VREX Varex Imaging

Sunny Sanyal President, Chief Executive Officer
Clarence Verhoef Chief Financial Officer
Howard Goldman Director of Investor Relations
Anthony Petrone Jefferies
Larry Solow CJS Securities
Suraj Kalia Oppenheimer
Mark Strouse JP Morgan
Jim Sidoti Sidoti & Company
Call transcript
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Greetings! And welcome to Varex Imaging Corporation, Second Quarter Fiscal Year 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Howard Goldman, Director of Investor Relations. you. Thank

begin. may You

Howard Goldman

and welcome second Imaging XXXX. quarter Sunny and today and CFO. call With earnings for are CEO; President our the of Sanyal, Verhoef, to afternoon, our Corporation’s Varex conference me Clarence Good fiscal year

otherwise discussion, of are year quarter all references year XXXX. of fiscal XXXX versus To comparisons unless to the to simplify stated, our quarter second fiscal quarter the second

our non-GAAP nor financial presented today's they measures. the adjusted financial financial On discuss our press GAAP website. call GAAP not with will measure measure comparable measures provided of earnings for in substitute release, certain accordance We a are on we a are to measures. is each which directly in These financial most reconciliation adjusted posted

that that will statements, we risks advised subject be those statements be projections future anticipated. call assumptions this are and which that to based cause events. during and are from forward-looking are expectations about actual materially These or results predictions could differ to uncertainties current making on Please

information discussion. discussion reports on The Form cause this and Risk we our to annual of those quarterly differ from Item report XX-Q of information Form in actual is speaks filings, in Factors could today's no concerning to XX-K. forward-looking update in the statement contained factors this obligation as assume materially and date, or revise anticipated XA our our results SEC Additional on that including

And now, I'll turn to call the over Sunny.

Sunny Sanyal

pandemic. welcome! the world around dramatically Thank the due changed Since last February, Good in us you, our Howard. afternoon COVID-XX earnings and has call to

also all COVID-XX. on the I to suppliers on lines closely thank customers of against our for behalf the the want impact world global working I selfless second professionals our discussing Before to manage everyone of quarter, the would volunteers And the at pandemic. for us front this fighting like with around and and to our Varex, of thank results

operational employees XXXX-plus personnel. safe all that our of factories well I’m and our grateful around staffed our all and are are essential the also that and centers by world service and

good and many We our employees internal and from distancing have implemented external working strong practices or social systems meetings. home non-production for using and video effectively hygiene conferencing with

to safety measures to extraordinary addition in took making health high operations many lockdown where the our some we of workers the local actions, commuting, products. Philippines government transportation production manufacture In public and The we some disrupted initiated to it in our volume by get and impossible virtually our for site. strong

able in customers. of were make to business the This I'm only also be maintain delivery on-time but many us for arrangement to our workers glad we say arrangements for not to continuity, impacted ensure to sheltered that our to premises. allowed

COVID-XX pandemic began our business quarter. The in second to the impact

experienced our quarter, prior overall shift between mix segments increased we a segment in our and year over business Although the lowered within margins. our each revenues substantial that

the segment second quarter million, in million. XX% million the revenues year from for $XXX Medical decreased to $XXX Revenues quarter. revenues while to $XXX segment prior increased X% industrial increased $XX to million

products sales for X-ray high and production We and with in higher much tubes increase tubes of other medical voltage demand the met significant our In CT incremental of for growth. detectors, tubes, increased connectors. that against a fight certain imaging revenue drove segment demand and radiographic and COVID-XX the assist CT

our levels in spending inventory systems. for manage decline This growth OEM products their in other uncertainty was partially sales offset as X-ray response around to the customers of imaging medical by a

quarters. has versatility versatile modalities, this. of diagnostic most that as to this shown diagnosing systems fight CT seeing healthy has the we new for CT continued to imaging anticipate CT of and practitioners is to demand coming in growth been assist The and from be we're solid demonstrates Demand CT using COVID-XX system the complications in one have COVID-XX. installations against over remain us

our our OEM not driven with These CT sales during longstanding forged success tube have customers, relationships win with First, continued is by It's Our and largest majority growth drove the to XX-plus that factors: particularly uncommon of technologies. vast in that customers. several customer the who for include years. relationships our we customer systems all global effective exceed in us the cost CT our quarter, advanced in to market

for Second, their technology disruption move forward operations plans. pandemic, system OEM adoption CT of most needs. and global Despite with on rely our to in our innovation continue in from future continue OEM drives their new the leadership customers introduction to product our customers Varex

of that an scalability operations the Third, advantage is value. our our customers

of some in and that customers this an fulfill COVID-XX during to the was mentioned, quarter. we able were driven for previously I systems by of saw demand uptick As most our their demand

where innovation the an globally believe oncology These firmly this OEMs we have our we known to well dental, While appear introductions. responded and to markets mammography that have a slowed to leader markets pandemic, very the product down temporary as situation are us. due for favorably and are recent is

any such performance has and effective Z cost notable of our the our platform for as applications. pandemic, rollout and slowdowns new surgical, dynamic high not been in the other dental, Despite there cardiovascular detector technologies

At detector progress and forward. projects introducing and locally have solid dental China Customer begun in increasing these areas to our products these same in for continued with are shipping products quantities. time the make have plans in radiographic made moving we

