Welcome, everyone, to this fireside chat with OSI Systems. We're here with Alan Edrick, CFO. Thank you for joining us. Oh, thank you for having me. Perfect. Let's start for the investors that are not familiar with OSI. Would you mind giving an overview of the business? Oh, sure. I'd be happy to. So, you know, OSI Systems, we're best known for our security business. We have three different divisions. We have a security division, we have an optoelectronics division, and we have a healthcare division. Our security division makes up over two-thirds of our revenues and even a higher proportion of our profits, so it's often what people focus on. Our security division, we do security detection for ports and borders, for aviation, and the like. About two-thirds of our revenues come from the ports and borders and related services, and maybe a third from our aviation and checkpoints. We've moved into what we believe to be the number one leadership position in security detection, so we're quite excited about that. We also have a healthcare business. It's a much smaller part of our portfolio. It's about 10% of our revenues. We sell into medium and large hospitals. We sell patient monitoring products, we sell cardiology products, and the related service supplies and accessories. What ties everything together is our optoelectronics division. It's our third division, representing about a quarter of our revenues. In opto, unlike security and healthcare, where we sell to the end customer, in opto, we sell to the OEMs, predominantly Fortune 500 companies in a variety of industries in aerospace and defense, medical, industrial, technology, automotive. In addition to selling to some of the leading companies in the world, our opto division also supplies many of the key components that go into both our security products and into our healthcare products. Through that vertical integration, we enhance the overall gross margin of OSI Systems. In addition, we can be faster, more responsive to our customer needs, and really kind of circumvent some of the supply chain challenges that some of our competitors face. That is really how all the businesses kind of tie together. Perfect. I'm going to jump before we dive into the different segments. Ajay Mehra just recently stepped up as CEO. What changes should we see from his new role? Because he has been on the company for a long time. Yes, yes. We have had a longstanding CEO, a founder CEO, who we announced back in May would be retiring, although he is still with us as Chairman of the Board and quite active. We are very pleased to announce that Ajay Mehra has become our CEO effective January 1. Ajay was our Security division president. He led us to become the number one security detection company in the world. He has been with us over 30 years. I think more so than anything, his selection was a vote in continuity. You know, the company is doing great. The guy who has been leading the business, that is two-thirds of our revenues or so, is a sort of a natural step in. I think while any CEO will clearly have a little bit of his own agenda and his own vision, I think we're going to continue largely on the path that we've been on, with some, hopefully, some nice incremental improvements and other ideas which are to come. He's been in the role for just under three months now. Perfect. Does he have any early views on the other segments that he's not that involved with? Yeah. Although he hasn't been as involved with optoelectronics and healthcare in the past, because he has been with the company for such an extended period of time, he clearly has a lot of market knowledge, customer knowledge, and business knowledge of our two other segments. Now he's diving at a deeper level into each of those. I think he's excited about our opto division, which I think is going to go through a period of accelerated growth now. In our healthcare division, he helped bring in a brand new president who just joined us on February 1st. I think this president is of an extremely high caliber, who recently ran one of our competitors and helped grow that business quite significantly. I think we're going to see much better performance out of our healthcare division going forward as well. Perfect. Now I'm going to touch base a little bit on the security business, right? Two-thirds of your exposure. The stock has reacted really positively post-election to your exposure to Customs and Border Protection. Do you mind giving us some context to how large is that exposure today? What is the opportunity in the coming years? Yeah, yeah. Great question. You're right. You know, our stock has reacted positively. I think there's a lot of tailwinds coming on the ports and borders. When you speak specifically in the United States post the election and CBP, Customs and Border Protection, clearly the new administration is highly focused on the borders. One of the nice things, though, is it's a very bipartisan support for what's called non-intrusive inspection, NII, or non-intrusive inspection scanning equipment at the borders. We tend to have the number one market share at the US-Mexico and US-Canada border for that. The belief is that the budgets are going to be significantly higher for NII equipment at the US-Mexico border and the US-Canada border. We just need the United States now to pass a budget. Of course, we just passed a continuing resolution, which we believe to be helpful. Ultimately, when a new budget is passed, we believe