Surgical Science Sweden AB (publ)

and welcome to the surgical science q4 2023 call my name is gisli hennemark i'm the ceo of the company and i will start this call off with a few general comments and then anna oldberg cfo will go through some of the details and then we will open up for questions so 2023 Q4 we had a decrease in our total revenue compared to the same period last year compared to the same period in 2022. What we saw in the fourth quarter was that the typical what we call end of year deals when hospitals are using their budgets that they've been waiting or saving during the year did not do so in 2023. It was a tough year for many hospitals and more so in the United States which is an important market for us and when our customers were planning to do their end of year purchases the budget was simply not there because it had already been spent. And this is not so strange looking at it in the reverse mirror. Most of these budgets were set in fall of 2022. And then inflation and cost increases ate away a lot of those budgets, making the environment difficult for the hospitals. We also noted that The Chinese market which we commented on in our Q3 report where we saw some bright signs and I actually travel quite a lot to China. I was there two times last year. We have an office there so we have our own people on the ground. But we noted that it was a change during the fourth quarter where the government, to our surprise, announced that they will continue the anti-corruption campaign specifically targeted towards hospitals and teaching institutions within hospitals. This puts a dampering effect on the market because no one wants to be subject for those kinds of investigations. The need is still very strong there. We expect the market to come back and our best guess currently is that that market will start bouncing back mid-2024. And I must add also that this comment is not attributable to industry OEM where we see a strong growth and lots of opportunities also in the Chinese market. Moving on, looking at more of the bright side of our Q4 report is the continued strong growth in license revenue. We ended the year with a total of 278 million Swedish crowns in license revenue. So these are the royalties that the surgical robotics companies are paying us to utilize our technology. and that's up more than 50% so it's a very strong tailwind and strong development also the fourth quarter had a growth of about 20% and you can see it there on the slide on your screen if you're in front of your computers where you see it quarter by quarter looking a bit at the market we follow very closely the utilization of surgical robots and we saw market leader Intuitive post their quarterly report about a month ago and they had all-time high utilization rates so procedural growth how much you use the surgical robots continues to grow very strongly This is extremely important to us because it means more surgeons are needed, which in turn means that you need to do more training and more use of our simulation technology. We also note that The new entrants that are competing with the market leader in this business typically have lower utilization rates and one important part of bridging and getting utilization rates up is to work with education and training and with simulation. another interesting observation is that and this is true particularly for europe where we have a regulatory environment where there are many robotic platforms robotic surgery platforms that are approved we note that the hospitals are really embracing simulation because these robots they are not like driving a car meaning that in between them they work differently of how you control them so you need to train on each one of these robots in order to perform surgery in a patient safe manner and we're really seeing hospitals embracing simulation and appreciating the fact that the simulation is the same from one vendor to another. So we feel that we are moving our positions forward in us being the de facto gold standard for simulation for robotic surgery. And we keep on investing in technology. So we have advanced our core technology meaning that we can do applications for our customers that we weren't able to do before. And we're also helping our customers utilize the simulation in different contexts. We call this product extensions, meaning that the core console simulation can be used also ahead of the surgeon even coming and sitting at the surgical robot for the first time. For example through head mounted display. These are VR headsets that we can utilize off the shelf hardware with our software. About a month ago the market leader Intuitive announced that they have now made a submission to the FDA in the United States for a next generation DaVinci called the DaVinci 5 and without making any comments whatsoever about the actual capability of DaVinci 5 I can note that generally speaking this is very good news for surgical science because when a new robot comes to market it typically has some features that are different and that requires more training and simulation is part of that training. It also typically has capabilities that over time means that the surgical robotic company can expand into new indications and when doing so it again puts a demand for more simulation. so generally speaking this is good news for surgical science of course in the very short term it can have some market dynamics that some customers may want to hold off a bit and get more information about what the new davinci 5 will actually have in terms of capabilities But this is again speaking historically what we've seen when Intuitive launched their latest Davinci called the Davinci XI. And what is different today is also that there are many more customers that are leasing the robots. So it means increased flexibility for them to upgrade at a future point of time. our profit margin in Q4 was disappointing and not where we are used to having our profit margin but actually looking a bit more closely at that profit margin the big effect was the currency effect on our receivables like accounts receivables because they need to be revalued at 31st of December, which happened to be a low point for the US dollar versus the Swedish crown. Actually, that effect was about 15 million Swedish crowns representing then six percentage points. So that's the difference between the actual 17% profit margin on an EBIT level to a more normal mid 20s profit margin, 23% in this example. And I will provide details on this matter. We have our largest office in Tel Aviv in Israel and throughout the fourth quarter we all know that Israel was at war. I was there the last time in December working with the team and even if war means a lot of emotions and a war is a tragedy for everyone involved on all sides, I can comment that Circus Science has not missed one single delivery or one single deadline out of the Tel Aviv office. So I'm extremely proud of how our team is pulling together there and how the whole company is working together in order to move the company forward. So business-wise the war has had a very marginal effect on our business. Now finalizing my introduction here I like to firmly restate that we have a strong belief in our 2026 goals. If we're looking at for example educational products that had a weak quarter in Q4 since we introduced our long-term financial goals Educational products have been well above the 10 to 15 percent on average revenue growth that's needed in order to reach the goal. That means sort of just mathematically if you take our total revenues that for 2024 ended at 883 million we need a total growth of just below 20 percent for 2024 up until 2026. We firmly believe in this goal and we also firmly believe in our strong position within the surgical robotic customer group that will drive license revenue and will make us reach our adjusted EBIT goal of 40%. of course looking in here into 2024 we know that there is a headwind in educational products there is a very strong demand we know the need from the customers but there are question marks about financing And actually last year, for educational products as a whole, it still grew, even if it was a very modest growth, I think like 10 million Swedish crowns. But if you look at what we had sort of against us in that year, there was the Q4 effect that sort of just didn't happen in 2023. In 2022 we had a sale to a leading US hospital chain of about 70 million Swedish crowns and then a sluggish China. In this environment we still grew educational products, meaning there are many other markets that had very nice growth in order to adjust for this. And we feel a strong tailwind in industry OEM. The strategy is working, the resources that we put in place are generating, and we're seeing not only surgical robotics, also outside of surgical robotics, we're seeing good progress. So with those words, I say thank you, and I hand over to our CFO, Anna Ahlberg.

