VREX - Earnings call transcript Q3 2022 | Varex Imaging Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to the Varex Third Quarter Fiscal Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. the to turn Belfiore. host, now will conference your over Chris I

may You begin.

Christopher Belfiore

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

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

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

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

Sunny Sanyal

remain for afternoon, good report million. third and $XXX happy everyone. very strong results good quarter very Chris, you, XXXX. fiscal Thank the to reaching Sales I’m of

otherwise range. continue show chain supply initiatives saw us challenging began Our our to about for at in growth. excited results be products enabled and to demand future We our high-end the of guidance to an sales robust environment realize and

$X.XX. margins EBITDA was was quarter quarter third XX%, actions sequentially, revenue while flat Adjusted million in the Price gross quarter our up medical productivity was year-over-year. Turning expectations. in our Revenue the the gains above in margin and industrial to quarter. increased non-GAAP and XX helped gross Non-GAAP improve revenue second the to X% results, was which compared was for declined X% and EPS X%.

Our quarter. the $XXX of the cash remains at position at million end solid

growth sequentially, environment. $X primarily in to Our in continued due to inventory current million down investment balance was support chain supply the

CT our other to flat medical qualitative was into market bring support sequentially demand as applications X% global also robust particularly models new OEMs our declined Let Medical strong segment current during Global challenges chain demand we continue continue for remains we and demand, our based CT our assessment Strong portfolio. Revenues and Demand products year-over-year. high oncology, X% X% non-destructive to increased including our maintain quarter. the the about our demand optimistic strength dental in to mammography. modalities, insights in segment industrial and future to to was tubes year-over-year. as remain sequentially supply China. of increased in the in level growth me are modalities environment continued flow inspection you a consistent a that different give many material. radiography, products of some with and so work in across able for on revenues We different fluoroscopy, through quarter,

in security for improvement energy see to sources continue high We demand screening. for

As in in signaled increase tender earlier the last activity demand. potential for quarter, we an year noted future

resulted quarter. activity this the of in Some during sales

to our inspection continue in pipeline healthy a business. see cargo security, in We especially

would on revenues overtime. our estimate to industrial medical million and CAGR or $X During In to you We overtime. our to this our $XXX first for imaging industrial quarter we of our XX% grow Varex fiscal X% perspective Today, how be provide were and growth addressable I like in X% current and market evolving opportunities with we see at segment believe our segment XXXX, market segment. our call, the earnings business a a market can segment which we highlighted segment about the sales. components industrial billion, X-ray share

levels, a our would recovery pick segment growth security up segment. the in we slower pace to the than has in Earlier slower tender later increased orders in related activity been had our we industrial anticipated year seen expected year. of pre-pandemic the returned While had the has revenue that when due to

are which third increased As the accelerators cargo in linear orders quarter. for used inspection our in expected

continue segment non-destructive several single-digits next We potential mid see to high the and at inspection for to portfolio can believe grow years. over this significant that industrial products our

security, to quality, different. like X-ray verticals Historically, for our segment not focus our but new them to our markets approach five are detectors markets consumer been verticals and will has be all food tubes the industrial across These expect safety. within Varex, customers. sell to and future to our key be electronics driving are These to We growth. energy, components

these increases segment addressable by system industrial $X in like However, as detectors, capabilities total more photon in fiscal for the We technologies XXXX. This provide workflow, acquisition billion and industrial solutions AI detection. approach nearly we for image counting market to software introduce by new verticals. automated intend integrated our

irradiate, Let a computer for the full we inspections. and or offering our foods, the sector, in high use supplies, solution software, me workflow as solution we detection. beam This market counting Similarly, fish growing acquisition of used pipeline can components, energy products. a In products. power corrosion well products a facing and as defects are growing examples. like X-ray of share and and plant AI using as weld consumer verticals automated the other to grains, and and to detectors photon This sterilized and and be side, inspect, medical E workflow incorporates consumer our well hardware immediate meat sources is oil some gas packaged specifically aided see X-ray detection facing image food as and consumer inspect on

are We of introduction the stages to development early these solutions market. the of in and

