Earnings Call: Q3 2020

Apr 28, 2020

Good day, and welcome to the Accuray Reports fiscal 2023rd Quarter Financial Results Conference Call. All participants will be After today's presentation, there will be recorded. I would now like to turn the conference over to Joe Diaz with Lytham Partners. Please go ahead. Thank you, Alissa, and good afternoon to everyone. Welcome to Accuray's conference call to review financial results for the third quarter of fiscal year 2020, which ended March 31, 2020. During our call this afternoon, management will review Ash Levine, Accuray's President and Chief Executive Officer and shim Hamamoto, Accuray's Senior Vice President And Chief Financial Officer. Before we begin, I would like to remind you that our call today includes forward looking statements. Actual results may differ materially from those contemplated or implied by these forward looking statements. Factors that could cause these results to differ materially are set forth in the press release we issued just after the market closed this afternoon, as well as in our filings with the Securities And Exchange Commission. The forward looking statements on this call are based on information available to us as of today's date, and we assume no obligation to update any forward looking statements as a result of new information or future events, except to the extent required by applicable securities laws. Accordingly, you should not put undue reliance on any forward looking statements. 2 housekeeping items for today's call: First, during the Q And A session, we request that participants limit themselves to two questions and then re queue with any follow ups. 2nd, all references we make this specific quarter in the prepared remarks are to our fiscal year quarters. For example, statements regarding our 3rd quarter referred to our fiscal third quarter ended March 31, 2020. Now, I'd like to turn the call over to Accuray's President and Chief Executive Officer, Josh Levine. Josh? Thanks, Joe, and thank you to everyone joining us today. I also want to thank Suzanne Winter, our Chief Commercial Officer and Head of R&D, and Mike Hoge, our Senior Vice President of Global Operations And Supply Chain, for joining our 3rd quarter earnings release webcast. Given their leadership roles in specific areas of responsibility as we mobilize our efforts and resources across the company to address COVID-nineteen, I thought it would be helpful to have both of them available to answer potential questions that are related to critical information in their respective areas. Clearly, because COVID 19 is at the forefront of everyone's mind, my prepared remarks this afternoon will focus on 3 primary topics: First, the impact that the pandemic is having on our customers' clinical practices and workflow second, what we are doing to support them while keeping our employees safe And lastly, our key areas of focus related to business continuity, both operational and financial. Although fighting the coronavirus has taxed the health care industry worldwide, the reality is that radiotherapy treatments are continuing around the world, And although based on direct feedback from customers, treatment delivery is being managed with modified clinical practice protocols and workflow, For example, lower risk in nonurgent cases and treatment starts are being pushed out and scheduled treatment times have been extended to allow for disinfection of treatment bunkers and equipment between patients. This has resulted in overall decreased patient treatment volumes. There has also been an increase in the use of hyperfractionation and ultra hyperfractionation to limit the risk of COVID-nineteen exposure for both patients and department staff, which we believe Accuray is uniquely positioned to support with our CyberKnife and Radixact systems. One of the other areas of paramount importance given COVID-nineteen impacts to the overall hospital environment and radiotherapy department clinical practice protocols is the health and team personnel who are responsible for installation, preventative maintenance and break fix activities that support our installed base customers. During moments like these, our ability to provide service and clinical application support to ensure that our customers can continue treating patients safely and effectively is critical. I'm incredibly inspired by these frontline heroes and their tireless dedication to supporting customers and patients and I want to thank them publicly. Our service teams around the world are following customer and institution specific defined safety protocols when they are on-site at customer locations and we are helping to ensure their safety by providing personal protective equipment. I'm extremely proud of the collective efforts of the Accurate team involved in the day to day support of our customers. Despite all of these efforts, we should not underestimate the magnitude of the challenges that our customers currently face as hospitals have been forced focus the majority of their clinical resources in intensive and critical care medicine areas to support COVID-nineteen patients, many have been proactively pulling back from all ability and associated cash flows, and a growing number of facilities are finding themselves under significant financial stress. The reprioritization of clinical resources and the associated customer challenges that have emerged, along with restricted travel and or facility access issues, created