Good morning and a warm welcome to the presentation of RaySearch Q3 2025 results. My name is Karolina Strömlid, and I'm new Head of Investor Relations at RaySearch. With me today are our founder and CEO, Johan Löf, and our CFO, Nina Grönberg, who will take you through the highlights and financials of the quarter. After the presentation, we will open up for questions, so feel free to submit them in the chat or ask them live. With that, let's kick off today's presentation.
Thank you, Karolina, and welcome again, everyone. Before we go through the Q3 results and highlights, I'd like to give a brief overview of RaySearch and our business. So, yeah, as you know, RaySearch is a pure software company, and we develop software for cancer treatments. We have four platforms: RayStation, which is our treatment planning system; RayCare, which is the oncology information system; RayIntelligence is our analytics tool for exploring population data; and RayCommand is the treatment control system. If you look at a comprehensive cancer center, we have usually the radiotherapy treatment in the basement. You see the treatment machines down there. In a comprehensive cancer center, you also perform surgery for cancer, and you deliver chemotherapy and other systemic therapies. A comprehensive cancer center can deliver all the types of treatments that are available for cancer.
RaySearch has, so far, during our first 25 years, been mainly focused on radiotherapy, or I would say only focused on radiotherapy. We do the treatment planning for radiotherapy, and also with RayCare, we manage the workflows, et cetera, for delivering radiotherapy. We have recently added a new function in RayStation for liver ablation planning and delivery. There is a little room in this clinic picture where you see liver ablation to the far right. This is the first time we actually go outside of radiotherapy because liver ablation is interventional radiology. Going forward, we will take care also of all the other aspects of cancer treatment. Next year, we are entering into chemotherapy, where we add chemotherapy planning into RayStation and chemotherapy management into RayCare. Further down the line, we will also support surgery in the same way.
Our long-term goal and vision is to provide a comprehensive cancer center with all the tools necessary to do whatever goes on in a center like that. We will support comprehensive cancer care. Many patients receive a combination of treatments. Breast, for example, you usually first perform surgery to remove the tumor or the breast, and then you irradiate lymph nodes, and after that, you deliver chemotherapy. Many patients have a combined treatment like that, and I would say there is hardly any support, any software support for that situation. We want to be able to co-optimize and coordinate such treatments in the future. This slide shows the long-term development for RaySearch in terms of revenues. We go all the way back to 2008.
I show this slide because I want to emphasize the importance of looking at RaySearch long-term because, as I have repeatedly stated over several years, our quarters fluctuate in terms of revenues. That has been quite common for a long time, even though maybe we see a little bit less of that than in the past, but it's still sort of a characteristic of RaySearch because there are some big deals that can fall on either side of into one quarter or another quarter. It is important to look at RaySearch over a longer period. If you look at this slide, you see that it's a pretty stable growth over the years. The magenta colored bars are the support revenues, and they are steadily increasing, and they are now about 39%-40% of the total revenues.
There is a dip, as you see, 2020 and 2021, that were, of course, during the COVID years where we were quite badly affected. But overall, over a longer period, we can see that there is a steady growth. Even if we had a somewhat weaker Q2 this year, Q1 and Q3 are record quarters in terms of revenues. We have an all-time high this quarter, but Q1 was very close as well. Basically, we have two all-time high quarters this year so far and one a bit weaker. I just want to remind everyone that one has to have a longer-term perspective on RaySearch development. Okay, now over to the latest developments. I'm happy to report that Q3 was a strong quarter for RaySearch with record high net sales and improved profitability.
I think Q3 demonstrates the strength of our business model and the importance of maintaining this long-term perspective. While revenues can fluctuate between quarters, this quarter confirms the company's continued solid performance. We saw continued strong interest for our solutions in the quarter, supported by the deliveries to six major particle centers in Asia. Net sales grew by 13% to SEK 332 million, reaching the highest revenue we have ever recorded. The increase in net sales helped lift operating profit by 44% to SEK 89 million, with an EBIT margin of 27%. Adjusting for costs from our global employee conference, EBIT was SEK 103 million, corresponding to a margin of 31%. Recurring support revenue continued to grow, reaching SEK 130 million in Q3, which then represents 39% of total revenues. Let's move on to the operational highlights of the quarter. Overall, customer activity remains strong, with order intake increasing by 70%.
