UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 2018
ACCURAY INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
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001-33301 |
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20-8370041 |
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(Commission File Number) |
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(IRS Employer Identification No.) |
1310 Chesapeake Terrace
Sunnyvale, California 94089
(Address of principal executive offices, including Zip Code)
Registrant’s telephone number, including area code: (408) 716-4600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On October 30, 2018, Accuray Incorporated (the “Company”) issued a press release announcing its financial results for the first fiscal quarter ended September 30, 2018. A copy of the Company’s press release dated October 30, 2018, titled “Accuray Reports Fiscal 2019 First Quarter Financial Results” is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The foregoing information (including the exhibit hereto) is being furnished under “Item 2.02 Results of Operations and Financial Condition” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 2.05. Costs Associated with Exit or Disposal Activities.
On October 29, 2018, the Company informed affected employees of a cost saving initiative designed to reduce operating costs through the elimination of approximately 5 percent of its global workforce. The Company expects to complete the cost saving initiative in the second quarter of fiscal 2019.
The Company estimates the total cost of this initiative to be approximately $2 million, which is expected to be recorded in the second quarter of fiscal 2019.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit No. |
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Description |
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99.1 |
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2
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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ACCURAY INCORPORATED |
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Dated: October 30, 2018 |
By: |
/s/ Shig Hamamatsu |
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Shig Hamamatsu |
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Interim Chief Financial Officer |
3
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Todd Kehrli |
Beth Kaplan |
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Investor Relations, EVC Group |
Public Relations Director, Accuray |
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+1 (310) 625-4462 |
+1 (408) 789-4426 |
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tkehrli@evcgroup.com |
bkaplan@accuray.com |
Accuray Reports Fiscal 2019 First Quarter Financial Results
SUNNYVALE, Calif., October 30, 2018 — Accuray Incorporated (NASDAQ: ARAY) today reported its financial results for the first quarter of fiscal 2019 ended September 30, 2018.
Company Highlights
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China Ministry of Health confirms Type A and B quota and licenses |
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• |
Gross orders increased 10 percent year over year to $61.4 million |
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Revenue increased 5 percent year over year to $95.8 million |
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Implements cost savings initiative |
“Our fiscal year is off to a good start with double digit gross order growth and revenue generation meeting our targets,” said Joshua H. Levine, president and chief executive officer. “We are also encouraged by the potential benefits to Accuray from the China Ministry of Health’s announcement yesterday of Type A and B quota and licenses. In addition, we’ve implemented a cost savings initiative designed to reduce our annual operating costs by approximately $15 million and provide us with a clear path to GAAP profitability, while preserving our ability to continue our product innovation objectives and drive improved sales growth going forward. These cost savings have enabled us to raise our adjusted EBITDA outlook for the current fiscal year.”
Fiscal First Quarter Results
Gross orders totaled $61.4 million, an increase of 10 percent compared to $55.6 million for the prior fiscal year period. Backlog as of September 30, 2018 was $461.9 million.
Total revenue was $95.8 million, an increase of 5 percent compared to $91.0 million in the prior fiscal year first quarter. Product revenue totaled $41.5 million compared to $38.9 million in the prior fiscal year first quarter, while service revenue totaled $54.3 million compared to $52.0 million in the prior fiscal year first quarter. Product revenue increased 7 percent year over year driven by strong growth in sales of the Company’s Radixact Systems. Service revenue grew 4 percent year over year driven by software upgrades sold through service contracts.
Total gross profit for the fiscal 2019 first quarter was $37.9 million, or 39.5 percent of sales, comprised of product gross margin of 40.9 percent and service gross margin of 38.5 percent. This compares to total gross profit of $38.1 million, or 41.9 percent of sales, comprised of product gross margin of 43.2 percent and service gross margin of 40.9 percent for the prior fiscal year first quarter.
Operating expenses were $42.6 million, an increase of 6 percent compared to $40.2 million in the prior fiscal year first quarter. The fiscal first quarter 2019 operating expenses included a one-time accounts receivable impairment charge of $3.7 million. Excluding the impact of this impairment charge, fiscal first quarter 2019 operating expenses were $38.9 million.
Net loss was $9.2 million, or $0.11 per share, compared to a net loss of $9.4 million, or $0.11 per share, for the prior fiscal year first quarter.
Adjusted EBITDA for the first quarter of fiscal 2019 was $4.0 million, excluding the impact of a one-time impairment
charge, compared to $3.1 million in the prior fiscal year first quarter.
Cash, cash equivalents and short-term restricted cash were $70.5 million as of September 30, 2018, a decrease of $22.4 million from June 30, 2018.
Cost Savings Initiative
Accuray has implemented a cost saving initiative designed to reduce operating costs and provide a clear path to GAAP net income while still focusing on top line growth. The actions implemented do not impact management’s fiscal 2019 outlook for gross order and revenue growth and has resulted in an increase in the adjusted EBITDA outlook for the fiscal year.
