Q2 2021 Accuray Inc Earnings Call
[music].
Good afternoon, and welcome to the Accuray second quarter of fiscal 2021 financial results Conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Ken Mow back of Vice President of Finance at Accuray. Please go ahead.
Thank you Gary and good afternoon, everyone. Welcome to Accuray's Conference call to review financial results from the second quarter of fiscal year 2021, which ended December 31 2020.
During our call. This afternoon management will review recent corporate developments joining us on today's call are Josh Levine, Accuray's, President and Chief Executive Officer, Shane Hamamatsu, Accuray's, Senior Vice President and Chief Financial Officer, and Suzanne Winter Accuray Chi.
The commercial officer, and senior Vice President of R&D.
Before we begin I would like to remind you that our call today includes forward looking statements.
Actual results may differ materially from those contemplated 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 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 ex.
<unk> to the extent of required by applicable securities laws. Accordingly, you should not put undue reliance on any forward looking statements.
Two housekeeping items for today's call first.
During the Q&A session, we request that participants limit themselves to two questions and then re queue with any follow ups second all references we make two of specific quarter in the prepared remarks are to our fiscal year quarters. For example, the statements regarding our second.
<unk> referred to our fiscal second quarter ended December 31, 2020 with that let me turn the call over to the Accuray's, President and Chief Executive Officer, Joshua Levine, Josh Thanks, Ken and thanks to everyone joining us on today's call.
Accuray's fiscal 2021 second quarter performance continues to reflect the positive momentum our business is making despite the headwinds created by the COVID-19 environment.
<unk> from our second quarter performance includes the beginning of the system revenue conversion related to the China type a licenses awarded to Accuray systems, receiving 500 10-K approval for clear our T. R. Helical KBC imaging on riders Act and the continued adoption of our latest innovations like synchrony real time motion tracking and delivery.
Adaptation on <unk>, and our latest generation cyber and Ipass <unk> system.
Revenue for the quarter came in at $97 5 million, which included approximately $21 million of China related system revenue.
The bulk of the China related system revenue recognized from the second quarter represents the beginning of revenue conversion related the type a licenses awarded to Accuray systems in the past 18 months, which have an aggregate estimate value of approximately $150 million.
While the number of pipe based system shipments will vary from quarter to quarter. We currently expect revenue related to the remainder of the Taipei licenses will be recognized over the course of the next 18 to 24 months.
Regarding the type B products segment, our China JV continues to make operational progress in advancing the manufacturing validation and qualification process and we believe we are on track to have our China manufactured type b products ready for market introduction in approximately 18 months.
Gross order volume for the quarter was $75 $4 million, which while down globally versus Q2 of the prior fiscal year due to Covid headwinds was in line with our internal expectations.
As we had shared in our first quarter earnings call. In October. This was expected as we highlighted the tough comparisons to the prior year driven by type a orders in China during Q2 of the prior fiscal year Cup.
Coupled with Covid related headwinds in the Americas and EMEA regions during the current fiscal year.
Despite those challenges we saw positive order growth in Japan, where gross orders grew 10% year over year, primarily driven by strong <unk> demand as well as new technologies, such as synchrony on <unk> Act on.
On a global basis, approximately 50% of New Riders Act orders during the quarter included synchrony, which is the significant increase from prior year and we believe this increase demonstrates that our customers see true clinical value and synchrony is proprietary real time motion tracking and delivery adaptation capability.
With respect of cyber knife, we saw of 17% unit volume increase year over year, driven by a seven orders in the Americas and EMEA regions.
From a financial perspective, we continue to see positive momentum in both operating and financial leverage from the cost management of cash preservation decisions. We initiated during the initial stages of the Covid pandemic.
With the improved operating leverage that we're seeing we will be increasing our investments in R&D, which will bring the spending run rate back to pre COVID-19 levels of investment.
On the product innovation front during the quarter, we announced that we have received five 10-K clearance for clear RT, our helical KBC imaging platform for the <unk> system. This regulatory approval paves the way for two important milestones in our phase product launch first we can now paying customer of clinical evaluation site.
Back and generate case studies, demonstrating the impact of clear our T on treatment related decision, making secondly, we look forward the gaining additional global regulatory clearances like CE, Mark and shown it in Japan in preparation for a broader commercial launch, which we anticipate will take place towards the end of this fiscal year.
