Teleconferência de Resultados do 4º Trimestre Fiscal de 2026 da OSI Systems (OSIS): Atraso de US$ 50 Milhões na Entrega e Guidance para o Ano Fiscal de 2027

Principais Destaques

• A receita do quarto trimestre fiscal de 2026 caiu aproximadamente 4% em relação ao ano anterior, para US$ 484 milhões, principalmente porque cerca de US$ 50 milhões em entregas planejadas da divisão de Segurança foram adiadas para depois de 30 de junho devido a atrasos relacionados a conflitos e restrições de acesso a locais no Oriente Médio. A empresa afirmou que as entregas permanecem no backlog e não foram perdidas.
• A receita do ano fiscal completo aumentou 4%, atingindo o recorde de US$ 1,79 bilhão, enquanto o LPA diluído não-GAAP cresceu 11%, para o recorde de US$ 10,35. No quarto trimestre, o LPA não-GAAP subiu 17%, para US$ 3,78.
• A margem operacional ajustada expandiu 200 pontos-base, para 17,7% no quarto trimestre. Todas as três divisões apresentaram melhora, incluindo a de Saúde (Healthcare), cuja margem operacional ajustada subiu de 1% para 10%.
• A OSI Systems encerrou o ano fiscal de 2026 com um backlog recorde de aproximadamente US$ 1,9 bilhão. A relação book-to-bill do ano completo ficou ligeiramente acima de 1, enquanto a do quarto trimestre ficou um pouco abaixo de 1.
• A administração projetou a receita do ano fiscal de 2027 entre US$ 1,875 bilhão e US$ 1,93 bilhão, e o LPA ajustado entre US$ 11,13 e US$ 11,49. Projeta-se que o crescimento seja mais forte no segundo semestre.
• O fluxo de caixa operacional atingiu o recorde de US$ 182 milhões no quarto trimestre e US$ 276 milhões no ano. A administração espera que o fluxo de caixa livre do ano fiscal de 2027 supere 100% do lucro líquido.

Principais Dados Financeiros

A OSI Systems recebeu US$ 159 milhões de seu maior cliente no México durante o quarto trimestre. O saldo de contas a receber desse cliente diminuiu de US$ 345 milhões (ou 40% do total de contas a receber) no final do terceiro trimestre para US$ 190 milhões (ou 25%) no encerramento do ano fiscal. A administração espera que esse saldo diminua significativamente ao longo do ano fiscal de 2027.

A empresa recomprou aproximadamente 565.000 ações no quarto trimestre a um preço médio de cerca de US$ 219, totalizando US$ 123,6 milhões. Ao longo do ano fiscal de 2026, a empresa recomprou e cancelou 1,1 milhão de ações. Após uma nova autorização, aproximadamente 1,1 milhão de ações permanecem disponíveis para recompra.

Desempenho Operacional e de Negócios

Segurança

A receita da divisão de Segurança recuou 7% no quarto trimestre. O declínio refletiu atrasos nas entregas para o Oriente Médio e uma base de comparação difícil em relação à maior receita do programa do México no mesmo período do ano anterior. A receita do ano fiscal de 2026 associada aos contratos de segurança no México ficou quase US$ 150 milhões abaixo da registrada no ano anterior, incluindo um impacto negativo de aproximadamente US$ 20 milhões no quarto trimestre.

A empresa espera que o impacto negativo nas receitas relacionadas ao México se modere para menos de US$ 25 milhões no ano fiscal de 2027, concentrado no primeiro semestre. Excluindo a receita de instalação no México do ano anterior, a receita de serviços de Segurança no quarto trimestre subiu 9% em relação ao ano anterior. A administração prevê um forte crescimento de dois dígitos na receita total de serviços durante o ano fiscal de 2027.

Após a reabertura do Departamento de Segurança Interna dos EUA em abril, as atividades de contratação se aceleraram. A Alfândega e Proteção de Fronteiras dos EUA (CBP) concedeu à OSI Systems dois contratos IDIQ exclusivos de cinco anos: um com teto de aproximadamente US$ 200 milhões para sistemas relocáveis de inspeção rápida de veículos de passageiros e outro com teto de cerca de US$ 85 milhões para sistemas móveis de raio X montados em vans.

A empresa já recebeu ordens de entrega sob ambos os contratos, incluindo uma ordem de serviço avaliada em cerca de US$ 21 milhões. A administração projeta uma contribuição limitada para o ano fiscal de 2027, com receitas substancialmente maiores a partir do ano fiscal de 2028. Os valores teto de contratos IDIQ não são lançados como backlog; apenas ordens firmes de entrega ou de serviço entram no backlog à medida que são concedidas.

