Earnings call transcript Q2 2023

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Operator

Good day and welcome to the Accuray Second Quarter Fiscal 2023 Financial Results. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jesse Chew, Senior Vice President, General Counsel and Corporate Secretary. Please go ahead.

Jesse Chew

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

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

and Suzanne on us President Executive Chief today's Officer. are Ali Joining Winter, Accuray's Pervaiz, call and Accuray's Chief Financial Officer;

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

Keeping call. As items for a few house today's

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

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

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

deck to investor can accessed directly be supplemental Additionally, Accuray's there which will investors.accuray.com. at by be that accompany call slide this a page going

Executive the Accuray's turn me to let Chief that, Officer, Suzanne? Suzanne Winter. over With call

Suzanne Winter

the second joining in year. and I afternoon call. with very and half into position Good Jesse. going the our our of am second the the excellent you, you fiscal pleased thank for performance quarter Thank

above-market of value can quarter, FY and of of revenue and profitability significant strategic stakeholders. on agenda revenue, across initiatives delivered we partnerships book our progress delivered and the 'XX and create orders that robust for the regions margin strong driving expansion performance, all a EBITDA all formation made During strategic

We on and call. later macroeconomic persistent are exchange will the elaborate Ali doing this headwinds while which navigating in foreign

I'd to new performance. continues of team my that start thanks like by deliver to levels Accuray to the expressing

have customers in environment the day, provide can tools every by year, advanced course cancer precision radiotherapy the improvements care and to lives. seen of challenge we While the have some accountability chain the improve to our the over past they to purpose highest access continue that Accuray's supply our of to so teams ensuring higher ride battle available, driven

better headwinds in why key proud year, past demand Over I'm will position put improve to of a These installed this smooth customer-facing teams operations within we well so we level. teams, at the customers. highest as new the initiatives with our have taken in chain especially manage and accomplishments the as of quarter. base maintain couple have ongoing that actions the of and performing satisfaction Accuray to This of is flexibility our supply fulfill a

quarter with second new the represents The for historical first, a XX milestone the system shipments delivered record we systems a in delivered which company.

of proud in Second, in-service on radiation IMV best oncology are for report professionals. we achieving annual IMV's be the service recognized by track to survey based radiation XXXX new oncology

of examples agility team. our shining global dedication and the talent, are These Accuray of

advancing in We our growth strategy. innovation-driven continue to make significant progress

the in and focus pipeline Our to strongest company's challenges of and our portfolio. solving continue the we history clinical the is value product enhancing on

market for impact for commercial faster will these included to grow orders reflect XX addressable QX I from and to factors the 'XX believe and Accuray growing initiatives. performance XX% revenue our orders which pleased with FY new the sequential and positive Accuray's represents both systems results demand dollar continue growth. very am These than customer beyond. We our Solutions

highlights radiotherapy the saw real-time and order by differentiated imaging Synchrony, and latest the outstanding growth orders U.S., adaptive of performance regions, key XX% are for rates. delivery ClearRT innovations. driven our with the Synchrony, region the of capabilities win are XXX% in Sharing Accuray's QX, that driving year-over-year in XX% In of CT only options Americas adoption included technology that helical exclusive quarter the from another up Radixact ClearRT, and we delivered QX. in the industry's

continued win has orders in number Nearly gained X XX% the rates. of aged in were our In installed share we base. Japan replacements Japan, competitive And market position. the Accuray competitors' QX, QX strong of

highly Radixact systems a X Additionally, a against team the the market share in battle public leader. tender Japan competitive won X number

Japan drive replacement largely continues market. gain to team this share Our in

EIMEA in the win Hospital. We replacement wins University and Belgium strategic also in With Radixact region. a competitive had [indiscernible]

Additionally, delivering demand CyberKnife for care. second endorsement X is Muacevic, Dr. purchased number Munich. patient the could Alexander CyberKnife Surgery the ultraprecise that he we growing additional strategic they and the win Euro technology radiosurgical celebrated the is radiosurgery facility prestigious CyberKnife the a for saying quoted so system in Center believes at Radio and of accommodate Director

