INVESTOR MEETINGfilecache.investorroom.com/mr5ir_varian/350/download... · 2013-06-24 · (As of end of Fourth Quarter, Fiscal 2012) Revenues growth estimated at ~ 8% to 9% for FY

INVESTOR MEETING ASTRO

October 30, 2012

1 Investor Meeting ASTRO 2102

2

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 outlook, including growth drivers; the company’s future orders, revenues, backlog, or earnings growth; future financial results; market acceptance of or transition to new products or technology such as TrueBeam and radiographic flat panel detectors, image-guided radiation therapy, stereotactic radiosurgery, filmless X-rays, proton therapy, and security and inspection, and any statements using the terms “could,” “believe,” “outlook,” 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 global economic conditions; the impact of the Affordable Health Care for America Act (including excise taxes on medical devices) and any further health care reforms (including changes to Medicare and Medicaid), and/or changes in third-party reimbursement levels; currency exchange rates and tax rates; demand for the company’s products; the company’s ability to develop, commercialize, and deploy new products such as the TrueBeam platform; the company’s ability to meet Food and Drug Administration (FDA) and other regulatory requirements for product clearances or to comply with FDA and other regulatory regulations or procedures; changes in the regulatory environment, including with respect to FDA requirements; challenges associated with the successful commercialization of the company’s particle therapy business; the effect of adverse publicity; the company’s reliance on sole or limited-source suppliers; the impact of reduced or limited demand by purchasers of certain X-ray products, including those located in Japan; 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 to public tender awards and the loss of such awards or other orders; 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.

Investor Meeting ASTRO 2102

3

Elisha Finney, Executive VP and CFO

Q4 & FY12 Review

FY2013 Guidance

Dow Wilson, CEO

Our Goal and Strategic Priorities Kolleen Kennedy, Sr. VP, President of Oncology Systems

Oncology

What’s new at ASTRO 2012

AGENDA


FINANCIALS Elisha Finney, Executive VP & CFO


VARIAN MEDICAL SYSTEMS FY12 PROFILE

Net Orders: $3.1 B

Revenues : $2.8 B

EPS: $3.76

Operating Earnings % 21%

Employees: 6,142

NYSE Symbol: VAR


BUSINESS SEGMENTS – NET ORDERS FY 2012 % Oncology Systems $2,400 M 77% Radiation Therapy Brachytherapy Radiosurgery X-Ray Products $ 506 M 16% Tubes Flat Panel Imagers Other $ 216 M 7% Ginzton Technology Center Security and Inspection Products VMS Particle Therapy TOTAL $3,122 M 100%


Q4 FY12 RESULTS

VMS OS XRP Other

Net Orders

964 Flat 789 10% 145 15% 30 (76%)

Revenues 756 5% 590 7% 130 9% 36 (29%)

Gross Margin 43% 44% 43% 29%

R&D 46

SG&A 110

Op Earnings 168 22% ROS (+ 5%)

Interest Income 0.7

EPS $1.08 (112M diluted shares)

Note: Dollars in millions, except per share amounts.


Q4 FY12 YTD RESULTS

VMS OS XRP Other

Net Orders

3,122 6% 2,400 7% 506 5% 216 7%

Revenues 2,807 8% 2,189 8% 493 5% 125 18%

Gross Margin 43% 44% 43% 22%

R&D 186

SG&A 417

Op Earnings 594 21% ROS (+ 1%)

Interest Income 1.8

EPS $3.76 (113M diluted shares)

Note: Dollars in millions, except per share amounts.


SIX YEARS OF EARNINGS GROWTH

06.01.12

9

CORPORATE PRESENTATION

GROWTH

$1.86

$2.31 $2.65

$2.96

$3.44

2007 2008 2009 2010 2011 2012

$3.76 EPS IN $USD

CONTINUED GROWTH IN ORDERS BACKLOG

06.01.12

10


$1,655

$1,888 $2,054

$2,193

$2,530

$2,844

2007 2008 2009 2010 2011 2012

$2.8B $USD

($ in millions)

Q4 FY12 BALANCE SHEET / CASH FLOW

CONSERVATIVE BALANCE SHEET – $705M cash and cash equivalents – $50M short-term investment – $161M total debt – $1,510M stockholders’ equity

DSO* 85 DAYS – Up 5 days from year ago quarter – Up 5 days from prior quarter

CASH FLOW – $191M cash flow from operations – $ 85M used to repurchase 1.4M shares in Q412

*Days Sales Outstanding


CONSISTENT CASH FLOW & CAPITAL DISTRIBUTION TO SHAREHOLDERS

06.01.12

12


(600)

