Good day, ladies and gentlemen. And welcome to the Q3 2014 Accuray Incorporated Earnings Conference Call. My name is Chris, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today Ms. Lynn Pieper, from Investor Relations. Please proceed.

Thanks Chris. This is Lynn Pieper, Accuray’s Investor Relations Counsel from Westwicke Partners. Thank you for joining us today on our conference call as we review Accuray’s third quarter of fiscal 2014. Joining us is Josh Levine, Accuray's President and Chief Executive Officer; and Greg Lichtwardt, Accuray's Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that our call today includes forward-looking statements that involve risks and uncertainties. There are a number of factors that could cause actual results to differ materially from our expectations including risks associated with the effects of the adoption of the new CyberKnife and TomoTherapy Systems; commercial execution; future order growth, future revenue growth, future profitability; and guidance for fiscal 2014. These and other risks are more fully described in the press release, we issued earlier this afternoon as well as in our filings with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements. With that, I would like to turn the call over to Accuray's President and Chief Executive Officer, Josh Levine.

Thank you, Lynn, and thanks everyone for joining us today as we review our results for the third quarter of fiscal 2014. I’ll begin today's call with an overview of the quarter and highlight some of our achievements. Greg will provide a more detailed financial review and then I’ll then wrap up with some commentary on our strategy and we will open the call up for questions. Third quarter financial statement results were strong, highlighted by impressive growth in revenue, profitability and positive cash flow. We reported revenue of $97.1 million in the third quarter, representing a 38% year-over-year growth. Last quarter marked the first quarter of positive year-over-year revenue growth since the acquisition of TomoTherapy and we are pleased to follow that with another quarter of strong growth. Our CyberKnife and TomoTherapy systems are generating a great deal of interest and we continue to receive positive feedback from our customers regarding product reliability and performance as measured in third-party reports such as MD Buyline. Product performance, reliability and customer service are important aspects of our business where we are driving significant improvements and we are committed to sustaining these levels going forward. Further, we reported adjusted EBITDA profit of $7.8 million in the third quarter, up 139% year-over-year and 15% over last quarter. This result was driven by revenue growth, margin expansion and operating expense control. We are extremely focused on maintaining and improving on the positive year-over-year revenue growth and adjusted EBITDA profit metrics going forward. Lastly, we generated significant positive cash flow this quarter of $14.4 million as a result of the positive adjusted EBITDA and working capital reduction. With respect to orders, as we indicated in terms of directional expectations in our last earnings call, both gross and net order volumes were lower year-over-year this quarter.…

Thank you, Josh and good afternoon everyone. Josh covered orders for the quarter, so let me just say as of March 31, 2014, product backlog of $354 million is 19% higher than the same time in the year ago period. Moving onto the financial statements, total revenue for the third quarter at $97.1 million is composed of $47 million in product revenue and $50.1 million in service revenue. Product revenue growth of 88% compares to our low point in the prior fiscal year and demonstrates the remarkable nature of the turnaround we are in the midst of. This result is attributable to both increased commercial effort and improvements in the company’s order to revenue conversion process. Service revenue represents year-over-year growth of 10%, driven by the increase in our installed base and conversion of customers to higher value service contracts. Gross profit of $39.7 million increased 98% over the prior year third quarter, indicating a further expansion of product margins. Product gross margins which had been in the 30% range in the prior fiscal year quarters due to excess and obsolete inventory reserves unabsorbed product production overhead and other fixed cost, continued to rebound, reaching 46.3% this quarter on a higher volume and stronger average product revenue. Service gross margin is also significantly higher than in the prior year at 35.8% and represents continued improvement at TomoTherapy Systems reliability which is driving lower parts consumption as well as sales of higher margin service contracts. Operating expenses of $40.2 million in the third quarter represents a decrease of approximately $5 million or 11% compared with spend in the preceding fiscal year third quarter. While total operating expenses increased somewhat from the immediately preceding quarter, they are in line with our guidance of approximately $40 million per quarter. Increased spending, mostly came…

Thank you, Greg. While I’m encouraged by our significantly improved financial results, it is clear that we have some continuing headwinds in the area of U.S. commercial execution. By observation as I think about the past several years at Accuray I’m not surprised that our commercial recovery is taking longer in the U.S. given many of the specific challenges and risks that were more magnified in the U.S. market following the acquisition of the TomoTherapy business in June of 2011. As we continue to execute our strategies for a broad based sustainable turnaround, it’s important to remember at the company’s current scale some elements of our performance trajectory, while clearly improving directionally may remain lumpy. With that said, there is value in reminding ourselves how far we’ve come in the past 18 months. When I joined the company, we had a business with $240 million in cumulative net operating losses that was continuing generate net operating losses and cash burn at a rate of $75 million a year through a combination of financial and operational actions we have stabilized the business and positioned it for sustainable profitable growth going forward. We are confident going forward that we’re on the right path to drive value for all of our stakeholders. Thank you for participating in today’s call. And we’re now ready to turn the call open to questions.

