Elekta AB (publ)

Hi everyone and good morning. My name is Peter Nyqvist and I'm head of investigations here at Elekta. With me here in Stockholm, in the studio, I have Jonas Belander, Elekta's president and CEO, and our CFO, Tobias Hägglöf, who will be presenting today's result. At the end of the day we will start with Jonas presenting some highlights of the development during the fourth quarter and the full year and some strategic achievements that we have done during the quarter. Then Tobias will give you details on the financials and the presentation will end with Jonas view on Elekta's outlooks and some conclusions. After the presentation, we will, as usual, there will be time for Q&A. But before we start, I want to remind you that some of the information discussed on this call contains forward-looking statements. This can include projections regarding revenues, operating results, cash flow, as well as products and product development. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statement. With that said, I would like to hand over the word to Jonas. Please, Jonas.

Thank you very much, Peter, and thank you all that attend this call. Since this is my first quarterly report and conference call as CEO and president of Elekta, I thought I would take just a few moments to introduce myself. So my name is Jonas Bolander and I've been working here at Elekta for over 20 years. I have experience from multiple roles in the company. Prior to this position, I held the position as general counsel and head of a number of group functions. My first time as CEO and president has been intensive, and I've focused hard on stabilizing and simplifying the business, and of course delivering on the commitments made to our different stakeholders, including the financial community. I would also like to update you on our ongoing recruitment process for a new president and CEO. We have an external recruitment process ongoing that proceeds as planned and we will provide you more information as soon as the board has selected the candidate. So now focusing on the financials starting with the key takeaways for the fiscal year 24-25. The book-to-bill ratio continued to be solid and came in at 109 for the full year of 24-25, implying a solid foundation for future sales growth. We have seen a positive contribution from our product launches in general, and in particular from Europe, where Elekta Evo and Elekta One Planning have received very positive feedback from our customers. As you know, the Chinese market has been negatively impacted by the anti-corruption campaign since August 2023. However, improvements have been visible in recent quarters, resulting in a high single-digit order growth for the full year and positive book-to-bill ratio. Net sales increased by 1% in constant currencies, in line with our guidance given in the Q3 report. The adjusted gross margin improved to 37.8% and increased by 30 basis points year over year. The increase came mainly from price increases and improved product mix. The adjusted EBIT margin amounted to 11.6%, a slight decrease year over year, mainly impacted by higher amortization costs following recent product launches. However, in line with our guidance. Our operating cash flow after continuous investments improved by SEK 240 million to SEK 1,056 billion for the full year. The board proposes a dividend of 2.40 Swedish krona per share to the AGM, and it is the same amount as last year, underlining Elekta's strong financial position. Now we will focus a bit on the key takeaways for the fourth quarter of fiscal year 2024-2025. The book-to-bill ratio came in at 1.12 in the fourth quarter. We saw a 10% order decline in constant exchange rate compared to last year. China showed a slight decline compared to last year's tough comparison, which then last year included a few unity orders. while we continue to see an increased public procurement activity in China. As expected, the US showed continued decline as a consequence of customers awaiting for the EVO clearance. We have strong order development for software, which will safeguard margins going forward. And we are in the middle of a global launch phase of Electa Evo and are expecting several approvals around the globe. Net sales increased by 6% in constant currencies, mainly driven by continued strong momentum for Europe supported by Elekta Evo and Elekta One Planning. It has been very well received. The adjusted gross margin improved significantly to 40.3%, an increase of 370 basis points year over year. And this is the best Q4 gross margin in five years. It is a very important step in our ambition to return to pre-pandemic levels. The adjusted EBIT margin amounted to 16.3%, positively impacted by the increased gross margin, while as expected, higher amortization costs will follow from recent product launches. During the fourth quarter, a non-cash impairment of 1 billion 64 Swedish krona was booked. We have done a review of Elekta's R&D assets on the balance sheet, which resulted in an impairment for projects where the course of direction has been changed. The non-cash impairment is predominantly a consequence of a change of scope. within software, partly driven by moving from an internal development cloud solution to an external suppliers platform. And Tobias will provide a bit more detail later in the presentation. Furthermore, in consultation with FDA, we have