OSI Systems OSIS Q3 2026 Earnings Transcript

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DATE

May 4, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Deepak Chopra
• President and Chief Operating Officer — Ajay Mehra
• Executive Vice President and Chief Financial Officer — Alan I. Edrick

TAKEAWAYS

• Total Revenue -- $453 million, setting a fiscal Q3 record for OSI Systems (NASDAQ:OSIS).
• Non-GAAP Diluted EPS -- $2.60, establishing a fiscal Q3 record for the company.
• Security Segment Revenue -- $319 million, with revenues excluding Mexico contracts up 25% year over year due to international growth in service, aviation, and RF revenues.
• Optoelectronics and Manufacturing Segment Revenue -- $111 million, a Q3 record, reflecting 10% year-over-year growth and driven by a diversified product and customer base.
• Healthcare Segment -- Lower sales and profitability resulting from order timing in the United States, partially offset by growth in the EMEA region.
• Book-to-Bill Ratio -- 1.3, with a record $1.9 billion backlog fueled by major awards including a $235 million UCA for Homeland Defense over-the-horizon radar systems.
• RF Business Revenue -- $38 million in the quarter, a new record for this recently acquired business unit.
• Operating Cash Flow -- $14 million generated in the quarter, with post-quarter collection of $74 million from the largest Mexico receivable, expected to support strong Q4 free cash flow.
• Gross Margin -- 33%, down slightly due to revenue mix, with higher service margins offset by less favorable product mix.
• SG&A Expense -- $71.5 million, down 2%, and representing 15.8% of sales, indicating cost discipline.
• R&D Expense -- $19.5 million, or 4.3% of revenues, up from $18.6 million or 4.2% the previous year, reflecting increased investment in innovation.
• Adjusted Operating Margin -- 14% company-wide, stable sequentially, but slightly below the prior year's level.
• Security Segment Adjusted Operating Margin -- 18.3%, up from last year's 18.1%, supported by growth in high-margin service revenues.
• Opto Segment Adjusted Operating Margin -- 13.5%, down from 14% due to less favorable revenue mix.
• Healthcare Segment Adjusted Operating Margin -- Negligible, attributed to soft sales.
• Effective Tax Rate (GAAP) -- 18.3%, up from 14.3%; normalized non-GAAP tax rate steady at 23.6%.
• CapEx -- $8 million, and Depreciation & Amortization -- $9.5 million for the quarter.
• Net Leverage -- 2.2x at quarter-end, as per credit agreement definition.
• Fiscal 2026 Guidance -- Revenue and non-GAAP EPS guidance maintained, with management noting sensitivity to timing of backlog conversion, DHS shutdown effects, Middle East conflict, and supply chain disruptions.

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RISKS

• Ajay Mehra stated, "Towards the latter half of Q3, we began to see initial impacts from conflict in the Middle East. Certain programs and activities have been delayed by factors such as logistics constraints, travel restrictions, and heightened security protocols."
• The company noted the recent U.S. Department of Homeland Security shutdown delayed Security segment bookings and could affect near-term Q4 revenues due to timing-related disruptions.
• Alan I. Edrick said, "The actual impact on the company's financial results of timing changes on the expected conversion of backlog to revenues, new bookings, timing of cash collections, tariffs, the recent DHS shutdown, the conflicts in the Middle East, and supply chain disruptions, among other factors, is difficult to predict and could vary significantly from the anticipated impact currently reflected in our guidance."

SUMMARY

The company delivered record fiscal Q3 revenues and non-GAAP EPS, underpinned by strong Security and Opto segment performances and reinforced by a record $1.9 billion backlog. Major contract wins, including a $235 million award for Homeland Defense and a $40 million medical OEM order in Opto, expanded future visibility and supported management's continued confidence. The significant post-quarter collection of $74 million on Mexico receivables is expected to drive robust operating and free cash flow as the company moves into Q4. Guidance for fiscal 2026 remains unchanged, with management explicitly citing the unpredictable nature of backlog conversion and external macro disruptions.

