Elekta AB (publ)

Hi, everyone, and good morning. My name is Peter Nyquist and I'm Head of Investor Relations here at Elekta.

With me here in Stockholm, in the studio, I have Jonas Bolander, Elekta's President and CEO; and our CFO, Tobias Hagglov, who will be presenting today's results. So we will start.

At the end of the day, we will start with Jonas presenting some highlights of the development during the fourth quarter and the full year and some strategic achievements that we have done during the quarter. Then Tobias will give you details on the financials and the presentation will end with Jonas' view on Elekta's outlooks and some conclusions.

After presentation we will, as usual, there will be time for Q&A. But before we start, I want to remind you that some of the information discussed on this call contains forward-looking statements.

These can include projections regarding revenues, operating results, cash flow as well as products and product development. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statement.

With that said, I would like to hand over the word to Jonas. Please Jonas.

Thank you very much, Peter. And thank you all that attending this call.

Since this is my first quarterly report and conference call as CEO and President of Elekta, I thought I would take just a few moments to introduce myself. So my name is Jonas Bolander and I've been working here at Elekta for over 20 years.

I have experience from multiple roles in the company. And prior to this position, I held the position as General Counsel and Head of a number of group functions.

My first time as CEO and President has been intensive, and I've focused hard on stabilizing and simplifying the business and, of course, delivering on the commitments made to our different stakeholders, including the financial community. I would also like to update you on our ongoing recruitment process for a new President and CEO.

We have an external recruitment process ongoing that proceeds as planned, and we will provide you more information as soon as the Board has selected a candidate. So now focusing on the financials, starting with the key takeaways for the fiscal year '24-'25.

The book-to-bill ratio continued to be solid and came in at 1.09 for the full year of '24-'25, implying a solid foundation for future sales growth. We have seen a positive contribution from our product launches in general and in particular, from Europe, where Elekta Evo and Elekta ONE Planning have received very positive feedback from our customers.

As you know, the Chinese market has been negatively impacted by the anticorruption campaign since August 2023. However, improvements have been visible in recent quarters, resulting in a high single-digit order growth for the full year and positive book-to-bill ratio.

Net sales increased by 1% in constant currencies, in line with our guidance given in the Q3 report. The adjusted gross margin improved to 37.8% and increased by 30 basis points year-over-year.

The increase came mainly from price increases and improved product mix. The adjusted EBIT margin amounted to 11.6%, a slight decrease year-over-year, mainly impacted by higher amortization costs following recent product launches, however, in line with our guidance.

Our operating cash flow, after continuous investments, improved to -- by SEK 240 million to SEK 1.056 billion for the full year. The Board proposes a dividend of SEK 2.40 per share to the AGM, and it is the same amount as last year, underlining Elekta's strong financial position.

Now we will focus a bit on the key takeaways for the fourth quarter of fiscal year '24-'25. The book-to-bill ratio came in at 1.12 in the fourth quarter.

We saw a 10% order decline in constant exchange rate compared to last year. China showed a slight decline compared to last year's tough comparison, which then last year included a few Unity orders, while we continue to see an increased public procurement activity in China.

As expected, the U.S. showed continued decline as a consequence of customers waiting for the Evo clearance.

We had strong order development for software, which will safeguard margins going forward. And we have a global -- and we are in the middle of a global launch phase of Elekta Evo and are expecting several approvals around the globe.

Net sales increased by 6% in constant currencies, mainly driven by continued strong momentum for Europe, supported by Elekta Evo and Elekta ONE Planning. It has been very well received.

The adjusted gross margin improved significantly to 40.3%, an increase of 370 basis points year-over-year, and this is the best Q4 gross margin in 5 years. It is a very important step in our ambition to return to pre-pandemic levels.

The adjusted EBIT margin amounted to 16.3%, positively impacted by the increased gross margin, while as expected, higher amortization costs follow -- will follow from recent product launches. During the fourth quarter, a noncash impairment of SEK 1.64 billion was booked.

We have done a review of Elekta's R&D assets on the balance sheet, which resulted in an impairment for projects where the course of direction has been changed. The noncash impairment is predominantly a consequence of a change of scope within software, partly driven by moving from an internal development cloud solution to an external suppliers platform, and Tobias will provide a bit more detail later in the presentation.

Furthermore, in consultation with FDA, we have changed our regulatory submission strategy in mid-May for Elekta Evo to better align with the FDA's approval process, with greater focus on cybersecurity. We expect that the impact of this delay on the overall product launch will be limited.

It should be noted that Elekta Evo and our software suite, Elekta ONE, are fully operational, currently in clinical use and has received outstanding feedback from health care providers across Europe. We continue to work tirelessly with the approval process and we'll resubmit to the FDA in near time.

Moving to the cash flow for the fourth quarter. The operating cash flow after continuous investment improved by SEK 376 million to SEK 1.248 billion, driven by improved earnings.

Moving to the next slide, where we will give you more details regarding the sales and marketing development during the quarter. In constant exchange rate, group sales increased by 6% year-over-year.

In the Americas, the development was similar to the third quarter of the fiscal year '24-'25, where growth in South America was fully offset by the decrease in the U.S., mainly as a consequence of customers awaiting Evo clearance. APAC sales grew by 5% in constant exchange rate with a good performance across most markets.

The Chinese market remained soft, still impacted by the consequences of the anticorruption campaign. However, improvements were seen during the quarter, resulted in a limited sales decline of 1% compared to last year.

Sales in EMEA increased by 16% in constant exchange rates compared to last year, driven by a strong performance in Europe, supported by new product launches. We saw strong growth in countries like Italy, Germany and Spain.

Elekta has a global installed base growing with around 4% per year, enabling significant service upgrade and after sales opportunities going forward. During recent years, we have been accelerating innovation.

And recently, we launched our new CT-Linac Evo and our software Elekta ONE Planning and Elekta ONE Online. And today, we have the leading and most comprehensive portfolio in the industry with the Leksell Gamma Knife, Esprit, the Brachy studio, MR-Linac Unity, Elekta Evo and Harmony and Elekta ONE software suite.

Looking across our portfolio, we can now proudly say that we enable adaptive treatments in all our product lines, Neuro, Brachy, Linacs and software solutions. Where our Unity has an unique MR imaging and comprehensive motion management technology.

The Elekta Evo now complements our adaptive linac portfolio with its online and offline adaptive capability with AI-enhanced imaging. We will leverage our leading product portfolio to drive profitable growth going forward.

During the quarter, we can clearly see how our adaptive capabilities across all our products are generating concrete customer wins. We see several deals where customers want both Elekta Evo and Elekta Unity, which is a proof point that the most advanced cancer centers will utilize both CT-adaptive and MR-adaptive treatments to enhance cancer care.

We also celebrated an important brachy win in the U.S., with 20 systems to the U.S. oncology networks.

Elekta is the global market leader in brachy, and this is a highly profitable business for us. Brachytherapy with our imaging ring, Brachy Studio, plays an important role when treating certain cancer types where it improves outcomes and ensure better quality of life.

These capabilities are what drives the demand for brachy solution, also in very mature market. What binds our adaptive story together is, of course, the software suite, Elekta ONE.

During the quarter, we see how Elekta ONE Planning and Elekta ONE Online are part of many of our deals globally. Recently at ESTRO, the European Congress for Radiooncology, we saw a great customer interest in this latest feature, and this is reflected in our orders.

Elekta ONE drives the shift towards adaptive treatments. So with the current geopolitical landscape, we also would like to take the opportunity to briefly clarify our U.S.

exposure to tariffs. Elekta sales in the U.S.

market is roughly 22% of our total sales, and it includes approximately 1/3 devices, 1/3 software and 1/3 service. Looking at the software, it is locally developed in the U.S.

And services are, by nature, domestic and are not directly impacted by tariffs. However, for the services we provide, we have minor imports of spare part.

When it comes to devices, our Linacs are from the U.K., which is the biggest portion of the device business. Brachy derives from the Netherlands and Neuro from Sweden.

Expect some software imported from China to the U.S. We have very limited flows between the U.S.

and China. When it comes to China, the absolute majority of products sold in China are produced locally in China, which is generally local for local market.

We are working actively with many different mitigation activities, which include but not are limited to tariff clauses in our contract. We improve our sourcing efficiency.

We adjust our cost base, and we are constantly adjusting our prices. Important is also the fact when starting to sell Evo in the U.S.

market, it will be in a position as a premium product, price on a higher level than our current offering in the U.S. market.

Overall, we are closely following the development on the tariffs and are actively trying to manage the situation in the best possible way. With that, I will hand over to Tobias for the financials.

Thank you, Jonas, and good morning, everyone. We'll start with the full year view.

For the fiscal year '24-'25, net sales increased by 1% in constant exchange rates. Most markets in the APAC region grew, while China and the U.S.

declined. While solutions declined by 2%, our service business grew nicely by 6% in constant exchange rates with positive development in most business lines and regions.

The adjusted gross margin amounted to 37.8%, an increase by 30 basis points year-over-year, supported by price increases and an improved product mix. Changes in foreign exchange rates had a negative impact of 60 basis points year-over-year.

The adjusted EBIT margin amounted to 11.6%, a slight decrease year-over-year, mainly impacted by higher amortization costs following our recent product launches. Net income amounted to SEK 240 million, impacted by the impairment in the quarter.

I will come back on details later in this presentation. Earnings per share amounted to SEK 0.62 and adjusted earnings per share amounted to SEK 3.08.

Let's then look into Q4. During the fourth quarter, net sales increased by 6% in constant exchange rates.

As Jonas previously mentioned, our product launches of Elekta Evo and Elekta ONE had a positive contribution to the growth in the quarter. Solutions increased by 7% and service grew by 4% in constant exchange rates, with positive development in most business lines and regions.

During the quarter, we have seen a solid software growth of 10%, which validates the investments made within this area and it's also another proof point of our strengthened software offering with Elekta ONE. The adjusted gross margin amounted to 40.3%, an increase by 370 basis points, and this is the best Q4 gross margin since fiscal year '19-'20.

This, in line with our strategy, was a result of higher volumes and continued price increases, supported by our recent product launches and strong software growth with high margins. It also includes a negative impact of 60 basis points year-over-year from changes in foreign exchange rates.

The adjusted EBIT margin improved to 16.3%, supported by the higher gross margin, partially offset by increased amortization costs following the recent product launches. And this, as previously mentioned, is in line with our plan.

Net income impacted by the impairment amounted to SEK 380 million negative. Earnings per share amounted to SEK 1.01 negative and adjusted earnings per share amounted to SEK 1.11.

Now focusing on the cost-reduction initiatives. As part of our ongoing efforts to improve cost efficiency, we have delivered on our targets.

On April 30, 2025, annual run rate savings amounted to SEK 279 million, above our targets of SEK 250 million. In '24-'25, year-over-year savings of SEK 145 million were achieved.

Implementation costs amounted to SEK 189 million and are reporting as items affecting comparability. Now taking a moment to explain the rationale for the announced noncash impairment.

As Jonas mentioned earlier, the fourth quarter results include a noncash impairment amounting to SEK 1.64 billion, representing approximately 8% of total intangible and tangible assets on the balance sheet. Elekta regularly performs asset impairment reviews in accordance with IFRS requirements.

Following a change of directions of the product development road map during the quarter, an impairment testing of R&D assets was performed. For some development projects, the course of direction has been changed, and these projects are not being continued or are not expected to deliver according to the original business plan.

The impairments are reported as items affecting comparability and further specifications can be found in Note 5 in the report. The impairment will reduce the increase of amortization by SEK 100 million in '25-'26.

Then looking into our cash flow. During the fourth quarter, cash flow after continuous investments increased to SEK 1.248 billion, an increase by SEK 376 million year-over-year.

The increase was supported by higher EBITDA and lower investments. Net working capital as a percentage of net sales amounted to a negative 9% at the end of the year.

In the fourth quarter, we continue to make R&D investments in new product solutions and software amounting to SEK 291 million and tangible assets of SEK 28 million. The rolling 12 months cash flow from operating activities amounted to SEK 2.62 billion, an increase by SEK 165 million year-over-year.

Rolling 12 months cash conversion amounted to 80%, which is above our target of 70%. As you previously heard, the Board suggests a dividend per share of SEK 2.4, unchanged compared to last year.

This represents a payout ratio of 78% of the adjusted net income, underlying Elekta's strong financial position. With that, I hand over to you, Jonas.

Thank you, Tobias. And let's now focus on the outlook for the fiscal year '25-'26.

So despite present market conditions and current political and macroeconomic visibility, net sales are expected to grow year-over-year. We expect gross margin and EBIT margins to expand, driven by price increases, product launches and volumes, resulting in a step-wise improvement towards our midterm target to move the gross margin to pre-pandemic levels and the EBIT margin of 14% and higher.

For the first quarter '25-'26, we expect normal seasonal development with lower sales volume as well as negative FX effects. So to summarize the fourth quarter '24-'25.

The fourth quarter was characterized by solid earnings momentum, where we delivered the best Q4 gross margin in 5 years and a record high absolute EBIT. Our recent product launches contributed positively to higher volumes, price increases and improved mix.

We had a solid cash flow, supporting the proposed dividend of SEK 2.40. To conclude, the positive development is supported by our accelerated innovations in the recent years, and all our products are now fully adapted.

Today, we have the industry's most competitive and comprehensive product portfolio, which we leverage to drive profitable growth going forward.

Thank you, Jonas. Before we will open for the Q&A, I would like to remind you about our upcoming event, the Investor update, June 10.

During the event, we will provide an in-depth look at our innovative products and solutions as well as an update on Elekta's progress in our key areas. This is an excellent opportunity to gain insights into Elekta's strategic direction and future growth prospects.

The first part of the investor update will be broadcasted, while the second part of the day will be an in-person event only and with a few deep dives, including the possibility to see our latest Gamma Knife Esprit here in the basement of Forskaren, to attend online or in person. And for more information, please register through the link that you see on this page.

And you will also find the invitation that we sent out in the press release on April 16. You are all warmly welcome here to Stockholm and Forskaren on June 10.

Lastly, please see our updated financial calendars. And with that said, operator, we are now open for the Q&A session.

So please, operator, you can open up.

I have many questions, but I will probably limit myself to 3, if that's okay.

That's okay.

Yes. And I'll take them one by one.

So first one, in terms of the 2025-'26 expected of sales growth, it leaves at least me with a bit of question from my end. So if you could share a few words on how you think about it in terms of magnitude.

I'm particularly interested perhaps in your overall thoughts on China, given where you are in book-to-bill. I think I heard you correctly that it was positive for the full year 2024-'25.

And then also on the U.S., of course, where you still have customers waiting for approval of the Elekta Evo linac. So yes, that's the first question.

So maybe Tobias, if you would start with that.

Yes, Mattias, and thanks for the question. As you mentioned here, we do see a revenue growth here in the fiscal year that we're in.

And obviously, here, we ended up strongly here in Q4, which is something further to build on. Talking about the China here, as you have seen, we have seen during the last quarters here a recovery here on the orders and start to be translating into revenue as well.

So you see a clear recovery here in the China market. Then in terms of the U.S., rightfully, as you mentioned, we have seen a weaker development on orders and revenues, which we also then expect to continue here at the beginning of the fiscal year that we are in.

So no commentary on magnitude of the sales growth?

We have not provided a magnitude on the revenue growth. But again, we will build on the momentum seen here in the fourth quarter.

Okay. Then I have 2 questions further.

So on FX, so if spot rates remain at this level, what rough expectations do you have when it comes to the margin impact on gross margin and EBIT margin for the full year 2025-'26? Is that possible to...

Yes, it's possible to reason about. And if you simplify it a little bit, there are 2 key currencies here.

So Elekta is actually long when it comes to U.S. dollar, more revenues than cost and the other way around from the British pound.

With the current exchange rates that we see now, the headwind here that we experienced here in the fourth quarter will be larger here in next fiscal year. So that is what you can expect.

Okay. Then if you could help us understand a bit better the order development by region, if you could declare some magnitudes.

I think you did not mention EMEA on the order side. Also sort of if I heard you correctly that the book-to-bill was above one in China for full year 2024-'25.

That's my last one.

China, we have passed one. So that's correct.

And when you look at the order development, I think we are at a very interesting spot here now at the starting phase here. We have talked about Elekta Evo and the traction here in the European region, the wait and see in the U.S., but we're also in a phase to have a global rollout, which is very exciting for us.

And obviously, here, when you look at the order in the quarter, the key, what we see here in the decline is actually the Americas, which really drags the order development down. Then what we also noticed and what Jonas mentioned here in the call, which is important for us is that we continue here in the quarter here with a high order growth of software.

So first one, a question on the decision to move away from the internal cloud solution. Was this a result of external pressure from the FDA to ensure cybersecurity demands?

Or has there been an internal pivot in strategy following managerial changes here? And should we expect any additional cost to come from this sort of R&D pivot here that you mentioned?

I can take the first one, and thank you for the question and so on. This is driven by, I wouldn't say the Evo launch and so on, but this is a process that started a bit earlier and also with the focus on cyber and so on and based on customer demand as well, so meaning that we had to kind of go from an internal solution to an external solution.

And then I will hand over the other part of the question to Tobias.

Yes. Sorry, Rich, could you repeat the second part of your question?

Yes. I was just curious to understand if there's any more additional investments or costs that will come from this shift to the external solution?

No, not that we see now. And as you know, we apply, I mean, IFRS standards here.

And when it's actually proper in line with the accounting regulations, we should do and we have done an impairment here, impairment testing and then followed by impairment, so -- but nothing more as of now. We have done this objectively and worked this through thoroughly.

Do you have a second question?

Yes. Yes, please.

So in conjunction with Q3, I believe you mentioned that quantifying the U.S. sales was down some 10% year-over-year.

So how much was sales and orders down in the U.S. in Q4?

Just trying to get a sense of the sort of air pocket created from the lack of Evo clearance in that market to put the pieces together.

Yes. In terms of the U.S.

market, we have seen a continued -- we have seen a clear impact here both on -- especially in orders, but also on the revenues. And it's -- we see the wait-and-see is here impacting the region and the country clearly, yes.

Was it a larger decline than Q3 then in the quarter here?

I think we saw already in Q3 in terms of the revenue impact. And I think it's -- we also could recognize a revenue impact here in Q4 as well.

And I think we should expect that also here in -- at the beginning of this fiscal year.

Then also, I think it's important to underline that, of course, customers are waiting for a new product, but we have also a quite broad portfolio in the U.S. that includes Brachy, MR-Linac, Gamma Knife and of course, software, which may not provide the same order volume, but a very good margin.

Can you hear me?

Yes.

Good. First, just coming back to this question about the U.S.

impact. Is it possible to give approximately figure for what order growth you would have if you strip out U.S.?

Right. No, yes, there was a significant impact.

We haven't quantified it in terms of the exact numbers, but it was a significant impact on the orders here in the U.S. in the quarter, yes.

Would you have been growing group orders, if it wasn't for the negative impact in the U.S.?

Yes.

Okay. Then I would like to turn to margins.

And I saw this slide where you had the guidance for the fiscal year, you only mentioned sales growth, but do you also mean that you expect margin to improve in the fiscal year of 2025, 2026?

Yes. We haven't explicitly given a margin guidance here for the fiscal year that we're in.

But I think that we're starting now here with a strong Q4 in terms of a quite significant margin expansion. As you know, we are surrounded by geopolitical uncertainties around us.

But what we could see in Q4 and also actually a bit under the hood here in Q3 that the strategy that we are on is really to improve our gross margin. We have repeatedly mentioned that.

And what you can see here in the Q4 is that both general price increases, the launches here of Elekta Evo and also the acceleration here of growth here of the high-margin business is predominantly software is giving the results here of a clear improvement on the gross margin and also leverage all through down to the operating margin. And obviously, for us, at the start of the launch phase, this is to build on and be worked on.

For the Q1, as you know, it's a seasonal weak quarters with lower sales volumes. And we are also here exposed with currency headwinds coming on that will be larger here with the current exchange rates.

So for us, it's now really to build on this and be firm on the strategy and the path that we're on and fully determined to, again, which we have repeated to now taking step-by-step towards our midterm guidance, and that is to bring back the operating margin to 14% or higher, and it is to bring back the gross margin here to pre-pandemic levels. And I think for us, it's really to build on the Q4 performance here.

And also just to talk a bit about the margins as well, if you look at the margin development and so on, it's very strong despite that we don't have Evo in the U.S. And as I see it, a strong foundation and then an upside with U.S.

clearance.

Okay. But just -- but the actual guidance, you're not guiding for a higher margin in the new fiscal year.

That's not the actual guidance. But when I listen to what you say, it seems that you think you will be able to improve the margin.

I mean our ambition is super clear what we want, right? And then we have a midterm here, and that is to bring back -- I mean, the operating margin to deliver an operating margin north of 14% and a gross margin to pre-pandemic levels, and that we are fully determined to do.

And I think that the Q4 results was a good step in that direction.

And given the strength you had in the Q4, higher software sales, Evo launch, et cetera, do you think that will be able to offset the negative FX impact on the margin despite being larger than the 60 basis points you had in Q4?

I mean in our work, I think we are -- I mean, we can blame the uncertainties around us and currency exposures and inflation, et cetera. But by the end of the day, we're here for delivering shareholder value, and that we are fully determined to do and also to work through the headwinds that we have around us.

So to your point that, yes, I mean, here, we -- given the current currency exposure and if there would be changes in the currency exposures, I mean, our focus is clearly to work that through via essentially price, but also portfolio mix and cost, et cetera, and that we are fully determined to do.

I will keep it to 3, please, if I can. One is sort of big picture.

Just if I look at your order growth over the last couple of years, it's been sort of flat to declining. I mean I think even in fiscal '25, the orders are plus 2.

I think the prior 2 years, you had orders declining. Just kind of curious what kind of baseline you think that gives you for sales momentum as we move into fiscal '26 and beyond?

Because if I look at consensus, the expectation that folks have is that sales are growing kind of 5% to 6%. But actually, with the orders where they are, there does seem to be quite a big gap.

So I'm just curious if you can comment on how you think about that order momentum translating into sales growth. So that's my first big picture question.

And then maybe I can do my technical ones after that, but let's get this one out of the way.

Yes. So first of all, and we have actually, as you know, changed the reporting here from order growth to book-to-bill.

And I think there is a key reason for us, it's absolutely key to have funding of future sales via a healthy book-to-bill. And here, we are ending here for the full year above 1, where we have above 1.1 in the fourth quarter.

We know that we had, as Jonas mentioned here, tough comparables in China where we you don't need that many Unity volumes for actually having a clear impact on the orders as such. We have seen here a recovery of the order growth in China.

We are at the beginning of a launch phase. It has started very well and a global launch will follow, which is highly of interest.

And not the least here for the U.S. market where the new products obviously will strengthen our edge towards customers and later on the patients, which we are really excited about.

So I think with that, we see -- we do have a strong backlog, and we have a positive book-to-bill, which we will build on.

And also, Veronika, I would like to add the orders that we see coming in with Evo, with Brachy, with the Neuro products and so on, they have significantly different margin. And there is a high anticipation for our adaptive portfolio with Evo growing quite or very strong, I would say, in Europe.

Got it. Okay.

And then maybe just -- I want to circle back to the margin guidance, And I guess I appreciate no guidance for fiscal '26 in terms of margins. But I was just kind of curious to get your thoughts so we have some headwinds coming in from tariffs, not meaningful, but there are some headwinds coming from FX, you had a very favorable product mix in fiscal '25 in terms of software and services doing super well.

I mean at this point in time, if you look at sort of the possible range of outcomes, is your best guess that margins are stable, up or down year-on-year given those moving parts, I guess?

I can just repeat the message that I recently said about this. I mean, we're coming out strongly here in Q4, and that is a step in the right direction here towards our midterm targets and that we are fully determined to deliver upon.

And I'm happy to see that the improvement that we see here in the Q4 is actually in line with the strategy and what we want to do. I think what you saw in terms of the tariffs is worthwhile to see that, I mean, our U.S.

operations here, so you can divide it into 3 parts, right? You have -- we have a software business, which is local in the U.S., and then we have a service business, which is predominantly local in the U.S.

and then it's the hardware business. And for this, I mean, we're not standing still, and we track it closely.

And obviously, we will work here with both prices and optimizations of supply chain, et cetera. So that we are determined to do.

Got it. And then just very quick final one, I promise.

Just your guide for R&D capitalization and amortizations for fiscal '26, if you could share that with us.

Yes, absolutely. So I think what you will see here in terms of the -- starting with the amortization is clearly that we -- the impairment as such will lower amortizations in this fiscal year that we're in by SEK 100 million.

But there still will -- in line with plan, also, it's important to say here, will be a net increase of amortization. So you will see that amortization will be north of SEK 800 million in current fiscal year.

So there will be a continuous increase of amortizations. In terms of the gross R&D as a percent of sales will go down.

And then in terms of the capitalization rates gradually also move downwards. So all in all, that will lead to a sort of -- with everything else equal, a better cash conversion, and you will also see that the gross and net R&D will continue to converge here in the fiscal year that we're in.

So that's how you can see it.

So my first question is on the FDA situation on Evo. I think you said, and correct me if I'm wrong, that you have resubmitted or will resubmit your FDA approval.

So -- but at the same time, you talk about -- you don't expect a major delay, but can you share with us how that's going to work out? Because I mean, I guess FDA will need a full new review time for Evo.

And when do you expect then Evo to be approved in the U.S. roughly?

So yes, you're right. And we have done this in consultation with the FDA, predominantly driven by cybersecurity and cybersecurity requirements.

So we have a new strategy with the simplification, I would say, of the application. We believe that to kind of stick to the original submission would have delayed it further.

So we had to redo that and do it in a better fashion. Then to provide any time lines, it's a bit out of our hands, but we hope with this kind of consultation with the FDA that we look at a faster time line than to stick to the original submission.

Then of course, once we get FDA clearance, then you will know a lot about it.

But you still have not resubmitted the new FDA approval, is that correct?

That's correct. We are in the process of resubmitting in as we speak.

So we will do that in a very short time frame.

Okay. Excellent.

And then just a clarification on -- you talked about pre-pandemic gross margin level just to make sure we're all on the same page here, are you referring to the 42% level you had in fiscal '19-'20 or which level are we talking about?

It's clearly north of 40%. So that is what we are talking about and to establish ourselves on that level.

And then my final question was I saw in the news in England, the other day about some large tender of GBP 70 million and your products were highlighted in there. Is that something you want to share with us about that tender?

Yes, I don't think we can share any news of that tender for the time being. But of course, it's yes, one of the things that we're working on.

I think that is also in line with that the U.K. government have found more funding for cancer care.

I think that was presented a quarter ago actually in around that area. So that's basically in line with that still.

I'm left with two. The first one is a very broad question about the market conditions.

Obviously, we're hearing a lot about potential budget constraints at the hospital level, both in the U.S., but also now probably coming to Europe. So just a very general overview of what you are hearing from your customers and whether this is leading to a more, let's say, discussions and delays maybe in taking decisions.

So anything would be helpful on this side. And the second one, coming back to the software to the R&D impairment, just making sure I understand that correctly.

What is exactly the software related to? I mean, are we talking about planning, monitoring, both?

So just to better understand what is at stake here? And to what extent cybersecurity is an issue in the discussion?

So if we start with the market and so on, and of course, you're right, it's an uncertain market today. But what we see from our customers, we don't see any impact so far.

If you look at China, for example, it's a quite large pent-up demand as things haven't been moving that much in China. We see very good demand in Europe and so on.

So, so far, so good, I would say. But of course, we're monitoring that very, very closely.

And we haven't heard anything about hospital budget constraints or anything like that so far. So yes, today, it looks quite decent.

But as we said, it's a constantly moving target these days.

Maybe Tobias, on the software question.

Yes, it's really to move from internal developed cloud to an external supplies platform. And I would more call it a sort of a broad platform for this where we actually see that we will benefit from this going forward.

So that's how I would frame it.

Okay. And if I may, just one follow-up on this.

You obviously mentioned that you do not expect any increased cost or impairment, whatever, but could that lead to more OpEx on your side because you're now using an external provider rather than an internal provider. So is it a drag on margin going forward?

Or is that irrelevant?

I think what you will see here, I mean, over time, is that capitalization moves into phases where the ratio here between capitalization and operating expenses are actually changing a bit towards more operating expenses than capitalizations. So then I mean, we stick to the same rules, the same methodology here that we are on according to IFRS.

And -- but in terms of the -- how the projects will play out, you will see a gradual decline of capitalization ratio for the years to come.

Just a couple of questions. One was just around China.

I know you mentioned sort of an improving sort of tendering environment there. Just be curious to get a little bit more color in terms of what's going on in the ground because obviously, I think your order rate was still negative, I think you said in China, right?

So just if you could -- is it sort of stimulus measures that are coming through? Is it just sort of time and duration that's sort of opening up people sort of purchasing decisions?

Just kind of what's different now to the previous quarter? That's my first question.

And then sort of building on that really, it was just a question around the general sort of CapEx environment more broadly across your key regions. I know you called out the U.S.

as a bit of a weak spot ahead of the new product launch. But is there anything else going on, on the ground just in terms of spending across the rest of the portfolio that you're seeing across those other regions?

Jonas?

I can start with the very first question about China and so on. So you talked a bit about stimulus software and so on.

It's hard to say, we haven't seen that much on it and so on, but we see increased customer activities. And we also see that it takes a bit longer time in China during the bidding process and probably a bit colored by the anticorruption campaign being more careful, being more prudent in their bidding and so on.

But we are very positive on China. It's really pent-up demand, and it's sizable.

And of course, there is a need of investment in China. So we are quite positive on it.

Then you had a second question as well about other markets and so on, if I understood it correctly. Could you repeat that again?

Yes. I know you sort of called out some softness in the U.S.

ahead of your sort of product launch. But just sort of beyond that one specific product, what are you seeing just in terms of the overall kind of spending appetite in the U.S.

and Europe and China as well?

Going back to the previous answer and so on, we don't see any constraints on budgets and so on. So, so far, so good, and that also applies for the U.S., I would say.

We don't see any major impact on the kind of a bit financial turmoil and so on. And it's going quite well and it's a quite large demand from multiple markets, I would say.

And also maybe adding that on China there, Robert, I mean, it's also worthwhile to mention again that there is still a large untapped demand here, which has not, I mean, decreased during the last years. So I think there is an underlying strong incentives, both from a sort of say, demand point of view, but also supported from a government here to support the demand in China.

That's great. Maybe if I can just squeeze one last one in.

Just around your comment on book-to-bills. Can you just give us a bit more color in terms of lead times between orders and sales across some of the key products in your business?

And what's the sort of average aggregate? Is it the same now as it was a couple of years ago?

Just interested how much mix is influence the sort of lead time between orders and sales across your portfolio?

Yes. Broadly speaking, you can say a standard Linac, you have about a year, 12 months between orders and revenues.

For the Gamma Knife, it's a bit longer, it's 12 to 18 months maybe and then for Unity, maybe 18 to 24 months. Then for our Brachy products, it's faster, so then it's maybe 6 months or so.

So that is then also adding to that, which is -- I mean for some of the larger deals, you do sort of say frame work here where you actually then you set up order agreement and contract and then you actually stall according to a very specific time line. So that's how you can think upon orders.

Thanks, Robert, and thank you, Jonas, and thank you, Tobias for today's call. And I just want to remind you again about the event coming up on June 10.

There's still time to sign up, and it will be an interesting day with both overall strategy topics as well as deep dives, the possibility to see products in lives and get more knowledge about our MR strategy as well. So welcome then on June 10 and have a great day.

Thank you.

Thank you.