ViewRay, Inc. (VRAY) Q2 2022 Earnings Call Transcript

ViewRay, Inc. (VRAY)
Q2 2022 Earnings Call
Aug 02, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day. My name is Melanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the ViewRay, Inc. Q2 2022 conference call.

[Operator instructions] Thank you. At this time, I'd like to turn the call over to Matt Harrison, director of investor relations. You may begin your conference.

Matt Harrison -- Director of Investor Relations

Thank you, operator. Good afternoon, everyone, and welcome to ViewRay's second quarter conference call. Joining me today are Scott Drake, our president and chief executive officer; Zach Stassen, our chief financial officer; and Paul Ziegler, our chief commercial officer. Earlier today, ViewRay issued a press release and presentation for today's call.

The presentation can be viewed live on our webcast or downloaded from our website. Today's call is being broadcast and webcast live. A replay will be available on our website for 14 days. Before we begin, I would like to remind you that the discussion during this conference call will include forward-looking statements.

Factors that could cause actual results to differ materially are discussed in the Company's most recent filings with the SEC. I will now turn the call over to Scott.

Scott Drake -- President and Chief Executive Officer

Thanks, Matt. Good afternoon, everyone, and welcome to our Q2 call. Today, I'll begin by providing an update on key patient and financial metrics, we'll show how our strategy is working as designed and driving commercial traction, I'll reaffirm our commitment to significant P&L leverage and the path to cash flow breakeven with our current balance sheet, Zach will go into depth on our financials and provide an update to our 2022 guidance. As of the end of Q2, we've treated about 25,000 patients and the ramp is accelerating.

We have several systems that will exceed 300 patients treated this year and a handful that are on track to do 400 plus. The vast majority of MRIdian patients are treated with an ablative dose, no fiducials, in five or fewer fractions with outstanding outcomes and very low to no grade 3 or higher toxicity. These metrics will be accelerated with A3i and stand in stark contrast to any other system in the market. We'll share more on A3i in a moment, but we are now the first and only system in the world that tracks in real time in three planes and automatically gates the beam.

Workflow and throughput enhancements are exceeding expectation and the first brain treatments have been successfully delivered. We're excited about our innovation and clinical leadership and progress is accelerating. MRIdian therapy is being delivered at 53 sites around the world with about 70 more in some stage of planning or installation. Please turn to Slide 4.

In Q2, we added eight more orders and the backlog increased to $353 million, up 27% versus prior year. Revenue grew 47%, resulting in gross margin of roughly 5%, a 1,600 basis point improvement versus last year. Gross margin expansion is simply a consequence of the backlog we've built and the revenue growth we're committed to delivering. Cash used in the quarter was $22 million, a step down from Q1, and we expect to continue nice progression through the second half of the year.

We finished the quarter with $161 million of cash on hand, which we believe gets us to cash flow breakeven. As previously stated, we expected the first half of 2022 to look a lot like 2021 and then ramp into the back half of the year. Results are unfolding as anticipated and position us well for the balance of the year and set us up for an exciting 2023. Let's pivot to Slide 5 and discuss how our strategy is driving commercial traction.

We said about four years ago that we would lead and differentiate with meaningful clinical data and lead the market in innovation. We also stated that our clinical and innovation pipelines would feed and fuel our commercial pipeline. This is happening as we speak. We and our customers also believe that market awareness is critical to our success.

Patients deserve and demand shorter courses of highly effective treatment with fewer negative side effects. Patients travel for MRIdian therapy, and we now have the footprint to warrant modest, but effective market awareness efforts. Let's break down each component of our strategy and provide a brief update. On Slide 6, on the clinical front, our mission is to treat and prove what others can't.

We have a defined clinical beachhead strategy designed to prove value in both the toughest to treat and more common cancers alike. Succinctly stated, in tough-to-treat cancers, we strive to extend survival and in common cancers, we strive to enhance quality of life. Among others, tough-to-treat cancers include pancreas, liver, kidney, oligomets, central and ultra-central lung, known as the no-fly zone for other forms of radiation therapy. In these tough-to-treat cancers, our goal is to meaningfully extend survival, increase local control and have very low or no grade 3 or higher toxicity.

