Surgical Science Sweden AB (publ)

Welcome to Surgical Science Q2 Report 2026 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 yourselves 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 earnings call for Certical Science for the second quarter of 2026. My name is Tom Englund, I'm the CEO and with me today is our CFO Anna Ahlberg. We'll start with a walkthrough of quarter two and the numbers and then we'll open up for questions. Quarter two was a strong quarter and I want to say that clearly upfront. We exceeded our financial targets on growth. Profitability was in line with our financial target and license revenues were strong. Revenue came in at 255 million SEK, up 22% reported and 25% in local currencies. Just a little bit reached 38 million SEC with a margin of 15%, which is a significant recovery from quarter two last year, which was an unusually weak comparison quarter. And it's a clear sign that the actions that we've taken to improve profitability and our customer offering are working. The gross margin improved to 69% up from 65% in the same period last year. This reflects both the stronger mix of license revenues and the profitability improvements that we've seen and have been driving in the simulator business. And gross margin excluding licenses also improved several percentage points. And I'll come back to what's behind that later. Licensed revenues for the quarter were 85 million SEK, up 44% year-over-year, and that's a strong number and reflects the momentum in the robotics market and the breadth of our customer base beyond intuitive. Looking at the first half as a whole, revenues are up 7% reported and 11% in local currencies. Currency adjusted EBIT for H1 was 15% right at our target level and operating cash flow for the first half was 81 million SEK, well ahead of the same period last year. So the business is performing well and I feel good about where we're headed. Now, let me take you through the different parts of the business. Educational products grew 19% year-over-year, or 24% in local currencies. That's a good result, and I'm genuinely pleased with what we're seeing across the different regions. All regions grew this quarter. Americas were up 4% versus Q2 2025, but I want to add some important context here. Actually, Americas was up around 40% compared to Q1 of this year, driven by the strength of the important US market. So the sequential momentum is strong and the year-over-year figure alone doesn't capture the full picture. China continues to be a market that we're managing carefully. The Chinese government's active support for locally operated and manufactured companies creates a structural headwind for our simulator business. And this has impacted our sales in China. And we're now taking concrete steps to navigate this. That said, the broader APAC region is growing nicely and compensating for the headwind that we see in China. And we remain committed to building our position in APAC and China over the long term. The strategic milestone this quarter was the opening of our APAC Service Hub in Hong Kong, which is part of our deliberate strategy to get closer to our customers, improve our service delivery and build a stronger local presence in the region. It's the kind of investment that takes time to show up in the numbers, but it's the right move for long-term customer relationships and growth. Ultrasound had another strong quarter, growing 34%. That's a good number, and it reflects a genuine acceleration, I would say, in how healthcare systems are adopting ultrasound training. The tailwind here is structural. Ultrasound is increasingly being used as a point-of-care diagnostic tool at the bedside in emergency settings, in primary care, and that means that the universe of clinicians who need training is expanding well beyond the traditional specialists. Our POCUS customers, those that are using ultrasound as a diagnostic instrument at the bedside, continue to grow alongside our traditional customer base. And this is exactly the dynamic that we communicated when we made the intelligent ultrasound acquisition last year. Women's health remains a strategic priority and continues to perform well. Ultrasound is one of the primary clinical tools for diagnosing conditions that disproportionately affect women, and it has been historically under-resourced when it comes to training. Our solutions are genuinely making a difference here, helping clinicians diagnose earlier with more confidence, and that's directly aligned with the purpose of surgical science. This quarter we also launched new software modules for obstetrics training on the ultrasound mentor platform. Integration work with Cervical Science UK, the 4 million intelligent ultrasound, continues to progress. We're realizing the synergies step by step and we remain convinced that the combined technology platform represents a significant opportunity in the years ahead. We believe that ultrasound simulation has the potential to represent a growing share of surgical sciences total revenues and Q2 gives us further confidence in that view. Moving over to industry. Industry revenues grew 24% this quarter or 27% in local currencies driven primarily by the very strong performance in licensed revenues. License revenues came in at 85 million SEK, up significantly from the 59 million in Q2 last year. The revenues came from a number of robotics customers, and this diversity is something that I want to highlight. We work with almost all of the leading robotics surgery companies, and this means that our robotics customer base is broad and is growing, and the license revenues is a reflection of that. License revenues are lumpy by nature, so I wouldn't over interpret any single quarter in isolation, but the direction is genuinely and clearly positive. On the market side, the picture continues to be genuinely exciting. Intuitive had another very strong quarter. Procedure volume grew 16%. And all intuitive customers that have active My Intuitive Plus annual contracts chose to renew their contracts. That means 100% retention, which tells