VREX - Earnings call transcript Q4 2021 | Varex Imaging Corporation

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Operator

Greetings. Welcome to the Varex Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in listen only mode. A question and answer session will follow the formal Presentation [Operator Instruction] Please note this conference is being recorded. I will now turn the conference over to your host, Chris Belfiore, Director of Investor Relations.

begin. may You

Chris Belfiore

and Web welcome call, for and With Imaging earnings webcast and Corporation’s today note CFO. Good the supplemental our presentation Web The webcast investors.vareximaging.com. unless presentation that fourth can will archived to all quarter the slide be at call live references that CEO; President our simplify the of Sunny this XXXX. be the Maheshwari, of conference quarter our site accessed are year site. on Please stated, otherwise conference are Varex’s supplemental afternoon, of XXXX. Sanyal, Varex Sam discussions, including fourth fiscal at slide me year To fiscal Varex’s to and quarter for

quarterly fourth from stated, prior of to made addition, year. XXXX, fiscal XXXX year quarter unless quarter fiscal third than comparisons the quarter the of the rather year otherwise sequentially are same of the In

and Finally, are all statements year, be projections the to stated. year forward-looking unless we are references future events. fiscal about to or are be filings which that to current statements, the anticipated. our actual assumptions and on call, during are and with described not in from that are making otherwise will this cause calendar release predictions Please advised These business based year that our uncertainties SEC. Risks earnings could results subject and materially expectations differ to the to risks those relating quarterly our

for discussion assume forward-looking The of to XX-K. or no Form of speaks our this as is Additional XA, we GAAP the date in over certain our Factors, including on and in our reports of today’s annual not site. filings, with information a provide are report to Form financial non-GAAP are most materially financial on substitute reconciliation call will in our On presented measure non-GAAP revise Item release, These posted their measures. I information measures. results to press Web update to turn differ each earnings discussion. obligation we nor GAAP financial call, from concerning will that they the and contained now XX-Q Sunny. which in statements in those accordance measure discuss We is anticipated directly actual a factors could today’s cause Risk comparable financial non-GAAP on measures quarterly SEC this our

Sunny Sanyal

and and very turned Thank afternoon, what a everyone. an XXXX year be out you, good Fiscal dynamic was challenging outstanding for Varex to environment. Chris, despite

we in systems. mind, of As and the healthcare pent many expanding of has an demand for their capabilities uncertainty the diagnostic countries world imaging demand entered COVID effects the year, on were ongoing delivery up the top increase around focus increased by around

levels we the both that output and execute margin, improving said, future year drive reducing and gross progressed, operating demand to to was chain constraints our As our met That our and profitability. challenged on introducing continue growth new profitability. technologies inventory, supply and this products with increased and initiatives, expenses strategic

specialty globally excited demand earnings quarter, quarter, the by million strength record driven working strong revenues and $XXX the was Turning segment, was quarterly to to the fourth capital of finish report the strong year. our cash growth for million $XX strong Profitability in tubes fourth operating to I'm a Broad-based expenses. the in quarter. million. the of Global the in medical Improved stable cash improved CT the in drove industrial and in and medical for year Cash detectors balance from management as drive robust end operations remained applications. the at quarter both helped $XXX flow the generation. demand in and quarter

modalities better pre-COVID above to quarter to pleased say I'm fourth return a for marked quarter many all that the modalities, third the levels saw While or pre-COVID medical levels.

X% were increased guidance in sequentially offset strong of end quarter segments volumes in both revenues revenues quarter and as by margin gross showing the Non-GAAP year-over-year range. of and margins XX% and top fourth exceeded with EPS partially Non-GAAP $X.XX non-GAAP strong were the XX% XX% of Our industrial supply growth. medical the challenges. was operating chain our

Let level into year-over-year. and during me sequentially how modalities revenues quarter. applications our give different you trended and high some XX% the X% segment Medical insight increased

and our [Technical year-over-year. oncology, fourth the We tubes industrial other radiographic, to difficulty] posted modalities, dental due sequential continue in pre-COVID to sequentially CT Fluoro and X% increased the quarter levels. was segment medical timing In XX% and shipments. Revenues flat our growth see in globally were quarter. above mammography, in for of

detectors the gas. soft, for and screening inspection Demand security strong industrial remain more a but demand and borders, well for products for as verticals, screening positive be in ports to our direction. of several During at in battery baggage at digital and imaging as both oil remained quarter airports, for inspection nondestructive continued headed including

to This will other with doing I few are and be detectors we one display software our like make the At nanotubes, on highlight strategic our along at to that past, visible AI-aided products, as such Z invisible is weeks Platform software a our would new LUMEN is photon As counting our outstanding we mission. and the RSNA in detectors. detectors, businesses. have to done in mission Varex, the of in work

year XXXX. business over $XX represented in in software fiscal Our revenue million

of more imaging on we decade leverages efficient a workflow As based globally. software are image more excited AI-aided software that experience represents. diagnostic critical, globally software growth accessible Varex’s becomes of field detection workstations is for more computerated and than about analysis potential and becomes with installed AI-aided thousands are the that