that it will contain significantly higher funding for CBP NII equipment and construction, which is exactly what we do. We, in the past at least, have had the highest market share at the borders, and we would hope to maintain that market leadership position. Under the continuing resolution, how much is the opportunity with this special continuing resolution that we have now that is more like allows for some new starts and like some money transferring? Like, do you see orders that could come in the next six months, or you actually have to wait for a real budget to be there? Yeah, no, we think on balance, the continuing resolution is helpful for us. It allows for some spending at similar levels to the prior year. It should open up some spending for CBP, both for the construction and for new sites. We are seeing increased activity in RFIs, requests for information. We're seeing increased activity that, you know, we thought we might land some new bookings. When you mentioned, do we expect to see more orders in the next six months, I would say the answer is undoubtedly yes. Perfect. How long are these processes usually between an RFI and actually an award? That is a great question. It also varies based upon a changing administration, new personnel getting up to speed. It is difficult to say. I think some of the stuff that had been in the queue could happen in the matter of weeks or months, where other stuff might be in the matter of several quarters. Perfect. Now when I think about the border, right, especially the U.S.-Mexico border, you're also exposed to Mexico contracts. Yes. How is the exposure there? You have like two really large contracts that are winding down. How should we expect to see revenue cadence from there, given like these contracts winding down, but also opportunities that could be in the pipeline? Yeah, it's a great question. When we think about the U.S.-Mexico border, we're fortunate that we get to double dip. We work with the U.S. government trying to stop narcotics, fentanyl from coming into the United States. We have contracts with the United States, Customs and Border Protection. As you just mentioned, we also have very significant contracts in Mexico, primarily to stop guns and cash coming back from the U.S. into Mexico. We won three very significant contracts in Mexico with the Mexican Army and with the Mexican Navy. The first one was with the Mexican Navy for over $200 million, followed by a $500 million win with the Mexican Army and a subsequent additional $100 million incremental order from the Mexican Army. On the initial contract, the one with the Mexican Navy called SEMAR, that contract is winding down. We've been delivering. It's been a fantastic producer for us. The customer is extremely happy. The product deliveries are winding down. What we see happening as the product deliveries wind down is the service revenues kick in. Generally, there's a one-year warranty. Post-warranty, we start to have the service revenues. Service revenues generally carry a higher margin than product revenues. Similarly, on the $500 million SEDENA contract with the Mexican Army, we're probably a little bit more than halfway through the deliveries of that contract. There will be significantly more delivered over the next 12 months. On the $100 million incremental contract, the majority of that has also not yet been delivered. You're also very correct in saying that the revenues are winding down from some of the peaks in Mexico. We had very strong revenues in fiscal 2024, stronger in the first half of our fiscal 2025. Our guidance is very strong for the second half of fiscal 2025, but that guidance incorporates a lower amount of Mexico revenues. You know, a year ago when we received these Mexico contracts, there was some concern from investors that, how are you going to kind of fill those holes? We said, this is a new baseline for us. Our plan is to continue growing from here. We are doing just that. You know, as you looked at our backlog at the end of December, it was a record backlog. That record backlog includes converting much of that Mexico backlog into revenue. The Mexico portion of the backlog is lower, and the rest of our business has been growing. We have been filling it up with both cargo-type business and aviation-type business in other parts of the world. We have a very strong backlog. We have a very strong pipeline of opportunities. It is exciting for us because there is a bit more diversification than when the Mexico revenues took up a stronger proportion of those overall revenues. It is a very nice place to be in for us. In these Mexico contracts, some investors have been hesitant around the receivables portion of it and how you have to recognize those product deliveries in your revenue, but you're not able to bill those steps. Do you mind explaining how is that trending and what are the expectations from a free cash flow perspective? Yeah, excellent question. Over the last couple of years, as we've received these Mexico contracts, we've invested a significant amount of working capital, both in inventory and receivables. These Mexico contracts were a government-issued RFP, so we didn't have the opportunity to negotiate the payment terms, if you will. The payment terms are maybe not as favorable as we would see in some of our other contracts. However, these contracts overall are very favorable economically for us. If we were offered the same contract 10 more times, we would undoubtedly