Yahoo Finance Varex Imaging Corp (VREX) Q2 2024 Earnings Call Transcript Highlights: Navigating Market ...
Revenue: $206 million, down 10% year over year.
Net Income: GAAP net earnings of $1 million; Non-GAAP net earnings of $7 million.
Earnings Per Share (EPS): GAAP EPS of $0.03; Non-GAAP EPS of $0.16.
Gross Margin: Non-GAAP gross margin at 33%, flat year over year.
Cash and Equivalents: $190 million, up $68 million from the previous year.
Medical Segment Revenue: $149 million, down 15% year over year.
Industrial Segment Revenue: $57 million, up 6% year over year.
Debt: Gross debt at $447 million; net debt after cash and equivalents at $257 million.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Varex Imaging Corp (NASDAQ:VREX) reported a revenue of $206 million for the second quarter, which was in line with the company's expectations.
The company's non-GAAP gross margin remained stable at 33%, consistent with the previous year's same quarter.
Varex Imaging Corp (NASDAQ:VREX) ended the quarter with $190 million in cash, cash equivalents, and marketable securities, marking an increase of $68 million from the previous year.
Photon counting technology continues to see accelerated engagement and adoption, particularly in the industrial segment, promising strong future sales growth.
The company has secured additional financing, enhancing its liquidity position and preparing it effectively for future refinancing of convertible bonds.
Negative Points
Revenue in the second quarter decreased by 10% year over year, with a significant 15% decline in the medical segment.
Non-GAAP earnings per share decreased to $0.16 from $0.26 in the previous year, indicating lower profitability.
Sales in China declined due to ongoing government audits and investigations into the healthcare system, with no expected pickup in sales before the next fiscal year.
The company observed cautious purchasing behavior across customers, leading to reduced demand and deferred shipments.
Varex Imaging Corp (NASDAQ:VREX) reduced its revenue expectations for the remainder of the fiscal year due to the continued softness in the market and challenges in China.
Q & A Highlights
Q: Can you provide more details on the situation in China and the expected timeline for recovery in sales? A (Shubham Maheshwari, CFO): The softness in China is due to an audit process by the Chinese government on hospitals, expected to take about 12 months. Initial expectations were for recovery by late spring or early summer, but current indicators do not suggest a significant recovery in our fiscal second half. The situation remains fluid, and we are closely monitoring it.
Q: What is the business environment like outside of China, particularly in the Americas and EMEA? A (Sunny Sanyal, CEO): Outside China, there is a general softness in demand, characterized by cautious purchasing behavior from our customers. This cautiousness is leading to adjustments in inventory levels and delayed shipments.
Q: Can you elaborate on the growth expectations for photon counting technology, particularly how it will scale up to 2029? A (Sunny Sanyal, CEO): Photon counting technology is expected to see steady, accelerating uptake, especially in industrial applications. The growth trajectory includes a mix of industrial and medical applications, with significant contributions expected from new CT systems as they come to market.
Q: How does the anti-corruption campaign in China affect the business, and are there any local competitive dynamics at play? A (Sunny Sanyal, CEO): The slowdown in China is primarily due to the anti-corruption campaign affecting hospital operations and not due to local competitive factors. Our business in China mainly involves highly engineered products like CT systems, which are directly impacted by reduced hospital purchases.
Q: Regarding the photon counting technology, is there a software or AI component that benefits from the increased data generated by these detectors? A (Sunny Sanyal, CEO): Yes, photon counting generates high-resolution images that provide substantial data, beneficial for AI applications. Our software group is actively involved in enhancing image processing capabilities to leverage this data effectively.
Q: What are the refinancing plans for the convertible bonds, and how does the current cash position influence these plans? A (Shubham Maheshwari, CFO): We have secured significant new financing, putting us in a strong liquidity position. The refinancing of convertible bonds, maturing in June 2025, will be decided based on prevailing market conditions and our robust cash position, which may allow for partial or complete paydown.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
