Q1 2025 Elekta Earnings Call

Speaker #1: However, the rolling 12-month book-to-bill ratio remains at 1.09, reflecting a healthy business environment. Net sales increased by 3% in constant currencies, mainly driven by continued strong momentum in Europe, where our latest linear accelerator, Elekta EVO, and our new software suite, Elekta One, are gaining traction.

Jonas Bolander: However, rolling 12-month book-to-bill remains at 1.09, reflecting a healthy business environment. Net sales increased by 3% in constant currencies, mainly driven by continued strong momentum in Europe, where our latest linear accelerator, Elekta EVO, and our new software suite, Elekta One, are gaining traction as online adaptive treatment capabilities continue to set new benchmarks in the market. The adjusted gross margin declined to 37% compared to 37.8% last year, mainly driven by changes in FX and tariff cost, with a total negative impact of 190 basis points. The negative impact was partly offset by price improvement. The adjusted EBIT margin amounted to 6.5% compared to 7.4% last year. The lower adjusted EBIT margin derives mainly from the gross margin and increased expenses from net R&D. However, the negative effect was partly offset by lower selling and administrative expenses, reflecting the positive effect from cost-saving initiatives.

Speaker #1: As online adaptive treatment capabilities continue to set new benchmarks in the market, the adjusted gross margin declined to 37% compared to 37.8% last year, mainly driven by changes in FX and tariff costs.

Speaker #1: With a total negative impact of 190 basis points, the negative impact was partly offset by price improvement. The adjusted EBIT margin amounted to 6.5% compared to 7.4% last year.

Speaker #1: The lower adjusted EBIT margin derives mainly from the gross margin and increased expenses from our net R&D. However, the negative effect was partly offset by lower selling and administrative expenses, reflecting the positive effect from cost-saving initiatives.

Speaker #1: Moving to the cash flow for the first quarter, the operating cash flow after continuous investments amounted to negative SEK 361 million, an improvement of SEK 529 million year over year, mainly driven by improved working capital management.

Jonas Bolander: Moving to the cash flow for the first quarter, the operating cash flow after continuous investments amounted to negative SEK 361 million, an improvement by SEK 529 million year over year, mainly driven by improved working capital management. Moving to the next slides, where I will give you more details regarding sales and market development during the quarter. In constant exchange rate, group sales increased by 3% year over year. Americas sales declined by 4% in constant exchange rates compared to the last year, when the region grew by 16%. The stable development in Latin America was fully offset by lower sales in North America, where U.S. volume declined mainly as a result of customers awaiting the Elekta EVO clearance. APAC sales declined by 4% in constant exchange rates, mainly due to lower volumes in China and India. Chinese sales were negatively impacted by last year's weak order intake.

Speaker #1: Moving to the next slides, where I will give you more details regarding sales and market development during the quarter. In constant exchange rate, group sales increased by 3% year-over-year.

Speaker #1: America's sales declined by 4% in constant exchange rates compared to last year, when the region grew by 16%. The stable development in Latin America was fully offset by lower sales in North America, where U.S.

Speaker #1: Volume declined mainly as a result of customers awaiting the Elekta EVO clearance. APEC sales declined by 4% in constant exchange rates, mainly due to lower volumes in China and India.

Speaker #1: Chinese sales were negatively impacted by last year's weak order intake. Sales in EMEA increased by 15% in constant exchange rates compared to last year, driven by strong performance in Europe, supported by new product launches.

Jonas Bolander: Sales in EMEA increased by 15% in constant exchange rate compared to the last year, driven by strong performance in Europe, supported by new product launches. We saw a strong growth in countries like France, UK, and Poland. As you can see in this slide, EMEA is now the biggest region with 40% of the group's total sales. During the quarter, we can clearly see how our adaptive capabilities across all our products are generating concrete customer wins. If you go to Elekta Unity, we have noted that the ERECT trial, which demonstrates Elekta Unity's capability to treat prostate cancer while preserving the erectile function, has gained significant attention. University of Texas Southwestern is the second bullet, where we also celebrated an important and comprehensive deal, including some of our most advanced solutions to the University of Texas Southwestern.

Speaker #1: We saw strong growth in countries like France, the UK, and Poland. As you can see in this slide, EMEA is now the biggest region, comprising 40% of the group's total sales.

Speaker #1: During the quarter, we can clearly see how our adaptive capabilities across all our products are generating concrete customer wins. If you go to Elekta Unity, we have noted that the direct trial, which demonstrates Elekta Unity's capability to treat prostate cancer while preserving erectile function, has gained significant attention.

Speaker #1: University of Texas Southwestern is the second bullet, where we also celebrated an important and comprehensive deal, including some of our most advanced solutions to the University of Texas Southwestern.

Speaker #1: UT Southwestern is at the very forefront of radiotherapy, and, as a long-standing partner to Elekta, we are very proud that our solutions will be taking cancer care to the next level in terms of ultra-hypofractionation.

Jonas Bolander: UT Southwestern is at the very forefront of radiotherapy and a long-standing partner to Elekta, and we are very proud that our solutions will be taking cancer care to the next level in terms of ultra-high hyperfractionation. During the quarter, the last bullet, the Leksell Gamma Knife received FDA clearance for treating certain types of epilepsy. This is an important step towards expanding the scope of stereotactic radiosurgery. Elekta is the global market leader in neuro, and this is a highly profitable business segment for us. Neuro, with our Leksell Gamma Knife, plays an important role when treating certain cancer types, where it improves outcomes and ensures a better quality of life.

Speaker #1: And the last slide then, during the quarter, or the last bullet, during the quarter, the Excel Gamma Knife received FDA clearance for treating certain types of epilepsy.

Speaker #1: This is an important step towards expanding the scope of stereotactic radiosurgery. Elekta is the global market leader in Europe, and this is a highly profitable business segment for us.

Speaker #1: Neuro, with our Excel Gamma Knife, plays an important role in treating certain cancer types, where it improves outcomes and ensures a better quality of life.

Speaker #1: During recent years, we have, as you know, been accelerating innovation, and therefore we are very glad for the positive customer response to our recently launched solutions, Elekta EVO, our software Elekta One Planning, and the Elekta One Online.

Jonas Bolander: During recent years, we have, as you know, been accelerating innovation, and we are therefore very glad for the positive customer response for our recently launched solutions, Elekta EVO, and our software, Elekta One Planning, and the Elekta One Online. During the quarter, we have seen several deals, including both Elekta EVO and Elekta One, showcasing the great value Elekta offered to its customers. We will continue this journey and leverage our leading product portfolio to drive profitable growth going forward. With the current geopolitical landscape, we want to take the opportunity once again to remind you about exposure to U.S. tariffs. Elekta sales in the U.S. market, roughly 21% of total sales, include approximately one-third devices, one-third software, and one-third of service. We communicated that our exposure already in the fourth quarter and that we expected an impact from tariffs in Q1.

Speaker #1: During the quarter, we have seen several deals, including both Elekta EVO and Elekta One, showcasing the great value Elekta offered to its customers. We will continue this journey and leverage our leading product portfolio to drive profitable growth going forward.

Speaker #1: So, with the current political landscape, we want to take the opportunity once again to remind you about exposure to U.S. tariffs. Elekta's sales in the U.S.

Speaker #1: Our market, roughly 21% of total sales, includes approximately one third devices, one third software, and one third services. We communicate that, with our exposure already in the fourth quarter, we expect an impact from tariffs in Q1.

Speaker #1: After reporting our first quarter, we now have a better view of the magnitude of the negative impact from tariffs. In the first quarter, additional tariffs compared to last year amounted to 33 million Swedish kronor, and tariffs had a negative impact on the adjusted gross margin of 90 basis points.

Jonas Bolander: After reporting the first quarter, we now have a better view of the magnitude of the negative impact from tariffs. In the first quarter, additional tariffs compared to last year amounted to SEK 33 million, and tariffs had a negative impact on the adjusted gross margin of 90 basis points. For Q2, we expect continuous negative impact on the gross margin. We are trying and working hard to offset these extra costs in various ways. We have implemented a specific tariff clause in our contract. We work on prices, improving our sourcing efficiency, and are adjusting our cost base. For prices, we are continuously adjusting our prices, as we have done for quite some time. Also, when Elekta EVO is launched in the U.S. market, their prices will be adjusted in accordance to the product being in the premium segment.

Speaker #1: For Q2, we expect a continuous negative impact on the gross margin. We are trying and working hard to offset these extra costs in various ways.

Speaker #1: We have implemented a specific tariff clause in our contract. We work on prices, improving our sourcing efficiency, and adjusting our cost base. For prices, we are continuously adjusting our prices, as we have done for quite some time.

Speaker #1: Also, when EVO is launched in the U.S. market, prices will be adjusted in accordance with the product being in the premium segment. Overall, we are closely following the market development and are actively trying to manage the situation in the best possible way.

Jonas Bolander: Overall, we are closely following the market development and are actively trying to manage the situation in the best possible way. With that, I will now hand over to Tobias for the financials. Thank you, Jonas. Good morning, everyone. Let's look into the first quarter. During the first quarter, net sales increased by 3% in constant exchange rates. Solution sales increased by 1%, and service grew by 4%. As Jonas previously mentioned, our product launches in Elekta EVO and Elekta One had a continuous positive contribution to the growth in the quarter. The adjusted gross margin amounted to 37%, with a negative impact from foreign exchange rates and increased tariffs costs. Price improvements continued in the quarter.

