Earnings call transcript Q3 2023

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Operator

Greetings. Welcome to the Varex Third Quarter Full Year 2023 Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Christopher Belfiore.

You may begin.

Christopher Belfiore

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

third unless to the for the To references quarter XXXX. year all simplify quarter otherwise our fiscal stated, discussion, of are

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

Finally, are stated. and year to all otherwise not references the to the unless year calendar year fiscal

uncertainties materially advised differ assumptions statements, are business These be earnings be and statements during the predictions that filings will results risks on to future from described we making with those that which release in expectations could current actual are events. our Please based Risks our forward-looking quarterly relating subject our and are this cause and to to that call, and anticipated. are SEC. projections about

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

they financial a most measure each for financial our website. the today’s on which financial directly These nor presented is financial press release, accordance non-GAAP in substitute measures. call, posted to comparable our measures GAAP certain are not we provided in non-GAAP reconciliation earnings GAAP non-GAAP We On are measures with, measures. of discuss will a

I will to the call Sunny. turn now over

Sunny Sanyal

XXXX everyone. of our Varex. Non-GAAP at in is were Revenue third quarter to industrial solid expectations of high-end of I’m fiscal in Thank good our report our of of share the was record $X.XX, XX% per results us. earnings quarterly you, gross the pleased margin for These continued exceeded business. another million helped $XXX Chris, by strength afternoon, a and non-GAAP and new quarter for guidance.

we quarter, In driven and by increased by in $XX million addition, cash increased inventory primarily management the diligent profitability.

was XXX the the quarter and due Revenue X% industrial margin sequentially Medical higher in third XX%, which up second sequentially in better points compared Industrial in and X% X% while the This Revenue quarter gross was third to Non-GAAP was year-over-year, quarter. sequentially X% our year-over-year. the segment up portion increased year-over-year. increased and revenue basis was primarily sales. and of expectations than the X% XX% to

Adjusted We reduction primarily with the sheet, million up the million prior equivalents the cash, in EBITDA quarter million quarter. was $XX to marketable cash and due in third and million in of $X.XX. third profitability was $XX in from ended quarter. EPS and quarter higher on inventory non-GAAP was This securities $XX $XXX the million the balance $XXX

we detailed and average, CT of global to sales quarter was in into sales by X-quarter Let compared in tubes insights me give modality the solid to segment, above sales will trend. you sales a which Medical our some quarter trend. its the In as refer remains

sales grow their quarter, the which is in continues and remained in Dental trend. improved third above above its the Our respective radiographic down were solid was and trends. quarter, positive be modalities lumpy quarter the to oncology trend. in and fluoroscopy a more but but trending in Mammography from direction sales flat can its compared to quarter-to-quarter, sales

including nondestructive the products intake strength remained cargo various primarily order solid. oil The in screening industrial Global were our applications, and of gas. robust was straight continued business and our second for sales quarter, and across inspection

increased food, quarter. in in battery We and the electronics of photon also inspection growth saw our with technology counting adoption

quarter, I’d year. introduced from provide we back a brief last our step a like Taking update to the of the on over some products

Detector with design including continues cost-effective our progress surgery to platform, are platform integrating various is into The dynamic cardiovascular these enabling solid for detectors who for applications. to at us Azure those Dynamic technology detector applications. Azure customers make systems, dynamic performance and a Our secure aimed wins

high new performance These existing detectors applications in high resolution sizes. which larger footprint expanding become and offers x-ray expensive silicon CMOS our alternative at than a is It it’s equivalent dose and detectors amorphous at at our are targeted lower cost-effective to customers. and

Azure new customers our our We expect of adoption continued see that many by years the in coming will detectors. Azure in and expect to system launches design

XXXX, in this seeing this also or in continued various our seen recently uptake Lumen across platform, to field. sales global launch detector of made are portfolio are China. a how happy in and performing in were in in interest barriers same political we including and have we the economic Lumen the products factory sales its Since have dental used is technology introduced for strong time, fluoroscopy. At now full detectors of detectors we with where there we China, no lumen of modalities, in We markets models made our

starting detectors this Lumen factory We of expect our the October in year. China shipments in made of in

coverage price design globally and competitive Lumen at expanding targeted detector applications. platform these a for our U.S. at radiographic a of The offers is applications

objects Our jet of to and growth accelerator inspection in rocket utilized high-power cargo nondestructive Industrial year, automotive linear in X-ray which due sources such business our strength linacs. parts, These referred are our as engines motors. this also applications, solid has are that products, as seen containers, inspection to large partly used