We now have thousands of patients treated with compelling and consistent reported outcomes. These data are highlighted by Dr. Michael Chuong's multicenter Pancreas trial, where median survival was 26 months on MRIdian or about double that versus conventional therapy. On more common cancers, such as breast and prostate, we strive to prove critical quality of life enhancements.

The MIRAGE prostate study is a Phase 3 randomized controlled trial directly comparing conventional therapy to MRIdian. MRIdian was so effective, enrollment was stopped early. MRIdian cut margins in half, cut healthy tissue toxicity also by about half, reduced treatment volumes by about 30%, treatments were completed and only five fractions with no fiducials and patient and physician feedback is remarkable. Customers state that demand for MRIdian therapy is "skyrocketing".

These data, combined with the completely non-invasive nature of MRIdian is causing patients to choose our therapy, as frontline care versus robotic surgery. This is a powerful early indicator of future growth. The drumbeat of clinical data spanning the toughest to treat and more common cancers will continue. We look forward to the SMART Pancreas data release and the forthcoming result of Lung STAAR, FORT, SHORTER and SMART One among others.

We are the only Company in the space leading with meaningful clinical data, and we are very happy we put this stake in the ground four years ago. Slide 7, one the innovation front, Henry Ford and the Miami Cancer Institute were the first two customers to upgrade their programs to MRIdian A3i. Over 100 fractions have been completed with A3i's advanced workflow, treating tumors in the pancreas, liver, prostate, lung and brain. The feedback has been very positive on A3i improving treatment efficiencies, expanding techniques for delivering an ablative dose, enhancing patient experience and increasing MRIdian's clinical utility by treating cranial targets.

These customers immediately experienced workflow enhancements and reduced treatment times, which will allow for incremental patient throughput. The broad technical complexity of MRIdian is designed to enable one simple yet critical feature that sets us apart from all other radiation devices. With MRIdian, the MRI controls the beam. The MRI acquires images multiple times per second and tracks the tumor and critical organs in real time.

The bean stops automatically faster than human hand-eye coordination if the target moves out of position or healthy tissue is at risk. We just celebrated our 10th anniversary of these critically important features. We remain the only Company in the world to offer them and A3i extends our lead. Let's turn to the importance of market awareness on Slide 8.

Despite the fact that radiation has been around for a long time, the therapy is perceived poorly as long course treatment and unwanted side effects are front of mind for patients. MRIdian has and is breaking these paradigms, and this needs to be broadly understood. Given the success of MRIdian programs globally and the current footprint and forthcoming clinical data, we feel that this is the appropriate time for targeted market awareness efforts for the patient and physician communities. This includes going beyond radiation oncology and educating medical oncologists and surgeons as well.

Our goal is to raise awareness, so that patients, who are told they have outdated or no treatment options may find hope and healing at MRIdian Centers. We have engaged in a strategic multiyear partnership with Katie Couric Media to increase awareness of MRIdian SMART therapy. Katie is a passionate, trusted and knowledgeable source for cancer patients. The KCM team has built a network of millions of subscribers and Katie has founded and championed the standup to cancer movement.

Throughout the engagement, KCM will be leveraging their reach to make patients aware that short course, highly effective, non-invasive and low side effect therapy is available on MRIdian today. On Slide 9, these strategic pillars, clinical data, innovation and market awareness, drive our commercial pipeline. I would characterize our commercial funnel in the following way: number one, it is ever increasing in size; number two, the diversity of customers from academic hospitals to freestanding centers is also continuously increasing; and number three, our customers are more focused on speeding MRIdian program launch. This is notably true in markets, where MRIdian is enabling competitive accounts to pull patients.

This past quarter is a great example of commercial traction. GenesisCare placed their sixth order. City of Hope is added to the MRIdian family. We secured another VA at Ann Arbor.

