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 showed broad-based strength, particularly in cargo security inspection systems and components [9][16] - Demand for X-ray sources and digital detectors in the medical segment remained strong, particularly in high-end CT [7][8] 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 position [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 investing in innovation and technology integration into next-generation imaging systems, particularly in the medical segment [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medical segment, indicating that previous headwinds are behind them, with strong demand for CT continuing [30][31] - The industrial segment's order pipeline and customer engagement are strong, particularly in food inspection and security screening [32] - Management noted that customer interactions at RSNA indicated a shift towards new product development and commercialization [15][34] Other Important Information - The company modified its non-GAAP policy to exclude gains and losses from equity method investments, reflecting a strategic shift [19] - Inventory increased by $29 million to $328 million, driven by anticipated demand across the industrial segment [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 about both medical and industrial segments, with strong order activity and customer engagement [29][30] Question: Progress on India operations - Management confirmed that the India factory is operational, producing detectors and tubes, with positive customer feedback regarding local manufacturing [36][37] Question: Guidance for the next quarter - Management provided guidance for revenues between $210 million and $225 million, with non-GAAP EPS expected between $0.15 and $0.25 [24][25] Question: Inventory increase explanation - Management explained that the inventory increase is intentional to prepare for cargo systems ramp-up and qualification cycles for products in India [80][81] Question: Refinancing plans - Management is working on refinancing high-yield debt due in October 2027, aiming to complete it before October 2026 [82][84]