PALO ALTO, Calif., Jan. 29, 2020 /PRNewswire/ --
First Quarter 2020 Summary
- Oncology Systems gross orders grew 8% in dollars or 9% in
constant currency in the quarter and over the trailing twelve
months
- Total company revenues grew 12% in dollars, or 13% in constant
currency, to $829 million; organic
revenues grew 8%(1)
- GAAP operating earnings declined 1% at 13.3% of revenues;
non-GAAP operating earnings grew 13% at 16.2% of revenues
- GAAP net earnings per diluted share of $0.96; non-GAAP net earnings per diluted share of
$1.16
- No change to fiscal year 2020 guidance
(1) Excludes the year-over-year impact of
foreign exchange and growth from our CTSI and Interventional
Solutions businesses
Varian (NYSE: VAR) today announced its first quarter fiscal year
2020 results.
"In the first quarter, our business fundamentals remained strong
and our team delivered solid results with double-digit revenue
growth in our Oncology Systems business driven by strong software
and services revenue growth," said Dow Wilson, Chief Executive
Officer of Varian. "We continue to make planned investments
across the portfolio to scale our global sales and operations
infrastructure as we execute on our long-term growth and value
creation strategy."
Summary
(Dollars and shares
in millions, except per share amounts)
|
Q1
2020
|
|
Q1
2019
|
|
Y/Y
|
Revenues
|
$
|
828.9
|
|
|
$
|
741.0
|
|
|
12
|
%
|
Gross margin as a
percentage of revenues
|
44.2
|
%
|
|
42.7
|
%
|
|
160
bps
|
GAAP net earnings
attributable to Varian
|
$
|
88.2
|
|
|
$
|
103.2
|
|
|
(14)
|
%
|
GAAP net earnings per
share - diluted
|
$
|
0.96
|
|
|
$
|
1.12
|
|
|
(14)
|
%
|
Net cash provided by
operating activities
|
$
|
112.6
|
|
|
$
|
140.9
|
|
|
(20)
|
%
|
Non-GAAP net earnings
attributable to Varian (1)
|
$
|
106.6
|
|
|
$
|
97.3
|
|
|
10
|
%
|
Non-GAAP net earnings
per share - diluted (1)
|
$
|
1.16
|
|
|
$
|
1.06
|
|
|
10
|
%
|
Shares used in
computing GAAP and non-GAAP net earnings per diluted
share
|
91.7
|
|
|
92.0
|
|
|
|
|
|
(1)
|
Non-GAAP net earnings
and Non-GAAP net earnings per diluted share are defined as GAAP net
earnings and GAAP net earnings per diluted share adjusted to
exclude the amortization of intangible assets and amortization of
inventory step-up, acquisition and integration-related expenses or
benefits, significant litigation charges or benefits and legal
costs, gains and losses on equity investments, and significant
non-recurring tax expense or benefit. Reconciliation of GAAP and
non-GAAP financial measures can be found at the end of the press
release.
|
The company ended the quarter with $722
million in cash and cash equivalents and $544 million in debt. Net cash provided by
operating activities was $113
million, down $28 million, due
to working capital investments to support growth. During the
quarter, the company invested $46
million to repurchase three hundred and thirty-three
thousand shares of common stock.
Oncology Systems Segment
Oncology Systems revenues
totaled $782 million, up 11%.
GAAP operating earnings were $136
million, up 10%. Gross orders were $774 million, up 8%. Gross orders in the
Americas increased 7% with 4% growth in North America. In
EMEA, gross orders rose 8%. In APAC, gross orders increased
9% driven by growth in China,
South East Asia and Korea that was
partially offset by softness in Japan.
Proton Solutions Segment
Proton Solutions revenues
totaled $28 million, down 28%.
The company received one new system order in the quarter.
Operating earnings were impacted by project mix and updated project
costs.
Other Segment
Revenues for the Other segment were
$19 million. The Other segment
is comprised of our Interventional Solutions business, including
cryoablation, embolic microspheres, and microwave ablation.
Additionally, it includes our investments in cardiac
radioablation.
Non-GAAP Adjustments
This quarter, our GAAP operating
earnings and GAAP EPS included a $9
million change in the fair value of contingent consideration
related to our acquisitions of Endocare and Alicon. In the
first quarter of fiscal year 2019, GAAP net earnings and GAAP EPS
included a $22 million gain on the
sale of our equity investment in Augmenix.
