Q3 FY25 Financial Performance - Revenue reached $203 million, a decrease of 3% year-over-year[7, 9] - Non-GAAP gross margin improved to 34%, a 100 bps increase year-over-year[7, 9] - Non-GAAP EPS increased to $0.18, a 29% increase year-over-year[7, 10] - Adjusted EBITDA increased to $29 million, a 27% increase year-over-year[13] - The company paid off $200 million in convertible notes on June 2[7] Balance Sheet and Cash Flow - Cash, cash equivalents, and marketable securities totaled $153 million[7, 8] - Adjusted EBITDA for the trailing twelve months (TTM) was $110 million[31] - Net debt leverage (TTM) was 20x[31] Segment and Geographic Revenue Mix - Medical segment revenue was $142 million[19, 21] - Industrial segment revenue was $61 million[19, 21] - Revenue from the Americas was $71 million[20, 22] Q4 FY25 Guidance - Revenue is projected to be between $210 million and $230 million[34] - Non-GAAP EPS is expected to be between $010 and $030[34]

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) The unaudited financial statements for July 4, 2025, reflect a net loss driven by a $93.9 million goodwill impairment, decreased assets and equity, but positive operating cash flow [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements show a Q3 2025 net loss of **$89.1 million** due to a **$93.9 million** goodwill impairment, despite a slight revenue increase for the nine-month period Condensed Consolidated Statements of Operations | Indicator | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended July 4, 2025 | Nine Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenues, net** | $203.0M | $209.1M | $615.7M | $605.3M | | **Gross Profit** | $67.5M | $66.9M | $212.7M | $189.8M | | **Impairment of goodwill** | $93.9M | $0M | $93.9M | $0M | | **Operating (loss) income** | ($80.7M) | $9.3M | ($47.4M) | $21.2M | | **Net (loss) income attributable to Varex** | ($89.1M) | $1.4M | ($82.5M) | $2.3M | | **Diluted Net (loss) income per share** | ($2.15) | $0.03 | ($2.00) | $0.06 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets as of July 4, 2025, indicate a decrease in total assets and stockholders' equity, primarily due to a reduction in goodwill and lower long-term debt Condensed Consolidated Balance Sheets | Account | July 4, 2025 | September 27, 2024 | | :--- | :--- | :--- | | **Total current assets** | $619.5M | $649.9M | | **Goodwill** | $198.5M | $291.0M | | **Total assets** | $1,073.4M | $1,213.6M | | **Total current liabilities** | $176.7M | $195.9M | | **Long-term debt, net** | $366.0M | $397.1M | | **Total liabilities** | $603.9M | $670.4M | | **Total stockholders' equity** | $469.5M | $543.2M | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended July 4, 2025, operating cash flow increased to **$33.8 million**, investing activities provided **$11.0 million**, while financing activities used **$77.0 million** primarily for debt repayment Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Nine Months Ended July 4, 2025 | Nine Months Ended June 28, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $33.8M | $21.4M | | **Net cash provided by (used in) investing activities** | $11.0M | ($13.5M) | | **Net cash used in financing activities** | ($77.0M) | ($4.1M) | | **Net (decrease) increase in cash** | ($31.9M) | $3.8M | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, a prior period financial statement revision, a **$93.9 million** goodwill impairment, debt structure changes, and significant customer concentration - The company identified and corrected an accounting error related to deferred tax assets and liabilities in prior periods, necessitating a revision of prior period balance sheets and statements of stockholders' equity due to the cumulative effect being material to the current year[27](index=27&type=chunk) - A goodwill impairment charge of **$93.9 million** was recorded for the Medical reporting unit during the third quarter of fiscal 2025, triggered by a sustained decline in market capitalization, stock price, and downward revisions to the long-term forecast, including impacts from tariffs and MOFCOM investigations in China[47](index=47&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - On June 1, 2025, the company's **$200.0 million** 4.00% Convertible Senior Unsecured Notes matured and were settled in cash, facilitated by the issuance of an additional **$125.0 million** of Senior Secured Notes in December 2024[121](index=121&type=chunk)[125](index=125&type=chunk) - Canon Medical Systems Corporation was a significant customer, accounting for **17.8%** of revenues for the nine months ended July 4, 2025, and **13.5%** of accounts receivable as of that date[39](index=39&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the impact of trade