Q3 2024 Varex Imaging Corp Earnings Call

Satsang with Mooji

Speaker Change: This is a work of fiction. Any resemblance to real persons, living or dead, is entirely coincidental.

Operator: Greetings. Welcome to the Varex Imaging third quarter fiscal year 24 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll turn the conference over to Christopher Belfiore, Director of Investor Relations. Christopher, you may now begin your presentation.

Christopher Belfiore: Welcome to the Varex Imaging, 3rd quarter fiscal year 24 earnings call. The third quarter of Fiscal Year 2024. With me today are Sunny Sanyal, President and CEO, and Sam Maheshwari, CFO.

Speaker Change: Greetings. Welcome to the Varex Imaging third quarter fiscal year 24 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero from your telephone keypad.

Please note, this conference is being recorded.

At this time, I'll turn the conference over to Christopher Belfiore, Director of Investor Relations. Christopher, you may now begin your presentation.

Christopher Belfiore: Good afternoon, and welcome to Varex Imaging Corporation's earnings conference call for the third quarter of fiscal year 2024. With me today are Sunny Sanyal, our President and CEO, and Sam Maheshwari, our CFO. Please note that the live webcast of this conference call includes a supplemental slide presentation that can be accessed on Varex's website at vareximaging.com. The webcast and supplemental slide presentation will be archived on Varex's website.

Speaker Change: Good afternoon and welcome to Verix Imaging Corporation's earnings conference call for the third quarter of fiscal year 2024. With me today are Sunny Sanyal, our president and CEO, and Sam Maheshwari, our CFO.

Operator: Please note that the live webcast of this conference call includes a supplemental slide presentation that can be accessed at Varex's website at VarexImaging.com. The webcast and supplemental slide presentation will be archived on Varex's website.

Speaker Change: Please note that the live webcast of this conference call includes a supplemental slide presentation that can be accessed at Varex's website at vareximaging.com.

Speaker Change: The webcast and supplemental slide presentation will be archived on Varex's website.

Operator: To simplify our discussion, unless otherwise stated, all references to the quarter are for the third quarter of fiscal year 2024. In addition, unless otherwise stated, quarterly comparisons are made year-over-year from the third quarter of fiscal year 2024 to the third quarter of fiscal year 2023. Finally, all references to the year are to the fiscal year and not the calendar year, unless otherwise stated.

Christopher Belfiore: To simplify our discussion, unless otherwise stated, all references to the quarter are for the third quarter of fiscal year 2024. In addition, unless otherwise stated, quarterly comparisons are made year over year from the third quarter of fiscal year 2024 to the third quarter of fiscal year 2023. Finally, all references to the year are to the fiscal year and not the calendar year unless otherwise stated.

Speaker Change: In addition, unless otherwise stated, quarterly comparisons are made year-over-year from the third quarter of fiscal year 2024 to the third quarter of fiscal year 2023. Finally, all references to the year are to the fiscal year and not the calendar year unless otherwise stated.

Operator: Please be advised that during this call we will be making forward-looking statements, which are predictions or projections about future events. These statements are based on current expectations and assumptions that are subject to risk and uncertainties that could cause actual results to differ materially from those anticipated. Risk-related to our business are described in our quarterly earnings release and our filings with this essay. Agency.

Christopher Belfiore: Please be advised that during this call, we will be making forward-looking statements, which are predictions or projections about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Risks relating to our business are described in our quarterly earnings release and our filings with the SEC. Additional information concerning factors that could cause actual results to materially differ from those anticipated is contained in our SEC filings, including item 1A, Risk Factors, of our quarterly reports on Form 10-Q and our annual report on Form 10-K.

Speaker Change: Please be advised that during this call we will be making forward-looking statements, which are predictions or projections about future events.

Speaker Change: These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Risks relating to our business are described in our quarterly earnings release and our filings with the SEC.

Operator: Additional information concerning factors that could cause actual results to materially differ from those anticipated is contained in our SEC filing, including Item 1A Risk Factors of our quarterly reports on Form 10-Q and our annual report on Form 10-K. The information in this discussion speaks as of today's day, and we assume no obligation to update or revise the forward-looking statements in this discussion.

Speaker Change: Additional information concerning factors that could cause actual results to materially differ from those anticipated is contained in our SEC filings, including Item 1A risk factors of our quarterly reports on Form 10-Q and our annual report on Form 10-K .

Christopher Belfiore: The information in this discussion speaks as of today's date, and we assume no obligation to update or revise the forward-looking statements in this discussion. On today's call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not presented in accordance with, nor are they a substitute for, GAAP financial measures. We provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure in our earnings press release, which is posted on our website. I will now turn the call over to Sunny. Thanks, Chris.

Speaker Change: The information in this discussion speaks as of today's date, and we assume no obligation to update or revise the forward-looking statements in this discussion.

Operator: On today's call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not presented in accordance with, nor are they a substitute for GAAP financial measures. We provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure in our earnings press release, which is posted on our website.

Speaker Change: On today's call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not presented in accordance with, nor are they a substitute for, GAAP financial measures.

Speaker Change: We provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure in our earnings press release, which is posted on our website.

Christopher Belfiore: I will now turn the call over to Sunny.

Sunny Sanyal: Good afternoon, everyone, and thank you for joining us for our third quarter earnings call. Third quarter revenues came in as expected, with continued strength in our cargo inspection business within our industrial segment. During the quarter, we continued to see customers in our medical segment adjust inventory levels, resulting in reduced demand for some medical products. We believe this is the result of our customers increasing their inventory levels during supply chain challenges over the past several years.

Sunny Sanyal: Thanks, Chris.

Sunny Sanyal: Good afternoon, everyone, and thank you for joining us for our third quarter earnings call. Third quarter revenues came in as expected, with continued strength in our cargo inspection business within our industrial segment. During the quarter, we continued to see customers in our medical segment adjust inventory levels, resulting in reduced demand for some medical products. We believe this is the result of our customers increasing inventory levels during the supply chain challenges over the past several years.

Speaker Change: During the quarter, we continue to see customers in our medical segment adjust inventory levels, resulting in reduced demand for some medical products.

Speaker Change: We believe this is the result of our customers' increasing inventory levels during the supply chain challenges over the past several years. We expect that these inventory adjustments should subside in early calendar 2025.

Sunny Sanyal: We expect that these inventory adjustments should subside in early Calendar 2025. In the quarter, gross margin was lower than anticipated, primarily as a result of unfavorable product sales makes in our industrial segment. The higher proportion of cargo equipment sales compared to service sales pressured gross margin in the quarter. In China, we continued to see softness in the third quarter as a result of the ongoing anti-corruption actions by the sales. While sales are down year over year, in the quarter, we saw modest improvements sequentially. We remain optimistic that the medical imaging market will improve in China and that Barracks is well positioned to benefit when Gross resumes.

