Varian Medical Systems (VAR) 23 Oct 182018 Q4 Earnings call transcript

Ladies and gentlemen, greetings, and welcome to the Varian Medical Systems, Inc. Fourth Quarter Fiscal Year 2018 Earnings Results Conference Call. [Operator Instructions].

As a reminder, this program is being recorded. It is now my pleasure to introduce your host, Michael Bruff. begin. may you you, Thank

Thank you, everyone. Good afternoon, Operator.

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

and webcast are website On of available and results stated, references release gross are and press fiscal fourth All net the Varian financial All quarter any perspective and Investor per to references call periods and EPS orders. are fiscal on Unless additional referred Relations deck, discussed stated. this all year-over-year, from website, otherwise intended which accompanying you earnings details. continuing growth are provide A can operations. periods at any find our are reconciliation otherwise non-GAAP All to unless web diluted orders non-GAAP to are share. www.varian.com/investors. to to are rates our

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

how as upcoming outlook to long-term year. Today, the the year this I'll quarter key contributed share milestones fiscal Thanks, our and achieved Mike, past well for and provide afternoon, we and strategy as our everyone. good they

of perspective. on driven quarter strong revenue revenues was a XX%, On XX%. our Oncology solutions grew of Total our software a million. touch were revenues result operational were of by $X.X a from of $XXX total performance, me or services. billion, platform, business our of Revenues which growth million $XXX revenues $XX full XX%. fourth XX.X% hardware, and and Operating let increased First, year for million execution, best-in-class growth earnings both proton basis, with XX%. the fiscal integrated grew

of For GAAP XX%. $XXX non-GAAP $X.XX of grew EPS grew or operating of revenues earnings XX%, XX.X% $X.XX year, the million EPS XX%. and full grew of

For the full Tax $X.XX XX% the million, Act, onetime of Cuts from and were $XXX year, declined non-GAAP and flows GAAP Jobs to $X.XX of EPS due down of EPS XX%. XX%. impact Cash operations grew the

up The the impacted cash detail our committed ensuring XX%. For to that disruption to year, full technologies. operations continues but situation without tariffs Gary customers in discuss will U.S. they our section. QX to China against flows result, in $XXX million, which more were from access and The his are able be the to Varian dynamic, remains patients any achieve our cancer, new victories treat leading-edge in

strategy that our growth working. long-term focus is position. the believe We leadership it right is to grow we Our have capabilities the and

in multidisciplinary our our as leader global cancer solutions. of into We strength integrated pleased announced to Zankowski, In in Corey together who under is May, leadership Solutions Software strategy. we leadership aligning that Kolleen, Group and to we provide have we growth Chris contributions the Varian our and to tremendous X were President changes established Oncology October, the of business. as team. Chief Oncology as our and our bringing team well In software on Varian's and our to announce this confident will scale strategy, initiative selectively financial this continue right portfolio a and pursuit the we Kolleen we to and the care Toth In transform over new Kolleen company deliver is Kennedy recently FlashForward made broaden global business. strategy. Corey proton solutions last will Growth serve decades, Systems succeeding the as Officer lead team that as our are leverage Chris

now me our on three made the time growth we across solid initiatives. have progress spend some let So

and on First, therapy strengthening our basis XXXX. our X% worldwide grew in radiation $X XX quarter. orders in ending to share we leadership the Oncology over XX% the record the market period. leadership in during trailing for June months, radiation therapy. that an our public quarter in filings, have Based grew business, We In a on broken market a maintained the time billion, $X.X billion orders first orders

growth we in grew growth quarter first we billion. $X.X year, this For these fourth record the impressive full Adding a exceeded to past driven This Similarly, Karolinska and year, MacCallum, time was success investments were Genesis to annual both Care. included wins billion big in orders. now by driven been and orders the and has the infrastructure by full $X milestones, industry-leading competitive innovation. This X% in year in region. every field

installed represents meaningful linac base Each and the services, upgrades from net now XXX new more lives is net socket patient worldwide most revenue future touched. Our growing fiscal year. importantly, units X,XXX software, units, in

to On factors. the with taken in for was made global XXX driven sites, XX the quarter. Nearly orders fourth and now and the our of uptick of Halcyon have launch, The -- we greenfield orders have these our by several XX% including hardware taken Halcyon's since expand were side, progress demonstrating rollout May market. ability XXXX

strong have driver First, adopters efforts early a been excellent orders an for all have had as new marketing customer sites. disease ongoing experience and endorsements treating

option. a we the Second, second kilovoltage XX% and the for XXX(k) Halcyon kV segment solution in orders cone-beam in EMEA. the nearly imaging clearance fourth which in CT market full were quarter for advanced Halcyon for the the this and of imaging the this clearance offering quarter mature with quarter with full for was had first provides more Kilovoltage

such humediQ, half tender Finally, process installed have this market had has tools, scanner, of as acquisition confirm safety with management been By In this radiation at our the our see base. portfolio right biometric to manufacturer introductions thus with extended a August, see to the orders and surface-guided we week. we're of starting $XXX right the time. growing Halcyon. unique as public will every patient opportunity. time system. of several ASTRO million IDENTIFY, We some the incremental, takes treatment XXXX, a patient over wins a get and Since IDENTIFY launch, Oncology therapy the exciting we tender worldwide positioning motion our

clinical First, at we to This together radiotherapy details PET work without for a high-fidelity console and artificial that's brings by CT radiation to shared suite of therapy intelligence. our MR, compromise multimodality development driven imaging adaptive enhance delivery. decision-making the platform