Many of our existing customers expanded their installations during the quarter to add more systems and functionality. Roughly half of our license sales continue to come from the installed customer base, demonstrating steady demand from the existing customers. Interest in RaySearch solutions remains high across all regions, with an increasing number of clinics choosing RayStation and RayCare over other systems. I can mention a few notable examples in Q3. Stanford Healthcare in the U.S. placed a new order for advanced proton therapy. AKMS Oncology selected RayCare and RayStation for its new cancer center in California. Keimyung University Dongsan Medical Center in South Korea will install RayStation and RayCare at its new proton center. RayStation has been installed at three new proton centers and two carbon ion therapy centers in China. Auckland City Hospital in New Zealand is expanding its radiotherapy capacity with additional RayStation licenses.
The replacement of Philips treatment planning system Pinnacle, which will be discontinued by 2027, continued in the quarter. The German health provider Med360 will deploy RayStation across 10 clinics for Elekta and Accuray treatment machines. In France, several clinics will replace both Pinnacle and Eclipse with RayStation. Another example of customer activity was the annual ASTRO Conference that took place in San Francisco at the end of September. This is a very important event for us, and we had a great interest in our offering. Finally, in September, we celebrated an important milestone. RaySearch marked 25 years as a company. For the first time since the pandemic, we gathered all our employees from around the world with an internal conference. This created valuable opportunities for knowledge sharing while also strengthening our company culture and engagement. Together, we will continue to build on this, improving cancer treatments for patients worldwide.
In September, we launched a new version of RayIntelligence, which is our oncology analytics platform. It's cloud-based, and we have built it with modern technology for scalability and accessibility. It comes with interactive dashboards that you can use to visualize data and understand correlations, et cetera. It's seamlessly integrated with RayStation and RayCare, meaning that it listens to everything that goes on in these systems. Without the user having to do anything, RayIntelligence will capture the information that's being generated in RayStation and RayCare. There is also a very powerful SQL scripting interface for custom queries and in-depth data exploration. Some examples of use cases for RayIntelligence are that you can get an overview of the clinical operation. You can get an overview of everything that goes on in your department. You can monitor machines, treatments, toxicities.
You can also track treatment quality and look at your population of patients over time, what are the side effects and what are the tumor control probabilities, et cetera. In our systems, we have several machine learning or AI models in certain algorithms, and RayIntelligence can also be used to monitor the performance of these machine learning models. RayIntelligence is also a very powerful tool to generate reports that takes data from RayStation, RayCare, but also external sources. This is an example of a dashboard where you follow the treatment planning in a specific clinic. You can track it over time. You see the time axis in one diagram there. You can track it on tumor type. How many plans did we create for breast, how many for prostate, for lung, et cetera. There are also statistics here for the different treatment planners.
Which person did the most plans and who did the least, et cetera. This is just an example of things that you can see and visualize with RayIntelligence. It's also important to note that although RayIntelligence comes with a large number of predefined dashboards that we have made, the user can create tools in RayIntelligence to create their own dashboards. It's a very powerful addition and complement to RayStation and RayCare. In the next slide, I try to visualize how RayIntelligence can be used to gather data. RayWorld, we call the combination of all our systems, is called RayWorld. We want RayWorld to be a learning system. What this slide illustrates is that those little squares or rectangles are data points that are being automatically at the back end captured by RayIntelligence from RayCare and RayStation.
That data is put in the cloud, in a data warehouse in the cloud. It can be a cloud on-premises, but it can also be a cloud in the cloud, so to speak. Based on this data, we achieve clinical insights. We feed back information. Those networks, neural network symbol there represents machine learning models going back to our systems. There are also other data points represented by those dots that are insights that we feed back to improve our algorithms. We have several algorithms that rely on historical data, like deep learning segmentation and deep learning planning. That is to improve the performance of, for example, RayStation. We can also improve the efficiency, the operational efficiency of the clinic. RayIntelligence will help determine bottlenecks in the workflow, and then you can take action to remove those bottlenecks.