Speaker #1: With that, I will now hand over to Tobias for the financials.

Speaker #2: Thank you, Jonas, and good morning, everyone. Let's look into the first quarter. During the first quarter, net sales increased by 3% in constant exchange rates.

Speaker #2: Solution sales increased by 1%, and service grew by 4%. As Jonas previously mentioned, our product launches in Elekta EVO and Elekta ONE had a continuous positive contribution to the growth in the quarter.

Speaker #2: The adjusted gross margin amounted to 37%, with a negative impact from foreign exchange rates and increased tariff costs. Price improvements continued in the quarter.

Speaker #2: The adjusted EBIT margin amounted to 6.5%, corresponding to a year-over-year decrease of 90 basis points, driven by the lower gross margin and higher net R&D costs.

Jonas Bolander: The adjusted EBIT margin amounted to 6.5%, corresponding to a year-over-year decrease of 90 basis points, driven by the lower gross margin and higher net R&D cost, while the SG&A costs were down compared to last year. Net income amounted to SEK 106 million, and adjusted earnings per share amounted to SEK 0.31. Let's look into the different billing blocks for the year-over-year adjusted EBIT development. Overall, as I just mentioned, the adjusted EBIT margin declined to 6.5% in Q1. Our gross margin declined to 37%, with a negative impact of 190 basis points from FX and additional tariffs cost. We have continued to improve our price levels with support from general price increases, as well as from newly launched products. In the first quarter, expenses declined by 4% and admin expenses by 3% in constant exchange rates.

Speaker #2: While the SG&A costs were down compared to last year, net income amounted to 106 million SEK, and adjusted earnings per share amounted to 0.31 SEK.

Speaker #2: Then, let's look into the different building blocks for the year-over-year adjusted EBIT development. Overall, as I just mentioned, the adjusted EBIT margin declined to 6.5% in Q1.

Speaker #2: Our gross margin declined to 37%, with a negative impact of 190 basis points from FX and additional tariff costs. We have continued to improve our price levels, supported by general price increases as well as newly launched products.

Speaker #2: In the first quarter, expenses declined by 4%, and admin expenses by 3% in constant exchange rates. The decline in SG&A costs is mainly related to the cost reduction initiative totaling 280 million SEK on an annual basis, implemented during last year.

Jonas Bolander: The decline in SG&A cost is mainly related to the cost reduction initiative, totaling SEK 280 million on an annual basis implemented during last year. Net R&D cost increased by 17% in constant exchange rates. This is due to higher amortization and lower capitalizations, while our gross R&D declined year over year. I will explain the FX movements in the quarter to facilitate understanding how it impacts Elekta's P&L. Our reporting currency is the Swedish krona, and what we have seen recently is the strengthening of the Swedish krona versus our main revenue currencies, U.S. dollar and euro. This leads to lower revenues and earnings in SEK, everything else equal. Secondly, we have more revenue than cost in U.S. dollar. The depreciation of the U.S. dollar versus our main cost currency, euro and pounds, has led to an unfavorable currency transactional impact in the quarter.

Speaker #2: Net R&D costs increased by 17% in constant exchange rates. This is due to higher amortization and lower capitalizations, while our gross R&D declined year over year.

Speaker #2: Then I will explain the FX movements in the quarter to facilitate understanding of how it impacts Elekta's P&L. Our reporting currency is the Swedish krona, and what we have seen recently is a strengthening of the Swedish krona versus our main revenue currencies, the US dollar and euro.

Speaker #2: This leads to lower revenues and earnings in SEK, everything else being equal. Secondly, we have more revenue than cost in US dollars. The depreciation of the US dollar versus our main cost currencies, the euro and pounds, has led to an unfavorable currency transactional impact in the quarter.

Speaker #2: We will continue to work with price improvements and productivity enhancements to mitigate FX headwinds. Let's then have a look at the cash flow development.

Jonas Bolander: We will continue to work with price improvements and productivity enhancements to mitigate FX headwinds. Let's then have a look at the cash flow development. In the season of weak first quarter, cash flow after continuous investments improved by more than SEK 500 million year over year to negative SEK 361 million. The improvement was mainly driven by the improvement in working capital, in particular operating receivables. Net working capital, as a percentage of net sales, amounted to negative 7%. Lower investments contributed positively as well. Rolling 12 months cash conversion amounted to 92%, which is well above our target of 70%. We also want to share the development of some key financial metrics: net sales, gross margin, EBIT margin, and operating cash flow, which are all key metrics for Elekta AB to deliver profitable growth.

Speaker #2: In the seasonal week of the first quarter, cash flow after continuous investments improved by more than 500 million SEK year-over-year to negative 361 million.

Speaker #2: The improvement was mainly driven by the enhancement in working capital, in particular operating receivables. Net working capital as a percentage of net sales amounted to negative 7%.

Speaker #2: Lower investments contributed positively as well. The rolling 12-month cash conversion amounted to 92%, which is well above our target of 70%. We also want to share the development of some key financial metrics.

Speaker #2: Net sales, gross margin, EBIT margin, and operating cash flow are all key metrics for Elekta to deliver profitable growth. Although net sales on a rolling 12-month basis are relatively flat year over year, we see a positive trend for the gross margin and EBIT margin, in line with our ambitions to move the gross margin to pre-pandemic levels and achieve an EBIT margin of 14% and higher.

Jonas Bolander: Although net sales on a rolling 12-month basis is relatively flat year over year, we see a positive trend for the gross margin and EBIT margin in line with our ambitions to move the gross margin to pre-pandemic levels and an EBIT margin of 14% and higher. Additionally, we have seen a positive development for the operating cash flow, and we have delivered significant improvement year over year. With that, I hand over to you, Jonas. Thank you very much, Tobias. Now focusing on our outlook for Q2 and the fiscal year 2025-2026. We expect net sales for Q2 to be negatively impacted by a continued weak U.S. development, as well as a negative effect from last year's low order intake in China. However, we expect sales in China to start to recover during the second half of 2025-2026.

Speaker #2: Additionally, we have seen a positive development in operating cash flow, and we have delivered significant improvement year over year. With that, I hand it over to you, Jonas.

Speaker #1: Thank you very much, Tobias. Now focusing on our outlook for Q2 and the fiscal year 2025-2026. We expect net sales for Q2 to be negatively impacted by a continued weak U.S.

Speaker #1: Development, as well as a negative effect from last year's low order intake in China. However, we expect sales in China to start to recover during the second half of Q1 2025.

Speaker #1: Furthermore, we expect a continuous negative impact on earnings from FX at current exchange rates and from tariffs in Q2. We reiterate our full-year 2025-2026 outlook, where we expect net sales in constant currency to grow year over year.

Jonas Bolander: Furthermore, we expect continuous negative impact on earnings from FX at current exchange rate and from tariffs in Q2. We reiterate our full year 2025-2026 outlook, where we expect net sales in constant currency to grow year over year. To summarize the first quarter 2025-2026, we continue to deliver solid performance in Europe, supported by product launches. We had a lower gross margin compared to last year, driven by changes in FX and tariffs, with an impact of 190 basis points in total. However, it was partly offset by price improvements through price increases and new product launches. Cash flow after investments improved by SEK 529 million year-over-year, driven by improved working capital. Thank you.

Speaker #1: So, to summarize the first quarter 25-26: we continue to deliver solid performance in Europe, supported by product launches. We had a lower gross margin compared to last year, driven by changes in FX and tariffs, with an impact of 190 basis points in total.

Speaker #1: However, it was partly offset by price improvements through price increases and new product launches. Cash flow after continuous improvement increased by $529 million year over year, driven by improved working capital.

Speaker #1: Thank you.

Speaker #2: Thank you, Jonas. And thank you, Tobias, for that presentation. Before handing over to the Q&A, here you can see the updated financial calendar. Next week, we have the ADM here in Stockholm, and then we will report our Q2 numbers on November 26.

Peter: Thank you, Jonas, and thank you, Tobias, for that presentation. Before handing over to the Q&A, here you can see the updated financial calendar. Next week we have the AGM here in Stockholm, and we will report our Q2 numbers on November 26. With that said, I would like to connect to the operator. We're now opening for Q&A. Please, operator.

Speaker #2: So, with that said, I would like to connect to the operator. We're now open for Q&A. So, please, operator.

Speaker #3: Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone.

Operator: Thank you very much. Ladies and gentlemen, we'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. The first question from the phone comes from Alcafel Hassan with Barclays. Please go ahead.

Speaker #3: The first question from the phone comes from Al-Kaval Hassan with Barclays. Please go ahead.

Speaker #4: Good morning, Hassan. Hi, good morning, and thank you for taking my questions. A couple from me, please. Firstly, if you could elaborate on the Q2 softer dynamics and how we should think about growth and margin expansion, if at all, in Q2, given tariff, FX headwinds, but also U.S.

Tobias: Morning, Hassan.

Hassan: Hi, good morning, and thank you for taking my questions. A couple from me, please. Firstly, if you could elaborate on the Q2 softer dynamics and how we should think about growth and margin expansion, if at all, in Q2, given tariff, FX headwinds, but also U.S. and China softness persisting. Secondly, if you could provide any update on when we should expect the EVO approval in the U.S., when you're expecting that, given that volumes continue to be impacted. Related to this, whether you think that U.S. weakness could be driven by anything else, maybe a weaker backdrop or share losses. Thank you.