• The record backlog, combined with ongoing high book-to-bill ratios, may enable sustained multi-period revenue growth if order conversion proceeds as projected.
• Management emphasized a continued shift towards higher-margin recurring service and support revenues across the business.
• The RF business contribution, especially its record $38 million quarterly revenue, reflects scaling execution and payoff from recent acquisitions.
• Ajay Mehra highlighted multi-geography manufacturing as a competitive advantage amid supply chain diversification trends.
• Despite U.S. and Middle East disruptions, management outlined a return to normalized order patterns following resolution of government and geopolitical events, but acknowledged the risk of continued volatility.

INDUSTRY GLOSSARY

• Book-to-Bill Ratio: The ratio of orders received (bookings) to units shipped and billed (billings) within the same period—a ratio greater than one indicates growing demand and backlog.
• Undefinitized Contract Action (UCA): A contract award allowing work to proceed before all terms, specifications, or price are agreed, subject to a not-to-exceed value.
• RF Engineered Solutions: Radio-frequency-based systems developed for advanced security and defense applications, including radar subsystems.
• DSO (Days Sales Outstanding): A measure of the average number of days it takes a company to collect payment after a sale has been made.
• IDIQ (Indefinite Delivery, Indefinite Quantity): A contract type providing for an indefinite quantity of supplies or services during a fixed period.

Full Conference Call Transcript

We delivered solid third quarter financial results, setting fiscal Q3 records across multiple metrics, despite facing the most challenging year-over-year comparison of fiscal 2026, primarily driven by our Mexico contracts. The company's revenues reached a fiscal Q3 record of $453 million, and non-GAAP earnings per diluted share set a fiscal Q3 record of $2.60. Importantly, excluding revenues generated by the large security contracts in both periods, Security revenues grew 25% year over year. Our Optoelectronics and Manufacturing division also performed well, posting 10% growth and a Q3 record for that division.

Bookings were strong, with a 1.3 book-to-bill ratio driven by both Security and Opto, resulting in a record backlog, highlighted by the previously announced Homeland Defense award, about which Ajay will provide more information shortly. On the cash side, we generated $14 million in fiscal Q3 operating cash flow despite limited collections in the quarter on the receivables in Mexico. Shortly after quarter end, we collected approximately $74 million of the largest Mexico receivable, a strong start to Q4 cash flow. Before diving more deeply into our financial results and discussing our outlook for fiscal 2026, I will now turn the call over to Ajay for our business and operational discussion.

Ajay Mehra: Thanks, Alan, and thank you everyone for joining us today. I am pleased to be here to discuss our third quarter results for fiscal 2026. We delivered another quarter of solid execution and ended the quarter with a backlog of approximately $1.9 billion, the highest in the company's history. We remain focused on execution, leveraging our strengths in key markets and utilizing our global operating model as we finish Q4 and head into fiscal 2027. Let us turn to our businesses to discuss Q3 performance in more detail, starting with Security. As expected, Q3 performance was up against difficult year-over-year comparisons, primarily due to our Mexico programs transitioning from significant product sales to long-term related service and support revenues.

Despite that, Security performed well with solid bookings, top-line growth, and operating margin expansion. Furthermore, we continue to be very active with customers across aviation, ports and borders, and defense-related applications. Bookings were highlighted by a sizable award from Homeland Defense of an undefinitized contract action, or UCA, with a not-to-exceed value of approximately $235 million for the production and integration of Homeland Defense over-the-horizon radar transmit subsystems. We continue to build strong traction with our RF engineered solutions, and are hopeful that there may be additional opportunities in this area of future business. In addition, these capabilities position us well to further support Golden Dome, the U.S. initiative to create an integrated missile defense system.