A OSI Systems também assinou um acordo tornando a Rapiscan apoiadora oficial da equipe dos EUA (Team USA) e provedora de hardware e software para tecnologia de triagem física e segurança dos Jogos Olímpicos e Paralímpicos de Los Angeles 2028 (LA28).

Programas de RF e defesa

A administração afirmou que o engajamento dos clientes em todo o portfólio de RF está em seu nível mais alto para essa linha de produtos. Durante o ano fiscal de 2026, a OSI Systems recebeu uma ação contratual não definitizada com valor limite de aproximadamente US$ 235 milhões para subsistemas de transmissão de radar além do horizonte voltados à defesa territorial. Cerca de 80% desse contrato entrou no backlog no terceiro trimestre fiscal, com uma parcela substancial agendada para entrega ao longo dos próximos anos.

A empresa também participa do contrato IDIQ SHIELD em suporte a iniciativas relacionadas ao sistema Iron Dome. A administração espera um forte crescimento em RF no ano fiscal de 2027 e um crescimento contínuo no ano fiscal de 2028.

Optoeletrônica e Fabricação

A receita do ano completo do segmento de Optoeletrônica e Fabricação aumentou 9%, alcançando US$ 451 milhões. A margem operacional ajustada do quarto trimestre subiu de 13,6% para 14,7%, impulsionada por ganhos de escala e por um mix de receita mais favorável.

A administração projeta que o crescimento da receita no ano fiscal de 2027 venha acompanhado de uma maior expansão da margem operacional, embora os resultados trimestrais possam oscilar conforme o mix de clientes e produtos.

Saúde (Healthcare)

A receita da divisão de Saúde no quarto trimestre cresceu aproximadamente 5% em relação ao ano anterior. A margem operacional ajustada melhorou de 1% para 10%, refletindo um maior volume, alavancagem operacional e melhorias operacionais implementadas ao longo do ano. A administração alertou para não extrapolar o desempenho da margem de um único trimestre.

Orientação da Administração (Guidance)

A administração declarou que as projeções adotam uma postura conservadora quanto ao cronograma de entregas no Oriente Médio e às futuras contratações na região. Espera-se que uma parcela substancial dos cerca de US$ 50 milhões em entregas diferidas ocorra no segundo semestre do ano fiscal de 2027, embora não a sua totalidade.

O guidance inclui apenas uma parcela das ordens de entrega do CBP já recebidas, e não o teto combinado de US$ 285 milhões dos contratos IDIQ. A administração espera que a maior contribuição dos recentes contratos firmados nos EUA ocorra nos anos fiscais de 2028, 2029 e posteriores.

A OSI Systems planeja aumentar investimentos operacionais selecionados em infraestrutura e inovação de produtos. Seu objetivo de longo prazo é combinar o crescimento da receita com a expansão da margem operacional, sustentado em parte por um crescimento mais rápido da receita de serviços, que possui margens mais elevadas.

Riscos e Pontos de Atenção

• Conflitos e restrições de acesso a locais no Oriente Médio atrasaram entregas e contratações de curto prazo. Novas alterações nos prazos podem afetar a conversão do backlog e a distribuição da receita ao longo do tempo.
• Espera-se que o crescimento do ano fiscal de 2027 seja concentrado no segundo semestre, aumentando a sensibilidade aos cronogramas de entrega.
• Elevados valores teto de contratos IDIQ não entram automaticamente no backlog ou na receita; a conversão depende de futuras ordens de serviço e de entrega.
• A administração identificou tarifas, interrupções na cadeia de suprimentos, câmbio, mix de produtos e serviços, prazos de recebimento de caixa e conflitos regionais como fontes de incerteza.
• A projeção de LPA para o ano fiscal de 2027 exclui potenciais perdas por redução ao valor recuperável (impairment), custos de reestruturação e outros custos, amortização de intangíveis adquiridos, efeitos tributários associados e itens pontuais ou não recorrentes.

Destaques da Sessão de Perguntas e Respostas com Analistas

• Conversão de caixa: A administração espera uma forte geração de caixa no ano fiscal de 2027 e afirmou que o fluxo de caixa livre pode superar 100% do lucro líquido. Os recebimentos são esperados ao longo do ano, com preferência por um padrão mais concentrado no início do período.
• Cronograma no Oriente Médio: A maioria das entregas atrasadas era destinada a clientes do Oriente Médio. A administração espera que uma parcela substancial seja concluída no segundo semestre do ano fiscal de 2027, mantendo premissas conservadoras.
• Dinâmica do backlog: Aproximadamente 80% do contrato de RF de US$ 235 milhões entraram no backlog no terceiro trimestre fiscal. No caso dos contratos IDIQ do CBP, apenas ordens firmes de serviço ou entrega são adicionadas ao backlog, e não os valores teto totais.
• Receita de serviços: Espera-se crescimento com o fim da garantia de sistemas no México, uma base instalada maior em produtos de carga, veículos e pontos de inspeção (checkpoints), suporte a RF, ofertas de segurança como serviço e serviços de software TruSaaS.
• Margens de Segurança: A administração espera que a receita de serviços cresça mais rápido que a receita de produtos ao longo do tempo. Como a receita de serviços traz margens mais altas, um mix maior de serviços pode sustentar a expansão das margens da divisão de Segurança além do ano fiscal de 2027.
• Oportunidade com a TSA: A administração afirmou que a oportunidade com escâneres de bagagem despachada da TSA ainda está a alguns anos de distância, pois a TSA prioriza sistemas para pontos de inspeção, mas o programa eventual pode se estender por vários anos.

