Elekta Ab Class B · OMXSTO:EKTA_B
Elekta Ab Class B — Investor Day (June 2015)
80 slides from Elekta Ab Class B's investor day presentation, Jun 11, 2015
Slide 1: Capital Markets Day 2015
CAPITAL MARKETS DAY 2015 June 11, Stockholm 1
Slide 2: Important information
Important information This presentation includes forward-looking statements including, but not limited to, statements relating to operational and financial performance, market conditions, and other similar matters. These forward-looking statements are based on current expectations about future event
Slide 3: Capital Markets Day June 11, 2015
Capital Markets Day June 11, 2015 13:00 Elekta Tomas Puusepp, President and CEO 13.20 Back to growth Ian Alexander, Chief Commercial Officer 13.40 Q&A Driving profitability through 13:50 Johan Sedihn, Chief Operating Officer improved efficiency 14:10 Q&A 14:20 Coffee The future of cranial Veronica B
Slide 4: Elekta - Capital Markets Day 2015
Elekta - Capital Markets Day 2015 Tomas Puusepp President and CEO 4
Slide 5: Market drivers support long-term growth
Market drivers support long-term growth • Cancer incidence growth and re treatments • Increasing utilization of radiotherapy • Closing the gap in emerging markets • Higher technology content, more aftermarket revenues • Need for information guidance and decision support through software • Demand for
Slide 6: Priorities for short, mid and long term
Priorities for short, mid and long term • Growth • Profitability • Cash flow 6
Slide 7: Strategic agenda
Strategic agenda • Innovation leadership • Commercial transformation • Lifecycle management • Expand addressable market 7
Slide 8: Innovation leadership
Innovation leadership Leksell Gamma Knife® Icon™ Esteya® Versa HD™ Atlantic – research program Monaco® MOSAIQ® 8
Slide 9: Commercial transformation
Commercial transformation - Driving towards commercial and operational excellence • Drive integrated hardware and software President & CEO Tomas Puusepp solutions • Create a platform for growth and cost Commercial Solutions Finance & Governance base consolidation Ian Alexander, CCO Johan Sedihn, COO
Slide 10: Lifecycle management - capture the upside in installed base
Lifecycle management - capture the upside in installed base • Capitalize on customer base Installed base of over • Enhance value offering • Hardware and software >3,500 upgrades systems • Education and training 3-year CAGR: 8%
Slide 11: Expand addressable market
Expand addressable market Cancer care - medical cost USD 188 bn • Evidence-based medicine • Knowledge management • Atlantic – MRI-guided radiation therapy • Leksell Gamma Knife® Icon™ USD 13 bn (7%) Radiation therapy 11
Slide 12: Our financial ambitions
Our financial ambitions Short-term Mid-term Long-term (2015/16) (2016/17 – 2017/18) • Return to growth in H2 • 3-5%* net sales growth • >10%* net sales growth 2015/16* per year per year • Improve EBITA margin • Improve EBITA margin with • Growth in EBITA to exceed ⁻ Cost reductions more than 6** per
Slide 13: Back to growth
Back to growth Ian Alexander Chief Commercial Officer 13
Slide 14: A new, lean, global commercial organization focused on growth
A new, lean, global commercial organization focused on growth Commercial Global I. Alexander functions: Regions: Global Marketing & Strategy Region North America One M. Wolleswinkel B. Yaeger global organization Global Service Region focused on Europe & AFLAME M. Gilday TBD customers Global Order Fu
Slide 15: Mid-term market growth: 3-5%
Mid-term market growth: 3-5*% • North America – hospital consolidation drives large and complex orders with long sales process • Europe & AFLAME – stable growth in line with GDP in mature markets: emerging markets continue to show positive growth although risks in some areas • Asia Pacific – stable
Slide 16: Turn around and drive growth in North America
Turn around and drive growth in North America • Bill Yaeger - New Executive Vice President North America • Reorganize sales force and bring focus to service organization • Grow in large competitor accounts − Expansion of team focused in this area • Launch of Leksell Gamma Knife® IconTM expected 2015
Slide 17: Strengthen our No.1 position in Europe and AFLAME
Strengthen our No.1 position in Europe and AFLAME • Drive sales focus to large installed base, managing customer requirements for service contracts, leveraging software and hardware enhancements • Manage risk and drive growth in prioritized emerging markets • Capitalize on recent acquisitions in Tur
