Accuray Q3 FY25 presentation: revenue jumps 12%, guidance revised downward

Accuray Incorporated (NASDAQ:ARAY) released its third-quarter fiscal year 2025 presentation on April 30, showing strong quarterly performance despite challenges in its China business that prompted a downward revision to full-year revenue guidance.

Quarterly Performance Highlights

The radiation therapy equipment manufacturer reported total net revenue of $113.2 million for Q3 FY25, representing a 12% increase year-over-year. This growth was driven by a 16% rise in product revenue to $57.3 million and a 9% increase in service revenue to $55.9 million. The company delivered 27 systems to customers during the quarter, marking a 23% increase globally compared to the same period last year.

Accuray significantly narrowed its net loss to $1.3 million, a substantial improvement from the $6.3 million loss reported in the prior-year period. Adjusted EBITDA surged to $6.0 million, compared to just $1.1 million a year earlier, representing a 456% year-over-year increase.

As shown in the following financial highlights:

The company’s operating expenses decreased by 9% year-over-year to $30.6 million, reflecting ongoing cost discipline. Accuray ended the quarter with $79 million in cash, up $15 million compared to the previous quarter, demonstrating improved cash flow management.

The comprehensive quarterly financial breakdown shows the company’s performance across key metrics:

China Business Impact

A significant factor affecting Accuray’s quarterly results is the volatility created by its China joint venture operations. Due to joint venture accounting rules, 49% of total margin is deferred upon shipment to the JV and only released when the JV ships to the end customer.

In Q3, the company experienced a net deferral of $2.4 million, primarily due to higher JV shipments to end customers in the previous quarter. This accounting treatment creates quarter-to-quarter fluctuations in reported margins that don’t necessarily reflect underlying business performance.

The following table illustrates how the China margin impact affects Accuray’s reported results:

When excluding the China margin impact, Accuray’s Q3 gross margin would have been 30.1% instead of the reported 27.9%, and Adjusted EBITDA would have been $8.5 million instead of $6.0 million. For the full fiscal year 2025, the company expects a net release of approximately $0.5 million in deferred margin.

Revised Guidance

Despite the strong quarterly performance, Accuray revised its full-year revenue guidance downward. The company now expects FY25 revenue in the range of $452 million to $460 million, representing year-over-year growth of 1% to 3%. This is down from the previous guidance of $463 million to $475 million.

However, Accuray maintained its Adjusted EBITDA guidance of $28.5 million to $31 million, which would represent year-over-year growth of 45% to 57%. This suggests the company believes it can achieve its profitability targets despite the revenue adjustment.

The revised guidance is presented in the following slide:

This guidance revision comes after the company had actually raised its outlook following Q1 results. In October 2024, Accuray had increased its full-year revenue guidance from $460-$470 million to $462-$472 million, reflecting optimism about growth in China and other markets.

Strategic Priorities

Accuray’s presentation outlined four key strategic priorities for fiscal year 2025:

1. Outpace the market and grow customer base

2. Expand service and solutions recurring revenue

3. Improve profitability and operational excellence

4. Strengthen balance sheet and cash flow

The company’s strategic focus areas are illustrated here:

These priorities align with Accuray’s vision "to expand the curative power of radiation therapy to improve as many lives as possible" and its mission to deliver better, safer radiation therapy solutions.

Market Context

Accuray’s stock closed at $1.62 on April 30, 2025, down 4.32% for the day. The company’s shares have been trading between $1.40 and $2.95 over the past 52 weeks, reflecting ongoing challenges in the medical equipment sector.

The radiation therapy market continues to grow globally, driven by increasing cancer incidence rates and expanding access to treatment in emerging markets. Accuray’s focus on China and other underserved markets positions it to potentially benefit from this trend, though margin volatility and competitive pressures remain challenges.

Despite the revised revenue guidance, Accuray’s improved profitability metrics and stronger cash position suggest the company is making progress on its operational efficiency goals while continuing to invest in growth opportunities.

Full presentation:

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