ARAY - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Q1 2019 Accuray Incorporated Earnings Conference Call. [Operator Instructions].

As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference Todd Kehrli with EVC Group. Please go ahead.

Todd Kehrli

Operator. you, Thank welcome call. and fiscal quarter first Good to conference earnings afternoon, Accuray's With Levine, Chief are Chief call me today's on Josh and Hamamatsu, Executive Shig Accuray's Accuray's Officer. Interim Financial Officer; and President

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

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

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

Joshua Levine

call. on you and for joining Todd. today's you, thank Good afternoon, everyone, Thank us

like done our to the our assuming to solid interim would of was October Interim was me Chief regards I XXXX. begin, is of role the introduce we interim Accounting before Hamamatsu, CFO great had VP and CFO we QX Before With Shig on joining Finance CFO today. Shig Shig call job to the performance, this during a our fiscal transition. a X. as start year on has Officer

highlighting newest and in base million highlights of hospitals. were offering. new interest First our were approximately treatment approximately for for strength than receiving with half orders coming our generation The and up Radixact regional-based from orders market specially vaults. year-over-year more customer orders, more year-over-year were QX orders $XX.X Radixact a gross quarter of growing community strong by Radixact adoption XX% gross doubled System. the Gross System for type, our demand down also system our of XX our Breaking orders orders with expanding orders

to competitive had quarter driven for product important growth. note which also orders positive quarter. new activity the that of strong our XX% indications orders doubled this vaults by Again, for base a year-over-year more It installed line. and both We approximately than was from represent Radixact for represented our gross these future competitive and is replacements,

exceedingly our and versatile to customer upgrade as success efficiency were of customer replacement improvements that systems. product orders order related Radixact improved with overall CyberKnife believe Lastly, replacements were platform for due efficient vaults and XX% a routine treatment we're all contributed orders new competitive We much down because sales feedback cases functional and have all great characteristics with Radixact case our have in positive stronger while variability for of treatment and efficiency, timing. year-over-year with to across as as well capability. performance gross Radixact's allowing to a speed position existing and throughput. in of for quarterly platform These speed characteristics for roadmap our capable the complex treating early highly Radixact primarily positioned Accuray profiles. seeing is performance Gross

reminder, fourth XXXX. quarter the As historically of we the fiscal the optimizer CyberKnife high mobile orders variability, -- of CyberKnife software reported to positively productivity treatment Regardless still last positive platform. a increased CyberKnife improved see in meeting year our on receive quarter-to-quarter launch given and which system full we both throughput reduced week order at expect time, substantially the ASTRO planning with growth patient the of

our with dollars saw half order of growth continued significant our almost the which for from regional distributor we managed to performance, contribution Turning markets. quarter a for accounted gross our from EMEA our region

successes and related announcement Pacific in orders we first China Overall, were which and quotas roughly traction region, also to direct. we well regarding in issued at A the XX% to the continue India In EMEA Health Type will news continues selling X,XXX while X:XX licenses calendar systems. and Type the perform in licenses last radiotherapy we A released prior licenses the there for of that continue by year for last long-awaited our gain and continue relative confirmed for see evening to double-digit big radiotherapy we’re where us, PM announcement issued the Type radiotherapy end the markets, very generate generating B fiscal of Pacific XXXX QX, now region Chinese be in the Ministry The While China growth XXX quarter and fiscal grew year. distributed again is systems Type order fiscal B Asia Time. to our between in Standard of to XXXX

on this regarding not While this of depth required, analysis evenings confirmation announcement to 'XX news China. breaking topic of last we timing late the be we’ve we adjustments both and from for related final based are details any guidance will the estimates on on pleased or FY this giving very that call

A to potential release from expect the Type We when we great our will licenses. the complete, benefits that Accuray analysis of in detail radiotherapy B is communicating about be and

has efforts related announcement regarding to night's the licenses last continuing a venture strategy establishing our and advance local we're to changed China and related this quotas in objective. partner to joint our with regarding nothing Additionally,

we continue we merit. goal, As as provide will work towards developments updates achieving this to

to tariffs erosion impact for significant in we based half variability our and primarily In we and Japan due China, region of few a from contribution a generally down historically timing Shonin our for this a Since data region, orders Japan. expect received orders remainder replacements but will expect year. we from for solid the our a integrated margin from received approval QX the pricing on in we our improve orders pricing our results in year-over-year quarterly of planning our competitive year orders continue this We management in don't our the in last first our receiving this order generation System growth the Regarding increase Japan funnel initiatives in In in market levels. system XXXX. system precision yielded in modest and with saw Americas software, end-user the quarter, region, standpoint to to positive see to region were fiscal Radixact has representing strong treatment high continued we our is given quarter U.S expand.

and replacement of multisystem to key focus opportunities competitive attention Accuray systems, wins. increased on continue Accuray existing including We on initiatives systems,

quarter million. to quarter adjusted our by the year-over-year $XX year-over-year a revenue the few for provide for X% first quarter. the a also prepared financial While X% provide his of of Total in first million. to increased detailed Shig highlights fiscal the increased driven remarks, review wanted increased the EBITDA for will of P&L revenue In System. Product generated first the fiscal $X adoption primarily we Radixact quarter, I

forward. ability Accuray market continue across announced functions reduction objectives we were The these actions strategic release, company, generate taken going organization. responsive a press our growth and of annual that product $XX organizational estimate innovation reduce earnings focused more cost the that preserving which today's actions savings higher a of in will the overall we’ve sales We levels in that noted our of make will leaner restructuring As million. workforce will initiated structure result noncommercial while approximately primarily and to

