Accuray Incorporated (ARAY) Q4 2020 Earnings Report, Transcript and Summary

Good afternoon. Welcome to the Accuray Report Fourth Quarter and Fiscal Year 2020 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Joe Diaz from Lytham Partners. Please go ahead.

Thank you, Kate, and good afternoon to everyone. Welcome to Accuray's conference call to review financial results for the fourth quarter of fiscal year 2020, which ended on June 30, 2020. During our call this afternoon, management will review recent corporate developments. Joining us today are Josh Levine, Accuray's President and Chief Executive Officer; and Shig Hamamatsu, Accuray's Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind you that our call today includes forward-looking statements. Actual results may differ materially from those contemplated or implied by these forward-looking statements. Factors that could cause these results to differ materially are set forth in the press release we just issued after the close – after the market closed this afternoon, as well as in our filings with the Securities and Exchange Commission. The forward-looking statements on this call are based on information available to us as of today's date, and we assume no obligation to update any forward-looking statements as a result of new information or future events, except to the extent required by applicable securities laws. Accordingly, you should not put undue reliance on any forward-looking statements. A few housekeeping items for today's call. There will be slide presentation accompanying today’s call, which can be accessed on the link provided in today’s earnings release or by going directly to the company’s investor page at accuray.com. Also, during the Q&A session, we request that participants limit themselves to two questions and then re-queue with any follow-ups. Finally, all references we make to a specific quarter in the prepared remarks are to our fiscal year. For example, statements regarding our fourth quarter refer to our fiscal fourth quarter ended June 30, 2020. With that, le me turn the call over to Accuray's President and Chief Executive Officer, Josh Levine. Josh?

