VREX - Earnings call transcript Q1 2019 | Varex Imaging Corporation

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Operator

Greetings and welcome to the Varex Imaging Corporation First Quarter Fiscal Year 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Howard Goldman, Director of Investor Relations. sir. ahead, go Please

Howard Goldman

and materially about uncertainties will differ results the and to risks These amount events. is expectations guidance we which statements welcome adjusted cause otherwise. are that to financial that from uncertainty making website. is first quarter Imaging we measure adjusted earnings subject quarter be XXXX. adjusted of and reconciling quarter Sunny GAAP on or Quarterly those XXXX or are future otherwise for This and only. call, fiscal release, the presented accurate per could actual call, today a timing of On Guidance versus and reconciliation simplify are CFO. directly stated non-GAAP basis the call discussion, comparisons quarter These provide diluted based our With of earnings this today’s fiscal are substitute for financial forward-looking provided of are GAAP will is unless projections unless to measures. net CEO in to President on our our first the a to the compilation press are forward-looking share due of unusual provided all that measures advised to items. most earnings comparable of Sanyal, certain first net posted Verhoef, to discuss afternoon our items for Please are in Corporation’s the and measure and We they diluted To earnings references anticipated. for Varex stated, statements to conference me meaningful a our GAAP Clarence an the for Good nor our during we adjusted XXXX be each the assumptions unable fiscal measure not quarters. year financial measures. current accordance financial which with, per are are financial predictions of fiscal on share

actual contained factors materially our discussion that of or fiscal in the risk in SEC concerning Form is we this factors to results filings, forward-looking to could Sunny. differ on The assume Additional to XXXX. report our for information information XX-K annual And cause year including Item of will call XA as date obligation today’s speaks no turn over and revise discussion. this now, I update the in statements

Sunny Sanyal

celebrated year everyone have more segment quarter. Medical performance our afternoon, start than solid we to prior industrial look in the a Good and and continued to the and growth. or rate and million we our X-year XXXX. quarter revenues innovation, third expected. specifics years our increased Clarence year grew more from increased margin public half gross lower Revenues of $X the first Howard. second minutes. XX%. a year last tariffs a particular, you, was segment week, forward year. many more revenues Last first quarter had We of had Thank will as X% in In of fiscal than from impact customer the We anniversary direct the few X% improvement in nice we more welcome the company. relationships strong in of from

products, boards. that for in tariffs As purchases certain like suppliers we circuit our printed components make recall, used by on China you may year, U.S. last from XX% increased in

expansion To Germany. on China of in products X-ray by China, and tubes. the operations the we accelerate on help by X% on increases manufacturing increased U.S. XX% plans addition, in tariffs, In to these previously and mitigate digital from we detectors to outlined export tariffs the

around the flexibility leads. our oncology to the Having to-date and to during closer strong year. a medical our half we start to manufacturing us and models continue gives CT, of We product with the some and second world demand commercial have sites production this to see customers made realign production In progress expect good be segment, number of for mammography local of our products. imaging

quarter, OEM customers CT our year. of than in and gain more tubes shipped to twice we many on to During the track China are first as as to units ship shipments momentum continued we last

are smaller the adding development Some customers quarters. stages approval of new coming We some anticipate CT pricing are process the for regulatory end agreements nearing systems. OEMs others while over in new their with the of

to tubes China, products CT presence we segment emerging addition with global for to the in see their markets the customers the value In in CT into expand of opportunity our our continuing market.

customers largest for introduced CT OEM markets. One of a emerging scanner our recently

while our We Sales due of to our detectors and lower tariffs upper of for products success segment bit the digital in market. detectors Demand remains other the competitive a are solid, the potential declined optimistic the story radiographic prior dynamic but mixed. and the year, factors. value about CT improved also impact tier opportunities is from growth of detectors for their tier

therapy corporate years X elderly used at for for and Most see X-ray of oncology We growth planning patient X-ray the imaging over therapy advances. by X% cancer, incidences systems. radiation next and systems driven growing increasing the treatment detectors of digital products population rate of continued to technological space positioning. and projected are in is radiation radiation The and sales tubes to grow

products to year a to mammography market the fiscal expect in and quarter. strong first of Sales be grew ‘XX We contributor our to continue for for the beyond. oncology growth

industrial applications at tubes. for tubes was and driven components for screening cargo linear broad for a imaging nondestructive airports. and mammography In CTs strong demand software and accelerators continue a borders We ports our security have components, at particularly of strong for offering our X-ray growth screening by and for revenue see to for imaging segment, industrial and X-ray demand used

using industrial for in in around screening expect to high upcoming baggage to as the CTs. airports continue We the demand in remain quarters security tubes world invest systems

proprietary that year. Most and is where a is and this focus imaging integration the its to off to VMI’s business we testing VMI completed last good software We in of the year. non-destructive is oil the pipelines. valves used closed start gas inspect of refinery segment Our acquisition market, of

