ACCURAY INC

Previous wording

The following discussion and analysis of our financial condition as of September 30, 2024, and results of operations for the three months ended September 30, 2024 and 2023 should be read together with our unaudited condensed consolidated financial statements and related notes included in this report. Statements made in this Form 10-Q report that are not statements of historical fact are forward-looking statements that are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this report relate, but are not limited, to: our future results of operations and financial position, including the sufficiency of cash resources and expected cash flows to fund future operations, including the next 12 months; our expectations regarding backlog, age-ins and age-outs, cancellations of contracts and foreign currency impacts; the anticipated drivers of our future capital requirements; expectations regarding our strategy in China and our China joint venture as well as its expected impact on our business; expectations regarding the market in China for radiation oncology systems; expectations regarding the effects of the global macroeconomic conditions, such as the COVID-19 pandemic on our financial results and business as well as the business of our customers and suppliers; expectations regarding delays in deliveries and installations and its impact on our business; expectations regarding inflation, supply chain challenges and heightened logistics costs and its impact on our business, including gross margins and net income (loss); expectations regarding revenue from the Americas region; expectations regarding the timing of deliveries and revenue conversion; our expectations regarding the adequacy of our manufacturing facilities; the anticipated risks associated with our foreign operations and fluctuations in the U.S. Dollar and foreign currencies as well as our ability to mitigate such risks; tariffs and trade policies; expectations related to the effect of the GILTI tax on our taxable income position; expectations related to our convertible notes and credit facility; expectations related to our leases; the amount of unrecognized tax amounts; the sufficiency of our cash, cash equivalents and investments to meet our anticipated cash needs for working capital and capital expenditures and our business strategy, plans and objectives. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “may,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements involve risks and uncertainties. If any of these risks or uncertainties materialize, or if any of our assumptions prove incorrect, actual results could differ materially from the results expressed or implied by these forward-looking statements. These risks and uncertainties include, those d…

Excerpt shortened here; the source contains the full paragraph.

Current wording

The following discussion and analysis of our financial condition as of December 31, 2024, and results of operations for the three and six months ended December 31, 2024 and 2023 should be read together with our unaudited condensed consolidated financial statements and related notes included in this report. Statements made in this Form 10-Q report that are not statements of historical fact are forward-looking statements that are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this report relate, but are not limited, to: our future results of operations and financial position, including the sufficiency of cash resources and expected cash flows to fund future operations, including the next 12 months; our expectations regarding backlog, age-ins and age-outs, cancellations of contracts and foreign currency impacts; the anticipated drivers of our future capital requirements; expectations regarding our strategy in China and our China joint venture as well as its expected impact on our business; expectations regarding the market in China for radiation oncology systems; expectations regarding the effects of the global macroeconomic conditions, such as the COVID-19 pandemic on our financial results and business as well as the business of our customers and suppliers; expectations regarding delays in deliveries and installations and its impact on our business; expectations regarding inflation, supply chain challenges and heightened logistics costs and its impact on our business, including gross margins and net income (loss); expectations regarding revenue from the Americas region; expectations regarding the timing of deliveries and revenue conversion; our expectations regarding the adequacy of our manufacturing facilities; the anticipated risks associated with our foreign operations and fluctuations in the U.S. Dollar and foreign currencies as well as our ability to mitigate such risks; tariffs and trade policies; expectations related to the effect of the GILTI tax on our taxable income position; expectations related to our convertible notes and credit facility; expectations related to our leases; the amount of unrecognized tax amounts; the sufficiency of our cash, cash equivalents and investments to meet our anticipated cash needs for working capital and capital expenditures and our business strategy, plans and objectives. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “may,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements involve risks and uncertainties. If any of these risks or uncertainties materialize, or if any of our assumptions prove incorrect, actual results could differ materially from the results expressed or implied by these forward-looking statements. These risks and uncertainties include, t…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are subject to risks and uncertainties caused, directly or indirectly, by events with significant geopolitical and macroeconomic impacts, including, but not limited to, inflation; actions taken to counter inflation, including rising interest rates; foreign currency exchange rate fluctuations; uncertainty and volatility in the banking and financial services sector; tightening credit markets; geopolitical concerns, such as the Russian-Ukraine and the Middle East conflicts and increasing tension between China and the U.S., including with respect to Taiwan; uncertainty caused by the China anti-corruption campaign and timing of the China stimulus program; changes in the U.S. presidential administration; as well as other factors that may emerge. In particular, we are continuing to navigate supply chain and inflation challenges and adverse foreign currency exchange rate fluctuations, all of which continues to have a negative impact on our results of operations.

