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Item 7. Management’s Discussion and Analysis

2025-11-18 compared with 2024-11-19 · 113 added, 87 removed, 156 unchanged (56% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis contain forward-looking statements relating to future events or our future financial or operating performance that involve risks and uncertainties, as set forth above under "Forward-Looking Statements." Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors described in this Annual Report on Form 10-K.

are critical components of a variety of X-ray based imaging equipment, and stand-alone X-ray based systems in select application areas.

The following discussion and analysis contains forward-looking statements relating to future events or our future financial or operating performance that involve risks and uncertainties, as set forth above under "Forward-Looking Statements." Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors described in this Annual Report on Form 10-K.

Varex Imaging Corporation is a leading innovator, designer and manufacturer of X-ray imaging components including X-ray tubes, flat panel and photon counting detectors and accessories, linear accelerators, and image software processing solutions, which are critical components of a variety of X-ray based imaging equipment, and stand-alone X-ray based systems in select application areas.

Our success depends, among other things, on our ability to anticipate and respond to changes in our business, the direction of technological innovation, and the demand from our customers.

For additional information on our business, see Item 1 "Business".

Impact of General Economic Environment

We remain cautious about the general economic environment as many factors remain dynamic and unpredictable.

The uncertain economic and geopolitical environment, supply chain and logistic challenges, and geopolitical tensions and local conflicts have contributed to, and may continue to contribute to, inflation, higher interest rates and capital costs, increased shipping costs, supply shortages, increased costs of labor and materials, exchange rate volatility, increased tariffs, and other similar effects.

We experienced fewer supply chain, manufacturing, and logistics challenges in fiscal year 2024 than in fiscal year 2023.

However, shortages of certain materials and delivery delays from some suppliers caused, and may in the future cause, delays in manufacturing products, as well as operational and customer order fulfillment challenges.

In addition, since late 2023 our Medical business has been negatively impacted by the Chinese government's anti-corruption campaign related to the healthcare industry, which we expect to continue at some level through fiscal year 2025.

We continue to observe cautious purchasing behaviors by our customers, which we expect to subside by calendar year-end 2024.

The impact to our business from potential changes to tariffs as a result of the outcome of the recent United States presidential and congressional elections is unknown at this time.

We continue to monitor developments in this area.

For additional information on risks related to supply chain and logistics challenges, cost increases, changes in U.S.

Impact of Current Economic and Trade Environment

The current economic and trade environment remains dynamic and unpredictable.

The uncertain outcome and effect of tariffs and reciprocal actions between the United States and other countries and its impact on the economic and geopolitical environment, supply chain and logistic challenges, and geopolitical tensions and local conflicts have contributed to, and may continue to contribute to, delayed customer purchasing decisions, increased tariff costs, higher inflation, fluctuations in interest rates and capital costs, supply chain disruption, increased costs of labor and materials, exchange rate volatility, increased shipping costs, and other similar effects.

Additionally, a sustained United States government shutdown could negatively impact the global economy and in turn our financial condition and results of operations.

During the calendar year 2025, the United States Administration has announced and/or imposed a variety of new tariffs on imports from other countries.

In response, a number of those impacted or potentially impacted countries have announced and/or

imposed retaliatory tariffs on United States imports.

These actions impacted our results of operations and profitability in fiscal year 2025, particularly the bilateral United States and Chinese tariffs.

Absent a de-escalation in the current trade wars, particularly the trade war between the United States and China, these tariffs have and are expected to make our products less competitive with similar product not imported from the United States, which has had and in the future is expected to negatively impact our business and financial results.

Additional new tariffs, trade restrictions or other retaliatory actions aimed at specific industries, such as X-ray imaging products, could also materially impact our business.

We remain committed to working with our customers to minimize the effects of the tariffs.

In this regard, we are actively working to implement a number of options that could reduce the impact, including pursuing commonly utilized mitigation practices and localizing more manufacturing in the region.

At this time, however, we do not anticipate these efforts will allow us to fully offset the additional costs or other negative impacts resulting from such tariffs.

Considering the mitigation efforts we have in flight at this point, we are not currently planning to do any restructuring in China.

