Accuray Incorporated — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2023. The filing is dated May 8, 2023. Unless otherwise noted, amounts are in U.S. dollars.
Business context and financial performance
Accuray develops, sells, and supports radiation therapy and radiosurgery systems, including CyberKnife and TomoTherapy/Radixact, and related services. It reports one operating segment and has a 49% interest in a China joint venture.
| Metric | Three months ended March 31, 2023 | Nine months ended March 31, 2023 |
|---|---|---|
| Revenue | $118.1 million, up 23% | $329.3 million, up 3% |
| Product revenue | $62.8 million, up 45% | $170.7 million, up 9% |
| Service revenue | $55.2 million, up 4% | $158.6 million, down 3% |
| Gross profit / gross margin | $38.7 million / 32.8% | $116.3 million / 35.3% |
| Operating income (loss) | $2.3 million | $2.8 million |
| Net income (loss) | $0.6 million; $0.01 per diluted share | $(6.7) million; $(0.07) per share |
| Operating cash flow | Not separately reported for the quarter | $6.7 million |
For the nine months, investing cash outflow was $4.7 million and financing cash outflow was $1.6 million. Cash, cash equivalents, and restricted cash totaled $90.9 million at March 31, 2023, including $89.1 million of unrestricted cash and cash equivalents. Inventory was $150.6 million, up from $142.3 million at June 30, 2022.
Total debt carrying value was $178.5 million: $100.0 million principal of 3.75% convertible notes due 2026, $71.5 million under the term loan, and $10.0 million under the revolver. Current liabilities were $191.8 million and current assets were $342.9 million.
Material changes versus comparable periods
- Quarterly revenue rose $21.9 million, led by higher system sales; nine-month revenue rose $9.4 million. Nine-month gross profit fell $0.7 million and gross margin was approximately 35.3%, versus 36.6% a year earlier.
- Quarterly net income improved from a $1.0 million loss to $0.6 million income; the nine-month net loss widened from $1.9 million to $6.7 million, amid higher interest expense and operating costs.
- Nine-month operating cash flow improved to $6.7 million from $2.2 million, with collections contributing to a $19.0 million decrease in accounts receivable; inventory growth and other working-capital movements used cash.
- Order backlog was $506.6 million, down from $580.4 million a year earlier. Nine-month gross orders were $222.6 million, down from $243.9 million; net orders were $115.2 million, down from $124.5 million. Book-to-bill was 1.3 for the nine months versus 1.6.
- Foreign exchange was a headwind: management cited a $16.1 million adverse impact on nine-month product and service revenue combined. Product costs and mix also weighed on nine-month product gross profit.
Outlook, management commentary, and risks
- Management said available cash, debt facilities, its business plan, and revenue prospects should fund operations for at least 12 months, while noting continued uncertainty and close monitoring of liquidity. No specific revenue or earnings guidance is provided in the filing.
- Management expects supply-chain and logistics challenges, higher material and freight costs, and related gross-margin and earnings pressure to persist at least through the remainder of fiscal 2023. Stronger U.S. dollar exchange rates also remain a headwind.
- In the second quarter, Accuray announced a cost-saving initiative that reduced its global workforce by 4.5%. Restructuring charges were $2.7 million for the nine months; $0.5 million remained accrued and was expected to be paid in fiscal 2023.
- In October 2022, the company amended credit-facility financial covenants through June 30, 2023, easing required ratios temporarily. Accuray reported compliance at March 31, 2023, but warned that post-June 2023 covenants become more difficult and a future breach could accelerate debt.
- Remaining performance obligations were $1.06 billion. Management estimates about 19% of the $937.5 million in open system-sales contracts may never produce revenue; cancellations, age-outs, customer financing and facility readiness, regulatory approvals, and shipment timing are key uncertainties.
- Accuray expects China’s JV to receive NMPA clearance for a locally branded Class B device at the end of calendar 2023 and to take orders shortly thereafter. Timing and regulatory approval remain uncertain; COVID-related restrictions had affected China sales and approval timing.
- Other material risks include dependence on certain single-source components, competition and product adoption, customer reimbursement and financing, interest-rate exposure, foreign-currency movements, and macroeconomic and geopolitical conditions. Management reported no probable and reasonably estimable material litigation losses; no material goodwill impairment was identified.
Important facts for investors to verify
- Whether orders and backlog convert to shipped systems and recognized revenue, and whether cancellations and age-outs remain elevated.
- Whether gross margins recover as supply, freight, labor, product mix, and foreign-exchange pressures change.
- Liquidity and covenant headroom after June 30, 2023, including the availability and cost of refinancing if needed.
- China JV regulatory milestones, customer licensing, sales conversion, and the company’s revenue concentration in JV-related transactions.
- Cash generation and inventory levels, alongside the stated expectation that liquidity will cover at least the next 12 months.