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Edited Transcript of CRAD B.ST earnings conference call or presentation 25-Oct-19 9:00am GMT

Q3 2019 C-Rad AB Earnings Call

Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of C-Rad AB earnings conference call or presentation Friday, October 25, 2019 at 9:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Therése Björklund

C-Rad AB (publ) - CFO

* Tim Thurn

C-Rad AB (publ) - CEO & President




Tim Thurn, C-Rad AB (publ) - CEO & President [1]


Welcome, everyone, to the presentation of C-RAD's report and the result from the first 3 quarters of 2019, and specifically, in the third quarter of this fiscal year.

Like always, we start with a administrative announcements. Everyone is put on mute and the webcast will be recorded, so the recording will be made accessible in the Investors section on the C-RAD website later during the day.

Let's get started with a short introduction. Today's webcast is presented to you by Therése Björklund, our CFO; and by me, Tim Thurn, the CEO. First, I'm going to guide you through the results of our sales activities, followed by commenting on the key events during the reporting period and walk you through the financial analysis before we have the Q&A session.

So I see we have a bit of a technical issue. If we could get the slides going. Okay. Now it works.

Like always, you can post your questions through the chat function and we are happy to answer them after the presentation.

Okay. Great, let's get started. Essentially, we are looking at a stable quarter, and at the same time, we are also continuing our growth journey in several areas. We are closing the third quarter with a total order intake of SEK 69.7 million compared to SEK 64.2 million in the same period last year. We are looking at a positive order intake development of 9%. It's encouraging to see that the sales of our positioning products across all regions grew 18% year-over-year and impressive 28% growth compared to the second quarter 2019 can be reported. This means we are back and show growth in the largest and most important segment.

After a very strong second quarter in the service business, Q3 2019 is about -- on the same level as 2018 with close to SEK 10 million in order intake for service contracts.

Overall, we assess that in the APAC region, customers tend to show less interest in service agreements. Customers in Europe and especially in North America choose to have service coverage for their systems. This underlines the continuous high willingness of our customers to engage into a long-term partnership with C-RAD. Service agreements are mostly long-term commitments from customers that will deliver a stable income for the forthcoming years.

It is encouraging to see that the sales of the positioning products show sizable growth again. This is the first indication that the wait-and-see momentum caused by the strategic changes in the market that we reported during the first half of this year have, to a large extent, been welcoming. It should be mentioned that C-RAD has decided to focus its activities on the main business and therefore terminated the distribution agreement with IBA Dosimetry, which is reflected here under distribution products. I would like to say we have distributed IBA products now in Scandinavia over the past, yes, almost 10 years. And now, we have decided to make a change and focus on our main business. And this termination was effective on September 30. So this means we are not expecting any orders in this product segment moving forward.

Looking at the geographical split. The sales in the important market in North America continues to show significant growth also in Q3. We attribute this to 2 main factors: first, C-RAD becoming more stablished relative to other competitors, and the growing interest overall for surface-tracking technology driven by changes in the reimbursement system. I think that's a very encouraging trend. At the same time, it should be noted that no orders from the cooperation with the company, Elekta, are included in these results.

Whereas the EMEA region in total shows a decline in order intake of 17%, we can say that this is a result of lower order intake, primarily from the Nordic region, where C-RAD was awarded an extraordinary large order from a customer in Stockholm, Sweden, Karolinska.

Sales in APAC grew with 8% in the third quarter whereas, this year, Australia has shown a very positive development. The market for new linacs in Japan has somewhat gone down compared to last year, which had a direct impact also on the sales of the C-RAD systems.

Looking at the order booking over the past few years. We see the usual seasonality pattern versus strong second half and a somewhat weaker beginning of each fiscal year. This is due to the majority of our customers having their budget cycle aligned to the calendar year. Order intake in the third quarter was about 10% stronger than in the second quarter of 2019.

Looking on the revenue. Overall, revenue grew with 19% during the third quarter compared to last year in the same period.