OEMs of detectors specifications X-ray lightest best-in-class the new in portable mobile is encouraged world, the the systems. detector most developing from currently by with the it and that traction we're one very received robust and Our wireless has

confident very to feel pause before. expect of out we competitively stronger than are we summary, come and technologies mark, this that hitting tube the temporary and detector our medical In

producing in of ports segment, and tender all in our industrial and many sales decline driven lower of which are governments, funded a to at for significantly the typically regions products In Most oil type world. prices our world cargo are projects this of borders. located by screening led of

the decreased many the substantially vertical impact commercial considerably COVID-XX gas oil customers contracted NDT of as that market, Similarly, products. and sharply. manufacture in companies declined to economic spending applications NDT other sales the on global for product and sales consumer Product due our in also to

in with industrial the business quarter second a we the believe increased; attractive year. application in to part for drop global term the headwinds airport anticipate second precipitous remains travel the however, of of growth COVID-XX, in this we Despite fiscal product security sales due that an for temporary half continue given our to In potential. product air decline sales market long segment this

demand for industrial our significant has the our the chain supply well applications, Overall, as its medical certain economy global created variability business, and uncertainty to disruption for as pandemic products and in COVID-XX on Varex’s impact a productivity. which and in manufacturing includes

least of the the this uncertainty current expect for year. to fiscal We at remainder continue

we're a As our previously result, year issued for guidance our withdrawing fiscal XXXX.

to challenges help measures a To we associated our the in year. with the cash second half of business fiscal that into condition series initiated extraordinary the will improve our COVID-XX, second cost our enable weather and preservation continue of better financial quarter and reduction

year. Clara For we into example, quarter fourth have date by current Santa closure the the of the of fiscal facility pulled quarter full in our

costs In the and through furloughs personnel. are we United in reductions labor reducing States targeted

fiscal salary and My weeks fiscal employees members by agreed and our a XX% by level. cash job the of Directors without our of retainer other XX% in effectively Board to will be half their XX%, for the year. this reduced reduction second this have annual of will of remainder reducing XX% on depending reductions, we through cash compensation salary pay approximately to of temporary non-production year, leave the be for addition, a In combination two for of

guidelines. We're Internationally, we're exploring XXXK work implementing and in-line match suspending with temporarily Employee the company's reductions along cash and of with Recognition reduced Programs. salary schedules, components local each

discretionary million and reduced costs either we're in actions these margin to this increase our portfolio $XX have $XX fiscal or expect the In the to expenses, taking aggregate, low products reduce on actions We will remainder year. million reduce prices discontinue by over to and of approximately we continue products. other to

well. lines, There look facilities, assets as as our other broad across cost term entire overhead well reductions and the portfolio at actions of as evaluation cost targeting are additional as We're product our structure. business long we closely our under

half on committed I We to details quarters. in will provide few additional of implementing The changes team expect delivering we next the are second and and the XXXX. begin this to over these leadership

the With to detail. Clarence me talk call that, to hand over about in greater let performance our financial

Clarence Verhoef

to Before go the The improve cost purposes, will hello performance I two the for performance, details I just into they preservation. everyone! for Thanks quarter discuss help Sunny cash to P&L and are critical the of reviewed Sunny are second actions and liquidity. wanted they that

actions taken your recently other have We well. cash as manage to

production products. months was on spending, for equipment needed demand we other increase high hold put capital Several a all than what that ago to

build manufacturing our demands. continue target the to while changing to managing reducing frequently customer levels inventory due We schedule

with payment monitoring We our terms. suppliers on negotiation are customer payment closely our and patterns

us end At balance to Program. in U.S. process additional adjusted modified $XX additional provided We borrowed are leverage steps the the of increase our Street EBITDA. the that of cash. Main sheet. ratio our Government with capital, sources taking the our credit March other of an facility to pursuing we Lending April the allowable In strengthen facility We're remaining X.XXx the million to credit of we covenants of balance of including

events. and gross the some weighed quarter, product to margins turning both segment operating performance while by had and and revenue good were Now one-time we down mix,

in quarter quarter the second million and the year revenues $XXX million the were $X decreased $X million prior $XX quarter. industrial compared Medical to million. for increased to $XXX million For $XXX million revenues revenues to

gross by about in gross For the the was our XX% compared quarter second quarter. declined segment XX% X margin to year prior points. Medical margin

of quarter million a and audit million the related closure During Europe of the customs costs $X related to the Santa depreciation accelerated approximately one-time Clara we to $X in approximately of facility. incurred

adjusted and was to compared year Industrial by prior mix segment. products. margin quarter, to due volume in XX% the margin primarily prior about points the to due performance year, versus segment of in Overall unfavorable an gross X our lower decreased gross lower industrial margin the XX%

increase second expenses in of prior conversion. R&D an quarter, million the primarily inclusion $XX the year $X due of the direct from were million quarter, to

revenues As about quarter. a the R&D was expense XX% percent for of

for increased million expenses the to and $XX the and were integration, were year million quarter other consulting million prior standards. costs. expenses $X year expense versus prior included expenses quarter SG&A accounting $XX of Second related million non-operating due also included to to other acquisition the and of and approximately restructuring $X with related of approximately approximately million and costs. audit non-operational implementation expenses SG&A fees SG&A $X and associated new remediation restructuring

