Q1 20/21

Aug 26, 2020

Good morning, everyone, and warm welcome to the presentation of Elekta's First Quarter in the New Fiscal Year 2021. My name is Cecilia Kietels, and I'm a Head of Investor Relations at Elekta. With me today in Stockholm, I have Gustav Salford, Elekta's Acting President and CEO and Johan Aardebeck, our acting CFO, who will be presenting the results. Today's agenda start off by Gustaf presenting the highlights of the development in the Q1. Then Johan will give you details on the financials. And finally, Gustaf will take a view on Elekta's outlook. And after the presentation, there will, as usual, be time for questions. But before we start, I want to remind you that some of the information discussed on this call contain forward looking statements. This can include projections regarding revenue, operating result, cash flow as well as products and product development. And these statements involve risks and uncertainties Thank you, Cecilia, and good morning, everyone. Thank you, Cecilia, and good morning, everyone. Before I cover our Q1 performance, I would like to start by highlighting our strategy, precision radiation medicine that continues to guide us in our efforts to drive innovation and growth and it's especially important under the current pandemic when it's challenging for patients to get access to treatments. Our vision is that everyone with cancer should have access to and benefit from precise personalized radiation therapy. If I now turn to our Q1 in summary, I would like to share a couple of highlights. In spite of COVID-nineteen, we were able to show positive order growth supported by large order from the U. S. Market. Our installation volumes and revenue was impacted by the pandemic, but still we were able to improve profitability and cash flow compared to last year. The improvements come from our efficiency initiatives in the areas of cost control and process improvements from our global resilience programs. Our current key priority is, of course, to support our customers by securing uptime of their solutions and services and help them work digitally and remotely. In May, we reached our Unity target of 75 machines and we are now very pleased to enter the 2nd commercialization phase of Elekta Unity, including the recent regulatory approval for the Chinese market. We also strengthened Elekta Digital by acquiring Kaikou Health, enabling our customers to digitally connect with patients. We believe that the recent consolidation of our industry provides a good opportunity to accelerate our leadership in precision radiation medicine and see increased innovation investments as key for long term success. The world is, of course, still impacted by the pandemic and the demand for radiation therapy products are included in that. But Elekta's solid performance in Q1 with positive order growth and increased profitability is a clear sign of our resilience and a strong underlying demand for our products. We were able to grow orders by 4% in the quarter and EBITDA came in at a strong 18.5%. However, revenues were affected by COVID-nineteen restriction leading to delayed installations on the customer sites. So far, only China has returned to a normal level of installations with a strong double digit revenue growth. Globally, we are pleased to see our recurring service revenues growing by historical levels. Now turning to order performance by region. In the Q1, Elekta had an order growth of 66% in North and South America and the key growth driver was the large order from Genesis Care as they enter the U. S. Market. South America also showed positive development in the quarter. Both EMEA and APAC had difficult comparisons versus last year and overall EMEA order volumes declined by 20%. Despite the low order activities overall in large radiation therapy markets such as Germany and France, some countries for example the Netherlands, Italy, Russia reported increased order intake. Morocco also showed order growth, which included major agreements from multiple linacs on color informatics solutions and treatment planning systems. The APAC markets declined by 12%. Australia had a large decline in order intake. However, in India, a large bundle deal was closed with 1 of the leading on quality service providers HCG for linacs and a large software package. The Chinese order volumes were almost in line with the same quarter last year. And in Japan, we got Unity orders from Chiba University Hospital and Osaka City University. The current COVID situation is still impacting our customers and their ability to place orders in most areas of the world. Now over to Unity and Elekta Unity is entering into the 2nd phase of the commercialization journey where we are focusing on a wider market adoption and collecting clinical evidence. We had a strong order momentum in Q1, which was the 2nd best Unity quarter so far. The clinical outcome is continuing to be very good with additional systems going clinical every quarter. During Q1, Baskent University in Turkey started to treat patients with their Unity as well as Genesis Care in Australia. More research publications are also being published by our customers. In 2019, Unity had approximately 30% more publication than the competition and during 2020, the difference has grown to 70%. We were also very pleased that we received regulatory approval for Unity from China's National Medical Products Administration last week. With this approval, we're now looking forward to being able to take new orders from the Chinese market. In the new industry landscape, Elekta will be the key global provider focusing on precision radiation medicine and our strategy consists of 3 main parts. It is to accelerate leadership in treatment solutions and we are looking forward to present our new linac in a digital launch in September. The linac will be a great product for both mature and emerging markets accessible for all. The value proposition is