RaySearch Laboratories AB (publ)

STO:RAY B

Earnings Call Transcript 2024-Q1

[Eva Nelson, executive]

Hello, and welcome to the presentation of RaySearch Interim Report for the first quarter of 2024. My name is Eva Nelson, and I will be the moderator here today. Joining us in today's call is, as always, Johan Lof, RaySearch Founder and CEO; and also the interim CFO, Annika Blondeau Henriksson.

Johan and Annika will give you a short summary of the quarter, including the financials. [Operator Instructions] I also want to remind you that this session is recorded and you can find it through the same link as you used for this call and on RaySearch website. And with that, I hand over to you, Johan, please go ahead.

[Johan Löf, executive]

Thank you, Eva. I would also like to welcome all of you to today's webcast. It's great to see that our positive momentum has continued in the first quarter of 2024, marking the seventh consecutive quarter of record-breaking sales, the highest ever for a corresponding quarter.

Sales for the first quarter amounted to SEK 257 million, up by 12% compared to the year-on-year period. Operating profit was SEK 46 million, resulting in an operating margin of 18%. This is a significant improvement from the previous year's 10%. The improved margin was largely driven by increased sales, where we maintained our momentum. Order intake for the first quarter was SEK 239 million, which is a 15% increase compared to last year. Our cash flow for the quarter was SEK 88 million.

So to summarize, RaySearch has a strong financial position with cash and cash equivalents of SEK 440 million and stable cash flow and no loans. As we announced yesterday, the next version of RayCare, 2024A has been certified as interoperable with Varian's TrueBeam linear accelerator. And this means that the new certificate is in place before the launch of RayCare 2024A, which will happen later this month. In technical evaluation of different oncology information systems, RayCare has received very positive reviews. With its advanced functionality combined with the fact that the system can now connect to all [ Linux ] in the TrueBeam family, RayCare is a very attractive alternative to competing systems.

We see a growing interest in RayCare from both new and existing customers. One example is Raigmore Hospital in Scotland. They have been using RayStation with their Truebeam for many years and are now replacing their existing oncology information system and older version of [indiscernible] from Varian with RayCare. In January, we signed an agreement for RayStation and RayCare with Royal Marsden in the U.K.

They will be the first center in the world to implement online adaptive radiotherapy with RayStation and RayCare in combination with the Radixact treatment delivery system from Accuray. In February, we acquired the product drug log from the Uppsala based company, Pharmacolog. DrugLog verifies the identity and concentration of compounded injectable medications that are used for cancer treatment with chemotherapy.

Our long-term vision is to provide software support for all types of cancer treatments, including chemotherapy. And as a first step, we plan to add support for treatment planning and RayStation and workflows in RayCare for chemotherapy management. We plan to launch our chemotherapy software package in 2026 and DrugLog [indiscernible] complement and significantly improve and simplify quality assurance in chemotherapy. So now let's take a closer look at the financials. So Annika, please go ahead.

[Annika Henriksson, executive]

Thank you, Johan. On this slide, we present our key metrics for the first quarter of 2024. The order intake increased by 15% from SEK 207 million in Q1 2023 to SEK 239 million in Q1 2024. In the quarter, our order intake for licenses increased by 18% from SEK 95 million to SEK 112 million, and our order intake for support increased by 36% from SEK 59 million to SEK 80 million in 2024. Our net sales in the first quarter was not derived from any major order, but it mainly comprises of revenues from small and normalized sized orders, which generated an increase in net sales by 12% from SEK 230 million to SEK 257 million in Q1 2024.

Adjusting for the exchange rate impact, net sales increased by 11% year-over-year. In the quarter, net sales of licenses increased by 14% from SEK 104 million to SEK 190 million, and net sales of support increased by 23% from SEK 87 million to SEK 107 million. Operating profit increased from SEK 24 million to SEK 46 million, which corresponds to an improved operating margin from EUR 103 million -- [ 10.3% ] to 17.8% in the first quarter. The improvement, as mentioned was Johan was generated from higher net sales, but we also had slightly increased operating expenses related to personnel as the number of employees at the end of the period has increased from 376 to 398 persons.

Furthermore, a number of development projects were activated during the period June to December in 2023, which led to increased depreciation in quarter 1 this year. Lastly, cash flow for the period was positive SEK 88 million, generated from customer contracts with advanced payment for license and support to be delivered. So this increase made the cash and bank equivalent amounting to SEK 440 million at the end of March.

Next page, please. This graph displays order intake and net sales for the past 3 years in a rolling 12 months perspective. At the end of first quarter 2024, our 12-month rolling order intake amounts to approximately SEK 1 billion compared to SEK 1.1 billion at the end of Q1 2023. Adjusting for the large order from [ IBA ] in Q4 2022, the order intake in the rolling 12 months period of 2024 is slightly increasing. The past 12 months net sales in a rolling 12-months perspective is an increase by 21% to over SEK 1 billion in net sales.

So the trend line for both order intake and net sales show steady growth. And at the end of the period, total order backlog amounted to SEK 1.848 billion, of which SEK 496 million is expected to generate revenue over the next 12 months. The remaining amount in the order backlog mainly pertains to support commitments that are primarily expected to generate revenue during the coming 4 years. On this slide, we present RaySearch quarterly operating results for the past 3 years. The operating profit in the first quarter is the seventh consecutive quarter with a positive operating profit of SEK 46 million. Back to you, Johan.

[Johan Löf, executive]

Thank you, Annika. Yes. So with another sales record, a robust order backlog of SEK 1.8 billion and continuously growing support revenue forward to a year of continued growth. We continue to focus on improving our operating margin, and we reiterate that a target of a minimum of 20% by the end of 2026 remains, and we are -- feel quite confident that we can reach that target. Thank you.

[Eva Nelson, executive]

Thank you, Johan and Annika, and we now open up for questions. So operator, over to you.

[Operator]

[Operator Instructions] There are no questions over the phone.

[Eva Nelson, executive]

And no written questions either actually. So I suppose there are no questions then. I'll give it a second. No? Okay, then. I'd like to thank you for your participation. We conclude this session, and we look forward to continue talking to you, if not before, then it will be when the interim report for the second quarter of 2024 will be presented, and that is on the 16th of August. So lastly, I'd like to remind you that you can always find the presentation through the same link as you used for this call and also on RaySearch website. So thank you for your participation today, and goodbye.