India’s space the technology the this motors, abnormalities. which proud to U.S., in we’re summary, in with used and detecting Chandrayaan-X rocket, a cracks very and was is manufacturers carrying we’re and tanks the that to world other rover say to quarter. Varex is the Varex propellent excited were in for integrity with manufacturing in program. used rocket Linacs the third the industrial growing Japan, We’re moon. our accelerators In of of the voids, and inspect leader Europe happy high-energy now work various India’s support performance linear We rocket applications. to

turn And results. now go financial details over I the over to call the Sam to of will our

Sam Maheshwari

and Sunny, everyone. hello, Thanks,

the As for margin third unless performance segment. The I’ll our guidance the to pleased midpoint the of sequential another quarter. indicated, reminder, of revenue. results quarter fiscal strong non-GAAP was Industrial Gross range, execution quarter exceeded otherwise our guided guidance. the above the of towards primary XXXX. end in was with driver XXXX EPS strong for those of continued of fiscal and the high was I’m a of provide comparisons second of our report We

in result, and was quarter, XX%. highest gross generated sales $X.XX. million $XXX As operating reported quarter margin we of of we generating a cash of as second cash public flow Further, non-GAAP million our company. a Non-GAAP the $XX EPS

increased quarter the of strength Third XX% second XXXX. Industrial total to quarter to Medical $XX million. the revenues the segment, Revenues industrial fiscal to X% increased were Medical were compared million, quarter. third quarter fiscal of revenues revenues ongoing our revenues Due for of the XXXX. were to $XXX of XX%. X% revenues revenues compared and Industrial climbed

was region. by XX% XX% increased X% at Looking China APAC Americas EMEA XX%. quarter. decreased and revenue the revenue sequentially, for of while the overall increased

a results GAAP now cover me basis. our Let on

million, was of $XX operating the were and fiscal million. shares. second $X was down quarter was gross earnings diluted was GAAP compared $X points million, higher million, income million quarter margin Third $X million on based basis sequentially. and XXXX XXX fully XX%, to Operating Net $XX EPS up expenses $X.XX XX

interest adoption reflect EPS and GAAP and approximately the non-GAAP that of the to for expense a add-back an adds involves quarter count. of to shares for note after-tax net of XX million third share million us diluted XXXX-XX. This Please ASU the earnings $X.X

$XX R&D margin XX% favorable quarter sequentially, $X spending for driven of to sales was third to our in million, of range. Industrial was and up This non-GAAP the by quarter. to quarter. to milestones within experience was in higher-margin X% the to payments second expenses. XXX pricing, primarily X% million points million of higher freight in second technology revenues $X the segment on the due related of in down a proportion Gross Moving quarter fiscal results to Micro-X higher compared R&D made of basis XX% XXXX. Overall, primarily was targeted the

the approximately fiscal quarter. was SG&A XX% operating second million revenues. compared was slightly were expenses was our flat sequentially. expenses of income to or $XX $X second $XX Operating of million XX% $XX to XX% above million, Overall, was Operating Operating quarter XX% our were revenue compared in expectations. the XXXX. of SG&A revenue. up margin million, of

$X.XX of Tax interest after-tax Non-GAAP diluted of $X second by is share, and income $X.XX $XX then $XX million compared million pretax million of expense expense $X.X net $X the XX% result per the was or sequentially. calculated fiscal third adding earnings or XX% to were in EPS or Net earnings million million ‘XX. to of XX quarter is million of in $X.XX shares. the by divided quarter up

Now from Accounts million XX decreased days steady and Inventory days. decreased days. by the and the prior third turning $X million balance of receivable $XX at the sheet. X quarter, increased to DSO XXX held quarter inventory days in to

the and We days. to and the continue days $X increased payable XX in of expect fiscal reducing are payable this fourth inventory by progress Accounts stood in ‘XX. at pleased with million quarter

end XX% million quarter $XXX operations net was million of to inventory. Adjusted of the in reduction of due second increase information. flow marketable securities We or and equivalents $XX the Gross the million, and quarter Now ‘XX. of with cash quarter $XX the from $XXX outstanding to the and an for in debt fiscal million of million. quarter quarter flow moving cash, $XXX million, was $XXX at Net securities and was sales. marketable cash third and the million $XX million cash was EBITDA of primarily ended debt profitability debt cash from of $XX

was of X.Xx debt months end. XX trailing EBITDA net ratio quarter leverage Our the at adjusted

