Operator
Good day and welcome to the AccuReFiscal 2024 Fourth Quarter Financial Results 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 remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. 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 Jesse Chu, Senior Vice President and Chief Legal Officer. Please go ahead.
Jesse Chu
Thank you, Operator, and good afternoon, everyone. Welcome to AccuReFalconference Call to review financial results for the fourth quarter of fiscal year 2024, which ended June 30, 2024. During our call this afternoon, management will review recent corporate developments. Joining us on today's call is Suzanne Winter, AccuReFalcon's President and Chief Executive Officer and Ali Pervaiz, AccuReFalcon's Chief Financial Officer. Before we begin, I would like to remind you that our call today includes four looking statements. The actual results may differ materially from those contemplated or implied by these four 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 of Security and Exchange Commission. We base the four looking statements on this call on the information available to us as of today's date. We assume no obligation to update any four looking statements as a result of new information or future events to the extent required by applicable security laws. Accordingly, you should not put undue reliance on any four looking statements. If you have any questions 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 paired remarks are to our fiscal year quarters. For example, statements regarding our fourth quarter refer to our fiscal fourth quarter end of June 30, 2024. 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 .accurate.com. With that, let me turn this call over to Accurate's Chief Executive Officer, Suzanne Winter. Suzanne?
Suzanne Winter
Thank you, Jesse, and thank you all for joining the call. Today I will provide highlights from our fourth quarter and fiscal 2024, both on our accomplishments and the areas of focus for FY25 and beyond. I am pleased with our solid performance in the fourth quarter, with total company revenue growing 14% year over year, reflecting strong operational and commercial execution. This growth was driven by a record number of system shipments within the quarter, representing 20% more than our previous highest shipment milestone. Momentum going into FY2025 remains elevated, particularly in the international markets, which represented more than 80% of our revenue for the fiscal year and reflects the strategy we laid out at the beginning of FY24 of entering emerging markets where patient access to radiation therapy is under-penetrated and where we can become the number one or number two player over time. In the quarter, we saw shipments accelerate nicely, both to new customers and by closing open opportunities from the prior period. We also saw orders growth of 8% versus last year, largely driven by emerging market growth in APAC and Latin America. China was, despite remaining headwinds from the anti-corruption campaign, who orders by 80% in the quarter year over year, driven by pent-up demand for the new Tomo Seed product, which recently received approval for our precision treatment planning system, making our Tomo Seed products ready to ship to end customers. Gaining share in Latin America is a priority for us, and this region saw order growth of more than 400% within the quarter, including a four-system competitive replacement win in Mexico. Finally, I was very pleased with our global Q4 -to-bill ratio, where even with record revenue shipments, it was healthy at 1.2. We believe the -to-bill metric continues to represent a strong leading indicator for future revenue. Product revenue contributed materially to the growth within the quarter, up approximately 28% year over year, driven by strong demand in China, which grew product revenue by 55% compared to the prior year, and the rest of APAC, which grew significantly year over year. EIMEA, our largest region, delivered 27% year over year product revenue growth. The Japan region was up 1% for the quarter year over year, and excluding headwinds from APACs, grew product revenue by 13%. Japan is a very strong market for us, and we have put in several initiatives to help mitigate the impact of foreign exchange. We remain the number two market share player and continue to drive share gain on our path to becoming number one in this developed market. Finally, the Americas region, as we had expected, continued to show weakness in Q4, with product revenue down 50% year over year, driven by customer delays and installation. We believe we felt the greatest impact in FY24 and are cautiously optimistic that we will see conditions improve in the U.S. market and show year over year growth starting in the second half of FY25. Service revenues for the quarter were down slightly due primarily to unfavorable effects in Japan and reduced training and spare parts revenue. However, I am encouraged that recurring service contract revenue was up 4% year over year, as we start to see the results of our strategy of driving install-based growth by penetrating emerging markets like China, where service revenue grew 22% year over year. During the quarter, we received final approval on our precision treatment planning system for China, which was the final step in our approval process for the TomoC platform. As of late fourth quarter, we now have the ability to sell and ship full systems to TomoC customers in the Type B segment. As a reminder, with this final approval, we can now fully record margin at time of delivery from our joint venture site in Tianjin to the end customer for all of our TomoC shipments in China. With this approval behind us, we are now able to fully compete in the Type B