built around delivering high productivity with high quality. It is a complete reengineering of the patient setup process, typically the most time consuming step of a treatment session. Another advantage is the full versatility and a small foot radiation medicine, Unity is of course playing a very important role by enabling to treat cancer cases that we before couldn't be targeted with radiation therapy. Over the coming year, we plan to release tools that together will form a comprehensive motion our portfolio. The most recent addition is Kaikou Health, which strengthened our software portfolio and our strategy of enhanced cancer treatment process and attain real world patient reported data. We're also deploying our cloud solution access across our markets and products. Going forward, we will continue to invest in R and D and innovation programs to secure our long term growth and drive this industry forward. And with that, I would like to hand it over to Johan. Thank you, Gustaf. I will go through the financials in more detail starting with the P and L. We had a relatively strong performance given that travel restrictions and limited access to hospitals continued to delay installations. Nevertheless, net sales declined by 5% in constant currency, a negative development that was seen in all three regions. Solution sales declined by 14% in the quarter. This relates especially to Elekta Unity and Lexel Gamma Knife products for which we have global installation teams. On the service side, we are particularly pleased to see strong service revenue growth of 7% in the quarter. The strong service performance is both related to orders, as Gustaf commented on earlier, and to net sales. Moving to regional performance and starting with North and South America. We saw a decline in net sales of 4%. The U. S. And several South American countries were growing, although Brazil had a weak development. Canada met a difficult comparison quarter and dropped some. In Europe, Middle East and Africa, sales declined overall by 1%. In Europe, there were a mixed development. Some larger markets like Italy, Germany and France had growth whereas others such as U. K. And Spain had a negative outcome. In the emerging markets, the largest growth was seen in Turkey, Saudi Arabia and South Africa. Asia Pacific sales declined by 11%. Most markets in the region had lower sales than in the last Q1, but China is back to normal, showing strong net sales growth in the quarter of 18%. Cost of goods sold declined by 13%, positively impacted by the sales mix with lower solutions and higher service sales. As a result, gross margin came in at 45.9%. I will come back to expenses and EBITDA on the following slides. So I jump to net financial expenses, which increased somewhat mainly due to lower return on our cash position. Income tax was SEK 66,000,000 equal to a tax rate of 23.5%. We continue to prioritize cost control and drive efficiency initiatives to stay resilient in these challenging times. We are especially focusing on digitalization and process improvements, which already had a positive impact on our expenses in the quarter and resulted in a significantly stronger cash flow compared to last year. In the short term, we are driving flexible staffing initiatives, digital marketing events, remote service efforts and reduced traveling. But we also prepare for the long term by driving simplification of our processes through digitalization with new IT systems and centralization to our shared service centers. Continued COGS reduction initiatives are an important area, and we are driving reduction both on existing platforms but also when launching new products. Looking at expenses. We have lowered the total expenses both compared to the Q1 last year and to our Q4. In selling expenses, we saw a significant decline. This was due to lower marketing expenses through postponed events, but also from lower costs in connection with virtual or digital events and marketing. Reduced travel was also a key driver of a lower selling expense. We see that travel costs are picking up somewhat, but we do not expect to get back to the pre COVID levels in the foreseeable future. The admin expenses increased both year on year and compared to Q4, mostly from increased IT spend due to remote working and investment in digital platforms. Moving to R and D. Our R and D net R and D expense declined as capitalization increased with SEK 48,000,000 year over year as more development projects reached the capitalization stages. Our EBITA came in at SEK551,000,000 corresponding to an EBITA margin of 18.5%, which is our strongest Q1 EBITDA and EBITDA margin for more than 10 years. This shows that we so far have been in mitigating the negative market conditions on net sales through resilience and good cost control. This bridge illustrates a growth of SEK 103,000,000 or 23 percent between last year's Q1 and this year. The largest positive effect comes from the mix of solutions, service, as mentioned before as well as our resilience measures and cost control. FX had in this quarter only a minor impact on the profitability compared to Q1 last year. Moving on to cash flow. We had our strongest Q1 cash flow since 2011. Cash flow after continuous investments came in at SEK 20 6,000,000 Our operational cash conversion for the last rolling 12 months was 61%, somewhat lower than our target of 70% but still a significant improvement from last year. Key drivers of improved cash flow were higher earnings and a significantly lower working capital buildup than Q1 last year. Net working capital is now at 4% of net sales and we'll continue and we will continue working on improving working capital management by focusing on inventory reductions and cash collection. Even if we are satisfied with improvement in cash flow in Q1, the level of uncertainty is still high, and we stay prepared for potential negative effects by maintaining a higher level of available