Q3 2025 Accuray Inc Earnings Call
Good day and welcome to the Accuray third quarter fiscal 2025 financial results Conference call.
Operator: Good day and welcome to the Accuray 3rd Quarter Fiscal 2025 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
All participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Jesse: I would now like to turn the conference over to Jesse to Chief Legal Officer. Please go ahead.
Jesse Chew: I would now like to turn the conference over to Jesse Chew, Chief Legal Officer. Please go ahead. Thank you, operator. And good afternoon, everyone.
Jesse: Thank you operator, and good afternoon, everyone.
Jesse Chew: Welcome to Accuray's conference call to review financial results for the third quarter of fiscal year 2025, which ended March 31, 2025. During our call this afternoon, management will review recent corporate development.
Jesse: Welcome to Accuray's Conference call to review financial results for the third quarter of fiscal year 2025, which ended March 31 2025.
Speaker Change: During our call. This afternoon management will review recent corporate developments joining us on today's call are Suzanne Winter Accuray's, President and Chief Executive Officer.
Jesse Chew: Joining us on today's call are Suzanne Winter, Accuray's President and Chief Executive Officer, and Ali Pervaiz, Accuray's Chief Financial Officer. 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 outlined 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. We base the forelooking statements on this call on the information available to us as of today's date.
Speaker Change: <unk> Pervaiz Accuray's, Chief Financial Officer.
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 outlined 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.
Speaker Change: We base our forward looking statements on this call and the information available to us as of today's date.
Jesse Chew: We assume no obligation to update any forelooking statements as a result of new information or future events except to the extent required by applicable securities laws. Accordingly, you should not put undue reliance on any forelooking statement.
Speaker Change: Assume no obligation to update any forward looking statements as a result of new information or future events, except as required by applicable securities laws.
Speaker Change: Accordingly, you should not put undue reliance on any forward looking statements.
Jesse Chew: A few housekeeping items for today's call. First, during the Q&A session, we request the participants limit themselves to two questions and then re-queue with any follow-ups. Second, all references to a 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, 2025.
Speaker Change: 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 second all references to a 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 2025.
Jesse Chew: Additionally, there will be a supplemental slide deck to accompany this call, which you can access by going directly to Accuray's investor relations page at investors.accuray.com.
Speaker Change: Additionally, there will be a supplemental slide deck to accompany this call, which you can access by going directly to the Investor Relations page at investors the accurate dot com.
Suzanne Winter: With that, let me turn the call over to Accuray's Chief Executive Officer, Suzanne Winter. Suzanne? Thank you, Jesse. Good afternoon, everyone, and thank you for joining us today.
With that let me turn the call over to <unk>, Chief Executive Officer, Suzanne Winter Susanne.
Thank you Jesse and good afternoon, everyone and thank you for joining us today.
Suzanne Winter: Today I want to explain four key points to help our stakeholders understand Accuray even better. First, similar to every U.S.-based company with significant international markets, the visibility on our very near-term growth in revenues and earnings is lower than just one month ago. However, our teams are identifying and executing on opportunities to operate more efficiently to become more and more resilient, while our commercial partnerships with customers are focused on placing our important products as quickly as possible. Second, recent results and orders outlook suggest strong demand for our technologies and improving execution by our team. This gives us increasing confidence that we can emerge from the current environment as a stronger, more resilient organization.
Speaker Change: I want to explain four key points to help our stakeholders understand accuray, even better first similar to every U S based company with significant international markets. The visibility on our very near term growth in revenues and earnings is lower than just one month ago. However, our teams are identified.
Speaker Change: <unk> and executing on opportunities to operate more efficiently to become more and more resilient, while all commercial partnerships with customers are focused on placing our important products as quickly as possible.
Speaker Change: Second recent results in orders outlook suggest strong demand for our technologies and improving execution by our teams. This gives us increasing confidence that we can emerge from the current environment.
Speaker Change: As a stronger more resilient organization.
Speaker Change: Third we continue to benefit from approximately $215 million of recurring annual services revenue within which we see several potential growth avenues demand for our products is strong and our services revenue provides a stable predictable base of growing revenues.
Suzanne Winter: Third, we continue to benefit from approximately $215 million of recurring annual services revenue, within which we see several potential growth avenues. Demand for our products is strong, and our services revenue provides a stable, predictable base of growing revenue. Fourth, our investments in ERP and talent is expanding our adaptability and improving our capabilities to operate in a rapidly changing, highly fluid global market. Regardless of the global trade circumstances that will likely remain volatile, we want to be the most reliable and trusted global partner of choice in radiation therapy treatment technology and we are staying close with our customers and prospects to help them get the equipment they need to provide vital care to their patients.
Speaker Change: Fourth our investments in ERP and talent is expanding our adaptability and improving our capabilities to operate in a rapidly changing highly fluid global market.
Speaker Change: Regardless of the global trade circumstances that will likely remain volatile we want to be the most reliable and trusted global partner of choice in radiation therapy treatment technology, and we are staying close with our customers and prospects to help them get the equipment they need to provide vital care to their patients.
Suzanne Winter: Today, we reported strong third quarter results which exceeded our expectations, and we are encouraged by the overall progress we have made operationally through the first three quarters of fiscal 2025. Revenue for the quarter was solid, growing at 12% year over year. This growth was driven by strong performances in both developed and emerging markets. We also saw a strong performance in our service business, which this quarter represented approximately 49% of our revenue and 59% of our gross margin. I was also pleased with our adjusted EBITDA performance at $6 million compared to $1.1 million a year ago.
Today, we reported strong third quarter results, which exceeded our expectations and we are encouraged by the overall progress we have made operationally through the first three quarters of fiscal 2025.
Speaker Change: Revenue for the quarter was solid growing at 12% year over year. This growth was driven by strong performances in both developed and emerging markets.
Speaker Change: I also saw a strong performance in our service business, which this quarter represented approximately 49% of our revenue and 59% of our gross margin.
Speaker Change: I was also pleased with our adjusted EBITDA performance at 6 million compared to $1 $1 million a year ago. The.
Suzanne Winter: The year-over-year increase was driven primarily by volume, pricing, and operational improvement. We managed our working capital extremely well this quarter with $16 million of free cash flow generation and reduced overall inventory levels, which Ali will speak about in greater detail. Turning to orders, our book to bill was over 1.2 this quarter representing healthy customer demand for solutions across both developed and emerging markets. Within these markets, order growth was driven largely by new customer expansion from customers adding new radiation therapy capacity to their facilities, and approximately 35% coming from the replacement of aged equipment. Product revenues were up 16% versus last year, growing faster than the market, and was driven by strong demand for our solutions across our expanded portfolio.
The year over year increase was driven primarily by volume pricing and operational improvements.
Speaker Change: We managed our working capital extremely well this quarter with $16 million of free cash flow generation and reduced overall inventory levels, which Ali will speak about in greater detail.
Speaker Change: Turning to orders our book to Bill was over one point to this quarter, representing healthy customer demand for solutions across both developed and emerging markets. Within these markets order growth was driven largely by new customer expansion from customers, adding new radiation therapy capacity to there.
Speaker Change: Facilities, and approximately 35% coming from the replacement of aged equipment.
Speaker Change: Product revenues were up 16% versus last year growing faster than the market and was driven by strong demand for our solutions across our expanded portfolio.
Moving on to our service business. Our Q3 service revenue grew by 9% year over year, we expect the service business to be a growth engine and primary catalyst for expanding margins as we benefit from higher pricing increased scale and operating leverage.
Suzanne Winter: Moving on to our service business, our Q3 service revenue grew by 9% year-over-year. We expect the service business to be a growth engine and primary catalyst for expanding margins as we benefit from higher pricing, increased scale, and operating leverage, and as we develop subscription software as a service offering in the coming years.
Speaker Change: And as we develop subscription software as a service offerings in the coming years.
Speaker Change: Finally, I'll briefly touch on the recently announced tariff policies and the impact to our business.
Suzanne Winter: Finally, I'll briefly touch on the recently announced tariff policies and the impact to our business. as a global company with life-changing technologies and key markets. 70% of our raw materials and product components are sourced within the U.S., and finished products are assembled and manufactured within the U.S., with over 80% exported throughout the world. I'm incredibly confident in our supply chain flexibility, and we have multiple mitigation actions underway to help offset the impact of the tariffs, including establishing a foreign trade zone in Madison, Wisconsin, two, duty drawback on qualifying parts and subcomponents. 3. Development of secondary domestic sources of raw material and components, and 4.
Speaker Change: As a global company with life, changing technologies and key markets, 70% of our raw materials and product components are sourced within the U S. And finished products are assembled and manufactured within the U S with over 80% export it throughout the world.
Speaker Change: I'm incredibly confident in our supply chain flexibility and we have multiple mitigation actions underway to help offset the impact of the tariffs, including establishing a foreign trade zone in Madison, Wisconsin.
Speaker Change: Two duty drawback on qualifying carton sub components three.
Speaker Change: Three development of secondary domestic sources of raw material and components and for working closely with our China JV to obtain a tariff exemption in China for a lifesaving products.
Suzanne Winter: Working closely with our China JV to obtain a tariff exemption in China for our life-saving product. While there is significant uncertainty, assuming the existing tariffs remain in place, we are expecting minimal shipments to China, despite customer demand, which has averaged over $25 to $30 million per quarter in product shipments over the first three quarters of FY25. Our teams are confident that we can offset a significant portion of this revenue impact in Q4 with greater contributions from the other regions. We estimate that there is a potential negative impact of $10 to $15 million in Q4 revenue as a direct result.
Speaker Change: Well there is significant uncertainty assuming the existing tariffs remain in place we are expecting minimal shipments to China, despite customer demand, which has averaged over $25 million to $30 million per quarter in product shipments over the first three quarters of FY 'twenty five.
Speaker Change: Our teams are confident that we can offset a significant portion of this revenue impact in Q4 with greater contributions from the other regions.
Speaker Change: We estimate that there is a potential negative impact of $10 million to $15 million in Q4 revenue as a direct result.
Speaker Change: Note that this impact is primarily isolated to product sales in China in general our service business is much more insulated from the tariff dynamics with exposure limited to parts consumption.
Suzanne Winter: Note that this impact is primarily isolated to product sales in China. In general, our service business is much more insulated from the tariff dynamics with exposure limited to parts consumption. For Adjusted EBITDA, although we expect headwinds due to reduced China volume and associated increased tariff costs, our teams have been laser focused on what we can control and are taking every action possible to mitigate the impact in Q4 and are confident that we can remain within full year Adjusted EBITDA guidance range. Further, we expect to see much greater positive impact to the mitigation efforts as we enter the second half of FY26.
For adjusted EBITDA, Although we expect headwinds due to reduced China volume and associated increased tariff costs. Our teams have been laser focused on what we can control and are taking every action possible to mitigate the impact in Q4 and are confident that we can remain within full year adjusted.
Speaker Change: EBITDA guidance range.
Speaker Change: Further we expect to see much greater positive impact of the mitigation efforts as we enter the second half of FY 'twenty six.
Suzanne Winter: This situation is subject to change at any point and we're monitoring it very closely.
Speaker Change: This situation is subject to change at any point and we're monitoring it very closely overall, we believe that despite the volatility and the uncertainty of these new challenges, we are well positioned to implement both long and short term mitigation to offset the tariff policy impact.
Suzanne Winter: Overall, we believe that despite the volatility and the uncertainty of these new challenges, we are well positioned to implement both long and short term mitigations to offset the tariff policy impact.
Ali Pervaiz: I will now turn it over to Ali who will cover our financial performance for the quarter. Thank you, Suzanne, and good afternoon, everyone.
Speaker Change: I will now turn it over to Ali who will cover our financial performance for the quarter.
Ali: Thank you Suzanne and good afternoon, everyone before we go into our fiscal third quarter financial results I want to begin by addressing the dynamic tariff situation and potential range of impact on our fiscal fourth quarter and FY 2025 results as the situation continues to evolve.
Ali Pervaiz: Before we go into our fiscal third quarter financial results, I want to begin by addressing the dynamic tariff situation and potential range of impact on our fiscal fourth quarter and FY 2025 results as the situation continues to evolve. As a company with a global footprint and majority of revenue generated outside the US, we have spent a considerable amount of time understanding the changes in trade policies and global tariffs announced recently and the potential impact on our business. As Suzanne mentioned, the impact of tariffs is expected to decrease near-term volume of product sales in China, which we estimate could impact product revenue by $10-15 million in Q4.
Ali: A company with a global footprint and majority of revenue generated outside the U S. We have spent a considerable amount of time understanding the changes in trade policies and global tariffs announced recently and the potential impact on our business as Suzanne mentioned the impact of tariffs is expected to decrease near term volume of product sales in China, which.
Suzanne Winter: We estimate could impact product revenue by $10 million to $15 million in Q4.
Ali Pervaiz: Additionally, tariffs associated with the U.S.-China trade are expected to have an incremental cost, which we had anticipated, and we believe we can offset these impacts through driving near-term actions with our cross-functional teams, as well as higher levels of contribution from other regions. With the above in mind, based on what we know today, we expect Q4 revenues to be in the range of $121 to $129 million and adjusted EBITDA in the range of $9.5 to $12 million.
Suzanne Winter: Additionally, tariffs associated with the U S, China trade or expected to have an incremental cost, which we had anticipated and we believe we can offset these impacts through driving near term actions with our cross functional teams as well as higher levels of contribution from other regions would be above in mind based on what we know today, we expect Q.
Suzanne Winter: For revenues to be in the range of $121 million to $129 million and adjusted EBITDA in the range of $9 $5 million to $12 million. Lastly, this range does not reflect any potential additional tariffs or any potential inflationary impact on labor cost or the cost of procure components.
Ali Pervaiz: Lastly, this range does not reflect any potential additional tariffs or any potential inflationary impact on labor costs or the cost of procured components.
Ali Pervaiz: Now turning to the quarter's financials, net revenue for the third quarter was $113 million, which was up 12% versus the prior year and up 14% on a constant currency basis. Product revenue for the third quarter was $57 million, up 16% from the prior year and up 16% on a constant currency basis, reflecting a 23% increase in unit volume over the same time period. Service revenue for the quarter was $56 million, up 9% from the prior year, and up 11% on a constant currency basis. Product gross orders for the third quarter were approximately $71 million and represented a book-to-bill ratio of 1.2.
Suzanne Winter: Now turning to the quarter's financials net revenue for the third quarter was $113 million, which was up 12% versus the prior year and up 14% on a constant currency basis.
Suzanne Winter: Product revenue for the third quarter was $57 million up 16% from the prior year and up 16% on a constant currency basis, reflecting a 23% increase in unit volume over the same time period.
Suzanne Winter: Service revenue for the quarter was $56 million up 9% from the prior year and up 11% on a constant currency basis.
Suzanne Winter: Product gross orders for the third quarter were approximately $71 million and represented a book to Bill ratio of one point to our book to Bill ratio is defined as gross product orders for the period divided by product revenue for the period.
Ali Pervaiz: Our book-to-bill ratio is defined as gross product orders for the period divided by product revenue for the period. We continue to believe that the book-to-bill ratio is the right metric to ensure healthy growth of our backlog as we add more product orders than shipments in the quarter. We ended the third quarter with a reported order backlog of approximately $452 million, defined as orders that are younger than 30 months. We had zero order cancellations in the quarter. As mentioned before, over the last couple of years, we have redefined our order booking criteria focused on deals with higher profitability that convert to revenue within 30 months.
Suzanne Winter: We continue to believe that the book to Bill ratio is the right metric to ensure healthy growth of our backlog as we add more product orders and shipments in the quarter.
Suzanne Winter: We ended the third quarter when the reported order backlog of approximately $452 million defined as orders that are younger than 30 months, we had zero order cancellations in the quarter as mentioned before over the last couple of years, we have redefined our order booking criteria are focused on deals with higher profitability to convert to revenue within 30 months.
Suzanne Winter: Our overall gross margin for the quarter was 27, 9% compared to 28, 7% in the prior year. This decrease was due to approximately 1.3 points or $1.4 million of incremental net China margin deferral associated with the shipments to the JV that did not make it to the end customer.
Ali Pervaiz: Our overall gross margin for the quarter was 27.9% compared to 28.7% in the prior year. This decrease was due to approximately 1.3 points or 1.4 million dollars of incremental net China margin deferral associated with the shipments to the JV that did not make it to the end customer. This was partly offset by higher install, training, and spare parts volume in our service business, which tends to have a higher margin. Operating expenses in the third quarter were $31 million compared to $34 million in the third quarter of the prior fiscal year. Operating income for the quarter was $1 million compared to an operating loss of $4.6 million from the prior year.
Suzanne Winter: This was partly offset by higher install training and spare parts volume in our service business, which tends to have a higher margin.
Suzanne Winter: Operating expenses in the third quarter were $31 million compared to $34 million in the third quarter of the prior fiscal year operating income for the quarter was $1 million compared to an operating loss of $4 $6 million from the prior year.
Ali Pervaiz: Adjusted even up for the quarter was $6 million compared to $1.1 million from the prior year, primarily due to higher shipments, better service margins, and lower overall OPEX. Turning to the balance sheet, total cash, cash equivalents, and short-term restricted cash amounted to $79 million compared to $64 million at the end of last quarter. Net accounts receivable were approximately $78 million compared to $87 million in the prior quarter. Our net inventory balance was $146 million, down $2 million from the prior quarter as we focus on a leaner approach to inventory management.
Suzanne Winter: Adjusted EBITDA for the quarter was $6 million compared to $1 $1 million from the prior year, primarily due to higher shipments better service margins and lower overall opex.
Suzanne Winter: Turning to the balance sheet total cash cash equivalents and short term restricted cash amounted to $79 million compared to $64 million at the end of last quarter net accounts receivables were approximately $78 million compared to $87 million in the prior quarter, our net inventory balance was $146 million down $2 million from the prior quarter as we focus.
Suzanne Winter: On a leaner approach to inventory management.
Suzanne Winter: Additionally, our major focus in addressing our capital structure and refinancing needs and as it pertains to that we are exploring any and all alternatives to find an optimal solution to maximize our opportunities and.
Ali Pervaiz: Additionally, a major focus is addressing our capital structure and refinancing needs. And as it pertains to that, we are exploring any and all alternatives to find an optimal solution to maximize our opportunities. and create value for our constituents. Lastly, as Suzanne mentioned, while we anticipate $10 to $15 million of product volume pressure in China due to the recent tariffs, we are maintaining our adjusted EBITDA guidance for fiscal year 2025 in the range of $28.5 to $31 million.
Suzanne Winter: And create value for our constituents.
Suzanne Winter: Lastly, as Suzanne mentioned, while we anticipate $10 million to $15 million of product volume pressure in China due to the recent tariffs we are maintaining our adjusted EBITDA guidance for fiscal year, 'twenty, five and the range of 28, 5% to $31 million.
Suzanne Winter: Those are our key financial highlights, and with that, I'd like to hand the call back to Suzanne. Thanks, Ali. I'm proud of our team and our ability to navigate through unforeseen challenges and execute at a high level, advancing progress towards achieving our longer-term goals. We continue to monitor and navigate the fluid tariff and geopolitical situation and the potential impact to the global economy and are taking the actions needed. Our results, year-to-date, demonstrate our dedication to improving patient outcomes and execution of our strategy. From an operational perspective, our business remains healthy, with strong underlying demand for our solutions and strength of our position in the markets in which we compete.
Suzanne Winter: All of our key financial highlights and with that I'd like to hand, the call back to Susanna. Thanks Ali.
Suzanne Winter: I'm proud of our team and our ability to navigate through unforeseen challenges and execute at a high level advancing progress towards achieving our longer term goals, we continue to monitor and navigate the fluid tariff and geopolitical situation and the potential impact of the global economy and are taking the actions.
Suzanne Winter: If needed a results year to date demonstrate our dedication to improving patient outcomes and execution of our strategy.
Suzanne Winter: From an operational perspective, our business remains healthy with strong underlying demand for our solutions and the strength of our position in the markets in which we compete.
Suzanne Winter: Further, we are actively exploring all possible avenues to strengthen our capital structure to allow us to achieve our long-term goals and deliver substantial long-term value for our shareholders.
Suzanne Winter: Further we are actively exploring all possible avenues to strengthen our capital structure to allow us to achieve our long term goals and deliver substantial long term value for our shareholders I will now turn it back over to the operator for Q&A.
Operator: I will now turn it back over to the operator for Q&A. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the button. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We ask that you please limit yourself to one question and one follow-up.
Suzanne Winter: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press star two.
Speaker Change: We ask that you please limit yourself to one question and one follow up.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: The first question today comes from Brooks O'neil with Lake Street Capital markets. Please go ahead.
Brooks O'Neill: The first question today comes from Brooks O'Neill with Lake Street Capital Markets. Please go ahead. Thank you. Good afternoon. Congratulations on the strong quarter and performance, guys. Really nice. I had a question. Obviously, Suzanne, you commented on the strong adjusted EBITDA performance in the quarter. I didn't hear Ali's specific comments about the impacts to adjusted EBITDA in the quarter, but was there much of a significant impact of deferred China adjusted EBITDA in this particular quarter? Yeah, Brooks, I can I can start. So on product margins, specifically, you'll see that product margins were at 22.7% this quarter, and that was primarily due to just having a higher margin deferral on China.
Brooks O'neil: Thank you good afternoon, congratulations on the strong quarter and performance guys, who are really nice.
Speaker Change: I had a question.
Suzanne Winter: Obviously, Suzanne you commented on the strong adjusted EBITDA performance in the quarter.
Speaker Change: Here always specific comments about the impacts to adjusted EBITDA in the quarter, but was there much of a significant.
Speaker Change: In fact of deferred China adjusted EBITDA in this particular quarter.
Brooks O'neil: Yes, Brooks I can I can start so.
Brooks O'neil: On product margins, specifically, you'll see that product margins were 22, 7%.
Brooks O'neil: This quarter and that was primarily due to just having a higher margin deferral on China, if you recall last quarter.
Suzanne Winter: If you recall last quarter, our China sorry, our overall product margin was about 43 and a half percent because we did see an outsized China margin release last quarter. But if you actually take a look at our overall product margins for the year, we're hovering around 31%, which is pretty much, you know, in line with where we want to be given that we're penetrating into the value segment. So, you know, I think overall, our EBITDA is reflective of the overall revenue volume that we had this quarter. Good. That's great.
Brooks O'neil: Our China I'm, sorry, our overall product margin was about.
Brooks O'neil: About 43, 5% because we did see an outsized China margin release last quarter, but if you actually take a look at our overall product margins for the year were hovering around 31%, which is pretty much in line with where we want to be given that we're penetrating into the value segment. So I think overall our EBA.
Brooks O'neil: Is reflective of the overall revenue volume that we had this quarter.
Brooks O'neil: That's great.
Suzanne Winter: Let me just ask, obviously, you commented quite a bit about the China impacts. I know you see tremendous potential in other non-US markets. Would you anticipate as big an impact in markets like India and South America as you anticipate in China at this time? You know, again, we're monitoring everything that is evolving and coming out of this administration. And, you know, I think that probably the China impact is the highest. And that's what we've really been laser focused on in determining what other regions will be able to, you know, either make up the volume here in Q4.
Speaker Change: Obviously, you commented quite a bit about the China impacts I know you see tremendous potential in other non U S markets would you anticipate a big as big an impact in markets like.
Brooks O'neil: India and South America.
Brooks O'neil: Do you anticipate in China at this time.
Brooks O'neil: You know again.
Brooks O'neil: Where we're monitoring everything that is evolving and coming out of this administration and I think that probably the China impact is the highest and that's what we've really been laser focused on them and determining what other regions will be able to.
Brooks O'neil: He didn't make up the volume here in Q4, but as we move forward. We've got strength in our largest region, which is EMEA and that does include India or non China APAC region is also performing very strong.
Suzanne Winter: But as we move forward, we've got strength in our largest region, which is the IMEA. And that does include India. Our non-China APAC region is also performing very strong. Japan had a very good quarter as well. We continue to see strength there. And the U.S. in this quarter, you know, it was better than previous quarters. And we're still looking for, you know, more of a turnaround in the U.S. market. But in general, I would say, you know, we're preparing for, you know, all potential as it relates to the China tariffs. And, you know, again, as visibility improves, we'll be able to provide more clarity.
Brooks O'neil: Japan had a very good quarter as well that we continue to see strength, there and the U S. In this quarter. It was yeah. It was better than previous quarters, and we're still looking for more of a turnaround in the U S market, but.
But in general I would say, we're preparing for all potential as it relates to the China tariffs and you know again as visibility improves we'll be able to provide more clarity.
Murray: The next question comes from Murray to bulk with B T. I G. Please go ahead.
Marie Thibault: The next question comes from Marie Thibault with BTIG. Please go ahead. Good afternoon. Thanks for taking the questions and congrats on a strong quarter. We have to commend you for being able to hold up those profit metrics, despite some of the challenges from the macro environment.
Murray Tobkin: Good afternoon, thanks for taking the questions and congrats on a strong quarter, we have to commend you for being able to hold up those.
Murray: Profit metrics, despite some of the challenges from the macro environment.
Suzanne Winter: Wanted to just quickly try to dive into the China issue a little bit more and ask if you could help us think about a couple of various scenarios. I know there had been some speculation that China might carve out medical products. So I'm wondering if that's what you're referring to when you said that, you know, trying to work with the China JV to find a tariff exemption. And then, if there were to be an exemption, how quickly could things slip? Could you start shipping right away? Or is this, we should really think of this as being something that would get pushed out into fiscal 26.
Speaker Change: Wanted to just quickly try to dive into the China issue, a little bit more in and ask if you could help us think about a couple of various scenarios I know there had been some speculation that China might carve out medical products. So I'm wondering if that's what you're referring to when you said that you know trying to work with the China JV to.
Murray: Sign a tariff exemption.
Murray: And then if there were to be an exemption how quickly could things flip could you start shipping right away or is this we should really think of this as being something that would get pushed out into fiscal 'twenty, six and and as part of that Oh, how would you have us think about it.
Suzanne Winter: And as part of that, how would you have us think about, you know, this 10 to 15 million a quarter? Is that kind of a good number to think about on a quarterly basis going forward? I realize it's a lot to get through, but any more detail on kind of the scenarios as we think about it? Yeah, no, I would say it, you know, it's murky. It's murky. And we're, we're taking a look at, you know, all the facts that we have.
Murray: You know this $10 million to $15 million a quarter is that kind of a good number to think about on a quarterly basis going forward and realize it's a lot to get through but any any more detail on kind of the scenarios as we think about it.
Murray: Yeah, No I would say it's murky.
Murray: It's working and where we're taking a look at you know all the facts that we have now let me just talk about the exemption are we're working very closely with our China JV and as you know they are a part of a state owned entity and they have their own government affairs.
Suzanne Winter: Now, let me just talk about the exemption. We're working very closely with our China JP. And as you know, they are part of a state owned entity, and they have their own government affairs efforts, just like we do here in the US. And we are partnering with them both in the US and in China, to try and get a medical device exemption. And again, we don't really have a lot of clarity in terms of probability, or when in how quickly that could impact things. So, you know, again, I think as we learn more, we'll be able to provide more transparency around that.
Murray: Efforts are just like we do here in the U S and we are partnering with them both in the U S and in China.
Murray: Try and get a medical device exemption and again, we don't really have a lot of clarity in terms of probability or win in how quickly that could impact things. So you know again I think as we learn more we'll be able to provide more transparency around that.
Murray: Okay, and any detail on how quickly you'd be able to start shipping again. It is something something like that came came through.
Suzanne Winter: Okay, and any detail on how quickly you'd be able to start shipping again if something something like that came came through? Yes, I mean, I think relatively quickly.
Murray: Yes, I mean, I think relatively quickly.
Murray: The next question comes from Jason Wittes with Roth Capital. Please go ahead.
Jason Wittes: The next question comes from Jason Wittes with Roth Capital. Please go ahead. Hi, thanks for taking the question and solid performance this quarter. Obviously, more questions on China. In terms of the potential impact going into next year, I mean, until this tariff situation gets resolved one way or another, are we assuming there's really just no, there'd be no activity in China? And in terms of the magnitude of that impact, this is the fourth quarter, is it more, would it have been more pronounced in the fourth quarter? That's what we're talking about here in relation to China.
Jason Wittes: Alright, Thanks for taking the question and a solid performance this quarter.
Murray: Obviously more questions on China.
Murray: In terms of the potential impact going into next year I mean until this tariff situation.
Murray: Gets resolved one way or the other.
Murray: Are we assuming there's really just no there'd be no activity in China.
Murray: And in terms of the magnitude of that impact this.
Murray: This is the fourth quarter or is it more whatever it what is it.
Murray: Been more pronounced in the fourth quarter.
Murray: Just trying to think about what parameters are we're talking about here in relation to China.
Suzanne Winter: Yeah. I mean, I think we're doing various scenarios. And again, as visibility improves, we'll be able to comment more. We're not going to be able to comment on FY26 at this point, and we normally don't at this point anyway. And we will probably have more clarity at the Q4 earnings call to be able to comment on FY26. But I would just say we're doing our own internal scenario planning based on that and taking the appropriate actions to remain. profitable and within our outlook.
Murray: Yeah, I mean, I think we're doing various scenarios and again as visibility improves we'll be able to comment more we're not going to be able to comment on FY 'twenty six at this point and we normally don't at this point anyway, and we will probably have more clarity at the Q4 earnings call to be able to comment on.
Murray: Slide 26, but I would just say, we're doing our own internal scenario planning based on that and taking the appropriate actions.
Murray: To remain profitable.
Murray: Profitable and within our outlook.
Speaker Change: Well just from your commentary it sounds like you know you're diverting resources at least from a sales and marketing front away from China for the moment to sort of offset that.
Suzanne Winter: Well, just from your commentary, it sounds like, you know, you're diverting resources, at least from the sales and marketing front, away from China for the moment to sort of offset that. I assume that that's going to be focused more towards some of the emerging markets, notably. I think you're now focused on India. How is that going to work? Is that just a global focus, or is that going to be looking at more emerging markets? Yeah. Great question. I think we have areas of strength in both developed and emerging markets. For example, just this past quarter, we were able to take advantage of stimulus in the UK, for example, and we took five new orders for premium high-end equipment, so that was fantastic.
Murray:
Murray: I I.
Speaker Change: I assume that that's going to be focused more towards some of the emerging markets, notably I think you are now focused on India.
Speaker Change: Or how does that going to work is that is that is that just a global focus or is that going to be looking at more emerging markets.
Speaker Change: Yeah, Great question, I think we have areas of stroke or strength in both developed and emerging markets. For example, just this past quarter.
Speaker Change: We were able to take advantage of stimulus in the U K for example, and we took five or new orders.
Speaker Change: For premium high end equipment, so that was fantastic and I think we're looking for those areas of opportunity and we're gonna be very opportunistic on where we put our resources but of course then there are there are also areas of opportunity in the emerging markets in non China APAC I think we talked about last time, how we had.
Suzanne Winter: And I think we're looking for those areas of opportunity, and we're going to be very opportunistic on where we put our resources. But of course, then there are also areas of opportunity in the emerging markets in non-China APAC. I think we talked about last time how we had created a separate region for non-China APAC because of the opportunities that we see there. Certainly last quarter, we did see strength there, and we had very strong orders in Thailand, Taiwan, Korea. And also, from a revenue standpoint, we shipped the first Helix system to Myanmar. And in Taiwan, we also shipped three RADxAC high-end X9 systems. And so we're going to continue to take a look at and long-term opportunities in both developed and emerging markets.
Speaker Change: <unk> created a separate.
Speaker Change: Region for non China, APAC because of the opportunities that we see there certainly last quarter, we did see strength there and you know we had very strong orders in Thailand, Taiwan Korea, and also from a revenue standpoint, we shipped the first helix system.
Speaker Change: Me and Maher and in Taiwan, We also shipped three rat exact high end X nine systems and so we're going to continue to take a look at it.
Speaker Change: And long term opportunities in both developed and emerging markets.
Speaker Change: Yeah.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Operator: This concludes our question and answer session.
Unknown Executive: I would like to turn the conference back over to management for any closing remarks. Very good.
Speaker Change: Very good. This concludes our earnings call. We look forward to speaking with you again in the summer for our fiscal 2025 fourth quarter and full year earnings release.
Unknown Executive: This concludes our earnings call. We look forward to speaking with you again in the summer for our fiscal 2025 fourth quarter and full year earnings release. Thanks very much.
Speaker Change: Thanks very much.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect.
Speaker Change: Hum.
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: [music].