OSI Systems Inc (OSIS) 2019 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the OSI Systems Incorporated First Quarter 2019 Conference Call. (Operator Instructions) As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Alan Edrick, Chief Financial Officer. Please go ahead, sir.

Well, thank you. Good afternoon, and thank you for joining us. I am Alan Edrick, Executive Vice President and CFO of OSI Systems, and I'm here today with Deepak Chopra, our President and CEO.

Welcome to the OSI Systems Fiscal 2019 First Quarter Conference Call. We would like to extend a warm welcome to anyone who is a first-time participant on our conference calls.

Earlier today, we issued a press release announcing our fiscal 2019 first quarter financial results. Before we discuss our results, I like to remind everyone that today's discussion contains forward-looking statements. In connection with this conference call, the company wishes to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to statements that may be deemed to be forward-looking under the securities laws.

These forward-looking statements are based on management's current expectations and are subject to uncertainties, risks, assumptions and contingencies, many of which are outside the company's control. Such statements include, without limitation, information regarding the expected financial and operational performance of the company and its operating divisions, the company's expected revenues, earnings, and growth, and expectations regarding the effects of recently enacted tax legislation. Undue reliance should not be placed on forward-looking statements, as actual results could differ materially from our forward-looking statements due to numerous factors, including factors described in the company's periodic reports filed with the SEC from time to time.

All forward-looking statements made on this call are based on currently available information and speak only as of the date of this call. And the company undertakes no obligation to update any forward-looking statement that becomes untrue because of subsequent events or new information or otherwise.

During today's conference call, we may refer to both GAAP and non-GAAP financial measures of the company's operating results. For information regarding non-GAAP measures and comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's press release regarding our fiscal 2019 first quarter results, which has been furnished to the SEC as an exhibit to a current report on form 8K.

Before turning the call over to Deepak to discuss the company's general business and operations, I will provide a high-level financial overview of the first fiscal quarter.

First, we reported record first-quarter revenues of $266 million, a 4% year-over-year increase. This increase was driven by the performance of our Security and Opto divisions.

In Security, we reported record Q1 revenues of $170 million driven primarily by growth in cargo equipment sales and service revenues, which were partially offset by the expected reduction in year-over-year turnkey revenue from our current Mexico SAT contract. Revenues in the Opto division increased 20% year-over-year with a combination of organic, acquisition-related, and inter-company sales growth. The Security and Opto division revenue growth was partially offset by a 16% year-over-year decrease in our Healthcare division revenues.

Second, we reported Q1 fiscal 2019 GAAP diluted earnings per share of $0.50 compared to diluted earnings per share of $0.52 in the same prior-year period. On a non-GAAP basis, Q1 EPS was $0.81 per diluted share compared to $0.79 in Q1 of fiscal '18. Earnings were especially strong in light of the difficult comparison with the prior year as a result of the changes in the Mexico contract and the prior-year benefit to explosive trace detection sales from the Department of Homeland Security Last Point of Departure Program, as well as a softer quarter in healthcare.

Q1 non-GAAP EPS excluded the impact of restructuring and other charges, including certain legal costs, amortization of acquired intangible assets, and non-cash interest expense all net of related tax effects. It also included discrete tax items.

Third, gross margin in the quarter improved to 36%, the highest first-quarter gross margin in eight years. And finally, the fiscal Q1 2019 book to bill ratio was 1.2. Our backlog as of September 30, 2018 was approximately $1.035 billion, an increase of 22% over the backlog figure as of September 30, 2017 and a 6% sequential increase.

Before diving more deeply into our financial results and discussing our updated fiscal 2019 guidance, let me turn the call over to Deepak.

Thank you, Alan, and again, good afternoon to all of you. Fiscal '19 started on a nice trajectory as we generated record revenues and non-GAAP EPS for the first quarter.

The Security division performed very well while bolstering its backlog with strong bookings during the quarter also. The Optoelectronics and Manufacturing division delivered strong double-digit revenue growth and operating margins, and completed a small strategic acquisition. The Healthcare division had a disappointing quarter, but we are optimistic that the division's financial performance will improve in the second half.