Bravos and to brachytherapy brachytherapy afterloader big launched space. to clinical experience advance workflow patient Bravos designed and an system the integrated is are a greater efficiencies for we and improve Second, we efficiency. by clinical which system, treatment, step-forward brachytherapy treatment this providing is excited in simplifying

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

also knowledge-based the quarter X%, of a launch, patented integrated Varian of Eclipse Software adoption by continue thousands consecutive care for in little orders. the XX% of users. XXX since took and hundreds plenty a quality more had over the base. software of our Customers we our because of HyperArc, now have from stereotactic of We decreased to a machine learning planning than installed record software, -- had X,XXX. they grew solutions. time revenues for our innovative our unique launch taken Since capabilities with last have increased approximately RapidPlan number year, Varian and have penetrated and solution radiotherapy Eclipse cancer patients. radiosurgery, of increased quarter, our total for XXX orders. symmetry record XX QX of orders. RapidPlan approximately high-definition has second RapidPlan, full The our unique adopt still customers derive to software X% value grew fully a runway we

Finally, our multi-criteria an to with not as have Imaging contract take likelihood The this our for XXX Eclipse validated in colleague, customer This year, industry installed new quarter results was orders a of an on QX focus a the machines, higher value. year. in represents and in IMV's of grew all for strength business, compared of Score. the for on optimization nearly average recommend total our offerings Net advanced more typically planning Promoter in XXXX orders XX%. enhanced did market planning, for also from XX% a with industry full across quality. we're report, and since customer had evolving over quarter an in needs and and MCO, we efficient geographies, a represents ServiceTrak score would uptake and the proton the quarter. Services which In solutions base lead systems demand last over ranked The manufacturer with a a providing the in and XX% of driven to newer, exceptional launch orders of mix and attach emphasis best-in-class honored XXX treatment growing in rate by control our service workflow, first products This treatment higher XX% score which integration clinical our software any metric we quarter. the

representing the in fall is Beam X stream for business. Delray full each handovers In Christie place the Treatment and the X completed installation, X for in Particle we the partnering are Proton we this room quarter, In September, cyclotron Danish of ASTRO first developments. clinical also exciting Varian For both At future These orders, Center, took treatments at proton start installation International important Therapy at Georgia year, the announced system first the revenue and single-room XXXX. handovers we clinical with proton announced the of in expected Proton for the recurring Proton an we therapy took new Therapy the Centre. Center proton patient fourth for at for Medical quarter. week, Centre Florida. to sites, The our

members research. treatments announced in potentially dose the will tissue tumor healthy take maintaining known is encouraging upon as We excellent protects thereby groundbreaking working This we research effort with of while Consortium Flash to closely suggest initial FlashForward which with the look innovative pre-clinical ultra-high and step-forward study ratio. consortium translational formation to Flash. that protons, the therapeutic rate of studies build an forward enhancing commonly cancer to more cancer XX First, important this control,

with ProBeam as volt to single-room provides XX% increases XXX, cost system. proton therapy construction with system, Second, previous path such the This and clinicians therapy. next-generation and technology a XX% access Flash a smaller potential this introduced as viable lower a with to our we footprint treatment, new compared

renewed ProBeam over of expect XXX under business the Kolleen's we the launch long leadership, and term. in the growth With proton

leadership radiation therapy. lot a strengthening of exciting are developments in So that our

Our second footprint. our to global growth extend is initiative

for in XX% in the XX% For context, was mix sales and XX% approximately in full EMEA APAC. our year the Americas,

region, We quarter. signed was largest to a with performance access growth in the a form Pacific care a driven across in XX number care strong research Europe. advanced for our of to quarter. Asia was Care strategic driven increase Genesis the linacs by This growth geographies. cancer by saw memorandum the partnership fourth orders and Our wins in Australia which resulted understanding key all Australia The -- care for cancer and in in of

We driven orders double-digit of orders strong also and growth we execute XX over in continue software units. and quarter saw outstanding to an Scandinavia, straight our of in tender China Japan, leadership. Halcyon fifth Spain EMEA, and In with -- and well and double-digit market Halcyon growth, wins growth by outstanding

the team include also HyperArc by saw hiring couch year. to XX% enhancements of driven the upgrade an over EMEA are and were where like $XX of a dedicated robust X-degree-of-freedom We quarter our and upgrades from and linear the focus the XX% Upgrades for greatest. performance of for increase by needs million, full accelerator

best-in-class our and for markets We extend continue emerging providing both competitive by and by winning integrated winning products to footprint takeouts. large tenders, mature solutions global and

mid-XXXX been continues for have the our over units. On grow. momentum and Of the since of to from XX% Halcyon launch, over have been orders XX% Halcyon global emerging front, those markets incremental taken

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

across TrueBeam included We collaboration have research a where supply Hospitals, and Kenya. to expand in opportunities. X Varian well Halcyon country access progress see the This of recently Mediheal Africa, partnership five X and new service, training of centers to the to therapy as as signed relationship to with radiation systems Group in agreement continued radiotherapy

the We Halcyon globally, patient but system. at system is feel tremendous day Sterling month, also treating still first making Halcyon began we're recently X good the with on very announced about treatment in comfortably Cancer We runway. XXX there the progress Hospital patients India the in a Within hospital Gujarat. per

