VREX - Earnings call transcript Q2 2022 | Varex Imaging Corporation

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Operator

Greetings. Welcome to the Varex Second Quarter Fiscal Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] 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

Christopher Belfiore

and To welcome unless supplemental call presentation for and With Imaging that earnings webcast and be Corporation's today website note CFO. stated, Good and the webcast The presentation that to slide second to quarter are call live can CEO; President our will the Sunny Varex's this the discussion, year XXXX. Maheshwari, a for quarter of supplemental conference on archived simplify our are all references Please conference afternoon, on website. Sanyal, the Varex Sam includes Varex' twerximaging.com/news. fiscal me otherwise of be accessed our XXXX. slide quarter at fiscal second year

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

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

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

Sunny Sanyal

Chris, you, afternoon, Thank good everyone. and

remains supply see supply despite achieved our in and million continued to continue constraints, the quarter $XXX The sales robust outside We second chain cost demand ongoing for of pressure shutdowns inflationary persistent fiscal challenging of with U.S. operating environment and constraints. products current XXXX the COVID-related

delivering our while While on of mitigate choice these in for we our they focused impacted expect these continue quarter, to headwinds, continue and Despite customers. the investing work we to our and remain in second in innovation the performance headwinds, we quarter. third to the backlog being this on partner

our expectations second margin Turning sequentially. actions was increased in in million of quarter EPS $X.XX. $XX the line Adjusted and in some cost as to Revenue in was offset year-over-year. increased non-GAAP price sequentially the was X% with and results; segment Industrial revenue the Medical Non-GAAP X% the EBITDA both and XX%, gross helped increases. quarter

quarter. secured of $XX Balance Our notes redemption of of position at capital at remained investments. a million by senior working end million sequentially, as strong as cash the down well $XXX the driven was million $XX our

Medical during qualitative the some modalities let quarter. and into based me segment our applications on XX% high-level demand assessment, a sequentially and insights increased year-over-year. revenues for environment X% Now the different provide

also oncology, medical in strong and demand modalities, tubes. We for continue to fluoroscopy, other including mammography. see CT robust dental was globally radiography, our Demand

decreased our Industrial X% revenues a year-over-year quarter year sequentially In to and very year. ago. compared quarter prior improved increased the to addition, in compared a last and posted Revenues in all X% strong modalities Industrial segment

verticals, to had for strong screening. inspection several picked we second demand In tender mentioned across see products the to industrial security to that for quarter, tubes of were our quarters, activity sources we previous inspection demand nondestructive had demand this translate future see experiencing some we see to continue we and for high and into for pleased expected electronics last energy In aerospace up. including as improved activity quarter, We are for applications. orders of us. Similar

future in customers details our the at provided in quarter, backlog strong our business. new believe some segment. we for medical products security the growth bodes addition, we In well on Last of

see their we business, tubes initial good continue tubes our several system new get additional from evaluating options, good continue to see for customer interest. to close to X-ray OEMs. and reactions and design products. continue is customer our traction applications response a our to launch, and high-performance our to getting One customers integration are others with We In positive cardiovascular

steady make technologies. with in progress Our venture joint nanotube continues to Germany

a quarter, in development medical signed multimeter customer, we the we industrial an prototype a the we customer. with noted As to and first first shipped agreement prototype

see this rate number their and shipped high continue frame to prototypes evaluated to the medical is additional detection. make work mammography. in and on as including inspection we integrating industrial Counting currently during customer system technology Counting in continues to of radiography closely modalities, progress ability, or detectors, Due systems imaging with and they being quarter. to Photon the also industrial work in-line Photon to We our automated the with customer continue adoption prototype utilized its In into dental, a

systems as foreign U.S. of for are We inspection food as analysis content. customers in from increased seeing well and orders on particle detection Europe Japan, focused the food

new we inspection this our food see systems utilizing detectors expect counting year, in Towards of photon additional in the inspection. customers to battery end and launch

