ARAY - Earnings call transcript Q1 2022

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Operator

Good afternoon and welcome to the Accuray Reports First Quarter Fiscal 2022 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 and Investor Relations. ahead. go Please

Ken Mobeck

and Call Anthony quarter everyone. to XX, Welcome fiscal Thank review good financial Conference XXXX. September ended to XXXX first results Accuray's year you, which afternoon, for of the

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

Josh call Suzanne President; Green, Joining Brandy Chief Chief Interim Accuray's Accuray's are on Executive Levine, us Financial and Accuray's today's Officer; Winter, Officer.

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

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

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

our XXXX. ended XX, statements regarding fiscal refer our first example, first quarter to For quarter September

accessed Levine. over this turn by that, accompany to deck investor let call Chief be Josh me Josh? be going can Executive Accuray's page@investors.accurate.com. there a Accuray's will Additionally, slide which With to supplemental directly the Officer, to call

Josh Levine

first CFO. call. had today fiscal Green, a very interim I'm Thanks, joining strong Ken Suzanne on President; our Brandy thank everyone by our quarter. any joined and measure, By Winter, you today's us to and Accuray

by Revenue investments the are a made focus revenue visible portfolio, growth world accelerated Our two our business. $XX first impact product those which to $XXX.X performance and company around to revenue which of how on million growth all has number to received have and translated and innovation reflects of translates largest driving year-on-year the XX% in growth. came the customers million being the we execution, are the commercial in at represents which our the laser-like technologies quarter order for Gross ever quarter was quarter for fiscal XX% year-on-year the volume reported.

contributions and technology beam and can her While strength confirm Underpinning Suzanne were operating is real-time and our in regions. our upgrades, Helical of I delivery strength Imaging all tracking our reflected ClearRT, latest the platform Radixact of regional during kVCT will prepared regarding Accuray's capability. Synchrony, remarks, provide adaptation this motion that impact details orders more revenue the results across

drive our both both have seen of systems. technology both these rates well very growth as we as current activity base We significant customer innovations and business. our with interest is The continuing new technology additions of orders attachment in to installed new cadence future upgrade Radixact for for in believe and strong

XXX%. prior which We represented strong QX revenue JV representing growth year was China $XX.X see fiscal our generated QX. gross growth volume XXX% order million $XX.X from continue of China to during for versus million, and contribution year-on-year year of we

and as with person XXXX Accuray the to shipments XX oncology with pending continue Type B participation had customer track we subsequent good meeting on and Last at Tianjin was calendar introduction investor clearance that the by year summer interact This in at our Chicago. are opportunity phased as in launch a in progress produced the our on expected the months. interest of conference make product strong interest Additionally, strong year. community the ASTRO the regulatory in to radiation participated end event. U.S. to market we of first in well week,

with shared as progress of long-term have Day today in occurring and we as business our us. As Astro Investor we our the about the growth presentation, opportunities excited well in see we we're front momentum

are Winter more across of stereotactic radiosurgery effectively, designed enhance commercial launching ultra our are during delivering call turn now treatment to to platforms safely We the highlights radiotherapy that I'll important the further details And quarter. hyperfractionated upgrades technology on more efficiently. for stereotactic current and some in over and capabilities Suzanne and both hypo body

Suzanne Winter

Thank you, Josh.

regions system greater We the are Synchrony than differentiated RO-APM as by well. four more The provide with growth treatments driven new customer order them them orders Americas pleased and very with all XX region in performance XXX% new with hypofractionated IMRT extremely SBRT that patients and quarter for led with environment. and executing ClearRT their Ultra our reimbursement will to first volume, allow growth compete for effectively the allow technologies strong demand within to and

in markets, Shinshu wins system systems. our as two this oncology and subregion key continued things: position that radiation orders beginning results; in to see an in therapy this The to within quarter expand driving will region University. capability the Helical are positive Nagoya growth deliver partner market C which spend we confidence arm Radixact's equipment EIMEA Turkey differentiated network conventional with a commercial to XX% is the growth in new year-over-year in at include and our demand with pent-up initiatives compared access us delivery of U.S. competitive which market Japan leveraging building of and give strengthen platform the one, highlights Radixact two, from In results Our reflected QX recovery some we're win budget capital to region, a distribution from important with seven region. impact

