ARAY - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2018 Accuray Incorporated Earnings Conference Call. [Operator Instructions].

As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Todd Kehrli of the EVC Group. begin. may you Sir,

Todd Kehrli

Executive Good year-end welcome me earnings Josh Chief and call Operator. Senior Waters, quarter President Vice on Accuray's and are and Chief President Accuray's fiscal conference Officer. Levine, and afternoon, you, Kevin to Accuray's and Financial fourth today's Officer; Thank call. With

well forward-looking that with to then questioner other available more to as housekeeping and our request in company's after assume Securities forward-looking this session and based to on well to regarding as These including, limit our this expansion, release risks of order items: Q&A questions involve forward-looking fully and afternoon There revenue growth, risks including date, The statements statements. I'd the Before filings information themselves products, that number that factors market call follow-up's. today's factors that to, we the like with issued Commission. press of from two products, begin, products differ the plans of requeue call, results to and first, on growth, no associated future could statements us macroeconomic each on ability existing materially and future as update future new as results are develop our and the a we control. cause we statements our but as not and outside we our in closed described everyone risk please Two strategies. today's to remind obligation management business execution, will make factors margin Exchange any our adoption future the are uncertainties, of or any during the are expectations, with the enhance limited commercial actual

a to in to fiscal are our we prepared quarter year Second, all quarters. the remarks make specific references

the call quarter Executive Levine. With our and President said, over regarding turn Chief statements fourth XX, XXXX. to fiscal Officer, refer that ended I'll quarter our June Accuray's now example, to Josh For fourth

Joshua Levine

joining of Thank year fiscal and a basis, us received orders the we fiscal you, Todd. full X% of now the increase organization, into U.S. for Americas in year. for had orders We generated representing fiscal rates in designed were call. win prior XXXX. thanks finished $XXX solid our which On gross regions gross we taken Take over $XX and number From to overall gross XX% sales million a have in to XX% today's the Japan a on We region. commercial the period. highlights for and standpoint, deeper gross we quarter backlog, million, The investments with order Americas declined Europe, since our fiscal growth with year all a than XXXX. XX% Radixact APAC solid orders over a more while the year-over-year. orders the approximately growth growth quarter, Fourth Good XXXX the of afternoon, year regional the resulting regional improve X% some and infrastructure everyone, were of up device. launching the and finish XXX doubled fourth up full experienced made starting look our full-year in orders Americas order region coverage year-over-year XXXX, XX%, between

that and and improving of related We were closing order value mix networks our selling to and delivery resulting multiple the lines roughly of in and our St. said, from shifted history. our longer the covers multisystem replacements the earlier order generation largest our the fourth funnel. the represented was It of both dollar With evidence system this customer ongoing institutions. continues variability, and complexity in represents quarter-to-quarter in with to we orders. competitive on in competitiveness be Radixact that included to time devices subject also in is our opportunities selling integrated and to large segment. locations our a Louis focus quarter from to awarded multisystem related The platforms geographic sales region XX-XX This replacements commercial CyberKnife momentum emphasis Accuray's Mercy order multisystem opportunity order the growing

strong Turkey, a our in contribution of and the perspective, saw which Europe, which were the Turning including in year, orders over Romania distributed from strong to Russia, system fiscal From mix XXXX, product region. prior region our orders EMEA the CyberKnife region, markets performance continued with level internal saw fiscal the Egypt. we gross double its increasing for during XX% in we strength plan

Additionally, received late to system, to June, precision important which this expand availability XX in Radixact solutions our our sell we of continue India in regulatory treatment from market. approval will

cancer Japan X%. We our continue strong our Transitioning health largest and had India. our increasing a XXXX care India grow installed global Several in orders contribution in strong leading to enterprises have base to patients oncology the region, a in of systems gross presence of in in are currently the centers treat volume fiscal we hospitals. with whose

contributed of also since important an milestone reached market. device XXXX. the was in fiscal fiscal devices installed in XX that that have in Radixact XXX We Japan Additionally, Japan has over XXXX. launched orders third now quarter

