Accuray Q2 2026 Accuray Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Accuray Inc Earnings Call
Speaker #1: Good
Speaker #1: Good afternoon, and welcome to Accuray's conference call to review financial results for the second quarter of fiscal year 2026, which ended December 31, 2025.
Speaker #1: All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
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Speaker #1: I would now like to turn the conference over to Mr. Stephen Monroe; please go ahead.
Speaker #1: ahead. Thank
Speaker #2: you, and good afternoon, everyone. Welcome to Accuray's conference call to review financial results for the second quarter of fiscal year 2026, which ended December 31st, 2025.
Stephen Monroe: Thank you, and good afternoon, everyone. Welcome to Accuray's conference call to review financial results for the second quarter of fiscal year 2026, which ended 31 December 2025. During our call this afternoon, management will review recent corporate developments.... Joining us on today's call are Steve LaNeve, 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 make the forward-looking statements on this call on the information available to us as of today's date.
Steve Monroe: Thank you, and good afternoon, everyone. Welcome to Accuray's conference call to review financial results for the second quarter of fiscal year 2026, which ended 31 December 2025. During our call this afternoon, management will review recent corporate developments.... Joining us on today's call are Steve LaNeve, 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 make the forward-looking statements on this call on the information available to us as of today's date.
Speaker #2: During our call this afternoon, management will review recent corporate developments. Joining us on today's call are Steve LaNeve, Accuray's President and Chief Executive Officer, and Ali Pervaiz, Accuray's Chief Financial Officer.
Speaker #2: 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.
Speaker #2: 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 #2: We based the forward-looking statements on this call on the information available to us as of today's date. 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 laws.
Stephen Monroe: 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 laws. Accordingly, you should not put undue reliance on any forward-looking statements. A few housekeeping items for today's call. All references to a specific quarter in the prepared remarks are to our fiscal year quarters. For example, statements regarding our second quarter refer to our fiscal second quarter, ending 31 December 2025. 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. As you review our prepared remarks and guidance today, please note that our outlook represents our current estimates and reflects the operating environment as we understand it today, including current tariff impacts and geopolitical conditions.
Steve Monroe: 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 laws. Accordingly, you should not put undue reliance on any forward-looking statements. A few housekeeping items for today's call. All references to a specific quarter in the prepared remarks are to our fiscal year quarters. For example, statements regarding our second quarter refer to our fiscal second quarter, ending 31 December 2025. 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. As you review our prepared remarks and guidance today, please note that our outlook represents our current estimates and reflects the operating environment as we understand it today, including current tariff impacts and geopolitical conditions.
Speaker #2: Accordingly, you should not put undue reliance on any forward-looking statements. A few housekeeping items for today's call. All references to a specific quarter in the prepared remarks are to our fiscal year quarters.
Speaker #2: For example, statements regarding our second quarter refer to our fiscal second quarter ended December 31st, 2025. Additionally, there will be a supplemental slide deck to accompany this call, which you can access by going directly to accuray'sinvestorrelations page at investors.accuray.com.
Speaker #2: As you review our prepared remarks and guidance today, please note that our outlook represents our current estimates and reflects the operating environment as we understand it today, including current tariff impacts and geopolitical conditions.
Speaker #2: As always, the situation remains dynamic, and we will continue to update investors as visibility improves. With that, let me turn the call over to Accuray's Chief Executive Officer, Steve LaNeve.
Stephen Monroe: As always, the situation remains dynamic, and we will continue to update investors as visibility improves. With that, let me turn the call over to Accuray's Chief Executive Officer, Steve LaNeve. Steve?
Steve Monroe: As always, the situation remains dynamic, and we will continue to update investors as visibility improves. With that, let me turn the call over to Accuray's Chief Executive Officer, Steve LaNeve. Steve?
Speaker #2: Steve,
Speaker #3: Thank you, Steve. Good afternoon, everyone, and thank you for joining us. I want to begin by recognizing the dedication of our employees and the trust of our customers.
Stephen LaNeve: Thank you, Steve. Good afternoon, everyone, and thank you for joining us. I want to begin by recognizing the dedication of our employees and the trust of our customers. Over the last 90 days, I've engaged deeply with our teams and customers across our regions, and my conviction in Accuray's opportunity has never been stronger. The more time I spend in the field, the clearer it becomes of the opportunity to accelerate top-line growth and to meaningfully expand profitability in the years ahead. And importantly, these insights are already translating into action. The discussions I've had have directly shaped our product and service strategy and the changes we are implementing to support those strategies, from right-sizing our cost structure, to re-energize our commercial organization, to more surgically prioritizing product and service investments.
Steve LaNeve: Thank you, Steve. Good afternoon, everyone, and thank you for joining us. I want to begin by recognizing the dedication of our employees and the trust of our customers. Over the last 90 days, I've engaged deeply with our teams and customers across our regions, and my conviction in Accuray's opportunity has never been stronger. The more time I spend in the field, the clearer it becomes of the opportunity to accelerate top-line growth and to meaningfully expand profitability in the years ahead. And importantly, these insights are already translating into action. The discussions I've had have directly shaped our product and service strategy and the changes we are implementing to support those strategies, from right-sizing our cost structure, to re-energize our commercial organization, to more surgically prioritizing product and service investments.
Speaker #3: Over the last 90 days, I've engaged deeply with our teams and customers across our regions, and my conviction in Accuray's opportunity has never been stronger.
Speaker #3: The more time I spend in the field, the clearer it becomes of the opportunity to accelerate top-line growth and to meaningfully expand profitability in the years ahead.
Speaker #3: And importantly, these insights are already translating into action. The discussions I've had have directly shaped our product and service strategy, and the changes we are implementing to support those strategies.
Speaker #3: From right-sizing our cost structure, to re-energizing our commercial organization, to more surgically prioritizing product and service investments, I recognize the unmistakable need to streamline how we operate and execute as we grow a global installed base that now spans more than 80 countries.
Stephen LaNeve: I recognize the unmistakable need to streamline how we operate and execute as we grow a global installed base that now spans more than 80 countries. Framing today's discussion, as many of you saw, in mid-December, we announced a comprehensive strategic, operational, and organizational transformation plan designed to sharpen accountability, tighten cost control, and accelerate execution while positioning Accuray for sustained, profitable growth. Today, I want to provide an update on the plan and the progress we have made on some strategic initiatives we are pursuing, as well as updates on some operational actions we introduced in December, which are geared towards improving the competitiveness, growth prospects, and profitability of our overall business. I will then discuss the quarter's performance and some insight into the next 12 months. Ali will then discuss the detailed financial results.
Steve LaNeve: I recognize the unmistakable need to streamline how we operate and execute as we grow a global installed base that now spans more than 80 countries. Framing today's discussion, as many of you saw, in mid-December, we announced a comprehensive strategic, operational, and organizational transformation plan designed to sharpen accountability, tighten cost control, and accelerate execution while positioning Accuray for sustained, profitable growth. Today, I want to provide an update on the plan and the progress we have made on some strategic initiatives we are pursuing, as well as updates on some operational actions we introduced in December, which are geared towards improving the competitiveness, growth prospects, and profitability of our overall business. I will then discuss the quarter's performance and some insight into the next 12 months. Ali will then discuss the detailed financial results.
