Accuray Generates $108.9 Million in Second Quarter Revenues

Record Revenues Achieved as Commercial Execution Continues; Management Reaffirms Fiscal 2016 Guidance

Jan 28, 2016, 16:02 ET from Accuray Incorporated

SUNNYVALE, Calif., Jan. 28, 2016 /PRNewswire/ -- Accuray Incorporated (NASDAQ: ARAY) announced today financial results for the second fiscal quarter and six months ended December 31, 2015.

Fiscal Second Quarter Highlights

  • Gross orders were $67.1 million; single and dual vault sites comprised more than 50 percent of total TomoTherapy® System orders; replacement orders to existing accounts comprised approximately 15 percent of all system orders
  • Total revenue was $108.9 million, an increase of 11 percent year-over-year or 15 percent on a constant currency basis
  • Gross profit margins expanded sequentially to 39.1 percent from 37.8 percent
  • Operating income was near breakeven compared to a loss of $3.6 million in the prior year
  • Adjusted EBITDA was $6.8 million compared to $3.7 million in the prior year
  • Cash, cash equivalents and investments increased $2.7 million compared to a decrease of $1.9 million in the prior year

"In the second quarter we achieved an all time high revenue quarter and near breakeven operating income, demonstrating that we are continuing to execute on each of our strategic commercial initiatives. Based on our commercial momentum, we expect that order and revenue growth in the second half of the fiscal year will be at levels well above overall market growth," said Joshua H. Levine, president and chief executive officer of Accuray.  "Additionally, in January 2016 we took steps to improve our capital structure by closing on a $70 million senior secured loan and subsequently retiring $63.4 million of convertible notes which were to mature in August 2016. We believe this demonstrates confidence on the part of the financial community in our ability to execute our commercial strategies and drive positive EBITDA.  With the retirement of the notes and our intent to pay the remaining convertible notes in cash we have reduced potential dilution by 10.6 million shares of our common stock."

Financial Highlights
Gross product orders totaled $67.1 million for the second fiscal quarter. Ending product backlog was $366.7 million

Total revenue was $108.9 million, an increase of 11 percent from the prior fiscal year second quarter and an increase of 15 percent on a constant currency basis.  The Americas region total revenue was $51.0 million and total revenue outside of the Americas region was $57.9 million.  Product revenue increased 17 percent to $55.8 million while service revenue increased 5 percent to $53.1 million.

Total gross profit was $42.6 million or 39 percent of sales, comprised of product gross margin of 41 percent and service gross margin of 37 percent.  This compares to total gross margin of 39 percent, product gross margin of 43 percent and service gross margin of 36 percent for the prior fiscal year second quarter.  On a constant currency basis, total gross margin for the second quarter of fiscal 2016 was 41 percent.

Operating expenses were $42.7 million, an increase of 1 percent compared with $42.1 million in the prior fiscal second quarter. The increase was primarily due to higher legal expenses, related to the amended award of $2.1 million for damages to the Company's former China distributor as well as increased research and development expenses to support ongoing product development efforts. These increases were partially offset by reduced compensation related expenses in sales and marketing and general and administrative functions.

In November 2015 Accuray's former distributor in China was awarded an interim award for damages of approximately $3.4 million. In January 2016, the International Chamber of Commerce International Court of Arbitration revised the award based on a clerical error they believe occurred in their calculation of the maximum amount of damages. Accuray incurred an additional $2.1 million in expenses related to this amended award in the second quarter of fiscal 2016. The remaining issue to be finalized in the arbitration relates to the payment of attorneys' fees. 

Net loss improved to $6.0 million, or $0.08 per share, for the second quarter of fiscal 2016, compared to a net loss of $10.0 million, or $0.13 per share, for the second quarter of fiscal 2015. 

Adjusted EBITDA for the second quarter of fiscal 2016 was $6.8 million, compared to $3.7 million in the second quarter of the prior fiscal year.

Cash, cash equivalents and investments were $155.8 million as of December 31, 2015, an increase of $2.7 million from September 30, 2015.

Six Month Highlights
For the six months ended December 31, 2015, total revenue reached $198.5 million, representing an increase of 10 percent or 14 percent on a constant currency basis, from the comparable period of fiscal year 2015.  Product revenue for the six month period was $95.8 million, representing an increase of 19 percent while service revenue was $102.8 million, representing 3% growth over the comparable prior fiscal year period. 

Gross profit margin for the six months ended December 31, 2015 was 39 percent, comprised of product gross margin of 42 percent and service gross margin of 35 percent.  This compares to total gross margin of 37 percent for the comparable prior fiscal year period. 

Operating expenses were $83.8 million for the six months ended December 31, 2015, compared with $85.2 million in the comparable prior fiscal year period.

Net loss for the six months ended December 31, 2015 was $19.1 million, or $0.24 per share, compared to a net loss of $31.6 million, or $0.41 per share, for the comparable prior fiscal year period.

Adjusted EBITDA for the six months ended December 31, 2015 was a positive $5.7 million, compared to a loss of $4.8 million in the comparable prior fiscal year period.

Cash, cash equivalents, and investments increased $11.9 million from June 30, 2015.

2016 Financial Guidance

Accuray reaffirmed previously provided financial guidance for fiscal 2016. Total revenue is expected to be between $395 million to $410 million and adjusted EBITDA is expected to range between $25 million to $35 million. Accuray continues to expect that gross orders for the fiscal year will be approximately $295 million, which would represent a 10 percent increase year over year.

This financial guidance is unchanged from that provided on January 11, 2016.

Conference Call Information  

Accuray will host a conference call beginning at 1:30 p.m. PT/4:30 p.m. ET today to discuss these results.  Conference call dial-in information is as follows:

  • U.S. callers: (855) 867-4103    
  • International callers: (262) 912-4764
  • Conference ID Number (U.S. and international): 19257397

Individuals interested in listening to the live conference call via the Internet may do so by logging on to Accuray's website, www.accuray.com.  In addition, a dial-up replay of the conference call will be available beginning January 28, 2016 at 5:00 p.m. PT/8:00 p.m. ET and ending February 4, 2016.  The replay telephone number is (855) 859-2056 (USA) or (404) 537-3406 (International), Conference ID: 19257397.

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").  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 more meaningful comparison of results for current periods with previous operating results.  A reconciliation of GAAP net loss (the most directly comparable GAAP measure) to non-GAAP adjusted EBITDA is provided in the schedule below.

Accuray presents certain measures, such as period-over-period revenue growth, on a constant currency basis, which excludes the effects of foreign currency translation.  Due to the continuing strengthening of the U.S. dollar against foreign currencies and the overall variability of foreign exchange rates from period to period, management uses these measures on a constant currency basis to evaluate period-over-period operating performance.  Measures presented on a constant currency basis are calculated by translating current period results at prior period monthly average exchange rates.

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) is a radiation oncology company that develops, manufactures and sells precise, 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 the company's future results of operations, including management's expectations regarding growth in orders, gross profit margins, revenues and adjusted EBITDA, ability to meet financial targets, and Accuray's leadership position in radiation oncology innovation and technologies.  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 the adoption of our CyberKnife and TomoTherapy Systems; 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, which was filed on August 28, 2015, the company's report on Form 10-Q, which was filed on November 5, 2015 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 December 31,


Six Months Ended December 31,


2015


2014


2015


2014









Gross Orders

$  67,078


$  72,261


$  132,006


$  131,024

Net Orders

42,679


41,474


87,478


73,756

Order Backlog

366,668


357,831


366,668


357,831









Net revenue:








Products 

$  55,759


$  47,650


$    95,754


$    80,665

Services 

53,153


50,505


102,789


99,871

Total net revenue 

108,912


98,155


198,543


180,536

Cost of revenue:








Cost of products 

32,717


27,171


55,734


47,836

Cost of services 

33,624


32,495


66,340


66,410

Total cost of revenue 

66,341


59,666


122,074


114,246

Gross profit 

42,571


38,489


76,469


66,290

Operating expenses:








Research and development 

14,931


13,917


29,227


28,066

Selling and marketing 

15,076


15,802


28,493


33,776

General and administrative 

12,688


12,361


26,104


23,311

Total operating expenses 

42,695


42,080


83,824


85,153

Loss from operations

(124)


(3,591)


(7,355)


(18,863)

Other expense, net

(5,070)


