Elekta AB (publ)

Good morning everyone and warm welcome to the first quarter of Elekta's fiscal year 2023-24. My name is Cecilia Ketels and I'm Head of Investor Relations at Elekta. And with me here in Stockholm, I have Gustav Salford, Elekta's President and CEO, and our CFO Tobias Hägglov, who will be presenting the results. And today's agenda starts off with Gustav presenting some highlights of the development, and then Tobias will give you details on the financials and the presentations, and with Gustav's view on Elekta's outlook. And after the presentation, there will, as usual, be time for your questions. Before we start, I want to remind you that some of the information discussed in this call contains forward-looking statements. This can include projections regarding revenue, operating result, cash flow, as well as product and product developments. And these statements involve risk and uncertainty that may cause actual result to differ material from those set forth in the statements. And with that said, I hand over to you, Gustav.

Thank you, Cecilia, and good morning, everyone. I would like to kick off with our strategy, Access 2025. In the quarter, we continued the improving trend from the previous quarters. We began our fiscal year with strong overall performance. We are delivering on our Access 2025 strategy and its four key pillars. Since launching the strategy in June 2021, it has guided us successfully through the first two years of the period. We have launched products across our portfolio and we are now bringing online adaptive technology across our solutions and also increasing value to patients and outcomes. We have also entered into new markets and formed new partnerships. And a key focus here in the strategy is, of course, to drive shareholder value by delivering strong net sales growth and EBIT modern expansion, something we're doing in Q1. In June, We provide an update on a strategy at the Capital Markets Day in Crawley. And we're now entering the second half of Access 2025 with good momentum to focus on value creation for patients, customers, and our shareholders. And the key priorities are really to get back to strong revenue growth and modern expansion, like in Q1, continue product launches to accelerate order growth, We should leverage our market leader product portfolio and we'll have unity in the lead. Services should be growing faster than installed base growth. We will continue our expansion of partnerships and we will gradually increase the leverage of Elekta One, our new software suite. Elekta's model, as you know, is really focused on radiotherapy. And we have some really key differentiators, and that is our versatile and open solutions, a true culture of innovation, and a commitment to partnerships. But if you now turn to the first quarter of our fiscal year, 23-24, and order development, we saw that in the quarter, we gained market shares in a bit slower market. In total, order intake declined by 7% in fixed currency. However, we saw large variations in the region. The moderate growth in the Americas was explained by weaker development in the US and Canada, but very good growth in Latin America led by Mexico. And it's also important to note that within EMEA, both Europe and the Middle East and Africa orders declined, but it is important that this order intake was heavily impacted by tough comparables in Europe due to last year's large tenders in Southern Europe. The order intake in APAC was strong, with double-digit growth rates driven by strong momentum in China, India, and Thailand. In total, we expect that the overall demand to improve in the coming quarters, already starting in Q2 in orders. If we then move to revenue, we saw that Q1 was the third consecutive quarter with strong revenue growth. We grew by 8% in a quarter, and that's higher than the market. Both mature and emerging markets grew. APAC and EMEA showed double-digit growth, and the European growth was driven by the installations from the recent large tenders in Italy and Spain. The development in APAC was really good throughout the region, with particularly strong growth in India and Thailand. In the Americas, installations in the US and Canada were somewhat lower than last year, while Mexico showed good growth. Solutions or installations grew by 9% and service grew with 7% and that's higher than installed base growth you see to the right. But we also hosted the 18th MR-Linac Consortium meeting in Amsterdam that brought together almost 90 centers and 600 participants with a common mission to improve patient care and optimize the MR-Linac as a standard treatment modality. With UNITY, Elekta delivers groundbreaking MR-guided radiotherapy that will change the standard of care for many cancers over the coming years. But it's also a sound value proposition for clinics and healthcare systems. Treatments are becoming quicker and require less staff. It also will open the possibility for even more radical changes in the way that radiation is used in cancer care. And I would like to specifically highlight three important areas of research where the UNITY is demonstrating very promising clinical results. Firstly, new and smarter workflows enables clinicians to reduce treatment times in prostate cancer, which allow for a higher throughput and increasing efficiency. Secondly, our newly launched comprehensive motion management enables two millimeter margins, which is crucial in getting ablative doses to pancreatic cancer that needed to enable better results and also improving survival rates. Thirdly, we're now going beyond seeing the tumor and its movements to actually see inside it, which will be used to adapt the dose depending on how the tumor responds, hopefully leading to much better outcomes for treatments of head and neck cancers. And these treatments are uniquely enabled by Unity. But we have also focused a lot on software and our newly launched Elector One software suite. And it's designed to increase productivity while managing clinicians' need for more complex workflows and personalized care. And Elector One delivers increased value to our customers and drives operational efficiencies and cost savings in the cancer clinics, up to 50% cost reduction per treatment. It also offers an attractive Software-as-a-Service, or SAS, commercial model. SAS now accounts for 15% of our on-calling information system software orders. ElectaOne gives us real opportunity for increased market shares, improved operations, strong revenue growth, and margin contribution going forward. And with that, I would like to hand it over to Tobias.

