Surgical Science Sweden AB (publ)

Welcome to Surgical Science Q2 Report 2025 presentation. During the Q&A session, participants can ask questions by pressing pound key 5 on their telephone keypad. During the Q&A, we kindly ask participants to limit themselves to two questions at first. If you have additional questions, please queue up again by pressing pound key 5. Now, I will hand over to the speakers, CEO Tom Englund and CFO Anna Ahlberg. Please go ahead.

Hi everyone and welcome to this Q2 presentation for Surgical Science. My name is Tom Englund, CEO of Surgical Science and with me today I have Anna Ahlberg, our company CFO. We will use our time together today to first present the report and then we will take questions from the audience. Despite a strong Q1 and start of the year, we saw more negative financial development during the second quarter. primarily driven by a weaker macroeconomic climate in some of our key markets. Sales was 209 million SEC, or 2% decrease versus the same quarter last year. Sales grew by 4%, however, in local currencies. The quarter also saw a significant impact from currency effects, affecting the result negatively by around 24 million SEC. Despite the financial headwinds during the quarter, our company maintained a high execution pace and achieved several important milestones, many of which will have positive impact already in the next few quarters. I want to present the most important highlights and results of the business during the quarter. After a good start of the year for educational products with a 32% increase in sales in the first quarter, our second quarter was significantly weaker with a 12% contraction in sales, both for comparable units excluding intelligent ultrasound. A large part of the contraction came from the US due to continued pressure on procurement budgets. there is still an uncertainty around the funding levels for certain funding bodies which affect our sales. And this is something that we've also communicated in previous reports. The situation doesn't really cause us to lose opportunities in that the customers say they don't consider buying anymore or buy from competition, but rather the opportunities sit in the pipeline for longer periods of time before closing. This also has as effect that close rates of proposals are more lumpy in nature. And for quarter two, that had as effect that many orders came late in the quarter. Some of them were too late for us to be able to ship out to customers within time. And then they ended up in the backlog. Backlog therefore increased with 30 million sec in both education of products and industry versus previous quarter. These orders will be shipped during quarter three instead. One priority for us is to increase production readiness and efficiency to be able to ship out products faster to eliminate big backlog swings. And the impact from this work will be seen already in the coming quarters. China revenue developed negatively during the quarter, primarily driven by late orders ending up in backlog and by continued hesitation by many Chinese customers due to effect from the already mentioned anti-corruption campaign. Europe saw good development of 22% growth, and we see now continued positive sales development from Europe during the last quarters. The intelligent ultrasound integration proceeded according to plan, and we are realizing the expected cost synergies, but we are behind on the plan on the revenue synergies. Our first ultrasound products with content from both intelligent ultrasound and surgical science will be launched during the third quarter. several important initiatives were launched and or executed during the quarter to support our education of products business and to improve our performance we launched partner path our new sales concept for distributors who account for approximately 50 percent of sales in education of products the aim of this initiative is to provide even better support to our distributors cover the market more effectively and raise awareness of surgical science The program will also have increased sales efficiency and improved profitability as effect for us. Prices were adjusted during the quarter to offset the stronger Swedish krona, as well as tariffs on products to the US. Moving over to Industry OEM. Industry OEM had a much weaker quarter than expected, with sales being down 3% after many quarters of sales growth at around 20%. We consider this result an outlier and not a trend shift, and the result is attributable to a set of specific factors. In general, we see a favorable market demand for industry OEM across the world from both existing and new customers. Simulator sales in industry declined by 36%. We do consider this business to be more lumpy in nature as well, due to that order sizes are quite big and order timing can affect a certain quarter considerably up or down. We did build up a large order book during the quarter and had some large simulator orders late in the quarter that ended up as backlog. License revenues during the quarter was weaker than expected, and there were two specific reasons for this. One reason was that robotic surgery customers who have just started selling products from which surgical science earns a license revenue buy these licenses in packages. There may be, therefore, the timing effects between quarters depending on when these package orders are placed and the licenses are used. In this quarter, revenue from these new customers was unusually low, and this is due to that In many cases, the development times and regulatory approvals for our robotics customers have taken longer time than previously estimated. The other reason for the lower license revenue was attributed to a lower renewal rate in the simulation subscriptions from Intuitive on the older generation of robotic systems. Despite this generational shift, Our revenue from Intuitive increased in Q2 2025 compared to the same period in the previous year in US dollars. Market activity within the robotics surgery space was quite high with important announcement from both Medtronic with their Jugo system and J&J with the Ottawa robot. During the quarter, we also launched our latest product for educational and industry customers, the Robotics Express, which you can see on the picture to the right. This is an entry level platform that makes advanced surgical simulation available to users outside of the operating room. The development philosophy for the product is accessibility to more surgeons, flexibility in configuration and training scenarios, portability, and all at this at an attractive price point. Initial customer response has been very positive, and the system has been launched for sales during August. Development revenues were very high during the quarter and grew by 172%. This significant uptick was primarily driven by the delivery of products to a Ministry of Defense in a Southeast Asian country, an order which was signed at the beginning of the year. During the quarter, we also signed several other important development projects, which will start generating revenue in late 25 or 26. Development projects are of strategic importance since they are the first step from where we later can generate either license or simulated revenues. Looking at the gross margins during the quarter, we saw a decline to 65% versus 68% in quarter two, 24. The decline was due to weak sense of simulators and negative revenue mix with a lower share of license revenue and the inclusion of intelligent ultrasound into the PNL, which has a lower gross margin than surgical science. We're working on a number of initiatives aimed at increasing the gross margin, and we expect to see gradual improvements from this work in the quarters ahead. To conclude, The second quarter was a quarter that we are not happy with. We feel, however, that this result doesn't reflect our everyday reality where we see a very positive development in dialogues with our customers and the work we do for them, as well as the improvements made internally by our team. I'm very happy with the work that the team has been doing in the pace of execution to serve our customers better and improve and develop our company. We have taken important steps forward in our strategic review, and we will be able to finalize the work in the coming months. We also have a high tempo internally on several strategic projects. First, we execute on a long list of customer projects to provide solutions for our industry customers. We also have a roadmap for new and exciting products for educational products. And there then we also focus on the intelligent ultrasound integration, our partner path program aimed at disability efficiency, our robotics express launch and many, many more initiatives. All these initiatives aim at serving our customers better and will also impact our financial result in the short and long term positively. And with that, I would like to hand over to Anna.