treatment systems. Software. system for Shonin of a growth. improved our continued Those our integrated Precision Treatment December a we seen receiving of significantly capabilities, and see overall department funnel our And We being Planning have solid as Japan data management source approval workflow result, connectivity planning and our upgrades oncology growth last since Accuray

led primarily National our announcement and radiotherapy that, X, Onrad fourth of provided which a A the principal declining we driver toward partner. provide an Commission process. of initiative our is we've make interest prior know in Onrad believe type and the local a pushing updates segment category. provincial and now been market that China with announcement products year quarter the radiotherapy Turning gross on negotiation The fourth APAC continuing boost we're manufacturing to timing joint region. was the of be the X of the scope China's year-over-year, China of type growth XX% with To lack as continue outside to that our this level in establishing a process we opportunity licenses strategic value We our This April -- selling objective. Health of over with a by achieving biggest with XXXX increasing and Asia a orders devices, as orders to a the important and systems. TomoH forward represents delay our will result to continues for we availability future with definitively Pacific source this in end, of the to work TomoH Fiscal lack quarter continued combination of the orders A challenging of year China. in in Despite at progress due gross XX% in venture

ensuring timelines We incrementally track. made remain of prepared the a rate that which this revenue some as fiscal made update run noted to believe the XXXX, in impact during calls cycle. investments these margin the the a the operating resulted investments result our infrastructure his higher for critical seeing R&D to invest decision While R&D, on important Kevin in our highlight release an of will that performance I'd of to the we previous in are of began on and expense provide company We've we remarks, like development in last on to the fiscal we're already as we year. programs

This improves kVCT to April has the fourth with with software new have no in quarter, the Radixact, the difficult for up been in and customer anatomical software Barcelona ASTRO imaging positive. image on increased improvement previous the we decrease launched Radixact was which visualize This from XX% -- the imaging the that soft making platform. improvements, conversion in we're imaging Conference previously including of very drives low-contrast for improved noise feedback generation resolution organs several imaging This During the dosing software. that introduced to the time. at significant in represents offers structures might imaging and first been resolution or tissue to

currently launch available our correction which for the capability. and CyberKnife We System market tracking tracking only Another motion important System. target the development intra-fraction and program this is system our the unique correction is our already of with on Radixact on have motion capability,

R&D resource like resulting we to to on confidence installation take System. during degree on submit of Radixact third fiscal to I'd and that moment track our first Based end quarter the in by for reimbursement. correction by this, XXXX, we the the estimate in of have we fiscal XXX(k) treating a would the end September XXXX. of additions of of topic tracking motion a on high our are comment With additional for the the customer patients application

centers. freestanding for calendar mainly some treatments been they're there've in SBRT in changes While related year rates proposed to XXXX, reimbursement

cuts that this proposed in CMS XXXX to are the great compared have address exposure space While minimal customer setting, radiation proposed of doesn't rates the no we changes scheduled in the to for majority Accuray because mix, the the companies is implementation. and proactively with to 'XX. reimbursement the hospital mention which impact worthy ASTRO to in our working It's of degree prior customer segment, show decline therapy other the to a we major in

capable and developing our our all require an a well position episodic a area more a positioned and moments, coverage we be requirements Maximizing the future. payment models, and these are future XXXX of that for turn also With and duration release our shorter that class details of reimbursement minimize quarterly of X% results as treatment We for factors, payment gross our providing In we complications total products quarter, of products, few Kevin for for releases. This focus gross decision believe delivery, highly-efficient providing in order peers. will precise XXXX, revenue to systems to the gross means overall increased is will factors, and platforms side specific the provided our implementation that effects that, forward. number likely order of variability joint venture of going of the and including well our in uncertainty by approach. around our timing, if moving Accuray's be licenses while reimbursement workflow. as evolution This guidance increasing not are opportunities as year, we high-quality fiscal performance fact, in likely fiscal this and treatment which Based orders for believe an will regional financial that X%. create call on multisystem fiscal granularity we courses to guidance a by over order grow finalized, provide detail the thorough issuance to review well In our remains do guidance delivery evaluated exclude we our for and each market will Kevin. we the of that expect supporting fiscal both XXXX. guidance Overall, more and of for very said, Chinese these metrics guidance. regarding A orders XXXX order I'll made In will up gross to we've treatment model next we be believe of on characterized the report

