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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to

Commission File Number: 001-33301

ACCURAY INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)

1310 Chesapeake Terrace

Sunnyvale, California 94089

(Address of Principal Executive Offices Including Zip Code)

(408) 716-4600

(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes  o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of "large accelerated filer," "accelerated filer,"  "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o  Yes  x  No

As of April 28, 2017, there were 83,000,966 shares of the Registrant's Common Stock, par value $0.001 per share, outstanding.

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Accuray Incorporated

Form 10-Q for the Quarter Ended March 31, 2017

Table of Contents

		Page No.
PART I.	Financial Information
Item 1.	Unaudited Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Balance Sheets as of March 31, 2017 and June 30, 2016	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended March 31, 2017 and 2016	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2017 and 2016	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
PART II.	Other Information
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35
Signatures		37

We own or have rights to various trademarks and trade names used in our business in the United States or other countries, including the following: Accuray ® , Accuray Logo ® , CyberKnife ® , Hi-Art ® , RoboCouch ® , Synchrony ® , TomoTherapy ® , Xsight ® , Accuray Precision™ Treatment Planning System, CTrue™, H™ Series, iDMS™, InCise™, Iris™, M6™ Series, OIS Connect™, PlanTouch™, QuickPlan™, TomoDirect™, TomoEdge™, TomoH™, TomoHD™, TomoHDA™, TomoHelical™, Tomo Quality Assurance™, Radixact™, StatRT™, and VoLO™. ImagingRing ®  is a registered trademark belonging to medPhoton GmbH. RayStation ®  is a registered trademark belonging to RaySearch Laboratories, AB.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Accuray Incorporated

Condensed Consolidated Balance Sheets

(in thousands, except share amounts and par value)

(Unaudited)

		March 31,			June 30,
		2017			2016
ASSETS
Current assets:
Cash and cash equivalents		$	60,170		$	119,771
Short-term investments		23,906			47,239
Restricted cash		1,154			891
Accounts receivable, net of allowance for doubtful accounts of $747 and $826 as of March 31, 2017 and June 30, 2016, respectively		87,091			56,810
Inventories		116,573			115,987
Prepaid expenses and other current assets		17,704			16,098
Deferred cost of revenue		3,725			4,884
Total current assets		310,323			361,680
Property and equipment, net		23,353			27,878
Goodwill		57,742			57,848
Intangible assets, net		1,646			7,611
Deferred cost of revenue		666			1,996
Restricted cash		13,085			1,471
Other assets		10,032			10,549
Total assets		$	416,847		$	469,033
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	23,633		$	15,229
Accrued compensation		24,224			18,725
Other accrued liabilities		18,551			22,184
Short-term debt		115,702			39,900
Customer advances		18,853			22,123
Deferred revenue		95,250			92,051
Total current liabilities		296,213			210,212
Long-term liabilities:
Long-term other liabilities		10,542			10,984
Deferred revenue		10,301			17,665
Long-term debt		54,335			170,512
Total liabilities		371,391			409,373
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $0.001 par value; authorized: 5,000,000 shares; no shares issued and outstanding		-			-
Common stock, $0.001 par value; authorized: 200,000,000 shares as of March 31, 2017 and June 30, 2016, respectively; issued and outstanding: 82,999,966 and 81,378,208 shares at March 31, 2017 and June 30, 2016, respectively		83			81
Additional paid-in-capital		492,311			481,346
Accumulated other comprehensive loss		(1,807		)	(960		)
Accumulated deficit		(445,131		)	(420,807		)
Total stockholders' equity		45,456			59,660
Total liabilities and stockholders' equity		$	416,847		$	469,033

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Accuray Incorporated

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

(Unaudited)

		Three Months Ended						Nine Months Ended
		March 31,						March 31,
		2017			2016			2017			2016
Net revenue:
Products		$	48,032		$	53,740		$	119,029		$	149,494
Services		49,280			51,544			152,291			154,333
Total net revenue		97,312			105,284			271,320			303,827
Cost of revenue:
Cost of products		29,574			29,622			75,895			85,356
Cost of services		32,313			30,718			97,269			97,058
Total cost of revenue		61,887			60,340			173,164			182,414
Gross profit		35,425			44,944			98,156			121,413
Operating expenses:
Research and development		12,484			13,270			36,657			42,497
Selling and marketing		13,025			12,516			41,247			41,009
General and administrative		11,184			13,716			32,890			39,820
Total operating expenses		36,693			39,502			110,794			123,326
Income (loss) from operations		(1,268		)	5,442			(12,638		)	(1,913		)
Other expense, net		(2,919		)	(3,963		)	(11,044		)	(14,124		)
Income (loss) before provision for income taxes		(4,187		)	1,479			(23,682		)	(16,037		)
Provision for income taxes		842			723			642			2,260
Net income (loss)		$	(5,029	)	$	756		$	(24,324	)	$	(18,297	)
Net income (loss) per share - basic		$	(0.06	)	$	0.01		$	(0.30	)	$	(0.23	)
Net income (loss) per share - diluted		$	(0.06	)	$	0.01		$	(0.30	)	$	(0.23	)
Weighted average common shares used in computing net income (loss) per share:
Basic		82,913			80,860			82,268			80,320
Diluted		82,913			82,071			82,268			80,320
Net income (loss)		$	(5,029	)	$	756		$	(24,324	)	$	(18,297	)
Foreign currency translation adjustment		435			796			(771		)	69
Unrealized loss on investments, net of tax		(6		)	149			(76		)	59
Comprehensive income (loss)		$	(4,600	)	$	1,701		$	(25,171	)	$	(18,169	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Accuray Incorporated

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

		Nine Months Ended
		March 31,
		2017			2016
Cash flows from operating activities
Net loss		$	(24,324	)	$	(18,297	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		13,848			13,644
Share-based compensation		9,985			9,446
Amortization of debt issuance costs		1,165			1,279
Amortization and accretion of discount and premium on investments		70			731
Accretion of interest on debt		2,117			5,155
(Recovery of) provision for bad debt, net		(64		)	162
Provision for write-down of inventories		1,131			1,472
Loss on disposal of property and equipment		4			11
Loss on extinguishment of debt		-			965
Changes in assets and liabilities:
Accounts receivable		(30,649		)	(10,294		)
Inventories		(2,386		)	(11,335		)
Prepaid expenses and other assets		(1,439		)	(3,993		)
Deferred cost of revenue		2,474			(1,941		)
Accounts payable		8,249			8,724
Accrued liabilities		1,578			1,289
Customer advances		(2,914		)	268
Deferred revenues		(2,907		)	13,808
Net cash (used in) provided by operating activities		(24,062		)	11,094
Cash flows from investing activities
Purchases of property and equipment, net		(3,619		)	(5,885		)
Purchases of investments		(14,992		)	(52,712		)
Sales and maturities of investments		38,179			45,695
Net cash provided by (used in) investing activities		19,568			(12,902		)
Cash flows from financing activities
Proceeds from employee stock plans		3,075			2,950
Taxes paid related to net share settlement of equity awards		(841		)	(3,045		)
Payments made to note and loan holders		(43,658		)	(65,531		)
Proceeds from debt, net of costs		-			64,632
Net cash used in financing activities		(41,424		)	(994		)
Effect of exchange rate changes on cash and cash equivalents		(1,806		)	(244		)
Net decrease in cash, cash equivalents and restricted cash		(47,724		)	(3,046		)
Cash, cash equivalents and restricted cash at beginning of period		122,133			84,709
Cash, cash equivalents and restricted cash at end of period		$	74,409		$	81,663

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Accuray Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

Description of Business

Accuray Incorporated (together with its subsidiaries, the "Company" or "Accuray") is incorporated in Delaware and has its principal place of business in Sunnyvale, California. The Company designs, develops and sells advanced radiosurgery and radiation therapy systems for the treatment of tumors throughout the body. The Company has offices in the United States, Switzerland, China, Hong Kong and Japan and conducts its business worldwide.

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the periods presented. Certain amounts in the prior year's condensed consolidated balance sheet have been reclassified to conform to the current period's presentation. These reclassifications had no impact on previously reported condensed consolidated cash flows or statements of operations. The results for the three and nine months ended March 31, 2017 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2017, or for any other future interim period or fiscal year.