Speaker #4: And China softness is persisting. Secondly, could you provide any update on when we should expect the EVO approval in the U.S.? When are you expecting that?

Speaker #4: Given that volumes continue to be impacted, and related to this, whether you think that U.S. weakness could be driven by anything else, maybe a weaker backdrop or share losses.

Speaker #4: Thank you. Maybe Tobias, you can start with the financial question, and then Jonas can address the FDA approval.

Tobias: Maybe, Tobias, you can start with the financial question and then Jonas on the FDA approval.

Speaker #2: Yes, absolutely. Good morning, Hassan. I will start covering your first question. Yes, so in our interim report here, what we have stated is that we do see a pressure in the second quarter on our revenues from China and the U.S.

Jonas Bolander: Yes, absolutely. Good morning, Hassan, and I will start covering your first question. Yes, you saw in our interim report here and what we have stated is that we do see here pressure in the second quarter on our revenues here from China and U.S. What we also see is that we see a recovery of the growth in China in the second half of this fiscal year. When you talk about the pressure here from the tariffs, we communicated now, as we know, the impact, and I think that you can assume the same level of margin impact from tariffs throughout the year. Obviously, with saying that, it's also important to say that we are not standing still. Of course, that we, as a company, just as Jonas mentioned here, will in different ways manage this.

Speaker #2: What we also see is that we see a recovery of the growth in China in the second half of this fiscal year. When you talk about the pressure here from the tariffs, we communicated now as we know the impact, and I think that you can assume the same level of margin impact from tariffs throughout the year.

Speaker #2: Then, obviously, with the saying that, it's also important to say that we are not standing still. So, of course, as a company, we will, in different ways, manage this, just as Jonas mentioned here.

Speaker #2: It will be via prices, it will be via optimizing our supply chain, and also productivity enhancements. So those measures are along the way. But as you know, it's also something that we are working through.

Jonas Bolander: It will be via prices, it will be via optimizing our supply chain, and also productivity enhancements. Those measures are along the way, but as you know, it's also something that we are working through. That's how I will mention and also state that the Q4 results that we presented here, which was an important milestone of driving profitable growth and enhancing the gross margin over time, that lies firm, and that is the work that we will continue to do.

Speaker #2: So that's how I will mention. And also state that the Q4 results we presented here, which were an important milestone in driving profitable growth and enhancing the gross margin over time, lie firm.

Speaker #2: And that is the work that we will continue to do.

Speaker #4: Thank you, Tobias and Jonas.

Tobias: Thank you, Tobias and Jonas.

Speaker #2: Thank you, by the way, for the question. If we then go to EVO approvals, you know, we talked a bit about that before. We changed our strategy with respect to the EVO approvals and so on, where we have a more efficient strategy today.

Jonas Bolander: Thank you, by the way, for the question. If we then go to EVO approvals, you know we talked a bit about that before. We changed our strategy with respect to the EVO approvals and so on, where we have a more efficient strategy today. EVO approvals have been resubmitted. We're working with the FDA. We hope that we get the products cleared sooner rather than later, but we don't know which timeline we can promise that on. Sorry, I honestly can't give you an answer on that. You were asking also about if we see anything else in the U.S. market. Maybe you know a bit of temporary wait and see in the U.S. relating to tariffs and tariff impact and so on. Maybe we start to see a bit of that. It gets slightly more complicated due to the tariff exposure there.

Speaker #2: EVO approvals have been resubmitted. We're working with the FDA, and we hope to get the products cleared sooner rather than later, but we don't know which timeline we can promise that on.

Speaker #2: So sorry, I honestly can't give you an answer on that. And then you were asking also about if we see anything else in the U.S.

Speaker #2: Market. You know, maybe there’s a bit of temporary wait-and-see in the U.S. relating to tariffs and their impact and so on.

Speaker #2: So maybe we start to see a bit of that. It gets slightly more complicated due to the tariff exposure there.

Speaker #4: Thanks, Jonas. Thanks, Hassan. For those questions, we'll move to the next question. Please, operator.

Tobias: Thanks, Jonas. Thanks, Hassan, for those questions. We'll move to the next question. Please, operator.

Speaker #3: The next question from the phone comes from Castle Eric with Danske Bank. Please go ahead.

Operator: The next question from the phone, counselor on Castle Eric with Danske Bank. Please go ahead.

Speaker #4: Good morning, Eric. Hi, good

Tobias: Morning, Eric.

Speaker #5: Hello, good morning.

Eric: Hello, good morning. Hi, good morning. First question, EMEA is doing really great, really carrying the group long-term margins. I think it was up some 5% at this point this quarter and has been doing really well for the past three. I was just going to ask, how much would you say that has been driven by mix effects from, if you can sort of split it up between software and EVO, how much of a driver each, say, software and hardware has been?

Speaker #4: morning.

Speaker #5: So, first question, EMEA is doing really great, really carrying the group now in terms of margins. I think it was up some 5% at this point this quarter and has been doing really well for the past three.

Speaker #5: So, I was just going to ask: how much would you say there has been driven by mixed effects from—if you can sort of split it up between software and EVO—how much of a driver each, say, software and hardware, has been?

Speaker #2: I think looking at the development of what we see in EMEA, it's clear to state that we have been in an investment period here, investing in our R&D portfolio and the innovation pipeline.

Jonas Bolander: I think looking at the development of what we see in EMEA, it's clearly stated that we have been in an investment period here and investing in our R&D portfolio and the innovation pipeline here. What we see in EMEA is clearly the result of that. The leading indicator here and the driver of the improvement in EMEA is led by our new products, Elekta EVO and Elekta One Online, and the software in general. That is key for us to both, of course, drive revenues, but equally important to drive the profitable growth and drive the gross margin expansion. That has absolutely been the most important factor in the EMEA region. It's backed up by the newly launched products.

Speaker #2: And what we see in EMEA is clearly the result of that. So, clearly the leading indicator here and the driver of the improvement in EMEA is led by our new products Elekta EVO and Elekta Online, and the software in general.

Speaker #2: And that is key for us to both, of course, drive revenues, but equally important to drive profitable growth and drive gross margin expansion.

Speaker #2: So that has absolutely been the most important factor in the EMEA region. It's backed up by the newly launched products.

Speaker #5: Okay, but can it be said anything if it's a majority of software or a majority of hardware? That's driving margins?

Eric: Okay, can it be said anything if it's a majority of software or majority hardware as driving margins?

Speaker #2: You You know what, yeah, I think it's I think it's both. When it comes to the our Elekta EVO, it's clearly that it's it is an enhanced customer and patient's value which clearly contributes both to enhance customer value but for also the shareholders, it means better margin.

Jonas Bolander: You know what? Yeah, I think it's both. When it comes to our Elekta EVO, it's clear that it is an enhanced customer and patient value, which clearly contributes both to enhanced customer value, but for also the shareholders, it means a better margin. The software in general, we have seen here throughout the last fiscal year that we're running with strong growth, and the growth here continued here in the first quarter. We don't necessarily strip out the exact impact of each factor here, but it's both, I would say, and the key for us to drive the profitable growth.

Speaker #2: The software, in general, we have seen here throughout the last fiscal year that we're running with strong growth, and the growth here continued in the first quarter.

Speaker #2: So we don't necessarily strip out the exact impact of each factor here, but it's both, I would say, and a key for us to drive profitable growth.

Speaker #4: Thanks.

Speaker #5: Okay, and then you're talking about Q2 being weak on the back of the two accretive regions within Elekta, U.S. and China. First, are you able to commit to say that you will see organic growth in Q2, or should that be negative?

Eric: Okay, and then you're talking about Q2 being weak on the back of the two accretive regions within Elekta, US and China. First, are you able to commit to say that you will see organic growth in Q2, or should that be negative? If we are to assume that both of these high margin regions will see a decline in Q2, how much of a gross margin impact could we see from geographic mix?

Speaker #5: And secondly, if we are to assume that both of these high-margin regions will see a decline in Q2, how much of a gross margin impact could we see from geographic mix?

Speaker #2: Yeah, so as you know, we don't explicitly guide on specific quarters here in terms of exact margin levels or growth levels. But what we see here in the second quarter is clearly that it will be impacted by the China operations as well as the U.S.

Jonas Bolander: As you know, we don't explicitly guide on specific quarters here in terms of exact margin levels or growth levels, but what we see here in the second quarter is clearly that it will be impacted by the China operations as well as in the US. I think for that, you can assume that we do not expect to say organic growth in the second quarter, but more than that, I don't provide an outlook. As said, I think it's also key for us to structurally see the improvement here in EMEA backed up on the product launches. Therefore, as Jonas mentioned, it's key for us to run through the FDA approval in the US, and in China, we see growth for the revenues in the second half. That's how I would frame it.

Speaker #2: So I think for that, you can assume that we do not expect a sort of organic growth in the second quarter. More than that, I don't provide an outlook, but as said, I think it's also key for us to structurally see the improvement here in EMEA, backed up on the product launches.

Speaker #2: Therefore, yes, as Jonas mentions, it's key for us to run through the FDA approval in the U.S. and in China. We see growth here for the revenues in the second half.

