OSIS US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes.This MD&A contains forward-looking statements and the matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those projected or implied in the forward-looking statements. Please see “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

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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. We have three operating divisions, each of which is a reportable segment: (a) Security, providing security and inspection systems and turnkey security screening solutions; (b) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for our Security and Healthcare divisions, as well as to third parties for applications in the defense and aerospace markets, among others; and (c) Healthcare, providing patient monitoring, cardiology and remote monitoring, and connected care systems and associated accessories.

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. Revenues from our Security division accounted for 70% of our total consolidated revenues for fiscal 2025.

Optoelectronics and Manufacturing Division. Through our Optoelectronics and Manufacturing division, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, telecommunications, office automation, computer peripherals, industrial automation, and consumer products. 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. Through our Healthcare division, we design, manufacture, market and service patient monitoring, cardiology and remote monitoring, and connected care systems globally for sale primarily to hospitals and medical centers. 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.

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.

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. 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. We acquired two businesses in fiscal 2025 and two businesses in fiscal 2024, as described in Note 2 to the Consolidated Financial Statements. None of these acquisitions was considered material.

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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. Our products and services are sold in numerous countries worldwide, with a large percentage of our sales generated outside the United States. Therefore, we are exposed to and impacted by global macroeconomic factors, U.S. and foreign government policies and foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, rising interest rates, and labor shortages. Increasing diplomatic and trade friction between the U.S. and China has also created significant uncertainty in the global economy. These global macroeconomic factors, coupled with the volatile U.S. political climate and political unrest internationally, have created uncertainty and impacted demand for certain of our products and services. Conflicts in Gaza and nearby regions have created political and economic uncertainty in the Middle East. Also, the continued conflict between Russia and Ukraine and the sanctions imposed in response to this conflict have increased global economic and political uncertainty. While the impact of these factors remains uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition or results of operations. We do not know how long this uncertainty will continue. These factors could have a material adverse effect on our business, results of operations and financial condition.

Global Trade. The current domestic and international political environment, including in relation to recent and further potential changes by the U.S. and other countries in policies on global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy and global trade. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

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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”). Our preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. As a result, actual results may differ from such estimates. Our senior management has reviewed these critical accounting policies and estimates and related disclosures with the Audit Committee of our Board of Directors. The following summarizes our critical accounting policies and estimates used in preparing our consolidated financial statements:

Revenue Recognition. We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied. Our performance obligations are broadly categorized as product sales, service revenue, and project-specific contract revenue. Revenue from sales of products is recognized upon shipment or delivery when control of the product transfers to the customer, depending on the terms of each sale, and when collection is probable. Revenue from services includes installation and implementation of products and turnkey security screening services and after-market services. Generally, revenue from services is recognized over time as the services are performed. Sales agreements with customers can be project specific, cover a period of time, and can be renewable periodically. The contracts may contain terms and conditions with respect to payment, delivery, installation, services, warranty and other rights. Contracts with customers may include the sale of products and services.

In certain instances, contracts with customers can contain multiple performance obligations such as civil works to prepare a site for equipment installation, training of customer personnel to operate equipment, and after-market service of equipment. We assign multiple elements in a contract into separate performance obligations if those elements are distinct, both individually and in the context of the contract. 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. 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.

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. 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.

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. We evaluate the recoverability of these future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates. To provide insight, we use our historical experience and our short and long-range business forecasts. We believe it is more likely than not that a portion of the deferred income tax assets may expire unused and therefore have established a valuation allowance against them. Although realization is not assured for the remaining deferred income tax assets, we believe it is more likely than not that the deferred tax assets will be fully recoverable within the applicable statutory expiration periods. 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.

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Subsequent to the fiscal year end, on July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. 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. 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. In connection with the acquisition of a business, we record the fair value of purchase consideration for the tangible and intangible assets acquired, and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is until we have all the necessary information about the facts and circumstances that existed as of the acquisition date up to one year from the acquisition date, we may record adjustments to the provisional amounts initially recorded for the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Legal and Other Contingencies. We are subject to various claims and legal proceedings. We review the status of each significant legal dispute to which we are a party and assess our potential financial exposure, if any. If the potential financial exposure from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we record a liability and an expense for the estimated loss. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and revise our estimates accordingly. Such revisions in the estimates of the potential liabilities could have a material impact on our results of operations and financial position.

Net Revenues

The table below and the discussion that follows are based upon the way we analyze our business. See Note 14 to the consolidated financial statements for additional information about business segments.

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​

​ 2023 Net Revenues 2024 Net Revenues 2025 Net Revenues % Change % Change ​

​ ​ (Dollars in millions) ​

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Fiscal 2025 Compared with Fiscal 2024. 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. 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.

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.

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Gross Profit

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Fiscal ​ % of ​ Fiscal ​ % of ​ Fiscal ​ % of ​

​ ​ (Dollars in millions) ​

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Fiscal 2025 Compared with Fiscal 2024. 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. The gross margin in fiscal year 2025 was relatively comparable to the prior year.

Operating Expenses

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​

​ 2023 Net Revenues 2024 Net Revenues 2025 Net Revenues % Change % Change ​

​ ​ (Dollars in millions) ​

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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.

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. 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 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. 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.

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. We have undertaken certain restructuring activities in an effort to align our global capacity and infrastructure with demand by our customers and fully integrate acquisitions, thereby improving our operational efficiency. Our efforts have helped enhance our ability to improve operating margins, retain and expand existing relationships with customers and attract new business. 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.

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Fiscal 2025 Compared with Fiscal 2024. 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. During the fiscal year ended June 30, 2024, restructuring and other charges were $6.4 million and consisted of $3.2 million for facility closure costs for operational efficiency activities, $1.4 million for employee terminations, $1.0 million in acquisition related costs, and $0.8 million in legal charges.

Interest and Other Expense, Net

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​ ​ Fiscal ​ Fiscal ​ Fiscal

​ ​ (Dollars in millions)

Interest and other expense, net ​ $ 20.0 ​ $ 27.8 ​ $ 31.4

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Fiscal 2025 Compared with Fiscal 2024. 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 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. 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.

