Accuray's CEO Discusses F4Q12 Results - Earnings Call Transcript

Accuray (ARAY)

F4Q12 Earnings Call

September 6, 2012 5:00 p.m. ET


Tom Rathjen - VP of IR

Euan Thomson - President and CEO

Derek Bertocci - SVP and CFO


Raj Denhoy - Jefferies

Steve [Busha] - Morgan Stanley

Tycho Peterson - JP Morgan

Charles [Crawson] - Sidoti & Company

Junaid Hussein - Dougherty & Company



Good day ladies and gentlemen, and welcome to the fourth quarter 2012 Accuray Incorporated earnings conference call. [Operator instructions.] I would now like to turn the conference over to Mr. Tom Rathjen, vice president of investor relations. Please go ahead sir.

Tom Rathjen

Thank you operator. Hello, and thank you for joining our conference call this afternoon as we review Accuray’s fourth quarter and fiscal year 2012. Joining us today are Dr. Euan Thomson, Accuray's president and chief executive officer; and Derek Bertocci, Accuray's senior vice president and chief financial officer.

Please note that today we will be referring to financial data which can be found in a summary slide deck on the investor relations page of the Accuray website at

Before we begin, I need to remind you that our presentation includes forward-looking statements that involve risks and uncertainties. There are a number of factors that could cause actual risks and uncertainties to differ materially from our expectations, including risks related to our ability to achieve projected revenue, gross margin, and profitability targets, achieve our TomoTherapy integration goals, launch new technologies, and improve performance in the U.S. through a realignment of our sales organization.

These and other risks are more fully described in the press release we issued earlier this afternoon, our form 10-K for fiscal 2012, which will be filed shortly, and other filings with the Securities and Exchange Commission. We assume no obligation to update any forward looking statements.

And now I would like to turn the call over to our president and chief executive officer, Dr. Euan Thomson. Euan?

Euan Thomson

Thank you, Tom. And thanks to everyone for joining us today for Accuray’s fourth quarter of fiscal year 2012 conference call. To help illustrate the main points discussed this afternoon, we have posted slides to the investor relations page of the Accuray website.

This afternoon, I’ll review the progress in our strategic plan and provide an update on our outlook for fiscal 2013 and beyond. I will then turn the call over to Derek Bertocci who will provide a detailed financial review.

As we’ve done in previous quarters, we’ll provide both GAAP and non-GAAP numbers. When Derek talks later, he will refer to both measures, but for the sake of clarity, I will refer only to the non-GAAP numbers, since they give you a clear picture of Accuray’s ongoing core operations.

Today our results show that we have achieved good progress in our strategic plan, although we know there is still work to do. Fiscal 2012 was a year of transition at Accuray, as we integrated our acquisition of TomoTherapy. It represented the first year of our multiyear strategy and execution story.

The first phase of our strategy centered on integrating the two companies, with a strong focus on solving the liability issues surrounding the TomoTherapy system. I’m pleased to report that we have now engineered solutions to TomoTherapy systems reliability issues, with upgraded technology that we’re in the process of rolling out to the field.

The second phase of our strategy is to drive system orders and revenue growth through a major technology release that we will unveil at the ASTRO trade show next month. This aspect of the plan we were not able to announce until today for commercial reasons, but I’ll talk more about it in a few minutes.

And the final phase will be to accelerate earnings growth, but I’ll concentrate today on the first two phases since they represent the year we just concluded and the period we’re now entering. Let me first provide a review of the fourth quarter and full fiscal year 2012. During the fourth quarter, total revenue was $101.1 million. 15 units were installed and 23 units shipped.

Total revenue for the fiscal 2012 was essentially unchanged from prior year when factoring nonrecurring platinum revenue and the difference in TomoTherapy product revenue accounting. This met a goal of maintaining revenue in the year in which we integrated two sales forces.

For the full year of fiscal 2012, we placed 99 system orders into backlog, and we shipped 92. The number of new orders increased for both product lines internationally, offset by a decline in U.S. orders for both products. There was a net worldwide increase in orders for TomoTherapy systems over the prior year, and a year on year decline in CyberKnife orders, although I’m glad to report that Q4 was a strong quarter of CyberKnife orders. We believe this is a sign that we’re reversing the decline in the CyberKnife product revenue that we observed during the first year of integration.

In the fourth quarter, we added $74.2 million in new orders to backlog. The rolling four quarter book-to-bill ratio is 1.02. For the past three quarters, the book-to-bill ratio was 1.12, and for Q4 it was 1.15. This indicates growing momentum in new order performance, a leading indicator of future revenue growth.

I’ll now briefly review the environment in the U.S. As we announced last quarter, we have realigned our U.S. sales force to address our recent U.S. weakness. Although the business environment in the U.S. remains somewhat weak, in certain territories we continue to do well.

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