Varex Imaging Corporation (Nasdaq: VREX) today announced its
unaudited financial results for the fourth quarter of fiscal year
2021.
4QFY21 Summary
- Revenues $226 million
- GAAP gross margin 33% | Non-GAAP gross margin* 34%
- GAAP operating expense $49 million | Non-GAAP operating
expense* $45 million
- GAAP operating margin 12% | Non-GAAP operating margin* 14%
- GAAP net earnings $0.20 per diluted share | Non-GAAP net
earnings* $0.45 per diluted share
FY21 Summary
- Revenues $818 million
- GAAP gross margin 33% | Non-GAAP gross margin* 35%
- GAAP operating expense $197 million | Non-GAAP operating
expense* $181 million
- GAAP operating margin 9% | Non-GAAP operating margin* 13%
- GAAP net earnings $0.43 per diluted share | Non-GAAP net
earnings* $1.31 per diluted share
“I am excited to report a strong finish to the year. Broad-based
strength globally, especially in our Medical Segment drove record
quarterly revenue of $226 million in the fourth quarter of fiscal
2021,” said Sunny Sanyal, Chief Executive Officer of Varex. Sanyal
added, “Profitability improved in the quarter driven by strong
growth and stable operating expenses. Improved earnings and working
capital management helped drive robust cash generation, with cash
flow from operations of $51 million in the quarter.”
Varex’s revenues in the fourth quarter increased 7% sequentially
from the third quarter of fiscal year 2021 with both the Medical
and Industrial segments showing strong growth. Similarly, robust
growth in both segments drove a 33% increase in revenues
year-over-year. Non-GAAP gross margin was 34%, as strong volumes
were partially offset by supply chain challenges. Lower operating
expenses helped drive non-GAAP EPS of $0.45.
Sanyal continued, “I am extremely proud of the immense effort
our global employees made to prioritize meeting the very high
demand environment while working to mitigate a dynamic supply
chain. We look forward to carrying this momentum into fiscal year
2022.”
Balance Sheet & Cash Flow Cash flow from operations
was $51 million for the fourth quarter of fiscal year 2021 driven
by solid profitability and working capital management. Cash and
cash equivalents improved $17 million sequentially to $145 million
at the end of the fourth quarter. In addition, the company
completed a $30 million bond redemption during the quarter.
Outlook The following guidance is provided for the first
quarter of fiscal year 2022:
- Revenues are expected to be between $200 million and $220
million
- Non-GAAP net earnings per diluted share is expected to be
between $0.20 and $0.40
Guidance for the company's net earnings per diluted share is
provided on a non-GAAP basis only. This non-GAAP financial measure
is forward-looking, and the company is unable to provide a
meaningful or accurate GAAP forecast of net earnings per diluted
share without unreasonable effort due to the uncertainty of amounts
and timing of unusual items, such as restructuring costs.
Non-GAAP Financial Measures *Please refer to
"Reconciliation between GAAP and non-GAAP Financial Measures" below
for a reconciliation of non-GAAP items to the comparable GAAP
measures.
Conference Call Information Varex will conduct its
earnings conference call for the fourth quarter of fiscal year 2021
today at 3:00 p.m. Mountain Time. The conference call, including a
supplemental slide presentation, will be webcast live and can be
accessed at Varex’s website at investors.vareximaging.com. Access
will also be available by dialing 877-524-8416 from anywhere in the
U.S. or by dialing 412-902-1028 from non-U.S. locations. The
webcast and supplemental slide presentation will be archived on
Varex’s website. A replay of the call will be available from today
through November 30th at 877-660-6853 from anywhere in the U.S. or
201-612-7415 from non-U.S. locations. The replay access code is
13724162.