market, which represents approximately $3 billion in market potential over the next five years. Ali will discuss more of the Q4 financials, but I wanted to touch briefly on margins, which continues to be an area of focus. Although our overall Q4 adjusted EBITDA margins were within the range we expected, we believe that several factors that negatively impacted margins were transitory in nature and mapped underlying productivity improvements we have achieved from our margin expansion initiatives. From a product perspective, the later timing of the approval of precision treatment planning system in China delayed when we could recognize full margin. With the clearance now behind us, we have begun shipping TomoC to customers and shipped our first system late in Q4 FY24 and expect the majority of shipments to accelerate starting in Q2 of FY25 based on customer readiness. This represents approximately $4 million of margin that was deferred at the end of FY24. Within service margins were mostly challenged by foreign exchange, which impacted our Japanese business performance materially, where we have a large install base. In addition, in Q4, we experienced an isolated supplier quality issue that caused a $2.4 million increase in parts consumption costs. We are working closely with the supplier and expect this to be resolved and recover the majority of these costs over the fiscal year. Once adjusted for the China margin deferral and the supplier quality issue, our Q4 growth margins would have been improved versus the same period in the prior year. Finally, region mix with the headwind to margin as we experience weakness in the U.S. market, which is a higher margin market for us. As discussed, we believe this is a temporary challenge in the U.S. market and are encouraged by the Q4 order performance in the U.S., which grew 9%, suggesting signs of gradual improvement. Moving into FY25, we will be monitoring the timing of order to revenue conversion as a leading performance indicator for recovery in the U.S. And this significantly contributes to slow the revenue growth in FY24. Reflecting on our full year performance, I remain incredibly proud of what our teams accomplished and remain humbled by our mission, which is centered around advancing care and radiation therapy through innovation, expanding patient access to radiotherapy globally, and delivering superior service and support to our customers. We remain confident based on the positive, secular trends in our industry as well as our ability to execute well and gain share in the markets we participate in. While global revenue was flat for the year, I am encouraged by the strong momentum in our international and emerging markets. Excluding the Americas region, international revenues grew 10% year over year for fiscal 2024. China revenue grew 27% year over year, whereas the rest of APAC grew 14% year over year. Our EIMEA region grew .5% year over year, driven in large part by higher growth sub-region markets like India, the Middle East, and CIS or the Commonwealth of Independent Countries. Japan was down approximately 11% year over year, driven largely by the impact of FX, and as I mentioned before, the Americas region, most notably the US, continued to lag other regions, declining 26% year over year. Despite the near-term challenges in capital equipment budget cycles, we believe that the long-term potential of the US market remains intact, with the advanced age of the US install of radiotherapy systems providing a catalyst for upgrade and replacement opportunities. We expect to see gradual improvement in the US in the second half of FY25 into FY26, where we estimate more of a full recovery. Moving on to service revenue for the full fiscal year, overall revenue was down 1% year over year, however, recurring contract revenue grew .5% year over year. As we mentioned on prior calls, we believe that our service solutions business is a huge long-term opportunity for both revenue and margin growth. The expansion of recurring service contract revenue demonstrates underlying performance improvements from the early stages of our plan. These include growth of our install base, impact of pricing actions, investments that will improve system uptime and serviceability performance, like our agreement with Airbus, which will leverage data and predictive analytics to help reduce customer downtime and reduce parts consumption. Finally, we introduced new service solution offerings like Cybercom for the Cyber Knight system, physics solutions like our partnership with True North, and advanced education offerings which we will deliver in our global education centers like the newly opened Innovation and Partnership clubs in General Neary Switzerland. We expect these areas will drive top line and margin improvements while increasing overall customer operational improvements and satisfaction. As we have articulated in the past, there are four major pillars of our strategic growth plan. Our first pillar is driving top line growth through innovation to advance radiotherapy and solve our customers' biggest needs. During the year, we had several product introductions that strengthened our portfolio and further differentiated accurate technology. Customer adoption of our new product innovation has been strong. Notably, this included a 31% year over year growth in Cyberknife system orders, which leads to rapidly growing clinical trends towards shorter course of latest treatments in one to five sessions backed by clinical data over the long term for areas like prostate, lung, and neuro treatments is driving the increase in Cyberknife system demand. Additionally, many Cyberknife system customers report strong patient awareness for Cyberknife system versus other treatment