delays in bunker modification projects and installations in our fiscal third quarter. We believe that these factors suggest that we should expect longer revenue conversion timelines in the near term. In terms of our internal business management focus, We've been taking actions across an array of both operational and financial areas to help ensure the continuity of our business On the operational side, we've been working aggressively with our critical supply chain and logistics partners to help ensure that we have adequate supply to support both our production and service activities globally, while maintaining maximum flexibility related to flexing up or down in terms of product build schedule changes. On the financial side of our business continuity efforts, we are focused on cash flow management, and we are taking aggressive actions designed to preserve cash and maximize liquidity through operating expense reductions without compromising commercial activities and future innovation. These actions include but are not limited to, reducing manufacturing raw materials purchases, aggressive account payables management, reducing CapEx spending, freezing all of discretionary hiring activity and reductions in travel spend across all functions, except for our global service personnel. We are of my 7 direct reports and myself, have agreed to take a temporary reduction to our base salaries and waived any discretionary annual bonus payment that might otherwise have been paid pandemic. Despite the challenging environment caused by COVID-nineteen from an operational standpoint, Accuray had a reasonably solid 3rd fiscal quarter. Gross orders for the quarter increased 27 percent to $106,000,000 compared to $84,000,000 in the prior year third quarter On the revenue side, we recorded as we saw timing impact due to COVID 19 deeper into the month of March when travel restrictions and lockdowns in certain markets went into effect, which as mentioned before, affected logistics and bunker construction schedules at both our distributor and end user levels. Although our revenue conversion timing for systems and upgrades has been impacted by the pandemic, we expect our service contract revenue, which has an annualized recurring run rate in excess of $200,000,000 to remain stable as our installed base customers continue to rely on accurate equipment to treat patients. From a product mix perspective, CyberKnife contributed approximately 40% of the total gross orders in Q3, while the tomotherapy platform led by Radixact accounted for approximately 60% of the gross orders during the quarter. From a regional order performance perspective, the Americas region delivered its 3rd consecutive quarter of double digit year over year order growth. Our focus on improving the consistency of commercial execution in the AMS region has been a work in progress and we are very pleased with the continued momentum our Americas commercial team has made in growing our sales pipeline throughout that region. Gross orders in EMEA grew 16% on a year over year actually declined year over year, but based on over achievement in the first half of the fiscal year, the region is still ahead of our internal expectations on a year to date basis. Transitioning to China, gross orders from China remained strong, with 11 new orders received during the quarter, 6 of which were type A and 5 of which were type B. Roughly 70% of these orders came through our joint venture sub dealer network, and the remaining 30% came through our legacy distributor TomoKnife. We are still waiting for completion of the tender process for the 1st batch of 50 China Type A licenses awarded for our systems in October of 2019, now believe that the beginning of revenue conversion will most likely begin in the first quarter of fiscal 2021. Might also be aware that we've been expanding the depth of our management team with the recent additions of highly experienced executives, including Suzanne Winter, our Chief Commercial Officer, who joined us from Medtronic and Mike Hoggi, Senior Vice President of Global Operations And Supply Chain, who joined us from GE Healthcare. The extensive experience and the success that these executives have achieved at their previous companies provide Accuray with impressive bench strength as we navigate through this challenging Given the unprecedented nature of the coronavirus pandemic and the significant economic uncertainty it introduces, we have made the decision to withdraw our fiscal 2020 guidance. Once we believe that we have sufficient visibility to reinstate guidance, we will do so. In closing, while the current market conditions limit our near term visibility We are aggressively focused on those activities and actions that we can control, ensuring the health and safety of our employees ensuring continued support for our With that, let me turn the call over to Shik for his review of the financial details. Shik? Thank you, Josh, and good afternoon, everyone. I will begin with some additional details on our order performance for the third quarter and then focus on certain highlights for the period. Gross orders for the 3rd quarter were $106,000,000, which was up 27% from the prior year. On a year to date basis, gross Net AGAS for the quarter were $20,000,000, which was in line with our prior expectation. We did have approximately $4,000,000 of aging activities during the quarter. We had cancellations and other adjustments of approximately $9,000,000. As a