go for that contract 10 more times because it's just such a good thing from an economic perspective. That being said, it has deferred our cash flow a little bit. We recognize revenue a couple of ways on the big $500 million contract. There's a construction element as we prepare the sites, and we recognize those revenues over time, kind of like percentage of completion, if you will. We're not able to bill for that, so it becomes an unbilled receivable. Similarly, as we deliver the products and recognize revenue in accordance with GAAP, we're not able to bill until we get site acceptance tests. Consequently, we had a larger unbilled receivable that we began to see come down at the end of December. We expect by the end of our fiscal year here in June and just over three months, it's going to be down considerably. While we've been investing in working capital in the past, we expect to see very sizable free cash flow in the second half of this fiscal year, frankly, the entire calendar year. We think we can have very strong free cash flow conversion. This is a perfectly way to the turnkey solutions, right? Because during this, like RFPs or like financing terms that come together with the technical capabilities that you put together, you have been able to explore new, I don't know, go-to-market opportunities with these turnkey solutions. Would you mind explaining how large are they today and what are the geographies that you see most opportunities? Yeah, maybe it'd be helpful to describe what turnkey solutions are. Our basic business model in the past had been to sell the products and then get the nice recurring revenue through service, spare parts, and maintenance, which is great. We challenged ourselves several years ago to say, how can we expand that revenue potential? How can we expand the margins? We said, what if there's a customer set out there that doesn't have the capital or the money to buy the equipment upfront? Or if they do, maybe they don't have the operational expertise. Maybe they'd like to turn it over to an organization to do what we call the turnkey program, or I coined it many years ago as our version of SaaS, security as a service. What we do in these turnkey programs is we manufacture the products. We place them at the customer site, but we generally own them. They sit on our balance sheet. We staff it up with our people. We enter into long-term contracts as little as six years, as many as 15 years. We charge a fee per scan or a fee per site per month. We get this great recurring revenue at higher margin. We think this model is great everywhere in the world, but in reality, what we've found is that the places that gravitate towards it on a more rapid basis tend to be some of the emerging economies. We have a great contract in Puerto Rico, in Guatemala, in Albania, in Uruguay, and we're working on others. You know, while it would be great for places such as the U.S. or Western Europe, these locations sometimes may not want to sort of turn over control in that regard. It has been a wonderful model for us, and it has helped us to develop some additional proprietary software and the like, which has been a big differentiator for us on many bids. Do you want to touch base on the software? Sure. We developed a proprietary software called Cert Scan. One of the nice things about the turnkey was we had access to a large, large volume of images. From those images, we could then use it to, kind of, we'll say, quote unquote, perfect our software or to make it much better. Cert Scan is a command and control center that's got a common viewer that can be utilized not only with our own equipment, but we can even utilize it with some of our competitors' equipment. It's been a real big differentiator, not just in turnkey programs, but for instance, the Mexico $500 million contract. Initially, when we were bidding on this contract, there was an expectation or a belief that that contract might be split amongst three parties. If we had gotten $150 or $200 million, we'd have been very, very happy. That's a great contract for us. However, as the customer went and started doing reference checks with other customers and they started to learn about the Search Scan software, they said, you know, we really want this whole thing. They sole sourced the deal with us and gave us the $500 million-plus contract. It has really been a great differentiator for us really throughout the world. Perfect. You also mentioned recurring revenues and how these new solutions are increasing that level. How much are recurring revenues right now, and where do you think they could be five years from now? When we look at recurring revenues in our security business, it's about 30% today. A little bit higher in our healthcare business and our opto business, although we don't call it recurring revenue, we call it repeat revenue. It's much, much higher. In security, which is our biggest segment, about 30% today, we see a path to being north of 40% in the future. That's great for us because this recurring service revenue generally carries a higher margin, so it can lead to some operating margin expansion as well. How should we think about margins in the security business five years from now? How much upside do you have? We think there's substantial upside. You know, it's hard to quantify at this point, but when we look at a greater install base, which will drive higher field service revenues at higher margin, as we roll out Search Scan as