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Edited Transcript of VRAY earnings conference call or presentation 8-Aug-19 8:30pm GMT

Q2 2019 ViewRay Inc Earnings Call

OAKWOOD VILLAGE Sep 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Viewray Inc earnings conference call or presentation Thursday, August 8, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James Alecxih

ViewRay, Inc. - Chief Commercial Officer

* Michaella Gallina

ViewRay, Inc. - Senior Director of IR & Communications

* Scott William Drake

ViewRay, Inc. - President, CEO & Director

* Shahriar Matin

ViewRay, Inc. - COO

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Conference Call Participants

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* Andrew Jacob D'Silva

B. Riley FBR, Inc., Research Division - Senior Analyst

* Anthony Charles Petrone

Jefferies LLC, Research Division - Equity Analyst

* Christopher Thomas Pasquale

Guggenheim Securities, LLC, Research Division - Director and Senior Analyst

* Craig William Bijou

Cantor Fitzgerald & Co., Research Division - Research Analyst

* Difei Yang

Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research

* Jason M. Bednar

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate

* Mason E. Austen

Morgan Stanley, Research Division - Research Associate

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the ViewRay Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Michaella Gallina, Head of Investor Relations. Ma'am, you may begin.

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Michaella Gallina, ViewRay, Inc. - Senior Director of IR & Communications [2]

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Thank you, operator. Good afternoon, everyone, and welcome to ViewRay's Second Quarter 2019 Financial Results Conference Call. Joining me today is Scott Drake, our President and Chief Executive Officer.

Earlier today ViewRay issued a press release announcing its second quarter 2019 financial results. The release is available on the Investor Relations portion of our website at www.viewray.com. This call is also being broadcast live over the Internet via our Investor Relations site and a replay of the call will be available on the website for 14 days.

Before we begin, I would like to caution listeners that comments made by Management during this call, may include forward-looking statements within the meaning of Federal Securities Laws. These statements involve material risks and uncertainties and actual results could differ from those projected in any forward-looking statements due to numerous factors including those discussed in the Risk Factors section of ViewRay's Form 10-Q for the quarters ended March 31st and June 30, 2019 and any subsequent reports filed with the Securities and Exchange Commission including our Form 10-K for the year ended December 31, 2018.

Furthermore, the content of this conference call contains time sensitive information accurate only as of today, August 8, 2019. ViewRay undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call.

I will now turn the call over to Scott.

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [3]

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Thank you, Michaella. Good afternoon, everyone, and thanks for joining our call. Today, we will provide revised 2019 revenue and cash guidance. I'll announce Executive and Board changes, provide context on the maturation of our business, 1-year into my role, will review financials and open the line for questions.

Let's start with guidance. We are updating our 2019 revenue guidance to be between $80 million and $95 million, with 12 to 15 installations and 3 upgrades. The reduction in our guidance is partially offset due to one system moving into 2019, as we will be able to recognize a significant portion of revenue at the time of delivery of that system.

This guidance reduction is chiefly the result of 3 systems taking longer than anticipated in the vault planning and permitting process and the lack of certainty around the timing of 2 distributor orders. Although, we are disappointed in this reduction. We believe it's the right course of action.

Let me share detail on why these time frames have elongated. Regarding installations. As we've shared, we have built a vault readiness team to reduce variability, lower customer costs and speed the path from PO to first patient treated.

Our stated target has been to reduce this timeframe from approximately 18 to 12 months. This is a worthy goal for the benefit of patients, customers and shareholders. Generally speaking, installations fall into one of 2 scenarios. In the first scenario planning, construction and installation generally go as anticipated, and no significant issues reside outside of our control. In these instances, our team has met or exceeded our 12-month goal, in fact, in a recent instance, the PO recommissioning took only 261 days. The second scenario is when circumstances impacting the timeline are largely outside of our control.

The majority of the delays that we're unable to mitigate are associated with customer planning, permitting and construction timelines. We're working to get earlier line of sight on these items and take appropriate action. Delays that were unable to mitigate resulted in 3 installations potentially being pushed from this year to next.

Our ability to recognize revenue for these systems is pushing up against the 2019 year-end time frame and we feel it's appropriate to reduce guidance under these circumstances. I want to reiterate, we've built a highly effective team that's well positioned to scale, but we must recognize the degree to which these items are difficult to mitigate.

