Accuray Incorporated (ARAY) Earnings Call Transcript & Summary

Good morning, and welcome to today's session at the JPMorgan Healthcare Conference with Accuray. My name is [ Jonathan Bam ] from JPMorgan's Healthcare Investment Banking team. And it's my great pleasure to introduce you to Josh Levine, the President and CEO of Accuray to kick things off.

Thanks, Jonathan. And thank you, everyone, for joining us this afternoon. I'd like to start by walking through our agenda. We have -- I'm going to be giving a verbal queue on what slide we're on going forward. But from an agenda standpoint, I want to start out by talking about our company's vision and our view going forward about our business. We're going to explore some key growth strategies and growth catalysts that we believe enable the business vision we have. We're going to provide a little bit of deeper look into our technology and how our portfolio transforms our growth trajectory, and then we'll open it up for Q&A. So we're going to transition to Slide 4. Our vision, simply put, is to expand the curative power of radiation therapy to improve as many lives as possible. The underlying thought with this is that utilizing radiation in the form and with the precision that our technology delivers it can be used to treat and cure patients across a broad spectrum of clinical needs and diseases, both within oncology and beyond. Turning to Slide 5. There is a very definitive transformation taking place at Accuray. It began about 2 years ago, and it involves repositioning the business for success, transforming the culture and really implementing an innovation and driven growth strategy that will result in a different growth trajectory, both in terms of top line revenue and profitability going forward. And it encompasses significant changes throughout that time line to people, product and portfolio and a significant cross-section of processes. It's about unlocking and exploiting key growth catalysts like our opportunity in China, opportunities related to portfolio and technology improvements, both self-driven and with collaboration partners who are best-in-class. Ultimately, the transformation is focused on driving solid, consistent execution, sustainable revenue and profitability growth and improved shareholder value. Transitioning to Slide 6. Accuray has a legacy that's tied to bringing true technical innovation to the radiotherapy space, and we expect that tradition to continue. Over the past 2 to 3 quarters, we've had a series of technology and product introductions, CyberKnife S7, Synchrony on Radixact, and most recently, the 510(k) approval of our ClearRT imaging solution. Our goal is to drive a steady, continuing cadence of product and innovation launches over the next 2 to 3 years that will drive top line growth and redirect and reposition the company's growth trajectory in general. We're defining this as our innovation-driven growth strategy. Turning to Slide 7. In the next section, we'll be focusing on growth catalysts as we see them ahead of us, and we'll explore some of the market dynamics and trends that are going to be enabling our growth going forward. On Slide 8, the topic of cancer and the treatment of cancer is still a growing need and a growing disease in our world. And radiotherapy has an important and larger role to play in multidisciplinary cancer care going forward. Over the next 15 years, estimates suggest that between replacement of existing linear accelerators and new linac placements, over 20,000 devices will be needed. Most of those new devices come from a concentration of installed base replacement in terms of served market replacement and new placements in developing markets with a significant number of those needed in China. Turning to Slide 9. China is a topic that we've talked about at great length over time. It's a significant growth catalyst for our company going forward. We typically talk about device penetration in our space by the number of linear accelerators represented in a market by 1 million people of population. On the left-hand side of this slide, down at the bottom, you can see kind of comparative examples in the bar chart of what penetration looks like in terms of capacity across different countries and different markets, with the U.S. on the left at roughly 12.5 linear accelerators per million people of population. France, which would be also representative, I think, more broadly of the Eurozone market in general at about 7.5 or 8 devices per million people of population. To the far right, you basically see China at 1.4. There is a significant degree of undercapacity in radiotherapy context in China in general. And I want to talk a little bit about how the market itself is segmented by technology and the kinds of products. On the right-hand side with the bar charts that are there, basically, there are 2 main categories of product definition and positioning: the premium segment, which is defined as Type A; and the core segment or value segment, which is defined as Type B. The premium segment, which is where Accuray has its strongest position today, and over the past -- the recent past is a business segment or a segment of products that are controlled by the central government, through the Ministry of Health, through a licensing process that end-user hospitals have to apply for. And we have, since the inception of that regulatory process for Type A licensing, we have won roughly about 80% -- or our devices have won roughly about 80% of the licenses for Type A that have