Varex Imaging Corp

Previous wording

•global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, reactionary import/export regulatory, tariff, and trade policy regimes, and other risks associated with international manufacturing, operations, and sales;

Current wording

•global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, import/export regulatory, tariff, and trade policy regimes, and other risks associated with international manufacturing, operations, and sales;

Previous wording

•inability to maintain or defend our intellectual property rights, and high cost of protecting our intellectual property and defending against infringement claims;

Current wording

•inability to maintain or defend our intellectual property rights, and high cost of protecting and defending such rights and defending against infringement claims;

Previous wording

Statements concerning supply chain and logistics challenges; cost increases and expense management; changes in U.S. and worldwide economic conditions, such as the impact of inflation, and fluctuations in foreign currency exchange rates; geopolitical tensions; legislative, tariff, and trade policy reforms and responsive retaliatory actions by impacted countries, and uncertainty resulting therefrom, such as the tariffs against China, Canada, and Mexico announced by the United States on February 1, 2025, and the retaliatory tariffs against the United States announced by China, Canada, and Mexico (collectively referred to as the "February 2025 Tariffs"); industry or business segment outlook; customer acceptance of or transition to new products or technologies such as advanced X-ray tube and digital flat panel detector products; growth drivers; future orders, revenues, market share, backlog, earnings or other financial results; and any statements using the terms “believe,” “expect,” “anticipate,” “can,” “should,” “would,” “could,” “estimate,” “expand,” “drive”, “may,” “intend,” “potential,” and “possible” or similar statements are forward-looking statements that involve risks and uncertainties that could cause our actual results and the outcome and timing of certain events to differ materially from those projected or management’s current expectations.

Current wording

Statements concerning legislative, tariff, and trade policy reforms, responsive retaliatory actions by affected countries, government investigations, and the uncertainty resulting therefrom; geopolitical tensions; supply chain and logistics challenges; cost increases and expense management; changes in U.S. and worldwide economic conditions, such as the impact of inflation, and fluctuations in foreign currency exchange rates; industry or business segment outlook; customer acceptance of or transition to new products or technologies such as advanced X-ray tube and digital flat panel detector products; growth drivers; future orders, revenues, market share, backlog, earnings or other financial results; and any statements using the terms “believe,” “expect,” “anticipate,” “can,” “should,” “would,” “could,” “estimate,” “expand,” “drive”, “may,” “intend,” “potential,” and “possible” or similar statements are forward-looking statements that involve risks and uncertainties that could cause our actual results and the outcome and timing of certain events to differ materially from those projected or management’s current expectations.

Previous wording

Our products are sold in three geographic regions: the Americas, EMEA, and APAC. The Americas includes North America (primarily the United States) and Latin America. EMEA includes Europe, the Middle East, India, and Africa. APAC includes Asia (other than India) and Australia. Revenues by region are based on the known final destination of products sold.

Current wording

Our products are sold in three geographic regions: the Americas, EMEA, and APAC. The Americas includes North America (primarily the United States) and Latin America. EMEA includes Europe, the Middle East, India, and Africa. APAC includes Asia (other than India) and Australia. Revenues by region and country are based on the known final destination of products sold.

Previous wording

We remain cautious about the general economic environment as many factors remain dynamic and unpredictable. The uncertain economic and geopolitical environment, supply chain and logistic challenges, the ultimate outcome and effect of the February 2025 Tariffs, and geopolitical tensions and local conflicts have contributed to, and may continue to contribute to, renewed inflation, higher interest rates and capital costs, increased shipping costs, supply shortages, increased costs of labor and materials, exchange rate volatility, increased tariff costs, and other similar effects.

Current wording

The current economic and trade environment remains dynamic and unpredictable. The uncertain outcome and effect of tariffs and reciprocal actions between the United States and other countries and its impact on the economic and geopolitical environment, supply chain and logistic challenges, and geopolitical tensions and local conflicts have contributed to, and may continue to contribute to, delayed customer purchasing decisions, increased tariff costs, higher inflation, higher interest rates and capital costs, supply chain disruption, increased costs of labor and materials, exchange rate volatility, increased shipping costs, and other similar effects.

