Hello and welcome to this Q4 2024 Presentation with Senzime. My name is Klas Palin, equity analyst at Carnegie, and I will be moderating the Q&A session. To present Senzime's Q4 report, with me in the studio, I have Philip Siberg.
Thank you.
Very welcome.
Thank you.
I give the word to you, Philip. Go ahead with your presentation.
Thank you. Nice to be here. I'm here to present a little bit of what happened last year and highlight a little bit of Q4 and just introduce, for those who are not familiar with the company, briefly again what we do. Senzime is a medical device business, originated out of the U.S., out of Mayo Clinic, headquartered now in Uppsala. We're driving change in the operating room. We've developed a system, the TetraGraph system, which is used to monitor patients as they're undergoing anesthesia. We monitor the patients during surgery to make sure they get the right dose of certain anesthetic drugs and that they are extubated or can breathe on their own again after surgery. Our system is available in about 500 hospitals around the world. We have about 3,000 of our monitoring systems, and by now we've monitored over 500,000 patients.
What we're driving here is called EMG. It's a technology for measuring the neuromuscular transmission or the level of paralysis in the body. We are pioneering this technology called electromyography. The change that we're driving, the paradigm shift, is that there's about 80,000-100,000 monitors out there in operating rooms using a traditional legacy technology where you measure the indirect effects of these special drugs. This legacy technology measures the indirect response, measures the muscle movement. There have been studies showing that the variability in the data is up towards 50%. There is definitely an opportunity for the patient to be extubated at the wrong time. They can end up in the postoperative care unit still being paralyzed, or they get the wrong amount of drugs during surgery. What we're driving is the change to EMG or electromyography.
It's an algorithm-based technology, digital, and we're measuring the response inside the muscle itself. It's a direct effect, and that's been shown to have a variability of 0.3%. Extremely clinically accurate. Examples of use are in operating rooms where robotic surgery is done. I typically call the TetraGraph the da Vinci robot's best friend. It's used to really, really accurately determine that the patient who is deeply blocked during robotic surgery has the right amount of anesthetic drugs, specifically paralytic drugs, and that they can end the session at the right time. What's so exciting about Senzime is not just the big market. There's about 100 million patients that are addressed with this technology.
It's that, one, there are now clear clinical guidelines, both in Europe and both in the US, mandating that every patient that receives paralytic drugs as part of anesthesia should be monitored with the technology. Number two here is to show that the EMG technology that we are driving has been shown to be significantly more accurate, just as I showed in the previous picture. The third thing here is that EMG monitoring has shown to radically decrease the amount of drugs needed during surgery because you can monitor accurately and let the patient spontaneously wake up, and also shown that it eliminates postoperative complications. Number four here is that our specific system, we've shown that we have the highest accuracy in the business, and by far now we are the only EMG portable-only system that is validated at all levels of patient block.
There is a very strong fundamental and basis for our business. If we look at 2024, I can summarize it into five buckets. I think it was another major growth year for us. Growth was about 65%. We reached SEK 58.5 million in sales. The U.S. market was the main driver with about 72% growth, but also the big chunk of our business. Our business model is predominantly based on selling disposable sensors. That is the importance here. That grew triple-digit, just over 100%. What is driving it is recurring use and recurring use of the monitors in the hospitals. During the fourth quarter, we launched our next generation TetraGraph. This is a project we have been working on for many years and was really a game changer in the industry. As we launched this pretty mid-October, there was a very successful feedback from the market.
What happened was that it kind of changed some of the short-term purchasing processes. The big opportunities we had in the pipeline all said shifted to, "Okay, we want your new monitor." This affected short-term Q4 growth, but very strongly sets us for the right position as we move to the future. If we look at our operating expenses, we made some significant investments last year, specifically in the U.S. commercial sales force. We're continuing to grow it, but last year the operating expenses were pretty much flat versus the year before. The fifth pillar here is that we secured additional funding last year. We did a directed share issue. We targeted towards institutional investors. We brought in the funding at market price. I'll come back to a little bit of how we see the future.
We continue to be one of the fastest growing companies in the medical device space on the NASDAQ main market. We are in a very exciting hockey club phase of our company. The delivery base of TetraGraph system is a key KPI for us. There are about 3,000 units out there now in the market. Again, the importance here is driving sales and usage of disposable sensors. If you look at the graph to the right, you can see that it is a typical bumpy ride between the months. It depends on how hospital systems stock up and ordering processes. What you can also see is that we had a little bit of perhaps lower rate in Q4, but if I look at what happened in Q1 instead, I had an all-time record high.
