Yes, hello and welcome to this live Q&A with Senzime and CEO, Philip Siberg.
Thank you.
We'll start off with a short introduction of the company and the quarterly report. Go ahead.
All right, thank you. Okay, Senzime, a medical device company. We're in the field of perioperative, precision-based patient monitoring. I will hit into the numbers right away and come back a little bit to the company. Okay, so Q1 was another record sales growth quarter. We saw good growth, 66% growth. We reached SEK 12.1 million in sales. U.S. is the main driver, 75% of the business and also the main driver of growth. What we can see here is the dynamics of the business. The run rate really took off. Sorry, I'm losing my voice again. Okay, let me just get one second here. Sorry about that. Got a water break here. Okay, so momentum in the business is good.
If you look at our net sales in the rolling twelve months, we're in the hockey phase, hockey stick curve here. You can see the pink point is truly the inflection point of the company. That's when the U.S. and the European guidelines were published. So since Q4 of 2022 or early 2023, we've had a very nice growth trajectory of the company. If you look at the installed base, up until end of March, we had installed over 2,300 Tetragraphs around the world. So the install base keeps growing. If you look at the shipped number of disposable sensors, we're also seeing a nice, almost exponential growth happening here, and a very strong quarter that continues into Q2. And of course, customer growth is everything here.
If you look at over the last 12 months, we've secured 83 new hospital contracts. If I just look at the first quarter alone, we had 33 new hospitals secured. So all in all, we have over 330 hospitals in the regions that I can control the numbers. So this includes some of the smaller distribution markets where I'm not fully aware of what we have. But this is a good business, and if I look at Q1 specifically, I believe that we only lost one single deal to a competitor in the U.S., so I think we're really strengthening our market shares in this segment. We are monitoring our utilization rates very closely. Utilization is important because that's what drives sensor sales. We're measuring it in two different buckets.
One is kind of the key opinion leader accounts, the large ones that we can control. If you look at the linear trend over time here, we're successfully kind of scaling this up. I want to reach beyond 4-5 patients per week per monitor. That's the goal here. And if you look at the whole, all accounts, we're growing that as well, and it's hard work in progress. But we have, and I'm very proud of, we have some of the world's leading hospitals as our customers, and it's good to see that it's getting protocolized, and it's really expanding the use all over the world.
To just mention a few highlights in the first quarter, in March, we announced one of our largest deals to date, a large Houston-based hospital system that we won in a big competitive tender. We announced that the deal was about 250 Tetragraphs to be rolled out during this year. The number that I have now is probably in excess of 300. So we started, we had a very small shipment in Q1 from this tender, but it really started now to take off in Q2. So we will see the effects of that during the year and also the disposable run rate from that. Another important news for the quarter was our update on our collaboration with Fukuda Denshi, the large Japanese patient monitoring company.
So we've had a long, 10-year relationship with them. They launched what they call the HN-100, which is an integrated module using the Tetragraph technology that we have. They built it into a module, so we supply them with know-how, and we supply them with the single-use sensors. And this integrated solution, I think, is just the start of what is to come in terms of having both a portable device and also integrated solutions into various patient monitors. And then I think the third important event of the first quarter was expansion of the U.S. commercial operations. So we expanded the U.S. team. We hired a brilliant new Vice President of Commercial Marketing based in the U.S., comes from Medtronic, and then we relocated our offices and placed it in St. Louis.
So we're in the middle of the U.S., very efficient for shipping and a cost-effective place to be. And we did this all in a very cost-neutral manner. We shifted back-end resources and moved them to the front end. So the commercial team in the U.S. is now very strong, with about 25 people and half of the company based there. If we look at the gross margin, it took a little bit of a hit in Q1. We've had a nice trajectory over the last quarters as we moved production back to Uppsala, to our head offices, and seeing also the growth in our consumables. So Q1 was a little bit of an odd quarter. We had a higher ratio of instrument sales.