Thanks, Joe, and thank you to everyone joining us today. Joining Shig and I on today’s call is also Suzanne Winter, our Chief Commercial Officer and Head of R&D, who will be joining us during the Q&A session. Despite the challenging environment caused by COVID-19, we concluded the fiscal year on a strong note and feel good about our full year fiscal 2020 performance. We generated 10% year-on-year order growth, aggressively managed expenses and working capital and positioned the business for future growth. With that said, it's clear that the macro environment is requiring our team to find new and creative ways to engage customers and manage the business. The intensity of the COVID-19 situation is highly variable by region and local markets, continuing travel and customer access restrictions in certain markets, and the resulting logistics and bunker construction schedules related to installation project timelines have been impacted at both our distributor and end user levels. As a result, we expect continued uncertainty of revenue conversion timing for at least the first half of fiscal 2021. Despite these headwinds, we're demonstrating a high degree of adaptability. Our commercial team continues to successfully respond to customer specific conditions and requirements. Sales, clinical application support, and even some service related diagnostics and troubleshooting interactions are being conducted through videoconference platforms that enable customer communication and support in real time. On balance, we believe we are operating very effectively within the constraints of the COVID environment. And I'm proud of our commercial team's ability to adapt and the dedication of our entire organization during these challenging times. From an internal focus perspective, we've been taking actions across an array of operational and financial areas to help ensure the continuity of our business. Operationally, we are continuing to work aggressively with critical supply chain and logistics partners to ensure that we can support our production and service activities globally, while maintaining maximum flexibility related to production schedule changes tied to revenue conversion timing. We exercise great financial discipline in fiscal 2020 and maintained our focus on cash flow management, with minimal compromise to commercial activities and advancing future innovation. While Shig will discuss our balance sheet position in greater detail in his prepared remarks, these actions allowed us to finish fiscal 2020 with a stronger cash position than our initial internal forecast anticipated. As we exited the fourth quarter, we were able to prepay $10 million of our term loan and renegotiate the covenants related to the remaining debt with the lender in the first week of the fiscal 2021 first quarter. Thinking about our strategic growth opportunities, we are still awaiting final completion of the tender process for the China Type A licenses, awarded to end user facilities for Accuray devices. While the timing of Type A shipments remains uncertain, our belief is that we will begin to see initial revenue impact sometime in the first half of fiscal ‘21. Turning to the Type B segment of the China market, we continue to advance our plan to produce a made in China product for the Type B segment. Operationally, we have made significant progress in readying our production capability in Tianjin. The JV manufacturing facility there is now complete, with manufacturing qualification, and in-country required testing, finishing sometime in the first calendar quarter of 2021. Based on estimates of the product registration process timelines, we expect that we will begin shipping the Tianjin produced version of Radixact in the fourth quarter of calendar ‘21, or roughly 15 months from now. Additionally, the Tianjin training center is also now complete and devices and equipment to support training are scheduled to be installed and in place by the end of this month, in order to support a grand opening of that facility by mid-September. Turning to one of our more important R&D development projects. During the fourth quarter of fiscal 20, we achieved full commercial release of the Synchrony Motion management upgrade on Radixact. And we are very encouraged by the strong interest in Synchrony from existing Radixact customers who are treating complex SBRT cases. During fiscal Q4, we shipped a total of nine Synchrony upgrades and installed three of these upgrades in the Japan market alone. We now have five customer locations that are actively treating patients with Synchrony-equipped Radixact’s, and our expectation is that we will have an additional 10 customer sites going live by the end of our current quarter. We believe the added clinical value that Synchrony can bring to Radixact will be a strong driver of trade-in, trade-up opportunities for existing Tomo-installed base replacement sales.. The importance of the Synchrony introduction on Radixact cannot be overstated in terms of clinical impact. In order to share with you how truly unique Synchrony’s motion management capability is, and the significance of the clinical