Varex Imaging (VREX) 19 Nov 242024 Q4 Earnings call transcript

Greetings, and welcome to the Varex Fourth Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Christopher Belfiore, Director of Investor Relations. Thank you.

You may begin.

to of earnings fiscal welcome the call and quarter fourth year afternoon, Varex conference Imaging's for Good XXXX. CFO. With our me our President Sanyal, and CEO; today and Sam are Sunny Maheshwari, this note conference presentation Please can at vareximaging.com/news. accessed website be live the webcast that call a supplemental that includes slide at Varex's of presentation The slide archived Varex' will webcast and website. on be supplemental

year To the fourth for the quarter simplify our are discussion, unless of otherwise XXXX. fiscal stated, all references to quarter

quarter of In XXXX. year-over-year fourth addition, unless from fourth the comparisons stated, year year made are fiscal quarter otherwise quarterly fiscal to XXXX the of

all to unless and Finally, references fiscal to stated. are the year, the calendar year not year otherwise

based the actual earnings call, which uncertainties that assumptions current subject be risks from in that anticipated. projections expectations events. Risks or are and Please to be are are making future and we to could are release during our our on predictions those that described forward-looking to materially statements, business this with and about our advised statements SEC. relating will quarterly differ results cause filings These

materially in concerning annual statements to speaks cause of including XA quarterly Factors this factors on in could Form those in revise on discussion. from SEC obligation no XX-Q our date, The and assume forward-looking this actual reports XX-K. as information and that report Form discussion we Item Risk is results today's filings, or our information our anticipated of to Additional contained the update differ

a release non-GAAP to GAAP directly financial website. GAAP are in not a for On non-GAAP financial We measures. most our posted press with, presented which provided today's earnings financial are non-GAAP in These we on accordance reconciliation the they financial call, measures nor our comparable certain each is will substitute measure measure of measures. discuss

the turn Sunny. now to call over will I

driven quarter mainly of our were you, Chris. range, us for in strength our our high at by the end everyone, Fourth fourth Good and afternoon, revenues you call. guidance industrial earnings segment. for thank joining Thank continued quarter

by our of the the During we the outside experienced quarter, in customers of destocking Medical actions segment continued effect China.

adjustment the high believe of However, the in equipment of inventory Gross unfavorable continued of our the destocking guidance XXXX. low sales quarter margin to in as in sales proportion due of at to in fiscal was customer our second stabilize Industrial we expect fourth are quarter actions to the effect end and subside segment quarter. range mix beginning

equipment sales We the of higher-margin future. to services expect the strong in growth drive

is level China our in remained overall than the a at for business fiscal business Revenue XXXX. in lower although running stable that quarter

Medical well We Imaging in China, are when optimistic that and demand growth benefit to resumes. is will improve positioned Varex

health yet our by not encouraged a system. the incoming making the measurable rate, their we care funds way have seen we into potential order are uptick stimulus of While in

decreased the Turning fourth in while segment in with year non-GAAP year-end. million, fourth balance fiscal equivalents marketable on fourth cash, and EPS quarter $XX quarter to X% quarter the Revenue results. securities ended was up was EBITDA revenue We quarter in fourth million compared Medical $XXX XX% year-over-year, in $XX the and $X.XX. the the and XX% fiscal prior year-over-year. year-over-year. million Industrial Revenue gross segment of Adjusted margin Non-GAAP XX%. to quarter decreased was cash sheet, decreased

mammography in be respective below the dental trends. their above CT trend. fluoroscopy, and in our customers. which all Let our Sales the compared continued and sales modalities we quarter sales due quarter, segment give trends. were continued to a by in the in to in to into compared flat to me management quarter in in oncology some radiographic modality modalities were trend quarter sales sales the sales you primarily modality inventory by Medical as Sales detailed insights in Global down while were refer average, to X-quarter

In our in screening, the industrial markets, products benefit our soft the of quarter. sales cargo customers primarily continue inspection end to demand quarter. security Industrial in to from strong battery driving segment, our Other semiconductor, in continue remain and inspection electronics

gears our in to future our growth refresh and our to comes portion in existing to about that subsequent XXXX, the to get we're what need To of models designed several customers is portfolio as grow excited will repeat each to fiscal we product initiatives Switching from significant This years. refer customers. business. drive purchases release. A from current business year system innovate product core core, our to that into plan continue we

premier to support tier capabilities the growing with CT market. resolution, develop detector as we're applications. applications our business, systems, to investing their work speed and believe of we in to and include in they rest this, closely the our margins compared accomplish imaging industrial the areas with existing CTT primarily in update To the imaging We is In high higher higher or dynamic cardiovascular customers CT, applications. a tier higher at of premium rate