you something about how deeply the digital offering and simulation is embedded within the intuitive ecosystem. Given this continued positive response from end customers for simulation, we estimate that the revenue loss for 26 that was part of the changed commercial terms with intuitive will be less than the 60 to 90 million that we initially estimated. Johnson & Johnson received FDA certification for its Otava system across several general surgery procedures earlier than anticipated by analysts. Medtronic started marketing its UGO system in the United States, and these are large, credible medtech companies entering robotic surgery at scale, and their entry into the US market, the world's largest surgical market, accelerates the broader training and simulation need across the entire ecosystem. More robots means more training needs and more licenses for surgical science. This July, we also presented at the SRS, that's the Society for Robotic Surgery conference in Florida in July. This conference had a record number of both participants and exhibitors and we had a very strong interest in our product and services. We launched our new world leading suturing module and procedure simulation for our robotics express platform that you can see on the top left picture. And the reception from customers and opinion leaders were excellent. During the quarter, we also reorganized our sales force focused on the industry segment in the United States. The goal is to sharpen our commercial execution and get closer to customers in what remains the world's largest medtech market. And we expect the effects of this change to become visible in the second half of 2026. Robotics is clearly becoming a central part of surgical medicine. Robotic procedures are growing share of total surgical volume and with many platforms now in the market and more on the way, the demand for scalable high quality simulation is going to grow in step with that. and we see no signs really of changes in competitive environment versus surgical science. There are no signs of robotic companies developing any advanced real-time procedural soft body simulation that the surgical science is world leader in. Surgical science is developing solutions for most of the top 20 robotic surgery companies. Our pipeline is the biggest it's ever been. Our conviction about the long-term opportunity here is unchanged and if anything, stronger than a year ago. Medical device simulation then finally grew compared to the comparison quarter, and we see clear progress in both product development and customer dialogues. While the segment's performance was not in line with other quarters during 2025, the underlying demand from our MedTech customers remains solid. More than 70% of customers in active development projects are repeat clients. That's a retention and loyalty number that tells you about the quality of what we deliver. We work with many of the world's largest medtech companies and we're a critical supplier in their product development and delivery programs and we continue to add new customers to the base. This segment moves in lumps. Projects have long lead times and the mix between development revenue, hardware and service in any given quarter can vary significantly. What I watch here is the lead indicators and those remain very positive. We have a strong pipeline and we expect to see meaningful growth from this segment in the coming quarters. Let me talk about margins and what's driving the improvement that we see. The gross margin expansion to 69% this quarter reflects two things. The strong license revenue mix and the underlying work that we have done to improve our profitability in the simulator business itself. Gross margin excluding licenses is now improved by several percentage points from previous quarters and it reflects the pricing work and operational improvements that we have done. We implemented a further price increase on simulators in April this year and these effects flow through gradually as sales cycles close and we see more benefit from those price increases in the second half of the year. And we see that the underlying business profitability trend is positive and expect further improvements going forward. So let me take a step back and talk about where we're going. The strategy that we laid out in December is about becoming the clear leader in five distinct market segments, all of which have very low penetration today. We're in the early innings of a long game, and quarter two shows us that the approach is working. An example that I find particularly exciting is emergency medical simulation. The order and project that we announced in early 2025 to a Southeast Asian country is now just months from delivery, and we see similar opportunities across multiple countries. This is a segment with real demand, serious customers, and genuinely differentiated technology from surgical science. From an operational standpoint, the significant milestone this quarter was the opening of our new production facility in Tel Aviv. This facility is purpose-built for higher volumes and improved productivity, and it gives us real capacity to scale manufacturing without the proportional increase in cost per unit. And it makes us also more resilient to supply chain pressures. We see further operational improvements ahead that will support continued cost efficiency improvements. So science has no debt and we ended the quarter with 658 million SEK in cash. We have a market leading positions, the products, the customer relationships and the clinical expertise. That combination is genuinely rare and it gives us real options. The tailwinds are real and they are growing. An aging population, increasingly complex clinical procedures, higher standards for patient safety, a shortage of trained healthcare professionals, all of these are driving demand for simulation every single year. We're building for that world, and I'm confident that we have the right strategy, the right team, and the right assets to get there. And with that, I will hand over to Anna to walk through the financials.