Going into each division's performance, starting with the Security division, where we reported revenue of approximately $170 million, an increase of 5% over the prior-year period. We are very pleased with the growth, especially given the tough comp with the prior year due to the reduced economics of the MSAT contract in Mexico, which we have disclosed on previous calls, and the prior year demand experienced for the explosive trace detection products stemming from the Department of Homeland Security Trace Last Point of Departure Program.

Security bookings were over $200 million in the quarter, which generated a non-turnkey book to bill ratio of 1.5 for this division. Bookings were strong in both the U.S. and international and across much of our product portfolio as border security and airport infrastructure efforts in Europe and Asia continue to expand.

A few of the highlights the Security division: breaking down the bookings further, security had strong bookings of over $100 million for the U.S. government agencies. Shortly after the quarter-end, we announced a few of the larger transactions, for example a delivery order for $61 million from the Customs and Border Patrol for Z Portal cargo and vehicle screening systems, a $21 million service and maintenance contract from another government agency to support our installed base of cargo and vehicle inspection systems, and a $10 million equipment order for another U.S. government customer to provide multiple units of our ZBV mobile inspection platform.

In addition to securing borders and airports, other examples of high-profile locations where our inspection products operate include embassies, military bases, government agency headquarters, courts and prisons, among other examples. Highlighting the airport activity, during the quarter we announced our first order for the 920CT, a computed tomographic-based checkpoint inspection system for carry-on baggage. This 920CT order is part of a larger contract that includes the deployment of Tray Return Systems, metal detectors, and explosive trace detection systems at an airport located near Melbourne, Australia, which is expanding to become an international airport.

On the checked baggage front, the RTT installed base continues to expand internationally, and TSA certification is ongoing. We will continue to update you on the progress of the TSA certification.

Our turnkey solutions contracts in Mexico, Puerto Rico and Albania continue to perform well, and we are happy to announce that we are gearing up to go live on 2 contracts that require integrated services and support in fiscal 2019.

Our efforts to grow in the event security are also gaining traction, as we are slated to provide security at several sporting events this fiscal year. We believe that an increasing demand for using screening technology to improve security at sports and entertainment venues provides ample opportunity for us to grow. Going forward, our strong security backlog and near-term sales opportunities position us very well for the remainder of the fiscal 2019.

Moving on to the Healthcare division, where Q1 sales declined 16% as compared to the first quarter of fiscal 2018, this quarterly performance is disappointing, but we are focused on working through the challenges in this division. We expect our recent senior leadership changes, combined with narrowing our focus on core products of patient monitoring, cardiology, and related supplies and accessories, should improve the operating performance and overall positioning us in the marketplace.

Moving to the Optoelectronic and manufacturing division, which had an outstanding quarter, where revenues, including inter-company revenues, grew 20% higher than the prior year with improving margins. The bookings in this division have been robust as we finished with a strong backlog. During the quarter, we also completed the acquisition of an electronics product line which is complementary and synergistic with our current offerings.

Overall, we are pleased with the strong start in Q1. The Security division has a robust backlog and numerous near-term opportunities in the pipeline. We believe that the Healthcare division will improve in the second half of fiscal 2019, and Opto is in a great position to have a strong year.

I'd like to take a moment to thank all our employees for their efforts during the quarter, and I'm excited about our future and look forward to the coming quarters.

With that, I'm going to hand over the call back to Alan Edrick to talk in detail about our financial performance before opening the call for questions. Thank you.

Thank you, Deepak.

Now let's review the financial results for the first fiscal quarter in greater detail. As mentioned previously, our revenues in Q1 of fiscal '19 increased by 4% year-over-year. Q1 revenues in the Security division increased by 5% from Q1 of fiscal '18, driven by strong growth in cargo and vehicle inspection equipment sales. In addition, as our installed base has grown, Security division field service revenues have also increased.

