Varex Imaging (VREX) investor relations material

Business overview and segment performance

• Operates two main segments: medical (70% of revenue) and industrial (30%), focusing on X-ray tubes and detectors.

• Industrial segment growth driven by security and cargo inspection systems, with over $50 million in new orders for cargo systems.

• Medical segment recovering as inventory destocking and anti-corruption headwinds in China have subsided, returning to growth.

• Photon counting and cold cathode nanotube technologies are advancing, with early revenues expected from new products and ongoing customer evaluations.

• Manufacturing footprint spans the US, Germany, China, Philippines, UK, and new facilities in India for both tubes and detectors.

Tariff mitigation and supply chain strategy

• Tariff impacts are being mitigated by passing costs to customers and operational strategies like bonded warehouses and shifting supply chains.

• New factories in India are central to tariff mitigation, with detector production starting imminently and tube production expected in 18 months.

• Local-for-local manufacturing is increasing, especially in China, to reduce tariff exposure and build resilience.

• Estimated gross margin impact from tariffs is about 100 basis points after mitigation efforts.

Regional market dynamics and growth outlook

• China business stabilized after anti-corruption and price dumping issues; now in growth mode, supported by government healthcare infrastructure initiatives.

• Industrial demand remains strong, especially for cargo and security inspection due to global safety and regulatory trends.

• Service revenues from new system installations expected to be accretive to margins 18–24 months post-shipment.

• Growth expected in FY2025 and FY2026, with new product launches and India ramp-up providing additional momentum.