Morning. Welcome to C-RAD webcast for the first quarter of 2024. I am Greta Cattani, Global Marketing Director, and I will be your moderator for today's session. We have an exciting agenda ahead, filled with valuable insights and updates. I'm delighted to introduce our CEO, Cecilia de Leeuw, who will guide us through the financial results and provide insights. Before we start, I'd like to remind you that we will not be taking any questions during the presentation. We encourage you to save your questions for the Q&A session that will follow the presentation. During that session, you will have the opportunity to ask your questions to Cecilia and to Jonas Reinhammar, which is our interim CFO, and will join Cecilia for the questions. We will not be taking any questions in the chat. A recording of the webcast will be available on the C-RAD website after the presentation.
Without further ado, let's get started. Cecilia, over to you.
Thank you, Greta, and welcome to our Q1 presentation. It's great to see so many of you here on our call today. For those of you that might be new to C-RAD, we are part of the fight against cancer. Radiation therapy, which is our field, is an important part of this fight. Approximately half of all cancer patients have radiation therapy as part of their treatment plan. Let's look into the Q1 numbers. The year is starting off with the best-ever revenue for a first quarter. The revenue growth of 40% to SEK 118 million is our best quarter so far, our best first quarter so far, and the second best ever, and we have growth in all markets.
Profitable growth continues to be our focus also for 2024, and the EBIT for Q1 more than doubled, translating to an EBIT margin of 12%. While the macroeconomic situation continues to be challenging, we have a stable order intake of SEK 92 million, which was at the same level as the first quarter of last year. Surface Guided Radiation Therapy, or SGRT, is increasingly becoming a given in the treatment workflow, and we are seeing great interest across all markets. The order backlog of SEK 730 million, an increase of 12% from Q1 last year. The cash flow from operations increased to SEK 16.5 million, supported by improved profitability and slightly lowered inventory levels. Our continued and profitable growth is moving our operations and organization towards the next level.
C-RAD has been growing rapidly in the recent years, which has taken us to a new level of operations. To further strengthen our foundation and enhance our capability to deliver on the strategy, we will make additional investments in the offering reach and organization during 2024. We are also strengthening our back office with process improvements and automation. Let's take a closer look into our markets and the sales performance. The U.S. is starting to show signs of recovery, and we can see that some investments that were on hold are now moving. I'm pleased that the revenue grew 41%, supported by a strong order backlog conversion. This includes deliveries both to U.S. and Canada, including some proton orders. The order intake of 25 million SEK is an increase of 20%.
Satisfied customers are important for our business in Americas, and hence, a cross-functional team program has been initiated to assess customer satisfaction. EMEA started the year well on the revenue side, growing 31% for the first quarter, with also here a strong conversion of the backlog. Order intake had a softer start with a decline of 25%, and this is mainly due to the lack of the larger tenders, the larger national tenders that we have seen in the last couple of years. And in addition, there is an increased tendency to delay extension of service contracts with many clinics being under cost pressure. We are intensifying our market activity and will hold a second distributor meeting for this year, this time in the Middle East.
In the quarter, we received a SEK 12 million extension order from our partner and distributor, Tecnosan in Italy, connected to the national tender awarded in the end of 2022. Another positive highlight is that we replaced a competitor in Tallinn, mainly due to our proven quality and performance. The interest in SGRT and our technology in the APAC markets is high, and the first quarter of this year was no exception. Revenues increased 57%, and order intake was SEK 34 million, a growth of 25%. New orders were taken in high competition in Australia from GenesisCare, for their newest and most advanced facility in Western Sydney, and this confirms our market-leading position. We participated in the ITEM conference at Japan with our industry partners, and the unmet demand for SGRT in Japan is evident.
The market activity level in China continues to be high, and so is the interest in our technology. I'm also pleased to announce that the important registration of our new generation of products in China was approved in April. We have a healthy order backlog of SEK 730 million to deliver off. A bit more than half, or 55%, is products, and 45% is services, and the backlog consists of orders received but not yet delivered. And the growth of products is true also on the revenue side. Product revenue outpaced services revenue for this quarter. It is, however, worth noting that the installed base of products is an opportunity for future service contracts. Our focus on profitable growth continues, and continues also to show results, with a strong EBIT, EBIT margin and a healthy gross margin of 65%.
