ARAY - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Accuray Incorporated Q2 Fiscal 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to Diaz conference with like speaker to now Joe today, Lytham would hand over the your I Partners. Please go ahead, sir.

Joseph Diaz

and review the Thank conference on December year Josh, good Welcome ended everyone. you, XXXX. to XXXX, call which to quarter financial second for XX, results of fiscal afternoon, Accuray's

afternoon, our recent will corporate developments. addition, during management In call this review

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

our in like statements products regarding China, would could expansion includes to Company's XXXX future I of regarding expectations call income begin, market product expectations regarding joint business exemption that risks including operating three today to releases guidance, market related EBITDA expectations strategies. the statements you Type systems, plans shipments, and uncertainties, guidance, we Company's gross recognition next the the the regarding new China installations venture, including opportunity involve that and A in and and tariff expectations Before and growth expectations affect such that our forward-looking China, revenue remind in regarding regarding for margins, years, fiscal expectations regarding conditions including and factors revenue and China our from adjusted of expectations

Radixact Exchange Type could China joint and in the There Company's with ongoing to order China as These risks the China, operationalizing A the and joint and Systems, associated Commission. fully with ability the just well as materially future of that macroeconomic a including, future are of the growth, number to and are realize our factors limited China, related the announcements as the closed as filings commercial revenue control. license in benefits Company's of the CyberKnife, to tender to risks uncertainties issued in news B we and adoption and cause profitability strategy after expected future execution; in other venture overall and release in outside growth, differ but the TomoTherapy this Securities the results risks more actual factors from the not our expectations, described of well venture, market afternoon process

should other to today's based and The forward-looking changes on we statements except available forward-looking assume on in date, on to statements. or applicable or call as extent undue forward-looking to update reliance by forward-looking of changes this factors no required you in information, assumptions are not information changes any to results, the performance securities actual us law. affecting put obligation statements Accordingly, any or reflect

call. Two housekeeping items today's for

during two that First, then the and limit to participants follow-ups. Q&A requeue session, request with we any themselves questions

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

example, XX, ended referred fiscal regarding For second quarter XXXX. to statements December second our our quarter

and turn to Executive Levine. the like Officer, Accuray's to I'd Now Josh Josh? President Chief over call

Joshua Levine

Thanks, thanks and having in Accuray's order call. on as gross we expectations a momentum Joe, and to comparison. performance a QX today's China exceeded year-over-year first everyone communicated has us order difficult despite maintained previously strong joining half

XX% by over year will strong deeply activities, prepared Shig In age-in last which his during increased more orders we net in quarter remarks. as addition, the saw cover

was our performance the In half and with our of in line expectations. QX terms first revenue,

China year that to recognition, believe we revenue timing we had in expected was the due of in weighted to we going the XXXX timing Type is shared be half calls, still to license second A As prior revenue growth the valid. fiscal projected of and

and patients that to will therapy expand momentum that systems. our following medical remains hospitals somewhat topic this call, to and We China. commercial our all accelerators support follow-up have radiation exemption that a open to in our an confirmed believe innovative we linear QX for applicable the access tariff As important exemption solutions is our for of

in In systems, coronavirus revenue recent radiation differentiated outlook events China the affects the radiotherapy that have a the longer-term light equipment believe do where in demand market. we significant to the highly years. for strategy for outbreak fastest-growing drive growth the in of oncology market we China, coming that outbreak not with remains world's