Thank you, Tom. And yes, starting by underlining that we are very pleased to report another solid quarter and a good first half year. And again, we had sales of 255 million for the quarter, up 22% in SEC and 25% in local currencies. So really strong, even though then the comparison quarter was a week quarter. Talking first a bit about currencies, we have after Q1 2025 seen a significant negative effect from currencies on our overall sales and also on our result, I will come back to that later, with our just below 80% of revenues in US dollars. For the first quarter against Q1 last year, the SEC USD average rate was down 14%. And now then for the first half year, it was down 9%. And that means that we also had some slight positive effects on the numbers in Q2. However, the Israeli shekel is also a very important currency for us and then in terms of costs. And here we saw the US dollar weakening considerably during the quarter, which then affects us negatively. Looking at the two business areas, then the split for the quarter was 52% for EDU and 48% for INDU. EDU then up 19% or 24% in local currencies and this is also the business area where we see the strongest growth for the first half year. And when we look at regions then sales in EMEA increased by 60% and Eastern European countries accounted for the majority of this increase. EMEA is also the region where we see the strongest development for the first half year with an increase of 45% and again really strong sales for the half year to Eastern Europe. Revenue in the Americas region then up 4% compared with the same period last year. However, as Tom also mentioned, the US was up close to 40% compared with Q1. And we had higher revenues here than for any other quarter in 2025. So that's really nice to see the strength in the US market. And then the APAC region up 10%, primarily attributable to orders to Pakistan and Taiwan. while China then continues to struggle a bit and was lower compared to Q2 last year. As mentioned, all our product segments were up and particularly then ultrasound with a 34% increase. Indu was up 24% or 27% excluding effects and license revenues, then 85 million, an increase of 44% compared with the same period in the preceding year. And looking down at our revenue streams, that meant 33% of our total revenues for the quarter were license revenues. For the first half, our license revenues from Intuitive, our largest customer, are in line with those for the first half year 2025 in US dollars. This is better than what we expected, and this is because the attach rate for DV5s has been much higher than what we calculated with. Also, this is the first quarter with renewals of DV5 subscriptions. The first customers that got their DV5s with the full digital package were in Q2 2025, and these packages were now up for renewal after one year. And for this quarter, then, all customers have renewed their subscriptions. As I'm sure you know and as Tom talked about we previously estimated that the announced memorandum of understanding cancellation meant reverting back to the old agreement between us and Intuitive starting January 1st this year and we our estimate was that this would have a negative impact on our license revenues of between 60 and 90 million SEK for 2026 compared to 2025. It is still too early to say how, for example, renewals and also the attach rate will continue to develop. But for this year, we have estimated now that we will be below this range when it comes to revenue loss. And we also had revenues from several other customers in the quarter. And as Tom went through, a lot of very exciting things are happening on the robotics market right now. Simulator sales done as a whole, they were up 25% compared to Q2 last year, but more flat compared to Q1. And so for the first half year, this revenue stream is up by just over 9%. More for Edu, which was positive and less for Indu, which is negative. and the sales is again more lumpy since it's usually tied to larger projects where development is also involved. Development revenues were in line with the first quarter and weaker than during the second quarter of the previous year. Again, the project that we have in the Southeast Asian countries proceeding very well. In July, we had major acceptance test that was conducted and approved. And so it means that the plan is still to largely complete this project during this year. And service revenues continue to be stable. Looking then at the cost side and margins, our gross margin for the quarter, 69% versus 65% in Q2 last year. Of course, license revenues then having a positive effect since they were a larger share of total sales than in Q2 last year. Also, the proportion of direct sales within educational products and primarily then in the US that was higher also had a positive effect. currency effects, a slight positive effect then as I talked about before, 0.2 percentage points. The US dollar for us has less impact on the cost of goods sold than on other cost items since our input goods are primarily purchased in other currencies than the US dollar and also our production and associated wage costs are not in US dollars. Price increases then implemented in 2025 for simulators continue to have a positive impact and then again we saw a new price increase in April. We also had a good product mix in the quarter. Regarding OPEX, the remuneration review process