VAR - Earnings call transcript Q3 2018 | Varian Medical Systems Inc

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Operator

Ladies and gentlemen, we will now get started.

Just a reminder that the replay of this call can be heard on the Varian Investor website at www.varian.com/investors. To hear a telephone replay, please dial 1-877-660-6853 from inside the U.S. or 1-201-612-7415 from outside the U.S. and enter confirmation code 13680748. be Friday will XX. replay telephone available July, through The

J. it Senior Now, turn to Michael Relations. I will Investor over Bruff, of Vice President

J. Michael Bruff

Quarter Good to Call operator. and Webcast. Fiscal Third and you, Conference Year Thank XXXX afternoon, Varian's welcome

in Gary Varian's and our Joining Executive detail. and long-term results more Financial Gary and Officer, call share financial will and Chief Chief Bischoping. and our President Dow me will Wilson; his the operating today Officer, on results cover are our Dow thoughts strategy, on

On Unless non-GAAP are release XX which can XX are orders perspective on items. to provide quarter recently last to to All We the results unusual differences growth and these website, the months and references from our find operational the otherwise completed are GAAP any of you most comparisons stated, additional of of in between financial rates the operations, day trailing Varian Investor measures. references refer and report Relations to and documents to non-GAAP fiscal third quarter. all orders. year-over-year reconciliation all financial performance, is and provide discussed fiscal our are earnings ending excluding press details. Included deck, the web intended gross months continuing non-GAAP trailing

we to forward-looking And discussed to turn We not conference and Dow. risks I'll filings. to call, statements based subject on are of any Actual it statements do call, because this statements. which and statements These events. factors duty any that our are uncertainties. will are forward-looking materially today's in that, this be over making results other current release, During future earnings predictions, projections, about differ with undertake or SEC and assumptions could expectations update

Dow R. Wilson

we past achieved Thanks, Mike, long-term milestones strategy. and Today, they contributed the and share quarter to this how day, everyone. key I'll our good

flows million was Therapy or XX%. and acquisition-related GAAP to share business were non-GAAP integrated $XXX earnings platform on XX%. Revenues Particle detail. per grew revenues of revenues Proton of related Center. me and software, of by diluted Gary impairment XX%, expected with $X.XX a diluted charge the operations company from our per Center in Cash X% will to in the services. large million, earnings million, of Proton our revenues Oncology best-in-class operations of XX%. GAAP for these XX%. up expenses from results. share refinancing XX.X% from grew discuss cash grew $XXX and Georgia $XXX driven million XX%, were $XXX let receipt the Treatment impacted $X.XX increased Treatment $XX by hardware, an the million. Total Operating touch flows down per due were share our Year-to-date Maryland grew more earnings period. First, of cash earnings prior-year

value growth In terms we strategy, creation initiatives. our made and long-term of progress growth across our three

our grew XX% therapy Varian basis orders the strengthening year-to-date, base share installed in worldwide units. period. in the our or in radiation business, on units X% the X% therapy. over X,XXX net In Based worldwide leadership maintained now our trailing months and that and filings, March First, orders quarter leadership growing Oncology XXX during X% an market ending XX XXXX. market grew its on public radiation is

since CT in as of of We've have we nearly orders Halcyon kilovoltage On X.X strong in new seen have our and part with launched third hardware XX quarter. taken orders XXXX April. of cone-beam that incremental. option progress now at the we Halcyon, including side, rollout global the launch our ASTRO the worldwide also launch, XX% made Since May been orders in XX interest

be quarter orders systems previous approximately are and one-third our of scheduled were half to – our of orders for our new of in All the these upgraded.

demand and strong On to the continue for positive software our software solutions. feedback see front, we

grew Customers solutions. X%. new continue the revenues adopt software to and unique Software Varian's grew of customers number software Varian XX%

over XX% launched prior base the now Eclipse, for years took taken orders enables ago. planning Eclipse MCO, have any product multi-criteria installed several quality. more and orders to we than the the for feature RapidPlan, compare our and nearly And plans For treatment clinicians enhancing This for both we and efficiency grew choose for quarter since licenses XXX we plan tool. quarter this licenses optimization quickly one, treatment in optimal

mix Therapy growing rate installed business, Our attach newer grew a driven quarter. In new XX% typically take our contract did not orders services revenues Particle the we higher which in any machines of base our higher by and and have value.