All right. (Operator Instructions). All right, so it looks like your first question comes from the line of Steve Beuchaw from Morgan Stanley. Please proceed.

Hi good afternoon. Thanks for taking the questions everyone. First just a clarification, on the last call you were kind enough to put out a target for net orders for the year that was 215 to 225m sorry if I missed it, but is that still your thinking for net orders for the fiscal ‘14?

Yes, Steve. The answer is yes. Again as we said last quarter we don’t want to be in the business of giving quarterly order guidance but we believe the full year net product order range that we communicated last quarter of 215 million to 225 million is still a good estimate. And again globally we expect to drive a sequential increase in order volume in Q4 versus Q3 in order to meet that range.

Thanks. That’s helpful. And then I wondered if Josh you could put a bit more meat on the bones of the story in terms of the traction that you’re seeing out there. Could you help us specifically to get to the underlying trend on orders even qualitatively from customers who engaged with Accuray since the new systems are rolled out back at ASTRO 2012, it’s hard for us to understand on the outside, because clearly some of the orders over the last year were to catch up from orders that might have been on the books or in the funnel from prior to the launch of the new system and clearly some catch up from orders that might have aged out. And we never really knew frankly how much of the order flow was from that group. So if you have isolated just new orders from customers, you bought into the story since as 2014, how is that been trending and it would really help that you get isolate North America in your response? Thanks so much.

Yes. So let me start with just the level of engagement and the level of interest that we're seeing in the products. And this is an overall answer in terms of geography Steve. We're still seeing very, very strong interest. And I think across the board we are very pleased with the level of engagement and interest and positive feedback about the functionality of the new devices, the level of improvement in operating speed and throughput, in every aspect, you really can measure. Feedback across the Board about the products continues to be strong. And I think we have, the right level of momentum there these are the products that meet clinical needs and meet customer needs across the Board. The situation in the U.S. is not necessarily product related, it's really more I will call it kind of systemic funnel issues or systemic issues that have really kind of gotten in the way or created longer timelines to advanced funnel opportunities or the leads, the sales leads that we're able to manage or track. We have had virtually no visibility at all in the U.S. market that would come from normally the kind of natural contracting opportunity that you would see in a typical med device med-tech company with regards to GPO and strategic accounts. So while I can't qualify it a specifically or quantify specifically, we know that Variant and Elekta enjoyed reasonably significant piece of their activity in U.S. market through the fact that they have contracts with GPOs and strategic accounts, they have early visibility into deal opportunity flow in those systems. And we have quite frankly been operating at a major, major deficit in that regard. So when you start to talk about how much of the market we see in the U.S. we have…

Thanks. That’s really helpful. One clarification, do you have a sense Josh, for what percentage of LINAC orders in North America go through GPOs?

We try to kind of triangulate on that number and I think that it would be hard to predict with a great degree of accuracy, but basically, it would be a significant portion of the opportunities. In other words, if an individual hospital that’s part of group purchasing system is about to purchase $2 million, $3 million, $4 million device to a place, something in a bunker that they have right now or to build out or outfit a new bunker. One of the first things we’re going to do is look to see at the system that they are member of from a GPO perspective, has something on contract. So, I mean estimates 75% of the market probably in terms of transactions is from an initial point of visibility, it’s coming through a GPO or strategic account purchasing contract.

Thank you so much, very helpful.

All right, so it looks like you have another question coming from the line of Tycho with JP Morgan. Please proceed.

Hi, this is Jordon McKinnie on for Tycho. Thanks for taking the questions. I was wondering could you give us some color on where you saw the cancellation versus the age outs in the quarter and then what drove them?

So, there were only two age outs in the quarter which is significantly less than what we saw obviously in the second quarter, but more inline with kind of an, sort of an average over a one year period. Age outs typically occur OUS quite frequently they are in the Latin America and China region specifically. And that’s inline with the commentary we gave last quarter.

Okay. And then could you give some color on your regional growth and sort of what’s your strategy and where you’re seeing market share gains?

We have been consistently communicating and there is no change in that communicating in terms of the trends, Jordon. About the health of our sales funnel and the commercial execution it’s driving growth in the EMEA region, in Japan and in the Asia Pacific region as well. If you would ask on a more granular level, within those regions where things are taking -- where we’re really seeing improved market penetration, I’d say in Western Europe, Germany and France that would be probably from an anchor standpoint that would be to the markets that I point out. Japan has continued to be a consistent performer for us and I believe that we are still in a growth in terms of market share mode there with both on the TomoTherapy side and the CyberKnife side. And again, we’re seeing good growth and healthy momentum in the Asia Pacific region as well. So, those three areas of world have continued to be our poll of the compensation if you will in terms of commercial execution and commercial momentum in offsetting the lag in what we know is going to happen in the U.S. market.