Further on revenue guidance. We have removed 2 other systems due to a distributor potentially not fulfilling their commitment this year. There is end-customer demand at both the clinical and executive level of these 2 hospitals. We will ensure that we have the right strategic partner to not only fulfill these 2 orders, but to address growing demand in this market. We are working to resolve this issue, but are not sure we'll be able to do so by year-end. We believe all 5 of these systems will be successful MRIdian centers in due time, but perhaps not in 2019.

Turning to cash. Our forecasted burn is impacted by the delay of revenue. Our updated cash usage guidance for 2019 is $80 million to $90 million. We used approximately $24 million in Q2. We have weekly rigor on operating expenses and working capital and remain focused on managing cash. Along with inventory reduction AR and AP management, we're exploring various sales models that could positively impact working capital needs. Financing partners and customers are working with us to shape these models in order to facilitate the acquisition of MRIdian Systems.

Moving on to Executive and Board changes. Ajay Bansal, our CFO, will be leaving the company effective September 30, 2019. Ajay will remain available to help us with the smooth transition. We thank him for his service and wish him well. We are in the midst of a retained search to find his replacement. Regarding our Board of directors Dr. Ted Wang has retired from service and we thank him for his many contributions.

We also recently announced that Dr. Gail Wilensky has been appointed to our Board. Gail is an impressive leader with an extensive track record in health care. Among other things, she served in the Bush 41 White House as a Senior Adviser on health and welfare and directed the Medicare and Medicaid programs. She also currently serves on several boards including UnitedHealth Group and Quest Diagnostics. We're very pleased to welcome Gail.

Let's turn our discussion to orders in commercial pipeline. In the second quarter, we took 3 orders for MRIdian Systems. This was the first full quarter that our newly built U.S. team was in their territories and we continue to enhance our direct and distribution network internationally. While this is a relatively light number of orders, we remain confident that we will demonstrate the momentum of our growing pipeline and end-customer demand moving forward.

To provide color. We're calling on a significantly higher number of customers and have put in place, training and process rigor to both sell systems and drive therapy adoption. For example this quarter, we sold the freestanding customer its second MRIdian system. Also it is notable that we have increasing interest for multi-system deals. Integrated networks for profit chains and academic centers expanding their MRIdian footprint, all represent active multi-system opportunities.

Finally, I'll share that we have demonstrated the potential to speed up the decision making process with certain customers. Traditionally, we have seen an 18- to 24-month sales cycle, but in a few instances, we have move customers to reach positive purchasing decisions much more quickly. On the other hand, academic centers have more time intensive processes. In Q2, several orders move beyond the end of the quarter, but are generally on track. We remain focused on the long-term opportunity versus short-term variability. In summary, the quantity, diversity and speed of our pipeline continues to improve.

I'll now shift to provide remarks on the newly proposed APM and how we made benefit in a bundled environment. As Dr. Steinberg and I spoke about at ASTRO last year, the market is heading to non-invasive therapy, shorter treatment times and the mitigation of side effects from legacy treatment modalities. MRIdian is swimming with the tide and trends of the market and we believe this proposal is favorable.

Under the draft APM, MRIdian's economic and clinical benefits are potentially even more compelling to patients, providers and physicians. Additionally, as the payment is site neutral, we see an incentive for freestanding centers to adopt the therapy, whereas they were previously incentivized to treat more fractions. Furthermore, our clinical evidence aligns nicely with APMs proposed 90-day treatment window. Hospitals will take on associated costs of complications related to the limitations of prior generation technology.

Shorter treatment times, improved outcomes and better quality of life are critical for patients. We've treated approximately 5,000 patients and have hundreds of papers abstracts and posters on MRIdian's clinical use and we have consistently demonstrated very low to 0 Grade 3 or higher toxicity. What further sets us apart in this model, is our ability to treat and higher than conventional SBRT doses without the typically expected increase in toxicity. SBRT cases inherently take longer than IMRT due to the incremental care required on potentially harmful doses. We are able to deliver our full suite of capabilities, including on-table adaptation during SBRT treatments in the same amount of time that conventional Linac treat SBRT without MRIdian's precision and accuracy. Our competitors are attempting to optimize technology that's been in the marketplace for many years. We on the other hand are operating at the very early stages of paradigm shift and our innovation pipeline is focused on optimizing the speed and workflow of our system.

