accuray incorporated - financial and strategic analysis...

Accuray Incorporated

Accuray Incorporated- Financial and Strategic Analysis Review Reference Code: GMDME69FSASource : www.globalmarketsandcompanies.com

Accuray Incorporated - Financial and Strategic Analysis Review Reference Code: GMDME69FSA

Publication Date: SEP 2009Company Snapshot Key Information

Accuray Incorporated, Key Information

Web Address www.accuray.com

Financial year-end June

Number of Employees 504

NASDAQ ARAY Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct

Company Overview Accuray Incorporated (Accuray) is a global leader inthe field of robotic radiosurgery. It develops andmarkets the CyberKnife Robotic RadiosurgerySystem, designed to treat tumor anywhere in the bodywith an accuracy of sub-millimeter. The CyberKnifesystem received FDA approval, CE marking and hasbeen approved for several indications in China, Japan,Korea, Taiwan, and other countries. The company haseight subsidiaries located in Switzerland, France, theUK, Hong Kong, Japan, Spain, India and Singapore.Accuray is headquartered in California, the US.

Key Ratios

Accuray Incorporated, Key Ratios

P/E 604.630

EV/EBITDA 479.400

Return on Equity (%) 0.400

Debt/Equity 0.0

Operating Profit Margin (%) -1.0

Dividend Yield NA Note: Above ratios are based on share price as of 03-Sep-2009 Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct

Share Data

Accuray Incorporated, Share Data

Price (USD) as on 03-Sep-2009 6.300

EPS (USD) 0.010

Book Value per Share (USD) 2.700

Diluted Weighted Average Shares (in million)

58.730

Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct

SWOT Analysis Accuray Incorporated, SWOT Analysis

Strengths Weaknesses The CyberKnife System Focused Research and Development Expanding Market Share in the Sector

Negative Operating Margin Dependence on Single-Source Supplier Limited Liquidity Position

Opportunities Threats Growing Aged Population Growth in the Prevalence of Cancer

Competitive Landscape Cost Containment Pressures


Performance Chart

Accuray Incorporated, Performance Chart (2005 - 2009)

Source: Company Annual Report Global Markets Direct

Financial Performance The company reported revenues of (U.S. Dollars)USD 233.60 million during the fiscal year ended June2009, an increase of 11.04% over 2008. Theoperating loss of the company was USD 2.42 millionduring the fiscal year 2009, as compared to anoperating loss of USD 0.93 million during 2008. Thenet profit of the company was USD 0.61 million duringthe fiscal year 2009, a decrease of 88.69% from 2008.



Table of Contents Table of Contents....................................................................................................................................................................................................................... 2 List of Tables.............................................................................................................................................................................................................................. 3 List of Figures............................................................................................................................................................................................................................. 3 Accuray Incorporated - Key Facts.............................................................................................................................................................................................. 4 Accuray Incorporated - Business Description ............................................................................................................................................................................ 4

Business Description - Other ............................................................................................................................................................................................... 4 Other - Overview ........................................................................................................................................................................................................... 4 Other - Financials.......................................................................................................................................................................................................... 4 Other - Key Strategies................................................................................................................................................................................................... 4

Business Description - Products.......................................................................................................................................................................................... 4 Products - Overview...................................................................................................................................................................................................... 4 Products - Financials..................................................................................................................................................................................................... 5 Products - Market View ................................................................................................................................................................................................. 5 Products - Key Strategies ............................................................................................................................................................................................. 5

Business Description - Services .......................................................................................................................................................................................... 5 Services - Overview ...................................................................................................................................................................................................... 5 Services - Financials ..................................................................................................................................................................................................... 5 Services - Market View ................................................................................................................................................................................................. 5 Services - Key Strategies.............................................................................................................................................................................................. 5

Business Description - Shared Ownership Program ........................................................................................................................................................... 6 Shared Ownership Program - Overview ....................................................................................................................................................................... 6 Shared Ownership Program - Financials ...................................................................................................................................................................... 6 Shared Ownership Program - Market View................................................................................................................................................................... 6 Shared Ownership Program - Key Strategies ............................................................................................................................................................... 6

Accuray Incorporated - Major Products and Services................................................................................................................................................................ 7 Accuray Incorporated - History................................................................................................................................................................................................... 8 Accuray Incorporated - SWOT Analysis..................................................................................................................................................................................... 9

SWOT Analysis - Overview ................................................................................................................................................................................................. 9 Accuray Incorporated - Strengths ........................................................................................................................................................................................ 9

Strength - The CyberKnife System ............................................................................................................................................................................... 9 Strength - Focused Research and Development .......................................................................................................................................................... 9 Strength - Expanding Market Share in the Sector......................................................................................................................................................... 9

Accuray Incorporated - Weaknesses................................................................................................................................................................................... 9 Weakness - Negative Operating Margin ....................................................................................................................................................................... 9 Weakness - Dependence on Single-Source Supplier ................................................................................................................................................... 9 Weakness - Limited Liquidity Position........................................................................................................................................................................... 9 Weakness - Low Return on Equity.............................................................................................................................................................................. 10

Accuray Incorporated - Opportunities................................................................................................................................................................................ 10 Opportunity - Growing Aged Population...................................................................................................................................................................... 10 Opportunity - Growth in the Prevalence of Cancer ..................................................................................................................................................... 10 Opportunity - Expansion.............................................................................................................................................................................................. 10 Opportunity - Launch of New Products ....................................................................................................................................................................... 10

Accuray Incorporated - Threats ......................................................................................................................................................................................... 10 Threat - Competitive Landscape ................................................................................................................................................................................. 10 Threat - Cost Containment Pressures......................................................................................................................................................................... 11 Threat - Stringent Government Regulations ............................................................................................................................................................... 11

Accuray Incorporated - Key Competitors ................................................................................................................................................................................. 12 Accuray Incorporated - Key Employees................................................................................................................................................................................... 12 Accuray Incorporated - Key Employee Biographies................................................................................................................................................................. 13 Accuray Incorporated - Company Statement ........................................................................................................................................................................... 14 Accuray Incorporated - Locations And Subsidiaries ................................................................................................................................................................ 16

Head Office........................................................................................................................................................................................................................ 16 Other Locations & Subsidiaries ......................................................................................................................................................................................... 16

Accuray Incorporated - Financial Ratios .................................................................................................................................................................................. 17 Financial Ratios - Capital Market Ratios............................................................................................................................................................................ 17 Financial Ratios - Annual Ratios........................................................................................................................................................................................ 17 Financial Ratios - Interim Ratios........................................................................................................................................................................................ 18


Accuray Incorporated- Financial and Strategic Analysis Review Reference Code: GMDME69FSA Source : www.globalmarketsandcompanies.com

