aray-10q_20190331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to             

 

Commission File Number: 001-33301

 

ACCURAY INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

20-8370041

(State or Other Jurisdiction of Incorporation or Organization)

 

(IRS Employer Identification Number)

 

1310 Chesapeake Terrace

Sunnyvale, California 94089

(Address of Principal Executive Offices Including Zip Code)

 

(408) 716-4600

(Registrant’s Telephone Number, Including Area Code)

 

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”  “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

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. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.001 par value per share

ARAY

The Nasdaq Stock Market LLC

 

As of April 30, 2019, there were 88,024,096 shares of the Registrant’s Common Stock, par value $0.001 per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page No.

 

 

 

PART I.

Financial Information

 

 

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

3

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2019 and June 30, 2018

3

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended March 31, 2019 and 2018

4

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended March 31, 2019 and 2018

5

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2019 and 2018

7

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

Item 4.

Controls and Procedures

38

 

 

 

PART II.

Other Information

 

 

 

 

Item 1.

Legal Proceedings

39

 

 

 

Item 1A.

Risk Factors

39

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

 

 

 

Item 3.

Defaults Upon Senior Securities

64

 

 

 

Item 4.

Mine Safety Disclosures

64

 

 

 

Item 5.

Other Information

64

 

 

 

Item 6.

Exhibits

65

 

 

 

Signatures

 

66

 

We own or have rights to various trademarks and tradenames used in our business in the United States or other countries, including the following: Accuray®, Accuray Logo®, CyberKnife®, Hi‑Art®, RayStation®, RoboCouch®, Synchrony®, TomoTherapy®, Xsight®, Accuray Precision®, AutoSegmentation™, CTrue™, H™ Series, iDMS®, InCise™, Iris™, M6™ Series, OIS Connect™, PlanTouch®, PreciseART®, PreciseRTX®, Treatment Planning System™, QuickPlan®, TomoDirect™, TomoEdge™, TomoH®, TomoHD®, TomoHDA™, TomoHelical™, Tomo Quality Assurance™, Radixact®, Onrad ™, StatRT™, and VoLO™. ImagingRing® is a registered trademark belonging to medPhoton GmbH. RayStation® is a registered trademark belonging to RaySearch Laboratories, AB.

2


 

PART I.  FINANCIAL INFORMATION

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

 

Accuray Incorporated

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share amounts and par value)

 

 

 

March 31,

2019

 

 

June 30,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,509

 

 

$

83,083

 

Restricted cash

 

 

2,103

 

 

 

9,830

 

Accounts receivable, net of allowance for doubtful accounts of $563 and

   $251 as of March 31, 2019 and June 30, 2018, respectively

 

 

99,774

 

 

 

65,994

 

Inventories

 

 

124,433

 

 

 

108,540

 

Prepaid expenses and other current assets

 

 

21,452

 

 

 

15,569

 

Deferred cost of revenue

 

 

157

 

 

 

1,141

 

Total current assets

 

 

310,428

 

 

 

284,157

 

Property and equipment, net

 

 

20,265

 

 

 

23,698

 

Goodwill

 

 

57,813

 

 

 

57,855

 

Intangible assets, net

 

 

714

 

 

 

821

 

Restricted cash

 

 

734

 

 

 

620

 

Other assets

 

 

16,180

 

 

 

11,576

 

Total assets

 

$

406,134

 

 

$

378,727

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

25,392

 

 

$

19,694

 

Accrued compensation

 

 

27,082

 

 

 

28,992

 

Other accrued liabilities

 

 

26,945

 

 

 

22,448

 

Customer advances

 

 

22,822

 

 

 

22,896

 

Deferred revenue

 

 

78,833

 

 

 

75,404

 

Total current liabilities

 

 

181,074

 

 

 

169,434

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term other liabilities

 

 

8,168

 

 

 

8,608

 

Deferred revenue

 

 

23,291

 

 

 

20,976

 

Long-term debt

 

 

145,957

 

 

 

131,077

 

Total liabilities

 

 

358,490

 

 

 

330,095

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; authorized: 200,000,000 shares as of

   March 31, 2019 and June 30, 2018, respectively; issued and

   outstanding: 88,020,073 and 86,129,256 shares at March 31, 2019 and

   June 30, 2018, respectively

 

 

88

 

 

 

86

 

Additional paid-in-capital

 

 

531,207

 

 

 

521,738

 

Accumulated other comprehensive income

 

 

489

 

 

 

1,093

 

Accumulated deficit

 

 

(484,140

)

 

 

(474,285

)

Total stockholders' equity

 

 

47,644

 

 

 

48,632

 

Total liabilities and stockholders' equity

 

