Senzime AB (publ)

Hello everyone, and welcome to today's live Q&A with Senzyme. With me here I have the CEO of Senzyme, Filip Syberg. First of all, we will hear a presentation from him, and after that we will have a Q&A session. And also on our website you can see that you can send in questions to the Q&A sessions. But first we will hear the presentation from Filip.

Okay, good morning. Pleasure to be here. I am pleased to announce the Q1 2026 report from Sunzyme. So just to start off with kind of a high-level summary. So Q1 2026 was a little bit of an outlier quarter. We reported a temporary dip on our growth journey, yet at the same time, we reported strengthened margins and good cash flow. And the four-year targets remain intact. What kind of stuck out in Q1 was slower sales in the U.S., specifically of closing new monitor deals, and mainly driven what we've seen as delayed purchasing processes, and a year starting with a bit of a macro concerns in the U.S. Nevertheless, we reported 40% growth in our sensor sales, calculated in constant currencies. Our underlying gross margin continues to improve very nicely, and we also reported a good traction on our operating cash flow. So all in all, I remain confident in our four-year target, despite the growth dip, and I will explain a little bit more on the background. So let's deep dive a little bit specifically on the U.S. market that I mentioned. If you look at the U.S. business, it grew 11% in local currencies in U.S. dollars. Specifically, look at disposables, the sensors, it grew at 55%. But then we were affected by, of course, the strong Swedish krona and the weak U.S. dollar. So versus the first quarter of last year, it was about 15% lower. So this ultimately led to our reported sales decreasing with 5% in the U.S., which was about 2.5 million SEK. But as I said, the growth, I would say, was predominantly delayed because of tetragraph deals that were delayed, and many of them moved into the second quarter. We did not see any of our deals that have been lost to competition. On the contrary, we've been secured with a number of verbal commitments, and we know that they are in a pipeline to close as they come. So during the quarter in the U.S., we shipped out 246 tetragraphs. And I will tell you a little bit more about a new business model that we've launched as a complementary service. And of those 246, 120 of them were part of our new TetraGraph as a service model. So if we look at the TetraGraph as a service, this is a business model that we've introduced in the U.S. It's a little bit of copying what's been common typically in the robotic surgery world. So what we do is that we We provide the TetraGraph monitors on subscription. So we own them and we place them with hospitals. And then we charge customers with a premium on the disposables that are used. So for hospitals, this is a compelling rationale because it shifts kind of the capital purchasing process rather to operational processes and costs. So it simplifies and accelerates purchasing processes. And for us, what it does is that it shortens sales cycles. The two deals that we have secured during the first quarter were closed at about half of the time versus a typical capital purchase. And if you look at the type of deals that we sell to customers, the value for us over time is about 90% of the revenues contribute from the sensors. So by By having a variable sensor price, it creates strong margin enhancements for us over time. So the first two key wins in the U.S. were to two Ivy League hospitals on the East Coast, and we supplied them with 120 petrographs to their hospitals. So we have had a tradition of focusing very hard on the U.S. market because that's where the conversion to our technology is happening the fastest. This is a map that I've shown before. We've had a lot of announce and big hospital wins over the last 15 months. And if I now start to add up to that one and I put in, so what have we done so far this year? And I'm saying year to date April. So we've had a number of important accounts. We secured a big hospital extension in Florida. We recently announced a statewide IDN expansion deal. This is to become one of our larger customers with a run rate of about 6 million SEIC a year. We announced an IDN entry, so we've entered into one of the largest IDNs in the world. secured a number of hospitals, both on the central U.S., but also on the West Coast. And there's a huge potential for us to further leverage that opportunity. We've won a very important children's hospital in Texas and the Ivy League hospitals I already mentioned. So this will just give you a few of what's going on in the first four months of the year. So right now in the U.S., we have about 250 hospitals as customers. Okay, so to wrap up the U.S. and try to conclude a little bit in comparing the numbers apple to apple. So if you look at what it was last year, so last year in Q1, that was the time when we rolled out the new next generation TetraGraph. Quite a few of the rollouts were demo monitors, and some were upgrades to accounts that already