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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to             

 

Commission File Number: 001-33301

 

ACCURAY INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

20-8370041

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification Number)

 

1310 Chesapeake Terrace

Sunnyvale, California 94089

(Address of Principal Executive Offices Including Zip Code)

 

(408) 716-4600

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

ARAY

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”  “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No

 

As of April 30, 2020, there were 90,516,626 shares of the Registrant’s Common Stock, par value $0.001 per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page No.

 

 

 

PART I.

Financial Information

 

 

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

3

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2020 and June 30, 2019

3

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended March 31, 2020 and 2019

4

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2020 and 2019

5

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2020 and 2019

7

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

 

 

 

Item 4.

Controls and Procedures

36

 

 

 

PART II.

Other Information

 

 

 

 

Item 1.

Legal Proceedings

37

 

 

 

Item 1A.

Risk Factors

37

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

65

 

 

 

Item 3.

Defaults Upon Senior Securities

65

 

 

 

Item 4.

Mine Safety Disclosures

65

 

 

 

Item 5.

Other Information

65

 

 

 

Item 6.

Exhibits

66

 

 

 

Signatures

 

67

 

We own or have rights to various trademarks and tradenames used in our business in the United States or other countries, including the following: Accuray®, Accuray Logo®, CyberKnife®, Hi‑Art®, RoboCouch®, Synchrony®, TomoTherapy®, Xsight®, Accuray Precision®, AutoSegmentation™, CTrue™, H™ Series, iDMS®, InCise™, Iris™, M6™ Series, OIS Connect™, PlanTouch®, PreciseART®, PreciseRTX®, Treatment Planning System™, QuickPlan®, TomoDirect™, TomoEdge™, TomoH®, TomoHD®, TomoHDA™, TomoHelical™, Tomo Quality Assurance™, Radixact®, Onrad ™, StatRT™, and VoLO™.

2


 

PART I.  FINANCIAL INFORMATION

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

 

Accuray Incorporated

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share amounts and par value)

 

 

 

March 31,

2020

 

 

June 30,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

89,742

 

 

$

76,798

 

Restricted cash

 

 

1,851

 

 

 

10,218

 

Accounts receivable, net of allowance for doubtful accounts of $1,169 and

   $605 as of March 31, 2020 and June 30, 2019, respectively (a)

 

 

102,685

 

 

 

111,885

 

Inventories

 

 

136,277

 

 

 

120,823

 

Prepaid expenses and other current assets

 

 

21,266

 

 

 

24,205

 

Deferred cost of revenue

 

 

190

 

 

 

146

 

Total current assets

 

 

352,011

 

 

 

344,075

 

Property and equipment, net

 

 

16,302

 

 

 

17,122

 

Investment in joint venture

 

 

15,018

 

 

 

 

Operating lease right-of-use assets, net

 

 

30,125

 

 

 

 

Goodwill

 

 

57,701

 

 

 

57,770

 

Intangible assets, net

 

 

720

 

 

 

679

 

Restricted cash

 

 

1,014

 

 

 

1,162

 

Other assets

 

 

17,097

 

 

 

17,373

 

Total assets

 

$

489,988

 

 

$

438,181

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

26,530

 

 

$

29,562

 

Accrued compensation

 

 

19,419

 

 

 

31,150

 

Operating lease liabilities, current

 

 

7,768

 

 

 

 

Other accrued liabilities

 

 

25,739

 

 

 

32,742

 

Customer advances

 

 

18,009

 

 

 

20,395

 

Deferred revenue

 

 

82,943

 

 

 

78,332

 

Total current liabilities

 

 

180,408

 

 

 

192,181

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities, non-current

 

 

25,881

 

 

 

 

Long-term other liabilities

 

 

6,596

 

 

 

9,646

 

Deferred revenue

 

 

26,563

 

 

 

26,639

 

Long-term debt

 

 

190,663

 

 

 

159,844

 

Total liabilities

 

 

430,111

 

 

 

388,310

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; authorized: 200,000,000 shares as of

   March 31, 2020 and June 30, 2019, respectively; issued and

   outstanding: 90,516,626 and 88,521,511 shares at March 31, 2020 and

   June 30, 2019, respectively

 

 

91

 

 

 

89

 

Additional paid-in-capital

 

 

542,126

 

 

 

535,332

 

Accumulated other comprehensive loss

 

 

(779

)

 

 

(10

)

Accumulated deficit

 

 

(481,561

)

 

 

(485,540

)

Total stockholders' equity

 

 

59,877

 

 

 

49,871

 

Total liabilities and stockholders' equity

 

$

489,988

 

 

$

438,181

 

 

 

(a)

Include accounts receivable from the China joint venture of $334 and $0 at March 31, 2020 and June 30, 2019, respectively. See Note 14.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

 

 

 

Three Months Ended

March 31,

 

 

Nine Months Ended

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

45,527

 

 

$

46,451

 

 

$

126,892

 

 

$

136,019

 

Services

 

 

54,021

 

 

 

56,770

 

 

 

161,059

 

 

 

165,349

 

Total net revenue (a)

 

 

99,548

 

 

 

103,221

 

 

 

287,951

 

 

 

301,368

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products

 

 

27,573

 

 

 

27,169

 

 

 

73,661

 

 

 

80,755

 

Cost of services

 

 

32,842

 

 

 

35,586

 

 

 

104,314

 

 

 

103,888

 

Total cost of revenue (b)

 

 

60,415

 

 

 

62,755

 

 

 

177,975

 

 

 

184,643

 

Gross profit

 

 

39,133

 

 

 

40,466

 

 

 

109,976

 

 

 

116,725

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

11,164

 

 

 

12,913

 

 

 

37,569

 

 

 

40,442

 

Selling and marketing

 

 

11,106

 

 

 

12,903

 

 

 

35,699

 

 

 

41,078

 

General and administrative

 

 

8,894

 

 

 

11,769

 

 

 

29,396

 

 

 

37,880

 

Total operating expenses

 

 

31,164

 

 

 

37,585

 

 

 

102,664

 

 

 

119,400

 

Income (loss) from operations

 

 

7,969

 

 

 

2,881

 

 

 

7,312

 

 

 

(2,675

)

Gain (loss) on equity method investment, net

 

 

222

 

 

 

 

 

 

222

 

 

 

 

Other income (expense), net

 

 

(5,281

)

 

 

(3,829

)

 

 

(1,954

)

 

 

(11,133

)

Income (loss) before provision for income taxes

 

 

2,910

 

 

 

(948

)

 

 

5,580

 

 

 

(13,808

)

Provision for income taxes

 

 

285

 

 

 

236

 

 

 

1,601

 

 

 

1,222

 

Net income (loss)

 

$

2,625

 

 

$

(1,184

)

 

$

3,979

 

 

$

(15,030

)

Net income (loss) per share - basic

 

$

0.03

 

 

$

(0.01

)

 

$

0.04

 

 

$

(0.17

)

Net income (loss) per share - diluted

 

$

0.03

 

 

$

(0.01

)

 

$

0.04

 

 

$

(0.17

)

Weighted average common shares used in computing net

   income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

90,476

 

 

 

87,962

 

 

 

89,585

 

 

 

87,220

 

Diluted

 

 

90,855

 

 

 

87,962

 

 

 

90,429

 

 

 

87,220

 

Net income (loss)

 

$

2,625

 

 

$

(1,184

)

 

$

3,979

 

 

$

(15,030

)

Foreign currency translation adjustment

 

 

(628

)

 

 

(270

)

 

 

(769

)

 

 

(604

)

Comprehensive income (loss)

 

$

1,997

 

 

$

(1,454

)

 

$

3,210

 

 

$

(15,634

)

 

(a)

Includes sales to the China joint venture, an equity method investment of $6,145 and $12,605 for the three and nine months ended March 31, 2020 and $0 for both the three and nine months ended March 31, 2019, respectively. See Note 14.

(b)

Includes cost of revenue from sales to the China joint venture, an equity method investment of $4,350 and $8,980 for the three and nine months ended March 31, 2020 and $0 for both the three and nine months ended March 31, 2019, respectively. See Note 14.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

Income /

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2019

 

 

88,521,511

 

 

$

89

 

 

$

535,332

 

 

$

(10

)

 

$

(485,540

)

 

$

49,871

 

Issuance of restricted stock

 

 

356,999

 

 

 

 

 

 

(207

)

 

 

 

 

 

 

 

 

(207

)

Share-based compensation

 

 

 

 

 

 

 

 

1,684

 

 

 

 

 

 

 

 

 

1,684

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,356

)

 

 

(9,356

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(1,018

)

 

 

 

 

 

(1,018

)

Balance at September 30, 2019

 

 

88,878,510

 

 

$

89

 

 

$

536,809

 

 

$

(1,028

)

 

$

(494,896

)

 

$

40,974

 

Issuance of restricted stock

 

 

987,765

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock under employee stock

   purchase plan

 

 

523,714

 

 

 

 

 

 

1,357

 

 

 

 

 

 

 

 

 

1,357

 

Share-based compensation

 

 

 

 

 

 

 

 

2,081

 

 

 

 

 

 

 

 

 

2,081

 

Tax withholding upon vesting of restricted stock units

 

 

(58,536

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,710

 

 

 

10,710

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

877

 

 

 

 

 

 

877

 

Balance at December 31, 2019

 

 

90,331,453

 

 

$

90

 

 

$

540,247

 

 

$

(151

)

 

