Hello and welcome to the presentation of RaySearch's Year-End Report for 2023. My name is Eva Nelson and I will be the moderator here today. Joining us in today's call is Johan Löf, RaySearch's Founder and CEO, and the interim CFO Annika Blondeau Henriksson. Johan and Annika will give you a short summary of the quarter including the financials, and after that we open up for questions which you can either ask orally or submit in the text field under the presentation. So if you'd like to ask a question orally you need to be in the call. I also want to remind you that the session is recorded and you can find it through the same link as you used for this call and also on RaySearch's website. And with that I hand over to you, Johan. Please go ahead.
Thank you, Eva. I would also like to welcome all of you to today's webcast. I'd like to start off this presentation with two historic records for RaySearch. The first is that our sales in 2023 exceeded SEK 1 billion, which is the highest annual sales in our history. The second one is that sales for the fourth quarter were the sixth consecutive quarter with highest record high sales for a corresponding quarter. Sales in the fourth quarter amounted to SEK 300 million, which is up 13% compared to the same period last year. At the same time, our cash flow for the quarter was SEK 46 million and EBIT amounted to SEK 44 million. This is equivalent to an operating margin of 15%, which is an improvement on the year-on-year period when operating margin was 8%.
The improved margin was mainly due to increased sales and we are maintaining our momentum and opportunities for continued growth. As for earlier quarters of 2023, the sales figures for the fourth quarter are not a result of a small number of large orders, but mainly consist of a combination of revenues from many small and normal-sized orders, as well as a stable and growing support revenue. During 2023, our support revenue increased by 29% and accounted for 41% of total sales. This is a result of new sales of licenses in combination with the fact that we are practically not losing any customers. Also worth mentioning is that sales during the four last quarters have been very consistent at SEK 230 million, SEK 240 million, SEK 253 million, and SEK 300 million respectively.
We have historically seen major fluctuations between quarters, but it's possible that the trend with more consistent sales between quarters could continue. Our order intake for the fourth quarter amounted to SEK 318 million. The corresponding figure for 2022 was SEK 514 million. The large difference is explained by the fact that we received our largest order ever in the fourth quarter of 2022 when IBA placed an order for RayStation and RayCare for nine new proton centers in Spain, which was worth SEK 188 million. So to summarize, RaySearch has a strong financial position with cash and cash equivalents of SEK 343 million, stable cash flow, and no loans. I'm also proud to say that we have passed the milestone in terms of number of cancer centers on our list of customers.
Since the launch of the first version of RayStation in 2009, we have invested significant resources in developing the most advanced treatment planning system in the world. Today, when more than 1,000 centers in 43 different countries have purchased RayStation, we can see that our efforts have paid off. Also, we can note that 10 of the 15 highest ranked cancer hospitals in the world, according to a ranking done by Newsweek, are current customers of ours. This reflects our strong position also in the top segment and confirms RaySearch as a leading vendor of high-quality cancer treatment. Since our solutions are appreciated by the majority of the most advanced cancer hospitals around the world, we should be able to continue to increase our total market share over time. Now let's take a closer look at the financials. So please, Annika, go ahead.
Thank you, Johan. On this slide, we present our key metrics for the fourth quarter of 2023. As you can see, the order intake decreased by 38% from SEK 514 million to SEK 318 million as the order intake in Q4, also mentioned by Johan, has the largest order ever for RaySearch from Ion Beam Applications, IBA, which amounted to SEK 188 million. Adjusted for this or disregarding it, the IBA order in Q4 2022, the order intake was SEK 326 million and the decrease to the order intake in quarter four 2023 was only 3%. Net sales in the quarter four was not derived from any major order, but it generated an increase in net sales by 13% from SEK 264 million to SEK 300 million. Adjusting for the exchange rate impact, the change in net sales was 6% increased year-over-year.
In Q4, we also saw the support revenue, which increased by 40% from SEK 86 million to SEK 120 million, but it included an unrecurring support revenue of SEK 8.5 million. Operating profit increased from SEK 21 million to SEK 44 million, corresponding to an operating margin improvement from 7.8% in Q4 2022 to 14.8% in the fourth quarter 2023. With the improvement in operating profit was generated from higher net sales, but it partially offset by higher selling expenses coming from increased sales and marketing activities, some higher personnel cost in R&D and administration, which also administration also increased expenses for consultants and IT expenses. Lastly, cash flow for the period was positive, amounting to SEK 46 million, which was in line with the cash flow for Q4 2022 at SEK 43 million.
Moving over to the full year 2023 and the financial numbers, the order intake decreased by 18% from SEK 1.2 billion to just about SEK 1 billion, which again is mainly explained by the IBA order of SEK 188 million in the fourth quarter of 2022. Adjusting for this, the IBA order, the change year-over-year would have been 3%. Net sales increased by 21% from SEK 844 million to SEK 1.02 billion. Adjusting for the exchange rate impact, the change in net sales increased by 16% year-over-year. We saw an increase in licenses by 14%, an increase in support revenue by 29%, hardware increased by 21%, and training and other increased by 34%. Operating profit improved from SEK 43 million to SEK 150 million for the full year with an operating margin improvement from 5.1% to 11.2%.
