Varex Imaging (VREX) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $209.1 million, down 9.9% year-over-year, with Medical segment sales declining 15% and Industrial segment sales rising 6% due to strong cargo inspection business; China and Medical segments remained soft.

• Non-GAAP diluted EPS was $0.14, down 62% from last year; GAAP net income was $1.4 million ($0.03 per share).

• Gross margin was 32%, below expectations, mainly due to unfavorable product mix in the Industrial segment and lower Medical sales.

• Cash, cash equivalents, and marketable securities totaled $192 million, up year-over-year; total debt was $447 million.

• Operating expenses increased year-over-year, driven by higher R&D, litigation, and environmental costs.

Financial highlights

• Adjusted EBITDA was $22.8 million, down from $37.7 million a year ago.

• Non-GAAP gross margin was 32%, down from 34% last year; non-GAAP operating margin was 7%, down from 12.5%.

• Operating income was $9.3 million (GAAP) and $14.8 million (non-GAAP), both lower year-over-year.

• Cash flow from operations was $8 million for the quarter.

• Days sales outstanding was 66 days; days of inventory was 180 days.

Outlook and guidance

• Q4 revenue guidance: $190–$210 million; non-GAAP EPS: $0.00–$0.15; gross margin expected at 33–34%; operating expenses $53–$54 million; tax rate 21–23%.

• No meaningful improvement expected in China in the near term; inventory normalization in Medical expected to improve in early 2025.

• Fiscal 2025 expected to be slightly better than 2024, mainly due to easing inventory pressures, not China recovery.

• Convertible Notes of $200 million mature in June 2025; refinancing anticipated via Revolving Credit Facility and cash.