduct 31 Table of Contents ongoing monitoring or audits of their security controls.
Removed
He has served in numerous senior leadership positions where he gained significant cybersecurity and risk management experience across multiple high-tech industries.
Added
These steps help reduce the risk that a weakness in a partner’s systems could compromise our data or operations. ● Employee Training and Awareness : A strong security culture among our employees is one of our best defenses in relation to cybersecurity events. Our employees are required to complete annual cybersecurity and data protection awareness training.
Removed
Our ISO has been with the Company since July 2018 and similarly has over 25 years of extensive cybersecurity, risk and compliance experience including CISSP and CISM certifications. 33 Table of Contents Information Security, Corporate Audit, Finance, Legal, Compliance and Investor Relations have a strong partnership at the management level and have established a Cybersecurity Council that connects the risk management and cybersecurity incident response processes.
Added
This training educates personnel on topics like phishing prevention, safe computing practices, and how to report potential security issues. We supplement formal training with periodic phishing email simulations and security reminders.
Removed
In the event of a cybersecurity breach, the ISO will inform the Cybersecurity Council, and then the Cybersecurity Council will determine materiality and next steps. The Cybersecurity Council will meet with the RMC and/or the full Board as needed to share details of the event and facilitate reporting to regulators as required. ​
Added
Through a combination of these technical, procedural, and educational measures, our program is designed to detect and respond to cybersecurity threats effectively and thereby safeguard our business operations and sensitive information. Cybersecurity threats are endemic to the modern business environment, and attempts to penetrate our network security are frequent and on-going.
Added
For additional information on cybersecurity related risks, see “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Governance and Oversight We have established strong governance practices to oversee cybersecurity and IT risks.
Added
Our Chief Information Officer (CIO) and Information Security Officer (ISO) receive security reports and threat intelligence from the Security Operations Center, which apprises the CIO and ISO of any potential incidents and the status of ongoing preventive measures and they share this information at least quarterly with the RMC. They also brief the full Board as needed on cybersecurity matters.
Added
We have a multi-disciplinary Cybersecurity Council that connects our Information Security, IT, Corporate Audit, Finance, Legal, Compliance, and Investor Relations teams. This Council facilitates coordination of cybersecurity risk management across our organization and a unified response to incidents.
Added
In the event of a cybersecurity incident, the ISO will lead our incident response efforts and convene the Cybersecurity Council to evaluate the situation and determine appropriate next steps (for example, engaging law enforcement or cyber-experts, and considering disclosure obligations).
Added
This integrated governance structure – from the operational teams up through senior management and the Board – helps drive accountability and visibility for cybersecurity throughout our organization. Our leadership team includes seasoned professionals with deep expertise in technology and security.
Added
Our CIO, Todd Weathersby, has more than 25 years of experience in global IT and cybersecurity management, and our ISO has more than 25 years of experience in cybersecurity, risk, and compliance (with certifications such as CISSP and CISM).
Added
The knowledge and experience of our CIO and ISO, along with the Board’s active engagement, provides a strong oversight of our cybersecurity strategy. The Board and management also receive regular briefings and training sessions regarding emerging cybersecurity threats and regulatory developments in order to be positioned to adapt to new challenges in the cybersecurity landscape. ​ 32 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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PROPERTIES As of June 30, 2024, we owned the following principal facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ Square Location Description of Facility Footage Billerica, Massachusetts Manufacturing, engineering, sales and marketing and service for our Security division 186,200 Snoqualmie, Washington Headquarters and administrative, manufacturing, engineering, sales, marketing and service for our Healthcare division 177,000 Batam, Indonesia Manufacturing for our Optoelectronics and Manufacturing division 93,500 Stoke on Trent, United Kingdom Manufacturing, engineering, sales, marketing and service for our Security division 90,000 Surrey, United Kingdom Manufacturing, engineering, sales, marketing and service for our Security division 59,000 ​ As of June 30, 2024, we leased the following principal facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ Location Description of Facility Square Footage Expiration Hawthorne, California ​ Corporate headquarters and administrative, manufacturing, engineering, sales and marketing and service for our Optoelectronics and Manufacturing division ​ 88,000 ​ 2027 Johor Bahru, Malaysia(1) Manufacturing, engineering, sales and service for our Security division 167,600 2025 Johor Bahru, Malaysia(1) Manufacturing, engineering, sales and service for our Optoelectronics and Manufacturing division 110,100 2024 ~ 2025 Torrance, California Manufacturing, engineering, sales and marketing and service for our Security division 91,900 2027 Batam, Indonesia (1) Manufacturing for our Optoelectronics and Manufacturing division 101,100 2024 ~ 2028 Andover, Massachusetts Manufacturing, engineering, sales and marketing and service for our Security division 64,200 2027 Tecate, Mexico Manufacturing for our Optoelectronics and Manufacturing division 60,200 2028 (1) This is comprised of multiple leases at the same or nearby facilities.
PROPERTIES As of June 30, 2025, we owned the following principal facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ Square Location Description of Facility Footage Billerica, Massachusetts Manufacturing, engineering, sales and marketing and service for our Security division 186,200 Snoqualmie, Washington Headquarters and administrative, manufacturing, engineering, sales, marketing and service for our Healthcare division 177,000 Dallas, Texas ​ Manufacturing, engineering, sales and marketing and service for our Security division ​ 147,400 Batam, Indonesia Manufacturing for our Optoelectronics and Manufacturing division 93,500 Stoke on Trent, United Kingdom Manufacturing, engineering, sales, marketing and service for our Security division 90,000 Surrey, United Kingdom Manufacturing, engineering, sales, marketing and service for our Security division 59,000 ​ As of June 30, 2025, we leased the following principal facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ Location Description of Facility Square Footage Expiration Johor Bahru, Malaysia(1) Manufacturing, engineering, sales and service for our Security division 167,600 2028 Johor Bahru, Malaysia(1) Manufacturing, engineering, sales and service for our Optoelectronics and Manufacturing division 110,100 2027 ~ 2028 Batam, Indonesia (1) Manufacturing for our Optoelectronics and Manufacturing division 101,200 2025 ~ 2028 Torrance, California Manufacturing, engineering, sales and marketing and service for our Security division 91,900 2027 Hawthorne, California Corporate headquarters and administrative, manufacturing, engineering, sales and marketing and service for our Optoelectronics and Manufacturing division 88,000 2027 Andover, Massachusetts Manufacturing, engineering, sales and marketing and service for our Security division 64,200 2027 Tecate, Mexico Manufacturing for our Optoelectronics and Manufacturing division 60,200 2028 (1) This is comprised of multiple leases at the same or nearby facilities.
Accordingly, we do not believe that our failure to renew any of the leases that are scheduled to expire in the next few years will have a material adverse effect on our operations. ​ 34 Table of Contents
Accordingly, we do not believe that our failure to renew any of the leases that are scheduled to expire in the next few years will have a material adverse effect on our operations. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS From time to time, we are subject to legal proceedings, claims, and litigation arising in the ordinary course of our business or otherwise.
