Accuray at Jefferies Global Healthcare: Navigating Tariff Challenges

On Wednesday, 04 June 2025, Accuray Incorporated (NASDAQ:ARAY) presented at the Jefferies Global Healthcare Conference 2025, outlining its strategic plans amidst market challenges. The company is navigating tariff impacts while seeking growth opportunities in emerging markets. With a focus on innovation and market expansion, Accuray aims to strengthen its position in the radiation therapy sector.

Key Takeaways

• Accuray is a $450 million company, with revenue split evenly between product sales and service.
• The company is implementing strategies to mitigate tariff impacts, including duty drawback programs and free trade zones.
• Accuray is focusing on expanding its presence in emerging markets, particularly with its Tomo C product in China.
• The service business is a key area for margin expansion and transitioning to a subscription model.
• Accuray is actively working on refinancing its capital structure to support growth initiatives.

Financial Results

• Accuray’s revenue stands at $450 million, with an equal split between product and service revenues.
• The service business is a major focus for growth, with minimal impact from current tariffs.
• Opportunities for margin expansion exist through enhanced service pricing and operational efficiencies.
• The direct material spend ranges from $150 million to $170 million, with a significant portion sourced from the US.

Operational Updates

• Accuray’s product portfolio includes Radixact, CyberKnife, Helix, and Tomo C, targeting various market segments.
• The company holds the number three market share in radiation therapy, with ambitions to increase it globally.
• Tariff mitigation efforts include a duty drawback program and potential establishment of a free trade zone in Madison.
• The Helix product launch is progressing as expected, with key markets in India and South America.

Future Outlook

• Accuray aims to penetrate emerging markets and leverage the Tomo C product in China’s value market.
• Manufacturing strategies may involve shifting production outside the US or regionalizing to reduce tariff risks.
• Tariffs are expected to persist, influencing strategic decisions.
• The transition of service offerings to a subscription model is underway, with refinancing efforts to support future growth.

Q&A Highlights

• Discussions on China tariffs highlighted the complexities of importing products and potential inflationary impacts.
• The free trade zone in Madison is expected to be established within 9 to 12 months.
• Accuray is collaborating with its China JV partner to seek tariff exemptions for medical devices.
• The company is focusing on expanding its market share in China’s Type B market with the Tomo C product.
• India is identified as a key growth market for radiation therapy equipment.

In conclusion, Accuray’s presentation at the Jefferies Global Healthcare Conference 2025 provided insights into its strategic initiatives and market positioning. For more detailed information, readers are encouraged to refer to the full transcript below.

Full transcript - Jefferies Global Healthcare Conference 2025:

Young Lee, Med Tech Analyst, Jefferies: All right. Thank you, everyone, for attending. My name is Young Lee, one of the med tech analysts here at Jefferies. Really happy, to be with, Accuray. To my left, Accuray’s CFO, Ali Pervais.

Thanks for coming. I guess to begin, why don’t we start a little bit high level. Just wanted to get an overview about end market growth, your competitive share position, and where Accuray sits or fits in the radiation oncology treatment paradigm.

Ali Pervais, CFO, Accuray: Yeah, great. Young, number one, thanks so much for having us at the conference. Happy to be here. Maybe just stepping back for folks that may not be familiar with Accuray, we’re about a $450,000,000 company that is in the radiation therapy space. Our revenue is roughly half product and half service.

And our service business really is recurring revenue that exists. And so that’s a little bit of an overview for our business. Our main product lines are a system called the Radixact and a system called the CyberKnife that is very much tailored towards the premium and specialty segment of the market. And then we just recently came out with a system called the Helix, which is more of our value product to really tailor towards more of the value market, the emerging markets. And then we also have a product called the Tomo C, which is a product that we have developed with our joint venture in China, which is a product that is in China for the China market.

And so by the introduction of both the Helix and the Tomo C, we have been able to double our total addressable market. And so we’re really looking forward to being able to utilize that to target those emerging markets and continue to really increase our install base at a rapid pace. As we increase our install base, really the strategy is that once those products are actually installed, they will then get on service contracts, which will really help grow our service annuity business, which we think is going to be a big area of focus, not only from a top line growth, but we think there’s a lot of momentum over there to be able to really increase margins in a meaningful way. And so that’s a little bit young about Accuray in total. And then I think from an overall share standpoint, there are we are number three out of three players in the industry.

