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Accuray Announces Results for First Quarter Fiscal 2013

November 7, 2012

SUNNYVALE, Calif., Nov. 7, 2012 /PRNewswire/ — Accuray Incorporated (Nasdaq: ARAY), the premier radiation oncology company, announced today financial results for the first quarter of fiscal 2013 that ended September 30, 2012. Non-GAAP results are provided to enhance understanding of Accuray’s ongoing core results of operations.

Recent highlights include a 31 percent increase in net new product orders for the first quarter of fiscal 2013 over the same quarter of the prior year, followed by the introduction of new CyberKnife and TomoTherapy Systems at American Society for Radiation Oncology (ASTRO) in October.

“Following the launch of two exciting new technologies at the ASTRO Annual Meeting, customers and prospects shared their enthusiasm for the new systems’ ability to expand the treatable patient population, increase accuracy of treatments, and improve throughput,” said Joshua Levine, president and chief executive officer of Accuray. “Capitalizing on these new products to grow future orders and revenue will be a principal focus of Accuray. As I go through my strategic and operational review, I am gaining greater insights into the business. After this review is complete, I look forward to providing guidance on our strategic agenda and associated metrics.”

For the first quarter of fiscal 2013 Accuray reported total consolidated GAAP revenue of $82.7 million and total non-GAAP revenue of $83.0 million. By comparison, for the first quarter of fiscal 2012, total GAAP revenue was $100.5 million and total non-GAAP revenue was $95.7 million. On a Non-GAAP basis product revenue was down by 28 percent from the same quarter of the prior year. “The year-on-year decline in product revenue reflects the fact that shipments of TomoTherapy Systems returned to normal levels from the unusually high levels in the first quarter after the acquisition was completed” said Derek A. Bertocci, chief financial officer of Accuray. “Service revenue continued to increase, up 10 percent from the prior year, driven primarily by continued increases in the installed base of systems.”

The consolidated GAAP gross margin for the first quarter of fiscal 2013 was 40.9 percent for products and 16.8 percent for services compared to 31.7 percent for products and 13.9 percent for services, for the first quarter of the prior year. The consolidated non-GAAP gross margin for the first quarter of fiscal 2013 was 50.1 percent for products and 16.7 percent for service, compared to 52.4 percent and 12.1 percent, respectively, for the first quarter of the prior year.

Consolidated GAAP net loss attributable to stockholders for the first quarter of fiscal 2013 was $24.1 million, or $0.34 per share, compared to $26.5 million or $0.38 per share for the first quarter of the prior year. Non-GAAP net loss for the first quarter of fiscal 2013 was $16.9 million or $0.23 per share compared to $11.1 million or $0.16 per share for the first quarter of the prior year.

Net product orders to backlog totaled $51.6 million during the first quarter of fiscal 2013, a 31 percent increase from $39.5 million during the first quarter of the prior year. Product backlog increased 9 percent to $294.3 million from $270.8 million at the end of the first quarter of the prior year. This was driven by a 61 percent increase in net orders for the TomoTherapy product line, offset by a 12 percent decline in orders for the CyberKnife product line, compared to the same quarter in the previous year.

During the first quarter of fiscal 2013, 15 units were shipped and 25 were installed, increasing Accuray’s worldwide installed base to 667 systems.

Accuray’s cash, cash equivalents and restricted cash totaled $124.5 million as of September 30, 2012.

Additional Information
Additional information including slides of first quarter highlights, which will be discussed during the conference call, is available in the Investor Relations section of the company’s website at www.accuray.com/investors.

Earnings Call Open to Investors
Accuray will hold a conference call for financial analysts and investors on Wednesday, November 7, 2012 at 2:00 p.m. PST/5:00 p.m. EST. The conference call dial-in numbers are1-866-788-0539 (USA) or 1-857-350-1677 (International), Conference ID: 32216030. A live webcast of the call will also be available from the Investor Relations section of the corporate website at www.accuray.com/investors. In addition, a recording of the call will be available by calling 1-888-286-8010 (USA) or 1-617-801-6888 (International), Conference ID: 10163094, beginning at 5:00 p.m. PST/8:00 p.m. EST on November 7, 2012 and will be available through November 14, 2012. A webcast replay will also be available from the Investor Relations section of the Company’s website at www.accuray.com/investors from approximately 5:00 p.m. PST/8:00 p.m. EST today through Accuray’s release of its results for the second quarter of fiscal 2013, ending December 31, 2012.