ITEM 3. LEGAL PROCEEDINGS From time to time, we are subject to litigation, legal proceedings, and claims arising in the ordinary course of our business or otherwise.
More information regarding legal proceedings in which we are involved can be found under Note 11, “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements in Item 8, which is incorporated by reference into this Item 3. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable PART II
More information regarding legal proceedings in which we are involved can be found under Note 11, “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements in Item 8, which is incorporated by reference into this Item 3. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable ​ 33 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+5 added−1 removed2 unchanged
The graph assumes that $100.00 was invested on June 30, 2019 in (a) our common stock, (b) The Nasdaq Composite Index, and (c) the companies comprising the peer group described above (weighted according to the issuer’s stock market capitalization at the beginning of each period for which a return is indicated). The graph assumes that all dividends were reinvested.
The graph assumes that $100.00 was invested on June 30, 2020 in (a) our common stock, (b) The Nasdaq Composite Index, and (c) the companies comprising the peer group described above (weighted according to the issuer’s stock market capitalization at the beginning of each period for which a return is indicated). The graph assumes that all dividends were reinvested.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Stock Market and Other Information Our common stock is traded on The Nasdaq Global Select Market under the symbol “OSIS.” As of August 26, 2024, there were approximately 92 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Stock Market and Other Information Our common stock is traded on The Nasdaq Global Select Market under the symbol “OSIS.” As of August 18, 2025, there were approximately 89 holders of record of our common stock.
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information concerning our equity compensation plans as of June 30, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ ​ ​ ​ ​ ​ remaining available for ​ ​ Number of securities to ​ Weighted ‑ average ​ future issuance under ​ ​ be issued upon exercise ​ exercise price of ​ equity compensation ​ ​ of outstanding options, ​ outstanding options, ​ plans (excluding securities Plan category ​ warrants and rights ​ warrants and rights ​ reflected in column (a)) ​ (a) ​ (b) (c) ​ Equity compensation plans approved by security holders 78,958 ​ $ 97.87 ​ 2,535,891 (1)(2) Equity compensation plans not approved by security holders — ​ ​ N/A ​ — ​ Total 78,958 ​ $ 97.87 ​ 2,535,891 ​ (1) These shares are available for future issuance under our Amended and Restated 2012 Incentive Award Plan (the “OSI Plan”), which was approved by our shareholders on December 10, 2020 and amended on December 12, 2023.
As of June 30, 2025, the maximum number of shares of common stock that may yet be purchased under the current plan authorized by the Board of Directors is 1,190,556. 34 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information concerning our equity compensation plans as of June 30, 2025. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ ​ ​ ​ ​ ​ remaining available for ​ ​ Number of securities to ​ Weighted ‑ average ​ future issuance under ​ ​ be issued upon exercise ​ exercise price of ​ equity compensation ​ ​ of outstanding options, ​ outstanding options, ​ plans (excluding securities Plan category ​ warrants and rights ​ warrants and rights ​ reflected in column (a)) ​ (a) ​ (b) (c) ​ Equity compensation plans approved by security holders 60,253 ​ $ 121.41 ​ 1,984,358 (1)(2) Equity compensation plans not approved by security holders — ​ ​ N/A ​ — ​ Total 60,253 ​ $ 121.41 ​ 1,984,358 ​ (1) These shares are available for future issuance under our Amended and Restated 2012 Incentive Award Plan (the “OSI Plan”), which was approved by our shareholders on December 10, 2020 and amended on December 12, 2023.
(2) Awards of restricted stock units or other awards that convey the full value of the shares subject to the award are counted as 1.87 shares for every one award granted. 35 Table of Contents Performance Graph The graph below compares the cumulative total stockholder return for the period beginning on the market close on the last trading day before the beginning of our fifth preceding fiscal year through and including the end of our last completed fiscal year with (a) The Nasdaq Composite Index and (b) a peer group of publicly traded issuer(s) with which we have generally competed.
Performance Graph The graph below compares the cumulative total stockholder return for the period beginning on the market close on the last trading day before the beginning of our fifth preceding fiscal year through and including the end of our last completed fiscal year with (a) The Nasdaq Composite Index and (b) a peer group of publicly traded issuer(s) with which we have generally competed.
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any Company filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. ​ ​ The following table provides the same information in tabular form as of June 30: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2019 2020 2021 2022 2023 2024 OSI Systems, Inc 100.00 66.27 ​ 90.24 ​ 75.86 ​ 104.62 ​ 122.10 The Nasdaq Composite Index 100.00 126.94 ​ 184.36 ​ 141.17 ​ 178.08 ​ 230.80 Peer Group 100.00 90.75 ​ 102.41 ​ 90.35 ​ 105.62 ​ 110.55 ​ ​ 36 Table of Contents ITEM 6. [RESERVED] ​ 37 Table of Contents
Historical stock price performance is not necessarily indicative of future stock price performance. 35 Table of Contents This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any Company filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. ​ The following table provides the same information in tabular form as of June 30: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 2021 2022 2023 2024 2025 OSI Systems, Inc 100.00 136.17 ​ 114.47 ​ 157.86 ​ 184.24 ​ 301.26 The Nasdaq Composite Index 100.00 145.23 ​ 111.21 ​ 140.28 ​ 181.81 ​ 210.31 Peer Group 100.00 112.85 ​ 99.56 ​ 116.39 ​ 121.83 ​ 159.41 ​ ITEM 6. [RESERVED] ​ ​
Unregistered Sales of Equity Securities We did not sell any unregistered shares of common stock during the fiscal year ended June 30, 2024. Issuer Purchases of Equity Securities We did not repurchase any shares of common stock during the fiscal year ended June 30, 2024.
Unregistered Sales of Equity Securities We did not sell any unregistered shares of common stock during the fiscal year ended June 30, 2025. In July 2024, we issued an aggregate of $350.0 million principal amount of 2.25% convertible senior notes due in August 2029.
Removed
Historical stock price performance is not necessarily indicative of future stock price performance.
Added
The 2029 Notes were issued to the initial purchasers in reliance upon Section 4(a)(2) of the Securities Act in transactions not involving any public offering. The 2029 Notes were resold by the initial purchasers to persons whom the initial purchasers reasonably believe are “qualified institutional buyers,” as defined in, and in accordance with, Rule 144A under the Securities Act.
Added
Any shares of our common stock that may be issued upon conversion of the 2029 Notes will be issued in reliance upon Section 3(a)(9) of the Securities Act as involving an exchange by us exclusively with our security holders.
Added
Initially, a maximum of 2,324,490 shares of our common stock may be issued upon conversion of the 2029 Notes based on the initial maximum conversion rate of 6.6414 shares of common stock per $1,000 principal amount of 2029 Notes which is subject to customary anti-dilution adjustment provisions.
