Accuray Reports Fiscal Third Quarter 2007 Financial Results

May 1, 2007 at 4:11 PM EDT

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Fiscal Third Quarter 2007 Highlights:

-- Record revenue of $37.3 million, up 129 percent from the fiscal third quarter 2006 and up 42 percent from the fiscal second quarter 2007

-- Total backlog increased to $559 million, up 60 percent from the fiscal third quarter 2006 and up 9 percent from the fiscal second quarter 2007

SUNNYVALE, Calif., May 1 /PRNewswire-FirstCall/ -- Accuray Incorporated (Nasdaq: ARAY), a global leader in the field of radiosurgery, today announced financial results for the fiscal third quarter ended March 31, 2007.

Total net revenues were $37.3 million for the fiscal third quarter 2007, as compared to $16.3 million for the fiscal third quarter 2006, an increase of 129 percent, and $26.3 million for the fiscal second quarter 2007, an increase of 42 percent.

For the fiscal third quarter 2007, product revenue was $29.5 million, an increase of 141 percent over the comparable period of 2006 and an increase of 53 percent over fiscal second quarter 2007.

Gross margin for the fiscal third quarter of 2007 was 59.0 percent, compared to gross margin in fiscal third quarter 2006 of 41.6 percent and gross margin in fiscal second quarter 2007 of 55.8 percent.

Operating expenses for the fiscal third quarter of 2007 were $22.9 million, compared to $14.3 million in fiscal third quarter 2006 and $22.0 million in fiscal second quarter 2007.

Total net income for the fiscal third quarter 2007 was $0.1 million, or approximately $0.00 per share, compared to a net loss of $7.7 million, or $0.48 per share, for the comparable fiscal quarter in 2006.

For the nine months ended March 31, 2007, total net revenues were $96.5 million, compared to $31.5 million for the same period in 2006, an increase of 206 percent.

The net loss for the nine months ended March 31, 2007 was $5.2 million, or $0.23 per share, compared to a net loss of $25.8 million, or $1.62 per share for the comparable period in 2006.

The Company reported that its results included stock compensation expenses of $3.7 million and $2.0 million for the fiscal quarters ended March 31, 2007 and March 31, 2006, respectively, and $8.8 million and $6.2 million for the nine months ended March 31, 2007 and March 31, 2006, respectively.

As of March 31, 2007, the Company's total backlog, which the Company now defines as backlog under signed non-contingent contracts as well as backlog under signed contingent contracts that the Company believes have a substantially high probability of being booked as revenue, was approximately $559 million. This represents a 60 percent increase and a 9 percent increase, respectively, over total backlog computed in accordance with this definition of $350 million at March 31, 2006 and $513 million at December 31, 2006. Of the Company's total backlog at March 31, 2007, $306 million was associated with CyberKnife System purchases and $253 million was associated with services and other recurring revenues.

Contingencies under customer contracts included in backlog include customer acceptance of the Company's legal terms and conditions of sale, hospital board approvals, customer establishment of necessary financing or legal entities and, in certain U.S. states, government approval of a certificate of need (CON) for the operation of a radiosurgery system. On a quarterly basis, the Company will review each contingent contract to determine whether progress toward satisfaction of contingencies is sufficient to support inclusion of the contract within backlog. Going forward, it is the Company's intention to provide information regarding total backlog in accordance with the definition described above on a quarterly basis.

At the end of the fiscal third quarter 2007, 97 CyberKnife Systems were installed at customer sites. This includes 87 systems sold directly to customers and 10 placed under shared ownership agreements. Of the 97 systems installed, 63 are in the Americas, 25 in Asia and 9 in Europe.

As of March 31, 2007, it is estimated that more than 30,000 patients have been treated with the CyberKnife System worldwide, up from an estimated 20,000 patients as of September 30, 2006. In the fiscal third quarter 2007, lung and prostate were the fastest growing clinical applications, increasing approximately 30 percent worldwide over the fiscal second quarter 2007.

