OSI Systems closed the latest fiscal year as a security-inspection franchise that grew through the runoff of its once-dominant Mexico program and still missed its own revenue range because Middle East site access slipped. The investment debate is whether a record inspection backlog, two fresh Customs and Border Protection awards, and a rising service mix replace the high-margin Mexican product work, or whether government timing risk is now the business. Annual sales still advanced, but the fourth quarter declined because planned Security shipments moved past year-end rather than disappearing from the book.
Mexico-related Security sales fell by nearly $150 million across the year, a drag that would have crushed a less diversified book. Service revenue rose to $441 million, and Security still produced a high-teens adjusted operating margin even as product mix worsened. Cash conversion was the cleanest print of the year after large Mexico collections finally arrived. The mix argument is that recurring inspection service and radio-frequency defense work carry better visibility than another sovereign turnkey build.
Fourth-quarter revenue of $484 million sat below the year-ago print after roughly $50 million of Middle East deliveries slipped. Management introduced next-year revenue guidance that still implies mid-single-digit growth and asked investors to treat the slip as timing. The question for the coming year is whether those deferred systems, the Customs awards, and faster service growth actually show up in shipments, or whether another geopolitical pause keeps the multiple compressed.