Looking at the distribution, we see a very similar geographical pattern due the very positive development in order intake in North America and the relatively short book-and-bill period, this is the period between order intake and delivery and subsequent revenue recognition, revenue in North America improved with 84% in Q3 over the same period last year.

Looking at the trend for order intake and revenue. The results -- I think the results are very encouraging and displays the interest from customers in surface tracking, in general, but also specifically, of course, in our technology. We are back and show a solid development in sales and order intake. Our early assessment of a significantly growing interest in a market for our surface tracking solution continue to be unchanged, and I think this is really the most important part. With the commitments of the treatment machine vendor towards positioning technology, we are convinced all steps are supporting our early assessment that this technology is on its way to becoming the standard of care.

Now I would like to comment on the key events during the period. The first item I would like to report, a large order from a customer in Germany. This order was booked in July, in the very beginning of the third quarter. MVZ Uhlenbrock & Partner is a privately held health care provider with sites at multiple locations primarily in the Ruhr area, covering medical services from radiology, radiation therapy, but also nuclear medicine. The team there is very much forward-looking and has the ambition to provide outstanding patient care within a highly populated region. The order includes both Sentinel and Catalyst Systems for several of their treatment sites or clinical sites, and now we can report that the first installation is ongoing.

In July, C-RAD announced that we are extending our strategic partnership with Elekta, which is a distribution agreement. Whereas, in the past, the cooperation between both companies was more on a project-by-project level, this agreement makes C-RAD's technology available to the Elekta sales organization through the price book. Beyond that, it's a joint effort to promote the combination of Elekta Versa HDRS and the C-RAD Catalyst System. The agreement enables Elekta to offer C-RAD's high-end surface tracking technology for stereotactic treatment and (inaudible) and to start with now in North America and Mexico and eventually also in other markets. We are expecting to see the first results from the strategic cooperation in the beginning of next year. It's a very positive signal that Elekta has selected C-RAD as their strategic partner for this cooperation to meet the growing demand of surface tracking.

The presentation of the system at ASTRO was a huge success and generated significant interest among our customers. Currently, both companies' sales organizations are working on building up a funnel of sales projects. We see a huge potential for both companies and also a high motivation to bring a comprehensive solution comprising C-RAD technology and the Elekta high-end treatment machine in a bundle to the customer.

Mid of August, the U.S.-based company, Mevion, and C-RAD announced [integration between] Catalyst PT and the Mevion treatment system. The union of both products supports a seamless workflow with uninterrupted patient surface tracking, monitoring from setup all the way to the end of the treatment. The purpose of this integration is to support a seamless workflow for highest level of patient safety and user comfort. Such an integration is unique in its kind between a PT vendor or a proton therapy vendor and a provider of surface tracking technologies. Based on the successful release of this integration, quotes for very same configuration have been issued to several other projects in both Europe and also North America.

After the successful completion of the release and the integration of the systems, both companies' systems, the C-RAD technology was also presented on the Mevion booth now at ASTRO. The display showcased the benefits from a workflow and safety perspective and showing also how this integration is implemented in a practical way. A nice video showing the integration actually in Maastricht, which was the first site, can be found on the website.

In this context, I also want to mention that ASTRO was a huge success overall this year. The system's on our own booth, of course, but also on the Elekta booth, customers had the opportunity to see C-RAD on the Mevion booth but also on the stand of the Belgian company, IBA. This presence was underlining our emerging position on the North American market.

And therefore, I want to hand over to Therése and she will guide you to the financial results of the third quarter 2019.


Therése Björklund, C-Rad AB (publ) - CFO [2]


Thank you, Tim. We will start to have a look at the income statement for the third quarter. I'm happy to present that the revenues for the quarter represented an increase of 19% compared to the last year and amounted to SEK 55.6 million. As Tim mentioned, this increase is primarily driven by the North American region, showing an increase of 84% compared to 2019. Also, revenue in the APAC region grew by 12%.

