Accuray(US:ARAY)2025-11-05 21:16Financial Performance - Gross orders decreased by $15.8 million to $39.57 million for the three months ended September 30, 2025, compared to $55.365 million in the same period of the prior fiscal year [136]. - Net orders fell by $23.7 million to $5.915 million for the three months ended September 30, 2025, primarily due to a decrease in gross orders and an increase in age-outs [139]. - Net revenue for the three months ended September 30, 2025, was $93.9 million, a decrease of 7% compared to $101.5 million in the same period of 2024 [141]. - Products revenue decreased by $11.2 million to $37.2 million, a decline of 23%, primarily due to lower shipment volumes to China [142]. - Services revenue increased by $3.6 million to $56.8 million, a growth of 7%, driven by higher contract revenues from an increased installed base [143]. - Gross profit for the three months ended September 30, 2025, was $26.5 million, down 23% from $34.5 million in 2024, with gross profit margin decreasing to 28.3% from 33.9% [144]. - The company experienced a net loss of $21.7 million during the three months ended September 30, 2025, which was offset by $21.1 million from net changes in assets and liabilities [162]. Order Backlog and Demand - Order backlog at the end of the period was $395.726 million, down from $468.607 million in the prior year [136]. - The book-to-bill ratio remained stable at 1.1 for the three months ended September 30, 2025, indicating consistent demand for products [138]. Operating Expenses and Financial Charges - Total operating expenses rose to $37.9 million, an increase of 3% from $36.6 million, with general and administrative expenses increasing by 13% [145]. - Interest expense increased significantly to $8.1 million from $3.0 million, primarily due to higher interest payments and financing costs [149]. Cash Flow and Liquidity - The company had $63.3 million in cash and cash equivalents as of September 30, 2025, and expects inflation and supply chain challenges to impact cash flows through at least fiscal year 2026 [153]. - For the three months ended September 30, 2025, net cash provided by operating activities was $12.18 million, compared to a net cash used of $7.29 million in the same period of 2024 [161]. - The company incurred $3.8 million in net cash used for investing activities, primarily for property and equipment purchases and capitalized software investments [163]. - Cash and cash equivalents at foreign subsidiaries amounted to $8.8 million as of September 30, 2025, with potential foreign tax implications upon repatriation [160]. Supply Chain and Market Challenges - Ongoing supply chain challenges and inflation are expected to adversely affect gross margins and net income through at least fiscal year 2026 [124]. - The company anticipates that sales to China will be negatively impacted by tariff uncertainties and expects financial results to be adversely affected through at least the first half of fiscal year 2026 [131]. - Revenue from the China market decreased by 55% to $15.2 million, significantly impacting overall revenue performance [143]. Strategic Initiatives - The company recorded a restructuring charge of $1.5 million for severance benefits and $1.3 million for consulting activities related to a cost-saving initiative [132]. - Approximately 70% of raw materials and product components are sourced within the U.S., with over 80% of finished products exported globally [125]. - The joint venture in China aims to serve a significantly underserved market for radiation oncology systems, with the approval of the Class B device expected to enhance market opportunities [130]. - The company is evaluating its liquidity position and operating expenses in light of the uncertain macroeconomic environment [126]. Financing Activities - The company entered into a senior secured credit agreement on June 6, 2025, providing for $150 million in new term loan facilities and additional credit facilities [155]. - The Financing Agreement includes borrowings under the Term Loan Facility of $150.0 million, with interest rates tied to a term SOFR-based rate or a base rate [180]. - The company issued detachable warrants to purchase 17.2 million shares of common stock at an exercise price of $1.68 per share as part of the financing agreement [157]. - The company issued detachable warrants to purchase 17.2 million shares at an exercise price of $1.68 per share, which could have a dilutive effect on common stock [181]. Accounts Receivable and Inventory - A decrease of $28.3 million in accounts receivable was noted due to increased collections from China, while inventories increased by $16.6 million due to higher material purchases [162]. - The company maintains reserves for potential credit losses and performs ongoing credit evaluations of customers [175].