Speaker #3: Framing today's discussion: as many of you saw, in mid-December we announced a comprehensive strategic, operational, and organizational transformation plan designed to sharpen accountability, tighten cost control, and accelerate execution, while positioning Accuray for sustained profitable growth.
Speaker #3: Today, I want to provide an update on the plan and the progress we have made on some strategic initiatives we are pursuing, as well as updates on some operational actions we introduced in December, which are geared towards improving the competitiveness, growth prospects, and profitability of our overall business.
Speaker #3: I will then discuss the quarter's performance and some insight into the next 12 months. Ali will then discuss the detailed financial results. Our plan started with establishing clear product and service strategies as well as the enablers that we believe are critical to achieving these strategies.
Stephen LaNeve: Our plan started with establishing clear product and service strategies, as well as the enablers that we believe are critical to achieving these strategies. The first of those enablers was the right sizing of our cost structure while improving process efficiency and use of technology. This was coupled with an organizational realignment that centralized certain functions, outsourced non-core activities, and emphasized accountability, control, speed of decision-making, and selling. At the same time, we reallocated engineering resources to focus on high ROI programs, to integrate third-party solutions, and to better reflect the voice of our customers. These elements of our transformation plan targeted an approximately $25 million improvement in annualized operating profitability, which included a workforce reduction of about 15% and are expected to deliver roughly $12 million of benefit in fiscal 2026, with substantially all initiatives implemented by fiscal year-end.
Steve LaNeve: Our plan started with establishing clear product and service strategies, as well as the enablers that we believe are critical to achieving these strategies. The first of those enablers was the right sizing of our cost structure while improving process efficiency and use of technology. This was coupled with an organizational realignment that centralized certain functions, outsourced non-core activities, and emphasized accountability, control, speed of decision-making, and selling. At the same time, we reallocated engineering resources to focus on high ROI programs, to integrate third-party solutions, and to better reflect the voice of our customers. These elements of our transformation plan targeted an approximately $25 million improvement in annualized operating profitability, which included a workforce reduction of about 15% and are expected to deliver roughly $12 million of benefit in fiscal 2026, with substantially all initiatives implemented by fiscal year-end.
Speaker #3: The first of those enablers was the right-sizing of our cost structure while improving process efficiency and use of technology. This was coupled with an organizational realignment that centralized certain functions outsourced non-core activities and emphasized accountability, control, speed of decision-making, and selling.
Speaker #3: At the same time, we reallocated engineering resources to focus on high ROI programs to integrate third-party solutions and to better reflect the voice of our customers.
Speaker #3: These elements of our transformation plan targeted an approximately $25 million improvement in annualized operating profitability, which included a workforce reduction of about 15% and are expected to deliver roughly $12 million of benefit in fiscal 2026.
Speaker #3: With substantially all initiatives implemented by fiscal year end, we also indicated that we expect approximately 10 million of restructuring charges across the second, third, and fourth fiscal quarters related to workforce reductions, facility consolidation, contract terminations, and other implementation costs.
Stephen LaNeve: We also indicated that we expect approximately $10 million of restructuring charges across the Q2, Q3, and Q4 fiscal quarters related to workforce reductions, facility consolidation, contract terminations, and other implementation costs. These measures are not, however, ends unto themselves, but rather are enablers of our long-term strategies, intended to build substantial value going forward as we take disciplined actions to strengthen our commercial execution and build a more predictable, higher-margin growth engine. Let me briefly highlight a few examples of the initiatives already underway. First, we are working to expand and diversify our service portfolio. We are shifting towards a comprehensive, solutions-oriented offering that increases customer uptime, enhances system performance, and drives higher margin recurring revenue while addressing customer needs and increasing life cycle engagement across the installed base. Second, we are working towards a more structured distributor partnership and management program.
Steve LaNeve: We also indicated that we expect approximately $10 million of restructuring charges across the Q2, Q3, and Q4 fiscal quarters related to workforce reductions, facility consolidation, contract terminations, and other implementation costs. These measures are not, however, ends unto themselves, but rather are enablers of our long-term strategies, intended to build substantial value going forward as we take disciplined actions to strengthen our commercial execution and build a more predictable, higher-margin growth engine. Let me briefly highlight a few examples of the initiatives already underway. First, we are working to expand and diversify our service portfolio. We are shifting towards a comprehensive, solutions-oriented offering that increases customer uptime, enhances system performance, and drives higher margin recurring revenue while addressing customer needs and increasing life cycle engagement across the installed base. Second, we are working towards a more structured distributor partnership and management program.
Speaker #3: These measures are not, however, ends unto themselves, but rather are enablers of our long-term strategies intended to build substantial value going forward as we take disciplined actions to strengthen our commercial execution and build a more predictable, higher-margin growth engine.
Speaker #3: Let me briefly highlight a few examples of the initiatives already underway. First, we are working to expand and diversify our service portfolio. We are shifting towards a comprehensive solutions-oriented offering that increases customer uptime and enhances system performance and drives higher margin recurring revenue while addressing customer needs and increasing lifecycle engagement across the installed base.
Speaker #3: Second, we are working towards a more structured distributor partnership and management program and global markets for distributors are central to our reach. We are in the process of putting in place robust systems clear performance standards tighter alignment more transparency and critically better support models to ensure consistent high-quality commercial execution.
Stephen LaNeve: In global markets where distributors are central to our reach, we are in the process of putting in place robust systems, clear performance standards, tighter alignment, more transparency, and critically, better support models to ensure consistent, high-quality commercial execution. Third, our determination to meet or exceed our customers' expectations has sometimes resulted in us not billing or collecting for services and service levels we have provided. We are now designing and implementing systems, processes, and controls to help ensure we are compensated to the extent to which we are entitled for the work our teams deliver every day. As a fourth example, we are on a path to optimizing pricing across our product and service portfolio.
Steve LaNeve: In global markets where distributors are central to our reach, we are in the process of putting in place robust systems, clear performance standards, tighter alignment, more transparency, and critically, better support models to ensure consistent, high-quality commercial execution. Third, our determination to meet or exceed our customers' expectations has sometimes resulted in us not billing or collecting for services and service levels we have provided. We are now designing and implementing systems, processes, and controls to help ensure we are compensated to the extent to which we are entitled for the work our teams deliver every day. As a fourth example, we are on a path to optimizing pricing across our product and service portfolio.
Speaker #3: Third, our determination to meet or exceed our customers' expectations has sometimes resulted in us not billing or collecting for services and service levels we have provided.
Speaker #3: We are now designing and implementing systems, processes, and controls to help ensure we are compensated to the extent to which we are entitled for the work our teams deliver every day.
Speaker #3: As a fourth example, we are on a path to optimizing pricing, across our product and service portfolio. This work will help ensure that our pricing reflects the true clinical and economic value our technology delivers.
Stephen LaNeve: This work will help ensure that our pricing reflects the true clinical and economic value our technology delivers, will facilitate our winning competitive bids at appropriate margins, and should be reflected in our sales and margin growth over time. Collectively, these are the types of actions that, as they are implemented and begin to take effect, are intended to represent a step change in how we drive growth, creating a more diversified revenue mix, a more resilient recurring base, and a more disciplined commercial organization. Strong commercial leadership is also a critical enabler of our strategies, and we hope to announce in the period ahead the appointment of a new global chief commercial officer with a track record and approach that align with our long-term objectives.