Transcrição Completa da Teleconferência de Resultados

Transcrição completa da teleconferência de resultados

Comentários da administração

Operator

Thank you for standing by and welcome to the OSI Systems, Inc.'s fourth quarter 2026 conference call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Alan Edrick, Chief Financial Officer. Please go ahead, sir.

Alan Edrick

Thank you. Good afternoon and thank you for joining us. I'm Alan Edrick, Executive Vice President and CFO of OSI Systems, and I'm here today with Ajay Mehra, OSI's President of Security. Welcome to the OSI Systems Fiscal 2026 Fourth Quarter and Year-End Conference Call. We're pleased that you can join us as we review our financial and our operational results.

I'd like to remind everyone that today's discussion will include forward-looking statements, and the company wishes to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. Forward-looking statements made in this call are based on currently available information, and the company undertakes no obligation to update any forward-looking statement based on subsequent events, new information, or otherwise. We will also reference both GAAP and non-GAAP financial measures. Applicable reconciliations are available in today's earnings release.

I will begin with a high-level summary of our financial performance for the fourth quarter and the full fiscal year, and then turn the call over to Ajay for a discussion of our business and operational performance. We will then finish with more detail regarding our financial results and our outlook for fiscal '27. Before I discuss our fourth quarter records, let me address the revenue results. Full-year revenues of $1.79 billion finished below our guidance range, and fourth quarter revenues of $484 million were down approximately 4% year-over-year.

Importantly, these results were affected by the timing of approximately $50 million of planned security deliveries that moved beyond our June 30th fiscal year-end because of conflict-related delays and site access constraints in the Middle East. I want to emphasize that these expected revenues are deferred, not orders lost. They remain firmly in our backlog and are expected to be delivered on a later schedule.

Setting this aside, we were really pleased with the overall performance as multiple key performance metrics for Q4 and the full fiscal year were extremely strong. We closed fiscal '26 with exceptional cash generation and strong profitability driven by solid adjusted operating margin expansion. We delivered record fourth quarter operating cash flow of $182 million. We grew fourth quarter non-GAAP earnings per share by 17% to a record $3.78. And we ended the year with a record backlog of approximately $1.9 billion.

For the full year, revenues reached a record $1.79 billion, up 4% year-over-year, and adjusted earnings per share grew to a record $10.35, up 11% year-over-year. Bookings were solid across the three divisions, and we finished the year with a record backlog and solid visibility as we enter fiscal '27. We also have a significant opportunity pipeline, and we have recently secured several important program wins.

Our cash conversion was outstanding, allowing us to strengthen the balance sheet while continuing to return capital to shareholders. In the fourth quarter, we repurchased approximately 565,000 shares at an average price of about $219 per share for a total of $123.6 million. Our board recently authorized an additional 1 million shares, leaving approximately 1.1 million shares available under our stock buyback program. Before diving more deeply into our financial results and discussing our outlook for fiscal '27, I'll turn the call over to Ajay.

Ajay Mehra

Thank you, Alan, and thank you to everyone for joining us today. I am pleased to be here to discuss our fourth quarter and full fiscal year 2026 results. Fiscal 2026 was a strong year for OSI Systems, capped by record annual revenues of $1.79 billion, record Q4 and annual non-GAAP earnings per share, and record Q4 and annual operating cash flow. That said, as Alan pointed out as well, we finished 2026 with revenues below expectations, mostly due to delays with the situation in the Middle East.

Overall, I am proud of how our team has performed across the portfolio, delivering solid bookings that translated into a record backlog of approximately $1.9 billion, which gives us good visibility as we enter fiscal 2027. While the Security division faced revenue headwinds in the quarter from the Middle East conflicts that have shifted the timing of certain deliveries, Optoelectronics delivered strong growth on broad-based demand, and Healthcare posted an improved quarter. The security-related deliveries that were pushed out remain in backlog and are expected to be completed in future orders.

