Radiation oncology company, Accuray Inc. ARAY, reported a loss of 4 cents per share in the third quarter of fiscal 2015. This was narrower than the Zacks Consensus Estimate of a loss of 5 cents and the year-ago loss of 6 cents per share.
Quarter Details
Total revenue came in at $97.5 million, up a marginal 0.4% (5% at constant currency) from the year-ago quarter. However, the top line fell shy of the Zack Consensus Estimate of $104 million.
Product revenues declined 1.5% (up 3% at constant currency) to $46.3 million. Service revenues totaled $51.2 million, up 2.1% (7% at constant currency) from the year-ago quarter, primarily on the back of reductions in the company’s service contract vacancy rate. However, an unfavorable foreign exchange rate is largely offsetting increases in the company’s installed base.
Total revenue from the U.S. surged 63% on a year-over-year basis to $52.6 million. On the other hand, revenues generated from outside the country slumped 31% to $44.9 million.
Third-quarter gross orders increased 15% (up 21% at constant currency) year over year to $52 million. System units’ gross orders grew a robust 28%.
Gross margin contracted 120 basis points (bps) on a year-over-year basis to 39.7%, primarily impacted by unfavorable foreign exchange rate.
As a percentage of revenues, selling & marketing (S&M) expenses contracted 250 bps and 60 bps, respectively, on a year-over-year basis. Research and development (R&D) expenses contracted 100 bps.
Total operating expenses declined 6.7% on a year-over-year basis to $37.5 million.
Adjusted EBITDA margin expanded 200 bps to 10.1%, primarily driven by stringent cost control.
Financial Condition
Cash, cash equivalents, and investments were $149.6 million as of Mar 31, 2015, compared with $150.8 at the end of the previous quarter. Long-term debt amounted to $201 million at the end of the third quarter, compared with 199.2 million at the end of the second quarter of fiscal 2015.
Guidance
Accuray revised its guidance for fiscal 2015. Total revenue is expected between $375 million and $385 million, compared with the previous guidance of $390–$410 million. Adjusted EBITDA is now anticipated in the range of $13–$16 million, compared with the previously guided $18–$27 million.
Our Take
Accuray is rapidly expanding its International operations in 2015. The agreement with Christie InnoMed Inc. for its CyberKnife and TomoTherapy System product portfolios in Canada is expected to boost Accuray’s market share in the country.
Accuray also recently announced the availability of its InCise Multileaf Collimator (MLC) for the CyberKnife M6 System in the international markets, where it has already been approved for commercialization.
We feel these initiatives will help Accuray gain significant market traction, going forward. Moreover, significant cost curtailments are a major positive, according to us.
However, we are concerned about the unfavorable foreign exchange rate, which continues to impact the company’s top line. Management’s decision to revise its top- and bottom-line guidance for fiscal 2015 downward is also a potent cause of worry.
Zacks Rank
Currently, Accuray has a Zacks Rank #3 (Hold). Better-ranked stocks in the medical instruments industry include IRadimed Corp IRMD, RTI Surgical RTIX and TriVascular Technologies TRIV. All the three stocks carry a Zacks Rank #1 (Strong Buy).
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