Accuray Reports Second Quarter Fiscal 2021 Financial Results

News provided by

Jan 27, 2021, 16:05 ET

SUNNYVALE, Calif., Jan. 27, 2021 /PRNewswire/ -- Accuray Incorporated (NASDAQ: ARAY) today reported its financial results for the second quarter of fiscal 2021 ended December 31, 2020.

Second Quarter Fiscal 2021 Summary

Net revenue of $97.5 million including $21.3 million of system revenue in China
Gross orders of $75.4 million, ending backlog of $596.2 million, an increase of 11 percent from December 31, 2019
GAAP operating income of $8.2 million and GAAP net income of $4.8 million compared to GAAP operating income of $3.6 million and GAAP net income of $10.7 million in the prior year second quarter
Adjusted EBITDA grew to $13.5 million from $7.1 million in the prior year second quarter
Received 510(k) FDA clearance for ClearRT™ Helical kVCT Imaging for the Radixact® System

"Our second quarter performance continues to reflect the positive momentum our business is making despite the headwinds created by the COVID-19 environment, said Josh Levine, President and CEO of Accuray. "Highlights from our second quarter performance include the beginning of system revenue conversion related to the Type A radiotherapy licenses in China as well as receiving 510(k) FDA clearance of our ClearRT Helical kVCT Imaging platform for the Radixact System. We are pleased with the continued resilience and commercial cadence that our business is exhibiting as well as the recent product innovation/upgrades coming through our development pipeline. We believe the additions of the Cyberknife S7 System, Synchrony on Radixact, and ClearRT Helical kVCT Imaging to our portfolio will have meaningful clinical impact for our customers and we look forward to the adoption of these important features and the functional improvement they represent in clinical practice."

Fiscal Second Quarter Results

Gross orders totaled $75.4 million compared to $98.6 million for the prior fiscal year period. Backlog as of December 31, 2020 was $596.2 million, an increase of 11 percent compared to $539.4 million for the prior fiscal year period.

Total net revenue was $97.5 million compared to $98.8 million in the same prior fiscal year period. Product revenue totaled $41.8 million compared to $43.8 million in the same prior fiscal year period, while service revenue totaled $55.7 million compared to $55.1 million in the same prior fiscal year period.

Total gross profit for the fiscal 2021 second quarter was $40.8 million, or 41.9 percent of net revenue, comprised of product gross margin of 44.7 percent of product revenue and service gross margin of 39.8 percent of service revenue. This compares to total gross profit of $37.9 million, or 38.4 percent of net revenue, comprised of product gross margin of 44.0 percent of product revenue and service gross margin of 33.9 percent of service revenue in the prior fiscal year second quarter.

Operating expenses were $32.6 million, a decrease of 5 percent compared to $34.3 million in the prior fiscal year second quarter.

Net income was $4.8 million, or $0.05 per share, compared to a net income of $10.7 million, or $0.12 per share, in the same prior fiscal year period. The prior year second quarter net income included a non-cash, special gain of $13.0 million related to the value of the Company's capital contribution to the Company's China joint venture. This gain was recorded as non-operating, other income in the prior fiscal year second quarter.

Adjusted EBITDA for the second fiscal quarter 2021 was $13.5 million compared to $7.1 million in the same prior fiscal year period, which excludes the non-cash, special gain related to the Company's capital contribution to the China joint venture recorded in the prior fiscal year second quarter.

Cash, cash equivalents and short-term restricted cash were $116.0 million as of December 31, 2020 compared with $95.5 million as of September 30, 2020.

Fiscal Six Months Results

For the six months ended December 31, 2020, gross product orders totaled $125.9 million compared to $177.0 million in the same prior fiscal year period. Ending product backlog was $596.2 million, approximately 11 percent higher than backlog at the end of the prior fiscal year second quarter.

Total net revenue for the six months ended December 31, 2020 was $182.8 million compared to $188.4 million in the same prior fiscal year period. Product revenue for the six months ended December 31, 2020 totaled $73.1 million compared to $81.4 million, while service revenue totaled $109.7 million compared to $107.0 million in the same prior fiscal year period.

Total gross profit for the six months ended December 31, 2020 was $76.2 million, or 41.7 percent of net revenue, comprised of product gross margin of 43.2 percent of product revenue and service gross margin of 40.7 percent of service revenue. This compares to total gross profit of $70.8 million, or 37.6 percent of net revenue, comprised of product gross margin of 43.4 percent of product revenue and service gross margin of 33.2 percent of service revenue in the same prior fiscal year period.

Operating expenses for the six months ended December 31, 2020 were $62.6 million, a decrease of 12 percent compared with $71.5 million in the same prior fiscal year period.

Net income was $5.2 million, or $0.06 per share, for the six months ended December 31, 2020, compared to net income of $1.4 million, or $0.02 per share, in the same prior fiscal year period. The prior year six month period ended December 31, 2019 included a non-cash, special gain of $13.0 million related to the value of the Company's capital contribution to the Company's China joint venture. The gain was recorded as non-operating, other income in the prior fiscal year second quarter.

Adjusted EBITDA for the six months ended December 31, 2020 was $22.5 million, compared to $6.1 million in the prior fiscal year period, which excludes the non-cash, special gain related to the Company's capital contribution to the China joint venture recorded in the prior fiscal year second quarter.

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 financial guidance for fiscal year 2021.

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 second quarter of fiscal 2021 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.