About Varex Varex Imaging Corporation is a leading
innovator, designer and manufacturer of X-ray imaging components,
which include X-ray tubes, digital detectors and other image
processing solutions that are key components of X-ray imaging
systems. With a 70+ year history of successful innovation, Varex’s
products are used in medical imaging as well as in industrial and
security imaging applications. Global OEM manufacturers incorporate
Varex’s X-ray sources, digital detectors, connecting devices and
imaging software in their systems to detect, diagnose, protect and
inspect. Headquartered in Salt Lake City, Utah, Varex employs
approximately 2,100 people located in North America, Europe, and
Asia. For more information visit vareximaging.com.
Forward Looking Statements This news release contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Statements concerning unaudited financial results;
benefits of cost reduction actions; industry or market outlook;
customer demand and revenue trends; revenues, product volumes, or
other expected future financial results or performance; and any
statements using the terms “believe,” “expect,” “intend,”
“outlook,” “future,” “anticipate,” “will,” “could,” “estimate,”
“outlook,” “guidance,” or similar statements are forward-looking
statements that involve risks and uncertainties that could cause
Varex’s actual results to differ materially from those anticipated.
While forward-looking statements are based on assumptions and
analyses made by us that we believe to be reasonable under the
circumstances, whether actual results and developments will meet
our expectations and predictions depends on a number of risks and
uncertainties which could cause our actual results, performance,
and financial condition to differ materially from our expectations.
Such risks and uncertainties include supply chain and logistical
challenges; price increases from suppliers and service providers;
the severity and duration of the COVID-19 pandemic and its impact
on both the global economy and Varex’s business; shifts in product
mix; not receiving the intended benefit of restructurings or cost
reduction actions; the continued impact of tariffs or a global
trade war on Varex’s products and customer purchasing patterns;
global economic conditions; demand for and delays in delivery of
products of Varex or its customers; litigation costs; Varex’s
ability to develop, commercialize and deploy new products; the
impact of reduced or limited demand by purchasers of certain X-ray
products; the impact of competitive products and pricing; and the
other risks listed from time to time in our filings with the U.S.
Securities and Exchange Commission, which by this reference are
incorporated herein. Any forward-looking statements made by us in
this news release speaks only as of the date on which it is made.
Factors or events that could cause our actual results to differ may
emerge from time to time, and it is not possible for us to predict
all of them. Varex assumes no obligation to update or revise the
forward-looking statements in this release because of new
information, future events, or otherwise.
Varex has not filed its Form 10-K for the fiscal year 2021. All
financial results described here should be considered preliminary,
and are subject to change to reflect any necessary adjustments or
changes in accounting estimates, that are identified prior to the
time Varex files the Form 10-K.
VAREX IMAGING
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
Twelve Months Ended
(In millions, except for per share
amounts)
October 1, 2021