changed our regulatory submission strategy in mid-May for Elekta Evo to better align with FDA's approval process with greater focus on cybersecurity. We expect that the impact of this delay on the overall product launch will be limited. It should be noted that Elekta Evo and our software suite Elekta One are fully operational, currently in clinical use and has received outstanding feedback from healthcare providers across Europe. We continue to work tirelessly with the approval process and will resubmit to the FDA in near time. Moving to the cash flow for the fourth quarter. The operating cash flow of the continuous investment improved by Swedish krona, 376 million to 1,248 billion, driven by improved earnings. Moving to the next slide where we'll give you more details regarding the sales and marketing development during the quarter. In constant exchange rate, group sales increased by 6% year over year. In the Americas, the development was similar to the third quarter of the fiscal year 24-25, where growth in South America was fully offset by the decrease in the US, mainly as a consequence of customer awaiting Evo clearance. APEC sales grew by 5% in constant exchange rate with a good performance across most markets. The Chinese market remained soft, still impacted by the consequences of the anti-corruption campaign. However, improvements were seen during the quarter, resulted in a limited sales decline of 1% compared to last year. Sales in EMEA increased by 16% in constant exchange rates compared to last year driven by a strong performance in Europe supported by new product launches. We saw a strong growth in countries like Italy, Germany and Spain. Elekta has a global installed base growing with around 4% per year, enabling significant service upgrade and after sales opportunities going forward. During recent years, we have been accelerating innovation. And recently, we launched our new CT Linux Evo and our software Electa One planning and Electa One online. And today, we have the leading and most comprehensive portfolio in the industry, with Dilexel, Gamma Knife Esprit, the Brackey Studio, MR-Linux Unity, Elekta Evo and Harmony, and Elekta One Software Suite. Looking across our portfolio, we can now proudly say that we enable adaptive treatments in all our product lines, Neuro, Brackey, Linux, and software solutions. Where our Unity has a unique MR imaging and comprehensive motion management technology, the Elekta Evo now complements our adaptive Linux portfolio with its online and offline adaptive capability with AI-enhanced imaging. We will leverage our leading product portfolio to drive profitable growth going forward. During the quarter, we can clearly see how our adaptive capabilities across all our products are generating concrete customer wins. We see several deals where customers want both Elekta Evo and Elekta Unity, which is a proof point that the most advanced cancer centers will utilize both CT adaptive and MR adaptive treatments to enhance cancer care. We also celebrated an important Brachy win in the US with 20 system to the US oncology networks. Elekta is the global market leader in Brachy and this is highly profitable business for us. Brachy therapy with our imaging ring Brachy Studio plays an important role when treating certain cancer types where it improves outcomes and ensure better quality of life. These capabilities are what drives the demand for Brachy solutions also in very mature market. What binds our adaptive story together is, of course, the software suite, ElectaOne. During the quarter, we see how ElectaOne planning and ElectaOne online are part of many of our deals globally. Recently at ESTRO, the European Congress for Radio Oncology, We saw a great customer interest in this latest feature, and this is reflected in our orders. ElectaOne drives the shift towards adaptive treatments. So, with the current geopolitical landscape, we also would like to take the opportunity to briefly clarify our US exposure to tariffs. Elekta sales in the US market is roughly 22% of our total sales and it includes approximately one third devices, one third software and one third service. Looking at the software, it is locally developed in the US. And services are by nature domestic and are not directly impacted by tariffs. However, for the services we provide, we have minor imports of spare part. When it comes to devices, our Linux are from the UK, which is the biggest portion of the device business. Brackey derives from the Netherlands and Nura from Sweden. expect some software imported from China to the US. We have very limited flows between the US and China. When it comes to China, the absolute majority of products sold in China are produced locally in China, which is generally local for local market. We are working actively with many different mitigation activities, which include, but not are limited to tariff clauses in our contract. We improve our sourcing efficiency. We adjust our cost base and we are constantly adjusting our prices. Important is also the fact when starting to sell EVO in the US market, it will be in a position as a premium product price on a higher level than our current offering in the US market. Overall, We are closely following the development on the tariffs and are actively trying to manage the situation in the best possible way. With that, I will hand over to Tobias for the financials.