Financial Ratios - Ratio Charts .......................................................................................................................................................................................... 19 Appendix .................................................................................................................................................................................................................................. 20

Methodology ...................................................................................................................................................................................................................... 20 Ratio Definitions................................................................................................................................................................................................................. 20 About Global Markets Direct.............................................................................................................................................................................................. 23 Contact Us ......................................................................................................................................................................................................................... 23 Disclaimer .......................................................................................................................................................................................................................... 23

List of Tables Accuray Incorporated, Key Facts ............................................................................................................................................................................................... 4 Accuray Incorporated, Major Products and Services ................................................................................................................................................................. 7 Accuray Incorporated, History.................................................................................................................................................................................................... 8 Accuray Incorporated, Key Employees .................................................................................................................................................................................... 12 Accuray Incorporated, Key Employee Biographies.................................................................................................................................................................. 13 Accuray Incorporated, Subsidiaries ......................................................................................................................................................................................... 16 Accuray Incorporated, Ratios based on current share price .................................................................................................................................................... 17 Accuray Incorporated, Annual Ratios....................................................................................................................................................................................... 17 Accuray Incorporated, Interim Ratios....................................................................................................................................................................................... 18

List of Figures Accuray Incorporated, Ratio Charts ......................................................................................................................................................................................... 19



Accuray Incorporated - Key Facts Accuray Incorporated, Key Facts

Corporate Address 1310 Chesapeake Terrace, Sunnyvale, CA, 94089, United States

Ticker Symbol, Exchange ARAY [NASDAQ]

Telephone +1 408 7164600 No. of Employees 504 Fax +1 408 7164601 Fiscal Year End June URL www.accuray.com Revenue (in USD Million) 210.38

Industry Pharmaceuticals and Healthcare

Locations China, France, Hong Kong Special Administrative Region of China, Japan, United States Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct

Accuray Incorporated - Business Description Accuray is a specialty devices company in the field of robotic radiosurgery. The company is the first to launch radiosurgery system designed to treat tumors anywhere in the body with sub-millimeter accuracy. The company develops and markets the CyberKnife Robotic Radiosurgery System. By using image guidance technology and computer controlled robotics, the CyberKnife System tracks, detects and rectify tumor and patient movement throughout the treatment. Currently, Accuray markets its systems in the US, Europe and Asia. European operations are headquartered in Paris and Asian operations are headquartered in Hong Kong.The company operates through four business segments, namely, Products Segment, Shared Ownership Program, Services Segment and Other Segment.

Business Description - Other

Other - Overview The company under its Other segment provides warranty services. The company provides a one-year warranty on the purchase of the CyberKnife system. Moreover, it also provides a multi year service plan for a fee that is fixed at the time of purchase. The company performs the installation and service of the CyberKnife system in the US and in selected countries outside the US. Also the company, has trained third-party service organizations and its distributors in Korea, Taiwan, Turkey and Italy for the purpose of performing the CyberKnife system installation and service. The company offers various training sessions for its customers and distributors for an additional fee.

Other - Financials For the fiscal year 2008, the Other segment accounted for revenues of $8.93 million, an increase of 180.86% over 2007.

Other - Key Strategies Accuray intends to increase the number of its installation and service personnel to increase its sales. The company would continue to focus on marketing and education efforts to surgical specialists and oncologists responsible for treating tumors throughout the body.

Business Description - Products

Products - Overview The principal product of the company under its product segment is the CyberKnife system. It is an intelligent robotic radiosurgery system that enables the treatment of tumors anywhere in the body where radiation is indicated without the need for invasive surgery or rigid frames. Other products in this segment includes Synchrony respiratory tracking system, Xsight Spine Tracking System, RoboCouch patient positioning system, Xsight Lung Tracking System, Xchange robotic collimator changer, In-Room CT System, 4D Treatment Optimization and Planning System, AXUM treatment couch, and many others. Around 140 CyberKnife system were installed in Americas, Asia and Europe as of June 30, 2008.



Products - Financials For the fiscal year 2008, the Products segment accounted for revenues of $152.37 million, an increase of 38.1% over 2007.

Products - Market View Cancer is the second leading cause of death in the US, after heart disease. The World Health Organization estimated that 7.9 million people died of cancer during 2007, which represented 13% of total deaths in the world. In 2008, the American Cancer Society (ACS) estimated that around 1.4 million new cancer cases will be diagnosed in the US alone and nearly 560,000 Americans will die.

Products - Key Strategies The company intends to develop and offer new clinical capabilities enhancing ease of use, reducing treatment times, improving accuracy and improving patient access. Accuray is also facilitating studies to further demonstrate the CyberKnife system’s efficacy for treating tumors outside of the brain. And the company believes that these studies would increase overall utilization of the CyberKnife system and continue to expand the number of patients eligible for radiosurgery. Moreover, the company is continuing to develop new upgrades to enable the CyberKnife system to be better suited for treating tumors where radiation is indicated.

Business Description - Services

Services - Overview Accuray also offers business solutions designed to help institutions acquire a CyberKnife System sooner. Accuray also provides business development support and CyberKnife Systems updates to help maximize the customer’s investments. The company provides optional hardware and software, technical enhancements and upgrades to the CyberKnife system to some of its customers.

Services - Financials For the fiscal year 2008, the Services segment accounted for revenues of $38.8 million, an increase of 130.18% over 2007.

Services - Market View The American Society for Therapeutic Radiology and Oncology (ASTRO) estimates that there are approximately 2,000 hospitals and stand-alone treatment facilities in the US offering radiation therapy services.

Services - Key Strategies Accuray believes the customer relationship is a long-term partnership. The company intends to continuously provide the customers with technology and high-quality service required to ensure their success in delivering the best patient care.



Business Description - Shared Ownership Program

Shared Ownership Program - Overview Under its Shared Ownership Programs the company provides a CyberKnife system to a customer while retaining ownership of that system. Moreover, it also provides the physician with training, educational support, general reimbursement guidance and technical support, as well as future upgrades to customers under this program.

Shared Ownership Program - Financials For the fiscal year 2008, the Shared Ownership Program segment accounted for revenues of $10.26 million, an increase of 1.7% over 2007.

Shared Ownership Program - Market View The American Cancer Society (ACS) estimates that approximately 560,000 Americans would die as a result of cancer in 2007. The ACS also estimates that approximately 1.4 million new cases of cancer will be diagnosed in the United States in 2007, with continued increases in the prevalence of cancer forecasted as the U.S. population ages. The National Institutes of Health estimates that the treatment of cancer accounted for more than $74.0 billion in direct medical costs in 2005.

Shared Ownership Program - Key Strategies The company intends to increase this shared ownership programs and to enable customers to reduce the upfront investment required for the CyberKnife system in exchange for sharing a significant portion of revenue with the company that is derived from each procedure.