We software connectivity other liver focus continue for it develop the and software to be the we and apply offer to for developing imaging, competencies other clouds. imaging across are have expect neuro via able happy to AI-aided an With we various lung, to and increasing these integration, to breast, modalities. been able on

lung a globally, trusted the think we software platform diagnostic high increased With the has contributor become as Veolity aided software, significant a throughput new industry potential focus Our lung standards screen AI to our Veolity, environments. setting growth. is called for to screening on in an

a we to British screening in and tenders won We for and have Columbia of lung been hospitals tender participating Province Canada. nine the in recently provide globally software

the We other year. the to Europe won adoption United related where a is projects XX,XXX cancer, deaths to The mortality the to cases it's at the and US of lung Veolity and each point broader XX% often in win help disease In there overtime. over lung of treat expect too to drive cancer over and Kingdom cancer XXX,XXX from lung this of rate alone, are about mainly catching high late diagnosis effectively.

and this eligible recommendations have years, lung early global more cancer other to screening. productivity we US, However, CT will encouraged the high-risk among screening X potentially of grow. to Veolity. from to using In of low cancer high could screening and screening number about a software regions the over This few key like enhancing national require for lung capability is following Europe, persons million this continue This nearly the that Canada expect expansion suit, of million. volume increase dose a XX With strength and Asia expansion effective last supports groups.

a diagnostic screening productivity progress Veolity and CT capabilities them offers Our quickly early volume measurement added automated confidence. radiologists perform with over enabling with oversight This can aided enhance tumor for comparisons that of by detection software tracks and of software and help workflow lung the historical time AI with AI can cancer. XD to

and CAGR the XX% last market instances benefit Americas, from to Veolity the at and five million expected we grow a global Varex lung of licenses screening market years, of to XXX Asia. $XX Over from has this growth. expect is across base approximately XXXX, over calendar The Europe in cancer

We innovator about in that and bring can this software is an excited the the aided imaging space. AI are world Varex possibility that proud to

capabilities Varex As become larger applications, software our we business expect we into the this expand AI in to aided a contributor other to future.

minute Sam, to the call reflect like on the I'd to a over hand I to year. past take Before

noted As was Increased levels. drove business fiscal to for across a earlier, new board. our record demand the Varex year XXXX

a EBITDA to strong the XX% an from was impacted translates million. $XXX before strong XXXX, XX% Looking period $XXX was up to in from from to significantly X% to COVID, was while back COVID. the margin, fiscal revenue the million which XXXX, of includes adjusted outstanding still time. increase fiscal by [period] This to effects incremental XXXX of be nearly a up quarter results very a first accomplishment This at

culminated to As million in we XX.X% fiscal fiscal while year revenue, revenue XX% continued led EBITDA while of but were COVID EPS to all fiscal $XX ‘XX position. an million XXXX, the $XXX expense million. exiting from strong fourth actions the growth the to to at recover point the the in $XXX This $X.XX. gross sequential bolster $XXX with strong in over improvement grew adjusted adjusted XXXX. know, took headwinds fourth significant position XXx results and quarterly in of of stronger Robust XXXX drove improved revenue even to us the met margins helped finished from quarter of we our million to in low the financial of This along that management, XXXX quarter demand with record

a we customers very end of global and in I'd all to suppliers XXXX like after environment a record of double and of cash July. down difficult operating period, demand to build In through and even CT being balance meeting fiscal flow upon. $XXX take weather globally our a XXXX, for set cash levels chain for the recognize significant moment to $XX at this $XX digits. generated employees, foundation volumes million elevated continuing million During increased strong our challenges. Fiscal to supply million us our year debt

