Elekta Ab Class B · OMXSTO:EKTA_B
Elekta Ab Class B — Investor Day (June 2016)
76 slides from Elekta Ab Class B's investor day presentation, Jun 9, 2016
Slide 1: Working our way to excellence
WORKING OUR WAY TO EXCELLENCE Elekta 2016 Capital Markets Day 1
Slide 2: Capital Markets Day June 9, 2016
Capital Markets Day June 9, 2016 Tomas Puusepp, 13:30 Working our way to excellence President and CEO Market development and Ian Alexander, 13:50 regional performance Chief Commercial Officer Håkan Bergström, 14:10 Driving margin expansion Chief Financial Officer 14:30 Q&A 20 min 14:50 Coffee 20 min
Slide 3: Elekta 2016 Capital Markets Day
Elekta 2016 Capital Markets Day Tomas Puusepp President and CEO 3
Slide 4: Priorities since 2005
Priorities since 2005 Net Sales • Innovation leadership SEK M 12 000 • Growing scale 10 000 CAGR 12% • Transformation 8 000 6 000 4 000 2 000 0 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 4
Slide 5: Innovation leadership - leading portfolio of recently launched solutions
Innovation leadership - leading portfolio of recently launched solutions Image guided radiation therapy Technologies Versa HD™ Agility SEK 9 bn invested since 2005 VMAT TPS and OIS Leksell Gamma Knife® Icon™ 5
Slide 6: Innovation leadership: MR-linac
Innovation leadership Next step in Image guided radiation therapy: MR-linac 6
Slide 7: Growing scale - installed base growth and No. 1 in emerging markets
Growing scale - installed base growth and No. 1 in emerging markets Installed base growth Growth in emerging markets (units) (SEK bn) CAGR: 3 650 14% 4,0 CAGR: 8% 1,9 CAGR: Emerging 4% markets 2 350 7,2 5,5 Established markets 2009/10 2015/16 2009/10 2015/16 7
Slide 8: Transformational and strategic acquisitions
Transformational and strategic acquisitions 8
Slide 9: Transformation program launched one year ago
Transformation program launched one year ago • Leaner company • Improved financial performance • Focus on high growth areas: service, software and image guided radiation therapy 9
Slide 10: Results and targets for the transformation program
Results and targets for the transformation program Cost saving target EBITA margin target of Net working capital SEK 700 M 20% <5% SEK 200 M in FY 2017/18 of net sales realized savings 10
Slide 11: The most common causes of death…
The most common causes of death… Heart & circulatory Respiratory Cancer disorders Nervous system disorders disorders Digestive disorders Kidney disorders Infections Non-transport accidents Diabetes Musculoskeletal disorders Suicide Transport accident Mental health disorders Undetermined events Murde
Slide 12: Growing need for cost-efficient cancer care
Growing need for cost-efficient cancer care Growth of cancer People, million 30 Currently there are 24 33 million 25 Cancer incidence 20 people 15 14,1 Mortality 14,6 living with cancer 10 8,2 (within 5 years of 5 diagnosis) 0 2012A 2015E 2020E 2025E 2030E 2035E 12 Source: Globocan 2012, all cancer
Slide 13: Well positioned in attractive market
Well positioned in attractive market Transformation Well positioned Strong product program on track in long-term offering and leading driving operational growing market innovation portfolio excellence
Slide 14: Working our way to excellence
Working our way to excellence 14
Slide 15: Market development and regional performance
Market development and regional performance Ian Alexander Chief Commercial Officer 15
Slide 16: Working our way to excellence
WORKING OUR WAY TO EXCELLENCE GROWING INNOVATION EXECUTING SCALE LEADERSHIP TRANSFORMATION 16
Slide 17: A diversified revenue base with business in >100 countries
A diversified revenue base with business in >100 countries China 14% of sales Sales by region (SEK bn) Europe 3,6 Asia Pacific 33% Japan CAGR: 16% of sales 7% CAGR: 7% 4,0 North and South America of sales 0,8 Americas RoW Europe, Middle 36% 10% 2,0 CAGR: 9% 3,7 East and Africa of sales of sales 1,6
Slide 18: Good momentum in order bookings
Good momentum in order bookings Net order bookings SEK bn • Large strategic wins in 14 all regions 12 − MD Anderson in US − HCG in India 45% Service and 10 − Genesis Care Australia/Europe software − Medicana in Turkey 8 − NHSSC and Leeds in UK 6 • Orders for Leksell Gamma Knife® improved in Q4 4 55%
Slide 19: Elekta's new orders for linear accelerators exceed the share of the installed base
Elekta’s new orders for linear accelerators exceed the share of the installed base Orders to new clinics Total orders and new bunkers Total installed base Other 10% Other Other 14% 22% Elekta Elekta 25% 39% Elekta 51% Varian Varian 35% Varian 51% 53% Unmet market need of >10,000 units Note: Order in