cash than normal. To summarize the financials, I view Q1 as a good start of year, especially given the challenging market conditions. And with that, I hand back the word back to you, Gustaf. Thank you, Jan. Now I'd like to say a couple of words on our dividend and also our outlook and priorities going forward. So at today's AGM, the Board of Directors proposes a dividend of NOK 90 per share for the fiscal year 2019 2020 which is in line with the dividend policy but half the level of last year. The Board of Directors may call for an extraordinary general meeting to propose an additional dividend. This is dependent on a general economic outlook and how COVID-nineteen will affect Elekta and its markets going forward. Looking into Q2, we expect to see continued negative impact from the current market situation and we refrain from giving a guidance at the moment. Order volumes are still impacted in most markets due to the uncertainty in timing of the customers' purchasing processes and decisions. We have a strong backlog to support installation and revenue, but there is still some delays in the customers' installation plans. In our global resilience program, we'll continue to drive cost control and cash flow measures to support a more stable performance going forward. Our focus right now is to deliver performance quarter by quarter in difficult market conditions. But in the longer term, we are convinced that the underlying demand for our solutions and innovations will continue to grow due to the large need for radiation therapy solutions around the world. We also believe that the recent consolidation of our industry provides good opportunities to accelerate our leadership in precision radiation medicine going forward. Thank you, Gustav. And before we open up for questions, I would like to push for our virtual launch of the new Linac. This will be on September 15, and we will send out an invitation shortly with more information and instructions on how to sign up for attending this virtual event. But please already now save the date. And with that, I hand over to the operator for questions. Thank you. Our first question comes from the line of Annette Lueckke of Handelsbanken. Please go ahead. Thank you so much for taking my questions and thank you or congrats on a pretty nice Q1 results. I'm not sure if you want to talk to the installations that you have done so far, but last year was you were updating us on the number of unit installations you did the quarter. And also you were sort of having some indications on how much you would do for the full year. That would be very nice. Also, if you could comment on the Gamma Knife installations, if hospitals have been bunker ready here and if all the backlog from last year is now installed. It is, of course, clearly that Q2, as you highlight, will have some negative impact. But on the other hand, you also have a huge Genesis Care order for 21st Century in the U. S. How would that installation pace go for the remainder of the year? And how much should we expect you to install here? And then also, can you clarify that you will now recognize the 5 systems from China after the clearance of Unity? That is my question for now. Thank you, Nete. So I will start with kind of the installation situation we see around the world for MR, Linux and Gamma Knife as I also referred to. Since we have more global teams, it's more difficult to get access to those countries because of travel restrictions. We've seen that in, for example, India. It's difficult to get installers in the country. So that's why you also see a bigger impact in the Q1 on Unity and on the Gamma Knife. We were pleased to see that we got 2 new clinical systems, but we didn't do any start of installations of Unity in the quarter. On the Gamma Knife side, that's lower versus the levels we should be at. It was quite low if you remember last year as well the first half. So of course we want to be at higher levels, but it's the same challenge for us to get our installation teams in, in many of these global markets. Looking into then installations in the U. S. Over next quarter, your question on Genesis Care, it's fantastic to see the progress that we have done with Genesis Care in that market. They have a very ambitious and good plan for how they want to replace the installed base in the previous 21st century installed base. And we are really there side by side helping them to do so. So you're right, it's going well and we will install machines in the U. S. For Genesis Care for sure. On looking forward on installations on MR Linac, I think that's too early to say exactly a number for the full year. We need to see how the lockdowns, the access to the hospitals will develop before we can give any indications there. Okay. And the And my follow-up is just yes? Maybe on the unit in China, yes, that we expect to or revenue recognize that, yes. Will that be all I mean, will it be 5 times, let's assume that the price was $8,000,000 or $9,000,000 or have some of it already been recognized? No. So we have we placed the orders. We took it to the order backlog when they booked at more research systems. And now we'll take the full revenue amounts. And since they were part of the first regulatory process, the pricing will be a bit lower compared to what you've been used to for other countries. But then going forward in China, we foresee regular price levels, I'd say. And that's the situation we're in right now that now we can take new orders from Chinese customers. Okay. And then just short on Unity orders per quarter. I know you're not willing to share all the details, but we probably were at around 13% for this quarter. But then looking forward, should we expect that due to delay in tender processes and maybe also lower appetite for capital in goods and hospitals? Should we expect that to come dramatically down the next few quarters? Or would you still be higher due to you enter into