Varex Imaging Corporation (Nasdaq: VREX) today announced its
unaudited financial results for the second quarter of fiscal year
2023.
2QFY23 Summary
- Revenues $228 million
- GAAP gross margin 32% | Non-GAAP gross margin* 33%
- GAAP operating margin 7% | Non-GAAP operating margin* 10%
- GAAP net earnings $0.10 per diluted share | Non-GAAP net
earnings* $0.26 per diluted share
- Cash flow from operations $27 million
“We are pleased to report results for the second quarter that
exceeded the high-end of our guidance. Demand for our products was
strong during the quarter. Revenue growth for the Industrial
segment exceeded our expectations, while Medical segment revenue
growth was as expected,” said Sunny Sanyal, Chief Executive Officer
of Varex. Sanyal added, “We are encouraged by the demand levels we
are seeing, and we anticipate our growth to remain solid in the
second half of the fiscal year.”
Varex’s revenue of $228 million was up 11% sequentially and 6%
year-over-year. Medical segment revenue of $174 million was up 9%
sequentially and 2% year-over-year. Industrial segment revenue of
$54 million was up 19% sequentially and 22% year-over-year.
Non-GAAP gross margin was 33% in the quarter compared to 32% in the
first quarter of fiscal year 2023 and non-GAAP EPS increased to
$0.26 from $0.21 last quarter.
Balance Sheet & Cash Flow
Cash flow from operations was $27 million in the second quarter
of fiscal year 2023, due primarily to a reduction in inventory.
Cash, cash equivalents, marketable securities and CDs increased $14
million sequentially to $122 million at the end of the second
quarter.
Outlook
The following guidance is provided for the third quarter of
fiscal year 2023:
- Revenues are expected to be between $220 million and $240
million
- Non-GAAP net earnings per diluted share is expected to be
between $0.20 and $0.40
Guidance for the company's net earnings per diluted share is
provided on a non-GAAP basis only. This non-GAAP financial measure
is forward-looking, and the company is unable to provide a
meaningful or accurate GAAP forecast of net earnings per diluted
share without unreasonable effort due to the uncertainty of amounts
and timing of unusual items.
Non-GAAP Financial Measures
*Please refer to "Reconciliation between GAAP and non-GAAP
Financial Measures" below for a reconciliation of non-GAAP items to
the comparable GAAP measures.
Conference Call Information
Varex will conduct its earnings conference call for the second
quarter of fiscal year 2023 today at 3:00 p.m. Mountain Time. The
conference call, including a supplemental slide presentation, will
be webcast live and can be accessed at Varex’s website at
www.vareximaging.com/investor-relations. Access will also be
available by dialing 877-524-8416 from anywhere in the U.S. or by
dialing 412-902-1028 from non-U.S. locations. The webcast and
supplemental slide presentation will be archived on Varex’s website
at www.vareximaging.com/financial-reports. A replay of the call
will be available from today through May 16th at 877-660-6853 from
anywhere in the U.S. or 201-612-7415 from non-U.S. locations. The
replay access code is 13738210. The listen-only webcast link is:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=X1ExHtPk
About Varex
Varex Imaging Corporation is a leading innovator, designer and
manufacturer of X-ray imaging components, which include X-ray
tubes, digital detectors and other image processing solutions that
are key components of X-ray imaging systems. With a 70+ year
history of successful innovation, Varex’s products are used in
medical imaging as well as in industrial and security imaging
applications. Global OEM manufacturers incorporate the company’s
X-ray sources, digital detectors, connecting devices and imaging
software in their systems to detect, diagnose, protect and inspect.
Headquartered in Salt Lake City, Utah, Varex employs approximately
2,400 people located in North America, Europe, and Asia. For more
information visit vareximaging.com.
