Varex Imaging(US:VREX)2026-02-10 21:08Production and Market Presence - Varex Imaging Corporation produced over 27,000 X-ray tubes and 20,000 X-ray detectors annually, with a worldwide installed base of more than 170,000 X-ray tubes and detectors [150]. - The Medical segment primarily serves OEM customers, with a significant portion of revenue coming from replacement and service of existing installed components [149]. - The company has experienced a significant increase in the number of medical institutions in China, leading to a growing demand for CT X-ray tubes and related subsystems [151]. Financial Performance - Total revenues for the three months ended January 2, 2026, increased by $9.8 million, or 4.9%, to $209.6 million compared to $199.8 million for the same period in 2025 [159]. - Medical revenues increased by $0.2 million, primarily due to increased sales in radiography, mammography, oncology, and other modalities, offset by decreased sales in dental, veterinary, CT, and fluoroscopic modalities [159]. - Industrial revenues increased by $9.6 million, driven by increased sales of inspection products and digital detectors [160]. - Gross profit for the Medical segment decreased by $3.5 million, primarily due to increased material costs of $6.8 million [163]. - Gross profit for the Industrial segment increased by $4.8 million, primarily due to increased sales volume and a favorable shift in product sales mix [164]. - Operating expenses decreased by $2.9 million, or 5.1%, to $54.4 million, representing 26.0% of total revenues [165]. - Interest and other expense, net increased by $2.9 million, totaling $(11.6) million for the three months ended January 2, 2026 [168]. - Cash and cash equivalents decreased by $25.5 million to $119.5 million as of January 2, 2026 [173]. - Net cash used in operating activities was $(16.1) million for the three months ended January 2, 2026, compared to $9.5 million for the same period in 2025 [175]. - As of January 2, 2026, the estimated total backlog was approximately $264 million [185]. Research and Development - The company employs approximately 400 individuals in research and development to drive innovation in X-ray imaging products [141]. - Research and development expenses decreased to $21.7 million, or 10.4% of total revenues, compared to 11.8% in the prior year [165][166]. Economic and Market Conditions - The current economic environment has led to increased tariff costs and supply chain disruptions, impacting customer purchasing decisions and overall financial performance [142]. - Varex is actively pursuing options to mitigate the impact of tariffs, including localizing more manufacturing in the region [143]. - The Industrial segment includes security applications for cargo screening, which are subject to varying buying patterns from government agencies [153]. - Non-destructive testing is identified as a significant growth opportunity, with ongoing efforts to develop new applications for X-ray sources [155]. Risk Factors - A 10% decrease in foreign exchange rates could result in an estimated annual impact of $15 million on earnings [197]. - A 100 basis point decrease in interest rates on marketable securities could lead to a $0.6 million impact on earnings [197]. - A 10% increase in commodity prices could result in a $2.9 million impact on earnings [197]. - The company is exposed to foreign currency exchange rate risk, credit and counterparty risk, interest rate risk, and commodity price risk [188]. Inventory and Receivables - Cash used for inventories increased by $14.5 million in the three months ended January 2, 2026, compared to the same period in 2025 [183]. - Cash provided by accounts receivables decreased by $10.6 million in the three months ended January 2, 2026, compared to the same period in 2025 [183]. - Days Sales Outstanding (DSO) was 64 days as of January 2, 2026, compared to 62 days on October 3, 2025 [182]. - Non-cancellable supplier purchase obligations totaled $2.8 million as of January 2, 2026 [180]. Legal and Contingent Liabilities - Legal expenses are expensed as incurred, with no material contingent liabilities reported as of January 2, 2026 [181].