Thank you, Tom. So starting with sales, as mentioned for the quarter, we had sales of 209 million SEC down 2%, where 22 million came from intelligent ultrasound or former intelligent ultrasound. I should say it has now been renamed Surgical Science UK, but I will use the abbreviation IU in this presentation. And all IU sales are attributable to the Edu products business area and to the ultrasound product group. As Tom mentioned, in local currencies, sales was up 4%. We have approximately 80% of our revenues in US dollars. And this is the first quarter in a very long time that we have had a negative effect from currencies on our overall sales. So going out of Q2, we then had an unusually high backlog or order stock. The difference between ingoing and outgoing order stock was approximately 30 million SEK. And this is relatively evenly distributed between the business areas and will, as mentioned before, be shipped now during Q3. Looking at the business areas, the split was 53% for EDU and 47% for INDU. EDU sales was flat or minus 20% excluding IU. Asia and then here specifically as we heard China was weaker compared to the same quarter last year. Sales in Europe continued to show strength. And the North and South America region also increased. However, this is also IU's largest market. And if we look at comparable numbers, sales decreased, and especially then in the US. As we said already in the Q1 report, then the outlook for the US market going forward is a bit uncertain. A lot of leads and discussions, but it remains to be seen at what pace the deals will be closed. And we now also have a higher and more permanent tariff rate. We are intending to put the effect for this on the customers, but the full effect still remains to be seen. Indu then down 3%, which is of course very disappointing. This is an area which has shown and should continue to show strong growth and i will come back to this a bit more on the next slide looking at the numbers for the first six months then this means that sales was 460 million sec this is an increase of 15 or 18 in local currencies And IU is included with just above 40 million, meaning that sales increased by 5% for comparable units. EDU for the first half year was up 23% or 2% excluding IU. And again, the EMEA region is the one that has shown the strongest development. INDU up 7% for the first six months and licensed revenues are up 10 percent and looking then at our revenue streams license revenues was 28 percent of total revenues for q2 compared to 32 last year as tom talked about and i will mention it again it's it's uh lumpy for new entrance where many of our customers are still in early phase and then they purchase their licenses and when it's used and for the quarter this part of the license sales was unusually low also for the quarter we then saw a decline when it comes to renewals of subscriptions for sim now with the older generations of intuitive surgical systems however despite this our revenue from intuitive increased in q2 compared to the same period last year in us dollars Simulator sales as a whole was down 8% compared to the same quarter last year, and this is then primarily due to Indu. Also here, we have said several times before that this is more lumpy than for sales within Edu since it's usually tied to larger projects where development is also involved. However, we do continue to view the segment very positively and have many exciting discussions ongoing within the area. Development revenues up a lot and this mentioned primarily due to the project we have for a Ministry of Defense in a Southeast Asian country, but not only. We still had good development revenues. The project that I mentioned is for 18 months and in total 52 million SEK. Approximately 1 million just below 1 million US was recognized for this quarter and we estimate that approximately 1 million US will also be recognized in Q3 on this project. Service revenues continue to be stable and growing with the installed base. Moving on to costs and EBIT margin for the quarter. Tom already talked about the gross margin being lower at 65% versus 68% last year. And several factors then influencing this. Licensed revenues have the highest margin. And these were as we saw them lower as a share of total sales, which affects the margin negatively. Then we also with the lower simulator sales have fixed costs that are spread over fewer simulators. US sales as we talked about was weaker and that is a direct market which means it has a higher gross margin for us. And then also the effect from the IU having a lower gross margin on those products. Regarding OPEX, as we reported in the first quarter, a smaller portion of the costs for that quarter were included in the