So let's discuss our business in more detail, beginning with Security. With DHS reopening in April, following the shutdown, we have seen procurement activity accelerate. Since the close of our fiscal year, CBP has awarded us two 5-year IDIQ contracts, one with a ceiling of approximately $200 million for relocatable rapid scan passenger vehicle inspection systems, and a second with a ceiling of roughly $85 million for van-mounted mobile X-ray inspection systems.

We have already received delivery orders under both these IDIQs, including a task order valued at about $21 million. These IDIQs represent continued funding provided under the omnibus bill. We expect to see some revenue contribution from these awards later in fiscal 2027, but significant contributions are expected in fiscal 2028 and beyond as well. We have also made growing recurring revenue a priority across the Security division, and with the size of our installed base today, we expect that effort to translate into substantial service revenue growth in fiscal 2027.

Recently, we entered into an agreement with LA28 to establish Rapiscan as an official supporter of Team USA and the official physical screening and security technology hardware and software solutions provider of the LA28 Olympic and Paralympic Games. This strategic partnership builds upon our security efforts at major recent events such as the FIFA World Cup, the Paris Olympics, and the Milan Winter Games. Few companies have a comparable track record at this scale, and our experience is a real advantage as we pursue future large venue and event security opportunities.

We continue to see strong momentum in our radio frequency, also known as RF business, and Homeland Security Defense business. Our over-the-horizon radar programs and involvement in multiple Iron Dome initiatives position us at the forefront of some of the nation's most significant defense priorities. Fiscal 2026 was an outstanding year for the RF business. During fiscal '26, we were awarded an undefinitized contract action with a not-to-exceed value of approximately $235 million for the production and integration of a homeland defense over-the-horizon radar transmit subsystems.

RF award today, and we continue to see follow-on opportunities related to this program. We are also a participant in the SHIELD IDIQ, which supports much of the Iron Dome-related initiatives and gives us a vehicle to pursue additional programs as they're defined over the next few years. All that said, the current level of customer engagement across our RF portfolio is the highest we have seen for this product line.

Turning to Optoelectronics and Manufacturing, which delivered another strong performance in fiscal 2026 as full-year revenues grew 9% to $451 million with strong margins. The bookings in Q4 reflected the strength and breadth of our entities' markets, and we expect these underlying trends to continue in fiscal 2027. Our ability to support customers with our highly engineered products, precision manufacturing, and global reach continues to differentiate us across the aerospace, defense, healthcare, and industrial customer base.

Our vertically integrated model and global manufacturing footprint helps us continue to capture business as customers diversify supply chains, and our backlog gives us strong visibility heading into fiscal 2027. Finally, our Healthcare division delivered an improved fourth quarter as revenues grew approximately 5% year-over-year and operating margin expanded to 10% from 1% compared to last year's Q4. These results reflected the operational improvements we've been implementing throughout the year.

We remain focused on expanding our installed base, supporting providers with innovative clinical solutions, and advancing the product development initiatives behind our next-generation patient monitoring platform. We are encouraged by the opportunities ahead. As we enter fiscal 2027, our record backlog, robust pipeline, and disciplined execution give us confidence for the coming years. As always, I would like to thank our employees, customers, and stockholders for their continued support and dedication. With that, I will turn the call over to Alan to discuss our financial results and our fiscal 2027 guidance in more detail before we open the call for questions. Thank you.

Alan Edrick

Thank you, Ajay. Let's begin with our revenue performance by division. Revenues in each of our Opto and Healthcare divisions increased 5% year-over-year. In Security, revenues declined 7%, reflecting the impact of the conflict in the Middle East, which delayed certain deliveries beyond our fiscal year-end, along with a difficult comparison against higher Mexico program revenues in the prior year quarter. We closed the year with approximately $1.9 billion in backlog. Deliveries that shifted out of the quarter remained in backlog, while certain expected bookings in the affected region were deferred.

As expected, we reported nearly $150 million lower fiscal '26 revenues related to the Mexico security contracts compared to the prior year, which included about a $20 million adverse impact in Q4. As we move into fiscal '27, we expect this headwind to moderate to less than $25 million for the full year, which is expected to be concentrated in the first half. Turning to services. For the full year, service revenues grew 13% to $441 million, though were fairly flat in Q4. Similar to Q3, fourth quarter service revenues in the prior year benefited from significant installation activity related to the Mexico contracts.

Excluding those installation revenues, security service revenues increased 9% year-over-year in Q4. Looking forward, in fiscal '27, we expect strong double-digit growth in service revenues for the full year. Our Q4 fiscal '26 gross margin expanded to 34.7% from 33.3% in the same quarter in the prior year, as a more favorable revenue mix on product sales more than offset the benefit in Q4 of the prior year received from higher installation-related service revenue. Our margins can fluctuate based on product and service mix and volume, supply chain costs, foreign exchange, tariffs, and other factors.