As XXXX, and ability confident quality customers. supply our products we're deliver demand [Technical our the to we remains Difficulty] move in to into strong,

to focus focus improving COVID the that expanding we around position remain profitability. journey maintaining long continued and on are term. our leadership Varex of innovation chain of expect steadfastly through XXXX, on business The While and we fiscal issues centered our is our focus during supply X.X environment part and

future fiscal several R&D to expenses Our that XXXX expect fully will drive growth. we initiatives include funding

a developing such generation several discussed well. on AI components cardiovascular flexible for radiographic we exciting applications, several software substrate, earlier, as photon detectors test of new products, CT tube and next control As and as detector models advanced counting new have we're for connect CT, and family aided

prototypes have of customer counting CT XXXX. available detector fiscal to of photon second in the quarter modules our expect We

initiatives customers. our innovative innovation increase our for and current and will as expect these other addressable technology We position partner with and market a expand preferred that potential

in are OEMs and local detectors applications, as we While our such China local in innovation surgery. highly cardiovascular, oncology continues in successful be local tubes, platform to now X-ray for with our engaged CT, for on

technologies are we shipping development where making at prototypes a stage progress VEC industrial process Our and our we are nanotube joint to venture is with steady OEMs. in

ongoing improvements and factory, and productivity lower Our supply on profitability designs, cost integration through cost cash by and product driven focus yield investments in vertical our improving are continued actions. generation in and chain reducing

come continue the We uncertainties with way, me to COVID same the In supply hand have expect With a created the and navigate over the weathered globally. to current let and by supply out emerge chain resilient far have uncertainties more we stronger. that, Sam. to so call

Sam Maheshwari

hello and Sunny, everyone. Thanks,

will those fiscal of our As million. quarter for otherwise indicated, industrial across the a continued demand strong an results were third quarter fourth reminder, our revenues Varex year revenues than with higher revenues sequential I quarter. of third modalities. EPS quarter Medical of $XX quarter results were our non-GAAP were XXXX. Fourth all the and the with X% provide fiscal year of increase range. to were from unless deliver and in comparison guided solid $XXX million, $XXX million XXXX Revenue

industrial both sales. medical posted. revenue have XX% we and revenue the the quarterly X% levels revenue These in China sales grew fiscal sequentially, in grew to APAC million and was industrial remain EMEA and medical Sequentially, this highest X%. regions all declined is Varex total America three medical grew in in Revenue grew sale level $XXX the For quarter. year X% XX% XXXX. levels and X% segment, strong translated XX%.

million Earnings of quarter, $X million million primarily $XX compared now higher to XX%, Fourth quarter. basis declined were prior previous diluted $X.XX compared GAAP quarter. Net down $X tax from income than $X gross margin quarter. cover the on basis. share quarter the a $X.XX was third XXX to previous compared our $X points earnings me higher a million per provision results was Operating on quarter. million the in the to third Let of the in

initiative, basis as Difficulty]. gross XXX we manufacturing service on third margin expand non-GAAP the challenges. reduction fiscal the cost quarter. points Moving down partially results in volumes higher XXXX, Gross to offset well ongoing efficiencies XX%, through margins [Technical to were by for supply quarter our the from chain as beginning aim of as and of At improve

margins in the our XXXX, full grew for we to points XX.X% gross earlier, year. noted XXX basis As

the with beyond. believe it we improvement pleased very solid for and foundation XXXX XXXX and are sets We saw margin gross in a

As continue gross the we XX% freight quarter, basis margins have to margin environment during expenses sequentially. Despite noted points. in plus the or be gross anticipated. to minus gross by supply than basis impacted demand past, points impacted the margin and more XX chain Freight expect XXX about we originally robust

the during and suppliers addition, resources towards we a In quarter, various alternate solving supply diverted qualified result issues. were chain as

of by of XX For impacted margin gross of the reason, goods million R&D cost this sold as to approximately This third charged compared points. $X quarter sequentially fiscal was to basis XXXX. about

in headwind. a quarter, fourth chain and cost semiconductors. used pronounced challenges the since our especially we around As and of products, availability more quarter highlighted some to make the impacted persistent supply been and largely constraints the became second freight have logistics These materials have

of operating revenue. our to our diluted annual similar earnings of compared fourth was million shares rolled expense million expenses XX% the to million, Recall $X of $XX that suppliers or and an benefits out digit of related bond between In at to our Net margin, million, such Lower X% about. share the to quarter gradually $XX fourth this continued pricing $XX.X in Operating diluted previous per steady $XX $XX current October, count million fiscal cost $XX held contracts, associated be of in Please Since bond the ignores within rang continues with many of hedge and price trading $X.XX drive million Difficulty] share target impact while price or XXXX. Despite margin pick XX% diluted are lower broad-based compared to rising sold. from to redirected by a of $X.XX mitigate quarter the operating to expect input to on share to explained was costs price expense share from in $X and share in as in approximately range. late the these GAAP increases. increase we a million quarter R&D a the environment, were count previous were the customers was roughly the are there impact, through to to [Technical to the the been QX. X% earnings through increasing cost the it down spending a to quarter. adjustments in single was from non-GAAP goods with higher. for revenue line working million hedge. R&D increased Average In diluted the has We quarter that million we GAAP we QX, hedge economic prior $X includes purposes. SG&A $XX in prior was challenges and the work difference backdrop per Tax million mid note or dynamic in due or quarter. notes of in quarter. $XX expenses increase the mitigate as throughout alternate prior environment. percentage management shares, our and convertible helped to operating quarter million. X% non-GAAP but