challenges, including a **$93.9 million** goodwill impairment, Q3 2025 revenue decline, nine-month revenue growth driven by the Industrial segment, improved gross margins, and sufficient liquidity - The company recorded a goodwill impairment charge of **$93.9 million** related to the Medical reporting unit due to macroeconomic challenges, including tariffs, MOFCOM investigations in China, a sustained decline in stock price, and a downward revision of its long-term forecast[178](index=178&type=chunk) - Management highlights ongoing risks from the trade environment, including US-China tariffs and two investigations initiated by China's Ministry of Commerce (MOFCOM) related to medical X-ray products imported into China, with sales of such products representing about **10%** of total revenue in fiscal 2024[163](index=163&type=chunk)[165](index=165&type=chunk) Segment Revenues (in millions) - Three Months Ended | Segment Revenues (in millions) | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | % Change | | :--- | :--- | :--- | :--- | | Medical | $142.1 | $148.6 | (4.4)% | | Industrial | $60.9 | $60.5 | 0.7% | | **Total** | **$203.0** | **$209.1** | **(2.9)%** | Segment Revenues (in millions) - Nine Months Ended | Segment Revenues (in millions) | Nine Months Ended July 4, 2025 | Nine Months Ended June 28, 2024 | % Change | | :--- | :--- | :--- | :--- | | Medical | $440.5 | $437.3 | 0.7% | | Industrial | $175.2 | $168.0 | 4.3% | | **Total** | **$615.7** | **$605.3** | **1.7%** | [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies market risks including foreign currency, credit, interest rate, and commodity price volatility, with a 10% foreign exchange rate decrease potentially impacting annual earnings by **$14.1 million** - Primary market risks identified are foreign currency exchange rate risk, credit and counterparty risk, interest rate risk, and commodity price risk[222](index=222&type=chunk) Estimated Annual Impact of Market Risk (in millions) | Market Risk Category | Hypothetical Change | Estimated Annual Impact (in millions) | | :--- | :--- | :--- | | Foreign Currency - Revenue | 10% decrease in foreign exchange rates | $14.1 | | Interest Rate - Marketable Securities | 100 basis point decrease in interest rate | $1.0 | | Commodity Price | 10% increase in commodity prices | $3.1 | [Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of July 4, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[232](index=232&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[233](index=233&type=chunk) [Part II. Other Information](index=50&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal actions but anticipates no material adverse effect on its operations or financial position from current or pending litigation - The company states that it does not currently have any pending litigation for which the outcome is expected to have a material adverse effect on its financial position or operations[234](index=234&type=chunk) [Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) The company highlights significant risks including customer concentration, geopolitical and trade challenges (tariffs, MOFCOM investigations), supply chain disruptions, and potential future goodwill impairment - A single customer accounted for approximately **18%** of revenue in the first nine months of fiscal 2025, highlighting significant customer concentration risk[236](index=236&type=chunk) - The company's business is negatively impacted by tariffs, trade wars, and national policies, especially the bilateral U.S.-China tariffs and the MOFCOM investigations into medical products imported into China[238](index=238&type=chunk)[241](index=241&type=chunk) - The company faces risks from supply chain disruptions and reliance on a limited group of or sole-source suppliers for key components like transistor arrays and specialized integrated circuits[270](index=270&type=chunk)[272](index=272&type=chunk) - The company warns that its financial condition could suffer from future goodwill impairments, following the **$93.9 million** charge recorded in Q3 2025, if key assumptions in its analysis are not realized[322](index=322&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=70&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - The company reported no unregistered sales of equity securities or use of proceeds from such sales[327](index=327&type=chunk) [Other Information](index=70&type=section&id=Item%205.%20Other%20Information) The Chief Human Resources Officer adopted a Rule 10b5-1 trading plan on June 17, 2025, for the sale of vested and soon-to-vest common stock shares - On June 17, 2025, Chief Human Resources Officer Karen Aranki adopted a Rule 10b5-1 trading plan for the sale of **3,174** vested shares and **6,665** shares scheduled to vest in December 2025[331](index=331&type=chunk) [Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and XBRL data files - The report includes standard exhibits such as the Certificate of Incorporation, Bylaws, CEO and CFO certifications (Rule 13a-14(a) and Section 906), and Inline XBRL documents[332](index=332&type=chunk)

