OSI Systems issues $350M in convertible senior notes

OSI Systems , Inc. (NASDAQ:OSIS), a semiconductor and related devices manufacturer, has entered into a material definitive agreement resulting in the issuance of $350 million in convertible senior notes, as detailed in a recent SEC filing. The Hawthorne, California-based company announced the completion of the offering on Friday, with the notes set to mature on August 1, 2029.

The 2.25% convertible senior notes, unsecured senior obligations of OSI Systems, rank equally with the company's future senior unsecured debt. They are senior to any potential subordinated debt, effectively subordinate to any secured debt to the extent of the collateral's value, and structurally subordinate to all liabilities of the company's subsidiaries.

Interest on the notes will be paid semi-annually, with the first payment due on February 1, 2025. The notes will initially be convertible into OSI Systems common stock at a rate of approximately 5.2090 shares per $1,000 principal amount, equivalent to an initial conversion price of about $191.98 per share. The conversion rate is subject to customary adjustments for certain events.

OSI Systems has also granted initial purchasers an option to buy an additional $50 million in notes, which has been fully exercised, bringing the total offering to $400 million. The company may redeem the notes after August 6, 2027, under certain conditions, including the stock price exceeding 130% of the conversion price.

Upon specific corporate events that constitute a "Fundamental Change," as defined in the indenture, note holders may require OSI Systems to repurchase their notes at the principal amount plus accrued interest. The notes also contain customary provisions for "Events of Default," which, if triggered, could lead to the acceleration of the obligation to repay the principal and interest.

The notes were issued in a private placement to qualified institutional buyers and are expected to be exempt from registration under the Securities Act of 1933. The company anticipates that any common stock issued upon conversion of the notes will also be exempt from registration.

This financial maneuver is part of OSI Systems' broader capital management strategy and is based on a press release statement. The company's latest financial commitment through these convertible notes reflects its ongoing efforts to manage its capital structure and financial obligations.

In other recent news, OSI Systems has announced a series of significant developments. The company declared its intention to offer $275 million in convertible senior notes due in 2029, with an additional option for initial purchasers to buy up to $41.25 million more within 13 days of issuance. Concurrently, OSI plans to repurchase up to $100 million of its common stock in privately negotiated transactions.

Moreover, OSI Systems has secured multiple contracts across various sectors. A notable $42 million contract was secured for enhancing security measures at an international airport, including the provision and maintenance of advanced screening technologies. The company also received a $7 million order to supply portable health monitoring devices to a leading provider of diagnostic solutions.

Other significant orders include a $7 million contract from an aerospace and defense original equipment manufacturer (OEM) for navigation sensors, an $11 million contract to supply radiation monitoring portals to an international client, and a $9 million order for its Eagle® M60 high-energy mobile cargo and vehicle inspection systems. These developments reflect OSI Systems' ongoing business activities across multiple sectors.

InvestingPro Insights

OSI Systems, Inc. (NASDAQ:OSIS) has demonstrated a robust financial performance as reflected in recent data. With a market capitalization of approximately $2.48 billion, the company's growth trajectory is evident, showcasing a notable 22.13% revenue growth in the last twelve months as of Q3 2024. This is further bolstered by a significant quarterly revenue growth of 33.85% in Q3 2024, indicating a strong upward trend in the company's financials.

Investors looking for value might find OSI Systems particularly appealing, as it is trading at a low P/E ratio of 19.57 relative to near-term earnings growth, according to an InvestingPro Tip. Additionally, the company's stock is trading near its 52-week high, which could signal confidence among investors about the company's market position and future outlook. Analysts are optimistic, predicting profitability for the year, which is corroborated by the company's profitable performance over the last twelve months.

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