Slide 20: Elekta's market opportunities
Elekta’s market opportunities Modernization, Cost-efficient and replacements Service and Highly competitive holistic solutions in established aftermarket sales product portfolio to new markets markets 20
Slide 21: A mixed bag of growth and challenges
Regional performance A mixed bag of growth and challenges Elekta US linac installed base market share* 17 • North and South America 15 − US: strategic wins, growth in service 12 11 11 − Challenging economic conditions 8 in South America 2007 2010 2011 2012 2013/14 2015/16 • Europe, Middle East and A
Slide 22: Continued potential in China and Asia Pacific
Regional performance Continued potential in China and Asia Pacific • China offers huge long-term expansion China order bookings − Strong product portfolio and supply chain Other 20% − Continued growth in Oncology − Early wave of installs now approaching replacement Elekta point 44% − Emergence of pr
Slide 23: Market dynamics improving
Market dynamics improving Market development (indication) North America Replacement market. Hospital consolidation South America Challenging conditions in Brazil Western Europe Pent-up demand and private initiatives Eastern Europe & Middle East Markets depending on the economy recovering China Growt
Slide 24: Working our way to excellence
WORKING OUR WAY TO EXCELLENCE GROWING INNOVATION EXECUTING SCALE LEADERSHIP TRANSFORMATION 24
Slide 25: The installed base - the platform for service and aftermarket revenue growth
The installed base - the platform for service and aftermarket revenue growth Elekta installed base* (no of units) 4 000 CAGR 3 500 7% • High share of hardware 3 000 sales to new centers 2 500 2 000 • Loyal customer base with over >85% retention 1 500 1 000 • Growing scale will continue 500 0 2010/11
Slide 26: Business model: large opportunity in recurring revenue
Business model: large opportunity in recurring revenue USD 2 M USD +2-3 M Field service Remote service Software license Upgrades Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Including: Software Installation Training Service Note: This is an illustration and
Slide 27: Significant potential to expand the service business
Significant potential to expand the service business Service share of total revenues (FY 2015/16) • Focused on service and selling 100% upgrades • Alignment in offering and 80% expansion of services 60% • New hardware systems coming out of warranty 40% 47% 35-40% 20% 15-20% Other Service revenues 0%
Slide 28: The service business enables margin expansion
The service business enables margin expansion … … and stable recurring revenues at limited capital investment Service revenues Service contract for a linear accelerator SEK M (example) 4 000 One year contract with automatic renewal. CAGR 15% Typical life-time for a linear accelerator is ~10 years 3
Slide 29: Innovative portfolio
Innovative portfolio Venezia™ Leksell Gamma Knife® Icon™ Versa HD™ Esteya® MOSAIQ® Monaco® MR-linac – research program 29
Slide 30: Drive sales effectiveness and topline growth
Drive sales effectiveness and topline growth Driving sales Excellence Accelerating Large complex and marketing in customer service business customer Commercialization focus on topline satisfaction growth solutions of MR-linac growth
Slide 31: Working our way to excellence
Working our way to excellence 31
Slide 32: Driving margin expansion
Driving margin expansion Håkan Bergström Chief Financial Officer 32
Slide 33: Working our way to excellence
WORKING OUR WAY TO EXCELLENCE EXECUTING Process Cost savings Cash flow TRANSFORMATION improvements 33
Slide 34: Initiated efficiency programs
Initiated efficiency programs Announced in June 2015 PRIORITIZE ROADMAP WORKING CAPITAL CENTERS OF EXCELLENCE EFFICIENCY Site consolidation Reduced lead times - and inventory CONSOLIDATE FUNCTIONS COGS REDUCTION SHARED SERVICES PROCESS IMPROVEMENTS 34
Slide 35: Executing transformation
Executing transformation Benchmark against best practices WE REDUCE WE IMPROVE OUR WE AIM AT THE COST BASE INTERNAL PROCESSES INCREASED VISIBILITY • Travel, consolidation of • Produce to order • Net sales sites, reduced office space and rent • Credit risk management • Backlog • Procurement – skills
Slide 36: The ambition is to improve EBITA margin to 20% by 2017/18
The ambition is to improve EBITA margin to 20% Margin development Transformation program targets 47% 46% 44% 40% Gross margin 41% EBITA margin of 20% by 2017/18 Cost reductions of Produce-to-order 23% 22% 20% EBITA margin SEK 700 *M Net working capital with one-off (OPEX 500 + COGS to sales below ne
