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Accuray Generated $55.6 Million in First Quarter Gross Orders; Revenue Increased 5 Percent Year over Year

SUNNYVALE, Calif., Oct. 24, 2017 /PRNewswire/ -- Accuray Incorporated (NASDAQ: ARAY) today reported financial results for the first fiscal quarter ended September 30, 2017.

Accuray Incorporated (PRNewsFoto/Accuray Incorporated) (PRNewsFoto/Accuray Incorporated)

First Quarter Highlights

  • Gross orders increased 11 percent to $55.6 million, net orders were $51.0 million. Ending backlog increased 14 percent year-over-year to $465.0 million
  • Gross orders featured a strong contribution from TomoTherapy® and Radixact™ Systems that represented approximately 75 percent of unit mix
  • Revenue increased 5 percent year-over-year to $91.0 million driven by product revenue growth of 9 percent
  • Gross margin expanded approximately 600 basis points year-over-year to 42 percent driven by significant improvements in both product and service gross margins
  • Enhanced capital structure by reducing short term debt and potential share dilution by refinancing and extending convertible debt
  • Newly published 10-year study data demonstrated the clinical efficacy of the CyberKnife® System with low-risk prostate cancer that showed 98.4 percent of study participants had local disease control 10-years post treatment (1)

"Our 11 percent year-over-year gross orders growth during the first quarter was highlighted by Radixact system wins primarily in new and competitor bunkers," said Joshua H. Levine, president and chief executive officer. "Customers cite the precision, case mix versatility and speed of our systems as reasons for their decision to select Accuray. Our first quarter results are on track to achieving our growth objectives for the year and therefore we are reaffirming today the fiscal 2018 guidance we provided in August."

Financial Highlights

Gross product orders totaled $55.6 million for the 2018 fiscal first quarter compared to $50.3 million for the prior fiscal year period. Ending product backlog was $465.0 million, approximately 14 percent higher than backlog at the end of the prior fiscal year first quarter.

Total revenue was $91.0 million compared to $86.5 million in the prior fiscal year first quarter. Service revenue totaled $52.0 million compared to $50.9 million, while product revenue totaled $38.9 million compared to $35.6 million in the prior fiscal year first quarter. The increase in product revenue was primarily due to backlog conversion of orders to revenue from the EIMEA and Japan regions. Service revenue increased due to the continued install base expansion.

Total gross profit for the fiscal 2018 first quarter was $38.1 million or 42 percent of sales, comprised of product gross margin of 43 percent and service gross margin of 41 percent. This compares to total gross profit of $31.3 million or 36 percent of sales, comprised of product gross margin of 34 percent and service gross margin of 38 percent for the prior fiscal year fiscal first quarter. The increase in gross margin was due to several factors including: volume, product mix, intangible amortization expiring in the fourth quarter of prior year and cost down initiatives on both product and service cost of goods sold.

Operating expenses were $40.2 million, an increase of 6 percent compared with $37.9 million in the prior fiscal first quarter. The increase is primarily due to investments in research and development as well as sales and marketing. Fiscal 2018 operating expense is now anticipated to be 3 to 5 percent higher than fiscal 2017, which is a run rate of approximately $39 to $40 million per quarter.

Net loss was $9.4 million, or $0.11 per share, for the first quarter of fiscal 2018, compared to a net loss of $9.9 million, or $0.12 per share, for the first quarter of fiscal 2017. Net loss for the first quarter of fiscal 2018 included a $3.2 million non-cash early extinguishment of debt expense.

Adjusted EBITDA for the first quarter of fiscal 2018 was $3.2 million, compared to $1.2 million in the prior fiscal year first quarter.

Cash, cash equivalents, investments and short-term restricted cash were $94.4 million as of September 30, 2017 compared to $108.8 million as of June 30, 2017.

As previously announced in August 2017, the company enhanced its capital structure through the issuance of approximately $85.0 million of 3.75% convertible senior notes due July 2022 and concurrently retiring approximately $75.0 million of previously outstanding 3.50% convertible senior notes due February 2018.

2018 Financial Guidance

The company is reaffirming the revenue, adjusted EBITDA, and gross orders guidance provided on August 22, 2017 as follows:

  • Revenue: $390.0 million to $400.0 million representing growth of approximately 2 percent to 4 percent year-over-year with product revenue growing approximately 5 to 10 percent year-over-year;
  • Adjusted EBITDA: $25.0 million to $30.0 million representing growth of approximately 23 percent to 47 percent year-over-year; and
  • Gross Orders growth of approximately 5 percent.

Guidance for non-GAAP financial measures excludes amortization of intangibles, depreciation, stock-based compensation expense, interest expense, net and provision for income taxes.  For more information regarding the non-GAAP financial measures discussed in this press release, please see "Use of Non-GAAP Financial Measures" below.

Conference Call Information  

Accuray will host a conference call beginning at 1:30 p.m. PT/4:30 p.m. ET today to discuss its fiscal first quarter results and recent corporate developments. Conference call dial-in information is as follows:

  • U.S. callers: (855) 867-4103 
  • International callers: (262) 912-4764
  • Conference ID Number (U.S. and international): 98682556

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: 98682556. 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 financial statement tables included in this press release, and investors are encouraged to review this reconciliation.

