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Welcome, everybody, to the IBA Half Year 2022 Results Conference Call. At this time, all remote participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. I would now like to turn the conference over to Olivier Legrain, Chief Executive Officer of IBA. Olivier.

Thank you, Olivier. Thank you, and good afternoon, everybody, especially our two guests here in the room. and more to come. And thank you for joining us for our half-year result call. I'm Olivier, the CEO of IDA, and I'm here with many, many people. But I will give the presentation today together with Soumya Chandra Mouli, our CFO. Before we start, I'd like to draw your attention to the company disclaimer on the forward-looking statement. So first of all, to start today, I think I'd like to especially thank the entire IBA team for their continued hard work over the first half of this year, even though it has been more of a normal year. It's still a bit challenging for many, many reasons that I think everybody knows, especially our colleagues in China that are still sometime in lockdown and that we have our time to visit so far. I'm confident it will change soon. So we are pleased to see that the hard work is paying off with the incredible resilience of our business. And I'm delighted to report on our positive progress over the year. As always, I will give an overview of our business and progress in the first half. Sumia will then summarize our financial statement and then after I will discuss the outlook and we will be happy, of course, to take any questions. Looking at the overview of the numbers, as you know, the group is funded on our expertise in particle beam in technology. We have four core business line, proton therapy, radiopharma solution, industrial solutions, and dosimetry. Each of these businesses continue to perform extremely well. We see actually quite an acceleration of the demand across the board for our product. And they will all be profitable, or they were all profitable in the first half of 2022. The key driver for the business unit, well, for each business unit, we made progress. We have increased our share of the patient QA market with stronger intake from dosimetry in the first half. You have seen that we have announced yesterday also a strategic partnership with Candidos in Sweden, which will further strengthen our product portfolio in the patient QA segment. As you may have seen, we come on top of another acquisition in the first lab in Canada, MODUS. where they're fully integrated yet, so I tend to forget the original name. In proton therapy, we have seen an acceleration in the conversion of the backlog, which we anticipate will continue in the second half. I'm very happy about the partnership with CGNNT and the first result we can witness there. We have announced already some sales of the first proton therapy center CGNNT was able to complete. also in proton therapy we were pleased to be able to partner with very very strong name in academia and industry through the recently launched conformal flash alliance with the aim of bringing conformal flash proton therapy to the clinic our radio pharmaceutical partnership with skcen uh in the development of actinium 255 25 so i'm a bit tired and now with north star for the production of isotope continue to evolve positively we continue to develop a new area for our business with the icon the new 30 mev cyclotron for the production of novel isotope And last but not least, on the medical device sterilization side, the IBA Rodotron is supporting a very strong increase in order of volume and is confirmed, let's say, or even more so important strategically for IBA. Now, let's take a look at some of our key highlights for the first half of the year. I will now take you through the key operational highlights. In terms of the business unit progress, we were pleased to sell four new proton therapy systems, one Proteus Plus in China, and three Proteus One machines in the U.S. and Europe, which is an excellent start of the year. Other accelerators I've seen record order intake. 21 systems were sold in the period and one announced already post-period end. The pipeline remained extremely active. This was compared to 14 machines sold at the end of last year. So, significant growth in the demand for our product. Our new proton therapy installation and nine in other accelerators started in the first half. despite the pandemic-related restrictions with two new proton therapy centers starting to generate revenues. As mentioned, backlog is at a record high, and while there has been good conversion with proton therapy, conversion across the business, especially in other accelerators, remains in the first half impacted by macroeconomic challenges, as well as COVID-19-related travel restrictions. The backlog sits at 1.2 billion euros, with equipment backlog reaching another record high at almost 500 million euros. Dosimetry has proved a resilient business unit, with order intake up 11% on the same period last year. The acquisition of the Canada-based Modus medical device completed earlier this year, complementing our Dosimetry portfolio. and increasing our dosimetry footprint in North America. Our strong performance is confirmed, let's say, by a strong balance sheet with 202 million gross cash. It's the first time we are above 200 million, I believe, and 137 million net cash. It is also worth highlighting that we completed the share buyback program that we initiated in 2021 representing a total over 300 000 shares moving to post period and highlights recently we announced a multi-year research collaboration with d hutch or let's say fred hutchinson cancer center at the university of washington for conformal flesh more recently we shared the news of our selection as the only bidder qualifying for the second round of the so-called spanish ministry of health standard to supply 10 proton therapy units in the country this is clearly a very significant and very exciting opportunity and we really look forward to sharing further updates in the future the radio pharma side this week we were pleased to announce the fourth cyclone icon sales since the product launch to Chengdu new radiomedicine technology company. Finally, yesterday we announced our latest dosimetry news with the agreement of a strategic alliance with Candidos, including IBA acquiring a 90.1% stake in the company. I now will pass on to Soumya to talk through our focus Thank you Olivier.