CT contributing a the are Since within step at important our R&D us. frequency, in and customers' replacement is plans profitable segment tubes for require revenue our for with modality Medical staying largest higher growth

cost the We detector CMOS-based our detectors. great effectively IGZO-based as AZURE with very with year performance platform, This enables success. launched last platform of high-quality compared are which happy we imaging to

as products going of applications include additional to we AZURE for In premium and oncology expand continue portfolio are to dynamic detectors cardiology. our such surgery, our to fiscal XXXX,

from platform applications. migrate design premium We are AZURE continuing legacy and to silicon wins the to in amorphous pursuing products customers

with that demand In additive to castings, to these high our versatile cases. digital inspection from along to in bendable radiographic We and conversion to space. evolve address processing continue needs well for applications differentiated manufacturing These nondestructive positioned using film are Industrial software growing pipelines image digital both are segment, resolution detectors inspection and accelerate detectors. to to analog we believe with applications the use complex address

high energy in growing in like and enable we're application X-ray with industrial digital imaging position aerospace growing expand sources. and platforms our margin-accretive a with AZURE where bendable us addition, for revenue contribution. Investment large see automotive areas a in In investing detectors detectors area to verticals, leadership for need CT, we

take where number steps to we novel We a expect a meaningful fiscal XXXX technologies. year with be of

been We developing which high spectral fast, can on and for we a radiation believe imaging. technologies, resolution enabler key laser-focused dose our counting low photon have be

technology, and next-generation of We counting be CTs is photon especially a photon to a significant of for expect Varex in driver manufacturer Varex. adoption new technologies. growth counting leading and merchant revenue supplier

in OEMs CT large We are to next-generation photon detectors their imaging designs. actively counting system technology engaged our integrate with

to prospects We technologies. counting working as OEMs adoption further about with imaging are excited photon well the medical other these OEMs drive of of as

photon expanding applications base. and we generate are the our of counting revenues, In our customer industrial segment, where we currently majority

we're as food interest inspection oil these new applications. opportunities and Specifically, We're OEMs security as well and seeing gas, by and continued about battery, in and medical both verticals adoption We growing adoption that in excited see and we both and industry at aerospace inspection. in segments XXXX. increased believe our with recycling counting, photon expect inflection point fiscal the is industrial in an to

Given near market the increase supplier, in and position leading of the size using our from technology merchant a as we in revenue products this future. counting photon potential contribution anticipate an

XXXX. earlier $XXX million photon highlighted year, approximately counting annual fiscal to contribute As by in revenue target we technologies we this

we provide types the we Industrial these systems fiscal our years high-energy systems. these linear a include to segment, of and inspection plan very of these our cargo know as a for the 'XX, and we that to gantry, our accelerators, portal, solutions, to differentiated components a scanner security systems third-party applications detectors, into a inspection scanner market. linear imaging accelerators many we a In directly software scanning and utilizing services end bring core In customers. experience value We provided for of years can are well we have launch as believe to mobile such portfolio excited car integrating

I'm completed a installations successfully cargo say and underway. that have to happy installations inspection we few systems additional have

tenders to can equipment tender-driven and We services a establish be but channels long-term from these revenue very are contribution for in working This and market with worldwide. solutions. distribution margin is see and actively and we end lumpy potential participate

in track quarter during production Our progress we India of continue India on third the fiscal plans make expansion remain begin of to to components and XXXX.

a Our for objective low-cost manufacturing components is India establish competitive for in very radiographic initial our to market.

confident improved grow radiographic sales we're and our of an outstanding we We structure, with product can have knowledge components. cost that

