Accuray Incorporated

Welcome to the Accra fourth quarter fiscal 2025 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, then one on your telephone keypad. To withdraw your question, please press pound, then one. Please note this event is being recorded. I would now like to turn the conference over to Steve Monroe, Vice President of Corporate Financial Planning and Analysis. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to ACCURI's conference call to review financial results for the fourth quarter of fiscal year 2025, which ended June 30, 2025. During our call this afternoon, management will review recent corporate developments. Joining us on today's call, are Suzanne Winter, Accuray's President and Chief Executive Officer, and Ali Pervez, Accuray'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 filings 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 in the prepared remarks are to our fiscal year quarters. For example, statements regarding our fourth quarter refer to our fiscal fourth quarter ended June 30, 2025. Additionally, there will be a supplemental slide deck to accompany this call, which you can access by going directly to Accuray's investor relations page at investors.accuray.com. With that, let me turn the call over to Accuray's Chief Executive Officer, Suzanne Winter. Suzanne?

Thanks, Steve, and welcome to our fourth quarter earnings call, and thank you all for joining today. Overall, I'm pleased with our performance in the fourth quarter, especially how we navigated a turbulent geopolitical environment, which impacted several key regions at various points in the quarter. Our solid revenue growth overcoming these obstacles was a testament to the resilience and flexibility of our operations and commercial teams to deliver product and provide service to the markets that were open during various periods within the quarter. Service was a highlight for the quarter with solid service revenue and margin growth, as well as the continued positive customer response to our new product innovations like Tomosi for China and Helix in international markets, both of which have been a central part of our growth strategy. Finally, we put a major milestone behind us by successfully completing refinancing of our debt and securing a strong strategic partner that has invested in our long-term success. Before I go into the specifics of the quarter, I'd like to review the macroeconomic geopolitical backdrop we continue to navigate through and provide some context on the guidance we provided last quarter and the resulting impact on our performance. Recall that in early April, trade negotiations escalated between the U.S. and China. The U.S. government announced a 145% tariff on goods from China entering the U.S., and China imposed a 125% tariff on goods coming from the U.S. After evaluating the potential impact to our business, we provided guidance during our fiscal third quarter financial results to reflect these developments in trade policy, which included revenue adjustments to account for an anticipated stall in China revenue, which at the time we expected would be partially offset by other regions like EIVA. Fast forwarding to May, the U.S. and China came to an agreement and each announced reduced 10% reciprocal tariffs, a significant improvement from the original April announcement. These actions reopened the China market for us, allowing us to resume shipments. Weeks later in June, there was an unexpected unrest in the Middle East, which affected trade in a significant portion of the EIVA region, essentially halting shipments to several countries within the region. All of these events created significant challenges within our supply chain as we pivoted several times within the quarter to deliver product to different regions of the world. The net result of all of this was that we were able to shift a portion of sales back into China in May, allowing us to deliver our overall revenues in line with our expectations. However, due to this regional shift of revenues into China and out of EIMEA, we had a $1.7 million higher margin deferral into future quarters, which impacted adjusted EBITDA. We expect to realize this margin as a positive adjusted EBITDA impact starting in the first half of fiscal 2026, as these products are delivered to their end customers. Despite these dynamics, I'm incredibly proud of how our team stepped up in a major way to mitigate the impact of the tariff volatility through focused actions, which Ali will speak to in greater detail. These include first, executing a drawback of duties paid on components, which were subsequently exported. Second, managing logistics to drop ship service parts directly to bonded warehouses and customer sites directly. Third, establishing dual source capabilities for key components. And most importantly, advancing progress in our plans to establish our Mastin manufacturing site as a foreign trade zone in the second half of the fiscal year 2026, which is expected to mitigate a significant portion of future tariffs. Now turning to the fiscal fourth quarter, total revenue for the quarter was approximately $128 million, down 5% year over year, driven by lower product revenue in our China and EIMEA businesses. As I alluded to earlier, reduced sales in China were linked to the tariff impacts in May, resulting in a 14% decline versus last year. And later in the quarter, the escalating tensions in the Middle East, which impacted our EIMEA business, resulting in a 34% decline versus last year. Additionally, Japan declined 11% in the quarter. Outside of these regions, we saw outstanding revenue performance in