been issued by the Ministry of Health over that period of time, basically, about the last 18 months. Those are devices that are scheduled for delivery starting essentially now. We talked about this at the end of our first quarter's earnings release. We expect that we'd start to see the beginning of this backlog opportunity for us, basically going to revenue over the course of the next 18 to 24 months. The Type A licenses that have been won to date represent in our current backlog, orders that in round numbers are roughly about $150 million. And again, we expect that those devices will be taken to revenue and convert to revenue over the course of the next 18 to 24 months. While this opportunity in Type A, obviously, has been a significant one for us and a transformative one for what our company -- for the size of our company, we believe that the big opportunity in China going forward is in the Type B segment, which is really represented by the bright green bar graphs on the right-hand side of the chart. These are devices from a licensing standpoint that are controlled through the provincial health care administration infrastructure throughout the country. So this is a very different process than a centralized approach that the ministry have helped us and been involved with Type A. But as you can see, in terms of absolute numbers, the real unit volume opportunity here is in Type B over the longer term. It's where the vast majority of the medium size, more provincially based facilities, smaller hospitals outside of major population centers will be essentially procuring the types of products that will be procured by those customer types. So you can see that today, again, the opportunity for us has been Type A. We have a lot of work to do still to recognize revenue in the Type A segment. But in the bigger scheme of things, it really represents probably no more than about 20% of the total market opportunity in China with the big upside being the Type B space, again, represented by the green bar graph on the right. Transitioning to Slide 10. So given the opportunity and the magnitude that I just talked about in the previous slide, the real question we faced as a company several years back is how can we participate in China in a way and an informed strategy-wise that makes sense for a company our size. We came to the conclusion based on several factors that this was probably not a road or a strategy that we're going to pursue on our own as a stand-alone situation. The idea of investing capital in brick-and-mortar manufacturing facilities in China, given our size and scale, given the operational requirements and challenges did not seem to make sense to us at that point. And we started really contemplating the possibility that if we could find the right partner, both from a manufacturing and technology standpoint, but also from a strategic market access perspective, we would really have the best of a series of elements that would be a pretty powerful and very uniquely differentiated strategy. And that was the path that we embarked on. And our -- the landing point in this was that we found a partner in the form of a company called China Isotope & Radiation Corp. They are a subsidiary of a large state-owned entity known as China National Nuclear Corp., and they are the market leader in medical radiopharmaceuticals in Mainland China. They have a strong market presence in their core radioisotope production area. They've got an active customer and sales base that's somewhere north of 8,000 hospitals throughout the country. And they have great market presence in the markets and in the customer areas that they serve. They provide us with significant strategic market access to parts of the market that would have been very, very difficult, if not impossible, for us to power up from a resourcing standpoint to be able to access in an efficient way. And so the nature of the relationship with CIRC or China Isotope & Radiation Corp. is that they're going to be helping us produce a locally manufactured product. We have actually completed the construction of a manufacturing facility with their leadership and help and a local training center for customer training for our products going forward. And we've embarked now on the manufacturing qualification and validation process for what will be the Type B production facility in Tianjin, which is about 2 hours southwest of Beijing. The reason we feel strongly about this strategy is that it is differentiated. We're the only player in the space that actually is working with a local partner. And this is important because of the following. One of the things that the Chinese government has wanted to see is the development of a local domestic manufacturing industry in this technology area, linear accelerators. And the product that we'll produce in Tianjin with CIRC's assistance is going to be an ethnically -- local ethic-branded product, a Chinese-branded product. And it aligns with local desire on local policy, again, to have that local industry, a domestic industry present in this area. So between the alignment with, again, the policies that the local government and the central government would like to see there, along with market access, along with a uniquely differentiated positioning capability, we think, provides the right answer for both a scalable manufacturing operation, market access to a significant portion of the market that we would not probably be able to access on our own. And we're excited about this. The commercial leadership