ARAY - Earnings call transcript Q2 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon and welcome to the Accuray Second Quarter Fiscal 2021 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ken Mobeck, Vice President of Finance at Accuray. ahead. go Please,

Ken Mobeck

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

management afternoon, this call our will recent corporate review developments. During

Josh Suzanne call Executive Hamamatsu, Commercial Vice and Winter Vice Accuray's Joining Senior President Chief and President Shig Accuray's Senior are Chief on and Levine, of us Financial Accuray's President today's Chief Officer; Officer; R&D. and Officer

as that implied I our Actual that begin, cause Exchange set Before just in forth with forward-looking would forward-looking these today's the we available materially are of remind no you statements. The statements of closed on today securities events, like on statements. call issued differ after we results release from results materially to in the includes the those well this this by statements. information Factors differ our call Securities a to may as filings applicable required Two by and any update not we new assume based press Accordingly, items reliance are contemplated you the could and should market housekeeping for or result as these as extent future except to information obligation forward-looking statements date put forward-looking to Commission. undue us or any laws. on to call. forward-looking today's afternoon,

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

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

the With Josh Chief quarter our that, refer Levine. Accuray's President Officer, ended XXXX. and XX, fiscal call Josh? regarding our to quarter second second statements example, over For let me turn Executive December to

Josh Levine

by delivery reflect to aggregate from everyone approximately like bulk revenue created positive SX the CyberKnife on adaptation in call. us despite Type million, China latest the Systems A system COVID-XX the to Type performance Thanks, Revenue our of Systems, momentum which to continues Radixact the to at generation Radixact tracking system our latest and Accuray Accuray's in innovations quarter of environment. $XXX A fiscal Ken, the quarter beginning for our and for today's beginning business and Accuray motion headwinds Synchrony, on revenue the the our system. imaging the revenue system included second XXXX to include: months, licenses China-related million the making, $XX came recognized The the Highlights revenue. of real-time past China-related the second conversion quarter receiving is in $XX.X of performance second and on adoption of thanks conversion million. of related XXX(k) kVCT estimate awarded value have licenses continued an quarter ClearRT, XX related represents approval awarded which to Helical joining approximately our

of While will vary remainder currently quarter-to-quarter, the we to over expect the course revenue recognized licenses A A be XX the Type number of to the from Type system of the months. shipments XX related next will

$XX.X was fiscal operational year progress for million, ready make advancing and in in prior to believe quarter B introduction months. we expectations. process Type volume approximately our in qualification the globally our of headwinds, internal the to track have on order versus and China B our XX Type are JV line market for while with manufacturing Gross segment, the the Regarding was product to continues China-manufactured QX which, product due validation we down COVID

in a of which and Type Radixact growth Despite cost Synchrony fiscal in Americas and COVID-related our on China call and both year-over-year orders year. fiscal during positive as COVID management this our global as driven a order orders in quarter grew such see XX% increase where first of the perspective, positive by the technologies Japan a in strong Americas increase increase orders is approximately stages With value headwinds SX we initiated saw during new leverage to Radixact. this from with in EMEA regions A current a decisions well by year, demand, year, year-over-year to and the was prior we preservation new Radixact prior during during challenges, we clinical as As capability. proprietary to cash true expected, earnings gross year On those the we real-time adaptation volume Synchrony's and From significant the primarily prior initial and XX% demonstrates saw financial quarter QX continue motion basis included we the Synchrony believe shared XX% in we that CyberKnife, tough we EMEA driven the the the momentum respect pandemic. from as by operating the in customers highlighted had October, comparisons in driven regions. unit coupled see tracking financial delivery orders of

run With leverage will are bring our to that which be investments the the operating improved back will pre-COVID increasing rate spending R&D of levels seeing in we we investment.

