Varex Announces Financial Results for First Quarter Fiscal Year 2025

SALT LAKE CITY--(BUSINESS WIRE)--Varex Imaging Corporation (Nasdaq: VREX) today announced its unaudited financial results for the first quarter of fiscal year 2025. 1QFY25 Summary Revenues of $200 million GAAP gross margin 34% | Non-GAAP gross margin* 35% GAAP operating margin 6% | Non-GAAP operating margin* 7% GAAP net loss $0.01 per diluted share | Non-GAAP net earnings* $0.07 per diluted share Cash flow from operations was $10 million Sunny Sanyal, Chief Executive Officer, stated, "Demand in the first quarter was solid, with both Medical and Industrial revenue up year-over-year. Favorable sales mix and productivity gains across both segments resulted in higher than expected profitability and earnings per share." Sanyal added, "We expect to see continued solid demand across both segments in the second quarter of fiscal 2025." Varex’s revenue of $200 million was up 5% year-over-year. Medical segment revenue of $145 million was up 3% year-over-year. Industrial segment revenue of $55 million was up 10% year-over-year. Non-GAAP gross margin was 35% in the quarter compared to 31% in the first quarter of fiscal year 2024 and non-GAAP EPS increased to $0.07 in the quarter from $0.06 in the first quarter of fiscal year 2024. Balance Sheet & Cash Flow Cash flow from operations was $10 million in the first quarter of fiscal year 2025. Cash, cash equivalents, and marketable securities, was $219 million at the end of the first quarter of fiscal year 2025 compared to $213 million at the end of fiscal year 2024. Outlook Our guidance for the second quarter of fiscal year 2025 is as follows: Revenues are expected to be between $200 million and $215 million Non-GAAP net earnings per diluted share is expected to be between $0.05 and $0.20 Guidance for the company's net earnings per diluted share is provided on a non-GAAP basis only. This non-GAAP financial measure is forward-looking, and the company is unable to provide a meaningful or accurate reconciliation to a GAAP forecast of net earnings per diluted share without unreasonable effort due to certain of these reconciling items being uncertain, out of our control, and the amount and timing of these items being unable to be reasonably predicted. The actual amounts of such reconciling items could have a significant impact on the company's GAAP net income (loss) per diluted share. Non-GAAP Financial Measures *Please refer to "Reconciliation between GAAP and non-GAAP Financial Measures" below for a reconciliation of non-GAAP items to the comparable GAAP measures. Conference Call Information Varex will conduct its earnings conference call for the first quarter of fiscal year 2025 today at 3:00 p.m. Mountain Time. The conference call, including a supplemental slide presentation, will be webcast live and can be accessed at Varex’s website at www.vareximaging.com/investor-relations. Access will also be available by dialing 877-524-8416 from anywhere in the U.S. or by dialing 412-902-1028 from non-U.S. locations. The webcast and supplemental slide presentation will be archived on Varex’s website at www.vareximaging.com/financial-reports. A replay of the call will be available from today through February 20th at 877-660-6853 from anywhere in the U.S. or 201-612-7415 from non-U.S. locations. The replay access code is 13751211. The listen-only webcast link is: https://event.choruscall.com/mediaframe/webcast.html?webcastid=8hRSur2G About Varex Varex Imaging Corporation is a leading innovator, designer, and manufacturer of X-ray imaging components, which include X-ray tubes, digital detectors, and other image processing solutions that are key components of X-ray imaging systems, as well as X-ray imaging systems for industrial applications. With a 70+ year history of successful innovation, Varex’s products are used in medical imaging as well as in industrial and security imaging applications. Global OEM manufacturers incorporate the company’s X-ray sources, digital detectors, connecting devices, and imaging software in their systems to detect, diagnose, protect, and inspect. Headquartered in Salt Lake City, Utah, Varex employs approximately 2,300 people located in North America, Europe, and Asia. For more information visit vareximaging.com. Forward Looking Statements This news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements concerning unaudited financial results; earnings guidance; industry or business outlook; product demand; expected future financial results or performance; and any statements using the terms “believe,” “expect,” “anticipate,” “can,” “should,” “will,” “could,” “estimate,” “may,” “intend,” “potential,” and “possible” or similar statements are forward-looking statements that involve risks and uncertainties that could cause Varex’s actual results and