impact it will have on the Radixact platform. We have some visuals to share with you, as I walked through my prepared remarks. As background, Synchrony uses artificial intelligence, employing predictive algorithms to automatically adapt to the known position of treatment targets, as they move during the rhythmic motion associated with the patient's respiratory cycle, and adjust when necessary, if the patient's breathing pattern changes. Synchrony also has the ability to adjust to targets that move intermittently as can often occurred during treatment of prostate cases. This unique ability to adapt the treatment delivery beam in real-time to a moving target enables clinicians to reduce margins, resulting in significantly less radiation dose to healthy tissue, which can lead to better outcomes when treating lesions in the lung, liver and other anatomical sites that move with respiration. It also allows for improved clinical confidence in utilizing hyperfractionated treatment plans to deliver SBRT cases. Going to our first slide, we have provided a comparative example of a lung case with and without Synchrony. Prior to Synchrony, the two conventional approaches of treating tumors or lesions that are affected by target motion are gating, and the ITV or internal target volume method, both of which require clinicians to utilize larger treatment margins. In gating, the radiation beam is turned off except when the target moves into a narrowly defined target window. Because beam-off time associated with gating results in less efficiency and overall treatment time, typically, during gating, the target window is widened, but in doing so that means that more healthy tissue is exposed to unwanted dose. With the ITV method, the beam targets the entire envelope or range of target motion, delivering a large amount of dose to healthy tissue. While this approach is more time efficient than gating, this method creates significantly greater radiation exposure to healthy tissue. Looking at the highlighted treatment locations in the side-by-side comparison in the slide, it's striking to see how much smaller the treatment margins are on the left side of the slide, utilizing Synchrony versus the gating or ITV approach. Because Synchrony enables clinicians to deliver larger doses, with smaller treatment margins, and faster treatment times, clinicians experienced with Synchrony report, greater clinical confidence in using hyperfractionated treatment plans for their more challenging SBRT cases. Turning to our second slide. We have provided a case study for a recent case performed at Froedtert Medical Center in the Medical College of Wisconsin of a 45-year old male patient with lung metastases. This is a great example of how small changes in margins can have an overly large impact on the amount of healthy tissue receiving radiation. This patient was treated fiducial-free, utilizing SBRT in three fractions with 30% less treatment volume. Beam-on time for this case was only nine minutes. Because the beam synchronization takes place automatically, and in real-time treatment delivery remains highly efficient, from a timing and workflow standpoint, with no need to ever pause the treatment beam, mechanically restrain the patient to ensure proper positioning or requiring the patient to hold their breath for uncomfortably long periods to interrupt the respiration cycle. Customer sites in Japan, Italy and the US have successfully delivered fiducial-free SBRT treatments for lung patients using hyperfractionated SBRT treatment plans with beam-on time of less than 10 minutes. Synchrony on the Radixact platform is driving clinical confidence and expanding the universe of patients who historically might not have been treated with hyperfractionated SBRT because of already compromised pulmonary or respiratory function. Looking forward in fiscal ‘21, we believe the COVID environment will continue to be a catalyst for radiotherapy treatments, utilizing high dose, shorter duration treatment timelines. Both of Accuray's treatment platforms are uniquely capable of supporting these requirements. Going forward, we expect the accelerated use of hyperfractionated treatments driven first, by changes in US-based reimbursement with the proposed alternative payment model. Second, the growing body of clinical data that demonstrates clinical safety and efficacy of hypofractionation versus conventional treatment. And lastly, the benefit of shorter treatment regimens for both the patient and the provider in terms of user experience. Covering both short and long term horizons, we believe Accuray's portfolio is very well positioned to meet the clinical needs of our customers and their patients. In closing, while the COVID-19 environment continues to be challenging, we are focused on managing the activities that we can control, ensuring the health and safety of our employees, ensuring continued support for our customers and their patients and focusing on those elements both operationally and financially that will drive Accuray's business continuity. Now, I'd like to turn the call over to Shig for his review of the financial details. Shig?

