VREX Varex Imaging

Sunny Sanyal President, Chief Executive Officer
Sam Maheshwari Chief Financial Officer
Clarence Verhoef Retiring Chief Financial Officer
Howard Goldman Director of Investor Relations
Larry Solow CJS Securities
Anthony Petrone Jefferies
Suraj Kalia Northland Security
Jim Sidoti Sidoti & Company
Mark Strouse JP Morgan
Call transcript
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Greetings! And welcome to the 3Q FY ’20 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. I would now like to turn the conference over to your host, Mr. Investor of Director Goldman, Relations. Howard Thank you.

begin. may You

Howard Goldman

our of risks for about with actual and Corporation’s Good XXXX, for uncertainties to non-GAAP each to call Please measures. GAAP all press are be projections reconciliation not quarter for call These certain forward-looking based our With the to are current posted that filings which and GAAP Clarence prior today quarter financial our directly Verhoef, are statements, described we Imaging CFO, making provided measure anticipated. business events. our unless earnings the CFO. on nor with, our assumptions fiscal discussion, stated measure the materially subject and are release, in afternoon welcome the to of could me unless discuss quarterly statements measures. expectations financial cause year President from Sanyal, differ release comparable a Sunny or in during this results most simplify earnings they third and advised that that our relating predictions earnings our is financial the presented of will today's are Sam to to We which on those the be and references XXXX. future are and Risks our Maheshwari new conference in fiscal to These website. year On SEC. Varex a are otherwise comparisons same will are call CEO; To substitute the year. third quarter our accordance are non-GAAP we Retiring of measures financial quarter stated, otherwise non-GAAP

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

Sunny Sanyal

Good and welcome. Howard. you, afternoon Thank everyone

his Varex particularly company. his Clarence We leadership along with year between a CT segments such demand of medical bubble detectors medical it a in shift years business in our began for the this as of mix, in in The quarter X-ray. impact an and mobile us areas it's COVID-XX service as Same largely CFO to second the and established into behalf CFO, high-tech experience companies growth. to than new want who’s of XX at us Q&A. begin, to for public today of this Verhoef, we in finance and into some Sam we get introduce him is Also Clarence you stage my been our be before Sam Before with pleasure up will leading Varex next our brings will and of and our certain wish the our years for instrumental retirement. all pandemic remarks best experience this thank and in the Maheshwari. private Varex, and to to his XX point. of with us spin-off in to during have getting industrial Tube I On everyone began here past during of independent as public the more

from were continue time, sales offset decline slowdown significant third increase radiographic our quarter progressed, At was a and a in a dental cargo quarter sales quarter. products. in year mammography. we to in X% sales of further XX% in by and CT oncology, in procedures same These segment, The industrial we pandemic airport the $XXX revenues the of in an industrial medical a see prior the cardiology, the in and revenue elective experienced As from decreased decreased net security. of impact in XX% particularly to medical and segment our the ago gains as year million. third On products declined used basis, such a

third industrial see growth long CT manufacturing from continued strength particularly volume which quarter, systems, in new by to our as customer win sales have demand new of our the the to came well in local continue business, CT innovation, During our efficient our CTs in both, in revenues the each we for global our and potential and as in ongoing relationships grew, the future. of and of China. a operations. represents globally our from customers, OEM Despite decade’s markets, for turbulence medical driven Tubes This we recurring strength in

customers Our mission the to components and our in that rely technologies sever, win systems. markets they innovative critical their continued have on to for provide

of In sale the fact our veterinary one our X,XXX recently their celebrated customers system detectors. using

led the of we sales related their quarter. revenues a experiencing customers are portfolio to inventory of In charges discontinued response an their low and quarter. the to markets Our products, mix The who now and decline gross our we decided grow. examined rate been variety China very gross product product closely in adjustments steady discontinue number one-time the businesses gains unusually share them of CT margins, progress and for margin look to products for margin combination making forward to additional in as market low we and components supplying unfavorable in with of local a the Systems in the with have COVID

past those quarter, sequentially also from XX% third reflected the to operating the by Over year fiscal our The and months, year XXXX we've prior for expenses declined quarter more of also quarter. of second the than are which been actions from taking in the five reduce expenses. actions results

of as XXX-K pay cash were and Some flow. at suspension aimed these largely managing such of in cost furloughs, reductions temporary actions nature and our

result this year year. ‘XX. actions an combined work to is addition expected impact of XX% savings actions other headcount took to result fiscal more in some these of force measures, temporary overall combined than $XX of will In in these when The which in cost calendar reduction actions, million with also we reduction about

completed, are while Some the actions cost out the productivity and of from the These Clara facility rationalization portfolio XXXX. these closing now have early of gains be part of will better and position between our carried best. Varex actions, our fiscal others year we Santa for by been markets caused product from the will employees when downturn wish force I recognize recover by to were them reduction. employees the all that contributions X-ray and want imaging of impacted COVID-XX. These the valued work the

execute and meet and that quarter so plans let our greater work, reprioritized to call assessed, their continue obligations. me in our On that third in Clarence customer carefully have about We redistributed financial to the over note, performance talk detail. the we hand can our to

Clarence Verhoef

our and perspective From areas. saw an changed hello it Third has of a Sunny COVID-XX in everyone! increased three the our effect business. due key financial Thanks economic quarter downturn on business to

of and First gross significantly. our all, revenues changed margin profile

liquidity, Second, our it we weather increased that needed so on ensure structure have an of to liquidity we to modified time. the the capital extended for pressure amount downturn

an were Third, to examination our the valued. forecast assets of changing properly ensure they business prompted

