Business context and reporting period
Accuray Incorporated develops, manufactures, sells and services radiation therapy systems, including CyberKnife and TomoTherapy/Radixact platforms. This is the Form 10-K for the fiscal year ended June 30, 2021—not a 2020 Q4 filing as indicated in the request metadata. The filing also reports the June 2021 quarter separately.
Financial performance
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $396.3 | $382.9 |
| Gross profit / margin | $159.5 / 40% | $149.7 / 39% |
| Operating income | $22.2 | $12.5 |
| Net income (loss) | $(6.3) | $3.8 |
| Operating cash flow | $38.5 | $(1.5) |
| Cash and cash equivalents at year-end | $116.4 | $107.6 |
| Working capital | $160.4 | $175.2 |
Revenue comprised $176.6 million of products and $219.6 million of services. Product gross margin was 42% and service gross margin 39%. Net loss per share was $0.07. Year-end total assets were $480.1 million, total liabilities $411.3 million, and stockholders’ equity $68.8 million.
For the quarter ended June 30, 2021, revenue was $110.9 million, gross profit $43.7 million, and net loss $11.1 million ($0.12 per share). The comparable June 2020 quarter had revenue of $95.0 million, gross profit of $39.7 million, and net loss of $0.2 million.
Debt, liquidity and cash flow
At June 30, 2021, debt had a $173.8 million carrying value and approximately $202.9 million of principal: $100 million of 3.75% convertible notes due 2026, $2.9 million of notes due 2022, an $80 million term loan, and $20 million drawn on a $40 million revolver. The company refinanced its prior credit facilities in May 2021 and exchanged about $82.1 million principal of 2022 notes for about $97.1 million of 2026 notes. New credit facilities are secured and subject to financial covenants. Management reported covenant compliance at year-end and believes available cash, facilities and expected cash flows will fund operations for at least 12 months.
Investing cash outflow was $2.4 million; financing cash outflow was $28.8 million. Operating cash flow turned positive from a $1.5 million use in FY2020, helped by non-cash expenses and working-capital movements. Cash includes $63.3 million held at foreign subsidiaries that the company considers indefinitely reinvested. The company repurchased 3.1 million shares for $14.1 million in May 2021.
Changes versus the prior year
- Revenue rose 3%, with product revenue up 6% and services up 2%. China revenue increased to $79.8 million from $30.4 million; Americas revenue fell to $105.9 million from $128.6 million.
- Gross profit increased 7%, and operating income improved by $9.7 million. Despite these gains, the company moved from net income to a net loss, primarily due to higher other expense, including $9.9 million of debt-extinguishment losses. FY2020 also included a $13.0 million non-cash gain on the China joint-venture contribution.
- Gross orders fell to $325.9 million from $377.3 million; net orders declined to $191.9 million from $280.5 million, reflecting lower orders and higher backlog age-outs. Backlog increased slightly to $616.4 million from $602.7 million.
- Operating cash flow improved from $(1.5) million to $38.5 million. Year-end cash increased $8.8 million, while working capital declined $14.8 million.
Outlook, risks and unusual items
- No specific revenue or earnings guidance is provided. Management expects COVID-related delivery and installation delays to continue into FY2022, affecting conversion of backlog to revenue; the duration and financial impact remain uncertain.
- Backlog and remaining performance obligations are not equivalent to assured revenue. The company estimated that approximately 26% of $1,009.4 million of open contracts may never produce revenue due to cancellations; it also warned of higher-than-normal age-outs.
- Key risks include COVID-19 effects on customers, installations, collections and supply chains; intense competition; long and variable sales cycles; reliance on single-source components; international, China and tariff exposure; reimbursement and regulatory changes; and debt covenant and refinancing risks.
- The Radiation Oncology Alternative Payment Model was scheduled to begin in 2022, potentially changing Medicare payment economics. The European Medical Device Regulation took effect in May 2021 and may increase certification burdens.
- The company reported two voluntary product recalls during FY2021, one for each platform; it said no serious adverse health consequences were reported and costs were not material. Management reported no probable and reasonably estimable losses from current litigation. The independent auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether COVID-related installation delays, customer payment requests and backlog age-outs persist in FY2022, and how quickly the $616.4 million backlog converts to revenue.
- Whether gross orders recover and whether China sales, including joint-venture activity and licensing, remain a sustainable source of growth.
- Debt principal, interest expense, covenant headroom and the company’s ability to meet obligations as they mature; assess dilution or cash needs if convertible notes are converted.
- Whether the improved operating cash flow is repeatable, given the FY2021 net loss, inventory write-downs and working-capital effects.
- Reimbursement changes, regulatory certification progress, supplier continuity and any further product quality or recall costs.