C-Rad AB Stock

Welcome to the C-RAD Q4 2025 Report Presentation.

[Operator Instructions]

Now I will hand the conference over to CEO, Tomas Blomquist, and CFO, Linda Frolen. Please go ahead.

Thank you, and good morning, everyone. Welcome to C-RAD's presentation of our results for the fourth quarter and full year 2025. I'm Tomas Blomquist, CEO of C-RAD, and joining me today is our CFO, Linda Frolen.

I will begin with a brief introduction and perspective. After that, Linda will walk through the financial and regional performance, and we will then open up the call for a Q&A session. This is my ninth day and first quarterly webcast as CEO of C-RAD, and I would like to begin by saying that I'm very happy and humbled to take on this role. I also would like to thank the Board for its confidence and I want to express my sincere appreciation to our interim leadership team, Linda Frolen, Johan Danielsson and Board member, Peter Simonsbacka for their disciplined and professional leadership during the transition. Their work ensures stability and continuity and provides a strong foundation as we move into the next phase of C-RAD development.

For those of you who do not know me, I have spent more than 30 years in Life Science, Diagnostics and Medtech, including over 2 decades in global leadership grows and 5 years as the CEO of a NASDAQ-listed large cap company. Throughout my career, my focus has been on building profitable growth companies with exceptional people through clear priorities strong execution and high-performance cultures. What attracted me to C-RAD was the combination of clinically relevant technology, a growing end market and solid fundamentals including a strong balance sheet, stable gross margins and a committed organization and Board. My leadership philosophy is pragmatic and execution driven. I believe in clarity, accountability and teamwork built on trust. High-performing organizations are created when expectations are clear, responsibilities are owned and teams are empowered to challenge constructively, always with a shared focus on delivery and outcomes and on our customers.

As I step into this role, my initial priority is to listen and learn, to deeply understand our organization customers, products and markets. At the same time, it is clear to me that the next phase of C-RAD will be defined less by ambition statements and more by consistent execution converting our strength into measurable and repeatable results. C-RAD is well positioned in an attractive niche, but we are not yet realizing our full potential. Going forward, our focus will be on strengthening commercial execution, simplifying and strengthening our organization where needed and ensuring that our organization processes and decision-making structures support scalable and sustainable growth. With that, I will now hand over to our CFO, Linda Frolen, who will review the financial performance for the quarter.

Thank you, Tomas. The performance in the quarter varied across regions. In constant currencies, order intake for the group declined in Q4 by 4% year-on-year. The Americas showed growth and was a positive contributor. The decrease was mainly driven by fewer product orders in APAC, reflecting a more difficult market environment in the region. In EMEA, we saw growth in product orders, which could not fully compensate for the decline in services. Revenue for the group was down 6% year-on-year in constant currencies. Americas showed strong growth versus last year with increased revenues in both products and services. The decline was primarily related to slower product deliveries in APAC. As the service business is a smaller part in APAC, delays in project deliveries have a more pronounced impact on total revenue in the region with a lower share of recurring revenues.

In summary, regional development in Q4 was uneven, with strength in the Americas, stability in EMEA and continued headwinds in APAC. While we continue to see some uncertainty in America still with some slow decision-making, the quarter marked an important milestone with the first deliveries of our entry-level system, Catalyst+LITE. In addition, reimbursement codes supporting active motion management are helping to underpin demand. As a result, order intake for the region increased by 7% year-on-year, and revenue grew strongly compared to last year. EMEA delivered a solid performance despite tough year-on-year comparisons. Momentum remained good, supported by continued end user engagement, including customer meetings and ongoing reference building. Order intake declined slightly versus last year, while revenue was broadly stable and slightly up. Finally, APAC, a region with strong comparison figures for '24. The region was weak in Q3 and continued to face challenging conditions with longer sales cycles and increased competition. This is reflected in a sharp decline in order intake for the quarter and a significant decline in revenue in the region.

