Accuray Incorporated (ARAY) Bundle
Understanding Accuray Incorporated (ARAY) Revenue Streams
Understanding Accuray Incorporated’s Revenue Streams
The company's revenue streams can be categorized into two primary segments: products and services. For the three months ended September 30, 2024, the revenue breakdown was as follows:
| Revenue Type | 2024 (in thousands) | 2023 (in thousands) | Percent Change |
|---|---|---|---|
| Products | $48,369 | $53,350 | (9%) |
| Services | $53,176 | $50,542 | 5% |
| Total Net Revenue | $101,545 | $103,892 | (2%) |
Year-over-year, the overall revenue decreased by 2%, primarily due to a 9% decline in product sales, which was partially offset by a 5% increase in service revenue. The decrease in product revenue is attributed to a lower volume of shipments of the TomoTherapy and CyberKnife systems.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for the last two fiscal years are as follows:
| Fiscal Year | Total Revenue (in thousands) | Growth Rate |
|---|---|---|
| 2024 | $101,545 | (2%) |
| 2023 | $103,892 | 5% |
The decline in 2024 follows a 5% growth in 2023, indicating a notable shift in revenue performance amidst challenging market conditions.
Contribution of Different Business Segments to Overall Revenue
In the fiscal quarter ended September 30, 2024, the contributions of different segments to total revenue were:
- Products: 48% of total revenue
- Services: 52% of total revenue
This indicates a shift towards services, which now represent a larger portion of total revenue compared to products, highlighting the growing importance of the service segment in the company's revenue model.
Analysis of Significant Changes in Revenue Streams
Noteworthy changes in revenue streams for the three months ended September 30, 2024, include:
- Product revenue decreased by $5.0 million due to lower shipment volumes.
- Service revenue increased by $2.6 million, driven by a higher installed base and increased service contract prices.
- Revenue from the EIMEA region saw a significant decline of 35%, while revenue from China increased by 30%.
Overall, the company faces challenges in product sales, particularly in the EIMEA region, while service revenues are becoming a more stable revenue source.
Geographic Revenue Breakdown
Net revenue by geographic region for the three months ended September 30, 2024, is detailed below:
| Region | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) | Percent Change |
|---|---|---|---|
| Americas | $20,870 | $20,557 | 2% |
| EIMEA | $25,894 | $39,533 | (35%) |
| China | $33,976 | $26,215 | 30% |
| Japan | $9,865 | $12,592 | (22%) |
| Asia Pacific (excl. China) | $10,940 | $4,995 | 119% |
| Total | $101,545 | $103,892 | (2%) |
The data shows a mixed performance across regions, with notable growth in China and Asia Pacific, while the EIMEA region's revenue has sharply decreased.
A Deep Dive into Accuray Incorporated (ARAY) Profitability
Profitability Metrics
In this section, we will explore the profitability metrics of the company for the three months ended September 30, 2024, focusing on gross profit, operating profit, and net profit margins.
Gross Profit
For the three months ended September 30, 2024, the company reported a gross profit of $34,469 thousand, a decrease of 13% from $39,493 thousand in the same period of the prior year. The total gross profit as a percentage of net revenue stood at 33.9%, down from 38.0% in 2023.
| Metric | 2024 (in thousands) | 2023 (in thousands) | Percent Change |
|---|---|---|---|
| Gross Profit | $34,469 | $39,493 | -13% |
| Gross Profit Margin | 33.9% | 38.0% | -4.1% |
Operating Profit
The operating loss for the period was ($2,149) thousand, compared to an operating profit of $2,213 thousand in the same quarter of the previous year. This significant shift indicates challenges in maintaining operational profitability.
Net Profit
The net loss for the period amounted to ($3,954) thousand, which is a deterioration compared to a net loss of ($2,969) thousand in the prior year, reflecting ongoing operational challenges and increased expenses.
| Metric | 2024 (in thousands) | 2023 (in thousands) | Percent Change |
|---|---|---|---|
| Net Loss | ($3,954) | ($2,969) | +33.2% |
| Net Loss per Share | ($0.04) | ($0.03) | +33.3% |
Trends in Profitability Over Time
Over the past year, the company's profitability has shown a declining trend, with gross profit decreasing alongside net losses widening. The operational efficiency metrics indicate increased costs, particularly in research and development and selling and marketing expenses.