an independent SaaS-based solution, software as a solution, software as a service solution for us as well as SaaS-like margins, that will really help our operating margins, expanding our turnkey programs and just leveraging our fixed cost structure to grow our margins. We think there's a tremendous opportunity to expand margins significantly in the next five years. Perfect. When you think about M&A, you recently did a deal, radio frequency and more like towards capabilities. When you think about like M&A pipeline, you think about like what type of capabilities you like to be exposed to, or is exposure to regions, or is exposure to like more services content? How do you think about that in the security business? Yeah, great question. You know, kind of M&A is in our DNA. We like doing acquisitions, but we're extremely disciplined when it comes to acquisitions, both on the valuation side and on the strategic and financial fit for us. That being said, when we do M&A in security, we're looking for things that might fill a technology need for us, maybe a gap in our product portfolio. We're looking for things that could fill a channel need. We've taken out competitors in the past. Generally speaking, they're accretive right out of the gate for us. We see upsides and opportunities to expand the revenue potential, but we also look at cost synergies as well. All of these things together have led to, frankly, a very successful M&A program on the security side for us. Perfect. If I think about the portfolio and the regions, are there any particular regions where you see significant opportunities coming from? Yeah, I think when we look out in the near future, the biggest areas for opportunity in the regions, I'd say the Middle East is an extremely fertile territory in security. The United States is extremely big opportunities for us as well. Also when we look at Europe, Latin America, and Asia, those are all real opportunities. China is not a place that we play in in any significant manner. Really throughout, excluding China and maybe some parts of Africa, really the rest of the world is great opportunities for us. Do you have a better competitive opportunity in some regions versus others? We think our competitive positioning really is global. You know, we think we're well positioned no matter where the region is. Maybe China excepted, who has a local company in that region, but our products are well suited and our solutions are well suited for the U.S., Asia, Europe, and Latin America. Perfect. I'm going to switch gears a little bit to the airport security business. In the past, you have talked about this replacement opportunity coming to the U.S. How should we think about it? Like how large is it? When is it coming? Yeah, the big replacement opportunity in the U.S. and aviation that we've been talking about is for checked baggage. These checked baggage machines were put in not long after 9/11. They're old. The U.S. government is spending a lot of money on service. It represents a huge opportunity. We think a billion dollar plus opportunity. We did not play in the initial deployment of these machines 20 years ago as we didn't have a product for checked baggage back then. When it needed to come out so fast, a lot of them were medical CT products, which were adapted for security applications. We then went on to develop what we believe to be the industry's first checked baggage solution specifically for security applications. We have had great success throughout the world, excluding the U.S., in places like Europe, the Middle East, Latin America, and Asia. We think the U.S. represents a big opportunity. It is unclear exactly when that opportunity is supposed to start. I think many felt it would have already started by now. I think a lot of folks are believing now it might be 2027, 2028, but it should be a billion dollar plus opportunity rolled out probably over about a five-year period. We would normally say you would get service for another 10 years. In this case, it seems like it has been 20 years. Generally speaking, the products are out there for 7 to 10 years. When you think about this new product development and R&D, how is that process? How much you spend on R&D? How you focus on what are the key arenas to invest on? Yeah, we have a tremendous set of engineers, both on the hardware side and the software side. We've been investing more and more in R&D over the years. When you look at OSI Systems overall, we're pretty much investing in the security side and the healthcare side. OPTO is mostly customer-funded R&D. On the security side, we've been investing both on the aviation side for new products to obsolete ourselves or for entry into new markets. On the cargo side for ports and borders and critical infrastructure, we've been coming up with new technologies and combinational technologies. We think what we've been doing in R&D has allowed us to have the broadest portfolio of products in the industry, particularly on the cargo side, which has allowed us to take over this sort of number one position in security detection. When you think about products versus software services, how do you think about your investments? We do both. Yeah, a lot of investments are in products, but really a lot of the differentiation is in the software. It is in the algorithms. As we look forward, AI is going to play a prominent role. We bought a small company on AI four to five years ago, which we think gave us a big jumpstart into