We had a higher ratio of very strong sales at the Asian markets, where the margins are a bit lower, and we had some one-off effects in write-downs of products that were old, that also affected the margin. So I think this is just a temporary effect on the gross margin. If we look at our expense levels, I'm also satisfied that we're having a very tight expense control. We had a significantly lower expense level than we had in the Q4. We're in line with about the same expense level that we had in Q1 of last year, and that is despite significant investments in commercial operations. So I'm glad to see that we found a good balance.
So I wanna grow this company with a balanced and a very controlled expense level, keep on improving the gross margin, and then having a strong growth rate. I just iterate, you know, we have a phenomenal base of shareholders in this company. Swedish, predominantly large institutions, with the Crafoord family and the Crafoord Foundation being our largest shareholder. Just to mention, what I've seen happen during the quarter is that we've had some American U.S.-based investors that have decreased their shareholding, while I can see that the Crafoord family has actually increased their shareholding. Otherwise, it's about the same. But I'm very proud of the strong shareholders that back the company. So just a glimpse of Q2, as we're already there. We've had some good announcements.
We announced some significant wins at U.S. clinics, again, both pediatrics, but also advanced robotics in some of the most prestigious U.S. hospitals. We announced that we won a major public tender. It was the Veterans Affairs in Gainesville, which is part of the largest VA system in North Florida. We secured that. We also secured our first group purchasing contract, or a GPO contract, which is a three-year contract that gives us kind of a hunting license to come into one of the largest integrated delivery networks in the U.S., with the... as a sole source supplier of portable EMG-based neuromuscular monitoring solutions. And then, I just commented in the CEO report that 66% growth in the quarter, you know?
Yes, pretty good number, but I'm a three-digit growth person and, if I look at what we did, by as we closed April, we are far beyond the 100% growth rate again. So we had some deals that were just shifted to, to April. So, we're on good track for the year, we are on the internal targets that we've set up, and I'm, I'm very positive for the outlook of the year. So my 300 equation stands, I've shown this before. Just to illustrative showing that, you know, when a s we have 300 hospitals, and I get each hospital to have 30 Tetragraph systems running, and each of these Tetragraph systems are running at least four times a week, that equals, for us, a recurring revenue base of SEK 300 million in consumable sales alone.
And by doing this, we're creating a very strong and profitable company. So, to sum up who we are, I mean, we, I, I typically describe us, and I believe we are the fastest growing on Nasdaq Main Market in the medical device space. It's driven by world-class technology that is now available in over 30 markets, you know, powered by a brilliant team that makes all this happen. The big inflection point for us is having the best technology in the market that perfectly meets these new European and U.S. guidelines that are saying that every patient that receives paralytic drugs as part of anesthesia, which is about 100 million patients a year, should be using the type of technology that Senzime leads the market with. So I will summarize with that. Thank you very much.
Okay, thank you, Philip, for the presentation. You're satisfied with the Q1 outcome, obviously, and you indicated some orders have fallen into Q2. Can you comment on that?
I mean, for example, this large Texas deal that I mentioned, which was phenomenal, we were hoping to get a little bit earlier in the year. It came in pretty mid, late March, and these are big hospital systems. You just don't get the order and ship overnight. It's kind of a... It's like a big tender where you roll it out over time. So that's, we just got a few Tetragraph units out in Q1-
Mm.
But now it's well under shipment in Q2.
Right. And, what would you say are the greatest operational challenges at the moment for you?
That's a good question. I think it's just, it's all about a commercial growth here. Continuing to maintain the market shares, secure the wins, make sure we have the right capacity of people. I am very, very content with our operations. We have perfect production, we have the capacity, we can deliver, but it's more about having enough people to meet the demand in the market.
Mm. And should we expect the OpEx to be at the same level the coming quarters as-
Yeah, that is the plan, and there can always be some deviations in OpEx 'cause things happen, but the general line is try to keep it within this box, and that includes about half of our OpEx is marketing and sales investments.