Previous wording

For additional information on risks related to supply chain and logistics challenges, cost increases, changes in U.S. and worldwide economic conditions, geopolitical tensions, and other risks that could impact our results, see Item 1A “Risk Factors”.

Current wording

For additional information on risks related to tariffs and trade wars, supply chain and logistics challenges, cost increases, changes in U.S. and worldwide economic conditions, geopolitical tensions, and other risks that could impact our results, see Item 1A “Risk Factors”.

Previous wording

In our Medical segment, we design, manufacture, sell and service X-ray imaging components, including X-ray tubes, flat panel and photon counting detectors and accessories, high voltage connectors, image-processing software and workstations, 3D reconstruction software, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, and coolers. These components are used in a range of medical imaging applications including computed tomography ("CT"), mammography, oncology, cardiac, surgery, dental, fluoroscopy, and other diagnostic radiography uses.

Current wording

In our Medical segment, we design, manufacture, sell and service X-ray imaging components, including X-ray tubes, flat panel and photon counting detectors and accessories, high voltage connectors, image-processing software and workstations, 3D reconstruction software, computer-aided diagnostic software, automatic exposure control devices, generators, and coolers. These components are used in a range of medical imaging applications including computed tomography ("CT"), mammography, oncology, cardiac, surgery, dental, fluoroscopy, and other diagnostic radiography uses.

Previous wording

In China, the government has continued its efforts to broaden the availability of healthcare services. In the past 20 years, the number of medical institutions and diagnostic radiology equipment per million population in China has increased substantially. We are developing CT X-ray tubes and related subsystems for Chinese OEMs as they introduce new systems in China. Over the long-term, our objective is to become the partner of choice both for new systems and for replacement components in existing systems as CT systems continue to be more widely adopted throughout China. In March 2024, China introduced a new stimulus program that includes the healthcare industry. We believe the stimulus program has led to customers delaying purchasing decisions in the short-term as they wait to understand the details of the program before making significant purchasing decisions, but are optimistic that it will result in increased opportunities for our business in the longer-term.

Current wording

In China, the government has continued its efforts to broaden the availability of healthcare services. In the past 20 years, the number of medical institutions and diagnostic radiology equipment per million population in China has increased substantially. We are developing CT X-ray tubes and related subsystems for Chinese OEMs as they introduce new systems in China. Over the long-term, our objective is to become the partner of choice both for new systems and for replacement components in existing systems as CT systems continue to be more widely adopted throughout China.

Previous wording

In our Industrial segment, we design, develop, manufacture, sell, and service X-ray imaging products for use in a number of applications, including security applications for cargo screening at ports and borders, baggage screening at airports, and nondestructive testing, irradiation, and inspection applications used in a number of other verticals. Our Industrial products include Linatron® X-ray linear accelerators, X-ray tubes, flat panel and photon counting detectors, computed radiography scanners, high voltage connectors, and coolers. In addition, we license proprietary image-processing and detection software designed to work with other Varex products to provide packaged sub-assembly solutions to our Industrial customers. Our Industrial business benefits from the research and development investment and manufacturing economies of scale on the Medical side of our business, as we continue to find new applications for our technology. Along with more favorable pricing dynamics, this allows us to generally achieve higher gross profit for Industrial products relative to our Medical business. In addition, our Industrial business benefits from our long-term service agreements for our Linatron® products.

Current wording

In our Industrial segment, we design, develop, manufacture, sell, and service X-ray imaging products for use in a number of applications, including security applications for cargo screening at ports and borders, baggage screening at airports, and nondestructive testing, irradiation, and inspection applications used in a number of other verticals. We also manufacture and sell our own X-ray imaging systems for industrial applications. Our Industrial products include Linatron® X-ray linear accelerators, non-intrusive cargo inspection systems, X-ray tubes, flat panel and photon counting detectors, computed radiography scanners, high voltage connectors, and coolers. In addition, we license proprietary image-processing and detection software designed to work with other Varex products to provide packaged sub-assembly solutions to our Industrial customers. Our Industrial business benefits from the research and development investment and manufacturing economies of scale on the Medical side of our business, as we continue to find new applications for our technology. Along with more favorable pricing dynamics, this allows us to generally achieve higher gross profit for Industrial products relative to our Medical business. In addition, our Industrial business benefits from our long-term service agreements for our Linatron® products.

