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RaySearch Laboratories

Quarterly Report Nov 15, 2018

3101_10-q_2018-11-15_57287305-66fd-4554-951c-2e3ced946950.pdf

Quarterly Report

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INTERIM REPORT JANUARY 1-SEPTEMBER 30, 2018

"In the third quarter of 2018, order intake rose 31 percent to SEK 176 M (134), the highest-ever order intake for the third quarter. Net sales rose 35 percent to SEK 150 M (112) and the operating margin to 8 percent (1), despite changes in accounting policies that are deferring our revenue recognition. Without application of the new accounting policies, net sales would have risen 47 percent to SEK 164 M and the operating margin would have been 15 percent. We have confidence in our long-term strategy, and our expansion will continue," says Johan Löf, CEO of RaySearch.

THIRD QUARTER (JULY-SEPTEMBER 2018)

  • Net sales SEK 150.4 M (111.7), of which revenues from RayStation®/RayCare® SEK 137.9 M (99.1)
  • Profit after tax SEK 13.5 M (-1.0) and earnings per share SEK 0.39 (-0.03)
  • Operating profit SEK 12.4 M (0.7)
  • Cash flow SEK -17.0 M (1.2)
  • Order intake SEK 175.7 M (133.8), of which RayStation/RayCare SEK 165.0 M (123.6)

NINE MONTHS (JANUARY-SEPTEMBER 2018)

  • Net sales SEK 407.8 M (380.1), of which RayStation/RayCare SEK 371.3 M (339.1)
  • Profit after tax SEK 45.9 M (45.3) and earnings per share before/after dilution SEK 1.34 (1.32)
  • Operating profit SEK 52.8 M (61.0)
  • Cash flow SEK -54.9 M (-15.5)
  • Order intake SEK 510.3 M (435.4), of which RayStation/RayCare SEK 479.3 M (401.2)
  • Order backlog SEK 740.4 M (571.3) at the end of the period, of which RayStation/RayCare SEK 688.3 M (511.7)

CHANGES IN ACCOUNTING POLICIES

• IFRS 15 Revenue from Contracts with Customers came into effect on January 1, 2018, and reduced the company's license revenue from RayStation and RayCare by 18 percent in the third quarter and 17 percent during the first nine months of 2018 compared with the previously applied accounting policy (IAS 18), see Notes 1-2. The accounting policy changes also had a negative impact on net sales and earnings over the past 12 months.

SIGNIFICANT EVENTS DURING THE THIRD QUARTER

  • RayStation was selected by several leading cancer centers, including Leeds Cancer Centre in the UK, the Swedish Cancer Institute in Seattle in the US, and Centre intégré de cancérologie de Laval in Québec in Canada. In addition, the University of California, San Francisco in the US has expanded its existing RayStation installation.
  • A long-term collaborative agreement for the development of RayCare was concluded with the Princess Margaret Cancer Center in Toronto, Canada.
  • RayCare was selected by Advanced Oncotherapy (AVO) in the UK.
  • RayCare 2A* and 2B* were released with a range of new features, including activity and rule-based scheduling for all clinical resources, clinical document management, support for full treatment delivery, workflow management and offline activitybased image analysis, and additional features for care administration and the management of external contacts.

SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD

  • Since October 8, 2018, RayCare and RayStation have been used to plan and manage the treatment of patients at Provision CARES Proton Therapy Center in Nashville in the US, which thereby became the first center to connect RayCare directly to a therapy system (ProNova SC360) to register and verify the treatments.
  • RaySearch and Canon Medical Systems Corporation entered into a collaborative agreement to integrate RayStation and RayCare with Canon Medical's imaging systems and advanced visualization solutions with the aim of creating a more efficient workflow for virtual simulation.

FINANCIAL SUMMARY

AMOUNTS IN SEK 000s JUL-SEP JAN-SEP OCT 2017- FULL-YEAR
20181 20172 20181 20172 SEP 20183 20172
Net sales 150,479 111,703 407,775 380,125 612,736 585,086
Operating profit 12,421 666 52,787 60,971 151,485 159,669
Operating margin, % 8.3 0.6 12.9 16 24.7 27.3
Profit/loss for the period 13,500 -1,028 45,874 45,338 118,163 117,627
Earnings/loss per share before/after dilution, SEK 0.39 -0.03 1.34 1.32 3.45 3.43
Cash flow from operating activities -12,883 35,669 57,858 100,696 104,643 147,481
Cash flow before financing activities -56,181 2,257 -92,509 -1,229 -91,931 -651
Return on equity, % 2.4 -0.2 8.1 10.1 20.9 22.6
Equity/assets ratio at the end of the period, % 59.9 67.2 59.9 67.2 59.9 63.4
Share price at the end of the period, SEK 122.3 173.5 122.3 173.5 122.3 171

* Regulatory approval is required in some markets.

1 IFRS 15 compliance, refer to Notes 1-2. 2 IAS 18 compliance. 3 IFRS 15 compliance in 2018 and IAS 18 compliance in the remaining quarters.

CEO COMMENTS

STRONG GROWTH

In the third quarter of 2018, our order intake rose 31 percent to SEK 176 M (134), the highest-ever order intake for the third quarter. Sales were strong in Europe and North America, but weak in Asia. Net sales rose 35 percent to SEK 150 M (112), despite changes in accounting policies (IFRS 15) that are deferring our revenue recognition. Without application of the new accounting policies, net sales would have risen 47 percent.

Operating profit rose to SEK 12 M (1), representing an operating margin of 8 percent (1), and the increase was mainly derived from sharply increased sales. Without application of the new accounting policies, operating profit would have increased to SEK 25 M, representing an operating margin of 15 percent.

EXPANDED PARTNERSHIPS

In the third quarter, we concluded more strategic partnerships. I July, Princess Margaret Cancer Center in Toronto became our eighth partner for the development of RayCare. Princess Margaret Cancer Center is one of the world's most important cancer clinics and their experience and clinical insights are priceless for the continued development of RayCare. In October, we also signed a collaborative agreement with Canon Medical to enable a smooth integration between our systems and Canon Medical's imaging systems and advanced visualization

solutions. The aim of this partnership is to create a more efficient workflow for virtual simulation.

RAYCARE – NOW IN CLINICAL USE

RayCare, our innovative oncology information system, is developing fast, and in September we released the latest version, RayCare 2B, which introduces several new features, including activity and rule-based scheduling for all clinical resources, clinical document management, support for full treatment delivery, workflow management and offline activity-based image analysis, and additional features for care administration and the management of external contacts.

On October 8, 2018, we also announced that Provision CARES Proton Therapy Center in Nashville in the US had begun using RayCare together with RayStation to plan and manage the treatment of patients. The radiation therapy department of Iridium Kankernetwerk in Belgium already uses RayCare in its clinical operations to manage treatment planning workflows. However, Provision CARES Proton Therapy Center in Nashville is the first center to connect RayCare directly to a therapy system (ProNova SC360) to register and verify the treatments. This is a hugely important milestone, and in combination with our fourth commercial order for RayCare from Advanced Oncotherapy in the UK, this is fantastic recognition of the RayCare system's qualifications.

