Q1 2021 Accuray Inc Earnings Call
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Thank you Rocco and good afternoon to everyone welcome to Accuray's Conference call to review financial results.
First quarter of fiscal year, 2021, which ended on September 30 2020.
During our call. This afternoon management will review recent corporate development joining us on today's call I'm, Josh Levine, Accuray's, President and Chief Executive Officer, and Chegg has a lot to add.
Great Senior Vice President and Chief Financial Officer.
Before we begin I would like to remind you that our call today include forward looking statements.
Actual results may differ materially from those comps later or implied by these forward looking statements factors that could cause these results to differ materially are set forth in the press release, we issued just after the market close this afternoon as well as in our filings with the Securities and Exchange Commission.
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 results.
To the extent required by applicable Securities law.
Accordingly, you should not undue reliance on any forward looking statements.
[music] housekeeping items for todays call.
Turning to Q and a session.
Request that participants limit themselves to questions and then re queue with any follow ups.
And all references we make this quarter and they were in the prepared remarks are to our fiscal year quarters. For example statements regarding our first quarter.
For fiscal first quarter ended September 30, 2020.
With that let me turn the call over to Accuray's, President and Chief Executive Officer, Josh Levine Josh.
Thanks, Joe and thanks to everyone for joining us on today's call I'm joined today by sheer called them out to our Chief Financial Officer, and Suzanne Winter, our Chief commercial officer and head of R&D.
Accuray's fiscal 2021 first quarter performance continues to reflect the positive momentum our business is making despite the headwinds created by the COVID-19 environment.
Our commercial team around the world continues to adapt and make the necessary adjustments to successfully compete at a high level even in the face of a number of key markets continuing to be impacted by travelling customer access restrictions as well as bunker construction and related installation delays.
Validating our ability to execute in these challenging times revenue for the quarter came in at $85.3 million and we generated positive operating income of 5.5 million.
This represents the fourth consecutive quarter that the company has generated a positive operating profit as we continue to demonstrate operating leverage that we expect to position us well in a post covert environment.
Rush order volume for the quarter was 51 million, which was substantially down globally versus Q1 of the prior fiscal year, although at the regional level, our EMEA and Japan regions. Both showed solid order growth during the quarter.
The overall order results in Q1 was not unexpected.
As we have communicated in our year end at 420 earnings call in August we highlighted the tough comparisons to the prior year driven by the realization of the first phase of Taipei orders in China in the first half and a large multi system order from our Latin American business.
Going forward, we are focused on ensuring the safety of our employees and meeting our customers needs to ensure that we maintain our overall customer responsiveness.
I want to thank the entire accuray team for their individual and collective dedication to supporting our customers and their patients under continuously evolving conditions.
Their efforts are making a difference as we focus on revenue conversion growing operating income and improving free cash flow during this fiscal year.
Our continued focus on aggressive working capital management and cash preservation will help ensure we successfully navigate through the current global economic conditions.
We finished fiscal Q1 with $95 million in cash and illustrated our commitment to reducing overall debt by prepaying 10 million of our term loan during the quarter.
Given the current macro operating environment, we're very pleased with this outcome.
We will provide you with greater detail on the quarterly financial results later in the call.
On the operational front, our joint venture with trying to isotope and radiation Corp continues to make significant progress with the tangent trying to training center opening in September and in person class instruction for customers, which started earlier this month.
This will be an important hub to enable medical professionals throughout China to learn about our products and how to successfully incorporate them into their practices.
As far as establishing our local manufacturing presence we are still on schedule to have the tangent produced type b product within the next 18 months.
As we look to revenue generation catalysts in the near term, we believe that revenue conversion related to the first of the China type a license is awarded for Accuray devices. In October 2019 will begin in this current fiscal quarter and will continue over the course of the next 18 to 24 months addition.
Additionally on October 27th 2020, the China National Health Commission announced the second tranche of Taipei Radiotherapy license Awards and we are pleased to report that Accuray systems were named in 24 of the additional 32 type a licenses awarded to end user hospitals.
Even the late timing of this announcement from the National Health Commission, we're still evaluating the impact of this announcement on our future order activity.
Earlier this week, our commercial team participated in the 2020 Astro annual meeting.
While that was conducted on a virtual basis for the first time, given the cobot environment. This was a great opportunity for us to launch several important strategic product innovations from our R&D pipeline.