Azure applications. multiple had dynamic and in Z have We called our Mobile design wins C-arm Platform dental detectors now with

our We half expect start to of second XXXX. product in systems ramping these production the shipments up and of

detectors. Separately, of we're good seeing with positive customers the launch with RAD feedback. In LUMEN addition, are prototypes more series evaluating progress our our

that several is and to series excited well that migrating LUMEN performing are our to the of customers existing We are product. this see

with We more LUMEN to the expect see competitive series. wins

quarters, several demand for continue to order we momentum about an robust talked the see have already to adding we Strong business. As continues backlog. solid across

in Our customers' in through expectations orders supports current our strong demand backlog in their new ability remains China, current to especially of our our demand through for work shutdowns tubes. continued the issuance strong, CT confidence Despite COVID-related China for our environment.

imaging needs happy We see in to advantage. that conference Japan of service imaging Wuxi is enabled in a to local exhibition We meet and we medical Chinese a for to with Our customers. for the supply, Japan has our which medical CT and by systems and surgery. was discussion OEMs attended gives imaging strength and confirmed our for were hub perspective investment well part that global imaging competitive medical our many them in connect manufacturing attended capacity of OEMs many recently our were on Radiology Congress. continued OEMs industrial a and us them able live the with is

path. and in for medical saw recovery slowed which imaging, COVID. interest the in X our confirming also of investments growing technology down to photon-counting results systems, cardiovascular during the demand had high-end The right technologies We of of signs past in on potential years the acknowledgment that are the due

pressure challenges continue and supply As Varex you're for a to companies aware, many be all chain globally. point other

vendor electronics. environment certain situation into This supply chain, across erratic expect hand-to-mouth future. we a components will continue near in related operate semiconductors exacerbated and to the for like by is further the performance which continue We

the outline respond me to taking are Let measures we that to these challenges.

have key and inventory materials. parts levels First, of increased we

to redesign R&D our efforts we new certain redirecting Second, are suppliers. and qualify products

prices. we're Third, when we we that to from semiconductors market improve prepaying the we Fourth, by certain need receive vendors higher sourcing are the the paying it. likelihood spot material

expect growth fiscal Pending Varex. chain year are let to we These completion helped call chain from robust using constraints quarter, mitigate see some over second expedited half We're efforts, of that, ocean hand of expense expect for to and forward look the supply the of year, successful underway, towards to diversification With the but shipping. profitability. chain Lastly, at we for moved in measures we Sam. supply supply XXXX of airfreight we volatility to products. already continue. which summary, fiscal shipments the be another In our the second are to the as demand me pleased

Sam Maheshwari

Thanks, and hello, Sunny, everyone.

and As our some first the of provide results sequential our I'll the and of weeks to with remained indicated, supply few last expectations to XXXX. to constraints our $XXX by of was credit pricing XXXX allowed gross were material SG&A $X.XX, revenues mitigate was post in of midpoint otherwise near said, for chain quarter. volumes reminder, -- guidance and fiscal rising those comparison fiscal to the our quarter at That of second benefited Demand top we pressured us unless second above of of of $XX This offset the million Non-GAAP initiatives. the a margin a which able from higher quarter which the the quarter, costs expense. during of being of robust than raw expectations. logistics EPS million, our

increased the and XX% medical the $XXX industrial production for quarter, million quarter. improved $XX and and were increased industrial revenues revenues helped the the Medical increased first were sales sales Second revenues end X% the Sequentially, XX% by Medical from XX% quarter. quarter towards of were of million. overall industrial were X%. revenues revenues revenues

the EMEA China increased increased was of by revenue APAC XX% revenue at in Looking XX% Overall, quarter. increased sequentially. the region, Americas X% X%. and

cover Let me GAAP on our results now basis. a

expenses $X $XX margin resulted $X.XX quarter down previous up million, and $X was of shares. gross million million sequentially. $XX million $XX diluted XX%, income GAAP in XX million, and million with the net EPS fully quarter. earnings This of were First in on was line Operating operating