Gross but orders we $XX our for above the $XX year's $XX.X down previously the quarter QX X% discussed from prior expected million the were in to second of million, call. quarter, million, materially range had

quotas During for received licenses that presented from tough China a and Chinese B published the XX prior we orders as year in quarter, Type comparison. order two, fiscal which the government A year-over-year growth long-awaited

contributors to gross earlier. EMEA pleased am APAC contributed a to despite were saw year-over-year, and new the order comparison orders in strong we and the XX from Americas Geographically, which growth of sequential XX% continue saw revenue regions report two represents order year-over-year grow mentioned in we contribution that focus which region. systems rebuilding pipeline I to the our quarters double-digit we in on that as orders, I fiscal tough meaningful QX, China,

will orders Revenues gross review of solid for numbers year-over-year. line provide its revenue a in delivered remarks. orders growing the quarter From results, also platform in the while for in was total XX% the a with prepared QX, were our TomoTherapy expectations, contributed the with million, internal by which XX% gross approximately led XX% CyberKnife perspective, during mix accounted the orders Japan product more of and quarter. gross approximately of $XX.X his Shig Radixact detailed

related Turning China. now to a more detailed to update

user that tender continue We be the is ongoing Type by closely their process a which of end monitor taking must completed device. receipt the of prior to to process, status hospitals the A

the the has to in hospital's not a related and order would is place has conditions in equipment process each hospital that competitive As the for. bidding situation result specific in transactional changes discussed license previously, this to define Type put that the A tender and terms device been received

fiscal sometime begin quarter. based We the see license the our fourth first will that timelines impact China we in tendering this for to process, A expect related on Type revenue required to awards

under China National of the We license are applications. that Health are also second currently believe and by well represented Commission are second round the Accuray Systems batch aware applications that review the of Type in A

not the of the license additional are known, additional of A is awards about While the opportunities Type excited months. announcement timing coming prospect of exact the in we

and will allow the Our manufacturing activities manufacturing areas. schedule joint products of to continues associated will progress B our as we a Type expect well as important opportunity and the facility for months, on JV make the operational with training B overall Construction Type which is radiotherapy XX of to to next in in XX commence growth us venture support number China products. the that center the

Stanford added a to patients. second radiosurgery Center the has back more CyberKnife Circling their expand of University Medical access to we to System during the that precise U.S., announced to quarter treatments

brain in tumors the diseases their The new be CyberKnife patients elsewhere dedicated skull, to while body. and be the treatment the system of base System will in on will with continue existing of the focused to

is unique you of an deliver value technological expanding birthplace many of CyberKnife patients. and product their continue proud Stanford know, see are the As of CyberKnife the in clinical clinical we to expanding treatment and treatment they to are volume this and to that capacity

of men announced therapy. excellent prostate with low in study, treatments administered System at a recently SBRT years, disease data the provided prospective that with rates also with after radiation CyberKnife recurrent cancer toxicity which hypofractionated showed with previous We from control five very treatment

most The of importantly, required recurrent which is no is Genesis cancer. for was Health at given prostate common conducted and a the hormone therapy, study of the multicenter Healthcare AtlantiCare, treatment men Geisinger XX% Partners which Most study part System.

and Oncology, results in International Biology recently Physics. Radiation Journal of the published The online were study

prostate are is cancer We reflect data data benefit excited CyberKnife of that may believe treating and the study treatment the our range these a act to of as in offered. whom clearly to recurrent catalyst the patients System expand

development technology Turning demand for ASTRO September. strong seen for which We've in roadmap. our Radixact, introduced Synchrony product at customer meeting the to now we annual our

innovation Accuray a and time. or adapts tissue Systems. now is motion may reminder, CyberKnife compensates tumor occur motion compensates by beam both target treatment that the delivery and Synchrony in precisely Synchrony Radixact As tracking and automatically that real changes in available on surrounding a for motion for during unique

clinical sites from These track completed install commercial maximum in production of impact sites ensure in sites full our will upon monitor installations valuable QX. and fiscal evaluation our We've gained next our product release on ramp experience and help quarter. to with reference primary global phase of the installation fiscal have additional fourth

to Conference like speak I'd the revenue Shig, for to the to month. I the which Before expectations call JPMorgan fiscal three we discussed over years, earlier this growth Accuray’s turn next at Healthcare

