Cuộc họp công bố kết quả kinh doanh Quý 4 năm tài chính 2026 của OSI Systems (OSIS): Trì hoãn giao hàng 50 triệu USD và Triển vọng năm tài chính 2027

Các điểm chính

• Doanh thu quý 4 năm tài chính 2026 giảm khoảng 4% so với cùng kỳ năm ngoái xuống còn 484 triệu USD, chủ yếu do khoảng 50 triệu USD đơn hàng giao thuộc mảng An ninh (Security) đã bị hoãn sang sau ngày 30/6 vì sự chậm trễ liên quan đến xung đột và hạn chế tiếp cận công trường tại Trung Đông. Công ty cho biết các đơn hàng này vẫn nằm trong khối lượng đơn hàng tồn đọng (backlog) chứ không bị mất.
• Doanh thu cả năm tăng 4% lên mức kỷ lục 1,79 tỷ USD, trong khi EPS pha loãng phi GAAP tăng 11% lên mức kỷ lục 10,35 USD. EPS phi GAAP quý 4 tăng 17% lên 3,78 USD.
• Biên lợi nhuận hoạt động điều chỉnh mở rộng 200 điểm cơ bản lên 17,7% trong quý 4. Cả ba bộ phận đều cải thiện, bao gồm Chăm sóc sức khỏe (Healthcare), nơi biên lợi nhuận hoạt động điều chỉnh tăng từ 1% lên 10%.
• OSI Systems kết thúc năm tài chính 2026 với lượng đơn hàng tồn đọng kỷ lục đạt khoảng 1,9 tỷ USD. Tỷ lệ nhận đơn hàng trên doanh thu (book-to-bill) cả năm cao hơn 1 một chút, trong khi tỷ lệ book-to-bill quý 4 chỉ thấp hơn 1 một chút.
• Ban lãnh đạo dự báo doanh thu năm tài chính 2027 đạt 1,875 tỷ - 1,93 tỷ USD và EPS điều chỉnh đạt 11,13 - 11,49 USD. Mức tăng trưởng dự kiến sẽ mạnh nhất vào nửa cuối năm.
• Dòng tiền từ hoạt động kinh doanh đạt mức kỷ lục 182 triệu USD trong quý 4 và 276 triệu USD cho cả năm. Ban lãnh đạo kỳ vọng dòng tiền tự do năm tài chính 2027 sẽ vượt 100% thu nhập ròng.

Dữ liệu tài chính quan trọng

OSI Systems đã thu về 159 triệu USD từ khách hàng lớn nhất của họ ở Mexico trong quý 4. Số dư khoản phải thu của khách hàng đó đã giảm từ 345 triệu USD, tương đương 40% tổng khoản phải thu, vào cuối quý 3 xuống còn 190 triệu USD, tương đương 25%, vào cuối năm tài chính. Ban lãnh đạo kỳ vọng số dư này sẽ giảm đáng kể trong năm tài chính 2027.

Công ty đã mua lại khoảng 565.000 cổ phiếu trong quý 4 với mức giá trung bình khoảng 219 USD, tổng cộng 123,6 triệu USD. Công ty đã mua lại và hủy bỏ 1,1 triệu cổ phiếu trong năm tài chính 2026. Theo sự chấp thuận mới, khoảng 1,1 triệu cổ phiếu vẫn còn sẵn sàng để mua lại.

Kết quả hoạt động kinh doanh và vận hành

An ninh

Doanh thu mảng An ninh giảm 7% trong quý 4. Mức giảm này phản ánh việc giao hàng ở Trung Đông bị chậm trễ và mức so sánh khó khăn với doanh thu từ chương trình ở Mexico cao hơn trong cùng kỳ năm trước. Doanh thu năm tài chính 2026 liên quan đến các hợp đồng an ninh ở Mexico thấp hơn gần 150 triệu USD so với năm trước, bao gồm khoản tác động bất lợi khoảng 20 triệu USD trong quý 4.

Công ty dự kiến tác động bất lợi đến doanh thu liên quan đến Mexico sẽ giảm xuống còn dưới 25 triệu USD trong năm tài chính 2027, tập trung vào nửa đầu năm. Nếu không tính doanh thu lắp đặt tại Mexico của năm trước, doanh thu dịch vụ An ninh quý 4 tăng 9% so với cùng kỳ năm ngoái. Ban lãnh đạo kỳ vọng tổng doanh thu dịch vụ sẽ tăng trưởng hai chữ số mạnh mẽ trong năm tài chính 2027.

