Accuray Incorporated

Good afternoon, everyone, and welcome to the Accuray Reports third quarter of fiscal 2021 financial results conference call. All participants will be in a 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 and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. We also note today's event is being recorded. At this time, I'd like to turn the conference call over to Ken Mobeck, Vice President of Finance and IR. Sir, please go ahead.

Thank you, Jamie, and good afternoon, everyone. Welcome to Accurate's conference call to review financial results for the third quarter of fiscal year 2021. which ended March 31st, 2021. 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, Sheik 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 law. Accordingly, you should not put undue reliance on any forward-looking statements. A few 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 third quarter refer to our fiscal third quarter ended March 31st, 2021. There will be a slide presentation accompanying this call, which can be accessed on the link provided in today's earnings release or by going directly to Accuray's investor page at Accuray.com. With that, let me turn the call over to Accuray's President and Chief Executive Officer, Josh Levine. Josh?

Thank you, Ken, and thanks to everyone joining us on today's call. Accuray's fiscal 2021 third quarter performance continues to reflect the positive momentum our business is making despite the headwinds created by the COVID-19 environment. Positive highlights from our third quarter include the continued conversion of China Type A system revenue, excellent progress in the phased introduction for our ClearRT helical KVCT imaging upgrade on RADIS Act, including regulatory approval for that in Japan, and the continued adoption of our latest innovations like synchrony, real-time motion tracking and delivery adaptation on RADIS Act, and our latest generation CyberKnife S7 system. Revenue for the quarter came in at $102.6 million, which was an increase of 3% from the prior year. Overall fiscal Q3 revenue included approximately 25 million of China-related system revenue, consisting of nine Type A and one Type B systems. the third quarter saw continued execution related to China Type A revenue conversion. While the number of Type A system shipments will vary from quarter to quarter, we expect revenue related to the remainder of Type A licenses will be recognized over the course of the next several quarters. 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 that we are on track to have our China manufactured Type B product ready for market introduction in approximately 15 months. Gross order volume for the quarter was $87.4 million, which included 37 system orders, was up 12 million or 16% sequentially from prior quarter, and in line with our internal expectations. Despite the COVID headwinds, we saw positive order growth in Japan and EMEA, where gross orders grew 19% and 7% year over year, respectively. primarily driven by strong demand for RATIS Act, as well as the adoption of new technologies like Synchrony on RATIS Act. On a global basis, approximately 44% of new RATIS Act orders during the quarter included Synchrony as an option, which is a significant increase from the prior year, and we believe demonstrates the growing clinical value of Synchrony's proprietary real-time motion tracking and delivery adaptation capability. With respect to the CyberKnife platform, 57% of the quarter CyberKnife orders and 73% of CyberKnife orders year-to-date consist of our latest generation S7 platform, indicating continued strong customer uptake related to this product launch. Additionally, we continue to see solid performance in trade-in trade-up orders, representing 22% of global orders in Q3, with a strong percentage of the product mix in our developed markets like EMEA and AMS where we are targeting older systems for upgrade to our latest generation CyberKnife and Radizak platforms. From a financial perspective, as mentioned in our last call, with the increased EBITDA we are generating, we have started to increase our investments in R&D in the third quarter and expect this trend to continue into the fourth quarter as we adjust our R&D investment run rate back to pre-COVID levels. On the product innovation front, we are seeing early order momentum from ClearRT helical KVCT imaging on the RADISAC platform, gaining four orders for ClearRT as an option on new RADISAC systems and 10 upgrade orders for existing installed base systems. Additionally, we are excited about the feedback from our initial clinical evaluation site where the staff is successfully treating patients guided by high fidelity helical KVCT images. Our ClearRT imaging upgrade provides improved ability to visualize both the tumor as well as surrounding healthy tissue, allowing the staff to plan and deliver the highest quality treatment plans with confidence and precision. Quoting Dr. Lane Rosen, Director of Radiation Oncology at Willis-Knighton Cancer Center, who is our collaboration partner, ClearRT exceeded our expectations and provided noticeably superior image quality compared to the cone beam CT systems on our conventional linear accelerators. we believe the RADISAC system and ClearRT imaging will allow our team to improve the care we provide our cancer patients significantly. From a regulatory clearance perspective during fiscal Q3, we received additional market clearance with shown approval for ClearRT in Japan, and we believe we are on track for CE mark certification sometime in our fiscal fourth quarter. With these additional clearances, we believe that our ClearRT imaging upgrade remains on track for a broader global commercial launch in our fiscal fourth quarter. The importance of the ClearRT introduction on RATIS Act cannot be overstated in terms of clinical impact and expanded clinical utility. In order to provide a sense about the overall image quality of ClearRT and how it compares to diagnostic