VREX - Earnings call transcript Q1 2020 | Varex Imaging Corporation

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Operator

Greetings and welcome to the Varex Imaging Corporation First Quarter Fiscal Year 2020 Conference 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 will now turn the conference over to your host, Mr. Investor of Director Goldman, Relations. Howard

Please You sir. ahead, may begin. go

Howard Goldman

Sunny conference to the XXXX. Good and are CFO. welcome Verhoef, earnings and With our call Clarence CEO; today year afternoon and fiscal our for our President and first me Sanyal, quarter

with in for press to To first earnings financial presented stated references adjusted adjusted reconciliation they quarter GAAP GAAP we financial XXXX. nor our today's are unless website. measure accordance of are of release, to quarter a of which will measures. otherwise, the the not call non-GAAP financial a are comparable in These are fiscal substitute most measures for first is discussion, financial directly We discuss fiscal simplify posted quarter provided measure our all comparisons our each XXXX measures. on certain versus On

share provide net basis unable forward-looking our to per only. earnings to reconciling or guidance for adjusted items for and which financial This will adjusted GAAP the Outlook making provided is net timing that a of compilation share we accurate diluted measure diluted on of an are meaningful we is this due uncertainty earnings predictions are advised about the projections future to be events. call unusual the of amount statements, items. per forward-looking or Please during and be

differ subject These current to and those and from risks to are that statements uncertainties on cause that based results materially are assumptions anticipated. could actual expectations

our on of speaks statements no we update assume to revise obligation date, XX-Q contained discussion. differ The our information forward-looking Item in and our XA Factors annual information and on including report that in Additional actual today's this quarterly Form those the from SEC this or concerning factors reports is anticipated cause of to materially could discussion filings, in results Risk XX-K. as Form

to call Sunny. I'll now, over turn the And

Sunny Sanyal

quarter. strong the line you, Thank this performance fiscal and with off first welcome. Good started year top afternoon Howard. in We

However, factors million Revenues profitability $XXX number I year $X same conversion was the of different were with our to in the million from million you. up the to due in in quarter and a Direct Clarence ago. review that a quarter contributed quarter. first below $XXX expectations will X%

revenues segment a industrial and medical basis X%. increased revenues X% On increased

Our global tubes revenue lower by growth products driven screening partially and detectors of offsetting oncology, higher these CT airport was dental sales and digital sales mammography already applications, products. were and gains graphic for baggage

airport party strong research, in segment X% once give the and reached color you global for compounded than these the industrial To airport of $X.X rate XXXX. quarter projected screening market grow at the the baggage screening by third next is led to five our again our over in more by for annually tubes some years billion systems to according CT Growth demand was applications. for first industrial

Stringent security need for the screening. systems throughput, both been checked for demand regulations CT carryon has and improved for driving and baggage the

replace CT Over coming more imaging threat years, airports most generation with that offer sophisticated next and we detection capabilities. automated XD older will systems the systems that expect

verticals. ship and to applications for continue linear defense In in we nondestructive testing accelerators the and aerospace, manufacturing inspection, imaging

During closer and and to the Houston quarter, opened in office serve customers a in vertical. we the the area to better gas also new be oil

about for and products more We have the talk through in to several them new this moving development quarters. phases expect vertical coming

well quarter prior have have of dental double-digits CT year detector sales increase tubes strong as an sequentially quarters. over oncology we In sales the segment, as medical global from revenues the and and particular, products. dental in our grown increased past In of four

for with calendar its through Medical year Systems three We Canon agreement also this XXXX. Varex that renewed afternoon XXXX announced years has pricing

into agreement CT tubes this term product be Canon relationship sales we Medical renewed global continue for This imaging integration the for potential to CT long through Medical heat Canon of agreement decade our with during to systems estimate extends our $XXX supply market. approximately which exchangers the multi We and million.

digital high and connectors. In Medical addition voltage through also Canon agreements separate supply with detectors we our

