Accuray Incorporated

Good afternoon and welcome to the Accuray First Quarter Fiscal 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. 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 star then two. Please note, this event is being recorded. I would now like to turn the conference over to Ken Mobeck, Accuray Vice President, Finance. Please go ahead.

Ken Mobeck Thank you, operator, and good afternoon, everyone. Welcome to Accuray's conference call to review financial results for the first quarter of fiscal year 2023. which ended September 30, 2022. During our call this afternoon, management will review recent corporate developments. Joining us on today's call are Suzanne Winter, Accurate's President and Chief Executive Officer, and Ali Pervez, Accurate's Chief Financial Officer. 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 Security 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. A few housekeeping items for today's call. First, during the Q&A session, we request that participants limit themselves to two questions and then read through with any follow-ups. Second, all references we make to a specific quarter And the prepared remarks are to our fiscal year quarters. For example, statements regarding our first quarter refer to our fiscal first quarter ended September 30, 2022. Additionally, there will be a supplemental slide deck to accompany this call, which can be accessed by going directly to Accurate's investor page at investors.accurate.com. With that, Let me turn the call over to Accurate's Chief Executive Officer, Suzanne Winger. Suzanne?

Thank you, Ken. Good afternoon, and thank you for joining the call. I am proud of how the Accurate team delivered a solid first quarter of the fiscal year despite the challenging macroeconomic operating environment. And as such, we are reiterating fiscal year guidance on revenue and EBITDA. I'll start this afternoon with a reminder of the long-term plan we laid out at the end of fiscal 2022, focused on growing our business faster than the market by delivering differentiated solutions to improve care and outcomes for all stakeholders, growing and improving our service business offering, and finally, enhancing margins and cash flow. In fiscal Q1, we have made significant progress in advancing that growth strategy. In the quarter, we introduced new innovative solutions from our investments in R&D, and we continue to execute on our commitment to delivering a robust product pipeline of differentiated solutions, which will deliver revenue, share growth, and shareholder value over the next several years. While we are early in the execution of our plan, we are already starting to see the impact. We recently attended the Astro Show in San Antonio, Texas. where it was wonderful to see the radiation oncology community getting nearly back to pre-COVID level attendance and evaluating new technology. At the show, we launched Vital Hold, an integrated and automated surface-guided radiotherapy solution for breast cancer patients on the RADxAC system. This development was the achievement of our partnership with CRAD. Vital Hold, in addition to Synchrony Adaptive Delivery, and ClearRT Helical Ultra-High Quality Imaging provides Rad Exact customers with the most comprehensive tool set to treat breast cancer. This is important because one in eight women will be diagnosed with breast cancer in their lifetime, and as a result, breast cancer represents one of the highest procedure volumes in a typical radiation therapy department. Additionally, at Astro, we demonstrated our newest innovation, Artemis. the online adaptive capability in partnership with Raysearch, a leader in treatment planning and OIS systems. Artemis uses RADxACT ClearRT helical CT images with Raysearch's AI-powered algorithms to adapt the treatment plan to changes in the patient's condition that can occur between treatment appointments. Artemis, in combination with Accurate's proprietary synchrony technology that corrects for changes during treatment delivery, represents a powerful competitive advantage for Accurate and will be a critical tool for the delivery of shorter regimen treatments that deliver a treatment dose over five or less fractions. As we execute our growth strategy, we've placed a high priority on key industry partnerships, such as C-RAD, RACER, Brain Lab, Lindus AI, all of which have substantially broadened our market and have enabled us to provide best-in-class solutions to key medical centers globally. Earlier this month, we announced a new global commercial partnership with GE Healthcare. GE Healthcare, a global innovation leader with a strategic focus on personalized oncology solutions, chose Accuray because of its strong brand and leadership environment in precision radiotherapy. The agreement will allow both companies to advance personalized cancer care and offer solutions throughout the care pathway from precision diagnostics, precision treatment delivery and planning, to precision monitoring post-treatment. Our joint goal is to leverage the expertise, commercial footprint, and best-in-class technologies of both companies to advance care, expand global reach and reduce the time between cancer detection and treatment. At ASTRO, we held a clinical session for analysts and investors where key U.S. opinion leaders discussed innovation and the future of radiotherapy. At the session, we announced support for clinical evidence generation that will help in three significant ways. One, driving the adoption of SBRT and SRS into clinical practice. Two, demonstrating the impact of Accurate Technology, and finally, generates clinical data to assist with reimbursement. Key opinion leaders discuss plans for clinical registries using Accurate Technology in prostate cancer, breast cancer, and in neurofunctional care. For the quarter, we delivered $96.5 million in revenue driven by strong demand in Japan and EIVA. Revenue for the quarter reflected a 10.5% increase in units year over year. We were unable to recognize three planned system shipments due to delivery delays of critical subcomponents from a few suppliers. While supply chain conditions have generally improved, we continue to navigate and actively support a few key suppliers. However, our teams understand the issues and are proactively addressing short, mid, and long-term solutions until conditions improve. Additionally, as expected, China revenue was a headwind, down 55% year-over-year, primarily due to the impact of their zero COVID policy. Despite the macro headwinds, underlying customer demand is strong. This is evidenced by improving demand trends we are seeing in orders. We booked 32 new system orders for RADEX-X and the CyberKnife S7, driven by the American and APAC regions. Reported orders growth overall was flat, but grew approximately 6.5% once adjusted for FX compared to the extraordinary quarter last year, which grew approximately 38% due to pent-up demand following COVID-19. We continue to be encouraged by the commercial traction of new innovations like ClearRT, Synchrony, and VoloUltra that are driving our trade-in, trade-up win rates and capturing competitive bunkers as 22% of our system orders came from displacing competitive systems. Despite the impact on revenue in China due to their COVID lockdown, we are encouraged to see signs of improved performance within the China market, The China region orders grew 33% year-over-year, lifted by wins with our current product in the Type B segment. In the Type A segment, we were pleased to see the reactivation of the Type A bidding after a long delay. Customers that were holding Type A licenses for the second round of bidding have successfully initiated their bidding processes, allowing them to begin installation planning, including 18 accurate systems which we expect to be delivered over the first three quarters of the calendar year 2023. Finally, I am pleased with the significant progress our regulatory and operations teams have made to advance our JV Type B products toward market clearance. I am pleased to announce that all product testing has been completed and our NMPA regulatory submission has been received by the agency one month ahead of expectations and is formally in process for review. Our JV partners are initiating targeted market introductions with a full launch beginning in the spring of calendar year 2023. To continue to make progress on our service growth agenda, this will be a transformational journey for our service business over the next several years, and we are already beginning to see improvements in service margins and expect to announce new service and support solutions in the second half of 2023. Finally, our margin and profitability expansion plans have been activated. We have identified three pillars for our focus. First, pricing discipline to capture higher value for our innovation. Second, reducing our product and service costs. And lastly, optimizing our operating expenses. Ali will speak more about our margin and profitability execution plan. Overall, I am pleased with the performance of our teams within the quarter, and I will now turn it over to Ali to discuss the financials.