Current wording

We are subject to risks and uncertainties caused, directly or indirectly, by events with significant geopolitical and macroeconomic impacts, including, but not limited to, inflation; actions taken to counter inflation, including high interest rates; foreign currency exchange rate fluctuations; uncertainty and volatility in the banking and financial services sector; tightening credit markets; geopolitical concerns, such as the Russian-Ukraine and the Middle East conflicts and increasing tension between China and the U.S., including with respect to Taiwan; uncertainty caused by the China anti-corruption campaign and timing of the China stimulus program; the change in the U.S. presidential administration; recent executive orders to impose new tariffs on imports from Canada, Mexico and China and uncertainties regarding impact, retaliations and further escalation, including against other countries; as well as other factors that may emerge. In particular, we are continuing to navigate supply chain and inflation challenges and adverse foreign currency exchange rate fluctuations, all of which continues to have a negative impact on our results of operations.

Previous wording

Our past results may not be indicative of our future performance, and historical trends including conversion of backlog to revenue, income (loss) from operations, net income (loss), net income (loss) per share and cash flows may differ materially. Accordingly, management is carefully evaluating our liquidity position, communicating with and monitoring the actions of our customers and suppliers, and reviewing our near-term financial performance as the uncertainty related to these factors continues to unfold. We also continue to evaluate our operating expenses, including our real estate needs and continue to assess our operations and how and to what extent we will continue to utilize our current real estate assets. The risks related to our business, including further discussion of the impact and possible future impacts of current economic conditions and the COVID-19 pandemic on our business, are further described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Current wording

Our past results may not be indicative of our future performance, and historical trends including conversion of backlog to revenue, income (loss) from operations, net income (loss), net income (loss) per share and cash flows may differ materially. Accordingly, management is carefully evaluating our liquidity position, communicating with and monitoring the actions of our customers and suppliers, and reviewing our near-term financial performance as the uncertainty related to these factors continues to unfold. We also continue to evaluate our operating expenses, including our real estate needs and continue to assess our operations and how and to what extent we will continue to utilize our current real estate assets. The risks related to our business, including further discussion of the impact and possible future impacts of current economic conditions on our business, are further described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Previous wording

Generating revenue from the sale of our platforms is a lengthy process. Selling our platforms, from first contact with a potential customer to a signed sales contract that meets our backlog criteria (as discussed below) varies significantly and generally spans between six months and 30 months. The length of time between receipt of a signed contract and revenue recognition is generally governed by the time required by the customer to build, renovate or prepare the treatment room for installation of the platform. We report our customer revenues in four geographic regions: the Americas, EIMEA, Asia Pacific and Japan. The Americas region includes the United States, Canada and Latin America. The EIMEA region includes Europe, India, the Middle East and Africa. The Asia Pacific region consists of Asia, Australia and New Zealand.

Current wording

Generating revenue from the sale of our platforms is a lengthy process. Selling our platforms, from first contact with a potential customer to a signed sales contract that meets our backlog criteria (as discussed below) varies significantly and generally spans between six months and 30 months. The length of time between receipt of a signed contract and revenue recognition is generally governed by the time required by the customer to build, renovate or prepare the treatment room for installation of the platform. We report our customer revenues in five geographic regions: the Americas, EIMEA, Japan, China and Asia Pacific. The Americas region includes the United States, Canada and Latin America. The EIMEA region includes Europe, India, the Middle East and Africa. The Asia Pacific region consists of Asia (excluding Japan and China), Australia and New Zealand.