Sunny Sanyal: We expect that these inventory adjustments should subside in early calendar 2020. In the quarter, gross margin was lower than anticipated, primarily as a result of an unfavorable product-sales mix in our industrial sector. A higher proportion of cargo equipment sales compared to service sales pressured gross margins in the quarter.

Speaker Change: In the quarter, gross margin was lower than anticipated, primarily as a result of unfavorable product sales mix in our industrial segment.

Sunny Sanyal: In China, we continue to see softness in the third quarter as a result of the ongoing anti-corruption actions by the Chinese government. While sales are down year over year, in the quarter, we saw modest improvements sequentially. We remain optimistic that the medical imaging market will improve in China and that Varex is well positioned to benefit when growth resumes. In particular, we continue to see a desire by Chinese medical institutions to upgrade from value, or 16 slice CTs, to performance, or 64 and 128 slice CTs. Turning to the third quarter results, revenue in the third quarter was down 10% year-over-year.

Speaker Change: In China, we continue to see softness in the third quarter as a result of the ongoing anti-corruption actions by the Chinese government.

Speaker Change: We remain optimistic that the medical imaging market will improve in China and that Varex is well positioned to benefit when growth resumes.

Sunny Sanyal: Particularly, we continue to see a desire by Chinese medical institutions to upgrade from value or 16-slice CTs to performance or 64- and 128-slice CTs.

Sunny Sanyal: Turning to the third quarter results, revenue in the third quarter was down 10% year over year; revenue in the medical segment decreased 15% year over year, while the industrial segment revenue increased 6%. Non-Gap gross margin in the third quarter was 32%. Adjusted EBITDA in the third quarter was $23 million, and non-GAAP EPS was $0.14 compared to $0.37 last year. We entered the quarter with $192 million of cash, cash equivalence, and marketable securities on the balance sheet, up $40 million compared to the third quarter of fiscal 2023.

Speaker Change: Turning to the third quarter results, revenue in the third quarter was down 10% year over year. Revenue in the medical segment decreased 15% year over year, while the industrial segment revenue increased 6%.

Sunny Sanyal: Revenue in the medical segment decreased 15% year over year, while revenue in the industrial segment increased 6%. Non-gap gross margin in the third quarter was 32%. Adjusted EBITDA in the third quarter was $23 million, and non-GAAP EPS was $0.14 compared to $0.37 last year. We ended the quarter with $192 million of cash, cash equivalents, and marketable securities on the balance sheet, up $40 million compared to the third quarter of fiscal 2023.

Speaker Change: Non-gap gross margin in the third quarter was 32%.

Sunny Sanyal: Let me give you some insights into sales detail by modality in the quarter compared to a five-quarter average, which we will refer to as sales trend. Sales in our medical segment were down in the quarter, driven primarily by inventory adjustment actions by our customers and lower sales in China. While sales in China improved slightly sequentially, the overall environment in China remained soft.

Sunny Sanyal: Let me give you some insights into sales detail by modality in the quarter compared to a five-quarter average, which we will refer to as the sales trend. Sales in our medical segment were down in the quarter, driven primarily by inventory adjustment actions by our customers and lower sales in China. While sales in China improved slightly sequentially, the overall environment in China remained soft. Global sales of CT tubes improved slightly in the quarter and were in line with its sales trend. Stealth in our radiographic modality was above its trend, but cells in our fluoroscopy, oncology, mammography, and dental modalities were all below their respective sales trends.

Speaker Change: Let me give you some insights into sales detail by modality in the quarter compared to a five-quarter average, which we will refer to as sales trend.

Speaker Change: Sales in our medical segment were down in the quarter, driven primarily by inventory adjustment actions by our customers and lower sales in China. While sales in China improved slightly sequentially, the overall environment in China remained soft.

Sunny Sanyal: Loft. Global sales of CT tubes improved slightly in the quarter and was in line with its sales trend. Sales in our radiographic modality was above its trend. Sales in our fluoroscopy, oncology, mammography, and dental modalities were all below their respective sales trends. In our industrial segment, sales of cargo inspection products remained solid as our customers benefited from strong demand in the global security screening and cargo inspection markets. We continued to experience softness in other industrial and markets, primarily in semiconductor, electronics, and battery inspection. The markets we operate in remain challenging, including ongoing softness in China, inventory adjustments by our customers, and continued competition from Asia-based detector manufacturers.

Speaker Change: Cells in our fluoroscopy, oncology, mammography, and dental modalities were all below their respective sales trends.

Sunny Sanyal: In our industrial segment, sales of cargo inspection products remain solid as our customers benefit from strong demand in the global security screening and cargo inspection market. However, we continue to experience softness in other industrial end markets, primarily in the semiconductor, electronics, and battery. The markets we operate in remain challenging, including ongoing softness in China, inventory adjustments by our customers, and continued competition from Asia-based detector manufacturers. We continue to remain focused on our long-term priorities in innovation, particularly photon counting, as well as cost leadership, as we continue to expand our presence and footprint in India. With that, let me hand over the call to Sam.

Speaker Change: In our industrial segment, sales of cargo inspection products remain solid as our customers benefited from strong demand in the global security screening and cargo inspection markets.

Speaker Change: We continue to experience softness in other industrial end markets, primarily in semiconductor, electronics, and battery inspection.

Speaker Change: The markets we operate in remain challenging, including ongoing softness in China, inventory adjustments by our customers, and continued competition from Asia-based detector manufacturers.

Sunny Sanyal: We continued to remain focused on our long-term priorities in innovation, particularly on photon counting, as well as cost leadership as we continue to expand our presence and footprint in India.

Speaker Change: We continue to remain focused on our long-term priorities in innovation, particularly on photon counting, as well as cost leadership as we continue to expand our presence and footprint in India.

Sam Maheshwari: With that, let me hand over the call to Sam.

Sam Maheshwari: Thanks, Sunny, and hello, everyone. Our revenues in the third quarter were $209 million, slightly below the midpoint of our guidance, while non-GAAP cross margin was 32% below our guided range. Non-GAAP EPS was 14 cents, slightly below the midpoint of our guided range. Third quarter revenues decreased 10% compared to the third quarter of fiscal 2023, driven by a 15% decrease in our medical segment, in part due to continued softness in China. Medical revenues were 149 million dollars, and industrial revenues were 60 million dollars. Medical revenues were 71% and industrial revenues were 29% of our total revenues in the quarter.