approval during that two platform milestones we clearance in the On kVCT had our launch. XXX(k) Helical quarter ClearRT for the way product we the product for This system. received imaging Radixact announced for innovation paves our important regulatory phased the front

of and evaluation we can demonstrating customer First, feedback decision-making. site the impact generate obtain on treatment-related studies ClearRT case clinical now

global will Japan launch Secondly, clearances we to a end look like the commercial combines image of for imaging Mark diagnostic that of Helical forward this broader to place in towards TomoTherapy clinicians allows treatment. uniform anticipate high-quality the longest year. and in images we preparation CE view the resolution gaining fiscal best-in-class field transverse near acquire which acquisition Radixact take providing and Shonin regulatory during additional capability Systems' speed kVCT image quality the unique with platform ClearRT

been our treatments. their of maintain as and to and results our to we in We the I'll that tracking pioneer Radixact workhorse overall has platforms call Synchrony Radixact effect beginning capabilities to additions to SBRT in we believe in bringing enable are growth that with a aligned adding review with technology in to strategic Shig? choice greater Shig that the scheduled delivery our portfolio our the payment real-time for the hyperfractionated CMS's well high-precision on are clinical the the and QX innovations and and and delivery a help over into go detail. positioning will that a model expect position hyperfractionation that platform technologies Accuray long-term gold now current are ensure and is oncology standard motion hypo we as SRS advance adaptation ultra January combined that ClearRT its with XXXX. radiation of will which catalyst market to further be believe functionality alternative turn product And We system. a financial significant

Shig Hamamatsu

highlights Josh then afternoon second good certain focus the the $XX.X you million on Gross for the quarter compared begin prior the Thank $XX.X orders I'll with everyone. year. as some and performance were in for second million and financial period. details additional our for to on quarter

we revenue be second as would Type to we orders in anticipated double-digit we occur by A October this order fiscal volume converting quarter. As system of orders fiscal of Type had we in saw is the more China demand quota years in focusing normalize existing back China announcement gross year initial the A pent-up generated what that growth triggered due of A for new on which the the two to XXXX, Type last

In addition, placement the U.S. near particularly the which continue the term. the see timing pandemic headwinds order to to has we some in in due affected region of

third we of quarter just expect of third gross the to similar which year year-over-year the lower expected to reasons quarter, A to $XX ahead quarter included be meaningfully for challenging fiscal million same for comparison Looking prior see third this The Type the year orders I stated. a in is orders.

also the to do from for accounted order second the to in approximately mix product volume our quarter. volume XX% accounted the order We a for and a year unit sequential second volume fourth CyberKnife the we of increase although fiscal more this the quarter in remaining be anticipate platform of quarter third anticipate quarter, towards for order XX%. weighted TomoTherapy perspective gross half From the

As order the a activities quarter, we order as million Net Josh Synchrony of Radixact SX. on a we quarter. where momentum during included $XX million highlighted age-in year-over-year CyberKnife during quarter both saw innovation-driven were for age-outs for saw strong as earlier, significant $XX growth well the the second and

of As China. pandemic expected, of by higher-than-normal exception saw timing quarter regions level a we of during as age-outs impacted revenue was the with all in the conversion the

million of we've represented the the ever reported. age-in highest $XX quarter age-ins activity during quality However,

year due extent age-outs disruption. second a impact COVID-XX Although this which based factors, driven higher-than-normal the pandemic the we vary to a of of depth this on could half of fiscal markets individual for and expect see to number level timing to will

FX had approximately million. and second other adjustments and the no During we quarter totaled $X cancellations

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

XX% a Service from product $XX which of revenue primarily revenue quarter's the and XX%. pandemic. X% CyberKnife in the to decline which regions, mix year-over-year to the accounted revenue of volume included million year-over-year Product the other quarter products. due million was Total an $XX.X income year. increase of was a our for the million system for million Turning million, perspective, was while for quarter included A China, TomoTherapy revenue accounted in by $XX.X prior and statement. remaining of the approximately for now revenue platform second $XX.X of the the the for impact quarter $XX offset Type increase From to unit significant China was revenue, revenue were system

Turning now gross to margin.

in XX% was quarter Product gross compared was the year. to XX.X% for XX.X% in the the the compared for overall margin to XX.X% Our prior gross prior margin quarter year.