Previous wording

With the receipt of the necessary permits and licenses to operate, the JV has begun selling products in China, much like a distributor. The JV has begun to manufacture and sell a locally branded “Made in China” radiotherapy device, the Tomo C radiation therapy system, in the Class B license category. We believe this strategy will allow us to best maximize both near and longer-term opportunities in China. In September 2023, we received approval for our Class B device from the National Medical Products Administration (“NMPA”) and our Accuray Precision Treatment Planning System for the Class B device was approved by the NMPA in June 2024. The JV also distributes other Accuray treatment delivery systems like the Radixact and CyberKnife treatment delivery systems.

Current wording

With the receipt of the necessary permits and licenses to operate, the JV has begun selling products in China, much like a distributor. The JV has begun to manufacture and sell a locally branded “Made in China” radiotherapy device, the Tomo C radiation therapy system, in the Class B license category. We believe this strategy will allow us to best maximize both near and longer-term opportunities in China. In September 2023, we received approval for our Class B device from the National Medical Products Administration (“NMPA”) and our Accuray Precision Treatment Planning System for the Class B device was approved by the NMPA in June 2024. The JV also distributes other Accuray treatment delivery systems like the Radixact and CyberKnife treatment delivery systems, including the Radixact SynC and CyberKnife S7 Systems, which received NMPA approval in January 2025.

Previous wording

Gross orders decreased by $8.4 million primarily due to a $9.2 million decrease in CyberKnife System gross orders and upgrades, partially offset by a $0.8 million increase in TomoTherapy System gross orders and upgrades during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year. System gross orders primarily decreased in the Americas region and Japan and were partially offset by an increase in system gross orders from the EIMEA region during three months ended September 30, 2024, as compared to the same period in the prior fiscal year.

Current wording

Gross orders decreased by $17.1 million and $25.5 million during the three and six months ended December 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to a decrease of $17.3 million and $26.5 million, respectively, in CyberKnife System gross orders and upgrades gross orders. System gross orders primarily decreased in the Americas region, China and Japan and were partially offset by an increase in system gross orders from the EIMEA and Asia Pacific regions during three and six months ended December 31, 2024, as compared to the same periods in the prior fiscal year.

Previous wording

Our book to bill ratio is defined as gross orders for the period divided by product revenue for the period. Our book to bill ratio was 1.1 during the three months ended September 30, 2024, respectively, as compared to 1.2 during the three months ended September 30, 2023, respectively. A book-to-bill ratio greater than 1.2 generally indicates strong demand for our products. This metric allows management to monitor our business development efforts to ensure we grow our backlog and our business over time.

Current wording

Our book to bill ratio is defined as gross orders for the period divided by product revenue for the period. Our book to bill ratio was 1.3 and 1.2 during the three and six months ended December 31, 2024, respectively, as compared to 1.8 and 1.5 during the three and six months ended December 31, 2023, respectively. A book-to-bill ratio greater than 1.2 generally indicates strong demand for our products. This metric allows management to monitor our business development efforts to ensure we grow our backlog and our business over time.

Previous wording

Net orders are defined as gross orders less cancellations, age-outs net of age-ins, foreign currency impacts and other adjustments during the period. Net orders decreased by $2.1 million during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year, primarily due to a decrease in gross orders as described above partially offset by lower cancellations in first quarter of fiscal year 2025 as compared to the same period in the prior fiscal year.

Current wording

Net orders are defined as gross orders less cancellations, age-outs net of age-ins, foreign currency impacts and other adjustments during the period. Net orders increased by $1.0 million and decreased $1.1 million during the three and six months ended December 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to lower cancellations fiscal year 2025 as compared to the same period in the prior fiscal year, partially offset by a decrease in gross orders.

Previous wording

Results of Operations — Three months ended September 30, 2024 and 2023

Current wording

Results of Operations — Three and six months ended December 31, 2024 and 2023

Previous wording

Includes sales of products to the joint venture, an equity method investment, of $28,644 and $21,952 during the three months ended September 30, 2024 and 2023, respectively. See Note 13.

Current wording

Includes sales of products to the joint venture, an equity method investment, of $29,722 and $58,366 during the three and six months ended December 31, 2024 and $17,890 and $39,842 during the three and six months ended December 31, 2023, respectively. See Note 12.

Previous wording

Includes sales of services to the joint venture, an equity method investment, of $4,058 and $2,854 during the three months ended September 30, 2024 and 2023, respectively. See Note 13.