We continue to monitor potential changes in customer procurement decisions resulting from the current trade climate, along with other tariff-related actions, investigations and other activities that might negatively affect our costs or otherwise impact our business and results of operations.

Furthermore, if international customers’ negative perceptions of the actions of the United States Administration influence their buying decisions, our business and results of operations could be negatively impacted.

In April 2025, the China Ministry of Commerce initiated two investigations related to medical products imported into China.

One investigation relates to the impact of imports of X-ray tubes on the domestic industry and its competitiveness, and another relates to imports into China of certain medical CT X-ray tubes and tube inserts for CT devices (collectively “CT Tubes and Inserts”) originating from the United States and India.

We produce CT Tubes and Inserts in the United States and export them to China, but we do not produce CT Tubes and Inserts in India.

Total sales of medical X-ray tubes we import into China represented approximately 10% of our total revenue in fiscal year 2025.

Both investigations were temporarily suspended in May 2025 and again in August 2025, and then both were indefinitely suspended in November 2025.

If recommenced, we anticipate that the MOFCOM Investigations may take approximately one year to resolve.

We are committed to complying with all applicable regulations.

In the past, we have experienced supply chain, manufacturing, and logistics challenges but these challenges have largely subsided.

However, given the current tariff environment and uncertainty around how it may impact customer purchasing decisions and the timing of those decisions, supply chain and logistics challenges could re-emerge.

For additional information on risks related to tariffs and trade wars, supply chain and logistics challenges, cost increases, changes in U.S.

and worldwide economic conditions, geopolitical tensions, and other risks that could impact our results, see Item 1A “ Risk Factors ”.

Our fiscal year is the 52- or 53-week period ending on the Friday nearest September 30.

Fiscal year 2024 was the 52-week period that ended September 27, 2024, fiscal year 2023 was the 52-week period that ended September 29, 2023, and fiscal year 2022 was the 52-week period that ended September 30, 2022.

Our fiscal year is the 52- or 53-week periods ending on the Friday nearest September 30.

Fiscal year 2025 was the 53-week period that ended October 3, 2025, fiscal year 2024 was the 52-week period that ended September 27, 2024, and fiscal year 2023 was the 52-week period that ended September 29, 2023.

Results of Operations

For a discussion and analysis of our year-over-year changes, financial condition, and results of operations for the fiscal years ended September 27, 2024 and September 29, 2023 refer to Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our annual report on Form 10-K for the fiscal year ended September 27, 2024, filed with the SEC on November 19, 2024.

Our year-over-year changes, financial condition, and results of operations for the fiscal years ended September 27, 2024 and September 29, 2023 are set forth below.

Our year-over-year changes, financial condition, and results of operations for the fiscal years ended October 3, 2025 and September 27, 2024 are set forth below.

Comparison of Results of Operations for Fiscal Years 2025 and 2024

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Industrial as a percentage of total revenues 29.8 % 28.3 % 24.6 %

Medical revenues decreased $91.6 million in fiscal year 2024 compared to 2023 primarily due to lower sales in our China business, as well as decreased sales of fluoroscopy, oncology, and dental applications.

Industrial revenues increased $9.2 million due to increased sales of security inspection products and industrial tubes.

Revenues by Region

Medical revenues increased $10.9 million in fiscal year 2025 compared to fiscal year 2024, primarily due to increased sales of CT, oncology, and mammography of $24.6 million, partially offset by decreased sales in radiography, veterinary, and dental modalities of $13.7 million.

Industrial revenues increased $22.7 million in fiscal year 2025 compared to fiscal year 2024, primarily due to increased sales of security inspection products and X-ray tubes of $15.3 million, digital detectors of $6.0 million and other components of $1.4 million.

Revenues, net by Region

(In millions) 2025 % Change 2024 % Change 2023

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APAC as a percentage of total revenues 33.5 % 32.6 % 35.9 %

The Americas revenues decreased $15.3 million in fiscal year 2024 compared to 2023 primarily due to decreased sales of digital detectors.

EMEA revenues decreased $10.4 million primarily due to decreased sales of digital detectors, partially offset by increased sales in security inspection products.