Speaker #2: So that's how I would frame it. In terms of the gross margin, the mid-term outlook is the same, and we have had an important milestone here in the last quarter. Now we see some additional headwinds here in the first quarter.

Jonas Bolander: In terms of the gross margin, the midterm outlook is the same, and we have had an important milestone in the last quarter. Now we see some additional headwinds in the first quarter coming from tariffs and currencies, but the path lies firm, and for us, it's taking on that and building on the strong ending of last year and continuing to drive that. We have also great tools from the new products, which we will continue on a global level to roll out, combine them with the other measures in terms of price increases, and drive the commercial execution as well as with productivity enhancements.

Speaker #2: Coming here from tariffs and currencies, but the path here lies firm and for us it's taking on that and built on the strong ending of last year and continuing to drive that.

Speaker #2: And we have great tools here from the new products, which we will continue to roll out on a global level. We will combine them with other measures in terms of price increases and drive the commercial execution, as well as with productivity enhancements.

Speaker #4: Thanks, Tobias.

Tobias: Thanks, Tobias.

Speaker #5: Okay, thank you, Tobias. Just one.

Eric: Okay, thank you, Tobias. Just, yeah, one more note, Eric.

Speaker #4: Thank you.

Speaker #5: One more note, Eric. Last one. Yeah, thank you, thank you. Just on the tariff clauses and pricing offsets that you talked about, I know during the high inflation period you mentioned not being able to implement much on already one orders.

Tobias: Last one.

Eric: Yes, thank you. Just on the tariff clauses and pricing offsets that you talked about, I know during the high inflation period, you talked about not being able to implement much on already won orders. I was just going to ask if you have any freedom now to implement price increases on the orders that you've taken or only the new ones that you're going to take, leading to installation in, say, a year to sort of model the phasing of price increases.

Speaker #5: I was just going to ask if you have any freedom now to implement price increases on the orders that you've taken, or only on the new ones that you're going to take leading to installation in, say, a year, to sort of model the phasing of price increases.

Speaker #2: Eric, it's a bit of a mixed bag. I would say if you look at the order backlog that we already have, we deal with these orders on a case-by-case basis.

Jonas Bolander: Eric, it's a bit of a mixed bag. I would say if you look at the order backlog that we already have, we deal with this order on a case-by-case basis. We are successful in some instances, and in some instances, the customers already have the set budget and/or severe difficulties to pay additional amounts for it and so on. It is dealt with negotiation on a case-by-case basis.

Speaker #2: We are successful in some instances, and in some instances, the customers already had set, so there are severe difficulties to pay additional amounts for it and so on.

Speaker #2: So it's dealt with negotiation on a case-by-case basis.

Speaker #4: Thanks, Jonas.

Eric: Thanks, Jonas. Thanks, Eric. We will move to the next question. Please, operator.

Speaker #5: Thanks, Eric. We will move to the next question. Please, operator.

Speaker #3: The next question comes from Vasten Mathias with SEB. Please go ahead.

Operator: The next question comes from Basten Matthias with SEB. Please go ahead.

Speaker #4: Good morning, Mathias.

Tobias: Good morning, Matthias.

Speaker #5: Morning, Mathias.

Eric: Morning, Matthias.

Speaker #4: Good morning. Mathias Vasten from SEB. Thank you for taking my question. First one, and sorry if I recall incorrectly here, but I think you said in the Q4 call that China had a big book-to-bill of above 1 for the 2024-25 fiscal year.

Jonas Bolander: Good morning.

Eric: Thank you for taking my question. First one, and sorry if I recall incorrectly, but I think you said in the Q4 call that China had a book-to-bill of above one for the 2024-2025 fiscal year. How are you talking about this figure now, sort of book-to-bill last month? Also, a clarification as to why China is so weak here in the start of the year, what magnitude of a sales drop you saw in Q1, and maybe a bit more specific on what you see in Q2. That's the first one, and then I have one more.

Speaker #4: So how are you talking about this figure now, sort of book-to-bill over the last four months? And also, sort of a clarification as to why China is so weak here at the start of the year.

Speaker #4: What magnitude of a sales drop did you see in Q1, and maybe a bit more specific on what you see in Q2? So, that's the first one.

Speaker #4: And then I have one more. Okay, we'll start with that then.

Tobias: Okay, we will start with that then.

Speaker #2: Should I start, and then you can continue, Tobias?

Jonas Bolander: Should I start, and then you can continue, Tobias? Thank you very much for the question. As you know, we have had the anti-corruption campaign in China, and that meant that we did a lot of installations from our order book during that period in time, while orders were not where they were before the pandemic. We basically have a quite small order book in China today that we need to recover, and we see a pickup in the order book. However, if you compare it to the numbers that we had pre-pandemic, the order book is not on that level, so we need to, of course, get additional orders. We see now a clear pickup, and that's also why we look a bit more positive on the second half of this year.

Speaker #4: Thank you very much for the question. So as you know, you know we have had the anti-corruption campaign in China and so on. You know, and that meant that we did a lot of installations from our order book during that period in time.

Speaker #4: While orders were not where they were before the pandemic, we basically have quite a small order book in China today that we need to recover.

Speaker #4: And we see a pickup in the order book. However, you know, if you compare it to the numbers that we had pre-pandemic and so on, the order book is not on that level.

Speaker #4: You know, we need to, of course, get additional orders. But we see now a clear pickup, and that's also why we look a bit more positive on the second half of this year.

Speaker #4: And if you look at the cancer programs in China and the need in China, it's still quite large. So we are positive on that.

Jonas Bolander: If you look at the cancer programs in China, the need in China is still quite large, so we are positive on that, but it takes time to transform these orders into revenue as well, and we need more orders in order to get the sales there. Yeah.

Speaker #4: But it takes time to transform these orders into revenue as well. And so, we need more orders in order to get the sales there.

Speaker #2: Yeah, I think you're doing pretty well, Jonas, and just translating to some financial metrics. So two questions there: the book-to-bill ratio continues to be well above one, which is then actually creating the platform. However, we do expect the revenues to be down here in the second quarter.

Eric: I think you're pretty well, Jonas, and just translating to some financial metrics. To your question there, the book-to-bill ratio continues to be well above one, which is then actually creating the platform there. We do expect the revenues to be down here in the second quarter, and we are, as you say here, building up the backlog, and we have a strong presence in China by being by far the market leader. That is essential for us and something that we will continue.

Speaker #2: And we are, as you say, building up the backlog, and we have a strong presence in China by being, by far, the market leader. So that is essential for us and something that we will continue.

Speaker #4: Thanks. And Mathias, you had a second question. Right?

Tobias: Thanks. Matthias, you had a second question, right?

Speaker #5: Yeah, I had first a follow-up. Would you disclose what orders and sales were year-over-year in China for Q1?

Eric: I had first a follow-up. Would you disclose what orders and sales were here in China for Q1?

Speaker #2: No, we don't explicit shareholder, but we that we state that we see that the yeah, I can just repeat what I just said here and that the we see the pressure in China when it comes to revenues but also pickup here in the second half.

Jonas Bolander: No, we don't explicitly show them, but we therefore state that we see the pressure in China when it comes to revenues, but also pickup here in the second half.

Speaker #5: Okay, then my next question. On EMEA, I agree with the previous person speaking here that it's really carrying the group. So, organic sales growth of 16% in Q4 and 15% in Q1 year-over-year.

Eric: Okay, my next second question on EMEA, I agree with the previous person speaking here that it's really carrying the group. Organic sales growth of 16% Q4, 15% Q1 year-over-year. Should we extrapolate those kind of performances from coming quarters, maybe not Q4 as the comp is tougher, but should we extrapolate that kind of performance, or are you seeing anything else?

Speaker #5: Should we extract those kinds of performances from coming quarters, maybe not Q4 as the comp is tougher? But should we extrapolate that kind of performance, or are you seeing anything else?

Speaker #2: I think, you know, we have the momentum right now in the European region, and so now we see that continuing. It is a launch phase.

Jonas Bolander: I think, you know, we have the momentum right now in the European region, and we see that continue. It is a launch phase. We already start with that, and everything will not go in a straight line here, but the momentum is there, and the new products are well accepted. That is absolutely something that we are determined to continue to expand here in Europe as of now. When you expand the time horizon on a global level and utilize the great product offering here, it's also.

Speaker #2: We already start with that, and everything will not go in a straight line here, but the momentum is there, and the new products are well accepted. So that is absolutely something that we are determined to continue to expand here in Europe as of now. But then it's also, when you expand the time horizon on a global level, to utilize the great product offering here.

Speaker #4: And it's also.

Speaker #5: Thank you very much.

Eric: Thank you very much.

Speaker #2: Market of the market, you know, where we're launching the product on.

Jonas Bolander: Market of the market, you know, where we're launching the product on.

Speaker #5: Yes, yes.

Eric: Yes, yes.

Speaker #4: Thanks, Mathias. We move to the next question. Please, operator.

Tobias: Thanks, Matthias. We move to the next question. Please, operator.

Speaker #3: The next question comes from Gustavsson Sten with ABG. Please go ahead.

Operator: The next question comes from Gustaf Salford with ABG. Please go ahead.

Speaker #4: Inge Sten.

Speaker #5: Morning, Sten.

Tobias: Morning, Stein.

Speaker #4: Morning. I was wondering if you could give us some quantitative comments or color on order development by region. That would be very helpful. And then I have a follow-up question on the tariff impact, or maybe a clarification.