We the with me potential combine VMI’s detectors are pipeline refinery new that, financial let detail. call for over about and performance hand to see to our proprietary software opportunities to to encouraged With Clarence our in our several greater inspections. talk digital CFO, Verhoef

Clarence Verhoef

a line and Originally, Sunny gross offset an than the I and top by Thanks, margins particularly hello impact expense. QX higher expected once but in a had had to our on OEM which segment quarter were our ask good would that summarize Tariffs China better for SG&A everyone. a as we again would expected offset with industrial performance, detectors. partially they tariffs business, of sales bit radiographic pay for concessions customers import in price detector Instead, different expected. the decline quarter. saw in than during we the we digital help initially would

margin reduction revenues, lowered related of gain actually basis to these fewer and sales U.S. about of points offsetting margin gross China. our gross lower margin Although the due rate was due rate these chain tariffs supply of to Roughly payments XX in a improved this products. direct

oncology Medical linear segment of were revenues which and tubes had digital to were CT Our X%, ago, increased shipments higher by and markets. quarter revenues the a revenues sales up a segment demand the for XD year dental XX% increased first for in security for experienced detectors slowdown compared up for first driven the for testing the applications. despite quarter sales. X% detector and both reduction airport non-destructive Industrial accelerator of radiographic quarter security

due quarterly have we U.S. additional expect to revenues in Looking some to and variability such tariffs. Brexit, as shutdowns, ahead, geopolitical issues various government

delays some could seen our shipments. receiving change timing have accelerators, linear in we for licenses of example, For export the future which

year. the quarter, first XX% gross the compared our to was For XX% margin in prior

which the recorded During was detector $X points charge. gross improved Santa the fab period. of margin of from or from adjusted Sequentially, change revenues closure XX% quarter a in margin year we Santa million depreciation R&D impact year ago $XX manufacturing tariffs to and completed as ago was comparable the Clara the The the of mix. in a expenses gross less product quarter. to by in were quarter, or to lower Clara, about variances ‘XX rate X QX the accelerated XX%, XX% of restructuring million $XX million and FY favorable in operations compared due

the restructuring cost of SG&A compared million $XX $XX First were million the to reductions. with In in year. first $X headcount expenses prior million associated quarter had approximately we quarter,

the amortization operations. In totaled the accelerated addition, earlier. matter $XX higher $X than detector fees and the expenses, million for incurred patent had million had $X included a legal additional we year usual and million with primarily compared restructuring depreciation professional current Depreciation a with The initiated. quarter of we fab to associated quarter first that of accounting litigation associated

from down million, year Our for the operating were quarter in $XX the same ago. a quarter first million earnings $XX

the quarter, was operating X% decline costs. in year a from quarter, first Our X% rate reflecting the restructuring margin the in ago

For primarily the slightly was in the operating $XX first prior first year The privately to prior the from $X Interest year. quarter expense operating held in million earnings the due the than year. year XX% which other adjusted adjusted and in margin quarter. quarter in the had earnings We lower million, the in million quarter compared was $X prior expense XX% investments to approximately our ago of to companies. results the $XX quarter, were compared first was million

prior year. was for tax effective to items the Our quarter XX% rate before compared the first in XX% discrete

reminder, XX.X shares for year $X.XX share diluted million versus quarter quarter. to quarter a due $X share the $X.XX recorded $XX to earnings net the earnings we or shares the tax per $X were diluted or U.S. quarter. were year. $X.XX million Diluted share the in the were last adjustments million per diluted shares significant prior year in outstanding compared or prior to year prior million Adjusted Net tax per As or million $XX XX.X one-time compared in per million for $X.XX share reforms. diluted

supply to equivalents of and the year. receivable $XX was the closure decreased first quarter the days fab demand at during working in year. $XX in $XX of increase projected million with of was million quarter. outstanding our the ended primarily to We increased first the million. XX the with and sales the Clara capital, for prior compared by due operations cash half Looking $XXX Santa days cash XX quarter transition second the to The the Days Inventory million. of accounts