Other external expenses amounted to SEK 13.6 million, representing an increase of SEK 1.2 million compared to last year. Adjusted for the IFRS effect, the OpEx would have been SEK 14.3 million. The difference from last year is in large due to marketing expenses and more specifically the participation in the ASTRO event in the U.S. that now took place in September this year whereas it was taken in the fourth quarter in 2018. OpEx also include costs for consultants within R&D.

Other personnel expenses increased SEK 2.4 compared to the same period in 2018 and amounted to SEK 16.6 million. This increase is due to a higher number of personnel within several functions of the company and related recruitment fees.

EBITDA adjusted for IFRS 16 effects was SEK 3.7 million compared to SEK 2.2 million in the third quarter last year and it's the highest figure since Q4 last year. We have chosen to show an EBITDA excluding the effect for IFRS 16 changes here to provide a figure comparative to last year's EBITDA.

The net result after tax was minus SEK 1.4 million for the quarter. This tax cost is based on deferred tax assets and reversal of the previously booked tax assets in the Swedish companies only. This is, hence, not a cost that will affect the cash flow, but a decrease of our deferred tax assets.

[Gross profit] differs between our product categories and is, therefore, expected to differ between the quarters depending on the product mix of delivered systems.

The gross profit margin was 59% compared to 61% in the same period 2018. We are continually focusing on improving our supply chain and to reduce cost of goods sold for our products, and we have been able to keep the gross profit margin on a stable rate for quite some time now.

As Tim mentioned earlier, we are no longer distributing IBA products from the 1st of October. There are a few orders still in the orders book, but it is expected to be delivered in the fourth quarter. But going forward, we can expect a more homogeneous gross profit as we are now focusing on our own products.

We continue to report all-time high order stock each quarter, in line with the (inaudible) value of the orders backlog by September 30 was SEK 229.6 million compared to SEK 175.4 million last year, which is an increase of 31%. Both backlog for products and for service contracts shows a positive development year-over-year. SEK 17.6 million of the order book for the service contracts is estimated to be recognized as revenue within the coming 12 months, this can be compared to revenue of SEK 14 million in the last 12 months.

For the third quarter, revenue from Life Cycle Business represented 8% of the revenue for the quarter. The average service contracts cover a period between 3 and 5 years, which means that revenue recognition is distributed over a longer period than our products. Service contracts are either sold together with the product as a new installation or as an add-on on already installed products.

Total cash flow for the first quarter was SEK 2.9 million, slightly higher than last year. Cash flow from investing activities amounted to minus SEK 3.3 million compared to minus SEK 0.9 million in 2018, showing increased investments primarily related to the different development projects within the positioning segment. This is both related to purchase of equipment and machines and man time that is being actuated.

Cash flow from financing amounted to SEK 6.3 million compared to minus SEK 5.5 million in 2018 where we have increased the usage of the invoice discounting solution during the quarter. The usage of this sort of financing is dependent on when deliveries are made, and hence, invoice (inaudible) and can differ between the quarters, depending on how the delivery flow is. In the third quarter, a lot of deliveries were made in the last month of the quarter, meaning that we had a high rate of outstanding invoices by quarter end.

Total [available funds] by end of quarter amounted to SEK 32.5 million (sic) [SEK 32.3 million] by end of September compared to SEK 25.5 million last year.

We end this presentation with a look at the trend in order intake and revenues and the operating profit. Operating profit for the quarter amounted to SEK 1.7 million compared to SEK 0.4 million in the same quarter last year. Looking at operating profit on a 12-month rolling base, it amounts to SEK 5.6 million for the period, October 2018 to September 2019, compared to minus SEK 1.3 million at the same point in time last year. This is an improvement of SEK 7 million year-over-year and shows the positive development of the company.

I would also like to take opportunity to remind you of our financial calendar. We will publish the year-end report on January 31, 2020, and the financial calendar for the coming year will be updated soon.


Tim Thurn, C-Rad AB (publ) - CEO & President [3]


Thank you very much, Therése. So as mentioned before, now there is an opportunity to raise some questions through the chat function of the system here. So I see that some of you made already use of this possibility.