this arena. We all believe it is going to be kind of the future of security. Software is really the biggest differentiating factor out there. Perfect. I am going to touch base a little bit on OPTO. How do you think about the opportunity of nearshoring, reshoring, and all this geopolitical environment? How much do you produce in the U.S.? How much do you produce in North America? Would you mind going through those details? Sure. In our OPTO business, we're a global player in OPTO as well and a global manufacturer. We manufacture quite a bit in Malaysia, Indonesia, and India, but we also manufacture right here in the U.K., in the U.S., in Canada, and a small amount in Mexico. We really serve a global customer base. On the OPTO side, in terms of what that means and what tariff implications and the like, it kind of changes on a daily basis. The manufacturing that we have in Mexico and Canada is small. It's almost a rounding error for us. We feel there's kind of tremendous opportunity for us in the OPTO division in order to move things around as necessary. When we talk about nearshoring, that changes. We believe that nearshoring is a tremendous opportunity. Of course, as tariffs come up and everything, it kind of changes that equation all the time. Until that kind of gets settled, we're not so sure. What we have seen, undoubtedly, is a migration of certain customers wanting to move away from China and into a more nearshoring capability, whether that's nearshoring towards the US or nearshoring in other parts of Asia outside of China. In your OPTO exposure, how much of the revenues are internal and go to your security business, healthcare, and then how are you exposed to different industries? Yeah, a lot of people think that it's a high proportion of our sales that's internal. It's not really. About 85% of our sales are to third-party customers. About 15% is internal. That 15% that's internal is very important to us. A lot of it is kind of some of the secret sauce that we do in the security area. We don't have any particular customer concentrations or even industry concentrations. We really have a nice pie of business when we look at aerospace and defense and medical and industrial and telecommunications and consumer and automotive and gaming. It's a really wide variety of customers. The nice thing about these customers is once we get engineered into a product, we can be there for a very long time through the customer's product lifecycle. Sometimes it's more than a decade. You call them like repeat sales. How much are them and how do you think about them going forward? We would estimate that over 80% of our OPTO revenues are repeat. We have great visibility into sort of the revenue pipeline. One of the nice things about OPTO today is over the last 12 to 18 months, we've seen some of our customers optimizing inventory levels. Previous to that, they probably maybe overbought a little bit for risk mitigation during some of the supply chain challenges and the COVID. Now everybody's been trying to right-size inventory levels, optimize working capital. While that's not completely done, we think it's largely behind us. We could see an acceleration of OPTO revenue beginning as early as this quarter. Would you mind going through some products where you think you really differentiate in the OPTO business? What OSI does uniquely? Yeah, so when we look at our OPTO business, we almost break it into kind of three arenas. We have pure optoelectronics, which are sensors and detectors that really are unique to what we do in aerospace and defense and in other areas, which is nice. We have a contract manufacturing portion, and then we have a flex business, flex circuits that we do. That's some higher margin work that we're kind of unique. And our value proposition in a lot of the things we do is we're not looking to do super high volume, razor thin margin. We do lower volume, higher mix where we add more value add, and consequently, we have very strong margins for this industry and in this division for us overall. Amazing. Now healthcare, right? Healthcare has been lagging in terms of volumes, but you mentioned you do have a new product and there's also a new president in the business. What are the expectations in the near to midterm on that business? We're excited about healthcare. It's only 10% of our revenues, but it's our highest contribution margin business. As revenues go up, there's an awful big pull-through to operating income, operating margins, EBITDA. Unfortunately, the inverse can be true. If revenues go down, you can't change your cost structure fast enough. We're very encouraged by what we're seeing. Our new President is looking at every single aspect of the business, invigorating some energy and some changes in thinking. It's happening fast. We've only had him for 45 days, and it's making a big difference. As we look out into the near term, I see us growing the top line, driving operating margin expansion, and then relentlessly focusing on the new products that we're going to be bringing out. First phase of our new patient monitoring platform slotted for the summer of calendar 2026. It's a multi-phase approach, but very excited about that. We think the future is much, much brighter for our healthcare business than maybe what we have seen for the past few years. When you think about that future, does that require any particular investment? And if it requires that, is it in products? Is it a sales effort? How should