Varian Medical Ends Fiscal Year With 2 Percent Growth

Varian Medical Systems ended its fiscal year on a humdrum note.

The company made a profit, but only barely. Fourth-quarter revenue barely was noticeable, climbing only 1 percent to $818 million (6 percent in constant currency). Full fiscal year sales were not much better, rising 2 percent to $3.1 billion compared with fiscal 2014 (but up 6 percent in constant currency). The firm’s backlog also grew 10 percent from the end of fiscal 2014 to $3.5 billion, according to Varian’s earnings report. 

“During the quarter, our Oncology Systems business generated healthy constant currency order growth, the Particle Therapy business gathered momentum, and the Imaging Components business continued to experience declines in orders, revenues and margins,” said Dow R. Wilson, CEO of Varian Medical Systems.  “As we previously reported, we experienced a shortfall of high-margin revenues in our Oncology business when several TrueBeam systems and related software slipped out of the quarter.” 

Oncology Systems proved the more profitable segment — fourth-quarter sales increased 2 percent to $633 million, up 9 percent in constant currency. Annual revenues were $2.3 billion, even with the prior fiscal year, and up 6 percent in constant currency. Gross orders in the final quarter (ended Oct. 2) swelled 5 percent to $919 million despite falling 5 percent in the Americas in both dollars and constant currency. In Europe, the Middle East and Africa (EMEA), gross orders were up 13 percent in dollars and up 25 percent in constant currency while Asia-Pacific gross orders fell 3 percent in dollars but rose 6 percent in constant currency.

Annual Oncology gross orders were $2.7 billion, even with fiscal year 2014 and up 6 percent in constant currency. In the Americas, annual gross orders were up 1 percent in dollars and constant currency and EMEA gross orders were flat in dollars but up 12 percent in constant currency. In APAC, order growth was also flat in dollars but up 9 percent in constant currency.  
  
“Oncology gross orders were strong in EMEA during the quarter when we booked orders for over 100 systems,” said Wilson.  “North American orders grew by 4 percent in the quarter driven by customers continuing to upgrade to newer technologies, replacements of competitors’ products, and increased software sales. We believe we gained share in constant currency in all regions.”

Fourth-quarter Imaging Components revenues slid 8 percent to $155 million and gross orders plunged 30 percent to $165 million. Full fiscal year Imaging proceeds slipped 7 percent to $611 million and gross orders declined 16 percent to $605 million.   

“Price erosion in response to aggressive euro- and yen-based competitors was the principal cause of the decline in orders and revenues for panels and tubes in our Imaging Components business,” said Wilson. “Gross orders for security products were down $63 million or 57 percent for the fiscal year, and annual revenues fell by $34 million or 37 percent, due largely to instability in key international markets. The company has initiated a restructuring program to right-size the Imaging Components business and to get it back on a growth track.”

During the fourth quarter of fiscal year 2015, the company paid roughly 52 million euros in cash to acquire Claymount Investments B.V., a privately-held, Netherlands-based supplier of components and subsystems for X-ray imaging equipment manufacturers.

The company’s Other category, including the Varian Particle Therapy business and the Ginzton Technology Center, posted $30 million in fourth-quarter revenue and $144 million in full-year proceeds. It generated gross orders of $141 million in the quarter and $317 million for the fiscal year. During the quarter, the Particle Therapy business booked orders for three proton therapy centers, including two in the United Kingdom and one in the United States, in New York, N.Y. “It is gratifying to see growing global market demand for Varian’s proton therapy systems,” said Wilson. “We are gaining momentum in this important clinical space.”   

Varian reported non-GAAP net earnings of $1.04 per diluted share and GAAP earnings of $0.99 per diluted share for the fourth quarter of fiscal year 2015. For the full fiscal year 2015, non-GAAP earnings were $4.29 per diluted share, and GAAP earnings were $4.09 per diluted share