Accuray (ARAY) Q4 Loss Wider Than Expected, Stock Down

Shares of Accuray Inc. (NASDAQ:ARAY) witnessed a 13.2% plunge in after-hours trading following the company’s fourth-quarter fiscal 2016 results. The company reported a loss of 9 cents per share, wider than both the Zacks Consensus Estimate of a loss of 6 cents and the year-ago reported loss of 7 cents.

The year-over-year deterioration can be attributed to a 6.7% year-over-year decline in total revenues to $94.9 million, lower than the consensus estimate of $99 million.

Quarter Details

The downside in revenues was majorly because of declining product revenues totaling $43.8 million, 15.2% lower than the year-ago quarter. However, services revenues increased 2.2% year over year to $51.2 million.

Meanwhile, gross orders increased 12.5% year over year to $95.4 million. Net orders totaled $79.2 million, up 7.2% on a year-over-year basis. Notably, the foreign exchange adjustments (strength in Japanese Yen) positively impacted net orders by $3.5 million. Product backlog was $405.9 million, which reflects an 8.2% increase on a year-over-year basis.

Accuray reported solid growth in TomoTherapy and Multileaf Collimator (MLC) equipped CyberKnife unit volumes, with strong performance in the EIMEA region, a key area of operations for the company. The rise in gross TomoTherapy orders was buoyed by a notable seven-unit order from the National Health Service – the largest so far for Accuray.

A key development for Accuray in the reported quarter was the 510(k) FDA approval for the Radixact platform. This image-guided IMRT platform is a noteworthy positive for the company, as it foresees opportunities to boost product revenues over the long haul.

Margin Details

Total gross margin contracted 50 basis points (bps) on a year-over-year basis to 39.3%. While the product gross margins in the quarter expanded 360 bps, driven by lucrative opportunities in the EIMEA region, service gross margins declined 340 bps from the year-ago quarter to 32.9%, primarily driven by one-time employee severance expenses.

As a percentage of revenues, research and development (R&D) and selling & marketing (S&M) expenses expanded 30 bps and 120 bps, respectively. General & administrative (G&A) expenses declined 40 bps to 10.8%.

As a result, Accuray reported an operating loss of $2.9 million, wider than the prior-year quarter loss of $1.4 million.

ACCURAY INC Price, Consensus and EPS Surprise

ACCURAY INC Price, Consensus and EPS Surprise | ACCURAY INC Quote

Guidance

Accuray has also initiated its financial guidance for fiscal 2017. The company projects full-year revenues in the band of $410.0 million to $420.0 million, which reflects growth of approximately 3% to 5% on a year-over-year basis, driven by continued penetration and market share gains by the TomoTherapy system. Additionally, solid momentum in CyberKnife system sales is expected to drive growth in the forthcoming quarters.

Adjusted EBITDA is anticipated in the range of $32 million to $38 million, representing year-over-year growth between 30% and 55%. Operating expenses are now expected at around $164.0 million. Backlog and gross orders are forecasted to grow around 5% in fiscal 2017.

Notably, management refrained from providing any formal guidance for the first quarter of fiscal 2017. However, it expects to rake in 45% of the total revenue in the first half of the fiscal and the remaining 55% in the second half.

Moreover, the Radixact platform is expected to prove highly accretive to earnings with new installations in the U.S. and Europe sites by the first quarter and early second quarter of fiscal 2017. Additionally, the Onrad System of Accuray has received CFDA approval for the China market earlier this month and is expected to book orders over the long haul.

Zacks Rank & Key Picks

Currently, Accuray carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector include CryoLife Inc. (NYSE:CRY) , Masimo Corporation (NASDAQ:MASI) and NuVasive Inc. (NASDAQ:NUVA) . Notably, all the three stocks sport a Zacks Rank #1 (Strong Buy).