Let me briefly take a step back and provide context on where we are in our journey. At the highest level, when we joined the company, we viewed ViewRay as both a turnaround and a scale up. One-year in, I think this assessment was correct on both fronts. We built a robust commercial team and created a vault readiness organization from the ground up. We also built out our field service, clinical training, operations, reimbursement and policy teams and fortified back office functions. Our innovation team is intensely focused on protecting and extending the technology lead that we enjoy today. I believe we've built a team worthy of the opportunity to change and improve the standard of care for cancer patients around the world.

In closing, we are driving more accurate and precise personalized therapy that yields better outcomes, shorter treatment times and attractive financial returns for our customers. We are well positioned to deliver what patients, physicians, providers and payers seek.

I will now turn the call over to Michaella, to discuss our Q2 financials.

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Michaella Gallina, ViewRay, Inc. - Senior Director of IR & Communications [4]

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Thank you, Scott. For the fiscal quarter ended June 30, 2019, total revenue was $30.2 million, primarily from 5 revenue units as compared to $16.4 million and 3 revenue units in the same period last year. Total cost of revenue was $26.9 million compared to $16.4 million for the same period last year. Total gross profit was $3.2 million compared to $0.1 million for the same period last year.

Total operating expenses were $29.5 million as compared to $18.3 million in the same period last year. Net loss in the quarter was $30.8 million or $0.32 per share compared to $22 million or $0.30 per share for the same period last year.

Turning now to orders and backlog. In the second quarter of 2019, we received 3 new orders for MRIdian Systems totaling approximately $18 million compared to orders, totaling approximately $35 million in the second quarter of 2018.

As of June 30 2019, our backlog stood at approximately $219 million compared to approximately $200 million as of June 30, 2018. In Q2, we used approximately $24 million of cash. We ended the quarter with total cash and cash equivalents of approximately $122 million. Lastly, and as discussed earlier, we are updating our guidance for 2019.

Prior guidance expected revenue in the range of $111 million to $124 million, primarily from 17 to 19 revenue units and 3 upgrades. We now expect total revenue to be in the range of $80 million to $95 million driven primarily by 12 to 15 revenue units and 3 upgrades. Regarding cash, our prior guidance was usage of $65 million to $75 million for the year. We now expect to use $80 million to $90 million in 2019.

And with that, we will now open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Anthony Petrone with Jefferies.

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Anthony Charles Petrone, Jefferies LLC, Research Division - Equity Analyst [2]

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I think there is clearly 3 moving parts here as orders backlog installations. I think though from a high-level standpoint is, if we look over the past 90 days, clearly, this is nearly a 180 and basically all of those kind of indicators for the business. So maybe just kind of looking at the past 90 days, it seems like a confluence of headwinds hit the business. So maybe just a little bit more on the totality of the change? And then maybe I'll have a couple of individual follow-ups.

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [3]

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Yes. Anthony, I would say that in the last 90 days, a few things, number one, I think the pipeline of commercial activity, which the Street doesn't have visibility to has improved, the number of customers that we're calling on is higher. The number of multi-system deals is higher, our ability to in a few instances speed customers through the purchasing decision historically 18 to 24 months, we've been able to achieve that more quickly. So I feel better about the overall pipeline, then I did previously. I do think there is a potential that the APM is getting customers to pause a bit in terms of their decisions. So I think that may be a difference from 90 days ago to today and I would also say the biggest learning would be in those instances where in bulk planning, and permitting, and construction were largely those things are outside of our control. We've hit some delays that neither customers nor we anticipated. So that's probably the biggest difference those 2 things today versus 90 days ago and the final one would be a distributor that is gone through a management change is doing some portfolio management work and we're probably going to have to find a new distribution partner in that market and don't know whether or not we're going to be able to do that quickly enough to satisfy the end-customer demand here in calendar '19.

So the 5 systems where revenue is coming down by is not ultimately, whether or not they will be MRIdian Systems in our estimation, it's more of the timing of that and it's quite possible that those systems will push into 2020 versus taking place in this year and that obviously has an impact on cash consumption.

