Accuray Grows Second Quarter Gross Orders 17%; Backlog Up 16% YoY
SUNNYVALE, Calif., January 31, 2017 – Accuray Incorporated (NASDAQ: ARAY) announced today financial results for the second fiscal quarter and six months ended December 31, 2016.
Fiscal Second Quarter Highlights
- Ending backlog increased 16 percent year-over-year to $426.2 million; gross orders were $78.5 million with net orders of $54.1 million
- Strong mix of CyberKnife® System orders; greater than 70% equipped with the InCise™ Multileaf Collimator ("MLC")
- Three-unit multi-system Radixact™ System order for Hong Kong Sanatorium and Hospital
- Multiple sites in the US and Europe now equipped and treating patients with the Radixact System
"Our 17% year-over-year gross order growth during the second quarter was led by increased demand for our CyberKnife system, especially from replacement orders to existing customers," said Joshua H. Levine, president and chief executive officer. "In addition, gross orders were favorably impacted by solid demand for our new Radixact System, which will be fully launched by the end of the third fiscal quarter. We performed above expectations in regards to gross order performance in the first half of the year and are seeing several indicators that lead us to believe our strong backlog growth will continue through the end of fiscal 2017 and into fiscal 2018."
Gross product orders totaled $78.5 million for the 2017 fiscal second quarter compared to $67.1 million for the prior fiscal year period. Ending product backlog was $426.2 million, approximately 16 percent higher than backlog at the end of the prior fiscal year second quarter.
Total revenue was $87.5 million compared to $108.9 million in the prior fiscal year second quarter. Service revenue totaled $52.1 million compared to $53.1 million, while product revenue totaled $35.4 million compared to $55.8 million in the prior fiscal year second quarter. The decrease in revenue was primarily due to lower sales unit volume as well as product and channel mix.
Total gross profit for the 2017 fiscal second quarter was $31.4 million or 36 percent of sales, comprised of product gross margin of 35 percent and service gross margin of 36 percent. This compares to total gross profit of $42.6 million or 39 percent of sales, comprised of product gross margin of 41 percent and service gross margin of 37 percent for the prior fiscal year second quarter.
Operating expenses were $36.2 million, a decrease of 15 percent compared with $42.7 million in the prior fiscal second quarter. The decrease was primarily because of lower legal fees, tradeshow expenses and research and development expenses.
Net loss was $9.4 million, or $0.11 per share, for the second quarter of fiscal 2017, compared to a net loss of $6.0 million, or $0.08 per share, for the second quarter of fiscal 2016.
Adjusted EBITDA for the second quarter of fiscal 2017 was $1.8 million, compared to $6.8 million in the prior fiscal year second quarter.
Cash, cash equivalents and investments were $108.4 million as of December 31, 2016, a decrease of $16.0 million from September 30, 2016, of which $5.0 million was due to secured debt principal pay down.
Six Month Highlights
For the six months ended December 31, 2016, gross product orders totaled $128.8 million compared to $132.0 million for the same prior year period.
Total revenue for the six months ended December 31, 2016, was $174.0 million compared to $198.5 million in the prior fiscal year period. Service revenue totaled $103.0 million which was flat from the prior fiscal year period, while product revenue totaled $71.0 million compared to $95.8 million in the prior year period. The decrease in revenue is the result of modestly extended revenue conversion times mainly resulting from a higher percentage of order growth in our distributor channels, which results in less direct control over the timing of revenue.
Total gross profit for the six months ended December 31, 2016, was $62.7 million or 36 percent of sales, comprised of product gross margin of 35 percent and service gross margin of 37 percent. This compares to total gross profit of $76.5 million or 39 percent of sales, comprised of product gross margin of 42 percent and service gross margin of 35 percent for the same prior fiscal year period. The decrease in gross margin stemmed from lower sales unit volume as well as product and channel mix.
Operating expenses were $74.1 million, a decrease of 12 percent compared with $83.8 million in the prior fiscal year period. The decrease was primarily because of lower legal fees and research and development expenses.
Net loss was $19.3 million, or $0.24 per share, for the six months ended December 31, 2016, compared to a net loss of $19.1 million, or $0.24 per share, for the prior year fiscal period.
Adjusted EBITDA for the six months ended December 31, 2016 was $2.9 million, compared to $5.7 million in the prior fiscal year period.
Cash, cash equivalents and investments were $108.4 million as of December 31, 2016, a decrease of $58.6 million from June 30, 2016 as the result of using $36.6 million to fully repay the Company’s 3.75 percent convertible debt in August 2016 and $5.0 million of additional secured debt principal pay down in the current quarter.
2017 Financial Guidance
The Company is today reaffirming guidance originally provided on August 17, 2016 for fiscal year 2017 for all metrics except operating expenses, as follows:
- Revenue: $410.0 million to $420.0 million representing growth of approximately 3 percent to 5 percent year-over-year
- Operating Expenses down approximately 3 to 4 percent over prior year (August 17, 2016 guidance for this metric was "Approximately $164.0 million or flat with the prior year")
- Adjusted EBITDA: $32.0 million to $38.0 million representing growth of approximately 30 percent to 55 percent year-over-year
- Gross Orders growth of approximately 5 percent
"During the second half of fiscal 2017, there are two major variables that could affect our revenue including China’s timing of Class A radiotherapy licenses and the impact of a higher mix of distributor orders which could continue to result in timing uncertainty," continued Mr. Levine. "We are proactively communicating with our independent distributor partners to understand how to provide additional support around site planning and installation activities to improve the visibility into the timing of revenue conversion."
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 second 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): 52778138
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 dial-up replay of the conference call will be available beginning January 31, 2017 at 5:00 p.m. PT/8:00 p.m. ET and ending February 7, 2017. The replay telephone number is (855) 859-2056 (USA) or (404) 537-3406 (International), Conference ID: 52778138.
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.
Accuray presents certain measures, such as period-over-period revenue growth, on a constant currency basis, which excludes the effects of foreign currency translation. Due to the continuing strengthening of the U.S. dollar against foreign currencies and the overall variability of foreign exchange rates from period to period, management uses these measures on a constant currency basis to evaluate period-over-period operating performance. Measures presented on a constant currency basis are calculated by translating current period results at prior period monthly average exchange rates.
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.
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, operating expenses, revenues and adjusted EBITDA, ability to meet financial targets, ability to influence revenue conversion, 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 report on Form 10-K, which was filed on August 24, 2016, the company’s report on Form 10-Q, which was filed on November 1, 2016 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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