As you know, we are a participant in the $151 billion Shield IDIQ, which we announced last quarter, and we look forward to the opportunities that may arise from this initiative. During Q3, we also received several international awards for cargo and vehicle inspection systems and airport screening solutions. In addition, we were an integral part of the security at the Milan Winter Olympic Games, providing our products to screen participants, officials, fans, as well as their baggage and cargo. Towards the latter half of Q3, we began to see initial impacts from conflict in the Middle East. Certain programs and activities have been delayed by factors such as logistics constraints, travel restrictions, and heightened security protocols.

Certain customers in the region are facing pressure from disruptions tied to the conflict. If the situation persists, we could see further impact on the timing of order intake and project completion timelines. That said, once the region stabilizes, we could potentially see even stronger demand for our security solutions. In the U.S., the order activity for security products was impacted during the quarter by the shutdown at DHS, which delayed the procurement of our products and services to support U.S. border initiatives.

Now that the shutdown has ended, we are hopeful for order patterns to normalize over the coming weeks and months, and I want to emphasize here that these are timing-related dynamics rather than changes in the underlying demand. In the U.S., we are also excited about the potential of our security solutions for high-profile upcoming events, such as the FIFA World Cup 2026 soccer tournament and the 2028 Olympics. Furthermore, in the U.S., the roughly $1 billion outlined in the One Big Beautiful Bill for NII equipment remains a significant growth opportunity, and of course, during the shutdown, the spending resulting from this bill was delayed in Q3.

Turning to Opto—our Optoelectronics and Manufacturing division—Q3 performance was again strong as revenues increased 10% year over year, with the book-to-bill ratio well exceeding one. In March, Opto received a $40 million award for electronic subassemblies from a medical OEM, a significant award in a division where most orders are under $5 million. Customers continue to value our vertically integrated model and global manufacturing footprint as they diversify supply chains and launch new products. Our global manufacturing footprint across Malaysia, Indonesia, India, Canada, Mexico, the UK, and the U.S. allows us to offer customers attractive combinations of value and scalability. Opto's backlog remains at record levels, providing great long-term visibility across aerospace, defense, medical, industrial, and other end markets.

And finally, our Healthcare division continues its path of improving operations and focusing on new product development. In Q3, Healthcare was adversely impacted by order timing, most notably in the U.S., resulting in lower sales and profitability. On the flip side, we did see growth in the EMEA region during the quarter. As you may know, Healthcare's products generally carry the highest contribution margins at OSI Systems, Inc., so even modest revenue growth has an outsized impact on profitability. Looking at OSI Systems, Inc. overall, our financial position remains strong. The robust and growing backlog, year-to-date cash flow generation, and a healthy balance sheet give us continued confidence in the company's prospects.

In addition to large program opportunities highlighted earlier, we remain focused on increasing our mix of recurring revenues through expanded service and support agreements. As always, I would like to thank our employees, customers, and stockholders for their continued support and dedication. With that, I will turn the call over to Alan to discuss our financial results in more detail before we open the call for questions.

Alan Edrick: Thank you, Ajay. Now let us review in greater detail the financial results for Q3. Let us begin with a look into our revenues by division. Security division revenues in Q3 came in at $319 million, driven by higher service revenues and increased contribution from the RF business, which has been effectively integrated into our overall operations, and increased aviation product revenues. As expected, revenues from our large Mexico Security contracts decreased to $11 million in Q3 fiscal 2026 from $69 million in Q3 of the prior year. Excluding the Mexico contracts, Security revenues surged 25% year over year, reflecting healthy growth across the broader Security portfolio.

Fiscal Q4 is expected to experience a reduced revenue impact from Mexico in comparison to Q3, with the magnitude of this headwind expected to largely roll off as the company enters fiscal 2027. Our Optoelectronics and Manufacturing division had another excellent quarter. Opto sales, including intercompany, increased 10% year over year to $111 million, a new Q3 record for this division. This was driven by sales growth across our diversified product and customer portfolios. And as described earlier, Healthcare division sales were soft. Our Q3 fiscal 2026 gross margin was 33%, slightly down from the same quarter in the prior year, as a less favorable revenue mix on product sales outweighed an increase in gross margin from higher service revenues.