Current wording

Includes sales of services to the joint venture, an equity method investment, of $5,179 and $9,237 during the three and six months ended December 31, 2024 and $4,134 and $6,988 during the three and six months ended December 31, 2023, respectively. See Note 12.

Previous wording

Products net revenue decreased $5.0 million during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year, mostly driven by a lower volume of shipments of system units of our TomoTherapy System and CyberKnife System. Services net revenue increased $2.6 million during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year, primarily due to an increase in our installed base and an increase in prices for certain of our service contracts.

Current wording

Products net revenue increased $9.7 million and $4.7 million during the three and six months ended December 31, 2024, respectively, as compared to the same periods in the prior fiscal year, mostly driven by a higher volume of shipments of system units of our CyberKnife System and system upgrades, partially offset by a lower volume of shipments of our TomoTherapy Systems.

Previous wording

Net revenue decreased $2.3 million during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year, primarily due to a lower volume of shipments to the EIMEA region, partially offset by a higher volume of shipments to China and the APAC region. This decrease was partially offset by higher service revenues in the EIMEA region and China due to an increase in our installed base in each region. Additionally, revenues from the Americas region are being negatively impacted by reduced budgets and lower capital deployment priority for radiotherapy equipment, along with longer customer installation timelines which we expect will continue to have an impact on net revenue through fiscal year 2026.

Current wording

Net revenue increased $8.9 million and $6.6 million during the three and six months ended December 31, 2024, respectively, as compared to the same periods in the prior fiscal year, primarily due to a by a higher volume of shipments to China, the APAC region and Japan, partially offset by a lower volume of shipments to the EIMEA and Americas regions. Additionally, revenues from the Americas region are being negatively impacted by reduced budgets and lower capital deployment priority for radiotherapy equipment, along with longer customer installation timelines which we expect will continue to have an impact on net revenue through fiscal year 2026.

Previous wording

Gross profit decreased by $5.0 million during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year, primarily due to $2.0 million increase in the net deferred gross profit on sales to the JV, a $2.0 million increase in departmental costs, and $1.0 million in higher service parts consumption.

Current wording

Gross profit increased by $6.0 million and $1.0 million during the three and six months ended December 31, 2024, respectively, as compared to the same periods in the prior fiscal year. The increase in the three months ended December 31, 2024 was primarily due to a $2.6 million increase in the net deferred gross profit recognized on sales to the JV and a favorable product mix.

Previous wording

Research and development expenses decreased by $1.9 million during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year, primarily due to lower compensation and benefit costs of $1.6 million as a result of lower headcount from the 2024 restructuring initiative in the second quarter of fiscal year 2024.

Current wording

Research and development expenses decreased by $1.6 million and $3.5 million during the three and six months ended December 31, 2024, respectively, as compared to the same periods in the prior fiscal year primarily due to lower headcount and severance costs from the 2024 restructuring initiative in the second quarter of fiscal year 2024, partially offset by higher spending for research and development projects.

Previous wording

General and administrative expenses decreased by $0.2 million during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year primarily due to $0.6 million in lower facility costs offset by a $0.3 million increase in bad debt expense.

Current wording

Selling and marketing expenses decreased by $0.2 million during the three months ended December 31, 2024 as compared to the same period in the prior fiscal year primarily due to a decrease of $1.0 million based on the timing of trade show costs, partially offset by an increase in compensation and benefits.

Previous wording

Income (loss) from equity method investment, which relates to our JV, decreased by $0.5 million during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year, primarily due to a decrease in the sale of systems.

Current wording

Income (loss) from equity method investment, which relates to our JV, increased by $2.0 million and $1.5 million during the three and six months ended December 31, 2024, respectively, as compared to the same periods in the prior fiscal year, primarily due to a higher volume of shipments of system units by the JV and higher service revenue due to the increase in installed base in China.

Previous wording

Interest expense remained flat during the three months ended September 30, 2024, as compared to the same period in the prior fiscal year, primarily due to higher average interest rates, partially offset by lower outstanding balances on our Credit Facilities.