Thank you Jonas and good morning everyone. We'll start with the full year view. For the fiscal year 24-25, net sales increased by 1% in constant exchange rates. Most markets in the APEC region grew, while China and the US declined. While solutions declined by 2%, our service business grew nicely by 6% in constant exchange rates, with positive development in most business lines and regions. The adjusted gross margin amounted to 37.8%, an increase by 30 basis points year over year, supported by price increases and an improved product mix. Changes in foreign exchange rates had a negative impact of 60 basis points year over year. The adjusted EBIT margin amounted to 11.6%, a slight decrease year over year, mainly impacted by higher amortization costs following our recent product launches. Net income amounted to 240 million SEK, impacted by the impairment in the quarter. I will come back on details later in this presentation. Earnings per share amounted to 0.62 SEC and adjusted earnings per share amounted to 3.08 SEC. Let's then look into Q4. During the fourth quarter, net sales increased by 6% in constant exchange rates. As Jonas previously mentioned, our product launches of Elekta Evo and Elekta One had a positive contribution to the growth in the quarter. Solution increased by 7% and service grew by 4% in constant exchange rates, with positive development in most business lines and regions. During the quarter, we have seen a solid software growth of 10%, which validates the investments made within this area and is also another proof point of our strength in software offering with Elekta One. The adjusted gross margin amounted to 40.3%, an increase by 370 basis points, and this is the best Q4 gross margin since fiscal year 1920. This, in line with our strategy, was a result of higher volumes and continued price increases supported by our recent product launches, and strong software growth with high margins. It also includes a negative impact of 60 basis points year-over-year from changes in foreign exchange rates. The adjusted EBIT margin improved to 16.3%, supported by the higher gross margin, partially offset by increased amortization costs following the recent product launches, and this, as previously mentioned, is in line with our plan. Net income impacted by the impairment amounted to 380 million SEK negative. Earnings per share amounted to 1.01 SEK negative and adjusted earnings per share amounted to 1.11 SEK. Now, focusing on the cost reduction initiatives. As part of our ongoing efforts to improve cost efficiency, we had delivered on our targets. On April 30, 2025, annual run rate savings amounted to 279 million SEK above our targets of 250 million SEK. In 2024-25, year-over-year savings of 145 million SEK were achieved. implementation cost amounted to 189 million sec and our reporting as items affecting comparability now taking a moment to explain the rationale for the announced non-cash impairment As Jonas mentioned earlier, the fourth quarter results include a non-cash impairment amounting to 1,064,000,000 SEK representing approximately 8% of total intangible assets on the balance sheet. Elekta regularly performs asset impairment reviews in accordance with IFRS requirements. Following a change of directions of the product development roadmap during the quarter, an impairment testing of R&D assets was performed. For some development projects, the course of direction has been changed, and these projects are not being continued or are not expected to deliver according to the original business plan. The impairments are reported as items affecting comparability and further specifications can be found in Note 5 in the report. The impairment will reduce the increase of amortization by 100 million sec in 2025-2026. then looking into our cash flow during the fourth quarter cash flow after continuous investments increased to 1 billion 248 million sec an increase by 376 million sec year over year the increase was supported by higher ebta and lower investments networking capital as a percentage of net sales amounted to a negative nine percent at the end of the year In the fourth quarter, we continue to make R&D investments in new product solutions and software amounting to 291 million SEC and tangible assets of 28 million SEC. The rolling 12 months cash flow from operating activities amounted to 2.62 billion SEC, an increase by 165 million SEC year over year. Rolling 12 months cash conversion amounted to 80%, which is above our target of 70%. As you previously heard, the board suggests a dividend per share of 2.4 SEC unchanged compared to last year. This represents a payout ratio of 78% of the adjusted net income underlying Elekta's strong financial position. With that, I hand over to you, Jonas.