APAC revenues decreased $56.7 million primarily due to decreased sales of X-ray tubes and digital detectors.

Overall revenue during fiscal year 2025 increased as compared to fiscal year 2024.

During fiscal year 2025, Americas revenues increased $10.0 million due to increased security inspection products sales of $13.3 million, increased X-ray tubes sales of $4.7 million, increased other product sales of $0.7 million, partially offset by decreased veterinary sales of $4.7 million, digital detector sales of $2.2 million, and software sales of $1.8 million.

EMEA revenues increased $4.5 million primarily due to increased digital detector sales of $4.3 million, other product sales of $2.4 million, and security inspection product sales of $0.9 million, partially offset by decreased veterinary sales of $1.8 million, software sales of $0.7 million, and X-ray tubes sales of $0.5 million.

APAC revenues increased $19.1 million primarily due to increased X-ray tubes sales of $14.7 million, security inspection products sales of $3.2 million, digital detector sales of $1.8 million, and software sales of $0.6 million, partially offset by decreased other product sales of $1.3 million.

See Note 2, Revenue , of the Notes to the Consolidated Financial Statements for information regarding disaggregated revenue by country.

(In millions) 2025 % Change 2024 % Change 2023

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Total gross margin 34.4 % 31.7 % 32.5 %

The Medical segment gross profit decreased $28.8 million in fiscal year 2024 compared to 2023 primarily due to lower volumes of X-ray tubes and digital detectors.

The Industrial segment gross profit decreased $4.6 million in fiscal year 2024 compared to 2023 primarily as a result of decreased volumes of digital detectors, partially offset by an increase in the sale of security inspection products.

Medical segment gross profit increased $23.4 million in fiscal year 2025 compared to fiscal year 2024 primarily due to increased sales volume, increased favorable product mix, and lower material costs of $13.3 million and improved productivity of $10.1 million.

Industrial segment gross profit increased $10.2 million in fiscal year 2025 compared to fiscal year 2024, primarily due to improved sales volume and favorable product mix of $20.1 million, partially offset by decreased productivity and increased material costs of $9.9 million.

Operating Expenses

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As a percentage of total revenues 15.8 % 17.0 % 14.4 %

Impairment of goodwill $ 93.9 100% $ — —% $ —

As a percentage of total revenues 11.1 % — % — %

Operating expenses $ 318.3 42% $ 224.8 5% $ 213.2

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Research and Development

Research and development costs for fiscal year 2024 increased to 10.7% of revenues primarily due to increased spending on material costs supporting research, partially offset by decreased development initiatives costs in the current fiscal year when compared to the prior fiscal year.

We are committed to investing in research and development efforts to support long-term growth objectives by bringing new and innovative products to market for our customers.

Research and development costs for fiscal year 2025 remained relatively unchanged at 10.8% of total revenue when compared to fiscal year 2024.

Selling, General, and Administrative

Selling, general and administrative expenses as a percentage of total revenues increased to 17.0% for fiscal year 2024 from 14.4% for fiscal year 2023 primarily due to decreased revenue, increased fixed cost commitments to a supplier, increased litigation costs, and increased severance costs, partially offset by lower intangible asset amortization expense.

Selling, general, and administrative expenses for fiscal year 2025 decreased primarily due to a decrease in fixed cost commitments to a supplier of $3.5 million and amortization of intangibles of $3.0 million, partially offset by an increase in depreciation costs of $1.2 million.

Impairment of Goodwill

During the third quarter of fiscal year 2025, we recognized a goodwill impairment charge of $93.9 million, following a determination that the fair value of the Medical reporting unit was below its carrying value.

See Note 5, Goodwill and Intangible Assets, of the Notes to the Consolidated Financial Statements of this report for further details.

Interest and Other Expense, Net

The following table summarizes our interest and other expense, net:

The following table summarizes the Company’s interest and other expense, net:

(In millions) 2025 % Change 2024 % Change 2023

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Interest and other expenses, net $ (31.4) 16% $ (27.1) (41)% $ (45.8)

Interest income increased in fiscal year 2024 compared to fiscal year 2023 primarily due to an increase in the average balance of investments in marketable debt securities during fiscal year 2024 when compared to the average balance during fiscal year 2023.