China. to Turning

China driver our Our market continue radiotherapy B, dominate we segment than greater Type market made market largest be share we to our In Accuray product million. will China joint continues Type with of the the in C. the $XXX advanced venture domestic progress our market compete of to which with submission in potential JV share. be market estimated an Tomo the completing will of XX% segment Tomo A regulatory a for that B long-term value premier of is annual and C segment NMPA Type

will globally with a large with the billion market allowing in $X.X value annual we in compete have brand help to value Tomo we Accuray C premier gain in Tomo C share China value of awareness new success product Further, also in success segment our B in Accuray's the enter segment upon believe Type introduction. geographies A and expect drive We segment as potential segment. global the product will reputation translation Type the

the for Type revenue process lockdown. bidding impact expected few the of the convert at for the saw system November, Accuray's radiotherapy, remains COVID lockdown challenges high. meeting China, a participation delay to in in the Additionally, annual licenses of training participants COVID and the quarters. XXX after in We next resumed over tremendous training with during XXth to XXX where are Health to attending users CyberKnife awarded participants and were Accuray due this to person and rates installation very systems Ministry A of Despite Eighteen firsthand central were demand in Central November, process customers online. training joining bidding over

where progress We think line impact saw are expansion tremendous we QX, to our continue service top growth equally made initiatives, and profitability we and on indicators margin of our to accelerate opportunity. solid through have a an we our early plans As in we on laser-focused profitability. margins area positive

new mentioned our As pricing recent including commercial meaningful pillars: will efforts, midterm. optimizing the reducing discipline service expenses main the service impact have we and product leadership calls, team in operating on X efficiencies a and costs in have I offerings, on and focused value-added which are through

to Finally, strategic expand establishing of scope partnerships growth best-in-class access. us our commercial to our the agenda, provide are and solutions essential allowing

allow information with key introducing correct systems solutions, of Accuray the combines radiotherapy Accuray in us patient that development solution auto RaySearch Artemis, Synchrony In strategic partner for imaging C-RAD, also partnerships, treatments changes will with breast digital for solution both comprehensive with to recently that ClearRT differentiate that and the Artemis package industry-leading can between radiotherapy package and This VitalHold and a precision, QX, contrary the only that in will technology breast experience. adaptive company most RaySearch's algorithms. treatment oncology with most during further and with very speed continues marketplace. planning comprehensive be a patient to both treatment as the offers advanced offer adaptive the strong we and

with we're Finally, have the to industry This ultraprecision survivorship. excited of technology pairs commercial diagnosis continuum, personalized treatment GE providing leaders announced solutions a from aligned throughout partnership care goal partnership X to very the with to Healthcare. together

respective the a will are customer for believe developing GE driver patients, We value commercial providers strengths pipeline. Our leveraging teams our shareholders. and partnership and be powerful engaged

who speak performance. to it more over our turn now about will Ali, I will financial

Ali Pervaiz

global a global intensity Thank you, everyone. good despite non-U.S. supply to of markets. XXXX pressure fiscal including thanking execute I'd and in functional and FX with Suzanne deliver quarter challenges, inflationary our class by shortages, chain second begin to macroeconomic the to our strong ongoing afternoon, like team headwinds

impact second due headwinds. of basis million on for year primarily X% X% a the and million fiscal to the in X% compared second which period currency $XX.X from Net was to up million revenue Product a supply $XXX.X year, revenue quarter the was foreign prior increase for same for which was after of adjusting X% year. constant the revenue constraints $XXX.X represents exchange and the down which Net prior a was up versus was quarter fiscal million $X.X chain the FX. prior the

represented for FX the the once was the record year that was of quarter which issues million XX flat upgrades As to is impact shipments which which work teams. history. for really system achieved Suzanne which was note adjusted mentioned, systems but negative speaks hard product this continuing supply revenue a important prior chain to $X.X cross-functional our of number while million. the was navigate $XX.X this in It's down company's unprecedented to of revenue Service from X%