Royal systems, Finally, site ANZ our APAC China, and the at in five won in, three we B. up Women's to subregion. trade in a XX% region outstanding become Type orders hospital our China Brisbane Outside by year-over-year, driven which including primarily Type will strong execution new a grew with eight trade reference Radixact second commercial A of

order U.S. expect to outpace QX market especially and growth significantly will global in market result market. growth in share gain, We the

orders the an launch introductions with of purchased XX cumulative momentum than drove since system product to Our XX option. bringing began new clear orders XX% our key less Approximately new as Radixact ClearRT ago. new a orders market year we the

Additionally, orders market focus of installed orders our trade results, comprised on of upgrading commercial base. showing U.S. capabilities our base and installed latest our aged performance developed the XX% in, existing being XX% trade up of is of to with orders

prioritizing heard installations. to A China strategic help included continue Shipments China, Beijing innovation. Union the demand connected of customers Cyberknife Ministry institutions Other and of product brand pent-up installations latest Beijing, awareness highly included both Accuray highlights nine for A reflecting quarter revenue our systems, exhibition very As believe therapy to conferences, for European We market. and oncology Health quarter to U.S. was and Josh, including and at both hospital, from for successful which a radiation the Type the highlighted our the equipment Type you key customer College where the we China in technology to these and China will solid serving senior another with drive radiation government. the some that our from premier are performances growth strong Medical outstanding, a demonstrates U.S.

system. within Accuray ClearRT VOLO for the precision platform Radixact, for approval speed, treatment product Radixact solution positioning for addition treatment introduced planning Altra a than In and the technology Radixact's VOLO for Synchrony to we workforce use XXX(k) enhancement received planning and a for superior as and increases XX less to for translates latest and quality CyberKnife allowing times of VOLO ease it the Ultra, Radixact, of of treatment minutes department.

in of PACE-B that the experienced that and platform underscores This side randomized of technology on tracking only capabilities XD full on vendor the value urinary and the system. trial. localized the occur. was systems. Marsden two important differentiation the from is Tree who tumor may therapy provides the the Tree have Synchrony, improved so therapy critical data outcomes For follow-up ESTRO, quality Cyberknife potential patients less news connectivity have At Xx Dr. to patients linac trial than Dr. effects reported of the integration across X-year outcome of than ESTRO timeframe clinical conventional Accuray life. best oncology London multiple the the supports a study treated with is in treated RayStation patients radiation scientific Cyberknife, side and This proprietary radiation delivery. multicenter from reported the hypofractionated like a control platform, of those we long-term OIS more treatments or on and research, seamless Allison partnership international breaking large years, sessions introduced allowing cancer. Cyberknife and effects department SBRT Accuray radiation Royal the competitive that Also provide prostate patients Accuray within treated a ultra clinical for Hospital for from after precision PACE-B radiosurgery Adaptive from technology

turn discussed technology. and we in driving reception benefit which randomized our As high-precision for in start us as clinical over call the outstanding product In capital positive demonstrate her I'd global is with to on to technology differentiated expected summary, hypofractionated grow for combined use like outstanding recovery the of Day like Accuray's new QX of details. the growth and conventional an positions now during clinical our are and And the from strategy, therapy interest review presentation, treatment studies that organization to signs execute an we greatly is financial trend. unique rapidly to improved Accuray ultra long-term growing equipment Brandy PACE-B radiation Investor platforms our from introductions to this of customer

Brandon Green

afternoon, FY focus good of will quarter. strong off I and We Suzanne with highlights. you, financial some those Thank Today, a everyone. started on 'XX

the for As TomoTherapy and orders the million, quarter mix platform orders accounted and XX% XX% XX% perspective, averages XX% year historical quarter the XX% up as remaining for compared From approximately over were and the $XX of the product TomoTherapy noted, accounted a first period. to CyberKnife CyberKnife. approximately for of gross gross prior for

ended from backlog increase cancellations of quarter we During approximately our $X.X with September XXXX. X% XX, an quarter, we $XXX.X million, of million first the net had and of

revenue revenue TomoTherapy our between Total unit the quarter approximately million, to of million, quarter, revenue and statement. China. strong the by a in year, in quarter-to-quarter. for compared perspective, to and Americas CyberKnife prior product Product reminder, varies $XXX.X accounted an volume $XX.X as the was Now of mix accounted From XX%. remaining from while led for first And quarter prior compared the income year-over-year platform for the XX% for TomoTherapy year. up the mix a increase turning XX% the was XX% to growth CyberKnife