These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and accompanying notes for the fiscal year ended June 30, 2016 included in the Company's Annual Report on Form 10-K filed with the SEC on August 24, 2016. The Company's significant accounting policies are described in Note 2 to those audited consolidated financial statements and there have been no subsequent material changes to such policies.

Recent Accounting Standard Update Not Yet Effective

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2017-07, Compensation-Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This guidance revises the presentation of employer-sponsored defined benefit pension and other postretirement plans for the net periodic benefit cost in the statement of operations and requires that the service cost component of net periodic benefit be presented in the same income statement line items as other employee compensation costs for services rendered during the period. The other components of the net benefit costs are required to be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations. This guidance allows only the service cost component of net periodic benefit costs to be eligible for capitalization. The guidance will be effective for the Company in the first quarter of its fiscal year 2019 and early adoption is permitted as of the beginning of an annual reporting period. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04,  Intangibles-Goodwill and Other Topics (Topic 350)-Simplifying the Test for Goodwill Impairment. This guidance eliminates the requirement to calculate the implied fair value of goodwill of a reporting unit by determining the fair value of its assets and liabilities (including unrecognized assets and liabilities) to measure a goodwill impairment charge. Instead, an entity will record an impairment charge based on the excess of the reporting unit's carrying amount over its fair value. The ASU will be effective for the Company in the first quarter of its fiscal year 2021 on a prospective basis and earlier adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments , which clarifies the presentation and classification of certain cash receipts and cash payments in the

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statement of cash flows. This ASU will be effective for the Company in the first quarter of its fiscal year 2019 and early adoption is permitted. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13 Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets held. This ASU will be effective for the Company in the first quarter of its fiscal year 2021 and must be adopted using a modified retrospective approach, with certain exceptions. Early adoption is permitted beginning in the first quarter of the Company's fiscal year 2020. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09,  Compensation-Stock Compensation (Topic 718) . The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. In addition, the guidance provides an option to recognize forfeitures as they occur versus estimating them at the time of grant. This ASU will be effective for the Company in the first quarter of its fiscal year 2018 and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02,  Leases (Topic 842) . Under the new guidance, a lessee will be required to recognize assets and liabilities for all leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as finance or operating lease. This ASU will be effective for the Company in the first quarter of its fiscal year 2020 and early adoption is permitted. The ASU requires adoption based upon a modified retrospective transition approach. Company has not yet selected a transition method, has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). ASU 2016-01 changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, it clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This ASU will be effective for the Company in the first quarter of its fiscal year 2019 and must be adopted using a modified retrospective approach, with certain exceptions. Early adoption is permitted for certain provisions. The Company has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is required to be adopted, using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures. In August 2015, the FASB approved a one year deferral of the effective period of ASU 2014-09. The standard will be effective for the Company in the first quarter of its fiscal year 2019, but early adoption is permitted starting in the first quarter of fiscal year 2018. The FASB issued supplemental adoption guidance and clarification to ASU 2014-09 in 2016 and 2017. The Company intends to adopt the new standard in the first quarter of fiscal year 2019 by recognizing the cumulative effect of the new standard as an increase to the opening balance of retained earnings. Based upon the Company's preliminary assessment, certain portions of its product revenue will be accelerated to reflect consideration upon delivery and an element of installation will be deferred until performed. Revenue policies for indirect sales and service revenues are expected to be unchanged under the new guidance. The Company also expects to capitalize incremental contract acquisition costs, such as sales commissions, and amortize over the economic life of its product or contractual relationship with the customer. The Company's current practice is to defer sales comissions until revenue is recognized. The Company currently does not expect the application of this guidance to have a significant impact on its consolidated financial statements; however, the Company's assessment may change as it continues its evaluation and analysis of this ASU.

Accounting Standard Update Recently Adopted

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash , which provides amendments to current guidance to address the classification and presentation of changes in restricted cash in the statement

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of cash flows. The Company early adopted this ASU and retrospectively applied the change to the statement of cash flows for the nine months ended March 31, 2016. The Company disclosed its restricted cash on its condensed consolidated balance sheets for the years presented. The adoption of this standard did not have a significant impact on the Company's condensed consolidated financial statements and related disclosures.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures at the date of the financial statements. Key estimates and assumptions made by the Company relate to revenue recognition, assessment of recoverability of goodwill and intangible assets, valuation of inventories, share-based compensation expense, income taxes, allowance for doubtful accounts, loss contingencies and corporate bonus expenses. Actual results could differ materially from those estimates.

Concentration of Credit and Other Risks

The Company's cash, cash equivalents and investments are deposited with several major financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. The Company has not experienced any losses in such accounts and does not believe that it is exposed to any significant risk of loss on these balances.

For the three months ended March 31, 2017 and 2016, there was one customer that represented 13% of total net revenue and no customers that represented 10% or more of total net revenue, respectively. For the nine months ended March 31, 2017 and 2016, there were no customers that represented more than 10% of total net revenue, respectively. One customer accounted for 25% and 18% of the Company's total accounts receivable as of March 31, 2017 and June 30, 2016, respectively.

Accounts receivable are typically not collateralized. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. Accounts receivable are deemed past due in accordance with the contractual terms of the agreement pursuant to which the receivables are generated. Accounts receivable balances are charged against the allowance for doubtful accounts once collection efforts are unsuccessful.

Single source suppliers presently provide the Company with several components. In most cases, if a supplier was unable to deliver these components, the Company believes that it would be able to find other sources at comparable prices for these components subject to any regulatory qualifications, if required.

Revenue Recognition

The Company earns revenue from the sale of products and related services. The Company records revenues net of any value added or sales tax. For arrangements with multiple elements, the Company allocates arrangement fees to products and services based upon Vendor Specific Objective Evidence (VSOE) of fair value of the respective elements, Third-Party Evidence (TPE), or Best Estimate of Selling Price (BESP), using the relative selling price method.

Product and Service Revenue

The majority of product revenue is generated from sales of CyberKnife and TomoTherapy Systems. If the Company is responsible for installation, the Company recognizes revenue after installation and acceptance of the system. Otherwise, revenue is recognized upon delivery, assuming all other revenue recognition criteria are met.

The Company offers systems with post-contract customer support (PCS), installation services, training and professional services. PCS includes planned and corrective maintenance services, software updates, bug fixes, as well as call-center support. Service revenue is generated primarily from PCS (warranty period services and post warranty services), installation services, training, parts and upgrades that are sold under service contracts and professional services. PCS revenue is deferred and recognized over the service period. Installation service revenue is recognized concurrently with system revenue. Training and professional service revenues that are not deemed essential to the functionality of the systems are recognized as such services are performed.

Costs associated with service revenue are expensed when incurred, except when those costs are related to parts or system upgrades where revenue recognition has been deferred. In those cases, the costs are deferred and recognized over the period of revenue recognition.

Net Income (Loss) Per Common Share

Basic and diluted net income (loss) per share is computed by dividing net income (loss) attributable to stockholders by the weighted average number of common shares outstanding during the period.

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A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income (loss) per common share follows (in thousands):

		Three Months Ended						Nine Months Ended
		March 31,						March 31,
		2017			2016			2017			2016
Numerator:
Net income (loss) used to compute basic and diluted net income (loss) per share		$	(5,029	)	$	756		$	(24,324	)	$	(18,297	)
Denominator:
Weighted average shares used to compute basic net income (loss) per share		82,913			80,860			82,268			80,320
Weighted average effect of dilutive stock options		-			101			-			-
Weighted average effect of dilutive RSUs, PSUs and MSUs		-			610			-			-
Weighted average effect of 3.50% Series A convertible notes		-			500			-			-
Weighted average shares used to compute diluted net income (loss) per share		82,913			82,071			82,268			80,320

The potentially dilutive shares of the Company's common stock resulting from the assumed exercise of outstanding stock options, the vesting of Restricted Stock Units (RSU), Market Stock Units (MSU) and Performance Stock Units (PSU), and the purchase of shares under the Employee Stock Purchase Program (ESPP), as determined under the treasury stock method, are excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive. Additionally, the 3.75% Convertible Senior Notes (the "3.75% Convertible Notes"), the 3.50% Convertible Senior Notes due February 1, 2018 (the "3.50% Convertible Notes"), the 3.50% Series A Convertible Notes (the "3.50% Series A Convertible Notes") due February 1, 2018 (together, the "Convertible Notes") are included in the calculation of diluted net income per share only if their inclusion is dilutive. For the three months ended March 31, 2016, the potentially dilutive shares issuable upon the conversion of the 3.50% Series A Convertible Notes were included in the calculation of the diluted net income per share, while the dilutive shares issuable upon the conversion of the 3.50% Convertible Notes were excluded from the calculation of diluted net income per share as their inclusion would have been anti-dilutive.

