Group 1 - VAREX IMAGING (VREX) shares have increased by 53.7% in the past four weeks, closing at $11.45, with a mean price target of $16.75 indicating a potential upside of 46.3% [1] - The average price targets range from a low of $10.00 to a high of $23.00, with a standard deviation of $5.38, suggesting variability in analyst estimates [2] - Analysts have shown strong agreement in revising earnings estimates higher, with a 59.5% increase in the Zacks Consensus Estimate for the current year, indicating positive earnings prospects [11][12] Group 2 - VREX holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates, which supports the stock's potential upside [13] - While price targets can be misleading, the direction implied by the consensus price target appears to be a useful guide for potential price movement [14]

Core Viewpoint - Growth investors are focused on stocks with above-average financial growth, but identifying such stocks can be challenging due to associated risks and volatility [1] Group 1: Company Overview - VAREX IMAGING (VREX) is recommended as a cutting-edge growth stock based on its favorable Growth Score and top Zacks Rank [2] - The company has a historical EPS growth rate of 13.4%, with projected EPS growth of 21.8% this year, surpassing the industry average of 12.5% [5] Group 2: Key Growth Metrics - Earnings growth is crucial for attracting investor attention, with double-digit growth preferred by growth investors [4] - VAREX IMAGING has an asset utilization ratio (sales-to-total-assets ratio) of 0.66, indicating higher efficiency compared to the industry average of 0.58 [7] - The company's sales are expected to grow by 1.5% this year, while the industry average is 0% [7] Group 3: Earnings Estimate Revisions - The current-year earnings estimates for VAREX IMAGING have increased, with the Zacks Consensus Estimate rising by 31% over the past month [9] - The upward trend in earnings estimate revisions supports the stock's potential for near-term price movements [8] Group 4: Investment Positioning - VAREX IMAGING holds a Zacks Rank 2 (Buy) and a Growth Score of B, positioning it well for outperformance in the growth investment space [11]

Core Insights - The article emphasizes the importance of value investing, which focuses on identifying undervalued companies in the market [2] - VAREX IMAGING (VREX) is highlighted as a strong value stock, currently holding a Zacks Rank 2 (Buy) and an A grade for Value [4][6] Company Metrics - VREX has a Forward P/E ratio of 16.98, significantly lower than the industry average of 21.37 [4] - The stock's Forward P/E has fluctuated between a high of 26.48 and a low of 12.16 over the past 52 weeks, with a median of 19.11 [4] - The P/S ratio for VREX is 0.53, compared to the industry average of 1.5, indicating potential undervaluation [5] Investment Outlook - The combination of VREX's favorable metrics and strong earnings outlook positions it as one of the market's strongest value stocks [6]

Core Viewpoint - VAREX IMAGING (VREX) is positioned as a strong investment opportunity due to significant revisions in earnings estimates, indicating an improving earnings outlook [1][2]. Earnings Estimate Revisions - Analysts have shown growing optimism regarding VAREX IMAGING's earnings prospects, leading to a rising trend in estimate revisions, which is expected to positively impact the stock price [2]. - The current-quarter earnings estimate is projected at $0.14 per share, reflecting a year-over-year decline of 26.3%. However, the Zacks Consensus Estimate has increased by 75% over the last 30 days, with one estimate rising and no negative revisions [5]. - For the full year, the earnings estimate stands at $0.55 per share, with a year-over-year change of 0.0%. The consensus estimate has increased by 30.95% due to one upward revision and no negative changes [6][7]. Zacks Rank and Performance - VAREX IMAGING has achieved a Zacks Rank of 2 (Buy), indicating favorable estimate revisions that suggest strong potential for outperformance compared to the S&P 500 [8]. - Historically, stocks with a Zacks Rank of 1 (Strong Buy) and 2 (Buy) have significantly outperformed the S&P 500, with Zacks 1 stocks generating an average annual return of +25% since 2008 [3][8]. Recent Stock Performance - VAREX IMAGING shares have increased by 23.2% over the past four weeks, reflecting investor confidence in the company's earnings growth prospects [9].

Group 1 - Varex Imaging (VREX) shares have increased by 23.2% in the past four weeks, closing at $9.77, with a mean price target of $16.75 indicating a potential upside of 71.4% [1] - The average price targets range from a low of $10.00 to a high of $23.00, with a standard deviation of $5.38, suggesting variability in analyst estimates [2] - Analysts are optimistic about VREX's earnings prospects, as indicated by a positive trend in earnings estimate revisions, which historically correlates with stock price movements [4][11] Group 2 - The Zacks Consensus Estimate for VREX's current year earnings has increased by 31% over the past month, with no negative revisions [12] - VREX holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] - While consensus price targets may not be reliable for predicting the extent of gains, they can provide guidance on the direction of price movement [14]

