8-K: Varex Reports Strong Q4, FY25 Revenue Growth

Varex Imaging Corporation announced robust fourth-quarter and fiscal year 2025 financial results, driven by strong medical and industrial segment performance.

Summary

• Fourth quarter fiscal year 2025 (Q4 FY25) revenues reached $229 million, an 11% increase year-over-year, meeting the high-end of expectations.
• Full fiscal year 2025 (FY25) revenues grew 4% year-over-year to $845 million.
• Q4 FY25 GAAP net income was $0.29 per diluted share, while FY25 GAAP net loss was $(1.70) per diluted share.
• Non-GAAP net income per diluted share for Q4 FY25 increased to $0.37 from $0.19 in Q4 FY24, and for FY25, it rose 73% to $0.90.
• Cash flow from operations was $8 million in Q4 FY25 and $42 million for the full FY25.
• Medical segment revenue in Q4 FY25 was $152 million, up 5% year-over-year, primarily driven by global CT tube sales.
• Industrial segment revenue in Q4 FY25 was $77 million, up 25% year-over-year, fueled by sustained momentum in cargo systems.
• Non-GAAP EBITDA for FY25 grew 37% to $122 million.
• Cash, cash equivalents, and marketable securities decreased to $155 million at the end of FY25 from $213 million at the end of FY24, mainly due to paying down outstanding principal of Convertible Notes on June 2, 2025.
• A goodwill impairment charge of $93.9 million was recorded in FY25.

Sentiment

Score: 7

Explanation: The company reported strong Q4 and FY25 non-GAAP results, exceeding revenue expectations for Q4, and highlighted significant growth in key segments and strategic initiatives. While GAAP results show a net loss for the year, the non-GAAP performance and positive outlook for Q1 FY26 suggest a positive trajectory, despite a decrease in cash due to debt paydown.

Positives

• Q4 FY25 revenue of $229 million was up 11% year-over-year and at the high-end of expectations.
• Strong finish to the fiscal year driven by global CT tube sales in the Medical segment.
• Sustained momentum in the cargo systems business led to a 25% increase in Industrial segment sales compared to last year for Q4.
• FY25 revenue grew 4% year-over-year to $845 million, driven by improvements in the Medical segment and continued strength in the Industrial segment.
• Non-GAAP EBITDA grew 37% to $122 million for FY25.
• Non-GAAP EPS rose 73% to $0.90 for FY25.
• Advanced key growth initiatives, including innovative technologies like photon counting for CT.
• Successfully launched a radiographic detector from a new facility in India.
• Made substantial progress with the cargo systems vertical, securing over $55 million in orders and shipping over 15 new systems during FY25.
• Non-GAAP gross margin improved to 34% in Q4 FY25 from 33% in Q4 FY24.

Negatives

• Reported a GAAP net loss of $(1.70) per diluted share for the full fiscal year 2025.
• Cash, cash equivalents, and marketable securities decreased from $213 million at the end of fiscal year 2024 to $155 million at the end of fiscal year 2025.
• The primary driver of the year-over-year change in cash was the use of cash to pay down the outstanding principal of Convertible Notes.
• FY25 GAAP operating margin was (3)%.
• Incurred a goodwill impairment charge of $93.9 million in FY25.

Risks

• Changes in import/export regulatory regimes, tariffs, trade wars, and national policies, including exemptions thereto.
• Reduction in or loss of business of one or more of our limited original equipment manufacturing customers.
• Global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, tariffs, trade wars, and other risks associated with international manufacturing, operations and sales.
• Loss of business to, and an inability to effectively compete with, competitors.
• Pricing pressures and other factors that could result in market erosion or loss of customers.
• Failure to meet customers' needs and demands.
• Supply chain disruptions resulting in delayed product delivery, and increased costs as a result of reliance on a limited number of suppliers for certain key components.
• Disruption of critical information systems or material breaches in the security of such systems.
• Inability to maintain or defend intellectual property rights, and cost associated with protecting our intellectual property and defending such rights and defending against infringement claims.
• Non-compliance with regulations applicable to marketing, manufacturing, labeling, and distributing our products and delays in obtaining regulatory clearances or approvals.
• Limitations imposed by operating and financial restrictions of our debt financing agreements.

Future Outlook

For the first quarter of fiscal year 2026, revenues are expected to be between $200 million and $215 million. Non-GAAP net earnings per diluted share are expected to be between $0.05 and $0.25. 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 the uncertainty and unpredictability of certain reconciling items.

Management Comments

• "Fourth quarter revenue reached $229 million, up 11% year-over-year and at the high-end of our expectations."
• "This strong finish to the fiscal year was driven primarily by global CT tube sales in our Medical segment, while sustained momentum in our cargo systems business drove a 25% increase in Industrial segment sales compared to last year."
• "In fiscal 2025, revenue grew 4% year-over-year to $845 million, driven by an improvement in our Medical segment and continued strength in the Industrial segment."
• "Non-GAAP EBITDA grew 37% to $122 million, and non-GAAP EPS rose 73% to $0.90 for the year."
• "We advanced key growth initiatives, including innovative technologies like photon counting for CT and the successful launch of our radiographic detector from our new facility in India."
• "In Industrial, we made substantial progress with our cargo systems vertical, securing over $55 million dollars of orders and shipping over 15 new systems during the year."

Industry Context

Varex Imaging operates in the X-ray imaging components market, serving both medical and industrial/security applications. The strong performance in global CT tube sales and cargo systems suggests a healthy demand in these specific niches, potentially indicating a recovery or sustained growth in medical diagnostics and increased investment in security/logistics infrastructure. The focus on innovative technologies like photon counting for CT and new manufacturing facilities in India aligns with broader industry trends towards advanced imaging solutions and globalized production.

Stakeholder Impact

• Shareholders: Positive impact from strong non-GAAP performance, revenue growth, and strategic advancements, but a GAAP net loss and cash reduction due to debt paydown might warrant scrutiny.
• Customers: Benefit from continued innovation (photon counting CT, new radiographic detector) and robust supply of cargo systems.
• Employees: Continued growth and strategic initiatives may indicate job stability and opportunities, especially with new facility launches.
• Creditors: Debt paydown of Convertible Notes reduces leverage, which is generally positive for creditors.

Next Steps

• Varex will conduct an earnings conference call on November 18, 2025, at 3:00 p.m. Mountain Time.
• The company will file its Form 10-K for the fourth quarter of fiscal year 2025.
• Guidance for the first quarter of fiscal year 2026 includes expected revenues between $200 million and $215 million and non-GAAP net earnings per diluted share between $0.05 and $0.25.

Key Dates

Recommendation

The company demonstrates strong operational performance and strategic growth, particularly in its non-GAAP metrics and segment-specific achievements. The Q4 revenue exceeding expectations and significant non-GAAP EPS and EBITDA growth are positive indicators. However, the full fiscal year GAAP net loss and the reduction in cash due to debt paydown, while a planned financial action, introduce some caution. The forward-looking guidance for Q1 FY26 is modest compared to the strong Q4 FY25, suggesting a potential slowdown or conservative outlook. Given the mix of strong operational execution and financial considerations (GAAP loss, cash usage), a "hold" recommendation is appropriate, advising investors to monitor the company's ability to translate non-GAAP strength into sustained GAAP profitability and manage its cash position effectively in the coming quarters.

Keywords

X-ray imaging, medical imaging, industrial imaging, digital detectors, X-ray tubes, cargo systems, photon counting CT, financial results, earnings, Varex Imaging, VREX, SEC filing, Q4 2025, FY 2025