million million. had property, we $XX cash from while reducing for $X operations debt by approximately plant quarter, and of flow equipment spent the and For million $XX

end debt was the $XXX or less total cash million position net Our at of the quarter. debt

changing outlook are We our year not XXXX. for fiscal

revenues a to $X.XX adjusted the and the anticipated net $XXX reminder, a of million, in provided impact between share million was $XX enacted per $XX range earnings million including guidance tariffs $X.XX. have As of to previously $XXX currently we million from and diluted

questions. your Now, for we up will open the call

Operator

comes Petrone question first Our the from Instructions] Anthony line proceed question. Please Jefferies. with [Operator your of with

Anthony Petrone

prior good a Thanks the then to down taking margin, just afternoon. side been and have I if that at maybe On of you than the here. both gross the move start industrial. tune medical questions Hi, for points the few plus XQ trend XQ years, basis look prior to higher order it should to gross into in XXX in related and year. on sequentially. questions the margin sort In going of am

I of You this mix forward? much there. was sequentially you much related follow-ups. of But you and how Clara of have Santa Thanks. then was some kind Sunny much going drivers how basis related, is sustainable Clarence were few recap up And sort XXX and/or of a through points walked so and will can the how

Clarence Verhoef

Yes.

I from manufacturing that Anthony, of compare the light a much think with getting was having in bit interesting fab and terms having I that QX side that of variances in one on in particular, that certainly do not operations the that behind think, the little we mean, it’s of the impact gain factor. little had fab in Santa because so and ‘XX QX high Clara is doubt. of amount FY I from bit us a to no an big a QX as

not we are The to be going of lower mix detectors and terms it’s of the into insignificant of margin mix less selling those highest when what the you have second coming around in radiographic is play.

think significant factor much think Tariffs, two prior a as as swing with that’s So, don’t it’s well. I as I items. more so comparable the that’s QX, the

Anthony Petrone

Okay.

how level here for are for the say it sort safe good full that is to we trends year? proxy this that is of seeing gross margin So

Clarence Verhoef

impact same the challenge time I perspective. Well, with little from for always I terms mean the right that at is a yet a mix happens because little mix terms hitting that from cost what starting of still have we of exactly that of for have direction away, in we amount Clara the that we bit us upside use of full us that we don’t the the I of there is we And in because then and it exit a a is built. is that bit think full to Santa fair certainly heading had a going right had fab, be, There an do us, time it in the in of bit up running goes predicting to inventory had that QX. but think structure

the time up use mentioned a bit little it structure I prior built some at As valuations and cost that us and there, the up. we so of will inventory that’s that take to

of the to half fab. the closing impact its like I of So the feeling see of start when kind year that of second timeframe will we favorable am

Anthony Petrone

is helpful. orders amount sort OEM, That’s frame is here, you much of said is of this in give there Thanks. mentioned just Q year, last to that sort of that what just from a sort – you in the then you on to on to industrial, there acquisition quarter, just dollars. year, OEM, but of then And contributed in the have contributed what VMI double in can way of announced sense it growth in China how that of and kind a the you was to for the quarter and way industrials? did the China some you us And what of expect reasonable sort then dollars orders one

Clarence Verhoef

quick million range. million VMI kind I one $X overall in of a with easy the first business, one, and in will that which to somewhere the of last because it’s the order just is is kind magnitude start somewhere business $X of of

that I to going a a orders don’t – major of unless a it about go of and of of we a but just am is we have into I terms factor. helps guess. it’s put backlog as detectors orders the we some I touched large driving we I all say because mean had terms agreements number not decline not But the – into in One very that have. things in significant that two I pricing sales nice that radiographic So do China that same would not there on talk but there, the in one growth. had on us that quarters details of said first what before performance of we and you at time number in we specific really had track by it’s had we units worth not CT certainly, the puts tubes for of shipping large doubling. the that’s on

Anthony Petrone

queue. will Thanks. in Thanks. I get Okay. back

Clarence Verhoef

Okay.