Provision for Income Taxes

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​ Fiscal Fiscal Fiscal

​ ​ (Dollars in millions)

Provision for income taxes ​ $ 23.5 ​ $ 33.1 ​ $ 36.5

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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.

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. 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. 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. Cash and cash equivalents totaled $106.4 million at June 30, 2025, compared to $95.4 million at June 30, 2024. 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. If we continue to net settle equity awards, we will continue to use additional cash to pay our tax withholding obligations in connection with such settlements. We currently anticipate that our available funds, credit facilities and cash flow from operations will be sufficient to meet our operational cash needs for the next 12 months and foreseeable future. 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.

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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. 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. 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. 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. 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 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. 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. 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. 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.

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. 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. 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. However, our future capital requirements will depend on many factors, including future business acquisitions, capital expenditures, litigation, stock repurchases and levels of research and development spending, among other factors. The adequacy of available funds will depend on many factors, including the success of our businesses in generating cash, continued compliance with financial covenants contained in our credit facility and the health of capital markets in general, among other factors.

Leases. We have lease arrangements for certain facilities and equipment under various operating lease agreements. 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. 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. We intend to permanently reinvest certain earnings from foreign operations, and we currently do not anticipate that we will need this cash in foreign countries to fund our U.S. operations. 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.

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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 2025, we repurchased 531,314 shares of our common stock. As of June 30, 2025, 1,190,556 shares remained available for repurchase.

The timing and actual numbers of shares purchased depends on a variety of factors, including stock price, general business and market conditions and other investment opportunities. Repurchases may be made from time to time under the program through open-market purchases or privately-negotiated transactions at our discretion. Upon repurchase, the shares are restored to the status of authorized but unissued shares, and we record them as a reduction in the number of shares of common stock issued and outstanding in our consolidated financial statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to certain market risks, which are inherent in our financial instruments and arise from transactions entered into in the normal course of business. We may enter into derivative financial instrument transactions in order to manage or reduce market risk in connection with specific foreign currency denominated transactions. We do not enter into derivative financial instrument transactions for speculative purposes.

We are subject to interest rate risk on our borrowings under our bank lines of credit. Consequently, our interest expense fluctuates with changes in the general level of these interest rates as we borrow under the credit facility.

Importance of International Markets

International markets provide us with significant growth opportunities. 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.

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. We closely monitor our operations in each country in which we do business and seek to adopt appropriate strategies that are responsive to changing economic and political environments, and to fluctuations in foreign currencies. Weaknesses in the currencies of some of the countries in which we do business are often offset by strengths in other currencies. Foreign currency financial statements are translated into U.S. dollars at period-end rates, except that revenues, costs and expenses are translated at average rates during the reporting period. We include gains and losses resulting from foreign currency transactions in income, while we exclude those resulting from translation of financial statements from income and include them as a component of accumulated other comprehensive loss. 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 $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 $11.5 million in fiscal 2025.

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Inflation

Heightened levels of inflation continue to present risk for us. We have experienced impacts to our materials and manufacturing costs and labor rates, and suppliers have signaled inflation-related cost pressures, which could flow through to our costs and pricing. If inflation remains at current levels for an extended period, or increases, and we are unable to successfully mitigate the impact, our costs could increase, resulting in pressure on our profits and margins. In addition, inflation and the increases in the cost of borrowing from rising interest rates could constrain the overall purchasing power of our customers for our products and services. Rising interest rates also will increase our borrowing costs. We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness of our products and services, which may, in part, offset cost increases from inflation.

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):

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​ ​ Maturity ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2031 and ​ ​ ​ ​ ​ ​

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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. 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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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

We make reference here to the Index to Consolidated Financial Statements that appears on page F-1 of this report. The Report of Independent Registered Public Accounting Firm from Grant Thornton LLP, the Consolidated Financial Statements, the Notes to Consolidated Financial Statements, and Supplementary Data—Unaudited Quarterly Results listed in the Index to Consolidated Financial Statements, which appear beginning on page F-2 of this report, are incorporated by reference into this Item 8.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of June 30, 2025, the end of the period covered by this report, our management, including our Chief Executive Officer and our Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a15(e) or 15d15(e) of the Exchange Act). Based upon management’s review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) or 15d-15(f) of the Exchange Act) for the Company. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on that evaluation, management concluded that our internal control over financial reporting was effective as of June 30, 2025.

In September 2024, we acquired 100% of the shares of common stock of a privately held provider of critical military, space and surveillance solutions (“Acquiree”). Management has excluded the Acquiree from its assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2025. The Acquiree represents approximately 6.1% and 4.7% of total assets and net sales, respectively, of the consolidated financial statement amounts as of and for the fiscal year ended June 30, 2025.

The effectiveness of the Company’s internal control over financial reporting as of June 30, 2025 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in its report, which is included in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud within the Company have been detected.

​

ITEM 9B. OTHER INFORMATION

None of our directors or officers informed us during the quarter ended June 30, 2025 of the adoption, modification or termination of a Rule 10b5 - 1 trading arrangement or non - Rule 10b5 - 1 trading arrangement, as those terms are defined in Regulation S - K, Item 408.

​

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

​

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2025.

We have adopted a Code of Ethics and Conduct that applies to all directors, officers and employees. The Code of Ethics and Conduct is available on our website at www.osi-systems.com under the Investor Relations - Corporate Governance section.

We have also adopted the OSI Systems, Inc. Insider Trading Policy that governs the purchase and sale or other dispositions of the Company’s securities by directors, officers and employees that is designed to promote compliance with insider trading laws, rules and regulations and any listing standards applicable to the Company. A copy of the OSI Systems, Inc. Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report.

​

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2025.

​

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2025.

​

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2025.

​

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting, presently scheduled to be held in December 2025.

​

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

2. Financial Statement Schedules.

Supplementary Data—Unaudited Quarterly Results

No other financial statement schedules are presented as the required information is either not applicable or included in the Consolidated Financial Statements or Notes thereto.

