Varex Imaging Q1 Earnings Call Highlights

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]