A XXXX the grants the growth us recent XXXX. compounded our XX this Type range fiscal XX% licenses Systems fiscal China, of will from enable We past for opportunity in to annual revenue October through a to Accuray radiotherapy achieve X% including of believe in

expect million to beginning to following Accuray awarded of A respect have that to of over the revenue $XXX units these and months. point XX that revenue these our With we XX system quarter the approximately convert will value the licenses already continue fourth first from fiscal Type Systems, units in and

adjusted for We we Accuray over expect us. been same periods on our the better the model built operating drive for from on singularly is faster of have summary, and our has entire I years. substantial never benefit revenue EBITDA to this business expansion we income into growth operating the in as will start our leverage growth believe focused In here opportunities positioned team ahead past several executing and

the to over financial a more for me the let quarter. review turn that, Shig results With detailed of call Shig? for the

Shigeyuki Hamamatsu

the and $XX.X you, period the Thank over million for on additional approximately expected prior X% for order year. year. a and I'll begin and were which year-to-date the some the Gross certain performance the previously million, focus XX% above our $XX everyone. highlights gross period. range second $XX increased for afternoon, down second quarter orders orders quarter basis, good materially Josh, the from on with million was same details On prior of to then

to better million, Net $XX significantly six previously million, as age-outs orders quarter converted million quarter. to the of prior were $X.X which was aged-out we the revenue $XX during our for expectation than

during age-ins across the were to orders regions. quarter The the all related

made age-ins pleased from we quarter-to-quarter, we expect the see we amount this will area. While vary to progress the are of have in

from believe years awarded number included past licenses that eventually Type of the will revenue. orders to XX previously The A during several Systems Accuray that that already China aged for continue convert were two the systems aged-out. a We out meaningful to

adjustments. other $X.X of had During recorded quarter, no and the cancellations we million second

million of a we $XX ended increase a an prior a increase result, backlog generated We over the a December represented on quarter, net second XX% XXXX. with second orders in from the million, which quarter XX, year. As $XXX XX% the of basis, of

our income revenue for million $XXX.X $XX.X Total quarter prior from statement. the Turning in the down now was to million, year. second

from internal fiscal consistent previously was which revenue of year, prior our half first the communicated. For with XXXX, we the down was X% expectations

prior the X.X% to of $XX.X the prior Service revenue $XX.X year. the quarter product declined compared year. million, Our during from was up quarter revenue million the in X% second

From of a product the mix the XX% revenue, revenue XX%. XX% remaining perspective, platform approximately the CyberKnife quarter's revenue approximately the Radixact of during TomoTherapy represented accounted for quarter. accounted for TomoTherapy while

now Turning margin. gross to

primarily margin revenue. CyberKnife gross compared of mix in the was in Service product XX.X% was the gross Our up prior year. due to quarter to XX.X% higher from the in XX%, XX.X% prior year, margin

our experienced As noted which our quarter, last we call, margin. QX consumption negatively than higher service parts in impacted normal service

quarter, the During of parts a in our field initiative. inventory parts have our full second network in service conducted quality connection service control we with engineering physical

impact off certain QX the QX of gross margin have service our which would lower been margin the a in gross by our result, XX%. parts will written service network, write-off, this XXX points. as basis And Without service

quality in normalize margin in compared year. rate the in the the second to the fiscal consumption XX.X% the believe reasonable our this XX.X% quarter, we second Overall second was With basis have quarter in control half a parts service gross taken will prior measure year. proactive that to of

or to of Operating Moving million, the statement. year. prior $XX.X for decrease million quarter XX% from a down were the income expenses $X

second expenses primarily in as by was initiatives a net driven year-ago. we items quarter approximately infrequent the the decline expenses a reduction million Although our benefit release reserves, cost undertook the $X operating operating such year-over-year included of from of tax non-income

revenue and full deliver to margin us in the our growth see in will coming second starting continue allow this to as we benefit pleased operating leverage quarters this the of the year. are fiscal EBITDA adjusted half We to the action believe expect of expansion and operating

in $X.X revenue, us loss leverage quarter decline the compared year-over-year income our to $XXX,XXX to slight operating a of deliver the the year. our operating Despite allowed GAAP million during operating prior of in

pickup We did any Accuray's timing record loss venture not contractual related equity contributions. quarter the to second during to China of obligations due our joint the

will JV and our in impact expect begin to a be China of it the the year. of We will second third half report loss quarter the operating fiscal for

reported million related equity the we exchange million of venture income of joint quarter I to $XX.X to $XX for contributed would to for net JV. in non-cash in that recording systems due second like China the note to the our stake gain