of the joint venture that we have with CIRC is being led by the former General Manager of Accuray's APAC or Asia Pacific business, and someone with a 2 decade-plus experience in very complex capital equipment in the health care space, comes from a diagnostic imaging background and a great track record of building very successful commercial business operations there. So we think that, again, from a -- an all-around angle with regards to the requirements in this situation, we've got a very, very sound strategy, one that's differentiated and one that will give us, I think, great runway and we think great runway in the Type B space in China going forward. Transitioning to Slide 11. One of the other key growth catalysts that we have in front of us is the installed base replacement opportunity. This is a slide in a pie chart capturing, in the U.S. market, the age and segmentation of the Accuray installed base. In round numbers, roughly 50%, a little more than 50% of the installed base in the U.S. market is at 10 years of age or older, and this creates a unique opportunity for us to be able to upgrade those customers to the latest generation devices, both on the Radixact and TomoTherapy side as well as the CyberKnife side of our product portfolio. This represents in round numbers, maybe 175 or 180 systems in the U.S. market. And again, we think it's got great -- creates great runway for us in terms of growth trajectory and sales opportunity from a replacement sale perspective. When you think about the things that we've been introducing and the upgrades we've been making to our portfolio with regards to additional technical innovation, both in terms of motion management and treatment adaptive -- real-time treatment adaptive capability with Synchrony on Radixact, with the recent announcement of the ClearRT imaging solution and on the CyberKnife side with the introduction of the latest generation product on S7, we think that there is catalyst here for, and real interest in customer installed base context for trade and trade-up opportunities that should provide some tailwinds for us in the U.S. market. When I think about the other areas of the installed base that are, again, in a similar form, the next most likely place would be our EMEA region with a heavy concentration geographically in Western Europe or really the Eurozone markets. And you'd see the same -- roughly the same kind of -- maybe not at the same numbers level, but the same kind of age, a little bit -- maybe a little bit younger in the Eurozone markets. And again, our focus is on installed base retention of these sockets of these customers and these customer relationships. And we think we've got the catalysts in the form of an improving product portfolio that gives us a chance to upgrade these customers to the latest generation devices. Transitioning to Slide 12. There are several macro factors driving a shift to SBRT treatments in the U.S. market. There's -- first and foremost, there's really a significant shift taking place between fee-for-service reimbursement and a move to more value-based care. Many of you have heard over time, the development of a program that CMS has announced around an alternative payment model. That payment model, based on most recent update is now scheduled to be implemented or initiated in January of 2022, calendar '22. But the implementation of that program is really already underway. It's certainly already underway in other areas of the payer market. If you look at the commercial payer side of the world, those payers are already moving towards a more value-based approach, where essentially, patients can be treated with higher dosing over fewer treatment fractions, which is really kind of the move away from a more fee-for-service kind of model, which has existed over an extended period of time, which was really being driving reimbursement based on the number of treatment fractions that were being employed in order to treat a patient over a given regimen. But this move to SBRT, we think, is a significant macro catalyst for shift in how treatment gets delivered and actually plays well for us, both from a portfolio positioning standpoint and a historical perspective. Because quite frankly, we pioneered the use of SBRT and hypofractionated delivery of SBRT with products like CyberKnife 10-plus years ago. And our product portfolio lends itself to these kinds of higher dosing, safe delivery of higher doses over fewer treatment fractions. And so it's kind of rewarding for us now after all of these years to see the reimbursement environment line up in a way that makes sense for both patients, clinicians and the payer community. We -- transitioning now to Slide 13. Again, this really just kind of capture some of what I just talked about. But in order to get to a situation where you can deliver high dose and deliver it over a minimum number of treatment fractions, you need to be able to deliver those safely. And in that context, the precision and accuracy of Accuray's products and some of our unique technology are what give us both -- historically have given us the confidence that we can do this safely. And I think it positions us well and strongly in the minds of the market now with regards to where the reimbursement environment is likely going to take and drive the shift in the way treatment gets delivered. When you start to think about technologies, unique technologies like Synchrony, which is an ability on -- has been a product or a capability on our CyberKnife platform for many