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Peter Nyquist: Hi, and good morning, everyone, and welcome to this second quarter Investor and Analyst Call. My name is Peter Nyquist. I'm heading up Investor Relations at Elekta. With me here, I have, for the first time, our new President and CEO, Jakob Just-Bomholt, and welcome Jakob for the first call, and hopefully, many to follow. Together with Jakob, we have our CFO, Tobias Hagglov. Jakob and Tobias will present the results for the second quarter and in the fiscal year of '25-'26. So we'll start off with Jakob giving some initial reflections on his first quarter as CEO, followed by a summary of the Q2 financials, including the order view announced today. Then, Tobias will go into the more details around the financials and Elekta's outlook. Jakob will then present the change in operating model and the organizational structure, leading to the cost reductions that we announced today as well. And after presentation, we will, as usual, be available for a Q&A session. But before I start, I want to remind you that some of the information discussed in this call contains forward-looking statements. These can include projections regarding revenues, operating results, cash flow as well as products and product development. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. With that said, I will hand over the word to you, Jakob.
Jakob Just-Bomholt: Yes. Thank you very much. Yes. So let me start by talking a bit about some of the initial reflections and then give highlights on Q2. Then, Tobias, you will go into Q2 financials in greater details. And then, importantly, we'll get back to Elekta Reset if you will, our new operating model. But on initial reflections, before I go into the details here on that slide, I would just say, fundamentally I like what I see. I'm now 4 months into the position. Obviously, prospectus will modify somewhat, but I do think directionally, what we will outline here in terms of strength and challenges and opportunities, we'll set the direction for the company ahead of us. We have been very open. Elekta is not performing at full potential. As incoming CEO, I think that's great, give us a lot to do. It also gives us an opportunity to do better. When we look at the company, we don't feel, and I don't feel that there are structural headwind. Of course, we have competition like for any company. But the challenges are really within our control to face. And that's what we're about to do. Today, we disclosed our must-win battle 1, we call simplify and power speed, but I'll get back to it. But let me go a little bit in details with some of the reflections. And if I start on the positive side, it's not positive, cancer burden is increasing. You all know that. Cancer incidence is on the rise, but fortunately, due to aging population and growing population, we see more and more that cancer is a chronic disease, so you get treated, you're cured, you come back, and then, you're using Elekta equipment again. Then, the second mega trend is that there is a shortage of professionals. I've heard numbers up to shortage of 80 million. So that really speaks for us as a vendor into the industry to innovate, to support the professionals with speed and better treatment and more precision. At Elekta, if I turn to the right, we're well positioned. We are #2. We are not #1. That's in many ways attractive position to be in, but we are clearly #2. Radiation therapy is an attractive and growing MedTech segment. We look at the segment likely to grow faster than the average MedTech segment. Then, we have many strongholds built up over many years in key markets outside U.S., strong in Europe, strong in many Middle East Africa markets, strong, very strong in China, strong in a number of Asia Pacific regions. But clearly, what we also imply here is that we are not strong enough in the U.S., and I'll get back to that on some of the challenges and opportunities. We are the only dedicated -- 100% dedicated company focused on radiotherapy. I think it's such a strength because when you're dedicated, you have to have product passion, you have to focus on your customers, you have to execute fast. We have a well-recognized brand. And what I truly cherish coming from a company with more indirect sales force, we have a direct sales force. So we are really in control of our commercial execution. When we look at R&D spend, we have been willing to spend on innovation. I think that's right because when you look at the graphic, again, to the left, there is a need for us to innovate. We need more precision, we need more speed. We are not mature or end of the road in terms of innovation. When you look at gross spend, we spent roughly 12%. So it's very high for a MedTech company. So it's certainly sufficient to realize what I would call future best-in-class solutions because that is the future of Elekta that we have best-in-class products, highly innovative, and the current spending run rate supports that. And then, we have, if you will, a razor blade model. So we sell our solutions, but then we supplement that revenue generation by more predictable, profitable software upgrades, but also service markets. And as you see, our service business continues to grow. So it's -- there are a lot of strength. We are fairly asset-light. We have, as you will outline, Tobias, good net working capital. Our physical CapEx requirements are relatively low. So there are many things to like about Elekta. And if we go on the next page, then importantly, also, we have a strong portfolio logic. If I just speak a little bit to it, then perhaps many of you know. But the products are complementary, both from a brand commercial, but also workflow perspective. So if I start from the right, we are building software that really connect the different modalities because that's a customer need. And often when we tender, it's not only a Linac, it's bundled with other products as well. But our Gamma Knife, what started Elekta, that is the gold standard for stereotactic radiosurgery of the brain, and we are uniquely positioned with -- and clear market leader. Same for brachytherapy actually. It's highly