Welcome to Carnegie and this Q3 report presentation with Senzime. My name is Klas Palin, and I'm an Equity Analyst and have coverage of Senzime. Now I will be responsible for the Q&A session. But before that, we will listen to a company presentation and a presentation of the development in Q3, which will be held by CEO Philip Siberg. Philip, very welcome, and please you may start your presentation.
Okay, thank you, and thank you for listening in to this quarterly Q3 report 2024. Okay, so Senzime, quick recap. So I mean, we are a medical device company. We develop solutions to radically change and improve anesthesia practice. So it's about helping patients throughout their journey from perioperative care and making sure they get the right dose of anesthetic drugs and are extubated so they can wake up at the right time. Our business is in around the TetraGraph system, which is our predominant focus area. The TetraGraph system is used in thousands of operating rooms around the world to accurately monitor the muscle activity or the electricity in the muscles during anesthesia, and this is done in real time with a monitor and sensors to make sure, again, that you are adequately relaxed, paralyzed, and that you get the right dose.
When the paralytic effect is out of the body, you know it's safe to wake up the patient to breathe on their own. This is our core business. In the Q3, we had strong accelerated sales. Once again, we reached SEK 17.4 million in sales, corresponding to 90% sales growth. The important U.S. market grew 81%. We had some currency effects that affected top-line sales negatively. But all in all, I'm very satisfied with the growth rate. If you look at rolling 12 numbers, we're continuing our hockey stick progression. When these guidelines came out that addressed both European and U.S. societies, which were mandating that all patients that receive paralytic drugs as part of surgery should be monitored with an objective type of system that Senzime is leading in.
And since that happened in Q4 2022, and then it was ultimately published in Q1 2023, we've seen a very nice growth rate in the company. So the business is both selling and placing TetraGraph monitors. So we nearly have 2,900 TetraGraph systems placed in hospital systems all around the world. And then, of course, connecting the TetraSens, the disposable sensors for each and single patient. The utilization rate, I will come back to, but we're also seeing a very nice growth rate in the disposable sensors. We're nearing about 500,000 patients that we've monitored so far. So if you look at the growth rate quarter by quarter, we're seeing again a very strong growth rate. So what's really happening here is that the installed base of monitors are increasingly used.
So a lot of these major hospital wins that we secured over the last 18 months are starting to come into effect just as we anticipated. So the growth rate is over 200% if we look at year- over- year in units. If you look at briefly where we are selling and what we're selling, U.S. is by far our most important region, 75% of the business. And also that's where we predominantly focused. And during the year, we expanded the sales team and the management presence in the area. Disposables is almost three quarters of our business, which is in line with our business plan. And we're seeing growth in pretty much all our regions.
It's a little bit slower in Europe, where the progression from conventional older technologies to electromyography, the technology that we are spearheading, is moving at a little bit slower pace, but we still believe in the long-term opportunities in the market. So overall, we're also seeing very nice growth in the Asian region, predominantly through our licensee Fukuda Denshi in Japan and our partner in South Korea. To mention some highlights during the third quarter, we secured two major hospital wins that we press released. We had a lot of other wins that we did not go out with. One was with a major, one of the U.S. top 10 healthcare systems in the southeast part of the U.S., where we secured a win already back in 2023. We started coming into the pediatric department. We proved the case. We showcased.
Then this year, they expanded to all their facilities. Now we're following and helping to monitor all adults as well. This has opened up for a four-fold volume increase into that system. By the end of the quarter, we announced another contract with a leading hospital within one of the largest IDN systems in the U.S. We just started rolling that out. Then we did a directed shares issue. Just in the end of the quarter, we announced that we raised SEK 86 million . We directed the shares issue to a group of existing and new investors. We did the offering at market price and did this with a very fast and cost-effective way of raising capital to the company. Looking a little bit about growth rate.
As we close Q3, we report that we now have over 500 hospitals which have the TetraGraph system or modules or simulator or technology in use. If you look at all the TetraGraphs out there, the usage rate that we monitor in terms of shipments of sensors is in and around two patients per week. We're seeing a positive trend, and it's moving in the right direction. If I look at the key accounts in the U.S., the number is in excess of four patients per week. And if I look at just a few examples, if I look at some of the robotic surgery centers we have in Germany, we're noting over eight patients a week in utilization. And I've told the market before, but the ultimate goal here is to get this to our overall number to be over four patients per TetraGraph and year.
