Accuray Incorporated

Good day and welcome to the Accoray fourth quarter fiscal 2026 financial results conference call. All participants will be in a listen only mode. Should you need assistance, please signal conference specialists 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 1 on your touchtone phone. And to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Mr. Steve Monroe, Vice President of Corporate Financial Planning and Analysis. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Welcome to Accuray's conference call to review financial results for the fourth quarter of fiscal year 2026, which ended June 30th, 2026. During our call this afternoon, management will review recent corporate developments. Joining us on today's call are Steve LaNeve, Accuray's president and chief executive officer, and Ali Pervaiz, Accuray's chief financial officer. Before we begin, I would like to remind everyone that our discussion today includes forward-looking statements. Actual results may differ materially from those contemplated or implied by these forward-looking statements. Factors that can cause actual results to differ materially are outlined in today's earnings release and in our filings with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements except as required by law. In addition, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are provided in today's earnings release. There is also a supplemental slide presentation available on the investor relations section of our website. With that, let me turn the call over to Steve LaNeve.

Thank you, Steve. Good afternoon and thank you for joining us. Fiscal 2026 was an important year for AccuRay. Last October, we began a comprehensive effort to evaluate every aspect of our business, engage with customers around the world, improve accountability and operating discipline, and position AccuRay for sustainable long-term success. Over the last several quarters, we have streamlined our organization, strengthened commercial leadership, sharpened our strategic focus and our execution, reduced our cost structure, worked towards expanding partnerships, have taken significant steps to improve our financial position. These actions were all designed with a common objective in mind, building a stronger, more competitive, and more profitable AccuRay. While the operating environment remained challenging throughout much of fiscal 2026 due to geopolitical uncertainty, tariff pressures, and regional market volatility, We remain focused on the factors within our control and have executed well against the transformation plan we introduced in December of last year. As a result of these actions, Accuray is fundamentally stronger than it was a year ago. We have strengthened our financial foundation, upgraded our people and processes, focused on core competencies by expanding our ecosystem of strategic partners, advanced key technology platforms, and Service Solutions, improved organizational discipline, increased our installed base and are now entering the next phase of our transformation, which consists of decisive steps to strengthen our competitive position, enhance customer value and drive long-term growth in revenues and margins. One of the most encouraging developments has been the positive response we are seeing from customers, partners and the broader radiation oncology community. The exceptional engagement we experienced at Estro 2026 is illustrative of this response. Our booth remained highly active throughout the event. Our clinical symposium was standing room only, and the quality of customer discussions was robust. Together, these interactions reinforced our belief that the market increasingly recognizes the value of AccuRay's innovation in precision treatment delivery, adaptive therapy, Real-time Motion Management, and Intelligent Software Solutions. Importantly, clinical data presented at ESTRO by global clinical leaders reinforced the growing role of precision, short-course radiotherapy across multiple disease sites. In prostate cancer, presentations from San Rafael Scientific Institute Italy and the European Institute of Oncology supported the feasibility and early safety of highly precise, motion-managed, ultra-hypofractionated treatment approaches using the CyberKnife platform. This data is built on broader published evidence base that includes randomized phase three prostate SBRT data and mature long-term robotic SBRT outcomes showing favorable relapse-free survival with very low severe toxicity. In breast cancer, investigators shared encouraging clinical experience with the treatment delivery on both robotic and helical platforms. The National Institute of Oncology, Hungary, reported institutional experience with partial breast irradiation, while researchers from the European Institute of Oncology, Italy, provided an update further supporting the feasibility and safety of this approach. Preliminary outcomes from patients treated on the RADxACT platform Incorporating the recent introduced vital hold system were presented by CHR Metsby and Vilfrance, highlighting the potential of integrated surface-guided radiotherapy and automated breath hold delivery to support precision treatment delivery. Additional data across kidney, lung, functional radiosurgery, and other precision radiotherapy use cases further reinforced the breadth of AccuRay's clinical relevance across multiple disease sites. These escrow presentations build upon a broader and expanding body of published clinical evidence supporting AccuRay technologies. This