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RaySearch Laboratories

Quarterly Report May 19, 2017

3101_10-q_2017-05-19_3d5742ec-92ef-4a8c-b4e2-58d69b6c6b38.pdf

Quarterly Report

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AMOUNTS IN SEK 000S JAN-MAR APR 2016- FULL-YEAR
2017 2016 MAR 2017 2016
Net sales 126,788 95.401 562,855 531.468
Operating profit 33,466 23,352 209,673 199,559
Operating margin, % 26.4 24.5 37.3 37.5
Profit for the period 26,274 17.760 159,922 151.408
Earnings per share before/after dilution, SEK 0.77 0.52 4.66 4.42
Cash flow from operating activities 39,387 21.863 138,372 120,848
Cash flow before financing activities 7,985 $-4,212$ 26,096 13,899
Return on equity, % 6.4 5.8 38.8 38.8
Equity/assets ratio at the end of the period, % 66.2 66.5 66.2 64.2
Share price at the end of the period, SEK 235.00 120.50 235.00 184.50

CEO COMMENTS

CONTINUED POSITIVE TREND DURING THE FIRST QUARTER

We see a continued positive trend for RayStation. Order intake excluding service agreements rose 29 percent to SEK 94 M [73] in the first quarter, mainly driven by continued strong sales in Europe and North America.

RayStation is already well-established in all major global markets as the most advanced treatment planning system for radiation therapy, and global demand for our innovative software is growing. One of RayStation's strengths is that the system can support more

types of radiation therapy devices than any other treatment planning system, and the launch of RayStation 6, for example, has made RayStation the only treatment planning system that can create plans for Accuray's TomoTherapy treatment system, in addition to conventional linear accelerators.

RayStation helps to improve the radiation therapy process and to extend the lifetime of therapy devices, which means they can be used more efficiently. This means that clinics that want to improve and develop their care are no longer dependent on buying the latest hardware - they can achieve similar, positive outcomes by choosing RayStation as their treatment planning system.

Proton therapy is a key area of focus for RaySearch. Due to the two new proton orders we secured in the first quarter, our customers now include a total of 29 proton therapy centers, which gives us a market share of about 30 percent.

In 2017, our global marketing organization will be expanded by adding more employees as well as more subsidiaries, in order to accelerate sales of RayStation and ensure the best-possible customer service.

INCREASED SALES AND IMPROVED EARNINGS

In the first quarter, net sales increased 33 percent to SEK 127 M [95], of which revenues from RayStation rose 39 percent to SEK 112 M [81]. Operating profit rose 43 percent to SEK 33 M [23], representing an operating margin of 26 percent [24]. We are working actively to strengthen our cash flow, which led to a positive cash flow before financing activities of SEK 8 M (neg: 4) in the first quarter.

NEXT-GENERATION ONCOLOGY SOFTWARE

RaySearch's overall objective is to improve cancer care through innovative software. Improving treatment outcomes and quality of life for cancer patients worldwide is the underlying driver of everything we create, and all decisions we make. The launch of RayCare, a next-generation oncology information system, in December 2017 will be an important milestone for both inpatient oncology units and RaySearch. RayCare brings integrated cancer treatment within reach of many cancer clinics, and will create clinical opportunities that existing systems simply cannot do. The response we have received for the clinical value to date has been tremendously positive, and shows how much this system is needed.

To ensure that we meet clinical needs, our development activities are conducted in close collaboration with leading cancer clinics. Our current partners include the University of California, San Francisco in the US, the University Medical Center Groningen in the Netherlands and the radiation therapy department of the Iridium Kankernetwerk in Belgium, and we can now announce that MD Anderson has joined as collaboration partner regarding RayCare. Solving the coordination, safety and efficiency needs of the world's largest cancer care clinics is one of our most exciting challenges to date. Our development model based on partnership with leading clinics provides excellent conditions for success by combining the extensive clinical knowledge and resources of our partners with RaySearch's ability to develop innovative software solutions.

To accelerate the pace of RayCare's development, we will be expanding our development department in 2017, and establishing development offices in two strategic cities: Toronto and San Francisco. These regions are home to many of our business partners and also offer good access to talented people, which will increase our ability to recruit personnel with the right knowledge.

CLEAR PLAN AND SOLID BASE FOR CONTINUED FOCUS

Our sales and earnings will continue to vary by quarter, since order intake remains subject to relatively large fluctuations. However, we are seeing continued sales growth, a steady rise in our recurring support revenues from RayStation and cash flow improvements. Combined with a clear strategic plan, this provides a stable base for continued investments in both RayStation and RayCare.