Sam Maheshwari: Thanks, Sunny. And hello, everyone.

Sam Maheshwari: Our revenues in the third quarter were $209 million, slightly below the midpoint of our guidance, while non-gap gross margin was 32% below our guided revenue. Non-Gap EPS was $0.14, slightly below the midpoint of our guidance. Third quarter revenues decreased 10% compared to the third quarter of fiscal 2023, driven by a 15% decrease in our medical segment, in part due to continued softness in China. Medical revenues were $149 million, and industrial revenues were $60 million.

Sunny Sanyal: Thanks, Sunny, and hello, everyone. Our revenues in the third quarter were $209 million, slightly below the midpoint of our guidance, while non-GAAP gross margin was 32% below our guided range. non-GAAP EPS was $0.14, slightly below the midpoint of our guided range.

Sunny Sanyal: Third quarter revenues decreased 10% compared to the third quarter of fiscal 2023, driven by a 15% decrease in our medical segment, in part due to continued softness in China.

Sam Maheshwari: Medical revenues were 71%, and industrial revenues were 29% of our total revenues in the quarter. Looking at revenues by region, America's decreased 4% compared to the third quarter of fiscal 2023, while EMEA decreased 8%, and APAC decreased 17%. The year-over-year decline in AIPAC was primarily the result of lower sales in China due to the government's anti-corruption campaign and investigation into its healthcare system. China accounted for 14% of overall revenues in the third quarter, compared to 18% in the third quarter of the prior fiscal year. While sales to China in the third quarter increased sequentially from the second quarter, we do not expect market conditions there to improve in the foreseeable future. Let me now cover our results on a gap basis.

Sam Maheshwari: Looking at revenues by region, America's decreased 4% compared to the third quarter of fiscal 2023, while EMEA decreased 8%, and APEC decreased 17%. The year-over-year decline in APEC was primarily the result of lower sales in China due to the government's anti-corruption campaign and investigation into its healthcare system. China accounted for 14% of overall revenues in the third quarter, compared to 18% in the third quarter of the prior fiscal year. While sales to China in the third quarter increased sequentially from the second quarter, we do not expect market conditions there to improve in the foreseeable future.

Sunny Sanyal: Looking at revenues by region, America's decreased 4% compared to the third quarter of fiscal 2023, while EMEA decreased 8% and APAC decreased 17%.

Sunny Sanyal: The year-over-year decline in AIPAC was primarily the result of lower sales in China due to the government's anti-corruption campaign and investigation into its healthcare system.

Sunny Sanyal: China accounted for 14% of overall revenues in the third quarter compared to 18% in the third quarter of the prior fiscal year.

Sunny Sanyal: While sales to China in the third quarter increased sequentially from the second quarter, we do not expect market conditions there to improve in the foreseeable future.

Sam Maheshwari: Let me now cover our results on a gap basis. Third quarter gross margin was 32%, down approximately 100 basis points year-over-year. Operating expenses were 58 million dollars, up to 6 million dollars compared to the third quarter of fiscal 2023. An operating income was 9 million dollars, down 15 million dollars from Q3 of 2023. Net earnings were 1 million dollars and EPS was 3 cents per share based on a fully diluted 41 million shares.

Sam Maheshwari: Third quarter gross margin was 32%, down approximately 100 basis points year-over-year. Operating expenses were $58 million, up $6 million compared to the third quarter of fiscal 2020. And operating income was $9 million, down $15 million from Q3. Net earnings were $1 million, and EPS was $0.03 per share based on a fully diluted $41 million share. Now moving on to non-GAAP results for the quarter.

Sunny Sanyal: Let me now cover our results on a gap basis.

Sunny Sanyal: And operating income was $9 million, down $15 million from Q3 of 2023. Net earnings were $1 million and EPS was $0.03 per share, based on a fully diluted 41 million shares.

Sam Maheshwari: Now moving on to non-GAAP results for the quarter. Gross margin was 32%, down from 34% in the third quarter of fiscal 2022.

Sam Maheshwari: Gross margin was 32%, down from 34% in the third quarter of fiscal 2020. The primary driver of the lower gross margin was decreased volume and unfavorable product mix in our industrial segment as we experienced higher equipment sales and lower services. R&D spending was $22 million, up $2 million compared to the third quarter of fiscal 2022. R&D was 11% of revenue. R&D spending is expected to remain around current levels, however, R&D as a percentage of sales may fluctuate due to overall sales levels.

Sunny Sanyal: Now, moving on to non-GAAP results for the quarter. Gross margin was 32 percent, down from 34 percent in the third quarter of fiscal 2023.

Sam Maheshwari: 23. The primary driver of the lower gross margin was a decreased volume and unfavorable product mix in our industrial segment, as we experienced higher equipment sales and lower service sales. R&D spending was $22 million, up $2 million compared to the third quarter of fiscal 2023. R&D was 11% of revenues. R&D spending is expected to remain around current levels; however, R&D as a percentage of sales may fluctuate due to overall sales levels. SG&A expense was approximately $31 million, up $2 million compared to the third quarter of fiscal 2023. SG&A was 15% of revenues. Operating expenses were $53 million, or 25% of revenues, at the high end of our expectations for the quarter.

Sam Maheshwari: SG&A expense was approximately $31 million, up $2 million compared to the third quarter of fiscal 2023. SG&A was 15% of revenue. Operating expenses were $53 million, or 25% of revenues, at the high end of our expectations for the quarter. Operating income was $15 million, down $14 million compared to the same quarter last year. Operating margin was 7% of revenue compared to 13% in the third quarter of fiscal 2023. During the third quarter, we saw higher losses associated with our DipEx joint venture and our investment in MicroEx, which resulted in an unusually high expense in the other income expense line.

Sunny Sanyal: SG&A expense was approximately $31 million, up $2 million compared to the third quarter of fiscal 2023. SG&A was 15% of revenues.

Sam Maheshwari: Operating income was $15 million, down $14 million compared to the same quarter last year. Operating margin was 7% of revenue compared to 13% in the third quarter of fiscal 2023. During the third quarter, we saw higher losses associated with our depicts, joint venture, and our investment in micro-X, which resulted in an unusually high expense in the other income expense line. Tax expense was approximately $350,000 or 6% of pre-tax income, compared to $5 million or 21% in the third quarter of the prior year. The lower than expected tax rate was primarily the result of decreased global pre-tax income and favorable impacts of tax reform items and tax credits in the US.

Sunny Sanyal: Operating income was $15 million, down $14 million compared to the same quarter last year. Operating margin was 7% of revenue compared to 13% in the third quarter of fiscal 2023.