We also want to provide clinical decision support by following the patients over time and knowing exactly what we did to these patients and what the preconditions were. We can improve, and we can give recommendations to the clinical teams on how to treat the next patient. Combined, all of this will then improve outcomes, the treatment outcomes for our patients. With that, I would like to hand over to Nina to tell us about the financial development.
Yes, thank you, Johan. In quarter three, we saw continued high activity in the market, both from new and existing customers and across the regions. Order intake increased by 17%, which brought, oh, sorry, yeah, which brought the rolling 12 curve upward again, up from the smaller drop that we had in the last quarter. We had high order intake from support contracts in the period.
The order backlog ending at SEK 1,617 million was also affected by that we had six Asian particle sales turning into net sales in the third quarter. High net sales gave us a Book to Bill ratio in the quarter of 0.9, and for the last 12 months, it was 1. Despite headwind from the strengthening of the Swedish krona, net sales grew with 13% in the quarter. Since the SEK 332 million outcome beat the previous record that we had from quarter one this year, if only with SEK 500,000, we did mark out a new record level. License sales growth was 40%, and support sales grew with 8%. The organic growth was 19%, mainly coming from new orders, but also from the already mentioned particle sales in Asia, sales that were previously recognized in our order backlog.
The high net sales drove EBIT up with 44% to SEK 89 million in the quarter and strengthened the margin to 27%. If we adjust for the costs that we had from our internal conference and the very small currency effect in the quarter, EBIT was SEK 103 million and the EBIT margin 31%. Year-to-date net sales was up 11% and 15% organic-wise, and the year-to-date EBIT margin was 21%. Okay, something happened there with the slides. I want the rolling 12 development of net sales and EBIT, that one, yes. Okay. Moving on to the rolling 12 development of net sales and EBIT, and also the perspective that we believe gives a better and more relevant description of RaySearch Laboratories business performance. We see that net sales for the last 12 months amounted to SEK 1,292 million, and that gave us an annual growth rate of 14% over the last two years.
The rolling 12 EBIT of SEK 274 million means a solid margin of 21%. This, I want to point out, is despite that we've had large effects from non-recurring costs and currency losses during 2025. Recurring revenue from the support contracts was, as mentioned, up 8%, amounting to SEK 130 million in the quarter and corresponding to 39% of total net sales. Year-to-date, the support contract growth was 13% and amounting to SEK 385 million, and that corresponds to 40% of the total net sales. Rolling 12 development, pictured with the blue line in this graph, shows the steady increase that we have in our support revenue over time. Moving on to the cash flow development. Cash flow in quarter three was -SEK 82 million and strongly impacted by a higher working capital.
Though this is not a satisfying outcome, I want to break it down for you, and I want to point out that the picture is brighter than it first looked like. There are mainly three things that have impacted working capital in the quarter, one of them being the already mentioned Asian sales, which were to a large extent prepaid. That is a good thing. I mean, we get paid before we deliver anything. That is something that is common when it comes to our sales in the APAC region. It also means that no cash flow is generated later on when the sales are recognized. Secondly, we have sales with longer payment terms. In some cases, these longer payment terms are related to tenders and framework agreements.
That is something that gives us good and profitable sales, but where we have to accept that we get paid a little bit later. For example, in the last two quarters, we had strong sales in the French market, and there we have these kinds of contracts. We get a smaller portion of the payment when we deliver, but we also have to wait with the invoicing until the customer has finalized their testing. In other cases, we have accepted longer payment terms or later invoicing since we can benefit from it in terms of price or in terms of long-term value from the customer relations. Third, a portion of the cash flow outcome is always related to timing of the sales in relation to quarter end, a timing that was not in our favor in the third quarter.