years. We've, in the last several quarters, introduced it on Radixact and the Tomo side. And this is a motion management and real-time compensation algorithm that automatically adjusts treatment beam to ensure that your -- we've got a target lock -- the beam locked on the target and tumor. So from a real-time adaptive treatment adjustment standpoint, this is a very, very unique situation and allows -- capability-wise, and allows for, again, higher dosing and a high degree of confidence in the minds of clinicians that have used it. We also just recently announced the introduction of -- or the 510(k) approval, rather, of our ClearRT imaging upgrade. And I'm going to go into this in a little bit further detail deeper into the presentation. But again, we believe that this is another confidence boost and capability to our existing platform on the Radixact side that will play well and create some significant interest as we move to this value-based care model that CMS is going to be implementing. Last but not least, again, precision and accuracy overall. It's kind of the hallmark of who we are. It's kind of in our DNA. It's been that case for decades at this point. And I don't think anybody in our space can deliver the kind of quality, both precision and accuracy-wise, that we can as it relates to patient experience, patient safety and quality of life outcomes with regards to how our care is delivered off our unique technology. Transitioning to Slide 14. I wanted to take some time and just describe a little bit about why and how we see customers choosing Accuray products and Accuray technologies. I think as I've talked about just recently, the precision and accuracy of our devices has always really been kind of a hallmark of how the market perceives us. We were an innovator from very early on with regards to the use of hyperfractionation and ultra hyperfractionation and increased dosing over fewer treatment fractions. And the capabilities that these products have defined and established around ultra-precise radiation therapy, high-quality treatment planning and unique delivery based on unique architecture is pretty well-characterized at this point. Our products have a broad case mix capability and a high ability to deliver significant dose customization across both platforms, which is why, I think, historically, we see very strong presence for Accuray devices in academic and research-based medical centers. When you think about the CyberKnife platform, we think there's an opportunity here. And we'll talk a little bit more about it to expand beyond oncology and radiation therapy in the oncology space and towards more neurosurgery. The product has its roots, quite frankly, in stereotactic radiosurgery. And I think that we believe that there are opportunities in other areas of the neuro spaces that we can capitalize on. On the TomoTherapy side, there's been a significant improvement in product performance, product functionality and feature set. And that's only improving if you think about the things we've been introducing over the last several quarters in terms of Synchrony on Radixact, and more recently, the ClearRT announcement of 510(k) approval. So whether it's focused on outcomes or patient experience, quality of life, our platforms continue to be unique in how they deliver treatment, and it's a significant reason why customers choose our products. Transitioning to Slide 15. We're going to talk a little bit about both platforms here for a minute. Radixact, which is the is latest generation TomoTherapy product really is unique in the sense that this is a linear accelerator that's been built and designed to operate on a gantry, a CT scanner gantry, with the treatment couch that moves through the bore. This is a unique situation because you have the only device, really, in the space that's got a 360-degree helical treatment delivery and imaging capability along with image acquisition that, again, is really unique because of the gantry design and the fact that you have essentially a big bore CT scanner married with linear accelerator. The Radixact has been now -- is in probably third or fourth generation since the very outset of its existence. It's always been known for very, very high level of capability around dose customization and complex case mix. It has improved dramatically over the last several years with regards to treatment speed, throughput. And is today, every bit as capable as the best products on the market with regards to wide range of case and clinical capability, the ability to deliver SBRT, the ability to deal with very, very long treatments, whether it's intracranial and spinal or metastases over the course of the spine. But it's a unique product. It comes to customers, quite frankly, precommissioned at the factory. So installation is relatively straightforward. It's relatively quick. It fits nice and neatly in a standard-sized bunker. So it's a very, very much of a workhorse product. Since its introduction, we've taken orders for roughly 200 -- maybe over 200 devices now. We've got more than 100 of them installed and providing treatment around the world. And I predict with the improvements and the innovation upgrades that we're adding to the product over the course of time, we're going to see a significant number of these -- additional number of these devices being chosen by customers going forward. Transitioning to Slide 16. Again, we introduced, I think, 2 quarters ago, Synchrony on Radixact. And I wanted to take a minute to describe how unique this