result, on a net basis, we generated $77,000,000 more orders in our 3rd quarter, which represented a 20% increase over the prior year. We ended a quarter with backlog of $570,000,000, representing an increase of 15%. From March 31, 2019. As Josh discussed earlier, we anticipate the COVID 19 disruption will adversely impact the pace of our backlog through revenue conversion in the near term. Although the depth and the extent to which COVID 19 will impact individual markets could vary based on a number of factors, We could As for the China orders already aged out, we continue to believe that a meaningful number of them will eventually convert to revenue. The 50 type of licenses already awarded for Actuary systems included several systems that were previously aged out. Turning now to our income statement. Total revenue for the 3rd quarter was $99,500,000, down from $103,200,000 in the prior year. On a year to date basis, revenue was down 4%. From the prior year. Our product revenue of $45,500,000 during the quarter declined 2% compared to prior year. Service revenue in the third quarter was $54,000,000, down 5% from the prior year. The decline in service revenue was primarily due to lower upgrade upgrades purchased through our service contracts. From a product mix perspective, CyberKnife accounted for approximately 20% of the quarter's revenue unit volume, while the tomotherapy platform accounted for the remaining 80%, most of which was driven by Radixact. Turning now to gross margin. Our product gross margin was 39.4% compared to 41.5% in the prior year. Service gross margin in the quarter was 39.2% compared to 37.3% in the prior year. Service margin for the quarter included an impact of fiscal 2020 bonus accrual reversal. Which, as Josh described earlier, related to waiver of executive bonus payout, as well as adjustments to generally employee bonus pool, to reflect the current business environment. Excluding the impact Our service gross margin for the quarter was 37%, which was in line with our historical norm. Overall gross margin for the 3rd quarter was 39.3% compared to 39.2% in the prior year. Excluding the impact of the bonus accrual adjustment I just described, our overall gross margin for the quarter was 38%. Moving down to income statement. Operating expenses for the quarter were $31,200,000, a decrease of $6,400,000 or 17 percent from the prior year. The year over year decline in our operating expenses was primarily driven by the bonus accrual reversal The remaining decrease was driven by reductions in discretionary spend, such as travel given that certain employee activities were restricted by COVID 19. GAAP operating income for the quarter was $8,000,000, compared to $2,900,000 in the prior year. Excluding the impact of the bonus accrual adjustments, our GAAP operating income was $2,300,000, for the quarter. We began reporting our operating impact over the China JV in the third quarter. And it was an income of $200,000. This item is being reported on our income statement as a single line item called gain on equity investment. While we reported a small income from the China JV this quarter, we fast to see a small loss in the next few quarters as the JV continues to ramp on its operational and commercial startup activities. Adjusted EBITDA for the quarter was $11,300,000 compared to $6,700,000 in the prior year. Excluding the impact of bonus accrual adjustment, adjusted EBITDA for the quarter was $5,600,000. Now, award about our balance sheet and liquidity position. We ended a quarter with $92,000,000 of cash and short term restricted cash, We carried approximately $200,000,000 of debt $85,000,000 convertible notes due July 2022, as well as a term loan of $85,000,000 and an asset backed revolver of $30,000,000 from one lender, both of which mature in 2024. In summary, none of our outstanding debt today is scheduled to mature in the next 2 years. From a working capital liquidity perspective, in addition to the asset backed revolver facility, we maintain access to accounts receivable acting facilities of over $20,000,000 in Japan. Beyond access to these credit facilities, as Josh mentioned earlier, we are taking focused cash and control actions to preserve our liquidity position. In addition, Our supply chain team is working very closely with our suppliers to adjust our inventory position to a profit level. As we closely monitor business conditions in the current environment. And with that, I'd like to hand the call back to Josh. Thank you, Shig. I want to thank all of Accuray's employees throughout the world for the tremendous energy they're bringing to their work and supporting our customers and their patients during this challenging time. And with that, operator, we're ready to open the call up for questions. The first question today comes from Brooks O'Neil of Lake Street. Please go ahead. Good afternoon, guys. Can you hear me okay? Doing good, Brooks. Great. I was hoping you might give us whatever color you could offer or in terms of what you're hearing, on the ground in China, either from your joint venture partners, from, Tomo Knight or from anyone else you think is credible there? Yes. So a couple of data points. I actually had a call with, the chairman and vice chairman of, China Icestop And Radiation Corp. About a little more than a week ago, in an effort to try and get some color from where they sit. There's no question they've confirmed that, I'll call it the pilot light Brooks