OSIS

• Overall Financial Performance

• Fiscal 2026 set records for annual revenue, non-GAAP earnings per share, and annual and fourth quarter operating cash flow
• Full year non-GAAP adjusted EPS grew 11% year over year to a record $10.35; fourth quarter non-GAAP adjusted EPS grew 17% year over year to a record $3.78
• Record fourth quarter operating cash flow of $182 million; full year operating cash flow of $276 million
• Ended the year with a record backlog of $1.9 billion, including all deferred Middle East deliveries that were pushed out of fiscal 2026
• Strengthened balance sheet, ended fiscal 2026 with $360 million in cash and no drawn amounts under credit lines; net leverage of 2.1 provides ample capacity for organic investment and acquisitions
• Repurchased 1.1 million shares in fiscal 2026; the board authorized an additional 1 million share repurchase, leaving ~1.1 million shares available under the program

• Security Division Updates

• Won two 5-year IDIQ contracts from CBP (DHS) with ceilings of $200 million and $85 million; already received a $21 million delivery order, with OSI as the sole awardee for both contracts
• Selected as the official security technology provider for the LA 28 Olympic and Paralympic Games, building on proven experience at large global events
• Record customer engagement for the radio frequency (RF) defense business; received the largest RF award in company history: a $235 million undefinitized contract for over-the-horizon radar subsystems for homeland defense, with follow-on opportunities expected
• Prioritizing recurring service revenue growth, supported by the large global installed base; expects substantial service revenue growth in fiscal 2027

• Optoelectronics Division Updates

• Strong performance driven by broad-based demand across aerospace, defense, healthcare and industrial end markets
• Vertically integrated model and global manufacturing footprint positions OSI well to capture new business as customers diversify supply chains
• Solid backlog provides strong revenue visibility heading into fiscal 2027

• Healthcare Division Updates

• Delivered an improved fourth quarter following year-long operational improvement initiatives
• Continues to focus on expanding the installed base, advancing development of the next-generation patient monitoring platform, and delivering innovative clinical solutions

• Management introduced fiscal 2027 guidance of $1.875 billion to $1.93 billion in total revenues, representing 5% to 8.1% year over year growth • Adjusted non-GAAP EPS guidance is $11.13 to $11.49, representing 7.5% to 11% year over year growth • Guidance takes a conservative approach to Middle East business, factoring in ongoing conflict-related delays to near-term deliveries and bookings, and assumes a substantial portion of deferred Q4 2026 deliveries will occur in the second half of fiscal 2027 • Only firm delivery orders in hand for the new CBP IDIQ contracts are included in fiscal 2027 guidance; the vast majority of revenue from these awards is expected to be recognized in fiscal 2028 and beyond, in line with the multi-year contract term • Management expects revenue growth to be strongest in the second half of fiscal 2027 • Strong double-digit growth in full year service revenues is projected for fiscal 2027 • Guidance excludes potential impacts from impairments, restructuring costs, non-recurring items and discrete tax events

For the fourth quarter of fiscal 2026:

• Security: Revenues declined 7% year over year, impacted by Middle East conflict-related delivery delays and difficult year-over-year comparisons against prior year higher Mexico program revenues. Adjusted operating margin expanded to 20.8% from 20.4% year over year, driven by stronger gross margins and reduced operating expenses.
• Optoelectronics: Revenues increased 5% year over year. Full year fiscal 2026 revenues grew 9% to $451 million. Adjusted operating margin increased to 14.7% from 13.6% year over year, benefiting from economies of scale and a more favorable revenue mix.
• Healthcare: Revenues grew approximately 5% year over year. Adjusted operating margin expanded significantly to 10% from 1% year over year, reflecting improved operational efficiency and operating leverage from higher volumes.

Full year consolidated revenues grew 4% year over year to a record $1.79 billion. Full year service revenues grew 13% to $441 million, with 9% year over year growth in fourth quarter security service revenues (excluding prior year Mexico installation activity).

• Ongoing conflict in the Middle East has caused delivery delays and deferred bookings for security projects in the region, pushing approximately $50 million in planned fiscal 2026 revenues to future periods • Final revenue and earnings may differ materially from guidance due to uncertainties around the timing of backlog conversion to revenue, new booking activity, cash collection timelines, supply chain disruptions, tariff changes, and the future progression of the Middle East conflict • Margins can fluctuate quarter to quarter based on changes in product and service mix, volumes, supply chain costs, foreign exchange rates, and tariffs • A large Mexican customer accounted for 25% of total accounts receivable at the end of Q4 2026, though collections are expected to continue throughout fiscal 2027

Q: Can you clarify whether the $50 million in delayed Middle East deliveries were for local customers or shipments through the region for other customers, and what portion of these deferred orders do you expect to deliver in fiscal 2027?

A: Nearly all delayed deliveries are for customers based in the Middle East. After Q3, management assumed a significant portion of these orders would be delivered in Q4 2026, but all were pushed out. A substantial portion of the deferred deliveries is expected to be completed in the second half of fiscal 2027, not all in that period.

Q: Why are only a small portion of the recent large CBP IDIQ contract awards included in fiscal 2027 guidance, and when will most of this revenue be recognized?

A: These are multi-year IDIQ contracts, and only firm delivery orders already in hand are included in fiscal 2027 guidance. The vast majority of revenue from these awards will be recognized in fiscal 2028 and beyond. As the sole awardee for both contracts, this gives OSI strong long-term visibility for future growth.

Q: What is your outlook for Optoelectronics segment margins as you add new capacity to meet growing supply chain diversification demand?

A: Optoelectronics has been attracting a stronger customer profile that has driven improved margins, and the plan for fiscal 2027 is to continue pairing revenue growth with operating margin expansion. Margins will vary quarter to quarter based on revenue mix, but management expects further overall margin expansion through fiscal 2027.

Q: What is driving long-term margin expansion for the Security segment, and can margins improve there over time similar to Optoelectronics and Healthcare?

A: Management's long-term plan is to pair top-line growth with operating margin expansion across all segments. Service revenues, which carry inherently higher margins than product revenues, are expected to grow faster than product revenues going forward. As higher-margin service becomes a larger share of total Security segment revenue over time, this will drive sustained operating margin expansion for the segment.