Hello everyone. You see a quick snapshot here as usual of the financial highlights as announced this morning. A few highlights that I will mention. Group revenue was 160 million up 17% versus the last year. With the excellent order intake, of course, as activity picked up, you've seen that we've reached 175 million in gross order intake for equipment versus around 228 million last year for the full year. So we are really on progress towards beating our last year's order intake levels and, of course, reaching a record order intake for the full year. The gross margin was 39%, which was an improvement versus the 33% last year, but this was influenced on the one hand by increased activity in proton therapy backlog conversion by a rather high margin product mix, but also by indemnities recognized following the bankruptcy of Rutherford in the UK and Forex gains on the strengthening of the US dollar. Group Rebit was Euro 4.6 million, the increase from last year reflecting all of the above, but also influenced by inflation, investments and OPEX and some write-offs with a net loss of Euro 1.7 million. Order intake was very strong and in the period there were four proton therapy rooms and 21 other accelerator systems sold, as Olivia already mentioned earlier. That's quite a record. And we reported another record equipment of service backlog of Euro 1.2 billion and the pipeline continues to remain extremely strong across all of our businesses. Finally, our balance sheet is very strong with 137 million net cash and that provides us with significant stability for the future periods despite the current economic situation that we're seeing. Look at some of the numbers in more detail. The group sales in the first half were 160 million, up 17% as I said from last year. largely due to increased activity and accelerated backlog conversion, as well as the Rutherford impact. Rebit profit increased to €4.6 million from €3.9 last year, reflecting strong top line and improved gross margin and the indemnities on the Rutherford bankruptcy, offset by increased investment and inflation, which led to higher OPEX. We've been catching up quite a bit on investments since COVID and that certainly has an impact and we increased FTE by more than 4% over the period to support growth and increasing operations in our businesses. That's around 50 hires over the period. Total group loss decreased to €1.7 million and improvement of €0.2 million from last year. On the balance sheet, as I already mentioned, we reported a gross cash position of €202 million. That's an absolute record, I think, since the history of IBA, and €137 million net cash. We also have €37 million undrawn short-term credit lines available, so significant capacity to be able to invest in the future too. In proton therapy and other accelerators, sales were up 20% from last year, reflecting all the things we just spoke about earlier, despite some travel difficulties, and as Olivia mentioned, the fact that in China we're not completely out of the lockdown yet in all regions. There were four new sales in proton therapy and 21 new sales for other accelerators in H1, with one more machine sold in other accelerators, and actually more if I count today, after end of period, and the pipeline continues to remain very promising. Now, this compares with one PT sale last year for the same period and 13 sales for other accelerators in H1 2021. On the proton therapy equipment front, if you look more in detail, backlog conversion resulted in revenues improving by 15%. Four new orders were received in H1. with a total of 24 projects in progress now, and services, which are, of course, an important revenue stream for us, have also seen very strong performance, with two new PT centers starting treatment in Asia and in the U.S. Nine new installations started in other accelerators, and 18 new should start in H2, as some of these issues are resolved. So we really expect revenue recognition to catch up significantly in both proton therapy and other accelerators. If you look at the group order intake a little bit more in detail, indeed, it's extremely high at 175 million already at the end of H1, and we can see that we are approaching 2021 year-end levels after six months. The same goes for the number of PT rooms sold and for order intake of PT and other accelerators, where we've already exceeded the previous year and are approaching year-end 2021 numbers. We also have a very high book-to-bill ratio in both PT and other accelerators, as well as in dosimetry, if you look at it. To the extent that we are seeing higher order intake, then we are burning backlog. That's obviously very positive for us, and we hope to be able to maintain that into 2023. We have growing sales in rototrons, especially for disposable medical device and bioprocessor sterilization, as well as for radiopharmaceutical equipment, thanks to the newly developed machines that allow us to serve a larger range of isotopes for our customers. Now, looking more specifically at backlog, this has increased to an all-time high of 497 million, as you can see, up from 449 million end of 2021. Of this Proteus 1 now represents 37% and other accelerators an impressive 38%. On the services front, revenues were up more than 11% to €51 million, growing for the fifth consecutive year despite the Rutherford bankruptcy. Services backlog is now at €661 million and did decrease due to the reduction of the Rutherford sites. 38 IBAPTC sites are now generating service revenues worldwide and these sites have remained fully operational. Now taking a look at our dosimetry business unit which had a very strong H1 driven by the MODIS acquisition on top line. Conventional radiation therapy and medical imaging performance. Order intake also was strong at €30 million and increased 11%. Backlog grew to a record €20.8 million versus the end of 21%. and we announced a strategic alliance with Scandidos that Olivier already explained. However, Revit did decrease to Euro 1 million versus last year, partly as a result of inflation, but also due to additional investments that we've been making in supply chain management to support future orders, the high order intake, and high-cost one-off purchases related to the shortage of electronic components in the worldwide market. Now, I'll hand back to Olivier to take you through a more in-depth business update.