targeted, internally delivered dose for specific cancers. It's not for all. It's cost effective. So it's also attractive for emerging markets. And very often, it complements the Linac's treatment so you can get a boost, and then, you get your Linac treatments or the other way around. And then, we have our Linacs. And we are the only one with both MR-guided and CT-guided Linacs. So the CT-guided Linac is really the workhorse for high volume, broad cancer treatment, and MR-guided is top of the line with the ultimate precision. So I want to take away -- my takeaway is, and hopefully, yours as well, the portfolio logic is good. That's not where we have a challenge. We don't need to slice off or do big portfolio changes. It really makes sense. But then, of course, if we get into improvement areas, and we also believe in the statement that we are not at full potential and the industry attractive, then what do we need to look at? If we look at gross margin, it's too low. We used to be in the 40s, better up actually in 40s. We did see a dip post-pandemic or during the pandemic. And we never really recovered. And if we look at it now, we have too much single source, too much supplier dependencies. Some of them take advantage, and we will double down on continuous engineering to make sure that we have a relentless COGS reduction focus in the years ahead. It's not -- there's not a quick fix, but it's going to happen, and it's certainly viable. Then, we -- when we look at our 12% gross spend on innovation, I do think we need to become more focused, more commercially driven. Elekta comes with very strong scientific routes, strong within academia. I would certainly push us to be a little bit more commercially focused when we take innovation bets in the future. And then, of course, over time, we need to grow at or above the market. When we look at our growth rate, we have to accept that we have been growing over the last really half a decade, even a bit longer, a bit slower, somewhat slower actually than main competitors. We don't like that. Specifically, we need a turnaround in our U.S. business. We'll get back on the FDA, I'm sure. And then, we want to preserve our China position, where Elekta very cleverly have been early in the market, have localized our supply chain. And then, overall, when I look at the commercial organization, and as you know, I've taken the regions in direct report, we need stronger commercial execution. We will have to apply cost focus across all spend categories, standardizing our processes. And then, I'll get back to organization, but we're looking at simplification. But it really starts with a new operating model, that's a starting point that then leads into a simplified organizational structure to target faster speed, faster speed on product development, operational execution, commercial execution, really with the goal of focusing on our customers and patients. And then, on quality of earnings, we will work hard to make the link between EBIT and cash strength. So these are some of the reflections I initially want to share with you. As we'll disclose in the end, we'll give a strategy update with further details during January. If we then look at Q2 specifically, and I'll do it fairly fast, a decent quarter, I would say. We did 1% organic growth, 2% on orders, strongest in Europe, 11%. So we continue to see momentum of our product launches. That's good. APAC saw revenue growth outside China, but it couldn't compensate for the double-digit decline in China. But on China, it's quite positive that we are now seeing growth in orders. They had a depleted backlog. We knew that. We now saw in Q2 order growth, and when we look at the momentum, it looks quite positive for second half skewed towards Q4. Then, negative growth of 8% in U.S. despite actually quite good order intake, but clearly, we need a commercial turnaround. I'll say the commercial organization needs Elekta Evo, but we need a turnaround in the U.S. We did have growth in LatAm. Then, one of my first actions as CEO was to change the reporting lines of the regional heads reporting to me. And then we initiated an action to review, to make a comprehensive review of the order backlog. And that's what I want to update you on today. Compared to the order review presented in June, we have implemented, I would say, a little bit firmer interpretation of order criteria in areas such as delivery times, end customer side, down payment price indexation, et cetera. There will always be a judgmental call, is a license there, is a site ready, and now, we apply a firmer interpretation. It's predominantly old orders that we are now canceling. But this action, I would say, we should have better forecasting accuracy, both in terms of sales development and profitability. The cancellation is SEK 2.2 billion. I would say this is it. We don't expect further structural revision of the order backlog. That's for me important to communicate. I've been in it at great detail. I would also like to stress that it has no revenue impact for this year or next year as such. And there's no cash flow impact. So we are not going to pay back any customer deposits. So that's where we stand. I would like to end by saying it's quite important to take away that we have an order backlog that I consider at a healthy level, 2x annual sales give and take, based on last year's sale. So we have a lot of business to look forward to, if you will. So if I close on Q2, book-to-bill of 1, all right. Rolling 12 months, importantly, 1.09. We continue to see good momentum in Europe. Of course, I like to see over time higher net sales growth than 1%. That's clear. Good margin uptake, close to 38%. On EBIT, 10.1% versus last year, 9.8%. But if you adjust for lower capitalization and higher amortization, it's actually quite a significant improvement in, if you will, cash-based EBIT margin. And then, you will outline to be as -- but if we look at year-to-date cash generation significantly better than same period last year and good to see that net debt versus a year ago has been reduced by almost SEK 700 million. So that concludes, and then, I look forward to coming back to the operating model.