I'm have renewed partnerships we segment in pricing XX% customers. customers. These represented additional of agreements our also the long-term XXXX. the say that year than including multiyear beginning the with customers since fiscal give revenues our with to you of nature reinforce happy To of of fiscal our these a reference, year, a more number of frame agreements key medical Canon

continue in fiscal along that with our our will contributed to China, their in local tube growth growth progress global of the customers new unit overall grow quarter. we OEM bringing sales systems during to the our This continue this rest world CT year. In and make expect CT to volumes market China, to in activity

most are global a reminder, CT systems of our base in CT tubes. placements new As of expand the China install that

grows, into the base install tubes feature the multiple as as we expect sales the of are that incorporated life the replacements systems As new the from of CT initial over to systems. well benefit both

feedback facility and During detectors existing factories the made of prospective Wuxi China. shipped We prototypes in for global been new digital number our first OEMs quarter, locally and local our of and both a orders first and shipped its has to radiographic customers manufactured Chinese positive. early OEMs

in This China, for a China supplying forward Wuxi of them launching new to working in future. example and contract recently and with look with of prospect OEM more the these the customers customer that is our customer signed in a from of systems We we are based just detectors will new facility. dental also we one potential be OEMs dental multiyear

coronavirus give impacted the about talking us. how me an you we're has outbreak China, on update While let

east have facility manufacturing in Shanghai. our and of located operations of in facility Wuhan on demand. to miles XX Wuxi China, west As of about cover and about reference, many manufacturers to point temporarily other Wuxi XXX current hold is other at a in a Like our shifted put locations miles we

virus. our to today, I'm as of that report concerning While time, the this glad has none certainly been constructed are a of employees

to to next look factory anticipate and forward our week currently in being reopen resume production. We able

radiographic for increased Somewhat used major respiratory tubes of event, type screening our of CT early health are for systems this demand to disease. in response to have this detectors imaging and incorporated seen we that diagnostic near-term signs some

We to situation in monitor will continue the closely.

Marketing discussed non-glass our efforts substrate RSNA, included In December, largest we liquid and trade nanotube, industry segment bearing off. the platform paying where tubes. medical photon detectors, counting and detectors, are show attended our X-ray in metal products. the digital tubes, and of innovative the CT imaging medical for and we detectors, year flexible showcased These several Z technologies event cardiac

artificial the and discriminate applications. detect lung software artifacts to demonstrated liver exhibited We autonomously dental and also in in intelligence our capabilities new pavilion AI images meaningful for X-ray where and team screening

good with incorporated next away customers X-ray Overall, RSNA show imaging was can into for with us prospective systems. generation number our and we scheduled want meetings of a busy their technologies to be discuss that came a new ways

We significant to be expect these new competitive technologies us for differentiator a future. in the

I Clarence, to in unusual you level which turn high margins gross Before me some call not for comments is us. variation expected first margin gross our let the over quarter. was regarding with in than Quarterly provide the lower

This XX% Our reduction is adjusted changes volume and over to customer pricing XX% could quarters. has rate be gross X or mix, past from to and product ranged product changes activities. productivity timing also primarily cost due in margin caused by of the

product detectors. offset varying and have that digital markets competitive our lower yields. in To to particularly with supply we programs and structure have levels of are erosion, for factory our by productivity price chain, improving redesigning effectiveness this, cost products We optimizing ongoing cost

related with significant and XXXX. operations by for in expected the to of some fiscal separate fourth Clara the facility Lake and team end to previously opportunity City year our been we Our Good of announced the Salt stop the XXXX. date Santa and improvement operations be to has various expect and We full by closure other transfer to ramp closer calendar down of to Santa a able locations. quarter in Clara pull progress in relates year production by now the had made quarter

let in Clarence greater detail. me financial call With over that, performance about hand talk to to the our

Clarence Verhoef

everyone. hello and Sunny, Thanks,

we on in in the that of financial closure, the million, second the from closure to benefit impact. range Sunny's we closer net this the indicated to now of we $XX of project, beginning Previously, comments as we year the Santa fiscal about timing would be As completion of annual its have view quarter better $XX on follow-up Clara get a million XXXX.

