Accuray Announces Results for Second Quarter Fiscal 2013 Decline in Product Revenue Partly Offset by Strong Service Revenue and Profitability

SUNNYVALE, Calif., Feb. 6, 2013 /PRNewswire/ -- Accuray Incorporated, a radiation oncology company, (Nasdaq: ARAY) today announced financial results for the second quarter of fiscal 2013 that ended December 31, 2012. Non-GAAP results are provided to enhance understanding of Accuray's ongoing core results of operations.

Recent highlights include a continued increase in service revenue and expanding service gross margin.

"While I am encouraged by the growing stream of profitable service revenue, we clearly need to concentrate on commercializing our two new product platforms that were announced in October 2012 during the ASTRO tradeshow," said Joshua Levine, president and chief executive officer of Accuray. "As part of our plan for sustained revenue growth and profitability, we are taking specific actions designed to reduce the company's cost structure by approximately forty million dollars per year and are focused on capitalizing on the significantly increased capabilities of our new products."

For the second quarter of fiscal 2013 Accuray reported total consolidated GAAP revenue of $77.8 million and total non-GAAP revenue of $77.7 million. By comparison, for the second quarter of fiscal 2012, total GAAP revenue was $106.4 million and total non-GAAP revenue was $102.9 million. On a non-GAAP basis revenue was down by 24 percent from the same quarter of the prior year.

The consolidated GAAP gross margin for the second quarter of fiscal 2013 was 44.0 percent for products and 26.9 percent for services, compared to 48.6 percent for products and 21.2 percent for services for the second quarter of the prior year. The consolidated non-GAAP gross margin for the second quarter of fiscal 2013 was 50.0 percent for products and 26.9 percent for service, compared to 55.8 percent and 12.3 percent, respectively, for the second quarter of the prior year. While we expect the underlying positive trend in our service gross margin to continue, we are likely to experience quarterly fluctuations as in past quarters. 

Consolidated GAAP net loss attributable to stockholders for the second quarter of fiscal 2013 was $29.2 million, or $0.40 per share, compared to $10.4 million, or $0.15 per share, for the second quarter of the prior year. Non-GAAP net loss for the second quarter of fiscal 2013 was $22.0 million or $0.30 per share compared to $7.1 million or $0.10 per share for the second quarter of the prior year.

Net product orders to backlog totaled $17.9 million during the second quarter of fiscal 2013, with an ending backlog of $279.0 million. Backlog decreased five percent sequentially from $294.3 million, at the end of the previous quarter, but is higher than the $276.8 million at the end of the second quarter of fiscal 2012. 

During the second quarter of fiscal 2013, 14 units were shipped and 17 were installed, increasing Accuray's worldwide installed base to 677 systems.

Accuray's cash and cash equivalents equaled $94.8 million and restricted cash was $2.6 million, for a total of $97.4 million as of December 31, 2012.

Restructuring
As previously announced, Accuray has restructured its operations to achieve two goals: first to improve commercial execution to generate revenue growth, and second, to reduce operating expenses so that the company is in a better position to achieve sustainable profitability. As a result of the restructuring, Accuray expects to take a non-recurring charge of $3.0 million to $4.0 million in the third quarter of fiscal 2013. The company expects operating expense savings of approximately $40.0 million per year from the level originally reported for fiscal 2012. The company expects operating expenses to be approximately $38.0 million per quarter on a non-GAAP basis and $38.5 million per quarter on a GAAP basis as we exit the fourth quarter of fiscal 2013.

Outlook
As stated on January 3, 2013, Accuray management projects total revenue for fiscal 2013 of $320.0 million to $330.0 million. This guidance represents expected results on a non-GAAP basis.

Additional Information
Additional information, including slides of second quarter highlights which will be discussed during the conference call, is available in the Investor Relations section of the company's website at www.accuray.com/investors.