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

compared in margin For to the XX% the year XX% quarter. third quarter our prior gross was

costs of incurred associated of the charges. one-time we the and discontinued $X of with inventory $XX restructuring products During million write-off for million quarter

from We due with primarily lower $X the due taken quarter, product lower quarter in see in non-GAAP about to in absorption or year X freight R&D Excluding expenses gross quarter Still prior months. the are quarter not prior operating treated shipments. million and for that the non-GAAP several decline due was margin as million costs and third quarter. points base. revaluation. our actions reserves, unusual was did $XX $X remaining reductions from of about the at to or revenues year year over adjustments, the XX% additional overhead non-GAAP other The of R&D non-GAAP expenses inventory and these a the margin decrease the the to from mix past unfavorable XX% in margin included prior adjustments, namely and revenue of items quarter. to XX% property adjusted some gross expense tariff compared million remained expenses the were unusual were third margin reduced in higher

prior restructuring Third million, the same quarter million year periods SG&A Both included other and of as integration, approximately $X quarter. costs. acquisition were expenses $XX related to non-operational expenses

intangibles recorded the the charge quarter associated with for impairment During $X totaled compared and conversion. of in million for the some amortization prior of acquisition Depreciation million the $X year. to third direct also we quarter $XX the a million

for loss compared closure income Clara an of the third accelerated $XX The million year of facility. Santa We quarter quarter. $X included of ago the to depreciation the in had operating quarter million to third the operating of $X million related

of diluted the joint of quarter. tax net the million unconsolidated loss outstanding third due operating issuance, compared the for to third year for non-GAAP the amount a million million quarter in the million with per $XX to the net consideration to prior third interest year quarter or loss the $X Our in quarter. quarter. $X expense the a million million diluted $X million conversion. compared remaining loss $X.XX million compared acquisition $X million the convertible $XX charges and $X ago diluted per $XX share million $X to share quarter was well from shares share non-GAAP valuation in of million a exchange the quarter. tax compared operating year to year non-GAAP the was per the for or had investment as expense deferred share The associated or earnings loss per compared included in of $X million, diluted XX of to year to prior Interest start-up and associated detector non-cash other for income in were $X the of or $X the quarter. technology, of third ago a losses million The of in net with was prior $X.XX quarter. year million including was in shares expense Diluted quarter $X.XX or We the in $X.XX million of quarter XX.X impairment benefit $X were debt net prior quarter We the of million interest for of ventures. recorded shares expenses $X Other third of as for compared expense in expense foreign direct

sales is for of to total ended flat decreased cash in Turning in inventory the XX balance million, year million changed. prior day the debt Collections $XX profile quarter. the quarter entirely of The $XX million $X remained quarter. flow quarter the to-date. was of $XX quarter the fiscal revolving days, debt quarter. the We The have million and outstanding for third an the by accounts the million $XXX stable our to-date and with We year at equivalents increased facility gross $XX with cash from in $XX the million. by during $XXX outstanding an loan, same the bank third prior as for third million million remained million, total plus sheet, undrawn at almost million. receivable now quarter available. million increase operations credit $XX with during compared debt has to year the $XXX term Cash is $XXX which Correspondingly, to of on

were call five we debt the years. notes convertible interest XX% have in In effectively increase a at quarter The cash callable to to issued raise are and of reduce used that that spread premium, million XX%. addition, $XXX the proceeds conversion but bank years. after our a and biannually due balance. was feature rate we paid The third that notes The a was purchased net set in X% are to three

and strengthened We plans, cost to and capital working cash availability higher position a reduction our revolver equipment the flow liquidity will improve programs drive with such capital purchases. as lower to continue balance our cash have reduced under and

want the team. gotten retirement, support everyone to for Varex into on thanks all the I've I from head I say As

lucky to appreciate their really many very vision. the in Over and bonds I wonderful XX their as with so years, to as company this well Varex the commitment build past been friendship, I've people

Let me focus on a couple.

that team and First to finance details the each close numbers. the me into of worked dive quarter of all, incredible tirelessly I've had an help has

company the senior the and being and past least, Sunny the that, have turn I'm partners certainly and the but Sunny to its to the let the discussion Sam that Varex. special have and outlook. legal through ability four to excited confidence Varex years, some everything and Sam’s for for to for lot a last for lead thanks in of they and growth. comments the not With on to then about thanks team leadership next over prospects the me Second, done me for for I of great a for Howard phase