CT, I have a visual to share as I walk through my prepared remarks. This slide contains a set of same patient images courtesy of the team at Willis-Knighton Cancer Center, our first clinical evaluation site. The image captured on the left was acquired using ClearRT helical KVCT imaging, and the one on the right is from a diagnostic CT. Clinicians who see these images find it difficult to discern the difference. Like the diagnostic CT, ClearRT helical KVCT has excellent uniformity across the image, accurate spatial resolution, and provides easy visualization of low contrast anatomy throughout the largest field of view available in the market. For background, unlike conventional cone beam CTs, ClearRT does not suffer from noise in the image that can obscure critical anatomy. And unlike MR images, ClearRT is not hampered by deformation of structures within the image, which can make accurate patient setup and adaptive workflows very challenging. Finally, ClearRT acquires these high-quality images fast, less than 20 seconds for a standard scan length and only one minute to scan a full meter. And patient dose exposure is very low, basically one to three grade, depending on the area of the image. As shown in the sample images, ClearRT combines the Radizak system's unique helical platform architecture with KVCT imaging capability, which provides near-diagnostic CT quality image resolution. Additionally, Radizak's unique architecture provides the largest transverse field of view in the industry and marries it with best-in-class image acquisition speed that allows clinicians to quickly and efficiently acquire uniform, high-quality images during the treatment. ClearRT represents a significant improvement in imaging capability over conventional cone beam CT And when added to Radizak's other unique capabilities, like Synchrony's proprietary real-time motion tracking and delivery adaptation capability, we believe it makes Radizak a truly unique, highly versatile, and efficient workhorse platform for radiotherapy departments, both large and small, due to its competitive total cost of ownership. Turning to our CyberKnife platform, we are very pleased with the continued demand for the CyberKnife S7. specifically in healthcare systems that are building world-class SRS and SBRT programs, offering ultra-hyper fractionated treatment for their patients. During the quarter, we received CyberKnife S7 orders at the China International Import Expo, including the PLA General Hospital, where this specific S7 order represents the third CyberKnife system at their facility. Additionally, we had the first installation of the S7 in Japan this quarter, at Kumamoto Radio Surgery Clinic and in the U.S. at Mount Carmel Health in Columbus, Ohio, which is part of the Alliance Oncology Network. CyberKnife S7's unique non-complainer delivery combined with synchrony motion tracking and real-time adaptation provides the highest level of precision needed for higher-dose SBRT treatments with treatment times under 15 minutes. A most recent retrospective study published in the February 2021 publication of frontiers in oncology demonstrates significantly fewer grade 3 and above toxicity outcomes for patients treated with CyberKnife and Synchrony. ACCURI has been a pioneer in the development of high-precision technologies that enable hypo- and ultra-hyperfractionation, and we believe that the innovations we are bringing to the market, like Synchrony and ClearRNT on RADIS Act and CyberKnife S7, will be catalysts for long-term growth and ensure that our differentiated radiotherapy platforms maintain their position as the gold standard choice in hypofractionated SRS and SBRT treatments. Highlighting news from a press release we put out yesterday, we are pleased to announce that Dr. Jean-Philippe Pignol has joined Accuray as Chief Medical and Technology Officer. In this role, Dr. Pignol will serve as a member of the company's executive leadership team and will lead the company's scientific and clinical research functions, work to develop strategic collaborations with global key opinion leaders that support technology assessment and development activities, and serve as our executive representative with important industry partners, including medical societies and regulatory and legislative agencies that influence healthcare policy and reimbursement. Dr. Pignol is a globally recognized and respected board-certified radiation oncologist with both an MD and a PhD in nuclear physics from University Louis Pasteur in Strasbourg, France. We are thrilled to have Jean-Philippe as part of our team and look forward to leveraging his expertise to expand Accuray's impact in the global radiation therapy market. Looking back over the past 12 to 15 months, clearly the COVID-19 challenges have created headwinds for many companies, and Accuray has been no exception. Despite these challenges, Accuray has navigated through this period comparatively well, and I believe we are emerging from the COVID pandemic a stronger company overall. We have an improved product portfolio with meaningfully differentiated technology upgrades that we believe will allow us to retain our installed base of customers and compete more effectively for new bunkers going forward. In terms of existing growth catalysts, we are seeing the tangible revenue impact of the China type A radiotherapy opportunity that we've been working to activate for quite a while and directional line of sight in our fiscal Q4 to continued commercial momentum. From a financial perspective, as a result of actions we took at the outset of the pandemic, we are showing an improvement in financial leverage and a stronger cash position. Lastly, and perhaps most importantly, we have a vastly improved, very focused executive leadership team that we firmly believe is positioned to effectively execute our strategic growth agenda going forward. And with that, I'll turn the call over to Shig to review our Q3 financial results in greater detail. Shig?