Good day ladies and gentlemen, and welcome to the third quarter 2010, Accuray Incorporated earnings conference call. My name is Stacy and I’ll be your conference moderator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator Instructions) I would now like to hand the presentation over to your host for today's call, Mr. Tom Rathjen, Vice President of Investor Relations; please proceed.

Thank you. Hello, and thanks for joining us this afternoon for Accuray's conference call for the third quarter of fiscal 2010. Joining us today is Dr. Euan Thomson, Accuray's President and Chief Executive Officer; as well as Derek Bertocci, Accuray’s Senior Vice President and Chief Financial Officer. As we have done in past quarters, we will again be referring to revenue and backlog data, which are found in PDF files on the Investor Relations page of the Accuray website at www.accuray.com. Please log on to this site to view this information. Before we begin I need to remind you that except for the historical information, the information that follows contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include matters described in the Risk Factors sections of our Annual Report on Form 10-K, as well as updated from time-to-time in our quarterly reports on Form 10-Q and other filings with the SEC. Now, I’d like to turn the call over to our President and CEO, Dr. Euan Thomson. Euan.

Thank you Tom, and thanks to everyone for joining us in our third quarter of fiscal 2010 conference call. Today we are reporting another quarter of solid orders and backlog expansion in addition to a quarter of sound profitability. During the third quarter, we added 14 orders to backlog, increasing total backlog by 8%. Six CyberKnife Systems were installed, and eight were shipped during the quarter. For the first nine months of fiscal 2010, Accuray has added 41 CyberKnife systems into backlog, and shipped 26 unties to customers worldwide. We believe that this positive ratio is a continued indicator of future growth. I'll now provide a brief review of the business highlights of the third quarter of our fiscal year 2010, and I'll then turn the call over Derek for a detailed financial review. During the quarter Accuray's total revenue was $51.9 million. Revenue from sources excluding previously differed platinum revenue was $48.8 million, which represents a 10% increase from Q3 and fiscal year 2009. During the third quarter, despite the year-on-year decline in deferred platinum revenue, we recorded net income of $2.3 million or $0.04 per diluted share. This was driven largely by improving gross margin and continued operating expense control. As validation of our improving financials, we increased year-over-year net income by $1 million on lower total revenue. As I mentioned 14 orders of CyberKnife systems were added into back-log in the third quarter, which along with service renewal contracts and other ancillary product purchases contributed a total of $76.6 million. Of the 14 orders, six were from customers within the Americas region, with an additional six orders from the European sales region, and one from Korea. One CyberKnife system was sold in Japan during the third quarter, continuing the renewed sales momentum in the region. Five of…

Thank you Euan, I'd like to start with a brief overview of the third quarters results, and then provide details for perspective. During the third quarter of fiscal 2010, total revenue was $51.9 million, compared to $61.3 million for the third quarter of the prior year. Excluding revenue previously differed for systems sold with Platinum service agreement, revenue was $48.8 million, up 10$ from the comparable $44.2 in the third quarter of the prior year. Gross profit margin of 48.9% was a sequential increase from the prior quarter and comparable to the gross profit margin during the third quarter of last year. We continue to control operating expenses, holding them to $22.6 million for the quarter, which is approximately 23% below the prior year’s level. The over result was net income of $2.3 million or earnings of $0.04 per diluted share for the third quarter, compared to net income of $1.2 million or $0.02 per share for the third quarter of the prior year. Orders added to backlog totaled $76.6 million in the third quarter and $227.5 million for the first nine months of fiscal 2010, representing book-to-bill ratios of 1.5 and 1.4 respectively. The increases in backlog generated by these orders validate ongoing customer demand for the CyberKnife, and will help support our continued growth in the further. We added 14 orders for CyberKnife Systems to backlog, with a value of $64.3 million, plus $12.3 million on renewal of service contracts, and other ancillary accessory orders. Six of the orders for CyberKnife Systems were from customers within the Americas region, six from Europe, one from Japan and one from the Asia Pacific region. One of the CyberKnife orders book to backlog this quarter was shipped and converted to revenue within the quarter. At the end of the third quarter…

Thank you, Derek. We had a strong third quarter in fiscal 2010 in terms of orders, expanding backlog, improving gross margin and profitability. Importantly we saw continued acceptance for CyberKnife Radiosurgery, growth in our core revenue, and sound profitability. Quiet the expected to tell us by differed platinum revenue. With that we’ll now be happy to take your questions.

