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Accuray (ARAY) Reports Loss in Q4, Revenues Beat Estimates

Zacks Equity Research

Accuray Incorporated ARAY reported fourth-quarter fiscal 2019 adjusted loss of 2 cents per share against the Zacks Consensus Estimate of earnings per share (EPS) of 3 cents. The company had reported a loss of a penny in the year-ago quarter.

Net revenues of the Zacks Rank #3 (Hold) company totaled $117.4 million, surpassing the Zacks Consensus Estimate by 1.1%. On a year-over-year basis, revenues climbed 3.2%.

FY19 at a Glance

For fiscal 2019, revenues totaled $418.8 million, beating the Zacks Consensus Estimate of $417.5 million and increasing 3.4% year over year.

Adjusted net loss for fiscal 2019 was 19 cents per share, wider than the Zacks Consensus Estimate of a loss of 16 cents. The year-ago figure was a loss of 28 cents.

Accuray reports through two major segments — Product and Service.

For the fiscal year, Product revenues were $196.7 million (47% of net sales), up 6.9% year over year. Service revenues were $222.1 million (53%), up 0.5%.

Fiscal Q4 Details

Product Revenues: Product revenues increased 11% year over year to $60.6 million in the reported quarter on strong demand for the Radixact system.

Service Revenues: Service revenues totaled $56.8 million, down 4% from the year-ago quarter.

Gross Order Update: Gross orders in the fiscal fourth quarter totaled $97.2 million, up 0.8% year over year. The upside was driven by strong demand for Radixact, CyberKnife and TomoTherapy platforms. Radixact accounted for approximately 60% of total gross orders while CyberKnife grew double digits.

U.S. gross orders declined in the reported quarter while that in EMEA grew mid-single digits.

Accuray Incorporated Price, Consensus and EPS Surprise

 

Accuray Incorporated Price, Consensus and EPS Surprise

Accuray Incorporated price-consensus-eps-surprise-chart | Accuray Incorporated Quote

Margins

Gross profit in the fiscal fourth quarter totaled $45.9 million, down 4.3% on a year-over-year basis. Gross margin was 39.1%, highlighting a contraction of 310 basis points (bps) year over year.

Research and development expenses rose 10% year over year to $16.1 million. Selling and marketing expenses declined 11.5% to $14.9 million. General and administrative expenses contracted 13% to $11.7 million.

Fourth-quarter operating profit was $3.3 million, up 5.3% from the year-ago quarter. Operating margin was 2.8%, up 10 bps year over year.

Cash Position

The company exited fourth-quarter fiscal 2019 with total cash, cash equivalents, and short-term restricted cash of $87 million, compared with $22.4 million at the end of Mar 31, 2019.

FY20 Guidance

For fiscal 2020, Accuray expects revenues within $410-$420 million. The Zacks Consensus Estimate for the same is pegged at $434.1 million, much higher than the projected range. Per management, Accuray has slashed its guidance by 1.5%. The company expects revenues from EMEA and Japan to remain flat or slightly below the fiscal 2019 levels. In the United States, Accuray expects modest revenue growth in fiscal 2020.

Our Take

Accuray wrapped up the fiscal fourth quarter on a mixed note. However, solid demand for the company’s Radixact, CyberKnife and TomoTherapy platforms has continued to boost business. We are also upbeat to note that this was the company’s fifth consecutive quarter of double-digit growth in gross orders, which was driven by continued strength in China. Accuray has also significantly operationalized its China joint venture agreement, which was signed earlier this year. A promising pipeline is expected to broaden the company’s product portfolio in the near term.

On the flip side, declining gross orders in United States raise concern. Gross margin significantly contracted in the quarter. Additionally, Accuray’s Service revenues were soft in the fiscal fourth quarter. A dull guidance for fiscal 2020 adds to the woes.

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks which posted solid results this earning season are Stryker Corporation SYK, Baxter International Inc. BAX and Intuitive Surgical, Inc. ISRG, each carrying a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered second-quarter 2019 adjusted EPS of $1.98, beating the Zacks Consensus Estimate by 2.6%. Revenues of $3.65 billion surpassed the Zacks Consensus Estimate by 1.4%.

Baxter delivered second-quarter 2019 adjusted EPS of 89 cents , which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Revenues of $2.84 billion outpaced the Zacks Consensus Estimate of $2.79 billion by 1.9%.

Intuitive Surgical reported second-quarter 2019 adjusted EPS of $3.25, which beat the Zacks Consensus Estimate of $2.85. Revenues were $1.1 billion, surpassing the Zacks Consensus Estimate of $1.03 billion.

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