GAAP year to we realized to on benefit and fourth actions give net in full the clear while the continue a current GAAP these expect line generate and down reductions income cost continue top opportunities believe that investment will improved that were pay cash, achieving will to business We of Accuray focus a us quarter position these path be to to levels income allow fiscal unavailable of previously We net will positive us. growth. debt, development believe we and unlock

briefly last week product touch Before call in annual ASTRO over innovation and highlighted at meeting San advancements I to on to Antonio. Shig, turn the I the want the we

to the tracking, platform. programs As is last launch System the for beam the the on synchronization quarter, similar which important System is of of most our I development capability, motion one correction and mentioned our CyberKnife Synchrony Radixact

Last by Synchrony capability submitted year. treating during the previewed of reception corrects to We CyberKnife our outstanding. Radixact our of at our target. for similar on Similar ensures that and on XXX(k) with Motion Tracking first application our Radixact technology we we the from the are submission, projected that for pleased and installation proprietary Target to Based Radixact the turnaround and of customers System. will on fiscal ASTRO, beam Radixact end Capability tracking synchronized how and with functionality is week existing motion estimate synchronization timing in our Correction will this was work announce prospective XXX(k) target our the System we correction quarter, the the our movement and platform, beam the be patients during customer respiration proprietary

time also plan treatment software, in by in Those we a even plan earlier generations. see as Optimizer created Optimizer had week's the fast, software functionality -- radiosurgery body our reduces have Optimizer. earlier my radiotherapy. planning using In VOLO further full is CyberKnife and latest next-generation CyberKnife quality and chance to VOLO planning -- in with as that mentioned who we Optimizer of previewed conjunction and are delivery CyberKnife remarks, than impressed. treatment and stereotactic meeting development improvements as much the that for much very The CyberKnife ASTRO line stereotactic been a by the last time XX% the as performance Plans efficient long treatment observed as the precise use As VOLO reported remarkably a believe at XX%. VOLO position body reduces CyberKnife treatment platform also to precision improve

full-year in platform. continued catalysts be will driving CyberKnife for improvements these and installed upgrades growth base order expect We our

the two the of treatment SBRT rates or data utilizing prostate five innovation, we in on studies of CyberKnife. System the sessions. we from fewer Lastly, on prostate past, focused the in CyberKnife data published survival multicenter products referenced cancer largest reinforces recently and topic The announced the published provides excellent treatment

in reported also In our fact, from for the to studies XXX%, efficacy historical superior Systems to to in which was patients. our cost turn Shig. the superior cancer rates validate as were of I provide fiscal believe will call radiotherapy intermediate now rates clinical and for update that will low-risk the that fiscal XX% turn of reductions survival XX% as utility prostate between guidance survival XXXX over annual We risk I treating regarding further just XX% to these patients, results first I the and said, our data. quarter details patients. of discussed. Shig conventional the superior disease-free results more the well These over CyberKnife studies the to light With call

Shig Hamamatsu

and afternoon, Josh, everyone. good you, Thank

through of orders representing of prior million gross in in previously of our gross As year. upgrade service are million increase beginning orders in our fiscal XX% we in XXXX. included $XX.X as Included a had gross order year orders an communicated, purchased quarter, contracts, $X.X which we Josh the our over highlighted,

by for orders, and Excluding growth. APAC gross year. had mix product a of million which first orders, the System, an the Radixact these prior this Both EMEA representing we of momentum basis, drivers was gross upgrade highlighted doubled quarter order over of the the X% than regions year-over-year. increase strong more were On $XX.X continued

of is the still of Due benefit. of the the we amount as our for between quota million, platform In We Systems. quarter age-outs, and by second Systems, included were we Additionally, of a be in will level of does the license million age-outs, the XX% the which quota application do was hospitals in China Radixact grow as adjustments to months TomoTherapy backlog geography of of reflect we Taipei decrease million, age-outs. for for anticipate we through of which basis, Net these devices. XX% age-outs which these orders were an with On to net in $XX.X our announcement quarter than X% China announcement and adjustments. to cancellations year. a revenue million Europe. the Japan, by the XX% we of representing QX just higher are approximately backlog process the million four A and cancellations, million expect to age-outs are on time to represented first the age-in, do $X.X were we by evaluating from to such regulatory Type represented conversion China the more yesterday, of quota yesterday for America, converting the net had quarter We quarter, X although of orders, primarily represented driven announced related process This orders. end-user required we of $XX Taipei full-year. believe and our benefit $X.X over first revenue Latin of in of that prior ended to in approximately lag start orders not Based additional the expect $XX.X go other $XXX.X generated which X

our now driven million, introduction, The were revenue the Service System an purchased Product strong representing revenue $XX.X the $XX.X increase in of quarter connectivity prior Turning through primary a over prior for for Since revenue year. increase Radixact we $XX.X revenue and drivers an increase revenue an revenue million, our for X% primarily the service service driven year-over-year. which was upgrades, its treatment The income X% than was million, APAC Total of the to Systems. quarter increase now was revenue of planning was first for doubled by increase Radixact in demand recognized Japan by year. statement. for prior growth. contracts. approximately product was over and quarter year. our over growth software more have XX X%

Turning now to gross margin.

