Accuray Q3 2025 Earnings Report

Accuray EPS Results

• Actual EPS: -$0.01
• Consensus EPS: -$0.05
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

Accuray Revenue Results

• Actual Revenue: $113.24 million
• Expected Revenue: $101.53 million
• Beat/Miss: Beat by +$11.71 million
• YoY Revenue Growth: N/A

Accuray Announcement Details

• Quarter: Q3 2025
• Date: 4/30/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, April 30, 2025
• Conference Call Time: 4:30PM ET

Accuray (NASDAQ:ARAY) (NASDAQ: ARAY) is a global medical device company that develops, manufactures and markets innovative radiation therapy solutions for the treatment of cancer. The company’s flagship products include the CyberKnife® System, a robotic radiosurgery platform offering sub-millimeter precision, and the TomoTherapy® System, which combines helical computed tomography (CT) imaging with intensity-modulated radiation therapy (IMRT). More recently, Accuray introduced the Radixact® System, an advanced iteration of its TomoTherapy technology designed to enhance treatment speed and clinical workflow.

Accuray’s suite of products enables clinicians to deliver highly targeted radiation doses while minimizing exposure to surrounding healthy tissue. The CyberKnife platform is widely used for stereotactic radiosurgery (SRS) and stereotactic body radiation therapy (SBRT), supporting treatments across a range of tumor types and anatomical sites. The TomoTherapy and Radixact systems incorporate integrated imaging, adaptive planning and dose-shaping capabilities that support daily adjustments in treatment delivery, helping to improve patient outcomes and operational efficiency in oncology centers.

Founded in 1990 and headquartered in Madison, Wisconsin, Accuray serves a broad network of hospitals, cancer centers and research institutions in North America, Europe, Asia-Pacific and other regions. The company maintains additional offices and service centers in locations such as Sunnyvale, California; Milan, Italy; and Singapore to support its global customer base. Since September 2017, Accuray has been led by President and Chief Executive Officer Peter C. Arduini, whose background in medical technology and healthcare operations has guided the company’s focus on product innovation and clinical collaboration.

Accuray Q3 2025 Earnings Call Transcript

Key Takeaways

• Revenue for Q3 was $113 M, up 12% YoY (14% constant currency), with product revenue up 16% and service revenue up 9%, driving adjusted EBITDA of $6 M versus $1.1 M a year ago.
• The book-to-bill ratio exceeded 1.2, supporting a backlog of $452 M as new customer expansions and 35% equipment replacements drive order growth across developed and emerging markets.
• Recurring service revenue of approximately $215 M annually now represents 49% of quarterly revenue and 59% of gross margin, providing a stable base and growth opportunities through higher pricing, scale, and future SaaS offerings.
• New US-China tariffs are expected to reduce Q4 China product shipments by $10 M–$15 M, though Accuray plans mitigation actions—such as a Madison FTZ, duty drawbacks, secondary sourcing, and JV tariff exemptions—to offset most impacts.
• Ongoing investments in ERP systems and talent aim to boost operational efficiency, supply-chain resilience, and adaptability in volatile global trade conditions.

Presentation

[Operator]

Good day, and welcome to the Accuray Third Quarter Fiscal 2025 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Jesse Chew, Chief Legal Officer. Please go ahead.

[Jesse Chew, Chief Legal Officer at Accuray]

Thank you, Operator, and good afternoon, everyone. Welcome to Accuray's conference call to review financial results for the third quarter of fiscal year 2025, which ended March 31st, 2025. During our call this afternoon, management will review recent corporate developments. Joining us on today's call are Suzanne Winter, Accuray's President and Chief Executive Officer, and Ali Pervaiz, Accuray's Chief Financial Officer. Before we begin, I would like to remind you that our call today includes forward-looking statements. Actual results may differ materially from those contemplated or implied by these forward-looking statements. Factors that could cause these results to differ materially are outlined in the press release we issued just after the market closed this afternoon, as well as in our filings with the Securities and Exchange Commission. We base the forward-looking statements on this call on the information available to us as of today's date.