and for the for revenue compared the quarter our However, historically, to CyberKnife on X% product year. XX% an been $XX.X years. annual was past has revenue up Service approximately fiscal mix basis, TomoTherapy XX% prior several million,

transacted the the accounting the venture margin excluding these for the margin XX.X% lower-than-planned quarter XX.X% to margin been There in per Now end At two XX.X% compared two the our quarter. for for for gross quarter service prior XX.X% gross difference that been the product through was compared the are turning prior the on drivers in to Service timing gross the year. the quarter on requirements, two quarter, XX.X% prior the XX.X% primary for our to of JV have to have year. for end customers, would systems, margin not quarter the was joint to gross deferred yet to Product China the gross margin. XX.X%. gross product margin margin we our sold Overall, in year. was systems compared

costs operational upgrades primarily in higher to and interest and increased consumption parts than latest First, than system products. increased our travel were related normal,

we've of due effects the pandemic. aftermarket and chain the cost logistical with supply our experienced parts increased to Second, delays

the pre-pandemic that for the would our service estimate approximately gross of which levels. Excluding margin impact have first consistent challenges, with XX.X% been these is we quarter

million to the events of due the Moving reinstated from were $XX.X actions Operating million, year. increase and in cash compensation including preserve marketing to were the costs historical year-over-year to reinstatement prior which the pandemic, $X.X near increase or of in that travel, certain taken operating levels. back expenses The to was quarter for down expenses statement. were an primarily XX% income response

of increased for income quarter impact Operating million a $X.X million. We costs JV in $X.X the also $X.X was the loss in was experienced to associated an operating revenue. for with China prior increase the of commission year. million quarter the compared The

anticipation are quarter in period. on as compared described recorded million in EBITDA right statement $XX.X in $X year quarter prior short-term EBITDA cash issued from cash to million adjusted $XXX The cash. the of earnings GAAP by prior prior year, was net the income gain/loss XX-month year, primarily called the in customer decrease this income. in the and nature. a income as the of the single plus reminder, a item today. both line procurement reconciliation trailing below earned On was a we seasonal million our in driven As fiscal restricted quarter payout of in operating The item equity million adjusted of EBITDA. for our basis, between the bonuses this employee Adjusted of which remainder investment inventory fulfilling release is $X.X for orders and fiscal ended in with of generated We our are

convertible the from QX Additionally, convertible of adopted conversion reclassifying of from long-term due on convertible notes option accounting will reduce and And to 'XX $X an FY million ASU XXXX QX most In equity notes fiscal net our The we cash into outlook. debt. when update back early notes hand our other for the due like notes update our adoption convertible Josh? loan. issued million QX, the in convertible discount on early on that, call this notes underlying paid to financial options, unchanged the accretion remained I'd XXXX XXXX-XX, exchanged 'XX for with to FY our term Josh of debt of of $XX.X has conversion we income. of The standards value our we the XXXX. debt with

Josh Levine

financial equipment to to at will treatment Brady. guidance global we X%. 'XX, Thanks, approximately continue for addressable Relative market planning believe FY in grow our and radiotherapy

growth we will the COVID While market and those remains, exceed believe some uncertainty can rates. related we that to recovery

revenue more increasing expecting and halves, year China end balanced stronger performance. the from U.S. of with are fiscal due our to both we Additionally, be to between contributions calendar

of million representing midpoint FY million range first As the versus updating with growth 'XX. previously quarter we X% the our that such, $XXX in are announced $XXX XXXX, to as the preliminary we for our revenue guidance fiscal expected results of range, year-on-year to

EBITDA, For range FY 'XX adjusted our is $XX $XX expected million. million to

pre that adjusted finish million our believe to to our full FY point. it best forward the year-end EBITDA over is 'XX adjusted represents continue comparison reference We the guidance as of last $XX.X EBITDA

aware, cycles preservation unusually the aggressive cuts COVID spending XXXX made you're last had adjusted impacted against COVID to that have fiscal As especially and challenging, EBITDA. and actions related two cash by comparability we related fiscal

We to with mainly continue accelerating FY that, our ready in 'XX, planned material within revenue two leverage over fiscal R&D cycles, operating to line the SG&A, allowing created us operator, in on demonstrate top improvements the And to we're increase last line spend growth. focusing open for questions.