Thank you, Tobias. And let's now focus on the outlook for the fiscal year 2025-2026. So despite present market conditions and current political and macroeconomic visibility, Net sales are expected to grow year over year. We expect gross margin and EBIT margins to expand, driven by price increases, product launches and volumes, resulting in a stepwise improvement towards a mid-term target to move the gross margin to pre-pandemic levels and the EBIT margin of 14% and higher. For the first quarter 25-26 we expect normal seasonal development with lower sales volume as well as negative FX effects. So to summarize the fourth quarter 24-25. The fourth quarter was characterized by solid earnings momentum, where we delivered the best Q4 gross margin in five years and a record high absolute EBIT. Our recent product launches contributed positively to higher volumes, price increases and improved mix. We had a solid cash flow supporting the proposed dividend of 2.40 Swedish krona. To conclude, the positive development is supported by our accelerated innovations in the recent years, and all our products are now fully adaptive. Today, we have the industry's most competitive and comprehensive product portfolio, which will leverage to drive profitable growth going forward.

Thank you, Jonas. Before we will open for the Q&A, I would like to remind you about our upcoming event, the Investor Update June 10th. During the event, we will provide an in-depth look at our innovative products and solutions, as well as an update on Elekta's progress in our key areas. This is an excellent opportunity to gain insights into Elekta's strategic direction and future growth prospects. The first part of the investor update will be broadcasted, while the second part of the day will be an in-person event, only and with a few deep dives, including the possibility to see our latest Gamma Knife Esprit here in the basement of Forskaren. To attend online or in person and for more information, please register through the link that you see on this page. And you will also find the invitation that we sent out in the press release on April 16. You are all warmly welcome here to Stockholm and Forskaren on June 10th.

lastly please see our update financial calendars and with that said operator we are now open for the q a session so please operator you can open up thank you very much we will now begin the question and answer session anyone who wishes to ask a question may press star and one on the telephone you will hear a tone to confirm that you have entered the queue if you wish to remove yourself from the question queue you may press star and two questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone with a question may press star on one at this time. Our first question comes from Mattias Wadsten from SEB. Please, go ahead.

Good morning, Mattias. Good morning, Mattias.

Good morning. Good morning. I have many questions, but I will probably limit myself to three, if that's okay?

That's okay.

Yeah, and I will take them one by one. So... First one, in terms of the 2025-26 expectancy of sales growth, it leaves me with a bit of questions from my end. So if you could share a few words on how you think about it in terms of magnitude. I'm particularly interested perhaps in your overall thoughts on China, given where you are in book to bill. I think I heard you correctly that it was positive for the full year 2024-25. And then also on the U S of course, where you still have customers waiting for approval of the elect evil in NAC. So yeah, that's the first question.

Maybe Tobias, if you would start with that.

Hello, good morning, Mattias, and thanks for the question. As you mentioned here, we do see a revenue growth here in the fiscal year that we're in. And obviously here, we ended up strongly here in Q4, which is something further to build on. Talking about the China here, as you have seen, we have seen during the last quarters here, a recovery here on the orders and start to be translating into revenue as well. So you see a clear recovery here in the US. china market then in terms of the us rightfully as you mentioned we have seen a weaker development on on orders and revenues which we also then expect to continue here at the beginning of the fiscal year that we are in okay so no commentary on magnitude of the sales growth We have not provided a magnitude on the revenue growth. But again, we will build on the momentum seen here in the fourth quarter.

Okay, then I have two questions further. So on FX, so if spot rates remain at this level, what rough expectations do you have when it comes to the margin impact on gross margin and EBIT margin for the full year 2025-26.

Is that possible to apply? Yes, it's possible to reason about. And if you simplify it a little bit, there are two key currencies here. So, electa is actually long when it comes to US dollar, more revenues than cost, and the other way around for the British pound. With the current exchange rates that we see now, the headwind here that we experienced here in the fourth quarter will be larger here in next fiscal year. So that is what you can expect.

Okay, thank you. If you could help us understand a bit better the order development by region, if you could declare some magnitudes. I think you did not mention MEA on the order side. Also, if I heard you correctly, that the book to build was above one in China for full year. 2024, 2025. That's my last one. Thank you very much.

