Varex Imaging (VREX) Jefferies 2024 Global Healthcare Conference summary

Market overview and growth drivers

• Medical segment grows 2%-4% annually, driven by population growth, aging, and new technologies.

• Industrial segment represents 25% of sales, growing 6%-8% annually, with applications in oil & gas, food inspection, and automotive.

• Customer relationships are highly sticky, with most OEMs remaining for decades.

• Industrial growth is supported by greenfield X-ray applications and strong cargo inspection demand.

Current challenges and regional dynamics

• Medical segment faces mid-teens revenue decline in H1, mainly due to China softness and global inventory adjustments.

• China business is impacted by an anti-corruption campaign and represents 14% of H1 revenue.

• Inventory destocking globally is expected to last 6-9 months, with gradual recovery anticipated.

• Recovery in China is expected to be gradual, influenced by macro conditions and the pace of anti-corruption campaign resolution.

• A government stimulus package in China is in early administrative stages, with positive impact expected in a few months.

Competitive landscape and innovation

• Minimal competition in X-ray sources; some competition in static detectors from Asia-based firms, but limited revenue exposure.

• Industry trend is toward more outsourcing, with increasing OEM specialization and demand for focused solutions.

• Value proposition centers on scale, R&D focus, and ability to offer innovative products at attractive prices.