3. Exhibits. Reference is made to item 15(b) below.

(c) Financial Statement Schedules. Reference is made to Item 15(a)(2) above.

​

ITEM 16. FORM 10-K SUMMARY

None.

​

​

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OSI SYSTEMS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

​ Page

Consolidated Balance Sheets ​ F-6

Consolidated Statements of Operations ​ F-7

Consolidated Statements of Comprehensive Income ​ F-8

Consolidated Statements of Stockholders’ Equity ​ F-9

Consolidated Statements of Cash Flows ​ F-10

Notes to Consolidated Financial Statements ​ F-11

Supplementary Data—Unaudited Quarterly Results ​ F-42

​

​

​

F-1

Table of Contents

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

OSI Systems, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of OSI Systems, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2025 and 2024, the related consolidated statements of operations, comprehensive income , stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2025, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated August 25, 2025 expressed an unqualified opinion.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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F-2

Table of Contents

Determination of standalone selling price – Security Segment Product Revenue

As described further in Note 1 to the financial statements, the Company’s revenue contracts in the security segment may include multiple performance obligations, which are accounted for separately when they are distinct. The Company derives revenues in the security segment mainly from sales of products, installation, civil works and training services. The Company allocates the transaction price to the distinct performance obligations on a relative stand-alone selling price basis and recognizes revenue when control is transferred. We identified the determination of the stand-alone selling price related to product revenues in the Security segment as a critical audit matter.

Auditing the Company’s product revenue stand-alone selling price in the security segment was complex due to the subjectivity of the assumptions that were used in developing the stand-alone selling price of distinct performance obligations. Evaluating the appropriateness of these assumptions requires extensive audit effort due to the complexity of these contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

We obtained an understanding, evaluated design and tested the operating effectiveness of internal controls related to the determination of the stand-alone selling prices related to the security segment.

To test management’s determination of stand-alone selling price for each performance obligation, we performed procedures to evaluate the methodology applied. We evaluated the Company’s analysis of stand-alone selling price, including inspecting a sample of executed contracts. For the sample selected we evaluated the contracts to determine the appropriateness of the method used and the underlying data including costs and margin percentages to estimate the stand-alone selling price.

​

​ ​ ​

/s/ GRANT THORNTON LLP ​

We have served as the Company’s auditor since 2023. ​ ​

​ ​ ​

Los Angeles, California ​ ​

​

​

​

​

F-3

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

OSI Systems, Inc.

​

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of OSI Systems, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended June 30, 2025, and our report dated August 25, 2025 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of a recently acquired wholly-owned subsidiary, whose financial statements reflect total assets and net revenues constituting 6.1% and 4.7%, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2025. As indicated in Management’s Report, the acquisition occurred during 2024. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of this entity.

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F-4

Table of Contents

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

​

​ ​ ​

/s/ GRANT THORNTON LLP ​

​ ​ ​

Los Angeles, California ​ ​

​

​

​

​

​

F-5

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

​

​ ​ ​ ​ ​ ​ ​

​ ​ June 30,

ASSETS ​ ​ ​ ​ ​ ​

CURRENT ASSETS: ​ ​ ​ ​ ​ ​

Prepaid expenses and other current assets ​ 74,077 ​ ​ 71,539

LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​

CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​

Current portion of long-term debt ​ 8,167 ​ ​ 8,130

Accrued payroll and related expenses ​ 46,732 ​ ​ 49,535

Other accrued expenses and current liabilities ​ 84,303 ​ ​ 110,120

Commitments and contingencies (Note 11) ​ ​ ​ ​ ​ ​

Stockholders’ Equity: ​ ​ ​ ​ ​ ​

Accumulated other comprehensive loss ​ (22,036) ​ ​ (20,928)

​

See accompanying notes to Consolidated Financial Statements.

​

​

F-6

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended June 30,

Net revenues: ​ ​ ​ ​ ​ ​ ​ ​

Cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Restructuring and other charges, net ​ 7,566 ​ ​ 6,391 ​ ​ 5,335

Earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​

Shares used in per share calculation: ​ ​ ​ ​ ​ ​ ​ ​ ​

​

See accompanying notes to Consolidated Financial Statements.

​

​

F-7

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended June 30,

Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​

Foreign currency translation adjustment, net of tax ​ 267 ​ ​ (2,918) ​ ​ 3,622

Other comprehensive income (loss) ​ ​ 5,835 ​ ​ (2,409) ​ ​ 1,108

​

See accompanying notes to Consolidated Financial Statements.

​

​

F-8

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands, except share data)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​

​ ​ Common Stock ​ ​ ​ ​ Other ​ ​ ​

​ ​ Number of ​ ​ ​ ​ Retained ​ Comprehensive ​ ​ ​

​ Shares Amount Earnings Loss Total

Exercise of stock options ​ 47,354 ​ ​ 3,666 ​ ​ — ​ ​ — ​ ​ 3,666

Vesting of RSUs ​ 313,862 ​ ​ — ​ ​ — ​ ​ — ​ ​ —

Stock-based compensation ​ — ​ ​ 29,124 ​ ​ — ​ ​ — ​ ​ 29,124

Other comprehensive income — ​ ​ — ​ ​ — ​ ​ 5,835 ​ ​ 5,835

Exercise of stock options ​ 22,698 ​ ​ 1,851 ​ ​ — ​ ​ — ​ ​ 1,851

Vesting of RSUs ​ 390,375 ​ ​ — ​ ​ — ​ ​ — ​ ​ —

Stock-based compensation — ​ ​ 28,706 ​ ​ — ​ ​ — ​ ​ 28,706

Other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ (2,409) ​ ​ (2,409)

Vesting of RSUs ​ 323,297 ​ ​ — ​ ​ — ​ ​ — ​ ​ —

Stock-based compensation ​ — ​ ​ 31,959 ​ ​ — ​ ​ — ​ ​ 31,959

Other comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ 1,108 ​ ​ 1,108

​

See accompanying notes to Consolidated Financial Statements.