had. So if I compare that, and then I look at, okay, what happened this quarter? So I had my reported sales, and then I had about $2.5 million sick in currency effects. And on top of that, I had the TetraGraph as a service, where I did not have a capital revenue, rather a long-term enhanced margin revenue on sensors. So if I look at that all in all and just compare these apples, just to explain, there's about $6.5 million, the ratio of difference here. So the underlying business in the U.S. is still moving in the right trajectory. Okay, so let's move on and look at, in general, the global business. So we continue to grow our install base and grow our shipments of TetraGraphs. So we've shipped over 5,500 TetraGraphs by now. In the quarter, we shipped out 376 in total versus 443 last year. And again, last year was a little bit boosted by upgrades and demo units that came out. If we look at our disposable sensors, remember this is a razor blade business where each patient connects to a sensor. We continue to grow the sensor business very nicely. We passed the milestone during the quarter of 1 million monitored patients. And this is an important milestone for us. Not only does it help to enhance margins, we get economies of scale, but it also provides kind of the reference space for further growth. So if you look at the rolling 12 months of the sensors, sometimes go up and down in volume, it's a 66% growth. So to sum up a little bit of sales numbers, we've talked about the US here first in line. Europe has had a decent start of the year, almost 60% growth in terms of disposables. We also had a small currency negative effect because of the Euro. The rest of the world had a little bit of weaker start of the year. Still very strong belief in the opportunities in Japan and South Korea, and we will certainly catch up that during the year. So you can see, if you look at the spread of our business today, U.S. is a little bit less dependent, and the sensor sales continue to be very strong as part of our company. Something that was announced during the quarter and that we have pre-announced before, but during the quarter, the actual publication of the new pediatric guideline was published. So, this is a guideline set that was created by the European Society of Intensive Care and Anesthesia, and really what it says is that Children that receive neuromuscular blocking drugs as part of surgery should be monitored using a quantitative neuromuscular monitor and preferably use an EMG-based solution because of the higher accuracy and reliability. And that's exactly what we offer. So, the pediatric opportunity is interesting. I mean, it is a smaller part of our overall business. I would say it's about 5 million patients a year versus about 100 in total for adults and all patients. But children are a specific group here. I mean, residual paralysis is common. And with residual paralysis, I mean that they wake up and they're still partly paralyzed. The consequences of this are serious. Children end up in postoperative care, and they get all kinds of different respiratory issues. And the issue has been here lack of available technology and a lack of kind of practice standards. So, I think that's a very strong guideline, and we have had the fortune to work with a lot of the guideline authors. We've conducted a number of webinars and seminars, and I believe we have the support to really grow this business opportunity. And so to look like where are we in this pediatric opportunity? It has been a small yet important part of our business, but it's a notable number to see that in Q1, The numbers should actually be here 2026, I can see. We actually threefold increased the sensory units, and we sold 65 tetragrafts specifically delivered to pediatric operating rooms. So definitely a trend shift here, yet from small levels. Another important news piece we had during the quarter is that we introduced what's called the TetraCom. The TetraCom is a novel technology that enables physicians and IT personnel to connect the Sensime Tetragraph directly to hospital health records, meaning directly into Epic and Oracle and other types of systems. And we do have a suite of partnerships where you can connect the data through providers such as Philips, Mousimo, GE, and Mindray. But with the TetraCom, you can connect seamlessly, wirelessly, directly into these systems. So it's a way for us to provide a service and also monetize on the data and the value to the customers. Let's look a little bit more about the numbers. Gross margin. I mentioned initially that the underlying gross margin continues to improve, and it does. So in the quarter, the underlying gross margin was 69.3%. We continue to improve it versus end of last year in Q1 last year. We continue to have a number of effects on the gross margin that are, I would say, beyond the company's control. We have the U.S. tariffs. They are still hitting us. We will see where that ends up. And we have the currency effect. So we have quite a hit on the currency in Q1. So the reported gross margin was 63.1%. We continue to increase