Thank you Soumya. So if we look more closely at proton therapy performance, you can see the geographical split between the four contracts signed in the first half, one in China, one in US, one in Milano, and one in Petersburg. And one new installation started in the US. As already discussed, the Conformal Flash Alliance was launched in June of this year, including the University of Pennsylvania, UMCG Gruningen, research amongst others, and we look forward to providing a date in the due course. Dynamic arc development are also being made with a recent PTCOC presentation showing the potential for proton therapy in the head and neck cancer when using dynamic arc. Looking more broadly at the proton therapy market, we have seen the resurgence in the proton therapy market has continued throughout 2022 and IBA has maintained its market leading position with 60% market share. IBA has also maintained its leading position of 44% for proton therapy room in operation and 41% for the total market share in proton rooms. we continue to work hard on innovating in proton therapy technology which is key to iba proton therapy strategy and comes under basically three main activities motion management dynamic arc and compromise with motion management we enable the treatment of more patients with confidence Development for dynamic arc and more efficient and simple way to deliver proton therapy are ongoing at Beaumont Proton Therapy Center. The conformal flash is a potential game changer in the radiation therapy market. In June this year, we launched the Alliance, the first collaboration of its kind between academia and industry to accelerate the delivery of the technology to patients. Recently, further collaboration on the technology was recently announced with our friend in Seattle. As part of the collaboration, IBA will equip the proton therapy system and the proton treatment at the Fred Hutchinson Cancer Center with comparable flash research functionality, which will enable preclinical research on flash therapy. Looking more closely at the radiopharmaceutical business, where IBA leads the market for radioisotope production accelerators, including high-energy machine, January saw the launch of the low-energy cyclotron, the Cyclone Key, increasing accessibility for small and medium-sized hospitals to diagnose solutions and enabling them to develop radiopharma products in-house. Our Cyclone ICON, which was launched in 2021, has seen a good traction. Earlier this week, we announced our latest ICON sale, the agreement was signed with CNFT, a Chinese manufacturer and provider of medical isotopes for oncology. The ongoing SCK-CEN partnership is progressing well, with several technological achievements and strategic milestones on the horizon. More broadly, we are seeing growing demand for radiopharmaceuticals and we will keep the market updated on the latest milestones. Moving to industrial solutions, Rodotron IBS high-power electron beam accelerators continue to be the key to this segment. In the first half of 2022, we have seen great progress with the accelerated adoption of E-beam and X-ray-based sterilization methods by key players. There continues to be interest in X-ray and E-beam solutions as alternatives to gamma, which is under supply pressure, and ethylene oxide, which has been impacted by toxicities. The collaboration with Northstar radioisotope continues with two beamlines for the production of isotope. In dosimetry, we have seen a particularly busy front on the collaboration and acquisition. with a QA agreement signed in March with Elekta and the acquisition of Modus we have already talked about. This week we announced the acquisition of 9.1% of ScanVidus as part of a strategic alliance and elsewhere we have seen strong order intake of patient dose monitoring device from original equipment manufacturer. This has been the result of forward planning with by the OEMs to build strategic stocks. Finally, we remain focused on broadening and strengthening the competitiveness of our product offering, particularly in patient view. This slide will be familiar to you and outlines our commitment to acting as a responsible corporation. We'll be updating on the progress made to our impactful social and governance goal at your end. Now over to Soumya to talk about numbers in more details.