Yes, hi everyone. So Q4 was a quarter where we had strong license revenues and weaker simulator sales because of the lack of what we call the year-end Q4 effect on the hospital side. Meaning sales was more on par with Q2 and Q3. In absolute numbers, we had sales of 227 million SEK, down 9% and the same than in local currencies. As you know, we are heavily dependent on the US dollar where we have 82% of our revenues. We have had a positive effect for quite some time from the strengthening US dollar. It was on par for the quarter then on the sales side, but we saw a negative effect further down in the income statement and I will get back to that in a while. Educational products was 54% of our sales for the quarter down 20% and more in line with Q2 and Q3 then because of the lack of the Q4 effect. We have had some great quarters for educational products with great growth up until and including Q1. We have repeatedly said that the rising inflation and downturn in the economy would affect us unless it was very short. And we do see there being a greater inertia in the market, not because the demand is not there, but we do see things taking a longer time and especially then in the US. And then we have the very important China market being weak due to the anti-corruption campaign affecting the healthcare sector. For educational products, Europe was slightly above Q2 and Q3. And the same goes for South America. Industry OEM was up 9%, 46% of our sales. And again, license revenues at an all-time high level and up 20% for the quarter. That meant we showed sales of 883 million for 2023, plus 10%, and in local currencies, plus 7%. Educational products then plus two and industry OEM plus 24. And as Kisly also said, after the merger with Symbionics, we had a very, very strong period for educational products. And that means that we at the CAGR level, we are above our target of 10 to 15% average growth per year since our financial goals were communicated. and license revenues for the year were up 50%. Looking at our four different revenue streams and also in the report you have them divided per business area as well. We see that license revenues for the quarter was 33% of our total sales And that meant that for 2023, our license revenues were 31% of our total sales, which was considerably higher than in 2022 when we had 23%. And this is, of course, very important for us, for our financial goals, both when it comes to our sales goal and our profitability goal. As we always emphasize this number, the license revenues is more lumpy between the quarters since new entrants buy their licenses more in batches. We do have today revenues from several customers within the segment. We also said that we gained new customers during 2023 within the robotics segment, even though they haven't started to generate license revenues yet. Simulator sales was 55% of our sales in Q4. If we look at full year 2023 and exclude the large U.S. order we had of approximately 68 million SEC, the increase was 18%. Development revenues were somewhat lower for the quarter, but we do have, as Kissele also said, several exciting projects within the area. And we are starting to see that our investments that we have made in the sales organization within industry OEM, that that is starting to pay off. This item consists of both robotics projects as well as sales of simulators where we do software adaptations to the OEMs. And our service revenues continue to be stable and grow with our installed base. Cost and EBIT margin for the fourth quarter, our gross margin was at the highest level that we had in Q4 for 2023. It was just above 71% due to both the fact that we had an increased share of license revenues, 33% versus 25% in Q4 2022. And we also had a good product mix and a favorable average sales price. Sales costs increased a bit compared to Q2 and Q3. They are usually a bit higher in Q4. One factor being that sales commissions often reach a higher level. And the costs were only, there was only a slight increase if we compare quarter over quarter for Q4. Sales costs were 19% of sales and admin then 9% of sales. Looking at R&D, the costs were on par with last year and they were at 20% of sales. We activated approximately 8 million SEC, the same as last year, but lower than in Q3 than when we had 12 