in decrease sequentially an second fiscal prior the orders million a year of represented which healthy the Gross period is for of from a quarter XX% $XX book-to-bill same X% X.X. were over increase ratio the of and and

and believe constant is will the revenue ensure a healthy orders convert basis backlog our to As teams $XX.X orders monitor months. on calls, to within growth book XX book-to-bill that the we mentioned to were for focus our prior Gross million. to ratio metric in currency right to

approximately of quarter, quarter cancellations XX driven year We the is timelines. quarter. order Moving $XX.X months due within that had which no backlog to mainly than by with orders customer prior the $XXX within the a ended backlog. installation We million of to million XX.X% aged lower second beyond

global within had resulted quarter to revenue. our aged out. discussed in $X.X converting million that prior all teams quarters, focused In revenue orders to this age QX, As of on previously converting regardless continue to commercial orders of in the be

FX discipline to margin focus through the Our is for quarter on the to margin our cost despite overall prior showcases expansion the shape. XX.X% year of which in take was This headwinds. and compared XX.X% increase starting is basis pricing XX points gross an

charges compared second charges the the nonrecurring in quarter of $XX.X to of ERP restructuring million million prior and ERP-related included $XX.X and in $X.X which were million $X.X second expenses quarter year. of Operating for fiscal million expenditures

to total quarter Excluding income was million as push operating prior our year. we return $X.X to X% to $X.X illustrating good charges, Operating continue on nonrecurring the expenses the from teams for the in year, to compared prior million same on period the down focus cost were control investment. compared

million $X.X is the line net prior year-over-year by income XX% $X.X to despite was quarter adjusted and GAAP top growth EBITDA compared today. The our between which described reconciliation Adjusted million FX the represents EBITDA $X.X a for our the release million. earnings issued in year headwinds which in impacted

the to had quite $XX Turning compared accounts balance $XX a few cash, to to shipments from in quarter. amounted million at were the of quarter. of and cash cash million $XX month last last receivable last sheet. quarter Net equivalents short-term million million, end $XX we Total up the restricted the as

up units we Our sites QX. in customer goods to expect quarter, balance which million, to $XXX to early primarily $X net inventory out X prior million due ship in was from finished

healthier bring capital. supply our constraints, taking continue to to in actions we the cash levels chain coming and our to Although to working we battle inventory quarters back are optimize firm

top delivered a we had have QX through to the and associated $XX million the in chain continue first strong foreign our half supply line with in impact While of headwinds XXXX. fiscal navigate on exchange results constraints,

our we million. range to with EBITDA target $XXX million revenue range million full are to Currently, of $XXX reiterating year the in guidance $XX million and of $XX

closely to the supply enter our monitor and fiscal continue of of half year. impact chain the FX as will We we second

financial Those to highlights. to Suzanne. with that, call the are our And hand back key I'd like

Suzanne Winter

care the provide again Ali. our support thank to their level In I'd you, patients. of for customers unwavering to so our they summary, of highest teams can like Thank

where and the While and are take continue we Accuray product uncertainty expect our trends as of macroeconomic the favor and robust encouraged that remain to well seen we continued navigate the market technology technologies win last customer as share. by we've over Accuray positioned to pipeline demand to year, we conditions for

partnerships. organization, and our growth an strengthening are fundamentals, advancing multiple new we strategic catalysts As creating

now to operator will I the turn back over Q&A. it for

Operator

first question comes Instructions] [Operator BTIG. Thibault Marie from Our with

Marie Thibault

that quarter? that geographies? Congrats of record a that more backlog a quarter. you to quarter. on been record mentioned wanted drove that metric Was up in try nice a building and drove start What of product really had very to in the I in this some here shipments this what revenue, little the strength about understand bit a bit the kind

Suzanne Winter

question. we did some say regions, recovery you the by the was driven Hi, EIMEA X as the as our Marie. well Thank region. for But as Yes, region would start revenue China well. I in to see Japan really

manufacture And supply and really our as so to be demand. product able as to able again, possible working be chain through fulfill to much that