Thank you, Josh. And good afternoon, everyone. I'll begin with some additional details on our financial performance for the fourth quarter, as well as our fiscal year 2020. And then focus on certain highlights for the period. Gross orders for the fourth quarter were $94.3 million, which was down 3% from the prior year. For the fiscal year 2020, gross orders totaled $377.3 million, an increase of 10% over the prior year. The Americas and Japan regions were the primary drivers of this year-over-year growth, with the growth rates of 64% and 10%, respectively. From a product mix perspective, the TomoTherapy platform accounted for approximately 70% of gross orders for the fourth quarter, and CyberKnife accounted for the remaining 30%. For the full year, TomoTherapy platform accounted for approximately 60% of gross orders and CyberKnife accounted for 40%, which was consistent with the prior year. Net age-outs for the quarter were $17 million, which was a better than our expectation going into the quarter, as we had approximately $5 million of age-in activities during the quarter. During the fourth quarter, we had cancellations of approximately $4 million, which was offset by $1.8 million of FX impact and other adjustments. As a result, on a net basis, we generated $75 million orders in the fourth quarter, which represented a 17% increase over the prior year. For the full year, net orders were $281 million, an increase of 29% over the prior year. We ended the fourth quarter with backlog of $603 million, representing an increase of 22% from June 30, 2019. Overall, the team has done a great job in generating new orders and age-ins in this challenging environment. With that said, and as Josh had indicated, we continue to anticipate that COVID-19 disruption will adversely impact revenue conversion timing in the near term. Although the depth and extent to which COVID-19 will impact individual markets could vary on a number of factors, we expect to see higher-than-normal level of age-outs in the coming quarters due to this disruption. Turning now to an income statement. Total revenue for the fourth quarter was $95 million, down 19% compared to the prior year. On a full year basis, total revenue was $382.9 million, down 9% from the prior year. On a regional basis for the full year, we saw year-over-year decline, revenue decline in all regions, primarily due to the impact of the pandemic. Except for Japan, where revenue grew by 4%. The growth in Japan came primarily from an increase in upgrade revenue related to Synchrony on Radixact. Product revenue for the quarter was $40.4 million, a decrease of 33% compared to the prior year. On a full year basis, product revenue was $167.3 million, a decrease of 15% from the prior year. From a product mix perspective, CyberKnife accounted for approximately 25% of the quarter's revenue unit volume, while the TomoTherapy platform accounted for the remaining 75%. For the full year, CyberKnife accounted for approximately 30% of total product revenue and TomoTherapy platform accounted for approximately 70% which was consistent with the prior year. Service revenue for the quarter was $54.6 million, down 4% from the prior year. On a full year basis, service revenue was $216 million, a decrease of 3% from the prior year, primarily due to fewer upgrades purchased through our service contracts. Turning now to gross margin. Our overall gross margin for the quarter was 42% compared to the 39.1% in the prior year. On a full year basis, our overall gross margin was 39.1% compared to 38.8% in the prior year. Product gross margin for the quarter was 45% compared to 40.7% in the prior year. The year-over-year increase in product gross margin is due to better pricing within our TomoTherapy platform, as well as stronger upgrade volume related to Synchrony on Radixact. Full year product gross margin was 42.7% compared to 40.7% in the prior year. Service gross margin for the quarter was 39.8% compared to 37.4% in the prior year. Q4 service gross margin benefited from cash preservation actions we implemented during the quarter, as well as reductions in travel and other operating costs, due to the pandemic. On a full year basis, service gross margin was 36.4% compared to 37.2% in the prior year. The year-over-year decline in service gross margin was primarily due to higher than normal level of parts consumption we experienced in the first half of fiscal 2020, which has been reduced and began to stabilize in the second half. Moving down to income statement, operating expenses for the quarter were $35.3 million, a decrease of $7.3 million, or 17% from the prior year. The year-over-year decline in operating expenses was primarily driven by cash preservation actions we implemented in response to the pandemic, which included position eliminations in the company-wide elimination of the annual incentive bonus. The spending in the fourth quarter also reflected curtailment of costs associated with the impact of COVID-19, particularly travel, marketing events and related expenses. Operating expenses for the quarter included approximately $1 million of severance charge as part of the cost reduction actions mentioned earlier. On a full year basis, operating expenses were $138 million or down 15% from the prior year. Operating income for the quarter was $4.6 million, compared to $3.3 million in the prior year. On the full year basis, operating income was $11.9 million compared to $0.6 million in the prior year. While our fiscal 2020 operating income benefited partially from cash preservation actions taken in response to the pandemic, that year-over-year growth of $11 million demonstrates improvement in our operating leverage that positions as well in the post COVID environment. Operating impact of the China JV for the quarter was a loss of $0.4 million. This item is being reported on our income statement as a single line item called gain or loss on equity investment, right below our operating income line. On a full year basis, the operating impact of the JV was a loss of $0.1 million. Adjusted EBITDA for the quarter was $9 million, which was consistent with the prior year and excludes $1 million of severance taken during the quarter. On a full year basis, adjusted EBITDA was $26.8 million, an increase of 13% compared to $23.7 million in the prior year. The adjustments between GAAP net income and adjusted EBITDA are outlined and quantified in our press release issued today. We ended the quarter with $109 million of cash and short term restricted cash, which was an increase of $17 million from the prior quarter. We generated $19 million of operating cash flow during the quarter, as we continue to focus on working capital management. Our strong cash position exiting the fourth quarter allowed us to reduce the term loan balance by $10 million immediately after the fiscal fourth quarter, and at the same time, renegotiate the key debt covenants thresholds to a lower level that position us well going into new fiscal year. While we are pleased with our fourth quarter performance, we continue to expect an uncertain near to mid term demand environment for future system orders and revenue. As COVID-19 continues to put constraints on capital expenditures at hospitals. Accordingly, we anticipate a first half fiscal 2021 orders and revenue to decline year-over-year. As we manage the near term headwinds in revenue conversion, we will focus on operational efficiency, margin expansion and working capital management. We are focused on inventory and supply chain management, and so far our product availability has been strong, thanks to the great work of our supply chain and manufacturing teams, and our partners, while ensuring our overall inventory position is reduced to an appropriate level in this uncertain environment. We are also working closely with our customers and suppliers to ensure a healthy and appropriate balance of our receivables and payables. We believe in $19 million of operating cash flow we generated in the fourth quarter demonstrates our operational efficiency and our ability to manage working capital in this challenging environment. And with that, I’d like to hand the call back to Josh.

