Core Viewpoint - Varex Imaging is experiencing stable demand despite geopolitical events and tariff volatility, with expectations for incremental margin improvement as prior tariff costs roll through inventory and long-term growth initiatives tied to manufacturing expansion in India and advancements in technology [6][12][18] Group 1: Demand and Market Conditions - Current conditions are described as "directionally positive," with ongoing policy discussions potentially leading to further changes [1] - Demand trends in security applications are at least "flat to positive," with increased inquiries about Varex's technologies [3] - The healthcare sector remains the largest end-market for Varex, driven by patient dynamics rather than macroeconomic events, with no significant impacts on hospital capital budgets reported [4] Group 2: Tariff and Pricing Adjustments - Varex has adjusted pricing and pass-through mechanisms in response to tariff escalations, with inventory levels affected by higher-tariff inventory still on hand [2] - If the current tariff regime remains, gross margin could improve modestly as older, higher-tariff inventory is cleared, with an estimated benefit of 30 to 50 basis points [7] Group 3: Regional Insights - In China, demand is stable to slightly growing, with a shift towards a more mature replacement-driven market, supported by government initiatives to enhance healthcare delivery in rural areas [8][9] - Domestic Chinese imaging players are gaining market share in competitive tenders, which is favorable for Varex as it supplies many of these players [10] Group 4: Growth Initiatives - Varex is ramping up production at two facilities in India, with expectations of generating approximately $100 million in incremental radiographic revenue over two years starting from fiscal 2027 [12][13] - The company is focused on photon-counting CT technology, aiming for deeper engagement with multiple OEMs by 2028 [14] Group 5: Financial Performance and Strategy - Recent debt refinancing has reduced coupon rates by about 175 basis points, resulting in annual interest savings of approximately $7 million to $8 million, translating to an annualized EPS benefit of about $0.15 to $0.16 [15] - The company aims to move corporate gross margin toward the high 30% range over the next few years, driven by growth in photon counting, cargo inspection systems, and India radiographic growth [18]

Varex Imaging Conference Call Summary Company Overview - **Company**: Varex Imaging - **Business Segments**: - Medical Imaging: Approximately 70% of revenues - Industrial Imaging: Approximately 30% of revenues - **Products**: X-ray tubes, X-ray detectors, associated software, and other components - **Key Customers**: Major medical imaging OEMs including GE, Siemens, Philips, Canon, and Hologic [3][4] Core Business Insights - **Tariff Mitigation**: - Successfully passed increased tariff costs to customers since April 2022 - Increased local manufacturing in China and Europe to mitigate tariffs - Recent Supreme Court ruling has reduced tariff rates, expected to positively impact P&L in 4-6 months [5][6][7][8][9] - **Market Environment**: - Stable demand in medical imaging with hospital capital expenditure (CapEx) remaining a top priority - Historical resilience during economic downturns, with stable to slight growth observed [10][11][12] - Channel inventory issues have been resolved, leading to improved procurement from China [13] - **Customer Engagement**: - Increased collaboration with major customers on new system developments, showing positive engagement and excitement [14] Industry Trends - **Transition from Analog to Digital**: - Complete in developed markets (U.S., Western Europe, Japan) but ongoing in regions like South Asia and certain Latin American countries [15][16] - **New Manufacturing in India**: - Two factories being established for radiographic products to regain market share in price-sensitive segments - First factory for detectors is operational but not yet at full capacity; second factory expected to be completed by end of 2023 [17][18][19][21] Industrial Segment Performance - **Cargo Inspection Systems**: - Strong sales of $55 million in FY25, with expectations for continued demand in FY26 driven by increased border security and tariff compliance needs [22][23][24][25] - **Service Revenue**: - Service revenue from cargo systems expected to be accretive to margins, typically starting after a warranty period of about 18 months [26][27] Technological Advancements - **Photon Counting Technology**: - Offers advantages such as high-speed imaging (10,000 frames per second) and significant dosage reduction (60-70% less) in medical applications - Expected to enhance image quality and provide material discrimination capabilities [28][29][30][31][32] - Anticipated market introduction in early 2027, with ongoing collaborations with customers [33][35] Financial Health - **Debt Refinancing**: - Total debt reduced to $350 million with a new coupon rate of approximately 6%, down from 7.875% - $18 million of debt paid down as part of refinancing, allowing for flexibility in future cash flow management [38][39][40] Future Outlook - **Exciting Developments**: - Anticipated growth from photon counting, cargo inspection, and Indian manufacturing initiatives - Focus on improving operating leverage and EBITDA margins as new products ramp up [44] - **Concerns**: - Ongoing volatility and uncertainty in the policy environment, which poses challenges for strategic planning [45]

