ACCURAY INC

Accuray Incorporated is a radiation therapy company that develops, manufactures, sells and supports market-changing solutions designed to deliver radiation treatments for even the most complex cases, while making commonly treatable cases even more straightforward. The company operates in the radiation therapy and radiosurgery markets, which are subject to intense and increasing competition and rapidly evolving technologies. New product sales in this competitive market are primarily dominated by two companies: Varian Medical Systems, Inc, a Siemens Healthineers company and Elekta AB. Other competitors include RefleXion Medical Inc., ZAP Surgical Systems, Inc., and other companies in the radiosurgical and radiation therapy markets. The company's innovative technologies, the CyberKnife and TomoTherapy platforms, including the Radixact System, are designed to deliver advanced treatments including stereotactic radiosurgery, stereotactic body radiation therapy, intensity modulated radiation therapy, image-guided radiation therapy, and adaptive radiation therapy.

Accuray competes primarily against Varian Medical Systems, Inc., a Siemens Healthineers company, and Elekta AB, which together dominate new product sales in the competitive market. The company also faces competition from RefleXion Medical Inc. and ZAP Surgical Systems, Inc. Accuray believes its products compete favorably on price and value based upon the technology offered by its platforms, and it strives to provide technologically superior products that cover substantially all aspects of radiation therapy. The company's competitive position depends on factors including widespread awareness and adoption of its products by the radiation oncology, cancer therapy and neurosurgery markets, innovations that improve treatment effectiveness and productivity, availability of reimbursement coverage, published peer-reviewed data, and the extent of its intellectual property protection. As of June 30, 2025, Accuray held an exclusive field of use licenses or ownership of 530 U.S. and foreign patents, and 84 U.S. and foreign patent applications.

Accuray generates revenue from the sale of its CyberKnife and TomoTherapy platforms, including the Radixact System, and from services which include post-contract customer support (warranty period services and post-warranty services), installation services, training, and other professional services. For the year ended June 30, 2025, products revenue was $237,580 thousand and services revenue was $220,925 thousand, representing 52% and 48% of net revenue, respectively. The company sells directly to customers in the United States and through distributors and sales agents internationally. Accuray also has a joint venture, CNNC Accuray (Tianjin) Medical Technology Co. Ltd., in which its wholly-owned subsidiary Accuray Asia Limited has a 49% ownership interest, which manufactures and sells radiation oncology systems in China and distributes other Accuray treatment delivery systems.

Accuray's product portfolio includes the CyberKnife platform, which is the only robotic, full-body SRS and SBRT delivery device on the market, with the latest generation being the CyberKnife S7 System that combines speed, advanced precision, and real-time AI-driven motion tracking. The TomoTherapy platform, including the next generation Radixact System, was the first to introduce helical radiation therapy and integrates linear accelerator and CT imaging technology to deliver radiation from multiple 360-degree rotations. The Accuray Helix system combines affordability with automation and tools for enhancing the speed of planning and delivery of radiation. The Tomo C System is the first CNNC-Accuray joint venture product, a fast and effective radiation delivery device made in China. The company also offers the Accuray Precision Treatment Planning System with iDMS Data Management Systems, which provides fully integrated treatment planning and data management for use with all compatible Accuray delivery platforms. Products revenue for the year ended June 30, 2025 was $237,580 thousand, and services revenue was $220,925 thousand.

In fiscal 2025, Accuray entered into a senior secured credit agreement on June 6, 2025, providing for $150 million of new five-year term loan facilities, a new $20 million delayed draw term loan facility, and a new $20 million revolving credit facility, each maturing on June 6, 2030. Concurrently, the company issued detachable warrants to purchase common stock, including 17,180,710 shares of common stock with an exercise price of $1.68 per share (Premium Warrants) and 6,247,531 shares of common stock with an exercise price of $0.01 per share (Penny Warrants). On June 5, 2025, the company entered into exchange agreements with holders of its 3.75% Convertible Senior Notes due 2026 to exchange approximately $82.0 million aggregate principal amount for an aggregate of 8,881,579 shares of common stock valued at $1.52 per share and an aggregate cash payment of approximately $68.5 million. The company also voluntarily initiated one recall in fiscal year 2025 related to the couch for the CyberKnife System, which was reported to the FDA.

For the fiscal year ended June 30, 2025, Accuray reported total net revenue of $458,505 thousand, compared to $446,551 thousand in the prior year, representing a 3% increase. Gross profit was $146,967 thousand, or 32.1% of net revenue, compared to $142,921 thousand, or 32.0% of net revenue, in fiscal 2024. The company reported a net loss of $1,591 thousand for fiscal 2025, compared to a net loss of $15,545 thousand in fiscal 2024. Diluted net loss per share was $0.02 in fiscal 2025 versus $0.16 in fiscal 2024. Income from operations was $7,839 thousand in fiscal 2025, compared to $504 thousand in fiscal 2024. Net cash provided by operating activities was $2,860 thousand in fiscal 2025, compared to net cash used in operating activities of $11,904 thousand in fiscal 2024.

A key growth vector for Accuray is expanding sales in international markets. The company intends to increase its international revenue by focused additions of direct sales personnel in targeted areas to further penetrate its most promising international markets, and additional distributors, strategic partnerships, or joint ventures where opportune. The company recently introduced Accuray Helix, a CT-guided helical radiotherapy system, to help address gaps in patient access to radiation medicine. The joint venture with CNNC High Energy Equipment (Tianjin) Co., Ltd. aims to be uniquely positioned to serve China, which the company believes is the world's largest growth market for radiation oncology systems. The JV has begun manufacturing and selling a locally branded 'Made in China' radiotherapy device, the Tomo C radiation therapy system, and also distributes other Accuray treatment delivery systems like the Radixact and CyberKnife treatment delivery systems, including the Radixact SynC and CyberKnife S7 Systems, which received NMPA approval in January 2025.