As to expect equity discussed contributions previously, the XX% the in allowed under maintain JV as non-cash venture interest we agreement. our through joint

of the systems calculation The gain joint non-cash nature. the as original to difference represents value statement due the income our excluded its and of special $XX in This recorded fair contributed. from the our income stake we other venture EBITDA gain equity of between was cost the million of adjusted and

quarter, in a increase the in gain the million Excluding described, to year. adjusted just which represented the prior EBITDA I was million $X.X $X.X XX% compared

from quarter cash, second million We million with quarter restricted prior very quarter. an strong and ended increase of $XX the collections cash $XX short-term had the of a cash and

guidance Turning now to XXXX. our for fiscal

revenue prior with between million $XXX are our expected We $XXX million. to range reiterating guidance and

to We return believe second of fiscal to to revenue during continue ability in year. our the half this growth

As year Type discussed orders of in quarter A fiscal hospitals XXXX the this the the forecast completion for system likely process. as fiscal previously, awarded of number to most licenses our wait fourth includes revenue, starting combining a revenue certain of tender their the for

our in regions XXXX during with range growth are expectations the single-digit We gross mid fiscal Americas order Japan leading and way. the reaffirming for

expect adjusted trend $XX range half, our compared EBITDA adjusted to to with guidance $X.X going full-year, As now the to adjusted $XX QX million, the million EBITDA see EBITDA the of for our be million second for favorable $XX given operating million. prior we into between guidance and expense $XX we of million

expected share the venture guidance China The of new our of of joint $X range includes approximately million loss operations.

our margin terms overall expect XX%. In of to margin be gross outlook, approximately gross we

to the reduction to be We XXXX see prior year-over-year approximately as that benefit X% X% the the year. for of fiscal forecast we in operating expenses we cost actions down took

anticipate We to to our in be range. net-age Turning million the to age-outs forecast. million $XX QX net $XX

up With Operator? open let's that, the questions. for call

Operator

from with comes question first Cowen. Our Josh Instructions] [Operator Jennings

You may proceed with your question.

Joshua Jennings

play tailwinds the for the China. strong on job Hi, the momentum follow-up just hoping a questions, that and with order Thanks question quarter I good in in the call-up you've and a afternoon. the was nice are of on you're to I side, taking out here. done congratulations think on seeing mapping

How guys a regions replacement getting in in of from to winning tailwind cycle the are And you're then on wanted Just check vaults? where – experiencing are you cycle? replacement the replacement much the what – strongest? is

Joshua Levine

geographically ongoing replacement they countries Americas in or U.S., of So are focus primary the in the and focus the standpoint region the the to Western in a the Josh, areas EMEA momentum in contributing are Europe terms a cycle and Eurozone essentially tailwind. order with primary contributing from region

of For base. This growing second off a orders second the AMS. it's showing relatively a had quarter, double-digit contribution – growth. from, quarter that we've good sequential again that orders were was quarter Admittedly, the small

with is we're declare but victory there. one to pleased seeing no directionally, we're here, what prepared So

from good that team think Winter, done, people needed Commercial processes our got in Suzanne at I we've of and we're place. are standpoint, understanding structure I a And job Chief from structure what's where think, and standpoint. has Officer, new a a the

from think continue should some that I momentum to from contribution we and U.S. So see

growth Japan in order quarter. was strong also the a

gross Japan. XX% roughly had – we order think I XX% growth in

better I of ability kind in we with is some has that wish have every into of to come It places, be we forward lot order that for a do string and cycle – together so the or Radixact visibility, to are that of I the haven't But feels contributing could at that more of And quarter. than seen that on to it started of should kind – going replacement every AMS to the launch Synchrony liked. region momentum China activity. quarter-after-quarter and have things introduction would you we more of this catalyst where marketplace, just level especially the story. tell like