Slide 18: Capitalize on our success in China
Capitalize on our success in China Net sales SEKM • Market growth to continue: 1 500 − Health care reform – clear direction 1 250 CAGR − Unmet need – 1.4 linacs/million, 1 000 19% vs target of 2 to 3 linacs/million • Growth within private sector 750 − Growing trend of acquisition of 500 hospitals −
Slide 19: Growth opportunities in Asia Pacific
Growth opportunities in Asia Pacific Japan India Rest of Asia • Elekta gained share on weak • Strengthened organization Australia: market and sales team • Great partnership with Genesis • Strong partnership with • Benefits of improved support Care Toshiba – large upgrade in service and order fulfilm
Slide 20: Relative market shares for linear accelerators
Relative market shares for linear accelerators North America EMEA Asia Pacific Accuray and Accuray and Accuray and others 7% others 5% others 10% Elekta 23% Varian 70% Varian 45% 50% Elekta Varian 44% 46% Elekta 20 Sources: Elekta
Slide 21: Commercial excellence in new organization
Commercial excellence in new organization • Global marketing − Going from decentralized marketing approach to single global team − Drive global messaging and alignment − Brand strength − Product launches − Business focus/market strategy • Sales transformation activities − Focus on installed base and
Slide 22: Global rollout of Elekta Care
Global rollout of Elekta Care Remote Service Technical Service/Support Software Support Application Support Physics Support 22
Slide 23: Significant growth potential in service revenue
Significant growth potential in service revenue • Capture growth Service revenues in installed base MSEK 1/3 of total 4 000 • Service contract CAGR 12% penetration 3 000 • Service growth 2 000 higher than linac hardware 1 000 • Elekta Care is 0 driving positive FY11/12 FY12/13 FY13/14 FY14/15 impact
Slide 24: Capture upside in installed base
Capture upside in installed base • Dedicated sales force and Elekta installed base tools to: No. of systems − Upsell software 4 000 CAGR − Upgrade hardware 3 500 8% − Cross-selling opportunities 3 000 2 500 • Maximize opportunity from many 2 000 1 500 recent product releases: 1 000 − AgilityTM/FFF 5
Slide 25: Strengthen global capabilities with larger opportunities
Strengthen global capabilities with larger opportunities Booked large orders and share of total 1 750 35% • Elekta has a strong offering as long-term partner 1 500 30% 1 250 25% • Support national cancer programs 1 000 20% • Good value proposition with 750 15% software/services 500 10% • Higher comp
Slide 26: Expected long-term growth
Expected long-term growth Long-term market • Improving world economy and political stability growth rate of • Cancer incidence growth and retreatments • Increased utilization of radiotherapy 4-5% • Closing the gap in emerging markets 6-7% • Higher technology content, more aftermarket revenues • Atla
Slide 27: Our financial ambitions
Our financial ambitions Short-term Mid-term Long-term (2015/16) (2016/17 – 2017/18) • Return to growth in H2 • 3-5%* net sales growth • >10%* net sales growth 2015/16* per year per year * In local currency 27
Slide 28: Driving profitability through improved efficiency
Driving profitability through improved efficiency Johan Sedihn Chief Operating Officer 28
Slide 29: Drive efficiency – 2-year program
Drive efficiency – 2-year program • Cost base reduction with > 300 MSEK − Implementation to start during the next 6 months • COGS efficiency programs > 150 MSEK − Focus on material costs • Working capital efficiency (balance sheet) > 200 MSEK − Initiated – reduction of inventory levels 29
Slide 30: Efficiency program drivers
Efficiency program drivers Consolidate functions Consolidate functions and shared services Prioritize roadmap Process improvements Focus on growth drivers and Improved time to customer – high margin products flexibility and mobility in R&D Working capital efficiency Centers of excellence Reduced lea
Slide 31: New lean global organization focused on customer offerings
New lean global organization focused on customer offerings Solutions J. Sedihn Research & Innovation Comprehensive Integrated J. Lapre Oncology Solutions T. Powell solutions • Focus on cost base organized • A lean organization Supply Chain & Manufacturing Brachytherapy Solutions around • Global view
Slide 32: Global efficiency in R&D
Global efficiency in R&D STOCKHOLM CRAWLEY SUN N YVALE BEIJING VEENENDAAL Objectives • Integrate to fewer hubs • Leaner organization Faster time to market • Cost base reduction • Capital efficiency 32