<unk> combines the <unk> ex systems unique tomo therapy, helical platform with <unk> imaging capability, providing near diagnostic quality image resolution the longest transfers field of view and best in class image acquisition speed that allows clinicians to acquire uniform high quality images during the true.
<unk>.
We expect expect the clear RT combined with our synchrony motion tracking and real time delivery adaptation on the right is ex platform will help to further advance the overall functionality and clinical capabilities of <unk> and its strategic positioning as the workhorse system.
We believe that the significant technology additions, we are adding to our current product portfolio are well aligned with cms's radiation oncology alternative payment model, which is now scheduled to go into effect beginning in January of 2022.
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 of catalyst for long term growth and ensure that our delivery platforms maintain their position as a gold standard choice and hypo fractionated Srs and <unk> treatments.
With that I'll turn the call over to ship to review, our Q2 financial results in greater detail chip.
Thank you Josh and good afternoon, everyone I'll begin with some additional details on our financial performance for the second quarter, and then focus on certain of the highlights for the period.
Gross orders for the second quarter was $75 $4 million as compared to $98 6 million in the prior year.
As we generated double digit gross order growth in the last two fiscal years due to pent up demand from China type a system.
Triggered by the initial announcement of the type a quota back in October of 2018, we had anticipated that we would be focusing more on converting existing type of orders to revenue. This fiscal year as the volume of new China orders normalize which is what we saw occur in the second quarter.
In addition, we continue to see some headwinds due to the pandemic, particularly in the U S region.
Which has affected the timing of order placement in the near term.
Looking ahead to the third quarter, we expect to see of similar challenging year over year comparison for gross orders. The prior year third quarter included $25 million of type a orders, which are expected to be meaningfully lower in the third quarter of this fiscal year for the same reasons I just stated.
We also anticipate our gross order volume in the second half of this fiscal year to be weighted more towards the fourth quarter. Although we do anticipate a sequential increase in order volume from the second quarter the third quarter.
From a product mix perspective, the tomo therapy platform accounted for approximately 55% auto unit volume for the quarter.
The <unk> accounted for the remaining 45%.
As Josh highlighted earlier, we saw a strong innovation driven order momentum during the second quarter, while we saw a significant year over year order growth for both synchrony on <unk> as well as cyber knife at seven.
Net age outs for the quarter were $35 million and included $13 million of age and the activities during the quarter.
As expected, we saw a higher than normal level of age outs during the quarter as timing of revenue conversion was impacted by the pandemic in all regions with the exception exception of China.
However, $13 million of age ins during the quarter represented the highest quality agent activity we've ever reported.
Although the depth and extent to which COVID-19 will impact individual markets could vary based on the number of factors, we expect to see of higher than normal level of the age outs for the second half of this fiscal year due to this pandemic driven timing disruption.
During the second quarter, we had no cancellations and FX and other adjustments totaled approximately $2 million as a result on the net basis, we generated $42 million of orders in the second quarter.
We ended the second quarter with a backlog of $596 million, which is an increase of approximately 11% from December 31 2019.
Turning now to our income statement.
Total revenue for the second quarter was $97 $5 million and included a significant year over year increase in China's system revenue, which was offset by year over year revenue decline in other regions, primarily due to the impact of the pandemic.
Product revenue for the quarter was $41 $8 million and included $21 million of system revenue to China, all of which $18 million for type a products.
From a product mix perspective, cyber knife of accounted for approximately 30% for the quarter's revenue unit volume.
While the tomo therapy platform accounted for the remaining 70%.
Service revenue for the quarter was $55 $7 million, an increase of 1% from the prior year.
Turning now to gross margin of all.
Overall gross margin for the quarter was 41, 9%.
Compared to the 30 compared to 38, 4% in the prior year.
Product gross margin for the quarter was 44, 7% compared to 44% in the prior year.
The second quarter product gross margin represented a meaningful sequential improvement from the first quarter of product gross margin of 41% as we saw a higher mix of Simon op units during the quarter.
Service gross margin for the quarter was 39, 8% compared of 33, 9% in the prior year.
As a reminder, prior year of Q2 services margin included the impact of higher than normal level of service parts consumption.
Our operations of service teams have done a great job of normalizing parts consumption in the past four quarters, which contributed to the material year over year improvement in service gross margin.
Additionally, Q2 services margin benefit from higher upgrade revenue as well as continued the benefit from reductions in trouble and other operating cost due to the pandemic.
