All right. Thank you, everyone, for attending. My name is Young Li, one of the medtech analysts here at Jefferies. All right. Thank you, everyone, for attending. My name is Young Li, one of the medtech analysts here at Jefferies. All right. Thank you, everyone, for attending. My name is Young Li, one of the medtech analysts here at Jefferies. Really happy to be with Accuray. To my left, Accuray's CFO, Ali Pervaiz. Thanks for coming. I guess to begin, why don't we start a little bit high level? Just wanted to get an overview about end market growth, your competitive share position, and where Accuray sits or fits in the radiation oncology treatment paradigm. Yeah, great. Young, number one, thanks so much for having us at the conference. Happy to be here. Maybe just stepping back for folks that may not be familiar with Accuray. We're about a $450 million company that is in the radiation therapy space. Our revenue is roughly half product and half service. Our service business really is recurring revenue that exists. That's a little bit of an overview for our business. Our main product lines are a system called the Radixact and a system called the CyberKnife that is very much tailored towards the premium and specialty segment of the market. We just recently came out with a system called the Helix, which is more of our value product to really tailor towards more of the value market, the emerging markets. We also have a product called the Tomo C, which is a product that we have developed with our joint venture in China, which is a product that is in China for the China market. By the introduction of both the Helix and the Tomo C, we have been able to double our total addressable market. We are really looking forward to being able to utilize that to target those emerging markets and continue to really increase our install base at a rapid pace. As we increase our install base, really the strategy is that once those products are actually installed, they will then get on service contracts, which will really help grow our service annuity business, which we think is going to be a big area of focus, not only from a top-line growth, but we think there's a lot of momentum over there to be able to really increase margins in a meaningful way. That is a little bit, Young, about Accuray in total. I think from an overall share standpoint, we are number three out of three players in the industry. We do think that we are going to continue to chip away where we think we can actually gain more and more share. We do have number two market share in the Japan market. We feel really good about how we're positioned over there, and we're taking that playbook and really putting that across in the rest of the world. All right. Great. Very helpful. I guess we can't really escape the tariff issue. Still a really hot topic. You have relative high exposure to China, and then you have the JV there, which was expected to be a major growth driver going forward. I guess just given the pause in orders from China was the high level of tariffs, but now that's changed again. The courts in the U.S. ruled against it. I guess can the China business, do you think, sort of return to a normal cadence in the near term? Or how quickly can orders or product come back to the market? Yep. That's a great question and certainly a hot topic for all. Obviously, it's been a very dynamic and fluid situation from a tariff standpoint, one that we continue to monitor very closely. For folks that have been following it, you've sort of seen that tariffs were put in place with the new administration coming into place in the U.S.. Specifically, as it pertains to China, there was a massive increase in terms of tariffs. For most in the headlines, they would have seen that it went up to 145%. It was higher in certain cases because there were existing tariffs that existed. Now it's really come back down to a level that is roughly around 30%, so still higher than what it was. Tariffs continue to exist, and there continues to be uncertainty around it. Maybe just to back up a little bit, the way that we think about tariffs is, number one, we do have a bunch of product that we import into the U.S. to be able to manufacture. If you really step back and think about kind of what our overall direct material spend is, it's somewhere between $150-$170 million. 70% of our supply chain is primarily in the U.S.. Roughly 10% has exposure to China, and about 20% is the rest of the world. When we think about the tariff impact, it's really, number one, for any product that is coming into the U.S.. If we focus only on China, right now that tariff impact is 30%. It used to be 145%. We are still waiting to see kind of where that goes. That obviously has a cost to the business associated with that. The second bucket is the retaliatory tariff that China has put on to any product that comes from the U.S. into China. When this was escalated, that tariff rate was 125%, which would really put pressure on shipping any product into China. Ever since the trade negotiations have happened, that has come down to about 10%. That is certainly meaningful progress from where it was. The third bucket that we really think about tariffs is for any of the suppliers that we have today that are not in China, how much exposure do they have in terms of tier two and tier three to suppliers that are perhaps based in China? How could that potentially result in any inflationary impact to us? Those are sort of the main buckets that we think about it in. While we do not know where this is going to end up, we certainly are taking