The following table sets forth all potentially dilutive securities excluded from the computation in the table above because their effect would have been anti-dilutive (in thousands):

		As of March 31,
		2017		2016
Stock options		2,510		1,981
RSUs, PSUs and MSUs		5,492		3,558
3.50% Convertible Notes		8,378		8,378
3.50% Series A Convertible Notes		-		-
		16,380		13,917

Outstanding Convertible Notes-Diluted Share Impact

The 3.50% Series A Convertible Notes have an optional physical (share), cash or combination settlement feature and contain certain conditional conversion features. Due to the optional cash settlement feature and management's intent to settle the principal amount thereof in cash, the conversion shares underlying the outstanding principal amount of the 3.50% Series A Convertible Notes, totaling approximately 13.2 million shares were not included in the potentially diluted share count table above. The zero potentially dilutive shares of the 3.50% Series A Convertible Notes as of March 31, 2017, included in the table above are the result of the lower average share price, which was below the conversion price and management's intent to settle the principal amount thereof in cash. The number of premium shares included in the Company's diluted share count will vary with fluctuations in the Company's share price. Higher actual share prices result in a greater number of premium shares.

The 3.75% Convertible Notes were fully settled in cash during January and August of 2016 as further discussed in Note 8. As of March 31, 2016, approximately 10.6 million shares related to the 3.75% Convertible Notes were excluded from the potentially dilutive share count table above due to the optional cash settlement feature and management's intent to settle the principal amount thereof in cash. In addition, there were no premium shares associated with the 3.75% Convertible Notes as the Company's average share price did not exceed the conversion price as of March 31, 2016.

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Segment Information

The Company has one operating and reporting segment (oncology systems group), which develops, manufactures and markets proprietary medical devices used in radiation therapy and radiosurgery for the treatment of cancer patients. The Company's Chief Executive Officer, its Chief Operating Decision Maker, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The Company does not assess the performance of its individual product lines on measures of profit or loss, or asset based metrics. Therefore, the information below is presented only for revenues and long-lived tangible assets by geographic areas. Revenue by geographic region is based on the shipping addresses of the Company's customers. The following summarizes revenue by geographic region (in thousands):

		Three Months Ended						Nine Months Ended
		March 31,						March 31,
		2017			2016			2017			2016
Americas		$	38,720		$	32,667		$	118,545		$	128,957
Europe, Middle East, India and Africa		21,785			43,643			68,705			102,461
Asia-Pacific		13,520			16,505			35,092			49,226
Japan		23,287			12,469			48,978			23,183
Total		$	97,312		$	105,284		$	271,320		$	303,827

Information regarding geographic areas in which the Company has long lived tangible assets is as follows (in thousands):

		March 31,			June 30,
		2017			2016
Americas		$	19,182		$	23,842
Europe, Middle East, India and Africa		706			551
Asia-Pacific		1,653			1,342
Japan		1,812			2,143
Total		$	23,353		$	27,878

2. Balance Sheet Components

Financing receivables

A financing receivable is a contractual right to receive money, on demand or on fixed or determinable dates, that is recognized as an asset in the Company's balance sheet. The Company's financing receivables, consisting of its accounts receivable with contractual maturities of more than one year and capital leases, totaled $5.5 million and $7.6 million at March 31, 2017 and June 30, 2016, respectively, and are included in Other Assets in the condensed consolidated balance sheets. Of the $5.5 million in financing receivables at March 31, 2017, $3.0 million is related to sales-type leases with customers while the remaining $2.5 million is related to contractual maturities of more than one year. Of the $7.6 million in financing receivables at June 30, 2016, $3.5 million is related to sales-type leases with customers while the remaining $4.1 million is related to contractual maturities of more than one year. Due to the homogenous nature of the leasing transactions, the Company manages them on an aggregate basis when assessing and monitoring credit risk. The Company evaluates the credit quality of an obligor at lease inception and monitors credit quality over the term of the underlying transactions. The Company performs a credit analysis for all new customers and reviews payment history, current order backlog, financial performance of the customers and other variables that augment or mitigate the inherent credit risk of a particular transaction. Such variables include the underlying value and liquidity of the collateral, the essential use of the equipment, the term of the lease and the inclusion of credit enhancements, such as guarantees, letters of credit or security deposits. The Company classifies accounts as high risk when it considers the financing receivable to be impaired or when management believes there is a significant near-term risk of non-payments. As of March 31, 2017, the sales-type lease portion of the financing receivables was rated at a moderate risk. The Company performed an assessment of the allowance for credit losses related to its financing receivables as of March 31, 2017 and June 30, 2016. Based upon such assessment, the Company did not record an allowance for credit losses related to such financing receivables as of March 31, 2017 and June 30, 2016, respectively.

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A summary of the Company's financing receivables is presented as follows (in thousands):

					Financed
		Lease			Service Contracts
March 31, 2017		Receivables			and Other			Total
Gross		$	4,185		$	4,288		$	8,473
Residual value		-			-			-
Unearned income		(465		)	-			(465		)
Allowance for credit loss		-			-			-
Total, net		$	3,720		$	4,288		$	8,008
Reported as:
Current		$	753		$	1,793		$	2,546
Non-current		2,967			2,495			5,462
Total, net		$	3,720		$	4,288		$	8,008

					Financed
		Lease			Service Contracts
June 30, 2016		Receivables			and Other			Total
Gross		$	4,998		$	5,840		$	10,838
Residual value		-			-			-
Unearned income		(623		)	-			(623		)
Allowance for credit loss		-			-			-
Total, net		$	4,375		$	5,840		$	10,215
Reported as:
Current		$	840		$	1,778		$	2,618
Non-current		3,535			4,062			7,597
Total, net		$	4,375		$	5,840		$	10,215

Actual cash collections may differ from the contracted maturities due to early customer buyouts, refinancing, or defaults. Future minimum lease payments to be received as of March 31, 2017 are presented as follows (in thousands):

Year Ending June 30,		Amount
2017 (remaining 3 months)		$	155
2018		930
2019		930
2020		930
2021		930
2022		310
Total		$	4,185

Inventories

Inventories consisted of the following (in thousands):

		March 31,			June 30,
		2017			2016
Raw materials		$	45,815		$	50,480
Work-in-process		17,477			20,190
Finished goods		53,281			45,317
Inventories		$	116,573		$	115,987

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Property and equipment, net

Property and equipment, net consisted of the following (in thousands):

		March 31,			June 30,
		2017			2016
Furniture and fixtures		$	4,511		$	4,527
Computer and office equipment		11,852			11,485
Software		11,362			11,104
Leasehold improvements		23,030			21,632
Machinery and equipment		50,120			47,171
Construction in progress		2,071			4,412
		102,946			100,331
Less: Accumulated depreciation		(79,593		)	(72,453		)
Property and equipment, net		$	23,353		$	27,878

Depreciation expense related to property and equipment for the three and nine months ended March 31, 2017 was $2.6 million and $7.9 million, respectively. Depreciation expense related to property and equipment for the three and nine months ended March 31, 2016 was $2.6 million and $7.7 million, respectively.

3. Goodwill and Intangible Assets

Goodwill

Activity related to goodwill consisted of the following (in thousands):

		Nine Months			Year
		Ended			Ended
		March 31,			June 30,
		2017			2016
Balance at the beginning of the period		$	57,848		$	58,054
Currency translation		(106		)	(206		)
Balance at the end of the period		$	57,742		$	57,848

In the second quarter of fiscal 2017, the Company performed its annual goodwill impairment test. Based on this analysis, the Company determined that there was no impairment to goodwill. The Company will continue to monitor its recorded goodwill for indicators of impairment.