Core Insights - Varex Imaging reported a strong start to fiscal year 2026, with first-quarter revenue of $210 million, a 5% increase year-over-year, driven by a 17% increase in the Industrial segment and stable performance in the Medical segment [5][16] - The company highlighted a favorable product sales mix contributing to a non-GAAP gross margin of 34%, and non-GAAP EPS of $0.19, up from $0.10 in the previous year [6][20] - Engagement with customers at the RSNA conference indicated a positive outlook for future demand, particularly in the Medical segment, with a focus on innovation and integration of technologies [10][12] Financial Performance - First-quarter revenue was $210 million, with Medical segment revenue at $145 million (69% of total) and Industrial segment revenue at $65 million (31% of total) [16] - Non-GAAP EBITDA for the quarter was $29 million, reflecting a 12% increase year-over-year [6] - Operating income was reported at $19 million, with an operating margin of 9%, up from 7% in the same quarter last year [20] Segment Performance - The Industrial segment showed strong growth, particularly in cargo security systems, which benefited from global demand [8][14] - The Medical segment remained stable, with solid demand for X-ray sources and digital detectors, although some modalities like dental and oncology were below sales trends [7][10] - The company is focusing on a modality-based approach to enhance customer engagement and drive long-term recurring revenue [11][12] Customer Engagement and Market Outlook - Increased customer engagement at RSNA, with over 150 meetings focused on design win opportunities and system upgrades [9][10] - The company is optimistic about future demand, particularly in the Medical segment, as customers shift from maintenance to new product development [13][29] - The India manufacturing strategy is seen as critical for future growth, with local production resonating well with customers [12][34] Inventory and Cash Flow - Inventory increased by $29 million to $328 million, driven by anticipated demand in the Industrial segment and qualification cycles for new products [21][62] - Net cash outflow from operations was $16 million, primarily due to inventory increases, with cash and marketable securities totaling $126 million [22][62] Guidance and Future Expectations - Guidance for the second quarter anticipates revenues between $210 million and $225 million, with non-GAAP EPS expected between $0.15 and $0.25 [23] - The company expects to continue seeing strong order activity in both Medical and Industrial segments, with a focus on securing new design wins [24][31]

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Core Insights - Varex Imaging reported a strong start to fiscal 2026, with first-quarter results at the high end of guidance, driven by growth in industrial markets and stable medical performance [4][3] Financial Performance - On a GAAP basis, gross margin was 33%, operating income was $15 million, net income was $2 million, and GAAP EPS was $0.05 per diluted share [1] - Non-GAAP gross margin was 34%, with non-GAAP EBITDA of $29 million, up 12% year over year, and non-GAAP EPS of $0.19, an increase from $0.10 in the previous year [2] - Total revenue for the first quarter was $210 million, reflecting a 5% year-over-year increase, with industrial segment revenue rising 17% [3][6] Revenue Breakdown - Medical revenue accounted for $145 million (69% of total revenue), while industrial revenue was $65 million (31% of total revenue) [1] - Regionally, the Americas grew by 17%, EMEA rose by 7%, and APAC declined by 7% year over year [1] Industrial Segment Insights - The industrial segment's growth was attributed to demand in cargo security systems and non-destructive testing (NDT) [11][12] - Management noted that orders in the industrial segment are "tender-driven" and can be lumpy, with potential for double-digit growth contingent on wins and shipment timing [12] Medical Segment Insights - The medical segment showed stable performance, with strong demand for X-ray sources, particularly in high-end CT, and increasing customer engagement on next-generation system designs [7][8] - Mammography exceeded sales trends, while CT, fluoroscopy, and radiography were in line with sales trends [10] Balance Sheet and Cash Flow - Inventory increased by $29 million to $328 million, leading to a $16 million operating cash outflow [5][15] - Varex ended the quarter with $126 million in cash and gross debt of $370 million, with a net leverage of approximately 1.9x [16] Future Outlook - For the second quarter, Varex guided revenue between $210 million and $225 million, with non-GAAP EPS expected to be between $0.15 and $0.25 [18] - Management expressed confidence in customer engagement across both segments, highlighting innovation in medical imaging and expanding industrial applications [17]

