Accuray(ARAY)2024-11-07 03:29Financial Data and Key Metrics - Net revenue for Q1 2025 was $102 million, down 2% YoY and 2% on a constant currency basis [41] - Product revenue was $48 million, down 9% YoY, while service revenue grew 5% YoY to $53 million [41][42] - Adjusted EBITDA for the quarter was $3.1 million, compared to $6.5 million in the prior year, impacted by one-time ERP implementation costs [47] - The company raised its full-year FY 2025 revenue guidance to $462 million - $472 million and adjusted EBITDA guidance to $28 million - $30 million [51] Business Line Performance - China revenue grew 30% YoY, driven by strong demand in both Type A and B markets, with 22% growth in new customer installations [12][14] - APAC region saw first-in-country shipments, including the first VitalHold system in Thailand and the first CyberKnife S7 in the Philippines [17][18] - EIMEA and Japan revenues declined 35% and 22% YoY, respectively, due to tough comps, but customer base grew 4% and 3% YoY [19][20] - Americas revenue grew 2% YoY, driven by product shipments, but service revenue declined 8% due to installed base consolidation [21] Market Performance - China remains a key growth market, with the Tomo C system expected to drive market share gains in the Type B segment, estimated at $3 billion over the next five years [13][14] - The company expects stronger revenue growth in EIMEA and Japan in the second half of FY 2025, driven by customer timing and additional commercial coverage [20] - The U.S. market is expected to recover in the second half of FY 2025, with improved conditions for trade-in and trade-up upgrades [21] Strategy and Industry Competition - The company is focused on new product innovation, service solutions expansion, and improving patient access in high-growth emerging markets [11] - The launch of the Helix platform in India and other emerging markets is expected to drive growth, with CE Mark approval and orders already secured [24][25] - The Adaptive suite, including Cenos, positions the Radixact system as a key differentiator in the radiotherapy market, with regulatory submission expected in FY Q4 [27][28] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about the company's competitive position and growth trajectory, driven by strong demand in key markets and operational efficiencies [10][33] - The company is focused on margin expansion and productivity initiatives, with cost efficiencies achieved YoY, excluding one-time ERP benefits [31][32] - The global increase in cancer incidence and the need for innovative radiotherapy solutions were highlighted as key drivers of future growth [53] Other Important Information - The company's book-to-bill ratio for Q1 was 1.1, with a backlog of $469 million, representing over two years of FY 2024 product revenue [26][44] - The PACE-B study, published in the New England Journal of Medicine, is expected to change the treatment of localized prostate cancer, further supporting the company's innovation efforts [29][30] Q&A Session Summary Question: Timeline for Tomo C rollout in China and its growth impact - The Tomo C system is expected to drive growth through Q2-Q4 FY 2025, with deferred margin release positively impacting gross margins and adjusted EBITDA [16][56] - The company anticipates gaining market share in the Type B segment while maintaining leadership in the Type A segment [57] Question: Service contract revenue growth and sustainability - Service contract revenue growth outpaced installed base growth, driven by enhanced service offerings and higher pricing for advanced configurations [60][62] - The company expects continued investment in service growth to improve top-line revenue and margins [64] Question: Guidance increase and cautiousness for FY 2025 - The company raised guidance modestly, reflecting strong underlying trends in APAC and optimism for recovery in EIMEA, Japan, and the U.S. in the second half of FY 2025 [68][69] - Revenue is expected to be weighted 45% in the first half and 55% in the second half of FY 2025 [71] Question: Impact of anticorruption campaigns and stimulus in China - The anticorruption campaign has slowed processes, but the company is gaining market share despite budget reductions, driven by pent-up demand and strong JV partnerships [72][73] Question: India market and Helix product outlook - The company has secured CE Mark for the Helix platform and expects to begin shipping in India after completing local regulatory testing in early Q3 FY 2025 [77][78] Question: Impact of U.S. election results on growth outlook - The company is monitoring potential policy changes, including corporate tax rates and onshoring incentives, which could positively impact its U.S.-based manufacturing [80][81]