Intangible Assets

The Company's unamortized intangible assets associated with completed acquisitions at March 31, 2017 and June 30, 2016 are as follows (in thousands):

				March 31, 2017									June 30, 2016
				Gross									Gross
				Carrying			Accumulated			Net			Carrying			Accumulated			Net
		Useful Lives		Amount			Amortization			Amount			Amount			Amortization			Amount
		(in years)
Developed technology		5 - 6		$	46,743		$	(45,097	)	$	1,646		$	46,743		$	(39,132	)	$	7,611

The Company did not identify any triggering events that would indicate potential impairment of its definite-lived intangible and long-lived assets as of March 31, 2017 and June 30, 2016.

Amortization expense related to intangible assets for the three and nine months ended March 31, 2017 was $2.0 million and $6.0 million, respectively. Amortization expense related to intangible assets for the three and nine months ended March 31, 2016 was $2.0 million and $6.0 million, respectively.

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The estimated future amortization expense of purchased intangible assets as of March 31, 2017 is as follows (in thousands):

Year Ending June 30,		Amount
2017 (remaining 3 months)		$	1,646

4. Foreign Exchange Instruments

The Company utilizes foreign currency forward contracts with well-known financial institutions to manage its exposure to fluctuations in foreign currency exchange rates on certain intercompany balances and foreign currency denominated cash and customer receivables. The Company does not use derivative financial instruments for speculative or trading purposes. These forward contracts are not designated as hedging instruments for accounting purposes. Principal hedged currencies include the Euro, Japanese Yen, Swiss Franc, and U.S. Dollar. The periods of these forward contracts range up to approximately three months and the notional amounts are intended to be consistent with changes in the underlying exposures. The Company intends to exchange foreign currencies for U.S. Dollars at maturity. There were no outstanding foreign currency forward contracts at the end of March 31, 2017 and June 30, 2016.

The following table shows the net effect of foreign currency expenses and forward contracts not designated as hedging instruments and foreign currency transactions gains and losses, which were included in "Other expense, net" on the condensed consolidated statements of operations in three and nine months ended March 31, 2017 and 2016 is as follows (in thousands):

		Three Months Ended						Nine Months Ended
		March 31,						March 31,
		2017			2016			2017			2016
Foreign currency exchange gain (loss) on foreign contracts		$	225		$	117		$	(942	)	$	(2,186	)
Foreign currency transactions gain (loss)		(44		)	(116		)	40			316

5. Financial Instruments

The Company considers all highly liquid investments held at major banks, certificates of deposit and other securities with original maturities of three months or less to be cash equivalents.

The Company classifies all of its investments as available-for-sale at the time of purchase because management intends that these investments are available for current operations and includes these investments on its balance sheet as short-term investments. Investments with original maturities longer than three months include commercial paper, U.S. agency securities, non-U.S. government securities and investment-grade corporate debt securities. Investments classified as available-for-sale are recorded at fair market value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders' equity. Realized gains and losses are recorded based on specific identification of each security's cost basis.

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels of inputs that may be used to measure fair value, as follows:

Level 1- Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

Level 2- Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

· Quoted prices for similar assets or liabilities in active markets;

· Quoted prices for identical or similar assets in non-active markets;

· Inputs other than quoted prices that are observable for the asset or liability; and

· Inputs that are derived principally from or corroborated by other observable market data.

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Level 3- Unobservable inputs that cannot be corroborated by observable market data and require the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

The following tables summarize the amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category for cash, cash equivalents and short-term investments (in thousands):

		March 31, 2017
											Estimated Fair Value
					Gross			Gross			Cash and
		Amortized			Unrealized			Unrealized			Cash			Short-term
		Cost			Gains			Losses			Equivalents			Investments
Cash		$	58,669		$	-		$	-		$	58,669		$	-
Level 1
Money market funds		1,501			-			-			1,501			-
Level 2
U.S. government agency securities		23,997			-			(91		)	-			23,906
Total		$	84,167		$	-		$	(91	)	$	60,170		$	23,906

		June 30, 2016
											Estimated Fair Value
					Gross			Gross			Cash and
		Amortized			Unrealized			Unrealized			Cash			Short-term
		Cost			Gains			Losses			Equivalents			Investments
Cash		$	95,906		$	-		$	-		$	95,906		$	-
Level 1
Money market funds		13,362			-			-			13,362			-
		13,362			-			-			13,362			-
Level 2
Commercial paper		14,704			-			-			8,938			5,766
U.S. government agency securities		28,000			7			(17		)	-			27,990
U. S. treasury securities		3,997			1			-			-			3,998
Municipal debt securities		1,565			-			-			1,565			-
Corporate debt securities		9,491			-			(6		)	-			9,485
		57,757			8			(23		)	10,503			47,239
Total		$	167,025		$	8		$	(23	)	$	119,771		$	47,239

Certain investments in the table above are classified as having Level 2 inputs because quoted prices in an active market are not readily accessible for those specific financial assets, or the Company may have relied on alternative pricing methods that do not rely exclusively on quoted prices to determine the fair value of the investments.

The Company had investments that were in an unrealized loss position as of March 31, 2017. The Company determined that (i) it does not have the intent to sell any of these investments and (ii) it is not likely that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company reviews its investments quarterly to identify and evaluate investments that have an indication of possible impairment. As of March 31, 2017, the Company anticipates that it will recover the entire carrying value of such investments and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three and nine months ended March 31, 2017.

2

Contractual maturities of available-for-sale securities at March 31, 2017 were as follows (in thousands):

		March 31, 2017
		Amortized			Estimated
		Cost			Fair Value
Due in 1 year or less		$	9,000		$	8,983
Due in 1-2 years		14,997			14,923
		$	23,997		$	23,906

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The following table summarizes the available-for-sale debt securities that were in a continuous unrealized loss position, but were not deemed to be other-than-temporarily impaired (in thousands):

		Less Than 12 Months						12 Months or Greater						Total
		Gross						Gross						Gross
		Unrealized			Estimated			Unrealized			Estimated			Unrealized			Estimated
		Losses			Fair Value			Losses			Fair Value			Losses			Fair Value
March 31, 2017
Debt Securities:
U. S. government agency securities		$	(86	)	$	20,912		$	(5	)	$	2,994		$	(91	)	$	23,906
Total		$	(86	)	$	20,912		$	(5	)	$	2,994		$	(91	)	$	23,906
June 30, 2016
Debt Securities:
Corporate debt securities		$	(3	)	$	6,325		$	(3	)	$	3,160		$	(6	)	$	9,485
U. S. government agency securities		-			-			(17		)	19,988			(17		)	19,988
Total		$	(3	)	$	6,325		$	(20	)	$	23,148		$	(23	)	$	29,473

The Company held a total of 8 positions as of March 31, 2017 and 11 positions as of June 30, 2016 that were in an unrealized loss position. Based on the Company's review of these securities, the Company believes it had no other-than-temporary impairments on these securities as of March 31, 2017 and June 30, 2016 because it does not intend to sell these securities and believes it is not more likely than not that it will be required to sell these securities before the recovery of their amortized cost basis. Gross realized gains and gross realized losses were insignificant for the three and nine months ended March 31, 2017 and the year ended June 30, 2016.

6. Commitments and Contingencies

Operating Lease Agreements

The Company leases office and manufacturing space under non-cancelable operating leases with various expiration dates through December 2025. In October 2016, the Company signed a lease extension on its Madison, Wisconsin facility through 2025, which would have expired in 2018. Accordingly, the Company's lease obligations increased from $39.9 million as of June 30, 2016 to $48.3 million as of March 31, 2017.

