Varian Medical Systems (VAR)
Q1 2012 Earnings Call
January 25, 2012 5:00 pm ET
Spencer R. Sias - Former Vice President of Corporate Communications & Investor Relations
Dow R. Wilson - Chief Operating Officer and Corporate Executive Vice President
Elisha W. Finney - Chief Financial Officer and Corporate Senior Vice President of Finance
Timothy E. Guertin - Chief Executive Officer, President and Executive Director
Steve Beuchaw - Morgan Stanley, Research Division
Amit Bhalla - Citigroup Inc, Research Division
Vivian Cervantes - Kaufman Bros., L.P., Research Division
David H. Roman - Goldman Sachs Group Inc., Research Division
Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division
Anthony Petrone - Jefferies & Company, Inc., Research Division
Jeremy Feffer - Cantor Fitzgerald & Co., Research Division
Junaid Husain - Dougherty & Company LLC, Research Division
Tycho W. Peterson - JP Morgan Chase & Co, Research Division
Jason Wittes - Caris & Company, Inc., Research Division
Dalton L. Chandler - Needham & Company, LLC, Research Division
Previous Statements by VAR
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» Varian Medical Systems Inc. - Shareholder/Analyst Call
Good day, ladies and gentlemen, and welcome to the Varian Medical Systems First Quarter Fiscal Year 2012 Earnings Conference Call. My name is Cathy, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today's call, Mr. Spencer Sias, Vice President of Investor Relations and Corporate Communications. Please proceed, sir.
Spencer R. Sias
Thank you. Good afternoon, and welcome to Varian Medical Systems conference call for the first quarter of fiscal year 2012. Participating in this call are Tim Guertin, President and CEO; Elisha Finney, CFO; Dow Wilson, Executive Vice President and Chief Operating Officer; and Tai Chen, our Corporate Controller. Tim is on travel and participating remotely. Tim and Elisha will summarize our results and will take your questions following the presentation.
To simplify our discussions, unless otherwise stated, all references to the quarter or year are fiscal quarters and fiscal years, quarterly comparisons over the first quarter of fiscal 2012 versus the first quarter of fiscal 2011. All results are for continuing operations, which excludes the sale of research and in proportion of ACCEL.
Please be advised that this presentation and discussion contains forward-looking statements. Our use of words and phrases such as outlook, could, should, believe, opportunity, can, expect, potential and similar expressions are intended to identify those statements, which represent our current judgment on future performance or other future matters. While we believe them to be reasonable based on information currently available to us, these statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of the important risks relating to our business are described in our first quarter earnings release and in our filings with the SEC. We assume no obligation to update or revise the forward-looking statements in this presentation and discussion because of new information, future events or otherwise.
And now, here is Tim.
Timothy E. Guertin
Good afternoon, and welcome. Today, we are reporting results for fiscal 2012 first quarter with revenue and earnings in line or ahead of our expectations, but net orders challenges in all of our businesses.
To summarize our results, revenues for the quarter rose by 8% to $625 million. Our gross margin dropped by 3% as anticipated due to a tough year-ago comparison, product mix and the Scripps Proton revenue recognition, which had 0 margin.
Net earnings were $0.79 per diluted share, down 1% from the year-ago quarter, but well ahead of our guidance for the quarter. Our quarter ending backlog, including the Proton business, expanded by 14% to $2.5 billion. Our focus now on orders and operations in each of our businesses.
Oncology Systems' first quarter net orders totaled $485 million, up 6%, with a 22% increase in the overall international regions that more than offset an 11% decline in North America. This is in stark contrast to the year-ago quarter, which had a 20% increase in North America and a 6% decline in international markets versus the first quarter of fiscal 2010.
Compared to the first quarter last year, net orders rose 27% in the Far East driven by gains in China, Thailand and Malaysia, as well as in Japan where we have just announced the establishment of a new training and education center. I believe we've gained market share in this region, and we continue to see a healthy pipeline of potential business in China where we're [indiscernible] from a larger and revitalized sales force.
In Europe, net orders increased 18% with the help of key wins in Sweden, The Ukraine, Turkey, The Netherlands, Egypt, Finland and Russia. Net orders in the rest of the world, including Latin America and Australia, grew 37% versus the year-ago period. Growth in Latin America was led by Argentina, Chile and Brazil where we have won all 3 of the last public tenders. New technology, a broader product line, unmatched service capability and new educational programs have enabled us to strengthen our position in all international regions.
In North America, which comprised 42% of the net orders for the quarter, we were impacted by several order push outs. We fully expect that we will book these orders in this fiscal year. While the sales funnel for this region looks healthy for our hospital customers, we're seeing some continued reimbursement uncertainty and slow purchasing activity among freestanding clinics.
On a global basis, the number of accelerators ordered in the quarter was up from the year-ago quarter driven by strong demand in international markets for both low- and high-energy accelerators, including our TrueBeam platform for radiotherapy and radiosurgery. The take rate for TrueBeam almost doubled in Europe, showing that it is gaining traction as a product with a broad clinical appeal and a driver for future growth in all parts of the world.