Varex Imaging(VREX)2025-02-07 02:52Financial Data and Key Metrics Changes - Revenue increased by 5% year over year, with medical segment revenue up 3% and industrial segment revenue up 10% [11][30] - Non-GAAP gross margin was 35%, up from 31% in the same quarter last year [11][34] - Adjusted EBITDA for the quarter was 19 million in the previous year [11][37] - Cash from operations was 219 million, up 145 million, constituting 72% of total revenue, while industrial segment revenue was 1 billion [20][21] - The company is focusing on expanding its offerings in cargo and security inspection to enhance security and improve trade compliance [16][20] Management's Comments on Operating Environment and Future Outlook - Management noted solid demand trends but highlighted unscheduled absences in US facilities as a challenge in fulfilling demand [9][75] - The company is monitoring tariff announcements closely but does not expect significant direct impacts on its business at this time [24][109] - Management expressed cautious optimism regarding the recovery in China, emphasizing that the long-term outlook remains positive despite current uncertainties [48][112] Other Important Information - The company ended the quarter with 571 million in gross debt, with a net debt leverage ratio of approximately 2.4 times adjusted EBITDA [41][42] - R&D spending was 23 million, representing 12% of revenues, with SG&A expenses at $31 million [35][36] Q&A Session Summary Question: Can you provide more details on the performance in China? - Management noted an uptick in sales in China but does not expect a meaningful improvement in demand this year [47][48] Question: What is the margin profile for the cargo and vehicle inspection systems? - The margin profile for hardware is expected to be lower initially, but service revenue margins are anticipated to improve over time [50][51] Question: What percentage of the industrial segment does the cargo inspection business comprise? - Cargo inspection is a significant part of the security inspection market, which constitutes about 40% of industrial sales [61] Question: How is the destocking phenomenon affecting orders? - Management indicated that destocking is largely behind them, leading to an uptick in order rates [81][127] Question: What is the status of the new plant in India? - The plant is on track to go online by the end of the fiscal year, focusing on detectors initially [118][121] Question: How will the new administration's focus on border security impact sales? - Management believes that increased focus on security globally will raise activity levels for cargo inspection tenders [130]