when professionals We show. of other in as We by to OEM and evaluation global one leading where imaging event efforts and to results, system Further we ECR. mode. that large customers on use In one Congress to to in are our as as that called our conduct European manufacturers. who particularly in see our To-date, radiographic their by from launched and some all COVID was and new others lock We will share happy July, manufacturers recognition your as addition also detector prototype remain in pleased new successfully inactive orders. event planning This into begin by is happy attended confident I’m dynamic place good Europe. attended in our the operations, at customer summary, more manufacturers incorporated in apparent The by in feedback the we evaluations. say a appreciate of detectors earned were and in four from to This we Azure our markets, attended China. backlog have XX they sell to Azure market continue radiologists that well to our was details very Radiology as downs designing platform of who of recently to deliver able reactions manufacturers our as presented shown annual ability European well systems some to dynamic is be us and imaging customers our LUMEN over China despite a as also Europe. our prominently top tradeshow ability new our systems run family product customers was referred to were this well

met hand to team has been the In are so thanked detectors our delivering addition, let closely to I OEMs the materials radiographic that, appreciated With to and products either Sam. Every them family more than XX over already despite our way working and or the call plan buying from that in customer XXXX. or with them LUMEN shortages. our all me do us very

Shubham Maheshwari

everyone. hello and Sunny Thanks

fiscal I third unless XXXX. those of the reminder allowed our robust provide ship for supply our Demand results a quarter fiscal As during otherwise comparison of year XXXX our expectations. indicated, sequential initiatives compared our to more product and of will the remains with to of us chain second quarter quarter

and of Non-GAAP was material posted by at pricing margin Non-GAAP the $XXX guidance $XX about productivity $X.XX. above supported guidance our was and million costs and of As gross pressure million, sales rising we inflationary logistics, withstood improved of a XX% top EPS result, at midpoint. our strong above the benefits.

sales million our revenues Sequentially were flat medical decreased were XX% of compared revenues quarter. $XXX quarter. and total the and industrial for revenues were to sales million. and increased XX% revenues X%. Medical were industrial revenues second quarter X% were the Third Medical $XX industrial revenues

X%. Americas EMEA Looking at and the APAC increased revenues by X% while increased sequentially, decreased region, X%

well. Our local performing manufacturing and China business in are initiatives development

it comprised our and year-to-date, is the about for revenue Yuan, product from currencies. overall X% remaining Chinese exports our XX% subsidiaries. sales, roughly sales well are sales China in China of quarter, are various of U.S. are XX%. to for in consumption, in XX% manufactured Euros, China in overall other our dollars XX% the X% as of Currently, in was Our into or as China and other in China

Let a GAAP me results now cover basis. our on

than basis quarter million. based XX% down the million were $XX Third higher earnings on million, fully quarter. $X.XX, were was and GAAP expenses EPS Net up operating $X shares. margin XXX $X $XX previous $X income XX and was Operating gross million was million points diluted million

Lake City R&D than Gross million XXX to points prior the SG&A basis sales within targeted to in prior up and volumes. quarter X% spending improvements our downward X% driven was was higher non-GAAP Moving quarter XX% range. in XX% factory. the inflation have Overall, $XX pressure quarter. $XX was yields million margin for $X third mitigating the approximately revenues was price higher been related Salt of the materials $X to the of than successful the our from better driven we by on It million in million, quarter. by quarter. gross margin results previous to

expenses million Operating XX% the Net XX% Tax fiscal incentive expense our was quarter, plan. the of share, income in XX% year was million, associated the earnings income $XX in million sequentially I revenues. pre-tax prior quarter of credit XX% million operating quarter. the a $X.XX XX% in XX% $XX down third from become increase and quarter. SG&A the to previous million, from diluted for for you to XXXX-XX by $X was was $X SG&A with are million, to compared were shares ASU want for The the or compensation similar that to second with result remind were or up us non-GAAP XX million, of previous the per higher XXXX $X convertible and due to operating diluted revenue compared driven a Please for quarter. increase of we As the in or quarter. quarter $X onwards. therefore in the $XX on basis total QX recorded performance expenses related expenses. effective expectations accrual revenues, the for in associated or Operating accounting a that of will year previous Operating was R&D shipments. to fiscal in note primarily our Average instruments increase our the million. margin in

related quarter days receivables $XX to million, highlighted the to two shipments initiatives in the turning DSO our the we million $X balance chain Inventory of due late sheet, proportion XX-days product to by on and a result of higher last accounts quarter. as Now, increased a call. in increased supply increased

is last We prices due to inventory pay inventory X% increases. XX% of stocking and certain and XX% having items. quantities roughly for of to Compared also is are parts and to inventory due year-end up quantity higher cost is fiscal larger to which