consolidated numbers for IU. which was consolidated from February 18 and that means of course that for this quarter the full costs are included for the UK. Sales costs were 28% of sales. There has been a very high level of activity related to trade fairs and conferences in the quarter. Starting in the second quarter, then we also saw the effects from tariffs on our simulators that are distributed from production units outside of the US. And this was approximately 1 million SEC in the quarter. As I mentioned, we aim to pass on this cost to the price of the products as far as possible. But for this quarter, that did not occur because there is always a delay between quotations and then delivery and invoicing. Then this quarter's expenses also included an item of a more occasional nature amounting to approximately 2 million. which was attributable to commissions, to distributors. And these then vary depending on the country in which the sale takes place. Admin costs 11% of sales and R&D 25% of sales where we activated 10 million SEK for the quarter. And the costs on this line also vary depending on how much development revenue there is for the quarter since salaries for the portion of development department staff who have worked on projects that generate development revenue are transferred to cost of goods sold. And that means that more was transferred in this quarter since development revenues were high. When we acquired intelligent ultrasound, we said that we estimated rationalizations and cost savings to between one and a half and two million pounds on an annual basis. As of Q2 and on an annual basis, these cost savings have been implemented of approximately 1.8 million pounds in relation then to the cost structure that existed in IU at the time of the takeover. And this is mainly in the form of reduced costs related to the company's previous stock market listing and staff reductions mainly in respect of sales personnel. For this quarter Q2, cost savings of approximately 4 million SEK are included. And then other operating income and operating costs for this quarter that is then primarily attributable to the revaluation of operating assets and operating liabilities in foreign currencies. We had a negative impact on this of approximately 25 million, where the major factor was the weakening of the US dollar against the shekel. As you know, we have large values and a big part of our balance sheet is in foreign currencies. And the largest factor here is then the revaluation of intragroup items. We are taking measures to reduce these items to the largest extent possible. Following this, our operating result for the second quarter then amounted to a negative 22 million, corresponding to a negative EBIT margin of 11%. And included in this is IU with an operating result of a negative of 5 million sec. We were 327 people in the organization at the end of Q2. This is a decrease if we compare to Q1 when we had 336 people. With the IU acquisition, we added 48 people and then we have had a number of redundancies. We do continue to employ people above all software developers. However, we are also working intensely with the efficiency improving projects and of course employ with caution and big cost consciousness. And you can see the split between the sites there down to the right. Adjusted EBIT, we measured that as EBIT exclusive of amortizations on surplus values that are related to acquisitions. For the quarter, adjusted EBIT was a negative 8% compared to 15% last year. And for the first half year, then it was 3% compared to 18% last year. We did in Q1 have acquisition and restructuring costs. And adjusted for this, our adjusted EBIT was 40 million or a margin of 9%. Finance, net and taxes. We have no loan financing and the net financial items for this quarter then mainly consisted of interest income on bank deposits and also a revaluation of an intragroup loan, both positive items and then a small negative from the IFRS 16 effect. Tax expense minus one and the net result then minus 20 million SEK. Cash flow from operating activities was 16 million for the quarter compared to 30 million last year. We had some larger tax payments that we made in Sweden, but we then had good cash flow from working capital was a positive 20 million compared to a negative of 17 last year. Inventory increased, but accounts receivable decreased during the quarter. And this can also be seen from the gray line there in the chart, where we continue to be at a very good level with our accounts receivable as a percentage of rolling 12 months sales. Cashflow from investing and financing activities, nothing really to mention. there and cash at june 30th then ended at 610 million sec tom thank you anna to conclude then

During this quarter, the second quarter of 25, our company took important steps in the right direction, and our team had a very high internal rate of execution. As I said before, the second quarter was a quarter that we're not happy with, but we feel, however, that the result doesn't reflect our everyday reality, where we see a very positive development in dialogues with our customers and the work that we do for them, as well as the improvements made internally by our team. Market penetration for surgical science is still low and the total addressable market for medical simulation is still very large. There are hundreds of thousands of medical professionals globally who could benefit from simulation from surgical science throughout their medical careers. We feel an energy within the entire company from all the ongoing and engaging customer dialogues and from the important value that we provide with our products and solutions. And with that, I would like to open the floor for questions.

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 Victor Hogberg from Danske Bank. Please go ahead.

Good morning. So, what's the smaller part of the Q2 sales, Mr. Schoen, or the non-renewals of the licenses for older generation simulators and innovative? It was higher than we, I guess, than you also had expected in the single quarter. Yet, you retreated the 2026 targets. So, you're implying that they see it was transitory or that you've been in large enough of a cushion into the 2026 targets to account for something like this. Just could you help us understand the building blocks to reaching the 2026 targets despite of this market is obviously doubting the prospects given that you since january you've said that the new deal with intuitive will not see negative financial effects yes what you could help us with what your visibility is uh what your assumptions are and if this is uh something that is material or not material for uh for the target reachability yeah that's the first question thank you that's that's a that's a long question victor

To start with the renewals from Intuitive, we have a situation where Intuitive is changing platforms from DV5 to DV4, and we are a supplier to both platforms with simulation. And we saw a lower renewal rate on the existing, the DV4 platform during the quarter, as you say. have to acknowledge that we don't have full visibility into exactly the pipeline and the CRM system of Intuitive, and there are several different factors that can affect the renewal rates, such as, for example, how quickly the DB5s can be activated with simulation, the sales effort from the intuitive team and certain other considerations as well, which means that I don't think we should judge the result or the renewal rates on one quarter alone, but rather look at it on a longer scale. and we are working very very closely with intuitive primarily on the longer term roadmap to make simulation an even more integral part of their platforms and of the surgeons everyday workflows so that is as much as we can say and then of course intuitive is also a public company and some of the numbers that they we would like to discuss, we can't really in this context. Then regarding the other second part of your question, which is the question about the financial targets and how this relates to the financial targets. We have not built our financial targets on a specific revenue from one specific customer, but rather looked at it kind of on a general market development and from a kind of a bigger development within the different buckets that we had, either educational products and industry or the five different market segments that we work on. And as we have stated several times during the presentation, the quarter two result is a result that we're not happy with, but it's also not indicative from the positive development that we see in the different areas of the business, both within industry OEM as well as education and products. We have some macroeconomic factors that are affecting us. We also have some specific timing related things regarding the backlog that we discussed that, of course, can make the results swing from one quarter to the next. But what we need to focus on is, of course, to deliver great value to our customers, deliver fantastic, new, innovative products. and then we will be able to reach the financial targets. So that is how we see this. It's not something that we should judge. We should not judge the financial targets from one quarter from the next, but rather kind of the general development and trend of the company.

Thank you. A follow up on that. The retroactive revenues for the files delivered in 2024 Any update on when you expect that? This is still for the second half of this year, slipping into 2026. Just thinking what that is part of the 2026 in your mind.

No, we said before, no, we don't have a specific update on that. We said before that The aim for them is to do the retrofits as quickly as possible, but it might be also into 2026 a bit.

And on the EDU side, I was thinking about profitability, the gross margin effect from the partner distributive program you talked about today. You say you're going to see gradual development

Victor, we cannot hear you.

