DEF: Varex Imaging Prepares for 2026 Annual Stockholder Meeting

Varex Imaging Corporation announces its 2026 Annual Meeting of Stockholders to address director elections, executive compensation, and auditor ratification, following a fiscal year with revenue growth but increased net loss.

Summary

• The 2026 Annual Meeting of Stockholders will be held virtually on Thursday, February 12, 2026, at 4:30 p.m. Mountain Time.
• Key proposals include the election of seven directors, an advisory vote on executive compensation, and the ratification of Deloitte & Touche LLP as the independent registered public accounting firm for fiscal year 2026.
• The record date for determining stockholders entitled to vote is December 15, 2025.
• Fiscal year 2025 revenue increased 4% to $845 million from $811 million in fiscal year 2024, driven by improved demand in both Medical (up 2%) and Industrial (up 10%) segments.
• The company reported a GAAP net loss of $70 million, or $(1.70) per diluted share, for fiscal year 2025.
• Cash and cash equivalents, and marketable securities stood at $155 million at the end of fiscal year 2025, with $75 million used to reduce outstanding debt.
• Cash flow from operations for fiscal year 2025 was $42 million, and total debt outstanding decreased to $370 million from $447 million.
• Net leverage decreased to 1.8x adjusted trailing-twelve months EBITDA.
• Sales in China increased by $10 million to $128 million in fiscal year 2025, representing 15% of total company revenues.
• Executive officers earned between 137% and 151% of their target annual cash incentive awards for fiscal year 2025.
• Fiscal year 2025 long-term incentive grant values were reduced by 29% compared to fiscal year 2024 due to a decline in the company's share price.

Sentiment

Score: 4

Explanation: While Varex Imaging demonstrated revenue growth, debt reduction, and strategic progress in new product development and market expansion, the significant increase in GAAP net loss and the negative impact on equity compensation (reduced LTI grants, underwater options) present notable financial challenges, leading to a slightly negative overall sentiment.

Positives

• Revenue increased to $845 million in fiscal year 2025, a 4% increase from the prior fiscal year.
• Both Medical (up 2%) and Industrial (up 10%) segments experienced improved demand, with particular strength in global CT sales and security inspection systems.
• The company made substantial progress in advancing innovative technologies such as photon counting for CT and nanotube technology.
• The new cargo inspection systems business launched in fiscal year 2025, booking over $55 million in orders and shipping over 15 systems.
• Solid progress was made with India expansion plans, focusing on low-cost manufacturing for radiographic components.
• Approximately $75 million of cash was used to reduce outstanding debt in fiscal year 2025, decreasing total debt to $370 million.
• Net leverage decreased to 1.8x adjusted trailing-twelve months EBITDA, reflecting higher profitability and solid cash generation.
• Executive officers earned above-target annual cash incentive awards, ranging from 137% to 151% of their targets.
• The company maintains strong corporate governance practices, including an independent Board Chair and a majority of independent directors.
• Stockholders showed strong support for the executive compensation policies, with approximately 97% approval in the 2025 advisory vote.

Negatives

• The company reported a GAAP net loss of $70 million, or $(1.70) per diluted share, for fiscal year 2025, an increase from the $48.3 million net loss in fiscal year 2024.
• Fiscal year 2025 long-term incentive grant values were reduced by 29% compared to fiscal year 2024 as a one-time action to ensure program affordability due to a decline in the company's share price.
• The exercise price of all outstanding stock options ($11.94) was greater than the closing stock price as of October 3, 2025, indicating these options held no value for Named Executive Officers (NEOs).

Risks

• General operational, economic, financial, legal, regulatory, and competitive risks faced by the company.
• Cybersecurity threats to the company's data and information systems, despite a dedicated program and insurance coverage.
• Risks associated with the company's use of artificial intelligence technologies, requiring ongoing monitoring and mitigation efforts.
• Potential conflicts of interest or related person transactions, which are subject to review and approval by the Nominating Committee.
• General risks and uncertainties that may cause actual results to differ materially from forward-looking statements, as detailed in the Annual Report on Form 10-K.