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Anthony Charles Petrone, Jefferies LLC, Research Division - Equity Analyst [4]

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Great. So maybe just to go into some of those moving parts. So on the installation cycle, the target was 12 months, I think it was hovering around 18 months, exiting last quarter there was a goal to get the 12, you mentioned some unforeseen hurdles even at the hospital level. So what is the realistic target here now as to where the installation cycle can go to and when do you think the company can get there?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [5]

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Yes. I think what we've done is built the team, as you know that's proactively engaging in bulk preparation and the goal of that work has been to get that PO to first patient treated timeframe down from about 18 months to 12 months. And generally speaking, there's 2 scenarios. There is one, where things go generally as planned and you see that we've been able to successfully bring that timeframe down inside of 12 months, 2 recent installations took place, 1 in 330 days, and the other one in 261 days, so we feel good about that in the majority of instances.

But then there is instances where things are just outside of our control and it's taking a bit longer and we've got to be very thoughtful about that as we move forward. I think it's important context to realize that we've got 28 systems total that are clinically in the ground. So a lot of the places that we're going into are new geographies and new governments that we're dealing with, and we've got to take into account, those things that are outside of our control, or generally outside of our control, as we go forward.

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Anthony Charles Petrone, Jefferies LLC, Research Division - Equity Analyst [6]

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The last one from me, I'll let others jump in, is just on orders. You mentioned the APM, if the APM were not announced. Where do you think the orders would have been? And how much of a chilling effect do you think it's having? In other words, are these now orders that kind of get pushed into next year? Or is this just sort of a moment in time and it sort of is transitory?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [7]

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Yes. I think it's transitory, I actually think the APM in the long run is going to be a tailwind for us. I think the market generally speaking was moving toward SBRT for clinical reasons, we highlighted that both Dr. Steinberg and I, at ASTRO of last year and I think the APM is going to now provide an economic incentive to move in the direction that clinicians ultimately wanted to go in any way. So I think in the long run, it's a tailwind. We had a customer that we were very close, kind of down to the red lining and they indicated that maybe we don't want to just buy one system, we want to buy multi, and so now we're in broader negotiations with that customer. So difficult in the short run, may be better in the long run for us and again, we're focused on the long-term opportunity and impossible for me to share with you if that didn't happen what would orders be. But again, I feel very good about the pipeline going forward and we're very much focused on driving that.

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Operator [8]

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And our next question is from the line of Chris Pasquale with Guggenheim.

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Christopher Thomas Pasquale, Guggenheim Securities, LLC, Research Division - Director and Senior Analyst [9]

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Scott, new orders had been steadily ramping, you've got probably by some of the volatility, given that the low number of systems that are involved, but I think the expectation was the changes that you've put in place since you came on board would certainly cause a positive inflection there. So this number is going to strike people as surprising and a bit concerning. Can you just sort of give us a point in time today on how you feel about the commercial organization you touched on the vault readiness team, but the other aspects of the commercial side of the business. Are they where you want them to be to drive the kind of positive order growth that I think we would have thought we'd see some at this quarter?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [10]

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Yes, happy to, Chris, I think, I would, I'd take a quick step back and say from a macro perspective, I feel very good about number one, the team that we've built, the training that they're going through and the coverage that we have. And evidence of that is the number of customers that are in our pipeline, where they're at within our kind of rigorous sales process, I mentioned the number of multi-system deals and in some instances, being able to kind of move customers through to a positive purchasing decision more quickly than historically, the company has been able to do.

I would remind us of what I've said on many occasions, which is Q2 was the first full quarter that, that team with ceded and that's our U.S. team. And so I think it makes sense to give them a little bit of time that's going to take some time for them to be fully trained and getting to know customers in their territory, and again, as I've said before, I think we'll get more and more effective over time. And to your point, we're kind of dealing with the law of small numbers. And so while I understand this is a relatively light quarter versus 2 recent ones it's right in-line with where we were at quarter or 2 before that. So we're going to have some lumpiness up and down, but I feel very good about the work that the team is doing and the trajectory that we're on.