Questions and Answers


Tim Thurn, C-Rad AB (publ) - CEO & President [1]


So the first question is related to the GEMini system, how the tests are progressing in China.

So the tests continues to be ongoing. As we reported that the integration is intended with one of the local linac vendors. There are still ongoing activities, both on the testing side but also from an integration perspective at this partner.

(inaudible) we say -- we see repetitive questions regarding GEMini, and of course, it's an interesting project. However, I would like to say I mean the focus for assessment of the company should rather be the positioning products, that is, I think in the short and also in the midterm, the main driver for the, yes, revenue order intake for this company.

So the second question is related, why are you growing slower than the market and I guess that's a reference to an indication that we have given about the long-term trend for the overall development of the market.

And I would like to say that I think the main reason is really what I mentioned when we spoke about order intake. It is due to the fact that during this year, we have seen a bit of a, yes, kind of hold-back situation (inaudible) due to the new alignment -- alliances that have been built on the market. So I think we can be very -- well, read the results already now from the third quarter that this, yes, wait-and-see momentum as we quoted before has somewhat decreased and that is the reason why there was a temporary effect that was kind of overlaying the overall situation in the market. And as I said, before, I mean, we assess the situation in the market, now especially also after ASTRO and many customer discussions that we have, that surface tracking is on its way to become standard of care and that there is still huge potential in the market, both in terms of equipping new linacs as part of new installations but also upgrade opportunities, especially in market like North America.

So the next question is related to (inaudible). Can you guide anything in regards to the Elekta agreement? Do you expect this to be a major contributor to sales during 2020?

As I said before, I mean, we are assessing the situation that the agreement will deliver some results starting from next year on. I think now -- what's happened now since basically July when the announcement was made that both companies align from a marketing perspective that will build up a coherent marketing message towards the customer. That has been presented at ASTRO, which I think we can say was a huge success. The sales organization has been trained. Now both companies' sales organizations are really working together in order to build up a funnel and then also to close the project.

So the next question relates to how did the fourth quarter start this year.

Yes, I mean, as you know, I can't comment on unpublished results. So I will skip this question.

So then the next question is related, again, to the Elekta agreement. Which other markets are you referring to when you say strategic partnership with Elekta will be extended into other markets?

So we are assessing this right now which markets are interesting for both companies, where we should expand the cooperation. And before this is really concluded, I would prefer not to disclose any results or any milestones in the discussions.

So how was the reimbursement working in the U.S.? What is the reimbursement position? Is it valid in all states?

Okay. This is a very comprehensive topic, but I think to [extract] the reimbursement structure that is important for us is that the incentive from a reimbursement perspective is given to support new and innovative treatment techniques, the so-called stereotactic treatment for many indications. And essentially for being able to provide this kind of treatment, it needs some kind of patient monitoring system as the C-RAD technology is required in order to provide a safe treatment to the patients. So basically, it's creating these incentives to drive the centers into implementing certain treatment techniques that has an impact on basically everyone who provides equipment for stereotactic treatment, but also C-RAD as the patient monitoring is becoming very crucial for these kind of treatment techniques.

The next question is related, if you noticed an increase in demand in China. Referring to the news last year that they will buy equipment for USD 2 billion over the next coming years.

I think China continues to be a very attractive market in all respect. I think the announcement last year from the government was basically that they are willing to give out licenses and there is -- develop radiation therapy more in rural areas where currently the focus is really more on the larger cities. So they wanted to deploy the coverage of radiation therapy across the country. And I think this is one component to it. In general, the ability or the willingness, I would say, to invest in contact in China is very high. The country is developing very (inaudible), building up new centers in the bigger cities but also in rural areas. And then also, of course, what we see there is a shift towards really high-end treatment techniques whereas, years back, the focus was probably to provide some basic level of constant care, we see a shift towards really high-end techniques. And essentially, we can say that the bigger constant care centers are, yes, competing now on the same level as, for example, here in Europe and also in Asia.

I think overall with the setup that we have in China, we are in a very good position, both with our partners and also with our own organization. And China is definitely one of the fast-growing market also for us.

