OSI Systems, Inc. (NASDAQ:OSIS) Q4 2023 Earnings Call Transcript

Deepak Chopra: Well, again, very good question. As you know, most of these products that we supply, their lifetime is of 10 years, 15 years. So as our installed base gets bigger and bigger, it has more and more service revenue and that has been very well taken care of and we continue to look at it. In addition to that, we have been very much focused on the CertScan software and that continues to be a success all over and also we keep talking about it, the turnkey solutions. So that as you combine all these functions, the bigger the installed base, more successes we have globally, the better long-term we look at recurring revenue in service and the turnkey models.

Josh Nichols: Yeah. Thanks. I will let someone else take the turn.

Operator: Thank you. One moment please for our next question. And it comes from the line of Jeff Martin with ROTH MKM. Please proceed.

Jeff Martin: Hey. Thank you. Hi, Deepak. Hi, Alan. How are you doing?

Alan Edrick: Hey, Jeff.

Deepak Chopra: Thank you.

Jeff Martin: So I was wanted to congratulate you on the TSA certification. I was just curious if you could give us a sense of how significant that is for the cargo screening business. I know you are — you have done quite well in that area already, but is this increment — does this provide significant incremental growth opportunity for you?

Deepak Chopra: This is Deepak here. Again a good question. This is quite important to us, because as you can understand it, for the air cargo business, not only do they need Xray machines, they also need distress detection systems. So now that we have got certification into it, we can offer a broader portfolio of products and service to our customer base in air cargo and that goes very well together. And on top of that, this product is coming at the right time that there is a revamp of what we call a new product, new technology, new instruments that the air cargo people want to buy and with us getting the certification and already a very broad-based with our RTT machines, with our normal BPI checkpoint machines this gives us a bigger portfolio. And not to forget that also as we get to a broader portfolio in that, we continue to focus on a services model and the CertScan model. So this helps very much together our broader product base.

Jeff Martin: Great. Thanks for the detail. And then one, international cargo and vehicle inspection has been a significant driver of your growth over the past several years. I was just curious outside of the large contract wins, which could be strong visibility into fiscal 2024. How do you look at maybe fiscal 2024 and fiscal 2025 in international cargo and vehicle inspection relative to the past couple of years, is there still significant room for growth there?

Deepak Chopra: The answer is yes. Obviously, we continue to look at it. But, again, our focus is not only just to sell equipment, but to sell a services model, to sell an integrating solution. So that means that as the business model goes up there worldwide, we are depending upon not just sales of equipment like in the past, but an integration model, which gives us much more capacity to grow and each one of them that we do, it has a long-term tail of service recurring revenue.

Jeff Martin: Great. Then one more, if I could. On the Healthcare side, it sounds like you are making some significant customer — potentially customer value enhancing changes in the subscription type model or lease type model. Is that something you have done much in the past or is that a new model for the Healthcare division?