includes randomized Phase III prostate SBRT data and mature long-term robotic SBRT outcomes demonstrating favorable disease control and Low Rates of Severe Toxicity, further strengthening the evidence base that supports our differentiated approach to radiation therapy. Lastly, ESTRO 2026 was not simply about visibility, it was about momentum. The event translated strong interest into measurable commercial activity, which led to a meaningful increase in qualified leads year over year. We also saw encouraging traction from the European debut of Stellar, as well as continued interest in the unique capabilities of the CyberKnife system. This engagement reinforces our confidence that the investments we have made in innovation, partnerships, and commercial execution are gaining traction in the market and creating opportunities for future growth. This afternoon, I will discuss our progress across five areas. Number one, financial foundation. Number two, strategic partnerships and our ecosystem. Number three, differentiated technology. Number four, transformation phase two. And number five, the FY27 Outlook. Our financial foundation. Let me begin with what I believe is one of the most important developments in the company's recent history. Last month, we announced a comprehensive transaction with TCW, Asset Management Company, LLC, that fundamentally strengthens our financial position and enhances our ability to execute our strategy. The transaction includes the conversion of $40 million of existing debt into preferred equity that is convertible into common shares of more than 100% premium to where the common stock was trading immediately prior to the announcement. A $15 million cash investment in additional convertible preferred equity additional liquidity available through a delayed draw facility, a covenant holiday through December 2027, and several governance and capital structure enhancements. I will add that certain elements of the transaction, such as the issuance of convertible preferred equity, remain subject to shareholder approval and other customary closing conditions as further described in our related Form 8K filing. Collectively, these actions would improve liquidity, reduce leverage, enhance financial flexibility, and provide a greater runway to execute our strategic priorities. We appreciate the continued support and confidence demonstrated by our partners at TCW. Importantly, these steps allow us to spend less time managing capital constraints and more time investing in our customers, innovation, commercial execution, and profitable growth. This transaction was not simply a financing exercise. It was designed to create a stronger foundation for the next phase of Accurate's evolution and beyond. Strategic partnerships and our ecosystem. The second area I would like to discuss is partnerships in our expanding clinical ecosystem. One of the key conclusions that emerged from our transformation work is that Accuration devoted its resources to the areas where we create the greatest value by focusing on core competencies and competitive differentiators while partnering with world-class organizations to further accelerate innovation and execution. We have taken important steps to build exactly that type of ecosystem. Recently, we entered into non-binding letters of intent with Samsung HME America and research laboratories while continuing to expand our relationship with Tata Consultancy Services These relationships are intended to strengthen our capabilities across volumetric imaging, software development, adaptive therapy, engineering, and customer support, while simultaneously producing operational efficiencies that we could not capture on our own. Additionally, we announced in May a landmark 10-year strategic collaboration with the University of Wisconsin School of Medicine and Public Health. This relationship is especially meaningful because it builds upon decades of shared innovation. Many of the technologies that helped establish AccuRay's helical platform originated from groundbreaking work conducted at the University of Wisconsin. Today, we are extending that legacy by creating a framework designed to advance adaptive radiation therapy research, education, training, and the next generation of personalized cancer treatment using our stellar adaptive radiation therapy platform. Together, these relationships are allowing us to build an ecosystem that extends our capabilities while enabling Accurate to remain sharply focused on our core competencies, radiation therapy innovation, clinical excellence, treatment delivery, patient outcomes, and customer solutions. By partnering with world-class organizations across imaging, software, engineering, AI, and services, we can accelerate innovation, improve execution, and increase efficiency without having to build every capability internally ourselves. We believe this approach can accelerate innovation while also improving efficiency and scalability across the business over time. Importantly, this is not a one-time effort. We view strategic partnerships as a key pillar of our operating model going forward. We expect to continue expanding our ecosystem with additional partnerships that further enhance our capabilities and create value for customers and shareholders. Differentiated technology. Innovation remains central to our strategy. As we look ahead, our product roadmap, including the CyberKnife and RADxact systems, is increasingly centered around three areas of differentiated technology. First is motion management. Synchrony