C-Rad AB (publ)

Your line is muted. Call recording is on. Welcome to the C-RAD Q3 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing hash 5 on their telephone keypad. Now I will hand the conference over to CFO and Acting CEO Linda Frolian and Deputy CEO Johan Danielsson. Please go ahead.

Thank you, and welcome to our Q3 presentation. This time, the presentation will be somewhat different compared to what you have seen before. The agenda will be key takeaways from the quarter, followed by some comments on the regional performance. After that, Johan will present the service business, and then we will conclude with the financials. And with that short introduction, let's look into the takeaway Q3. The performance in the quarter varied across regions. Order intake grew 11% and revenue grew 16% in constant currencies. The increase in both order intake and revenue were driven by the performance in EMEA together with our services business. We saw positive EBIT development and the operating margin increased to 19% in the quarter. Important drivers behind the increase are favorable market mix coupled with a strong contribution from services, which Johan will talk more about in just a minute. And we also have some one-time adjustments affecting our cost of goods, which will be explained in the financial section. Hello, cash has been a focus area, and we had a strong operating cash flow in the quarter, which amounted to 24 million SEK. And with that, let's look into the regional performance. Starting off with the Americas, both order intake and revenue declined. Order intake was down 40% and revenue followed with a 15% drop. This reflects market uncertainty and slower decision making, and we are not satisfied with the performance in the quarter. Moving over to EMEA, which clearly stands out, showing continued good momentum. Order intake increased by 112% and revenue grew 52%. Our position in Central Eastern Europe was further strengthened by the 10 million SEK Czech Republic multi-site product and services contract. Finally, in APAC, a region with strong comparison figures for 24, order intake declined 16% and revenue had a 3% decline. The lower order intake was mainly related to Japan and Hong Kong, while other markets in the region were more stable. And with that, I will hand over to you, Juan, for a closer look at services.

Thank you, Linda. So we want to take this opportunity to speak more in detail about services compared to what we have done before. As it is a key offering, we are very focused on growing this part of the business. So as you can see here on the And on this slide, our results demonstrate the continuously growing service business with increasing revenues from service contracts over the last two-and-a-half-year period. The figure on the left shows the quarterly service percentage of Sierra's total revenues. Again, increasing trend over the years. On the right-hand side, you have a rolling 12-month service revenue contribution, which in this quarter generates about 90 million SEK plus. And as mentioned before, our contracts are typically in the range of three to five years and renewed on expiration, unless systems are up into latest and generational technology. With that said, we can move to the next slide, where to give you a better view of what we deemed as services. So the mission of scope for global services is that once a commercial agreement is made with the customer and we have confirmed the order, the service organization takes on the project management and supervise the order fulfillment process, including technical installation of the products in the customer clinics. But we also perform application training for the end users so that they are enabled to actively use and apply the system to their patients. So we have taken from the last two years to optimize both phases, both the technical installation part but also the application training part to reduce the time we need in the field to complete an installation and finally perform an acceptance test, which is the final system handover to the customer. and also the start of the warranty period. The application training in itself, we have revamped over the last year to provide much level of access to our technical trainers and our clinical specialists so that the customers really become very enabled and long-term successful in their use of our systems. So that said, one key driver for the business and for the customer success is to have long-term service contracts. So if we go forward, this gives you an overview of the services lifecycle. So as mentioned before, once the acceptance test is in handover, the warranty period starts, and then it's followed typically by a three- to five-year contract. And we have multiple options here for the different customer demands and needs, what is included in each contract. But typically, we supply a premium contract, which has a very extensive coverage in both technical and clinical support. Once these contracts expire, then the contracts are normally renewed, unless the systems are upgraded to the latest generation technology. And if that happens, obviously, the warranty period starts all over with the service contract and renewal phase following. This is the general lifecycle, and this is how the business is running over a typical contract period. And in the end, we want our customers to be very enabled and also very successful, able to share their knowledge with their peers in the industry.