Thanks Olivier. So as mentioned earlier, group sales were up 17% in spite of the macroeconomic challenges with an exceptionally strong order intake. and strongly improved backlog conversion for proton therapy, but it also included the indemnities on the Rutherford contract. In other accelerators, backlog conversion weakened versus last year as a result of pandemic restriction and some supply chain challenges, but also due to timing simply related to the order intake. It is expected that this improves in the second half with a strong increase and a doubling in the number of installations versus H1. Gross margin improved in absolute value as well as a percentage of sales versus 2021, thanks to product mix revenue recognition on some high margin contracts and a positive impact from the Rutherford indemnities. The 31% increase in OPEX reflects a rise in activity and an acceleration of large investments in R&D for future growth. Alongside this, there was also an increase in sales and marketing costs as activity returned to pre-pandemic levels. There were also increasing levels of inflation, which impacted the cost line. We are seeing around 5% increase in personnel costs from inflation, but also to some extent in material costs, which impact higher up in the P&L. As a result of the above, IB reported group rebate of Euro 4.6 million and a net loss of Euro 1.7 million. Now turning to the cash flow statement, there was a positive cash flow from operations driven by higher order intake and related down payments. There was an increase in cash flow used in investing with higher capex as we invest in infrastructure and R&D as I explained earlier, and some M&A related cash outflows from the MODIS acquisition. The cash outflow used in financing activities basically included repayments and borrowings and the pre-purchase of shares. I won't go into the details of the balance sheet, but it's worth reiterating that both the gross cash position and net cash position remain very strong. We have an all-time high backlog for proton therapy and other accelerators, and we have been optimizing our working capital to ensure that we use our cash to the best effect possible. I'll now hand back to Olivier to discuss the outlook.

Thank you, Shubhmea. I think we have a good flow of good news. I think the strong performance of the IBA has been seen across all the business line um and the prospect continued to be quite quite good the other intake has rapidly accelerated across all business lines and there is potential for this to further accelerate especially in proton therapy we have talked about the spanish standard and also in sterilization business with eBIM X-ray being in very high demand across the globe. The pipeline remains extremely active in the US, in Asia, and in Europe. It provides us with significant visibility for the period ahead. The growing service business provides further visibility as a stable recurring revenue stream and backlog remains high. alongside this our robust balance sheet and record high cash position provide us with significant opportunities for both organic and inorganic growth it was briefly mentioning the situation in russia we have operations ongoing in the region and have not seen a material impact on our business although the dosimetry business has been affected by some bands And for the business more broadly, there have been some challenges with circulating cash. The broader geopolitical situation remains complex. And as a result in supply chain and inflationary pressure for global business, including Ivy. We are managing these challenges proactively. However, there is some uncertainty. as to how the situation will unfold. As a result, we want to remain cautious and we are unable to provide reliable financial guidance at this stage. I think we have our financial calendar to flag some key dates for the year ahead. We plan to do a capital market day at Astro in October. So if you want to join us in San Antonio, I believe, Texas, you are welcome. The date is yet to be confirmed. And as usual, we'll publish our quarter three business update on November 17th. Many thanks for your time today. We look forward to updating you soon. as we remain focused on delivering our strategy across all our business line. We are now, Soumya and I, pleased to take your questions. Thank you very much.

Thank you, Olivier. Maybe we can start with people in the room.

Yeah, we'll start with people in the room. They deserve it.

All right. Maybe we can go there. Good results, at least very strong activity in my opinion. My first question will be a bit regarding to that front. You have these massive backlogs, almost 500 million in equipment. What I'm wondering going forward, it seems almost certain if the situation does not deteriorate and improves most likely, You have very strong top line figures in the second half of the year and 2023-2024. There were 18 systems starting installation. How should we look at the cost line? The margins, I think, should remain around the 34% mark, maybe. But then at the operational costs also, we see some additional investments, some labor.

how should we model this uh looking forward because i would expect there to be very strong operational leverage coming in uh in the upcoming so i i you know i think we don't give guidance so uh it's of course it's of course a difficult line to work uh maybe i i'll start and then sumia will we go but hopefully so you I think we were going to grow. That's kind of obvious with the book-to-bill ratio. And indeed, I think we will potentially, and especially with the 10-order in Spain, going to continue to experience some growth. And rightfully so, you said, well, we'll see some operational leverage, definitely. Some of it will have to invest in the growth, and some of it will have to deal with additional inflation. even though, you know, we're working also on passing that or at least part of it to our customers. So, you know, we don't give guidance. But in a normal world, indeed, I think we'll see some improvement of our EBIT numbers going forward.