Tobias Hagglov: Okay. Yes. Thank you, Jakob, and good to have you on board here. So I will then move into the quarter here a little bit more in detail. You mentioned that, Jakob, that we grew here in the quarter by 1%. This is then in constant exchange rates. We had a decline in our solutions operations by 4%, while our service grew by 7%. And also, I would like to mention here that the product launches of Elekta ONE and Elekta Evo had a continued positive contribution in the quarter. Then, looking at the profitability, we land here in the second quarter a gross margin of 37.9%, which then means 220 basis points improvement year-over-year. We see that our new products continued to contribute positively. We also have a higher share of our service business in the quarter. Our Brachy and Neuro business, strong development, strong growth in the quarter. Price continues to be positive. And then, here, as we had in the previous quarter, we have a negative impact then from tariffs and FX, and this negative impact is then 70 and 50 basis points, respectively, corresponding to a total of SEK 163 million in the quarter. The operating margin, adjusted EBIT margin, amounted to 10.1%, a 30 basis points improvement, and you are fully correct Jakob that we have a reduction in our gross R&D. When you see the impact in net R&D, it's increasing in the quarter, driven then by both lower capitalizations and higher amortizations. Selling and admin expenses increased somewhat in the quarter, and this was selective investments in marketing and IT and a bit of the phasing of the ASTRO cost here compared to last year as well as then some transition-related costs. But we will come back, as you were pointing out Jakob here to the program that we are on here. Net income amounted to SEK 229 million, and adjusted earnings per share amounted to SEK 0.65. So let's move into next slide. And FX, I think that we have a similar view here of the FX movements as we had in the previous quarter. So how does FX then impact our operations? The first point being is that, as you know, our reporting currency is the Swedish krona. And when you have a strengthening of the Swedish krona versus the main currencies, U.S. and euro, this means that the sales in dollars and euro actually becomes less worth in Swedish krona, which then leads to in nominating terms lower revenues and earnings in SEK everything else equal, the translation effect as such. Then, secondly here, we also have more revenues and cost in dollars. And when you actually then have a depreciation of the U.S. dollar versus our main cost currencies, euro and pounds, we also have then an unfavorable currency transactional impact in the quarter. And as you see in this table then, FX then had a negative impact of 50 basis points on the adjusted gross margin and 60 basis points on the adjusted EBIT margin. Then, coming back here to Jakob's point here, we have a reduction of the net debt of SEK 700 million year-over-year, and it's obviously then driven by the cash flow generation. If you look now year-to-date, we have -- in the seasonal weak start since we're building working capital in the first 2 quarters to larger quarters later in the year, we normally have a weak start of our cash flow generation. But if you compare this to last year, we are about SEK 900 million better when you look at the cash flow after continuous investments. When you look at the quarter, we improved our cash flow year-over-year by SEK 389 million. And this is then driven here, to your point, Jakob, to lower R&D spend as well as more favorable development of working capital here with more customer advances as well as a reduction of accounts receivables. And our net working capital as a percentage of net sales is now a negative of 7%. If we then look at the cash conversion here, it amounts to 91% compared to 65% a year ago. And if you then look at some more long-term trends and key financial metrics and look into the net sales, gross margin, EBIT margin and operating cash flows, which obviously are all key metrics here for driving profitable growth and return to our shareholders is that we have seen net sales on a rolling 12-month basis, which is relatively flat year-over-year. However, we see a positive trend for the -- both the gross margin and the EBIT margin. And then, here, what we just were talking about is that we have seen -- also seen a positive development for the operating cash flow, where we had delivered a significant improvement year-over-year. If we then focus a bit on the outlook for the second half of the current fiscal year '25-'26 and the full fiscal year, we reiterate our full-year '25-'26 outlook, where we expect net sales in constant currency to grow year-over-year. We expect sales in China to start recovering during the second half of '25-'26. And furthermore, we expect a continued negative impact from tariffs and FX at current exchange rates. So with that, I hand over to you, Jakob.