Future minimum lease payments under non-cancelable operating lease agreements as of March 31, 2017 are as follows (in thousands):

		Operating
Year Ending June 30,		Leases
2017 (remaining 3 months)		$	2,144
2018		8,612
2019		6,596
2020		6,278
2021		5,931
Thereafter		18,694
Total		$	48,255

The Company's contractual obligations were presented in the Annual Report on Form 10-K for the previous annual reporting period ended June 30, 2016. As discussed in Note 8, in August 2016, the Company settled the remaining approximately $36.6 million in aggregate principal amount of the 3.75% Convertible Senior Notes and accrued interest for $37.3 million in cash. In November 2016, the Company repaid $5.0 million of its Secured Loan. Except for the change in lease obligations presented in the above table and a reduction of the Company's Notes and Secured Loan, there has been no significant change outside of the ordinary course of business in those obligations during the three and nine months ended March 31, 2017.

Litigation

From time to time, the Company is involved in legal proceedings arising in the ordinary course of its business. The Company records a provision for a loss when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Currently, management believes the Company does not have any probable and reasonably estimable losses related to any current legal proceedings and claims. Although occasional adverse decisions or settlements may occur, management does not believe

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that an adverse determination with respect to any of these claims would individually or in the aggregate materially and adversely affect the Company's financial condition or operating results. Litigation is inherently unpredictable and is subject to significant uncertainties, some of which are beyond the Company's control. Should any of these estimates and assumptions change or prove to have been incorrect, the Company could incur significant charges related to legal matters that could have a material impact on its results of operations, financial position and cash flows.

Software License Indemnity

Under the terms of the Company's software license agreements with its customers, the Company agrees that in the event the software sold infringes upon any patent, copyright, trademark, or any other proprietary right of a third-party, it will indemnify its customer licensees against any loss, expense, or liability from any damages that may be awarded against its customer. The Company includes this infringement indemnification in all of its software license agreements and selected managed services arrangements. In the event the customer cannot use the software or service due to infringement and the Company cannot obtain the right to use, replace or modify the license or service in a commercially feasible manner so that it no longer infringes, then the Company may terminate the license and provide the customer a refund of the fees paid by the customer for the infringing license or service. The Company has not recorded any liability associated with this indemnification, as it is not aware of any pending or threatened actions that represent probable losses as of March 31, 2017.

7. Share-Based Compensation

The following table summarizes the share-based compensation charges included in the Company's condensed consolidated statements of operations and comprehensive loss (in thousands):

		Three Months Ended						Nine Months Ended
		March 31,						March 31,
		2017			2016			2017			2016
Cost of revenue		$	519		$	448		$	1,461		$	1,270
Research and development		644			717			1,808			1,888
Selling and marketing		769			714			2,077			2,116
General and administrative		1,666			1,688			4,639			4,172
		$	3,598		$	3,567		$	9,985		$	9,446

8. Debt

First Lien Senior Secured Term Loan due January 2021 (Secured Loan)

In January 2016, the Company closed a $70.0 million first lien senior secured debt financing agreement (as amended, the "Secured Loan") with Cerberus Business Finance, LLC, as collateral and administrative agent. As required by the terms of the financing, upon the closing of the financing , the Company used a portion of the net proceeds from the financing to repurchase approximately $63.4 million in aggregate principal amount of the 3.75% Convertible Senior Notes.

The Secured Loan is repayable in consecutive quarterly installments of $875,000 with the final payment due on the maturity date. The Secured Loan matures on the earlier of: (i) January 11, 2021 and (ii) the date that is 120 days prior to the scheduled maturity date of the 3.5% Convertible Senior Notes maturing February 1, 2018 unless the Company has set aside specifically identifiable funds raised from new common equity or new debt equal to the then-outstanding principal amount of the 3.5% Convertible Senior Notes. The Company may, at its election, repay the Secured Loan at any time and if so, the Company will be required to pay a prepayment premium of 2% of the outstanding amount if the Secured Loan is repaid or accelerated within the first year and 1% of the outstanding amount if the Secured Loan is repaid or accelerated within the second year. The Secured Loan is secured by first-priority liens on substantially all the assets of the Company.

Interest under the Secured Loan is payable monthly at a variable rate per annum equal to, at the Company's option, (i) the LIBOR Rate for one month plus an applicable margin of 7.00% (subject to a LIBOR Rate floor of 1.00% per annum), or (ii) a Reference Rate, which is the higher of 1) 3.25%, 2) Federal Funds Rate plus 0.5%, 3) the LIBOR rate for 1 month plus 1%, and 4) the US Prime Rate as published in the Wall Street Journal, plus an applicable margin of 4.75% per annum. As part of the amendment in March 2017, discussed further below, the applicable margins for the LIBOR and Reference Rate increased to 7.50% and 5.25%, respectively, and these margins will remain in effect until certain specified conditions are met.

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Under the terms of this Secured Loan, the Company must comply with certain customary financial and non-financial covenants, including covenants for secured leverage, total leverage, fixed charges, EBITDA, capital expenditures and other covenants as defined in the agreement. The Company was in compliance with the required covenants as of March 31, 2017, and June 30, 2016.

In November 2016, Company and Cerberus amended the Secured Loan, which modified the compliance levels of certain financial covenants and specified that the Company pay a fee of $0.3 million. In conjunction with the amendment, the Company repaid $5.0 million of the outstanding principal amount. In March 2017, the Secured Loan was further amended, which (i) modified the compliance levels and definitions of certain financial covenants (ii) increased the applicable interest rate margins under the Secured Loan by 0.50% until certain specified conditions are met, (iii) required the Company to obtain a letter of credit in the amount of $12.5 million for the benefit of the administrative agent, which is drawable and will be applied to any outstanding principal balance upon the occurrence or nonoccurrence of certain conditions and events and (iv) specified that the Company pay a fee of $0.3 million.

The net proceeds from the offering, after deducting the initial purchaser's discount and commission and the related offering costs, were approximately $65.5 million. The offering costs of $3.1 million and the initial purchaser's discount and commission of $1.4 million are classified within long-term debt on the condensed consolidated balance sheets and are being amortized to interest expense using the effective interest method over five years. The funds associated with the $12.5 million letter of credit were reclassified from cash and cash equivalents to long-term restricted cash on the condensed consolidated balance sheet at the time of the amendment in March 2017.

3.75% Convertible Senior Notes due August 2016

In August 2011, the Company issued the 3.75% Convertible Senior Notes to certain qualified institutional buyers, or QIBs. The 3.75% Convertible Senior Notes were offered and sold to the QIBs pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), or Rule 144A. The net proceeds from the $100 million offering, after deducting the initial purchaser's discount and commission and the related offering costs, were approximately $96.1 million. The offering costs and the initial purchaser's discount and commission were amortized to interest expense using the effective interest method over five years. The 3.75% Convertible Senior Notes bore interest at a rate of 3.75% per year, payable semi-annually in arrears in cash on February 1 and August 1 of each year, beginning on February 1, 2012. The 3.75% Convertible Senior Notes matured on August 1, 2016. A portion of these notes were redeemed in January 2016, and the remainder of these notes was redeemed on August 1, 2016, as discussed further below.

The 3.75% Convertible Senior Notes were issued under an Indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. Holders of the 3.75% Convertible Senior Notes may convert their 3.75% Convertible Senior Notes at any time on or after May 1, 2016 until the close of business on the business day immediately preceding the maturity date. Prior to May 1, 2016, holders of the 3.75% Convertible Senior Notes could convert their 3.75% Convertible Senior Notes only under the following circumstances: (1) during any calendar quarter after the calendar quarter ending September 30, 2011, and only during such calendar quarter, if the closing sale price of the Company's common stock for each of 20 or more trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price in effect on the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading-day period (such five consecutive trading-day period, the "Note Measurement Period") in which the trading price per $1,000 principal amount of 3.75% Convertible Senior Notes for each trading day of that Note Measurement Period was equal to or less than 98% of the product of the closing sale price of shares of the Company's common stock and the applicable conversion rate for such trading day; (3) if the Company calls any or all of the 3.75% Convertible Senior Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate transactions as described in the Indenture. Upon conversion by holders of the 3.75% Convertible Senior Notes, the Company will have the right to pay or deliver, as the case may be, cash, shares of common stock of the Company or a combination thereof, at the Company's election. At any time on or prior to the 33rd business day immediately preceding the maturity date, the Company may irrevocably elect to (a) deliver solely shares of common stock of the Company in respect of the Company's conversion obligation or (b) pay cash up to the aggregate principal amount of the 3.75% Convertible Senior Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock of the Company or a combination thereof in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the 3.75% Convertible Senior Notes being converted. The initial conversion rate was 105.5548 shares of the Company's common stock per $1,000 principal amount of 3.75% Convertible Senior Notes (which represents an initial conversion price of approximately $9.47 per share of the Company's common stock).