Added
Issuer Purchases of Equity Securities Excluding shares tendered to satisfy minimum statutory withholding obligations related to the vesting of RSUs, we repurchased 531,314 shares of common stock during the first quarter of fiscal year 2025. We did not repurchase any shares of common stock during the ensuing quarters in fiscal year 2025.
Added
(2) Awards of restricted stock units or other awards that convey the full value of the shares subject to the award are counted as 1.87 shares for every one award granted.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Item 6. ​ [RESERVED] ​ 37 Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 38 Item 7A. ​ Quantitative and Qualitative Disclosures About Market Risk ​ 45 Item 8. ​ Financial Statements and Supplementary Data ​ 46
Item 6. ​ [RESERVED] ​ 36 Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 36 Item 7A. ​ Quantitative and Qualitative Disclosures About Market Risk ​ 44 Item 8. ​ Financial Statements and Supplementary Data ​ 45

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.
Income Taxes. Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.
Security Division. Through our Security division, we provide security screening products, software, and services globally, as well as turnkey security screening solutions. These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects for weapons, explosives, drugs, radioactive and nuclear materials and other contraband.
Security Division. Through our Security division, we provide security screening products, multi-platform software solutions, and services globally, as well as turnkey security screening solutions. These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects for weapons, explosives, drugs, radioactive and nuclear materials and other contraband.
We intend to continue this trend in future years, although specific programs may or may not continue to be funded and funding levels may fluctuate. R&D expenses included research related to new product development and product enhancement expenditures. Fiscal 2024 Compared with Fiscal 2023.
We intend to continue this trend in future years, although specific programs may or may not continue to be funded and funding levels may fluctuate. R&D expenses included research related to new product development and product enhancement expenditures. Fiscal 2025 Compared with Fiscal 2024.
Please see “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Overview We are a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products and provide related services in diversified markets, including homeland security, healthcare, defense and aerospace.
Please see “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. 36 Table of Contents Overview We are a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products and provide related services in diversified markets, including homeland security, healthcare, defense and aerospace.
Provision for Income Taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Fiscal Fiscal ​ ​ 2022 ​ 2023 ​ 2024 ​ ​ (Dollars in millions) Provision for income taxes ​ $ 24.8 ​ $ 23.5 ​ $ 33.1 ​ The effective tax rate for a particular period varies depending on a number of factors including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections, (v) tax holidays granted to certain of our international subsidiaries, (vi) return to provision adjustments and (vii) changes in tax legislation.
Provision for Income Taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Fiscal Fiscal ​ ​ 2023 ​ 2024 ​ 2025 ​ ​ (Dollars in millions) Provision for income taxes ​ $ 23.5 ​ $ 33.1 ​ $ 36.5 ​ The effective tax rate for a particular period varies depending on a number of factors including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections, (v) tax holidays granted to certain of our international subsidiaries, (vi) return to provision adjustments and (vii) changes in tax legislation.
We anticipate that cash generated from our operations, in addition to existing cash borrowing arrangements and future access to capital markets should be sufficient to meet our cash requirements for at least the next 12 months.
We anticipate that cash generated from our operations, existing cash borrowing arrangements and future access to capital markets should be sufficient to meet our cash requirements for at least the next 12 months.
As of June 30, 2024, we were in compliance with all financial covenants under our various borrowing agreements. See Note 8 to the consolidated financial statements for further discussion.
As of June 30, 2025, we were in compliance with all financial covenants under our various borrowing agreements. See Note 8 to the consolidated financial statements for further discussion.
These foreign funds were held primarily by our subsidiaries in the United Kingdom, India, Singapore, Canada, and Australia, and to a lesser extent in Malaysia, Egypt, Albania, Indonesia and Germany, among other countries.
These foreign funds were held primarily by our subsidiaries in India, United Kingdom, Canada, Singapore, and Malaysia, and to a lesser extent in Australia, Albania, Indonesia, Uruguay and Germany, among other countries.
Although SG&A expense increased in fiscal 2024 compared to fiscal 2023, as a percentage of net revenues, SG&A expense decreased from 17.9% in fiscal 2023 to 17.5% in fiscal 2024. Research and Development Our Security and Healthcare divisions have historically invested substantial amounts in research and development (“R&D”).
Although SG&A expense increased in fiscal 2025 compared to fiscal 2024, as a percentage of net revenues, SG&A expense decreased from 17.5% in fiscal 2024 to 17.0% in fiscal 2025. Research and Development Our Security and Healthcare divisions have historically invested substantial amounts in research and development (“R&D”).
We also provide our optoelectronic devices and electronics manufacturing services to OEM customers, and our own Security and Healthcare divisions. Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 21% of our total consolidated revenues for fiscal 2024. Healthcare Division.
We also provide our optoelectronic devices and electronics manufacturing services to OEM customers, and our own Security and Healthcare divisions. Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 20% of our total consolidated revenues for fiscal 2025. Healthcare Division.
Consolidated Results Discussion and analysis of our financial condition and results of operations for fiscal 2022 has been omitted from this Annual Report on Form 10-K, and is available in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended June 30, 2023.
Consolidated Results Discussion and analysis of our financial condition and results of operations for fiscal 2023 (compared with fiscal 2024) have been omitted from this Annual Report on Form 10-K, and is available in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended June 30, 2024.
We may utilize similar measures in the future to realign our operations to further increase our operating efficiencies. The effect of these efforts may materially affect our future operating results. Fiscal 2024 Compared with Fiscal 2023.
We may utilize similar measures in the future to realign our operations to further increase our operating efficiencies. The effect of these efforts may materially affect our future operating results. ​ 41 Table of Contents Fiscal 2025 Compared with Fiscal 2024.
Operating Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ ​ ​ Fiscal ​ % of ​ Fiscal ​ % of ​ Fiscal ​ % of ​ 2022-2023 ​ 2023-2024 ​ ​ 2022 Net Revenues 2023 Net Revenues 2024 Net Revenues % Change % Change ​ ​ ​ (Dollars in millions) ​ Selling, general and administrative ​ $ 235.6 ​ 19.9 % $ 228.3 ​ 17.9 % $ 269.7 ​ 17.5 % (3.1) % 18.1 % Research and development ​ 59.6 ​ 5.1 % 59.4 ​ 4.7 % ​ 65.3 ​ 4.3 % (0.3) % 9.9 % Impairment, restructuring and other charges ​ 7.5 ​ 0.6 % 7.6 ​ 0.5 % ​ 6.4 ​ 0.4 % 1.3 % (15.8) % Total operating expenses ​ $ 302.7 ​ 25.6 % $ 295.3 ​ 23.1 % $ 341.4 ​ 22.2 % (2.4) % 15.6 % ​ Selling, General and Administrative Our significant selling, general and administrative (“SG&A”) expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, and depreciation and amortization expense.
