Accuray (NASDAQ:ARAY) reported an 8% decline in fiscal first-quarter revenue as weaker product sales, particularly amid market challenges in China, offset growth in its service business. The radiation therapy company said cost reductions and improved service margins helped it generate positive adjusted EBITDA.
Revenue for the quarter ended September 30, 2026, fell to $86.5 million from $93.9 million a year earlier. Product revenue dropped 26% to $27.3 million, while service revenue rose 4% to $59.2 million.
President and CEO Steve La Neve said product orders and revenue fell short of expectations, with geopolitical and other market factors in China creating a significant headwind. Accuray’s priority, he said, is converting its sales pipeline into orders and revenue while expanding recurring service revenue.
“Fiscal 2027 is about execution,” La Neve said. The company did not provide financial guidance.
Product Orders Lag as Service Revenue Grows
Accuray shipped 12 systems and several upgrades during the quarter, Chief Financial Officer Ali Pervaiz said. Gross product orders totaled $19.8 million, producing a quarterly book-to-bill ratio of 0.7. The trailing 12-month ratio was 1.1, compared with the 1.2 level the company considers healthy for backlog growth.
Reported order backlog was approximately $272 million at quarter end, including only orders less than 30 months old. La Neve said Accuray has changed its commercial leadership and reorganized sales and marketing, including creating a dedicated channel management organization to improve distributor relationships and performance.
The company’s installed base exceeded 1,100 systems globally, supporting more than $230 million in recurring annual revenue, La Neve said. Pervaiz said service contract pricing contributed approximately $0.8 million to the quarter’s year-over-year service revenue increase. Growth in the installed base and higher training and other service solutions revenue accounted for the remaining $1.6 million.
Service gross margin rose to 35.1% from 33.9% a year earlier and 31% for fiscal 2026. Pricing and lower labor costs helped margins, partly offset by tariffs and inflationary pressures on materials and freight. Product gross margin declined to 19.4% from 20.8%, reflecting lower volumes, tariffs and purchase price variances.
Cost Cuts and Accounting Charges
Accuray reported an operating loss of $36.5 million, compared with a loss of $11.3 million a year earlier. The latest quarter included a $35.4 million non-cash goodwill impairment charge; excluding that charge, the operating loss was $1.1 million.
Pervaiz said a $59.6 million gain on extinguishment of debt, related to a July financing transaction, increased the carrying amount of equity without a corresponding increase in the company’s fair value. That triggered an interim goodwill impairment test and the resulting charge.
Adjusted EBITDA was $2.5 million, compared with a loss of $4.1 million in the prior-year quarter. Excluding the impairment and restructuring expenses, operating expenses fell 25% to $26.8 million. Pervaiz said transformation initiatives contributed approximately $13 million in year-over-year bottom-line improvement.
Cash, cash equivalents and restricted cash totaled $50.4 million at quarter end, including $8.1 million of restricted cash. The balance included a $15 million investment from TCW. After the quarter ended, shareholders approved proposals needed to advance the broader transaction, including the planned exchange of $40 million in term loan debt for convertible preferred equity.
Partnerships Target Imaging and Adaptive Therapy
La Neve highlighted a definitive agreement with RaySearch to combine Accuray’s treatment delivery and imaging capabilities with RaySearch’s treatment planning and workflow software. The online adaptive radiation therapy initiative is planned initially for the Radixact platform, with an extension to CyberKnife.
Accuray also advanced its collaboration with Samsung NeuroLogica to pursue volumetric imaging for CyberKnife. La Neve said the company sees an opportunity to combine advanced imaging, treatment adaptation and real-time motion management.
He also cited results from the randomized phase III PACE-A trial comparing surgery with stereotactic body radiation therapy for localized prostate cancer. At a median follow-up of eight years, the estimated five-year freedom from biochemical or clinical failure was 94.8% with radiation therapy and 94.1% with prostatectomy. La Neve said investigators also found advantages for radiation therapy in preserving sexual function and quality of life at five years.
About Accuray (NASDAQ:ARAY)
Accuray Incorporated develops, manufactures and supports radiation oncology systems used to treat cancer. The company focuses on precision radiotherapy technologies designed to deliver targeted radiation while helping clinicians manage treatment complexity and limit exposure to surrounding healthy tissue.
Its principal product platforms include the CyberKnife System, a robotic, image-guided radiation therapy system used for radiosurgery and stereotactic body radiation therapy, and the Radixact System, an image-guided tomotherapy platform designed to deliver highly conformal radiation treatments.
