Form 10-Q ACCURAY INC For: Dec 31

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10-Q

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 December 31, 2021


☐	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 January 20, 2022, there were 92,733,531 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 December 31, 2021 and June 30, 2021	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended December 31, 2021 and 2020	4

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended December 31, 2021 and 2020	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2021 and 2020	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	37

PART II.	Other Information

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73

Item 3.	Defaults Upon Senior Securities	73

Item 4.	Mine Safety Disclosures	73

Item 5.	Other Information	73

Item 6.	Exhibits	74

Signatures		75

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™, CyberKnife M6™ Series, Accuray OIS Connect™, PreciseART®, PreciseRTX®, Treatment Planning System™, TomoDirect™, TomoEdge™, TomoH®, TomoHD®, TomoHDA™, TomoHelical™, TomoTherapy Quality Assurance™, Radixact®, Onrad ™, S7™, and VoLO™.

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)


	December 31, 2021			June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	123,196		$	116,369
Restricted cash		244			560
Accounts receivable, net of allowance for credit losses of $1,199 and $1,048 as of December 31, 2021 and June 30, 2021, respectively (a)		81,905			85,360
Inventories		123,680			125,929
Prepaid expenses and other current assets (b)		20,940			21,547
Deferred cost of revenue		1,355			3,008
Total current assets		351,320			352,773
Property and equipment, net		12,208			12,332
Investment in joint venture		14,678			15,935
Operating lease right-of-use assets, net		19,429			22,522
Goodwill		58,006			57,960
Intangible assets, net		322			435
Restricted cash		1,256			1,272
Other assets		18,282			16,869
Total assets	$	475,501		$	480,098
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	29,258		$	19,467
Accrued compensation		24,184			26,865
Operating lease liabilities, current		8,327			8,169
Other accrued liabilities		33,883			27,471
Customer advances		24,610			24,937
Deferred revenue		76,585			81,660
Short-term debt		7,541			3,790
Total current liabilities		204,388			192,359
Long-term liabilities:
Operating lease liabilities, non-current		13,756			17,441
Long-term other liabilities		6,696			7,766
Deferred revenue		25,175			23,685
Long-term debt		174,492			170,007
Total liabilities		424,507			411,258
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, $0.001 par value; authorized: 200,000,000 shares as of December 31, 2021 and June 30, 2021, respectively; issued and outstanding: 92,733,531 and 90,821,661 shares at December 31, 2021 and June 30, 2021, respectively		93			91
Additional paid-in-capital		536,709			554,680
Accumulated other comprehensive income		2,216			2,093
Accumulated deficit		(488,024	)		(488,024	)
Total stockholders' equity		50,994			68,840
Total liabilities and stockholders' equity	$	475,501		$	480,098

(a)

Includes trade receivable from the China joint venture, an equity method investment of $11,735 and $8,822 at December 31, 2021 and June 30, 2021, respectively. See Note 14.

(b)

Includes other receivable from the China joint venture, an equity method investment of $415 and $187 at December 31, 2021 and June 30, 2021, respectively.

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

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share amounts)


	Three Months Ended December 31,						Six Months Ended December 31,
	2021			2020			2021			2020
Net revenue:
Products (a)	$	60,721		$	41,805		$	113,480		$	73,063
Services (b)		55,554			55,654			110,237			109,728
Total net revenue		116,275			97,459			223,717			182,791
Cost of revenue:
Cost of products		35,520			23,102			67,029			41,528
Cost of services		38,128			33,526			74,537			65,029
Total cost of revenue (c)		73,648			56,628			141,566			106,557
Gross profit		42,627			40,831			82,151			76,234
Operating expenses:
Research and development (d)		14,697			11,956			29,079			24,104
Selling and marketing		13,233			10,348			24,504			19,246
General and administrative		10,716			10,328			22,176			19,217
Total operating expenses		38,646			32,632			75,759			62,567
Income from operations		3,981			8,199			6,392			13,667
Income (loss) on equity method investment, net		(832	)		1,117			(1,172	)		1,089
Other expense, net		(2,490	)		(4,260	)		(5,158	)		(8,954	)
Income before provision for income taxes		659			5,056			62			5,802
Provision for income taxes		480			287			911			631
Net income (loss)	$	179		$	4,769		$	(849	)	$	5,171
Net income (loss) per share - basic	$	0.00		$	0.05		$	(0.01	)	$	0.06
Net income (loss) per share - diluted	$	0.00		$	0.05		$	(0.01	)	$	0.06
Weighted average common shares used in computing net income per share:
Basic		91,761			92,025			91,299			91,609
Diluted		93,932			93,353			91,299			92,607
Net income (loss)	$	179		$	4,769		$	(849	)	$	5,171
Foreign currency translation adjustment		(108	)		1,809			123			3,302
Comprehensive income (loss)	$	71		$	6,578		$	(726	)	$	8,473