Gross profit for the quarter was SEK 75 million compared to SEK 80 million a year ago. Gross margin development continued to be positive with an increase from 66% in Q4 last year to 71% in this quarter. The increase year-on-year is explained by the higher share of service revenue in this quarter, and a favorable market mix as we have a higher share of our total revenue in Americas this quarter and a lower share from APAC. We also had some proton revenues in this quarter, which we did not have in the fourth quarter of last year. But the main driver behind the increased margin is the increase in services and the geographical mix. Looking at our operating expenses after capitalized expenses and adjusted for one-off items. You see to the left of this chart that they increased 8% year-on-year from SEK 56 million last year to SEK 60 million in this quarter. The increase year-on-year is mainly due to increased number of employees. These are mainly within sales, product development and services where we have gradually exchanged consultants with own employees.

The additions are deliberate and support our strategic priorities and growth ambitions. We also have somewhat increased other OpEx, which relate to increased travels and higher costs for freight and customs. To the right of the slide, you see that quarter-on-quarter OpEx is up from SEK 58 million in Q3 to SEK 60 million in this quarter. The increase is related to lower personnel expenses in Q3 due to summer holidays. We have reduced our annualized cost base by SEK 23 million from the peak level of SEK 253 million in Q3 of '24. Importantly, despite the recent increases, we will remain a sharp focus on running the organization as efficiently as possible. At the same time, as we increase our focus on innovation and product development, underlying OpEx may increase slightly. These increases are targeted and strategic. And as initiatives approach the commercialization phase, the capitalization rate is expected to increase, partly offsetting the OpEx impact.

EBIT for the fourth quarter adjusted for unrealized FX and one-off items was SEK 11 million compared to SEK 21 million a year ago, and the margin reached 11% versus 17% a year ago. The decrease for this quarter is mainly explained by fewer product deliveries that put pressure on margins, coupled by somewhat higher expenses. As already said, we remain focused on running our operations as efficiently as possible. At the same time, we need to balance this with initiatives that support future growth. Our cash balances increased by SEK 20 million during 25 million and stood at SEK 171 million at year-end, compared to SEK 151 million at the beginning of the year. Repurchase of shares were made during Q4 of SEK 12 million. Cash flow from working capital was SEK 16 million in the quarter, which is a great improvement from last year when it was SEK 3 million. Altogether, our operating cash flow remained solid and positive, amounting to SEK 21 million in Q4 SEK 71 million for the full year, reflecting continued focus on cash discipline.

And as you know, we have had orders on our balance sheet that have been awaiting final acceptance test and that have, therefore, been waiting to be invoiced. These are down 19% since last year and will continue to be in focus going forward, as well as our overall focus on our balance sheet and our cash flow. I would also like to remind you that C-RAD is a company with a strong balance sheet with no long-term debt. And with that, we will hand over back to the moderator for Q&A.

[Operator Instructions]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you. To conclude, I would like to briefly outline how I view the coming months and my approach. My first 100 days as CEO are centered around 3 priorities. First, building a deep fact-based understanding of the business and strengthening relationships across the organization and with key external stakeholders. Second, working closely with the management team and the Board to sharpen priorities and ensure alignment. Third, establishing the structure, pace and accountability required to support disciplined organic growth and efficient organization and over time, selective inorganic opportunities.

C-RAD has a clear strategic direction, a relevant product offering and a strong position in a growing market. Our task now is execution, reducing complexity where appropriate, strengthening ownership and ensuring that we consistently deliver on our commitments. I approach this role with humility, energy and ambition. Humility in respect of the complexity of the business and the work already done. Energy to engage fully with the organization, our customers and our partners. And ambition to help C-RAD realize its full potential. As an ending note, I really would like to thank our global team, customers, partners and shareholders for your continued support. I look forward to working together as we take the next steps in C-RAD's development. Thank you for joining us today. We look forward to sharing our initial 100-day observations and reporting our Q1 2026 results on May 6. Take care.

Welcome to the C-RAD Q3 2025 Report Presentation. [Operator Instructions]

Now I will hand the conference over to CFO and Acting CEO, Linda Frölén; and Deputy CEO, Johan Danielsson. Please go ahead.

Thank you, and welcome to our Q3 presentation. This time, the presentation will be somewhat different compared to what you have seen before. The agenda will be key takeaways from the quarter, followed by some comments on the regional performance. After that, Johan will present the service business, and then we will conclude with the financials.