During Astro, we had high quality interactions with clinicians and leading institutions, who show great interest in our Radixact and Cyberknife platforms, particularly with the technology enhancements that we've recently introduced both preceding and during Astro on both product platforms.
These include the new Cyberknife as seven with Volvo treatment planning.
Our synchrony motion synchronization and real time delivery adaptation on the Radixact platform and our new fuel KBC imaging capability for the Radixact platform called clear arty.
We expect that these technology innovations will help to further advance our radiation therapy planning and delivery capabilities and will have a meaningful impact to our role overall product functionality and strategic positioning.
We see growing clinical experience and adoption of synchrony and the introduction of the synchrony technology on the Radixact platform in combination with our clear RT imaging upgrade creates a uniquely versatile and powerful treatment platform.
Additionally, and most importantly, we believe that the advanced ultra precise treatment capabilities of both of our product platforms are well aligned with the new alternative payment model and reimbursement fee schedule recently announced by the centers for Medicare and Medicaid services, which is now plan to go into effect in July 2021.
[music].
Accuray has been a pioneer in high precision technologies that enable hypo and ultra hyper fractionation and we believe that the innovations we are bringing to the market will be a catalyst for long term growth and ensure that our delivery platforms maintain their position as the gold standard choice for hyper fractionated SPR t. treatments.
At this week's Astro conference 44, clinical abstracts shared by Accuray users reinforce the clinical value of Tomotherapy and cyberknife for delivering moderately or ultra hyper fractionated treatments.
Experience of global health care providers during the covert pandemic has highlighted and reinforce the need for expeditious and effective treatment options and actuaries position as a pioneer in precise image guided platforms that safely deliver hypofractionated treatments with excellent long term results is driving clinical cost.
And it's in the radiotherapy community and creating a broader market opportunity for our products.
We are launching important technology upgrades across both of our platforms that are designed to further enhance their current treatment capabilities in delivering hypo and ultra hyper fractionated, Srs and SBR TV more effectively safely and efficiently.
As discussed during our Astro Investor Day presentation earlier. This week, we are excited about the momentum and progress we see occurring with our business today as well as the long term growth opportunities we have in front of us.
One of the opportunities that we are most excited about is the neural radio surgery market.
Yesterday, we announced the collaboration with Brainlab, who is the market leader in treatment planning surgical navigation and an innovator in radio surgery solutions that will focus on expanding cyberknife treatment capabilities for the new already or surgery market.
Our brainlab collaboration will create a development path that addresses three distinct areas of focus.
First to provide the neural radio surgery community with access to optimize dose current ordering capabilities to improve the accuracy of dose delivery.
Second to provide improved inter operability between brand labs element software and the accuray precision treatment planning software to ensure optimized neuro radio surgery workflows and last through brain lapse Quinstreet patient registry platform to provide accurate customers with the ability to add cyberknife treatment day.
To neurosurgery registries to help clinicians improve patient outcomes. We believe this collaboration will be a strong catalyst for future market penetration in neuro radio surgery.
And with that I'll turn the call over to ship to review, our Q1 financial results Chick.
Thank you, Josh and good afternoon, everyone out.
I will begin with some additional details on our financial performance for the first quarter and then focus on some highlights for the period.
Gross orders for the first quarter or $51 million as compared to $78 million in the prior year.
The year over year decline in gross autos can be attributed to the three factors.
First as we had anticipated we saw a decline in China type orders due to the challenging comparable to Q1 last year.
I'd like to remind you that type of orders received in the prior year reflected significant pent up demand from my end users and legacy distributor Tomer knife, which was triggered by the announcement of tight that quota back in 2018.
As most of the orders related to the first phase of 50 type of licenses awarded to Accuray systems have been already received prior to the start of this fiscal year, we anticipated a decline in tight they order activity.
Looking ahead to the second quarter prior year second quarter gross orders included $28 million, what type of system orders, which were not.
Which are not expected to recur in the second quarter of this fiscal year for the reasons I reasons I just stated.
In addition to China, the first quarter presented a tough year over year comparison from a gross orders perspective for the Americas region as the prior year included $8 million Multisystem order from South America.
Lastly, we did see some expected headwinds due to the pandemic, particularly in the US region, which has affected the timing of order placement.
Despite the challenging year over year comparison for China, and the Americas regions, We did see strong order growth in the EMEA and Japan regions.
Orders grew 4% and 14% respectively.
From a product mix perspective, Tomotherapy platform accounted for approximately 55% of auto unit volume for the quarter in Cyberknife accounted for the remaining 45%.