Jonas Bolander: Morning, Stein.

Eric: Morning. I was wondering if you could give us some quantitative comments or color on order development by region. That would be very helpful. I have a follow-up question on the tariff impact, or maybe a clarification. I think you said something like we should expect a similar level going forward. I assume you mean the 90 basis point impact. If you could give us some more color on the order activity by region, that would be very helpful.

Speaker #4: I think you said something like we should expect a similar level going forward. I assume you mean the 90 basis point impact, but maybe we can start with the first one. If you could give us some more color on the order activity by region.

Speaker #4: That would be very helpful.

Speaker #2: I'm sure that it would be helpful, but unfortunately, we don't disclose that. So, I'm sorry for that.

Jonas Bolander: I'm sure that it would be helpful, but unfortunately, we don't disclose that. I'm sorry for that.

Speaker #4: Okay, I understand.

Eric: Okay, I understand.

Speaker #2: And Tobias, do you want to?

Jonas Bolander: Tobias, do you want to take the second one?

Speaker #4: On.

Speaker #2: Take the second one.

Speaker #4: Yeah, I can say, but to help you out a little bit, I think what we see is, I mean, also related to the products, we see a very strong order development here in the EMEA region.

Eric: Yeah, I can say, but to help you out a little bit, I think what we see is, I mean, also related to the products, we see a very strong order development here in the EMEA region that we see, and that is backed up from the new launch products. That is very clear. In terms of the tariffs here, when I was talking about that, it's approximately this level of margin impact when you're talking about the gross impact from the tariffs. The coming quarters are a little bit bigger than Q1 as a quarter. In absolute terms, you will have a slightly more impact in absolute terms from the tariffs, but margin impact, it's about these levels that we see in the first quarter.

Speaker #4: That we see and that is backed up from the newly launched products, so that is very clear. In terms of the tariffs here, when I was talking about that, it's approximately this level of margin impact when you're talking about the gross impact from the tariffs.

Speaker #4: Then the coming quarters are a little bit bigger than Q1 as a quarter. So, in absolute terms, you will have a slightly more impact from the tariffs, but the margin impact is about at these levels that we see in the first quarter.

Speaker #4: Okay, Tobias.

Speaker #5: And would you say that this sales mix in America is a good representation for Q1 or what you show on that slide with 21% of sales coming from the U.S.?

Eric: Would you say that this sales mix in Americas is a good representation for Q1 or what you show on that slide with 21% of sales coming from the US and there's like one-third devices?

Speaker #5: and there's like one-third devices?

Speaker #2: Yes, I mean that is what we presented. Then, when you look at the Americas as a total share of or as a share of the total Elekta sales, obviously we want to grow.

Jonas Bolander: Yes, I mean, that is what we presented. When you look at the Americas as a share of the total Elekta sales, obviously, we want to grow. We want to grow in the U.S. and Americas, and the key here for us is to work through the FDA approval and work on that. It is, I mean, the U.S. is the single largest market in the world. Of course, we are also targeting here to utilize the strength of Elekta to further expand in the U.S. I think that, I mean, looking again here and built on the strength that we have and the momentum that we have in EMEA, which we are determined also to utilize on a global level. It is as Jonas said, it will be a country by country based here as we roll it out.

Speaker #2: We want to grow in the U.S. and Americas, and key here for us is to work through the FDA approval and work on that.

Speaker #2: And it's, I mean, the U.S. is the single largest market in the world, and of course, we are also targeting here to utilize the strength of Elekta to further expand in the U.S.

Speaker #2: But I think that, looking again here and building on the strengths that we have and the momentum that we have in EMEA, which we determine also to utilize on a global level.

Speaker #2: But it's as Jonas said, it will be a country-by-country basis here. And as we roll it out.

Speaker #4: Great, isn't there a risk that the tariffs or the impact on tariffs will be higher going forward once the EVO is approved? I assume there would be more solution sales there.

Eric: Great. Isn't there a risk that the tariffs or the impact from tariffs will be higher going forward once the EVO is approved? I assume there will be more solution sales there.

Speaker #2: Yeah, you are right in that sense that if we have stronger growth in the U.S., everything else equal, the more impact it will have from the tariffs as such.

Jonas Bolander: Yeah, you are right in that sense that if we have the stronger the growth in the U.S. is and everything else equal, the more impact it will come from the tariffs as such. I would also say that, I mean, here coming in with these new products will also mean different price levels. The net net of that will clearly be very positive.

Speaker #2: Then I would also say that, coming in with these new products will also mean different price levels. So the net effect of that will clearly be very positive.

Speaker #4: Of course. Great, Sten. Thank you for those questions. We'll

Eric: Of course.

Tobias: Great, Stein. Thank you for those questions.

Speaker #5: Thank you.

Eric: Thank you.

Speaker #4: move to the next question.

Tobias: will move to the next question.

Speaker #3: The next question comes from Lilibet Christopher with Carnegie. Please go ahead.

Operator: The next question comes from Christopher Lilliberg with Carnegie. Please go ahead.

Speaker #4: Morning, Christopher.

Tobias: Morning, Christopher.

Speaker #5: Morning, Christopher. Good morning. Hi. Now it's DMB Carnegie. I have a few questions. First, on orders, I understand you don't want to give details of the order growth, but is it possible to say anything about the backlog you have in China?

Eric: Morning, Christopher. Morning.

Christopher: Good morning. Hi. Now it's DMB Carnegie. I have a few questions. First, on orders, I understand you don't want to give details of the order growth, but is it possible to say anything about the backlog you have in China, how much smaller it is than the previous levels, and when you think you could be back at a more normal level?

Speaker #5: How much more is it than the previous levels? And when do you think you could be back at, yeah, a more normal level?

Speaker #2: If I start and then Tobias can continue. Thank you, by the way, Christopher. You know, it's not non-existing. I would say we still have a backlog in China and so on, but it's quite much smaller than the backlog we had pre-pandemic.

Jonas Bolander: If I start and then Tobias can continue. Thank you, by the way, Christopher. You know, it's not non-existing. I would say we still have a backlog in China and so on, but it's quite much smaller than the backlog we had pre-pandemic, as we kind of delivered, yeah, okay, on revenue during the anti-corruption campaign and so on. We clearly need to fill it up, but as we have a book-to-bill ratio well above one, we're quite confident that we're filling it up and that will be turned into revenue for the second half here.

Speaker #2: You know, as we kind of delivered okay on revenue during the anti-corruption campaign and so on. So we clearly need to fill it up, but as we have a book-to-bill ratio well above one, you know, we're quite confident that we're filling it up and that we'll be turned into revenue for the second half here.

Speaker #4: Yeah, I think.

Speaker #5: When it comes to orders in China, without mentioning any detailed figures, are you seeing a sequential gradual improvement? So that Q4 was better than Q3, and now Q1 is sequentially better than Q4?

Eric: Yeah.

Christopher: When it comes to orders in China, without mentioning any detailed figures, are you seeing a sequential gradual improvement? Q4 was better than third quarter, now Q1 sequentially were better than Q4, if you adjust for seasonality, of course.

Speaker #5: If you adjust for seasonality, of course.

Speaker #2: Yeah, we don't explicitly talk about the orders per SC, but in structural terms and what we have seen, I mean, we had quite a severe drop here from the anti-corruption campaign in terms of the order development.

Jonas Bolander: Yeah, we don't explicitly talk about the orders per se, but on the structural terms and what we have seen, I mean, we had a quite severe drop here from the anti-corruption campaign in terms of the order development. What we have seen now is that we are on a recovery path, and just as Jonas is saying, the book-to-bill is well above one, and that is the trajectory that we estimate to continue here.

Speaker #2: And then what we have seen now is that we are on a recovery path, and just as Jonas is saying, the book-to-bill is well above one, and that is the trajectory that we estimate will continue here.

Speaker #5: And with that in mind, even though you are cautious on sales and earnings, maybe in the second quarter, you may expect order growth to be back in positive territory now from the second quarter and then for the rest of the year.

Christopher: With that in mind, even though you are cautious on sales and earnings maybe in the second quarter, do you expect order growth to be back in positive territory now from the second quarter and then for the rest of the year?

Speaker #2: I mean, again, we don't explicitly talk about the orders per SC in the regions. But to your point, yes, we do expect that we can continue on the path here to have a book-to-bill above one, which actually then.

Jonas Bolander: I mean, again, we don't explicitly talk about the orders per se on the regions, but to your point, yes, we do expect that we can continue on the path here to have a book-to-bill above one, which actually.

Speaker #5: I mean, for the group, in the second quarter.

Christopher: I mean, for the group in the second quarter.

Speaker #2: Yeah, for the group. Okay, for the group. Yeah, again, when looking at the order development here for the group, we will continue to do so.

Jonas Bolander: Yeah, for the group. Okay, for the group. Again, when looking at the order development here for the group, we will continue to do so. We had, though, a fairly strong order pipeline here last year, but we aim to continue here to have a decent book-to-bill. In terms of the exact order development, what we can state here for the full year, we aim here an order growth.

Speaker #2: We had a fairly strong order pipeline here last year, but we aim to continue to have a decent book-to-bill ratio. In terms of the exact order development, what we can state here for the full year is that we aim for order growth.

Speaker #4: Okay, thanks, Tobias. Thanks, Christopher. We'll move on.