(5,528)


(10,161)


(10,989)

Loss before provision for income taxes

(5,194)


(9,119)


(17,516)


(29,852)

Provision for income taxes

833


873


1,537


1,790

Net loss

$   (6,027)


$   (9,992)


$   (19,053)


$   (31,642)









Net loss per share - basic and diluted

$     (0.08)


$     (0.13)


$       (0.24)


$       (0.41)

Weighted average common shares used in computing loss per share:








Basic and diluted

80,346


77,924


80,053


77,607

 

Accuray Incorporated

Consolidated Balance Sheets

(in thousands)

(Unaudited)






 December 31, 


 June 30, 


2015


2015

 Assets 




 Current assets: 




 Cash and cash equivalents 

$        88,451


$   79,551

 Investments 

67,304


64,306

 Restricted cash 

2,596


3,734

 Accounts receivable, net 

66,044


77,727

 Inventories 

111,513


106,151

 Prepaid expenses and other current assets 

13,598


15,991

 Deferred cost of revenue 

8,834


6,869

 Total current assets 

358,340


354,329

 Property and equipment, net 

29,550


31,829

 Goodwill 

57,892


58,054

 Intangible assets, net 

11,587


15,564

 Deferred cost of revenue 

2,152


1,500

 Other assets 

13,804


8,695

 Total assets 

$         473,325


$    469,971

 Liabilities and equity 




 Current liabilities: 




 Accounts payable 

$        19,561


$   13,096

 Accrued compensation 

20,484


21,934

 Other accrued liabilities 

23,839


18,720

 Short-term debt 

96,551


-

 Customer advances 

19,377


19,385

 Deferred revenue 

94,386


96,780

 Total current liabilities 

274,198


169,915

 Long-term liabilities: 




 Long-term other liabilities 

10,829


10,934

 Deferred revenue 

17,257


10,489

 Long-term debt 

110,172


202,853

 Total liabilities 

412,456


394,191

 Commitment and contingencies 




 Equity: 




 Common stock 

81


79

 Additional paid-in capital 

476,387


471,430

 Accumulated other comprehensive loss 

(1,243)


(426)

 Accumulated deficit 

(414,356)


(395,303)

 Total equity 

60,869


75,780

 Total liabilities and equity 

$         473,325


$    469,971

 

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 December 31,


   Six Months Ended December 31,


2015


2014


2015


2014

 GAAP net loss 

$ (6,027)


$ (9,992)


$ (19,053)


$ (31,642)

   Amortization of intangibles (a) 

1,988


1,988


3,976


3,976

   Depreciation (b) 

2,514


2,994


5,085


5,984

   Stock-based compensation (c) 

3,365


3,854


5,879


7,127

   Interest expense, net (d) 

4,138


4,023


8,294


8,011

   Provision for income taxes 

833


873


1,537


1,790

 Adjusted EBITDA 

$  6,811


$  3,740


$    5,718


$   (4,754)

 

 (a) 

consists of amortization of intangibles - developed technology. 

 (b)

consists of depreciation, primarily on property and equipment. 

 (c)

consists of stock-based compensation in accordance with ASC 718. 

 (d)

consists primarily of interest income from available-for-sale securities and interest expense associated with our convertible notes. 

 

Accuray Incorporated

Forward-Looking Guidance

Reconciliation of Projected Net Loss to Projected Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-Based Compensation (Adjusted EBITDA)

(in thousands)

(Unaudited)



Twelve Months Ending June 30, 2016


From


To

 GAAP net loss 

$ (28,200)


$ (18,300)

   Amortization of intangibles (a) 

7,950


7,950

   Depreciation (b) 

10,850


10,850

   Stock-based compensation (c) 

14,100


14,100

   Interest expense, net (d) 

17,300


17,300

   Provision for income taxes 

3,000


3,100

 Adjusted EBITDA 

$  25,000


$  35,000

 

 (a)  

consists of amortization of intangibles - developed technology.

 (b)

consists of depreciation, primarily on property and equipment. 

 (c)

consists of stock-based compensation in accordance with ASC 718. 

 (d)  

consists primarily of interest income from available-for-sale securities and interest expense associated with our convertible notes.

 

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SOURCE Accuray Incorporated



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