Nina, can you hear us and can we move on to the next question, please?

The next question comes from Ulrich Trattner from DNB Carnegie. Please go ahead.

Thank you very much. And two questions on my end. And the first one, you touched upon this, but what type of feedback are you getting from intuitive in terms of the reasoning behind not renewing their subscriptions? I mean, it wasn't an add on when they bought it initially. Are they calling this more of a pain trade on the cost side on their end or is the need for simulation sort of less so now versus historically, or are these predominantly customers that are transitioning from old platform to the DB5, where it's already integrated and thus potentially not needing to renew their licenses?

It's a combination of the factors that you just mentioned, Ulrik, I would say, and we have some visibility and dialogue with this about intuitive, but also they don't necessarily know all the details and can quantify the different factors very accurately. It definitely has to do with the fact that you're transitioning from an old system to a new system. And then, of course, certain customers would rather have simulation on the new system than the old system. It can also be different types of functionality in the entire digital package between the systems that can make a customer choose the one or the other. Uh, so there is a number of factors and I think you're describing them quite accurately. Um, uh, that kind of all effect. And then, and then once again, we, we have limited, uh, visibility into, uh, the, the reasoning about, uh, behind. Intuitive customers. So you have to kind of take that, those comments with a grain of salt and you can't really put accurate numbers on, on, on to the different, uh, explanation factors.

Okay, great. Thank you, Tom. And my second question relates to your margin targets for 2026. OPEX have now outgrown top line for six consecutive quarters, even if we were to adjust for restructuring and different kinds of one-offs. And we have six quarters left before we are ending 2026, and you should achieve 25 to 30 percent margin. Can you help us provide a bridge to your guidance? And is this purely sort of an achievement of like growing top line without costing costs? That would be very helpful to just get some sense on how you're thinking here.

Yeah, it's a good question. I think it's basically two, two different components. One is, of course, that the financial targets are dependent upon a certain level of license revenues here, right, both from existing as well as new customers that have a more attractive gross margin than the rest of the business. So that's one important factor to achieving goals. The other one is, of course, general improvements in the rest of the business, the simulator business for for educational products as well as industry OEM. And there there's a range of different things we want. We are doing both to increase top line and revenue as well as becoming more efficient and working on the cost side. And that's what I try to outline also in the report more specifically about the things that we're doing to increase prices, improve profitability from distribution, launch new products. work on our general expenses, both R&D sales and marketing and so on. So it's a range of different levers that we can pull now to be able to improve the profitability of the rest of the business, excluding licenses for robotics companies. Hope that answers your question.

Yeah, great. That was very, very helpful. That was my two questions, and I'll get back into the queue.

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

Thank you for taking my questions. My first one is a follow-up on Victor's question. If you could please clarify, given that you seem to be upbeat about the coming quarters, do you expect to achieve your sales target for 2026 through mainly organic growth? Or do you see that you need support from inorganic addition?

The targets were built on achieving organic growth. So, yes, that's what we're doing. And then, of course, we have an active M&A agenda, but we wouldn't sort of not pursue M&As to achieve a certain financial goals. We pursue M&As because we see synergies within the different parts of the business from an external company. It could be technical synergies, it could be product synergies, it could be customer relations as well as competencies. So that's how we judge M&As and the timing, that can happen within the frame of the financial targets or outside, that doesn't really affect us. Then it's important to notice that we have made an acquisition intelligent ultrasound and that affected our margins negatively. And of course, we have to accommodate for that in the P&L and of course, improve from there. But that sort of changes the kind of perspective a bit, financial profile a bit, I should say.

Okay, thank you. And you described the second quarter sales from Industry OEM as an outlier. So how should we think about the license revenue in the third quarter? Do you expect some rebound and that the DB5 licenses are starting to compensate for the lower renewal of

