RaySearch Laboratories AB (publ) (RSLBF) Earnings Call Transcript & Summary

Hello, and welcome to the presentation of RaySearch Interim Report for the second quarter of 2025. My name is Henrik Prefors, and I will be the moderator today. Joining us in today's call is Johan Lof, RaySearch Founder and CEO; and Nina Grönberg, our CFO. Johan and Nina will give you a brief summary of the quarter, including the financials. And after that, we open up for questions. I also want to remind you that this session is recorded, and you will be able to find our recording on the website on the upcoming days. With that said, I hand over to you, Johan. Please go ahead.

Thank you, Henrik. I would also like to welcome all of you to today's webcast. Sales for the second quarter was SEK 305 million. That is a decrease of 4% compared to the same period in 2024. The weaker sales were partly due to the delay of several orders. Therefore, the order intake in July was unusually high, SEK 56 million higher than in July last year and more than SEK 50 million above the average order intake for the last 3 years. I'd also like to point out that the revenue for the second quarter of 2024 included a onetime item of SEK 37 million from a previously prepaid license sale to MedAustron, which made the year-on-year comparison more difficult. Operating profit for the quarter came in at SEK 36 million, translating to an operating margin of 12%. Profit in the second quarter was negatively affected by a declining dollar and also some nonrecurring costs. If you exclude those effects, the operating profit would have been SEK 51 million with an operating margin of 17%. Order intake for the second quarter landed at SEK 241 million. As we noted before, order intake can fluctuate significantly between quarters, and that was especially clear this quarter. Still, we're seeing strong momentum across our markets. Customer interest remains high. Demand is solid, and this supports our confidence in continued growth going forward. Overall, RaySearch has a strong financial position. As of 30th of June, our cash and cash equivalents was NOK 403 million, and we have stable cash flow and no loans. We're proud to report that RayStation was used in the first European treatment with Neutron Therapeutics accelerator-based BNCT, Boron Neutron Capture therapy. These groundbreaking treatments were performed at Helsinki University Hospital in Finland and they were part of the clinical trial. RayStation's advanced BNCT capabilities, now clinically validated in both Japan and Finland are critical in supporting high-precision individualized treatment planning, which is vital for successful BNCT. The fact that RayStation was selected for this pioneering work once again reinforces our leading position in the clinical development of the ECT. At the end of the quarter, we released RayCare version 2025, the latest version of our oncology information system. This version delivers important functionality upgrades to streamline clinical workflows, improve data management and enhance interoperability across the treatment chain. With integrated and intelligent solutions and updated treatment support, this version of RayCare empowers clinical teams to deliver more coordinated and efficient care throughout the entire treatment process. On July 21, we announced that AKSM Oncology has placed orders for both RayCare and RayStation to be used at Advanced Radiation Therapeutics, which is a new center in California that's expected to open in March next year. The center will use RayStation and RayCare together with their TrueBeam linear accelerators. Now let's take a look at the financials. So please, Nina, go ahead.

Thank you, Johan. Yes, the second quarter in 2025 indeed emphasized the importance of taking a longer than quarter-to-quarter perspective when looking at RaySearch. The momentum and favorable market condition for RaySearch is still there. But with orders delayed to July and strong comparisons, we get a weaker outcome than we've been used to. Therefore, I will start with the rolling 12 development of net sales, EBIT and EBIT margin. It is visible that quarter 2 outcome caused a downturn in an otherwise straight upward trend. However, the annual growth rate over the last 2 years is still 15% and the rolling 12 EBIT margin, 20%. Moving on to the quarter 2 overview. Order intake in the second quarter decreased with 17% from SEK 290 million to SEK 241 million. The order intake for licenses were down 20%, ending at SEK 107 million, while the order intake for support decreased 19% to SEK 96 million. Research order intake fluctuates between the quarters, but also it is important to remember that it does only include contracted amounts. Since our churn is close to 0, there is also an essential amount of captured future support income that's not included in the order intake nor in the order backlog. Order backlog end of June amounted to SEK 1.665 billion, of which SEK 550 million is expected to generate net sales in the next coming 12 months and the rest over the 4 years after that. Net sales, including currency effects with a weaker U.S. dollar decreased with 4% from SEK 319 million to SEK 305 million. Currency adjusted growth was 0. The sales of licenses amounted to SEK 131 million, corresponding to a decrease of 20%. Last year's license sales amounted to SEK 164 million, powered by the SEK 37 million revenue from the MedAustrom deal that we had last year. The support revenue amounted to SEK 131 million, which is an increase of 14% compared to last year. The operating profit for the quarter was SEK 36 million, and that is corresponding to an operating margin of 12% and again, negatively affected by foremost a weaker U.S. dollar and also temporarily higher cost, as Johan also mentioned. Adjusted for the reporting currency losses, the operating profit was SEK 43 million and the operating margin of 14%. Operating profit in the second quarter last year was SEK 79 million, including a full drop-through of the MedAuston deal of SEK 37 million. Cash flow from operations amounted to SEK 71 million in the quarter compared to SEK 155 million last year, and the decrease is mainly related to the lower profit, but also an increase in the operating capital and higher preliminary tax payments. The net cash flow for the period was minus SEK 104 million, affected by the SEK 103 million dividend that we paid out in May. The free cash flow was minus SEK 1 million in the quarter. Moving forward and summarizing the first 6 months. Order intake has increased with 23% from 529 million to SEK 651 million. Order intake for licenses increased 8% to SEK 266 million and order intake for support increased 50% to SEK 298 million. Net sales for the first 6 months was up 11% from SEK 576 million to SEK 637 million, where license sales stood for an increase of 5% to SEK 297 million and support sales increased 16% to SEK 256 million. The 6-month operating profit amounts to SEK 111 million and the operating margin to 18%. Last year's operating profit for the first half year was SEK 125 million with a margin of 22% Cash flow from operations amounted to SEK 217 million for the first 6 months compared to SEK 322 million last year and almost SEK 60 million of those is related to higher tax payments in 2025 and where SEK 46 million of those is related to the 2024 year profit. Last year also included positive effects from big improvements in the operating capital. The net cash flow for the period was minus SEK 38 million compared to plus SEK 83 million last year, where we had higher dividend in 2025 that stood for SEK 37 million of that difference. Moving on to the overview of the quarter-by-quarter development. It is clearly visible that quarter 2 2025 stands out as an exception to a strong previous performance. And last, moving back to the long-term perspective and the development all the way back from 2008. RaySearch continues the growth journey with the increased robustness from 40% recurring support revenue. And with this said, I hand over to you again, Johan.