To date, 400 cancer clinics in 28 countries have purchased RayStation. At the same time, there are more than 8,000 radiation therapy clinics worldwide, and that number is expected to grow 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. While the market is growing steadily, we will continue to grow considerably faster than the market. Our aim is that at least 3,000 clinics will have purchased RayStation within ten years, representing a market share of at about 30 percent.

Software is now driving many of the advances in cancer treatment. RaySearch is uniquely positioned to contribute to this development and we have excellent prospects for succeeding with our joint mission - to continue the advancement of cancer care by developing innovative software solutions that save lives and improve quality of life for cancer patients.

Stockholm, May 19, 2017

Johan Löf President and CEO of RaySearch Laboratories AB (publ)

FINANCIAL INFORMATION

ORDER INTAKE

In the first quarter of 2017, order intake excluding service agreements rose 28.1 percent to SEK 104.9 M [81.9], of which order intake for RayStation excluding service agreements rose 29.2 percent and amounted to SEK 93.8 M (72.6). During the first quarter, order intake in North America and Europe was particularly strong. At March 31, 2017, the order backlog for RayStation was SEK 58.1 M [47.1].

Rolling Full-year
Order intake (amounts in SEK M) $01-17$ 04-16 03-16 $02 - 16$ 01-16 12 months 2016
Order intake excl. service agreements - RauStation 93.8 176.3 91.2 120.8 72.6 482.2 461.0
Order intake excl. service agreements - Partners 11.1 12.7 9.8 8.3 9.3 41.9 40.1
Total order intake excl. service agreements 104.9 189.0 101.1 129.1 81.9 524.1 501.1
Order backlog for RayStation at the end of the
period 58.1 67.6 55.5 65.2 47.1 58.1 67.6

REVENUES

In the first quarter of 2017, net sales rose 32.9 percent to SEK 126.8 M [95.4]. Net sales consist of license revenues from sales of the RayStation treatment planning system, sales of software modules via partners, and support revenues. The growth in net sales was largely a result of sharply increased revenues from RayStation, which rose 39.0 percent to SEK 112.3 M [80.8]. In the first quarter, net sales had the following geographic distribution: North America, 37 percent [26]; Asia, 4 percent [15]; Europe and the rest of the world, 59 percent [59].

Rolling Full-year
Revenues (amounts in SEK M) Kv1-17 04-16 03-16 02-16 01-16 12 months 2016
License revenues - RayStation 99.8 164.3 104.5 100.7 74.0 469.2 443.4
License revenues - Partners 11.1 12.7 9.8 8.3 9.3 41.9 40.1
Support revenues - RayStation 11.5 9.5 8.0 6.9 6.7 35.9 31.1
Support revenues - Partners 3.4 3.9 3.3 2.8 5.4 13.4 15.4
Training and other revenues - RayStation 1.0 1.0 0.1 0.3 0.1 2.4 1.5
Net sales 126.8 191.4 125.7 119.0 95.4 562.9 531.5
Sales growth, corresp. period, % 32.9% 45.0% 25.0% 53.6% 8.7% 38.9% 33.7%
Organic sales growth, corresp. period, % 28.1% 39.2% 24.0% 55.4% 8.7% 35.9% 31.6%

Recurring support revenues from RayStation rose 73 percent to SEK 11.5 M [6.7], representing 10.3 percent [8.3] of total revenues from RauStation.

Revenues from sales of software modules via partners declined 1 percent to SEK 14.5 M (14.6), representing 11.4 percent (15.3) of net sales.

OPERATING PROFIT

In the first quarter of 2017, operating profit increased to SEK 33.5 M (23.4), representing an operating margin of 26.4 percent [24.5]. The earnings increase was mainly due to sharply increased sales of RayStation.

The continued expansion of RaySearch's research and development departments and global marketing organization has led to higher operating expenses. This cost increase was offset by sales growth in the first quarter of 2017.

Other operating income and expenses pertain to exchange-rate gains and losses, with the net of these amounting to a loss of SEK 4.2 M (loss: 2.6) in the first quarter of 2017. This was mainly due to the large proportion of accounts receivable denominated in USD and EUR, both of which weakened against the SEK in the first quarter compared with the end of the fourth quarter.

Currency effects

The company is impacted by exchange-rate trends in the USD and EUR against the SEK, since invoicing is mainly denominated in USD and EUR, while most costs are in SEK.

At unchanged exchange rates, organic sales growth was 28.1 percent in the first quarter of 2017, compared with the year-onyear period.

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 2.4 M in the first quarter of 2017, while a corresponding change in the EUR exchange rate would have impacted consolidated operating profit by approximately +/- SEK 0.5 M.