Kevin Waters

Thank you, afternoon, everyone. Josh, and good

As highlighted in to the U.S., in had all On by quarter, Josh XX% seen fourth product we the performance multisystem On discussed. year. of $XX.X -- growth basis, the a for quarter gross regional primarily regions. prior System mix growth due was the Mercy orders strongest million across over the with basis, order highlighted, strong Josh a up CyberKnife was

to provided; On other higher in due guidance generated our and of than million, Japan, and In included million America, slightly East. the than being fourth cancellations, for had systems. Age-outs $XX.X the represented were we adjustments which were net and large can existing adjustments. basis, the $XX.X of In percentage quarter quarter-to-quarter, addition, and age-outs X geography were which cancellations, fourth $XX trade-ins orders a which cancellations Middle million fluctuate a quarter, average. by order for we Latin of lower

net on XX% For the in X% Cancellations and approximately continue anticipate from prior $XX these a represented the which of to on year first quarter backlog years. net backlog, which in to age-in. ending million, XX% We X-year is basis, our X% slightly revenue orders full of of full be age-outs is aged-out on work prior range year, to basis XX%. X the with up the converting to consistent we

prior is for existing Approximately, gross remaining the were composition new competitive year-end. full of order orders were replacements XX% and orders to a of full Turning our $XXX.X the basis, were XX% and On from of which a X% represent trade-ins for year. year from installed ending million, base, the up positive ratio backlog book-to-bill now vaults. is XX% X.XX mix

Turning over $XXX.X full a million, $XXX.X increase. year. was On now for was the service year to particularly was basis, our the the a was representing income X% was to our statement. prior prior strong Total for increase representing revenue growth revenue a fourth our revenue $XX.X year period. quarter over X% Full a revenue quarter year decrease region, Product growth. a and million, also in European revenue large of contributor million, XX%

However, driven TomoTherapy our fairly full by revenue product European Product basis CyberKnife Systems revenue between margin a mixed was expanded for which drove year, expansion. and full evenly on the X%, year our region.

increased can our Radixact revenue year. the is purchased platform, million, the over quarter service growth and around in base planning historical These both should at of the well was XX% System. upgrades are going On TomoTherapy contracts, rate. which growth from in revenue sales, recent the Service the we approximately primarily upgrades revenue upgrade to or the installed of software of timing was were both and above averages for attributed releases XX% related treatment and and an prior pleased our were $XX.X increase rate our units expectation service grow we service on revenue from The increase service quarter-to-quarter. our revenue vary that around forward the believe with connectivity.While from

now Turning margin. gross to

gross of increased improved of prior XX.X%. to the quarter quarter quarter the to in year. from fourth Our overall XX.X% Product year the margin in prior fourth the XX.X% to gross margin compared XX.X% for

pricing financial the previous Therefore, XX%. acquisition, intangible $X product QX to the fourth a product in still a Service part lower margin increase, for quarter margins current margins quarter exclude which yields In XX% were Normalizing period CyberKnife the contribution the a of fourth product margins the primary fourth fully to amortization. from As calls, TomoTherapy is quarterly of margins million prior also year-over-year year. line, higher increases significant saw was healthy even which and from discussed service been prior during exclude our our charge in year when we systems. amortization year. prior higher the we consumption. quarter XX% normalizing amortized this quarter, the our was prior to gross charge, of saw included would year have compared XX.X% The gross in driver in

basis, year our an increase overall expectations. year service On gross year are prior was in-line full a However, full margins year margin with XX.X%. the XX.X%, and prior of our from

the of our accelerating and business Moving income The in key increase of quarter in already we X to U.S. were of majority statement. R&D million, down sales is the $XX.X growth initial $XX.X specifically, investing signs our China XX% an operating for expenses initiatives: from team, long-term Operating million from our period. roadmap; coming our the from in primarily first, have expense team which progress; investing seen development, commercial year-ago strategy. related third, the second,