Operator

Solow question Larry with comes next line Please Our with CJS of question. your from Securities. proceed the

Larry Solow

single-digit of you, lot out, bit because a to us the seasonally the rest some of the in year side detectors you declines know – know take so your of quarter lower in could last and the I medical, don’t how a especially on quarter at we the the quarter just guys. at normally if the in quarters least that some sort flat guide the the years of year? view Thanks think – but think still implies relation medical sort look the of rest overall per slowest of I the for to I I up on on midpoint should for little just Great. mid medicals – you to year give orders it single-digit I guys where of se, basis was to believe is the of because QX year-over-year of exceptionally on guidance little panel X% sort a mid and your QX but a slow growth the were rest that back pushed I flavor, look

Clarence Verhoef

a that a I stand Larry it quarter ago. I you which just of little mean kind medical with we on guess is starts So had it and bit touched a year soft

the lighter was I year up more driven space and two sales and a strong those the segment quarter quarters. pretty net usual. space segments oncology than in in dental year [ph] say ago second that the in would medical that followed the last Our particular by with

things of think for And be I with tough us on of that’s comp medical I going a as actually mean overall mean the into year the certainly space. going a from perspective big the and I in is bit China for you then QX for look So that we mean to I CT driver the of and balance have space. got and still have the growth going we medical a

that’s think business nice of the then the that’s I I kind is there mean I that balance fully question, the things say see the sure space mammography demand a we amount good one the have and I Medical. mean the year And I I of oncology about in little the certainly the of up-tick. indicators level or not would So of of got kind of answered that bit covers of but that we a for it think your so, business I’m

Larry Solow

an And will, even going forward so some Santa closes, already just facility seem know like SG&A outlook on if about know for a just sounds has more little and an I then percentage or something gave margin? focused level a the I that some still though reduced facility, but of profit improvement then is was [indiscernible] still it perhaps didn’t side your so which is the you too to like you the even that and good it drag is but you obviously, materially this gross bit big then of as gross pretty you Okay. quarter much been color open, sort see on on elsewhere I margin guys would a improve be and been got revenue, opportunity how just basis was that’s quarter with Clara absolute side when it think the fine there the in it this hopefully increased

Clarence Verhoef

couple targeted are additional end a some deal a sure to up revenue right, of than the associated close audit we socks to went had implementation we unusual the fair I I’m as of had cost not higher that through Yes, a the defending the an fees now a a amount around it’s quarter of as there. a being SG&A was I having that done this some last litigation percentage XX% with mean, be still and same the year there’s getting in the of first-time with to there’s associated sizable usual had a of of about we that you little that time, managing SG&A to that the are first year at still out side with a so and on for bit and one I look math that but be revenue a defending amount expense are QX expense we structure so was the in there, us little bit at we growth uptick expense some we our to well good litigation our as the own patents, as helps just so increased get more the other in in patent that as forward see as well shot was with that’s the work expense

Larry Solow

that, in just just assume customers you it smaller you follow-up, opportunities to of out the not or that big anything China, one And already from larger one that the believe how orders opportunity two are buy of XX in in but more some you doubling have the to you the maybe anything are we and mentioned quick a on of or it’s a OEM outlook? in reaffirmed than OEMs quarters, tariffs changed the I already unit follow-up the certainly there contract Okay. I just expected customers on or pretty patterns spending the larger have not sounds advancing Has sort like would contracts as like you and queue expect hope sales on look question some two that next sort are in China? doubling that market near there a in have you you on contract the five to future, some for next years over to is you but maybe or mentioned

Sunny Sanyal

Hey Larry, this is Sunny.

with months after the purchase that down five the be size playing first the OEMs, we’ve were end agreements but those, you are up smaller so at signed take remaining largest will we would XX will of won’t already of of I that XX XX if getting we’re safe OEMs sort smaller. that the Let say, it’s to and ones months, materially look they it me everyone next to the be what line the with, closed we they many anywhere say of of what’s much

Larry Solow

Yes, Go sorry. ahead, fair I’m enough.

Clarence Verhoef

and about Well, of added that the and Larry, change there no with any those that that’s the tariff on I other perspective tariff there is impact, comment customer’s we’ve much been is from all, tubes, U.S. seen rate from plans. it’s business a our one CT a guess on also seen impact in not we’ve and first what smaller

Larry Solow

Right.