Jakob Just-Bomholt: Yes. Yes. So if we move on in terms of driving improvements, then we commenced really 3 months ago, forensic, if you will, of Elekta data 360 review as a leadership team and together with the Board to assess the situation. And with the outset in that analysis, we then defined 4 must-win battles, of which we are today disclosing the first one. We call it simplify, empower, speed. And it's really about a new operating model. I've seen certain comments saying, "Oh, it's a cost-saving exercise". It's not. It's a new operating model. Then, there are consequences of that new operating model that I'll come back to in terms of cost saving. But the aim was really to increase velocity for our product development organization, our commercial execution and our operational execution. The secret sauce of a company like Elekta when we compete with the even larger enterprise has to be speed, agility, customer intimacy, product passion. So what we are trying to do with this exercise, and we will do it is to simplify how we are organized. We will eliminate complexity and certainly become a bit more assertive and insist on accountability. But with accountability also comes the ability to empower teams, so we move decision-making closer to our customers. And then, in doing so, we approached the organizational review, zero-based. We say, okay, this is -- these are the focus areas, this is how we want the operating model to work, what organizational size do we then need to support those priorities? And we have then moved it into a much more decentralized model with regional-based P&L. So we will take our regions P&L that will add up give and take to Elekta's P&L, again, to increase ownership mindset, make sure we drive decisions closer to where we meet customers, increase speed, agility, make people work as owners of their own business, if you will. If we then look at this slide, there has been changes to the executive committee. It's not all of these boxes that are part of the executive committee, but they do report to me with the exception of Neuro that reports to Brachy. But let me highlight some key functions here. We have made changes in the executive committee. We communicated that almost 3 months ago. We feel good about these changes. We have now hired new CFO, but thank you so much to you, Tobias, for still being here in the interim. We have hired a new Head of HR, soon to be disclosed. We have a search ongoing for COO. We have strong regional managers. But what we did do when we looked at how we are organized is to say how can we increase the span of control, and some of the consequence, I will outline on the following page really stems from that we have increased the so-called span of control from 6 to 8.5. And we have reduced organizational layers from 9 to 6. And you can say, "Ah, is that a big thing?" It's a big thing because it reduces the chains in the chain of command. It makes us more agile. And obviously, it has significant consequences, not least on management positions. So if we go on the next one, then I'll outline some of the consequences. So based on the new operating model, and based on the supporting org structure and a zero-based approach, we have then defined that we need to do a net reduction in our workforce, roughly 10%. We are 4,500 today. And we have identified 450. It will happen pretty quick. It has major impact on material positions. The targeted cost reduction is no less than SEK 500 million. It's a net reduction. It will have full impact our Q1 '26-'27, but you're going to start to see impact really from our Q4 this year. If we give a split because some of the resources are part of COGS today, 30%, we estimate, our COGS goes into gross margin and 70% OpEx. Those numbers may change, but directionally, they are right. And then, we are going to communicate with Q3 latest the restructuring charts. But I'll just reiterate what it is, what is stated to the right. We are doing this to get speed and agility. We are doing this to firm up accountability, so we can empower our teams. Yes, absolutely, we need cost discipline across the organization. And then, we are doing this to increase velocity across the board at Elekta. So it's a big day. I would also say it's a tough day because we have to disappoint a lot of colleagues that they will no longer be part of the journey. But our job is to continue to be successful, financially successful, so we can invest in life-saving technology, and that's what we are committed to. And then, we look forward to giving you further strategy update during January '26. We are deliberating the date. We'll get back to you in due course. We will have our interim report early March. And then, we will invite for our Capital Markets Day in June here in Stockholm and very much look forward to that with the leadership team standing behind the updated financials. Thank you. So let me conclude here by saying good performance, strong performance in Europe. Yes. Elekta Evo is making an impact. It's also a great product, I have to say. Gross margin, improving. Cash flow, as you outlined, Tobias, continues to be better than last year. We have now disclosed our first must-win battle leading to a simplified organization, but as I said, really with a view of accelerating execution. And then, we have done a comprehensive order review. And based on firmer interpretation of criteria, we canceled SEK 2.2 billion, but no cash flow effect, no revenue impact.
Peter Nyquist: Great. Thanks, Jakob and Tobias, for a little bit longer presentation, but it was very much needed in where we stand right now. So we have still 30 minutes for Q&A. I think Jakob went through the calendar. There's nothing to add to that. So try to keep the questions 2 at each time, so if you have further questions you can line up later in the queue so everybody has a chance to ask question. So by that, operator, we are now open for a Q&A session.