QX margin product attributable to gross in year. our first a to Our the compared to was XX.X% the year. margin sales the gross year. XX.X% quarter was generation The prior driven the in continue primarily TomoTherapy in by generation the history older compared in see compared compared the XX.X% quarter quarter with of the to assumption product mix being and with compared gross in XX.X% margin prior do low Radixact a margin for prior in to the TomoTherapy was premium margins overall for Systems in was margin Prior of service single first Service to a quota paid latest the XX.X% percentage the platform Systems. driven Product by XX.X% prior represented other highest costs. part We company's larger gross overall year decrease year. service the

represents XX.X% Our service current margin of improvement and fiscal service was of margin service XX.X% XXXX quarter service fiscal XXXX fourth liability Therefore quarter efficiency. XX.X%. was continuous margin in the and our

prior an down quarter to from Moving statement, income the expenses the million, X% for $XX.X million were increase $XX.X in operating of year.

accounts The receivable to $X.X first million a expense quarter one-time impairment customer. particular one related G&A included charge

representing a million $X were first On basis, sequential charge, from million, four approximately in of operating $XX.X a quarter this expenses decrease fiscal XXXX. million over expenses prior year. Excluding of $XX.X decreased the operating one-time our quarter X%

sequential $X quarter. sequentially. did the charge, three one-time Excluding our first, recur due current prior the expenses expenses the in in reasons: of operating impact decreased decrease impairment we was that million quarter the had expenses in related primarily tradeshow not operating to The

commission and associated with the costs management lower headcount to Second, compensation levels. related revenue

motion lower synchronization as for the Radixact R&D costs we release Third, near of System.

million $X in First to Adjusted a $X.X prior to for compared EBITDA $X.X loss was million year-ago. compared million quarter of the the was loss first year. operating quarter a million $X.X from

of quarter which was in charge as $XX $X.X with $X bonus primarily fiscal ended cash prior this in in The for customer well impairment in orders of million driven and earned of prior remainder fulfilling million from employee by decrease cash are discussed the the inventory cash. excludes EBITDA of restricted both anticipation year, short-term payout seasonal the as first We adjusted one-time over the quarter the of of in fiscal nature. a earlier. the quarter impact million First procurement year

year. We of cash operating for expect flow fiscal to generate this remainder the positive

year. in will update remainder total annualized to the one-time savings I in and cost benefit million is workforce. gross while fiscal the of margin, the quarter from impact this to fiscal The like second expected XXXX this the discuss $XX action we full targeted in reduction reduction start on the this cost to savings, earlier. Before be quarter anticipate expect million discussed benefit XX% taking reduction approximately our operating to charge approximately of the approximately related expenses. I to financial initiatives of expected guidance, benefit of a Of realizing fourth million will $X $X.X the Josh move We the to would

XXXX. Turning B as the China for Ministry our of we now Type still to license yesterday The the reflect analyzing benefits. benefits fiscal are quota following guidance of potential XXXX for Health does such announcement process guidance the of fiscal of in and not and A

when communicate of As complete. josh our analysis will we the potential benefits this earlier, is development mentioned

of provided in X% annual We are The range approximately million revenue revenue $XXX reaffirming $XXX fiscal back includes guidance the XXXX. is of to X% to over million, representing revenue X% X% the which product growth. growth to guidance for in August, of

to to XX%, gross anticipate this We XXXX revenue margin nearly fiscal be gross of match essentially total platform continue as expect to of overall revenue fiscal higher TomoTherapy, we year. in margin percentage Radixact

quarter to range million, cost adjusted expect million $X.X as of our impairment the from second updated reduction impact expense the our and would $XX reduction million of between to reflects first the This and We cost million $XX to represent in in initiatives. EBITDA XX% growth the $XX impact the XX%. are follows: increase million guidance and updating to we reflect to range the the be million adjusted million previous of initiatives The charge severance EBITDA EBITDA excluding quarter. now our operating EBITDA impact the of range direct is an guidance year-over-year $X our $X.X the and $XX in of charge

year-over-year, As million full which down severance impact quarter. I expenses on an impairment expectation full to earlier. initiatives, of previously mentioned, the cost be to discussed annualized charges fiscal with that, And We will excluding X% like back would our guidance benefit in the operating that fourth be hand expect the one-time $XX and approximately now Josh. of updated is the starting approximately in basis, to reflects call the realized

Joshua Levine

Shig. Thanks,

questions, the their the like team commitment thank now line to focus, Accuray open-up making call your execution, the ready for questions. open in to to improving we work I’d difference the entire and Operator, that’s Before a we're patients lives. for continued important supporting

Operator

Instructions] Capital with you. Markets. line Street O'Neil from Thank first Our [Operator the Lake question comes Brooks of

Your line is now open.

Brooks O'Neil

you Good understand just year. say that afternoon you what previously? had with start on the expected comments the with terrific you consistent the are numbers and you. gross situation, China are congratulations whether the to I guys delaying could but on Thank

Joshua Levine

commenting might in it and we very for obviously benefit XXX we're you -- consistent Type were Again, been Brooks, us A and in expecting. Type It's this pleased. our pretty very we imagine, potential long is Josh. X,XXX we're we Yes, not B while what very licenses, And to a expectations. consistent be relative into definitely detail going to translates line on with with licenses. it. are as positive -- impact, about are what excited very or wait

Brooks O'Neil

too. I’m excited It's fantastic.

hopefully will even later the year. flow-through So, begin this that maybe

good. be will So that

other. understand from out through radiotherapy generally and CT the think was ears right that side not between am I admittedly adaptive and guidance MRI noise hoping out to guidance all one Secondly, go the differences and related hence a to my clinician you and there I the I

feeling in your with relative relates So field. touted to high-level competitors I about the able hoping as synchronization by to be your being motion are you describe capabilities, to some CyberKnife Radixact and that your particularly the was it might capabilities of the

