Q3 2021 Accuray Inc Earnings Call
Good afternoon, everyone and welcome to the Accuray reports third quarter of fiscal 2021 financial results Conference call.
All participants will be in a listen only mode should you need assistance. Please see the old conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star and then why do you think you touched on the telephone. So withdraw your questions you May press star and two.
Please also note today's event is being recorded.
At this time I'd like to turn the conference call over to Ken <unk>, Vice President of Finance and IR. Sir. Please go ahead.
Thank you Jamie and good afternoon, everyone. Welcome to Accuray's Conference call to review financial results for the third quarter of fiscal year 2021, which ended March 31st 2021 day.
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, Shake Hamamatsu, Accuray's, Senior Vice President and Chief Financial Officer, and Suzanne Winter Accuray's.
Chief 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 for.
Factors that could cause of these results to differ materially are set forth in the press release 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, except to the extent required by applicable securities law Accordingly.
You should not put undue reliance on any forward looking statements.
A few 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.
All references we make two of specific quarter in the prepared remarks are to our fiscal year quarters. For example statements regarding our third quarter refer to our fiscal third quarter ended March 31 2021.
Finally, there will be a slide presentation accompanying this call, which can be accessed on the link provided in today's earnings release or by going directly to accuray's investor page at Accuray Dot com.
With that let me turn the call over to Accuray's, President and Chief Executive Officer, Josh Levine, Josh. Thank you, Ken and thanks to everyone joining us on today's call Acura.
Accuray's fiscal 2021 third quarter performance continues to reflect the positive momentum of our businesses, making despite the headwinds created by the COVID-19 environment.
The highlights from our third quarter include the continued conversion of China type a system revenue excellent progress in the phased introduction for our clear our T. Helical KBC P imaging upgrade on riders act, including regulatory approval for that in Japan, and the continued adoption of our latest innovations like synchrony real time motion.
Tracking and delivery adaptation on Rattus Act and our latest generation cyber knife at seven system.
Revenue for the quarter came in at $102 $6 million, which was an increase of 3% from the prior year.
Overall fiscal Q3 revenue included approximately $25 million of China related system revenue, consisting of nine type a and one type of systems.
The third quarter quarter saw continued execution related to China type a revenue conversion, while the number of type a system shipments will vary from quarter to quarter. We expect revenue related to the remainder of type a licenses will be recognized over the course of the next several quarters.
Regarding the type B product segment, our China JV continues to make operational progress in advancing the manufacturing validation and qualification process and we believe that we are on track to have our China manufactured type of product ready for market introduction in approximately 15 months.
Gross order volume for the quarter was $87 $4 million, which included 37 system orders was up $12 million of 16% sequentially from prior quarter and in line with our internal expectations.
Despite the COVID-19 headwinds, we saw positive order growth in Japan, and EMEA, where gross orders grew 19% and 7% year over year, respectively, primarily driven by strong demand for <unk> as well as the adoption of new technologies like synchrony on <unk>.
On a global basis, approximately 44% of new <unk> orders during the quarter included synchrony as an option, which is of significant increase from the prior year and we believe demonstrates the growing clinical value of synchrony as proprietary real time motion tracking and delivery adaptation capability.
With respect to the cyber knife platform, 57% of the quarter cyber knife orders and 73% of cyber knife orders year to date consist of our latest generation of seven platform, indicating continued strong customer uptake related to this product launch. Additionally.
Additionally, we continue to see solid performance in trade in trade up orders, representing 22% of global orders in Q3 with the strong percentage of the product mix in our developed markets like EMEA and Ams, where we are targeting older systems for upgrade to our latest generation cyber knife and <unk> platforms.
From a financial perspective as mentioned in our last call with the increased EBITDA. We are generating we have started to increase our investments in R&D in the third quarter and expect this trend to continue into the fourth quarter as we adjust our R&D investment run rate back to pre COVID-19 levels.
