OSI SYSTEMS INC

Previous wording

This management’s discussion and analysis of financial condition as of March 31, 2026 and results of operations for the three and nine months ended March 31, 2026 should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 filed with the SEC.

Current wording

This management’s discussion and analysis of financial condition as of September 30, 2026 and results of operations for the three months ended September 30, 2026 should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026 filed with the SEC.

Previous wording

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to our current expectations, beliefs, and projections concerning matters that are not historical facts. Words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “intend,” “may,” “should,” “will,” “would,” and similar words and expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions and contingencies, many of which are outside our control. Assumptions upon which our forward-looking statements are based could prove to be inaccurate, and actual results may differ materially from those expressed in or implied by such forward-looking statements. Important factors that could cause our actual results to differ materially from our expectations are disclosed in this report, our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (including Part I, Item 1, “Business,” Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and other documents filed by us from time to time with the SEC. Such factors, of course, do not include all factors that might affect our business and financial condition. We could be exposed to a variety of negative consequences as a result of delays related to the award of domestic and international contracts; failure to secure the renewal of key customer contracts; delays in customer programs; government shutdown; delays in revenue recognition related to the timing of customer acceptance; the impact of potential information technology, cybersecurity or data security breaches; changes in domestic and foreign government spending, budgetary, procurement, and trade policies adverse to our businesses; the impact of the Russia-Ukraine conflict or conflicts in the Middle East, including the potential for broad economic disruption and increased global tensions; global economic uncertainty, including the impact of tariffs; material delays and cancellations of orders or deliveries thereon, supply chain disruptions, plant closures, or other adverse impacts on our ability to execute business plans; unfavorable currency exchange rate fluctuations; unfavorable interest rate fluctuations; effect of changes in tax legislation, guidance and interpretations; market acceptance of our new and existing technologies, products and services; our ability to win new business and convert any orders received to sales within the fiscal year; contract and regulatory compliance matters, and actions, which if brought, could result in judgments, settlements, fines, injunctions, debarment or penalties; and other risks and uncertainties, in…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to our current expectations, beliefs, and projections concerning matters that are not historical facts. Words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “intend,” “may,” “should,” “will,” “would,” and similar words and expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions and contingencies, many of which are outside our control. Assumptions upon which our forward-looking statements are based could prove to be inaccurate, and actual results may differ materially from those expressed in or implied by such forward-looking statements. Important factors that could cause our actual results to differ materially from our expectations are disclosed in this report, our Annual Report on Form 10-K for the fiscal year ended June 30, 2026 (including Part I, Item 1, “Business,” Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and other documents filed by us from time to time with the Securities and Exchange Commission (“SEC”). Such factors, of course, do not include all factors that might affect our business and financial condition. We could be exposed to a variety of negative consequences as a result of delays related to the award of domestic and international contracts; failure to secure the renewal of key customer contracts; delays in customer programs; government shutdowns and other lapses in, or delays of government appropriations; delays in revenue recognition related to the timing of customer acceptance; the impact of potential information technology, cybersecurity or data security breaches; changes in domestic and foreign government spending and budgetary, procurement and trade policies adverse to our businesses; the impact of the Russia-Ukraine conflict or conflicts in the Middle East, including the potential for broad economic disruption, increased global tensions, or potential disruptions to customer operations, procurement activities, transportation networks and project timing; global economic uncertainty, including the impact of tariffs; material delays and cancellations of orders or deliveries thereon, supply chain and transportation networks disruptions, plant closures, or other adverse impacts on our ability to execute business plans; unfavorable currency exchange rate fluctuations; unfavorable interest rate fluctuations; the effect of changes in tax legislation; market acceptance of our new and existing technologies, products and services; our ability to win new business and convert any orders received to sales wi…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products and provide related services in diversified markets, including homeland security, healthcare, defense and aerospace. We have three operating divisions: (a) Security, providing security and inspection systems, turnkey security screening solutions and radio frequency equipment; (b) Optoelectronics and Manufacturing, providing specialized electronic components for our Security and Healthcare divisions, as well as to third parties for applications in the defense and aerospace markets, among others; and (c) Healthcare, providing patient monitoring, cardiology and remote monitoring, and connected care systems and associated accessories.

Current wording

We are a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products and provide related services in diversified markets, including homeland security, healthcare, defense and aerospace. We have three operating divisions, each of which is a reportable segment: (a) Security, providing security and inspection systems, high-power RF systems and turnkey security screening solutions; (b) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for applications in the defense and aerospace markets, among others, and for our Security and Healthcare divisions; and (c) Healthcare, providing patient monitoring, cardiology and remote monitoring, and connected care systems and associated accessories.

