Q : How does the recent acquisition of the RF solutions business fit into OSI Systems' strategy? A : Ajay Mehra noted that the acquisition benefits from OSI's global sales infrastructure and financial strength. The RF solutions business, crucial for border security and drug interdiction, provides broad-range surveillance capabilities. OSI plans to leverage its existing customer base to expand opportunities in defense and border security.

Q : How significant was Mexico's contribution to the quarter, and what is the outlook for the second half of the year? A : Alan Edrick, Chief Financial Officer, stated that Mexico was a significant contributor in the first half and will continue to be important, though at a lighter level than the previous year. OSI is effectively replacing Mexico's strong revenues with non-Mexico contracts, supported by a robust backlog and opportunity pipeline.

Q : What is the outlook for the product versus services mix, especially with the transition in Mexico contracts? A : Ajay Mehra highlighted that shipped products lead to recurring service revenue, which is expected to grow significantly in 2026 and beyond. Alan Edrick added that as products roll off warranty, service revenue, which has higher margins, will increase, starting as early as Q3.

Q : Can you discuss the opportunities in the aviation sector and the global replacement cycle? A : Ajay Mehra explained that the aviation market is vast, with opportunities in checkpoint CT, trace detection, and checked baggage. The US is focused on checkpoint CT, while internationally, OSI is winning orders across various segments. The replacement cycle is ongoing, with recurring service revenue opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

This article first appeared on GuruFocus .