Moving on to operating expenses. We continue to work diligently across all divisions to manage our SG&A cost structure efficiently. SG&A expenses in the 2026 Q4 were $70 million, down 7% from the prior year Q4, representing 14.4% of sales compared to 14.8% of sales in the prior year. R&D expenses in Q4 were $19.5 million, or 4% of revenues, up from $18.8 million, or 3.7% of revenues in the same quarter last year. This increase stems from our commitment to investing in innovation, resulting in market-leading offerings, and positioning OSI well for the future.

We expect to continue our heightened R&D efforts to advance key initiatives. Even with these R&D investments, our combined SG&A and R&D expenses as a percentage of sales have decreased annually for each of the past 8 years, underscoring our ability to drive operating efficiencies while still funding growth initiatives. Now let's move below the operating line. Net interest and other expenses in Q4 were $4.1 million, down from $7.2 million in the same quarter of the prior year, primarily due to reduced borrowing costs coupled with increased interest income on higher cash balances.

Our effective tax rate under GAAP was 20.8% in Q4 of '26 versus 19.8% in Q4 last year. Excluding discrete tax items, our normalized effective tax rate, which is the one used in calculating non-GAAP EPS, was 21.5% in Q4 compared to 21.9% in the same prior year quarter. On a non-GAAP basis, our Q4 '26 adjusted operating margin was 17.7%, up 200 basis points from the 15.7% reported in the prior year fourth fiscal quarter, with each of the three divisions reporting growth.

The Security division's adjusted operating margin expanded from 20.4% to 20.8% in Q4 this year, driven by a stronger gross margin combined with reduced operating expenses. The Opto adjusted operating margin increased to 14.7% in Q4 of '26 from 13.6% in last year's fiscal Q4, primarily from the benefits of economies of scale and a more favorable mix of revenues. And on the heels of stronger revenues, the adjusted operating margin of our Healthcare division, as Ajay said, increased to 10% in Q4 this year, from 1% in Q4 of the last fiscal year, reflecting the operating leverage. And while we would not extrapolate one quarter, it shows what this division can do as volume grows.

Moving to cash flow and the balance sheet. We generated a record $182 million of operating cash flow in Q4 and $276 million for the full fiscal year driven by strong collections across the businesses. This included collecting $159 million from our largest customer in Mexico in Q4. On that customer specifically, the balance stood at $345 million at the end of Q3, representing 40% of the company's total accounts receivable, and declined to $190 million, or 25% of the company's total AR, as of the end of Q4.

This balance should significantly decrease further throughout fiscal '27 as substantial payments are expected to be received, contributing to the strength in the anticipated fiscal '27 operating cash flow and free cash flow conversion. DSO in Q4 decreased 18% from third quarter DSO. CapEx in Q4 was $9.3 million, while depreciation and amortization expense in the quarter was $13.3 million. Our balance sheet remains solid, providing us great flexibility. We ended the year with $360 million in cash, up from $106 million a year ago, and with no amounts drawn under our lines of credit.

During the year, we refinanced our credit facility and extended its maturity while adding low-cost long-term debt. Gross debt increased with these moves, and with the capital we returned to shareholders, our net leverage at the end of Q4 of fiscal '26 was approximately 2.1x as calculated under our credit agreement. This leaves us ample capacity for both organic investment and acquisitions. During the fiscal year, we repurchased and retired 1.1 million shares, reflecting our conviction in the intrinsic value of our business. Our board recently authorized an additional 1 million shares for repurchase with no expiration on this authorization.

Now, turning to our guidance. We are introducing our fiscal '27 guidance for revenues and non-GAAP earnings per share. We currently expect revenues of $1.875 billion to $1.93 billion, or 5% to 8.1% year-over-year growth, and adjusted earnings per share of $11.13 to $11.49, or 7.5% to 11% year-over-year growth. This guidance factors in the expected impact from the conflicts in the Middle East, which have affected near-term bookings, though over a longer horizon the resolution of these matters could represent future opportunities for the company.

Although we are pleased with some notable wins with the Department of Homeland Security over the past few months and expect more, we believe a substantial amount of such bookings will lead to revenue in fiscal '28 and beyond. Thus, we have included a portion of the delivery orders from CBP already in hand rather than the full ceiling value of those programs and assumed a later delivery schedule in the Middle East. Given the timing of each of these items, we currently expect fiscal '27 growth to be strongest in the second half.

We note that our fiscal '27 non-GAAP diluted EPS guidance excludes any impact of potential impairment, restructuring and other costs, amortization of acquired intangible assets and their associated tax effects, and discrete tax and other non-recurring items. We currently believe this guidance reflects reasonable estimates. The actual impact on the company's financial results of timing changes on the expected conversion of backlogged revenues, new bookings, timing of cash collections, tariffs, the conflicts in the Middle East, and supply chain disruptions, among other factors, is difficult to predict and could vary significantly from the anticipated impact currently reflected in our guidance.