In to to announce pleased our We in technology. investments completed X-ray cathode or Micro-X. evaluation about begin we control talked with electronics and we recently the cold will We're Nanotube transfer that tubes shipping have a several customers. of past, tube full Nanotube-based consisting technology kits

stages OEM who working customers teams addition, early and in technology, commercializing to are forward to our market. to we In this systems of bring innovative look with novel engaged them are with R&D

to steps As forward taking leadership to and drive XXXX, are necessary look growth. we we future we believe expand our fiscal the

second not market China, potential medical dynamics, of to destocking encouraged terms their system. uptick health XXXX. of quarter OEMs impact In order fiscal stimulus measurable into way seen in a care As subside of incoming the expect noted in by have we funds of the are earlier, rate, our we the in we making by the while

we diversification developments on call operations unknown, effect will the monitor like we effect our to where to in supplier handing The to Before changes but our our well tariffs to Meanwhile, continue manufacturing continue of to local-for-local currently Sam, advance area adjust I'd as is the as and this touch briefly potential on possible. business. strategies.

of consumption in changes also may mitigate manufacture tariff potential of policies. global Our impact in initiative to help India the for some

With call over the that, me to Sam. let hand

Thanks, Sunny, and hello, everyone.

revenues the million, end guidance high of were fourth our towards the Our in $XXX quarter range.

gross low Although range. the the margin projected at XX% our end was non-GAAP of

the exceeding $X.XX, was end guidance. EPS non-GAAP of our Our high

the fiscal the segment a this our was reduction of largely decline the quarter to in same Medical primarily inventory to ongoing fiscal attributed challenging Despite to Comparing in our due in XXXX, revenues segment by performance, QX the XX%, a experienced year-over-year customers. to adjustments fourth revenues 'XX. due against period record comparison X% Industrial XX% decreased decline the achieved strong our

million. amounted segment, million, and $XX our revenues By Industrial XX%. to $XXX were revenues revenues Medical total were constituted revenues XX% industrial of and medical

Americas medical for 'XX, decline the decreased fourth by compared of fiscal and and 'XX. XX% X% these revenues. the to were an X%. fiscal EMEA APAC revenues XX% proportions revenues Over industrial quarter revenue Analyzing revenues XX% for declined region, saw

For fiscal XX% the to year previous compared million, to Varex XX% $XXX 'XX, of a reached represented sales decline our sales. reflecting and China

sales China. the sequential We are optimistic cautiously in increase quarterly to about

easing stimulus major progress, campaign anticorruption the of equipment pending. and signs early funds observed still capital making gradually investment we is Although

margin quarter cover fiscal was $XX million compared increase a valuation a XXX were of me of to $XX the fiscal allowance million, a $XX loss fourth of of 'XX. Operating from Net noncash primarily was related million. decline of 'XX. QX charge due million, of GAAP of fourth quarter income results Let $XX million, Operating expenses year-over-year. $XX tax points the million decrease now basis a to basis. on our $X Gross XX%, for an

represented GAAP diluted based EPS fully a million of shares. XX on loss $X.XX

For due the down gross segment, margin Industrial sales our unfavorable to year-over-year, sales and mainly points an contributed service sales to mix. quarter, lower in higher this non-GAAP lower equipment and XX%, was XXX unfavorable basis mix volume

basis 'XX the due of full fiscal unfavorable and mix. For gross compared to was volume sales quarter XX% of 'XX, the fiscal $XX XX% full in to lower industrial fourth down of points and revenues. 'XX, the similar fiscal R&D fourth representing margin reasons quarter to spending was XXX million same

expenses $XX XX% of year-over-year million, $X Consequently, of million was the million increase representing an representing operating approximately revenues. $XX million, XX% of an 'XX, fourth of revenues. SG&A fiscal compared of increase $X to quarter totaled

to an million, fiscal XXXX, fiscal $XXX For were increase XXXX, compared representing revenues. of XX% expenses X% of operating

was and XX% 'XX. income quarter X% million, operating of million of fiscal the margin revenue a decrease year the to previous Operating from was of in fourth compared down $XX $XX

the returns. $X 'XX. U.S. fourth to fourth in X% due primarily of million of the the and Tax tax pretax income was The Germany or with an $XX favorable the in full operating of year, benefit quarter $X fiscal For margin adjustments year in million negative X% full expense XX% of a compared million income benefit quarter fourth to tax or in the reflect operating on was was of revenue. quarter