By already facility, in we in fiscal closing rest the expect We've by the of in for half year some pulling year full of the of to now benefit glass received closure fiscal of receive that the XXXX. XXXX. the a benefit of year portion the fab first facility date

pulling costs overlapping overlapping allows to for $X.XX in to indicated these City. gross Santa for Salt we the year. costs impact offset quarter, and expectations the this maintain from full of to XXXX there that Last year fiscal closure of of the date be Lake The margin help within $X.XX to our the Clara year fiscal EPS transition would us

year both had instead quarter, quarter. while a onetime Now operating we in weighed quarter is weeks being year turning performance margins some to the Fiscal XX-week by good particular, events. gross first first and had Varex XXXX revenue were the XX. of we week the down an In for with additional XX

a additional also the that This quarter. throughout the in is news we while the impacted due delivered P&L additional week expenses week. have week operating contained which productivity, number revenues; first negative number a higher of the had holidays impact some items extra of however, good a The added an on to

quarter, revenues million quarter $XX to the first industrial revenues Medical compared million year increased $XXX the for the revenues to $XXX X% to increased For and prior million million. were quarter. $XXX in X%

Medical was declined prior first segment margin quarter, our points. margin year For quarter. XX% gross X in to compared the gross XX% about by the

we holidays week October. physical first with the had in productivity of the quarter, the lower inventory added our and factories in During a

slow custom's due detector reserves related Europe digital audit increased moving to additional and Our for costs margins and we a in warranty declined inventory. to

Industrial margin primarily direct million week expenses due and segment year an $X products. the of about million the prior additional of quarter. the first Overall, were the quarter revenue prior our to to favorable gross increased from in of improved three of $XX XX% to inclusion due the about gross in margin higher XX% a versus conversion. of points the quarter. prior year was expense XX% quarter, compared R&D the mix margin R&D year adjusted to by increase

fees. SG&A were to Quarter expenses costs. the non-operating prior non-operational costs. weekend, expenses year expenses higher approximately the and million audit year quarter included added related million and increased, million the versus and and restructuring and also acquisition $X were other included for and other $XX of SG&A the $XX integration, SG&A approximately consulting expenses $X restructuring of quarter prior related to First to million due

in change adjustments. a reporting adopting Going forward, be we our of will non-GAAP

year fiscal from do initial of the the setup 'XX quarter For non-GAAP after our the year separation the associated XXXX XXXX, Varian. of Sarbanes-Oxley fiscal treated as implementation we expenses first adjustment and and with a with

Now has SOX ongoing treated be that SOX implementation and will as monitoring transitioned and non-GAAP activity, any consulting longer an audit implementation costs a adjustment. and associated no with monitoring to

million and quarter to million Depreciation the year. $XX prior compared first $X amortization totaled the for in

the included first last detector year million accelerated with the restructuring of operations. quarter fab of of $X The depreciation associated

operating for in to $X million million first Our ago quarter earnings quarter. year the the were $XX compared

compared Our year adjusted quarter. operating ago to the million $XX first were the in $XX for million earnings quarter

of year tax million prior a or was quarter $X.XX first near Interest prior Tax net million is $X the the million, per expense of or $X quarter. net first to year ago benefit in loss quarter. per quarter to in which comparable in year of to the the earnings for $X share zero million diluted $X.XX compared in compared quarter. the the first expense We $X diluted recorded quarter share was

million for diluted quarter versus million per per earnings diluted in year quarter. prior prior shares share quarter. million shares million $XX compared or to Diluted shares the outstanding or $X net XX.X were Adjusted $X.XX the XX.X year share were $X.XX the in

in $XX million the quarter capital, the compared of prior in million. quarter to Day during first the Inventory outstanding year We cash decreased with days $XX was quarter. XX our $XX first equivalents million accounts quarter. days XX increased to $XXX receivable ended sales million. the working and by at Looking cash

million. we a debt During by debt million total $XXX and quarter, of the with $XX the reduced outstanding quarter end

and During completed the leasing. accounting on the of roughly P&L our equal new for million standard $XX first assets it $XX of impact immaterial, the The and implementation a was we but by quarter, million, increased liabilities respectively. amounts

quarter than quarter file in some expectations filing standard, a financial it will operating though, we but by are new not the a of overall the Even will were line performance plan We still related that the first to in margins completing work for our this for and year. with deadline future. anticipate we on first be our usual, XX-Q lower gross our result, the as accounting the near tomorrow,