Operator

question [Operator Markets. Brooks Street O'Neil comes Instructions] Our from first with Lake Capital

ahead. go may You

Michael Cox

This preparedness reimbursement Brooks My on you details models. Hi. filling for RO-APM Michael hoping is systems think Cox the are question, terms you where for hospital O'Neil. I'm new can provide in of first some in that

Josh Levine

Mike, the can that, I please? you hear ask I to didn't question. whole restate

Michael Cox

the systems you that Yes. new for terms I'm hoping you are think details RO-APM on model. provide preparedness of can some hospital where reimbursement in

Josh Levine

I across board. think, the varies it quite frankly,

rapid SBRT ultra case hyperfractionation. larger embracing have are in standpoint there mix in institutions hypo that been technology from mix a They're product utilizers more and of that think I general. some and

nature think for current by are their they proactive more what's of XXXX. or in in probably approach January better of, kind I the coming prepared environment by

is assist think really, there imagine, represent I positioned as Accuray really our in us why able telling transition ideal the as probably story that product to others not to prepared. the you be are targets be to are lineup really about might for And RO-APM. uniquely to those this

Michael Cox

the question Accuray all? shortages an impacted any current been And at labor market additional is has with worker with

Josh Levine

Again, cognizant standpoint. cetera. see No, that. of chain, and related people We're supply now not from challenges an et headwinds the labor that operational to

had really significant areas. not in those have problems We

and Suzanne team. terrific continue to execute operations have I our in faith both We well,

we gives at Mike And seen really haven't so no, that us point. pause that or concern anything, this

Michael Cox

And And you then to there any combat do chain? any you last seeing due disruptions how are question disruptions for have you plans any? me supply if these on is, are do the

Josh Levine

or working isn't level look that that company are But of can macro there's feeling you diligently. trends. today these again, kind some of, Again, no really I see impact mean, at we

diligently. is Our team ops working

continue sure that and to with excited keeping really of, install people the macro equipment the revenue these that Our continue sourcing are equipment and headwinds to in is install and supply, we're make can we be about and recognize ready work that they're pace to diligently working level team doing to kind proud seeing.

Michael Cox

Thank Perfect, question and quarter. taking a you for great my congratulations on

Josh Levine

Thank you.

Operator

next Our with from question comes Jennings Josh Cowen.

You may go ahead.

Joshua Jennings

Congratulations Hi on Good afternoon. 'XX. to start strong fiscal a

ASTRO from follow-up the two Just questions, Day. Investor

RaySearch. about with and development planning about talked paths and to And our about the the true XX the milestones thinking it's there how solution we one updates is plans internal The with the -- development to you parallel be as community and in the on also think next collaboration there. on arc to and great your we online investment of hear this the two radar? your progress are just over towards about system we progress journey XX key adaptive wondering, have first precision should a should path months, And any

Suzanne Winter

at are that show I Yes. your what you don't radar is mean, it I feedback there did know on we're we need of on key track. very based right the positive have ASTRO, on customers to the milestones the our that to but goal, any that especially

to of the the ClearRT that's a unique is in market online offerings. the also, got customers adaptive again, treatment that solution that the our be of will advantage pursuing, our planning as for basis customers have of something terms our what we within that the a use vulnerability industry. and We have treatment current planning. inputs into of And Synchrony are well and We that's RaySearch feedback precision as as think great

improve market this is And at to goal time. our the so what upon available is to

year. overall have no, next our again, I at something goal is, say, So ASTRO to would

Joshua Jennings

just then one follow-up. And

China all value the is be XXXX. as to try in and JV looking and is is and As going to that collaboration that opportunity unleashed we're

opportunity B has one of to B system I elements system the Type the Accuray sell the underappreciated that into that global and think Type other manufactured segments. value is China

that just it's into but sales. you that is bit million on hoping does the driving value and terms system just wanted or sense where Accuray of global that on a selling in Investor stand assumption $XXX today And and Day cited. TomoH could segment in B little your orders I then you get with touched how during immaterial annual was You a baseline build systems de the impact it's potentially opportunity that -- in But ONRAD million $XXX to that see this Type minimis our manufacturing to or of the that penetration and annual opportunity. you China

