Accuray Incorporated

Good day, and welcome to the Accurate Third Quarter Fiscal 2023 Financial Results Conference Call. All participants will be in a listen-only mode for the duration of the call, and should you need any assistance during that time, 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. If you would like to ask a question, you may press star, then one on your telephone keypad to join the queue. If you would like to withdraw your question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to the Chief Legal Officer, Jesse Chu. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to Accurate's conference call to review financial results for the third quarter of fiscal year 2023, which ended March 31st, 2023. During our call this afternoon, management will review recent corporate developments. Joining us on today's call are Suzanne Winter, Accra's President and Chief Executive Officer, and Ali Pervez, Accra'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 outlined in the press release we issued just after the market closed this afternoon, as well as in our files with the Securities and Exchange Commission. We base the forward-looking statements on this call on the information available to us as of today's date. 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 re-queue with any follow-ups. Second, all references to a specific quarter and the prepared remarks are to our fiscal year quarters. For example, statements regarding our third quarter refer to our fiscal third quarter ended March 31, 2023. Additionally, there will be a supplemental slide deck to accompany this call, which you can access by going directly to Accurate's investor relations page at investors.accurate.com. With that, let me turn the call over to Accurate's Chief Executive Officer, Suzanne Winter. Suzanne?

Thank you, Jesse. Good afternoon and thank you for joining the call. Let me start by saying that I'm very pleased with our third quarter results, which demonstrate meaningful progress in achieving the long-term agenda that I set forth when assuming the role of CEO just under a year ago. I am enormously proud of the Accurate team, who are laser-focused on our main priorities, driving above-market revenue growth, expanding profitability through operational efficiencies and pricing discipline, and leveraging strategic partnerships to more effectively compete in the global radiation therapy market. During this quarter, we grew global revenue by 23% year over year. We also achieved a new milestone in systems manufactured and shipped within the quarter, representing a 67% unit growth compared to the prior year period. Although we continue to face headwinds from the supply chain, which had a negative impact on our margins, Customer demand for the installation of CyberKnife, Rad-Exact, and Tomotherapy systems is robust. Our operations and regional teams are consistently performing at the highest levels, collaborating closely with our supplier partners to minimize supply chain disruptions, and working with our customers to ensure timely delivery and installation. The organization has rallied around converting our backlog of orders into customer installations. so that more institutions have access to Accurate products to deliver advanced care to their patients. We are experiencing strong demand for Accurate products fueled by our new product innovations, including ClearRT and Synchrony on RADxACT, as well as the CyberKnife S7. Our commercial priority is on converting the aging installed base of systems to the most recent performance capabilities, so our customers have the latest generation of high-precision robotic and helical radiation therapy tools to provide advanced care and help our customers achieve strong competitive positioning in their market. In the quarter, global product revenue grew 45% year-over-year, driven by the developed markets. America's product revenue more than doubled. EIMEA delivered 66% product revenue growth and we achieved almost 150% product revenue growth in Japan, where we are number two in market share. Expanding our service revenue is a critical pillar in our revenue growth, and in Q3, global service revenue grew by 4%. Emerging markets, like APAC, played a significant role in driving growth, particularly in China, where our JV team, CNNC, Accuray, increased the number of executed service contracts for their expanding base of installed systems, resulting in a strong 28% growth in service revenue. Orders were solid, with 34 new system orders representing a 3% growth in units year-over-year and consistent with our target of 1.2 book-to-bill performance. Although we saw some orders in the U.S. region push out of Q3 to future quarters due to delays in purchasing cycles, U.S. order backlog grew 8% within the quarter compared to the same period a year ago, indicating continued growing demand from U.S. customers. Our next strategic priority is driving profitability expansion. In Q3, adjusted EBITDA grew 54% year-over-year despite FX, which had a $4.1 million negative impact to our top line versus last year, and inflation, which impacted our margins by $2.2 million. While we are still in the early stages of our margin expansion initiatives, we are already seeing the results of our strategic pricing actions being reflected in higher average sales prices for new orders, which we expect will impact our revenue and gross margin in future quarters. Additionally, Ali and I are driving operational rigor and review of every area of our business. spotlighting areas where we can build efficiencies, reduce waste, and improve our return on capital. All these actions are helping us in the short term to navigate the FX and inflation headwinds and reduce volatility from the current environment, while positioning us to accelerate profitability in the long term when these macro conditions improve. Expanding patient access to Accurate technologies worldwide is a fundamental part of Accurate's vision, particularly in regions where technology penetration is currently low. In Q3, our global installed base of customers grew by over 4%, driven in large part by installations in the APAC region. China grew its installed base by 29 systems compared to the number of systems at the end of Q3 last year. our CNNC Accuray commercial team has been executing targeted pre-launch market activities for our Tomo C Type B product with a Made in China designation. Regulatory approval by the National Medical Products Administration in China for the Tomo C product is expected at the end of the calendar year, and the response from KOLs to the feature set has been strong. In South Korea, We conducted our first users meeting with over 100 participants attending since transitioning our commercial service operations from indirect to direct. The decision to go direct in service in South Korea aligns with our commitment to get closer to our customers in target markets where we believe we can improve the local technical and clinical support of our installed base. In Japan, we were very busy this quarter installing 10 new systems in Q3, and growing the installed base by 9% year-over-year to 143 systems. Six out of these 10 systems were competitive replacements and will help to build up our reference base. Although Japan is considered a developed and highly penetrated market, it is still in the early adoption phase of using shorter-course SBRT treatments for prostate cancer compared with the U.S. or Western Europe. In March, Accuray held a dedicated SBRT course for prostate cancer in Tokyo, led by world-class faculty from NYU and the Royal Marsden, along with our chief medical officer, Dr. Seth Blacksburg. This interactive hands-on course received a tremendous response, which we expect will generate additional demand for Accuray technology in the Japanese market. We are committed to driving advanced education to support clinicians worldwide on the use of FBRT treatments to advance care, and we plan to take the course on the road with China as the next stop. EIMEA continues to be our largest customer base, growing 5% year over year and achieving the 350 installed base milestone. As mentioned earlier, in the U.S., product revenue doubled compared to a year ago, with solid customer demand for our differentiated platforms. In fact, CyberKnife was recently featured in the Journal of the Society of Mechanical Engineering as one of seven robots that can save your life. Our final strategic priority is leveraging our commercial partnerships with the goal of increasing our commercial scale and improving solution value for our customers. Our partnership with GE Healthcare continues to advance on multiple commercial fronts. In the quarter, we held a joint oncology innovation workshop in our EIMEA region, and our commercial teams in the U.S. are working together building joint customer strategies. We are seeing growth in commercial momentum and are building a sales funnel from our combined activities. Additionally, we are in the early phases of expanding beyond the U.S. to other target regions as well. And finally, at the European Society of Radiation Oncology, ESTRO, In Vienna, taking place in May, we will align marketing themes to promote our commitment to interoperability within the radiation therapy department with the goal of ensuring open access to the best technologies available for each unique patient treatment. I am excited to see how our partnership is progressing and the expanding areas of collaboration between our companies. I will now turn it over to Ali, who will speak more about our financial performance.