the appropriate tariff mitigation actions to make sure that we can actually navigate through what seems like is going to remain for the foreseeable future. When we think about the actions that we are taking to be able to mitigate tariffs, the first one is really this whole notion of a duty drawback program. The easiest way to explain it is that if you bring product into the U.S., you have to pay a tariff on it right now. If that product leaves the U.S., you can actually reclaim a refund that you can file with the Customs and Border Protection to be able to reclaim that back. That is something that we have actively engaged in and are working closely with the authorities to make sure that we can take advantage of that program that exists and not have to pay more tariff than we need to for product that is not going to remain in the U.S.. The other thing that we are looking into is establishing a free trade zone. A free trade zone, by definition, would allow us to bring product into our factory in Madison once it becomes a designated free trade zone without having to pay any tariff. If that product is not going to remain in the U.S., you actually do not have to pay that tariff, and you only pay the tariff when it remains in the U.S.. I think those are two actions that we're taking to be able to mitigate the tariff impact. Our operations team is really focused on understanding, okay, great, where should we be looking at dual-source suppliers? Right now, at times, we may be shipping parts into the U.S. that come from outside the U.S. that perhaps we don't need to. We are just thinking about other opportunities to drive more efficiency in the way that product flows across the globe to be able to really minimize the impact of tariffs. Tariffs, we think, are here to stay. We're glad that they're moving in the right direction. However, it is pretty uncertain, and we don't know where it's going to end up. We are taking those right mitigation actions. Now, coming to your question in terms of how it's going to impact China, I think it's certainly something that we are working closely with our China joint venture to take a look at. It has moved around quite a bit. We are hopeful that this tariff rate is going to continue to stay at the rate that it is. We do expect then over time for volume to normalize. All right. Great. That's a very helpful overview. Appreciate all the color. I guess to follow up real quick, just on the free trade zone in Madison, how long would that take to get established? Yeah, it's a pretty complex process. It's one that we are still investigating. It obviously has multi-prongs in terms of approvals that are needed by the regulatory bodies. There is obviously a lot of different preparation that we need to do from a logistics, from an IT standpoint. We are running as fast as we can and are hopeful that we can put something in place in the next 9-12 months. Okay. Great. Long term, the China business is pretty critical to growth and the outlook of the company. I guess once trade policies are more certain, what are your views for Accuray to shift manufacturing more OU.S. or have more regionalized manufacturing? Yeah, it's a great question. I mean, I think just given some of the uncertainty that everyone's felt over the last several months, I would say all options are on the table. We really need to take a look at our overall supply chain, take a look at kind of where we're manufacturing, take a look at our customers. Like I said, our strategy is really to penetrate into emerging markets. I think we're going to continue to look at all options that are going to allow us to be able to grow in a way that's not going to impact our margins. Those are certainly areas that we're looking into. Got it. Kind of curious about the impacts of the high tariffs on sort of recurrent or service revenues. What's the impact there? Can you pass some of these tariff-related pricing onto customers, given that it's relatively understood why it's happening? Yeah. It's a great question. I would say let's start with the first one, which is pricing. That is certainly something that we're looking into. We think that we should be able to pass on pricing to our customers to be able to cover for tariffs. That is certainly an action that we're going to look into and start to take appropriately. The second part of your question in terms of how does it impact the service business, I would say it's going to be a minimal impact to our service business at the current tariff rate the way it exists today. Obviously, it's a fluid situation. I think we just need to continue to monitor it. We do think right now it's going to have a very minimal impact to our service business in China. For our service business globally, we think we're in good shape. We don't think this is going to be much of an impact if tariff rates continue to remain the way that they are. As I said, for our service business, that is one area that we think that there is a lot of opportunity from a margin expansion standpoint. We already hit on pricing. I know you were talking about China, but I would say globally, we think that there's more room for us to continue to enhance our service pricing. When it comes to our costs within the service business or our cost to serve, one of the biggest costs that we have is parts that are consumed as you're servicing this equipment. We have a big focus within the company to really continue to focus on quality and really elongate the meantime between failure for those parts. If we can do that, we think that could have a meaningful impact