Interest expense increased in fiscal year 2024 compared to fiscal year 2023 primarily due to the termination of the ABL facility which resulted in the recognition of $0.6 million of the remaining unamortized deferred issuance costs.

Other expense, net decreased in fiscal year 2024 compared to fiscal year 2023 primarily due to a gain on business acquisition and decreased losses in certain investments in privately-held companies and equity investments, partially offset by increased foreign exchange expense.

Taxes on Income

Interest income increased primarily due to an increase in the average cash and cash equivalents balance being held in interest bearing deposit accounts during fiscal year 2025 as compared to fiscal year 2024.

Interest expense increased primarily due to higher interest costs in connection with the additional Senior Secured Notes issued during the first quarter of fiscal year 2025 to partially refinance our convertible senior unsecured notes that matured in June 2025 and the Revolving Credit Facility established during the final week of the second quarter of fiscal year 2024.

Other expense, net remained relatively unchanged during fiscal year 2025 as compared to fiscal year 2024.

Taxes on Income (Loss)

Effective tax rate (18.1) % 1,066.0 %

We had an income tax expense of $52.2 million and an income tax benefit of $17.4 million, resulting in effective rates of 1,044.0% and (55.6)%, for fiscal years 2024 and 2023, respectively.

We had an income tax expense of $ 10.7 million and an income tax expense of $ 53.3 million, resulting in effective rates of (18.1)% and 1,066.0%, for fiscal years 2025 and 2024, respectively.

During fiscal year 2025, our effective tax rate varied from the U.S.

federal statutory rate of 21% primarily due to the unfavorable impact of U.S.

federal statutory rate of 21% primarily due to the goodwill impairment that took place in the third quarter of fiscal year 2025, the unfavorable impact of U.S.

deferred tax attributes and losses in certain foreign jurisdictions for which a valuation allowance is provided as well as profit in foreign jurisdictions with statutory tax rates greater than 21%.

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During fiscal year 2024, our effective tax rate varied from the U.S.

federal statutory rate of 21% primarily due to the favorable impact of the release of the U.S.

valuation allowance, U.S.

federal statutory rate of 21% primarily due to the unfavorable impact of U.S.

deferred tax attributes and losses in certain foreign jurisdictions for which a valuation allowance is provided as well as profit in foreign jurisdictions with statutory tax rates greater than 21%.

These unfavorable items were partially offset by the favorable impact of U.S.

tax reform regarding international provisions, R&D credits, and return to provision adjustments.

These favorable items were partially offset by the unfavorable impact of profit in foreign jurisdictions with statutory tax rates greater than 21%.

We estimated the fiscal year 2024 GILTI (global intangible low-taxed income), BEAT (base-erosion anti-abuse tax), FDII (foreign-derived intangible income), limitations on interest expense deductions, and other components of U.S.

tax reform, and have included these amounts in the calculation of the fiscal year 2024 tax provision.

We made an accounting policy election, as allowed by the SEC and FASB, to recognize the impact of GILTI as a period cost if and when incurred.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operations, including working capital and investing activities.

We believe that our operating cash flow, cash on our balance sheet, availability under our Revolving Credit Facility and Equipment Credit Facility, and our ability to access the credit and capital markets are sufficient to meet our anticipated operating activities and cash commitments for at least the next 12 months and will be sufficient to allow us to continue to invest in our existing businesses, consummate strategic acquisitions, and manage our capital structure on a short-term and long-term basis.

We are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in or that are reasonably likely to result in a material change to our liquidity needs during or beyond the next 12 months, except for $200.0 million of our Convertible Notes that become due in June 2025 that we currently anticipate refinancing using some combination of future borrowings under our Revolving Credit Facility and cash.

The availability under our Revolving Credit Facility and Equipment Credit Facility is $155.0 million and $20.0 million, respectively.

As of September 27, 2024, our Revolving Credit Facility and Equipment Credit Facility remain undrawn.

At September 27, 2024 we had total debt of $443.4 million, net of discounts and deferred issuance costs of $3.2 million.