Moving down the income statement operating expenses for the quarter or $32 6 million.
A decrease of $1 6 million or 5% 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 positioning of eliminations as well as curtailment of costs associated with the impact of COVID-19 per.
Particularly travel marketing events and related expenses.
As we look forward to the second half of this fiscal year, we anticipate our quarterly operating expense run rate will start to normalize in the range of 35 of the $47 million.
As we restore sort of expenses and continuing to invest in our R&D pipeline.
In addition, the higher operating expense run rate in the second half of this fiscal year is consistent with the seasonality we have seen in the past fiscal cycles.
Operating income for the quarter improved $4 $6 million to $8 2 million compared to $3 $6 million in the prior year.
This represented the fifth consecutive quarter of GAAP operating income generation and we have generated $27 million of operating income for the trailing 12 months period measured it from December 31 2019.
While operating income benefited partially from cost management actions taken in response to the pandemic.
We expect our improved operating leverage will position us well in the post COVID-19 environment.
The operating impact of the China JV for the quarter was an income of $1 1 million.
This item has been reported on our income statement as a single line item called gain or loss on equity investment right below operating income line.
As of our China joint venture continues to ramp its operational and commercial activities to the.
Expect our share of JV, the quarterly income of loss will.
We will continue to fluctuate in the near term and.
And do we expect out of share of <unk> operating impact will be a small loss in the second half of this fiscal year.
Adjusted EBITDA for the quarter was $13 $5 million compared with the $7 $1 million in the prior year.
On the trailing 12 months basis, we have generated $44 million of adjusted EBITDA.
The adjustments between GAAP net income and adjusted EBITDA outlined and quantified in our earnings release issued today.
Our cash and short term restricted cash position improved $7 million from the start of this fiscal year to $116 million as of December 31, 2020, despite paying down $10 million of term loan as the team continues to focus on managing our working capital.
We also generated $15 million of free cash flow in the first half of this fiscal year.
As we look ahead to the second half second half from revenue front.
We remain cautious on revenue conversion timing given the current state of the pandemic. Although we believe the visibility we are gaining on China type a revenue conversion will soften the potential impact of the pandemic driven timing disruptions.
As we manage the near term of headwinds in revenue from version we.
We are continuing to focus on operational efficiency.
Many of the investments in innovation margin expansion and working capital management.
We also focused on inventory of supply chain management as we execute on China type a revenue from version, while maintaining appropriate levels of inventory.
With that we're ready to open up the call for your for your questions operator.
We will now begin the question and answer session to ask the question you May Press Star then one on your telephone keypad. If you were using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press the Star then two at this time, we will pause momentarily to assemble our roster.
Okay.
Our first question comes from Josh Jennings with Cowen. Please go ahead.
Hi, guys. This is actually Neil on for Josh Thanks for taking our questions.
The first question I had was just.
I guess around clear arty.
None of it.
Crude could you maybe just lay out kind of out of high level, what the path forward is towards having.
It's a broader adaptive therapy solution.
What the steps would be to get there.
Sure Josh.
Suzanne.
Little bit about our phased product introduction, we shipped to our clinical sites for our phase one part of the introduction, we're getting feedback from our clinical sites. Then we will go to a broader introduction in Q4.
And we hope to follow up with the CE Mark and is shown in some of that we can address broader markets clear our team is really going to be the fundamental difference.
And backbone of any adaptive therapy that will be developed in our innovation pipeline.
One of the things, we've certainly been watching to take a look at existing adaptive therapies that are out there now and still very well a good idea and a good first half of them at adaptive therapy changes.
It still is burdensome from of workflow standpoint, and also very resource intensive so from that standpoint, I think we are happy to be a fast follower here and take a look at what we can improve on on the next phase to ensure that it is not clearly adopted.
By clinicians.
Great Thanks for that.
Just a second question.
Just in terms of the the.
The joint venture.
The sales force team and leadership, that's currently under the IRC, how has that I guess position versus the prior distributor sales force.
In terms of offering the.
Current type of the offerings for <unk> and tomo ph.
Our thought is that.
That would be the stronger effort versus the.
The prior but just one of the sanity check that.
We agree aneel.
So.
Again the.
Appreciate it.
Legacy distributor <unk> has done a terrific job looking back over the years of positioning our brands.
What CRC as the joint venture partner really brings us as strategic market access in a pretty powerful way as you've heard us talk about they are.
