Senzime AB (publ)

Good morning and welcome to this presentation of the Q3 report for Sanzime. Okay, just as a little recap starter, Sanzime. We are a medical device company. We are pioneers in the field of precision-based patient monitoring. Specifically, what we do is what we've developed and we've been pioneers in the field of neuromuscular monitoring. We brought to market the TetraGraph. It's the world's first portable electromyography based system. It's used by anesthesia clinicians to ensure the right timing of intubation, to ensure that every patient gets the right dose of paralytic drugs during surgery, and that each patient can wake up and breathe by themselves after surgery. My phenomenal team has brought this system to the global market. So as of now, we have about 6,000 systems delivered out to operating rooms around the world. The opportunity is far beyond 400,000 operating rooms. We have about 800 hospitals in about 30 markets. By now, we've monitored over 1.3 million patients. Our business model is based on recurring revenues of sensors and selling and placing monitors. So today, about 80% of our business is recurring sales of disposable sensors. Last year, we did about 100 million in sales. And since the market normalized after COVID, We've had an annualized growth rate of an average of 95% per year. And to support our technology, we have a strong patent portfolio of about 109 patents. Okay, so let's look a little bit of Q3. So Key 3, I think, was a pretty good quarter. We reported growth in all our regions around the world. We regained growth and grew 14%. Specifically, what's important is that the disposables, the sensors, grew 43%. Our gross margin increased to 74% versus 61% last year. I'll come back to this. We continued to decrease our operating expenses. They were down by 15%. which led to ultimately our EBTA moving in a very nice consecutive manner towards profitability. So in September we were almost breakeven. The cash flow also improved significantly thanks to this and we disclosed to market that we once again have secured the financing needed to take us to long-term profitability. Okay, so let's look at some numbers. Let's start out looking at the sensors. As I said, the sensors continue to grow very nicely. We shipped out over 130,000 sensors in the quarter. If you look at the trailing, kind of rolling 12 months, the growth rate is 53%. And then if you look at the install base, how are we doing with the systems in the market? And I want to continue to track this KPI to the markets going forward, looking specifically at U.S. accounts. This is where we can control the business, and we're very close to our customers. And if you look at the key accounts, which contribute to about 90% of the volume, you can see that the weekly average utilization rate continues to increase. If you look at over this year, it's actually grown by 60%. And this is thanks to meticulous hard work. We're supporting our customers, we're training, we're providing them the tools necessary Analytics and various types of services to help them standardize this technology. So what the utilization means here, it's the number of Tetra sensors used per monitor and week. So we still have a significant opportunity to grow this, but we're moving very nicely in the right direction. If you want to look at one specific U.S. case study, this was a study that was presented about two weeks ago at the big anesthesiology congress in the U.S. So this is one of our customers. This is University of Miami, the big hospital system. They have been users and customers of ours since about 2023. And what they reported here is that they had a very interesting increase in utilization over time. And what happened was that in mid-25, we upgraded to the next generation TetraGraph, our current state-of-the-art monitor. And that, including that the hospital system institutionalized or protocolized the usage of our products, really made them to the next level. So now, today, they are at about 80% utilization rate. The right technology, the right supporting protocols, and the support from us and the clinicians. That's what drives up this usage. And then one more number on utilization. So look at pediatrics. And I reported this a couple of times that there were European... guidelines published that specifically talk about children, specifically talk about when they get paralytic drugs, they need to be monitored, and these guidelines state that they should be using electromyography-based technology. So when the guidelines were first announced about last summer, we saw an interesting kind of change in the growth trajectory curve. So we went from a constant growth rate, and then suddenly the growth rate doubled. And I'm seeing that we're kind of winning and attracting pediatric hospitals around the world right now. Okay, so let's just look at three main events during the quarter. We started in mid-July. We announced the Philips OEM slash commercial partnership. This is a landmark agreement for Senzyme. It's the biggest and most important partnership we've signed so far. I've educated the market a little bit about this before, but what we're doing, we're co-developing, we're going to co-commercialize, and this is something that will scale the business of Sanzime to a next level. Further, a couple of weeks later, we announced that we were awarded a sole source agreement from the U.S. Veterans Affairs. It's a five-year agreement. The U.S. Veterans Affairs is the largest U.S. hospital system with over 170 hospitals. And then we've continued throughout the quarter to win and secure more hospital