Varex Imaging Corporation (Nasdaq: VREX) today announced its
unaudited financial results for the fourth quarter of fiscal year
2023.
Q4 FY23 Summary
- Revenues of $227 million
- GAAP gross margin 34% | Non-GAAP gross margin* 36%
- GAAP operating expense $54 million | Non-GAAP operating
expense* $51 million
- GAAP operating margin 11% | Non-GAAP operating margin* 13%
- GAAP net income $0.66 per diluted share | Non-GAAP net income*
$0.45 per diluted share
- Cash flow from operations $47 million
FY23 Summary
- Record revenues of $893 million
- GAAP gross margin 32% | Non-GAAP gross margin* 33%
- GAAP operating expense $213 million | Non-GAAP operating
expense* $199 million
- GAAP operating margin 9% | Non-GAAP operating margin* 11%
- GAAP net income $1.08 per diluted share | Non-GAAP net income*
$1.27 per diluted share
- Cash flow from operations $108 million
“We are pleased to report another solid quarter. Revenue of $227
million in the fourth quarter of fiscal 2023 was the result of the
strong performance in our Industrial segment, offset primarily by
lower revenue in China in our Medical segment,” said Sunny Sanyal,
Chief Executive Officer of Varex. Sanyal added, “Cash generation
remained robust due to solid profitability and a continued focus on
inventory management, enabling us to finish the fiscal year with
$195 million of cash and marketable securities on the balance
sheet.”
Varex’s revenues in the fourth quarter decreased 2% sequentially
from the third quarter of fiscal year 2023 with the Medical segment
down 7% and the Industrial segment up 12%. Compared to the fourth
quarter of fiscal year 2022, overall revenues decreased 2% with
Medical down 10% and Industrial up 27%. Non-GAAP gross margin of
36% percent and non-GAAP EPS of $0.45 was driven primarily by a
higher proportion of Industrial sales and better price
realization.
Sanyal continued, “We believe we are well positioned to grow in
China when the anti-corruption campaign winds down and the
healthcare market improves. At the same time, through investments
in new products and applications, we are encouraged by the
long-term growth potential of our Industrial segment.”
Balance Sheet & Cash Flow
Cash flow from operations was $47 million for the fourth quarter
of fiscal year 2023. Cash, cash equivalents, marketable securities,
and certificates of deposits as of the end of fiscal year 2023
totaled $195 million.
Outlook
The following guidance is provided for the first quarter of
fiscal year 2024:
- Revenues are expected to be between $180 million and $200
million
- Non-GAAP net income per diluted share is expected to be between
$0.00 and $0.20
Guidance for the company's net income 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 reconciliation to a GAAP forecast of net
income per diluted share without unreasonable effort due to certain
of these reconciling items being uncertain, out of our control, and
the amount and timing of these items being unable to be reasonably
predicted. The actual amounts of such reconciling items could have
a significant impact on the company's GAAP net income per diluted
share.
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 fourth
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
vareximaging.com/investors. 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. A replay of
the call will be available from today through November 28th at
877-660-6853 from anywhere in the U.S. or 201-612-7415 from
non-U.S. locations. The replay access code is 13741953. The
listen-only webcast link is:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=jaQBhURj
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; industry or market outlook; growth
potential performance, and marketing positioning; revenues, product
volumes, cash generation or other expected future financial results
or performance; and any statements using the terms “believe,”
“expect,” “encouraged,” “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
reduction in or loss of business of one or more of our large
customers; inability to effectively compete with competitors;
market erosion due to pricing pressures and other factors; failure
to meet customers’ needs and demands; economic instability,
shifting political environments, changing tax treatment,
reactionary regulatory regimes, and other risks associated with
doing business internationally; supply chain disruptions; inability
to maintain or defend intellectual property rights, and the high
cost of protecting such rights and defending against infringement
claims; disruption of critical information systems or material
security breaches of such systems; non-compliance with
product-related regulations and delays in obtain regulatory
clearances or approvals; 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 statement 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-K for the 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 the Form 10-K.
VAREX IMAGING
CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended
Twelve Months Ended
(In millions, except for per share
amounts)
September 29, 2023
September 30, 2022
September 29, 2023
September 30, 2022
Revenues, net
Medical
$
163.7
$
181.5
$
673.3
$
674.7
Industrial
63.7
49.9
220.1
184.7
Total revenues
227.4
231.4
893.4
859.4
Gross profit
Medical
52.8
56.8
205.5
210.5
Industrial
25.2
17.7
84.8
73.0
Total gross profit
78.0
74.5
290.3
283.5
Operating expenses:
Research and development
21.8
20.2
84.8
77.0
Selling, general and administrative
31.9
29.7
128.4
118.3
Total operating expenses
53.7
49.9
213.2
195.3
Operating income
24.3
24.6
77.1
88.2
Interest income
1.6
0.2
3.7
0.4
Interest expense
(7.2
)
(9.4
)
(29.3
)
(39.8
)
Other expense, net
(17.7
)
(1.3
)
(20.2
)
(4.3
)
Interest and other expense, net
(23.3
)
(10.5
)
(45.8
)
(43.7
)
Income before taxes
1.0
14.1
31.3
44.5
Income tax (benefit) expense
(31.0
)
0.9
(17.4
)
13.7
Net income
32.0
13.2
48.7
30.8
Less: Net income attributable to
noncontrolling interests
0.1
0.1
0.5
0.5
Net income attributable to Varex
$
31.9
$
13.1
$
48.2
$
30.3
Net income per common share
attributable to Varex
Basic
$
0.79
$
0.33
$
1.20
$
0.76
Diluted
$
0.66
$
0.32
$
1.07
$
0.73
Weighted average common shares
outstanding
Basic
40.4
40.0
40.3
39.8
Diluted
50.5
40.9
50.3
41.6
VAREX IMAGING
CORPORATION
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In millions, except share and per
share amounts)
September 29, 2023
September 30, 2022
Assets
Current assets:
Cash and cash equivalents
$
152.6
$
89.4
Account receivable, net
163.6
173.3
Inventories, net
277.5
303.2
Prepaid expenses and other current
assets
64.6
44.0
Total current assets
658.3
609.9
Property, plant and equipment, net
143.6
141.3
Goodwill
288.5
284.5
Intangible assets, net
22.4
33.6
Investments in privately-held
companies
29.0
46.4
Deferred tax assets
41.3
2.3
Operating lease assets
29.0
23.2
Other assets
37.5
43.2
Total assets
$
1,249.6
$
1,184.4
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
64.7
$
78.2
Accrued liabilities and other current
liabilities
82.6
81.4
Current operating lease liabilities
3.8
4.0
Current maturities of long-term debt
1.5
2.1
Deferred revenues
10.2
7.4
Total current liabilities
162.8
173.1
Long-term debt, net
441.1
412.3
Deferred tax liabilities
—
0.5
Operating lease liabilities
23.1
18.0
Other long-term liabilities
41.6
33.8
Total liabilities
668.6
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: 40,529,573
and 40,085,126 at September 29, 2023 and September 30, 2022,
respectively
0.4
0.4
Additional paid-in capital
450.4
469.1
Accumulated other comprehensive (loss)
income
(1.2
)
0.1
Retained earnings
118.1
63.8
Total Varex stockholders' equity
567.7
533.4
Noncontrolling interests
13.3
13.3
Total stockholders' equity
581.0
546.7
Total liabilities and stockholders'
equity
$
1,249.6
$
1,184.4
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Twelve Months Ended
(In millions, except per share
amounts)
September 29, 2023
September 30, 2022
September 29, 2023
September 30, 2022
GROSS PROFIT RECONCILIATION
Revenues, net
$
227.4
$
231.4
$
893.4
$
859.4
Gross profit
78.0
74.5
290.3
283.5
Amortization of intangible assets
1.9
1.7
7.3
7.2
Other non-operational costs
1.1
—
1.1
—
Non-GAAP gross profit
$
81.0
76.2
298.7
290.7
Gross margin
34.3
%
32.2
%
32.5
%
33.0
%
Non-GAAP gross margin
35.6
%
32.9
%
33.4
%
33.8
%
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE RECONCILIATION
Selling, general and administrative
$
31.9
$
29.7
$
128.4
$
118.3
Amortization of intangible assets
1.6
1.7
6.4
7.4
Restructuring charges
1.0
1.7
3.2
7.3
Other non-operational costs
(0.3
)
(0.6
)
4.3
1.4
Non-GAAP selling, general and
administrative expense
$
29.6
$
26.9
$
114.5
$
102.2
OPERATING EXPENSE
RECONCILIATION
Total operating expenses
$
53.7
$
49.9
$
213.2
$
195.3
Amortization of intangible assets
1.6
1.7
6.4
7.4