million. We got some questions then if that level should be considered to be sort of the new level going forward. But it does depend a lot on what we work on during the quarter. And again, we are working on many good projects within the industry OEM area and here revenue recognition can be a bit more lumpy. The item other is usually not significant. For this quarter, however, we had a large currency effect from the weakening US dollar. The dollar went from 10.8 on September 30th to 10.0 on December 31st. And when we then revalue our operating assets and liabilities in above all US dollar, This was the effect of that. So it is not a realized loss, but more of a translation loss. This item also includes an IFRS 2 effect from our options programs. EBIT was then 38 million, corresponding to a margin of 17%. If we exclude the 15 million that we just discussed, we are at a more normal 23% EBIT margin. Organization. We were the same number of employees at the end of the year as after Q3, 260 people. We are continuing to grow the organization, especially within R&D, but also other areas. We have a good plan for this year and are growing with cost control. Down to the right you can see the split between the countries where we have approximately half of our staff in Israel and then one quarter each in Sweden and the US respectively. Adjusted EBIT, where we have our financial goal of 40% in 2026, which corresponds to EBIT adjusted for amortizations on acquisition related items, such as customer contracts and technology. For Q4, this number was 44 million, a margin of 19%. And for the full year, we had adjusted EBIT of 240 million. That was a margin of 24%, approximately one percentage point above 2022. Finance net and taxes. Finance net for the quarter was 80 million SEK, and 70 of these came from the effect of the Mimic earn out. Going into the quarter, we had 7.8 million US dollars in our balance sheet, which was attributable to 2023, which was the last year of this continuing consideration that was in the deal when we acquired Mimic in 2021. 6.7 of these will not be paid out and they are in the finance net and then 1.1 million US dollar will be paid out to the former shareholders of Mimic. This item is then still in the balance sheet as a short-term liability and after it has been paid out during the spring there is nothing left referring to the Mimic acquisition or the contingent consideration of the earnouts. Other items in the finance net, interest on bank balances, approximately 4 million, revaluation of internal loans, 7 million, and then a smaller amount attributable to IFRS 16. Taxes for the quarter were 20 million and for the full year 34 million. Our taxes paid are affected by the fact that we have no carry forwards in Sweden and the US. That means then that not all of the tax expense in the income statement will be paid. Some is booked towards deferred tax assets because of these nulls. And going into 2024, we have nulls left in the US in MIMIC. Net result for the quarter was 98 million SEK and for the full year 234 million SEK, approximately 26%. Cash flow from operating activities, it was 40 million SEK for the quarter. A negative change in working capital, minus 15. Inventory and accounts receivables decreased. However, other current receivables increased. For the full year, we see that inventory has increased due to the fact that we have more production. while accounts receivables have decreased. This is the most important item that we work with in our cash management. Accounts receivables are more important than the inventory level, especially in the US, since that is a direct market. I'm very happy with the development we've had. You see the grey line there with a decreasing trend. Accounts receivables as a percentage of rolling 12-month sales. We see decreasing also for Q4, but I think we are pretty much where we want to be with that now. It's more a question of continuing to do this good work on the AR side. Cash flow from investing activities was minus 12. That is mainly investments in development costs from financing activities. It was a plus nine and IFRS 16 effects. And that meant that we ended the year with 634 million in our bank accounts. That was plus 28 million for the quarter and just above 200 million SEC plus for 2023.