We announced a landmark account at Saitama in Japan and added two more sites in France. We're frequently asked if our order funnel will sustain long-term high levels of revenue growth. We firmly believe the answer is yes. We have clear line of sight to our back half of 2022 growth and increasing clarity on '23 and '24.

Given our backlog and prospective customers, we believe our growth prospects are bullish and industry-leading. Let's take a look at how all of these efforts culminate in a market on Slide 10. We've used Florida as an example previously. Today, let's take a look at California.

A short time ago, we had three systems in the state, UCLA, an early MRIdian adopter and two community hospitals in the form of Enloe and Hoag. Successful MRIdian programs prompted others to move. Stanford, a world-renowned cancer center is now live and on a great trajectory. Bass, a free-standing center has its first system treating patients.

UC Irvine is preparing to launch, as a City of Hope and multiple programs are planning for second systems. All in, we'll go from three MRIdian programs in California to double-digit systems in a short period of time, and these successful programs are pulling patients and creating more demand. This kind of activity is taking place in California, the Northeast Seaboard, the Upper Midwest, Florida, France, the U.K. and Italy.

This is our formula. This is our strategy, and it is working. On Slide 11, we're often asked also about how does our strategy translate into an attractive sustainable business model? The answer is simple. Chronologically, orders translate into higher backlog, which turns into higher revenue, which drives significant gross margin expansion, and when combined with tight opex control, yields P&L leverage, which drives our path to cash flow breakeven.

We are looking forward to an investor day in Q4 of this year, and we'll provide further clarity on our long-term plans and projections. For 2022, Zach will provide more detail, but you can expect rapid revenue growth of about 40%, gross margin expansion of 750 basis points to 1,000 basis points and tight operating expense control. And very importantly, we believe we're in a position to get to cash flow breakeven with our current balance sheet. We're excited about this phase of our Company and how quickly we will transform and grow in the next few years.

I am equally, if not more excited for the patient impact that we'll deliver in the years to come. With that, I'll turn it over to Zach.

Zach Stassen -- Chief Financial Officer

Thanks, Scott. Today, I'll cover our second quarter business results and changes to our 2022 guidance. Full details can be found in today's press release, and we will be filing our 10-Q tomorrow morning. During the quarter, we received eight orders with a total gross order value of approximately $46 million and backlog ended at roughly $353 million, a 27% increase over the same period last year.

Interest for MRIdian has never been higher, and our commercial funnel continued to be robust. These factors are an evidence our commercial strategy is working and give us confidence in the strong revenue growth we expect for '22, '23 and beyond. Revenue in the quarter grew 47% to roughly $22 million, driven primarily by four revenue units, including one upgrade versus $15 million driven primarily by two revenue units in the same period last year. Product revenue was $16.5 million, a 51% increase versus the prior-year quarter, while service revenue grew 40%, driven by the continued expansion of our installed base and upgrades to our enhanced service plans in anticipation of A3i.

Gross profit during the quarter was approximately 5%, a solid step in the right direction, as we work to deliver continued margin expansion into the future. Excluding the impact of the upgrade unit in the period, gross margin was 8%, demonstrating the type of leverage driven by additional volume. As we discussed previously, we are currently built for approximately 25 installs per year and have meaningful infrastructure that we are on the path to fully absorbing. We were pleased to see the significant improvement both year over year and sequentially in system and service gross margin.

This is a result of a lot of hard work by our team, driving efficiencies over the last several years. This work will be augmented by our ongoing cost reduction efforts and gives us confidence in achieving industry-standard margins. Operating expenses were $31 million in the quarter, and we do expect growth in opex to moderate throughout the remainder of the year. Expenses in the quarter were impacted by a $1.8 million impairment charge related to the elimination of one of our Mountain View facilities.

We made the decision to consolidate to one facility, as a part of a broader cost-saving effort. During the quarter, our teammate retention rate was better than forecasted. This represents positive progress, but did result in moderately higher personnel costs. Additionally, in line with the macro environment, we are experiencing elevated travel costs, and we did have our largest and most costly OUS conference escrow in the quarter.