Operating Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ ​ ​ Fiscal ​ % of ​ Fiscal ​ % of ​ Fiscal ​ % of ​ 2023-2024 ​ 2024-2025 ​ ​ 2023 Net Revenues 2024 Net Revenues 2025 Net Revenues % Change % Change ​ ​ ​ (Dollars in millions) ​ Selling, general and administrative ​ $ 228.3 ​ 17.9 % $ 269.7 ​ 17.5 % $ 290.9 ​ 17.0 % 18.1 % 7.9 % Research and development ​ 59.4 ​ 4.7 % 65.3 ​ 4.3 % ​ 73.4 ​ 4.3 % 9.9 % 12.4 % Restructuring and other charges ​ 7.6 ​ 0.5 % 6.4 ​ 0.4 % ​ 5.3 ​ 0.3 % (15.8) % (17.2) % Total operating expenses ​ $ 295.3 ​ 23.1 % $ 341.4 ​ 22.2 % $ 369.6 ​ 21.6 % 15.6 % 8.3 % ​ Selling, General and Administrative Our significant selling, general and administrative (“SG&A”) expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, and depreciation and amortization expense.
The net change in cash flows from operating activities was due primarily to a net increase in accounts receivable and inventories associated with the revenue growth in the Security division, partially offset by other changes in net working capital compared with the same period last year as well as impact of higher net income in fiscal 2024 compared with the prior fiscal year.
The positive change in cash flows from operating activities was due primarily to improvements in collection of accounts receivable and utilization of inventories associated with the revenue growth in our Security division, partially offset by other changes in net working capital compared with the same period last year, as well as the impact of higher net income in fiscal 2025 compared with the prior fiscal year.
Cash Provided by (Used in) Operating Activities. Cash flows from operating activities can fluctuate significantly from period to period, as net income, adjusted for non-cash items, and working capital fluctuations impact cash flows. During fiscal 2024, we used cash from operations of $87.5 million compared to cash provided by operations of $94.8 million in the prior fiscal year.
Cash flows from operating activities can fluctuate significantly from period to period, as net income, adjusted for non-cash items, and working capital fluctuations impact cash flows. During fiscal 2025, cash provided by operations was $97.6 million compared to cash used in operations of $87.5 million in the prior fiscal year.
Material Cash Requirements Our material cash requirements include the following contractual and other obligations. Borrowings. Outstanding lines of credit and current and long-term debt totaled $521.6 million at June 30, 2024, an increase of $162.0 million from $359.6 million at June 30, 2023.
Material Cash Requirements Our material cash requirements include the following contractual and other obligations. Borrowings. Outstanding borrowings on lines of credit and other current and long-term debt totaled $649.6 million at June 30, 2025, an increase of $128.0 million from $521.6 million at June 30, 2024.
During the fiscal year ended June 30, 2023, restructuring and other charges were $7.6 million and consisted of $3.9 million for legal charges, net of insurance reimbursements, $1.7 million for employee terminations, $1.5 million for other facility closure costs for operational efficiency activities, and $0.4 million in acquisition related costs.
During the fiscal year ended June 30, 2025, restructuring and other charges were $5.3 million and consisted of $0.7 million for facility closure costs for operational efficiency activities, $2.7 million for employee terminations, $0.6 million in acquisition related costs, and $1.3 million in legal charges.
See Note 14 to the consolidated financial statements for additional information about business segments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ ​ Fiscal % of Fiscal % of Fiscal ​ % of ​ 2022-2023 2023-2024 ​ ​ 2022 Net Revenues 2023 Net Revenues 2024 Net Revenues % Change % Change ​ ​ ​ (Dollars in millions) ​ Security ​ $ 663.2 ​ 56.0 % $ 760.3 ​ 59.5 % $ 1,043.1 ​ 67.8 % 14.6 % 37.2 % Optoelectronics / Manufacturing ​ 314.3 ​ 26.6 % ​ 327.6 25.6 % ​ 324.3 ​ 21.1 % 4.2 % (1.0) % Healthcare ​ 205.7 ​ 17.4 % ​ 190.5 14.9 % ​ 171.4 ​ 11.1 % (7.4) % (10.0) % Total Net Revenues ​ $ 1,183.2 ​ ​ ​ $ 1,278.4 ​ ​ ​ $ 1,538.8 ​ ​ ​ 8.0 % 20.4 % ​ Fiscal 2024 Compared with Fiscal 2023.
See Note 14 to the consolidated financial statements for additional information about business segments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ ​ Fiscal % of Fiscal % of Fiscal ​ % of ​ 2023-2024 2024-2025 ​ ​ 2023 Net Revenues 2024 Net Revenues 2025 Net Revenues % Change % Change ​ ​ ​ (Dollars in millions) ​ Security ​ $ 760.3 ​ 59.5 % $ 1,043.1 ​ 67.8 % $ 1,196.2 ​ 69.8 % 37.2 % 14.7 % Optoelectronics / Manufacturing ​ 327.6 ​ 25.6 % ​ 324.3 21.1 % ​ 348.6 ​ 20.3 % (1.0) % 7.5 % Healthcare ​ 190.5 ​ 14.9 % ​ 171.4 11.1 % ​ 168.4 ​ 9.9 % (10.0) % (1.8) % Total Net Revenues ​ $ 1,278.4 ​ ​ ​ $ 1,538.8 ​ ​ ​ $ 1,713.2 ​ ​ ​ 20.4 % 11.3 % ​ Fiscal 2025 Compared with Fiscal 2024.
Fiscal 2024 Compared with Fiscal 2023. For the fiscal years ended June 30, 2024 and 2023, we recorded a provision for income taxes of $33.1 million and $23.5 million, respectively. The effective tax rate for the fiscal years ended June 30, 2024 and 2023 was 20.5% and 20.4%, respectively.
Fiscal 2025 Compared with Fiscal 2024. For the fiscal years ended June 30, 2025 and 2024, we recorded a provision for income taxes of $36.5 million and $33.1 million, respectively. The effective tax rate for the fiscal years ended June 30, 2025 and 2024 was 19.6% and 20.5%, respectively.
In addition, we received proceeds from maturities of certificates of deposit of $10.3 million in fiscal 2024 compared to $3.8 million in the same prior-year period. Cash Provided by (Used in) Financing Activities. Net cash provided by financing activities was $144.3 million during fiscal 2024, compared to net cash used of $37.2 million during the prior fiscal year.
In addition, we received proceeds from maturities of certificates of deposit of $0.1 million in fiscal 2025 compared to $10.3 million in the same prior-year period. Cash Provided by Financing Activities. Net cash provided by financing activities was $30.8 million during fiscal 2025, compared to $144.3 million during the prior fiscal year.
Cash Used in Investing Activities. Net cash used in investing activities was $37.6 million during fiscal 2024 as compared to $40.5 million used during the prior year. During fiscal 2024, we used cash of $9.0 million for the acquisition of businesses as compared to $7.1 million in the prior fiscal year.