Lastly, Varian, Varex to the I after Varex so to look forward to transition announce intend more CFO, all later this that I year. than the the would I and to to retire stay with like over you next I will years from through new few continuing of XX assist a quarters. to work with on

Sunny Sanyal

the years Sunny an Clarence inspirational move from to I acknowledge to ago. has for then made part integral take spinoff contributions years we has to before Company. Q&A, that through want So on a Sanyal, our of many, three just leader this many that is to Clarence company and been Varian the tremendous moment

time components business and and corporate future. have His and the the with global Varian revenues Clarence under established guidance, a that we've $XXX a as we million have in for finance and tremendous depth later imaging from team the into over been his industry operations fortunate During been the team. and will his leader the knowledge grew our $XXX Varex, very in and our management infrastructure million, to help us lead asset, finance of

open let's the With for up that, your call questions.

Operator

your this session. Anthony will Your [Operator proceed conducting question of At time, line you. Thank with a from comes Jefferies. we Please first with Instructions] Petrone question-and-answer be question.

Anthony Petrone

future. luck what have address few Hope the is Clarence on to expectation timing on I'll to just CEO cross paths congratulations follow-ups. topic the to in stay of just the best and just transition, on. there? as and Maybe again, to And Thanks. you goes time approach to Thanks of going transition then be for and just

Sunny Sanyal

Yes, Anthony.

his expressed we has retire. as said, Clarence, to So intent

we now, are didn't that, until and start get beginning just really So with we will the process we -- going.

but significant year We expect stay on transition the will in assist that. to a Clarence for and expeditiously, do this he'll of portion through

Anthony Petrone

quarter into to then, bridge. just maybe guidance and just for adjusted shift to just the and and And the numbers operating margin the go

it that the bridging as in from a next et that allocated just level whether I the drivers the quarter, getting what sort Where's flow the expectation costs but of little seen bit back China OEMs some for the maybe mix? non-recurring be the for to it So, you are the or there? in specifically, first the the $X.XX help to we've first order quarters. Is signed year? out is it Is first in quarter it of quarter? newly or and three full comfort customers, look here the understand numbers over from just deficit the cetera? of guidance So And

Sunny Sanyal

Sure.

I a mean, So, on I'd you've I touched say this, couple think things.

is would that First level rates, than the be full the that by closure that a be all, think one-time lower margins some going around in makes being in margin year. of all Clara a you maybe also actually events quarter, benefit. by the for both pulling that have profit to I The quarter, gross the and operating Santa a key little significant item but

fiscal before built year and of And of a not the Lake some happening the numbers, bit till in up the we and other the in overlap the in in operations none ramping fundamentally locations City mid-XXXX. into had benefit and really costs with happening little Salt

good pull that has as us. some impact benefit of bit that fourth little the we now already So, and that, in get quarter for that a or amount benefit of we a

say little for on That bit tubes element helps for forward side. going the mix seen that the on good a other the we've as the us product would CT year. I is, demand

that the going to going there. think So, make bit a a element I to that's be other of is difference

Anthony Petrone

your gears top line shift to and just maybe to in outlook And on specifics China. comments

so as So, this relates the view seen mix just coronavirus. we've season, far earning it to

to than in your some expected higher demand coronavirus. mentioned due there's You comments potentially that prepared

Just so Siemens, be a we'll cycles in announced but machines that sort of specifically China? last CT installations necessarily a one Thanks. installation maybe trying for sense China? And impacted, just of in instance, that, to bit not on on could then follow-up. timing little CT installation it's cycles for get orders, have

Sunny Sanyal

Yes.

don't shift pick point it time to the the to the as OEMs point is how in where having to where from we their From facility shipped good X install and systems. they works, the order, we is to, places it Anthony, typically get they So, them. our we when an perspective up tubes it the so sits our order are for what takes customer long consider how much visibility long how or elapsed gets,

the to these ordered. for are over demand had customers in the shipments. above immediate get tubes, uptick ASAP, said, try us on that standing us to are top to slight these the made what from Now for tubes mean reference of I these I and they

we're to with So, that get these our as doing sort them ASAP best in and cover trying of much urgency. out of to to

get facilities. will out And our their customers by out these shipped of systems ASAP,