Joshua Levine

a of stab a me but mouthful that's [ph] question, at Yes, it. kind let take a

volume from important. we that Brooks, we’ve on a said resolution, throughput, very between the of to tissue of MR a given and it's important based that never are which is more been be side going will, schedules and cost very have functionality patient with, absolutely resolution patient start product what their daily generate treatment resolution speed by if improved on really you Quite the both economics that to trade-off better is to or image is beginning balance systems believe and and the and and devices that the there's difficult the schedules saying we they that we kind hand So the design don't a believe one large of especially treatment on large because basis. equation frankly, volume the image soft they support

in our and is for -- enhanced on hand automatically track synchrony the synchronization already the we're we elements like and again, we real-time capabilities the beam if I the general, that that balance the and the best in are roadmap in that see overall imaging CT technology Radixact, our or and improved improvements our economics we to other. soft on resolution, again our capability. look we’re it no we the the soon-to-be view, throughput between tissue and everyone motion to provides our that devices -- terms view of ensure to and at just already beam capability, in improved our as in software imaging advancing there's pipeline with motion, along to made the would therapy allow we devices deliver other Our resolution imaging that for platforms and device adaptive believe have correct continuing efficiency and that of improvements the ways will one described, question form KV And, cone CyberKnife being able advance --

Brooks O'Neil

as I that quick about that you efficient, have to I you helpful. the understand correctly. were and throughput right? quick is one follow-on, I and the just others to relation it in in talking and beam ability talking efficiency, is the your efficiency, Do very sense see adjust if with you very, a That’s -- my what

Joshua Levine

doing treatment and no the hardware the being turning of there's Yes, -- algorithm essentially done no off. patient -- couch either yes. or we're the is we’re no or the to and There's gating There's making adjustments there's on software and beam not what by involved. position also

all efficiency. again just create of So those vis-à-vis better elements throughput

Brooks O'Neil

you congratulations again progress. much Thank excellent. the very and That’s on

Joshua Levine

Thanks, Brooks.

Operator

Thank you.

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

now Your is open. line

Anthony Petrone

good if maybe the just also Josh, the congratulations Maybe the afternoon can that I'm you on Thanks left been announcement again last information X,XXX, maybe correctly. front. at be China going Class of and where think bit a crosswalk and XXX memory road in be already that year crosswalk all secured, can limited were the B sure a back Accuray service a so, I we But may where of about Accuray this? stood we going It's Class ever and licenses a off is our look start had on licenses just, the node not Accuray disclosed. long to night. A and or realize on there here. But when number XX

Joshua Levine

Sure.

had licenses go if that. So radiotherapy total They issued, were still actually actually issued. of -- had Anthony, more Type actually being you XX been back when than a A authorized to XX

or was I that TomoTherapy XX XX Only to CK. time the XX actually awarded to either think and XX XX to devices, issued Accuray the had XX been somewhere that at XX were in of range. or the number

think that’s then, expecting we're I of level rate. mean, what with I win really would -- going if mean it's long ago, at the something again. I frankly, almost back holds or in way Probably feel flow that like think in operate now and that really the how licenses of to forward calculation is you space that's that not quite our a now. XX% future don't we assumptions. back about I X XX But look back effective frankly, So bullish on out quite XX years XX%, clearly starting we we the at were going

have we go thing just prior about revenue only I time starting in the from flow. to thing again see the lag probably based really is licenses that other two, that is on, you between to think I -- until experience, to that we talked those reinforce would -- a of quarter remarks announcement the prepared we which see a time would expect again or start time the to related license we on in impact

Anthony Petrone

And bookings. derivative helpful. that’s within be taking then Now there flow would gross be to just clear, another of

of this would now forward. should to we there's So all the impact an XXXX, I increased bookings reflect also quarterly think of in going mean, that number presumably available this? licenses how about bookings of

Joshua Levine

absolutely to without question. as orders impact It's going well

that we might think as here I China our of and the around clarity announcement has was finally as license incremental to looking market flow was some forward distributor getting were expect I we as see an that in from we’d you to flow, imagine think that availability. now would that start orders

are the or Hospitals their submitting process either lag that here we speak level facility in accounts training time import defined standpoint, will they receive higher to looking a essence -- would application the at be those Class be Class the or of they Just the to are of application which of an And devices that B to once or both this to that those. the to or are quick, A number go granted -- from essence facility establishing in licenses then ready provide, a criteria will for the have and Anthony, allow that that where be or itself, just of kind will be when country to in an issued some Health that hospitals used essentially will process to licenses and Ministry B number to granted, space A create a starts number the the A submitting interested there little capability that bit more will process through radiotherapy. Type color issued are, Class devices in standpoint, staff timeline forward procure in of specification accessing a see in would with The the real they going been would for situation a or are kind on them accept somewhat activity, of to criteria. location of purchase that geographic license with start the -- who from Class purchase. just now the which application bidding of are

that time So together about that in remarks. talked two of Shig that kind quarter prepared just one to his ties lag

Anthony Petrone

get got could describe VOLO on CyberKnife more wondering great. you to the you I’m good had side Thanks And CyberKnife just what will queue. VOLO. does I’ve of just demand think and to one in what and can going VOLO do on feedback We kind follow-up maybe go again. forward? times It's I CyberKnife for back treatment