The company follows the financial policy established by the Board of Directors, whereby exchange-rate changes are not hedged. Overall, currency effects had a positive effect on net sales and operating profit in the first quarter of 2017, compared with the year-on-year period.

Capitalization of development expenditure

At March 31, 2017, some 116 (103) employees were engaged in research and development. Research and development expenditure includes payroll costs, consulting fees, computer equipment and premises.

Rolling Full-year
Capitalization of development expenditure Kv1-17 04-16 03-16 02-16 01-16 12 months 2016
Research and development expenditure 39.6 42.3 32.9 35.5 30.6 150.3 141.3
Capitalization of development expenditure $-29.8$ $-31.0$ $-22.8$ $-25.7$ $-24.8$ $-109.4$ $-104.4$
Amortization of capitalized develop, expenditure 14.7 13.7 14.0 14.8 13.7 57.3 56.3
Research and development expenditure after
adjustments for capitalization and amortization
of development expenditure 24.5 25.0 24.1 24.6 19.5 98.2 93.2

Research and development expenditure totaled SEK 39.6 M [30.6], of which development expenditure of SEK 29.8 M [24.8] was capitalized. The increase mainly pertained to RayCare, which will be launched in December 2017 as planned. In the first quarter, amortization of capitalized development expenditure amounted to SEK 14.7 M [13.7]. After adjustments for capitalization and amortization of development expenditure, research and development costs totaled SEK 24.5 M (19.5).

Amortization and depreciation

In the first quarter of 2017, total amortization and depreciation was SEK 17.7 M (16.5), of which amortization of intangible fixed assets accounted for SEK 14.7 M (13.7), primarily related to capitalized development expenditure, and depreciation of tangible fixed assets accounted for SEK 3.0 M [2.8].

PROFIT/LOSS FOR THE PERIOD AND EARNINGS PER SHARE

Profit after tax for the first quarter of 2017 was SEK 26.3 M [17.8], corresponding to earnings per share before and after dilution of SEK 0.77 [0.52]. Tax expense for the quarter was SEK 6.4 M [expense: 5.2], corresponding to an effective tax rate of 19.5 percent [22.5].

CASH FLOW AND LIQUIDITY

In the first quarter of 2017, cash flow from operating activities was SEK 39.4 M (21.9). Improved earnings were offset by a yearon-year increase in working capital. The increase in working capital was mainly a result of higher accounts receivable and accrued income due to high sales growth. At the end of the period, accounts receivable amounted to 43 percent (41) of net sales over the past 12 months. Several measures have been taken to reduce the period between revenue recognition and payment, and the results of these measures are provisionally positive.

In the first quarter, cash flow from investing activities was a negative SEK 31.4 M (neg: 26.1). Investments in intangible fixed assets amounted to a negative SEK 29.8 M (neg: 24.8), and comprised capitalized development expenditure for RayStation and RayCare. Investments in tangible fixed assets amounted to a negative SEK 2.6 M (neg: 1.3) and, in addition, financial leasing was used to finance an additional SEK 1.0 M (0.0).

Cash flow before financing activities was SEK 8.0 M (neg: 4.2) in the first quarter of 2017.

Cash flow from financing activities amounted to a negative SEK 11.0 M (neg: 1.0), mainly attributable to a repayment of SEK 10 M on the company's revolving credit facility.

Cash flow for the period amounted to a negative SEK 3.0 M [neg: 5.2] and at March 31, 2017, the Group's cash and cash equivalents amounted to SEK 84.4 M [54.6].

FINANCIAL POSITION

At March 31, 2017, RaySearch's total assets amounted to SEK 736 M (508) and the equity/assets ratio was 66.2 percent $[66.5]$

Current receivables amounted to SEK 341.2 M [207.0]. The receivables mainly comprised accounts receivable and accrued income, and the increase was primarily the result of sharp sales growth.

In September 2016, the company's credit facility was increased from SEK 50 M to SEK 100 M, whereby chattel mortgages increased to SEK 100 M. The credit facility matures in September 2019, and consists of a revolving credit facility of up to SEK 75 M and an overdraft facilitu of SEK 25 M. During the first quarter, SEK 10 MSEK has been amortized and at March 31. 2017, a total amount of SEK 40 M had been utilized under the terms of the revolving loan. Of the company's overdraft facility of SEK 25 M, an amount of SEK 16.2 M has been blocked as collateral for bank guarantees.

At March 31, 2017, consolidated net debt was negative SEK 32.9 M (neg: 4.8).

EMPLOYEES

At the end of the first quarter, the Group had 208 employees [180], of whom 168 were based in Sweden, and 40 in foreign subsidiaries. The average number of employees during the January-March period of 2017 was 201 [177].