For China, we have passed one, so that's correct. And when you look at the order development, I think we are at a very interesting spot here now at the starting phase here. We've talked about the EVO and attraction here in the European region, the waitings in the US, but we're also in a phase to have a global rollout, which is very exciting for us. And obviously here, when you look at the order in the quarter, the key the key what we see here in the decline is actually the americas which really drags the the order development down then what we also noticed and what jonas mentioned here in the call which is important for us is that we continue here in the quarter here with the high order growth of the software

Thanks, Mattias. I think those were your three questions. And operator, we'll move to the next question, please.

The next question comes from Richard Anderkrantz from Handelsbanken. Please go ahead.

Morning, Richard. Morning. Thank you for taking my question. So first one, question on the decision to move away from the internal cloud solution. Was this a result of external pressure from the FDA to ensure cybersecurity demands? Or has there been an internal pivot in strategy following managerial changes here? And should we expect any additional cost to come from this sort of R&D pivot here that you mentioned?

I can take the first one and thank you for the question and so on. This is driven by, I wouldn't say the EVO launch and so on, but this is the process that started a bit earlier. and also with the focus on cyber and so on, and based on customer demand as well. Meaning that we had to kind of go from an internal solution to an external solution. And then I will hand over the other part of the question to Tobias.

Sorry, Rachel, could you repeat the second part of your question?

I was just curious to understand if there's any more additional investments or costs that will come from this shift to the external solution.

No, not that we see now. And as you know, we apply IFRS standards here, and when it's actually proper in line with the accounting regulations, we should do, and we have done an impairment here, impairment testing and then followed by impairment. But nothing more as of now. We have done this objectively and worked this through thoroughly.

Thanks. Did you have a second question?

Yes. Yes, please. So in conjunction with Q3, I believe you mentioned that quantifying the U.S. sales was down some 10% year over year or so. So how much was sales and orders down in the U.S. in Q4? Just trying to get a sense of the sort of air pocket created from the lack of Evo clearance in that market to put the pieces together. Thank you.

In terms of the US market, we have seen a continued... We have seen a clear impact here, both on... especially in orders, but also on the revenues. And we see the balances here impacting the region and the country. Clearly, yes.

Was it a larger decline than Q3 then in the quarter here?

I think we saw already in Q3 in terms of the revenue impact and I think we also could recognize a revenue impact here in Q4 as well and I think we should expect that also here at the beginning of this fiscal year.

Then also, I think it's important to underline that, of course, customers are waiting for a new product, but we have also a quite broad portfolio in the US that includes Brackey, MR Linac, M&I, and of course, software, which may not provide the same order volume, but a very good margin.

All right, thank you for taking my questions.

Thanks, Richard. Operator, we'll move to the next question, please.

The next question comes from Christopher Liljeberg from Carnegie. Please go ahead.

Hello, Christopher.

Hi, can you hear me?

Yes.

Good. First, just coming back to this question about the U.S. impact, is it possible to give...

approximately figure for what order growth you would have if you had if you strip out us right no yeah there was a significant impact we haven't quantified it in terms of exact numbers but it was a significant impact on the orders here in the us in the quarter yes would you have been growing group orders if it wasn't for the negative impact in the us yes okay

Then I would like to turn to margins and I saw this slide where you had the guidance for the fiscal year you only mentioned sales growth but do you also mean that you expect margin to improve in the fiscal year of 2025-2026?

We haven't explicitly given a margin guidance here for the fiscal year that we're in. But I think that we're starting now here with a strong Q4 in terms of a quite significant margin expansion. As you know, we are surrounded by geopolitical uncertainties around us. But what we could see in Q4, and also actually a bit under the hood here in Q3, The strategy that we are on is really to improve our gross margin. We have repeatedly mentioned that. And what you can see here in the Q4 is that both the general price increases, the launches here of Elekta Evo, and also the acceleration here growth here of the high margin business is predominantly software is giving the results here of a clear improvement on the gross margin and also leverage all through down to the operating margin and obviously for us at the start of a launch phase this is to built on and be worked on for the q1 as you know it's a seasonal weak quarters with low sales volumes and and we're also here exposed with currency headwinds coming on and that will be larger here with the current exchange rates So for us it's now really to build on this and be firm on the strategy and the path that we're on and fully determined to again, which we have repeated, to now taking step by step towards our mid-term guidance and that is to bring back the operating margin to 14% or higher, and it is to bring back the gross margin here to pre-pandemic levels. And I think for us, it's really to build on the Q4 performance here.