improvement quarter gross prior quarter. product as a first the Service higher the quarter CyberKnife of gross was XX% sequential during XX.X% the to we units from a margin meaningful second year. of the XX.X% quarter mix in margin for saw gross The margin compared represented product

higher-than-normal impact service service prior parts As year a level consumption. reminder, QX of included of margin the a

job Our to operations done a great consumption which gross contributed have a margin. normalizing in year-over-year of parts four and past quarters, teams in improvement the service material service

due from benefit travel continued well reductions as benefit and the higher margin pandemic. as service revenue QX upgrade costs from Additionally, other operating to in

pandemic, we in for operating to expenses million, Operating the Moving travel, statement. related driven of expenses quarter included actions costs The particularly of COVID-XX, the associated marketing year-over-year down the well or decrease decline and in the was the from of by impact prior physician implemented income X% year. were million events eliminations a $X.X as expenses. response the primarily which curtailment $XX.X our with as

in normalize the forward half to to as million quarterly operating of the million, run fiscal of in certain our continue this look $XX anticipate range $XX restore will we invest R&D rate we we expenses our As second to and year, to expense pipeline. start

expense in second fiscal million trailing In operating with to XX run we in consistent the of $X.X from fiscal $X.X the the improved the period months to million this income measured Operating million fifth operating XXst, generated quarter have for generation income quarter is we half million of year $XX addition, consecutive have year. compared income the This in December higher past the seen the the of rate GAAP operating and $X.X seasonality XXXX. prior represented cycles. for

of environment. for income loss statement open right actions line to This as below cost improved post-COVID million. on we the our a position income being called $X.X us While income reported operating The China from equity item pandemic, operating will our expect was income taken single or partially is leverage on in benefited management an investment gain item well the impact response JV the line. quarter our in the our operating of

issued to to half As have loss EBITDA. trailing second for commercial between quarter the the EBITDA expect adjusted $XX.X to expect The loss of will million ramp $X.X year. XX-month or near joint in JV's share and compared share Adjusted our in our operational $XX activities, we the our term operating continue quarterly in venture adjustments China a JV's fluctuate this release be net of quantified the continues outlined million our of generated income in basis its of income fiscal EBITDA million and prior impact GAAP we was we and and earnings today. small will On a adjusted year.

of million continues cash position $XX to short-term start paying managing from million million this of of loan and team on as fiscal our restricted cash XXXX the term improved despite to year capital. Our XXst, focus $X working as $XXX December the down

year. in flow this We cash free first fiscal also generated half of of $XX the million

the revenue the A believe of conversion state on gaining pandemic, to although soften the of are the ahead revenue look visibility the timing China second half given pandemic-driven cautious on we on will As remain we we we the impact revenue current front, conversion timing disruption. potential Type

manage working capital to our focus and are efficiency, expansion, and investments continued we on revenue we As conversion, operational margin headwinds in management. near-term continuing innovation,

We inventory. management your on are to up chain the With supply as also ready of focused we Operator? questions. on while open A call inventory revenue China of Type levels maintaining we're for appropriate conversion that, execute

Operator

will begin [Operator Josh from now session. first comes ahead. with We Cowen. question-and-answer Our Instructions] the Jennings Please question go

Unidentified Analyst

actually on taking for Thanks our Neal is Josh. This for guys. Hi questions.

question around first guess had I was ClearRT. The just I

be solution? adaptive just what get forward could lay high the you towards what to I path steps a approved therapy would having broader it's kind level that maybe is Now a out at And there? of guess

Suzanne Winter

Sure. Josh, Suzanne. it's

about to we the hope with product from shipped go part will introduction. We're in little therapy follow-up introduction. of We broader to innovation fundamental the for address be backbone our our a our CE difference we'll in a Mark really ClearRT clinical any going that sites be And X to our getting that feedback bit we developed phased Shonin broader adaptive Phase can introduction site pipeline. so and markets. is of and to Just then clinical our QX.

is One good burdensome adaptive of there intensive. therapies also still take certainly to look the now that a at are therapy resource things good and been idea is -- and very a a changes and workflow watching path at still standpoint from a adaptive well first very existing we've out

on that from at clinicians. that to standpoint, fast next look a I are the to more ensure by think be So, we adopted improve phase take is it and we here happy a follower can what clearly

Unidentified Analyst

that. for Thanks Great.