Accuray Incorporated - Major Products and Services Accuray operates in the field of robotic radiosurgery, developing and marketing the CyberKnife Robotic Radiosurgery System. The company’s key products and services include the following:

Accuray Incorporated, Major Products and Services

Products:

Robotic Radiosurgery System

Advanced Patient Positioning System

Tracking System

Respiratory Tracking System

Workflow based Treatment Planning Software

Image Fusion and Contouring Station

Services:

Shared Ownership Program

Accuray Training Center

Physics Collaboration

Clinical Information

Brands:

CyberKnife

RoboCouch

Xsight

Synchrony

MultiPlan

InView Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct



Accuray Incorporated - History Accuray Incorporated, History

2008 New Product Approvals Accuray received approval of CyberKnife System for use in the treatment of extracranial tumors from the Japan’s Ministry of Health.

2008 New Products/Services Accuray announced the offering of treatment planning service to new and existing CyberKnife customers. This service will enable the customer to control their cost and the company will increase its customers globally.

2007 Stock Listings/IPO In 2007, Accuray went for an initial public offer and its common stock were listed on the NASDAQ Stock Market are being traded under the symbol ARAY.

2006 Corporate Changes/Expansions In 2006, the company opened a new manufacturing and R&D facility.

2006 New Product Approvals Moreover, the company's Xsight Lung Tracking System and 4D Treatment Optimization and Planning System got clearance from FDA.

2005 New Products/Services

Accuray introduced the Xsight Spine Tracking System, which is capable of automatically tracking, detecting and correcting for tumor movement throughout the treatment without implanting radiographic markers or fiducials. The company’s Xsight, provides patients with comfortable treatment for the delivery of radiosurgery and sub-millimeter accuracy along the entire spinal region. The system enables physicians save time and provides better care to patients.


Accuray updated the CyberKnife System to take advantage of new technologies and faster computers in order to provide the best radiosurgery treatments. In November 2005, Accuray introduced the fourth generation CyberKnife System, which treats with faster and greater flexibility making extracranial radiosurgery easier.

2004 New Product Approvals

In 2004, Accuray received FDA clearance for the sale of its Synchrony Respiratory Tracking System. Synchrony System allows clinicians to continuously track, detect and correct for tumors that are affected by respiration such as those in the lung, liver and pancreas without breath-holding or gating techniques. The Synchrony System enables patients to breathe normally throughout their treatment while maintaining extreme accuracy and minimizing damage to surrounding healthy tissue.


The company received FDA clearance to introduce enhancements to the CyberKnife System for the treatment of tumors anywhere in the body. The CyberKnife System was cleared to treat both intracranial and extracranial tumors.

1999 New Product Approvals

FDA approved the CyberKnife System for the treatment of head, neck and upper spine tumors in 1999. The CyberKnife System was the first in radiosurgery system to combine image guidance and computer controlled robotics giving birth to the next generation in radiosurgery – intelligent robotic radiosurgery.

1990 Incorporation/Establishment Adler together with a group from Stanford and a manufacturer of linac technology founded Accuray Incorporated in 1990.

1987 Other

Accuray's history began with the invention of CyberKnife System by John R. Adler, MD, professor of neurosurgery and radiation oncology at Stanford University Medical Center. With the CyberKnife System, Adler’s vision was to develop a non-invasive robotic radiosurgery system with superior accuracy for treatment of tumors anywhere in the body.




Accuray Incorporated - SWOT Analysis

SWOT Analysis - Overview Accuray Incorporated provides cancer patients with an alternative treatment option other than traditional surgery with the development of the world’s first and only radiosurgery device the CyberKnife Robotic Radiosurgery System. The company's focused R&D activities allow the company to gain competitive advantage and drive its product portfolio, helping it to gain large market share. However, any non-compliance by the company with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits and licenses could have an adverse effect on the company's results of operations and financial performance.

Accuray Incorporated - Strengths

Strength - The CyberKnife System Accuray’s CyberKnife system is the first and only commercially available intelligent robotic radiosurgery system, which is designed to treat solid tumors anywhere in the body as an alternative to traditional surgery. The CyberKnife system represents the next generation of radiosurgery systems. It combines the continuous image-guidance technology with a compact linear accelerator, which has the ability to move in three dimensions according to the treatment plan. As of June 2008, Accuray has installed 140 CyberKnife systems at customer sites in the Americas, Asia and Europe. The customers of the company have reported that over 50,000 patients throughout the world have been treated with its CyberKnife system. Out of this, approximately 56% of patients in the US were treated for tumors outside the brain during 2008. The CyberKnife system has a modular design which facilitates the implementation of upgrades without requiring the customers to purchase an entirely new system. Moreover, the company has a well-established track record of developing and delivering state-of-the-art upgrades to its customers, enabling them to take advantage of the continued evolution of CyberKnife system.

Strength - Focused Research and Development The company continues to increase its investment in research and development (R&D) activities. Its current product development efforts comprises of projects expanding clinical applications in radiosurgery, product differentiation, as well as enhancing the CyberKnife system's capabilities. Research activities strive to allow new product development opportunities by developing new technologies and advancing areas of current core technology like a next-generation linac. Accuray's R&D expenses amounted to $32.88 million, representing 15.63% of its total revenues for the fiscal year 2008. The company's focused R&D activities allow the company to gain competitive advantage and drive its product portfolio, helping it to gain large market share.

Strength - Expanding Market Share in the Sector The company's compounded annual growth rate (CAGR) for revenues was 81.08% during 2004-2008, increasing from $19.57 million to $210.38 million. This was above the Medical Devices sector average* of 10.2%. A higher than sector average* revenue CAGR indicates that the company has outperformed the average sector growth and gained market share over the last four years. Its revenues increased by 49.79% in 2008. At the end of June 2008, 31 CyberKnife systems were installed, which includes 27 units sold and four pursuant to its shared ownership program. The company may have achieved this growth due to better competitive positioning or superior products and services offering compared to other companies in the sector.

Accuray Incorporated - Weaknesses

Weakness - Negative Operating Margin The company's operating margin was -0.44% for the fiscal year ended June 2008. This was below the Medical Devices sector average* of 10.8%. A lower than sector average* operating margin may indicate inefficient cost management or a weak pricing strategy by the company. In 2008, Accuray recorded negative operating margin in 2008. Its operating margin was -0.44% in 2008 when compared to -6.08% during 2007. As a result, the company recorded losses during 2008. The operating loss of the company was $0.93 million during the fiscal year 2008, as compared to an operating loss of $8.54 million in 2007. However, the company's operating margin has increased 564 bps over 2007 which may indicate that the management has been focusing on profitability.