Thank you, Nina. Yes. So to summarize, after 11 consecutive quarters of record sales, we now have a quarter with slightly lower sales compared to last year. However, we don't see this as a trend change, but rather as a consequence of temporary effects that I described earlier. We're maintaining our target of an operating margin of at least 25% by 2026. In conclusion, the outlook for growth remains strong, and I'm optimistic about the future. Thank you.

Thank you, Johan and Nina. We will now open up for questions. [Operator Instructions]. And I think we have someone who's been waiting for a little while, Kristofer please go ahead and don't forget to unmute.

Can you hear me?-- it's Kristofer from DNB Carnegie. Two questions. First, just interesting to hear the reason why support revenues were up quite a bit quarter-over-quarter, i.e., versus the first quarter despite I think the U.S. dollar should have dropped 10%, and you also had the euro dropped 5% versus krona. So that was a bit surprising. And then also, is it possible to say anything about how you expect working capital to evolve here in the second half of the year? That's all for me.

Yes, we have -- maybe you need to repeat the question a little bit. You asked about the support revenue that was...

I guess, yes, if you take support revenues, all else equal, I think it should have dropped maybe 7% versus the first quarter just because of currency effects, but it was up quite a bit. So it seems -- I don't know if you have been able to increase prices or if there's something else extraordinary in the numbers.

Yes. No, there are no -- I mean, we have no specific price increases, but we raised prices, I mean, along the way with the customers. But I mean, we have -- we will increase our support revenue going forward since we have more and more support contracts. So if you need a more detailed question or answer to that question, I need to look further into it.

I mean just to confirm, so we could use this as a quarter number as a starting point for the rest of the year.

I would say so. Do you have anything to add, Johan?

No, I agree.

But let me look further into that and see if there are -- we have something special in quarter 2, but that's -- I don't think so. That's not what we have looked at.

Okay. I think we're heading over to the chat...

There was one more question from Kristofer. How are we going to -- how is the working capital going to -- how will we work with the working capital?

Yes. Okay. Yes. Yes, how it will develop going forward or Yes, working capital is something that I look upon -- I mean, all the way through the month. And it is a little bit special with the working capital in Research, I would say, because it depends a lot on the contracts that we have in the balance sheet at the moment. Some of them can be pretty large. And if we have negotiated payment terms with the customers where we get paid upfront, then we have a good process in the working capital and otherwise not. And it fluctuates a lot dependent on the customers. So we are working on that, and I think that we will be able to improve the working capital going forward. But in the end, it depends on the negotiations with each customer.

Okay. So in the chat, we have a question -- or 3 questions actually, but we'll take them one by one from Mats...

I can take those and answer them at the same time.

Okay.

So the first question is, when will Ortega revenues start to appear? And over how many quarters will we see them? We see some revenues from Ortega in Q4 this year from the first center. And then this will span over a 3- to 4-year period until they have built all the 9 proton centers in Spain. So these revenues will be spread over a quite long time period. Second question is what percentage of the licensing revenue will come from customers replacing Pinnacle during this quarter? I don't have that number calculated yet. But I -- it's probably north of 60% is my guess. So -- but I don't have it in front of me. But it's a big focus now on replacing as many pinnacles as we can before Pinnacle becomes end of life, which is end of 2026. The third question is, what does the onetime cost consist of? And what is the amount? So the amount is SEK 7 million, and it's 2 things. One is dispute regarding adaptation of our facilities here in our headquarters. So dispute with our landlord that's settled. And then the second part is an internal global conference that will not recur next year. So those are the 2 items. So those were the answers to Mats Anderson's 3 questions. Maybe we should take the chat and maybe we should take every other question from the people raising hands.