Guidance for Full Fiscal Year 2020
Based on solid
operating performance in the first fiscal quarter and continued
market and product momentum, the company is making no changes to
the fiscal year 2020 guidance given during the last earnings
call. The company expects earnings to be weighted towards the
back-half of the fiscal year as it continues to invest in future
growth. The company considers factors that can influence the
business, including the strength across the portfolio, growing
contribution from software and services, performance variability of
the Proton Solutions segment, and the mix of mature and emerging
markets.
Investor Conference Call
Varian Medical Systems is
scheduled to conduct its first quarter fiscal year 2020 conference
call at 1:30 p.m. Pacific Time
today. To access the live webcast or replay of the call,
visit the Investor Relations page on our website at
www.varian.com/investors. To access the call via telephone,
dial 1-877-869-3847 from inside the U.S. or 1-201-689-8261 from
outside the U.S. The replay can be accessed by dialing
1-877-660-6853 from inside the U.S. or 1-201-612-7415 from outside
the U.S. and entering conference ID 13697535. The teleconference
replay will be available until 5:00 p.m.
Pacific Time, Friday, January 31,
2020.
About Varian
At Varian, we envision a world without
fear of cancer. For more than 70 years, we have developed, built
and delivered innovative cancer care technologies and solutions for
our clinical partners around the globe to help them treat millions
of patients each year. With an Intelligent Cancer Care approach, we
are harnessing advanced technologies like artificial intelligence,
machine learning and data analytics to enhance cancer treatment and
expand access to care. Our 10,000 employees across 70 locations
keep the patient and our clinical partners at the center of our
thinking as we power new victories in cancer care. Because, for
cancer patients everywhere, their fight is our fight. For more
information, visit http://www.varian.com and follow
@VarianMedSys on Twitter.
Forward-Looking Statements
Except for historical
information, this news release contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements concerning industry or market outlook,
including growth drivers; the company's future orders, revenues,
operating expenses, tax rate, cash flows, earnings growth or other
financial results; and any statements using the terms "could,"
"believe," "expect," "promising," "outlook," "should,"
"well-positioned," "will" or similar statements are forward-looking
statements that involve risks and uncertainties that could cause
the company's actual results to differ materially from those
anticipated. Such risks and uncertainties include our ability to
achieve expected synergies from acquisitions; risks associated with
integrating recent acquisitions; global economic conditions and
changes to trends for cancer treatment regionally; currency
exchange rates and tax rates; the impact of the Tax Cuts and Jobs
Act; the impact of the Affordable Health Care for America Act
(including excise taxes on medical devices) and any further
healthcare reforms (including changes to Medicare and Medicaid),
and/or changes in third-party reimbursement levels; recent and
potential future tariffs or a global trade war; demand for and
delays in delivery of the company's products; the company's ability
to develop, commercialize and deploy new products; the company's
ability to meet Food and Drug Administration (FDA) and other
regulatory requirements, regulations or procedures; changes in
regulatory environments; risks associated with the company
providing financing for the construction and start-up operations of
particle therapy centers, challenges associated with
commercializing the company's proton solutions business; challenges
to public tender awards and the loss of such awards or other
orders; the effect of adverse publicity; the company's reliance on
sole or limited-source suppliers; the company's ability to maintain
or increase margins; the impact of competitive products and
pricing; the potential loss of key distributors or key personnel;
challenges related to entering into new business lines; and the
other risks listed from time to time in the company's filings with
the Securities and Exchange Commission, which by this reference are
incorporated herein. The company assumes no obligation to update or
revise the forward-looking statements in this release because of
new information, future events, or otherwise.
Varian has not filed its Form 10-Q for the period ended
January 3, 2020. As a result,
all financial results described here should be considered
preliminary, and are subject to change to reflect any necessary
adjustments, completion of purchase accounting, or changes in
accounting estimates, that are identified prior to the time the
company files the Form 10-Q.