In accordance with ASC 470-20, Debt with Conversion and Other Options , the Company separately accounts for the liability and equity conversion components of the 3.75% Convertible Senior Notes. The principal amount of the liability component of the 3.75% Convertible Senior Notes was $75.9 million as of the date of issuance based on the present value of its cash flows using a discount rate of 10%, our approximate borrowing rate at the date of the issuance for a similar debt instrument without the conversion

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feature. The carrying value of the equity conversion component was $24.1 million. A portion of the initial purchaser's discount and commission and the offering costs totaling $0.9 million was allocated to the equity conversion component. The liability component is being accreted to the principal amount of the 3.75% Convertible Senior Notes using the effective interest method over five years.

In January 2016, the Company repurchased approximately $63.4 million in aggregate principal amount of the 3.75% Convertible Senior Notes for $66.6 million in cash. In August 2016, the Company settled the remaining 3.75% Convertible Senior Notes for approximately $36.6 million aggregate principal amount and $0.7 million accrued interest for approximately $37.3 million in cash.

3.50% Convertible Senior Notes due February 2018

In February 2013, the Company issued $115.0 million aggregate principal amount of its 3.50% Convertible Senior Notes to certain Qualified Institutional Buyers or QIBs. The 3.50% Convertible Senior Notes were offered and sold to the QIBs pursuant to Rule 144A. The net proceeds from the offering, after deducting the initial purchaser's discount and commission and the related offering costs, were approximately $110.5 million. The offering costs and the initial purchaser's discount and commission are both being amortized to interest expense using the effective interest method over five years. The 3.50% Convertible Senior Notes bear interest at a rate of 3.50% per year, payable semi-annually in arrears in cash on February 1 and August 1 of each year, which began on August 1, 2013. The 3.50% Convertible Senior Notes will mature on February 1, 2018, unless earlier repurchased, redeemed or converted.

In April 2014, through a series of transactions, the Company refinanced approximately $70.3 million aggregate principal amount of the 3.50% Convertible Senior Notes with approximately $70.3 million aggregate principal amount of the Company's new 3.50% Series A Convertible Senior Notes due 2018 (the "3.50% Series A Convertible Notes").

The 3.50% Convertible Notes were issued under an Indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. Holders of the 3.50% Convertible Notes may convert their 3.50% Convertible Notes at any time until the close of business on the business day immediately preceding the maturity date. The 3.50% Convertible Notes are convertible, as described below into common stock of the Company at an initial conversion rate equal to 187.6877 shares of common stock per $1,000 principal amount of the 3.50% Convertible Notes, which is equivalent to a conversion price of approximately $5.33 per share of common stock, subject to adjustment.

Holders of the 3.50% Convertible Notes who convert their 3.50% Convertible Notes in connection with a "make-whole fundamental change", as defined in the Indenture, may be entitled to a make-whole premium in the form of an increase in the conversion rate. Additionally, in the event of a "fundamental change," as defined in the Indenture, holders of the 3.50% Convertible Notes may require the Company to purchase all or a portion of their 3.50% Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of 3.50% Convertible Notes, plus accrued and unpaid interest, if any, to, but not including, the fundamental change repurchase date.

In accordance with guidance in ASC 470-20, Debt with Conversion and Other Options and ASC 815-15, Embedded Derivatives , the Company determined that the embedded conversion components of the 3.50% Convertible Note do not require bifurcation and separate accounting. The remaining $44.7 million principal amount of the 3.50% Convertible Note has been recorded in short-term Debt on the condensed consolidated balance sheet as of March 31, 2017.

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3.50% Series A Convertible Senior Notes due February 2018

In April 2014, the Company entered into note exchange agreements with certain holders (the "Participating Holders") of the 3.50% Convertible Notes to refinance approximately $70.3 million aggregate principal amount of the 3.50% Convertible Notes with approximately $70.3 million aggregate principal amount of the 3.50% Series A Convertible Notes. Pursuant to the note exchange agreements, the Company also paid the Participating Holders an aggregate of approximately $0.4 million in cash in connection with such transactions. The principal amount of 3.50% Convertible Notes refinanced for each $1,000 principal amount of the 3.50% Series A Convertible Notes was $1,000 and the amount in cash paid per $1,000 principal amount of such 3.50% Convertible Notes delivered was determined in individual negotiations between the Company and each Participating Holder. The 3.50% Series A Convertible Notes have the same interest rate, maturity and other terms as the 3.50% Convertible Notes, except that the 3.50% Series A Convertible Notes are convertible into cash, shares of the Company's common stock or a combination of cash and shares of common stock, at the Company's option.

The 3.50% Series A Convertible Notes were issued under an Indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. Holders of the 3.50% Series A Convertible Notes may convert their Securities at any time on or after November 1, 2017 until the close of business on the business day immediately preceding the maturity date. Prior to November 1, 2017, holders of the 3.50% Series A Convertible Notes may convert their securities only under the following circumstances: (1) during any calendar quarter after the calendar quarter ending September 30, 2014, and only during such calendar quarter, if the closing sale price of the Company's common stock for each of 20 or more trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price in effect on the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading-day period (such five consecutive trading-day period, the "Note Measurement Period") in which the trading price per $1,000 principal amount of 3.50% Series A Convertible Notes for each trading day of that Note Measurement Period was equal to or less than 98% of the product of the closing sale price of shares of the Company's common stock and the applicable conversion rate for such trading day; or (3) upon the occurrence of specified corporate transactions as described in the Indenture. Upon conversion by holders of the 3.50% Series A Convertible Notes, the Company will have the right to pay or deliver, as the case may be, cash, shares of common stock of the Company or a combination thereof, at the Company's election. At any time on or prior to the 17th business day immediately preceding the maturity date, the Company may irrevocably elect to (a) deliver solely shares of common stock of the Company in respect of the Company's conversion obligation or (b) pay cash up to the aggregate principal amount of the 3.50% Series A Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock of the Company or a combination thereof in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the 3.50% Series A Convertible Notes being converted. The initial conversion rate is 187.6877 shares of the Company's common stock per $1,000 principal amount of 3.50% Series A Convertible Notes (which represents an initial conversion price of approximately $5.33 per share of the Company's common stock). The conversion rate, and thus the conversion price, is subject to adjustment as further described below.

Holders of the 3.50% Series A Convertible Notes who convert their notes in connection with a "make-whole fundamental change", as defined in the Indenture, may be entitled to a make-whole premium in the form of an increase in the conversion rate. Additionally, in the event of a "fundamental change," as defined in the Indenture, holders of the 3.50% Series A Convertible Notes may require the Company to purchase all or a portion of their 3.50% Series A Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 3.50% Series A Convertible Notes, plus accrued and unpaid interest, if any, to, but not including, the fundamental change repurchase date.

In accordance with Accounting Standards Codification, or ASC 470-20, Debt with Conversion and Other Options , the Company separately accounts for the liability and equity conversion components of the 3.50% Series A Convertible Notes. The principal amount of the liability component of the 3.50% Series A Convertible Notes was $62.5 million as of the date of issuance based on the present value of its cash flows using a discount rate of 7%, our approximate borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity conversion component was $7.9 million. In addition, the portion of the cash amount paid to the Participating Holders totaling $0.4 million was allocated to the debt discount with the remaining $47,000 to the equity component. The liability component is being accreted to the principal amount of the 3.50% Series A Convertible Notes using the effective interest method through the maturity in February 2018.

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The following table presents the carrying values of all Convertible Notes and notes issued pursuant to the Secured Loan (collectively, "Notes") as of March 31, 2017 (in thousands):

					3.50%			3.50%
		Secured			Convertible			Series A
		Loan			Notes			Convertible Notes			Total
Principal amount of the Notes		$	61,500		$	44,654		$	70,346		$	176,500
Unamortized debt costs		(2,322		)	(784		)	-			(3,106		)
Unamortized debt discount		(1,343		)	-			(2,014		)	(3,357		)
Net carrying amount		$	57,835		$	43,870		$	68,332		$	170,037

The net carrying amount of the equity conversion component related to the 3.5% Series A Convertible Note was approximately $7.8 million at March 31, 2017.