X%, the the guidance of beginning that range. year Now half to of expect be to second fiscal provided moving in we for we guidance. to growth of on sales the X% for ‘XX, and At

$XXX is $XXX non-GAAP are and between expected the the $X.XX diluted Here is million for guidance and million per quarter. earnings share, expected fourth $X.XX. Revenues between and

count are based million of a diluted fourth million $XX per gross operating million, in share rate in about range the of XX% the $XX about on shares non-GAAP to non-GAAP range to quarter ASU XXXX-XX. non-GAAP XX margin XX% expectations expenses Our of of for tax XX%,

call open With now questions. your that, we’ll for the

Operator

Suraj with Oppenheimer Our Company. proceed Instructions] line first question the comes Kalia question. [Operator Please with from of your &

Suraj Kalia

hear you can alright? Sam, Sunny, Hi, me

Sunny Sanyal

Yes, How we are you? can, Suraj.

Suraj Kalia

well. Doing nice Gentleman, a congrats quarter. really on

medical, should So how is key adjudicate talking fits also either adoption one about and and if understand being viewed. Sunny the give could have you one, that I with I a as numerous photon counting specifically talked example, photon counting past know photon pie? in to we of or if GE you could, times, Sunny, the some Sunny, on And you worldwide for that Sam, things know, thing maybe real I’d love us sales competitive Varex dynamics? counting where snapshot in are detectors

Sunny Sanyal

Suraj. Sure,

in technology, for reputation of So the it’s photon or counting process the XX is the has that in let’s publicized gaining emerging medical market, bit and say, it months and an field, a applications. so in CT of type it’s the been last, quite only

perspective, from So that the into medical it would in also direction. we’re move of to now went counting excited anticipation because our that in seeing photon about CT in bring solid and starting industry we’re value capabilities we

been in counting Industrial two and present far. cycle than The with in faster are medical photon We has markets, in is so – industrial medical.

also of food And etcetera. in by photon in a – counting few so part was battery this driven industrial like detectors quarter processing, inspection, of applications our use

counting industrial to excited faster. we’re see So get in traction. getting traction photon It’s

are the CT. in of interest and have We started market who the applications. with recently, the And counting – OEM a engaged gaining from of fairly OEMs medical more some photon medical we’ve use good use

newer absorbs is that this expected technologies we’ve while platform, is their said a that several the said, in and contribution the designs. into novel these medical to market growth our still So side away, years

we So where stand. that’s

up the major We’re It’s glad excited of the also we’re lining see the behind that adoption forward, what OEMs makes technology. it to because that’s and about moving some increase.

Sam Maheshwari

now Suraj, generating then, there. photon integration we our And Yes. of growth add $XX combined, are that, counting and is million right sales as that annualized, I’ll seeing now, about of charge business and

perspective revenue-wise. we to now of give you are this of So that technology with where as just wanted

Suraj Kalia

me if Sam, if you share. Perfect. on. Yes. more I And you for and calls what forgive on and That cold also helpful. currently MIC have dynamics Sunny, one extent question one multiple you are China we any updates, Sunny, status for XXXX, the case can and to really Sam. missed going is the could there that cathodes this,

of margins. your Gentlemen, management year half growth How say, of your let’s we of going Just about think of and gross Congrats pace as in again. taking first should questions. you gross we this it GAAP inventory into, for exit margin, my terms ‘XX. thank and

Sunny Sanyal

Okay.

with Suraj, cathode time for I much respect cold nanotube cold is said, would with there new applied adoption to kinds what out adopt than along photon – figure an newer, industry takes So tubes applications Nano further counting to are just trying like technology, to it be technologies. to it. with and curve the cathodes, of is

tubes make with our with from than that’s that the is technology perspective, contribution on perspective, photon and continuing from technology. – revenue – we our progress are further a development again, where that out product we’re the making to So developing counting,

very transfer for well. technology gone Micro-X Our has

that technology. we’re with and do work, to evolve continuing are continuing that to We

to our from We of technology. have relationship. through the some we’re our aspects prototypes working good venture perspective, progress we’re now make with short, In joint commercial continued and with making partner, our