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

achieving become who context companies and global patient and the strategy strengthened to with quarter towards as driver unmet care We the enter continue on recently to quarter believe Overall, that year to Oncology will future a engage our company platform test software of and the large as We in Oncology to and of XXX growth communications solutions. we're more patients, the XXX cancer collect clinical of of enable be coordination, application PRO comprehensive a taken for turn the capabilities provide the with and acquisition need. of care with will multidisciplinary market we will in long-term or fourth software research. our With the are patient to over Patient Noona I'll data, reported efficacy designed Varian in clinical trials mobile With full Healthcare, a developer for financial that, patient strides meaningful PROs. full we engagement pleased science outcomes evidence-based used Noona fourth of acquisition, life growing importance leader the cancer outcomes software gains partnerships cloud-based reported this capture new it integrated translational is progress results. modalities. treatment the that a studies year Gary, cancer made manage

hello, Thanks, everyone. Dow, and

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

growth. in impacted the by are XX% August XX% or let in our $XXX me which constant $X the for tariffs million from guidance. million start were Company-wide So were revenues accounted in previous enacted Oncology approximately quarter, revenues in of fourth quarter XX, the not up currency. contra-revenue China retaliatory with

Oncology, in XX% XX% $X.X full were XX% currency, the For or constant X%. services. hardware, driven of and the ended in across up software billion revenues currency. or year, million, in $XXX with were We growth backlog, $X.X up up In XX% billion year by constant revenues

grew currency. Orders XX% revenues up or year, full $X.X were XX% in the in XX% For currency. XX% constant billion, or constant

and or in quarter X% for For We the full in grew growth business growth up $X a $XXX look closer the In Taking North ended in Orders Oncology X% billion Latin America. in in grew year. grew currency. the strong results. revenues our full and X% orders Americas, at the of million X% America X%, X% the by X%. constant quarter year, backlog, driven double-digit with

healthy were and $XXX the the For driven for orders Americas orders America Europe, in XX%. X% North numerous solutions. full East, Growth full and multisite India and grew revenues In grew and year. XX% year, demand large quarter Africa by America in Middle and X%. XX% for increasing the in SRS orders SBRT the in was geography, North grew our Orders million,

full orders XX%. grew the year, For

the region, We have X with driven the seen outstanding wins double-digit and quarters results growth, consecutive tender of across by geography. strong performance across

for Taiwan. were and key revenues Pacific our quarter first in grew growth the and XX% for year's million by teams Asia XX% full in increasing this in execution year. Australia and to of account commercial remarkable Orders the distributor $XXX X% China Japan, due in acquisition the the from time, wins

lead For XX%. full In We Japan, to continue of orders the the XX%, year to China growth full X%. grew we for market for the the the year, in Pacific year, over growth region in Greater contributing orders Asia quarter, nearly low grew double-digit growth saw with and mid-teens there.

Our million business of which year. in revenues proton $XX XX% solutions quarter, the compared down with is posted last

million, revenues the down year, For full were XX%. $XXX

included was the Turning gross the which basis resulted relatively the Oncology tariffs to rate at impact revenue to profitability, total gross Oncology company increased by total This of XX level. portfolio. margin driven approximately to where points of we revenues, business, year-over-year. see fourth across our negative margin XX%, our flat solid company XX.X% business, growth impact quarter The of in continue

points. from the heavily last year by referenced to more Oncology driven XXX this basis basis margin with Approximately by rest North and XXX points and weighted of increased gross that full by to revenue -- America of year, outside X%, the impact tariffs above rest mix year. compared XX.X%, gross driven XX rate growth, down the gross margin points decline increased XX.X%. Oncology quarter largely basis was was fourth rate geographic the was basis margin points XX For increased XX.X%. Full as

quarter on high-margin were on year progress margin proton solutions, fourth $X gross up driven -- million, at by projects up were dollars XX%, dollars Looking million. margin projects. higher-margin $X Full gross

in let term. over areas. me the $XX our up million remain $XXX expenses business to and SG&A XX% to a In X% investment investments basis functions. committed in investing In of up and were programs. revenues, representing down driven spend revenues. the long this key XX to value the other R&D Now driven R&D the of strategic revenues. by at as software, XX% adaptive quarter, million for was investments We our radiotherapy X.X% turn quarter, R&D drive percent full were improvements points year productivity of million, XX.X% or in was expenses the $XXX of innovation year revenues, by G&A of

year, driven receivable full SG&A the a basis decrease of XXX were year. For percent as by to of last related of accounts a points non-recurrence million reserve revenues. or the revenues, down XX.X% The expenses proton million $XX $XXX business primarily was the

this SG&A $XXX year, and operating Excluding G&A increasing driven flat for Company investment XX%. were full efficiencies. was earnings or marketing, continued by million by in spend the sales item, offset of XX.X% were that revenues,

full $XXX operating of of or revenues earnings increased million XX%. the For XX.X% year,

recognized of the loan than year, upon fiscal growing earnings full in of each Center for operating driven incremental Proton by realization paid we fourth interest of Maryland income the August. accrued center the revenue. the on the year faster P&L $X the have In leverage from million XXXX, quarter, in For we interest in refinancing and quarter Treatment

Turning to taxes.

associated regulations of XX.X% rate tax of Act. to impacts The For impact final not Tax legislation. IRS the tax U.S. Jobs and the full year, our Cuts with of rates of and our onetime The tax the the future tax GAAP recent laws projection change could the due of our U.S. facts. applied effective tax as regulations issued the was to are estimates act our the interpreted best reflected impact act and and finalized our represent the further and results, has in

year, GAAP higher full EPS million shares non-GAAP was expected XX.X because our than of the effective of earnings. primarily with $X.XX the For of the geographic shift related in share EPS This a in was was count tax the and $X.XX, diluted XX% XX.X%. rate we non-GAAP was mix quarter.