Previous wording

Security applications primarily consists of cargo security for the screening of trucks, trains, and cargo containers at ports and borders as well as airport security for checked baggage and palletized cargo. The end customers for border protection systems are typically government agencies, many of which are in oil-based economies and war zones where there can be significant variation in buying patterns. We have recently expanded our security offerings to include full systems that perform cargo and vehicle inspections. These systems are used for screening cargo at ports and borders.

Current wording

Security applications primarily consist of cargo security for the screening of trucks, trains, and cargo containers at ports and borders as well as airport security for checked baggage and palletized cargo. The end customers for border protection systems are typically government agencies, many of which are in oil-based economies and war zones where there can be significant variation in buying patterns. We have recently expanded our security offerings to include full systems that perform cargo and vehicle inspections. These systems are used for screening cargo at ports and borders.

Previous wording

The fiscal years of the Company as reported are the 52 or 53-week periods ending on the Friday nearest September 30. Fiscal year 2025 is the 53-week period ending October 3, 2025. Fiscal year 2024 was the 52-week period that ended on September 27, 2024. The fiscal quarters ended January 3, 2025 and December 29, 2023 were a 14-week period and 13-week period, respectively.

Current wording

The fiscal years of the Company as reported are the 52 or 53-week periods ending on the Friday nearest September 30. Fiscal year 2025 is the 53-week period ending October 3, 2025. Fiscal year 2024 was the 52-week period that ended on September 27, 2024. The fiscal quarters ended April 4, 2025 and March 29, 2024 were both 13-week periods. The six-month fiscal periods ended April 4, 2025 and March 29, 2024 were a 27-week period and a 26-week period, respectively.

Previous wording

The increase in Medical segment gross profit was primarily due to increased sales volume, favorable product mix, and refunds of foreign customs duties and taxes previously paid.

Current wording

The increase in Medical segment gross profit was primarily due to improved productivity and lower material costs of $8.6 million and increased sales volume and favorable product mix of $2.6 million.

Previous wording

We are committed to investing in the business to support long-term growth and believe long-term research and development expenses of approximately 8% to 10% of annual revenues is the appropriate range that will allow us to innovate and bring new products to market for our global OEM customers. Research and development costs increased to 11.8% of revenues for the first quarter of fiscal year 2025, due to increased costs and the fifth and final milestone payment for the Micro-X technology transfer.

Current wording

We are committed to investing in the business to support long-term growth and believe long-term research and development expenses of approximately 8% to 10% of annual revenues is the appropriate range that will allow us to innovate and bring new products to market for our global OEM customers. Research and development costs decreased to 10.3% of revenues for the second quarter of fiscal year 2025. The decrease was primarily due to higher revenue in the second quarter of fiscal year 2025 compared to the second quarter of fiscal year 2024, and a milestone payment for the Micro-X technology transfer of $1.0 million in the second quarter of fiscal year 2024 that did not repeat in the second quarter of fiscal year 2025.

Previous wording

Selling, general, and administrative expenses for the first quarter of fiscal year 2025 increased $1.4 million, primarily due to increased fixed cost commitments to a supplier.

Current wording

Selling, general, and administrative expenses for the second quarter of fiscal year 2025 decreased $2.9 million, primarily due to a decrease in fixed cost commitments to a supplier of $1.6 million and amortization of intangibles of $1.3 million.

Previous wording

Interest expense increased primarily due to interest costs in connection with the Revolving Credit Facility and the Equipment Credit Facility issued during fiscal year 2024 and the additional Senior Secured Notes issued during the first quarter of fiscal year 2025.

Current wording

Interest expense increased primarily due to interest costs in connection with the additional Senior Secured Notes issued during the first quarter of fiscal year 2025 and the Revolving Credit Facility established during the final week of the second quarter of fiscal year 2024.