The 20% year-over-year revenue growth reported for our Opto division was driven by revenues from the flex circuit businesses acquired in January '18 and from our optical sensor and higher-level assemblies business acquired in July '18, as well as ongoing strength in both organic external sales and inter-company sales, primarily to our Security division.

As Deepak mentioned, we experienced continued challenges in the Healthcare division as revenues fell 16% compared to Q1 of the same prior year period.

Our Q1 gross margin was 36.0% compared to 35.5% in Q1 of last year. This improvement was driven by improvements in our Opto division as a result of favorable product mix and improved operating efficiencies, as well as improvement in the gross margin in our Healthcare division, as decreased sales were countered by our focus on more profitable product lines. Again, the 36% gross margin was the highest first fiscal quarter gross margin in eight years. As mentioned on previous calls, our gross margin will fluctuate from period to period based on revenue mix, among other factors.

Moving to operating expenses, in Q1 of fiscal '19, SG&A expenses were up $6 million primarily to support the Security and Opto division growth, as well as due to the added expenses from the 2 Opto division acquisitions mentioned previously. We continue to focus in all of our divisions on improving efficiencies and prudently managing our cost structure. R&D expenses in Q1 were $13.8 million, down by $1.3 million from Q1 of the prior year due to efficiencies in our Security division from consolidation of operations of acquired businesses post-acquisitions and healthcare division reductions from our de-emphasis on anesthesia products, as mentioned on last quarter's call. We remain focused on innovative product development, which we view as vital to the long-term success of our business.

Restructuring and other charges were $4.2 million in Q1 of fiscal '19. This current year amount primarily consisted of legal costs associated with litigation and investigations, as well as acquisition-related and employee severance costs.

Moving to taxes, excluding the impact of discrete tax items, the company's effective tax rate was 28.1% in Q1 of fiscal '19 compared to 28.3% in Q1 of fiscal '18. During the 3 months ended September 30th, '18, we recognized a discrete tax benefit for equity-based compensation of $1.5 million under ASU2016-09 resulting in an effective tax rate of 13.9%. During the 3 months ended September 30, 2017, we recognized an approximate $700,000 net discrete tax charge resulting in an effective tax rate of 32.9%.

Let's now turn to a discussion of our non-GAAP adjusted operating margin, which excludes the items mentioned earlier in the call. The company's non-GAAP adjusted operating margin was 9.2% in Q1 of fiscal '19, down slightly from 9.4% in Q1 of fiscal '18. This decrease resulted from decreased operating margin in the Security division due to reduced Mexico contract revenues, among other factors, and Healthcare division losses, offset partially by margin expansion in the Opto division.

Moving to cash flow, in Q1 of fiscal '19, we used $2.8 million in operating cash flow. Cash flow was impacted by a buildup of inventories to support expected shipments over the remainder of fiscal '19, taxes paid as we took advantage of certain repatriation opportunities, and higher days' sales outstanding, or DSO, due to the timing of customer collections. DSO was 76 days in Q1 of fiscal year '19 as compared to 72 days in Q1 of fiscal '18. Capital expenditures in the quarter were $7.9 million, which included amounts pertaining to the new turnkey program we announced last year and Deepak referenced earlier, while depreciation and amortization was $14.1 million.

Our balance sheet remains strong. We ended the quarter with net leverage of approximately 1.9. And finally, turning to our guidance, we are raising our fiscal year 2019 sales guidance to a range of $1.14 billion to $1.175 billion, and we are increasing our fiscal year 2019 non-GAAP earnings per diluted share guidance to $3.85 to $4.05. This non-GAAP diluted EPS range excludes restructuring and other charges and amortization of acquired intangible assets and noncash interest expense and their associated tax effects and discrete tax items.

Additionally, we continue to evaluate the impact of tax reform on our effective tax rate, including the effect of new taxes associated with computations for the Global Intangible Low Income Tax, known as GILTI, and Foreign-Derived Intangible Income, known as FDII. Each of these provisions is complex. The effective tax rate is subject to significant volatility and will be updated as more analysis and information is available.

