Accuray(ARAY) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q4 was $110 million, down 1% year-over-year, while full-year revenue reached $430 million, representing an 8.5% increase, marking a record for the company [29][30] - Product revenue for Q4 was $58 million, up 3.4% year-over-year, and for the full year, it was $214.7 million, an increase of 21.5% [29][30] - Service revenue for Q4 was $52 million, down 5% year-over-year, and for the full year, it was $215 million, a decrease of 2% [30][34] - Overall gross margin for Q4 was 39.1%, slightly down from 39.4% in the prior year, while full-year gross margin was 37.2%, down from 40.3% [33][34] - Adjusted EBITDA for Q4 was $5.2 million, compared to $6.7 million in the prior year, while full-year adjusted EBITDA was $22.8 million, exceeding the higher end of guidance [36] Business Line Data and Key Metrics Changes - The TomoTherapy platform accounted for approximately 65% of Q4 revenue unit volume, while the CyberKnife platform accounted for 35% [29] - For the full year, TomoTherapy represented about 69% of unit volume, with CyberKnife at 31% [29] - Gross orders for Q4 were $88 million, down 22% year-over-year, while total gross orders for the fiscal year were $332 million, up 2% [30] Market Data and Key Metrics Changes - The Americas region saw a 31% year-over-year growth in orders and 17.5% growth in revenue [16] - The EIMEA region experienced a 10.6% decline in orders year-over-year but a 10.7% increase in revenue [16] - The APAC region had an 8% year-over-year increase in orders, with revenue growing 9% [17] - Japan's orders were flat, and revenue declined 15% year-over-year, impacted by foreign exchange headwinds [17] Company Strategy and Development Direction - The company aims to grow faster than the market, deliver differentiated solutions, improve service offerings, and enhance margins and free cash flow [7][21] - A focus on innovation-driven growth is emphasized, with plans to invest approximately 14% of revenue back into R&D in FY '23 [22] - The company is undergoing a multi-year transformation of its service business to capture greater value and improve operational efficiency [23] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued macroeconomic challenges and foreign exchange headwinds in the first half of FY '23, with revenue guidance set between $447 million and $455 million [38] - There is cautious optimism regarding recovery in China and the potential for improved performance as supply chain conditions stabilize [39] - The company remains committed to investing in technology and clinical innovation to differentiate its offerings and improve patient outcomes [39] Other Important Information - The CyberKnife system showed significant revenue growth due to increasing demand for ultra-hypofractionated treatments [13] - The company reported a strong backlog of approximately $564 million, which is 9% lower than the prior year due to net age-outs [32] Q&A Session Summary Question: Competitive assessment of systems and machines - Management believes they are in a strong position, especially in the premium segment, with unique technologies like ClearRT and Synchrony providing significant differentiation [44][45] Question: Current situation in China - Management expects similar conditions in the first half of FY '23 due to COVID lockdowns but remains cautiously optimistic about demand and backlog conversion [47] Question: Replacement market opportunities - There is increased activity to upgrade older systems, particularly in developed markets, with a focus on driving trade-ins and trade-ups [51] Question: Impact of geopolitical tensions - Geopolitical tensions have affected installations and supply chains, but management is confident in converting backlog to revenue once conditions improve [53][55] Question: Capital spending appetite across geographies - There are variances by region, with some slowdowns expected in China and Japan, but overall demand for cancer care remains strong [59][60] Question: Service business improvements and pricing - The transformation of the service business is a multi-year effort, focusing on adding value rather than just raising prices [62] Question: Synchrony and ClearRT adoption impact on pricing - Innovations are expected to drive higher average selling prices (ASPs) due to increased value associated with new technologies [66] Question: Timeline for China JV Class B product - The submission for NMPA approval is on track for Q2 FY '23, with expectations for a material impact on orders and revenue in FY '24 [75]