Full Press Release Details
Accuray Reports Financial Results for Third Quarter of Fiscal Year 2015
SUNNYVALE, Calif., April 30, 2015 Accuray Incorporated (Nasdaq: ARAY) announced today financial results for the third fiscal quarter and nine months ended March 31, 2015.
Third Quarter Highlights
Gross orders grew 15 percent year-over-year or 21 percent on a constant currency basis
Total revenue remained approximately flat at $97.5 million year-over-year but increased 5 percent on a constant currency basis
Continued expansion of service gross profit margins to 38.4 percent
Achieved positive operating income
Adjusted EBITDA reached $9.9 million
Year-over-year gross order growth was restored in the third quarter, but our overall gross order volume during the period did not fully meet our internal objectives, particularly in the U.S., said Joshua H. Levine, president and chief executive officer of Accuray. At the same time, our operating results were relatively solid with good revenue volume, expanding margins, controlled expenses and an operating profit for the first time in many years.
Mr. Levine continued, During the past few weeks, we have completed a thorough assessment of our execution on our five core strategies for driving consistent growth. We have concluded that we still have more work ahead of us to build a stronger U.S. funnel, however we met or exceeded our expectations on strategies related to emerging markets, installed base satisfaction and TomoTherapy System positioning, all of which demonstrate that we have many pieces in place to achieve our growth objectives and build shareholder returns.
Financial Highlights
Gross product orders totaled $51.9 million for the 2015 fiscal third quarter, an increase of $6.7 million or 15 percent from the third quarter of the prior fiscal year. On a constant currency basis, gross product orders for the fiscal third quarter were $54.5 million. Ending product backlog was $347.4 million or approximately 2 percent lower than backlog at the end of the prior fiscal year third quarter. Units in backlog have increased 10 percent year over year and on a constant currency backlog dollars have increased $12 million.
Total revenue was $97.5 million, which was relatively flat from the prior fiscal year third quarter and an increase of 5 percent on a constant currency basis. The Americas region total revenues were $52.6 million, an increase of 63 percent from the prior fiscal year third quarter. Total revenues outside the Americas region were $44.9 million, a decrease of 31 percent from the prior fiscal year third quarter. Product revenues totaled $46.4 million and represented a decrease of 1 percent from the fiscal 2014 third quarter while service revenues totaled $51.2 million, an increase of 2 percent over last year s fiscal year third quarter.
Total gross profit for the third quarter of fiscal 2015 was $38.7 million or 40 percent of sales, comprised of product gross margin of 41 percent and service gross margin of 38 percent. This compares to total gross margin of 41 percent, product gross margin of 46 percent and service gross margin of 36 percent for the prior fiscal year third quarter. Total gross margin for the third quarter of fiscal 2015 was 42 percent on a constant currency basis as compared to 41 percent the prior year period.
Operating expenses were $37.5 million, reflecting a decrease of 7 percent compared with $40.2 million in last fiscal year s third quarter. The decrease was primarily due to lower incentive compensation and consulting expenses partially offset by higher legal fees.
Net loss was $3.0 million, or $0.04 per share for the third quarter of fiscal 2015, compared to a net loss of $4.7 million, or $0.06 per share, for the fiscal 2014 third quarter.
Adjusted EBITDA for the third quarter of 2015 was $9.9 million, compared to $7.8 million in the prior fiscal year third quarter.
Cash, cash equivalents, and investments were $149.6 million as of March 31, 2015, a decrease of $1.2 million from December 31, 2014.
Nine Month Highlights
For the nine months ended March 31, 2015, total revenue reached $278.1 million, representing an increase of 4 percent, or 7 percent on a constant currency basis, from the comparable period of fiscal year 2014. Product revenue for the nine month period was $127.0 million, representing an increase of 4 percent while service revenue was $151.0 million, also representing 4 percent growth over the comparable prior fiscal year period.
Gross profit margin for the nine months ended March 31, 2015 was 38 percent, comprised of product gross margin of 41 percent and service gross margin of 35 percent. This compares to total gross margin of 39 percent for the comparable prior fiscal year period. Total gross margin for the nine months ended March 31, 2015 would have been 39 percent on a constant currency basis as compared to the comparable prior fiscal year period.
