Financial Analysis

2. Business Combinations Under Accounting Standards Codification Topic 805, Business Combinations (ASC 805), the acquisition method of accounting requires us to record assets acquired less liabilities assumed from an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase price over the estimated fair value of the net assets acquired should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Managements estimates of fair value are based on assumptions which are believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period for fair value, which is up to one year from the acquisition date, as additional information that existed at the acquisition date becomes available, we may record adjustments to the preliminary assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are included in earnings. Fiscal Year 2025 Business Acquisitions In September 2024, we (through our Security division) acquired 100% of the shares of common stock of a privately held pr …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

10. Commitments and Contingencies Acquisition-Related Contingent Obligations Under the terms and conditions of the purchase agreements associated with certain acquisitions, we may be obligated to make additional payments based on the achievement of certain sales or profitability milestones through the acquired operations. For agreements that contain contingent consideration obligations, the remaining maximum amount of such potential future payments is $37.9 million as of December 31, 2025. Projections and estimated probabilities are used to estimate future contingent earnout payments, which are discounted back to present value to compute contingent earnout liabilities. The following table provides a roll-forward from June 30, 2025 to December 31, 2025 of the contingent consideration liability, which is included in other accrued expenses and current liabilities and other long-term liabilities in our consolidated balance sheets (in thousands): Beginning fair value, June 30, 2025 $ 19,086 Foreign currency translation adjustment (34) Changes in fair value for contingent earnout obligations (5,203) Payments on contingent earnout obligations (486) Ending fair value, December 31, 2025 $ 13,363 Guarantees We are periodically required to provide performance bonds to do business with certain customers. These arrangements are common in the industry and generally have terms ranging between one year and ten years. The bonds are provided by various bonding agencies. However, we are ultimat …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

8. Borrowings Revolving Credit Facility In July 2025 we amended and extended our revolving credit facility, now maturing in July 2030, to increase the limit from $600 million to $725 million and replaced the $128.1 million term loan with a $100.0 million term loan which were accounted for as a debt modification. The sub-limit for letters of credit was increased from $300 million to $350 million, which includes up to $300 million for borrowings in certain foreign currencies. Under certain circumstances and subject to certain conditions, we have the ability to increase the revolving credit facility by an amount equal to the greater of $300 million or such amount as would not cause our secured leverage ratio to exceed a specified level. Other enhancements include the permitted securitization of certain qualifying assets of up to $100 million. Borrowings under the facility bore interest at SOFR plus a margin of 1.25% as of December 31, 2025 (which margin can range from 1.0% to 1.75% based on our consolidated net leverage ratio as defined in the credit facility). Letters of credit reduce the amount available to borrow under the credit facility by their face value amount. The unused portion of the facility bore a commitment fee of 0.15% as of December 31, 2025 (which fee can range from 0.10% to 0.25% based on our consolidated net leverage ratio as defined in the credit facility). Our borrowings under the credit agreement are guaranteed by certain of our U.S.-based subsidiaries and …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

4. Goodwill and Intangible Assets The changes in the carrying value of goodwill by segment for the six-month period ended December 31, 2025 were as follows (in thousands): Optoelectronics And Security Manufacturing Healthcare Division Division Division Consolidated Balance as of June 30, 2025 $ 266,365 $ 72,323 $ 48,705 $ 387,393 Goodwill adjustments during the period (see Note 2) (1,306) (1,306) Foreign currency translation adjustment 40 (328) (52) (340) Balance as of December 31, 2025 $ 265,099 $ 71,995 $ 48,653 $ 385,747 Intangible assets consisted of the following (in thousands): June 30, 2025 December 31, 2025 Gross Gross Carrying Accumulated Intangibles Carrying Accumulated Intangibles Value Amortization Net Value Amortization Net Amortizable assets: Software development costs $ 91,386 $ (8,941) $ 82,445 $ 99,947 $ (10,115) $ 89,832 Patents 9,617 (4,353) 5,264 9,675 (4,435) 5,240 Developed technology 99,937 (55,865) 44,072 100,049 (61,345) 38,704 Customer relationships 20,991 (9,380) 11,611 18,410 (8,794) 9,616 Total amortizable assets 221,931 (78,539) 143,392 228,081 (84,689) 143,392 Non-amortizable assets: Trademarks 39,898 39,898 40,002 40,002 Total intangible assets $ 261,829 $ (78,539) $ 183,290 $ 268,083 $ (84,689) $ 183,394 Amortization expense related to intangible assets was $5.6 million and $4.4 million for the three months ended December 31, 2024 and 2025, respectively. Amortization expense related to intangible assets was $10.4 million and $9.2 million for t …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

