Varex Imaging Corporation

Greetings and welcome to the Merrick's Q1 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christopher Belfort, Director of Investor Relations. Thank you, Chris. You may begin.

Good afternoon and welcome to Barrick Imaging Corporation's earnings conference call for the first quarter of fiscal year 2024. With me today are Sunny Sanyal, our President and CEO, and Sam Maheshwari, our CFO. Please note that the live webcast of this conference call includes a supplemental slide presentation That can be accessed at Varix's website at variximaging.com. The webcast and supplemental slide presentation will be archived on Varix's website. To simplify our discussion, unless otherwise stated, all references to the quarter are for the first quarter of fiscal year 2024. In addition, unless otherwise stated, quarterly comparisons are made year over year from the first quarter of fiscal year 2024 to the first quarter of fiscal year 2023. This is a change compared to prior quarters where since COVID we have compared results sequentially. We believe going forward this will be a better representation of our results given that the impacts of COVID are largely behind us. Finally, all references to the year are to the fiscal year and not calendar year unless otherwise stated. Please be advised that during this call we will be making forward-looking statements which are predictions or projections about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Risks relating to our business are described in our quarterly earnings release and our filings with the SEC. Additional information concerning factors that could cause actual results to materially differ from those anticipated is contained in our SEC filings, including item 1A, risk factors of our quarterly reports on Form 10-Q and our annual report on Form 10-K. The information in this discussion speaks as of today's date, and we assume no obligation to update or revise the forward-looking statements in this discussion. On today's call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not presented in accordance with nor are they a substitute for GAAP financial measures. We provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure in our earnings press release, which is posted on our website. I will now turn the call over to Sonny.

Thanks, Chris. Good afternoon, everyone, and thank you for joining us for our first quarter earnings call. Revenue of $190 million in the first quarter of fiscal 2024 was in line with our expectations. Lower volumes and unfavorable mix in both medical and industrial segments impacted profitability. As a result, non-GAAP gross margin was 31% and non-GAAP earnings per share was 6 cents. Revenue in the first quarter was down 8% year over year, Revenue in the medical segment decreased 13% year-over-year, while the industrial segment revenue increased 10% year-over-year. Non-GAAP gross margin in the first quarter was 31%, which was below our expectations, and down approximately 100 basis points compared to the same quarter last year. Adjusted EBITDA in the first quarter was $19 million, and non-GAAP EPS was 6 cents. We ended the first quarter with $195 million worth of cash, cash equivalents, and marketable securities on the balance sheet, up $87 million compared to the first quarter of fiscal 2023. Let me give you some insights into sales detail by modality in the quarter compared to a five-quarter average, which we will refer to as the sales trend. In our medical segment, global sales of CT tubes were seasonally softer than usual and below its sales trend. Fluoroscopy and oncology modalities were weaker in the quarter and were below their respective sales trends. The lower volumes in these three modalities contributed to the unfavorable mix in the quarter for medical. Dental improved slightly in the quarter but remained below its sales trend. Mammography continued to be solid, with revenues above the sales trend in the quarter, while radiographic was below its sales trend. Global sales of our industrial products in the quarter were solid, but below its sales trend in the quarter. We continue to see strong momentum in our cargo inspection business. Outside of cargo, we're experiencing softness in industrial and markets, particularly in semiconductor, automotive, and electronics. The lower than expected industrial revenue contributed to lower gross margin in the quarter. At the end of November, we attended the Radiological Society of North America show, which is the world's largest imaging-focused event and attended by radiology professionals and diagnostic imaging companies globally. We had over 150 meetings with our customers and prospects, and it was a very productive business development event for us. We displayed and discussed several new products across our entire portfolio, including a prototype of our photon counting detector module. Unlike in the last couple of years where supply chain related matters dominated the agenda, nearly all discussions with our customers at this RSNA were focused on new product development, including for CT, mammography, surgery, interventional, and general X-ray systems. We also met with several new OEMs with novel technologies that would benefit from our Azure and photon counting detectors and our software applications. Photon counting continue to be at the front and center in many of our discussions. I'm happy to say that a major global OEM has expressed their interest to incorporate our photon counting technology into their next generation of CT scanners. Discussions with others are ongoing. With the acute supply chain problems behind them, our customers' focus has returned to new product introductions, and so have our discussions with them. In summary, we continue to be excited about the prospects for new imaging products like photon counting CT and our unique position to support our customers in bringing innovative systems to market. With that, let me hand over the call to Sam.