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Accuray's CEO Presents At Morgan Stanley Global Healthcare Conference (Transcript)

So we have very solid indicators already of future growth in the product revenue line. And it’s not a launch that’s done through an act of desperation. This is a good solid launch that supplements our existing momentum in growing our product revenue line.

Steve Beuchaw - Morgan Stanley

Well, you have introduced quite a few topics there. Let's spend a little bit more time on what's been probably the highest profile topic for investors for the company over the last year, and that’s margins and the evolution of margins. So I think somewhere we are a little bit surprised by the margins in the quarter and we have more spending coming ahead at ASTRO. Can you help people understand though, the trajectory of margins over the course of the year? How the spending that’s happening around ASTRO is somewhat discreet in nature. And then help people think about the longer term trajectory, because you have been very clear about the importance of the [1000] system hurdle. We are still thinking about 10% to 15% margin objective there and we are still thinking about profitability by the end of fiscal ’13. Can you help us walk down that path?

Euan Thomson

Yeah. The easiest way to answer that is just talking about the individual element and I will give some overall, sort of summary at the end of it. So if you think about the drivers for our profitability, as we entered the year the big question mark was really of the service? And going back beyond that, Accuray had run what I think was an excellent service business with very solid revenue. And if you compare even the topline performance from the service business for the size of our installation versus the other players in the industry, you get a very very positive ratio. So we definitely have always maximized the value of our installed base in terms of service revenue.

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