Joshua Jennings

of the with on just us not progress is then question tough CMS' your hearing, my models? buzz into to any a or instituting Thanks for Excellent. And timing the in follow-up anything And for just answer, terms or just queue. that that in any can payment maybe alternative you're terms in that questions. calendar the back you XXXX? of whether in expectations out will be share kick I'll delayed to taking get but

Joshua Levine

communicated. problem. No answer is, the heard I mean, what's already incremental been to haven't we anything

even drew which a time the the comment that least they'd that of that really anticipated there – was what then been a more I when I that. beyond the important if bit, at the period think little to close timing see anything think the directionally, to what important and had around they I than is XXXX like has calendar new. move from at in public at started perhaps the what's happen you fall do don't that looked last moved this. – about of beginning and expect, timing about July, of to part out have year, CMS clear

And areas. of our ultra SBRT think past for – That direction have the perhaps I what bodes that I hyperfractionated is word conventional treatment And out more think treatment there. as message impact there. it in in that talked case movement well us, about those focus and out on hyperfractionated more delivery that more terms traditional messaging that movement and our fractions, is to to towards we've portfolio I given opposed as the in think and mix, what will

Operator

you. Thank

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

your proceed may You question. with

Brooks O'Neil

afternoon, congratulations. also and guys, Good

work. good think up terrific so progress, a it's the I quarter, keep all terrific

Joshua Levine

Brooks. Thanks,

Brooks O'Neil

to always the of are B be from comment I your a licenses XX% licenses. if the included converting out you X% think XX that massive you contribution revenue I'm to additional Type think there. the potential X% curious, outside to potential in XX% on your I I and about A might future? little A further commented is the based I Type licenses didn't you Type expectations and to wasn't, bit I growth what more any correctly, primarily just from for So potential that and what's allude heard XX% amount XX% was Could it's possible is listening upside about

Joshua Levine

Yes.

communicated again, from to So that devices, XX tranche to Brooks, of XX between fiscal we fall, announcement and related Systems, a have there annual the for to growth XXXX first the for or directly X% And of mix XX A Type sight that to that licenses. we've devices, were fiscal XX% for last platforms. of direct across compounded line mix very the XXXX TomoTherapy so XX CyberKnife is Accuray was were both healthy contribution range

Type not really We're that tranche, don't is you will, currently fact than A active of we're process that. second that – the the of those timing aware wave license the to review specific beyond the anything applications, form or or announcement awards in an other for have visibility we if of

we in we represented Systems do – in that universe that have are think well to alluded remarks, Accuray I understanding we do an Although, prepared of applications.

How premature We comment this have or on of at actually on. many point, that forecast to it’s device? get Accuray an end will user hospitals those an award

that's little But bit. is that a core So doing based of we won't what and that. the Shig assumption elaborate a I'll on to give chance on be kind

Shigeyuki Hamamatsu

think value expect over And revenue The It's way about Josh the starting we we with quarter. to was I that we and to Yes. $XXX period. recognition associated licenses fourth months Hey, the of of XX that is about Type revenue occur won. said the A already million this $XXX in XX the million Brooks. what Josh. it Thanks, talked

in to XXXX we million two that we for you think X% if talked FY us about the so while our gives rates achieve feel – good about growth and years, ability $XXX already having pretty about. we XXXX, that talked next So a to XX%

we facility, to, the in what talked making B manufacturing on a) and Type we're near-term. for market to want mainly you market progress I that's about was we year, penetrate you the joint that further get penetration think when know to as China out addition venture in the third

lift if additionally, think in also to way And the so that the win have it out. B addition in to year, XX say, about us you third Type in branded we Type a is, let's year XX A we to the but revenue, think expect from third product to months, we in locally China in additional that volume expect market about the giving a

