• Net Sales Growth: Increased by 2% in constant currencies.
• Adjusted Gross Margin: Improved to 37.1%.
• Adjusted EBIT Margin: Increased to 11.7%.
• Book-to-Bill Ratio: Strong at 1.15 for the quarter.
• Order Growth: 21% increase in constant exchange rates.
• Net Income: SEK336 million.
• Earnings Per Share (EPS): SEK0.89.
• Annual Run Rate Savings: SEK264 million from cost reduction initiatives.
• Cash Flow After Investments: SEK730 million, a record high for Q3.
• R&D Investments: SEK321 million in new products and software.
• Cash Conversion: 79%, above the target of 70%.

• Warning! GuruFocus has detected 8 Warning Signs with EKTAF.

Release Date: February 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Elekta AB (EKTAF) reported a 21% order growth in constant exchange rates, with growth across all regions and business lines.
• The adjusted gross margin improved to 37.1%, driven by price increases and a favorable product mix.
• Elekta Evo and Elekta ONE Planning have been well received, contributing positively to order and sales growth in Europe.
• The company achieved a record high third-quarter cash flow of SEK730 million, supported by higher EBITDA and lower investments.
• Elekta AB (EKTAF) has secured significant commercial wins, including a major deal in Mexico and Unity wins in the US and Europe.

Negative Points

• Net sales increased by only 2% in constant currencies, with declines in the US and China impacting overall growth.
• The adjusted EBIT margin was slightly up at 11.7%, but higher amortization costs from recent product launches affected profitability.
• Elekta AB (EKTAF) adjusted its full-year guidance due to lower volumes in the US and China, expecting net sales to be broadly stable and EBIT margin to be lower compared to the previous year.
• The Service margin was negatively impacted by market mix and higher material costs.
• The company faces challenges in the US market, with slower installation volumes and delays in regulatory clearance for Elekta Evo affecting sales.

Q & A Highlights

Q: What led to the adjustment in guidance regarding the installation pace in the US, and when is the US clearance for Elekta Evo expected? A: The slower installation volumes in the US, both in the current quarter and anticipated in Q4, prompted the guidance adjustment. The Elekta Evo is currently in the FDA process, and while questions are being addressed, a specific clearance date cannot be provided at this time. (Gustaf Salford, CEO)

Q: Despite a strong order growth in China, why is there a cautious outlook for the region? A: Although there was a 24% order growth in the quarter, the book-to-bill ratio in China remains negative. The cautious outlook is due to timing effects and the need to fill the backlog, despite increased public procurement activity. Year-to-date order growth in China is 13%. (Gustaf Salford, CEO; Tobias Hagglov, CFO)

Q: Can you provide more details on the EBIT margin guidance and expectations for Q4? A: The full-year EBIT margin is expected to be lower year-over-year. Positive factors such as price contributions and cost reduction initiatives will continue to impact Q4 margins positively. However, specific guidance for Q4 is not provided. (Gustaf Salford, CEO; Tobias Hagglov, CFO)

Q: How is the Elekta Evo performing in Europe, and what is the attachment rate for the Elekta ONE suite? A: Almost 50% of linac orders in Europe were for Evo, with a high attachment rate for the Elekta ONE suite. Customers are willing to pay for the adaptive treatment capabilities, and the product has been well-received across Europe. (Gustaf Salford, CEO)

Q: What are the key drivers for achieving the medium-term EBIT margin target of 14% or higher? A: Key drivers include new product launches, increased software in the mix, and aftersales and service growth on a strong installed base. The timing for achieving this target will be discussed further at the Capital Markets Day. (Gustaf Salford, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.