Accuray Reports Fourth Quarter and Fiscal 2020 Financial Results

News provided by

Aug 13, 2020, 16:02 ET

SUNNYVALE, Calif., Aug. 13, 2020 /PRNewswire/ -- Accuray Incorporated (NASDAQ: ARAY) today reported financial results for the fourth quarter and fiscal year ended June 30, 2020.

Q4 Fiscal 2020 and Recent Operating Highlights

Gross orders of $94.3 million, including 8 orders from China
Net revenue of $95.0 million, net loss of $0.8 million, Adjusted EBITDA of $9.3 million
Generated $19.2 million of operating cash flow and ended the quarter with $108.6 million of cash and short-term restricted cash
Shipped nine Synchrony upgrades

Fiscal Year 2020 Highlights

Gross orders increased 10 percent to $377.3 million versus prior fiscal year
Ending backlog of $602.7 million, an increase of 22 percent from June 30, 2019
Robust demand for Synchrony on Radixact: 56 global orders and 16 total shipments since commercial release
Net revenue of $382.9 million, net income of $3.2 million, Adjusted EBITDA grew to $26.8 million from $23.7 million in prior fiscal year
GAAP operating income grew to $11.9 million from $0.6 million in prior fiscal year

"Despite the circumstances and the uncertainties associated with the COVID-19 pandemic, we finished fiscal 2020 with a solid performance and grew our gross orders by 10 percent year over year," said Josh Levine, president and chief executive officer of Accuray. "I am proud of the team's execution during the quarter, especially given the challenging operating environment created by the pandemic. We saw strong operating cash flow generation during the quarter and exited the quarter with $108.6 million of cash and short-term restricted cash as we continue to focus on operating efficiencies and working capital management. We believe that our operational focus, joint venture strategy in China, and continued investments in our value creating R&D pipeline projects, positions Accuray strongly for the future."

Q4 Fiscal 2020 Financial Highlights

Gross product orders totaled $94.3 million for the fourth quarter of fiscal 2020 compared to $97.2 million for the prior fiscal year fourth quarter. Ending order backlog was $602.7 million, approximately 22 percent higher than at the end of the prior fiscal year.

Total revenue was $95.0 million for the fourth quarter of fiscal 2020 compared to $117.4 million for the prior fiscal year fourth quarter. Product revenue totaled $40.4 million compared to $60.6 million for the prior fiscal year fourth quarter, while service revenue totaled $54.6 million compared to $56.8 million for the prior fiscal year fourth quarter.

Total gross profit for the fourth quarter of fiscal 2020 was $39.9 million or approximately 42.0 percent of sales, comprised of product gross margin of 45.0 percent and service gross margin of 39.8 percent. This compares to total gross profit of $45.9 million or 39.1 percent of sales, comprised of product gross margin of 40.7 percent and service gross margin of 37.4 percent for the prior fiscal year fourth quarter.

Net loss was $0.8 million, or $0.01 per share, for the fourth quarter of fiscal 2020, compared to a net loss of $1.4 million, or $0.02 per share, for the prior fiscal year fourth quarter.

Adjusted EBITDA for the fourth quarter of fiscal 2020 was $9.3 million, compared to $8.9 million for the prior fiscal year fourth quarter.

Cash, cash equivalents, and short-term restricted cash were $108.6 million as of June 30, 2020, an increase of $17.0 million from March 31, 2020.

Fiscal Year 2020 Highlights

For the fiscal year ended June 30, 2020, gross product orders totaled $377.3 million, representing growth of 10.2 percent compared to the prior fiscal year period.

Total revenue was $382.9 million for the fiscal year ended June 30, 2020 compared to $418.8 million for the prior fiscal year period. Product revenue totaled $167.3 million compared to $196.7 million for the prior fiscal year period, while service revenue totaled $215.6 million compared to $222.1 million for the prior fiscal year period.

Total gross profit for the year ended June 30, 2020 was $149.9 million or 39.1 percent of sales, comprised of product gross margin of 42.7 percent and service gross margin of 36.4 percent. This compares to total gross profit of $162.7 million or 38.8 percent of sales, comprised of product gross margin of 40.7 percent and service gross margin of 37.2 percent for the prior fiscal year period.

Operating expenses were $138.0 million, a decrease of 14.9 percent compared to $162.1 million for the prior fiscal year period.

