Accuray (ARAY) Q4 FY26 earnings call: guidance

Accuray achieved over $20 million in cost and margin improvements in FY26 against an original plan of $12 million (which represented approximately $25 million in annualized run-rate benefit). The initiatives encompassed organization streamlining, reduction of operating expenses, commercial realignment, and operational efficiencies across both product manufacturing and service delivery. Management projects these actions will generate approximately $15 million in incremental annualized cost and margin enhancements in FY27 under Phase II of the transformation plan.

To stabilize its capital structure, Accuray finalized a major agreement with TCW Asset Management Company LLC. The agreement converts $40 million of existing debt into convertible preferred stock carrying an 8% annual dividend and a conversion price of $0.50 per share (over a 100% premium to pre-announcement trading). TCW is contributing an additional $15 million cash investment in preferred equity alongside a $5 million delayed-draw term loan facility, coupled with a complete financial covenant holiday through December 31, 2027, with testing resuming on March 31, 2028. Stockholder approval will be sought for preferred issuance and a proposed reverse stock split.

At ESTRO 2026, clinical presentations highlighted the efficacy of Accuray's radiation platforms, including prostate ultra-hypofractionated SBRT studies from San Raffaele Scientific Institute and European Institute of Oncology on CyberKnife, as well as partial breast irradiation and Radixact VitalHold surface-guided automated breath-hold radiotherapy data from CHR Metz-Thionville. Accuray also announced a landmark 10-year research collaboration with the University of Wisconsin School of Medicine and Public Health to advance adaptive radiotherapy using the Stellar platform, complemented by LOIs with Samsung HME America and RaySearch Laboratories.

Product revenues fell significantly in FY26, declining 27% to $173 million (down 42% in Q4 to $40.8 million). Approximately $58 million of the annual decline stemmed from lower sales in China due to prolonged geopolitical tensions and tariff uncertainty^🌐. Book-to-bill for Q4 was 0.9 on $38 million of gross orders, bringing the TTM book-to-bill to 1.1 on $192 million in orders, ending with a 30-month order backlog of $313 million compared to the target healthy ratio of 1.2.

Reported gross margin of 34.8% in Q4 FY26 was heavily influenced by a $5.8 million favorable adjustment related to the invalidation of IEEPA tariffs by the Supreme Court ($5.5 million of which pertained to FY26 expenses, representing 95% of the total credit, and $0.3 million to prior periods). This was partly offset by a $1.5 million nonrecurring inventory write-down of an obsolete component. Normalizing for both items, Q4 pro forma gross margin was 30.5% ($30.8 million), while pro forma product gross margin stood at 17.5% ($7.1 million).