Operator: [Operator Instructions] The first question comes from the line of Deshpande, Kavya from UBS.
Kavya Deshpande: Two for me, please. First was just around the order review. So I understand your reasoning was just applying stricter criteria on the back of the June review. I don't know if you could provide any more color on sort of the regional exposure of the orders that were canceled. And then the second was just on the Evo in Europe. So would you be able to compare how it's been doing this quarter versus last quarter? I appreciate you called it out on the call, but it wasn't called out in the press release, hence, the question. And whether the strength was mostly upgrades or whole device sales? I don't know if you could provide color on that.
Jakob Just-Bomholt: Sure, I can do that. Yes. So we did the order review. And as I said, we applied the same criteria, but in a firmer context. If we look at regions, it was predominantly our Middle East, Africa region. That's where we saw the biggest impact. There were -- it was old orders. So some of them up to 5 years. And there will always be a degree of subjectiveness, do we think the ride is going to be ready, is there funding in this or that location? And as I said now, we apply the firmer interpretation. On Evo, up from last quarter in terms of units marginally, and outlook, good second half.
Operator: The next question comes from the line of Vadsten, Mattias from SEB.
Mattias Vadsten: I'll keep myself to 2 questions. After some commentary on sales growth going forward, perhaps after 2025-'26, so if we look at recent 5, 10 years, Elekta has grown, let's say, around 3% per annum. Order momentum has not been there recently in some areas. It's understandable, for instance, China. With the cost savings also now ahead and the operational improvements, you talked about the third program, I think, so what kind of growth rate do you see doable for the company more structurally, let's say, midterm? Yes, it sounds maybe difficult to outpace the growth we've seen in the recent 5 years. Or am I missing something there? That's the first one. And then, I have another one.
Jakob Just-Bomholt: So we don't provide more guidance than what we have for this year, and that's a positive organic growth rate. On mid- to long-term, we will come back to that at Capital Markets Day. On cost savings, I'll just like you to come back to what I said. We are adjusting the operating model to accelerate commercial execution. As a consequence of operating model, there are cost savings. And over time, we clearly need to grow at or above the market. That's our ambition, and we'll come back with the detailed plan latest Capital Market Day next year.
Peter Nyquist: You had a second question.
Mattias Vadsten: Yes. You disclosed book-to-bill for China, which is appreciated, and it looks like the order momentum picks up. Could you also remind sort of how book-to-bill for China looked, let's say, last 12 months or now fiscal 2024-'25 just to get a sense of where we are on China right now? That is my second one.
Jakob Just-Bomholt: Yes. So, yes, we had a book-to-bill roughly 1.3 this quarter, roughly 1.3 last quarter. I think rolling 12 months, as I recall, 1.14. Then, I think they're important to say, well, we recognize at Elekta, we are bullish than most MedTechs on China, but we have the visibility we have. So Elekta got in early. We have localized our supply chain, then the market was strong. Then, we had the anticorruption campaign. It became much weaker. But if we look at our first half, we have seen the RT market up by a very strong amount. And we are now seeing positive year-on-year order growth. And when we look at our sales funnel, it looks like a strong both revenue order growth, double digit, high double-digit second half. So we -- that's the visibility we have, and we believe in it.
Tobias Hagglov: Absolutely. Absolutely. And just to add to that, Mattias, when you look at the book-to-bill here for China, it has actually been a steady increase, and you saw a reported number, but if you would look at the rolling 12, it has actually been a steady improvement here over the quarters here, and it has been ongoing for a while.
Peter Nyquist: We'll move to the next question.
Operator: The next question comes from the line of Liljeberg, Kristofer from Carnegie.
Kristofer Liljeberg-Svensson: Also 2 questions. First, coming back to the implied cost savings from the new operating model, it seems all else equal that would add some 3 percentage points to the EBIT margin. But I think you talked about this being a net effect, but are there some negative factors that might offset this? For example, you mentioned that you want to improve quality of earnings. One way of doing that is, of course, to stop capitalized R&D, and if you were to do that, I guess that would, at least from an accounting perspective, remove part of the, otherwise, positive effect, if you could comment on that.