Slide 33: COGS efficiency in the Elekta value chain
COGS efficiency in the Elekta value chain Elekta Logistics Platform Supplier Elekta Customer Base Manufacturing Base 33
Slide 34: Efficiency programs in supply chain to improve productivity and performance
Efficiency programs in supply chain to improve productivity and performance Elekta Logistics Platform Manufacturing - example from Elekta Beijing - • Supplier Productivity of 10% per year Elekta Customer Supply chain management, inventory goods • Table Base Manufacturing production moved to Beijing
Slide 35: Innovation is in our DNA
Innovation is in our DNA 2013 1985 Electronic First digital brachytherapy controlled 2006 for skin cancer 1949 linac Esteya® 2014 Integrated The future Stereotaxy oncology Software in radiation Leksell software Information- Stereotactic solutions guided cancer therapy frame 2003 careTM Atlantic MOSA
Slide 36: R&D investments for future growth
R&D investments for future growth R&D expenditures (gross), SEKM 2 000 1 750 1 500 1 250 1 000 • Significant increase 750 in R&D investments 500 250 ‒ Atlantic 0 11/12 12/13 13/14 14/15 ‒ Software 36
Slide 37: Prioritizing R&D drives profitability
Prioritizing R&D drives profitability • Further integration of our radiotherapy solutions • Atlantic • Information-guided cancer care™ • Brachytherapy HDR • Maintenance releases to drive customer satisfaction 37
Slide 38: Summary
Summary • Cost savings • Working capital efficiency • R&D effectiveness 38
Slide 39: The future of cranial radiosurgery
The future of cranial radiosurgery Veronica Byfield Sköld VP Product Commercialization, Elekta Neuroscience 39
Slide 40: The potential of Radiosurgery (SRS)
The potential of Radiosurgery (SRS) Increasing importance for both cancer & functional disease 40
Slide 41: Strong growth of radiosurgery expected
Strong growth of radiosurgery expected Brain/CNS cancer patient services 2013-2023 SRS 71% Emergency Department visits 19% Other radiation therapy 16% Surgical 15% Imaging and diagnostics 14% The highest growth rate among brain Eevaluation & Management visits 13% cancer therapies Chemotherapy 12% Ho
Slide 42: New landmark study supporting radiosurgery
Hot off the press New landmark study supporting radiosurgery • Multicenter, randomized trial • 213 patients: WBRT + SRS vs SRS alone • +50% risk of neurocognitive decline with WBRT added to SRS, no survival benefit Initial treatment with SRS only and close monitoring is recommended 42 NCCTG N0574 (A
Slide 43: Potential of radiosurgery for functional disease
Potential of radiosurgery for functional disease Large patient populations Incidence per million (% potentially treatable w/ GKRS) Trigeminal Neuralgia 126-289 (50%) Science is building 50% Essential Tremor 237 (50%) growth of functional Parkinson’s Disease 120-146 (15%) cases treated with Epilepsy
Slide 44: What will it take to tap into this potential?
What will it take to tap into this potential? 44
Slide 45: Leksell Gamma Knife Icon
Leksell Gamma Knife® Icon™ Precision Radiosurgery with Online Adaptive DoseControl™ 45 Leksell Gamma Knife® Icon™ is not approved for sale in all countries (CE mark; 510(k) pending)
Slide 46: New technology
Leksell Gamma Knife® Icon™ New technology • Precise frameless workflow • Integrated stereotactic CBCT imaging • Online Adaptive DoseControl™ for continuous quality control 46 Leksell Gamma Knife® Icon™ is not approved for sale in all countries (CE mark; 510(k) pending)
Slide 47: Significant customer value
Leksell Gamma Knife® Icon™ Significant customer value UNLIMITED FLEXIBILITY FOR CRANIAL SRS • Frame/frameless, single session/fractionation, any target(s), SRS/microradiosurgery THE HIGHEST PRECISION • The most targeted dose delivery with the highest accuracy – for all workflows CONTINUOUS QUALITY C
Slide 48: Successful launch at ESTRO
Successful launch at ESTRO Barcelona April 24-27, 2015 48 Leksell Gamma Knife® Icon™ is not approved for sale in all countries (CE mark; 510(k) pending)
Slide 49: Successful launch at ESTRO
Successful launch at ESTRO Barcelona April 24-27, 2015 • Great interest throughout the congress • Positive customer feedback – relevant technology in radiation oncology segment • Several leads identified for a strong pipeline going forward 49 Leksell Gamma Knife® Icon™ is not approved for sale in al
Slide 50: Leksell Gamma Knife Icon commercial status