Forward Looking Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Statements concerning
unaudited financial results; supply chain diversification
activities; industry or market outlook; customer demand and revenue
trends; revenues, product volumes, or other expected future
financial results or performance; and any statements using the
terms “believe,” “expect,” “intend,” “outlook,” “future,”
“anticipate,” “will,” “could,” “estimate,” “guidance,” or similar
statements are forward-looking statements that involve risks and
uncertainties that could cause Varex’s actual results to differ
materially from those anticipated. While forward-looking statements
are based on assumptions and analyses made by us that we believe to
be reasonable under the circumstances, whether actual results and
developments will meet our expectations and predictions depend on a
number of risks and uncertainties which could cause our actual
results, performance, and financial condition to differ materially
from our expectations. Such risks and uncertainties include supply
chain and logistical challenges; price increases from suppliers and
service providers and inflation generally; the lingering impacts of
the COVID-19 pandemic on both the global economy and Varex’s
business; shifts in product mix; the continued impact of tariffs or
a global trade war on Varex’s products and customer purchasing
patterns; global economic conditions and political conditions
globally or regionally, including any impact due to armed conflicts
(such as the conflict between Russia and Ukraine as well as
governmental sanctions imposed in response and increasing tensions
between China and Taiwan); demand for and delays in delivery of
products of Varex or its customers; litigation costs; Varex’s
ability to develop, commercialize and deploy new products; the
impact of reduced or limited demand by purchasers of certain X-ray
products; the impact of competitive products and pricing; and the
other risks listed from time to time in our filings with the U.S.
Securities and Exchange Commission, which by this reference are
incorporated herein. Any forward-looking statements made by us in
this news release speaks only as of the date on which it is made.
Factors or events that could cause our actual results to differ may
emerge from time to time, and it is not possible for us to predict
all of them. Varex assumes no obligation to update or revise the
forward-looking statements in this release because of new
information, future events, or otherwise.
Varex has not filed its Form 10-Q for the second quarter of
fiscal year 2023. All financial results described here should be
considered preliminary and are subject to change to reflect any
necessary adjustments or changes in accounting estimates that are
identified prior to the time Varex files it's Form 10-Q.
VAREX IMAGING
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
Six Months Ended
(In millions, except for per share
amounts)
March 31, 2023
April 1, 2022
March 31, 2023
April 1, 2022
Revenues, net
Medical
$
174.1
$
170.4
$
334.2
$
326.1
Industrial
54.1
44.3
99.6
87.4
Total revenues
228.2
214.7
433.8
413.5
Gross profit
Medical
51.7
53.4
98.0
99.4
Industrial
21.0
17.4
38.0
36.2
Total gross profit
72.7
70.8
136.0
135.6
Operating expenses:
Research and development
23.0
18.9
43.0
36.6
Selling, general and administrative
34.1
25.3
64.4
58.4
Total operating expenses
57.1
44.2
107.4
95.0
Operating income
15.6
26.6
28.6
40.6
Interest income
0.7
0.1
1.2
0.1
Interest expense
(7.3
)
(11.1
)
(14.8
)
(21.0
)
Other expense, net
(1.2
)
(2.0
)
(1.8
)
(2.8
)
Interest and other expense, net
(7.8
)
(13.0
)
(15.4
)
(23.7
)
Income before taxes
7.8
13.6
13.2
16.9
Income tax expense
3.5
6.0
5.7
7.7
Net income
4.3
7.6
7.5
9.2
Less: Net income attributable to
noncontrolling interests
0.2
—
0.3
0.2
Net income attributable to Varex
$
4.1
$
7.6
$
7.2
$
9.0
Net income per common share
attributable to Varex
Basic
$
0.10
$
0.19
$
0.18
$
0.23
Diluted
$
0.10
$
0.18
$
0.18
$
0.21
Weighted average common shares
outstanding
Basic
40.2
39.7
40.2
39.6
Diluted
40.5
42.2
40.5
43.2
VAREX IMAGING
CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In millions, except share and per
share amounts)
March 31, 2023
September 30, 2022
Assets
Current assets:
Cash and cash equivalents
$
104.4
$
89.4
Accounts receivable, net of allowance for
credit losses of $0.6 million and $0.6 million at March 31, 2023
and September 30, 2022, respectively
159.5
173.3
Inventories
310.7
303.2
Prepaid expenses and other current
assets
43.8
44.0
Total current assets
618.4
609.9
Property, plant, and equipment, net
142.6
141.3
Goodwill
289.2
284.5
Intangible assets, net
28.9
33.6
Investments in privately-held
companies
47.3
46.4
Deferred tax assets
2.1
2.3
Operating lease assets
23.2
23.2
Other assets
39.1
43.2
Total assets
$
1,190.8
$
1,184.4
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
74.2
$
78.2
Accrued liabilities and other current
liabilities
66.9
81.4
Current operating lease liabilities
3.9
4.0
Current maturities of long-term debt
2.0
2.1
Deferred revenues
10.2
7.4
Total current liabilities
157.2
173.1
Long-term debt, net
441.0
412.3
Deferred tax liabilities
—
0.5
Operating lease liabilities
17.1
18.0
Other long-term liabilities
42.6
33.8
Total liabilities
657.9
637.7
Stockholders' equity:
Preferred stock, $.01 par value:
20,000,000 shares authorized, none issued
—
—
Common stock, $.01 par value: 150,000,000
shares authorized
Shares issued and outstanding: 40,384,190
and 40,085,126 at March 31, 2023 and September 30, 2022,
respectively.