Weakness - Dependence on Single-Source Supplier Several components and raw material, such as robotic couch, magnetron, imaging plates, robotic manipulator, and treatment table are provided to the company by single source suppliers. Any failure or interruption in the supply through sole-sourced suppliers for necessary component could harm the company’s ability to manufacture its products until a new source of supply is found. The company may not even find a sufficient alternative supply channel within a specific time period. This may result in the impairment of its business or even reduce the quality of its products. Such high dependence on suppliers means that Accuray's business would be severely affected if it loses any supplier and if alternative sources of supply are unavailable at reasonable rates.

Weakness - Limited Liquidity Position The company's current ratio was 1.65 at the end of fiscal year 2008. This was below the Medical Devices sector average* of 2.4. Its current ratio was 1.65 in 2008, as against 2.2 at the end of fiscal year 2007. A lower than sector average* current ratio indicates that the company is in a weaker financial position than other companies in the sector.



Its total contractual obligations were $8.98 million, of which it has to pay $4.71 million in less than one year period and $4.23 million within 3 years. Accuray reported a decline in the cash and cash equivalent due to negative cash flow from operating activities in 2008 from the comparable period in 2007. The cash outflows from operating activities were $17.99 million in 2008, as against cash flows from operating activities of $11.6 million during 2007. Also, the company’s cash and cash equivalent as of June 2008 was $36.94 million, a decrease of 81.9% over 2007. Limited cash position shows the company’s inability to incur additional debt to finance acquisitions, business opportunities, capital expenditures or other capital requirements in the future.

Weakness - Low Return on Equity The company's return on equity (ROE) was 4.1% at the end of fiscal year 2008. This was below the Medical Devices sector average* of 10.3%. A lower than sector average* ROE may indicate that the company may not be using the shareholders' money as efficiently as other companies in the sector and that it is generating low returns for its shareholders compared to other companies in the sector.

Accuray Incorporated - Opportunities

Opportunity - Growing Aged Population The increasing population of people aged above 65, who consume more medical solutions than younger people and are more prone to chronic diseases, hold significant market potential for the company. According to the United Nations Population Division, people aged 60 are projected to account for 22% of the total world population by 2050, up from 11% in 2007. In the US, the Census Department projected that the 65 and older segment of the population will expand from 38.7 million in 2008 to 72.1 million by 2030. As a percentage of the total population, persons 65 and older are expected to account for over 19% of all Americans, up from 13% in 2008.

Opportunity - Growth in the Prevalence of Cancer The growing prevalence of cancer provides a substantial opportunity for the company as its CyberKnife system and products in development are designed to treat solid tumors. Cancer is the second-leading cause of death in the US, accounting for one out of every four deaths per day. The World Health Organization (WHO) estimated that approximately 7.9 million people died of cancer during 2007 that accounted for 13% of all deaths throughout the world. Since 1990, over 18 million new cancer cases have been diagnosed. The American Cancer Society estimates that around 1.4 new cancer cases will be diagnosed in 2008 in the US. As America’s baby boomer population ages, incidence of cancer is likely to increase. As a result of this growth in the disease prevalence, oncology is one of the fastest growing markets in the pharmaceutical industry, with the market contributing nearly 17 percent of global pharmaceutical sales growth in 2008.

Opportunity - Expansion Accuray plans to continue to expand its sales and distribution activities outside of the US to take advantage of the large international opportunity for its products. Currently, the company has offices in Paris, France, Hong Kong, China, Tokyo, Japan, Madrid, Spain, Singapore, and New Delhi, India. Also, its distribution channels cover over 50 countries worldwide. The company intends to increase its international presence by increasing the number of direct sales force and distributors in targeted new foreign markets, and by further penetrating its established international markets. In 2008, Domingo Luciani Hospital purchased a CyberKnife system for installation at their new oncology center located in Caracas, Venezuela. This is the first CyberKnife system in South America.

Opportunity - Launch of New Products Accuray's newly approved and launched products provide enough opportunities for the company to improve market share. The company launched the InTempo Adaptive Imaging System that increases its CyberKnife Robotic Radiosurgery System’s ability to continually track and correct for motion of the prostate during treatment on September 19, 2008. Accuray provided a new configuration for its CyberKnife system treatment vault that will allow installation of the System into most existing conventional gantry LINAC vaults. This new layout will allow an accelerated go-live schedule, helping sites to start treating patients within a significantly shorter period of time. On June 19, 2008, Japan’s Ministry of Health, Labor and Welfare (MHLW) granted Shonin approval of its CyberKnife Robotic Radiosurgery System used to treat extracranial tumors. This approval expanded the types of patients that can be treated with the company's radiosurgery system. As a result of this clearance, the CyberKnife system can be used in Japan for the treatment of tumors, including those in the spine, lung, liver, pancreas and prostate. Furthermore, Accuray announced to provide a treatment planning service to its current and new customers on January 24, 2008. This new service will help its customers control costs and increase their patient throughput, and also help the company to increase its recurring revenue.

Accuray Incorporated - Threats

Threat - Competitive Landscape The medical device industry is subject to intense competition and rapid technological change. The company competes directly with traditional radiosurgery systems from Elekta AB, BrainLAB AG, Integra LifeSciences Holdings Corporation and Varian Medical Systems, Inc. Constant developments by other companies of new or improved products, processes or



technologies will make the company’s products obsolete or less competitive. The demand for its products is impacted by competitive conditions, including the timely development and introduction of new competitive products and the response of the company towards downward pricing to sustain competition. Factors such as changing customer order patterns, changing incentive programs; or competitors’ new products can impact the company’s competitive positioning.

Threat - Cost Containment Pressures The company’s ability to price its devices is under threat following the increased level of scrutiny over the cost effectiveness of treatments from the government as well as private payers. The initiatives of managed care organizations and governments to contain health care costs in the US are placing an increased emphasis on the delivery of more cost-effective medical therapies. This could adversely affect sales and prices of the company’s products. Physicians, hospitals and other health care providers may be reluctant to purchase the company's products if they do not receive reimbursement for the cost of the company's products from third-party payers such as Medicare, Medicaid and health insurance programs.

