ACCURAY INC

Previous 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.

Current wording

The following discussion and analysis of our financial condition as of March 31, 2025, and results of operations for the three and nine months ended March 31, 2025 and 2024 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 the impact of changes in government administration policy positions; 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 o…

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 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.

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; changes in government administration policy positions; recent executive orders to impose new tariffs on global imports 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

We expect that our customers’ business and our business will continue to be adversely impacted, directly or indirectly, by these macroeconomic and geopolitical issues. Inflation and the ongoing supply chain challenges and logistics costs have materially affected our gross margins and net income (loss), and we expect that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistic expenses through fiscal year 2025. In addition, the Company expects inflation and the ongoing supply chain challenges and logistics costs to impact its 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 our net revenue since fiscal year 2024, and we expect this will continue to have an impact through fiscal year 2026. The extent of the ongoing impact of these macroeconomic events on our business, our markets and on global economic activity however, is uncertain and the related financial impact cannot be reasonably estimated with any certainty at this time.

Current wording

We expect that our customers’ business and our business will continue to be adversely impacted, directly or indirectly, by these macroeconomic and geopolitical issues. Inflation and the ongoing supply chain challenges and logistics costs have materially affected our gross margins and net income (loss), and we expect that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistic expenses through calendar year 2025. In addition, the Company expects inflation and the ongoing supply chain challenges and logistics costs to impact its cash from operations through calendar 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 our net revenue since fiscal year 2024, and we expect this will continue to have an impact through fiscal year 2026. The extent of the ongoing impact of these macroeconomic events on our business, our markets and on global economic activity however, is uncertain and the related financial impact cannot be reasonably estimated with any certainty at this time.

Previous 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.

Current wording

Gross orders decreased by $17.9 million and $43.4 million during the three and nine months ended March 31, 2025, respectively, as compared to the same periods in the prior fiscal year. CyberKnife System gross orders and upgrades decreased by $21.9 and $48.5 million during the three and nine months ended March 31, 2025, respectively, as compared to the same periods in the prior fiscal year, partially offset by an increase to TomoTherapy System gross orders and upgrades of $4.0 million and $5.1 million, during the three and nine months ended March 31, 2025, respectively, as compared to the same periods in the prior fiscal year. Gross orders primarily decreased in the EIMEA region, the Americas region and Japan during the three months ended March 31, 2025, as compared to the same period in the prior fiscal year. Gross orders primarily decreased in the Americas region and Japan during the nine months ended March 31, 2025, as compared to the same period 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 1.3 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.

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 1.2 for both the three and nine months ended March 31, 2025, respectively, as compared to 1.8 and 1.6 during the three and nine months ended March 31, 2024, 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 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.

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 decreased by $14.1 million and $15.2 million, respectively, during the three and nine months ended March 31, 2025, respectively, as compared to the same periods in the prior fiscal year, primarily due to a decrease in gross orders and an increase in age-outs, partially offset by an increase in age-ins and favorable foreign currency impacts.

Previous wording

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

Current wording

Results of Operations — Three and nine months ended March 31, 2025 and 2024

Previous 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.

Current wording

Includes sales of products to the joint venture, an equity method investment, of $17,967 and $76,333 during the three and nine months ended March 31, 2025, and $15,662 and $55,504 during the three and nine months ended March 31, 2024, respectively. See Note 12.

Previous 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.

Current wording

Includes sales of services to the joint venture, an equity method investment, of $5,351 and $14,588 during the three and nine months ended March 31, 2025, and $3,982 and $10,970 during the three and nine months ended March 31, 2024, respectively. See Note 12.

Previous 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.

Current wording

Products net revenue increased $7.7 million and $12.4 million during the three and nine months ended March 31, 2025, respectively, as compared to the same periods in the prior fiscal year. The increase in products net revenue during the three months ended March 31, 2025, was mostly driven by a higher volume of shipments of our TomoTherapy Systems. The increase in products net revenue during the nine months ended was primarily due to a higher volume of shipments of both our TomoTherapy Systems and CyberKnife Systems.

Previous wording

Services net revenue decreased $0.7 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 in training revenue based on the timing of installations. Service net revenues increased $1.9 million during the six months ended December 31, 2024, as compared to the same period in the prior fiscal year, primarily due to higher contract revenues as a result of an increase in our installed base.

