Form 10-Q ACCURAY INC For: Dec 31

January 28, 2022 4:40 PM EST

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10-Q
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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 December 31, 2021

 

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 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™.

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)

 

 

 

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.

3


 

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.

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, 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.

5


 

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