Sam Maheshwari

excited Thanks growth join company next help and lead to Clarence. through profitability. to the its phase I'm Varex of

of information over new covenants late of XX-Q. some improving as current the Based facility a will the credit working the we As become meet focus area order the working Clearance this financial be noted, I'll under structure, in agreement not the structure to More next filing XX we may operating Hence, of company. the are and the on existing first cost months. for financing. as of notice able quarter third capital near current term on included the as key the actively with In be on us. our of credit well of has debt liquidity on our replacing be sources forecast our job,

side, On take to the to steps operating continue costs. we lower

of the approximately of is from City this Salt Santa be facility First, fiscal and consolidation million. annual the year. $XX from Lake net this the by production The transfer to Clara the sites end completed detector be benefit to will projected other

be benefit start the showing of fully XXXX. and fiscal the quarter this in expect on to P&L starting We fiscal reflected XXXX second in

fiscal uncertainty lower we force the fiscal annual opportunities. All few for to to better fully with a P&L is with reduction savings result have of and be and COVID-XX the reduction of that of the lead XXXX. EPS associated the Varex economy Secondly, cost to XXXX the in last when structure actions our on weeks million recovers from will full will approximately cost in these $XX Due partner people. reduction reflected revenue we suppliers announced continue a quarter This and of expected position pandemic, withdrew profitability the COVID-XX. on quarter from guidance we the first ago year to XX to

provided we $XXX million. range would the Sunny that, revenues in QX While for reevaluate like to can the back to expect we closing of basis, hand guidance be remarks. for an be With $XXX ongoing fiscal XXXX, on that to call some to I of million

Sunny Sanyal

Thank you, Sam.

will facing demands there us, and of that bounce markets are for our uncertainties While a number confident I back. effect once the that am pandemic COVID-XX the of passes, the serve we products

is customers, exceptional with our and an are resilient, are We healthcare need lifelong given leader products security innovation a market leading end markets relationships with for there products. and our and

on with introduction this term track During economic long strategy on our downturn we stayed new product have programs. remained our focused and

to In addition, are normal. corresponding of not expect strategies to world remain to healthcare COVID-XX, the market we capital sales when headwinds we that operationally strong, that Despite are fundamentals our the growth leadership due facilities and confident but the our on. only still to our around equipment volumes that facilities returned elective and procedure at imaging see are demand prepared meet the of business spot for

of introductions discussed As and first, new are; term to applications. innovation we new and strategy drive enable market to previously, our product via expansion have the growth growth three long technology pillars

third, for in strategy; this Second, by verticals emerging in growth industrial and and continued all to good expansion quarter. the on the drive of drive implementing growth local to markets third imaging. into fronts local three momentum We’ve a progress very new made year via greenfield and

made these progress in about more areas. bit little a you tell me Let each of

four It our Platform momentum performance launched what the customers approaches and customer shipping lines. reason to enabled disruptive or detectors versions silicon products platform market customers. detectors. platform in dental like and with effectively. more technology our x-ray our a medical CMOS displace potentially This begun out. us fiscal Our across dozen new Continuing Last innovation. nearly known that our for be our of is we of Z expect a cost time is updated we success to early Over one by year can solution Z why we've year, dynamic this Platform as number and seek are imaging we which

dental lightweight, our with of ideal response array that enthusiastic are happy with very detectors surgery, both Z performance market is generation OEMs an leading for next applications. mobile are in the early with Platform We and markets. cardiovascular wireless by radiographic the robot Along fixed and

shipping volume rugged, to make we these intend are on detectors detectors and these We future now, available non-glass the in in substrate.

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establish our of approach strategy leg to globally customer second local local as The is local a ourselves our with to company operations relationships. for and

now in a in are shipping actively assembled Wuxi Wuxi tubes been detectors shipping now. We and we while for have made

before, relationships mentioned China, strategy our content, local who us. local local OEMs our growing as want with I local a local targeting commercial operational like in for from well have partner as we like our OEM support both, global As and is with customers

As these the U.S. serve implemented global Europe to OEM regions. program have customers facilities you’re that aware, local-for-local maybe our also in and our in we've manufacturing

differentiator. We unique are it and is this capability in a significant

on perspective drive changed. a pillar us to for and is and security term segment forward. in development continue product development for The in of growth very this opportunity has In our strong value our applications and imaging industrial is sales industrial growth verticals our proposition these in long oil verticals not market The in airport efforts many move as we for and slowdown and into a QX cargo to verticals. third strategy but saw gas,

our from juncture to X.X. Varex an in We important as are we evolution, Varex at transition X.X

spin first of completed and our capital growth and global among improving major The stood is structure. consolidation public up company will footprint. new the a and version be where expanded driving our a performance and about we following integration our things financial other Varex off, X.X acquisition

questions. Over With for the coming X.X. open the information on quarters, now we for provide up vision will Varex your that, call we will more our


[Operator Instructions] Securities. the line from Larry Our with first Solow CJS question of comes

with your You may proceed question.

Larry Solow

Thank here. Clarence Great! of all, and Sam, very of and just luck first to you you much best welcome

Clarence Verhoef

Thanks Larry.

Sam Maheshwari

you. Thank

Larry Solow

pleasure. my it’s Absolutely! Yeah,

I it like money Just a and seem at cycle, some are revenue bit couple does you a OEMs, least spending but trends on longer the little are you realize cases. in guys some

separate So I'm to trying just this.

