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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 December 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)

 

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

 

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

 

As of January 31, 2020, there were 90,466,953 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 December 31, 2019 and June 30, 2019

3

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended December 31, 2019 and 2018

4

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended December 31, 2019 and 2018

5

 

 

 

 

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

6

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

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

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

 

 

 

Item 4.

Controls and Procedures

33

 

 

 

PART II.

Other Information

 

 

 

 

Item 1.

Legal Proceedings

34

 

 

 

Item 1A.

Risk Factors

34

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

61

 

 

 

Item 3.

Defaults Upon Senior Securities

61

 

 

 

Item 4.

Mine Safety Disclosures

61

 

 

 

Item 5.

Other Information

61

 

 

 

Item 6.

Exhibits

62

 

 

 

Signatures

 

63

 

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®, 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.

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)

 

 

 

December 31,

2019

 

 

June 30,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

96,420

 

 

$

76,798

 

Restricted cash

 

 

2,648

 

 

 

10,218

 

Accounts receivable, net of allowance for doubtful accounts of $670 and

   $605 as of December 31, 2019 and June 30, 2019, respectively

 

 

87,734

 

 

 

111,885

 

Inventories

 

 

131,253

 

 

 

120,823

 

Prepaid expenses and other current assets

 

 

20,320

 

 

 

24,205

 

Deferred cost of revenue

 

 

140

 

 

 

146

 

Total current assets

 

 

338,515

 

 

 

344,075

 

Property and equipment, net

 

 

16,977

 

 

 

17,122

 

Investment in joint venture

 

 

15,925

 

 

 

 

Operating lease right-of-use assets, net

 

 

31,110

 

 

 

 

Goodwill

 

 

57,740

 

 

 

57,770

 

Intangible assets, net

 

 

607

 

 

 

679

 

Restricted cash

 

 

1,322

 

 

 

1,162

 

Other assets

 

 

17,277

 

 

 

17,373

 

Total assets

 

$

479,473

 

 

$

438,181

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

22,062

 

 

$

29,562

 

Accrued compensation

 

 

22,308

 

 

 

31,150

 

Operating lease liabilities, current

 

 

7,598

 

 

 

 

Other accrued liabilities

 

 

28,686

 

 

 

32,742

 

Customer advances

 

 

18,231

 

 

 

20,395

 

Deferred revenue

 

 

79,599

 

 

 

78,332

 

Total current liabilities

 

 

178,484

 

 

 

192,181

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities, non-current

 

 

27,166

 

 

 

 

Long-term other liabilities

 

 

6,717

 

 

 

9,646

 

Deferred revenue

 

 

27,242

 

 

 

26,639

 

Long-term debt

 

 

183,864

 

 

 

159,844

 

Total liabilities

 

 

423,473

 

 

 

388,310

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

   December 31, 2019 and June 30, 2019, respectively; issued and

   outstanding: 90,331,453 and 88,521,511 shares at December 31, 2019 and

   June 30, 2019, respectively

 

 

90

 

 

 

89

 

Additional paid-in-capital

 

 

540,247

 

 

 

535,332

 

Accumulated other comprehensive loss

 

 

(151

)

 

 

(10

)

Accumulated deficit

 

 

(484,186

)

 

 

(485,540

)

Total stockholders' equity

 

 

56,000

 

 

 

49,871

 

Total liabilities and stockholders' equity

 

$

479,473

 

 

$

438,181

 

 

  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 Income (Loss)

(in thousands, except per share amounts)

 

 

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

43,760

 

 

$

48,051

 

 

$

81,365

 

 

$

89,568

 

Services

 

 

55,066

 

 

 

54,267

 

 

 

107,038

 

 

 

108,579

 

Total net revenue (a)

 

 

98,826

 

 

 

102,318

 

 

 

188,403

 

 

 

198,147

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products

 

 

24,518

 

 

 

29,062

 

 

 

46,088

 

 

 

53,586

 

Cost of services

 

 

36,408

 

 

 

34,876

 

 

 

71,472

 

 

 

68,302

 

Total cost of revenue (b)

 

 

60,926

 

 

 

63,938

 

 

 

117,560

 

 

 

121,888

 

Gross profit

 

 

37,900

 

 

 

38,380

 

 

 

70,843

 

 

 

76,259

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

13,064

 

 

 

13,640

 

 

 

26,405

 

 

 

27,529

 

Selling and marketing

 

 

11,327

 

 

 

15,139

 

 

 

24,593

 

 

 

28,175

 

General and administrative

 

 

9,886

 

 

 

10,469

 

 

 

20,502

 

 

 

26,111

 

Total operating expenses

 

 

34,277

 

 

 

39,248

 

 

 

71,500

 

 

 

81,815

 

Income (loss) from operations

 

 

3,623

 

 