Sam Maheshwari: Tax expense was approximately $350,000, or 6% of pre-tax income, compared to $5 million, or 21%, in the third quarter of the prior year. The lower-than-expected tax rate was primarily the result of decreased global pre-tax income and favorable impacts of tax reform items and tax credits in the U.S. We expect a tax rate of 21% to 23% for the fourth quarter of fiscal 2024.

Sunny Sanyal: Tax expense was approximately $350,000 or 6% of pre-tax income compared to $5 million or 21% in the third quarter of the prior year.

Sunny Sanyal: The lower-than-expected tax rate was primarily the result of decreased global pre-tax income and favorable impacts of tax reform items and tax credits in the U.S. We expect a tax rate of 21 to 23 percent for the fourth quarter of fiscal 2024.

Sam Maheshwari: We expect a tax rate of 21 to 23% for the fourth quarter of fiscal 2024. Net earnings for $6 million are 14 cents per diluted share, down 23 cents year over year. Average diluted shares for the quarter were 41 million on a non-GAAP basis.

Sam Maheshwari: Net earnings were $6 million, or $0.14 per diluted share, down $0.23 year-over-year. Average diluted shares for the quarter were $41 million on a non-GAAP basis. Now, turning to the Balanchine.

Sunny Sanyal: Net earnings were $6 million or $0.14 per diluted share, down $0.23 year-over-year. Average diluted shares for the quarter were $41 million on a non-GAAP basis.

Sam Maheshwari: Now turning to the balance sheet. Accounts receivable was flat compared to the second quarter of fiscal 2024, and day sales outstanding improved by one day to 66 days. Inventory decreased $4 million sequentially in the third quarter, and days of inventory improved by five days to 180 days. Accounts payable increased by $1 million and days payables remained at 45 days.

Sam Maheshwari: Accounts receivable was flat compared to the second quarter of fiscal 2024, and day sales outstanding improved by one day to 66 days. Inventory decreased $4 million sequentially in the third quarter, and days of inventory improved by 5 days to 180 days. Accounts payable increased by $1 million, and days payable remained at 45 days.

Sunny Sanyal: Now, turning to the balance sheet.

Sunny Sanyal: Accounts receivable was flat compared to the second quarter of fiscal 2024 and day sales outstanding improved by one day to 66 days.

Sunny Sanyal: Inventory decreased $4 million sequentially in the third quarter and days of inventory improved by 5 days to 180 days. Accounts payable increased by $1 million and days payables remained at 45 days.

Sam Maheshwari: Now moving to debt and cash flow information. Net cash flow from operations was $8 million. We ended the quarter with cash, cash equivalence, and marketable securities of $192 million, up $40 million compared to the third quarter of the prior year and up $2 million compared to the second quarter of 2024. Please note that $192 million includes $156 million of cash and cash equivalents and $35 million of marketable securities. Gross debt outstanding at the end of the quarter was $447 million, and debt net of $192 million of cash and marketable securities was $255 million. Adjusted at the end of the quarter was $23 million, or 11% of sales.

Sam Maheshwari: Now moving to debt and cash flow information. The net cash flow from operations was $8 million. We ended the quarter with cash, cash equivalents, and marketable securities of $192 million, up $40 million compared to the third quarter of the prior year and up $2 million compared to the second quarter of 2021. Please note that $192 million includes $156 million of cash and cash equivalents and $35 million of marketable securities. Gross debt outstanding at the end of the quarter was $447 million, and debt net of $192 million of cash and marketable securities was $255 million.

Sunny Sanyal: Now moving to debt and cash flow information.

Sunny Sanyal: Net cash flow from operations was $8 million. We ended the quarter with cash, cash equivalents, and marketable securities of $192 million, up $40 million compared to the third quarter of the prior year, and up $2 million compared to the second quarter of 2024.

Sunny Sanyal: Please note that $192 million includes $156 million of cash and cash equivalents and $35 million of marketable securities.

Sunny Sanyal: Gross debt outstanding at the end of the quarter was $447 million, and debt net of $192 million of cash and marketable securities was $255 million.

Sunny Sanyal: Adjusted EBITDA for the quarter was $23 million, or 11% of sales. Our trailing 12-month adjusted EBITDA was $105 million, and our net debt leverage ratio was approximately 2.4 times on a trailing 12-month basis.

Sam Maheshwari: Our trailing 12 months adjusted at the end of the quarter was $105 million, and our net debt leverage ratio was approximately 2.4 times on a trailing 12 month basis.

Sam Maheshwari: Now moving on to the outlook for the fourth quarter. We continue to navigate a challenging demand environment due to softness in China, inventory adjustments by certain customers, and continued competition from Asia-based detector manufacturers. In light of this environment, guidance for the fourth quarter is: revenues are expected between $190 and $210 million, and non-GAAP earnings per diluted share are expected between $0.00 and $0.15. Our expectations are based on non-GAAP cross margin in a range of 33 to 34%, non-GAAP operating expenses in a range of $53 to $54 million, interest and other expense, net. In a range of $7 to $8 million, tax rate of about 21 to 23% for the fourth quarter and non-GAAP diluted share account of about 41 million shares.

Sam Maheshwari: Adjusted EBITDA for the quarter was $23 million, or 11% of sales. Our trailing 12-month adjusted EBITDA was $105 million, and our net debt leverage ratio was approximately 2.4 times on a trailing 12-month basis. Now moving on to the outlook for the fourth quarter, we continue to navigate a challenging demand environment due to softness in China, inventory adjustments by certain customers, and continued competition from Asia-based detector manufacturers. In light of this environment, guidance for the fourth quarter is revenues expected between $190 million and $210 million, and non-GAAP earnings per diluted share are expected between $0.05 and $0.15.

Sunny Sanyal: Now moving on to the outlook for the fourth quarter.

Sunny Sanyal: We continue to navigate a challenging demand environment due to softness in China, inventory adjustments by certain customers, and continued competition from Asia-based detector manufacturers.

Sunny Sanyal: In light of this environment, guidance for the fourth quarter is, revenues are expected between $190 and $210 million, and non-GAAP earnings per diluted share are expected between $0.00 and $0.15.

Sam Maheshwari: Our expectations are based on non-gap gross margin in a range of 33 to 34 percent, non-gap operating expenses in a range of 53 to 54 million dollars, interest and other expense net in a range of 7 to 8 million dollars, tax rate of about 21 to 23 percent for the fourth quarter, and non-gap diluted share count of about 41 million. With that, we'll now open the call to your questions.

Sunny Sanyal: Our expectations are based on non-gap gross margin in a range of 33 to 34 percent, non-gap operating expenses in a range of 53 to 54 million dollars.

