8-K: Varex Imaging Reports Mixed Q1 Results, Revenue at Mid-Point of Guidance

Varex Imaging Corporation announced its first quarter fiscal year 2024 results, with revenue meeting guidance but profitability impacted by unfavorable mix.

Summary

• Varex Imaging Corporation reported a revenue of $190 million for the first quarter of fiscal year 2024, which was at the mid-point of their guidance.
• However, the company experienced an unfavorable mix in both the Medical and Industrial segments, which negatively impacted profitability.
• Total revenue was down 8% year-over-year, with the Medical segment declining by 13% to $140 million, while the Industrial segment increased by 10% to $50 million.
• Non-GAAP gross margin was 31%, compared to 32% in the same quarter of the previous year.
• Non-GAAP earnings per diluted share decreased to $0.06 from $0.21 year-over-year.
• Cash flow from operations was $10 million, primarily due to stable working capital management.
• Cash, cash equivalents, marketable securities, and CDs remained flat at $195 million compared to the end of fiscal year 2023.
• The company expects second quarter revenue to be between $195 million and $215 million, and non-GAAP net earnings per diluted share to be between $0.10 and $0.30.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the year-over-year revenue decline, significant drop in earnings per share, and unfavorable mix impacting profitability, despite meeting revenue guidance. The positive cash flow and stable cash position are mitigating factors.

Positives

• Revenue met the mid-point of the company's guidance at $190 million.
• The Industrial segment showed strong growth with a 10% year-over-year increase in revenue.
• Cash flow from operations was positive at $10 million.
• The company maintained a stable cash position of $195 million.
• The company provided revenue and earnings guidance for the next quarter.

Negatives

• Overall revenue decreased by 8% year-over-year.
• The Medical segment experienced a significant 13% year-over-year revenue decline.
• Non-GAAP gross margin decreased from 32% to 31% year-over-year.
• Non-GAAP earnings per diluted share decreased significantly from $0.21 to $0.06 year-over-year.
• Unfavorable mix in both Medical and Industrial segments impacted profitability.

Risks

• The company is facing challenges in the Medical segment, which saw a significant revenue decline.
• Unfavorable product mix is impacting profitability across both segments.
• The company's non-GAAP earnings per share has decreased significantly year-over-year.
• The company's forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations.

Future Outlook

The company expects second quarter revenue to be between $195 million and $215 million, and non-GAAP net earnings per diluted share to be between $0.10 and $0.30. The company is unable to provide a GAAP forecast of net earnings per diluted share due to the uncertainty of reconciling items.

Management Comments

• Sunny Sanyal, Chief Executive Officer of Varex, stated that revenue of $190 million in the first quarter of fiscal 2024, was at the mid-point of our guidance, however unfavorable mix in both the Medical and Industrial segments impacted profitability.

Industry Context

Varex operates in the X-ray imaging components market, serving both medical and industrial sectors. The results indicate a mixed performance with weakness in the medical segment and strength in the industrial segment. This could reflect broader trends in healthcare spending and industrial activity.

Comparison to Industry Standards

• While specific competitor data is not provided in the document, Varex's performance can be compared to other medical and industrial imaging component manufacturers.
• Companies like Canon Medical, Siemens Healthineers, and GE Healthcare are major players in the medical imaging space, and their performance in similar segments would be a relevant benchmark.
• In the industrial sector, companies like Teledyne and Hamamatsu Photonics are key competitors, and their growth rates in similar markets would be a useful comparison.
• Varex's 8% year-over-year revenue decline and the significant drop in non-GAAP EPS suggest underperformance compared to industry growth averages, particularly in the medical segment.
• The company's non-GAAP gross margin of 31% is a key metric to compare against peers, as is the cash flow from operations of $10 million.

Stakeholder Impact

• Shareholders may be concerned about the decrease in revenue and earnings per share.
• Employees may be affected by the company's performance and any potential cost-cutting measures.
• Customers may be impacted by any changes in product mix or pricing.
• Suppliers may be affected by changes in demand for components.
• Creditors may be concerned about the company's financial performance and ability to repay debts.

Next Steps

• Varex will conduct an earnings conference call on February 6, 2024, at 3:00 p.m. Mountain Time.
• The company will file its Form 10-Q for the first quarter of fiscal year 2024.

Key Dates

Keywords

Varex Imaging, X-ray imaging, Medical imaging, Industrial imaging, Financial results, Revenue, Gross margin, Earnings per share, Non-GAAP, Guidance