However, months we've XX pipeline taken sales our solid. four proton trailing and orders remained over the

construction We is scheduled to completing begin under announced a month, sites rooms College ProBeam last Hospitals toward London. continue will treatment progress The cyclotron of installation to feature patients center and at are the XXXX. in University four that in Varian make treating

our well. We perform proton our operating continue installations continue to at to centers strength as see services business in

Treatment schedule. Project Proton currently Georgia ahead the example, of Center For is

second Our initiative extend our is global growth footprint. to

EMEA. share Our growth gains orders-based by continued global market was share driven in

from company's from in proud strong We're in team's linacs, system, four orders strongest two an our the of In and segments. National In growth and Teaching ordered linacs, double-digit of and in Africa, Nairobi straight Service Leeds Health in Kenya share University For three Britain, three for an nine ordered XX Great Halcyon continue four to Lagos we maintain a Nigeria. received private execution, Ortega achieving market Foundation leadership history. in for order across quarters and Halcyon in we systems. order EMEA the example, Catalonia including the Spain, Poland, the TrueBeam a Hospital TrueBeam quarters including West in sequential system, public Halcyon And systems.

Brazil network our the America. quality CL a Cooperative Ministry Varian's we with acquired state-of-the-art with Health team, and part COOP, of made and to Latin that to Enterprises This our America in Ministry care America, Science the footprint strong and towards in local agreement global we in can of Asia, global and a of believe In access extending in Institutions. COOP's Taiwan. for of or regions. progress and distributor radiotherapy and equipment Latin Taiwan. commitment also Brazil cancer training increase In provide Asia-Pacific agreement by cooperation radiotherapy Technology We to Health and Varian's signed partner leading patients Latin Brazil treatment we leveraging We is

brain Finally, advanced stereotactic more the is using to institutions treatments we cancer like with high-definition and in we're to were announced simplify the Two which with treated pleased that to first sophisticated to company's patients leading partner patients. cancer Korea HyperArc patients radiotherapy, automate treated Hospital Ajou were the Varian's deliver treatments HyperArc, University and with Ajou at cancer radiosurgery. like designed

of momentum share launch, front, have incremental segment. Of On approximately global grow. have emerging in and orders we the been Halcyon Halcyon to thus units, the see nearly for our continues expanding this XX% taken markets XX% Halcyon market the and been these since market from

was key high-quality One Halcyon to access for therapy around of expand regions radiation ambitions to underserved our world. to the

quarter, now is South three Clinique d'Oncologie we Africa: and This used in Halcyon le in Morocco, Oncology Centre Africa. Casablanca being that announced Center, Nakhil Littoral centers and in Hillcrest in Busamed Rabat

patients therapy on the therapy, using body months, offers image-guided treating day Halcyon patients in Within staff Nakhil RapidArc and at equipment treating and the Centre two several Rabat, commissioned, Halcyon XX fact, just state-of-the-art radiation weeks. and radiation other Varian per was began stereotactic installed, is techniques, In exclusively. d'Oncologie center trained already including

these our proud and collaboration centers provide with are around high-quality to of forward look centers the cancer more to We and treatments. across working with to world Africa access

expand markets. Lastly, to our addressable third other growth into initiative is

care be a Oncology will continue of believe as to market, coordination company large the for driver need. the XXX cancer that enter unmet We future area growth an of we

example, an XXX New towards center alliance productivity. Montefiore Proton opinion for our demonstrating And look patient engagement impact pursuing cancer and our between and this which Sinai. as five-year have to efficiency is represents won competitive effectiveness can forward of a For a progress well product Memorial we on Sloan key quarter, at as the leader the Center, Mount we This platform Oncology. The contract strategy of clinical York contract adoption Kettering,

or context strides third RapidSphere towards to over have care our our a X.X, normal now FDA in results. cancer of SIRT. received interventional on receiving Varian's we're for meaningful will module The clinicians patients turn oncology strategy we with toxicity financial version XXXX. software quarter multi-disciplinary software X.X the third I'll that, the progress to new YXX market. a module XXX(k) in cancer pleased the long-term clearance. global that made new provide Velocity to and And allows better Therapy quarter our made integrated RapidSphere, who tissue tumor dosimetry We solutions. with RapidSphere it module extends Additionally, launched Radiation fiscal imaging radioembolization individual SIRT leader understand we the Gary a become year for and more Overall, of in Selective response Internal Velocity Velocity to includes analysis. platform

Gary Bischoping, Jr.