We believe that our operating cash flow, cash on our balance sheet, availability under our Revolving Credit Facility, and our ability to access the credit and capital markets are sufficient to meet our anticipated operating activities and cash commitments for at least the next 12 months and will be sufficient to allow us to continue to invest in our existing businesses, consummate strategic acquisitions, and manage our capital structure on a short-term and long-term basis.

Beyond the next 12 months, our Senior Secured Notes mature in October 2027.

As of October 3, 2025, the availability under our Revolving Credit Facility was $154.8 million, and we had total debt of $367.5 million, net of deferred issuance costs of $2.4 million.

Cash and Cash Equivalents, Certificates of Deposit, and Marketable Debt Securities

The following table summarizes our cash and cash equivalents, certificates of deposit, and marketable debt securities:

(In millions) September 27, 2024 September 29, 2023 $ Change % Change

(In millions) October 3, 2025 September 27, 2024 $ Change

Cash and cash equivalents $ 145.0 $ 168.7 $ (23.7)

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Marketable debt securities not included in cash and cash equivalents 10.1 40.8 (30.7)

Total $ 212.9 $ 194.9 $ 18.0 9.2 %

$ 155.1 $ 212.9 $ (57.8)

The following table summarizes the changes in our debt outstanding:

(In millions, except for percentages) September 27, 2024 September 29, 2023 $ Change % Change

October 3, 2025 September 27, 2024

(In millions, except for percentages) Amount Amount $ Change

Current maturities of long-term debt:

Current portion of Convertible Senior Unsecured Notes $ 45.0 $ — $ 45.0 — %

Convertible Senior Unsecured Notes $ — $ 45.0 $ (45.0)

Other debt 1.5 1.5 —

Total current maturities of long-term debt $ 1.5 $ 46.5 $ (45.0)

$ 46.5 $ 1.5 $ 45.0 3,000.0 %

Non-current maturities of long-term debt:

Convertible Senior Unsecured Notes (1)

$ — $ 155.0 $ (155.0)

Senior Secured Notes 368.0 243.0 125.0

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Total non-current maturities of long-term debt $ 368.4 $ 400.1 $ (31.7)

$ 400.1 $ 446.5 $ (46.4) (10.4) %

Unamortized issuance costs and debt discounts:

Unamortized issuance costs - Convertible Notes $ — $ (1.0) $ 1.0

Debt issuance costs - Senior Secured Notes (2.2) (2.9) 0.7 (24.1) %

Total (3.2) (5.4) 2.2 (40.7) %

Unamortized issuance costs, net of debt premium - Senior Secured Notes (2.4) (2.2) (0.2)

Total unamortized issuance costs and debt discounts (2.4) (3.2) 0.8

Total debt outstanding, net $ 367.5 $ 443.4 $ (75.9)

(1) This amount was excluded from current liabilities as it was supported by the Revolving Credit Facility and restricted cash from the proceeds of the Senior Secured Notes Add On (as defined in Note 6, Borrowings ), which were expected to, and did, remain outstanding for an uninterrupted period extending beyond one year from the balance sheet date.

(In millions) 2025 2024 2023

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Effects of exchange rate changes on cash and cash equivalents and restricted cash 0.6 (0.1) 0.1

Net increase (decrease) in cash and cash equivalents and restricted cash $ 16.4 $ 63.4 $ (55.5)

Net (decrease) increase in cash and cash equivalents and restricted cash $ (23.3) $ 16.4 $ 63.4

Net cash provided by operating activities.

Net cash provided by operating activities was $47.3 million and $108.4 million for the fiscal years 2024 and 2023, respectively.

The decrease in cash provided by operating activities was primarily due to a decrease in net income and a decrease in cash inflows for inventory and prepaid expenses and other assets, partially offset by decreased payments for accounts payable during fiscal year 2024.

Net cash used in investing activities .

Cash used in investing activities was $27.5 million and $44.9 million for the fiscal years 2024 and 2023, respectively.

The decrease in cash used in investing activities was primarily due to increased proceeds from the

maturities of marketable debt securities, partially offset by increased purchases of marketable securities, increased purchases of property, plant, and equipment, and the settlement of net investment hedges in the prior year.