Market, leading company in medical radio isotope production and sales and they've got active customer relationships.
The seven or 8000 hospitals across the country.
So they are a both a manufacturing partner for us in terms of the on the ground products being produced on the type B and intangible but they also are we think of a very powerful.
Our partner in the context of commercial activity strategic market access.
And visibility if you will.
Across more than just the major population centers because of kind of the big the big upside here for us when we think about the type b products is the opportunity that exists in small to medium sized facilities out of the provinces and that's where CRC has an existing strength in terms of market position customer relationships that will.
Very valuable in the context of <unk>.
Helping us ramp up the type b products.
Great. Thanks, that's it from me.
The next question is from Brooks O'neil with Lake Street Capital markets. Please go ahead.
Good afternoon, everyone and congratulations on the well.
But I think it's a terrific quarter in light of the challenging conditions.
Thanks Brooks.
I was hoping to just get a little color obviously.
We see the Covid impact.
Underlying some of the numbers. So if you could just maybe your Suzanne Josh could walk us around the key markets outside of China in terms of what Youre seeing right now and then the <unk>.
Typically I am I'm curious about the U S market and how you see the impact of the pushout of the APM.
The started the next year.
Because of the business in the next 12 months.
Brooks, it's Josh I'll take those.
So of Covid, let's just start.
The start at home so to speak in terms of the Americas region, primarily being U S vs.
We were in a word of different place than we were.
Let's say during during the summer or at the end of the summer when hospitals had been locked down for a period of time in some cases, an extended period of time and then we are opening back up last late late summer of I'll call. It early fall.
We have not seen a widespread visibility of lockdowns in the U S market.
Similar to the that existed last year. So I don't think were at least by visible signs, we're not there where we were last year.
With that said this is the.
The intensity of the Covid cases, and ICU capacity varies pretty highly from.
Area to area or region to region across the country.
And.
There is that.
The ability if you will really kind of makes it difficult to identify and of broad sense.
Painting painting, an outcome of a recovery.
Timelines to.
With the single brush so to speak.
I think that if.
The one thing I can confirm is.
The cancer cancer patients are being treated.
<unk> heard us say before the cancer has not taken the vacation for the Corona virus and that is still very much the case and we.
We have active.
Active patient treatment, taking place in our installed base throughout the country.
And so there is really it's a.
I think that it's likely that we will continue to see let's say for the first half of calendar 2021 a M.
The slowdown in a continued slowdown in terms of timing.
Or go slow approach from an order activity standpoint.
And I would say what I just described for the Americas region is reasonably similar in the other developed markets. So I would say fairly consistently similar with regards to western Europe, the eurozone markets, primarily and.
So I would say the the Americas and EMEA are kind of in that same place.
We talked of in the prepared remarks about order activity in Japan, which is really showing.
Remarkably robust I think a true.
Trajectory of at least backdrop again, given an environment, where there is there are seemingly is challenged with the COVID-19 situation as anywhere else geographically, but there are clearly decisions being made there with regards to allocation of resources around capital expenditures et cetera. So we're encouraged by that.
The second part of your question I believe Brooks was around the APM model and while we are where we.
We understand the reasons behind the delay of implementation for the APM model until January of 2022.
We don't think it affects longer term the overall trajectory or the impact that that decision will have on our business you've heard us talk about before the fact that you know.
The business is coming based on the reimbursement changes the business is moving in the direction of Hypo fractionation and ultra hyper fractionated treatment delivery, our portfolio is getting stronger by the quarter.
As you've seen the cadence of new innovations that we're launching and we think we're extremely well positioned going forward in the context of the environment that the APM.
The implementation will continue to or impact in a in a.
A positive sense relative to.
Its impact on us.
That's great that's great color, if I could just ask a second probably a two part question I apologize but.
Can you give us a little a little more color on the.
The China revenue.
How many systems kind.
What do you expect over the next few quarters of the type B side.
I know you mentioned the commentary about the joint venture production.
The 12 to 18 months out.
Do you expect any milestones on the.
Type b side in the.
The next day 12 months.
Yeah, Okay. So on on the quarter.
We just reported we took four orders.
On the order side from the China JV, they were to Taipei and to type B on the revenue side in the quarter, We book nine nine.
<unk> systems, seven where type day, two we're type b and of the seven that we are on the revenue side that we booked.
<unk>.