Joshua Levine

Sure.

improvement times, for different of optimizer treatment time. We’ve MLC, The significant It's time going to really XX%. took precision planning a So, of or one introduction the plan the in a Multileaf of accuracy takes validity generations for treatment deliver Collimator takes of earlier as And debated almost the this come level. time of to over of at ever device And the plan it the reduce you it's which where people, VOLO MX. is challenge the been treatment. by kind the the a develop we've seen generation latest the so certainly to with that reduce has develop to if amount platform CyberKnife. What by was a look amount time and the of is challenged that takes much going from it it deliver time no XX%. the treatment and as to treatment to the the MX, to over both

telling in with versus vary vary we’re the regards may reductions optimizer the are users prostate what seeing cancer, spine, experience. terms what say numbers time reasonably might are of of across but type the that I’d across those to in us their general versus and long of accurate Now

quite reduce the historically. like with probably contained organ cancer, So experience in to market leap time -- prostate, will something is it XX frankly with an where really again that it XX takes that's example from and we that's been extraordinary sub from treatment an CyberKnife, maybe And experience clinical to minutes, minutes. XX have

U.S the in installed base is by trade-in, opportunities high optimism So the geographic creates catalyst the optimizer primarily of allows of will, introduction opportunity, which have trade-off a or our us is the concentration, and that sales you catalyst, replacement primarily a opportunity. to VOLO for if the terms

Anthony Petrone

again. Thanks

Operator

Thank you.

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

now is open. line Your

Unidentified Analyst

Amit. Hey, for guys. on me Can This hear okay? is you Phil

Joshua Levine

Yes.

Unidentified Analyst

to little want China. great. I bit Great, a Anthony's on to follow-on questions

lines TomoH. I clear between or terms make about clarify we B, licenses? the in Type strategy I'm lines the sure think of Type A previously Type with B Onrad there A just and the and decisions between where of the and product Just talked sort Type you on Can

Joshua Levine

technical specification. A both price Type as by radiotherapy and the the higher-end higher-end are products, defined by So category by point definition

effective mean are you’d Type probably not Type facilities. I essentially public would and but we or maybe see to products. devices more I hospitals of that the products radiotherapy products the either freestanding B that efficient, military PLA in think and centers doesn't in good segment settings, not -- that the academic capable, more think calling value the market. they’re of A It probably smaller in larger the you but see large you'd in channel not or with the market, treatment medical maybe line tend exclusively, hospitals in

essentially opportunity primarily the product growth that expectations the products hospitals, look the hospitals, and what line of again Tier private But segment B, Type the talking market for different unit here largest going volume probably and and if different really A in X would lend -- forward with at volume going requirements also sector, radiotherapy tend if is how themselves are will to the for themselves big market. up of you you’re at more forward. you The about the that Type or Just look the licenses. develop

Unidentified Analyst

That’s helpful. Okay. very

that the clear or think those there confluence along that, a of point? it line is, any is price it throughput Is give additional a sort there breakeven you I of anything are specifications price lines? on clarity consideration, the is can versus paid

Joshua Levine

we think a I'm of know, see standpoint Not this are get or of north I in end-user at back to products in to can it if what general level, north point. certainly that probably and Taipei, but that emerges what million. from that $X beyond you, of point $X.X products price something the currently you'd million We is something aware that or at try either there's incremental or is

Anthony Petrone

That’s helpful. Okay. very

provide I year, there? line on on currency one, line the embedded or and the more, top the you financial can there quick around follow-on as any side. quarter or the clarity any your [indiscernible] color Is could maybe on top well on Just one foreign-exchange OpEx if for for either

Joshua Levine

Yes.

So our growth for a constant sense that was the in product currency X%. was revenue just we kind of X%, but that feel

basis minimal about growth uplift. constant a X% talked Service On very So we X% little X%. currency a about. larger, was

have would it been So X%.

Anthony Petrone

Okay.

an the saw quarter. currency reversal expecting mutual uplift essentially the in Are first with the year currency? we for you So

Joshua Levine

That's how expecting. we’re

Anthony Petrone

very you That’s right. helpful. Thank All both. Okay.

Joshua Levine

Thank you.

Operator

Thank you.

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

Your line open. is now

Brandon Henry

how on my various thanks contributing we ramp savings? discussing million Thanks. also of Can cost the Yes, latter savings in over with of for increase about savings? And million you taking fiscal reconcile the areas 'XX? some point, are And you $X just to got guidance in follow-ups. should the EBITDA a that can that time think help the cost adjusted cost couple then the year And the course the of question. spend just $XX I

Shig Hamamatsu

Sure, Brandon.

when very section affected, execute functional think and about to be the were annualized cost you commercially. type lines were in the areas. of mostly to impacting And ability G&A the savings, that not we remainder million benefit -- incremental prepared and the about it's to I $XX in as the of Josh we XX% remarks, the margin. goods mentioned areas expect So support OpEx of my careful

we operations. that related areas the went up So commercial to

due personal a couple China transition, that of on some see personals. these a some savings, you’re expectation offset expect kind ramp we projects. there's future savings the Type to to And effects being are Number side QX, I more that some how realize one: by but as the JV, savings JV bit to have on should spend of quarters, it of going far time in does little next also things As two to take things. the we a would

of those advisory, its legal, costs. type So

a annualized fourth guess I’m don’t of to be million have we expect to benefit in last the quarter. why the savings saying your that’s full so so to point, And and full I benefit until $XX QX. And

So that’s one like quarter.