Net income was $3.2 million, or $0.04 per share, basic, for the fiscal year ended June 30, 2020, compared to a net loss of $16.4 million, or $0.19 per share, basic, for the prior fiscal year period. Net income included a non-cash, special gain of $13.0 million related to the value of the company's capital contribution to its China joint venture in exchange for the company's 49% equity interest in the joint venture. This gain was recorded as non-operating, other income in the second quarter of fiscal 2020.

Adjusted EBITDA for the fiscal year ended June 30, 2020 was $26.8 million, compared to $23.7 million for the prior fiscal year period.

Financial Guidance

The impact of the COVID-19 pandemic on Accuray's fiscal 2021 results remains uncertain. Given the continued evolution of the COVID-19 pandemic and the uncertainty surrounding its impact on the global economy and the healthcare industry, Accuray believes it is prudent to refrain from providing revenue and adjusted EBITDA guidance for fiscal year 2021. The company is carefully monitoring the pandemic and the impact on its business; however, given the uncertainty regarding the pandemic's spread, duration, and impact, the company is currently unable to predict the extent to which the COVID-19 pandemic will impact its future operations and financial results.

Conference Call Information

Accuray will host a conference call beginning at 1:30 p.m. PT/4:30 p.m. ET today to discuss results for the fourth quarter and fiscal 2020 as well as recent corporate developments. Conference call dial-in information is as follows:

U.S. callers: (877) 270-2148
International callers: (412) 902-6510

Individuals interested in listening to the live conference call via the Internet may do so by logging on to the Investor Relations section of Accuray's website, www.accuray.com. There will be a slide presentation accompanying today's event which can also be accessed on the Company's Investor Relations page at www.accuray.com.

In addition, a taped replay of the conference call will be available beginning approximately one hour after the call's conclusion and available for seven days. The replay telephone number is (877) 344-7529 (USA) or (412) 317-0088 (International), Conference ID:10146316. An archived webcast will also be available at Accuray's website until Accuray announces its results for the first quarter of fiscal 2021.

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"). The calculation of adjusted EBITDA also excludes certain non-recurring, irregular and one-time items, including the non-cash, special gain related to Accuray's capital contribution to the China joint venture, an accounts receivable impairment charge, costs associated with reduction of staff and a non-cash reversal of deferred rent related to a lease termination. 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 income (loss) (the most directly comparable GAAP measure) to non-GAAP adjusted EBITDA is provided in the schedules below.

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.

About Accuray

Accuray Incorporated (Nasdaq: ARAY) develops, manufactures and sells radiotherapy systems that are intended to make cancer treatments shorter, safer, personalized and more effective, ultimately enabling patients to live longer, better lives. Our radiation treatment delivery systems in combination with fully-integrated software solutions set the industry standard for precision and cover the full range of radiation therapy and radiosurgery procedures. 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; expectations regarding the effect of the COVID-19 pandemic on the company and the company's position after the pandemic; the company's ability to realize the benefits of its operational focus, joint venture strategy in China, and continued investments in R&D pipeline projects; the company's ability to capitalize on operating efficiencies and working capital management; expectations regarding future sales in China; expectations regarding our Chinese joint venture, including the timing of revenue recognition and the manufacture and shipment of a joint venture manufactured product; expectations regarding the company's product portfolio, including with respect to the company's new Synchrony upgrade; expectations regarding the future of radiotherapy treatment; and the company's leadership position in radiation oncology innovation and technologies. These forward-looking statements involve risks and uncertainties. If any of these risk or uncertainties materialize, or if any of the company's assumptions prove incorrect, actual results could differ materially from the results express or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the effect of the COVID-19 pandemic on the operations of the company and those of its customers and suppliers; the company's ability to achieve widespread market acceptance of its products, including new product and software offerings; the company's ability to develop new products or enhance existing products to meet customers' needs and compete favorably in the market, the company's ability to effectively integrate and execute the joint venture, the company's ability to realize the expected benefits of the joint venture; the ability of customers in China to obtain Class or B user licenses to purchase radiotherapy systems; risks inherent in international operations, the company's ability to effectively manage its growth, the company's ability to maintain or increase its gross margins on product sales and services; delays in regulatory approvals or the development or release of new offerings; the company's ability to meet the covenants under its credit facilities; the company's ability to convert backlog to revenue; and such other risks identified under the heading "Risk Factors" in the company's Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the "SEC") on May 8, 2020 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.