About Accuray
Accuray Incorporated (Nasdaq: ARAY), based in Sunnyvale, Calif., is the premier radiation oncology company that develops, manufactures and sells personalized, 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 – the CyberKnife and TomoTherapy Systems – are designed to deliver radiosurgery, stereotactic body radiation therapy, intensity modulated radiation therapy, image guided radiation therapy, and adaptive radiation therapy. To date, 667 systems have been installed in leading hospitals around the world. For more information, please visit www.accuray.com.

Safe Harbor Statement
Statements made in this press r lease 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 growth; the effects of the introduction of new CyberKnife and TomoTherapy Systems, clinical applications, clinical efficacy, treatment populations, efficiency, order growth, revenue growth and future profitability. 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 its worldwide sales and marketing efforts; the success of the introduction of our CyberKnife and TomoTherapy Systems; the extent of market acceptance for the company’s products and services; 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 filed on September 10,( )2012 and the company’s report on Form 10?Q to be filed for the first quarter of fiscal 2013.

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.

                                        Accuray Incorporated
                               Consolidated Statements of Operations
                               (in thousands, except per share data)

                                                         Three months ended
                                                           September 30,
                                                           -------------
                                                              2012                       2011
                                                              ----                       ----
                                                            (unaudited)
    Net revenue:
    Products                                               $40,628                    $56,174
    Services                                                42,120                     43,401
    Other                                                        -                        876
                                                               ---                        ---
    Total net revenue                                       82,748                    100,451
    Cost of revenue:
    Cost of products                                        24,009                     38,373
    Cost of services                                        35,063                     37,349
    Cost of other                                                -                        301
                                                               ---                        ---
    Total cost of revenue                                   59,072                     76,023
                                                            ------                     ------
    Gross profit                                            23,676                     24,428
    Operating expenses:
    Selling and marketing                                   12,889                     13,581
    Research and development                                20,209                     20,565
    General and administrative                              13,269                     14,969
    Impairment of indefinite lived intangible
     assets                                                 12,200                          -
                                                            ------                        ---
    Total operating expenses                                58,567                     49,115
                                                            ------                     ------
    Loss from operations                                   (34,891)                   (24,687)
    Other income (expense), net                               (747)                    (2,858)
                                                              ----                     ------
    Loss before provision for income taxes                 (35,638)                   (27,545)
    Provision for income taxes                                 597                        538
                                                               ---                        ---
    Net loss                                               (36,235)                   (28,083)
    Noncontrolling interest                                (12,105)                    (1,573)
                                                           -------                     ------
    Net loss attributable to stockholders                 $(24,130)                  $(26,510)
                                                          ========                   ========

    Net loss per share:
    Basic and Diluted                                       $(0.34)                    $(0.38)
                                                            ======                     ======
    Weighted average common shares  used in
     computing net loss per share
    Basic and Diluted                                       71,995                     70,263
                                                            ======                     ======

    Cost of revenue, selling and marketing, research and development, and general and administrative expenses include stock-based
     compensation charges as follows:

    Cost of revenue                                           $247                       $558
    Selling and marketing                                     $220                       $229
    Research and development                                  $516                       $602
    General and administrative                                $772                     $1,220
                                          Accuray Incorporated
                                      Consolidated Balance Sheets
                                  (in thousands, except share amounts)

                                                             September 30,           June 30,
                                                                               2012               2012
                                                                               ----               ----
                                                              (unaudited)
     Assets
     Current assets:
     Cash and cash equivalents                                             $121,861           $143,504
     Restricted cash                                                          2,611              1,560
     Accounts receivable, net
      of allowance for
      doubtful accounts                                                      57,620             67,890
     Inventories                                                             81,739             81,693
     Prepaid expenses and
      other current assets                                                   17,619             16,715
     Deferred cost of revenue-
      current                                                                 4,078              4,896
     Total current assets                                                   285,528            316,258