Previous wording

Security Division. Through our Security division, we provide security screening products and services globally, as well as turnkey security screening solutions. These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects for weapons, explosives, drugs, radioactive and nuclear materials and other contraband. We also advance the application of radio frequency broadcast transmission and scientific and industrial equipment for a global customer base across various sectors.

Current wording

Security Division. Through our Security division, we provide security screening products, multi-platform software solutions, and services globally, as well as turnkey security screening solutions. These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects for weapons, explosives, drugs, radioactive and nuclear materials and other contraband. We also provide high-power RF systems for transmission, surveillance and other applications for defense, research and industrial use. Revenues from our Security division accounted for 66% and 65% of our total consolidated revenues for the three months ended September 30, 2025 and 2026, respectively.

Previous wording

Optoelectronics and Manufacturing Division.* *Through our Optoelectronics and Manufacturing division, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, telecommunications, office automation, computer peripherals, industrial automation and consumer products. We also provide our optoelectronic devices and electronics manufacturing services to OEM customers and to our own Security and Healthcare divisions.

Current wording

Optoelectronics and Manufacturing Division.* *Through our Optoelectronics and Manufacturing division, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, telecommunications, office automation, computer peripherals, industrial automation, and consumer products. We also provide our optoelectronic devices and electronics manufacturing services to OEM customers, and our own Security and Healthcare divisions. Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 23% and 26% of our total consolidated revenues for the three months ended September 30, 2025 and 2026, respectively.

Previous wording

Healthcare Division.* *Through our Healthcare division, we design, manufacture, market and service patient monitoring, cardiology and remote monitoring, and connected care systems globally for sale primarily to hospitals and medical centers. Our products monitor patients in critical, emergency and perioperative care areas of the hospital and provide information, through wired and wireless networks, to physicians and nurses who may be at the patient’s bedside, in another area of the hospital or even outside the hospital.

Current wording

Healthcare Division.* *Through our Healthcare division, we design, manufacture, market and service patient monitoring, cardiology and remote monitoring, and connected care systems globally for sale primarily to hospitals and medical centers. Our products monitor patients in critical, emergency and perioperative care areas of the hospital and provide information, through wired and wireless networks, to physicians and nurses who may be at the patient’s bedside, in another area of the hospital or even outside the hospital. Revenues from our Healthcare division accounted for 11% and 9% of our total consolidated revenues for the three months ended September 30, 2025 and 2026, respectively.

Previous wording

Global Economic Considerations. Our products and services are sold in numerous countries worldwide, with a large percentage of our sales generated outside the United States. Therefore, we are exposed to and impacted by global macroeconomic factors, U.S. and foreign government policies and foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, interest rates, and labor shortages. Increasing diplomatic and trade friction between the U.S. and China has also created significant uncertainty in the global economy. These global macroeconomic factors, coupled with political unrest internationally and the volatile U.S. political climate, have created uncertainty and impacted demand for certain of our products and services. The continued conflict between Russia and Ukraine and in the Middle East and the sanctions imposed in response to this conflict have increased global economic and political uncertainty. While the impact of these factors remains uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition or results of operations. We do not know how long this uncertainty will continue. These factors could have a material adverse effect on our business, results of operations and financial condition.

Current wording

Global Economic Considerations. Our products and services are sold in numerous countries worldwide, with a large percentage of our sales generated outside the United States. Therefore, we are exposed to and impacted by global macroeconomic factors, U.S. and foreign government policies and foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, interest rate policies, and labor shortages. Increasing diplomatic and trade friction between the U.S. and China has also created significant uncertainty in the global economy. These global macroeconomic factors, coupled with political unrest internationally and the volatile U.S. political climate, have created uncertainty and impacted demand for certain of our products and services. In addition, the military conflicts in the Middle East and the continued conflict between Russia and Ukraine, each as discussed further below, together with the sanctions, export controls and other measures imposed in response to these conflicts have increased global economic and political uncertainty. While the impact of these factors remains uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition or results of operations. We do not know how long this uncertainty will continue. These factors could have a material adverse effect on our business, results of operations and financial condition.