So, that's we of your demand answers these -- if current I to are that fulfill question, bulk don't but expect that in know quarter. this extra

Anthony Petrone

again. that some there But intuitive I'll for there potential mentioned providers In Okay of if a one in Thanks course, just upcoming other was and there deadline, deadline of have quarter? dynamics that any in back pull never December, last was in of wondering, tariffs, forward was the specifically me. get sort it some capital tariffs here. was happened. orders

Sunny Sanyal

in not tariffs. change one No, another the any or way our for any, behavior change due other to see we any patterns did customers ordering

Operator

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

Larry Solow

on had release that us Canon contracts. medical Any actually for Can changes? re-upped. will of these agreement you mentioned you've like your similar levels? pricing that Sunny, give just couple over than separate XX% any feel you color a on you there the rolling It contracts you of sounds and great. basically Are volume greater questions. a at Just be mentioned

Sunny Sanyal

Yes, my of contracts. -- about first Larry, other reason for a couple backgrounder comment the a the on

Canon largest it's So, us. long of always our all, with customer continued first see with great to decade's this on relationship

says So, that into just how a calendar this. with excited the second rest of give year I of about a to frame thought we're doing our month you we're the customers and of I'd and it We're representative. example the reference of as

for us there point key multiyear The that agreements. are is these

means, faith in in have customers pricing it of also stability our the faith us, that not is but only So in market.

a We're were ago we detector that multiyear three might we're recall would customers our agreements. in You agree pricing lock pricing kind agreement of and us. few customers happy to say years to very in to with pricing huge able seeing a swings to few any get with

So, we're about happy very that.

coming approach any color your no about and with price cetera, that pricing our levels. then historical et pricing consistent nothing, or shift are other on in erosion been to And on tubes be real to question price continued in Tubes, has noteworthy. conversations previous since there's erosion, pricing

In adjustments we nominal cases, get fact, to volumes. for get In some we prices. some some wrote case, we in hold

And actually, in some of at we've pricing. looking performance the cases, its performance started driven, based

that in the consistent. Detectors fairly been So, historically, have price seen and continued. has erosion erosion said price and I'd single we've we've say, digits tubes fees

mentioning. dramatic really that's worth there's So, nothing

Larry Solow

kind just about quarter. follow-up of Okay, Anthony's the on profitability of question the

then quarter, an and it obviously, your that below revenue. much should sounds were on gross your to operating extra you but year. you it benefited quarter, there full was certainly line, also week expenses, the obviously So, an -- like it guide any guide Is higher quarter, I was but was know a said for there than extra numbers the was -- certainly don't and obviously the

I'm make gap or So, -- little lower earlier you'll some for better was grasp with have just and up numbers? get then up of it there words, I'm this bit on a bridge to just said and for a for closure an little is making with had a we up of to -- but of in you it that. better other a it. you an bit other of facility, trying lower trying quarter just aberration make the to sort the But

Sunny Sanyal

at a Larry. take me Let shot that first,

Larry Solow

figure going explained are you try And you You've you Sunny, and to explained but really it to not trying just up? are you why how to you why haven't how up, out missed, miss? make make it going

Sunny Sanyal

Yes.

an operating on the the I adding expenses. week an So, impact mean, extra not is insignificant

same of variability I is kinds You're what revenue the as are levels -- revenue. your to variable we little bit extra mentioned, going a running be right, get costs the which the of and at

normal. that's the expenses, there's offset So, no OpEx to But that.

range that's R&D million the $X something a that additional of So expenses just and basically operating in in incremental, and of extra million, quarter there's $X do in SG&A. an the or week kind

moving basically extra as as not And or all one-time to quarter. for business the necessarily aside margin, come relative set gross the about of factors you around of we audit money those slow warranty perform money drivers it Those into few set then, within the well that. have week, the inventory. to And do of events, mentioned, all are around and but detector we play some that a primary quite and didn't some kinds in customs unusual that are aside more I it for where the and wanted

in of beyond the business moving would that parts I it's rest as terms say of usual, I the there's quarter. of think, kind in