October 2, 2020
October 1, 2021
October 2, 2020
Revenues:
Medical
$
180.7
$
135.9
$
643.8
$
584.5
Industrial
45.6
34.1
174.3
153.8
Total revenues
226.3
170.0
818.1
738.3
Gross profit:
Medical
56.9
31.2
203.2
136.4
Industrial
18.7
14.0
68.3
53.8
Total gross profit
75.6
45.2
271.5
190.2
Operating Expenses:
Research and development
17.8
17.3
71.9
78.9
Selling, general and administrative
31.3
40.7
125.5
142.2
Impairment of intangible assets
—
0.1
—
2.8
Operating expenses
49.1
58.1
197.4
223.9
Operating income (loss):
26.5
(12.9
)
74.1
(33.7
)
Interest income
0.1
—
0.1
0.1
Interest expense
(10.8
)
(14.5
)
(42.1
)
(31.4
)
Other expense, net
(1.0
)
(3.1
)
(3.5
)
(7.6
)
Interest and other expense, net
(11.7
)
(17.6
)
(45.5
)
(38.9
)
Income (loss) before taxes
14.8
(30.5
)
28.6
(72.6
)
Income tax expense (benefit)
6.0
(4.3
)
10.7
(15.2
)
Net income (loss)
8.8
(26.2
)
17.9
(57.4
)
Less: Net income attributable to
noncontrolling interests
0.1
0.2
0.5
0.5
Net income (loss) attributable to
Varex
$
8.7
$
(26.4
)
$
17.4
$
(57.9
)
Net income (loss) per common share
attributable to Varex
Basic
$
0.22
$
(0.68
)
$
0.44
$
(1.49
)
Diluted
$
0.20
$
(0.68
)
$
0.43
$
(1.49
)
Weighted average common shares
outstanding
Basic
39.4
39.1
39.3
38.8
Diluted
43.5
39.1
40.3
38.8
VAREX IMAGING
CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In millions, except share
amounts)
October 1, 2021
October 2, 2020
Assets
Current assets:
Cash and cash equivalents
$
144.6
$
100.6
Accounts receivable, net
155.3
123.8
Inventories
224.8
271.9
Prepaid expenses and other current
assets
29.5
25.7
Total current assets
554.2
522.0
Property, plant and equipment, net
140.2
145.2
Goodwill
292.2
293.1
Intangibles assets, net
50.7
67.5
Investments in privately-held
companies
49.3
51.3
Deferred tax assets
4.0
0.5
Operating lease assets
24.3
27.7
Other assets
32.6
32.2
Total assets
$
1,147.5
$
1,139.5
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
58.8
$
72.9
Accrued expenses and other current
liabilities
89.7
70.5
Current operating lease liabilities
6.2
6.1
Current maturities of long-term debt
2.8
2.5
Deferred revenues
9.1
8.6
Total current liabilities
166.6
160.6
Long-term debt, net
431.7
452.8
Deferred tax liabilities
2.2
2.3
Operating lease liabilities
18.7
23.1
Other long-term liabilities
31.8
34.9
Total liabilities
651.0
673.7
Stockholders' equity:
Preferred stock, $0.01 par value:
20,000,000 shares authorized, none issued
—
—
Common stock, $0.01 par value: 150,000,000
shares authorized,
Shares issued and outstanding: 39,435,830
and 39,059,094 at October 1, 2021 and October 2, 2020,
respectively
0.4
0.4
Additional paid-in capital
449.4
434.4
Accumulated other comprehensive income
—
0.8
Retained earnings
33.5
16.1
Total Varex equity
483.3
451.7
Noncontrolling interests
13.2
14.1
Total stockholders' equity
496.5
465.8
Total liabilities and stockholders'
equity
$
1,147.5
$
1,139.5
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Twelve Months Ended
(In millions, except per share
amounts)
October 1, 2021
October 2, 2020
October 1, 2021
October 2, 2020
GROSS PROFIT RECONCILIATION
Revenues
$
226.3
$
170.0
$
818.1
$
738.3
Gross profit
$
75.6
$
45.2
$
271.5
$
190.2
Amortization of intangible assets
2.0
2.2
8.6
9.1
Restructuring charges
—
0.7
0.2
4.2
Other non-operational costs
—
(0.8
)
3.5
17.7
Purchase price accounting adjustments
—
—
—
0.3
Non-GAAP gross profit
$
77.6
$
47.3
$
283.8
$
221.5
Gross margin %
33.4
%
26.6
%
33.2
%
25.8
%
Non-GAAP gross margin %
34.3
%
27.8
%
34.7
%
30.0
%
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE RECONCILIATION
