Sign in

You're signed outSign in or to get full access.

AI

ACCURAY INC (ARAY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 revenue was $101.5M (down 2% YoY), with product revenue $48.4M (down 9%) and service revenue $53.2M (up 5%). GAAP EPS was $(0.04); adjusted EBITDA was $3.1M. Management raised FY25 guidance modestly on revenue and adjusted EBITDA, citing strength in China and service as catalysts .
  • China delivered ~30% YoY revenue growth, driven by Type A and B segments and Tomo C ramp; management expects $3–$4M of deferred margin release from the China JV to benefit FY25 adjusted EBITDA, a tailwind for gross margin and EBITDA phasing in Q2–Q4 .
  • Mix headwinds and prior-year one-time service cost benefits tied to ERP timing weighed on gross margin (33.9%), though ex-China margin deferral, Q1 gross margin would have been ~35.9% .
  • Consensus estimates from S&P Global were unavailable at the time of analysis; comparison to Street numbers is not provided (S&P Global data could not be retrieved due to request limits).

What Went Well and What Went Wrong

  • What Went Well

    • China strength: ~30% YoY revenue growth, rising installations, and Tomo C ramp; JV structure enables deferred margin release as systems ship to end customers in Q2–Q4 .
    • Service momentum: service revenue grew 5% YoY, with contract revenue growing 5% and pricing accretion as customers adopt enhanced configurations (e.g., ClearRT, VitalHold) .
    • Guidance raised: FY25 revenue guidance increased to $462–$472M (from $460–$470M) and adjusted EBITDA to $28–$30M (from $27.5–$29.5M), reflecting improved visibility and China margin release .

  • What Went Wrong

    • Gross margin compression: GM fell to 33.9% from 38.0% YoY, with mix and the absence of prior-year one-time ERP-related service cost benefits; ex-China deferral, margin would have been ~35.9% .
    • Regional softness outside APAC: EIMEA revenue down ~35% YoY and Japan down ~22% YoY on tough comps and timing, though installations and IB growth were positive; Americas service declined ~8% YoY amid installed base consolidation .
    • Orders/backlog moderation YoY: Gross orders were $55.4M (vs. $63.7M YoY) and backlog ended at ~$468.6M (down ~4% YoY), though book-to-bill was healthy at 1.1 and trailing 12-month book-to-bill remained 1.5 .

Financial Results

Headline P&L vs prior periods (USD):

MetricQ1 FY2024Q4 FY2024Q1 FY2025
Total Revenue ($M)$103.9 $134.3 $101.5
Gross Profit ($M)$39.5 $38.5 $34.5
Gross Margin (%)38.0% 28.6% 33.9%
Operating Expenses ($M)$37.3 $31.6 $36.6
Operating Income ($M)$2.2 $6.8 $(2.1)
Net Income ($M)$(3.0) $3.4 $(4.0)
Diluted EPS ($)$(0.03) $0.03 $(0.04)
Adjusted EBITDA ($M)$6.5 $10.1 $3.1

Segment revenue (USD):

SegmentQ1 FY2024Q4 FY2024Q1 FY2025
Product Revenue ($M)$53.4 $79.7 $48.4
Service Revenue ($M)$50.5 $54.6 $53.2

KPIs and balance items:

KPIQ1 FY2024Q4 FY2024Q1 FY2025
Gross Product Orders ($M)$63.7 $95.5 $55.4
Book-to-Bill (x)1.2 1.2 1.1
Backlog ($M)$489.0 $487.3 $468.6
Cash & ST Restricted Cash ($M)N/A$69.1 $59.7
Constant Currency Revenue ($M)N/AN/A$102.0
Trailing 12-mo Book-to-Bill (x)N/AN/A1.5
Gross Margin excl. China deferral (%)N/AN/A35.91%

Notes:

  • Service revenue grew 5% YoY in Q1; contract revenue grew 5% YoY, outpacing installed base growth of ~2% YoY .
  • China revenue grew ~30% YoY in Q1; EIMEA/Japan were down YoY on tough comps; Americas service -8% YoY .

Consensus vs actual (S&P Global):

  • Primary EPS Consensus Mean: Unavailable (could not retrieve due to S&P Global request limit)
  • Revenue Consensus Mean: Unavailable (could not retrieve due to S&P Global request limit)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY2025$460M–$470M $462M–$472M Raised
Adjusted EBITDAFY2025$27.5M–$29.5M $28.0M–$30.0M Raised