​

​

F-9

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​

Amortization of debt discount and issuance costs ​ 196 ​ ​ — ​ ​ 1,683

Prepaid expenses and other assets ​ (5,422) ​ ​ (31,656) ​ ​ 2,297

Accrued payroll and related expenses ​ ​ 4,716 ​ ​ (5,010) ​ ​ (730)

CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​

Proceeds from sale of property and equipment ​ ​ 347 ​ ​ 510 ​ ​ 275

Purchases of certificates of deposit ​ ​ (5,280) ​ ​ — ​ ​ —

Proceeds from maturities of certificates of deposit ​ ​ 3,827 ​ ​ 10,329 ​ ​ 110

Payments for intangible and other assets ​ (16,443) ​ ​ (17,330) ​ ​ (17,665)

CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​

Payment of contingent consideration ​ ​ (4,103) ​ ​ (602) ​ ​ (477)

Repurchase of common stock ​ (34,749) ​ ​ — ​ ​ (80,443)

Effect of exchange rate changes on cash ​ (4,628) ​ ​ (507) ​ ​ 489

Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​

​

See accompanying notes to Consolidated Financial Statements.

​

​

F-10

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE YEARS ENDED JUNE 30, 2025

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business—OSI Systems, Inc., together with our subsidiaries, is 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.

We have three reporting segments: (i) Security, providing security and inspection systems and turnkey security screening solutions; (ii) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for our Security and Healthcare divisions, as well as third parties for applications in the defense and aerospace markets, among others and (iii) Healthcare, providing patient monitoring, cardiology and remote monitoring, and connected care systems and associated accessories.

Through our Security segment, we provide security screening products and related services globally. 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, as well as radio frequency transmission equipment, such as high-power transmitters, amplifiers and power supplies for broadcast, communications, science and industry. In addition to these products, we also provide site design, installation, training and technical support services to our customers. We also provide turnkey security screening solutions, which can include the construction, staffing and long-term operation of security screening checkpoints for our customers.

Through our Optoelectronics and Manufacturing segment, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, telecommunications, office automation, computer peripherals, industrial automation and consumer products. This division provides products and services to OEM customers and to our own Security and Healthcare divisions.

Through our Healthcare segment, we design, manufacture, market and service patient monitoring, cardiology and remote monitoring, and connected care systems and associated accessories globally. These products are used by care providers in critical care, emergency and perioperative areas within 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.

Consolidation—The consolidated financial statements include the accounts of OSI Systems, Inc. and our wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in joint ventures over which we have significant influence but do not have voting control are accounted for using the equity method. Investments over which we do not have significant influence or control are not material and are carried at cost as there is no readily determinable fair value for equity interests.

Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales,costs of sales and expenses during the reporting period. The most significant of these estimates and assumptions for our company relate to contract revenue, fair values of assets acquired and liabilities assumed in business combinations, values for inventories reported at lower of cost or net realizable value, stock-based compensation expense, income taxes, accrued warranty costs, contingent consideration, allowance for doubtful accounts, and the recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Due to the inherent uncertainty involved in making estimates, our actual amounts reported in future periods could differ materially from these estimates.

Reclassifications—Certain prior year amounts have been reclassified within operating activities on the consolidated statements of cash flows as well as within current liabilities on the consolidated balance sheets to conform with the current year presentation. These reclassifications do not affect previously reported cash flows from operating activities in the consolidated statements of cash flows and total current liabilities on the consolidated balance sheets.

F-11

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

Cash and Cash Equivalents—We consider all highly liquid investments with maturities of three months or less as of the acquisition date to be cash equivalents.

Our cash and cash equivalents totaled $106.4 million at June 30, 2025. Of this amount, approximately 78% was held by our foreign subsidiaries and subject to repatriation tax considerations. 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. We have cash holdings in financial institutions that exceed insured limits for such financial institutions; however, we mitigate this risk by utilizing international financial institutions of high credit quality.

Accounts Receivable—We monitor collections and payments from our customers, and we maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We determine the allowance based on known troubled accounts, historical experience, current economic trends that might impact the level of credit losses in the future and other available information. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required.

Inventories—The majority of our inventories are valued using the average costing method with select subsidiaries using the standard costing method. All methods of valuing inventory used by the Company approximate the first - in - first out basis for valuing inventory. Inventories are generally 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, market conditions among other items. If these factors become less favorable than those projected, additional inventory write-downs may be required.

Property and Equipment—Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are charged while assets are used in service and are computed using the straight-line method over the estimated useful lives of the assets taking into consideration any estimated salvage value. Amortization of leasehold improvements is calculated on the straight-line method over the shorter of the useful life of the asset or the lease term. Right-of-use assets from finance leases are included in property and equipment. Amortization of property and equipment under finance leases is included with depreciation expense. In the event that property and equipment are idle, as a result of excess capacity or the early termination, non-renewal or reduction in scope of a turnkey screening operation, such assets are assessed for impairment on a periodic basis or if any indicators of impairment exist.

Goodwill and Other Intangible Assets and Valuation of Long-Lived Assets—Goodwill represents the excess purchase price over the estimated fair value of the assets acquired and liabilities assumed in a business combination. Goodwill is allocated to our reporting units based on the nature of the product line of the acquired business. The carrying value of goodwill and indefinite life intangible assets are not amortized but are annually tested for impairment as of the end of the second quarter and more frequently if there is an indicator of impairment. We assess qualitative factors of each of our three reporting units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and intangible assets. The assessments conducted as of December 31, 2024 indicated that it is not more likely than not that the fair values of our three reporting units are less than their carrying amounts, including goodwill and intangible assets.There were no qualitative factors which would trigger impairment testingof goodwill and indefinite life intangible assets between measurement dates. Thus, we have determined that there is no goodwill or indefinite life intangible assets impairment for any of the three reporting units.

We evaluate long-lived assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. If impairment does exist, we measure the impairment loss and record it based on the discounted estimate of future cash flows. In estimating future cash flows, we group assets at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows from other asset groups. Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors.

