• Revenue: $113 million, up 12% year-over-year.
• Product Revenue: $57 million, up 16% year-over-year.
• Service Revenue: $56 million, up 9% year-over-year.
• Gross Margin: 27.9%, compared to 28.7% in the prior year.
• Adjusted EBITDA: $6 million, compared to $1.1 million a year ago.
• Free Cash Flow: $16 million generated in the quarter.
• Book-to-Bill Ratio: Over 1.2, indicating healthy customer demand.
• Order Backlog: Approximately $452 million.
• Operating Income: $1 million, compared to an operating loss of $4.6 million in the prior year.
• Total Cash, Cash Equivalents, and Short-term Restricted Cash: $79 million.
• Net Inventory Balance: $146 million, down $2 million from the prior quarter.
• Q4 Revenue Guidance: Expected to be in the range of $121 million to $129 million.
• Q4 Adjusted EBITDA Guidance: Expected to be in the range of $9.5 million to $12 million.
• FY25 Adjusted EBITDA Guidance: Maintained in the range of $28.5 million to $31 million.

• Warning! GuruFocus has detected 6 Warning Signs with ARAY.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Accuray Inc (NASDAQ:ARAY) reported a strong third quarter with revenue growth of 12% year-over-year, driven by strong performances in both developed and emerging markets.
• The company achieved an adjusted EBITDA of $6 million, a significant increase from $1.1 million a year ago, primarily due to volume, pricing, and operational improvements.
• Accuray Inc (NASDAQ:ARAY) maintained a healthy book-to-bill ratio of over 1.2, indicating strong customer demand for its solutions across various markets.
• The service business, which represented approximately 49% of revenue and 59% of gross margin, grew by 9% year-over-year, providing a stable and predictable revenue base.
• The company is actively exploring avenues to strengthen its capital structure and create long-term value for shareholders, demonstrating a proactive approach to financial management.

Negative Points

• Visibility on near-term growth in revenues and earnings is lower due to global market uncertainties, impacting the company's ability to forecast accurately.
• The recent tariff policies are expected to negatively impact product sales in China, with an estimated revenue impact of $10 million to $15 million in Q4.
• Gross margin decreased to 27.9% from 28.7% in the prior year, partly due to incremental net China margin deferral.
• The company faces significant uncertainty regarding the potential exemption of medical devices from tariffs in China, which could affect future revenue.
• Accuray Inc (NASDAQ:ARAY) anticipates headwinds in adjusted EBITDA due to reduced China volume and increased tariff costs, despite efforts to mitigate these impacts.

Q & A Highlights

Q: Was there a significant impact of deferred China adjusted EBITDA in this particular quarter? A: Yes, product margins were at 22.7% this quarter due to higher margin deferral on China. Last quarter, product margin was 43.5% due to an outsized China margin release. Overall, EBITDA reflects the revenue volume for the quarter. - Ali Pervaiz, CFO

Q: Do you anticipate as big an impact in markets like India and South America as in China? A: The China impact is the highest, and we are focused on determining which regions can make up the volume in Q4. We have strength in IMEA, including India, and non-China APAC regions. Japan had a strong quarter, and the US market is improving. - Suzanne Winter, CEO

Q: Could you provide more detail on the China tariff exemption efforts and potential scenarios? A: We are working with our China JV to seek a medical device exemption. The situation is unclear, and we don't have a timeline for when this might impact shipments. If an exemption occurs, we could resume shipping relatively quickly. - Suzanne Winter, CEO

Q: Are you assuming no activity in China until the tariff situation is resolved? A: We are conducting scenario planning and will provide more clarity at the Q4 earnings call. We are taking actions to remain profitable and within our outlook despite the uncertainty. - Suzanne Winter, CEO

Q: How are you reallocating resources in response to the China situation? A: We are focusing on both developed and emerging markets. We took advantage of stimulus in the UK and saw strong orders in non-China APAC regions like Thailand, Taiwan, and Korea. We are opportunistic in resource allocation. - Suzanne Winter, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.