$

(484,186

)

 

$

56,000

 

Issuance of restricted stock

 

 

185,173

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Share-based compensation

 

 

 

 

 

 

 

 

1,879

 

 

 

 

 

 

 

 

 

1,879

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,625

 

 

 

2,625

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(628

)

 

 

 

 

 

(628

)

Balance at March 31, 2020

 

 

90,516,626

 

 

$

91

 

 

$

542,126

 

 

$

(779

)

 

$

(481,561

)

 

$

59,877

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

Income /

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2018

 

 

86,129,256

 

 

$

86

 

 

$

521,738

 

 

$

1,093

 

 

$

(474,285

)

 

$

48,632

 

Exercise of stock options, net

 

 

3,500

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Issuance of restricted stock

 

 

367,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

2,947

 

 

 

 

 

 

 

 

 

2,947

 

Adoption of new revenue recognition standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,114

 

 

 

5,114

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,206

)

 

 

(9,206

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(395

)

 

 

 

 

 

(395

)

Balance at September 30, 2018

 

 

86,500,260

 

 

$

86

 

 

$

524,699

 

 

$

698

 

 

$

(478,377

)

 

$

47,106

 

Exercise of stock options, net

 

 

14,550

 

 

 

 

 

 

58

 

 

 

 

 

 

 

 

 

58

 

Issuance of restricted stock

 

 

1,054,539

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock

   purchase plan

 

 

442,051

 

 

 

 

 

 

1,540

 

 

 

 

 

 

 

 

 

1,540

 

Share-based compensation

 

 

 

 

 

 

 

 

1,959

 

 

 

 

 

 

 

 

 

1,959

 

Tax withholding upon vesting of restricted stock units

 

 

(125,797

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adoption of new revenue recognition standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61

 

 

 

61

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,640

)

 

 

(4,640

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

61

 

 

 

 

 

 

61

 

Balance at December 31, 2018

 

 

87,885,603

 

 

$

88

 

 

$

528,254

 

 

$

759

 

 

$

(482,956

)

 

$

46,145

 

Exercise of stock options, net

 

 

96,882

 

 

 

 

 

 

417

 

 

 

 

 

 

 

 

 

417

 

Issuance of restricted stock

 

 

37,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

2,536

 

 

 

 

 

 

 

 

 

2,536

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,184

)

 

 

(1,184

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(270

)

 

 

 

 

 

(270

)

Balance at March 31, 2019

 

 

88,020,073

 

 

$

88

 

 

$

531,207

 

 

$

489

 

 

$

(484,140

)

 

$

47,644

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


 

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Nine Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

3,979

 

 

$

(15,030

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,581

 

 

 

6,088

 

Share-based compensation

 

 

5,865

 

 

 

7,779

 

Amortization of debt issuance costs

 

 

1,005

 

 

 

1,157

 

Accretion of interest on debt

 

 

3,090

 

 

 

2,489

 

Provision for bad debt

 

 

1,169

 

 

 

3,639

 

Gain on contribution to equity method investment

 

 

(12,964

)

 

 

Provision for write-down of inventories

 

 

2,877

 

 

 

2,099

 

Loss on disposal of property and equipment

 

 

9

 

 

 

250

 

Gain on equity method investment

 

 

(222

)

 

 

 

 

Elimination of equity method investment intra-entity profit on sales

 

 

1,129

 

 

 

Gain on termination of lease obligation

 

 

 

 

 

(1,007

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

7,519

 

 

 

(34,971

)

Inventories

 

 

(23,844

)

 

 

(17,763

)

Prepaid expenses and other assets

 

 

2,682

 

 

 

(7,382

)

Deferred cost of revenue

 

 

81

 

 

 

520

 

Accounts payable

 

 

(3,366

)

 

 

5,465

 

Operating lease liabilities, net

 

 

(461

)

 

 

 

Accrued liabilities

 

 

(16,716

)

 

 

1,458

 

Customer advances

 

 

(2,299

)

 

 

107

 

Deferred revenues

 

 

4,598

 

 

 

6,375

 

Net cash used in operating activities

 

 

(20,288

)

 

 

(38,727

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,764

)

 

 

(3,236

)

Purchase of intangible asset

 

 

(170

)

 

 

 

Net cash used in investing activities

 

 

(2,934

)

 

 

(3,236

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from employee stock plans

 

 

1,359

 

 

 

3,215

 

Taxes paid related to net share settlement of equity awards

 

 

(207

)

 

 

 

Proceeds from debt, net of costs

 

 

24,716

 

 

 

5,000

 

Borrowings under Revolving Credit Facility, net

 

 

2,458

 

 

 

6,498

 

Net cash provided by financing activities

 

 

28,326

 

 

 

14,713

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(675

)

 

 

(937

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

4,429

 

 

 

(28,187