Brooks O'Neil

I'm I Yes. That's that. thought confirmed great. and That's that glad case, was the fantastic. you

lot to have I a ascribe guidance but your going to So here. I'm try questions, other of to

might a little I response remarks. was bit prepared hoping to about know guys was the bit just there the So market in little Synchrony. talk you a I

feel that others? would And it in on the CyberKnife Thank in relates to relates at Synchrony's or the to Radixact receiving marketplace out you it how talked particular, That might is least as as competitive be be about help? by market the and there capabilities you. big offerings a

Joshua Levine

wouldn't sites type So ago, in familiar their what launch we allowed full aspects process go patients approach started technologies. we calling in of clear new production, taking making years of ramp us able call also in without commercial other that and place evaluation that will us feedback a we introduction. terms release Brooks, with supporting it, those of to or sure the We understand any commercial get feedback that new started we're clinical as to be that new – use of about monitor large introduction had, beta experience early product sites full product help you're product to and the technology provide the from or introduction treating with several

and things around learned customers. getting installation we for place activity in upgrade related the The to technology

making It feel field to it's are gives make whether engineers dial training and early in other feedback also a a well. important, get actions we smoothly. in corrective process our for served more So us has it's a that us service additional chance installations these that go

– trade biggest to the to is and catalyst going the forward received. think well now. – up simply really installed generation the base Europe of the I installed Synchrony is in in single business, we earlier support which base of put continue on activity trade has largest kind TomoTherapy which right it Western And been and concentration is the think – it of U.S.

terms platform. becomes significant continued pretty a a momentum Synchrony catalyst on of – sale So replacement I for opportunity TomoTherapy think the in

Brooks O'Neil

very you Thank much. Great.

Operator

Thank you.

from BTIG. comes Thibault question Marie with next Our

may question. proceed with your You

Marie Thibault

Great. Thanks congratulations taking to the performance. add on for I'll questions, and here great see. really It's my strong a

Joshua Levine

Thanks, Marie.

Marie Thibault

that? Is it first can in are this? you question, replacement in it Any to us wanted that seeing getting would My us they're in the little the seeing with and orders just getting I Synchrony multi-system the excited possible Is driving a bit cycle? on that you're growth in detail the region? And you're Radixact? dig offer onboard Americas bit it tell of understand about ordering? a strength what little if more you trends could help Is sustainability on so about

Joshua Levine

point, natural say, the a think of would launch the any contribution standpoint. trends cycle also of model at replacement from large I kind and I Synchrony it's it concentrated related I too of Marie, to from CMS. it around to don't heavily alternative this characterize of or Yes. proposed any it's most payment probably believe early

the early could really more it's the Although over platform represents. Synchrony opportunity I standpoint Radixact would for also and motion to on reaction describe impact, management from organic capabilities as opportunity be an I installed an time but base think what that that

Marie Thibault

proactively of of the you Coronavirus lot clearly thank outbreak for since on Makes minds. people's the a I front have And touching to it's sense. at Perfect.

from if there's color ground at for might in the the mean, there that a the change longer-term I emphasize of what and installation us your hospital hearing China no of little could give anything to schedules? you near-term customers you're wonder sort on on about what situation all folks if demand. You some

Joshua Levine

that what's just disclosed. publicly say would incremental been information any I plainly we have don't to

radiotherapy I world. calibrated impact fastest – the is obviously the information that This any the think overall and But here. longer-term in this. the growing changes we are overall people around again, around don't have appropriately cautious outlook market that general

the We to – have we've with of see opportunity. good to, in we a a momentum a online us we to about to people a the overshare that we and an that that strategy current that partner timelines think regards communicated. good a gives we've company in plant visibility and – think very our got to on feel we selected able we've chance that from that for operational the size JV the be projected participate as way coming And bandwidth standpoint

So might I longer-term could mean, the have I in other can't I about the don't that still and we around add are or very comment Coronavirus to that impact specifics bullish anything outbreak mean, have have to any outlook. timeframe. or

Marie Thibault

Perfect. Okay. Thank you so much.