Core Insights - VAREX IMAGING reported revenue of $209.6 million for the quarter ended December 2025, marking a year-over-year increase of 4.9% and a surprise of +0.22% over the Zacks Consensus Estimate of $209.15 million [1] - The company achieved an EPS of $0.19, which is a significant increase from $0.07 a year ago, resulting in an EPS surprise of +35.71% compared to the consensus estimate of $0.14 [1] Revenue Performance - Industrial revenues reached $64.8 million, exceeding the estimated $61.61 million, reflecting a year-over-year increase of +17.4% [4] - Medical revenues totaled $144.8 million, slightly below the estimated $147.5 million, with a minimal year-over-year change of +0.1% [4] Profit Metrics - Gross profit from Industrial operations was reported at $23.8 million, surpassing the average estimate of $21.27 million [4] - Gross profit from Medical operations was $46 million, which fell short of the average estimate of $48.32 million [4] Stock Performance - VAREX IMAGING shares have returned +5.5% over the past month, while the Zacks S&P 500 composite remained unchanged [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Viewpoint - VAREX IMAGING reported quarterly earnings of $0.19 per share, exceeding the Zacks Consensus Estimate of $0.14 per share, and showing significant growth from $0.07 per share a year ago, indicating a strong performance in the recent quarter [1][2]. Financial Performance - The company achieved revenues of $209.6 million for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 0.22% and reflecting an increase from $199.8 million in the same quarter last year [2]. - Over the last four quarters, VAREX IMAGING has consistently exceeded consensus EPS estimates, achieving this four times [2]. Stock Performance - VAREX IMAGING shares have increased approximately 20.5% since the beginning of the year, significantly outperforming the S&P 500, which gained 1.7% during the same period [3]. - The stock currently holds a Zacks Rank 3 (Hold), indicating it is expected to perform in line with the market in the near future [6]. Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.20, with projected revenues of $214.15 million, while the estimate for the current fiscal year stands at $0.89 on revenues of $870.27 million [7]. - The outlook for the Medical - Products industry, to which VAREX IMAGING belongs, is currently in the bottom 29% of Zacks industries, suggesting potential challenges ahead [8].

Varex Imaging (NasdaqGS:VREX) Q1 2026 Earnings call February 10, 2026 05:00 PM ET Company ParticipantsChristopher Belfiore - Director of Investor RelationsLarry Solow - PartnerSam Maheshwari - CFOSunny Sanyal - President and CEOSuraj Kalia - Managing DirectorYoung Li - SVP and Equity ResearchConference Call ParticipantsJames Sidoti - AnalystOperatorGreetings and welcome to the Varex first quarter fiscal year 2026 earnings conference call and webcast. At this time, all participants are in listen-only mode. A ...

Financial Data and Key Metrics Changes - First quarter revenue was $210 million, up 5% year-over-year, driven by a 17% increase in the industrial segment revenue [5][17] - Non-GAAP gross margin was 34%, at the high end of guidance, benefiting from a favorable product sales mix [6][20] - Non-GAAP EBITDA was $29 million, up 12% compared to the same quarter last year [7] - Non-GAAP EPS in the first quarter was $0.19, up from $0.10 in the previous year [7][22] Business Line Data and Key Metrics Changes - Medical segment revenue was stable year-over-year at $145 million, while industrial segment revenue increased to $65 million, representing 69% and 31% of total revenues respectively [17] - The industrial segment showed broad-based strength, particularly in cargo security inspection systems and components [9][16] - Demand for X-ray sources and digital detectors in the medical segment remained strong, particularly in high-end CT [7][8] Market Data and Key Metrics Changes - Americas revenue grew 17%, driven by strength in the industrial segment related to cargo systems [18] - EMEA revenue rose 7%, while APAC revenue decreased by 7% year-over-year [18] - Sales volume to China remained steady, contributing 17% of total revenues, indicating resilience in the healthcare market position [18] Company Strategy and Development Direction - The company is focusing on a modality-based approach to enhance customer engagement and drive long-term recurring revenue [12] - Increased collaboration with customers is aimed at addressing complex inspection problems using X-ray imaging in real-time manufacturing [9][12] - The company is investing in innovation and technology integration into next-generation imaging systems, particularly in the medical segment [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medical segment, indicating that previous headwinds are behind them, with strong demand for CT continuing [30][31] - The industrial segment's order pipeline and customer engagement are strong, particularly in food inspection and security screening [32] - Management noted that customer interactions at RSNA indicated a shift towards new product development and commercialization [15][34] Other Important Information - The company modified its non-GAAP policy to exclude gains and losses from equity method investments, reflecting a strategic shift [19] - Inventory increased by $29 million to $328 million, driven by anticipated demand across the industrial segment [22][23] - The company ended the quarter with cash and marketable securities of $126 million, down $30 million from the previous quarter [23] Q&A Session Summary Question: General outlook for the business - Management indicated optimism about both medical and industrial segments, with strong order activity and customer engagement [29][30] Question: Progress on India operations - Management confirmed that the India factory is operational, producing detectors and tubes, with positive customer feedback regarding local manufacturing [36][37] Question: Guidance for the next quarter - Management provided guidance for revenues between $210 million and $225 million, with non-GAAP EPS expected between $0.15 and $0.25 [24][25] Question: Inventory increase explanation - Management explained that the inventory increase is intentional to prepare for cargo systems ramp-up and qualification cycles for products in India [80][81] Question: Refinancing plans - Management is working on refinancing high-yield debt due in October 2027, aiming to complete it before October 2026 [82][84]

