Good morning, everyone, and welcome to the Jefferies 2023 Industrials Conference. My name is Sela Korf , and it is my great pleasure to introduce you to Alan Edrick, EVP and CFO of OSI Systems.
Well, thank you. Good morning, everybody. I think we have a really exciting story to share with you. So without further ado, let me jump into it. At OSI Systems, we have three primary businesses. We're a Security division that makes up the majority of our revenues. We have a Healthcare business, and what ties it all together is our Optoelectronics business, which has been performing exceptionally well over the years. We are a June thirtieth fiscal year, so we've recently finished our fiscal year-end with nearly $1.3 billion in revenue. Give you a couple highlights. For the fourth quarter that we just ended, we had 22% year-over-year growth. All three of our divisions grew double digits, leading to record revenues.
We had record non-GAAP earnings, and in addition, we finished the year with a record backlog of $1.8 billion, giving us excellent visibility as we move into fiscal 2024. We recently provided our fiscal 2024 guidance on our call a couple of weeks ago, and we expect to grow our top line by at least 18%. We expect to leverage that strong top-line growth to at least 25% growth in adjusted EPS. And with our strong balance sheet and cash flow, it really gives us great flexibility to act opportunistically. We're really in a position of incredible momentum. We've had strong organic growth. We've complemented that with some rather small tuck-in acquisitions that have filled a channel need or a technology need.
With our, with our strong backlog, it gives us the best visibility that we've ever had coming into a new fiscal year, so we're quite excited about that. We have a strong marquee customer base. At the heart of things, we're a technology company. We invest a significant amount of R&D for next-generation products, and we have a nice recurring revenue stream, which is often underappreciated. But in each of our businesses, we have strong recurring revenues and strong repeat revenues, and I'll show you a slide coming up on that as to what that represents. Just a couple of financial slides before moving into our overall business. Again, as mentioned, we expect to grow at least 18% this year. We have a history of growing the top line.
We took a little bit of a pause during the primary years of the pandemic. But even during that pause, you can see on the picture on the right, we really have strong earnings growth. So we're able to manage productivity improvements, our cost structure, to continuously improve our overall adjusted EPS. And in the current year that we're in, we're expecting to grow, you know, at least 25% and believe we're in a good position to achieve that. So in terms of our recurring revenue or our repeat revenue, our security business, over 40% of our revenues are recurring through service, what we call turnkey, some of the consumables, and that's been an increasing percentage, which is quite nice for us.
Our healthcare business, generally over a third of our revenue, tends to also be of a recurring nature. In our optoelectronics business, while it might not meet the classic definition of recurring revenue, it's repeat revenue. Once we get into a customer and get engineered into those products, over 80% of our revenues tend to be repeat. One of the really nice things, mentioning the visibility, is over on the right-hand side. We've had a growing backlog, and you can see it really grew significantly over the past 12 months. We grew 46%, year-over-year, giving us nice visibility going forward. From a cash flow side, we've been a strong cash flow generator over the last 6 years. We've recorded over $650 million of operating cash flow.
The last couple of years, we've been investing a little bit more in some working capital, and we'll continue to do so as to support the very strong growth that we have coming up. We have, you know, our cash management with what we've been doing with that. We've done some acquisitions. We've been pretty aggressive in our stock buyback, and any extra cash we have, we'll generally use just to pay down our revolver, but we do not have significant leverage. As you see here, our net leverage is below 1.5, giving us excellent flexibility to move forward. So kind of moving into some of our markets and the businesses. You know, in security, we tend to be the number one or number two provider in each of the markets that we play in.
We do security detection, so when you go to airports or you're over at ports and borders or at sporting events, critical infrastructure, and other places, you tend to see our products. The primary brands that we have are Rapiscan, AS&E, and S2, and it's really been a great business for us. We've been capturing market share, it appears to be sort of each and every year. In optoelectronics, we supply components, sensors, detectors, other electronic components to the leading OEMs of the world in a variety of industries. In addition, our optoelectronics business supplies the key components that go into many of our security products and into many of our healthcare products.
So through that vertical integration, we enhance the company's overall gross margin, and we can control the supply chain and be faster and more responsive to our customer needs. In healthcare, with an aging population, we target products that go into hospitals. We generally target medium and large hospitals, with primarily providing patient monitoring and cardiology products. At the heart of things, we really are a technology company. Most of the R&D that we spend goes into our security and healthcare products, as the R&D in Opto tends to be customer-funded. This has led to a number of new products, which has allowed us to capture significant market share, most notably in our security business. We are a global company. We're headquartered in California, but we do much of our manufacturing in low-cost jurisdictions such as Malaysia, Indonesia, and India.