I recall that in your past you mostly said that your operational costs should grow in line with inflation. I mean, first half it was a bit more than that. I'm just wondering, do you stick with this in line with inflation, or are there some additional investments to be done because you have such a strong backlog, or maybe give some examples of the investments?

I think, I mean, what are the different areas of investment? First of all, and especially if I take... If I take industrial application, I think we'll have to give up on our service capabilities. So we need to hire people. When we hire people, we need to train them. And this is additional, let's say, temporary additional overhead, let's say. So we'll see some of it. You have seen the order intake for other accelerators. So we can expect very significant growth into this segment, which will come with a let's say, a significant hiring program to be able to service and install this going forward. So that's one of the investments. I think the other part of the investment is we continue to invest into digitalization, you know, across the board, being for R&D purposes or for expansion. uh erp going forward so that's why i think the uh the opex will grow slightly uh more than inflation to basically cope with the course once again we don't give guidance on this uh but but indeed i think with grow as we see and once again look at the book to build so you can in a normal world try to to evaluate what this growth will be, we'll have to have an increase of our OPEX slightly above inflation.

And then let's not discount the impacts of IFRS. You know that a lot of software-related investments now potentially have to be put into OPEX rather than into CAPEX. So up to now, we've not had too much of an impact from that. But going forward, I don't know. future investments will hit the OPEX. But on the other hand, it's an accounting issue more than a strategic issue itself because it's basically putting in capex and amortizing it or else directly taking it in OPEX as the costs come. So let's see how that works out. But indeed, as Olivia said, there's quite an extensive investment plan and we can give you a little bit more color maybe at your end on how much we plan to invest once we have a better view on that.

Okay. Well, that's clear. Maybe second question on the second big topic, of course, the Spain tender. I noticed the slides with the market share, no variant in there. So I'm just wondering what happened there. You know, I'm not variant, so you can ask them a question. I think you are in the same bidding round, or you are in the same contest as them. Yes. Regarding to that, and maybe on the The tender in itself, how come that you are the sole supplier, selected as the sole supplier? And also, you know, you're still in the bidding process, but looking at the capacity, 10 systems, how fast could you provide these systems? Normally you make them in two and a half years, but okay, in the past it has been taking a bit longer here and there.

If it happens, mostly because of the customer side. I think in the IBA story, we have always been on time. And when it comes to being in a position to ship the equipment, I think the building on the side of the customers are sometimes more challenging. I think in this case, you know, this factory that you're about to visit has been designed to produce, if I remember well, 20 Proteus-1 in one go. It's not only Proteus-1 we produce here, we produce Rodotron as well, and we test machines. So we have a very good use of this factory, but we have also a very good network of suppliers. So I'm not so concerned about our capability to deliver. the spanish tender needs to be delivered over a period of five years if i remember well and therefore it's something we can cope with uh on top of you know business as usual we continue to intend to sell more therapy system on top of the spanish center so and and so i don't i don't see any big issue on the on the the capacity here uh including the one of our of our supplier When it comes to, the only thing I can comment is our competitive positioning in proton therapy. I think what you see in the Spanish standard is the significantly, let's say, superiority of the Proteus One value proposal. We keep hammering for a long time that compactness is very important. and the Protease-1 is the most compact system. We keep hammering that standardization is very important in proton therapy, and Protease-1 is the closest you can get from a product standpoint. Otherwise, in proton therapy, most of the time you speak about project, which means that indeed we are very competitive into this segment, whereas other competitors, let's put it that way, uh are far from being there and therefore i believe are potentially challenged from a profitability standpoint much more than we are and the focus on idea on proton therapy for a long time has helped us also to develop a significant network of suppliers that are fully committed behind us to, you know, being able to provide whatever the demand will be, which might not be the case of other suppliers. And there's maybe more arbitrage to be done, more profitability, let's say, constraint that we have into this tender. And it's not that we were the only bidder, we were the only selected bidder.

I think maybe just to add to that, you must remember that when we decided to build this new production facility, it was also to ramp up the number of sales we were having on an annual basis. And so it came a bit delayed. Maybe it's coming now, but it was already a ramp up basically to deliver more than what we were already delivering. So five, six, seven centers a year was absolutely no problem. If we have to double that, that won't be.