Cash provided by operating activities was $41.7 million and $47.3 million for fiscal years 2025 and 2024, respectively.

Net cash provided by operating activities decreased $5.6 million for fiscal year 2025 compared to fiscal year 2024.

Significant changes in operating assets and liabilities affecting cash flows during these periods included:

• Net loss was $69.9 million for fiscal year 2025 compared to a net loss of $48.3 million for fiscal year 2024.

The increase in net loss was primarily due to a goodwill impairment charge of $93.9 million in fiscal year 2025 and $5.3 million of higher interest expense in fiscal year 2025 compared to fiscal year 2024, partially offset by $33.6 million of higher sales compared to fiscal year 2024.

• Non-cash adjustments to reconcile net loss to net cash provided by operating activities increased $49.4 million in fiscal year 2025 compared to fiscal year 2024.

The increase was primarily due to the add back related to the goodwill impairment charge of $93.9 million, partially offset by a $38.6 million reduction in deferred taxes add back in fiscal year 2025, compared to fiscal year 2024 as a result of the increase in a valuation allowance during the fiscal year 2024.

• Cash used for inventories was $46.5 million higher in fiscal year 2025, compared to the fiscal year 2024, primarily due to an increase in quantity of inventory for anticipated future demand.

• Cash provided by accrued liabilities and other current and other long-term liabilities increased by $9.2 million in fiscal year 2025, compared to fiscal year 2024, primarily due to an increase of $16.2 million related to the timing of and estimation of certain compensation costs, partially offset by $5.5 million related to the reduction of warranty accruals.

Net cash provided by (used in) investing activities.

Cash provided by (used in) investing activities was $10.3 million and $(27.5) million for fiscal years 2025 and 2024, respectively.

The increase in cash provided by investing activities was primarily due to the implementation of an investment strategy to increase the Company’s cash balance to pay down the outstanding Convertible Notes that matured and were repaid in full during the third quarter of fiscal year 2025.

This strategy resulted in lower purchases of short-term marketable securities and CDs of $30.4 million, increased proceeds from maturities and sales of marketable debt securities of $4.8 million, and lower purchases of property, plant, and equipment of $4.0 million.

Net cash used in financing activities.

Net cash used in financing activities was $3.3 million and $0.2 million for the fiscal years 2024 and 2023, respectively.

The decrease in cash used in financing activities was primarily due to increased cash payments related to debt issuance costs and taxes for net share settlement of equity awards, partially offset by reduced repayments of borrowings when compared to fiscal year 2023.

Net cash used in financing activities was $75.9 million and $3.3 million for fiscal years 2025 and 2024, respectively.

The increase in cash used in financing activities was primarily due to the repayment in full of the Convertible Notes of $200.0 million, partially offset by the issuance of the Senior Secured Notes Add On of $126.9 million during the first quarter of fiscal year 2025.

Days Sales Outstanding

Trade accounts receivable days sales outstanding (“DSO”) was 70 days and 65 days at September 27, 2024 and September 29, 2023, respectively.

Trade accounts receivable days sales outstanding (“DSO”) was 62 days and 70 days at October 3, 2025 and September 27, 2024, respectively.

Our accounts receivable and DSO are impacted by a number of factors, including the timing of product shipments, collections performance, payment terms, the mix of revenues from different regions and the effects of economic instability.

Material Contractual Obligations

The following table summarizes, as of September 27, 2024, the total amount of future payments due in various future periods:

The following table summarizes, as of October 3, 2025, the total amount of future payments due in various future periods:

Payments Due by Period

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Dividends to MeVis noncontrolling interest 2.5 0.5 1.0 1.0 —

Development and share purchase commitments 1.0 1.0 — — —

Non-cancellable supplier purchase obligations 3.0 3.0 — — —

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In October 2013, we entered into an amended agreement with dpiX and other parties that, among other things, provides us with the right to 50% of dpiX’s total manufacturing capacity produced after January 1, 2014.

The amended agreement requires us to pay for 50% of the fixed costs (as defined in the amended agreement), as determined at the beginning of each calendar year.