11. Income Taxes The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the development of tax planning strategies during the year. In addition, as a global commercial enterprise, our tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions. The effective tax rates for the three months ended December 31, 2024 and 2025 were 23.3% and 19.5%, respectively. During the three months ended December 31, 2024, we recognized a net discrete tax benefit of $0.3 million, related to equity-based compensation under ASU 2016-09. During the three months ended December 31, 2025 we recognized a net discrete tax benefit of $0.9 million related to equity-based compensation under ASU 2016-09 and a benefit of $1.0 million for changes in prior years estimates. The effective tax rates for the six months ended December 31, 2024 and 2025 were 22.9% and 19.7%, respectively. During the six months ended December 31, 2024, we recognized a net discrete tax benefit of $0.8 million, related to equity-based compensation under ASU 2016-09. During the six months ended December 31, 2025 we recognized a net discrete tax benefit of $1.7 million, related to equity-based compensation under ASU …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

6. Leases The components of operating lease expense were as follows (in thousands): Three Months Ended December 31, Six Months Ended December 31, 2024 2025 2024 2025 Operating lease cost $ 2,805 $ 3,746 $ 5,618 $ 7,203 Variable lease cost 285 248 479 534 Short-term lease cost 434 272 931 541 $ 3,524 $ 4,266 $ 7,028 $ 8,278 Supplemental disclosures related to operating leases were as follows (in thousands): Balance Sheet Category June 30, 2025 December 31, 2025 Operating lease right of use (ROU) assets, net Other assets $ 32,040 $ 42,054 Operating lease liabilities, current portion Other accrued expenses and current liabilities $ 11,712 $ 12,775 Operating lease liabilities, long-term Other long-term liabilities 20,977 30,493 Total operating lease liabilities $ 32,689 $ 43,268 Weighted average remaining lease term 5.5 years Weighted average discount rate 5.7 % Supplemental cash flow information related to operating leases was as follows (in thousands): Six Months Ended December 31, 2024 2025 Cash paid for operating lease liabilities $ 6,059 $ 6,955 ROU assets obtained in exchange for new lease obligations 2,887 15,616 Maturities of operating lease liabilities at December 31, 2025 were as follows (in thousands): December 31, 2025 Less than one year $ 14,720 1 2 years 10,889 2 3 years 5,660 3 4 years 4,420 4 5 years 2,760 Thereafter 12,200 50,649 Less: imputed interest (7,381) Total lease liabilities $ 43,268 …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) and other regulatory bodies that are adopted as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our Consolidated Financial Statements upon adoption. There were no new pronouncements adopted in the second quarter of fiscal year 2026. Accounting Guidance Not Yet Adopted In December 2023, the FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (ASU 2023-09), which provides for additional disclosures primarily related to the income tax rate reconciliations and income taxes paid. ASU 2023-09 requires entities to annually disclose the income tax rate reconciliation using both amounts and percentages, considering several categories of reconciling items, including state and local income taxes, foreign tax effects, tax credits and nontaxable or nondeductible items, among others. Disclosure of the reconciling items is subject to a quantitative threshold and disaggregation by nature and jurisdiction. ASU 2023-09 also requires entities to disclose net income taxes paid to or received from federal, state and foreign jurisdictions, as well as by individual jurisdiction, subject to a five percent quantitative threshold. ASU 2023-09 may be adopted on a prospective or retros …