Over the summer, we also released a new version of RayStation, version 8A, as planned, with a range of new and innovative features, including support for the TomoDirectTM treatment method with Accuray's TomoTherapy and Radixact systems.

CONTINUED EXPANSION STARTING TO YIELD RESULTS

We have confidence in our long-term strategy and will continue to expand our global marketing organization in order to address the entire market systematically, to accelerate sales of both RayStation and RayCare, and to ensure the best-possible customer service. This has decreased the company's operating margin in the short term, but will lead to high growth with healthy margins moving forward. In the second and third quarters, we saw signs that our investments have begun to yield results in terms of higher order intake.

In 2018, we have entered new geographic markets and had a stronger focus on smaller cancer centers around the world. Our solutions are well-suited to helping small and mid-sized centers provide high quality patient care, increase their efficiency and maximize the use of their resources.

CLEAR PLAN AND SOLID BASE FOR CONTINUED INVESTMENT

Our sales and earnings will continue to vary by quarter, since the order intake remains subject to relatively large fluctuations. However, our recurring support revenue is steadily growing and now accounts for 21 percent of net sales. Combined with a strong financial position and a clear strategic plan, this provides a stable base for continued investment in both RayStation and RayCare.

To date, 524 cancer centers in 32 countries have purchased RayStation. At the same time, there are more than 8,000 radiation therapy centers worldwide, and that number is expected to increase sharply over the next decade. The driving forces include rising cancer rates, growing awareness of the advantages of radiation therapy and major investment in cancer therapies in Asia. The market is therefore growing steadily and we will continue to grow considerably faster than the market. Our aim is that at least 3,000 cancer centers will have purchased RayStation within eight to ten years, corresponding to a market share of about 30 percent.

This is an exciting time. We have made great progress so far and, above all, created a platform for further expansion and new strategic opportunities. Through collaboration, openness and innovation, we will continue to work towards our vision of a world where cancer is defeated.

Stockholm, November 15, 2018

Johan Löf CEO of RaySearch Laboratories AB (publ)

FINANCIAL INFORMATION

ORDER INTAKE

In the third quarter of 2018, order intake rose 31.5 percent to SEK 175.7 M (133.8), of which order intake for RayStation/RayCare rose 33.5 percent to SEK 165.0 M (123.6).

Rolling Full-year
Order intake (amounts in SEK M) Q3-18 Q2-18 Q1-18 Q4-17 Q3-17 12 months 2017
Licenses 105.6 122.3 82.8 164.8 95.7 475.5 455.5
Hardware 19.6 15.4 11.1 20.8 4.6 66.9 41.4
Support (incl. warranty support) 45.9 62.4 31.8 46.6 31.7 186.7 166.3
Training and other 4.6 6.1 2.8 6.9 1.7 20.3 11.3
Total order intake 175.7 206.2 128.4 239.1 133.8 749.4 674.6
Order backlog (amounts in SEK M) Q3-18 Q2-18 Q1-18 Q4-17 Q3-17
Licenses 30.8 25.8 12.1 11.8 18.7
Hardware 34.7 32.6 22.5 25.9 14.6
Support (incl. warranty support) 652.8 644.5 593.7 531.2 532.2
Training and other 22.1 20.7 14.1 12.3 5.8
Total order backlog at the end of the period 740.4 723.5 642.5 581.2 571.3

During the first nine months of 2018, order intake rose 17.2 percent to SEK 510.3 M (435.4), of which order intake for RayStation and RayCare rose 19.4 percent to SEK 479.3 M (401.2).

IFRS 15 – Revenue from Contracts with Customers applied from January 1, 2018, which is deferring the company's revenue recognition and increasing the order backlog by the corresponding amount. At September 30, 2018, the total order backlog amounted to SEK 740.4 M (571.3), which is expected to generate revenue of SEK 201 M over the next 12 months.

REVENUE

In the third quarter of 2018, sales rose 34.7 percent to SEK 150.5 M (111.7). The increase was largely due to a sharp increase in sales of RayStation.

The application of IFRS 15 – Revenue from Contracts with Customers from January 1, 2018, has deferred revenue recognition and reduced the company's license revenue from RayStation and RayCare by 18.4 percent, and net sales by 8.5 percent, during the third quarter of 2018 compared with the accounting policy previously applied (IAS 18), see Notes 1-2. Without application of the new accounting policies, net sales would have risen 46.8 percent.

Revenues (amounts in SEK M) Q3-181 Q2-181 Q1-181 Q4-172 Q3-172 Rolling
12 mån3
Full-year
20171
License revenue – RayStation/RayCare 89.4 99.8 75.0 162.1 81.8 426.3 438.5
License revenue – Partners 9.8 9.2 9.2 9.4 9.3 37.6 40.5
Hardware revenue 16.7 7.3 11.0 11.2 3.9 46.2 36.2
Support revenue – RayStation 28.9 21.3 16.8 18.9 13.1 85.9 54.6
Support revenue – Partners 2.8 2.6 2.9 2.9 3.3 11.2 12.8
Training and other revenue – RayStation 2.9 0.8 1.4 0.5 0.3 5.6 2.3
Net sales 150.5 141.0 116.3 205.0 111.7 612.8 584.9
Sales growth, corresp. period, % 34.7% -0.4% -8.3% 7.1% -11.2% 7.2% 10.1%
Organic sales growth, corresp. period, % 27.5% -0.7% -3.2% 9.4% -8.9% 7.7% 10.2%

1 IFRS 15 compliance, see Notes 1-2.

2 IAS 18 compliance.

3 IFRS 15 compliance in 2018, and IAS 18 compliance in the remaining quarters.

During the first nine months of 2018, sales rose 7.3 percent to SEK 407.8 M (380.1), of which revenue from RayStation and RayCare rose 9.5 percent to SEK 371.3 M (339.1). Without application of the new accounting policies, net sales would have risen 19.4 percent, see Notes 1-2.

During the first nine months, net sales had the following geographic distribution: North America, 44 percent (42); Asia, 12 percent (17); Europe and the rest of the world, 44 percent (41).

Recurring support revenue from RayStation rose 87 percent to SEK 66.9 M (35.8), representing 16 percent (9) of net sales during the nine-month period.

Revenue from sales of software modules via partners declined 9 percent to SEK 36.5 M (41.0), representing 8.9 percent (10.8) of net sales.

OPERATING PROFIT

In the third quarter of 2018, operating profit increased to SEK 12.4 M (0.7), representing an operating margin of 8.3 percent (0.6). The earnings improvement was attributable to sharply increased sales and positive currency effects on net sales.

IFRS 15 came into effect on January 1, 2018, which has deferred the company's revenue recognition and reduced operating profit by SEK 13.1 M in the third quarter of 2018, see Notes 1-2. Without application of the new accounting policies, operating profit would have increased to SEK 25.5 M in the third quarter, representing an operating margin of 15.3 percent.

Operating expenses rose 28.9 percent to SEK 121.4 M (94.3), mainly because the company has increased its employees by 16 percent since the third quarter of 2017, primarily in the global marketing organization and in research and development. In addition, the company's amortization/depreciation expenses have increased, mainly due to the launch of RayCare.