It bumps between the months, but you can see a very nice trajectory growth. Overall, split of sales, U.S., as I said before, is about 73% of our business. If we look at the markets, Europe had a weaker capital year last year. It did move to the positive in Q4, but overall it was longer sales processes for capital goods. Some of our stars were South Korea and Japan that had phenomenal growth rates, where you could see that in specifically South Korea, the local reimbursement in South Korea for our type of system is driving growth. Just make a quick spotlight in the U.S. We announced about a year ago that we were going to expand the U.S. commercial team additionally. We did, and we expanded the marketing team. This resulted in strong growth in the U.S. market, about 72%.
If you look at over the last three years, we've actually six-fold increased our sales. We've secured a number of main, large, and very prestigious hospital systems all across the U.S., both for adult and pediatric use. We secured a major Veterans Affairs public tender, and we signed our first GPO agreement last year, which is a group purchasing agreement where we are already clinically validated. There is a pricing scheme, and we can see deliveries to one of the largest U.S. hospital systems via that agreement. Quick on the next-gen TetraGraph that we launched in October. The beauty of this is really making advanced neuromuscular monitoring and the type of technology we have very simple, and then by that addressing a very large addressable market.
The highlights of this, not without going into details, it's all about making very simple, introducing a gauge to make it very simple for clinicians to really follow how deeply blocked is the patient. On top of that, we added adaptive intelligence to help make it easier and a number of features that we believe are very positively seen by the market. We really developed this together with anesthesiologists around the world. What we are doing now is really doing clinical evaluations all around the globe. Strong pipeline, strong interest. Typically when you buy these types of units and invest in this, you want to make a clinical evaluation. You want to get on board everybody on the nurses, on the clinicians' team, etc. It is an exciting phase that's ongoing right now.
If we look at Q4, we had growth, of course, but it was impacted a little bit by the short-term next-gen launch. SEK 14 million in sales, about 30% growth rate. Gross margin was a little bit improved as well. I think it was because of a higher proportion of sensor sales. Otherwise, the KPIs that we've had in the past remain pretty much in effect, about 500 hospitals out there. Typically, we're seeing that our key opinion leader accounts are running about four sensors per monitor per week, but also seeing additional accounts now with robotic surgery cases where there's a higher penetration throughput. Highlights of the quarter, as I said, the successful launch, including FDA and MDR clearance.
There was also this study that I mentioned early on, which was very important to really validate that the TetraGraph system and the algorithms and the solutions that we use has the leading accuracy on the market. Again, that it's validated now clinically, not just for lightly paralyzed patients, but also under very deep block, which is important in robotic surgery. We announced that we secured the first deals, which was pretty quickly. We secured a hospital in Switzerland, and we had more hospital wins communicated early on in the year of 2025. One more spotlight on Japan. I think it's a very exciting market. We've been there and we've had a collaboration with Fukuda Denshi since about now almost 10 years back now. They launched early on last year the first integrated patient module, which was based on our technology.
Fukuda has a large installed base of patient monitors, predominantly in Japan, but also in the U.K., U.S., Italy, and a few other markets. They now offer the solution where you modulize our technology and then click it into the existing installed base of monitors. We supply the sensors and we are granted a royalty on the sales of the module itself. We could see that in the Japanese market, sales grew almost 90% last year, which was very much driven from sensors and sales of these modules. Fukuda is not our only industrial partner. We've had a long-term relationship with Philips. The majority of our systems that are sold are now connected into a Philips monitor. You can see the data on your centralized Philips monitor.
In early, late Q3, we also had an integration completed and approved with GE Healthcare, so we can integrate into their systems. We announced early in now in Q1 with Masimo that we've had a relationship with over two years, which was a second milestone in our collaboration. Now we're linking into their system and then further on into electronic health records like Epic and Cerner. We just released a connectivity to Mindray as well, so we can connect into their system. I would say that we have the most comprehensive integration package on the market. Quickly looking at some of the numbers, operating expenses, I think I've had an ambition all the time to really nail down every little dime that we have, but to keep it flat at the same time as we grow.
If I look at our full year expenses 2024, they were pretty much flat as compared to the year before. This was despite significant commercial investments in the U.S. market. Specifically in Q4, operating expenses were at SEK 33 million, which is a significant reduction from the year before. We also took some one-time hits in Q4, of which one was related to an office lease we have in a former Boston office that we're trying to get out of. I made some one-time severance offers. There are some one-time hits into this. Of course, the currency rate has effects on our expense base, and the favorable or the strong US dollar had positively affected the expenses in the quarter. If I look at our progression towards profitability, I would say we're also making a nice trend towards the right way.
