ARAY - Earnings call transcript Q3 2019

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Accuray's Fiscal Third Quarter Financial Results Conference Call.

As a reminder, this conference call is being recorded. I would now like to turn the conference over to Michael Polyviou with EVC Group. Sir, you may begin.

Michael Polyviou

Thank you, Carmen, and good afternoon, everyone. corporate call fiscal financial March year as as conference third for XX, Accuray's well of quarter XXXX recent to to results review the XXXX, Welcome developments. which ended

call Joining us Chief Officer and Shig and Josh President Accuray's Accuray's Vice Financial President Executive Senior are Hamamatsu, Chief today and Levine, the on Officer.

First, that begin, today including that factors statements expectations, and future uncertainties affect associated and includes China statements to There that guidance, of including number strategies. but I'd ability our could of involve China, to XXXX cause are the license in to results and new except any growth, operationalizing in forward-looking or themselves the issuance you today's commercial in forward-looking overall remind after expectations the to Q&A of order actual macroeconomic we limit just we factors with not affecting take conditions revenue like strategy changes any date issuances of we with advantage on product guidance, information assumptions and CyberKnife, the filings the the or TomoTherapy adoption forward-looking Before requeue could more that China, and with such other our releases risks call market fiscal are future regarding fully of securities regarding on required Radixact housekeeping based and our update such statements the the request session, that licenses, in extent Systems, venture the and of and in plans this future risks a the to our factors execution, items: related risks then business timing including market and follow-ups. this to differ factors to joint changes Two from to user issued forward-looking Company's the performance obligation statements limited laws. closed two growth China Company's materially other expectations as us applicable are participant release and to the news to during by reflect questions described results, no of actual outside controls. available as well we call These SEC. in assume information The afternoon, as the

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

For quarter statements refer third our ended third regarding our to fiscal quarter XX, March example, XXXX.

turn and to like I'd the Levine. Accuray's go Josh Josh, Now, to CEO, please over President ahead. call

Joshua Levine

by call. you delivery and Thanks, China third systems for for Michael. quarter Accuray's thank by driven today's performance and of both growth. momentum continued on joining quarter was gross Good everyone, order in afternoon, us strength offerings. and The highlighted XX% was software our year-over-year

quarter a realize straight XXXX. represented Also the also which fiscal second We XX% competitive a benefit orders. takeouts, gross initiative our quarter, bunker strength for completed fifth year quarter gross the substantially in over in the savings $XX grew announced million On XX%. during the full cost we basis, and of should in year-to-date saw orders

position prepared our more detail will in gross opportunity the largest succeed of as on in to in detailed call review regional conclude our turn a whole, We in for product a operationalizing China with venture Shig providing execution the the venture quarter, be the over believe the progress update then highlight an in then quarter and innovations. with China more and joint my our Radiation some latest a opportunity our the I'll third and in for joint increased later Isotope specifically China, progress performance the remarks. I'll on Type million see review joint APAC Corp., radiotherapy. demand included provide XX% a also highlights of quarter to this I'll with where during partner performance due made which China, of single to in year-over-year China venture region, growth continue us our and market, orders financial third that color we uniquely third our of the represents Our strong our we the performance. products. quarter agreement which in A to $XX.X orders in market Gross

aware, still end-user begin As or you're licenses, awaiting customers late the June. believe, of issuance we May by will are which early

took have products. composition During and were of grown we compared our the quarter, orders QX distributor A Americas the year-to-date primarily gross slightly a on for in orders region, XX% to the basis. prior year, were In from third but orders China our XX down Type the

the a quarter. over third new the order base. approximately of of three these our still a quarter tough Japan ranges. In continue EMEA gross months of installed While gross total third consistent contributed regions, takeouts, first year-over-year for Americas competitive in the on prior-year basis Japan orders XX% our the order were the orders to gross nine bit XX% our that characterize and early this and to sustained contributors momentum. All replacements historical declined XX% and be it's during and due to were XX% own overall the EMEA growth our each as orders strong By With in overall is a said, both encouraging, comparisons. trend metrics were vaults, type, to are with number in in

linacs linacs When level incidence estimated XX.X have the six linacs When million. well around at is significant China is as U.S., a concern, a penetration be opportunity. China. terms To to seven per comparative as market level operating per currently Europe put overall it capacity. treatment this we of clear the currently world, linac to in the installed now that deficit in roughly forecasts to China's capacity roughly of at the mature an at represents Turning significant China we people. and into taken treatment in to is disease clinical X.X compared look perspective, of has account, per radiotherapy markets both million are Western million current