On the product innovation front, we are seeing early order momentum from clear Rte helical KBC imaging on the <unk> platform gaining for orders for clear our T. As an option on <unk> X systems, and 10 upgrade orders for existing installed base systems.
Additionally, we are excited about the feedback from our initial clinical evaluation site, where the staff is successfully treating patients guided by high fidelity helical KBC images.
Our clear art imaging upgrade provides improved the ability to visualize both the tumor as well as surrounding healthy tissue, allowing the staff the plan and deliver the highest quality treatment plans with confidence and precision.
Quoting Dr Lane Rosen director of radiation oncology at Willis Knight Cancer Center, who is our collaboration partner <unk> exceeded our expectations and provided noticeably superior image quality compared to the cone beam <unk> systems on our conventional linear accelerators, we believe the <unk> system and clear <unk> imaging.
<unk> will allow our team to improve the care, we provide our cancer patients significantly.
From a regulatory clearance perspective during fiscal Q3, we received additional market clearance with shown on approval for <unk> in Japan, and we believe we are on track for CE Mark certification sometime in our fiscal fourth quarter.
With these additional clearances, we believe that are clear on imaging upgrade remains on track for a broader global commercial launch in our fiscal fourth quarter.
The importance of the clear RT introduction on <unk> cannot be overstated in terms of clinical impact and expanded clinical utility.
In order to provide a sense about the overall image quality of clear RT and how it compares to the diagnostic C. P. I have of visual to share as I walk through my prepared remarks.
This slide contains a set of same patient images courtesy of the team at Willis Knight Cancer Center, our first clinical evaluation site the.
Of the image captured on the left was acquired using clear Rte helical KBC the imaging and the one on the right is from of diagnostic C T.
Clinicians, who see these images find it difficult to discern the difference.
The diagnostic CP clear Rte helical KBC has excellent uniformity across the image accurate spatial resolution and provides easy visualization of low contrast anatomy throughout the largest field of view available in the market.
For background, unlike conventional cone beam Cts clear our T does not suffer from noise in the image that can obscure of critical anatomy.
And unlike the MLR images clear our tea is not hampered by deformation of structures within the image, which can make accurate patient setup and adaptive workflows very challenging.
Finally clear RT acquire these high quality images fast less than 20 seconds for standard scan link and only one minute to scan of full meter and patient dose exposure is very low basically one to three gray depending on the area of the image.
As shown on the sample images clear RT combines the <unk> system's unique physical platform architecture with KBC imaging capability, which provides near diagnostics <unk> quality image resolution. Additionally.
Additionally, <unk> unique architecture provides the largest transfer of field of view on the industry and Mary's It with best in class image acquisition speed that allows clinicians to quickly and efficiently acquire uniform high quality images during the treatment.
<unk> represents a significant improvement in imaging capability over conventional cone beam and when added to <unk> other unique capabilities like synchroneyes proprietary real time motion tracking and delivery adaptation capability. We believe it makes <unk> a truly unique highly versatile and.
The efficient workhorse platform for radiotherapy departments, both large and small due to its competitive total cost of ownership.
Turning to our cyber knife platform. We are very pleased with the continued demand for the cyber knife edge seven specifically in healthcare systems that are building world class Srs and <unk> programs offering ultra hyper fractionated treatment for their patients.
During the quarter, we received the <unk> seven orders at the China International import Expo, including the PLO General Hospital, where this specific at seven order represents the third cyber knife system at their facility.
Additionally, we had the first installation of the S. Seven in Japan this quarter at Kumamoto Radiosurgery clinic and in the U S at Mount Carmel Health in Columbus, Ohio, which is part of the alliance oncology network.
The <unk> S. <unk> unique non coplanar delivery combined with synchrony motion tracking and real time adaptation provides the highest level of precision needed for higher dose SPR T treatments with treatment times under 15 minutes.
Recent retrospective study published in the February 2021 publication of frontier in oncology demonstrates significantly fewer grade three and above toxicity outcomes for patients treated with cyber knife and synchrony.