Threat - Stringent Government Regulations The company is subject to various local, state, federal, foreign and trans-national laws and regulations. These include the operating and security standards of the Drug Enforcement Administration (DEA), the FDA, various state boards of pharmacy, state health departments, the National Research Council (NRC), the Department of Health and Human Services (DHHS), the European Union member states and other comparable agencies. Any non-compliance by the company with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits and licenses could have an adverse effect on the company's results of operations and financial performance. NOTE: * Sector average represents top companies within the specified sector The above strategic analysis is based on in-house research and reflects the publishers opinion only



Accuray Incorporated - Key Competitors The following companies are the major competitors of Accuray Incorporated: Elekta AB Varian Medical Systems, Inc. BrainLAB AG Integra LifeSciences Holdings Corporation Siemens AG TomoTherapy Incorporated

Accuray Incorporated - Key Employees

Accuray Incorporated, Key Employees

Name Job Title Board Level Since Age

Euan S. Thomson, PhD Chief Executive Officer, Director, President

Executive Board 2002 45

Wayne Wu Chairman Executive Board 2004 45

Robert S. Weiss Director Non Executive Board 2007 62

Li Yu Director Non Executive Board 2004 67

John Wareham Director Non Executive Board 2008 67

Elizabeth Davila Chairman, Vice Non Executive Board 2008 64

Wade Hampton Chief Sales Officer, Senior Vice President

Senior Management 2007 53

Eric P. Lindquist Chief Marketing Officer, Senior Vice President


Chris A. Raanes Chief Operating Officer, Senior Vice President


Derek Bertocci Chief Financial Officer, Senior Vice President


Theresa L. Dadone Senior Vice President, Human Resources Senior Management 2007 54

Holly R. Grey Senior Vice President, Finance Senior Management 2009 35 Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct



Accuray Incorporated - Key Employee Biographies

Accuray Incorporated, Key Employee Biographies Euan S. Thomson, PhD Job Title: Chief Executive Officer, Director, President Board Level: Executive Board Since: 2002 Age: 45

Dr. Thomson is the President, the Chief Executive Officer and a Director of Accuray since 2002. During 1999-2002, he was the President, the Chief Executive Officer and a Director at Photoelectron Corporation, a publicly held medical device company. Prior to this, he was a medical physicist within the UK National Health Service and worked as a consultant for Varian Oncology Systems and Radionics, Inc.

Wayne Wu Job Title: Chairman Board Level: Executive Board Since: 2004 Age: 45

Mr. Wu is the Chairman of Accuray since May 2004. He joined the board in April 1998. He is also a Director of Green Tree Investment Company. Mr. Wu has been the President for Pacific Health Investment, Inc., a life science investments company since June 2005. During 1998-2005, he served as the Manager at Pacific Republic Capital Group, a life science investments fund.

Wade Hampton Job Title: Chief Sales Officer, Senior Vice President Board Level: Senior Management Since: 2007 Age: 53

Mr. Hampton is the Senior Vice President and the Chief Sales Officer of Accuray since April 2007. From August 2006 to April 2007, he served as the company's Senior Vice President, Worldwide Sales. During 2003-2006, he was the Senior Vice President at Lumenis Ltd., a medical device company. During 2001-2003, he served as the Vice President, International at Natus Medical, Inc. Prior to this, he has been the Vice President, International for Coherent, Inc., a medical device company from September 1999 to October 2001. During 1997-1999, he served as the President and the Vice President at Andros Incorporated, a scientific instrumentation company.

Eric P. Lindquist Job Title: Chief Marketing Officer, Senior Vice President Board Level: Senior Management Since: 2004 Age: 48

Mr. Lindquist is the Senior Vice President and the Chief Marketing Officer of Accuray since November 2004. During March 2004-November 2004, he was the Senior Vice President, Marketing at Omnicell, Inc., a healthcare services company. Mr. Lindquist served in various senior management roles, including the President at Brain LAB, Inc. and a Director, North American Sales at BrainLAB AG from March 1997 to March 2004.

Chris A. Raanes Job Title: Chief Operating Officer, Senior Vice President Board Level: Senior Management Since: 2002 Age: 43

Mr. Raanes is the Senior Vice President and the Chief Operating Officer of Accuray since 2002. During 1999-2002, he served as the Vice President and the General Manager, Digital Imaging for PerkinElmer Optoelectronics, a business unit of PerkinElmer, Inc. Prior to that, Mr. Raanes was the General Manager at Amorphous Silicon, a business unit of PerkinElmer, Inc. During 1992-1998, he held a number of positions, including the President and the General Manager at EG&G Reticon, a subsidiary of a predecessor to PerkinElmer.

Derek Bertocci Job Title: Chief Financial Officer, Senior Vice President Board Level: Senior Management Since: 2009 Age: 54

Mr. Bertocci is the Chief Financial Officer and the Senior Vice President of Accuray since January 2009. Prior to this, he served as the Chief Financial Officer and Secretary at BioForm Medical Incorporated, a medical aesthetics company. He was also the Chief Financial Officer at Laserscope, a provider of lasers and fiber optic devices. He held several senior management positions at VISX, a leading provider of systems used in laser vision correction surgery.