compared and year. totaled amortization $X in to second quarter million $XX for Depreciation the the million prior

closure related previously, included of of mentioned the quarter Santa to the depreciation million $X the As accelerated Clara facility. second

million quarter for quarter. $XX $X earnings second in million compared were the operating ago year to the Our

million $XX was to earnings operating quarter. which the $XX the from second adjusted quarter. Our for compared was second quarter year the ago $X in the to quarter expense year were million ago million Interest comparable

of in one-time In consideration earnings. revalued April deferred of is for recorded was payment fixed a we Varex shares. the and on acquisition other the excluded deferred completed consideration net our reduction second income. gain gain Due which share price we based the direct This conversion, amount amount million adjusted in to the Varex the of of the the quarter, a $X from of

diluted recorded Tax to $X of quarter $X per was $X loss in year of million quarter. less second share compared in diluted quarter. per of to We prior $X.XX million of or expense million net $X in second prior a the $X.XX earnings for the tax the compared quarter million than the share year expense net

million earnings million million $X.XX shares the million or in year quarter $XX.X to or per year outstanding per versus were quarter. diluted quarter. share, $XX shares net prior shares for Diluted compared share in $XX.X prior the diluted Adjusted $X were this $X.XX

Looking from year of the prior at transfer Clara in million XX preparation receivable Santa to Salt our days City. increased production second to quarter. million sales working $X for increased outstanding days by $XXX primarily compared $XX capital, Inventory million, quarter. additional the Day in to the accounts detective XX was due during Lake to quarter in the inventory

equivalents cash of ended second million. with quarter $XX We and the cash

increase debt of million. outstanding by quarter and the total debt the with During $X we quarter ended million $XXX

directionally to continue at we we have Due with the industrial end COVID-XX year. for in fiscal that segment uncertainty of withdrawn the in the fiscal the the guidance will associated decline the year least That said, through the anticipate revenues pandemic, XXXX.

back over closing comments. some it Sunny turn I'll for Now to

Sunny Sanyal

Thank you, Clarence.

near significant we business emphasize to Before I'd term the questions, to get despite like fundamentals strong. our headwinds that remain

future. to into We our the continue we that support will to to will innovate, positioned well we customers, continue actions take Varex is to will continue ensure and

is Varex unique.

for and industry in more the recognize been leader leader and XX have X-ray continue than that years We for years and plan next quality continue both leadership XX beyond. We're in we innovation – the a on customers a imaging and that. our to

relationships on with who have imaging We decade many their rely customers needs. long multi Varex system for

believe and only in detectors. demand not We will of continued independent long X-ray We these tubes approximately products Varex’s be tubes only tubes X-ray and XX% detectors, manufacturer all detectors X-Ray but and the there digital the and term both are for United for States. of globally, supply

for Thank support. unusual we only competitively your get not you is this, stronger. but time will This through an and emerge

call We questions. your for will now the open it up,


Thank Instructions]. you. [Operator

comes Our with Petrone line the question on with question. Jefferies. Anthony first your proceed of Please

Anthony Petrone

the Hope everyone's And thanks Great! and healthy and for afternoon. update. well Hi! good doing staying

Sunny Sanyal

Anthony! Hello

Anthony Petrone

back add Sunny? are to on housekeeping Just just margin. gross million $X.X you one quick How question, the

specifically in way you provide particular the then then in the quick tube and demand in CT orders of Thank bit you. little of how that and that and will of backlog, China a back on anything terms I'll the follow-ups. this half quarter color trend two from have there Just into can

Sunny Sanyal

I’ll Clarence second. take and first I’ll the one take let the

Clarence Verhoef

what's the – on the there. Anthony, with going I'll Yeah answer add-back

way payments related customs is audit year we've associated those this for that's so customs prior and that. it's in of the some Germany with in particular, amounts going one the under booked So things estimated to where

that than by and a our contesting that into a which the historically Germany chosen detectors rate a classification it tariff are about they've has imported we’ve higher because used. We customs ruling in being or are what for there's authorities that for courts, any been for down detectors classification code the matter

is that resolved. going of so get this a will bit And to a to be process some take time

further that go up say the recent as Germany. probably that the process, through around that a it's quarters coming expect terms we in bit auditor all and end to time more little booking in from the we have I of periods clarity and get we would courts going more locations in I the will

Anthony Petrone


So again, repeated, add-back will off sort to then that point from sort around and of half into the you would quarter back two fluctuate of you expect next know you here. million $X know possibly trail or be

Clarence Verhoef

that a that. to to define or of has take we to going expect next estimate whether number, the size I'm – or work to two finish kind it’s quarters Yeah, because something in yes, their would like still next it's see an the that it. says exactly, that, similar quarter to another auditor number the Hard around

estimates the identified. So identified booked it’s at all about numbers only versus kind we the that's clearly rough and amount of time

Anthony Petrone

Got it.

