VREX - Earnings call transcript Q3 2024 | Varex Imaging Corporation

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Operator

Greetings. Welcome to the Varex Imaging Third Quarter Fiscal Year '24 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. At this time, I'll turn the conference over to Christopher Belfiore, Director of Investor Relations. Christopher, you may now begin your presentation.

Christopher Belfiore

Good afternoon, and welcome to Varex Imaging Corporation's earnings conference call for the third quarter of fiscal year 2024. supplemental Sunny CFO. Please President webcast website note conference includes are Sam CEO; of at today can call our that Maheshwari, that a vareximaging.com. me Sanyal, at and our and this be With accessed presentation Varex's slide the live simplify to of The and the for third quarter website. To quarter year presentation unless XXXX. otherwise archived on will are webcast discussion, be stated, fiscal slide Varex's supplemental our all references the

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

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

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

Sunny Sanyal

afternoon, Thanks, us everyone, joining for our Chris. quarter you call. Good third and earnings thank for

came as our within in strength business, segment. our Third expected with in Industrial cargo quarter revenues continued inspection

in continued resulting inventory adjust we in chain some to levels reduced for quarter, segment is of increasing see the We medical years. believe customers during the our supply our inventory demand Medical several past During the levels, the result challenges over customers this products.

product of we cargo to in inventory segment. XXXX. In a these actions quarter. In proportion We the that adjustments as margins gross a sales result China, early lower the equipment quarter continued quarter, margin the result expect government. of to in sales Chinese ongoing the unfavorable was service primarily in subside sales mix in our calendar than anticipated, Industrial higher should third by as gross pressured of the see softness anticorruption compared The

see from down optimistic XXX or to quarter, resumes. slice is the improve in We Chinese to performance, XX to modest While CTs a medical China Varex we saw sales benefit XX value, are year-over-year, well will market desire to Particularly, CTs. we that institutions sequentially. the in slice that and by or medical positioned growth imaging when continue upgrade and improvement remain

revenue XX% in quarter was was gross the Turning year-over-year. compared the fiscal up the year-over-year, year. quarter $XX quarter We the increased compared to and XX%. Adjusted $XXX the the decreased ended quarter $X.XX to cash, results, XXXX. non-GAAP to and equivalents Non-GAAP was third revenue the securities the third last $XX in quarter was EPS on cash of million sheet, with in the margin Medical X%. quarter while third in third segment of Revenue $X.XX, marketable EBITDA down million segment million balance third XX% Industrial

by detail in sales down into a China. insights some Medical the as our you trend. lower average, to in the segment we modality quarter, customers driven our and actions in sales in refer X-quarter sales quarter, Sales will to compared by adjustment give inventory by were which me Let primarily

China our in Sales modalities China sequentially, in environment modality sales our slightly Industrial fluoroscopy, of oncology, cargo above sales trends. In line cargo remained improved all and CT in the solid, respective from our inspection our demand below security remained screening in and with strong in sales inspection the of segment, the While mammography its as sales were and customers dental quarter soft. Global benefited in in products Sales global their its overall trend. was improved tubes sales was slightly trend. radiographic markets.

We primarily including adjustments ongoing markets, continued from inventory challenging, operate softness and softness continue we remain detector electronics semiconductor, inspection. The by end experience manufacturers. to China, and in competition customers in our in battery in Asia-based other markets industrial

footprint long-term We continue well our as continue in hand let that, to on counting leadership, photon as we call over to particularly remain on in and to expand focused our priorities India. With Sam. the innovation, me as presence cost

Shubham Maheshwari

And hello, Sunny. Thanks, everyone.

revenues slightly below below margin in was XX% non-GAAP our $X.XX, midpoint of the the our quarter Our were million, was the guidance, range. of guided midpoint $XXX while gross slightly our guided third EPS range. below Non-GAAP

XX% and China. decreased in segment, million in $XX continued were million. quarter of to were Medical revenues the Medical revenues our due XX% revenues the revenues quarter. were XX% Third Industrial in revenues fiscal softness $XXX revenues of third XXXX, to our and in compared Industrial driven total a part were quarter decrease XX% by Medical

investigation quarter due in to was overall of compared decline XX%. for lower of government's decreased the of in X% in third its the third X% The Looking XXXX, and fiscal by decreased quarter, APAC the Americas to fiscal healthcare XX% revenues quarter at third result into sales APAC in anticorruption campaign system. China while the XX% the EMEA the prior region, compared China revenues year-over-year year. primarily to and decreased accounted of

foreseeable market not improve there quarter do the the second While sales to to China expect third conditions in in the sequentially from we increased quarter, future.

