Good day and thank you for standing by and welcome to the telephone conference in conjunction with the Research Interim for the report for the Q2 2021. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. For your information, the conference is being recorded. Now I would like to hand the conference over to your speaker, Johan Love.
Please go ahead.
Thank you. Good afternoon, and welcome to Research Earnings Conference Call for the Q2 of 2021. My name is Johan Loehrv, and I'm the CEO and Founder of Research. With me here, I have our CFO, Peter Tussel, and together we'll try to answer any questions that you may have after my presentation. I will start by giving a brief overview of our Q2.
The COVID-nineteen pandemic had a negative impact on research also in Q2. Market conditions remain challenging in Europe and North America, while the market situation was somewhat better in Asia. In the Q2 of 2021, our order intake was SEK 190,000,000, representing a 7% increase year on year. However, our net sales declined 6% to SEK155 1,000,000 and the change is explained by lower license sales, mainly due to the pandemic, but also negative currency effects. As far as we know, we are not losing market shares.
And with fixed currencies, our net sales would have increased 5% quarter to quarter. Our recurring support revenues rose 9% and accounted for 44% of our net sales. However, as a result of our lower license sales, our operating profit declined to minus SEK22 1,000,000, representing an operating margin of minus 15%. Our cash flow was minus SEK74 1,000,000 in the second quarter, partly due to a repayment of our credit facility of SEK 50,000,000 and also investments in our new head office in Stockholm. It is uncertain how long the pandemic will have a negative impact on our revenues.
Going forward, we will focus even more on our costs. While continuing the strategically important investment in our product portfolio, we will adapt our operations in various ways to achieve substantial cost savings. However, over the next few months, our operating expenses will most likely increase year on year, mainly because several product launches during the past year have resulted in increased depreciation. Overall, our profitability will remain under pressure in the short term Before sales return to normal and the cost savings take effect. Ongoing pandemic has caused significant challenges for research, but we still believe strongly strategy for comprehensive cancer care.
And therefore, we have chosen to continue our important product expansion and investment in our product portfolio. At the end of last year, we launched 2 new products, Ray Intelligence and Ray Command. Gray Intelligence is our platform for data driven oncology and machine learning. This Software as a Service platform is fully integrated with both RayStation and RayCare, and it enables cancer centers to Consolidate structure and search data to individualize treatment protocols and also hopefully improve patient outcomes. RAISE ELEMENT is our first product that is only available via annual subscription.
This allows customers to pay on an ongoing basis, thereby avoiding a substantial initial investment. Great demand is our treatment control system, which offers unified management and control of the main systems in the radiotherapy treatment room, The treatment machine, the treatment couch, imaging systems and patient positioning devices. The goal is to ensure safe and effective patient care, while offering a more consistent user experience and a more efficient workflow regardless of the type of treatment machine. The development of RayStation and RayCare continues at a fast pace. One of the main news for RayStation So we are introducing support for Accuray's CyberKnife machine.
We already support the tomotherapy and Radixact machines, and thereby RayStation provides complete support for the entire suite of Accuade machines. Another focus is improving workflows and integration between registration and RayCare. This is particularly important for cancer centers that is complex treatment processes and adaptive treatment techniques that place high demands on efficient scheduling and optimized resource utilization. During the year, we will also release a large number of new machine learning models. This can be used in both new and older versions of wave station and can immediately be used by customers in markets with no regulatory obstacles.
Several research projects are also in progress, Starting opportunities to acquire tools outside the area of radiation therapy, for instance, in medical imaging and various types of surgery. Because of the large number of undiagnosed cancer cases during the pandemic, There will be a surge in new cases after COVID. And this means that clinics will need to treat more patients per day for the same resources. Efficient resource utilization in Cancer Care has long been a focus area for research. Our software enables fast and automated preparation of treatment plans for each patient.
It also shortens treatment duration while retaining treatment quality and provides more efficient scheduling of the treatment machines and health professionals. Following the vaccine rollout, we will now gradually increase our sales activities in the coming quarters, For example, by taking part in ASTRO in Madrid in August and ASTRO in Chicago in October, 2 of the major conferences in our field. It will be research mission to show cancer clinics, large and small, how they can improve their activities through software driven innovation, a strategy that will ultimately deliver working efficiencies by giving more patients access to the best possible cancer care. This concludes my presentation. Peter and I are now ready for Any questions that you may have.
Thank And we are taking our first from the line of Rain Lisi at Avaron Asset Management. Please go ahead.
This is Ryan from Mauer and Asset Management. I would just like to kind of further ask on the COVID impacts as you, Bandur, brought this out as it continues to impact your sales activity. I mean, generally, we have seen economies opening up. And if you look at the activity of the cancer treatment equipment manufacturers and their sales are already covering. So kind of why you remain more impacted compared to vendors?