Thanks, Shig. Even with the uncertainties created by the COVID environment, we are encouraged by our Q4 and full fiscal year operating results. We are demonstrating daily that we have the ability to successfully adapt to this new external environment. And we are excited about our future. I want to thank all of our employees across the globe for their energy and contributions they're making to support our customers and their patients during these unprecedented times. And with, we’re ready to open up the call for your questions.

[Operator Instructions] Our first question is from Josh Jennings from Cowen. Go ahead.

Thanks. Good afternoon and congratulations on such a strong new order results, despite the pandemic. I was hoping to start off, Josh, just to hear your thoughts on the Siemens-Varian combination and what that potentially does to the radiation oncology market from a competitive standpoint. Do you expect any more consolidation between advanced imaging, manufacturers and radiation therapy companies? And if you could remind us just about your relationship with Hitachi, what that exactly - how that sits today and whether or not just help us understand what their radiation business looks like internationally outside of their proton therapy business?

Yeah, Josh, there's obviously a bunch of components to that question. Let me start with just kind of Siemens Varian situation. The - I mean, I think to some degree there's an inflection point here. I think that there will be undoubtedly during some period, taking place of integration. There's going to be some likely disruption or distraction factor, we certainly would expect that to occur. And I think that we're going to be opportunistic in trying to take advantage during that period of time of, you know, just from a commercial perspective, the competitive dynamics and be opportunistic to the degree that we can and taking advantage of it. On, you know, the question, the part of the question around, is there is there more to occur in this regard? I mean, I think we believe strongly that there's that imaging and imaging capability is a growing in importance area related to radiotherapy treatment. We have, as you know, we have a significant amount of activity taking place in our development roadmap around that kind of technology upgrade ourselves. But, as you think about diagnostic imaging, and you think about radiation therapy, that the combination of these pieces together, create a true end-to-end kind of oncology care strategy or oncology care services strategy related to what is important to customers and their patients. So, I mean, while it's difficult to predict specifics or timing, I think that the strategy or the potential value proposition that results is - would likely create some tailwind for more consideration of these types of combinations. On the question around Hitachi, Hitachi has been a distribution partner of ours in Japan for many years, that relationship is now non-exclusive. And Hitachi has actually been in the process of exiting their diagnostic imaging business. The deal hasn't closed yet, but that business I believe is being purchased by Fujifilm. And we're strong in Japan. Its probably our strongest from a market penetration region of the world. We're continuing to do well there. We are considering and looking at a variety of options from a distribution standpoint, at present. We're still involved with Hitachi. But obviously, as they transition their business to Fuji, it becomes probably something that is a catalyst for us looking at other options or possible combinations. So I think I'll leave it at that.

Great. And then just one follow up on hospital capital equipment budgets, there's been a lot of concerns around how they'll shape up in the back half here. But can you provide any color on what you're hearing from your hospital customers and anything on new order trends you experienced already in July and August? Thanks a lot for taking all the questions.

Sure. Look, I think while procedure activity, you know, some of the other procedures that had been put on hold by most hospitals, while the procedure activity in general is starting to come back. I think it's safe to say or fair to say that most hospitals right now are in kind of a holding pattern, on large capital equipment, CapEx spending. Those that are that are moving forward with those kind of decisions are places where either they're at capacity with their current product and technology capability or are moving in a direction where they need to be able to treat a different mix of patients or they're at the end of useful, you know, lifecycle of the equipment they've already had, historically, their legacy equipment. And so again, it's hard to kind of put everyone in the same box with regards to one size fitting all. But as our strength coming through the fourth quarter showed, there were still people obviously placing orders for equipment. And we would expect that to continue. I think it's more difficult to predict in the near term, and maybe intermediate term what the trends look like. But again, I think that any one of a number of those two or three kind of variables I talked about, are creating a catalyst for people to continue on with CapEx investments in this kind of equipment. So, which is encouraging.

Thanks, Josh.

Our next question is from Brooks O'Neil from Lake Street Capital Markets. Go ahead.

Good afternoon, and congratulations on the terrific results in this environment. I was hoping to maybe pick Suzanne's brain a little bit in terms of how you guys see your hospital and clinic customers balancing three big things that are going on out there in the world. Number one is obviously COVID-19. Number two is this movement that you guys talked about towards adaptive radiotherapy, something that's probably transforming cancer care, both here and around the world. And then third, is the reality that at some point, our friends at CMS will get off their butt and get us to the APM, and the reality that they need to - that these hospitals need to prepare for that and be in a position where they can still play and deliver cancer care in their communities, whether obviously, we're talking to US on that factor. But Suzanne, what are you seeing out there right?

Hey, Brooks. Yeah, no, I think you're absolutely right. It's a balance. I think it's a real challenge for all of our customers and trying to make sure that they're providing the best care, but getting access to capital. I would say here in the short term, and I say the short term, the next couple of quarters for sure, there's just uncertainty. And so, you know, where we are focusing is exactly what Josh had just talked about, are those customers that can access capital because they lack capacity or it's going to be very clear that the RO-APM at some point is going to go into effect. But not only that, I think the COVID environment in general has put on - magnified the importance of shorter duration treatments. And so having technology that's going to allow them to do hypofractionation and ultra hypofractionation is going to be critically important for them to remain relevant and competitive within their own marketplace. So, we're working with our customers to be able to build that kind of an argument, so that they can go and propose to their administration. That being said, it's still really hard, as the COVID continues, they're - everyone's sort of holding back, until the end of the tunnel, and then may release additional capital equipment fund. So, it's for sure, a balance. I think the only other area that we are being opportunistic are in under-penetrated markets. Again, where radiation therapy is not available and to where the government sees it as being strategically important. So again, it just means being close to our customers as much as possible and helping them with lots of abilities to try and navigate this environment.