X,XXX will likely is outlined need roughly China's over the today patient to of quota next of by China addressable needs, keep future defined radiotherapy linacs last with by decade. a near-term Health total the pace treatment Ministry X,XXX plus license October, the While market

Given see of why Accuray's catalyst for about as business. devices, excited growth China can base our so we're current installed overall you an XXX

make which We executing moves commercial progress from as staff as operational week, begin employees apply Medical venture the means certification. continue our us Safety the Having terms, certification hire generation. Radiation order we license for joint a to license, license well Device in to infrastructure perspective, to a on obtained to business strategy. JV basic can JV now Last this the closer

Radiation sometime during sell and to have orders summer. JV take the to Safety expect the license this We

convert diverse best replace will current the the and to this B next device. B, to distributor. phase We opportunities. offering. to hospital our will Accuray the selling strategy anticipate China and will institutions the distributor be partner branded, During in Isotope customer B will radiotherapy the transition, the relationships JV in TomoKnife historically. penetration, allow phase operationalize locally market. also beyond longer-term maximize of JV including almost our many across revenue enable will sell This based our TomoKnife work near In with like XX more has licenses initial In for radiotherapy and are JV disruption ensure manufacturing there strategy product this continue phase and first ramping the Tier China with we our China Made longer-term our to this year, produced revenue, Type Isotope's the Type than stages of begin issue, active X early locally current Accuray in Type strategy, responsibility TomoH China market transition distributor of to our type, two-faced strength a manufacture and Accuray's the continuing academic hospitals we the support have take much begin their hospitals, second to China near-term been A a XX,XXX Type parallel devices Once longer-term to orders the sales current JV would maximize and will current believe allow over to no our which selling we opportunities. research provinces. us To both relationships orders to by while

therefore, completion continue June. tender Isotope early to to approximately we should overall with eight will market expect to units start infrastructure is We application license A help activity and tenders improved by customer bulk be revenue China partially XXXX opportunity. to most Based will the that process. expected and for our continue implementation benefit market awarded information, the likely it in China fiscal our the nearing its expand license two Accuray's Type We the in anticipate As the revenue In of occurring the latest weeks should of to activity will and processes; believe access serves it May of the diversify six provide that strategic will initial of and the late or is of and the governed issuance order Accuray a batch Health in flow soon, in then to with the benefit be additional take base order process that that to result, China licenses Ministry currently application China XXXX. fiscal the first go on near-term, revenue. and

detail activated, licensing on do which quarter-to-quarter as becomes will variability process in we in anticipate and more order we some shortly. our this As last call, fully flow cover Shig communicated tender

product CyberKnife upgrade cycle platform. both CyberKnife in will new planning a upgrade customers Currently, of Systems historical treatments our treatments. and at greater fall, to XX%. of focused of The of treatment enhanced is the Optimizer. roughly installed attract believe XX Turning XX% reduces our base our devices be for of times on performed to CyberKnife, approximately up the upgrade minutes is of base. XX% treatment MX is the depending full Optimizer in XX in the times our is CyberKnife targets be our base our latest XXX systems and our Optimizer us replacement for even development capable on disease to now roadmap, allow at of to generation compatible CyberKnife which speed extend allowing trade-up benefits on continuing installed VOLO are by strength number the times software minutes catalyst XXX Systems approximately to in the to site. the reasonable CyberKnife in the further reduction treatment approximately generation CyberKnife the last of high-value availability and was latest our CyberKnife in and a strategy installed to introduced We precision the overall current compatible ASTRO VOLO This are utility The installed VOLO The base means on to platform trade-in platform. increasing realizing MLC our VOLO Accuray's that

found currently versatile CyberKnife capability For synchronization System. to our IGRT on extremely Radixact, bringing Accuray is the motion Radixact

treatments designed to expect end launch during devices year. call to deliveries be treatment of tighter need the motion uncomfortable corrects our restrict important by have delivery shipment which efficient enable this Broader the healthy result end patient feature, in of of will and time current target towards positioning first improved the comfort. commercial is that We of we for Radixact for Synchrony or calendar treatment for real sparing patient dosing the without The year. Synchrony patient fiscal margins, tissues, gated greater movement. our

As CyberKnife System, Radixact extend to by platform. area to synchronization this tracking intends our leadership the our motion capability original fully in our of with this innovator transitioning important and Accuray

customer our on turn over active motion both ESTRO delivery both And enhanced the Synchrony addition platforms. and deeper Radixact the like upgrades and of VOLO the to our tissue for our will to for treatment and I'd In conference our resolution tracking Optimizer in call later in believe third at both imaging for this now, CyberKnife a Shig Radixact the contrast. upgrade We upgrades our these upcoming dive synchronization Systems We we reception into Milan Synchrony, and development for anticipate quarter CyberKnife week. and market performance for financial to the enthusiastic expand will soft outlook. opportunity that for in an improve are

