Welcome to the C-RAD Q2 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing Hash five on their telephone keypad. Now, I will hand the conference over to CEO Cecilia De Leeuw and CFO Linda Frölén. Please go ahead.
Welcome to our Q2 presentation, and thank you for joining us today in the middle of the Swedish summer. We have concluded a busy quarter with high activity in all markets, with an increased order intake and winning deals despite market uncertainty. As many of you know, the foundation for our offering is the demand and need for safer cancer treatments, with a focus on the patient's quality of life. It's also about increasing efficiency in the customers' clinics. We are on a journey. We are building an even stronger C-RAD, working hard on our financial strengths so that we can access both established and untapped markets globally with our world-leading products and services. Now, let's take a look at the Q2 performance and the key takeaways. Q2 was indeed a busy quarter, and we are taking steps towards our financial targets.
I am pleased that the hard work done by the team, driving marketing activities, participating in trade shows, organizing reference site visits, which is common in the final phase of the customer buying process, and all this hard work is paying off. We took a number of larger deals in both the U.S. and EMEA in the second quarter. Our order intake grew 11% in constant currencies. The main contribution came from EMEA and Americas. We ended the quarter with a strong order backlog of SEK 735 million. When looking at the backlog, approximately half of the order backlog consists of products and the other half of service contracts. Service contracts are typically three to five years, and this does, of course, provide good recurring revenue invoiced at the start of each quarter. Revenue year-on-year declined with 13% in constant currencies.
The main reason is a softer order intake during 2024. It's also worth noting that Q2 last year was boosted by approximately SEK 20 million of China deliveries due to the product registration approval. The weaker top line had a direct impact on EBIT, and we came in on a moderate SEK 8 million. However, we have a stable gross margin, and Linda will share more soon, and a solid growth in service revenue. Our EBIT margin in the quarter was 8%. We are step-by-step improving the operational efficiency and have reduced OpEx by 10% compared to Q2 last year. The focus on cost efficiency is now part of our DNA, which means that we are continuously driving both cost control and implementing measures to streamline operations. That said, we have more work to do. Let's look into the regional performance in the quarter. I'll start off with the Americas.
Our long-term focus is to strengthen our position in the US market, and we had good progress also for this quarter despite US market uncertainty, and this is mainly due to tariffs. The two large orders in the quarter that we are showing here on the slide are representing different aspects of our untapped opportunity. The product order to a prominent Texas cancer center is for linear accelerators in their newly built satellite facility. I am delighted that this existing customer decided to expand their footprint with us. The other large order is a pure service contract with a renowned cancer center on the East Coast. This is a renewal, which is important to us, and it's a clear indication of the strength of our offering and our focus on customer retention.
Order intake for Americas increased 11% to SEK 31 million in Q2, and revenue grew 26% in the quarter. Moving over to EMEA, the hard work by the team is paying off in the quarter. We have good momentum, and we were rewarded an SEK 8.5 million strategic multi-site product and services contract in France with the leading private care provider, Ramsay Santé Group. We are motivated by this as France is a market where we are coming from a challenger position. We can also see signs of recovery in the important German market, and I'm pleased that we received an SEK 9 million product and service contract from one of the most important healthcare providers in the dynamic Stuttgart region in southern Germany. Order intake increased 47% to SEK 46 million.
Revenue in EMEA was down 11% to SEK 43 million, still impacted by a lower order intake during last year. Finally, then APAC. APAC had a softer second quarter. Q2 last year was fueled by VitalHold order intake from the earlier Japanese market launch in the end of 2023. However, APAC is still our largest market, and there is untapped demand in advanced markets as well as the large developing markets in the region. We have a healthy market mix and see an increasing uptake of SGRT, and it's starting to become a given in the clinical workflow. Order intake declined 15% to SEK 58 million, and revenue in APAC declined 34% to SEK 44 million in Q2. As I mentioned earlier, it's impacted by strong China deliveries last year. If we adjust for these deliveries, APAC had a 1% growth in constant currencies.
With that, over to you, Linda, for a closer look at the financials.
Thank you, Cecilia. I will take you through some of the main financials for our second quarter. As Cecilia has already explained, order intake and revenue, I will not go into that again, but rather focus on gross margin, cost levels, earnings, and cash flow. Gross profit for the quarter was SEK 70 million compared to SEK 88 million a year ago. The decrease in gross profit is following the decrease in revenue year-on-year, as we had SEK 20 million in high margin proton revenues from the long-awaited product registration approval in China last year. The gross margin for the quarter was 67% versus 68% last year, and the current levels are in line with what we have had in previous quarters and within the range of what we would have expected.