$

406,134

 

 

$

378,727

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

 

 

 

Three Months Ended

March 31,

 

 

Nine Months Ended

March 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

46,451

 

 

$

43,244

 

 

$

136,019

 

 

$

129,266

 

Services

 

 

56,770

 

 

 

56,588

 

 

 

165,349

 

 

 

161,845

 

Total net revenue

 

 

103,221

 

 

 

99,832

 

 

 

301,368

 

 

 

291,111

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products

 

 

27,169

 

 

 

25,332

 

 

 

80,755

 

 

 

74,291

 

Cost of services

 

 

35,586

 

 

 

38,251

 

 

 

103,888

 

 

 

103,110

 

Total cost of revenue

 

 

62,755

 

 

 

63,583

 

 

 

184,643

 

 

 

177,401

 

Gross profit

 

 

40,466

 

 

 

36,249

 

 

 

116,725

 

 

 

113,710

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

12,913

 

 

 

13,906

 

 

 

40,442

 

 

 

42,663

 

Selling and marketing

 

 

12,903

 

 

 

14,612

 

 

 

41,078

 

 

 

43,241

 

General and administrative

 

 

11,769

 

 

 

11,552

 

 

 

37,880

 

 

 

34,696

 

Total operating expenses

 

 

37,585

 

 

 

40,070

 

 

 

119,400

 

 

 

120,600

 

Income (loss) from operations

 

 

2,881

 

 

 

(3,821

)

 

 

(2,675

)

 

 

(6,890

)

Other expense, net

 

 

(3,829

)

 

 

(4,465

)

 

 

(11,133

)

 

 

(14,774

)

Loss before provision for income taxes

 

 

(948

)

 

 

(8,286

)

 

 

(13,808

)

 

 

(21,664

)

Provision for income taxes

 

 

236

 

 

 

566

 

 

 

1,222

 

 

 

1,289

 

Net loss

 

$

(1,184

)

 

$

(8,852

)

 

$

(15,030

)

 

$

(22,953

)

Net loss per share - basic and diluted

 

$

(0.01

)

 

$

(0.10

)

 

$

(0.17

)

 

$

(0.27

)

Weighted average common shares used in computing net loss per

   share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

87,962

 

 

 

85,459

 

 

 

87,220

 

 

 

84,594

 

Net loss

 

$

(1,184

)

 

$

(8,852

)

 

$

(15,030

)

 

$

(22,953

)

Foreign currency translation adjustment

 

 

(270

)

 

 

909

 

 

 

(604

)

 

 

1,467

 

Unrealized gain on investments, net of tax

 

 

 

 

 

319

 

 

 

 

 

 

443

 

Comprehensive loss

 

$

(1,454

)

 

$

(7,624

)

 

$

(15,634

)

 

$

(21,043

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2017

 

 

83,739,804

 

 

$

84

 

 

$

496,887

 

 

$

(52

)

 

$

(450,386

)

 

$

46,533

 

Issuance of restricted stock

 

 

19,367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement of common stock

 

 

(4,506

)

 

 

 

 

 

(19

)

 

 

 

 

 

 

 

 

(19

)

Share-based compensation

 

 

 

 

 

 

 

 

2,348

 

 

 

 

 

 

 

 

 

2,348

 

Allocated transaction cost in debt issuance

 

 

 

 

 

 

 

 

8,798

 

 

 

 

 

 

 

 

 

8,798

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,382

)

 

 

(9,382

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

346

 

 

 

 

 

 

346

 

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

22

 

 

 

 

 

 

22

 

Balance at September 30, 2017

 

 

83,754,665

 

 

 

84

 

 

 

508,014

 

 

 

316

 

 

 

(459,768

)

 

 

48,646

 

Exercise of stock options, net

 

 

105,200

 

 

 

 

 

 

423

 

 

 

 

 

 

 

 

 

423

 

Issuance of restricted stock

 

 

1,037,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee

   stock purchase plan

 

 

447,756

 

 

 

1

 

 

 

1,579

 

 

 

 

 

 

 

 

 

1,580

 

Retirement of common stock

 

 

(57,030

)

 

 

 

 

 

(274

)

 

 

 

 

 

 

 

 

(274

)

Share-based compensation

 

 

 

 

 

 

 

 

3,141

 

 

 

 

 

 

 

 

 

3,141

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,719

)

 

 

(4,719

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

212

 

 

 

 

 

 

212

 

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

102

 

 

 

 

 

 

102

 

Balance at December 31, 2017

 

 

85,287,635

 

 

 

85

 

 

 

512,883

 

 

 

630

 

 

 

(464,487

)

 

 

49,111

 