We’re And happy technology. this customers with technology. we’re to they applications the their get head how about to around engaged think for starting might get now seeing

Sam Maheshwari

back to your inventory on margin. and gross And then Suraj, coming questions,

are you So on we’ve continues. been We we to in and million, know, inventories the of very inventories, inventories focus that brought down, in quarter. $XX our bring made trying last this as pleased progress terms by down we with that and

inventories We down are further. to expecting come

We direction. are that working in

much not think targeting amount inventory – further. next some to the I by down, should how are months guiding bringing are in we bring bring and amount but we down. have are So the to not we guiding X we the X it months, be that down further room we

freight ours made margin gross this And on drag that minimized. back I some generally in terms has December, of cost benefited – in fully come we we some have then in drag in. cost gross manufacturing been about, various talked good initiatives still as through time the through has efficiencies has to and components continued But our inventory, of way we’ve P&L, to I are the are environment through And The would quarter. work in by there and suffering January margin, progress quarter. price expecting still been favorable them last cost the last have their are frame. we high price system say

XXX pickup point, basis further So gross margin I’m at a that thinking of points in of, say, further. around

gross gross picture target we somewhere getting So shaping is and margin that committed remain XX%. how is margin XX% up, to of our to non-GAAP and a between

Sunny Sanyal

we what few you as didn’t our the China sure taking address China with wasn’t Suraj, China to I asked as XXXX you And also you requirements – different about concerned, journey the meant is a XXXX word that. began need that for years ago. we of we were in far what understand that at MIC, by sites But China. first I XXXX. two said made

we has with make tubes – and Wuxi local for to expanded been it, that in local detectors tubes, a products making started China, large approach our we’re our we’ve number started with detectors, China. to and of to in and terms now in we In very of facility

are so are happening. couple the We things – of

We’re the in – – two our that which of is get in we portfolio have that products China made expand label. to – continue will such and are XXXX to China kind we made that carried way we currently. for China products that get registered where sell And is of be a products can and strategy that the labeling, our we with to

China both of with in all you support Chinese contract In supplier then things our that also Wuxi been locally relationships products, that’s our a to expanding the expect office addition, shipment of facility the our Wuxi but in new and survey manufacturers. we’ve warranty – handle we so commercial China out that would local for based

from can And expectations sell vast China. so be be of XXXX, China majority approach products we by – our the we’re a taking. will the That’s that supplied in

We alignment comfort in China they doing, be global see have we’re we OEMs us local their our what and OEMs to with in XXXX. of the and expecting validated from to with are approach what for seem with level this

Suraj Kalia

Thank you.

Operator

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

Larry Solow

couple Suraj’s as new well. ones follow-ups A and thanks. Great, of of couple questions a to

or think it’s Sunny, you today. accounting, full-time on the might on Just about mentioned mentioned million I Sam – in sales have $XX

So that’s about X% of sales.

years Just still of products I how or trying total my sales that a in you say? today. little sort X new of the figure fair it’s a to they hands last like of under imagine to of represent products get around much have X%. like and Is introduced your

Sam Maheshwari

Sam. is this Larry,

terms and last received the X new products, perspective. products revenue In the years of related over from to that new

Larry Solow

whether that don’t just trying Or you to yes, – might look that’s period, know but how a sense today have could our and that that’s revenue introduced newer maybe X X that that, get whatever in some [indiscernible]. of how you X contributing in – whatever be sort years years years, products at X I’m year much I or what guys of over and

Sam Maheshwari

Larry, it So product, the say do customers have I into number we my that the released release qualitatively goes right see volume has here top now. that up our is head picks product in customer’s are volumes. trying do product it fairly through off once when been of and not that product, want product. business, – long And to sense pretty a the the in I that release But their then they we cycle to adoption the when and make their

years, X high it is years been normal for time of where revenues. to not in quite and a has generating and X product significantly amount released that business be some easily quite time the is that quite it easily, could and our So some natural X

product But X out of we seeing and figure in of do the So that may some we be can years perspective, not a future. for lot whole that of revenues, it way. for from track not release, we so that conversation the first

think more horizon in more thinking business, will X-year I from in our a sense of it terms perspective. make

at later So that some call, other here. don’t we can about talk it I have Larry, right

Larry Solow

Okay.

Sunny Sanyal

can give I’ll of you I one give reference. – frame Larry,

Larry Solow

ahead, Yes. Go Sunny.