Leksell Gamma Knife® Icon™ commercial status • CE mark on June 5 • FDA 510(k) filed on June 8, expecting clearance in September/October • Registration in Japan within 12 months • First sites lined up for acquisition and/or installation • La Timone, Marseille (FR) surveillance site – clinical start e
Slide 51: Significant potential
Significant potential Installed • Increased flexibility and broader application Upgrade installed base base • Easy upgrade available for Perfexion (200 systems) Solidify position in • Broader application of precision in neurosurgical setting neurosurgery • Superior tool for functional treatments New
Slide 52: Significant potential
Significant potential Price premium Incremental Incremental after sales new sales Double-digit growth for Gamma Knife business from 2016/17 and onwards 52
Slide 53: Summary
Summary • Icon uniquely positioned to leverage strong growth in cranial SRS segment • CE mark in Europe, 510(k) pending • First sites lined up for acquisition and/or installation • Competitive platform for continued growth 53
Slide 54: Atlantic – game changer
Atlantic – game changer Kevin Brown Global Vice President Scientific Research 54
Slide 55: The future of cancer care: Atlantic
The future of cancer care Atlantic Better knowledge of the Tomorrow’s RT: Today’s RT: patient and disease • Better outcomes IGRT with VMAT is • Lower costs Increased accuracy standard of care and precision • Potential for new indications Real-time adaption (motion, shape, biology) 55
Slide 56: Atlantic project is on track for commercial launch
Atlantic project is on track for commercial launch Demonstrated Crawley Atlantic facility completed • 1.5 T MRI imaging quality for both 3D • The project team will be testing 12 systems in and 2D Cine the next 12 months • Image quality not affected by: • Consortium members are preparing their − Radi
Slide 57: Leading consortium members
Leading consortium members Froedtert and Medical The Christie AVL-NKI College of Wisconsin ICR – The Royal Marsden UMC Utrecht MD Anderson Cancer Center - Houston Sunnybrook - Toronto Over 100 people conducting research to demonstrate the 7 sites clinical value of Atlantic have signed up 57
Slide 58: How we demonstrate clinical value
How we demonstrate clinical value Increasing • Planning and imaging studies − Virtually validate clinical hypotheses and estimate dosimetric benefit strength of evidence; • Feasibility studies time and − Optimize work flow, establish safety and confirm dosimetric benefit investment • Single arm stud
Slide 59: Nine tumour sites prioritized
Nine tumour sites prioritized Prioritization • Number of patients that will benefit Size of ‒ Incidence of disease and stage of sites the value • Size of benefit per patient ‒ Quality and extension of life The consortium Technical • Ease to demonstrate benefit members submitted Access ‒ # of patient
Slide 60: Tumor site groups established
Tumor site groups established • Each tumor site group is formed from clinical experts from each of the 7 consortium members • Planning and imaging studies defined; many have begun • Detailed timelines for pre-clinical and clinical studies being developed • Data management approach and infrastructure
Slide 61: Atlantic – launch and commercial orders from 2017
Atlantic – launch and commercial orders from 2017 Planning Ambition Consortium orders – research systems 8 Regulatory approvals - CE Mark, 510(k) During 2017 Launch and taking commercial orders 2017 Total orders during ramp up (until 2019) 75 Expected market price 8-10 MUSD 61
Slide 62: Summary
Summary • Project on track • Market interactions confirm our commercial expectations • Consortium is making good progress developing trials and performing initial studies to demonstrate clinical value • Preparation for the delivery of the consortium systems is underway 62
Slide 63: Financials
Financials Håkan Bergström CFO 63
Slide 64: EBITA margin drop mainly driven by decline in sales volumes
EBITA margin drop mainly driven by decline in sales volumes EBITA margin drop of 6,8 ppts mainly driven 20,4% by decline in sales volumes of 8%: -1,7 ppts -2,0 ppts -0,9 ppts Price and mix: -1,7 ppts -1,1 ppts -0,7 ppts -0,4 ppts 13,6% • Unfavorable product mix • Price pressure in some emerging mark
Slide 65: Ambition to improve EBITA-margin
Ambition to improve EBITA-margin Margin improvement ambition* Effect on Margin Development Mid-term (3-year perspective) margin% 60% Higher share of service revenues ~1.0% Gross Margin EBITA margin 50% 47% 46% 44% Mix improvement in high margin ~1.0% 40% products 40% Indicative COGS efficiency progr