all right thank you anna um ending the address here with after numbers to the left and right with a picture a couple of photos from reality a couple of weeks ago we had our annual sales and partner meeting we had it in budapest this year and we're about 120 people from all over the world literally all over the world meeting up and they were surgical science people you know we our internal staff but the majority are our distributors our sales partners within educational products and this community is strong And I'm really proud of the sales network we have and our sales organization helping them get customers their needs met with simulation, but also the service and support organization that can help customers with this broad portfolio of simulators for medical specialties. We also had the technical training and it's such a vibrant amazing community that keeps on growing and that is ready to sell new products. We really feel after the various acquisitions we made that our strategy of being a simulation company with a broad product portfolio is really working. So with that, I would like to hand over for any questions. Thank you.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Simon Larson from Danske Bank. Please go ahead.

Hi, Gisle and Anna. I'm filling in for Victor today. A few questions from my end, please. So maybe, Gisle, you're highlighting some short-term dynamics here in the robotic market as a potential challenge going into this year. I guess the DaVinci 5 launch is maybe a thing for the back half of this year or beginning of next. Should we expect this to hamper the license growth in coming quarters in any way, or that some customers might wait for that launch to invest, or how should we think about this?

Like I spoke about earlier, there can be some wait and see effect. If you look at what Intuitive said during their earnings call in January, a month ago. they said that they expect trading volumes to be somewhat lower but they also highlighted the fact that many customers now have the lease option so if you are curious about DaVinci 5 you can always go with a DaVinci XI while waiting a DaVinci 5 so it's a little bit hard to know how it will plan out in the short term But I think you have to go back and look at the really key metrics and that is procedural growth, Simon. If you look at the 22% procedural growth intuitive published in Q4. That is really, really strong number and I think they're guiding for next year between 13 and 16%. And that means more surgeons are performing robotic surgery. They need more training and they need more surgeons combined with the new entrance. But we pointed out because it can have a short term effect, but I can't quantify it if that makes sense.

Yeah, no, but that's that's very clear. I think I mean, 1316% growth for procedures. I mean, that's awesome. That's quite strong, actually. So maybe the second question, if you know, it also brought up, you know, budget constraints a bit, I saw there was some news out this morning around, you know, China implementing volume based procurement here in 24 to try to cut prices. on larger CapEx items such as laparoscopic robots. At the same time, you know, both HCA 10MET seemed to guide quite strongly CapEx-wise here in 2024. So, yes, you know, if you can paint the picture, what you're seeing around budget constraints here during the year.

Yeah, we see the need, Simon. We see the need, we see customers' plans, but what we experienced in the reverse mirror was really that budgets ran out in 2023. It's always easier to be logic in the reverse mirror but it makes sense. They made the budgets sometimes in 2022, they got them approved and in 2023 there was a lot of cost increases and hospitals really felt the pain. it's a bit difficult to say what will happen with what will happen with budgets in 2024 but i know that made budgets for 2024 and then if inflation starts coming down i think that will also help us a lot and then it's very big differences also from market to market i commented on china where we really saw the signs. I mean, I was there during the fall. I saw the signs that things are easing up. And then we were a bit surprised that the current anti-corruption campaign now is announced to continue to the midpoint of 2024. So it also has big differences from market to market. But the need is really strong and that is what makes us positive overall for the adoption of the medical simulation.