You you know some some lots know your are with guys again markets are those margin you and But just to now. of of are starting surgeries day-to-day OEMs related somewhat things more you spend the obviously be coming of in and mix color I do trying directly correlate seem to figure, any drop to on not activity. realize back know to higher are more

You of and mentioned visibility revenue sort gave guidance you there’s not much some that. to

if trying little just I'm on to get more can. you that So a color

Sunny Sanyal

Sunny. [inaudible] Larry, you is and give To on this geography. front Yeah, by color

these [Audio into there, that equipment that are components reminder the making capital imaging Gap] First these go the and equipments. OEMs

purchase So availability the equipment is care capital budget what health capital in the triggers organizations. the of of

continued bubble all saw a demanded CT third strong to CT the in of continued quarter, as the first year, still process. CT of on. quarter in we fact in in height the So the now during active second terms pandemic, the stay and throughout has whole has we this through in the and seen then modalities, We’ve of said,

consistent modality up It's Where the uptick XXXX the it’s what volumes return encouraging in to equipment These with for geography. tender used a say now of in little our – markets hearing modalities. U.S. levels, starting in – elective are the great, a know they normal. starting ticking markets, is CT our hasn't calling as flavor to is you still U.S. that mammography. China that the rapidly yet that's globally to a in a there some a you that is purchasing and story surgery as down and So by are see the was our continued is Asia activity, What are and volumes confident major seeing from to Radiographic been it's bubble. if is for recall, including of comments – followed and has are by activity, with its some back behind CT hopefully there's buying customers oncology, that significant saw the dental that is also are starting up-tick. behind. projection normalcy. for let’s be, and Europe certain cap There farthest off but that what does customers versatile drop normal bubble see the settle probably demand. question been cardiology, is on demand procedure behind procedural they that we're headed There slowly volumes on. emerging activity, are is so are is farthest hospitals, was been us and and has China of – that. we’ve capital the actually a what significant to it fairly will which quote that they when America, people type are hearing your volumes consistent towards making and Rest The Europe in them to dental you and in – came those like but that and markets back Latin is the is, what see it’s well,

customers, for our products, amount represents U.S. you the for rest for the know of value market country's some customers, markets, back, us, the they're our segment coming it's the of the while products. largest still of high-end most us emerging For and

part that's the color. I I the you So recovery speed a unknown. lot depends gave The of on enough recovery. hope is

- So and by by modality. we’ll proceed geography us for

Larry Solow

COVID hospitals issue will really happen on obviously under to an anymore, effect. know which next hospitals mentioned six even unlikely have you in visibility? with the know You any OEMs, spend the not months. procedures, And probably only if XX obviously will will in until continued sort you demand, pressure hopefully is the of remain knock improvement

are under hospitals there a where is possibility So of a lot pressure. financially

So extended even a time below for budgets remain in well an period world. of normal post-COVID

Sunny Sanyal

– that’s unfortunately I possible. our murky. mean don't is a We on ball crystal have that Larry,

given our conduct we customers won’t that a global that think However, story. be globally, business

think lot of will there that – I global variability globally. in a be out how plays

also based entirely hospital not budgets, are budgets right. the So

budget, there's a dental of lot mammography of outpatient physician and equipment most physician offices So dental, the into offices. goes

a if we see So, up will light modality capital purchasing switch on. of being based versus ratcheting thrown equipment

staying this So very and you as know, supply we are the close on ahead we’re to very, chain of the chain, value front.

So than I'm that perhaps may earlier some optimistic of trends see of will that little these a the we – shipments you equipment. bit actual

Larry Solow

Okay, fair enough.

two Just something. I detrimental of – margin. margin a on sequentially like more obviously just then or mix quick overhead. the think you the question The gross and drop, one mentioned was Clarence monitored the on XX% drivers

higher quarter even than worst. sounds I It be, because this somewhat I it know probably So thought was would already by QX mix. like was impacted

XX% or was had categories, you those if of overhead it a close even? or contraction in bucket, to two that – more to was the mix trying Just both

Sam Maheshwari

Yeah you margin. I'll bit mind, don’t the Larry, XX% from if of gross margin last little walk XX% a non-GAAP just gross a through go maybe of to year's

Larry Solow

fine. That’s

Sam Maheshwari

[Cross Okay. Talk]

P&L in we of were was there did was – treated we significant adjustments non-GAAP have been not as but non-GAAP, that increase costs. that would items time then one is some of And some an tariff and treated revaluation as some profile, treated on some volume changing freight on there did in a they non-GAAP. the that expense get though So as even also not and adjustments based we nature, be assets and had also reserves that that an inventory additional some

freight, mean lot know say Somewhat recently. freight, margin. The points, and productivity, you up is advance costs roughly intercompany the kinds of those gone one and – the a three time lower movement so less of of The those then freight change part I just points and of the inbound well, of eight absorption, be would is about I'd have going – Santa is and gross mostly because points in is balance a Clara of three to it. as probably overhead it complicating mix, the bit of two that the last to the little remaining point that's of I put swing due combination mix

So five call to important is I guess three some is to mix, advance. points unusual it it's is, to points tied either let’s tied the other things that but tied one-time volume more fairly or

Larry Solow

that’s Okay, now useful color.

exiting were of less that exiting. some products question more years gross was you're you detector this seems you Just you markets some side end impacting are products getting, the on products it or of your or like margin you last of guys are that stuff think actually money? Is lower on these the know I know and losing

Sunny Sanyal

Yes, so these detector mostly – Larry, products. these are

You electronics upgrade frequent with in more NPI faster products know these cycle. are and models

to productivity and – of know to deciding us with led the and replacement our shut and took we them get that work our have you to products and customers help at in for down. which that'll products a variety to looked to And them So cost them older the we different this opportunity go future. actions them us with to structures back

Larry Solow

line, exiting opposed whole you down. more product So of a actually just as it know narrowing your rationing skews it’s the to

