Executive Summary
Accuray reported a modestly softer quarter on a revenue basis but delivered meaningful growth in recurring service revenues and a robust backlog that underscores visibility into the company’s long-term growth trajectory. Total net revenue of $102.0 million declined 2% year over year (YoY) and was flat on a constant-currency basis, driven by a 9% drop in product revenue to $48.0 million and a 5% rise in service revenue to $53.0 million. The quarter highlighted regionally diverse dynamics: China grew revenue by 30% YoY as Tomo C shipments begin to contribute and as the company ramps production for the China JV, while APAC saw multiple first-in-country shipments and Europe/Japan experienced softer year-over-year comparisons after record shipments in the prior year. Backlog remained strong at about $469 million, with a book-to-bill ratio of 1.1, supporting revenue visibility over the next several quarters. However, gross margins contracted to 33.9% from 38.0% a year ago, and the company reported a GAAP operating loss of $2.1 million (operating margin of –2.12%), with adjusted EBITDA of $3.1 million (versus $6.5 million a year ago). The company attributes near-term margin volatility to JV margin deferrals in China, which management expects to unwind meaningfully in FY2025, contributing approximately $3–$4 million of incremental EBITDA as the deferral reverses, then normalizing thereafter. Management concluded the quarter with a modest upgrade to full-year guidance, reflecting improving demand in high-growth markets and continued progress on margin expansion initiatives. Looking ahead, Accuray raised its FY2025 revenue guidance to $462–$472 million and adjusted EBITDA guidance to $28–$30 million, contingent on a second-half recovery in the U.S. market and continued strength in emerging markets like China and APAC. The company also highlighted strategic product initiatives (Tomo C in China, Helix for emerging markets), the Adaptive Radixact ecosystem (Cenos, ClearRT, VitalHold), and ongoing ERP-driven productivity gains as catalysts for sustained margin expansion.
Key Performance Indicators
QoQ: -24.38% | YoY:-2.26%
QoQ: -10.36% | YoY:-12.72%
QoQ: -131.52% | YoY:-197.11%
QoQ: -216.74% | YoY:-33.18%
QoQ: -216.18% | YoY:-28.66%
Key Insights
Revenue and mix: Q1 revenue of $102.0m, down 2% YoY and down 2% CC; product revenue $48.0m (-9% YoY, -9% CC); service revenue $53.0m (+5% YoY, +6% CC). Gross margin: 33.9% (vs 38.0% YoY). Operating income: –$2.1m (operating margin –2.12%); Adjusted EBITDA: $3.1m (vs $6.5m prior year). Net income: –$3.95m (EPS –$0.0395). Cash flow: operating cash flow –$7.29m; free cash flow –$8.41m. Backlog and orders: product gross orders ~$55m; book-to-bill 1.1; backlog ~ $469m (youngest 30 months)...
Financial Highlights
Revenue and mix: Q1 revenue of $102.0m, down 2% YoY and down 2% CC; product revenue $48.0m (-9% YoY, -9% CC); service revenue $53.0m (+5% YoY, +6% CC). Gross margin: 33.9% (vs 38.0% YoY). Operating income: –$2.1m (operating margin –2.12%); Adjusted EBITDA: $3.1m (vs $6.5m prior year). Net income: –$3.95m (EPS –$0.0395). Cash flow: operating cash flow –$7.29m; free cash flow –$8.41m. Backlog and orders: product gross orders ~$55m; book-to-bill 1.1; backlog ~ $469m (youngest 30 months). Balance sheet: cash and equivalents $60m; total debt $208.8m; net debt $149.6m; inventory up to $155m; accounts receivable ~$92m. Backdrop: management cites longer sales cycles for capital equipment, plus JV margin deferral in China as a near-term earnings headwind; expectation of consistent improvement in H2 FY2025 as Tomo C shipments yield deferred margin release and as China volumes normalize. Guidance: modest raise for FY2025 amid expectations of U.S. recovery in H2 and ongoing demand in emerging markets, with margin expansion and cost efficiencies from ERP integration and productivity programs as accelerants to profitability.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
101.55M |
-2.26% |
-24.38% |
| Gross Profit |
34.47M |
-12.72% |
-10.36% |
| Operating Income |
-2.15M |
-197.11% |
-131.52% |
| Net Income |
-3.95M |
-33.18% |
-216.74% |
| EPS |
-0.04 |
-28.66% |
-216.18% |
Key Financial Ratios
operatingProfitMargin
-2.12%
operatingCashFlowPerShare
$-0.07
freeCashFlowPerShare
$-0.08
priceEarningsRatio
-11.41
Management Commentary
Themes from management commentary and conference call:
- Growth momentum in China and high-growth APAC markets: China revenue grew 30% YoY on Tomo C rollout and Type A/B demand; Thailand and Philippines product introductions; Myanmar Radixact system shipments; management sees China Type B market expansion and potential market share gains (Suzanne Winter). Significance: China is a core growth engine and a primary driver of Accuray’s long-term backlog expansion.