pricing. We are noting U.S. pricing levels now for us increasing. So I continue to iterate that the gross margin will improve over time. If we look at our operating expense level, I've iterated before. We continue to keep it very flat. So we try to grow this business rapidly with a flat operating expense curve. We were actually down 5% versus last year and almost 17.5% versus Q4 of last year. And this is important because we continue to invest in sales, in marketing, in net affairs, and we continue to do a lot of science to be the industry leader in our field. If we then moved down the profit and loss and look at the cash flow. So I think the cash flow stood out this quarter. It improved by 33%. Yes, we are still negative, but as we work diligently on optimizing working capital, we're starting to see that the burn rate is significantly getting down. EBITDA was slightly better than last year. Net earnings improved drastically, which was majority of focus or result of currency effects. So we had 55.3 million SEIC in cash by the end of the quarter, and then we had a credit facility of an additional 42.5 million SEIC. So I think we're well-funded for our venture. And to comment on the credit facility, this was something we announced in conjunction with our Q4 report, which was iterated again. We had a group of key shareholders and a bank, DBT, which is part of NOBA Bank Group, That provided us with a credit facility of $50 million. This is to be used for working capital purposes to give us the flexibility to grow very fast and that there are no warrants, no diluted instruments or any other type of special conversion rights. We have called for $7.5 million of this, and that was part of a contractual obligation, part of the credit facility from DBT Group. If we look at our shareholder base, if we look at kind of the top 10, it hasn't changed very much. There are some small changes, but the top five shareholders remain very strong and intact. We have 3,600 shareholders. There has been some good trading volumes, so definitely have been shares trading hands. I don't have the specific of who's been buying or selling at this point. Okay, so a little bit back on the goals and where are we. As I've said so many times before, we're on a mission here to radically build and create the undisputed market leader within quantitative neuromuscular monitoring. We're targeting a very big market. There's a lot of hospitals and there's a lot of operating rooms left to be converted. And the outlook for our business is that we're going to continue to grow in line with what we've done in the past. So if you look at our full year goal, it remains strong and intact, despite the little dip in the growth rate of Q1. And we're going to make this happen by continued streamlining and optimizing the gross margin, continuing to scale down on the operating expense level, and continue to grow our recurring base of revenues. So just a minute on what is it we do again. So remember, we have developed, we're the first in the world who have pioneered a technology, make it available in operating rooms to make sure that people are intubated at the right time, that they get the right amount of these paralytic drugs and the reversals of them, and that they're extubated at the right time. Sophisticated technology. We have over 109 patents now, 40 years of research behind us. but a very smart real-time technology to assess and monitor the level of paralysis in the patient. And this is specifically important in operating rooms where, for example, you're doing robotic surgery. This is just an example picture from a Swedish hospital, a good customer of ours. But what's been seen in published research, if you use the type of technology we have, you can eliminate complications related to these dangerous drugs. And you can actually reduce the amount of these drugs by 70%. So you're not only saving the patient, but you're saving the hospital a lot of money on this. So the wrap-up and the key takeaways. I mean, we are on a hypergrowth journey. We've had a CAGR of almost 60% over the last five years. Yes, Q1 stuck out a little bit, but, you know, that curve is going to continue. Operating expenses and margins, you know, we are improving. We're on the path for profitability. There is a strong demand for our products out there. The pipeline is strong. We have a lot going on, and I think we'll materialize, and I'll come back to that. And again, the guidelines are there, the science is there, and the clinical need is there. And we have the people, we have the technology, and we have the funding to make it happen. So join us on our mission as we safeguard every patient's journey from anesthesia to recovery. Thank you.

Perfect. Thank you very much for the presentation. Thank you. So we received some questions, and I also have some questions by myself. First, maybe we can focus on the sales. It came in a bit lower than expected. You also state that this is mainly due to FX, also a softer U.S. market. You also believe that this is temporary. What kind of arguments do you have for that statement?