platforms, with many specifically requesting to be treated on the Cyberknife system due to its strong branding and high precision capabilities. A key area of focus for R&D investment will be the expansion of next generation capabilities for the Cyberknife system to further advance the use of stereotactic radio surgery and SBRT and drive replacement of our install base in the developed markets like the US, Europe, and Japan. Customer reception also continues to be strong on our RadExact platform, which represents approximately 70% of product orders in FY24 driven by clear RTCT imaging, synchrony real-time motion management, oil holes, which expands our breast treatment capabilities, and CNOS online adaptive functionality that we introduced as a works in progress and are planning a full introduction at SRO 25. Beyond penetrating the China market, we also intend to serve other high potential markets where patient access to radiotherapy is challenged, particularly India, where we introduced our new AcuRe helix product at the Indian Cancer Congress last fall. Today, we are announcing that we have obtained CE mark clearance for this product with a press release to follow, and will ship our first unit to India in the coming months. Our next strategic pillar is expanding and growing our service business. We set out a multi-year plan to strengthen our service business, which represents a recurring revenue stream and margin expansion opportunity. Our service revenue has been essentially flat over the last decade and currently represents 48% of our global revenue for fiscal 24. Service contract revenue growth is largely guided by growth of our install base. In FY24, we saw an expansion of our global install base in three of our four regions driven by meaningful growth in the APAC region and healthy growth in both EIMEA and Japan regions. We're taking a longer-term approach in the U.S. with focused commercial investment, expanding our commercial footprint with the goal of ensuring the highest level of service and customer satisfaction. So we're best positioned in competitive replacement cycles as well as upgrading our own install base. Expanding margin and profitability and improving our balance sheet was our third pillar. In 2023, Ali and I laid out a multi-year, multi-faceted plan to drive margin expansion and cost efficiencies with the goal of leaving no stone unturned. While we have made good progress against our goals with actions that have helped us to navigate the impact of inflation, logistics costs, and foreign exchange fluctuations, we are still in the early innings of improvements and believe that we have laid out a strong foundation to show material improvement to margins as macro factors improve and as we increase scale. Finally, in FY24, we strengthened our existing strategic partnerships with GE Healthcare and Research and also created new ones like our product development partnerships with CRED, Lindus AI, RAD Formation, and service partnerships with Airbus and TrueNorth. We believe these alliances help us bring -in-class solutions to the market faster, improve our sales funnel, and enhance our win rate. I wanted to take a moment and highlight some of the key milestones in FY 2024 that have put us in a more favorable position going into FY 2025. We enter FY25 with a strong backlog of orders, which at 487 million represents over two years of product revenue potential. From a demand perspective, we saw global orders grow by 10% year over year for the full year, an annual -to-bill ratio of 1.5, exceeding our goal of 1.2. On the operational side, we completed the first full year on our new SAP ERP system without major negative disruption. I'm extremely proud of our teams as this was a foundational milestone for the company. I expect continued productivity benefits and better data and analytics to help us make improved operational decisions that drive further efficiencies. As I mentioned on past calls, working capital will be a key part of cash flow improvements, and we delivered a $21 million reduction in total net inventory from Q3 and $7 million reduction for the fiscal year. This remains a priority for us going into FY25. Finally, entering into the Type B market in China has been a long journey for us, and I am pleased with how we have worked as a cross-functional team to ramp up our joint venture manufacturing site in Tianjin, completing the first 10 system builds of Tomlosee, and executing our first customer shipment of Tomlosee in June to Shandong Hospital. With these key milestones behind us, I believe we are well positioned to execute our strategic growth plan in FY2025. The US remains challenging, and we will continue to monitor key performance indicators. Additionally, we will closely watch China market conditions, including any remaining slowdown due to the anti-corruption campaign in addition to the timing of the China stimulus program, which we believe can be a potential tailwind aimed at replacement opportunities. These factors could impact demand for installations in FY25, but believe these are timing related and difficult to predict exact timing and trajectory, and therefore remain prudent in our guidance as we wait to see stronger signals of US market recovery. And in summary, I am proud of the foundation we have set for future growth. We achieved strategic customer wins in the marketplace, penetrated new markets, and forged key partnerships that enhance our solutions and improve our competitiveness. While we are still early in our transformation, we end the year to drive top-laying growth, gain share in the markets where we compete through strong growth in margin and profitability over the coming years. I will now turn it over to Ali, who will cover our financials.
