The medtech analyst at Jefferies, thanks for coming to our conference. I'm very excited to have management from Varex Imaging here as well. To my immediate left, you got Sunny Sanyal, the CEO, and next to him, the CFO, Sam Maheshwari. Thank you, gentlemen, for coming, and looking forward to a good discussion. I guess to start, maybe a little bit high level. You guys are leaders in CT and X-ray tubes and detectors. It's used in medical industrial applications. You work with most of the OEMs worldwide. Can you talk a little bit about the main value prop for what Varex brings to the table for your customers? Why are OEMs choosing to outsource these critical components to Varex instead of bringing it in-house? Yeah. Thank you. Good morning, everyone. Varex is a market leader in imaging components that are for X-ray-based imaging systems, both in medical and industrial. Our medical business is roughly 70%-80% of our business, so we're overwhelmingly largely a medical company. That said, there are several modalities in which we lead further ahead than others, and CT is one of those stronger modalities for us. In our business model, the B2B business model, the main driver for why OEMs talk to us and work with us is because of our investments in innovation. We have, over the last 20 years, invested over $1 billion in foundational technologies that, frankly, most OEMs don't have. There's only top four or five OEMs that even have the basic capabilities to make these foundational components, and the remaining 150 don't. That is the main reason why we are called to the table. We're a design partner. We have very large R&D organizations. Our value proposition is the 500 people that we have in X-ray-based product development, product design, 600 or so patents in this space, and the amount of money that we put into innovation in these foundational components. For our OEMs, that means they get bespoke components that are made uniquely for them. That gives them differentiated capabilities, and we help them bring these to market faster. If they had to start by designing an X-ray tube for the next CT system, it would take them five, seven years to bring a CT to market. Instead, with our help, they can bring these to market faster, leverage our scale. We tend to aggregate scale between medical and industrial and across modalities, which puts us in a unique position. OK. So I guess fair to assume that you still see the market as going more and more towards outsourcing versus insourcing? These go in cycles. The top four or five OEMs, we talk about companies like GE, Siemens, Philips, Canon, they have the ability to make these tubes. The question is, just because they have the ability, would they or not? The majority do not. Our strength has been in identifying the ones who are the future winners and who are going to end up leading and partnering with them. We work with pretty much every OEM. The trend is largely more towards outsourcing than insourcing. If you just dial back 20 years, Canon was a new player in CT 20 years ago. We identified them. The players that we work with in other parts of the world now and in China, they were not there 10 years, 15 years ago. Similarly, as we look forward to countries like India and the new emerging markets and the new emerging OEMs, somewhere in there also are winners. So that's 100% outsourced market. All right. Great. Maybe if you can touch upon sort of the recent fiscal 2Q results. So the numbers you printed were pretty strong, above consensus on revenue, gross margin, EPS, above your guidance. You saw some demand come back after, I guess, a decently long period of channel inventory dynamics. Wanted to hear about the state of the state right now, just the strength of the base business and what drove the upside in fiscal 2Q. Yeah. I'll just make a general comment, and I'll ask Sam, our CFO, to also fill in. In general, throughout last year, throughout 2024, we were telegraphing the market trends. The two things that we felt were holding back the market, one was the audits of the hospitals in China and then the inventory situation. We sit further up in the value chain, so we get visibility to some of these things six months or so ahead of everyone else. I'm very happy to say that the first half results were very good, and they were in line with what we had been telegraphing for market trends and the trend of orders. We saw good solid order coverage. It played out the way we had said. The audit of the hospitals was, we said, that would be reduced in its effect. We also expected that the destocking phenomena would be behind us by end of December. We saw that play out just that way as we had predicted. Yeah. I would add that the order momentum starting from January, February time frame has remained good. The order momentum was good, and business was nicely recovering. From mid-April onwards, or say first or second week of April, the tariff-related situation started to come in, causing a few areas of uncertainty. Overall, the demand is there. The patient flow, all of that is there for the hospitals. The CapEx situation remains very much intact. From the base drivers of the business, those base demand drivers are there, and the order flow is good. All right. That's helpful. I guess since you brought up tariffs, and it's a subject we can't really avoid nowadays, there's seemingly weekly or daily updates on the subject matter. I guess, can you maybe just talk about a little bit high level what you're seeing currently, given the pause? Our customers in China right now just sort of racing to get their orders in during this time. Are there any high level puts and takes you have us kind of think about during this dynamic environment? Yeah. The situation remains fluid. Maybe fluid is a soft term. It's turbulent. Since our earnings and the tariffs was at the 145% level, it's come down quite a bit. It's