Shares of Accuray Inc. ARAY fell 3.3% in after-hours trading following the company’s third-quarter fiscal 2016 results and trimmed fiscal 2016 guidance. The company narrowed the high end of its previously announced revenue guidance owing to weakness in Japan, which is expected to hurt order conversion rates.Meanwhile, Accuray earned a penny in the quarter, comparing favourably with the Zacks Consensus Estimate of a loss of a nickel and the year-ago loss of 4 cents per share. The year-over-year improvement can be attributed to almost 8% revenue growth which totaled $105.3 million. The revenue figure was also better than the Zacks Consensus Estimate of $102 million. The upside in revenues was also driven by higher product sales that jumped 16% to almost $53.7 million. Both TomoTherapy and CyberKnife unit volumes increased with particularly strong TomoTherapy performance in EIMEA which was offset by lower product revenues in the Americas region. Service revenues inched up 0.8% to $51.5 million.Revenues from the Americas totaled $32.7 million, while the company garnered $72.6 million outside the region.Gross orders increased 9% year over year (18% at constant currency) to $64.9 million. Net orders totaled $58 million, up 60% on a year-over-year basis.Management noted an increasing number of orders for TomoTherapy systems. Accuray is winning orders from customers with single or dual vaults. Meanwhile, most of the orders for TomoTherapy came from community or regional hospitals.Age outs (orders that have not gone to revenue in 30 months since being recorded offset by orders going to revenue that were previously aged out) grossed $10.8 million in the third quarter. Notably, there were no order cancellations in the quarter.Product backlog was $370.5 million, which reflects a 7% increase on a year-over-year basis.Operating DetailsGross margin expanded 300 basis points (bps) on a year-over-year basis to 42.7%, driven by higher product margin (up 400 bps) and service margin (up 200 bps).Meanwhile, adjusted EBITDA surged 40.8% from the year-ago quarter to $13.9 million. The improvement was buoyed by higher revenues and stringent direct cost control.As a percentage of revenues, research and development (R&D) and selling & marketing (S&M) declined 60 bps and 140 bps, respectively. General & administrative (G&A) expenses increased 110 bps to 13%.As a result, Accuray reported operating income of $5.4 million, as compared with $1.2 million posted in the year-ago quarter.GuidanceAccuray now projects fiscal 2016 total revenues in the range of $395–$405 million as compared with the earlier guided range of $395–$410 million. Gross order is now expected between $280 million and $290 million, down from the earlier guidance of $295 million.This reflects 5% to 8% growth, driven by continued penetration and market share gains by the TomoTherapy system in single and dual vault accounts. Additionally, continued momentum in replacement sales and improvement in CyberKnife system sales are expected to drive growth in the fourth quarter.Adjusted EBITDA is anticipated in the range of $25–$30 million, down from the previous forecast of $25–$35 million. The company also anticipates positive cash flow for fiscal 2016.Zacks Rank & Key PicksCurrently, Accuray has a Zacks Rank #3 (Hold).Better-ranked stocks in the medical instruments industry include Exactech EXAC, Hologic HOLX and Inogen INGN. All the three stocks carry a Zacks Rank #2 (Buy). Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report HOLOGIC INC (HOLX): Free Stock Analysis Report ACCURAY INC (ARAY): Free Stock Analysis Report INOGEN INC (INGN): Free Stock Analysis Report EXACTECH INC (EXAC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research