is and what it does for the Radixact system. The -- essentially, the -- on the left-hand side of this chart, Synchrony allows for, in real time, intrafractionally, allows the radiation beam to adjust itself for any motion management or motion changes in the target, either through respiratory cycle or other movement, changes in anatomy over time. And it allows this to occur and supports this without turning the beam on and off, which is known as gating, which is really kind of the common methodology for our competitors' devices to be able to try and attempt to keep the beam locked on the target. The fact that we do this automatically and we do this intrafractionally allows, again, a faster treatment. It allows the beam to remain on through the entire range of motion of the target. And it really enables ultra hyperfractionation, which is, again, directionally where we believe the market is headed, higher dose over fewer treatment fractions with much greater precision. And so this is a very, very -- really a truly unique situation for us. It's had a tremendous impact on the CyberKnife platform over time. We believe it will have a similar impact on the Radixact side. Transitioning to Slide 17. We announced at the very end of December that we had received 510(k) approval for helical ClearRT, which is our helical kVCT imaging solution. This is a really unique capability at this point for when you think about the current imaging modalities that are being used in radiotherapy. Imaging really has become kind of a table stakes topic in our space. And the unique opportunity we think we have with ClearRT is that, again, it's enabled by the fact that our device is essentially a CT scanner in its purest form with a linac attached to it. It brings all kinds of capabilities to bear. We think that this is a significant step up from what the market has seen traditionally as the kind of the industry standard of cone beam kV. It brings -- again, because of our unique architecture, it brings the largest field of view, transactional field of view in the space. The scan length is the longest of any product available. Meaning that, again, if you've got total narrow radiation cases or total body radiation, long field size or length metastasis involved in a patient, you've got the ability to treat those unique cases. Its acquisition speed based on, again, the 360-degree helical capability of the gantry will be able to essentially acquire images at a speed of about 1 meter a minute, which is really extraordinary when compared to the other devices on the market. It's got dual energy. It's got kV capability or kV energy, but it also will have mV, which means that if you've got patients with orthopedic implants, let's say, a hip or a knee, which would not be scannable or treatable with a kV -- dedicated kV energy device. With the mV capability on Radixact and with ClearRT, you'd be able to treat those patients. So it's got a high degree of flexibility in terms of both speed of acquisition and the ability to dial up or down on the resolution capability of the image that's taken. Transitioning to Slide 18. You can see in this slide, a little bit of the additional areas of focus here. Again, on the right, you see the long field or scan length and field size involved. But basically ClearRT because of its advantages, provides a uniformity of an image and low scatter or low noise, if you will, which is really visual interference, if you will. It provides the best uniformity across the entire image. With cone beam kV, as you move from the center of an image to the edges, the peripheral edges, you end up seeing degradation and resolution based on scatter and ClearRT prevents that, quite frankly. You'll also have exceptional spatial resolution to the imaging capability and low contrast when you're talking about soft tissue. So there's a significant advantage and capability here. We're excited about it. From a timing standpoint, we believe that we're probably a quarter or 2 away from -- in a multiphase launch before we'll start to see orders on this. But we believe it's got game-changing capability in terms of how Radixact has -- can be positioned going forward and the product functionality that will result. Transitioning to Slide 19. The CyberKnife S7 was a product, the latest generation CyberKnife that we launched, I believe, 2 quarters ago. And this was really the pioneering product used in stereotactic radiosurgery, had its initial focus in intracranial and neurosurgery applications. But it's become really kind of a gold standard as it relates to full-body radiosurgery device. The case mix now across the entire installed base of CyberKnife is probably about 50% intracranial still. But just about every other area of the body is encompassed in the remainder of the case mix: lung, liver, prostate. It's got, again, very unique technology, noncoplanar delivery through the robotic capability, which creates, again, the ability to increase dose and do it safely because it's got the Synchrony motion management and real-time adaptive treatment capability attached to it. It's got a vastly improved treatment planning system with VOLO with regards to the development of a treatment plan, speed and treatment delivery speed. So this product today can now deliver treatment in a 15-minute time slot from a treatment schedule standpoint and is very fast in the development of treatment plans. This is really a unique -- a very unique device in our space even after the years that it's been involved or available