and our of The showing earnings notes table of GAAP convertible reconciliation of on provided count diluted the slides effects hedge appendix purposes. provide our the related share have press a the at non-GAAP bond the end between the two We release. for the

to $XX to turning and million improved million, days. days. increased Accounts days the by quarter. improved days stable inventory by high to XX decreased days. the million in two to XXX declined DSO XX balance receivables $X due sales Inventory was days of Accounts $X by Now sheet. payable mainly and

$XXX with Cash severely quarter to moving cash was Now balance the working reflecting has EBITDA our Recall quarter net to ratio information. of X a present million, [Technical at cash both $XX a operations for the quarter. the million on debt an The debt anticipated supply our margin to combination thank fiscal would on XX% robust to challenges fourth debt. quarter, higher of that to of million our in $XX debt Adjusted down chain, of net improved XXXX and million Fiscal million by seemingly the our flow was paying generation in increase profitability to To driven every and after operating EBITDA $XX on quarter times. focused efforts to of levels end. capital. achieving ended course year a of and Difficulty] leverage. lower our record tremendous outstanding leverage worldwide We sheet, demand than and Adjusted improved the in basis. turn improve but cash time declined their $XXX I these remain $XX $X was million results. from leverage bring million priority goal strategy quarter. net $XXX debt leverage of deliver to the profitability in at continue fourth and on net cash the ratio million, debt up to debt our capital on constrained the to staying X.X Gross was and colleagues helped Varex end a excellent below a we prior at end, improved like from

Before revenue step for and a back context our I QX providing guidance, expectations take our wanted and QX. for result the to discuss of

and part towards than planned raw demand. QX, lumpy. were came consequently expected supply additional to results meet end in earlier the unpredictable of environment QX able customer The and in Our remain some because material than higher received significantly chain we

that have higher constraints, all may establishing demand due demand to we supply the and when be remains this our backdrop, not as $X.XX able into $XXX $X.XX. With for guidance. QX non-GAAP here and ship Revenues per and chain share in are While account QX expected QX, diluted are taken than to QX. expected $XXX and strong between a million between our guidance million and is earnings

based costs; QX gross going please note, the a $XX expenses increases ongoing of fiscal to of about and dynamic and for operating for count non-GAAP full margin are expand cable fiscal rising now your as price following; $XX and balance our slightly forward, between about an share for in the non-GAAP for be for million tax XXXX; open call to of factory of integrating the XX%; margin rate range capacity tube the expectations build XXXX on as higher expect in Our new the to XX% of million; XX our million full million complete XX% the well year shares diluted gross $XX that, CapEx factory, questions. we’ll we non-GAAP a about Philippines. to With out

Operator

[Operator First with from Jefferies. question Instructions] is Anthony Petrone

Frank Pinal

a This I first again. Anthony. nice is very Pinal Frank on off, quarter for on congratulations guess,

The supply guess, we're you pricing it companies increases. first of on chain with on of question, a I and delays and touch seeing impacts touched lot sort

what maybe the exiting mid XQ, sort perhaps as do you're impacts long to wondering you if quarter you thinking just seeing to that's beyond? about these you're sort of expect impacting on were half, and of you how the persistent, XXXX back Just port China, through maybe and you going can touch congestion how

Sunny Sanyal

moved that ocean freight pretty -- port away our at from congestions a question air wasn't the but in let point The us a implications. do and It’s problem is freight to in we've Sam broad all time, for and inbound. for financial I’ll jump

perspective, our So of are handled the those costs freight from freight, customers. by a outbound

inbound we materials The those through we from that So we'll doorstep. up buy come freight. pick input buy from air that our

able been at congestions ports. delays to in avoid we've So the sea

our lumpy, continued that from lumpy. have issues to fact unpredictable, around the chain become suppliers material very they're supply supply hover Our they're

and going just been it's we've we're qualifying new, not This and solid in suppliers. of but Sam alternate situation figuring the months it. it's increasingly out, for XX continuing. managing now plus that more-and-more through are is And suppliers suppliers ongoing fill is as forward. this out just how dynamic And on pointed difficult a falling because Now good been gaps, and qualifying we've behind has an alternative to these been and becoming managing

Sam Maheshwari

is What here I of expensive. can freight ocean we much add that instead going more air and more more and freight are

as were basis run basis on sequentially at points So XX long we average, XX freight. look higher freight our points I running is But higher.