XX-days. a As and procured payable of days was increased million Accounts result, $X increased inventory as XXX-days. more payables by these inventory we

the quarter. the was marketable on debt flow million from information, million decrease to cash moving and ended cash and the of with prior $X sheet, the and cash a the decrease the million million cash outstanding the operations sales. securities equivalents quarter of end The growth capital. quarter and net securities was of $XXX use of $XXX balance in in was of cash, debt quarter, at was million. primarily Now quarter third due $X working adjusted cash debt $XXX was for $XXX the flow million XX% from of we to $XX Adjusted marketable EBITDA margin million was and in Gross EBITDA the and

quarter debt ratio end. leverage net at Our X.X was times

diluted $X.XX. are Now, and higher $XXX levels. fourth and quarter. Demand share and initiatives to million supply the are between per chain we between million expect on to non-GAAP expected support guidance $X.XX strong moving expected for $XXX our earnings remains and shipment Revenues

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

Sunny Sanyal

Sam. you, Thank

Bardwell, in we for add senior joined Regulatory like would want president Steris Katy of just the I turn a comment. former who tremendous look and Katy the XX-years products vice Before experience working Corporation, quality We an infection to our warm Directors. She welcome Affairs she and a extend has quick with Q&A, is leading compliance you, today be background procedural I and a Board and to we a to of announced to to of will board. services. of to of prevention provider extensive asset audit affairs brings other field and coupled and our regulatory with accounting forward Kathy.

up questions. So open with for let’s that Operator it

Operator

CJS questions. Instructions] Securities. your question is proceed with Solow Our Larry with first [Operator from Please

Larry Solow

material on initiatives. supply and acquiring are like today? are and you more - still they we you those side the to obviously, where to benefiting assuming now? excuse even the be Just other Most you know, of seems it’s guys of significantly. lot But are and chain qualify or could lot. Can maybe on of where the some you pull you know, cost like the just there an suppliers Are are stand - Sunny inventory. they me, there Are stand will And kind the done we the you you constraint is that a you you changing sounds more way actual levers first or I on on question Sam, we give suppliers? guys, of almost that? improving us issues, still of well idea that a revenue they

Sunny Sanyal

this Yes, is hey, Larry, Sunny.

while So we a number are began things. ago, initiatives several and with there a of

with talked there are and all, categories about components. you of and semiconductors situation probably the First then situation two with parts electromechanical

there. And and chips. some There that we there, are flow I the side to a going know think but are other we have along well, things better are we point, work have across products we and forward. against the is I still you obsolescence our of wouldn’t tenuous, making but dealing as of are woods have that to done semiconductor rolling where seeing very well, semiconductors, - out the what them. issues, - is have, we unknowns a side, the semiconductor to on and somewhat on lot semiconductors purchased we mitigated those progress hotspots with that So have this we at have and say both is moving with we make bought good are is Where of we lot of the sure them been access we were still we there we of those know, critical that

they the continues are it On is and newest electromechanical there. efforts continuing, the with late. side, diversification That I situation it continuing to we are, where call be, suppliers short They our you, shipping. are are

out we of we Larry, a worked. that of done are summary, you woods in we But the of seeing work yet. and lot results not So of are have the know, some

Larry Solow

price know price coming or charge, And guys just sort And started of which year of I and one putting going are that guess, I beginning the put November. you component color is to is terms in, of them up fiscal I are appreciate the of are increases, in mentioned, that increases, anniversary close inventory, said but what you know, you I you like that. to least. X%, at we

with think quite I increase. don’t So increases are commensurate getting X% price getting, you are that you

is So to that Are chasing performance? more that is still kind there impacting on you in her still come? of overall of kind

