A World Leader in Imaging Components
Forward-Looking Statements 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; 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 impact of the acquisition of the PerkinElmer medical imaging business on the company’s financial results; the ability to obtain regulatory and third party approvals 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 the products of PerkinElmer's imaging business into the company’s product offerings and sales and marketing operations; recognize the intended benefits and synergies of the acquisition; and retain the services of key acquired personnel; global economic conditions; 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; the outcome of the corporate tax reform recently passed into law; 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 engineers >21,000 Flat Panel Detectors/year >100,000 HV Cable Assemblies/year 65+ Relationship Builders Product Portfolio Leaders 65+ years in X-ray • Extensive portfolio of critical • Work with >90% of X-ray Imaging Components imaging components imaging OEMs • Broad breadth of complementary • 40+ year partnerships with top accessory products 5 customers 20+ Global Locations Mfg in US, EU, and APAC 3
TWO PRIMARY MARKETS applications include Medical We partner with medical, dental, and veterinary OEMs to help bring their products to market 80% Digital X-Ray CT faster with our imaging components and technology. x-ray tubes • detectors • software & workstations • cables & interconnects • collimators Mammography Mobile C-arms Industrial Varex Imaging partners with many system integrators on the industrial, cargo security, Manufacturing Inspection Cargo Screening 20% and airport security industries to provide key imaging components. x-ray tubes • detectors • linear accelerators • specialized software Industrial Inspection Security Inspection 4
How We Win in Medical • Pioneers in digital detectors • Innovation leaders in CT Market Trends • Broad product portfolio — China healthcare expansion, e.g., CT • Manufacturing scale — Portability and improved workflow • Subsystem solutions for — Increasing global adoption of digital technology speed-to-market — Productivity and total cost of ownership — Dose reduction vs. Clinical efficacy 5
Market Trends — New requirements for material discrimination and throughput for airport baggage screening are expanding How We Win in the use of CT Industrial & Security — New applications for the use of X-ray imaging to drive productivity in non-destructive testing and inspection in manufacturing • Innovation in X-ray imaging technologies for new applications — Increased demand for cargo inspection at ports & borders • Provider of choice for digital detectors — New applications for X-ray • Requested brand in tenders technologies in sterilization and food • Committed customer partnerships inspection 6
Q2 Highlights 2QFY18 Financial Results 2QFY18 revenues +30% and exceeded expectations. Revenues +30% to $201M 2QFY2018 Revenues would have been +5% if EPS of $0.32 acquired imaging business revenues has Adjusted EPS* of $0.45 been included in the prior year quarter. YTD Cash from operations of $46M YTD FCF of $39M 2Q increase led by higher sales of products for the CT, industrial and oncology markets. Partially offsetting was a decline in products for the radiographic market. FY17 Financial Results 3-D dental imaging digital detector Revenues +13% to $698M revenue returned to historic levels in 2Q FY2017 and were +50% from 1QFY18. EPS of $1.36; Adjusted EPS* of $1.80 Added pricing agreements in 2Q: $10M of Cash from operations of $75M digital detectors for European market & FCF of $55M $50M of X-ray tubes and digital detectors for China market. Includes new pricing agreement for CT tubes; brings total to 5 agreements to date. *See - reconciliation between GAAP and adjusted financial 7 measures in appendix of this presentation
Growth Driver: Deep Customer Relationships Product Development Cycle Early engagement in customers’ Product Development Cycle Continuous Replacement Cycles due to product end of life and/or technology advances System released Engaged in several projects with for sale customers at any time; in various stages of System “Refresh development cycle and in multiple Cycle” begins modalities Many customer touch points, including Volume account management, customer service, deliveries begin technical support, and engineering support Component “Replacement Cycle” begins 8
Key Growth Statistics Growth Driver: China @ 10% of FY17 revenues China’s Healthcare Reform Initiatives CT system growth at 6%+ Government focused on improving delivery of healthcare services including imaging systems Growth rate for CT tubes to be [Made In China 2025 - Center for Strategic and International Studies] more than double due to • Started with general radiographic imaging replacements • Transitioning to expansion of CT as a modality of choice; estimate of un-met need for +25,000 new CT systems Government preference for local Chinese manufacturers, so business will transfer from global OEMs to local OEMs • Varex engaged with most significant imaging OEMs who are developing CTs for local market • CT subsystems, technical support help deliver speed-to-market • To date 5 three-year pricing agreements valued at +$120M Expanding investment in personnel and manufacturing infrastructure to support these customers 9
Growth Driver: Varex well positioned to meet growing demand Changing Flat Panel Detector Landscape with broad portfolio and multiple detector technologies (A-Si and CMOS) Market trends driving digital adoption Shipped over 175,000 digital detectors Increasing global adoption of digital detectors driven by • Legislative incentives • Improved workflow, efficiency, dose reduction Innovation driving refreshes • Large analog installed base…at current rates, 8-10 years for first time digital use • Initial adoption followed by replacements with newer technologies • Excess capacity for radiographic detectors driving down costs Analog vs Digital Annual Units 2017 2021 P ~60% ~67% 42,000 Dynamic 33,000 ~55% ~24% ~43% ~30% 58,000 63,000 Static Digital Retrofit Analog New Systems Digital New Systems 10
Consolidation PerkinElmer Imaging Business acquisition grew Completed digital detector revenues by 55% to ~$400M 4 acquisitions in Acquisition past 3 years Opportunities: OEM divestitures, detector Growth manufacturers resulting in >$200M in revenue growth Portfolio Expansion MeVis acquisition expanded portfolio into imaging software post processing Claymount acquired for complementary imaging Strategically expanding products such as high voltage cables and collimators product and technology Opportunities: Additional x-ray imaging capabilities to provide components, software, new imaging technologies customers with most complete X-ray imaging Adjacent Opportunities component offering Acquisitions that leverage Varex brand, technology and manufacturing expertise 11
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