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TomoTherapy, Inc. (

TOMO

)

Q3 2010 Earnings Call

October 27, 2010 5:00 p.m. ET

Executives

Tom Powell – CFO and Treasurer

Fred Robertson – President and CEO

Analysts

Ben Andrew – William Blair

Jeff Johnson – Robert W. Baird

Mark Arnold – Piper Jaffray

Josh Jennings – Jefferies & Co.

Presentation

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Operator

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Good day Ladies and Gentlemen, and welcome to the Third Quarter 2010 TomoTherapy, Incorporated Earnings Conference Call. My name is Alisha, and I’ll be your coordinator for today. (Operator Instructions)

I would now like to turn the presentation over to your host for today’s call, Mr. Tom Powell, Chief Financial Officer. Please proceed, sir.

Name

Tom Powell

Thank you, Operator, and good afternoon. Joining me on today’s call is Fred Robertson, TomoTherapy’s President and CEO.

Before we begin, I’d like to preface our remarks with the customary Safe Harbor Statement.

Today’s conference call contains certain forward-looking statements. These statements are based on the current estimates and assumptions of TomoTherapy’s management, and are subject to uncertainty, risks, and changes in circumstances. Given these uncertainties and risks, you should not place undue reliance on these forward-looking statements. Actual results may vary from the expectations contained in today’s call and those differences may be material. Important factors that could cause such differences include among others, those described under the heading Risk Factors, and our most recent 10-K, and 10-Q filings.

I would now like to turn the call over to Fred for an overview of the quarter and key highlights. And I’ll provide a more detailed review of our third quarter performance, and Fred will close with a discussion of our 2010 outlook. Fred.

Fred Robertson

Thank you, Tom, and good afternoon everyone.

We’re pleased to report that our third quarter performance showed continued improvement demonstrating our efforts on several fronts are paying off.

For the quarter, we reported revenue of $43.6 million, an increase of 27% over the 34.4 million in the third quarter of 2009, reflecting strength in both product sales as well as service.

Our loss from operations decreased 10% year over year from $16.1 million to 14.6 million. And we reported a net loss of 10.9 million, or $0.21 per share.

Our revenue backlog at September 30

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was $146.4 million, a 5% increase from the 139.2 million backlogged as of June 30

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, 2010. This includes $35 million of new equipment orders in the quarter. This increase continues the trend from last quarter, and reflects the positive impact of our stronger, more integrated global sales and marketing effort, as well as the market’s demand for our new more diverse product offerings.

In the quarter, we also continued to maintain our strong capital position with $140 million in cash and short-term investments.

From a macro perspective, global market conditions remained difficult to assess, yet we have seen positive indications recently the demand is stabilizing.

Similar to last quarter, we continued to be encouraged by the environment in North America. While there is still uncertainty and the recovery appears slow, we’ve seen a number of prospects both in the for-profit and not-for-profit segments begin to come off the sidelines.

In addition to U.S. wins in the quarter, just this week we reached an agreement to install a TomoTherapy system at the Swedish Cancer Institute in Seattle. At the largest and most comprehensive cancer treatment program in the Pacific Northwest, this is important for our West Coast presence.

With respect to Europe, there has been mixed news with continued uncertainty throughout various regions. However, we have had some success there and continue to believe that there is substantial opportunity.

During the quarter, we announced the installation of our treatment system at the Nottingham Radial Therapy Center in England as part of the service expansion and relocation project. This facility is a division of Nottingham University Hospital’s National Health Service Trust, which is one of the country’s largest teaching hospitals.

Also in July, James Cook University Hospital in Middlesboro, England began treating cancer patients on the TomoTherapy system enabling this hospital to offer leading radial therapy to cancer patients in the Northeast region of England.

In September, the European Society for Therapeutic Radiology and Oncology, or ESTRO, held their bi-annual meeting in Barcelona. We saw very strong customer interest at this conference where more than 80 studies highlighted the critical benefits of TomoTherapy technology.

So while the operating environment remains uncertain through several regions, we’re confident that Europe will be an important market in the long term.

As a note, I would point out that our co-founder and chairman, Rock Mackie, was awarded honorary membership into the European Society for Therapeutic Radiology and Oncology for his scientific contributions to the field of radiation oncology. This is a distinguished honor, and speaks to the value of our platform.

In the Asia-Pacific Region, we remain encouraged by recent performance there and continue to believe that this is a marketplace for significant growth. We recently held our Asia-Pacific User Symposium in South Korea where we saw attendance double over the 2009 levels.

TomoTherapy’s installed base in this region has increased by 27% in just the last year with consistent growth of about 30% in the last several years. Key growth drivers for the region have been Korea, Japan, and more recently China. During the quarter, we announced that General Hospital of Guangzhou Military Command of PLA purchased the first TomoTherapy radiation therapy system to be installed in Southern China. This hospital treats more than 1 million patients annually, and presents a tremendous opportunity for our treatment system to benefit a broad range of patients.

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