Current wording

Interest expense remained flat during the three and six months ended December 31, 2024, as compared to the same period in the prior fiscal year, primarily due to lower average interest rates, mostly offset by higher average outstanding balances on our Credit Facilities in fiscal year 2025.

Previous wording

On a quarterly basis, we provide for income taxes based upon an estimated annual effective income tax rate. The provision for income taxes decreased by $1.3 million during the three months ended September 30, 2024, primarily due to an additional expense in the prior year period relating to higher deferred tax liability on unremitted foreign earnings.

Current wording

On a quarterly basis, we provide for income taxes based upon an estimated annual effective income tax rate. The provision for income taxes decreased by $0.2 million and $1.5 million during the three and six months ended December 31, 2024, respectively, as compared to the same periods in the prior fiscal year, primarily due to an additional expense in the prior year period relating to higher deferred tax liability on unremitted foreign earnings.

Previous wording

At September 30, 2024, we had $59.2 million in cash and cash equivalents. Cash from operations could be affected by various risks and uncertainties, including, declines in our revenue, particularly without a corresponding decrease in our expenses, the timing of payments from our customers and our expenditures, as well as but not limited to, macroeconomic conditions, inflation, actions taken to counter inflation, foreign currency exchange rate fluctuations, and the risks included in Part I, Item 1A titled “Risk Factors.” In particular, we expect inflation and the ongoing supply chain challenges and logistics costs to impact our cash from operations through fiscal year 2025. Based on our cash and cash equivalents balance, available debt facilities, current business plan and revenue prospects, we believe we will have sufficient cash resources and anticipated cash flows to fund our operations for at least the next 12 months. However, we continue to critically review our liquidity and anticipated capital requirements in light of the significant uncertainty created by macroeconomic conditions.

Current wording

At December 31, 2024, we had $62.6 million in cash and cash equivalents. Cash from operations could be affected by various risks and uncertainties, including, declines in our revenue, particularly without a corresponding decrease in our expenses, the timing of payments from our customers and our expenditures, as well as but not limited to, macroeconomic conditions, inflation, actions taken to counter inflation, foreign currency exchange rate fluctuations, and the risks included in Part I, Item 1A titled “Risk Factors.” In particular, we expect inflation and the ongoing supply chain challenges and logistics costs to impact our cash from operations through fiscal year 2025. In addition, reduced budgets and lower capital deployment priority for radiotherapy equipment, along with longer customer installation timelines, in the United States have negatively impacted net revenue since fiscal year 2024, and we expect that this will continue to have an impact through fiscal year 2026. Based on our cash and cash equivalents balance, available debt facilities, current business plan and revenue prospects, we believe we will have sufficient cash resources and anticipated cash flows to fund our operations for at least the next 12 months. However, we continue to critically review our liquidity and anticipated capital requirements in light of the significant uncertainty created by macroeconomic conditions.

Previous wording

Our liquidity and cash flows have been and could continue to be materially impacted by factors other than our cash from operations and factors that are not in our control, such as current macroeconomic factors, including facility closures, supply chain disruptions, inflation, foreign currency exchange rate fluctuations, increased volatility in the financial markets, uncertainty caused by the China anti-corruption campaign and timing of the China stimulus program changes in the U.S. presidential administration, tightening of credit markets which could impact debt availability. These factors have and could continue to negatively impact our business operations and cash flows for the foreseeable future, including reductions in revenue, decreases in gross margin and delays in payments from customers, as well as declines or delays in the conversion of backlog to revenue. Certain of our revenue may not be collectible to the extent our customers suffer financial difficulty. There remain uncertainties as to how the current macroeconomic environment will impact our business, results of operations, access to sources of liquidity and financial condition in the future. As a result, we are unable to predict with certainty the impacts of these factors on our ability to maintain compliance with the financial covenants contained in the credit and security agreements related to our credit facilities. On September 12, 2024, we entered into the Fourth Amendment to (i) change the requirements of certain financial maintenance covenants under the Credit Agreement for the fiscal quarter ending September 30, 2024, (ii) add a minimum liquidity covenant to the Credit Agreement and (iii) reduce the available revolving commitments available under the Credit Agreement to no more than $20.0 million through the end of the agreement.