GAAP results Let cover basis. on a me now our

XX%, fiscal income from operating expenses XXX year-over-year. compared Operating was million was approximately third were fully diluted EPS margin QX million $X points of basis million, XX quarter $XX and was and down Third a Net on $XX XXXX. shares. up per $X.XX XXXX million down million, were million quarter share, earnings $X $X to based the gross of

Now revenues. unfavorable moving we expected XX% our margin current the to to to of volume on gross XXXX. non-GAAP results down Industrial XX% quarter levels. the the of equipment segment of quarter from spending remain quarter. in service mix million sales. R&D higher fiscal driver the for margin compared decreased lower up in XX%, and fiscal was R&D and product lower was third $X The primary is as around was third R&D was experienced of million, sales $XX spending XXXX. Gross

for may XXXX. of percentage of SG&A was of were XXXX. million, SG&A fluctuate revenues, in at the sales was approximately XX% quarter $XX due end down the of XX% Operating revenue, to million, a third expense $XX However, quarter overall million, of the was expectations XX% up the $XX margin of same to million quarter. the levels. high to compared R&D last as revenues. Operating fiscal compared fiscal $X sales or our million compared quarter expenses $XX was of X% to third Operating income year.

expense tax million, an with of losses $X global the year. The and expected than impacts X% was in rate reform resulted tax the dpiX we unusually income in quarter, other favorable the joint the the expense income or Tax pretax result our or prior saw approximately in line. third decreased to in was Micro-X, of and venture our high and credits investment XX% $XXX,XXX, associated compared higher of third expense the pretax lower U.S. in During quarter primarily which tax of items income

for tax a on per quarter $X fiscal quarter earnings XX diluted million, or expect basis. down the year-over-year. diluted XX% the of shares Net were to XXXX. were We rate million share, $X.XX a fourth non-GAAP for of Average XX% $X.XX

sheet. balance XX by was and days. sequentially outstanding flat compared third payables receivable increased Inventory day $X of fiscal by and decreased XX days days. to the the days to of X to turning remained days. second quarter days days XXX sales quarter XXXX payable the improved in inventory by X Now to million and million $X Accounts at improved Accounts

marketable at EBITDA of debt was $XXX and that million and debt $X second quarter of outstanding million of third with the cash, was million. million, for equivalents $XXX the Net securities quarter ended debt year cash of and and XX% of million to $XXX $XX to to marketable and marketable quarter $XXX quarter information. XXXX. Please prior moving Now securities securities. the $XX million cash or of of flow was the million cash net $XXX Gross note $X operations includes up million of the sales. We cash compared $XXX cash million. Adjusted compared the was the from cash flow equivalents, up million and quarter end and $XX million of

$XXX months was was ratio basis. XX our adjusted month a approximately net trailing on Our EBITDA million debt trailing XX and X.Xx leverage

moving the outlook Now quarter. fourth the for to on

continue and per environment, detector expected and by expected to In $X.XX diluted $XXX revenues million adjustments is, certain share from customers $XXX demand $X.XX. in competition earnings inventory between navigate and We manufacturers. and to fourth this non-GAAP challenging the environment China, of quarter are a between softness million; due Asia-based continued are guidance light for

open $X and quarter; in of of XX%; non-GAAP we'll are questions. million $XX million to now XX% non-GAAP range diluted based about $X to on million; for to to call interest in margin shares. With share the XX% million; million a of and other range fourth about XX of non-GAAP expense, rate for net a gross XX% Our in $XX expectations count range expenses that, your tax of the operating a

Operator

comes Jefferies. of our with And today, Instructions] Li line [Operator from Young the question first

Young Li

bit wanted more be improved, moderately seemed a on to to but still I get guess it's better down I sequentially year-over-year, than mean, last little quarter. to China. start, color

quarter. bottom kind So last of

year well, you the comment more? competitive any know the that little just us can the China? Can your a comment might it's the in APAC? versus you since also maybe it's improvements stimulus going seeing although on go There's little pressures not foreseeable Eventually as a then, not a we in And anticorruption talk reconcile future to understand about comment all been help bit campaign. China Just away. the Maybe China in in bit your there details. on