Selling, general and administrative
expense
$
31.3
$
40.7
$
125.5
$
142.2
Amortization of intangible assets
2.1
1.9
8.2
8.1
Separation and related costs
—
—
—
2.5
Restructuring charges
0.1
6.7
0.8
9.3
Acquisition and integration related
costs
0.1
0.6
1.5
2.6
Impairment charges
0.5
—
0.5
—
Other non-operational costs
1.3
0.9
5.4
1.4
Non-GAAP selling, general and
administrative expense
$
27.2
$
30.6
$
109.1
$
118.3
OPERATING EXPENSE
RECONCILIATION
Operating expense
$
49.1
$
58.1
$
197.4
$
223.9
Amortization of intangible assets
2.1
1.9
8.2
8.1
Separation and related costs
—
—
—
2.5
Restructuring charges
0.1
6.7
0.8
9.3
Acquisition and integration related
costs
0.1
0.6
1.5
2.6
Impairment charges
0.5
—
0.5
2.7
Other non-operational costs
1.3
0.9
5.4
1.4
Non-GAAP operating expense
$
45.0
$
48.0
$
181.0
$
197.3
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Twelve Months Ended
(In millions, except per share
amounts)
October 1, 2021
October 2, 2020
October 1, 2021
October 2, 2020
OPERATING INCOME (LOSS)
RECONCILIATION
Operating income (loss)
$
26.5
$
(12.9
)
$
74.1
$
(33.7
)
Amortization of intangible assets
(includes amortization impacts to cost of revenues)
4.1
4.1
16.8
17.2
Purchase price accounting adjustments
(includes purchase price accounting impacts to cost of
revenues)
—
—
—
0.3
Separation and related costs
—
—
—
2.5
Restructuring charges (includes
restructuring impact to cost of revenues)
0.1
7.4
1.0
13.5
Acquisition and integration related
costs
0.1
0.6
1.5
2.6
Impairment charges
0.5
—
0.5
2.7
Other non-operational costs (includes
other non-operational impacts to cost of revenues)
1.3
0.1
8.9
19.1
Total operating income adjustments
$
6.1
$
12.2
$
28.7
$
57.9
Non-GAAP operating income (loss)
$
32.6
$
(0.7
)
$
102.8
$
24.2
Operating margin
11.7
%
(7.6
)%
9.1
%
(4.6
)%
Non-GAAP operating margin
14.4
%
(0.4
)%
12.6
%
3.3
%
INCOME (LOSS) BEFORE TAXES
RECONCILIATION
Income (loss) before taxes
$
14.8
$
(30.5
)
$
28.6
$
(72.6
)
Total operating income adjustments
6.1
12.2
28.7
57.9
Convertible notes non-cash interest
expense
2.0
2.0
7.9
2.5
Acquisition related (benefit) costs
—
—
—
(0.8
)
Impairment charges
—
—
—
2.7
Other non-operational costs
1.5
7.4
1.5
7.4
Total income before taxes adjustments
$
9.6
$
21.6
$
38.1
$
69.7
Non-GAAP income (loss) before taxes
$
24.4
$
(8.9
)
$
66.7
$
(2.9
)
INCOME TAX EXPENSE (BENEFIT)
RECONCILIATION
Income tax expense (benefit)
$
6.0
$
(4.3
)
$
10.7
$
(15.2
)
Tax effect on non-GAAP adjustments
0.2
3.1
(3.5
)
(8.9
)
Non-GAAP income tax expense (benefit)
$
5.8
$
(7.4
)
$
14.2
$
(6.3
)
VAREX IMAGING
CORPORATION
RECONCILIATION BETWEEN GAAP
AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
Twelve Months Ended
(In millions, except per share
amounts)
October 1, 2021
October 2, 2020
October 1, 2021
October 2, 2020
NET INCOME (LOSS) AND DILUTED NET
INCOME (LOSS) PER SHARE RECONCILIATION
Net income (loss) attributable to
Varex
$
8.7
$
(26.4
)
$
17.4
$
(57.9
)
Total earnings before taxes
adjustments
9.6
21.6
38.1
69.7
Effective tax rate on non-GAAP
adjustments
2.1
%
14.4
%
(9.2
)%
(12.8
)%
Tax effect on non-GAAP adjustments
0.2
3.1
(3.5
)
(8.9
)
Non-GAAP net income (loss)
$
18.5
$
(1.7
)
$
52.0
$
2.9
Diluted net income (loss) per share
$
0.20
$
(0.68
)
$
0.43
$
(1.49
)
Non-GAAP diluted net income (loss) per
share
$
0.45
$
(0.04
)
$
1.31
$
0.07
DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING RECONCILIATION
GAAP weighted average common shares -
dilutive
43.5
39.1
40.3
38.8
Dilution offset from convertible notes
hedge transaction
(2.5
)
—
(0.6
)
—
Non-GAAP dilutive shares
41.0
39.1
39.7
38.9