Current wording

Our liquidity and cash flows have been and could continue to be materially impacted by factors other than our cash from operations and factors that are not in our control, such as current macroeconomic factors, including facility closures, supply chain disruptions, inflation, foreign currency exchange rate fluctuations, increased volatility in the financial markets, uncertainty caused by the China anti-corruption campaign and timing of the China stimulus program, the change in the U.S. presidential administration, recent executive orders to impose new tariffs on imports from Canada, Mexico and China and uncertainties regarding impact, retaliations and further escalation, including against other countries, and tightening of credit markets which could impact debt availability. These factors have and could continue to negatively impact our business operations and cash flows for the foreseeable future, including reductions in revenue, decreases in gross margin and delays in payments from customers, as well as declines or delays in the conversion of backlog to revenue. Certain of our revenue may not be collectible to the extent our customers suffer financial difficulty. There remain uncertainties as to how the current macroeconomic environment will impact our business, results of operations, access to sources of liquidity and financial condition in the future. As a result, we are unable to predict with certainty the impacts of these factors on our ability to maintain compliance with the financial covenants contained in the credit and security agreements related to our credit facilities. On September 12, 2024, we entered into the Fourth Amendment to (i) change the requirements of certain financial maintenance covenants under the Credit Agreement for the fiscal quarter ending September 30, 2024, (ii) add a minimum liquidity covenant to the Credit Agreement and (iii) reduce the available revolving commitments available under the Credit Agreement to no more than $20.0 million through the end of the agreement.

Previous wording

In May 2021, we issued $100.0 million aggregate principal amount of 3.75% Convertible Senior Notes due 2026 under an indenture between us and The Bank of New York Mellon Trust Company, N.A., as trustee. Concurrently, with the issuance of the convertible notes, in May 2021, we entered into a senior secured credit agreement with Silicon Valley Bank, individually as a lender and agent, and the other lenders (the “Credit Agreement”), which provides for a five-year $80 million term loan facility (the “Term Loan Facility”) and a $40 million revolving credit facility (the “Revolving Credit Facility”). As of September 30, 2024, we had an outstanding balance under the Term Loan Facility of $62.0 million and Revolving Credit Facility of $10.0 million. Refer to Note 9. Debt to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for discussion of the Term Loan Facility, the Revolving Credit Facility and our Convertible Notes outstanding as of September 30, 2024.

Current wording

In May 2021, we issued $100.0 million aggregate principal amount of 3.75% Convertible Senior Notes due 2026 under an indenture between us and The Bank of New York Mellon Trust Company, N.A., as trustee. Concurrently, with the issuance of the convertible notes, in May 2021, we entered into a senior secured credit agreement with Silicon Valley Bank, individually as a lender and agent, and the other lenders (the “Credit Agreement”), which provides for a five-year $80 million term loan facility (the “Term Loan Facility”) and a $40 million revolving credit facility (the “Revolving Credit Facility”). As of December 31, 2024, we had an outstanding balance under the Term Loan Facility of $60.0 million and Revolving Credit Facility of $17.0 million. Refer to Note 8. Debt to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for discussion of the Term Loan Facility, the Revolving Credit Facility and our Convertible Notes outstanding as of December 31, 2024.

Previous wording

Additionally, the undistributed earnings of our foreign subsidiaries at September 30, 2024, for all countries except Japan, France, Switzerland and the United Kingdom are considered to be indefinitely reinvested and unavailable for distribution in the form of dividends or otherwise. Future repatriation of our foreign earnings could be subject to income taxes. As of September 30, 2024, we had $11.9 million of cash and cash equivalents at our foreign subsidiaries. If such funds were repatriated, there will be additional foreign tax withholdings imposed depending on the country from which the funds were repatriated.

Current wording

Additionally, the undistributed earnings of our foreign subsidiaries at December 31, 2024, for all countries except Japan, France, Switzerland and the United Kingdom are considered to be indefinitely reinvested and unavailable for distribution in the form of dividends or otherwise. Future repatriation of our foreign earnings could be subject to income taxes. As of December 31, 2024, we had $9.2 million of cash and cash equivalents at our foreign subsidiaries. If such funds were repatriated, there will be additional foreign tax withholdings imposed depending on the country from which the funds were repatriated.