Could you kind of elaborate on it?
Yes. Well, I supposedly refer to Varian and Eletka. Yes. And yes. And I think there are some aspects of that.
It's very hard to compare these companies. We don't know how I mean, they're engineering hardware, and they have very long lead times. And in general, I think it's hard to just compare Hardware and software. Hardware and machines, for instance, you just replace machines on a regular basis. It's not like Probably a business decision for the clinic.
Of the New Zealand after 10 years and then just by Newland. It's not a big undertaking really. It's not a critical decision for the operation. Whereas to replace, I call it, information system or treatment planning system is not It involves a lot of involves the entire department. And it's I think it's it can be that can be a reason.
So we don't I don't think you or we can see exactly I mean, it's the software business of Elekta and Aon or doing change in these markets. And we see clearly how we know that The hospitals that we speak to, for instance, mainly North America and Europe, the decisions are delayed. It is a COVID. They're still overwhelmed by the COVID situation. They have the travel restrictions.
They cannot come to the conferences. And they are really sort of preoccupied with the pandemic. And there are delays in making decisions and there are budget freezes. So this is just we don't we haven't seen in this time, there hasn't been any deals that have gone to either vector variant that we are involved in. It's just postponements and delays of decisions.
So I think, of course, from an outsider, it's maybe It looks strange. I think the key explanation is that We are in 2 different fields of radiotherapy. It's different between software and hardware. I think that's a good explanation. Okay.
I remember in the past, you have, On ad hoc basis, commented on the number of on-site demos you have had during the period. Can you kind of maybe give kind of some reference how many on-site demos you have been given, let's say, in the last quarter or in the last half year and how this it compares with, let's say, pre COVID situation, just to maybe give some reference.
It's like a complete spot. Maybe now we start to get some we start to open up a little bit, but We haven't been allowed to visit the hospitals for a very long time. And It doesn't mean that we haven't had any contact with them. We haven't had many, many more I mean, we're better at online demonstrations now than ever. So we do a lot of those.
So those compensate in part for the lack of on-site payments. And Hopefully, I mean, we'll go back to on-site demos, but hopefully, We will be able to do higher quality online demos going forward. Those are much more efficient, and that's where we can save money not traveling there. And during the pandemic, we have Entire organization is much more skilled now than providing this sort of interaction with Or having this sort of interaction with the customer. So but to answer your question, during the pandemic, The hospitals in Europe globally have been pretty much close for visits.
Okay. I don't know if there are any other participants So in the queue as well, but I would have a couple more questions, if I may. So first, as Estor is just about to begin, I mean, It's kind of too early to speak about the kind of client interest. But in terms of number, Participants' Easter event still as big and substantial as it used to be? Or Has it been kind of scaled down as well?
It has been scaled down. It will be hybrid conference. So I think the Brussels booking is going to be like 20% of dilution numbers of participants in in the actual Congress in Madrid. But a lot of the events will also be virtualized, so people can participate from outside. For instance, our large proposal will be both Presented in the lecture hall as well as broadcasted to other participants.
Okay. And if you compare the Conversion rate of the on-site demos and online demos. Then I mean how big is the difference? Or do you have any kind of feeling how the kind of efficiency of Online demos compares with actually physical meetings.
No, I think today, I would say the difference is rather small. The benefits with online demos is that we can have we do it from Stockholm, for instance, we have We can have a lot of experts involved with the research, and we can have the more footprint with the same client. So That's what compensates from being there physically. So I think to build relationship is always good to meet So we are told that maybe you have your first demonstration at the trade show, and then you have another demonstration that is online. And then at some point, you should go and visit the clinic as well, physically.
Okay. And last question that I have is on the headcount. I see that your headcount continues to increase. Maybe you could just indicate, is it more on the development side? Or is it more on the sales force you are growing?
It is across the board. It's been mainly for in the service department and in the R and D department. So now we will that's going to be Obviously, one part of our cost saving strategy that we will not necessarily decrease Staff will not increase it. And there's always a natural turnover of staff. And so I think basically everything is up to grabs, except for the R and D resources.
Now we need to keep that momentum because we have so we have 4 very important products that are in different states of maturity, And we need to continue that momentum to stay very competitive. I don't to answer your question directly, I don't think we will see we will definitely not see the same growth in number of employees until we are back to revenue or normalized revenues again and revenue growth. So we'll hold off for some time now until the situation stabilizes.
Okay. Thank you. I'll give a chance to others to ask questions as well.
Thank you for your questions.
Thank you. There are no other questions on the line. Please continue. There are no other questions on the line. Please continue.
Then I think we should thank everyone for participating and the call.
This concludes the conference for today. Thank you for participating. You may disconnect. Thank you very much.
Bye bye.