F-12

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

Income Taxes—Deferred income taxes are provided for temporary differences between the financial statement and income tax basis of our assets and liabilities, based on enacted tax rates. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Income tax accounting standards prescribe a two-step process for the financial statement measurement and recognition of a tax position taken or expected to be taken in a tax return. The first step involves the determination of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination, based on the technical merits of the position. The second step requires that any tax position that meets the more likely than not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. See Note 10 for additional information.

Fair Value of Financial Instruments—Our financial instruments consist primarily of cash and cash equivalents, insurance company contracts, accounts receivable, accounts payable, debt instruments, an interest rate swap contract and foreign currency forward contracts. The carrying values of financial instruments, other than long-term debt instruments and our interest rate swap contract, are representative of their fair values due to their short-term maturities. The carrying values of our term loan and lease obligations are considered to approximate their fair values because the interest rates of these instruments are variable or comparable to current rates for financing available to us. The fair values of our foreign currency forward contracts were not significant as of June 30, 2025.

Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The “Level 1” category comprises assets and liabilities measured at quoted prices in active markets for identical assets and liabilities. The “Level 2” category comprises assets and liabilities measured from observable inputs other than quoted market prices. The “Level 3” category comprises assets and liabilities for which valuation inputs are unobservable and significant to the fair value measurement. Our contingent payment obligations related to acquisitions, which are further discussed in Note 11 to the consolidated financial statements, are in the “Level 3” category for valuation purposes.

The fair values of our financial assets and liabilities as of June 30, 2024 and 2025 are categorized as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

​

Derivative Instruments and Hedging Activity—Our use of derivatives consists of foreign currency forward contracts and an interest rate swap agreement. Our foreign currency forward contracts are utilized to partially mitigate certain balance sheet exposures or used as a net investment hedge to protect against potential changes resulting from short-term foreign currency fluctuations. These contracts have original maturities of up to three months. We also manage our risk to changes in interest rates using derivative instruments. We use fixed interest rate swaps to effectively convert a portion of the variable interest rate payments to fixed interest rate payments. We do not use hedging instruments for speculative purposes.

The net gains or losses from our foreign currency forward contracts, which are not designated as hedge instruments, are reported in the consolidated statements of operations, and the amounts reported for the years ending June 30, 2023, 2024 and 2025 were not significant. The fair value of our foreign currency forward contracts is estimated using a standard valuation model and market-based observable inputs over the contractual term. Unrealized gains are recognized as assets and unrealized losses are recognized as liabilities. As of June 30, 2024 and 2025, we held foreign currency forward contracts with notional amounts totaling $96.4 million and $99.9 million, respectively. Unrealized gains and losses from our foreign currency forward contracts as of June 30, 2024 and 2025 were not significant.

F-13

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

The interest rate swap agreement was entered into to improve the predictability of cash flows from interest payments related to our variable, Secured Overnight Financing Rate (“SOFR”) based debt. The interest rate swap matures in December 2026. The interest rate swap is considered an effective cash flow hedge, and as a result, the net gains or losses on such instrument are reported as a component of other comprehensive income (loss) in our consolidated financial statements and are reclassified as net income when the underlying hedged interest impacts earnings. A qualitative and quantitative assessment of the interest rate swap hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate that the hedge may no longer be highly effective.

​

As of June 30, 2024 and June 30, 2025, the notional amount of the interest rate swap hedge derivative instrument was $175 million. The fair value of the interest rate swap contract as of June 30, 2024 and June 30, 2025 is recorded in Other assets within the consolidated balance sheet. The effect of the cash flow hedge on other comprehensive income (loss) and earnings for the periods presented was as follows:

​

​ ​ ​ ​ ​ ​ ​

​ ​ Fiscal Year Ended June 30,

​

Revenue Recognition

We recognize revenue under Accounting StandardsCodification Topic 606, Revenue from Contracts with Customers (“ASC 606”), which superseded all prior revenue recognition methods and industry-specific guidance. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of control for promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue recognition principles, an entity is required to identify the contract(s) with a customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue as the performance obligations are satisfied (i.e., either over time or at a point in time). ASC 606 further requires that companies disclose sufficient information to enable readers of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

Product Sales. We recognize revenue from sales of products upon shipment or delivery when control of the product transfers to the customer, depending on the terms of each sale, and when collection is probable. We generally offer customers payment terms of less than one year. In cases when payment terms extend beyond one year, we consider whether the contract has a significant financing component. In the circumstance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until we have achieved the customer acceptance criteria unless such acceptance criteria are perfunctory or inconsequential. On occasion, the Company receives requests from customers to delay physical transfers of products for the customers’ convenience under bill-and-hold arrangements. We recognize revenue from these arrangements in accordance with ASC 606, which requires the transaction to meet the following criteria to determine that the customer has obtained control: (a) the reason for the bill-and-hold is substantive, (b) the product has separately been identified as belonging to the customer, (c) the product is currently ready for physical transfer to the customer, and (d) the Company does not have the ability to use the product or direct it to another customer. The Company recognized bill-and-hold revenues of $19.1 million and $5.5 million for fiscal years ended June 30, 2025, and 2024, respectively.

Service Revenue. Revenue from services includes installation and implementation of products and turnkey security screening services and after-market services. Generally, revenue from services is recognized over time as the services are performed. Revenues from out of warranty service maintenance contracts are recognized ratably over the respective terms of such contracts. Deferred revenue for such services arises from payments received from customers for services not yet performed.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

Contract Revenue. Sales agreements with customers can be project specific, cover a period of time, and can be renewable periodically. The contracts may contain terms and conditions with respect to payment, delivery, installation, services, warranty and other rights. In certain instances, we consider an accepted customer order, governed by a master sales agreement, to be the contract with the customer when legal rights and obligations exist. Contracts with customers may include the sale of products and services, as discussed in the paragraphs above. In certain instances, contracts can contain multiple performance obligations as discussed in the paragraph below. According to the terms of a sale contract, we may receive consideration from a customer prior to transferring goods to the customer, and we record these prepayments as an advance receipt. We also record deferred revenue, typically related to service contacts, when consideration is received before the services have been performed. We recognize contract liabilities and deferred revenue as net sales after all revenue recognition criteria are met.