We do expect our aggregate travel costs to moderate in the second half. We are actively balancing the need to be in person with customers against driving leverage in opex. Turning to cash use, we used approximately $22 million in the quarter. Our cash burn this quarter was impacted by a combination of receivables and inventory.

We are managing through a challenging supply chain environment and are actively working to mitigate risks. In some instances, risk mitigation requires cash to purchase incremental inventory and deposits to solidify supply. On a positive note and consistent with our commentary at the beginning of the year, we are seeing improved access for both sales and installation activity. Similar to prior years, we expect cash burn to moderate in subsequent quarters, as this year's cash collection activity is more heavily weighted to the second half of the year.

We finished the quarter in a strong liquidity position with approximately $161 million of cash and believe this is sufficient to reach cash flow breakeven. Turning to guidance on Slide 14. We are raising the bottom end of our revenue guidance range from $84 million to $90 million. The new range of $90 million to $104 million reflects increased confidence in revenue achievement.

We are encouraged by what we see in the market and are focused on delivering top-tier growth this year. Our new revenue guidance implies 28% to 48% top-line growth. We are reiterating our cash usage guidance of $68 million to $83 million. As mentioned before, we continue to face a challenging supply chain environment that sometimes requires us to deploy more capital near term to solidify vendor supply.

Despite these issues, we continue to expect a significant step down in cash burn in the second half of the year and remain confident we are well capitalized to achieve growth and reach cash flow breakeven. The investments we are making are having -- are driving a positive return. The initial feedback on A3i in the market is strong and pairing that with our clinical data will no drug -- no doubt drive meaningful growth. The increased volume from growth along with our direct MRIdian cost-down efforts will propel the business to an attractive financial profile over the next several years.

We are planning a Capital Markets Day, as Scott mentioned, in Q4 of this year and look forward to diving a bit deeper on the bright future ahead. With that, we will now open the line to Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] Your first question comes from the line of Rick Wise with Stifel.

Rick Wise -- Stifel Financial Corp. -- Analyst

Good afternoon. Hi, Scott. Hi, Zack.

Scott Drake -- President and Chief Executive Officer

Hey, Rick.

Rick Wise -- Stifel Financial Corp. -- Analyst

Let me start -- it's nice to see the solid quarter. Let me start with, to me, the most important part, the results of all your excellent work, the order book. I mean it's sort of great to see you, see the order, gross order step up now to eight, you've been at seven per quarter. Maybe just help us think through, Scott, is this -- is this a sustainable higher level.

It seems to me when I look at the second half, it's a marked acceleration again versus the first half versus last year and would suggest that as I look at my numbers for '23 and '24, that those order rates could be low based on what I'm hearing from you? How encouraged are you? How do we think about the trajectory from here?

Scott Drake -- President and Chief Executive Officer

Yeah. Thank you, Rick. I appreciate the question. And I would say a couple of things.

Number one, it's really important to note that the commercial funnel that we have now, I know, I characterized it this way in prepared remarks, but it is forever increasing, which is very encouraging. The diversity of our prospective customers is also expanding on a quarter-over-quarter-over-quarter basis, that feels very good to us. More and more of our customers are buying incremental systems. And when you take that fact pattern, and you add to it the clinical pipeline of data that we have, the rollout of A3i and future innovations that we've not talked about publicly, you add to that market competition that we've highlighted now in the past couple of calls and add on top of it the work with Katie and her team, we feel really good about the future of this business.

If you look at it from a patient standpoint, it seems quite logical to us that patients deserve and demand, short course, highly effective treatment with very low side effects. We think what we deliver is special in the market. And when you look at things through our customers' lens, they see the clinical value translating into strategic and then economic value. And we anticipate that this -- that the market competition and the patient awareness will really propel us, as we go forward.

So we feel very good about the order funnel that we have and how that impacts the P&L and balance sheet, as we go forward.