August China year, XX%. impact guidance. $X.XX $X.XX, EPS XX after full our impacted were EPS was set EPS introduced enactment was $X.XX the to of up GAAP that a negative and was which An factor the external non-GAAP we For retaliatory tariffs, due

balance equivalents We the million ended debt. cash $XXX and liquidity. the to with sheet X year Turning and and cash of

While cash flow from This operations Europe, with from operational balance. expectations, flow year operations in management. fell million, by and short driven up days, were $XXX resulting higher to AR, Even decreased discipline DSO in full in demonstrating the further down of receivables XX%, by from increase faster growth million, XX%. were XXX days Oncology cash $XXX improved working XXX the X capital

In $XX addition to quarter included CapEx. million the other R&D, in investments in

We in spending back are million buying quarter, on active share $XX shares repurchases. this

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

our Thanks, maintain XXXX to fiscal guidance, guidance. continue we Gary. approach considered pragmatic following and regarding assumptions respect have the our With to annual a year

market projected continued First, growth.

Representative resonating, market tariffs leadership. the as this impact on is by the operating Trade United net impact tariffs down $XX impact of our driving China from States Second, million imposed impact July from million. on guidance solutions the August to gross and of as retaliatory X Included in $XX of well the we the XX. earnings, tariffs And third, products a the reflected projected our of are imposed

G&A XX% $XXX to all non-GAAP of of fiscal guidance XX% supply consideration per After average of assumptions, these fiscal to following future X% $X.XX; non-GAAP a share and count percentage XX% to as $X.XX aggregate, driving effective implementing to tariffs. while R&D XXXX We flows to of rephasing investments. of $X.XX the also the within $XXX productivity actions are tax excludes from representing impact X%; expect chain of in earnings revenue operating M&A for revenues million. the million of guidance $XX The we operations commercial these year as XX%; billion, the some The address of of and assumes rate billion careful growth of XX% beginning million. from operations foreign assumes exchange of will non-GAAP specific share a impact diluted XXXX: expected In of our activity currently enacted includes weighted the any and year earnings $X.XX cash tariffs. to and of rates actions

will our operator. year. now Thank various weighted around months take in it to to efforts towards be back of more several heavily half earnings we And performance go Q&A, mitigation tariffs, to As expect you. let's the our phase the

[Operator Instructions].

Our Citigroup. line from first question Amit comes of from the Hazan

just I days change thought because start really was and what such maybe the it obviously I just XX we've from a would Halcyon big ago since from with seen launch.

driving this helped of that is much else what did getting saying the this? get bit little what behind mean, really kind -- some quarter's this more this? see of is I by think of was numbers? we with hoping quarter these this color been you I change that's magnitude given to the prior you're -- drivers, you what on a quarter you in what Halcyon really kV us larger just the Or the give versus just kind could I'm driving on really but the I

A of Thanks. things. couple

First of all, volume. love we the

ASTRO going. as Europe earlier and to uptake you at kilovoltage been Well, the well funnel heard XXX(k), the the we that's product. year this the that we've had think on We clearance, numbers. in kilovoltage I it, very that an go get had good out funnel introduction ever that our impact introduced in as U.S. in since market that seeing something clearly the along, all

is the about are consistent incremental about really for is the But thing product, of adaptive along XX% we're launch say, new triggering this sockets. is been on the product, developed radiation talking with really the of that's that these like vision we from well the the some I'd kilovoltage one As therapy thing other market. that

-- really really fact. So like that we we

XX% We emerging markets, mature, in year. on XX% emerging are the markets very strong

So that's good, XX% new sites.

the I our in underscore orders growing base. business. about the -- think that, greenfield XX% And a kind really very it's of excited These are We're Halcyon in took for that's So XXXX were new installed folks we that. of to sites.

and talking wanted little that some We had mean, tender been bit. And hesitant a the a also we to we've takeouts, the when got from We've a competitive We've has it, think question the saw I demand, fair and on bit good Missouri, amount tender saw I we on that, market. little on that building of product. be some been you it. saw and we very also been wins

And then follow-up Okay. a just the tariffs. on

if both I just China get wanted to you whether U.S. what it's sense you year. expect fiscal the quarter for a or next You're the during the from and

the line, And see On you expect did any of 'XX? impact reactions, from fiscal terms tariffs top line for customer the on do any top in the if any? you

in I alluded is, version in our fourth fourth We had double-digit China. quarter, performance quarter quarter short China. saw to our a you The

quarter, see any the on certainly, impact. So didn't

relationships, In statements fact, leadership, our great market great it share market a and some We We demonstrated to our continue leader. was QX, We've very is strong maybe in delay market good about to in enough growing technology. we want market to had that that be strategy the made believe there. clear, QX. have that

can a in view, Maybe the we as so in we're okay. But clearly QX at watching in at by very point And tariff translates what Gary China, are of talk least a this point side pleased and point market time, from view. it we it revenue of of it. we're little about bit saw a from

bit tease out little it. transparent be and Yes, Amit, about this of a just to to kind more