Thanks, Dow.

comments will I and our consistently the long-term growth profitability of always, value strategy and growth, includes which As liquidity. balancing creation my frame context in

Americas, as X%. planning. speed for let systems across currency. revenues in million, trailing We in currency. up XX% grew dollars business X% trailing our currency, up $XXX Oncology, North by in orders from and as XX-month America and Halcyon growth quarter, and dollars XX% X%. quarter XX% X% in the and demand XX% grew orders GPU in orders Taking were of X%. billion dollars results, in Americas. and hardware, a driven in enhances Company-wide orders Oncology were in XX% Orders growth Year-to-date third in North or start the constant On and in the currency. So, ended orders the which saw In dose dollars North me dollars in X% orders by grew X% America quarter look in $XXX HyperArc services. $X.X growth. calculations strong Over year-to-date; in revenues treatment revenues our the in million, Halcyon XX% backlog, were MCO XX% million $XXX the for in TrueBeam well and the and $XXX constant were with a driven across million We constant software X% of basis, were closer constant XX-month and up in in constant and our grew at up up America On of revenues XX% XX% grew for in currency. X%, Americas with basis, quarter

orders China XX% XX%. and India were On across year-to-date, X%. We saw up orders and XX% orders increasing Asia-Pacific quarter, orders. Asia-Pacific quarter been and both in have and Middle the XX% mid-single East, the Greater Orders performance XX% driven decreased Japan, were a for decreasing XX-month the Africa digits. trailing revenues On large grew X%. to orders grew there. In hardware growth saw XX%. $XXX million basis, year-to-date lead We and trailing the in growth year-to-date. a XX-month In moderate slightly market and region in up by in basis, the with were in million, revenues quarter results product grew region outstanding software Europe, strong tenders orders the geography, $XXX and continue

which revenues quarter, last significant Our the compared when the $XX Particle Treatment from is Proton in Therapy posted down revenues XX% Center. of recognized business million we with Georgia year,

recognized million quarter, primarily Dow we is the of quarter, fourth schedule. this which, However, said, as Project, earnings driven the ahead in Georgia for $X by previously expected

mix. rate margin largely Oncology XX company hardware, of was largely margin to where revenues. revenue increased business XX.X% software as revenue see and the well expansion Turning gross growth was rate TrueBeam up solid rate and margin growth by million, Oncology gross total million continue at was from driven our This XX%, to basis of up profitability, $XXX a XX.X%, services, we across points. driven XX% higher by of $XXX as

margin was to SG&A to faster million, were X% strategy. million $XX Investment investing in Particle or million sales programs. gross company operating long-term be our of million revenues – million quarter, at organic or $X Company-wide $XX The XX%. we revenues Likewise, company for a than count head were $XXX XXXX, leverage Year-to-date R&D of margin the $XXX key primarily of G&A into by revenues growing of operating infrastructure in up to we're while quarter earnings of by our XX%. P&L or $XXX each innovation sales Year-to-date, investments of revenues. million. expenses growth. fiscal to of continue support and investments dollars growth marketing. XX.X% In in investing were scales responsible XX.X% marketing continuing down and was driven ensure were our is and value Looking X.X% will earnings driver Therapy, Company XX.X% of $X.X to be our driven million, the growth. creation and have in increase increasing revenue earnings operating up

two GAAP had that items we earnings. significant impacted quarter, This

and primarily fee. dollar by totaled expenses partially the loss Sirtex, offset acquisition for the acquisition-related $XX price First, by the Australian costs hedging driven for related million purchase the to quarter, breakup

of of anticipate as in as impairment charge continues information the us security terms key difference the Second, part per over charge updated Proton the of value patients additional be treating quarter. refinancing. the the between took fourth day. issued exchange estimated a million. by a expected the Maryland Maryland and of an close in The value on We Center, held security new reflects Treatment Proton XXX refinancing of refinancing well, facility the will in result Overall, to of the perform we $XX to

GAAP resulting XX.X%, to net was also non-GAAP GAAP for After Turning effective diluted XX.X% impact. which Jobs Similarly, legislation. Tax excludes was new impacts the per the diluted the rate share impact tax and rate of was quarter the excludes non-GAAP tax our net legislation, share to effective $X.XX. of transition our the our per taxes. earnings this third earnings Cuts Act

net XX.X million in of non-GAAP shares diluted quarter. earnings was share diluted $X.XX per share with count Our related the

with balance liquidity, the we $XXX of to ended $XXX of million cash debt and since and cash equivalents quarter. the and quarter million Turning $XX last sheet million,

we XXX from our the Center brings Cash changes due cash operations to related quarter. trailing flow Jobs our XX% are XX% million, Proton Tax and operations from in from to a Act, $XXX This cash in $XXX down operations $XXX flows Oncology debt. XX to prior-year were to days XX%. days cash from to the Georgia repatriate million, to cash With to from flows period. significantly up days up by year-to-date million, received Cuts large the the the decreased able XX-month in DSO XXX reduce

stock. the investments repurchase million shares R&D in in other addition addition and investments included – quarter of In CapEx to to $XX in R&D, our to million $XX

we of to discuss back year it updated I turn under As remaining the XXXX the annual authorization. repurchase our shares guidance. end quarter, X.X now our will million existing share had of who will fiscal over Dow