Net Asia, it's what a quarter or $25 million and included $3 million of aging activities during the quarter.
During the first quarter, we had cancellations of approximately $2 million, which was offset by $1 million benefit from FX impact and other adjustments.
As a result on the net basis, we generated $24 million of orders in the first quarter.
We ended the first quarter with backlog of $597 million, which is an increase of 21% from September Thirtyth 2019.
We continue to anticipate that cold at 19 disruption will slow revenue conversion timing in the near term.
Although at a depth and extent to which club at 19 will impact individual markets could vary based on a number of factors. We also expect to see higher than normal level of age outs in the coming quarters due to this disruption.
Turning now to our income statement.
Total revenue for the first quarter was $85.3 million down 5% compared to the prior year.
On the regional basis, we saw year over year revenue declines in all regions, except for the eight APAC region, excluding China, primarily due to the impact or the pandemic.
Although the degree of decline varied across the regions.
Product revenue for the quarter was $31.3 million, a decrease of 17% compared to the prior year.
From a product mix perspective, cyberknife accounted for approximately 15% of the quarter's revenue unit volume why the Tomotherapy platform accounted for the remaining 85%.
One reminder, about our product revenue mix.
The mix between Cyberknife and Tomotherapy varies from quarter to quarter. However, on an annual basis product revenue mix has being approximately 30% cyberknife and 70% Tomotherapy for the past two fiscal years.
Also the mix within the 50, China Taipei licenses granted to Accuray systems.
Approximately 40% Cyberknife and 60% Tomotherapy.
With revenue recognition related to the China type the licenses expected in the second quarter of fiscal 2021, along with our product portfolio being well positioned for the value based care environment. We believe we can maintain a healthy product mix between the two platforms on an annual basis going forward.
Service revenue for the quarter was $54.1 million, an increase of 4% from the prior year as we saw healthy demand for upgrades as well as increased installation and training activities during the quarter.
Turning now to gross margin overall gross margin for the quarter was 41.5% compared to 36.8% in the prior year.
Product gross margin for the quarter was 41.1% compared to 42.6% in the prior year.
The lower gross margin for the fourth quarter was primarily due to the product mix, which as I mentioned earlier.
Fluctuate from quarter to quarter.
Service gross margin for the quarter was 41.7% compared to 32.5% in the prior year.
I'd like to remind you that prior year Q1 service margin included the impact of higher than normal level of service parts consumption.
The team has done a great job on normalizing parts consumption in the past three quarters, which contributed to a material year over year improvement in service gross margin.
Additionally, Q on service margin benefited from higher operating revenue as well as continued to benefit from the reductions in travel and other operating costs due to the pandemic.
Moving down the income statement operating expenses for the quarter was $29.9 million, a decrease of $7.3 million or 20% from the prior year.
The year over year decline in operating expenses was primarily driven by the actions we implemented in response to the pandemic.
Which included physician eliminations as well as curtailment of costs associated with the impact of 12 and 19.
Particularly travel marketing events and delayed expenses.
The prior year first quarter operating expenses also included costs associated with the annual Ashland trade show, which is accounted for in the second quarter of this fiscal year.
Operating income for the quarter was $5.5 million compared to a loss of $4.3 million in the prior year.
The first quarter represented the fourth consecutive quarter of GAAP operating income generation and we have generated $22 million of operating income for the trailing 12 months period measured from September Thirtyth, Twentytwenty, which is a significant improvement from the $1 million.
Operating income generated in the previous trailing 12 months period measured from September Thirtyth 2019.
While operating income benefited partially from the actions taken in response to the pandemic.
Consistency in generating operating income demonstrates improvement operating leverage that is expected to position us well in the post cobot environment.
The operating impact of the China JV for the quarter was a loss of $28000.
This item is being reported on our income statement as a single line item called gain or loss on equity investment right below operating income line.
Adjusted EBITDA for the quarter was $9 million compared to a loss of $1 million in the prior year.
On a trailing 12 months basis, we have generated $37 million of adjusted EBITDA.
The adjustments between GAAP net income and adjusted EBITDA aligned and outlined and quantified.
Our earnings release issued today.
We ended the quarter with $95 million of cash and short term restricted cash.
Q1, ending cash reflects the impact of a voluntary $10 million term loan prepayment.
In connection with the amendment to our debt facility completed at the beginning of the quarter.