Sunny Sanyal

One reference. of frame

time, off X of – been in a OEMs those. the designed. now when China our we implementing from And those about we recall, were and tubes designing in. time, at CT revenues discussions spun there China tubes and them recall, of that may And said at lot had or contribution years. we You It’s them, were that

into now are it years to you’re and our as expect does what chatting China we going that’s to how a sort once X, of launch X We what you kind happens And that volume sort market. have active of you, do, journey, of reference, frame of we products, long an in now when what revenues see are. take? to

Larry Solow

I appreciate yes, appreciate I that. color. the Sunny,

While that. I you got on

So referenced in from vast the or XX% the that China. Sam majority is coming CT of Is you tubes? referenced today that

Sunny Sanyal

tubes It’s tubes in there. us for is tubes, And majority CT of yes.

Larry Solow

Right.

Right, But you then going else? were say to Okay. you off cut I there, think something okay. I did

Sunny Sanyal

that’s it. No,

Larry Solow

if issues And maybe of you of or, EBITDA were in XXX did guess, EBIT just what sort price-to-cost XXX you there on guys XXX thought margin in then I you to year, on sort You did higher. margin. adjusted you margin. lag, mentioned raising. We trying far what of supply I bps think lag, tie how Okay. versus I bps have – in quarter you are you basis inflation – early I places QX, look a think a price one price-to-cost gross we? catch follow-up tailwind another of like cited along on you guess also with at was you chain up on I sort this the like just the said And point kind But question. the XXX of to

as XXX does spoke that get QX? we So look should out? kind bps XXX How view Can about capture you we more of to that that? in we that

Sam Maheshwari

Yes, Larry.

and on were precrisis it, talked there So that lot of of have things now supply A and number X, freight it, including efficiencies levels. manufacturing pre-COVID working and months ago, X chain-driven issues, about are type headwinds been when them slowly, were crisis we back etcetera. a we the to of or

are there say basis at say, XXX more improvement to point, possible would points. we where I basis this is closer still of So would But XXX here. from points to I XXX XXX,

already might get recovered there here working lot – some of have are it. it, margin we have now quarter-to-quarter been and are noise we cause and these of the from But are those the actually – is through that a other You behind and improvement. factors or we

Larry Solow

enough. Fair

that of sort on you margin. XXX bps said So gross

like you driving calendar operating would I be the by the So year, little bit end, it or new there it of guess, prices on beyond more that, going just maybe once get operating hopefully sometime products a right? is feels that maybe and higher but end have leverage, forward to the

Sam Maheshwari

things, element operating One third will said segment business, Yes, of has the And a a new what that. there then the the that portion you Larry. is margin. in higher will products on and margin will effect be factor three as gross a the will drive be mix. becomes second industrial it positive there exactly, be is the other leverage. the overall major then the volume, sales And

Larry Solow

it. Got

question. me one Okay. more squeeze And just in let

lower why are – the or maybe how guidance, I range, the But we That’s I quarter guidance mix same gross QX, missing of being had it you is margin quarter, as usually, seasonally of the I at majority any sort margin. of down a Usually, I QX. come the on kind of there? Is because anything figure have than you being revenue. there so trying medical and better usually get a out to I little is just come this thought am to little QX out QX and a – we Just stronger reason with am medical look bit seasonally and bit nice stronger. a stronger

Sam Maheshwari

sure. Yes,

Larry, that for – will question I let you. take So me

‘XX versus FY X%. of the of around look we at you are So, ‘XX, first our FY second half up half if

were If at about to first half, second X%. year we last you look half

So, But quarter, that versus I million we pretty what same you the into comes would can pattern. within happening optics bit then say than at so a it, at said. you But half, $X broader here, half the growth. what X% X.X% of give that full we look we are much million, we this something midpoint or for and kind $X look at the if the is are the showing from if a of quarter-to-quarter. pretty can it next year versus to also $X quarter, little million, for And end up full X%, the we year, much doing guided quarter, the are looking quarter and at

perspective, for to from what out we that achieving a have are quarters essentially, So ‘XX. can But between there couple we effect. the millions then set optics and of FY here our do

Larry Solow

enough. Fair appreciate Thank all you. the it. Got I color.