to our margin rates by driving parts consumption down. I think part of the tariff mitigation efforts is shifting focus from China to other APAC countries, as well as in EIMEA. Does that mean you're just filling some of these backlog orders from other regions earlier and converting some of those orders to revenues quicker? Yeah. I mean, I wouldn't say that we're necessarily doing it earlier. I would say that we have a pretty robust backlog globally. While the focus has been on China, I would say, number one, our biggest region is our EIMEA region, which continues to grow. It has the biggest backlog for the company. It also has a pretty vast geography. Like I said, we are looking to grow within emerging markets. We're excited about the potential for that business to continue to grow. In Japan, we have number two market share and actually have over 150 units that are installed that come at a really good service pricing. We're really excited for that business to continue to grow as well. In the U.S., which is primarily a replacement market, we're focused on our install base and continuing to win competitive sockets. You're right. For the rest of APAC, there's a huge opportunity in terms of really going after some of these emerging markets. While China is a contributor to revenue for Accuray, there's a lot of other regions that continue to provide us with meaningful revenue growth as well. What can your China JV partner do to sort of help out with this situation? Do they have strong central government ties, or are they more on the region provincial level? Yeah. I mean, I would say our partners have been helpful in many ways. I think most recently with this tariff impact, we've obviously been working with them to try and see if we can get exemptions for medical devices going into China. They certainly have strong ties with both provincial and other governments. We certainly make sure that we try and leverage that relationship as much as possible. Are there any order cancellations in China? Maybe if you can zoom out and talk a little bit about your market share dynamic in China and how competitive the local players are. Yep. Yep. Great question. We've had no recent order cancellations in China as far as I can remember. That's one. If you just think about the China market, it's really split into two segments. The premium and specialty segment is the type A market. Then there's the type B market, which is the value segment. We enjoy a very high market share in the type A space. I think it's greater than 60%. That's been a really great space for us to be able to win orders. That market is significantly smaller than the type B market, which is more of a value market. As we've had good success in the type A market with the share that we have, that has had a halo effect in terms of how people perceive our product within the type B value market. That type B value market is the one that we have really positioned our Tomo C product for. That is the one that we expect to grow meaningfully over the course of the next five years. I think with having the Tomo C and having it jointly developed with a local joint venture is certainly proving to be the right strategy. We are excited to see how this plays out. I guess to follow up on one of the earlier statements you made just on Japan, I think you're number two in terms of market share there. Can you talk a little bit about why or how you're so successful in that market? And then can that playbook be replicated to other key markets? Yeah. Yeah. No, I mean, I think in Japan, we've had a strategy in which we continue to partner with key academics, key opinion leaders. We just have a very strong team commercially and on the service side that are very focused on relationships with our customers. That's obviously proven out to be a successful strategy for us in Japan, obviously coupled with the fact that people really believe in the technology and in the product. We are certainly taking that playbook and applying it across the rest of the world as well to continue to gain share. Your value product, Helix, it's approved and launched now, I guess. Wanted to hear how's the performance been since launch versus your internal expectations? I think it's been in line with our expectations. I think it's been very well received. It is still going through regulatory approval for certain parts of the world. As that continues to happen, we think that we're going to start to see even more demand. It's been very much in line with our expectations. Are there key markets to sort of watch out for in terms of approvals or revenue contribution? Yeah. I would say India certainly is one of those markets in which we think that there's a lot of potential over there. We think that market's going to grow in a meaningful way when it comes to radiation therapy and patients having access to radiation therapy equipment. That is a market that we are actually directing from a strategy standpoint and think that could continue to be a good revenue generator for us. We are going to be focused also on South America, in which there are a lot of different countries within South America that we think the Tomo, sorry, the Helix is going to really help us differentiate and be at the right price point for that market as well. Like you said, Young, and the rest of APAC, there's a vast geography over there. We do think that the Helix should be able to cater to a lot of the demand needs for some of those countries. I guess in terms of market potential, looking at India compared to China, I guess how many years do you think India