Other operating income and expenses relate to exchange-rate gains and losses, which amounted to SEK -6.0 M (-10.7) net in the third quarter of 2018 due to the large proportion of accounts receivable in USD and EUR, which weakened compared with the Swedish SEK in the third quarter, compared with the end of the second quarter.

During the first nine months, operating profit declined to SEK 52.8 M (61.0), representing an operating margin of 12.9 percent (16.0). The weaker earnings were largely attributable to the application of IFRS 15.

Without application of the new accounting policies, operating profit would have increased to SEK 94.1 M in the first nine months, representing an operating margin of 21.1 percent, see Notes 1-2.

Currency effects

The company is impacted by USD and EUR to SEK exchange-rate trends, since most sales are invoiced in USD and EUR, while most costs are in SEK. At unchanged exchange rates, organic sales growth was 27.5 percent in the third quarter of 2018, compared with the year-earlier period. Currency effects therefore had a clearly positive impact on the company's net sales and operating profit in the third quarter of 2018, despite exchange-rate losses of SEK 6.0 M (10.7) on balance sheet items.

A sensitivity analysis of the company's currency exposure shows that a 1-percentage point change in the USD exchange rate against the SEK would have impacted consolidated operating profit by approximately +/- SEK 4.7 M in the third quarter of 2018, while a corresponding change in the EUR exchange rate would have impacted consolidated operating profit by approximately +/- SEK 2.4 M.

The company follows the financial policy established by the Board, whereby exchange-rate fluctuations are not hedged.

Capitalization of development costs

At September 30, 2018, some 149 (141) employees were engaged in research and development.

Capitalization of development costs Q3-18 Q2-18 Q1-18 Q4-17 Q3-17 Rolling
12 months
Full-year
2017
Research and development costs 42.8 53.4 50.4 59.7 41.7 206.3 183.7
Capitalization of development costs -31.5 -39.2 -38.7 -46.2 -30.7 -155.6 -137.8
Amortization of capitalized development costs 25.0 22.0 23.1 13.7 14.8 83.8 58.4
Research and development costs after
adjustments for capitalization and
36.3 36.2 34.8 27.2 25.8 134.5 104.3

amortization of development costs

During the first nine months, research and development costs rose 18.2 percent to SEK 146.6 M (124.0), of which development costs of SEK 109.4 M (91.6) were capitalized. The increase was mainly due to higher development costs for RayCare. In the first nine months, amortization of capitalized development costs amounted to SEK 70.1 M (44.7). After adjustments for capitalization and amortization of development costs, research and development costs rose 39.1 percent to SEK 107.3 M (77.1).

Amortization and depreciation

In the third quarter of 2018, total amortization and depreciation amounted to SEK 29.8 M (18.0), of which the amortization of intangible fixed assets accounted for SEK 25.1 M (14.8), mainly related to capitalized development costs. Depreciation of tangible fixed assets amounted to SEK 4.7 M (3.2).

During the first nine months, total amortization and depreciation amounted to SEK 82.8 M (54.3), of which the amortization of intangible fixed assets accounted for SEK 70.1 M (44.7), mainly related to capitalized development costs. Depreciation of tangible fixed assets amounted to SEK 12.7 M (9.6).

PROFIT AND EARNINGS PER SHARE

In the third quarter of 2018, profit after tax totaled SEK 13.5 M (-1.0), representing earnings per share of SEK 0.39 (-0.03) before and after dilution. In the first nine months, profit after tax totaled SEK 45.9 M (45.3), representing earnings per share of SEK 1.34 (1.32) before and after dilution.

Tax expense for the first nine months of the year amounted to SEK 5.2 M (13.1), corresponding to an effective tax rate of 10.1 percent (22.4). The low tax expense was partly attributable to a remeasured and dissolved tax reserve in the North American subsidiary, and a lower tax rate in the US due to the US Tax Reform, which took effect on January 1, 2018. The new corporate tax rates introduced in Sweden in June 2018 also impacted the effective tax rate and reduced the Group's tax expense by SEK 4.0 M.

CASH FLOW AND LIQUIDITY

Cash flow from operating activities declined to SEK -12.9 M (35.7) in the third quarter of 2018, mainly due to an increase in working capital. Working capital primarily comprises accounts receivable and accrued income. At the end of the period, accounts receivable accounted for 38 percent (42) of net sales over the past 12 months, and accrued income for 43 percent (17) of net sales over the same period.

RaySearch has agreements with customers whereby deliveries have long payment terms, which is standard in the industry. The company recognizes accounts receivable when there is an unconditional right to consideration, and accrued income when delivery has occurred but an invoice has not been issued, such as when a payment plan exists. The subsequent effect is that the Group's accounts receivable and accrued income, respectively, add up to relatively high amounts compared with net sales. Over the past 12 months, accounts receivable have declined in relation to net sales, while accrued income has risen sharply because the company has signed more agreements in North America with payment plans. The company expects its credit risk to remain low since the counterparties are institutions with high credit ratings.

In the third quarter, cash flow from investing activities was SEK -43.2 M (-33.4). Investments in intangible fixed assets amounted to SEK -31.5 M (-30.7), comprising capitalized development costs for RayStation and RayCare. Investments in tangible fixed assets amounted to SEK -11.7 M (-2.7), mainly related to investments in two new offices in North America, and one expanded office in Stockholm.

During the first nine months, cash flow from investing activities was SEK -150.4 M (-101.9). Investments in intangible fixed assets amounted to SEK -109.4 M (-91.6), comprising capitalized development costs. Investments in tangible fixed assets amounted to SEK -41.0 M (-11.8).

Cash flow before financing activities was SEK -56.2 M (2.3) in the third quarter of 2018, and SEK -92.5 M (-1.2) in the first nine months of 2018.

Cash flow from financing activities was SEK 39.2 M (-1.0) in the third quarter of 2018. During the first nine months of 2018, cash flow from financing activities was SEK 37.6 M (-14.3).

Cash flow for the period totaled SEK -55.0 M (-15.5) for the first nine months of 2018, and at September 30, 2018, the Group's cash and cash equivalents amounted to SEK 52.9 M (69.6).

FINANCIAL POSITION

At September 30, 2018, RaySearch's total assets amounted to SEK 1,043 M (756) and the equity/assets ratio was 59.9 percent (67.2).

Current receivables amounted to SEK 547.1 M (349.7). The receivables mainly comprised accounts receivable and accrued income, and the increase was primarily due to more agreements with long payment terms.

In the fourth quarter of 2017, the company signed a six-year lease for a new office space in San Francisco with commencement in the second quarter of 2018, and a ten-year lease for a new office space in New York with commencement in the third quarter of 2018 due to renovations. In 2018, the company also signed a three-year lease for additional office space in Stockholm with commencement in the third quarter of 2018.

In 2017, the company's line of credit was increased from SEK 100 M to SEK 350 M. The credit line expires in May 2021 and comprises a revolving loan facility of up to SEK 300 M and an overdraft facility of SEK 50 M. Chattel mortgages amount to SEK 100 M. At September 30, 2018, a short-term loan of SEK 74 M (40) was raised under the company's revolving loan facility and SEK 39.9 M (0) of the credit facility had been drawn.

