Varex Imaging (NASDAQ:VREX) reported what executives described as a strong start to fiscal 2026, with first-quarter results landing toward the high end of the company’s guidance range. Management emphasized continued momentum in industrial markets—especially cargo security systems—alongside stable medical performance in what it called a seasonally light quarter.
First-quarter results: revenue up 5%, industrial strength leads
For the first quarter of fiscal 2026, Varex posted revenue of $210 million, up 5% year over year. CEO Sunny Sanyal said growth was driven by strength in the cargo systems business, which helped lift industrial segment revenue 17% from the prior-year period. He said the medical segment was stable year over year, with continued strength in CT and increasing engagement with customers on next-generation system designs.
CFO Sam Maheshwari added that medical revenue was $145 million and industrial revenue was $65 million, representing 69% and 31% of total revenue, respectively. Regionally, the Americas grew 17%, EMEA rose 7%, and APAC declined 7% year over year. China-related sales volume was steady, representing 17% of total revenue.
On a GAAP basis, gross margin was 33%, operating income was $15 million, net income was $2 million, and GAAP EPS was $0.05 per diluted share.
Modality trends: CT strength, radiography pipeline, and mixed performance elsewhere
Sanyal reviewed performance in the medical segment by modality compared with a five-quarter average “sales trend.” He said the quarter was driven by solid demand for X-ray sources, particularly in high-end CT, as well as digital detectors. He also pointed to growing customer activity around new platforms.
- Mammography exceeded its sales trend
- CT, fluoroscopy, and radiography were in line with sales trends
- Dental and oncology were below sales trends
During Q&A, Sanyal said Varex has focused on winning back share in general radiography with newer detector products that he described as functionally rich and competitively priced, including products tied to the company’s “made in India” strategy. He also highlighted customer interest in combining detectors with the company’s Nexus software offering to provide a more complete imaging chain.
Industrial business: cargo security and NDT momentum; orders described as tender-driven
Management described the industrial segment as a key growth opportunity, citing demand in security screening and non-destructive testing (NDT). Sanyal said global demand for security screening remained strong, driving growth in both cargo security inspection systems and components. He also said NDT and inspection demand was supported by strength in high-energy linear accelerators and X-ray tube products, and that photon counting detectors saw solid demand across industrial verticals, including food inspection.
In response to investor questions about cargo orders, Maheshwari said the company does not plan to issue press releases for each purchase order unless it is material, and characterized the business as “somewhat lumpy” due to being tender-driven and episodic. He said the company’s goal is to smooth revenue where possible but noted that timing depends on customer delivery requirements. He also said the potential exists for industrial to grow double digits, contingent on both wins and shipment timing before fiscal year-end.
RSNA highlights: subsystem approach, design-win pipeline, and photon counting progress
Sanyal said the company held more than 150 customer meetings at RSNA, focused primarily on design-win opportunities and system upgrades. He said discussions reflected increased customer engagement across modalities and that Varex introduced a more integrated, modality-based approach—showcasing components such as tubes, detectors, generators, connectors, heat exchangers, and software as subsystem assemblies rather than standalone parts.
He described the reception to new technologies as strong and said some design-in discussions were tied to platforms already under development, particularly in general radiography, with certain opportunities expected to convert in fiscal 2026 and potential revenue contribution “as early as fiscal 2027.”
On photon counting, Sanyal said the company is making progress and that two OEMs already engaged with Varex were moving through commercialization processes, though he did not provide timing details. He said Varex’s goal is to “democratize” the technology beyond early, high-end market entrants.
Balance sheet, inventory build, and Q2 outlook
Maheshwari said inventory increased $29 million to $328 million, with days of inventory rising to 214 days. He attributed the increase primarily to supporting anticipated demand in the industrial segment, including cargo system deliveries and new product ramps, as well as inventory associated with India-related qualification work. He also noted tariffs capitalized into inventory as a factor. The company’s stated aim is to normalize inventory as programs progress, and Maheshwari said he would like to see inventory reduced by about $10 million to $15 million over the next couple of quarters.
Net cash outflow from operations was $16 million, driven primarily by the inventory increase. Varex ended the quarter with $126 million in cash, cash equivalents, and marketable securities, and gross debt of $370 million. Adjusted EBITDA was $29 million, and net debt leverage was approximately 1.9x trailing 12-month adjusted EBITDA.
For the second quarter, Varex guided to:
- Revenue: $210 million to $225 million
- Non-GAAP EPS: $0.15 to $0.25
- Non-GAAP gross margin: 33% to 34%
Maheshwari also discussed refinancing plans for the company’s high-yield debt due in October 2027, saying Varex would like to refinance before it becomes current—before October 2026. He said the current interest rate is 11.875%.
Management closed the call by reiterating confidence in customer engagement across both segments, citing innovation-focused dialogue in medical imaging and expanding industrial applications in areas including oil and gas, food inspection, and security screening.
About Varex Imaging (NASDAQ:VREX)
Varex Imaging Corporation is a global provider of X-ray imaging components and solutions for the medical, security and industrial markets. The company designs, develops and manufactures a broad range of products that convert X-ray energy into high-resolution digital images. Its portfolio includes X-ray tubes, flat panel detectors, digital sensors, specialty radiographic tubes and related software, all engineered to meet the demanding requirements of original equipment manufacturers (OEMs) in diagnostic imaging, computed tomography (CT), fluoroscopy, mammography, dental radiography and non-destructive testing applications.
The company’s medical imaging offerings support a wide spectrum of clinical modalities, from portable radiography systems to advanced CT scanners, enhancing image quality and dose efficiency for healthcare providers.