But we have manufacturing in the U.S. and Europe as well, sales offices throughout the world, and R&D facilities throughout the world as well. So let's first start with with our security business. You know, we have a large, large installed base. What's nice when you have that installed base is you get that recurring service revenue. Service revenue comes at a significantly higher margin, generally speaking, than the than the product revenue. With this business growing so fast, you know, it approached, you know, 60% of our revenues or so in the last fiscal year, expected to be even much higher than that in the in the current fiscal year that we're in.
We're number one, not just in many of the products that we play in, but in other business models that we developed that I'll talk about as well, what we call turnkey, another version of SaaS for us. Let's kinda keep going. So what we do provide is a real integrated solution. We provide these advanced security systems at ports, borders, critical infrastructure, courthouses, office buildings. We have the most diverse product portfolio in the industry. Therefore, we don't need to push a particular technology on any of our customers. We can see what is right for them, and as a result, we'll provide that product, which has really led us to capture significant market share.
But in addition to supplying products, we provide screening solutions, so we're able to provide a full-scale offering, including our people, to man many of these operations. And speaking of that, you know, what one of the things that we pioneered, a few years ago, we said: How can we expand our revenue potential, and how can we expand the margins? And we said, "Well, what if there's a customer set out there that either doesn't have the capital or the operating expertise to run a machine? What if we provide a full solution?" And we call that turnkey. It's our version of SaaS. Instead of Software as a Service, it's Security as a Service. And what we do is we manufacture the product, we place it at the customer location, but we generally own it. It sits in our balance sheet.
We staff it up with our people. We enter into long-term contracts that have generally ranged from 5 to 15 years, and then we charge a fee per scan or a fee per site per month. Thus, we get this very nice recurring revenue at higher margin. We've had a number of wins, but mostly in the international marketplace, and it's been, you know, quite exciting for us. We're the clear, we're the clear leader in this area. So kinda talking about, you know, SaaS, as you will, you know, we really look at SaaS in two components: the Security as a Service, which is our turnkey that we just talked about, which is this nice, repeat, higher margin revenue for us. Then from that, we developed a proprietary software that we call CertScan, and this is a true Software as a Service product.
It's something that we've recently launched. We're selling it not just to our existing customers and not just for our products, but it's really agnostic. It can be used with some of our competitors' products as well, so we're getting into a number of these opportunities. This is in the early days for us. We look at this as a significant growth opportunity for us and to get SaaS-like margins for these, so very exciting for us right now. If we talk about some of our products, the area that has really been growing the most for us is our cargo and vehicle inspection. We inspect cars and trucks as they go across borders, come out of ports, and other locations. We're the number one market leader in this area. We've been winning some significant new contracts.
We have the most diverse technology in the industry, and it's really allowing us to move to a sort of a new whole plateau. We talked about the significant growth in our backlog, growing 46% year-over-year. A big part of that is based on our cargo and vehicle inspection products. To show you, you know, a couple of the wins, just last year in our second quarter, we announced a $200 million-plus international win, and in the April time period, we announced a $500 million-plus win to Mexico to the Mexican Army. These are very, very significant contracts, which primarily will begin to be delivered here in fiscal 2024 and beyond. Puts us really on a new plateau.
These were both sole-source contracts, so quite exciting for us, giving us excellent visibility, not just for the product revenue, but for that recurring service revenue that we hope to get for many years to come, thereafter. Another big area for us are checked baggage machines, commonly referred to in the industry as hold baggage. Our product, called RTT, which stands for Real-Time Tomography, was the industry's first checked baggage machine designed specifically for security applications. Earlier machines were medical CT systems adapted, after 9/11. We've had great success with this product, selling it primarily internationally, in the EU, Latin America, Asia, the Middle East. We've also had tremendous success in air cargo, selling it to the DHLs, FedExes, UPSes of the world.
Big opportunity here in the United States, which will be going through a replacement cycle, in a few years, which will be a multi-year replacement cycle, and we hope to be a, a big participant in that replacement cycle. What we've probably long been known for are our checkpoint machines. These are the machines at the airport that you might see that you put your carry-on bag or, or laptop through. Brand is called Rapiscan. We sell these globally. What's interesting is everybody focuses on aviation, but we probably sell five times as many of these machines into other venues: courthouses, schools, hotels, office buildings, sporting events, and the like. So real nice area for us. We also sell a, a CT machine you see pictured here on the lower right that we OEM from another company.
Generally speaking, most of our products are developed in-house, but this is one that we partner with another company on and been selling internationally. So good area for us. And another area that very much complements this is trace detection.... You'll see these products at airports, at nuclear power plants, and the like. We have a strong product here that we acquired back in 2017 or so, that's been a good contributor for us. When you think about our customer base in the United States, you know, anytime there's a significant tender, Rapiscan tends to be invited to that opportunity. We sell into many branches of the Department of Defense, the Department of Homeland Security, whether it's CBP, Customs and Border Protection, or TSA, or other agencies are very big customers for us.