The amended agreement requires us to pay for 50% of the fixed costs (as defined in the amended agreement), as determined and approved by the dpiX board of directors at the beginning of each calendar year.

In January 2025, the Company's fixed cost commitment was determined to be $13.7 million for calendar year 2025.

For the remainder of calendar year 2025, we estimate that we have fixed cost commitments of $3.4 million related to this amended agreement.

The fixed cost commitment for future periods will be determined and approved by the dpiX board of directors at the beginning of each calendar year.

The amended agreement will continue unless the ownership structure of dpiX changes (as defined in the amended agreement).

In October 2015, pursuant to a Domination and Profit and Loss Transfer Agreement (the “MeVis Agreement”), we committed to grant the noncontrolling shareholders of MeVis:

(1) an annual recurring net compensation of €0.95 per MeVis share;

and, (2) a put right for their MeVis shares at €19.77 per MeVis share.

The annual net payment will continue for the life of the MeVis Agreement, which we anticipate will continue for as long as we remain as the controlling shareholder of MeVis.

As of September 27, 2024, noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.3% of the outstanding shares.

In the fourth quarter of fiscal year 2022, we entered into a development agreement and a share purchase agreement with a third-party company.

For more information about these agreements, see Note 13, Commitments and Contingencies , included in the accompanying Notes to the Consolidated Financial Statements.

In August 2015, pursuant to a Domination and Profit and Loss Transfer Agreement (the “DPLTA”), we committed to pay the noncontrolling shareholders of MeVis Medical an annual recurring net compensation of €0.95 per MeVis Medical share.

The annual net payment will continue for the life of the DPLTA, which we anticipate will continue for as long as we remain as the controlling shareholder of MeVis Medical.

As of October 3, 2025, noncontrolling shareholders together held approximately 0.5 million shares of MeVis Medical, representing 26.3% of the outstanding shares.

The Company enters into purchase agreements with its suppliers in the ordinary course of its business for the purchase of goods and services.

Some of these purchase agreements are non-cancellable and thus contractually obligate us to future cash payments.

As of October 3, 2025, our non-cancellable supplier purchase obligations totaled $3.0 million.

Our operations and facilities, past and present, are subject to environmental laws, including laws that regulate the handling, storage, transport and disposal of hazardous substances.

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In connection with those laws and certain of our past and present operations and facilities, we are obligated to indemnify Varian for the cleanup liabilities related to prior corporate restructuring activities.

As of September 27, 2024, our estimated environmental liability for these sites is $3.9 million, net of expected insurance proceeds.

As of October 3, 2025, our estimated environmental liability for these sites is $3.2 million, net of expected insurance proceeds.

For further discussion regarding our environmental obligation, see Note 1, Summary of Significant Accounting Policies, included in the accompanying Notes to the Consolidated Financial Statements.

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A loss or a range of loss is disclosed when it is reasonably possible that a material loss will be incurred and can be estimated or when it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision.

We did not have any material contingent liabilities as of September 27, 2024 and September 29, 2023.

We did not have any material contingent liabilities as of October 3, 2025 and September 27, 2024.

Legal expenses are expensed as incurred.

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Our critical accounting policies that are affected by accounting estimates include valuation of inventories, assessment of recoverability of goodwill and intangible assets, and income taxes.

Note 1, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements, Item 8 "Financial Statements and Supplementary Data" describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.

Note 1, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements, Item 8.

" Financial Statements and Supplementary Data " describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.

For a discussion of how these estimates and other factors may affect our business, see Item 1A.

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We performed the annual goodwill analysis as of the first day of the fourth quarter of each fiscal year (using balances as of the end of the third quarter of that fiscal year).

In fiscal year 2025, changes in facts and circumstances related to a sustained decrease in our stock price, a decrease in our market capitalization, and downward revisions in our longer term forecast, which included the impact of tariffs and the MOFCOM initiating two investigations related to medical products imported into China resulted in our management determining that an indicator of possible impairment existed within our reporting units.

Accordingly, we performed a quantitative impairment analysis to determine the fair values of those reporting units, using both an income approach utilizing the discounted cash flow method and a market approach utilizing the public company market multiple method.