0.4
0.4
Additional paid-in capital
441.6
469.1
Accumulated other comprehensive income
0.2
0.1
Retained earnings
77.4
63.8
Total Varex stockholders' equity
519.6
533.4
Noncontrolling interests
13.3
13.3
Total stockholders' equity
532.9
546.7
Total liabilities and stockholders'
equity
$
1,190.8
$
1,184.4
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Six Months Ended
(In millions, except per share
amounts)
March 31, 2023
April 1, 2022
March 31, 2023
April 1, 2022
GROSS PROFIT RECONCILIATION
Revenues, net
$
228.2
$
214.7
$
433.8
$
413.5
Gross profit
72.7
70.8
136.0
135.6
Amortization of intangible assets
1.8
1.8
3.6
3.6
Non-GAAP gross profit
$
74.5
$
72.6
$
139.6
$
139.2
Gross margin %
31.9
%
33.0
%
31.4
%
32.8
%
Non-GAAP gross margin %
32.6
%
33.8
%
32.2
%
33.7
%
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE RECONCILIATION
Selling, general and administrative
$
34.1
$
25.3
$
64.4
$
58.4
Amortization of intangible assets
1.6
1.9
3.2
3.8
Restructuring charges
0.8
1.1
1.5
4.3
Other non-operational costs
3.2
0.1
3.8
1.9
Non-GAAP selling, general and
administrative expense
$
28.5
$
22.2
$
55.9
$
48.4
OPERATING EXPENSE
RECONCILIATION
Total operating expenses
$
57.1
$
44.2
$
107.4
$
95.0
Amortization of intangible assets
1.6
1.9
3.2
3.8
Restructuring charges
0.8
1.1
1.5
4.3
Other non-operational costs
3.2
0.1
3.8
1.9
Non-GAAP operating expense
$
51.5
$
41.1
$
98.9
$
85.0
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Six Months Ended
(In millions, except per share
amounts)
March 31, 2023
April 1, 2022
March 31, 2023
April 1, 2022
OPERATING INCOME RECONCILIATION
Operating income
$
15.6
$
26.6
$
28.6
$
40.6
Amortization of intangible assets
(includes amortization impacts to cost of revenues)
3.4
3.7
6.8
7.4
Restructuring charges (includes
restructuring impact to cost of revenues)
0.8
1.1
1.5
4.3
Other non-operational costs (includes
other non-operational impacts to cost of revenues)
3.2
0.1
3.8
1.9
Total operating income adjustments
7.4
4.9
12.1
13.6
Non-GAAP operating income
$
23.0
$
31.5
$
40.7
$
54.2
Operating margin
6.8
%
12.4
%
6.6
%
9.8
%
Non-GAAP operating margin
10.1
%
14.7
%
9.4
%
13.1
%
INCOME BEFORE TAXES
RECONCILIATION
Income before taxes
$
7.8
$
13.6
$
13.2
$
16.9
Total operating income adjustments
7.4
4.9
12.1
13.6
Convertible notes non-cash interest
expense
—
2.2
—
4.3
Other non-operational costs
—
1.2
—
1.2
Total income before tax adjustments
7.4
8.3
12.1
19.1
Non-GAAP income before taxes
$
15.2
$
21.9
$
25.3
$
36.0
INCOME TAX EXPENSE
RECONCILIATION
Income tax expense
$
3.5
$
6.0
$
5.7
$
7.7
Tax effect on non-GAAP adjustments
(0.8
)
(0.8
)
(0.1
)
(2.6
)
Non-GAAP income tax expense
$
4.3
$
6.8
$
5.8
$
10.3
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Six Months Ended
(In millions, except per share
amounts)
March 31, 2023
April 1, 2022
March 31, 2023
April 1, 2022
NET INCOME AND DILUTED NET INCOME PER
SHARE RECONCILIATION
Net income attributable to Varex
$
4.1
$
7.6
$
7.2
$
9.0
Total earnings before taxes
adjustments
7.4
8.3
12.1
19.1
Effective tax rate on non-GAAP
adjustments
10.8
%
9.6
%
0.8
%
13.6
%
Tax effect on non-GAAP adjustments
(0.8
)
(0.8
)
(0.1
)
(2.6
)
Non-GAAP net income
10.7
15.1
19.2
25.5
Diluted net income per share