Cash Used in Investing Activities. Net cash used in investing activities was $117.9 million during fiscal 2025 as compared to $37.6 million used during the prior year. During fiscal 2025, we used cash of $76.7 million for the acquisition of businesses as compared to $9.0 million in the prior fiscal year.
Interest and Other Expense, Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ Fiscal ​ 2022 2023 2024 ​ ​ (Dollars in millions) Interest and other expense, net ​ $ 9.0 ​ $ 20.0 ​ $ 27.8 ​ Fiscal 2024 Compared with Fiscal 2023.
Interest and Other Expense, Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ Fiscal ​ 2023 2024 2025 ​ ​ (Dollars in millions) Interest and other expense, net ​ $ 20.0 ​ $ 27.8 ​ $ 31.4 ​ Fiscal 2025 Compared with Fiscal 2024.
On a year-over-year basis, currency exchange rates negatively impacted reported sales by approximately 1.6% for the year ended June 30, 2024 compared to the year ended June 30, 2023, primarily due to the strengthening of the U.S. dollar against other foreign currencies in fiscal 2024.
On a year-over-year basis, currency exchange rates positively impacted reported sales by approximately 0.4% for the year ended June 30, 2025 compared to the year ended June 30, 2024, primarily due to the weakening of the U.S. dollar against other foreign currencies in fiscal 2025.
Net capital expenditures in fiscal 2024 were $22.1 million compared to $15.8 million in the prior fiscal year. Expenditures for intangible and other assets in fiscal 2024 were $17.3 million compared to $16.4 million in the prior fiscal year.
Net capital expenditures in fiscal 2025 were $23.8 million compared to $22.1 million in the prior fiscal year. Expenditures for intangible and other assets in fiscal 2025 were $17.7 million compared to $17.3 million in the prior fiscal year.
Our products monitor patients in critical, emergency and perioperative care areas of the hospital and provide information, through wired and wireless networks, to physicians and nurses who may be at the patient’s bedside, in another area of the hospital or even outside the hospital.
Our products monitor patients in critical, emergency and perioperative care areas of the hospital and provide information, through wired and wireless networks, to physicians and nurses who may be at the patient’s bedside, in another area of the hospital or even outside the hospital. Revenues from our Healthcare division accounted for 10% of our total consolidated revenues for fiscal 2025.
Certain hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, higher interest rates make access to credit more expensive, and fiscal stimulus programs enacted during the COVID - 19 pandemic wind down. To the extent macroeconomic conditions remain challenging, it is likely that hospitals’ spend on capital equipment will be adversely impacted.
Certain hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs and higher interest rates make access to credit more expensive. To the extent macroeconomic conditions remain challenging, it is likely that hospitals’ spend on capital equipment will be adversely impacted. Russia-Ukraine and Israel-Hamas Conflicts.
Any further strengthening of the U.S. dollar against foreign currencies would adversely impact our sales in future periods, and any weakening of the U.S. dollar against foreign currencies would positively impact our sales in future periods. Coronavirus Pandemic.
Any strengthening of the U.S. dollar against foreign currencies would adversely impact our sales in future periods, and any weakening of the U.S. dollar against foreign currencies would positively impact our sales in future periods. Significant International Security Contracts.
Gross profit is impacted by sales volume and changes in overall manufacturing-related costs, such as raw materials and component costs, warranty expense, provision for inventory, freight, and logistics. Gross profit increased approximately $100.0 million in fiscal 2024 as compared to the prior year on a 20.4% increase in sales.
Gross profit is impacted by sales volume and changes in overall manufacturing-related costs, such as raw materials and component costs, warranty expense, provision for inventory, freight, tariffs, and logistics. Gross profit increased approximately $56.7 million in fiscal 2025 as compared to the prior year on an 11.3% increase in net revenue.
As of June 30, 2024, we had lease payment obligations of $30.8 million, with $10.8 million payable within the next 12 months. 44 Table of Contents Cash Held by Foreign Subsidiaries Our cash and cash equivalents totaled $95.4 million at June 30, 2024. Of this amount, approximately 81% was held by our foreign subsidiaries and subject to repatriation tax considerations.
As of June 30, 2025, we had lease payment obligations of $32.7 million, with $13.0 million payable within the next 12 months. Cash Held by Foreign Subsidiaries Our cash and cash equivalents totaled $106.4 million at June 30, 2025. Of this amount, approximately 78% was held by our foreign subsidiaries and subject to repatriation tax considerations.
This uncertainty is exacerbated by sanctions imposed by the U.S. government against certain businesses and individuals in select countries. Continued or increased uncertainty regarding global trade due to these or other factors may require us to modify our current business practices and could have a material adverse effect on our business, results of operations and financial condition. Healthcare Considerations.
Continued or increased uncertainty regarding global trade due to these or other factors may require us to modify our current business practices and could have a material adverse effect on our business, results of operations and financial condition. Healthcare Considerations.
We write down inventory for slow-moving and obsolete inventory based on historical usage, orders on hand, assessments of future demands, and market conditions, among other items. If these factors are less favorable than those projected, additional inventory write-downs may be required. 40 Table of Contents Income Taxes.
Inventories are stated at the lower of cost (first - in, first - out) or net realizable value. We write down inventory for slow-moving and obsolete inventory based on historical usage, orders on hand, assessments of future demands, and market conditions, among other items. If these factors become less favorable than those projected, additional inventory write-downs may be required.
The increase in service revenue was due primarily to the increase in the installed base of products. 41 Table of Contents Revenues for the Optoelectronics and Manufacturing division during the fiscal year ended June 30, 2024 decreased year-over year mainly due to a decline of $11.9 million in the optoelectronics business.
The increase in service revenue was due primarily to the increase in the installed base of products. Revenues for the Optoelectronics and Manufacturing division during the fiscal year ended June 30, 2025 increased year-over year mainly due to an increase of $23.5 million in the contract manufacturing business.
The slowdown in the optoelectronics business was primarily driven by the push-out of orders and deliveries from customers who were adjusting their inventory levels ​ Revenues for the Healthcare division during the fiscal year ended June 30, 2024 decreased year-over-year due primarily to a reduction in patient monitoring sales of $24.2 million, partially offset by increases in service revenue of $3.7 million, cardiology sales of $0.3 million and supplies and accessories revenue of $1.1 million. ​ Gross Profit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ % of ​ Fiscal ​ % of ​ Fiscal ​ % of ​ ​ 2022 Net Revenues 2023 Net Revenues 2024 Net Revenues ​ ​ ​ (Dollars in millions) ​ Gross profit ​ $ 424.4 ​ 35.9 % $ 430.5 33.7 % $ 530.5 ​ 34.5 % ​ Fiscal 2024 Compared with Fiscal 2023.