Sunny Sanyal

Sam bit color. This little is Sunny. to a ask get more I'll give and started

sequentially few China, as our from uptick that slight for the -- that in sequential see orders a did but see trend sells and we we don't quarters. So next

effects said, continuing. the of we've are the audits still As

we as things look, undefined year, lot next a that about itself, by for future, see now don't a in of stimulus there's significant foreseeable go we we to The program. this However, movement stimulus will there. start into expect off. But the the taper

direct seeing yet. of impact not any are that we So

of equipment any that However, good can investment for a us, for impact that buying us. is care -- impacts in on have positive health

in our players. And that And intensity that's seeing where more competitors about balance the we on a This and in talked having overall, -- Asia-Pacific in of the But past an end market competitive is say So not the intensity that in competition as kick effect particularly low on of be orders detectors the any we're in don't of from players. program and good we've just sales of when is detectors. unusual should demand dental. us. that Asian indication is, modalities for muted, we terms continued the in this competition stimulus in, such we from there, would aggressiveness soft find in then, it's And have us. with for radiographic, will terms

Shubham Maheshwari

add improvement pattern. to the news in also years. And as now This a government there's seeing quarter other what positive, -- durable the like from done is that Plus, to we China, anticorruption Sam. is this from stimulus we has year you expanded said. in been campaign, for have are I'd with Sunny but that the last it way. a a knowledge there year X we that new X-year add campaign with not just this or but sequential X a was campaign while right though what there Even extended, X are are to

So that of sort pause. a gives us some

business expecting foreseeable improvement China China the in so are business we are to the we And meaningful that see a not -- expecting future.

Young Li

be thoughts the for a Appreciate little of I you a inventory black but Medical follow-up, Industrial Great. Okay. of seems still to some there. 'XX. is can side might easing. I pressures was be wondering early It qualitative the like box, well. guess bit China provide on color there, the fiscal for if any seems the doing

high would level on really any be comments helpful. So fiscal 'XX

Shubham Maheshwari

business that for to has Yes, at now -- sure, say a it level. provide, too soon It's China a would FY would try Young. try XX I low bit or for months I us, been 'XX been been has China that to but operating has almost

we perspective, meaningful not that we expecting seeing versus are are 'XX, there. we So of -- not expect a 'XX improvement lot whole from

or as Sunny However, phenomenon. And situation said side, inventory supposed XXXX. on from temporary to in of normalization as a the improve it's remarks, the expecting destocking that there prepared be over are his side the you to that said, beginning we

improvement at 'XX. better point, there than that situation be we to China gradual be ought this and a So slightly are ought expecting But to 'XX continues. the

And so we 'XX not for point. baking in this are at that

Operator

Our the next question line Kalia is with from Suraj of Oppenheimer.

Unknown Analyst

on is This Jacob Suraj. ] actually [

So topic little of China the bit of quickly coming back a just on granularity. for

end biggest inbound indicator your orders a moving on the mentioned being things positive You've of direction. into

push past no foreseeable had look expectations anything, this but to from XQ I changed does as if what, future, you the QX? fiscal this And wondering, out how just year? know we in said improvement, So

Shubham Maheshwari

in Yes, it a here said, improve are to we pattern bit, durable and did yes, pattern orders so I of as the a Jacob, but sales, not terms are little order continuing improve. that again, that seeing

worsening, And on are we a So kind obviously we they sustained hoping of sales I but are think have to pattern order that's low basis, stabilized they and what but the seeing. improve at are not levels. for not

for we 'XX So into sustained for improvement indicator we China. year to with this for line that been quarter that data is has expecting the an in point say going are FY where next is us want And a the here. be at one year, probably next point, not just

We expecting continue we'll are low we months significant this is are improve, to just possible It after these are monitor we X of situation. And expecting is at or there. But situation this now. things not improvement in see, we'll that the X a levels. but China current where as

Unknown Analyst

quick question in just the Great. And you one traction Industrial. see then, on

maybe Could with stability softness of of see cargo cargo going You that you there outside mentioned by that what remind Industrial it's is industrial the and of driven us cargo. you percentage forward? indications

Shubham Maheshwari

also Yes, a year last bit to so Industrial we grew business, year. expect this last over it quite and year grow

So there been capacity though where and particularly semiconductors the softness, it bit of a capacity Within because are the some there. decent there that electronics, digestion being pockets, seeing in traction we've Industrial, was predominantly digested is as happened, of shipped.

the So softness last this we quarter. are in quarter, some seeing there

that cargo for reasonably over mentioned, business sure. and few However, strong quarters we continue next as we have for visibility is the good strength to

sales we business, 'XX full cargo fiscal cargo although fiscal have our increasing. that So in for numbers overall disclosed FY previously, year been area year cargo business' proportion has --

cargo we think need I and us higher more disclose be previously was would and give you. expect year one those FY be But to just proportions complete able 'XX disclose our it full we you we what did in proportion to FY when 'XX business to than 'XX. in quarter much

Operator

of line comes & next Jim Sidoti the Sidoti from Company. question Our with

James Sidoti

improve don't to right? couple don't over I step-down I'm it say you expect I you hearing the hear expect China you next the I another is that saying think in quarters. But Is you think business, what near-term.