And so we do think that we are going to continue to chip away where we think we can actually gain more and more share. We do have number two market share in the Japan market. And so we feel really good about how we’re positioned over there, and we’re taking that playbook and really putting that across in the rest of the world.

Young Lee, Med Tech Analyst, Jefferies: All right, great. Very helpful. I guess we can’t really escape the tariff issue. It’s still a really hot topic. You have relative high exposure to China and then you have the JV there, which was expected to be a major growth driver going forward.

I guess, given the pause in orders from China was the high level of tariffs. But now that’s changed again. The courts in The US ruled against it. I guess, can the China business, do you think, sort of return to a normal cadence in the near term? Or how quickly can orders or product come back to the market?

Ali Pervais, CFO, Accuray: Yeah. That’s a great question and certainly a hot topic for all. And obviously, it’s been a very dynamic and fluid situation from a tariff standpoint, one that we continue to monitor very closely. For folks that have been following it, you’ve sort of seen that tariffs were put in place with the new administration coming into place in The US. And specifically as it pertains to China, there was a massive increase in terms of tariffs.

And for most of the headlines, they would have seen that it went up to 145%. And it was higher in certain cases because there was existing tariffs that existed. And now it’s really come back down to a level that is roughly around 30%, so still higher than what it was. And so tariffs continue to exist, and there continues to be uncertainty around it. And so maybe just to back up a little bit, the way that we think about tariffs is, number one, we do have a bunch of product that we import into The US to be able to manufacture.

So if you really step back and think about what our overall direct material spend is, it’s somewhere between 150,000,000 to $170,000,000 70 percent of our supply chain is primarily in The US. Roughly 10% has exposure to China, and about 20% is rest of the world. And so when we think about the tariff impact, it’s really number one for any product that is coming into The US. And so if we focus only on China, right now that tariff impact is 30%. It used to be 145%.

And so we’re still waiting to see where that goes. And so that obviously has a cost to the business associated with that. The second bucket is the retaliatory tariff that China has put on to any product that comes from The US into China. And so when this was escalated, that tariff rate was 125%, which would really put pressure on shipping any product into China. And so ever since the trade negotiations have happened, that has come down to about 10%.

And so that is certainly meaningful progress from where it was. And then the third bucket that we really think about tariffs is for any of the suppliers that we have today that are not in China, how much exposure do they have in terms of tier two and tier three to suppliers that are perhaps based in China? And how could that potentially result in any inflationary impact to us? So those are sort of the main buckets that we think about it in. And so while we don’t know where this is going to end up, we certainly are taking the appropriate tariff mitigation actions to make sure that we can actually navigate through what seems like is going to remain for the foreseeable future.

And so when we think about the actions that we’re taking to be able to mitigate tariffs, the first one is really this whole notion of a duty drawback program. And the easiest way to explain it is that if you bring product into The US, you have to pay a tariff on it right now. But if that product leaves The US, you can actually reclaim a refund that you can file with the Customs and Border Protection to be able to reclaim that back. So that is something that we have actively engaged in and are working closely with the authorities to make sure that we can take advantage of that program that exists and not have to pay more tariff than we need to for product that is not going to remain in The United States. The other thing that we are looking into is establishing a free trade zone.

And so a free trade zone, by definition, would allow us to bring product into our factory in Madison once it becomes a designated free trade zone without having to pay any tariff. And if that product is not going to remain in The U. S, you actually do not have to pay that tariff, and you only pay the tariff when it remains in The U. S. So I think those are two actions that we’re taking to be able to mitigate the tariff impact.

And then our operations team is really focused on understanding, okay, great, like where should we be looking at dual source suppliers? And right now, at times, we may be shipping parts into The U. S. That come from outside The U. S.

That perhaps we don’t need to. And so we’re just thinking about other opportunities to drive more efficiency in the way that product flows across the globe to be able to really minimize the impact of tariffs, right? So again, tariffs, we think, are here to stay. We’re glad that they’re moving in the right direction. However, it is pretty uncertain, and we don’t know where it’s going to end up.

So we are taking those right mitigation actions. Now coming to your question in terms of how it’s going to impact China, I think it’s certainly something that we are working closely with our China joint venture to take a look at. And it’s moved around quite a bit. And so we are hopeful that this tariff rate is going to continue to stay at the rate that it is, and we do expect then over time to volume to normalize.

