Episode Details

OSI Systems (OSIS) Q4 FY2026 — Q4 FY2026 (quarter and year ended June 30, 2026): non-GAAP EPS $3.78 vs a $3.77 bar, a one-cent beat, on Q4 revenue of $484.1M that FELL 4.1%. Full-year revenue $1.79B (+4.25%) and non-GAAP EPS $10.35 (+10.6%). The shares gapped -10.13% at the open on August 21, made a fresh 52-week low at $186.50, then bought back 49% of the gap to close -5.21% at $206.73 on 8.4x median volume. A one-cent beat carries no information. So we read the backlog instead - and there are two of them. The release leads with a record $1.9B. The audited ASC 606 measure in Note 5 of the 10-K reads approximately $1.8B at June 2026 AND at June 2025: one sentence, one figure, both dates, on a scope that got WIDER this year. Only 59% converts inside twelve months. THE CALL: HOLD (3/5, THE PRINT WAS NOISE, THE AUDITED BACKLOG IS FLAT, AND THE PRICE HAS ALREADY DONE MOST OF THE WORK) — base-case value ~$211.17 vs ~$206.73 today. KEY METRICS: - THE TWO BACKLOGS: headline $1.9B (company-defined, unaudited, 5-year horizon) vs remaining performance obligations of ~$1.8B in BOTH FY2026 and FY2025. 59% converts within 12 months = $1,062M against a $1.903B revenue guide, so the guided year is 56% contracted and $840M must be won AND shipped inside it. Book-to-bill reads 1.06x, but both endpoints are rounded to $0.1B so anything from 1.00x to 1.11x fits the disclosure. - THE SEGMENTS: Optoelectronics and Manufacturing carried the year - revenue +9.40%, non-GAAP operating profit +10.72%, margin 13.1% to 13.3%. Security leaked - revenue +4.33% but operating profit +0.54% and margin 18.5% to 17.9%. In Q4 Security revenue fell 7.42%, a larger dollar decline than the whole company's. Healthcare revenue fell 3.35% for the year but its Q4 margin went 0.9% to 10.0%. - THE DENOMINATOR: the 10-K cover shows 15,941,968 shares against a weighted diluted 17,280,000. Hold non-GAAP profit completely flat and EPS still rises from $10.35 to $10.94, +5.7%, from the share count alone - against a guide of +7.5% to +11.0%. On that conservative count the guide implies profit growth of +1.7% to +5.0% versus revenue guided +5.0% to +8.1%: slower than revenue at every point. What to watch: UP: the delayed Middle East shipments are described as deferrals, not cancellations, and remain in backlog with revised schedules - if they simply ship, revenue lands at the top of the guide and the bull case is $300. DOWN: Security is 70% of revenue, grew 4.33% and delivered 0.54% more operating profit as its margin fell 67bp; the FY2027 guide's entire revenue range sits below consensus. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.