Accuray has been a pioneer in the development of high precision technologies that enable hypo and ultra hyper fractionation and we believe that the innovations we are bringing to the market like synchrony and clear arent tea on Rattus Act and cyber knife edge seven will be catalysts for long term growth and ensure that our differentiated radiotherapy platforms.
Maintaining our position as the gold standard choice and Hypo fractionated SP as of Srs and <unk> treatments.
Highlighting news from our press release, we put out yesterday, we are pleased to announce that Dr. John Felipe <unk> has joined the accuray as chief Medical and Technology Officer.
In this role Dr. <unk> will serve as a member of the company's executive leadership team and will lead the company's scientific and clinical research functions work to develop strategic collaborations with global key opinion leaders that support technology assessment and development activities.
And serve as our executive representative with important industry partners, including medical societies, and regulatory and legislative agencies that influence healthcare policy and reimbursement.
Dr. <unk> is a globally recognized and respected board certified radiation oncologist with both at M D and a Phd in nuclear physics from University of Louis Pasteur in Strasbourg, France.
We are thrilled to have John Felipe as part of our team and look forward to leveraging his expertise to expand accuray's impact and the global radiation therapy market.
Looking back over the past 12 months to 15 months clearly the COVID-19 challenges have created headwinds for many companies and Accuray has been no exception.
Despite these challenges accuray has navigated through this period comparatively well and I believe we are emerging from the COVID-19 pandemic a stronger company overall.
We have an improved product portfolio with meaningfully differentiated technology upgrades that we believe will allow us to retain our installed base of customers and compete more effectively for new bunkers going forward.
In terms of existing growth catalysts, we are seeing the tangible revenue impact of the China type a radiotherapy opportunity that we've been working to activate for quite a while.
Directional line of sight in our fiscal Q4 to continued commercial momentum.
From a financial perspective as the result of actions we took at the outset of the pandemic, we are showing an improvement in financial leverage and a stronger cash position.
Lastly, and perhaps most importantly, we are a vastly improved very focused executive leadership team that we firmly believe is positioned to effectively execute our strategic growth agenda going forward.
And with that I'll turn the call over to ship to review, our Q3 financial results in greater detail.
Thank you, Josh and good afternoon, everyone.
I will begin with some additional details on our financial performance for the third quarter and then focus on certain the highlights for the period.
Gross orders for the third quarter were $87 $4 million on increase of $12 million or 16% from the second quarter, but down from $106 million in the prior year third quarter as we continued to see some headwinds due to the pandemic, particularly in the Americas region, which has the.
Effect of the timing of order placement in the near term.
In terms of the sequence of increase from the second quarter of this fiscal year. It was driven by double digit order growth from each of the regions outside of the Americas.
From a product mix perspective the.
Tomo therapy platform accounted for approximately 80% of auto unit volume for the quarter.
And Simon I of accounting for the remaining 20%.
As Josh highlighted earlier, we continue to see a strong innovation driven auto momentum during the third quarter as we saw a significant portion of our gross orders included synchrony on VAT is act as well as cyber knife as set them.
Additionally, when you see the first batch of clear or the orders as we executed well on its phase commercial launch.
Net age outs for the quarter was $16 million and included $9 million of the aging activities during the quarter $7 million of which related to China type a orders previously aged out.
Although the depth and the extent to which COVID-19 will impact individual markets because of the vary based on a number of factors, we expect to see a higher than normal level of the age outs in the near term due to this pandemic driven timing disruption.
During the third quarter, we had $8 million with cancellations and the FX and the other adjustments all of the zero point $6 million as a result on the net basis, we generated $62 $8 million of orders in the third quarter.
We ended of flow quarter, where the backlog of $611 million, which is on increase of 7% for March 31 2020.
Turning now to our income statement.
Total revenue for the second quarter was $102 $6 million on increase of 3% from the prior year as we continued to execute on our revenue ramp related to China type a systems.