Young Lee, Med Tech Analyst, Jefferies: All right. Great. That’s a very helpful overview. Appreciate all the color. I guess to follow-up real quick, just on the free trade zone in Madison, how long would that take to get established?

Ali Pervais, CFO, Accuray: Yeah, it’s a complex process. And so it’s one that we are still investigating. It obviously has multi prongs in terms of approvals that are needed by the regulatory bodies. And then there’s obviously a lot of different preparation that we need to do from a logistics, from an IT standpoint. And so we are running as fast as we can and are hopeful that we can put something in place in the next nine, twelve months.

Young Lee, Med Tech Analyst, Jefferies: Okay, great. Long term, the China business is pretty critical to growth and the outlook of the company. I guess once trade policies are more certain, what are your views for Accurate to shift manufacturing more OUS or have more regionalized manufacturing?

Ali Pervais, CFO, Accuray: Yeah, it’s a great question. And I I think just given some of the uncertainty that everyone’s felt over the last several months, I would say all options are on the table. We really need to take a look at our overall supply chain, take a look at kind of where we’re manufacturing, take a look at our customers. Like I said, our strategy is really to penetrate into emerging markets. And so I think we’re going to continue to look at all options that are going to allow us to be able to grow in a way that’s not going to impact our margins.

And so those are certainly areas that we’re looking into.

Young Lee, Med Tech Analyst, Jefferies: Got it. Kind of curious about the impacts of the high tariffs on sort of recurrent or service revenues. What’s the impact there? And can you pass some of these tariff related pricing on to customers given that it’s relatively understood why it’s happening?

Ali Pervais, CFO, Accuray: Yes. It’s a great question. So I would say let’s start with the first one, which is pricing. That is certainly something that we’re looking into. We think that we should be able to price to pass on pricing to our customers to be able to cover for tariffs.

And so that is certainly an action that we’re going to look into and start to take appropriately. The second part of your question in terms of how does it impact the service business, I would say it’s going be a minimal impact to our service business at the current tariff rate the way it exists today. But obviously, it’s a fluid situation. And so I think we just need to continue to monitor it. But we do think right now it’s going to have a very minimal impact to our service business in China.

For our service business globally, we think we’re in good shape. We don’t think this is going to be much of an impact if tariff rates continue to remain the way that they are. And as I said, business, that is one area that we think that there is a lot of opportunity from a margin expansion standpoint. We already hit on pricing. I know you were talking about China, but I would say globally, we think that there is more room for us to continue to enhance our service pricing.

And then when it comes to our costs within the service business or our cost to serve, one of the biggest costs that we have is parts that are consumed as you’re servicing this equipment. And so we have a big focus within the company to really continue to focus on quality and really elongate the meantime between failure for those parts. And so if we can do that, we think that could have a meaningful impact to our margin rates by driving parts consumption down.

Young Lee, Med Tech Analyst, Jefferies: And I think part of the tariff mitigation efforts is shifting focus from China to other APAC countries as well as EMEA. Does that mean you’re just filling some of these backlog orders from other regions earlier and converting some of those orders to revenues quicker?

Ali Pervais, CFO, Accuray: Yeah. I mean, wouldn’t say that we’re necessarily doing it earlier. I would say that we have a pretty robust backlog globally. And so while the focus has been on China, I would say, number one, our biggest region is our EIMEA region, which continues to grow. It has the biggest backlog for the company, and it also has a pretty vast geography.

There, like I said, we are looking to grow within emerging markets, and so we’re excited about the potential for that business to continue to grow. In Japan, we have number two market share and actually have over 150 units that are installed that come at a really good service pricing. And so we’re really excited for that business to continue to grow as well. In The U. S, which is primarily a replacement market, we’re focused on our installed base and continuing to win competitive sockets.

And then you’re you’re right. For the rest of APAC, there’s a huge opportunity in terms of really going after some of these emerging emerging markets. And so while China is a contributor to revenue for Accuray, there’s a lot of other regions that continue to provide us with meaningful revenue growth as well.

Young Lee, Med Tech Analyst, Jefferies: And then what can your China JV partner do to sort of help out with this situation? Do they have strong central government ties? Or are they more on the region provincial level?