And with that short introduction, let's look into the takeaway Q3. The performance in the quarter varied across regions. Order intake grew 11% and revenue grew 16% in constant currencies. The increase in both order intake and revenue were driven by the performance in EMEA together with our services business. We saw a positive EBIT development and the operating margin increased to 19% in the quarter. Important drivers behind the increase are favorable market mix, coupled with a strong contribution from services, which Johan will talk more about in just a minute. And we also have some onetime adjustments affecting our cost of goods, which will be explained in the financial section. As you know, cash has been a focus area, and we had a strong operating cash flow in the quarter, which amounted to SEK 24 million.

And with that, let's look into the regional performance. Starting off with the Americas. Both order intake and revenue declined. Order intake was down 40% and revenue followed with a 15% drop. This reflects market uncertainty and slower decision-making, and we are not satisfied with the performance in the quarter.

Moving over to EMEA, which clearly stands out, showing continued good momentum. Order intake increased by 112% and revenue grew 52%. Our position in Central Eastern Europe was further strengthened by the SEK 10 million Czech Republic multisite product and services contract. Finally, in APAC, a region with strong comparison figures for '24, order intake declined 16% and revenue had a 3% decline. The lower order intake was mainly related to Japan and Hong Kong, while other markets in the region were more stable.

And with that, I will hand over to Johan for a closer look at services.

Thank you, Linda. So we want to take this opportunity to speak more in detail about services compared to what we have done before as it is a key offering, and we are very focused on growing this part of the business.

So as you can see here on the figures and on this slide, our results demonstrate a continuously growing service business with increasing revenues from service contracts over the last 2.5-year period. The figure on the left shows the quarterly service percentage of C-RAD total revenues, again, increasing trend over the years. And on the right-hand side, you have a rolling 12-month service revenue contribution, which in this quarter generates about SEK 90 million plus. And as mentioned before, our contracts are typically in the range of 3 to 5 years and renewed on expiration unless systems are upgraded into latest generation of technology.

With that said, we can move to the next slide, where to give you a better view of what we deem as services. So the mission of scope for global services is that once a commercial agreement is made with the customer and we have confirmed the order, the service organization takes on the project management and supervise order fulfillment process, including technical installation of the products in the customer clinics, but we also perform application training for the end users so that they are able to actively use and apply the system to their patients.

So we have taken over the last 2 years to optimize both phases, both the technical installation part, but also the application training part to reduce the time we need in the field to complete an installation and finally perform an acceptance test, which is the final system handover to the customer and also the start of the warranty period. The application training in itself, we have revamped over the last year to provide much level access of -- and to our technical trainers and our clinical specialists so that the customers really become very enabled and long-term successful in their use of our systems.

So that said, one key driver for the business and for the customer success is to have long-term service contracts. So if we go forward, this gives you an overview of the services life cycle. So as mentioned before, once the acceptance test is and system is hand over, the warranty period starts and then it is followed typically by a 3- to 5-year contract. And we have multiple options here for the different customer demands and needs, what is included in each contract. But typically, we supply a premium contract, which has a very extensive coverage in both technical and clinical support.

Once these contracts expire, then the contracts are normally renewed unless the systems are upgraded to the latest generation technology. And if that happens, obviously, the warranty period starts all over with the service contract and renewal phase following. So this is the general life cycle, and this is how the business is running over a typical contract period. And in the end, we want our customers to be very enabled and also very successful able to share their knowledge with their peers in the industry.

Thank you, Johan. So I will now take you through some of the main financials for our third quarter with focus on gross margin, cost levels, earnings and cash flow. Gross profit for the quarter was SEK 83 million compared to SEK 73 million a year ago. The gross margin for the quarter was 74% versus 73% last year. The margin in this quarter is considered to be temporarily high. The increase year-on-year is explained by the higher share of service revenue in the quarter and a favorable market mix. The gross margin was also affected by positive onetime adjustments primarily related to repayments of license fees in the cost of goods. Our assessment is that the underlying gross margin for the quarter is in the high 60s compared to 67% in the previous quarter, meaning Q2 of this year. We had no proton revenues in the quarter, which we did have in the third quarter of last year.