Our margins can fluctuate based on product and service mix and volume, supply chain cost, FX, tariffs, among other factors. Moving on to operating expenses, SG&A expenses in the 2026 third fiscal quarter were $71.5 million, down 2% from the prior year fiscal Q3 and representing 15.8% of sales compared to 16.5% of sales in Q3 last fiscal year. We continue to work diligently across all divisions to manage our SG&A cost structure efficiently. R&D expenses in Q3 were $19.5 million, or 4.3% of revenues, up from $18.6 million, or 4.2% of revenues, in the same quarter last year.

This increase stems from our commitment to investing in innovation, resulting in market-leading offerings in Security and positioning OSI Systems, Inc. well for the future. We expect to continue our heightened R&D efforts to advance key initiatives. Even with these R&D investments, our combined SG&A and R&D expenses as a percentage of sales have decreased annually for each of the past eight years, underscoring our ability to drive operating efficiencies while still funding growth initiatives. Now moving below the operating line, interest and other expenses, net, in fiscal Q3 was $4 million, down from $8.2 million in the same quarter in the prior year, primarily due to reduced borrowing costs.

Our effective tax rate under GAAP was 18.3% in this Q3 versus 14.3% in Q3 last year. Excluding discrete tax items, our normalized effective tax rate, which is the rate used in calculating non-GAAP EPS, was 23.6% in Q3 this year compared to 23.7% in the same prior-year quarter. On a non-GAAP basis, our Q3 2026 adjusted operating margin of 14% was comparable on a sequential basis from Q2 and slightly below the prior-year third fiscal quarter. The Security division's adjusted operating margin expanded from 18.1% in Q3 last year to 18.3% in 2026, driven by growth in higher-margin Security service revenues combined with reduced operating expenses. This, though, was offset by the other two divisions.

The Opto adjusted operating margin decreased to 13.5% in Q3 this fiscal year from 14% in last year's fiscal Q3 on a less favorable mix of revenues. The adjusted operating margin of our Healthcare division was negligible due to the sales level. As Ajay mentioned, we expect margin recovery as Healthcare performance improves. Moving to cash flow and the balance sheet, we generated $14 million in Q3 operating cash flow despite limited collections in the quarter on our largest receivable in Mexico. However, as mentioned earlier, not long after quarter end, we received a payment of approximately $74 million from our largest Mexico customer, providing a strong start to our Q4 cash flow.

Operating cash flow for the first nine months of fiscal 2026 was just shy of the amount for all of fiscal 2025. DSO increased 7% from fiscal Q2. Current expectations are that DSO will decrease by fiscal year end. We expect substantial cash inflows in Q4 and into fiscal 2027 as we continue to collect on the Mexico receivables, which should lead to sizable operating cash flow and strong free cash flow conversion. CapEx in Q3 was $8 million, while depreciation and amortization expense was $9.5 million. Our balance sheet remains solid. We ended the quarter with $345 million in cash. Our net leverage at the end of Q3 fiscal 2026 was approximately 2.2, as calculated under our credit agreement.

Now turning to our guidance, we are maintaining our fiscal 2026 guidance for revenues and non-GAAP earnings per share. The recent shutdown of the Department of Homeland Security and the conflicts in the Middle East have impacted short-term bookings and could impact near-term Q4 revenues, but looking out further, resolution of each of these matters—one of which has just been done—could potentially represent future opportunities for the company. We note that our fiscal 2026 non-GAAP diluted EPS guidance excludes any impact of potential impairment, restructuring and other costs, amortization of acquired intangible assets and their associated tax effects, and discrete tax and other non-recurring items. We currently believe this guidance reflects reasonable estimates.