We currently believe the sales and earnings guidance reflects reasonable estimates. Actual sales and earnings, however, could vary from the anticipated ranges due to the risks and uncertainties specifically affecting our business and generally affecting industries in which we operate. These risks and uncertainties include items beyond our control, such as site readiness for product installations, evolving government trade policies, customer acceptance, and the timing of orders in each division, and other risks and uncertainties discussed in our SEC filings.

We have continued to grow our business while investing in product development and making selective strategic acquisitions. Our product and acquisition investments enable OSI to continue our leadership role with innovative products and solutions across our various industries.

Thank you for participating in this conference call. And at this time, we would like to open the call to questions.

(Operator Instructions) And our first question comes from Brian Ruttenbur with Drexel Hamilton.

Very good quarter. Couple quick housekeeping questions to start off with. Tax rate, first of all, was very low in the first quarter. What should we expect for the year, and what's included in your guidance, in your earnings guidance?

This is Alan. Yes, so the low effective tax rate you're looking at on a GAAP basis includes about $1.5 million benefit on a discrete item. If we exclude the discrete items, our effective tax rate was 28.1%, which was pretty comparable to last year, which was 28.3%. So our guidance assumes that annual effective tax rate, more or less.

Okay, so roughly 28% is what we should assume for the rest of the year? Or should we see this kind of tax rate continue in this quarter that we back out then?

Yes. That was a one-time benefit that occurred. There may be further discrete items throughout the year, but the largest of those tends to occur in Q1 related to that particular item. So using a 28% rate we believe would be appropriate. We continue to evaluate tax planning opportunities to lower that effective tax rate, but we do think that would be appropriate to use at this point in time.

And then another housekeeping on the R&D side. The amount was down year-over-year. And is this related to anything with RTT certification? Is this related to healthcare, less investment there? Could you give us some kind of -- or it just could be seasonal? I have no idea.

This is Alan. I'll take that one as well. It's really related to 2 things. One, like you mentioned in healthcare, as you recall from last year, we talked about de-emphasizing our anesthesia product line. And in so doing, some of the R&D that we were spending on anesthesia at this point last year no longer continues. So we'd see our R&D in healthcare come down a bit.

The second would be post-acquisition of the trace detection business. We saw opportunities to further consolidate and gather some synergies, and we took advantage of those opportunities. So that drove down a little bit of our R&D on the security side. Both of those type of things were very helpful for us.

And then just a couple other questions beyond housekeeping. On the Healthcare side, it continues to be weak. You've made changes. When do you expect to see those changes as they start showing up in the revenue line?

This is Deepak here. We feel good about some of the changes that we [set out] and focus on the product line, like the monitoring and the cardiology and the supplies and accessories. I said it in my speech, that second half should be better.

And we certainly expect, even before the second half, on a sequential basis we would anticipate Q2 being much stronger than Q1.

Then on the year in your guidance, do you anticipate Healthcare to be up or down on a year-on-year basis? Or it's going to recover in 2020, is what you're anticipating? It's still going to be down in 2019. Is that fair?

Yes. So we only provide guidance on an overall company basis, but we are anticipating much stronger performance out of the Healthcare division than that which we saw in the first quarter.

And then just a couple other quick questions, then I'll stop. Middle East exposure, there's been a lot of questions about companies' exposure into Saudi Arabia and places like that. I know that Middle East is a large buyer of your products. Can you talk a little bit about any kind of issues that you're seeing, or any slowdown you're seeing in the Middle East, maybe specifically to Saudi in [the security box]?

This is Deepak here. We haven't seen anything. In that part of the world, there's a lot of activity. But if you look at it from a global perspective, our product line and our geographic reach is so broad, we look at a total world. And there's always some turmoil some places. Some places are great opportunities. We don't see anything today at all to do with Saudi.