Sau khi Bộ An ninh Nội địa Hoa Kỳ mở cửa trở lại vào tháng 4, hoạt động thu mua đã tăng tốc. Cơ quan Hải quan và Bảo vệ Biên giới Hoa Kỳ (CBP) đã trao cho OSI Systems hai hợp đồng IDIQ (giao hàng không xác định số lượng) thời hạn 5 năm cho nhà thầu duy nhất: một hợp đồng có hạn mức tối đa khoảng 200 triệu USD cho các hệ thống kiểm tra xe chở khách quét nhanh di động và một hợp đồng khác có hạn mức tối đa khoảng 85 triệu USD cho các hệ thống X-quang di động gắn trên xe van.

Công ty đã nhận được các lệnh giao hàng theo cả hai hợp đồng, bao gồm một lệnh giao nhiệm vụ trị giá khoảng 21 triệu USD. Ban lãnh đạo dự kiến đóng góp trong năm tài chính 2027 sẽ ở mức hạn chế, với doanh thu nhiều hơn đáng kể trong năm tài chính 2028 và các năm tiếp theo. Giá trị hạn mức tối đa của hợp đồng IDIQ không được ghi nhận là khối lượng đơn hàng tồn đọng; các lệnh giao hàng hoặc lệnh giao nhiệm vụ chính thức mới được đưa vào khối lượng đơn hàng tồn đọng khi chúng được trao.

OSI Systems cũng đã ký một thỏa thuận biến Rapiscan thành nhà tài trợ chính thức của Đội tuyển Mỹ (Team USA) và là nhà cung cấp phần cứng cũng như phần mềm công nghệ kiểm tra an ninh và sàng lọc thể chất cho Thế vận hội Olympic và Paralympic LA28.

Các chương trình tần số vô tuyến (RF) và quốc phòng

Ban lãnh đạo cho biết mức độ tương tác của khách hàng trên toàn bộ danh mục sản phẩm RF đạt mức cao nhất từ trước đến nay cho dòng sản phẩm này. Trong năm tài chính 2026, OSI Systems đã nhận được một hành động hợp đồng chưa xác định điều khoản (UCA) với giá trị không vượt quá khoảng 235 triệu USD cho các phân hệ phát radar ngoài đường chân trời phục vụ phòng thủ nội địa. Khoảng 80% giá trị hợp đồng đó đã được đưa vào đơn hàng tồn đọng trong quý 3 năm tài chính, với một phần lớn dự kiến sẽ được giao trong vài năm tới.

Công ty cũng tham gia vào hợp đồng SHIELD IDIQ hỗ trợ các sáng kiến liên quan đến Vòm Sắt (Iron Dome). Ban lãnh đạo kỳ vọng mức tăng trưởng RF mạnh mẽ trong năm tài chính 2027 và tiếp tục tăng trưởng trong năm tài chính 2028.

Quang điện tử và Sản xuất

Doanh thu cả năm của mảng Quang điện tử và Sản xuất tăng 9% lên 451 triệu USD. Biên lợi nhuận hoạt động điều chỉnh quý 4 tăng từ 13,6% lên 14,7%, nhờ lợi thế về quy mô và cơ cấu doanh thu thuận lợi hơn.

Ban lãnh đạo kỳ vọng sự tăng trưởng doanh thu năm tài chính 2027 sẽ đi kèm với việc tiếp tục mở rộng biên lợi nhuận hoạt động, mặc dù kết quả theo quý có thể thay đổi tùy thuộc vào cơ cấu khách hàng và sản phẩm.

Chăm sóc sức khỏe

Doanh thu quý 4 của mảng Chăm sóc sức khỏe tăng khoảng 5% so với cùng kỳ năm ngoái. Biên lợi nhuận hoạt động điều chỉnh cải thiện từ 1% lên 10%, phản ánh sản lượng cao hơn, đòn bẩy hoạt động và các cải tiến vận hành được triển khai trong năm. Ban lãnh đạo cảnh báo không nên suy diễn từ kết quả biên lợi nhuận của một quý.

Dự báo của ban lãnh đạo

Ban lãnh đạo cho biết triển vọng này áp dụng phương pháp tiếp cận thận trọng đối với thời gian giao hàng ở Trung Đông và các đơn đặt hàng trong tương lai tại khu vực này. Một phần lớn trong khoảng 50 triệu USD đơn hàng bị hoãn giao dự kiến sẽ được thực hiện vào nửa cuối năm tài chính 2027, nhưng không phải toàn bộ.

Dự báo này chỉ bao gồm một phần các lệnh giao hàng của CBP đã nhận được thay vì toàn bộ tổng hạn mức IDIQ kết hợp trị giá 285 triệu USD. Ban lãnh đạo dự kiến sự đóng góp lớn hơn từ các hợp đồng gần đây tại Mỹ sẽ diễn ra trong năm tài chính 2028, năm tài chính 2029 và xa hơn nữa.