Shubham Maheshwari

this Larry, Sam. is hi, Yes,

our prices work customers, the in they We are of many contracts, to increase are as and our know on we with annual continuing you business, them.

the that up purchase renewal, on and order are orders to in the placed, new And come prices getting higher that purchase are when have we so, contract at are been prices. for based the as placed placed then increase able they after the and

remind improving is just So gross to was single range in cost we impact on definitely mid And that inflationary goal announced you, making increases. our costs. Larry progress had basis. X% margin we the prices. I want And cost on digit mitigate of that type to of from are price the

we so our it deliver plan been delivering able to keep that. and And on on to that is far have

go So are go more through price print through couple going and increases as and a the by. definitely quarters is more on to to there more P&L

Larry Solow

are to you like year, good? your as your price so or raise feel to does also have continue ball go fiscal need rising to next like guys crystal will out, sort if to, year, seem Obviously, next costs get you we Okay. but of into it I likely,

Shubham Maheshwari

the overall the forces situation we course, you market how inflationary well, we as as of know, the is So developing. as situation see will evaluate

basis. it dynamic definitely a it and be at assessing will yes, So, on looking we

Larry Solow

Okay. And the in the of but nothing’s was maybe terms supply just has still uncertainty, slightly, changed a the pretty big of a been guys range. wide the little a And stuff, bit grip there range QX, also the on outlook variable. the first think which then have lot narrowed chain environment. Does is for question a of seem on like on better you I a

end is between of high biggest was of side? it of lot a think end? demand issue. has difference still I on a, a previous course, a the was and low of that more sort variable supply room what demand of or the Is more the So sort the Is there? The the

Shubham Maheshwari

So as end, look in said the Sunny supply uncertainties, Larry, is chain there first at QX, we delays. guidance related there in for the question, like trade is related still your

be chain. I So, we would we supply is don’t that say say at But made in bankable, progress where are we into point a situation to can like be supply it our to in a to have improving. And forward guidance. lot it baked or of I seems go that for it is think

into is range So still as at the And the supply this guidance forming we guide that guidance. look chain situation, is at we point. with our what uncertainty baked

demand there is we strong, quarter. That of delays up backlog get or side the the probably of this receipt last the would quite the towards demand and be range. higher went said, even more receiving end a of we the material, if then have is in be further so range. raw to material so on material, And are in might lower some hiccups extent, of we the And raw

it completed the is ship we and the got It get to factory. is it So there. to demand just

Larry Solow

it. I Thanks. the appreciate Got color. all

Shubham Maheshwari

Larry. you Thank

Operator

question. Our with Jim your the Sidoti next proceed Please Company. with question from Sidoiti & is

James Sidoti

taking Hi good the question. thanks afternoon for and

it say on increases, have where fair question Larry’s on to price increases, it follow-up is the sticking? to just you is that those implemented So

Shubham Maheshwari

been this accepting they prices understands those are Yes, and to Sam pass and customers sticking inflation where at in is, price and also they its partnership, increases are price hi we increases to have point, the sense Jim and are the long-term understand sticking. the customers for Yes able our everybody here.

James Sidoti

are the to adding on and to oil you inspection, I for those think side, respond food our prospects that that improvements R&D pipelines you seem capitalize mentioned potential? to inspection. you be How you to increasing out markets, and industrial you salespeople? you called gas for are do related do products What do And cargo that

Sunny Sanyal

place the are into many in we that Hey for is and Jim would starting And anticipated inspection Industrial on we orders saw we had year those we verticals, shippable. and where pickup products see has the we side, getting orders, us. on Sunny. are out broken side. cargo have tender in the are are into that that see security we that activity to the turn earlier this some There is already those

fact, nothing talked deal an other are the already as with inspection, about, done than are other I against ongoing need vetted like let’s customers. In workflow those sales food our R&D, of ship customers to gas one we is really the process been we So OEM have talked several out there what are full have about segment, but of our oil there the we that. of the the be that solutions. to and to that we in more with doing Those just has in example and really gas, to - products take rolled in being have verticals we with customers those getting closer the areas

we like next are quarters inspection into mid to products new convert then several flight. progress activity OEMs. year. And but flight expect and will expect that those rolled areas next will be there R&D over on early these the investments and out in and is And or in areas that some start in we that other the those sometime we So have areas, to irradiation, in with food posted in to those keep you traction