$XX the the to $XX impact, retaliatory million of of is So tariff million from that related China. of gross

And so and gross the and related that's are to our as million $XX that treated will revenue. coming be U.S. $XX will of impact treated U.S. going as million from cost, and contra products products the the China that be from to that's our into China,

we to net G&A, right, mechanics back commercial the the can chain, we $XX is our of million operating 'XX. productivity that's terms that and now rephasing, impact of kind what in so the FY an and FY gross about, impact through as operations, in supply actions And And the 'XX. for again, to down R&D accounting talked

one give quick the for you us for guidance, revenue final Can Gary. year ex your one guidance, And you FX? your

and are today -- guidance you. that's X%., Revenue is tariffs enacted X% inclusive I sorry, misheard all the of sorry. to that

side, fiscal FX it's year. the at our rates the the of FX on So start

And what would for ex what the it's reported, it be in currency? -- growth X% to If fiscal constant constant currency be X% 'XX? would

are impact X% based that all we But we There to not rates. talked for don't for in already current mean, It's I it's our on we material, or think, know some accounted impacted it. 'XX. to about. terribly again, already growth X%

the from question Petrone comes of next Our line Jefferies. Anthony from

north product think maybe getting mean, years cycles, kind the XXX back you this be sort of look when the prior X based cycle, would XXX, instance, at close on rate, for run the I year. orders so, we to XXX that TrueBeam Maybe of start peaked just XXX, of I again for or for year. to was I on Halcyon, just at order flow this maybe wondering, product quarter.

of terms think So you a is on it think And peak runway orders? how could Halcyon a from do I of a long where you And have product then follow-up do adding on guidance. cycle? in more

keep the replacing case here. complementary-focused we growing. eventually our a We product TrueBeam, love is line. We want our to both we not is to very here. were is whole couple quarter. There Halcyon the line. product differences introduced When That

said, in had the going huge in As base. uptake installed I incremental That's focus. we sockets really the been

product a market-leading position. these It is So basket having just products beat. our can't of both in be

we're very where introduction has the happens in The kind at product good in it ASTRO. go, new reception developed kilovoltage here developed does In what of a terms markets. of markets. And to interested very had is watch

I that if us markets, a been my to exactly uptick year. the over growing is saw in still some we've emerging legs Sorry, had X markets, market. seen we rest percentage have in Halcyon then more in was little that I voice actual in give the talking the And in gravelly. with last a developed going emerging big But lot with mean, was strategy days. of what XX% the of the is this QX, we even the adaptive

got prouder stepping and today, customers, we've had. So kind the team from across kind strongest and the a is the the you -- our what what capture bit hardware, here. exhibit ASTRO. I vision good position. the When of just be very ASTRO -- -- of we've a future, therapy, -- debt proton done ever this I little the last of software, think imagination portfolio of We've day look don't back of for I couldn't at year's I -- the

And my helpful. then count. in that's tariffs, by share would know be, from but there's guess, That's there guidance about a variable earnings the a I I $X.XX math, to on impact follow-up

So I'm those the just potential China to wondering exemptions, in some exemptions And was U.S. there reverse? my for the and a go companies, to that understanding, there of in is EPS various through pathways if to both was and offered that's accurate. and in so, headwind actually,

about a don't about guidance, getting talk you little Why and talk the bit exemption? I'll

the pretty much you're impact. on Yes, spot $X.XX spot is And to Anthony, on. sure. $X.XX,

good So math there.

to no. an binary situation current around know and to can of the -- what's In continue until filed a of thing, dispute. in then to encouraging exclude monitoring bring getting leaders that's cancer to the terms that or exemption won't trade solutions we key Yes. the meantime, we're and actively -- of very have We from conversations We're world patients kind very, it's our this we China. the closely. yes, the with we likelihood exemption, an government especially in And productive ensure

from line the of from JPMorgan. Our Tycho next comes question Peterson

Eleni leaning towards can guys us strategy, We what remind is Tycho. of pearls it terms you Is approach? a you're your your heading on were M&A adjacencies for into fiscal This wondering, still in of year? string next

Sure.

some invested on acquisition a software took I that and did we business. say acquisitions, we our though capital, at to In key have do would the core think core that are we We you our complementary our return at XXXX. as were portfolio. what on Sirtex, the both to look acquisitions, had provided know, areas willing We're make synergies did return us bigger. with out run investment we'll saw acquisitions good you little we bigger the XXXX, a business in business. of in smaller, and see that I complementing the