OSI Systems có kế hoạch tăng cường các khoản đầu tư hoạt động được chọn lọc vào cơ sở hạ tầng và đổi mới sản phẩm. Mục tiêu dài hạn của công ty là kết hợp tăng trưởng doanh thu với việc mở rộng biên lợi nhuận hoạt động, được hỗ trợ một phần nhờ sự tăng trưởng nhanh hơn của doanh thu dịch vụ có biên lợi nhuận cao hơn.

Rủi ro và các điểm cần theo dõi

• Xung đột và sự hạn chế tiếp cận công trường ở Trung Đông đã làm chậm trễ việc giao hàng và các đơn đặt hàng trong ngắn hạn. Những thay đổi tiếp theo về thời gian có thể ảnh hưởng đến chuyển đổi đơn hàng tồn đọng và tiến độ ghi nhận doanh thu.
• Tăng trưởng năm tài chính 2027 dự kiến sẽ dồn vào nửa cuối năm, làm tăng độ nhạy cảm đối với tiến độ giao hàng.
• Giá trị hạn mức IDIQ lớn không tự động được ghi nhận vào khối lượng đơn hàng tồn đọng hoặc doanh thu; việc chuyển đổi phụ thuộc vào các lệnh giao nhiệm vụ và giao hàng trong tương lai.
• Ban lãnh đạo đã xác định thuế quan, gián đoạn chuỗi cung ứng, tỷ giá hối đoái, cơ cấu sản phẩm và dịch vụ, thời gian thu hồi tiền mặt và xung đột khu vực là những yếu tố gây ra sự không chắc chắn.
• Dự báo EPS năm tài chính 2027 không bao gồm các khoản tổn thất tài sản tiềm năng, chi phí tái cơ cấu và chi phí khác, phân bổ tài sản vô hình đã mua, các ảnh hưởng thuế liên quan và các khoản mục phát sinh riêng lẻ hoặc không thường xuyên.

Những điểm nổi bật trong phần Q&A với chuyên gia phân tích

• Chuyển đổi tiền mặt: Ban lãnh đạo kỳ vọng khả năng tạo tiền mặt mạnh mẽ trong năm tài chính 2027 và cho biết dòng tiền tự do có thể vượt 100% thu nhập ròng. Việc thu hồi tiền dự kiến sẽ diễn ra trong suốt cả năm, với ưu tiên nghiêng về giai đoạn đầu năm nhiều hơn.
• Thời gian tại Trung Đông: Hầu hết các đơn hàng bị hoãn giao là dành cho khách hàng ở Trung Đông. Ban lãnh đạo dự kiến một phần lớn sẽ hoàn thành vào nửa cuối năm tài chính 2027, trong khi vẫn duy trì các giả định thận trọng.
• Cơ chế đơn hàng tồn đọng: Khoảng 80% hợp đồng RF trị giá 235 triệu USD đã được đưa vào khối lượng đơn hàng tồn đọng trong quý 3 năm tài chính. Đối với các hợp đồng IDIQ của CBP, chỉ có các lệnh giao nhiệm vụ hoặc giao hàng chính thức mới được thêm vào khối lượng đơn hàng tồn đọng, chứ không phải toàn bộ giá trị hạn mức.
• Doanh thu dịch vụ: Mức tăng trưởng dự kiến đến từ các hệ thống tại Mexico hết thời gian bảo hành, cơ sở lắp đặt lớn hơn đối với các sản phẩm hàng hóa, phương tiện và điểm kiểm soát, hỗ trợ RF, các gói dịch vụ an ninh (security-as-a-service) và dịch vụ phần mềm TruSaaS.
• Biên lợi nhuận mảng An ninh: Ban lãnh đạo kỳ vọng doanh thu dịch vụ sẽ tăng trưởng nhanh hơn doanh thu sản phẩm theo thời gian. Vì doanh thu dịch vụ có biên lợi nhuận cao hơn, cơ cấu dịch vụ lớn hơn có thể hỗ trợ mở rộng biên lợi nhuận mảng An ninh sau năm tài chính 2027.
• Cơ hội từ TSA: Ban lãnh đạo cho biết cơ hội cung cấp máy quét hành lý ký gửi của TSA vẫn còn cách vài năm nữa do TSA ưu tiên các hệ thống điểm kiểm tra, nhưng chương trình cuối cùng có thể kéo dài trong nhiều năm.

Toàn văn cuộc họp báo cáo kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

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.

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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.