Looking ahead to the second quarter, we continue to expect on uncertain near to mid term demand and bar environment for future system orders as COVID-19 continues to put constraints on capital expenditures at hospitals.
In addition, as I mentioned earlier, our prior year second quarter gross orders included $28 million of type a system orders, which are not expected to recur in the second quarter of this fiscal year.
Possible revenue, although we are gaining more confidence that revenue recognition related to the China type. It licenses will start this fiscal year, we anticipate revenue in the second quarter will remain below prior year levels due to coal headwinds experienced in other regions.
As we manage the near term headwinds in revenue conversion.
We continue to focus on operational efficiency margin expansion and working capital management.
We are also focused on inventories supply chain management as we execute on the China in Taipei revenue conversion, while maintaining appropriate levels of inventory.
And with that I'd like to hand, the call back to Josh. Thank.
Thank you should even with the uncertainties created by the cobot situation. We are encouraged by our Q1 operating results. We are demonstrating daily that we have the ability to successfully adapt to this new external environment and we are excited about our future.
I want to thank all of our employees across the globe for their energy and the contributions they are making to support our customers and their patients. During these unprecedented times and with that we're ready to open the call up for questions.
Thank you we will now begin the question and answer session to ask a question Press Star then one on the Touchstone slow.
If you are using a speaker phone we ask that you. Please.
Pressing the keys to withdraw your question. Please press Star then two and once again, ladies and gentlemen, we do as you. Please limit yourself to two questions.
Todays first question comes from Josh Jennings with Cowen. Please go ahead.
Hi, guys. This is Neil on for Josh.
Thanks for taking our questions.
First question just on clear artsy.
Just wondering how does this technology to advance your efforts.
Clinicians and adaptive radiation therapy solution.
Yes, anything you can share there in terms of what.
Steps remain to get to a complete adaptive offering.
And how big of a step clear RTT is in that direction.
The Illumina, let Suzanne winter take this question Hi, Neal Thanks for the question.
Yes, or no declare that clear our key hilco kv introduction that we've done here at Astro, We think it's a significant step forward, especially in the realm of imaging and imaging is at the heart of adaptive therapy.
We have the advantage epicor, our tomo Radixact platform is.
Basically a CTG system with a slip bring design that allows us to be able to do full 360 degree HEALICOIL imaging.
So what we're bringing to the table here compared to what is available in the market from Columbia NTT is much better visualization of low contrast images very low noise low scatter compared to cone beam Colombians DT. The best imaging is really at the center of the image once you move beyond the.
And are you starting to lose your image quality. There is the largest field of view at 50 centimeters from an axial standpoint and from a longitudinal standpoint 1.35 meters again significantly longer than what is available on the market and so our competitors.
Have to stitch together their images.
And so theres interpolation of data so ultimately what we're bringing to the market is Natalie uniform imaging, but fundamentally the the images and the the image data is higher fidelity, which ultimately goes into dose calculation, which ultimately translate.
It's into accuracy and and ultimately that's what you want, especially when you are doing alter hypofractionated treatments.
The highest precision possible. So we do believe what we are bringing to the table is much better than cone BTT and we are on the path to providing.
Imaging soft tissue contrast, closer to diagnostics CTG and we're continuing the investments you know.
Again to even get as high as you know.
Competing with them our type resolution.
Great. Thank you for that and then.
I just had one follow up on just wondering if you could share with us your views on the tailwind and now also the headwinds I guess associated with Siemens and buried in combination.
And how that could impact after his success.
So we've we've up.
Since public in these comments and these thoughts in previous quarter, but.
You know in the near term Neal I think the answer is that there is likely to be some you know.
Short to intermediate term disruption in.
As as the two businesses on that income together I actually think that we we might have benefited from some of that in the two regions that we've highlighted in the prepared remarks today, specifically, a pack and Oh, I'm, sorry, EMEA and <unk> and Japan.
Which were strong performers for us order generation wise I think they're in a reported that the.
Down down yet comparisons in those those regions and I think that that might reflect some some of the.
Early disruption, if you will or distraction factor call it in the coming.
Coming together those two businesses longer term I think the jury is still out I mean, the bottom line is that.
The combined company is going to have to create a value proposition that makes sense for customers without really asking customers to do dramatically different things from a workflow standpoint, and I'm not sure that that's going to be easily obtained.
Or or achieved so.
Again, we're we're closely watching this and following it but I think it's too early to say we are excited about the things were doing from a technology standpoint.