Okay. clear for me um just because you mentioned a bit about the profitability could you assume that you know siemens doesn't want to see uh any losses from variant and the proton territory i think nobody likes to notice so yeah okay i mean the strategy has changed that's maybe i think you know once again variant is a very good company and cement is also a very good company i think proton therapy is also very

specific business and maybe they took some assumption in the past that are not realizing now and they they correct the trajectory i think it's potentially that is as i as i can as i can see i can assume because i don't see it thank you very much

Thank you for your presentation and for taking my question. First question regarding proton therapy. So you mentioned before that 2022 was not about installation, but that these will accelerate in 2023. To what extent do you expect these installations to be impacted by supply issues, as we saw with other accelerators this semester?

Almost everything that we're going to install in 2023 is all shipped or about to be shipped. Most of it, a lot of it will happen in China. And so on that standpoint, I think we're pretty much in good shape. I think overall we're in good shape. It's like, I think we can say that lead time has increased, you know, but it's not that we cannot provide. It's just that it takes a bit more time. and indeed as Soumya alluded to already we had you know sometimes

shipment constraint of things like that as you know there is much less uh shipping lines available yeah exactly one of the things that we try to do is we don't try to we try not to ship our equipment in several lots because of course the cost of shipping it far away is expensive so we wait until all the supply has been procured before we ship it so obviously that means that sometimes things take a little more time and that impacts revenue recognition and that has been the case for pt as well as for the other accelerators

but it's it's timing mostly yeah mostly timing i think indeed when we say it's impacted by covet the the the old global supply chain has slowed down if only because of one thing the ship in in in uh in going to china they had to quarantine so uh plus of course the russian war which means that uh all the russian uh companies that were shipping well we don't use them so so coming back to your question i think have a pretty good view on on this what will happen in 2022 second half and early 2023 is or in the box here or in the or already on on its way to to the customer we have a pretty good view okay thank you which does not remove all the uncertainty because indeed uh uh our backlog conversion depends also on on the capacity of our supplier to let's say provide the next But I think overall, with a little bit slower turnaround, it's coming back quite nicely.

And then a question regarding other accelerators. You said in the past that you were expecting normalization plus level, but we see now that it's increasing quite a lot. So what's your view on that for the future? What do you expect it to be?

I think a very different drive from one to the other. I think what we see in radiopharma solution is, I would say, three drivers. One is uh a huge big big demand coming from develop under development countries china is definitely moving uh india is moving even africa is moving we have started to sell cyclotron in in africa which is a very good news for for all of us so under equipped countries are you know moving uh that's the number one drive number two drive is new isotopes uh whereas ids developer the competence in providing i would say higher energy cyclotron like the icon the reason behind the icon is germanium today i'm not good with numbers so it's germanium 68 which is also in high demand because some people have developed generator and the supply chain of germanium is in very high demand and our icon is the answer to that. Then you have strontium rubidium also with 70 MeV where the demand is increasing and people need to buy higher energy cyclotron to do that. So that is radio pharma solution. In industrial, you know I work for IBA for 26 years. and 26 years ago we already said one day medical device service sterilization service provider we need to build up capacity for sterilization using eb x-ray because there's a there's a some limitation to alternative technologies such as gamma irradiation and ethylene oxide and we were right but 26 years too early and the good news is still today we're so far ahead of competition and and it it's really happening so i think the big players in the field have decided to move they are building up capacity the reason why they're doing it we we mentioned it in the in the presentation that there's strong let's say uh concern with the use of ito I think I've seen another recall recently of food products that were infected with ETO, because the gas is very dangerous. It explodes. We have seen a few accidents. So there's a lot of scrutiny over ETO, and definitely also people believe that they will be able to expand a bit the existing capacity, but they will have no new permit to build ETO capabilities. And on gamma irradiation, you need to use cobalt sources. There's a huge shortage globally of cobalt. So there's no choice. And it happens at the time where there is a huge increase of the demand for sterilization, amongst other due to COVID, because of the need to sterilize the changes. And therefore, they're kind of in a hurry to expand their volume and IBA seems to be, it's not that we're only one, but we have a very mature technology and we have a huge competitive advantage when it comes to the level of energy and power that we're able to develop with the Rodotron isn't met on the market. so uh yes we see a massive increase of the demand and and your question was about the future i think it will continue for uh for a while is it going to grow like this i don't know but maybe it will stabilize at this level strategically we are preparing to significantly increase our capacity in uh in rodotron for sure and to a certain extent to uh to

A part of the OPEX increase is also related to the ramp up on that. But you know, it's always the same story. You have to ramp up before you have the revenue. So there's a time difference between the two.