Previous wording

Global Trade. The current domestic and international political environment, including in relation to recent and further potential changes by the U.S. and other countries in policies on global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy and global trade. This uncertainty is exacerbated by sanctions imposed by the U.S. government against certain businesses and individuals in select other countries. Tariffs and trade restrictions and retaliatory measures by such other countries could result in revenue reductions for the Company or cost increases on material used in our products. We are taking measures to contain costs to reduce the impact of tariffs and to date, such measures have helped reduce our exposure to these conditions. Continued or increased uncertainty regarding global trade due to these or other factors may require us to modify our current business practices and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Current wording

Global Trade. The current domestic and international political environment, including in relation to recent and further potential changes by the U.S. and other countries in policies on global trade and tariffs, has resulted in uncertainty surrounding the future state of the global economy and global trade. This uncertainty is exacerbated by sanctions imposed by the U.S. government against certain businesses and individuals in select other countries. Tariffs, trade restrictions and retaliatory measures by such other countries could result in reductions in our revenues or cost increases on materials used in our products, which could materially and adversely affect our business, financial condition, results of operations and cash flows. Consistent with our strategy, we are taking measures to contain costs to reduce the impact of tariffs. To date, our strategies have mitigated, but not eliminated, our exposure to these conditions. We continue to monitor changes in trade policies and evaluate additional actions to manage potential effects on product costs, supply availability and customer demand. Continued or increased uncertainty regarding global trade due to these or other factors may require us to modify our current business practices and could have a material adverse effect on our business, results of operations and financial condition.

Previous wording

Supply and Demand for Memory and Semiconductor Components. We have experienced tighter supply conditions and increased costs for certain memory associated and semiconductor components, reflecting a broader global imbalance between supply and demand for memory used in data center and AI related infrastructure. While we have taken actions to mitigate these impacts, continued constraints in component availability could adversely affect our business.

Current wording

Supply and Demand for Memory and Semiconductor Components. We have experienced tighter supply conditions and increased costs for certain memory and other semiconductor components, reflecting a broader global imbalance between supply and demand for memory used in data center and AI-related infrastructure. While we have taken actions to mitigate these impacts, including qualifying alternative sources, purchasing certain components in advance of demand and seeking price adjustments from customers, we may not be able to fully offset these cost increases, and continued constraints in component availability could delay our ability to fulfill customer orders and adversely affect our gross margins, business and results of operations.

Previous wording

Russia’s Invasion of Ukraine. The invasion of Ukraine by Russia and the sanctions imposed in response to this conflict have increased global economic and political uncertainty. This has the potential to indirectly disrupt our supply chain and access to certain resources. While we have not experienced material adverse impacts to date resulting from this conflict, we have certain research and development activities within Ukraine for our Healthcare division which have been somewhat impacted. The conflicts also have increased the threat of malicious cyber-activity from other countries and other actors.

Current wording

Russia-Ukraine Conflict. The ongoing conflict between Ukraine and Russia and the sanctions and export controls imposed in response to this conflict have increased global economic and political uncertainty. This has the potential to indirectly disrupt our supply chain and access to certain resources. While we have not experienced significant adverse impacts to date resulting from this conflict, we have certain research and development activities within Ukraine for our Healthcare division which have experienced limited disruption. This conflict and the conflict in the Middle East also have increased the threat of malicious cyber-activity from other countries and other actors.

Previous wording

Currency Exchange Rates. On a year-over-year basis, currency exchange rates positively impacted reported sales by approximately 0.8% for the nine months ended March 31, 2026 compared to the nine months ended March 31, 2025, primarily due to the weakening of the U.S. dollar against other foreign currencies in 2026. Any strengthening of the U.S. dollar against foreign currencies would adversely impact our sales for the remainder of the fiscal year, and any weakening of the U.S. dollar against foreign currencies would positively impact our sales for the remainder of the fiscal year.

Current wording

Currency Exchange Rates. On a year-over-year basis, currency exchange rates positively impacted reported sales by approximately 0.04% for the three months ended September 30, 2026 compared to the three months ended September 30, 2025, primarily due to the weakening of the U.S. dollar against certain other foreign currencies compared to the prior year period. Any strengthening of the U.S. dollar against foreign currencies would adversely impact our sales in future periods, and any weakening of the U.S. dollar against foreign currencies would positively impact our sales in future periods.

Previous wording

Government Policies. Our results of operations and cash flows could be materially affected by changes in U.S. or foreign government legislative, regulatory or enforcement policies, as well as potential or actual U.S. government shutdowns, including the impact on near-term bookings and revenues of the recent Department of Homeland Security shutdown.