Average tax or XX were low. million the for X% 'XX, diluted Net share Due $X quarter to shares of of for pretax the in earnings to this, compared $X.XX non-GAAP unusually fiscal million. the were basis $X.XX per income on was million quarter. expense full year-ago a diluted or $X

earnings were or million million shares $X.XX year. on diluted of XX fiscal XXXX, the net for average based For $XX

sales X days of to X receivable by turning the million days. and balance XXX Now outstanding by and the sheet. days XX days Accounts improved quarter. decreased increased to days the in Inventory million by days by increased $XX fourth inventory $X to quarter in

'XX. on fiscal days moving in of by $XX efficient days. efforts lower X inventory reduction inventory decreased focused forward. payable Accounts was million the while our And maintaining with some XX pleased are by We payable levels we this days result sales of decreased to remain and

cash 'XX $XXX marketable sheet, year-end in prepaid securities million in an million Please inventory. other from quarter the from cash expense to with was of $XX cash in $XX moving increase and of the of operations marketable the debt equivalents to the Now million fiscal equivalents solid $XX and primarily million QX million on flow million and and reduction cash of of of million due deposits a includes current quarter 'XX. $X flow information. million, and We certificates cash Net cash, shown million $XXX ended $XXX the and $XX $XX from recorded note balance securities assets. of

debt the securities quarter for the Adjusted sales. end $XX of margin $XXX at net $XXX of was and EBITDA of cash million. was outstanding debt the was EBITDA XX% million was and million adjusted million of $XXX Gross quarter and

Our EBITDA and adjusted fiscal sales. was 'XX $XX XX% of million

net adjusted EBITDA a leverage was XX-month of X.Xx basis. Our trailing on debt ratio

Now fiscal XXXX. of year quarter outlook for the first moving to the

In China levels. current sales expect at terms to stable of remain market we to dynamics,

We provinces quarter on the impact by Elsewhere, way potential to customers the expect making incoming stimulus follow-through into in second our we are China medical subside orders. see XXXX. we fiscal to funds yet have encouraged by of their destocking a but

in is of mind and include contribute million note $X.XX $XXX of a share. expected is seasonal I operating in of QX. quarter. EPS trend week between to for Before additional non-GAAP Revenues $X.XX between this profit to approximately subsequent please The XX QX evaluating revenue $XX important first a million is are per guidance keep of loss and quarter expected in details, expected the the $XXX 'XX provide when It million results. that weeks for will and

net operating including based are expectations of milestone count for expense non-GAAP XX the extra expenses a shares. $X other margin $XX in Micro-X about final $X diluted of of tax and gross approximately Our non-GAAP on million, quarter XX%, of million, for of Interest about and week. range million million million rate XX% related approximately to the and the non-GAAP payment share $X operating

With will we for now your the that, open call questions.

Company. & the session. of first will now We be Instructions] with from conducting Suraj question Our question-and-answer Kalia a [Operator line Oppenheimer comes

love It one So are Sunny, ask a your couple China our obviously, suggesting get that. I on with of part of all the been -- of field expectations. prepared for may the stimulus remarks, level of of And China questions I'd the adapting for has Sam. the part the of checks you to of is reason necessarily are amount that jive how or Sunny, you right? stimulus, stimulus? stimulus, the level to color And and original not how level you're your China all thinking stimulus? about

orders say in large uptick we attributing to the as for in stimulus. been our that that health the to to China, provinces, It an us. enough whole that made its are program OEMs to not have systems buying and the yet system Suraj, through hasn't care us able the to but then we be seen So and indicated has to the stimulus we way

haven't yet. effect felt we the So

muted So and that's right why -- now, for we're it. watching it's us we

not have that, is we we stimulus any seen good, appreciate Now but and effect. the