year $X.X reinvested operating fourth due revenue. the that our and million Additionally, was was growth. compared discussed in a the decline EBITDA I the prior key The year to $XX.X fourth we million revenue In operations. million in fourth of million generation investments, our short-term Full quarter mentioned. and year operating the our fiscal from years million year, cash strategic approximately was in ended only quarter. profit cash current with we compared beginning initiatives fiscal we $XX.X for is exit We and up our of $XX of strengthened cash, an convertible investments operating restricted future realized $XXX convertible profit notes increase the of grew million the equivalents, XXXX due of previously XXXX, year, year, ago. drive due cash sheet. million million quarter year In Even which we million though million balance compared million profit the of the We the approximately X the compensation-related increase strong quarter was the had we debt, from higher-than-expected X% million expenses, which At represented notes. $XX.X that I $XX expenses $XX with XX%. to in debt, $X.X into $XXX debt expenses adjusted EBITDA prior gross strategic were from year. from of to the Adjusted also fiscal $XXX are quarter, prior of had maturity to $X.X now. the all to the of which higher in Fourth was with to

range of product X% represent fiscal for This be to growth which of over X% growth $XXX to revenue now revenue fiscal of in We million X%, with our growth $XXX XXXX. backlog to our X% current of is aligned would year approximately Turning XXXX. the million, would guidance to which anticipate to represent X%.

X%, of our range operating revenue EBITDA we of Adjusted achieve China the XX% to growth flat continued $XX bottom-end expect EBITDA will year-over-year range, comparable. would some allows difficult XX%. service for to expect represent prior We of have in more which expenses The range also and year-over-year $XX installations. revenue in adjusted as expected is to year. approximately margins a between delay we be growth our To gross million, million and both revenue

fiscal revenue anticipate of we from margins, the year, therefore, product Radixact next XXXX. TomoTherapy and platform overall decreasing margins to more Regarding the in

that inform to Before was effective I back to X want the made backlog a hand Josh, fiscal perspective you for call policy July I of change XXXX.

meaningful service upgrade numbers. gross not moving include orders will part performance purchased gross gross contracts through could better as operational of our our our backlog we or will included orders more in upgrade reflect of order number. forward. in these in order business forward, were become these upgrades our our inclusion reported our orders Going a Historically, The upgrades

had the fiscal to now call And Josh. that, XXXX. of in million For back reference, like $XX revenue approximately hand with to such I upgrade would we

Joshua Levine

Kevin. Thanks,

thoughtful open the to Before Accuray included for company serving past privately I'd through remain October After the of new our available to assume accepted Kevin XXXX. October the call after thank X, assist calendar the and effective Officer to VP in Accounting leadership the behalf in end become as transition and team, want of Finance year. will Kevin and items On will is him X, last and wish has going transition headquartered held joined to in the be dedication is over currently to be urology leadership the Kevin CFO to Shig Hamamatsu who in area. CFO segment, CFO that agreed the team year press Accuray a through Chief finance the of I any to service offer here And company ongoing responsibilities the for October for past our with initiate an was the built operator, search. On lines Kevin we has years. we will and release. X, leaving planning years this like as He open this our to you the Interim goals objectives address of shared three CFO board as market in now CFO three and questions, there is his Bay X, And we're to to ensure our the afternoon. We time the best October questions. with the while endeavor. transition his CFO, impact line the no ready believe we've a that, we into on

Operator

comes with first Cowen. Josh the Jennings line our question of And Instructions]. [Operator from

Joshua Jennings

just you'll from hear hear of part I the decision-making the that process hoping was company. you, Accuray leaving of be in Kevin, sad terms your maybe leaving to ship.

Kevin Waters

thought of company Area. Yes. the privately to this in from made become And also underneath the CFO in make just a offered here Bay and attractive was Look, lot me the of bringing team that, a solid standpoint market at both Josh, a a move. time urology progress seamless this really me Accuray transition. with to for financial make held in We opportune now I've the the opportunity I an to been

Joshua Jennings

should to -- bit making? are you forecast just and here revenue wanted guidance, the out and new understanding about clarity into around Sounds on order growth to on adding we beyond. also or understand order get just that fiscal follow-up to more orders like color think wanted a order little as an so it. Understood. that But And it, to clarify 'XX other I the not? growth upgrade you wanted my any to decision I just decision upgrade expecting I that are we be just thinking clarify But question. includes then and be that new -- for and whether new eliminate