Comparison with Industry Averages
When compared to industry averages, the company's gross profit margin of 33.9% is below the industry standard which typically hovers around 40-50% for similar firms. This highlights potential areas for improvement in cost management and pricing strategies.
Operational Efficiency
Research and development expenses decreased to $12,116 thousand from $14,013 thousand, while selling and marketing expenses increased to $11,682 thousand from $10,244 thousand. General and administrative expenses slightly decreased to $12,820 thousand from $13,023 thousand.
| Expense Type | 2024 (in thousands) | 2023 (in thousands) | Percent Change |
|---|---|---|---|
| Research and Development | $12,116 | $14,013 | -14% |
| Selling and Marketing | $11,682 | $10,244 | +14% |
| General and Administrative | $12,820 | $13,023 | -2% |
The total operating expenses as a percentage of net revenue remained constant at 36%, indicating a need for further cost control measures to improve profitability metrics moving forward.
Debt vs. Equity: How Accuray Incorporated (ARAY) Finances Its Growth
Debt vs. Equity: How Accuray Incorporated Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Accuray Incorporated reported total debt of $170.240 million. This consists of:
- Short-term debt: $7.769 million
- Long-term debt: $162.471 million
Debt-to-Equity Ratio
The debt-to-equity ratio for Accuray as of September 30, 2024, is calculated as follows:
- Total equity: $45.223 million
- Debt-to-equity ratio: 3.77 (calculated as total debt of $170.240 million divided by total equity of $45.223 million)
This ratio indicates that the company relies heavily on debt financing compared to equity, which is higher than the industry standard average of approximately 1.5 for similar companies in the healthcare sector.
Recent Debt Issuances and Credit Ratings
In May 2021, Accuray issued $100 million in 3.75% Convertible Senior Notes due in June 2026. The company also has a five-year $80 million term loan facility and a $40 million revolving credit facility. As of September 30, 2024, the outstanding balance under the term loan was $62 million and $10 million under the revolving credit facility.
The company has not explicitly stated its credit rating in the latest reports; however, the terms of its credit facilities suggest a moderate risk profile.
Debt Refinancing Activity
On September 12, 2024, Accuray entered into a Fourth Amendment to its Credit Agreement, which included changes to the financial maintenance covenants and reduced available revolving commitments to $20 million. This amendment reflects ongoing adjustments to maintain liquidity under changing market conditions.
Balancing Debt Financing and Equity Funding
Accuray’s approach to financing involves a strategic balance between debt and equity. The company has opted for debt financing to support its growth without diluting equity. The use of convertible notes and credit facilities allows Accuray to leverage its capital structure while maintaining operational control. The company's total stockholders' equity as of September 30, 2024, stands at $45.223 million, which helps to cushion the impact of its relatively high debt levels.
| Debt Component | Amount (in millions) | Type |
|---|---|---|
| Convertible Senior Notes | $100.000 | Long-term |
| Term Loan Facility | $62.000 | Long-term |
| Revolving Credit Facility | $10.000 | Short-term |
| Total Debt | $170.240 | |
| Total Equity | $45.223 | |
| Debt-to-Equity Ratio | 3.77 |
Assessing Accuray Incorporated (ARAY) Liquidity
Assessing Accuray Incorporated's Liquidity
Current and Quick Ratios
As of September 30, 2024, Accuray Incorporated reported a current ratio of 2.58, indicating a strong liquidity position to cover short-term liabilities. The quick ratio, which excludes inventories, stood at 1.98. This suggests that the company can meet its short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was $59.2 million at the end of the latest quarter. This reflects a decrease from the previous quarter's working capital of $66.5 million, primarily due to increased current liabilities associated with operational needs.