Shubham Maheshwari

That's correct, Jim.

we I think we yes. need sustained improve and are and to indicators at specific are see before low It's able already to that we very that's a what basis. say running it's saying, going on to definitive levels

Sunny Sanyal

will type is comment audit there for is about -- years of an then Jim, on And at that process. of pretty ongoing program the continuing, X that oversight purchasing our that's a understanding But another comment Jim, - our about be audit current our an the least, program sorry, action. the basis drastic

so at has much for a going ongoing that yet when far, it And down not level. transition seen more occur. the quite to it's we haven't but but shut way that's Now purchasing, it slower happened will allow like going to

James Sidoti

in All products update the right. technology? past. Any with You've counting on that the photon new about talked the

On you the headway are side, making Medical there? any

Sunny Sanyal

Yes.

had optimistic we're in is So that's the given part some growth that good contribution us. long-term term. our quarter we in for our still And color very what and looking And we're to of longer And strategy, progress as we good expect very of excited. last making terms its there.

think, thing to near-term I are get investments once is in in the we with be that cost-out the destocking continuing our though, India. levels, we about initiatives that we've as these past excited launched the

expect to where us areas lost We and market dental that radiographic, we in ability lost give regain to share and share have ground.

We in expect the to those up mid-term frame. make time

and optimistic all we're -- continuing about are these near-term and long-term So be looking investments, good it. both in to mid-term

James Sidoti

for one the What's on update that debt? last refinancing then And some Sam. of

Shubham Maheshwari

Yes, sure.

So, a we completed months we credit -- ago -- we Jim, completed the financing. few

convertible And around bonds we in are that. XXXX. our June so flexibility sufficient our revolver, And have maturing of

we we'll when we inform you, as and it when be And here. this to at comes time a but sure have reasonably decision, have time a flexibility some we So refinancing. make good to

James Sidoti

do you make think decision XXXX? that early And Okay. you'll in sometime

Shubham Maheshwari

I decision. when cannot us. time you'll some from make say the be the to at June, to but decision us time this Obviously have just will give be time what before it hear we would will final that

You know, the we is few when made a decision we it of by Jim, Directors, is then the everybody. way Board have days works inform before a

you. the is as so sure we'll be to inform decision And made,

Operator

of Young Our next question Jefferies. from Li the with is line

Young Li

guess is sheet question. Jim's allocation the I prior what up All question, just balance your following stronger guess, priorities right. the becomes I on from capital after refinancing? maybe the

Shubham Maheshwari

Yes.

continue completely requirements. XX all So fund fund right our now, the needs, between the needs, all to of capital months, business now, expenditure are priorities say to operating next

India right Salt Lake and our here. We in in also CapEx factory in now are investing automation for

operating are the needs, beyond deleveraging. So priorities

And deleverage to once in we we million an between in The which at but million of once to we that deleveraging is the do looking to at deleveraging in next yet of structure, debt $XXX past, expect are be We the the terms also think -- $XXX quantum months. to optimal at time. XX I we anywhere then want we we further have beyond I deleverage. think that would decided, opportunities are M&A and there, growth total in debt, would be said

X the are cash those months' operating needs, So beyond of the areas deployment of main beyond frame. XX time

Operator

time, the the remarks. At session. of we've Christopher our floor for Belfiore I'll to end And this back closing question-and-answer reached turn

Christopher Belfiore

A quarterly earnings for XX archived and Thank at webcast you replay supplements your our Thank accessed be call of available of and August will for the and be can our The and through in be presentation slide will participating today. website. vareximaging.com/investor-relations. all questions conference conference goodbye. call on you

Operator

today's concludes This conference.

You your a may Have time. at this lines you your wonderful participation. disconnect day. Thank for

Varex Imaging (VREX) 1 Aug 242024 Q3 Earnings call transcript