Dow R. Wilson

annual pragmatic our have second, respect considered implications XXXX markets; tax cuts tax third, we fourth, recent regarding our and maintain market continue the following Gary. guidance, fluctuations Thanks, With solutions products continued to of market year to growth; and to approach the guidance: fiscal a projected are in our our first, our rate. the currency impact resonating, driving leadership; the and and their factors

net non-GAAP to dynamic it our million from And shares it million, of guidance range have Additionally, our flows annual of while fiscal annual of a of continues to non-GAAP be the Operator? $X.XX, operations a After per we earnings of to and July environment, to million. guidance X% Thank projected average impact $X.XX revenue these Representative. to update to we XX States of Trade is consideration tariffs XX%, as on careful fluid percentage reflected by factors, following: XX.X% believe tax let's year share United the updated imposed range to XXXX non-GAAP range the range XX%, diluted growth cash operating in Xth rate to weighted $XXX XX%, $XXX of Q&A. you. now, earnings go of revenues effective of diluted prudent

Operator

line first Citi. question. Our your Hazan the from from of Please with proceed question Amit comes

Unknown Speaker

you Can Hi, on is guys. for hear Amit. (XX:XX) Phil This me okay?

Dow R. Wilson

yeah. (XX:XX) Loud clear. and Phil Hey,

Unknown Speaker

could. Two Great. on the I guidance, questions if

probably could quarter? The the revenue guidance for, last versus wondering quarter first if it one was was this you what for I what's ex-FX clarify Gary, as

Gary Bischoping, Jr.

to what we FX sorry with today guidance rates The the – the we running today. guidance of – had are reflected where FX guidance when stand is is original where – to similar kind consistent today

So, the and going forward. where kind are we use we it's that's of kind framework of

Unknown Speaker

and didn't sorry, what updated Could guidance phrase So, it's maybe the I was it ex-FX call at well. you characterize being to quarter last today? what

Gary Bischoping, Jr.

guidance, that, did hear I Ex-FX not sorry, yeah.

Unknown Speaker

okay. that's Well,

Gary Bischoping, Jr.

from percentage points of So the the in was currency. X impact that was from quarter growth last embedded guidance

So, been X%, would X% X% have and and ex-currency. X%

Unknown Speaker

have quarter. today to X% X% would X% and last been X%

Gary Bischoping, Jr.

X% No, X% okay, currency sorry last that X%, gave X% points X%, quarter embed was X – embedded to growth. of to revenue growth the – to we of was guidance X% in

Unknown Speaker

Sure.

Okay.

in So, guidance is headwinds? X FX the in currency still your today embedded of points

Gary Bischoping, Jr.

That's correct.

Unknown Speaker

second was And Got the side. Okay. the operating it. on one margin

you a parse components on Just for the if impacting of Dow those reduction and in some out can operating touched wondering are margin guidance that year. how the the

Gary Bischoping, Jr.

Yeah.

Let that. to me go

as few things see So and on. about we quarter, there's third the thought guidance the you a the results in going

in investing results, as is, in our support growth well So as one right. the SG&A trajectory, we're R&D to

see it's You topline where moving moving. the

reiterate operating margin moving to I our You year-to-date, want see dollars is where earnings growth it's that gross moving. just the dollar XX%.

the the revenue then of quarter year-to-date fiscal operating growth, year-on-year first from than you right. our faster XX%. If be will And year growth PT growing the dollar exclude that's charge XXXX, earnings

we're G&A the business is investments this the needs the P&L. said, with good two a from from markets, in see in we're where that revenue. So, infrastructure right, out but G&A G&A see setting so territories we're on into getting now what the scaling a markets. years, support investment, there's scaling be acquisition sell the numbers, next there's perspective. year That Mobius some emerging three And key setting to for new up we and side, an there would you for ago, there running reps sales expansion up software and in in weren't those perspective for Investments Evinance

a So that key that in and of seeing number. are SG&A perspective elements running the sales growth the lines from those marketing you're

Dow R. Wilson

mean, that. impact starting line. just to the in business software I'd add maybe And our see a to follow-on of we're this little I

new software our in software So, the especially many has of very software double and it's said, growth. some marketing best the outside we've to as quarter making in ever And products been investments had that ways, and support we've of the had. We U.S. support to digit strong been Gary acquisitions sales distribution the

quarters. both in the You underscored had biggest RapidPlan, and call, I their heard HyperArc

in MCO, of spear quarters X.X optimization We I strong in multi-criteria in the And big XXX I very very the point York this also our the were kind strategy win at our continues call, Oncology be then, call. our vision mentioned for our driving of order had product. Velocity mentioned pleased product New that to as well with customers. that We as to the

strategy to going said, So just anyway, I of as a forward. lot software infrastructure, that mean, we is a support roll Gary as

Unknown Speaker

Thanks Appreciate color. right. for it. All the

Operator

comes Jefferies. Please Anthony Our the proceed of question. Petrone from your with line from next question

Anthony Petrone

Hi, everyone. and good afternoon,

Dow R. Wilson

Good afternoon.