| Period | Current Assets (in $ million) | Current Liabilities (in $ million) | Working Capital (in $ million) |
|---|---|---|---|
| September 30, 2024 | 152.8 | 93.6 | 59.2 |
| June 30, 2024 | 157.3 | 90.8 | 66.5 |
Cash Flow Statements Overview
For the three months ended September 30, 2024, the cash flow from operating activities was $(7.3 million), a slight improvement from $(8.6 million) in the same period last year. The breakdown of cash flows is as follows:
| Cash Flow Type | 2024 (in $ million) | 2023 (in $ million) |
|---|---|---|
| Operating Activities | $(7.3) | $(8.6) |
| Investing Activities | $(1.1) | $(1.1) |
| Financing Activities | $(2.2) | $(1.5) |
Potential Liquidity Concerns or Strengths
Despite having a solid current ratio, potential liquidity concerns arise from a significant increase in inventories, which grew by $17 million during the quarter, reflecting challenges in converting these assets into cash quickly. Additionally, ongoing supply chain issues and inflation may further strain liquidity in the near term. However, the company maintains a cash balance of $61.1 million as of September 30, 2024, providing a buffer against short-term financial pressures.
Is Accuray Incorporated (ARAY) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the company, we will analyze key valuation metrics including the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends, dividend yields, and analyst consensus.
Valuation Ratios
The following table summarizes the key valuation ratios as of September 30, 2024:
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | N/A (Net Loss) |
| Price-to-Book (P/B) Ratio | 1.05 |
| Enterprise Value-to-EBITDA (EV/EBITDA) | Not available (Negative EBITDA) |
As of September 30, 2024, the company reported a net loss of $3.954 million compared to a net loss of $2.969 million in the same period of the previous year, leading to an undefined P/E ratio. The P/B ratio of 1.05 suggests that the stock is trading slightly above its book value.
Stock Price Trends
Over the past 12 months, the stock price has exhibited the following trends:
| Date | Stock Price |
|---|---|
| September 2023 | $3.50 |
| December 2023 | $4.00 |
| March 2024 | $3.80 |
| June 2024 | $3.20 |
| September 2024 | $3.10 |
The stock price has decreased from $3.50 in September 2023 to $3.10 by September 2024, indicating a decline of approximately 11.4%.
Dividend Yield and Payout Ratios
The company does not currently pay any dividends, as indicated by a dividend yield of 0%. The focus appears to be on reinvesting in the business rather than returning capital to shareholders.
Analyst Consensus on Stock Valuation
According to the latest analyst ratings, the consensus indicates:
| Analyst Rating | Count |
|---|---|
| Buy | 1 |
| Hold | 5 |
| Sell | 2 |
The current analyst consensus reflects a cautious stance, with a majority recommending a hold position. This sentiment may stem from the company’s ongoing net losses and market challenges.
This financial snapshot illustrates the valuation landscape for the company, highlighting its current market position and potential investment considerations.
Key Risks Facing Accuray Incorporated (ARAY)
Key Risks Facing Accuray Incorporated
Accuray Incorporated faces several internal and external risks that could significantly impact its financial health and operational performance. These risks include industry competition, regulatory changes, and evolving market conditions.
Industry Competition
The medical technology sector, particularly in radiation therapy, is highly competitive. Accuray's primary products, the CyberKnife and TomoTherapy platforms, compete against established players as well as emerging technologies. This competition can lead to pricing pressures and reduced market share.
Regulatory Changes
Changes in healthcare regulations and reimbursement policies can adversely affect sales. For instance, increased scrutiny from state boards when evaluating certificates of need impacts purchasing decisions by hospitals. The ongoing reform in healthcare could also alter reimbursement rates for procedures using Accuray's products.
Market Conditions
Economic instability can result in reduced capital expenditures by healthcare providers. In the Americas, specifically, reduced budgets and lower capital deployment priorities for radiotherapy equipment have negatively impacted revenue. This trend is expected to continue through fiscal year 2026, with longer customer installation timelines further exacerbating the situation.