Current wording

Government Policies. Our results of operations and cash flows could be materially affected by changes in U.S. or foreign government legislative, regulatory or enforcement policies, as well as potential or actual U.S. government shutdowns, including the impact on near-term bookings and revenues of the most recent Department of Homeland Security shutdown. U.S. government operations are currently funded under a continuing resolution that expires on December 11, 2026. A further lapse in appropriations, or an extended period of funding under continuing resolutions, could delay U.S. government procurements, contract awards, deliveries and payments and adversely affect our results of operations.

Previous wording

Revenues for the Security division during YTD Q3 fiscal 2026 increased year-over-year due to an increase in product and service revenues of approximately $25.5 million and $53.5 million, respectively. The increase in product revenues was primarily driven by growth in aviation screening systems and radio frequency products. The increase in service revenue was due primarily to an increase in the installed base of products.

Current wording

Revenues for the Security division during Q1 fiscal 2027 increased year-over-year due to increases in product and service revenues of approximately $3.6 million and $6.2 million, respectively. The increase in product revenues was primarily due to increases in RF system and checkpoint screening revenues, partially offset by lower cargo and vehicle inspection revenues. The increase in service revenues was primarily attributable to growth in the installed base of products and airport screening services.

Previous wording

Revenues for the Optoelectronics and Manufacturing division during YTD Q3 fiscal 2026 increased year-over year as a result of an increase in revenue in both our contract manufacturing business and our optoelectronics business.

Current wording

Revenues for the Optoelectronics and Manufacturing division during Q1 fiscal 2027 increased year-over-year due to increases in product revenues of approximately $5.5 million in our optoelectronics business and $9.2 million in our contract manufacturing business.

Previous wording

Gross profit is impacted by sales volume and changes in overall manufacturing-related costs, such as raw materials and component costs, warranty expense, provision for inventory, freight, tariffs, and logistics. Gross profit were comparable to the same period last year. The gross margin decreased as compared to the prior year comparable period as the prior year period had a more favorable mix of Security division product revenues.

Current wording

Gross profit is impacted by sales volume and changes in overall manufacturing-related costs, such as raw materials and component costs, warranty expense, provision for inventory, freight, tariffs, and logistics. Gross profit for Q1 fiscal 2027 increased to $123.8 million from $123.2 million in the prior-year period. The increase was primarily attributable to higher gross profit in our Security and Optoelectronics and Manufacturing divisions, partially offset by lower gross profit in our Healthcare division. Gross profit as a percentage of net revenues decreased to 30.7% from 32.0% in the prior-year period, reflecting lower Healthcare revenues, which generally carry relatively higher gross margins; unfavorable changes in revenue mix within the Security division; and higher Optoelectronics and Manufacturing revenues, which generally carry relatively lower gross margins.

Previous wording

Selling, general and administrative*.* Our significant selling, general and administrative (“SG&A”) expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, foreign currency translation, and depreciation and amortization expense. Our SG&A expenses for Q3 fiscal 2026 were $1.7 million lower than in the same prior-year period, primarily due to a favorable impact from foreign currency exchange rates, favorable settlement of a post-acquisition claim and lower professional fees, partially offset by an increase in bad debt expense.

Current wording

Selling, general and administrative*.* Our significant selling, general and administrative (“SG&A”) expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, and depreciation and amortization expense. SG&A expense for Q1 fiscal 2027 increased $1.7 million compared to the same prior-year period, primarily due to higher salaries and benefits, occupancy costs, and certain technology, marketing, and outside-services costs. These increases were partially offset by lower acquired-intangible amortization, bad-debt expense, external commissions, and travel expense.

Previous wording

Research and development. Research and development (“R&D”) expenses include research related to new product development and product enhancements. R&D expenses were higher than the same period last year primarily due to an increase in compensation costs to support new product development initiatives in our Security and Healthcare divisions.

Current wording

Research and development*.* Research and development (“R&D”) expenses include research related to new product development and product enhancement expenditures. R&D expenses for Q1 fiscal 2027 decreased $1.0 million compared to the same prior-year period largely due to lower outside services costs, partially offset by higher compensation and certain technology and research-related expenditures.

Previous wording

Impairment, restructuring and other charges. Impairment, restructuring and other charges generally consist of costs relating to reductions in our workforce, facilities consolidation, costs related to acquisition activity, and other non-recurring charges. During Q3 fiscal 2026, we recognized $6.2 million in impairment, restructuring and other charges, which included $0.2 million for impairment of assets, $1.7 million for employee terminations, $2.0 million for acquisition-related costs, $1.2 million for non-recurring business unit modifications and $1.1 million for a legal settlement, primarily in our Healthcare division. During Q3 fiscal 2025, we recognized $2.3 million in impairment, restructuring and other charges, which included $1.8 million for employee terminations and $0.5 million for facility closure costs.