China that's been why so growth. projections we've careful our about for And

is of 'XX through. right that FY think a to certain it? So on way not the about level flowing Is stimulus predicated necessarily

stimulus. not at way this we're correct. seeing we -- significant That any on have made assumptions any And any time, baked the it based is

would going and just is for that portion I we of if agree add more bit other pleased you little been a have think with a care I package we only health was quantum wanted more. to overall the Suraj, towards that is care health limit And one would that perhaps

are least the pretty basis, right? and that Sunny, counting, photon an theoretically, this it photon do their think to you rollout, Sunny, adoption Philips picks But photon benefits your of share is they on of market picks providing has of obvious. think photon-counting, At about up pretty are smaller How a I their own, market is counting counting obvious, as has apples-to-apples right? as the OEMs you GE up, gains their own. own velocity differential currently. -- guys

one necessarily to the differentiates share cause other what from for market So all? you gains

falls County, categories, photon there's OEMs Photon we reached of think that about into the the So first there's -- start combination understood. different as a technology benefits why a feel which point counting us and where we it's And think is many we to experiment hardware those. we tipping software. a of as adoption said, you that's good can can of we The all, applications. on then starts the for -- is increase the differentiate where fact this way to of It's with all the few now

the hardware square counts number X of its is So speed to large of second very ability able and on a millimeter be the process to per the to important per side, things. photon do detector there's

First supports. it's application different of And secondly, to that create type the energy it of bids. all, ability many

enough benefits separation attraction that So counting the able contrast of more be or contrast higher able get things of perhaps main to the with the being the that's you'd of be the do by can reducing tier precise discrimination, the media to for improve need you clinic you agents. clinical to material of one energy potentially do workflow that can large can photon

start advantage to then of of application that take the crowd the you technologies. see separation type the Once you of, the get that can of to benefits

detector the side. is and resolution, So mostly on This those with speed, energy to multiple we're ability hardware bins. of on process the sensitivity focused things:

to way do years side, bring comes in of software our detectors out further enhances of that processing digital image the a these detectors. we what experience On with

So leadership are that's our in see to way, a ability the position a those in I simple how role. ourselves

would of in elasticity photon demand price would counting? this -- And the

At this time, the higher focused tiers, of CT on most of the premium the the applications systems. tiers are

phases. high but that available customers are are with also the have at also So tiers. broadly tomography, And the us right? tiers, working applications, forms can are the in that mid-upper The then we at of more applications, in its at who is looking of various type both so that We be customers it looking looking tomosynthesis of democratizing technology, type early technology early. other it's have

higher. up, we'll with start will are And this digital see we industry perhaps the to costs the better exact cycle detectors. to better same pricing, that towards will once adoption structures scale the went allow technology itself through accelerate. We move So that cost

I'm you elasticity. So sure what exactly by do price not mean

I think in early out focused technologies, door, it's at the the and knowing the this that costly. OEMs getting point, on mainly of are stage our right applications it's

the both Now that is we that different across we industrial segments, since said, across one our serve and two able we're medical things. aggregate We areas. two of to -- do and scale advantages market OEMs

gives of telluride. benefits is of to the take itself, us The cadmium ability expensive material the scale. the most So part technology this that

right, margins, a had you'll gross Sam, road map.

much You'll point have that gross much At gross margins would the on? in incremental marginal margins game, specific margin say How can to a implemented of out event from stage this gross how macro road of gross squeeze are be changes more synergies, map company-specific expansion. driven? terms is you this

initiatives and efforts margin. to and our taking improve company level been that energies are we've There gross

we you and both segment, as If at segments. and disclose our gross by you medical look margins know, Medical industrial

cost then little we Also improved from supplier from On we reduction, benefiting the benefits time, that gross also And quarters. executed have because mix few bit less China. efforts in are over the previously. margins medical efforts the last is from And there, margin this we pricing-related integration. diversification freight currently at vertical are a the Medical benefiting gross segment, steadily on

segment faster to Medical is we has our our the segment generally segment, margins. the than Medical comes and on have margin. gross that the where have and improved So a gross we higher segment also Industrial been when But it segment growing industrial

margins gross even are So sales increasing, steadily with our happening is come what have Industrial down. segment, though

gross increasing, volume linear if that the Industrial we are that have not low the generally, cargo would So has has Industrial linacs unusually inspection segment high up, market. is margin the margins corporate gross gross up, into overall volume picked as shipping And down. are pick is lower much of these seen accelerators our of their proportion the sales margin. brought margins, for And at because that And but case. been than has we

down So industrial is detectors gross to this by also some energies, overall corporate this with some cargo systems. market-driven. segment's our swap tubes, same but margin. We at hope, hope the gross margins then time, We have of or and margin the of industrial is weighed Industrial this volume higher been

segment point Industrial made, So we Medical to needs I particularly would as destocking towards the with the pick think, work margin picks have up, that needs also the margin. gross I of overall to to type along But up, that segment volume remain mid-XXs subside. continue to things those improvement we gross are on say