Anthony Petrone

Maybe you can TrueBeam, XX-unit on here of a the of is other a just seeing in notable, strength, so in start bit of consecutive for bit Britain in order little two this technology, little also world. quarters but you're renaissance Great regions traction the

and you in a bit demand talk So, it I maybe pricing because the follow-ups. the just of a how where then, couple about on has is is can you TrueBeam specifically TrueBeam, a the HyperArc shifted, TrueBeam have And from, of here? for coming from sustainable of little is on think top that, bit more color little growth

Dow R. Wilson

really in a strength seen TrueBeam. quarters multiple good We've That's Yeah. question.

trend this flexible, by to stretch. a most there. it be very market-leading continues So, any but on machine not out have good most is Yes, versatile TrueBeam, quarter we did a the

news. not that's So,

love base growth units is flavor our installed can the strategy us, get. growth For we thrilled of right I I'm over about now. is X,XXX and XXX really units, we these any mean And socket socket

contracts, that upgrades talk software cetera. as call. about know, you et That the on You heard service us drives,

With I supporting it's the TrueBeam very much. think Halcyon,

So, is very well. I working strategy think out that

to We them We've And me the say majority mark introduced XX are the vast year seeing Anthony, A at a Almost a over You think ago. we're call, it. since pause we're the just one-year orders emerging strategy. it point, – TrueBeam of are product introduced now. taken heard worth them your it's of I incremental. the in support markets. we half on

product product so orders new and It's high the well, that's XXX at share that working since very tenders. a good we line socket part very getting of driving in the a And also XX play. we're quarter, of it's had growth imagination in and is TrueBeam HyperArc, the end, launch.

think strong and do the of in we So, now a total context total see it's to But position very right have with portfolio I rocking. portfolio it the the TrueBeam. is,

Gary Bischoping, Jr.

up installed thing Yeah. would is The that I right. is add base X%, only

Dow R. Wilson

Yeah.

Gary Bischoping, Jr.

in well. grew the backlog And period as

the So, good strong across execution portfolio.

Anthony Petrone

revenue would And just base on be, that XXXX in been the here growth into It I then maintained which in has questions growth, fiscal the which of backlog just delta low-teens. should point, follow-up Gary, the certainly still installed some say leads question the getting single-digits. to of growth your the product

maybe helpful? reconciliation could so any then update between two post-Sirtex, be on numbers just just be And add anything would helpful. those for capacity, me balance So certainly would be the last obviously strategy you there would a sheet freeze a Thanks.

Dow R. Wilson

take me. So, not here. I'm try I'll correct this a if Anthony, answering right,

is Yes, revenue for year. service very a Our machines, into when we new are well, these base, it's they go warranty they – when doing revenue. installed double-digit in

that's service So, revenue see number come then, out catch But, it, In with time, higher software we where But the service it, double-digit year. up we revenue pleased of and said there. as don't And also briefly, the what we the we're yes, service but for were were numbers I we very than saw warranty. was that will impact so revenue double-digit, take of we'll product both are. this the kind one quarter.

was it portfolio. really strength So, across the whole

Operator

line Our your the proceed from JPMorgan. question. next Tycho Please from of comes with question Peterson

Tycho W. Peterson

the thanks. I'm do terms Hey, Taiwanese in the on numbers? with talk X%, Asia. that down and on quarter APAC distributor maybe guys did orders couple going you anything Dow, start were you to to can of in

Dow R. Wilson

Southeast by Short kind mid-to-high that and were and at the the top. had starting up we both driven and single-digit a tough was really version region Asia Australia. comp China especially of in is Japan

see that did pretty quarter much us, excited executing really Taiwan, in was in good It off we comp some It's to yes, back didn't two by digit been have capability this markets. acquisition. quarter I growth mid-single quarter. that that in bring shocked about we're we execution driven excited was We same, so Asia. mean, every in the this anything tough in and China we're So, that Asia. we going Southeast had market and Japan about. about ANZ those the double-digit

nothing In good. impact close Asia terms on And quarter, in to notable. really it out by saying looks maybe then very the just pipeline of