Sunny remain is and said, it lumpy things So as expensive. And unpredictable.

later sooner or of stuff the inefficiencies told or the at be causes bit and late weeks and we product terms of last that a lot in a shipping time. in or factory scheduling comes a late, sometimes to on that week weeks be moment, would it's Sometimes and going providing three two

those it all drain through going issues actively So definitely a but are we are the managing and through performance. is managing but through we're it it, on

Frank Pinal

touch be you after [Technical on I guess if follow-up you I one that would demand underlying that also the next question, have if if will, Difficulty] great. backlog can possible. question CT,

Sunny Sanyal

China in mean, I driven it's let in CT has and by, for on is it's demand services that's the that. as been continuing. China healthcare expansion in Government The been not and increasing thing of and Chinese continued steady one you up the know,

there this because systems. continuing our that participation -- to that designing we've they're in more Chinese and our products are of OEMs a strong got Chinese journey ago OEMs, our -- Secondly, that while state started release are because pretty is several

continues to this we So continuing. as foreseeable and strong remain strong. into there that the future well, The demand see is

Sam Maheshwari

XX-Q to but Frank XX-K I our on we not a is every have documents. backlog And provided or it question that, in can typically, add quarter, backlog, number

planning We in it. working a so are here. We've XX-K file been to our or week on

of predictor not I us caution want million again, you, for significantly ahead revenues increased million, little did to a $XXX previously. performance. necessarily versus that million, end QX. QX our for significantly from necessarily around $XXX you the future not just to million was is of remind is things backlog change. backlog at to strong Nonetheless a $XXX because a QX very of $XXX revenue But [measure] backlog backlog I of closer So, can But want

Frank Pinal

of can updates nanotech one on And you or just any sort wondering here. X-ray last technology. if provide color Just one

hear that. I are generally people to excited most think about

Sunny Sanyal

starts It's introducing a feel novel and BXB Difficulty] our ready it's And since go after know, novel time technology to our to do with to of as start we have customer how takes through technologies will we excited the of this for consumption saying technology the technology. it for we to and conceiving [Technical also then also applications. our in OEM business, about consulted customer we you technology. and be what trying process summarize channel understand -- that it continue by this I a

We have been with steadily, so that for. parameters characteristics customers continuously kinds validating and be for can assessing applications intelligent about this the the technology we itself will parameters have and our suitable the performance technology, conversations of what

that including are are I evaluate we stage who where that prospects now prototypes we So our to customers are we piece mentioned to shipping the into that want and this of in technology. work at now

So that's where are. we

Operator

next Securities. from Larry is Our question Solow with CJS

Larry Solow

bit been NDT things know side. come guess, sort back are maybe and it's more else languishing solid, well, I really inside COVID said of is sort you Other both hasn't sort cargo demand I industrial pretty that's from that side, industrial a most [improving]. is the other little been on fluoroscopy, the strong us guess, laggard? any across did a doing It you the a on little mentioned well segments I question. anything a like did that's modalities. first you mention, general know, I and sort sounds question just it's is of than there? doing there of of And Anything

Sunny Sanyal

know quarter. the said, in modality did fluoro, slightly else's quarter fourth down. well timing down, modalities the find as next slightly our we business, And in someone as was quarter all that's one sometimes one might you you So

modalities. of there couple pattern in the no there's So and the

cardiovascular has back has strength slow to good ground back say. back there throughout as seeing at procedure coming CT health, come throughout, to then strong was now up initial COVID, to up you so and after the the slightly slowdowns volumes Surgery returning it's but been So up. know. And as mammography well started held during as we're came

globe -- out hard recovered medical shown that strength. was COVID in we're identifying the hasn't mode. because around on and nothing recovery the depending But starting patterns, different dental, patterns in within some [Technical time I call side you there's that of Larry, had hasn't growth even dental, would some as So Even that can move around. there in moved type or Difficulty] we

industrial side, security. general, airport security, and cargo the On in and cargo

as customers’ major Although orders, they at have --they're trajectory. right our confirming on also that OEMs they're received. space, reporting orders the And in look you that