The decrease in the gross margin year-on-year is explained by the high amount of proton revenue last year, which was partly compensated by a higher share of service revenue in this quarter. We had no proton revenues in this quarter. Looking at our main operating expenses, you see to the left of this slide that they decreased 10% year-on-year from SEK 68 million last year to SEK 61 million in this quarter. The decrease is mainly related to lower external expenses as we have gradually replaced external consultants with own employees. To the right of this slide, you see that quarter-on-quarter OpEx is up 9% from SEK 56 million in Q1 to SEK 61 million in this quarter. The increase is mainly related to payout of sales commissions related to earlier quarters that were not fully provided for.
The increase is also related to lower personnel expenses in Q1 due to holidays. We are monitoring our cost levels closely, and we are happy to see that our efficiency measures are showing results. Our yearly OpEx levels are now down by SEK 31 million from the peak in Q3 last year, as we have now reached a more stable level. EBIT for the second quarter was SEK 8 million compared to SEK 18 million a year ago. The decrease in EBIT for this quarter is fully explained by the lower revenue, as both gross margin and OpEx are in line with our expectations. I can also mention that unrealized currency effects in this quarter were only minor. Our increased focus on smart spending is moving us in the right direction, and looking back a few quarters, C-RAD shows continuous improved earnings and an increased profitability over time.
With this development as a foundation, we are well equipped to continue to grow as we believe we can increase the EBIT margin even more over time according to our medium-term financial targets, even if we may have short-term deviations. Our cash balances decreased by SEK 3 million during the quarter and stood at SEK 158 million at quarter end, compared to SEK 161 million at the beginning of the quarter. Cash flow from working capital was minus SEK 8 million, which is a great improvement from last year, but still on the negative side. The increase in working capital is related to accounts receivables, as a large number of old orders were invoiced late in the second quarter. A few orders on our balance sheet that have been awaiting final acceptance tests have been paid during the quarter, and many have also been invoiced after completed final acceptance tests.
Some of these are expected to be paid during Q3. Last but not least, I would like to remind you that C-RAD is a company with a strong balance sheet and with no long-term debt. With that, I will hand over back to Cecilia for some closing comments.
Thank you, Linda. I'd like to summarize the quarter by the increased order intake generated by high market activity. In addition, I also want to remind you of our financial targets for the medium term that were announced last quarter. Therefore, I'd like to conclude by taking you through our Q2 progress on our journey towards our financial targets, strategy, and priorities. Let me take you through this slide left to right. First, our strategic goal to grow sales and market reach globally. C-RAD already today has a global reach, and we are expanding step-by-step to grow our sales. Our growth target means that we will further penetrate markets, capturing unmet demand. For Q2, order intake grew 11% in constant currencies. As I already mentioned, this is mainly driven by Americas and EMEA. This is in line with our strategic ambition to grow in the U.S.
and our focus on EMEA's advanced markets, where we had major wins this quarter. Secondly, our strategic ambition to ensure that we have world-leading products. We have a highly competitive portfolio and will continue to invest and innovate in the offering and in new complementing solutions. In this quarter, we introduced a new and improved gating solution, and this integrated gating interface is developed together with one of our leading industry partners and integrated with a linear accelerator. Thirdly, there is truly untapped market potential. SGRT is standard of care in many markets, and still, it's early days and there are many systems without. Hence, we see a potential to retrofit existing linear accelerators and proton machines. We also see a great opportunity to grow services as our install base of systems is growing, and this is another priority for us.
Services is not only important for sales and happy customers, but it's also generating recurring revenue and supporting our profitability. For Q2, order intake for service grew 86% in constant currencies compared to Q2 last year. Finally, we are steering towards our financial targets. C-RAD has good financial stability and are building a resilient company supporting scalability. It's resilient from a market perspective and from building a more mature company supporting growth. For Q2, we have further trimmed down our OpEx by 10%, and this is mainly by replacing consultants, as you heard from Linda, within administration and also within service. We are taking steps towards our financial targets. With that, over to you, moderator for Q&A.
If you wish to ask a question, please dial Hash five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial Hash six on your telephone keypad. If you are listening to the presentation through the webcast, you can ask a question by clicking the raised hand symbol. The next question comes from Oscar Bergman from Redeye. Please go ahead.
Hello, Cecilia and Linda. I have a few questions that are not really related to the quarter, but more so on C-RAD on a general level. The first one is about competition for service value. Could you just briefly elaborate on the main value propositions? Also, are your selling activities dependent on any cyclical buying patterns amongst your customers?