Revenues for the Healthcare division during the fiscal year ended June 30, 2025 decreased year-over-year due primarily to a reduction in cardiology sales of $4.8 million and patient monitoring sales of $1.8 million, partially offset by increases in service revenue of $2.4 million and supplies and accessories revenue of $1.1 million. 40 Table of Contents Gross Profit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ % of ​ Fiscal ​ % of ​ Fiscal ​ % of ​ ​ 2023 Net Revenues 2024 Net Revenues 2025 Net Revenues ​ ​ ​ (Dollars in millions) ​ Gross profit ​ $ 430.5 33.7 % $ 530.5 ​ 34.5 % $ 587.2 ​ 34.3 % ​ Fiscal 2025 Compared with Fiscal 2024.
In the event we repatriate cash from certain foreign operations and if taxes have not previously been withheld on the related earnings, we would provide for withholding taxes at the time we change our intention with regard to the reinvestment of those earnings.
In the event we repatriate cash from certain foreign operations and if taxes have not previously been withheld on the related earnings, we would provide for withholding taxes at the time we change our intention with regard to the reinvestment of those earnings. 43 Table of Contents Stock Repurchase Program In September 2022, our Board of Directors increased to a total of 2,000,000 shares the maximum number of shares authorized under the stock repurchase program.
We acquired two businesses in fiscal 2024 and four businesses in fiscal 2023, as described in Note 2 to the Consolidated Financial Statements. None of these acquisitions was considered material. Trends and Uncertainties The following is a discussion of certain trends and uncertainties that we believe have influenced, and may continue to influence, our results of operations. Global Economic Considerations.
None of these acquisitions was considered material. 37 Table of Contents Trends and Uncertainties The following is a discussion of certain trends and uncertainties that we believe have influenced, and may continue to influence, our results of operations. Global Economic Considerations.
Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards.
Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards.
Revenues from our Security division accounted for 68% of our total consolidated revenues for fiscal 2024.
Revenues from our Security division accounted for 70% of our total consolidated revenues for fiscal 2025. Optoelectronics and Manufacturing Division.
In addition, we anticipate that cash generated from operations, without repatriating earnings from our non-U.S. subsidiaries, and our credit facilities will be sufficient to satisfy our obligations in the U.S.
In addition, we anticipate that cash generated from operations, without repatriating earnings from our non-U.S. subsidiaries, and our credit facilities will be sufficient to satisfy our obligations in the U.S. ​ 42 Table of Contents Our credit facility comprised a term loan and a $600 million revolving credit facility, which included a $300 million sub-facility for letters of credit.
During fiscal years 2023 and 2024, our Security division was awarded three significant international contracts valued in aggregate greater than $800 million with expected revenues to be recognized over multiple years.
During fiscal years 2023 and 2024, our Security division was awarded three significant international contracts valued in aggregate greater than $800 million During fiscal years 2023, 2024 and 2025, we recognized revenues generated from these contracts of approximately $17 million, $404 million and $231 million, respectively.
Our income from operations increased to $189.1 million in fiscal 2024 or 39.8% growth from the prior year driven primarily by increased sales of $260.3 million which increased associated gross profit by $99.9 million, partially offset by and an increase in operating expenses of $46.2 million. Acquisitions.
Our income from operations increased to $ 217.5 million in fiscal 2025 or 15% growth from the prior year driven primarily by increased net revenue of $174.4 million which increased associated gross profit by $56.7 million, partially offset by and an increase in operating expenses of $28.3 million. Acquisitions.
During the fiscal years ended June 30, 2024 and 2023, we recognized a net discrete tax benefit of $4.7 million and $2.8 million, respectively, primarily related to equity-based compensation under ASU 2016-09, adjustments to prior year estimates, and changes in uncertain tax positions. 43 Table of Contents Liquidity and Capital Resources Our principal sources of liquidity are our cash and cash equivalents, cash generated from operations and our credit facility.
The net discrete benefit recorded in the fiscal year ended June 30, 2024 is primarily related to equity-based compensation under ASU 2016-09 and adjustments to prior year estimates. Liquidity and Capital Resources Our principal sources of liquidity are our cash and cash equivalents, cash generated from operations, existing cash borrowing arrangements and access to capital markets.
Fiscal 2024 Compared with Fiscal 2023. We reported consolidated sales of $1,538.8 million in fiscal 2024, a 20.4% increase compared to the prior year.
Fiscal 2025 Compared with Fiscal 2024. We reported consolidated net revenue of $1,713.2 million in fiscal 2025, a 11.3% increase compared to the prior year.
If multiple promises comprise a series of distinct services which are substantially the same and have the same pattern of transfer, they are combined and accounted for as a single performance obligation. Inventory. Inventories are stated at the lower of cost (first - in, first - out) or net realizable value.
If multiple promises comprise a series of distinct services which are substantially the same and have the same pattern of transfer, they are combined and accounted for as a single performance obligation. Inventory. The majority of our inventories are valued using the average costing method with select subsidiaries using the standard costing method.
Revenues for the Security division during the fiscal year ended June 30, 2024 increased on a year-over-year basis due to an increase in product and service revenues of approximately $275.0 million and $7.8 million, respectively.
Revenues for the Security division during the fiscal year ended June 30, 2025 increased on a year-over-year basis due to an increase in product and service revenues of approximately $97.0 million and $56.1 million, respectively. The increase in product revenue was primarily driven by growth in cargo and vehicle inspection systems, trace detection systems, and checkpoint screening sales.
Critical Accounting Policies and Estimates The following discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).
Further revenues are expected to be recognized in fiscal year 2026 and beyond, albeit at relatively lower amounts as we have fulfilled the majority of equipment deliveries as of the end of fiscal year 2025. ​ 38 Table of Contents Critical Accounting Policies and Estimates The following discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).
R&D expense during the fiscal year ended June 30, 2024 was $5.9 million higher than in the same prior-year period, driven primarily by compensation costs related to investments to support new product development initiatives, mainly in our Security division compared to the same prior-year period. 42 Table of Contents Impairment, Restructuring and Other Charges Impairment, restructuring and other charges generally consist of charges relating to reductions in our workforce, facilities consolidation, impairment of assets, costs related to acquisition activity, legal charges and other non-recurring charges.
R&D expense during the fiscal year ended June 30, 2025 was $8.1 million higher than in the same prior-year period, driven primarily by compensation costs related to investments to support new product development initiatives, mainly in our Security division.
Fiscal 2024 Compared with Fiscal 2023. SG&A expense for the fiscal year ended June 30, 2024 was $41.4 million higher than in the same prior-year period, primarily due to increases in compensation expense, provision for losses on accounts receivable, and an unfavorable impact of foreign currency exchange rates compared to the same prior-year period.
Fiscal 2025 Compared with Fiscal 2024. SG&A expense for the fiscal year ended June 30, 2025 increased $21.2 million compared to the same prior-year period, primarily due to increases in compensation expense, professional fees, information technology costs and the unfavorable impact of foreign currency exchange rates, partially offset by lower bad debt expense compared to the same prior-year period.
However, deferred tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced or available tax planning strategies are no longer viable. Business Combinations.