the 2nd wave? I think it's important to say that we're now entering the second phase of the commercialization of Unity that we have reaching the 75 that we achieved. But now we'll focus more on the overall growth getting into new markets But I would like to say at the same time that Uniti as you have seen is But I would like to say at the same time that Uniti as you have seen historically, you cannot really compare it quarter by quarter. It is a lumpy project based business and you should more look at it on a rolling 12 month basis or that perspective. Okay. Thank you so much. Our next question comes from the line of Patrick Wood of Bank of America. Please go ahead. Perfect. Thank you very much. I have 2, if I can, please. The first would be on the gross margin, which was obviously very strong in the Q1. Just qualitatively, it might be helpful if you could give us a sense of how much of that was a function of, say, the COGS work and the reduction and what you're doing there? And how much was a function of the service mix within the group? And then secondly, on service in general, two questions there. One is, is the service strength in Q1 a function of the strong placements that you had in Q1 last year coming off warranty and therefore rolling into service contracts? Or is there something else going on there? And within the service overall, do you think there's a long term opportunity? We talk about digitization and moving over from removing some of the costs and just generally increasing service margin to having a more efficient service business and a higher margin there? Thanks. Yes. On the first one, gross margin, I would say it's mostly the mix. So the increased service revenue, which is the key driver of that effect. And then if you look at the service business going forward and the strong 7%, I often look at installed base growth and then I expect that the service revenue should follow it quite closely between the quarters. You see fluctuations between quarters, but it's often 6%, 7%. So we have been focusing a lot of keeping the service up and running to make sure that the customer has this right service offering as well throughout COVID and thereby and therefore it has also had positive benefits on the revenue number there because of that focus. And sorry, Patrick, your last question was more forward looking service. Was that The last question. Yes, that was basically on service. You're doing increasingly remote service and digitalization. I guess, even after COVID, is there an opportunity here to have lower service costs for you guys, but similar service pricing, therefore better margins? Do you see what I mean? Like a shift to remote servicing? Absolutely. So what you sell to the customer, of course, is uptime and a great service, also education, training, all those aspects. And we have now worked a lot with digital trainings, remote service, remote fixing in our help desk and also through our service engineers. And that has we've seen a very positive outcome of that also on uptimes, etcetera. So I foresee, as you say, Patrick, that will continue going forward because it's good for the customers and it's good for us as well. Brilliant. Thank you for taking my questions. Thank you. Our next question comes from the line of Christopher Lillebee of Carnegie. Please go ahead. Thank you. Three questions. First one on orders, if we assume unity orders in absolute numbers are down a little bit year over year, it must mean that the underlying business are growing or the base business or whatever we should phrase it, a bit surprising considering the pandemic. But are there any other big orders explaining this? For example, the one you press released in India, is that included in this quarter? And my second question also relates to India. When you talk about, I think you said license agreement, is this some sort of subscription model in India? And if so, is this new strategy for you? And the final question coming back to the lower operating costs. Is it possible to say how much of this is a more structural longer term nature and how much is just short term effects from less traveling, etcetera? Thank you. Yes. So I'll kick off with questions around orders. So it was a resilient market from that perspective. Then of course Genesis Care had a big impact in both quarters. We had 32% order growth in Q1 last year. So it was a difficult comparison, especially in Europe or EMEA and APAC in Australia. So that's one effect. But the underlying growth in the markets was quite resilient. We saw larger deals as you mentioned in ACG in India. I'll come back to that, but also other parts of the world that placed bigger deals. And we mentioned Morocco as one of those examples. The ACG deal is very interesting. That's interesting. Yes. Sorry, Gerstel. On that topic, would you say you were a bit lucky in the quarter? Maybe that's the wrong word, but maybe understand what I mean. But we should be careful here in the Q2. I think we had The Q2 should be down more. I think it's a good question, Christoph. Of course, in this area or time of uncertainty in ISO, we had a lot of orders that came into the quarter in the end and that was of course a good signal. But looking into Q2, we still see the uncertainty. So I think it was from an order perspective. And if you compare it to radiation therapy market overall, we had a very relatively strong order number. But looking into Q2, the uncertainty is absolutely still there on order side for sure. It's more I'm And if you compare this with, I think, Varian orders were down some 14%. But that, of course, includes the month of April. So could you say anything about what April looked like compared with what is it you like? I don't go into specific months in the quarter, but what I can say is that the discussions with the customers on the order side are is picking up now. It's easier to travel around Europe to visit customers. Although APAC has