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 expenditure and items related to finance leases are recognized in the Group, but not in the Parent Company. The Parent Company's current receivables mainly comprise receivables from Group companies and accounts receivable.

SIGNIFICANT EVENTS DURING THE PERIOD

RayStation 6 has been launched

In January, it was announced that the latest version of RayStation had been launched, making RayStation the only treatment planning system that can create plans for Accuray's TomoTherapy treatment system, in addition to conventional linear accelerators. RayStation 6 also includes other significant new functionality, including a Monte Carlo pencil beam scanning [PBS] model for dose computation, PBS planning with block aperture computation, simultaneous optimization of multiple beamsets, MRI-based planning and automatic reset.

RauStation chosen bu several leading cancer clinics

In the first quarter of 2017, several of the world's largest and most respected cancer clinics have chosen RayStation as their treatment planning system, including Nottingham City Hospital in the UK, Zhuozhou in China, the Tata Memorial Centre in India, Kennestone Hospital (part of WellStar Health System) and Sharp Memorial Hospital (part of Sharp HealthCare) in the US. In addition, among others, the Maryland Proton Treatment Center, in partnership with the University of Maryland, have expanded their RayStation installations.

New AI technology for automated treatment planning

In February, it was announced that University Health Network (UHN) in Canada had exclusively licensed to RaySearch a new artificial intelligence (AI) technology for automated radiation therapy treatment planning (AutoPlanning).

Johan Löf named Sweden's foremost entrepreneur

In February, RaySearch's CEO and founder, Johan Löf, was named Sweden's foremost entrepreneur in the Swedish final of the EY Entrepreneur of the Year 2016 competition. The jury citation was: "Johan Löf has created a company that brings benefits to both individuals and society. Advanced products, combined with personal and commercial drive, distinguish his business. Continued expansion is on the agenda for this entrepreneur who improves quality of life for millions of people."

Long-term collaborative agreement with MD Anderson related to RayCare

In March, it was announced that RaySearch had entered a long-term collaborative agreement with the University of Texas MD Anderson Cancer Center in Houston, Texas for RayCare, the next-generation oncology information system (OIS) developed by RaySearch. Johan Löf says: "By combining MD Anderson's extensive clinical knowledge and resources with RaySearch's capacity for innovative development, this partnership has all the prerequisites for success."

SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD

RaySearch published its Annual Report on April 28, 2017. The Annual Report can be downloaded at www.raysearchlabs.com and a printed version of the Annual Report can be ordered via [email protected].

THE COMPANY'S SHARE

At March 31, 2017, the total number of registered shares in RaySearch was 34,282,773, of which 8,694,975 were Class A and 25,587,798 Class B shares. The quotient value was SEK 0.50 per share and the company's share capital amounted 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 March 31, 2017, the total number of votes in RaySearch was 112,537,548.

In April, 40,000 Class A shares were converted to Class B shares at the request of shareholders. The total number of registered shares in RaySearch thereafter amounted to 34,282,773, of which 8,654,975 are Class A and 25,627,798 are Class B shares. The total number of votes thereafter amounted to 112,177,548.

SHARE OWNERSHIP

At March 31, 2017, the number of shareholders in RaySearch was 5,749 and, according to Euroclear, the largest shareholders were as follows:

Class A Class B Total Share
Name shares shares shares capital, % Votes, %
Johan Löf 6,243,084 618.393 6,861,477 20.0 56.0
Lannebo Funds n 4.032.869 4032.869 11.8 3.6
Swedbank Robur Funds 0 2,968,239 2.968.239 8.7 2.7
Second AP Fund 0 1,891,775 1,891,775 5.5 1.7
First AP Fund 0 1,409,118 1,409,118 4.1 1.3
Anders Brahme 1,390,161 0 1.390.161 4.1 12.4
Montanaro funds 0 1,385,000 1,385,000 4.0 1.2
Carl Filip Bergendal 1,061,577 144,920 1,206,497 3.5 9.6
JPMorgan Chase (UK) 936.853 936.853 2.7 0.8
Goldman Sachs 0 809.542 809,542 2.4 0.7
Total, 10 largest
shareholders 8.694.822 14.196.709 22.891.531 66.8 89.9
Others 153 11,391,089 11,391,242 33.2 10.1
Total 8,694,975 25,587,798 34,282,773 100.0 100.0

OTHER INFORMATION

2017 ANNUAL GENERAL MEETING

The 2017 Annual General Meeting of RaySearch Laboratories AB (publ) will be held at RaySearch's office, Sveavägen 44 in Stockholm, Sweden, on Tuesday, May 23, 2017 at 6:00 p.m.