Current wording

Services net revenue increased $4.4 million and $6.3 million during the three and nine months ended March 31, 2025, respectively, as compared to the same periods in the prior fiscal year, primarily due to an increase in the sale of spare parts and higher contract revenues as a result of an increase in our installed base.

Previous 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.

Current wording

Net revenue increased $12.1 million during the three months ended March 31, 2025, as compared to the same period in the prior fiscal year, primarily due to a higher volume of shipments to the APAC and China regions, and increases in service revenue from the EIMEA and China regions, partially offset by a decrease in the volume of shipments to Japan. Net revenue increased $18.7 million during the nine months ended March 31, 2025 as compared to the same period in the prior fiscal year, primarily due to a higher volume of shipments to the China and the APAC regions and an increase in service revenue from the EIMEA and China regions, 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 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.

Current wording

Gross profit increased by $2.6 million and $3.5 million during the three and nine months ended March 31, 2025, respectively, as compared to the same periods in the prior fiscal year. The increase in gross profit during the three and nine months ended March 31, 2025 was primarily due to an increase in net revenues, partially offset by a $2.6 million and $2.0 million increase in net deferred gross profit on sales to the JV during the three and nine months ended March 31, 2025, respectively.

Previous 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.

Current wording

Research and development expenses decreased by $0.2 million during the three months ended March 31, 2025, as compared to the same period in the prior fiscal year. Research and development expenses decreased by $3.7 million during the nine months ended March 31, 2025, as compared to the same period in the prior fiscal year, primarily due to lower compensation and benefits, severance costs in fiscal year 2024 for the restructuring initiative in the second quarter of fiscal year 2024 and the capitalization of internal labor for software development to be sold, partially offset by higher spending for research and development projects and an increase in facility and information system costs.

Previous wording

Selling and marketing expenses increased by $1.2 million during the six months ended December 31, 2024, compared to the same period in the prior fiscal year primarily due to an increase in compensation and benefits and an increase in research grants.

Current wording

Selling and marketing expenses decreased by $1.2 million during the three months ended March 31, 2025, as compared to the same period in the prior fiscal year was primarily due to lower compensation and benefits. Selling and marketing expenses were flat during the nine months ended March 31, 2025, as compared to the same period in the prior fiscal year.

Previous wording

General and administrative expenses decreased by $0.8 million and $1.0 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 in consulting costs in the current period related to the implementation of our ERP system in fiscal year 2024, and a decrease in facility costs partially offset by an increase in compensation and benefits.

Current wording

General and administrative expenses decreased by $1.7 million during the three months ended March 31, 2025, as compared to the same period in the prior fiscal year primarily due to a decrease in consulting costs in the current period due to the completion of the implementation of our ERP system in fiscal year 2024 and an overall focus on disciplined expense management. General and administrative expenses decreased by $2.7 million during the nine months ended March 31, 2025, as compared to the same period in the prior fiscal year, primarily due to a decrease in consulting costs due to the completion of the implementation of our ERP system in fiscal year 2024 and a decrease in facility costs, partially offset by an increase in compensation and benefits.

Previous wording

Income (loss) on equity method investment, net

Current wording

Income from equity method investment, net

Previous 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.

Current wording

Income from equity method investment, which relates to our JV, increased by $1.3 million and $2.8 million during the three and nine months ended March 31, 2025, 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 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.

Current wording

Interest expense remained flat during the three and nine months ended March 31, 2025, 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 revolving credit facility in fiscal year 2025.

Previous wording

Other expense decreased during the three months ended December 31, 2024, as compared to the same period in the prior fiscal year, primarily due to favorable changes in the fair value of foreign currency forward contracts. Other income increased during the six months ended December 31, 2024 as compared to the same period in the prior fiscal year, primarily due to favorable changes in the fair value of foreign currency forward contracts, partially offset by increased costs for hedging activities.

Current wording

Other expense increased during the three months ended March 31, 2025, as compared to the same period in the prior fiscal year, primarily due to unfavorable changes in the fair value of foreign currency forward contracts. Other income increased during the nine months ended March 31, 2025, as compared to the same period in the prior fiscal year, primarily due to favorable changes in the fair value of foreign currency forward contracts, partially offset by increased costs for hedging activities.

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 $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.