Jakob Just-Bomholt: Yes, we absolutely can. So yes, you should think that way that we say no less than SEK 500 million, and there will be a full impact on the margins with the split I outlined COGS and OpEx, but, of course, come into EBIT. I think let's keep accounting separate. I'd just say that, in general, we like to build a closer link between the EBIT and cash generation. We have heard that from a number of you also that you would like to see that, I agree. I'm not a big fan of too much capitalization, some you have to do, but we are certainly deliberating on what is the right approach going forward, but that's accounting. So I think we need to keep that separate.
Kristofer Liljeberg-Svensson: Okay. Yes, to be clear, so the way you report EBIT, it might not improve the full SEK 500 million?
Jakob Just-Bomholt: I would more say it differently that the 3% you should expect with full run rate for Q1 next fiscal. And whether we will do adjustment in how we do to capitalize is a separate topic. And frankly, we haven't decided on anything except what I'm saying that I would like to see a stronger link between EBIT and cash flow.
Tobias Hagglov: Absolutely.
Kristofer Liljeberg-Svensson: Okay. And then my second question, of course, the importance here of getting Evo approved in the U.S. I saw you comment or said to one of the Swedish news agencies that you expect to have an approval within the 180 days review period. So maybe if you could talk about your confidence? And how this process is ongoing with the FDA?
Jakob Just-Bomholt: Yes. Yes. So we have been confident along the way. It's just taking a really long time. So we submitted over the summer. And as you outlined here, you have a 180-day window. There are periods in the submission process where the clock has stopped. But you should say, 180 to 200 days. And we do expect to get approval within. Of course, it's not fully in our control, there is a regulatory body. But based on indications, we are positive. We have been positive all along the way. We are even more positive now than we were 3 months ago.
Operator: The next question comes from the line of Germunder, Ludwig from Handelsbanken.
Ludwig Germunder: Ludwig Germunder from Handelsbanken. I have 2, please, and I'll take them one by one. So the first one is around the regional restructuring of the P&L. As a consequence of this, do you have any -- or could you say anything about how incentive systems will change to drive the more local P&L ownership?
Jakob Just-Bomholt: Yes, I could. And I probably will, in due course, but first, I would like to discuss it with the regional management team. Today, we are announcing the change in structure. But clearly, clearly, we want incentives to match the value creation of Elekta. It's very clear. And I would, in general, like to see a stronger ownership mindset in the company.
Ludwig Germunder: Okay. And my second question is on the cost savings as well. You gave us the figure of SEK 500 million annually in cost savings. Would you be willing to give us some more flavor on the different parts? And how they will move in, let's say, next year? So, I mean, if you share up the OpEx and -- or should we expect different parts to move given the SEK 500 million? Or should we expect a decrease? Or in the parts expected to increase?
Jakob Just-Bomholt: Yes. Yes, it's a good question. I think the guidance we gave here is no less than SEK 500 million. So the approach has been to start by saying what is the right structure, and then, we are down to now individuals. In general, we have been doing it to increase commercial execution and operational execution, and very importantly, avoid duplicate work, which we have identified, delayering become more agile. I will not go into the specific details in terms of where are we removing the 450. We -- as you can imagine, we have a town hall this afternoon. We will -- I think our staff deserves to be told first in greater detail. But I think what you should take away is that we do this for enhancing the execution, and then, as a consequence, savings no less than SEK 500 million, and we are fully committed to. You will see the full run rate effect Q1 next year, and that's not too far away.
Tobias Hagglov: And you also had allocation there, what's in the gross margin and what's below the gross margin.
Jakob Just-Bomholt: Yes. Good point.
Peter Nyquist: We'll move to the next question. I think it's from Erik Cassel at Danske Bank.
Erik Cassel: First, I want to talk a bit about the software backlog and deliveries in Europe. I mean, we're naturally seeing EMEA margins come up quite significantly. And I just want to get some sort of understanding on how much of that is driven by software? And if possible, I'd like to know if the software book-to-bill is still positive in EMEA?
Tobias Hagglov: Yes. Well -- I mean, I think we stated here. I think, as you alluded to here, we have seen a very strong contribution from -- I mean, both in terms of the Elekta Evo per se as well as the upgrades here in -- on the existing Linacs, what we call them, Iris. And when it comes to -- we see a continued strong development here. And you heard Jakob talk about in the second half. So that remains, and that is what we -- still, we view it very positively.
Jakob Just-Bomholt: Yes. So I can say -- yes, sequentially, Erik, we had double-digit growth sequentially on Iris and Elekta planning.
Erik Cassel: Is that on orders or on deliveries?
Jakob Just-Bomholt: Both.
Erik Cassel: And is the book-to-bill still positive?