It demand customer be we strong. Our list. through working priority continues of very the our at fulfill to supply top was again, that to demand. make very, chain And sure can our

Marie Thibault

third as well you're components And while expecting reopening, around that the or I the sort China, challenges, partial we're right quarter? are there? you're I Year, quarter fiscal Lunar a But dynamics with guess, talking on specific the navigating from any issues New know the any of dealing quite impact now. the are about in what supply of chain And COVID follow-up you

Suzanne Winter

certainly, general, a our would in than chain dozen chain. dozen. some of past chain standpoint, dealing vendor issues, of Yes, I year, just I And it narrowed instead supply standpoint, a from think to easing think supply from supply this down we X with half less course seeing the . over we've of are that

those with still real. working Now a very -- those closely are challenges those dozen half We're suppliers.

it where materials. micromanaging to to helping the are We're think, be At those battle it building I We're and we overall We day. our same a we need time, flexibility, the continues headwind supply in chain. single every to. operations. redesigning in source We're

In are lockdown. seeing recovery COVID some that terms China, I of would say since up opening we the with

Our orders have half. first been very strong in the

indication, think, in good starting a to is things turn I that of So China.

And year, so recovery. expecting the see are half we're of going we that to the some second

Operator

from comes Josh Cowen. Our question with next Jennings

Joshua Jennings

order better off the just and Americas I strategic get performance that reminder or kind wanted for ask just place to a region. in big I start to growth, to the initiatives are that know 'XX technology and orders And the about growth wanted but continue remainder and you I have through portfolio of drive strategic of in were that of other initiatives region. any beyond? successful play that fiscal the Americas the that's could in the understand

Suzanne Winter

Yes, the for Josh. care The globally. the market obviously Thanks largest is region question. health Americas

organization We and have doubled down in in initiatives. investment terms of commercial our

U.S. a mature This is large a market the market. replacement replacement of big the catalyst One growth very market. is largely the in It's

installed CyberKnife systems base. I would care have our to upgrading firmly say but We ensuring and start can aged like trade-in, also in our teams customer an those performance are so provide installed radiosurgical they on sales older trade-up focused base satisfaction that through latest to within encouraging ultra-hypofractionation advanced that capabilities, capabilities.

to we see and continue return those the So expect focus. on that to investments do

Joshua Jennings

just in the details seems what fiscal more we any in about Accuray? ask award conversion to Type revenue more And China one, go? great wanted -- process? within half A should I there a you revenue and But wins just the A can opportunity for here. next? And cycle It more the to the channel, early bidding in 'XX. the that's share there like and opportunity is just are November Is just the Type expect And on rounds that back

Suzanne Winter

time Yes. during to was A, process of resumed the period we Again, it the encouraged delayed. the COVID, thanks see bidding, Type after question. a that were Yes. for central where bidding No, very

and funding systems in being And bidding achieving is I next is is and step it's the so think -- the sign the of beginning encouraging good for this This -- China. the very installation. recovery the of process a to

that is which, just very again, systems critical premier systems think that into of to And the drive the for XX institutions strategic. mass that market opportunity place branding for is at within market the it's China the more so within premier It us, will we subregion. Accuray

timing. Type a market indication, this that we sizes. X-year And get will additional better No, time A that be central will be expect happen Type at I the a any B new think, into don't bidding announced processes there's and throughout plan We of visibility there'll have will that year. certainly, do bidding --

Joshua Jennings

fiscal just some you progress facility, seems and But thinking the If sneak on I we more China? could track. a Maybe today with C testing JV downloaded regulatory kind of on us launch? just are the China, things should for about submission any 'XX Tomo of at be about timelines completion approval still the the through the in, while and you'd in to on everything and production of like just refresh have we're the one just manufacturing thinking

Suzanne Winter

Yes.

XX can typical potential the we what FY yes, regulatory for cycle holding be information think from typical, we've about But that months. half in assume we're A -- Tomo product. discussed impact regulatory back the predict cycle. we from And additional of still to I an the it is in we the no if again, never will C have past. 'XX approval

Operator

comes question Riley. Neil next B. from Chatterji with Our

Neil Chatterji

Congrats second on Maybe Center, talked about CyberKnife. just first strong adding you the Munich the off, a quarter.

Just see curious just centers you how often of could adding if systems. you iterate multiple dynamic us remind that

Suzanne Winter

great a that's question. Yes,

having workhorse CyberKnife but referrals, really how this I I teams more of up CyberKnife can and patient radiosurgery combination their is think our our the combination the we're We're more. that a Radixact. their get commercial can the showing build the like also in that that starting build how strategy also of it system seeing seeing that, to centers think sites business And Radixact. system a are they a by and are the

I more we're because think thrilled see radiosurgery. known more. very continue primarily Munich, So absolutely and with in center they're But the to we're going it for to well

for intracranial more cranial full second bought buying now body for of the type of applications. SBRT he really system is extra type was first The and more system applications

use site can think strategic we endorsement and we reference. strong a it's And so that for a again,

Neil Chatterji

one Maybe just here. follow-up

regarding delays So the customer outs. of or kind the aged installation

to Just the issues? insight supply Just curious update there? environment, if worker any shortages updated any construction that's related or on there's whether

Suzanne Winter

Yes. out. Russia No, had that have I the would we aged the out largely in systems hope to aged COVID impact length will think think have for in it are backlog say in orders going that's a really of an is because great on go there, the by out, we question. that driven I still and that I that of of time backlog. aged general, on some the that timing had But installation. what's our Also,

are And the the that we hospital. it orders, think for months trying go We sort length spend. there's XX radiation will I orders believe a our installation we through generator general, lengths capital new couple that of that research I on we're focused But catalysts. is to But is for very have not seeing revenue dynamic. And say, in I installations. of so on put this firmly to independent. a of key out region within increased of don't it's the think there some good time there's that oncology equipment One, would

So line service key care positioned capital also it's strategic It's for area. spent. oncology, well a priority equipment and the

then equipment replacement large a key market of research one capital that opportunity that key equipment be how a funds. seems is the -- in and of And old there to third prioritization of the is points the done, was

that will installation that we So priority dollars that are amongst needed. again, think the drive

Operator

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

Brooks O'Neil

expecting established just call I what under you to if you you hear and think what circumstances. you could about competitive think leading your wins, what wonder are competitors, that be I the are just of on Suzanne but could a if is wins to out would And pleased quarter wins great. dynamics congratulations victims think leading bit am -- the terrific amplify a not little that have to versus highlight sort talk you I I to you is necessarily and the on competitive

Suzanne Winter

excited. Thank you we're for the question, Brooks. Yes. No,

I think wins. about competitive our

think the to think, for ClearRT, that, this as product differentiation the in for -- bit in obviously, and the our call competition. of It able a VOLO the us that I the our look systems things basic increase on that is unique other technology not in compared a think get we said, platforms lot allowing competitive able it a of our second innovation little of to on And driving been for the And new are well, I to have talked do. to with ordering wouldn't product driven SBRT the very part and precision That products. that's And just a Synchrony the seeing gaining others X to I do gotten growing ultra-hypofractionation, product we we based more lot on strong in are products that CyberKnife. is how a landscape example, many that never We We're think in by the in years is maybe the there's position. innovations. being are very disruption is continues need table of traction. thing unique the that use for I be demand bring growing important. of Same ago. that has And the -- that cannot. Ultra to

are just those focus commercial commercial previous a more and with think, we of all think, against little a I I swagger, in win So leaders. can that knowing market things, helping us bit of along

Brooks O'Neil

question, strategic priorities? margin some in be objectives. any key improvement of Can your you color might you remarks prepared revenue driving second fast where to able additional we in see are, and my give are feel talked on a it us little you service how key you but I about the So increasing bit progress know just the

Suzanne Winter

key absolutely a it's Yes, priority.

doing we Ali expansion. We as what we're the those also little talk margin well service areas. think tremendous a more let in in bit opportunity as have business I'll about

Ali Pervaiz

absolutely. Brooks. Yes, Hey,

bit top really line could the beyond opportunity the that On It's expansion. side, more and we over is of which that -- there top a little on increase making try bit offerings margin around focus continue and and then that parts And through to sure comes we parts just that service consumption. the And actually quite cost really tailored a line that our optimize bigger in business Take look big drive on a a utilization, that and X around there's when on is drivers growth those. really opportunity needs. enhanced it around better on be consumption, just focus are focused the really that we're service at customers' And massive parts that really, to think our down. business. understand are training we we annuity optimizing the to think to utilizing it's

Operator

Our next question with comes Wittes Jason Capital. Loop from

Jason Wittes

kind off, it the First the X in replacement where were cycle? terms systems this cycle of least. it quarter and the One, those to And secondly, drive indication replacements? in like new at you of or year. innovations and any of terms should driving give any do replacement regionally how you're even I you are doing Can have for what's what sold what quite looks in mentioned know then things of a I in of give us guys us terms might if through don't of bit ASPs? of I have the a at many rest you of that mean rate terms take And replacement kind this think you can color point. is of offering we be

Suzanne Winter

the I'll developed in But and Europe, our question Yes. I'd then our markets, like like largely hand replacement market. And like markets yes, is it over to, I'll Western say Japan, ASP the start in Ali. U.S., a mature

performance. COVID, XX-year XX.X-year of would is our use life. through to XX up IB on teams our bringing to heavily life the average latest goal have say, aged the systems so gone the really I from And to for

growing revision. so well able bring And little our bit those they're this that be that, the with is as I'll to pricing. growth to there is more Ali drives and the NPIs, speak as higher it growing that. a demand, And customers let to value a supporting catalyst to a And -- for trends latest -- higher us clinical certainly,

Ali Pervaiz

Yes.

part our our in initiative. point, the But over it really them actually majority of commercial reach bit question, reiterate, quite incoming your as so of is customers' around -- Pricing our So can activity optimize within the markets. positioning new pricing we just we've also margin we've of to going our optimizing expansion margin they that actually trade-in, margins. that's terms of aligned we tools but initiative, things expansion for mature there our a to targets the happening is And with done profitability to and incentive cornerstone needs trade-up Suzanne's our one, And Number the right? we've meet customers, team's are actually then commercially. we ensuring armed orders. to configurations we're so that can our changing that

that on are see not overall So orders pretty of are those think X positive really orders coupled profitable together driving things but And focus actually, I the volume. in we only bringing to volume in signs in reflect bringing quarter-over-quarter. some starting our ASP

So that is very encouraging.

those -- and And focused so all orders revenue. those of healthy we're converting into that just fills orders our good on backlog with are

Jason Wittes

of are back and China, quick years in just notably that lot is back maybe did world and have going hospitals equipment in held now post-COVID say what's -- kind a well capital sense to saying, your kind we're a as Maybe some we a mature we reinvesting in terms especially exception products. of where markets? the and we X we're mean, I in of the last and the follow-up. going have been And in talking we've I on, at them look, of wouldn't but of

Suzanne Winter

dependent I the on would say it's institution. Yes. highly

have institutions be that's done that also that equipment certain equipment. get I to what's back I say the I would their think of but level was second to But to factor a equipment. big and in I capital and driving seen is feeling to think rest their capital this 'XX, into already able again, of would year back equipment research half 'XX least because really easing surveyed should in the C level. area at say upgrade old about X/X the by like, them pre-COVID how are do is that we the go calendar I some

Operator

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

Suzanne Winter

you our call. very Thank And much. earnings concludes this

with earnings our third are fiscal joining We again release. year XXXX us. you forward to all April for looking Thanks quarter for in speaking

Operator

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

You disconnect. may now

Accuray (ARAY) 1 Feb 232023 Q2 Earnings call transcript