at about 55% level on equivalent terms for input materials. The situation, it is moving in a more positive direction from that perspective. Your question about the order situation, the fundamental end market demand continues to be more or less the same. The tariffs haven't impacted that. We have not seen a change in the end market demand. The way our customers place orders, they give us a frame order for what they need for our lead times. We have 90-day, 120-day lead times. They give us orders for 120 days, 90 days' worth. Then they give us specific guidance on what to ship when. The situation still remains that they are very careful about not ordering too much, because who knows? Next week, the next 10 days, something better might happen. That said, we have seen this move has been positive. As we had said, if the 145% tariff level is like an embargo, anything better than that will make things better. That is the situation. What we are currently doing is continuing to focus on the mitigation actions. We have near-term, mid-term, long-term mitigation action plans. The near-term action is, whether it is 100% tariffs or 50% tariffs or 30% tariffs, we are going to pass on the input cost to our customers. That has been our stance. We have rolled that out. We are working with our customers on that. The second thing we said we would do was we are redirecting our supply chain to more tariff-favorable suppliers in other parts of the world. We have been diversifying our supply chain. The third thing we're doing is finding out ways to double down on our regionalization strategy of manufacturing and seeing, for the longer term, make ourselves much, much more resilient. We are already far more resilient than we were back in 2018, 2019 when this happened. Yes, the situation is fluid, and it's moving in the positive direction. We're happy to see that. Our customers are responding also favorably to that. There are more inquiries about what we can do and when we can ship new products to them. We're limited by lead times, but we're doing our best. We're working with our customers. OK. Got it. That's very helpful. I guess because your products are designed in with your OEMs, they have to buy the replacement tubes and detectors from you. I guess I'm kind of curious, what about new equipment orders in China? How much is that being impacted by the tariff situation? Yeah. Again, we'll talk about China a little bit more broadly. First and foremost, now that the tariff, I'm sorry, now that the hospital audit situation is behind us in China, we are seeing increased—we are hearing of increased tender activity by our Chinese customers. Even in this current environment, our tubes that we're shipping are going to both install base and to fulfill new demand, because we keep hearing about our customers bidding in tenders and the competitive situation there. That is going on. I've not seen a connection yet between the tariff situation and end market demand yet. The direct answer to your question is, yes, we do expect that some of our tubes and detectors that we sell in China and other parts of the world are going towards new equipment sales. That said, when we had the guidance that we've given remains our guidance. We are designed in. Yes, there is a lot of stickiness in the way our products are designed in. The only way someone would stop ordering our product is if they have a form, fit, function exact replacement for our component, or they just have to design a new system and use a new set of components and new infrastructure for that new system, which takes a lot of time. There is a very large install base of our components globally and also in China, for which we expect that for what's needed for replacement will keep coming back to us for an extended period of time, unless someone just comes up with something that immediately replaces us, which is not an easy thing to do, particularly for tubes. Maybe, Sam, you can comment on the guidance comment that we made. Yeah. The guidance that we had provided at that time, the tariff rates were high. Obviously, the move down of tariff rates from 145% to whatever it is is definitely a positive for commerce between the two countries. That is also positive for us. However, the challenge that any company, including us, we look at the situation, and anything can change tomorrow. Anything can change next week. We have to keep that in consideration. Given the movement that we know since the earnings date today, it's been positive, but we're still looking at uncertainty, as I explained. We are neither confirming nor denying guidance. However, it's definitely a positive in terms of our business outlook. OK. Very helpful, color. Can I maybe just follow up on that topic, just on the mitigation efforts you talked about? One thing was sort of regionalizing the manufacturing process. You do have a plant in India. I think you just flew in from India last night, Sam. Flying around the world to be here to talk to us today, we appreciate it. Can you give us the latest update on the India plant? When do you think products will start to come out, and how much can it serve the China market and help mitigate the tariff situation? Yeah. Sure. Thanks, Yang. Yes, our activities and efforts in India are going as per our plan, and they're going very well. We have two factories that are coming up in India. One is for detectors, and another one is for tubes. For the detectors factory, all the construction building is all done. Equipment validation is going on. Certain last few steps in terms of licensing and all of that to start shipping from that factory is awaited. We are in the very final stages of that factory for detectors. I hope in the next few months, call it three, four months, we should be shipping from that factory in India. The second factory is related to our tubes production. It is a lot more involved affair in