Cash flow has also been a focus area over the last quarters, and the positive trend is clearly visible. We have a positive cash flow of SEK 14 million in the quarter and an improved cash flow from operations. We have also started to work with trimming the inventory levels. This year started off in full speed, and I recently returned from our important trade show, ESTRO, where we announced our very interesting strategic research collaboration with RaySearch. And we are two strong Swedish companies who have many common customers, and in the collaboration between our two R&D departments, we showcased one potential application as a demo at ASTRO, ESTRO. The rich data from the C-RAD service, surfaces, provides enhanced input to the RaySearch treatment planning system.
With that, let's summarize our focus going forward and the value of investing in the fight against cancer. Across our global team, we continue to build our capabilities in line with the execution plan and our focus on profitable growth. Firstly, the investment in research and development organization is to secure our world-class portfolio today and tomorrow, and that continues. Patient safety and improved quality of life is the foundation for our technology. SGRT, or Surface-Guided Radiation Therapy, is all about the precise targeting of the tumor while minimizing radiation exposure to healthy tissues. We have a seamless integration to our industrial partners, such as Elekta, Varian, Accuray, and the proton and CT suppliers. Secondly, we have a hybrid approach to improve scalability and global reach with a combination of direct sales and partners.
To capture the unmet demand of SGRT, we are strengthening the capabilities of our distributor network. In early March, we had the first face-to-face APAC distributor meeting, and later in March, the EMEA distributors gathered for training and knowledge sharing. Next up is the upcoming distributors meeting in the Middle East. Thirdly, it's still early days for SGRT and a lot more to do. And I'm really pleased to see that SGRT is rapidly becoming a given in the clinics as part of the treatment workflow. The interest in the market is high, and many of the tenders today have the requirement from the start. This is true both for LINAC and proton machines, and in addition, the investment is minor, only some 5% of the total investment to equip the treatment room.
Even for advanced markets, only some 30% of the linear accelerators are equipped with SGRT, and hence, we see an opportunity to retrofit existing LINACs. Services is another strategic asset for two main reasons. Firstly, to ensure that our customers are using the technology to its full potential, and secondly, we want to secure a growing portion of recurring revenue. This requires hard work. Last but not least, we have a solid financial position with SEK 147 million in cash balance, and an equity to asset ratio of 68%, and are completely debt-free. Our focus on profitable growth continues to show results. In conclusion, why do we do all this?
Well, it's about serving our customers, ensuring safety and efficiency in advanced radiation oncology, and we are part of the important fight against cancer, and to improve lives of cancer patients around the world. And with that, it's time for questions, and I will be accompanied by Jonas Reinhammar, our interim CFO as of today.
Thank you, Cecilia.
It's now time for the Q&A session. If you wish to ask a question, please press the raise your hand button. I will turn on your microphone, and you will be able to ask your question directly to Cecilia and Jonas. I will ask you to state your questions, and then mute you so that the audio will be a better quality. So let's see if someone has already some questions. We have the first question from Christian Lee. Christian Lee, please state your question. Thank you.
Thank you. Good morning. I hope you can hear me.
Yes, we do.
Absolutely. Hi, Christian.
Hi, good morning, Cecilia and Jonas. Thank you for taking my questions. I have three, please. You plan to make investments in the offering, which an organization, during 2024. Could you please quantify what it means in terms of increasing OpEx, and also a few words on your product development?
Yeah. So let's start with the investment. So, you know, just stepping one step back, we have been growing quickly in the past years, and now it's actually time to take the next level of making sure that we have solid operations, and we are investing in things like automation and process improvements. So I cannot specifically quantify, but it's quite natural when you grow, for example, to ensure that you have a services organization that can take care of all the new installations that we have around the world. And when it comes to R&D, for example, it's also important for us to continue to be, you know, on top and market leading. So that's also makes, you know, perfect sense.