Yeah, perfect thanks. Thanks so much and the final one from my end. So on the dynamic around the license sales in the quarter and you know, I know you'll be talking about this before this, you know when a new customer starts selling And the robot, you know, they tend to order in bulk or licenses in bulk for the simulation. Did you have any of those bulk orders here in the quarter? Or was it more rather like broad-based demand for licenses?

Yeah, we do have again, we have revenues, licensed revenues now from several customers, meaning several more defined as new entrants. And since they are purchasing in in bulk, as you say, or batches, that will always be an effect in sort of each quarter. But it can vary, of course, if several buy their batches in one quarter and maybe less in the next, then that effect is larger, of course. So it depends on when these batches come in, so to speak.

Yeah, okay, I see. Perfect, okay. Thanks so much.

Thank you.

And continuing maybe on that note before we take the next question we have some written questions as well and also around the license revenues and what is recurring or not and what the model looks like. So for the license revenues we have one part that is more perpetual tied to the actual robot when the robot is being sold with our simulation package on it we get we get money for that. But then we also have a recurring part. We have not stated the percentage or the split between the two different ones. What we said when we acquired Symbionics was that for their contract with Intuitive, the larger part was recurring. And recurring can be both on installed base or based on usage. So with that, I think we can take the next question.

The next question comes from Ulrik Tratner from Carnegie. Please go ahead.

Great. Thank you very much. Hi, Gisle. Hi, Anna. A few questions on my end. And I'll start off with the stricter budgets in Q4 and What you're seeing there in terms of restrictions from release of the full budgets into Q4, since you mentioned inflation, but you also feel that hospitals in general have been kept on a sort of tighter leash when it comes to releasing their budgets for Q4. And is this mainly a US thing? I do note that we're seeing decline in all geographies and we can take away China with anti-corruption. But do you see this as a general theme for Q4?

It's a general theme for Q4 Ulrik and I mentioned the United States because it's such an important market for us and it's also a direct sales market where we have a larger margin contribution also larger cost of course because we have our own direct sales people But it was felt everywhere. I mean, hospitals were under pressure last year, and that I think goes as a general comment across the line. But despite that, like Anna mentioned, we grew in Europe, for example, queue over queue in educational products. So yeah, that's what I can say about the budget squeeze.

Okay. Do you expect this to turn more positive in Q1? If I remember correctly, you have quite tough comps on the educational side with orders from Q4 being spilled over into Q1 due to the high demand that we were seeing. I know if they can't release their full budget for Q4, is there someone waiting until Q1 for buying? What's your gut feeling here?

I don't like I mean I can't give any forecast we don't give any forecasts but we did comment in our Q1 report in 2023 that we had unusual and unusually large backlog from Q4 meaning in 2022 we couldn't deliver everything the customers wanted to buy so we had 17 million that spilled over into Q1 2023 but it will be really interesting to see because I mean we see the demand we know that a lot of customers want to buy now if they went to their purchasing office and said I want to buy this simulator and they got a no in Q4 Will it mean that they get a yes in Q1 to a larger extent or will it mean that the finance department will say it looks good but hold off and there will be a larger Q4 effect? in 2024. It remains to be seen and I don't have any forecast on the short term impact or dynamics. But I do know that the underlying demand is there. It's strong and we have a good position as a company.

Great. And if we stay on geographical growth here and you mentioned that you delivered on a large deal in Romania Q2 and Q3 this year and as well as we went back in the quarterly report you mentioned a larger deal in Pakistan. Do you feel that we should take this into consideration for 2024 or is this just normal operations on your end and you're expecting to be able to meet these orders with new orders for the full year 24?