 

(868

)

 

 

(657

)

 

 

(5,556

)

Other income (expense), net

 

 

7,766

 

 

 

(3,321

)

 

 

3,327

 

 

 

(7,304

)

Income (loss) before provision for income taxes

 

 

11,389

 

 

 

(4,189

)

 

 

2,670

 

 

 

(12,860

)

Provision for income taxes

 

 

679

 

 

 

451

 

 

 

1,316

 

 

 

986

 

Net income (loss)

 

$

10,710

 

 

$

(4,640

)

 

$

1,354

 

 

$

(13,846

)

Net income (loss) per share - basic

 

$

0.12

 

 

$

(0.05

)

 

$

0.02

 

 

$

(0.16

)

Net income (loss) per share - diluted

 

$

0.12

 

 

$

(0.05

)

 

$

0.02

 

 

$

(0.16

)

Weighted average common shares used in computing net loss

   per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

89,517

 

 

 

87,237

 

 

 

89,145

 

 

 

86,858

 

Diluted

 

 

90,279

 

 

 

87,237

 

 

 

90,095

 

 

 

86,858

 

Net income (loss)

 

$

10,710

 

 

$

(4,640

)

 

$

1,354

 

 

$

(13,846

)

Foreign currency translation adjustment

 

 

877

 

 

 

61

 

 

 

(141

)

 

 

(334

)

Comprehensive income (loss)

 

$

11,587

 

 

$

(4,579

)

 

$

1,213

 

 

$

(14,180

)

 

(a)

Includes sales to the China joint venture, an equity method investment of $2,643 and $6,460 for the three and six months ended December 31, 2019 and $0 for both the three and six months ended December 31, 2018, respectively. See Note 14.

(b)

Includes cost of revenue from sales to the China joint venture, an equity method investment of $2,140 and $4,631 for the three and six months ended December 31, 2019 and $0 for both the three and six months ended December 31, 2018, respectively. See Note 14.

 

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

Income /

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2019

 

 

88,521,511

 

 

$

89

 

 

$

535,332

 

 

$

(10

)

 

$

(485,540

)

 

$

49,871

 

Issuance of restricted stock

 

 

356,999

 

 

 

 

 

 

(207

)

 

 

 

 

 

 

 

 

(207

)

Share-based compensation

 

 

 

 

 

 

 

 

1,684

 

 

 

 

 

 

 

 

 

1,684

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,356

)

 

 

(9,356

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(1,018

)

 

 

 

 

 

(1,018

)

Balance at September 30, 2019

 

 

88,878,510

 

 

$

89

 

 

$

536,809

 

 

$

(1,028

)

 

$

(494,896

)

 

$

40,974

 

Issuance of restricted stock

 

 

987,765

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock under employee stock

   purchase plan

 

 

523,714

 

 

 

 

 

 

1,357

 

 

 

 

 

 

 

 

 

1,357

 

Share-based compensation

 

 

 

 

 

 

 

 

2,081

 

 

 

 

 

 

 

 

 

2,081

 

Tax withholding upon vesting of restricted stock units

 

 

(58,536

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,710

 

 

 

10,710

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

877

 

 

 

 

 

 

877

 

Balance at December 31, 2019

 

 

90,331,453

 

 

$

90

 

 

$

540,247

 

 

$

(151

)

 

$

(484,186

)

 

$

56,000

 

 

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

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

Income /

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit

 

 

Equity

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

2,947

 

 

 

 

 

 

 

 

 

2,947

 

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

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

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

5


 

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Six Months Ended

December 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,354

 

 

$

(13,846

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,712

 

 

 

4,174

 

Share-based compensation

 

 

3,849

 

 

 

4,899

 

Amortization of debt issuance costs

 

 

661

 

 

 

764

 

Accretion of interest on debt

 

 

2,018

 

 

 

1,626

 

Provision for bad debt

 

 

853

 

 

 

3,615

 

Gain on contribution to joint venture

 

 

(12,964

)

 

 

-

 

Provision for write-down of inventories

 

 

2,208

 

 

 

1,302

 

Loss on disposal of property and equipment

 

 

 

 

156

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

23,589

 

 

 

(21,518

)

Inventories

 

 

(17,210

)

 

 

(11,718

)

Prepaid expenses and other assets

 

 

2,986

 

 

 

(3,587

)

Deferred cost of revenue

 

 

132

 

 

 

405

 

Accounts payable

 

 

(7,718

)

 

 

11,558

 

Operating lease liabilities, net

 

 

(331

)

 

 

 

Accrued liabilities

 

 

(11,084

)

 

 

(6,109

)

Customer advances

 

 

(2,085

)

 

 

(3,022

)

Deferred revenues

 

 

1,863

 

 

 

(297

)

Net cash used in operating activities

 

 

(8,167

)