Final question on Field Services, Alan, I think that you mentioned that that's really growing fast. Can you give us some kind of number, or percentage or something that we can get our hands around that -- how fast Field Services is growing?

Yes, it's really been a nice source for us of growth. Our installed base has been increasing significantly over the past several years. And as a result, as products come off of warranty, our service revenues increase with that. So without going into specific numbers, we really did see significant growth in our Field Service revenues throughout our different security product lines.

Was that related to RTT in Europe also?

RTT in Europe was certainly a part of that. We also saw it in the cargo area and the trace area.

And our next question comes from Sheila Kahyaoglu with Jefferies.

Alan, I guess can you elaborate a little bit on security and mix and what's driving such strength there, if you could talk about that a bit more about profitability?

On the profitability or on the sales?

On the profitability side.

Yes. So I guess probably the sales and the profitability might go hand-in-hand a little bit, but the security management team has done an outstanding job growing the pipeline of opportunities, resulting in the bookings and the realization of sales. And we've seen it both on the equipment side and on the service side, and we're really pleased with that performance in light of the difficult comps, especially related to Mexico from a year-over-year perspective. To have top line growth in the Security and having comparable type of profits to last year is really a notable achievement.

The cargo team has done really an outstanding job driving the cargo equipment revenues both in the U.S. and internationally, and the related service that comes with that. Similarly, on the other side of the business for our baggage and parcel inspection products and our explosive detection systems and trace products, our teams have really done a nice job growing that.

At the same time, everybody's been focused on improving efficiencies, looking at supply chain and other opportunities to continue to improve the profits in that regard. So I think all those things factored together really helped drive a nice bottom line to your question.

In terms of sequentially on an adjusted basis, your margins were still up 300 bps post-Mexico. So is that just double-digit growth in Services that you're seeing, or I'm putting words in your mouth by quantifying it? But is that what's really driving it?

You are absolutely partially right. The basic service revenue, non-turnkey service revenue growth, which generally carries a higher gross margin and, therefore, operating margin than an equipment sale has absolutely contributed to that. So you're absolutely right.

And then just on the free cash flow, can we talk about the cadence of growth from here? What improves? Is it just timing? If you could expand on that a little bit more?

Sure. So coming off of a very strong free cash flow year in fiscal '18, Q1 was a little bit light. And the reason for that was multi-fold. A big part of it was the increase in inventories, so our inventories increased quite substantially. And that's really all geared to the buildup to fulfill the large backlog that we have as we head into Q2, Q3 and Q4. So that was all anticipated.

We saw a little bit slower customer collections, so we had a little bit higher DSO. Going forward, we think there's great opportunity for free cash flow because some of that buildup in inventory will be burned down. So we'll improve our days inventory. We'll improve our DSO on some faster collections. And then we generally have higher profitability in Q2 through 4 than we do in Q1. So we would anticipate that our cash flow will really gear up, too.

In addition, we had some residual taxes that we had to pay in Q1 from some of the repatriation initiatives that we executed in fiscal 2018 that were very beneficial to the company, but there was just a lag effect on the timing of those payments.

In terms of bookings, the $200 million was in Security that you booked in the quarter. You mentioned, I think, $100 million from U.S. agencies. What's driving -- is that a pickup from the U.S. agencies? Is that budget-driven, if you could expand on that?

This is Deepak here, Sheila. These are customers that we've had for a long time, and some of them are additional products. Some of them are Service. And some of them are new initiatives as the total world is more focused onto the Security. And definitely September end is the budget year-end for the U.S. government, so that does help. But we are very, very happy and proud to say that this has been a good year for us for U.S. government-related bookings, not to mention also international.

And our next question comes from Larry Solow with [CJ] (sic) [CJS Securities].

Just a couple of clarifications. On the EPS, Alan, for the quarter, you actually, on the non-GAAP adjusted, you take out the benefit, right, on the tax rate? So you're using that 28% and change effective rate. Is that correct?

That's correct, Larry. We're not using the 14%. We're using the 28%. That's correct.