Sunny Sanyal

Hey Anthony…

Anthony Petrone

you. thank Yeah,

Sunny Sanyal

how with rebounded in part CT, trajectory Second happy to the CT and six, I'm to to there for they right out to have the rapidly when down So weeks China things normal back, were and CT this They were your on. line know back in quarter – bright and where there? then came we China of quickly. you been seven and fairly in very returned the came things performance spots fairly that China question, going are back orders, things China are say that

with are in China. So very happy what's we satisfied going and on

that a performer And it COVID-XX. in two us, anticipate addition assisting for CT tied on One, know in demand we normal anticipated, general related quarter, diagnosis That's and of additional during for COVID-XX CT things and purchases. that was run combination that progressed we – you good our and had a as for the continued used to to had we of things. was rate was

able but was we there our that line nice of this foundational the to a expectations. we had quarter against, with in during deliver bubble were So CT demand

Anthony Petrone

market, so there headwinds headwinds? and two on obviously to also half, checks in but and know also backlog? end closures. procedures we've our orders dental, of physician out two heard referenced in you you decrease headwinds industrial. How follow-ups. when think also then lots those obviously Is mentioned that but and in oil on Sunny backlog impaired Okay, particular the you office you the on imaging second And medical the in quick then the the about risk spend do gets play the into these a space

Sunny Sanyal

I'll start side. with the demand

As CT we versatile when they year own of as it’s the as buying be strength and usually I – paths modalities demand other multiple expect CT from very have people have the in benefiting and a normal. seems to just for we second pick modality of as and it's one, so we and year choice to CT, its have are that. half to mentioned, any

modalities, other grinding physician the mammography, stopped you offices know into they and office. came as the stopped the you’ve said, those that a coming as Then seen performing dental, in halt to procedures market,

our So demand kinds haven’t for should these those of we've dentist opening getting – but translated yet, that external into but seen of offices outpatient signs up, up, stoppage, those that soon we but as back open we we're clinics as seeing us that believe volumes. straight start to

is next two the a is now, Timing is. it uncertain; quarter, uncertainty quarters from where that's bit is it

earlier mammography We dental end chain signals. are looking customers we will supply production we months that we're know ones signals our are usually back that to to Since than customers, daily we and weekly, will this, there. ahead you as their talking right demand – be three expect the shipments, we treated in customers, the comes we so first of the hope know get front on for of

the expect open outpatient seen are is that markets We've which – that would these then in offices pattern, physician purchases up other resume. following once demand similar back, they will begin, and dental system China if we come related

the I'm your then, I Talk] the late get – last question didn't sorry, [Cross for regarding of part And question…

Anthony Petrone

the that segment of detection terms industrial. that of you business, oil in included Yeah, portfolio in security just mentioned that

you security so at just of demand is know that of of terms you business know and the linear risk. for accelerators in more out backlog Just detection, that's how playing now

Sunny Sanyal

Yeah, general don't of carry we backlog. a in much

XX As XXX you times takes delivering our between know days. lead we for anywhere it usually, products to

any impact impairment So significant or backlog. real there's backlog to no to any

our that because do of What of many is securities happened to show market COVID-XX came a there projects that stop, installations. One, in two people of played segment up the because to in. factors just couldn’t

So slowdown. pause number – the one was that’s that for why

delay. of on of actual delay probably it, shipments projects felt also this, Again, related and those systems why saw of front move end install felt our the we slowdown cargo are or so that's then to a the the systems in we the those quarter. and the we so out, customers then caused who ship deliver But other a part impact during

part second is prices oil this of that effect down Oil usually tenders come prices. The on a have slowing out.

largely they driven expecting where to this all reason. know right, is were a and the number that's where tenders two come tender were, customers out, so So you business we projects our to moved

to gas business, related solid prices, to we that, oil presence in And in there and prices down, came spend the vertical, related a the money as have our shrank. willingness the also oil good oil industrial and to

So and COVID-XX. than tied detectors and gas that prices to tubes, we for be software oil oil industrial more that those think will

Anthony Petrone

queue. you. I'll back get Thank Okay, into

Sunny Sanyal

you. Thank


Our proceed comes from next Solow question Please a line question. CJS Securities. Larry with your with of

Larry Solow

everybody afternoon Great, Hope is thanks. guys. Good okay. doing

Sunny Sanyal

Larry. Hi

Larry Solow

a I of just follow-ups. a couple few question, have

and – in for what later, weeks. impacts you of Just until quarter two, obviously know you know probably COVID three, much the but on four it not, of China the feel most probably didn't clearly you your started

get I in areas of a constant. you in from terms been, level, Just said trying April, sales you you they, know some you kind trying just remains and know high and like not are have trends just but know giving others – in CT in to bed of a to stuff guidance,

quarter half maybe to even trying terms in happened of the us back get tell of of first in front kind versus some what or half. Just feel

Clarence Verhoef

a start out Well bit. Larry, little I'll with

specific color give give First of reminders. to going all, much you Yes, guidance and can't this. I'm anymore, the I we give don't too probably around

weeks front that of probably midway just around second the last it, that. is of industrial to saw is know second key few that's indications of end our slowdown think quarter, got to industrial, cycle Sunny point business, as in is the started you the you the the see continuing I just was you And expectation more mentioning. not because more half remember through we going of slowdown though that know it side the the and we’re on that the on the that necessarily are all and

Larry Solow

I I week the right, gotten right, during it’s And mean… least at suppose worse, last

Clarence Verhoef

about a okay specific, I'm had an but first know because not I you in still it half. you the means going thinking to the very would that know yes get second we – it, say if that had of half slowdown as you're we

get And than you rather on so just or a and just now of that half month a full impact month recognize a worth quarter's of a this it.