(400)

(200)

-

200

400

600

FY07 FY08 FY09 FY10 FY11 FY 12

• $493mm in CFFO during FY12 – In-line with Net Income of

$427mm

• Since 2007, $1,943mm returned to shareholders – Spent $85mm to repurchase 1.4

million shares of common stock in 4Q12

• Diluted share count fell at an average rate of 3% – 131 million shares in 2007 – 113 million shares today

FY 2013 OUTLOOK (As of end of Fourth Quarter, Fiscal 2012)

Revenues growth estimated at ~ 8% to 9% for FY 2013

EPS estimated at ~ $4.06 to $4.16 for FY 2013 (1)

Revenues growth estimated at ~ 8% to 9% for Q1 FY 2013

EPS estimated at ~ $0.83 to $0.88 for Q1 FY 2013 (2)

Notes: 1) EPS for FY13 includes ~ $0.06 to $0.08 effect from the pending medical device excise tax. 2) EPS for Q1 FY13 includes a restructuring charge of $0.02 to $0.03 to be taken in the first quarter of fiscal 2013. 3) Varian updates its outlook once per quarter when it reports financial results. 4) The outlook is for Continuing Operations.


OUR GOAL & STRATEGY PRIORITIES Dow Wilson, CEO



STRATEGIC PRIORITIES

2. GO GLOBAL

3. GROW SOFTWARE, SERVICES

4. COMMERCIALIZE PROTONS

1. INNOVATE

5. OPERATIONAL EXCELLENCE


INNOVATE


HISTORY OF INNOVATION

$-

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0VAR

Anode-End-Grounded X-ray Tubes

TrueBeam

RapidArc OBI

IMRT

Flat Panel

Security Materials

Discrimination


R&D INVESTMENT


0

100

200

300

400

500

600

700

800

900

FY07 FY08 FY09 FY10 FY11 FY12

7% of Revenues

>900 Engineers

ONCOLOGY PRIORITIES

DISEASE SITE SOLUTIONS – Lung & Liver – Prostate – Prone Breast

SPEED & EFFICIENCY

HYPOFRACTIONATION

COST REDUCTION

EMERGING MARKET PRODUCTS

DEMONSTRATION OF CLINICAL BENEFITS


XRAY…GROWING SHARE IN $2B MARKET

RADIOGRAPHIC PANELS (WIRELESS)

INFIMED (WORKSTATIONS)

INTEGRATED WIRELESS RAD PANEL & WORKSTATION

8064 – ATLAS GE AFTERMARKET TUBE

DYNAMIC PANEL (4343CB)


ADVANCE SIP TECHNOLOGY

High confidence threat resolution in under a minute VARIAN AUTO-THREAT RESOLUTION


GLOBALIZE


SALES GROWTH BY REGION

24

FYE 2012

North America

49% Europe 30%

Far East 16%

ROW 5%

North America

44%

Europe 30%

Far East 21%

ROW 5%

FYE 2007

26% Outside US and EU

16% 5yr CAGR in Far East

10% Total 5yr CAGR


BRIC-AT SALES GROWTH

25

$-

$40

$80

$120

$160

FY07 FY08 FY09 FY10 FY11 FY 12

Brazil Russia India China Africa Turkey

28% Combined 5yr CAGR

11% Total Company Sales

$300+ Combined Revenue

($ in millions)


KEY MARKET OPPORTUNITIES

1,611 LINACS TODAY → 2,700 LINACS Expanding distribution, service, education

267 LINACS TODAY → 500 LINACS Short-term…large buy by MOH

110 LINACS TODAY → 300 LINACS Well positioned with the Siemens partnership

246 LINACS TODAY → 600 LINACS IN 5 YEARS Expanding distribution. Financing partnersships important. Leveraging Siemens channel


GROW SOFTWARE, SERVICES


SERVICE: >$1 BILLION POTENTIAL

INITIATIVES: • Build Proton, X-Ray, and Security

services

• Add professional services, grow existing services

• Promote sales and value proposition with marketing

• Drive emerging market growth with education and training

SERVICE REVENUE


0

100

200

300

400

500

600

700

800

900


SOFTWARE GROWTH

~$550M BUSINESS PLATFORM FOR GROWTH: • Mobility

• Cloud

• Knowledge network

• X-ray image processing

• Integration

• Lower cost of ownership


FY 07 FY 12

COMMERCIALIZE PROTONS


PROTON INITIATIVES

COMPLETE SCRIPPS INSTALLATION • First patient treatment in 2013

BEGIN NEW INSTALLS • Saudi Arabia

• St. Petersburg

FINANCE, BOOK NEW ORDERS • Maryland

• Emory

TWO ROOM SYSTEM


OPERATIONAL EXCELLENCE



FOCUS AREAS: • Product cost reduction

• Service Productivity – Lowering installation and warranty as a percent of sales