Rick Wise -- Stifel Financial Corp. -- Analyst

Great. Scott, you highlighted a couple of things that are interesting that you're seeing an improved access to hospitals and hospital decision-makers accounts, I assume, I'll let you flesh it out as your answer. But help us think about the clear momentum you have in the sort of the complex environment, this is the third week of large cap, larger, smaller cap med tech earnings, and we've heard a lot about slowdown in decision, in capital purchasing we've -- I feel like, although we've been talking about staffing issues, as a concern generally broadly for three quarters, four quarters now. We're starting to, this quarter, see the impact on -- so even for innovation and innovative technologies, we're seeing the impact of slowdown, not acceleration because of staffing shortages.

And similarly, on the supply chain, companies unable to get their innovative products out the door because of the shortage of parts and electronic components. Can you help us understand why you're able to sort of move ahead through all that? I think I can guess at the answer, but -- and to the extent that capital headwind, staffing, supply chain, etc., we should not be concerned if you see what I'm getting at. Thank you.

Scott Drake -- President and Chief Executive Officer

Yeah. I do, Rick. Thank you. There's a lot to unpack there.

I would say, my shortest answer is, I think the team is really executing at a very high level. And frankly, I felt that way throughout the course of the whole pandemic and now we find ourselves in a quasi-post pandemic environment. As it relates to the capital environment, I think fundamentally, we see an improvement in elective procedures, little bit spotty from quarter to quarter, but generally speaking, our customers are in a pretty good place there, and that's the lifeblood of their P&L. And when you look at what others have said from a reporting perspective, whether you're talking about hospital groups or the larger cap companies, the data is kind of mixed, right? Some are reporting relative strength, others less so.

And as it relates specifically to ViewRay, as we've shared before, a ViewRay purchase, a purchase of MRIdian tends to fall within a strategic bucket versus replacement capital. And the notable points of weakness that I've read about from you and others on the street is more on the replacement capital side than the strategic capital side. And in fact, I would tell you that our customers appear to be even more motivated than previously about getting their programs up and alive and working, and that's notably true in these markets that I've highlighted that have a fair amount of competition. So in summary, Rick, hats off to our team.

I think we're operating at a high level. And I think these macro headwinds impact us differently than they affect large cap companies.

Rick Wise -- Stifel Financial Corp. -- Analyst

That's great. Thank you, Scott.

Scott Drake -- President and Chief Executive Officer

Thank you.

Operator

And your next question comes from the line of Marie Thibault with LDR. Your line is now open.

Sam Eiber -- BTIG -- Analyst

Hey, good afternoon, Scott and Zach. This is Sam Eiber on for Marie. Thanks for taking the questions and congrats on the nice quarter here. Maybe I can just dive a little bit deeper on some of the installation environment.

Zach, you mentioned some supply chain challenges during the quarter. I guess my question is, is there any potential impact on installation or even construction time lines going forward?

Zach Stassen -- Chief Financial Officer

I don't think so. There may be some delays here and there, just normal course on the construction side of it. That may be a little more subject to labor. But generally, when we get in there, we move pretty quickly.

We're kind of -- we've moved our average significantly down from what used to be 90-day to 120-day install down to 45 days to 50 days. And I think we're managing the supply chain issues well and making appropriate trade-offs to continue to push things forward. So yeah, I think we're able to navigate it pretty solidly at this point.

Sam Eiber -- BTIG -- Analyst

OK. Great to hear. And then maybe, Scott, you talked about some getting increased visibility now into 2023, as we sit here in August. I know you're not giving guidance at this time, but any initial thoughts on maybe how we should be thinking about that if maybe a similar cadence for 2022, whether it's the 40%-ish plus top-line growth, similar types of gross margin expansion? Any other color on maybe how you're starting to think about 2023, would be great.

Scott Drake -- President and Chief Executive Officer

Yeah. Sam, I would say if you take a big step back and you look at where we are, again, I would take my hat off to the team, we've built a backlog now of about $350 million on systems. As you're aware, you can roughly double that from a service standpoint. So we have, give or take, $700 million in high confidence revenue, as we go forward.