we think about that? We have a fantastic sales force. Really, my background before coming to OSI Systems was a CFO at multiple medical device and life sciences companies. So very, very familiar with sales forces and life sciences. We have an outstanding sales force, an outstanding commercial organization. As we put these new products into their bag of tricks, I'm really excited for what the future holds there. Perfect. I will open up for questions. If you have any questions, please raise your hand and we will have a microphone going your way here in the front. Thank you very much for the. It's being recorded, so we record it. Thank you. Thank you very much for a very interesting discussion. One thing I'd like to understand a bit better, at some point you mentioned software is the biggest differentiator, you said. I think you were talking about the security. Can you talk a little bit more about that? If software is the biggest differentiator, how exposed does that make your business to disruption from some kind of tech startup in software? Great question. This business in security has always been much more evolutionary than revolutionary. We have not seen any major disruptive changes in the last 20 years in security. Software is the biggest differentiator. We look at that both in our Search Scan software platform, the algorithms that we are constantly developing and enhancing to beat the bad guys, so to speak. While there is always the threat of a startup or a technology company doing something, we look at that as probably not a realistic scenario. If there was somebody, they would probably come to us and we might license some of that software from them. It is always a potential out there, but we do not look at it as a major risk. When you think about software, right, how much of that software you think is core to your product and you want that software at the edge? Where you start to think about partnerships to actually not only have a really strong software that increases the potential of your products, but also makes those products talk to other stuff? Yeah, so we've taken the approach that we think we like to develop it all in-house. We haven't partnered on the software to any large degree. We've done it in certain cases. Doing it all ourselves, we have some tremendous software development teams globally, sort of throughout the world, has really led to some big differentiation. Whether that's the algorithm development or the Search Scan software that has been a bit of a game changer for us on the cargo and solution side, our preference is still to continue to do things ourselves. We think we have the team to do that. Where it might make sense to partner or outsource part of that, we would have no qualms about doing that as well. Perfect. Any other questions there? Could you touch on your competitive position relative to others in the healthcare side? There are some larger competitors just to get a feel for the niches and your market shares, particularly in certain niches. Sure. Good question on the healthcare side. Unlike security, where we tend to have the number one or number two market position in almost all the markets that we play in, in healthcare, we compete against some of the big players out there, such as Philips and GE. We are not arrogant or naive enough to believe that we are going to overtake a Philips or GE. Our market share today is in the single digits when it comes to patient monitoring. With the new platforms that we have coming out beginning in the summer of 2026, as currently slated, we believe we can take some additional market share from some of these large companies. The market is large, and market share gains and revenue gains from us at the high contribution margins that we have can make a very, very meaningful financial impact to the overall organization. Following up to that, would you mind discussing the competitive position you have in the different security businesses as well? Sure. When we look at our competitive position in security, if we start off with cargo for ports and borders and critical infrastructure, we believe we have the majority market share already, so a very strong position. We compete against also some larger companies, but within these larger companies, their security divisions are a bit smaller than ours are. Very strong companies overall. When we look at our differentiation in ports and borders and critical infrastructure, it comes down to having the broadest portfolio of products. We have high energy, medium energy, low energy, X-ray. We combine these technologies. We also combine it with our proprietary Search Scan software. All of this has allowed us to clearly differentiate from our competition, which has allowed us to capture such a strong market share that we have today. When we look at the aviation business, which is a highly regulated market requiring certifications and everybody has to meet a minimum threshold, we have competitors today who are probably a little bit stronger than us in aviation. We believe we're catching up. Our aviation businesses grew double digits in the first half of this fiscal year. We have come up with some unique ways of imaging some of what we do in the aviation industry. It is exciting for us out there. I would say our competitive position is stronger in ports and borders and critical infrastructure, but it is also quite strong in aviation, though we're not the leading market participant today. Perfect. We had