Accuray Lags 3Q Earnings Est
) third-quarter fiscal 2013 adjusted loss of 37 cents per share
was wider than the Zacks Consensus Estimate of a loss of 21
cents. Adjusted loss excludes one-time items such as acquisition,
restructuring and integration-related expenses associated with
TomoTherapy and Morphormics.
Results were higher than both the year-ago adjusted loss of 13
cents per share as well as the sequential quarter's adjusted loss
of 30 cents per share.
Reported net loss attributable to shareholders in the quarter was
$31.2 million (or 44 cents a share) versus a loss of $14.9
million (or 21 cents a share) in the prior-year quarter.
In spite of a declining bottom-line in the quarter, management
asserted that higher new order volumes in the third quarter along
with healthy adoption of Accuray's new products such as the
CyberKnife M6 Series and TomoTherapy H Series systems should
boost the company's growth going forward.
Adjusted revenues for the quarter were $70.6 million (down 30.5%
year-over-year), which missed the Zacks Consensus Estimate of $78
million. Adjustments exclude deferred sales related to the
TomoTherapy products and services. Reported revenues for the
quarter were $70.5 million.
Adjusted revenues from products were $25.1 million (down 59%) in
the quarter, mainly due to manufacturing and supply-related
issues, which led to shipment delays of new products. Adjusted
revenues from services were $45.5 million, (up 13.2% year over
year), reflecting positive trends from the TomoTherapy business.
Accuray shipped 7 and installed 14 new CyberKnife and TomoTherapy
systems during the quarter, taking the aggregate global installed
base to 693 units.
The company added new system orders worth $44.1 million, net in
the quarter, leading to a total system backlog of $297.9 million
(up 6.5% year over year). Net new product orders jumped more than
twofold sequentially, which led to backlogs increasing 7% over
the prior quarter.
Adjusted gross margin for the quarter was 31.4% versus 38.6% in
the year-ago quarter due to a change in sales mix. Adjusted
product and services gross margins were 34.7% and 29.5%,
respectively, in the third quarter versus 53.5% and 16.1% in the
Improving service gross margin following the acquisition of
TomoTherapy is encouraging. The company expects service gross
margin to improve but it is likely to demonstrate quarterly
fluctuations, going forward.
On an adjusted basis, operating expenses decreased to $39.8
million from $44.2 million a year ago, mainly due to the
company's restructuring activities. Operating expense was close
to the company's plan of spending $38 million on operational
On an adjusted basis, selling and marketing along with general
and administrative expenses were 41.2% of sales versus 24.8% in
the year-ago quarter. On an adjusted basis, Research and
Development (R&D) expenses, as a percentage of sales, inched
up to 22.0% from 21.7% in the year-ago period.
Accuray exited the quarter with cash, cash equivalents and
restricted cash of roughly $184.1 million, up 18.9% year over
year. Long-term debt was $197.7 million in the quarter, up 51.8%.
The Calif.-based company lowered its revenue outlook for fiscal
2013. Revenues, on an adjusted basis, are expected in the range
of $310-$318 million (earlier $320-$330 million). The fiscal 2013
Zacks Consensus Estimate for revenues and losses is $325 million
and 88 cents per share, respectively.
We are impressed with Accuray's achievement of improving product
order momentum in the third quarter, reflecting healthy product
adoption of new products. Additionally, the company's
restructuring efforts and healthy service revenues and gross
margin are also helping it stabilize.
However, a lot needs to be done to bring the company back on
track. We remain concerned over Accuray's declining top and
bottom line along with reduced full-year guidance. Management
needs to improve its higher-margin product revenues and
aggressively remediate its structural issues for new 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
Currently, the company carries a Zacks Rank #2 (Buy). Other
medical instrument companies such as
MAKO Surgical Corp.
) with a Zacks Rank #2 (Buy) are worth considering.
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