You have mentioned that positioning technology is on its way to become a standard now for a while. When do you appreciate to -- it to happen in the order book has heavily increased?

So I guess the question is related to how quick the implementation will be to adopt the technology to become really standard of care. I think it is really a matter of looking into different markets. I truly believe that the North American market is more dynamic in the sense of adopting these kind of technologies. That is primarily because the market is a privately driven market. Most of the health care providers are operating not under the governmental funding system, but rather as a company (inaudible) equipment when they see a demand. So that, of course, allows them to adopt new technologies much quicker and to react on changes, for example, in the reimbursement system. So I think that is also, as I indicated before, part of the driver of the good development that we see in North America now.

At the same time, if you look to, yes, Europe and to large extent also to the Asian markets, most of the health care providers are funded by either the government -- by the federal government, by the state or by the more regional government. And there, the processes are, let's say, not as agile as obviously in North America. And typically, the linac accelerators are -- have a lifetime between 10 and 15 years. So in Europe and also in Asia, we see (inaudible) together with investments in new treatment machines. So that when the customers are in the process to change or swap linacs or build a new linacs that they also, at the same time, go for surface tracking system and invest in this technology.

So to answer the question, even if I can't give you a year now, but my expectation -- or our expectation is that in North America, we have a much bigger adoption rate whereas, due to the system -- due to the funding system in Europe and Asia, it will take more time until we see that the large majority of the linacs is equipped with this kind of technology.

Next question is related to the GEMini. Is that going to be a game-changer for C-RAD? How important is this project really?

I think the assessment that we are looking at for the company (inaudible) product. I think the GEMini in the short and midterm will not have a significant impact on the development of the organization.

Why did you pay tax on the profit? And why don't you have -- don't you have a deferred tax asset that you can use against profits?

I would refer to Therése to answer this question.


Therése Björklund, C-Rad AB (publ) - CFO [2]


Yes. So yes, we have deferred tax assets. As you may recall, we booked a big tax income in the last quarter last year. So what we can see now is that we are taking a tax cost that will decrease the deferred tax assets. So it is not a cost in the sense that it's tax that we need to pay. It's rather a decrease of the deferred tax. And this is done on the (inaudible) and basically I mean it's the positioning company or C-RAD positioning AB that is driving a profit here, so that we are reversing the tax.


Tim Thurn, C-Rad AB (publ) - CEO & President [3]


Thank you. So the next question is related to the changes in the reimbursement system. Looking now at the timestamp, I see that this question was asked before. I answered earlier a very similar question.

Today, you have 57 people on staff. How do you see the need to hire more people moving forward?

So I think there are different aspects to it to support the ongoing sales activities, it's not necessarily, say, meaning that we need to increase also the sales organization in the same pace as we increase (inaudible). I think a very important contributor that is affecting the sales efficiency is the adaptation of surface tracking, in general, in the market. So customers are much quicker in the decision-making process. They have opportunities to get informed on other channels and through our salespersons. And that has an impact on the overall volume of sales per person, but also on the length of the sales cycle. So that's, I think, 2 very important effects that have an impact in the markets where we have a direct sales organization.

The other aspect that I wanted to highlight in this context is, of course, related to the OEM corporation, now primarily here also there's Elekta. There is -- of course, our organization is supporting Elekta, but then there's an effect of scale whereas the Elekta (inaudible) to work on this very important market, North America. I mean it is a huge market, just to put it a bit in perspective, I mean with roughly 3,000 treatment centers whereas, let's say, Germany, we see 300. So that means there's a factor 10 in between in order to cover all these sites is very important to have access to a broad network of people that are supporting the sales activity. And I think that's really the big opportunity also for us now from a commercial perspective in this cooperation, that through the Elekta organization or through the sales channel, we have the possibility to approach much more customer with this -- from a technical and clinical perspective, I must say, very neat solution based on their linac and -- or surface tracking technology.