Kevin Waters

address I'll a Josh maybe strategic could about bit then and the rationale. the talk financials

our So, year. that we will yes, included and is statement upgrades in Josh's now will that included the number in grow be next

that just my say the -- I'd independent in prepared backlog Maybe... fiscal XXXX included to put say our change I this of retrospectively this had our in would $XX However, change gave growth to I'll perspective, 'XX have And policy, to impact that is forward. fiscal the been million moving results, that. in remarks on numbers opposed we we as

Joshua Levine

me from rest of Yes, the it take standpoint. Josh, just a let strategic

impact it like be. basis contributing difficult identified, factors on predict elements that believe funnel and Again, inside I that think more bit as the it bigger that institutions primarily will in we focused net in and are to make reiterate, leading decision decision-makers standpoint. us opportunity, timing multiple little of growing variability Again, of on process, points creates but headwind forecasting to decision little for orders these touch the just this more feels It's were absolutely orders. what grow. It multisystem predictability a integrated gross of delivery will the from and we see a are things basis, deals, with a order network. terms and an to or it a quarter-to-quarter just a that expect bit on Kevin opportunity also factors

probably or of guiding space, of other we we shouldn't the were spirit was universe, on and to were sense an the takeaway away -- looking this across or other all looked thought to we regarding when it be made that to the at aspect in this concern players at that outlier that the the in space, And in other just that companies from coming again, a actually approach this So with all. conform commenting -- -- the peer it the of metric in regards regard taking. the

Operator

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

Anthony Petrone

opportunity working Congratulations, the bit certainly, Kevin. It with to was bit you, then guidance back Bay luck China just in go a future a Maybe great as Area. on good and your to on and little discuss well. little

headlines moving that's So type follow-up this place? a the trying a in tariffs, sounds once addition to target how come I Both up the think for the just was that, it A orders lot the be once would it's licenses, any of And then be, But to a at get also a in impactful within is as revenue maybe to China, through on of that the -- the just relates China, that will sense JV in is has on to that it baked JV into place for establishment? updated timing? all? at outlook in views in And China China, point. like you do that just

Joshua Levine

So this tag Anthony, we're team going look, answer. to

take part it. me of first the Let

perspective, reasonably with and have believe start are On analyzed trade is China. a imports immaterial we frankly that coming an imports impact which, components to the like we our of guidance. discussion I'll at full point, few level So year this We have to tariff the else everyone side quite our business, kind macro the from from monitoring an -- topics question.

believe that contract done. believe on our risk From borne being mitigated analysis by based exports model by limited the fact side, contemplates our business risks we we we've the costs So current these distributors. got an that terms have are the we by we

we I in -- one and the again, impact I'd big we're, it as way reasonably don't But see right other. protected think So well say, a this. now or

timing this. us clarity last the think point and be. right On for that us would mean, is heard delay We we're that consistently released, cautious when. another incremental we to the our Kevin contemplates class -- what just be could guidance at say but of obviously, identified, still of A I about -- it that quarter impact the part but current this for expect And of discussion, to start over as foolhardy any any being triangulate several try will took this regard. with precision, quarters, us forecast don't to in degree 'XX this you've of our And I be quarter the kind continued have region on now data APAC fiscal make our sure in we're point

details we see JV the some tell that, terms China. we release a bullish our we and to will this us, tell the the I about regards of impact to given for we're where road. you talking counterparty in has, We're regards any sense have makes point progress. good and it where it pretty our for the in products progress, business I to On feel land that very we're really opportunity counterparties will side, where both with having at now to We good made impact transformative than but its It see for more can at, our you down business. in

be we'll share to in have you able So next the couple of more to details quarters. some with hopefully,

Anthony Petrone

orders? maybe -- X how How that that orders software And follow-up out did That's to you as potentially at quick next this relates helpful. the year just mentioned year. -- will it clearance on software play true and motion

Kevin Waters

Yes.

proxy given had XXXX would good what number as could fiscal right That to well. be 'XX should around in for a expect impact -- So pretty we we this -- put to our that the $XX million. that

Operator

from Amit comes question line next Hazan of Citi. Our with the

Unidentified Analyst

the both that change [ph] the you two decision? touch all could backlog of wondering made Phil questions. is no. questioning reason This the was It first on kind and of of the on line I if you conversion following policy that from

Kevin Waters

Yes.