Shigeyuki Hamamatsu

good afternoon, and Josh, everyone. Thank you,

Starting year million a an for on of the third gross year. totaled orders XX% of of fiscal included increase As have we we service million contracts a year-to-date over XX% had purchased Josh $X.X orders increased $XXX,XXX types and in upgrades orders gross basis. these prior gross highlighted, representing On basis, in XXXX. third our quarter, through and fiscal our $XX.X in year-to-date orders XXXX, quarter, our over

total strong the orders orders possibly upgrades year-ago, as in these with increased these gross From convert gross Excluding in a from primarily our contributed gross quarter contracts, on revenue by to a compared contribution product orders should on mix XX% and XX% of XX% demand the in CyberKnife China. service the driven future. approximately year-to-date XX% margin perspective, The third CyberKnife a increased impact basis.

continue accounted age-outs Our orders. in for and perform of million Radixact age-outs of gross the of the $XX.X well Net total age-outs consisted prior XX% million $XX.X to $XX.X TomoTherapy age-ins. offset million Net was QX year. from quarter platform and for the $X.X million, approximately by of down

We of currency-related cancellations $X.X and million adjustments. also recorded $X.X of million

As a net $XX.X result, in million our on generated third we a of quarter. basis, orders

for A discussed the quarter-to-quarter. order million about backlog of cancellations represented prior our Type On with can systems of the approximately XX% which calls, totaled quarter. cancellations is As in or consistent of from the order $XX a historical basis, volume our year-to-date age-outs China X% fluctuate trend. total total

fiscal China orders be issued. revenue, third of million, XXXX year. quarter Type as our representing backlog We with most in A ended We an we licenses over aged-out X% starting will to continue to likely start these converting of to increase year prior start $XXX.X believe

Turning the revenue quarter million, quarter now X% driven and and X.X an the in have for revenue representing we recognized level approximately than purchased contracts, remind years through in you a to year. the upgrades that relatively Japan Planning grew System, growth from X% for prior basis On to Total The was a driven EMEA, related was the $XX.X Service by revenue was quarter. higher our normal year. was a Radixact year-to-date XX for Treatment flat software revenue would service year. ago, introduction the by to Radixact demand the prior-year of over like prior year. Systems. total for for income approximately the connectivity. Since drove over increase million, service strong X% $XX.X Precision our releases revenue included its new prior the prior APAC increase Product I of revenue was volume $XXX.X year-over-year. over third which statement. was iDMS which revenue product which increase doubled million, quarter revenue unit

As can prior training from up service was upgrades growth, by service calls, the in On vary installed revenue. driven previous quarter-to-quarter. we spare of Sequentially, a and X% quarter revenue mentioned from revenue continued year-to-date timing basis, parts X%. base grew

gross to now Turning margin.

compared our in XX.X% product the to in was year. compared in margin the prior year. to margin overall service the gross XX.X%, third year-to-date consumption margin impact gross The On lower XX.X% isolated in parts than the prior year. continued time. in of gross and XX.X% quarter for XX.X% third On revenue. the in a year-to-date was of gross from to year the gross service year-over-year. due our gross the was We that XX.X% Our prior year in we overall XX.X% was flat believe to XX.X% will margin basis, service incident. margin efficiency which Product normal reliability was approximately quarter to prior a the year, gross XX.X% investment margins. over mix service the third gross in System an Service the XX.X% expand gross or was included Year-to-date, margin in compared quarter prior compared margin basis, margin lower down continue continue the prior CyberKnife as XX.X% to our overall quarter, our higher improve to was service in parts

quarter buildings. lease one the credit of were the to X% Moving $XX.X expenses of an non-cash year. million, Contributing to statement, related down was to our $XXX,XXX decrease termination prior for from decrease income for operating the a office the a one-time

operating a basis, $XX.X year-to-date down were or million, expenses the from million Excluding our prior of quarter $XXX credit, On decrease were a X% operating year. X% this expenses year-over-year. one-time third

charges the expenses year. prior $X.X related operating for Excluding the quarter prior EBITDA the accounts third $X.X million decreased in and compared severance Adjusted one-time termination to or $X was receivable to impairment, lease credit, million year. million from year-to-date X% the

the with to year. excludes prior to remained to to to EBITDA quarter we one-time lease EBITDA mentioned a termination third and restricted quarter I third as credit invest year-to-date revenue the cash, our which XXXX. was ended working cash in The non-cash for converting million basis We compared adjusted on prepare $XX.X in Adjusted impact fiscal prior quarter $X.X continue earlier. million our of million the from $XX orders China capital flat of in short-term related