Core Insights - VAREX IMAGING reported revenue of $203 million for the quarter ended June 2025, a decrease of 2.9% year-over-year, but exceeded the Zacks Consensus Estimate of $190.2 million by 6.73% [1] - The company's EPS was $0.18, up from $0.14 in the same quarter last year, resulting in a significant EPS surprise of 350% compared to the consensus estimate of $0.04 [1] Revenue Breakdown - Industrial revenue was $60.9 million, surpassing the average estimate of $57.09 million by two analysts, reflecting a year-over-year increase of 0.7% [4] - Medical revenue totaled $142.1 million, which was above the average estimate of $133.17 million, but represented a decline of 4.4% year-over-year [4] Profitability Metrics - Gross profit for the Industrial segment was $20.8 million, exceeding the average estimate of $18.11 million [4] - Gross profit for the Medical segment was $46.7 million, also above the estimated $42.27 million by two analysts [4] Stock Performance - VAREX IMAGING shares have declined by 16.5% over the past month, contrasting with a 1.2% increase in the Zacks S&P 500 composite [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 $0.18 per share, significantly exceeding the Zacks Consensus Estimate of $0.04 per share, marking an earnings surprise of +350.00% [1][2] Financial Performance - The company achieved revenues of $203 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 6.73%, although this represents a decline from year-ago revenues of $209.1 million [2] - Over the last four quarters, VAREX IMAGING has consistently surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Performance - VAREX IMAGING shares have declined approximately 51.8% since the beginning of the year, contrasting with the S&P 500's gain of 7.9% [3] - The current Zacks Rank for VAREX IMAGING is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $0.08 on revenues of $199.03 million, while the estimate for the current fiscal year is $0.42 on revenues of $801.93 million [7] - The trend of estimate revisions for VAREX IMAGING was mixed prior to the earnings release, which may change following the recent results [6] Industry Context - The Medical - Products industry, to which VAREX IMAGING belongs, is currently ranked in the bottom 37% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $203 million, a decrease of 3% year over year, with the Medical segment down 4% and the Industrial segment up 1% [8][22] - Non-GAAP gross margin was 34%, which is 100 basis points higher than the same quarter last year [8][25] - Non-GAAP earnings per share increased to $0.18, up from $0.14 in the previous year [8][27] - Operating expenses were unusually high at $148 million, primarily due to a non-cash goodwill impairment charge of $94 million [25][28] Business Line Data and Key Metrics Changes - Medical revenues were $142 million, accounting for 70% of total revenues, while Industrial revenues were $61 million, making up 30% [22] - Sales in oncology and mammography modalities were above their respective sales trends, while sales in fluoroscopy were below trend [10][11] - Demand in the Industrial segment remained strong, particularly in cargo inspection systems and security screening components [11][20] Market Data and Key Metrics Changes - Americas saw a 1% increase in revenues year over year, while EMEA revenues were down 2% and APAC decreased by 8% [23] - Sales volume to China contributed 15% of total revenues, with a 4% increase year over year [23][24] - The company was able to accommodate shipment needs in China after tariffs dropped from 145% to 55% [6][7] Company Strategy and Development Direction - The company is expanding its manufacturing capabilities in India to establish low-cost production for radiographic components [12][13] - The focus on photon counting technology is expected to contribute significantly to revenue, with anticipated contributions of $150 million from medical and $50 million from industrial applications [54][58] - The company is ramping up system production in the UK and investing in its Las Vegas facility to support the growing demand in the cargo systems business [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability and health of demand in China, expecting it to remain normal barring external events [33][34] - The overall demand environment for capital spending in the medical sector appears healthy, with expectations for growth entering fiscal year 2026 [48][49] - Management indicated that the company is in a comfortable cash position and plans to target gross debt in the range of $300 million to $350 million [36][37] Other Important Information - The company paid off $200 million in convertible notes, reducing its overall debt burden [8][28] - The company expects fourth-quarter revenues to be between $210 million and $230 million, with non-GAAP earnings per diluted share expected between $0.10 and $0.30 [29][30] Q&A Session Summary Question: Did fulfilling orders to China result in higher than expected expenses? - Management confirmed that there were no higher than normal expenses related to fulfilling orders to China [32] Question: What are the expectations for China sales in Q4? - Management stated that demand in China is stable and healthy, expecting it to remain normal [33] Question: Are there any medical OEMs testing the photon counting technology? - Management confirmed ongoing activity with medical OEMs focusing on photon counting technology [34] Question: What is the plan for using operating cash to pay down debt? - Management indicated a comfortable cash situation and plans to continue building cash reserves before refinancing in the next 12-18 months [36] Question: Can you characterize the capital spending environment? - Management noted that the demand pattern is good, and the overall investment perspective in imaging seems decent [48] Question: What is the outlook for gross margin in Q4? - Management explained that the expected decrease in gross margin is due to tariff impacts and a shift in product mix [80][83] Question: What is the status of the tariff mitigation strategy? - Management reported good progress in redirecting supply chains and increasing local manufacturing to mitigate tariff impacts [96][100]

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)