Yeah, this is more in line with normal operations. We always have, I mean, different size deliveries. And, you know, as you know, there might be one large order in one country, one quarter. And then there might not be any sales to that country for a few quarters, but then something else comes up. So it's more to comment on where we had the deals for that specific quarters. Within educational products, even though it tends to be more linear in its growth, within that we have deals that can look very different and in different countries. so the the deal that we comment on is the large us deal of course because that was something sort of extraordinary it was a very large deal that we also had to had to announce usually we don't announce deals even though they might be of different different sizes great um perhaps you can we can switch to fx

uh because you are heavily tilted to the dollar in terms of sales and as well as receivable and that's quite obvious here in q4 but you're also heavily tilted towards the dollar and the shekel in terms of your cost space can you give us some indication on the fx effect on operational expenses here in q4 i'm guessing you had some favorable effects

Yes, on the cost side, as you say and you saw it in the report, we have approximately 50% of our cost base in Czechoslovakia and we do purchase a lot of things for our production locally. and then of course the cost for our employees etc. in the countries where we are. So we mentioned the negative effect of the 15 million on the revaluation of the balance sheet but then yes the shekel depreciated somewhat against the US dollar. is calculated in several steps, but meaning then that there might be a slight positive effects on the other part of the costs, but nothing major. The largest part is on the sales side, which will always then also, of course, disclose the percentage excluding FX effects.

Yeah. Great. Do you have a switch to each to intuitive system, the new system. It's a more advanced system with more functionalities. Are you including more advanced simulation and adjusting prices?

I cannot make any comments regarding that Ulrik. We are bound by strict NDA and confidentiality agreements as a company. Actually, I'm personally bound also with that particular client. So I cannot comment on that.

Okay. Last question on my end. Mimic, you have three years of contingent considerations on sales targets and they've been lowered, the outcome has been lowered each year. Were expectations set extremely high or have MIMIC underperformed or how should we read into this?

We are extremely satisfied with the acquisition of Mimic Technologies and the team we have in Seattle. They're a valuable part of our company and we are very pleased with how it's been planned out. Now when you discuss with the former owner, the now former owner, about price for the asset, it's very natural that the view diverges quite substantially. and I'm no big fan of earnouts because it can quickly put in incentives that are not aligned within the company but in this case it was actually very easy to define an earnout based on already delivered content at negotiated prices over a three-year period and It's just natural in my mind that what the former owners thought about the development was very different than what we thought and as a result we have paid out not the maximum earn out but an earn out that is hopefully something good for the former Mimic shareholders and overall we're very pleased with the acquisition and the position that it has put us in.

Okay, that's great. That's all on my end. Thanks for taking my question.

The next question comes from Christian Lee from Pareto Securities. Please go ahead.

Yes, thank you. Good morning. You expressed some hopes of China returning to normal volumes in the second half of this year. Could you please elaborate on what you base your view on? Have you seen any signs of demand picking up despite the ongoing anti-corruption campaign?

I base that on a what the authorities are communicating b what our own staff since many years in our China office in Shenzhen are saying and number three what I experienced being there on the ground I was there two times last year and I spoke to a lot of people and when I was there in the fall we really felt things easing up. And these sort of policies, they usually start and end in Beijing. And we saw the beginning of the end, but then somehow it tightened up again towards the end of last year. And this is why we clearly state that in this quarterly report, because it's different than what we said in Q3. However, the underlying demand is still huge there and it's not like we're making zero business. It's just not at the normal level. And I can also mention that we are making good progress with the chinese med device companies because they are serious they're good they're investing in their products and they want world-class simulation and then they turn to surgical science so my comments in in this aspect are purely on the educational product side

Excellent, thank you. There are several market challenges such as the restrained hospital budgets, the timing of China's bounce back, and perhaps the short-term dynamics in the robotics market. How good is your visibility for 2024? Given that you had only 7% organic growth in 2023, how can you be sure that you can grow by a CAGR of 10% until 2026?