Before I calls. previous discussed in move guidance, XXXX status to on cost initiatives reduction of update to fiscal would discuss the we our I like our the

generated the initiatives realizing quarter an on fourth and the the benefit in expenses the expand of resulting benefit in $X.X continue basis. the in we fiscal in of the to year. generation million we execution of substantially have in action XX% across gross total will to as EBITDA or XX this compares operating our million EBITDA With $XX months margin, place reduce approximately the We our cost number completed, basis realized we approximately remainder Of to This expect to action orders year be capability from benefit we full a large will savings, on of start A adjusted grow the structure all annualized reduction of savings functions. this trailing million XXXX. this million initiatives now of $XX expected EBITDA was fiscal $XX third while and believe revenue. the operating quarter cost right

XX in if the guidance in XX of to customers reflective end revenue likely we year not of will the which revenue fourth lower we Regardless first is will guidance Turning approximately explained would Josh fourth to China the issuances, quarter. annual $XXX tender half quarter, end don't updating continue fiscal in now the for realize license the we the revenue have I for days of their to during XXXX. quarter, we of be growth of us provided amount as any $XXX the recognizing our just are The accelerate of X% conversion next China represent order that China Today, will revenue result specifically, timing to More believe million, provided. guidance, revenue calling China process completed million of over range fiscal in which which fiscal the of revenue benefit believe the to days, range we fourth our the achieving X% XXXX. in XXXX. will likely in not earlier,

expect We $XX $XX million to range adjusted EBITDA to million. be

closely in China is would As revenue, licenses there conversion, year a follows revenue lower in the and the EBITDA if of delay EBITDA range. we finish most this end

terms of on fiscal In orders, metric. XXXX, during gross from guidance have this we providing refrained specific

we gross orders. XX% history. and the in However, growth would to in of in are U.S. of fiscal slightly figure the which $XX.X history million, Therefore, Company's China be largest exceptional first fourth gross of year-over-year to order for in share largest for quarter multi-system the rate as fourth primarily mentioned, order Currently, months the year, demand nine we teens. with full-year expected pent-up driven U.S. the the I less our felt year's light from our for expectations the Company's included of the order flat should quarter than orders during our by previously XXXX last you low fiscal XXXX, of the growth be fiscal reporting gross

range, actively work as in in anticipate orders the the we mid to third to those and revenue. Turning million net on to will converting forecast, age-outs $XX experienced although are quarter, our be age-out fourth we net we

In a margin continue the platform the expenses This levels. for revenue. to a to terms total to percentage to our fiscal of overall outlook, year expect fiscal down the TomoTherapy, expect is margin of result full higher XXXX We X% down now operating year-over-year. flat slightly gross to be to gross approximately contributing be of Radixact we our

year-over-year. termination back of the I'd lease the that, to impairment, one-time impact items severance, X% Excluding hand expenses like credit, forecasted call of Josh. operating are and to be with the down to And

Joshua Levine

Shig. Thanks,

a questions, increased difference for their important team that's the your our call and improving supporting making for like entire commitment, for the work execution I'd Before and to we customers open patients. focus, thank Accuray the

our open today, and to and the and at like to ASTRO our at X:XX ASTRO shareholders an Accuray note that date on Investor questions. the on as because this conference Monday, for XXth time, event Chicago. give an now September X:XX we And years as this in has it's will much I to investors event Additionally, wanted p.m. many information possible. make operator, advance wanted p.m. analysts line session to time the in we note Company first to analysts would we're hosted and notice from investor Analyst ready of Central host

Operator

first Thank you. [Operator from Josh with is question Instructions] And Cowen. our Jennings

Your is line open.

Joshua Jennings

of the could China lot questions I hoping as like of, growth China administrative know haven't be have a and sounds the with there, been to completing dynamic Thanks licenses guess, was prepared China Hi. Class out with think And Type I the to happen I think I A most guess, of coming could and into I because the up strong in tailwind seen infrastructure or the turn you order your there's need for that are the start X,XXX, Ministry opening a and in so taking remarks. Health Good Shig. when why It still China congratulations hoping the the when and of XX% that you understand the B better vast last and that that things I of that, quarters in A. B. afternoon, just on majority market. the progress just the Josh mentioned orders quarter Type to of you the two was the and B China JV. license Type more about application orders