when China seeing tailwinds that be but it helpful. Also, dilutive, of it are help although us. from a so might volume perspective, be mix overall margin We perspective, back, should comes would that,

dynamics, some So about those some in of of this talk also that the working and been we've energies are the I area. on market-driven

with Riley comes B. line Kyle Bauser the question next Securities. of from Our

oncology looks I'll It X-quarter quarter last segment. Can Or it in talk that about you in there any dynamics to the like anything Maybe the average. is caused compared out this? start stabilized here? to call

perhaps the phenomena as was destocking I that been subside than to less dynamic products, same to It's of other nothing same or can type started more unusual. particular there pinpoint the No well.

on the destocking we'll maybe situation. And stick

of kind you you Can to in expect seeing to and segment. glad more seeing ordering hear quarter would the give Is it here? you color Any patterns talked with kind to fiscal second clients or that oncology about it you talk stabilize confidence? here the pattern a already that what great. by of about So it bit confidence you be discussions you're the give

for his color quarters as this few and Sam intake pointing for maybe when rate. and started it is inbound we get the leading ago, well. can provide us, chime indicator I'll out, started our us A in order Yes.

process order order inbound can you see fast-moving ups look downs fairly in generally into us shipment there the that's XX gives going and and as In and something that in have what's days the at we early on We indicators market to out. intake rate we rate this downward seeing at saw slope then -- begun we with the as now rate, early and start And the on stabilize. particularly we order in phenomena. to looked the of customers, indications working saw intake there, upticks, we And we've it started China.

So the us they're sort plus, also having -- that's customers. a of the giving so to conversations is year-end most customers, giving for indication what's our an and our of year-end. cleanup that's with of data end Plus, we're say. in this tail plus is December us their that process, the

cleanup traditional that's us. that be early us. indications And us we behind this will also starting this see you the be giving expect so quarter, might year-end the what's behind first So the in calendar

trend the should I kind $X how if capital regarding kind of about this Should item cadence initiatives similar growth of given we and of quarterly expenditures, may, we strategy? million? anticipate a to think lastly, then company's line maybe And $X to current

this Kyle, Sam. Yes. is

take me that question. Let

infrastructure investment and into towards the up year, in of this plan, fiscal also capability out targeted in majority of a our India. So just completed we 'XX, expenditure building capital the terms manufacturing of and our coming is

expecting it, And this for coming flat come 'XX would call million 'XX was $XX beyond somewhere I $XX in should to bit for of range, down. the are fiscal the it be expenditure. average little But would that. that, a capital it FY as we also to 'XX somewhat that's what our million elevated. higher stay So year. expenditure capital to than expect And or X-year on around now

comes question & line next Sidoti Company. Sidoti with from of Our the Jim

ago? exactly a I in in out get million third little revenue of You year fourth you Can you did China? $XX Can stable know what was a the about more quarter. what the was said you and it the there? quarter revenue with specific it's break

Yes. Sure.

Jim, just was ago quarter million So China $XX it in in completed, million and the the $XX quarter. was year

at So it it lower stable is although stable, is levels.

I characterize way that lower it stabilized levels. has would at the is So China

last any QX, are million. And But was quarter this million. it We seeing $XX $XX worsening. in not was

timing So We terms has would a one might But we picked think our And from up. begin that need to still is bit definitely that in that of but to has worsening. that uncertain it mind, of China see I going China pickup orders say that's quarter-to-quarter variation. is it just that stabilized. we is not what little more mean up. to say it The is saying before pick in by

to the you quarter. management, said to demand, destocking expect to And say grow. you Is seeing continue the with regards that you you by demand inventory second to customer subside gives Are that? end-user your confidence what

they rich begin although year are concrete comes conversation, for that coming their and dialogues time their the customers what on although we say to say, to mostly that once the terms more it get frame, get it with would then But it us more in bit upon I December of with aspect, fiscal us. and is have with all complete they little customers, expectations January, to so our time. February we based much active would qualitative, year in is mostly as our conversations with

happening. based as say to it begun So discussions, well the taper I conversations order believe have been say, has to qualitative rate destocking we is January leads take behind when that to expecting something able or be all done that us. are the be destocking way January, these although down, February that like the we currently that us And will fully it on, would as would to until

balance the question. last sheet for one And then me,

up year $XX and Or it's to it's the up quarter, is property equipment, that? about million else June ago. Your what about from India? Is to $X plant, that from a contributing million

Jim. Sorry,

your hear it? could The I out, it. question first repeat got part of Could you cut not

Yes. Sure.