Sam Maheshwari

right. exactly That’s

just generally to products, wile?’ were determination products. the worth would they associated looked they demand say with as they of on very margin are it fundamentally, COVID, we us the at speaking, So because – the not. products outlook and were look enough there lower losing actually ‘is low based not volume and there at I say, made but made these be money

from a point of little a kind but the sure that bit little it bit that’s help is not should the I'm help impact, I huge other a on think margin think us I it that forward. key it's profile perspective. does going

Sunny Sanyal

Okay, great. Thanks again.


comes Petrone Jefferies. with the question Anthony Our the next line from of

may You with your question. proceed

Anthony Petrone

off million, and is the Thanks would on with of million fourth $XXX It I I the last and there don’t mentioned pick to Shubham run second revenue run the what’s I follow-ups. question departure the here. revenue to on rate friendly group you $XXX the again know if rate was The actual much working of that couple to and great have a Clarence. is reflected you I'll one. welcome how products? and need the quarter, be, for the discontinued guidance in a

Sam Maheshwari

you and an quarter a don't that number in of a just is low. bit that million so for it's, know you and they're it's the in answer of – kind have little than it's products discontinued the reason It's they – it's that less I'm of speculate going on that of number. I margin are because I’d say the part with those to was exact revenue the a low $X volume, products, low associated but kind

mean small I on that. pretty a it's impact So

was I a So anything that think factor in the major for terms outlook QX. of in don't

Sunny Sanyal

Anthony, in subsequent models products, way a cases, because the are of it evens these a out. lot of there

With time volumes COVID, to – us get can the it the we to sunset, life due extra strategies through customers gives to execute with our them of – here. lowering to the of work end these

customers models. help and there there's volume installed back the with service stream not to our base you and be typically wouldn't low take the go So a of these work them know customer and for products is on to loss, the our newer customers a support are loss, into revenue opportunity

Anthony Petrone

end when here, sit, a million helpful broadly, end. to what in if I we No, range, low sort your the wondering, high-end you next that's of the just – toward have the in various just geographies them to to the then the to. that’s from range are as low if number XQ, you gets what the that and And as you OEMs hospitals question high of helpful. tone pressed which background But maybe on capital spread know you we, and adjust drivers in think And are there. the $X even where to the budgets you the million the guidance as million exposed $XX just bit discuss you opposed I know of then for with then in we know And one with. you know have follow-up quarter in end $X capital I'm then a in

Sunny Sanyal

comment makes and $XXX the on makes the $XXX his from ask million what let $XXX the the question Okay, take million to million, $XXX I'll me and the the million. and what on around second thoughts Sam tone OEMs,

know You seen that is some in the modalities, of level the reason they optimistic. there but certain is activity. tender in know tone you cliché OEMs in for the that increase of The so optimistic, is uncertainty are from there, for still cautiously

that’s the For market them activities of early, the the harbinger returning.

part Some countries investments all different governments the that to over of world. is due in by

of environment, outpatient normal type is the these part to dental. of returned tender Dental started, general activity. of in has Some activity activity, market just particularly some it

they that while have out, saying far – that is So that OEMs bottom they also don't bottomed very are not think they the are away.

it it look felt, the everything this a a So QX towards get pick is And part said, clear from back we're When not of a a mode up. in from there normal we XXXX to of the you it's back getting of But it clear time frame. just downward believe – where will it at as does QX we they that us. sort felt looked was bottom with know asymptotic trend. the pretty else type that's was QX, forward, into as

that Now U.S. so geography. the that OEMs U.S. the their all look Most of and to oncology, I if mammography, for concerned is the you are forward high end they OEMs flatish, market at are as trend. we And quite count positive that on as space, the momentum by market market our listen it’s we dental about see in products. the on it feels the the not but said but certainly varies yet, worst there

Sam Maheshwari

your the the higher revenue I'll question versus as for end address Sure the Anthony, project of we lower end try on and QX. to

upon a book same portion two really is in that so and which the quarter, level three month, third the there's the in ship activity of know quarter for a depends business last always the towards weeks. the particularly You or of

the which definitely are here seeing strong, of pockets activity some but We and there time soft. are are somewhat and at geographies same modalities

the of you, for we order it both So our some Then as both at guidance kind bookended up in the looked of you products know come the industrial numbers and number way. that to with are side, towards on higher the ships before is know it it end of upon the one type acceptance is ASP, factory you of and and end quarter. the it high the shipment kind activity at and dependent, that looking of machine of depends kind machines

fence quarter falls numbers next a of the in the bit. the this also so So the of or whether quarter, changes side that it little

that's are would say we providing the I revenue you think where overall I know in terms of to guidance you.

Sunny Sanyal

play on to in a forget And earlier Larry's shouldn’t Anthony question industrial. and We that add have also we revenue just strong your to to question. also back

slightly the that's depended dynamics the They're slide not the budgets, capital are On and we why like market. industrial hospital the on industrial different.

expected its a distributed by is quite more recovery vertical large very the organizations. difference a of in be number industrial across it is bit. to varies there that The rapid, So because

all that airport's, So cargo faster expect - take than may security will and airport the we longer on security recover, airport side would but to say the while everyone recovery security, side. the we NBT

Anthony Petrone

round out airport on a will take disruptive cargo on but expect more security testing, that you to the just then And rapid that? is take there, recovery, longer

Sunny Sanyal

do activity as yes, we drive, the projects side on the a OEMs people's at still back one one the before scanners there's because on number customer are not work is the and and new installing it’s replacement tenders project. hear are travel from on projects for – CT up that do no is depend hold, side. will and there on to to the new sooner, be the there’s the airports while airports will airports thing tender – while or are vendor The new gone, business pick either ability proposition you way Those know will by the but come activity, value it the volumes so are

away, haven't it's the to are which to So projects. gone us these able just waiting faith that be gives do for people we opportunity that