the used on, doing already the within mean on kind touched then I kind is detectors still medical radiographic some products CT of That bit little space, has demand a think for continues And and that demand about there. know the X-ray you I are of imaging. chest Sunny basic

So higher-end I a purchases in mean I about capital of the and – for into it's the equipment seen a of going latter we’ve the part quarter. bit slowdown think March that next it’s additional applications more and

Larry Solow

know it's set impact increasingly mostly just think I out of would more CT so the but challenging to you just mix, you because on Right, and not you tubes, mentioned, in side, QX undoubtedly have of industrial on drop look machines that least in was the the in side too know good the performance, much, because terms the in back in these, of right. an that where margin margins, world. in terms of you the probably then some – as just the pretty I at medical But terms right

Sunny Sanyal

with the gross glad Larry, terms more know at it you as been prior targeting XX% in Because a which bit the year we ago be to up a was our you or that. comparable for me I I’m year. a We've ended at as of margin. year macro little XX%, little in let of Yeah, kind bit maybe looked asked yeah, – more,

roughly significant third, points is of pretty and it us, a categories. a third loss into margin for down break movement third, a I’d three a three So

of first whether products mix mix, of is it's between selling. the even overall The we the that are it segments or

are less quarter have. the products just we the We than high-end in selling of second historically

we year, have we and on prior overlap this yet, haven't associated still touched you the still with we particularly Santa really the Clara have, the second, when comparing costs The are with but transfer.

So and in some costs Santa ramping City Salt stranded support production we the Clara have we overhead and for transfer. in in preparation up were Lake

a of that freight that's know not lose factories. some on and impact So of of in you roughly point higher good as impact just well. And sight in itself productivity then of by costs, the us caused terms let's COVID less kind

as roughly we just were so efficient we associated as are We point of with before, as impact and that a well. not saw

number by certainly this challenge there's and available are with the of available well, restrictions or up and have is would other way a the You are freight say you know see on airplanes ships as is know that the companies costs costs freight as you have I that that freight gone increased.

Larry Solow

After impacted fees. out the that consulting margin? SG&A know your of than little side, that, on $X much be would. it increased may operating on I your you side, the million I your higher gross And SG&A through how seems also called of

And even so that questions timer accounting that guess is more a that next this quarter? a the that I out even So think standard, down, though XX% okay. new – number, basically quarter, were revenue just that of there this one is costs was mix couple decent close going was and a still revenue I to number to take leak of is I into itself, if of not

in those there’s else related COVID maybe So trying stuff. if beside anything to figure some out, there,

Clarence Verhoef

would that million kind new elements that associated and so least over bit probably added accounting I with to that’s an is associated a about and only million I the through as most was run that. that combination $X standard first probably as consulting QX, of put that, into of it bled was with talk you of do different know of I’ll accounting – had in that. the That’s standard, little kind you implemented of far at we know $X QX of all costs the and

used We also remediation non-GAAP if we to that now have started you remember, earnings, in our that costs, the to our SOX adjusted out we financials. include and adjusted said

you non-GAAP is that additional historically know there So adjustments some has out been a adjusted associated cost that, perspective. with from

just as good because as in that then, bucket, you the so time less a of haven’t in I a with business, the would know terms costs into performance been we I of putting bit And the right, you're little that lot I a whole incur more of overall COVID, have think just like is general, COVID. of extra hard lot SG&A that associated It didn’t operating efficiently we normally to. a

on direct the addition does line, particularly is we with conversion, adds I the of conversion. as year, which R&D point, generating which missed the have comparison one revenues additional on And well. not the it but we doing mostly other are when a costs with add prior SG&A the I some direct yet we are do

call now revenue SG&A a let’s us So on right a going perspective. there's a as business still from in of percentage – bit it of that that impacts a investment

Larry Solow

Longer selling guess. cycle, I

control. I a and lot couple hopefully were on, this question kind know of Just under temporary it's next year, Sunny you in much last touched know guess or a stuff years pretty hopefully of back you oven is come

they’ll machines question my hospitals; their in if these a get CT stuff. lot there funding can A-to-B its the your maybe of these know -- the lot you are driven stuff back, surgeries, not but a is your to even maybe meantime to and by part hospitals, a in the I likely high-end If guess of quite lot were some side, and come of they medical where lot of a of lower. is, purchases are on

direct a an on of the where you there surgeries lead the know you sales impact slowdown is know guys. of to possibility maybe that your impact slower for equipment and then OEM or lack So impact you period, economic extended would

Clarence Verhoef

has interesting I he – I ensure hearing a you interest of in that sure you then making response to properly and know of the there’s bit viable lot that are question bit like to pulse Sunny I about and think I that. answer what think with what of initial going more and a give question well. you an hospitals is that's little happen are a will because I'm I’m I the functioning know are an say a from funded and that to better what little I’m that more, economics, the finger was they that kind hospital is, would hospitals on and reading want because know

not sure that agree will have future. think I struggling I'm your in the they'll they that premise, So more be with that – all you

there’s well. that Sunny? to sure think governments commitment I the make function by a hospitals

Larry Solow

No, will a I I devil's play your appreciate trying hear I’m and know you it's there. – just wanted know theory it’s a advocate that thoughts to be but to they that just premise. not you struggling,