is back on. The their signs of life in the China market. Their primary business, you'll remember, is the radioisotope business today. They're not necessarily in big capital equipment yet. But, they're seeing order activity on the radioisotope side, And hospitals started to kind of return to, I'll call it a new normal state I think that their belief is that on the equipment side of the world, which would obviously cover our situation and the JV that, you know, that may be a little bit longer in, in ramp in terms of, starting to see that, that, come back, but there's, progress being made and advanced on the tendering process as well. So I mean, again, I think that we've been, we've been pretty straightforward about not obviously not having control over the timing of, of, when the tendering process would end, but the feedback has been that progress has been made there. And, I think if you go back to where we were, at the time we last reported, we were thinking and feeling that with a little bit of luck, we might have seen tendering complete earlier in, in the 4th quarter, our fiscal 4th quarter and maybe, would have had some possibility of revenue activity before the end of the fiscal year. At this point, I'm thinking that from a conservative view, it's probably Q1 at this stage. We're still waiting also for, from, National Health Commission on the 2nd round of, Type A licenses that, that activity, has all the applications are in They've been reviewed to our understanding, but there's been no announcement attached to that tranche yet, and we expect that As we get perhaps deeper into the quarter, towards the end of this cycle, fiscal cycle, we might hear something on that second tranche of our Type A licenses as well. That's great. That's great. Let me ask you just one more question. I'll jump back. I hear anecdotally from people in the industry that there's a high likelihood we'd see positive movement with regard to the new reimbursement codes, most likely for implementation beginning January 1. Can you just tell us what you hear out there and what your expectations are at this point? So I think that the general wisdom and our belief was that, up until the height of the pandemic kind of was upon us, The, the general belief was that we were looking at probably a July 1 implementation. You may be aware that ask both Astro and, and Abimed, have both, communicated with the folks at CMS that they believe that, COVID 19, focus right now has taken an impact or had an impact on the market's readiness, from a provider side standpoint clinically to be ready for a July 1 implementation. And they're, they're hoping and pushing, suggesting CMS hold that off until January 1st. And that's that's, you know, kind of hot off the press. I mean, you know, the, the communication between Avamed and ASCO and CMS has taken place inside of that, with that recommendation within the last, probably 3 weeks or so. Great. I mean, to me, that doesn't seem terrible. So, I'd say keep up all the great work. And, I'm excited for you. Thank you very much. Thanks Brooks. Thanks Brooks. The next question today comes from Josh Jennings of Cowen. Please go ahead. Hi, good afternoon and congrats on solid quarter navigating the initial piece of this COVID storm. I wanted to just see if, I know you've, there's a lot of, variables going into the pot here, but if we could just hear in terms of anything that you can disclose around the trends that you're seeing in April and some of the different geographies and we just heard a little bit from China, maybe you could expand on Western Europe, Middle East, maybe the Americas as well? Josh, the general answer there is, you know, and as we said in prepared remarks, we saw probably the biggest, piece of slowdown or impact of slowdown as we got deeper into March. I'd say the 1st 2 months of the quarter, 3rd quarter were proceeding as, as we hoped and expected. And as we talked about, again, earlier, there was timing definitive timing impact towards the end of the last couple of weeks of March, on, delays that push will push revenue recognition on a couple of deals that we were counting on in the quarter push them into probably Q4. It's a highly variable situation across the rest of the world. I don't know that the recovery, if you will, or kind of the next phase of this is going to look the same in every region. As a matter of fact, I would be reasonably certain that it probably doesn't. There are 2 primary factors driving this. One is, the financial impact that, hospitals are now dealing with and sustaining around, the elimination of the elective and non essential procedure activity, and as it relates to that, cash flows being impacted, we're assuming we're pushing out expectations around DSO and AR collection I think we have less exposure on the service revenue side of our business, given the fact that patients are being treated with our devices, and we've got some leverage in ensuring that we're going to get paid on the service side. But I think that, a wise expectation would be that, you know, service system revenue collectability, just given, what's happening from a financial stress standpoint at hospital end is going to probably push out And then the discussion around where do where and when, is there a confidence on the part of hospital to reinvest from a CapEx standpoint. And that's the piece that has a much more difficult, aspect to it with regards to visibility demand visibility around that