Tobias: Okay, thanks, Tobias. Thanks, Christopher.

Speaker #5: But short one, because we have a few more people actually asking questions. So, Christopher, please. Yeah, so you mentioned about tariffs. Will this impact remain for the rest of the year, more or less?

Christopher: I ask another one.

Tobias: A short one because we have a few more people actually asking questions. A short one, Christopher, please.

Christopher: Yeah, you mentioned about tariffs. Will this impact remain for the rest of the year, more or less? Is it the same with FX as currencies is now if you look at the current spot rates?

Speaker #5: Is it the same with FX as currencies is now if you look at the current spot rates?

Speaker #2: No, no. The currencies are a bit different. So what you actually see is that these currency moves that we saw last year will then be in the comparable.

Jonas Bolander: No, the currencies is a bit different. What you actually see is that these currency moves that we saw last year will then be in the comparable. The negative currency impact that you saw here in the first quarter will gradually decline with the current levels that we have in terms of FX. The FX headwind, if you call it as such, will go down gradually for the coming quarters in this fiscal year.

Speaker #2: So the negative currency impact that you saw here in the first quarter will gradually decline with the current levels that we have in terms of FX.

Speaker #2: So the FX headwind, if you call it as such, will go down gradually for the coming quarters in this fiscal year.

Speaker #4: Great. Thank

Tobias: Great.

Speaker #5: Great, thank you.

Christopher: Great, thank you.

Speaker #4: You, Christopher. We'll move to the next question, please.

Tobias: Thank you, Christopher. We'll move to the next question, please.

Speaker #3: The next question comes from Reinberg Oliver with Kepler. Please go ahead, sir.

Operator: The next question comes from Oliver Reinberg with Kepler. Please go ahead, sir.

Speaker #4: Good morning, Oliver.

Tobias: Morning, Oliver.

Speaker #5: Morning, Oliver.

Jonas Bolander: Morning, Oliver.

Tobias: You're still there, Oliver? Can you hear us?

Speaker #4: You still there, Oliver? Can you hear us?

Speaker #5: Sorry, can you hear me now?

Jonas Bolander: Sorry, can you hear me now?

Speaker #4: We can hear you perfectly.

Tobias: We can hear you perfectly.

Speaker #5: Morning, Oliver. Perfect, good morning. Thanks so much. I just want to expand on the last question. I mean, can you provide us any kind of color on what currency impact you expect for the full year?

Jonas Bolander: Morning, Oliver.

Tobias: Perfect. Good morning. Thanks so much. I just wanted to expand on the last question. Can you provide us any kind of color what currency impact you expect for the full year? As part of that, can you also give us any kind of flavor after the margin decline in Q1 and Q2 not looking potentially much better? Do you still see a chance for a margin expansion for the group in the full year? That would be question number one. Secondly, just on R&D, I think gross R&D came down quite a bit. Can you provide some kind of color where do you see gross R&D as a percentage of sales for the full year? I noted obviously that capitalization came down now, I think, to 46%. Is this a new one way that we can assume?

Speaker #5: And as part of that, can you also give us any kind of flavor after the margin decline in Q1 and Q2 not looking potentially much better?

Speaker #5: Do you still see a chance for margin expansion for the group in the full year? That would be question number one. And then secondly, just on the I think gross R&D came down quite a bit.

Speaker #5: Can you provide some kind of color regarding gross R&D as a percentage of sales for the full year? And I noted, obviously, that capitalization came down now, I think, to 46%.

Speaker #5: Is this actually a new one way that we can assume? And if you can give us a kind of color on normalization for the full year, please.

Tobias: If you can give us a kind of color on amortization for the full year, please. Thank you. I think, Tobias, that's a good start for you.

Speaker #5: Thank you.

Speaker #4: I think, Tobias, that's a good start for you.

Speaker #2: Yes, sorry, the first question there, Oliver. What was that?

Jonas Bolander: Yes, sorry, the first question there, Oliver, what was that?

Speaker #4: Currency impact full year.

Tobias: Currency impact full year.

Speaker #2: Yeah, the currency impact. No, so I mean, but to help you out here, you can basically see that, I mean, the levels that we, with the current currency rates that we have, that will gradually go down to essentially a wash in the fourth quarter. And then you sort of say if we're gradually going down in the quarters to come.

Jonas Bolander: Yeah, the currency impact. No, I mean, not to help you out here, you can basically see that, I mean, the levels that we, with the current currency rates that we have, that will gradually go down to essentially a wash in the fourth quarter. You sort of say it will gradually go down in the quarters to come. That has to do actually with then the currency levels. What you should look at here is predominantly the US dollar currency rate, the British pound, and the Swedish krona. What you see then in the comparables there is that basically in Q4 with the current levels is a wash. The currency impact here will gradually go down. That can sort of say help you in terms of modeling the currency impact. When you look at the gross R&D as such, yes, we expect that to go down.

Speaker #2: And that has to do, actually, with then the currency levels. What you should look at here is predominantly the US dollar currency rate, the British pound, and the Swedish krona.

Speaker #2: And what you see then in the comparables there is that basically in Q4, with the current levels, it is a wash. And then the currency impact here will gradually go down.

Speaker #2: So that can sort of say help you in terms of modeling the currency impact. When you look at the when you look at the gross R&D as such, yes, we expect that to go down.

Speaker #2: Maybe not as much as you saw here in Q1, but it will be lower as a percentage of sales year over year. And sorry, was there another question about the R&D?

Jonas Bolander: Maybe not as much as you saw here in Q1, but it will be lower as a percentage of sales year over year. Sorry, was there a more question about the R&D?

Speaker #4: Margin expansion for the full year as well.

Tobias: Margin expansion for the full year as well.

Speaker #2: Yeah, margin expansion for the full year. Yeah, so we have not stated explicit a margin guidance for the full year. Although I mean for us it's absolutely key to drive the profitable growth.

Jonas Bolander: Yeah, margin expansion for the full year. We have not stated an explicit margin guidance for the full year. Although, I mean, for us, it's absolutely key to drive the profitable growth. The midterm targets are still there, you know, and therefore, it is important now. We have been exposed here by some external headwinds, but for us, it's to manage these and continue here with the positive development on the price improvements, both from the new products with general price increases. We will, of course, continue with productivity enhancements, etc. That path lies firm in terms of the growth and the profitability development ahead.

Speaker #2: And the mid-term targets are still there, you know. Therefore, it is important now. We have been exposed here to some external headwinds, but for us, it's about managing these and continuing with positive development on the price improvements, both from the new products and with general price increases. We will, of course, continue with productivity enhancements, etc.

Speaker #2: So, that path lies firm in terms of the growth and the profitability development ahead.

Speaker #5: Okay, so despite you not guiding for it, you still see a chance for margin expansion in the full year?

Tobias: Okay, despite you're not guiding for, you still see a chance for a margin expansion in the full year?

Speaker #2: Yeah, again, we don't guide for that, but our ambition is crystal clear in what we want to do, and that is to drive profitable growth.

Jonas Bolander: Yeah, again, we don't guide for that, but our ambition is crystal clear in what we want to do, and that is to drive profitable growth.

Speaker #5: That's helpful. And on R&D, the capitalization came down now to 46%, which is quite an improvement from an earnings quality perspective. Is that something that we should take as a new one-way? And also, can you just guide on normalization for the full year?

Tobias: That's helpful. On R&D, the capitalization came down now to 46%, which is quite an improvement from an earnings quality perspective. Is that something that we should take as a new one way? Also, can you just guide on amortization for the full year? Is it still around SEK 800 to 850 million, please?

Speaker #5: Is it still around $800 to $850, please?

Speaker #2: Yeah, so in terms of the capitalization rate, it will be lower than last year, and it has to do with the maturity of the projects that we develop here.

Jonas Bolander: In terms of the capitalization rate, it will be lower than last year, and it has to do with the maturity of the projects that we develop here. In terms of the amortization, it will increase, and you will see a gradual increase to somewhat those levels that you just mentioned. I would say that in the lower range of that clearly.

Speaker #2: In terms of the amortization, it will increase, and you will see a gradual rise to somewhat those levels that you just mentioned.

Speaker #2: I would say that in the lower range of that, clearly.

Speaker #4: Okay, thanks, Oliver.

Tobias: Okay, thanks, Oliver.

Speaker #5: Okay, thanks so much.

Jonas Bolander: Okay, thanks so much.

Speaker #2: Thank you.

Speaker #4: Questions? Please next question.

Tobias: Thank you. Please, next question.

Speaker #3: The next question comes from Davis Robert with Morgan Stanley. Please go ahead.

Operator: The next question comes from Davis Robert with Morgan Stanley. Please go ahead.

Speaker #4: Good morning, Robert. Morning,

Tobias: Morning, Robert.

Speaker #5: Yes.

Speaker #4: Robert.

Jonas Bolander: Yes, speaking of questions.

Speaker #5: Second, second questions. Good morning. The question I had was just around the rebound in China sales. So, the second half of the year, when your conviction around that, is that based on actual orders you've already got?

Tobias: Morning. The question I had was just around the rebound in China sales through the second half of the year and your conviction around that. Is that based on actual orders you've already got? Is that based on tendering activity, conversation with customers? Just trying to get a sort of sense of the conviction level and your kind of confidence heading into H2. The second was just on sort of pricing and the backlog. I know you'd obviously canceled some orders as part of the capital markets day update. Could you just give us a sort of sense of where pricing is sitting now versus that sort of pre-cancellation phase? Thank you.