So then, of course, on the service side. I mean we see the service activities as a profit center. So income from surface contract is, of course, very important for us and continues to become even more important in the future. The service business is -- yes, all the profitability of the service business is coming with the scale. So I think that will also have a very positive impact.

Then on the third, and so to say I would like to refer to the activities on the R&D side. I think, I mean, we are in a very high-technology environment now with the possibility to have ongoing sales organization also to generate profit. I think our focus is also to develop new products, to enhance our products, to provide the customer with some more exciting value proposition than what we have right now. And yes, I think this -- the cPatient and cAccessory that we have presented on previous exhibitions, we are taking (inaudible) in the development of a more comprehensive solution.

So then there's one question related to the ASTRO, the conference that took place this year in the third quarter. What was the financial impact of this?

So I refer to Therése to answer the question.


Therése Björklund, C-Rad AB (publ) - CFO [4]


Yes. So I don't have the exact figure here. But if you compare to last year, it's around SEK 1.5 million in investment for an event of this size.


Tim Thurn, C-Rad AB (publ) - CEO & President [5]


So the cooperation with Elekta, does that mean that your gross margin will go down, but that OpEx will be lower for the orders generated from Elekta?

So in general, of course, the sales model is based on commission-based sales model whereas Elekta gets a commission or basically there's a difference between the purchase price and the resale price to the end customer and that's basically the commission that covers the cost for the effort that Elekta has, of course.

I think what is important to mention, I mean, in general, the price level in North America is high or very high also due to the fact that there is -- yes, is reimbursement, indirect reimbursement for surface tracking, so a clear business case can be presented to the customer and that's, of course, overall lifting the price level -- average sales prices in North America relative to other regions. And that is, of course, very good and has a very positive (inaudible). So I think, yes, it will have an impact, but not of significant nature.

How will the gross margin be impacted by the termination of the agreement with IBA?

Perhaps I'll ask Therése to answer this question as well.


Therése Björklund, C-Rad AB (publ) - CFO [6]


Yes. So as I mentioned before, what we can expect is that, I mean, the distribution products are the products where we have the lowest gross profit margin, by far. However, the distribution -- the volume of the distribution is very low. So in a normal quarter, it doesn't have that big an effect on the gross profit. If you look at the quarter, Q2 last year, for example, when we had this unusual delivery to NKS with a lot of distribution products, it absolutely has an effect. But as the volume is rather small, it's (inaudible) not to be very big, but it will be more stable.


Tim Thurn, C-Rad AB (publ) - CEO & President [7]


So then the next question is about the Chinese markets. Also, again, looking at the timestamp, I think the question was raised before. I answered a similar question. If there's still something open, please feel free to post a more specific question.

So then the next question is what is about -- what is the situation in the Beamocular case. Does that really affect the finances of the organization further on?


Therése Björklund, C-Rad AB (publ) - CFO [8]


Yes. As I said before, we take the expenses for lawyers and all the legal fees recurringly. So everything that has been -- everything allocated to the project so far, you can already see in the finances. We have received the approval (inaudible) ongoing or under review.


Tim Thurn, C-Rad AB (publ) - CEO & President [9]


So the next question is, who's taking the position for Peter Eidensjö in Board of Directors.

Yes. I can't really comment on this right now. I mean, that's basically the responsibility of the Nomination Committee. I know that they are working on this, and I'm sure that at a given time, the announcement will be made.

So you never showed very good sales growth in North America, but can you give us some color on how the development was for Vision RT in the same market? (inaudible) is increasing footprint or have you gained market shares from Vision RT?

Well, it's not or. It can be and, right? So I mean, I think, first of all, historically, the focus for us, C-RAD, was the European market and also the Asian market, and I think there, we are really dominant players. So really enter it -- we've really entered 2016 to the North American market and that was kind of the division -- let's say, territory. Also, due to the historical cooperation they had with Varian, they had a very good access to the North American market. There's no doubt about this. And looking at the installed base in North America, it is, of course, to a large extent, Vision RT or (inaudible) called osms.