Neary Switzerland
Thank you Suzanne, and good afternoon everyone. I would like to begin by thanking our global cross-functional teams who banded together and executed with unwavering dedication to deliver the strongest revenue quarter in the company's history. As we had mentioned before, fiscal year 2024 was a very important year for our company. Not only did we enter the value market of radiation therapy equipment to essentially double our addressable market, we also continue to add more operational efficiencies to our business model, which continues to move the needles on our margin expansion plan. Although we face macroeconomic headwinds, particularly in the US, as well as unfavorable foreign exchange and inflation, we believe we are in a good position for growth in most of our markets and are well positioned when the US market recovers. Now turning to the quarter. Net revenue for the fourth quarter was $134 million, which was up 14% versus prior year, and the highest reported revenue quarter in the company's history, exceeding Q4 of last year by $16 million, exhibiting strong demand for our innovations, driven by a 28% increase in -over-year product revenue. Net revenue on a constant currency basis for the fourth quarter was approximately $137 million, which represented a 16% increase versus prior year. On a full year basis, total revenue was $447 million, which is roughly flat from the prior fiscal year. On a constant currency basis, total revenue for the fiscal year was $448 million and represents a slight increase versus the prior fiscal year, despite the Americas region being down 26% versus prior year. Revenue in the rest of the world grew by 10% -over-year and made up 80% of our global revenue fiscal year 24, which is a powerful indication of our continued strength in those markets. Product revenue for the fourth quarter was $80 million, up 28% from prior year and up 29% on a constant currency basis. As Suzanne mentioned, product revenue included 36 system shipments, which is the new record number of shipments in the company's history, and a 24% is unit growth versus prior year. On a full year basis, product revenue was $234 million, roughly flat from the prior year. Full year product revenue adjusted for the impact of foreign exchange was $235 million, representing a slight increase versus the prior year. Service revenue for the quarter was $55 million, down 2% from the prior year and flat on a constant currency basis, primarily driven by $3 million of lower revenue related to training and lower spare parts volume. Notably, the contract revenue portion of our service business was up 4%, or $1.8 million versus the prior year, which showcases growth in the mostly annuity part of the service business as our install base continues to expand globally. Full year service revenue was $212 million, down 1% versus prior year. Service contract revenue was also a highlight for full year service revenue, which grew at .5% and contributed $8.5 million in additional revenue versus last year. This is noteworthy, since contract revenue represents greater than 90% of service revenue. Growth orders for the fourth quarter were approximately $95 million and represented a book to bill ratio of 1.2. On a full year basis, growth orders were $342 million and represented a book to bill ratio of 1.5. Moving to the backlog, the end of the fourth quarter was a backlog of approximately $487 million, which represents greater than two years of product revenue, and we feel confident about the ability of this backlog to convert to revenue within 30 months. As part of our diligence in ensuring a high quality backlog, we canceled three units representing approximately $6 million of orders due to evolving customer dynamics. Our overall gross margin for the quarter was .6% versus .9% in the prior year, with a year over year decline primarily due to 2.1 points of higher margin deferral from China shipments and 2.1 points from higher parts consumption. Excluding the age of factors, our reported gross margin would have been higher by 4.2 points implying year over year margin attrition. As discussed in previous quarters, the China margin deferral is a delay of margin recognition until the final product makes it to the end user, and we expect to recognize all of the deferred margins in Q2, FY25, and beyond. Parts consumption was higher due to a supplier quality issue we faced in the quarter that resulted in higher than anticipated failure rate of a critical component utilized in our CyberKnife platform. Our engineering teams have worked closely with the supplier to identify the root cause and to put appropriate corrective actions in place. We continue to monitor this quality issue and expect it will be resolved in the first half of fiscal year 25. Excluding the China margin deferral and the higher parts consumption, our gross margins would have been higher than prior year driven by lower costs due to productivity actions the team has prioritized, along with higher contract revenue and pricing in our service business as part of our margin expansion actions. On a full year basis, our overall gross margin was 32% compared to .4% in the prior year, with the decline mainly driven by one point of higher China margin deferral, which we expect to contribute to margin beginning in Q2 of fiscal year 25, and two points of higher net parts consumption versus prior year, which was partially due to the supplier quality issue mentioned earlier. But if already changed overall service is 30 basis points headway for us in fiscal year 24, the Japanese yen alone contributed to a 1.1 point headlink, which was partly offset by other global currencies during the year. Had the Japanese yen not deteriorated by approximately 12% through fiscal year 24, it would have contributed an additional $5 million for our bottom line. Operating expenses in the fourth quarter were $31.6 million compared to $38.1 million in the fourth quarter of prior fiscal year. This 17% year over year reduction was driven by improved efficiencies across the