2019 Annual Report People Powering Victories Financial highlights(1) Dollars in millions, except share amounts GAAP Non-GAAP(2) FY17 FY18 FY19 FY17 FY18 FY19 Revenues $ 2,619 $ 2,919 $ 3,225 $ 2,619 $ 2,919 $ 3,225 Gross margin $ 1,114 $ 1,274 $ 1,370 $ 1,119 $ 1,280 $ 1,391 Operating earnings $ 298 $ 437 $ 386 $ 392 $ 513 $ 542 Operating earnings (as a percentage of revenues) 11.4% 15.0% 12.0% 15.0% 17.6% 16.8% Net earnings—continuing operations $ 226 $ 150 $ 292 $ 305 $ 409 $ 426 Net earnings per diluted share(3)—continuing operations $ 2.42 $ 1.62 $ 3.18 $ 3.26 $ 4.42 $ 4.63 Gross orders $ 3,076 $ 3,172 $ 3,569 $ 3,076 $ 3,172 $ 3,569 Backlog $ 3,083 $ 3,183 $ 3,390 $ 3,083 $ 3,183 $ 3,390 Gross orders & revenues Combined businessOncology systems Proton solutions $M $M $M 4,000 4,000 350 3,500 3,500 300 3,000 3,000 250 2,500 2,500 200 2,000 2,000 150 1,500 1,500 100 1,000 1,000 500 500 50 0 0 0 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 Gross orders Revenues Operating & net earnings Backlog $M $M 600 4,000 3,500 500 3,000 400 2,500 300 2,000 1,500 200 1,000 100 500 0 0 FY17 FY18 FY19 FY17 FY18 FY19 Operating earnings Net earnings (1) All financial metrics, including historical figures, reflect results from continuing operations and reflect the new revenue recognition standard, ASC 606. (2) Reconciliations to GAAP financials can be found in our earnings press releases at www.varian.com/investors. (3) GAAP EPS was reduced in fiscal year 2018 primarily due to the mandatory repatriation of unremitted foreign earnings per the new Tax Cuts and Jobs Act. People Powering Victories: Varian 2019 Annual Report 1 To our stockholders Fiscal year 2019 was Our continued innovation and strong an overall customer satisfaction and execution resulted in record operating brand loyalty metric that measures an exceptional year for performance for the company. This customer willingness to recommend Varian, characterized by was the second consecutive fiscal year a company’s products or services to achievement of multiple of double-digit revenue growth and 9% others. The strong demand across Oncology systems orders growth. We our portfolio, including for our operational records, delivered high single-digit Oncology TrueBeam, Halcyon, Bravos™ and continued innovation orders growth in the Americas and newly introduced Ethos™ products/ APAC and double-digit Oncology systems/solutions, demonstrates within our core business orders growth in EMEA. Record orders that our long-term growth and value and expansion of our for our Halcyon™ system—with a creation strategy is working and addressable markets— majority in emerging markets—is an delivering value to patients, clinicians endorsement of our strategy to build and our shareholders. helping us achieve our cost-effective cancer care solutions to We attribute the impressive build- accelerate global adoption and access vision of a world without out of our world-class integrated to life-saving technology. Like Halcyon, portfolio to a sustained commitment fear of cancer. our TrueBeam®T system had a record to investing in innovation. First and year for both orders and revenues, foremost, our goal is to improve and wwe manufactured the 3000th patient quality of life and treatment TrueBeam. Our Software business also outcomes. In mature markets, our had solid double-digit revenue growth, innovations are helping to drive whilee our Services business continued sophisticated treatment protocol to benefit from our growing global efficiency. In emerging markets, we installa ed base. We enter 2020 with are addressing affordability barriers the best portfolio of prroducts in the and helping bridge skills gaps through history of the company. By 2022, our simplification and automation, as offerings should enable us to double well as by investing in cloud, machine the number of patients we help over learning, artificial intelligence, and our 2017 baseline. technology-enabled services. In fiscal 2019 we made significant Over the past decade, we have progress on four stratege ic enablers invested approximately $2 billion in for transforming the company into R&D programs, as we accelerated the glg obal leader in multidisciplinary our R&D investment from 6.5% of cancer care: (1) innovating in radiation revenue to 8% of revenue this year. therapy; (2) leveraging artificial At ASTRO, we had more than 1,100 intelligence, machine leearning and customers at our Users Meeting and cloud-based solutions; (3) growing unveiled multiple exciting innovations, emergr ing businesses and technologies; including Ethos therapy, and a multi- and (4) improving operational, financial room ProBeam® 360° proton therapy and capital efficiency. system option. We continue to extend our leadership Ethos therapy unlocks the ability to in thee radiation therapy market deliver on-couch adaptive radiation through innovation and targeted therapy treatments using artificial acquisitions to expand within the intelligence and multimodality imaging cancer care continuum and improve in a standard 15-minute