and timing, timing certainty. Again, I think it's going to look different, different parts of the world. And we're just going to have to see how it plays out. Understood. Understood. A lot of unknowns out there. And just to kind of lead into another next question, but just on your long term guidance, I think you prior to COVID really kicking in in Europe and in the U. S. Earlier this year, you talked about 8% to 12% revenue growth into the out years. I assume that we should be just thinking about our own projections in the fiscal fourth quarter and then the time period duration of this crisis and impact on some of the CapEx spending in the different geographies and try and would you advise us to disregard that guidance for fiscal 'twenty one? And then the long term outlooks being similar in fiscal 2022 and beyond. Thanks for taking the questions. Yes. I think the simple answer to that, and I would cash caveat it by saying there aren't a lot of simple answers in the current environment. When I think about the underlying demand characteristics, in our business right now, I don't know that, I think, China is still a very, very big growth catalyst for us. Going forward. And I think that, if they were the first into the pandemic and kind of the first out of the pandemic, I think that as the market starts to come back to life in China, I think that again, the underlying demand, aspects of what they're dealing with there terms of under capacity and radiotherapy is still a very, very big growth driver for us. I think the the discussion in, the other parts of the world, again, it's variable by region and by area. But we, we've been seeing as the results we put up in Q3 would suggest, we've been seeing strong interest in our product. Demand for our products. And we haven't even really gotten to some of the more important innovation introductions that we're we've been talking about with regards to, upgraded imaging capability on the Radixact platform, the fully, full commercial impact of Synchrony on Radixact. So we think there's a lot there to be excited about. I think tempering tempering the expectations from the 8 to 12 where we were, let's say, at the beginning of this calendar year to something in the intermediate term, maybe a little bit down from that. Longer term, I think that, that ranges is a, you know, is a reasonable landing spot. But again, the question is that the timelines to recovery and where and how that impacts the momentum. And I think it's the reason we've suspended guidance And, you can imagine that we're focused on this. Our ears to the ground, we're in front of customers, on a very active base at this point. And, again, we're doing the things that we can control. We think it's prudent to be, to be managing liquidity aspects of our company at this point. And I can tell you that Shig and I have a high degree of confidence that, we have the right approach and the right focus on navigating through The next question today comes from Anthony Petrone of Jefferies. Please go ahead. Thanks. And I hope everyone's staying healthy and good to see at least some encouraging signs out there in the print here today, but let me dig in on a few, specific like housekeeping questions. And then I have a couple of follow ups on how you see the Corona virus cycle playing out. So just in terms of overall gross orders in the quarter, can you quantify how much of that was actually previously aged out orders returning to the backlog? And I guess what specific triggered those coming back in and regionally with those U. S. Orders, were they China orders or European orders? And then I'll have a follow-up. Yes, Anthony. To answer your first question there, just to be clear, the gross orders that we reported, which $106,000,000 this quarter. Those are new orders. So they have nothing to do with the previous ASDA orders. So I just want to make that clear for you. Yes, rather than the backlog, I was talking about. Apologies for that. Yes, no problem. So backlog, as I said, I had, but we had $77,000,000 of net order added to the backlog. So $106,000,000 gross orders, and we had a net age out of $20,000,000. And the other adjustments in cancellations about $9,000,000. So, and also the $4,000,000 of Asian back end the revenue, previously aged out items. So that's the roll forward of the backlog, if that's helpful. Okay. So $4,000,000 came back in. Okay. Correct. But just to be clear, hey, Anthony, just to be very clear, I know it gets tangent confusing, but when I say 4,000,000 aged out, I mean, is back in. What it means is it didn't really go into, backlog per se. It just went straight to revenue out of Asia pool. So net net age that item had a net net 0 impact on the reported backlog, just so you know. Okay. No, that's helpful. And maybe the follow ups would be, a little bit more in terms of trends in March April, but maybe more on the U. S. Installation and order side of things, in terms of just hospital regulations, our understanding is that even installations to an extent have been pushed out beginning mid March. And then specific, I guess, Josh, to your comments on CapEx, how, order specifically, I guess late in the quarter and early this quarter are trending in the U. S. Specifically? And then I'll have one last one on China. Thanks. Yes. Anthony, I think, And I don't know. This is specific in the to the U. S. Situation or the Americas region. I think that the reality is that things, basic elements of this