"Our fiscal third quarter results demonstrate the continued recognition of the CyberKnife System as an effective treatment option for tumors anywhere in the body," said Euan S. Thomson, Ph.D., president and chief executive officer of Accuray. "While the CyberKnife System continues to receive clinical acceptance in the treatment of brain tumors, we are experiencing rapid worldwide growth in many applications including the treatment of spine, lung and prostate tumors. The impressive growth that the CyberKnife System has gained in these applications is driven by our system's unique ability to autonomously track, detect and correct for tumor and patient movement in real- time during the procedure, enabling delivery of precise, high dose radiation with sub-millimeter accuracy. We believe these unique capabilities combined with the momentum of our sales organization will continue to drive our success in building the market for radiosurgery."

Earnings Call Open to Investors

Accuray will hold a conference call for financial analysts and investors today, May 1, 2007 at 2:00 p.m. PT / 5:00 p.m. ET. The conference call dial- in numbers are (800) 811-0667 (USA) or +1 (913) 981-4901 (International), Access Code: 7523746. A live webcast of the call will also be available from the Investor Relations section on the corporate Web site at http://www.accuray.com. In addition, a recording of the call will be available by calling (888) 203-1112 (USA) or +1 (719) 457-0820 (International), Access Code: 7523746, beginning at 6:00 p.m. PT / 9:00 p.m. ET, May 1, 2007. A webcast replay will also be available from the Investor Relations section of the corporate Web site at http://www.accuray.com from approximately 5:30 p.m. PT / 8:30 p.m. ET, May 1, 2007. The telephone and webcast replays will be made available for 10 days.

About Accuray

Accuray Incorporated (Nasdaq: ARAY) based in Sunnyvale, Calif., is a global leader in the field of radiosurgery. Its CyberKnife System is the world's first and only commercially available intelligent robotic radiosurgery system designed to treat tumors anywhere in the body, typically with sub- millimeter accuracy. To date, it is estimated that the CyberKnife System has been used by physicians to treat more than 30,000 patients worldwide. For more information, please visit www.accuray.com.

Forward-Looking Statements

Except for the historical information contained herein, the matters set forth in this press release, including statements as to financial guidance including realization of backlog, procedure growth and market acceptance, product development, clinical studies, regulatory review and approval, and commercialization of products, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date the statements are made and are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events. You should not put undue reliance on any forward- looking statements. Important factors that could cause actual performance and results to differ materially from the forward-looking statements we make include: fluctuations in results of operations; reimbursement for the CyberKnife procedure; market acceptance of our products; government approvals of our products; intellectual property protection for our products; competing products; funding requirements; and other risks detailed from time to time under the heading "Risk Factors" in our report on Form 10-Q for the quarterly period ended December 30, 2006, as may be updated from time to time by our other filings with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize, or if any underlying assumptions prove incorrect, our actual performance or results may vary materially from any future performance or results expressed or implied by these forward- looking statements. We assume no obligation to update forward-looking statements to reflect actual performance or results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

NOTE: Accuray, the Accuray logo, CyberKnife, Synchrony, Xsight and RoboCouch are among trademarks or registered trademarks of Accuray Incorporated.


                             Accuray Incorporated
          Unaudited Condensed Consolidated Statements of Operations
                      (in thousands, except per share data)

                             Three months ended        Nine months ended
                           March 31,    March 31,    March 31,    March 31,
                             2007         2006         2007         2006
    Net revenue:
     Products              $29,515      $12,261      $75,591      $20,350
     Shared ownership
      programs               2,437        2,145        7,248        5,860
     Services                4,579        1,134       11,209        3,063
     Other                     809          760        2,410        2,224
     Total net revenue      37,340       16,300       96,458       31,497
    Cost of revenue:
     Costs of products      12,183        7,086       30,263       10,323
     Costs of shared
      ownership programs       663          620        1,965        1,852
     Costs of services       1,955        1,310        6,584        2,874
     Costs of other            517          506        1,619        1,466
     Total cost of revenue  15,318        9,522       40,431       16,515
     Gross profit           22,022        6,778       56,027       14,982
    Operating expenses:
     Selling and marketing   9,830        6,319       27,124       17,271
     Research and
      development            6,951        4,141       19,265       13,051
     General and
      administrative         6,100        3,852       16,855       10,239
     Total operating
      expenses              22,881       14,312       63,244       40,561
    Loss from operations      (859)      (7,534)      (7,217)     (25,579)
    Other income and expense 1,039          (40)       1,349          (61)
    Income (loss) before
     provision for income
     taxes and cumulative
     effect of change in
     accounting principle      180       (7,574)      (5,868)     (25,640)
    Provision for income taxes  62          116          185          196

    Income (loss) before
     cumulative effect of
     change in accounting
     principle                 118       (7,690)      (6,053)     (25,836)
    Cumulative effect of
     change in accounting
     principle, net of
     tax of $0                  --           --          838           --
    Net income (loss)         $118      $(7,690)     $(5,215)    $(25,836)

    Net income (loss)
     per common share:
      Basic                  $0.00       $(0.48)      $(0.23)      $(1.62)
      Diluted                $0.00       $(0.48)      $(0.23)      $(1.62)
    Weighted average common
     shares outstanding used
     in computing net income
     (loss) per share:
      Basic                 37,018       16,100       23,137       15,953
      Diluted               56,234       16,100       23,137       15,953

    Cost of revenue,
     selling and marketing,
     research and development,
     and general and
     administrative expenses
     include stock-based
     compensation charges
     as follows:
      Cost of revenue         $398         $222         $848         $641
      Selling and marketing $1,247         $627       $2,903       $1,918
      Research and
       development            $689         $407       $1,609       $1,220
      General and
       administrative       $1,350         $767       $3,412       $2,457


                             Accuray Incorporated
               Unaudited Condensed Consolidated Balance Sheets
                       (in thousands, except share amounts)

                                                    March 31,      June 30,
                                                      2007           2006
                                                   (unaudited)
    Assets
    Current assets:
      Cash and cash equivalents                     $193,354        $27,856
      Restricted cash                                     --              1
      Accounts receivable, net of allowance for
       doubtful accounts of $20 at
       March 31, 2007 and June 30, 2006               15,285         11,698
      Inventories                                     14,694         10,100
      Prepaid expenses and other current assets        6,004          3,512
      Deferred cost of revenue-current                25,312          4,810
        Total current assets                         254,649         57,977
    Property and equipment, net                       24,657         21,945
    Goodwill                                           4,495          4,495
    Intangible assets, net                             1,252          1,446
    Deferred cost of revenue and
     other noncurrent assets                          36,892         52,760
        Total assets                                $321,945       $138,623
    Liabilities, temporary equity and
     stockholders' equity (deficiency)
    Current liabilities:
      Accounts payable                               $13,012         $4,726
      Accrued expenses                                14,623         15,055
      Customer advances and deferred revenue          62,200         41,979
        Total current liabilities                     89,835         61,760
    Long-term liabilities:
      Customer advances and deferred revenue         111,359        130,214
        Total liabilities                            201,194        191,974

    Temporary equity:
      Redeemable convertible preferred stock,
       no par value Authorized: 30,000,000 shares;
       issued and outstanding, respectively: none
       and 17,419,331 at March 31, 2007 and
       June 30, 2006 respectively; liquidation
       amount: none and $40,354 at March 31, 2007
       and June 30, 2006 respectively.                    --         27,504
    Stockholders' equity (deficiency):
      Preferred stock, $0.001 par value;
       Authorized: 5,000,000 shares and none
       at March 31, 2007 and June 30,2006,
       respectively; no shares outstanding.               --             --
      Common stock, $0.001 par value and no
       par value at March 31, 2007 and
       June 30, 2006, respectively;
       authorized: 100,000,000 and 70,000,000
       shares at March 31, 2007 and June 30, 2006,
       respectively; issued and outstanding:
       53,438,922 and 16,243,150 shares at
       March 31, 2007 and June 30, 2006,
       respectively.                                      53         13,276
      Additional paid-in capital                     246,571         43,988
      Notes receivable from stockholders                  --           (206)
      Deferred stock-based compensation                   --        (17,272)
      Accumulated other comprehensive income             (17)            --
      Accumulated deficit                           (125,856)      (120,641)
        Total stockholders' equity (deficiency)      120,751        (80,855)

        Total liabilities, temporary equity
         and stockholders' equity (deficiency)      $321,945      $ 138,623

SOURCE Accuray Incorporated
05/01/2007
CONTACT: investors, Robert McNamara, Senior Vice President and CFO, +1-408-789-4264, or investorrelations@accuray.com, or media, Stephanie Tomei, Accuray PR Manager, +1-408-789-4234, or stomei@accuray.com, both of Accuray Incorporated
Web site: http://www.accuray.com