COVID second and third waves, you can still get better access compared to previous situations. The U. S. Access in some areas, but still quite impacted by COVID and you have the full discussion about CapEx freeze and bundled payments and so on. So it's not just around COVID there. But that's why we are cautious, especially on the order side when looking into the next quarters here. But if I compare to the COVID situation April versus July, if that was your question, I think it has improved from our side. And then moving a bit to ACG then on if that's a new strategy of Elekta. As all of you know, MiniMedTech segment has gone more into subscription based models or solutions as a service and we start to see that in radiation therapy as well. I think ACG is an excellent example of that. I believe we'll see more of those types of deals that we truly partner with the customers on getting more recurring revenue stream rather than an upfront initial purchase. And we see it as a good opportunity for Elekta. It would be a gradual shift. So don't expect over a couple of quarters or so on that this will have a huge impact, but it will happen over the next couple of years. And we are pleased to see that development actually. On your phone Do you expect this to have any significant effect on the cash flow? I guess you will when you sell the machines, that will show up as CapEx or something else in the balance sheet? Yes. I mean, it will show up on balance sheet. It will be a gradual slow shift. So I don't foresee any immediate or medium term material effect on cash flow from this. And then as Johan mentioned, I think we still see opportunities to improve net working capital as a percentage of sales. And some of that improvement we can use in these types of situations to drive growth, but also get to a more recurring revenue stream that I think is helpful for Elekta as well. On your third question on lower operating costs, I mean, absolutely short term, we see this and it will continue for some time, difficult to give a forecast on that. But there I would say it's also a longer term shift. I mean, we are moving more to digital marketing, I think less traveling on a continuous basis. So operating expenses from that perspective should go down. How much and timing and so on is difficult to foresee, but it is a trend shift, I would say. So you have a lower underlying cost base today than you had 9 months or 12 months ago? Sorry, I didn't catch on. So do you have a lower underlying cost base today than you had 9 or 12 months ago? Yes. Yes. Okay. And what we invest in Chris, however, Johan mentioned it, we will invest in IT platforms because that's about optimization, centralization to our shared service center in Warsaw. It's about process improvements across the business. So there is a bit of investment, but you will get the benefit on operating expenses going forward as well. Thank you. Our next question comes from the line of Kit Lee of Jefferies. Please go ahead. Thank you. I have 2, please. I guess, firstly, just to come back on the bundled deal in India. Can you just talk about the timing of revenue recognition there? And is the phasing quite different to what we have seen in the past in the sense that do you still get most of your revenue from the installation of the systems or is it more than even facing now with this kind of agreement? And the second question is on your selling expenses. I'm sorry if I missed that, but any of the savings come from fellow or government subsidies? And how much savings do you think you can retain through the rest of the fiscal year? Thank you. On the rev rec on the HCG deal, that will be more continuously. So we'll take not as it will not be tied to installation. It will be over the time of the contract. Selling expenses, we did not have anything in Sweden when it comes to government subsidies. We've had some in other countries, but not material amounts. And I think going through COVID, what we're really focused on is to keep our employees throughout this period. But we have worked more with how flexible working hours and those types of with our employees, but it's not about government subsidies. It's ourselves taking care of that flexible working schemes and so on. And that's how we will continue to work throughout this period because we are convinced we will need our employees going forward to drive the growth and our pipelines here in the next quarters and years. And just to follow-up on the deal in, do you expect revenue to start to recognize this year? And just on the length of the contract, is that a 3 year contract, 5 year or is that on a rolling basis? Yes, we do expect some revenue this financial year and the contract is multiyear long term contract. Great. Thank you. Our next question comes from the line of Veronika Dubajova of Goldman Sachs. Please go ahead. Good morning, gentlemen. I hope you can hear me okay. I have 2 big picture questions, please, and then one just housekeeping, if that's all right. One good stuff, I kind of want to get a sense for you for the degree of activity you're seeing in the market. I think when we last spoke on the last call, you sort of suggested that order momentum could probably remain subdued beyond the Q1. I think you said it's hard for me to tell when order momentum troughs, but it's unlikely to be Q1. Kind of curious what your updated thoughts are on this. Do you think 2Q and Q3 will be worse than what we have seen better comparable to what you've done in the Q1? If you can talk to that, that would be really helpful. Certainly, I think lots of different data points out there in the market. So it would be helpful to understand how you're thinking about it. And the second question is just a gross margin question. I appreciate you're not giving a guide for the year, but helpful to understand as installations normalize, whether your expectation is that the gross margin changes in any significant