our APAC region, which was up 22% driven by improved demand, and we were pleased to see a return to revenue growth in the Americas at 24% with a solid conversion of backlog. Service revenue was a highlight for the quarter at $56.9 million, up 4% versus the prior year. We see tremendous opportunity in our service business for both revenue and margin expansion as we grow our installed base at customers. All regions showed installed base growth with the exception of the U.S., which essentially remained flat. A key area of focus in the quarter was driving improvement in service margins. I was encouraged to see service margins up nicely both year over year and sequentially. This will be a continued area of focus for us in the future, and we believe that we have laid out the foundation, including strategic pricing, development of high-value support and education offerings, and finally driving efficiencies in our cost to service. Over the last two years, we have focused R&D investment in making our current designs more robust and have started to realize more substantial benefits here. One of the biggest factors in improving service margin is reducing service parts consumption, and we are now positioned well to execute on this initiative and feel it is a big opportunity for us over the next few years. Additionally, order trends continue to support our target book-to-bill ratio of 1.2, a level which we believe to be a healthy balance to grow our company. From a regional perspective, the biggest highlights were a 50% growth in orders in APAC, and 34% year-over-year growth in Japan, followed by a 15% growth in China and a 12% growth in EIMEA. These were partly offset by slower order demand in the U.S., which was down as the replacement market has yet to recover in a meaningful way. Growth in the emerging markets, where we have introduced new products like the Helix and Total C in China, are seeing strong demand. are among the highest growth markets in the world, which we are actively targeting and are an integral part of our growth plan in the next few years. Reflecting on our fiscal full-year performance, I remain proud of what our team has accomplished this year and remain humbled by our mission, which is centered around advancing care through innovation, expanding patient access to radiotherapy globally, and delivering superior service to our customers. Global revenue for the year grew 3%, and I'm very pleased by the strong performance in our international markets. China product revenue grew 20% year-over-year, whereas the rest of APAC grew over 200% year-over-year. Offsetting growth in these regions was a decline in product revenues in some of the developed markets, which had a substantial impact on the year-over-year EIMBA growth, which was down 32%. and a decline in our Japan region where the economy has slowed over the past few quarters and was down 19%. Service was strong with revenue up 4% for the full fiscal year, which represents the highest annual growth we've seen of the last several years and over nearly all regions. Growth was primarily driven by three factors, including expansion of our installed base, increased service contract capture rates following warranty, and additional value-added service offerings like CyberCom, all of which demonstrated meaningful results in nearly all regions. Leading the way here was China, where we saw 21% year-over-year growth in service revenue. This was followed by 10% growth in Japan, 7% growth in the EIMEA regions, and 3.5% growth in APAC, which were partly offset by the Americas, which declined 7%. While region product revenue varies from quarter to quarter, the growing contribution from our service business, particularly service contract revenue, provides greater revenue predictability and a base to expand margin. During the year, we also kicked off the Accurate Care Service Initiative with focused R&D investment to further strengthen our existing platform designs to improve system uptime performance, extend service parts life, and improve our customer response times, and time to repair. We're leveraging system data, AI, and predictive analytics to improve costs to serve by reducing parts consumption with a goal of no patient having to be rescheduled for treatment due to system downtime. In summary, I'm proud of what we've accomplished this year. We've built a strong foundation for top-line growth driven by international markets, achieved a strong market position in key markets like Japan and China, We grew our installed base of customers as well as delivered strong growth in our service business. Despite the near-term challenges and capital equipment budget cycles, we believe that the long-term potential of developed markets like the U.S. remain intact, with the advanced age of installed base of radiotherapy systems providing a catalyst for upgrade and replacement opportunities. We were pleased to see revenue growth in Q4 from the U.S. and expect to see a gradual improvement from this region accelerating in fiscal year 26. Before I hand it over to Ali, who will provide more details, I want to take a moment to talk about the refinancing transaction that closed during the quarter and what it just means for our company in the long run. This transaction was driven by our desire to find the right partner for the business and create financial flexibility. We are looking forward to working with TCW and our newly appointed independent board member. I believe they're going to be a tremendous asset to us as we grow our business in the upcoming years. I'll now turn it over to Ali, who will cover our financial performance in court.