What I feel very confident about, Christian, is that when we summarize 2026, surgical science has reached its goals of 1.5 billion Swedish crowns in turnover and 40% adjusted EBIT. And that I base on us growing on average 10 to 15 percent within educational products and industry OEM having a larger part of license revenues that are progressive towards the end of that period. And I think overall we feel that we are in a very good and comfortable position to reach that. And when you talk about challenges yes there are challenges but we are a company that are used to challenges this is what we face every day and in the sort of more than usual challenges in educational products last year if you think about it 70 million on the large order to use leading hospital change X number of millions in China. That was very sluggish. The economic headwind and no Q4 effect. I mean, all those orders in December that just sort of all of a sudden customer calls and says, hey, this quote that I've had sitting on my desk for a while, can you put a new date on it? Because I will get money now. It didn't happen. If you add all those effects up, it's a big sort of number to recuperate which we did plus another 10 million Swedish crowns we actually still grew a little bit in 2023 in educational products and we are above our 10 to 15 percent on average growth for the period since we set our new financial goals. So I hope that helps. Maybe Anna has a comment as well.

Just adding to that because we have a written question on that same same note asking how we will grow towards 2026 and you know between the years and that is not any guidance that we've ever given that it will be a certain percentage each year etc. We've said 10 to 15 percent average for educational products and again industry OEMs should grow more but also progressive towards the end of the period. So just emphasizing that.

You can also look, Christian, on the surgical robotics side. We have 15 approximately surgical robotics companies that have our software embedded on their platforms and still the majority has not even sort of come to market yet. There are only a few of them that have come to market and there are several that are in various stages of regulatory approval processes. So we are keeping a strict view on our 2026 goals that we will accomplish. We are growing the company in a very planned and structured way. with a good control of costs, even if we had a dip in profitability in Q4 on an EBIT level attributable then to primarily FX effects.

Okay, perfect. My final question, your growth assessment for industry OEM based on the estimated number of robotic systems coming out on the market, increasing attachment rate or the discussions with your OEM customers regarding the need for simulation and clarification would be helpful. Thank you.

Our main focus is that we have a large share of the circular robotic market for simulation. Within that market you have several different players. Some of these players will do better than expected and some will do worse than expected. It doesn't affect us for our long-term financial goals because what's important for us is that the market overall growth grows. And actually I can maybe intervene also a question here in the chat because there was someone asking how is the fact that new players are entering the surgical robotic market affecting demand for simulation? Does each robot have a different simulation specified for the robot? It's like this. Every robot has some unique features in how it's controlled. I mean, we all know how to drive a car. It's a steering wheel. But for surgical robots, the UIDs, user input devices, are different. So you control them in a different way. We embed very much the same simulation software onto the consoles and then we do some customization in connecting that simulation with the API and the kinematics of the robot. But the experience when you do a CircoScience simulated exercise or a simulated procedure is very much the same. So this is where we get the scalability and this is where we invest money so we can do even more things with simulation. So I just interviewed a question there in the chat.

Yeah, we have some more on the same topic. When we expect new customers to generate license revenues, the business model is that we get development revenues during the development phase. Then our customers enter into their regulatory approval process phase. And then when the robot has been approved and is starting to be sold, that is when we start to get license revenue. So it depends of course on when the robot is approved and we don't comment on our specific customers timelines on that. As you know we have several large OEMs as our customers and they have talked about timelines for their robots so we refer to that. Then there is also a question on the attach rate per robotic company. And that means then that when a robot is being sold with our simulation package on it, That is the attach rate and that is true for intuitive. However, for many of the new entrants, they are heavily dependent on being able to show how to introduce the new robot in a patient safe way and the customers expect there to be simulation on it. So, for example, CMR Surgical has stated there it's not a choice. It's not something you purchase on top of the robot. It's included. Yes, I think we can go for the next.

There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

I do think that we have addressed most of the written questions. I'm looking through the list here. Yes, we have. So if no further questions, I think we will end this just on time. A couple of minutes early before lunch. Starting a meeting on time is respect. Ending it before time is love. Thank you very much and take care.

Thanks. Bye.