Previous wording

Our cash flows for the three months ended September 30, 2024 and 2023 are summarized as follows (in thousands):

Current wording

Our cash flows for the six months ended December 31, 2024 and 2023 are summarized as follows (in thousands):

Previous wording

Net cash used in operating activities during the three months ended September 30, 2024 was from a net loss of $4.0 million and a decrease from the net changes from assets and liabilities of $12.2 million, partially offset by an increase from non-cash items of $8.9 million.

Current wording

Net cash used in operating activities during the six months ended December 31, 2024 consisted of a net loss of $1.4 million, a decrease from the net changes from assets and liabilities of $12.4 million, and an increase from non-cash items of $8.3 million.

Previous wording

Non-cash items primarily consisted of $3.6 million in profit margin deferred on sales to the JV, share-based compensation expense of $2.4 million, depreciation and amortization expense of $1.5 million, and the provision for write-down of inventories of $0.9 million.

Current wording

Non-cash items primarily consisted of share-based compensation expense of $4.6 million, depreciation and amortization expense of $3.0 million, and the provision for write-down of inventories of $2.2 million, partially offset by $1.5 million in income from equity investment and $0.9 million in recognized gross profit on sales to the JV.

Previous wording

The major contributors to the decrease from the net changes of assets and liabilities during the three months ended September 30, 2024 were as follows: a $17.0 million increase in inventories that was primarily due to increased purchases of materials to meet expected demand; a $3.9 million decrease in accrued compensation and accrued liabilities primarily due to the payment of value added tax payables, partially offset by a $6.8 million increase in deferred revenue primarily due to an increase in billings and deliveries where the timing of revenue recognition was deferred.

Current wording

The major contributors to the decrease from the net changes of assets and liabilities during the six months ended December 31, 2024 were as follows: a $17.1 million increase in inventories that was primarily due to increased purchases of materials to meet expected demand; and a $4.1 million increase in prepaid and other assets primarily due to value added tax receivables and an increase in prepaid expenses, partially offset by a $4.9 million increase in accounts payable that was primarily due to the timing of payments, a $2.0 million decrease in accounts receivable that was primarily due to increased collections, and $1.9 million increase in deferred revenue primarily due to an increase in billings and deliveries where the timing of revenue recognition was deferred.

Previous wording

Net cash used in investing activities was $1.1 million during the three months ended September 30, 2024 and was for the purchase of property and equipment.

Current wording

Net cash used in investing activities was $2.7 million during the six months ended December 31, 2024 and was primarily for the purchase of property and equipment and investments in software.

Previous wording

Net cash used in financing activities during the three months ended September 30, 2024 was due to the scheduled payment of $2.0 million for the principal amount outstanding on our Term Loan Facility. In addition, we borrowed and repaid $10.0 million on our Revolving Credit Facility during the first quarter of fiscal year 2025.

Current wording

Net cash provided by financing activities was $3.6 million during the six months ended December 31, 2024 was due to $7.0 million in net borrowings on our Revolving Credit Facility, partially offset by the scheduled payments of $4.0 million for the principal amount outstanding on our Term Loan Facility.

Previous wording

We presented our contractual obligations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Our contractual obligations consist of debt, operating leases, purchase commitments, and other contractual obligations. There have been no material changes to these obligations outside the ordinary course of business during the three months ended September 30, 2024 as compared to the contractual obligations disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended June 30, 2024.

Current wording

We presented our contractual obligations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Our contractual obligations consist of debt, operating leases, purchase commitments, and other contractual obligations. There have been no material changes to these obligations outside the ordinary course of business during the six months ended December 31, 2024 as compared to the contractual obligations disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended June 30, 2024.

Previous wording

During the three months ended September 30, 2024, there were no material changes to the critical accounting policies and estimates, previously disclosed in Part II, Item 7, of our Annual Report on Form 10-K filed with the SEC on September 19, 2024.

Current wording

During the six months ended December 31, 2024, there were no material changes to the critical accounting policies and estimates, previously disclosed in Part II, Item 7, of our Annual Report on Form 10-K filed with the SEC on September 19, 2024.