(Operator Instructions) Your first question comes from Mark Arnold - Piper Jaffray.

I guess two questions here. Were there any VSI shipments in the quarter? Then secondly, that the product revenue per system installed was really high in the quarter, can you just explain that a little bit?

We didn’t have any VSI shipments in the quarter. We have had one VSI shipment so far in the fourth quarter. As far as the system revenues improving, as I indicated that’s a big significant factor as to why the gross margins improved. It is a reflection of a difference in mix of products, and improvement in the pricing in general in our products.

Okay and then just on the platinum side, the $4 million that’s likely to be recognized in fiscal ‘011, is that likely to be recognized for the most part in Q1?

It will spread over the year, but it will be more heavily weighted towards the beginning of the year, so it will tail off across the year just as it has tailed off across this year.

Your next question comes from Josh Jennings - Jefferies & Company. Josh Jennings - Jefferies & Company: I mean, looking at your order numbers $76.6 million and you’re come up with a $92 million number in fiscal Q2, what do you think is driving that? Is it outside of the demand that you are seeing for the CyberKnife and as far as capabilities, are you also seeing some loosening of some of these hospital budgetary constraint in the US, and if you can comment on the purchasing environment in Europe and Asia as well, compared to the first half of fiscal year that you saw in Q3.

Sure, I think generally we are seeing an improvement in the sales environment throughout the world. In the US, it’s slow, because I said, I used the word cautiously optimistic just now, I think that’s reasonable. Our sale force is definitely seeing some loosening of capital budgets, which helps. I think the impact of VSI has been very positive, been very well received and it’s past the machine with enhanced capabilities, and that certainly has encouraged people to buy. I think also the other impact on sales has been our regionalization efforts. Given a great sense of focus, a good team environment and blending kind of sales and marketing skills in all the different regions, and allowing people to be very versatile and adaptive to local market requirements, and I think that’s in an environment where the market is relatively fast changing as we come out of the recession, that’s been an important key factor. Josh Jennings - Jefferies & Company: Just in terms of the competitive environment, you mentioned in terms of your competitive launching the TrueBeam STX system. I know you haven’t lost any orders and nothing has fallen out of your pipeline, how do you see that going forward and how do you feel that CyberKnife is competitively positioned outside of the real time tracking. What really drives the technological benefit that you see in SRS treatments for the CyberKnife? Thanks.

There are a number of factors that make the CyberKnife distinctly different from any gantry based products, and I think our customers see that. We really didn’t skip a beat when the competitive launch took place. I think there is no question that the machine rotating in a gantry around a fixed isocenter, is unlikely to have the same capability as a robotic system such as the CyberKnife, which can automatically move to 100 to 200 beam positions for a single patient treatment, and move the radiation beam as the target moves due to either patient motion or the [Inaudible] motion of the patient; it’s just not something that could be matched. I think that our customers saw that and consequently there was really no significant change in the sales environment.

Your next question comes from Tycho Peterson - JPMC.

I just wanted to dig a little bit more into some of the gross margin trends this quarter. Could you help tease out some of the underlying factors there again, maybe more information on what’s driving up your product gross margin, back to 2008, 2007 levels. Then also on the service gross margin side, I think you had expected that to increase slightly in the back half of the year, and just any more color you can provide on what was going on there in the quarter and outlook. Thank you.

On the systems side, the margins increased in part because of improvements in pricing the product, and that was across our markets. As far as the other factor that effected systems, we did have a slightly different mix of systems in terms of configurations that customers were choosing this quarter, some of them being slightly lower cost configurations for us, plus we have continued to work on improving the cost basis of the system in our manufacturing. All those factors together pushed us to the higher margins for system. As far as the service margins go, the slight decline which we do have some variability about quarters, I don’t want to drive too much from any one quarter, was driven in part by some costs related to certain products that were chosen as upgrades under our diamond service program, as well as some increases in cost in the service group as we prepare for additional customers and systems to come online for service in the future.