And the DSOs went up a little bit, as you mentioned, and a little bit more on the collections. What gives you sort of -- is it one thing in particular that's driving that? Or what gives you sort of the confidence that that'll improve?

Yes, we just saw some slowdowns during the summer, particularly with some of the international customers, which is not necessarily atypical in certain periods during the vacations of August and September. We've already seen a pickup in collections in October. And based upon some of the discussions that we've been having, we anticipate that will continue in November and December. So we believe we will see an improvement in our DSO.

I know the geopolitical risk question was brought up, and Saudi doesn't sound like it's a risk in the short-term. Is there any particular area that you guys are being impacted at all by any of this sort of perception or rising sort of headwinds outside of the U.S.?

This is Deepak here, Larry. Again, my answer is that we look at it, very focused on it, the whole -- globally there's something happening somewhere. But, our business is so broad, our customer base is so broad, our global reach is so broad that I don't think that there's any alarm for us.

And Security, Deepak, obviously it seems like the last few quarters, bookings have been strong, and the strength seems pretty broad-based. Any one particular area that has really been the leader? Or, conversely, any area that's sort of lagging on the security side?

Well, U.S. has been very good, both in the cargo space and the trace kind of thing. But on the international side, it's the RTT. It's our standard products. It's cargo. There's no one region. If there is one area that we know it's weak, but it's been for some time, Latin America has been weak for the last couple of years. But the rest of the world -- I believe that, with all the stuff that you hear in the news, including what you heard over the last couple of days, security is going to continue being the focal point for everybody to increase. And that's a sad thing to say, but that's a fact.

Absolutely. You mentioned that -- I think you said 2 contracts are going live that will require the integrated services. I guess one of them was this $40 million so-called hybrid contract you announced in August of last year. Is that correct? And then, could you tell us what the other one is?

Very astute. That is true what you just mentioned. And the other one is a small contract, international, that is going live, and that's also integrated services contract for which Alan mentioned that we also put some CapEx this quarter.

And on the Opto side, really good operating margin there. It looks like it (inaudible) that of the last few years. It's one of the highest, not the highest, maybe the second highest quarterly result. I realize there's a little bit of quarterly volatility, but is this number sustainable? Has it been helped sort of by some of these acquisitions? Any color on that?

This is Alan. Good question. You're right. It was very strong operating margins. And we continue to believe that the business can continue to put up very strong operating margin numbers. We'll always see some volatility associated with the mix, but some of the acquisitions that have been done recently have absolutely contributed to expanding operating margin business, higher quality type of sales with higher margins leading to higher gross margins. So the business has done a really nice job shifting away from what we had a few years ago of some of the lower margin business to higher margin business, and continuing to grow the top line and leveraging that growth in the top line to operating margin expansion.

Just lastly on the Healthcare piece, I think directionally no surprise there, perhaps a little bit worse than we had thought. But has the exit of the anesthesia business, is that almost complete? What sort of gives you some of the confidence that you'll -- what gives you sort of the confidence that we'll see a rebound in the back half? Can you maybe discuss the macro? Or what sort of efforts gives you that confidence and visibility? Thanks.

This is Deepak here. Bottom line is that we have been a player in anesthesia, but it's not been a success. And so we decided that we've got to focus on it, and we said it at the last conference call, because we're known in the industry for the patient monitoring. And basically, we want to focus, focus, focus, and put more emphasis on that. And also, I think Alan has mentioned before on the calls, that anesthesia not only was not growing, but it also was a loss-making.

So we decided that we need to exit that, redirect ourselves, and we believe, with the redirection and the focus we have, that we should get more business. As you know, on the other hand, healthcare has a single digit growth anyway. So we want to just focus on it and see what we can capture, both domestically and internationally, and we have brought some new talent into both at the top. At the same time, we believe that supplies and accessories, which is a good business, it puts us in front of the customers most of the time even after the sale. So we brought in some new leadership there and want to focus and grow that side of the business, because that's a very predictable, long-term business that continues to make you in front of the customers.