Sunny Sanyal: Interest and other expense net in a range of $7-8 million, tax rate of about 21-23% for the fourth quarter, and non-GAAP diluted share count of about 41 million shares.

Operator: With that, we'll now open the call for your questions.

Speaker Change: With that, we'll now open the call for your questions.

Operator: Thank you.

Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star 2 if you would like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Operator: We'll now be conducting a question and answer session. If you'd like to ask a question, you may press star one from your telephone keypad, and a confirmation tone to indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, so we pull for questions. Thank you.

Speaker Change: Thank you. We'll now be conducting a question and answer session.

Speaker Change: If you'd like to ask a question, you may press star 1 from your telephone keypad and a confirmation tone to indicate your line is in the question queue.

Sunny Sanyal: You may press star 2 if you would like to withdraw your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for questions. Thank you. Thank you, and our first question today comes from the line of Xuyang Li with Jeff, to soothe your questions.

Sunny Sanyal: One moment please while we poll for questions. Thank you.

Young Lee: Thank you, and our first question today comes from the line of Young Lee with Jeffries. Please excuse your question. All right, great. Thank you so much for taking our question. I guess the star wanted to get a little bit more color on China. It's moderately sequentially improved, still down year over year, but it seemed to be better than last quarter, so kind of bottom last quarter. Just your comment on not seeing any improvements in the foreseeable future in China can maybe reconcile that a little bit versus it's been a year since the anti-corruption campaign. Eventually, it's going to go away.

Speaker Change: Thank you. And our first question today comes from the line of Xuyang Li with Jeffries. Please proceed with your question.

Xuyang Li: All right, great. Thank you so much for taking our questions.

Xuyang Li: I guess to start, I wanted to get a little bit more color on China. I mean, it's moderately sequentially improved, still down year over year, but seems to be better than last quarter. So kind of bottomed last quarter.

Younglee: All right, great. Thank you so much for taking our questions. I guess to start, I wanted to get a little bit more color on China.

Speaker Change: It's moderately, sequentially improved, still down year over year.

Sunny Sanyal: Just your comment on not seeing any improvements in the foreseeable future in China. Can you maybe reconcile that a little bit versus it's been a year since the anti-corruption campaign; eventually, it's gonna go away. There's talk about stimulus in China as well, although we might not know all the details. And then there is also your comment on the competitive pressures there in APAC. Maybe you can just help us understand the China comment a little bit more.

Sunny Sanyal: There's talk about stimulus in China as well, although we might not know all the details, and then also your comment on the competitive pressures there in APAC. Maybe you can just help us understand the China comment a little bit more. Hey, young, this is Sunny. I'll get to started and ask Sam to give a little bit more color. We did see sequential slight uptake sequentially in our orders and cells from China, but we don't see that as a trend for the next couple of quarters. As we've said, the effects of the audits are still continuing.

Speaker Change: and then also your comment on the competitive pressures there in APAC. Maybe you can just help us understand the China comment a little bit more.

Sunny Sanyal: Hey, this is Sunny. I'll get us started and ask Sam to give us a little bit more color. So we did see a slight sequential uptick sequentially in our orders and sales from China, but we don't see that as a trend for the next couple of quarters, as we've said, where the effects of the audits are still continuing. However, as we go into next year, we expect that this will start to taper off, but for now, in... In the foreseeable future, we don't see a significant movement there. The stimulus by itself, you know, it's...

Sunny Sanyal: Hey Yang, this is Sunny. I'll get us started and ask Sam to give a little bit more color. So we did see sequential slight uptick sequentially in our orders and sales from China but that we don't see that as

Sam Maheshwari: A trend for the next few quarters, as we've said, were the effects of the

Sunny Sanyal: However, as we go into next year, we expect that this will start to taper off. But for now, in the foreseeable future, we don't see a significant movement there. The stimulus by itself, you know, it's... There's a lot of things undefined about the stimulus program, so we are not seeing any direct impact of that yet. However, for us, any investment in healthcare that impacts that can have a positive impact on buying equipment is good for us. So overall, on balance, we would say that the stimulus program should be good for us, but we don't have any indication of when that will kick in, in terms of having an effect on orders and sales for us.

Sunny Sanyal: audits are still continuing however look as we

Sam Maheshwari: As we go into next year, you know, we expect that this will start to taper off. But for now, in the foreseeable future, we don't see a significant movement there.

Sunny Sanyal: The stimulus by itself, you know, it's

Sunny Sanyal: There are a lot of things undefined about the stimulus program, so we're not seeing any direct impact of that yet. However, for us, any investment in healthcare that can have a positive impact on buying equipment is good for us. So overall, on balance, we would say that the stimulus program should be good for us, but we don't have any indication of when that will kick in, in terms of having an effect on orders themselves.

Sunny Sanyal: There's a lot of things undefined about the stimulus program, so we're not seeing any direct impact of that yet.

Sunny Sanyal: However, for us, any investment in health care that impacts, that can have a positive impact on buying equipment is good for us. So overall, on balance, we would say that the stimulus program should be good for us, but we don't have any indication of.

Sunny Sanyal: And then in terms of the competition from Asia-Pacific players, this is, you know, we've talked about the competitive intensity in detectors in the past with Asian players, and we're just seeing, you know, continued intensity of competition there, particularly in the low-end modalities such as radiographic dental. And that's, you know, in a market where demand is soft and muted, it is not unusual that we find more aggressive aggressiveness from our competitors.

Sam Maheshwari: And then in terms of the competition from Asia-Pacific players, we've talked about the competitive intensity and detectors in the past with Asian players, and we're just seeing continued intensity of competition there, particularly in the low-end modalities such as radiographic dental. And that's in a market where demand is soft and muted. This is not unusual that we find that we have more aggressiveness from our competitors and detectors. Hi, and this is Sam. I'd just like to add what Sunny said: even though there was a sequential improvement in this last quarter from China, we are not seeing it as a durable pattern.

Sunny Sanyal: And then, in terms of the competition from Asia-Pacific players...

Sam Maheshwari: Hi Yang, this is Sam. I'd just like to add to what Sunny said. Even though there was a sequential improvement in this last quarter from China, we are not seeing it as a durable pattern. Plus, while the stimulus is positive, there's also been other news that the government there has extended or expanded the anti-corruption campaign from one year to three years. And you are right that we are now one year done with the campaign, but with this new knowledge that we have for a three-year campaign, in a way, so that gives us some sort of a pause. And so we are not expecting the Chinese business to see a meaningful improvement.