Slide 66: Order backlog - visibility of future revenue
Order backlog - visibility of future revenue Order backlog maturity by year (bnSEK) 17,1 Service Hardware/Software/Aftersales 49% Order backlog: 40% • Longest maturity in service - mostly in US 25% 51% 61% 20% 15% • Multiyear contracts - part of 55% 41% 26% larger deals 39% 45% 74% 59% Opening Backl
Slide 67: Order backlog to revenue
Order backlog to revenue Revenue and book & bill – 2014/15 (bnSEK) 13.6 Whereof 30% service 10.8 5.2 40% of backlog 5.6 Backlog Revenue from Backlog Book & Bill Revenue FY14/15 67
Slide 68: Principles for capitalizing R&D
Principles for capitalizing R&D According to IAS 38 and described in annual report IAS 38 Intangible Asset Requires development expenditures to be capitalized as an intangible asset while research cost must be expensed when incurred Research costs are expensed as they are incurred. Identifiable cost
Slide 69: R&D capitalization
R&D capitalization Capitalized development costs SEK M Atlantic • Still in capitalization phase 800 33% 600 400 200 Software • Continued capitalization linked to 0 FY10/11 FY11/12 FY12/13 FY13/14 FY14/15 Capitalized 30% knowledge mgmt, OIS, TPS Amortization Capitalization R&D SEK M 2000 1,6 bn SEK L
Slide 70: R&D commitment continues for future growth
R&D commitment continues for future growth R&D expenses SEK M % of net sales 3 000 13% 14% 11% ~11% 12% 2 500 Indicative 2 000 9% 9% 9% 10% • Gross R&D investments 8% ~10% 7% 7% ~8% 8% will normalize 1 500 6% • Net R&D trailing behind 1 000 4% due to amortizations 500 2% 0 0% 11/12 12/13 13/14 14/15
Slide 71: Reduction in net working capital
Reduction in net working capital Net working capital / net sales DSO* development mSEK mSEK 6000 16% 6000 120 14% 5000 5000 100 Ambition 12% 4000 <10% 10% 4000 80 76 3000 8% 8% 3000 60 6% 2000 2000 40 4% 1000 1000 20 2% 0 0% 0 0 11/12 12/13 13/14 14/15 11/12 12/13 13/14 14/15 Improvement drivers US
Slide 72: Revenue recognition and project-based operations
Revenue recognition and project-based operations Revenue recognition Invoicing – Payments • Revenue recognized when risk and rewards Revenue recognition often does not coincide with invoicing have been transferred to the customer and payments from customers • Linacs on average: 85% shipment, 15% • I
Slide 73: Elekta's DSO components
Elekta’s DSO components Share of sales% Project related Service related (90%) Advances from customers Prepaid income Invoicing > Revenue Payment > Revenue • Payment terms are not always Liabilities linked to revenue recognition FY13/14 FY14/15 FY13/14 FY14/15 and vary by project and market 16% 20% 1
Slide 74: Agenda for improved DSO – target 70 days
Agenda for improved DSO – target 70 days New organization - Strengthened focus on order fulfillment Improved cash management - Payment terms and collections DSO at 70 days Incentives in place… …to deliver cash flow performance Centralized functions for Contract administration - Credit assessments -
Slide 75: Focus on collections and to close old projects
Focus on collections and to close old projects Accounts Receivables aging SEK millions 341 546 Cash received/collections Overdue >90 SEK billions Overdue 1-90 days Not due 13,0 3 560 3 475 FY13/14 FY14/15 11,1 296 213 End End End End FY13/14 FY14/15 FY13/14 FY14/15 4,3 3,6 2,8 2,8 2,9 3,1 3,0 1,6 Ac
Slide 76: Financial position – debt profile
Financial position – debt profile Leverage profile Maturity profile SEK M 7 000 4,0x 3 000 6 500 6 000 Net debt 3,5x 2 500 Net debt / equity 5 500 3,0x Available funds 5 000 Net debt /EBITDA Target Net debt/equity 2 000 SEK ~5bn 4 500 2,5x 4 000 3 500 2,0x 1 500 3 000 2 768 2 635 2 500 2 239 1,5x 1
Slide 77: Cash conversion – ambition > 70%
Cash conversion – ambition > 70% 140% 126% 120% • Cash conversion 100% target in relation to Investments Indicative EBITDA 77% 81% 80% 60% 76% 60% • Lower levels of investment 40% 20% 32% • Working Capital <10% of sales 0% 12/13 13/14 14/15 15/16 16/17 17/18 Free cash flow / adjusted net profit Cash
Slide 78: Slide 78
Slide 79: Priorities for short, mid and long term
Priorities for short, mid and long term • Growth • Profitability • Cash flow 79
Slide 80: Our financial ambitions
Our financial ambitions Short-term Mid-term Long-term (2015/16) (2016/17 – 2017/18) • Return to growth in H2 • 3-5%* net sales growth • >10%* net sales growth 2015/16* per year per year • Improve EBITA margin • Improve EBITA margin with • Growth in EBITA to exceed ⁻ Lower cost base more than 6** per