Accuray Incorporated - Company Statement A statement from the Accuray Incorporated's Management Discussion and Analysis section is given below. The statement has been taken from the company’s 2008 10K. We have developed the first and only commercially available intelligent robotic radiosurgery system, the CyberKnife system, designed to treat solid tumors anywhere in the body as an alternative to traditional surgery. The CyberKnife system combines continuous image-guidance technology with a compact linear accelerator that has the ability to move in three dimensions according to the treatment plan. Our image-guidance technology continuously acquires images to track a tumor's location and transmits any position corrections to the robotic arm prior to delivery of each dose of radiation. Our compact linear accelerator, or linac, is a compact radiation treatment device that uses microwaves to accelerate electrons to create high-energy X-ray beams to destroy the tumor. This combination, which we refer to as intelligent robotics, extends the benefits of radiosurgery to the treatment of tumors anywhere in the body. The CyberKnife system autonomously tracks, detects and corrects for tumor and patient movement in real-time during the procedure, enabling delivery of precise, high dose radiation typically with sub-millimeter accuracy. The CyberKnife procedure requires no anesthesia, can be performed on an outpatient basis and allows for the treatment of patients that otherwise would not have been treated with radiation or who may not have been good candidates for surgery. In addition, the CyberKnife procedure avoids many of the potential risks and complications that are associated with other treatment options and is more cost effective than traditional surgery. In July 1999, we obtained 510(k) clearance from the FDA to market the CyberKnife system for the treatment of tumors and certain other conditions in the head, neck and upper spine. In August 2001, we received FDA clearance for the treatment of tumors anywhere in the body where radiation treatment is indicated. In September 2002, we received a CE mark for the sale of the CyberKnife system in Europe. We received approval for full-body treatment in Japan in June 2008; previously our CyberKnife regulatory approvals in Japan were limited to treatment for indications in the head and neck. The CyberKnife system has also been approved for various indications in Korea, Taiwan, China and other countries. Our customers have reported that over 50,000 patients worldwide have been treated with the CyberKnife system since its commercial introduction. In the United States, we sell to customers, including hospitals and stand-alone treatment facilities, directly through our sales organization. Outside the United States, we sell to customers in over 50 countries directly and through distributors. We have sales and service offices in Paris, France, Hong Kong, China, Tokyo, Japan, Madrid, Spain, New Delhi, India and Singapore. As of June 30, 2008, we had 61 sales personnel in our sales organization. Our CyberKnife systems are either sold to our customers or placed with our customers pursuant to our shared ownership program. As of June 30, 2008, we had 140 CyberKnife systems installed at customer sites, including 137 sold and three pursuant to our shared ownership program. Of the 140 systems sold and installed, 90 are in the Americas, 38 are in Asia and 12 are in Europe. Under our shared ownership program, we retain title to the CyberKnife system while the customer has use of the system. Our shared ownership contracts generally require a minimum monthly payment from the customer, and we may earn additional revenue through the use of the system at the site. Generally, minimum monthly payments are equivalent to the revenue generated from treating three to four patients per month, and any revenue received from additional patients is shared between us and the customer. We expect to continue to offer our shared ownership program to new customers and believe the number of installed units pursuant to and revenue from our shared ownership program to increase in future periods, but to decrease as a percentage of total revenue as we recognize more revenue from CyberKnife systems sold to customers. The shared ownership program typically has a term of five years, during which the customer has the option to purchase the system at pre-determined prices. At June 30, 2008, we had three systems installed under our shared ownership program. During the years ended June 30, 2008 and 2007, $23.7 million and $3.0 million, respectively, of total revenue was recognized in the consolidated statements of operations for the sale of 12 and one CyberKnife system units, respectively, that were formerly under our shared ownership program. At June 30, 2008 and 2007, $2.3 million and $50,000, respectively, of amounts for extended warranty and training services related to these sold shared ownership units remained recorded as deferred revenue, and will be recognized over the life of the extended warranty service period and as training service obligations are fulfilled. We manufacture and assemble our CyberKnife systems at our manufacturing facility in Sunnyvale, California. We purchase major components, including the robotic manipulator, the treatment table or robotic couch, the magnetron, which creates the microwaves for use in the linear accelerator, the imaging cameras and the computers, from outside suppliers, some of which are single source. Our reliance on single source suppliers could harm our ability to meet demand for our products in a timely and cost effective manner. However, in most cases, if a supplier were unable to deliver these components, we believe that we would be able to find other sources for these components subject to any regulatory qualifications, if required. We manufacture certain other electronic and electrical subsystems, including the linear accelerator. We then



assemble and integrate these components with our proprietary software and perform testing prior to shipment to customer sites. We generate revenue by selling the CyberKnife system and by providing ongoing services and upgrades to customers following installation of the CyberKnife system. The current United States list price for the CyberKnife system ranges from approximately $4.2 million to $5.75 million depending upon system configuration and options purchased by the customer. The list price typically includes initial training, installation, and a one-year warranty. We also offer optional hardware and software, technical enhancements and upgrades to the CyberKnife system, as part of our multiyear service plans. Currently, our most comprehensive service plan is our Diamond Elite multiyear service plan, or Diamond plan. Under our Diamond plan, customers are eligible to receive up to two upgrades per year, when and if available. Through June 30, 2008, the Diamond Plan listed for $460,000 per year and provided for annual renewals for four years including the one-year warranty period. Effective July 1, 2008, the Diamond plan lists for $495,000 per year and provides for annual renewals for five years including the one-year warranty period. The customer may cancel the service plan at any time. As of June 30, 2008, 107 of our customers had purchased service plans. Prior to introducing our Diamond plan, we offered legacy service plans, some of which continue to have future upgrade obligations. In these cases, revenue, including Cyberknife product revenue, is recognized ratably over the remaining life of the contract once all upgrade obligations have been satisfied. The CyberKnife procedure is currently covered and reimbursed by Medicare and other governmental and non-governmental third-party payors. Medicare coverage currently exists in the hospital outpatient setting and in the free-standing clinic setting. For 2007, the CMS issued a final rule that resulted in a downward adjustment to the reimbursement rates for treatments using our technology in the hospital outpatient department. For 2007, under the finalized Medicare payment rules, the national payment rates for procedures billed using Medicare billing codes for treatments using the CyberKnife system are $3,896 for the first treatment and $2,645 for each treatment thereafter, up to a maximum of five treatments, which is an approximately 25 to 29 percent reduction as compared to 2006 payment rates. The implementation of this reimbursement reduction did not have a material impact on our consolidated financial position or results of operations for the year ended June 30, 2007. For the calendar year 2008, CMS has published increased payment rates as compared to 2007. The published rates for the calendar year 2008 are $3,930 for the first treatment and $2,871 for each treatment thereafter. In July 2008, CMS issued proposed payment rates under these codes for 2009. The proposed payment rate under HCPCS code G0339 for 2009 is $3,664 and the proposed payment rate under code G0340 for 2009 is $2,654. We do not anticipate a significant impact of this rule on our business or results of operations. Our total net revenue was $210.4 million, $140.5 million and $52.9 million during the years ended June 30, 2008, 2007 and 2006, respectively. Our net income (loss) was $5.4 million, ($5.6) million and ($33.7) million during the years ended June 30, 2008, 2007 and 2006, respectively. Our net cash provided by (used in) operating activities was ($18.0) million, $11.6 million and $22.1 million during the years ended June 30, 2008, 2007 and 2006, respectively. As of June 30, 2008, our backlog as discussed under "Backlog", was approximately $647.0 million. The contingent portion of backlog was $187.3 million at June 30, 2008. Contingent backlog consists of backlog under contracts that are subject to the satisfaction of contingencies prior to the customer becoming legally bound to proceed with the acquisition of a CyberKnife system. The non-contingent portion of backlog was $459.7 million at June 30, 2008. Our future success will depend in large part on our ability to establish and maintain a competitive position in the market. To compete successfully, we will need to continue to demonstrate the advantages of our products and technologies over alternative procedures, products and technologies, and convince physicians and other healthcare decision makers of the advantages of our products and technologies. Our business and sales and installation cycle does not immediately create recognizable revenue. As such, we must invest in sales and marketing activities up to 24 months prior to realizing the revenue from those activities. Our ability to achieve and maintain long-term profitability is largely dependent on our ability to successfully market and sell the CyberKnife system and to control our costs and effectively manage our growth.



Accuray Incorporated - Locations And Subsidiaries

Head Office Accuray Incorporated 1310 Chesapeake Terrace Sunnyvale CA ZIP: 94089 United States Tel: +1 408 7164600

Other Locations & Subsidiaries Accuray Incorporated, Subsidiaries

Accuray Europe SARL

Tour Atlantique 25e

1 Place de la Pyramide

Paris La Defense Cedex

Zip: 92911

France

Tel: +33 155 232020

Accuray Asia Ltd.