discussion, such as facility access, lockdown, lock down travel access between markets and countries. I mean, this absolutely has impacted installation timing and customer acceptance timing. No question. It's not a U. S. Only phenomenon. And again, those guidelines relative to access, in facilities, it looks different in different places, but certainly in, as we got deeper into the third quarter, those things became bigger, bigger, bigger impacts. Going forward, I mean, again, difficult to predict where and how CapEx activity starts to come back into where it falls from a prioritization standpoint, but I think our view is that at a minimum, we're looking at several quarters of, reduced or moderated CapEx kind of spending. I think a lot of this depends on how how long hospital stay in a shutdown or lockdown mode relative to the, what they're considering is non essential, or elective procedures. And those 2 are linked. I mean, they are cause and effect on one another in terms of kind of the drivers of a recovery timeline estimate. Fair enough. In terms of, Maybe one quick follow-up there. Just on therapy volumes, you commented obviously radiation therapy is essential is there anything noticeable there just in terms of kind of demand pent up scenarios? Are you seeing at least some delays in radiation therapy procedures at hospitals the bigger, the longer that gets backed up? I mean, how does that actually drive capital decisions? In other words, could that be maybe perhaps even a small tailwind, even though of course, CapEx budgets are pressured. And then just specifically on on China, just to follow-up there. I guess to clarify just in terms of the orders this quarter, how many of those orders were, I guess, tender driven versus just underlying demand of the China orders that you put up? Thanks again. Just a note or a word on treatment volumes, we have line of sight on our tomo family of products to, online visibility relative to treatment activity. And I would tell you that, we're still, overall, we haven't seen any large drop off in treatment volumes as it relates to the installed base. I'd say it's probably 95 plus percent what it had been And I think that's an interesting indicator. I mean, again, what it says to me is, cancer is not taking vacation. Based on the coronavirus. And these patients, where they are being slowed down or starts are being slowed down They're being slowed down in cases where, radiation oncologists can make a decision, a comfortable decision that this doesn't change longer term outcomes in terms of, local control, survivability, etcetera. So I think that for the most part, we'll continue to see installed installed base devices in reasonably high degrees of utilization treating patients. I talked a little bit about in the prepared remarks, about the some of the specific protocols and workflow changes that customers have made with regards to, you know, longer, longer turnover time, if you will, of a bunker in between treatments to make sure that the appropriate disinfecting, protocols, etcetera, are being followed. But, you know, I don't see, we don't see at this point in the data that we have visibility to big, big drop offs in treatment volume. The CapEx discussion, again, is it's just It's a difficult situation to predict at this point. And we will stay close to it And when we know we'll let you know, what that looks like, your question, Anthony, on the activity in China, how much of it was tender driven and how much of it was, just orders orders that were being placed ahead of a cycle, the tendering process for the Type A licenses that we received awarded for our devices in October of last year. That tendering process is still not complete. And so there are, I would say probably the vast majority of what we took was orders orders ahead of actual completion of tendering across that activity. Okay. The next question comes from Tycho Peterson of JP Morgan. Please go ahead. Hey, thanks. Just a couple of follow ups here. I guess on the CapEx theme, Josh, are you sensing any change in priorities around CapEx? As we think about your budgets eventually starting to free up. And just delaying the APM until January, the order book in your view, then you also alluded to ABLs going up. I'm just curious if you could talk a little bit more about that dynamic. Let me start with the APM discussion. I think, again, I think prior to, prior to kind of the explosion, of the pandemic, I think that the general view Tycho was that, you know, we'd probably be on a pathway timeline wise for a July 1 rollout, January 1st, in my view, doesn't seem like it's an extraordinarily, extended timeframe. And I don't think it has an impact on order, orders and, you know, bookings going forward. I mean, if you're a facility that is moving in the direction that the APM is encouraging treatment to move in and providers to move in. And you're not really as well equipped from an SBRT or hyperfractionation capability standpoint, I think you've got technology decisions that you're going to want to make that will allow you to, protect your business model and optimize your business model under the, the new guidelines come next January. So I don't see that having a big impact on the downside. On the, on the CapEx situation from a prioritization standpoint, Again, I think it's difficult to take a brush and paint the entire market with the same outlook, because I just don't think it's realistic. I think that, if you are, an