Anthony Petrone

one me from Understood! last the And and back get I’ll in.

you had more the As revolver on mostly upcoming which used on the term part convert. on know little convert the more filing. potentially the we to deck tier was give service color triple facility talking existing facilities we’re I information you Sam I were proceeds a Can bit was and mentioned, of debt. know the the about a that being outstanding, covenants here? to there that was There

also is triple where debt versus the EBITDA the potential a have violation stretched from, of a of sort how think drop but driven of additional and comes you actually Just So when is additional here? you much covenant. Thanks. month trailing in the XX coming Do on, debt EBITDA. the by

Sam Maheshwari

Sure, Anthony. thank you

talking We our them have loan term covenants we covenants are rightly, June. of convertible related are here and The debt we Both actually to is are the same to and and out. revolver. following not pointed that debt debt you that in related about correctly these the issued

covenants of here the is we're combination revolver. about of same the but talking debt revolver The nonetheless again So what undrawn, remains apply. and set

at covenants So, we end months, forecast know those not that we you QX trailing the at to the able look as but we here, of covenants. the that EBITDA as XX all we over the at looking numbers, are quarter QX – and over meet met we the be fiscal may situation

plan to our this, lines standards concern of modify that sources ahead replace new a debt, of So disclose irrespective new to go situation debt. require what sources this is type is the or replaces as with our accounting But a essentially of refinance with debt and of covenants. ability those going these to happens in debt these of business

Anthony Petrone

you. That’s helpful. Thank


next question comes the Kalia of from Security. Our Suraj line with Northland

proceed question. may with You your

Suraj Kalia

everyone. afternoon Good

a with was and you you, pleasure and it a relaxed healthy Clarence, retirement. working So wish

Clarence Verhoef

relaxed. already I’m

Suraj Kalia

are. with I'm working club. welcome Sam, you. the forward you to look Yes, sure to And

Sam Maheshwari

Thank you.

Suraj Kalia

start let and I'll with hop So, and to over me you Sam. then Sunny Clarence out

term and right are as but Do prominent Santa ask higher know, part let implemented were and acute in in you'll COVID becoming thinking forth, why? that might question. changes exhilarated about, now? me more You envision level nature changes have some of these Clara so of on What you so that short the

Sunny Sanyal

Suraj, sure furloughs and cash improve took the question temporary relief actions, for certain appropriately. I your took were were our the that – temporary; that I earlier But the make were permanent from those want we immediate actions on intended effect. of reductions, We just to followed rest actions to pay flows. for

those – that so and are. So

was mean that our, all like of So looking were continued are earlier, have I the example at actions up took structure that that certain these example, came cost intention sharp on. to, we for our at actions we COVID With we product for would headcount been look the there reduction things we've took, our a and rationalization.

cost rate to I lifecycle work had $XX back ramp in that into the serious will of effect of get ratchet will will effect it where value slowdown to right? in the these going question QX. of up a up some us see an the I this permanent, and but gave due will – go those some COVID, continue product it impact product we is actions reduction full that we continue and of Did to - and all believe opportunity overall to that then know see due through of volumes in You they’ll QX your about certain increase. that The continue. actions actions million QX, will and The a run we'll actions on, in rationalization, we

Suraj Kalia

changes sure Sunny savings maybe differently. to cost should make should t want it done. But the is I what one have guess is, cost impact, was I Yeah. is you trying have just that you're I have – really of I Maybe right, going that of I phrased understand to like to affected, on what the optimized? The some effect to trying the also people been looking get hence all structure is that's top had net reduce revenue, to this and was it's not what understand. line

Sunny Sanyal

Suraj. correct is That

Our term. goal is long the to for run the company

revisited we our - need no. – and what's this fundamentally the said, entire The there. So does strategy on is our to strategy? does at be change our going answers looked we Is product

marketing things ability So those to those China – strategy in actions our making not and the the we're we’ve impaired. on programs, programs going have are investments and on, there, that's that not are continue made local related R&D those sure up set local work and sales the and the that for

their the new customers by COVID, – the they're though actions exceptional, customer relationships the going introduction way So product even on our are the stellar from launches hurting by our still product are still way are continuing. revenue working, also and and are absolutely by

normal. activity have top track, those the line will of on market the it's purely which both towards of the growth now So the stayed buying matter a back things and drive return mix driven, and

dental of as around that, are pressed need side we Suraj some we clinical dental are the oncology, come where the, this, where all look back. value of at us those services. the cardiology, for those to still are higher hard Similarly And back, procedures intact. people the of The dental the come that's so driving fundamentals how equipment see won't bound procedures to are

So the not be impacted impacted, we're don't to we've we're - revenue being actions commercially by taken. the going see we not

all it's activity. market driven Now

Sam Maheshwari

Is I my add the growth bit we that two actions are the not our lower levels little to term with or taking one a currently ability that weeks here. we the or Suraj, recover are. can long that do impact from

So these reductions, no or growth compromise way jeopardized in headcount our potential revenues.

if So you I that's were what don't know asking.