At September 30, 2018, the Group's net debt amounted to SEK 69.1 M (-20.1).

EMPLOYEES

The average number of employees in the Group was 286 (240) in the third quarter, and 278 (220) in the January-September period of 2018. At the end of the third quarter, the Group had 290 (251) employees, of whom 222 (199) were based in Sweden, and 68 (52) in foreign subsidiaries.

PARENT COMPANY

RaySearch Laboratories AB (publ) is the Parent Company of the RaySearch Group. Since the Parent Company's operations are consistent with the Group's operations in all material respects, the comments for the Group are also largely relevant for the Parent Company. However, the capitalization of development costs and items related to finance leases are recognized in the Group, but not in the Parent Company.

Differences in profitability between the Parent Company and the Group are attributable to the Parent Company accounting for a relatively high proportion of operating expenses, and to the capitalization of development costs being recognized in the Group but not in the Parent Company.

The weaker earnings for the Parent Company are partly due to the application of IFRS 15 as of January 1, 2018, which has deferred the company's revenue recognition and reduced the company's operating profit by approximately SEK 6.7 M in the third quarter of 2018, and SEK 20.7 M in the first nine months.

The Parent Company's current receivables mainly comprise receivables from Group companies and accounts receivable.

SIGNIFICANT EVENTS DURING THE PERIOD

Strategic partnership with MD Anderson to improve radiation therapy

In February 2018, it was announced that the University of Texas MD Anderson Cancer Center and RaySearch had entered into a strategic partnership to improve cancer radiation therapy. The aim is to achieve greater precision when treating tumors and to improve and increase access to an existing radiation therapy approach – adaptive radiation therapy (ART) – which, at present, is largely limited to highly specialized cancer centers.

RayStation selected by several leading cancer centers

In 2018, some of the largest and most respected cancer centers in the world selected RayStation as their treatment planning system, including the Georgia Proton Treatment Center, Mission Health SECU Cancer Center and the Swedish Cancer Institute in the US, CHU de Québec-Université Laval and Centre intégré universitaire de santé et de service sociaux de l'Estrie-Centre hospitalier universitaire de Sherbrooke and Centre intégré de cancérologie de Laval in Canada, the Heidelberg Ion Beam Therapy Center (HIT) and Marburg Ion Beam Therapy Center (MIT) in Germany, and Leeds Center and Advanced Oncotherapy (AVO) in the UK. In addition, the University Medical Center Groningen in the Netherlands and the University of California, San Francisco in the US expanded their existing RayStation installations.

RayStation selected by several leading cancer centers

In the third quarter, Advanced Oncotherapy (AVO) in the UK selected RayCare as its oncology information system (OIS), bringing the total number of commercial orders for RayCare in 2018 to three.

Share conversion

In March 2018, 200,000 Class A shares were converted to Class B at the request of a shareholder. The total number of votes in RaySearch was thereafter 110,377,548. The total number of registered shares in RaySearch is 34,282,773, of which 8,454,975 are Class A and 25,827,798 Class B.

Collaborative agreement for RayCare with Heidelberg University Hospital

In April 2018, it was announced that RaySearch had entered into a long-term collaborative agreement for RayCare with Heidelberg University Hospital in Germany. The collaboration will also involve the two affiliated sites, Heidelberg Ion Beam Therapy Center (HIT) and Marburg Ion Beam Therapy Center (MIT).

Collaborative agreement for brachytherapy with Eckert & Ziegler BEGIG

RaySearch and Eckert & Ziegler BEBIG, a leading European manufacturer of brachytherapy products, have entered into a collaborative agreement to integrate RayStation and RayCare with Eckert & Ziegler BEBIG's brachytherapy system.

Research collaboration and licensing agreement for carbon-ion therapy with NIRS/QST

Research collaboration and a long-term licensing agreement for carbon-ion therapy have been concluded with the National Institute of Radiological Sciences (NIRS) and the National Institutes for Quantum and Radiological Science and Technology (QST) in Japan, which will lead to the integration of NIRS's microdosimetric kinetic model (MKM) in RayStation.

RayStation 8A released

In June, it was announced that RaySearch had released RayStation 8A, the latest version of the innovative treatment planning system. The new version includes, for example, support for the TomoDirectTM treatment method with Accuray's TomoTherapy and Radixact systems. In addition, the functionality for proton and carbonion therapy has been developed, and the integration with RayCare expanded.

RayCare 2A and RayCare 2B released

In the third quarter, RaySearch released RayCare 2A and RayCare 2B, the latest versions of this groundbreaking oncology information system (OIS). RayCare is undergoing rapid development based on clinical feedback from some of the world's leading cancer centers. The new versions introduce a range of new features, including activity and rule-based scheduling for all clinical resources, clinical document management, support for full treatment delivery, workflow management and offline activity-based image analysis, and additional features for care administration and the management of external contacts.

Collaborative agreement for RayCare with the Princess Margaret Cancer Center

In July, it was announced that RaySearch had entered into a long-term collaborative agreement for RayCare with the Princess Margaret Cancer Center, part of the University Hospital Network in Toronto, Canada. "The Princess Margaret Cancer Center is one of the leading cancer centers in the world, and their experience and insights are invaluable for the continued development of RayCare. Our collaboration has been ongoing for more than ten years and forms one of the pillars for all of RaySearch's efforts to achieve better cancer care. We are working together to take cancer care to a higher level and make patient-centered care real," says Johan Löf, President and CEO of RaySearch.

SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD

RayCare – now in clinical use

Since October 8, 2018, RayCare and RayStation have been used to plan and manage the treatment of patients at Provision CARES Proton Therapy Center in Nashville in the US. In February, it was announced that the radiation therapy department of Iridium Kankernetwerk in Belgium uses RayCare in its clinical operations to manage treatment planning workflows. However, Provision CARES Proton Therapy Center in Nashville is the first center to connect RayCare directly to a therapy system (ProNova SC360) to register and verify the treatments.

Collaborative agreement for imaging systems and visualization solutions with Canon Medical Systems

RaySearch and Canon Medical Systems Corporation entered into a collaborative agreement to enable a seamless integration between RaySearch's advanced treatment planning system and oncology information system, and Canon Medical's imaging systems and advanced visualization solutions. The goal is to create a more efficient workflow for virtual simulation.

THE COMPANY'S SHARE

At September 30, 2018, the total number of registered shares in RaySearch was 34,282,773, of which 8,454,975 were Class A and 25,827,798 Class B shares. The quotient value is SEK 0.50 and the company's share capital amounts to SEK 17,141,386.50. Each Class A share entitles the holder to ten votes, and each Class B share to one vote, at a general meeting. At September 30, 2018, the total number of votes in RaySearch was 110,377,548.

