Accuray Incorporated

Good afternoon and welcome to the Accuray Second Quarter Fiscal 2021 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press Start Then 2. Please note, this event is being recorded. I would now like to turn the conference over to Ken Mobeck, Vice President of Finance at Accuray. Please go ahead.

Thank you, Gary, and good afternoon, everyone. Welcome to Accuray's conference call to review financial results for the second quarter of fiscal year 2021, which ended December 31, 2020. During our call this afternoon, management will review recent corporate developments. Joining us on today's call are Josh Levine, Accuray's President and Chief Executive Officer, Shig Hamamatsu, Accuray's Senior Vice President and Chief Financial Officer, and Suzanne Winter, Accuray's Chief Commercial Officer and Senior Vice President of R&D. Before we begin, I would like to remind you that our call today includes forward-looking statements. Actual results may differ materially from those contemplated or implied by these forward-looking statements. Factors that could cause these results to differ materially are set forth in the press release we issued just after the market closed this afternoon, as well as in our filings with the Securities and Exchange Commission. The forward-looking statements on this call are based on information available to us as of today's date, and we assume no obligation to update any forward-looking statements as a result of new information or future events, except to the extent required by applicable securities laws. Accordingly, you should not put undue reliance on any forward-looking statements. Two housekeeping items for today's call. During the Q&A session, we request that participants limit themselves to two questions and then re-queue with any follow-ups. Second, all references we make to a specific quarter in the prepared remarks are to our fiscal year quarters. For example, statements regarding our second quarter refer to our fiscal second quarter ended December 31, 2020. With that, let me turn the call over to Accuray's President and Chief Executive Officer, Josh Levine.

Josh? Thanks, Ken, and thanks to everyone joining us on today's call. Accuray's fiscal 2021 second quarter performance continues to reflect the positive momentum our business is making despite the headwinds created by the COVID-19 environment. Highlights from our second quarter performance include the beginning of system revenue conversion related to the China Type A licenses awarded to AccuRay Systems, receiving 510K approval for ClearRT, our helical KVCP imaging on Radizak, and the continued adoption of our latest innovations like Synchrony, real-time motion tracking, and delivery adaptation on Radizak, and our latest generation CyberKnife S7 system. Revenue for the quarter came in at $97.5 million, which included approximately $21 million of China-related system revenue. The bulk of the China-related system revenue recognized in the second quarter represents the beginning of revenue conversion related to Type A licenses awarded to Accurate Systems in the past 18 months, which have an aggregate estimate value of approximately $150 million. While the number of Type A system shipments will vary from quarter to quarter, we currently expect revenue related to the remainder of the Type A licenses will be recognized over the course of the next 18 to 24 months. Regarding the Type B product segment, our China JV continues to make operational progress in advancing the manufacturing validation and qualification process, and we believe we are on track to have our China manufactured Type B product ready for market introduction in approximately 18 months. Gross order volume for the quarter was $75.4 million, which while down globally versus Q2 of the prior fiscal year due to COVID headwinds, was in line with our internal expectations. As we had shared in our first quarter earnings call in October, this was expected, as we highlighted the tough comparisons to the prior year, driven by type A orders in China during Q2 of the prior fiscal year, coupled with COVID-related headwinds in the Americas and EMEA regions during the current fiscal year. Despite those challenges, we saw positive order growth in Japan, where gross orders grew 10% year over year, primarily driven by strong RATASAC demand, as well as new technologies such as synchrony on RADIS Act. On a global basis, approximately 50% of new RADIS Act orders during the quarter included synchrony, which is a significant increase from prior year, and we believe this increase demonstrates that our customers see true clinical value in synchrony's proprietary real-time motion tracking and delivery adaptation capability. With respect to CyberKnife, we saw a 17% unit volume increase year-over-year, driven by S7 orders in the Americas and EMEA regions. From a financial perspective, we continue to see positive momentum in both operating and financial leverage from the cost management and cash preservation decisions we initiated during the initial stages of the COVID pandemic. With the improved operating leverage that we are seeing, we will be increasing our investments in R&D, which will bring the spending run rate back to pre-COVID levels of investment. On the product innovation front during the quarter, we announced that we had received 510K clearance for ClearRT, our helical KVCT imaging platform for the RADISAC system. This regulatory approval paves the way for two important milestones in our phased product launch. First, we can now obtain customer clinical evaluation site feedback and generate case studies demonstrating the impact of ClearRT on treatment-related decision making. Secondly, we look forward to gaining additional global regulatory clearances like CE-MARC and Shonen in Japan in preparation for a broader commercial launch, which we anticipate will take place towards the end of this fiscal year. ClearRT combines the Radizak system's unique tomotherapy helical platform with KVCT imaging capability, providing near-diagnostic quality image resolution, the longest transverse field of view, and best-in-class image acquisition speed that allows clinicians to acquire uniform, high-quality images during the treatment. We expect that ClearRT, combined with our synchrony motion tracking and real-time delivery adaptation on the RADISAC platform, will help to further advance the overall functionality and clinical capabilities of RADISAC and its strategic positioning as a workhorse system. We believe that the significant technology additions we are adding to our current product portfolio are well aligned with CMS's radiation oncology alternative payment model, which is now scheduled to go into effect beginning in January of 2022. Accuray has been a pioneer in high-precision technologies that enable hypo- and ultra-hyperfractionation, and we believe that the innovations we are bringing to the market will be a catalyst for long-term growth and ensure that our delivery platforms maintain their position as a gold standard choice in hyperfractionated SRS and SBRT treatments. And with that, I'll turn the call over to Shig to review our Q2 financial results in greater detail. Shig?