Suites 1702 - 1704, Tower 6

The Gateway

Harbour City

Hong Kong Special Administrative Region of China

Tel: +852 22478688

Accuray Japan K.K.

Level 28, Shinagawa Intercity Tower A

2-15-1 Konan

Minato-ku

Tokya

Zip: 108 6028

Japan

Tel: +81 03 67172894 Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct



Accuray Incorporated - Financial Ratios

Financial Ratios - Capital Market Ratios

Accuray Incorporated, Ratios based on current share price

Key Ratios 03-Sep-2009

P/E (Price/Earnings) Ratio 604.629

Enterprise Value/Earnings Before Interest, Taxes, Depreciation and Amortization 479.397

Enterprise Value/Sales 1.363

Enterprise Value/Total Assets 1.160 Note: Above ratios are based on share price as of 03-Sep-2009, the above ratios are absolute numbers Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct

Financial Ratios - Annual Ratios

Accuray Incorporated, Annual Ratios

Key Ratios Unit/Currency 2005 2006 2007 2008 2009

Equity Ratios

EPS (Earnings per Share) USD -1.764 -2.106 -0.210 0.089 0.010

Book Value per Share USD -1.765 -3.285 2.332 2.396 2.717

Cash Value per Share USD 1.048 1.715 3.807 0.677 0.650

Profitability Ratios

Gross Margin % 43.071 40.815 54.721 46.589 47.494

Operating Margin % -111.199 -63.316 -6.080 -0.444 -1.035

Net Profit Margin % -112.566 -63.697 -3.999 2.559 0.261

Profit Mark up % 86.712 78.532 127.219 94.766 93.776

PBT Margin (Profit Before Tax) % -112.263 -63.210 -3.567 2.971 0.284

Return on Equity % -4.477 4.117 0.396

Return on Capital Employed % -44.937 -43.574 -4.065 -0.582 -1.493

Return on Assets % -29.000 -24.306 -1.691 1.825 0.222

Return on Fixed Assets % -46.780 -41.530 -13.876 -1.286 -2.953

Return on Working Capital % -1,140.900 -5.750 -1.064 -3.019

Cost Ratios

Operating Costs (% of Sales) % 211.199 163.315 106.080 100.444 101.035

Administration Costs (% of Sales) % 109.443 77.715 44.004 35.653 34.981

Liquidity Ratios

Current Ratio Absolute 1.069 0.939 2.217 1.652 1.712

Quick Ratio Absolute 0.867 0.775 2.078 1.481 1.455

Cash Ratio Absolute 0.541 0.451 1.678 0.910 0.903

Leverage Ratios

Debt to Equity Ratio Absolute -0.101

Debt to Capital Ratio Absolute 0.052

Efficiency Ratios

Asset Turnover Absolute 0.258 0.382 0.423 0.713 0.851

Fixed Asset Turnover Absolute 1.726 2.410 5.868 12.274 15.505

Inventory Turnover Absolute 1.745 2.722 3.557 4.488 4.092

Current Asset Turnover Absolute 0.665 0.912 0.519 0.946 1.213

Capital Employed Turnover Absolute -0.781 -0.991 1.120 1.609 1.518

Working Capital Turnover Absolute 10.260 0.946 2.398 2.917

Revenue per Employee USD 454,865

Net Income per Employee USD 1,208

Capex to Sales % 11.829 19.260 5.148 2.391 Source: Annual Report, Company Website, Primary and Secondary Research



Global Markets Direct

Financial Ratios - Interim Ratios

Accuray Incorporated, Interim Ratios

Key Ratios Unit/Currency Sep-2008 Dec-2008 Mar-2009 Jun-2009

Interim EPS (Earnings per Share) USD -0.058 0.023 0.021 0.021

Book Value per Share USD 2.401 2.567 2.633 2.717

Current Ratio Absolute 1.719 1.825 1.637 1.712

Asset Turnover Absolute 0.199 0.202 0.225 0.214

Current Asset Turnover Absolute 0.270 0.280 0.327 0.305

Working Capital Turnover Absolute 0.645 0.619 0.840 0.734 Source: Annual Report, Company Website, Primary and Secondary Research Global Markets Direct



Financial Ratios - Ratio Charts

Accuray Incorporated, Ratio Charts

EPS Operating Margin

Return on Equity Return on Assets

Debt to Equity Ratio


Appendix


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Methodology Global Markets Direct company reports are based on a core set of research techniques which ensure the best possible level of quality and accuracy of data. The key sources used include:

• Company Websites • Company Annual Reports • SEC Filings • Press Releases • Proprietary Databases

Currency Codes

Currency Code Currency

USD U.S. Dollars Global Markets Direct

Ratio Definitions Capital Market Ratios

Capital Market Ratios measure investor response to owning a company's stock and also the cost of issuing stock.

Price/Earnings Ratio (P/E)

Price/Earnings (P/E) ratio is a measure of the price paid for a share relative to the annual income earned per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of income, so the stock is more expensive compared to one with lower P/E ratio. Also, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. Price per share is as of previous business close, and EPS is from latest annual report. Calculation: Price per Share / Earnings per Share

Enterprise Value/Earnings before Interest, Tax, Depreciation & Amortization (EV/EBITDA)

Enterprise Value/EBITDA (EV/EBITDA) is a valuation multiple that is often used in parallel with, or as an alternative to, the P/E ratio. The main advantage of EV/EBITDA over the PE ratio is that it is unaffected by a company's capital structure. It compares the value of a business, free of debt, to earnings before interest. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Calculation: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / (Net Income + Interest + Tax + Depreciation + Amortization)

Enterprise Value/Sales

Enterprise Value/Sales (EV/Sales) is a ratio that provides an idea of how much it costs to buy the company's sales. EV/Sales is seen as more accurate than Price/Sales because market capitalization does not take into account the amount of debt a company has, which needs to be paid back at some point. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Calculation: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Sales

Enterprise Value/Operating Profit

Enterprise Value/Operating Profit measures the company's enterprise value to the operating profit. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Calculation: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Operating Income

Enterprise Value/Total Assets

Enterprise Value/Total Assets measures the company's enterprise value to the total assets. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Calculation: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Total Assets

Dividend Yield

Dividend Yield shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Calculation: Annual Dividend per Share / Price per Share


Appendix


Equity Ratios

These ratios are based on per share value. Earnings per Share (EPS)

Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. Calculation: Net Income / Weighted Average Shares

Dividend per Share

Dividend is the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Dividend Cover

Dividend cover is the ratio of company's earnings (net income) over the dividend paid to shareholders. Calculation: Earnings per share / Dividend per share

Book Value per Share

Book Value per Share measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Calculation: (Shareholders Equity - Preferred Equity) / Outstanding Shares

Cash Value per Share

Cash Value per Share is a measure of a company's cash (cash & equivalents on the balance sheet) that is determined by dividing cash & equivalents by the total shares outstanding. Calculation: Cash & equivalents / Outstanding Shares


Profitability Ratios

Profitability Ratios are used to assess a company's ability to generate earnings, based on revenues generated or resources used. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.