Actual revenues and non-GAAP earnings per diluted share could also vary from the guidance indicated above due to other risks and uncertainties discussed in our SEC filings. In summary, fiscal '26 was a year of record cash generation, record backlog, and strong earnings quality. We strengthened our liquidity, and we returned capital to shareholders. We are committed to operational excellence as we continue to grow our businesses and provide innovative products and solutions to our customers. We aim to invest in key strategic areas with the goal of driving long-term value for our shareholders. Once again, we thank the entire global OSI team for their dedication to supporting our customers and our partners. Their efforts are what makes these results possible. And at this time, we'd like to open the call to questions.

Operator

Our first question for today comes from the line of Josh Nichols from B. Riley Securities. Your question, please.

Perguntas e respostas

Josh Nichols

Understand the pushout, not lost orders regarding the Middle East, but I was curious on that. Do you expect that free cash flow generation in fiscal year '27 could similarly exceed net income generally, and how you think about the pace of collections is going to drive that this year?

Alan Edrick

Josh, thank you. This is Alan. Good question. We are anticipating a strong cash flow year in fiscal '27, strong free cash flow, and we do anticipate that our free cash flow could exceed 100% of net income and fully expect that to occur. With respect to the pace of collections, we expect to be collecting nicely over the course of the fiscal year, hoping it's more front-loaded than back-loaded, but we do anticipate a good, strong overall year.

Josh Nichols

I think the timing, it's understandable for some of the orders in the Middle East, but there's been a flurry of award activity just over the last couple weeks. I'm curious, how much of that, are you being conservative when you think about how much of that gets factored into the guidance for this fiscal year, given the ongoing conflict? And are you assuming most of that gets pushed out to fiscal year '28 and beyond? I'm just trying to get a little bit better grasp on how you're thinking about these newer awards and IDIQs and the timing in your guidance for this year.

Ajay Mehra

So, this is Ajay. You know, like we pointed out, there's a portion in '27, but the vast majority is in '28 and beyond. You know, these are multiple-year IDIQs. I do want to point out both the $200 million and the $85 million IDIQ with CBP, we're the only awardee on there. So, it gives us a very good confidence that as we look at not just '27, but '28, '29, and beyond, the visibility really is there for us.

Josh Nichols

Thanks for clarifying. I'll hop back into queue.

Operator

Our next question comes from the line of [ Don Gooden ] from Citigroup. Your question, please.

Unknown Analyst

You know, obviously it's a complex situation in the Middle East. I was hoping to revisit, just maybe offer a little more detail on kind of what's going on there from your perspective on the ground, just to kind of give us a better feel for things. And in the release, you used the phrase that demand for products and services remains encouraging. In the prepared remarks, I felt like you used the word strong a few different times when talking about the shape of the business. I'm not trying to wordsmith this, but maybe just revisiting the Middle East and exactly how you see the demand today, a bit of a temperature check would be helpful.

Ajay Mehra

Sure. I think when we talk about strong demand, you've got to look at the overall business, the Security, the Opto, and even the improvements we've had on the Healthcare side. But specifically on Security, we have a lot of strong demand. Finally, like I pointed out, DHS, it's time to release orders. It's been a flurry of activity. We've also had some strong orders, like we pointed out, on the RF side. And international orders continue to be strong.

Now, specifically on the Middle East, yes, I think there's been a delay, deferment of some orders. You know, they're more interested in making sure they protect their people with incoming missiles, et cetera. And we are a partner, we work with them, make sure that whatever they need in the short run, we provide. But we believe in the long run, it's actually an opportunity for us, not just for the Middle East, but really with the DOD and other places where force protection is going to get more and more important, not just our overall security business and perhaps even including RF. So it's a complicated situation, but you know we've got to look at it as an overall business in the entire world, and we remain very confident there.

Unknown Analyst

Got it. That's helpful. And for the RF product line, I think you used the phrase that customer engagement was the highest you've ever seen, and certainly understandable given everything we're seeing in the defense complex and Iron Dome, et cetera. But I was hoping you could talk a little bit more about that and how are you kind of baking in the outlook for RF in the guidance for '27 and might it continue to grow in '28 as well?

Ajay Mehra

So, you know, we don't really break it down, but I will say on the RF side, we see very strong growth, and we see that growth continue into '28. And I think, you know, you talk about the conflict in the Middle East. If anything, what's been going on there, when you talk about the Iron Dome, it only further strengthens the idea of why we need an Iron Dome going forward.

Unknown Analyst

Got it. Appreciate the color.