Varian Medical
Systems, Inc. and Subsidiaries
|
Preliminary
Condensed Consolidated Statements of Earnings
|
(Unaudited)
|
|
|
|
|
|
(Dollars and
shares in millions, except per share amounts)
|
|
Q1
2020
|
|
Q1
2019
|
Gross
orders
|
|
$
|
818.6
|
|
|
$
|
721.7
|
|
Oncology
Systems
|
|
773.8
|
|
|
716.5
|
|
Proton
Solutions
|
|
25.9
|
|
|
5.2
|
|
Other
|
|
18.9
|
|
|
—
|
|
Order
backlog
|
|
3,305.3
|
|
|
3,174.7
|
|
Revenues
|
|
828.9
|
|
|
741.0
|
|
Oncology
Systems
|
|
782.4
|
|
|
702.5
|
|
Proton
Solutions
|
|
27.6
|
|
|
38.5
|
|
Other
|
|
18.9
|
|
|
—
|
|
Cost of
revenues
|
|
462.1
|
|
|
424.9
|
|
Gross
margin
|
|
366.8
|
|
|
316.1
|
|
As a percentage of
revenues
|
|
44.2
|
%
|
|
42.7
|
%
|
Operating
expenses
|
|
|
|
|
Research and
development
|
|
67.1
|
|
|
60.9
|
|
Selling, general and
administrative
|
|
177.0
|
|
|
141.1
|
|
Acquisition-related
expenses
|
|
12.7
|
|
|
2.4
|
|
Operating
earnings
|
|
110.0
|
|
|
111.7
|
|
As a percentage of
revenues
|
|
13.3
|
%
|
|
15.1
|
%
|
Interest income
(expense)
|
|
(1.7)
|
|
|
2.7
|
|
Other income,
net
|
|
4.4
|
|
|
23.0
|
|
Earnings before
taxes
|
|
112.7
|
|
|
137.4
|
|
Taxes on
earnings
|
|
23.8
|
|
|
33.5
|
|
Net
earnings
|
|
88.9
|
|
|
103.9
|
|
Less: Net earnings
attributable to non-controlling interests
|
|
0.7
|
|
|
0.7
|
|
Net earnings
attributable to Varian
|
|
$
|
88.2
|
|
|
$
|
103.2
|
|
|
|
|
|
|
Net earnings per
share - basic
|
|
$
|
0.97
|
|
|
$
|
1.13
|
|
Net earnings per
share - diluted
|
|
$
|
0.96
|
|
|
$
|
1.12
|
|
|
|
|
|
|
Shares used in the
calculation of net earnings per share:
|
|
|
|
|
Weighted average
shares outstanding - basic
|
|
90.9
|
|
|
91.0
|
|
Weighted average
shares outstanding - diluted
|
|
91.7
|
|
|
92.0
|
|
Varian Medical
Systems, Inc. and Subsidiaries
|
Preliminary
Condensed Consolidated Balance Sheets
|
(Unaudited)
|
|
|
|
|
|
(In
millions)
|
|
January
3,
|
|
September
27,
|
2020
|
2019
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
721.9
|
|
|
$
|
531.4
|
|
Trade and unbilled
receivables, net
|
|
1,073.5
|
|
|
1,106.3
|
|
Inventories
|
|
597.4
|
|
|
551.5
|
|
Prepaid expenses and
other current assets
|
|
248.5
|
|
|
206.2
|
|
Total current
assets
|
|
2,641.3
|
|
|
2,395.4
|
|
|
|
|
|
|
Property, plant and
equipment,
net
|
|
317.0
|
|
|
311.5
|
|
Right-of-use
assets
|
|
127.4
|
|
|
—
|
|
Goodwill
|
|
612.4
|
|
|
612.2
|
|
Intangible
assets
|
|
290.9
|
|
|
300.7
|
|
Deferred tax
assets
|
|
85.7
|
|
|
84.7
|
|
Other
assets
|
|
370.3
|
|
|
397.2
|
|
Total
assets
|
|
$
|
4,445.0
|
|
|
$
|
4,101.7
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
215.3
|
|
|
$
|
248.5
|
|
Accrued
liabilities
|
|
471.2
|
|
|
459.5
|
|
Deferred
revenues
|
|
812.2
|
|
|
766.0
|
|
Short-term
borrowings
|
|
542.0
|
|
|
410.0
|
|
Total current
liabilities
|
|
2,040.7
|
|
|
1,884.0
|
|
Long-term lease
liabilities
|
|
103.7
|
|
|
—
|
|
Other long-term
liabilities
|
|
443.3
|
|
|
440.1
|
|
Total
liabilities
|
|
2,587.7
|
|
|
2,324.1
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
Varian stockholders'
equity:
|
|
|
|
|
Common
stock
|
|
90.7
|
|
|
90.8
|
|
Capital in excess of
par value
|
|
870.4
|
|
|
845.6
|
|
Retained
earnings
|
|
983.2
|
|
|
934.0
|
|
Accumulated other
comprehensive loss
|
|
(97.0)
|
|
|
(102.1)
|
|
Total Varian
stockholders'
equity
|
|
1,847.3
|
|
|
1,768.3
|
|
Non-controlling
interests
|
|
10.0
|
|
|
9.3
|
|
Total
equity
|
|
1,857.3
|
|
|
1,777.6
|
|
Total liabilities
and equity
|
|
$
|
4,445.0
|
|
|
$
|
4,101.7
|
|
|
|
|
|
|
Discussion of Non-GAAP Financial Measures
This press
release includes the following non-GAAP financial measures derived
from our Condensed Consolidated Statements of Earnings: organic
revenue growth, non-GAAP operating earnings, non-GAAP net earnings
and non-GAAP net earnings per diluted share. We define organic
revenue growth as revenue growth less the impact of revenue growth
from our CTSI and Interventional Solutions businesses and adjusted
for the impact of foreign exchange. We define non-GAAP operating
earnings as operating earnings excluding amortization of intangible
assets, amortization of inventory step-up, acquisition and
integration-related expenses or benefits, significant litigation
charges or benefits and legal costs. These measures are not
presented in accordance with, nor are they a substitute for U.S.