Shareholders representing approximately 66 percent of the total number of votes propose the reelection of Board members Carl Filip Bergendal, Johan Löf and Hans Wigzell, the new election of Johanna Öberg, and that Carl Filip Bergendal be elected as Chairman of the Board.

For more information about the 2017 Annual General Meeting, visit the company's website www.raysearchlabs.com.

Proposed dividend

Since the company is amid an expansive and capital-intensive phase, the Board of RaySearch proposes that no dividend be paid for the 2016 fiscal year. A dividend of SEK 8.6 M was paid for the 2015 fiscal year, corresponding to SEK 0.25 per share.

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. Risk management at RaySearch 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 2016 Annual Report. For a more detailed description of RaySearch's risks and risk management, refer to pages 7-9 and 31-32 of the 2016 Annual Report.

SEASONAL VARIATIONS

Revenues from RaySearch are subject to seasonal variations that are typical of the industry, whereby the fourth quarter is normally the strongest, mainly because many clinics' budget year follows the calendar year, and the second quarter is normally the weakest.

ENVIRONMENT AND SUSTAINABILITY

RaySearch works actively to reduce its negative environmental impact and to become a sustainable company. The company's products, comprising software to improve radiation therapy for cancer treatment, have a limited negative impact on the environment. 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. RaySearch has an established environmental policy, and promotes social responsibility and long-term sustainable development based on sound ethical, social and environmental principles.

REVIEW

This interim report has not been reviewed by the company's auditors.

Stockholm, May 19, 2017 The Board of Directors of RaySearch Laboratories AB (publ)

Johan Löf President/CEO and Board member

FOR FURTHER INFORMATION, PLEASE CONTACT:

Johan Löf, President and CEO Tel: +46 8 510 530 00
Peter Thysell, CFO Tel: +46 70 661 05 59

E-mail: [email protected] E-mail: [email protected]

The information contained in the interim report is such that RaySearch Laboratories AB (publ) is obliged to disclose under the EU's Market Abuse Regulation and the Securities Market Act. The information was submitted for publication on May 19, 2017 at 7:45 a.m. CET.

FINANCIAL CALENDAR

2017 Annual General Meeting Interim report for the first six months of 2017 Interim report for the third quarter, 2017

May 23, 2017 August 24, 2017 November 22, 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IN SUMMARY

AMOUNTS IN SEK 000S JAN-MAR APR 2016- FULL-YEAR
2017 2016 MAR 2017 2016
Net sales 126,788 95,401 562,855 531,468
Cost of goods sold 1) $-9,982$ $-5,253$ $-31,601$ $-26,872$
Gross profit 116,806 90,148 531,254 504,596
Other operating income 2,631 14,738 17,369
Selling expenses $-38,953$ $-31,502$ $-164,292$ $-156,841$
Administrative expenses $-15,624$ $-13,260$ $-68,655$ $-66,291$
Research and development expenditure $-24,513$ $-19,460$ $-98,260$ $-93,207$
Other operating expenses $-4,250$ $-5,205$ $-5,112$ $-6,067$
Operating profit 33,466 23,352 209,673 199,559
Result from financial items $-841$ $-429$ $-1,886$ $-1,474$
Profit before tax 32,625 22,923 207,787 198,085
Tax $-6,351$ $-5,163$ $-47,865$ $-46,677$
Profit for the period 2) 26,274 17,760 159,922 151,408
Other comprehensive income
Items to be reclassified to profit or loss
Translation difference of foreign operations for the period 378 487 $-2,276$ $-2,167$
Comprehensive income for the period 2) 26,652 18,247 157,646 149,241
Earnings per share before and after dilution (SEK) 0.77 0.52 4.66 4.42

$^{11}$ Does not include amortization of capitalized development expenditure, which is included in research and development expenditure.
2) 100 percent attributable to Parent Company shareholders.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY IN SUMMARY

AMOUNTS IN SEK 000S JAN-MAR
2017 2016 2016
Opening balance 460,188 319,517 319,517
Profit for the period 26,274 17,760 151,408
Translation difference for the period 378 487 $-2,167$
Dividend paid ۰. ۰ $-8,570$
Closing balance 486,840 337,764 460,188

CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN SUMMARY

AMOUNTS IN SEK 000S MAR 31, DEC 31, 2016
MAR 31, 2017 2016
ASSETS
Intangible fixed assets 258,305 206,240 243,219
Tangible fixed assets 35,336 40,317 35,667
Deferred tax assets 455 57 512
Other long-term receivables 15,941 2,267
Total fixed assets 310,037 246,614 281,665
Current receivables 341,427 207,025 347,869
Cash and cash equivalents 84,432 54,644 87,720
Total current assets 425,859 261,669 435,589
TOTAL ASSETS 735,896 508,283 717,254
EQUITY AND LIABILITIES
Equity 486,840 337,764 460,188
Deferred tax liabilities 73,920 53,797 70,601
Long-term liabilities 51,563 37,151 61,527
Accounts payable 13,156 17,861 11,943
Other current liabilities 110,417 61,710 112,995
TOTAL EQUITY AND LIABILITIES 735,896 508,283 717,254

CONSOLIDATED STATEMENT OF CASH FLOW IN SUMMARY

AMOUNTS IN SEK 000S JAN-MAR FULL YEAR
2017 2016 2016
Profit before tax 32,625 22,923 198,085
Adjusted for
non-cash items 1) 11,093 12,013 75,238
Taxes paid $-4,166$ $-6,747$ $-19,218$
Cash flow from operating activities before changes in working capital 39,552 28,189 254,105
Cash flow from changes in working capital 165 $-6,326$ $-133,257$
Cash flow from operating activities 39,387 21,863 120,848
Cash flow from investing activities $-31,402$ $-26,075$ $-106,949$
Cash flow from financing activities $-10,991$ $-1,013$ 12,291
Cash flow for the period $-3,006$ $-5,225$ 26,190
Cash and cash equivalents at the beginning of the period 87,720 59,705 59,705
Exchange-rate difference in cash and cash equivalents $-282$ 164 1,825
Cash and cash equivalents at the end of the period 84,432 54,644 87,720

$^{\,1)}$ These amounts primarily include amortization of capitalized development expenditure.

PARENT COMPANY INCOME STATEMENT IN SUMMARY

AMOUNTS IN SEK 000S JAN-MAR FULL-YEAR
2017 2016 2016
Net sales 102,035 79,550 460,728
Cost of goods sold 1) $-6,649$ $-2,599$ $-15,418$
Gross profit 95,386 76,951 445,310
Other operating income 2,631 17,369
Selling expenses $-23,705$ $-19,758$ $-106,745$
Administrative expenses $-15,749$ $-13,503$ $-67,178$
Research and development expenditure $-39,599$ -30,586 $-141,312$
Other operating expenses $-4,250$ $-5,205$ $-6,067$
Operating profit 12,083 10,530 141,377
Result from financial items $-656$ $-278$ 2,012
Profit after financial items 11,427 10,252 143,389
Appropriations $-40,144$
Profit before tax 11,427 10,252 103,245
Tax $-2,775$ $-2,361$ $-25,817$
Profit for the period 8,652 7,891 77,428

$^{\,1)}$ Does not include amortization of capitalized development expenditure, which is included in research and development expenditure.

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME

AMOUNTS IN SEK 000S JAN-MAR
2017 2016 2016
Profit for the period 8.652 7.891 77.428
Other comprehensive income $\blacksquare$
Comprehensive income for the period 8,652 7.891 77,428

PARENT COMPANY BALANCE SHEET IN SUMMARY

AMOUNTS IN SEK 000S MAR 31, 2017 MAR 31, 2016 DEC 31, 2016
ASSETS
Tangible fixed assets 21,219 25,761 21,316
Shares and participations 640 564 640
Deferred tax assets 455 57 512
Other long-term receivables 2,275 2,267
Total fixed assets 24,589 26,382 24,735
Current receivables 358,396 235,015 350,149
Cash and cash equivalents 62,080 43,789 66,984
Total current assets 420,476 278,804 417,133
TOTAL ASSETS 445,065 305,186 441,868
EQUITY AND LIABILITIES
Equity 246,813 177,195 238,161
Untaxed reserves 77,695 37,551 77,695
Deferred tax liabilities 163 $\overline{\phantom{a}}$
Long-term liabilities 40,000 25,000 50,000
Accounts payable 16,256 20,285 16,249
Other current liabilities 64,301 44,992 59,763
TOTAL EQUITY AND LIABILITIES 445,065 305,186 441,868

NOTES

NOTE 1 ACCOUNTING POLICES

The RaySearch Group applies International Financial Reporting Standards (IFRS) as adopted by the EU. The Swedish Financial Reporting Board's recommendation, RFR 1 Supplementary Accounting Rules for Corporate Groups, has also been applied. 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. The accounting policies applied are consistent with those described in the 2016 Annual Report for RaySearch Laboratories AB (publ), which is available on www.raysearchlabs.com New or revised IFRS reporting requirements for 2017 have not impacted RaySearch during the period. This year-end report in summary for the Group was prepared in accordance with IAS 34 Interim Financial Reporting and the applicable provisions of the Swedish Annual Accounts Act.