XX% million, $X.X about of QX. goes OpEx to that in it's So

are you million. If QX year, exit about last $XX rate we think about

rate, I of think couple a or QX if last take So dollars to want to out to you XX QX million try project year. down, that year from exit in to the million rate this

looking think I you’re that’s what at.

Brandon Henry

just When be really And running? then could China expect finalized? clear. that? JV, that that you get on how to does with long Very And where we'll and fully then on Okay. at give update can take you you are an the up

Joshua Levine

that final negotiations to We’ve a there's could timing So this and we Brandon, exclusive we’re at sure negotiations. get to the exclusive calendar we’re definitive will, of we’re they a you say, term that right is get make on We’ve so excited executed working an the a impossible hope agenda we the is at work mean, China. doing, executed obviously opportunity year, and party. think counter our are again around party, We in are -- least get but -- are, gotten I this But I forward, given if fast with predict in or of as going this in to as that difficult said, get the or agreement. to and hard end this. part we an something to we potentially aspiration growth and they’re to important going to want sheet strategic

get we are right a in tact and completed for fashion that and with in right important a -- parties. the both that more it's than elements So we

long We right it a to expect done quickly. more it and important be is getting than marriage it getting

lot there's focus to a related both that. on Although and again, a of lot energy of sides

ground the the related which the manufactured on for the On a be ramp there registration process Chinese a related for a the to the eyes Type really in essentially They the question true or product brand. be the would to will part by product, product, a approval development of ramp, be that timeline have partner. for will regulatory the of the the ethnic the essentially B responsibility would domestic be of considered the local a device longest and and activities JV will market

we process, the about a to So away talking its that's, facility, up manufacturing XX months when about registration probably you in guess, think are I starting something timeline. XX

Brandon Henry

All any the And last AR just details impairment the quarter? Can then for charge you provide on more right. Thanks. me. in question

Joshua Levine

Brandon. Yes,

cancer this we this quarter. unique just so couple don’t customer at So years one took is is never from a It's off, truly who We a the charge this case had. to took got [indiscernible] ones a any Unfortunately, center hence have that it center, exposure point. further of us customer cancer we ago.

Brandon Henry

you. Thank Okay.

Operator

Thank you.

line of with the from Lavin BTIG. comes question next Our Sean

now Your line is open.

Unidentified Analyst

Hi. taking This question. for Thanks is [indiscernible] on for the Sean.

Joshua Levine

are How Hi, you? [indiscernible].

Unidentified Analyst

I wanted with to to start orders this -- wanted the net hi. I quarter.

And if of curious I’m in the terms there of anything mentioned was I age-outs I and call growth So think else in adjustments, I Type the a that. that wanted in or China, ages difference out was had in understand that I little that guided. a larger A between but have other little that a the expected quarter? been with orders than larger cancellations to of to you think wonder do in you of I terms lot also

Shig Hamamatsu

being million so so part China I you, Yes, of that age-outs. Yes, pointed large thank [indiscernible]. the $XX.X out that

with promote we revenue said, able As heard. to the hope we to we be that announcement

I percentage also the so distribution aspect XX% exit think or think revenue we’re to pointed years, QX. we the out other in in be high I recent continue the range that orders a about

converting continue to revenue. again, those But take we So, focus areas some time. distribution to in do orders some on

total in low single-digit to I can think comfortable from that basis, But I think we quarter-to-quarter that remain still that’s from cancellation the relation vary. are backlog. our annual in perspective, the for

related want in is there than small of X% to backlog less adjustment, number. adjustment the FX I XXX the to one-time that other and impact point its that transition, The small adjustment

Unidentified Analyst

how hear U.S And little to a going Shig. of part order big Thanks, I that’s that wanted about is look systems a there? story. know to growth multi and the of great. kind Okay, bit I

that So anecdotal I give or anything love on new would you hear front? that to can anything us

Joshua Levine

with looks that both I U.S multiunit of as influencers or there selling or the in level facilities -- we in Murray like are previous we’ve So funnel have because opportunities those [ph], a improving than for Radixact of primarily Americas involved. CK process in in and or we talked more more the quarter, past. situations, more different complexity -- think visibility decision-makers funnel and the in about the involve general the the had more Again an

bit improving So those. of the from in about we feel more little essence touch or more an becomes customer in But terms situation of a some -- opportunity in more going side opportunities. it to terms timing contributor contributor to had in accurately I in we is quarter, those more driver the hone order good how a multiunit points predict a difficult of the U.S orders. the was though situation should only Radixact how of -- about was talked Radixact not We the that big in forward. point out in gross set,

I in other Europe in and occurring is a standpoint Western think the both direct U.S sales profile the from expanding. the thing that’s is customer

U.S Department Oncology that with a in etcetera. have larger larger the in based U.S be operating footprints Our dual hospitals in settings, longer-term centers, And we're bigger a greater extent strong our vaults have activity was either at I and vault terms research-based we business which level. is or pretty past. indication TomoH than a in playing from we quarter Over or single the been activity another situation in the contribution that's in expect in smaller centers of of reason optimism strengths medical XX% of medical traditional to of think Radixact can regional the academic community Radiation for first to number terms

Unidentified Analyst

think I of longer remind us a guess book-to-bill is us it I of you Is cycles, cycle kind China? time turnaround anything than -- typical can the as of you. a we in in typical abnormality terms China there? shorter you last than any give can there what of with One kind great quick That’s us Thank licenses, one, that. color. or kind tell in appreciate just ahead

Joshua Levine

directional we were I'd again, if A time go shorter then. actively sense, backlog think probably back I operating where In period Type winning shorter the that say and to think are we time in orders when the a I segment, of during orders -- very back in we to the period. taking probably

Unidentified Analyst

Thank you. Great.

