Varex Imaging — Third Quarter Fiscal Year 2026 Earnings Summary

Financial Performance

• Total revenues for Q3 FY26 were $210.5 million, representing a 4% year-over-year increase compared to $203.0 million in Q3 FY25; product sales before IEEPA-related customer reimbursement adjustments were approximately $217 million.
• Medical segment revenue was $134.0 million, while Industrial segment revenue was $76.5 million.
• GAAP gross margin was 36.4% and Non-GAAP gross margin was 36.7% (reported as 37% in summary), compared to 33.3% GAAP and 33.5% Non-GAAP in the prior-year quarter.
• GAAP operating margin was 10.8% and Non-GAAP operating margin was 11.6% (reported as 12% in summary), compared to a GAAP loss of 39.8% and Non-GAAP margin of 8.2% in the prior-year quarter.
• GAAP net income attributable to Varex was $15.7 million ($0.37 per diluted share), compared to a net loss of $89.1 million ($2.15 per diluted share) in the prior-year quarter.
• Non-GAAP net income was $13.4 million ($0.31 per diluted share), compared to $5.3 million ($0.13 per diluted share) in the prior-year quarter.
• Cash flow from operations was $21 million.
• Cash, cash equivalents, and marketable securities totaled $99.2 million as of July 3, 2026, down from $155.1 million ($145.0 million cash + $10.1 million marketable securities) at the end of fiscal year 2025.
• Inventories increased to $347.1 million from $299.4 million at the end of fiscal year 2025.
• Long-term debt, net, decreased to $328.9 million from $366.0 million at the end of fiscal year 2025.
• Deferred revenues decreased to $8.6 million from $13.0 million at the end of fiscal year 2025.

Guidance and Future Outlook

• The company will not provide financial guidance for the fourth quarter or full year in conjunction with this release due to the pending transaction with Teledyne Technologies Incorporated.
• Management stated the company enters the fourth quarter with "continued momentum."

Business Segments and Product Lines

• The Industrial segment showed continued expansion in cargo and vehicle inspection systems.
• The quarter included the recovery of tariffs that had previously increased product costs.

Market and Competitive Landscape

• The company received refunds totaling $17 million from U.S. Customs related to previously paid IEEPA tariffs.
• A corresponding $7 million reduction to revenues was recorded to reflect an accrual for expected customer reimbursements of previously billed IEEPA tariffs.
• These tariff-related items resulted in a $10 million increase in third-quarter gross profit.

Risks and Challenges

• Key risks include the ability to consummate the proposed transaction with Teledyne on anticipated terms and timing, including obtaining stockholder and regulatory approvals.
• Risks involve changes in import/export regulatory regimes, tariffs, trade wars, and national policies.
• Potential loss of business from limited original equipment manufacturing (OEM) customers and inability to effectively compete with competitors.
• Supply chain disruptions and reliance on a limited number of suppliers for key components.
• Risks associated with international manufacturing, operations, and sales, including economic instability and changing tax treatments.

Management Commentary and Tone

• Sunny Sanyal, Chief Executive Officer, noted that third-quarter product sales before the IEEPA-related customer reimbursement adjustment were approximately $217 million, reflecting strong growth in Industrial and continued expansion in cargo and vehicle inspection systems.
• Management highlighted the recovery of tariffs and the generation of $21 million in operating cash flow as positive indicators of momentum.

Other Key Points

• Varex Imaging Corporation has announced a transaction with Teledyne Technologies Incorporated, resulting in the cancellation of the scheduled earnings conference call for Q3 FY26.
• The company modified its non-GAAP policy to exclude gains and losses from equity-method investments, a change applied retroactively to fiscal year 2025 for comparison purposes.
• The company recorded a $93.9 million impairment of goodwill in Q3 FY25, which was not present in Q3 FY26.
• Non-ordinary course litigation expenses were $0.6 million in Q3 FY26 compared to $1.7 million in Q3 FY25.
• The company employs approximately 2,500 people across North America, Europe, and Asia.