0.10
0.18
0.18
0.21
Non-GAAP diluted net income per share
$
0.26
$
0.37
$
0.47
$
0.62
DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING RECONCILIATION
GAAP weighted average common shares -
dilutive
40.5
42.2
40.5
43.2
Dilution offset from convertible notes
hedge transaction
—
(1.7
)
—
(2.2
)
Non-GAAP dilutive shares
40.5
40.5
40.5
41.0
ADJUSTED EBITDA RECONCILIATION
Net income attributable to Varex
$
4.1
$
7.6
$
7.2
$
9.0
Interest expense
7.3
9.9
14.8
19.8
Income tax expense
3.5
6.0
5.7
7.7
Depreciation
4.7
4.8
9.3
9.6
Amortization
3.4
3.7
6.8
7.5
Stock based compensation
3.2
3.9
6.5
7.3
Restructuring charges
0.8
1.1
1.5
4.3
Other non-operational costs
3.2
1.3
3.8
3.1
Adjusted EBITDA
$
30.2
$
38.3
$
55.6
$
68.3
Discussion of Non-GAAP Financial Measures
This press release includes non-GAAP financial measures derived
from our Condensed Consolidated Statements of Operations. These
measures are not presented in accordance with, nor are they a
substitute for U.S. generally accepted accounting principles, or
GAAP. These measures include: non-GAAP gross profit; non-GAAP gross
margin; non-GAAP operating expense; non-GAAP operating earnings;
non-GAAP operating earnings margin; non-GAAP earnings before taxes;
non-GAAP net earnings; non-GAAP net earnings per diluted share,
non-GAAP dilutive shares; and non-GAAP EBITDA. We are providing a
reconciliation above of each non-GAAP financial measure used in
this earnings release to the most directly comparable GAAP
financial measure. We are unable to provide without unreasonable
effort a reconciliation of non-GAAP guidance measures to the
corresponding GAAP measures on a forward-looking basis due to the
potential significant variability and limited visibility of the
excluded items discussed.
We utilize a number of different financial measures, both GAAP
and non-GAAP, in analyzing and assessing the overall performance of
our business, in making operating decisions, and forecasting and
planning for future periods. We consider the use of the non-GAAP
measures to be helpful in assessing the performance of the ongoing
operation of our business by excluding unusual and one-time costs.
We believe that disclosing non-GAAP financial measures provides
useful supplemental data that allows for greater transparency in
the review of our financial and operational performance. We also
believe that disclosing non-GAAP financial measures provides useful
information to investors and others in understanding and evaluating
our operating results and future prospects in the same manner as
management and in comparing financial results across accounting
periods and to those of peer companies.
Non-GAAP measures include the following items:
Amortization of intangible assets:
We do not acquire businesses and assets on a predictable cycle. The
amount of purchase price allocated to intangible assets and the
term of amortization can vary significantly and are unique to each
acquisition or purchase. We believe that excluding amortization of
intangible assets allows the users of our financial statements to
better review and understand the historic and current results of
our operations, and also facilitates comparisons to peer
companies.