SHARE OWNERSHIP

At September 28, 2018, the total number of shareholders in RaySearch was 7,244 and the largest shareholders, according to Euroclear, were as follows:

Share
Class A Class B capital,
Name shares shares Total shares % Votes, %
Johan Löf 6,243,084 618,393 6,861,477 20.0 57.1
Swedbank Robur Funds 0 3,211,839 3,211,839 9.4 2.9
First AP Fund 0 2,864,138 2,864,138 8.4 2.6
Second AP Fund 0 1,929,651 1,929,651 5.6 1.8
Montanaro Funds 0 1,527,436 1,527,436 4.5 1.4
Lannebo Funds 0 1,490,545 1,490,545 4.4 1.4
Anders Brahme 1,150,161 200,000 1,350,161 3.9 10.6
Carl Filip Bergendal 1,061,577 144,920 1,206,497 3.5 9.8
JP Morgan (UK) 0 1,182,157 1,182,157 3.5 1.1
State Street Bank & Trust 0 855,687 855,687 2.5 0.8
Total, 10 largest shareholders 8,454,822 14,024,766 22,479,588 65.6 89.3
Others 153 11,803,032 11,803,185 34.4 10.7
Total 8,454,975 25,827,798 34,282,773 100.0 100.0

OTHER INFORMATION

2019 ANNUAL GENERAL MEETING

RaySearch's 2019 Annual General Meeting will be held on May 28, 2019 at 6:00 p.m. at the company's office on Sveavägen 44, Stockholm, Sweden. Shareholders wishing to have a matter addressed at the AGM must submit a written request to the Board of Directors. Such a request must normally have been received by the Board of Directors not later than seven (7) weeks prior to the AGM.

RISKS AND UNCERTAINTIES

As a global Group with operations in different parts of the world, RaySearch is exposed to various risks and uncertainties, such as market risk, operational risk and financial risk. RaySearch's risk management aims to identify, measure and reduce risks related to the Group's transactions and operations. No significant changes have been made to the risk assessment compared with the 2017 Annual Report. For more information about risks and risk management, refer to pages 8-10 and 33-34 of RaySearch's 2017 Annual Report.

SEASONAL VARIATIONS

RaySearch's operations are somewhat characterized by seasonal variations that are typical for the industry, whereby the fourth quarter is normally the strongest – mainly because many customers have budgets that follow the calendar year – and the second quarter is normally the weakest.

ENVIRONMENT AND SUSTAINABILITY

RaySearch works actively to reduce the company's negative environmental impact and to become a sustainable enterprise. The company's products, comprising software to improve radiation therapy for cancer, have a limited negative environmental impact. The company's environmental impact is mainly related to the purchase of goods and services, energy use and transportation. RaySearch aims to contribute to sustainable development and therefore works actively to improve the company's environmental performance wherever this is financially viable.

Stockholm, November 15, 2018

Johan Löf President and Board member

AUDITOR'S REVIEW REPORT

INTRODUCTION

We have conducted a review of the interim financial information (interim report) for RaySearch Laboratories AB (publ) at September 30, 2018 and for the nine-month period that ended on that date. The Board of Directors and the President are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express an opinion on this interim report based on our review.

SCOPE OF THE REVIEW

We have conducted our review in accordance with the International Standard on Review Engagements, ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical audit and other review procedures. A review has a different focus and is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing standards.

The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the opinion expressed on the basis of a review does not give the same assurance as an opinion expressed on the basis of an audit.

OPINION

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group, and in accordance with the Swedish Annual Accounts Act for the Parent Company.

Stockholm, November 15, 2018 Ernst & Young AB

Per Hedström Authorized Public Accountant

FOR FURTHER INFORMATION, PLEASE CONTACT:

Johan Löf, CEO Tel: +46 (0)8 510 530 00 E-mail:[email protected] Peter Thysell, CFO Tel: +46 (0)70 661 05 59 E-mail: [email protected]

The information contained in this interim report is such that RaySearch Laboratories AB (publ) is obliged to disclose under the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication on November 15, 2018 at 7:45 a.m. CET.

FINANCIAL CALENDAR

Year-end report, 2018 February 20, 2019 Interim report for the first quarter, 2019 May 9, 2019 Annual General Meeting 2019 May 28, 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IN SUMMARY

AMOUNTS IN SEK 000s JUL-SEP JAN-SEP OCT 2017- FULL-YEAR
Note 20181 20172 20181 20172 SEP 20183 20172
Net sales
2.3
150,479 111,703 407,775 380,125 612,736 585,086
Cost of goods sold4 -10,674 -5,969 -31,702 -26,877 -41,475 -36,650
Gross profit 139,805 105,734 376,073 353,248 571,261 548,436
Other operating income 0 - 26,583 - 33,595 7,012
Selling expenses -67,204 -56,886 -178,218 -148,799 -234,271 -204,852
Administrative expenses -17,872 -11,667 -59,021 -43,049 -79,219 -63,247
Research and development costs -36,339 -25,770 -107,325 -77,053 -134,576 -104,304
Other operating expenses -5,970 -10,745 -5,306 -23,376 -5,306 -23,376
Operating profit 12,421 666 52,787 60,971 151,485 159,669
Result from financial items -914 -1,277 -1,738 -2,536 -2,970 -3,768
Profit before tax 11,506 -611 51,048 58,435 148,514 155,901
Tax 1,994 -417 -5,174 -13,097 -30,351 -38,274
Profit/loss for the period5 13,500 -1,028 45,874 45,338 118,163 117,627
OTHER COMPREHENSIVE INCOME
Items to be reclassified to profit or loss
Translation difference of foreign operations for the period 22 905 -1,339 2,601 -1,330 2,610
Comprehensive income for the period5 13,522 -123 44,535 47,939 116,833 120,237
Earnings/loss per share before and after dilution (SEK) 0.39 -0.03 1.34 1.32 3.45 3.43

1 IFRS 15 compliance, see Notes 1-2.

2 IAS 18 compliance.

3 IFRS 15 compliance in 2018, and IAS 18 compliance in the remaining two quarters.

4Does not include amortization of capitalized development costs, which is included in research and development costs.

5 Wholly (100%) attributable to Parent Company shareholders.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY IN SUMMARY

AMOUNTS IN SEK 000s JUL-SEP JAN-SEP FULL-YEAR
2018 2017 2018 2017 2017
Opening balance 611,438 508,250 580,425 460,188 460,188
Profit/loss for the period 13,500 -1,028 45,874 45,338 117,627
Translation difference for the period 22 905 -1,339 2,601 2,610
Closing balance 624,960 508,127 624,960 508,127 580,425

CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN SUMMARY

AMOUNTS IN SEK 000s Note Sep 30,
2018
Sep 30,
2017
Dec 31,
2017
ASSETS
Intangible fixed assets 361,875 290,201 322,598
Tangible fixed assets 65,833 38,417 36,114
Deferred tax assets 2,530 455 780
Other long-term receivables 12,555 7,203 11,684
Total fixed assets 442,793 336,276 371,176
Inventories 226 722 33
Current receivables 547,103 349,680 439,699
Cash and cash equivalents 52,893 69,591 104,156
Total current assets 600,222 419,993 543,888
TOTAL ASSETS 1,043,015 756,269 915,064
EQUITY AND LIABILITIES
Equity 2 624,960 508,127 580,425
Deferred tax liabilities 98,215 80,937 92,424
Long-term liabilities to credit institutions 7,943 10,596 9,751
Accounts payable 21,537 28,427 27,403
Current liabilities to credit institutions 114,055 38,933 74,033
Other current liabilities 2 176,305 89,249 131,028
TOTAL EQUITY AND LIABILITIES 1,043,015 756,269 915,064