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5. Contract Assets and Liabilities We enter into contracts to sell products and provide services, and we recognize contract assets and liabilities that arise from these transactions. We recognize revenue and corresponding accounts receivable according to ASC Topic 606, Revenue from Contracts with Customers (ASC 606). When we recognize revenue in advance of the point in time at which contracts give us the right to invoice a customer, we record this as unbilled revenue, which is included in accounts receivable, net, on the consolidated balance sheets. We may also receive consideration, per the terms of a contract, from customers prior to transferring control of goods to the customer. We record customer deposits as contract liabilities. Additionally, we may receive payments, most typically under service and warranty contracts, at the onset of the contract and before services have been performed. In such instances, we record a deferred revenue liability in either Other accrued expenses and current liabilities or Other long-term liabilities. We recognize these contract liabilities as sales after all revenue recognition criteria are met. The table below shows the balance of contract assets and liabilities as of June 30, 2025 and December 31, 2025, including the change between such dates. There were no substantial non-current contract assets for the periods presented. Contract Assets (in thousands) June 30, December 31, 2025 2025 Change % Change Unbilled revenue (included in account …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

12. Segment Information We operate in three identifiable industry segments: (a) security and inspection systems (Security division), (b) optoelectronic devices and manufacturing (Optoelectronics and Manufacturing division) and (c) medical monitoring systems (Healthcare division). We also have a corporate segment (Corporate) that includes executive compensation and certain other general and administrative expenses, expenses related to stock issuances and legal, audit and other professional service fees not allocated to industry segments. Both the Security and Healthcare divisions comprise primarily end-product businesses, whereas the Optoelectronics and Manufacturing division primarily supplies components and subsystems to external OEM customers, as well as to the Security and Healthcare divisions. Sales between divisions are at transfer prices that approximate market values. All other accounting policies of the segments are the same as described in Note 1, Basis of Presentation. We disclose segment income (loss) from operations as our measure of segment profit/loss, reconciled to consolidated income (loss) from operations. The measure of segment income (loss) from operations excludes impairment, restructuring and other charges presented below which are presented to reconcile to consolidated income from operations. Business segment disclosures consider information used by/provided to our chief operating decision maker (CODM). Our Chief Executive Officer serves as the CODM. The …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

9. Stockholders Equity Stock-based Compensation As of December 31, 2025, we maintained the Amended and Restated 2012 Incentive Award Plan (the OSI Plan) as a stock-based employee compensation plan. We recorded stock-based compensation expense in the consolidated statements of operations as follows (in thousands): Three Months Ended December 31, Six Months Ended December 31, 2024 2025 2024 2025 Cost of goods sold $ 226 $ 291 $ 470 $ 576 Selling, general and administrative 8,142 6,595 14,166 12,349 Research and development 141 164 295 325 Stock-based compensation expense $ 8,509 $ 7,050 $ 14,931 $ 13,250 As of December 31, 2025, total unrecognized compensation cost related to share-based compensation grants under the OSI Plan were estimated at $1.3 million for stock options and $19.1 million for restricted stock units (RSUs). We expect to recognize these costs over a weighted average period of 2.3 years with respect to the stock options and 2.3 years with respect to the RSUs. The following summarizes stock option activity during the six months ended December 31, 2025: Weighted Average Weighted-Average Aggregate Number of Exercise Remaining Contractual Intrinsic Value Options Price Term (in thousands) Outstanding at June 30, 2025 60,253 $ 121.41 Granted 8,379 266.17 Exercised (5,925) 102.80 Expired or forfeited (618) $ 152.22 Outstanding at December 31, 2025 62,089 $ 142.41 7.6 years $ 7,087 Exercisable at December 31, 2025 36,226 $ 109.21 6.6 years $ 5,283 The following summari …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing