Q3 2020 Earnings Call

I'm good day and welcome to the Acura reports fiscal twenty twenty third quarter Financial results conference call. All participants will be in listen-only mode. So do you need assistance with my conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Joe Diaz with Lewis & Partners, please go ahead. Thank you Alyssa and good afternoon to everyone welcome to acura's conference call to review Panache results for the third quarter of fiscal year 2020 which ended March Thirty One twenty twenty

During our call this afternoon management will review recent corporate developments joining us today are Josh Levine Acuras president and chief executive officer wage. I'm about to Acura senior vice president and Chief Financial Officer before we begin I would like to remind you that our call today includes forward-looking statements month of May differ materially from those contemplated or implied by these forward-looking statements factors that could cause you to results to differ materially are set forth in the press release issued just after the market closed this afternoon as well as in our filings with the Securities and Exchange Commission, the forward-looking statements on this call are based on information available to us as of today's date and we assume no obligation to update any forward-looking statements as a result of new information or future events except to the extent required dead.

by applicable Securities laws

Accordingly you should not put undue Reliance on any forward-looking statements.

To housekeeping items for today's call First during the Q&A session. We request that participants limit themselves to two questions and then wreak you with any follow-ups on a second all references. We make this specific order in the prepared remarks are to our fiscal year quarters, for example statement regarding our third quarter pack back to our fiscal third-quarter ended March Thirty One twenty twenty now, I'd like to turn the call over to acura's president and chief executive officer Joshua Levine.

Thanks, Joel. And thank you to everyone joining us today. I also want to thank Suzanne winter our chief commercial officer and head of R&D and Mike Hoagie our senior vice president of global global operations and supply chain for joining our third quarter earnings release webcast given their leadership roles and specific areas of responsibility as we mobilize our efforts and resources across the company to address covid-19. I thought it would be helpful to have both of them available to answer potential questions that are related to critical information in their respective areas clearly because covid-19 is at the Forefront of everyone's mind. My prepared remarks this afternoon will focus on three primary topics first the impact that the pandemic is having on our customers clinical practices and workflow second thoughts what we were doing to support them while keeping our employees safe and lastly our key areas of focus related to business continuity, both operational and Financial.

All those fighting the coronavirus has taxed the healthcare industry worldwide. The reality is that radiotherapy treatments are continuing around the world and although based on Direct feedback from customers treatment delivery if she managed with modified clinical practice protocols and workflow, for example lower risk and non-urgent cases and treatment starts are being pushed out and scheduled treatment times have been extended to apply for disinfection of treatment bunkers and Equipment between patients. This has resulted in overall decrease patient treatment volumes. There is also been an increase in the use of hypofractionation off and Ultra hyper fractionation the limit the risk of covid-19 exposure for both patients and Department staff, which we believe Acura is uniquely positioned to support with our CyberKnife and systems.

What are the other areas of Paramount importance given covid-19 impacts to the overall hostile environment and radiotherapy Department clinical practice protocols is the health and safety of our front-line employees almost a third of our entire employee population our global Service team Personnel who are responsible for installation preventative maintenance and break-fix activities that support our installed base customers off during moments, like these our ability to provide service and clinical applications support to ensure that our customers can continue treating patients safely and effectively is critical. I'm incredibly inspired by these front-line Heroes and their tireless dedication to supporting customers and patience and I want to thank them publicly our service teams around the world are following customer is specific to find safety protocols when they are on site at customer locations, and we are helping to ensure their safety by providing personal protective equipment. I'm extremely extremely proud of the wage.

efforts of the accurate team

Involved in the day-to-day support of our customers.

Despite all of these efforts. We should not underestimate the magnitude of the challenges that our customers currently face as hospitals have been forced to focus the majority of their clinical resources in intensive and Critical Care Medicine areas to support covid-19 patients many have been proactively pulling back from all clinical service lines and procedures deemed non-essential or elective in nature for many hospitals. The resulting impact has been an extremely rapid loss of profitability and Associated cash flows and a growing number of facilities are finding themselves under significant financial stress off the reprioritization of clinical resources, and the associated customer challenges that have emerged along with restricted travel and or facility access issues created delays and bunker modification project and installations in our fiscal third-quarter. We believe that these factors suggest that we should expect longer Revenue conversion timelines in the near-term.

In terms of our internal business management Focus, we've been taking actions across an array of both operational and financial areas to help ensure the continuity of our business on the operational side, We've been working aggressively with our critical supply chain and Logistics Partners to help ensure that we have adequate Supply to support both our production and service activities globally while maintaining maximum flexibility related to flexing up or down in terms of product build schedule changes on the financial side of our business continuity efforts. We are focused on cash flow management and we are closed aggressive actions designed to preserve cash and maximize liquidity to operating expense reductions without compromising commercial activities and future innovation.

These actions include but are not limited to reducing manufacturing raw materials purchases aggressive account payables management reducing capex spending freezing all discretionary. Hi my activity and reductions and travel spend across all functions, except for our global Service Personnel. We are essentially evaluating all potential options that can contribute to cash preservation additionally Acura is executive team consisting of my seventh direct reports and myself have agreed to take a temporary reduction to our base salaries and waved any discretionary annual bonus payment. Might otherwise have been paid out in the fiscal twenty year. We believe the actions that we have taken will help a cure effectively navigate through the course of this pandemic.

Despite the challenging environment caused by covid-19 from an operational standpoint Acura had a reasonably solid third fiscal quarter gross orders for the quarter increased 27% to 1.6 million compared to $84 million the prior year third quarter on the revenue side. We reported Q3 revenue of 99 and 1/2 million dollars, which was below our expectations long as we saw timing impact through the covid-19 deeper into the month of March when travel restrictions and lockdowns in certain markets went into effect which has mentioned before affected Logistics and bunker construction schedules at both our distributor and end user levels Although our Revenue conversion timing for systems and upgrades has been impacted by the pandemic. We expect our service contract Revenue wage, which has an annualized recurring run rate in excess of two hundred million dollars to remain stable as our installed base customers continue to rely on accurate equipment to treat patients.

our product mix perspective

Sorry, but I have contributed approximately 40% of the total gross orders in Q3 while the tomotherapy platform led by rattus accounted for approximately sixty percent of the gross orders during the quarter.

From a regional order performance perspective the Americas region delivered its third consecutive quarter of double-digit year-over-year order growth our focus on improving the consistency of commercial execution. The AMS region has been a work-in-progress and we are very pleased with the continued momentum are America's commercial team is made in growing our sales pipeline throughout that region.

What's orders in a Mia grew 16% on a year-over-year basis in Japan has actually declined year-over-year but based on over achievement in the first half of the fiscal. The region is still ahead of our internal expectations on a year-to-date basis.

Transitioning to China Rose orders from China remains strong with 11 new orders received during the quarter six of which were type A + 5 of which were tight feet roughly seventy percent of these people came to our joint venture sub dealer Network and the remaining 30% came to our Legacy distributor told my wife. We are still waiting for completion of the tender process for the first batch of 50 Chinatown licence is awarded for our systems in October of 2019. And now believe that the beginning of Revenue conversion will most likely begin in the first quarter of fiscal 2021.

You might also be aware that we've been expanding the depth of our management team with the recent editions of Highly experienced Executives, including Suzanne winner our chief commercial officer who join us from Medtronic and Mike Holmes senior vice president of global operations and supply chain who joined us from GE Healthcare the extensive experience that success and the success that these Executives have achieved at their previous companies providing accurate with impressive bench trained as we navigate through this challenging operating environment and the lastly an update regarding Financial guidance given the unprecedented nature of the coronavirus been dead and the significant economic uncertainty. It introduces. We have made the decision to withdraw our fiscal 2020 guidance. Once we believe that we have sufficient visibility to reinstate guidance, we will do so long and closing while the current market conditions limit our near-term visibility. We are aggressively focused on those activities and actions that we can control ensuring the health and safety of our employees in Chicago.

Continued support for our customers and their patients and focusing on those elements both operationally and financially that will drive Acuras business continuity with that. Let me turn the call over to shake for his review of the financial details shape. Thank you Josh and good afternoon everyone. I will begin with some additional details on an auto performance for the third quarter and then focus on Sunday is what a.

Gross orders for the third quarter War one hundred six million dollars which was up 27% from the prior year or a year to day basis gross orders increased approximately 15% over the same period prior year is worth a quarter War twenty million dollars, which was in line with a prior expectation. We did have approximately four million dollars of Aging activities during the quarter.

During the third quarter, we had a cancellations and other adjustments of approximately nine million dollars as a result on the net basis. We generated $77 for orders in a third quarter, which represented a 20% increase over the prior year.

We ended the quarter with backlog of $570 representing an increase of 15% for March 31st, 2019.

Josh discussed earlier we anticipate the covid-19 disruption will adversely impact the pace of the revenue conversion in the near-term.

All those deaths and the extent to which covid-19 will impact individual markets could vary based on a number of factors. We could see higher-than-normal level of Asia in the Club Quarters do to this disruption.

I just bought a China order is already a stout. We continue to believe that a meaningful number of them will eventually convert the revenue.

The safety type of licenses already awarded for Acura systems included several systems that were previously aged out.

Turning now to our income statement.

Total revenue for the third quarter was ninety-nine point five million dollars down from one hundred three point two million dollars in the prior-year.

What are you on a year to day basis Revenue was down 4% from the prior-year?

Oh what part of L. Are you are forty five point five million dollars during the quarter declined 2% compared to Prior year service Revenue in the third quarter was $54 down 5% from the prior-year. The decline in service. Revenue was primarily due to lower upgrade upgrades purchased through our service contracts.

From my perspective CyberKnife accounted for approximately 20% of the quarters Revenue unit volume by the tomotherapy platform accounted for the remaining 50% Most of which was driven by rattus Act.

Turning out the gross margin product gross margin was 39.4% compared to 41.5% in the prior year service gross margin in the quarter was 39.2% compared with 37.3% in the prior year service module for the quarter included an impact of fiscal twenty $20 bonus across which has just described earlier related to waiver of bonus payout as well as adjustments to General employee bonus pool to reflect the current business environment, excluding the impact of this bonus accrual adjustment our service gross margin for the quarter was 37%

Which was in line?

historical Norm

all gross margin for the third quarter was 39.3% compared with 39.2% in the prior year.

Excluding the impact of the bonus accrual adjustment. I just described all of our gross margin for the quarter was 38%

moving down the income statement operating expenses. What a quarter or Thirty one point two million dollars a decrease of six point four million dollars or 17% from the prior-year off the year-over-year decline, you know, operating expenses was primarily driven by the Bonus accrual reversal of approximately 4.5 million dollars.

The remaining decrease was driven by reductions in discretionary spend such as travel given that certainly employee activities or restricted by covid-19.

Gaap operating income for the quarter was eight million dollars compared the two point nine million dollars in the prior-year.

Excluding the impact with a bonus of carola judgments or gaap operating income was two point three million dollars for the quarter.

We began reporting over offering an impact over the China JV in the third quarter and it was an income of 0.2 million dollars. This item is being reported off on our income statement as a single line item called gain Equity investment.

Why would he pointed a small income from the China JV this quarter? We expect to see a small loss in the next few quarters as a JV continues to ramp on its operational and Commercial start, please.

Adjusted ebitda up with a quarter was eleven point three million dollars compared to 6.7 million dollars in the prior-year excluding the impact of bonus accrual adjustment adjusted wage for the quarter was five point six million dollars.

Now a word about our balance sheet and liquidity position.

We ended up quoting with ninety-two million dollars with cash and short-term restricted cash. We carried approximately two hundred million dollars of debt in aggregate at the end of the quarter which consists of eighty five million dollar convertible notes due July 2022 as well as a Term Loan of $85 and an asset-backed revolver of $30 off one lender both of which mature in 2024.

In summary, none of that today. It's scheduled to mature in the next two years from a working capital liquidity perspective. In addition to the assets Volvo pasilla T. We maintain access to accounts receivable factoring facilities of over twenty million dollars in Japan.

Beyond access to these credit facilities as Josh mentioned earlier, we are taking focused cash and control actions to preserve the Quidditch position wage in addition supply chain team is working very closely with our suppliers to adjust our inventory position to appropriate level as we closely monitor business conditions in the current environment and with that a light and call back to Josh. Thank you. I want to thank all of our employees throughout the world for the tremendous energy. They're bringing to their work in supporting our customer and their patience during this challenging time and with that operated. We're ready to open the call up for questions.

We will now begin the question-and-answer session to ask.

Good question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We will pause momentarily to assemble the roster. The first question today comes from Brooks O'Neill of like Street, please go ahead.

Good afternoon, guys, can you hear me? Okay Brooks. Great. I was hoping you might give us whatever color you could offer in terms of what I'm hearing on the ground in China either from your joint venture Partners from Total Tomo knife or from anyone else. You think it's credit there.

Yeah, so a couple of data points. I actually had a call with the chairman and vice-chairman of trying to I still up and radiation Corp office little more than a week ago in an effort to try and get you know some color from where they sit there's no question. They've confirmed that you know, I'll call it. The pilot life Brooks is is back on you know, the the the there's Signs of Life in the the China Market their primary business. You'll remember is the radioisotope business today. They're not necessarily in big Capital Equipment yet, but they're seeing you know order activity on the radioisotope side and you know, you know hospitals started to kind of returned to you know, I'll call it a new normal State. I think that their belief is that on the equipment side of the world, which would obviously cover our our situation. Yep.

JV that you know, that may be a little bit longer in in ramp in terms of you know, starting to see that that come back but there's progress being made an advanced on the tendering process as well. So I mean again, I think that we've been we've been pretty straightforward about not obviously not having control over the timing of of when the tendering process would end but the feedback has been that you know progress has been made there. And you know, I think if you go back to where we were at the time last reported we were thinking and feeling that you know, if with a little bit of law, you know, we we might have seen tendering complete earlier in you know in the fourth quarter of fiscal fourth-quarter and and maybe you know would have had some some possibility of Revenue activity, you know before the end of the fiscal year at this point. I'm thinking Thursday.

From a conservative you it's probably q1 at this stage. We're still waiting also for an announcement from National Health commission on a second round of Taipei licenses that that activity has, you know, all the applications are in they've been reviewed aren't understanding but there's been no announcement attached that truant yet and we expect that, you know as we get perhaps deeper into the quarter towards the end of this cycle fiscal cycle. We might hear something on that second tranche of type a license as well.

That's great. That's great.

Let me ask you this one one more question. I'll jump back. I hear anecdotally from people in the industry that there's a high likelihood. We see positive movement with regard to the new reimbursement code. Most likely for implementation beginning January one. Can you just tell us what came here out here of what your expectations are at this point.

Yeah, so I think that that the general wisdom and our belief was that up until you know, the the height of the pandemic kind of was upon us with the general belief was that we were looking at probably a July one implementation. You may be aware that asked both Astro and and I have both communicated with the folks at CMS that they believe that covid-19 Focus right now has taken an impact or had an impact on the the markets Readiness, you know from a provider site standpoint clinically to be ready for a July one implementation and their thoughts are hoping and pushing a suggesting CMS hold that off until January 1st. And that's that's you know, kind of hot off the press. I mean, you know the the the communication between yep.

Have a med and Astro and CMS has taken place inside of that, you know with that recommendation within the last probably three weeks or so.

Great. I mean to me that doesn't seem terrible. So I think keep up all the great work and I'm excited for you. Thank you very much. Thanks Brooks wage, but

The next question today comes from Josh Jennings, please go ahead. Hi good afternoon and congrats on solid quarter navigating the the initial piece of the scope. It's storm. I wanted to just see if you know, I know you it's a lot of variables going into the pot here. But if we could just hear terms of anything that you can just walk around the trends that you're seeing in April and some of the different geographies and we just heard a little bit from China. Um, maybe you could expand on on Western Europe Middle East and maybe the Americas as well.

You know Josh the the the the the general the general answer there is you know, and as we said in prepared remarks, we we saw em, the the the biggest piece of slow down or or impact of slow down as we got deeper into March, you know, I'd say the first 2 months of the quarter the third quarter were you know, we're we're proceeding as as we hoped and expected and as we talked about again earlier that the there was there was timing definitive timing impact towards the end of the you know, the last couple of weeks of March on delays that pushed, you know, we'll push Revenue recognition on a couple of deals that we were counting on in the quarter pushed them into projects for you know, it's it's a highly variable situation across the rest of the world. I don't know that the the the recovery. Yep.

well, or you know kind of the the

Next phase of this is going to look the same in every region. As a matter of fact, I would be reasonably certain that it probably doesn't there are two primary factors driving. This one is off the the financial impact that you know hospitals are are are now dealing with and sustaining around, you know, the elimination of the the elective and non-essential procedure activity and you know, as it relates to that, you know cash flows being impacted. We're we're assuming we're pushing out expectations around and I I think we have less exposure on the service Revenue side of our business given the fact that patients are being treated with our devices and we've got some leverage in ensuring that we're going to get paid on the service side. I think that a wise a wise expectation would be that, you know service system Revenue collectability just given what's happening from a financial stress wage.

Pointed hospital and is going to probably push out and then the the discussion around you know, where where do where and when is there a confidence on the part of hospitals off to reinvest from a capex standpoint? And that's the piece that has a much more difficult aspect to it with regards to visibility demand visibility around that time and timing, you know timing certainty again, I think it's going to look different different parts of the world. And you know, we're just going to have to see how it plays out.

Understood understood a lot of unknowns out there and it just kind of leads into another next question. But just on your long-term guidance think you prior to really kicking in in Europe and Thursday or early this year. You talk about eight to twelve percent Revenue growth into the out years. I assume that we should be just thinking about our own projections in the fiscal fourth-quarter. And then and then the time. Duration of this crisis an impact on the capex spending and the different geographies and and try and would you advise us to disregard that guidance for fiscal 21,000 then the long-term Outlook still being being similar in fiscal 22 and Beyond thanks for taking the questions. Yeah. I think the the simple answer to that and and I I would caveat it by saying there aren't a lot of sympathizers in the car environment. You know when I think about the underlying demand characteristics in our business right now, I don't know that I think China Club.

Still a very very big growth Catalyst for us going forward and I think that you know, if they were the first into the pandemic and the kind of the the first out of the pandemic, I think that as you know, the market starts to come back to life in China, I think that again the underlying demand aspects of what they're dealing with there in terms of under capacity and radiotherapy is is still a very very big growth driver for us. I think the the the discussion in the other parts of the world again, it's variable by by region and by area but you know, we we we've been seeing as as the the results we put up in Q3 would suggest we've been seeing strong strong interest in our products and demand for our products and we haven't even really gotten to some of the thoughts important innovation introductions that we're we've been talking about with regards to upgraded Imaging capability on the rat attack platform the fully full commercial dead.

impact of of synchrony on so we think there's a lot

There to be excited about I think tempering tempering the the expectations from an you know, the eight to twelve where we were let's say at the beginning of this calendar year. There's something from you know in the intermediate-term maybe a little bit down from that longer-term. I think that you know that that ranges is a you know, you know is is a bath a reasonable landing spot. But again, you know, the question is that the timelines to recovery and where where and how that impacts the you know, the the momentum and I think you know, it's the reason we'd suspended guidance and you know, you can imagine that we're focused on this our ears to the ground. We're in front of customers, you know on a very active basis at this point in life, you know, again, we're doing the things that we can control. We think it's prudent to be to the managing the liquidity aspects of our company at this point and I can tell you the sugar and I have a yep.

With confidence that we have the the the right approach and the right focus on navigating through this to be able to compete on the other side.

The next question today comes from Anthony Petrone of Jeffries, please go ahead.

Thanks, and hope everyone's staying healthy and good to see at least you know, some some encouraging signs out there, you know in the print off today, but let me Dig Inn on a few specific like housekeeping questions. And then I have a couple of follow-ups on on how you see the coronavirus cycle playing out. So just in terms of overall gross orders in the quarter you can you quantify how much of that was actually previously aged out orders returning to the backlog and I guess what specifically triggered me is coming back in and and regionally with those orders were they trying to orders or european orders and then I'll have a follow-up.

Yeah, that's me to answer your first question. They're just be very clear that grows older is that reported which was kind of six million dollars this quarter those aren't you order? So they have nothing to do with the previous aged out orders. So I just want to make that clear for you rather the backlog that was talking about apologies for that. So I plug as I said, you know, I had a we had seventy seven million in that order added to the backlog so hundred six million gross orders. I had a net age that a 20 million dollars and the other adjustments and cancellations about nine million dollars. So uh and also the full million dollars of Asian back in the office you previously age that items. So that's a roll-forward of the the backlog. That's helpful. Okay. So four million came back in okay dead.

Just be very clear. I know it just can't get confusing about what I say 4 million days. I mean he's back in what it means is

To go into you know backlog per say just went straight to revenue out of a pool. So net-net is is you know, is that item had a net net zero impact or on Thursday about reporting Park was just so you know.

Okay. No, that's that's that's helpful when the follow-ups would be, you know a little bit more in terms of Trends in in March and April, but maybe more on the off the the installation and and Order side of things, you know in terms of just Hospital regulations, you know understanding is that even installations to an extent you have been pushed out beginning mid-march and then specific. I guess she asked your comments on capex, you know how order specifically may I guess leading the quarter and early this quarter or trending us specifically and then I'll have one last one on China. Thanks.

Yeah anything I think you know the the I don't know this is this is specific in the to the situation or the Americas region. You know, I think that the reality is that things basic basic elements of this discussion such as you know facility access, you know lock down, you know lock down travel travel access, you know between markets and countries. I mean this this absolutely has has impacted installation timing and customer acceptance timing no question. It's not only phenomenon and again it, you know, those those guidelines relative to access in facilities. It looks different in different places, but you know certainly in as we got deeper into the third quarter those things became bigger bigger bigger impacts.

You know going forward, I mean Again difficult to predict, you know, where where and how capex activities starts to come back into, you know, Thursday. We're we're a falls from a artist prioritization standpoint. But you know, I think our view is that at a minimum, you know, we're looking at several quarters of you know, I'm reduced or or moderated capex kind of spending. I think, you know a lot of this depends on how how long Hospital stay in a shutdown or lockdown relative to the the what what they're considering is not essential or or elective procedures and those two are linked. I mean, they're they're they they are often has an effect on on one another in terms of you know, kind of the drivers of a recovery timeline estimate.

Fair enough in in terms of give me one quick follow-up. They're just going on therapy volumes you commented obviously radiation therapy is essential, you know, is there anything noticeable? They're just in terms of you know, kind of demand pent-up scenarios. Are you seeing at least some delays aggravation therapy procedures at hospitals, you know, the bigger ugh, the the longer that gets backed up. I mean, how does that actually drive Capital decisions in other words? Could that be uh, maybe perhaps even a small Tailwind even though of course capex budgets are pressured and then just, you know specifically on on China, you know, just to follow up, you know, they're dead. I guess the clarified just in terms of the orders this quarter how many of those orders were I guess tender driven versus just underlying demand of the China orders that you put up. Thanks again God.

Just a note or word on on treatment volumes.

We have line of sight on our Tomo family of products to you know, uh online visibility relative to treatment activities and I would tell you that, you know, we're still overall. We haven't seen any large drop off in treatment volumes as it relates to the installed base. I'd say it's probably off 95 plus percent what it had been and I think that's a an interesting, you know, an interesting indicator. I mean again what it says to me is Cancer's not taking vacation based on the coronavirus office and these patients where where where they are being slowed down or starts are being slowed down there being slowed down in cases where you know radiation oncologists can make a decision a comfortable with the decision that this doesn't change longer-term outcomes in terms of you know, local control, you know, survivability Etc, you know so dead.

I think I think that for the most part will continue to see installed installed base devices, you know in in reasonably High degrees of utilization treating patients. I talk a little bit about in the prepared remarks about the you know, some of the specific protocols and workflow changes that customers have made with regards to you no longer own no longer turn over time. If you will have a bunker in between treatments to you know, make sure that the appropriate disinfecting protocols Etc are being followed, but you know, I don't I don't see we don't see it this point in the data that we have visibility to big big drop-offs in in treatment volume the capex discussion again is it's it's just a it's a difficult situation to predict at this point and you know, we we will stay close to it and when we know we'll let you know what that looks like your dog.

Anthony on the activity in China how much of it was tender driven and how much of it was, you know, just uhhh orders orders that were being placed ahead of time a cycle, you know the tendering process for the Taipei licenses that we received awarded for our devices in October of last year that tendering process is still not complete and so, you know there there are I would say probably the vast majority of what we took was orders orders ahead of you know, actual, you know completion of tendering across that activity.

Okay.

Thank you.

Again, if you have a question, please press * then 1 the next question comes from Tycho Peterson of JPMorgan, please go ahead.

Okay. Thanks. Just a couple of follow-ups here. I guess I'm a Catholic steam Josh. Are you sensing any change in priorities around as we think about you know your budget, you know eventually start free up and and just delaying the 8 p.m. Until January help or hurt, you know the order book in your view and then you also going off. I'm just curious if you can talk a little bit more about that dynamic.

Let me start with the 8 p.m. Discussion. I think again, I think prior to prior to you know, kind of the explosion of the pandemic. I think that the general view Tycho was that we probably be on a pathway time line wise for a July one roll out January 1st in my view doesn't seem like it's it's an extraordinarily long extended time frame and I I don't think it has an impact on order orders and you know bookings going forward. I mean if if you're a facility that is moving in the direction that the APM is encouraging treatment to move in and providers to move in and you're not really as well equipped from a an S550 or hypofractionation capability standpoint. I think, you know, you're you've got you've got technology decisions that you're going to want to make that will allow you to

You know.