Just question. a second

force of currently offering I venture, team stronger can a versus terms that the sales CIRC, leadership how if current just prior guess B Type terms is force that's wanted under Just Our versus for of positioned that distributor sales be that in that. effort the but the check ONRAD TomoH? and the joint offerings is and in thought would you prior

Josh Levine

agree, Neil. We

the back our brings terrific way. distributor over a in CIRC market So positioning looking pretty done TomoKnife years we're again that joint access appreciative partner What had us really job the powerful as a brands. strategic venture legacy a of is

and in us As in a X,XXX you've relationships about ready X,XXX got sales active are country. medical they've talk and heard or probably customer they hospitals company market-leading the isotope production across

the in both has that's the will you market up B here in exists produced the are ground that valuable the provinces. being opportunity they will terms than of So customer terms be we a partner manufacturing upside in context partner helping they for where of us visibility just market the product Type big centers of powerful if we activity, out us a to very medium-sized access the in CIRC But facilities in about us Type on are commercial population position, the strategic across think very on product Tianjin. more that the for And major relationships because the also is existing in product. context an the of think the ramp in B when Type B strength small and

Unidentified Analyst

Okay. me. it That’s for Thanks.

Operator

question Please next Capital Markets. O'Neil Lake ahead. is with The go from Brooks Street

Brooks O'Neil

quarter terrific the in conditions. congratulations everyone, is challenging afternoon, light and what think a on I Good of

Josh Levine

Brooks. Thanks

Brooks O'Neil

little Obviously, underlying So the I was to a the just COVID color. hoping get of numbers. some impact see we

impact the Suzanne, the outside curious the you until the in key the year if maybe right what markets of specifically you're next see the months? seeing of U.S. could So the the then of And around XX China next just could APM terms walk pushout and us start market about business Josh how of impacting you I'm you now? of the in

Josh Levine

Yeah. Brooks, it's Josh. I'll take those.

summer when say start just terms in U.S. in I'll some summer early time late at cases were different Americas extended COVID end down locked opening primarily we place and for to during of been let's it so region, let's being we're period of up than the call a then speak the So the summer We're period of home had at fall. a of in back or the hospitals time an

in seen year. lockdowns visibility widespread U.S. of market have We last that similar existed the not to

area that least so a broad across think that signs were or the With an there's -- outcome So year. identify in capacity if country. we're And brush last to -- and single you not area highly really don't we're recovery said, there at I with the -- will visible of region painting to we a this region pretty makes is by intensity where it's cases from to difficult timelines sense COVID or varies it variability the speak. to ICU

one are if can I think being cancer patients is that thing -- treated. I confirm

that say before the cancer vacation place have case. is throughout for us our patient coronavirus the is a the heard not install taking country. still You've taking much active that base and in treatment And we very

the a -- XXXX, continue And terms half I in from an for or so in will first -- see there's the it's reasonably timing standpoint. what similar of order I I'd the go-slow slowdown markets. other that slowdown it's say a described activity region And think that of developed we really likely let's say a Americas calendar is just and for to continued approach

So I would Europe, primarily. fairly the Eurozone markets regards consistently Western similar with say, to

We made but geographically around there capital allocation cetera. least situation an say with as robust which are remarkably anywhere with I activity are the et order in showing Americas seemingly I'd remarks Japan, of clearly challenged a trajectory in in where environment kind expenditures think about again EMEA so talked and they're And to same resources given place. the at that or prepared really being decisions is regards else as there backdrop, of COVID the

So we're encouraged by that.

of we believe question, the model part talk think second the heard on around on hyperfractionated Brooks is APM moving reimbursement until business – that decision delivery. The model. The it term, will delay the implementation hypofractionation in in the based while understand we're trajectory have We and the impact you've fact APM direction your overall for was I the the us of don't XXXX. treatment behind about that the that business. changes. the or reasons affects And coming longer is ultra And the our business January before

by the cadence Our its stronger we're context seen positive impact the we well that in portfolio continue getting APM as innovations sense to the launching. going relative of And think we're extremely our implementation is new to quarter, of the the you've environment us. positioned in will or on a impact that forward

Brooks O'Neil

That's apologize. the on Do two-part the quarters you production And Type what venture side? side could A revenue? the a XX But I ask joint months know little XX few months? you systems about us in expect say probably you color. China great the great. That's just If give question color I Type second more kind the How the a on B of any many over next I expect you XX milestones on to next commentary mentioned out. can

Josh Levine

Yes.