Okay. And then would you mind giving us your total installed base?

The total installed base as of March 31st is 730 systems.

Okay, thanks.

All right. So it looks like you have another question coming from the line of Jason Wittes with Brean Capital. Please proceed.

Hi guys. Thanks for taking the question. Just wanted to go back and focus a little bit on the U.S. Josh you mentioned the U.S. being behind, you gave some parameters around that. Is that based on the funnel that you have right now, it seems like you’re saying I don’t know six months or year ahead, behind obviously some substantial orders from the U.S. And it also sounds like the big driver there is going to have to be these national contracts and GPOs, of which you just signed one or you’ve been up signing this afternoon?

So Jason, the answer is I don’t think we certainly are in certain systemic discussions or elements that I highlighted earlier. One being the structural alignment between sales and service some of those types of situations. We probably are a year or more behind the OUS regions. But quite frankly, we have been working hard to accelerate funnel management, funnel visibility in the U.S. market, the better visibility that results from the enhanced CRM tool we put in place is going to help us hopefully accelerate lead generation and stage-gate momentum in the funnel. So, I don't think we're a year off by frankly in terms of being able to see tangible results and improvement in the U.S. funnel and U.S. momentum. I think we're probably a quarter or two away. But it's something that we are exceedingly focused on and it's something that’s getting all of the right kind of intentions quite frankly going forward.

Could you, you have in the given us, so I don't know if it's possible to get the percentage OUS, U.S. write down for revenues and for orders this quarter?

No, I don't think we've been quite frankly all that granular about it. I mean it would be remiss of me not to take that opportunity though, to thank the people that are running our international business, because quite frankly their backs are hurting, they have been carrying the offset quite frankly for the U.S. slack. And the commercial leadership in that team, in Europe, in Japan, in Asia is they've done a hell of a job for us. And I think that again, if you think about what I just described in terms of the another quarter or two before we start to see real funnel improvement and real stage-gate advancement in terms of the U.S. sales funnel, I think that we're going to continue to count on our teams in EMEA, Japan and Asia-Pac to continue to do the things, that they’ve been doing all along. The good news is I have a high degree of confidence in the strength of the funnel and the opportunities that they are working with. And momentum -- commercial momentum is an interesting thing, once you can start to generate traction, if you keep doing the things, it’s got you there, it can continue. So I like -- I am appreciative, number one of the work that the guys outside the U.S. have done, and I am highly confident that they are going to continue to carry the banner for us until our [brad run] in the U.S. kind of come on line, which quite frankly we have the gas chips turned up on high for that group.

Understood and then just one other clarification or the detail, and that is last quarter you had a very big bonus of CyberKnife orders that kicked in. That was somewhat unusual, have the CyberKnife quarters continued into Q3 if I look to breakdown of the orders for this quarter?

Well, I mean if you look at gross and net for Q3, both product platforms obviously were down on a sequential quarter-to-quarter basis. I mean we are still very pleased quite frankly with the way CyberKnife is moving in terms of M6 and the adoption and the market reception for it. Obviously the MLC we believe should and will help that discussion but we got product as we’ve said in the last couple of quarters that functionality wise is performing at treatment speed, throughput user interface in terms of treatment planning applications in a much different way than the previous generation devices. And so we continue to be pleased with the M6 momentum if you will overall.

Great, thanks guys. I will jump back in queue.

All right, so it looks you have another question. Next question comes from the line of Toby Wann of the Obsidian Research Group. Please proceed.

Hey, good afternoon guys. Quickly, could you give us a breakdown of revenues of U.S. versus OUS just in terms of maybe a percentage, because it's still kind of 70-30, I think it's what it used to come turn around.

Jason just asked that. I'm going to ask you to wait until the 10-Q is filed.

Okay, no problem. And then with regards to the kind of structural realignment there in the U.S., were there any kind of charges associated and expenses incurred in this quarter that maybe aren't going to be present on a go forward basis? I know we did see -- I know that you guys did manage to the $40 million number on the expense side; it’s up a little bit sequentially, but I mean how kind of should we think about that on a go forward basis? Is still that $40 million kind of is the target and below that?