We have a phenomenally strong customer list where we are winning large academic and IDN systems in the U.S. and other regions. A brief look at the expense level. The expense level was hit this quarter by the weakened Swedish krona. Really what happened was that the dollar dropped towards the krona, and that really changed the balance sheet effects of that created. Sorry, it was a strong krona. I flipped it around there. The expense level here is actually lower, the direct expenses, than it was in the last four quarters. If we adjust for these non-cash flow affecting currency effects, the operating earnings were actually better than last year. If we look at the cash position, we had about SEK 50 million at the end of the quarter.
Then, as noted, we raised another SEK 86 million that was not in the bank yet as a quarter closing. We announced part of our Q2 report, but just to reiterate them again, our outlook, both long and short. I mean, if we look at the market we're in, we're in a phenomenally interesting market shift. It's moving rapidly from, in some markets where patients have not been monitored at all, to certain markets where it's shifting very rapidly to electromyography, the technology that we're spearheading. So we're seeing more and more evidence for that our technology is becoming the gold standard. And we're addressing a market that exceeds 100 million patients of opportunity. So the goal for Senzime is to be the undisputed market leader in the field of EMG-based quantitative neuromuscular monitoring.
As we grow this journey, the short-term goals are to reach revenues of SEK 250-350 million and be cash flow positive during 2026. Also longer term to reach SEK 1 billion in sales. These goals and ambitions remain very well intact. A quick snapshot at the ownership structure. As said, we did the directed shares issue, which increased the number of shares with 13.8 million. These are all not yet registered with the Swedish Bolagsverket. But the shareholder list remains pretty much intact after the share. We did have a flag from Handelsbanken Fonder, who's reduced their shareholding with about one million shares during the last few weeks. Okay, and then just after the quarter end, we made a significant announcement where we launched the TetraGraph next-generation.
This project and this product and system is a result of extensive collaborations, long-term research, and partnerships with anesthesiologists around the world. We're truly introducing a new technology and solutions to make advanced complicated neuromuscular monitoring intelligent and very simple and addressable and available to a broader market. Some of the key features include the gauge, the first picture to the left, which is a simplified way for physicians to adhere and comply to guidelines. So it very simply helps you understand what is the level of block of your patient. We also introduced a number of intelligent features we call adaptive intelligence to help streamline the process, help it easier to monitor the patient, and make it more smooth throughout the journey. The system is based on our sixth generation EMG algorithm with unprecedented accuracy to make sure you make the right decision.
It's all about slim and portable design, and then this is truly a medical device system that is developed from a sustainable approach using sustainable materials and a very robust production process here in Uppsala to comply to hospitals' new demands of sustainability. There was yet another important clinical study published as well during just the launch of the next gen, so this was a validation study where specifically researchers in the U.S. evaluated the TetraGraph system and then evaluated against a laboratory gold standard technique to understand how accurate is this system versus a gold standard laboratory, and what it proved was that the TetraGraph system has, if you compare it to other similar peer-reviewed and published data on competitive devices, we have the highest accuracy towards this reference. It was also the first study to prove and validate the system like ours over the full scope of block.
So not just during moderate and kind of light block, but also under very deep levels of block, which is important during robotic surgery and laparoscopy, etc. So the researchers here again define that EMG is recommended as a new gold standard in monitoring patients undergoing anesthesia. Okay, so to wrap this up, we're on a phenomenal growth journey, a very exciting inflection point for the company, strong drivers where the guidelines are really catalyzing our business. We're seeing more and more that the technology that we are spearheading is becoming the gold standard. And the next gen system has been received very well from the market. We already announced first orders in Europe and very positive on the outlook there.
We continue to secure a lot of hospital accounts, strong long-term financial backing as well as a pipeline and good traction and en route to meet the targets that we have promised to market. So thank you.