I think if you fast forward.
You know a year from now two years from now I think that the products and the upgrades that were launching innovation wise right now are going to be game changers for our product and portfolio positioning capabilities and I think the feedback we're getting from customers.
Concurrent with this week's feedback from a.
From the Astro meeting.
Well it gives us gives us significant confidence to what I just described.
Great Thanks for that.
And our next question comes from Brooks Oneil with Lake Street Capital markets. Please go ahead.
Hi, good afternoon, everyone. Congratulations on the new typing orders in China, and the solid quarter overall I thought it was.
Very good in light of the cobot. So I have a couple of questions. The first one is.
What is it exactly that triggers the revenue recognition on the class a licenses in China and.
Maybe why Wouldnt you you're confident you will get to be recognized in revenue in Q2, and then also on China I was hoping you could say something about what you're hearing and take the opportunity and the status there up yet Hey, Brooks. This is shaygan I want to take for.
First a question on the process and timing a Rev. Rec on maybe I can pass the a type b to.
Josh maybe so.
As we talked about in the past.
The the first step of that type of revenue recognition now and use or how to get the license, which as you know has happened a year ago with the 50 license wins and in addition, Josh talked about the recent 24 in addition to that.
And the next step.
After the end user receives.
License is they have to go through a tender process, which we've been talking about whole good part of the last one year. So the reason that we are gaining confidence in terms of starting the first otherwise being whack recognition and coming out of the first 50.
In Q2 is because of the progress that we have seen out of China, China that.
The end user with the license can start to purchase so thats why so we we've seen that news out of China.
And before I pass that question back to Josh and type B one clarification.
That 23, I'm, sorry, 24, new Taipei write licenses granted to to Accuray systems in the recent news that Josh mentioned during his prepared remarks.
Those are not orders were just letting you know that there was announcement from Chinese government that additional 24 licenses have been granted to accuray systems. So those are not orders in Q1, although as I said in my prepared remarks, we're not expecting to receive orders for those in Q2, either so I just.
I wanted to make that clarification.
Thank you I appreciate that I'll give it to Josh Prototypey Brooks. Thank you.
Type b as you've heard us say in the past the type b product opportunity in China really truly represents while there are different segments inside of pipe B. Overall, we believe it represents about 80% of the market opportunity in the country, which as you know by any bench marker comparison is a big big number.
And we.
We think that the opportunity here for us as we've talked about in the past is unique because of the go to market strategy that we've deployed which is you know having a.
Manufacturing partner on the ground there in the form of trying to I stop and radiation Corp that is able to operate at scale. They have the advantages of being a state owned entity and quite frankly give us market visibility to things that we might likely not have had visibility to if we were standalone trying to go it alone.
On.
They have.
A significant position in the radio.
Radio isotope business set like 70% market share in their core business and.
An active selling relationships in somewhere between eight and 9000 hospitals throughout the country. So their their market access.
What they help deliver for us or create for us in terms of market access is not insignificant and last but not least the fact that we are going to be producing a product in 10 Gen that is going to be at a.
Essentially an ethnic Chinese brand, it's a it's a local brand the product built locally which is really aligning with what the government wants that happened around.
Made it made in China 2025, it basically that this is a high technology product area that the government wants and is certainly supporting local.
Local local domestic capability.
In in market access for and again, we think that that the relationship we have with CRC positions us well for this where.
We're going through BMT testing right now, which is in country testing and validation for.
The product that we're going to be producing and 10 Gen and we think we are still on schedule for a.
A product a product release produced and Tan Gen sometime roughly in the 18 month time.
Timeline or window from right now.
Great. That's good I'm, just going to sneak in one more I am curious if you could help us to understand if you believe you're better positioned than competitors to benefit from the our old ATM and maybe you could just elaborate on why or why not thank you very much and good keep up all the good work.
Thanks Brooks.
The ROI PM is it is it is a model that essentially.
Puts a premium on.
Value and value being defined by speed and.
And overall efficiency of treatment.
As opposed to where the market has been in terms of prior prior reimbursement methodology, which paid people based on the number of treatment sessions or fractions that were being employed to treat a patient over an entire regimen.
And the only thing I would add to that is you know at the recent Astro we had 44 different clinical presentations posters oral presentations.
On.
We have to focus on the use of hype of fractionation and also have a fractionation because we were the pioneer too we have the longest follow up data that's been reported on safety and efficacy. So we do think we are well positioned.