Operator

[Operator you. Jefferies. Petrone Instructions] from Our next from question Anthony comes Thank

You may proceed with your question.

Anthony Petrone

EBITDA? from that the gain some A disclosed out the clarity on a to or Thanks that Maybe I'll couple then good Is just of the and and little reversed that tender congrats start And from licenses? here JV So licenses on a on here. on were from with was those orders China gain you've shipments adjusted quarter due shift of the U.S. maybe to of a just Shig, adjusted Class EBITDA. outside for in

Shigeyuki Hamamatsu

Yes. It that is would complete. tender revenue the be joint venture, have Anthony, short My answer that the going process which caused contributed a shipment with we thanks has we're the to the gain two systems once do to question. the for nothing the to to quarter.

I that to clear. want make So

joint agreement the X.X% It for systems other joint use, the the purpose. the our venture for the our equity joint where into was side venture us onset into for in was to to into putting interest, put was the JV with the simply venture agreement, – cash whereas the a partner cash of exchange of operational putting instead for venture transaction joint

So that's transaction. really the underlying

its It's really not it's nature, to operations speak. so our a event. So therefore with one-time ongoing alignment given

calculation. we why out that's it the So took adjusted EBITDA of

Anthony Petrone

follow-up JV on to while on topic. the the just Maybe we're

being update where And on distribution an the established. I out? sits systems training out at joint also think I moment. network actively the think maybe the you've venture the the infrastructure in Just build is of shared that on they're past

a little infrastructure the JV? just of So on bit the

on of opportunity RO can think average And you in then the is the installed and the the quantify upgrade the last once U.S. from the the just Maybe installed age you what base bundle base. again. Thanks one going? gets U.S. that

Joshua Levine

question opportunities what Anthony, trade are me really terms or we've and I'd substantially terms wise, to all really that service – different from seeing take over not range in sweet XX-year sequencing of the – probably we're spot me take of in different is of that the life in, up XX that time. last life trade seen in say let just first. what let

I mean, as in eight the XX in replacement – are maybe probably early that most as But these the life recent come active that But XX beyond probably devices speak, to in range. that say it's in we've activity, so well. to in the service use windows, I'd into systems and years. got XX-year as beginning

I the trade launched trade I'd over impact – it think more think don't payment of question. going what that now, officially that very hear by discussion. an tying could trade as seeing that – might too it's and seeing proposed covers don't model once up activity. of specifically on But have it think time, catalyst RO-APM, for opportunity don't a well replacement any think right to the that that I before, it's yet in, mentioned – rolls the part up we're of I out alternative and forward being of in as impossible a that I I current have I anything that so trade as say, we're early. not that any impacted don't that is gets

taking a discussion, groundbreaking I speed of and the I facility on on On July, month July the facility. you and the I China sense XX the are China customer joint just about JPMorgan, to January. week a in plant, which facility, there or days give before place was into late last of venture things so right – with was mean kind happening. the physical infrastructure training manufacturing again was the and

offices out – classrooms, the headquarters all the complete. essentially, for And customer is now training built customer internal the location, JV the and that of administrative the facility and

are facility, and be being those venture. reside will in the that those completed actual was while equipment be training leadership there. I bunkers bunkers, with administratively from the were including used would bunkers folks the being manufacturing roles activities And – actually will in functional It's by involved occupied training where training the customers, the joint that

for The in standpoint. facility there – just projected fast from of how terms a out, end really will, it is May, and construction it's project close of towards timeline things you if the manufacturing move extraordinary April, beginning sometime of

that oversee and our Tianjin who licensing We've for construction provincial great gotten JV cetera. the with the They great partner. from et government permitting folks relationships have permits, building and are support

with support we've things nicely to had So of our along from And Isotope Corp, the China lot been moved have we've regards fortunate that of a & facility. Radiation as partner. the construction

the are age-ins going to will Type the distributors of A attached the be mechanism that the forward primary All well China that as and sales and Type as represent JV for selling B.