I think it's interesting when we get these questions from quarter to quarter, because I think that you have to look at the robotics business. We start with the robotics business. You have to look at it in a slightly longer context, right? Not just one quarter from one quarter to the next. We have to understand that we are in a big transition here from doing minimal invasive surgery or open surgery towards robotic surgery. And there is the hundreds of robotics customers now jump robotics companies now jumping into this market and developing different types of products. It takes time for them to develop these products and bring them to market through all the certification hoops and doing this in a very patient safe way. What we can affect is, of course, the relationships with these customers and the work that we do for them. And that we feel very confident with that we provide a lot of value to them. And then, of course, we are dependent upon them reaching the market approvals that they need to be able to go and actively sell this. And that is why I in the reporting that I do try to outline kind of the key milestones that our robotics customers have been taking in the last couple of months that take them further on to market clearance. So it will be dependent, the next coming quarters will be dependent, of course, on the velocity of the DB5 launch for Intuitive and how quickly they can put product in the market. And it will be dependent on all these other players being able to push product out. And as we also know, we sell to many of these robotics customers licenses and batches, which is also kind of a factor that you have to take into consideration. So you cannot judge, for example, sales from one quarter to the next because revenue can be quite spiky in one quarter and then nothing for a couple of quarters. So I think you should look at the robotic development in a slightly longer context than just quarter to quarter. I don't know if you want to add anything to that answer, Anna. No.

okay thank you very much as a reminder if you wish to ask a question please dial pound key 5 on your telephone keypad the next question comes from Ulrich Trattner from DNB Carnegie please go ahead thank you very much and an additional question on my end and just looking at similar sales within

your OEM segments, and part of that has historically been to the non-robotic segment, but it's been a bit of a sharp decline here for the second quarter. Is this related to some type of effects that there's been projects that have matured, or is the demand for simulation outside of robotic surgery sort of lower currently than before, or is there any other reasoning behind the decline?

It's a very good question, and we are not happy with this kind of steep decline in simulator sales in industry for this quarter, given the strong performance and growth that we've had in the previous quarters. But once again, it's not signifying any kind of market slowdown or change in direction in the development of the market. Many of our projects that we do for our customers when we then sell simulators, they're quite big in development, in the development phase. And then usually the customers place quite big orders also on the simulator side. And depending on the timing of these simulator orders, it can have like a very positive or very quite negative effect then. And I think that there was a timing effect here in the second quarter where we did not have any of these larger simulator states. But that's also why we very explicitly spoke about the backlog increase that we had. and both for Edu and industry. And we also said that we won several larger orders from device companies also during the quarter. The trend is very clear. Medical device is digitizing rapidly. All our big customers are growing nicely and are putting out lots of products. For example, a customer like Boston Scientific has 100 product launches per year, for example. And many of them require a simulation. So we look at this segment in a very kind of attractive, attractive way. And we have many engaging and positive customer discussions.

Yeah. And remember, development revenues were very good during the quarter, and it was not only attributable to this this project in Southeast Asian country. And although I know I usually say that they are not directly correlated because they're not when it comes to amounts, but of course the number of projects that we are working on is correlated to later on receiving more simulator sales and or license revenues.

Okay, great. And second question is more bigger picture type of questions. We all know that you have established relationship with majority of the robotic surgery players out there, but there's been an inflow and especially on the capital side to a lot of challengers in the industry. So have you been able to establish a relationship with these and are there sort of additional new customers that are part of your portfolio today that wasn't part of it like one, two years ago? Or are these systems not in your book yet?

No, we feel positive about the robotics customer development. We have explicitly said that we have 15 robotics customers, and the number of customers is also growing. Many are jumping into the fray. And of course, if you say that there's 100 robotics companies, not all, of course, will survive. But by being kind of the key supplier for simulation solutions to many companies, we can work with ones that will make it. And I think that this is kind of a very positive development where all these new entrants are rapidly democratizing robotic surgery and bringing it to new niches and to hospitals with new price points that weren't available before. So what's going to happen is that the entire pie is going to increase. You have to remember that robotic surgery still accounts for only somewhere between 10 and 20% of all the procedures that are done globally. So there's a huge opportunity here for all of them to take part as this market size grows rapidly. It's predicted to grow by between 3 to 4x between now and 2030. So I think we should look at all these entrances at something tremendously positive for the market and for patient outcomes. And it's, of course, an opportunity for us. And we feel confident. We are very kind of aware that we need to deliver every day, but we feel confident about our value proposition to these surgical robotics companies.

Great. Well, thank you very much again, Tom and Anna. I'll get back to you. Thank you.

The next question comes from Victor Hogberg from Danske Bank. Please go ahead.