ADJUSTED EBITDA RECONCILIATION
Net income (loss) attributable to
Varex
$
8.7
$
(26.4
)
$
17.4
$
(57.9
)
Interest expense
10.8
14.5
42.1
31.4
Income tax expense (benefit)
6.0
(4.3
)
10.7
(15.2
)
Depreciation
5.0
5.0
20.5
22.3
Amortization
4.1
4.1
16.8
17.2
Share-based compensation
3.3
3.2
13.9
13.4
Purchase price accounting adjustments
—
—
—
0.3
Separation and related costs
—
—
—
2.5
Restructuring charges
(0.1
)
6.6
0.8
10.6
Acquisition and integration related
costs
0.1
0.6
1.5
1.8
Impairment charges
0.5
—
0.5
5.4
Other non-operational costs
1.5
0.8
9.1
19.9
Adjusted EBITDA
$
39.9
$
4.1
$
133.3
$
51.7
Discussion of Non-GAAP Financial Measures
This press release includes non-GAAP financial measures derived
from our Condensed Consolidated Statements of Earnings. These
measures are not presented in accordance with, nor are they a
substitute for U.S. generally accepted accounting principles, or
GAAP. These measures include: non-GAAP gross profit; non-GAAP gross
margin; non-GAAP operating expense; non-GAAP operating earnings;
non-GAAP operating earnings margin; non-GAAP earnings before taxes;
non-GAAP net earnings; non-GAAP net earnings per diluted share,
non-GAAP dilutive shares; and non-GAAP EBITDA. We are providing a
reconciliation above of each non-GAAP financial measure used in
this earnings release to the most directly comparable GAAP
financial measure. We are unable to provide without unreasonable
effort a reconciliation of non-GAAP guidance measures to the
corresponding GAAP measures on a forward-looking basis due to the
potential significant variability and limited visibility of the
excluded items discussed.
We utilize a number of different financial measures, both GAAP
and non-GAAP, in analyzing and assessing the overall performance of
our business, in making operating decisions, and forecasting and
planning for future periods. We consider the use of the non-GAAP
measures to be helpful in assessing the performance of the ongoing
operation of our business by excluding unusual and one-time costs.
We believe that disclosing non-GAAP financial measures provides
useful supplemental data that allows for greater transparency in
the review of our financial and operational performance. We also
believe that disclosing non-GAAP financial measures provides useful
information to investors and others in understanding and evaluating
our operating results and future prospects in the same manner as
management and in comparing financial results across accounting
periods and to those of peer companies.
Non-GAAP measures include the following items:
Amortization of intangible assets:
We do not acquire businesses and assets on a predictable cycle. The
amount of purchase price allocated to intangible assets and the
term of amortization can vary significantly and are unique to each
acquisition or purchase. We believe that excluding amortization of
intangible assets allows the users of our financial statements to
better review and understand the historic and current results of
our operations, and also facilitates comparisons to peer
companies.
Purchase price accounting charges to cost
of revenues: We may incur charges to cost of revenues as a
result of acquisitions. We believe that excluding these charges
allows the users of our financial statements to better understand
the historic and current cost of our products, our gross margin,
and also facilitates comparisons to peer companies.
Separation and related costs: We
separated from Varian Medical Systems on January 28, 2017 and
incurred non-operational expenses associated with the separation.
