Accuray Incorporated (ARAY) reported fourth quarter and full fiscal year 2009 results. Earnings per share in the fourth quarter were 2 cents, compared to the Zacks Consensus Estimate of 3 cents and the year-ago earnings that were break-even.

Quarterly results

Sales

Total revenues in the quarter were $58.8 million Incorporatedreasing 15% year over year. Growth was primarily led by higher services revenues that increased 58% year over year to $18.6 million. Product revenues increased roughly 11% year over year to $39.5 million. The total number of CyberKnife Systems installed in the quarter was twelve, twice that in the year-ago quarter.

Backlog

Accuray has a practice of reporting backlog comprised of signed contracts that can generate revenues in the future. Total backlog at the end of the quarter was $556 million, compared to $591 million in the prior quarter. CyberKnife System contracts and Services and other recurring revenues generated backlog of $285 million and $271 million, respectively.

Margins

Gross margin declined 670 basis points year over year to roughly 46.1%. The decline was due to a higher cost of revenue that increased 32% year over year.

Selling and marketing expenses as a percentage of sales declined 400 basis points year over year to 16.8%. Research and development expenses as a percentage of sales declined 90 basis points year over year to 15.6%.

General and administrative expenses as a percentage of sales declined 350 basis points year over year to 13.1%. Accuray’s strong expense management helped it increase operating margin 170 basis points year over year to 0.6%.

Fiscal year results

Sales

Total revenues in the year were $233.6 million Incorporatedreasing 11% year over year. Services revenues increased 71% year over year to $66.3 million. Product revenues increased roughly 5% year over year to $159.3 million. The total number of CyberKnife Systems installed in the year was 36 Incorporatedreasing 16% year over year.

Margins

Gross margin declined 140 basis points year over year to roughly 49.4%. The decline was due to higher cost of revenue that increased roughly 14% year over year.

Selling and marketing expenses as a percentage of sales declined 80 basis points year over year to 19.5%. Research and development expenses as a percentage of sales declined 20 basis points year over year to 15.4%. General and administrative (G&A) expenses as a percentage of sales increased 20 basis points year over year to 15.5%.

Lower gross margin coupled with higher G&A expenses resulted in lowering operating margin 60 basis points year over year to a negative 1%.

Outlook

Accuray has provided sales guidance for the first quarter and full fiscal year 2010. For the first quarter, revenues are expected between $40 million and $50 million. For fiscal 2010, revenues are expected between $215 million and $230 million, lower than that in fiscal 2009.

Accuray is a global leader in the field of radiosurgery and provides a non-surgical treatment option for those diagnosed with cancer. The company develops and markets the CyberKnife Robotic Radiosurgery System for the treatment of extracranial tumors, which are defined as tumors in the lung, prostate, spine, liver and pancreas.

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