Varex Imaging(US:VREX)2025-09-17 20:17Varex Imaging Conference Summary Company Overview - Varex Imaging is a leading provider of X-ray components, with over 50 years in the industry and a focus on innovation and scale. The company operates two business segments: medical (approximately 70% of revenue) and industrial (approximately 30% of revenue) [2][3]. Key Business Segments - Medical Segment: Dominated by X-ray tubes and detectors, with a significant focus on digital detectors since the late 1990s. The company plans to enter the CT detector market using photon counting technology acquired from Direct Conversion in 2018 [2][3]. - Industrial Segment: Includes components for cargo inspection systems, which have shown steady growth despite some destocking issues. The company has received over $50 million in orders for new cargo systems [16][17]. Tariff Impact and Mitigation Strategies - Tariffs have significantly impacted Varex's business, with an estimated 100 basis points gross margin impact even after mitigation efforts [4][6]. - The company has successfully passed some tariff-related costs to customers and is implementing operational strategies, including establishing bonded warehouses and shifting supply chains to lower tariff regions [5][4]. - Two factories in India are being developed to produce X-ray components, with the first factory expected to begin shipping detectors soon [8][9]. China Market Update - The business in China has stabilized after previous impacts from an anti-corruption campaign and price dumping investigations. The company anticipates growth in the upcoming fiscal year due to government initiatives to upgrade healthcare infrastructure [10][11][12][13]. - The Chinese government's multi-year initiative to improve rural hospital infrastructure is expected to drive demand for mid-end CT systems [11][13]. Inventory Levels and Purchasing Patterns - The destocking trend among customers, particularly in the medical segment, is largely behind Varex, with a return to regular purchasing patterns [15]. Industrial Segment Growth - The industrial segment has continued to grow, driven by demand for security and cargo inspection systems. The company is seeing a push for more imaging due to safety concerns and regulatory pressures [16][17]. Photon Counting Technology - Varex is developing photon counting technology, which allows for significant dosage reduction and faster X-ray imaging. The company is working with two customers to customize products for the CT market [28][29][30]. - The industrial application of photon counting has already generated about $20 million in annual business, with ongoing customer evaluations [30]. Financial Health and Debt Management - Varex has improved its financial health by paying down a $200 million convertible loan and focusing on deleveraging. The company aims to reduce long-term debt from $370 million to around $325 million [41][43]. - The company expects growth in fiscal 2026, driven by new opportunities in cargo systems, the operationalization of the Indian factory, and early revenue from photon counting technology [45][46]. Conclusion - Varex Imaging is positioned for growth in the coming years, with stabilization in key markets, successful mitigation of tariff impacts, and promising developments in new technologies. The company remains cautious about geopolitical uncertainties but is optimistic about its growth trajectory [46].