Purchase price accounting charges to cost
of revenues: We may incur charges to cost of revenues as a
result of acquisitions. We believe that excluding these charges
allows the users of our financial statements to better understand
the historic and current cost of our products, our gross margin,
and also facilitates comparisons to peer companies.
Restructuring charges: We incur
restructuring charges that result from events, which arise from
unforeseen circumstances and/or often occur outside of the ordinary
course of our on-going business. Although these events are
reflected in our GAAP financials, these unique transactions may
limit the comparability of our on-going operations with prior and
future periods.
Acquisition and integration related
costs: We incur expenses or benefits with respect to certain
items associated with our acquisitions, such as transaction costs,
changes in fair value of acquisition related hedges, changes in the
fair value of contingent consideration liabilities, gain or expense
on settlement of pre-existing relationships, etc. We exclude such
expenses or benefits as they are related to acquisitions and have
no direct correlation to the operation of our on-going business. We
also incur expenses or benefits with respect to certain items
associated with our acquisitions, such as integration costs
relating to acquisitions for any costs incurred prior to closing
and up to 12 months after the closing date of the acquisition.
Impairment charges: We may incur
impairment charges that result from events, which arise from
unforeseen circumstances and/or often occur outside of the ordinary
course of our on-going business and such charges may limit the
comparability of our on-going operations with prior and future
periods.
Other non-operational costs:
Certain items may be non-recurring, unusual, infrequent and
directly related to an event that is distinct and non-reflective of
the Company’s ongoing business operations. These may include such
items as non-ordinary course litigation, legal settlements,
inventory write-downs for discontinued products, cost of facilities
no longer in use, extinguishment of debt and hedge costs,
environmental settlements, governmental settlements including tax
settlements, and other items of similar nature.
Convertible notes non-cash interest
expense: We issued convertible notes in June 2020 at a
discount related to the conversion feature of the notes and
capitalized certain costs related to the issuance of these notes.
The discount and capitalized issuance costs are amortized into
interest expense over the term of the convertible notes. The
amortization recognized for the convertible notes will be greater
than the cash interest payments for the notes. We believe that
excluding the convertible notes non-cash interest expense allows
the users of our financial statements to better understand the
historic and current results of our operations. This also
facilitates comparisons to peer companies.
Non-operational tax adjustments:
Certain tax items may be non-recurring, unusual, infrequent and
directly related to an event that is distinct and non-reflective of
the Company’s normal business operations. These may include such
items as the retroactive impact of significant changes in tax laws,
including changes to statutory tax rates and one-time tax
charges.
Tax effects of operating earnings
adjustments: We apply our non-GAAP adjustments to the GAAP
pretax income to calculate the non-GAAP effective tax rate. This
application of our non-GAAP effective tax rate excludes any
discrete items, as defined in the guidance for accounting for
income taxes in interim periods, or any other non-operational tax
adjustments.
Dilution offset from convertible notes
hedge transaction: In connection with the issuance of the
Company’s Convertible Senior Unsecured Notes (the Convertible
Notes) in June 2020, the Company entered into convertible note
hedge transactions (the Hedge Transactions) to reduce the potential
dilutive effect on common shares upon the eventual conversion of
the Convertible Notes. GAAP diluted shares outstanding includes the
incremental dilutive shares from the Company’s Convertible Notes.
Under GAAP, the anti-dilutive impact of the Convertible Note Hedge
Transactions is not reflected in GAAP diluted shares outstanding.
In periods in which the average stock price per share exceeds
$20.81 and the Company has GAAP net income, the non-GAAP diluted
share count includes the anti-dilutive impact of the Company’s
Hedge Transactions, which reduces the potential dilution that
otherwise would occur upon conversion of the Company’s Convertible
Notes. We believe non-GAAP diluted shares is a useful non-GAAP
metric because it provides insight into the offsetting economic
effect of the Hedge Transactions against potential conversion of
the Convertible Notes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230502005394/en/
Christopher Belfiore Director of Investor Relations Varex
Imaging Corporation 801.973.1566 |
christopher.belfiore@vareximaging.com
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