• Process improvement

• Lowering cost of quality

• Cash management – Improving inventory turns


SALES GROWTH OPPORTUNITY

FY12

$2.8B

FY17

$4.4B


KEYS: • Innovation

• Globalize

• Software, Service

• Commercialize Protons

ONCOLOGY SYSTEMS

06.01.12

35


ONCOLOGY SYSTEMS

06.01.12

36


• Innovation

• Globalization

• Software Leadership

• Services Growth

• Operational Excellence

ONCOLOGY SYSTEMS

06.01.12

38


INNOVATION RADIOSURGERY

INNOVATION

06.01.12 CORPORATE PRESENTATION

• Next generation radiosurgery suite

• Best radiosurgery system

• Precision: <1mm end to end position and tracking accuracy

• Efficiency: industry-leading workflow and treatment delivery

• Scalability: radiosurgery upgrade packages available for installed base

• Small footprint

• 510(k) clearance pending

39

Cancer Surgery. No knife.

TM

INNOVATION TRUEBEAM® UPDATE

INNOVATION


• Fastest adoption of any accelerator

• PerfectPitch 6-degree of freedom couch i

• New advanced IGRT motion management package for during-treatment target verification

• Slim form factor

• Motion-management interface

• Intuitive, streamlined user interface

• Available with industry-leading 2.5mm and 5mm MLC technology

~645 / ~330 Orders Installations

40

INNOVATION ARIA V11

INNOVATION


• Full launch underway!

• ARRA HITECH compliant

• Unmatched visual workflow

• Safety focused with embedded quality checklists

• iPAD mobility

• Includes Brachytherapy

• Patient Engagement and Survivorship

• Proven interoperability with >1000 interfaces supporting >60 vendors

iPad

41

Clinical + Practice Management Analytics

INNOVATION LUNG SOLUTION

INNOVATION


• Clinical trials underway for early stage NSCLC SBRT

• Real-time, Non-ionizing, Direct target positioning and verification.

• Optimized workflow & contouring library for 4D treatment planning

• New thoracic surgeon CPT code. Proposed CPT code under review for beacon placement

• Enhanced Calypso® system* & anchored beacon transponders for real-time tracking of lung tumors.

• Acuros™ most accurate dose calculation algorithm

• Full system integration available 2013

42

*510(k) pending


INNOVATION BRACHYTHERAPY

INNOVATION

• ASTRO launch Vitesse real time planning for HDR

• Complete integration of HDR treatment delivery with ARIA network

• Acuros BrachyVision - AAPM physics community guidelines released

• Cost effective RT modality for emerging markets

43

GLOBALIZATION BRIC GROWTH

GLOBALIZATION


• Expanding RT utilization

• Growing Varian market share

• Simple, effective treatment paradigms with excellent support services

• Innovative training & education initiatives

• Public and private opportunities

• Creative finance programs

44


34% Total CAGR

System & Service BRIC Orders (M$)

GLOBALIZATION INVESTMENT

GLOBALIZATION


• Global footprint expansion

• Manufacturing plants

• Education centers

• Direct sales and service channels

• Parts depots

• Research and development

• Government affairs

• Regulatory expertise

45

GLOBALIZATION


46

• Announced April 2012

• ESTRO May 2012 OUSA go-live

• ASTRO Oct 2012 North America go-live

• Charter: Envision Better Cancer Care

GLOBALIZATION SIEMENS STRATEGIC ALLIANCE

GLOBALIZATION


47

• Leverage market leading diagnostic imaging and cancer care technology

• Enhance and expand clinical offerings

• Increase global access

• Explore joint development opportunities

GLOBALIZATION SIEMENS STRATEGIC ALLIANCE

Global Reach Connectivity

& Interoperability

Collaborative Innovation

& Future Joint

Development

Diagnostic Imaging for Radiation Oncology

ONCOLOGY SOFTWARE MARKET LEADER

ONCOLOGY SOFTWARE LEADER


• >3,000 ARIA sites worldwide

• >3,000 ECLIPSE sites worldwide

• FullScale IT Solutions Portfolio

• Flexible SW sales and service models

• Eclipse & ARIA for RO, MO, BT, PT

• Power of the truly integrated and comprehensive solution

• $500M SW business

48

#

SERVICES GROWTH

GROWTH


• PremierAssurance™

• Services contract flexibility and customization

• Growing contract capture rate. Richer contract mix

• Global parts depot network

• Installation and Warranty productivity

• Innovative SmartConnect technology. Expanding remote diagnostic and servicing capabilities