We believe that excluding separation costs allows the users of our
financial statements to better understand the historic and current
results of our operations, and also facilitates comparisons to peer
companies.
Restructuring charges: We incur
restructuring charges that result from events, which arise from
unforeseen circumstances and/or often occur outside of the ordinary
course of our on-going business. Although these events are
reflected in our GAAP financials, these unique transactions may
limit the comparability of our on-going operations with prior and
future periods.
Acquisition and integration related
costs: We incur expenses or benefits with respect to certain
items associated with our acquisitions, such as transaction costs,
changes in fair value of acquisition related hedges, changes in the
fair value of contingent consideration liabilities, gain or expense
on settlement of pre-existing relationships, etc. We exclude such
expenses or benefits as they are related to acquisitions and have
no direct correlation to the operation of our on-going business. We
also incur expenses or benefits with respect to certain items
associated with our acquisitions, such as integration costs
relating to acquisitions for any costs incurred prior to closing
and up to 12 months after the closing date of the acquisition.
Impairment charges: We may incur
impairment charges that result from events, which arise from
unforeseen circumstances and/or often occur outside of the ordinary
course of our on-going business and such charges may limit the
comparability of our on-going operations with prior and future
periods.
Other non-operational costs:
Certain items may be non-recurring, unusual, infrequent and
directly related to an event that is distinct and non-reflective of
the Company’s ongoing business operations. These may include such
items as non-ordinary course litigation, legal settlements,
inventory write-downs for discontinued products, cost of facilities
no longer in use, extinguishment of debt and hedge costs,
environmental settlements, governmental settlements including tax
settlements, and other items of similar nature.
Convertible notes non-cash interest
expense: We issued convertible notes in June 2020 at a
discount related to the conversion feature of the notes and
capitalized certain costs related to the issuance of these notes.
The discount and capitalized issuance costs are amortized into
interest expense over the term of the convertible notes. The
amortization recognized for the convertible notes will be greater
than the cash interest payments for the notes. We believe that
excluding the convertible notes non-cash interest expense allows
the users of our financial statements to better understand the
historic and current results of our operations. This also
facilitates comparisons to peer companies.
Non-operational tax adjustments:
Certain tax items may be non-recurring, unusual, infrequent and
directly related to an event that is distinct and non-reflective of
the Company’s normal business operations. These may include such
items as the retroactive impact of significant changes in tax laws,
including changes to statutory tax rates and one-time tax
charges.
Tax effects of operating earnings
adjustments: We apply our non-GAAP adjustments to the GAAP
pretax income to calculate the non-GAAP effective tax rate. This
application of our non-GAAP effective tax rate excludes any
discrete items, as defined in the guidance for accounting for
income taxes in interim periods, or any other non-operational tax
adjustments.
Dilution offset from convertible notes
hedge transaction: In connection with the issuance of the
Company’s Convertible Senior Unsecured Notes (the Convertible
Notes) in June 2020, the Company entered into convertible note
hedge transactions (the Hedge Transactions) to reduce the potential
dilutive effect on common shares upon the eventual conversion of
the Convertible Notes. GAAP diluted shares outstanding includes the
incremental dilutive shares from the Company’s Convertible Notes.
Under GAAP, the anti-dilutive impact of the Convertible Note Hedge
Transactions is not reflected in GAAP diluted shares outstanding.
In periods in which the average stock price per share exceeds
$20.81 and the Company has GAAP net income, the non-GAAP diluted
share count includes the anti-dilutive impact of the Company’s
Hedge Transactions, which reduces the potential dilution that
otherwise would occur upon conversion of the Company’s Convertible
Notes. We believe non-GAAP diluted shares is a useful non-GAAP
metric because it provides insight into the offsetting economic
effect of the Hedge Transactions against potential conversion of
the Convertible Notes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211116005401/en/
Christopher Belfiore Director of Investor Relations Varex
Imaging Corporation 801.973.1566 |
christopher.belfiore@vareximaging.com
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