Joshua Levine

Sure.

Operator

Cowen. next Our comes the line Instructions] [Operator Josh Jennings question of from with

open. now is line Your

Joshua Jennings

I for on already manufacturing then competitors on to questions. you’ve us the But on what think as remarks had domestic, missed if you’re have China update I you footprint and if of specifically the you the ground, Hi. running questions having of think how see I taking Accuray guess, the to an asking a hop I’m repeat up some and you're call, opportunity, a start just some talk size feel about opportunity maybe and if your free about would that the could all Thanks on -- opportunity again, making Good yourselves. just talk thoughts questions, once prepared evening. about emerging maybe question actually front? I from to on like the the China can look so mean, opportunity. there your mean, in I markets so -- perspective? another maybe for just in I addressed But these to JV another China,

Joshua Levine

in opportunity value the So, Type -- Type Josh, terms that and which consistently really time products. from growth a would the perspective the big be B in of we’ve is category over volume unit is B B time that over segment, or said Type specification pretty the

And of in market how core from conclusion perspective, felt market longer-term. existing we ethic in of -- came company the we strategy -- space, have quite of portfolio strong to brand. a partnership country. do really there H TomoH, they this pretty etcetera, they’re to comfortable that presence positioning that in very business. operating way, that access, go-to-market alone, does someone Onrad, more do around and in throughout market quickly that Finding advantages also more risk that a from that a radiotherapy in They’ve of not series, We calculus a the a we trying a necessarily we profile play a a in to have don't big but number although distinct risks but has the again, large to the think path frankly and product down we the our with. go started healthcare we think today space is the partner And we as domestic size of when calculus not it to was the their are standpoint alone strong was just market that leader accounts are

infrastructure business growth from So it's very comes is much also think that a into provinces, we again where the reach has which longer-term.

provides frankly, quite to to we products for mitigate get of the to taking us with our -- terms all if ourselves. gives for us We great of do reasons core is kind in someone a technologies play and of risks all those we’re So strategy. some on, think chance be leverage we partner in this that’s that us of for the better and trying a will by this that

So that I mean, market we’re else in thinking JV that’s, about great world. in growth the is the frankly, we how that’s and going longer-term part in everywhere a believe participation to outpace quite virtually

Joshua Jennings

years about Josh. is mean, you say $X market to I And opportunity within you then China, opportunity? XX billion would to I million how market talk the B over mean that that $XXX see in opportunity, and segment? Class Thanks, growth much next I maybe just the X this a guess,

Joshua Levine

is facilities, prospect numbers what mean, again, in growth product end not be funded, lot it more comparatively And depends X XX under available or of spectrum on the capacity being private but XX,XXX, again, -- in that in if ones, a projected there population, today by the about kind just private-sector to around from most who's There's side. but for Say, than top liver. now, that of growth to cancer are today. treat that conservative on to you'll Josh, something you years aging wise public with side, or they about you're that. projections that wanted years today, a overlaid more will some you would incidences see market XX ground vast the aggregate on a estimates ones quarter anywhere the the you PLA all of demographics, population new math the rates of in and about And the are funded, older growth you that go X,XXX So I of are in would a XXX% but the are the probably be in country -- get on built, that estimates talking private do say you projected and really the types, of capability like patients look growth not there the diagnosis aged just facilities overlay the mean, radiotherapy very new people, like on the if I of the the a maybe the the the again or aggressive sheer think would number incremental especially not and devices in in the billion China. that aggressive existing the of hospitals what lung forecasted nearly the start capital rates world,

work points can data those but is some number. kind not high I’m and of So, calibrate how this, big up of but some maybe on take math that -- sure a own of your it, anybody actually its that -- on it's

Joshua Jennings

meaningful already to again, for that us specific Thanks treatment tell addressed last the that the but please And it, me well. CyberKnife oncologist about going you’ve reduction talk as prostate that VOLO lung to and are taking been also be free of data issues we've CyberKnife And of Thanks go have in planning of to you’re feel forward hurdles the treatment questions. with where and can optimizer the to you terms times. the a the significantly, this how the adoption for you of to treatment for times but my hurdles specifically, framing and helpful. have that’s prolonged then come down kind the times? question, and times you data But That’s talked of up. about Thanks. launch one can in claiming planning CyberKnife historically that one radiation treatment did

Joshua Levine

Yes.

we're would in that an -- treatment you impact I spend treatment But be on abbreviated that develop almost that an be earlier to because the did planning question. give a of time plan time will -- time a a would about to response XX%. the talking reduction we some So,

treatment change cancer, again, you’re So location of variation or you’re it's what or I you time, roughly sea but terms depending delivery probably about. of have kind in difference. of the reductions where kind the treatment -- on higher talking treatment delivery of in And time mean, some type XX% of

catalyst optimizer, get as the with we’re a case. with exists in you the opportunity that prostate the are XX be for CyberKnife example, to this Collimator time with If we five we a with use impact impact just CyberKnife Probably up that the We've the different a again to on truly replacement. think over MX treatment MLC, latest -- which the able makes really, older improvements time. incremental years, to the MX, equipped or trade first into has base sub proxy the kind essentially making generation four last is forward. going or what And think installed different that’s of XX than as product a prostate XX optimizer Multileaf in, would there VOLO been experienced out but coming activity the device the really be something dramatically over minutes, that devices minute a one like which our next market trade generation with going

Joshua Jennings

readdressing Thanks that. for Appreciate Great. it.