The actual impact on the company's financial results of timing changes on the expected conversion of backlog to revenues, new bookings, timing of cash collections, tariffs, the recent DHS shutdown, the conflicts in the Middle East, and supply chain disruptions, among other factors, is difficult to predict and could vary significantly from the anticipated impact currently reflected in our guidance. Actual revenues and non-GAAP EPS per diluted share could also vary from the guidance indicated above due to other risks and uncertainties discussed in our SEC filings.

In summary, we delivered a record fiscal Q3 driven by our two largest divisions, a record backlog providing multi-period visibility, and we also made a meaningful cash collection in the beginning of Q4 that further enhances our balance sheet. We remain committed to operational excellence as we grow our businesses and deliver innovative products and solutions to our customers. We aim to invest in key strategic areas with the goal of driving long-term value for our shareholders. Once again, we thank the entire global OSI team for their dedication to supporting our customers and partners. Their efforts are what make our results possible. We will now open the call for questions.

Operator: Thank you. As a reminder, to ask a question, you will need to press star then the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. Your first question comes from the line of Larry Solow with CJS Securities. Your line is open.

Lawrence Scott Solow: Good afternoon. I guess first question, we know Mexico is going to be pretty slow, so the 25% growth you have seen outside Mexico—where is that coming from, and just on the product mix? Is most of that still ports and borders, vehicle inspection, or where? I am just trying to figure out if you could parse out, give us a little color on the origin of the growth.

Alan Edrick: Larry, this is Alan. Good question. We are seeing growth in a bunch of different areas. First off, geographically, we are seeing most of the growth internationally. As we look forward, with the ending of the DHS shutdown, we foresee the U.S. picking up steam significantly as we enter fiscal 2027. But to date, most of the growth has been driven internationally. And we are seeing it across a wide variety of our areas. We are seeing our service revenues increase nicely. We are seeing our aviation revenues increase nicely. We are seeing our RF revenues increase nicely. And that is predominantly what has driven most of the growth that we are seeing outside of Mexico, as you mentioned.

Lawrence Scott Solow: And the RF contract that you got, the Golden Dome contract that you announced—you announced it in April—but was it actually obtained before the end of the quarter? Because that sounds like that order is clearly in the backlog and the book-to-bill for the quarter, correct?

Ajay Mehra: Yes. It came in at March.

Lawrence Scott Solow: Got it. And I guess you were just delayed because of the government shutdown, or any reason why that release was not put out?

Ajay Mehra: Larry, it just takes a little bit of time to go through the various sequences in order to get a press release out and get the appropriate approvals to do so.

Lawrence Scott Solow: And just on the government shutdown or delays and whatnot, it sounds like it certainly has impacted your bookings a little bit to date, maybe a little bit more Q4. Has it impacted revenue at all to date? It sounds like maybe no, but there is potential in Q4. Is that what I hear?

Ajay Mehra: What I pointed out earlier was yes, it has impacted some bookings, but really it is a timing issue. We think that those bookings—and, like I said, the $1 billion big, beautiful bill—is still sitting there. In Q4, we are hoping things start loosening up over the next few weeks to a few months, and it may have a slight impact, but we will wait and see.

Operator: Your next question comes from the line of Christopher Glynn with Oppenheimer. Your line is open.

Christopher Glynn: Hey, thanks. Good afternoon. Just wanted to ask about the services revenue. I know it was not going to be totally linear, but it was above 5% growth after having been consistently strong double digits. My understanding, following significant sustained backlog growth for a few years, was that this would probably be a double-digit grower compounding pretty consistently. Is that still an appropriate view, or should we view it as maybe stepping down to a single-digit profile for services going forward?