Restructuring charges
1.0
1.7
3.2
7.3
Other non-operational costs
(0.3
)
(0.6
)
4.3
1.4
Non-GAAP operating expense
$
51.4
$
47.1
$
199.3
$
179.2
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Twelve Months Ended
(In millions, except per share
amounts)
September 29, 2023
September 30, 2022
September 29, 2023
September 30, 2022
OPERATING INCOME RECONCILIATION
Operating income
$
24.3
$
24.6
$
77.1
$
88.2
Amortization of intangible assets
(includes amortization impacts to cost of revenues)
3.5
3.4
13.7
14.6
Restructuring charges (includes
restructuring impact to cost of revenues)
1.0
1.7
3.2
7.3
Other non-operational costs (includes
other non-operational impacts to cost of revenues)
0.8
(0.6
)
5.4
1.4
Total operating income adjustments
5.3
4.5
22.3
23.3
Non-GAAP operating income
$
29.6
$
29.1
$
99.4
$
111.5
Operating margin
10.7
%
10.6
%
8.6
%
10.3
%
Non-GAAP operating margin
13.0
%
12.6
%
11.1
%
13.0
%
INCOME BEFORE TAXES
RECONCILIATION
Income before taxes
$
1.0
$
14.1
$
31.3
$
44.5
Total operating income adjustments
5.3
4.5
22.3
23.3
Convertible notes non-cash interest
expense
—
2.3
—
8.8
Investment impairment charges
16.4
—
16.4
—
Other non-operational costs
—
—
—
1.2
Total income before taxes adjustments
21.7
6.8
38.7
33.3
Non-GAAP income before taxes
$
22.7
$
20.9
$
70.0
$
77.8
INCOME TAX (BENEFIT) EXPENSE
RECONCILIATION
Income tax (benefit) expense
$
(31.0
)
$
0.9
$
(17.4
)
$
13.7
Tax effect on non-GAAP adjustments
(32.4
)
(2.7
)
(29.1
)
(6.1
)
Non-GAAP income tax (benefit) expense
$
1.4
$
3.6
$
11.7
$
19.8
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Twelve Months Ended
(In millions, except per share
amounts)
September 29, 2023
September 30, 2022
September 29, 2023
September 30, 2022
NET INCOME AND DILUTED NET INCOME PER
SHARE RECONCILIATION
Net income attributable to Varex
$
31.9
$
13.1
$
48.2
$
30.3
Total income before taxes adjustments
21.7
6.8
38.7
33.3
Effective tax rate on non-GAAP
adjustments
(149.3
)%
(39.7
)%
(75.2
)%
(18.3
)%
Tax effect on non-GAAP adjustments
(32.4
)
(2.7
)
(29.1
)
(6.1
)
Non-GAAP net income
21.2
17.2
57.8
57.5
Interest expense on Convertible Notes, net
of tax
1.5
—
6.2
—
Diluted Non-GAAP net income
22.7
17.2
64.0
57.5
Diluted net income per share
0.66
0.32
1.08
0.73
Non-GAAP diluted net income per share
$
0.45
$
0.42
$
1.27
$
1.43
DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING RECONCILIATION
GAAP weighted average common shares -
dilutive
50.5
40.9
50.3
41.6
Dilution offset from convertible notes
hedge transaction
—
(0.5
)
—
(1.3
)
Non-GAAP dilutive shares
50.5
40.4
50.3
40.3
ADJUSTED EBITDA RECONCILIATION
Net income attributable to Varex
$
31.9
$
13.1
$
48.2
$
30.3
Interest expense
7.2
9.4
29.3
38.6
Income tax (benefit) expense
(31.0
)
0.9
(17.4
)
13.7
Depreciation
5.3
4.7
19.5
19.0
Amortization
3.5
3.4
13.7
14.6
Stock based compensation
3.4
3.3
13.5
14.0
Restructuring charges
1.0
1.7
3.2
7.3
Impairment charges
16.4
—
16.4
—
Other non-operational costs
0.8
(0.6
)
5.4
2.6
Adjusted EBITDA
$
38.5
$
35.9
$
131.8
$
140.1
Discussion of Non-GAAP Financial Measures
This press release includes non-GAAP financial measures derived
from our 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 selling, general and administrative expense; non-GAAP
operating expense; non-GAAP operating income; non-GAAP operating
margin; non-GAAP income before taxes; non-GAAP income tax (benefit)
expense; non-GAAP net income; non-GAAP diluted net income per
share, non-GAAP dilutive shares; and adjusted 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 income
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/20231114381906/en/
Christopher Belfiore Director of Investor Relations Varex
Imaging Corporation 801.973.1566 |
christopher.belfiore@vareximaging.com
Varex Imaging (NASDAQ:VREX)
Historical Stock Chart
From Apr 2024 to May 2024
Varex Imaging (NASDAQ:VREX)
Historical Stock Chart
From May 2023 to May 2024