Sunny Sanyal

Yeah, Larry on into specific think of why theory finger and we I a guidance. translates timing that's know put the we’re not I withdrawing uncertainty think because recovery, your timing – that can't we're and you our

diminishing. for about it, let's cancer that oncology But just treatment, an we fundamentally, if as take you don't think see example. Demand

just know is, come drivers or back, like question demographic be that return basic are versus see faster hospital, continue there, the things we will to know dental oncology, you going we don't the those. the ambulatory procedures, because So these and to the mammography, will a on

are revenues portion on replacement tubes. pretty significant the side a Secondly, tube of our

you know you some slowed CT online, stopped that function, down surgeries continue of hospitals know There that was – that as to back. comes done. demand demand when just if as well back things So as systems getting come

demand – more a know is, we're online bullish then the placing bet we’re the drivers back systems, you market on. side and the this not bring we're fundamental timing but will So that

Larry Solow

color. a the appreciate Thanks I lot guys.


from of comes question question. next Oppenheimer. Our with Kalia Suraj the Please proceed with line your

Suraj Kalia

Good afternoon Sunny, Howard, safe are everyone. hope and Clarence, everyone healthy.

Sunny Sanyal

you. Thank

Suraj Kalia

hear you me alright? Can

Sunny Sanyal


Suraj Kalia

anywhere dance down albeit been collateral between Okay, Sunny, one companies of from the and Sunny the companies XX%. just telegraphing. things a procedures XX% universe, down me kind Clarence, most impact, questions. of has in so and most some let volumes Look, April these that are of of of hospital’s hospitals in to were to know obviously the that shut we around have the correlated our

you'll this oil are you'll a and maybe heard early guys where so. that I'm relative industrial to Would shape-up. and Now you on April, was the pre-COVID. maybe down of patterns what only May this demand, sure obviously or sort numbers perspective, saw normally any know not just know for you visibility specific but not color much how gas, it have and ordering medical you'll even some see as little you different, give was know I you this us where is and businesses you a in

Sunny Sanyal

the a or Well that of in is Suraj, I talked is side see little starts just second quarter's the with this, decline. we quarter full of bit we part I I the industrial second the – business would to middle say worth the think Anthony and expect that of about which I'm a slowdown the saw that now

what quarter's extrapolating of is around math full little decline a in do terms can that you bit a a quarter’s half decline. a versus So the

not we of I'm of lot without they because business still ship give a specific much with demand. in log and deliver then numbers, probably do pretty and back know to that a you come we our lot as to and somewhat very orders going so

Suraj Kalia

we if in any. how you about it, Got Sunny, terms know of contractual okay. again, should think minimums

contractual is offsets say let's impacted, get are to we what going how everyone but next, You guys quarters. are over getting impacted, You right, minimums there? should think about the three know any

could know you year, in calendar counter say some this here gas. despite perspective slowdowns tie let’s us some and to effect a is okay, oil have give of balancing You that

Sunny Sanyal

customers a prices pricing about have really down and/or think more know said so are and but when I less. may that with volume are no the there no what down, – driven, they fast and we real – a exceptions speaking, customers, have need, they sit few sit and to agreements – don't quarter pricing, volumes then year customers, know minimums. before we've discussion we’ll – agreements then with need our if what next our where you are are Suraj, contractual you with this you done are prices our and special there we take our projects around if they talk know than So but mostly more have largely they hard take next generally speaking a These than take down we

see adjustments you're us. of don't any so We significant an volume any from And impact because going not to that of have adjustments.

Suraj Kalia

Fair enough, in Clarence, so terms no okay. in time lines realizing. And offsets, of Clara, Santa change in any

COVID. has color is track or delayed on You for Any things some it because still additional of been ’XX? know calendar

Clarence Verhoef

all manufacturing I there team, they and the No, to say actually work right of in those right well, of want a City, – them terms having those detectors now just up production that, the going initial validate we’re in to the because and in kudos our first to ramping ton right that do of having of on that perform midst Salt the that is capabilities go customers, of to Lake building now. those,

operations end to to some We start quarter quarter, so fourth the this into down year. the the of ramp of see we see will the Clara the at of in slowdown, the and financial start Santa fiscal going quarter benefit this fourth

moved have a from we what talked originally quarter that about. So in we about

So of fiscal talking will most instead end the have the the the calendar production by of about been end stopped year. year, of of

pulled So months in we about it there. three from

that all of benefit means So get fundamentally for it will full year costs those fiscal ‘XX. the reducing we of

hiccups lot work would but you so there's a I way, a track always on say and all-in-all I schedule. along There's know and pretty of are mean I learnings on be they the And few much to done. say that would

Suraj Kalia

I've back jumping final been queue. in and between And me; in Sunny, Fair I'll two just question calls. forgive hop enough.

item it industrial versus Is my models the factor to say to remaining So spend industrials. of – medical than of demand, per the forma trying much in in impact safe Thank just gas be you fair the CapEx out pretty you and everyone. be would predominantly impact the more we as drop relative that step-down, oil line or the map structural medical taking related, on all the side for map we should segment? and the going questions to out the the in would I'm you more specifically visualize know COVID and how quarters, it safe to is industrials, guys thereof say

Sunny Sanyal

to hey can Yeah, answer, actually frame difficult the you. me by let if behavior Suraj, question that's it a in industrial I see for The vertical. but pretty segment different is

play you a sort Within through got got a few as – airport examples your happening security framework you a get What's and can articles, cargo. we've of around so go in security we as know of and So I'll you've vertical. this.