There are limitations in using this non-GAAP financial measure because it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies and excludes expenses that may have a material impact on the company's reported financial results. This 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, backlog, revenues, adjusted EBITDA, operating expenses and run rates, ability to meet financial targets, and Accuray's leadership position in radiation oncology innovation and technologies.  Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, including but not limited to: the company's ability to convert backlog to revenue; the timing of the China Class A license announcement; the success of the adoption of our CyberKnife, TomoTherapy, and Radixact Systems; the company's ability to manage its expenses; continuing uncertainty in the global economic environment; and other risks detailed from time to time under the heading "Risk Factors" in the company's Annual Report on Form 10-K, which was filed on August 25, 2017, 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.

(1)

Katz A (September 09, 2017) Stereotactic Body Radiotherapy for Low-Risk Prostate Cancer: A Ten-Year Analysis. Cureus 9(9): e1668. DOI 10.7759/cureus.1668

Financial Tables to Follow

 

Accuray Incorporated

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)



Three Months Ended September 30,


2017


2016





Gross Orders

$   55,647


$ 50,335

Net Orders

51,038


37,187

Order Backlog

464,968


407,487





Net revenue:




Products 

$   38,916


$ 35,599

Services 

52,034


50,907

Total net revenue 

90,950


86,506

Cost of revenue:




Cost of products 

22,102


23,352

Cost of services 

30,742


31,810

Total cost of revenue 

52,844


55,162

Gross profit 

38,106


31,344

Operating expenses:




Research and development 

14,093


12,229

Selling and marketing 

14,757


14,318

General and administrative 

11,308


11,344

Total operating expenses 

40,158


37,891

Loss from operations

(2,052)


(6,547)

Other expense, net

(6,571)


(4,005)

Loss before provision for income taxes

(8,623)


(10,552)

Provision for (benefit from) income taxes

759


(626)

Net loss

$   (9,382)


$ (9,926)





Net loss per share - basic and diluted

$    (0.11)


$   (0.12)

Weighted average common shares used in computing loss per share:




Basic and diluted

83,747


81,576

 

Accuray Incorporated

Consolidated Balance Sheets

(in thousands)

(Unaudited)






 September 30, 


 June 30, 


2017


2017

 Assets 




 Current assets: 




 Cash and cash equivalents 

$         67,916


$      72,084

 Investments 

23,931


23,909

 Restricted cash 

2,547


12,829

 Accounts receivable, net 

69,650


72,789

 Inventories 

113,421


105,054

 Prepaid expenses and other current assets 

16,909


18,988

 Deferred cost of revenue 

2,497


3,350

 Total current assets 

296,871


309,003

 Property and equipment, net 

21,672


23,062

 Goodwill 

57,863


57,812

 Intangible assets, net 

929


964

 Deferred cost of revenue 

74


206

 Other assets 

16,543


15,417

 Total assets 

$          393,952


$       406,464

 Liabilities and equity 




 Current liabilities: 




 Accounts payable 

$         22,199


$      17,486

 Accrued compensation 

20,813


25,402

 Other accrued liabilities 

18,113


23,870

 Short-term debt 

39,151


113,023

 Customer advances 

19,364


16,926

 Deferred revenue 

80,303


87,785

 Total current liabilities 

199,943


284,492

 Long-term liabilities: 




 Long-term other liabilities 

10,414


10,068

 Deferred revenue 

16,080


13,823

 Long-term debt 

118,869


51,548

 Total liabilities 

345,306


359,931

 Equity: 




 Common stock 

84


84

 Additional paid-in capital 

508,014


496,887

 Accumulated other comprehensive income (loss) 

316


(52)

 Accumulated deficit 

(459,768)


(450,386)

 Total equity 

48,646


46,533

 Total liabilities and equity 

$          393,952


$       406,464

 

Accuray Incorporated

Reconciliation of GAAP Net Loss to Adjusted Earnings Before Interest, Taxes, Depreciation,

Amortization and Stock-Based Compensation (Adjusted EBITDA)

(in thousands)

(Unaudited)



Three Months Ended September 30,



2017


2016


 GAAP net loss 

$   (9,382)


$  (9,926)


   Amortization of intangibles (a) 

36


1,988


   Depreciation (b) 

2,478


2,667


   Stock-based compensation (c) 

2,432


3,473


   Interest expense, net (d) 

6,820


3,592


   Provision for (benefit from) income taxes 

759


(626)


 Adjusted EBITDA 

$    3,143


$    1,168







(a) consists of amortization of intangibles - developed technology and acquired patents. 

(b) consists of depreciation, primarily on property and equipment. 

(c) consists of stock-based compensation in accordance with ASC 718. 

(d) consists primarily of interest income from available-for-sale securities, interest expense associated with our convertible notes and revolving credit facility and non-cash loss on extinguishment of debt. 

 

Accuray Incorporated

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)



Twelve Months Ending
June 30, 2018


From


To

 GAAP net loss 

$     (20,600)


$     (15,600)

   Depreciation and amortization (a) 

10,400


10,400

   Stock-based compensation (b) 

13,000


13,000

   Interest expense, net (c) 

19,000


19,000

   Provision for income taxes 

3,200


3,200

 Adjusted EBITDA 

$       25,000


$       30,000





(a) consists of depreciation, primarily on property and equipment as well as amortization of intangibles - developed technology and acquired patents. 

(b) consists of stock-based compensation in accordance with ASC 718. 

(c) consists primarily of interest income from available-for-sale securities, interest expense associated with our convertible notes and revolving credit facility and non-cash loss on extinguishment of debt. 

 


Doug Sherk

Investor Relations, EVC Group

+1 (415) 652-9100

dsherk@evcgroup.com


Beth Kaplan

Public Relations Director, Accuray

+1 (408) 789-4426

bkaplan@accuray.com

 

 

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SOURCE Accuray Incorporated