Varex Imaging(VREX) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter revenue was $210 million, up 5% year-over-year, driven by a 17% increase in the industrial segment revenue [5][17] - Non-GAAP gross margin was 34%, at the high end of guidance, benefiting from a favorable product sales mix [6][20] - Non-GAAP EBITDA was $29 million, up 12% compared to the same quarter last year [7] - Non-GAAP EPS in the first quarter was $0.19, up from $0.10 in the previous year [7][22] Business Line Data and Key Metrics Changes - Medical segment revenue was stable year-over-year at $145 million, while industrial segment revenue increased to $65 million, representing 69% and 31% of total revenues respectively [17] - The industrial segment saw a 17% increase, primarily from cargo system shipments, while the medical segment remained flat [17][18] - Customer activity in the medical segment showed solid demand for X-ray sources and digital detectors, with mammography exceeding sales trends [8][9] Market Data and Key Metrics Changes - Americas revenue grew 17%, driven by strength in the industrial segment related to cargo systems [18] - EMEA revenue rose 7%, while APAC revenue decreased by 7% year-over-year [18] - Sales volume to China remained steady, contributing 17% of total revenues, indicating resilience in the healthcare market [18] Company Strategy and Development Direction - The company is focusing on a modality-based approach to enhance customer engagement and drive long-term recurring revenue [12] - Increased collaboration with customers is aimed at addressing complex inspection problems using X-ray imaging in real-time manufacturing [9][12] - The company is optimistic about future demand, particularly in the medical segment, as customers return to new product planning [15][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the medical segment and strength in CT, with no significant weaknesses noted [31] - The order pipeline and customer engagement in the industrial segment are strong, particularly in food inspection and security [33] - Management highlighted the positive reception of new technologies at industry events, indicating a strong future demand [10][15] Other Important Information - The company has modified its non-GAAP policy to exclude gains and losses from equity method investments, reflecting a strategic shift [20] - Inventory increased by $29 million to $328 million, driven by anticipated demand and new product ramps [22][23] - The company ended the quarter with cash and marketable securities of $126 million, down $30 million from the previous quarter [23] Q&A Session Summary Question: General outlook for the business - Management indicated optimism in both medical and industrial segments, with strong order activity and customer engagement [29][31] Question: Progress on India operations - The India factory is operational, producing detectors and tubes, with significant customer interest in local manufacturing [37][39] Question: Guidance for the next quarter - Management provided a revenue guidance range of $210-$225 million and non-GAAP EPS guidance of $0.15-$0.25 [25] Question: Inventory increase explanation - The increase in inventory is intentional to prepare for cargo systems ramp-up and qualification cycles for new products [78] Question: Refinancing plans - The company plans to refinance high-yield debt due in October 2027 before it goes current, aiming for completion by October 2026 [80]