Speaker #5: Is that based on tendering activity conversations with customers? Just trying to get a sort of sense of the conviction level and your confidence heading into H2.

Speaker #5: And then the second was just on sort of pricing in the backlog. I know you'd obviously canceled some orders as part of the Capital Markets Day update.

Speaker #5: If you could just give us a sort of sense of where pricing is sitting now versus that sort of pre-cancellation phase. Thank you.

Speaker #2: So rebound in China and you know it's both. Robert, you know we're we have a backlog that we are delivering on, but we also take new orders and we see quite positively on that for the second half.

Jonas Bolander: Rebound in China, and you know, it's both, Robert. You know, we have a backlog that we are delivering on, but we also take new orders, and we see quite positively on that for the second half. The next question was around.

Speaker #2: And then the next question was around.

Speaker #4: Pricing in the backlog.

Tobias: Pricing in the backlog.

Speaker #2: Pricing, yeah. Which quite helped us quite a bit, you know. So we have a positive pricing effect, but then it takes a bit of time to implement it and to get the price levels up.

Jonas Bolander: Pricing, yeah, which helped us quite a bit, you know. We have a positive pricing effect, but then it takes a bit of time to implement it and to get the price levels up. What we see has the biggest effect is the launch of our new products as well. We're getting there, and that really helped to get the prices in the order backlog up to a different level. Also adding to that, I mean, here what we have stated and what we have heard is that we have seen the price improvements on orders for quite some time. We have the backlog, and it takes some time to work it through in terms of that to be translated into the revenues.

Speaker #2: And what we see as the biggest effect is the launch of our new products as well. But we're getting there, and that really helped to get the prices in the order backlog up to a different level.

Speaker #4: And also adding to that, I mean here what we have stated and what you have heard is that we have seen the price improvements on orders for quite some time.

Speaker #4: Then we have the backlog, and it takes some time to work it through in terms of that to be translated into the revenues. But just as Jonas stated here, we continue with improved price levels, and that comes both from what we say, then book and installs throughout the year, but also gradually improving the price points in the backlog.

Jonas Bolander: Just as Jonas stated here, we continue with improved price levels, and that comes both, I mean, from what we said and booking installs throughout the year, but also gradually improving the price points in the backlog.

Speaker #4: Thanks, Tobias. Thanks, Jonas.

Tobias: Thanks, Tobias. Thanks, Jonas.

Speaker #5: Okay, that's great. Thank you. Thanks very much.

Christopher: Okay, that's great. Thank you.

Speaker #2: Thank you.

Speaker #4: So next question, please.

Tobias: Thanks, Robert. Next question, please.

Speaker #3: Next question comes from Germunda Ludwig with Handelsbanken. Please go ahead.

Operator: Next question comes from Germund and Ludwig with Handelsbanken. Please go ahead.

Speaker #4: Hey, Ludwig.

Tobias: Hey, Ludwig.

Speaker #2: Hey, Ludwig.

Jonas Bolander: Hey, Ludwig.

Speaker #5: Good morning. Ludwig, I'm from Handelsbanken. Thanks for taking my questions. I have two: the first one would be on your outlook as well.

Eric: Good morning. Ludwig Germund from Handelsbanken. Thanks for taking my questions. I have two. The first one would be on your outlook as well. Talking about China sales and your outlook that you expect a recovery in the second half of the year, can you tell us something about how confident are you in this statement, and could you tell us anything about the magnitude of recovery you expect? My second one would be on the cash flow. You have a non-cash item adjustment in the cash flow, which is under negative SEK 142 million for this quarter. Can you tell us anything about what makes up this post? Thank you.

Speaker #5: So, talking about China sales and your outlook that you expect the recovery in the second half of the year, can you tell us something about how confident you are in this statement? And could you tell us anything about the magnitude of recovery you expect?

Speaker #5: And my second one would be on the cash flow. You have a non-cash item adjustment in the cash flow, which is under negative $142 million for this quarter.

Speaker #5: Can you tell us anything about what makes up this post? Thank you.

Speaker #4: So, so, Jonas, if you say.

Jonas Bolander: Yes, we expect sales in China to grow the second half. We have quite solid order development in China with a positive book-to-bill. We expect that to continue, and we will convert the backlog plus new orders the second half. One note there that may be good to remember is that we had a weak sales development end of last year in China, so quite good comparison there. Your second question in terms of the non-cash item, it's predominantly FX and reevaluation of FX, what you see in that specific item.

Speaker #2: Yeah, so yes, we expect sales in China to grow second half. And you know we have quite solid order development in China with the positive book to bill.

Speaker #2: We expect that to continue, and we will convert the backlog plus new orders in the second half. Also, you know, one note there that may be good to remember is that we had a weak sales development at the end of last year in China.

Speaker #2: So quite good comparison there.

Speaker #4: And then your second question there, in terms of the non-cash item, it's predominantly FX and re-evaluation of FX, what you see in that specific item.

Speaker #4: Thanks. Okay, Ludwig.

Tobias: Thanks. Okay, Ludwig.

Speaker #5: Thank you. And if I can, can I just follow up on the outlook question? About the U.S., you mentioned the U.S. development to Q2, but we leave no comments about your expectation for the second half.

Eric: Thank you. If I can, can I just follow up on the outlook question about the US? You mentioned the US development for Q2, but you leave no comments about your expectation for the second half. Should we interpret this as you don't expect an FDA approval for EVO anytime soon?

Speaker #5: Should we interpret this as that you don't expect FDA approval for EVO in the near future?

Speaker #2: Sorry, I didn't hear.

Jonas Bolander: Sorry, I didn't hear.

Speaker #4: FDA approval in the U.S. In the second half.

Eric: FDA clearance in the U.S. in the second half.

Speaker #2: In the second half, yeah, no, you shouldn't interpret it that way. You know, as I mentioned, it's been resubmitted. We're working it through, and we will definitely let you know. In particular, we will let our customers know when we have it approved.

Jonas Bolander: In the second half, no, you shouldn't interpret it that way. As I mentioned, it's been resubmitted. We're working it through, and we will definitely let you know, and in particular, we will let our customers know when we have it approved. It's very difficult for us to predict the timeline on it, but it hopefully will be earlier than the second half.

Speaker #2: It's very difficult for us to predict the timeline on it. But hopefully, it will be earlier than the second half.

Speaker #4: Great, thanks. Thanks, Ludwig.

Tobias: Great, thanks. Thanks, Ludwig.

Speaker #2: Thank you, Ludwig.

Jonas Bolander: Thank you, Ludwig.

Speaker #4: Thanks. We'll move to the next question, please, operator.

Tobias: Thanks. We'll move to the next question, please, operator.

Speaker #3: The next question comes from Odou Julien with Bank of America. Please go ahead.

Operator: The next question comes from Odile Julien with Bank of America. Please go ahead.

Speaker #4: Good morning, Julien.

Tobias: Morning, Julien.

Speaker #5: Thank you very much. Thank you. Yeah, thank you. Good morning. Sorry to be annoying with China, but let me try again. No other company is basically betting on improvement in China, or at least doesn't have embedded anything in their guidance.

Eric: Thank you very much.

Tobias: Thank you very much.

Eric: Yeah, thank you. Good morning. Sorry to be annoying with China, but let me try again. No other company is basically betting on improvement in China, or at least doesn't have embedded anything in their guidance. Why is it different for you? Is it again imaging versus radiotherapy, or is there anything else that we haven't understood today? That's the first question. Just on your recent comment about EVO, maybe you hope that you're going to get the clearance in H2. Is there anything included in your guidance? Do you need the approval in H2 to meet the guide? That's the second question. Then just a third one very quickly, just to clarify your comment about the Q2 being weak, does it mean that margin won't expand year-over-year due to tariff and FX? Just wanted to make sure given the consensus has a pretty big margin expansion in Q2.

Speaker #5: So why is it different from you? Is it again imaging versus radiotherapy, or is there anything else that we haven't understood today? So that's the first question.

Speaker #5: Just on your recent comment about EVO, that, yeah, I mean maybe you hope that you're going to get the clearance in H2. Is there anything included in your guidance?

Speaker #5: I mean, do you need your approval in H2 to meet the guide? So that's the second question. And then just a third one very quickly.

Speaker #5: Just to clarify your comment about the two Qs being weak, does it mean that margin won't expand year over year due to tariffs and FX?

Speaker #5: Just wanted to make sure given the consensus has a pretty big margin expansion in Q2. Thank you.

Eric: Thank you.

Speaker #2: Should I start with China? Yeah, just to reiterate the message. You know, we have quite good insight into the market in China. And then, I guess you know it's better to be number one in China as well.

Jonas Bolander: Should I start with China? Yeah, just to reiterate the message, we have quite good insight in the market in China. I guess it's better to be number one in China as well, which kind of gives us hopefully a bit of better tailwind. We expect it to, we see good order intake. We expect it to be turned into revenue the second half. Still, quite meager order backlog. We need to build that continuously, but now we see that it's starting to fill up. In terms of the margin question here and in terms of, I mean, we, again, we don't specifically provide earnings guidance for a single quarter. What we just can say is that, I mean, we talked about the importance of gross margin expansion, and the work with that will continue.