CONSOLIDATED STATEMENT OF CASH FLOW IN SUMMARY

AMOUNTS IN SEK 000s JUL-SEP JAN-SEP FULL-YEAR
Note 2018 2017 2018 2017 2017
Profit/loss before tax 11,506 -611 51,048 58,435 155,901
Adjusted for non-cash items1) 37,087 12,832 62,615 31,875 56,181
Taxes paid -10,091 -5,308 -37,399 -13,193 -11,724
Cash flow from operating activities before
changes in working capital
38,502 6,913 76,264 77,117 200,358
Cash flow from changes in working capital -51,385 28,756 -18,406 23,579 -52,877
Cash flow from operating activities -12,883 35,669 57,858 100,696 147,481
Cash flow from investing activities -43,298 -33,412 -150,367 -101,925 -148,132
Cash flow from financing activities 39,150 -1,025 37,557 -14,255 19,773
Cash flow for the period -17,031 1,232 -54,952 -15,484 19,122
Cash and cash equivalents at the beginning of the
period
69,153 70,165 104,156 87,720 87,720
Exchange-rate difference in cash and cash
equivalents
771 -1,806 3,689 -2,645 -2,686
Cash and cash equivalents at the end of the
period
52,893 69,591 52,893 69,591 104,156

1) These amounts mainly include amortization of capitalized development costs.

PARENT COMPANY INCOME STATEMENT IN SUMMARY

AMOUNTS IN SEK 000s JUL-SEP
JAN-SEP
FULL-YEAR
Note 20181 20172 20181 20172 20172
Net sales 111,789 91,753 305,643 308,697 480,774
Cost of goods sold3) -4,759 -4,261 -14,563 -12,868 -19,548
Gross profit 107,030 87,492 291,080 295,829 461,226
Other operating income - - 26,583 - 7,012
Selling expenses -38,915 -40,765 -104,834 -101,067 -133,066
Administrative expenses -17,745 -11,903 -58,685 -43,623 -64,065
Research and development costs -42,761 -41,737 -146,602 -124,035 -183,683
Other operating expenses -5 970 -10,745 -5,318 -23,376 -23,376
Operating profit 1,639 -17,658 2,224 3,728 64,048
Result from financial items -784 -1,115 -1369 -2,085 2,887
Profit/loss after financial items 855 -18,773 855 1,643 66,935
Appropriations - - - - -19,815
Profit/loss before tax 855 -18,773 855 1,643 47,120
Tax -1,793 3,146 -1,793 -2,241 -13,227
Profit/loss for the period -938 -15,627 -938 -598 33,893

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME

AMOUNTS IN SEK 000s JUL-SEP JAN-SEP FULL-YEAR
20181 20172 20181 20172 20172
Profit/loss for the period -938 -15,627 -938 -598 33,893
Other comprehensive income - - - - -
Comprehensive income for the period -938 -15,627 -938 -598 33,893

1 IFRS 15 compliance, see Notes 1-2.

2 IAS 18 compliance.

3Does not include amortization of capitalized development costs, which is included in research and development costs.

PARENT COMPANY BALANCE SHEET IN SUMMARY

AMOUNTS IN SEK 000s Note Sep 30,
2018
Sep 30,
2017
Dec 31,
2017
ASSETS
Tangible fixed assets 27,704 25,251 23,686
Shares and participations 1,772 1,046 1,046
Deferred tax assets 742 455 780
Other long-term receivables 12,373 3,844 10,405
Total fixed assets 42,591 30,596 35,917
Inventories 226 722 33
Current receivables 539,299 363,866 458,270
Cash and cash equivalents 5,549 35,582 42,857
Total current assets 545,074 400,170 501,160
TOTAL ASSETS 587,665 430,766 537,077
EQUITY AND LIABILITIES
Equity 271,117 237,563 272,054
Untaxed reserves 97,510 77,695 97,510
Accounts payable 19,860 32,064 30,168
Current liabilities to credit institutions 114,055 38,933 74,033
Other current liabilities 85,123 44,511 63,312
TOTAL EQUITY AND LIABILITIES 587,665 430,766 537,077

NOTES, GROUP

NOTE 1 ACCOUNTING POLICIES

The RaySearch Group applies International Financial Reporting Standards (IFRS) as adopted by the EU. The accounting policies applied are consistent with those described in the 2017 Annual Report for RaySearch Laboratories AB (publ), which is available on www.raysearchlabs.com This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company applies the Swedish Annual Accounts Act and RFR 2 Accounting for Legal Entities. The interim report for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act, Chapter 9, Interim report.

New or revised accounting standards applicable to annual reporting periods beginning on or after January 1, 2018. As of January 1, 2018, RaySearch has applied IFRS 9 Financial Instruments, and IFRS 15 Revenue from Contracts with Customers. RaySearch otherwise applies the same accounting policies as those set out in the 2017 Annual Report.

IFRS 9 Financial Instruments has replaced IAS 39 Financial Instruments: Recognition and Measurement. The new policies for the classification and measurement of financial assets had no impact on the Group's earnings and position. The new model for calculating credit losses impacts the impairment process, but had no significant impact on the Group's earnings and position. The company follows the financial policy established by the Board, whereby exchange-rate fluctuations are not hedged, and are not therefore impacted by the new policies for hedge accounting.

IFRS 15 Revenue from Contracts with Customers has replaced previously issued revenue standards and interpretations. Under IFRS 15, revenue is recognized when a promised good or service is transferred to the customer, which may occur over time, or at a point in time. Revenue is the amount the company expects to receive as payment for the transfer of goods or services.

IFRS 15 will be applied as of January 1, 2018. Transition to the standard was achieved by using a forwardlooking retroactive transitional method, whereby any transition effects were recognized against equity on January 1, 2018, and by presenting the income statement in accordance with IFRS 15 as of 2018. As no significant agreements were in effect at the end of the year, according to the previously applied accounting policies, no transition effect arose at January 1, 2018.

The IFRS 15 transition impacts license and support revenues from RayStation and RayCare, mainly attributable to the warranty period and the training courses offered by the company. Under IFRS 15, the license revenue recognized is reduced by an amount equal to the value of the support provided during the agreed warranty period, and this amount is then recognized over time during the warranty period. The transition to IFRS 15 will reduce the company's license revenue from RayStation and RayCare, while the company's support revenue will increase by the same amount, with an average deferral period of about nine months.

New or revised accounting standards that will become effective in forthcoming periods

IFRS 16 Leases will come into effect on January 1, 2019. RaySearch has begun evaluating the effects of the new standard and the assessment is that the company will be impacted by the new standard by having to recognize leases for premises and other sizable assets on the balance sheet.

NOTE 2 IMPACT OF CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

IFRS 15 Revenue from Contracts with Customers

The following tables summarize the impact of the transition to IFRS 15 on the consolidated income statement for the third quarter and the first nine months of 2018, and on the consolidated balance sheet at September 30, 2018. The transition to IFRS 15 has no material effect on consolidated cash flow.