non-GAAP quarter. basis by ago year to diverted continue Compared our for a of Gross by results result, XX roughly costs suppliers. expenses the to gross and quarter XX previous expectations impacted sequentially. Trade as with helped basis Like compared quarter. to impacting first basis maintain quarter various about towards These the similar our was as about we margin basis are gross and to by by margin line points quarters, expenses levels, issues. points. to resources XXX mitigating activities points were the qualify And offset alternate margin XXX supply now. quarter. impacted improvement margin gross us XX%, freight R&D compared gross to on chain to last pre-COVID Moving the margin higher in points Price by for

realize up million, offset stated broad-based prior customers Since have we $X million launched X% we profitability. expect not are in to October annual incentive XXXX, or initiative inflation percentage cost were a late second was approximately to an was X% initiatives price spending contract, previously, gradually on associated and an improve As mid-single-digit communicated increases we of SG&A XX% increases R&D I At XXXX. higher. revenues as $X range. was price up the many this improvement to for $XX the their the reiterate come than seeing It from price with with within the quarter. quarter fiscal contracts to throughout stage, related continue of renewal. this we to work traction million The initiative, plan. that and credit our with are prior want our to target remaining we lower was customers decrease $XX to quarter. in million,

diluted the leverage million, As operating the to or was of the $XX from income. Operating a the the down $XX a $X we the SG&A million in expense diluted earnings the result, $XX earnings XX% the about note continue million basis. were to in million the million on were were XX% lower Operating driven of compared $XX $XX $X diluted SG&A. were was or to XX% first quarter, compared tax revenue Tax quarter in Average $X quarter quarter. share revenue, pretax year. million shares sequentially. XX% XX% Please prior XX% share quarter. or for target in mainly of quarter full P&L. or expenses margin per by per million $X.XX revenues, Net million second demonstrating first rate $X.XX of was up non-GAAP Operating that in in

a for become XXXX-XX, at is which purposes related GAAP provides effect shares a count diluted the at from press GAAP instruments on for year our Separately, showing share will and the different non-GAAP us share onwards. provided QX of have of to appendix non-GAAP the of earnings reconciliation to The our and prices. accounting release. effective table end hedge slides ASU the convertible XXXX fiscal bond our We between for

improve the for having our turning quarter. receivable Accounts increased higher higher as likelihood prices the increased due to also and by semiconductors quantities in vendors material This to increased sales timely. of and million of actions $XX prepaying Now certain $XX stock parts materials. a the to also the larger of to to DSO pay sheet. million included result receiving days. Inventory late balance to Hence, XX

payable $X to million inventory was days. As a payable and increased Accounts result, of days days. XXX increased days XX by

balance end. cash from quarter, flow in prior the well on and net as Cash in of quarter in Now debt The and combination was million reduction debt adjusted sheet, senior ratio the moving the $XX of notes principal was in we EBITDA solid profitability and second Gross a $XXX million position as a quarter flow X.Xx was $XXX our quarter. $XXX from and helped cash information. accounts our million million. inventory the $X of end net to million Adjusted the debt ended million to an debt and decrease EBITDA and operations of The at of keep of with leverage $XX our was secured at the a increase cash receivables. result XX% quarter of the million $XX was was redemption of margin of of outstanding sales. amount decrease cash cash

Before step earlier. comments back discuss providing I with revenue a take dynamics connection guidance, in broader Sunny's and to wanted

our was above came exact end the but face XXXX. quarter experienced current expectations. This performance dynamic assembly somewhat the volatility continue similar in will product certain our materials we to to we of significant raw to revenue in what illustrates near in receiving of of the strong what to the chain was in the QX due complete of the influence QX, quarter. the mainly sales environment Our experienced towards and fourth demand future. midpoint fiscal the in the opposite supply of in It This

volatility $X.XX here million and are non-GAAP guidance $XXX reduce chain Revenues and the QX. million earnings our this share move and and are third between However, diluted our we past expect $X.XX. backdrop, we is supply a to diversification further between initiatives With that as quarter. progress per expected for $XXX as expected

on range $XX of non-GAAP million, the to million share Our range operating expectations rate to based for about XX for XX% in Non-GAAP XX%. are that, non-GAAP XXXX, XX% count QX we shares. fiscal open of million diluted the call of and a about your gross will expenses questions. in With tax margin $XX of now