Thank you. I guess we have a second question from Christian again.
Yes, please. Increasing services is a priority for you. How does this resonate with your strategy execution to strengthen your distributor network combined with direct sales and partners?
Mm
Can you please elaborate on the dynamics of the service agreements, depending on what sales channel the services are delivered through?
Yeah.
Thank you.
No, no, thank you for your question, Christian, and it's definitely so that services is a priority for us. So, when it comes to the service agreements, it doesn't make such a, you know, big difference whether we go direct or whether we go through distributors. The important thing here, and you know, why I want to emphasize that, we are working with a hybrid approach, it's not only on the sales side, but it's also partly on the services side. So, since we have the focus on profitable growth, it's important for us to make sure that we have, that we are cost conscious, you know, in everything we do. So sometimes, let's say, for example, if we have.
If we're just starting on the market, it might make more sense for us to go through a distributor, because they already have a position in the market. When we grow, we might want to have more people of our own, for example. So, that's how we or the services organization really try to manage the cost step by step.
Thank you, Cecilia, and I guess we still have one more question from Christian.
Yes.
Yes, perfect. Thank you. It would be interesting to hear your thoughts on Adaptive RT, if it represents opportunities or potential threats for us, SGRT as a concept, and how the launch of Elekta Evo could impact your collaboration with Elekta?
No, I think, you know, in general, Adaptive Radiation Therapy is really important. It's also part of what we do already. When it comes to Elekta Evo, that is, it doesn't change anything in our collaboration. The collaboration with Elekta is really great. And for Elekta Evo, that was launched at Astro, as you mentioned. It's still important to know in this workflow, in the process, to know that the patient is exactly on the same place between the imaging and there, the SGRT technology with the monitoring makes a lot of. You know, it's still extremely important. So, no, we don't see any change in the need for SGRT, SRS.
Thank you, Cecilia. The next question will be from Michael Jakobsén. Michael Jakobsén, Jakobsén, please state your question.
Hello, can you hear me?
Yes, we do.
Yes.
Okay, great. Yeah, the first question may be answered, but, I'm going to reiterate it,
So what is your assessment of how Elekta's new Evo could impact your position in the SGRT market?
Hi, Michael. Nice to speak with you. No
Yeah.
As I, you know, partly covered already, you know, we also believe that adaptive is very important and is part of how we also see how the treatment is progressing. But, you know, do remember that it's still very important that the patient is in the position that you intend the patient to be, and it's a long time that the patient is on the couch. So we don't see any change in that importance and in that need. I think, you know, in general, it is, you know, for us, it's good that the market of radiation therapy continues to enhance and evolve, and we stay on top of that.
Thank you, Cecilia. If we have any other question from the audience, please use the raise your hand function. Okay, we have a second question from Michael.
Yes, I have a few more, so let's see. Your former CFO resigned with a 6-month notice period. Why did you appoint an interim CFO while he still had a notice period remaining?
Can you restate? So, why or how?
Yeah, your former CFO resigned
Yeah
With a 6-month notice period.
Yeah.
So why did you appoint an interim CFO while he still had a notice period remaining?
Thank you, Michael, for the question. No, so it's so important for us to have a smooth transition, and we are a completely global company, as you know, with you know lots of things going on. And for us, it's good to have this long transition period so that Jonas and Christoffer can work closely together. Jonas has been working with us since February in the finance department, and is part of the you know some of the process improvements that we are working with. So no, it's simply to make sure that we have a good transition.
Thank you, Cecilia. I think that we still have another question from Michael, so.
Indeed.
Yay!
With regards to order intake, what would you say is a normalized ratio between product and service?
So, thank you, Michael, for your question. So we, you know, just taking one step back, for us it's important to grow both products and services. That, you know, they're different. They're important for different reasons. As I mentioned earlier, products is important because it gives us a foundation to deliver more. For example, service contracts or other things, you know, software updates, for example. So both things are important, and we're tracking both.
And, for example, we have a very proactive work from the services organization to track the contracts that are or the warranty periods that are expiring, the attachment rate, and work with the sales team to make sure that we do our very best to increase that ratio. So we track both, but we don't specifically, you know, guide for some, you know, for some percentage.