     Property and equipment,
      net                                                                    39,536             37,458
     Goodwill                                                                59,344             59,215
     Intangible assets, net                                                  39,122             49,819
     Deferred cost of revenue-
      noncurrent                                                              3,575              2,433
     Other assets                                                            10,912              7,987
     Total assets                                                          $438,017           $473,170
                                                                           ========           ========
     Liabilities and equity
     Current liabilities:
     Accounts payable                                                       $28,025            $18,209
     Accrued compensation                                                    16,226             23,071
     Other accrued liabilities                                               27,025             31,646
     Customer advances                                                       21,173             18,177
     Deferred revenue-current                                                77,797             83,071
     Total current liabilities                                              170,246            174,174
     Long-term liabilities:
     Long-term other
      liabilities                                                             5,592              5,988
     Deferred revenue-
      noncurrent                                                             12,582              9,675
     Long-term debt                                                          80,507             79,466
     Total liabilities                                                      268,927            269,303

     Equity:
     Preferred stock, $0.001 par value; authorized: 5,000,000 shares; no
      shares
     issued and outstanding                                                       -                  -
     Common stock, $0.001 par value; authorized: 100,000,000 shares;
      issued and
    outstanding: 72,143,926
     and 71,864,268 shares at
     September 30 and June
     30, 2012, respectively                                                      72                 72
     Additional paid-in
      capital                                                               411,136            409,143
     Accumulated other
      comprehensive income                                                    2,302              2,837
     Accumulated deficit                                                   (240,557)          (216,427)
     Total stockholders'
      equity                                                                172,953            195,625
     Noncontrolling interest                                                 (3,863)             8,242
     Total equity                                                           169,090            203,867
     Total liabilities and
      equity                                                               $438,017           $473,170
                                                                           ========           ========

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures, as defined in Regulation G promulgated by the Securities and Exchange Commission, with respect to the three months ended September 30, 2012 and 2011. “GAAP” refers to generally accepted accounting principles in the United States.

Accuray closed the acquisition of TomoTherapy on June 10, 2011 and TomoTherapy’s operations since that date are included in Accuray’s consolidated results of operations. Accounting for the impact of this acquisition has resulted in changes to the value of assets and liabilities from the amounts reflected by TomoTherapy prior to the acquisition and the creation of incremental assets and liabilities including intangible assets for developed technology and backlog, and unfavorable lease obligations. These changes have impacted revenues and expenses recorded in Accuray’s consolidated statements of operations since the close of the acquisition. In addition, Accuray has incurred significant expenses as a result of the acquisition, some of which are one-time charges while others were incurred over fiscal 2012 for the integration of TomoTherapy.

To reflect the ongoing core results of operations of the Company, including adjusting for the impact of the acquisition of TomoTherapy, the Company has presented its operating results on an adjusted non-GAAP basis as well as in accordance with GAAP for the three months ended September 30, 2012 and 2011. We use the following measures shown in the following tables, which are not calculated in accordance with GAAP. All significant adjustments to reconcile to GAAP primarily relate to the acquisition of TomoTherapy except the adjustment to Other income (expense). The Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses these non-GAAP financial measures in connection with its own budgeting and financial planning, as well as evaluating management performance for compensation purposes. These non-GAAP financial measures are in addition to, not a substitute for, nor superior to, measures of financial performance prepared in conformity with GAAP.

     Revenue Three months ended September 30, Three Months Ended September 30,
             -------------------------------- --------------------------------
                 2012             2012                 2012      2011                  2011            2011
                 ----             ----                 ----      ----                  ----            ----

              GAAP        Adjustments            Non-GAAP     GAAP             Adjustments       Non-GAAP
              ----        -----------            --------     ----             -----------       --------
     Products $40,628             $265       (A)    $40,893   $56,174                  $348  (A)    $56,522
     Services  42,120              (59)      (B)     42,061    43,401                (5,068) (B)     38,333
     Other          -                -                    -       876                     -             876
     -----        ---              ---                  ---       ---                   ---             ---
     Total    $82,748             $206              $82,954  $100,451               $(4,720)        $95,731

         (A)        As of the close of the acquisition,
                    TomoTherapy's deferred product revenue
                    related to products shipped but not yet
                    installed was written down to the fair
                    value of goods and services remaining
                    to be delivered. As a result, during
                    the three months ended September 30,
                    2012 and 2011, product revenue recorded
                    by Accuray for the sale of TomoTherapy
                    products was $0.3 million lower than
                    product revenue that would have been
                    recorded by TomoTherapy if the
                    acquisition had not occurred.

         (B)        As of the close of the acquisition,
                    TomoTherapy's deferred service revenue
                    was written up to fair value. As a
                    result, deferred service revenue
                    recognized by Accuray during the three
                    months ended September 30, 2012 and
                    2011 was $0.1 million and $5.1 million
                    higher than the amount that would have
                    been recognized by TomoTherapy if the
                    acquisition had not occurred.