Revenue for the quarter was $47 $4 million. It included $25 million of system revenue to China, all of which $23 million for type a products.
From a product mix perspective, <unk> accounted for approximately 30% of the quarter's revenue revenue unit volume, while the tomo therapy of platform accounted for the remaining 70%.
Service revenue for the quarter was $55 $1 million on increase of 2% from the prior year.
Turning now to the gross margin.
Our overall gross margin for the quarter was 38, 6% compared to 39, 3% in the prior year.
Product gross margin for the quarter was 41, 6% compared to 39, 4% in the prior year.
The improvement in product gross margin for the prior year was primarily driven by a higher mix of cyber knife units during the quarter in connection with China type a revenue ramp.
Service gross margin for the quarter was 35, 9% compared with 39, 2% in the prior year.
The lower service gross margin for the quarter was primarily due to two factors that are considered the infrequent in nature.
First as we announced back in the last November we have partnered with DHL to upgrade our global service parts of the logistics that is expected to further strengthen our after market supply chain and expand the company's high quality customer service service globally.
The installed base continues to grow.
During the quarter, we incurred certain investments in connection with the going live with this new logistics platform.
While this investment negatively impacted our service gross margin for the third quarter, we expect to realize meaningful benefit both operationally and financially in the future periods.
From the new platform.
On other items that negatively impacted third quarter service gross margin related to a bulk sale of service parts of China, JV for which we were required to defer recognition of a portion of gross margin until future periods, given our ownership in the JV.
This is purely a timing issue as imposed by the JV accounting rule and we expect to recognize the margin deferred this quarter in the next couple of quarters.
On the JV consumes the parts sold.
As the JV continues to ramp its system installation and service activities, we may see similar for.
<unk> margin deferral from time to time in the future.
Excluding the impact of these two infrequent items out of service gross margin for the third quarter would have been approximately 38%, which is more in line with our historical range in the high Thirty's.
Moving down the income statement.
Operating expenses for the quarter was $35 1 million on the.
Lease of $2 5 million sequentially from the second quarter as we started to see normalization of certain expenses as previously anticipated.
As compared as compared to the prior year, the third quarter operating expenses increased $4 million or 13%.
As a reminder of the prior year operating expenses included a one time benefit of the bonus accrual reversal of $4 $5 million.
Which was part of the cash preservation actions, we took in response to the pandemic.
As we look forward to the fourth quarter, we anticipate on a quarterly operating expense run rate to continue to normalize in the range of $38 million as what his thoughts on expenses and continued to invest in our R&D pipeline.
As mentioned in our last call a 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 was for $4 million compared the $8 million in the prior year adjusted EBITDA for the quarter was $8 7 million compared to $11 3 million in the prior year.
The prior year third quarter, GAAP operating income and adjusted EBITDA, both benefited from a onetime favorable impact of $4 5 million bonus accrual reversal.
On a trailing 12 months basis.
Through a milestone of one 2021, we have generated GAAP operating income of $23 million and adjusted EBITDA of $41 million as we continued to demonstrate our ability to consistently generate profits and positive cash flows using our operating leverage.
The operating impact of the China JV for the quarter was a loss of zero point of $1 million.
This item is being reported on our income statements are the single line item called gain or loss on equity investment right below the operating income line.
As our China joint venture continues to ramp its operational and commercial activities. We expect the we expect out of share with Jbs quarterly income of loss will continue to fluctuate in the near term.
On a cash and short term restricted cash position improved $21 5 million from the start of the fiscal year to $130 million.
As of March 31, 2021, despite paying down $10 million of term loan as the team continues to <unk>.
<unk> focus on maintaining on working capital managing our working capital.
We also generated $31 million of free cash flow in the first nine months of this fiscal year.
As we look ahead to the fourth quarter on revenue front, we remain cautious on revenue conversion timing given the current state of pandemic. Although we believe the visibility we are gaining on China type a revenue conversion was soft on the potential impact of the pandemic driven timing disruptions as we manage the near term headwinds in revenue for <unk>.
We plan to continue focusing on operational efficiency investments the innovation.
Margin expansion and the working capital management.
We are also focused on inventory and supply chain management as we execute on China type a revenue conversion.
While maintaining appropriate levels of inventory.
With that we're ready to open up the call for questions operator.
Ladies and gentlemen at this time, we'll begin the question and answer session.
Once again in order to ask a question. Please press star and then one.
To withdraw your question you May press star into.
If you are using a speaker phone we do ask you. Please pickup your handset before pressing the keys.
Once again that is star and then one to join the question queue.
Our first question today comes from Josh Jennings from Cowen. Please go ahead with your question.
Hi, good afternoon, gentlemen, thanks for taking the questions.
I wanted to start off just share your last kind of segment. There you know prepared remarks talking about the headwinds and revenue conversion out.
Outside of China, but China, obviously type a license from the conversion of being.
Super strong.
Buffering.
The revenue conversion of disruption caused by the pandemic can you help us understand I know that it's a wildcard scenario two degree in terms of trying to predict but the the backlog that could have converted to revenue here in fiscal <unk> and fiscal Q4, and then in the in the fiscal 'twenty two many of that that will ultimately converge just wanted to make sure that.
There isn't risk of of the revenue conversion disruption leading to age outs and that we should see that bolus of that backlog really start to flow through but the stronger and and all the regions outside of China and in the coming quarters.
Yeah. No I think you are seeing is a right way Josh appreciate the question I think of my commentary of the referred to.
We certainly have the visibility of China, which has given us a pretty good baseline on the revenue conversion and we continue to see that all of the next several quarters. Despite the China I think well I just you know.
As we look out a mass excuse me that the Americas, we're referring to and.
Places like of India, I think the we're just being cautious with respect to what's going on but I think in other.
The area as we see improvements as well so.
I'm, just talking about a little bit of a balance there amongst the regions and we are really glad to see us returning to year over year of growth in Q3, 3% growth I think we got a pretty good feel for Q4.
Again by pauses for good reasons, and especially as we look to next year, we like where we are too.
Started to deliver a more consistent growth year over year.
Hey, Josh just to add emphasis to <unk> comments just to be clear, we're not seeing orders cancel out of the back backlog. That's just I want to be definitive about that this is really more just kind of the reflection of timing.
The timing differences, perhaps from what we originally expected with regards to some of the other regions and.
Again, just given where you see flare ups right now in other parts of the World. We just think we're being prudent around.
Baking that into the thought process, but but again to <unk> point earlier, China, China is creating some real buoyancy for us relative to offset in the other regions.
No that makes a lot of sense of considering the environment to be a little bit cautious.
That makes a lot of sense to us so Jim the second question and then I'll get back in the queue. Just your announcement on naming a chief medical and Technology Officer. I believe this is the first chief Medical office for Accuray since the Doctor Adler was in that seat just wanted to.
See if you could help us understand what you're signaling here I.
I think doctor opinion on was the first region of colleges as the Chief Medical officer, and Accuray or where should we be seeking about our pursuit of more clinical evidence behind.
Iran is back behind the cyber knife and then also I mean, you guys have been on an innovation Crusade and him being the Chief Technology Officer, how should we be thinking about.
The next steps in the evolution of these platforms the things with him on on the on the team. Thanks for taking the questions guys no. The Josh. Thank you for that question of quite quite frankly, what you just what you just articulated is exactly right.
That's exactly why.
Why this is.
We're so excited about this.
For people in in the space from a clinical perspective. This is a world class not just world class radiation oncologist. This is a world class technology person. He's got a Phd of nuclear physics. He has done a lot of research across many many dimensions both.
Within the space as well as with different products.
Elaborated with a lot of different companies. So he is he's uniquely qualified.
And in those areas and quite frankly, it's really the perfect degree of the moment in time for us to have this this come together from.
From a timing perspective, you are correct in your assessment that this is the first time, we've had a chief medical officer in the role since John Adler led the company back literally decades ago and.
We think that debt John Felipe is uniquely qualified to help.
Really leverage and power up areas the areas that you actually highlighted Josh the first is the clinical evidence piece.
Our products are different the way they operate is different and we need to be able to show people, what those differences translate into relative to clinical outcomes and the reduction of toxicity and how how we fare relative to some of the things that they're getting.
A lot of a lot of press lately things like EMR Linux.
Biologically guided products and so we are I can't I cannot speak highly enough about John Felipe and I can't I can't <unk>.
The Kate.
More excitement than than than I am right. Now we are thrilled to have this happen at this point, John flips going to make a major impact for us.
Oh, that's great congratulations on bringing him in thank you.
If you would ask of them.
Star and the one.
So all of you you are in.
Our next question comes from Brooks O'neil from Lake Street Capital markets. Please go ahead with your question.
Hey, good afternoon, everyone.
Since you have highlighted the importance of clear on tea.
Can you just talk a little bit on about how you anticipate debt.
On the testing itself in the income statement.
I guess, how but also the timing of what you expect to see from clear R. A T.
Yeah, and Brett Thanks for the question I'll, maybe take that question first and maybe Suzanne can chime in if she wants to on the.
So what you heard.
Earlier today in the prepared remarks, and Joshua section that we actually got on 14 orders on clarity.
In Q3 and.
He gave us a little bit of a flavor of it but.
The full units.
For orders that of 14 related to <unk>.
Customers trying to buy a new land is act and the actually choosing on auctions include the credit card. So thats. The one flavor of the how this kind of get sold on.
The new option too.
The new newly delivered of bodies Act on.
The other one that we have 10 of orders which of the upgrade orders really.
Really for the existing installed base of all of that exact and they wanted to upgrade.
The upgraded by the.
The standalone upgrades to their installed base.
So.
I'm not going to get into the timing of those 14 units going through revenue necessarily right now.
Brooks.
As you can imagine over the next.
So the next I would say a few quarters, we are going to start to deliver some of those as we get into full commercial launch and he says out of doing that.
We're going to start to see shipments in our Q, Florida Q for going into Q1 so.
We will start to realize the there's some tremendous pent up demand so.
Yeah.
That's great that's great. Okay, I'll just ask.
The second and.
I guess I wanted to pick on you again.
You talked about the improvement in the cash flow on the balance sheet.
I think theres still maybe a one tranche of your convertible securities out there how are you thinking about the balance sheet and dealing with with debt.
The tranche.
Over the next year.
Thanks for the question Brooks.
I'm really pleased to see that the team has done a tremendous job of managing the working capital and we ended up where the Han that 30 million of the cash.
And as I consistently said in the past as we get into one year of window of the convert.
Our convertible notes maturity.
Due July 22.
We're going to start looking potentially refinancing and I think the quite frankly, the cash position that we just reported the end of Q3, our position us very well to do that successfully when we are ready to do it so.
I think on the good track to actually accomplish that at the right time.
Great perfect. Thank you very much thanks Brooks.
And our next question comes from Anthony Petrone from Jefferies. Please go ahead with your question.
Hi, and good afternoon.
Josh.
Sort of go back and revisit the oral bundle just just latest thoughts there on timing and rollout and sort.
How do you think that debt impacts capital sales just some renewed thoughts there and then sort of when we think about.
The sort of overall, China trends interest.
In relation to the COVID-19, obviously, there's still momentum on the tight bayside type be reiterating the timelines here for sure if.
If we could just maybe just recap the opportunity a bit how many licenses have been issued so far.
How many are in the type b opportunity and again this goes back to the 2018 tender and then maybe just thoughts on on when this tender will will actually really get into full swing. Thanks sure. Anthony So just taking it in the order that you pose those so.
