Accuray Incorporated ((ARAY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Accuray Incorporated’s recent earnings call presented a mixed sentiment, reflecting both promising developments and significant challenges. The company showcased strong interest and growth in its service segment and new product launches, yet faced hurdles with declining revenue, lower product sales, and increased operating losses. While transformation efforts and strategic partnerships hint at potential future growth, current financial metrics raise concerns.
Launch of Stellar Product
In September, Accuray introduced the Stellar product at the ASTRO conference, marking a significant step in adaptive radiotherapy and precision care. This launch was met with positive reception and strong interest from both existing and new customers, underscoring the company’s commitment to innovation in the healthcare sector.
Memorandum of Understanding with University of Wisconsin
Accuray signed a memorandum of understanding with the University of Wisconsin School of Medicine and Public Health, aiming to advance online adaptive radiotherapy. This collaboration focuses on clinical research, education, and the development of adaptive technology, reinforcing Accuray’s strategic partnerships in the medical field.
First Patients Treated with CyberKnife in Australia
The first patients in Melbourne, Australia, were treated using the CyberKnife system, a milestone that enhances access to radiation therapy and minimizes the need for long-distance travel. This development highlights Accuray’s global reach and commitment to improving patient care.
Service Revenue Growth
Service revenue for the quarter reached $57 million, marking a 7% increase from the previous year. This growth was primarily driven by a 10% year-over-year rise in contract revenue, showcasing the strength of Accuray’s service segment.
Decline in Net Revenue
Accuray reported a net revenue of $94 million for the first quarter, a 7% decline compared to the previous year and a 9% decrease on a constant currency basis. This decline reflects the challenges faced in maintaining revenue growth.
Decrease in Product Revenue
Product revenue for the first quarter was $37 million, down 23% year-over-year. This decrease was mainly attributed to slower performance in the EIMEA and China regions, indicating regional market challenges.
Reduction in Gross Margin
The overall gross margin for the quarter dropped to 28.3%, down from 33.9% in the prior year. This reduction was due to factors such as sales mix, tariffs, and a one-time obsolescence charge, impacting profitability.
Operating Loss Increase
Accuray’s operating loss for the quarter increased to $11.3 million, compared to a loss of $2.1 million in the previous year. This was influenced by gross margin challenges and restructuring costs, highlighting financial pressures.
Challenges in Product Orders
Product orders for the first quarter were approximately $40 million, falling short of expectations due to timing issues in China and the Americas regions. This shortfall underscores the difficulties in aligning product orders with market demand.
Forward-Looking Guidance
Despite a 7% decrease in net revenue compared to the prior year, Accuray maintained its fiscal year guidance, projecting revenues between $471 million to $485 million and an adjusted EBITDA range of $31 million to $35 million. The company aims for a high single-digit adjusted EBITDA margin within 12 months, with plans to expand to double digits in the medium to long term. Accuray’s order backlog stands at approximately $396 million, representing over 18 months of product revenue, with expectations for improved performance in the second half of the fiscal year.
In summary, Accuray’s earnings call painted a picture of both opportunities and challenges. While the company is making strides with new product launches and strategic partnerships, financial metrics such as declining revenue and increased operating losses present concerns. However, with maintained guidance and a focus on transformation plans, Accuray remains optimistic about future growth prospects.