Financial Data and Key Metrics Changes - First quarter revenue was $210 million, up 5% year-over-year, driven by a 17% increase in industrial segment revenue [5][15] - Non-GAAP gross margin was 34%, at the high end of guidance, benefiting from a favorable product sales mix [5][17] - Non-GAAP EBITDA was $29 million, up 12% compared to the same quarter last year [6] - Non-GAAP EPS in the first quarter was $0.19, up from $0.10 in the previous year [6][18] - GAAP gross margin was 33%, down 100 basis points year-over-year [16] Business Line Data and Key Metrics Changes - Medical segment revenue was stable year-over-year at $145 million, while industrial segment revenue increased to $65 million, representing 69% and 31% of total revenues respectively [15] - Medical segment performance was stable, with strong demand for X-ray sources and digital detectors [6][8] - Industrial segment delivered a 17% growth, driven by cargo security inspection systems and components [5][15] Market Data and Key Metrics Changes - Americas revenue grew 17%, driven by strength in the industrial segment [15] - EMEA revenue rose 7%, while APAC revenue decreased by 7% year-over-year [15] - Sales volume to China remained steady, contributing 17% of total revenues [15] Company Strategy and Development Direction - The company is focusing on a modality-based approach to enhance customer engagement and drive long-term recurring revenue [10][11] - Increased collaboration with customers is aimed at addressing complex inspection problems using X-ray imaging [8][10] - The company is investing in innovation and technology integration into next-generation imaging systems [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medical segment, indicating that previous headwinds are behind them and customer order activity is strong [27] - The industrial segment's order pipeline remains robust, particularly in food inspection and security screening [27] - Management noted that customer engagement at RSNA was significantly more positive compared to previous years, indicating a shift towards new product development [29][30] Other Important Information - The company modified its non-GAAP policy to exclude gains and losses from equity method investments, reflecting a strategic shift [16][17] - Inventory increased by $29 million to $328 million, driven by anticipated demand and qualification cycles for new products [19][72] Q&A Session Summary Question: General outlook for the current environment - Management indicated that headwinds faced in previous years are behind them, with strong order activity in the medical segment and stability in China [27][28] Question: Progress on India operations - Management confirmed that the India factory is operational, producing detectors and tubes, with strong customer interest in locally sourced products [32][34] Question: Guidance for the upcoming quarter - Management provided guidance for Q2 revenues between $210-$225 million and non-GAAP EPS between $0.15-$0.25, citing a conservative approach [21][22] Question: Cargo orders and industrial segment growth - Management noted strong traction in cargo systems, with potential for double-digit growth in the industrial segment, contingent on customer demand [42][45] Question: Inventory increase and future plans - Management explained that the inventory increase is intentional to support cargo systems ramp-up and qualification cycles in India, with plans to normalize inventory levels [70][72] Question: Refinancing plans - Management is working on refinancing high-yield debt due in October 2027, aiming to complete it before October 2026 [73][74]