Accuray (NASDAQ:ARAY) executives used the company’s fiscal second-quarter earnings call to outline progress on a broad transformation program while acknowledging that tariff impacts and geopolitical instability—particularly in China—pressured results and prompted a reset of full-year guidance.
Transformation plan targets profitability and operational discipline
CEO Steve La Neve said the company is executing a “comprehensive strategic, operational, and organizational transformation plan” announced in mid-December. He framed the effort as aimed at sharpening accountability, tightening cost control, and accelerating execution as Accuray’s installed base spans more than 80 countries.
La Neve emphasized that cost actions are intended to support longer-term strategies, including efforts to strengthen commercial execution and create a more predictable, higher-margin growth model. He said Accuray has tightened weekly and monthly financial and operating reviews around orders, revenue, margins, service performance, and cash, with an emphasis on faster corrective actions and greater accountability.
Strategic initiatives focus on services, channels, billing discipline, and pricing
La Neve outlined several initiatives already underway:
- Expanding and diversifying the service portfolio toward a “solutions-oriented” offering designed to increase uptime, improve performance, and drive higher-margin recurring revenue.
- Building a more structured distributor partnership program, including clearer performance standards, tighter alignment, and improved support models in markets where distributors play a central role.
- Improving billing and collections for services provided, after management said the company has sometimes not billed or collected for service levels delivered.
- Optimizing pricing across product and service offerings to better reflect value and support competitive bids at appropriate margins.
During Q&A, La Neve added that Accuray sees opportunity to build on its service programs—described as Select, Advantage, and Optimum tiers—expanding beyond break-fix to include elements such as training, quality support, user groups and forums, data management, real-time monitoring, software upgrades, consulting, and workflow analysis.
On the channel side, he described a tiered, pay-for-performance approach for distributors and dealers, where higher-performing partners could receive better economics. He also said Accuray intends to add channel leadership to increase focus on partner management. La Neve said the company hopes to announce the appointment of a new global chief commercial officer in the period ahead.
Q2 results: revenue declined as China product revenue fell; services grew
CFO Ali Pervaiz reported second-quarter net revenue of $102.2 million, down 12% year over year (down 13% on a constant-currency basis). The decline was driven by product revenue, which totaled $45.0 million, down 26% year over year (down 28% on a constant-currency basis). Pervaiz said most of the product revenue decline was due to lower-than-expected results in China amid geopolitical tensions and tariff impacts.
Service revenue was described as resilient, with $57.2 million in the quarter, up 4% year over year (up 3% on a constant-currency basis). Management reiterated that services are a key component of Accuray’s recurring revenue strategy and have benefited from efforts to add and diversify offerings and expand the installed base.
Accuray reported product growth orders of approximately $66 million, representing a book-to-bill ratio of 1.5 for the quarter and 1.2 on a trailing 12-month basis. The company ended the quarter with order backlog of approximately $383 million, defined to include only orders younger than 30 months. Pervaiz said the backlog represents over 18 months of product revenue, remains geographically diversified, and was supported by long-term customer commitments. He added that there were no order cancellations during the quarter.
Margins and profitability pressured by China dynamics, tariffs, and product mix
Gross margin in the quarter was 23.5%, down from 36.1% in the prior year. The decline was primarily attributed to product gross margin, which was 19.7% versus 43.5% a year ago.
Pervaiz broke down the year-over-year pressure on product gross margin as largely tied to China and mix. He cited:
- Lower China margin releases versus the prior year (with the prior-year quarter including releases following NMPA approval of TomoC).
- Incremental costs from higher tariffs, which he said impacted product gross margin by approximately 6 points.
- A mix impact from having five CyberKnife shipments in the prior year versus zero in the current quarter.
Service gross margin was 26.6% compared with 27.7% a year earlier, primarily due to higher net parts consumption. Pervaiz said the company remains focused on service margin expansion through higher pricing, improved reliability that could reduce labor and parts usage, lowering cost to serve, and increasing penetration of higher-margin service offerings, while noting quarterly service margins can fluctuate with parts timing.
Operating expenses were $35.6 million, compared with $37.2 million a year ago, and included $6.1 million of one-time restructuring expenses. The company posted an operating loss of $11.6 million, compared with operating income of $4.7 million in the prior-year quarter. Adjusted EBITDA was a loss of $1.9 million, compared with positive $9.6 million a year earlier.
Guidance reset reflects China volatility and tariff headwinds
La Neve said second-quarter top-line performance did not meet expectations, citing the ongoing tariff environment and unstable geopolitics, “particularly as it relates to China.” He said external pressures affected demand patterns and the timing of commercial activity in difficult-to-anticipate ways.
Accuray revised fiscal 2026 guidance to:
- Revenue of $440 million to $450 million
- Adjusted EBITDA of $22 million to $25 million
The prior outlook was $471 million to $485 million of revenue and $31 million to $35 million of adjusted EBITDA. Management said the updated guidance assumes continued volatility in China, persistence of current tariff structures, and ongoing headwinds, but does not assume a material worsening beyond current conditions.
In Q&A, La Neve attributed the change primarily to China timing, referencing the country’s process involving quota, license, tender, and funding, and said that process had slowed, making deal dynamics more protracted than anticipated.
Despite the guidance reduction, La Neve said management continues to expect a high single-digit adjusted EBITDA margin run rate within the next nine months and aims to expand to double digits over the medium to long term.
On customer capital spending, La Neve said the company’s discussions have not indicated a downward shift in hospital CapEx appetite, adding that Accuray has not heard concerns about customers’ ability to buy equipment.
On the balance sheet, Accuray ended the quarter with $41.9 million in total cash, cash equivalents, and short-term restricted cash, down from $63.9 million the prior quarter, which Pervaiz attributed primarily to working capital usage, cash interest, and restructuring payments. Net accounts receivable rose to $61.0 million, while net inventory declined to $151.0 million.
About Accuray (NASDAQ:ARAY)
Accuray Incorporated (NASDAQ: ARAY) is a global medical device company that develops, manufactures and markets innovative radiation therapy solutions for the treatment of cancer. The company’s flagship products include the CyberKnife® System, a robotic radiosurgery platform offering sub-millimeter precision, and the TomoTherapy® System, which combines helical computed tomography (CT) imaging with intensity-modulated radiation therapy (IMRT). More recently, Accuray introduced the Radixact® System, an advanced iteration of its TomoTherapy technology designed to enhance treatment speed and clinical workflow.
Accuray’s suite of products enables clinicians to deliver highly targeted radiation doses while minimizing exposure to surrounding healthy tissue.
