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Accuray's (ARAY) Q1 Loss in Line, Revenues Beat Estimates

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Accuray IncorporatedARAY reported a loss of 7 cents per share in the first quarter of fiscal 2018, in line with the Zacks Consensus Estimate. The figure was narrower than the loss of 12 cents incurred in the year-ago quarter.

Total revenue in the first quarter increased approximately 5.1% year over year to $90.9 million and beat our estimate of $89 million. The year-over-year upside was driven by product revenue growth of 9.3%.

Segment Analysis

Product Revenues: Revenues at the segment increased 9.3% to $38.9 million on the back of solid performances by the CyberKnife, TomoTherapy Systems and Radixact platforms of the segment. The increase in product revenues was driven by backlog conversion of orders to revenues from the EIMEA and Japan regions.

Accuray Incorporated Price, Consensus and EPS Surprise

Accuray Incorporated Price, Consensus and EPS Surprise | Accuray Incorporated Quote

Service Revenues: Revenues at the segment saw a modest year-over-year increase of 2.2% to $52 million. Per management, growth at the segment was primarily driven by continued install base expansion.

Gross Order Update: In the reported quarter, gross product orders totaled $55.6 million, up 10.6% year over year. The rise in gross orders was supported by the company's flagship Radixact System and TomoTherapy.

Other Highlights

Radixact Platform Drives Sales: The company's new TomoTherapy product platform, also known as Radixact, continued to contribute to the top line. Radixact represented the majority of Accuray's TomoTherapy order mix in the reported quarter.

Japan witnessed stellar performances at the Radixact and TomoTherapy platforms.

The Precision System: Accuray announced the launch of new precision treatment planning system recently. The system leverages on the company's flagship Radixact and CyberKnife system platforms. This will provide significantly improve treatment speed and overall throughput of the CyberKnife system.

IBMS Data Management System for TomoTherapy: Accuray also announced 510(k) clearance for the new IBMS data management system for TomoTherapy. It is a centralized database that shares and makes data accessible between multiple accurate systems, enhancing flexibility and improving workflow efficiency in the radiation therapy department.

Margin Details

Gross margin (as a percentage of net revenues) expanded 566 basis points (bps) in the first quarter to 41.9%. This was primarily driven by a significant rise in both product and service gross margins. Product gross margin improved on the back of CyberKnife systems in first-quarter 2018 as compared to prior year quarter.

Operating expenses in the first quarter totaled $40.2 million, compared with $37.9 million in the year-ago period.

Guidance

Accuray reaffirmed the guidance for fiscal 2018.

The company maintains full-year revenue projection at the band of $390 million to $400 million. This represents growth of 2% to 4% on a year-over-year basis.

The company also expects a 5% increase in gross orders in fiscal 2018.

Adjusted EBITDA for fiscal 2018 is anticipated in the range of $25 million to $30 million, up 23% to 47% year over year.

Our Take

Accuray reported loss in the first quarter of fiscal 2018. However, the loss was narrower than the year-ago figure. The company exited the quarter on a solid note with earnings meeting the consensus estimate and revenues surpassing the same. The year-over-year increase in both Product and Service revenues is encouraging. The reaffirmed guidance also buoys optimism. However, fluctuations in currency exchange rates, particularly because of a strong dollar, will continue to affect the company's backlog and top line.

Zacks Rank & Key Picks

Currently, Accuray has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical sector are PetMed Express, Inc. PETS , Abbott ABT and Intuitive Surgical, Inc. ISRG . Notably, PetMed sports a Zacks Rank #1 (Strong Buy), while Abbott and Intuitive Surgical carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

PetMed reported EPS of 43 cents in the second quarter of fiscal 2018, up 79.2% from the year-ago quarter's 24 cents. Also, gross margin expanded 548 bps year over year to 35.2% in the reported quarter.

Abbott reported third-quarter 2017 adjusted earnings from continuing operations of 66 cents per share, up 11.9% year over year. Also, third-quarter worldwide sales came in at $6.83 billion, up 28.8% year over year.

Intuitive Surgical posted adjusted earnings of $2.77 per share in the third quarter of 2017, up 34.5% on a year-over-year basis. Also, revenues increased 18% year over year to $806.1 million.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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