ACCURAY INC Q3 FY2025 earnings call

• Strong third quarter results with 12% y-o-y revenue growth, driven by developed and emerging markets. • Adjusted EBITDA was $6 million compared to $1.1 million a year ago, driven by volume, pricing, and operational improvements. • Book-to-bill was over 1.2x, indicating healthy customer demand. • Service revenue grew 9% y-o-y, expected to be a growth engine. • Implemented tariff mitigation actions like foreign trade zone establishment, duty drawback, secondary domestic sourcing, and working with China JV for tariff exemption. • Net inventory balance down $2 million from prior quarter due to lean inventory management.

For the third quarter, revenue grew 12% year-over-year. Product revenue was up 16% versus the prior year, driven by strong demand across the portfolio. Service revenue grew by 9% year-over-year. The service business represented approximately 49% of revenue and 59% of gross margin in the quarter.

• Q4 revenues expected in the range of $121 million to $129 million and adjusted EBITDA in the range of $9.5 million to $12 million. • Maintained adjusted EBITDA guidance for fiscal year ‘25 in the range of $28.5 million to $31 million.

• Potential negative impact of $10 million to $15 million in Q4 revenue due to tariffs on product sales in China. • Uncertainty around tariff dynamics and geopolitical situation affecting global operations.

Q: Brooks O’Neil asked about the impact of deferred China adjusted EBITDA in the quarter.

A: Ali Pervaiz responded that product margins were affected by higher margin deferral on China, but overall product margins hover around 31% which is in line with goals.

Q: Brooks O’Neil asked about the impact in markets like India and South America compared to China.

A: Suzanne Winter said China impact is the highest, but they see strength in EMEA including India, non-China APAC is performing strong.

Q: Marie Thibault asked about China tariff exemption scenarios.

A: Suzanne Winter stated they are working closely with the China JV for a medical device exemption but lack clarity on timing.

Q: Marie Thibault asked about shipping quickly if exemption is granted.

A: Suzanne Winter replied it could be relatively quick.

Q: Jason Wittes asked about resource diversion from China to emerging markets.

A: Suzanne Winter mentioned taking advantage of opportunities in developed markets like UK stimulus and seeing strength in non-China APAC with strong orders in various countries.