[VAREX Q3 FY2025 Earnings Release](index=1&type=section&id=VAREX%20Q3%20FY2025%20Earnings%20Release) Varex reports its third-quarter fiscal year 2025 financial results, highlighting key performance metrics and future outlook [Financial Highlights and Business Overview](index=1&type=section&id=Financial%20Highlights%20and%20Business%20Overview) Varex reported Q3 FY2025 revenue of $203 million, a 3% year-over-year decrease, with improved non-GAAP gross margin and EPS Q3 FY2025 Key Financial Metrics | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $203M | $209.1M | -3% | | Medical Revenue | $142M | $148.6M | -4% | | Industrial Revenue | $61M | $60.5M | +1% | | Non-GAAP Gross Margin | 34% | 32% | +2 p.p. | | GAAP Net Loss per Share | $(2.15) | $0.03 | N/A | | Non-GAAP EPS | $0.18 | $0.14 | +28.6% | - CEO Sunny Sanyal noted that revenue was above guidance, driven by a **strong Industrial segment** and **better-than-expected Medical revenue in China**. The company is encouraged by the adoption of its systems in cargo inspection applications[3](index=3&type=chunk) - Cash flow from operations was **$8 million**. The cash and marketable securities balance decreased from **$226 million** in the prior quarter to **$153 million**, primarily due to using cash to pay down the principal of Convertible Notes[4](index=4&type=chunk) [Financial Outlook](index=1&type=section&id=Financial%20Outlook) Varex projects Q4 FY2025 revenues between $210 million and $230 million, with non-GAAP EPS of $0.10 to $0.30, and 3% full-year sales growth Q4 FY2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenues | $210M - $230M | | Non-GAAP Net EPS | $0.10 - $0.30 | - The company expects a healthy demand environment to drive sales growth of approximately **3%** for the full fiscal year 2025[3](index=3&type=chunk) - Guidance for net earnings per diluted share is provided on a non-GAAP basis only, as the company is unable to provide a reconciliation to GAAP forecasts without unreasonable effort[5](index=5&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents Varex's unaudited condensed consolidated financial statements, including Statements of Operations and Balance Sheets, for detailed financial performance and position [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q3 FY2025, Varex reported total revenues of $203.0 million, an operating loss of $(80.7) million, and a net loss of $(89.1) million due to a significant goodwill impairment charge Q3 Statement of Operations Highlights (in millions) | Line Item | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Total Revenues | $203.0 | $209.1 | | Total Gross Profit | $67.5 | $66.9 | | Impairment of goodwill | $93.9 | $0 | | Operating (Loss) Income | $(80.7) | $9.3 | | Net (Loss) Income Attributable to Varex | $(89.1) | $1.4 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of July 4, 2025, Varex's total assets decreased to $1,073.4 million, primarily due to reduced goodwill and cash, with total liabilities also decreasing to $603.9 million Balance Sheet Highlights (in millions) | Account | July 4, 2025 | September 27, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $136.4 | $168.7 | | Goodwill | $198.5 | $291.0 | | Total Assets | $1,073.4 | $1,213.6 | | Long-term debt, net | $366.0 | $397.1 | | Total Liabilities | $603.9 | $670.4 | | Total Stockholders' Equity | $469.5 | $543.2 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section details adjustments from GAAP to non-GAAP measures for Q3 FY2025, including a $93.9 million goodwill impairment, transforming GAAP operating loss to non-GAAP operating income Q3 FY2025 GAAP to Non-GAAP Operating Income Reconciliation (in millions) | Description | Amount | | :--- | :--- | | **GAAP Operating Loss** | **$(80.7)** | | Amortization of intangible assets | $1.0 | | Restructuring charges | $0.4 | | Impairment of goodwill | $93.9 | | Non-ordinary course litigation | $1.7 | | Other non-operational costs | $0.3 | | **Non-GAAP Operating Income** | **$16.6** | Q3 FY2025 GAAP to Non-GAAP Net Income Reconciliation (in millions) | Description | Amount | | :--- | :--- | | **Net Loss Attributable to Varex (GAAP)** | **$(89.1)** | | Total income before tax adjustments | $96.6 | | Tax effect on non-GAAP adjustments | $0.1 | | **Diluted Non-GAAP Net Income** | **$7.6** | [Discussion of Non-GAAP Financial Measures](index=11&type=section&id=Discussion%20of%20Non-GAAP%20Financial%20Measures) Varex