And also, just to talk a bit about the margins as well, if you look at the margin development and so on, it's very strong, despite that we don't have Evo in the US. And as I see it, you know, strong foundation and then an upside with U.S. clearance.

Okay, but the actual guidance, you're not guiding for a higher margin in the new fiscal year. That's not the actual guidance. But when I listen to what you say, it seems that you think you will be able to improve the margin.

I mean, our ambition is super clear what we want, right? And then we have a midterm here and that is to bring back, I mean, the operating margin to deliver an operating margin north of 14% and a gross margin to pre-pandemic levels. And that we are fully determined to do. And I think that the Q4 results was a good step in that direction.

And given the strength you had in the Q4, you know, higher software sales, EVO launch, etc. Do you think that will be able to offset a negative FX impact on the margin despite being loaded at the 60 basis points you had in Q4?

I mean, in our work, I think we are, I mean, we can blame the uncertainties around us and currency exposures and inflation, etc. But by the end of the day, we're here for delivering shareholder value and that we are fully determined to do and also to work through. the headwinds that we have around us so to point that yes i mean here we we given the current currency exposure and and if there would be changes in the currency exposures i mean our Focus is clearly to work that through via essentially price, but also portfolio mix and cost, et cetera. And that we are fully determined to do.

Thanks. And Kristoffer, I guess... Thank you. We'll move to the next question, please.

The next question comes from Veronica Dubajova from Citi. Please go ahead. Hi, Veronica.

Hi, Veronica.

Yes. Hi guys. Good morning. And thank you for taking my questions. I will keep it to three, please, if I can. One is sort of big picture. Just if I look at your order growth over the last couple of years, it's been sort of flat to declining. I mean, I think even in fiscal 25, the orders are plus two. I think the prior two years you had orders declining. Just kind of curious, what kind of baseline you think that gives you for sales momentum as we move into fiscal 26 and beyond? Because if I look at consensus, the expectation that folks have is that sales are growing kind of 5% to 6%. But actually, with the orders where they are, they just seem to be quite a big gap. So I'm just curious if you can comment on how you think about that order momentum translating into sales growth. So that's my big picture question. And then maybe I can do my technical ones after that. But let's get this one out of the way.

So first of all, and we have actually, as you know, changed the reporting here from order growth to book to bill. And I think there is a key reason. For us, it's absolutely key to have funding of future sales via a healthy book to bill. And Here, we are ending here for the full year above one. We have above 1.1 in the fourth quarter. We know that we had, as Jonas mentioned here, tough comparables in China where we... You don't need that many unity volumes for actually having a clear impact on the orders as such. We have seen here a recovery of the order growth in China. We are at the beginning of a launch phase. It has started very well, and a global launch will follow, which is highly of interest. not the least here for the US market where the new products obviously will strengthen our edge towards customers and later on the patients, which we are really excited about. So I think with that, we do have a strong backlog and we have a positive book to build, which we will build on.

And also, Veronica, I would like to add, you know, the orders that we see coming in with Evo, with Brackey, with the Neuro products and so on, they have a significantly different margin. And there is a high anticipation for our adaptive portfolio with Evo growing quite or very strong, I would say, in Europe.

Got it. Okay. Thank you. And then maybe just, I want to circle back to, to the margin guidance. I guess I appreciate no guidance for fiscal 26 in terms of margin. I was just kind of curious to get your thoughts and say, we have some headwinds coming in from tariffs, don't meaningful, but there are some, some headwinds coming from ethics. Um, you had a very favorable product mix in fiscal 25 in terms of software and services are super well. I mean, at this point in time, if you look at sort of the possible range of outcomes, it's your best guess that margins are stable up or down year on year, given those moving parts, I guess.