[Jesse Chew, Chief Legal Officer at Accuray]

We assume no obligation to update any forward-looking statements as a result of new information or future events, except to the extent required by applicable securities laws. Accordingly, you should not put undue reliance on any forward-looking statements. A few housekeeping items for today's call. First, during the Q&A session, we request that participants limit themselves to two questions and then re-queue with any follow-ups. Second, all references to a specific quarter in the prepared remarks are to our fiscal year quarters. For example, statements regarding our third quarter refer to our fiscal third quarter ended March 31st, 2025. Additionally, there will be a supplemental slide deck to accompany this call, which you can access by going directly to Accuray's Investor Relations page at investors.accuray.com. With that, let me turn the call over to Accuray's Chief Executive Officer, Suzanne Winter. Suzanne?

[Suzanne Winter, President and CEO at Accuray]

Thank you, Jesse. Good afternoon, everyone, and thank you for joining us today. Today, I want to explain four key points to help our stakeholders understand Accuray even better. First, similar to every U.S.-based company with significant international markets, the visibility on our very near-term growth in revenues and earnings is lower than just one month ago. However, our teams are identifying and executing on opportunities to operate more efficiently to become more and more resilient, while our commercial partnerships with customers are focused on placing our important products as quickly as possible. Second, recent results and orders outlook suggest strong demand for our technologies and improving execution by our teams. This gives us increasing confidence that we can emerge from the current environment as a stronger, more resilient organization.

[Suzanne Winter, President and CEO at Accuray]

Third, we continue to benefit from approximately $215 million of recurring annual services revenue, within which we see several potential growth avenues. Demand for our products is strong, and our services revenue provides a stable, predictable base of growing revenues. Fourth, our investments in ERP and talent are expanding our adaptability and improving our capabilities to operate in a rapidly changing, highly fluid global market. Regardless of the global trade circumstances that will likely remain volatile, we want to be the most reliable and trusted global partner of choice in radiation therapy treatment technology, and we are staying close with our customers and prospects to help them get the equipment they need to provide vital care to their patients. Today, we reported strong third quarter results, which exceeded our expectations, and we are encouraged by the overall progress we have made operationally through the first three quarters of fiscal 2025.

[Suzanne Winter, President and CEO at Accuray]

Revenue for the quarter was solid, growing at 12% year-over-year. This growth was driven by strong performances in both developed and emerging markets. We also saw a strong performance in our service business, which this quarter represented approximately 49% of our revenue and 59% of our gross margin. I was also pleased with our Adjusted EBITDA performance at $6 million compared to $1.1 million a year ago. The year-over-year increase was driven primarily by volume, pricing, and operational improvements. We managed our working capital extremely well this quarter, with $16 million of free cash flow generation and reduced overall inventory levels, which Ali will speak about in greater detail. Turning to orders, our book-to-bill was over 1.2 this quarter, representing healthy customer demand for solutions across both developed and emerging markets.

[Suzanne Winter, President and CEO at Accuray]

Within these markets, order growth was driven largely by new customer expansion from customers adding new radiation therapy capacity to their facilities, and approximately 35% coming from the replacement of aged equipment. Product revenues were up 16% versus last year, growing faster than the market, and was driven by strong demand for our solutions across our expanded portfolio. Moving on to our service business, our Q3 service revenue grew by 9% year-over-year. We expect the service business to be a growth engine and primary catalyst for expanding margins as we benefit from higher pricing, increased scale, and operating leverage, and as we develop subscription software as a service offerings in the coming years. Finally, I'll briefly touch on the recently announced tariff policies and the impact to our business.

[Suzanne Winter, President and CEO at Accuray]

As a global company with life-changing technologies in key markets, 70% of our raw materials and product components are sourced within the U.S., and finished products are assembled and manufactured within the U.S., with over 80% exported throughout the world. I'm incredibly confident in our supply chain flexibility, and we have multiple mitigation actions underway to help offset the impact of the tariffs, including establishing a foreign trade zone in Madison, Wisconsin, two, duty drawback on qualifying parts and subcomponents, three, development of secondary domestic sources of raw material and components, and four, working closely with our China JV to obtain a tariff exemption in China for our life-saving products.