QX from number, least I tariffs in portion trending that year it towards that not to So it impact at overall to is the if fair sounds it’s is the know $XX that below least changing through lower million, that know only guidance, at the of at early say? in your you’re that I not $XX like but least million but

Clarence Verhoef

still impact volatility the do had factors price range line, impact, that the what still, business away when a with amount something of kinds adjustments you to well. X, we stuff China concession, XX moved kind China similar it in or I is think it might potential just one had of and of of on whether top that that always tariffs there where it’s years in the we’re XX% the we is ship we might price from some and we like different just have whether X so importing similar of of some it things to couple to we the are fair importer ago, it’s because it still record was into little we then we parts went it be there’s pay be guess % some and had cost I remember to structure and Yes, of got is there’s our that of currency when as one

Sunny Sanyal

second Larry, seen in your have of any And part changes environment the is China. question about in we

Larry Solow

Yes.

Sunny Sanyal

the We escalating the XXXX reinforced X,XXX haven’t purchasing it’s customers by and their to are it’s data authorities X,XXX, seeing systems actually investments. reinforced, only proving going CT announcement been and out they’re an of buy recent Chinese that the additional we’re of by point market the that’s any in end our opportunity, continuously none not

Larry Solow

that know bit, I impact. great are there just is already that’s over relative on right so, it’s the tariffs and that’s amount the mostly by increased now a or minuscule small little tubes a Excellent the [indiscernible]

Sunny Sanyal

was before. what It X% more is than

Larry Solow

that $X.X million Is just expense of Okay, other book question, was housekeeping the line? what to that? And the great. below last

Clarence Verhoef

So that’s been in our.

Larry Solow

JV?

Clarence Verhoef

so. there manufacturer the JV, detector Yes, the that’s dpiX

Larry Solow

Got it.

So a of for a bit that was for know? I think you positive

Clarence Verhoef

that Yes, their do a are of bit on business operations kind to that’s and go down in going little time and of how we just variability have running. at just up

Larry Solow

directionally would overall mean? positive right? as that but say, should contributor Or, a be Okay I I

Clarence Verhoef

that a doing at all they in is they and of which cost good that of structure low reduce most line. are impact low cost necessarily them you hid reducing if they We what know cost R&D doesn’t that as they the run from are a goods, it’s profit so business, that our get cost progress that reduces we it of buy so at about the and in kind its, making other with the for we level be no, positive

Larry Solow

Appreciate okay. that. Got it, Thanks.

Clarence Verhoef

Sure.

Operator

comes your from of the Please question next line proceed with Koller Oppenheimer. with Our John question.

John Koller

Good How afternoon, are you? gentlemen.

Sunny Sanyal

How Good. are you?

Clarence Verhoef

John. Good. Hi,

John Koller

Good. Co. It’s & Oppenheimer

of to get went Just on quick I wanted the and fair read I couple part questions to a advertising I tandem make sure legal adjustment a were not to expenses that through professional did adjustment the the correct? expense see adjusted the I didn’t of just the the and EPS for

Clarence Verhoef

onetime. those I they they are not of business, Yes, are that’s right. treat items, not regular did ongoing adjusted our part I guess as

John Koller

Okay, great.

give Just wanted on leave in Just litigation? you to there to it Q? out see make want sure information that any and suppose we’ll don’t the the I patent

Clarence Verhoef

little a but color bit this be well, time. point will add There of more nothing the in as in to at Q

John Koller

expansions that acceptable achieving quickly China going time just you small guess in point? are a from and to probably you that this and if too have Okay, I’m solid Germany great. manufacturing timeline you on Really away at they’re efficiency those the it’s then some or if if on wondering think

Clarence Verhoef

to we at are a will out at It’s this line in small point the way going product roll that time. the it is out we dribble

be impact another. way So productivity there in is or a really not one going to material

John Koller

to keep at to up-market, Okay. you China, are Germany, going be guess those are going And but I the mid advancement this those to fairly, a little more probably at lower maybe point? in you technological can in see

Sunny Sanyal

Yes.

in have products both a be were legacy of and into in it products so existing where acquisition PerkinElmer the products we made the largely so a products of mix PerkinElmer products, Germany, PerkinElmer we facilities So, blend China it’s would of mix Germany our of there’s in it that a through again and mix China Varex products. PerkinElmer came sell what’s

John Koller

Okay, great. you’ll one cost you’re still the improvement with to Then still reductions? confident if pretty targets quarter announced the ask I to and cut I costs, ability further able on and be for achieve margin previously assume could that

Clarence Verhoef

of the be that changed wanted I maybe things is about carrying I so But then don’t XX% the okay, unusual on, we’re you to forward outlook. that hit us on. that are level a at little and R&D, think look that. and the well And mean, perspective I what always a so running terms to it’s mean, relative from at I with I that gross think those actions in changes is going much said bit which of Yes, lot reduction after SG&A, like, anything I our we around mix, we product anything of the margin, the items on don’t going think items or factors QX cost talked some we in not as got had as

