Varex Imaging Corporation Q3 FY2025 earnings call

• Revenue of $203 million was above the high end of guidance; non-GAAP gross margin was 34%, above guidance. - Chinese customers paused shipments due to high tariffs but resumed once tariffs dropped, and Varex accommodated their needs. - Medical segment progress: India expansion plans, LUMEN HD detectors launched with regulatory approvals, photon counting with OEMs and new product THOR for industrial CT. - Industrial segment: Cargo systems performing well, new orders for cargo inspection systems, vertical integration advantage. - Paid off $200 million convertible notes, ended quarter with $153 million in cash, adjusted EBITDA $29 million for the quarter.

Total revenue was $203 million in the third quarter. The Medical segment had revenue of $142 million (70% of total revenues) and decreased 4% year-over-year. The Industrial segment had revenue of $61 million (30% of total revenues) and increased 1% year-over-year. China sales contributed 15% of total revenues, increased 4% year-over-year, and ended up fairly in line with recent quarters.

• Fourth quarter revenues expected between $210 million and $230 million. - Non-GAAP earnings per diluted share expected between $0.10 and $0.30. - Non-GAAP gross margin expected 32%-33%, non-GAAP operating expenses ~$51 million, interest and other expense net $9M-$10M, tax rate ~25%.

• Tariffs: Fluctuations in tariffs affected shipments and margins. - Supply Chain: Dependence on global supply chains and potential disruptions. - Regulatory: Changes in regulatory requirements impacting product approvals and sales.

Q: Could you fulfill orders to China and did it cause higher expenses?

A: Sunny Sanyal said no, they had capacity and fulfilled demand without extra expenses.

Q: Expectations for China sales in Q4?

A: Sam Maheshwari said demand in China is stable and healthy, expected to remain normal.

Q: Photon counting in medical OEMs?

A: Sunny Sanyal said there are big CT projects on medical side with OEMs in design implementation phase.

Q: China business and government stimulus impact?

A: Sunny Sanyal said sales in China steady, no lumpy buying, and no significant impact from government stimulus yet.

Q: Gross margin outlook and mix?

A: Shubham Maheshwari said gross margin degradation due to tariffs and cargo systems mix, with service margins improving over time.

Q: Supply chain redirect for tariffs?

A: Sunny Sanyal said making progress with initiatives like India production, bonded warehouses, and passing price increases, but takes time.