Tycho W. Peterson

can that? linacs, China, you talk on on can tariffs, in outcome? of just to to you list, approval talk then mentioned then Obviously, so you thinking – risk can And maybe we're latest didn't so I one forward you hear the going and on for quantify, you

Dow R. Wilson

mean, I suppliers. our tens patient created the than of million each vast of level, majority innovation thousands jobs American and job in sure. from our expand for guidance maybe those U.S. QX, We see and included At tariffs patients guidance support innovator, really we QX that proud so there. I'll American Yeah, I'm impacts have is team. of a just the is our for what the the built year, our manufacturing of thousands you of creation. into of to piece an more efforts Varian top, say jobs, X in

system fact, In in Varian Americans in lifetime. will their seven one with treated be a

advanced really long-term treatment trust, that of fear cancer the most relationships a mission have We provide to globe cancer. our with of our provide strategy and world without to to around fulfil the years are is cutting-edge built

every American and an ensure should the trade businesses to access also field efforts bilateral U.S. person dispute that each around and to impact of a treatment for support have not through quality highest more for globe. we on trade, the playing level While we American adverse cancer believe

kind that impact productive tariffs you the continue American disclose are today. to that's disproportionate as in know Americans we who the as we and detail, those to with those But we And of face what to manufacturing to administration more on very ongoing. get jobs So happens. conversations we'll conversations and technologies, investments cancer next-generation of have

Tycho W. Peterson

And the It TrueBeams two it flow? all this just did bit the recognize you then UK all on did decline talk cash Thanks. to ship there, XX and Okay. ones. could quarter, can Gary, that? of a quick looks like

Gary Bischoping, Jr.

Yeah.

$XXX So that that trailing held year-on-year. here, to we've million, operations, a XX-month nice up XX% flow in $XXX that's cash on million cash that's $XXX range increase, so from million flow,

execution, So well, on I DSO think were days. teams executing again there year-over-year business Oncology operational down the XX out basis, good in

invoice the ability the collectible like Also, we're so number collected, that an through earlier, and get show earnings up it growth as out And time I mentioned are see operating before, well. well, the that first and follow-up engagement, question in is said is executing to the the The cash starting driving as the I've door was? teams get, to flow.

Tycho W. Peterson

Did you recognize XX TrueBeams... all

Gary Bischoping, Jr.

No, no, no.

I that'll think us to get those a time installed. two couple over years take

Tycho W. Peterson

Thanks. Perfect.

Operator

Kumar Our your question next comes Evercore. proceed Please line with the question. of from Vijay from

Vijay Kumar

on nice I questions. a Hey, quarter. few guys. Congrats had a

(XX:XX), – year-to-date even maybe revenue impressive been I look X% I'll So look when of guess backlog, seen, catch is, there up, issue dip. it my at explain a just the growth, the is this now because so the revenue comp or they've the right, you be the please? XX%, start order a backlog feels maybe And and this that issue, you then revenues growing to when with on – really comp the front, X% or product is XX% on sort we've a X% the look product product is growth this that and XXXX, question revenues. like to at you can going orders at last year versus I

Dow R. Wilson

Yeah. I market trailing growth seen XXXX version I talk about months of of backlog same. we'll Oncology, next say in we've to XX growth about you about will is, quarter. mean, short X%

sort level that our of months, trailing XX performance. market So, performance

Gary Bischoping, Jr.

Yeah.

Dow X% guys days. in talk we'll about And on currency like constant you basis. solid So, to X%, yeah, XX a growing a XXXX about said, we're

Vijay Kumar

that's And the product revenue growth.

and revenues I what's issue, think recognized mostly of right, was the because way I think coming if higher a that is be proportion explained faster. I a Is on going you to here? tend correctly, those understand mix this from it Europe

Gary Bischoping, Jr.

and about everybody this going how in XXXX Yeah. not XXXX we're days. said, XX to talk plays implications get Like I out. into Vijay, to We'll the

Vijay Kumar

– GM you, just we're And margins QX. looks the – that tariffs one be XX.X% mentioned looking to baked guidance, should I know – XX% QX mix, on like just that Gary. obviously then that's range. be that you ballpark is the at for based you in this the the modeling? on for different Is to tariffs, being but was margin us Got into for is somewhere Is just gross on think, you assuming it right

Gary Bischoping, Jr.

Yeah.