And sooner or for those later, expect translate to we well. us into shipments as

like calls that a we electronics based said, in that seems well are And our it's in NDT strong sign. NDT, our we positive that were Industrial direction. previously that the battery mentioned So doing in right space very is then areas it’s as moving like is, as inspection, earlier business inspection, and usual. detectors, broad

Larry Solow

going know quarterly guidance. the second And question just to just guidance, annual on guidance. I you're no longer give giving

as sounds and year. you if supply maybe frame slower It don't to expect that you'll or used up will make bit roll better Should might year that higher. expect I a of going in up And R&D forward. you What's the So a like Pricing a and any [Technical a called maybe have worse? be can couple have like a get get chain. with goes make or little pluses still anymore. these guess bit. revenue? moving help on. you play the if or even of that parts, more seasonality Did comes but skewed or I QX little better sometimes there's know just may of Difficulty], seasonality loss stuff COVID benefit to be bunch to supply you into chain

representation maybe worse give get side from you high to better, of that is -- we of this And to help Should get things the can a trying just a us just little on So more perspective good year? expect either QX, level. marketably a that?

Sunny Sanyal

and a of Larry. of questions good Yes, lot that's lot a ones,

absolutely. yes, So

in But right. then is environment. demand general, QX for a that the us. But So in the constrained yes, is slow quarter you're is world

you normal and a of because seasonality year, that of stuff. demand of is there is As type when all know

as window. essentially, be now, then chain we operating indicated more So the in but that's the are supply a are what were goes that in supply would we here But that constrained there. operating we quite we environment. seasonality than environment, so shipping are out if we right not there, And clearly concept applied constrained clearly bottlenecks guiding

I that XXXX, focus maybe removed, in all constraints much too are seasonality but say seasonality supply perhaps and to So chain year comes by the on follow would the who of back knows. not

are we cetra, in you know, about as terms in then way are invest are year, the planning et to thinking the of So R&D we the situation planning, how develops we that resources. it is

to We number and the the capacity things. of CapEx tubes factory are increasing planning other invest and additional for

we ‘XX to here. So a growth expecting our are FYXXXX, be fiscal

of really in terms unpredictable type It we supply not I chain. for uncertain, of that guidance what mean the is year, the However, thing have very visibility. into And visibility an that entire by environment. do much such of is and any a

So we from providing are guidance. an annual staying away

I what constrained constrained a say chain early say then time, we to if fiscal supply we we constraints growth they will this at retired all can and be a And get that So environment, operate do continue in time a ‘XX that's we to is can where And really can big year. then Larry. are expecting better. if remain

Larry Solow

saying, that's is a basis you’re year growth on EPS So that…

Sunny Sanyal

I a basis… sales mean, on

Larry Solow

absorption just issues, basis? or but R&D just range. and a could it go are mix just a remain gross side, question, thing that little And of is margin an sounds side, is that I Is leverage there margin and is longer down, chain thing? just on wait forward at operating on on the -- bit supply XX% X for X% operating maybe further appreciate to overhead the the then levers income operating clarification. like of Last more up similarly, a that term,

Sunny Sanyal

operating an P&L leverage from the So significant leverage, growing our of operating basis, segments. and definitely, has both are segments

operating So incremental of outside that, and our P&L, chain definitely a of headwinds see should drive there nice of we supply should income. operating sales are, on incremental whatever leverage outside development

that from that So be perspective, way would and a thinking fine. longer modeling term way

Operator

Company. question is and Sidoti Sidoti from next Our with Jim

Jim Sidoti

about down from that trend XX going wanted down about I to fiscal Why you million [Technical think of inventory from I because XX going you is ‘XX. continue it’s you'll and fiscal sort XXXX and forward? fiscal that ask and do to XXXX, mean, think being is almost inventory, million or Difficulty] have I it's

Sunny Sanyal

and the to So that. at reduce achieve or as some an you color to and know, targets. of yes, able say out fiscal you I'm had some pleased those achieve guidance on initiative we inventory we ‘X provided we beginning rolled And were over that to

over we there. well So did

However, in a this rather bit supply you right now, of than I out, chain less. pointed as have type inventory more rightly would environment,

we are how but likely when said, not my probably is up I coming to is that So the of levels up fiscal way expecting planning as inventory the would little be perhaps started the than quarters, year. where and bit more all are go we that it in a the back 'XX thinking the year, to build was growth we And inventory. in not a

also on provide our and top-line the So streamline I and factory. think support bit our objective then would more that operations nice a little for provide a efficient here growth to

