Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Accuray Inc (ARAY, Financial) reported a 21% global order growth in Q3, and an 8% growth on a trailing 12-month basis, indicating strong customer adoption of product innovations.
- The company's installed base grew by 4% year-over-year, with service contract revenue growing 2% year-over-year and 4% on a trailing 12-month basis, suggesting a steady increase in long-term revenue streams.
- Accuray Inc (ARAY) received regulatory approval to market the Tono C equipment in China, a significant step towards expanding its market presence in the region.
- The EIMEA region showed robust performance with a 5% revenue growth and 29% order growth on a trailing 12-month basis, indicating strong market traction and potential for continued expansion.
- Accuray Inc (ARAY) is actively investing in global training centers and partnerships, such as with IUCT Oncopole and Airbus, to enhance service offerings and drive future revenue growth.
Negative Points
- Accuray Inc (ARAY) experienced a disappointing quarter with significant near-term challenges, including delayed shipments and a slowdown in the US market, impacting financial results.
- The company faced a substantial slowdown in the US due to longer capital equipment budget cycles, contributing to a 38% year-over-year revenue decline in the Americas region for Q3.
- Three expected system shipments were delayed to Q4, affecting the company's revenue and adjusted EBITDA for the quarter.
- Accuray Inc (ARAY) is still awaiting regulatory approval for the precision treatment planning system in China, which is necessary to fully capitalize on the Tono C equipment's market potential.
- The company's overall gross margin for Q3 decreased to 28.7% from 32.8% in the prior year, influenced by increased China margin deferral and unfavorable foreign exchange impacts.
Q & A Highlights
Q: Can you provide more details on what's causing the installation delays in the Americas region?
A: Suzanne Winter, President and CEO of Accuray, explained that the primary issue is a significant slowdown in the US market due to tighter capital equipment budgets. Customers are delaying upgrades as they wait for funds, impacting the company's performance and leading to revised guidance.
Q: Despite current challenges, how does Accuray view its long-term opportunities, especially with upcoming international catalysts like China and Helix?
A: Suzanne Winter highlighted that despite near-term headwinds, the company is on the verge of significant breakthroughs such as regulatory approvals in China and the introduction of Helix in India. These developments are expected to unlock deferred revenues and drive growth, particularly in the EIMEA and APAC regions.
Q: What is the expected timing for the treatment planning approval in China?
A: Suzanne Winter mentioned that the approval is anticipated by the end of the fiscal year. The company is confident that this final regulatory step will soon allow the China team to begin market deliveries and recognize deferred margins.
Q: How will the approval of the treatment planning system in China impact Accuray's financials in fiscal '25?
A: Ali Pervaiz, CFO, noted that while detailed fiscal '25 guidance will be provided in the next earnings call, the approval is crucial for revenue recognition from shipments to China, which will significantly influence growth and margins.
Q: How do you assess your company's execution this quarter, and what are the areas of improvement?
A: Suzanne Winter acknowledged the challenges faced due to external factors but also pointed out internal areas needing better execution, such as reducing product COGS and improving overall margins. Despite these issues, she noted progress in key areas like order growth and service revenue.
Q: Are there opportunities for competitive wins in the US market despite the current slowdown?
A: Suzanne Winter believes there are opportunities to win against competitors in the US by enhancing customer relationships and leveraging commercial partnerships, similar to their successful strategy in Japan.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