- Margin deferral in China and near-term profitability trajectory: Ali Pervaiz highlighted that approximately 50% of margin from shipments to the JV in China must be deferred until the JV ships to end customers, creating volatility in quarterly margins; they expect $3–$4 million of EBITDA benefit from deferrals in FY2025 as shipments proceed (deferral timing expected to be less impactful beyond FY2025).
- Product and service mix evolution; service monetization: Service revenue grew +5% YoY, led by contract revenue (over 90% of service revenue) and pricing on enhanced service contracts; Cybercomm and other value-added services are accelerating non-contract revenue and helping margin expansion over time (Ali and Suzanne). Significance: recurring service revenue provides visibility and margin upside as installed base expands in emerging markets.
- Regulatory and product pipeline milestones; strategic initiatives: CE Mark for Helix in August; ASTRO conference reception for Cenos and Adaptive suite; expected regulatory submissions for Radixact Adaptive enhancements in Q4 FY2025 with revenue potential in 2025 calendar year end in Europe and the U.S.; PACE-B prostate cancer SBRT results published in NEJM; ongoing education initiatives (Suzanne). Significance: pipeline and adjacent product opportunities support longer-term growth and differentiation.
- ERP integration and cost productivity: ERP implementation completed with ongoing margin expansion and productivity improvements; management views ERP as a leaner operation enabler during a pivotal growth phase (Suzanne). Significance: higher operating leverage as the company scales.
- Market and policy dynamics; regional variability: Anticipated U.S. market improvement in H2 FY2025; APAC momentum; Europe/Japan variability due to tough comps; political/regulatory considerations in China and India; management notes a cautious but constructive view on foreign markets (Suzanne; Ali). Significance: regional timing will drive quarterly variability but long-term trajectory remains positive.
"China delivered significant revenue growth at 30% year-over-year, driven by strong customer demand in both Type A and B markets... the Tomo C system expands our product portfolio in China and allows us to compete in the largest and fastest-growing segment of the China radiotherapy market, the Type B segment."
— Suzanne Winter
"China margin deferral is one of the factors that has had an outsized impact to our quarterly results in the last couple of years. Given all the Tomo C shipments to-date, as the deferred margin starts to release to the P&L beginning in Q2 and through FY 2025, we expect to have approximately $3 million to $4 million benefit, which is included in our fiscal year 2025 adjusted EBITDA guidance."
— Ali Pervaiz
Forward Guidance
Outlook and targets are anchored by a combination of growth catalysts and macro/operational risks:
- Guidance uplift: FY2025 revenue guidance raised to $462–$472 million and Adj. EBITDA to $28–$30 million, implying a modest full-year improvement despite a softer start to the year. Management expects H2 to contribute the majority of the revenue and EBITDA, with Q2 historically stronger and Q4 typically the peak revenue quarter.
- Key catalysts: (1) Tomo C shipments in China driving Type B market expansion and backlog conversion; (2) Helix platform entering India and other emerging markets with CE mark enabling orders; (3) Radixact Adaptive suite (Cenos, ClearRT, VitalHold, Synchrony) enabling higher-value patient-specific treatment and margin expansion; (4) PACE-B prostate SBRT results supporting broader adoption; (5) ASTRO education and customer wins reinforcing demand in high-growth regions.
- Margin dynamics: Near-term gross margin pressure due to the China JV margin deferral, with a projected EBITDA uplift of approximately $3–$4 million in FY2025 as deferred margins are released. Beyond FY2025, management expects the deferral impact to diminish as joint-venture volumes normalize.
- Balance sheet and liquidity considerations: The company is prioritizing working capital optimization (inventory reduction/turnover improvements) and refinancing flexibility to support growth investments. Cash at quarter-end was $60 million with total debt of $208.8 million and net debt of $149.6 million, highlighting moderate leverage in a growth phase.
- Risks to monitor: China policy dynamics (anticorruption timing, stimulus initiatives), continued variability in capital-equipment sales cycles given longer installation timelines, currency effects, ERP-related execution risks, and potential delays in U.S. market recovery that could shift profitability timing into later quarters.
- Judgment on achievability: Given the company’s backlog depth (~$469 million), product pipeline (Tomo C, Helix, Cenos Adaptive suite), and service-margin acceleration, the FY2025 targets appear attainable if demand remains resilient in China/APAC, the U.S. market improves in H2, and deferral unwind proceeds as forecast. Investors should monitor quarterly progression of Tomo C shipments, Helix orders, and the rate at which deferred margins are released in FY2025.