explains its use of non-GAAP financial measures to provide transparency and assess ongoing business performance by excluding unusual or one-time costs for investors - The company uses non-GAAP measures to assess ongoing business performance by excluding unusual and one-time costs, believing it provides greater transparency for investors[22](index=22&type=chunk) - Specific items excluded from GAAP results to arrive at non-GAAP measures include[23](index=23&type=chunk)[25](index=25&type=chunk)[27](index=27&type=chunk) - Amortization of intangible assets - Restructuring charges - Impairment of goodwill - Non-ordinary course litigation - Acquisition and integration related costs - Other non-operational costs [Company and Event Information](index=3&type=section&id=Company%20and%20Event%20Information) Varex Imaging Corporation, a leading X-ray imaging component manufacturer, will host a conference call on August 7, 2025, to discuss its Q3 FY2025 financial results - Varex is a leading innovator and manufacturer of X-ray imaging components, including tubes and digital detectors, used in medical, industrial, and security imaging applications[10](index=10&type=chunk) - The company will host an earnings conference call with a live webcast on August 7, 2025, to discuss the quarterly results. A replay will be available through August 21st[9](index=9&type=chunk)

Summary of Varex Imaging (VREX) Conference Call Company Overview - Varex Imaging is a market leader in imaging components for x-ray based imaging systems, primarily in the medical sector, which constitutes approximately 78-80% of its business [2][3][4]. Core Value Proposition - Varex's competitive advantage lies in its significant investment in innovation, having invested over $1 billion in foundational technologies over the past 20 years, which most OEMs lack [3][4]. - The company employs around 500 people in x-ray product development and holds approximately 600 patents, allowing it to provide bespoke components that help OEMs bring products to market faster [4][5]. Market Trends - The trend in the industry is shifting towards outsourcing rather than insourcing, with Varex working with a wide range of OEMs, including emerging players in markets like India and China [6][7][8]. - The company identifies future winners among OEMs and partners with them, which has been a successful strategy over the years [6][7]. Recent Financial Performance - Varex reported strong fiscal 2Q results, exceeding consensus on revenue, gross margin, and EPS, with a recovery in demand following a period of channel inventory adjustments [10][12]. - The company noted that the audit situation in Chinese hospitals and destocking issues had improved, leading to solid order coverage [12][13]. Tariff Impact and Mitigation Strategies - The tariff situation has been turbulent but is moving in a positive direction, with current tariffs at about 55% for input materials [16][17]. - Varex is implementing several mitigation strategies, including passing on input costs to customers, diversifying its supply chain, and regionalizing manufacturing to enhance resilience [20][21][36]. Manufacturing Developments - Varex is progressing with two factories in India: one for detectors expected to start shipping in 3-4 months, and another for tubes, which is 12-15 months away from production [31][32]. Customer Relationships - Canon remains Varex's top customer, contributing 17-18% of annual revenues, with a stable relationship focused on ongoing R&D projects [51][53]. - The company has observed a healthy demand for its products, with a significant installed base ensuring continued orders for replacement components [25][54]. End Market Dynamics - The medical segment has shown stability, with channel inventory returning to normal operating conditions [47][49]. - In the industrial segment, Varex has seen faster growth compared to medical, driven by demand in global security and cargo inspection markets [60][61]. Direct-to-Customer Opportunities - Varex's direct-to-customer industrial inspection business has shown promising growth, with significant orders in the cargo inspection systems space, which is a billion-dollar addressable market [62][63]. Competitive Landscape - Varex differentiates itself through vertical integration, being one of only two companies globally with this capability, which enhances its innovation and product tailoring [63][64]. Conclusion - Varex Imaging is well-positioned in the imaging components market, leveraging its innovation, strong customer relationships, and strategic responses to market dynamics and challenges, including tariffs and supply chain issues. The company is optimistic about future growth in both medical and industrial sectors.