institution today that, is, where radiation oncology is already an important element of your overall, revenue and profit generation capabilities. And you are seeing equipment that at extended ages and not as efficient as it could be based on treatment speed, throughput, etcetera, I think that you would still be in a mode where you know, prioritizing upgrade of that older equipment is probably something that will, you'll want to consider. If you have, you know, a situation on the other end of it where you've got relatively recent equipment or newer equipment, and you're able to keep up with the treatment volumes that you were dealing with pre pandemic I'm not sure that there's going to be a big catalyst for, trade and trade up or technology upgrade. So again, going to look different in different locations. I think it's going to look different across the regions. But I think that, again, this is a business that, people are not going to abandon. It's probably one of the few places, inside departments inside of a hospital today that is still actually treating patients. You've got intensive care, critical care medicine. You've got in a number of locations, labor and delivery, And the other location, the other department that's alive and running is, radiotherapy, radiation oncology. So, if this is an important piece of your overall business model, I think it's going to be a priority for you to, based on your individual circumstances, to continue to think about the kinds of things that we just talked about, technology upgrade, and bringing newer equipment in. But again, it's going to look different across regions and across facilities. And on your last question, Tycho, on the age out, as we said on the prepared remarks, we do think that the age out could increase in near term, to the extent that we talked about, revenue conversion cycle, we see that lengthening in the near term for the obvious reasons, globally. And also, to the extent, so just to remind, you that the 30 month, Asia policy clocks in on 30 months from the order receipt. And to the extent that we, I would say probably 75% to 8% of orders we take today is a distribution channel outside of the United States. And, before the pandemic, we're probably looking at anywhere from 18 to 20 months, 24 months time frame for revenue conversion those regions. And, we do think that the lengthening of the revenue conversion cycle in the near term in those regions could adversely impact the trend on the age out in the near term. Having said that, I want to make it clear too that age being aged out doesn't mean the orders are automatically canceled. We do look at those opportunities to be managed out every quarter for revenue conversion opportunity. So, as we come out of this pandemic situation, again, we don't know when that is, but, we are hopeful that we can ace those back in as soon as possible. And then on pipeline, Josh, I mean, allude to KV Imaging Modernada, is that still on deck for this fall? And then also any comments on the progress with the type E product you're developing for the JV in China? Yes. The answer on the first piece is, yes, it's still on the path that we have identified and it was the, we were looking at, commercialization by the end of this calendar year. I don't know whether or not we will, whether there'll be an Astro meeting this fall or not, but I think if there is an Astro Meeting, it's likely we will introduce, that capability there. But, well, I guess we'll see what, what, where we are when we get deeper into the fall as far as timing goes on the Astro Meeting piece. And I'm sorry I missed your missed the other the other point. The Type B product you're developing is kind of curious. Yes. We are still on the timeline that we expected. I think the manufacturing facility that we we're involved in build out of, with, CIRC. It probably lost about 90 days of time maybe 100 days of time frame, when China was shut down, but they've, they've got construction continuing, restarted now continuing. And our expectation is by, probably mid July, the facility will be, up and running in terms of, not necessarily producing product. We've got essentially the, the training facility and training bunkers there. And those will start to be utilized. And, the timelines for production of Type B in Tianjin is still on that roughly, 18 month, 20 month kind of a timeline from now. From the time the plant is up and open, if you will. And then last one, just on the costs, you previously flagged $15,000,000 cost saves. Can you just give us some context on some of the incremental actions you're taking? How much how material that could be on top of the 15,000,000 groups you discussed? Yes, Tycho. So the, obviously, given the no guidance, the guidance withdrawal that we announced. I'm not any specific to the numbers, but what I can tell you that coming through, Q3 we just reported that $15,000,000 year over year savings already baked in. Okay. Thank you. Yes. At this time, I'm not showing any additional questions. This concludes our question and answer session. I would like to turn the conference back over to Mr. Josh Levine for any closing remarks. I'd like to thank everyone that, joined the call this afternoon. We look forward to speaking with you again in August. When we report, full year 2020 financial results. Thanks very much for your participation today, and everyone please stay healthy and safe. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.