Varex Imaging Corporation (NASDAQ:VREX) Q4 2022 Earnings Call Transcript

Sam Maheshwari: Thanks, Anthony and good to hear your voice back and welcome back on our call. Thank you. So, yes, what I would say in terms of CT, CT demand is still high. The graphic color that we provide is really compared how we see the side of business this quarter versus the last quarter. CT has been a growing business for us for quite a few number of quarters here. And so what we — it’s still from a historical perspective this line is still running towards the higher end. It’s just that it is not as high as what it was last quarter or the prior quarter. So we feel good about the CT business. As we’ve talked about we’ve been — we’ve qualified a number of new OEMs in China. And so our demand for CT from China, Japan et cetera is quite strong.

So overall CT is good, but compared to the prior quarter it’s a little bit down. And as we look forward into the remaining quarters of the year as Sunny was mentioning we need to think about in terms of the product mix whether any recessionary pressure forces our customers to ship down on the product mix in terms of saving dollars yet the quantities remain good. So we just need to watch out for that going forward in CT. But overall we feel pretty good about CT. And your next question comes on dental. Maybe Sunny you want to add on dental?

Sunny Sanyal: Yes. I wasn’t — Anthony it wasn’t clear to me what you meant by labor pressures. Were you saying that in your other calls or you’ve been hearing that…

Anthony Petrone: So due to labor pressure — yes due to continued labor pressures at the side of carry

Sunny Sanyal: For the clinic?

Anthony Petrone: Correct. Some of the dental companies that have exposure to procedures they talked about a slowdown through this current quarter. I’m wondering if that translates.

Sunny Sanyal: See our — we have strong — we have good market share in dental. We’re fairly diversified across many geographies. So we haven’t felt that yet. I mean we’re not seeing any specific softness in any way that I can call out specifically. Europe continues to be strong for us in dental. So I really don’t have any way of verifying or validating what you’re saying? There’s…

Anthony Petrone: No worries. No worries. A couple of follow-ups would be one on currency. The dollar here is obviously strong year-over-year elevated now for almost six months. It hasn’t appeared to have any impact in demand on Varex Solutions. Just wondering what the latest is on the currency discussion as we’re just dealing with an elevated dollar here?

Sam Maheshwari: Yes. So let me provide some color on that Anthony. Our business on an annual basis about 25% is in foreign currencies as sales comes in and 75% is in US dollars. And so we’ve looked at it and the top-line impact compared to how we started this last fiscal year 2022. It’s been about $18 million to $20 million. Obviously, dollar has strengthened across every major currency whether it’s yuan, Japanese yen or the euro. So that impact on the top-line to us has been about $20 million. But at the same time from a margin and the bottom-line perspective as you know we do have operations in Europe in terms of our R&D facilities as well as production facilities and we also do have production in China. So what ends up happening for us is that the top-line has been compressed by say for the full year by about $18 million, $20 million, but the gross margin becomes a little bit more difficult for us.