In addition, a taped replay of the conference call will be available beginning approximately one hour after the call's conclusion and will be available for seven days. The replay telephone number is (877) 344-7529 (USA), or (412) 317-0088 (International), Conference ID: 10151157. An archived webcast will also be available at Accuray's website until Accuray announces its results for the third quarter of fiscal 2021.

Use of Non-GAAP Financial Measures

Accuray has supplemented its GAAP net income (loss) with a non-GAAP measure of adjusted earnings before interest, taxes, depreciation, amortization, gain on contribution to equity method investment in joint venture 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 income (the most directly comparable GAAP measure) to non-GAAP adjusted EBITDA is provided in the schedules below.

There are limitations in using 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, including expectations regarding gross orders, order volume and age-outs; expectations regarding the effect of the COVID-19 pandemic on the Company; the Company's ability to adapt and make the necessary adjustments to compete and operate effectively; the Company's continued resilience and ability to continue to realize the benefits of working capital management and cash preservation activities; expectations regarding future sales in China; expectations regarding the Company's Chinese joint venture, including the timing of and ability to drive revenue conversion and introduce a Type B product to the market in China as well as the operating impact of the joint venture on the Company's income statement; expectations regarding the Company's product innovations and developments, including expectations related to future regulatory approvals; expectations regarding the Company's product portfolio, the clinical impact and value of those products on our customers, and market adoption of such products, including with respect to the Company's Synchrony on Radixact, CyberKnife S7 System and Clear RT Helical kVCT Imaging upgrades as well as other strategic product innovations; expectations regarding the commercial launch of Clear RT Helical kVCT Imaging; expectations regarding the new Centers for Medicare and Medicaid Services alternative payment model and reimbursement schedule; 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 A 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 November 4, 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.

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

	Three Months Ended December 31,				Six Months Ended December 31,
	2020		2019		2020		2019
Gross Orders	$	75,365	$	98,556	$	125,893	$	177,043
Net Orders		42,462		89,904		66,016		128,885
Order Backlog		596,214		539,357		596,214		539,357
Net revenue:
Products	$	41,805	$	43,760	$	73,063	$	81,365
Services		55,654		55,066		109,728		107,038
Total net revenue		97,459		98,826		182,791		188,403
Cost of revenue:
Cost of products		23,102		24,518		41,528		46,088
Cost of services		33,526		36,408		65,029		71,472
Total cost of revenue		56,628		60,926		106,557		117,560
Gross profit		40,831		37,900		76,234		70,843
Operating expenses:
Research and development		11,956		13,064		24,104		26,405
Selling and marketing		10,348		11,327		19,246		24,593
General and administrative		10,328		9,886		19,217		20,502
Total operating expenses		32,632		34,277		62,567		71,500
Income (loss) from operations		8,199		3,623		13,667		(657)
Income on equity investment, net		1,117		—		1,089		—
Other income (expense), net		(4,260)		7,766		(8,954)		3,327
Income before provision for income taxes		5,056		11,389		5,802		2,670
Provision for income taxes		287		679		631		1,316
Net income	$	4,769	$	10,710	$	5,171	$	1,354
Net income per share - basic	$	0.05	$	0.12	$	0.06	$	0.02
Net income per share - diluted	$	0.05	$	0.12	$	0.06	$	0.02
Weighted average common shares used in computing income per share:
Basic		92,025		89,517		91,609		89,145
Diluted		93,353		90,279		92,607		90,095

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

	December 31,		June 30,
	2020		2020
Assets
Current assets:
Cash and cash equivalents	$	107,322	$	107,577
Restricted cash		8,692		997
Accounts receivable, net		65,367		90,599
Inventories		138,655		134,374
Prepaid expenses and other current assets		22,309		21,227
Deferred cost of revenue		2,577		2,712
Total current assets		344,922		357,486
Property and equipment, net		13,773		15,349
Investment in joint venture		17,019		13,929
Goodwill		57,963		57,717
Intangible assets, net		549		663
Operating lease right-of-use assets		26,110		28,647
Other assets		17,806		17,136
Total assets	$	478,142	$	490,927
Liabilities and equity
Current liabilities:
Accounts payable	$	10,876	$	23,126
Accrued compensation		21,942		17,963
Operating lease liabilities, current		8,587		8,224
Other accrued liabilities		24,396		27,180
Customer advances		19,516		22,571
Deferred revenue		80,884		83,207
Short-term debt		12,530		—
Total current liabilities		178,731		182,271
Long-term other liabilities		9,195		7,416
Deferred revenue		23,391		24,125
Operating lease liabilities, non-current		20,965		24,173
Long-term debt		168,082		189,307
Total liabilities		400,364		427,292
Equity:
Common stock		93		91
Additional paid-in capital		551,409		545,741
Accumulated other comprehensive income (loss)		2,818		(484)
Accumulated deficit		(476,542)		(481,713)
Total equity		77,778		63,635
Total liabilities and equity	$	478,142	$	490,927

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

	Three Months Ended December 31,				Six Months Ended December 31,
	2020		2019		2020		2019
GAAP net income	$	4,769	$	10,710	$	5,171	$	1,354
Depreciation and amortization		1,663		1,846		3,313		3,697
Stock-based compensation		2,364		2,149		4,608		3,849
Interest expense, net		4,430		4,683		8,823		8,883
Gain on contribution to equity method investment in joint venture (a)		—		(12,965)		—		(12,965)
Provision for income taxes		287		679		631		1,316
Adjusted EBITDA	$	13,513	$	7,102	$	22,546	$	6,134


(a) Consists of non-cash gain related to the value of the Company's capital contribution to the China joint venture.

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