Jakob Just-Bomholt: We don't go in -- it is actually, but we don't go in further details. In general, we keep our book-to-bill at a fairly aggregate level for competitive reasons.
Tobias Hagglov: Yes.
Erik Cassel: Okay. Perfect. Then just last question. Solutions seems to be down some 20% organically in Americas. I was just wondering, how much more is it down in the U.S. since that's a key driver? LatAm seemed pretty strong. And how many more quarters of negative organic growth in the U.S. do you expect to see?
Jakob Just-Bomholt: Yes. So we actually had a good order quarter in the U.S. in Q2. But we do expect that solutions will bounce back, obviously, when we get Evo FDA approved. So we look forward to our Q4 this year. Then, we need to get reference sites upgraded. We need to sell into our installed base, make the market recognize the Evo platform, which is versatile and precise. And then, it's going to be the grind of selling and competing.
Tobias Hagglov: And I can also add a little bit flavor without giving numbers that both the orders as well as the revenues are better in the U.S. than on average for Americas.
Peter Nyquist: Thanks, Erik. [Audio Gap]
Veronika Dubajova: I'm going to keep it to 2, please. The first one is just how you're thinking about the competitive landscape? Obviously, Varian or Healthineer has announced the plan to launch a new next-generation Linac platform sometime in 2026. I'm just curious kind of how you think either will stack up against that as sort of you as fast forward into '26 and '27 and whether this is a concern for you? And then my second question is a bigger question, obviously, the ambition to return to market growth. I know you guys don't want to guide, but I'm just curious if you might be willing to at least give a little bit of a time line on when you think that is achievable? Is this already a project for '26-'27? Is there more R&D work that's going to take a bit more time and we need to wait a little bit longer? So that -- any color you can give around that, that would be great.
Jakob Just-Bomholt: Yes, I can take those. In general, I prefer not to comment on competitive -- competitors' product portfolio. We focus on us. And, of course, in our engine room, we benchmark, and we are taking note of the same data points that you highlight. We look at our competitive situation here now and we think we stack up. Of course, we have certain improvement in areas. We have certain strength. I'm not going to disclose them all. It would not be a smart move. And then, as I started out by saying we invest 12% of revenue in R&D. So we have a number of pipeline projects ourselves, some exciting, some need tweak. So -- and then let's see how we stack up. But I personally would say, and I live that in other companies as well, being dedicated to RT and being willing to fund investment. And being passionate about what you do from a product development perspective can take you very far, and it should be the secret sauce of a company like Elekta. Then, when we come to growth, yes, clearly, our ambition is over time to grow at, I would dare to say, above market. No MedTech company would want to lose market share as we have been doing for some years. I've been very clear to the organization, very clear to the commercial part, but also to the product development guys that now is time to shape up. In terms of when, I think let's come back when we have Capital Market Days. I think that's appropriate. So it's not hip shooting, but it's really anchored in a financial plan.
Peter Nyquist: Thanks, Veronika. We'll move to the next question, Jon Unwin at Barclays.
Jonathon Unwin: I just had a question on the R&D expense. You've commented that 12% of revenues, but also that you need to sort of focus on more commercially viable projects. Is there scope for that 12% of percentage of sales to come down over time as you focus the R&D intensity on the commercial projects? And then, my second question is on the midterm targets and sort of taking over the CEO role, and how confident you are in the ability to increase gross margin to pre-pandemic levels and EBIT margin above 14%? And any color you can give on a time line for those targets would be helpful.
Jakob Just-Bomholt: On R&D expense, what I can say is 12% is in general high. It's, in many ways, good because it's funded today in our cash flow at least. What I stated was that when we look at both existing portfolio and future portfolio initiatives, we will have a strong commercial lens as well as scientific and feature lens to really understand what are we solving for. I think, if you take, for instance, our MR-guided Linac, Unity, wonderful product, truly making impact in the market. Commercially, we haven't achieved what we hoped for when we started out that project. And we want to make sure that we learn from that when we move forward. Is there scope for further reduction? We'll see. I think it starts by saying, do we have the right projects in the pipeline? If we do, we'll keep at 12%. If we don't, we'll reduce. In terms of midterm targets, I'll restate, we'll get back to that in our Capital Market Day. I would say, though, I think there are opportunities to increase the gross margin. But I'm not going to say whether that's at or above our midterm guidance. We'll come back to that.
Peter Nyquist: And next question will come from Sten Gustafsson at ABG.