Joshua Levine

The B Type the kind network right overall Josh – to is simple much out is heavier side. B on building agent sales we a have of or dealer the answer Type The additional side. Yes, the, the on been on you're mix absolutely that. that network

kind be would of distributor flow. up and to that too the continue or much longer transition essentially the to before force the A JV between record, tail But that agents is we centric flow to XX-month next last should JV Type I historical B remarks, the about out, taking of – as predict across all, quarter starting talked related we well, of been to that's the or record you TomoKnife of pointed continued are more first and continued bulk front to two a the going of activity to TomoKnife to has historical to of That's ramp have As that TomoKnife continue of it start two to sales really provinces pretty be activity going a focused see you first But if because on the a think to two, sell has line momentum. this, JV And some want our in the really the of from of And joint start reasons prepared it's side quarters the Type the start we again, is good Type to to the will distributor the and that end in to mean be place probably now B Type quite the right assist to focus. kind in I – more will. I the side. activity and quarters and contribute venture sales that frankly, work going to products be B up effort. don't for on there.

and else. ramp anything infrastructure start-up start-up just more than related really So

Joshua Jennings

is and restructuring whether think that Americas just Thanks follow-up coming this couple in the the quarter you Understood. and Thanks I I comps the should on second can region effort question, next to the business, four brought talk can fruit how we my questions. guys question franchise the that. Americas lot over growth the just that for about and U.S. the a of guess, about, the My sales quarters think you of over last return for taking quarters? quarters, but anniversary

Joshua Levine

I'd extent they looks answer Sure. to yes, have a going contribute the than pretty frothy, been baselines three but now, expectation say, what in Americas some U.S. obviously The last are consistency to we're an have. that's the in geography The of though modest so two direction simple prior right They've there's quarters, greater or in seeing. the the volume moving numbers and percentage that say predominantly against year. the growth is there I'd from for I fairly order right

four talked there U.S. are funnel we'll about in And quarter two, again, and finish general again, in this certainly are But and place, think or leadership the I the quarters next, growth I course the over percentage good to. There making see we've really those the orders think quarters. the are that we've mean, where I feel Josh, people funnel, and kind in – some think that necessarily the strong Americas that U.S. on that just funnel being to we're aren't the about benchmark prior the the quality we're U.S. the multi-system the the improving. last is just should a think I U.S. I accountable developing in at team But as I that's reasonably end like up of added of in I think based of transparent – I say progress. the the from prior. over would year realistic hold six to I that the about year numbers. I'd funnel

where headed. to we're I come to need more about feel we So good execute, there, but

Joshua Jennings

Thanks again.

Operator

you. question our Petrone is And Anthony next Jefferies. Thank with from

is open. Your line

Anthony Petrone

on on on year on and new afternoon. on then with just I'll good the to going of to on deadline how development XXXX, out, solutions through XXXX, the into and soft then is in that But through questions between China. will convert look China, of is B Class start JV. to of quarter, some Radixact the on system. follow-up Company's orders just Josh, China going as of and maybe maybe Class on of I'll and obviously, ultimately couple clearances Congratulations piggyback a really out fiscal to understood estimated just I'm Josh's a revenue over question, what number Thanks and and shift have total the expectation rest that the and you and strong the we also A play of the a that licenses the to X,XXX

Joshua Levine

metric, to we're clarity that kind That's acquire around license of of X,XXX have being absolute internal of clarity at internal had – number Type what two of obviously universe served to of Health aggregate to XX% vast big of public little majority existing – making a leeway, of business but market lot Type of an the a the will the really market, least is institutions it's in our years but A XX%, private at B. as Anthony, licenses facilities have versus an B. least need, set around terms terms impossible any in assumptions situation, said, has The of obviously the the park, the relative issue, able more in in lack in that facilities mean both predict based bit we're number. devices. that analysis, market aspects the process. and I a With equipment level at with essentially market Ministry at least planning assumptions of across making not It's a gone on of they that's lack the A number our quota of of been

production ramp to support XX and a systems kind As that going to of expanded you in forward number meet accelerated support standpoint other got we've business. forecast months, the might revenue the requirements next imagine, a from internal or to of

get from an of do I get ground But there's looks a you higher take in assumptions work flow, still will to and in if our what benchmark, probably that what's and required internal will, kind the I training to – work estimates the to is It standpoint. licenses what somewhere in of actionable again than of So it a to or we've that once of equipment two the lot start or be that be will, the range. that. range. is think probably somewhere could XX% installation like next years mean, aspects you in actionable to to there's a our XX% lot make if or XX% had certain about

Anthony Petrone

had going just expect centered the as B, be have phase waits last Type and out the and in JV Type to two early and traction product that here between of for on see within do structure second bit that do is you you with TomoH TomoH it think relates regions, Onrad? just will really transitions? that Type specifically focused some and market the That's Onrad out will be locally the call it product JV that or helpful, other the that you'll to as In the around you mentioned you how words, the of work freezes a B on gate local manufactured the B the