[Suzanne Winter, President and CEO at Accuray]

While there is significant uncertainty, assuming the existing tariffs remain in place, we are expecting minimal shipments to China, despite customer demand, which has averaged over $25 million-$30 million per quarter in product shipments over the first three quarters of FY 2025. Our teams are confident that we can offset a significant portion of this revenue impact in Q4 with greater contributions from the other regions. We estimate that there is a potential negative of $10 million-$15 million in Q4 revenue as a direct result. Note that this impact is primarily isolated to product sales in China. In general, our service business is much more insulated from the tariff dynamics, with exposure limited to parts consumption.

[Suzanne Winter, President and CEO at Accuray]

For Adjusted EBITDA, although we expect headwinds due to reduced China volume and associated increased tariff costs, our teams have been laser-focused on what we can control and are taking every action possible to mitigate the impact in Q4, and are confident that we can remain within full-year Adjusted EBITDA guidance range. Further, we expect to see much greater positive impact of the mitigation efforts as we enter the second half of FY 2026. This situation is subject to change at any point, and we're monitoring it very closely. Overall, we believe that despite the volatility and the uncertainty of these new challenges, we are well-positioned to implement both long and short-term mitigations to offset the tariff policy impact. I will now turn it over to Ali, who will cover our financial performance for the quarter.

[Ali Pervaiz, CFO at Accuray]

Thank you, Suzanne, and good afternoon, everyone. Before we go into our fiscal third quarter financial results, I want to begin by addressing the dynamic tariff situation and potential range of impact on our fiscal fourth quarter and FY 2025 results as the situation continues to evolve. As a company with a global footprint and majority of revenue generated outside the U.S., we have spent a considerable amount of time understanding the changes in trade policies and global tariffs announced recently and the potential impact on our business. As Suzanne mentioned, the impact of tariffs is expected to decrease near-term volume of product sales in China, which we estimate could impact product revenue by $10million-$15 million in Q4.

[Ali Pervaiz, CFO at Accuray]

Additionally, tariffs associated with the U.S.-China trade are expected to have an incremental cost, which we had anticipated, and we believe we can offset these impacts through driving near-term actions with our cross-functional teams, as well as higher levels of contribution from other regions. With the above in mind, based on what we know today, we expect Q4 revenues to be in the range of $121 million-$129 million and Adjusted EBITDA in the range of $9.5 million-$12 million. Lastly, this range does not reflect any potential additional tariffs or any potential inflationary impact on labor cost or the cost of procured components. Now, turning to the quarter's financials, net revenue for the third quarter was $113 million, which was up 12% versus the prior year and up 14% on a constant currency basis.

[Ali Pervaiz, CFO at Accuray]

Product revenue for the third quarter was $57 million, up 16% from the prior year and up 16% on a constant currency basis, reflecting a 23% increase in unit volume over the same time period. Service revenue for the quarter was $56 million, up 9% from the prior year and up 11% on a constant currency basis. Product gross orders for the third quarter were approximately $71 million and represented a book-to-bill ratio of 1.2. Our book-to-bill ratio is defined as gross product orders for the period divided by product revenue for the period. We continue to believe that the book-to-bill ratio is the right metric to ensure healthy growth of our backlog as we add more product orders than shipments in the quarter. We ended the third quarter with a reported order backlog of approximately $452 million, defined as orders that are younger than 30 months.

[Ali Pervaiz, CFO at Accuray]

We had zero order cancellations in the quarter. As mentioned before, over the last couple of years, we have redefined our order booking criteria focused on deals with higher profitability that convert to revenue within 30 months. Our overall gross margin for the quarter was 27.9% compared to 28.7% in the prior year. This decrease was due to approximately 1.3 points or $1.4 million of incremental net China margin deferral associated with the shipments to the JV that did not make it to the end customer. This was partly offset by higher install, training, and spare parts volume in our service business, which tends to have a higher margin. Operating expenses in the third quarter were $31 million compared to $34 million in the third quarter of the prior fiscal year.