And are to important we've fact increasingly upgrades, our expect that just what I recognize believe reflection include just more service quicker be to for of of revenue at operational what the orders represent company. these and purchased make upgrades future number we the say. cash will to contracts these exclude, to convert lot me, to to decision opinion, point should predictable a we is, becoming our they more include. one. we So the including upgrades would backlogs as seem performance of -- around a is be meaningful if made our revenue while better a they're going -- software two that on sense future. And to much And and are time, business. same currently than due out the the typically in didn't upgrade, it revenue. of best Point And not backlog; to for reflection future particularly, contribute to in systems That's a excuse

an it's our reflection improvement. better more actually of think we transparent reality. It's and So a

Unidentified Analyst

right. you All That's right? that next total how year, enough. goes fair of this to either said negative I confirm orders year or independent positive to want item expect grow Okay. next you just

Joshua Levine

Correct.

Kevin Waters

Yes.

Unidentified Analyst

Okay. And to what then, to with comparable are we -- and a be basis should comparable on try we year basis? should Or a sort this get reporting from as go you we of forward? going to $XX do million the

Kevin Waters

$XX Yes. Look, 'XX. was in said I million it

think universe, more on our heard both is revenue proxy more I aligned performance peer prepared You our in mentioned performance, that little highlight now reporting. our for at granularity order XXXX. also also can which you with look much on remarks regional also and assume the I that's a call if we're a the I'd his company fairly had hope providing, you as good that this Josh

Unidentified Analyst

Sure.

three of first kind was That part question. Okay.

sneak I'll So positive one try in the side. quick on X and

class in B, momentum prospects the the sort thereafter? pretty of the quarter the the orders are positive region how looking A APAC five after Just here? towards

Joshua Levine

doing product across opportunity from space. growth when think China to trying look venture partner of is segments probably lot impact the where that forward. you the longer-term, the the in non-type right biggest area in manufacturing joint going bigger now about a to get going A we're the status. in is It's the we a This there work Look, driver we're ground select right from on the

coverage again, joint sales actively the that access, of current segment are place market So the distributor in in feel more And A terms from think B about China this we've put in that, market broadly. market better Onrad getting segment. selling to non-type got venture that improvements type in infrastructure relationships I or we really serve strongly and TomoH result will and

Operator

Capital the And from our line RBC Markets. Henry comes Brandon with next of question

Brandon Henry

it's new best -- a the Kevin, role. wish at you. CFO -- you all I your working And pleasure as been with

you First you the fiscal about order gross missed question, like gross Can you quarter you think guidance. looks fourth XQ previous And fell where on short? what the orders it think happened the just in front? talk

Joshua Levine

it. I'll Brandon, Well, take

some additive I Kevin have think as comments may well.

quarter-to-quarter you as as of level, chain influence. terms In touch physics of precise both is result to were close a again, the variability or are scale seeing not predictability us. order and what but the a described more involved, that can't more some and news. that situations, financial in time but at that, also just to and radiation be points are There because to medical not of close orders, of number those say to folks that's That's people level, the have, quarter-to-quarter biggest staff the from in takeaway orders. headwind got these I shouldn't also we -- in you've the as CFO, points these just the we're of weighing going for to in we're smaller think challenging an perhaps I activity. of becomes funnel on crisp or significant and size not that as level can't have of at multisystem that of good some the be those more larger administrative a And orders. clinical time of some regards leaders I surprisingly, with downside impact better supply opportunities of oncology are the nature, those

that's parts. of that Great a that about cautious more So growing, are chasing this. for us moving we're we're little lots primary be opportunities of but the reserved want we why just or the -- again, reason to kind

Brandon Henry

infrastructure the 'XX? discuss fiscal be year fiscal Okay. confidence in a can increase what the the you Americas commercial gives than 'XX? year had within Americas there And then year that will seeing big region, 'XX And you're region kind you performance are of fiscal for seeing you year business that with you that in the a guys after better