Alan Edrick: Good question. What we saw throughout calendar 2025 for four straight quarters was very strong double-digit growth in service revenues as our installed base increased significantly. In this particular quarter, we had mid-single-digit growth in our service revenue coming off of a more difficult comp, and it also has to do with some of the timing of installations that were done in prior quarters versus this quarter. As we look forward, we continue to expect to see very strong service revenues. There will be certain periods where we will see good double-digit growth; there will be other periods where it is single digit.

But overall, we expect to see nice growth in service revenues, which is nice because it inherently carries a higher margin associated with it.

Christopher Glynn: Okay. So, Alan, it sounds like you expect, generally over the next year or two, to be outgrowing equipment. Is that right?

Alan Edrick: It can be; it all depends. It will vary with the mix and with the strong product revenues we are expected to have as well.

Christopher Glynn: On Security margins, you have effectively run down the Mexico revenues you described as very efficient production runs. Should Security be on a pretty consistent margin expansion trajectory from here?

Alan Edrick: Our goal in Security is always to couple top-line growth with operating margin expansion, and that is what we look to do over the long term. There will be certain quarters or periods where, based upon the mix of the revenues—particularly the mix of the product revenues—it may not necessarily lead to that end result. But over a longer-term basis, that is absolutely the goal and the intent of the company.

Operator: Your next question comes from the line of Josh Nichols with B. Riley. Your line is open.

Michael Joshua Nichols: Thanks for taking my question. Great to see the record backlog and book-to-bill yet again. Despite the DHS shutdown, now that is back open again, are there any specific mechanisms by which the CBP procurement resumes post-shutdown, or do you expect there would be a relatively quick uptick in order activity between now and your fiscal year end in June?

Ajay Mehra: I think it is going to be relatively quick—over the next few weeks, maybe some months. But there is really no restriction that we can see that they cannot resume. It is just people coming back in; it takes some time to get everybody working and concentrating on letting out orders instead of where the funding is going to come from. We feel good about it. Over the next few weeks, time will tell, but we are very encouraged that the shutdown is over.

Michael Joshua Nichols: I just wanted to touch on two things for my last two-part question. One, this $235 million Homeland Defense contract—I think that is much larger than anyone was anticipating. You touched on Shield. Do you see any other large opportunities within that piece of potential business that you think the company is in a good position to secure? And lastly, Alan, on the $74 million Mexico accounts receivable that you got—how would you characterize the related AR levels today?

Ajay Mehra: I will take the first part. We are very happy and proud of this contract we got. It demonstrates our technical expertise. Some of the products we have were well considered by the government and other customers. There are opportunities out there. I am not going to try to quantify them. It is a very new market; we are all looking at it. But by the size of the order and what the future holds, we will wait and see over the next few quarters. It is a great start, and we feel very good about it.

Alan Edrick: And on the Mexico receivable, with the recent receipt of the $74 million, it certainly reduces the Mexico receivable balance. That being said, there are ample opportunities for significant cash flow as we collect on this receivable over the coming months and quarters. We would expect the free cash flow conversion to be quite outstanding over the foreseeable future.

Michael Joshua Nichols: Appreciate the detail. Thanks, guys.

Operator: Your next question comes from the line of Citi.

Analyst: Hi. This is Bradley Eister for John. Thanks for taking my question. I just want to take a step back and look bigger picture on the opportunities we are seeing, particularly around airport security demand. I appreciate that you touched upon the potential supply chain challenges given the dynamic macro environment. But in that same school of thought, with reduction of flight capacity to various degrees and concerns over jet fuel cost and availability, I know it is still early days, but have you seen any impact to the demand for these services, or any timing impacts creeping up from this?

Ajay Mehra: It is a great question. Overall, after a conflict ends—unfortunately, being in the security business—things tend to pick up. There are some temporary disruptions in the Middle East because of aviation, yes. But we have to look at it from an overall standpoint. As and when this gets put behind us, we think we will see—not just in aviation, but overall—an uptick potential in our business.