[Ali Pervaiz, CFO at Accuray]

Operating income for the quarter was $1 million compared to an operating loss of $4.6 million from the prior year. Adjusted EBITDA for the quarter was $6 million compared to $1.1 million from the prior year, primarily due to higher shipments, better service margins, and lower overall OPEX. Turning to the balance sheet, total cash, cash equivalents, and short-term restricted cash amounted to $79 million compared to $64 million at the end of last quarter. Net accounts receivable were approximately $78 million compared to $87 million in the prior quarter. Our net inventory balance was $146 million, down $2 million from the prior quarter, as we focus on a leaner approach to inventory management.

[Ali Pervaiz, CFO at Accuray]

Additionally, a major focus is addressing our capital structure and refinancing needs, and as it pertains to that, we are exploring any and all alternatives to find an optimal solution to maximize our opportunities and create value for our constituents. Lastly, as Suzanne mentioned, while we anticipate $10 million-$15 million of product volume pressure in China due to the recent tariffs, we are maintaining our Adjusted EBITDA guidance for fiscal year 2025 in the range of $28.5 million-$31 million. Those are our key financial highlights, and with that, I'd like to hand the call back to Suzanne.

[Suzanne Winter, President and CEO at Accuray]

Thanks, Ali. I'm proud of our team and our ability to navigate through unforeseen challenges and execute at a high level, advancing progress towards achieving our longer-term goals. We continue to monitor and navigate the fluid tariff and geopolitical situation and the potential impact of the global economy and are taking the actions needed. Our results year to date demonstrate our dedication to improving patient outcomes and execution of our strategy. From an operational perspective, our business remains healthy, with strong underlying demand for our solutions and strength of our position in the markets in which we compete. Further, we are actively exploring all possible avenues to strengthen our capital structure to allow us to achieve our long-term goals and deliver substantial long-term value for our shareholders. I will now turn it back over to the operator for Q&A.

[Operator]

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. We ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question today comes from Brooks O'Neil with Lake Street Capital Markets. Please go ahead.

[Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets]

Thank you. Good afternoon. Congratulations on a strong quarter and performance, guys. Really nice. I had a question. Obviously, Suzanne, you commented on the strong Adjusted EBITDA performance in the quarter. I did not hear Ali's specific comments about the impacts to Adjusted EBITDA in the quarter, but was there much of a significant impact of deferred China Adjusted EBITDA in this particular quarter?

[Ali Pervaiz, CFO at Accuray]

Yeah, Brooks, I can start. On product margin specifically, you'll see that product margins were at 22.7% this quarter, and that was primarily due to just having a higher margin deferral on China. If you recall, last quarter, our overall product margin was about 43.5% because we did see an outsized China margin release last quarter. If you actually take a look at our overall product margins for the year, we're hovering around 31%, which is pretty much in line with where we want to be given that we're penetrating into the value segment. I think overall, our EBITDA is reflective of the overall revenue volume that we had this quarter.

[Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets]

Good. That's great. Let me just ask. Obviously, you commented quite a bit about the China impacts. I know you see tremendous potential in other non-U.S. markets. Would you anticipate as big an impact in markets like India and South America as you anticipate in China at this time?

[Suzanne Winter, President and CEO at Accuray]

Again, we're monitoring everything that is evolving and coming out of this administration. I think that probably the China impact is the highest, and that's what we've really been laser-focused on and determining what other regions will be able to either make up the volume here in Q4. As we move forward, we've got strength in our largest region, which is the EIMEA, and that does include India. Our non-China APAC region is also performing very strong. Japan had a very good quarter as well. We continue to see strength there. The U.S. in this quarter, it was better than previous quarters, and we're still looking for more of a turnaround in the U.S. market. In general, I would say we're preparing for all potential as it relates to the China tariffs. As visibility improves, we'll be able to provide more clarity.

[Operator]

The next question comes from Marie Thibault with BTIG. Please go ahead.

[Marie Thibault, Managing Director and BTIG Medical Technology and Digital Health Analyst at BTIG]

Good afternoon, and thanks for taking the questions, and congrats on a strong quarter. We have to commend you for being able to hold up those profit metrics despite some of the challenges from the macro environment. Wanted to just quickly try to dive into the China issue a little bit more and ask if you could help us think about a couple of various scenarios. I know there had been some speculation that China might carve out medical products, so I'm wondering if that's what you're referring to when you said trying to work with the China JV to find a tariff exemption. If there were to be an exemption, how quickly could things flip? Could you start shipping right away, or is this we should really think of this as being something that would get pushed out into fiscal 2026?