part, build have we today. out for selling facility have of – out. great trained, distributor couple terms the months another been except those we in I and materially All are mean, complete maybe of they're say of I'd in organizations

the involving hiring But of of complete cetera. terms service network, transitioning sales, infrastructure that et employees, field marketing, sales in employees, support, terms in – is work engineering service

start roughly, think that of think all well, months, people That functions XX from across or in a to total X.X gone months, from organization now I – last phenomenal. July. a in X maybe pretty they've XX span I dead related organization has its

Anthony Petrone

for That's great. Thanks the update.

in. Now, I'll Thanks. back get

Operator

from comes with question Tycho next Peterson JPMorgan. Our Instructions] [Operator

your with question. proceed may You

Eleni Apostolatos

thank Hi, on Tycho. for you. is This Eleni

just lower is China if better I you anticipated. had the talk starting you're from something or to else to significantly about Could age-outs So dynamics see underpinning here? age-ins wondering result whether at play net than off, the And regionally, there was were start you here?

Joshua Levine

Yes. the Eleni. Thanks question, for

hard the to As as I previously also of any we convert obviously begin said those earlier, total look been watching we quarter. a but try a a age-in time have to six aged-out And the we quarter, only that each orders not and revenues. every had in at backlog, orders

said from that number could far quarter-to-quarter. So as earlier, vary as as aging I of too, the

China, Although, the items. three two quarters to A revenue include if at in of convert start that previously look I you do out, aged-out to we some that's think Type going to as

really we to that's few do I flow of the dynamic expect out, but start age-ins, So more see a here. quarters steady

far the regions. it as as across all And six was age-ins orders,

see And as well. so good to was that

majority States, know, the As big of outside you distribution sales the pretty we United a of presence. have China

where a those So had are age-outs particular, of in we beyond China. regions EMEA, very high amount

So to it's steady the started we in convert very future. get the revenue good and to see the China about age-ins as – a hopefully, very positive more activity the here,

Eleni Apostolatos

year, XQ? to I revenue about of balance XQ the we in pacing was your half you. That's for think should terms understand of and how wondering, helpful. fiscal also the just the better between second the guidance Thank

Joshua Levine

Yes.

the believe to I think QX. going it A conversion Type that we to look in been we've the revenue for best it's is, start consistently at saying way China,

towards So between would two half, I weight more anything second the quarters QX. in it if

Eleni Apostolatos

in gross basis Okay. of then And points around you the and just embedding margin for outlook? you still tariffs, that, to wanted topline to terms XXX your are check with also

Joshua Levine

the us had terms we Thanks revenue it status the obviously year. million recall coming And to quarter. to did call I might this this was X.X% that, specifically into guidance. – you tariff for Yes. we of exemption left it question, Eleni. $X before about the so range confirm see great And as in was or it status Yes, out that for

been that about we Type And we've benefit realization think of shipment about. the the is that – tariff way into again, revenue A this exemption the it ties of timing talking

change shipment, at for really So dependency of guidance the this of on because point. the make the sense timing didn’t to us,

amount we're good And the stress the that that news tariff. going it thought to the that about is thing is lose I we that a would

a of Now And just we don't. it’s timing. matter

talked about year. I a year So issue. originally whether timing come or million into purely this next that's It's $X

we So it. think that's about how

Eleni Apostolatos

Okay. Thank you. That's helpful.

Operator

Incorporated showing any call the any over further not like CEO I'm Josh back and And Instructions] I turn [Operator would President Levine, to now for further this of at questions to remarks. Accuray time.

Joshua Levine

We in forward again with speaking results. you much for very to your to afternoon. this quarter Thanks our third our joining fiscal I'd thank look for like everyone call participation. April, when report we

Operator

this concludes and Ladies for you. conference today's Thank Thank call. participating. you gentlemen,

disconnect. You may now

Accuray (ARAY) 28 Jan 202020 Q2 Earnings call transcript