You I saw Noona a from one Noona the in pharma tool also gives We're reported XX software, looks of acquired space. a that us is a the days cloud-based little those it us Health, Health. that patient We a ago. of bit very very outcomes pleased exciting. in very, briefly play mentioned call,

in outcomes cancer so speak, reported the the trials and we're patient taking across performing excited outcome. enterprise, evaluate how very opportunity. to what cancer we're perceives about clinical that to are And So is patient

planning at forms look into some radiation. doing other opportunities our Whether started treatment a treatment inorganic there's for we of that opportunity be business, see And planning radioembolization, we that's those extend of As There ones. play we us. an may to some it nice organically. be

play. good potential And synergies interventional at other radiation oncology look used cancer as tool in places for to a there as really be some is a continue care. might where We

tariff front. of offset were on margins. some what are have question We the to on the And taken wondering the your steps impact tariff Great. a you

one? crack want at that you take to Gary, a Yes,

we'll Yes, like we making R&D major the that. That R&D productivity are are that our opportunities other programs at But will innovation actions. are environment things We're those of portfolio. opportunities commercial looking chain. here, not around of today evaluating holistically ASTRO taking our and rephasing today, actions that at up of the in announced there, long-term we the and this things in supply the strategic looking some and outlined that kind this holds portfolio what rephasing and at the G&A be see operations then we sure kind impact in and portfolio

half-weighted. think of it and a in the thing the quarters add take to be us it's get going, second some I a said will to little so only that call, but impact couple going bit is, to I'd we this the

from of Evercore the Kumar Vijay comes question ISI. line from next Our

This is Vijay.

but on the how an So I to was is maybe on -- this been orders. starting -- point, -- asked, just what can this? I back has or sustainable we're trying trend maybe, where on get Was you this I and wanted order, the this like what drove to is bulk apologize type? one, what's understand guess one-off, inflection Halcyon And this with comment now if then

it really a And year robustness of to second, on say is The short have product effort the XX%. what the we light but endorsements last over is points call, here. been had the forget that -- marketing version it's didn't of a have for launch. Customer uptime our speaks this product strong. X,XXX I -- from its at good uptime and in market, introduce product has the It's very QX stumble since the finally, look quarter the first I fumble been be for year. the the kind other the This you products to right been bringing get they day. X is are of and Yes, an our X finally competitors years, the fiscal workflow beginning. biggest a seasonality outstanding and of or there works. they and because product has from might very -- little And

from some did view. clearance, the full So we quarter was imaging XXX(k) where the point it that first I'd seasonality in of kilovoltage quarter the for a full expect We clearance second the had EMEA. with --

that here here think adaptive launched our we're the strategy be I ASTRO. will at -- to We Halcyon product. linked --

product. going good think be some down up going there's be this I to and quarters. there's yes, there's quarters there's I on very momentum think and But -- and to lumpy seasonality, quarters

you've just on guidance And the the getting spoken helpful, in administration about know, an the I with talks Dow. tariff past, being That's the maybe exemption here. on in impacts. maybe on

And why just you talks phenomenal organic the are relative administration? you update we guys, X%, revenue the an us I a an For with to right? standpoint, vis-à-vis, revenues, had year, give look to where you can from the, at X% when on So trends those side revenue of underlying well? Halcyon comment just as maybe the you of like but And on would are looks moderate, the business, up tougher can issue then it sort if you so understand will? the make given steam, the picking I comps,

For the tariff thing first.

have exemption. And there's we on We're kind conversations a don't so timing. involved. an As filed process. until I yes, news have it everybody said, But having kind the binary really a It's a It's decision. of and no, productive of get totally no is binary process. guarantee we we with

think We involved. export So we're and to -- very related that the treat -- innovation the pressing who a this it patients is very is net U.S. big tied we're our a in very, It's We the big all are cancer need exporter administration of stories. hard. veterans XX,XXX-plus almost radiation jobs in U.S.

those that the administration. we you let And the making as arguments we're -- the that's So are with hear, we'll soon as know.

side, On the you comment a on mean, I comment, make don't Gary, market the revenue little why after. and I'll

year. the X% of kind saw the equation we that X% so Vijay, goes X% to of OS into that on is orders Yes,

Our backlog has year. grown the OS on X% in

You I outlined in there's from revenue X% million think contra running X%. the detail, in as it, about to tariffs in $XX of that

And all put of X% so that that that, when when that tells X% about -- it's kind up that you you right you together, seems tie all you to equation. like

came catch-up guidance EPS those the initial this half a implies But step-up about comment Can maybe road? flow, more is for cash cash, one first versus 'XX in coming then the just like you below midpoint looks guys. free one Gary, at if talk fiscal second and timing there's right? on Maybe maybe the over cash if in free squeeze that cadence? in if fiscal can you a mid-single-digit 'XX. free a issue, So the know it down expectations, the half of I that I the could in And

I've -- guidance to we've as are you here been we annual know, annual so switched only. guidance,

the the in we're we A half. lot As in over I strategies are said second place of tariff putting mitigation first that preamble, we're half-weighted. in of the putting place, the course

impact our you can half-weighted, second will more of and little a the be so our will second Gary, rest they half, earnings question. the take So

right, And rest I that's the sorry. question, the Dow. think missed of I

I'm sorry.

cash guidance... On the free flow

definitely what Is that you needed, Vijay?

you guidance, cash below... sorry, came it the looks free said, 'XX in The like fiscal

and a world. strong longer you Europe, earnings the we're growth driven and kind Vijay, they're a in of Europe. of rest than of And just So look really at little if little conditions, terms that's bit kind short, the and the by

through. bit little that and a takes mix, just while to clear So

continue So we like actions operating move working to evaluate right million to direction. and to guidance of million, that and in drive the the $XXX $XXX capital to continue we'll

line comes RBC of next from Our question Capital Markets. from Brandon the Henry

can about what last market talk over just Obviously, about growth. a talk you pickup in you to question what on one Just market guys the elected, quarters, growth kind of you of the continue you just then view? given next over is I And think And a driving in have that pickup XX the your this follow-ups. of market confidence few level can the growth couple what's that months?