We do have zero to one systems fall out on a quarterly basis, but not material in light of that $700 million number. And we've got a clearer and clearer visibility into that, as we go forward. As we said previously, we thought the front half of 2022 would look a lot like '21 and it did, and we said that things would accelerate in the back half of '22. So we look forward to, hopefully, knock wood, putting up a solid Q3 and then being able to share more about our plans and projections, as we go forward.

But without giving any specific numbers, I think you can expect to see from us late levels of top-line revenue growth that leads to gross margin expansion that I think will unfold very nicely. You can expect us to be very disciplined on the opex side. And all of that leads to that path to cash flow breakeven with the current balance sheet that we have. So we'll get a little bit more granular with you guys here in a few months.

But we feel really good about the position that we're in right now.

Sam Eiber -- BTIG -- Analyst

Great. Thanks for taking the questions. And yes, looking forward to the Capital Markets Day.

Scott Drake -- President and Chief Executive Officer

Thanks, Sam.

Operator

And your next question comes from the line of Jason Bednar with Piper Sandler. Your line is now open.

Jason Bednar -- Piper Sandler -- Analyst

Thanks. Good afternoon, guys. Congrats on another nice quarter here. Scott, I'll follow up on Rick's question there, just bigger picture capital environment with the two partner here to get going.

First, just on -- I guess on how you'd characterize the health or stability of the backlog in the current environment. I think you addressed that a little bit in Sam's question there, but maybe just to expand a little bit or make sure we're all comfortable with kind of, again, the health and stability of that backlog. And then, just in the current environment, something like MRIdian does tend to be a longer cycle decision for hospitals. So the conversations you're having today are likely to show up in orders, maybe later this year, but even more so in 2023.

So I guess with that in mind, can you talk about whether you're noticing any shift in the customer mix and the conversations that you're having today?

Scott Drake -- President and Chief Executive Officer

Yeah. Jason, I would start by saying we feel really good about our backlog, both on the system side and on the service side. We take that incredibly seriously. We are judicious about what we call an order and very judicious about what we put into our backlog and what remains in our backlog.

That posture will never change, so long as we're here as an executive team. So we feel very good about that. As you've seen from us over now many quarters, as we scrutinize things on a quarterly basis on occasion, we will take a system out of backlog because we're unsatisfied with the end customer activity at some point in time. But I think you can expect that to be a very small number of systems on any quarterly basis.

As it relates to the prospects as we move forward, as I mentioned, Jason, I don't want anybody to get ahead of us. But we just feel really good about patients demanding this therapy, traveling for it without any advertising dollars being spent. We've highlighted Cornell before their prostate program is up fourfold with zero ad dollars. And now with increased market competition for MRIdian and an increased investment in terms of market awareness.

I just think we're going to continue to take nice steps, as we go forward here. And patients -- we're highly motivated for patients to get this therapy.

Jason Bednar -- Piper Sandler -- Analyst

All right. Great. That's helpful. And maybe I'll just ask two more, I follow-up with that I'll ask them all here together.

One is a follow-up there, just to confirm, I think there was maybe one order in different backlog, but as an extension of that, can you remind us how currency movements affect the P&L and backlog just in terms of quarterly reporting? And then the second question here, I'm sorry if I missed it, just balancing a few calls here, but I think we're expecting data from the SMART study here soon. Do you have a planned venue, where you're expecting that to be made available? And then just bigger picture, what are the next steps going to be for SMART Pancreas, is it -- is the Phase 3 trial in the works or is it something maybe you consider? And just to get any sense of what a trial like that could look like for ViewRay? Thank you.

Scott Drake -- President and Chief Executive Officer

Yeah. Why don't we flip the order, Zach, I'll take the SMART Pancreas, and you can take the first part of that. Yeah. Jason, we have seen the data for SMART Pancreas.

We've got to be careful because we're trying to maximize the -- both publication and podium impact of that data. So we have nothing to share at this point in time until we take a few more steps there. You can expect to see both acute toxicity and an early survival signal when we published that data. So hopefully, that answers your question on SMART Pancreas.