     Cost of Revenue Three months ended September 30,                          Three Months Ended September 30,
                     --------------------------------                          --------------------------------
                                       2012                          2012                                     2012         2011                 2011                  2011
                                       ----                          ----                                     ----         ----                 ----                  ----

                             GAAP                     Adjustments                              Non-GAAP            GAAP         Adjustments               Non-GAAP
                             ----                     -----------                              --------            ----         -----------               --------
     Products                       $24,009                       $(3,617) (C)                             $20,392      $38,373             $(11,491) (C)          $26,882
     Services                        35,063                           (11) (D)                              35,052       37,349               (3,644) (D)           33,705
     Other                                -                             -                                        -          301                    -                   301
     -----                              ---                           ---                                      ---          ---                  ---                   ---
     Total                          $59,072                       $(3,628)                                 $55,444      $76,023             $(15,135)              $60,888
         (C)       Products cost of revenue included the
                   following charges arising from the
                   acquisition of TomoTherapy during the
                   three months ended September 30, 2012
                   and 2011, respectively: $-0- and $7.6
                   million due to the write up of finished
                   goods and work-in-process inventory
                   on hand at the time of the acquisition
                   from cost basis to fair value and was
                   subsequently sold in the period, $3.6
                   million and $3.8 million for
                   amortization of intangible assets
                   created by the acquisition.

    (D)            Services cost of revenue included the
                   following charges and reductions to
                   expenses arising from the acquisition
                   of TomoTherapy during the three months
                   ended September 30, 2012 and 2011: $0.2
                   million and $0.1 million charges for
                   property, plant and equipment
                   revaluation, $-0-and $1.2 million
                   charges due to employee severance,
                   integration and retention expenses.
                   Additionally, service cost of revenue
                   also included: $-0-and $3.6 million
                   charge due to the write up of service
                   related inventory on hand at the time
                   of the acquisition from cost basis to
                   fair value, $(0.3) million and $(1.3)
                   million reductions in expenses due to
                   the roll out of fair value increases in
                   warranty and loss contracts reserves,
                   both of which were related to service
                   provided during the periods.

                           Three months ended September 30,                     Three Months Ended September 30,
                           --------------------------------                     --------------------------------
              Gross Profit                   2012                         2012                               2012         2011                2011              2011
              ------------                   ----                         ----                               ----         ----                ----              ----

                                   GAAP                     Adjustments                       Non-GAAP            GAAP         Adjustments          Non-GAAP
                                   ----                     -----------                       --------            ----         -----------          --------
     Products                             $16,619                       $3,882                            $20,501      $17,801             $11,839           $29,640
     Services                               7,057                          (48)                             7,009        6,052              (1,424)            4,628
     Other                                      -                            -                                  -          575                   -               575
     -----                                    ---                          ---                                ---          ---                 ---               ---
     Total                                $23,676                       $3,834                            $27,510      $24,428             $10,415           $34,843

                                  Three months ended September 30,                    Three Months Ended September 30,
                                  --------------------------------                    --------------------------------
              Gross Profit Margin               2012                            2012                                2012       2011               2011           2011
              -------------------               ----                            ----                                ----       ----               ----           ----

                                        GAAP                       Adjustments                       Non-GAAP             GAAP       Adjustments        Non-GAAP
                                        ----                       -----------                       --------             ----       -----------        --------
     Products                                   40.9%                            9.2%                               50.1%      31.7%              20.7%          52.4%
     Services                                   16.8%                          (0.1)%                               16.7%      13.9%             (1.8)%          12.1%
     Other                                       0.0%                            0.0%                                0.0%      65.6%               0.0%          65.6%
     -----                                       ---                             ---                                 ---       ----                ---           ----
     Total                                      28.6%                            4.6%                               33.2%      24.3%              12.1%          36.4%
                                                      Three months ended September 30,                           Three Months Ended September 30,
                                                      --------------------------------                           --------------------------------
                      Operating Expenses                                2012                           2012                                     2012         2011                2011                  2011
                      ------------------                                ----                           ----                                     ----         ----                ----                  ----