James Sidoti

happening? that think would should to issues the cash from subside? I that one last or four that any to anything quarters improve start the is start there the chain next three flow as over there to supply me, And Is Okay. free prevent for mean, reason

Shubham Maheshwari

Hi, Jim, Sam here.

has and the our So, to in situation in in that putting gone up us enabling position or couple is product the or better drove to complete order demand in increases last inventory specific a of of a ship us customers meet it. and the and as inventory decision quarters

go forward, slow inventory increase rate So should of as the down.

flow. And debt. generate wherever by able At can, to so, same would we caches, pay for capital, working the cash capital to followed our the we priorities the like we free expenditures the time, should business for down be

the have are liquidity those sufficient we Jim. priorities So,

which $XXX we maintaining want plus million are that And completely of cash which is we is line to said operating what We have we for also have then purposes. credit, keep undrawn.

quite more ability higher the I’m So little bankable grow to bit it and deliver because we chain to certain about or deliver be here supply of have we the becomes or growth do our a situation, more excited profits. should the said, inventory improves able as and sales you and more further generate like than more

James Sidoti

that it me. for Thank Alright you. is

Sunny Sanyal

Thank you.

Shubham Maheshwari

Jim. Thanks

Operator

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

Unidentified Analyst

[Shane and Sunny quick the carbon to Any Sam, Eson] nanotubes. Hey, update? validation OEM this for for the so start (Ph) Suraj. I of partner status

Sunny Sanyal

on. continuing proceeding is is that that Yes,

those our have, are development we so progressing more and longer had, then And is that we take to so the we that progress. that in in OEMs we feasibility have more assessments. got These that shipping them platforms cycle. work engaged And types of been novel tubes steady ones making for have

with then to are move continue moving way. they this will and some projects. forward. formulate forward OEMs, then designs, the their Those take So this And their time

Unidentified Analyst

in steady? tubes you maintain Is being shortages are to or given components How for that. it Thank the you the seeing and able detectors. it. tech for cycle upstream the slowing Got guys replacement

Sunny Sanyal

cycle is meaning consistent have replacement finite The tubes a life.

be tube be to a if lasts know a in you the to they once are year. year, replaced need needs that So going

from For new us is a replacement tube. different tube a no

the same is it So thing.

replacement sales no versus or in is revenue cycle there difference tubes. So cycle our new for really

Unidentified Analyst

look your Thank getting back, questions. for is margin? you taking the How for roadmap to gross getting XX% Okay. our

Shubham Maheshwari

thanks Shane. Sure

inefficiencies, mid-XXs. margin freight we to gross our the portfolio So, running that. margin, right business lower gross the have around that supply chain is and little etc, Mid-XX issues, now a than in current higher, related bit for highlighted due

closer XXs get XX%. to roadmap or to our of terms to high In

a I platitude you be think and products photon that products. working shamed, would then have we to we need released, few new particularly also related which on been nanotubes counting are

get and So then and also those We products We should see. they products, improvement gross those in see with as released margin. of get should software adopted. our course,

Operator

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

Christopher Belfiore

be earnings questions will year call conference supplemental this you for quarter presentation The webcast conference XXXX. fiscal third the be for Thank of call will A Varex’s our quarterly on in slide replay archived your or and and of participating XXX-XXX-XXXX website. locations. at can bye. anywhere call available from through calling U.S. and Thank August from XXXXXXXX. you replay code the be XXth good accessed by website the The or XXX-XXX-XXXX in non-U.S. Company’s conference access is and

Operator

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

Christopher Belfiore	Director of Investor Relations
Sunny Sanyal	President and Chief Executive Officer
Shubham Maheshwari	Chief Financial Officer
Larry Solow	CJS Securities
James Sidoti	Sidoiti & Company
Suraj Kalia	Oppenheimer& Co

Varex Imaging (VREX) 3 Aug 222022 Q3 Earnings call transcript