Thank you so much, Philip, for the presentation. And I would like to start with a couple of questions about, I think, what really stood out in Q3 was the very strong sales development or sales growth of the sensor sales. And this was particularly in the U.S. and Asia. But is this a result of you driving up the utilization rate of the installed base? Or is it also some customers that perhaps are building up the stocking?
I mean, I would say it's predominantly hard work and usage rates that are increasing.
So I mean, we've over the last months did a lot of large installations, and we're seeing that as these come into effect, volumes are now going up. So we're seeing a nice increase across the large accounts that we've installed. So I don't see any specific kind of one-time or stocking order type of deals in the quarter.
And this is also when it comes to the Asian markets. So you don't see Fukuda Denshi building up inventory?
No, no. I mean, they source from us on a forecast, and they source to us pretty much transparent according to customer needs. So there is no unnecessary stocking at the partner level in between.
When it comes to the rest of the world, Asia, is it particularly in Japan you saw this strong development, or is it also South Korea that is growing?
I would say it's both markets.
Japan is having good growth, I think, a little bit thanks to their integrated kind of Senzime Inside module that they launched earlier this year. Then South Korea, we've had presence, and we're seeing that the large bulk of monitors, they have a few hundred installed there in leading hospitals. They just continue to increase and ramp up. That is despite the still ongoing healthcare strike that's been going on in South Korea for many, many months.
While the sensor revenues growth was very strong, the monitor sales were a little bit softer in Q3, particularly in the U.S. then. What was the reason behind this, you think?
I don't think it was any specific, maybe a little bit of a seasonal effect. Nothing sticking out, no major losses to competition. It's more we keep on rolling out.
And if I compare it to Q3 last year, we had two major deals. It was two major California healthcare systems that we rolled out. So a little bit of a comparative effect as well in the numbers.
So, okay. And you're now launching the new TetraGraph, and you did it at ASA conference. Could you tell us anything more about the feedback you got?
I mean, I think we got a huge positive feedback from the clinical market and the key opinion leaders, both that we've been working with together to develop this, but also from in and around the market. I mean, ASA is a large conference every year that attracts about 13,000-14,000 people.
If you look at the agenda and the curriculum for the conference, the first morning session after the conference opens is a discussion, a large panel discussion about how to make neuromuscular monitoring standard of care. The guidelines are there. Now it needs to become into standard practice. So the guideline committee was there presenting. They highlighted even the next-gen TetraGraph from Senzime as part of that presentation. And I think one of the key takeaways is that clinicians are looking for technical solutions that are very simple to adopt, too. Clinicians need to understand how to very efficiently follow the guidelines. And I think what we're doing here with the next-gen is perfectly fitting that demand.
And you will start shipping the new system later this quarter, I guess?
Yes, yes.
Yeah. And will you do this in parallel with the older system as well?
Yes.
So we will have like a portfolio approach here where we will keep the current TetraGraph. We are renaming it to the TetraGraph Classic. And then we will have the next-gen as a little bit of a premium product. So we're segmenting the market with two different products and optimizing pricing to various needs. So some hospitals are very keen on having the latest technology. And while other hospitals are more price sensitive and just want to buy what's already been on the market and is very well validated. So there's room for both here.
And as you mentioned, it's a premium price. How does that affect your gross margin?
I mean, the next-gen is partly developed as well to help improve gross margins.
So it has a more attractive financial offering for us as a company, both in terms of cost, but also in terms of top line price.
When it comes to manufacturing capacity, are you scalable?
We are fully scalable. We are in our new sustainable headquarters here in Uppsala, and we have perfectly the resources and the capacity to meet our business plan.
But in Q3, the gross margin was somewhat soft. And I think you mentioned that it was due to some volume deals. Can you give us any further clues what that involves?
Yeah, I mean, it remains a little bit of the U.S. price level. So kind of price levels of monitors are, I would say, temporarily a little bit lower.
We've also judged that it's important to win the deals and that the long-term value of this hospital contracts that we sign, they're all based on the consumables and the long-term recurring revenue. It's more part of rolling out monitors with a lower price level. The sensor levels, the pricings remains intact. I don't see any further reductions in market pricing level on sensors.