Thank you, Johan. So I will now take you through some of the main financials for a third quarter with focus on gross margin, cost levels, earnings, and cash flow. Gross profit for the quarter was 83 million SEK compared to 73 million SEK a year ago. The gross margin for the quarter was 74% versus 73% last year. The margin in this quarter is considered to be temporarily high. The increase year on year is explained by the higher share of service revenue in the quarter and a favorable market mix. The gross margin was also affected by positive one-time adjustments, primarily related to repayment of license fees in the cost of goods. Our assessment is that the underlying gross margin for the quarter is in the high 60s, compared to 67% in the previous quarter, meaning Q2 of this year. We had no proton revenues in the quarter, which we did have in the third quarter of last year. Looking at our main operating expenses, you see to the left of the chart that they increased 12% year-on-year, from 54 million SEK last year to 60 million SEK in this quarter. The increase in year-on-year OPEX is mainly due to two factors. The first one is the ASTRO Congress, which took place in Q3 this year, but Q4 last year. And we also lowered our full-year bonus provision in Q3 last year. To the right of the slide, you see that quarter-on-quarter OPEX is down from 61 million SEC in Q2 to 60 million SEC in this quarter. The decrease is related to lower personnel expenses in the quarter due to summer holidays, which were partly offset by higher costs for marketing, meaning ASTRO. We are monitoring our cost levels closely, and we are happy to see that our efficiency measures are showing results. Our yearly OPEX levels are down by 25 million SEC from the peak in Q3 last year, and we have now reached a more stable level. Worth noting regarding the higher figure in this quarter is, as I already mentioned regarding ASTRO, that it includes costs from two conferences, both Q4 of last year and Q3 of this year. EBIT for the third quarter was 21 million SEC compared to 17 million SEC a year ago. The increase in EBIT for this quarter is explained by several factors pointing in the right direction. We have higher revenue, higher gross margin, and stable operating expenses. I can also mention that unrealized currency effects in this quarter were only minor. And as I said last quarter, our increased focus on smart spending is moving us in the right direction. Looking back a few quarters, CRUD shows continuous improved earnings and an increased profitability over time. With this development as a foundation, we are well equipped to continue to grow as we believe we can increase the EBIT margin even more over time according to our medium-term financial targets, even if we may have short-term deviations. Our cash balances increased by 15 million SEK during the quarter and stood at 173 million SEK at the quarter end compared to 158 million SEK at the beginning of the quarter. Cash flow from working capital was flat in the quarter, which is a great improvement from last year when it was 37 million SEK negative. Total operating cash flow was with this improvement 24 million SEK positive compared to negative 17 million SEK loss. A few orders on our balance sheet that have been awaiting final acceptance tests have been paid during the quarter, and many have also been invoiced after completed acceptance tests. Some of these are expected to be paid during Q4. I would also like to remind you that Searide is a company with a strong balance sheet with no long-term debt. And as you know, we communicated yesterday that the board have decided on a share repurchase program in order to optimize C-Ride's capital structure. So, the next steps. As you also know, we have communicated management changes, and we now have a smaller executive management team to complement C-Ride's current leadership team. This smaller group consists of Johan and myself, but also Peter Simonsbacka, who is a board member and previously had the position as chief commercial officer at AdLife. I would like also to remind you of our strategy. This newly formed executive management team will, as stated in the press release, focus on accelerating the level of activity, supporting our strategy and our financial targets, meaning increase sales growth, focus on product innovation, and growing the service offering. And with that, over to the moderator for the Q&A session.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Christian Lee from Pareto Securities. Please go ahead.

Good morning and thank you for taking my questions. Linda, you mentioned that the gross margin adjusted for one of the items would have been high 60s. And you also mentioned that you had 67% in Q2. So does this imply that just the gross margin in the third quarter was higher than what you had in Q2?

Yes.

OK. OK, thank you. Your overall ambition is to grow faster than the market. Could you please clarify which specific market you are referring to? And given that the product order intake has declined year over year for six consecutive quarters, do you still believe that the 10% growth in 2026 is achievable?

We are working towards the external targets that we have communicated. The detail in your questions, you know, it's still early days for Johan and me in this new team formation, so we would like to come back to that one.

Okay, fair enough. The U.S. market appears to be constrained due to limited budgets for capital equipment. Could you please provide an update on your retrofit strategy and traction to date in this environment?

Can you repeat? I didn't hear the first part of the question.

Yeah, I mean, the constrained budgets is limiting the investments in capital equipment in the U.S., obviously. So could you please provide an update on your retrofit strategy? Yeah, given that your solution is accounting for around 5% of total registered therapy equipment investments, so my question is basically why do the budget constraints create a meaningful headwind in your offering?

But I would say this is also something that might be a bit early for me and you want to answer. But I would say that mainly it's creating uncertainties on how much money the clinics have to have in their pockets, so to say. And that uncertainty means that the decision takes more time.

But does this also affect the retrofit strategy?

I wouldn't say so.

Okay. Okay, that's all from me. Thank you.

Thank you, Christian.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you all for listening to our Q3 presentation, and Johan and I both wish you all a very nice day.