Operating expenses were $122.6 million for the nine months ended March 31, 2015, compared with $117.8 million in the fiscal 2014 comparable period.
Net loss for the nine months ended March 31, 2015 was $34.6 million, or $0.44 per share, compared to a net loss of $25.6 million, or $0.34 per share, for the comparable prior fiscal year period.
Adjusted EBITDA for the nine months ended March 31, 2015 was $5.1 million, compared to $10.8 million in the comparable prior fiscal year period.
2015 Financial Guidance
Accuray is revising financial guidance for fiscal year 2015 as follows: total revenue of $375 million to $385 million and adjusted EBITDA of $13 million to $16 million. This compares to previously issued guidance updated most recently in January 2015 of $390 million to $410 million in revenue and $18 million to $27 million in adjusted EBITDA. This revision is caused primarily by the effects of foreign currency on reported results. The company reiterates that gross order growth in the second half of the fiscal year 2015 is expected to be greater than market growth.
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) 798-3048
International callers: (262) 912-4764
Individuals interested in listening to the live conference call via the Internet may do so by logging on to the company s website, www.accuray.com. In addition, a dial-up replay of the conference call will be available beginning April 30, 2015 at 5:00 p.m. PT/8:00 p.m. ET and ending May 8, 2015. The replay telephone number is (855) 859-2056 (USA) or (404) 537-3406 (International).
Use of Non-GAAP Financial Measures
The company 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.
The company 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.
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 gross 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 29, 2014, the company s reports on Form 10-Q which were filed on
November 7, 2014 and February 6, 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)
| Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||
| Gross Orders | $ | 51,891 | $ | 45,168 | $ | 182,915 | $ | 188,860 | |||||
| Net Orders | 35,937 | 38,622 | 109,693 | 158,051 | |||||||||
| Order Backlog | 347,408 | 353,621 | 347,408 | 353,621 | |||||||||
| Net revenue: | |||||||||||||
| Products | $ | 46,361 | $ | 47,045 | $ | 127,026 | $ | 121,761 | |||||
| Services | 51,154 | 50,099 | 151,025 | 145,658 | |||||||||
| Total net revenue | 97,515 | 97,144 | 278,051 | 267,419 | |||||||||
| Cost of revenue: | |||||||||||||
| Cost of products | 27,332 | 25,255 | 75,168 | 68,836 | |||||||||
| Cost of services | 31,523 | 32,185 | 97,933 | 94,230 | |||||||||
| Total cost of revenue | 58,855 | 57,440 | 173,101 | 163,066 | |||||||||
| Gross profit | 38,660 | 39,704 | 104,950 | 104,353 | |||||||||
| Operating expenses: | |||||||||||||
| Research and development | 12,836 | 13,763 | 40,902 | 40,148 | |||||||||
| Selling and marketing | 12,987 | 15,310 | 46,763 | 44,026 | |||||||||
| General and administrative | 11,665 | 11,106 | 34,976 | 33,656 | |||||||||
| Total operating expenses | 37,488 | 40,179 | 122,641 | 117,830 | |||||||||
| Income (loss) from operations | 1,172 | (475 | ) | (17,691 | ) | (13,477 | ) | ||||||
| Other expense, net | (3,618 | ) | (3,312 | ) | (14,607 | ) | (9,547 | ) | |||||
| Loss before provision for income taxes | (2,446 | ) | (3,787 | ) | (32,298 | ) | (23,024 | ) | |||||
| Provision for income taxes | 521 | 878 | 2,311 | 2,615 | |||||||||
| Net loss | $ | (2,967 | ) | $ | (4,665 | ) | $ | (34,609 | ) | $ | (25,639 | ) | |