constant X% we we up couple And X% We constant then were mirror in XX%, a there's the up the were year, year, currency. U.S., think finished look X% going currency. in in on. on in were things in EMEA, for I up X% currency. XX% U.S. constant a U.S. to In -- the of we up second, the APAC, rearview the our numbers,

in EMEA that context across the kind has think the board. one And exceptional when here the been has about So of you EMEA. say been of markets, I'd the

is it markets. Some of emerging

in those Eastern in got East. Africa and we've So Europe those and numbers, Russia India Middle numbers,

Europe good well, Europe. that's We've and continue. think to Western as in had going I Western performance very Central

the say, I'd very, not double-digit but good. probably we that market's been there. well. grow that's continues in So It's hanging hanging very market, to it's in rest and think a there,

better other -- is Asia The little growth historically. -- we've numbers maybe Americas and in Americas a than done

done Asia, better. arguably, we've

upside is market things And getting to the might good seeing watch portfolio, the finally we're we report one to execute to out, might on close and as more number, it change So portfolio it's -- we'll we products very when kind historically about. of from of at kind We've about upside. the talked some I little of a probably market XX- this, people and mid-single-digit to of a feel markets in look historically out, with the be to that I we've a say and upgrade. of bit think kind and the our kind talked XX-year-old we'll balance, to up that year. upgrades scenario, X are the And about X going the scenario think we be what

kind Halcyon, do longer-term, how All demand position pent-up think about right. And that, about then maybe for thinking quarters? developed the sustainability the in number TrueBeam order think And of longer-term? of we kV the that any should over you be imaging gross there's Halcyon of then terms the on couple how the do kind we in how versus Halcyon, next of you of And portfolio markets?

products a in great the marketplace. position Now both two have the

across strategy time. the those flexible will electrons. we've treatments not one and launched adaptive making SBRT, done positions the the are TrueBeam you SRS installed in are choices -- a our of our Clinac now Customers by we has versatility for base extend million huge strategy and flexible, SRS more that most doing choice, business. excited Halcyon one. We has We about C-arm have about on ultimate to what has the have all fastest still mechanical adaptive much the over market much applications. dose does SBRT will Halcyon with When the very geometry entire platform rate, have the upgrade. in remain our We're TrueBeam beginning adaptive strategy higher on Halcyon. X.X gun West.

on disclosing Our That's we base. a about year installed why our started ago. you growing is to that focus

the You've into do us way net the and adaptive world of kind to and XXX-ish is forward. installed in the had that we uptick, growth linked are growth sell year, significant give I we material the and base that unit it think product last market. going is exciting, the introduction strategy installed portfolio as base seen tremendous that's managing that the some with we've legs that this kilovoltage developed on and going

then 'XX And the you and one of margins fiscal margin for Can All me. guidance question operating FX? factor are get you about for EPS right. talk just in year end upper that range? guidance operating And assuming your for lower you what and then to the last

XX% basis to That that the points net that it earnings talked of $XX tariffs relates in impact had to million about. the way impact. from we XX%, operating as is about XX XX that basis guidance Yes, think to there about a the point is there's operating so in

think to I puts takes through. and way other there's your think

got you that say, just think time are profitability always then balanced, and R&D. at I to about. certainly we're would like offset are see investments leverage in great it's the accretive rates, services with over know, some getting I -- now favorable in things the as and G&A our growing right software margin talked we on average rate. portfolio and balancing going We've and we're And I said, I those, the growth company making operating

couple what kind look top yielding the and the of that's tremendous a line. out of of that at today in we last rolled days R&D and you If in San that's growth here portfolio you're Antonio, seeing in

we to And make want to top those make continue sure that so we continue to line investments growth.

kind the as are those of XX% about puts So to and in takes that you XX%. think earnings operating

we fiscal what not at a of a but of what's start currency have basis, to relates the impact the -- is our that again, And look if in year fiscal of running rates -- implies it currency, material. year-over-year is from implied what the that currency the our of all you kind -- end on as our small the As guidance.

comes Baird. question of line Bednar next from Our from the Jason

first. China on start to wanted just I

that any the public data on good you're if in guys from still up slowdown. change out you that some are some customers of any out just spend seeing macro of putting the very some suggest commentary numbers. just of reports maybe the company market? in there's Some willingness to Obviously, in recent -- of of economic But an curious or recent rumblings that ground

radiation all. at from very view. The China a point of therapy underserved market Not remains

It's We're share say, resolved important very, in our China in have remains seeing we're market. from we government many, invest a that, view, be to a market least years, we've point good. to Over But of as market grow I'd environment that the many working of share extended continues very far, robust to trade cancer continued for from this that our services. position, share. at so relative reasons. very a us U.S., disputes. through funnel Our lots

of at we and as China market done well we very, have in the in X you Our very look the well. When a that growing position. have market-leading quarters each -- share public tender wins, last

we're things we're is beyond the of seeing demand in hardware. One market seeing that that

relatively So strategies about We've localization us. for which as software, in that. we're business for is our new seeing well very got software excited we're some the some uptick there, and

or And sourcing things chain. tariff any then risk of? the mentioned or in Gary, curious, if of XX% know trying risk -- of maybe some Okay. But can maybe on some that mitigation sight consist efforts just you to to if and have just you profile more line you supply alternating mitigating some the the are detail sense pretty what Dow, really provide what I those get of just good efforts of mitigation impact? the around that truly a

transparent, in about on, deliver more on million executed like and They actions going be right some $XX going in look, 'XX the we second the those what order now. swift Taken we're are million and and operations. to a in into for taking supply going commercial we're and go we're right the Competitively, our operational And there to place. that are us to chain $XX breakout half-oriented order execute, not that's the FY actions given get the in rigor, gross in in impact everything to But a just talk very about lot commitments. the level. detail to right, going we're at

the -- when share we tariffs, and more. and as what So when we'll more know that's we about know

just if in that Is just Okay. business I recently believe was will And is you Augmenix. last quick guidance, one-off before then can in, acquired. that something or just that in on you minority interest that's it I a sneak that one had one, reflected it a exclude?