(a)

Includes sales to the China joint venture, an equity method investment of $8,816 and $14,735 for the three and six months ended December 31, 2021 and $1,446 and $4,320 for the three and six months ended December 31, 2020, respectively. See Note 14.

(b)

Includes sales to the China joint venture, an equity method investment of $2,679 and $5,494 for the three and six months ended December 31, 2021 and $3,186 and $5,262 for the three and six months ended December 31, 2020, respectively. See Note 14.

(c)

Includes cost of revenue from sales to the China joint venture, an equity method investment of $6,203 and $14,248 for the three and six months ended December 31, 2021 and $2,757 and $4,701 for the three and six months ended December 31, 2020, respectively.

(d)

Includes chargeback to the China joint venture, an equity method investment related to research and development project of $415 and $994 for the three and six months ended December 31, 2021 and $430 for the three and six months ended December 31, 2020.

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

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, 2021		90,821,661	$	91	$	554,680		$	2,093		$	(488,024	)	$	68,840
Cumulative adjustment due to adoption of ASU No. 2020-06		—		—		(25,633	)		—			849			(24,784	)
Issuance of restricted stock		97,315		—		—			—			—			—
Share-based compensation		—		—		2,506			—			—			2,506
Net loss		—		—		—			—			(1,028	)		(1,028	)
Cumulative translation adjustment		—		—		—			231			—			231
Balance at September 30, 2021		90,918,976	$	91	$	531,553		$	2,324		$	(488,203	)	$	45,765
Exercise of stock options, net		331,401		1		1,223								$	1,224
Issuance of restricted stock		1,061,356		—		(258	)		—			—			(258	)
Issuance of common stock under employee stock purchase plan		421,798		1		1,523			—			—			1,524
Share-based compensation		—		—		2,668			—			—			2,668
Net income		—		—		—			—			179			179
Cumulative translation adjustment		—		—		—			(108	)		—			(108	)
Balance at December 31, 2021		92,733,531	$	93	$	536,709		$	2,216		$	(488,024	)	$	50,994

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


	Common Stock				Additional Paid-in			Accumulated Other Comprehensive Income /			Accumulated			Total Stockholders’
	Shares		Amount		Capital			(Loss)			Deficit			Equity
Balance at June 30, 2020		91,178,108	$	91	$	545,741		$	(484	)	$	(481,713	)	$	63,635
Issuance of restricted stock		95,575		—		—			—			—			—
Share-based compensation		—		—		1,910			—			—			1,910
Net income		—		—		—			—			402			402
Cumulative translation adjustment		—		—		—			1,493			—			1,493
Balance at September 30, 2020		91,273,683	$	91	$	547,651		$	1,009		$	(481,311	)	$	67,440
Exercise of stock options, net		17,175		—		66			—			—			66
Issuance of restricted stock		1,117,816		—		(343	)		—			—			(343	)
Issuance of common stock under employee stock purchase plan		580,663		1		1,041			—			—			1,042
Share-based compensation		—		—		2,995			—			—			2,995
Net income		—		—		—			—			4,769			4,769
Cumulative translation adjustment		—		—		—			1,809			—			1,809
Balance at December 31, 2020		92,989,337	$	92	$	551,410		$	2,818		$	(476,542	)	$	77,778

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

Accuray Incorporated

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended December 31,
	2021			2020
Cash flows from operating activities
Net income (loss)	$	(849	)	$	5,171
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		2,841			3,317
Share-based compensation		5,211			4,608
Amortization of debt issuance costs		379			717
Accretion of interest on debt		—			2,491
Provision (reversal of provision) for credit losses		366			(512	)
Non-cash revenue transactions related to joint venture contribution		—