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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, 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 January 25, 2021, there were 92,898,337 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, 2020 and June 30, 2020

3

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended December 31, 2020 and 2019

4

 

 

 

 

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

5

 

 

 

 

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

6

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

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

22

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

 

 

 

Item 4.

Controls and Procedures

35

 

 

 

PART II.

Other Information

 

 

 

 

Item 1.

Legal Proceedings

36

 

 

 

Item 1A.

Risk Factors

36

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

 

 

 

Item 3.

Defaults Upon Senior Securities

68

 

 

 

Item 4.

Mine Safety Disclosures

68

 

 

 

Item 5.

Other Information

68

 

 

 

Item 6.

Exhibits

69

 

 

 

Signatures

 

70

 

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™, PreciseART®, PreciseRTX®, Treatment Planning System™, QuickPlan®, TomoDirect™, TomoEdge™, TomoH®, TomoHD®, TomoHDA™, TomoHelical™, Tomo Quality Assurance™, Radixact®, Onrad ™, S7™, 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)

 

 

 

December 31,

2020

 

 

June 30,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

107,322

 

 

$

107,577

 

Restricted cash

 

 

8,692

 

 

 

997

 

Accounts receivable, net of allowance for doubtful accounts of $745

   and $1,268 as of December 31, 2020 and June 30, 2020, respectively (a)

 

 

65,367

 

 

 

90,599

 

Inventories

 

 

138,655

 

 

 

134,374

 

Prepaid expenses and other current assets (b)

 

 

22,309

 

 

 

21,227

 

Deferred cost of revenue

 

 

2,577

 

 

 

2,712

 

Total current assets

 

 

344,922

 

 

 

357,486

 

Property and equipment, net

 

 

13,773

 

 

 

15,349

 

Investment in joint venture

 

 

17,019

 

 

 

13,929

 

Operating lease right-of-use assets, net

 

 

26,110

 

 

 

28,647

 

Goodwill

 

 

57,963

 

 

 

57,717

 

Intangible assets, net

 

 

549

 

 

 

663

 

Restricted cash

 

 

1,340

 

 

 

1,337

 

Other assets

 

 

16,466

 

 

 

15,799

 

Total assets

 

$

478,142

 

 

$

490,927

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,876

 

 

$

23,126

 

Accrued compensation

 

 

21,942

 

 

 

17,963

 

Operating lease liabilities, current

 

 

8,587

 

 

 

8,224

 

Other accrued liabilities

 

 

24,396

 

 

 

27,180

 

Customer advances

 

 

19,516

 

 

 

22,571

 

Deferred revenue

 

 

80,884

 

 

 

83,207

 

Short-term debt

 

 

12,530

 

 

 

 

Total current liabilities

 

 

178,731

 

 

 

182,271

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities, non-current

 

 

20,965

 

 

 

24,173

 

Long-term other liabilities

 

 

9,195

 

 

 

7,416

 

Deferred revenue

 

 

23,391

 

 

 

24,125

 

Long-term debt

 

 

168,082

 

 

 

189,307

 

Total liabilities

 

 

400,364

 

 

 

427,292

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; authorized: 200,000,000 shares as of December 31, 2020 and June 30, 2020, respectively; issued and outstanding: 92,989,337 and 91,178,108 shares at December 31, 2020 and June 30, 2020, respectively

 

 

93

 

 

 

91

 

Additional paid-in-capital

 

 

551,409

 

 

 

545,741

 

Accumulated other comprehensive income (loss)

 

 

2,818

 

 

 

(484

)

Accumulated deficit

 

 

(476,542

)

 

 

(481,713

)

Total stockholders' equity

 

 

77,778

 

 

 

63,635

 

Total liabilities and stockholders' equity

 

$

478,142

 

 

$

490,927

 

 

(a)

Includes accounts receivable from the China joint venture of $366 and $3,039 at December 31, 2020 and June 30, 2020, respectively. See Note 14.

(b)

Includes receivable from the China joint venture of $430 and $0 at December 31, 2020 and June 30, 2020, 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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

41,805

 

 

$

43,760

 

 

$

73,063

 

 

$

81,365

 

Services

 

 

55,654

 

 

 

55,066

 

 

 

109,728

 

 

 

107,038

 

Total net revenue (a)

 

 

97,459

 

 

 

98,826

 

 

 

182,791

 

 

 

188,403

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products

 

 

23,102

 

 

 

24,518

 

 

 

41,528

 

 

 

46,088

 

Cost of services

 

 

33,526

 

 

 

36,408

 

 

 

65,029

 

 

 

71,472

 

Total cost of revenue (b)

 

 

56,628

 

 

 

60,926

 

 

 

106,557

 

 

 

117,560

 

Gross profit

 

 

40,831

 

 

 

37,900

 

 

 

76,234

 

 

 

70,843

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (c)

 

 

11,956

 

 

 

13,064

 

 

 

24,104

 

 

 

26,405

 

Selling and marketing

 

 

10,348

 

 

 

11,327

 

 

 

19,246

 

 

 

24,593

 

General and administrative

 

 

10,328

 

 

 

9,886

 

 

 

19,217

 

 

 

20,502

 

Total operating expenses

 

 

32,632

 

 

 

34,277

 

 

 

62,567

 

 

 

71,500

 

Income (loss) from operations

 

 

8,199

 

 

 

3,623

 

 

 

13,667

 

 

 

(657

)

Income on equity method investment, net

 

 

1,117

 

 

 

 

 

 

1,089

 

 

 

 

Other (expense) income, net

 

 

(4,260

)

 

 

7,766

 

 

 

(8,954

)

 

 

3,327

 

Income before provision for income taxes

 

 

5,056

 

 

 

11,389

 

 

 

5,802

 

 

 

2,670

 

Provision for income taxes

 

 

287

 

 

 

679

 

 

 

631

 

 

 

1,316

 

Net income

 

$

4,769

 

 

$

10,710

 

 

$

5,171

 

 

$

1,354

 

Net income per share - basic

 

$

0.05

 

 

$

0.12

 

 

$

0.06

 

 

$

0.02

 

Net income per share - diluted

 

$

0.05

 

 

$

0.12

 

 

$

0.06

 

 

$

0.02

 

Weighted average common shares used in computing net

   income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

92,025

 

 

 

89,517

 

 

 

91,609

 

 

 

89,145

 

Diluted

 

 

93,353

 

 

 

90,279

 

 

 

92,607

 

 

 

90,095

 

Net income

 

$

4,769

 

 

$

10,710

 

 

$

5,171

 

 

$

1,354

 

Foreign currency translation adjustment

 

 

1,809

 

 

 

877

 

 

 

3,302

 

 

 

(141

)

Comprehensive income

 

$

6,578

 

 

$

11,587

 

 

$

8,473

 

 

$

1,213

 

 

(a)

Includes sales to the China joint venture, an equity method investment of $4,632 and $9,583 for the three and six months ended December 31, 2020 and $2,643 and $6,460 for the three and six months ended December 31, 2019, respectively. See Note 14.

(b)

Includes cost of revenue from sales to the China joint venture, an equity method investment of $2,757 and $4,701 for the three and six months ended December 31, 2020, respectively, and of $2,140 and $4,631 for the three and six months ended December 31, 2019, respectively.

(c)

Includes chargeback to the China joint venture, an equity method investment related to research and development project of $430 for the three and six months ended   December 31, 2020, respectively, and no chargeback for the three and six months ended December 31, 2019.

 

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, 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.

 

 

 

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

 

 

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,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

5,171

 

 

$

1,354

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,317

 

 

 

3,712

 

Share-based compensation

 

 

4,608

 

 

 

3,849

 

Amortization of debt issuance costs

 

 

717

 

 

 

661

 

Accretion of interest on debt

 

 

2,491

 

 

 

2,018

 

Change in (recovery of) allowance for doubtful accounts

 

 

(512

)

 

 

853

 

Non-cash revenue transactions related to joint venture contribution

 

 

(1,365

)

 

 

Gain on contribution to joint venture

 

 

 

 

 

(12,964

)

Provision for write-down of inventories

 

 

3,504

 

 

 

2,208

 

Loss on disposal of property and equipment

 

 

2

 

 

 

Income on equity method investment

 

 

(1,089

)

 

 

 

 

Release of equity method investment intra-entity profit on sales

 

 

(557

)

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

26,683

 

 

 

23,589

 

Inventories

 

 

(6,809

)

 

 

(17,210

)

Prepaid expenses and other assets

 

 

684

 

 

 

2,986

 

Deferred cost of revenue

 

 

137

 

 

 

132

 

Accounts payable

 

 

(12,076

)

 

 

(7,718

)

Operating lease liabilities, net

 

 

(306

)

 

 

(331

)

Accrued liabilities

 

 

2,102

 

 

 

(11,084

)

Customer advances

 

 

(3,637

)

 

 

(2,085

)

Deferred revenues

 

 

(6,651

)

 

 

1,863

 

Net cash provided by (used in) operating activities

 

 

16,414

 

 

 

(8,167

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,167

)

 

 

(2,533

)

Additional investments in joint venture

 

 

(79

)

 

 

 

Net cash used in investing activities

 

 

(1,246

)

 

 

(2,533

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from employee stock plans

 

 

1,042

 

 

 

1,358