So not the fiscal are necessarily targeting upcoming year. in further reduction inventory for we

up around we fiscal or had 'XX. but from quarter-to-quarter, another move here 'XX for Now of around initiative there do for not we that it can have

Jim Sidoti

flow in cash a that cash going boost are it's What you had the to it be like even of is still going not cash XXXX if spending the get fiscal generated you're there bit uses $XX don’t XXXX, seems forward? even million of CapEx and of fiscal inventory, going $XX have to to free million, significant cash. that But around you quite if from operating the operating in

Sunny Sanyal

right. You're

generate fully our is as Again, that have said expect coming are fund goal all sure. details Yes, CapEx CapEx. operating well I out year, laid technologies, needs, time. what fiscal laid that that cash We flow for we the this I positive the planning I for to that's out, new at as to as

of cash that we Beyond flow, to down amount pay for every are allowed year. excess the debt some calendar

go opportunity would share broadly I say such ahead one as you on which that So that is with made, that and keep focus any a is And balance such if But to the it able either opportunity. basis is we or is is strategy made, there. cash debt to I retire the so sheet where decision a when we net way on on the and is our is to would debt de-levering. are is think de-lever the decision our whether

Operator

Our the Oppenheimer [Operator & is Kalia Instructions] Co. from next Suraj question with

Suraj Kalia

for a of great a on questions congrats Gentleman, progress. excellent Sunny, quarter for Sam bunch also. and a couple you and

So let me throw out my questions to you first, Sunny.

digital for couple you. what systems, I And versus that significant out in or you get The still medical on try walk to biz. tap on little want view of question could us concept venture that but fascinating what it's advantage, would time, more the engineering could could love in finally, you lung spending you're the to time color it I'd was be overall a core color the and be just would is through the quote on would industrial Sunny. this substrates, AI was on other a more systems, for don't to how one is down competitive the detectors. much AI needed how Maybe the AI, other side? I it flexible Varex's to bogged provide. on the and component you validation example, you, capital, a If get you could and first long love remember a first so too Specifically, side, I any

Sunny Sanyal

So sequence. I'll it take that in

as long. for on so of, on a know, in be very that -- First for acquired AI, that detection of that time, been Germany technology in we all, quite MeVis, this you competitive have XX% the company the Suraj, been the area the could company we has space in some

experience got of experience lot with lot and technology. we’ve in-house field of a a AI So

lung we have there So workstation. developed screening

workstation to lung and OEMs it's those or very the can't the versus the do our it we to What So in thing relatively. for build what and solution. someone we full screening say, algorithms, one workflow and algorithms have versus do as what the very we AI AI it's increase speak do It's screening come competitor else's, radiologists deal type anticipate high at organization get and radiologists designed enable in very are at you there because solution workflow being efficiency limited the to volumes that high speed, with mammography you lung that with of read would and could same to where we full sell screening and lung that our efficiently. I difference well a have see is, velocity. screening able workflow -- solution of

the in they want their efficiency even in department. go they, And their so if they the that's radiology group want through, to way productivity see main thing wants,

very as tumors with we've it able Secondly, this user help are where the we diagnosis, the for by the and kinds combination got types automated side, provide the experience measuring, decades clinically solutions. to over very able workflow information great. really things of do really, friendly volumetric work can radiologists, to be track such these that on -- do we from come way, has is being and very, the way believe solution on clinical calculations, clinical the of things way robust that the And make of radiologist these of a we images progression present the of historicals the to we

what So that's basically we're doing.

that's you we of most government in initiated different outside to and tender the in positioning help steps are why know tenders. we're as industry And technologies Now, adoption, by US, and health these the with we also case, are are these initiatives. programs particular taking this

our and broad liver, in the UK, on to momentum And with able the market then, with have like these work provide of these independently, One be able other Canada organ for is into is separately, dental, but of here adoption incorporate technologies. solutions. to -- to other in technologies we the also So parts to and we've that the based. continued broader intention systems AI world, be

image our that software packages analysis included you of if So were as detectors. are -- we processing part packages, offer do

pre-processed So a before images be get they to even can radiologist. these

And fast of we broader down stay would so say, to our more bring top forward on to and into I that capabilities continue if were and applications. those

So that was color on AI.