organizations, benefits from the restructuring we announced earlier in the year, and a lower company bonus payout. Operating expenses for the full year were $142.4 million compared to $151.6 million in prior year, representing a 6% reduction year over year, showcasing focused cost control as we continue to push our teams to prioritize return on investment as part of our margin expansion actions. Operating income for the quarter was $6.8 million compared to a loss of $0.5 million from prior year. Operating income for the full year was $0.5 million compared to $2.4 million in the prior fiscal year. Adjusted EBITDA for the quarter was $10.1 million compared to $5.2 million for the prior year period. For the full year, adjusted EBITDA was $19.7 million compared to $23.9 million for the prior period. From a year over year perspective, there were two main factors that negatively impacted our adjusted EBITDA. Firstly, we deferred $5 million of additional China margin versus last year, which we know are the timing-related issues that will result in a benefit starting in Q2 of fiscal year 25 and will be normalized going forward now that we have the NMPA approval for the precision treatment planning system. Secondly, we experienced $4 million of higher parts consumption on which $2.4 million was related to a particular supplier quality issue, which we anticipate resolving in the first half of fiscal year 25. Without these two issues, our adjusted EBITDA would have surpassed last year, which points to the strong underlying operating performance of the business. We described the reconciliation between gap net income and adjusted EBITDA in our earnings issued earlier today. Turning to the balance sheet, total cash, cash equivalents, and short-term restricted cash amounted to $69 million compared to $61 million at the end of last quarter. Net accounts receivable were approximately $92 million, up $19 million from the last quarter, with the record number of system shipments. Our net inventory balance was $138 million, down $21 million from the prior quarter. I'm extremely proud of the way our teams executed to improve working capital performance with a substantial decline in inventory and an increase in cash, which resulted in $9.4 million of free cash flow generation in Q4. In summary, fiscal year 24 was a challenging year for us to execute through from a macro standpoint. While we saw inflation ease slightly over last year, the foreign exchange volatility, especially the Japanese yen, served as a big headwind that hampered our results. Additionally, the slowdown of the US market drove a 26% -over-year decline in revenue from that region, which also happens to be a higher margin region in our portfolio. Despite those headwinds, our global teams worked tirelessly and were able to grow total revenue by 10% -over-year, excluding the Americas, which also represents 15% -over-year gross in product revenue, which will serve as a catalyst to our service business in the coming quarters. Another positive indicator for our business was a strong growth in service contract revenue of .5% -over-year, which represents more than 90% of service revenue. I'm extremely proud of the financial discipline and operating rigor we have put in place over the last two years across our entire organization. Our teams continue to execute from an operational perspective and are laser-focused in margin expansion through pricing actions, service growth, operational excellence, and focused on tax management. While we've had many headwinds on gross margins, the hard work being done in all these areas above is helping to offset macro factors and we believe will meaningfully contribute to our P&L in the near term once those exogenous factors dissipate. Additionally, we are well positioned to accelerate our growth in APAC and EIMEA while anticipating the recovery of the US market. Looking forward to fiscal year 25, I firmly believe that the new product innovations and service offerings we introduced in fiscal year 24, along with expansion into the value segment, will position us nicely to drive an extended period of top-line growth and profitability. Based on the above, for fiscal year 25, we are guiding to a revenue range of $460 to $470 million and an adjusted EBITDA range of $27.5 to $29.5 million. This guidance range assumes the following key factors. Firstly, the US market will begin to recovery in the second half of fiscal year 25, delaying system revenue and associated margin and adjusted EBITDA to the back half of the year. Secondly, China margin deferrals due to delayed NMPA approval of the precision treatment planning system to begin releasing starting in Q2 of fiscal year 25 and then normalizing in the back half of the year. Those are key financial highlights and with that, I'd like to hand the call back to Suzanne.
Suzanne Winter
Thank you, Ali. In closing, I'm incredibly proud of our global employees and the progress they have made this year against each of our strategic growth objectives. While we did not grow the way we had planned, we end with very strong fourth quarter performance. We have major regulatory approvals in place, including full Tomlissi approval in China and CE Mark for the Helix platform. We have a strong backlog of orders, commercial momentum in the majority of our markets, and strong customer demand for our unique radiotherapy platforms. Additionally, we've navigated a number of macroeconomic factors over the last couple of years, including inflation and foreign exchange headwinds and remain cautiously optimistic that as these conditions improve, could provide a tailwind to our performance. All of this sets us up nicely to deliver to our guidance of 3 to 5% top line growth and greater than 40% EBITDA for the year. And advance our strategic growth pillars into the next phase of execution as we drive to deliver compelling solutions to improve patient outcomes and quality of life for patients diagnosed with cancer or neurological disease. I will now turn it back over to the operator for Q&A.