Joshua Levine

'XX what where pretty Brandon. is plan order a to the And ramping we've X look of were first of came had half finished the curve. started year We 'XX, were plan fiscal hiring from the significantly out the behind behind we So if encouraging. an We we slow. seen -- mode. but last power in fiscal I the what We I still a that were we -- pretty standpoint, expected say -- we I've seen momentum-wise quarters at hiring, trend-wise, in would

performance light general where look in for they up QX, So but finished year. in the if significant QX a at, win made of were was the uplift, back-half half terms of the in first you where really the again, through they

again work funnel. say to clear, We've out this, of 's we've got I'd can do in think an I'm and not I we optimism sales 'XX. -- general, to got think but encouraged got some I build things got for early And we've on of we're -- victory signs positives sure. U.S. so is with coming momentum, is I while the build on market us we can this. declaring We've more the that that directionally, want on signs momentum performance. be And giving around here in QX improving

Brandon Henry

on then just And guidance. Okay. expense operating one the

-- X% year-over-year, but think expenses guys you flat to expected grew I you to year only be fiscal orders 'XX. said gross operating be in

gross enough in expenses keeping place do made that right while big have support in order and going to now the you investments you've operating growth you commercial forward So the think the infrastructure flat? infrastructure

Joshua Levine

that standpoint now Unequivocally, the I a add house from on -- additional a scalability will to Yes. side the commercial not people. need yes. think don't of see have we we place I

Operator

Tycho comes with from question next the our line And JPMorgan. of Peterson

Tycho Peterson

of want to multiunit to orders. I Josh, back theme kind of the go

that couple of talked the of you're conversion at orders? pursuing kind bigger You've these talk And some backlog point orders? order call. of of chunkier you this much about improve this multiunit are to able maybe of times other in the how to initiatives Are

Joshua Levine

Yes.

take order me let U.S. been earlier revenue big has So is I the conversion. we we a year second management on order answer very part yes, added first. mean, again, customer the some -- the was the you there. last I a position positions sales definitively improvement standpoint more better strategic U.S. the in have, going that so the and situation to and think come of phenomenon, will, really impact, backlog revenue. improvement growing by to move to also the got multisystem to -- visibility, of those Tycho, majority I of I orders momentum, that there's a but from the in think investments The just is reside. getting not that area. opportunities opportunity -- IDNs, the vast We've standpoint, from in also Again, business on in the management we've if people dedicated is that to our -- made these are now, infrastructure where, development segment where focused funnel a of account the contribute in mean impact which

over good at I'd impact So factors, of on say and those time. from all based we'll continued this see positive of likely about, we feel where we're momentum

Kevin Waters

XX% than that slate on looking multisystem take of at fact backlog, rather orders of composition. frame your And of and forward. have fourth quarter of book, the between the of growing kind just the importance multisystem our question in sense full order Maybe will fiscal I of $XXX-plus in I'll it the which total million the kind XX% moving gives that our these were

Tycho Peterson

little they know to as guess, the some losses? can year. field? And on there any guys on favor were your a probably just And I Is are -- picked the XX% bit. give Okay. note you us replacements in competitive you're these I there you what course seeing of feedback in over anything said cancellations, the you then, competitive up of

these were any still competition? to you're know winning I So your losses of fair but share,

Joshua Levine

we're definitely we're -- feel than the of installed. retention in very first so of losing. being into we're part terms about we on ground where Tycho, more still And net a side, at. question, net positive bunker the think the winning good going equipment On and I basis, on the we're

X X to as rate I devices, standpoint cancellation or from look I pretty X orders of of our distributor so a or maybe fairly the heavy again, that business -- think of X at say, just quarters I'd you been been cancellations the it's think, X X and of steady -- of our our has mix again, kind generally, a we've if to mix in back, backlog, consistent rolling related become level. going as the kind

business if you we're it's again, to going would to we order mix the or distributor-related opportunity like wouldn't have in -- I But think time over as look if on that the maybe participate at opportunities that's will, we look bigger activity, we bigger dependency, business. distributor or forward. didn't what where the predict the participating changing hard have

direct So resource, operations because to we the the don't bandwidth to into of all have financially put able be those selling markets.