so X-ray multi-emitter cold cathode, sources. that nanotube related Secondly, our

make we're that push given what We sure and want of of tubes our to it's to make make is cycle satisfies that as time -- a that's color is are to life say been meant the to to things. them into where capable continue complex learning of more more a product for don't stability, emitters OEMs, life down performance, doing. that that our and everyone of not we're engage longevity, all edges what make needs lot we we've the tubes life, and are to we've us ascertain these continued good yield, share technology that kinds I one, that's doing. what But with we this in and in with understand more all about, path And I've development journey to And I’ll what those we way how and and that just to disappointed. cycle

where there having we're it's Now convenient put constraints industrial versus regulatory industrial to medical, customers conversations fewer the are but are something setting always simultaneously, in with there. that an for us

life for easier And the because there use, helps, in out experience something to it's the us real So try field. activity. real the life integration

So that's what we're doing.

disappointed process the flex not part far. we're then have our lastly, that substrate. been a doing pretty it's we of and journey and so standard So And

substrate we platform. flex in new Z material it the the is terms we between Z of IGZO talked what an it's platform about dropping think use IGZO. should just difference the about in But whole designed So -- sensor, we for called, material. detectors you didn't that get that with do sensor from of that. And dynamic was, advantage took type performance you we platform. platform of Z the What we the did that with new a

big don't rate, versions we're of of is to May with will intention to year I detectors our be breakage substrate. planning customer breakage Flex supply be cost take detectors chain. a space upcoming lower order be radiographic have done that the okay, or here this a deal. whole few way shippable capability. So June the much. it we've the that generation What redesign middle with new lower into by rate, Same of by And very -- electronics, new aggressively. introduce, available nominal. that of is would premium high the to with grams, These that in -- platform. the is new cost down radiographic attack mean, would everything, new designs, advantage wasn't flexible capabilities that bring to our doesn't detectors full itself, whole Weight that simulator, glass whole but savings do hundred will with

So premium as while either from a at decided, flexible we it, robustness will the onto them move mechanical substrate, these detectors. and benefit be in away high we’re give design. glass well hey, of might the very quality added And you

Suraj Kalia

hop I'll maybe and back in you this. for queue, question referenced one and already Sam, you

this. catch So if I didn't please forgive me

of is you price LIFO, my are help pass this issues, how chain Thank sustainable price materials are you is shifting congrats the increasing. when any please, improve FIFO million one inventory gross through taking or got to because the P&L for had increase? I raw of you me And and optimize increase, this I inventory but In component, Sam, you if in could the the So supply believe, one think the also XX correct questions. terms you that so articulated had ASP clearly one was things base, do efforts environment, margin if and you wrong, again. and joined was Gentlemen, us target the area. and you articulated number X% understand a

Sam Maheshwari

those. right 'XX definitely that achieve reduction signed was one our up were for a fiscal that’s the Yes, initiative for. as of we result, And show that we to inventory that able

situation current discussing Our our we not the LIFO, FIFO, are accounting and that. method,

looking not cost changing So or or the at inventory inventory method, standard method. relieving method the are we accounting

follow So we the followed plan same to continue have we to practices that before.

margin. been gross cost versus increase price So increases our the a we increases, has that's not versus of customers. pass improve the And out was in the to LIFO rolled the to and when initiative the cost on price It's FIFO on our goal increase with reduction inventory. to terms over the was price and

scrap For us. improving initiatives, all a all factory yield warranty of and improving and towards improvement, continue gross those the factory, work of much which efficiencies, costs, to out we margin by pretty relaying determined reducing are reducing

one, In pass and minus over looking not And terms term doing the are word guidance, margin our are we should gross continue. a plus we not minus price margin plus materials maintain I gross to transitory. gross expecting in at provided that to on you, pricing. should is here how expectations customers, are that longer we the XXX points, basis, and increases, to of maintain XX% the guidance costs plan use is but And are These what sustainable. on margin that's we that remain increase expectation basis these

costs As you know, some not down. the go do of

that inflation wage is dealing example, down. with expected also For are we something not and to go that's

they is transitory, prices So deal prices in vantage we permanent. the future, not come may are in perspective, rolling permanent. that point, are we that out, other from our And increase will with them. subject market are then But to factors our from

Operator

the have the session. And I the now call We reached end of question-and-answer over Chris turn will to for Belfiore remarks. closing

Chris Belfiore

can call Web available company's the site conference is or in webcast replay Web Thank goodbye. by archived fiscal November supplemental our and and XXXXXXXX. locations. will A from code will call be Varex on The accessed fourth for slide you, call his quarterly calling Thank the The from the of year you conference participating presentation XXth be your quarter questions site. earnings conference for XXX-XXX-XXXX XXXX. in and at replay access and be anywhere XXX-XXX-XXXX US or through non-US

Operator

conference. today's concludes This

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

Varex Imaging (VREX) 17 Nov 212021 Q4 Earnings call transcript