way Or do we go back to what we had seen in prior years? And then a quick housekeeping question just on the R and D capitalization and amortization since there's quite a lot of movement in the last couple of quarters, if you can give us the guidance for what the appropriate run rate should be for the remainder of the year? Thank you. Thank you, Veronika. I'll start with the first question and then hand over to Johan for gross margin and the R and D cap piece. Orders, I don't want to look in further than Q2. Q3 and Q4, we need to get through Q2 first. What we see right now is what I mentioned a big impact in the customer contacts, how we can have meetings. Estro, Astro, you have been there. That's very important shows for this industry. Now they're going digital with implications of course. So that's more the negative factors. The positive factors is that we can start to get access to physical meetings with customers. We also have HBL that I or the new Linac that will come out now that I'm really eager to launch here because I think that's an important part of our growth strategy as well. And that comes together with new software that as being a bit negatively impacted by COVID, but I'm positively optimistic if you look further out. Understood. Thank you. On the gross margin, when solution sales picks up again, we will see a more normalization of gross margin, I would say, with the mix of solutions and service going back to what we had before the situation we saw in Q1 here. So that's hopefully a good enough answer for you. The on the capitalization and amortization, capitalizations or as you know driven by projects that we do can capitalize on and we do have we see that bit more higher than what we saw last year, I would say. So expecting to be around these levels. Amortizations have been more stable, and we foresee them to be stable in the coming quarters. That's helpful. And Gustaf, can I just kind of ask why still no guidance? I mean, I guess you have decent visibility in the backlog. You're saying it's becoming easier to install, it's becoming easier to see customers. I'm surprised what would you need to see for you to feel comfortable to issue guidance again? That the customers are comfortable with their installation dates. So we have, of course, a very large backlog. And then it's more how we plan with our customers to be able to start the installations of that backlog. That's the uncertainty. So when they can confirm installation dates, we can have a much clearer view on the revenue going forward. So that's what we are anticipating and working proactively working with the customers to get to those installation dates. Service is of course easier. That's more linked to contract that you take monthly revenue on every month. But it's more about the solutions part of the business, the devices when we can install them. So that's the uncertainty. And that's why I don't think it would be wise to guide the market right now when we don't have that transparency. Understood. Thank you, both. Our next question comes from the line of David Adlington of JPMorgan. Please go ahead. Good morning, guys. Thanks for the questions. So first one really is a bigger picture question, just given the sector consolidation you're seeing. Just wondered what your thoughts on the impact of Healthineers and Verint getting together, the impact of the market, how you plan to react to that? Has it changed your thinking on the outlook for the business? And then secondly, just a more specific question around advanced payments. The amount of advanced payments on your balance sheet has been coming down fairly materially over the last couple of years. I just wondered what was the trend behind that, please? Okay. I will start with industry landscape question and then I will hand over more advanced payments to Johan. But of course, it's a big event for this industry that Varian is acquired by Siemens Healthineers. And it changed a lot of the industry dynamics, but it hasn't really changed Elekta's strategy. And as we've talked about the last years, we are focused on radiation therapy. We're focused on the radiation therapy department and really that customer relationship on innovation side and new products and the processes there. And we'll continue to do so with our new innovations and developments. So that hasn't changed from our perspective. The software content in that relationship just increases. And we also see ourselves as agnostic. We can now collaborate in the customer situations with all the different imaging players or primarily outside in Siemens, but with other players as well that I believe will be an opportunity on order and sales side going forward. So we see this as a true opportunity for us. Then of course as we all know with larger mergers and we should merge 2 companies processes and so on That often takes time, focus, driving synergies and so on. And through that period, we will focus on customer demands and supporting the customers with new innovations and better processes. So we truly see it as an opportunity. And we have been able to compete taking shares over the last decades in this industry and we continue to believe that we'll continue to do so over the next years. Okay. And on the advanced payments, well, as you know, I mean, the amount here is dependent on the projects its related projects and the payment terms and installation dates for different projects. And if you recall, when we went to IFRS 15 a couple of years back, we had a significant increase there. We also had a relatively large backlog of uninstalled systems. We've been working that off. Many of those were prepaid. So that's an effect we've seen for the last couple of years with advances coming down. We're at the end of that cycle. I would say there are very few of them left. So that effect is more or less finalized. That's the key driver of the decrease in advances we've seen for some time. I think this