OSI Systems (OSIS) Morgan Stanley Technology, Media & Telecom Conference 2026 summary

Business overview and segment performance

• Operates in three divisions: security (over two-thirds of revenue), optoelectronics (about 25%), and healthcare (under 10%).

• Security division, branded as Rapiscan, is the largest global security detection provider, focusing on cargo, vehicle, and aviation inspection.

• Optoelectronics supplies sensors and components to Fortune 500 firms and internally, enhancing gross margins through vertical integration.

• Healthcare division, Spacelabs, sells patient monitors and cardiology products, with about half of revenue recurring from services and supplies.

• Opto division has seen double-digit growth, benefiting from global manufacturing outside China and strong demand from both external and internal customers.

Security division growth drivers and market dynamics

• Security business has grown significantly, especially in cargo and vehicle inspection, now holding over 50% market share in that segment.

• Recurring revenue models, including Security as a Service and long-term contracts, are expanding, with recurring revenue expected to rise from 30% to 40% over time.

• Proprietary Certscan software and turnkey solutions differentiate offerings and have secured major contracts, such as $800 million in Mexico.

• Global conflicts and heightened geopolitical risks have increased the opportunity pipeline, with new U.S. government funding (One Big Beautiful Bill) and Golden Dome initiatives providing further tailwinds.

• Product replacement cycles in aviation and cargo offer future growth, with a major U.S. checked baggage refresh expected in a few years.

Healthcare and optoelectronics segment updates

• Healthcare faces strong competition from major players but is investing in a new patient monitoring platform, expected to launch in about 12 months.

• Cardiology products in healthcare deliver high contribution margins, and recurring revenue in this segment is about 50%.

• Leadership changes and new strategies are expected to drive accelerated healthcare growth into fiscal 2027.

• Optoelectronics division is experiencing industry-leading growth and margins, with a global manufacturing footprint and increased business from existing and new clients.