Operator
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-down phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Young Lee from Jefferies. Please go ahead.
Young Lee
Very great. Thanks for taking our questions and congrats on a strong finish to the year. I guess this starts us on the guidance. Was curious if you can talk a little bit more about it. How much Tomo C is in the guidance? What are some of the potential upside and downside drivers that can get you to the top end or lower end? And I guess within China, what are the expectations for either anti-corruption impacts or stimulus impacts?
Neary Switzerland
Hey, Young. Thanks so much for the question. I think in terms of overall guidance, maybe starting with the bottom end versus the top end, the two big factors are the recovery and the timing of the recovery of the U.S. market, which would really take us to the higher end versus the lower end that continues to be delayed. That's a significant factor. Obviously, there's certainly a lot of different macro tailwinds that we continue to track as well. Those are the two main factors that really determine the range of our guidance between 460 to 470, the important one really being the timing of the U.S. market recovery. I think overall, when you think about our guidance for next year, maybe I could just provide some more color. If you think about revenue, we really think it's going to be a similar first half, second half performance that we've had historically, which is 45% in the first half versus 55% in the second half, which really is related to the demand profile that we're seeing for our customers. I think one thing that is noteworthy in the first half is that we do expect seasonality between Q1 and Q2. Historically speaking, Q1 has been our lowest revenue quarter. Q1 of 24 perhaps was a little bit of an anomaly, so maybe Q1 of 23 is a better representation of how we expect revenue to unfold in the first half between those two quarters. Also in the back half of the year, Q3 tends to be the lower revenue quarter, and then we obviously have a huge wrap up in Q4, which we experienced this particular year. I think that's certainly very important to take into consideration as we think about revenue profile for next year. When it comes to our EBITDA profile, I would say it's somewhat similar in nature to what we experienced in fiscal year 23. The biggest factor to take into consideration over there is really our service margin and our service parts and options. Our overall service margin for the year was roughly .9% for the total year. In Q1 of fiscal year 24, it was 43%, so it was 10 points higher than where we actually ended the year. That was artificially higher because if you recall, we had an ERP implementation that was completed in Q1 of fiscal year 24, and so we actually had almost $5 million of lower parts consumption that's been trickled into the remainder of the year. It is going to be important to ensure that as we're thinking about Q1, that was a one-off, and that's certainly not going to repeat. Again, that's one factor to take into consideration. Then as I shared within the script, we do expect the China margin deferral to start to release in Q2 of our fiscal year. That's really related to the fact that it is year-end for our JV partner. They're starting to bring a lot of customers online, and they expect the bolus of shipments to occur in Q2 and beyond. That's when we actually start thinking about the release activity to start to pick up. I think those are really the way to think about guidance in terms of low-end versus high-end, and then also how we think about the year on board.
Young Lee
Okay, great. That's very comprehensive, very helpful. I guess maybe just to follow up with wondering if you can talk a little bit more about the contributions from TomoC in China and what you're hearing from the anti-corruption campaign side and anything on the stimulus side.
Suzanne Winter
Yes, absolutely. We're celebrating after a very long time waiting for the final approval to really do a full introduction. Certainly our JV partner is very excited. We did ship our first unit to our first customer at the very end of Q4, and now they're working very closely to drive the remainder of the take installation based on customer timing in the first half and, of course, into the back half of the year as well. Really, we think there'll be a surge in Q2 in terms of the overall installation. I think that the response is very strong. Again, China ended the year very strong in order to which we'll translate into revenue over the coming years. We're very enthusiastic about the potential now that we have this clearance behind us. Just in terms of the anti-corruption campaign, I think there's just lingering processes that have slowed down over this past year, the process. Again, it certainly hasn't hurt us from the results that we are seeing, but we do expect that something is going to be the new normal. I think our team just built that into their overall forecast that some things are just going to take longer. In terms of stimulus, that is starting to roll out. Again, it's an interest-free loan that the government is providing, and not just the healthcare of many industries, but it's really directed at replacement of older systems. Again, our team in China is positioning these customers to be able to train access to those funds. They have not. We haven't seen it actually initiated yet, but we do expect that probably in the back half of the year, we'll start to see some contribution to that, but we have not built that into our numbers until we start to see greater signals.
Young Lee
All right, great. That's very helpful. Thank you so much.
Operator
Our next question comes from Marie Thibault from BTIG. Please go ahead.