is a very important part that Johan is talking about. We are coming more in a steady working capital situation. Of course, Brexit is not gone, but we don't have the Brexit effects of last year. We had a Chinese unities that we needed to get to CFDA before we could take the revenue and reduce the inventory. And we have also seen the transition from IFRS 15 to where we are today. So we are pleased with this cash flow and working capital situation we have today, but we see good opportunities to also address inventory and accounts receivables going forward to have an even better situation on the working capital side. Perfect. And then maybe just a third one, just a follow-up unrelated. Just wanted to get any updates on the CEO process, please. The CEO process, yes, absolutely. So there's an ongoing process that the Board is driving. I haven't seen any specific timing and so on. And of course, it's a bit more difficult now in COVID times. But it is ongoing. That's the only thing I can say. But there's no time final time set. Perfect. Thank you. Our next question comes from the line of Scott Bardo of Berenberg. Please go ahead. Yeah. Thanks very much for taking my questions. So clearly, I appreciate that you're looking to take Unity into the next commercial phase. But this has obviously been a major source of investment for the company and has underpinned a significant part of your previous growth forecasts. So just before we enter the next phase, I would appreciate some clarity on how many Unity orders you have now in Q1. I think you had 80 as of last quarter and how many have been installed and revenue recognized please? Second question, pleasing to see that you're launching your new linac. You shared some brief technical details, but are there any particular market segments or regions that you see ability to take share? Or is this more of a global product where you expect similar dynamics across the regions? Last question, please. Obviously, following on for Veronika's, I appreciate you've resisted giving any sort of quantitative guidance at this point. That makes sense. But given where we are with the service mix, relatively decent gross margin, somewhat surprising order dynamic, is it fair to assume that we are in a positive growth scenario on the top line for Elekta this year and that profitability is above the 17.3% last year? Just like some qualitative statements there to help better align market forecasts. Thank you. Thank you, Scott. So we have entered the next phase. And that is what we said since 20 17 that we will work hard to reach the 75, but then we go into a new phase with gradual reimbursement, more market adoption and we will stick to that. In the quarter, we mentioned it was the 2nd best Unity ever quarter ever and it was around 10 units in the quarter. On revenue guidance, how many installations and so on, we will not carve out the Unity numbers from the total going forward. But of course, we will give updates and comments on the performance of revenue and orders and of course the MOMENTUM study as well. HPL then, it's a very versatile product that is targeting all different markets. As usual, you often start with CE Mark and then you take it through the world as we did with previous products as well. But it has a big role to play both in emerging markets and in mature markets. And it has a role to play where you have smaller bunkers as well. And that is a big installed base of those in emerging markets, but also in some mature markets. On the guidance side, no, we are not giving guidance because we don't think it would be wise to do so under the current circumstances. We're done certain on the customer side. We are focusing now on delivering quarter by quarter focusing on keeping the machines up and running, the customer visits going, installations getting into their bunkers, that's where we have the focus and we'll continue to do so through Q2. As soon as we feel comfortable or the customers feels comfortable about their installation and order plans, then we'll start to talk about that externally as well. Understood. Okay. Thank you for the comments. And I guess just quickly following up, I guess nothing to hide away from given the strong Unity dynamic. Am I right in saying that of the say 90 orders you have then, there still is some 60 or so to be installed and revenue recognized. Just some clarity at this point of your growth cycle would be useful. And maybe just following on from David's question about some of the major consolidation activities. Obviously, a big move in the industry and metac more generally has been consolidating sector for some years. Can you share some thoughts about the importance for Elekta to remain an independent company? Thank you. Thank you, Scott. So on the order backlog on Unity, yes, we have a healthy order backlog on Unity that will continue to install as soon as the customers are ready over the next couple of years. So and that's what we discussed previously. When you get up to the bigger backlog, you'll also be easier to get the smoother revenue flow from Unity quarter by quarter as well. You need to have that kind of scale. On the industry consolidation and the importance of Elekta to be independent, My question my answer to that is, yes, it is important. We are we have been successful in driving that agenda over the last 50 years, I would say, since Elekta started. We have been able to grow by innovation, customer focus and independence, however, with close collaborations with many different players. So I foresee a situation where we would drive our focus on precision radiation medicine, but we also have opportunities to form close collaborations and partnerships with other players in this industry and around this industry. Thanks, Gustaf. Our next question comes from the line of Michael Jungling of Morgan Stanley. Please go ahead. Thank you and good morning. I have three questions. Firstly, when it comes to Siemens Healthineers, can you comment on how reliant you are on Siemens for parts, especially the supply of the CT for Linacs? Secondly, for the CEO search, is the Siemens, Varian combination helpful for your CEO search? And then the third question is, again Siemens and Varian, I think you mentioned and if I don't, hopefully I didn't misinterpret your comments, but it seems you're actually quite positive about the transaction. Does this mean that when you get asked by the European Commission and by the FTC about your view on the deal that you will endorse it? Is that a sort of correct interpretation of what you sort of said about the implications to you? Thank you. Okay. Take them 1 by 1 here. And Siemens supply chain parts, those aspects impacts on our supply chain or and I'm not foreseeing any impact there from our side as far as I know. On the CEO search if it's positive or negative, it's not really for me to say. It's more a board discussion. So I don't really have a view on that topic. Siemens Healthineers positive. I believe it's positive for us that we can remain faster and nimble in these markets around the world. The more market and legal aspect of it, I don't really have a perspective on that at this point in time. Okay. And maybe then I can just ask another question about the line item in your P and L and then as exchange rate differences. It's kind of weird this quarter that normally would expect the relationship between sales and your hedging contracts to probably be more positive than negative, but you actually recorded a negative number of minus 55. Why is it so different this quarter And would you envisage given where the exchange rates are today that this number turns materially positive for the remaining three quarters? For that line item, I mean, in this quarter, there was very large foreign exchange movements, especially in July. So what ends up on that line is the contracts, as you say, but also revaluation of balance sheet items. So and that's really the key driver, the very significant foreign exchange moves we saw in the last month of the quarter. It's what that line item will be is fully dependent on foreign exchange movements, which we cannot predict. So it's difficult for us to say what that number will be. The net effect from foreign exchange in the quarter, including that line item, but also the effect on all other items in the P and L was close to 0. So minus 3, I think. So the net effect from foreign exchange was small in the quarter. That line item was negatively relatively large amount. But if you take the current exchange rates, I'm not asking you to be sort of a forecast in exchange rates for the year. But if you take the exchange rates that where we are today, it is probably most likely that the number is going to be a material positive for the full year. Is that directionally a correct statement? Yes. Sorry, did you say yes? Yes, I said yes. You have if you look at that line item last year, it was significantly more than 200 minuteus negative and that will not that goes away, if I put it like that. So if you start from that starting position, your comment is correct. Given where exchange rates are now and so on, we would expect to have a positive effect from exchange rates over the years compared to last year. Thank you. And we have time for one more question. This is from the line of Steen Gustafsson of Nordea. Please go ahead. Thank you and good morning. So talking about the HPL, you mentioned it will be launched in September. And it sounded like you maybe I didn't get it right, but it sounded like you expected that to have a positive impact on your orders relatively soon. But can you remind me about the timeline for regulatory approvals? That would be helpful. That's the first question. And secondly, if you could comment on the underlying demand for Versa HD, which we haven't talked about for a while. And specifically on sort of the mid segment or high end range of the mid segment product range, What your plans are there in terms of upcoming product launches and so on? How you see that market develop would be helpful. Thank you. Absolutely, Stijn. So HPL, I don't want to steal the thunder from the launch on in mid September here. But if you look at the financial implications of it, yes, we see in this fiscal year there should be opportunities to get orders from the new linac around the world. The regulatory approval is much easier compared to if you say how we need to work with Unity because that was a completely different type of product with the MR included. So that will be much, much shorter process compared to what you were used to on the Unity side. So I would say during the autumn, but then it depends a bit market by market of course. We'll focus on CE initially. Your questions on more premium segments versus HD and so on, it's a big focus area for us right now. We've worked a lot with new applications and new areas there. But at the same time, of course, we're developing new platforms. As usual, we always focus on new platforms. And the linac segment is the largest part of our business and we will continue to work on the innovation side there as well. That's what I can say at this point in time. Thank you. But does that mean that you're working on a new product right now and that may be launched in the near future? No, I wouldn't say that, but we are always working on new products in all our segments. Okay. And regarding the HPL, so Seamark probably this fall and also 510 within the 1st year, I guess? Yes, within the 1st year, yes. But I need to come back on specific dates. So take the opportunity to listen in on 15th. Will do. Thank you very much. Thank you. Okay. Thank you, Steen and all the others. I'm sorry that we don't have time to take more questions. But today, we also have our AGM, so we needed really to keep it to the hour today. But thank you all for participating and goodbye. Thank you. Thank you.