Joshua Levine

Yes.

Operator

Thank you.

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

Your line is now open.

Tycho Peterson

to actually point Hey, CyberKnife thanks. want fleet upgrading Systems. last of your installed there Josh, on follow-up the

imaging then optimizer, the until the upgrade? from do got upgrade you you’ve you think to timeline How further put of potentially is but KVCT Or catalyst customers? KV coming the do wait think got a much VOLO You the you road. down obviously a on they

Joshua Levine

I Based big know think that on be a taking catalyst would optimizer the trade already people it's conversations there is feedback feedback -- are got The up from feedback, a to week, going standpoint. in, early optimizer last we I and us. from used for say, a trade I have big that place

Tycho Peterson

I’m actually still then, to waiting of announce and I just I over to got appreciate the but A the trying on And quotas, to color. guess, the partnership I much new all the Okay. you're the up do you the B can of Type lower obviously China, commentary that kind had guess shifting reconcile, out you’ve and you you and running partnership. have of how actually -- a cost penetrate coming that? JV back or equipment some think and of quota

Joshua Levine

A essentially I licenses when seeing Again, mean, with take issued became revenue said still X experience years starting our quarters. in somewhere were were and between back from quarter earliest phase, available to their and about the being we were plus Type based from licenses impact two ago to prior the times, its -- we on time time w a revenue

So, see you we impact to would from year that think some night. this of would this last start announcement

not how I about much get specific to going we're think that impact. again

a the as too. it's it a on you unknown might definitive our mean, order put I I side I that's be completed us Petrone of that as -- is distributor the can the And the think agreement, stake I side. earlier was the revenue with Jefferies, I think timing. and of question a going earlier, impact we needs it on significant answered of think the long other the as negotiating equation attention they’re counterparty in think our announcement Again, from I’m know -- that's or full an earnestly we're get I Anthony vis-à-vis to what to think exclusive in that’s imagine our discussion. I I selling agreement also on takes ground tuned think attention. prior again, has with our full the what they has be going -- the is on kind has -- side how in again, how mentioned the for I pretty of stay terms we based on to long hit to take. opportunity running has It of been, as thought JV ground this on what to have discussion are so. been as the to a waiting of that based certain, -- don't going your we experience it It question their

Tycho Peterson

round in comments, with this there tariff around Are pricing, to at the up does to that prepared in allude you tariffs? did some dynamic And elaborate the sensitivity your go third kind China. then of able on you And risk of all?

Joshua Levine

are a high that material actually today So, think -- in I of China. From based I China, China user carries on yes we're $X.X of got -- negotiation -- a U.S., of -- pricing Linac continuing so sight in burden specified we QX line Waveguide that tell end detector China. import amount on devices don’t healthy China, in manufacture the distributor on full orders, comfortable took in think that of if -- on that an it's our standpoint. an but contracts to that part wasn’t for -- basis, Linac, we’ve probably in a minimal into from in it's We million user pricing saying the import it very some it. Chengdu, to side margins flat-panel the annually, we a But I purchase export perspective, healthy import of tariff. and terms manufacture we the distributor from an supplier would sold maybe in place you the got from that systems

Tycho Peterson

you just just adoption. How I’m anyway, maybe you the of which then kind motion sync, Radixact. CTrue those to of lastly think within have real-time is obviously the orders important been strong context And type on feedback do then announcements, reconstruction, are ASTRO curious help Obviously, you’ve and Right. the what Radixact iterative pending. revenue Can but got?

Joshua Levine

relatively fiscal or that I our Radixact-based think can we we for very on taking customers that of time we -- been they're treatments that the orders number about talking motion a never cycle, installed the I’m synchrony meaningful. you upgrade and timing but kind and large calendar got ramp innovation and a regulatory guarantee we're from patient the -- based turnaround we outcome that on estimate a the from And premise essentially that this And year, of from standpoint in pipeline standpoint. some the we for projected and XXX(k) end times the would submitted them, we’ve installation a already those straightforward systems and site really based software site reference in technology We said we'd a could think terrific have fact monitor interest a about pathway standpoint. before their backlog Radixact roadmap it's and of have upgrade is important. submission. orders that, the -- and pathway sorry, We’ve for which our place them of end this was be for before the placing have talked

just based community or that a about we -- dual for things the contributors of it these material was and thing we the customer not a in locations, vault single centers. the were or think for level you’re Again, centers. And the interest Radixact definition orders facilities, aggregate are mentioned Radixact. general medical all growing product. before, in to regional general quarter went again, academic even into maybe the in These in of I hospitals strong which XX% pretty smaller that is talking I QX So took took meant in interesting freestanding by types.

Tycho Peterson

Okay. Thank you.

Joshua Levine

Yes.

Operator

Thank you. Levine back I'd There this closing for Josh questions like call are turn remarks. at to time. no to now the further

Joshua Levine

your for earnings to participation on this speaking thank operator, look with everyone call. our you fiscal afternoon. again. Thanks, second you forward and We Thanks quarter

Operator

thank participating conclude program. This today’s gentlemen, and today's you for does conference. in Ladies

great You have day. may all Everyone disconnect. a

Accuray (ARAY) 31 Oct 182019 Q1 Earnings call transcript