Current wording

Restructuring and other charges*.* Restructuring and other charges generally consist of charges relating to reductions in our workforce, facilities consolidation, costs related to acquisition activity, legal charges and other non-recurring charges. During Q1 fiscal 2027, restructuring and other charges were $2.1 million, which consisted of $0.2 million for acquisition-related costs, $0.5 million for employee terminations, $0.1 million for facility closures, $0.3 million in legal charges, and $1.0 million for non-recurring charges in the Security and Healthcare divisions. During Q1 fiscal 2026, restructuring and other charges were $2.7 million, which consisted of $2.4 million primarily for non-recurring charges in the Security and Healthcare divisions and $0.3 million for employee terminations.

Previous wording

Income taxes. The effective tax rate for a particular period varies depending on a number of factors, including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections (v) tax holidays granted to certain of our international subsidiaries and (vi) discrete tax items. For Q3 fiscal 2025 and 2026, we recognized a provision for income taxes was $6.9 million and $9.0 million, respectively. The effective tax rates for Q3 fiscal 2025 and 2026 were 14.3% and 18.3%, respectively. During Q3 fiscal 2026 we recognized net discrete tax benefits of $2.6 million related to equity-based compensation under ASU 2016- 09 and uncertain tax benefits. During Q3 fiscal 2025 we recognized net discrete tax benefits of $4.5 million related to equity-based compensation under ASU 2016-09 and changes in prior year tax estimates and uncertain tax benefits.

Current wording

Income taxes. The effective tax rate for a particular period varies depending on a number of factors including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections, (v) tax holidays granted to certain of our international subsidiaries, (vi) return to provision adjustments and (vii) changes in tax legislation. For Q1 fiscal 2027 and 2026, we recognized a provision for income taxes of $5.7 million and $5.1 million, respectively. The effective tax rates for Q1 fiscal 2027 and 2026 were 18.8% and 19.9%, respectively. The decrease in the effective tax rate for Q1 fiscal 2027 primarily reflects discrete tax benefits associated with equity-based compensation recognized under ASU 2016-09 and the expiration of applicable statutes of limitations related to certain uncertain tax benefits. During Q1 fiscal 2027 and 2026, we recognized a net discrete tax benefit of $0.7 million and $0.9 million, respectively, related to equity-based compensation under ASU 2016-09. In addition, during Q1 fiscal 2027, we recognized a net discrete tax benefit of $0.5 million related to changes in uncertain tax benefits resulting from the expiration of applicable statutes of limitations.

Previous wording

Our principal sources of liquidity are our cash and cash equivalents, cash generated from operations and our credit facilities. Cash and cash equivalents totaled $345.2 million at March 31, 2026 compared to $106.4 million at June 30, 2025. We currently anticipate that our available funds, credit facilities and cash flow from operations will be sufficient to meet our operational cash needs for the next 12 months and the foreseeable future beyond that. In addition, we anticipate that cash generated from operations, without repatriating earnings from our non-U.S. subsidiaries, and our credit facilities will be sufficient to satisfy our current obligations in the U.S.

Current wording

Our principal sources of liquidity are our cash and cash equivalents, short-term investments, cash generated from operations, existing cash borrowing arrangements and access to capital markets. Cash and cash equivalents totaled $236.3 million at September 30, 2026, compared with $359.8 million at June 30, 2026. Short-term investments were $65.7 million at September 30, 2026, compared with $0.2 million at June 30, 2026. We currently anticipate that our available cash and cash equivalents, short-term investments, credit facilities and cash flow from operations will be sufficient to meet our operational cash needs for the next 12 months and foreseeable future. In addition, we anticipate that cash generated from operations, without repatriating earnings from our non-U.S. subsidiaries, and our credit facilities will be sufficient to satisfy our obligations in the U.S.

Previous wording

In July 2025 we amended and extended our credit facility to mature in July 2030, to increase the revolving limit from $600 million to $725 million and replaced the $128.1 million term loan with a new $100.0 million term loan. 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. As of March 31, 2026, there were no borrowings outstanding under the revolving credit facility, $106.7 million of outstanding letters of credit, and $95.0 million outstanding under the term loan. As of March 31, 2026, the total amount available under our credit facility was $618.3 million. See Note 8 to the consolidated financial statements for further discussion.