Analyst: Got it. Appreciate the color. I just want to touch upon the opportunities on Golden Dome and Shield that you are pursuing, more medium to longer term. How would you measure out the competitive landscape here for the RF protection side specifically? Any update you can provide on traction or customer interest would be helpful.

Ajay Mehra: We have been talking about it for several quarters. This initial contract has been very good for us. We announced smaller contracts last quarter. We think there is a lot of momentum going forward. There is a limited amount we can talk about because of the type of contracts these are, but we think the future looks good. The timing—we will just have to wait and see.

Operator: Your next question comes from the line of Seth Seifman with JPMorgan. Your line is open.

Analyst: Hi. Good afternoon. This is Rocco on for Seth. Should we think about the Homeland award and possible similar awards in the future as supporting the longer-term growth in the Opto segment? Should we be thinking about the top-line growth in 2027, following the low double-digit pace this year? Could it be one of the faster growers next year?

Ajay Mehra: First of all, this is in the Security segment—the Golden Dome—that is where it falls. On the Opto side, we think that yes, there is room for potential growth as we go forward. There is definitely a movement away from China, and with our capabilities all over the world—not just in Asia, but in Europe and the U.S.—from a manufacturing basis, we provide a lot of flexibility to our customers. We feel good as we move forward. There are always a little bit of ups and downs, but overall, I think Opto is in a good position.

Seth Seifman: Great. Thank you.

Operator: Once again, everyone, if you would like to ask a question, press star one. Your next question comes from the line of Jeff Martin with ROTH Capital. Your line is open.

Jeffrey Michael Martin: Thanks. Good afternoon, Ajay and Alan. Wanted to dive into the RF business a bit more. Are you able to give us the revenue number from that business for the quarter? And then I believe you were ramping up additional production facilities there. Curious where you are today in production capacity relative to the Homeland Defense contract?

Ajay Mehra: I will not go through the actual numbers, but we started ramping up the production capabilities and moved into new facilities over the last several months—we made that decision a while ago—and frankly, it looks like a very good decision. We have ramped up that capacity. We keep on ramping it up. We are in a new facility, and we feel good about what we can do and offer the government in terms of being able to turn around product a lot faster than we were able to maybe a year or two ago.

Alan Edrick: We were pleased with the revenues in the RF business. I believe it was a new record for us. We did about $38 million in the quarter. So the run rate of that business has significantly increased since the time of acquisition, about eighteen months or so ago. We are very pleased with the trajectory.

Jeffrey Michael Martin: That is helpful. Thank you. I know you are not in a position to give any guidance beyond this year, but just curious, qualitatively, how you are thinking about growth and your growth prospects in fiscal 2027 and 2028.

Alan Edrick: Good question, and you are right—we will be giving our guidance for fiscal 2027 on our next call in August. That being said, we are optimistic for growth as we move into our new fiscal year just two months from now. We are excited to close out Q4 and fiscal 2026. With the strong backlog and robust opportunity pipeline that we have out there, fiscal 2027 could be a very, very exciting year for us.

Jeffrey Michael Martin: Last one for me: you have been a very value-oriented buyer on the M&A front. A lot of those have produced very good returns—the RF business is case in point. Are you seeing other opportunities out there that are similarly interesting? And are there areas from either a market expansion standpoint or a technology expansion standpoint that you are looking at that could move the needle the next couple of years?

Ajay Mehra: We are always looking at opportunities. As Alan has pointed out before, we have a lot of dry powder available to us. From a technology standpoint, we want to make sure that one plus one is greater than two—maybe more. There are opportunities, but I do not want to get into specifics. We are always actively looking, but we are not going to do anything unless we feel it really makes a difference from a strategic as well as from a business perspective as we move forward.

Jeffrey Michael Martin: Thank you.

Operator: There are no further questions at this time. That concludes the Q&A session.

Ajay Mehra: Once again, thank you all for attending our conference call. We look forward to speaking with you during our next earnings call following the completion of our fiscal year. Thank you.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.

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