Gross Margin

Gross margin is the amount of contribution to the business enterprise, after paying for direct-fixed and direct-variable unit costs. Calculation: {(Revenue-Cost of revenue) / Revenue}*100

Operating Margin

Operating Margin is a ratio used to measure a company's pricing strategy and operating efficiency. Calculation: (Operating Income / Revenues) *100

Net Profit Margin

Net Profit Margin is the ratio of net profits to revenues for a company or business segment - that shows how much of each dollar earned by the company is translated into profits. Calculation: (Net Profit / Revenues) *100

Profit Mark up

Profit Mark up measures the company's gross profitability, as compared to the cost of revenue. Calculation: Gross Income / Cost of Revenue

PBIT Margin (Profit Before Interest & Tax)

Profit Before Interest & Tax Margin shows the profitability of the company before interest expense & taxation. Calculation: {(Net Profit+Interest+Tax) / Revenue} *100

PBT Margin (Profit Before Tax)

Profit Before Tax Margin measures the pre-tax income over revenues. Calculation: {Income Before Tax / Revenues} *100

Return on Equity Return on Equity measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. Calculation: (Net Income / Shareholders Equity)*100

Return on Capital Employed

Return on Capital Employed is a ratio that indicates the efficiency and profitability of a company's capital investments. ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings. Calculation: EBIT / (Total Assets – Current Liabilities)*100

Return on Assets

Return on Assets is an indicator of how profitable a company is relative to its total assets, the ratio measures how efficient management is at using its assets to generate earnings. Calculation: (Net Income / Total Assets)*100

Return on Fixed Assets

Return on Fixed Assets measures the company's profitability to its fixed assets (property, plant & equipment). Calculation: (Net Income / Fixed Assets) *100

Return on Working Capital

Return on Working Capital measures the company's profitability to its working capital. Calculation: (Net Income / Working Capital) *100


Cost Ratios

Cost ratios help to understand the costs the company is incurring as a percentage of sales. Operating costs (% of Sales)

Operating costs as percentage of total revenues measures the operating costs that a company incurs compared to the revenues. Calculation: (Operating Expenses / Revenues) *100

Administration costs (% of Sales)

Administration costs as percentage of total revenues measures the selling, general and administrative expenses that a company incurs compared to the revenues. Calculation: (Administrative Expenses / Revenues) *100

Interest costs (% of Sales)

Interest costs as percentage of total revenues measures the interest expense that a company incurs compared to the revenues. Calculation: (Interest Expenses / Revenues) *100


Appendix


Liquidity Ratios

Liquidity ratios are used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.

Current Ratio

Current Ratio measures a company's ability to pay its short-term obligations. The ratio gives an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. Calculation: Current Assets / Current Liabilities

Quick Ratio

Quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. Calculation: (Current Assets - Inventories) / Current Liabilities

Cash Ratio

Cash ratio is the most stringent and conservative of the three short-term liquidity ratio. It only looks at the most liquid short-term assets of the company, which are those that can be most easily used to pay off current obligations. It also ignores inventory and receivables, as there are no assurances that these two accounts can be converted to cash in a timely matter to meet current liabilities. Calculation: {(Cash & Bank Balance + Marketable Securities) / Current Liabilities)}


Leverage Ratios

Leverage ratios are used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.

Debt to Equity Ratio

Debt to Equity Ratio is a measure of a company's financial leverage. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries tend to have a higher debt-equity ratio. Calculation: Total Liabilities / Shareholders Equity

Debt to Capital Ratio

Debt to capital ratio gives an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. This tells investors whether a company is more prone to using debt financing or equity financing. A company with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and increase its default risk. Calculation: {Total Debt / (Total assets - Current Liabilities)}

Interest Coverage Ratio

Interest Coverage Ratio is used to determine how easily a company can pay interest on outstanding debt, calculated as earnings before interest & tax by interest expense. Calculation: EBIT / Interest Expense


Efficiency Ratios

Efficiency ratios measure a company's effectiveness in various areas of its operations, essentially looking at maximizing its use of resources.

Fixed Asset Turnover

Fixed Asset Turnover ratio indicates how well the business is using its fixed assets to generate sales. A higher ratio indicates the business has less money tied up in fixed assets for each currency unit of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets. Calculation: Net Sales / Fixed Assets

Asset Turnover

Asset turnover ratio measures the efficiency of a company's use of its assets in generating sales revenue to the company. A higher asset turnover ratio shows that the company has been more effective in using its assets to generate revenues. Calculation: Net Sales / Total Assets

Current Asset Turnover

Current Asset Turnover indicates how efficiently the business uses its current assets to generate sales. Calculation: Net Sales / Current Assets

Inventory Turnover

Inventory Turnover ratio shows how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. Calculation: Cost of Goods Sold / Inventory

Working Capital Turnover

Working Capital Turnover is a measurement comparing the depletion of working capital to the generation of sales. This provides some useful information as to how effectively a company is using its working capital to generate sales. Calculation: Net Sales / Working Capital

Capital Employed Turnover

Capital employed turnover ratio measures the efficiency of a company's use of its equity in generating sales revenue to the company. Calculation: Net Sales / Shareholders Equity

Capex to sales Capex to Sales ratio measures the company's expenditure (investments) on fixed and related

Appendix


assets' effectiveness when compared to the sales generated. Calculation: (Capital Expenditure / Sales) *100

Net income per Employee

Net income per Employee looks at a company's net income in relation to the number of employees they have. Ideally, a company wants a higher profit per employee possible, as it denotes higher productivity. Calculation: Net Income / No. of Employees

Revenue per Employee

Revenue per Employee measures the average revenue generated per employee of a company. This ratio is most useful when compared against other companies in the same industry. Generally, a company seeks the highest revenue per employee. Calculation: Revenue / No. of Employees

Efficiency Ratio

Efficiency Ratio is used to calculate a bank's efficiency. An increase means the company is losing a larger percentage of its income to expenses. If the efficiency ratio is getting lower, it is good for the bank and its shareholders. Calculation: Non-interest expense / Total Interest Income


Notes • Financial information for the company is taken from the most recently published annual reports or SEC filings • The financial and operational data reported for the company is as per the industry defined standards • Turnover converted to USD at average annual conversion rate as of fiscal year end

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accuray incorporated - financial and strategic analysis...

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