treatment access to quality cancer care time slot, providing an opportunity worldwide. We believe that with the to transform cancer care. The strong rightt solutions and a multidisciplinary reception for the product validates approach, we can help more clinicians our long-standing belief that Ethos fight cancer around the globe. will be a game changer when it comes Our advances in radiation therapy to personalized radiation therapy. combined with software are helping to The recently launched multi-room redeffine “state-of-the--art” in cancer ProBeam 360° system is the smallest care. The impact of our investments multi-room proton therapy system is reflected in our growing worldwide currently available. This system offers market share and our industry leading an optimized human centered design, Net Promoter Score (NNPS). NPS is 2 People Powering Victories: Varian 2019 Annual Report To our stockholders Continued efficient patient workflow, superior the opportunity to touch more based, best-in-class practices, to total cost of ownership, and a viable patients and accelerate our growth. power technology-enabled services, path to potential next-generation Since the beginning of fiscal 2018, accelerating both mature market treatments such as Flash therapy. we have completed 10 acquisitions, productivity and emerging market including six in fiscal 2019. Our acquired adoption. In addition to product innovation, businesses and platforms have we continue to partner with the In summary, we continue to execute benefited from Varian’s expertise and global community of clinicians and well on our strategy to build an scale. For example, our fiscal 2019 scientists from leading cancer clinics industry leading portfolio of products, acquisition of the Noona® software on numerous clinical trials. The expand into high growth adjacencies, application for managing patient FlashForward™ Consortium, which and create new business models—all symptoms and capturing patient was formed in October 2018, achieved of which will expand the number of reported outcomes is being deployed significant research milestones this patients we touch annually, increase at over 30 centers across Tennessee past year. We demonstrated the revenue diversity, and drive a higher Oncology and is positioned to reach first use of an integrated treatment recurring revenue mix. approximately 25,000 patients per planning and treatment delivery for year. Similarly, the IDENTIFY product Finally, none of these achievements Flash using protons. We also gained acquired through our fiscal 2018 would be possible without the early insights into the biology of humediQ acquisition experienced dedication and partnership of our how Flash works. Support from the strong orders momentum this year. employees. I’m proud of the exceptional academic and medical community efforts and commitment that each has been encouraging, and as we look This year, we entered the fast-growing individual in our amazing organization forward to bringing Flash therapy interventional oncology market and demonstrates every day, and I look to patients, we will continue to work added a consumables portfolio to forward to all that we will accomplish with our partners worldwide to ensure our product offerings through the in the year ahead. At Varian, we don’t a safe, integrated, and effective acquisitions of Endocare, Alicon, and just imagine a better world—we take treatment modality. To advance the Boston Scientific’s embolic beads a proactive role in turning promise into worldwide adoption of intelligent portfolio. We believe that our expertise reality. As a global leader in developing adaptive therapy, concurrent with in radiation therapy, combined with and delivering multidisciplinary, the launch of Ethos, we formed an our software offerings, can unlock integrated cancer care solutions, we Adaptive Intelligence Consortium that meaningful value creation opportunities are focused on shaping the future includes clinicians and scientists from in the interventional oncology space. of cancer care and creating a world leading cancer clinics across the globe. Through the acquisition of CyberHeart, without fear of cancer. The consortium will lead clinical trials we acquired exciting intellectual to develop evidence-based protocols property for treating ventricular for Ethos therapy. tachycardia (VT) with radiation, giving us the opportunity to play in a $400 Finally, our organic innovation is million VT ablation market(1). And, with complemented by our disciplined the acquisition of Cancer Treatment acquisition strategy to expand into Services International (CTSI), we Dow R. Wilson other addressable markets, providing added a platform to leverage evidence- President and Chief Executive Officer Indexed price performance 9/28/18 to 11/5/19 VAR $ FY19 year-end 130 SP565 Healthcare Index 125 IHI Medical Devices ETF 120 115 110 105 Indexed Stock Price 100 95 90 85 80 9/28/18 10/28/18 11/28/18 12/28/18 1/28/19 2/28/19 3/31/19 4/30/19 5/31/19 6/30/19 7/31/19 8/31/19 9/27/19 10/31/19 © 2019 Ipreo.