Sunny Sanyal: Even though there was a sequential improvement in this last quarter from China, but we are not seeing it as a durable pattern.

Young Lee: Plus, while stimulus is positive, there's also been other news that the government there has extended or expanded the anti-corruption campaign from one year to three years. And you are right that we are now one year done with the campaign, but with this new knowledge that we have for a three-year campaign in a way, so that gives us some sort of a pause. And so we are expecting that the China business; we are not expecting China business to see a meaningful improvement in the foreseeable future. Okay, great. Appreciate the color there.

Sunny Sanyal: While stimulus is positive, there's also been other news that the government there has extended or expanded

Speaker Change: Anti-corruption campaign from one year to three years and you are right that we are now one year done with the campaign but with this new knowledge that we have for a three-year campaign in a way so that gives us some sort of a pause and so we are

Speaker Change: We are expecting that the China business, we are not expecting China business to see a meaningful improvement in the foreseeable future.

Sam Maheshwari: Okay, great. I appreciate the color there.

Young Lee: I guess for the follow-up, I was wondering if you can provide any early qualitative thoughts for fiscal 25. It seems like, on the medical side, there's some of the inventory pressures might be easing. China still a little bit of a black box, but industrial seems to be doing well. So any high-level comments on fiscal 25 will be really helpful. Yeah, sure, young. You know, it's a bit too soon for F525 for us, but I would try to provide, or I'll try to say that China has been, China business has now been almost 12 months than it has been operating at a low level.

Speaker Change: Okay, great. I appreciate the color there. I guess for the follow-up, I was wondering if you can provide any early qualitative thoughts for Fiscal 25.

Sam Maheshwari: I guess for the follow-up, I was wondering if you could provide any early qualitative thoughts for Fiscal 25. It seems like, you know, on the medical side, some of the inventory pressures might be easing. You know, China is still a little bit of a black box, but industrials seem to be doing well. So, any high-level comments on Fiscal 25 would be really helpful. Yes, sure, Xuyang.

Sam Maheshwari: Yes, sure, Xuyang. It's a bit too soon for FY25 for us, but I would try to provide or I'll try to say that, you know, China has been China's business for now for almost 12 months, and it has been operating at a low level. So, from that perspective, we expect 25... versus 24, we are not expecting a whole lot of meaningful improvement there. However, on the de-stocking side or the inventory normalization side, as you said, it's supposed to be a temporary phenomenon, and as Sunny said in his prepared remarks, that we are expecting that situation to improve over there from the beginning of 2025.

Young: Yes, sure, Xuyang. You know, it's a bit too soon for FY25 for us, but I would try to provide, or I'll try to say that, you know, China has been...

Sunny Sanyal: So, from that perspective, we expect 25 versus 24; we are not expecting a whole lot of meaningful improvement there. However, on the de-stocking side, or the inventory normalization side, as you said, it's supposed to be a temporary phenomenon. And as Sunny said, in his prepared remarks, that we are expecting that situation to improve over there from the beginning of 2025. So, at this point, we are expecting that there ought to be a gradual improvement, and 25 ought to be slightly better than 24, but the China situation continues. And so we are not baking that in for 25.

Sam Maheshwari: So at this point, we are expecting that there ought to be a gradual improvement, and 2025 ought to be slightly better than 2024, but the China situation continues, and so we are not baking that in for 2025.

Young Lee: at this point.

Young Lee: Alright, thank you very much. Thank you very much.

Young: All right, thank you very much.

Suraj Kalia: Our next question is from the line of Suraj Kalia with Oppa Hammer. Let's just see with your questions. Hi, Sunny and Sam.

Suraj Kalia: Our next question is from the line of Suraj Kalia with Oppenheimer. I am pleased to see you with your question.

Suraj Kalia: Hi Sunny and Sam, this is actually Jacob from Perseraj. Thank you for taking our questions. So just quickly coming back on the topic of China, China for a little bit of granularity, you've mentioned inbound orders being the biggest indicator on your end of things moving into a positive direction. And I know you said in the foreseeable future, no improvement, but how does this push out expectations as we look past this fiscal year?

Jay Fibon: This is actually Jay Fibon for Suraj. Thank you for taking our questions. So just quickly coming back on the topic of trauma, China for a little bit of granularity. You've mentioned inbound orders being the biggest indicator on your end of things moving into a positive direction.

Jay Fibon: So just wondering what, if anything, had changed from 2Q to 2-3, and I know you said in the foreseeable future no improvement, but how does this push out for expectations as we look past this fiscal year? Yeah, so as I said, Jacob, that in terms of water pattern and sales, yes, it did improve a little bit, but again, we are not seeing a durable pattern here that the orders are continuing to improve. So I think they are not worsening, but they have kind of stabilized at the low levels, and we are obviously hoping for order pattern and sales to improve on a sustained basis, but that's not what we are seeing.

Sam Maheshwari: Yeah, so as I said, Jacob, in terms of order patterns and sales, yes, they did improve a little bit. But again, we are not seeing a durable pattern here where the orders are continuing to improve. So I think they are not worsening, but they have kind of stabilized at low levels.

Sam Maheshwari: And we are obviously hoping for order patterns and sales to improve on a sustained basis, but that's not what we are seeing. So we just want to say that, you know, one quarter data point is not an indicator for a sustained improvement here. And going into the next year, at this point, we are expecting that the next year will probably be in line with where FY24 has been for us, in China.

Sunny Sanyal: So we just want to say that one quarter data point is not an indicator for a sustained improvement here. And going into the next year, at this point, we are expecting that the next year is probably be in line with where F-24 has been for us for China. We are not expecting a significant improvement there, but we'll see; we'll monitor the situation. It is possible after six or nine months things improve, but this is where we are as of now, and we are just expecting that this current situation is China to continue at these low levels.

Young: And going into the next year, at this point, we are expecting that the next year is probably be in line with where FY24 has been for us, for China. We are not expecting a...

Sam Maheshwari: We are not expecting significant improvement there, but we'll see. We'll monitor the situation. It is possible after six or nine months things improve. But this is where we are as of now, and I'm expecting the current situation in China to continue at these lower levels.

Jay Fibon: Great. Thank you.

Sunny Sanyal: Great, thank you. And then just one quick question on the traction you see in industrial, you mentioned that it's driven by cargo with industrial softness outside of cargo. Could you remind us the percentage of industrial that is cargo and maybe what indications of stability there you see going forward? Yeah, so that's

Sunny Sanyal: And then just one quick question on the traction you see in industrial. You mentioned that it is driven by cargo with industrial softness outside of cargo. Could you remind us the percentage of industrial that is cargo and maybe what indications of stability there you see going forward? Yeah, so industrial business grew quite a bit last year, and this year also we expected to grow over last year. So there is a decent bit of traction there. Within industrial, though, there are pockets, particularly in semiconductors and electronics, where we've been seeing some softness, predominantly because of the capacity digestion that happened, the capacity being digested as it was shipped.