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 was flat during the three months ended March 31, 2025 as compared to the same period in the prior fiscal year. The provision for income taxes decreased $1.5 million during the nine months ended March 31, 2025, as compared to the same period 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 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.

Current wording

At March 31, 2025, we had $77.8 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 calendar 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, 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.

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, changes in government administration policy positions, recent executive orders to impose new tariffs on global imports 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 or our ability to refinance our existing debt.

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 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.

Current wording

In May 2021, we issued $100.0 million aggregate principal amount of 3.75% Convertible Senior Notes due 2026 (the 'Notes") under an indenture between us and The Bank of New York Mellon Trust Company, N.A., as trustee. Concurrently, with the issuance of the 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 March 31, 2025, we had an outstanding balance under the Term Loan Facility of $58.0 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 March 31, 2025.

Previous 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.

Current wording

Additionally, the undistributed earnings of our foreign subsidiaries as of March 31, 2025, 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 March 31, 2025, we had $11.5 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 six months ended December 31, 2024 and 2023 are summarized as follows (in thousands):

Current wording

Our cash flows for the nine months ended March 31, 2025 and 2024 are summarized as follows (in thousands):

Previous 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.

Current wording

Net cash provided by operating activities during the nine months ended March 31, 2025, was due to $15.5 million from non-cash items offset by a net loss of $2.7 million and a $0.2 million decrease from the net changes of assets and liabilities.

Previous 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.

Current wording

Non-cash items primarily consisted of $7.4 million of share-based compensation expense, $4.6 million of depreciation and amortization expense, $4.1 million in deferred gross profit on sales to the JV and $2.3 million for the provision for write-down of inventories, partially offset by $3.8 million in income from equity investment.

Previous 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.

Current wording

The major contributors to the decrease from the net changes of assets and liabilities during the nine months ended March 31, 2025 were as follows: a $14.6 million increase in inventories that was primarily due to increased purchases of materials to meet expected demand; $5.2 million decrease in accounts payable that was primarily due to the timing of payments and a $3.8 million increase in prepaid and other assets, partially offset by a $14.7 million decrease in accounts receivable due to increased collections, and a $10.2 million increase in deferred revenue.

Previous 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.

Current wording

Net cash used in investing activities was $5.1 million during the nine months ended March 31, 2025, due to spending $2.9 million for the purchase of property and equipment and $2.2 million in costs for capitalized investments for software to be sold.

Previous 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.

Current wording

Net cash provided by financing activities was $1.6 million during the nine months ended March 31, 2025, was due to $7.0 million in net borrowings on our Revolving Credit Facility, partially offset by the scheduled payments of $6.0 million for the principal amount outstanding on our Term Loan Facility.

Previous wording

Servicing and maturity of our current future indebtedness, including interest rates;

Current wording

Our ability to refinance our current indebtedness in a timely manner, and servicing and maturity of our current and future indebtedness, including interest rates;

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 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.

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 nine months ended March 31, 2025 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

We experienced rising costs for certain materials, including increased logistics and duties costs that adversely affected our gross margins and net income (loss), and had a material effect on our business, financial condition and results of operations for fiscal years 2023 and 2024. We expect that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistic expenses in fiscal year 2025 as we are unable to pass all of these increased costs to our customers. In addition, we expect inflation and the ongoing supply chain challenges and logistics costs to impact our cash from operations through fiscal year 2025. Continued pressure from inflationary factors, such as further increases in the cost of materials for our products, cost of labor, interest rates, overhead costs, logistics and duties costs could further exacerbate these effects and harm our business, operating results, and financial condition.

Current wording

We experienced rising costs for certain materials, including increased logistics and duties costs that adversely affected our gross margins and net income (loss), and had a material effect on our business, financial condition and results of operations for fiscal years 2023 and 2024. We expect that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistics expenses in calendar year 2025 as we are unable to pass all of these increased costs to our customers. In addition, we expect inflation and the ongoing supply chain challenges and logistics costs to impact our cash from operations through calendar year 2025. Continued pressure from inflationary factors, such as further increases in the cost of materials for our products, cost of labor, interest rates, overhead costs, logistics and duties costs could further exacerbate these effects and harm our business, operating results, and financial condition.

Previous 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.

Current wording

During the nine months ended March 31, 2025, 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.