Protect your business model and optimize your business model under the the new guidelines come next January. So I don't see that having a big impact on the downside on the month on the capex situation from a prioritization standpoint again, I think it's difficult to take a brush and paint the entire market with the same Outlook cuz I don't think it's realistic. I think that you know, if you are a an institution today that is you know, a radiation oncology is already dead an important element of your overall revenue and profit generation capabilities, you know, and you are, you know, seeing equipment that at you know, extension ages, you know, and and and not as efficient as it could be based on treatment speed throughput at cetera. I think that you know, you would still be in a mode where you know prioritizing upgrading

How older equipment is is probably something that will will you know, you'll want to consider if you have you know, a situation on the other end of it where you've got relatively they you know recent equipment or newer equipment and you're able to keep up with the treatment volumes that you were dealing with pre pandemic. I'm not sure that there's going to be a big Catalyst for you know trade and trade up or technology upgrade. So it again it it's going to look different in different locations. I think it's going to look different across the regions, but I think that again this is this is a business that people are not going to abandon. It's it's probably one of the few places inside the apartments inside of a hospital today that is still active or treating patients, you know, you've got intensive care and Critical Care Medicine you've got in in a number of locations labor and delivery and the other located the other department that's alive and running is Radio Thursday.

Radiation oncology. So if this is an important piece of your overall business model, I think it's going to be a priority for you to you know, based on your individual circumstances to continue to think about the kinds of things that we just talked about technology upgrade, you know, and and and bringing newer equipment in but again it it's going to look different across across regions and across the facilities. And and on your last question Thai Kona Asia, you know as we said on the prepared remarks, we do think that the Asia wage could increase on your term to the extent that we talked about Revenue conversion cycle. We see that lengthening in the near term for the obvious reasons both globally and also to the extent so it just remind you that the 30-month Asia policy clocks in a 30 months from the order receipt and to the extent that dead

We I would say probably 75% to 80% of orders we take today is distribution Channel.

Outside of the United States and you know before the pandemic we were probably looking at anywhere from you know, eighteen to twenty months twenty-four months time frame for Revenue conversion in the thousands regions, and we do think that the lengthening or the revenue conversion cycle in the near-term in those regions could adversely impact the trend on the age, you know, near-term having said that I want to make it clear to that being aged out doesn't mean the olders are automatically cancelled. We do look at those opportunities to be an aged out every quarter of an opportunity. So, you know as we come out of this pandemic situation we again, we don't know when that is but we we we hopeful that the we can use those back in touch as soon as possible.

And then on and then also any comments on the progress with the typing product back to the gym in China. Yeah, the the answer on the first piece is yes. It's still on the path that we have identified and it was the you know, we were looking at em, you know commercialization by the end of this calendar year. I don't know whether or not we will whether there'll be an astro meeting this fall or not. But I think if if there is an astro meeting it's likely we should introduce that capability there. But well, I guess we'll see what what where we are when we get get deeper into the fall as far as timing goes on the on the Astro meeting piece off.

And I'm sorry I missed your missed the other thoughts on the the timeline that we expect that I think you know, the the manufacturing facility that we we are involved in in build-out of with c i r c it probably lost about 90 days of time. Maybe maybe a hundred days of time frame when China was shut down, but they've they've they've got, you know, I am continuing restarted now continuing and our expectation is by probably mid July the facility will be back up and running in terms of, you know, not necessarily producing product. We've got essentially the the training facility and training bunkers there and those wage

To be utilized and you know, the the the timelines for production of type B intention is still on that, you know, roughly eighteen months down kind of a timeline from now from from from the time. The plant is is up up and and open if you will.

And the last one costs you previously flagged $15. It costs you just you know, give us some contacts on some of the incremental actions you're taking how how much how much it'll have to be on top of the $15 off.

Yeah.

So the obviously given the no Guidance with the guidance withdrawal that we announced. I'm not specific to the numbers, but what I can tell you that coming through Q3, which we just reported that fifty million year-over-year savings only take 10.

Okay. Thank you.

As a reminder it is star one to ask a question.

At this time. I'm not showing any additional questions. This concludes. Our question-and-answer session. I would like to turn the conference back over to mr. Josh Levine for any closing remarks Thursday that joined the call this afternoon. We look forward to speaking with you again in August when we report full year 2020 Financial results. Thanks very much for your participation today and everyone. Please stay healthy and safe.

Conferences now concluded thank you for attending today's presentation. You may now disconnect.