the outcome and timing of certain events to differ materially from those anticipated. While forward-looking statements are based on assumptions and analyses made by Varex that it believes to be reasonable under the circumstances, whether actual results and developments will meet such expectations depends on a number of risks and uncertainties which could cause actual results, performance, and financial condition to differ materially from such expectations. Such risks and uncertainties include reduction in or loss of business of one or more of our limited OEM customers; loss of business to, and an inability to effectively compete with competitors; market erosion or loss of customers due to pricing pressures and other factors; failure to meet customers’ needs and demands; economic instability, shifting political environments, changing tax treatment, reactionary import/export regulatory, tariff, and trade policy regimes, and other risks associated with doing business internationally; supply chain disruptions; inability to maintain or defend intellectual property rights, and the high cost of protecting such rights and defending against infringement claims; disruption of critical information systems or material security breaches of such systems; non-compliance with product-related regulations and delays in obtaining regulatory clearances or approvals; limitations imposed by operating and financial restrictions of our debt financing agreements; and the other risks listed from time to time in our filings with the U.S. Securities and Exchange Commission, which by this reference are incorporated herein. Any forward-looking statement made in this news release speak only as of the date on which it is made. Factors or events that could cause Varex’s actual results to differ may emerge from time to time, and it is not possible to predict all of them. Varex assumes no obligation to update or revise the forward-looking statements in this release because of new information, future events, or otherwise. Varex has not filed its Form 10-Q for the first quarter of fiscal year 2025. All financial results described here should be considered preliminary and are subject to change to reflect any necessary adjustments or changes in accounting estimates that are identified prior to the time Varex files its Form 10-Q. VAREX IMAGING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended (In millions, except for per share amounts) January 3, 2025 December 29, 2023 Revenues, net Medical $ 144.6 $ 139.9 Industrial 55.2 50.1 Total revenues 199.8 190.0 Gross profit Medical 49.5 38.9 Industrial 19.0 18.2 Total gross profit 68.5 57.1 Operating expenses: Research and development 23.5 20.5 Selling, general, and administrative 33.8 32.4 Total operating expenses 57.3 52.9 Operating income 11.2 4.2 Interest income 2.1 1.9 Interest expense (8.0 ) (7.3 ) Other (expense) income, net (2.8 ) 0.6 Interest and other expense, net (8.7 ) (4.8 ) Income (loss) before taxes 2.5 (0.6 ) Income tax expense (benefit) 2.6 (0.2 ) Net loss (0.1 ) (0.4 ) Less: Net income attributable to noncontrolling interests 0.2 0.1 Net loss attributable to Varex $ (0.3 ) $ (0.5 ) Net loss per common share attributable to Varex Basic $ (0.01 ) $ (0.01 ) Diluted $ (0.01 ) $ (0.01 ) Weighted average common shares outstanding Basic 41.1 40.6 Diluted 41.1 40.6 VAREX IMAGING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions, except share and per share amounts) January 3, 2025 September 27, 2024 Assets Current assets: Cash and cash equivalents $ 176.0 $ 168.7 Marketable securities 36.6 31.8 Accounts receivable, net of allowance for credit losses of $1.0 million and $1.0 million at January 3, 2025 and September 27, 2024, respectively 138.1 157.7 Inventories, net 279.9 264.8 Prepaid expenses and other current assets 26.3 26.9 Total current assets 656.9 649.9 Property, plant, and equipment, net 151.1 153.4 Goodwill 287.2 291.0 Intangible assets, net 14.2 16.1 Investments in privately-held companies 25.2 26.8 Deferred tax assets 3.1 4.7 Operating lease assets 27.1 28.3 Restricted cash 125.8 1.7 Other assets 41.6 45.1 Total assets $ 1,332.2 $ 1,217.0 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 65.6 $ 59.1 Accrued liabilities and other current liabilities 70.4 78.6 Current operating lease liabilities 3.7 4.0 Current maturities of long-term debt, net 1.4 46.3 Deferred revenues 9.4 7.9 Total current liabilities 150.5 195.9 Long-term debt, net 565.6 397.1 Deferred tax liabilities — 1.4 Operating lease liabilities 21.4 23.0 Other long-term liabilities 40.5 50.4 Total liabilities 778.0 667.8 Stockholders' equity: Preferred stock, $0.01 par value: 20,000,000 shares authorized, none issued — — Common stock, $0.01 par value: 150,000,000 shares authorized Shares issued and outstanding: 41,231,000 and 41,094,179 at January 3, 2025 and September 27, 2024, respectively. 