generally accepted accounting principles, or GAAP. In addition,
these measures may be different from non-GAAP measures used by
other companies, limiting their usefulness for comparison purposes.
The non-GAAP financial measures should not be considered in
isolation from measures of financial performance prepared in
accordance with GAAP. Investors are cautioned that there are
material limitations associated with the use of non-GAAP financial
measures as an analytical tool. We have provided a reconciliation
of each non-GAAP financial measure used in this earnings release to
the most directly comparable GAAP financial measure. We have not
provided a reconciliation of non-GAAP guidance measures to the
corresponding GAAP measures on a forward-looking basis due to the
potential significant variability and limited visibility of the
excluded items discussed below.
We utilize a number of different financial measures, both GAAP
and non-GAAP, in analyzing and assessing the overall performance of
our business, in making operating decisions, forecasting and
planning for future periods, and determining payments under
compensation programs. We consider the use of the non-GAAP measures
to be helpful in assessing the performance of the ongoing
operations of our business. We believe that disclosing non-GAAP
financial measures provides useful supplemental data that, while
not a substitute for financial measures prepared in accordance with
GAAP, allows for greater transparency in the review of our
financial and operational performance. We also believe that
disclosing non-GAAP financial measures provides useful information
to investors and others in understanding and evaluating our
operating results and future prospects in the same manner as
management and in comparing financial results across accounting
periods and to those of peer companies. Non-GAAP operating earnings
and non-GAAP net earnings exclude the following items, except for
gain and losses on equity investments, and significant
non-recurring tax expense or benefit, which are only excluded from
non-GAAP net earnings:
Amortization of intangible assets and amortization of
inventory step-up: We do not acquire businesses and
assets on a predictable cycle. The amount of purchase price
allocated to intangible assets, the step-up of inventory values,
and the term of amortization can vary significantly and are unique
to each acquisition or purchase. We believe that excluding
amortization of intangible assets and amortization of inventory
step-up allows the users of our financial statements to better
review and understand the historic and current results of our
operations, and also facilitates comparisons to peer companies.
Acquisition and integration-related expenses or
benefits: We incur expenses or benefits with respect to
certain items associated with our acquisitions, such as transaction
costs, hedging gains and losses, changes in the fair value of
contingent consideration liabilities, gain or expense on settlement
of pre-existing relationships, integration costs, and breakup fees.
We exclude such expenses or benefits as they are related to
acquisitions and have no direct correlation to the operations of
our on-going business.
Significant litigation charges or benefits and legal
costs: We may incur charges or benefits as well as legal costs
from time to time related to litigation and other contingencies. We
exclude these charges or benefits, when significant, as well as
legal costs associated with significant legal matters, because we
do not believe they are reflective of on-going business and
operating results.
Gains and losses on equity investments: We may incur
gains and losses from our equity investments in privately-held
companies. We do not trade equity investments, and we do not plan
on these investments for the funding of ongoing operations. We
exclude such gains and losses because we do not believe they are
reflective of our core business.
Significant non-recurring tax expense or benefit:
We may incur a significant tax expense or benefit as a result of
tax legislation and/or a change in judgment about the need for a
valuation allowance that are generally unrelated to the level of
business activity in the period in which these tax effects are
reported. We exclude such expenses or benefits from our non-GAAP
net earnings because we believe they do not accurately reflect the
underlying performance of our continuing business operations.
