Varex Imaging Corporation

Greetings and welcome to the VARIC's first quarter fiscal year 2026 earnings conference call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0 on your telephone keypad. It's now my pleasure to turn it over to Christopher Belfiore, Director of Investor Relations. Christopher, please go ahead.

Good afternoon, and welcome to Barracks Imaging's earnings conference call for the first quarter fiscal year 2026. 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 Barracks' website at barracksimaging.com. The webcast and supplemental slide presentation will be archived on BARICS' website. To simplify our discussion, unless otherwise stated, all references to the quarter are for the first quarter of fiscal year 2026 and to the year are for the fiscal year 2026. In addition, unless otherwise stated, quarterly comparisons are made year over year from the first quarter of fiscal year 2026 to the first quarter of fiscal year 2025. I would like to remind you that Q1 of 2025 was a 14-week quarter. Finally, all the references to the year are to the fiscal year and not the 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 information, 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 filing, including items 1A, risk factors of our quarterly reports on Form 10-Q, and our annual report on Form 10-K. The information in these discussions 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 be discussing certain non-GAAP financial measures. Beginning with the first quarter of fiscal 2026, we changed our non-GAAP policy with regard to equity method investments. We will provide more detail later in the call. A reconciliation of these changes is presented at the back of our earnings release and slide presentation for the quarter. Our 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.

Thank you, Chris. Good afternoon, everyone, and thank you for joining us for our first quarter earnings call. I'm very pleased to announce a strong start to the year. First quarter revenue was $210 million, up 5% year-over-year, and toward the high end of our guidance. Growth in the quarter was driven by strength in our cargo systems business, which contributed to a 17% year-over-year increase in industrial segment revenue. Our medical segment performance was stable year-over-year in what is typically our seasonally light quarter, with continued strength in CT and growing engagement around next-generation system designs. Non-gap gross margin of 34% in Q1 was at the high end of our guidance, benefiting primarily from a favorable product sales mix in the quarter. Looking at a year-over-year comparison, total revenue was up 5% with medical segment flat compared to last year and industrial segment up 17%. Non-GAAP EBITDA of $29 million was up 12% compared to the same quarter last year. Non-GAAP EPS in the first quarter was 19 cents, up 9 cents compared to 10 cents last year. Let me give you some insights into sales detail by modality in the quarter compared to five-quarter average, which we refer to as the sales trend. Our medical segment performed well in the quarter, driven by solid demand for X-ray sources, particularly in high-end CT, as well as digital detectors. Customer activity and sales pipeline development around new platforms continued to gain momentum. Mammography modality exceeded its sales trend in the quarter. CT, fluoroscopy, and radiography modalities were in line with their respective sales trends, while dental and oncology modalities were below their respective sales trends. Our industrial segment delivered another solid growth quarter, with broad-based strength across multiple platforms and verticals. Global demand for security screening remained strong, driving growth in both cargo security inspection systems and components. We also continue to see positive momentum in our non-destructive testing and inspection business, supported by strength in our high-energy linear accelerators and X-ray tube products, both of which are used in non-destructive testing applications. In addition, demand for photon counting detectors was solid across several industrial verticals and drove growth in our food inspection products. Overall, the industrial segment remains an attractive growth opportunity for the company. We are collaborating closely with customers to address complex inspection problems by using X-ray imaging in real-time manufacturing and finding solutions that were previously difficult or impossible to achieve. At the beginning of December, we attended RSNA, the Radiological Society of North America's annual meeting. This is the world's largest medical imaging exhibition and brings together over 38,000 radiology professionals and medical imaging OEMs from all over the world. RCNA is one of the most important events on our calendar each year because the deep and broad engagement it enables with our customer base. We use the conference to showcase our newest technologies, and more importantly, to work with customers on how these innovations can be designed into their current platforms and future systems. We held more than 150 customer meetings focused primarily on advancing design win opportunities and opportunities to upgrade their systems to our latest technologies. These meetings underscored increased customer engagement with a meaningful emphasis on innovation-driven discussions across all modalities. We view this increased level of activity as a positive signal for future demand. These engagements are translating into a growing pipeline of new business opportunities, which typically lasts for multiple product cycles and support durable long-term revenue streams. We felt a very strong reception to our new technologies, which reinforces our confidence that the investments we've made in innovation are positioning Varix well for sustained growth as customers move from technology evaluation to system development and ultimately commercialization. This year at RSNA, we introduced a more integrated modality-based approach to our value proposition. Across key modalities, including CT, general radiography, fluoroscopy, mammography, we showcase Verix's offerings including tubes, detectors, generators, connectors, heat exchangers, and software as fully integrated imaging chain assemblies and subsystems rather than as individual components. This modality-based approach represents a meaningful evolution in how we engage with customers. By taking a modality-based approach, we're able to deliver best-in-class performance and attractive total system economics while also enabling potential faster time to market for customers looking to bring new and differentiated imaging applications to market. We believe this approach further strengthens our position as a strategic partner to our customers and enhances our ability to drive long-term recurring revenue through deeper system-level design wins. We are encouraged by the enthusiastic receptivity to our approach, and we will continue these discussions with our customers with the intention of securing new design wins in fiscal 26 and beyond. Our Lumen family of radiographic detectors, combined with our Nexus software, was a significant topic of discussions at RS&A. Customers and prospects were very interested in our regional manufacturing strategy, particularly with our factories in India, which they see as critical for their future growth in the region. We also had numerous conversations about our cutting edge photon counting technologies and the progress that we are making there. For the past few years, our customers had been busy dealing with the fallout from COVID, chip shortages, followed by supply chain crisis, and had to deploy R&D and growth capital towards taking care of maintenance problems. During the 2025 RSNA, we felt that our customers were returning to new product planning mode. And at this RSNA, we felt even more so that our customers were actively engaged in new product development and were in commercialization mode. In summary, RSNA was very positive for us and gave us a good feel for our customers' vision and where they were headed. While these design-in opportunities typically convert over time, several of the discussions we had at RSNA are tied to platforms that are currently already under development, particularly in general radiography modalities. We are confident that some of these opportunities will convert this fiscal year with the revenue opportunities as early as fiscal 27. Moving to our industrial segment, our cargo security systems business continues to be a bright spot with multiple installations during the quarter in various countries. In addition, during the quarter, we received multiple orders for different products, including repeat orders from an existing customer. Our customer base has long considered our linear accelerator technology as best in class, and we view repeat orders like this as a testament to our success of deployment and performance of our new systems. We remain engaged on many tender offers and look forward to continued sales success in our cargo systems business in fiscal 26 and beyond. With that, let me hand over the call to Sam.