Sten Gustafsson: So 2 questions on Evo, please. Firstly, regarding going back to the FDA approval process, have they communicated with you that there is a delay related to the government shutdown? Do you think that has had any impact on the timeline for your approval process? And my second question would be if you could remind me about the -- how you plan to roll out the launch globally of Evo in China, Japan and other key markets?
Jakob Just-Bomholt: Yes. To take your first question, no. No impact from shutdown. We have a good dialogue with the FDA, actually very good. Secondly, rollout, yes, we got the Evo domestic approved in China. So that's good. Focus is on ensuring market access. It's coming in. It's actually proceeding quite nicely. The sore spot is in U.S., but I think we discussed that already.
Sten Gustafsson: So it's already approved in China?
Jakob Just-Bomholt: Yes.
Sten Gustafsson: Excellent.
Jakob Just-Bomholt: Yes. We think so also.
Peter Nyquist: Thanks, Sten. Now, we'll move to the next question from David Adlington at JPMorgan.
David Adlington: First one, just a sort of bigger picture one on the 450 roles being cut. Just wondered how you think about eliminating that level of workforce -- tentative workforce without having an impact on R&D, quality of services, manufacturing capacity? Just how you're thinking about that? And then secondly, as you look into next year, Street has got mid-single-digit top line growth. How comfortable are you with that with -- given the fact that the order book has been tracking some way below that?
Jakob Just-Bomholt: So if I take the first one, keep in mind, we solve for something different than reducing headcount by 10%. We solve for speed, execution, accountability, delivering products faster to the market. And in doing so, we have delayered the organization, increased span of control. So as such, if you do the math, then it has a very significant impact on managerial positions. We are not reducing frontline field service engineers, so it is an office-based managerial reduction. And we do it because we believe we can, frankly. And we believe that we -- it will enable us to move faster with firmer accountability. We have had too many functions with duplicate roles, duplicate managers, and that's what we are resetting. And then, we also take the liberty to be a little bit less corporate, a little bit more business savvy. So we are streamlining central functions across the board under with due consideration to guardrails and controls. So we feel good about that, and it's confirmed throughout that we should be able to move, I will have to say, faster than we are today from a commercial and product development perspective. In terms of longer-term guidance, I'll stay at what we said, we guide this year, positive organic growth rate, and then, we'll come back at the Capital Market Day, and we very much look forward to that.
Peter Nyquist: Thanks, David. And now, we'll come up to the last question for this session, and that is a question from Ludvig Lundgren at Nordea.
Ludvig Lundgren: Yes. So 2 for me. And first one on gross margin. I wonder if you had any effect from tariff mitigation actions here in the quarter and whether you have some further pricing potential here moving ahead?
Tobias Hagglov: Yes, we have some. But I think in -- on average here, that the -- what we see as a net impact from the tariffs is actually that it drags down the gross margin in the quarter. But, obviously, here, to your point, and I think also what we alluded to in general, more broad terms that we will continue to work here on the passing through this cost through the value chain and also here addressing in terms of productivity as such.
Ludvig Lundgren: Okay. Great. And then final one on the order cancellations here. I guess, these were mainly orders that had a very small or no prepayments connected to them. So I wonder, like looking at the remaining part of the order backlog, have all of the remaining orders, some prepayment attached to them? Or how does it look for the main part?
Jakob Just-Bomholt: A very significant part. Typically, if it's public tender, we don't get prepayment. Then, we have some older orders that we have deemed very high likelihood will lead to revenue generation that are without prepayment. But in general, you should think that all orders coming in now from private sector will have prepayment or they have to be validated by me and CFO.
Peter Nyquist: Thanks, Ludvig. And that was the end of this call. But maybe before closing, a final remark from your side, Jakob.
Jakob Just-Bomholt: Yes. So we are on it. This is a quarter of execution. As you may also sense, we have focused on what happens this quarter, next quarter, the next 18 months. We know that we are not at full potential. It's a lot of hard work. I take a lot of comfort in that everyone from Board of Directors to management team to Elekta employees are committed that we know we need to change. We know we can do better. And we don't do it just for our shareholders, we also do, but we also do it so we can continue to drive our purpose of building hope, invest in technology, as I started out by saying there's a huge unmet need for radiation therapy. And there is a strong need for us to innovate and be a strong competitive alternative to the major player. So look forward to meeting all of you in future engagements.
Peter Nyquist: Thanks.
Tobias Hagglov: Thank you.
Jakob Just-Bomholt: Thank you very much, everyone.
Peter Nyquist: Thank you.