When determining revenue recognition for contracts, we make judgments based on our understanding of the obligations in each contract. We determine whether or not customer acceptance criteria are perfunctory or inconsequential. The determination of whether or not customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognition. Judgments also include estimates of warranty reserves, which are established based on historical experience and knowledge of the product under warranty.

Multiple Performance Obligations. Certain agreements with customers include the sale of capital equipment involving multiple elements that may include civil works to prepare a site for the installation of equipment, manufacture and delivery of equipment, installation and integration of equipment, training of customer personnel to operate the equipment and after-market service of the equipment. We assign multiple elements in a contract into separate performance obligations if those elements are distinct, both individually and in the context of the contract. 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.

In cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct obligation or bundle of obligations has been met.

The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is only one performance obligation associated with a contract, the entire sale value is attributed to that obligation. When a contract contains multiple performance obligations, the standalone selling price is first estimated using the observable price, which is generally a list price net of applicable discount, or the price used to sell the good or service in similar circumstances. In circumstances when a selling price is not directly observable, we will estimate the standalone selling price using information available to us including our market assessment and/or expected cost plus margin.

The timetable for fulfilment of each of the distinct performance obligations can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The timing of revenue recognition for each performance obligation may be dependent upon several milestones, including physical delivery of equipment, completion of factory acceptance test, completion of site acceptance test, installation and connectivity of equipment, certification of training of personnel and, in the case of after-market service deliverables, the passage of time (typically evenly over the post-warranty period of the service deliverable).

We often provide a guarantee to support our performance under multiple performance obligations. In the event that customers are permitted to terminate such arrangements, the underlying contract typically requires payment for deliverables and reimbursement of costs incurred through the date of termination.

We disaggregate revenue by reporting segment (Security, Optoelectronics and Manufacturing, and Healthcare) to depict the nature of revenue in a manner consistent with our business operations and to be consistent with other communications and public filings. Refer to Note 14 for additional details of revenues by reporting segment.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

Contract Assets and Liabilities. We enter into contracts to sell products and provide services, and we recognize contract assets and liabilities that arise from these transactions. We recognize revenue and corresponding accounts receivable according to ASC 606. When we recognize revenue in advance of the point in time at which contracts give us the right to invoice a customer, we record this as unbilled revenue, which is included in accounts receivable, net, on the consolidated balance sheet. We may also receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. We record customer deposits as contract liabilities. Additionally, we may receive payments, most typically under service and warranty contracts, at the onset of the contract and before services have been performed. In such instances, we record a deferred revenue liability. We recognize these contract liabilities as sales after all revenue recognition criteria are met.

Practical Expedients. In cases where we are responsible for shipping after the customer has obtained control of the goods, we have elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation. Additionally, we have elected to capitalize the cost to obtain a contract only if the period of amortization would be longer than one year. We only give consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater than one year.

Freight—We record shipping and handling fees that we charge to our customers as revenue and related costs as cost of goods sold.

Research and Development Costs—Research and development costs are those costs related to the development of a new product, process or service, or significant improvement to an existing product, process or service. Such costs are charged to operations as incurred.

Stock-Based Compensation—Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the employee’s requisite service period for all stock-based awards granted or modified. Certain restricted stock unit awards vest based on the achievement of pre-established performance criteria. The fair value of performance-based awards is estimated at the date of grant based upon the probability that the specified performance criteria will be met, adjusted for estimated forfeitures. Each quarter we update our assessment of the probability that the specified performance criteria will be achieved and adjust the estimate of the expenses of the performance-based awards if necessary. We amortize the fair value of performance-based awards over the requisite service period for each separately vesting tranche of the award. See Note 9 to the consolidated financial statements.

Restructuring and Other Charges—We account for certain charges related to restructuring activities, litigation, acquisition-related costs and other non-routine charges as Restructuring and other charges in the consolidated financial statements. See Note 7 for additional information about these charges.

Credit Risk and Concentration—Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable. We restrict investments in cash equivalents to financial institutions with high credit standing. Credit risk on accounts receivable is minimized as a result of the large and diverse nature of our company’s worldwide customer base. As of June 30, 2024, two customers in the Security division accounted for 39% and 10% of accounts receivable, net. As of June 30, 2025 one customer in the Security division accounted for 42% of accounts receivable, net. In fiscal year 2024, two Security division customers accounted for 16% and 11% of net revenues, respectively. In fiscal year 2025, one Security division customer accounted for 11% of net revenues. We perform ongoing credit evaluations of our customers’ financial condition and maintain allowances for potential credit losses.

Our cash and cash equivalents totaled $95.4 million and $106.4 million at June 30, 2024 and 2025, respectively. Of these amounts, approximately 81% and 78% were held by our foreign subsidiaries at June 30, 2024 and 2025, respectively.

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 second sources for many of our materials, parts, and components. While management believes that relying on key vendors improves the efficiency and reliability of business operations, relying on any one vendor for a significant aspect of business can have a significant negative impact on revenue and profitability if that vendor fails to perform at acceptable service levels for any reason, including financial difficulties of the vendor.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

Foreign Currency Translation and Transactions—We transact business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets. We also have subsidiaries where the United States dollar has been designated as the functional currency based on individual facts and circumstances. Remeasurement of non-United States dollar monetary assets and liabilities are translated using period-end exchange rates and associated gains and losses are recognized in the consolidated statements of operations. Non-monetary assets and liabilities are translated using historical exchange rates. 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.

Business Combinations—Under ASC 805, the acquisition method of accounting requires us to record assets acquired and liabilities assumed from an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase price over the estimated fair value of the net assets acquired should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is until we have all the necessary information about the facts and circumstances that existed as of the acquisition date up to one year from the acquisition date, as additional information that existed at the acquisition date becomes available for preliminary estimates, we may record adjustments to the provisional amounts initially recorded for assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are included in earnings.