Great. That's fantastic. I appreciate that. And then maybe, obviously there were some comments in the prepared remarks about China. But in my opinion, China is a huge opportunity for you guys and a huge wildcard in terms of when we're actually going to see things start to move. So any other color, either Josh or Shig, or Suzanne could give about what you're seeing and hearing from people in China. And when we're going to break that logjam? That would be extremely helpful.

Yeah, Brooks, again, you've heard us say this before. We don't think this is a matter of if, we think this is a matter of when. And there's no question that the COVID situation has impacted the timing of this. But we still believe from a visibility and kind of an encouragement standpoint based on our people on the ground there and the things they're hearing, that this is something from an activity standpoint, in terms of the Type A impact, that we should start to see some beginnings of revenue impact on this, between now and the end of this calendar year. So, again, nothing definitive, beyond what we've said before, but the tendering process, which is really kind of the administrative aspect of what was the remaining work that needed to be done on the Type A licenses, from our understanding, is now complete, which means that there should be some news here, sometime soon.

Okay. And Type B, you're pretty excited about too, I think, right?

We are, Type B is - we've made - while it's, you know, it really hasn't had the visibility that the Type A part of the discussion has. We've made a lot of progress. And I think that we're going to be able to compete, certainly for our fair share of what is really by comparative context, the much bigger opportunity, longer term in China on the Type B side.

Okay. Thank you so much for taking my questions.

Sure.

[Operator Instructions] Our next question is from Anthony Petrone from Jeffries. Go ahead.

Hi. This is Briana, on for Anthony. Thank you for taking our questions. We have two, and I'll just ask them upfront, if that's okay. So I was wondering if you have an update on rad-onco volumes. Are centers seeing volumes back up to pre-COVID levels at this point? And then regarding the RO bundle, are you expecting it to be implemented for January 1, 2021, or will that be delayed? Thank you.

Briana, this is Josh. So I got the first question. Regarding patient volumes, the data that we get off of our installed base equipment suggest that from a patient volume, a treatment volume standpoint, we're actually seeing pretty stable numbers and numbers that would be consistent with what we were driving or seeing coming through those devices from a throughput standpoint in the pre COVID timeframe. So, at the end of the day, radiotherapy and radiation oncology is revenue generating service line, clinical service line for hospitals around the world. And they, while they're doing it, and providing these services, obviously under different protocols now from a patient and employee safety standpoint, no one really, that I can identify or very, very few people have ever had turned off, if you will their radiotherapy capability during this time. It was one of the only areas of the hospital that you know, they were consistently moving forward with. So no real drop off in patient volume from a treatment perspective. And was your second question related to the APM discussion?

Yes, the RO bundle, that was going to be implemented in January or January 1, 2021, or if that will be delayed?

No, I think the answer is, there's a reasonable degree of certainty at this point that it's going to be probably longer out than that in terms of timeframe. But sometime still, in a, you know, an overall window that would be probably sometime in the first half of calendar 2021. So, while not in January, sometime not too far beyond that.

Okay. Thank you so much.

Our next question is from Tycho Peterson from JPMorgan. Go ahead.

Hi, guys. This is Casey on for Tycho. A few of my questions have been answered, but just one maybe on OpEx. How should we be thinking about that moving forward in terms of any more sort of levers you can pull for more OpEx reductions in maybe the first half of 2021? Thank you.

Sure. Yeah. No problem. Thanks for the question. And obviously, given no guidance, I can't be specific to the number in ‘21. But what I can do is kind of give you a sense of our OpEx run rate in Q3, Q4, looking backwards here in 2020. Because I know that in Q3 and Q4, there was some noise in our OpEx in terms of one-offs here and there. So if you look at Q3 of FY ‘20, we reported $31 million of OpEx but that included a benefit of about $3.5 million related to the elimination of bonus accrual. So Our Q3 run rate in true sense were about $35 million, I would say, looking backwards and Q4, we just reported, we reported about $35 million. And I had a earlier remark in my section that highlight $1 million of severance in there, which I consider one-time and a few things, although I didn't specify my prepared remarks, but I would say there's about $1.5 million to $2 million, including $1 million of severance that’s in there in Q4. So I would say Q4 OpEx run rate exiting the year was about $33 million. So hopefully that gives you a sense of what the run rate is on OpEx exiting the fiscal 2020.

Got you. Thank you.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Joshua Levine for closing remarks.

I'd like to thank everyone for joining the call this afternoon. And we look forward to speaking with you again in October when we host our Annual ASTRO investor event and report our fiscal 2021 first quarter results. Thanks very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.