If to the look at you both. issues security vertical, airport related security tied are

airports. going know us of You it's volume – through volume for tied to passengers

more systems more go are right, demand for through number As related. airports, that's one; COVID more tubes, and used passengers that's

are able our security Now, based with they've you being some economies, countries, security, but in out. are yes, move that had customers if there demand related the there know and these comes other cargo producing projects for delayed, the pay delays projects oil in these then to from in oil getting

will delayed. the stuff past seen get temporary the oil related go stabilize. will related stuff this combination – it's back projects oil in when continue security, oil a the there prices project in is and prices the mostly when COVID this Hopefully to funding come we've So happen down, but

let's look manufacturing and at broad facing. say consumer other if that you verticals In based verticals, are more

vertical, tied and will there to open inspection be spending tied recovery food and start, COVID tied or the up electronics when So and production these are vertical and factories inspection right. to these are these consumer

aerospace. Then like the government we spend that budget. you've we will continue to got think sectors, to government are are money their in optimistic, verticals the according There that

totally there funding track. It’s government based and budgets. So recovery on government a – that is different on

tied So prices. to that where vertical software and tubes, detectors, every – were gas oil oil and selling we is again

single for in staged. be we’ll We industrial the recovery. isn’t there one So think reason

things as general a manufacturing, on. and full will hard start to come earlier so on some resume time put will we’ll there, resume recovery comes to their other is they online, know operations as manufacturing verticals recovery, You finger see frame


from comes next with Strouse JP with question. Morgan. Our question Mark Please a your proceed of line

Mark Strouse

very good for thank you Yeah, taking our evening, questions. much

about number? versus Just half, savings the during color cost When on wanted versus a plans? to in savings. there COGS would that prior be $XX color year-over-year OpEx? bit second Just and $XX a the much cost Is to is million in also how any get that more talk million then you that

Clarence Verhoef

take shot that. I’ll a at

run against its, would Mark So our right. be current it

that are run the half these happening against run are So rate, first that you reductions current say would rate.

you it. expenses. model kind good of easiest a related the people probably of And portion that that's So know way you for to is

actions etcetera. of of reductions, of kind in Sunny walked we you and – So different through walked salary the furloughs through terms know some

are spread labor impacting those production. of are in not because lines, the So we more SG&A the to going be direct R&D and

you heavier people you're in margin. the see So gross to going the related up expenses costs a those weighting operating than in would

well. some At expenses let's of of and the overhead, those at same time we're it looking inside reducing as variable call some of our, the manufacturing

see with little a line, you closure. line. subset do pull-in in and the is that the that margin bit some So of that's we Santa the Clara a where know with gross We that, R&D benefit of see benefit the mostly in

mixed would of probably a order very bag. two-thirds in roughly magnitude expense, of of speaking. I one-third bit say a So operating the margin, gross

Mark Strouse

go margin gross I to term that's your And back Clarence, Okay, you. then helpful long wanted thank to targets.

to that recover, talked for structural this of You out are long might that that market think expectations but impact the any there eventually term about changes you come target?

Clarence Verhoef

guide structure, other how Well, can as picture little But of to this there's salary color more we fundamental variable we here about a finance but little could a about through continue these operational point. I’m that and things we can function could process that's kinds costs the furloughs Sunny so I things. you of reduced kind like just on, there talked color a then the form give of things going reductions, learned starting just be on ago, know, and maybe about give etcetera, think of second opportunities expenditures, cost that that you with a the much bit the say some and broader the so not

– should the some And of say increase. margin difference and of that structure overhead we perspective. level performing make what to some discontinue either our expenses, are of can cross know take price Those gross a the we to or we kind look at things a going the our overall some then, lines you our we're look as lower just – those product hard at get from of do

the end and that continue will for same the the in associated you we about us. I detectors, the the improving the invest a it. big performance of talk deal that’s for has R&D product you know those up – one on mean good know actually that things time, of to a is right structure you it’s – cost we with know Z platform At with new

things to some of it detector with business lead the better performance side in like does that. the So

Mark Strouse

very helpful. Thank Okay, you.

Sunny Sanyal



from Company. Sidoti line comes next Our of with the question & proceed Jim with Sidoti your Please question.

Jim Sidoti

guys. afternoon. I everybody’s It's safe. hear you hope good to Good

Sunny Sanyal

Jim! Hi

Clarence Verhoef

Hello Jim!