Yes. So let's move over to Oscar Bergman, who has been raising his hand for a while.

Can you hear me now?

Yes.

Great. Yes, I have 3 questions before I can head back into the queue. The first one is the delayed orders that were pushed to July, if they would have been recognized in Q2, can you say what sales would have been in this quarter?

Not exactly, but the majority of those orders will be recognized quickly. I don't know exactly the mix, but the vast majority of the order value will be recognized in Q3 and would have been recognized in Q2 had they come in.

And would you categorize them as small or a bit larger works?

So there are a few -- I think the largest is SEK 12 million, then there are a couple of SEK 10 million orders. But then in total, 20 orders are part of this delay. So it's a mixture of small add-ons and a few larger -- or well, medium-sized, like around SEK 10 million.

Okay. And can you elaborate shortly on the reasons for the delays?

Just administrative hiccups and that happen from time to time.

Right. I see. And then -- so I expect we could see a pretty strong Q3 then. I mean we're still in it, of course, but should we assume that maybe we will -- we will be back at record sales in Q3?

We cannot predict that. But I mean, theoretically, the same thing can happen in Q3, right? So the orders can be delayed into Q4. But of course, it's -- we will not predict now Q3, but it's nice to have a strong start of the quarter. I mean it's painful to lose the orders from Q2. But then now when we're in Q3, then it's -- it can be regarded as a positive thing.

Okay. And are there any signs of potential delays from Q3 to Q4 as well?

No. We don't see those delays until they actually happen.

Anything, the final question. sorry Nina...

No, but I just wanted to add there that -- I mean, our customers, I mean, the hospitals and the cancer clinics, they don't work at the same -- with the same clock as we do because, of course, we want to get the orders and the sales into a specific quarter, but I mean, they don't care. So they work according to another schedule. And sometimes we just have to accept the customer schedule here.

Okay. All right. So just a final question before I head back into the queue. Do you focus more on increasing the number of RayStation licenses per existing customer sites going forward? Because I suspect this hasn't really been a huge focus area for your operations historically?

We're preparing that as we speak. So that will be a very important topic for the second half of 2025.

Okay. And if you were to compare this, sort of say, optionality to increasing the modules per license, which would you say is the most -- has the most potential?

Which of the modules?

No. Yes, that was the question, but increasing the number of licenses per center or increasing number of modules.

I see. For me, they're all licenses. It's RayStation licenses and then it's module licenses. Okay. So there is huge potential in both. As we have said before, if we have sold 4,600 RayStation licenses or something like that so far, we could sell to our current installed base at least another 4,000. That's like a theoretical maximum, I would say. So you still have that. But the potential is probably even larger for the modules just in sheer numbers is much less saturated. The module that has sold the most out of the, I would say, 30 modules now that are viable options for -- that are relevant for all the entire customer base. The module that has sold the most has only sold 1,700 -- almost 1,700 copies. So -- so it's -- and then it's a falling scale from there. So the modules are from just sheer number perspective, much less saturated. But then we can't assume that we will have 8,000 modules sold to every module to the entire customer base. So there is -- but it should be higher than it is currently. And that's what we'll be working on more actively now to have our customers realize what they have under the hood, so to say, because they have all these modules physically on their computers in the clinic. So they could -- if they purchase them, they can release a lot more power from RayStation than they currently have. So that will be -- it's very hard to predict what this would result in, but it's a potential that we will try to extract during -- going forward from now.

Thank you very much. So heading back to the chat, we have Ivan few questions. I'll read them. In Q1, Johan mentioned the idea of opening up all licenses to the installed base for a limited period of time in the hopes of then making the customers buy the licenses. Has there been any progress to this idea? And could this theoretically add 5 to 10x license revenue?

Yes, I think I partly answered this question. So this is work in progress right now. So this will be activated during the fall. And also, as I answered to Oscar previously, it's very hard to predict. what this will mean in terms of license revenue. But for sure, we will be able to sell more licenses to our installed base if we actively pursue this. But to say 5x or 10x is we can't predict that.

Thank you. How is the competition looking within the area of chemotherapy? Does Elekta ovarian have software for chemo? Or are there other competitors in this field? Also, how large is the potential for chemotherapy in regards to the total clinics globally?

Yes, there is some competition. I would point out that Epic, for example, has the most common hospital information system has a chemotherapy module. And then there are several smaller players require very simple software solutions for chemo. But I don't think there is any -- there is no software that takes chemotherapy as seriously as RayStation RayCare will do. So I think we'll have a very competitive -- on a different level, competitive solution on the market next year. And there is also a question about the potential for chemotherapy globally. And I cannot answer that today.