for 2026 for the group was completed during this quarter, during Q2. All units in our group have April 1st as the review date, except for Sweden, which has January 1st, and in total this effect is approximately 3.5 million SEK per quarter. Sales costs, 19% of sales, down from 28 last year. During this quarter, we received the first refund relating to custom duties in the US, approximately 1.2 million SEK, and that was for the corresponding quarter in 2025. We will continue to apply for this as more periods open up. Admin costs also down 9% of sales versus 11 last year. This quarter's costs include consulting costs, approximately 1.1 million relating to the work that we are currently doing to change our listing to the Nasdaq main market and that process is proceeding according to plan and as we previously communicated we expect the relisting to take place next year. In the quarter we also had costs attributable to the work to set up legal entities in Hong Kong and in China. R&D costs, 23% of sales. We activated a bit more, approximately 14 million versus 10 in Q2 last year. And again, the costs on this line, they vary depending on how much development revenue we have because salaries for the portion of development department staff who work on projects that generate development revenues are transferred to cost of goods sold. Other operating income and costs that mainly consists of revaluation of operating assets and liabilities in foreign currencies. We had a negative impact here on results of 9 million SEK. compared to 25 in Q2 last year. And as I previously mentioned then, during the quarter, the Israeli shekels strengthened against the dollar. Exchange rate on June 30th was approximately 6% higher than going out of Q1. and since the majority of trade receivables in our Israeli company is in US dollars, this resulted in a revaluation loss and that was approximately 6 million. In the comparative quarter, profits were also negatively affected by large currency effects attributable to the same weakening of the US dollar against the shekel. So following this, our operating profit for the quarter was 33 million, corresponding to a margin of 13%. And for the first half year, operating profit was 56 million or 11%. If we then adjust our P&L for FX effects EBIT for the first half year, was 68 million or 13%. And the way we do this is that we use the average exchange rates then for the first half year last year. Balance sheet items, however, and their impact on other operating income and expenses that we just talked about, they have not been restated. Organization. a number of employees at the end of the period was 319. That was eight less than going out of Q2 last year. The majority of this change is attributable to the restructuring of the sales force that we did following the acquisition of Intelligent Ultrasound last year. And as mentioned then during the quarter, we have opened our new service hub in Hong Kong, and we are continuing to invest in this part of the world also in terms of people. For adjusted EBITDA where we have our financial goal of 15% and that is an EBIT exclusive of amortizations on surplus values related to acquisitions. Here we saw 38 million for the quarter and that is a margin of 15% and in line with our financial goals. And if we adjust for FX effects the same way as we did for EBIT, it was 34 million or 14%. And for the first half year, 77 million or 15% again in line with our financial targets. Finance net and taxes. No loan financing meaning net financial items mainly consist of interest income on bank deposits and we also have the revaluation of internal loan liabilities to subsidiaries as well as the effect of IFRS 16 impacting the finance net. Net profit for the quarter was 21 million SEK and the tax expense for this quarter was higher than in Q1. That is largely attributable to taxes for the 2025 financial year in the US affecting this quarter. Also, we do have non-deductible amortizations in our P&L and that's affecting the effective tax rate for the quarter. These were five and a half million SEK. Cash flow, 15 million from operating activities, approximately the same as last year. However, in this quarter, we saw negative working capital. For this quarter, both inventories and accounts receivable increased. And the increase in inventory here, it's partly attributable to a buildup due to the project in Southeast Asian country. project is now entering a phase of hardware delivery. Accrued income has also increased and this item then primarily relates to accrued license revenue that is invoiced and paid in the following quarter. And so this relates then to the fact that we had higher license revenues in the quarter. However, and as Tom mentioned before, for the first half year cash flow from working capital was positive and we see AR decreasing. And we also see the gray line there that it's at a good level in relation to sales and continue to be at a good level. Investing activities, we invested approximately 6 million in the quarter in the construction in our new production facilities in Tel Aviv. For the first half year, we have invested 12 million and in total approximately 17. And as we talked about, these new facilities were commissioned at the end of the second quarter. Nothing to mention around financing activities. And so at June 30th, our cash position was 658 million. Back to you, Tom.