Steve LaNeve: This work will help ensure that our pricing reflects the true clinical and economic value our technology delivers, will facilitate our winning competitive bids at appropriate margins, and should be reflected in our sales and margin growth over time. Collectively, these are the types of actions that, as they are implemented and begin to take effect, are intended to represent a step change in how we drive growth, creating a more diversified revenue mix, a more resilient recurring base, and a more disciplined commercial organization. Strong commercial leadership is also a critical enabler of our strategies, and we hope to announce in the period ahead the appointment of a new global chief commercial officer with a track record and approach that align with our long-term objectives.
Speaker #3: We'll facilitate our winning competitive bids at appropriate margins and should be reflected in our sales and margin growth over time. Collectively, these are the types of actions that, as they are implemented and begin to take effect, are intended to represent the step change in how we drive growth.
Speaker #3: Creating a more diversified revenue mix, a more resilient recurring base, and a more disciplined commercial organization. Strong commercial leadership is also a critical enabler of our strategies.
Speaker #3: And we hope to announce in the period ahead the appointment of a new global chief commercial officer with a track record and approach that align with our long-term objectives.
Speaker #3: Overall, these initiatives are already in motion and would play a critical role in strengthening our top line, improving profitability, and supporting sustainable value creation going forward.
Stephen LaNeve: Overall, these initiatives are already in motion and would play a critical role in strengthening our top line, improving profitability, and supporting sustainable value creation going forward. Against the backdrop of our transformation, our customer conversations have been strikingly consistent across geographies. Health systems appear to be prioritizing three things: reliability, interoperability, and patient throughput. This clarity is helping us sequence our product roadmap and service investments with much greater discipline. From an operating rhythm perspective, we have tightened weekly and monthly financial and operating reviews around orders, revenue, margins, service performance, and cash, highlighting KPIs that are critical to improve business performance, enabling faster corrective actions where needed. This rhythm supports the accountability and execution pace we committed to in December.
Steve LaNeve: Overall, these initiatives are already in motion and would play a critical role in strengthening our top line, improving profitability, and supporting sustainable value creation going forward. Against the backdrop of our transformation, our customer conversations have been strikingly consistent across geographies. Health systems appear to be prioritizing three things: reliability, interoperability, and patient throughput. This clarity is helping us sequence our product roadmap and service investments with much greater discipline. From an operating rhythm perspective, we have tightened weekly and monthly financial and operating reviews around orders, revenue, margins, service performance, and cash, highlighting KPIs that are critical to improve business performance, enabling faster corrective actions where needed. This rhythm supports the accountability and execution pace we committed to in December.
Speaker #3: Against the backdrop of our transformation, our customer conversations have been strikingly consistent across geographies. Health systems appear to be prioritizing three things: reliability, interoperability, and patient throughput.
Speaker #3: This clarity is helping us sequence our product roadmap and service investments with much greater discipline. From an operating rhythm perspective, we have tightened weekly and monthly financial and operating reviews around orders, margins, service performance, revenue, and cash.
Speaker #3: Highlighting KPIs that are critical to improve business performance, enabling faster corrective actions where needed. This rhythm supports the accountability and execution pace we committed to in December.
Speaker #3: Lastly, from a people and culture point of view, our leadership team knows that we need to emphasize and incentivize teamwork, cross-functional collaboration, data-driven decision-making, and a heightened sense of urgency in order to create a performance-driven environment.
Stephen LaNeve: Lastly, from a people and culture point of view, our leadership team knows that we need to emphasize and incentivize teamwork, cross-functional collaboration, data-driven decision-making, and a heightened sense of urgency in order to create a performance-driven environment. I believe strongly that transformations succeed when they are owned by the organization. I'm proud of how our teams have leaned in, maintaining customer focus while embracing new ways of working. We are supporting our people through the transformation, and I want to thank every Accuray teammate for their resilience and professionalism. Now, turning to the quarter results. From a top-line perspective, this quarter did not meet our expectations. Our business was most notably impacted by the ongoing tariffs and an increasingly unstable geopolitical environment, particularly as it relates to China, which has been a big part of our growth story over the last couple of years.
Steve LaNeve: Lastly, from a people and culture point of view, our leadership team knows that we need to emphasize and incentivize teamwork, cross-functional collaboration, data-driven decision-making, and a heightened sense of urgency in order to create a performance-driven environment. I believe strongly that transformations succeed when they are owned by the organization. I'm proud of how our teams have leaned in, maintaining customer focus while embracing new ways of working. We are supporting our people through the transformation, and I want to thank every Accuray teammate for their resilience and professionalism. Now, turning to the quarter results. From a top-line perspective, this quarter did not meet our expectations. Our business was most notably impacted by the ongoing tariffs and an increasingly unstable geopolitical environment, particularly as it relates to China, which has been a big part of our growth story over the last couple of years.
Speaker #3: I believe strongly that transformations succeed when they're owned by the organization. I'm proud of how our teams have leaned in, maintaining customer focus while embracing new ways of working.
Speaker #3: We are supporting our people through the transformation, and I want to thank every Accuray teammate for their resilience and professionalism. Now, turning to the quarter results.
Speaker #3: From a top-line perspective, this quarter did not meet our expectations. Our business was most notably impacted by the ongoing tariffs and an increasingly unstable geopolitical environment, particularly as it relates to China.
Speaker #3: Which has been a big part of our growth story over the last couple of years. These external pressures affected both demand patterns and the timing of commercial activity in ways that have been difficult to fully anticipate.
Stephen LaNeve: These external pressures affected both demand patterns and the timing of commercial activity in ways that have been difficult to fully anticipate. We are keeping a close eye on all of these factors, and we'll keep you updated as we get more clarity over the next few quarters. Given the visibility we have today, we think it's prudent to reset our fiscal 2026 revenue and Adjusted EBITDA outlook for the remainder of the fiscal year. This updated guidance assumes and reflects continued volatility in China, the persistence of current tariff structures, and other ongoing headwinds, but does not assume a material worsening beyond what we are experiencing today. Our revised guidance on the revenue will be in the range of $440 to 450 million, with Adjusted EBITDA guidance of $22 to 25 million.
Steve LaNeve: These external pressures affected both demand patterns and the timing of commercial activity in ways that have been difficult to fully anticipate. We are keeping a close eye on all of these factors, and we'll keep you updated as we get more clarity over the next few quarters. Given the visibility we have today, we think it's prudent to reset our fiscal 2026 revenue and Adjusted EBITDA outlook for the remainder of the fiscal year. This updated guidance assumes and reflects continued volatility in China, the persistence of current tariff structures, and other ongoing headwinds, but does not assume a material worsening beyond what we are experiencing today. Our revised guidance on the revenue will be in the range of $440 to 450 million, with Adjusted EBITDA guidance of $22 to 25 million.
Speaker #3: We are keeping a close eye on all of these factors, and we'll keep you updated as we get more clarity over the next few quarters.
Speaker #3: Given the visibility we have today, we think it's prudent to reset our fiscal 2026 revenue and adjusted EBITDA outlook for the remainder of the fiscal year.
Speaker #3: This updated guidance assumes and reflects continued volatility in China the persistence of current tariff structures and other ongoing headwinds. But does not assume a material worsening beyond what we are experiencing today.
Speaker #3: Our revised guidance on the 440 to 450 revenue will be in the range of million dollars. With adjusted EBITDA guidance of 22 to 25 million dollars.
Speaker #3: This compares to our previous guidance of 471 to 485 million dollars of revenue and 31 million to 35 million dollars of adjusted EBITDA. That said, the underlying trends inside the company tell a different and more encouraging story.
Stephen LaNeve: This compares to our previous guidance of $471 to 485 million of revenue and $31 to 35 million of Adjusted EBITDA. That said, the underlying trends inside the company tell a different and more encouraging story. We are beginning to translate our strategic intent into operational execution, tightening costs, streamlining decision-making, improving competitiveness, and reallocating resources toward areas where we can drive the greatest value. Despite the external headwinds, we remain firmly focused on delivering against our transformation commitments and strengthening Accuray's foundation for sustained profitable growth. Our objectives are clear: drive top line growth, improve profitability, and create lasting value for patients, providers, and shareholders.
Steve LaNeve: This compares to our previous guidance of $471 to 485 million of revenue and $31 to 35 million of Adjusted EBITDA. That said, the underlying trends inside the company tell a different and more encouraging story. We are beginning to translate our strategic intent into operational execution, tightening costs, streamlining decision-making, improving competitiveness, and reallocating resources toward areas where we can drive the greatest value. Despite the external headwinds, we remain firmly focused on delivering against our transformation commitments and strengthening Accuray's foundation for sustained profitable growth. Our objectives are clear: drive top line growth, improve profitability, and create lasting value for patients, providers, and shareholders.
Speaker #3: We are beginning to translate our strategic intent into operational execution: tightening costs, streamlining decision-making, improving competitiveness, and reallocating resources toward areas where we can drive the greatest value.
Speaker #3: Despite the external headwinds, we remain firmly focused on delivering against our transformation commitments and strengthening accurate foundation for sustained profitable growth. Our objectives are clear.
Speaker #3: Drive top-line growth, improve profitability, and create lasting value for patients, providers, and shareholders. With that in mind, we continue to expect to reach a high single-digit adjusted EBITDA margin run rate within the next nine months, and to expand that margin to double digits over the medium to long term.
Stephen LaNeve: With that in mind, we continue to expect to reach a high single-digit Adjusted EBITDA margin run rate within the next nine months and to expand that margin to double digits over the medium to long term. With that, I'll hand it over to Ali for a detailed review of our second quarter results. Ali?
Steve LaNeve: With that in mind, we continue to expect to reach a high single-digit Adjusted EBITDA margin run rate within the next nine months and to expand that margin to double digits over the medium to long term. With that, I'll hand it over to Ali for a detailed review of our second quarter results. Ali?
Speaker #3: With that, I'll hand it over to Ali for a detailed review of our second quarter results.
Speaker #3: Ali,
Speaker #2: Thanks, Steve,
Ali Pervaiz: Thanks, Steve, and good afternoon, everyone. I would like to begin by thanking our global cross-functional teams for their continued dedication and hard work as we continue to execute on our transformation plan. Turning to Q2 results. Net revenue for the quarter was $102.2 million, which was down 12% versus the prior year and down 13% on a constant currency basis. Product revenue for Q2 was $45 million, down 26% overall and down 28% on a constant currency basis. As Steve mentioned, most of this decline was due to product revenue in China that was lower than expected as a result of ongoing geopolitical tensions and the impact of tariffs.
Ali Pervaiz: Thanks, Steve, and good afternoon, everyone. I would like to begin by thanking our global cross-functional teams for their continued dedication and hard work as we continue to execute on our transformation plan. Turning to Q2 results. Net revenue for the quarter was $102.2 million, which was down 12% versus the prior year and down 13% on a constant currency basis. Product revenue for Q2 was $45 million, down 26% overall and down 28% on a constant currency basis. As Steve mentioned, most of this decline was due to product revenue in China that was lower than expected as a result of ongoing geopolitical tensions and the impact of tariffs.
Speaker #2: begin by thanking our global cross-functional and good afternoon, everyone. I would like to teams for their continued dedication and hard work as we continue to execute our transformation plan.
Speaker #2: Turning to the second quarter results. Net revenue for the quarter was 102.2 million, which was down 12% versus the prior year and down 13% on a constant currency basis.
Speaker #2: Product revenue for the second quarter was $45 million, down 26% overall and down 28% on a constant currency basis. As Steve mentioned, most of this decline was due to product revenue in China that was lower than expected as a result of ongoing geopolitical tensions and the impact of tariffs.
Speaker #2: On a positive note, our service business was quite resilient despite some of these weaker macro trends, coming in at $57.2 million in revenue, up 4% from the prior year and up 3% on a constant currency basis.
Ali Pervaiz: On a positive note, our service business was quite resilient despite some of these weaker macro trends, coming in at $57.2 million in revenue, up 4% from the prior year and up 3% on a constant currency basis. As we have mentioned on past calls, service is a key part of our recurring revenue growth strategy and continues to benefit from efforts to add to and diversify our offerings, as well as continue expansion of our global install base. Product growth orders for Q2 were approximately $66 million and represented a book-to-bill ratio of 1.5, with a trailing 12-month ratio of 1.2. We ended Q2 with a reported order backlog of approximately $383 million, defined to include only orders younger than 30 months.
Ali Pervaiz: On a positive note, our service business was quite resilient despite some of these weaker macro trends, coming in at $57.2 million in revenue, up 4% from the prior year and up 3% on a constant currency basis. As we have mentioned on past calls, service is a key part of our recurring revenue growth strategy and continues to benefit from efforts to add to and diversify our offerings, as well as continue expansion of our global install base. Product growth orders for Q2 were approximately $66 million and represented a book-to-bill ratio of 1.5, with a trailing 12-month ratio of 1.2. We ended Q2 with a reported order backlog of approximately $383 million, defined to include only orders younger than 30 months.
Speaker #2: As we have mentioned on past calls, service is a key part of our recurring revenue growth strategy and continues to benefit from efforts to add to and diversify our offerings as well as continue expansion of our global install base.
Speaker #2: Product growth orders for the second quarter were approximately $66 million and represented a book-to-bill ratio of 1.5, with a trailing 12-month ratio of 1.2.
Speaker #2: We ended the second quarter with a reported order backlog of approximately 383 million dollars defined to include only orders younger than 30 months. This represents over 18 months of product revenue and the backlog remains diversified geographically and supported by long-term customer commitments and we saw no order cancellations during the quarter.
Ali Pervaiz: This represents over 18 months of product revenue, and the backlog remains diversified geographically and supported by long-term customer commitments, and we saw no order cancellations during the quarter. Our overall gross margin for the quarter was 23.5%, compared to 36.1% in the prior year. This decline was primarily due to product gross margins, which were 19.7%, compared to 43.5% in the prior year. The majority of the unfavorable impact to product gross margins was related to our China business. First, we had lower China margin releases compared to the prior year, which contributed 8.2 points of the decline. As a reminder, in Q2 of fiscal 2025, we released 27 units of China product following an NMPA approval of the Tomo C.
Ali Pervaiz: This represents over 18 months of product revenue, and the backlog remains diversified geographically and supported by long-term customer commitments, and we saw no order cancellations during the quarter. Our overall gross margin for the quarter was 23.5%, compared to 36.1% in the prior year. This decline was primarily due to product gross margins, which were 19.7%, compared to 43.5% in the prior year. The majority of the unfavorable impact to product gross margins was related to our China business. First, we had lower China margin releases compared to the prior year, which contributed 8.2 points of the decline. As a reminder, in Q2 of fiscal 2025, we released 27 units of China product following an NMPA approval of the Tomo C.
Speaker #2: Our overall gross margin for the quarter was 23.5% compared to 36.1% in the prior year. This decline was due to margins, which were 19.7% compared to 43.5% in the prior year.
Speaker #2: The majority of the unfavorable impact to product gross margins was related to our China business. First, we had lower China margin releases compared to the prior year, which contributed 8.2 points of the decline.
Speaker #2: As a reminder, in Q2 of fiscal 2025, we released 27 units of China product following an MPA approval of the TOMOC. Second, the year-over-year incremental cost from higher tariffs impacted product gross margins by approximately 6 points.
Ali Pervaiz: Second, the year-over-year incremental cost from higher tariffs impacted product gross margins by approximately 6 points. Lastly, we had 5 CyberKnife shipments in the prior year versus 0 in the current quarter, which impacted product gross margins by approximately 5.4 points. Service gross margins were 26.6%, compared to 27.7% in the prior year, primarily driven by higher net parts consumption. Overall, we continue to be focused on margin expansion in our service business, driven by higher pricing, improved product reliability, leading to lower labor costs and parts consumption, and reducing our cost to serve and the increased penetration of diverse, high-margin service offerings. Quarterly service gross margins can fluctuate due to the timing of parts consumption, which we experienced in Q2.
Ali Pervaiz: Second, the year-over-year incremental cost from higher tariffs impacted product gross margins by approximately 6 points. Lastly, we had 5 CyberKnife shipments in the prior year versus 0 in the current quarter, which impacted product gross margins by approximately 5.4 points. Service gross margins were 26.6%, compared to 27.7% in the prior year, primarily driven by higher net parts consumption. Overall, we continue to be focused on margin expansion in our service business, driven by higher pricing, improved product reliability, leading to lower labor costs and parts consumption, and reducing our cost to serve and the increased penetration of diverse, high-margin service offerings. Quarterly service gross margins can fluctuate due to the timing of parts consumption, which we experienced in Q2.
Speaker #2: Lastly, we had five CyberKnife shipments in the prior year versus zero in the current quarter, which impacted product gross margins by approximately 5.4 points.
Speaker #2: Service gross margins were 26.6%, compared to 27.7% in the prior year, primarily driven by higher net parts consumption. Overall, we continue to be focused on margin expansion in our service business, driven by higher pricing, improved product reliability leading to lower labor costs and parts consumption, reducing our cost to serve, and the increased penetration of diverse, high-margin service offerings.
Speaker #2: Quarterly service gross margins can fluctuate due to the timing of parts consumption, which we experienced in Q2. While several of these factors are transitory, such as prior-year China releases and product mix, others like tariffs may persist in the near term.
Ali Pervaiz: While several of these factors are transitory, such as prior year China releases and product mix, others, like tariffs, may persist in the near term. Our transformation actions are designed to offset these pressures through cost reduction, operational efficiency, and margin improvement in service. Operating expenses in Q2 were $35.6 million, compared to $37.2 million in Q2 of the prior fiscal year. The $35.6 million includes $6.1 million of one-time restructuring expenses. Stripping those out, our operating expenses declined almost 21% quarter-over-quarter. Operating loss for the quarter was $11.6 million, compared to income of $4.7 million in the prior year. The $6.1 million in restructuring charges recognized in Q2 included severance costs and other one-time costs directly related to our restructuring and transformation plans.
Ali Pervaiz: While several of these factors are transitory, such as prior year China releases and product mix, others, like tariffs, may persist in the near term. Our transformation actions are designed to offset these pressures through cost reduction, operational efficiency, and margin improvement in service. Operating expenses in Q2 were $35.6 million, compared to $37.2 million in Q2 of the prior fiscal year. The $35.6 million includes $6.1 million of one-time restructuring expenses. Stripping those out, our operating expenses declined almost 21% quarter-over-quarter. Operating loss for the quarter was $11.6 million, compared to income of $4.7 million in the prior year. The $6.1 million in restructuring charges recognized in Q2 included severance costs and other one-time costs directly related to our restructuring and transformation plans.
Speaker #2: Our transformation actions are designed to offset these pressures through cost reduction, operational efficiency, and margin improvement in service. Operating expenses in the second quarter were $35.6 million, compared to $37.2 million in the second quarter of the prior fiscal year.
Speaker #2: The $35.6 million includes $6.1 million of one-time restructuring expenses. Stripping those out, our operating expenses declined almost 21% quarter over quarter. Operating loss for the quarter was $11.6 million compared to income of $4.7 million in the prior year.
Speaker #2: The 6.1 million dollars in restructuring charges recognized in the second quarter included severance costs and other one-time costs directly related to our restructuring and transformation plans.
Speaker #2: Adjusted EBITDA for the quarter was a loss of 1.9 million dollars compared to positive 9.6 million dollars in the prior year. We described the reconciliation between gap net income and adjusted EBITDA in our earnings release issued today.
Ali Pervaiz: Adjusted EBITDA for the quarter was a loss of $1.9 million, compared to positive $9.6 million in the prior year. We described the reconciliation between GAAP, net income, and adjusted EBITDA in our earnings release issued today. Turning to the balance sheet, total cash, cash equivalents, and short-term restricted cash amounted to $41.9 million, compared to $63.9 million at the end of last quarter, primarily due to working capital usage, cash interest, and restructuring payments. Net accounts receivable were $61 million, up $6.6 million from the prior quarter, largely due to higher sequential quarter revenue. Our net inventory balance was $151 million, down $4.5 million from the prior quarter. And with that, I'd like to hand the call back to Steve.
Ali Pervaiz: Adjusted EBITDA for the quarter was a loss of $1.9 million, compared to positive $9.6 million in the prior year. We described the reconciliation between GAAP, net income, and adjusted EBITDA in our earnings release issued today. Turning to the balance sheet, total cash, cash equivalents, and short-term restricted cash amounted to $41.9 million, compared to $63.9 million at the end of last quarter, primarily due to working capital usage, cash interest, and restructuring payments. Net accounts receivable were $61 million, up $6.6 million from the prior quarter, largely due to higher sequential quarter revenue. Our net inventory balance was $151 million, down $4.5 million from the prior quarter. And with that, I'd like to hand the call back to Steve.
Speaker #2: Turning to the balance sheet, total cash, cash equivalents, and short-term restricted cash amounted to $41.9 million compared to $63.9 million at the end of last quarter, primarily due to working capital usage, cash interest, and restructuring payments.
Speaker #2: Net accounts receivable were $61 million, up $6.6 million from the prior quarter, largely due to higher sequential quarter revenue. Our net inventory balance was $151 million, down $4.5 million from the prior quarter.
Speaker #2: And with that, I'd like to hand the call back to
Speaker #2: Steve. Thank you,
Stephen LaNeve: Thank you, Ali. In closing, I continue to be excited about the opportunities Accuray has in front of it. I fundamentally believe in our differentiated product offerings and am committed to enabling access to these truly unique helical and robotic platform technologies by patients globally. As stated previously, my underlying goal is to foster a performance-driven culture that pairs innovation with execution, strengthens operational discipline, and drives sustainable, profitable growth while creating long-term value for patients, providers, and shareholders we serve. As you look ahead to the next several quarters, we believe our progress should be measured by three things: resumption of expansion of our installed base, improved cost discipline and EBITDA margin trajectory, continued resilience and margin expansion in our service business, and evidence that our operational simplification is translating into more consistent execution. I will now turn it back over to the operator for Q&A.
Steve LaNeve: Thank you, Ali. In closing, I continue to be excited about the opportunities Accuray has in front of it. I fundamentally believe in our differentiated product offerings and am committed to enabling access to these truly unique helical and robotic platform technologies by patients globally. As stated previously, my underlying goal is to foster a performance-driven culture that pairs innovation with execution, strengthens operational discipline, and drives sustainable, profitable growth while creating long-term value for patients, providers, and shareholders we serve. As you look ahead to the next several quarters, we believe our progress should be measured by three things: resumption of expansion of our installed base, improved cost discipline and EBITDA margin trajectory, continued resilience and margin expansion in our service business, and evidence that our operational simplification is translating into more consistent execution. I will now turn it back over to the operator for Q&A.
Speaker #1: Ali: In closing, I continue to be excited about the opportunities Accuray has in front of it. I fundamentally believe in our differentiated product offerings and am committed to enabling access to these truly unique helical and robotic platform technologies by patients globally.
Speaker #1: As stated previously, my underlying goal is to foster a performance-driven culture that pairs innovation with execution, strengthens operational discipline, and drives sustainable, profitable growth while creating long-term value for the patients, providers, and shareholders we serve.
Speaker #1: As you look ahead to the next several quarters, we believe our progress should be measured by three things: resumption of expansion of our install base improved cost discipline and EBITDA margin trajectory continued resilience and margin expansion in our service business and evidence that our operational simplification is translating into more consistent execution.
Speaker #1: I will now turn it back over to the operator for
Speaker #1: Q&A. Thank you.
Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Our first question for today will come from Marie Thibault with BTIG. Please go ahead.
Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Our first question for today will come from Marie Thibault with BTIG. Please go ahead.
Speaker #2: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.
Speaker #2: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. And our first question for today will come from Marie Seibel with BTIG.
Speaker #2: Please go
Speaker #2: Go ahead. Good evening, Steve and Ali.
Marie Thibault: Good evening, Steve and Ali. Thanks for taking the questions. I wanted to dig here a little bit on the revenue guidance cut. You know, we've grown very used to Accuray having kind of a 40/60 split, 40% of revenue coming in the first half of the fiscal year, 60% in the back half. If I look at what you've done so far in the first half of this fiscal year, you're right on track with 40% for that prior guidance range. Wonder what exactly you saw that's coming in the back half of the year that's sort of made you get more cautious? Is it China alone? Is there just closer visibility on timelines and other projects? Any more detail on the guidance cut, because you're certainly right on track for that 40/60 that we're used to.
Marie Thibault: Good evening, Steve and Ali. Thanks for taking the questions. I wanted to dig here a little bit on the revenue guidance cut. You know, we've grown very used to Accuray having kind of a 40/60 split, 40% of revenue coming in the first half of the fiscal year, 60% in the back half. If I look at what you've done so far in the first half of this fiscal year, you're right on track with 40% for that prior guidance range. Wonder what exactly you saw that's coming in the back half of the year that's sort of made you get more cautious? Is it China alone? Is there just closer visibility on timelines and other projects? Any more detail on the guidance cut, because you're certainly right on track for that 40/60 that we're used to.
Speaker #3: Thanks for taking the questions. I wanted to dig here a little bit on the revenue guidance cut. You know, we've grown very used to Accuray having kind of a 40-60 split—40% of revenue coming in the first half.
Speaker #3: If I look at what you've done so far in the first half of this fiscal year, you're right on track with 40% for that prior guidance range.
Speaker #3: So I'm wondering what exactly you saw that's coming in the back half of the year that's sort of made you get more cautious. Is it China alone?
Speaker #3: Is there just closer visibility on timelines and other projects? Any more detail on the guidance cut? Because you're certainly right on track for that 40-60 that we're used
Speaker #3: to. Yeah, hi
Stephen LaNeve: Yeah. Hi, hi, Marie, and thanks for the question. This is Steve. Maybe I'll just do a very gentle kind of adjustment on the 40/60 comment. I think it's typically been, you know, closer to 45/55. So maybe just that, you know, clarification there. And then with respect to China, you know, clearly, as we stated in the remarks, the business was, you know, impacted by the ongoing tariffs and an increasingly unstable geopolitical environment that we've commented on before. And obviously, that's been a big part of our growth story over the last couple of years. And those external pressures affected both the demand patterns and the timing of our commercial activity in ways that have been difficult to fully anticipate.
Steve LaNeve: Yeah. Hi, hi, Marie, and thanks for the question. This is Steve. Maybe I'll just do a very gentle kind of adjustment on the 40/60 comment. I think it's typically been, you know, closer to 45/55. So maybe just that, you know, clarification there. And then with respect to China, you know, clearly, as we stated in the remarks, the business was, you know, impacted by the ongoing tariffs and an increasingly unstable geopolitical environment that we've commented on before. And obviously, that's been a big part of our growth story over the last couple of years. And those external pressures affected both the demand patterns and the timing of our commercial activity in ways that have been difficult to fully anticipate.
Speaker #4: Marie, and thanks for the question. This is Steve. Maybe I'll just do a very gentle kind of adjustment on the 40-60 comment. I think it's typically been, you know, closer to 45-55.
Speaker #4: So maybe just that, you know, clarification there. And then with respect to China, you know, clearly as we stated in the remarks, the business was, you know, impacted by the ongoing tariffs and an increasingly unstable geopolitical environment that we've commented on before.
Speaker #4: And obviously that’s been a big part of our growth story over the last couple of years. And those external pressures affected both the demand patterns and the timing of our commercial activity in ways that have been difficult to fully anticipate.
Speaker #4: As you likely know, there's a process in China around quota license tender and then funding. That process flow has slowed, and so the deal dynamics have wound up being different than we had anticipated and have just become more protracted.
Stephen LaNeve: As you likely know, there's a process in China around quota, license, tender, and then funding, and that process flow has slowed. And so the deal dynamics have wound up being different than we had anticipated and have just become more protracted. And it's really as simple and as complicated as that.
Steve LaNeve: As you likely know, there's a process in China around quota, license, tender, and then funding, and that process flow has slowed. And so the deal dynamics have wound up being different than we had anticipated and have just become more protracted. And it's really as simple and as complicated as that.
Speaker #4: And it's really, as simple and as complicated as that.
Speaker #3: Okay, that's helpful, Steve. Thank you. And then I guess on product gross margins, I think a little light this quarter. I think related to some of the China JV timing, what should we expect on product gross margins going forward here with this new revenue range and with some of the dynamics that you've just
Marie Thibault: Okay. That's helpful, Steve. Thank you. And then I guess on product gross margins, I think a little light this quarter, I think, related to some of the China JV timing. What should we expect on product gross margins going forward here with this new revenue range and, and with some of the dynamics that you just showed?
Marie Thibault: Okay. That's helpful, Steve. Thank you. And then I guess on product gross margins, I think a little light this quarter, I think, related to some of the China JV timing. What should we expect on product gross margins going forward here with this new revenue range and, and with some of the dynamics that you just showed?
Speaker #3: shown? I can take that
Ali Pervaiz: I can take that one, Marie. Thanks for the question. So look, I mean, I think in general, product gross margins are going to continue to get hit with the impact of tariffs, which is a new entrant compared to prior year, and then also just inflation that we continue to have over the last couple of years. We're certainly taking actions to combat that as part of our margin expansion plan, but you know, the headwinds are certainly stronger than the way that we're executing against it. As it pertains to Q2, in particular, you know, in my prepared comments, there are really three main contributors. There was a China JV release of about 8 points compared to prior year.
Ali Pervaiz: I can take that one, Marie. Thanks for the question. So look, I mean, I think in general, product gross margins are going to continue to get hit with the impact of tariffs, which is a new entrant compared to prior year, and then also just inflation that we continue to have over the last couple of years. We're certainly taking actions to combat that as part of our margin expansion plan, but you know, the headwinds are certainly stronger than the way that we're executing against it. As it pertains to Q2, in particular, you know, in my prepared comments, there are really three main contributors. There was a China JV release of about 8 points compared to prior year.
Speaker #4: One, Marie. Thanks for the question. So, look, I mean, I think in general product gross margins are going to continue to get hit with the impact of tariffs.
Speaker #4: Which is a new entrant compared to the prior year, and then also just inflation that we continue to have over the last couple of years.
Speaker #4: We're certainly taking actions to combat that as part of our margin expansion plan. But, you know, the headwinds are certainly stronger than the way that we're executing against it.
Speaker #4: To Q2 in particular, you know, in my prepared comments, there are really three main contributors. There was a China JV release of about 8 points compared to prior year.
Speaker #4: There was a tariffs of about 6 points. And then overall product mix that was roughly another 8 points or so. And so those are really the key contributors versus prior year.
Ali Pervaiz: There was a tariffs at about 6 points, and then overall product mix that was roughly another 8 points or so. So those are really the key contributors versus prior year. Again, probably more headwinds this quarter, so I would not expect product growth margins to continue to hover in the 20% range. I would expect them to be somewhere between 20% to 30%, but that's highly dependent upon the product mix that shipped out and also dependent upon the timing of the releases, which is, you know, very China-centric.
Ali Pervaiz: There was a tariffs at about 6 points, and then overall product mix that was roughly another 8 points or so. So those are really the key contributors versus prior year. Again, probably more headwinds this quarter, so I would not expect product growth margins to continue to hover in the 20% range. I would expect them to be somewhere between 20% to 30%, but that's highly dependent upon the product mix that shipped out and also dependent upon the timing of the releases, which is, you know, very China-centric.
Speaker #4: Again, probably more headwinds this quarter, so I would not expect product gross margins to continue to hover in the 20% range. I would expect them to be somewhere between 20% to 30%.
Speaker #4: But that's highly dependent upon the product mix that's shipped out and also dependent upon the timing of the releases which is, you know, very
Speaker #4: China-centric. All right, very helpful,
Marie Thibault: All right. Very helpful, Ali. I'll jump back in queue. Thank you.
Marie Thibault: All right. Very helpful, Ali. I'll jump back in queue. Thank you.
Speaker #3: Ali. I'll jump back in Q. Thank you.
Speaker #4: Thanks, Marie. Thank
Ali Pervaiz: Thanks, Marie.
Ali Pervaiz: Thanks, Marie.
Speaker #4: You. The next question will come from Young.
Stephen LaNeve: Thank you.
Steve LaNeve: Thank you.
Operator: The next question will come from Young Li with Jefferies. Please go ahead.
Operator: The next question will come from Young Li with Jefferies. Please go ahead.
Speaker #2: Lee with Jefferies. Please go
Young Li: All right, great. Thanks for taking our questions. I guess, maybe to start, wanted to hear a little bit more about the new initiatives you put in for, I guess, re-returning the business to growth, sort of the solutions-oriented initiatives, as well as the structure distributor partnerships. I guess for those, you know, are there any potentials for disruption as things change? When do you expect us to see some results from that? And, yeah, those are the questions. Thank you.
Young Li: All right, great. Thanks for taking our questions. I guess, maybe to start, wanted to hear a little bit more about the new initiatives you put in for, I guess, re-returning the business to growth, sort of the solutions-oriented initiatives, as well as the structure distributor partnerships. I guess for those, you know, are there any potentials for disruption as things change? When do you expect us to see some results from that? And, yeah, those are the questions. Thank you.
Speaker #4: All right, ahead. great. Thanks for taking our questions. I guess maybe to start, wanted to hear a little bit more about the new initiatives you put in for, I guess, returning the business to growth.
Speaker #4: Sort of the solutions-oriented initiatives, structure distributor partnerships. I guess for those, you know, are there any potentials for disruption as things change? When do you expect to see some results from that?
Speaker #4: And yeah, those are the questions. Thank you. Yeah, thank you, Young. This is Steve. Appreciate the question. You know, as we've looked at transformation and spoken about that in the past, obviously have spent time on restructuring the ourselves for growth.
Stephen LaNeve: Yeah, thank you, Young. This is Steve. Appreciate the question. You know, as we've looked at transformation and spoken about that in the past, obviously have spent time on restructuring the organization to really position ourselves for growth. As we had commented on before, about a 15% workforce reduction. And then looking at kind of the opposite side to the cost savings and the program redirection, really spending time on growth and looking at operating rigor and speed of decision making, making sure that we establish clear product and service strategies, reallocating engineering sources to focus on high ROI programs. And then specifically to your point on the solutions in the service area, we think there's a great opportunity to build on what we call our Select, Advantage, and Optimum programs.
Steve LaNeve: Yeah, thank you, Young. This is Steve. Appreciate the question. You know, as we've looked at transformation and spoken about that in the past, obviously have spent time on restructuring the organization to really position ourselves for growth. As we had commented on before, about a 15% workforce reduction. And then looking at kind of the opposite side to the cost savings and the program redirection, really spending time on growth and looking at operating rigor and speed of decision making, making sure that we establish clear product and service strategies, reallocating engineering sources to focus on high ROI programs. And then specifically to your point on the solutions in the service area, we think there's a great opportunity to build on what we call our Select, Advantage, and Optimum programs.
Speaker #4: And as we had commented on before, about a 15% workforce at kind of the opposite side to the cost savings and the program redirection, really spending time on growth.
Speaker #4: And looking at operating rigor and speed of decision-making making sure that we establish clear product and service strategies reallocating engineering sources to focus on high ROI programs and then specifically to your point on the solutions and the service area we think there's a great opportunity to build on what we call our SELECT advantage and optimum programs.
Speaker #4: And those programs go from sort of base level to mid-level to premium level service offerings. And they go beyond break/fix and include, potentially, areas like training, quality support, user groups and forums, data management, real-time monitoring, software upgrades, consulting, and workflow analysis.
Stephen LaNeve: And those programs go from sort of base level to mid-level to premium level service offerings. And, they go beyond break fix and include potentially areas like training, quality support, user groups and forums, data management, real-time monitoring, software upgrades, consulting, workflow analysis, and those sorts of options that we want to build into our services capabilities. It gives us steadier, we think, opportunities, to drive top line growth. It's, less lumpy in nature, and we think changes the way we look at that services business. The company, I think, has focused a lot on products in the past, and we see a great opportunity and a lot of lift on the service side, with respect to, to our transformation activities.
