Oncology Systems gross orders grew 1% in dollars or 2% in constant currency in the quarter; trailing twelve months gross orders grew 5% in dollars or 6% in constant currency
PALO ALTO, Calif., May 4, 2020 /PRNewswire/ --
Second Quarter 2020 Summary
- Oncology Systems gross orders grew 1% in dollars or 2% in constant currency in the quarter; trailing twelve months gross orders grew 5% in dollars or 6% in constant currency
- 15 EthosTM orders received, including 11 in North America, 3 in Europe and 1 in Asia-Pacific
- Two Proton orders awarded in Asia-Pacific
- Total company revenues grew 2% in dollars, or 3% in constant currency, to $794 million; organic revenues declined 1%(1)
- GAAP operating earnings declined 50% at 6.9% of revenues; non-GAAP operating earnings declined 14% at 12.9% of revenues
- GAAP net earnings per diluted share of $0.47; non-GAAP net earnings per diluted share of $0.85
- The company is withdrawing fiscal year 2020 guidance due to uncertainty surrounding the severity and duration of COVID-19
| (1) | Excludes the year-over-year impact of foreign exchange rates and growth from CTSI and Interventional Solutions businesses |
Varian (NYSE: VAR) today announced its second quarter fiscal year 2020 results.
“On behalf of everyone at Varian, I want to express our gratitude to all individuals on the frontlines dedicated to fighting this global pandemic. I also want to thank Varian employees worldwide who continue to focus on cancer patients receiving vital care during these turbulent times,” said Dow Wilson, Chief Executive Officer of Varian. “While COVID-19 has created some unique challenges, our business has solid liquidity and is well-positioned strategically and organizationally to navigate through this challenging environment, continue to grow our market leadership, and deliver best-in-class solutions to cancer patients globally.”
Summary
| (Dollars and shares in millions, except per share amounts) | Q2 2020 | Q2 2019 | Y/Y | FY 2020 | FY 2019 | Y/Y | |||||||||||||||
| Revenues | $ | 794.5 | $ | 779.4 | 2 | % | $ | 1,623.4 | $ | 1,520.4 | 7 | % | |||||||||
| Gross margin as a percentage of revenues | 42.5 | % | 40.8 | % | 160 bps | 43.4 | % | 41.7 | % | 170 bps | |||||||||||
| GAAP net earnings attributable to Varian | $ | 43.2 | $ | 88.6 | (51) | % | $ | 131.4 | $ | 191.8 | (32) | % | |||||||||
| GAAP net earnings per share - diluted | $ | 0.47 | $ | 0.96 | (51) | % | $ | 1.43 | $ | 2.09 | (31) | % | |||||||||
| Net cash provided by operating activities | $ | 21.9 | $ | (13.4) | 263 | % | $ | 134.5 | $ | 127.5 | 5 | % | |||||||||
| Non-GAAP net earnings attributable to Varian (1) | $ | 77.6 | $ | 96.2 | (19) | % | $ | 184.2 | $ | 193.5 | (5) | % | |||||||||
| Non-GAAP net earnings per share - diluted (1) | $ | 0.85 | $ | 1.05 | (19) | % | $ | 2.01 | $ | 2.10 | (4) | % | |||||||||
| Shares used in computing GAAP and non-GAAP net earnings per diluted share | 91.4 | 91.9 | 91.6 | 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, impairment charges, significant litigation charges or benefits, legal costs, gains and losses on equity investments, and significant non-recurring tax expense or benefits. Reconciliation of GAAP and non-GAAP financial measures can be found at the end of the press release. |
The company ended the quarter with $668 million in cash and cash equivalents and $521 million in debt. Net cash provided by operating activities was $22 million. During the quarter, the company invested $40 million to repurchase three hundred and fifteen thousand shares of common stock.
Impact of COVID-19 Pandemic
The impact of the pandemic in the quarter has varied by region based on the stage of containment and government actions. The impact on revenues in the quarter was primarily due to timing delays associated with installations and acceptance of the company’s products and solutions, as well as delays in the delivery of interventional oncology procedures. As shared in the March 9 press release, the preliminary impact from COVID-19 for the fiscal second quarter was limited to the Asia-Pacific geography. Between March 9 and the end of the quarter, the pandemic spread and impacted the company’s operating performance in the Americas and EMEA (Europe, Middle East, India, and Africa) geographies. The company estimates the operational delays after March 9 negatively impacted revenues in those two geographies by approximately $30 million. This was partially offset by better performance across Asia-Pacific during the last three weeks of the quarter as China and South Korea began to recover from the pandemic.
Oncology Systems Segment
Oncology Systems revenues totaled $761 million, up 2%. GAAP operating earnings were $111 million, down 16%. Gross orders were $773 million, up 1%. Gross orders in the Americas were down 3%, including North America down 1%. In EMEA, gross orders rose 11% driven by two large orders, in Russia and the United Kingdom. In Asia-Pacific, gross orders were down 5%. Gross orders globally were impacted by delays related to COVID-19.
Proton Solutions Segment
The company received two new system orders in Asia-Pacific in the quarter. Proton Solutions revenues totaled $22 million, down 32%. Operating earnings benefited from higher service revenues which were offset by project mix.
Other Segment
Revenues for the Other segment were $12 million. The Other segment is comprised of the Interventional Solutions business, including cryoablation, embolic microspheres, and microwave ablation. Additionally, it includes investments in cardiac radioablation.
Non-GAAP Adjustments
GAAP operating earnings and GAAP EPS included a $41 million impairment of loan receivables from California Proton Therapy Center and a $9 million benefit from the reversal of acquisition-related earnouts.
Guidance Withdrawn for Full Fiscal Year 2020
Since the previous update provided by the company on March 9, 2020, the severity of the COVID-19 pandemic has expanded globally and resulted in a shift in the macroeconomic environment. The uncertainty around the severity and duration of COVID-19 has impacted the company’s ability to reliably estimate the financial impact of the pandemic for the balance of the fiscal year. As a result, the company is withdrawing its fiscal year 2020 guidance. Additionally, as a precautionary measure, the company has paused share buybacks to preserve liquidity.
Investor Conference Call
Varian Medical Systems is scheduled to conduct its second 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 the company’s 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 13700412. The teleconference replay will be available until 5:00 p.m. Pacific Time, Friday, May 8, 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 the company’s future orders and the anticipated impact of the COVID-19 pandemic on our business; 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 the future impact of the COVID-19 pandemic on our business, including but not limited to, the impact on our workforce, operations, supply chain, demand for our products and services, and our financial results and condition; our ability to successfully manage the challenges associated with the COVID-19 pandemic; 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. For additional information concerning factors that could cause actual results and events to differ materially from those projected herein, please refer to our Form 10-K for the year ended September 27, 2019 and subsequent Forms 8-K and 10-Q filed with the Securities and Exchange Commission. 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 April 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.
Investor Relations Contact
Anshul Maheshwari
Vice President, Treasury and Investor Relations
+1 (650) 424-5163
investors@varian.com
Press Contact
Rosemarie Smith-Wood
Sr. Director, Global Brand and Marketing
+1 (650) 424-5208
rosemarie.smith-wood@varian.com
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SOURCE Varian
Company Codes: NYSE:VAR
