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Varex Imaging(VREX) - 2025 Q1 - Quarterly Report
VREXVarex Imaging(VREX)2025-02-06 21:08
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Revenue Performance - Total revenues for the three months ended January 3, 2025, were 199.8million,anincreaseof199.8 million, an increase of 9.8 million or 5.2% compared to 190.0millionforthethreemonthsendedDecember29,2023[155].−Medicalsegmentrevenuesincreasedby190.0 million for the three months ended December 29, 2023[155]. - Medical segment revenues increased by 4.7 million to 144.6million,primarilydrivenbyhighersalesofCTandfluoroscopyproducts,whilesalesinradiographic,dental,oncology,andmammographydecreased[155].−Industrialsegmentrevenuesroseby144.6 million, primarily driven by higher sales of CT and fluoroscopy products, while sales in radiographic, dental, oncology, and mammography decreased[155]. - Industrial segment revenues rose by 5.1 million to 55.2million,reflectingagrowthof10.255.2 million, reflecting a growth of 10.2% compared to the previous period[155]. - Medical segment accounted for 72.4% of total revenues, while the Industrial segment represented 27.6%[155]. Gross Profit and Expenses - Total gross profit for the three months ended January 3, 2025, was 68.5 million, a 20.0% increase from 57.1millionforthesameperiodin2023[157].−Medicalsegmentgrossprofitroseto57.1 million for the same period in 2023[157]. - Medical segment gross profit rose to 49.5 million, reflecting a 27.2% increase, primarily due to increased sales volume and favorable product mix[157]. - Research and development expenses increased to 23.5million,representing11.823.5 million, representing 11.8% of total revenues, up from 10.8% in the previous year[159][160]. - Operating expenses totaled 57.3 million, an 8.3% increase from 52.9million,withselling,general,andadministrativeexpensesrisingby52.9 million, with selling, general, and administrative expenses rising by 1.4 million[159][161]. Debt and Cash Flow - As of January 3, 2025, total debt outstanding was 567.0million,anincreasefrom567.0 million, an increase from 443.4 million as of September 27, 2024[168]. - Cash and cash equivalents increased to 176.0million,upfrom176.0 million, up from 168.7 million, reflecting a 7.3millionincrease[167].−Netcashprovidedbyfinancingactivitieswas7.3 million increase[167]. - Net cash provided by financing activities was 124.9 million for the three months ended January 3, 2025, compared to (1.7)millionintheprioryear[171].MarketandEconomicConditions−Theuncertaineconomicenvironment,includingsupplychainchallengesandgeopoliticaltensions,mayimpactfuturefinancialperformance[140].−Thecompanyhasexperiencedsupplychaindisruptionsbuthasseenimprovements,althoughmaterialshortagesanddeliverydelaysmaystillposechallenges[141].−Asignificantportionofthecompany′scustomersareoutsidetheUnitedStates,leadingtopotentialpricingpressureduetoastrongU.S.Dollar,whichmayresultindiscountedpricesordelayedpurchasingdecisions[182].RiskManagement−Thecompanymayenterintoforeigncurrencyforwardandoptioncontractstohedgeagainstforeignexchangerisks,typicallyforonetothreemonths[183].−Thecompanyperformsongoingcreditevaluationsofcustomersandmaintainsstrongcreditcontrols,includinglettersofcreditanddownpayments[185].−AsofJanuary3,2025,thecompanyhadnoborrowingssubjecttofloatinginterestrates,reducinginterestrateriskexposure[186].−Thecompanyisexposedtomarketrisksrelatedtovolatilityinrawmaterialprices,whichcanaffectproductmarginsandprofitability[189].BacklogandInstalledBase−Theestimatedtotalbacklogwasapproximately(1.7) million in the prior year[171]. Market and Economic Conditions - The uncertain economic environment, including supply chain challenges and geopolitical tensions, may impact future financial performance[140]. - The company has experienced supply chain disruptions but has seen improvements, although material shortages and delivery delays may still pose challenges[141]. - A significant portion of the company's customers are outside the United States, leading to potential pricing pressure due to a strong U.S. Dollar, which may result in discounted prices or delayed purchasing decisions[182]. Risk Management - The company may enter into foreign currency forward and option contracts to hedge against foreign exchange risks, typically for one to three months[183]. - The company performs ongoing credit evaluations of customers and maintains strong credit controls, including letters of credit and down payments[185]. - As of January 3, 2025, the company had no borrowings subject to floating interest rates, reducing interest rate risk exposure[186]. - The company is exposed to market risks related to volatility in raw material prices, which can affect product margins and profitability[189]. Backlog and Installed Base - The estimated total backlog was approximately 307 million as of January 3, 2025, representing orders for which revenues have not yet been recognized[178]. - The installed base includes over 160,000 X-ray tubes and 170,000 X-ray detectors, with a significant portion of revenue coming from replacement and service of existing components[146]. Research and Development - The company employs approximately 400 individuals in research and development to drive innovation in X-ray imaging products[139]. - The company is developing CT X-ray tubes for Chinese OEMs, anticipating increased opportunities due to a new stimulus program in the healthcare industry introduced in March 2024[147]. Interest and Commodity Price Impact - Interest and other expense, net, increased to (8.7)million,comparedto(8.7) million, compared to (4.8) million in the prior year, primarily due to higher interest expenses[162]. - A hypothetical 10% decrease in foreign exchange rates could result in an estimated annual earnings impact of 13.5million[191].−A100basispointdecreaseininterestratesofmarketablesecuritiescouldleadtoanestimatedannualearningsimpactof13.5 million[191]. - A 100 basis point decrease in interest rates of marketable securities could lead to an estimated annual earnings impact of 2.9 million[191]. - A 10% increase in commodity prices could result in an estimated annual earnings impact of $3.2 million[191].