the sense it's a larger factory. It is still 12 months -15 months away from producing products. I would say that our India strategy has been very timely. I say to everybody is that we are 15 months or 18 months ahead in this tariff regime and environment. I say that we are 12 months behind. I wish we had those factories running and producing and shipping products as we speak. That would have definitely helped us. We are quite pleased with the progress there. We are full steam ahead on both of those manufacturing locations. OK. Very helpful. I mean, you have a lot of materials that source OUS. Are there any more sensitive raw materials or components or products that's potentially being impacted by tariffs or supply chain? Yeah. There are certain components or raw materials that we buy. Just like for our customers, it also applies to us that for our product, it is not easy to change the raw material that goes into the building of a tube and also that goes into certain aspects of the detector. Those supply chains are very sticky. Changing them in a matter of months is not possible. If you are looking at 24 months or 36 months type of a horizon, yes, we can make a difference there. Right now, as we speak, we are continuing to bring in material into the U.S. from countries in Europe, Japan, et cetera. We are paying tariffs. We are seeing increased costs in our cost of goods sold. That said, it is not a one or a zero or a billion type of an answer. We are, wherever we can diversify the supply chain, we are diversifying. We are sourcing more from India now. We are also sourcing more from other countries where the tariff rates might be lower. There is a move away to source from China, a move away from China in terms of sourcing for U.S. production and source it from India or some other country. That is definitely in process and in progress. We are making good progress there. The bigger strategy, as Sunny mentioned, is a bigger focus towards regionalization of manufacturing. Produce in China, source from China, and ship to customers in China, for example. Similarly, try to do that in the U.S. India sits as more of a neutral country as of now. That helps us in our diversification of supply chain. OK. Got it. You mentioned passing off price as a mitigation factor as well. Just curious, how receptive are customers to that? It seems pretty straightforward, because we know why prices are going up. Are you seeing any pushback from customers? Are you sharing some of the pain with them? Are they handling it pretty well? Majority of our customers are going with the flow. They know it's inevitable. Nobody likes it. We're making it easier for them by giving them some amount of transparency, line itemizing it, and working with them to figure out how it makes it palatable for them for their internal purposes. A few of the large customers obviously want more details, more information. This is going to take a little bit of time for us to operationalize. I'd say, on balance, it's going just the way we expected it would, which is they would accept it. They're not going to take it without asking a lot of questions, which is what they're doing. Yeah. Something I can add, Yang, here is some of the challenges are when the tariff rates are changing on a monthly basis. What tariff to charge itself becomes a question mark. Obviously, customers want details on that. That makes it very difficult in a manufacturing flow, which is long duration in the sense it takes six to eight weeks to complete a tube. That is one challenge, for example. Secondly, obviously, from our customer perspective, they want to know what are we doing to minimize the tariff for the entire supply chain. For example, if I'm buying something and paying tariffs, what can we do in terms of reducing that tariff burden? All of those discussions take time. It is applicable to the entire customer base. You can imagine our sales is extremely busy right now as we speak on this aspect. Those are some of the push and pull. The basic argument or the logic of passing it on to customers is not being contested by anybody. It's just that, what can we do about it, as well as the appropriateness of it. OK. Very helpful. I guess maybe just one more on China, somewhat separate. Wanted to hear the latest updates, if there's any, on the Ministry of Commerce investigations. Yeah. This is the anti-dumping investigation and also the industry investigation that was in process. We feel that this was one of the retaliatory actions. Once the pause was announced by the U.S. government, the Ministry of Commerce also announced a pause. It was almost pretty much the same the next day or two. It is currently on pause. We have communicated that we will collaborate, and we will work with them. We have continued to do the work ourselves, the homework that we needed to do to continue to gather data and do our analysis. We are doing that. It is on pause currently. OK. Great. I guess maybe focusing on the medical segment a little bit. The medical revs ex China has been relatively stable in the fiscal first half. Can you maybe talk a little bit about sort of where are you with the channel inventory dynamics currently? Do you expect—I mean, you have somewhat of a lead time with your customers' orders. Maybe you can just update on the health of the channel inventory currently. OK. As we had mentioned, we talked about earlier about how we expected the destocking to play out. We believe that that has happened. It has played out the way we had anticipated. We were working very closely with our customers to understand their inventory positions. It is our belief that they are back to normal operating conditions. Most of our customers do not keep a lot of inventory. A few of our large customers even go to the extent of having just-in-time inventory. They have to maintain stock in the field for service purposes. Our customers