Looking at our main operating expenses, you see to the left of the chart that they increased 12% year-on-year from SEK 54 million last year to SEK 60 million in this quarter. The increase in year-on-year OpEx is mainly due to 2 factors. The first one is the ASTRO Congress, which took place in Q3 this year, but Q4 last year. And we also lowered our full year bonus provision in Q3 last year. To the right of the slide, you see that quarter-on-quarter OpEx is down from SEK 61 million in Q2 to SEK 60 million in this quarter. The decrease is related to lower personnel expenses in the quarter due to summer holidays, which were partly offset by higher costs for marketing, meaning ASTRO.

We are monitoring our cost levels closely, and we are happy to see that our efficiency measures are showing results. Our yearly OpEx levels are down by SEK 25 million from the peak in Q3 last year, and we have now reached a more stable level. Worth noting regarding the higher figure in this quarter is, as I already mentioned regarding ASTRO, that it includes costs from 2 conferences, both Q4 of last year and Q3 of this year. EBIT for the third quarter was SEK 21 million compared to SEK 17 million a year ago. The increase in EBIT for this quarter is explained by several factors pointing in the right direction. We have higher revenue, higher gross margin and stable operating expenses. I can also mention that unrealized currency effects in this quarter were only minor. And as I said last quarter, our increased focus on smart spending is moving us in the right direction.

Looking back a few quarters, C-RAD shows continuous improved earnings and an increased profitability over time. With this development as a foundation, we are well equipped to continue to grow as we believe we can increase the EBIT margin even more over time according to our medium-term financial targets, even if we may have short-term deviations. Our cash balances increased by SEK 15 million during the quarter and stood at SEK 173 million at quarter end compared to SEK 158 million at the beginning of the quarter. Cash flow from working capital was flat in the quarter, which is a great improvement from last year when it was SEK 37 million negative. Total operating cash flow was with this improvement, SEK 24 million positive compared to negative SEK 17 million last year.

A few orders on our balance sheet that have been awaiting final acceptance tests have been paid during the quarter and many have also been invoiced after completed acceptance tests. Some of these are expected to be paid during Q4. I would also like to remind you that C-RAD is a company with a strong balance sheet with no long-term debt. And as you know, we communicated yesterday that the Board have decided on a share repurchase program in order to optimize C-RAD's capital structure.

So the next steps. As you also know, we have communicated management changes, and we now have a smaller executive management team to complement C-RAD's current leadership team. This smaller group consists of Johan and myself, but also Peter Simonsbacka, who is a Board member and previously had the position as Chief Commercial Officer at AddLife. I would like also to remind you of our strategy. This newly formed executive management team will, as stated in the press release, focus on accelerating the level of activity supporting our strategy and our financial targets. Meaning, increased sales growth, focus on product innovation and growing the service offering.

And with that, over to the moderator for the Q&A session.

[Operator Instructions] The next question comes from Christian Lee from Pareto Securities.

Linda, you mentioned that the gross margin adjusted for the one-off items would have been high 60s. And you also mentioned that you had 67% in Q2. So does this imply that the adjusted gross margin in the third quarter was higher than what you had in Q2?

Yes.

Okay. And your overall ambition is to grow faster than the market. And could you please clarify which specific market you are referring to? And given that the product order intake has declined year-over-year for 6 consecutive quarters, do you still believe that the 10% growth in 2026 is achievable?

We are working towards the external targets that we have communicated. The details in your questions, it's still early days for Johan and me in this new team formation. So we would like to come back to that one.

Okay. Fair enough. The U.S. market appears to be constrained due to limited budgets for capital equipment. Could you please provide an update on your retrofit strategy and traction to date in this environment?

Can you repeat? I didn't hear the first part of the question.

Yes. I mean the constrained budgets is limiting the investments in capital equipment in the U.S., obviously. So could you please provide an update on your retrofit strategy? Given that your solutions is accounting for around 5% of total registered therapy equipment investments. So my question is basically, why do the budget constraints create meaningful headwinds in your offering?

But I would say this is also something that might be a bit early for me and Johan to answer. But I would say that mainly it's creating uncertainties on how much money the clinics have to have in their pockets, so to say. And that creates -- that uncertainty means that the decision takes more time.

But does this also affect the retrofit strategy?

I wouldn't say so.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you all for listening to our Q3 presentation. And Johan and I both wish you all a very nice day.