Ali Pervais, CFO, Accuray: Yes. I mean, I would say our partners have been helpful in many ways. And so I think most recently with this tariff impact, we’ve obviously been working with them to try and see if we can get exemptions for medical devices going into China. And they certainly have strong ties with both provincial and other governments. And so we certainly make sure that we try and leverage that relationship as much as possible.

Young Lee, Med Tech Analyst, Jefferies: And then are there any order cancellations in China? And maybe if you can zoom out and talk a little bit about your market share dynamic in China and how competitive the local players are.

Ali Pervais, CFO, Accuray: Yep. Yep. No. Great question. So we’ve had no recent order cancellations in China as far as I can remember.

So so that’s one. But I think if you just think about the China market, it’s really split into two segments. The premium and specialty segment is the type a market, and then there’s the type b market, which is the value segment. We enjoy a very high market share in the Type A space. I think it’s greater than 60%.

And so that’s been a really great space for us to be able to win orders, but that market is significantly smaller than the Type B market, which is more the value market. So as we’ve had good success in the Type A market with the share that we have, that has had a halo effect in terms of how people perceive our product within the Type B value market. That Type B value market is the one that we have really positioned our Tomo C product for, and that’s the one that we expect to grow meaningfully over the course of the next five years. And I think with having the Tomo C and having it jointly developed with a local joint venture is certainly proving to be the right strategy. And so we’re excited to see how this plays out.

Young Lee, Med Tech Analyst, Jefferies: And then I guess to follow-up on one of the earlier statements you made just on Japan. I think you’re number two in terms of market share there. Can you talk a little bit about why or how you’re so successful in that market? And then can that playbook be replicated to other key markets?

Ali Pervais, CFO, Accuray: Yeah, no, I mean, think in Japan, we’ve had a strategy in which we continue to partner with key academics, key opinion leaders. And we just have a very strong team commercially and on the service side that are very focused on relationships with our customers. And that’s obviously proven out to be a successful strategy for us in Japan, obviously coupled with the fact that people really believe in the technology and in the product. And so we are certainly taking that playbook and applying it across the rest of the world as well to continue to gain share.

Young Lee, Med Tech Analyst, Jefferies: Your value product, Helix, it’s approved and launched now, I guess. Wanted to hear how’s the performance been since launch versus your internal expectations?

Ali Pervais, CFO, Accuray: I think it’s been in line with our expectations. I think it’s been very well received. It is still going through regulatory approval for certain parts of the world. And so as that continues to happen, we think that we’re going to start to see even more demand. So it’s been very much in line with our expectations.

Young Lee, Med Tech Analyst, Jefferies: Are there key markets to sort of watch out for in terms of approvals or revenue contribution?

Ali Pervais, CFO, Accuray: Yes. I would say India certainly is one of those markets in which we think that there’s a lot of potential over there. We think that market’s going to grow in a meaningful way when it comes to radiation therapy and patients having access to radiation therapy equipment. And so that is a market that we are actually directing from a strategy standpoint and think that will continue to be a good revenue generator for us. We are going to be focused also on South America, in which there are a lot of different countries within South America that we think the Helix is going to really help us differentiate and be at the right price point for that market as well.

And then like you said, Young, and the rest of APAC, there’s a vast geography over there, and we do think that the Helix should be able to cater to a lot of the demand needs for some of those countries.

Young Lee, Med Tech Analyst, Jefferies: I guess in terms of market potential, looking at India compared to China. I guess, many years do you think India is sort of behind China now as a market? And as India develops, do you think it can grow to become a comparable market in terms of sizing versus China?

Ali Pervais, CFO, Accuray: Yeah. It’s it’s a it’s a it’s a good question. In terms of number of years, I’m not sure I can give you mean, look, I think we can all agree that it’s certainly behind. And the needs continue to exist. And so coming back to my commentary earlier, that is a market that we think does not have the right amount of radiation therapy equipment than what the market needs are from a patient access standpoint.

And so the population is vast. And unfortunately, cancer incidence continues to grow within that geography as well. And so we do think there’s going to be continued demand for the product and for radiation therapy equipment. And I think that’s kind of where our Helix product should be able to fit pretty nicely.

Young Lee, Med Tech Analyst, Jefferies: And then I guess switching gears a little bit, maybe just focusing on The US market. There’s been some pressures on the hospital CapEx side, sort of more focused on radiation oncology. Where are we in The US market, pressure dynamic? You know, what do you think are some of the key gating factors and timing on the potential rebound for the for The US?