Operator

Please Solow time, we'll this from session. Our your CJS [ph] be proceed [Operator a with At conducting is with question-and-answer question. Larry Instructions] first Securities. question

Larry Solow

afternoon, guys. thanks. Great, It's CJS. Good

Sam, increases the sort to were on the on Just increases, of cover obviously, more sort in, mentioned of realization on price costs. -- of as those put price you defense opposed to offensive your just

questions of Just couple a there.

So you most annualized mentioned contracts. are these of

calendar I So halfway through that, year even kind obviously. we're less not assume yet or than the there we're of 'XX, so

benefit more even hopefully, perhaps you but some least or wind putting So when -- still your done have at price these increase -- you in of some than first at in. but them, you you've of terms back are costs start rolling some perhaps through, higher

in? Or amount still maybe to And of sort come a more Is you to fair my put I a can assumption how that statement? have look and at that? So do good that back board you go. drawing you

Sam Maheshwari

Larry. Thanks,

them we working So in our yes, increases. to price we October communicated then on customers started and with

So that you in it this a began out, going from activity rolling pointed to on January the effectively basis. year, rightly like and kick is of

to able us. have we ahead of contracts up still more come for get we are renewal, So increases. And as activity the those

have So these as on that an in way, we generally, basis. a mentioned we annual

and next at X the send round monitor time. is would out it, the phase earliest we the October cost for be that XXXX, decide if So of it the or to letters

right we into inflation are hope the phase right perspective very much very don't situation subsides, now. good we our, a that So have really time. And it, evaluate we we X. but now, call But at will

now. the are We will much just act very we monitor into situation then right the and But accordingly. phase initial

Larry Solow

Right.

Okay. segment And of is there supply chain, the the revenue, impact just in not much of medical obviously, -- just a piece in so your but of Is terms it's on and business, terms bigger that it having supply? on because from side. just cost -- actually Or demand has industrial. rebounding industrial experienced maybe disproportionate piece to also more Is is COVID growth their looks relative of versus like issues segment with is better that sort the better? impact

Sam Maheshwari

continued that is the of that issues, for XX% if that type are revenue type characterize you industrial of both and would experiencing has for a on. would notice, I not quarters, medical industrial That segment. way kind us that of And has many, many been years. if

And a perspective, quarter, might XX-XX Here or from a effect and given there, see here there. a of terms XX% or you thematic still split. Larry, revenue But for than in that's it's XX%, other spot that, continuing.

a see proportional of revenue terms company. there might in or for plus/minus You the percent overall here

both So getting industrial the impacted Similarly, in they're of course, business.

systems recently, and tender business particularly have on security there. in when also recently. that a business, lot that I remarks, we there's mentioned months, of the the say Sunny side. are activity been activity in That in And business, that his X last We seeing prepared say I would

we excited finally beginning COVID. the So back to that about the are piece business, of from come

on So of business, been the bit COVID a kind from resurgence delay COVID, picked right to other of COVID? from there's business after has a up that whereas

Larry Solow

some But getting you larger sound and products. on gave closer to but the And an a side. And prototype like these inflection many great. on we're least commercialization. it does I it before last have Good still say? there's sound appreciate that of like sounds stage, the programs. seems probably least point time fair it does traction reaching little question. it of at these programs, go you're lot at to Is a mass R&D maybe the Sunny just Okay, update us bunch a -- yet, like then of like not new

Sunny Sanyal

are moving forward. programs The

funded. the down, also on R&D now that activity. encouraging programs to ago, for side, that couple what's of is A moving us So customer continued years be in customers continued slowed reengaged forward. some we've engagement and seen our And but They've had there's of earnest.