Another growth vector is continued innovation through clinical development and collaboration. The company proactively seeks out and relies on constructive feedback from system users to enhance technology, continually refining and upgrading its systems. Upgrades are designed to address customer needs in improving ease of use and accuracy of treatment, decreasing treatment times, and improving utilization for specific types of tumors. The company has entered into collaboration agreements with partners such as RaySearch Laboratories AB, Photo Diagnostic Systems, Incorporated, Brainlab, C-RAD, Limbus AI (now Radformation), GE Healthcare, Oncopole Claudius Regaud and Airbus SAS, and TrueNorth Medical Physics LLC to enhance its platforms and expand capabilities. The company also continues to seek out new partnerships to complement its internal developments and implement its product strategies.

The company expects that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistics expenses through at least calendar year 2025, and potentially longer, as the company is unable to pass all of these increased costs to its customers. The company also expects inflation and the ongoing supply chain challenges and logistics costs to impact its cash from operations through at least calendar year 2025. The company's Board of Directors and Compensation Committee determined that no payouts pursuant to the company bonus plan would be paid for fiscal year 2025 to reduce operating expenses and conserve cash in light of the uncertain macroeconomic environment due to tariffs.

The company expects that reduced budgets and lower capital deployment priority for radiotherapy equipment, along with longer customer installation timelines, in the United States will continue to have a negative impact on net revenue through fiscal year 2026. The company also expects that sales to China will be adversely impacted through at least the first half of fiscal year 2026 due to tariff uncertainty. The company is working to implement mitigations to the tariff policy impacts but cannot predict the full impact or timing of such efforts. The company continues to evaluate its real estate needs and assess its operations and how and to what extent it will continue to utilize its current real estate assets.

Research and development expenses for fiscal year 2025 were $47,942 thousand, representing 10% of net revenue. The company's capital expenditure requirements depend on numerous factors including revenue generated by sales, ability to generate cash flows from operations, costs associated with sales and marketing initiatives and manufacturing activities, facilities, equipment and IT systems required to support operations, and the rate of progress and cost of research and development activities. The company believes its current cash and cash equivalents balance will be sufficient to meet its anticipated cash needs for working capital and capital expenditures for at least the next 12 months. The company may seek to sell additional equity or debt securities or enter into additional credit facilities if necessary.

Structural headwinds explicitly flagged by management include the impact of tariffs imposed by the United States and China, which the company expects will continue to have incremental costs and cause the volume of product sales in China to decrease. The company also faces headwinds from reduced budgets and lower capital deployment priority for radiotherapy equipment in the United States, which has negatively impacted net revenue since fiscal year 2024 and is expected to continue through fiscal year 2026. Additionally, the company faces risks from inflation and ongoing supply chain challenges and logistics costs, which have materially affected gross margins and net income (loss) and are expected to continue to impact cash from operations through at least calendar year 2025.

Geographic and regulatory constraints identified by management include the impact of geopolitical disruptions in the EIMEA region, which contributed to lower product sales in fiscal year 2025. The company also faces risks from the uncertain macroeconomic environment, including foreign currency exchange rate fluctuations, and the impact of the China anti-corruption campaign and timing of the China stimulus program. The company notes that its ability to achieve adoption of its treatment systems and significant sales volume in international markets will depend in part on the availability of reimbursement for procedures performed using its products, and the process of obtaining coverage approvals has been slower outside of the United States.

Accuray faces material risks from its substantial indebtedness, including $150 million ¹ outstanding under its term loan facility and $18.0 million ² in principal amount of convertible notes due June 1, 2026, which could adversely affect its financial condition and require substantial cash flows for debt service. The company has not been in compliance with certain financial covenants in the past and may need waivers in the future. The company is also exposed to significant risk from enhanced international tariffs, particularly between the U.S. and China, which have increased costs and decreased product sales in China, with the company expecting minimal shipments to China if tariffs increase. The company relies on single-source suppliers for critical components including the robot, couch, and magnetron for the CyberKnife platform and the couch, solid state modulator, and magnetron for the TomoTherapy platforms, and any disruption could harm its ability to meet demand. Additionally, the company faces intense competition from Varian Medical Systems, Inc. and Elekta AB, which have greater resources and market share, and rapid technological change could render its products obsolete.

Management's message emphasizes the company's strategy to develop equipment and technology enabling physicians to deliver precise and accurate, customized, leading-edge treatments, with a vision to expand the curative power of radiation therapy to improve as many lives as possible. Key strategic priorities emphasized for the period ahead include increasing physician adoption and patient awareness to drive utilization, continuing to expand the radiosurgery market, continuing to innovate through clinical development and collaboration, expanding sales in international markets, and pursuing strategic partnerships and joint ventures. Management acknowledges that the company's Board of Directors and Compensation Committee determined that no payouts pursuant to the company bonus plan would be paid for fiscal year 2025 given that the company would not have been compliant with the debt covenants in effect at the beginning of fiscal year 2025 and to reduce operating expenses and conserve cash in light of the uncertain macroeconomic environment due to tariffs. The company also continues to evaluate its real estate needs and assess its operations.