PP&E up ago. India up why $XX about it's is million from sheet, Is million Or about balance increasing? June, a year is from the On that $X that coming up?

Yes.

year, a and It of if are it for PP&E that at you India. So be mostly PP&E million, in around, just And at $XX and levels. full million kind is those that proxy that for you to should neighborhood remain year, it ended, $XX capital is we expect fiscal right. the be expenditure, really should look coming

Somewhere and $XX between $XX million.

So that and should contributing? is we assume that should from the start complete plant that, nearly India

Yes.

on in second factory, to two the we half expecting We are begin 'XX. are factories in of One to India, product Jim. produce fiscal working

months have good then would behind little be we one, behind is factory that nine first first there. And progress the So made probably the bit second pretty and one. a the

production will it of of there PP&E the But into down investment FY to be one, FY PP&E spending, 'XX. quantum expenditure So part go us would in expect or the of but equipment-related still a rate ends the the first of as 'XX. 'XX by we time say, the come of half in would 'XX. or second But FY fiscal we behind end capital the some be rate first big

And plants India should parts Asia? we the stay assume and that those will at of made products primarily in other

necessarily. No, not

Our focused for in strategy consumption. India global production is around in India

more India is of produce to strategy from somewhat competitive so out somewhat production that products advantage cost a in initial have India. Our we of

of the out global And a is competitive that is India. consumption strategy, products on it essentially, yes. So the

of line the from comes question CJS Securities. with Larry next Our Solow

trends. looks but extra us exclude we some year-over-year. about flat question, I first know guess normally QX week high-level given guidance or years week, in at or the like past, you don't -- guidance, for It you're extra like revenue annual least give don't I you've adjusted if I think just

destocking. Obviously, but midpoint, you've expecting million you the of you or last think spoken $XXX I for improvement qualitatively, So -- did inventory -- waning think year, what $XXX is full could that the year? about million you're I right?

just us give QX? on where beyond at we're high-level the thoughts So you least slower going think seasonally maybe that can you some

Yes.

Larry, think, low China I at So but has it is stabilized. running levels,

However, by the completed growth frame, we China timing or more get at and time. also destocking time January, destocking kind getting to more we as about feeling the of previously. And side, are better for on trends of the unknown constructive this said is February

coming that get all be two might up QX our we So way is good, and of beyond. tailwinds into as those

and administration due this potential cautious the changes to be time to need incoming we tariff the However, regime. at to

not do So full feel And full go position guide year. we anyways, to that time. like We we year this at guide in quarter-by-quarter. we not a generally are

we you these all when mind, one providing are perspectives take just a time. quarter so in of at And

have to you guys most already. exposure of that specifically, your And I the tariff thought reduced

you So actually not higher impact tariffs how if but Or would -- specifically? quantify you tariffs the just qualitatively. can just

two Larry, world, One, they're rate the out. that's this that they comes -- higher cost. XX% into for be those and to will we in the the been China, to costs, if they're somewhere U.S. we've export duty are for been so we rate, stuff we have get what input able if coming we're a us, impact ways. exemptions. import is the Sunny. drawbacks in for And at past, a from Tariffs able else We've input get

that margins and of So tariffs, the U.S. that retaliatory are some difficult is of now. there But that that don't actions be. know the one. part unpredictable retaliatory with extent the mitigated. impacts can ship to gross of That's when completed can be part is impact tariffs We number what -- what where say will out sales I'd more products we dealing right happens we the

that's at So the anyway, framework tariffs. the for looking we're how -- that's

happened in presence, point, we we more your different we in this a local when manufacture products for to certain place. in China. were then, China for Since have so XXXX, local Now can

business. in that you -- allow didn't products, if us our the also detector last could we time at that happened, We China onto to have detector this look manufacturing hold

make detectors in can help in That yes, we so those increased. our many has make China, the Germany should in level that we now and in us in resiliency However, of the making the also have this is to Also, behind to our in we location. another purpose whole the investments ability have India these whole redundancy supply world in -- scenario. been another from U.S.

