Accuray (ARAY) Q3 Earnings Top Estimates, Gross Orders Rise

Accuray Incorporated ARAY reported third-quarter fiscal 2019 adjusted loss of a penny per share, narrower than the Zacks Consensus Estimate of a loss of 4 cents. The company had reported a loss of 10 cents in the year-ago quarter.

Net revenues in the quarter totaled $103.2 million, missing the Zacks Consensus Estimate of $104 million. On a year-over-year basis, revenues climbed 3.4%.

Q3 Details

Product Revenues: Product revenues increased 7.6% year over year to $46.5 million in the reported quarter on strong demand for the Radixact system.

Service Revenues: Service revenues totaled $56.8 million, up 0.4% from the year-ago quarter on continued growth in installed base.

Accuray Incorporated Price, Consensus and EPS Surprise

Accuray Incorporated Price, Consensus and EPS Surprise | Accuray Incorporated Quote

Gross Order Update: Gross orders in the third quarter totaled $83.6 million, up 11.6% year over year. The upside was driven by strong demand for Radixact, CyberKnife and TomoTherapy platforms.CyberKnife contributed approximately 45% to total gross orders compared with 35% a year ago, primarily driven by strong demand in China.Radixact and TomoTherapy platform accounted for approximately 55% of third-quarter total gross orders.

However, gross orders in the United States, EMEA and Japan declined year over year in the quarter under review.

Margins

Gross profit in the fiscal third quarter totaled $40.5 million, up 11.6% on a year-over-year basis. Gross margin was 39.2%, highlighting an expansion of 290 basis points (bps) year over year.

Research and development expenses contracted 7.1% year over year to $12.9 million. Selling and marketing expenses declined 11.7% to $12.9 million. General and administrative expenses rose 1.9% to $11.8 million.

Third-quarter operating profit was $2.9 million against a loss of $3.8 million in the year-ago quarter. Operating margin was 2.8%.

Cash Position

The company exited third-quarter fiscal 2019 with total cash, cash equivalents, and short-term restricted cash of $64.6 million, flat sequentially.

2019 Guidance Reiterated

Accuray has kept its fiscal 2019 guidance unchanged.

The company expects product revenue growth between 4% and 8% and service revenues are projected to grow approximately 2%. This is expected to result in total revenues of $415-$425 million, indicating year-over-year growth of 3-5%.

Adjusted EBITDA is expected between $23 million to $29 million, suggesting 35-70% growth year over year.

Our Take

Accuray wrapped up the fiscal third quarter on a mixed note. While loss per share was narrower than estimates, revenues lagged the same.Solid demand for the company’s Radixact, CyberKnife and TomoTherapy platforms has continued to boost business. Expansion in gross margin also buoys optimism. We are also upbeat to note that this was the company’s fourth consecutive quarter of double-digit growth in gross orders, which was driven by continued strength in China. Accuray has also significantly operationalized its China joint venture agreement, which was signed in January. The deployment of the VOLO Optimizer software has also consolidated the company’s product development roadmap.

On the flip side, declining gross orders in United States, EMEA and Japan raise concern.