AMOUNTS IN SEK 000s JUL-SEP 2018 JAN-SEP 2018
Recognized in
accordance
with IFRS 15
Adjustments Amounts
according to
previous
standard (IAS
18)
Recognized in
accordance
with IFRS 15
Adjustments Amounts
according to
previous
standard (IAS
18)
Revenue
License revenue – RayStation/RayCare 89,445 20,211 109,656 264,240 53,892 318,132
Hardware revenue – RayStation/RayCare 16,659 0 16,659 34,956 0 34,956
License revenue – Partners 9,729 0 9,729 28,206 0 28,206
Support revenue – RayStation 28,818 -4,729 24,089 66,872 -5,650 61,222
Support revenue – Partners 2,846 0 2,846 8,276 0 8,276
Training and other revenue – RayStation 2,983 -1,559 1,424 5,226 -2,307 2,919
Net sales 150,479 13,924 164,403 407,775 45,936 453,711
Operating expenses -138,058 -873 -138,931 -354,988 -2,875 -357,863
Operating profit 12,421 13,051 25,472 52,787 43,061 95,848
Profit before tax 11,506 13,051 24,558 51,048 43,061 94,109
Tax 1,994 -2,612 -619 -5,174 -9,215 -14,389
Profit for the period 13,500 10,439 23,940 45,875 33,846 79,721
Comprehensive income for the period 13,522 10,439 23,961 44,535 33,846 78,381
AMOUNTS IN SEK 000s Sep 30, 2018
Recognized in
accordance
with IFRS 15
Adjustments Amounts
according to
previous
standard (IAS
18)
Equity and liabilities
Equity 624,960 33,846 658,806
Deferred tax liabilities 98,215 0 98,215
Long-term interest-bearing liabilities 7,943 0 7,943
Accounts payable 21,537 0 21,537
Current liabilities to credit institutions 114,055 0 114,055
Contractual liabilities 121,591 -45,936 75,655
Other current liabilities 54,714 12,090 66,804
Total liabilities and equity 1,043,015 0 1,043,015

NOTE 3 REVENUE FROM CONTRACTS WITH CUSTOMERS

RaySearch conducts sales of goods and services in various regions. Revenue from sales of licenses and hardware is recognized in profit or loss at a point in time, while revenue from sales of training and support is recognized over time.

AMOUNTS IN SEK 000s JUL-SEP 2018 JAN-SEP 2018
RayStation/RayCare Partner Total RayStation/RayCare Partner Total
Revenue by type
Licenses 89,445 9,729 99,174 264,240 28,206 292,446
Support 28,818 2,846 31,664 66,872 8,276 75,148
Hardware 16,659 0 16,659 34,956 0 34,956
Training and other 2,983 0 2,983 5,226 0 5,226
Total revenue from contracts with customers 137,904 12,575 150,479 371,293 36,482 407,775
Revenue by geographic market
North America 67,617 6,215 73,832 170,308 16,734 187,042
APAC 15,609 1,417 17,026 43,616 4,286 47,902
Europe and rest of the world 54,678 4,944 59,622 157,369 15,463 172,832
Total revenue from contracts with customers 137,904 12,575 150,479 371,293 36,482 407,775
Revenue by date for revenue recognition
Goods/services transferred at a point in time1 106,104 9,729 115,833 299,196 28,206 327,402
Services transferred over time2 31,801 2,846 34,646 72,098 8,276 80,373
Total revenue from contracts with customers 137,904 12,575 150,479 371,293 36,482 407,775

1 Licenses and hardware

2 Support, training and other

NOTE 4 ESTIMATES

Preparation of the interim report requires that company management makes estimates that affect the carrying amounts. The actual outcome could deviate from these estimates. The critical sources of uncertainty in the estimates are the same as those in the most recent Annual Report.

NOTE 5 FINANCIAL INSTRUMENTS

RaySearch's financial assets and liabilities comprise accounts receivable, cash and cash equivalents, accrued income, accrued expenses, accounts payable, bank loans and finance leases. Accrued income and receivables are discounted, while other financial assets and liabilities have short maturities. Accordingly, the fair values of all financial instruments are deemed to correspond approximately to their carrying amounts. RaySearch has not applied net accounting to any financial assets or liabilities, and has no agreements that permit offsetting.

NOTE 6 RELATED-PARTY TRANSACTIONS

No transactions were conducted between RaySearch and related parties with any material impact on the company's position and earnings during the period.

NOTE 7 PLEDGED ASSETS IN THE GROUP AND PARENT COMPANY

AMOUNTS IN SEK 000s SEP 30, 2018 SEP 30, 2017
Chattel mortgages 100,000 100,000
Guarantees 8,001 4,079

GROUP QUARTERLY OVERVIEW

2018 2017 2016
AMOUNTS IN SEK 000s Q31 Q21 Q11 Q42 Q32 Q22 Q12 Q42
Income statement
Net sales 150,479 141,039 116,257 204,961 111,703 141,634 126,788 191,355
Sales growth, % 34.7 -0.4 -8.3 7.1 -11.2 19.0 32.9 45.0
Operating profit 12,421 26,258 14,108 98,698 666 26,839 33,466 100,249
Operating margin, % 8.3 18.6 12.1 48.2 0.6 18.9 26.4 52.4
Profit/loss for the period 13,500 20,595 11,779 72,289 -1,028 20,092 26,274 75,924
Net margin, % 9.0 14.6 10.1 35.3 -0.9 14.2 20.7 39.7
Cash flow
Operating activities -12,883 14,720 56,021 46,785 35,669 25,640 39,387 73,866
Investing activities -43,298 -64,003 -43,066 -46,207 -33,412 -37,111 -31,402 -31,207
Cash flow before financing activities -56,181 -49,283 12,955 578 2,257 -11,471 7,985 42,659
Financing activities 39,150 -979 -614 34,028 -1,025 -2,239 -10,991 13,940
Cash flow for the period -17,031 -50,262 12,341 34,606 1,232 -13,710 -3,006 56,599
Capital structure
Equity/assets ratio, % 59.9 61.4 63.5 63.4 67.2 67.1 66.2 64.2
Net debt 69,105 13,595 -34,701 -20,372 -20,062 -20,841 -32,869 -26,193
Debt/equity ratio 0.1 0.0 -0.1 0.0 0.0 -0.0 -0.1 -0.1
Net debt/EBITDA 0.3 0.1 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1
Per share data, SEK
Earnings per share before dilution 0.39 0.60 0.34 2.11 -0.03 0.59 0.77 2.21
Earnings per share after dilution 0.39 0.60 0.34 2.11 -0.03 0.59 0.77 2.21
Equity per share 18.23 17.84 17.28 16.93 14.82 14.83 14.20 13.42
Share price at the end of the period 122.3 105.0 123.0 171.0 173.5 235.5 235.0 184.5
Other
No. of shares before and after
dilution, 000s 34,282.8 34,282.8 34,282.8 34,282.8 34,282.8 34,282.8 34,282.8 34,282.8
Average no. of employees 286 280 267 253 240 219 201 192

GROUP, ROLLING 12 MONTHS

AMOUNTS IN SEK 000s Oct 2017-
Sep 20183
Jul 2017-
Jun 20183
Apr 2017-
Mar 20182
Jan 2017-
Dec 20172
Oct 2016-
Sep 20172
Jul 2016-
Jun 20172
Apr 2016-
Mar 20172
Jan 2016-
Dec 20162
Income statement
Net sales 612,735 573,960 574,555 585,086 571,480 585,507 562,855 531,468
Operating profit 151,485 139,730 140,311 159,669 161,220 199,019 209,673 199,559
Operating margin, % 24.7 24.3 24.4 27.3 28.2 34.0 37.3 37.5

1 IFRS 15 compliance, see Notes 1-2.

2 IAS 18 compliance.

3 IFRS 15 compliance in 2018, and IAS 18 compliance in the remaining two quarters.

DEFINITIONS OF KEY RATIOS

The interim report refers to a number of non-IFRS financial measures that are used to provide investors and company management with additional information to assess the company's operations. The various non-IFRS measures used to complement the IFRS financial statements are described below.