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Christopher Thomas Pasquale, Guggenheim Securities, LLC, Research Division - Director and Senior Analyst [11]

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And then the other number that stands out to me is the cash use, and I know that the sort of goes hand-in-hand with the revenue line, but you mentioned exploring some different sales models it's a different thing that could positively impact your cash needs. How soon could we see some of that put into effect and how are you thinking about trying to close that burn gap that exists today before you start to get the point you need to consider another round of financing?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [12]

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Yes. So I would say first relative to cash generally, you're right, it just goes hand-in-hand with revenue in terms of our reduction in revenue guidance, it's pretty straight line between those 2 things. As I've shared, we're very focused on cash. We have weekly rigor on, not only operating expenses, but inventory AR, AP and also as you highlighted, we're working with customers and financial partners on various models to kind of speed the path to purchasing MRIdian Systems. What's extraordinary about the last year that I've had with the company is I've never had a bad conversation with the customer from a clinical perspective, I've never gotten to a no clinically. Where there is friction is on the economic side, so we're trying to figure out ways and provide our customers some flexibility on that front to reduce some of that friction. So we're in the midst of just being in the early stages of that. And for competitive reasons, I don't want to go too deep into it. But if we're successful with that and it takes hold. We'll certainly be sharing that with the Street.

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Operator [13]

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And our next question comes from the line of Craig Bijou with Cantor Fitzgerald.

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Craig William Bijou, Cantor Fitzgerald & Co., Research Division - Research Analyst [14]

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Scott, I wanted to maybe dig a little bit deeper into your comments about the APM and the impact that it potentially had on orders. I was wondering if you could maybe provide a little bit of more color on the discussions with facilities and I understand that you guys think that it's going to be -- it could be a benefit over the long run, but I guess the concern here would be that in the short term, it could still impact orders, whether it's the second half or even longer. So I guess, I just kind of wanted to get a sense for the discussions you've had, if any have been in detail with some of the facilities? And then if -- what gives you confidence that it's not going to be a lingering potential impact?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [15]

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Yes. I don't want to over emphasize it, Craig. I do think it's potentially a component here, I mentioned that one customer that we were kind of down to the goal line and they wanted to broaden and talk about a multi-system deal, so bad short term, good long-term. But again, I would look at the big picture here and recognize that, we've built a team very quickly, and this was in the first quarter that they were in their territory. So I don't want to overweight one variable versus another. I would just tell you that I feel very good about the commercial pipeline that we're building, it's very difficult for me to predict and we've tried to stay away from predicting when exactly we might hit a steeper part of the S curve of adoption. But I believe we're doing all the right things from a commercial standpoint, in innovation standpoint, a clinical data standpoint to seize the long-term opportunity of fundamentally changing the standard of care in radiation therapy delivery.

The difference in our technology versus conventional technology is profound and our customers are understanding that more and more clearly as we're out there, delivering our clinical message, our economic value proposition and our strategic value proposition to the customer base.

I'd point to Florida as an example, pretty interesting and noteworthy I think. We currently have the 2 systems in Miami, we have 1 in Tampa, 1 in Orlando and we have I think 3 more systems Jim that are probably going to be in the ground in Florida in the not too distant future. That's due to the fact that patients are traveling to be treated on the MRIdian System and there is some competitive pressure that's building in that market and we've got to replicate that in markets all around the world. So those are the things that we're focused on, they don't happen overnight, but I feel like there is several different variables here and we're working on the right things.

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Craig William Bijou, Cantor Fitzgerald & Co., Research Division - Research Analyst [16]

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Okay. That's helpful. Maybe just a follow-up on orders. I mean is there any difference between what you're seeing in the U.S. versus OUS? Or I mean it was, obviously, the order number is lower than we expected, but I guess is there anything specific is a U.S. specific OUS issue?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [17]

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I don't think so, I mean, I think the U.S. team is further along than our international team, our VP of Sales internationally is making really good progress, building out that team on a direct basis and also building out our distributor network, I referenced to change that we're likely to make in one of our key markets. So I think the U.S. team is a little bit ahead of where we're at internationally, and it's a larger direct team that we have in that market, but again, we're dealing with the law of small numbers here. I don't think there is a signal to read into either U.S. or internationally in this individual quarter.

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Craig William Bijou, Cantor Fitzgerald & Co., Research Division - Research Analyst [18]

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Okay. And then just one last quick one, I think you've alluded to some improvements on the system in the later half. And so I guess, the lower revenue guidance, the higher cash burn I mean, any impact on some of the things that you were planning on doing either from a software or hardware perspective in the second half of the year?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [19]

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No, not at all. No, we're investing in our innovation pipeline very heavily, there are very exciting things that will positively impact, we predict patient care going forward. There are also very exciting things as it relates to making our workflow even faster and more streamlined and there is all systems go on the clinical front. So look, I understand kind of the line of questioning. We are very much taking long-term approach. It's going to take us time as I've said to capitalize on the opportunity to change the standard of care, which frankly I believe our patients and customers are looking for and deserve.