Suzanne Winter

there's Absolutely talked the now. Investor a annual million think is and about opportunity The were opportunity we're in we that that the that participating we in larger a what where about two locations: we Brazil, at of been Day market both segments, for able segment was product talked really to market we value incremental to participate India that those just in. $XXX haven't also

we sort while so are we Type with a of markets. B do well very in think our same product will that, China, other that value on And segment for do track future set

emerging focus million are really, we on. think, but those $XXX the we'll in terms of tip the of I market So is iceberg that places two talked opportunity about,

Joshua Jennings

Great. answers. Thanks for that

Operator

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

go ahead. may You

Anthony Petrone

any were my from oral what on that be Josh's details And here. behind of, at question thanks you follow-up second neurosurgery be us questions neurosurgery be for as just opportunity, the to or question. when referenced is as about the And night's and Analyst then think would sort Maybe that queue last bundle, in surprised getting investment will wondering that just announcement Great on planned? would just we specifically. everything, a Day first

Suzanne Winter

your..? to want You have

Josh Levine

to Anthony, conquer. update. divide second I'll question and Yes. are Susan I is and take the which going RO-APM the

January on et cetera, think might part the speculation I continued confirm there that X. out one push there going of they gave them environment, been they did are are takeaway So in elements answer the going information think have is -- collection was that data start that big That activities. given going There to forward button were happen? some latitude X. that they was I were some there COVID about release -- some also come the certain the And to January

of anything that self-reported. one probably more and they've a they're considering because that in the You'll as measurement that a those to this of They that submission that remember defining than else, think time. requirements the Again, health of, I the moment invoked public metrics was have quality a or was quality relaxed of kind RO-APM quality system, for components that of environment and a COVID collection of, the going emergency measures. the kind be

it payment this that measures relaxed again, tied first The fee so quality relaxed. given model, they've also -- withhold, given of year of, on the was And the to they've kind they that X% was requirements piece.

a, you on So piece last schedule. there's review in and little first the if treatment -- made a been of also on fee They've will, optional probably that that the piece I'll call of feedback conducting I specifically. think it, bit the model. Again, a of were those audit year reprieve, the around this three of was plans of the requirement the peer

environment most going important We you've but those, So for, to think made to is that provisions start-up COVID a important we on like the a of again, and customers probably lineup they've be reasons kind that where the program kind think for model. how allowances related January given to standpoint X. is got going of that's from we and is to we're our clinical this going product to positioned, new practice what's variety under -- given be of,

Anthony Petrone

the follow-up the on there. investment neurosurgery, And is just then

Suzanne Winter

Yes.

trade XXX We we out. about XXXX, XX we that with CyberKnife to for than are really, greater aging now through total And neurosurgery. looking market think for Investor to that going get think, we will only treats a planning neurosurgeons, Gamma the contouring an brain replacement SX is both there'll Gamma So and does and showed believe, that million. advantage. competitive The replacement market potential systems what we us frame approximately will these be competitive be of opportunity years to position some about and of talked The And put and a with without Knife use be having to interface patient we'll a Anthony, be opportunities. opportunity a $XXX improved familiar will Knife able represents in that brain. penetrate the so CyberKnife again, a Brainlab, of what be an experience we a yes, fact talked head that preferred at spine incremental Day, also, treatment strong in and market to

Anthony Petrone

And maybe a tailwind for that [ph].

Operator

our to question-and-answer would to session. conference concludes any for back This I remarks. Levine like Josh turn over the closing

Josh Levine

I'd like Thanks, the thank focus Accuray execution. commercial operational great and for commitment team operator. entire to their continued and to

impact contribution Beyond portfolio our improved by most competitive related our and the recent products. Accuray innovations resulted the in team, for to have positioning tremendous clinical

grow We you of as 'XX very decade you of the I As factors, Thank never Accuray these much. been future January we second forward release. about the in earnings business excited quarter rate positioned at with the our more FY have a to speaking and with again unfolds. believe look result fastest is fiscal in over a to I've associated

Operator

concluded. today's The conference for now is Thank attending presentation. you

disconnect. You may now

Accuray (ARAY) 4 Nov 212022 Q1 Earnings call transcript