Accuray Incorporated Q3 FY2026 earnings call

Steve Leneve discussed that since joining Accuray last October, he's seen the strength of the technology, commitment of people, etc. The company is prioritizing investment in innovation, product reliability, etc. They launched a transformation plan in mid-December to sharpen accountability, tighten cost control, etc. They're expanding and diversifying service portfolio, making progress on distributor partnership model, implementing systems for service compensation, optimizing pricing, and Paul Maielli joined as Chief Commercial Officer. They're also focused on strategic partnerships, including leveraging partnerships to create a clinical evidence engine and ecosystem of aligned partners. They're excited about the upcoming European Society of Radiation Oncology conference.

Total revenue was approximately $105 million, down 7% year over year. Product revenue for the third quarter was $49.7 million, down 13% versus the prior year. Service revenue for the third quarter was $55.1 million, down 1% from the prior year. Product gross margins in the third quarter were 21.9% compared to 22.7% in the prior year. Overall gross margin for the quarter was 24.1% compared to 27.9% in the prior year. Operating expenses in the third quarter were $34.4 million compared to $30.6 million in the third quarter of the prior fiscal year. Operating loss for the quarter was $9.1 million compared to income of $1 million in the prior year. Adjusted EBITDA for the quarter was $3.8 million compared to $6 million in the prior year.

The company withdrew financial guidance due to the dynamic geopolitical environment and difficulty in predicting when shipments to certain regions would resume. They will provide an update on the business when they report fiscal fourth quarter results. They remain confident in the impact of their strategic focus and transformation plan over the coming quarters with 2027 and 2028 expected to reflect the benefits of current actions.

Geopolitical disruption in the Middle East has caused delays in product shipments to certain customers in the Middle East, North Africa, and Pakistan, impacting both product and service revenue. Business in China continues to face headwinds due to geopolitical tensions and ongoing tariff uncertainty. Tariffs have adversely impacted product and service margins and the landscape is fluid and difficult to predict.

Q: Marie Thibault asked about the decision to remove guidance and why not revise instead of removing entirely.

A: Steve said shipments to certain regions were delayed indefinitely due to tensions and the dynamic nature made withdrawing guidance more appropriate.

Q: Marie asked about adjusted EBITDA being below expectations.

A: Ali said transformation is moving along well, they're ahead on cost-cutting, and the benefits of transformation will take time but they expect solid annualized benefit in fiscal 27