Great thanks, and then also within the US market; I wonder if you could provide some additional color on what you are seeing in the hospital market versus the pre-training facilities. I think last quarter you didn’t have any new orders out of pre training centers. Are you seeing the dynamics begin to change there or?

We are still generally in the US focused on the hospital market as opposed to free standing center market. There has been no significant shift from our stocks in that. It’s really a question of the certainty of the reimbursement being much higher in a free standing center. There is definitely some regions that has definitively interest from free sanding centers from entrepreneurial groups and established providers of free standing services, but there has been no overall shift in the purchasing pattern.

(Operator Instructions) Your next question comes from Robert Manning – Janney Montgomery Scott. Robert Manning – Janney Montgomery Scott: Euan, I know you don’t like to be too specific in guidance, but it seems to me that we might be at a point where the growth rate might pick up a little bit, and I might just be interested in any color you could offer there. I mean there is clearly a lot more anecdotes, word of mouth spreading about CyberKnife. We are getting close. I guess we actually have now patients with five years of history which they’ve all been claiming for and hospital budgets loosening up. Order rate for the first six months annualizes your 54-55 units, why would it be too much to hope for, that we could see the installation rate get up to something like that level, maybe in fiscal 2011?

You said at the beginning Bob, we don’t like to give too much detail on some of these aspects. Robert Manning – Janney Montgomery Scott: I want color.

On the basic sales environment, just going back and reinforcing what we said, I think its definitely an environment where we feel that we have got more momentum, we are making more headway than we were say a year ago, and generally people are very positive and upbeat, and a positive book-to-bill ratio is what Derek talked about. Certainly a firm indicator of future growth in our eyes, and that’s why we have been fairly positive I think in the description of the company’s growth during this call. Beyond that, I wouldn’t want to be specific. I think the physician environment is good for us in terms of our customers recognizing that CyberKnife is uniquely different from other systems. Clinical data continues to grow and mature, and that really does help with not just in the US, but particularly in international markets where they are very, very data driven. I think our own internal structure as I said in regionalization in particular helps us significantly. I think we are certainly fairly positive about future growth, and there is no doubt having the kind of book-to-bill ratio that we have achieved over the last few quarters. It certainly is we believe a good indicator of solid future growth. Robert Manning – Janney Montgomery Scott: Earning capacity restraints that would prevent you from getting installation rate up to the order rate?

Well let’s see, we hope that we’ll always grow the order rate faster than we’ll grow the installation rate, but there are no capacity issues now. We can manufacture certainly within the range of systems that we would expect to shift. The gating item is generally the hospitals being ready to receive the CyberKnife system. It’s not us and our ability to provide the equipment. They all have manufacturing programs they need to go through to a lesser or greater extent, even you build new rooms or some times whole new buildings and whole new units. Robert Manning – Janney Montgomery Scott: As far as that time to install, I mean a few years go we were looking for a 12 to 18 months and that kind of stretched out 18 to 24. Do you see signs that that might be coming back in, certificates are easier to get or anything like that.

Bob, it’s not exactly a change probably in the certificates of need, it’s more that when we look at our backlog, and the orders that we are reporting in backlog, these are orders that we believe have the characteristics that indicate that they are more consistent and more reliable in terms of transitioning to shipments of revenue. So that’s why we are expecting, it’s our expectation that the orders and backlog would transition the revenue over a 12-month period.

Your next question comes from [Bob Lubec] - CJS Securities.

You spoke earlier in the call about the April Medicare meeting as it relates to prostate radiation treatment. Could you just give us a little more color around that update on the progress of reimbursement throughout the US for you with prostate surgery?