Ali Pervais, CFO, Accuray: Yeah. It’s a it’s a good question. It’s a it’s a pretty fluid dynamic, I would say, in The US. You know, our vantage point, interest rates are obviously a huge factor when it comes to folks making decisions about capital equipment. And interest rates have not come down the way that I think the market was really expecting them to come down.

So that does change the dynamic in which people that are holding on to capital equipment are waiting to really see where interest rates go, and therefore, are sweating their assets a little bit more. And so I think we just are sort of waiting and sort of seeing where this is going to go. I think at the same time, playing offense to make sure that we continue to retain our IB and really go after the replacement market in a meaningful way.

Young Lee, Med Tech Analyst, Jefferies: Got it. I guess, what about, you know, the rest of the sort of developed markets? Can you maybe talk about trends in Western Europe, for example?

Ali Pervais, CFO, Accuray: Yep. So so The US and Western Europe, I would say, are two markets that are similar in terms of their mainly replacement markets. And for the most part, they are saturated from the amount of radiation therapy systems that they have. And so really, we’re taking a look at all the aged IV over there. And that’s really what presents us as an opportunity because there is a lot of installed base out there that is aged greater than ten years, not only ours, but also our competitors.

And so really just being able to take a look at making sure that we’re maintaining RIB in both those different geographies, but they are very similar in nature in terms of they do have a replacement nature to them.

Young Lee, Med Tech Analyst, Jefferies: And then I think previously you talked about the service segment having kind of a SaaS model in the coming years. Where are you in that process? What are the key next steps or markets for this initiative?

Ali Pervais, CFO, Accuray: Right. I would say we are in the early innings of really changing the way that we think about our service offerings and moving towards more of a, I’ll call it, a subscription model. But we do think that, that is going to be in line with our customers’ needs and also in line with sort of where the industry is going. So while we’re in the early innings, we do think it’s going to be a good contributor of revenue to us.

Young Lee, Med Tech Analyst, Jefferies: Can you talk a little bit about, you know, where are you on potentially refinancing the needs there as well as the cap structure updates?

Ali Pervais, CFO, Accuray: Yes. Look, I mean, think we’ve spoken about this in the past and even on our last earnings is that our capital structure and our refinancing is something that is front and center for us, and it’s certainly something that, you know, we we we take seriously. We want to make sure that we’re doing the right solution, and so we continue to be really focused on it, and we’d like to get it done and behind us as soon as possible.

Young Lee, Med Tech Analyst, Jefferies: All right, great. I wanted to sort of wrap up kind of high level. What do you think is the biggest misconception for Accurate for investors?

Ali Pervais, CFO, Accuray: It’s a great question. I mean, I think being the number three player, I mean, I think folks may not necessarily understand how differentiated our technology is. And so it obviously starts with dedication to innovation and then also having the right technology. So I think that’s probably one area that should be an area of focus for people that are looking into Accuray in terms of how differentiated our technology is. I think the second one is we’re a $450,000,000 company, but roughly half of our we’re approximately $450,000,000 roughly half of our revenue is an annuity revenue, which is, you know, a significant portion of it, right?

And so I would say those are probably the two big areas that, you know, investors likely don’t know. I think the last one is the potential that we have from a margin expansion standpoint and how we have really activated margin expansion within our culture. I would say a lot of the actions that we’ve been taking in terms of pricing really focused on COGS reduction, focusing on how do we go about reducing our cost to serve, being very mindful about where we invest our dollars and being focused on return on investment. All the work that we’ve been doing has been making really steady progress. Unfortunately, a lot of that has just been masked by the macro in terms of deep foreign exchange headwinds, inflationary headwinds.

And so we’re hoping as the macro starts to thaw out, we’ll really start to see those benefits reflect in the P and L.

Young Lee, Med Tech Analyst, Jefferies: Great. And then I guess, you know, is there anything else you wanna highlight or anything we didn’t talk about yet?

Ali Pervais, CFO, Accuray: No. I think I think we covered good ground, Young. Really appreciate you guys having us at the conference.

Young Lee, Med Tech Analyst, Jefferies: Alright. Great. Thank you very much.

Ali Pervais, CFO, Accuray: Thanks a lot.

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