Varex Imaging (VREX) Q1 2025 earnings summary

Executive summary

• Q1 FY25 revenue reached $200 million, up 5% year-over-year, with Medical up 3% and Industrial up 10%; headwinds from inventory destocking and China are subsiding.

• Gross margin improved to 35% (non-GAAP), up from 31% last year, driven by favorable mix, productivity gains, and refunds of foreign customs duties.

• Cash, cash equivalents, and marketable securities increased to $219 million, reflecting strong cash generation and liquidity.

• China sales improved 7% year-over-year and 12% sequentially, now 18% of total sales; APAC revenue increased to $75 million.

• $14 million in new cargo inspection system orders secured, expanding presence in the global security market.

Financial highlights

• Q1 revenue: $200 million; Medical $145 million (72%), Industrial $55 million (28%).

• Non-GAAP gross margin: 35% (up 350 bps YoY); GAAP gross margin: 34% (up from 30.1% YoY).

• Adjusted EBITDA: $24 million (12% of sales); trailing 12 months: $94 million.

• Net earnings: $3 million, or $0.07 per diluted share (non-GAAP); GAAP net loss: $0.3 million, or $(0.01) per share.

• Cash, equivalents, and marketable securities: $219 million; gross debt: $571 million.

Outlook and guidance

• Q2 revenue expected between $200–$215 million; non-GAAP EPS $0.05–$0.20.

• Non-GAAP gross margin guidance: 32%–34%; operating expenses ~$52 million; tax rate expected at 22%.

• Management remains cautious due to ongoing economic and geopolitical uncertainties, supply chain risks, and Chinese anti-corruption measures.

• Backlog at quarter-end was approximately $307 million, providing visibility into future revenue.