Exercise of stock options, net

 

 

3,600

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Issuance of restricted stock

 

 

38,738

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Retirement of Convertible Senior Notes

 

 

253,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

2,989

 

 

 

 

 

 

 

 

 

2,989

 

Allocated transaction cost in debt issuance

 

 

 

 

 

 

 

 

288

 

 

 

 

 

 

 

 

 

288

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,852

)

 

 

(8,852

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

909

 

 

 

 

 

 

909

 

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

319

 

 

 

 

 

 

319

 

Balance at March 31, 2018

 

 

85,583,802

 

 

$

86

 

 

$

516,173

 

 

$

1,858

 

 

$

(473,339

)

 

$

44,778

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

 

86,129,256

 

 

$

86

 

 

$

521,738

 

 

$

1,093

 

 

$

(474,285

)

 

$

48,632

 

Exercise of stock options, net

 

 

3,500

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Issuance of restricted stock

 

 

367,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee

   stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

2,947

 

 

 

 

 

 

 

 

 

2,947

 

Tax withholding upon vesting of restricted

   stock units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adoption of new revenue recognition

   standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,114

 

 

 

5,114

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,206

)

 

 

(9,206

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(395

)

 

 

 

 

 

(395

)

Balance at September 30, 2018

 

 

86,500,260

 

 

 

86

 

 

 

524,699

 

 

 

698

 

 

 

(478,377

)

 

 

47,106

 

Exercise of stock options, net

 

 

14,550

 

 

 

 

 

 

58

 

 

 

 

 

 

 

 

 

58

 

Issuance of restricted stock

 

 

1,054,539

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee

   stock purchase plan

 

 

442,051

 

 

 

 

 

 

1,540

 

 

 

 

 

 

 

 

 

1,540

 

Share-based compensation

 

 

 

 

 

 

 

 

1,959

 

 

 

 

 

 

 

 

 

1,959

 

Tax withholding upon vesting of restricted

   stock units

 

 

(125,797

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

Adoption of new revenue recognition

   standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61

 

 

 

61

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,640

)

 

 

(4,640

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

61

 

 

 

 

 

 

61

 

Balance at December 31, 2018

 

 

87,885,603

 

 

 

88

 

 

 

528,254

 

 

 

759

 

 

 

(482,956

)

 

 

46,145

 

Exercise of stock options, net

 

 

96,882

 

 

 

 

 

 

417

 

 

 

 

 

 

 

 

 

417

 

Issuance of restricted stock

 

 

37,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

2,536

 

 

 

 

 

 

 

 

 

2,536

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,184

)

 

 

(1,184

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(270

)

 

 

 

 

 

(270

)

Balance at March 31, 2019

 

 

88,020,073

 

 

$

88

 

 

$

531,207

 

 

$

489

 

 

$

(484,140

)

 

$

47,644

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


 

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Nine Months Ended

March 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(15,030

)

 

$

(22,953

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

6,088

 

 

 

7,387

 

Share-based compensation

 

 

7,779

 

 

 

9,074

 

Amortization of debt issuance costs

 

 

1,157

 

 

 

1,259

 

Amortization and accretion of discount and premium on investments

 

 

 

 

 

(15

)

Accretion of interest on debt

 

 

2,489

 

 

 

2,589

 

Loss on sales of investment

 

 

 

 

 

77

 

Provision for (recovery of) bad debt

 

 

3,639

 

 

 

(74

)

Provision for write-down of inventories

 

 

2,099

 

 

 

1,104

 

Loss (gain) on disposal of property and equipment

 

 

250

 

 

 

(8

)

Loss on extinguishment of debt

 

 

 

 

 

3,452

 

Gain on termination of lease obligation

 

 

(1,007

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(34,971

)

 

 

(8,435

)

Inventories

 

 

(17,763

)

 

 

(14,656

)

Prepaid expenses and other assets

 

 

(7,382

)

 

 

3,851

 

Deferred cost of revenue

 

 

520

 

 

 

630

 

Accounts payable

 

 

5,465

 

 

 

5,463

 

Accrued liabilities

 

 

1,458

 

 

 

(2,000

)

Customer advances

 

 

107

 

 

 

5,321

 

Deferred revenues

 

 

6,375

 

 

 

(1,621

)

Net cash used in operating activities

 

 

(38,727

)

 

 

(9,555

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment, net

 

 

(3,236

)

 

 

(4,598

)

Purchases of investments

 

 

 

 

 

(5,940

)

Sales and maturities of investments

 

 

 

 

 

29,875

 

Net cash provided by (used in) investing activities

 

 

(3,236

)

 

 

19,337

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from employee stock plans