Previous wording

Other (expense) income, net decreased due to increased losses in certain investments in privately-held companies and equity investments and increased foreign exchange expense.

Current wording

Other (expense) income, net decreased primarily due to increased losses in certain investments in privately-held companies and equity investments of $2.9 million and increased foreign exchange expense of $1.4 million.

Previous wording

For the three months ended January 3, 2025, we recognized income tax expense of $2.6 million on $2.5 million of pre-tax income. For the three months ended December 29, 2023, we recognized income tax benefit of $0.2 million on $0.6 million of pre-tax loss. Our tax expense increased for the three months ended January 3, 2025, primarily due to increased pre-tax income in certain jurisdictions, valuation allowance positions in the U.S. on deferred tax assets, and losses in certain foreign jurisdictions for which no benefit can be recorded.

Current wording

For the three months ended April 4, 2025, we recognized income tax expense of $3.7 million on $10.8 million of pre-tax income. For the three months ended March 29, 2024, we recognized income tax expense of $0.7 million on $2.3 million of pre-tax income. Our tax expense increased for the three months ended April 4, 2025, primarily due to increased pre-tax income in certain jurisdictions, valuation allowance positions in the U.S. on deferred tax assets, and losses in certain foreign jurisdictions for which no benefit can be recorded.

Previous wording

Medical revenues increased $4.7 million, primarily due to increased sales of CT and fluoroscopy, partially offset by decreased sales in radiographic, dental, oncology, and mammography.

Current wording

Medical revenues increased $9.7 million, primarily due to increased sales of CT, oncology, and fluoroscopy modalities of $20.6 million, partially offset by decreased sales in radiography, dental, mammography, and veterinary modalities of $9.5 million.

Previous wording

We assess our liquidity in terms of our ability to generate cash to fund our operations, including working capital and investing activities. We believe that our operating cash flow, cash on our balance sheet, availability under our Revolving Credit Facility, and our ability to access the credit and capital markets are sufficient to meet our anticipated operating activities and cash commitments for at least the next 12 months and will be sufficient to allow us to continue to invest in our existing businesses, consummate strategic acquisitions, and manage our capital structure on a short-term and long-term basis. We are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in or that are reasonably likely to result in a material change to our liquidity needs during or beyond the next 12 months, except for $200.0 million of our Convertible Notes that become due in June 2025 that we currently anticipate repaying using some combination of future borrowings under our Revolving Credit Facility, net proceeds from the Senior Secured Notes Add On, and cash. As of January 3, 2025, available restricted cash from the Senior Secured Notes Add On for repurchase prior to maturity or repayment at maturity of our Convertible Notes was $124.1 million, and the availability under our Revolving Credit Facility was $155.0 million. As of January 3, 2025, our Revolving Credit Facility remains undrawn. At January 3, 2025, we had total debt of $567.0 million, net of deferred issuance costs of $3.7 million.

Current wording

We assess our liquidity in terms of our ability to generate cash to fund our operations, including working capital and investing activities. We believe that our operating cash flow, cash on our balance sheet, availability under our Revolving Credit Facility, and our ability to access the credit and capital markets are sufficient to meet our anticipated operating activities and cash commitments for at least the next 12 months and will be sufficient to allow us to continue to invest in our existing businesses, consummate strategic acquisitions, and manage our capital structure on a short-term and long-term basis. We are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in or that are reasonably likely to result in a material change to our liquidity needs during or beyond the next 12 months, except for $200.0 million of our Convertible Notes that become due in June 2025 that we currently anticipate repaying using some combination of future borrowings under our Revolving Credit Facility, net proceeds from the Senior Secured Notes Add On, and cash. As of April 4, 2025, restricted cash from the Senior Secured Notes Add On available for the repurchase prior to maturity or repayment at maturity of our Convertible Notes was $125.4 million, and the availability under our Revolving Credit Facility was $154.8 million. At April 4, 2025, we had total debt of $567.2 million, net of deferred issuance costs of $3.2 million.