John Koller

you’re if not some Okay. sizable you and know forward seeing out-years improvement you’ve you’re action market? And seen if out be last Thanks. question shifting and Industrial, efforts the be I door. really gives can have the Industrial, in on ability any to But that taking just I’m it out confidence in this quarter, go you to may traction you’ve based in was what get that that the we’ve accelerators my then going on far curious that get on really is and the – you’ll a the see may linear some assets deployed so year beyond the that appropriate but mentioned

Sunny Sanyal

Clarence to growth seen expect take and Industrial in traction X-ray higher continue the there are an having normal investments that fill we’ve – just we tubes half impact, we that business, is energy last second the good you it Hey energy announced energy, tubes linear X-ray that for will the is our of – a year, and and pretty which focus its the long-term. Industrial kV we the not accelerators can which and the realignment we’re in. that I’ll seeing John, maybe in on and

gas expect Beyond we us in software, Industrial already where have acquisition vertical. strong software a The oil we that, proprietary the VMI. detector will additional of growth from some to and business, through the brings very I think VMI come some be

we’re about channel by offerings oil oil able presence with existing further market and because packaging bullish expand segment. and detectors them and good VMI’s vertical tubes our our the products, a with good being they’ve got So, a gas gas and into in to

John Koller

congrats quarter want on QX this guess to soft the just is one, alright. fiscal glad on Okay, that had I reduction. focus one say I QX last debt especially generally pretty you a after And see know year, last debt repayment, but the I Thanks. to

Sunny Sanyal

you, Thank John. Sure.

Operator

Sidoti Sidoti next [Operator proceed Please with the line of Instructions] Company. Our comes question question. and your from Jim with

Jim Sidoti

you Good hear afternoon. Can me?

Clarence Verhoef

and how you? hear, are to got we Yes,

Sunny Sanyal

Yes.

Jim Sidoti

Good.

little you and customers is then pay you two a that your you in why of need that? So, thought, less concessions was you’ve said tariffs, over and that quarter also there’s the over materials you make to tariffs, on to impacts tariffs than component tariffs purchase. this they’re was indicated there a you as bit the second result That the paying

Clarence Verhoef

either that and think of it amount of I shipments of more it’s anything that our that volume-related were terms to significantly it China? slightly, was inventory whether less, number and products cross-borders it did we moving stuff but the wasn’t the or was we think into imported whether in that I than went

Jim Sidoti

and mix product the access? on the helped essentially with gross margin a both So, line tariff you

Clarence Verhoef

hidden think a bit a product guess that tariffs. Yes, into linked back certain benefit you’re degree, another There to I is mix I right. is from of little the

Jim Sidoti

have mean, you any you the the do for that expense, could Do a think I this the continue? year or if way will is things rest of trend go other that

Clarence Verhoef

difficult to pretty good think little a QX I very like year the but outlier in a indicator the the so is specifics and the we’re it’s that of of tariff year actually that bit give quarters. early impact, what perspective in terms mix is on looking from of

Sunny Sanyal

Thank alright. Okay, you.

Clarence Verhoef

Sure.

Operator

from line comes of question Jefferies. question. with Please Anthony next proceed Petrone your with Our the

Anthony Petrone

Thanks.

handful tariffs. supply OEM, One chains was related potentially I also but stay materials, know Maybe there variables having OEMs multi-national relates supply to as those that Just to their one just different shift directly around. to of another China your tariffs. it to on was

the announcements And April in what If get we million? $XX so to come of factored the to downside? could or to Here and areas again. China announcement should on there’s U.S.? the upside between can of or unwind favorable a war trade tariffs? a case kind is offset get And $XX How efforts favorable a the whatever of may either less all going Thanks, of how that it’s surprise million again – that some two-way potentially sort again, March you quickly much some be. we not, of the

Clarence Verhoef

side, I obvious go I’ll is again, part some first hitting cost be of that’s the these tariffs is the that resolution Well, there okay. to the gets second and mean, one answer if part us which the on away,

away, what the the benefit, had uptick there. XX basis the in part on an that is is, that so to that measure so And top-line the we then points does stuff. more get that mean get we first that or impact that Certainly, quarter of difficult we separate goes structured away back. price in doing et and clear price invoice, we’ve get where a goes are benefit that very line we on given we’ve identifiable those tariffs clearly ones that that concession where a we’re because it’s and manner that so the concessions, of they So, so cetera, then

get the be how would business where about always do think that has have to want determined a these good the I I back, we that we pay still it’s somebody would there conversations a ones doesn’t we customers, that that’s Now say back. gone to likelihood with away business so little or more indirect is that business tariff the ongoing because get