So that is one aspect. The other aspect is, of course, that the market, in general, is growing pretty rapid. And as I indicated before, I mean, there are certain market drivers, also the reimbursement system and the overall changes in the market with regards to more high-precision treatment techniques, stereotactic treatment and hypofractionated treatment. So there is -- this is a really driver for our surface tracking technology.

And then as another aspect, I mean, yes, there are certain customers that really like the C-RAD solution. We have, I think, made very good progress on really important universities. I mean, we reported, for example, in the Anderson -- Swedish Cancer Center, Northwestern University, so those are really big names in North America that looked at all systems and decided for C-RAD. So I think (inaudible) I believe that we have the better technology that we can provide for the market. And then it's up to us through our sales organization to get the message across to the customer.

So yes, I mean, I think we would like to see larger results, but I mean, this is work and we are working on it. And I think if you look at the overall development in terms of growth rates, still on a fairly small level, I agree on that. But I think the development and the trend is pointing in the right direction.

So then there's a question regarding the impact on exchange rates.

Yes. Perhaps, Therése, if you can answer this?


Therése Björklund, C-Rad AB (publ) - CFO [10]


Yes. So of course, looking at the order intake, we have a positive effect, that's both the euro and the USD has increased, and those are our 2 main currencies. If we look at the result, however, we have costs in different regions and in the different currencies as well. So the effect on the result is much lower than on the order intake.


Tim Thurn, C-Rad AB (publ) - CEO & President [11]


Thank you, Therése. Then the next question is do you know if Herlev -- sorry, no the question jumped actually. Question, jumped here. Do you know if Herlev will equip their new linacs with positioning equipment?

As I reported before, I'm not really commenting on the ongoing discussions that we have with the customer. But again, say that we are in close contact with the customer and don't consider to distribute. Waste of time.

We have a little bit of a technical issue, the questions always jump. Okay. So we have seen a trend of fewer large orders, but more of smaller orders. Is that trend you see will continue?

Well, I think, actually, that is the dynamics that we see now between the years. I think last year, we have seen more larger orders, and of course, they all have significant impact on the overall result. I think the underlying development that drove to the situation that there were more larger orders is unchanged. And what I mean by that is that the overall acceptance of this technology is increasing, customers feel more comfortable to not only purchase one system, but equip the entire department, so make larger investments. At the same time, it is, of course, a matter of those projects being (inaudible) those customers that have the possibility and the interest to invest in these larger -- large-scale -- mid- to large-scale investments in surface tracking, that they have funds available and are able to invest. And that is really something we did not see that much this year, I agree. But also looking at the funnel, I don't have a reason to believe that this is a structural change, but rather an effect that impacted us now during the first quarters.

So the last question I see here, are you happy with the outcome of the GE agreement?

I think what we can say is that the GE agreement in itself is not generating a large volume by itself. At the same time, part of the GE agreement was, of course, that we came into (inaudible) related together with the GE CTs. And even though I don't have the numbers available right now, I think we are selling, in general, quite a significant number of Sentinel systems into the GE installed base or in GE projects. So it didn't generate a lot of revenue directly, the agreement, but it give us access to market where we would otherwise not have had any access.

So the last question for today is related to the Japanese market. So what's happened in the Japanese market?

And I think what we can say here is that overall, the market dynamics in Japan is a bit volatile over the years. That is nothing really new that has been in the past like this and probably will continue to be like this also in the future. And we simply see that during this year, the investments were not done in the same (inaudible) as what we have seen, for example, in the previous year. Having this said, the good thing about volatility is that it goes up and down and then up again. So, again, I mean, we don't see any structural changes there, just the opposite. I think also on the most recent conventions, Japanese customers reported great results from the implementation of C-RAD systems, together with Elekta, which are very encouraging and definitely also of interest for many other customers in the Japanese market.

So there was a lot of question, but it's great. I would like to thank everyone for attending our webcast today. That said, we will put the recording on our website and that will be made available later during the day. And then, yes, even though it's only lunchtime, I wish everyone a good day ahead. Thank you very much. Bye-bye.