Yes, I mean just to be clear, I'll take the first part of that question, Toby. The answer is no, there were no one-time non-recurring charges in the quarter related to any of the organizational alignment discussion that I talked about. It's really more executive reporting changes. We now have the first time in the U.S. market in maybe ever quite frankly at least that I'm aware of, we have a unified executive responsibility for all of the actions and activities that are market facing under one unified executive chain of command, which is it may not sound like a lot, but it's a big deal. And if you want to see proof of that, I pointed what's happening in the other regions of the world right now for us as proof positive of that.

Okay, fair enough.

The answer to the rest of your question is we -- our outlook for the fourth quarter is also for $40 million in operating expenses and we'll provide 2015 guidance in the fourth quarter earnings call likely in August of this year.

Okay. And then one last one and then I’ll jump back in queue, with regards of pricing, just kind of general commentary everybody is still behaving rationally out there from a pricing standpoint?

Yes. We have no, nothing that I would say at least in the quarter, occurred that was out liar activity or things that are different that won’t be seen over the course of last several quarters.

Thanks a lot.

Yes.

Okay. Thanks a lot congratulations.

All right, so it looks like you have another question coming from the line of Steve Beuchaw with Morgan Stanley. Please proceed.

Hi thanks for taking the second round. I wonder if there is any early feedback on the MLC now that you have a product that you can probably start showing to key customers, I mean are you at the point yet where you’ve been able to show functioning MLC to a potential customer to someone along the line to maybe UPMC, do you have any early feedback on that product, whether its perspective on what I might do for throughput, or just general level of interest in the markets, so the expense you have seen any feedback upto this point?

So I mean just specifically to answer that question, the answer Steve is we don’t have a device that component that we’ve actually launched or released into our customers hands that basically resides on a device at this point, that’s still probably about 60 days away we’re targeting and believe we are in the timeframe of probably a late June release, limited release. As you would expect customers coming through our site visit, site towards especially people that we’ve work with for a long time, have seen devices kind of on the bench top but nothing that would provide them with the ability to give us feedback in a true commercial setting so we’re still little bit ahead of the moment and time quite frankly where we would be able to answer your question directly around customer feedback specific to having a device in their own setting.

Got it. It makes sense. And then Josh I know your mantra is that your market share is low and given where your market share is the end market conditions that you’re facing don’t matter so much. But I wonder if in this quarter given that there is a little bit of capital pressure in the U.S. there are some evolving parts in terms of how equipment is purchased in China and in Japan and then we of course have a disruption in Russia. I mean were there any cases where you saw an end market hiccup that might have had any impact on the business in the quarter? Thanks so much.

No, I mean, there wasn’t anything here that I would attribute to market conditions or changes in market conditions or shifts in philosophical views regarding CapEx spending in anyway, we are quite frankly, I am not going to know in this organization Steve is going to make an excuse for something that didn’t happen that was really related to quite frankly what I consider and what we consider our benchmark performance. We have to do better job of managing the funnel and filling the funnel and advancing the funnel in the U.S. market and we’ve got to do better job of supporting customer needs and we’ve got every touch points in organization that touches those activities. I think aligned and aligned up today in a way that we’re going to be much better at it going forward and I wish there are a way that I can push a button and accelerate the health of the U.S. funnel overnight, I can’t, and but I am highly confident that what we're seeing in the other regions of the world is going to be the pattern that emerged in the U.S. and we're going to stay after it until that’s the case quite frankly.

Great. Thanks again.

All right. So it looks like you have another question coming in from the line of Brooks O'Neil with Dougherty & Company. Please proceed. Brooks O'Neil - Dougherty & Company: Hi, guys. I got on a little bit later. I'm just curious, I'm wondering if you could comment on how you see new stack relative to competition and the software dimension? And if this software is a bit of an issue competitively are there anything, you think you can do to bridge the gap or close the gap with (inaudible)? Thanks a lot.

Brooks, I'm not going to get into specifics about product, strategic product pipeline details. We -- I commented publicly and I've been asked in public settings before about the strategic implications of connectivity and the like and quite frankly, it’s a topic that I answered it then I’ll answer it the same way today. It's important, we are very, very focused on understanding how we can close some of those gaps. I don't think quite frankly, it's an overly big gaining item for us, it's a gaining item. But I think we are proving that we can sell through it in many cases and we're working hard to trying to address some of the connectivity issues that and call it gaps if you will that we think exists to improve our overall product position and capabilities, which is what we would continue to do under any circumstances. So yes, again I don't want to make, I don't use that as an excuse quite frankly for what happen in Q3. Brooks O'Neil - Dougherty & Company: Sure, I applaud what you are do, I appreciate your answer, thanks a lot.

No problem.

All right. So it looks like there are no further questions at this time. So I hand it back over to Josh Levine for closing.

So we want to thank all of you for participating in today’s call. And we look forward to speaking with you at the year end and Q4 earnings release. Thank you very much.