Group 1 - VAREX IMAGING reported $212.9 million in revenue for the quarter ended March 2025, a year-over-year increase of 3.3% [1] - The EPS for the same period was $0.26, compared to $0.16 a year ago, indicating a significant improvement [1] - The reported revenue exceeded the Zacks Consensus Estimate of $206.83 million by 2.93%, and the EPS surprised by 85.71% against the consensus estimate of $0.14 [1] Group 2 - VAREX IMAGING's Industrial revenues were $59.10 million, slightly below the estimated $59.12 million, reflecting a 3% year-over-year change [4] - Medical revenues reached $153.80 million, surpassing the average estimate of $147.36 million, marking a 3.4% increase year-over-year [4] - Gross profit for Industrial was $20.80 million, exceeding the estimated $19.64 million, while Medical gross profit was $55.90 million, above the estimated $48.61 million [4] Group 3 - VAREX IMAGING shares have returned -6% over the past month, contrasting with the Zacks S&P 500 composite's +11.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Company Performance - VAREX IMAGING reported quarterly earnings of $0.26 per share, exceeding the Zacks Consensus Estimate of $0.14 per share, and up from $0.16 per share a year ago, representing an earnings surprise of 85.71% [1] - The company posted revenues of $212.9 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.93%, compared to year-ago revenues of $206.2 million [2] - Over the last four quarters, VAREX IMAGING has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Performance and Outlook - VAREX IMAGING shares have declined approximately 44% since the beginning of the year, while the S&P 500 has decreased by 4.3% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the sustainability of the recent earnings numbers [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.16 on revenues of $207.93 million, and for the current fiscal year, it is $0.54 on revenues of $824.37 million [7] Industry Context - The Medical - Products industry, to which VAREX IMAGING belongs, is currently ranked in the bottom 32% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact VAREX IMAGING's stock performance [5][6]

Financial Data and Key Metrics Changes - Total revenue for the second quarter was $213 million, a 3% increase year over year, driven by a 3% increase in both Medical and Industrial segments [23][24] - Non-GAAP gross margin was 36%, up from 33% in the same quarter last year, reflecting improved volume and productivity gains [9][27] - Adjusted EBITDA for the quarter was $34 million, compared to $25 million in the previous year [9][23] - Cash from operations was strong at $17 million, with total cash, cash equivalents, and marketable securities at $226 million, up $36 million year over year [9][31] Business Line Data and Key Metrics Changes - Medical segment revenues were $154 million, constituting 72% of total revenue, while Industrial segment revenues were $59 million, making up 28% [24] - Sales in the Medical segment were led by strong global sales of CT tubes, with fluoroscopy, oncology, mammography, and dental modalities all performing above their respective sales trends [10] - The Industrial segment saw strong demand, particularly in global security screening, which drove sales of cargo inspection components and systems [11] Market Data and Key Metrics Changes - Americas revenue increased by 2%, EMEA revenues were flat, and APAC revenues increased by 8%, primarily due to increased sales in China [24] - Sales in China increased by 25% year over year but declined by 11% compared to the prior quarter, with China sales constituting 15% of total sales [24][25] Company Strategy and Development Direction - The company plans to mitigate the impact of tariffs through various strategies, including localizing manufacturing and pursuing operational strategies to reduce costs for customers [12][14][22] - The focus remains on long-term growth strategies based on innovation and cost leadership, with continued investment in regional manufacturing operations [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about demand trends across the business, despite headwinds from tariffs, and noted that no orders have been canceled from the $316 million backlog [21][22] - The company anticipates a sales impact of approximately $20 million in China due to tariffs, with a potential EPS reduction of $0.15 to $0.20 in the third quarter [32] Other Important Information - The company plans to use restricted cash from a senior secured debt offering to repay outstanding convertible notes upon maturity in June [9][31] - The gross debt outstanding at the end of the quarter was $570 million, with a net debt leverage ratio of approximately 2.1 times adjusted EBITDA [31] Q&A Session Summary Question: Update on orders in China and customer purchasing behavior - Management noted that while some customers are pausing purchases, they