And our next question comes from Jeff Martin with ROTH Capital Partners.

Just want to verify, these service and maintenance contracts that you're bringing on board, those are non-CapEx-requiring contracts. Is that right?

This is Alan. One of the contracts does require CapEx akin to a turnkey-type contract. So some of the CapEx that you saw here in Q1 was associated with that.

And that CapEx has been expensed at this point?

That CapEx is part of our -- yes, it's been incurred, yes.

And then, could you elaborate on the event security opportunity? I know we've been talking about that for a couple quarters now, but it seems like you're getting some traction specifically this year. And how large of a market do you think that can be for you on an annual basis, over time? And you don't have to put a timeframe on it, but maybe over the long run, what do you see it getting to potentially?

Jeff, number one is I don't -- obviously we have internal targets kind of a thing, but it's a new market. It's very difficult to put a number on it. But I think there's a reason for us, that is we will always like this (inaudible), so we were focusing on it and looking at it, that there are these what I would call smaller, predictable, long-term repeatable sporting events, concerts and stuff which is requiring more and more security, what I would call it at upgraded securities, not just a simple guard service, upgraded.

So we decided we're going to put up -- we're going to try our hand, so we did the sponsorship for the PGA Senior Golf tournament. It was very well received, because it just gets the name out there, and a lot of people in this industry around -- whether it's tennis or whether it's basketball, whether it's football or cruise lines, or whatever -- or concerts, they all get together. So we are able to show our name there. And we believe that, with that showing of name out there and our ability to grow the technology platform to make security more safer and more predictable, we think that we'll make some headroom. It's not going to become a -- what I would call a $100 million business. I think it's too early to say. But we believe that, if we can take it into the 10s, 20s, it'll be a great business for us.

Could you touch on your acquisition strategy? Are there opportunities you're looking at in all 3 segments, and perhaps not Healthcare as much, but -- and you've made acquisitions in Opto -- just kind of what you're thinking from a bigger picture standpoint would be helpful.

Well, one of the things we're not going to -- we're not going to share much of what we are doing. But I think you'll see us in the Opto manufacturing business to do strategic, synergistic, technology-broadening acquisitions. And we're going to -- they tend to be smaller, but they tend to be what I would call a product line that we can add on synergistically, offer more services to our customers that we already have, or their customers -- where we can take some of the stuff we have to put it in their side.

In the Security side, we're a little bit more focused on a broader picture globally, and with a product line expansion. And the 2 acquisitions that we have done have been very good for us. Are we looking at more? The answer is we always do. We're not going to say anything more than that. And then, as we broaden our reach, whether it's in turnkey, whether it's in sporting events, whether it's in cargo inspection or the turnkey, we continue to look at opportunities.

My last question is on the Harris-L3 merger. How do you view that from a competitive standpoint, and also an opportunistic standpoint?

Well, a lot of people have asked us that. We don't see anything of any consequence one way or the other. L3, the big guy to begin with, so they got bigger. Harris doesn't have much presence at all, or if any, in the security side, so it doesn't bring any synergy on that side. So we look at it business as usual. On the other hand, if their focus -- when they get together finally and they consolidate it, and this becomes less important, we will always look at it.

And then were there any stock repurchases in the quarter?

Yes, there were. We repurchased approximately 100,000 shares of stock during the quarter.

And our next question comes from Josh Nichols with B. Riley.

I was curious, really strong quarter, especially you see with the bookings to the U.S. government, especially it is their year-end. But I was going to ask, some of the bookings numbers can layer into revenue over multiple years. Any kind of color you could give us on how much of that backlog do you expect to kind of fall into fiscal '19, roughly?

This is Deepak here. I can't break it out on specifics. Most of the orders that we have announced is for equipment, and if the equipment orders depending upon some plus/minuses, they all will get shipped in the next couple of quarters. Alan, if you want to add? Some of them are maybe multi-year some add-on service contracts. They happen all the time. But I want to think that most of their stuff, $100 million is service-related. It's mostly equipment-related. Alan?