Previous wording

The following table summarizes our cash and cash equivalents, certificates of deposit, and marketable securities:

Current wording

The following table summarizes our cash and cash equivalents, certificates of deposit, and marketable debt securities:

Previous wording

(1)This amount has been excluded from current liabilities as it is supported by the Revolving Credit Facility and restricted cash from the proceeds of the Senior Secured Notes Add On (as defined below) and is expected to remain outstanding for an uninterrupted period extending beyond one year from the balance sheet date.

Current wording

(1)This amount has been excluded from current liabilities as it is supported by the Revolving Credit Facility and restricted cash from the proceeds of the Senior Secured Notes Add On (as defined below), which are expected to remain outstanding for an uninterrupted period extending beyond one year from the balance sheet date.

Previous wording

Net cash provided by (used in) financing activities. Net cash provided by (used in) financing activities was $124.9 million and $(1.7) million for the three months ended January 3, 2025 and December 29, 2023, respectively. The increase in cash provided by in financing activities was primarily due to the issuance of the Senior Secured Notes Add On during the fiscal quarter of fiscal year 2025.

Current wording

Net cash provided by (used in) financing activities. Net cash provided by (used in) financing activities was $124.2 million and $(3.0) million for the six months ended April 4, 2025 and March 29, 2024, respectively. The increase in cash provided by in financing activities was primarily due to the issuance of the Senior Secured Notes Add On during the first quarter of fiscal year 2025.

Previous wording

In October 2013, we entered into an amended agreement with dpiX and other parties that, among other things, provides us with the right to 50% of dpiX’s total manufacturing capacity produced after January 1, 2014. The amended agreement requires us to pay for 50% of the fixed costs (as defined in the amended agreement), as determined at the beginning of each calendar year. In January 2025, the Company's fixed cost commitment was determined to be $13.7 million for calendar year 2025. The amended agreement will continue unless the ownership structure of dpiX changes (as defined in the amended agreement).

Current wording

In October 2013, we entered into an amended agreement with dpiX and other parties that, among other things, provides us with the right to 50% of dpiX’s total manufacturing capacity produced after January 1, 2014. The amended agreement requires us to pay for 50% of the fixed costs (as defined in the amended agreement), as determined at the beginning of each calendar year. In January 2025, the Company's fixed cost commitment was determined to be $13.7 million for calendar year 2025. As of April 4, 2025, the Company estimated it has $10.2 million related to this fixed cost commitment remaining for calendar year 2025. The amended agreement will continue unless the ownership structure of dpiX changes (as defined in the amended agreement).

Previous wording

The Company enters into purchase agreements with its suppliers in the ordinary course of its business for the purchase of goods and services. Some of these purchase agreements are non-cancellable and thus contractually obligate the Company to future cash payments. As of January 3, 2025, our non-cancellable supplier purchase obligations totaled $5.6 million.

Current wording

The Company enters into purchase agreements with its suppliers in the ordinary course of its business for the purchase of goods and services. Some of these purchase agreements are non-cancellable and thus contractually obligate the Company to future cash payments. As of April 4, 2025, our non-cancellable supplier purchase obligations totaled $4.6 million.

Previous wording

Trade accounts receivable days sales outstanding (“DSO”) was 68 days at January 3, 2025 and 70 days at September 27, 2024. Our accounts receivable and DSO are impacted by a number of factors, including the timing of product shipments, collections performance, payment terms, the mix of revenues from different regions and the effects of economic instability.

Current wording

Trade accounts receivable days sales outstanding (“DSO”) was 62 days at April 4, 2025 and 70 days at September 27, 2024. Our accounts receivable and DSO are impacted by a number of factors, including the timing of product shipments, collections performance, payment terms, the mix of revenues from different regions and the effects of economic instability.

Previous wording

Backlog is the accumulation of all orders for which revenues have not been recognized and are still considered valid. Backlog also includes a small portion of billed service contracts that are included in deferred revenue. Our estimated total backlog at January 3, 2025 was approximately $307 million.

Current wording

Backlog is the accumulation of all orders for which revenues have not been recognized and are still considered valid. Backlog also includes a small portion of billed service contracts that are included in deferred revenue. Our estimated total backlog at April 4, 2025 was approximately $316 million.