of a small that and company, below it a We percentage owned one-off. be It's will the line. very

Not guidance. reflected in

in all. at not reflected And Yes. guidance

Sachs. line of next from Ro Goldman Isaac comes question Our from the

on This Isaac. is questions Two for for me. Frits

expected feel on margin. guidance But supply is one talked a gross what's expected we question, that a healthy was of that year, quarter, just gross gaining chain shuffling this mix, kind First was year mix. next I on than some for it then for rate. about Obviously, software and and the and what takes of geographic assuming guiding year. you've tax was above higher puts know appreciate again, And part next margin second there. for your and the this then

the wondering, is the growth in up out that we're higher it going States, of Just seeing in given United rate those business, why situations? your

take can't Yes, rate. was it realize from business. hedging mostly I as contracts a on U.S. contracts, hedging Those geographic tax the adopt. last underlying much which really would say, on get the value to From not that one outside rate as in a our and the the I'll tax driven so the first, perspective, you mix, U.S., and the underlying you exposure tax higher

that's really so majority that business. it's underlying And mix of not earnings, geographic in the the

The sorry? second the again, question, part first or part -- time, more one your of

In software gross is margin, benefit. know positive a I

chain mitigate to tariffs. cost working supply from You're

for Just overall year. puts and takes there what you're next guidance and assuming

U.S., bit you that margin the pressure by are well would I say -- to Guide P&L It's I sell and puts-and-takes-wise, into the favorable. price get right to we've the tell the mix of in continuing more offset margin tremendous the will But gross the roll rate, services overall, just you seen to geographic is momentum that realize little the Halcyon 'XX. margin the you the and here into mix, trade-offs would executing of business very with of to inside I value that, market and outside software then growth. in start also FY a gross think mix a line. teams little certainly, bit

why the pleased performance past continue. to wouldn't believe very that year And this so with team's reason and no

from Ladies gentlemen, and of question line Petrone our Jefferies. the Anthony next comes from

guidance, in guidance. handful just contributions transactions capital just, and Maybe X% the a in to acquisitions, just wondering that X% what are the the from various to then, software X% And allocations. of so X% there's I'm overall,

but also can There's other you You quarter. buybacks mentioned did you areas, this tuck-ins. course, of in, some move

haven't seen in to earnings reflected for I buybacks. you the just So bit, in I'm the guidance what's so market a come wondering

year. the it's and immaterial Anthony, next of really M&A on front, kind

key to we've little $XX were no kind We the we now advantage or in worth yield million what well fourth tremendous us take us in the to maintain more included organically. And terribly in in versus would financial see in of right this make nicely go over time. manage core that $XX share great that. relative lot from capital invested we continue change we're 'XX. market there. both the portfolio there to nothing legs material about to want share this to going I on we to a But to out up in enough of roughly flat we the forward. But material business do as as $XX allocation we'll software lined but the flexibility as prior million really averaging a back capital we benefit will out nice say of and to think and the and our a FY allocation From the that. approach quarter, opportunities guidance. the assumption here earnings so sure has expecting see We'll count active And think business, Add have in a I how from. a inside stock per of to plays million in results we're that saw track cases, perspective, buying you of tuck-ins,

Ladies to back and no over for like questions at further management to gentlemen,, turn time. have floor this queue the closing. in we I'd

is you. it One, Wait, Thank continue just we've Looking forward comments. few business closing, a and here. effectively tariff worldwide to situation. our weather we China right strength the U.S., got that compete here. the to such close In of

The next market of of to the share we business in million had years of mitigate million, We said, down impact that we fourth growth is and outstanding. on year. the quarter, expect be growth. tariffs rate several China our $X double-digit strength building $XX could a As gross to

Sorry, really million. just down to quickly, interrupt, $XX just to mitigate

did What I say?

million. $X said You

$X million.

to momentum double-digit of million million. in commercial growth continue we've very pleased now. us on you we the to Sorry, of in we share of fourth rate new our remain do, the China technologies absolutely market We And forward cancer. last several of the building in soon. joining to today. look basket infrastructure and investments maintaining the our to our outstanding. the business we China. pulling towards innovating long-term and and in ultimate and quarter world growth with towards innovation Thank no marketplace, executing excellent last year for the had Thanks remain We is in have customers few victory, we over closing, in The a years on to $XX Halcyon we from in committed committed drive intention the win I'm here over value-creation the and for growth, fourth fueled by everything years back $XX a strength quarter, product joining our progress our In strategy. without our to having us made fear have today.

does conclude This teleconference our today. you, Thank ladies for and gentlemen.

may a now line this and You Thank your your disconnect for you at time. participation, have wonderful day.