ACCURAY INC Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Suzanne Winter returns as CEO, thanks team for interim leadership.
• Strong Q1 results; progress on FY 2025 priorities: new product innovation, service solutions expansion, commercial strategies in China and APAC.
• Tomo C production ramped in Tianjin, with systems to ship in coming quarters, impacting margins.
• Service revenue growth due to enhanced contracts and value-added services.
• ERP system fully integrated, margin expansion and productivity initiatives, past one-time ERP benefit.
• PACE-B study published, SBRT symposium held to advance radiotherapy practice.

Segment Performance

• China: Q1 revenue grew 30% year-over-year. Tomo C product production ramped in Tianjin, with systems expected to ship in Q2-Q4, releasing deferred margin. Type A market had 22% YOY growth in new customers installed.
• APAC: First-in-country shipments of Radixact, CyberKnife, and VitalHold systems in Thailand, Philippines, Myanmar.
• EIMEA and Japan: Q1 revenue in line with expectations, but down YOY; customer base grew 4% (EIMEA) and 3% (Japan) YOY.
• Americas: Revenue up 2% YOY, driven by product shipments, offset by 8% decline in service revenue due to installed base consolidation.
• Service Business: Service revenue grew 5% YOY, with contract revenue growth outpacing installed base growth, driven by enhanced service offerings like Cybercomm.

Guidance

• Modestly raised full year fiscal 2025 revenue guidance to $462M-$472M and adjusted EBITDA to $28M-$30M.
• U.S. market recovery expected in second half of FY 2025, delaying system revenue and margin.
• Tomo C margin deferral to positively impact adjusted EBITDA in Q2-Q4 FY 2025.

Risks

• Anticorruption campaign and stimulus delays in China impacting budgets.
• Volatility in orders and revenues due to longer sales cycles and timing of installations.
• Regulatory and market dynamics in regions affecting revenue trajectory.

Question and Answer

• Q: Marie Thibault on China and Tomo C rollout A: Suzanne mentions pent-up demand for Tomo C, margin deferral release in Q2-Q4, JV partner still reaching out to accounts in the large Type B segment.
• Q: Marie Thibault on service contract growth A: Service growth driven by installed base, enhanced service contracts with richer configurations, and value-added services like Cybercomm which reduces commissioning time.
• Q: Young Li on guidance and China stimulus A: Guidance raised modestly with cautious optimism; anticorruption campaign and stimulus delays in China, but Accuray is gaining share in the market despite budget delays.
• Q: Brooks O'Neil on India and election impact A: Helix product in India expected to ship after Q3 regulatory testing; watching election policies and their impact on U.S. competitiveness and health system policies affecting radiotherapy.