[Marie Thibault, Managing Director and BTIG Medical Technology and Digital Health Analyst at BTIG]

As part of that, how would you have us think about this $10 million-$15 million a quarter? Is that kind of a good number to think about on a quarterly basis going forward? Realize it's a lot to get through, but any more detail on kind of the scenarios as we think about it?

[Suzanne Winter, President and CEO at Accuray]

Yeah, no, I would say it's murky. It's murky, and we're taking a look at all the facts that we have. Now, let me just talk about the exemption. We're working very closely with our China JV, and as you know, they are part of a state-owned entity, and they have their own government affairs efforts, just like we do here in the U.S., and we are partnering with them both in the U.S. and in China to try and get a medical device exemption. Again, we don't really have a lot of clarity in terms of probability or when and how quickly that could impact things. I think as we learn more, we'll be able to provide more transparency around that.

[Marie Thibault, Managing Director and BTIG Medical Technology and Digital Health Analyst at BTIG]

Okay. Any detail on how quickly you'd be able to start shipping again if something like that came through?

[Suzanne Winter, President and CEO at Accuray]

Yes. I mean, I think relatively quickly.

[Operator]

The next question comes from Jason Wittes with Roth Capital. Please go ahead.

[Jason Wittes, Managing Director at ROTH Capital]

Hi. Thanks for taking the question and solid performance this quarter. Obviously, more questions on China. In terms of the potential impact going into next year, I mean, until this tariff situation gets resolved one way or the other, are we assuming there's really just going to be no activity in China? In terms of the magnitude of that impact, this is the fourth quarter. Would it have been more pronounced in the fourth quarter? Just trying to think about what parameters we're talking about here in relation to China.

[Suzanne Winter, President and CEO at Accuray]

Yeah. I mean, I think we're doing various scenarios, and again, as visibility improves, we'll be able to comment more. We're not going to be able to comment on FY 2026 at this point, and we normally don't at this point anyway. We will probably have more clarity at the Q4 earnings call to be able to comment on FY 2026. I would just say we're doing our own internal scenario planning based on that and taking the appropriate actions to remain profitable and within our outlook.

[Jason Wittes, Managing Director at ROTH Capital]

Just from your commentary, it sounds like you're diverting resources, at least from the sales and marketing front, away from China for the moment to sort of offset that. I assume that that's going to be focused more towards some of the emerging markets. Notably, I think you're now focused on India. How is that going to work? Is that just a global focus, or is that going to be looking at more emerging markets?

[Suzanne Winter, President and CEO at Accuray]

Yeah. Great question. I think we have areas of strength in both developed and emerging markets. For example, just this past quarter, we were able to take advantage of stimulus in the U.K., for example, and we took five new orders for premium high-end equipment. That was fantastic. I think we're looking for those areas of opportunity, and we're going to be very opportunistic on where we put our resources. Of course, there are also areas of opportunity in the emerging markets in non-China APAC. I think we talked about last time how we had created a separate region for non-China APAC because of the opportunities that we see there. Certainly, last quarter, we did see strength there, and we had very strong orders in Thailand, Taiwan, Korea, and also from a revenue standpoint, we shipped the first Helix system to Myanmar.

[Suzanne Winter, President and CEO at Accuray]

In Taiwan, we also shipped three Radixact high-end X9 systems. We are going to continue to take a look at both mid and long-term opportunities in both developed and emerging markets.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

[Suzanne Winter, President and CEO at Accuray]

Very good. This concludes our earnings call. We look forward to speaking with you again in the summer for our fiscal 2025 fourth quarter and full year earnings release. Thanks very much.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Ali Pervaiz, CFO
• Suzanne Winter, President and CEO
• Jesse Chew, Chief Legal Officer

Analysts

• Marie Thibault, Managing Director and BTIG Medical Technology and Digital Health Analyst at BTIG
• Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets
• Jason Wittes, Managing Director at ROTH Capital