continue to place orders for essential products, particularly for high-end tubes [35][36][40] - Customers are trying to manage inventory while awaiting potential tariff resolutions [41][42] Question: Impact of the $25 million cargo inspection order on capacity - Management confirmed that lead times for delivery are typically 120 to 180 days, with civil works affecting timelines [47][48][50] Question: Clarification on tariff impacts and revenue drivers in China - The majority of revenue in China comes from CT tubes, and customers are currently delaying orders while exploring alternatives [57][58][62] Question: Trends outside of China and overall demand - Management indicated that demand trends outside of China remain strong, with broad-based strength in both medical and industrial segments [78][80] Question: Updates on the India plant and tariff mitigation strategies - The company is accelerating activities in India to help mitigate tariff impacts and is qualifying suppliers from India [85][86] Question: Anticipated impact of tariffs on industrial business - Tariffs are expected to impact the industrial business as well, but the sales of industrial products into China are minimal [94] Question: Potential for near-term tariff relief and its impact - Management indicated that any near-term relief could lead to immediate recovery in sales, depending on timing [102][103]

Financial Data and Key Metrics Changes - Total revenue for the second quarter was $213 million, a 3% increase year over year, driven by both Medical and Industrial segments [22][23] - Non-GAAP gross margin was 36%, up from 33% in the same quarter last year, reflecting improved volume and productivity gains [7][25] - Adjusted EBITDA for the quarter was $34 million, compared to $25 million in the previous year [7][22] - Cash from operations was strong at $17 million, with total cash, cash equivalents, and marketable securities reaching $226 million, an increase of $36 million year over year [8][29] Business Line Data and Key Metrics Changes - Medical segment revenues were $154 million, accounting for 72% of total revenue, while Industrial segment revenues were $59 million, making up 28% [23][24] - Sales in the Medical segment increased, particularly in CT tubes, fluoroscopy, oncology, mammography, and dental modalities, while radiography sales were below trend [9][10] - The Industrial segment saw strong demand, particularly in cargo inspection systems and non-destructive inspection applications [10][19] Market Data and Key Metrics Changes - Americas revenue increased by 2%, EMEA revenues were flat, and APAC revenues rose by 8%, primarily due to increased sales in China [23] - Sales in China increased by 25% year over year but declined by 11% compared to the previous quarter, representing 15% of total sales [24] Company Strategy and Development Direction - The company plans to mitigate tariff impacts by localizing manufacturing and pursuing operational strategies [12][21] - Continued investment in regional manufacturing operations and supply chain capabilities is a priority [21] - The company remains committed to innovation and cost leadership as part of its long-term growth strategy [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about demand trends across the business, despite headwinds from tariffs [20] - The company does not anticipate restructuring in its China business and has not seen order cancellations in its backlog [20] - Future sales impacts from tariffs are expected to be temporary, with recovery anticipated in Q4 [67][68] Other Important Information - The company plans to use restricted cash to repay outstanding convertible notes upon maturity in June [8][29] - Gross debt outstanding at the end of the quarter was $570 million, with a net debt leverage ratio of approximately 2.1 times adjusted EBITDA [29] Q&A Session Summary Question: Update on orders in China and customer purchasing behavior - Management noted that while some customers are pausing purchases, orders for essential tubes continue, and customers are lobbying for tariff exemptions [35][36][41] Question: Impact of the $25 million cargo inspection order on delivery capacity - Management confirmed that lead times for delivery are typically 120 to 180 days, with civil works affecting timelines [46][48] Question: Clarification on tariff impacts and revenue drivers in China - Management indicated that the majority of revenue in China comes from CT tubes, and customers are currently holding off on orders due to tariffs [55][61] Question: Trends outside of China and overall demand - Management reported broad-based strength in both medical and industrial segments, with positive order intake rates [78] Question: Updates on the India plant and tariff mitigation strategies - Management confirmed that activities in India are proceeding as planned, with efforts to accelerate operations to mitigate tariff impacts [86] Question: Passing on tariff costs to customers - Management stated that they plan to pass tariff costs directly to customers without markups, and discussions are ongoing [88][89] Question: Anticipated impact of potential near-term tariff relief - Management suggested that any near-term relief could lead to immediate recovery in sales, depending on timing [103] Question: Timeline for reaching margin accretiveness in the inspection business - Management indicated that it may take at least two years for the inspection business to become margin accretive [111]

Making the Invisible Visible Q2 FY25 Earnings Presentation May 8, 2025 5/8/2025 1 Forward Looking Statements This supplement contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements concerning financial results; earnings guidance; tariffs and trade wars and their impact on our customers; industry or business outlook, including for our business in China; product demand; payoff of our convertible debt; expected future financial results or per ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) This section presents the unaudited Condensed Consolidated Financial Statements for the quarter ended April 4, 2025, detailing the company's financial performance and position Condensed Consolidated Statements of Operations Highlights (In millions, except per share amounts) | Metric | Three Months Ended April 4, 2025 | Three Months Ended March 29, 2024 | Six Months Ended April 4, 2025 | Six Months Ended March 29, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenues, net** | $212.9 | $206.2 | $412.7 | $396.2 | | **Gross profit** | $76.7 | $65.8 | $145.2 | $122.9 | | **Operating income** | $22.1 | $7.7 | $33.3 | $11.9 | | **Net income attributable to Varex** | $6.9 | $1.4 | $6.6 | $0.9 | | **Diluted EPS attributable to Varex** | $0.17 | $0.03 | $0.16 | $0.02 | Condensed Consolidated Balance Sheets Highlights (In millions) | Metric | April 4, 2025 | September 27, 2024 | | :--- | :--- | :--- | | **Total current assets** | $683.8 | $649.9 | | **Total assets** | $1,357.6 | $1,217.0 | | **Total current liabilities** | $168.8 | $195.9 | | **Total liabilities** | $793.7 | $667.8 | | **Total stockholders' equity** | $563.9 | $549.2 | Condensed Consolidated Statements of Cash Flows Highlights (In millions) | Metric | Six Months Ended April 4, 2025 | Six Months Ended March 29, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $26.1 | $13.4 | | **Net cash provided by (used in) investing activities** | $11.7 | $(21.2) | | **Net cash provided by (used in) financing activities** | $124.2 | $(3.0) | | **Net increase (decrease) in cash** | $161.8 | $(10.8) | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's accounting policies, segment reporting, revenue recognition, debt structure, related-party transactions, and other financial data - The company operates in two reportable segments: **Medical** and **Industrial**. The Medical segment provides X-ray imaging components for various medical applications, while the Industrial segment focuses on security, inspection, and non-destructive testing markets[27](index=27&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - Canon Medical Systems Corporation is a significant customer, accounting for **19.0% of revenues** for the three months ended April 4, 2025, and **14.8% of accounts receivable** as of that date[33](index=33&type=chunk) - In December 2024, the company issued an additional **$125.0 million of Senior Secured Notes**. The proceeds will be used to repay a portion of the **$200.0 million Convertible Notes** maturing in June 2025[114](index=114&type=chunk) - The company has a **40% ownership in dpiX Holding**, a key supplier. Varex has a fixed cost commitment of **$13.7 million to dpiX** for calendar year 2025[70](index=70&type=chunk)[74](index=74&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting revenue growth, improved gross margin, US-China trade impacts, and liquidity for upcoming debt maturities Q2 2025 vs Q2 2024 Revenue and Gross Profit by Segment (In millions) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | % Change | Q2 2025 Gross Profit | Q2 2024 Gross Profit | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Medical | $153.8 | $148.8 | 3.4% | $55.9 | $44.7 | 25.1% | | Industrial | $59.1 | $57.4 | 3.0% | $20.8 | $21.1 | (1.4)% | | **Total** | **$212.9** | **$206.2** | **3.2%** | **$76.7** | **$65.8** | **16.6%** | - The increase in Medical segment gross profit was primarily due to improved productivity and lower material costs of **$8.6 million**, along with favorable sales volume and product mix[169](index=169&type=chunk) - The company is exposed to risks from the US-China trade environment. On April 9, 2025, the US raised tariffs to at least **145%** on Chinese imports, and China retaliated. Sales to China represented approximately **15% of total revenue** in fiscal 