Speaker #2: Which kind of gives us, hopefully, a bit of a better tailwind. So we expect it to, you know, we see good order intake. We expect it to be turned into revenue in the second half.

Speaker #2: But still, you know, quite a meager order backlog. So we need to build that continuously. But now we see that it's starting to fill up.

Speaker #4: Yeah, and then in terms of...

Speaker #2: The margin question here, in terms of, I mean, we again, we don't specifically provide earnings guidance for a single quarter. What we can say is that, I mean, we've talked about the importance of gross margin expansion, and the work with that will continue.

Speaker #2: In the first quarter here, we have had some headwinds, but the work here with improving the price level, utilizing the product offering, etc. will continue.

Jonas Bolander: In the first quarter here, we have had some headwinds, but the work here with improving the price level, utilize the product offering, etc., that will continue. That is what I can say in terms here in the NITO.

Speaker #2: So that is what I can say in terms here in NATO.

Speaker #4: That's it. Did you have a third question as well, Julien?

Tobias: That's it. Did you have a third question as well, Julien?

Speaker #5: Yeah. Yeah, it was just if the EVO clearance is included in the guidance or not. Just wondering because you don't have a clear idea about the timing, but have you embedded anything in the guide?

Eric: Yeah, it was just if the EVO clearance is included in the guidance or not. Just wondering, because you don't have a clear idea about the timing, but have you embedded anything in the guidance?

Speaker #2: You know, when we do look into the full year, I think it's worthwhile to state that, I mean, we talked about here Q4 last year. We looked at the growth level that was basically where the weak U.S. market.

Jonas Bolander: You know, when we do look into the full year, and I think it's worthwhile to state that, I mean, we talked about here Q4 last year, looked at the growth level that was basically with a very weak U.S. market. We reiterate that we will grow this year organically, and that is the same as previously. There is that embedded, I mean, both risk and opportunities in how we see that. It's a balanced view here on all regions that we have. Of course, it's important here to work it through with the FDA approval in the U.S., but Elekta AB is much broader than that. Obviously here also, when the lines come, it's actually to work through here both on a technical point of view, but also in a commercial point of view. It's a balanced approach.

Speaker #2: We reiterate that we will grow this year organically, and that is the same as previously. We then embed both risks and opportunities in how we see that, so it's a balanced view here on all regions that we have.

Speaker #2: Then, of course, it's important here to work it through with the FDA approval in the U.S., but it's not— I mean, it's much broader than that.

Speaker #2: And obviously here, when the lines come, it's actually to work through here both on a sort of, say, technical point of view, but also from a commercial point of view.

Speaker #2: So, it's a balanced approach. Yes, we have a bit of that in the forecast, but I would state it as much more comprehensive in how we view the growth outlook for the year.

Jonas Bolander: Yes, we have a bit of that in the forecast, but I would state it as much more comprehensive in how we view the growth outlook for the year. Yeah. I agree with you, Tobias. EVO is not the only product we have in our product portfolio. There are numerous products in it. Of course, U.S. approval is important to us, but so is approvals on other markets as well, where we have, you look at the traction we have in Europe, of course, we want to have that on as many markets as possible. That is what we're working on now.

Speaker #4: Yeah, so I mean, sorry, I agree with you, Tobias. You know, EVO is not the only product we have in our product portfolio. There are numerous products in it.

Speaker #4: And of course, US approval is important to us. But so is approvals on other markets as well, you know, that where we have you look at the traction we have in Europe, of course, we want to have that as on as many markets as possible.

Speaker #4: And that is what we're working on now.

Speaker #5: Okay, so you can deliver on the guidance even if you don't get the EVO approval in the U.S. this year?

Eric: Okay, so you can deliver on the guidance even if you don't get the EVO approval in the US this year?

Speaker #2: Yeah, I mean, Elekta's performance is much more than that. And we talk here about the importance of the momentum in Europe; we're talking about China, etc.

Jonas Bolander: Yeah, I mean, Elekta's performance is much more than that. We talk here in the importance of the momentum in Europe. We talked about China, etc., and the growth in the second half. It's broader, and we also do well in other parts of Asia and the Middle East, etc. That is a work that will continue.

Speaker #2: and the growth in the second half. So it's broader, and we also do well in other parts of Asia and the Middle East, etc.

Speaker #2: So that is a work that will continue.

Speaker #4: Thanks, thanks.

Tobias: Thanks, thanks, Tobias.

Speaker #5: Perfect, thank you again.

Speaker #2: Thank you.

Eric: Thank you.

Speaker #4: We'll move to the last question for this session. So please, operator.

Tobias: We'll move to the last question for this session. Please, operator.

Speaker #3: Last question comes from Dermois Julien with Jeffreys. Please go ahead, sir.

Operator: Last question comes from Dormois Julien with Jefferies. Please go ahead, sir.

Speaker #4: Good morning, Jonas.

Tobias: Morning, Julien.

Speaker #5: Hi, good morning. Thanks for taking my questions. I have a question focused on India because you called out some weaknesses in the country during the quarter.

Christopher: Hi, good morning. Thanks for taking my questions. I have two. One is focused on India because you called out some weakness in the country during the quarter. If you could provide us with a rough estimate of how much India makes of APAC sales, just a rough % of sales would be great. Also, explain why the country went into some problems. Is that a market issue or is there anything else in there? My second question is on Q2 again, just making sure that I understood correctly. You are not committing to a positive organic sales growth in the second quarter, even though you will be facing very easy comps from last year?

Speaker #5: So, just if you could provide us with a rough estimate of how much India makes of APAC sales, just a rough percentage of sales would be great.

Speaker #5: And also explain why the country went into some problems. Is that a market issue or is there anything else in there? And my second question is on Q2 again.

Speaker #5: Just making sure I understood correctly: you are not committing to a positive organic sales growth in the second quarter, even though you will be facing very easy comps from last year.

Speaker #2: I I can take India first. You know, we see this as a very temporary weakness. In an overall very, very positive market. Where with that, yeah.

Jonas Bolander: I can take India for us. We see this as a very temporary weakness in an overall very, very positive market. We don't see this as a big thing. I would add, we have gained some very important deals in India and started to build a presence there, which will be important. Obviously, when you look at the sort of growth potential, we talk about this number of linacs per million inhabitants, and you have a number of 12 approximately in the US. I think we are below one in India. Obviously, when you expand the horizon and see the growth opportunity, India is absolutely where we expect demand to grow. Given its size, it's still not that big in terms of the group size, but we expect it to grow over the years to come. We see a lot of variation in India between the quarters.

Speaker #2: So we don't see this as a big thing.

Speaker #4: Yeah, and then I would add here, we have gained some very important deals in India and started to build a presence there, which will be important.

Speaker #4: And obviously, when you look at the growth potential, we talk about this number of linear accelerators per million inhabitants, and you have a number of approximately 12 in the U.S.

Speaker #4: I think we are below 1 in India. So, obviously, when you expand the horizon and see the growth opportunity, India is absolutely where we expect demand to grow here.

Speaker #4: It's still not, I mean, given its size, it's still not that big in terms of the group size, but we expect it to grow here over the years to come.

Speaker #4: And we see a lot of variation in India between the quarters, and then, of course, you know, if it's a huge market, it's very interesting for us to launch our new products in that market as well.

Jonas Bolander: Of course, if it's a huge market, it's very interesting for us to launch our new products in that market as well.

Speaker #2: Yes.

Tobias: Yes. I guess your second question, Julien, was about organic growth for the group in the second quarter, right?

Speaker #4: And I guess your second question, Julien, was about organic growth for the group in the second quarter, right?

Speaker #5: That's right, yes.

Eric: That's right, yes.

Speaker #2: Yeah, I think we had that question earlier. And again, we don't provide specific guidance, but what we have talked about here is that we see pressure in China in the second quarter and also that we are awaiting FDA approval in the U.S.

Jonas Bolander: Yeah, I think we had that question earlier. Again, we don't provide specific guidance, but what we have talked about here is that we see pressure in China in the second quarter, and also that we are awaiting the FDA clearance in the U.S. I don't think that you should expect organic growth in the second quarter.

Speaker #2: So, I don't think that you should expect organic growth in the second quarter.

Speaker #4: Thanks, Julien. For that last question, but before closing this Q1 call, maybe a closing remark from your side, Jonas.

Tobias: Thanks, Julien, for that last question. Before closing this Q1 call, maybe a closing remark from your side, Jonas.

Speaker #2: Yes, thank you, Peter. I would like to take the opportunity to end this call by welcoming Jacob, just above, as our new CEO.

Jonas Bolander: Yes, thank you, Peter. I would like to take the opportunity to end this call by welcoming Jacob Just Bumholt as our new CEO. Jacob is a highly experienced international executive with a successful career and CEO positions in various global industries, including the medtech sector. Jacob will assume this new role as CEO on September 1, i.e., Monday. On a personal note from me to you, thank you very much for listening, attending, and really appreciate that.

Speaker #2: Jacob is a highly experienced international executive with a successful career and CEO position in various global industries, including the med tech sector. Jacob will assume this new role as CEO on September 1st, i.e., Monday.

Speaker #2: And also, on a personal note from me to you, thank you very much for listening and attending. I really appreciate that.

Tobias: Thank you. Thank you all, and thank you all for participating in this call.