Slide 37: On track to reach the target of SEK 500 M in OPEX-savings
On track to reach the target of SEK 500 M in OPEX-savings Accumulated expense reduction, SEK M Leaner and more efficient operations 500 450 ~100 ~500 Lean administration 400 350 200 Shared service center 300 320 120 250 Prioritization of R&D projects 200 150 200 Consolidation of marketing 100 50 Sca
Slide 38: Margin improvement from reduction in expenses
Margin improvement from reduction in expenses 2017/18 Functions 2014/15 target Manufacturing 3.2% 2.5% Service 13.3% 13.5% Sales* 10.0% 9% Admin 9.6% 7% R&D Net 8.8% 9% R&D Gross 13.1% 10 % Total (of sales) 45% ~41% * Excluding bad debt 38
Slide 39: …and to reach COGS reductions of SEK >200 M
…and to reach COGS reductions of SEK >200 M Accumulated COGS savings, SEK M Process - Best practices Plan in place. Good progress Cost analysis Supplier economics analysis Confirmed ~150 ~250 Value chain analytics Achieved 80 Structured RFQ process 50 Savings in FY15/16 FY16/17 FY17/18 Target FY17/1
Slide 40: Operational excellence: produce to order process
Operational excellence: produce to order process Announced in March 2016 “Historically we have accepted to take orders late in In Q1 FY 2016/17 we have changed this practice a quarter and ship in the same quarter. To manage – now we produce to customer order without these shipments we have pre-produ
Slide 41: Operational excellence: Produce-to-order process
Operational excellence: Produce-to-order process Linac installation lead time to be reduced PROJECT INSTALLATION PLAN – AFFECTING WORKING CAPITAL Current: 210 projects Future: shorter lead time 80 75 60 Reduced accrued income 35 40 expected 30 10 10 <3 m 3-6 m 6-9 m 9-12 m >12 m <3 m 3-6 m 6-9 m 9-1
Slide 42: Reduction of outstanding receivables
Reduction of outstanding receivables Accounts receivables Risk perspective SEK M • Customer, project risk – credit process 4 206 -21% • Country risks 3 300 − Iraq 2 303 − Brazil -32% 1 557 − Russia Overdue >90 days: SEK 400 M • Distributor risks - due to •Emerging markets: SEK 270 M 1 903 -8% 1 743
Slide 43: Credit management– standardized processes
Credit management– standardized processes Pre-offer work Shipment Overdue collection Write off Offer submission Payment due date Default management ORDER PHASE PRE-SHIPMENT PHASE COLLECTION PHASE • Approval needed for all projects • Financial check pre-shipment • Group policy for overdue receivables
Slide 44: Cash conversion - target > 70%
Cash conversion - target > 70% 140% 126% 120% 111% 100% Indicative 80% 77% • Transformation program 60% • Lower R&D investments 60% • Tangible capex of ~ 2% 40% 20% 0% 12/13 13/14 14/15 15/16 16/17E 17/18E Operational cash conversion Target 44 Definition: cash flow from operating activities / EBITDA
Slide 45: Order backlog going into FY 2016/17
Order backlog going into FY 2016/17 Order backlog per region Order backlog per product area 2.7 10.5 5.6 9.9 7.7 Asia Pacific Europe, Middle East and Africa Service and Software North and South America Hardware Total: SEK 18.2 bn Total: SEK 18.2 bn 45
Slide 46: Visibility of revenue - from order backlog
Visibility of revenue - from order backlog 2015/16 2016/17 Book and bill in % by (SEK bn) (SEK bn) quarter – historic 18.2 indication 17.1 Q1: 75% * Q2: 50% 4.5 11.2 Q3: 25% Q4: <10% 6.7 6.8 Opening backlog Revenue from Book & bill Revenue FY15/16 Opening backlog Revenue from Book & bill backlog bac
Slide 47: Initiated efficiency programs
Initiated efficiency programs Announced in June 2015 PRIORITIZE ROADMAP WORKING CAPITAL CENTERS OF EXCELLENCE EFFICIENCY Site consolidation Reduced lead times - and inventory CONSOLIDATE FUNCTIONS COGS REDUCTION SHARED SERVICES PROCESS IMPROVEMENTS 47
Slide 48: Working our way to excellence
Working our way to excellence 48
Slide 49: Innovation for growth and improved cancer care
Innovation for growth and improved cancer care John Lapré Chief Technology Officer 49
Slide 50: Working our way to excellence
WORKING OUR WAY TO EXCELLENCE GROWING INNOVATION EXECUTING SCALE LEADERSHIP TRANSFORMATION 50
Slide 51: Create value
Create value Capitalize on Drive Prioritize innovation customer leadership satisfaction 51
Slide 52: Prioritize: ambition to lower R&D expenses to ~9%
Prioritize: ambition to lower R&D expenses to ~9% Prioritizing and pruning R&D expenses SEK M % of net sales 3 000 14% 13% ~12% 2 500 11% 12% Priorities Indicative 2 000 9% 9% 9% ~9% ~9% 10% • MR-linac 8% 1 500 7% 7% 8% • Software Net R&D expenses 6% • Integration 1 000 R&D capitalization 4% - amort
