Varex Imaging Corp (NASDAQ: VREX)

Varex Imaging Corp is a leading innovator, designer, and manufacturer of X-ray imaging components, catering to the medical diagnostic imaging, security inspection systems, and industrial quality inspection systems industries. The company specializes in producing X-ray tubes, flat panel and photon counting detectors, linear accelerators, image software processing solutions, and stand-alone X-ray based systems. Varex's components are integral to applications ranging from medical diagnostics to security screening and industrial analysis, enabling detection, diagnosis, protection, irradiation, and inspection across various sectors.

Varex generates revenue through the sale of its X-ray imaging components, which are incorporated into systems by original equipment manufacturers (OEMs). The company's primary products include X-ray tubes, flat panel and photon counting detectors, high voltage connectors, image-processing software, and workstations. These components are used in a range of medical imaging applications such as computed tomography (CT), mammography, oncology, cardiac, surgery, dental, fluoroscopy, and other diagnostic radiography uses. Additionally, Varex offers products for security applications, including cargo and baggage screening, and industrial applications like non-destructive testing and inspection. The company's customer base consists primarily of large OEMs, independent service companies, distributors, and end-users for replacement purposes.

• Medical: This segment focuses on designing, manufacturing, selling, and servicing X-ray imaging components for medical applications. Key products include X-ray tubes, flat panel and photon counting detectors, high voltage connectors, image-processing software, workstations, 3D reconstruction software, computer-aided diagnostic software, automatic exposure control devices, generators, and coolers. These components are used in various medical imaging modalities such as CT, mammography, oncology, cardiac, surgery, dental, fluoroscopy, and other diagnostic radiography uses. Varex's medical components are primarily sold to OEM customers, who integrate them into their X-ray imaging systems. The company's long-standing relationships with a substantial majority of medical X-ray imaging OEMs globally, many of which have been customers for over 35 years, highlight its strong market position. Varex's hardware and software products are tightly integrated with customers' systems, making it costly and complex for customers to switch providers. This segment also includes sales to independent service companies, distributors, and directly to end-users for replacement purposes.

• Industrial: This segment involves designing, developing, manufacturing, selling, and servicing X-ray imaging products for security and industrial applications. Key products include Linatron® X-ray linear accelerators, non-intrusive cargo inspection systems, X-ray tubes, flat panel and photon counting detectors, computed radiography scanners, high voltage connectors, and coolers. The segment also licenses proprietary image-processing and detection software designed to work with other Varex products. Security applications primarily consist of cargo security for screening trucks, trains, and cargo containers at ports and borders, as well as airport security for checked baggage and palletized cargo. Industrial applications utilize X-ray imaging for non-destructive testing and inspection in various industries, including aerospace, automotive, electronics, oil and gas, food packaging, metal castings, and additive manufacturing. The Industrial segment benefits from research and development investment and manufacturing economies of scale on the Medical side, allowing for higher gross profit margins compared to the Medical business.

Varex holds a significant position in the X-ray imaging components industry, competing with both in-house manufacturing operations of major diagnostic imaging systems companies and other suppliers. The company's competitive advantages include innovative technology, greater product performance, better product quality, better product availability, and lower product price. Varex's amorphous silicon-based digital detector technology, photon counting technology, and complementary metal-oxide-semiconductor technology compete with other detector technologies, providing a competitive edge due to product quality, performance, and lower total cost of ownership. In the digital flat panel detector business, Varex competes against Trixell S.A.S., Canon, Vieworks Co., Ltd., Hamamatsu Corporation, iRay Technology (Shanghai) Limited, and Jiangsu CareRay Medical Systems Co., Ltd. In the Industrial segment, Varex competes with iRay, Teledyne, Comet AG, Nuctech Company Limited, Siemens, ETM Electromatic Inc., and PMB Alcen, among others.

Varex's customers include some of the largest OEMs in the medical imaging and security industries. The company's top five customers, measured by revenue, are Canon Medical Systems Corporation, United Imaging Healthcare, General Electric Company, Siemens Healthineers AG, and Rapiscan Systems, Inc. These customers collectively accounted for approximately 40% of total revenue in fiscal year 2025. Varex's largest customer, Canon, accounted for approximately 18%, 18%, and 17% of total revenue for fiscal years 2025, 2024, and 2023, respectively. The ten largest customers as a group accounted for approximately 52%, 53%, and 51% of revenue for fiscal years 2025, 2024, and 2023, respectively. The company's customer base also includes independent service companies, distributors, and end-users for replacement purposes.