Mm.
But then we have. We're driving a lot of large innovation projects that is part of this OpEx that are on route to come out and I think this will make a major impact on the market.
Right. And in the report, you mentioned that you only lost one deal to a competitor.
Yeah.
Can you tell us who that competitor was?
You know, I can, but I probably not in a public forum like this. But competitor, I've always said it before, I love the competitors because they keep us on the toes. We can't win everything.
Mm.
Every time we lose something, we learn something, we take it into consideration to the next deal. But it's good to see that, I think, we've flipped the market, we've twisted and turned, and we perfected our offering. And with the team, with the product, and the solution we have-
Mm
... we are winning, I'm really proud of it.
Right. And when you, when you are not winning, what is usually the reason that you're not winning? Is there a common thing-
Well, first we're all very upset, and we're
Yeah
... annoyed by it. The reason is it could be a price competition, and I don't want to saturate our price. It could be that some clinicians prefer something, and we have something else, so it's... But I think that the, we're just a few companies in our space that are driving the EMG, the electromyography, digital transition. And I think that's where this market is evolving to very rapidly, especially in the U.S. And ultimately, the larger installed base of reference accounts we have and the research behind it, we are the trusted and the good long-term choice for hospital systems.
Right. The situation in Europe, could you comment on the demand here, and maybe compare the price sensitivity compared to-
Yeah
... to the U.S. market?
Yeah. So Europe had a bit of a weaker start of the year. We've seen these effects happen before. It takes time for the budgets to open up for instrument sales. And also, as we came into Q2, we saw that the budget started to open up again. Europe is just a little bit different, where there's already a well-installed base of AMG, the kind of what I defer to as the... There is an analog technology there that's been there in the market. And so there, the battle for us is more transitioning from analog to digital.
Mm.
We're seeing the shift happening. We just secured Sweden's second-largest hospital yesterday, who has then also seen... They've been using AMG for many years, and then they've been evaluating us and saw, "Okay, we need the Senzime technology.
Mm.
But again, they start typically in smaller increments. They buy it for the robotic surgery suites, and they go to laparoscopic suites, and then it moves to, to the full hospital. So it's, it's just a little bit of a longer sales cycle.
Right. And, price sensitivity compared to the U.S.?
Yes. I mean, I would say probably Europeans are a little bit more careful with disposables. But all in all, it's about the same.
Okay. Yeah, if you could describe how important it is to develop integrated module to patient monitoring systems, like the one you have with Fukuda Denshi? Did you say that?
Yeah.
Yeah.
No, I think it's extremely important. If you look at the history of new technologies and patient monitoring, as they come into the operating room or ICU, they come in as a new technology with a fancy box. It takes up a lot of space. And then as it gets established, and guidelines come, and the industry sees it, everybody wants this technology, and then build it into the already existing patient monitor that's in there.
Yeah.
I anticipate that over time, our business is gonna transform to being... a majority of our business will be integrated solutions-
Yeah
... where our technology is either plugged in like this, or there's a cable into it, and... So that's why we have dialogues with a lot of the industry players. And I have a plan to come out with various types of connectivity solutions.
Okay.
It's a transition that typically takes 7-10 years over time. Yeah.
All right. Could you comment a bit on the Masimo collaboration? What is it?
Yeah, it's a little bit slow. So Masimo, for those of you who followed, had a pretty tough hit about a year ago, and at that point, kind of said, "Okay, we need to pull back on some of our external projects and refocus our efforts to drive our own improvement of gross margin and products." So we are still awaiting some of their final touches to our co-development projects. We've released parts of the collaboration with integrated connections. But the kind of the main connectivity product is still in development mode.
Right. You have won some prestigious contracts this year, for example, the large hospital chain in Houston. Can you describe the process in such large tenders, and why you think they decided to go with you?