0.4 0.4 Additional paid-in capital 470.0 467.2 Accumulated other comprehensive loss (0.3 ) (2.9 ) Retained earnings 70.1 70.4 Total Varex stockholders' equity 540.2 535.1 Noncontrolling interests 14.0 14.1 Total stockholders' equity 554.2 549.2 Total liabilities and stockholders' equity $ 1,332.2 $ 1,217.0 VAREX IMAGING CORPORATION RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES (Unaudited) Three Months Ended (In millions, except per share amounts) January 3, 2025 December 29, 2023 GROSS PROFIT RECONCILIATION Revenues, net $ 199.8 $ 190.0 Gross profit 68.5 57.1 Amortization of intangible assets 0.5 1.8 Non-GAAP gross profit $ 69.0 $ 58.9 Gross margin % 34.3 % 30.1 % Non-GAAP gross margin % 34.5 % 31.0 % SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE RECONCILIATION Selling, general, and administrative $ 33.8 $ 32.4 Amortization of intangible assets 0.4 1.8 Restructuring charges 0.7 0.1 Other non-operational costs 1.6 1.9 Non-GAAP selling, general, and administrative expense $ 31.1 $ 28.6 OPERATING EXPENSE RECONCILIATION Total operating expenses $ 57.3 $ 52.9 Amortization of intangible assets 0.4 1.8 Restructuring charges 0.7 0.1 Other non-operational costs 1.6 1.9 Non-GAAP operating expense $ 54.6 $ 49.1 VAREX IMAGING CORPORATION RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES (Unaudited) Three Months Ended (In millions, except per share amounts) January 3, 2025 December 29, 2023 OPERATING INCOME RECONCILIATION Operating income $ 11.2 $ 4.2 Amortization of intangible assets (includes amortization impacts to cost of revenues) 0.9 3.6 Restructuring charges (includes restructuring impacts to cost of revenues) 0.7 0.1 Other non-operational costs (includes other non-operational impacts to cost of revenues) 1.6 1.9 Total operating income adjustments 3.2 5.6 Non-GAAP operating income $ 14.4 $ 9.8 Operating margin % 5.6 % 2.2 % Non-GAAP operating margin % 7.2 % 5.2 % INCOME (LOSS) BEFORE TAXES RECONCILIATION Income (loss) before taxes $ 2.5 $ (0.6 ) Total operating income adjustments 3.2 5.6 Gain on purchase of business — (2.1 ) Other non-operational costs 0.1 0.1 Total income before tax adjustments 3.3 3.6 Non-GAAP income before taxes $ 5.8 $ 3.0 INCOME TAX EXPENSE (BENEFIT) RECONCILIATION Income tax expense (benefit) $ 2.6 $ (0.2 ) Tax effect on non-GAAP adjustments (0.1 ) (0.8 ) Non-GAAP income tax expense $ 2.7 $ 0.6 VAREX IMAGING CORPORATION RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES (Unaudited) Three Months Ended (In millions, except per share amounts) January 3, 2025 December 29, 2023 NET LOSS AND DILUTED NET LOSS PER SHARE RECONCILIATION Net loss attributable to Varex $ (0.3 ) $ (0.5 ) Total income before tax adjustments 3.3 3.6 Effective tax rate on non-GAAP adjustments % 3.0 % 22.2 % Tax effect on non-GAAP adjustments (0.1 ) (0.8 ) Diluted non-GAAP net income 2.9 2.3 Diluted net loss per share (0.01 ) (0.01 ) Non-GAAP diluted net income per share $ 0.07 $ 0.06 ADJUSTED EBITDA RECONCILIATION Net loss attributable to Varex $ (0.3 ) $ (0.5 ) Interest expense 7.9 7.3 Income tax expense (benefit) 2.6 (0.2 ) Depreciation 6.2 5.1 Amortization of intangible assets 0.9 3.6 Share-based compensation 4.1 3.7 Restructuring charges 0.7 0.1 Gain on purchase of business — (2.1 ) Other non-operational costs 1.7 2.0 Adjusted EBITDA $ 23.8 $ 19.0 Discussion of Non-GAAP Financial Measures This press release includes non-GAAP financial measures derived from our Condensed Consolidated Statements of Operations. These measures are not presented in accordance with, nor are they a substitute for U.S. generally accepted accounting principles, or GAAP. These measures include: non-GAAP gross profit; non-GAAP gross margin; non-GAAP operating expense; non-GAAP operating earnings; non-GAAP operating earnings margin; non-GAAP earnings before taxes; non-GAAP net earnings; non-GAAP net earnings per diluted share, non-GAAP dilutive shares; and non-GAAP EBITDA. We are providing a reconciliation above of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. We are unable to provide without unreasonable effort a reconciliation of non-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis due to the potential significant variability and limited visibility of the excluded items discussed. We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, and forecasting and planning for future periods. We consider the use of the non-GAAP measures to be helpful in assessing the performance of the ongoing operation of our business by excluding unusual and one-time costs. We believe that disclosing non-GAAP financial measures provides useful supplemental data that allows for greater transparency in the review of our financial and operational performance. We also believe that disclosing non-GAAP financial measures provides useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Non-GAAP