What guide is right, the So in grow good we saw quarter though well. execution margin gross services we and rate. did software on TrueBeam, in as we see solid and don't

So, that's line margin seeing the perspective flowing the the you're actuals into here in quarter. third what through from

guide with to happy we're the rate don't we again, that. So, And purposes. external margin for

Vijay Kumar

question tariff was to another ask year-to-date margin impact, Gary, and lowered, line, based a and impact, that's if that that op the and right, the way, was gross tariffs in right. the have Or I on margins

for modeling gross margin is baking we're if QX for a and in impact? So the that's tariffs, guidance saying

Gary Bischoping, Jr.

we That that growing execute flow is faster gross continue very but, are tariff will perpetuate Vijay, Cash And XX% of numbers year-on-year. happy of flow and No, That's through Both The we'll with we're than XX% and growing line. dollars again, year-on-year. we're operating ex-PT growing as revenue. are go to those try numbers forward. those good the and correct. margin execution. impact proud is charge, margin

Vijay Kumar

the people happy flow cash sure will turnaround. I'm Gary. that see Absolutely, to be

this when right, launched, one was Halcyon. be to maybe Just Halcyon the last corporate to know margins. one I incremental supposed on was

be expecting to be is corporate incremental that the given should to still the Halcyon going to Given tariff China, impact? in assembled be Street Halcyon

Dow R. Wilson

back high-quality pretty in cancer list people treatment of it's they we're are we're these far. have here going an with really on really can these And we we've cancer vaults, include small incremental, XX% – replacement disputes administration. around exposure Yes, on get very vaults the they're where the as coming other few cobalt reminder, are what for building vaults, opaque that, impact in volume into to of have now comfortable number to productive that into trying is continue continue with not a emerging to doesn't again, we going going of might said tomotherapy – into but have very seen well. very, But we're to High go till as – U.S., part the call, we small of have we technologies fighting the pleased around are percentage with the Europe, that really so I tariff are. on remove world. a markets, doing from them you. adverse the some vaults the probably discussions forward and them, as As and We're trade

So, that's conversation. ongoing an still

Vijay Kumar

helpful Dow. That's commentary,

is, or... last was there think acquisition, all M&A, for I the So me Q material one any heard anything in say you at contribution distributor guys from the I

Dow R. Wilson

We've about impact. that QX I'd a very excited closed least we're say that got marginal we've couple for at

Gary Bischoping, Jr.

plan on to... But tracking and

Dow R. Wilson

network. me a in fix On there. with little us distribution them a we plan, story growth really We positive gives this but on tools let impact, access taking Mobius our that, global like what getting and maybe That QA track particular, saw. tracking, nice small through software these to

Vijay Kumar

guys. you, Thank

Operator

from from comes the proceed next Goldman Isaac line Our question Ro question. of with your Sachs. Please

Isaac Ro

Good Hi. afternoon. Thanks.

might or sort this had rest maybe of quarter this be Just customer outlook give this making topic, decisions, little could a in another us what's now one you different interested on as I'd bit be delays you year? to color in what for (XX:XX) embedded of your the fiscal maybe conversations tariff basically the of and result a as causing hearing the you're in just decision

Dow R. Wilson

far, we are us. are of so to important conversations relationships and customers. they're deep and mean, I are the franchise have. relationships, critical that short-term our position Those long-term we relationships all enable very obviously with None have terrific us to having these that

year. our significantly patients the we I earlier, R&D. about million investing We're a in mentioned treat As in call X

Our We've tariff guidance. customers keep to the fourth best reflected our we going. quarter want and impact buy us because we're into that

is productive to with and to tariffs disproportionate As have are impact as to address the trying said, conversations to impact that going I Washington that, continue the have not we impact a Americans be because beyond at this to time had of what point, R&D view. impact, real it's jobs, of the manufacturing American at but and think kind this of I – from investment. But point to market no just

on digit so really a on You comp, haven't market seen still China tough the we impact saw the our side. mid-single were orders

Isaac Ro

on on your of it this with a conversation. for and Okay. customers this quarter discourse most is. just of I'd for few (XX:XX) last in months, last has it velocity has really slow now would the question be That's Obviously, trickle then helpful. of And you. the be been several weeks issue? or just part in for this wasn't us velocity topic customers last sort with sort of the up picked Thank a interested of the

Dow R. Wilson

than These happening very that I'd sense conversations joint kind of world advance continue customers There's the decades that often opaque. fear with least say it's work them to create wouldn't of that we've strong not, often and and, seen you're we in a our more getting at long to every mission day. partnerships we without say have to are I cancer. at. pickup our velocity with the in a

Isaac Ro

you, Got it. Thank guys.