Operational Risks
Operationally, the company has reported challenges related to supply chain disruptions and increased costs. For the three months ended September 30, 2024, the total cost of revenue was $67.1 million, compared to $64.4 million in the prior year. This increase in costs can pressure margins and profitability.
Financial Risks
As of September 30, 2024, Accuray reported an accumulated deficit of $521.6 million, highlighting ongoing financial challenges. The company has incurred net losses and anticipates continued losses, particularly with increased selling and marketing expenses ahead of expected revenue.
Debt Obligations
The company has significant debt in the form of $100 million in Convertible Senior Notes due in 2026. This debt could strain financial resources as it matures, potentially requiring refinancing under less favorable terms.
| Risk Factor | Description | Impact on Financial Health |
|---|---|---|
| Industry Competition | Intense competition in radiation therapy technologies. | Pricing pressures and potential loss of market share. |
| Regulatory Changes | Increased scrutiny on healthcare costs and reimbursement policies. | Potentially reduced sales and increased compliance costs. |
| Market Conditions | Reduced budgets for capital expenditures in healthcare. | Negative impact on revenue through fiscal year 2026. |
| Operational Risks | Supply chain disruptions and increased operational costs. | Higher cost of revenue impacting gross margins. |
| Financial Risks | Accumulated deficit of $521.6 million. | Ongoing net losses affecting stock price and investor confidence. |
| Debt Obligations | Convertible Senior Notes due in 2026. | Pressure on cash flows and potential refinancing challenges. |
Mitigation Strategies
Accuray has initiated several strategies to mitigate these risks, including diversifying its product offerings and enhancing its marketing efforts to increase market acceptance of its platforms. Additionally, the company is focusing on improving operational efficiencies to better manage costs and enhance gross margins.
Future Growth Prospects for Accuray Incorporated (ARAY)
Future Growth Prospects for Accuray Incorporated
Analysis of Key Growth Drivers
The company is positioned for growth through several key drivers, including product innovations, market expansions, and strategic partnerships. Notably, the launch of advanced radiation therapy systems, such as the Tomo C radiation therapy system, is expected to enhance its service offerings in China, where the market for radiation oncology systems is growing rapidly.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year ending September 30, 2025, the company anticipates revenue growth driven by an estimated 27% to 35% recognition of remaining performance obligations amounting to $902.4 million. This includes significant contributions from service contracts and upgrades to existing systems.
| Fiscal Year | Projected Revenue Recognition | Remaining Performance Obligations |
|---|---|---|
| 2025 | $243.648 - $315.84 million | $902.4 million |
| 2026 | Estimated Growth | Projected to remain strong |
Strategic Initiatives or Partnerships
The establishment of a joint venture in China with CNNC High Energy Equipment is a strategic initiative aimed at enhancing market penetration in the region. This partnership allows the company to manufacture and sell localized products, thereby reducing costs and increasing competitive advantage.
Competitive Advantages
Accuray holds several competitive advantages, including its proprietary technology in the CyberKnife and TomoTherapy platforms. The company has established a strong brand reputation for precision and efficacy in cancer treatment, which is crucial as healthcare providers prioritize advanced treatment options.
Financial Overview
As of September 30, 2024, the company reported net revenue of $101.545 million, a slight decrease from $103.892 million in the prior year, primarily due to lower product sales. However, service revenue showed resilience, increasing by 5% year-over-year to $53.176 million.
| Revenue Category | Q1 2024 | Q1 2023 | Change (%) |
|---|---|---|---|
| Products | $48.369 million | $53.350 million | (9%) |
| Services | $53.176 million | $50.542 million | 5% |
| Total Net Revenue | $101.545 million | $103.892 million | (2%) |
Conclusion
The company is set to capitalize on its growth opportunities through strategic initiatives and its innovative product offerings, positioning itself favorably within the competitive landscape of radiation therapy solutions.
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Resources:
- Accuray Incorporated (ARAY) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Accuray Incorporated (ARAY)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Accuray Incorporated (ARAY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.