NOTE 2 ESTIMATES

Preparation of the year-end report requires that company management makes estimates that affect the carrying amounts of assets, liabilities, revenues and expenses. 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 3 FINANCIAL INSTRUMENTS

RaySearch's financial assets and liabilities comprises accounts receivable, cash and cash equivalents, accrued income, accrued expenses, accounts payable, bank loans and financial leasing. Long-term accounts receivable and accrued income are discounted, while other financial assets and liabilities have short terms. 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 4 RELATED-PARTY TRANSACTIONS

There were no transactions between RaySearch and related parties that materially affected the company's position and earnings during the period.

NOTE 5 CURRENT RECEIVABLES

AMOUNTS IN SEK 000S MAR 31, 2017 MAR 31, 2016
Accounts receivable 242.133 165,952
Prepaid expenses and accrued income 93.407 32,997
Other current receivables 5.887 8.076
Total current receivables 341.427 207.025

NOTE 6 OTHER CURRENT LIABILITIES

AMOUNTS IN SEK 000S MAR 31, 2017 MAR 31, 2016
Tax liabilities 9.960 999
Accrued expenses and prepaid income 87.675 42.574
Other current liabilities 25.938 35,998
Total current receivables 123.573 79,571

NOTE 7 PLEDGED ASSETS IN THE GROUP AND PARENT COMPANY

AMOUNTS IN SEK 000S MAR 31, 2017 MAR 31, 2016
Chattel mortgages 100,000 50.000
Guarantees 16.152 4.000

GROUP QUARTERLY OVERVIEW

2017 2016 2015
AMOUNTS IN SEK 000s 01 04 03 02 01 04 03 02
Incomestatement
Net sales 126,788 191,355 125,730 118,982 95,401 131,957 100,570 77,342
Sales growth, % 32.9 45.0 25.0 53.8 8.7 22.4 40.5 49.1
Operating profit 33,466 100,249 38,465 37,493 23,352 44,302 20,085 $-2,114$
Operating margin, % 26.4 52.4 30.6 31.5 24.5 33.6 20.0 $-2.7$
Profit for the period 26,274 75,924 28,887 28,837 17,760 33,311 14,480 $-2,605$
Net margin, % 20.7 39.7 23.0 24.2 18.6 25.2 14.4 $-3.4$
Cash flow
Operating activities 39,387 73,866 10,211 14,908 21,863 41,224 13,093 18,458
Investing activities $-31,402$ $-31,207$ $-23,320$ $-26,347$ $-26,075$ $-27,564$ $-18,579$ $-27,546$
Cash flow before financing activities 7,985 42,659 $-13,109$ $-11,439$ $-4,212$ 13,660 $-5,486$ $-9,088$
Financing activities $-10,991$ 13,940 8,955 $-9,591$ $-1,013$ $-1,234$ $-1,012$ $-1,004$
Cash flow for the period $-3,006$ 56,599 $-4,154$ $-21,030$ $-5,225$ 12,426 $-6,498$ $-10,092$
Capital structure
Equity/assets ratio, % 66.2 64.2 65.8 64.3 66.5 65.9 62.3 63.4
Net debt $-32,869$ $-26,193$ 30,420 16,018 $-4,784$ $-8,512$ 4,816 $-0,820$
Debt/equity ratio $-0.1$ $-0.1$ 0.1 0.0 0.0 0.0 0.0 0.0
Net debt/EBITDA $-0.1$ $-0.1$ 0.1 0.1 0.0 $-0.1$ 0.0 0.0
Per share data, SEK
Earnings/loss per share before dilution 0.77 2.21 0.84 0.83 0.52 0.97 0.42 $-0.08$
Earnings/loss per share after dilution 0.77 2.21 0.84 0.83 0.52 0.97 0.42 $-0.08$
Equity per share 14.20 13.42 11.26 10.40 9.85 9.32 8.36 7.95
Share price at the end of the period 235.0 184.5 198.50 119.00 120.50 122.50 119.00 108.00
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 201 192 185 181 177 175 164 150

GROUP, ROLLING 12 MONTHS

AMOUNTS IN SEK 000s Apr 2016-
Mar 2017
Jan 2016-
Dec 2016
Oct 2015
Sep 2016
Jul 2015-
Jun 2016
Apr 2015-
Mar 2016
Jan 2015-
Dec 2015
Oct 2014
Sep 2015
Jul 2014
Jun 2015
Income statement
Net sales 562,855 531.468 472.070 446.909 405.268 397.600 373.423 344.455
Operating profit 209,673 199.559 143.612 125.232 85.625 95.344 103.809 101,949
Operating margin, % 37.3 37.5 30.4 28.0 21.1 24.0 27.8 29.6

DEFINITIONS OF KEY RATIOS

The interim report refers to several 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 financial measures that are used to complement the financial information reported in accordance with IFRS are described below.