Steve LaNeve: And those programs go from sort of base level to mid-level to premium level service offerings. And, they go beyond break fix and include potentially areas like training, quality support, user groups and forums, data management, real-time monitoring, software upgrades, consulting, workflow analysis, and those sorts of options that we want to build into our services capabilities. It gives us steadier, we think, opportunities, to drive top line growth. It's, less lumpy in nature, and we think changes the way we look at that services business. The company, I think, has focused a lot on products in the past, and we see a great opportunity and a lot of lift on the service side, with respect to, to our transformation activities.
Speaker #4: Those sorts of options that we want to build into our services capabilities. It gives us steadier, we think, opportunities to drive top-line growth. It's less lumpy in nature.
Speaker #4: And we think changes the way we look at that services business. The company I think has focused a lot on products opportunity and a lot of lift on the in the past and we see a great service side.
Speaker #4: With respect to our transformation activities. And so we've kind of doubled down on just in terms of our staff that we've put that's an area that into that area, our strategy, our structure, our systems.
Stephen LaNeve: So that's, that's an area that we've, you know, kind of doubled down on just in terms of our, our staff that we've put into that area, our strategy, our structure, our systems, and, and think there's a lot of upside there. With respect to, the dealers and distributors, have a program that looks at tiered levels, basically a pay-for-performance model. Obviously, for those dealers and distributors that do more for us, the idea would be that they enjoy, better margins or transfer pricing really. It's really about pricing.
Steve LaNeve: So that's, that's an area that we've, you know, kind of doubled down on just in terms of our, our staff that we've put into that area, our strategy, our structure, our systems, and, and think there's a lot of upside there. With respect to, the dealers and distributors, have a program that looks at tiered levels, basically a pay-for-performance model. Obviously, for those dealers and distributors that do more for us, the idea would be that they enjoy, better margins or transfer pricing really. It's really about pricing.
Speaker #4: And think there's a lot of upside there. With respect to the dealers and distributors, have a program that looks at tiered levels basically a pay-for-performance model.
Speaker #4: And obviously for those dealers and distributors that do more for us, the idea would be that they enjoy better margins or transfer pricing really.
Speaker #4: It's really about pricing. And we think the channel leader that really doubles down on looking at those channel addition of a management opportunities versus regions.
Stephen LaNeve: And, and we think, the addition of a channel leader that really doubles down on looking at those channel management opportunities versus having this maybe at a higher level within the regions, gives us the kind of focus and, and precision that we're looking for out of channel partners who do a lot for us in terms of driving revenue. And of course, with our presence in 81 countries, it would be impossible with our current scale to have directly loaded sales organizations in all those locations. And so our distributor and dealer base, obviously are very important to us.
Steve LaNeve: And, and we think, the addition of a channel leader that really doubles down on looking at those channel management opportunities versus having this maybe at a higher level within the regions, gives us the kind of focus and, and precision that we're looking for out of channel partners who do a lot for us in terms of driving revenue. And of course, with our presence in 81 countries, it would be impossible with our current scale to have directly loaded sales organizations in all those locations. And so our distributor and dealer base, obviously are very important to us.
Speaker #4: Having this maybe at a higher level within the gives us the kind of focus and precision that we're looking for out of channel partners who do a lot for us in terms of driving revenue.
Speaker #4: And of course with our presence in 81 countries, it would be impossible with our current scale to have directly loaded sales organizations and all those locations.
Speaker #4: And so our distributor and dealer base obviously are very important to us. All right, great. Very helpful. And then we've been asking several of our companies sort of the same theme type of questions.
Young Li: All right, great. Very helpful. And then, you know, we've been asking several of our companies sort of the same theme type of question, but, you know, new calendar year, just wanted to get your views on, I guess from your hospital customers' perspective, you know, how is the capital environment from their perspective, especially in places like US, China, EU, and key emerging markets?
Young Li: All right, great. Very helpful. And then, you know, we've been asking several of our companies sort of the same theme type of question, but, you know, new calendar year, just wanted to get your views on, I guess from your hospital customers' perspective, you know, how is the capital environment from their perspective, especially in places like US, China, EU, and key emerging markets?
Speaker #4: But new calendar year—just wanted to get your views on, I guess, from your perspective, how is the capital environment from their perspective, especially in places like the US, China, the EU, and key emerging markets?
Speaker #4: Yeah, so we spend a lot of time talking to our customers directly and from everything that we're seeing and hearing we don't see CapEx shifts by hospitals downward.
Stephen LaNeve: Yeah, so we spend, you know, a lot of time talking to our customers directly, and, you know, from everything that, you know, we're seeing and hearing, we don't see CapEx shifts by hospitals downward. You know, we see increases and we see opportunities, you know, we believe for our equipment to be purchased or leased, depending on how they go about that. There are different acquisition models in different countries, but we haven't heard anything from the conversations that we're having with our various regions or customers specifically, where they're concerned about, you know, the ability to buy equipment. Doesn't seem to be any shift or trend there that would work against us.
Steve LaNeve: Yeah, so we spend, you know, a lot of time talking to our customers directly, and, you know, from everything that, you know, we're seeing and hearing, we don't see CapEx shifts by hospitals downward. You know, we see increases and we see opportunities, you know, we believe for our equipment to be purchased or leased, depending on how they go about that. There are different acquisition models in different countries, but we haven't heard anything from the conversations that we're having with our various regions or customers specifically, where they're concerned about, you know, the ability to buy equipment. Doesn't seem to be any shift or trend there that would work against us.
Speaker #4: We see increases and we see opportunities. We believe for our equipment to be purchased or leased, depending on how they go about that. There are different acquisition models in different countries.
Speaker #4: But we haven't heard anything from the conversations that we're having with our various regions or customer specifically where they're concerned about the ability to buy equipment.
Speaker #4: Doesn't seem to be any shift or trend there that would work against us. All right, great. Thank you very much.
Young Li: All right, great. Thank you very much.
Young Li: All right, great. Thank you very much.
Speaker #2: Again, if you have a question please press star then one. Again, that is star then one. This concludes our question and answer session. I would like to turn the conference back over to Mr. Steve Laneve for any closing remarks.
Operator: Again, if you have a question, please press star, then one. Again, that is star, then one. This concludes our question and answer session. I would like to turn the conference back over to Mr. Steve LaNeve for any closing remarks. Please go ahead.
Operator: Again, if you have a question, please press star, then one. Again, that is star, then one. This concludes our question and answer session. I would like to turn the conference back over to Mr. Steve LaNeve for any closing remarks. Please go ahead.
Speaker #2: Please go ahead.
Speaker #4: Thank you all for joining our call today, and we look forward to speaking with you again in May when we report our fiscal 2026 third quarter earnings results.
Stephen LaNeve: Thank you all for joining our call today, and we look forward to speaking with you again in May when we report our fiscal 2026 Q3 earnings results. This concludes our earnings call. Thank you very much.
Steve LaNeve: Thank you all for joining our call today, and we look forward to speaking with you again in May when we report our fiscal 2026 Q3 earnings results. This concludes our earnings call. Thank you very much.
Speaker #4: This concludes our earnings call. Thank you very much.
Operator: The conference call has now concluded. Thank you for your participation. You may now disconnect.
Operator: The conference call has now concluded. Thank you for your participation. You may now disconnect.