Suraj Kalia

months? the in customers changed buying. credit and inventor you whether is customer more shaping have few Fair I are demand seeing up, specifically trying credit enough, chain mentioned to buying, guess asking now? Sunny any the okay. how difference last side guys Just right you for side, on ordering about the inventory understand patterns on terms? Are the lenient

Sunny Sanyal

for terms Suraj, no been their or perceptible for preservation or So other changes cash needs. its no not customers asking there’s whether real, be at the all, it's in

down in they you we've not our more to pockets conservative, own so strong, and at happening. mostly and being throughout down, of pricing and deplete the softness in year. had precedes They're as a perceive And our that. inventory, and with negotiate have our customers this and demand, been those It changes there to being anything so their no customers are customers that our some buffers demand, DSO’s that's have collections of go hasn't their judicious know of doing not strong remained else. try seen fact and though and kinds and that remained but back In work XX. activities all. no way where impact they slowing – we've inventory When do at changed they What is –

Suraj Kalia

to Clarence from I'm earnings any Clarence, XX% know going and in different by it you digits, or two Sunny, fair and QX business, medical end calendar thank components at last I can terms the that taking guess to is end, any that low the be I of and year, questions. come my industrial different people a you you just the you another whether so to angle second missed your a guys I would different Gentlemen, call guidance, be the expecting part. I know shape.’ it understand – next maybe parse ‘look, calendar in – assuming there QX double I the expecting and is, have said, your of tried for and part, V thing one Sam. out shape QX guess is, think? I a companies to XX%. right one on commentary most ways. of you Should normalcy the not Right, Maybe we the high am so of on for know Sam great. down U XX%, way trying the recovery is and probably color a come that's or down I be how are you. One the Is going are And have to

Sam Maheshwari


probably then other You and go provide can some fill know Sunny you here I'll – in other some color.

recover sure actions, able profitability. take and quite is doing are business the you more to business in when we know are that meantime we the does you cost know generate we recover, so what So to would levels are

in say at that's going it's anymore. and very seeing are business where hard the to for are of but it in degradation so that, know really us at this our exactly range when we it it us XXX is we a lower XXX type stabilized. sense just we That's number providing, and to to level, pinpoint you of stabilized but not is so not would down, the mid-point to don't but that XXX XXX has lot a gone at a whole anymore, has the of has quarter, did XXX. more We much seems it discussions know down here it know You that recover,

to somewhat business hard here. a to the levels, and of recovery guide lower would for sharp where able at the pinpoint us to a stabilized you So quarter see kind is really but we be

you. Sunny So Maybe that's you want I color can add anything? to the provide

Sunny Sanyal

I'll just one No, and more thing. add

we global OEMs different So served the local global from geographies. OEMs in benefit the as trends and the we have, all OEMs and

speak recovery who you they start with. to the So by of question expect when varies

the is markets is China, they'll in and as out well see China totally Chinese So say that for a I'm that there. example way mixed happy are faster. glad in and a business reflected OEMs, to begun at Then will that's going their say, our by recoveries are to and hand strategy OEMs certain you I'm our have be look other our business recovering

So there, America pessimistic thank Europe. than Latin view versus on bottom on their say earlier where of Latin is their is. be let's in view list the the is U.S. of to might U.S. after and I next where everyone's be seems line America

the is very – a serving one market there's this most since here here, gradations think of I OEMs. So and we're leading have, companies we

but more the industrial my NDT, really will indexed market overall will we in medical up see up is verticals to hoping recovery, in end I optimistic be – faster that more certain by geography. – I'm will be we I'm performance end – see say. being to particularly will it’ll to sense more we our so think

Sam Maheshwari

and talking Hey ago. Suraj, year because you one comparisons QX other a about probably comment, were versus

that's think the comparison. probably not I right

know probably You we that QX a just was how over $XX is the because look $XXX thinking comp that we in year versus industrial. ago the more revenue. to that of QX million be finished, in million about things need you were

little to it's the of of between in being more oranges bit important medical and a it's think profile as So and it QX to apples more QX similar and terms I industrial. of think mix

Suraj Kalia

point. Great


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

You may proceed with your question.

Sunny Sanyal

Hello Jim.

Jim Sidoti

me? hear you Can afternoon. Good

Sunny Sanyal

Yeah, we you. got

Jim Sidoti

great. Great,

seems you're know work you Clarence, now did like and it So you the all leaving.

them leaving easy cause. You're an with

Clarence Verhoef

up That's right, I them. set for everything

Jim Sidoti

point? Clara, is that closed Santa this It’s at officially

Sam Maheshwari

in end a some some so of still we terms of those had no, kind September. end few and products No, over the up, it the the of won't completely production. there's of There’s till finishing inventory quarter inventory, be complete where products a carried we fundamentally closed that to won't up of – want it until finish

Jim Sidoti

though year okay. cost reduction… will then the So thing be [Cross by savings basically entire fiscal And force the Talk] with have you work XXXX for well, should the same

Sam Maheshwari

about This it. the is a little around accounting bit

as it's of So costs any non-GAAP those and cleanup production part then once already of the will kinds treated operating have the we've done, things stops, kind on final that facility for. to longer set charge no be and an you side the that know as restructuring of expense be

Jim Sidoti

Okay, and willing to force I mean you're more reduction. benefit see with that the of some in XXXX. the work fiscal

Sunny Sanyal

QX ‘XX. is the you quarter, get of the reality the in already, you mean happen but where couple a part July, latter in got in of FY I of little only months bit get that benefit Yes, a benefit you so it's of but fourth in