Earnings Call Open to Investors 
Accuray will hold a conference call for financial analysts and investors on Wednesday, February 6, 2013 at 2:00 p.m. PST/5:00 p.m. EST. The conference call dial-in numbers are 1-866-761-0749 (USA) or 1-617-614-2707 (International), Conference ID: 63591669.  A live webcast of the call will also be available from the Investor Relations section of the corporate website at www.accuray.com/investors.  In addition, a recording of the call will be available by calling 1-888-286-8010 (USA) or 1-617-801-6888 (International), Conference ID: 63531003, beginning at 5:00 p.m. PST/8:00 p.m. EST on February 6, 2013 and will be available through February 13, 2013. A webcast replay will also be available from the Investor Relations section of the Company's website at www.accuray.com/investors from approximately 5:00 p.m. PST/8:00 p.m. EST today through Accuray's release of its results for the third quarter of fiscal 2013, ending March 31, 2013.

About Accuray
Accuray Incorporated (Nasdaq: ARAY), is a radiation oncology company that develops, manufactures and sells personalized, innovative treatment solutions that set the standard of care with the aim of helping patients live longer, better lives. The Company's leading-edge technologies deliver the full range of radiation therapy and radiosurgery treatments. 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, expected total revenue, product revenue, service revenue, gross service margin, orders and operating expenses, quarterly fluctuations in service margins; the effects of the introduction of new CyberKnife and TomoTherapy Systems; commercial execution; the company's future cost structure; the impact of the restructuring of our operations, including the goals of the restructuring and the expected restructuring charge; the company's future growth including: order growth, revenue growth and future profitability; and fiscal 2013 revenue guidance. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, including but not limited to: the company's ability to convert backlog to revenue; the success of its worldwide sales and marketing efforts; the success of the introduction of our CyberKnife and TomoTherapy Systems; the extent of market acceptance for the company's products and services; the impact and success of the restructuring of our operations; the company's ability to manage its expenses; continuing uncertainty in the global economic environment; and other risks detailed from time to time under the heading "Risk Factors" in the company's report on Form 10-K  filed on September 10, 2012 and the company's report on Form 10‑Q filed on November 7, 2012 for the first quarter of fiscal 2013 and the Form 10-Q to be filed for the second quarter of fiscal 2013 and our 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

Consolidated Statements of Operations

(in thousands, except per share data)








Three Months Ended December 31,


Six Months Ended December 31,



2012


2011


2012


2011



(unaudited)


(unaudited)

Net revenue:









Products 


$  33,170


$  63,802


$  73,798


$119,976

Services 


44,609


42,097


86,729


85,498

Other 


-


524


-


1,400

Total net revenue 


77,779


106,423


160,527


206,874

Cost of revenue:









Cost of products 


18,564


32,800


42,573


71,173

Cost of services 


32,589


33,177


67,652


70,526

Cost of other 


-


203


-


504

Total cost of revenue 


51,153


66,180


110,225


142,203

Gross profit 


26,626


40,243


50,302


64,671

Operating expenses:









Selling and marketing 


15,761


14,017


28,650


27,598

Research and development 


17,239


18,283


35,813


37,401

General and administrative 


15,892


13,395


28,734


28,083

Total operating expenses 


48,892


45,695


93,197


93,082

Loss from operations


(22,266)


(5,452)


(42,895)


(28,411)

Other expense, net


(2,580)


(4,464)


(3,284)


(7,236)

Loss before provision for income taxes 


(24,846)


(9,916)


(46,179)


(35,647)

Provision for income taxes 


667


367


1,264


905

Loss from continuing operations


(25,513)


(10,283)


(47,443)


(36,552)



















Loss from discontinued operations:









Loss from operations of a discontinued variable interest entity 


(1,400)


(1,908)


(3,505)


(3,722)

Impairment of indefinite lived intangible asset of discontinued variable interest entity 


-


-


(12,200)


-

Loss from deconsolidation of a variable interest entity 


(3,442)


-


(3,442)


-

Loss from discontinued operations, net of tax


(4,842)


(1,908)


(19,147)


(3,722)










Loss from discontinued operations attributable to noncontrolling interest


(1,184)


(1,804)


(13,289)


(3,377)

Loss from discontinued operations attributable to stockholders


(3,658)


(104)


(5,858)


(345)










Net loss attributable to stockholders


$(29,171)


$(10,387)


$(53,301)


$ (36,897)










Loss per share attributable to stockholders









Basic and diluted - continuing operations


$    (0.35)


$    (0.15)


$    (0.65)


$     (0.52)

Basic and diluted - discontinued operations


$    (0.05)


$             -


$    (0.09)


$              -

Basic and diluted - net loss


$    (0.40)