Hi. Just on the licenses follow-up, other robotics customers buying in batches, we've seen that for previous years, not worrying in itself. I'm just wondering, what's lower now in Q2? Was Q1 boosted, so to say? Maybe the truth is somewhere between these two quarters, or was Q1 a normal quarter for these customers? Just help us to understand what the potential baseline could be.

Yeah, I mean, we don't give forecasts for specific quarters. Of course, yes, it was higher. But again, and of course, a combination then of them being higher and Intuitive was also higher. So that meant that that number was higher than this quarter. It was the highest we've ever had. But again, we see a lot of positive development on the market also for our new customers. And this quarter wasn't usually low in that regard. I mean, we don't give forecasts for specific quarters or how it will look in Q3 or Q4. But again, we are very, very positive on the market.

Thank you. Just a follow up. I think you didn't cover it already. The profitability or the gross margin effect in educational thanks to the partner path distributor program. These are gradual improvements. What kind of magnitude are we talking about? This is something that will be seen on a group level eventually.

I think the partner path is a very exciting program. We now have the strongest distributor network from all medical simulation companies globally. And we invest, we want to invest a lot in this distributor program to make sales grow both for our distributors and for us. So the partner path, what it really does is that it's a set of different things that we want to achieve at one point. It's a portal for the distributors to be able to take part in marketing activities and marketing content. It's a joint CRM system, so we can better judge the opportunities of our distributors and we can better sort of support them throughout the sales process and guide them and make the sales come quicker. And it's also differentiated distributor discount ladder, where the higher the engagement you have with surgical science, the bigger the discount will be. And that will definitely relatively quickly drive profitability because we will not have kind of general discounts for all distributors, but rather to lower discounts for lower performing and lower volume distributors and higher discounts for the other ones. And that actually will drive. So all the three that I just mentioned will affect the P&L in different ways, but all of them will affect it positively.

Okay, and the discount, that is an immediate effect.

Yeah, it's being rolled out here in this and the next, towards the end of the year. And then, of course, there's also, you have to remember that there's a certain lag also in the order process where we put out quotes and then we wait and then we win them. So it would be a gradual impact, positive impact here in the end of this year and the beginning of next year.

Thank you very much.

We also have a few written questions, primarily around robotics. I think we answered some of them. There's one question if there are indications that robotic companies will develop their own simulation systems in the future. That is a question that we received a lot more before, I would say, than today. And it doesn't really make sense for these companies to do the type of advanced simulation that we have been working on investing in for 25 years it's a important strategic question for these companies but but it's not a huge part of of their cogs and it also has to do with ip where we never give out our ip meaning that all our customers can benefit from from everything we do sort of meaning that We have today a large development organization that can tend to these customers in a very efficient and good way. And then, of course, it's always for us to stay on top, being the technology leader. And we are working on that every day. And Tom talked about the Robotics Express, for example, as a new part of this change. And I think also, of course, this new agreement with Intuitive showed that there is trust in us as a supplier of medical simulation for these companies. And the following question there was also around the subscription-based licensing models and if we will move more in that direction. And this is also about the customer journey for these companies where the new entrants usually start with what we call more basic skills and then you add content and move to more advanced procedures. Also when these companies get approvals for different type of indications. And this is the sort of short answer that moving along this customer journey also moves towards more subscription based licensing models. There is a description in the annual report which discusses this more in detail.

There is another factor that will also drive licensing revenues to become more subscription based, and that is that experienced surgeons they will use simulation advanced simulations to a higher extent tomorrow than they're doing today pretty much the same way as the professional athletes are training all the time they're not just training when they're young they're always holding specific skills or specific critical parts in in in in in whatever they do right So, if you look at the surgeon as a professional athlete that continuously needs to train, they also have to continuously use advanced simulation, and that is also going to drive kind of this repeated use, and that's going to speak in favor for a subscription-based value delivery, if you like. So, that's the second factor. Of course, it will take some time, but we see it very clearly in the market. Yeah.

And then there's also a question around if all DV5 systems are equipped with our software. And the first systems that were delivered in 2024, they did not have simulation or they did actually not have the digital package. But that's what we discussed previously around the retrofits, that they will all have the digital package. So yes, the DV5 systems will all be equipped with our software when they go out. And with that, I think we answered also the written questions and we have no more people in the queue asking questions.

um so to conclude uh i would like to thank you all for listening and wish everybody a great day bye-bye thank you bye