in the market, as it's continued to be upgraded and its capabilities have continued to grow. And we're excited about the opportunities, commercial opportunities, we have with CyberKnife going forward. Transitioning to Slide 20. One of the areas that we're most excited about with CyberKnife is work that we're doing to expand beyond just a pure oncology focus or radiation oncology focus with the device. We believe there's a significant opportunity in the neuro space, both from a neuro-oncology perspective, but also in areas that are more functional disease, neurology-related opportunities. The program and the package, if you will, that we're developing for this will allow us to offer both frameless or frame-based treatments with CyberKnife. And that's unique in the context that if you're a customer that's been using a Gamma Knife, say, historically, and are really more comfortable with a frame-based system, you would have the opportunity to use a frame-based system with CyberKnife or not. And so there's -- we think there's great flexibility in the offering of both. We announced a quarter ago that we had established a really important relationship with Brainlab, which is an independent treatment planning and surgical navigation system and company based in Germany. They have a significant presence in the neuro space, and we believe they're a terrific partner for us in helping expand the capabilities and the functionality of the surrounding adjacent capabilities related to treatment planning, surgical navigation in some of these areas that opportunity presents themselves on the neuro side. This is really, we think, a terrific opportunity going forward from a targeting standpoint with the installed base of Gamma Knife devices that exist around the world. We believe that number is probably somewhere in the 300 to 350 device range. So there's a significant universe of target opportunities, if you will, for a CyberKnife neuro-focused product and overall package. And we're excited about what this represents going forward from a growth impact standpoint. Transitioning to Slide 21. In addition to all of the things I've just kind of highlighted from a product portfolio and an innovation perspective, we've been working on driving an improved operating leverage model for our business. And on the left-hand side of this slide, you can see over the course of the last 8 or 9 years, there's been a reasonably good cadence for the growth in the installed base. This really is important because it represents the service revenue stream, the annuity kind of aspect of the revenue base for us, which is now over 50% of the total revenue of the company in excess of $200 million in annual revenue. And so this is an important aspect of our free cash flow generation and an important aspect of the overall financial impact to our business. I referenced the operating leverage, improving operating leverage just a moment ago. It's represented on the right-hand side of the slide. And we have I think a continuing looking-forward view that this has legs going forward in terms of continued impact to the business. As we can show growth, improved growth and growth trajectory shifts in top line revenue, the current scenario relative to cost structure and our current cost ratios across the income statement, give us, I think, a great opportunity to create incremental drop-through and profitability stream going forward that will allow us to reinvest in additional innovation to continue to drive better growth at the top line going forward. And that's clearly how we're thinking about improve -- putting the improved operating leverage to use, quite frankly, going forward. Just last, finishing up on Slide 22. We are 100% focused on transforming this business and focused on the things that we need to do to drive value creation for shareholders. We think we have a significant number of growth catalysts going forward in terms of improved and incremental growth on the top line. And with the operating leverage and the model -- financial model that I've just described, we think that, that will create and provide an added level of acceleration in profitability and free cash flow generation-wise going forward. And what ultimately shouldn't be lost on listeners is the current significant discount that we trade at relative to peers and to the other players in our space from a valuation perspective. We think that the execution, the focus on execution, the focus on accountability in these strategies that I've highlighted today, will do a significant -- create significant movement in closing this valuation gap, quite frankly, with -- in terms of how our company is being valued relative to other players. So I want to thank everyone for listening in today. We're going to be transitioning to the Q&A section of our presentation this morning. And I'd like to ask Suzanne Winter, our Chief Commercial Officer and the leader of our R&D organization. And I'd like to also introduce Shig Hamamatsu, our Chief Financial Officer, to join me for some of the -- for the Q&A session.

So we have a couple of questions that have already kind of come in. I'd like to kind of start with these. The company has clearly stepped up innovation in the past number of quarters with CyberKnife S7, Synchrony and now ClearRT, which looks like it to be a game -- can be a game changer for the company. Can we talk a little bit about our innovation pipeline and how ClearRT positions the company going forward? I think I'm going to ask Suzanne to take this one.