Based on the output of the analysis, we determined that the carrying amount of our Medical reporting unit exceeded its fair value.

Accordingly, we recorded a $93.9 million impairment charge to our Medical reporting unit within impairment of goodwill in the Consolidated Statements of Operations during the fiscal quarter ended July 4, 2025.

Refer to Note 5, Goodwill and Intangible Assets, of our Consolidated Financial Statements for additional information.

Significant changes in our projections of our operating results or other factors could cause us to make interim assessments of impairment in any quarter that could result in some or all of the goodwill being impaired.

A future impairment charge for goodwill could have a material effect on the Company's consolidated financial position and results of operations.

In the fourth quarter of 2024, changes in facts and circumstances related to reduced demand of the Company's medical products, coupled with a sustained decrease in the Company's stock price, resulted in the Company determining that an indicator of possible impairment existed within its reporting units.

Accordingly, the Company performed a quantitative impairment analysis to determine the fair values of those reporting units, using both an income approach utilizing the discounted cash flow method and market approach utilizing the public company market multiple method.

Based on the output of the analysis, the Company determined that the fair values of both the Medical and Industrial reporting units exceeded their carrying amounts.

Accordingly, no impairment charges were recorded during the year ended September 27, 2024.

Taxes on Income

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We periodically reassess our positions and record any changes in the financial statements as appropriate.

Gross uncertain tax positions, exclusive of interest and penalties, were $1.6 million and $1.4 million as of September 27, 2024, and September 29, 2023, respectively.

Gross uncertain tax positions, exclusive of interest and penalties, were $1.3 million and $1.6 million as of October 3, 2025, and September 27, 2024, respectively.

We believe the resolution of these matters will not materially affect our consolidated financial statements.

Income taxes are described further in Note 16, Taxes on Income, in our Notes to the Consolidated Financial Statements.

Income taxes are described further in Note 12, Taxes on Income (Loss), in our Notes to the Consolidated Financial Statements.

The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and also considers all available positive and negative evidence factors.

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Changes in our current estimates, due to unanticipated business conditions, governmental legislative actions or events, could have a material effect on our ability to utilize deferred tax assets.

The valuation allowance balances were $74.7 million and $18.7 million as of September 27, 2024 and September 29, 2023, respectively.

Refer to Note 16, Taxes on Income, of our consolidated financial statements for additional information on the composition of valuation allowances.

The valuation allowance balances were $79.4 million and $74.7 million as of October 3, 2025 and September 27, 2024, respectively.

Refer to Note 12, Taxes on Income (Loss), of our Consolidated Financial Statements for additional information on the composition of valuation allowances.

Compensation Recovery Analysis

As disclosed in more detail in “Revision to Prior Period Financial Statements” in Note 1, Summary of Significant Accounting Policies , of the accompanying Notes to the Consolidated Financial Statements, the Consolidated Financial Statements include the correction of an error to previously issued financial statements that required a recovery analysis of incentive-based compensation received by our executive officers under the Varex Imaging Corporation Compensation Recovery Policy filed as Exhibit 97 to this Annual Report.

We have determined that no recovery of incentive-based compensation is required as the correction resulted in no changes to the performance metrics used to determine incentive-based compensation for executive officers during any of the applicable completed fiscal years.

Recent Accounting Standards or Updates Not Yet Effective

See Note 1, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements for a description of recent accounting standards, including the expected dates of adoption and the estimated effects on our consolidated financial statements.

See Note 1, Summary of Significant Accounting Policies , of the accompanying Notes to the Consolidated Financial Statements for a description of recent accounting standards, including the expected dates of adoption and the estimated effects on our Consolidated Financial Statements.

Backlog is the accumulation of all orders for which revenues have not been recognized and are still considered valid.

Backlog also includes a small portion of billed service contracts that are included in deferred revenue.

Our estimated total backlog at September 27, 2024 was approximately $299 million.

Our estimated total backlog at October 3, 2025 was approximately $262 million.

Orders may be revised or canceled, either according to their terms or as customers' needs change.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis