Suzanne Winter: Thanks for the question, Brooks. Clearly, we’re focusing on the areas where we can improve from an execution standpoint in all the areas that, are within our control mean we missed three system shipments. And some of that was due to some delays in customer processing. But again, we are looking back at everything within the quarter, to see what could we have done better, what can we execute better in the future? How do we plan for these kind of headwinds – and at the same time, there’s a lot that we’re very proud of. We’ve made some significant progress against key priorities in the long-term plan. And I think that have been shown by delivering our strong orders growth, are continuing to build our healthy backlog, growing our installed base, certainly seeing some good positive growth in the service contract revenue.
Again, all parts of our long-term strategy. We’re starting to see improved margins in service. And again, some of these take time to be able to come through the P&L. I think if there are areas we know we need to continue to laser focus, is bringing down product COGS, and we have a path to do that. And we’ll continue to look for areas where we can improve overall margins even in this difficult environment. Because even though we see good news, there are still external headwinds that overshadow the goodness, which hopefully we’re able to show you where, are the parts of the business that long-term are improved. And so that we’re building a better balanced business. I think I look at the U.S. and again, part of our strategy to go to high-growth emerging markets where IT access has been limited, is partly, because we see low growth in the developed markets.
It’s largely a replacement market. So while we didn’t expect the U.S. to slow down so much, I think that it reinforces the strategy that we have, which is how do we balance going into high-growth markets where we can grow our installed base, which ultimately will grow our service revenue.
Brooks O’Neil: Yes, all that makes sense. I get it. I appreciate your commentary and your color there. Could you say – obviously, you’ve had tremendous success in Japan with competitive wins. And I recognize the environment is challenging in the U.S. right now, but are there any indications that you might have opportunities to win some competitive bunkers in the U.S. despite the slowdown that’s been occurring?
Suzanne Winter: Definitely. So if we look at what are we going to do in the U.S. and what do we learn from Japan and how we’ve done well there. They have gotten very close to their customers and building relationships and being there with solutions. And so, just – it’s the same in the U.S., where, again, it’s largely a replacement market. We’re obviously very focused on replacing our own systems and upgrading them, but it is an opportunity to also look at vulnerable competitive sites. And so, we’re going to get closer to our customers. We’re going to bring in solutions that will help them through this difficult period of time. We’re going to focus on the IB and make sure that everyone is satisfied with their equipment. And again, leverage our commercial partnerships that we have, so that when conditions improve, we’re there, and we’ll be able to capitalize on it.
Brooks O’Neil: Makes sense. I’m sorry, I didn’t mean to interrupt….
Suzanne Winter: No, I was just going to say, and I think we – that’s something that our Japan team has done just an incredible job. And as a result, they’re there when the customers are ready.
Brooks O’Neil: Sure. I assume in the U.S., you might benefit some from your commercial partnership with GE Healthcare?
Suzanne Winter: I think all GE as well as all of our commercial partners, we’re obviously all in a challenging space, especially as it relates to radiotherapy priority, but we absolutely will leverage all of our commercial relationships, including GE.
Brooks O’Neil: Cool. Thank you very much for taking my questions.
Operator: The next question will come from Jason Wittes with ROTH MKM. Please go ahead.
Jason Wittes: All right. Thanks for taking the questions. Just a couple on the outlook. Specifically, first off, the three systems that didn’t occur this quarter, is that really more of a 2025 event that you expect them to be filled? Or is that something that’s going to hit the fourth quarter?
Suzanne Winter: It will be in Q4 revenue.
Jason Wittes: It will be in Q4 revenue. Okay. And then in terms of the size treatment approval, it’s now, I guess, late June or sometime in June, how does that impact the outlook in terms of what were you anticipating earlier for China? And does this move that out into 2025?
Ali Pervaiz: So Jason, I guess what I would say is, number one, we’re continuing to ship systems to our China JV partner because they need to continue to manufacture a certain number of these systems just to get ready. So as soon as the approval is there, they can start to cater to their customers. So I would say, we’re continuing to ship systems from a revenue standpoint and they contribute to revenue. Where it has an impact is this whole deferral of 50% of the margin related to JV accounting rules. And so just to clarify, we sell to our JV partner, we defer 50% of our margin until our JV partner sells through to their end customer. That’s just part of JV accounting rules. And so said another way, we have 50% of the margin associated with those shipments that, is deferred and sitting in our balance sheet, right?
So once we’re actually able to get this precision NMPA approval, and once their JV partner starts to ship systems to their end customers. And at that point, will we be able to recognize half of that margin – right now, all of that margin is deferred related to the Tomo C shipments that we’ve made.
Jason Wittes: Okay. So revenue, there’s really – that’s not impacted is really a margin in terms of whenever depending on when the approval happens?