Additional context: Management expects ~$3–$4M of deferred margin release from the China JV to benefit FY25 adjusted EBITDA as systems ship to end customers in Q2–Q4 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 FY24; Q-1: Q4 FY24)Current Period (Q1 FY25)Trend
China JV & Tomo CQ3: Focus on China market and Tomo C approvals pipeline; orders strengthened (+21% YoY). Q4: NMPA TPS approval for Tomo C; record shipments .~30% YoY revenue growth; manufacturing ramp in Tianjin; margin deferral to release with shipments; strong demand in Type A & B .Improving execution tailwind .
Service businessQ3: Training center expansion; CyberComm introduced; service is a growth driver . Q4: Continued service focus .Service revenue +5% YoY; contract revenue +5% with pricing accretion; IB +2% YoY .Positive mix/pricing tailwind .
U.S. marketQ3: Slower than expected U.S. installations . Q4: Strength overall; FY25 guide added .Americas revenue +2% YoY; service -8% YoY; recovery expected 2H FY25–FY26 .Gradual recovery expected .
EIMEA/JapanQ3: Mixed; orders building . Q4: Record shipments; strong comps .Revenue down YoY (EIMEA ~-35%, Japan ~-22%) on tough comps; installations healthy; IB +4% (EIMEA), +3% (Japan) .Near-term soft; H2 strengthening expected .
Orders/backlogQ3: Orders +21% YoY; book-to-bill 1.8; backlog ~$503M . Q4: Orders $95.5M; book-to-bill 1.2; backlog $487.3M .Orders $55.4M; book-to-bill 1.1; backlog ~$468.6M; trailing 12-mo B/B 1.5 .Healthy, moderated vs tough comps .
Product innovation (Helix/Cenos/ClearRT/VitalHold)Q3: CyberComm; AI collaboration; product roadmap. Q4: CE Mark for Helix; VitalHold installs in Japan .Helix orders finalized at ASTRO; Cenos online adaptive slated for regulatory submission in fiscal Q4; positions Radixact as adaptive leader .Building commercial momentum .
Supply chain/ERPQ3: ERP transition ongoing; weighed on service mix/costs . Q4: ERP year rolled out .Prior-year ERP timing benefited service COGS; now normalized; ERP fully integrated, enabling efficiencies .Normalizing; efficiency tailwind .
China macro (stimulus/anti-corruption)N/AAnti-corruption and delayed stimulus slowing budget cycles; Accuray still gaining share via JV and domestically produced Tomo C .Mixed macro; company-specific share gains .

Management Commentary

  • “The region [China] delivered significant revenue growth at 30% year-over-year… strong customer demand in both Type A and B markets.” — Suzanne Winter, CEO .
  • “As the deferred margin starts to release to the P&L beginning in Q2 and through FY ’25, we expect to have approximately $3 million to $4 million benefit, which is included in our fiscal year 2025 adjusted EBITDA guidance.” — Ali Pervaiz, CFO .
  • “Service revenues for the quarter… grew at 5% year-over-year… contract revenue… makes up greater than 90% of our service revenue… [illustrates] price accretion.” — Ali Pervaiz, CFO .
  • “We believe our Adaptive suite, including Cenos, will be a key differentiator… the only player… that can adapt treatment plans between, during and on the day of treatment.” — Suzanne Winter, CEO .
  • “We are modestly raising full year fiscal 2025 guidance… updated revenue range of $462 million to $472 million and adjusted EBITDA range of $28 million to $30 million.” — Ali Pervaiz, CFO .

Q&A Highlights

  • China/Tomo C trajectory: Management sees pent-up demand; JV is still early in outreach, with shipments and margin release expected through Q2–Q4 FY25; gaining share in Type B while maintaining leadership in Type A .
  • Service contracts/pricing: Enhanced configurations support higher-priced contracts; new offerings (e.g., CyberComm) reduce commissioning times and carry incremental value; management plans continued investment to grow service margin .
  • Guidance philosophy and phasing: Raised modestly; Q4 remains the largest revenue quarter; ~45%/55% H1/H2 revenue split assumed in guide .
  • China macro sensitivity: Anti-corruption efforts and delayed stimulus slow budget cycles, but Accuray’s JV and “China for China” product positioning drive share gains despite headwinds .
  • India/Helix timeline: CE Mark enables orders; local regulatory testing expected to complete in early Q3 FY25, enabling shipments and fuller launch thereafter .
  • U.S. policy/election context: Monitoring potential impacts; emphasis on U.S. manufacturing competitiveness could be supportive; radiotherapy demand remains structurally strong .

Estimates Context

  • S&P Global consensus for Q1 FY25 revenue and EPS was unavailable at the time of analysis due to request limits on the data service; as a result, we cannot categorize beats/misses vs Street for this quarter.

Key Takeaways for Investors

  • China is the key growth engine near-term: ~30% YoY revenue growth with Tomo C ramp and JV-driven margin deferral release sets up improving gross margin and EBITDA through Q2–Q4 FY25 .
  • Service resilience: 5% YoY service growth with contract pricing accretion and new paid services (e.g., CyberComm) provides defensive earnings quality and supports margin expansion over time .
  • Margins should recover intra-year: Reported GM 33.9% masks deferral effects; ex-China deferral, Q1 GM would have been ~35.9%; deferred margin release and mix normalization are tailwinds .
  • Guidance bias: Modest raise to FY25 revenue ($462–$472M) and adjusted EBITDA ($28–$30M); revenue is H2-weighted with Q4 as the largest quarter—set expectations for back-half execution .
  • Watch regional dynamics: EIMEA/Japan soften on tough comps but installations/IB growth are healthy; U.S. service softness persists, with recovery expected in 2H FY25–FY26 .
  • Balance sheet/cash: Inventory build to support shipments weighed on cash in Q1; working capital optimization and shipments (including Helix and Tomo C) should aid cash conversion as the year progresses .
  • Catalysts: Continued Tomo C deliveries in China, Helix order-to-revenue conversion in emerging markets, Cenos regulatory submission in fiscal Q4, and potential guidance updates as visibility improves .