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Operator [20]

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And our next question comes from the line of Andrew D'Silva with B. Riley FBR.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [21]

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And sorry if you highlight any of this before, I was moving between calls, so just let me know, if you did and I'll check it out in the transcript tonight. I have just a couple of quick bookkeeping right out of the gate. If you could just let me know stock-based comp, depreciation and amortization, cash flow from operations and CapEx was for the quarter? And then while that's being pulled, I would also just like your thoughts on GenesisCare. You had an announcement about them during the fourth quarter last year and it was just announced that they were placing a fairly significant 9 order Unity system order and appear to be a significant discount as well. So just any color on the choice as you are familiar with both platforms would be useful?

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Michaella Gallina, ViewRay, Inc. - Senior Director of IR & Communications [22]

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Andy, I'll run through those numbers for you and then we'll hand it to Scott for your GenesisCare question. Our stock-based comp in the quarter was $4.9 million, depreciation and amortization was about $2 million, our cash flow from operations was about $25.9 million and we spent about $3 million in CapEx in the quarter and our key was just filed. So you'll be able to pull more detail.

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [23]

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And Andy, regarding the GenesisCare question. I would say the following; there are very large and important customer of ours today and I fully anticipate that there will be an even larger and more important customer for us going forward. We have, I think very clear line of sight in terms of how they view our technology in the marketplace versus any competitor and we've got a lot of confidence in that point of view. I would also share with you that they have been clear with us from the get go, that they want to see, how we perform with them, within GenesisCare facilities, and I think that's a very fair ask and we're working really hard with them on a couple of different ball preparations as we speak right now and will move into the installation phase in the not too distant future. And it's our goal just to deliver radical customer delight to them and treat patients in an extraordinary way. And I think that will earn us more and more business with GenesisCare, as we go forward.

The other thing that I've said repeatedly since I've been here for 12 months is that in certain instances where there are a whole bunch of systems kind of legacy systems, if you will, within a customer, whether it's an individual hospital with multiple bunkers or a customer such as this, our competitor has an opportunity to drive an economic value proposition that's beyond what we would do, and frankly they have more levers to pull than we do. And in those instances where our batting average is not going to be as good as it is where it's just a head-to-head clinical competition. So that would be my assessment, I would anticipate, like I said, doing more and more business with them over time and we're going to work really hard to delight that customer going forward.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [24]

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Okay. Great. And my last question, just as it relates to the previously discussed capacity capabilities, specifically related to the semiconductor supply constraints or I guess better word be limitations, have those been resolved and if not, do you have a plan to resolve that or bring it in-house in some manner?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [25]

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Can you clarify that Andy, what's the question about supply constraints, is that about us or about a competitor?

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [26]

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No, no, about -- previously there used to be issues with being able to get the split magnets in enough quantity perhaps to hit some of the longer-term projections that you had, and I was curious if that had been resolved?

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Shahriar Matin, ViewRay, Inc. - COO [27]

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Yes. This is Shar, yes, that has been resolved. We work very closely with our -- many of our partners in our supply chain and from a magnet perspective, they've scaled their system and we've got, as you can see on our books, we've got adequate inventory to address any demand that's out there.

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Operator [28]

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And our next question is from Matt O'Brien with Piper Jaffray.

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Unidentified Analyst [29]

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This is [Jeron]for Matt. I know on a previous call, you mentioned that about 80% of the way there on getting your vault readiness teams in place. I guess, I want to just follow up and kind of see how the progress is going there? And then try to understand exactly what 100% means in terms of getting that order to install time down under 12 months. And I guess is it mainly just scaling that team?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [30]

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Yes. I would share that, I think that team is more or less in place. I welcome Shar to go ahead and answer, but whether you're talking about our vault preparation team or installation team, I feel very good about the capabilities that we've built in and we're in a very good position to scale from that perspective. Evidence of 2 recent PO to commissioning timeframes coming in well inside of a year's time. So when things are generally inside of our control and go as usual, that capability exists and we've been very successful. What we've experienced in a few instances as well that we're highlighting on this call, is that some of the regulatory and permitting delays are simply outside of our control. And we need to be very thoughtful about that going forward. But I would say, the team is in place and I think we've proven our capability on that front. Shar, anything to add?

