Varex Earnings Rebounded as Tariff Refund Lifted Margins
Operating cash flow improved to $21 million after two quarters of outflows.
Varex Imaging Corp. (VREX), a maker of medical and industrial X-ray imaging components, returned to a quarterly profit as tariff-related benefits widened margins and industrial sales rebounded.
Revenue rose 4% from a year earlier to $210.5 million, though it slipped about 2% from the second quarter and remained below the $229 million recorded in the fourth quarter of fiscal 2024. Reported revenue included a $7 million reduction for expected reimbursements to customers previously billed for tariffs imposed under the International Emergency Economic Powers Act.
GAAP earnings were $0.37 a share, compared with a loss of $2.15 a share a year earlier, when Varex recorded a $93.9 million goodwill impairment. Adjusted earnings increased to $0.31 a share from $0.13 and accelerated from $0.21 in the preceding quarter.
Industrial revenue climbed to $77 million from $60 million in the second quarter, returning to its fiscal fourth-quarter level as cargo and vehicle inspection systems continued to expand. Medical revenue fell to $134 million from $156 million, its lowest level across the five reported quarters.
Non-GAAP gross margin expanded to 36.7% from 33.5% a year earlier and 34% in each of the previous three quarters. About $10 million of gross profit came from $17 million in refunds of previously paid tariffs, partly offset by the $7 million customer-reimbursement accrual. GAAP operating margin rose to 11% from 7% in the second quarter.
The results landed near the bottom of Varex’s previous revenue guidance of $210 million to $225 million, while adjusted earnings exceeded the prior range of $0.15 to $0.30 a share. The company stopped providing financial guidance and canceled its earnings call because of its pending transaction with Teledyne; a quarter earlier, it had forecast fiscal 2025 revenue of $860 million to $880 million and adjusted earnings of $0.80 to $1.00 a share.
Varex’s March refinancing reduced outstanding debt by $18 million and was expected to cut annualized cash interest expense by more than $7 million. Interest expense subsequently declined to $5.8 million from $9.4 million a year earlier, while quarter-end cash and marketable securities recovered to $99 million from $88 million in the second quarter.