Accuray (ARAY) Q4 2013 earnings summary

Executive summary

• FY13 net revenue was $316.0M, down 23% YoY as system sales weakened; service revenue grew, but operating and net losses widened.

• Commercial priorities included growing sales and marketing, expanding international reach and improving profitability; MLC supply and durability issues constrained CyberKnife M6 availability.

Financial highlights

• Net revenue was $315.974M vs. $409.223M in FY12; products $137.403M, services $178.571M and other $2.070M.

• Gross profit was $97.640M; gross margin declined 2.6 percentage points YoY, with lower production volume and inventory write-downs pressuring product margins.

• Operating loss was $80.655M; net loss attributable to stockholders was $103.219M, or $1.41 per diluted share, vs. $72.042M and $1.02 in FY12.

• Operating expenses were $178.295M; R&D fell to $66.197M, while selling and marketing was $54.372M and G&A was $57.726M.

• Net cash used in operations was $66.2M; cash and equivalents were $73.3M and investments were $101.1M at June 30, 2013.

Outlook and guidance

• FY14 selling and marketing expense expected to rise on planned sales-force hiring; R&D expected below FY13 and G&A modestly lower.

• FY14 capital expenditures estimated at $15M–$20M; available cash, equivalents and investments expected to cover needs for at least 12 months.

• Service revenue expected to increase with installed-base growth.

• Long-term system growth depends on adoption of the M6 and H Series, MLC production, clinical evidence, reimbursement and international expansion.