) second-quarter fiscal 2013 adjusted loss of 30 cents per share
was narrower than the Zacks Consensus Estimate of a loss of 34
cents. Adjusted loss excludes one-time items such as acquisition
and integration-related expenses associated with TomoTherapy and
Morphormics. The year-ago adjusted loss was 10 cents per share.
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Reported net loss attributable to shareholders in the quarter was
$29.2 million (or 40 cents a share) versus a loss of $10.4
million (or 15 cents a share) in the prior-year quarter.
Adjusted revenues for the quarter were $77.7 million (down 24.5%
year-over-year), which surpassed the Zacks Consensus Estimate of
$74 million. Adjustments exclude deferred sales related to the
TomoTherapy products and services. Reported revenues for the
quarter were $77.8 million.
Adjusted revenues from products were $33.2 million (down 48%) in
the quarter, mainly due to manufacturing and supply-related
issues, which also led to a decline in net product orders.
Adjusted revenues from services were $44.6 million, (up 16.1%
year-over-year), reflecting positive trends from the TomoTherapy
Orders and Margins
Accuray shipped 14 and installed 17 new CyberKnife and
TomoTherapy systems during the quarter, taking the aggregate
global installed base to 677 units. The company added new system
orders worth $17.9 million in the quarter, leading to a total
system backlog of $279.0 million (up 7.9% year over year).
However, backlog decreased 5% sequentially, reflecting a marked
slowdown mainly due to shipment delays and a lack of sales force
Adjusted gross margin for the quarter was 36.7% versus 39.6% in
the year-ago quarter, due to a change in sales mix. Adjusted
product and services gross margins were 50.0% and 26.9%,
respectively, in the quarter. Service gross margin more than
doubled year over year following the acquisition of TomoTherapy.
The company expects service gross margin to improve but it is
likely to demonstrate quarterly fluctuations, going forward.
On an adjusted basis, operating expenses were $48.1 million
compared with $43.8 million a year ago, mainly due to the
restructuring activities. On an adjusted basis, selling and
marketing along with general and administrative expenses were
40.0% of sales versus 25.5% in the year-ago quarter, driven by
new product launches. On an adjusted basis, Research and
Development (R&D) expenses, as a percentage of sales,
increased to 22.0% from 17.2% in the year-ago period.
Accuray exited the quarter with cash, cash equivalents and
restricted cash of roughly $97.4 million, down 35.9% year over
year. Long-term debt was $81.6 million in the quarter, up 5.3%.
Management cited manufacturing and supply-related issues along
with a lack of marketing focus and sales force transitional
problems as the reasons behind the disappointing fiscal
In an effort to remediate the shortfall, the company announced a
restructuring initiative for its operations. Management will
setup a cost structure that will enhance marketing capabilities
and overall business processes to boost sales. Accuray will also
cut workforce by 13%, mostly in the U.S.
Based on these restructuring efforts, Accuray expects to incur a
non-recurring charge of $3-$4 million in the third quarter of
fiscal 2013. Further, the company anticipates adjusted operating
expenses to be $38.0 million per quarter through the fourth
quarter of 2013.
The positive impact from the restructuring will likely begin from
the fourth quarter of this fiscal year and the company is hopeful
that it will manage to save roughly $40 million of operating
expenses in the year compared with fiscal 2012.
The Calif.-based company also provided an outlook for fiscal
2013. Revenues, on an adjusted basis, are expected in the range
of $320-$330 million. The fiscal 2013 Zacks Consensus Estimates
for revenues and losses are $324 million and 94 cents per share,
Although management is optimistic regarding adoption of the
company's latest technology unveiled at the ASTRO meeting,
Accuray needs to aggressively remediate its structural issues for
these offerings to fully contribute to total sales. Moreover,
Accuray remains susceptible to the weak U.S. and European
markets, reimbursement uncertainties and faces stiff challenges
from competitive product offerings.
Currently, the company carries a Zacks #4 Rank (Sell). While we
are negative on Accuray, medical instrument companies such as
IDEXX Laboratories, Inc.
) with a Zacks Rank #2 (Buy) are worth considering.