Cash flow was also affected by quarter three being summer months, which means vacation payouts. Last but not least, I want to remind you that we have a cash balance of SEK 323 million when we exit the quarter. We have no loans, and on top of that, a non-used overdraft facility. Breaking it down further to you and looking at the three items in our balance sheet, building up the main part of the working capital, the contract assets and the contract liabilities, which are receivables and liabilities we have towards our customers. Here we have been used to having a net that is negative. That means that we have more prepayments from our customers, meaning they pay us before delivery than the customers owe us because we have delivered and not got paid. That is an extremely good position, I must say. Now in September, it turned the other way around, but as I see it, we're still in a rather good shape. As with net sales, we will have fluctuations in these items as well going forward, depending on the mix of the customer contracts. We will, of course, continue optimizing the working capital in relation to the business. With that, I hand over to you, Johan, who will give a summary of the quarter.
Thank you, Nina. All right, to summarize the quarter, we achieved record high net sales. Our profitability improved significantly. We continue to see increasing interest in our solutions. There is still a very large potential within our existing customer base, giving us the opportunity to sell additional systems as well as additional modules to them. With our leadership in innovation, strong partnership, and an expanding and loyal customer base, RaySearch is very well positioned for long-term growth. We will now open up for questions, and I will hand over the word to Karolina.
Yes, thank you, Johan. We will start with questions from our analysts. The first question comes from Mattias Vadsten at SEB. Mattias, please go ahead and unmute yourself.
Good morning. Can you hear me loud and clear?
Yes.
Yes.
Perfect. I think we'll start with three questions. I think the first one, as has been discussed in this case before and in conference calls, the upselling potential is quite massive as it looks. This effect, if I do my calculations, has been quite sort of substantial, both over time, but also in particular, I would say, in 2024 and into 2025. If you could just confirm this is the case, and also if it is something special happening driving this recently, and yeah, how the sort of setup looks there going into the future here and into 2026, 2027. That's the first question.
Yeah, okay. Let's take them one by one, please. Then you can ask the second if you have more. Yeah, also in this quarter, we had about 50% of the license sales from the installed base and the other half from new customers. This seems quite constant. It's just, yeah, a behavior of our customers. We have a campaign that we're starting in just a couple of regions where we allow customers to use the systems. We unlock all of RayStation's functionality for a limited period of time and have the customers try out everything that all the modules that you can buy in RayStation. They are also free to use that clinically. After this trial period, which we are experimenting with, but it's about six months, they have to decide whether they want to buy it or not, but the modules are shut down after that trial period. It has been very well received in the markets where we have initiated. We want to do it on a small scale to start with in certain in these countries just to gain experience, and then based on that experience, we will open it up to other markets. We believe that that should benefit the sales to our installed base. Did that answer your question?
Yeah. When was this initiative started? Yes, please, Apollo.
I'm sorry, I didn't hear what you said.
Did you have another question, Mattias?
Yes. First, a follow-up to this question I asked just now. When was this initiative started?
The letter was sent out maybe two months ago, something like that. I don't remember exactly, but it's quite recent.
Okay, good. Next question is, I think you point out also very well in the presentation, a strong delivery quarter in terms of licenses this time, also from new customers, sales exceeding orders last 12 months in this line, and order backlog therefore falling vis-à-vis last year and previous quarters for licenses specifically. Just how you view this and sort of how to think about the future with regards to this. That's the second question.
Okay. Yeah, the reduction of the order backlog was a direct consequence of those deliveries. As you may have noted, the order backlog and the order intake for one quarter is a very bad predictor for the revenues for the next quarter or future quarters. Because most of the order intake is still, most of the revenues are still RayStation revenues. And most of those, except for these special particle centers, etc., most of that order intake is directly converted into revenues. Let's say that we have a strong Q4 quarter, then it would be strong both in terms of order intake and revenues. That's just the nature of the business.
Thank you. I have one more, if that's okay. If you could just spend a minute.
Did you have any other question, Mattias?
Yes. I have one final question, then I will allow other analysts.
Okay.
We will move over to Kristofer Liljeberg at DNB Carnegie. Kristofer please go ahead and unmute yourself.
I think you have some—it's Kristofer. I think you have some problem.
Can you hear us, Kristofer?
Yes, I can hear you. Do you hear me?
Nope.
Can you hear me?
We'll try with Oscar Bergman then from RedEye. Oscar, please go ahead and unmute yourself.
Hi, can you hear me? Can you hear me?
No one there.
Yeah, someone here.
We can come back to the phone questions again and move over to questions posted in the chat.
Okay, I can start with those. There are lots of different questions here. Where do we start? There's one question stating this. Could you give some color on the share of previous Pinnacle Clinics accounting for the license sales in the quarter? Yeah, about half of the new license sales to new customers were by converting Pinnacle Clinics to RayStation.
The other half was converting other systems. That would be Monaco and Eclipse. This was posted by Daniel Kakai. He also asks, could you elaborate on the revenue model of RayCare? Is it similar to RayStation in terms of license fee plus support revenue? That was the first question. Yes, it is, but it's a bit higher. You can assume about 30% higher for a certain clinic with its certain size, then the RayCare installation would be about 25%-30% more expensive than the RayStation installation. The second question is, and how is pricing determined? Is it based on patient throughput and users? It's mainly based on patient volume or patient throughput, as it's stated here, and connections to machines. If you have more machines, Linacs you have, the more expensive RayCare becomes.
Also, how many patients you want to treat with RayCare, that also affects the price. That is the difference between RayStation, which is mainly based on the number of users. Question from another person here, Gilbert Vissier. Could you come back on Philips discontinuation? How well are you positioned to benefit from this? Is it already visible in your order intake, or should we wait until 2027? I would say that we are very well positioned, and we are focusing very hard to convert the remaining Pinnacle sites. It has been visible, I would say, so we do not have to wait until 2027. This has been visible for a few years, actually. It is intensifying now as the clinics cannot wait until 2027. They have to convert well before New Year's Eve of 2026. They cannot have an interruption. We go to let's see. It's moving around at the same time as I try to. Oscar Bergman has asked several questions, so I will go through those. I wonder if can we check that they can ask questions? For example, Kristofer asked, are we sure?
No, we seem to have some kind of technical issue, so I think it's better to take them written. He has posted in the chat. Yeah.
Okay. Great. So the first question from Oscar Bergman, the EBIT margin was at 27% and 31% adjusted. Is above your target that I had previously argued is quite conservative? Are you looking to increase your EBIT margin target now as you have done before when you have exceeded the target? Okay, but I agree that it looks quite promising that we will achieve at least an EBIT margin of 25% in 2026 given the current performance.
We haven't changed that. We let it stay as it is. We will communicate new targets later on, but that will be communicated in conjunction with the press release or report. For now, we stick to the at least 25% EBIT margin target, and we feel quite confident that we will be able to fulfill that target. Second question is end-of-life Pinnacle. Can you elaborate a bit more on the sales funnel here, specifically your market share of winning these accounts? Also, what is a more realistic timeline for these centers to have finalized their transition? Or should we assume that some center will still be doing this in December of next year?
As I said earlier, I think they will do this well before December next year because there are a few months of preparation, etc., when you move from one treatment planning system to another before you can start to treat patients. I think we are well positioned. It's very hard to know exactly our share, but I think we have more than 50% of these accounts, I think, that we win. Number three, I understand a lot of resources are going to getting these Pinnacle clinics. Once that window is closed, how quickly can you shift after non-Pinnacle clinics? Is there any risk of a temporary slowdown after the Pinnacle opportunity? As I also stated before, 50% of the new sales are other sites. They are a conversion of Eclipse and Monaco. That is already up and running. It varies between different markets.
For example, in Japan, this Pinnacle conversion has pretty much already happened. All the new license sales are from converting other systems and Pinnacle. Yeah, I don't think there will be a temporary slowdown. We are already converting other systems at a good pace. Number four, 96% gross margin, about 4 percentage points above the average you had for many years. Were there any one-offs or something like that that gave this strong margin? Yeah, there were two things that happened. There were less computers being sold through us. We do offer our customers to provide them with the servers and hardware necessary to run our products. We have a decent margin on that as well. Since there were less of those this time, this particular quarter, that helped because it's obviously a lower margin on the servers than the software.
The other thing was that the deliveries to these particle centers in Asia did not come with hardware at this point. That also helped. I think that is probably an unusually high gross margin. We cannot expect that every quarter going forward. Number five, the final question here. In Q2, you had received four new RayCare orders year to date. You mentioned that you expected four or five more during the second half of 2025. Can you give some update on this? Is the question. We achieved another two orders this quarter for RayCare. Yeah, we will see what happens during the rest of the year. What we can say about RayCare right now is that the interest has intensified greatly, and I think we will see good orders during 2026 for RayCare. That was Oscar Bergman. Now, let's see here.
Carlos Moreno, when will RayCare really start to be material to license sales? Is 2025 proving demand for the product? Okay, I guess I just sort of answered that. RayCare, when it really started to be material, we have to look two or three years out. That will be, I think, a large revenue contributor. Okay. Another comment here is that there is a problem with the sound. They can hear the analysts, but not us, which is a bit unfortunate.
Yes, very unfortunate.
Okay. I have a question here from Kristofer Liljeberg. Seems it does not work to ask questions on the line, so here are the ones from me. One, will you be able to track how customers are using RayStation modules during the campaign? The answer is yes. Do you expect working capital to come down again or continue to increase?
Yeah, that's for me. Yeah, I would say, as I also said during the presentation, it will fluctuate also going forward. Of course, I see that the items that we have on the receivable side in the working capital, some of them or a big portion of them will get paid during quarter four and quarter one next year. I mean, the working capital will also be dependent on the deals or the sales that we do later on here in quarter four. Right now, I don't know how those agreements will look like. I have no clear answer to that. It will be better, I can say.
Thank you, Nina. Kristofer's third question is, high gross margin for lower hardware sales. Okay, I guess. Is it temporary, or can it be started with new trend? As I explained before, I think it's temporary. Number four, how do you view deal flow in Q4? Yeah, we have good momentum. I would say I can answer to that. Number five, seems on track to reach EBIT margin target for next year. How do you view investment needs after that? Okay, number five. Yeah, I think we will revise our EBIT margin targets up for the future without quantifying that. We will reach, we hope, and we are quite confident that we reach the current EBIT margin target. Before that, we are going to define a new EBIT margin target maybe three years out. In general, we believe that this business will be very profitable going forward. Those were all of Kristofer's questions. I can take one more question here. How is RayCare integration progressing for other Varian hardware? When could it be expected, an integration of Halcyon?
Are you working with other vendors such as Hitachi and United Imaging? That's a good question. Yeah, we are having discussions with Varian on integrating RayCare also with Halcyon. It's hard to say exactly when that will be clinically available, but it will be a couple of years from now. We have very constructive and fruitful discussions with Varian on this. The second part of the question was, are you working with other vendors such as Hitachi and United Imaging? We work with many other vendors. Not United Imaging, but we work with Hitachi on both their OXRAY machine and the proton machine. OXRAY is an ordinary Linac. They have a ProBeat, which is a proton machine. We work with Leo Cancer Care. We work with IntelliRay. We work with Accuray. We work with Our. We work with Panacea. We work with Beobig.
I don't know if I mentioned Leo Cancer Care. We are working. Within the next 12 months, there will be quite a large number of additional interoperability interfaces for new machines for RayCare. Within 18 months, there will be even more. This is progressing very well. I take one more question here. Are there any discussions with Elekta regarding integration of RayCare? We talk to Elekta from time to time about this. We would very much like to integrate RayCare with their machines. I cannot say anything more on that currently.
That concludes today's Q&A. A recording of this presentation will be available shortly on our investor website. If you have any additional questions, you're very welcome to reach out to us. Thank you for joining us today. We look forward to seeing you again on February the 12th for our year-end results. Have a great Friday.
Thank you.
Thank you.