Yes, we have Matthias on the line. Matthias, hi.

Yeah, hi. Can you hear me? Hi, good afternoon. Thank you for taking my questions. Maybe, yeah. To start with, on the topics that have already been touched upon, but it's a bit of a follow-up question, specifically on the operating leverage, could you maybe just elaborate a little bit on your personnel costs? How much does it actually contain of the OPEX and how much sits in Belgium? And how should we think about inflation going forward? And then also, probably importantly, if you look at inflation, how well are you able to pass on that inflation towards your customers? So what are the posture mechanisms in the existing in the backlog? I would say if we could, if you could elaborate on that. And then second question, maybe on the Spanish tender. Could you maybe give us a little bit of an indication on the timeline actually and what still needs to be, I would say, decided given that you're now the only contender that goes into the next phases. It's a bit abstract maybe that there's still a second and third round. Could you maybe elaborate a little bit on that and then on the execution of the contract? How should we see this? How should we think about this? falling true into sales. If you could give us some guides on that, that would be great. Thank you.

So on the inflation, if I remember well all your questions. First of all, when it comes to people, we have about half of our people here in Belgium and half in the rest of the world, with the main jurisdiction being Germany, US and China. and then the rest is basically spread but with belgium us china and germany we cover probably yeah we probably cover like almost 90 percent of our people or 80 85 85 percent of our people so uh you know the number probably as well as i know them in belgium uh when it comes to uh to index uh that we are going to face I think we speak more or less of 10%. That's as easy as that. In the rest of the world, there is no mandatory index. Now there's also a fight for talent. So you can assume that inflation in these countries are probably the number we are looking in terms of salary increase. When it comes to mechanism for passing out to To the customer, when it comes to service business, it's contractual. So I would say most of our service contracts have an indexation clause that we basically apply. When it comes to backlog, equipment backlog, I would say that most, not all, of our recent contracts have an indexation clause. Some older contracts have no indexation clause. Now, most of them are about to be built or let's say the purchases have been done. We have orders to supplier and still we have the intention to open the dialogue with this customer to basically Yeah, see or negotiate additional price increase if they are significant, but I'm not aware of any significant price increase in the backlog. So I would say we're overall quite protected. I still expect to see an impact, but it's not going to be very significant. We have anticipated some of it already. We have already adjusted in our number

uh let's say some kind of reserve for increase of of of supply chain um i think you also asked what's the proportion of our opex which comes from uh salary right it's between around 70 to 70 to 80 percent depending on so a big chunk of the opex is indeed is

but when i look at this dynamic i mean i think that there's basically uh going forward three things that will happen one we will grow you have already already anticipated that you will see some operational leverage uh the second thing is we're going to see some inflation so we'll have to uh uh let's say increase prices to compensate for this price. And we need to work on both the operational leverage, but also efficiency across the operation. So overall, once again, we don't give guidance, but we can expect, how do we say that, profitability expansion, or what do they say? That's all right. I'm allowed to say it. thanks to the growth despite the context so yes and everybody is looking at me now very upset sorry yeah no no go ahead please

The second question was on the Spanish tender, effectively.

The Spanish tender is quite simple. There are three envelopes. You have to help me maybe. One was the qualification criteria.

For example, how we had to have a certain number of proton therapy centers working, etc. Basically, on what we already do in proton therapy.