If I start this off, when it comes to the value proposition, it's both in terms of only targeting the healthy tissue on the patient, which has societal value and also, of course, patient value. The other one is, of course, the efficiencies in the clinic. This is a very minor investment for the clinic. We say it's only typically some 5% of the investment. For a lot of return, it's a minor investment. In terms of the cycles, this is not typically a cycle as such, but it's something that we see happening through the years. We sometimes see a higher purchase in the end of the year depending on the budgets for the hospital, but that depends. It's also worth saying that this is a highly regulated market.
When it comes to competition, it's not such an easy market to enter because you have to have registration in each and every market.
Sure. How do you typically compete? Do you do it on pricing or more so on functionality?
I would say that we always try to compete on functionality and can probably say that we have a lot of uniqueness here. However, it is also so that sometimes there is a market price that we have to manage. I would say it's a combination.
If you look at the market, can you say any estimates on what % of the machines are equipped with this type of technology and how you expect this to change in the coming five years? If there are any big trends moving this in the right direction?
I mentioned that earlier in the presentation that we see that it's more and more becoming standard of care. In the advanced markets, let's say Germany, for example, there is a slightly higher percentage. In developing markets, you have markets that so far yet don't have any SGRT. It's a big difference, but the standards that came out end of 2022 is, of course, supporting. If we look at the attachment rate in different markets, in the U.S., for example, it's slightly higher. It's more north of 40%, and in developing markets, it could be from zero and up.
I guess, to assume that for the proton centers, you have an even higher attachment rate than for photon.
Also, there it varies. It's a lot of opportunities. If you look at the opportunity there, sometimes it's part of a newly built bunker. Sometimes we retrofit existing proton machines. Also, there, as an example, we have a clinic, a customer in Miami Cancer Center in the U.S., Florida. There they have C-RAD on all machines, both proton and photon. That's, of course, a very strong reference for us.
Great. Just one final question for me. Maybe this says somewhere in the report or on your web page, but can you say how many RT centers worldwide you are actually installed at today?
We don't typically disclose that today, but we are in more than 50 countries worldwide.
Are you looking into providing such details going forward?
We'll look into that.
Thank you.
Thank you.
The next question comes from Christian Lee from Pareto Securities. Please go ahead.
Thank you. Good morning, Cecilia and Linda. Thank you for taking my questions. I have three, please. The first is regarding the strong order intake in the quarter. Do you expect the good momentum in EMEA to continue in the second half of the year? How do you view your chances of winning more significant product orders in the U.S. in the near term? Thank you.
When it comes to EMEA, as I mentioned earlier, it's nice to see that EMEA is starting to pick up again. Of course, it's too early to say. We have a good pipeline, but we have to work hard every day.
Regarding your chances of winning.
Can you repeat the US question?
Your chances of winning more significant product orders in the U.S.
You have to take it one more time, Christian. Sorry.
Sorry about the bad line here. I was wondering how you view your chances of winning more significant product orders in the U.S. in the near term since the majority was service contract.
Right. No, to start off, we are also very happy with the order, the Texas order, of course, which is a pure product order. We see a strong opportunity in the US to, as I've talked about before, retrofit also existing linear accelerators. It is also so that we do see indications that customers are able to make faster decisions on the OpEx investments than CapEx new products. It has been favorable for our service business, but in the short term, it might be impacting our product business. Our assessment is this is connected to the uncertainty around trade and tariffs.
Great. Thank you. My second question, did you have any negative impact on the results from the tariff situation?
Not in this quarter, no.
Do you expect any negative impact in the third quarter?
Depending on, as you all know, these decisions are put on hold for now. Our current assessment is that it's only the hardware that will be affected, and our general terms and conditions allow us to pass on the costs of tariffs to the customer. In the near term, we don't see any major effects of the tariffs.
That's clear. Thank you very much. My last question, given that organic sales decreased by 13% in the second quarter, do you feel confident about reaching your target of 10% growth for the full year?
Just to remind you on our financial targets, it's actually over time, so it's in the midterm. We will continue working and looking at the order intake, which is the first important step to get revenue. Just as a reminder, it's typically six- eight months from order to delivery. That's a good step in the right direction.
Perfect. Thank you very much.
As a reminder, if you wish to ask a question, please dial Hash five on your telephone keypad or click the raised hand symbol on the webcast. There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Thank you all for attending our Q2 presentation. I mentioned earlier that we are on a journey, and this is vital because we are here to increase safety and efficiency in cancer care. This is important not only for patients and clinics, but also for shareholders. With that, I want to thank you and wish you a nice summer.