Non-IFRS measures Definition Reason for using the measure
Order intake The value of all orders received and changes to Order intake is an indicator of future revenue and thus a
existing orders during the current period key figure for the management of RaySearch's
operations
Order backlog The value of orders at the end of the period that The order backlog shows the value of orders already
the company has yet to deliver and recognize as booked by RaySearch that will be converted to revenues
revenue in the future.
Sales growth The change in net sales compared with the year The measure is used to track the performance of the
earlier period expressed as a percentage company's operations between periods
Organic sales growth Sales growth excluding currency effects This measure is used to monitor underlying sales growth
driven by changes in volume, pricing and mix for
comparable units between different periods
Gross profit Net sales minus cost of goods sold Gross profit is used to measure the margin before sales,
Operating profit Calculated as earnings before financial items and research, development and administrative expenses
Operating profit/loss provides an overall picture of the
tax total generation of earnings in operating activities
Operating margin Operating profit/loss expressed as a percentage of Together with sales growth, the operating margin is a
net sales key element for monitoring value creation
Net margin Profit for the period as a percentage of net sales for The net margin shows the percentage of net sales
the period remaining after the company's expenses have been
deducted
Equity per share Equity divided by number of shares at the end of Shows the return generated on the owners' invested
the period capital per share from a shareholder perspective
Rolling 12 months' sales, Sales, operating profit/loss or other results This measure is used to more clearly illustrate the trends
operating profit/loss or measured over the last 12-month period for sales, operating profit/loss and other results, which
other results is relevant because RaySearch's revenue is subject to
monthly variations
Working capital Working capital comprises inventories, operating This measure shows how much working capital is tied up
receivables and operating liabilities, and is obtained in operations and can be shown in relation to net sales
from the statement of financial position. Operating to demonstrate the efficiency with which working
receivables comprise accounts receivable, other capital has been used
receivables and non-interest bearing prepaid
expenses and accrued income. Operating liabilities
include other non-interest bearing long-term
liabilities, advance payments from customers,
accounts payable, other current liabilities and non
interest bearing accrued expenses and deferred
income.
Return on equity Calculated as profit/loss for the period as a Shows the return generated on the owners' invested
percentage of average equity Average equity is capital from a shareholder perspective
calculated as the sum of equity at the end of the
period plus equity at the end of the year-earlier
period, divided by two
Equity/assets ratio Equity expressed as a percentage of total assets This is a standard measure to show financial risk, and is
expressed as the percentage of the total restricted
equity financed by the owners
Net debt Interest-bearing liabilities less cash and cash This measure shows the Group's total indebtedness
equivalents
and interest-bearing current and long-term
receivables
Debt/equity ratio Net debt in relation to equity The measure shows financial risk and is used by
management
to monitor the Group's indebtedness
Net debt/EBITDA Net debt in relation to operating profit before A relevant measure from a credit perspective that shows
depreciation over the past 12-month period the company's
ability to repay its debts

CALCULATION OF FINANCIAL MEASURES NOT INCLUDED IN THE IFRS FRAMEWORK

AMOUNTS IN SEK 000s Sep 30, 2018 Sep 30, 2017 Dec 31, 2017
Working capital
Accounts receivable 234,260 237,992 335,125
Inventories 226 722 33
Accrued income – non-current 12,220 7,203 11,468
Accrued income – current 249,577 89,750 78,482
Other current receivables (excl. tax) 38,207 20,581 25,742
Accounts payable -21,537 -28,427 -27,403
Other current liabilities (excl. tax) -174,105 -127,430 -115,084
Working capital 338,848 200,391 308,363
AMOUNTS IN SEK 000s Sep 30, 2018 Sep 30, 2017 Dec 31, 2017
Net debt
Current interest-bearing liabilities 114,055 38,933 74,033
Non-current interest-bearing liabilities 7,943 10,596 9,751
Cash and cash equivalents -52,893 -69,591 -104,156
Interest-bearing receivables - - -
Net debt 69,105 -20,062 -20,372
AMOUNTS IN SEK 000s Oct 2017-Sep
20181
Oct 2016-Sep
20171
20172
EBITDA
Operating profit 151,485 161,220 159,669
Amortization and depreciation 99,693 70,380 70,790
EBITDA 251,178 231,600 230,459

1 IFRS 15 compliance in 2018, and IAS 18 compliance in the remaining two quarters.

2 IAS 18 compliance.

HEAD OFFICE

RaySearch Laboratories AB (publ) Box 3297 SE-103 65 Stockholm, Sweden

STREET ADDRESS

Sveavägen 44, Floor 7 SE-111 34 Stockholm, Sweden

Tel: +46 (0)8 510 530 00 www.raysearchlabs.com Corporate Registration Number: 556322-6157

ABOUT RAYSEARCH

RaySearch Laboratories AB (publ) is a medical technology company that develops innovative software solutions for improved cancer treatment. The company develops and markets the RayStation treatment planning system and RayCare oncology information system to cancer centers all over the world and distributes the products through licensing agreements with leading medical technology companies. RaySearch's software is currently used by over 2,600 centers in more than 65 countries. The company was founded in 2000 as a spin-off from the Karolinska Institute in Stockholm and the share has been listed on Nasdaq Stockholm since 2003. More information about RaySearch is available at www.raysearchlabs.com

BUSINESS CONCEPT

RaySearch's mission is to contribute to the advancement of cancer care by developing innovative software solutions that improve quality of life for cancer patients and save lives.

BUSINESS MODEL

RaySearch's revenues are generated when customers pay an initial license fee for the right to use RaySearch's software and an annual service fee for access to updates and support. The RayStation treatment planning system and the RayCare oncology information system are developed at RaySearch's head office in Stockholm, and distributed and supported by the company's global marketing organization.

STRATEGY

A radiation therapy center essentially needs two software platforms for its operations: a treatment planning system, and an information system. With RayStation and RayCare, RaySearch will strengthen its position and continue to grow with high profitability. The strategy rests on a strong focus on software development, leading functionality, broad support for many different types of treatment techniques and radiation therapy devices, as well as extensive investments in research and development.

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