Marie Thibault
Hi, thanks for taking the questions. I wanted to follow up a little bit on Japan. I heard that after you exclude the yen headwind, it certainly sounds like strong demand. I think in the past, you've said that you expected to see a strong backlog come through in that country. I'm curious if some of that came through in this quarter, and how long we might expect some of that demand to last.
Suzanne Winter
Thanks for your question, Marie. Yes, I think that Japan's Q4 did come through with some strong revenue performance. It is a developed market, and we've talked about this in the past, a developed market. We do not have the same first rule phrase in some of the emerging markets, but our Japan team is really going after competitive replacements. They have done just an outstanding job in terms of really going after age to sell base, not only ours, but also our competition. Again, we've talked a bit about them being the number two position, but we think they're on their way to being number one, just based on how they're trending at this point. So again, we look at the Japan team, and we think that they've set a high bar for the other regions, just in terms of really how to drive strong customer satisfaction. So we do expect a continued, important contribution from that region.
Marie Thibault
Okay, that's helpful. And then maybe talking about one of the more emerging regions that has a lot of opportunity. Congrats on the CE mark for Helix. Can you tell us a little bit more about your plans there in India? Could we expect to see some orders get booked here in this fiscal year? And while we're talking about regulatory wins, have there been any updates from the FDA on CINO since you submitted the 510-K last year? Thanks.
Suzanne Winter
Let me talk about India first. We do have CE marks. There's still a couple more regulatory hurdles in India, but we do expect that we'll be in the end of our calendar year. But we are able to take orders now. So the good news is we get started to build a funnel of orders within that region. And you're right, we see a lot of potential in India. And we believe that India has the potential over this coming year to be as big a market as China is potentially. Right now, we think it's about $100 to $125 million market. We think the Helix will play very well there. But meanwhile, we are investing in our commercial footprint in India as well as our back office. Because we do believe the potential is very strong. And now with Helix, we've got a full portfolio. We will go out to the market. Just in terms of the regulatory approval and CE marks, that is extended, I think, from what we had originally thought. Again, we had gone back and we're having conversations with the FDA in terms of just making sure that we now have the cybersecurity requirements as well as some other requirements around human factors. So at this point, we're planning for a full introduction at EPSTROM. But we'll be in a shipping mode probably by the end of the calendar year. So we do think it'll help us to win the new rat effect orders. But the revenue travel, we know, will come in the first half of that. That's my thinking.
Marie Thibault
OK, very helpful, Suzanne. Just to clarify, more regulatory hurdles in India for Helix. Is that things like treatment planning system or something else?
Suzanne Winter
Yeah, no. Now, we're at SDSCO. And it's more of a localization kind of hurdle. What we need to do is make sure that we ship our first order and that we have someone local body that does testing on it. And then we open it up to bring your shipments.
Marie Thibault
Gotcha. OK, thank you so much. Nice quarter. Thank you.
Operator
The next question comes from Brooks O'Neill from Lakes Reach Capital Markets. Please go ahead.
Suzanne
Thank you very much. Good afternoon. I'm just curious if you could give us a little more color on the US market in particular, maybe a little bit about the competitive environment. Do you feel like you're gaining share or losing share, gaining bunkers, losing bunkers? And what do you think the outlook is for fiscal 2025 in the US?
Suzanne Winter
Thanks for your question, Brooks. I mean, I would say the US market, too, when we talk about revenue, we're really talking about delays that we see our customers having from order to installation and getting the capital priorities to be able to install what we saw over FY24 was a slow down, lower priority for radiation therapy. But I think as we go into FY25, what's playing out is what our customers have been telling us, which is they expect to see some gradual improvement in the back half of the year. They have greater visibility. As a result, we have greater visibility. So we think the back half of the year will start to see a gradual increase and then more of a full recovery in FY26. In terms of are we winning, our orders actually were good in the US and overall of the neighbors that were worse. So we think that's very strong. We think it's faster than the overall market growth and that we are gaining share as a result of our strong customer reception to our new product innovation. So what we're really looking at, and we take a look at the region for the year, is what is that timing of order to installation and can we help to accelerate that? And some of the things, again, is better visibility. The other is making sure that we've got a very robust order to revenue process so that we work very closely with our customers to help them to get the fragility.
Suzanne
Great. Let me ask one more. Appreciate the color. You were two ago a lot of focus on service, margin improvement, service growth. Would you say if I was listening correctly, maybe I wasn't, but it sounded like most of the service opportunity is perhaps more tied to system shipments, new system shipments. And I guess the question really is do you continue to see opportunity to drive growth in service and service margin? Thank you very much.