tend to keep about a month's worth of inventory. We think we are in sort of that bracket. Very few customers keep more than that, maybe 60 days-90 days. From what we can see and hear and from what we're seeing in the ordering patterns, we're back to historical norms. All right. Got it. So you disclose revenue from your top customers, your number one customer is Canon. Just looking back at that relationship, it seems like the revenue contribution has been pretty stable, $140 million-$150 million a year, 17%-18% of annual revs. They just launched a new product with you. Wanted to hear a little bit about the outlook on that relationship and if you think they'll continue to outsource or they have the capability to insource if you're hearing anything on that front. Canon's been a stable customer for us in that 16%-17%-18% bracket for a very, very long time. We don't see that dynamic changing in the near term. We are continuing to be very engaged with them on R&D projects, on innovation. We don't typically do new product announcements. We did announce one recently about their vertical CT scanner because it was so unique and novel. We were very happy that they did that using our technology. There are ongoing R&D projects for other revisions of their CTs and new CT models. That relationship is very healthy and continuing. Yang, the one thing I want to add is if you look at a two- to three-year type of a window and look at the dollar to yen exchange rates, et cetera, in yen it has gone up. In dollar terms, it may appear flat. Although we do not have that much of a yen exposure in the sense billing is in dollars. From the customer perspective, they're paying more in terms of where they consume the product. OK. That's very helpful. Maybe you can dig in a little bit on some of the end markets within medical. I think most recently, fluoro, oncology, mammo, dental were above trend. Some of the other segments, maybe flattish or a little bit below trend, five-quarter ordering trends. Can you maybe talk a little bit about the key drivers for some of those end markets? Then your outlook on some of those you want to highlight. Yeah. The end market demand for these products is in line with secular demand rates for those modalities, for fluoroscopy, for oncology, for surgery, et cetera. There is nothing unusual or noteworthy for me to call out. Since the overstocking situation is behind us, we had a tough time in 2024 with the inventory situation. Now we have seen it return to normal. We are seeing good year over year, or the five-quarter comp sales versus the five-quarter comps. We are good. We expect that to stay normal. OK. Great. Switching over to the industrials business. It's been growing faster than medical for a while. I think you called out subsegments like global security, cargo inspection, airport inspection, those type of markets that's driving a lot of growth. Can you maybe provide us with some view on the sustainability of the strong growth in those key markets going forward? Yeah. I think demand in the industrial market is durable because it's greenfield. It's large. It's greenfield. And it's diversified across many verticals. We had also, in 2024, suffered from the overstocking situation. But we've seen growth come back as the new order demand coverage has been good. Within that segment, we sell detectors, tubes also, and high-energy linear accelerators. More recently, we introduced systems for cargo and for irradiation. We're excited about these new systems products because they're, again, a brand new addressable market for us. We are a very well-known player in that space. Historically, we have been in that space selling systems. We're getting drawn into, pulled into systems, tenders. Industrial is growing for us, as well as the end markets are growing faster than medical. It's also much larger. We are excited about the prospect of industrial driving growth for our business. I guess one exciting new development is your direct-to-customer industrials inspections business. I think you had $25 million orders last quarter, $14 million the quarter before. How big is that opportunity for you? Can you maybe talk a little bit about where are you winning these tenders from? How's the competitive dynamic? How do you differ from the competition? And why are customers choosing you? Yeah. I think specifically, Yang, I think you might be referring to cargo systems space. In the cargo inspection systems, that is a billion-plus type of an addressable opportunity space. As I mentioned, we are very well known because of our brand recognition and our very large footprint of the critical components in the space. We get visibility to most of the tender and deal activity that is going on. It is kind of safe to say that. We are participating actively. There are a few large players in that space. Of course, we end up competing against them. Our distinction here is that we are one of the only, really, two companies in the world that are vertically integrated end-to-end. One is us, and the other is a Chinese company. It gives us quite a bit of advantage when it comes to innovation and tailoring our components to make our systems differentiated. We are bullish and optimistic about our ability to win business in this space. It might be difficult for us to go head-to-head against a large player at a country level. There is a lot of business happening that are in the periphery of the small-sized businesses. When I say small, we are talking about 10, 15, 20, 30+. In the type of deals that we have been doing, there is a lot of that volume. We expect to keep doing that and gather critical mass and referenceability, which is what has been happening. It is only recently that we started announcing these wins. We will continue to do that for at least some period of time to give you visibility. All right. Great. I think that's all the time we have.