The fair value of the Company's 3.50% Convertible Notes was $48.8 million and $51.5 million at March 31, 2017 and June 30, 2016, respectively. The fair value of the Company's 3.50% Series A Convertible Notes was $76.9 million and $81.1 million at March 31, 2017 and June 30, 2016, respectively. These borrowings are valued based on the closing trading price per $100 of the Convertible Notes as of the last day of trading for the period and are classified as Level 2 within the fair value hierarchy.

The carrying value of the Company's Secured Loan approximates its estimated fair value as these borrowings have a variable rate structure that is based on a market observable interest rate that resets periodically. The Secured Loan is classified as Level 2 within the fair value hierarchy.

A summary of interest expense on the Notes is as follows (in thousands):

		Three Months Ended						Nine Months Ended
		March 31,						March 31,
		2017			2016			2017			2016
Interest expense related to contractual interest coupon		$	2,255		$	2,677		$	7,125		$	6,612
Interest expense related to amortization of debt discount		661			1,285			2,117			5,155
Interest expense related to amortization of debt issuance costs		383			508			1,165			1,279
		$	3,299		$	4,470		$	10,407		$	13,046

9. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss consist of net loss, unrealized gains and losses on available-for-sale investments, changes in foreign currency exchange rate translation and net changes related to defined benefit pension plan. These components are excluded from earnings and reported as a component of stockholders' equity. The foreign currency translation adjustment results from those subsidiaries not using the United States dollar as their functional currency since the majority of their economic activities are primarily denominated in their applicable local currency. Accordingly, all assets and liabilities related to these operations are translated at the current exchange rates at the end of each period. The resulting cumulative translation adjustments are recorded directly to the accumulated other comprehensive loss account in stockholders' equity. Revenues and expenses are translated at average exchange rates in effect during the period.

The components of accumulated other comprehensive loss in the equity section of the balance sheets are as follows (in thousands):

		March 31,			June 30,
		2017			2016
Net unrealized loss on short-term investments		$	(91	)	$	(15	)
Cumulative foreign currency translation adjustment		350			1,121
Defined benefit pension obligation		(2,066		)	(2,066		)
Accumulated other comprehensive loss		$	(1,807	)	$	(960	)

10. Subsequent Events

On April 24, 2017, the Company decided to eliminate the role of Chief Operating Officer following the conclusion of fiscal year 2017. As a consequence, Kelly Londy, the Company's Executive Vice President, Chief Operating Officer, will be leaving the Company on July 5, 2017.

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition as of March 31, 2017 and results of operations for the three and nine months ended March 31, 2017 and 2016 should be read together with our condensed consolidated financial statements and related notes included elsewhere in this report. Statements made in this Form 10-Q report that are not statements of historical fact are forward-looking statements and are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this report relate, but are not limited, to: our future results of operations and financial position, including the sufficiency of cash resources and expected cash flows to fund future operations, including the next 12 months; our backlog and expectations regarding age-outs, cancellations of contracts and foreign currency impacts, the effects of our process improvements on age-outs, backlog and revenue; expected uses of cash during fiscal 2017; the anticipated drivers of our future capital requirements; the success of the multi-leaf collimator, or InCise MLC for the CyberKnife Systems, its impact on our business; our expectations regarding the factors that will impact long-term success, sales, competitive positioning and long-term success for our CyberKnife and TomoTherapy Systems; our belief that TomoTherapy Systems offer clinicians and patients significant benefits over other radiation therapy systems in the market; the anticipated risks associated with our foreign operations and fluctuations in the U.S. dollar and foreign currencies as well as our ability to mitigate such risks; the sufficiency of our cash, cash flow equivalents and investments to meet our anticipated cash needs for working capital and capital expenditures and our business strategy, plans and objectives. Forward-looking statements generally can be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "may," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, including those risks discussed in this quarterly report, in particular under the heading "Risk Factors" in Part II, Item 1A as well as the risks detailed in Part I, Item 1A of the Company's annual report on Form 10-K for fiscal year 2016 , in Part II, Item 1A of the Company's quarterly reports on Form 10-Q for the quarters ended September 30, 2016, December 31, 2016 and other filings we make with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statements are made and are based on information available to the Company at the time those statements are made and/or management's good faith belief as of that time with respect to future events. The Company assumes no obligation to update forward-looking statements to reflect actual performance or results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. Accordingly, investors should not place undue reliance on any forward-looking statements.

In this report, "Accuray," the "Company," "we," "us," and "our" refer to Accuray Incorporated and its subsidiaries.

Overview

Products and Markets

We are a radiation oncology company that develops, manufactures, sells and supports precise, innovative treatment solutions which set the standard of care, with the aim of helping patients live longer, better lives. Our leading-edge technologies, the CyberKnife and TomoTherapy Systems, and Radixact, the next generation TomoTherapy System platform are designed to deliver advanced radiation therapy including radiosurgery, stereotactic body radiation therapy, intensity modulated radiation therapy, image-guided radiation therapy and adaptive radiation therapy tailored to the specific needs of each patient. The CyberKnife and TomoTherapy Systems are complementary offerings serving largely separate patient populations treated by the same medical specialty, radiation oncology, with advanced capabilities that offer increased treatment flexibility to meet the needs of an expanding patient population including patients requiring retreatment with radiation therapy.

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The CyberKnife Systems

The CyberKnife Systems are robotic systems designed to deliver radiosurgery treatments to cancer tumors anywhere in the body. The CyberKnife Systems are the only dedicated, full-body robotic radiosurgery systems on the market. Radiosurgery is an alternative to traditional surgery for tumors and is performed on an outpatient basis in one to five treatment sessions. It enables the treatment of patients who typically might not otherwise be treated with radiation, who may not be good candidates for surgery, or who desire non-surgical treatments. The use of radiosurgery with CyberKnife Systems to treat tumors throughout the body has grown significantly in recent years, but currently only a small portion of the patients who develop tumors treatable with CyberKnife Systems are treated with these systems. A determination of when it may or may not be appropriate to use a CyberKnife System for treatment is at the discretion of the treating physician and depends on the specific patient. However, the CyberKnife Systems are generally not used to treat (1) very large tumors, which are considerably wider than the radiation beam that can be delivered by CyberKnife Systems, (2) diffuse wide-spread disease, as is often the case for late stage cancers, because they are not localized (though CyberKnife Systems might be used to treat a focal area of the disease) and (3) systemic diseases, like leukemia and lymphoma, which are not localized to an organ, but rather involve cells throughout the body.

Our CyberKnife M6 Series Systems have the option of: fixed collimator, Iris Variable Aperture Collimator and/or multi-leaf collimator, or InCise MLC. The InCise MLC is designed specifically for the M6 Series. With the addition of the InCise MLC, clinicians can deliver the same precise radiosurgery treatments they have come to expect with the CyberKnife System, faster and for a wider range of tumor types. The addition of the InCise MLC, now makes it faster and more efficient to treat a wider range of tumor types with the CyberKnife M6 Series System, including larger tumors and those with multiple sites of disease.

We believe the long term success of the CyberKnife Systems is dependent on a number of factors including the following:

· Continued adoption of our CyberKnife M6 Series Systems;

· Production and shipment of InCise MLCs that meet the standards that we, and our customers, expect in our products;

· Change in medical practice leading to utilization of stereotactic body radiosurgery more regularly as an alternative to surgery or other treatments;

· Greater awareness among doctors and patients of the benefits of radiosurgery conducted with the CyberKnife Systems;

· Continued evolution in clinical studies demonstrating the safety, efficacy and other benefits of using the CyberKnife Systems to treat tumors in various parts of the body;

· Continued advances in our technology that improve the quality of treatments and ease of use of the CyberKnife Systems;

· Receipt of regulatory approvals in various countries which are expected to improve access to radiosurgery with the CyberKnife Systems in such countries;

· Medical insurance reimbursement policies that cover CyberKnife System treatments; and

· Our ability to expand sales of CyberKnife Systems in countries throughout the world where we do not currently sell CyberKnife Systems.