Thank you, Cecilia. Let's now see. There's another question from Michael. So here you go.
Yes. Maybe my last question. Let's see. Will you try to compensate the 1% royalty through savings in cost of sales or increase prices from the royalty you have to pay to the former employee?
Yeah, so we are, of course, you know, working. There are different ways to, to address that. One is, of course, as you said, to increase the prices, you know, for the part of the, the product that, that is using the invention. So there are multiple ways to go about this.
Thank you, Cecilia. Let's see. I see that someone is typing the questions in the chat. I'll remind you that we are not taking any questions from the chat, so if you want to ask your question directed to Cecilia and Jonas, please use the raise hand function, and you will be given the time to speak. We have a question from Marcus Mattsson. Marcus, please state your question. You are mute.
Hello, Cecilia and Jonas. I have actually two questions.
Yeah.
The collaboration with RaySearch, in which specific areas are you looking for to cooperate? What kind of new products can we see in the market near term and long term? Can you elaborate more on that?
Yeah, shall we start with that one, Marcus, and then you'll get to ask your second question after? Yeah, thank you, Marcus. Nice that you have noticed the collaboration, and it's still early days, but we work together between these two R&D organizations as we have identified that we have lot to gain from working together. And you know, for example, as I mentioned, we had one application or potential future product, one could say, that we displayed at ESTRO in the research booth. And that is one way for the customers or, you know, potential, our joint customers, to have an even better experience in the research treatment program. And that could, for example, be a license fee, let's say.
There are multiple things that we are looking at, so this is just, you know, one, one thing that we have identified.
Thank you, Cecilia. Now we will get the second question from Marcus. We cannot hear you, Marcus. Maybe you are on mute.
Yeah. Can you hear me now?
Yes.
Yes.
Yeah, perfect. My second question is about the cash levels.
Yeah.
It's now SEK 147 million. It's about 10% of the market cap. Are there any plans for that cash? I mean, are there any competitive acquisitions out there you're looking for, or are you looking for any share buyback if you find the share attractive value here? For example, if you extrapolate what you can earn this year, the share is trading with a discount of 30%-50% within the sector.
Oh, thank you, Marcus, for your question. So, no, we're very happy about our strong cash position, and we are working together also with the board, and working on the strategy and our ambitions going forward. So of course, there are multiple ways to use this cash. And one is also, of course, to do some cash buybacks, I mean, share buybacks. But we are looking at multiple avenues, and you know, we are happy that we are in this position.
Thank you, Cecilia. Let's see if there are more questions coming. Right now, I don't see any hands. We do have Tim Hansson. So. So Tim.
Hello
Please state your question.
Yes, thank you. So the last quarter, you had almost 18% EBIT margin, and you have a very strong gross margin. So I was just wondering, could you give some flavor on the decrease in the margin in this quarter compared to Q4? Thank you.
Yeah. Thank you, Tim, for the question. So we are, as I also mentioned in the presentation, very actively working with profitable growth. So we are constantly overseeing the, you know, the investment versus, you know, the top line. For C-RAD, typically, the fourth quarter is our strongest. So that's, if you go a bit back in time, you will see that the fourth quarter is when we are the strongest. So I'm actually very happy to show that, you know, with the hard work from the team, that we have also a strong, or the best ever, of course, EBIT and EBIT margin for Q1. So if you would go back in time, you would see that the Q1 is typically not the strongest for C-RAD.
Thank you, Cecilia. Let's see if we have more questions popping up. I don't see any raised hand. Maybe we wait just a bit more longer. Since we have no further questions, I think that the Q&A session is now concluded. A recording of this session will be available on our website shortly. I would like to take this opportunity to thank our CEO, Cecilia de Leeuw, and our interim CFO, Jonas Reinhammar, for their insightful presentation and for taking the time to answer to your questions today. I would also like to thank everyone who attended this webcast. We appreciate your commitment to staying informed about C-RAD, and we look forward to making a difference in cancer care together. Thank you.