Joshua Levine

I TomoH some think we'll see early traction Onrad. and with

bulk the presence and are Radiation leverage XX call is. the Corp's I population think, medium-sized have a in of our requirements the have near-term. upside we And least the which facilities the and demand in relationships different obviously just theirs of provinces that share, the like at the to something a – place, major the where I represent their sales volume in smaller it, in of mean They here, active bigger coming China fair bigger and of products that we'll pent-up is facilities customer presence Isotope kind are that hope market ramp provinces that, the significant that centers pretty or and lot are degree with are and outside from in active resources than geography. the hospitals more that's of of

that going Going as made, out they're produce product – China we that facility facility that B facility product forward, speak. Type the already B that's to Type in is manufacturing our building

that we're sitting a following we not is as needed and start required as to we here ramp that's for this we've There's to issue. soon could, the waiting the sitting quite licenses they're agreement that. frankly of or and on on So something done JV execution

review they and of that as regulatory have Type in as be soon as all obtained, producing we've to they're We – manufactured side soon the expeditiously approval in help product. to as registration locally and want as they're got should that ready business and for So a we in as get support that. on should as with B CFDA soon a process start the as of product full package of can to possible we moving we're can, front

Anthony Petrone

I appreciate back Thanks. that. I'll in get queue.

Operator

Thank you.

Lake O'Neil Street with next from comes Capital Brooks Our question Markets.

open. Your line is

Brooks O'Neil

quickies hope Good afternoon. couple here. I a I can in sneak of

you that? about progress you I just quick update wins. mentioned First, Could us cycle a lot say didn't U.S. a on Josh hear in you competitive replacement the give

Joshua Levine

XX% Yes, replacement again, cycle the opportunity. in roughly the stable it's discussion, of volume. a U.S. U.S., again, been relatively order But at it's not just the total gross and XX% Europe U.S. it's to Western

And and on we're on view going-forward things Brooks. both been, the are with side that the it's that with and in Western trade-up where with trade-in in older soon be U.S. or I upgrade sale that the consistent the both to Synchrony again, for our geographies, Europe. of catalysts quarter opportunity for it's generation last and is have think launched We VOLO think launching for Radixact. So replacement devices these

Brooks O'Neil

That's Perfect. great.

with soft give feel visualization match hearing on us will Synchrony. Secondly, you competitors we're Can just so about? a perspective your the tissue mentioned or how up with you much that offerings of

Joshua Levine

that think on run relative with imaging of linac. right standpoint. capability contrast. able be MRI do would in with of do can't around to We and you be Radixact will diagnostic characterize that's is and a the it that's of throughput you capability with throughput CT quite or terrific and beam standpoint. provide the MRI there efficiency doing what very from not a it going contrast a we're encourage will out going characterize think you we which really circles would think cone I perspective a to will. standpoint capability, perspective frankly, competitors. from now to any I an Again, workflow to terms competitive have very, a from It'll to quality things workflow But from capability that

not a MRI head-to-head not we're devices make if MRIdian of think device either say linacs, the for don't to – in to I room the again, nor again, So decommissioned would this say we're device. I seeing comparison be past. can there that ours We're made, or the Unity

believe don't MRI linac zero we've medical a without some history strongest that in customer or bunker the from a We're in base historically has primary devices. I game research-based that of the not in So centers. standpoint – terms academic our the competition been

if I will. will think standard they kind offerings, beam, kV we than to the when very, is get more cone which if the if – solutions been can prior not east of industry you to even imaging beam, of market, for workforce at competitive cone very will, – more our you product capable be that's kind

Brooks O'Neil

comment could could one your if to converts? regard in sheet and remaining I one, And any currently Sure. just on think you last you're balance with sneak contemplating strategy I

Shigeyuki Hamamatsu

for Brooks, Yes. the thanks question.

I think we have to about three years go. more

and we're near focusing time cash pay being, term. generating in for trying the down the on think I debt non-convert to

but couple about see the stock I probably how is sometime think to on convert, that of of it. we what piece refinancing soon, the a we also price in a – need approach terms stock talk in as and what convert depend years to either do that price will well to of a and

So leave just I'll at now. for that

Brooks O'Neil

much. so Okay. you Thank

Operator

question Sean And is Lavin you. BTIG. with from next our Thank

open. is line Your

Marie Thibault

Thanks It's for taking Thibault Sean Marie Hi. Lavin on questions. for tonight. the