I know I know, we had seen the cyber knife and total therapy and <unk>.
Products as well as to tomo wage devices on the type B side. So you know as we've talked before it's not it's not as if we don't have anything to sell in <unk>.
Spots of the market with regards to type B today, we've got on Red We've got TAMO H both of our active in the qualification universe. If you will of the type B of approved products. So we're continuing to see some activity there and I would expect that that will continue.
Which will be helpful quite frankly until we're ready to have our Tianjin produce products coming out of the factory with the CRC in about 18 months.
Great any color on type B I mean would you expect from type b in terms of orders ramping up or whatever.
Well I mean again, we're taking type of orders today with our current product offerings. So the the products that I mentioned before <unk> are are active.
They are in the the approved products list for type B.
The the JV and our dealer network. There are actively taking and can take orders for those products and they are doing so and as you saw in the <unk>.
And it's been fairly consistent over the last year, or so or 18 months, where we.
We're showing again, it's admittedly modest unit volume level, but we're not a we're not of non presence. If you will in type b today.
And we will continue I would imagine brooks at that pace or cadence if you will.
Until we have our own products.
Produced the China produced products available and not at about 18 months.
Okay. That's great. Thank you for taking my questions sure.
The next question is from Murray to vote with BT Iga. Please go ahead.
Hi, Congrats on the strong quarter I may start with a follow on the Brooks' question about the China of revenue.
Wanted to get a little more insight into.
How you envision I guess kind of the cadence of some of this rolling out I know you said that there is the total value of $150 million of those orders. So how we should think about kind of the lumpiness or not lumpiness of that revenue recognition as well as kind of the second tranche.
Of awards that you also have in hand.
Hey, Mark Thanks for the question I'll take that and.
Yeah, So again.
We're not going the other to give us specifics on quarterly cadence, but as we said earlier.
We think it's going to be a rollout of the remaining revenue out of the hunting of $50 million, we talked about over the course seven next 18 to 24 months now to Joshua mentioned, we shipped $18 million of Thai day, which was part of the $21 million we talked about.
And so.
What I could probably say is.
Is it going to be.
The big fluctuation from quarter to quarter in next few quarters went out seeing the unnecessarily, but again, we do expect.
The amount of the revenue number of units share from quarter to quarter very so I'll just leave it as that Murray.
Okay clear enough.
That and then perhaps you could talk a little bit about the replacement tailwind.
Certainly been vocal about the.
Oh, the age of your installed base, So I'd love to hear what you're hearing from some of your legacy customers, who are thank you bought replacement than possible timing on when we may see some of that start to turn in the bigger way.
Yeah, Marie we started to see some of the tailwind even this quarter at 26% of our total orders were trade in trade up and I think you know we're excited about the response that we're getting with the introduction of clear our T M.
So I think that with synchrony is providing a really good.
Rationale for our customers to make the investment to upgrade so.
We only expect as we move forward that you know that percentage may increase as well.
Fantastic. Thank you.
The next question is from Anthony Petrone with Jefferies. Please go ahead.
Hi, Thanks, maybe a couple of one on China. The stay there and then and then a couple of Covid.
On the on the I'm going to shift to the spend side, Josh and Chegg just on China on the JV you mentioned recently at the Jpmorgan Conference you want to add up to an additional 100.
The head count to the to the 100 basis get up to 200, but fiscal 'twenty three.
I'm just wondering what the cadence.
Of adding those.
Adding to the infrastructure is through 2023 should we expect the bolus near term.
Or will it be sort of evenly low.
<unk> through 2023.
And then I'll have two follow ups.
The Anthony I'll take that question. Thanks for the question and I think what we see as more of the even.
Even glad you'll have built all of that additional head count at the JV level and just to remind you.
As they get added to the JV operations. They don't run through our our expenses, it's not going to show up as the accuray's P&L expense in Cogs or Opex.
Rather the impact of that for us should be picked up through that point of 9% equity interest pick up towards the bottom of the income statement. So I just want to make that clear.
And I guess from the next question.
Sure, Yeah, and again, well one would be on on the the the head count adds of Manhattan fully understand that theres the ownership in the JV, but the funding of the new head count.
Maybe just the.
Refresh on how actually the funding will go and how the.
The funding of growth of the JV will yes, Brian yes.
Yes at this point of the best way to think about how to fund that at the JV level is that there are self funded.
And so the initial capitalization was completed.
When we formed the JV effectively.