Future Outlook

The company expects its short-term and long-term incentive programs for fiscal year 2026 to remain substantially the same as fiscal year 2025, continuing to link executive compensation to Adjusted EBIT, adjusted EBITDA margin, and relative Total Shareholder Return. The Board plans to hold the next advisory vote on executive compensation at the 2027 Annual Meeting and the next advisory vote on the frequency of such votes at the 2031 Annual Meeting.

Management Comments

• "We hope that you can join us. However, whether or not you plan to attend, please vote your shares as soon as possible so that your vote will be counted." Walter M Rosebrough, Jr., Chair of the Board.
• "We believe that mailing or emailing the Notice and posting other materials on the Internet allows us to provide you with the information you need more quickly while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting." Matthew A. Martinez, Corporate Secretary.
• "The Compensation Committee believes that attracting, motivating, and retaining a team of high-performing executives is critical to advancing the interests of stockholders."
• "The Compensation Committee believes that our compensation programs should include short-term and long-term components, including cash and equity-based compensation, and should reward performance as measured against established goals and in terms of stockholder value creation."
• "We are committed to the responsible use of AI in our business operations."

Industry Context

Varex Imaging operates in the specialized X-ray imaging components market, serving both medical and industrial sectors. The company's reported revenue growth, particularly in global CT sales and security inspection systems, indicates a positive trend in demand within its core markets. Strategic initiatives like advancing photon counting and nanotube technologies, coupled with expansion into low-cost manufacturing in India and the launch of cargo inspection systems, suggest a proactive approach to innovation and market diversification. The recovery of sales in China, following a period impacted by an anti-corruption campaign, highlights the sensitivity of the medical device industry to regional regulatory and economic factors.

Comparison to Industry Standards

• Executive compensation is benchmarked against a peer group of companies primarily in the healthcare equipment and supplies, life sciences tools and services, and electronic equipment instruments and components industries.
• Performance Stock Units (PSUs) tied to relative Total Shareholder Return (TSR) are measured against the Russell 2000 Value Index constituents over a three-year period.
• The Dow Jones Medical Equipment Index is used as a peer group for Total Shareholder Return (TSR) comparison in the Pay Versus Performance section.

Management Changes

Corporate Governance

Related Party Transactions

• No material related person transactions were identified or believed to be in effect during fiscal year 2025, based on information available to the company and provided by directors and executive officers.

Stakeholder Impact

• Shareholders: Directly impacted by voting on governance matters and the company's financial performance, including revenue growth, net loss, and debt reduction. Executive compensation policies aim to align management interests with shareholder value creation.
• Employees: Executive compensation programs are designed to attract, motivate, and retain high-performing talent. All employees are eligible for standard group benefits and 401(k) plans.
• Customers: Benefit from the company's focus on innovation and new product development, such as photon counting technology and cargo inspection systems, which aim to meet evolving market needs.
• Creditors: Positively impacted by the company's reduction of $75 million in outstanding debt and improved net leverage ratio, indicating stronger financial health and reduced risk.

Next Steps

• Stockholders are encouraged to vote on the election of directors, advisory executive compensation, and auditor ratification at the 2026 Annual Meeting.
• The Board and Compensation Committee will consider the outcome of the advisory vote on executive compensation when making future compensation decisions for NEOs.
• The Audit Committee will review its future appointment of Deloitte if the ratification of their appointment for fiscal year 2026 is not approved by stockholders.
• The company will file a Current Report on Form 8-K with the SEC within four business days after the Annual Meeting to disclose the final voting results.
• The Board and Audit Committee will continue to monitor management's efforts to identify, assess, and mitigate risks associated with the company's use of artificial intelligence technologies.

Key Dates

Recommendation

While Varex Imaging demonstrated positive operational momentum with revenue growth, new product advancements, and significant debt reduction, the reported increase in GAAP net loss for fiscal year 2025 and the negative impact on executive equity compensation due to share price decline present notable concerns. The mixed financial signals suggest a 'hold' position is prudent for investors, awaiting clearer evidence of sustained profitability and positive share price trajectory before considering a stronger recommendation.

Keywords

Varex Imaging, Proxy Statement, SEC filing, X-ray imaging components, medical devices, industrial imaging, corporate governance, executive compensation, financial results, annual meeting, director election, auditor ratification, cybersecurity, artificial intelligence, debt reduction, revenue growth, net loss, photon counting, India expansion, cargo systems