As a result of the initiative, Accuray expects to take a non-recurring charge of $1.5 million to $2 million in the second fiscal quarter of 2019. The company expects annualized cost savings of approximately $15 million compared to fiscal 2018, with the full benefit realized starting in the fourth quarter of fiscal 2019.
2019 Financial Guidance
The Company is reaffirming revenue guidance provided on August 16, 2018 and updating adjusted EBITDA guidance for fiscal year 2019 as follows:
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Revenue: Product revenue growth is expected to range between 4 and 8 percent and service revenue is expected to grow approximately 2 percent, resulting in total revenue of between $415.0 million to $425.0 million, which would represent 3 to 5 percent growth year over year; |
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Adjusted EBITDA: $23.0 million to $29.0 million representing growth of approximately 35 percent to 70 percent year over year. The adjusted guidance reflects the impact of restructuring and excludes the impact of a one-time accounts receivable impairment charge and the one-time charge related to the announced cost savings initiatives. This is adjusted from the previous range of $21.0 million to $27.0 million. |
Conference Call Information
Accuray will host a conference call beginning at 1:30 p.m. PT/4:30 p.m. ET today to discuss results for the first fiscal quarter as well as recent corporate developments. Conference call dial-in information is as follows:
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U.S. callers: (855) 867-4103 |
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International callers: (262) 912-4764 |
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Conference ID Number (U.S. and international): 3146329 |
Individuals interested in listening to the live conference call via the Internet may do so by logging on to Accuray’s website, www.accuray.com. In addition, a taped replay of the conference call will be available beginning approximately two hours after the call’s conclusion and available for seven days. The replay telephone number is (855) 859-2056 (USA) or (404) 537-3406 (International), Conference ID: 3146329. An archived webcast will also be available at Accuray’s website.
Use of Non-GAAP Financial Measures
Accuray has supplemented its GAAP net loss with a non-GAAP measure of adjusted earnings before interest, taxes, depreciation, amortization and stock-based compensation (“adjusted EBITDA”). Management believes that this non-GAAP financial measure provides useful supplemental information to management and investors regarding the performance of the company and facilitates a meaningful comparison of results for current periods with previous operating results. A reconciliation of GAAP net loss (the most directly comparable GAAP measure) to non-GAAP adjusted EBITDA is provided in the schedule below.
There are limitations in using these non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential
investors should consider non-GAAP financial measures only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP.
About Accuray
Accuray Incorporated (Nasdaq: ARAY) is a radiation oncology company that develops, manufactures and sells precise, innovative treatment solutions that set the standard of care with the aim of helping patients live longer, better lives. The company's leading-edge technologies deliver the full range of radiation therapy and radiosurgery treatments. For more information, please visit www.accuray.com.
Safe Harbor Statement
Statements made in this press release that are not statements of historical fact are forward-looking statements and are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release relate, but are not limited, to the company's future results of operations, including management's expectations regarding orders, revenue, and adjusted EBITDA; expectations related to GAAP net income profitability and sales growth; expectations regarding the company’s product portfolio and future product enhancements and releases, including the impact of new products and releases on order growth; expectations regarding regulatory approvals, including the impact of such approvals on order growth; and the company's leadership position in radiation oncology innovation and technologies. These forward-looking statements involve risks and uncertainties. If any of these risk or uncertainties materialize, or if any of the company's assumptions prove incorrect, actual results could differ materially from the results express or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the company's ability to achieve widespread market acceptance of its products, including new product offerings; the company’s ability to develop new products or enhance existing products to meet customers’ needs and compete favorably in the market; the company's ability to effectively manage its growth; the company's ability to maintain or increase its gross margins on product sales and services; delays in regulatory approvals or the development or release of new offerings; the company's ability to meet the covenants under its credit facilities; the company's ability to convert backlog to revenue; risks and uncertainties related to the China Class A and B license announcement; and such other risks identified under the heading "Risk Factors" in the company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on August 24, 2018 and as updated periodically with the company's other filings with the SEC.
Forward-looking statements speak only as of the date the statements are made and are based on information available to the company at the time those statements are made and/or management's good faith belief as of that time with respect to future events. The company assumes 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. Accordingly, investors should not put undue reliance on any forward-looking statements.