Financial Tables to Follow

Accuray Incorporated
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

	Three Months Ended June 30,				Twelve Months Ended June 30,
	2020		2019		2020		2019
Gross Orders	$	94,293	$	97,166	$	377,295	$	342,321
Net Orders		74,607		64,364		280,144		218,263
Order Backlog		602,713		495,627		602,713		495,627
Net revenue:
Products	$	40,410	$	60,646	$	167,302	$	196,665
Services		54,567		56,771		215,626		222,120
Total net revenue		94,977		117,417		382,928		418,785
Cost of revenue:
Cost of products		22,221		35,956		95,882		116,711
Cost of services		32,860		35,535		137,174		139,423
Total cost of revenue		55,081		71,491		233,056		256,134
Gross profit		39,896		45,926		149,872		162,651
Operating expenses:
Research and development		12,215		16,051		49,784		56,493
Selling and marketing		11,555		14,920		47,254		55,998
General and administrative		11,570		11,697		40,966		49,577
Total operating expenses		35,340		42,668		138,004		162,068
Income from operations		4,556		3,258		11,868		583
Loss on equity investment, net		(371)		—		(149)		—
Other expense, net		(4,746)		(3,794)		(6,700)		(14,927)
Income (loss) before provision for income taxes		(561)		(536)		5,019		(14,344)
Provision for income taxes		262		864		1,863		2,086
Net income (loss)	$	(823)	$	(1,400)	$	3,156	$	(16,430)
Net income (loss) per share - basic	$	(0.01)	$	(0.02)	$	0.04	$	(0.19)
Net income (loss) per share - diluted	$	(0.01)	$	(0.02)	$	0.03	$	(0.19)
Weighted average common shares used in computing income (loss) per share:
Basic		90,748		88,202		89,874		87,465
Diluted		90,748		88,202		90,623		87,465

Accuray Incorporated
Consolidated Balance Sheets
(in thousands)
(Unaudited)

	June 30,		June 30,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	107,577	$	76,798
Restricted cash		997		10,218
Accounts receivable, net		89,599		111,885
Inventories		134,525		120,823
Prepaid expenses and other current assets		21,227		24,205
Deferred cost of revenue		2,712		146
Total current assets		356,637		344,075
Property and equipment, net		15,349		17,122
Investment in joint venture		13,929		—
Goodwill		57,717		57,770
Intangible assets, net		663		679
Operating lease right-of-use assets		28,647		—
Other assets		17,136		18,535
Total assets	$	490,078	$	438,181
Liabilities and equity
Current liabilities:
Accounts payable	$	23,126	$	29,562
Accrued compensation		17,963		31,150
Operating lease liabilities, current		8,224		—
Other accrued liabilities		27,180		32,742
Customer advances		22,571		20,395
Deferred revenue		83,207		78,332
Total current liabilities		182,271		192,181
Long-term other liabilities		7,416		9,646
Deferred revenue		24,125		26,639
Operating lease liabilities, non-current		24,173		—
Long-term debt		189,307		159,844
Total liabilities		427,292		388,310
Equity:
Common stock		91		89
Additional paid-in capital		545,741		535,332
Accumulated other comprehensive loss		(662)		(10)
Accumulated deficit		(482,384)		(485,540)
Total equity		62,786		49,871
Total liabilities and equity	$	490,078	$	438,181

Accuray Incorporated
Reconciliation of GAAP Net Loss to Adjusted Earnings Before Interest, Taxes, Depreciation,
Amortization and Stock-Based Compensation (Adjusted EBITDA)
(in thousands)
(Unaudited)

	Three Months Ended June 30,				Twelve Months Ended June 30,
	2020		2019		2020		2019
GAAP net income (loss)	$	(823)	$	(1,400)	$	3,156	$	(16,430)
Depreciation and amortization		1,960		2,178		7,526		8,266
Stock-based compensation		2,287		2,822		8,152		10,601
Interest expense, net		4,590		3,973		17,986		15,015
Gain on contribution to equity method investment in joint venture (a)		—		—		(12,965)		—
Impairment charge (b)		—		—		—		3,707
Cost savings initiative (c)		1,058		511		1,058		1,509
Gain on lease termination (d)		—		—		—		(1,007)
Provision for income taxes		262		864		1,863		2,086
Adjusted EBITDA	$	9,334	$	8,948	$	26,776	$	23,747
____________________
(a) consists of non-cash gain related to the value of the Company's capital contribution to the China joint venture.
(b) consists of an accounts receivable impairment charge related to one customer in the first quarter of 2019.
(c) consists of costs associated with reduction of staff.
(d) consists of a non-cash reversal of deferred rent related to a facility lease that was terminated.

Joe Diaz	Beth Kaplan
Investor Relations, Lytham Partners	Public Relations Director, Accuray
+1 (602) 889-9700	+1 (408) 789-4426
[email protected]	[email protected]