So longer going give term, us that's additional advantage. to

I should we quarters, you for don't next I the I probably And -- right? come the I out say. doesn't week gross I extra future of extra feel margin of don't slower but tariffs would you over what's I margin quarters, like have couple again, as also it because costs, you an it's going to to So volumes also feel Just XX%, But to assume guide that like, an with fast look happen gross is impact feel can't want that anyhow, of right? week, depressed but would you bit, guess sales like artificially Or it little margin Is know one drop I or a right? know outlook over that seasonality, the drop, up Industrial? the based that week? ex what's I on the quarter-over-quarter mean, is lower it that again, starters?

Yes.

and there. extra of at that guidance million. XX%. was quarter When million So The gross are $XXX compare And time, week, Larry, year we a also. margin margin, out $XXX ago at QX you of the couple this also gross stripping was in themes

year-over-year So compare is one that you. for

we holding are there. So of steady kind

would business definitely, million So below I scale. at is say, $XXX

there on is scale effect a so margin. volume gross And of

at at look to a quarter. QX XX-week were you If

scale is clearly, there. So

we a help up the to XX-week to margin. to volume pick that We hope should So year hope basis. on during gross pick up XX-week

gross like And the as up we we So that's to come do definitely FY quarters just 'XX. beyond margin, QX, expand there. hope in did

of increased If just the the on in guess your the I sales vehicles. I sales Or great, the you customers? Is competing Mexico U.S., customers? focused is too. more a of feel too. against And government and of it a targeting smaller, Any out Is most the new security be selling maybe X question is some linear it customers? I some little website, the to right? I'm that vehicles other have for these stuff maybe there. guess, -- on you're customers? for is see same say, like with are have know couple that it that one. challenge your or private scanning or same the I I solutions. going at it's some ask bodies, it looked you question to there, equipment question customers, These you are that of question, B yourself international cargo, been for looks the larger targeting Is them? is it would some your least places. Part right, accelerators last -- you then and bit whether players, compete Are on be passenger drop-through players have at the that same could you -- or sort guess, ones the pictures -- would first one I I after today Is to

can also players Yes. the play and Larry, we this believe in full space, we of other with this components systems. in both as to a supplier space

we software that a things Now our consists else, take to variety of of sold someone integrator, which accelerator, systems go linear detectors, then would packages, even and our historically, have a subsystems, market.

of see you're It's that garages with believe It other to So venues, and we've in them growing, it. what types doing, the we're a large. to and can you're big. are we believe we It's while makes we from as is have they us. The space them and we customers places. the mobile now that borders continuing products spoken applications going our buy future, with doing expanding job a good well. other ports their at it understand of differentiated do seeing footprint And to grow be they and used only both. smaller to sites, to this, know applications. about in It worth And those is

differentiated of plenty there's market think we this in applications. opportunity So for

places be But one-offs, you locations fair been a more So Is by you're smaller got at feels than you targeting speaking like type is say? maybe that guys not to. some an also bigger have owned to or like string least going maybe XX be maybe it smaller that one-off garage to the will of garages, more targeting some but operator.

I can niche that is a where have We'll we go products scanner. well to be an of do example scanner. a and on of in car participate we referring based and Car car capabilities, you were a what would have scanner terms think product we into

So other footprint. who are this like yes, scale ones potential space the and players, the in established and have the

starting be in from these number. space. are in that have They we're not but Customs many continues been Border service installed systems out. been a the and There's of that We're this Look, the aware, By starting there may people Patrol. and are through already small way, we our probably border installed. to are there, U.S.-Mexico several have XX be of in

good deals where So bit we but a we do experience differentiated we're believe initially, a have to opportunity. of look have for we going

Thank you.

the reached end have turn We to call back of over question-and-answer And closing for remarks. Belfiore now Christopher I'll session. the the

on fiscal of vareximaging.com/investorrelations. great available through will a at be presentation participating and and A X year website. replay our in of conference webcast quarter earnings our quarterly you all supplemental Thank XXXX. conference call call The have for you, fourth accessed for be archived Thank and be can the December the slide evening. will

you And you Thank conference, at lines and this your time. participation. concludes for today's this may your disconnect