A WORLD LEADER IN X-RAY IMAGING COMPONENTS 1
This presentation contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Among others, statements concerning industry outlook and information relating to Varex Imaging Corporation’s (the “company”) goals; priorities; financial results; conditions and assumptions; earnings guidance, future tax rates, growth opportunities; the impact of tariffs; demand for the company’s products; the company’s future orders, revenues, product volumes, or earnings growth or other future financial results or performance; the ability of the company's technology and products to achieve stated results or outcomes; customer service and innovation plans; customer relationships, including the ability to attract new customers and retain current customers; addressable markets; the ability to obtain regulatory and third party approvals; expected acquisition benefits; expected benefits from restructurings; and any statements using the words “anticipate,” “plan,” “estimate,” “expect,” “target”, “assume,” “opportunity,” “will,” “should,” “projected,” or similar statements are forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from those anticipated. Such risks and uncertainties include the ability to continue to find markets for our products; effectively integrate recent acquisitions and the ability to retain the services of key acquired personnel; global economic conditions, including the impact of tariffs; demand for and delays in delivery of products of the company or its customers; the company’s ability to develop, commercialize and deploy new products; the impact of reduced or limited demand by purchasers of certain X-ray products; the impact of competitive products and pricing; and the other risks listed from time to time in the company’s filings with the U.S. Securities and Exchange Commission, which by this reference are incorporated herein. Any forward-looking statements made by us in this presentation speak only as of the date made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. The company assumes no obligation to update or revise the forward-looking statements in this presentation because of new information, future events, or otherwise. 2
WHO WE ARE Our mission at Varex Imaging is to be the world’s leader in imaging components HQ in Salt Lake City, UT through the delivery of high quality products that enable our customers’ success. USA X-ray Imaging Innovators Efficient Manufacturers • 250+ patents >25,000 X-ray Tubes/year ~2000 Employees • ~25% of employees are >21,000 Flat Panel Detectors/year engineers >100,000 HV Cable Assemblies/year 65+ Relationship Builders Product Portfolio Leaders 65+ years in X-ray • Work with +90% of X-ray • Extensive portfolio of critical Imaging Components imaging OEMs imaging components • 40+ year partnerships with top • Broad breadth of complementary 5 customers accessory products 20+ Global Mfg. & Service Center Locations 3
FY2018 Financial Results Revenues: +11% to $773M FY2018 Revenues Medical +8% ● Industrial +21% • EPS: $0.72 per diluted share • Included full year contribution from Adj. EPS*: $1.30 per diluted share acquired imaging business • Mammography, Fluoroscopy & Cash flow from operations: $85M Industrial up; CT & Radiography stable; Free cash flow: $65M 3D Dental down FY2018 Performance Metrics REVENUES ($ in millions) Gross Margin 33% $773 $698 $800 Adj. Gross Margin* 35% $620 $600 Operating Margin 6% Adj. Operating Margin* 11% $400 $200 $0 FY2016 FY2017 FY2018 *See - reconciliation between GAAP and adjusted financial measures in 4 appendix of this presentation
TWO PRIMARY MARKETS Medical Industrial [~80% of Revenues] [~20% of Revenues] We partner with We partner with medical, dental, and system integrators in veterinary OEMs to the industrial NDT, help bring their cargo inspection and products to market airport security faster with our industries to provide imaging components key imaging and technology. components. • x-ray tubes • detectors • x-ray tubes • detectors • software & workstations • linear accelerators • cables & interconnects • specialized software • collimators 5
HOW WE WIN IN MEDICAL • Innovation leader in X-ray tubes • Pioneer in digital detectors Key Market Trends • Broad product portfolio — China healthcare expansion: CT • Manufacturing scale — Emerging market expansion — Increasing global adoption of digital technology 6
HOW WE WIN IN INDUSTRIAL & Key Market Trends SECURITY — Increased demand for cargo screening at • Innovation in high energy X-ray ports & borders and airports using CT imaging technologies imaging technology • A provider of choice for digital — New X-ray imaging applications and detectors increased productivity in NDT testing and inspection • Reliability and up-time 7
DEEP CUSTOMER RELATIONSHIPS Long-Term Customer Relationships Average +25 Years • Early engagement in customer Product Development Cycles • Continuous Product Replacement/Refresh Cycles • Typically engaged in multiple development projects with each customer 8
GROWTH DRIVER: Key Statistics China’s Healthcare Reform Initiatives CT system growth in China Government expanding geographic delivery of estimated at +6% healthcare services including imaging systems Projected +25,000 new CT systems CT is modality of choice over next 10 years Government preference for local Chinese manufacturers +3,500 new CT systems to be installed in government hospitals • Varex engaged with local OEMs developing CT systems for by end of 2020 China market • Some OEMs transitioning to production & hospital installation • 5 three-year OEM pricing agreements valued at +$120M • Ramp-up of CT tube shipments to OEMs during FY2018; expect shipments to more than double in FY2019 9
GROWTH DRIVER: Industrial NDT & Security Industrial Nondestructive Testing Cargo Screening: Ports/Borders & Airports • CT technology being incorporated in new airport • NDT applications include: oil & gas, aerospace, screening systems for checked/carry-on bags automotive, military and manufacturing industries • We introduced a new platform of linear accelerators • Acquired VMI in 4QFY18 for proprietary NDT imaging for mobile cargo screening applications software that can be used with Varex detectors 10
ACQUISITION Consolidation Completed PerkinElmer Imaging Business : highly 5 acquisitions in past 4 GROWTH complementary digital detector business years resulting in >$200M Opportunities: OEM divestitures, detector in revenue growth manufacturers Portfolio Expansion FY2018 ROIC MeVis: imaging software post processing PKI = 10% MeVis = 14% Claymount: high voltage cables and collimators Claymount = 10% VMI: industrial NDT proprietary imaging software Opportunities: Additional X-ray imaging Strategically expanding components, software, new technologies product & technology Adjacent Opportunities capabilities to provide Acquisitions that leverage Varex brand, customers with technology and manufacturing expertise comprehensive X-ray imaging component offerings 11
RESTRUCTURING Restructuring & Impairment Charges Integration of the acquired imaging Primarily related to consolidation of business complete; moving forward with operations in the acquired imaging business. consolidation. FY2018 $17M • Closing a-Si glass fabrication at Santa FY2019 ~$4M - $6M expected Clara facility and London detector R&D facility; expect to be substantially • Expect to achieve ~$10M - $13M in completed 1QFY19 annual cost savings starting in 2H FY2019 • Transfer glass production to dpiX facility • Equates to ~1% GM improvement • Scintillator production & detector • Future cost synergies on track assembly to continue at the Santa Clara facility 12
TARIFFS IMPACT TO VAREX Supply Chain • Purchase of parts/items sourced with Chinese content or directly from Chinese suppliers Product Sales In China OUTLOOK • Digital detectors, X-ray tubes, other products • Non-OEM aftermarket • Tariffs will likely have a greater impact on our digital detectors than on our other ACTION PLANS products imported to China • Lobby U.S. Legislators & U.S. Trade Rep • Trade war has caused us to accelerate • Petition China customs to reclassify Varex product codes plans for operational diversification; • Expand Wuxi facility to manufacture detectors increasing local manufacturing at our for sale in China. Underway…6-12 months to existing facilities around the world be operational 13
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