contracts. We announced one of these, which is a major system in the eastern part of U.S., and there we deployed 60 tetragram systems. But this was just one of many opportunities. Let's look at overall sales. As I said, we're back to growth. We're growing in all regions. The growth rates for the sensors were 43%, so that offset a weaker number, which was monitor sales. Monitor sales continue to have a little bit of a tougher year, specifically in the U.S. market. We're just seeing, like I reported in Q1 and Q2, that It takes time to close the deals. We do believe, I feel that the catch-up effect is coming. I feel we're increasing the opportunity to close the pipeline. We have a partly new leadership team in the US that is doing a phenomenal job and I'm very positive about the outcome for the US market. But the important thing is here that If you look at the product mix of our company right now, in Q3, the sensors accounted for 83% of our business. So we're building a very strong recurring revenue base in this company. And US continues to be the strong driver with 70% of the business. Okay, let's look at the gross margin. As I said, it grew very nicely. It reached 74%. I think this is a new record level. It's up 13 percentage points from the same quarter last year. The improvement here comes from various sources. One is new products. I announced earlier in the year that we moved production. We redesigned our sensors. We now have a Partly European-based operations of that and that has really given us more favorable unit economics. We also have a nice product market mix with heavyweight on sensors and we were boosted a little bit from tariffs. As you can see, the 74% was the reported gross margin number. And this is what I've communicated constantly in the past that we are Driving innovation. We are working with pricing levels and we're doing things to really drive up our gross margin to be in excess of 70%. And then let's look at the operating expense level. So we've this year really worked hard. We have a meticulous cost control. We've lowered our operating expense level with 15% as of if I compare to the Q3 number last year. And if I look specifically at Q3, this is about 6 million CX. So we have reduced headcount. We've focused more into the commercial sector. We're using AI, which is making productivity enhancements within specifically our technology team. And we just have a lower cost base level to the product. So if I translate this to, so what does this mean with the sales, with the gross profit, and then the OPEX, okay, EBITDA, as I showed before, it's a nice trend. It's moving favorably month by month, and we are moving towards profitability. We also internally report, you know, how are we doing from a profitability point of view in our US market and in our German market, which are separate entities. And both of them reported non-allocated head office expenses, but they reported EBITDA positive numbers. So the Q3 EVTA improved by 59% and it's quite a difference where we are minus 8 million versus minus 19.4 last year. So how does this transfer then into cash flow? Caslow has also improved quarter over quarter. It's actually improved by 70%. And so the burn rate of the quarter was minus 8.7 million versus 28.3 last year. So this is a major improvement, I would say. The improvement here is from increased sales, improved gross margin, reduced expenses, but also working a lot with our working capital. So we're optimizing, we're getting on inventory to move faster. and we are getting our customers to pay us faster as well. So just look at a little bit on the financing. We did report during the quarter that we refinanced our loan package. So what we have is a A 35 million credit line, which is provided by predominantly the Segula Group and the Crawford Group. We renegotiated it during the quarter to get a little bit better interest rate, and we extended it in time as well. And this facility I can call upon as needed, and it's a very smart way for the company to use as working capital needs are on. So we had 28.7 million SEG in 2019, In cash, the end of the quarter. And then on top of that, we have the 35 in the credit line. So we have 63.7 million in available funding. So it's important to kind of emphasize that we have the capital needed to take us to profitability. And we also reiterated a few weeks ago that we still believe we're on path to reach positive cash flow within the fourth quarter. Okay, this is gonna update on the shareholder base. There's been a lot of trading going on in our share during the third quarter. If you look at from the top, I mean, A company like ours is constantly under restricted trading. There's always a logbook. There's always something going on that restricts insiders from trading. But in these few spots, we had a couple of insiders that increased their share. But we also have a pretty massive outflow from two of our funds, the TIN, Nyteknik, and also Lannebo Fonder. And I think there was a couple of million shares that were flooded into the market, and this really were difficult to catch up by buyers. But all in all, we continue to have very, very strong support from our top 10 shareholders. Okay, to wrap up the third quarter with three takeaways. One, our recurring revenues continue to grow very nicely. 43% growth in sensors, we're proving that the install base Thank you very much. but also working with leading OEM partners to find new markets and integrate our technology to grasp the mass market of this opportunity. So join us on our mission as we safeguard every patient's journey from anesthesia to safe recovery. Thank you.