Sunny Sanyal

This Anthony, to just part changes – the of Hey we counteract our operational Sunny. just were because to that of tariffs that. in always them business. changes The our We let plan made original tariff. add is me accelerated

have XXXX. So, we address China to

Chinese and customers want in So eventually multinationals China. our our local sourcing customers,

we’re put I So, going misunderstood – we’re those not costs actions. are our your for that we not year, with those motion, going part guidance to associated and We in just question, maybe those we the investments will – of the we capital tariffs going accelerate where unwind just cost go will away, Clarence long-term a those then go investments will benefit keep is China, The but some parts what in exactly our material goals. we we away, the our described. towards made, to see

Anthony Petrone

corporate that be small, margins are how from again impact That’s And but know average? margin $X I have that helpful. million, the gross are follow-up Thanks. those it’s VMI, just above to last VMI in revisiting of million queue. would does And much a on $X me

Clarence Verhoef

There’s it business, selling our components how is have margins a sold. passed with of is going they’re again, own versus on their say much are little How within a they they comparable being software how I would much of have soft through business. bit is mix too. a – much proprietary versus bit components of their thing – Varex – their that

of also rest third-party is be comparable are our of – it a is, the three. be of more obviously, components – So, in margin. business. our But is product with those margin, so I any versus overall they the the And higher that the numbers would can Varex what there more see pass-through better software the

Anthony Petrone

the about I And on helpful? – how how guidance debt that benefit? as Okay. is adjusted Thanks. how acceleration plays through update of that housekeeping Then flows well pay-down guidance? then be much reaffirmed any a mean, the the tax I into if How EPS the would on, a that on just should the just earnings? and may last we just one one again think

Clarence Verhoef

Yes. think on actually either anything I don’t changes those. of

the expense what reduction to million. $XX in generated, think is beginning I right flow expect would would at going reduction line The towards debt in be I what was to which going said we the year, cash say debt have with the of interest $XX I that year. the for million in line are is is with

don’t So XX%, I that’s changes where – quarter. said, to XX% from I think Tax, that anything this XX% perspective.

feels in it So, like line. still it’s also

Anthony Petrone

Okay, great. Thanks.

Operator

question. [Operator comes Instructions] Solow CJS of from Please Our next Securities. line your Larry the with with proceed question

Larry Solow

Thanks. Great.

follow-up. a Just quick

nice R&D benefits probably great which you couple at we’ll this least you year’s jump guys little I the or the sort a last think business, that is a you for tone pretty had bit and R&D hopefully down a full-year? of the that a last I benefit know out. side, is a to something a quarter near that thing we think sort year see those as Just for some of last tax of and expect took in of on reinvested levels just But levels the some do drop, bit of years year’s remain or of sort of will – year, at little

Clarence Verhoef

last of little XX.X%. little bit north year No, a a XX.X%, was around almost

that’s it’s had at be last year XX%. for come for prototype targeting So, of the good timing factors we’re of – uptick and tubes into materials proto several in this quarter pretty I One CT the We XX%. like. And play. the around think to year. what costs is And it was right is a

is gets a think so I think of behind I that that’s little bit. now, normalized some – us that

is, Clara the The a of bit supporting operation. in little fab associated of with Santa is costs other there R&D that terms

so well. And as some that expense out we take of

us puts in those of things combination that range. XX% the So,

Larry Solow

Thanks. Great.

Operator

turn no are further for the management in call there As over the queue, left back to would questions like I remarks. closing to

Howard Goldman

participating access through Thank you the XX questions locations. call for for fiscal first this can be quarter U.S. and or of call replay accessed from available in February earnings be at today XXX-XXX-XXXX replay A the goodbye. code and XXXXXXXX. non-U.S. or of XXXX. call will conference year conference you, our the calling website and your XXX-XXX-XXXX from company’s Thank is by in anywhere The conference from

Operator

This concludes today’s teleconference.

lines this disconnect for your may participation. You you now at your time. Thank

Varex Imaging (VREX) 5 Feb 192019 Q1 Earnings call transcript