Operator

line the question. Johnson proceed from your Please Robert with from W. comes of question next Our Baird. Jeff

Unknown Speaker

is guys. with Hey, Jason on Jeff. for tariff, just the wanted again. I to This start (XX:XX)

here, for offset you putting supply in discuss Just is mitigation efforts lobby or place like manufacturing the or is to headwinds, a or there of anything you're trying just perspective government the from removal can maybe really on potentially anything sourcing in the tariff? it to order

Dow R. Wilson

I yes, is, we're at everything. hard short we're the to continuing efforts looking at answer administration. mitigation with looking mean, work and to hard very mean, I very the

We I mentioned. as are having conversations productive there,

Our focus our growth initiative. on is

that's to us. R&D, disproportionate for is growth, to R&D game face in enjoying only and that you've next-technologies, that, want and the growth. we're a our and the in marketing because but nice a impact so seen, who business Americans maintaining to drive that's stuff tariffs, share an we As it that our the business investment activities to doesn't keep have a supporting of Clearly, American having on the and spending sales from not right with we're right in uptick cancer, jobs

supply So chain. we evaluate will always our

I mentioned. given more what supply a we've but evaluate supply as that to chain here U.S. of the We'd our of always we'll job very of tens think team's jobs. proud that, jobs keep then I'm generated probably chain thousands and done environment. love I great of going, thousands of obviously our in the We've it done. and optimize

Unknown Speaker

a supply shift, about that think Dow. more for Thanks, more fair plan of way that's the manufacturing you plan of that to B, chain Would it? is be would Yeah. a you, C consider and

Dow R. Wilson

look version some piece. capability. at And global clearly, got We're that'll I short really as be we're exporter. to we've forward, go mean, U.S. the very important exporter. a is, think we've U.S. cost But large major we a I got a very

global. Our We is supply some do requirements. have chain regulatory

I'm get. manufacturing I probably approval to do isn't a specific FDA today, that's snap So going through a fingers, because go And think have your cycles. shifting to for as we

Unknown Speaker

change That's FX question just then, a XXX EPS And wanted the assuming for no from you're that to Okay. guidance in confirm come basis tailwinds helpful. wanted to that Gary, still one the guide. back assuming there's to in the on earlier just I year, question points.

accurate? the guidance reflect part guide then is is tariffs, entirety But no the follow-on from top traced FX, be one the all the of two is end then to there is that's So takedown that the your that the question? change in EPS to of that of of part can then EPS

Gary Bischoping, Jr.

Yeah.

points, XX% the saw revenue that line X the to X% still So right. you on that guidance percentage reflects

so And of what's that's today. kind in

Unknown Speaker

Okay.

so in yeah, FX from from FX? no takedown the full guide the reduction EPS guide EPS in there's no is tied to So for tariff, – reduction or guide the the there's the there's

Gary Bischoping, Jr.

going this. I'm of to Yeah. point the not talk to tariff

in picture reflects of rest there's the but so we're – thing range so, but $X.XX that at currency, will year. of it's pretty going what maybe the to operate big say I'd of We think or about here we the de minimis for the

Unknown Speaker

Very much. Thank very helpful. Okay. you

Operator

the next of question. Anthony from question Please comes proceed from Jefferies. Petrone Our with line your

Anthony Petrone

just for thanks follow-up. the Hey,

potentially the math that is? revenues the make that on would to or the Just assumption goods on on actual question that impact order again, sold in of on is what tariffs be cost an estimate

Dow R. Wilson

you to, clear me call we what XX up back very come and in next and us opaque for in given QX, guidance days. it days have and all is let know for learn we XX the Again, we'll it

as for clarity very the of that, So get XXXX, conversations here to continuing administration. relates some in job business – it get that it's I we us to I to treatment we built. the exporter, we've it's lot on American deliver here we very continue to part worldwide that with productive proud as the to think we've And about we've want case, U.S. today. And process. I've We're important capability of talked until and very, through conjecture think in have. a kind have kind of story next the make think, our we're got got a the very best sure kind terrific strong of strong the of the that a and I the cancer

Anthony Petrone

again. Thanks,

Operator

question-and-answer reached closing to for session. And Ladies the we gentlemen, call turn like have back would to and of end management I the the remarks.

Dow R. Wilson

– operator. progress made very creation strategy. Yeah. I'm quarter towards the on pleased third Thanks. long-term with Thanks, we've the in our valuation executing value

our extend markets. strengthen our footprint continue to in grow We our therapy, addressable and leadership radiation global

we'll forward, of our victory, all without us initiatives towards this drive technologies to afternoon. ultimate cancer. a Looking to continue the world joining growth new remain to innovating in for invest committed fear and Thanks

Operator

conference. today's concludes This

lines at your your disconnect may time. You this Thank you for participation.

Varian Medical Systems (VAR) 25 Jul 182018 Q3 Earnings call transcript