Sunny Sanyal: Yeah, so industrial business, you know, grew quite a bit last year, and this year also we expect it to grow more than last year. So there is a decent bit of traction there.

Speaker Change: Yeah so industrial business you know grew quite a bit last year and this year also we expect it to grow over last year so

Young: There is a decent bit of traction there.

Sunny Sanyal: Within industrial, though, there are pockets, particularly in semiconductors and electronics, where we've been seeing some softness, predominantly because of the capacity digestion that happened, the capacity being digested as it was shipped. So we are seeing some softness there in the last quarter and this quarter. The [inaudible] has been increasing. I think you just need to give us one more quarter when we complete our full year and be able to disclose those proportions to you. But we did disclose FY23 previously, and we expect in FY24 the cargo business proportion would be much higher than what it was in FY23.

Young: Within industrial, though, there are pockets, particularly in semiconductors and electronics where we've been seeing some softness, predominantly because of the capacity being digested as it was shipped.

Sunny Sanyal: So we are seeing some softness there in the last quarter, this quarter. However, as we mentioned, cargo business is strong, and we have a reasonably good visibility for that strength to continue over the next few quarters, for sure. So cargo business, you know, we have disclosed full year fiscal 23 numbers for cargo area previously. Although that and cargo businesses proportion in our overall FY20 fiscal year sales has been increasing.

Sunny Sanyal: I think you just need to give us one more quarter when we complete our full year and be able to disclose those proportions to you. But we did disclose FY23 previously, and we expect in FY24, Cargo Business Proportion would be much higher than what it was in 23.

Jim Sidoti: Our next question comes from the line of Jim Sidoti Company. Let's just use the question. Hi, good evening. Thanks for taking the question. I think what I hear you saying is, you know, trying to business you don't expect it to improve in the near term. But I think I'm here, and you say you don't expect another step down over the next couple of quarters. Is that right? That's correct, Jim. I think that's what we are saying. Yes, it's already running at a low level, and we need to see very specific and definitive indicators before we are able to say that it's going to improve on a sustained basis.

James Sidoti: Our next question comes from the line of James Sidoti with the Sidotian Company. Please answer your question.

Young: Our next question comes from the line of James Sidoti, Sidotian Company.

James Sidoti: Hi, good afternoon. Thanks for taking the question. I think what I hear you saying is, you know, China business, you don't expect it to improve in the near term, but I think I'm hearing you say you don't expect another step down over the next couple of quarters.

Jim Sidoti: Please just use your questions.

James Sidoti: Hi, good afternoon. Thanks for taking the question. I think what I hear you saying is, you know, China business you don't expect it to improve in the near term, but I think I'm hearing you say you don't expect another step down over the next couple quarters. Is that right?

Sam Maheshwari: That's correct, Jim. I think that's what we are saying, yes. I mean, it's already running at a low level, and we need to see very specific and definitive indicators before we are able to say that it's going to improve its effectiveness.

Young: That's correct, Jim. I think that's what we are saying, yes.

Speaker Change: It's already running at low level and we need to see very specific and definitive indicators before we are able to say that it's going to improve on a sustained basis.

Sunny Sanyal: And Jim, comment about. Sorry, Jim, our comment about the program audit program continuing. That's going to our understanding is that the current audit is a pretty drastic type of an action. But then, on an ongoing basis for another two years, at least, there will be oversight of the purchasing process. Now, that's not going to shut it down like the way it has happened so far. But it's going to allow for ongoing purchasing, but at a much more slower level. And we haven't quite yet seen when that transition will occur.

Sam Maheshwari: And you, Mark, comment about... Sorry, Jim, our comment about the program, the audit program continuing, that's done. Our understanding is that the current audit is a pretty drastic type of action. But then on an ongoing basis for another another two years, at least until there is oversight of the purchasing process. Now that's not going to shut it down like the way it has happened so far, but it's going to allow for ongoing purchasing but at a much slower level, and we haven't quite yet seen when that transition will occur.

Young: Sorry, Jim, our comment about the program, audit program, continuing.

Young: That's all

Young: [inaudible]

Young: shut it down like the way it has happened so far, but it's going to allow for ongoing purchasing, but at a much more slower level, and we haven't quite yet seen when that transition will occur.

Sunny Sanyal: All right, any update on the new products with the photon counting technology? You've talked about that in the past. On the medical side, are you making any headway there?

Jim Sidoti: Any update on new products with the photon counting technology? You talked about that in the test.

Sunny Sanyal: On the medical side, are you making any headway there? Yeah, so as you know, that's part of our long term strategy and making very good progress there. And last quarter, we had given some color in terms of what we expect its contribution to our growth in the longer term. And that is still that's still looking good for us. And we're very optimistic and excited.

Sunny Sanyal: Yeah, so as you know, that's part of our long-term strategy and we are making very good progress there. And last quarter, we had given some color in terms of what we expect its contribution to our growth in the longer term. And that is still, is still looking good for us. And we're very optimistic and excited. I think in the near term, though, once we get past these de-stocking levels, the thing that we are continuing to be excited about is the cost-out initiatives that we've launched with our investments in India.

Speaker Change: Yes, so as you know that's part of our long-term strategy and making very good progress there and last quarter we had given some color in terms of what we expect its contribution to our growth in the longer term and that is still that's still looking good for us and we're very optimistic and excited.

Sunny Sanyal: I think in the near term, though, as you as once we get past these destocking levels, the thing that we are continue to be excited about is the. Cost out initiatives that we've launched with our investments in India. We expect that to give us ability to regain market share in radiographic dental and areas where we have lost share and lost ground. We expect to make those up in the midterm timeframe. So all these investments, both in near term, midterm, and long term, are looking good, and we're continuing to be optimistic about it.

Sunny Sanyal: We expect that to give us the ability to regain market share in radiographic dental and areas where we have lost share and lost ground. We expect to make those up in the midterm time frame. So all these investments, both in the midterm and long term, are looking good, and we're continuing to be optimistic.

Young: We have lost share and lost ground. We expect to make those up in a mid-term time frame. So all these investments, both in mid-term and long-term, are looking good, and we continue to be optimistic about it.