another question on the back. Thanks. You mentioned China being challenging. Can you, I suppose, discuss which peers you face and whether they threaten your growth in emerging markets? Yeah. In terms of China, there's a local Chinese competitor who dominates the Chinese market. When we look at emerging markets, maybe outside of Africa, we continue to do very well, as do some of our competitors. While that Chinese company can be a challenge when looking at certain pricing, there are a number of countries who have a sentiment of not necessarily wanting to buy Chinese product for security applications. That sentiment, in many cases, seems to be increasing, which can be helpful for us. In some of the emerging markets, that's where Chinese companies can sometimes play a bigger role. Perfect. Any other questions? Can you give an idea about how localized is manufacturing, especially security, in different regions and also related to the tariff risks? Yeah. The question about the microphone was the localization of our manufacturing for security and maybe tariff implications. In our security business, we manufacture in three principal locations: right here in the U.K., in the United States, and in Malaysia. We have capacity to grow in each of these places. Our manufacturing and operations teams are excellent. We do not believe that we should see any meaningful impact in our security business from tariffs. Of course, it remains to be seen as it changes on a regular basis. Today, as we assess the situation, we do not perceive that to be a significant risk for us. When you think about geopolitics and how you are exposed around the world, what other arenas could be opportunities or challenges? From where you have your cash and all these things, how should we think about that? Yeah. I mean, some opportunities when we think about geopolitical things going on are wars. Oftentimes, when wars are taking place, there's not necessarily security purchases taking place in those war regions. When the wars die down, for instance, things in Russia and Ukraine, in the Middle East, it oftentimes creates a real opportunity for additional security equipment there. If that were to take place in the coming future, we think that's a real opportunity for us. From a cash perspective, we have cash throughout the world, but we never maintain a lot of cash as we're in a net debt position that we love where we are from a balance sheet perspective. We ended last quarter with net leverage of around 2.1. Throughout the world, we have a few million dollars here, a few million dollars there. The money we have in the United States, we use to pay down a revolver and minimize our interest. We have the ability to repatriate cash from really any location in the world. Some have a little bit more tax implications than others, but we have good strategies for that. As you approach some of these projects that require your capital, right? There is some free cash flow volatility. How should we think about free cash flow going forward, free cash flow conversion, and what is the normal levels of investment and recovery? Exactly. Outside of potentially new large turnkeys, and we would love to win new large turnkeys, they will require some CapEx investment upfront. Outside of new large turnkeys, we believe that we can convert close to 100% of our free cash flow to net income, sometimes a little bit higher than that, sometimes a little bit lower than that. We think we are kind of in an outstanding position. With that free cash flow, and we look at capital allocation, we kind of really look at three things: M&A. We are a disciplined buyer. We talked a little bit about M&A in the beginning. Stock buyback. We bought back about $80 million of stock in our first fiscal quarter of this current fiscal year. Any residual cash we have will just pay down our revolver in order to minimize our interest expense. Perfect. Any other questions? Perfect. We are going to close with the last one that I usually like. On the two ends, what are you most excited about, but then also what keeps you up at night? Yeah, great question. What am I most excited about? I think this company has never been positioned better. Our security business now has the number one overall market leadership position. The opportunities throughout the world are fantastic. We're sitting on a record backlog as of the end of the last quarter. Our funnel of opportunities is outstanding. The teams that we have, the commercial teams, the operations teams, the R&D development teams, we believe sort of second to none. We think the future is extremely bright. The world's not getting a whole lot safer, as we see every day, but that plays very well into what we do as a security detection company. We think we have some wins at our back from some of the stuff going on domestically in the United States. Really feel great about where the company's situated today. In terms of what keeps me up at night, not a lot, honestly. I mean, we feel that things that are within our control, we have great execution plans. We have a great track record of delivering. We do not see anything getting in the way. I guess it would be the uncertainties that we see created in the U.S. and other markets seemingly more regularly than perhaps we have seen in the past. Some of those things outside of control, that could play a role. Perhaps it could actually help us, but it could always be a risk as well. Perfect. Thank you very much. Thank you.