I can just repeat the message that I recently said about this. I mean, we're coming out strongly here in Q4. That is a step in the right directions here towards our mid-term target that we are fully determined to deliver upon. I'm happy to see that the improvement that we see here in the Q4 is actually in line with the strategy and what we want to do. I think what you saw in terms of the tariffs is worthwhile to see that, I mean, our US operations here, so you can divide it into three parts, right? We have a software business which is local in the US and And then we have a service business, which is predominantly locally in the US. And then it's the hardware business. And for this, I mean, we're not standing still. And we track it closely. And obviously, we will work here with both prices and optimizations of supply chain, etc. So that we are determined to do.

Got it. Thank you. And then just very quick, final one, I promise, just your guide for R&D capitalization and amortization for fiscal 26, if you could share that with us. Thank you, guys.

Yes, absolutely. So I think what you will see here in terms of starting with the amortizations is clearly that the impairment as such will lower amortizations in this fiscal year that we're in by 100 million SEC. but there still will in line with plan also it's important to say here will be a net increase of amortization so you will see that amortization will be north of 800 million second in current fiscal year so there will be a Continuous increase of amortizations in terms of the gross R&D as a percentage of sales will go down. And then in terms of the capitalization rates, gradually also move downwards. So all in all, that will lead to a sort of a... Everything has equally better cash conversion, and you will also see that the gross and net R&D will continue to converge here in the fiscal year that we're in. So that's how you can see it.

Thanks, Tobias, and thanks, Veronica, for those three questions. Operator, we'll then move to the next question, please.

The next question comes from Stine Gustafsson from ABG Sandal Collier. Please, go ahead. Good morning, Stine.

Jens Nielsen Good morning, all. So my first question is on the FDA situation on Evo. I think you said, and correct me if I'm wrong, that you have resubmitted or will resubmit your FDA approval. But at the same time, you talk about you don't expect a major delay, but Can you share with us how that's going to work out? Because, I mean, I guess FDA will need a full new review time for Evo. And when do you expect then Evo to be approved in the U.S.? ?

Roughly. Yes, you're right. We have done this in consultation with the FDA, predominantly driven by cybersecurity and cybersecurity requirements. We have a new strategy with the simplification, I would say, of the application. We believe that to kind of stick to the original submission would have delayed it further. So we had to redo that and do it in a better fashion. Then to provide any timelines, it's a bit out of our hands, but we hope with this kind of consultation with the FDA that uh we look at the uh a faster timeline than to stick to the the the original submission and of course you know once we get the fda clearance then you you will know about it but you still have not resubmitted the the new

FDA approval is that correct?

That's correct you know we are in the process of resubmitting as we speak so we will do that in a very short time frame.

Okay excellent thank you and then just a clarification on you talk about pre-pandemic gross margin level just to make sure we're all on the same page here are you referring to the 42% level you had in fiscal 1920 or which level are we talking about?

It's clearly north of 40% so that is what we are talking about and to establish ourselves on that level.

Okay. And then my final question was I saw in the news in England the other day about a large tender of 70 million pounds and your products were highlighted in there. Is that something you want to share with us about that tender?

I don't think we can share any news of that tender for the time being. But of course, it's one of the things that we're working on.

I think that is also in line with that the UK government have found more funding for cancer care. I think that was presented a quarter ago actually around that area. So that's basically in line with that, Sten.

All right. Excellent. Thank you very much. I'll get back into the queue.

Operator, we're now ready for the next question.

The next question comes from Julien Dormois from Jefferies. Please go ahead.

Hello, Julien.

Hi, good morning.

Good morning, Julien, Tobias, and Peter. Thanks for taking my questions. I'm left with two. The first one is a very broad question about the market conditions. Obviously, we're hearing a lot about potential budget constraints at the hospital level, both in the U.S., but also now probably coming to Europe. So just a very general overview of what you are hearing from your customers and whether this is leading to a two more discussions and delays maybe in taking decisions or anything would be helpful on this side. And the second one, coming back to the software, to the R&D impairment, just making sure I understand that correctly. What is exactly the software related to? I mean, are we talking about planning, monitoring, both? So just to better understand what is at stake here. and to what extent cybersecurity is an issue in the discussion.