Sam Maheshwari

Larry. you, Thank

Operator

of Our with Jefferies. proceed next your question comes from the question. Young Please line Li with

Young Li

the trend, margin of in there. a Maybe to Thanks so good And visibility industrials? on early the if guess our ordering see of the a growth the cycle growth are contribution maybe this the sustainability little into about questions. performance, of your we industrials and bit multiyear still patterns the is sort innings there? Alright. to for for can growth talk you wondering start I taking continued much Great. m I

Sunny Sanyal

and strong, So, been growing. and I been back think been industrial strong consistently it us, come post-COVID, for has it it has has and has been

are it. So, very we with pleased

market are a are are adopting imaging the of fairly point We rapidly. that certain there segments where at also

benefit And effect. so from to we – continue be that

seems industrial lumpy. – industry are non-destructive So, inspection of for fairly – look, have strong tender-driven adoption can fairly to optimistic and been are and it that us. industrial, be that are continued are we be fairly But of technology there general that steady in about areas in parts

the So, faster I in prognosis well, am long-term – optimistic largely we greenfield because a medical It’s than growing past. also as it’s about have as market. the it’s discussed

Young Li

growth below historical I Okay. mid-single my just if provide year-over-year, to digit And did great the you expectations? be it this relative China, rev outlook I How growth forward? Very single more your growth on that can growth of saw for on you guess to color the some what’s trend. helpful. that’s going It China perform that the XX% low implies guess quarter. follow-up for would

Sam Maheshwari

Young. sure, Yes,

I positive So, in growth, expectations. back the to neither then would say are – are China this question last quarter. There And per for of becoming or our numbers performed versus a reasonably China your for was a expectations now that as fairly negative large us. coming becoming year-over-year

law well the – a ongoing as XX% now large to coming size grow of dollar to So, in percentage even reasonably smaller as but terms is the as it’s basis, region amount. is numbers for difficult XX%, as continue well large in of

percentages, seeing past that in are and which growth seeing year-over-year but over this – is of are kind strength the moderate, you So, of but in terms about we in that strength talked moderating, is natural, fall of room world. there line the we rest growing – still of with the the of in world, terms will in go to but there rest more China China time, is the back growth some faster than fall have in

how it to China So, do. would sales expect China as is happening and are is now, like – we behaving of

Young Li

Got you much. very it. Thank

Operator

the comes Sidoti question next James line Company. with & with your Sidoti Our of question. from proceed Please

James Sidoti

because a and back. issues I for beginning cutting components thanks supply afternoon the OEMs. Good at you that taking questions. the Hi. they at worried were maybe year, about little Can be your having of had of the know might they talk oversupply were and that your you bit inventory an medical chain

have down product subsided? the inventory of where months chain road, issues those supply Now, months your at the is And eight to six the OEMs?

Sunny Sanyal

yet. then, flow environments of they the issues getting our couple are was There declaring through customers, there were that. and our But had some issues chain inventory. quarters eased. with things we some and have Hi where our victory OEMs acute of improved the seeing a flow amount our are of quarter And well, are generalize. their Yes, are seems Jim, ago, chain have is some of and first supply chain this production caught will problems situations spotty spots and – there supply supply were to of since faced of you stress still I because issues still get up. been but a recall, Sunny. in factories those there may – as with few lot that’s vendors, products that where There backlogs, why have broad-based a they our while were of result are get as of not we to huge

are they So, say, than where product it’s would inventory woods our overall were would yet, out ago. with, in, not the the I that fully but of a of I levels lower our I say, customers of couple quarters say would

James Sidoti

it Okay. concerns quarters other it of two was uncertainty. of slow ago economic one road, as then may we seems hospital you pressures initially. more as you bad up six their down down might there thought as subsided willing to like because hospitals thought not the step capital spending, months seen you you again, And And had well? Have the the be the recession capital spending? Have seen

Sunny Sanyal

increasingly, labor-related their doing are easing is hearing And better labor. What are we that use the of we costs hospitals are with seeing up. temporary

that see improves positive, profitability. a as that we So,

by buying We continued have hospitals. – also seen some buying amount of

what hard basis. positive speculate than particularly looks So, global that, beyond geography. generalized vary it’s I on for say like, more it that to was things it’s environment it’s – But a before. would by These us

James Sidoti

million current I million, where up $XX was and then And the is? the cash that one sheet. other balance sneak in in some the more on Prepaid that Alright. $XX of quarter. expense Okay. assets, Is about will just

Sunny Sanyal

say want I to and hear I Yes. Did you make other Jim, it sure current prepaid assets? just correctly.