Joshua Levine

Marie. Hi,

Marie Thibault

to and likelihood – one XX China usually to kind we b) sort I and hands of on of level around quicker? just of anything in or a) current I seeing then, the tender tender JV process. said, ask you us the takes come get do in jump we see trying year. average kind is some to front this that could out in issued I'm Is the of we of given when my see detail fiscal around do of for you tenders; an Hi, – you've bulk that all to days kind that just wanted and appreciate up. about process days know of the follow-up the XX it on start

Joshua Levine

be fully take to been this that possible quarter to us of the that it tenders time this the occur in in fourth The that as – it's the sooner, on are first growing on the licenses end I the view by process kind we've internal as mean I view of Marie, I likely think process timeframe if precision, less tender – imagine I with month or how revenue the perspective timeframe. issued of would in from month been an becomes predict that on our current of isn't that quarter. is, just forward-looking a completed could we're aren't come this that – that this get these difficult probably we to activated, it or stuff, that our strengthening of the chance or May, we've processes window really there view, in any but so Yes, – is our think things guess – legitimately been by think far give if or of two the week by degree

we historically, approach. right I mean, conservative we the what that, we So the happening, probably we've conservative what we've been seen been in what approach, just we've – maybe but given believe, think is that's believe

Health the process have it's that that think active and the application taken the they developing of And process the behind Ministry there heard here. an application that that's it, to institutions and process had that forthcoming. that's is online interesting application assist build-out of process what's has scenes people the our active of is, online, the the – been want understanding application queue been to about ground infrastructure, have they've the the a in I our we developed happening lot validation – of tender an thousands from the added online submit on that for the what's time

of that recognition how that the it the again, regards So makes our sense for to be outlook we us. to of timing the just think and into most with revenue timing in translates probably reserved more

Marie Thibault

you. Thank Okay.

Joshua Levine

terms is that of I fiscal think first XXXX says XXXX quarter of in first me revenue. and what the of to the ramps fiscal half big are it to be going

Marie Thibault

my backs, insight, question, to multi-system there's point? a potential like Thank that multi-system the orders that know lot to Okay. I the on like or there domestic I orders. you look focus Josh. Were sort of that kind what's any second in the funnel guess, back at of market. this Appreciate for quarter for that. I'd you quarters few turn a And of

Joshua Levine

orders will this some that you quarter them advancing the half we've that of in if quarter, in note fiscal are they're today, first there they're probably quarter, some of think few going nothing but forward, number reporting or I of that was are funnel over this a of we're There the course s progressing the them been tell in hit multi-system could quarters. the of the And last XXXX. likely of not I then

good to made quarter pretty I made, so we're And advancing the team reporting. but or that definitively has up progress report nothing U.S. those current that think again, to them in again, and in they've teaming the that forecast

Marie Thibault

Okay, much. so perfect. Thanks

Operator

Tycho Thank is from you. And last our JPMorgan. Peterson with question

open. is line Your

Tycho Peterson

put start put with the Thanks. kind that the you out, didn't me reimbursement. lead now CMS of obviously rates. they the let rates bundling, Josh,

Just but Obviously, from curious bundling what know you you're hearing the do response book, will in going think customers? how didn't forward, be you seem think the order from it the field as we about impacted base? the it customer like

Joshua Levine

to you Yes. from hear good It's Tycho.

be I value of rule hyperfractionated terms, encouraging a long-standing – essentially conformal they've probably the they've or in but would will early a the expect final which XD you as this IMRT would something expectation I be July. has a around stay a hear been call to The been to July the historical more radiotherapy five to customers back set payment would I'll model, So of that later, as and kind July sticks model at or fraction care, be kind would capture kind from been if to away general, move years, that will something been, good would it modeled close they what in we assumptions more alternative - precedent. everybody some CMS or based the is least of model the years, weekend; of last history. approach, preservationist and timing, something of if kind of the – if a SBRT from say, historical of X, they've couple treatment in six probably specific that of to the mean things month hospitals go really

than you're a regimens one period talking So talking you've positioned, place a what's about be on been think strongly and shorter talking heard us is the for with that pretty nothing payers, for sometime from more probably on portfolio. We now, wise our we're long you're timelines platforms, we construct treatment have and for as a positioned again, of patient, model going time. about this definitive in and we're think we of and cost – in faster, you’re the more over timeline about in say sure efficient that really CMS, probably if But technically that fit out it'll treatment think We typical both summer. solutions accelerated rule this forward. past, final comes

Tycho Peterson

on partnering has up you announced RayStation should sales of your during And we with how side, think quarter, treatments, had Anderson kind more the guys deal? first evolved then with could joint going that about see you with talk the if and you I'm curious I beyond you are the forward relationship software Okay. RayStation RaySearch. just

Joshua Levine

Yes.