Larry Solow

a you're is And some are towards maybe do equipment get net, diagnostic, and adjusting it gear guidance more stand to of your that? effect, in in a not then -- have and positive? actually any some you hopefully where today the negative also you right from of bit the then and bit, you going or China Or now for from that think you coronavirus spoke mentioned, the diagnostic is that. But little coronavirus switch the a closures of little facility just Sunny soon, benefit reopen

Sunny Sanyal

to too another. way early it's or tell So, one

Larry Solow

question? mean just the quantitatively of I

Sunny Sanyal

versus detectors hypothesize but normal pulling. the might you that by through are that the quantitatively tubes still orders and these hope are can are Again, will but extra hospitals specifically going plans the TBD. Yes, incremental sites tough impacted these have, that's say that any are unbalanced, coronavirus, of be helpful. to the incremental since Those to we

there In on terms seen the we we from and materials hasn't of on carry for things that inventory to a impact -- haven't and been cost the cost purchases any us. side, We we China. carry, our depend

So, get through we're all off into for supply the way we the of March, rest our working the and of as quarter current chain.

haven't we impact another. an So, felt or one way

Now, in if the beyond then be entire worse globally think everyone a gets us, industry way. impacted the situation current similar and and I projections will the and

So, wait a that's and see situation for us.

Clarence Verhoef

I a think, does it the Larry, more this uncertainty though, what is introduces year. in little bit

quarter-to-quarter already that In quarterly terms of of just me. talked same just that variations like tells what variation about we we more have as the it's

Larry Solow

think update, last I Just last any scaled quarter it. you you of performing? how acquired back initially think expectations little when I bit mean, I sort a from question, directors

perhaps, $X number. quarter, it's an little a mentioned You million bit but this inflated of

So, any update on how that's progressing?

Sunny Sanyal

So, that. I would say

their challenges timing a getting that up being Okay, developing have product ramping a be development counting phases happen when on we to their around when with market backed to product the door, to customers. their off about and gone time applications about market timing business. customers. or challenges photon this little us little some number acceptance right And customers of the new the see bit their of the And $X isn't by it's but little is them more for having where being we out bit will a you're million is product that we deliveries of the the expect and the a been nice going to the directors their and that's take into, directs get get process bit through their

out is overall, a proving to still technology well that being received. strong very I be mean, it's

of it. There products. around ton the a traffic We have trade RSNA the in a interest show was of lot at

I versus So, very think to about it's it's question well, a little long-term. near-term bit how going a do but

Operator

question of with Your a Kalia Suraj Oppenheimer. line next from comes

Suraj Kalia

I but a So be way dealing with of it's a guess, first to all luck still and couple dealing congrats for of been nonetheless. pleasure quarters to foremost, you best and Clarence, the

provided demand, so So can customers the and can commentary. the us. uptick maybe in medical for ASAP there was And The for is, orders comments term Clarence you guys The second short maybe an a was reason? segment, your right. of The lot or guys you whatever your X% extra holidays. to offset selling by you Sunny Sunny week was fill about in wanted blanks that one fill

normalize when particularly? is, these have growth Can And in the I what you take guess medical us been So sustainable step would if what the I'm of category, remove up I for this three. understand all these to is year-over-year, I how segment factors? trying some

Sunny Sanyal

just QX. would let let I'll coronavirus we extra for Clarence Suraj, to that but So, chime ship would in, we me alluded clarify. what be The was in them we now, for demand or that saw for not It right.

So now. those are coming in

impact So, Clarence comment let that. timing wise, that positive and didn't have impact our first quarter. to does The extra I'll week

Clarence Verhoef

Maybe us for what of increase. bit I movers around I production interpret through of I is week the extra of that. little an the if key walk kind it's mean, a of the I how

a We Okay, ago in ended at we're up -- at now. XXX. $XXX million and XXX so a million year $XXX

that didn't I not something year like million the $X conversion put ago. million But just -- in a that. of was week, So, or specific numbers $X order around something because extra $X magnitude million it, the in we period comparable I'm to of probably the adding talked to but about a direct it's going

the double multiple our for that's you So, us, up got did well as we're we've in bit and went about Those oncology as have business that then markets, a digits in in markets. these on CT just market, the we markets the addition. talking going medical, -- on think particular. are because I overall touched little but in in as the markets well dental the drivers biggest industrial And growth

that's seem the for trend us still have in to the the big for CT more the actually But now we markets demand biggest at say ongoing space that is good -- day, tubes. going to It's got be those end nice an strong of factor. I see on dental money So, in such. us. recovery would of going that as it's

