Accuray targets $471M–$485M revenue in fiscal 2026 as service business growth offsets geopolitical headwinds

Earnings Call Insights: Accuray Incorporated (ARAY) Q4 2025

MANAGEMENT VIEW

* Suzanne Winter, President and CEO, stated that "I'm pleased with our performance in the fourth quarter, especially how we navigated a turbulent geopolitical environment, which impacted several key regions at various points in the quarter." She highlighted solid revenue growth despite obstacles and emphasized the resilience of operations and commercial teams.
* Winter identified service revenue and margin growth as highlights, with new product innovations like Tomo C for China and Helix in international markets as central components of Accuray's growth strategy. She also celebrated the completion of a debt refinancing and the securing of a strategic partner.
* The CEO recounted that major tariff escalations between the U.S. and China in April were followed by a reduction in tariffs in May, which reopened the China market. However, unexpected unrest in the Middle East later in June halted shipments to several EIMEA countries, causing supply chain pivots and a $1.7 million higher margin deferral into future quarters. "We expect to realize this margin as a positive adjusted EBITDA impact starting in the first half of fiscal 2026," Winter said.
* Ali Pervaiz, CFO, stated, "Net revenue for Q4 was $128 million, down 5% year-over-year or $126 million on a constant currency basis, a 6% decrease." He emphasized that for the full fiscal year, total revenue reached a record $459 million, up 3% from last year. International business now represents 80% of total revenue. "Service revenue for the quarter was $57 million, up 4% year-over-year," Pervaiz added. "Gross margin for the quarter was 30.6%, up 200 basis points year-over-year."
* Pervaiz explained that the company completed a comprehensive debt refinancing in early June, exchanging approximately $82 million of senior convertible notes for 8.9 million shares of common stock and $68.6 million in cash, and securing $190 million in new financing from TCW.

OUTLOOK

* Accuray is guiding to a fiscal year 2026 revenue range of $471 million to $485 million and an adjusted EBITDA range of $31 million to $35 million. Winter explained, "Fiscal 2026 represents a new chapter for the company. I'm looking forward to ASTRO in October, where we will showcase new solutions around adaptive radiotherapy."
* The company expects installed base growth to feed directly into its service business, with installation and training revenue serving as a growth driver for both revenue and margins long term. Accuray has launched an internal initiative to accelerate margin expansion by simplifying processes and harnessing gen AI tools.
* Winter cautioned about continued market uncertainties and geopolitical dynamics, stating, "As we gain greater clarity throughout the year, we will adjust our guidance accordingly."

FINANCIAL RESULTS

* Total Q4 revenue was $128 million, with product revenue at $71 million, down 11% year-over-year. Service revenue reached $57 million, up 4% year-over-year. For the full fiscal year, total revenue was $459 million, a 3% increase, and service revenue was $221 million, up 4% from last year.
* Gross margin for the quarter was 30.6%. Service gross margins improved by 9 points. Adjusted EBITDA for Q4 was $9.4 million; for the full year, adjusted EBITDA was $28.3 million, up 44% year-over-year.
* The company ended Q4 with a backlog of about $427 million and a book-to-bill ratio of 1.2. Operating expenses in Q4 were $34.7 million. Total cash and cash equivalents were $62 million at quarter end.

Q&A

* Marie Yoko Thibault, BTIG: Asked about customer sentiment in China and the outlook after tariff reductions. Winter responded that "we are in a better position than we were at the end of Q3 earnings call, obviously, but I don't think it's completely returned back to normal" and described ongoing strong demand for Tomo C and a cautious growth outlook for China.
* Thibault also inquired about the foreign trade exemption zone's impact on guidance. Winter confirmed, "That is assumed in the guidance."
* Jason Wittes, ROTH Capital: Asked about optimism for the U.S. market. Winter replied, "We're very pleased with Q4 performance in the Americas... We expect to see that going into FY '26," but noted a need for more uptick in orders.
* Wittes asked for an outlook on Helix in India and emerging markets. Winter said, "The regulatory approval in India took a little bit longer, but we do now have that in place. We do expect in FY '26 we're going to see more Helix."
* Wittes questioned tariff impacts. Pervaiz said, "We had $4 million of a cash impact. Half of that... we were able to mitigate... That's exactly, I think, how we are thinking about it from a run rate basis as we go into fiscal year '26."
* Pervaiz shared revenue and EBITDA seasonality: "First half of revenue is going to be roughly about 45%... second half is really going to be about 55%... roughly 30% of EBITDA coming in the first half and 70% coming in the back half."

SENTIMENT ANALYSIS

* Analysts voiced cautious optimism, commending the company for navigating external challenges but repeatedly probed for clarity on China and tariff exposure, signaling slightly positive to neutral sentiment.
* Management maintained a confident yet cautious tone, with Winter stating, "I think the demand... for our products is still very strong" and Pervaiz reiterating mitigation measures and guidance assumptions. The tone was measured but projected steady confidence.
* Compared to the previous quarter, both analysts and management displayed marginally increased confidence, with management offering more specifics on mitigation and guidance, while analysts pressed less on unresolved risks.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for fiscal 2026 was newly provided this quarter, including a specific revenue and EBITDA range. The previous quarter included only Q4 and full-year 2025 guidance.
* Management discussed completed refinancing and the addition of a strategic partner, compared to the prior quarter's mention of exploring refinancing options.
* Service margin improvement and operational efficiency through gen AI tools were highlighted as new initiatives, whereas last quarter focused more on tariff mitigation and near-term order shifts.
* Analysts in the prior quarter were more focused on China trade risks and potential revenue loss; this quarter, questions shifted toward execution in emerging markets and service growth.
* Key metrics such as revenue, service revenue, and adjusted EBITDA displayed sequential growth, and management's tone moved from reactive to proactive.

RISKS AND CONCERNS

* Management flagged ongoing geopolitical uncertainty, particularly regarding tariffs and regional unrest, which impacted both supply chain and revenue recognition.
* The company is actively pursuing strategies including duty drawback programs, dual sourcing, and establishing a foreign trade zone to mitigate tariff risks.
* Management acknowledged that tariffs were only extended for 90 days, so continued monitoring is required.
* Analysts sought clarity on customer sentiment in China and the durability of tariff relief, highlighting ongoing uncertainty as a key risk.

FINAL TAKEAWAY

Accuray leadership underscored the company's resilience in overcoming geopolitical headwinds, with particular strength in service revenue growth and operational initiatives aimed at margin expansion. The company expects further growth in emerging and international markets and has provided fiscal 2026 guidance of $471 million to $485 million in revenue, with a continued focus on mitigating tariff and supply chain risks. Management believes the foundation has been laid for sustained top-line growth and improved profitability, supported by recent refinancing and a strategic partnership.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/aray/earnings/transcripts]

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