Current wording

Our senior secured credit facility comprises a term loan and a $725.0 million revolving credit facility which mature in July 2030. The revolving credit facility includes a $350.0 million sub-limit for letters of credit, which includes up to $300.0 million for borrowings in certain foreign currencies. As of September 30, 2026, there were no borrowings under the revolving credit facility, $87.6 million was outstanding under the letters of credit sub-facility, and $90.0 million was outstanding under the term loan. As of September 30, 2026, the amount available to borrow under the credit facility was $637.4 million. See Note 8 to the condensed consolidated financial statements for further discussion.

Previous wording

*Cash Provided by Operating Activities.*Cash flows from operating activities can fluctuate significantly from period to period, as net income, adjusted for non-cash items, and working capital fluctuations impact cash flows. For YTD Q3 fiscal 2026, cash provided by operations was $93.8 million compared to $97.0 million in the comparable prior-year period. The net decrease in cash flows from operating activities was due primarily to unfavorable changes in net working capital, including lower advances from customers and lower impact of changes in deferred revenue compared to the same prior-year period. These unfavorable impacts were partially offset by favorable changes in accounts receivable, inventories, and accrued payroll and related expenses, as well as higher net income compared to the same prior-year period.

Current wording

Cash Provided by Operating Activities. Cash flows from operating activities can fluctuate significantly from period to period due to changes in net income, adjusted for non-cash items, and working capital. Cash provided by operating activities was $37.1 million during Q1 fiscal 2027, compared to $17.1 million during the same prior-year period. The increase was primarily due to higher net income and favorable changes in working capital. Significant contributors included increased accounts payable of $21.5 million compared to $12.0 million in the prior-year period, increased advances from customers of $21.7 million compared to $11.1 million in the prior-year period, and lower cash usage from deferred revenue. These favorable changes were partially offset by inventory growth of $48.5 million, compared to $47.4 million in the prior-year period, and a lower source of cash from accounts receivable of $10.3 million compared to $17.0 million in the prior-year period. Inventory increased to support anticipated fiscal 2027 revenue growth primarily in the Security and Optoelectronics and Manufacturing divisions.

Previous wording

See Note 8 to the condensed consolidated financial statements for a detailed discussion regarding issuance of the 2031 Notes, our revolving credit facility and other borrowings.

Current wording

See Note 8 to the condensed consolidated financial statements for a detailed discussion regarding our credit facility and other borrowings.

Previous wording

Our cash and cash equivalents totaled $345.2 million at March 31, 2026. Of this amount, approximately 25% was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by our subsidiaries in the United Kingdom, India, Singapore, Canada, and Malaysia and to a lesser extent in Albania, Australia, and Guatemala, among other countries. We intend to permanently reinvest certain earnings from foreign operations, and we currently do not anticipate that we will need this cash in foreign countries to fund our U.S. operations. In the event we repatriate cash from certain foreign operations and if taxes have not previously been withheld on the related earnings, we would provide for withholding taxes at the time we change our intention with regard to the reinvestment of those earnings.

Current wording

Our cash and cash equivalents totaled $236.3 million at September 30, 2026. Of this amount, approximately 35% was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by our subsidiaries in India, the United Kingdom, Singapore, and Canada. We intend to permanently reinvest certain earnings from foreign operations, and we currently do not anticipate that we will need this cash in foreign countries to fund our U.S. operations. In the event we repatriate cash from certain foreign operations and if taxes have not previously been withheld on the related earnings, we would provide for withholding taxes at the time we change our intention with regard to the reinvestment of those earnings.

Previous wording

During the nine months ended March 31, 2026, other than the replacement of the $128.1 million term loan with a $100.0 million term loan in July 2025 in connection with the expansion and extension of our credit facility and issuance of the 2031 Notes in November 2025, there were no material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. See Notes 1, 6, 8 and 10 to the condensed consolidated financial statements for additional information regarding our contractual obligations.

Current wording

During the first quarter of fiscal year 2027, there were no material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026. See Notes 1, 6, 8 and 10 to the condensed consolidated financial statements for additional information regarding our contractual obligations.

Previous wording

From time to time, new accounting pronouncements are issued by the 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. See Note 1 for further discussion. There were no new pronouncements adopted in the third quarter of fiscal year 2026.

Current wording

From time to time, new accounting pronouncements are issued by the 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. During the first quarter of fiscal year 2027, we adopted ASU 2024-04 and ASU 2025-05. These adoptions did not have a material impact on our condensed consolidated financial statements. See Note 1 for further discussion.