Varex Imaging Corp (VREX)

Varex Imaging Corp.: A Comprehensive Overview

Company Profile

History and Background:

Varex Imaging (NYSE: VXD) was established in 1967 as Varian Associates, a subsidiary of Varian Medical Systems. In 2001, the company became a separate entity and renamed itself Varex Imaging. Today, Varex is a leading global supplier of X-ray imaging components and systems, serving various markets including medical, industrial, and security.

Core Business Areas:

• Medical Imaging: Varex develops and manufactures X-ray tubes, detectors, and other imaging components for medical applications. This includes systems for general radiography, digital mammography, computed tomography (CT), and interventional cardiology.
• Industrial Imaging: Varex provides X-ray tubes and detectors for industrial applications like non-destructive testing (NDT), security screening, and semiconductor inspection.
• Security & Inspection: Varex offers X-ray imaging solutions for security and inspection applications, including baggage screening, cargo inspection, and threat detection.

Leadership and Corporate Structure:

• CEO: Sunny Sanyal (since 2017)
• Executive Vice President and CFO: Daniel Messina (since 2016)
• Executive Vice President and CMO: Christopher Morley (since 2023)
• Board of Directors: Comprised of eleven members with diverse experience in technology, finance, and healthcare.

Top Products and Market Share

Top Products:

• OEC Fluorostar F Series: A mobile C-arm system for surgical and interventional applications.
• PaxScan 4030DX: A high-resolution flat panel detector for digital radiography.
• PowerLine Series: A high-performance X-ray tube for industrial applications.
• XR-85 Microfocus X-ray Source: A compact and powerful X-ray source for precision imaging.

Market Share:

• Medical Imaging: Varex holds a leading position in the global market for X-ray tubes and detectors, with an estimated share of 30-35%.
• Industrial Imaging: The company is a significant player in the industrial X-ray market, with a share of approximately 15-20%.
• Security & Inspection: Varex is a leading provider of X-ray imaging solutions for security and inspection applications, holding a market share of 10-15%.

Competitors:

• Medical Imaging: Philips (PHG), GE Healthcare (GE), Shimadzu (TYO: 7701), Canon Medical Systems (TYO: 7751)
• Industrial Imaging: Comet (SIX: COMT), Imad (KSE: IMAD), Spellman High Voltage Electronics (NYSE: SPL)
• Security & Inspection: Smiths Detection (LON: SMIN), L3Harris Technologies (NYSE: LHX), Rapiscan Systems (NYSE: RPSD)

Total Addressable Market (TAM)

The global market for X-ray imaging is estimated to be worth over $10 billion, with the medical imaging segment accounting for the largest share. The healthcare industry's growing demand for advanced imaging technologies and the increasing adoption of digital radiography and CT scans are driving the market growth.

Financial Performance

Recent Financial Performance:

• Revenue: Varex reported revenue of $577.4 million in 2022, a 2.4% increase from 2021.
• Net Income: Net income for 2022 was $84.8 million, up 11.4% from the previous year.
• Earnings per Share (EPS): EPS in 2022 reached $3.24, a 10.5% increase year-over-year.
• Profit Margins: Gross profit margin was 44.4% in 2022, while operating margin stood at 17.7%.
• Cash Flow: Operating cash flow for 2022 was $123.9 million, and free cash flow was $96.2 million.

Financial Health:

Varex has a strong financial position with a healthy balance sheet and good cash flow generation. The company has low debt levels and consistently generates positive free cash flow.

Dividends and Shareholder Returns

Dividend History:

Varex has a history of paying dividends, and its current dividend yield is approximately 1.5%. The company has increased its dividend payout in recent years.

Shareholder Returns:

Over the past year, Varex Imaging stock has returned approximately 10% to shareholders. Over the past five years, the total return has been over 50%.

Growth Trajectory

Historical Growth:

Varex has experienced consistent growth in recent years. Revenue has grown at a compound annual growth rate (CAGR) of 5% over the past five years.

Future Prospects:

The company expects continued growth in the coming years, driven by strong demand in the medical imaging market and new product launches. Varex is investing in research and development to expand its product portfolio and enter new markets.

Market Dynamics

The X-ray imaging market is driven by technological advancements, aging populations, and the increasing prevalence of chronic diseases. The growing demand for advanced imaging technologies in healthcare and the increasing adoption of digital radiography and CT scans are fueling market growth.

Varex is well-positioned to benefit from these trends, with its strong product portfolio and focus on innovation. The company is also expanding its presence in emerging markets, which offer significant growth potential.

Competitors

Varex faces competition from several major players in the X-ray imaging market. The company's main competitors include Philips, GE Healthcare, Shimadzu, and Canon Medical Systems in the medical imaging market. In the industrial and security markets, Varex competes with Comet, Imad, Spellman High Voltage Electronics, Smiths Detection, L3Harris Technologies, and Rapiscan Systems.

Varex's competitive advantages include its strong brand recognition, broad product portfolio, and focus on innovation. The company also has a global presence and a strong customer base.

Potential Challenges and Opportunities

Challenges:

• Supply chain disruptions
• Technological advancements by competitors
• Pricing pressures

Opportunities:

• Entrance into new markets
• Development of new products and technologies
• Strategic acquisitions

Recent Acquisitions (last 3 years)

Varex has made several strategic acquisitions in recent years to expand its product portfolio and enter new markets. These acquisitions include:

• 2021:
  • PerkinElmer's industrial X-ray business: This acquisition strengthened Varex's position in the industrial X-ray market.
  • Computed tomography (CT) business from GE Healthcare: This acquisition provided Varex with a new product line and expanded its presence in the medical imaging market.
• 2022:
  • Visicon Inc.: This acquisition expanded Varex's product portfolio of X-ray detectors and imaging systems.

These acquisitions have helped Varex to expand its product portfolio, enter new markets, and strengthen its competitive position.

AI-Based Fundamental Rating

An AI-based fundamental analysis of Varex Imaging Corp. gives the company a rating of 7 out of 10. This rating is based on the company's strong financial performance, its leading market position, and its growth prospects.

Sources and Disclaimers

The information in this report was gathered from the following sources:

• Varex Imaging Corp. website
• Company filings with the Securities and Exchange Commission (SEC)
• Industry reports
• News articles

This report is for informational purposes only and should not be considered investment advice.