Larry Solow

great. Okay, you, that. Thank guys. Appreciate

Sam Maheshwari

Larry. Thanks,

Operator

question is from Kalia next with with Please Our question. proceed Suraj your Oppenheimer.

Suraj Kalia

Sam, right? afternoon, hear can me you Good all Sunny,

Sam Maheshwari

Yes, we can

Sunny Sanyal

Yes.

Suraj Kalia

many, Perfect. Sunny, many, Gentlemen, calls quarter. the same Hey, on the many congrats on going time. at

me have So please mentioned already this. if forgive you’ll

us might any can feedback have approach? could your specific that – you’ll regulatory that Your received tweaking. OEM cathode, cause And you core require some walk that through

Sunny Sanyal

Yes.

provide technologies to Suraj, systems. we then these into OEMs components the who their So our incorporate

approval don't that processes regulatory they we file they'll do. per devices sometimes predicate and have our customers or seek don't we And So use. XXX(k) OEM established se,

actively not a consideration in So that is launch terms something that we technology. this not and pursue how real of we

terms when of is with are forth between what forth technology In the other going they OEMs feedback, process do back you novel the that. very technology, and our through like do and have a similar back what they need go so go which they can tubes, on and they and

more have that getting feedback the with application-specific OEMs from So we do needs. to are the

the tubes through we as -- ongoing basic our So of The multimeter -- this the customers dynamic that's well. emitters design are It's number well. go is of process. is They system. technology need instead might working an working very their very well, x say, of phase

in So we're that mode.

design continuing them so industrial, market we're medical and secondly, done helping what to to customers with specific needs; and supporting combination And things: a of with X we've our OEMs. this in other their with doing

So serving. of we Ion think this seeking technology capable with applications the is out that

Suraj Kalia

an you commercial done of end its array KvP, all the pretty down specific any the update period let’s have most been testing, cycle much in Right. more so and regulatory emitters, X it would where the are? say, on forgive, devices across launch, the the be of line? user of should about board? forth different configs we for and are Or so terms number on And part I But approach. And your – Sunny, on

Sunny Sanyal

So to talked did that the lot We're characterization about in and you early look, quarters. performance guys on, point. that last we a few of then we the past

say, got capable of performance, a are bracket the are dose the energy, and handle We these performance capabilities tubes on et the from the with we've brackets satisfied what on a basic cetera.

purely add share there. focused more there's no are right news and getting adoption. -- What that mind doing new So application to we now on really is

like phase examples bit So in. the customers place of That's generation technology have continue we when And the it these on we a side to a then you adoption. a quite with will to novel under our this, a we're few can get examples. of get demand better with be work belt, the once takes we concrete give in because together

Suraj Kalia

going gross of additional doesn’t in Fair give -- your hop where management perspective you at play, margins some cost taking in appreciate inflation. enough. of I'll your be I the you Sam, question. LIFO thank are inventory management, shift managing your visibility And us Gentlemen, what current are you of has lack especially -- just environment. there I get Sam, story. made component congrats. one because remarks been inventory in throw your so queue. plans? with in to and commentary. questions, comes your about when terms way LIFO Any in to that How it and – color for a a back the briefly that really around you would that's everything into my point perspective great. would all love key care your know given I’d when any