And would we consider doing a Phase 3 randomized controlled prospective multicenter study in pancreas. We certainly would. We have a ton of data at this point on pancreas, but we are certainly not opposed to doing more of it. But we're going to take this step-wise here, we've got, whether you're talking about tough-to-treat cancers like Smart One single fraction therapy and in six of the hardest-to-treat cancers, whether you're talking about SCIMITAR, MIRAGE, SHORTER, FORT in prostate, Lung STAAR for Central and ultra-central lung.

We have a trial going on in oligomet, liver, kidney, you name it. We love the clinical pipeline that we have in front of us. We study it very closely, and we're going to continue to be differentiated on that front. So we'll give you more as we get closer to it, but we think the next step is to release the data and then make a determination on how much more we want to do in pancreas and those other tumor sites that I mentioned.

Zach Stassen -- Chief Financial Officer

Yeah. And Jason, just to follow up on the Capital Markets Day, we are just nailing down details. And obviously, we'll make that public from a scheduling standpoint as soon as we've possibly can. And then on the backlog side of things.

I think we didn't take one system out this quarter, as we've commented in the past, it's kind of zero to two normal course. So as a part of our naturally quarter -- natural quarter process did take the one out. And then as it relates to currency, generally, our exposure to foreign currency is minimal. Most of our orders are denominated in U.S.

dollars, and so the exposure within the backlog is very light, the only instance is when we contract directly with some government institutions or universities in select foreign countries, where we're direct, do we ultimately have to transact in local currency, but I would characterize that as a minimal number at this point. So not a lot of exposure in the P&L on the revenue side.

Jason Bednar -- Piper Sandler -- Analyst

All right. Very helpful. Thanks so much.

Zach Stassen -- Chief Financial Officer

Thanks Jason.

Operator

Your next question comes from Cecilia Furlong with Morgan Stanley. Your line is now open.

Unknown speaker -- Morgan Stanley -- Analyst

Thanks for taking the questions. This is Calvin on for Cecilia. Congrats on a great quarter. Few quick ones from me.

First is just in the backdrop of sort of a complicated macro environment here, as it relates to capital cycle, supply chain, staffing, I'm curious what has driven or instigated conversations or bookings in centers recently, as it relates to sort of what has resonated with centers to a greater degree, either from a data standpoint or upcoming data standpoint or from a COVID recovery standpoint or something else?

Scott Drake -- President and Chief Executive Officer

Yeah. Calvin, I would say that the vast majority of conversations we have with customers now, and this stands in contrast to where we were just a couple of years ago, the vast majority of dialogue with our customers surrounds clinical data. There's -- we scour the landscape for anybody delivering our customers' definition of clinical success. And as a reminder, five components to that: ablative dose, tight margins, no fiducials, fiber-fewer fractions and low to no grade 3 or higher toxicity, and we don't see that coming from any other system.

So that is a stunning thing when our customers understand that. And then, as I've mentioned to you before, that competitive dynamic that we're seeing in Florida, California and the other markets that we've highlighted that's really accelerating things for us as well, so I thinks it's kind of a combination that always begins with clinical data and then you have other influences in there, you have customer with long waiting times for MRIdian therapy I talked to a customer yesterday that now he is upto a 10-week waiting on his system. He needs another. And he also wants to do a hub and spoke kind of thing within his system.

So that's one example there, other examples would be patients travelling to other systems and then a competitive account is really motivated. So beyond the clinical you tend to get different motivations there, but it always begins with clinical and we feel momentum building in the commercial funnel.

Unknown speaker -- Morgan Stanley -- Analyst

Scott, very helpful. And I also just wanted to ask about China, I think to date you've been dealing with serval dynamics in China, including I think first of all travel restrictions and just getting into the country altogether. And now in the second quarter there is the new lock down. So I'm wondering, do you think the worst is behind you? What can you share on your outlook in that region from here on out?