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Shahriar Matin, ViewRay, Inc. - COO [31]

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Yes. Scott, I agree with all of that. I think the place where as we learn from each one of our installations as Scott mentioned, we've got under 30 installs that we've done actively and learn from them and it's really that transfer of best practices. So that we can add value to each one of our customers may be approved preferred suppliers, design houses whatnot that they can just accelerate the whole process for our customers. So that I would say is, as we get better at that with additional installers and can transfer that best practice, both nationally and internationally that's really going to be the next leg to just making our whole process more efficient for us and our customers.

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Unidentified Analyst [32]

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Okay. Very helpful. And did you disclose what market that problem distributor served?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [33]

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No, we haven't. Just in respect to that particular partner, we're going to keep that one to ourselves. But the big point is we're going to have the right strategic partner in that market to not only fulfill these 2 customers demand, but also more generally fulfill the building demand that exists in that market.

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Operator [34]

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Our next question is from the line of David Lewis with Morgan Stanley.

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Mason E. Austen, Morgan Stanley, Research Division - Research Associate [35]

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This is Mason on for David today. Just a quick one from me. You talked about how growing installed base and driving system placements obviously remains a top priority. However, I was wondering if you could, I mean there is the guidance adjustments change your thoughts on longer term path to profitability?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [36]

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Yes, Mason, I would say we haven't talked about profitability yet. I think that some time out in the future. What we have shared is, the most important metrics that we have certainly our orders, and revenue, and cash utilization, and we're highlighting those. It's a little bit premature for us to be talking about profitability or calling that timeframe. So we'll stay silent on that for the time being and as we progress, we'll keep everybody posted.

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Operator [37]

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Our next question is from Jason Bednar with Baird.

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Jason M. Bednar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate [38]

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Scott, just start with you, I mean, given your comments around maybe the 18 to 24 months on the decision cycle that your customers have historically had, I mean would you still think it's fair then to expect an improvement in the trajectory of your order book as we move into the stronger seasonal period in the back half of the year, just given the comments around the health of the pipeline? Or do you think investors should re-calibrate expectations for order momentum to be more in 2020 just once you extended salesforces has been in place for over a year and can really stimulate some of that demand? And then I have a follow-up after that.

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [39]

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Yes, I think that's a very thoughtful question, Jason. I think it's very difficult for us to predict exactly when we're going to just really take hold and traction in the marketplace. I believe fervently that Jim and his team are doing all of the right things articulating our clinical, our economic and strategic value proposition, I highlighted the Florida example where I anticipate as many as 3 incremental orders here in the not-too-distant future and drive that kind of competitive dynamic in multiple markets. Difficult for us to predict exactly when that will take place, but I believe that doing the right things in the short-run, will lead to the right long-term results and we will get more and more effective over time. We're obviously dealing with kind of the law of small numbers here, but I'm convicted that we're doing the right things.

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Jason M. Bednar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate [40]

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Okay. And then just separate from the recent GenesisCare announcement, I mean your competitor has received several regulatory approvals here just now over the past few quarters. I mean are you seeing any change in the competitive dynamics, be it pricing or sweeteners, they may be adding the deals that they may be winning and just anything from your salesforce that you're hearing on that regard?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [41]

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I would say that I think what's taking place out in the market and I would encourage you to do channel checks. I think there are certain people that are looking to see whether there is a class effect in the marketplace with MR guided systems. And I think our team is clarifying the fact that we don't believe there is a class effect. There are extraordinary differences between our system and every other system that's out there. We are the only system that's able to track soft tissues in tumors in real time, we're the only system that is able to shape a very precise dose along with that, we're the only system that strikes the tumor automatically, when it's in the plan target and stops automatically when the tumor is outside of the target or a vital organ or healthy tissue is in the way.

The aggregate effective that is extraordinarily different from anything else that's offered in the marketplace and the other thing that is being recognized is that the number of patients that we're able to treat in a single day on a single system is what others have been able to treat in upwards of a year, on a single system. So the clinical utility of our system is becoming more and more known and understood. And I think the big difference is, our customers are realizing that there is likely not a class effect in the category.

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Operator [42]

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Our next question comes from the line of Difei Yang with Mizuho.