The improvement in operating profit is primarily resulting from higher net sales of licenses and support, but is partially offset by higher selling and administration expenses compared to 2022. Lastly, cash flow for the period was a positive SEK 190 million compared to SEK 47 million for the full year 2022. The improvement comes from strong operating result and a favorable change in operating receivables. This graph displays order intake and net sales over the past 12 quarters in a rolling 12-month perspective. We see at the end of the period of the 12 past months order intake amounting to SEK 1 billion, the past 12 months net sales also amounting to SEK 1 billion. We have also adjusted for the IBA order in the rolling perspective, which is the yellow-green line. All overall, the trend is still that order intake and net sales are steady growing.
At the end of the period, the total order backlog amounted to SEK 1.9 billion, of which SEK 461 million expected to generate revenue over the next 12 months. The remaining amount in the order backlog mainly pertains to support commitments that are primarily expected to generate revenue during the coming four years. Operating profit over time, we present RaySearch quarterly operating results since Q4 2020 to Q4 2023. The operating profit is now with the sixth consecutive quarter a positive operating. We end the year with SEK 44 million in Q4 2023. We summarize 2023 a year when RaySearch reached SEK 1 billion revenue milestone. The operating margin was 11.2% and cash flow was a positive SEK 190 million. Back to you, Johan.
Thank you. So it's good to note that the positive trend that we saw during the first three quarters of 2023 has continued into the final quarter of the year. A strong order backlog, which amounted to SEK 1.8 billion, and a steadily growing support revenue contributed to the positive growth and good end to the year. As previously communicated, focus is on improving the operating margin with a target of a minimum of 20% within three years. I feel confident that we will achieve this goal. Given our strong financial position and good future prospects, we propose an ordinary dividend of SEK 0.7 per share and an extra dividend of SEK 1.3 per share. Thank you.
Thank you, Johan and Annika. We now open up for questions. Operator, over to you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only headsets while asking a question. Anyone who has a question may press star and one at this time. The first question is from Kristofer Liljeberg, Carnegie. Please go ahead.
Yeah, thank you. I could start with two questions. First, if you could update us on the plan to reduce administrative costs in 2024. And then I wonder about if we look at rolling 12 sales and orders on a rolling basis, with sales now being higher than orders for the first time, how would you view that? Is that the signal that you expect sales growth to slow down from here, or do you expect this to revert back to the historical pattern? Thank you.
Thank you, Kristofer. So regarding the lowering the admin costs, we are working on that, of course. And we have less and less consultants in the financial team. And I think, as we have said before, after the second half of this year, we will basically have no consultants in the finance team so that the recruitment of permanent staff is ongoing. And most of the positions have been replaced now. There is a couple left. Would you like to add something to lowering the admin costs?
No.
Yeah, I could add one thing that we are still, of course, we have some prospects for subleasing parts of our offices here in our headquarters in Stockholm. We have a few quite interesting parties there, but nothing is complete yet. But that should happen during the year. Annika, do you have something to add?
I can just add that the plan is progressing as it should. Obviously, to find some of the key positions has taken a little bit longer. But I'm optimistic that by the midst of this year, we should be primarily with permanent staff within the finance department.
That will make a big change, I think.
Based on the yeah.
Okay.
Based on that, do you think it's realistic to even assume administrative cost in absolute terms, so in Swedish krona, being lower in 2024 than in 2023?
Not necessarily because it's not just finance within the admin expenses. We are having some other functions where we need to invest. I'm thinking about IT as an example. So I cannot say that in absolute terms you will see a reduction in 2024.
Okay.
To your second question, regarding.
Rolling sales and order.
Right. And no, I agree. If you look at the graph, it looks a bit worrying. Of course, the main contribution is the IBA order, the very difficult comparison from last Q4. But even if you disregard that, it's sort of flat-ish. But if you look at the pipeline and looking forward, I'm not worried. I think the order intake will pick up. And I'm not worried about the sales growth going forward.
That's great. Thank you.
Thank you.
For any further questions, please press star and one on your telephone. Star and one. There are no more questions. There is a follow-up, sorry, from Mr. Kristofer Liljeberg, Carnegie. Please go ahead.
Yeah, if there's no other questions, I have three more, if that's okay. First, maybe you could explain a little bit about your expectations for RayCare sales and orders in 2024. And also, if we look at support revenues, even stripping out the non-recurring items that you have had in some of the quarters this year, it seems that a quarter-over-quarter increase is getting larger than historically. So is this just a reflection of the larger number of clinics you have, or is there anything in the setup, in the contract that has changed? So this will be a larger part of sales going forward. And also the final question for me is if you could update us on the timing for when you expect revenues from the IBA deal in Spain? Thank you.
Okay. So RayCare sales 2024, your first question. There is a lot more activity now than ever before for RayCare. So we will see substantial orders coming in this year. It takes longer time for RayCare to generate revenues, I mean, to go from order to revenue because it's a much longer process to install and get approval from the customer. So it won't affect the sales very much during 2024, but we'll see a shift and a strong increase in order intake, I would say, for RayCare during this year. Yeah, the support revenue is steadily growing. It seems to be how it is now. And we haven't really changed. It's not due to any change in mechanism in the support contracts. Although in the future, we will see that because we have indexed the support fee in newly signed support contracts.
But that indexing hasn't had an effect yet. Would you like to add something to the support increase?
Yeah, obviously, we have the currency impact also impacting the quarter. I think it's timing sometimes as we have had these non-recurring revenue streams occasionally that impacts it.
Yeah, but even if those out, I think the growth is quite it's larger than the 11% that we used to see in the past. So yeah. Timing of Ortega, I think we will see the first revenues from that in 2025 and then gradually over a few years. But let's say that the first revenues will come from that from a center or two out of the nine centers in 2025.
Okay.
Thank you. That's very helpful. Thank you very much.
Thank you.
There are a couple of written questions, additional questions about RayCare from Joakim Bornold at Söderberg & Partners. Do you think that RayCare will contribute to more growth than RayStation? And then there's a question from Mats Andersson.
We can take one question.
Take one question at a time. Okay. So do you think that RayCare will contribute to more growth than RayStation? And he's mentioning 2024, but I mean, maybe you could elaborate a couple of years.
Yeah, yeah. For sure, not in 2024. But it will be since we go from 20-24 customers or so currently for RayCare compared to 1,000 RayStation customers; it will contribute over the next few years. If we look at 2025, 2026, and forward, we will have a substantial contribution from RayCare in terms of revenues.
Okay. Good. And then from Mats Andersson, he's also adding, what is the average income for a RayCare license? And what percentage of a license revenue in Q4 comes from RayCare?
Thank you. We normally don't talk about the average prices since, well, we have competition, obviously. Also, we are not disclosing specifically the revenue streams for RayCare or RayStation, the split.
No. Thank you. And Mats Andersson also asks about the other products, RayCommand and RayIntelligence, actually the same questions. So how many licenses have you sold? And if you don't want to disclose the revenue, but talking a little bit about the licenses and number of products.
It's the same answer as Annika gave for that. But what we can say is that the main revenue generator still is by far RayStation.
Yeah, of course. Carlos Dahlin has a question. He wants you to elaborate a little bit more about the orders. He's talking about the orders 318 during 2023. How big part do you think that will be that will actually happen? And when will that happen during 2024?
That was not very clear, but I.
No, I'm not sure.
But I assume that how long will it take to convert the orders to revenue? And I think Annika mentioned that before, but you can repeat that again.
Yeah, I mean, we are disclosing a number in the report where we say that of our backlog, it's SEK 461 million, which is primarily, it's going to generate revenue for the 12 months to come.
Yeah. And the second question, I think you already answered, but will sales go down during 2024 compared to 2023 because the order book has decreased?
No, we certainly don't believe that.
No. Joakim Bornold has a second question. Which markets do you see as key to support top-line growth in 2024?
It's the U.S., and well, it's all of our markets. North America, Europe, and APAC will contribute to the growth in 2024.
Then he adds another question. Can you talk a little bit about the total addressable market for RayStation globally today?
Yes, that's a very good question. So there are 8,000 radiotherapy clinics in the world today, and we have 1,000. So it's a big remaining addressable market. And that's why it's so interesting to compare that to the two-thirds that we have in the top 15 cancer centers in the world. Two-thirds have our system, and they are our customers. So that's why we say that we think, given the competitive landscape as well, with only two competing systems, really, that we have a very good chance to reach something similar, but maybe not two-thirds, but we should for sure increase significantly from the 11% or so we have today. I would say, as we have said before, 3,000, going from 1,000 to 3,000 RayStation or RaySearch customers is a very realistic number.
It's hard to say exactly how long it will take, but we believe that we have a very good chance to reach that given our extremely strong market position as reflected also by these two-thirds of the top clinic market penetration.
Thank you. Last question from Mats Andersson. When will the support income start to be indexed, regulated?
It is new contracts being signed that have been signed during this year, during 2023, I mean. All of the new contracts are indexed.
Okay. Moving forward.
So we'll see, yeah. But it's a mix because when we go into 2024, some of those contracts are 5 years old or 6 years old and 3 years old, so they will not be affected. But some of the contracts will be indexed during 2024.
Thank you very much. Thank both of you. Thanks for all the questions. Are there any more oral questions, maybe?
There are no questions from the phone.
No. Okay. Then I think we can conclude the session. We look forward to continue talking to you. If not before, that will be then when the interim report for the first quarter of 2024 is presented. That's on the 17th of May. I'd also like to remind you that you can find the presentation through the same link as you used for this call and on RaySearch website. Thank you and goodbye.
Thank you. Bye-bye.