Yes, absolutely. We have really focused and strengthened our R&D pipeline. We're very excited about ClearRT in this introduction. We believe this introduction will fill a market need for customers who are looking for improved performance from their imaging capabilities beyond what is available today, from cone beam CT and the CR linac, conventional linacs in the marketplace. And also, those that are hesitant to go to an MR linac due to the acquisition costs, the maintenance cost and just the complexity of that workflow. Josh talked a lot about the diagnostic-like image quality that is as a result of the helical delivery on the Tomo Radixact platform. So we're excited about the potential. We've already gotten some very good feedback from our customers who have seen our early work. And we will be doing a phased product launch here over the next couple of quarters. But we believe that this will provide a very strong value proposition for customers who are looking for the highest-performance system without sacrificing efficiency and speed.

Thanks, Suzanne. Question #2 is really around the approach that we've taken in developing our opportunity in China versus our other main competitors by establishing really a uniquely differentiated structure with the joint venture that we have there. And the question is, what's the strategy behind our thinking and what are our expectations for this market in the coming years? Shig, you want to take that one?

Sure, Josh. Thanks. As Josh described earlier in his presentation, it was very critical for us to partner with somebody who had a sizable presence in the China already with the relationship and commercial infrastructure within the country. So we found that in the China Isotope & Radiation Corp. that Josh talked about. They are very excited about the opportunity, and that was one of the drivers. And also, as Josh stated, we wanted to differentiate ourselves in terms of the strategy, having a local partner. And it was important for us to be seen as the domestic Chinese player as opposed to a foreign company doing business in China. So we believe the long-term strategy will bear the fruit in terms of the China-type market penetration.

Thanks, Shig. Another question on the impending alternative payment model. Basically, we seem well positioned to benefit from the impending RO-APM model when it goes into effect. What are we hearing from customers around their preparations for implementation of that model? And what impact will this have for the company? Suzanne, do you want to take that one?

Yes, absolutely. And I just -- I would just say, the ZIP codes have been released. So I think the providers that are within that 30% that are going to participate in the RO-APM, they're already making their preparations to make sure that they can compete and work in this new environment. And so we are working very closely with them. Obviously, they need to -- those folks that have a fleet of age -- of an aged installed base, we're working with them to upgrade to the latest technology so that they can start to provide hypofractionated treatments to their patients. So we think we're well positioned, and we are partnering very closely with those customers.

Thanks, Suzanne. The last question we had was on identifying other growth drivers or the drivers that we're focused on and that the markets to be aware of for the next, let's say, 24 to 36 months as we continue to accelerate our momentum in the market. I mean I think you've heard about the key growth drivers as we see them in this presentation. I would say, going forward from here, the impact of changes in improvements add -- additions, if you will, to our portfolio based on the things coming out of our R&D pipeline are probably some of the most exciting things I think we've got in front of us. They're not small adds with regards to technology upgrades. They're meaningful in terms of how treatment gets delivered, how clinicians will use our products, certainly in the U.S. market under a different reimbursement scheme and environment. And I think that we're excited about our positioning going forward. I think that Radixact is becoming -- it's already mainstream. It's becoming more mainstream and more meaningful with regards to its potential going forward with the additions we're making with Synchrony, with ClearRT going forward from here. And I think that the aspects of the strategies that we have for CyberKnife, especially around the neuro opportunity is also going to be meaningful going forward in terms of growth impact. So we're excited about our prospects. In 8-plus years, I've never been more excited about our business -- forward-looking business prospects than I am right now. We've upgraded -- substantially upgraded our executive team. We're upgrading our products in our portfolio. We're upgrading processes, and I think we're showing a degree of consistency with regards to execution that will continue going forward from here. That's going to put us on a good path. So with that said, I'd like to thank everyone for joining us this afternoon. I'd also like to remind everyone that we'll be releasing Q2 earnings after the close of the market on January 27. I would encourage you to tune in to listen to that. Thank you very much.