is sort of behind China now as a market? As India develops, do you think it can grow to become a comparable market in terms of sizing versus China? Yeah. It's a good question. In terms of number of years, I'm not sure I can give you, I mean, look, I think we can all agree that it's certainly behind. The needs continue to exist. Coming back to my commentary earlier, that is a market that we think does not have the right amount of radiation therapy equipment than what the market needs are from a patient access standpoint. The population is vast. Unfortunately, cancer incidence continues to grow within that geography as well. We do think there's going to be continued demand for the product and for radiation therapy equipment. I think that's kind of where our Helix product should be able to fit pretty nicely. I guess switching gears a little bit, maybe just focusing on the U.S. market. There's been some pressures on the hospital CapEx side, sort of more focus on radiation oncology. Where are we in the U.S. market? Pressure dynamic. What do you think are some of the key gating factors and timing on the potential rebound for the U.S.? Yeah. It's a good question. It's a pretty fluid dynamic, I would say, in the U.S.. From our vantage point, interest rates are obviously a huge factor when it comes to folks making decisions about capital equipment. Interest rates have not come down the way that I think the market was really expecting them to come down. That does change the dynamic in which people that are holding on to capital equipment are waiting to really see where interest rates go. Therefore, they are sweating their assets a little bit more. I think we just are sort of waiting and sort of seeing where this is going to go. I think at the same time, also playing offense to make sure that we continue to retain our IB and really go after the replacement market in a meaningful way. Got it. I guess what about the rest of the sort of developed markets? Can you maybe talk about trends in Western Europe, for example? Yep. The U.S. and Western Europe, I would say, are two markets that are similar in terms of they're mainly replacement markets. For the most part, they are saturated from the amount of radiation therapy systems that they have. Really, we're taking a look at all the aged IB over there. That's really what presents us as an opportunity because there is a lot of install base out there that is aged greater than 10 years, not only ours, but also our competitors. Really just being able to take a look at making sure that we're maintaining our IB in both those different geographies. They are very similar in nature in terms of they do have a replacement nature to them. I think previously you talked about the service segment having kind of a SaaS model in the coming years. Where are you in that process? What are the key next steps or markets for this initiative? Right. I would say we are in the early innings of really changing the way that we think about our service offerings and moving towards more of a, I'll call it a subscription model. We do think that that is going to be in line with our customers' needs and also in line with sort of where the industry's going. While we're in the early innings, we do think it's going to be a good contributor of revenue to us. Can you talk a little bit about where are you potentially refinancing the needs there as well as the CapEx structure updates? Yeah. Look, I mean, I think we've spoken about this in the past and even on our last earnings is that our capital structure and our refinancing is something that is front and center for us. It's certainly something that we take seriously. We want to make sure that we're doing the right solution. We continue to be really focused on it and would like to get it done and behind us as soon as possible. All right. Great. Wanted to sort of wrap up kind of high level. What do you think is the biggest misconception for Accuray for investors? It's a great question. I mean, I think being the number three player, I mean, I think folks may not necessarily understand how differentiated our technology is. It obviously starts with dedication to innovation and then also having the right technology. I think that's probably one area that should be an area of focus for people that are looking into Accuray in terms of how differentiated our technology is. I think the second one is we're a $450 million company, but roughly half of our revenue is annuity revenue, which is a significant portion of it, right? I would say those are probably the two big areas that investors likely don't know. I think the last one is the potential that we have from a margin expansion standpoint and how we have really activated margin expansion within our culture. I would say a lot of the actions that we've been taking in terms of pricing really focused on COGS reduction, focusing on how do we go about reducing our cost to serve, being very mindful about where we invest our dollars, and being focused on return on investment. All the work that we've been doing has been making really steady progress. Unfortunately, a lot of that has just been masked by the macro in terms of deep foreign exchange headwinds, inflationary headwinds. We are hoping as the macro starts to thaw out, we'll really start to see those benefits reflect in the P&L. Great. I guess is there anything else you want to highlight or anything we didn't talk about yet? No. I think we covered good ground, Young. Really appreciate you guys having us at the conference. All right. Great. Thank you very much. Thanks a lot.