2024[150](index=150&type=chunk) - China's Ministry of Commerce (MOFCOM) has initiated investigations into imported medical X-ray tubes, which represented about **10% of the company's total revenue** in fiscal 2024. The outcome is uncertain and could impact business[152](index=152&type=chunk) - The company believes its liquidity is sufficient for at least the next 12 months. It plans to repay **$200.0 million of Convertible Notes** due in June 2025 using proceeds from the Senior Secured Notes Add On, its Revolving Credit Facility, and cash[189](index=189&type=chunk) - The company's estimated total backlog at April 4, 2025 was approximately **$316 million**[201](index=201&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies primary market risks including foreign currency, credit, interest rate, and commodity price, using derivatives to hedge exposures and assessing potential earnings impacts - The company is exposed to four primary market risks: **foreign currency exchange, credit/counterparty, interest rate, and commodity price**[204](index=204&type=chunk) - A strong U.S. Dollar may create pricing pressure on international customers. The company uses foreign currency forward contracts and cross-currency swaps to mitigate some of this risk[205](index=205&type=chunk)[206](index=206&type=chunk) Sensitivity Analysis (as of April 4, 2025) | Market Risk Category | Hypothetical Change | Estimated Annual Impact (In millions) | | :--- | :--- | :--- | | Foreign Currency - Revenue | 10% decrease in foreign exchange rates | $13.9 | | Interest Rate - Marketable Securities | 100 basis point decrease in interest rate | $2.9 | | Commodity Price | 10% increase in commodity prices | $3.2 | [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of April 4, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of April 4, 2025, providing reasonable assurance that required information is recorded, processed, and reported in a timely manner[214](index=214&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended April 4, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[215](index=215&type=chunk) [Part II. Other Information](index=46&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal actions, including ongoing disputes with joint venture partners, though no material adverse effects are currently anticipated - The company states that it does not believe any current litigation will have a material adverse effect on its operations or financial position[216](index=216&type=chunk) - The company's German subsidiary is involved in multiple judicial proceedings with its partner in the VEC joint venture, with each party seeking to remove the other's management and exclude them from the venture[244](index=244&type=chunk) - An ongoing dispute exists with the joint venture partner in Varex Imaging Arabia LLC regarding the operation of the joint venture[245](index=245&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks including high customer concentration, US-China trade impacts, supply chain vulnerabilities, and financial risks related to substantial debt - The company has high customer concentration risk. One customer accounted for approximately **19% of revenue** in Q2 2025, and the ten largest customers accounted for about **55%**[218](index=218&type=chunk) - The business is negatively impacted by tariffs and trade wars. Sales to China, which represented **~15% of FY2024 revenue**, are at risk due to retaliatory tariffs and MOFCOM investigations into imported medical products[220](index=220&type=chunk)[221](index=221&type=chunk)[223](index=223&type=chunk) - The company relies on a limited group of or sole-source suppliers for key components like transistor arrays and X-ray tube targets, creating supply chain vulnerability[252](index=252&type=chunk) - Significant indebtedness of approximately **$570.4 million** imposes operating restrictions. The company must repay **$200.0 million in Convertible Notes** maturing in June 2025 and must comply with financial covenants in its Revolving Credit Facility[293](index=293&type=chunk)[294](index=294&type=chunk)[296](index=296&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=65&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[307](index=307&type=chunk) [Defaults Upon Senior Securities](index=65&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[308](index=308&type=chunk) [Mine Safety Disclosures](index=65&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[309](index=309&type=chunk) [Other Information](index=65&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter - During the fiscal quarter ended April 4, 2025, no directors or officers adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[310](index=310&type=chunk) [Exhibits](index=66&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes required exhibits such as CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL data files[311](index=311&type=chunk)