| Net loss per share - basic and diluted | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.44 | ) | $ | (0.34 | ) | |
| Weighted average common shares used in computing loss per share: | |||||||||||||
| Basic and diluted | 78,746 | 76,382 | 77,981 | 75,447 |
Accuray Incorporated
Consolidated Balance Sheets
| March 31, | June 30, | ||||||
| 2015 | 2014 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 95,449 | $ | 92,346 | |||
| Investments | 54,185 | 79,553 | |||||
| Restricted cash | 2,858 | 1,492 | |||||
| Accounts receivable, net | 61,376 | 72,152 | |||||
| Inventories | 109,705 | 87,752 | |||||
| Prepaid expenses and other current assets | 15,650 | 17,873 | |||||
| Deferred cost of revenue | 8,743 | 13,302 | |||||
| Total current assets | 347,966 | 364,470 | |||||
| Property and equipment, net | 29,856 | 34,391 | |||||
| Goodwill | 58,020 | 58,091 | |||||
| Intangible assets, net | 17,552 | 23,517 | |||||
| Deferred cost of revenue | 1,752 | 2,899 | |||||
| Other assets | 8,513 | 11,820 | |||||
| Total assets | $ | 463,659 | $ | 495,188 | |||
| Liabilities and equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 13,656 | $ | 15,639 | |||
| Accrued compensation | 19,530 | 32,569 | |||||
| Other accrued liabilities | 20,151 | 24,464 | |||||
| Customer advances | 18,951 | 19,804 | |||||
| Deferred revenue | 93,500 | 92,093 | |||||
| Total current liabilities | 165,788 | 184,569 | |||||
| Long-term liabilities: | |||||||
| Long-term other liabilities | 10,454 | 6,593 | |||||
| Deferred revenue | 9,946 | 9,866 | |||||
| Long-term debt | 200,989 | 195,612 | |||||
| Total liabilities | 387,177 | 396,640 | |||||
| Commitment and contingencies | |||||||
| Equity: | |||||||
| Common stock | 79 | 77 | |||||
| Additional paid-in capital | 465,952 | 451,750 | |||||
| Accumulated other comprehensive income | 154 | 1,815 | |||||
| Accumulated deficit | (389,703 | ) | (355,094 | ) | |||
| Total equity | 76,482 | 98,548 | |||||
| Total liabilities and equity | $ | 463,659 | $ | 495,188 |
Accuray Incorporated
Reconciliation of GAAP Net Loss to Adjusted Earnings Before Interest, Taxes Depreciation
Amortization and Stock-Based Compensation (Adjusted EBITDA)
| Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||
| GAAP net loss | $ | (2,967 | ) | $ | (4,665 | ) | $ | (34,609 | ) | $ | (25,639 | ) | |
| Amortization of intangibles (a) | 1,989 | 1,998 | 5,965 | 6,391 | |||||||||
| Depreciation (b) | 2,915 | 2,982 | 8,899 | 9,155 | |||||||||
| Stock-based compensation (c) | 3,377 | 3,260 | 10,504 | 8,243 | |||||||||
| Interest expense, net (d) | 4,051 | 3,366 | 12,062 | 10,013 | |||||||||
| Provision for income taxes | 521 | 878 | 2,311 | 2,615 | |||||||||
| Adjusted EBITDA | $ | 9,886 | $ | 7,819 | $ | 5,132 | $ | 10,778 |
(a) consists of amortization of intangibles - developed technology and distributor licenses
(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
Reconciliation of Projected Net Loss to Forward-Looking Guidance for Non-GAAP Financial Measures
| Twelve Months Ending June 30, 2015 | |||||||
| From | To | ||||||
| GAAP net loss | $ | (39,975 | ) | $ | (36,975 | ) | |
| Amortization of intangibles (a) | 8,000 | 8,000 | |||||
| Depreciation (b) | 11,775 | 11,775 | |||||
| Stock-based compensation (c) | 14,000 | 14,000 | |||||
| Interest expense, net (d) | 16,200 | 16,200 | |||||
| Provision for income taxes | 3,000 | 3,000 | |||||
| Adjusted EBITDA | $ | 13,000 | $ | 16,000 |
(a) consists of amortization of intangibles - developed technology and distributor licenses
(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