Operator

Our next question comes from the line of Jeff Martin from Roth Capital Partners. Your question, please.

Jeff Martin

Just was curious if you could clarify whether these were deliveries to customers in the Middle East or whether there were shipments going through the strait that perhaps were intended for non-Middle Eastern customers of other nations that were also impacted.

Alan Edrick

These were mostly, if not all, customers in the Middle East.

Jeff Martin

Okay. And then in terms of what you were assuming in your updated fiscal '26 guidance after the third quarter, were you assuming that all of these orders would be delivered in Q4 or was the assumption that some of them would be and some of them would be pushed out further?

Alan Edrick

Jeff, this is Alan. So following the Q3 release, we assumed a significant portion of these Middle East orders would be delivered in Q4. Not all of them, but a significant portion.

Jeff Martin

Okay. And it sounds like your assumption is that a good portion of these will be delivered in the second half of fiscal '27. Is that fair to say?

Alan Edrick

That is fair to say. Not all of it, but a substantial portion in the second half of fiscal '27.

Jeff Martin

Okay. And then my other question is on the bookings. Could you speak to book-to-bill for the full year and then also kind of give us a sense on Q4? I know there were delays that impacted bookings in the second half in general, but just some contextual reference would be helpful.

Alan Edrick

Sure, Jeff. So for Q4, our book-to-bill was just shy of 1. It was very strong in our Opto division, solid in our Security division as well, and Healthcare. So giving us a very good book-to-bill in our highest revenue quarter. And for the full year, our bookings were quite solid as well. So the book-to-bill was a little bit north of 1 for the full year, which led to our highest overall backlog at the end of June.

Operator

Our next question comes from the line of Christopher Glynn from Oppenheimer. Your question, please.

Christopher Glynn

Just want to talk a little bit about the mechanics of phasing from large project awards, IDIQ and RF into backlog. You know, it was clear that the recent $285 million were subsequent to the quarter end. And I think you talked about $21 million firm order plus others. Should we think about the delivery orders as what goes into backlog and then also, using that framework for the $235 million RF, I think most of that did go in backlog in the prior quarter. So, I guess the implication would be those delivery orders were more coincident with the award, if you could clarify those points.

Alan Edrick

Sure, Chris. Happy to do so. With respect to the RF order, the $235 million that you referred to that we won in Q3, roughly 80% of that was booked into backlog in the third quarter, meaning we have it and a substantial portion of that is going to get delivered over the next couple of years. With respect to the two large IDIQs that we just won with CBP, the $285 million that you referred to, those are ceiling values where we're the sole awardee, as Ajay mentioned. What goes into our backlog is not the IDIQ value, it would be the firm fixed order, the delivery order or the task order at $21 million that Ajay referred to. So over the course of time, we expect that to significantly increase and move into our backlog and then convert into revenue.

Christopher Glynn

Okay, great. And my understanding is historically that those ceilings have essentially been realized and well within the IDIQ timeframe. And in particular, the context here is there's a much bigger funding than these amounts. So they've got to get through executing these portions in order to further exercise through the overall funding, which I think approximates a billion. Is that about the right understanding?

Ajay Mehra

Yes, that's the right understanding. I mean, keep in mind, these are orders that are being released. There are more orders that will be released in different products as we move along as part of the billion-dollar funding. So these are specifically for the two types of systems that I pointed out in my prepared remarks.

Christopher Glynn

Okay, great. And last one was, wanted to ask about the Opto segment profitability approaching 15%. I know you've brought on some new capacity. You're continuously expanding that business given the share opportunity with customers securing their supply chains. So as you utilize new capacity, are we talking about consistently higher margin opportunities for the O&M than over the past few years?

Alan Edrick

Yes, Chris, this is Alan. Really good question. The Opto business has been bringing on a stronger customer profile that is leading to improved margins. Our plan for fiscal '27 is to continue to pair revenue growth with operating margin expansion. It will vary from quarter to quarter based upon the revenue mix that we see and what products and which customers we happen to be selling to in that quarter. But we do believe that we'll see further operating margin expansion through the course of fiscal '27.

Operator

Our next question comes from the line of Larry Solow from CJS Securities. Your question, please.

Lawrence Solow

I guess the first question, just better frame the outlook for revenue guidance. So it sounds like you are including most of that 50 to come in, but just how about qualitatively from the Middle East? Are you assuming that there's still impacts obviously going on there? So what are your high-level expectations for the Middle East and also what's incorporated in the growth outlook from the United States? Not specifically, but is there some delays? Bookings obviously were delayed a lot. It sounds like most of the benefits from the omnibus bill and the acceleration in the U.S. that everybody's looking for, you're not building most of that in until '28. Is that all fair to say?