Earnings per Share—We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. We compute diluted earnings per share by dividing net income available to common stockholders by the sum of the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares consist of the shares issuable upon the exercise of stock options and restricted stock unit awards under the treasury stock method and shares issued upon conversion of the 2.25% convertible senior notes due 2029 (the “2029 Notes”) discussed in Note 8. 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. In periods where a net loss is reported, basic and diluted net loss per share are the same since the effect of potential common shares is antidilutive and therefore excluded.

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

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Fiscal Year Ended June 30,

Dilutive effect of equity awards ​ 362 ​ ​ 376 ​ ​ 372

Dilutive effect of 2029 Notes ​ ​ — ​ ​ — ​ ​ 46

Basic earnings per share ​ $ 5.45 ​ $ 7.55 ​ $ 8.93

Diluted earnings per share ​ $ 5.34 ​ $ 7.38 ​ $ 8.71

​

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

Warranty Provision—We offer our customers warranties on many of the products that we sell. These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, we record a provision for estimated warranty expenses with a corresponding increase in cost of goods sold. We periodically adjust this provision based on historical experience and anticipated expenses. We charge actual expenses of repairs under warranty, including parts and labor, to this provision when incurred. The current obligation for warranty provision is included in other accrued expenses and current liabilities and the noncurrent portion is included in other long-term liabilities in the consolidated balance sheets, whose activity for each of the three fiscal years ended June 30, 2025 is summarized in the following table (in thousands):

​

​ ​ ​ ​

Warranty claims provided for/assumed in acquisition ​ 4,193

Settlements made ​ (6,391)

Warranty claims provided for/assumed in acquisition ​ 5,878

Settlements made ​ (5,938)

Warranty claims provided for/assumed in acquisition ​ 5,704

Settlements made ​ (5,182)

​

Leases—Right-of-use (“ROU”) assets represent our right to use an underlying asset during the reasonably certain lease terms, and lease liabilities represent our obligation to make lease payments arising from the leases. We recognize ROU lease assets and lease liabilities at lease commencement on our consolidated balance sheet based on the present value of lease payments over the lease term using a discount rate determined based on our incremental borrowing rate since the rate implicit in each lease is not readily determinable. We elected the package of practical expedients, which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification of any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component. We also elected the hindsight practical expedient, which allows us to use hindsight in determining the lease term. We do not record a ROU asset and corresponding lease liability for leases with an initial term of one year or less (“short-term leases”). The terms in our leases may include options to extend or terminate the lease. We recognize ROU assets and liabilities when it is reasonably certain that we will exercise those options. Judgment is required in our assessment as to whether renewal or termination options are reasonably certain to be exercised and factors such as contractual terms compared to current market rates and the importance of the facility and location to our operations, among others, are considered. Lease payments are made in accordance with the lease terms, and lease expense, including short-term lease expense, is recognized on a straight-line basis over the lease term.

We lease facilities and certain equipment under various operating lease agreements. The majority of our lease arrangements are comprised of fixed payments while certain of our other leases provide for periodic rent increases. Our leases may contain escalation clauses and renewal options. Most of the leases require us to pay for certain other costs such as common area maintenance and property taxes. Rent expense for leases with periodic rent increases or escalation clauses is recognized on a straight-line basis over the minimum lease term. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. We also have finance leases for fleet vehicles that are not material to the consolidated financial statements.

Subsequent Event—In accordance with ASC 855, our management evaluated material events after the balance sheet date through the date of the filing of this report with the SEC, which includes the amendment and extension of our credit facility and paid down the delayed draw term loan in July 2025 as further described in Note 8.

Recent Accounting Guidance

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) and other regulatory bodies that are adopted as of the specified effective dates. Unless otherwise discussed below, management believes that the impact of recently issued standards, which are not yet effective for the Company, will not have a material impact on our Consolidated Financial Statements upon adoption.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

Accounting Guidance Adopted in Fiscal Year 2025

We adopted Accounting Standards Update 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. See note 14 for required disclosures. Interim disclosures will commence in the first quarter of fiscal year 2026.

Accounting Guidance Not Yet Adopted

In December 2023, the FASB issued Accounting Standards Update 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”) which provides for additional disclosures primarily related to the income tax rate reconciliation and income taxes paid. ASU 2023-09 requires entities to annually disclose the income tax rate reconciliation using both amounts and percentages, considering several categories of reconciling items, including state and local income taxes, foreign tax effects, tax credits and nontaxable or nondeductible items, among others. Disclosure of the reconciling items is subject to a quantitative threshold and disaggregation by nature and jurisdiction. ASU 2023-09 also requires entities to disclose net income taxes paid or received the federal, state and foreign jurisdictions, as well as by individual jurisdiction, subject to a five percent quantitative threshold. ASU 2023-09 may be adopted on a prospective or retrospective basis and is effective for fiscal years beginning after December 14, 2024 with early adoption permitted. We are evaluating the impact of ASU 2023-09 on disclosures in our Consolidated Financial Statements.

In November 2024, the FASB issued a new standard to expand disclosures about income statement expenses. The guidance requires disaggregation of certain costs and expenses included in each relevant expense caption on our consolidated income statements in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The standard will be effective for us beginning with our Form 10-K for fiscal year 2028 and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures.

