Accuray Incorporated (NASDAQ:ARAY) Q2 2023 Earnings Call Transcript

Suzanne Winter: Thank you for the question, Brooks. Yes. No, we’re excited. I think about our competitive wins. I think, obviously, a lot of it is driven by our new product innovations. We talked a little bit on the — in the basic this part of the call on how many systems are ordering ClearRT, for example, in Synchrony and VOLO Ultra as well, that is driving a lot of the differentiation of our products compared to competition. And I think that, that’s gaining traction. We’re seeing the increase in growing demand for our products. Same thing in — for the CyberKnife. It continues to be a very unique product that just based on the technology is able to do things that other platforms are not able to do. That being said, I think there’s disruption in the competitive landscape that is allowing us to get the second look that maybe we wouldn’t have gotten 5 years ago.

And we are in a very strong position. And I think that with the growing use of SBRT and ultra-hypofractionation, the need for precision has never been more important. And we bring unique product innovation to the table that others cannot. So all of those things, I think, are just helping us along with commercial focus and a little bit more of a commercial swagger, I think, in knowing that we can win against previous market leaders.

Brooks O’Neil: So my second question, I know you talked a little bit about it in the prepared remarks but increasing your service revenue and driving margin improvement are key strategic objectives. Can you just give us any additional color on where you feel you are, how fast we might be able to see progress in some of the key priorities?

Suzanne Winter: Yes, it’s absolutely a key priority. We also think we have tremendous opportunity in the service business as well as margin expansion. I’ll let Ali talk a little bit more about what we’re doing in those areas.

Ali Pervaiz: Yes, absolutely. Hey, Brooks. On the service side, we are — we think there’s a massive opportunity to continue to increase the top line on that annuity business. It’s through enhanced offerings that could be around training that are more tailored to our customers’ needs. And we think the bigger opportunity in service beyond just the top line growth is around margin expansion. And really, it’s focused on just really optimizing that business and making sure that we focus on 2 of the big cost drivers over there which is really around parts consumption. Take a look at our parts consumption, understand that a little bit better and really focus on parts that we’re utilizing quite a bit and actually try and optimize those. And then when it comes to utilization, really drive that down.

Operator: Our next question comes from Jason Wittes with Loop Capital.

Jason Wittes: First off, 2 things in terms of what’s driving this quarter and it looks like it should drive through the rest of the year. One, I think you guys have mentioned replacement cycle or replacement at least. I mean where are we in terms of a replacement cycle? And I don’t know if you can even give us any kind of color in terms of how many of the systems sold regionally were replacements? And then secondly, you do have quite a bit of new innovations you’re offering at this point. Can you give us any kind of indication in terms of what the take rate is for those and what that might be doing to ASPs?