Okay.

So on just Type JV. on Type B. two were orders and from the four A took we the reported, quarter order China side we They the two

and seven on the that think – Radixact TomoTherapy side TomoH the nine we – we Type booked had side. well were and revenue as I B. the And A, we two systems, as revenue of side products on the Type seven know CyberKnife were that On we B I the devices two Type in booked quarter,

anything products. if got sell are the we've with we the before, Type the you Both universe we've as it's we've to today, TomoH. to Type to as got So approved ONRAD, respond market if of B and regards active will talked in qualification have don't not B

CIRC to So the will would product which months. we're our of I that until quite XX there. be out see some have helpful expect And in coming frankly about ready continuing factory that to activity continue will with we're Tianjin-produced

Brooks O'Neil

terms B? B on color in ramping Type from orders of expect Any whatever? or what Great. And you up Type

Josh Levine

offering. product B with Well today our we're current again mean, I taking Type orders

year quarter I unit products in you that So China-produced before the or the modest and – months will we're Type or for mentioned at the taking doing admittedly products B Brooks level a cadence orders own our active. product and there fairly We're products we're dealer if so. but The XX they XX ONRAD B. available non-presence pace that we actively And consistent take TomoH over They're you about showing in if are our are saw as those approved have in for you today. continue and it's list I the until imagine been and the network are will and would – it's again and or JV not in so product can months. Type volume last we'll

Brooks O'Neil

questions. Okay. Thank you taking That’s great. for my

Josh Levine

Sure.

Operator

with The next Please Thibault is question Marie ahead. go from BTIG.

Marie Thibault

out? about Congrats the little kind a on quarter. those value in guess, said rolling $XXX with revenue. you there's follow-on to million a some strong this a I how start Wanted question Hi. envision, the you I of China total of, may more the I of of into that orders. know insight cadence Brook's to get

hand? So how second recognition, also revenue not you should the in as the think lumpiness we of of kind of lumpiness of as that that kind awards have well tranche or about

Shig Hamamatsu

of quarterly But, $XXX the XX we yes, thanks able that. we as And, think Hey, take the XX again, of to said the to give specifics Marie, months. course million the over going to be question. remaining the be I'll to about on so talked revenue it's next not earlier, for out rollout we going we're of cadence. a

million was talked Josh as A, of shipped $XX we Now, part Type million which $XX mentioned, of the about. we just

vary. the a units revenue to do we quarters? But, from going next expect necessarily. of seeing that number or what be quarter-to-quarter big not from And quarter-to-quarter is, so, We're amount the in few the is probably could fluctuation I shipped it say again,

So I will just leave at it that, Marie.

Marie Thibault

replacement then, And talk tailwinds. perhaps little bit we Clear appreciate about enough. I the that. could Okay. a

of your installed base. the age older certainly vocal You've been about

you're who when your thinking are from on So possible customers timing some some of turn I'd that way? hearing what and bigger a about love we see to in replacements legacy start hear of may to

Suzanne Winter

even Yes. of the about see this that the Marie, at getting response were introduction I and trade-in think, tailwind, trade-up. some excited orders quarter, we our of with we're the And, ClearRT. XX% started we're total in to

that providing Synchrony good our is customers rationale make investment for with a think, I really to to the upgrade. so, And

we may So that move that only well. expect we percentage as increase as forward

Marie Thibault

Thank you. Fantastic.

Operator

The next quarter with is go Petrone Anthony Please Jefferies. from ahead.