The value of all orders received and changes to
Order intake is an indicator of future revenues and is thus
Order intake excluding
existing orders during the current period excluding the
service agreements
is a key figure for the management of RaySearch's
value of service agreements.
operations.
Order intake is an indicator of future revenues and is thus
Order intake for RayStation
The value of orders received and changes to existing
orders for RayStation during the current period,
is a key figure for the management of RaySearch's main
excluding service agreements
excluding the value of service agreements.
operational areas.
The value of orders for RayStation at the end of the
The order backlog shows the value of orders already
Order backlog for RayStation
booked by RaySearch that will be converted to revenues in
period that the company has yet to deliver and
the future.
recognize as revenue.
The change in net sales compared with the year-
Sales growth
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.
Net sales minus cost of goods sold.
Gross profit
Gross profit is used to illustrate the margin before sales,
research, development and administrative expenses.
Calculated as earnings before financial items and tax.
Operating profit/loss provides an overall picture of the total
Operating profit
generation of earnings in operating activities.
Operating profit/loss expressed as a percentage of net
Together with sales growth, the operating margin is a key
Operating margin
element for monitoring value creation.
sales.
Profit for the period as a percentage of net sales for
The net margin illustrates the percentage of net sales
Net margin
remaining after the company's expenses have been
the period.
deducted.
Equity divided by number of shares at the end of the
Equity per share
Illustrates the return generated on the owners' invested
period
capital per share from a shareholder perspective.
Rolling 12 months' sales,
Sales, operating profit/loss or other results measured
This measure is used to more clearly illustrate the trends
operating profit/loss or other
over the last 12-month period.
for sales, operating profit/loss and other results, which is
relevant because RaySearch's revenues are subject to
results
monthly variations.
The Group's working capital is calculated as current
Working capital
This measure shows how much working capital is tied up in
operating receivables less current operating liabilities.
operations and can be shown in relation to net sales to
demonstrate the efficiency with which working capital has
been used.
Return on equity
Calculated as profit/loss for the period as a
Illustrates 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.
Interest-bearing liabilities less cash and cash
The measure shows the Group's total indebtedness
Net debt
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
Non-IFRS financial measures Definition Reason for using the measure
ability to repay its debts

CALCULATION OF FINANCIAL MEASURES NOT INCLUDED IN THE IFRS REGULATORY FRAMEWORK

AMOUNTS IN SEK 000s Mar 31, 2017 Mar 31, 2016 Dec 31, 2016
Working capital
Accounts receivable 242,133 165,952 282,535
Other current receivables 99,294 41,073 65,334
Accounts payable $-13,156$ $-17,861$ $-11,943$
Other current liabilities $-110,417$ $-61,710$ $-112,995$
Working capital 217,854 127,454 222,931
AMOUNTS IN SEK 000s Mar 31, 2017 Mar 31, 2016 Dec 31, 2016
Net debt
Current interest-bearing liabilities 12,709
Long-term interest-bearing liabilities 51,563 37,151 61,527
Cash and cash equivalents $-84,432$ $-54.644$ $-87,720$
Interest-bearing receivables
Net debt $-32,869$ $-4,784$ $-26,193$
Apr 2016- Apr 2015- Full-year
AMOUNTS IN SEK 000s Mar 2017 Mar 2016 2016
EBITDA
Operating profit 209,673 85,625 199,559
Amortization and depreciation 68,594 61,030 67,339
EBITDA 278,267 146,655 266,898

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 8 510 530 00 www.rausearchlabs.com Corporate Registration Number: 556322-6157

ABOUT RAYSEARCH

RaySearch Laboratories is a medical technology company that develops advanced software solutions for improved radiation therapy of cancer. RaySearch develops and markets the RayStation treatment planning system to clinics all over the world and distributes the products through licensing agreements with leading medical technology companies. The company is also developing the next-generation oncology information system, RayCare, which comprises a new product area for RaySearch, and will be launched in 2017. RaySearch's software is currently used by over 2,600 clinics 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 Nasdag 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 is being developed at RaySearch's head office in Stockholm, and is distributed and supported by the company's global marketing organization.

STRATEGY

A radiation therapy clinic essentially needs two software platforms for its operations: an information system and a treatment planning system. With RayStation and the planned launch of RayCare in 2017, RaySearch will further 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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