Sam Maheshwari: And then our rest one for Sam, you know, what's the update on We Finance and some of that debt? Yeah, sure. So Jim, we few months ago, we completed the, we completed credit financing. And so we have sufficient flexibility around that. And, you know, our revolver, our convertible bonds are maturing in June of 2025. So we have some time, time here. And, you know, as in when we make a decision, we'll be sure to inform you, but we have a reasonably good flexibility at this time. It comes to refinancing.

Sam Maheshwari: And then last one for Sam, what's the update on refinancing some of that debt?

Speaker Change: And then our last one for Sam, you know, what's the update on refinancing some of that debt?

Sam Maheshwari: Yes, sure. So, Jim, we, a few months ago, we completed the... We completed credit financing, and so we have sufficient flexibility around that. And our convertible bonds are maturing in June of 2025. So we have some time here, and as and when we make a decision, we'll be sure to inform you. But we have reasonably good flexibility at this time when it comes to revenue. Okay. And you think you're OK.

Young: Yes, sure. So, Jim, we, a few months ago, we completed the...

Speaker Change: time here and you know as and when we make a decision we'll be sure to inform you, but we have reasonably good flexibility at this time when it comes to refinancing.

Sam Maheshwari: Okay, and do you think you'll make that decision sometime in early 2025?

Sam Maheshwari: Okay, and you think you'll make that decision sometime in the early 2025? Cannot say at this time what would be the time when we will make that decision. Obviously, it will be before June, but you'll just have to give us some time to hear the final decision from us. You know, Jim, the way it works is when the decision is made by the Board of Directors, then we have a few days before we inform everybody. And so, as the decision is made, we'll be sure to inform you.

Sam Maheshwari: I cannot say at this time what the time will be when we make that decision. Obviously, it will be before June, but you'll just have to give us some time to hear the final decision.

Young: Oh.

Speaker Change: I cannot say at this time what would be the time when we will make that decision. Obviously, it will be before June , but you'll just have to give us some time to hear the final decision from

Young: You know, Jim, the way it works is when a decision is made by the Board of Directors, then we have a few days before we inform the public.

Jim Sidoti: inform everybody and so as the decision is made we'll be sure to inform you.

Jim Sidoti: Okay, all right, thank you.

James Sidoti: All right, thank you.

Young Lee: Our next question is from the line of Young Elite with Jeffries. Let's see with your questions. All right, thanks for the follow-up.

Jim Sidoti: Okay. All right. Thank you.

Speaker Change: Our next question is from the line of Xuyang Li with Jefferies. Please proceed with your questions.

James Sidoti: All right, thanks for the follow-up. I guess maybe just following up on the prior question, Jim's question, I guess what your capital allocation priorities will be after the balance sheet becomes stronger from the refinance?

Young Lee: I guess maybe just following up on the prior question, Jim's question, I guess what is your capital allocation priorities after the fallout sheet becomes stronger from the refined effort? Yeah, so right now between now, say next 12 months, our priorities are to continue to fund all of the business needs, operating needs, and completely fund all the capital expenditure requirements. We are right now investing capex in India and also for automation in our factory in Salt Lake here. So beyond the operating needs, priorities are de-leveraging; we expect to de-leverage. The quantum of the de-leveraging is yet to be decided, but we do want to de-leverage in the next 12 months.

Younglee: All right, thanks for the follow-up. I guess maybe just following up on the prior question, Jim's question, I guess what is your capital allocation priorities after the balance sheet becomes stronger from the refinancing?

Sam Maheshwari: Yeah, so right now, between now and the next 12 months, our priorities are to continue to fund all of the business needs, operating needs, and completely fund all the capital expenditure requirements. We are right now investing in CapEx in India and also for automation in our factory in Salt Lake here.

Speaker Change: Yeah, so right now, between now, say next 12 months, our priorities are to continue to fund all of the business needs, operating needs.

Younglee: completely fund all the capital expenditure requirements. We are right now investing CAPEX in India and also for automation in our factory in Salt Lake here. So beyond the operating needs,

Sam Maheshwari: So beyond operating needs, the priorities are deleveraging. We expect to deleverage. The quantum of the deleveraging is yet to be decided, but we do want to deleverage. We would be looking at growth opportunities in terms of M&A and also further deleveraging at that time. So those are the two main areas of deployment of cash beyond operating needs, beyond the 12-month time frame.

Jim Sidoti: The quantum of the deleveraging is yet to be decided, but we do want to deleverage.

Sunny Sanyal: And beyond that, I think we would, once we are at an optimal debt structure, which we have said in the past, you know, anywhere between 300 to 350 million dollars in total debt. Once we are there, then I think we would be looking at growth opportunities in terms of M&A and also further de-leveraging at that time. So those are the two main areas of deployment of cash beyond operating needs beyond the 12-month timeframe. Okay, great. That's very helpful. Thank you very much.

Younglee: in the next 12 months. And beyond that, I think we would, once we are at an optimal debt structure, which we have said in the past, you know, anywhere between $300 to $350 million in total debt. Once we are there,

Younglee: Then I think we we would be

Jim Sidoti: We would be looking at growth opportunities in terms of M&A and also further deleveraging at that time. So those are the two main areas of deployment of cash beyond operating needs, beyond the 12-month time frame.

James Sidoti: Okay, great. That's very helpful. Thank you very much.

Operator: Thank you.

Speaker Change: Okay, great, that's very helpful. Thank you very much.

Christopher Belfiore: Thank you. At this time, we've reached the end of our question and answer session, and I'll turn the floor back to Christopher Belfiore for a closing remark.

Speaker Change: Thank you.

Christopher Belfiore: At the time we've reached the end of our question and answer session, and I'll turn the floor back to Christopher Belfier for closing remarks. Thank you all for your questions and for participating in our earnings conference call today. The webcast and supplements of slide presentation will be archived on our website. A replay of a quarterly conference call that will be available through August 16th and can be accessed at various Imaging.com forward slash investors relations.

Jim Sidoti: Thank you. At this time, we've reached the end of our question and answer session, and I'll turn the floor back to Christopher Belfiore for closing remarks.

Operator: Thank you all for your questions and for participating in our earnings conference call today. The webcast and supplemental slide presentation will be archived on our website. A replay of the quarterly conference call will be available through August 16 and can be accessed at vareximaging.com forward slash investor relations. Thank you, and goodbye.

Christopher Belfiore: Thank you all for your questions and for participating in our earnings conference call today. The webcast and supplemental slide presentation will be archived on our website. A replay of the quarterly conference call that will be available through August 16th and can be accessed at vareximaging.com forward slash investors relations. Thank you and goodbye.

Operator: Thank you and goodbye.

Operator: This concludes today's conference. We disconnect your lines at this time. Thank you for your participation.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

Speaker Change: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

Operator: Have a wonderful day.