As far as the timing of the Ro APM.
Yes.
There is no update or no change in timing from what we've communicated and what the industry has heard from CMS.
The most recently, which basically puts the SM.
Essentially the the implementation of the Ro APM model.
In the January one 2000 calendar 2022.
Time, and so again no change to that from what we what we've heard or what we expect and in the context of is this what impact would this have on capital purchases.
It's <unk>.
It would again as we've talked about in the past it would lead you to believe that if a up a facility that knows they're going to be participating in in the model. They are in the ZIP code debt that's been identified as for inclusion in the model and the <unk>.
Reimbursement approach.
If they are dealing with equipment that is either functioning at capacity or is not necessarily.
In a place where they are.
As confident as they should be or could be in delivering.
Hi, dose SBR tea and.
Fractionated or ultra hyper fractionated treatment regimens, then one would assume that it could be of catalyst for them to want to think about a different mix of equipment, but again thats going to vary it's going to really probably not possible. The paint the entire market with the same brush on this it's going to vary from facility the facility and.
I think so thats that.
Kind of the answer on around the Ro APM piece. The other the other wildcard here again is that while I think we see and are optimistic about the evolution of the COVID-19 environment again, if there are no flare ups or there are things that are beyond the market's control relative to market.
The access or things related to COVID-19. Those are also impacts obviously that could could affect of the.
The capital the capital side of it.
Equipment market purchases, but again from where we sit right. Now we think this is a relatively improving situation. We are we don't see orders canceling out of the backlog we see.
<unk> access improving for our people both on the service and the commercial side and so you know.
Knock on wood it's.
It's moving Directionally in the right direction with that said there are some markets that obviously are going to continue to be challenged India would be a good example of it big opportunity there, but they have more than they can handle right now.
Vis vis the COVID-19 situation.
With regards to your question on China, and China trends. If you go back to the original quota in the previous five year plan. There were 208 type b devices and 188.
The type a devices identified in the very original quota.
On the on the kind of the.
The current licenses issued to date I'm going to shift to shift here and not him let him answer the details on that one yes. Thank you Josh.
Anthony I'm going to go with a <unk> type a and so the quota of originally it was 188 and to date 90 of 188, having the issued 74 of which we won so that's the 82% win rate that we talked about before so the idea of 98 in the main the meaning to be issued.
And two on the scanning that.
On the issuance of the type a license seems like they're falling about of once a year of issuance cadence.
So it's hard to say when this calendar year are they on the issue but.
We think sometime in the next three to six months' day should be announcing the on another batch of type of license and I know that the <unk>.
Some of our customers our pi for that match as well. So we're all anxiously awaiting for the announcement as well.
So thats type a tie.
Type B, Josh is correct the originally.
This quarter was 1200 I believe the increased by additional 200 subsequent to that so it's actually of 1400 type b.
Licenses.
Originally of variable under the quota.
<unk>.
Type b is a bit hard to track.
Centrally.
How many of the for the haunted had been issued only because as we said before the larger issue I think its quarterly at the provincial level and so there's a little bit of lack of the central data to say, how many but two on the scanning it has been flowing and as Youll see on our P&L every call.
We are reporting a few units not a large unit yet for us until we have a.
Locally manufactured products in 15 months, but to our understanding of the type B has been flowing at the provincial level.
Of that much disruption.
Once again, if you would like to ask a question. Please press star and one to withdraw your question you May press Star and two.
And once again that is star and then one to ask a question.
Ladies and gentlemen at this time in showing no additional questions. We will conclude our question and answer session I'd like to turn the conference call back over to Josh Levine for any closing remarks.
I want to thank everyone for joining us on the call. This afternoon, and we look forward to speaking with you again in August when we report our full year fiscal 2021 results. Thanks very much.
Ladies and gentlemen, the conference has now concluded we do thank you for attending today's presentation. You may now disconnect your lines.
Okay.