on distributor probably more So I a basically byproduct order growing of distributor mix anything, versus with side. it's emphasis direct think than it's the the channel by

Tycho Peterson

just then next for modeling Okay. on the last one X year. And

And think this about think more there at about I be on but know you the important. I guess, of year to guidance, real think an your as guidance? becoming there really should XXX? year? no about sounds we software beginning we going impact wasn't same anything ASC Is said tariff As impact, per is like, comments, we next it for the

Joshua Levine

No.

we materially through I couple or now we recognize the forward, of the this don't Accuray. this a that had revenue XXX the X timing know went either full believe which impact but months change is ago, other to amounts larger the of So in moving made companies announcement analysis won't of adoption space about going we

Operator

[Operator Instructions].

with will O'Neil line Capital Markets. next Lake Our Street Brooks the of from come question

Brooks O'Neil

guys doing do you're In you'll feel software soft tissue being you see talked but tissue more how So how I work in little development, noticed be you about visibility. a you in the you're do with important development? competitive particular, about And visibility soft software bit serving? the discussion markets

Joshua Levine

of I improved kind the linacs resolution, that topic, -- X in quite and at introduction beam mean, the Radixact of is, imaging degree about and consciousness feel resolution to at. the capability is are CT about development of largest I -- the imaging CyberKnife the land related. are MR the across CyberKnife at integrated we frankly, looking imaging improving going on good forward to capability platform internal an and R&D from resolution standpoint, imaging that the a especially everybody around I the regards think X platform, to I the has feel raised to from an X space think very where enhancement -- of of Brooks, think We with the programs the good it's with competitive where we're Imaging that big this standpoint imaging going enhancing is And imaging that cone enhancement medPhoton mean, I we're tissue on and soft kV we in a market regard. -- have tissue and topic ring. point. inside regards soft improving

that this So introduced remarks as moving is received -- and iterative a about of we CTrue, that it's nicely. kind in my well process prepared I that's again on been is the an uptake at talked actually Escrow,

medPhoton kVCT volumetric ring. months kVCT probably imaging from on to XX away imaging CyberKnife We probably to are Radixact, months volumetric imaging through well XX away and -- upgrade another on conversion the side as the the

Brooks O'Neil

this a don't regard? probably, the I'm but see if not might be need to follow-up, go to So just imaging you in full you understating I see to it competitive quick and don't -- as stay MRI

Joshua Levine

but frankly, with comfortable quite people to with don't. they there look linac it's they're we'll integrated the the solution, that correction a is answer -- quite regards larger the MRI have you We a tracking and budget the capability I'm kVCT where and are from with, our at -- centers, that academic -- much their mainstream we're the pretty budget -- to be elasticity when significant, we're motion capability. of Again, And MRI places market. I with frankly, at think the standpoint, or gone the medical is can afford not intra-fractional where around

Brooks O'Neil

great. That's

helpful. you of cycle, cycle? one of me somewhere see us about ask way talk out of hoped? a the you're for years what you where Is in big to you materialize be Okay, just market, there there opportunity to Historically, would in a terms the replacement in let Any couple you replacement and Is about more. beginning U.S. lot it guys? bulbous can just particularly, conversation next seeing focus comments the the

Kevin Waters

Yes.

represented So start gross I And our early look XX% of XXXX, orders. the cycle. Fiscal it think in look in we'll -- replacement

opportunity However, quarter that in in order to -- moving it at I and number those was us think which retain base, particular, a was if high installed forward look U.S. closer of the represents nice so And in XX%, the a watermark for growth. in I contribute for fourth systems to XXXX. fiscal aid us our to

Operator

showing to back at further I'm Mr. time. for And no questions to closing this the call CEO, turn Levine, remarks. and like now Josh I President would

Joshua Levine

ASTRO a thank Thank at in of on you, for us you'll with everyone, sooner the San earnings or fiscal good have rest Thanks, first meeting in and October this to day. you, you And if in be operator. participation quarter Antonio call our speaking your We October. afternoon. late with look forward

Operator

gentlemen, Ladies thank today's may program, the all in This day. you does great and you disconnect. conference. participating have conclude and Everyone, a for

Accuray (ARAY) 16 Aug 182018 Q4 Earnings call transcript