Sam Maheshwari

Suraj. Thank you,

COVID, practices, So has more by taken down. manufacturing and yes, And were inventory ago, making demand management chain was side the And our supply since phase. positive issues. significantly and on to processes bring or of able the quarters X turn production COVID a say, we that followed in were inventory terms we X effective and quarters during

stocking parts. this at material more looking at are So raw and we time,

go a bit may and has So perspective, up, and stocking up little we an yet again. inventory from more that on average, are gone more our it

trying customer raw we sure to of terms outlined we in the materials one number do. Sunny be of that's that a to the thing have making to meet So initiatives demand. are able

that and simply said, more. So of as we are we that, would actions, on taking all I top buying Sunny those are add of

long purchase suppliers. orders to lead giving our We are

were X are in we months for we supplier, to now giving that -- double if now buying advance a PO to double doing that. doing a we're X say, that So

so So factory are to changes made. more as some are that we way, And -- we have that's getting is are of suppliers visibility the we in it talked nature, running, prior sense, in and quarters by and to start about the driven have of the and we with of assured scramble that in inefficiently those of our the all I material providing trying things. material. would all lot chain, of a now those you, say, The soft for supply

So manage factories we meet trying best are are situation, are balance our and ensure inefficient, we to our leveraging to also the we through can demands. this sheet that customers'

Operator

Suraj, does question? that your answer

Suraj Kalia

Yes, thank you.

Operator

question. [Operator question Company. Sidoti is Instructions] Jim Sidoti Our proceed your with & next with Please from

Jim Sidoti

Good the afternoon, thanks for taking questions.

first supply quarter weighted is of were for talk the towards me, mean a you third of excuse towards the of the can quarter I -- X -- the third The quarter about fairly the because the on of supply because months issues? chain heavily month chain very shipments one issues. the

Sam Maheshwari

as for were the AR Hi, ship the shipments Yes. Jim, towards to the get this month the to third the quarter, result, tilted Sam. X, we balance high it so is it linear, up, weeks it the able Yes, And customers. and on quarter. the were finish our not be quarter were product caused to of a of the sheet. to yes, finish were able X last material, And and they

Jim Sidoti

during of lot period. overtime a assume I there that And was

as the that margin So well. gross impacted

Sam Maheshwari

do goes over we Suraj, Yes. we all need time, yes. have over And on, just do times and was under We time, I do complete have many to of the we both as that product. answering, time,

are all aspects I inefficiently. So when those mean say factories are when I covered running

So yes.

Jim Sidoti

little can that credit color just then Okay. give you was about? the what SG&A, us And on a for

Sam Maheshwari

Yes.

caused credit there was a we looked versus to this quarter, that and are our we related on able performance at that's that to and P&L. where this where gap, the of it, last looked incentive year and credit is we and the plans. adjusted demand the in ahead went what that at ship, And So and year, is at we looked we and the reestimated for

Jim Sidoti

Okay.

continue shouldn't in half -- we year? of second that to next So expect the in the the

Sam Maheshwari

only expenses guiding what Jim. actuals in The line line in of with were to guided with had also were operating towards in what we correct, for QX would outside is That also you QX. line credit, and QX. It the are be with what that pretty and much we

expenses $XX outside running or million, are range. $XX million around So million $XX the operating base credit, of the

Jim Sidoti

a now And that Sunny that top the you Okay. year. then growth he made Is bottom the expected for beginning both. supply the growth at constraints, comment despite or growth or line said line

Sam Maheshwari

Jim, we hopeful -- for line guiding are only I line hope growth. year year we as of now, full think we full but are bottom and QX, of top growth

Jim Sidoti

All you. thank right,

Operator

Thanks, Jim.

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

Christopher Belfiore

and be access the A conference quarterly this through replay Thank Varex' and locations. call fiscal year replay the calling can XXX-XXXX is of website (XXX) or XXXX-XXXX. and by of company's goodbye. U.S. you XX May will presentation and 'XX. archived website. for be be second for webcast accessed code call call slide you, XXX-XXXX conference The Thank supplemental non-U.S. conference the or (XXX) in your questions participating from available in our The at quarter will earnings on anywhere from

Operator

This concludes at your may today's your this conference, and for you you disconnect Thank time. lines participation.

Varex Imaging (VREX) 9 May 222022 Q2 Earnings call transcript