VREX — Varex Imaging Corporation

Varex Imaging Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenue: $210 million, up 5% year-over-year, aligning with the high end of guidance.
• Non-GAAP Gross Margin: 34%, at the high end of expectations, benefiting from a favorable product sales mix.
• Non-GAAP EBITDA: $29 million, up 12% year-over-year.
• Non-GAAP EPS: $0.19, an increase from $0.10 in the prior year.
• Medical Segment Revenue: Stable at $145 million (69% of total revenue).
• Industrial Segment Revenue: $65 million, up 17% (31% of total revenue).
• Operating Income: $19 million, up from $14 million year-over-year.
• Cash Position: $126 million, down $30 million from the previous quarter.
• Inventory: Increased by $29 million to $328 million, attributed to anticipated demand and new product ramps.

2. Strategic Updates and Business Highlights

• Strong growth in the Industrial segment, particularly in cargo systems and nondestructive testing.
• Positive engagement at the RSNA conference, with over 150 customer meetings focused on new technologies and design wins.
• Introduction of a modality-based approach to product offerings, enhancing customer collaboration and potential for long-term revenue.
• Progress in the India manufacturing strategy, with ongoing production of detectors and plans for a tube factory.

3. Forward Guidance and Outlook

• Q2 Revenue Guidance: Expected between $210 million and $225 million.
• Q2 Non-GAAP EPS Guidance: Expected between $0.15 and $0.25.
• Anticipation of continued strength in Medical segment, especially in CT, and robust order activity in Industrial.
• Confidence in the long-term growth potential driven by innovation and customer engagement.

4. Bad News, Challenges, or Points of Concern

• Inventory Levels: Increased inventory may indicate potential overstock or supply chain challenges, with a goal to normalize inventory in the upcoming quarters.
• China Market Stability: While revenue from China remains stable, macroeconomic uncertainties could impact future performance.
• Operating Expenses: Although down year-over-year, ongoing costs related to ramping up India operations are impacting profitability.

5. Notable Q&A Insights

• Market Conditions: Management expressed optimism about customer engagement and order activity, particularly in the Medical segment, indicating a shift from maintenance to new product development.
• India Operations: The India factory is operational, producing detectors and tubes, with strong customer interest in locally sourced products.
• Photon Counting Technology: Progress is being made with two OEMs in product commercialization, with a focus on democratizing access to this technology.
• Cargo Systems Orders: Management noted that orders are strong but will not disclose every purchase order, indicating a strategic shift in reporting.
• Refinancing Plans: The company plans to refinance its high-yield debt before it becomes current in October 2026, aiming to reduce interest costs.

Overall, Varex Imaging reported a solid start to fiscal 2026, with strong growth in the Industrial segment and stable performance in Medical, while navigating challenges related to inventory and macroeconomic conditions.