As the U.S. and the rest of the world performs very well, Europe is a little bit, it's a bit weak. Do you see any light at the end of the tunnel, or should we think that the European market will stay a AMG market?
It's been a tougher year. I do think we saw some light in the tunnel in Q3 where our sales increased. Q3 is normally a quite weak quarter in Europe.
And I think I've noted other industry peers having a pretty tough capital year in Europe. I do believe there's a lot of initiatives in Europe that will ultimately drive in favor for us, including additional guidelines that are announced to come out next year, for example, for pediatrics. AMG, the kind of legacy technology, has a stronghold in the market. But we are increasing our penetration rate into areas as robotic surgery and others. So that's where we continue to win. And so we continue to secure new hospital wins. But it's on a smaller level. And as I said before, it kind of incrementally grows over time. But all in all, U.S. has a significantly faster kind of adoption and ramp-up rate. So that's where the best traction is right now.
And I mean, costs are under good control, at least from my perspective.
But you have strengthened your financing recently. Are you planning to size up the organization somewhat going into 2025, or how does your outlook?
No, not necessarily. We are always trimming and perfecting and being very cost-conscious and hoping that we can kind of stay approximately at the level we are. So I want to keep on growing and keeping a very stable cost level as we grow the business.
Perfect. And you reiterate the financial goals in the report. That's very good. But I just wonder, would you provide any clues how the market is for the moment? You have been affected by the storms in the southern USA, I guess, that had some effect on surgical procedures.
I think there was, I mean, yeah, I was in the U.S. in and around that IV issue happening with IV fluid shortages.
I think there were some issues maybe for a week or two where elective surgery was postponed. The message I'm hearing now from the market is that elective surgeries and clinical business is up to normal again. So that seems to be okay. I think perhaps the election period here in the U.S. and Q4 creates some buzz. But otherwise, business rolling, very consumed with a rollout. And always, perhaps as you transition and you come in with a second line of products, you always have perhaps short-term some challenges in people choosing what to roll out. But all in all, I remain very positive.
It's also to the customer interest that you got right now.
Yeah, very satisfied.
I have also received a couple of questions from other investors.
And I think in the CEO comment in the report, you mentioned that you want to grow through smart industrial partnership. And if you could give us some details what that could mean?
Yeah. So I mean, today, our main business is selling a portable standalone monitoring system, which is used in the operating room. And modern operating rooms nowadays are very integrated systems with large patient monitors that consolidate all the data. And the requirement for customers is more and more that everything needs to be interoperable and talk together. So probably about 75% of all the monitors that we sell, we have various types of connectivity solutions into external patient monitors as GE, Philips, Masimo, etc. So all these industry partnerships are very important as we scale up the business. And we have more coming as we do that.
And then I think Fukuda Denshi in Japan serves as one of our partnerships where I said, like I said, they took our technology, they integrated, and they built a module. So it's inside the patient monitor itself. And I foresee that as this market grows, there will be multiple opportunities as that to build in our technology into other partnerships solutions.
Yeah. I also got a question about how the tender procedure is perhaps the same or different in the U.S. compared to Japan and South Korea, if it's possible.
Yeah, I mean, there are some similarities. U.S., I would say one trend that I noted in the report was I think the evaluation processes are going faster and faster. Sales cycles are being slower, I mean, shortening, and having quite a lot of business now just rolling out without clinical evaluations at all.
They're just looking at what the key opinion leaders are doing and then just follow the references. Japan and South Korea are quite similar in terms of evaluations. The Japanese market is characterized by typically they buy a couple of monitors per hospital. They keep it, they try it, and they think, and they're very meticulous in Japan about evaluating it. As they like it, they will buy a couple more. So they evaluate more by buying and trying it out that way.
Okay. And thank you then so much for the presentation. Any final words?
No, thank you. Thank you for this opportunity. Very happy about the progress. It's been a very exciting year for Senzime. I think we made significant progress. We're making an impact for so many thousands of patients. And I'm very happy.
And my team, they are the ones to receive all the credit. And I would like to thank them for their brilliant contributions. So thank you.
Perfect. Thank you so much.
Thanks.