​

2.BUSINESS COMBINATIONS

Fiscal Year 2025 Business Acquisitions

In September 2024, we (through our Security division) acquired 100% of the shares of common stock of a privately held provider of critical military, space and surveillance solutions to expand our customer base and offer additional products and services for existing customers, for approximately $76.0 million, plus up to $24.0 million in potential contingent consideration. We paid $75.5 million in cash at the closing of the transaction and recorded a holdback liability of $0.5 million which is expected to be released in November 2030. The cash paid for this acquisition was financed with borrowings from our credit facility. The acquisition date fair value of the contingent consideration was $9.7 million, therefore, when combined with the amount of cash paid at close and the holdback amount, total purchase consideration was $85.7 million which has been allocated to the preliminary fair value of assets acquired and liabilities assumed. The preliminary acquisition date fair value of total assets acquired, including measurement period adjustments, was $115.7 million which comprised accounts receivable of $26.6 million, inventory and other current assets of $2.7 million, property and equipment of $7.0 million, goodwill of $32.1 million, other intangible assets of $47.2 million and other noncurrent assets of $0.1 million. Goodwill includes the value of the assembled workforce, new customers and other future economic benefits which do not qualify for separate recognition. The goodwill recognized for this business acquisition is not deductible for income tax purposes. Other intangible assets include amortizable intangible assets of $39.1 million with amortization periods of 7 to 10 years and an indefinite-lived intangible asset of $8.1 million. The preliminary acquisition date fair value of total liabilities assumed, including measurement period adjustments, was $30.0 million, which includes a deferred tax liability of $9.1 million that was recognized primarily due to the acquisition of other intangible assets. During fiscal 2025, we recorded measurement period adjustments which increased goodwill by $3.7 million due to a decrease in net working capital of $6.3 million and an increase in deferred income taxes of $0.7 million, which were partially offset by an increase in intangible assets of $3.3 million. The measurement period adjustments did not have a significant impact on the consolidated statement of operations. If additional information pertaining to working capital items becomes available, we may further revise the preliminary purchase price allocation as soon as practical, but no later than one year from the acquisition date. Revenue and net income from this acquired business was $80.8 million and approximately $8.9 million, respectively,from the acquisition date through June 30, 2025.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

In April 2025, we (through our Security Division) acquired a privately held provider of engineering and structural component services for approximately $1.2 million, plus up to $1.1 million in potential contingent consideration. The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is not deductible for income tax purposes.

Fiscal Year 2024 Business Acquisitions

In December 2023, we (through our Optoelectronics and Manufacturing division) acquired a privately held contract manufacturer for approximately $6.3 million. The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is deductible for income tax purposes.

In October 2023, we (through our Security division) acquired a privately held provider of radiation detection technology for approximately $2.8 million, plus up to $3.6 million in potential contingent consideration. The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is not deductible for income tax purposes.

Fiscal Year 2023 Business Acquisitions

In April 2023, we (through our Optoelectronics and Manufacturing division) acquired a privately held provider of engineering and contract manufacturing solutions for approximately $2.5 million, plus up to $2.5 million in potential contingent consideration. The acquisition was financed with cash on hand.

In February 2023, we (through our Healthcare division) acquired a privately held provider of software and solutions for approximately $2.1 million plus up to $5.0 million in potential contingent consideration. The acquisition was financed with cash on hand.

Through our Security division, we acquired (i) in December 2022 certain assets of a provider of baggage and parcel inspection systems for approximately $1.6 million and (ii) in August 2022 a privately held provider of training software and solutions for approximately $1.9 million plus an immaterial amount of potential contingent consideration. These acquisitions were financed with cash on hand.

3.BALANCE SHEET DETAILS

​

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

​

​ ​ ​ ​ ​ ​ ​

​ ​ June 30,

Less allowance for doubtful accounts ​ (19,072) ​ ​ (17,751)

​

​ ​ ​ ​ ​ ​ ​

​ ​ June 30,

​

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Estimated ​ ​ ​ ​ ​ ​

​ ​ Useful ​ June 30,

Property and equipment, net Lives 2024 2025

Buildings, civil works and improvements ​ 5-40 years ​ ​ 48,552 ​ ​ 55,559

Computer software implementation in process ​ N/A ​ ​ 6,514 ​ ​ 4,472

Construction in process ​ N/A ​ ​ 6,986 ​ ​ 7,370

Less accumulated depreciation and amortization ​ ​ ​ ​ (179,111) ​ ​ (184,834)

​

During fiscal 2023, 2024 and 2025, depreciation expense was approximately $19.5 million, $19.4 million and $22.0 million, respectively.

​

4.GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill by segment for fiscal 2024 and 2025 are as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ Optoelectronics ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ and ​ ​ ​ ​ ​ ​

​ ​ Security ​ Manufacturing ​ Healthcare ​ ​ ​

​ Division Division Division Consolidated

Goodwill acquired or adjusted during the period ​ 1,628 ​ ​ 827 ​ ​ — ​ ​ 2,455

Foreign currency translation adjustment ​ (75) ​ ​ (408) ​ ​ 3 ​ ​ (480)

Goodwill acquired or adjusted during the period ​ 33,804 ​ ​ — ​ ​ — ​ ​ 33,804

Foreign currency translation adjustment ​ 346 ​ ​ 1,516 ​ ​ 247 ​ ​ 2,109

​

Intangible assets consisted of the following (dollar amounts in thousands):

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Weighted ​ Gross ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ ​

​ Lives Value Amortization Net Value Amortization Net

Amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-amortizable assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FOR THE THREE YEARS ENDED JUNE 30, 2025

Amortization expense related to intangible assets was $19.0 million, $22.8 million and $21.6 million for fiscal 2023, 2024 and 2025, respectively.

At June 30, 2025, the estimated future amortization expense was as follows (in thousands):

​

​ ​ ​ ​

​

Software development costs for software products incurred before establishing technological feasibility are charged to operations. Software development costs incurred after establishing technological feasibility are capitalized on a product-by-product basis until the product is available for general release to customers at which time amortization begins. Annual amortization, charged to cost of goods sold, is the amount computed using the ratio that current revenues for a product bear to the total current and anticipated future revenues for that product. In the event that future revenues are not estimable, such costs are amortized on a straight-line basis over the remaining estimated economic life of the product. Amortizable assets that have not yet begun to be amortized are included in “Thereafter” in the table above. During fiscal 2023, 2024 and 2025, we capitalized software development costs in the amounts of $16.2 million, $16.6 million and $16.9 million, respectively.

​

5.CONTRACT ASSETS AND LIABILITIES

The table below shows the balance of contract assets and liabilities as of June 30, 2024 and 2025, including the change between the periods. There were no substantial non-current contract assets for the periods presented.

Contract Assets (dollar amounts in thousands)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ June 30, ​ June 30, ​ ​ ​ ​ ​

​

Contract Liabilities (dollar amounts in thousands)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​