Suraj Kalia

is this You've there the that a peel think tiered just does the it. here, Canon And you other release is up stack a of prior it divided Is comps, renewal multi-year if How relative guys the X? customers. volume of on how out And of arrangement? about a to layer kind just Is it? and put we contract commentary with it I basis? can by the rolling about Sunny, contract. let's onion got on should press XXX Maybe it in order

it I to Gentlemen, that, Is would at color just questions. there contract help if whatever three-year contextualize. look my prior taking just Just or even great? any us on was, to stability, for going but the you thank be provide price three-year the

Sunny Sanyal

Yes.

I want answer to try your in general. Suraj, exposing competitive question just So, to information without

based with agreements customers' done customers pricing on Our of forecasts our our speaking, large pretty And generally job have plans. their historically good a volume. are business

So, our the what And that, on we tube telling that based they'll do years. associate different us on based three an customers over that. the we for XXX is models. Based an price are that, next these average estimate on believe

is roll So based that. XXX up a on

other on year I they're rolling ongoing And for goes X basis. going that. helps. based -- tubes well. to an of true the customers per they to do not on, It's we Okay. for as come true that it's an and that's agreement So that tell number hope price And us

Operator

you. Thank

Morgan. question with your question. next line JP proceed Please a from with Strouse Your of comes Mark

Mark Strouse

questions Clarence, and to very my I'd well. much like congrats taking Yes. for Thank add our as you

you've wondering if long-term in since change mid-single-digit that not spin, already Sunny, follow range. lock on as can want kind seemed kind term. to multi-year customers been now years growth over just questions to kind in in recall of been be I been bit necessarily of optimistic that of pricing a of I'm forecast to ago of anyway, comfortable targeting Really, a couple up asked, a the to just more in. that there's locking more I mentioned or bit And a couple far but the as be you that to have any now a looking customers so reasons

higher? give reason think that does So potentially you to could number be that any

Sunny Sanyal

that at said Industrial We've is change in there's X% the the at growing position. market no is medical on X%. market to growing X% So, -- to our X%.

on targeting to slightly one the customers we the growth that's leaders growing now, projections. gives up we where -- our do market, end expect it's And to better you agreements with. X% and we to essentially they based stability market the more the with multi-year with approach less percentage that signed how as expect signed -- go different X some and products or price growth. blended, So our that These we're but with that came than pricing of agreements we our that us bottoms-up

helps forecasting. that us with planning. So, our helps our with It us

Operator

comes with [Operator from Instructions] of Your & with question the line Please proceed next Jim question. Co. Sidoti your Sidoti

Jim Sidoti

just Great. hope not because up. picked I I I it like Great. you're feel Clarence, me. of leaving

Clarence Verhoef

No.

Jim Sidoti

for you clear, your $X.XX want I just reiterating $X.XX to be to EPS? right, the are annual All of guidance year

Clarence Verhoef

EPS. We're not making any and changes both to revenue guidance the

Jim Sidoti

Okay. I on be to that. just All clear want right.

assume from mean facilities that an Now, other have able Was Chinese which said the the margin on that ship possibly I in with U.S. the you Germany and facility, impact to gross did -- quarter? product were you

Clarence Verhoef

difference in where little U.S. I than the Trussville. That's you're right. via from, have reality. more a made any it probably mean, product from did Germany from No, wouldn't ship

that is of tariffs just from product of that some place U.S. And -- some impact in still the that there's ship because

Jim Sidoti

me then, cost the include material to EPS. that And you start Sarbanes-Oxley you're -- is, going the your indicated Okay. SOX Is that in a number? last to cost one Sarbanes for

Clarence Verhoef

was. It

$X for So, to year somewhere range. million in non-GAAP million, that probably I $X think of been adjustment last have a kind the would

an not it's So insignificant number.