As you recall of our partner provided the cash capital we provided the in kind of capital. So they are fully capitalized and they're going to fund additional head count through their own operations. Anthony We don't really don't expect any any incremental or surprise capped.
<unk> calls.
From where we sit today I mean again, which should just highlighted I think is is our strong belief very confident belief that this is.
Self funded on there and just to be more of a little bit more granular.
Most of if not the vast majority of all of the commercial.
Operational side of the let me backup commercial piece of the infrastructure is actually in place today.
Full full.
Of representation, if you will on the on the strategic marketing side.
And sales and marketing side in general I think the head count that Youll see added over time now is really more on the operational side with specific emphasis on the manufacturing operation and perhaps the regulatory <unk>.
The regulatory manpower in efforts related to product registration.
Registration approval and pilot manufacturing qualification and validation approval. So by functional area, it's really heavily index to more of the ops the manufacturing the opposite regulatory piece.
Okay.
The follow up here would be also just the I guess on the multiyear outlook from a segment basis.
Can you sort of had material out there, suggesting this kind of sort of.
Approach, the 4000 linac opportunity in China.
How about 2026, when you back out the.
The existing tender.
Both the 2018 and I guess, the prior 2015 tender Youre looking at.
Almost 2000 additional units and so when you sort of think about debt multiyear opportunity where does the confidence come in in that outlook.
What is the expectation.
For a follow on tender from the 2018 one.
In terms of the timing.
Well I mean, I think if you look at traditionally how the government the central government handles the five year planning process. The 14th five year plan is probably in development and active.
<unk>.
The process, if you will from of development standpoint, as we speak.
I can't predict when it would be announced obviously, but.
We certainly believe that there are we know that there are on the Thai base side at least another call. It in round numbers maybe.
1995 additional type a.
Devices that were identified in the original quota that will probably rollover.
Certainly rollover into the next five year plan if they are not captured in this five year plan.
We also know that as we mentioned in the last earnings release.
We believe that applications have already been.
<unk> captured online in the central government's Ministry of Health application electronic application process that would indicate that there are there's a third batch of pipe.
Licenses that have been applications have been received for and not yet announced which we believe.
Likely will occur sometime maybe in.
April may kind of timeframe, but.
As you were talking about the big upside here is type B and.
There would be.
I think every bit of the the the same kind of.
Unit volume quota.
The impact that we saw in the original quota announcement.
<unk> was something that had been in round numbers ultimately increased about 1400.
The type B type b.
Devices in the type of quota, we would think that their debt.
At least that many would be represented again in the next five year plan. So.
The magnitude of the market opportunity in China is it can't be overstated.
And the fact that we have we still believe of very unique strategy.
The strategy in terms of our participation in that market and the value of our core segments of the market opportunity. There is what gives us quite frankly of the confidence to feel like we're on the right path.
With that I'll leave it there thanks.
Again, if you have a question. Please press Star then one.
The next question is from Jason Wittes with Northland. Please go ahead.
Hi, Thanks for taking the questions just more questions on China, you gave some indication in terms of.
What the comp was for China revenues last quarter or the year ago quarter.
Could you tell us what the comp is for the upcoming quarter and for the year for China revenues.
Yes.
I think we referenced orders against the prior the prior year and I am sorry orders if you could yeah.
Yes so.
What I said I think Jason was last year.
She has to re spin.
Within the segment.
I believe.
Sure.
Last year Q suite of something like a $25 million of type of orders last year Q3, so that would be a tough comp for US again. This year I mean, just next quarter excuse me.
Good morning commentary I think.
Could you also add revenues I mean, you did provide revenues for this quarter. So I'd be curious to know what the revenue contribution was for next quarter for the year.
Just so we can kind of track.
Track, the progress of China, which I think is.
At least of the way I'm, a pretty critical to the outlook for I guess most of us here.
So again I don't think we specifically talk about China revenue contribution in the context of the last year Q3, Jason by the way to think about it is we had a small units of a b or b units in the last year Q2. So we're talking about the last probably mid single digit China revenue last year Q3.
Okay.
And I guess, that's kind of the tone for the.
I look at last year that was the tone of probably the car.
So if somebody of the mid single digits as it does that range is that the right way to think about it that's the way to think about it because again you know we didn't have a type of revenue as we are waiting for the.
The tender to complete so we had a small contribution from b units.
The second half of last last year. So that's the way to think about it.
