Varex Imaging: From Deleveraging to Full-Year Guidance — a Confidence Rebound
Strong Q2, debt refinancing, and India ramp signal a steadier growth profile, but tariff and memory costs linger.
VREX · Earnings Call · 2026-05-07
Varex Imaging: From Deleveraging to Full-Year Guidance — a Confidence Rebound
Varex shares have surged over 74% in the last month, a remarkable turn for a stock still 57% below its all-time high. The catalyst: a solid Q2 where the company wrapped up a debt refinancing, resumed annual guidance, and signaled that its India ramp is nearing an inflection point.
A Fortified Balance Sheet
we completed our debt refinancing activities, which resulted in the reduction of outstanding debt and a decrease in our annual interest expense.
That quote from CEO Sunny Sanyal opens the report. Backed by CFO Sam Maheshwari's details: gross debt reduced to $351M, net debt to $263M (including $88M cash), and leverage at 2.2x trailing EBITDA. Effective net cash improved materially from the $397M deficit a year ago to -$276M — still negative, but a clear move toward flexibility. The refinancing also cuts interest expense, directly supporting financial flexibility for R&D and industrial expansion.
Guidance, Again
Sam Maheshwari: “we are modifying our guidance practice to start providing an annual view.” — Shubham Maheshwari, Chief Financial Officer · 2026-05-07 This is the first annual revenue and EPS guidance since the pandemic-era volatility forced suspension. Management now expects FY26 revenue of $860–880M and EPS of $0.80–1.00, implying 3% second-half growth. The return to annual guidance is meaningful — it indicates forecasting confidence after the destocking and China troubles of prior years. As Sunny explained, “it's been always our intention to provide annual guidance... we've strengthened some of our procedures.” — Sunny Sanyal, President and Chief Executive Officer · 2026-05-07
India Ramp: Near-Term Headwind, Long-Term Tailwind
The detector factory in India is ramping but still drags gross margin. CFO Sam noted utilization is low, but “by the year-end, we are thinking that it should be materially utilized.” — Shubham Maheshwari, Chief Financial Officer · 2026-05-07 This aligns with the broader strategy to move cost of ownership down for customers, especially in price-sensitive emerging markets. The tube plant will follow next year. Management expects this to flip from headwind to tailwind as utilization crosses 60–70%.
The India angle has been a multi-quarter story. As Sunny said back in February, “We feel good that the problems of the past are – we're past them.” — Sunny Sanyal, President and CEO · 2026-02-11 — referring to the destocking and China headwinds. The current quarter's execution validates that optimism.
Macro: Memory, Tariffs, and the Photon Counting Promise
memory chips costs have risen, but Sunny noted procurement is adequate thanks to buffer stock and other offsets. Tariffs are being passed through in most cases, and the company's diversified supply chain (including India) cushions the blow. The cargo security systems business booked multiple new deals, including mobile scanners and Car scanner wins, strengthening the industrial growth narrative.
Photon counting detectors are now engaged with 8 OEMs beyond the 2 CT partners. Sunny noted “the applicability of this technology is expanding beyond CT into other areas as well.” — Sunny Sanyal, President and Chief Executive Officer · 2026-05-07 This is a long-term growth lever, consistent with the prior goal of $150M in photon counting revenue by 2029 — “we had indicated that we're expecting $150 million of contribution from photon counting.” — Sunny S. Sanyal, President and CEO · 2025-08-08 EMEA weakness this quarter is purely a timing artifact of large linear-accelerator orders in the prior year.
Fundamentals: Stabilizing Top Line, Recovering Leverage
Total revenue of $216M, +1% yoy, is still below the FY23 peak of $224M. Gross margin of 34% is down 240bps, but that includes tariff and India costs. Interest coverage is still low but improving with lower debt. The debt paydown is the most concrete step toward long-term value creation. The stock market seems to be pricing in the inflection: the 90-day return of +65% reflects that.
Verdict
Varex is not yet growing, but it is healing. The combination of a fortified balance sheet, resumption of annual guidance, and a clear India ramp positions it for a more consistent fiscal 2027. The warning signs — memory costs, tariff drag, and low gross margins — are known and being managed. The real story is that Varex has re-earned the right to give investors a look forward.