Scott Drake -- President and Chief Executive Officer

Yeah. What we really have our eye on in China is preparation for approval in that market for our linac. And we've been working on that for some period of time. As we've said publicly before, we anticipate that, that's either a '22 or '23 event.

We don't have anything new to share there, but we're working with Chindex very closely in preparation for that launch. There is a bit more access in that market, and we're preparing for their big show that's coming up here in a little bit later in this year. And fingers crossed on getting approval sooner versus later.

Unknown speaker -- Morgan Stanley -- Analyst

Got it. Thanks so much.

Scott Drake -- President and Chief Executive Officer

Thanks, Calvin.

Operator

Your next question comes from the line of Mike Ott with Oppenheimer. Your line is now open.

Mike Ott -- Oppenheimer and Company -- Analyst

Good afternoon, Scott and Zach. I'm on for Suraj. Congrats and thanks for taking our questions. Great to hear over 100 fractions with the A3i launch at Henry Ford and MCI.

I think Scott, you touched on some of the reduced treatment times. I don't know if you're preparing at this early stage yet to quantify or at least anecdotally, any of what they're seeing on the reduced treatment times?

Scott Drake -- President and Chief Executive Officer

Yeah. Mike, it is a little bit anecdotal at this point. But I would tell you, we are very pleased with the feedback from both institutions, doing adaptive treatment, tracking in three planes, doing brain treatment, all of it is very gratifying, and I think validates the design intent of A3i. It's still early.

We're only talking about two customers at this point. But if you would have said to me six months ago, take the feedback that you have today or not -- I would take this and run. We did see MCI come out with their own -- I don't know, if it was a press release or what it was, but they indicated that treatments for certain patients were reduced by 40% to 50%. I think it's still too early for us to put our thumbprint on that.

We'll just let a little more time go here and then look forward to expanding the launch to other customers. But again, very, very happy and validated the design of A3i with simplification, parallel workflow, increased throughput, all of the things that we were hoping for. And thus far, we're very happy.

Mike Ott -- Oppenheimer and Company -- Analyst

That's great to hear, and thanks for that additional color, Scott. And then you touched on ASTRO back in Denmark in May. Curious if there are any highlights in the 40 or so abstracts there. And related to that, looking forward on the data besides SMART Pancreas, any other data readouts you expected to fall radiology comes in to the ASTRO, RSNA, etc.

Scott Drake -- President and Chief Executive Officer

Yeah. I think what was interesting at ASTRO was the amount of activity that we had in our booth. In fact, one kind of funny anecdote, we've got into a little trouble on a couple of occasions because people paying attention to the presentations taking place in the booth, spilled over into the hallway area, and we were asked on a couple of occasions to please try to keep the activity in the scope of our booth. So kind of an indicator of how much interest we have there.

A lot of interest in A3i, a lot of interest in the clinical data, so much of it that our customers were there to talk about, a lot of interest in terms of people understanding not only the clinical data, but hey, how do I get a MRIdian program live. So all of that felt very good to us. And we look forward to ASTRO coming up in the not-too-distant future.

Mike Ott -- Oppenheimer and Company -- Analyst

Great. Thanks so much for taking my questions, guys.

Scott Drake -- President and Chief Executive Officer

Thanks, Mike.

Operator

[Operator instructions] There are no further questions at this time. Scott Drake, I will turn the call back over to you.

Scott Drake -- President and Chief Executive Officer

Thanks, operator, and thanks, everybody, for joining our call. We appreciate it. Look forward to checking in with you in another 90 days. Have a good afternoon.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Matt Harrison -- Director of Investor Relations

Scott Drake -- President and Chief Executive Officer

Zach Stassen -- Chief Financial Officer

Rick Wise -- Stifel Financial Corp. -- Analyst

Sam Eiber -- BTIG -- Analyst

Jason Bednar -- Piper Sandler -- Analyst

Unknown speaker -- Morgan Stanley -- Analyst

Mike Ott -- Oppenheimer and Company -- Analyst

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