Varian Reports Results for First Quarter of Fiscal Year 2019
PALO ALTO, Calif., Jan. 23, 2019 /PRNewswire/ --
First Quarter 2019 Summary
– Oncology gross orders grew 16% in dollars, or 17% in constant currency
– Total company revenues grew 9% in dollars, or 10% in constant currency, to $741 million
– GAAP operating earnings grew 11% at 18.2% of revenues; Non-GAAP operating earnings declined 5% at 16.2% of revenues
– GAAP net earnings per diluted share of $1.12; Non-GAAP net earnings per diluted share of $1.06
– Recently enacted US/China tariffs negatively impacted revenues by $8 million and operating earnings by $11 million, generally in line with company expectations
– Reaffirming fiscal year 2019 guidance of Non-GAAP net earnings per diluted share range of $4.60 to $4.75
Varian (NYSE: VAR) today announced its first quarter fiscal year 2019 results. All comparisons in this announcement are year-over-year, all quarter and year references are fiscal unless noted otherwise, and any references to orders are gross orders.
(Dollars and shares in millions, except per share amounts)
Gross margin as a percentage of revenues
GAAP net earnings (loss) attributable to Varian
GAAP net earnings (loss) per share – diluted
Net cash provided by operating activities
Non-GAAP net earnings (1)
Non-GAAP net earnings per share - diluted (1)
Shares used in computing GAAP net earnings (loss) per diluted share
Shares used in computing non-GAAP net earnings per diluted share
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, acquisition-related expenses and benefits, significant litigation charges or benefits and legal costs, significant non-recurring tax expense or benefit, and gains or losses on equity investments.
"In the first quarter, we built on the strong trajectory from last year, bringing our trailing twelve-month orders growth rate to 11%," said Dow Wilson, chief executive officer of Varian. "The team delivered exceptional performance, with accelerating software revenues and overall orders growing double-digits in each of our three geographic regions. We made progress on our strategic growth initiatives, extending our global footprint by securing Halcyon approval in China and expanding our addressable markets by signing two Noona deals with pharmaceutical companies. With a strong start to the year and tariff mitigation activities on track, we are well-positioned to deliver results within our fiscal year 2019 guidance."
The company ended the quarter with $616 million in cash and cash equivalents and no debt. Net cash provided by operating activities was $141 million, down 21% due to timing of certain accounts receivable collections and inventory build to meet demand. During the quarter, the company invested $35 million to repurchase 320,000 shares of common stock.
Oncology Systems Segment
In the first quarter, Oncology revenues totaled $702 million, up 8%. Operating earnings for the segment decreased 10%, primarily driven by the impact of tariffs.
Orders were $716 million, up 16%. Orders in the Americas increased 12%. In EMEA, orders rose 15%, the sixth consecutive quarter of double-digit growth for the region. In APAC, orders increased 25%, with accelerating growth in China.
Proton Solutions Segment
In the first quarter, Proton Solutions revenues totaled $39 million, up 32%. The company completed clinical handovers for one room each at three sites.
Varian's GAAP operating earnings include $22 million from the gain on the sale of the company's equity investment in Augmenix, Inc. The company also incurred $2 million in acquisition-related expenses.
Guidance for Full Fiscal Year 2019
We are reaffirming the following guidance for fiscal year 2019:
Revenue range of $3.06 billion to $3.15 billion, representing growth of 5% to 8%
Non-GAAP operating earnings as a percentage of revenues range of 17.0% to 18.0%
Non-GAAP net earnings per diluted share range of $4.60 to $4.75
Cash flows from operations range of $460 million to $510 million
The guidance assumes a Non-GAAP effective tax rate of 21% to 22% and a weighted average diluted share count of 92 million. The guidance also assumes currency rates as of the beginning of fiscal year 2019, includes the expected net impact of all tariffs effective as of the beginning of the fiscal year, and excludes any future acquisitions.
Please refer to "Discussion of Non-GAAP Financial Measures" below for a description of items excluded from expected non-GAAP earnings.
Investor Conference Call
Varian Medical Systems is scheduled to conduct its first quarter fiscal year 2019 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 13685671. The teleconference replay will be available through 5:00 p.m. Pacific Time, Friday, January 25, 2019.
Varian is a leader in developing and delivering cancer care solutions and is focused on creating a world without fear of cancer. Headquartered in Palo Alto, California, Varian employs approximately 7,000 people around the world. For more information, visit http://www.varian.com and follow @VarianMedSys on Twitter.
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; 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; new 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; the company's assessment of the goodwill associated with its proton solutions business, 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 company's assessment of the goodwill associated with its proton solutions business; the potential loss of key distributors or key personnel; 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 quarter ended December 28, 2018. As a result, all financial results described here should be considered preliminary, and are subject to change to reflect any necessary adjustments, or changes in accounting estimates, that are identified prior to the time the company files the Form 10-Q.