Yes, a nice portion of our bookings, both in the U.S. and abroad, will ship in the fiscal '19 period, though there's certainly aspects of it that will ship beyond that as well, based on customer requirements. In addition, some of the service contracts can be multi-year in nature, so those will be a combination of fiscal '19 and beyond.

I was going to ask, so I know it's only been a quarter since you announced some of the changes going on in the Healthcare business. Any specifics you could provide on that action plan as far as what's been done to date, or what are some of the checklist items to do and kind of the timeline for some of those things?

This is Deepak here. Josh, it's been about -- it's been more than a quarter, approximately. Again, I don't want to sound like a broken record. Focus, focus, focus is what we are at it. We are de-emphasizing anesthesia. We are trying to make the product stability, and whatever else growth needs to happen, new things have to be added onto the monitoring line. And the cardiology line, which is a higher margin business, we want to expand that.

Supplies and accessories is another area which I've said that we want to focus on, and we got some leadership in there. And basically better and faster and more predictable delivery, supply chain, a happy experience, and features that the customers want and what they know about us, we want to make sure we provide that service to our partners and to our customers.

I know historically, as other people have mentioned, you have a really diverse business, but you do do work in the Middle East. I know rising oil prices has kind of generally been a favorable tailwind to the company. Is that a materially impactful thing that you've noticed in the security business? Or is it more a small incremental benefit as far as the security business that you're seeing for the bookings?

Well, if you're referring to it, oil prices relate to the thing just in the Middle East area, yes. A couple of years ago when the oil was in the 20s or 25s, obviously everything stopped. But in the last couple of years, the economies in all these places have been good. And I've always maintained what I said before. It's important, because that generates their liquidity. That generates the dollars and whatever of the currency. But security is a primary important thing for all these countries.

I say it all the time. Even if you have to -- you have to protect your assets of oil, just like you have to protect your house, so you want security. So we believe that, long term, our goal is to provide a solution that can be the right solution for what the customer wants for securing their assets and looking after them.

Last question from me, kind of 2 parts really, but related to kind of check baggage and screening really. So now you've seen your first shipment, for first order for the 920CT that's been approved in Europe. One, how material of an impact do you think that that could have on European sales? And then also, you're waiting on approval from the TSA for the RTT110. Anything you could tell us about what that process looks like, or how long can that process take to get approval from the TSA?

Well, you ask two-sided questions. On the first one, on the RTT, not -- on the CT checkpoint, we continue to watch. Basically, this is a evolving new trial, demos. Most customers are looking at trying to put to see how much benefit they get. We are watching on it. We have a product. We've been successful. We are deploying it. We are doing demos in other parts of the world. But, it's a wait-and-see game how it works. Everybody's going to take a very careful view to how it grows, and we just want to be there.

Good news is we are already in that socket anyway to that customer, so we can be there, add on the new product, help with them, and see where it goes.

Regarding the RTT110 certification, we are in the final throes of the certification in TSA, but we can't commit to when. I think if we have to go -- we've been saying it for many years. I think this is clear. We'll definitely get the certification.

(Operator Instructions) And we do have a follow-up with Brian Ruttenbur with Drexel Hamilton.

Yes, just one quick follow-up. Can you repeat the amount of bookings that you had post- the quarter? Was it $200 million that you had in additional bookings? Was that the number?

I think what Deepak was referring to was announcements that were made subsequent to quarter-end for bookings that occurred during Q1, Brian. So the total security bookings were about $230 million in Q1.

How have things progressed post- the end of the quarter? Have bookings continued to be strong?

Yes.

Any elaboration on that?

You know I'm not going to say it.

And I'm not showing any further questions. That does conclude today's question and answer session.

Thank you. I would like to thank everyone for joining our call. We are very happy on the Q1, the beginning of the fiscal 2019, and look forward to speaking with you again on our next call. Thank you very much to all of you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect, and everyone, have a great day.