measures include the following items: Amortization of intangible assets: We do not acquire businesses and assets on a predictable cycle. The amount of purchase price allocated to intangible assets and the term of amortization can vary significantly and are unique to each acquisition or purchase. We believe that excluding amortization of intangible assets allows the users of our financial statements to better review and understand the historic and current results of our operations, and also facilitates comparisons to peer companies. Purchase price accounting charges to cost of revenues: We may incur charges to cost of revenues as a result of acquisitions. We believe that excluding these charges allows the users of our financial statements to better understand the historic and current cost of our products, our gross margin, and also facilitates comparisons to peer companies. Restructuring charges: We incur restructuring charges that result from events, which arise from unforeseen circumstances and/or often occur outside of the ordinary course of our on-going business. Although these events are reflected in our GAAP financials, these unique transactions may limit the comparability of our on-going operations with prior and future periods. Acquisition and integration related costs: We incur expenses or benefits with respect to certain items associated with our acquisitions, such as transaction costs, changes in fair value of acquisition related hedges, changes in the fair value of contingent consideration liabilities, gain or expense on settlement of pre-existing relationships, etc. We exclude such expenses or benefits as they are related to acquisitions and have no direct correlation to the operation of our on-going business. We also incur expenses or benefits with respect to certain items associated with our acquisitions, such as integration costs relating to acquisitions for any costs incurred prior to closing and up to 12 months after the closing date of the acquisition. Impairment charges: We may incur impairment charges that result from events, which arise from unforeseen circumstances and/or often occur outside of the ordinary course of our on-going business and such charges may limit the comparability of our on-going operations with prior and future periods. Other non-operational costs: Certain items may be non-recurring, unusual, infrequent and directly related to an event that is distinct and non-reflective of the company’s ongoing business operations. These may include such items as non-ordinary course litigation, legal settlements, inventory write-downs for discontinued products, cost of facilities no longer in use, extinguishment of debt and hedge costs, environmental settlements, governmental settlements including tax settlements, and other items of similar nature. Non-operational tax adjustments: Certain tax items may be non-recurring, unusual, infrequent and directly related to an event that is distinct and non-reflective of the company’s normal business operations. These may include such items as the retroactive impact of significant changes in tax laws, including changes to statutory tax rates and one-time tax charges. Tax effects of operating earnings adjustments: We apply our non-GAAP adjustments to the GAAP pretax income to calculate the non-GAAP effective tax rate. This application of our non-GAAP effective tax rate excludes any discrete items, as defined in the guidance for accounting for income taxes in interim periods, or any other non-operational tax adjustments. Dilution offset from convertible notes hedge transaction: In connection with the issuance of the company’s Convertible Senior Unsecured Notes (the Convertible Notes) in June 2020, the company entered into convertible note hedge transactions (the Hedge Transactions) to reduce the potential dilutive effect on common shares upon the eventual conversion of the Convertible Notes. GAAP diluted shares outstanding includes the incremental dilutive shares from the company’s Convertible Notes. Under GAAP, the anti-dilutive impact of the Convertible Note Hedge Transactions is not reflected in GAAP diluted shares outstanding. In periods in which the average stock price per share exceeds $20.81 and the company has GAAP net income, the non-GAAP diluted share count includes the anti-dilutive impact of the company’s Hedge Transactions, which reduces the potential dilution that otherwise would occur upon conversion of the company’s Convertible Notes. We believe non-GAAP diluted shares is a useful non-GAAP metric because it provides insight into the offsetting economic effect of the Hedge Transactions against potential conversion of the Convertible Notes.

Varex Announces Financial Results for First Quarter Fiscal Year 2025

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