We apply our GAAP consolidated effective tax rate to our
non-GAAP financial measures, other than when the underlying item
has a materially different tax treatment.
The following tables reconcile GAAP and non-GAAP financial
measures:
Varian Medical
Systems, Inc. and Subsidiaries
Reconciliation of
Preliminary Revenue Growth and Organic Revenue Growth Financial
Measures
(Unaudited)
|
|
(Dollars in
millions)
|
|
Q1
2020
|
|
Q1
2019
|
|
Percent
Change
|
|
Impact from
Acquisitions
|
|
Impact from
Foreign Exchange
|
|
Organic
Growth
|
Total
revenues
|
|
$
|
828.9
|
|
|
$
|
741.0
|
|
|
12
|
%
|
|
(5)
|
%
|
|
1
|
%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Varian Medical
Systems, Inc. and Subsidiaries
Reconciliation of
Preliminary GAAP and Non-GAAP Financial Measures
(Unaudited)
|
|
(Dollars and
shares in millions, except per share amounts)
|
|
Q1
2020
|
|
Q1
2019
|
Non-GAAP
adjustments
|
|
|
|
|
Amortization of
intangible assets and inventory step-up (1)
|
|
$
|
9.8
|
|
|
$
|
4.2
|
|
Acquisition-related
expenses (2)
|
|
12.7
|
|
|
2.4
|
|
Litigation charge and
legal costs
|
|
2.1
|
|
|
0.9
|
|
Total non-GAAP
adjustments to operating earnings
|
|
24.6
|
|
|
7.5
|
|
Gain on equity
investments (3)
|
|
(1.4)
|
|
|
(22.0)
|
|
Tax effects of
non-GAAP adjustments
|
|
(3.2)
|
|
|
3.8
|
|
Significant effects of
tax legislation (4)
|
|
(1.6)
|
|
|
2.3
|
|
Changes in deferred
tax related to an acquisition (5)
|
|
—
|
|
|
2.5
|
|
Total net earnings
impact from non-GAAP adjustments
|
|
$
|
18.4
|
|
|
$
|
(5.9)
|
|
Operating earnings
reconciliation
|
|
|
|
|
GAAP operating
earnings
|
|
$
|
110.0
|
|
|
$
|
111.7
|
|
Total operating
earnings impact from non-GAAP adjustments
|
|
24.6
|
|
|
7.5
|
|
Non-GAAP operating
earnings
|
|
$
|
134.6
|
|
|
$
|
119.2
|
|
Net earnings and
net earnings per diluted share reconciliation
|
|
|
|
|
GAAP net earnings
attributable to Varian
|
|
$
|
88.2
|
|
|
$
|
103.2
|
|
Total net earnings
impact from non-GAAP adjustments
|
|
18.4
|
|
|
(5.9)
|
|
Non-GAAP net earnings
attributable to Varian
|
|
$
|
106.6
|
|
|
$
|
97.3
|
|
GAAP net earnings per
share - diluted
|
|
$
|
0.96
|
|
|
$
|
1.12
|
|
Non-GAAP net earnings
per share - diluted
|
|
$
|
1.16
|
|
|
$
|
1.06
|
|
Shares used in
computing GAAP and non-GAAP net earnings per diluted
share
|
|
91.7
|
|
|
92.0
|
|
|
|
(1)
|
Includes $2.2 million
and $1.9 million, respectively in cost of revenues for the periods
presented.
|
(2)
|
Includes an $8.8
million change in the fair value of contingent consideration in the
first quarter fiscal year 2020.
|
(3)
|
Represents the gain
on sale of our equity investment in Augmenix in the first quarter
of fiscal year 2019.
|
(4)
|
Represents the tax
effect of a change in law related to the U.S. Tax Cuts and Jobs
Act.
|
(5)
|
Represents the charge
to income tax expense due to the increase of a valuation allowance
as a result of an acquisition.
|
Investor Relations Contact
Anshul Maheshwari
Vice President, Treasury and Investor Relations
+1 (650) 424-5163
investors@varian.com
Press Contact
Mark
Plungy
Director, Public Relations
+1 (650) 424-5630
mark.plungy@varian.com
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content:http://www.prnewswire.com/news-releases/varian-reports-results-for-first-quarter-of-fiscal-year-2020-300995599.html
SOURCE Varian