So if we start with the market and so on, and of course, you're right, it's an uncertain market today. But what we see from our customers, we don't see any impact so far. If you look at China, for example, it's a quite large pent-up demand as things haven't been moving that much in China yet. We see, you know, very good demand in Europe and so on. So, so far, so good, I would say. But of course, we're monitoring that very, very closely. And we haven't heard anything about hospital budget constraints or anything like that so far. So, yeah, today it looks quite decent, but... As we said, it's a constantly moving target these days.

Maybe Tobias on the software question.

Yeah, it's really to move from internal developed cloud to an external supplies platform. And I would more call it a sort of a broad platform for this, where we actually see that we will benefit from this going forward. So that's how I would frame it.

Okay, and if I may just one follow up on this, you obviously mentioned that you do not expect any

Now we are ready for the last question of this call. So operator, please.

The last question comes from Robert Davis from Morgan Stanley. Just a couple of questions.

One was just around China. I know you mentioned sort of an improving tendering environment. I'd just be curious to get a little bit more color in terms of what's going on on the ground, because obviously I think your order rate was still negative, I think you said, in China, right? So just if you could, is it sort of, stimulus measures that are coming through? Is it just sort of time and duration that's sort of opening up people sort of purchasing decisions? Just kind of what's different now to the previous quarter was my first question. And then sort of building on that, really, it was just a question around the general sort of CapEx environment more broadly across your key regions. I know you called out the U.S. as a bit of a weak spot ahead of the new product launch. But is there anything else going on on the ground just in terms of spending across the rest of the portfolio that you're seeing across those other regions? Thank you.

I can start with the first question about China and so on. You talked a bit about stimulus offer and so on. It's hard to say. We haven't seen that much on it and so on, but we see increased customer activities. And we also see that it takes a bit longer time in China during the bidding process and probably a bit colored by the anti-corruption campaign being more careful, being more prudent in their bidding and so on. But we are very positive on China. It's really pent up demand and it's sizable. And of course, you know, there is a need of investment in China. So we are quite positive on it. Then you had a second question as well about other markets and so on, if I understood it correctly. Could you repeat that again?

Yeah, I know you sort of called out some softness in the US ahead of your sort of product launch, but just sort of beyond that one specific product, what are you seeing just in terms of the overall kind of spending appetite in the US and Europe and China as well?

Thank you. Going back to the previous answer and so on, we don't see any constraints on budgets and so on. So far, so good. And that also applies for the US, I would say. We don't see any major impact on the kind of a bit financial turmoil and so on. And it's going quite well and it's a quite large demand from multiple markets, I would say.

And also maybe adding that on China there Robert I mean it's also worthwhile to mention again that there is still a large untapped demand here which has not I mean decreased during the last years so I think there is an underlying strong incentives both from a demand point of view but also supported from a government here to support the demand in China.

That's great. Maybe if I can just squeeze one last one in. Just around your comment on book to bills, can you just give us a bit more color in terms of lead times between orders and sales across some of the key products in your business? And what's the sort of average aggregate? Is it the same now as it was a couple of years ago? Just interested how much mixes influence the sort of lead time between orders and sales across your portfolio. Thank

Yeah, broadly speaking, you can say that in a standard LINAK, you have about a year, 12 months between orders and revenues. For the gamma knives, it's a bit longer. It's 12 to 18 months maybe. And then for unit, it's maybe 18 to 24 months. Then for our bracket products, it's faster. So then it's maybe six months or so. So that is... and then also adding to that which is I mean for some of the larger steels you do a sort of say framework here where you actually then you set up order agreement and contract and then you actually installed according to a very specific timeline so that's how you can think upon orders

very helpful thank you thank you robert and thank you jonas and thank you tobias for today's call and i just want to remind you again about the event coming up here june 10th there is still time to sign up and it will be an interesting day with both overall strategy topics as well as deep dives the possibility to see products in lives and get more knowledge about our MR strategy as well. So welcome then on June 10th and have a great day.

Thank you. Thank you.