Great Suzanne Thank you very much.
And our next question today comes from Marie Cubo would be TRG. Please go on the please go ahead.
Hi, Good afternoon. Thank you for taking my question.
Want to start here on China wanted to see if a you know quantitatively you could size up the revenue opportunity. My notes have you having said that it is now that the first tranche of type a orders a would be about 115 million in terms of revenue.
Recognition, so I wanted to double check that that was still true and then secondly, I know its early given the recent announcement of the second tranche, but wondered if you could size up what that would mean an eventual revenue.
Amounts or how many millions or that those systems or worse.
Yes, so Larry Thanks for the question I'll take the first part.
Yeah show your recollection on 115.
He is correct in that you know that well that number roughly.
Represented the system revenue.
For the first 50 type of licenses, we won back in I guess about a year ago now.
And so data is still correct in terms of the estimated system revenue value again too.
Josh as you know as John described in his script, we're expecting.
First wave out or that 115 to start in the second quarter were in right now and we believe that 115 gets recognized over the following 18 to 24 months. So hopefully that gives you a sense. So the pacing cadence of that amount and I'm going to pass the second part of the question to John.
Sure Maria just some additional color on this.
We recognize that that itself, it's a hard.
And at times confusing kind of backdrop to piece together what is first traunch second tranche, where does the first tranche and then the second tranche pick up I think that the important takeaways here are pretty simple and straightforward and they are first and foremost that we're continuing to win.
Our devices are continuing to win.
At a very very high level of the Taipei licenses that the.
I am a wage and National help commission are distributing to end user hospitals. That's 0.1 0.2 is that.
The the visibility that should talked about before with regards to the tendering process being being complete.
We have been waiting as you've just pointed out it's almost the better part of a year no. One is more frustrated by the delay here than we are maybe other than you guys.
But quite frankly.
Tendering process and the bidding process related to the tender is complete in at least in that in that first wave.
The first 50 licenses that we've talked about and what that means is customers are basically now at a point where they can.
Execute paperwork execute contracts and schedule installation of equipment and so that's the kind of the trigger here in in activation. If you will that gives us the confidence around revenue conversion starting to become visible in the current quarter.
Our dream marketing two different opportunity actually in two different parts first theres, an immediate replacement opportunity again, there's an aged installed base of gamma knife as well as still some novellus systems that are out there I would say in total thats, probably about 500 units globally and even at a conservative way of looking.
Looking at assuming 10% of these would move toward more of a shared system between radiation oncology and dedicated neurosurgery I think that translates to about $150 million to $200 million at least in the short term I think the longer term opportunity and you heard a little bit about this at Investor day is the opportunity to take rate.
The Asian therapy into.
Treatment of movement disorders, and you heard Dr., Chris Liddell from Swedish Medical Center talk a little bit about the use in essential tremor.
Again that opportunity right now fids refractory to pharma.
Therapy. They go for deep brain stimulation and there's still a number of issues associated with that so you know I think and the prevalence is 5% of the adult population and it gets more severe as you age. So we think theres a real opportunity here in therapy penetration.
And we haven't put market.
Actual on that at this point, but we will continue to work with clinicians to see what the potential is in terms of translation into system purchases moving forward.
Very helpful. Suzanne Thank you so much.
And ladies and gentlemen, as a reminder to ask a question. Please press Star then one.
Question comes from Anthony Petrone with Jefferies. Please go ahead.
Thank you and good afternoon, I hope everyone is doing well.
Staying healthy maybe Josh can shake a couple of questions one would be and what are your top around calls here. So I am Paul you guys. If you sort of touched on these but yes.
One would be just with the cobot resurgence and sort of when you think of hospital preparedness, you know when and how they may be thinking about the next few months is that changing the conversation around capital equipment adoption, specifically radiation therapy.
If you noticed any of those trends in any of the key geographies and then and then maybe just to get your views.
Again on the push out of the radiation bundle in the us.
Obviously, there is a debate as to whether that's a headwind or tailwind. It's now pushed into the middle of next year. So your latest thoughts there on the push out of the radiation in Bonn bundle and whether or not that's a tailwind.
For capital adoption yup, Thanks, Anthony I'm sorry.
Overnight team, there's no question that the intensity of the covert situation.
Is it continues to be a pretty variable by region.
That's not not necessarily changing it is quite frankly, it is ramping up in terms of intensity you heard.