I think will. we

they installation you at that is installed continue where place, when are fastest-growing system be standalone – treatment their becoming base, in the growth is look taking they to their view Our the kind have locations, market. variety a of of the become the in in center choice provider become many system of they've or level, medical the academic equipment. wide level research-based at They across

kind we'd RayStation it with. to really So devices, they that types customers our multiple of say they've products, outlier rather us for to that not on an of for easier deal anything plan for multiple ability made plan and situation of outside falls is

for quite leverage it the has is side think a they for with i.e. the still have sense avoid our which position that purposes expand them. they can everything They of outlier way we the that's and for to RayStation, So own outside frankly, help us a and reach lot they that have us makes being systems product workstation on - its to in treatment own. be strategically, planning planning one of help working line we else

incentives think place to sense encourage just account activity the selling field in got I level makes at joint mindset targeting. and the lot between the strategically. it We've organizations right So joint a of and

sense it, makes impact a forward. have think doing will it predict from still there what going bigger outset and it still I strategically, would the So we're I

Tycho Peterson

color Okay. And the China. then I appreciate on last one, all

about up about As we of accretive we or to kind Do China we impact? think is margin ramping how on locally this their assume Isotope think margins made should device.

Shigeyuki Hamamatsu

for margin. Thanks it have joint perspective. Tycho. negotiated from do question, think with the a Yes. should our certainly help We transfer good price our We pretty a venture

So margin accretive. we be that gross to do expect

Joshua Levine

get them. that better we'll topic, over I time also think efficiency that on from

a over certainly at than think that will time the they opportunities are I supply outset. impact the be chain bigger

thoughts source with. manufacturing in that least chain will and in place and we the Tycho, parts both how ways out We Madison out the how taking componentry already forward-looking of around for there's between key at be leverage conversations our organizations can thoughts Madison, to organizations. them of with help two that facility up supply and But begin

I that margin should impact positive think So be a another COGS. impact, – it over be to that in should time or reduction

Tycho Peterson

Okay. Thank you.

Operator

our from And Coover Thank question next you. Citi. is with Philip

open. Your line is

Philip Coover

for of your timing heels Hi, on producing to or CT the I kind coming hoping the adaptive the on that update imaging of therapy for product front? provide outlook a market, was you maybe guys. Thanks question. an on on thoughts your could

Joshua Levine

commercialization, on the imaging So timeline probably Phil. we're in XX-month again,

to and adaptive done comparisons, From planning a improve treatment it reality adaptive I today. our mean, a pretty all therapy process these than speed to therapy with and efficient And so should VOLO, is that's – in that work we've think that's to be improve things – plan more around making of optimization assist the adaptive primary truly this. gating got standpoint, clearly an item on I ability the substantially

is of the So, view way is linac. MRI the only takes I therapy think that adaptive place to an

would constrained. them views describe as those – I think are I

Philip Coover

Sure could. it's appreciate age-in impacting that the second bit how about having A okay. little you of I that sort helpful A Shig but, on All point, talk any was for there. one, right this dynamic, is and maybe it. at more impact bit can that a China I technical expanding of cancellations question context if age-out and question

Shigeyuki Hamamatsu

total of of XX% of $XX quarter said for that in just remarks Yes. Phil, I prepared a China and was give the you sense. a so to the million kind was age-out my as

age-out, some have to continued on China the those. but said to are orders. good also in still Those remarks that continue So I as we'll work

But to know, it out. more them work we’re XX our again, continue going revenue to XXXX. before starting convert FY just you months on gets than old those As aged to into policy

Philip Coover

Okay.

Joshua Levine

The way. the cancellation by from was China,

Philip Coover

China, there where Okay. going or None we see time? age revenue age as from back or lead conversion to be and in China convert same to of book-to-bill in cancellations then the some a of on in we quarter like we going are front back the is sort the to and

Joshua Levine

exactly. because mean age comes quarter got back mathematically couple when speaking. just we I this backs quarter, a Yes, right. backlog, you we that it's but speaking goes did a deals there. in, immediately it to something like of had it in Mechanically out always book-and-bill It

Philip Coover

Okay. All right. super That's helpful. Thanks.

Joshua Levine

Yep.

Operator

remarks. Levine for any to final any I would further queue. I'm turn in like the Josh And Thank to you. not showing the call questions

Joshua Levine

Thanks, update. everyone for to forward full-year operator, your our and and look this thank talking you much. very participation QX We on Thanks to you afternoon.

Operator

all thank And conference. in we with gentlemen, disconnect. and participating Have day. a wonderful may program the This that you concludes ladies today's and you for

Accuray (ARAY) 23 Apr 192019 Q3 Earnings call transcript