Yeah, these processes can take everything from 3 years to 3 months. But processes are typically that there is an ambassador within the hospital system that realizes that, "Okay, we need to implement a protocol-wide solution or a standardization of patient monitoring." And then typically, that leads to, like, a work process, a work stream, where they define a team that says, "Okay, let's evaluate and look at what's on the market." Then they invite in a number of vendors to do clinical evaluations. We come in with a team, and we run our products through a number of the hospitals and show and tell, and then we present the data to see what we've seen.
And then there is a value-based committee that goes through the results and the expenses, and what's the cost-benefit and health cost-benefit. And then ultimately, there's usually a pretty big democracy forum of people, including nurses, professors, and clinicians, who ultimately decide, "What do we wanna do?" And I think those components together, we've been fortunate to be perceived as, again, the trusted long-term partner with- to work with. And I think that with the 40 years of legacy we have, the algorithm, the very strong base of science behind our products, we are the trusted choice.
The next one is a big question, but if you could describe the current market in the U.S.?
I typically describe it as the opportunity of a decade. Typically, once every 10 years, there is a new clinical variable that's introduced in the operating room. And then everybody sees that, okay, there's this new clinical variable that we have to follow, and then comes various types of recommendations and guidelines saying that, you know, this needs to be tracked. And this window is happening here and now. And again, this is the result of over. It's actually been results over thousands of studies, 40 years of research and clinical background, that ultimately led to clear mandates saying that these patients, there's so many patients that we should be monitoring. So I would say that when we go to large medical conferences, this is the number one topic right now in the anesthesia market.
Right. And you recently signed a contract with a GPO-
Yeah
... in the U.S. Can you first off just describe what a GPO is and how you will work?
Yeah, so GPO is a group purchasing organization. It's like an umbrella that once they see that, okay, there's a category of products here that is big enough and relevant enough, then they will negotiate with suppliers like us, and then make sure that there's a competitive deal, and then they will offer it on a fixed price list to their associated members, which are hospitals.
Mm.
It's sort of just a middleman that helps to negotiate deals and put a contract together. GPOs typically only sign contracts with very established technologies, where there's big enough volume for the economy, because GPOs have a very slim 1% margin.
Okay.
So they ultimately came to us after we've had some good traction with, among the GPO members, and said, "Hey, we wanna have a contract." And ultimately, we negotiated, we signed, and as I mentioned, we are the sole source supplier here of portable EMG solutions. So we're already partly in a lot of these member hospitals, but now it gives us a lot of good upsides for this contract period. And I think it opens up for other GPOs, and this GPO is part of a larger GPO. It's this huge market. So it opens a lot of doors for us in the U.S. market.
Right. And even though you're growing very fast, there's still a long way to go to your financial goals-
Absolutely, yeah
... for 2025. Can you s-
Yeah
... describe a bit about-
No, but we have a super exciting trajectory. As I mentioned, we are growing. We are on good track. We're on our internal targets. We have ambitious targets for the future. But as I, you know, expand the hospital base, I get more and more hospitals, I get more Tetragraphs into the hospitals, I get the utilization rate up, this generates into an exponential curve. So, I still remain confident that we can meet this, and we're certainly en route to build, you know, the new Swedish global market leader in patient monitoring.
Mm-hmm. You have an installed base of about 2,300 monitors now, right?
Yeah, yeah.
How many of these are in the U.S., and do you know how many of these are in use?
I don't know exactly, and I'd probably not want to comment too tightly on it, because some of them were bought or purchased early, some of them were purchased during COVID. But I'm seeing that of the Tetragraphs that we sold in the last 18 months, we're having 100% utilization rate on those. So those are all used and quickly getting into rapid production. While the number of exactly how they are split between the countries, I will come back to that in a next report.
Okay, great. That was all of my questions.
Okay.
Thank you for being here.
Thank you very much. Thank you.