Jim Sidoti

it sure So and I before those just just is about in was China make couple where a running what of follow-ups. are that said, back wanted COVID? to to you up manufacturing quick facilities and business

Sunny Sanyal

off. Jim, Sunny. this start is I'll

from shutdowns quickly fairly they fairly recovered on has over the related came least COVID they rapidly China that at back track. So – from right a period, had

China remain increasing all quantities, – on making up those happy that’s know we remained our starting has all we of we shipping are that’s you We're very in RADs, are radiographic producing doctors, detectors our factory production plans about production, for projects, detectors, CT work, track, projects, are them of dental China, in oncology our our track. our detectors, so so that. on – And the

Clarence Verhoef

our And supply right in suppliers and manufacturing addition we we some activity had and China, in suppliers on begun portions some talked track to in our now. our using also of on Remember in going those of are moving those China we're move. – qualifying about that's chain

Jim Sidoti

on in know shifts much back worldwide, you facilities you cut have you how percentage on other cut us Okay, you tell a and and your then back. can

Sunny Sanyal

we time We etcetera. be in created was challenges only transportation about resilient No, the down, was cutting The off. production dips where this we that issues. the we're – didn’t, in we earlier geographies balanced we and there said actually we had talked There place more we so a production production quarters of Philippines was we and dorms them on and between didn’t. in of facilities, our when the shifts, distributing went employees period globally our for because look, and back staffing paid production no we we that housed can where

significant pretty products, at our in volume a the those greater on-time despite in time products a know impact high than of point remained at You Philippines, delivery XX%.

were and So the the in faltered Netherlands and balance more in Netherlands, we we've the added there. more we Philippines able shifts balancing added to then have not between shifts were and We back went and Philippines. the shifts we been, labor and

Salt demand we City, within running Lake of portions were at levels The historical capacity and the to major – we've same thing in able running been at deliver here we quarter. the increased were

Jim Sidoti

And how about April? of in the in month of April, the shifts reduced month have you

Clarence Verhoef

about, is where of in the the production little in has a slowed if accelerator linier a a probably and bit a be down bit of we production, Jim the slowdown where for example you I there is little know example, is industrial, little that that. gone think would

Sunny Sanyal

X-ray And there the industrial there the made labor the a facilities tubes correct. fungible, the different, tubes, regular those are two accelerators linear are fungible, tubes, tubes, have in that's different – productions, the product, production is are but no medical processes the That's industrial the there shared. made even resources for same and are

the economies get the both of we So having advantage together, that's those of scale.

Jim Sidoti

to slowdown same you're this three you with even the I operating in industrial, still were mean so changes right, shifts you had drastic production. all your months to ago. haven't make Okay,

Sunny Sanyal


Jim Sidoti

gain then of in and to acquisition I share final about wanted the from a about just already shares price. you of been my last change the the rest account issued have payment should those the reported because share you to or fund think talked and it question year? we Okay make what sure, Clarence, for the

Clarence Verhoef

memory from I’m got to that I April believe it’s line in shares, and magnitude. in XXX,XXX something The go something bit of a issued order going here. little

Jim Sidoti

around that will you so be still XX.X million shares. Okay,

Clarence Verhoef

of little a here. get so Yeah, you’ll dilution bit

we’ll at XX.X like I that. that be think So you million, so were something we million, quarter next XX.X XX.X know, million or

Jim Sidoti

thank Got alright Okay, it! you.

Clarence Verhoef


Sunny Sanyal

you, Jim. Thank


from Petrone. Anthony Our question. follow-up next is your question with proceed question a Please

Anthony Petrone

Thanks, that. I appreciate

balance the know I called out cash the that Just reductions out on in and half. one second cost look. sheet you

in do debt from short $XX and due credit million You revolver. out have million term took you the $XX

next guess fiscal color think there of So early you there the XQ looking the some flow in it business cash cash look XQ, the be of Thanks. be as outlook, just cash specifically should you there? of into fiscal in that positive? will the appears And sort year, level Was as I burn. any

Clarence Verhoef

terms watching quarter. we our spend a topic the it on we It of lot that's of payment color it’s time that a Yeah, these a a Maybe days little and I debt. closely. bit on that make very just in is of $X.X million have minimum a loan, term that

So that debt have pay payments that's to as amount QX in far and in minimum the we QX. as

The our their that business their payments dealing in about customers is timely. we're with with very and entities financial good news that substantial repeat are make strength that we're dealing large that

that, we've patterns okay, the which a to deal not pay in their closely big is changes seen point terms in monitor they to any customer this very time, to continue So level. because we continue payment at as

to about It going the sure make for slowdown in customers the having making for is ordering we to as are from to that what The items is and the are us our need that in key have not inventory key of products shift we to that's see sit inventory. and manufacturing we that’s mix our for seen payment us, all in as been adjust just about, we've reduce the focus for we outflows schedules such me. so

on the there's build and main schedules, we of in that lot terms So suppliers. our from the That's a of adjusting have. purchases going focus corresponding

helps the obvious an our that be keep going feel is the be positive also it's to of for the flow like the tight, It's cash but and I'm us that, there’s talked which spot. other item would in you I the we're to tell the that okay going we second is half. going the what to tight, that about to of happens CapEx some million – $XX the $XX expenses, with million then I say spending benefit reducing reduction


closing There management hand the questions call for like remarks. in queue. are back no to to I'd further

Sunny Sanyal

company's you Thank for our in conference anywhere this location. and A questions from be your XXX-XX-XXX. call accessed XXX-XXX-XXXX replay of Good code by replay access be website call a of participating XX is fiscal in from calling quarterly the conference The or May second or through bye! earnings the can XXXX. XXX-XXX-XXXX will year call the for U.S. non-U.S. at and quarter available conference


teleconference. this gentlemen, Thank conclude for and Ladies today's does you your participation.

disconnect a may and your day! You lines at time this have wonderful

Sunny Sanyal

Thank you, guys.