James Sidoti

Right.

Sunny Sanyal

Yes.

other where it current Some is that’s cash days yes. is, is XX of the it beyond considered and because assets,

James Sidoti

or in any much just equivalent. the the cash quarter, Okay. that that was other is the so basically Is up why there reason

Sunny Sanyal

cash is That basically equivalents. the

but a a Now, is is few here be nice – or there, of the cash might XXXK it it level change, other most equivalents. the

James Sidoti

Alright. Okay. Alright. felt I what just you. want sure. Thank That’s to I make

Sunny Sanyal

you. Thank

Operator

And Please the with questions. Anthony our from next your of proceed comes with Mizuho question Securities. Petrone line

Anthony Petrone

we And versus margins. mix, get just overall where over that for on here. will manufacturing Thanks look Lake being is ahead at update me follow-up that kind to – as have gross Wuxi in actually just amount squeezing next influences question. trend? mix an I margin years, the On produced what can Salt how of and And one want couple of

Sam Maheshwari

is voice. hear your So, Sam. this Anthony, Good to

about terms done in smaller of for Germany, scheme Philippines, us. even things, now, revenue Lake would as say a production, remaining the is City the Wuxi, through overall I to of Wuxi. and closer or in done Wuxi site and value volume of Salt is XX% is Netherlands So, of through

through Wuxi. bit that on a would of still it gives of annualized little basis, revenue you XX% volume So, I than say less overall our perspective. going an a is

margin, can little So, And it of a terms in a and we just depends change. from shipping that of you what of perspective overall it that there. are gives there, gross type modality then bit from

something it depending It versus else. from So, it or not to Wuxi is upon difference is gets which customer, anything Salt that – City. due impacted are is what modality Lake largely labor which shipping we

quarter-to-quarter. So, It it’s of question vary a a little to can bit from answer. hard

Anthony Petrone

tubes last detectors, between tubes particular, panel mix CT year, an in but flat in maybe were holding update well. months flat on and pricing was there extending even on the panel components, detectors, just ago, price other pressure maybe quite XX And

into back the of we as and detectors the on questions. Thanks anything flat panel between So, into the for year, tubes maybe the XXXX. again even note half look taking of pricing side

Sam Maheshwari

Yes.

years and C&C XX% connect sources, be say in I our and to detectors, panels ago, business So, would general, XX% control and software. used be would a or and XX% few

that which software, and XX% but are across and used I XX%. be now, medical be used to of we segments, say, has and XX% equal between split, would grown As tubes XX% sources C&C the side, industrial the around sources that towards the XX% a side bit medical than panel XX% the the – panels, now and But sources factor side. has driven faster tubes moved towards by that to

so components sources What And the other business. Anthony? X-ray and question, is second that overall was distribution of between panels the and the

Anthony Petrone

Price.

Sam Maheshwari

customer you base In pricing, increases. price been a broad I so know, that. have months for had at we XX ago, terms would initiative that the or entire of ago, we as say XX across successful months

of a type the And on that been somewhat based prices to side panel increases those been prices back sources prices. pricing since prices go then then panel months a look at us were spiked up. up. all say, on the been and in to And XX side mechanical for increase able increase last time, But those product, panels. And the to it’s those largely have a that we semiconductors, it on hardware – enabled metals to higher Those – bit our We phases a into as of on the I helped us a tubes go would as getting and more. bit of experience, that, side. costs the prices XX on has has which on more sources. I months side, of now, some

Anthony Petrone

very you Thank much.

Operator

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

Christopher Belfiore

Thank you. I comments. will you hand to some Sunny call back your now Thank for final the for questions.

Sunny Sanyal

year. on employees of taking third time Thank for quarter achieve very continued and very difference join the on that and to a daily for In for I am And our are the our rate thank results and interest make to proud Chris. we today a And you, basis. target track global with pleased in the closing, all growth Varex. you solid us as your always, team

Christopher Belfiore

goodbye. you today. August presentation slide thank participating through your our will XX you, Thank on call and supplemental of can call all vareximaging.com/investorrelations. our for and you website, and in conference earnings webcast available our archived questions Thank this accessed quarterly be be The and replay will A Sunny, on be conference website. and

Operator

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

Varex Imaging (VREX) 1 Aug 232023 Q3 Earnings call transcript