Yes, it was a special panel established by CMS to evaluate all prostate radiation treatment, and they looked with a view to giving CMS guidance on where reimbursement should head. There were various groups represented, and as I indicated the CyberKnife had 19 or so speakers who were there to specifically support CyberKnife prostate radiosurgery, and they put a very good case forward I think. In the end the conclusion of the panel really was that the data that was available for any radiation treatment wasn’t particularly strong. The key thing from our perspective was that they did not kind of call out prostate radiosurgery with the CyberKnife as being in a different category from any of the others, which to us is an indicator of the move towards the main stream. There was certainly no question of them saying that it was an experimental treatment, and therefore uniquely differently from the others and should be treated differently. So we came away feeling fairly positive at the efforts of our physicians and customers over recent years have been very positive. So generally things are moving in the right direction. Data only matures one way. The studies that have been down and are ongoing with CyberKnife for prostate radiosurgery mature. They continue to show generally good results, high levels of blood control, low levels of toxicity, and the older they get the more value they have in the academic community. The same things move generally in the right direction. International again, similarly reimbursement trends are overall good, and you would expect again, as the general data matures for all categories of radiosurgery on the CyberKnife, but there is more and more evidence, and therefore reimbursement should generally go in one direction, and that’s to improve and become more solid.

Okay great, that’s very helpful, thank you. As it relates to your sales and marketing realignment and your move to regionalize that, could you give us an updated on where you stand with regional GM's, and what goals you have from that overall shift.

I can’t give you specifics, but I can tell you that we have teens in each region now. We are building up more the local presence, particularity in field marketing areas, to support the field sales teams. We seen that close link between those two groups, it’s very successfully in the regions where it seems better established, and that’s really our objective at this stage. The point is that these regions can respond very differently to local market pressures, and I think the evidence that the markets are different is there in the different form of levels in the different regions that we have. In Japan we've definitely seen a renewed sales activity. The Americas is certainly responding well now in terms of sales, and Europe remains strong performers, it has been a strong performer for some time. So we are very pleased with the way things are headed there.

Great, thanks. And a last one; with your strong cash balance and then with the end essentially of the differed revenue, or essentially getting close to that, we should see the cash balance growing on a go forward basis. So could you just update us on our latest thoughts on our uses of cash for the company?

So the cash balance will grow as we continue to improve our progress towards sustained profitability. The differed revenue that we have, and differed cogs does rollout as we ship units. So that has been in the past, relative to the rollout of the differed platinum costs, has actually probably served to lessen the cash that we have. As far as our goals for the cash, it is one to ensure that as customers consider buying a long term asset from a company, we want to make sure that the customers are confident that we have the stability to support them over a ten year horizon. Secondly we have used our cash at times to invest in technology related extensions or acquisition for the company; and thirdly, we view the long term growth of the company as something that keeps us on the lookout for opportunities that would be complementary to our product line, and allow us to further support our customers and patients.

Josh Jennings - Jefferies & Company: I just had some follow-ups here, thanks. I wonder if you could just give us some updates on the MD Anderson on operable lung tumors, the CyberKnife versus open surgery, and second, the University of Pittsburg trial on inoperable tumors. Then lastly, do you still expect insulations to grow year-over-year in fiscal ‘10 over fiscal ‘09. Thanks a lot guys.

So the MD Anderson study, many of the sites have now completed the credentialing process and its early days, but we are seeing more of a steady flow of patients. Could you just repeat the… Josh Jennings - Jefferies & Company: Just an updates on the University of Pittsburg trial as well for inoperable lung tumors.

For peripheral tumors that’s now completed, and we are still accruing patients for the medium tumors, the ones that are more central; and in terms of, that question was the installation rates? Josh Jennings - Jefferies & Company: Yes, instillations for fiscal ‘10 versus fiscal ’09. Do you still expect that to be up year-over-year?

Josh, the instillations at this point, it is not completed clear exactly which customers will end up installing as we have increased our sales in areas outside the US. Some of the significant portions of sales are through distributors and we are not in control of the instillation points. So it is not clear to us at this point whether the installs will increase over the prior year, because we don’t know exactly when those distributors will be completing their installs.

And at this time I’d like to turn the presentation back over to Dr. Euan Thomson for closing remarks.

Thank you. The third quarter of fiscal 2010 was one of solid orders, backlog expansion and profitability. Accuray remains dedicated to expanding the use of CyberKnife radiosurgery, as we change the way in which cancer is treated around the world. As always, I want to take a moment to acknowledge Accuray employees, and the tremendous contribution they make everyday. Thank you for joining us today and we look forward to speaking to you on our next call.

We thank you for your participation in today’s conference. This does conclude your presentation. You may now disconnect and have a great day.