TomoTherapy and Radixact Systems

The TomoTherapy Systems are advanced, fully integrated and versatile radiation therapy systems for the treatment of a wide range of cancer types. The TomoTherapy Systems are specifically designed for image-guided intensity-modulated radiation therapy (IG-IMRT). The TomoTherapy Systems include the TomoTherapy H Series Systems with configurations of TomoH, TomoHD  and TomoHDA. Based on a CT scanner platform, the systems provide continuous delivery of radiation from 360 degrees around the patient, or delivery from clinician-specified beam angles. These unique features, combined with daily 3D image guidance, enable physicians to deliver highly accurate, individualized dose distributions which precisely conform to the shape of the patient's tumor while minimizing dose to normal, healthy tissue, resulting in fewer side effects for the patient. The TomoTherapy Systems are capable of treating all standard radiation therapy indications including breast, prostate, lung and head and neck cancers, in addition to complex and novel treatments such as total marrow irradiation. Radiation therapy has been widely available and used in developed countries for decades, though many developing countries do not currently have a sufficient number of radiation therapy systems to adequately treat their domestic cancer patient populations. The number of radiation therapy systems in use and sold each year is currently many times

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larger than the number of radiosurgery systems. The new Radixact System is the next generation TomoTherapy platform and is currently approved for sale in the US, Europe, Japan and other territories. The Radixact System is a new, smart system with integrated Accuray Precision treatment planning software and the new iDMS Data Management System. The Radixact System leverages the TomoTherapy System's efficient daily low-dose fan beam MVCT image guidance and unique ring gantry architecture, delivering precise radiation treatments for more patients, faster, with simpler, more automated workflows. We believe the TomoTherapy Systems and the Radixact System offer clinicians and patients significant benefits over other radiation therapy systems in the market. We believe our ability to capture more sales will be influenced by a number of factors including the following :

· Continued adoption of our TomoTherapy Systems and adoption of the Radixact System in markets where it is available;

· Greater awareness among doctors and patients of the unique benefits of radiation therapy using TomoTherapy and Radixact Systems because of their ring gantry architecture and ability to deliver treatment from 360 degrees around the patient;

· Advances in our technology which improves the quality of treatments and ease of use of TomoTherapy and Radixact Systems;

· Greater awareness among doctors of the now-established reliability of TomoTherapy Systems;

· Our ability to expand sales of TomoTherapy Systems in countries throughout the world; and

· Our ability to scale up commercial launch of the Radixact System in those markets where it is approved.

Sale of Our Products

Generating revenue from the sale of our systems is a lengthy process. Selling our systems, from first contact with a potential customer to a signed sales contract that meets our backlog criteria (as discussed below) varies significantly and generally spans between six months and two years. The length of time between receipt of a signed contract and revenue recognition is generally governed by the time required by the customer to build, renovate or prepare the treatment room for installation of the system.

In the United States, we primarily market directly to customers, including hospitals and stand-alone treatment facilities, through our sales organization and we also market to customers through sales agents and group purchasing organizations. Outside the United States, we market to customers directly and through distributors and sales agents. In addition to our offices in the United States, we have sales and service offices in Europe, Asia, and South America.

Key Metrics

Backlog

For orders that cover both products and services, only the portion of the order that is recognizable as product revenue is reported as backlog. The portion of the order that is recognized as service revenue (for example, Post-Contract Customer Support (PCS), installation, training and professional services) is not included in reported backlog. Product backlog totaled $450.0 million as of March 31, 2017 compared to $405.9 million as of June 30, 2016.

In order for the product portion of a system sales agreement to be counted as backlog, it must meet the following criteria:

· The contract is properly executed by both the customer and us. A customer purchase order that incorporates the terms of our contract quote will be considered equivalent to a signed and executed contract. The contract has either cleared all its contingencies or contained no contingencies when signed.

· We have received a minimum deposit or a letter of credit; or the sale is to a customer where a deposit is deemed not necessary or customary (i.e. sale to a government entity, a large hospital, group of hospitals or cancer care group that has sufficient credit, customers with trade-in of existing equipment, sales via tender awards, or indirect channel sales that have signed contracts with end-customers);

· The specific end customer site has been identified by the customer in the written contract or written amendment;

· Less than 2.5 years have passed since the contract met all the criteria above.

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Although our backlog includes only contractual agreements with our customers for the purchase of CyberKnife Systems, TomoTherapy Systems, Radixact System and related upgrades, we cannot provide assurance that we will convert backlog into recognized revenue due primarily to factors outside of our control. The amount of backlog recognized into revenue is primarily impacted by three items: cancellations, age-outs and foreign currency fluctuations. Orders could be cancelled for reasons including, without limitation, changes in customers' needs or financial condition, changes in government or health insurance reimbursement policies, or changes to regulatory requirements. In addition to cancellations, after 2.5 years, if we have not been able to recognize revenue on a contract, we remove the revenue associated with the contract from backlog and the order is considered aged out. Contracts may age-out for many reasons, including but not limited to, inability of the customer to pay, inability of the customer to adapt their facilities to accommodate our products in a timely manner, or inability to timely obtain licenses necessary for customer facilities or operation of our equipment. Our backlog also includes amounts not denominated in U.S. Dollars and therefore fluctuations in the U.S. Dollar as compared to other currencies will impact backlog. Generally, strengthening of the U.S. Dollar will negatively impact revenue. Backlog is stated at historical foreign currency exchange rates, and revenue is released from backlog at current exchange rates, with any difference recorded as a backlog adjustment.

A summary of gross orders, net orders, and order backlog is as follows (in thousands):

		Three Months Ended						Nine Months Ended
		March 31,						March 31,
		2017			2016			2017			2016
Gross orders		$	83,823		$	56,410		$	212,612		$	188,416
Net orders		71,830			57,559			163,086			145,037
Order backlog at the end of the period		449,955			370,488			449,955			370,488

Gross Orders

Gross orders are defined as the sum of new orders recorded during the period adjusted for any revisions to existing orders during the period. Net orders are defined as gross orders less cancellations, age-outs and foreign exchange adjustments.

Gross orders increased by $27.4 million for the three months ended March 31, 2017, as compared to the three months ended March 31, 2016. This was a result of an increase of $25.4 million in new system order volume compared to the same prior year period. The CyberKnife System order volume drove the increase for this period as well as a slight increase in order volume for the TomoTherapy System. Upgrade orders and other adjustments increased by $2.0 million in the three months ended March 31, 2017 as compared to the same prior year period.

Gross orders increased by $24.2 million for the nine months ended March 31, 2017, as compared to the nine months ended March 31, 2016. This was a result of an increase of $16.7 million in new system order volume compared to the same prior year period. The CyberKnife System order volume drove the increase for this period as well as a slight increase in order volume for the TomoTherapy System. Upgrade orders and other adjustments increased by $7.5 million in the nine months ended March 31, 2017 as compared to the same prior year period.

Net Orders

Net orders increased by $14.3 million for the three months ended March 31, 2017, as compared to the three months ended March 31, 2016, resulting from the increase in gross orders of $27.4 million. The increase was offset by foreign currency adjustments of $7.2 million, net age-outs of $3.2 million, and cancellations of $2.7 million.

· There were age-outs of $8.5 million for the three months ended March 31, 2017, a decrease of $2.3 million from the prior year period due to fewer systems exceeding the 2.5 year criteria specified above. The age-outs for the three months ended March 31, 2017 did not include any age-ins, which represent orders that have previously aged-out but have been taken to revenue in the current period. Age-ins offset the gross amount of age-outs in a particular period.

· There was $2.7 million in cancellations in the three months ended March 31, 2017, and no cancellations in the three months ended March 31, 2016. Cancellations are outside of our control and difficult to forecast; however, we continue to work closely with our customers to minimize the impact of cancellations on our business.

· Currency impacts resulted in a decrease in net orders of $0.8 million and an increase of $6.4 million in the three months ended March 31, 2017 and 2016, respectively.

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