remains one of the most differentiated capabilities in radiation therapy and enables clinicians to track and adapt to patient and tumor motion in real time during treatment. Leveraging AccuRay's proprietary software and AI-enabled algorithms, Synchrony helps predict, track, and compensate for motion throughout treatment, positioning AccuRay at the forefront of intelligent motion management. As precision medicine continues to evolve, we believe the importance of motion management will only increase. Second is imaging. ClearRT continues to provide high-quality volumetric imaging that supports treatment planning, patient positioning, adaptive workflows, and clinical decision-making on our RADxACT platform. As the field increasingly emphasizes precision and adaptation, AccuRay's innovation roadmap will continue to prioritize enhanced imaging on the RADxACT and CyberKnife systems. Third is software. In response to our voice of customer findings, we continue to invest in precision, Volo, workflow enhancements, and software-enabled treatment optimization capabilities. We believe software will play an increasingly important role in driving both clinical and operational value. Volo's advanced optimization engine enables faster, high-quality treatment planning while ongoing investments in workflow automation and adaptive treatment capabilities help improve efficiency, support clinician productivity, and further differentiate the accurate treatment platform. What gives us confidence is not only the technology itself, but also the growing body of supporting clinical evidence. At ESSRO 2026, data presented by key opinion leaders highlighted compelling outcomes across multiple indications including impressive kidney treatment results and long-term prostate cancer outcomes demonstrating excellent disease control with low toxicity profiles. These clinical findings reinforce our belief that AccuRay's differentiated technology platform remains well positioned as radiation oncology increasingly shifts towards adaptive, precise, and personalized treatment approaches. Our transformation phase two. The first phase of our transformation program focused primarily on creating a more efficient and competitive operating model and a more agile, responsive and accountable enterprise. We streamlined our organization, simplified decision making, improved accountability, reduced costs, strengthened commercial focus and improved operational discipline. With the incredible efforts of our team, we were able to exceed the financial benefits of our transformation actions. As we had previously communicated, we were expecting approximately $12 million of cost and margin improvement in fiscal 2026, which represented roughly $25 million of annualized benefit. Through disciplined execution, We ultimately realized more than $20 million of cost and margin improvement during fiscal 2026 versus a target of $12 million. These realized improvements are expected to support approximately $15 million of incremental annualized cost and margin improvement in fiscal 2027, with the degree of contribution, depending on product demand levels, the cost environment, and broader business and macro conditions. Now we are entering transformation phase two. This next stage of Accuray's transformation focuses on the following priorities. Differentiated innovation, investing in technologies and capabilities where Accuray possesses unique competitive advantages. Continuing to lower our cost structure, driving further efficiency, leveraging technology and partnerships, and removing complexity throughout the organization. expanded market reach, improving commercial execution, strengthening distributor performance, growing customer and channel partner engagement, and expanding market penetration globally. Service revenue and margin expansion, driving growth in service revenues and margins through price optimization, more efficient parts and personnel utilization, using remote diagnostics in introduction of value added solutions our customers have been asking for. We believe these initiatives help position us to improve both revenue growth and profitability over time. As we enter fiscal 2027, we are doing so from a position of greater strength than a year ago. Our priorities remain clear, executing on our transformation initiatives, improving profitability, expanding recurring revenue and creating long-term shareholder value. At the same time, geopolitical developments, trade policy uncertainty, tariff impacts, conditions in China and the Middle East, and broader macroeconomic factors continue to create significant uncertainty around product demand and margins. Given the long sales cycle inherent in our business, These factors can also affect the timing of orders, installations, and revenue recognition. As a result, we are not providing formal revenue or adjusted EBITDA guidance for fiscal 2027. Instead, we expect continued growth in service revenue, improved service margins driven primarily by pricing optimization and operational efficiencies, ongoing operating expense discipline, and continued benefits from our transformation initiatives. We also expect strategic partnerships to play an increasingly important role in expanding our capabilities while allowing us to remain focused on our core competencies. While product revenue and margin performance remain difficult to predict, we believe the actions taken over the past year have strengthened the business and improved our ability to execute in fiscal 2027. With that, I'll turn the call over to Ali.