Suzanne Winter
Yes, absolutely. I'll start and I'll let Ali jump in here. Yeah, I would say our service results of the year don't tell the full story. I think that we did get some training and some installation revenue that was tied to the American installations that we planned for events that affected our overall service revenue. But what's most important to us is growing that service contract revenue. That's the recurring part of the business. That is 90% of the revenue because these other things are one-time factors. And so at .5% growth, we think that that is a significant win. And we think there's still a lot more room for us to grow the service business, not only from an increasing price, but these new service solutions that we talked about like Cybercom that we can now sell to our Cyber9 customers in a service contract that greatly reduce their commissioning time as well as other value-added service solutions that we can bring to the table and also advanced education. We've made a big investment in our global education center, including the General UA Innovation Hub as well as one in China, we have one in Japan, and we have also invested to expand our training center in Madison. So all of these things, we think we're in the early inning. We're certainly consciously optimistic at the .5% growth on the service contract revenue. And we think we've got more to go. From a margin standpoint, I'll let you make comments.
Neary Switzerland
Yes, Suzanne, I totally agree with what you said. I think the important metrics that we look at is how is contract revenue growing because that is really representative of most of the individual part of the service business. Suzanne mentioned that's going to get .5% year over year and just installer terms that added about $8.5 million of continued revenue into that particular line-up. So then you're asking, why is service revenue not growing by the same amount? Like Suzanne mentioned, that's being offset by some of the training, install revenue, mostly by lower activity in our US markets. And then also spare parts revenue. And spare parts revenue gets impacted when we actually enter countries for the first time because our distributors are building up their spare parts. And we actually had lower first in country activity in this particular year. So I would say that's all mostly timing driven, but it's not a good indication of the fundamental performance of our service business. The contract revenue really is. And so that grew 4.5%, which is both an indication of growing higher than our install base and also the pricing activity that the team has been doing over the last 18 months. So we feel good about the fact that pricing activity is now starting to showcase into the P&L. I think the other element that's important to note is that we got hit with about $2.4 million of higher part consumption related to a supply of quality issue. And so really had it not been for that particular one-off, our service margins would have been better by that amount. I think we look at a lot of other operating metrics as well. I think the good news in terms of service part consumption, which is probably the cost our service business bears, is that overall from the volume of part consumed, we're seeing a lot of productivity. Where that's being offset is by the impact of inflation. So last year, in the clear 23, we had almost about 3% inflation. This year that grew by about 2.3%. And so again, a lot of that underlying activity the team is doing is being matched by a lot of these exogenous factors. And we do think that once these exogenous factors start to dissipate, not only by themselves, but also through the work that our teams are doing with our suppliers, with our engineering teams, that will meaningfully start to showcase our P&L. So I would say margin expansion builds very much front and center, not only for our service business, but also in just overall cost reduction activity. We did a lot of that in-house activity initially, but now we're actually actively engaging with our suppliers to really utilize them as partners to understand how do we start to accelerate this activity going into fiscal year 25. As a matter of fact, we just had our first supplier summit earlier this month. And that's exactly the type of partnership we're looking for from our suppliers is how do we continue to reduce the cost activity as we anticipate our volume to pick up.
Suzanne
Great. Thank you for all of that. Looking forward to coming here.
Operator
Thank you, Brett. Again, if you have a question, please press star, then one. And our next question comes from Jason Witz from Roth Capital. Please go ahead.
Jason Witz
Hi. Thanks for the questions. So in terms of your service revenue and how you're growing it, largely pricing initiatives or are just higher take rates on service contracts? I understand the mechanics behind the optimism there.
Suzanne Winter
Yeah. Well, it's definitely the growth of our install base. So, you know, we had a strategy of going to emerging markets that would hide growth. Those installations then generate service contract revenues. So that's really the big driver. But we also have, we're starting to see pricing actions come through the P&L. And so that's also very encouraging. And then we believe that in future, we'll start to see more contribution to the growth rate from our new value added service offerings that are new and could be a source of growth for higher value in what we provide to our install base.
Jason Witz
Okay. And then, you know, if I think about, you know, your growth over the last, you know, several years, it's kind of kind of mid to high single digits is kind of in the range. Part of that's half your revenue being service, the other half obviously being capital equipment purchases. But with, you know, this new initiative to go after emerging markets, and now that you're kind of set up both in China and India, I assume that's all incremental. And is that potentially going to push you guys more towards double digit type growth? Or how do we think about this opportunity sort of progressing over the next couple of years?