Thank you, Gustav, and good morning, everyone. Before moving into the details, I would like to start where we ended at the capital markets day. Elekta has continued the momentum we have seen in the last quarters. Our revenue continued to grow at a healthy level in the quarter, and combined with successful cost reduction execution, we are now seeing a substantial margin expansion. Then looking into the Q1 financials, net sales increased by 8% in constant exchange rates, supported by double-digit growth in the May and APEC. Profitability rose sharply with a gross margin improvement of 260 basis points and an EBIT margin expansion of 720 basis points. Earnings per share increased strongly despite a higher finance net. If you look at the drivers in more details, we can see that currencies impacted our sales and to a lesser extent earnings and margins. Foreign exchange rates contributed with 7% in points of growth, a negative impact on gross margin by 70 basis points, and a positive contribution to our EBIT margin of 100 basis points. Operationally, Electa delivered strong profitable growth. The improvement was mainly driven by strong revenue growth and successful execution of cost reduction. We also benefited from lower logistic costs compared to the peak in Q1 last year. In the quarter, we also recognized a positive year-over-year impact of 130 basis points from inventory revaluation, driven by the inflationary pressure. As previous quarters, inflation continued to pressure our gross margin. When it comes to the operating margin, the revenue growth and lower level of cost give further leverage to our margin on top of the improved gross margin. The positive effect from the inventory revaluation will not be seen in the next quarter and the inflation of pressure will continue. In addition, in Q1, we had a large share of high margin service revenues. Then looking into our expenses in constant currencies and adjusted for the items effect and comparability. All in all, the operating expenses decreased by 1% year over year, driven by cost reductions. Selling expenses increased by 6%, driven by more customer events. Administrative expenses declined following improved cost control. And net R&D expenses declined as a consequence of lower gross R&D. Looking at then the R&D, gross R&D has continued to decline and on a rolling 12 month basis and ended at 12.4% of net sales. Net R&D decreased year over year as lower gross R&D more than offset higher amortization. Sequentially, net R&D increased following a seasonal lower capitalization rate and somewhat higher amortizations. Then moving over to the balance sheet. Networking capital was on the same level as end of Q1 last year. Sequentially, networking capital increased following a seasonal buildup of inventories and the inflation-based revaluation. Higher sales towards the end of the quarter generated higher accounts receivable, and a larger share of installations in Southern Europe drove a higher level of income. Finally, higher shipments generated higher customer advances. Following the record strong Q4, cash flow in the first quarter amounted to a negative 900 million SEK. Higher earnings was offset by the aforementioned seasonal increase of working capital. Operational cash conversion was 55% on a rolling 12 month basis. Our continuous investments amounted to 348 million SEC mainly driven by investments in our innovation pipeline. Over to you, Gustav.