Slide 53: Innovative portfolio
Innovative portfolio Venezia™ Leksell Gamma Knife® Icon™ Versa HD™ Esteya® MOSAIQ® Monaco® MR-linac – research program 53
Slide 54: Innovation leadership: Leksell Gamma Knife Icon
Innovation leadership Leksell Gamma Knife® Icon™ Highest precision in the market • Average 0.15 mm accuracy in clinical setting • High therapeutic dose with maximum precision • Lowest dose to healthy tissue: 2-4 times lower dose to normal brain Integrated imaging Efficient and safe through seamless
Slide 55: Customer satisfaction
Customer satisfaction Accuracy Speed Integration Example: Monaco Treatment Planning Software up to 4 times faster
Slide 56: MRI guided radiation therapy: MR-linac
MRI guided radiation therapy: MR-linac Treat the patient while simultaneously being imaged by a conventional 1.5T diagnostic MRI • Fully integrate three subsystems • State-of-the-art radiotherapy system Magnetron − Treatment volume coincident with MRI imaging volume − Modified to make it compatible
Slide 57: Increased interest in MR guided RT reflected in the scientific literature
Increased interest in MR guided RT reflected in the scientific literature MRI & Radiotherapy MRI & Radiotherapy per anatomy 450 250 CAGR CAGR 2010 – 2015: 400 2010 – 2015: 12.6% 350 16% 200 300 150 radiotherapy MRI H&N 250 radiotherapy MRI lung 200 radiotherapy MRI rectum 100 radiotherapy MRI prosta
Slide 58: MR-linac on track - launch and commercial orders from 2017
MR-linac on track - launch and commercial orders from 2017 Planning Ambition Delivery of all consortium systems By end 2016 Regulatory approvals - CE Mark, 510(k) During 2017 Launch and taking commercial orders 2017 Total orders during ramp-up (until 2019) 75 >700 MUSD Expected market price USD 8-10
Slide 59: Working our way to excellence
Working our way to excellence 59
Slide 60: MR-linac, the clinical perspective
MR-linac, the clinical perspective Esophagus Capital Market Day Elekta Stella Mook June 9, 2016
Slide 61: Introduction: Richard Hausmann
Introduction Richard Hausmann President and CEO of Elekta as of June 10, 2016 97
Slide 62: Background, what I have done so far, next steps
What I have Background Next steps done so far 98
Slide 63: Background: physicist by education
Marriage 1985 At home 1961 Amherst, 1985 Physicist by education • Studied in Regensburg (Germany) Nanjing, 2008 • NY University at Stony Brook (USA) 99
Slide 64: A long career at Siemens…
A long career at Siemens… • Magnetic Resonance & Computed Tomograpy • President & CEO of Computed Tomography • President & CEO of Siemens China
Slide 65: …then I joined GE Healthcare
…then I joined GE Healthcare • President and CEO of Global MR Business • Turned around USD 2.4 bn business with full P&L responsibility • Increased global market share with 4 percentage points. 101
Slide 66: I believe in... Clear visions, focused strategies
I believe in... Clear visions Focused strategies Operational Growth by Customer Result excellence innovation focus driven 102
Slide 67: True innovations in workflows, software, technology
… True innovations in workflows, software, technology to achieve real customer benefits SIGNA NICU-MR SIGNA PET-MR SILENT MR 103
Slide 68: Listening to and working with customers!
... Listening to and working with customers! Customer visit in China for GE MR: Prof Jin, PUMC … an old friend from the Siemens CT times! 104
Slide 69: Background, what I have done so far, next steps
What I have Background Next steps done so far 105
Slide 70: Joined Elekta as of May 2
Joined Elekta as of May 2 ESTRO 2016, Turin, Italy Gamma Knife Society Meeting, Amsterdam 100+ • Visited Elekta sites • Met with 2 MR-linac customer meetings around the world consortium members 106
Slide 71: First observations
First observations COMMITMENT INNOVATION TRANSFORMATION 107
Slide 72: MRI: true breakthrough and guidance for our future therapy solutions
MRI: true breakthrough and guidance for our future therapy solutions Magnetron MR-linac Magnetron Waveguide Treatment beam
Slide 73: See you September 1st
See you September 1st C) ELEKTA
Slide 74: Working our way to excellence
Working our way to excellence 110
Slide 75: Well positioned in attractive market
Well positioned in attractive market Transformation Well positioned Strong product program on track in long-term offering and leading driving operational growing market innovation portfolio excellence
Slide 76: Working our way to excellence
Working our way to excellence 112