• $1B Trajectory

49

16% CAGR

Revenues (M$) FY08 FY09 FY10 FY11 FY12

SERVICES GROWTH

GROWTH


• Over 250 clinical resources worldwide

• Training and support in 15 languages

• Blended learning strategy including classroom, on-site, peer to peer, and e-Learning programs

• Five state of the art WW training facilities • Las Vegas • Beijing • Mumbai • Tokyo • Zug

• HelpDesk supports >70,000 Customer Touches every year

50

Training & Technical Support




• Manufacturing

• Supply chain optimization

• Test cell cycle time

• Customer Support Services

• Installation & Warranty productivity

• Remote Diagnostics & Servicing

• Engineering

• Standardized cabling & board design

• Slim Form Factor

51

10% Reduction

Target

TrueBeam Cost Reduction


GROWTH


• Re-packaging by market segment

• Increase software components in package deals

• Improve positioning to enhance value proposition

• Creative & flexible finance programs

• Implement 3rd party component cost controls

• Continued Installation & Warranty focus

52

Improving margins OUSA


GROWTH


Varian has been rated #1 among linear accelerator manufacturers…

53

“Varian Ranked #1 in Net Promoter Score,

24% higher than industry average “

ServiceTrak™ 2012 survey

Q&A


VARIAN MEDICAL SYSTEMS (NYSE:VAR)

INVESTMENT SUMMARY • Market and technology leader

• Multiple global growth platforms – Radiotherapy/Radiosurgery – Filmless X-ray imaging – Proton Therapy – Port and border protection

• >$750M annual service business

• Management focus on execution

• Strong balance sheet, significant cash flow, stock buybacks


SLIDE APPENDIX


SIX YEARS OF EARNINGS GROWTH

06.01.12

58


GROWTH

$1.86

$2.31 $2.65

$2.96

$3.44

2007 2008 2009 2010 2011 2012

$3.76 EPS IN $USD

Q4 FINANCIAL HIGHLIGHTS

06.01.12

59


HIGHLIGHTS

• Net earnings of $1.08 per diluted share

– Up 14% from year-ago quarter

– Net earnings of $0.95 in 4Q11

• $756mm in total Revenue

– Up 5% from year-ago quarter

– Up 9% excluding proton revenues from year-ago quarter

NET ORDERS AND REVENUE

06.01.12

60


$2,934 $3,122

$2,597 $2,807

$-

$700

$1,400

$2,100

$2,800

$3,500

FY11 FY12

Net Orders Revenue

Fiscal Year End

$968 $964

$719 $756

$-

$300

$600

$900

$1,200

4Q11 4Q12

Net Orders Revenue

Three Months Ended

INCOME STATEMENT

06.01.12

61


FYE FYE FYE FYE FYE FYE2007 2008 2009 2010 2011 2012

Backlog 1,655$ 1,888$ 2,054$ 2,193$ 2,530$ 2,844$

Net Orders 2,010 2,302 2,317 2,556 2,934 3,122 Revenue 1,755 2,070 2,214 2,357 2,597 2,807

Gross profit 733 878 961 1,026 1,136 1,196 Profit margin 41.8% 42.4% 43.4% 43.5% 43.7% 42.6%

Total R&D 117 136 148 157 171 186 % of sales 6.7% 6.6% 6.7% 6.6% 6.6% 6.6%

SG&A 277 323 339 335 377 416 % of sales 15.8% 15.6% 15.3% 14.2% 14.5% 14.8%

Operating earnings 339 419 474 534 588 594 EBIT margin 19.3% 20.3% 21.4% 22.7% 22.7% 21.2%

Net Earnings 243$ 295$ 332$ 368$ 409$ 427$ Diluted shares 130.6 127.6 125.0 124.0 118.7 113.5 Diluted EPS 1.86$ 2.31$ 2.65$ 2.96$ 3.44$ 3.76$

(Total Company w/o Discont. Operations; $ in millions except per share)

Documents

INVESTOR MEETINGfilecache.investorroom.com/mr5ir_varian/350/download... · 2013-06-24 · (As of end of Fourth Quarter, Fiscal 2012) Revenues growth estimated at ~ 8% to 9% for FY