Alan Edrick

Larry, I should probably flip-flop and call you Chris for the moment. Good questions, Larry. You know, so with respect to the Middle East, we've taken a conservative approach in our guidance for fiscal '27, both with the planned deliveries that got deferred out of Q4, as well as for future orders, for obvious reasons, while the conflict is taking place. With respect to the United States, the really exciting part for us is, yes, we're getting nice bookings. We expect to get significantly more bookings. And you're exactly right. There's a portion built into fiscal '27, but a smaller portion. The much, much larger portion is in fiscal '28, '29, and even beyond that. So it really gives us some excellent visibility into real nice growth beyond this fiscal year. So, quite exciting for us. Was there a third element to it, or did I capture that?

Lawrence Solow

I think you got it. I just, the question that, a couple of thoughts just on the omnibus bill, I think it was a well over $6 billion authorization. And obviously I think a billion of that was kind of in the heart of your non-intrusive equipment. But I know that the Secure America Act came out. I think there was another like $3 billion or a little more than that, maybe north of that. Any clarity on how much of that could be funneled down into your kind of sweet spots?

Ajay Mehra

So, you know, it's a great question. We're aware of it. We're working with the customer very closely. Obviously, they're trying to make sure that they award, with all the delays, they award the billion dollars at the fastest pace possible. I think there is still some clarity to be had with what the next 2 or 3 billion would be. And I would add on the omnibus bill, we talk about customs, but there's substantial funding for the RF side as well, which is obviously helping us as well.

Lawrence Solow

Okay, if I can just squeeze one more, just on the margins, you're forecasting 5% to 8.1% revenue growth and a little bit higher on the earnings, 7.5% to 11%, not much, but you're also getting a pretty good benefit from your repurchases, right? You cut down your share count by like 3%. So you're actually building in, adjusted-wise, a little bit less earnings growth versus sales growth. Am I missing something, any reason for that?

Alan Edrick

Yes, Larry, we're just being a little bit modest and conservative coming out of the gate here, doing a little bit more investments in some OpEx and positioning ourselves for the future as well and some of the new innovative products that are coming out and the associated infrastructure sort of associated with it. But that's the general tone of it.

Lawrence Solow

Okay. So there's no structural change or anything. I mean, Healthcare, which we've talked about, much smaller, and Opto, moderate size, but those, we've talked about margins going up in those segments over the next few years. Any reason to believe that Security shouldn't have upward trends in the margins as well, maybe not so much this year, but just in general?

Alan Edrick

Yes, that's our plan. Our plan is to pair the top-line growth with operating margin expansion. From a contract-to-contract basis that may change a little bit. So it may change things from a quarter to quarter, but over the long term structurally, our goal is to continue to improve our margins. We expect our service revenues to be growing at a faster clip than our product revenues, and our service revenues inherently carry a higher margin. So as we start to look out beyond '27, '28, '29, and '30, as service revenues become a bigger and bigger proportion of our overall revenues, that can really drive some nice operating margin expansion in Security as well.

Operator

As a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Seth Seifman from J.P. Morgan. Your question, please.

Seth Seifman

This is Rocco on for Seth. On the prior comment on the services revenue growth, should we think about a driver of that growth being the transition of the work in Mexico towards services? And does the services revenue in Mexico carry a stronger margin relative to OSI's typical services revenue, kind of similar to the product revenue being a pretty strong margin?

Alan Edrick

Yes, Rocco, so nice questions. So our service revenues, the Mexico service revenues are more or less in line with overall service revenue margins, which are quite strong to begin with. So we're encouraged by that. In terms of the service revenue growth, what's driving it, it's kind of multifold. Part of it is the Mexico product revenue rolling off of warranty and more and more of that moving into service revenues. That helps. The larger installed base, though, that we have throughout our cargo and vehicle inspection products, throughout our aviation and checkpoint products, and even some of the RF products will all drive more service revenues with strong margins.

We're also looking at some of the SaaS-type work that we do for our security as a service, our turnkey products, and we think there's some good opportunities going forward there. And also our software as a service, our TruSaaS, for CertScan and otherwise, which carry substantial margins, and we see some nice growth opportunities there as well. So the top-line growth of service could be quite substantial for us at a much higher margin.

Seth Seifman

Great. That makes sense. And then kind of looking ahead, are there any updates on the TSA checked bag scanner contract that's expected in '27, and when should we start thinking about that kind of coming into focus?

Ajay Mehra

I think we're looking at it and TSA basically is trying to get their checkpoint taken care of first and we think it's still a few years away, but it'll go on for several years, so the opportunity definitely is still there.

Operator

This does conclude the question and answer session of today's program. I'd like to hand the program back to management for any further remarks.

Alan Edrick

Once again, thank you all for attending our conference call. We look forward to speaking with you during our next earnings call following the completion of our first fiscal quarter.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.