Jim Sidoti

guidance that But $X.XX from that $X.XX already? to anticipates Okay. your

Clarence Verhoef

going that Yes. knew this. into We already

already So the I was built year. for that our plans into mean

Operator

Petrone question with Anthony question. your Please from Jefferies. proceed next with follow-up a Your is

Anthony Petrone

Hey.

to couple math of follow-ups the of a here. some up tighten Just

are Clarence, you So, just you the Everyone will of on top OEM are the day, the additional announced customers expected medical follow-up one, think, extra last announced. Canon And And know you then, that the where think here to $X then, So over be add next XX week, was selling here. I'll cycle just extra overall? there on terms in million, the customers, the the $X mentioned the question those I with just is of first and year? that or any I just be million that there. to OEM contribution deals, was in

numbers level and on lesser high the OEM on CT maybe the where stand a side. flat update an extent to on orders Just side China both Thanks. panel on

Sunny Sanyal

So, let latter renewal. renewals that me I or transitions. the customer and for that mean, two we Anthony, questions. volume individual start announce to those the don't done we've only historically Canon of given size

well. or general, we happy -- significant don't These XX, that we So, -- proceeding haven't all leakages conversations as group are point we're actually a -- the in anything big top top can I'm are we that to very to seen OEMS, are XX, customer say not top problem.

to very, very and hold And way then, continuing your... I'm the with grow. So, relationships are our happy long-term

Clarence Verhoef

on as key So, are business. medical to that follow just that point the the we've that is renewed agreements of I agreements got guess represent maybe that multi-year to XX%

I has So, to it get the just work. mean, be our larger to this is be for math -- customers, to that to

in that OEMs So, are ongoing out partnership our with it good from strong to and a renewal have sends their place message them. perspective customers, good there and a us major our and to been it us that that commitment puts it's with about the a

super came time number little so very like, how number back about of basically, week, productive it's and I adds that. about it extra perspective. to that's Granted we a rough of during the extra you holidays rough bit if the a so But out it's how you not time. get think from much it -- to was when and production got Now that

that other through -- we of for -- quarter. good variety just of And had so, the still that, ongoing I the quarter in more demand applications throughout year. And we think the us a quarter it's strong helped a first that's -- just it's importantly, but

Sunny Sanyal

question about last your Anthony, then, else And around detectors. China and orders CT anything

ones systems we're in steady mix had demand China most on are are with is continuing And XX slice. they us. what out, side, of on the anticipated. the that them the we been that seeing seeing currently the make our -- highest rolled as projects demand CT the good on we're are So, They're progress. who've where working growing there their and initial from CT good to customers And the

with we're customers CT demand the and volumes the and the our satisfied happy progress customers, and but of in So China.

frankly These we a lost it'll side, The given in those the we sense the those -- detectors, for we we've of the models, And detectors, time didn't in initial recouping to us the China those are had production start going the a regaining in it. situation. China and for sell to radiographic detectors position take our detectors, shipped optimistic on that prototypes year, chunk radiographic get our the great for we've us pulled that -- of back happy customers. just radiographic will detector forward, shipments with I'm detectors. that with groove but bit new are really and to make with tariff last begun, begun from have it we They're because -- the

in sell to detectors we've China recall, we also OEMs continued China. both Now, detectors and OEMs. Chinese for dynamic And our in with do industrial steady global of business some high-end the

dental OEMs. incremental usual. applications very So, mentioned, in signed multi-year China happy us dental our with and add excited with that good be that an are China. we this that has to agreement, the We're we these for with introducing there We're continue to other we business on we dental optimistic continued a in and -- high-end are will agreement of on that as OEMs are some business one as for OEMs as with now new them one

Operator

closing Ladies question-and-answer And would back the like the end to we reached remarks. for Goldman Mr. and session. call I to gentlemen, of turn have the Howard

Howard Goldman

our will questions year accessed through of February at available call from and XXX-XXX-XXXX for XXth website the be or the A of your the and company's by first replay call for XXXX. or you locations. XXX-XXX-XXXX U.S. be earnings non-U.S. anywhere in conference Thank from in quarter participating can fiscal calling this conference

access Our conference call replay code is XXXXXXXX.

goodbye. and you Thank

Operator

conference. This concludes today's

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

Varex Imaging (VREX) 11 Feb 202020 Q1 Earnings call transcript