However, deferred tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced or available tax planning strategies are no longer viable. ​ 39 Table of Contents Subsequent to the fiscal year end, on July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law.
Cash and cash equivalents totaled $95.4 million at June 30, 2024, compared to $76.8 million at June 30, 2023. During fiscal 2024, cash used in operations was $87.5 million.
Cash and cash equivalents totaled $106.4 million at June 30, 2025, compared to $95.4 million at June 30, 2024.
As of June 30, 2024, there was $135.6 million outstanding under the term loan, $384.0 million outstanding under our revolving credit facility and $74.5 million of outstanding letters of credit. As of June 30, 2024, the total amount available under our revolving credit facility was $141.5 million. See Note 8 to the consolidated financial statements for further discussion.
As of June 30, 2025, there was $128.1 million outstanding under the term loan, $178.0 million outstanding under our revolving credit facility and $82.8 million of outstanding letters of credit. As of June 30, 2025, the total amount available under our revolving credit facility was $339.2 million.
For the fiscal year ended June 30, 2024, interest and other expense, net was $27.8 million as compared to $20.0 million in the comparable prior-year period. This increase was driven by higher average interest rates and higher average levels of borrowing under our credit facility.
For the fiscal year ended June 30, 2025, interest and other expense, net was $31.4 million as compared to $27.8 million in the prior fiscal year.
The changes in cash flows from financing activities primarily relate to (i) net borrowings on bank lines of credit and long-term debt of $162.0 million in fiscal 2024 compared to $5.9 million in the prior fiscal year; (ii) $23.3 million used for taxes paid related to the net share settlement of equity awards in fiscal 2024 compared to $12.0 million in the prior fiscal year; and (iii) there were no share repurchases in fiscal 2024 compared to $34.7 million in the prior fiscal year.
The changes in cash flows from financing activities primarily relate to proceeds from issuance of $350.0 million in senior convertible notes, net of issuance costs of $9.5 million, partially offset by (i) net repayments on bank lines of credit of 214.2 million in fiscal 2025 compared to net borrowings of $162.0 million in the prior fiscal year; and (iii) share repurchases totaling $80.4 million in fiscal 2025 compared to no share repurchases in the prior fiscal year.
Significant judgment is required in determining our tax expense and in evaluating our tax positions including evaluating uncertainties. We review our tax positions quarterly and adjust the balances as new information becomes available. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years.
Significant judgment is required in determining our tax expense and in evaluating our tax positions including uncertainties. We review our tax positions quarterly and adjust the balances as new information becomes available. We recognize liabilities for uncertain tax positions that reflect our best estimate of the amount ultimately expected to be paid, including, where appropriate, related interest and penalties.
Stock Repurchase Program In September 2022, our Board of Directors increased to a total of 2,000,000 shares the maximum number of shares authorized under the stock repurchase program. This program does not expire unless our Board of Directors acts to terminate the program. During fiscal 2024, we did not repurchase shares of our common stock.
This program does not expire unless our Board of Directors acts to terminate the program. During fiscal 2025, we repurchased 531,314 shares of our common stock. As of June 30, 2025, 1,190,556 shares remained available for repurchase.
This has the potential to indirectly disrupt our supply chain and access to certain resources. While we have not experienced significant adverse impacts to date and will continue to monitor for any impacts and seek to mitigate disruption that may arise, we have certain research and development activities within Ukraine for our Healthcare division which have been somewhat impacted.
While we have not experienced significant adverse impacts to date resulting from these conflicts, we have certain research and development activities within Ukraine for our Healthcare division which have been somewhat impacted. The conflicts also have increased the threat of malicious cyber-activity from other countries and other actors. Currency Exchange Rates.
Government Policies. Our results of operations and cash flows could be materially affected by changes in U.S. or foreign government legislative, regulatory or enforcement policies. 39 Table of Contents Russia’s Invasion of Ukraine. The invasion of Ukraine by Russia and the sanctions imposed in response to this conflict have increased global economic and political uncertainty.
The invasion of Ukraine by Russia and the sanctions imposed in response to this conflict as well as the Israel-Hamas conflict have increased global economic and political uncertainty. This has the potential to indirectly disrupt our supply chain and access to certain resources.
We also executed an interest rate swap in fiscal 2023 which resulted in a benefit of $1.3 million and $3.6 million in fiscal 2023 and 2024, respectively.
This was partially offset by lower interest expense associated with the 2029 Notes which resulted in a decrease in overall average borrowing rate, including the benefit from the interest rate swap. Interest expense for fiscal 2025 and 2024 included a benefit of $2.4 million and $3.6 million, respectively, from the interest rate swap.
Removed
As a result of terrorist attacks and smuggling operations against the U.S. and in other locations worldwide, security and inspection products have increasingly been used at a wide range of facilities in addition to airports, such as border crossings, seaports, freight forwarding operations, sports and entertainment venues, government and military installations, railways, and nuclear facilities.
Added
We acquired two businesses in fiscal 2025 and two businesses in fiscal 2024, as described in Note 2 to the Consolidated Financial Statements.
Removed
We believe that our wide-ranging product portfolio together with our ability to provide turnkey screening solutions position us to pursue security and inspection opportunities as they arise throughout the world.
Added
This uncertainty is exacerbated by sanctions imposed by the U.S. government against certain businesses and individuals in select countries. Tariffs, trade restrictions and retaliatory measures could result in revenue reductions or cost increases on material used in our products, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
Removed
In recent years, U.S. government budget deficits and the national debt have created increasing pressure to examine and reduce spending across many federal agencies, including those responsible for national security spending. Additionally, there continues to be volatility in international markets that has impacted international security spending.
Added
Consistent with our strategy, we are taking measures to contain costs to reduce the impact of tariffs. To date, our strategies have helped minimize our exposure to these conditions.
Removed
We believe that the diversified product portfolio and international customer mix of our Security division position us well to withstand the impact of these uncertainties and even benefit from specific initiatives within various governments. However, future budgetary reductions may be implemented as both the U.S.
Added
Key income-tax related provisions of the OBBBA relevant to our Company include the removal of mandatory capitalization of domestic research and development expenditures, permanent extension of bonus depreciation and revisions to international tax regimes. We are evaluating the financial impact of OBBBA, which will be in effect for the fiscal year ending June 30, 2026.
Removed
Government and other international government customers manage fiscal challenges including those stemming from government spending that occurred during the COVID-19 pandemic; such reductions could have a material, adverse effect on our business, financial condition and results of operations. Optoelectronics and Manufacturing Division.
Added
The legislation will affect the timing and recognition of certain deductions, which, if implemented, could impact our effective tax rate and deferred tax balances in future periods. Business Combinations.
Removed
Revenues from our Healthcare division accounted for 11% of our total consolidated revenues for fiscal 2024. 38 Table of Contents The healthcare markets in which we operate are highly competitive. We believe that our customers choose among competing products on the basis of product performance, functionality, price, value and service.