And this one has been opened and we passed this number one step. We have already submitted the three envelopes. Nobody else can submit three envelopes. Everybody has submitted the three envelopes. They have opened envelope number one, and based on what they had on envelope number one, we're the only qualified supplier. So then they have opened now envelope number two. Envelope number two is technical specification. So they have opened it, they have looked at it, they say, oh, looks good. But still, they have a committee that is supposed to go through the technical specification of our offer. and then they will, and I expect it to be almost certain, but you never know, they will say, ah, IBA complies with the technical specification of the tender, and then they will open the third envelope, which is the most important one, the price. And they will basically open our envelope, they will look at our price, they will look at other envelope price I know because there is no other envelope price. So then I think I expect this one to go through quite well as well. And then we will contractualize all this. How long will it take? That's a very good question. I think there's some, let's say, will to make it fast. because the Ortega Foundation gave a frame for it to happen. So they don't want it to take 10 years before we can start to work on this. They want to have a good, let's say, a good reason to do this. So I guess the end of the year is a good estimation on having the pre-envelope open and FDA confirm as a supplier for the TEN system. And then we will start to deliver them. I think Matthias, you know very well the kind of timing we're looking at. They will have to build 10 buildings for proton therapy. We'll have to build 10 Proteus-1, you know, standard, let's say lead time to produce a Proteus 1 is 18 months. So we'll start to produce them in 18 months and we'll start to deliver them one after the other with a few months gap between all of them. So 18 months we deliver one, a few months later we deliver number two, three, four, five, six. So if I were if i if i had to do a business model that's why i would look at it starting to to work on it in january 2023 18 monthly time one delivery every every three months let's say just to say something uh starting month 18 and going forward that's i think that the standard plan let's say and then we'll see what happens if there's some delays on the building side or faster building side and we will we'll try to i mean we will work in full sync with uh with the moh and uh we speak about 10 system but it's nine uh nine it's not it's eight single room and one double room but the double room will be a double protest one so that's why we say 10 properties one but we will work with the nine customers the nine region to basically think power delivery and installation with their building. We can expect some of them to be fast. We can expect some of them to be slower. So that's a little bit of uncertainty. Let's say some variability on the model we've just expressed.

I think anyway, first we need to win the tender and then we need to negotiate. So once we have that done, when that happens, we'll be able to give more color on that.

Yes. But overall, that's what it will look like.

Okay, clear. Maybe just one short follow-up. You might have said it, we might have missed it, but in terms of services contract for these 10 rooms, is this makes this, how would I say, subject of the present tender and negotiations, or would that still be negotiated afterwards?

In the tender, if I remember well, we had to give an indication of price and service. but it will be negotiated with every nine customers later on all right but we can expect to see the usual level of services for the nine or the ten but you have understood let's say the ten uh the ten machine yeah okay that's clear thank you

I think we have another question. I'm sorry, I don't know who it is. Can you please introduce yourself?

Apparently not.

Are there any other questions? Please raise your hand and we can take them.

Otherwise, we have one more question in the room, I think. You had one more question? It was answered.

I still have some questions in the meantime. Maybe on dosimetry in general. You acquired Modus Canada. Now yesterday, again, a few years ago, you were willing to divest the business. What's changing your mind on this, Francis?

I think we've changed our mind a few years ago. I think a few years ago we've looked at what was the potential strategic alliance with someone else. Is there a better shareholder for Dosimetrine and IBA? We didn't think it was a good thing to do, so as soon as we decided to let's say keep the business we also decided to continue to invest into it and and what we have said is basically is we we believe this business can can significantly grow uh providing we complete the product portfolio and that's what we do. So we develop new product when we believe we are well positioned to come with a killing application or we buy a product that are nicely adding to our product portfolio. This is what we did with Modus and what we are going to do with ScandiDocs. Sometimes it is an acquisition because people are entertaining the conversation sometimes it's more of a strategic alignment with candidates because they they want to keep to stay as an independent company but that's our focus so complete the product portfolio we are very strong in some area you remember in dosimetry basically there's three segments let's say machine qa patient qa and uh more of a diagnostic application and mainly OEM. Very strong in OEM, very strong in machine QA. We had significant gap in our product portfolio in patient QA. This is our focus now.

Okay, we take one last question. I think Matthias still has one question.

Yeah, I'll keep it short. It's a housekeeping question. The impact of the acquisition in H1 and what you expect for the full year in dosimetry, so modest medical and

Okay, we haven't disclosed it separately from the rest of dosimetry, but I think the IFRS report will be out soon and you'll see the value of the acquisition, which was, I think, mentioned. I don't remember if you mentioned it, but you will see it in the IFRS report. On the impact on the P&L, it's already accreted, so we already have a positive impact from it, but we're not disclosing the amount right now. So that's the way it was planned, basically. We wanted to ensure that we would have a positive impact in the first year of acquisition. And by the way, it's very short, but for H2, we'll see that impact appearing.

And by the way, it's working very well. I think we can see the commercial synergy. So the idea, once again, is to take a product of itself, Let's say a single product company, which is Candido, but Modus, they had a very nice product portfolio, but they didn't have the full range. And adding the two portfolios together, you're much more competitive. And we have seen we're able to push through our commercial channel the product of Modus much better than they used to do it. And we have seen quite a significant uptake of their sales volume.

Thank you. That's clear.

Great. Then there are no more questions. I think we can close the call. Thank you, everyone, for attending. And we will speak to you very soon.