Accuray Inc. ARAY reported a loss of 6 cents per share in the third quarter of fiscal 2017, comparing unfavorably with the Zacks Consensus Estimate of earnings of a penny. The figure was also significantly lower than earnings of a penny in the year-ago quarter.
Total revenue in the third quarter decreased approximately 7.6% year over year to $97 million and missed our estimate of $117 million. The decline was primarily due to lower sales as well as product and channel mix.
Notably, Accuray carries a Zacks Rank #2 (Buy), hinting at probabilities of outperformance in the near term.
Segment Details
Product Revenues: The downside in revenues was more reflected in product revenues that decreased 10.6% to $48 million ($53.7 million in the second quarter). Product revenues in both the U.S. and Japan were significantly above the prior-year quarter. However, China and Europe delivered a sluggish revenue performance in the quarter.
Service Revenues: Revenues at the segment decreased 4.4% to 49.3 million year over year. Per management, the decrease in revenues was primarily due to lower installations.
Gross Order Update: In the reported quarter, gross product orders totaled $83.8 million, compared with $56.4 million in the prior-year quarter. At the end of the quarter, product backlog was $450 million, approximately 21% higher year over year. Gross order performance was favorably impacted by the company’s flagships Radixact Systemand CyberKnife System orders.
Accuray Incorporated Price, Consensus and EPS Surprise
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Other Highlights
The company’s new TomoTherapy product platform, also known as Radixact, continued to contribute to the company’s top line. The platform gained Japanese regulatory approval (Shonin approval) and is expected to start formal treatments from the fourth quarter.
Onrad, Accuray’s second new product, also provided a modest contribution to gross orders.
Coming to the CyberKnife platform, this represented approximately 50% of gross orders in the quarter, courtesy of its M6 system.
Margin Details
Gross margin (as a percentage of net revenues) contracted 620 basis points (bps) in the third quarter to 36.4%. This was primarily driven by reduced product gross margins.
Product gross margin (as a percentage of product revenues) decreased 650 bps over the prior year to 38%, primarily driven by lower overall unit sales volumes.
Service gross margins in the fiscal third quarter were 34.4%, down 600 bps on a year-over-year basis.