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Difei Yang, Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research [43]

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Just a couple. So the first one is with regards to the new orders. This time around is has been weak. And would you be able to comment to what degree is this number being actively influenced by competitive dynamics?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [44]

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Yes, I think there is -- I think there is multiple variables there in terms of what's happening in the marketplace and relative to orders. Again, it's a little bit redundant. I like what I see in our commercial pipeline going forward. We have competitors that are more apt to do discounting and those kind of things versus how we're selling on innovation and clinical data. I do think there is a component of that happening in the market. We've been talking about that for the last 4 quarters that I've been with the company. So I do think that's present, but it's not necessarily new, and I think there is also other impacts out there, not the least of which is a brand new sales team that we have recently put in place.

Let me see if Jim Alecxih wants to make a comment here.

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James Alecxih, ViewRay, Inc. - Chief Commercial Officer [45]

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Well, we're -- I think we're pleased that our U.S. sales force is in place in Q2 and the number of accounts that they're calling on and bringing into the top of the pipeline is encouraging and there certainly a timeframe that takes customers to make a decision. And along those lines, there are also competitive dynamics in the marketplace. But as Scott stated earlier, we feel confident in the response we have received from our prospects that our technology is clearly superior and we feel confident that there are customers who respond accordingly.

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Difei Yang, Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research [46]

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Okay. And then changing subject to the potential replacement for the CFO. So Scott, would you be able to comment, what would you be looking for in the new CFO?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [47]

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Yes. First, I just want to say our regard for Ajay is very high and thank him for the work that he's done over the last 3 years and we're in the midst of a very amicable separation and he is availing himself to make a very smooth transition. We're really looking for the right business partner that can scale with this company over time, just as we've built-in every other functional area. And I'm pretty confident that we'll be able to find that person and we're in the midst of a retained search on that front. So we'll keep you posted and we look forward to welcoming that new team mate which really represents the last piece of the Executive team that I've built here over the last 12 months.

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Operator [48]

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And our next question is a follow-up from Anthony Petrone with Jefferies.

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Anthony Charles Petrone, Jefferies LLC, Research Division - Equity Analyst [49]

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Maybe just follow-up on a cash position here is just it's obviously that's gone a bit lower here. I'm just as you look at the need for cash and liquidity maybe just an update there your views? And then in terms of data, obviously, how important is data in the context of the AAPM? And maybe just a follow-up to that would be timing on prostate, and when do you think we'll actually see data from the pancreatic cancer study, the smart study?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [50]

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Yes, happy to. So first, Anthony, regarding cash, our burn was about $24 million in the quarter, we've got about $122 million on hand. I mentioned the rigor that we have on operating expenses and our balance sheet and I feel as though we're in a decent place right now. There is nothing further on that front that I care to share it would be premature for me to do that as was asked previously on the call, we're experimenting with both financial partners and customers, some things that we can do creatively to drive the adoption of MRIdian into the marketplace more rapidly. And so there is really nothing more to share on the cash front there.

Regarding APM. I think as I mentioned before, it is a tailwind to the company, long term, if we get something similar to what has been proposed. I think it's going to provide an economic incentive to where the market already wants to go clinically and having treatment timeframes down inside of 90 days and we can treat many, many forms of cancer with high dose SBRT safely, with a much smaller treatment volume than many other systems out there on the market. So what's good clinically now may be very attractive economically, in our ability to treat, give or take 400 patients on a system, in a given year versus a conventional Linac at about 250, represents a real economic opportunity for our customers to take advantage of, and forgive me, I forget the third component to your question?

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Anthony Charles Petrone, Jefferies LLC, Research Division - Equity Analyst [51]

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Timing on the prostate data being published and then update on the timing for the initial data out of the smart study for pancreatic cancer?

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [52]

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Yes. On the smart study, the timing there is still about the same. I think we'll get that first signal on -- the safety signal on the 25 patients sometime around the end of the calendar year or the beginning of 2020. And as it relates to the prostate data, it has been submitted for publication, it's undergone kind of the routine review and re-submission. So there is positive progress there and we're very much looking forward to it being in print. I don't have exactly when it will be, but there is tangible progress and we look forward to seeing it.

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Operator [53]

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And I'm not showing any further questions. I'll now turn the call back over to Scott Drake for closing remarks.

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Scott William Drake, ViewRay, Inc. - President, CEO & Director [54]

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Thank you, operator, and thank you all for joining us. We look forward to updating you further in another quarter. Thanks very much.

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Operator [55]

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Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.