Radiation oncology company, Accuray Inc. (ARAY), reported a loss of 13 cents per share in the second quarter of fiscal 2015, wider than the Zacks Consensus Estimate of a loss of 8 cents and the year-ago loss of 7 cents per share.
Quarter Details
Total revenue came in at $98.2 million, up 5% (9% at constant currency) from the year-ago quarter. The upside was primarily due to an improvement in both product and service revenues. However, the top line fell shy of the Zack Consensus Estimate of $101 million.
Product revenues increased 6% (10% at constant currency) to $47.7 million. Service revenues totaled $50.5 million, up 4% (7% at constant currency) from the year-ago quarter, primarily on the back of reductions in the company’s service contract vacancy rate.
Total revenue from the U.S. increased 31% on a year-over-year basis to $45.7 million. On the other hand, revenues generated from outside the country declined 11% to $52.5 million.
Second-quarter gross orders decreased 10% on a year-over-year basis to $72.3 million. On a constant currency basis, gross product amounted to $74.4 million.
Gross margin contracted 160 basis points (bps) on a year-over-year basis to 39.2%. Higher revenues were offset by foreign currency fluctuations and the company’s additional spending for service infrastructure.
As a percentage of revenues, selling & marketing (S&M) and general & administrative (G&A) expenses increased 90 bps and 60 bps, respectively, on a year-over-year basis. Conversely, research and development (R&D) expenses decreased 20 bps.
Operating margin, as a result of increased operating expenses (up 8% year over year), contracted nearly 290 bps.
Financial Condition
Cash, cash equivalents, and investments were $150.8 million as of Dec 31, 2014, a decrease of $1.9 million from the previous quarter. Long-term debt increased modestly by 1% to $199.2 million.
Guidance
Accuray has reaffirmed its financial guidance for fiscal 2015. Total revenue is expected between $390 million and $410 million. Adjusted EBITDA is anticipated to lie in the range of $18–$27 million.
Our Take
Accuray’s fiscal second quarter results have failed to impress us on both the top and bottom-line front.
Higher expenses have caused margins to remain under severe pressure and this trend does not look likely to reverse any time soon. For the third quarter, management expects to incur approximately $500,000 in employee-related expenses in connection with a minor reorganization.
However, the company has begun the implementation process associated with the recently executed Group Purchasing Organization (GPO) contracts. We feel these contracts will aid Accuray to improve its sales channel in the U.S., going forward.
Zacks Rank
Currently, Accuray holds a Zacks Rank #4 (Sell).
Better-ranked stocks in the medical instruments industry include Inogen (INGN), Synergetics USA (SURG) and ABIOMED (ABMD). While Inogen and Synergetics USA sport a Zacks Rank #1 (Strong Buy), ABIOMED carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment