Elekta AB (publ)

Hi, and good morning, everyone. My name is Peter Nyquist.

I'm the Head of Investor Relations here at Elekta. With me here in Stockholm, I have our CEO, Jonas Bolander; and our CFO, Tobias Hagglov, who will be presenting the results from the first quarter of this fiscal year '25, '26.

So we will start with the normal agenda with Jonas presenting some highlights from the development during the first quarter as well as some achievements we have reached during the quarter. Then Tobias will bring us down to more details on the financials.

And then we will have an outlook from Jonas by the end of the presentation. And as always, after presentation, we will end with a Q&A.

But before starting, I want to remind you that some of the information discussed on this call contains forward-looking statements. This can include projects -- projections regarding revenue, operating result, cash flow as well as products and product development.

These statements involves risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. With that said, I would like to hand over the word to you, Jonas.

So please, Jonas.

Thank you very much, Peter, and thank you all for attending this call. So we start with the key takeaways for the first quarter of fiscal year '25, '26.

The book-to-bill ratio came in at 1.05 in the first quarter. We saw a 1% order decline in constant exchange rate compared to last year.

However, rolling 12-month book-to-bill remains at 1.09, reflecting a healthy business environment. Net sales increased by 3% in constant currencies, mainly driven by continued strong momentum in Europe where our latest linear accelerator, Elekta Evo, and our new software suite, Elekta ONE, are gaining traction, as online adaptive treatment capabilities continue to set new benchmarks in the market.

The adjusted gross margin declined to 37% compared to 37.8% last year, mainly driven by changes in FX and tariff costs with a total negative impact of 190 basis points. The negative impact was partly offset by price improvement.

The adjusted EBIT margin amounted to 6.5% compared to 7.4% last year. The lower adjusted EBIT margin derives mainly from the gross margin and increased expenses from our net R&D.

However, the negative effect was partly offset by lower selling and administrative expenses, reflecting the positive effect from cost saving initiatives. Moving to the cash flow for the first quarter.

The operating cash flow after continuous investments amounted to negative minus SEK 361 million, an improvement by SEK 529 million year-over-year, mainly driven by improved working capital management. Moving to the next slides, where I will give you more details regarding sales and market development during the quarter.

In constant exchange rate, group sales increased by 3% year-over-year. Americas sales declined by 4% in constant exchange rate compared to the last year when the region grew by 16%.

The stable development in Latin America was fully offset by lower sales in North America, where U.S. volume declined mainly as a result of customers awaiting the Elekta Evo clearance.

APAC sales declined by 4% in constant exchange rates, mainly due to lower volumes in China and India. Chinese sales were negatively impacted by last year's weak order intake.

Sales in EMEA increased by 15% in constant exchange rate compared to the last year, driven by strong performance in Europe, supported by new product launches. We saw a strong growth in countries like France, U.K.

and Poland. As you can see in this slide, EMEA is now the biggest region with 40% of the group -- group's total sales.

During the quarter, we can clearly see how our adaptive capabilities across all our products are generating concrete customer wins. For -- if you go to Elekta Unity, we have noted that the ERECT trial, which demonstrates Elekta Unity's capability to treat prostate cancer while preserving the erectile function, has gained significant attention.

University of Texas Southwestern is the second bullet where we also celebrated an important and comprehensive deal, including some of our most advanced solutions to the University of Texas Southwestern. UT Southwest is at the very forefront of radiotherapy and a longstanding partner to Elekta, and we are very proud that our solutions will be taking cancer care to the next level in terms of ultra- hypofractionation.

And the last slide then, during the quarter -- or the last bullet. During the quarter, the Leksell Gamma Knife received FDA clearance for treating certain types of epilepsy.

This is an important step towards expanding the scope of stereotactic radiosurgery. Elekta is the global market leader in neuro, and this is a highly profitable business segment for us.

Neuro with our Leksell Gamma Knife plays an important role when treating certain cancer types where it improves outcomes and ensures a better quality of life. During recent years, we have, as you know, been accelerating innovation.

I'm therefore very glad for the positive customer response for our recently launched solutions, Elekta Evo, and our software, Elekta ONE Planning and the Elekta ONE Online. During the quarter, we have seen several deals, including both Elekta Evo and Elekta ONE, showcasing the great value Elekta offers to its customers.

We will continue this journey and leverage our leading product portfolio to drive profitable growth going forward. With the current geopolitical landscape, we want to take the opportunity once again to remind you about exposure to U.S.

tariff. Elekta's sales in the U.S.

market, roughly 21% of total sales include approximately 1/3 devices, 1/3 software and 1/3 of service. We communicated our exposure already in the fourth quarter and that we expected an impact from tariffs in Q1.

After we reported our first quarter, we now have a better view of the magnitude of the negative impact from tariffs. In the first quarter, additional tariffs compared to last year amounted to SEK 33 million, and tariffs had a negative impact on the adjusted gross margin of 90 basis points.

For Q2, we expect continuous negative impact on the gross margin. We are trying and working hard to offset these extra costs in various ways.

We have implemented a specific tariff clause in our contract. We work on prices, improving our sourcing efficiency and are adjusting our cost base.

For prices, we are continuously adjusting our prices as we have done for quite some time. Also when Evo is launched in the U.S.

market, their prices will be adjusted in accordance to the product being in the premium segment. Overall, we are closely following the market development and are actively trying to manage the situation in the best possible way.

With that, I will now hand over to Tobias for the financials.

Thank you, Jonas, and good morning, everyone. Let's look into the first quarter.

During the first quarter, net sales increased by 3% in constant exchange rates. Solution sales increased by 1%, and Service grew by 4%.

As Jonas previously mentioned, our product launches in Elekta Evo and Elekta ONE had a continuous positive contribution to the growth in the quarter. The adjusted gross margin amounted to 37% with a negative impact from foreign exchange rates and increased tariffs costs.

Price improvements continued in the quarter. The adjusted EBIT margin amounted to 6.5%, corresponding to a year-over-year decrease of 90 basis points, driven by the lower gross margin and higher net R&D costs, while the SG&A costs were down compared to last year.

Net income amounted to SEK 106 million, and adjusted earnings per share amounted to SEK 0.31. Then let's look into the different building blocks for the year-over-year adjusted EBIT development.

Overall, as I have mentioned, the adjusted EBIT margin declined to 6.5% in Q1. Our gross margin declined to 37% with a negative impact of 190 basis points from FX and additional tariffs cost.

We have continued to improve our price levels with support from general price increases as well as from newly launched products. In the first quarter, expenses declined by 4% and admin expenses by 3% in constant exchange rates.

The decline in SG&A cost is mainly related to the cost reduction initiative totaling SEK 280 million on an annual basis implemented during last year. Net R&D costs increased by 17% in constant exchange rates.

This is due to higher amortization and lower capitalizations while our gross R&D declined year-over-year. Then I will explain the FX movements in the quarter to facilitate understanding how it impacts Elekta's P&L.

Our reporting currency is the Swedish krona, and what we have seen recently is the strengthening of the Swedish krona versus our main revenue currencies, U.S. dollar and euro.

This leads to lower revenues and earnings in SEK, everything else equal. Secondly, we have more revenue than cost in U.S.

dollar. The depreciation of the U.S.

dollar versus our main cost currency, euro and pounds, has led to an unfavorable currency transactional impact in the quarter. We will continue to work with price improvements and productivity enhancements to mitigate FX headwinds.

Let's then have a look at the cash flow development. In the seasonal weak first quarter, cash flow after continuous investments improved by more than SEK 500 million year-over-year to negative SEK 361 million.

The improvement was mainly driven by the improvement in working capital, in particular operating receivables. Net working capital as a percentage of net sales amounted to negative 7%.

Lower investments contributed positively as well. Rolling 12 months cash conversion amounted to 92%, which is well above our target of 70%.

We also want to share the development of some key financial metrics, net sales, gross margin, EBIT margin and operating cash flow, which are all key metrics for Elekta to deliver profitable growth. Although net sales on a rolling 12-month basis is relatively flat year- over-year, we see a positive trend for the gross margin and EBIT margin, in line with our ambitions to move the gross margin to pre- pandemic levels and an EBIT margin of 14% and higher.

Additionally, we have seen a positive development for the operating cash flow, and we have delivered significant improvement year-over-year. With that, I hand over to you, Jonas.

Thank you very much, Tobias. Now focusing on our outlook for Q2 and the fiscal year '25, '26.

We expect net sales for Q2 to be negatively impacted by a continued weak U.S. development as well as a negative effect from last year's low order intake in China.

However, we expect sales in China to start to recover during the second half of '25, '26. Furthermore, we expect continuous negative impact on earnings from FX at current exchange rate and from tariffs in Q2.

We reiterate our full year '25, '26 outlook, where we expect net sales in constant currency to grow year-over-year. So to summarize the first quarter '25, '26.

We continue to deliver a solid performance in Europe, supported by product launches. We had a lower gross margin compared to last year, driven by changes in FX and tariffs with an impact of 190 basis points in total.

However, it was partly offset by price improvements through price increases and new product launches. Cash flow after continuous -- improved by SEK 529 million year-over-year, driven by improved working capital.

Thank you.

Thank you, Jonas, and thank you, Tobias, for that presentation. Before handing over to the Q&A, here, you can see the updated financial calendar.

So next week, we have the AGM here in Stockholm, and then we will report our Q2 numbers on November 26. So with that said, I would like to connect to the operator.

So we're now opening for Q&A. So please, operator.

A couple from me, please. Firstly, if you could elaborate on the Q2 software dynamics and how we should think about growth and margin expansion, if at all, in Q2 given tariffs, FX headwinds, but also U.S.

and China softness persisting. And then secondly, if you could provide any update on when we should expect the Evo approval in the U.S., when you're expecting that, given that volumes continue to be impacted.

And related to this, whether you think that U.S. weakness could be driven by anything else.

Maybe a weaker backdrop or share losses.

Maybe, Tobias, you can start with the financial question then, Jonas, on the FDA approval.

Yes, absolutely. Hassan, I will start covering your first question.

Yes, so in our interim report here and what we have stated is that we do see here a pressure in the second quarter on our revenues here from China and U.S. What we also see is that we see a recovery of the growth in China in the second half of this fiscal year.

When you talk about the pressure here from the tariffs, we communicated now as we know the impact. And I think that you can assume the same level of margin impact from tariffs throughout the year.

Then obviously, with saying that, it's also important to say that we are not standing still. So of course, that we, as a company, just as Jonas mentioned here, will in different ways manage this.

It will be via prices. It will be via optimizing our supply chain and also productivity enhancements.

So those measures are along the way. But as you know, it's also something that we are working through.

So that's how I will mention. And I also state that the Q4 results that we presented here, which was an important milestone of driving profitable growth and enhancing the gross margin over time, that lies firm, and that is a work that we will continue to do.

Thank you, Tobias. And Jonas, on the FDA approval.

Thank you, by the way, for the question. If we then go to Evo approvals, we talked a bit about that before.

We changed our strategy with respect to the Evo approvals and so on, where we have a more efficient strategy today. Evo approvals have been resubmitted.

We're working with the FDA. We hope that we get the products cleared sooner rather than later, but we don't know which timeline we can promise that on.

So sorry, but we honestly can't give you an answer on that. And then you were asking also about if we see anything else in the U.S.

market, maybe a bit of temporary wait and see in the U.S. relating to tariffs and tariff impact and so on.

So we start to see a bit of that, that it gets slightly more complicated due to the tariff exposure there.

So first question, EMEA is doing really great, really carrying the group now in terms of margins. I think it was up some 5 percentage points this quarter and has been doing really well for the past 3.

So I was just going to ask, how much would you see that has been driven by mix effects from -- if you can sort of split it up between software and Evo, how much of a driver each, say, software and hardware has been?

I think looking at the development, what we see in EMEA, it's clearly state that, I mean, we have been in an investment period here and investing in our R&D portfolio and the innovation pipeline here. And what we see in EMEA is clearly the result of that.

So clearly, the leading indicator here and the driver of the improvement in EMEA is led by our new products, Elekta Evo and Elekta ONE Online and the software in general. And that is key for us to both, of course, drive revenues, but equally important to drive the profitable growth and drive the gross margin expansion.

So that has absolutely been the most important factor in the EMEA region. It's backed up by the new -- newly launched products.

Okay. But can it be said anything if it's a majority of software or majority hardware that's driving margins?

Yes, I think it's both. When it comes to the -- our Elekta Evo, it's clearly that it is an enhanced customer and patient's value, which clearly contributes both to enhance customer value.

But for also the shareholders, it means a better margin. The software, in general, we have seen here throughout the last fiscal year that we're running with a strong growth, and the growth here continued here in the first quarter.

So we don't necessarily strip out the exact impact of each factor here. But it's both, I would say, and a key for us to drive the profitable growth.

Okay. And then you're talking about Q2 being weak on the back of the 2 accretive regions within Elekta, U.S.

and China. First, are you able to commit to say that you will see organic growth in Q2?

Or should that be negative? And secondly, if we are to assume that both of these high-margin regions will see a decline in Q2, how much of a gross margin impact could we see from geographic mix?

So as you know, we don't explicitly guide on specific quarters here in terms of exact margin levels or growth levels. But what we see here in the second quarter is clearly that it will be impacted by the China operations here as well as in the U.S.

So I think for that, you can assume that we do not expect, so to say, organic growth in the second quarter. But more than that, I don't provide us an outlook.

But as I said, I think it's also key for us to structurally -- we see the improvement here in EMEA backed up on the product launches. Therefore, yes, as Jonas mentioned, it's key for us to run through the FDA approval in the U.S.

And in China, we see a growth here for the revenues in the second half. So that's how I would frame it.

In terms of the gross margin, the midterm outlook is the same. And we have had an important milestone here in the last quarter.

Now we see some additional headwinds here in the first quarter coming here from tariffs and currencies, but the path here lies firm. And for us, it's taking on that and build on the strong ending of last year and continue to drive that.

And we have also great tools from the new products, which we will continue on a global level to roll out this and combine them with the other measures here in terms of price increases and drive the commercial execution as well as with productivity enhancements.

Can I do a quick last one? Yes, just on the tariff losses and pricing offsets that you talked about.

I know during the high inflation period, you talked about not being able to implement much on already -- on orders. I was just going to ask if you have any freedom now to implement price increases on the orders that you've taken or only the new ones that you're going to take leading to installation in, say, a year to sort of model the phasing of price increases.

Erik, it's a bit of a mixed bag, I would say, if you look at the order backlog that we already have. We deal with this order on a case- by-case basis.

We are successful in some instances. And in some instances, the customers already had set budget and are severe difficulties to pay additional amounts for it and so on.

So it's dealt with negotiation on a case-by-case basis.

First one, and sorry if I recall incorrectly, but I think you said in the Q4 call that China had a big book-to-bill of above 1 for 2024, '25 fiscal year. So how are you talking about this figure now sort of book-to-bill last month?

And also sort of a clarification as to why China is so weak in the start of the year. What magnitude of a sales drop you saw in Q1?

And maybe a bit more specific on what you see in Q2? So that's the first one.

And then I have one more.

Okay. We'll start with that one.

Should I start, and then you can jump in, Tobias? Thank you very much for the question.

So as you know, we have had the anticorruption campaign in China and so on. And then that meant that we did a lot of installations from our order book during that period in time, while orders were not where they were before the pandemic and so on.

So we basically have a quite small order book in China today that we need to recover, and we see a pickup in the order book. However, if you compare it to the numbers that we had pre-pandemic and so on, the order book is not on that level.

So we need to, of course, get additional orders. But we see now a clear pickup, and that's also why we look a bit more positive on the second half of this year.

And if you look at the cancer programs in China and the need in China is still quite large. So we are positive on that.

But it takes time to transform these orders into revenue as well. And so we need more orders in order to get the sales there.

Yes. I think you're pretty well, Jonas, in just translating to some financial metrics.

So to your question that the book-to-bill ratio continues to be well above 1, which is then actually creating the platform there. But we do expect the revenues to be down here in the second quarter.

And we are, as you say here, building up the backlog. And we have a strong presence in China by being, by far, the market leader.

So that is essential for us and something that we will continue.

Thanks. And Mattias, you had a second question, right?

Yes. I had, first, a follow-up.

Would you disclose what orders and sales were year-over-year in China for Q1?

No, we don't explicit show that. But we said that we see that the -- yes, I can just repeat what I just said here that the -- we see the pressure in China when it comes to revenues, but also pick up here in the second half.

Okay. Then my next second question.

On EMEA, I agree with the previous person speaking that it's really carrying the group. So organic sales growth of 16% Q4, 15% Q1 year-over-year.

Should we extrapolate those kind of performance as some coming quarters, maybe not Q4, the comp is tougher, but should we extrapolate that kind of performance? Or are you seeing anything else?

I think we have the momentum right now in European region. And as of now, we see that to continue.

It is the launch phase. We already start with that, and everything will not go in a straight line here.

But it's -- the momentum is there and we -- the new products are well accepted. So that is absolutely something that we are determined to continue to expand here in Europe as of now, but then it's also when you expand the time horizon on a global level and utilize the great product offering here.

And it's also market of the market where we're launching the product on.

Yes, yes.

I was wondering if you could give us some quantitative comments or color on order development by region. That would be very helpful.

And then I have a follow-up question on the tariff impact or maybe a clarification. I think you said something like we should expect a similar level going forward.

I assume you mean the 90 basis point impact. But maybe we can start with the first one, if you could give us some more color on the order activity by region, that would be very helpful.

I'm sure that it would be helpful, but unfortunately, we don't disclose that. So I'm sorry for that.

Okay. I understand.

And Tobias, do you want to take the second one?

Yes, I cannot say. But to help you out a little bit, I think what we see is, I mean, also related to the products.

We see a very strong order development here in the EMEA region that we see, and that is backed up from the new launch product. So that is very clear.

In terms of the tariffs here, when I was talking about that, it's approximately this level of margin impact. When you talk about the gross impact from the tariffs, then the coming quarters are a little bit bigger than Q1 as a quarter.

So in absolute terms, you will have slightly more impact in absolute terms from the tariffs. But margin impact, it's about these levels that we see in the first quarter.

And would you say that this sales mix in Americas is a good representation of -- for Q1 of what you show on that slide with 21% of the sales coming from the U.S., and there's like 1/3 devices?

Yes. I mean, that is what we presented.

And when you look at the Americas as total share of -- or as a share of the total Elekta sales, obviously, we want to grow. We want to grow in the U.S.

and Americas, and the key here for us is to work through the FDA approval and work on that. And it's, I mean, it is the -- U.S.

is the single largest market in the world. And of course, we are also targeting here to utilize the strength of Elekta to further expand in the U.S.

But I think that, I mean, looking again here and built on the strength that we have and the momentum that we have in EMEA, which we -- I'm determined also to utilize on a global level. But it's as Jonas said, it will be a country-by-country base here and as we roll it out.

Isn't there a risk that the tariffs or the impact on -- from tariffs will be higher going forward once the Evo is approved, and I assume there will be more Solution sales there?

Yes. You are right in that sense that if we have the stronger the growth in U.S.

is and everything else equal, the more impact it will come from the tariffs as such. Then I would also say that, I mean, here, coming in with these new products will also mean different price levels.

So the net-net of that will clearly be very positive.

Now it's DNB Carnegie. I have a few questions.

First on orders, I understand you do want to give details of the order growth, but is it possible to say anything about this? The backlog you have in China, how much smaller it is than the previous levels and when you think you could be back at, yes, a more normal level?

And if I start, and then Tobias can continue. Thank you, by the way, Kristofer.

And it's not nonexisting, I would say. We still have a backlog in China and so on.

But it's quite much smaller than the backlog we have pre-pandemic as we kind of delivered okay on revenue during the anticorruption campaign and so on. So we clearly need to fill it up.

But as we have a book-to-bill ratio well above 1, we're quite confident that we are filling it up and that will be turned into revenue for the second half here.

And when it comes to orders in China, without mentioning any detailed figures, but are you seeing a sequential gradual improvement, so that Q4 was better than third quarter, now Q1 sequentially were better than Q4, if you adjust for seasonality, of course?

Yes. We don't explicitly talk about the orders per se, but on a structural terms and what we have seen, I mean, we had a quite severe drop here from the anticorruption campaign in terms of the order development.

And then what we have seen now is that we are on a recovery path. And just as Jonas is saying that the book-to-bill well above 1, and that is a trajectory that we estimate to continue here.

And with that in mind, even though you are cautious on sales and earnings maybe in the second quarter, should we expect order growth to be back in positive territory now from the second quarter and then for the rest of the year?

I mean, we -- again, we don't explicitly talk about the orders per se on the regions. But to your point, yes, we do expect that we can continue on the path here to have a book-to-bill above 1, which actually then...

I mean, for the group.

Yes, again, we -- when looking at the order development here for the group, we will continue to do so. We have, though, a fairly strong order pipeline here last year, but we aim to continue here to have a decent book-to-bill than in terms of the exact order development.

What we can state here for the full year, we aim here an order growth.

Could I ask another one?

Yes. A short one because we have a few more people actually asking questions.

So a short one, Kristofer, please.

Okay. Yes, yes.

So you mentioned about tariffs will -- this impact will remain for the rest of the year, more or less. Is it the same with FX as currencies is now if you look at the current spot rates?

No, no. The currencies is a bit different.

So what you actually see is that these currency moves that we saw last years will then be in the comparable. So the negative currency impact that you saw here in the first quarter, that will gradually decline with the current levels that we have in terms of FX.

So the FX headwind, if you call it as such, that will go down gradually for the coming quarters in this fiscal year.

Are you still there, Oliver? Can you hear us?

Sorry. Can you hear me now?

We can hear you perfect.

Perfect. I just wanted to expand on the last question.

I mean, can you provide us any kind of color what currency impact you expect for the full year? And as part of that, can you also give us any kind of flavor after the margin decline in Q1 and Q2, not looking potentially much better.

Do you still see a chance for margin expansion for the group in the full year? That would be question number one.

And then secondly, just on R&D. I think gross R&D came down quite a bit.

Can you provide some kind of color where do you see gross R&D as a percentage of sales for the full year? And also I note obviously that capitalization came down now, I think, to 46%.

Is this actually a new runway that we can assume? And if you can give us a kind of color on normalization for the full year, please?

I think, Tobias, it's a good start for you.

Yes. Sorry, the first question there, Oliver.

What was that?

The currency impact full year.

Yes. The currency impact.

No. So I mean, we -- okay.

But to help you out here, you can basically see that, I mean, the levels that we -- with the current currency rates that we have, that will gradually go down to essentially a wash in the fourth quarter. And then you sort of say,it will gradually go down in the quarters to come.

And that has to do actually with the currency levels. What you should look at here is predominantly the U.S.

dollar currency rate, the British pound and the Swedish krona. And what you see then in the comparables there is that basically in Q4 with the current levels is a wash.

And then the currency impact here will gradually go down. So that can sort of say help you in terms of modeling the currency impact.

When you look at the gross R&D as such, yes, we expect that to go down, maybe not as much as you saw here in Q1, but it will be lower as a percentage of sales year-over-year. And sorry, was there more a question about the...

Margin expansion for the full year as well.

Yes. Margin expansion for the full year, yes.

So we have not stated an explicit margin guidance for the full year. Although, I mean, for us, it's absolutely key to drive the profitable growth.

And the midterm targets are still there. And therefore, it is important now.

We have been exposed here by some external headwinds. But for us, it's to manage these and continue here with the positive development on the price improvements, both from the new products with general price increases, we'll, of course, continue with productivity enhancements, et cetera.

So that path lies firm in terms of the growth and the profitability development ahead.

Okay. So despite you're not guiding for, you still see a chance for margin expansion in the full year.

Yes. Again, we don't guide for that.

But our ambition is crystal clear on what we want to do, and that is to drive profitable growth.

That's helpful. And on R&D, the capitalization came down now to 46%, which is quite an improvement from an earnings quality perspective.

Is that something that we should take as a new run rate? And also can you just guide on amortization for the full year?

Is it still around 800 to 850, please?

Yes. So in terms of the capitalization rate, it will be lower than last year, and it has to do with a majority of the projects that we develop here.

So that is in terms of the amortization, it will increase, and you will see a gradual increase to some of those levels that you just mentioned. I would say that in the lower range of that, clearly.

First one I had was just around the rebound in China sales through the second half of the year and your conviction around that. Is that based on actual orders you've already got?

Is that based on tendering activity, conversation with customers? Just trying to get a sort of sense of the conviction level and your kind of confidence heading into H2.

And then the second was just on sort of pricing and the backlog. I know you'd obviously canceled some orders as part of the Capital Markets Day update.

Can you just give us a sort of sense of where pricing is sitting now versus that sort of precancellation phase?

So rebound in China, and it's both, Robert, where we have a backlog that we are delivering on, but we also take new orders, and we see quite positively on that for the second half. And then the next question was around pricing, yes, which quite helped us quite a bit.

So we have a positive pricing effect. But then it takes a bit of time to implement it and to get the price levels up.

And what we see has the biggest effect is the launch of our new products as well. So -- but we're getting there, and that really helped to get the prices in the order backlog up to a different level.

And also adding to that, I mean, here, what we have stated and what you have heard is that we have seen the price improvements on orders for quite some time. Then we have the backlog, and it takes some time to work it through in terms of that to be translated into the revenues.

But just as Jonas stated here, we continue with improved price levels, and that comes both, I mean, from what we say then booking installs throughout the year, but also gradually improving the price points in the backlog.

Ludwig Germunder from Handelsbanken. I have two.

The first one would be on your outlook as well. So talking about China sales and your outlook that you expect a recovery in the second half of the year.

Can you tell us something about how confident are you in the statement? And could you tell us anything about the magnitude of recovery you expect?

And my second one would be on the cash flow. You have a noncash item adjustment in the cash flow, which is under negative SEK 142 million for this quarter.

Can you tell us anything about what makes up this post?

Jonas, if you start.

Yes. So yes, we expect sales in China to grow second half.

And we have a quite solid order development in China with a positive book-to-bill. We expect that to continue, and we will convert the backlog plus new orders in the second half.

And also one note there that may be good to remember is that we had weak sales development end of last year in China. So quite good comparison there.

And then your second question there in terms of the noncash item that it's predominantly FX and revaluation of FX, what you see in that specific item.

And if I can I just follow-up on the outlook question about the U.S.? You mentioned the U.S.

development of Q2, but you had no comments about the -- your expectation for the second half. Could we interpret this as that you don't expect an FDA approval for Evo anytime soon?

Sorry. I didn't hear.

FDA approval in U.S. in the second half.

In the second half, the -- no, you shouldn't interpret that. As I mentioned, it's been resubmitted.

We're working it through, and we will definitely let you know. And in particular, we will let our customers know when we have it approved.

It's very difficult for us to predict the time line on it, but it hopefully will be earlier than the second half.

Sorry to be annoying with China, but let me try again. No other company is basically betting on improvement in China or at least doesn't have embedded anything in their guidance.

So why is it different from you? Is it, again, imaging versus, like, radiotherapy?

Or is there anything else that we haven't understood today? So that's the first question.

Just on your recent comment about Evo that, yes, I mean, maybe you hope that you're going to get the clearance in H2. Is there anything included in your guidance?

I mean, do you need the approval in H2 to meet the guide? So that's the second question.

And then just a third one very quickly. Just to clarify your comment about the 2Q being weak.

Does it mean that margin won't expand year-over-year due to tariff and FX? Just wanted to make sure, given the consensus of a pretty big margin expansion in Q2.

Should I start with China? Yes, just to reiterate the message, it's -- yes, we have quite good insight in the market in China.

And then I guess, it's better to be #1 in China as well, which kind of gives us, hopefully, a bit of better tailwind. So we expected to -- we see good order intake.

We expect it to be turned into revenue, the second half. But still quite meager order backlog.

So we need to build that continuously. But now we see that it's starting to fill up.

Yes. And then in terms of the margin question here and in terms of -- I mean, we -- again, we don't specifically provide earnings guidance for a single quarter.

What we just can say is that, I mean, we've talked about the importance of gross margin expansion, and the work with that will continue. In the first quarter here, we have had some headwinds.

The -- but the work here with improving the price level, utilize the product offering, et cetera, that will continue. So that is what I can say in terms here in the near term.

That's it. You had -- you did have a third question as well, Julien.

Yes, yes. It was just if the Evo clearance is included in the guidance or not.

Just wondering because you don't have a clear idea about the timing, but have you embedded anything in the guide?

When we do look into the full year, and I think it's worthwhile to state that, I mean, we talked about here Q4 last year, looked at the growth level, that was basically with a very weak U.S. market.

We reiterate that we will grow this year organically, and that is the same as previously. And then it's embedded, I mean, both risk and opportunities in how we see that.

And so it's a balanced view here on all regions that we have. Then, of course, it's important here to work it through with the FDA approval in the U.S., but it's not -- I mean, Elekta is much broader than that.

And obviously, here also with the launch coming, it's actually to work through here, both on, sort of say, technical point of view, but also in a commercial point of view. So it's a balanced approach.

Yes, we have a bit of that in the forecast, but we -- I would state it as much more comprehensive in how we view the growth outlook for the year.

Yes. Sorry.

I agree with you, Tobias. Evo is not the only product we have in our product portfolio.

There are numerous products in it. And of course, U.S.

approval is important to us. But so is approvals on other markets as well where we have -- you look at the traction we have in Europe, of course, we want to have that as -- on as many markets as possible, and that is what we're working on now.

Okay. So you can deliver on the guidance even if you don't get the Evo approval in the U.S.

this year.

Yes. I mean, Elekta's performance is much more than that.

And we talked here the importance of the momentum in Europe. We talked about China, et cetera, and the growth in the second half.

So it's broader. And we also do well in other parts of Asia and Middle East, et cetera.

So that is a work that we will continue.

I have two. One is focused on India because you called out some weakness in the country during the quarter.

So just if you could provide us with a rough estimate of how much India makes of APAC sales. Just a rough percentage of sales would be great.

And also explain why the country went into some problems. Is that a market issue?

Or is there anything else in there? And my second question is on Q2, again, just making sure that I understood correctly.

You are not committing to a positive organic sales growth in the second quarter, even though you will be facing very easy comps from last year.

I can take India for us. We see this as a very temporary weakness in an overall very, very positive market with that -- yes.

So we don't see this as a big thing.

Yes. And then I would add here, I mean, we have gained some very important deals in India and build -- start to build a presence there, which will be important.

And obviously, when you look at the sort of, say, growth potential, we talk about this number of linacs per million inhabitants, and you have a number of 12 approximately in the U.S. I think we are below 1 in India.

So obviously, when you expand the horizon and see the growth opportunity in India, it's absolutely where we expect the demand to grow here. It's still not -- I mean, given its size, it kind of is still not that big in terms of the group sales.

But it -- we expect it to grow here over the years to come here.

And we see a lot of variation in India between the quarters. And then, of course, it's a huge market.

It's very interesting for us to launch our new products in that market as well.

And I guess, your second question, Julien, was about organic growth for the group in the second quarter, right?

That's right, yes.

Yes. I think we had that question, Julien.

Again, we don't provide specific guidance, but what we have talked about here is that we see China here, pressure in China in the second quarter. And also that we are awaiting the FDA approval in the U.S.

So I don't think that you should expect an organic growth in the second quarter.

Thanks, Julien, for that last question. But before closing this Q1 call, maybe a closing remark from your side, Jonas.

Yes. Thank you, Peter.

So I would like to take the opportunity to end this call by welcoming Jakob Just-Bomholt as our new CEO. Jakob is a highly experienced international executive with a successful career and CEO positions in various global industries, including the MedTech sector.

And Jakob will assume this new role as a CEO on September 1, i.e., Monday. And also on a personal note from me to you, thank you very much for listening, attending, and really appreciate that.

Thank you. Thank you all on -- thank you all for participating in this call.