Jim Sidoti

Okay, recovering. know agreeing and know started with you procedures I know you now – the procedures Sunny, you you covered, names I know

You July. most in for know actually we’re the names up of

the back as So the over business, that. of industrial the come I'm timing quarters. confident I business, of with think I’m that the But you business the next medical couple medical will not timing in for confident know the

will think and pipeline come people you security the business know $XX long notably do how much quickly, back? you airport think just NDT come going how back probably before million that be year indicated oil those to and but that of do a inspection; that You ago, was you a is start to

Sunny Sanyal

small a without at that small terms, with us actual themselves, with oil point. relative to break vertical is called numbers of for company new a VMI. gas us acquisitions in the for fairly So, we going into Remember it’s decided this and

of a and business verticals. So we’re many The drug sort there. NDT in of early our entering comes bulk that phase from in in

as recovery, inspection, about think aerospace, foot automotive. inspection, electronics example, for you think So about

a pace there at of the are from number gas. So and where recovery oil airport happen articles and a different will

that anticipating we that upcoming of take and might to sooner that then industrial progressing. get the longer we that's parts recover, parts to recover will some better we So will is in visibility why how quarters our – are have

Jim Sidoti

any back the think now, XX see you months to that won’t XXXX mean levels business to Do over I get why reason XX next do XX you months? in

Sunny Sanyal

those facing think hope back. a hard I and will would to so, about this. mean come but because a the lot that's blip consumer say, will of Boy, we industrial, areas – just I have of little

face x-rays space we just So enough and you fish, processed people a food for food – know used there that that have inspection, know up you for that's inspection, took less needed. grains cute you processed know COVID that during that they

You know frankly, we be oil the TBD that vertical the airport two that's are trailing is the that [ph]. slowest activity verticals, security all, and there, the one is gas. and they'll the when seeing two those and start two Those

Jim Sidoti

slightly you're over sounds liquidity have worried common is interest issues may any me, the is to the Okay. like sound be of some months, that right? Alright XX that you’ll having it next then the it like do doesn't rate, kind with last from refinancing, higher issue about equity but

Sam Maheshwari

That's correct we are on working refinancing.

partners on would we've complete, that Of like and working been course refinancing I but with advisors. it to see our

a done, somewhat bit that's it's until big not but worried, a yeah, little I'm So worry.

Jim Sidoti

Okay, alight.

I you. pretty good said I like in good next beginning, it Clarence Sam, good your you with with you and luck shape the think was at Thank left adventure. working Clarence So so

Sam Maheshwari

Thank you.


with of line Strouse the from Morgan. Mark comes question next Our JP

question. with You may your proceed

Mark Strouse

taking wishes and Yes, thanks welcome questions best I my echo you fray. the very to Clarence Sam to to and much for like

comments now, last Just for one million to $XX you're is or the about incremental? million sorry is you're greater clarification point I'm I million The quarter? than $XX reductions from I $XX missed then building that of talking of this if cost me, talking to think this. entirely off

Sam Maheshwari

Clara Santa Yeah, benefits the it facility. including is from

I know then also million actions that reduced about talked number on a and you So $XX people. of of set we

have $XX the in million a few offer here. things there and that are that's So other we

good in them about be three cost feel through the a you will and of begun. play, are thinking sale million a cost did XX% all upwards I that line math that, plans. of about quarter of flows of We are may do through $XX completes, of of able not rough flow we So that those know, total that and OpEx. of to on definitely we and reductions quarters but

might it to are we think kind where idea of targeting I the at. of kind an be So you give here to prudent of OpEx land

run type we able am think time non-GAAP a to rate So by say OpEx $XX be I would XXXX. we to achieve get able done, would of are things million, thinking the quarter $XX there million by all these and I QX be of

that effect So etc., their XXXX. of reduce will QX, to bit, little costs but a will full QX, print QX actions from in the begin

roughly this on gross So reductions that's of are margin these where about X give months’ we land us the on side, time-frame, trying the should six percentage cost points. OpEx then course you in And side. know to

to We in going start but the print upcoming these are begin of to getting little-by-little also. the benefits quarters, they gross some in by margin QX should

Mark Strouse

to always join. changes in to decided like Okay, hear Sam. why thank people With management, you

can time of Sam, your against why join but decided us know on your Varex?. I elevator to you kind we're up he So butting here just quick given pitch

Sam Maheshwari

Yes, in draw me was Varex is. I biggest for which the the industry think

And applications and of and did so there kind during You healthcare, sunshine here. I long a here would discussions, medical do my and X-ray mind. know X-ray to there's is growing. be looked for and the a say some good know would industry capabilities then healthcare particularly Everybody industrial. I in position needed term just to so see, etc., also work then and you X-ray thing need improve leadership always at many provider the potential my last and other the profitability

in me here. that the of So brought were those some draws

Mark Strouse

much. Great! us. Okay that's it you for Thank very

Sam Maheshwari

Thank you, Mark.


the of [inaudible]. comes line next question Our from

with proceed question. You may your

Sunny Sanyal

we’ve of hour, So operator, we time. the passed top our at are the

I the the will Howard. So this back I’m to time to right be call. think to end it turn over going


back like over would you it turn to to remarks. closing I for

Howard Goldman

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


conference. today's concludes This

time. disconnect you You your for Thank great lines this may day! at a your participation. Have