Anthony Petrone

Maybe there on Thanks. Hi. Josh then and China a couple going and couple on Shig, I'm to COVID. -- the China on stay side, to a I the guess, spend the on to JV. just shift

JPMorgan at additional the headcount is the XXXX. Will Should follow-ups. recently to evenly to have near mentioned term? loaded expect to it of I'm through through to -- sort the two adding get cadence be You adding by And infrastructure those up of XXX fiscal then, we bolus XXX XXXX? I'll the up the just what want wondering Conference, base, an you XXXX. add to XXX

Shig Hamamatsu

up show would for OpEx, impact the through towards equity not rather It's or they going us interest the Accuray's of picked level. up be expenses. see expense what take in you, as XX% bottom build that Thanks think I'll P&L JV more pickup of additional of income at question. for don't just our at to we COGS to Anthony, Yes. that And to JV question. that the gradual the operations, is they of remind headcount it as And even through statement. get run I an the

question. you to next clear. want I guess, just make And, that have I So

Anthony Petrone

of mean, well, in how growth the how actually blend on the And, would there's go be the adds. one maybe will new that just three? funding the again, will ownership fully understand of on I those the but I JV the refresh funding JV, and of a funding headcount Sure. headcount

Shig Hamamatsu

At to way JV point, Yes. about that they think is the fund that are best at self-funded. this level how the to

when initial the formed capitalization JV effectively. And was the so, completed we

our provided provided capital. the capital. you As We recall, in-kind partner cash the

they So fully they're own and headcount their additional to going fund through are operations. capitalized

Anthony Petrone

it. Got

Josh Levine

capital that today. what confident highlighted, we self-funded is this don't we sit incremental just surprise very calls expect belief, I where end. their or from again, is any our mean, Anthony, strong I on really belief Shig think,

side granular, a Just commercial vast bit you all of general. me let the not to back today, most will if, sales in majority side and on infrastructure the more strategic be the -- operational marketing side and it of marketing a place the full is -- the little representation commercial of actually in more of piece of if

I that validation time now think operation and over side the the approval see related some the count manufacturing -- really with manufacturing and emphasis added and to in more on regulatory head efforts on qualification you'll is registration regulatory product specific manpower additional operational perhaps approval.

functional by So regulatory area and the piece. ops heavily the ops of manufacturing it's really indexed more to

Anthony Petrone

out approach a Okay. just tender And XXXX tender back and China. both the basis, XXXX a the from follow-up opportunity segment in sort outlook here have guess units. there And existing you would by on of at also be almost the looking XXXX when the I you're XXXX the multiyear I XXXX sure material out you guess suggesting prior can linac this additional

outlook? you a in, And timing? multiyear the sort for confidence what expectation XXXX follow-on terms the opportunity one that of when And about so, where in come from does in the is of tender think that

Josh Levine

believe will A there over additional active -- that are quota original mean I very Type know plan. obviously. we you certainly XXth government when least devices announced think that if if the next plan were another round Well side probably Type on process, X-year maybe there the identified into as I in handles we and that standpoint Government captured how -- development XX, at at from if the A are look XX will, development But in is be predict call they're -- X-year this you we can't X-year would X-year the I numbers a it plan not roll Central roll that the process over in probably planning speak. it traditionally the certainly in the

-- Central Government's original about of yet numbers would process saw third we maybe talking about have we here that and big been for B of -- were earnings had that are to applications licenses the last have plan. that B. Ministry frame. would unit Application we quota in Application there's A Type I already upside the the that But captured have Type there volume the of not mentioned applications -- time release, kind occur we believe as would at batch is quota that B devices bit -- that same represented there also XXXX think every likely which Type know quota. as the would And indicate received kind Electronic in round increased sometime we Health was been Although Type that X-year will again in that believe the announced been in a been in think ultimately of in the online many of least you in next announcement be something be impact that which April/May We

of quite opportunity in to confidence -- a terms magnitude like fact and segment of believe market of is very right that on opportunity strategy it that in the is still And path. unique the the we core there market the our So have value what frankly market China the gives of us the feel be participation we're in can't we overstated. the

Anthony Petrone

that with hear. to Now Thanks. all good

Operator

Jason ahead. Instructions] from [Operator Wittes go Please Northland. The question is next with

Jason Wittes

taking for questions. Thanks Hi. the

Accuray (ARAY) 28 Jan 212021 Q2 Earnings call transcript