Added
The gross margin in fiscal year 2025 was relatively comparable to the prior year.
Removed
In addition, many factors, including public policy spending priorities, available resources, and product and economic cycles, have a significant impact on the capital spending policies of our customers. Impasses in national, regional, or local government budgeting decisions could lead to substantial delays or reductions in governmental spending.
Added
Restructuring and Other Charges Restructuring and other charges generally consist of charges relating to reductions in our workforce, facilities consolidation, impairment of assets, costs related to acquisition activity, legal charges and other non-recurring charges.
Removed
Many of our products have lengthy sales and purchase order cycles or are subject to competitive bidding or public tender processes. As a result, customers may delay or accelerate system purchases in conjunction with timing of their capital budget timelines or be unable to complete such purchases at all.
Added
The increase in interest and other expense, net was driven primarily by higher average levels of borrowings to support the increase in working capital associated with the growth in revenues, business acquisition activity, and for the repurchase of approximately $80 million of shares of common stock in July 2024.
Removed
As described, our Healthcare division experienced some increased demand for its patient monitoring products as a result of the COVID-19 pandemic during the earlier stages of the pandemic.
Added
During the fiscal years ended June 30, 2025 and 2024, we recognized a net discrete tax benefit of $6.7 million and $4.7 million, respectively. The net discrete benefit recorded in the fiscal year ended June 30, 2025 is primarily related to equity-based compensation under ASU 2016-09, favorable resolution to a foreign tax dispute, and changes in uncertain tax positions.
Removed
The conflict also has increased the threat of malicious cyber activity from nation states and other actors. Currency Exchange Rates.
Added
During fiscal 2025, we generated positive cash flow from operating activities and issued senior convertible notes which were primarily used to repay borrowings on our credit facility, repurchase shares of common stock, fund investing activities and pay taxes related to net share settlements of equity awards as discussed further below.
Removed
The coronavirus disease 2019 (“COVID-19”) pandemic dramatically impacted the global health and economic environment, with millions of confirmed cases, business slowdowns and shutdowns, and market volatility.
Added
Subsequent to June 30, 2025, in July 2025 we amended and extended the credit facility, now maturing in July 2030, and paid down the delayed draw term loan. See Note 8 to the consolidated financial statements for further discussion. Cash Provided by (Used in) Operating Activities.
Removed
The COVID-19 pandemic caused, and may continue to cause, significant economic disruptions and impacted, and may continue to impact, our operations and the operations of our suppliers, logistics providers and customers as a result of supply chain disruptions and delays, as well as labor challenges.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−0 removed10 unchanged
Transaction gains and losses, which were included in our consolidated statement of operations, amounted to a net gain (loss) of approximately $0.6 million, $2.0 million, and $(5.1) million for the fiscal years ended June 30, 2022, 2023 and 2024, respectively.
Transaction gains and losses, which were included in our consolidated statement of operations, amounted to a net gain (loss) of approximately $2.0 million, ($5.1) million, and ($12.7) million for the fiscal years ended June 30, 2023, 2024 and 2025, respectively.
A 10% appreciation of the U.S. dollar relative to the local currency exchange rates would have resulted in a net increase in our operating income of approximately $0.1 million in fiscal 2024.
A 10% appreciation of the U.S. dollar relative to the local currency exchange rates would have resulted in a net increase in our operating income of approximately $11.5 million in fiscal 2025.
Conversely, a 10% depreciation of the U.S. dollar relative to the local currency exchange rates would have resulted in a net decrease in our operating income of approximately $0.1 million in fiscal 2024. Inflation Heightened levels of inflation continue to present risk for us.
Conversely, a 10% depreciation of the U.S. dollar relative to the local currency exchange rates would have resulted in a net decrease in our operating income of approximately $11.5 million in fiscal 2025. ​ 44 Table of Contents Inflation Heightened levels of inflation continue to present risk for us.
Our financial results in future periods could, however, be adversely affected by periodic economic downturns in different regions of the world, changes in trade policies or tariffs, civil or military conflict and other political instability.
Our financial results in future periods could, however, be adversely affected by periodic economic downturns in different regions of the world, changes in trade policies or tariffs, civil or military conflict and other political instability. We monitor economic and currency conditions around the world to evaluate whether there may be any significant effect on our international sales in the future.
Interest Rate Risk The principal maturity and estimated value of our long-term debt exposure for each of the fiscal years set forth below as of June 30, 2024 were as follows (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maturity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2030 and ​ ​ ​ ​ ​ ​ ​ 2025 2026 2027 2028 2029 Thereafter Total Fair Value Term loan ​ $ 7,500 ​ $ 7,500 ​ $ 120,625 ​ $ — ​ $ — ​ $ — ​ $ 135,625 ​ $ 135,625 ​ Average interest rate ​ ​ 6.44 % ​ 6.44 % ​ 6.44 % ​ — % ​ — % ​ — % ​ 6.44 % ​ 6.44 % Finance lease obligations ​ $ 667 ​ $ 619 ​ $ 490 ​ $ 145 ​ $ 4 ​ $ — ​ $ 1,925 ​ $ 1,925 ​ Average interest rate of finance lease obligations ​ 5.7 % 5.7 % 5.7 % 5.7 % 5.7 % — % 5.7 % 5.7 % ​ As further described in Note 8 to the Consolidated Financial Statements, subsequent to June 30, 2024 we issued $350 million in senior convertible notes which have a coupon interest rate of 2.25% maturing in August 2029. ​
Interest Rate Risk The scheduled principal maturity and estimated value of our long-term debt exposure for each of the fiscal years set forth below as of June 30, 2025 were as follows (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maturity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2031 and ​ ​ ​ ​ ​ ​ ​ 2026 2027 2028 2029 2030 Thereafter Total Fair Value Term loan at 5.68% annual interest ​ $ 7,500 ​ $ 120,625 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 128,125 ​ $ 128,125 Convertible notes at 2.25% annual interest ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 350,000 ​ $ — ​ $ 350,000 ​ $ 472,770 Finance lease obligations 6.1% annual interest ​ $ 630 ​ $ 412 ​ $ 202 ​ $ 32 ​ $ 2 ​ $ — ​ $ 1,278 ​ $ 1,278 ​ As further described in Note 8 to the Consolidated Financial Statements, subsequent to June 30, 2025, in July 2025 we amended and extended the credit facility, now maturing in July 2030, and reduced the term loan.
We monitor economic and currency conditions around the world to evaluate whether there may be any significant effect on our international sales in the future. 45 Table of Contents Foreign Currency Our international operations are subject to certain opportunities and risks, including from foreign currency fluctuations and governmental actions. We conduct business in more than 35 countries.
Foreign Currency Our international operations are subject to certain opportunities and risks, including from foreign currency fluctuations and governmental actions. We conduct business in more than 35 countries.
Added
The scheduled maturities above reflect the term loan balance and scheduled maturities prior to the amendment and subsequent reduction of the term loan. ​

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