                                                              GAAP                     Adjustments                               Non-GAAP            GAAP         Adjustments              Non-GAAP
                                                              ----                     -----------                               --------            ----         -----------              --------
     Selling and Marketing                                           $12,889                            $ -                                  $12,889      $13,581             $(1,724) (E)          $11,857
     Research and Development                                         20,209                           (163) (F)                              20,046       20,565                (301) (G)           20,264
     General and Administrative                                       13,269                           (976) (H)                              12,293       14,969              (2,381) (I)           12,588
     Impairment of indefinite lived intangible assets                 12,200                        (12,200) (J)                                   -            -                   -                     -
     ------------------------------------------------                 ------                        -------  ---                                 ---          ---                 ---                   ---
     Total                                                           $58,567                       $(13,339)                                 $45,228      $49,115             $(4,406)              $44,709
    (E)             Includes $0.8 million charge due to
                    employee severance and retention
                    expenses, and $0.9 million due to
                    preparation for integration of work
                    forces and operations from our
                    acquisition of TomoTherapy.

    (F)             Includes $0.1 million due to retention
                    expenses from the acquisition of
                    Morphormics, and $0.1 million due to
                    property, plant and equipment
                    revaluation from acquisition of
                    TomoTherapy.

    (G)             Includes $0.3 million charge primarily
                    due to employee severance and retention
                    expenses from the acquisition of
                    TomoTherapy.

    (H)             Includes $0.3 million charge primarily
                    due to employee severance from the
                    acquisition of Morphormics, $0.2
                    million related to employee severance
                    and retention due to consolidation of
                    European offices, $0.1 million charge
                    related to preparation for acquisition
                    of Morphormics and $0.4 million due to
                    property, plant and equipment
                    revaluation due to the acquisition of
                    TomoTherapy.

    (I)             Includes $0.9 million charge due to
                    employee severance and retention
                    expenses, $1.0 million of charges
                    related to preparation for integration
                    of work forces and operations, and $0.5
                    million charge for property, plant and
                    equipment revaluation related to the
                    acquisition of TomoTherapy.

    (J)             Represents the impairment charges
                    related to the write-down of the in-
                    process research and development
                    (IPR&D) asset based on results of
                    research and development work carried
                    out by CPAC, a variable interest entity
                    consolidated by the Company.
     Net Loss Attributable to Stockholders
                                           Three months ended September 30,                         Three Months Ended September 30,
                                           --------------------------------                         --------------------------------
                                                              2012                         2012                                    2012           2011                 2011                  2011
                                                              ----                         ----                                    ----           ----                 ----                  ----

                                                   GAAP                     Adjustments                             Non-GAAP             GAAP           Adjustments             Non-GAAP
                                                   ----                     -----------                             --------             ----           -----------             --------
     Loss From Operations                                 $(34,891)                     $17,173 (K)                            $(17,718)      $(24,687)             $14,821 (K)           $(9,866)
     Other Income (Expense)                                   (747)                         379 (L)                                (368)        (2,858)                 639 (M)            (2,219)
     Provision For Income Taxes                                597                            -                                     597            538                    -                   538
     Noncontrolling Interest                               (12,105)                      10,323 (N)                              (1,782)        (1,573)                   -                (1,573)
     -----------------------                               -------                       ------ ---                              ------         ------                  ---                ------
     Net Loss Attributable to Stockholders                $(24,130)                      $7,229                                $(16,901)      $(26,510)             $15,460              $(11,050)
     -------------------------------------                --------                       ------                                --------       --------              -------              --------

      Net Loss Per Share -Basic and
      Diluted                                               $(0.34)                       $0.10                                  $(0.23)        $(0.38)               $0.22                $(0.16)
     ------------------------------                         ------                        -----                                  ------         ------                -----                ------

      Weighted Average Common Shares
      outstanding -Basic and Diluted                        71,995                                                               71,995         70,263                                     70,263
              (K)             Represents impact of all adjustments (A)
                              through (J) on loss from operations.

              (L)             Includes $1.0 million non-cash interest
                              expense arising from the accretion of
                              interest expense on the long-term
                              debt, offset by $0.6 million gain on
                              previously held equity interest due to
                              the acquisition of Morphormics.

              (M)             Represents non-cash interest expense
                              arising from the accretion of interest
                              expense on the long-term debt.

              (N)             Represents the noncontrolling portion of
                              the $12.2 million impairment charge
                              related to the write-down of the IPR&D
                              asset based on results of research and
                              development work carried out by CPAC, a
                              variable interest entity consolidated
                              by the Company.

SOURCE Accuray Incorporated


Source: PR Newswire