Okay.
And then looking at the P&L I guess, you're indicating that the opex is going to go up in the second half.
I assume that's more in the fourth quarter in the third quarter.
But I also can we assume that this is going back to sort of post COVID-19 levels or is this still going to be.
In those numbers as you described is there still a pretty pretty large COVID-19 impact on the expected in those numbers, yes. The answer the question Jason So.
The cadence of Q3 versus Q4 Youre correct.
I would expect the Q4 to be higher than Q3, which is the.
The seasonality of that we always saw in the past fiscal cycles and I think the way we think about in the second half run rate I said $35 million to $37 million per quarter.
It is the moment normalizing back to what we were of pre Covid and.
The best way to think about this Jason is that.
I would compare.
The annual run rate to what we had in FY 19, which of the full pre COVID-19 fiscal year, when we incurred a $162 million of.
M <unk>.
The opex for the entire year I would say when we start to 135 to 37 in the second half of this year and that would probably equate to the annual run rate or something like $144 million or something like that which implies that we are still operating even know after normalizing coming out of Covid. It was probably still operating about 10% below.
While we were in terms of Opex pre COVID-19 the cycle.
Yes, Okay. That's helpful.
It scares and Oh inquiry Archie Josh. Thank you you got to approve congratulations but does seem pretty incremental but it sounds like it's gonna be a controlled launch initially is that the way to think about it and when do we when does it sort of go fully fully out to the field I guess.
Yes. So it is the phased launch and again, we're in phase one of the lines, which is sending to us.
Some of the installations going very well.
And we're at the point of just getting clinical evidence as well of finalizing final product parameters and then we'll go to a full launch which will be in the Q4 timeframe.
Q4, okay.
They are older.
The older Red ex <unk> machines, upgradable to clearer and clearer to you as well and could you give us an indication of kind of what the.
Price bump is for clearer Archie.
Yes.
Is it clear our team will be available to the rat exact installed base of an upgrade and it's also available to add new tomo therapy customer there'll be an upgrade trade in trade up price.
Two of the latest version with clear our team.
Yes.
So if I haven't heard of a I.
I guess, the if I ever current system without the without clearer to you is it just an upgrade right it's not a replacement.
The customer yes, it's an upgrade.
And do you have an indication of kind of of what the ASP is for an upgrade.
Jason not yet on the clarity so.
We're probably in the next few months ramping up on commercial activities. So I think of it should be it the talk about the little bit more of them.
Okay, and then also just related to that I assume that upgrades aren't gonna be available till that Q4, one of the full rollout that comes through or was it. The other way we think about it okay.
Last question just.
If I think about you know obviously, we're very focused on China here, Japan, obviously came in very nicely as well.
In terms of more established U S and European markets.
It sounds like the tone is that Covid is still largely impacting both the performance there but also.
Just kind of the visibility for the moment is that is that the right way to think about it.
I would say that that's a fair representation I think I think it's important to note, though Jason that we're not seeing orders cancel out of the backlog. Okay. So we're not we are not again, if you think about where where the market was going back to last summer.
Even into in some places in the early fall.
I don't I don't see today in the developed markets. So call. It in the U S and Western Europe, I don't see that that level of again, there isn't any visible signs of AR.
Wall-to-wall locked down in hospitals today.
What's happening is timelines of pushing out so timelines on projects that are already teed up orders in the backlog.
Timing for revenue conversion is pushing out.
Again highly variable from institution institutional region to region.
But obviously, we are we're staying close to all of those customers and we are ready.
To begin installation and push the go button on any of the or all of those projects that customers are when they give us the sign that they are ready to go we can react quickly so.
But I think I think as you.
You've described it that would be a book.
A good representation in terms of how we're how we're thinking about it relative to impact.
Okay. Thank you that's very helpful I'll jump back in queue the excellent guys.
This concludes our question and answer session I would like to turn the conference back over to Josh Levine for any closing remarks.
Thank you operator in closing we are pleased with the progress we see occurring with the business. Despite the challenging environment and we're strongly focused on taking advantage of the anticipated growth catalysts and opportunities we have in front of us during the fiscal third quarter, we of a number of investor conferences that we look forward to participating in including the <unk> healthcare.
Conference in February and the Cowen Health Care Conference in March.
Lastly, we intend to report our fiscal 2021 third quarter results at the end of April thanks to everyone listening into today's call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.