Both chicken I talk in prepared remarks about cobot headwinds in certainly the U.S. the us market and I think that that's.
That's very visible at this point I think also western Europe, maybe not every one of those the eurozone countries or markets, but but certainly you know.
You know, France, Germany, Italy, and Spain remain you know I would say at risk as well.
Interestingly with all of that said we saw.
Good good order generation in EMEA in the quarter, which you know again, maybe we're we're splitting hairs here on timing you know certainly, France, and Germany have announced on the last day or so that that they are.
Going to more restrictive.
Kind of environmental precautions, but.
But you know we're not we're not seeing orders cancelled out of the backlog related to covert.
I don't think there's any question, though that and again the selected markets that I just talked about us being one markets in western Europe. The other.
We would anticipate that there would be some slowdown and some some impact from a an order ramp standpoint.
You know, we're not hearing directly from any hospitals that you know, they're going back to where they were back in you know late spring or early summer with absolute lockdowns and and other other procedures essentially being turned off so.
I would say that that there's no visibility to those severe kind of decisions being made again at this point, which I think is a good thing.
But again this is.
It's a day by day situation I wish I could give you a high degree of confidence or predictability around where we'll land.
Six months 12 months from now, but I think you know.
We're going to be taking this you know.
Day by day, and seeing what what customers and what the marketplace is is going to allow for.
With regards to your question on CMS.
We are.
We are we were actually supportive of the idea that.
This.
The push for implementation would move until July.
There was a significant amount of dialogue between Astro and.
And CMS.
There was discussion with through the ADMET channels with CMS and primarily the messaging was that given the pandemic.
The the practitioners felt like they weren't going to be completely ready in the ways they needed to be Anthony in order to to fulfill their obligations under the requirements and so.
As a as a provider two hours a vendor to the provider community. We have to respect that and we do and so we were aligned we gave our input into into those discussions and.
You know it's interesting whether you whether you saw implementation beginning January of.
The coming January or or you see it occur in July as its now scheduled to.
Is almost.
In our view, it's somewhat irrelevant because the train on this topic has left the station. If you look at the commercial payer side of the world.
Most of the commercial payers that we see.
Involved and reimbursement with our products are already.
Either already have moved or are rapidly moving to.
No more more.
Focus on.
Hyper fractionated SPR t. delivery and so.
I don't think I don't think the difference between a January implementation or July is really going to change the broader trends macro trends on this topic in the market.
Thank you so much.
And our next question today comes from room discerning with Neuberger. Please go ahead.
Hey, guys.
Iran.
On the EBITDA lots of puts and takes in the first quarter. Thanks.
We are sort of absent can you give us but if.
Can you give us any sense for.
You know I know you don't.
We don't really guide but.
Any sense at all around how.
A typical that $9 million is.
Any sense, maybe fall for if we have a similar level of revenue into Q, what what the EBITDA puts and takes might be.
Yes at random.
I appreciate the question and.
You know.
Im not going to be specific about that but let me try to give you. Some color to help you think about this.
So.
First quarter historically has been the lowest quarterly opex quarter. So part of it is that and also as I said in my remarks that the this year the Astro expense shifted from.
This past quarter Q1 to Q2. So you are right. There are some puts and takes but I think if I think back about.
I know you asking about EBITDA from our Opex perspective.
The.
Coming out of Q4 last year, I said $33 million to a quarterly run rate Opex is something that I'm comfortable with looking forward. So I was still has had a same thing even though Q1 was more like a 30 million I think on a on an average basis $33 million Opex is a good place to be.
From my perspective.
On top of that I think will harboring around a 40% gross margin for the last few quarters I see that being somewhat of a consistent the area that we can probably produce.
So hopefully those gross margin.
All back to run rate.
Give you enough sort of.
Headed to kind of sort of help you model a little bit.
Without.
My my giving you guidance in any way here and you just need to layer into revenue so to speak.
Thank you we'll use him.
Yes.
So no I think.
Thank you I was just when we close out the question answer session, we'll turn the conference back over to Mr. remain pretty boomers.
Thank you operator, thanks, everyone for joining US afternoon, we look forward speaking with you again in January when we present that JP Morgans annual healthcare conference and later on in January January when we report our fiscal 2021 second quarter results. Thanks very much.
Thank you ladies and gentlemen, this concludes today's announced the strongest we thank you all attending today's presentation. You may now disconnect your lines and have a wonderful day.