In some shape, manner, or form in the United States, a good portion of our sales are to the government, whether that's federal, state, or local. We'll sell commercially, too, to sporting venues and hotels and, and air cargo companies and the like, but a lot of government-related business here. And as you can imagine, the world's not getting a whole lot safer, but it plays very well into many of the things that we do. Similarly, internationally, whether it's in Latin, Latin America, South America, Central America, Europe, Middle East, Africa, Asia, in many of the, you know, key locations, we're there.
You know, we tell a lot of our, you know, customers, "If it's good enough, if it's good enough for the White House, you know, if it's good enough for the Vatican, it's probably gonna be good enough for you for security as well." So, we're really at many of the preeminent locations. That takes us to our Opto division. Our Opto division, simply speaking, has really performed exceptionally well. You know, I think over the last dozen years or so, with the exception of one year, we've shown operating margin expansion each and every year. It used to be our smallest division. It's now our second-largest division. We just completed a quarter where we again, we grew double digits in the business, coupled with operating margin expansion.
This business, unlike security, where we sell to the end customer, in this business, we sell predominantly to Fortune 500 and other companies in a variety of industries. It could be aerospace and defense, industrial, medical, gaming, technology. We really have a who's who list of customers, in addition to selling to our sister companies, our security business and our healthcare business. And although those sales are eliminated in consolidation, the margin remains in-house, so it's been quite nice. We sell under two brands, OSI Optoelectronics and OSI Electronics. Those are the primary ones for us. We do both work on sensors, detectors. We do some contract manufacturing as well. Shown here on the right are some of the customers that we have in defense and technology and medical.
It's really been a, a nice, nice business for us. We play in a lot of different verticals. We don't have any significant customer concentration or really even any kind of market concentration. Continue to develop next-generation technologies. As we get engineered into these products with our customers, we tend to be there through the customer's product life cycle, for the most part, so many, many long-term customers that can sometimes expand well over, well over a decade. And finally, moving to our, our third division, which is our healthcare division. It's called Spacelabs Healthcare. In Spacelabs, we sell patient monitoring products and cardiology products, predominantly at the hospitals.
These are the patient monitors that you might see at the bedside, which is connected to a central station, where a nurse can look at multiple rooms simultaneously, which is also connected to the hospital's electronic medical records, and through telemetry, the patient can be continuously monitored as they move throughout the hospital. Very important to be on what they call GPO contracts, group purchasing organizations, and IDNs, integrated delivery networks, and we're on many of the leading GPO contracts and are working with many of the IDNs. This is a business that becomes a little bit stickier. We think that the best customer you have is the customer you have, and we have a very high retention rate of our current customers, and then we go after some competitive conversions.
You know, unlike security, where we tend to be number one or number two in each of the markets we play in, we compete against a few bigger companies here, so we are not at that same level, but we are growing, and we're looking to grow our business. We just finished in our fourth quarter, growing 18% in the quarter, and we're expecting fiscal 2024 to be a nicer year in this business than fiscal 2023 was. We're developing a number of new products that we hope to launch in a few years' time that will be quite exciting for us for new platforms. Speaking about, you know, patient monitoring, this is what... This is really what I just described. These are the bedside monitors, the central stations.
We call, we call the products Xprezzon and Xhibit, along with our telemetry products, and the Spacelabs has a very nice reputation throughout the industry. Similarly, in cardiology, we sell these products not only within hospitals but also in some physicians' offices. This is ambulatory blood pressure monitoring, Holter monitoring, largely a software-based product. So these cardiology products are not only the highest margin products within Spacelabs, they're also some of the highest margin products within all of OSI Systems. We've developed a number of new products and launched them over the last couple of years. More on the horizon to come. Very strong internationally in places like Germany and the UK.
We've developed a sales force in the United States and are expanding that and expect to have added penetration in the coming years in this business. So really, kind of as we put it all together, you know, I don't think OSI Systems has ever been in a better position. We have excellent visibility. You know, looking forward, we're expecting good, strong top line and bottom line growth. We're investing a significant amount in R&D for our next-generation products, you know, throughout our portfolio. We have a very, very strong balance sheet. We have a number of, you know, catalysts for growth in all three of our businesses, so it's really an exciting time for us. I think we might have a few minutes for any questions that there might be. Okay. Yes?
Can you go through the product roadmap of security as far as, you know, technologically, what you're looking to develop over time and how you guys-
Yeah
... win the technology?
Yeah, in terms of, The question was, can we go through a sort of a product roadmap for our technology and security? You know, in security, we have the most diverse technology out there. We use high-energy X-ray, medium energy, and low energy. We also use certain CT applications and backscatter, which is a low-energy X-ray. Through our roadmap, we're looking to constantly evolve that. We're also looking at adding new software features. We're looking at adding artificial intelligence into some of our operations, so it's really an exciting time for us. All right. Well, thank you very much. Wish you a good-