$     (0.15)


$    (0.74)


$     (0.52)

Weighted average common shares used in computing loss per share









Basic and Diluted


72,870


70,698


72,433


70,481



















Cost of revenue, selling and marketing, research and development, and general and administrative expenses include stock-based compensation charges as follows: 

Cost of revenue 


$       319


$       437


$       566


$       995

Selling and marketing 


$       327


$       151


$       547


$       380

Research and development 


$       477


$       567


$       993


$    1,169

General and administrative 


$    1,173


$       792


$    1,945


$    2,012

 

 

Accuray Incorporated

Consolidated Balance Sheets

(in thousands, except share amounts)






 December 31, 


 June 30, 


2012


2012


(unaudited)

 Assets 




 Current assets: 




 Cash and cash equivalents 

$         94,773


$       143,504

 Restricted cash  

2,657


1,560

 Accounts receivable, net of allowance for doubtful accounts 

63,468


67,890

 Inventories  

88,830


81,693

 Prepaid expenses and other current assets 

14,766


16,715

 Deferred cost of revenue—current  

7,509


4,896

 Total current assets  

272,003


316,258





 Property and equipment, net 

$         37,209


37,458

 Goodwill  

59,389


59,215

 Intangible assets, net 

36,317


49,819

 Deferred cost of revenue—noncurrent  

2,760


2,433

 Other assets 

7,957


7,987

 Total assets  

$       415,635


$       473,170

 Liabilities and equity 




 Current liabilities: 




 Accounts payable  

$             20,668


$             18,209

 Accrued compensation 

12,809


23,071

 Other accrued liabilities 

28,657


31,646

 Customer advances 

18,576


18,177

 Deferred revenue—current  

87,272


83,071

 Total current liabilities  

167,982


174,174

 Long-term liabilities: 




 Long-term other liabilities 

5,293


5,988

 Deferred revenue—noncurrent  

9,968


9,675

 Long-term debt 

81,565


79,466

 Total liabilities  

264,808


269,303





 Equity: 




 Preferred stock, $0.001 par value; authorized: 5,000,000 shares; no shares  issued and outstanding

-


-

 Common stock, $0.001 par value; authorized: 200,000,000 and 100,000,000 shares; issued and outstanding: 73,920,824 and 71,864,268 shares at December 31 and June 30, 2012, respectively 

74


72

 Additional paid-in capital  

418,008


409,143

 Accumulated other comprehensive income 

2,473


2,837

 Accumulated deficit  

(269,728)


(216,427)

 Total stockholders' equity 

150,827


195,625

 Noncontrolling interest 



8,242

 Total equity 

150,827


203,867

 Total liabilities and equity 

$       415,635


$       473,170

 

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures, as defined in Regulation G promulgated by the Securities and Exchange Commission, with respect to the three and six months ended December 31, 2012 and 2011. "GAAP" refers to generally accepted accounting principles in the United States.

Accuray closed the acquisition of TomoTherapy on June 10, 2011 and TomoTherapy's operations since that date are included in Accuray's consolidated results of operations. Accounting for the impact of this acquisition has resulted in changes to the value of assets and liabilities from the amounts reflected by TomoTherapy prior to the acquisition and the creation of incremental assets and liabilities including intangible assets for developed technology and backlog, and unfavorable lease obligations. These changes have impacted revenues and expenses recorded in Accuray's consolidated statements of operations since the close of the acquisition. In addition, Accuray has incurred significant expenses as a result of the acquisition, some of which are one-time charges while others were incurred over fiscal 2012 and 2013 for the integration of TomoTherapy.

To reflect the ongoing core results of operations of the Company, including adjusting for the impact of the acquisition of TomoTherapy, the Company has presented its operating results on an adjusted non-GAAP basis as well as in accordance with GAAP for the three and six months ended December 31, 2012 and 2011. We use the following measures shown in the following tables, which are not calculated in accordance with GAAP. All significant adjustments to reconcile to GAAP primarily relate to the acquisition of TomoTherapy except the adjustment to Other income (expense). The Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses these non-GAAP financial measures in connection with its own budgeting and financial planning, as well as evaluating management performance for compensation purposes. These non-GAAP financial measures are in addition to, not a substitute for, nor superior to, measures of financial performance prepared in conformity with GAAP.