The quarter cleared expectations on EPS, but not on reported revenue. Non-GAAP diluted EPS was $0.31 versus a published consensus near $0.21–$0.22, a clear beat, while revenue of $210.5 million was below the roughly $215.5–$218.2 million expectation range. However, product sales before the $7 million customer-reimbursement accrual were approximately $217 million, making the underlying top line broadly in line with expectations. (Financial Highlights; Management commentary)
| Metric | Q3 FY2026 | Q3 FY2025 / expectation | Read |
|---|---|---|---|
| Revenue | $210.5M | $203.0M; consensus roughly $215.5M–$218.2M | 4% reported growth, but below consensus (Financial Highlights) |
| Product sales before reimbursement accrual | ~$217M | — | Underlying sales roughly in line (Management commentary) |
| Non-GAAP diluted EPS | $0.31 | $0.13; consensus roughly $0.21–$0.22 | Material beat (Non-GAAP net income reconciliation) |
| Non-GAAP gross margin | 36.7% | 33%–34% company guidance; 33.5% prior year | Well above both guidance and prior year (Non-GAAP reconciliation) |
| Adjusted EBITDA | $33.1M | $27.5M prior year | 20% year-over-year increase (Adjusted EBITDA reconciliation) |
| Operating cash flow | $21M | — | Positive cash generation, but liquidity declined (Management commentary; Balance Sheet) |
The margin beat is much less clean than the headline suggests. Varex received $17 million of tariff refunds and recorded a $7 million accrual for expected customer reimbursements, producing an estimated $10 million increase to gross profit. That benefit explains a substantial portion of the 36.7% non-GAAP gross margin and $24.5 million of non-GAAP operating income; excluding it, the underlying operating result would have been materially weaker. (Management commentary; Non-GAAP operating income reconciliation)
Industrial demand is doing the heavy lifting while Medical remains a drag. Industrial revenue rose to $76.5 million from $60.9 million, roughly 26% higher year over year, helped by cargo and vehicle inspection systems. Medical revenue fell to $134.0 million from $142.1 million, so the overall 4% revenue increase reflects a sharp mix shift rather than broad-based growth. (Financial Highlights)
The outlook is less informative because management withdrew guidance and the call. Varex did not provide fourth-quarter or full-year guidance and cancelled its earnings call because of the pending Teledyne transaction. Since the transaction was already announced, this is more a loss of forward visibility than a new operating deterioration; nevertheless, investors cannot test the quarter's momentum against updated targets. (Management commentary)
The net read is a modest beat with notable quality caveats. EPS substantially exceeded the published expectation and underlying product sales were near consensus, supporting a mildly positive read. But the earnings upside was helped by a non-recurring tariff refund, Medical revenue declined, cash fell to $99.2 million from $155.1 million at fiscal year-end, and inventory increased to $347.1 million from $299.4 million. (Balance Sheet; Management commentary)
Read the original 8-K on SEC EDGAR ↗