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Financial Tables to Follow
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
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Three Months Ended September 30, |
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2018 |
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2017 |
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Gross Orders |
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$ |
61,414 |
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$ |
55,647 |
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Net Orders |
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24,911 |
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51,038 |
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Order Backlog |
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461,876 |
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464,968 |
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Net revenue: |
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Products |
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$ |
41,517 |
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$ |
38,916 |
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Services |
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54,312 |
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52,034 |
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Total net revenue |
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95,829 |
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90,950 |
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Cost of revenue: |
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Cost of products |
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24,524 |
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22,102 |
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Cost of services |
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33,426 |
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30,742 |
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Total cost of revenue |
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57,950 |
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52,844 |
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Gross profit |
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37,879 |
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38,106 |
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Operating expenses: |
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Research and development |
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13,889 |
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14,093 |
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Selling and marketing |
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13,036 |
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14,757 |
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General and administrative |
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15,642 |
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11,308 |
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Total operating expenses |
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42,567 |
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40,158 |
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Loss from operations |
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(4,688 |
) |
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(2,052 |
) |
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Other expense, net |
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(3,983 |
) |
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(6,571 |
) |
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Loss before provision for income taxes |
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(8,671 |
) |
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(8,623 |
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Provision for income taxes |
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535 |
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759 |
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Net loss |
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$ |
(9,206 |
) |
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$ |
(9,382 |
) |
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Net loss per share - basic and diluted |
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$ |
(0.11 |
) |
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$ |
(0.11 |
) |
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Weighted average common shares used in computing loss per share: |
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Basic and diluted |
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86,479 |
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83,747 |
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Consolidated Balance Sheets
(in thousands)
(Unaudited)
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September 30, |
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June 30, |
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2018 |
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2018 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
68,545 |
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$ |
83,083 |
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Restricted cash |
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1,969 |
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9,830 |
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Accounts receivable, net |
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66,420 |
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65,994 |
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Inventories |
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117,684 |
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108,540 |
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Prepaid expenses and other current assets |
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17,075 |
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15,569 |
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Deferred cost of revenue |
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220 |
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1,141 |
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Total current assets |
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271,913 |
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284,157 |
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Property and equipment, net |
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23,126 |
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23,698 |
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Goodwill |
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57,767 |
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57,855 |
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Intangible assets, net |
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785 |
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821 |
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Other assets |
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15,540 |
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12,196 |
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Total assets |
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$ |
369,131 |
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$ |
378,727 |
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Liabilities and equity |
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Current liabilities: |
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Accounts payable |
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$ |
25,921 |
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$ |
19,694 |
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Accrued compensation |
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21,857 |
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28,992 |
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Other accrued liabilities |
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21,240 |
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22,448 |
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Customer advances |
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19,181 |
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22,896 |
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Deferred revenue |
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72,278 |
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75,404 |
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Total current liabilities |
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160,477 |
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169,434 |
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Long-term liabilities: |
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Long-term other liabilities |
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9,890 |
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8,608 |
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Deferred revenue |
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22,732 |
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20,976 |
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Long-term debt |
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128,926 |
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131,077 |
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Total liabilities |
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322,025 |
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330,095 |
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Equity: |
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Common stock |
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86 |
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86 |
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Additional paid-in capital |
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524,699 |
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521,738 |
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Accumulated other comprehensive income |
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698 |
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1,093 |
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Accumulated deficit |
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(478,377 |
) |
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(474,285 |
) |
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Total equity |
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47,106 |
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48,632 |
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Total liabilities and equity |
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$ |
369,131 |
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$ |
378,727 |
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Reconciliation of GAAP Net Loss to Adjusted Earnings Before Interest, Taxes, Depreciation,
Amortization and Stock-Based Compensation (Adjusted EBITDA)
(in thousands)
(Unaudited)
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Three Months Ended September 30, |
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2018 |
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2017 |
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GAAP net loss |
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$ |
(9,206 |
) |
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$ |
(9,382 |
) |
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Amortization of intangibles |
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36 |
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36 |
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Depreciation (a) |
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2,093 |
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2,478 |
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Stock-based compensation |
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3,212 |
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2,432 |
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Interest expense, net (b) |
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3,592 |
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6,820 |
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Impairment charge (c) |
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3,707 |
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- |
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Provision for income taxes |
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|
535 |
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|
759 |
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Adjusted EBITDA |
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$ |
3,969 |
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$ |
3,143 |
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(a) consists of depreciation, primarily on property and equipment.
(b) consists primarily of interest income from available-for-sale securities, interest expense associated with our outstanding debt and non-cash loss on extinguishment of debt.
(c) consists of a one-time accounts receivable impairment charge related to one customer
Forward-Looking Guidance
Reconciliation of Projected Net Loss to Projected Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-Based Compensation (Adjusted EBITDA)
(in thousands)
(Unaudited)
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Twelve Months Ending June 30, 2019 |
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From |
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To |
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GAAP net loss |
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$ |
(23,000 |
) |
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$ |
(17,000 |
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Depreciation and amortization (a) |
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10,100 |
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10,100 |
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Stock-based compensation |
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13,000 |
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13,000 |
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Impairment charge (b) |
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3,700 |
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|
3,700 |
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Cost savings initiative (c) |
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2,000 |
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2,000 |
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Interest expense, net (d) |
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15,100 |
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15,100 |
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Provision for income taxes |
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2,100 |
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|
2,100 |
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Adjusted EBITDA |
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$ |
23,000 |
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$ |
29,000 |
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(a) consists of depreciation, primarily on property and equipment as well as amortization of intangibles.
(b) consists of a one-time accounts receivable impairment charge related to one customer recorded in the first quarter of 2019.
(c) consists of costs associated with a staff reduction expected to be recorded in the second quarter of 2019.
(d) consists primarily of interest expense associated with our outstanding debt.