Elekta AB Earnings Call: Margin Gains Amid Headwinds

Elekta AB Unsponsored ADR Class B ((EKTAY)) has held its Q3 earnings call. Read on for the main highlights of the call.

Elekta AB’s latest earnings call struck a cautious but constructive tone. Management showcased improving margins, strong cash EBIT momentum, solid order intake and a recovering China, yet also highlighted heavy FX and tariff headwinds, restructuring charges and weakness in the Americas that temper the near‑term outlook for investors.

Slow but Positive Top-Line Growth

Net sales rose 2% in the quarter, with organic growth also at 2%, underscoring a modest but positive top‑line trajectory. Solutions revenue grew 1% while Service increased 3%, signaling that recurring support and maintenance remain key stabilizers for Elekta’s overall revenue mix.

Order Momentum and Healthy Book-to-Bill

Order intake remained robust, with quarterly book‑to‑bill at 1.17 compared with 1.15 a year earlier. The rolling 12‑month book‑to‑bill of 1.09 suggests Elekta is consistently booking more orders than it ships, building a solid backlog to support future revenue.

New Products and U.S. Approval Boost Commercial Outlook

The Elekta Evo platform received U.S. FDA approval on January 16, a critical milestone in the key U.S. market. Management said Evo and Elekta ONE launches are already translating into orders and upgrade activity across several regions, helping to deepen the sales funnel.

China Returns to Growth and Regains Momentum

China returned to both order and revenue growth in the third quarter, reversing prior weakness tied to anticorruption measures. Management expects roughly 10% order and revenue growth in China for the second half, with book‑to‑bill above 1.1 and Elekta maintaining a high‑30s share in new system placements.

Margins and Cash EBIT Trend Higher

Gross margin improved by 120 basis points to 38.3% despite sizable tariff and FX drag, and the reported EBIT margin ticked up to 11.9%. Adjusted cash EBIT margin expanded by 170 basis points year on year, and rolling cash EBIT continues to show sequential improvement, signaling better underlying profitability.

Stronger Cash Flow and Deleveraging

Year‑to‑date cash flow is roughly SEK 400–500 million better than last year, reflecting tighter working capital and more stable inventories. Net debt is down by more than SEK 200 million versus the prior‑year quarter, giving Elekta added balance‑sheet flexibility despite near‑term volatility.

Restructuring and New Operating Model

Elekta’s shift to a new operating model is about 83% executed, with U.K. consultation now concluded and a broad restructuring underway. The program targets run‑rate savings of more than SEK 500 million, roughly 30% from cost of goods and 70% from operating expenses, with most benefits expected from the next fiscal year.

Currency Headwinds Weigh on Reported Results

FX movements had a major negative impact, cutting net sales by more than SEK 500 million in the quarter, equivalent to about 12 percentage points of growth. Currency effects also reduced gross margin by around 130 basis points and operating margin by roughly 180 basis points, masking stronger underlying performance.

Tariffs Add Further Pressure to Margins

Tariffs shaved about 100 basis points off gross margin in the quarter, compounding the FX drag and limiting reported margin expansion. Management warned that tariff‑related headwinds are likely to persist into the fourth quarter, keeping pressure on manufacturing economics.

Large Restructuring Charge Hits P&L

Elekta booked a SEK 417 million restructuring charge in the third quarter, classified as items affecting comparability, with total program costs guided at SEK 450–500 million. Only about SEK 100 million of this was cash‑paid in Q3, leaving the remainder to be paid later and continuing to weigh on reported EBIT in coming periods.

Americas Softness Highlights U.S. Challenge

Revenue in the Americas fell 6% in the quarter, driven largely by a depleted U.S. backlog despite the recent Evo approval. Management reiterated that the U.S. remains a critical must‑win market, suggesting investors should watch closely for signs of order and installation acceleration there.

Quarterly Cash Flow Dips on Timing and Restructuring

Third‑quarter cash flow was weaker than the same period last year, even though year‑to‑date trends are clearly better. Management attributed the quarterly dip mainly to timing effects and the initial cash outlays tied to restructuring, rather than a deterioration in underlying cash generation.

Regional Slowdowns and Installation Timing Risks

Some Asia‑Pacific markets, particularly Japan and Indonesia, showed signs of slowing, adding another layer of regional complexity. In the Middle East, potential delays in installations could affect up to about 2% of fourth‑quarter sales, a risk management called manageable but still uncertain.

R&D Accounting Clouds EBIT Comparisons

Lower capitalization and higher amortization of research and development spending reduced comparability versus last year’s reported EBIT. Management aims to better align R&D capitalization and amortization going forward, but for now this accounting shift creates a headwind to reported EBIT relative to cash‑based metrics.

Guidance Reaffirmed Amid Persistent Headwinds

Management reaffirmed guidance for year‑over‑year net sales growth in constant currency for FY25/26 and kept mid‑term targets unchanged, signaling confidence in the core trajectory. They guided total restructuring charges of SEK 450–500 million and more than SEK 500 million in run‑rate cost savings from the next fiscal year, while cautioning that FX, tariffs and some Middle East installation risks will continue to weigh on the near term.

Elekta’s earnings call painted a story of improving fundamentals partially obscured by macro and one‑off headwinds. For investors, the key takeaway is a business building backlog, margins and cash flow, yet still needing to prove it can convert new products, restructuring benefits and a recovering China into sustained growth, especially in the all‑important U.S. market.