EBITDA over the full year was minus just under SEK 100 million, which was an improvement from the year before. If I look at EBITDA, specifically in Q4, it was minus SEK 18.1 million versus SEK 34.7 million last year. Again, this relates to increase of sales, keeping costs fixed, and with help of currency as well. By the end of the year, we had just over SEK 100 million in our cash position. We had a little bit more that was not yet in from our directed share issue due to administrative reasons of U.S. investors, etc. Looking a little bit at the outlook, we announced in Q3 last year kind of one of our long-term goals with this. I mean, it's of course to be the undisputed market leader in electromyography and monitoring patients inside the operating room.
The long-term goal is to really create a billion SEK company with high profitability. On the route to that is 2026 goals, which is to reaching revenues of 250-350 million SEK. What we said this year, as we now grow up as a company and we're maturing and we kind of can see and learn from the business, the outlook for this year is to reach somewhere around 110-140 million SEK, which is predominantly more than doubling our business. This is driven from existing recurring business. We have a strong base and we have a very strong pipeline of business as well. Equally important is operating expenses. I anticipate that there will be we are now making additional investments in the U.S. commercial team.
Despite that, operating expenses are expected to grow single digit, which is pretty much in line with overall cost in society. Quick on our shareholder base. If I summarize what's happened in the last quarter, I would say that my top investors continue to increase their position. Handelsbanken Fonder and TIN reduced some of their positions last year. All in all, we have now just over 130 million shares on the market. 2025 growth drivers, what's happening now? I mean, one, it's the commercial excellence out of this. I mean, we have, as I said, a strong recurring base. We have some of the top leading hospitals in the world, and it's really driving business out of this.
The industrial partnerships that I mentioned that we're working with together are important drivers of business, as well as we now expand the U.S. team additionally with about 30% increase in headcount if I look at the commercial team in the U.S. We have a very strong leading commercial portfolio of products now. Extremely happy about the next generation TetraGraph. We have a strong pole position in the market. We're now starting to roll it out. We will roll it out in March to remaining. We started by launching it in the U.S., and now we're launching it to the rest of the world here in Q1. If I look at the drivers in the market, it's the guidelines. More guidelines are anticipated to come this year. I will keep you updated on that. We're seeing more and more protocolization.
Hospitals are introducing this as a standard of care and getting it to every single patient. We're seeing that these data integrations are important. Of course, we have a strong set of collaborations and partnerships with KOLs and science to back all this up. The last puzzle bit is, of course, having the capacity to deliver. Last year, we moved into new sustainable production facilities in Uppsala, north of Stockholm. This is all FDR, MDR compliant, and we have the capacity to meet the business plan for the next five years. We're also closely monitoring the U.S. market in terms of tariffs and trade and what's going to happen. We have the readiness. We have tactics. We have strategies. If there are tolls introduced, we have ability to do this.
I think we're, just as everybody else in the medical device industry, we're following this closely to see what happens. To conclude, very exciting commercial phase. 2024 was yet again a commercial breakthrough year for us. It's driven by guidelines, driven by standards of care, protocolization, and I think driven from a need to monitor every single patient out there and with adequate technology. EMG that we've been spearheading has quickly established itself as the new gold standard in operating rooms. There are more than 160,000 operating rooms out there to target, and we've come at least a way on that mission. U.S. has been our strong focus. It will continue to be. We have the backing. We have the pipeline. We have the right owners of this. I think we have very clear communicated how we're going to make this happen.
It's all about revolutionizing perioperative care. Thank you.
Thank you so much, Philip, for a nice presentation. I'd like to start with some questions then related to Q4 particularly. Strong growth in 2024, however, a little bit of a hiccup perhaps in Q4. Were you satisfied with the sales outcome in the fourth quarter?
A CEO should never be satisfied. I am extremely satisfied with the introduction of our new product portfolio. I guess we made such an impact that it almost hit us negatively because everybody said, "Okay, we're in the buying process for the classic that we call TetraGraph," but everybody said, "Okay, wow, we want to shift. This is what we want." We started to deliver our first units in the end of December, but really now in 2025, delivering a volume. It short-term hit capital sales. It is the function of bringing fantastic technology to market.
Okay. This affects cycles. When you're talking to customers, does this become more lengthy processes or?
No, I do not think so. It is more that when you buy this as a leading hospital system, everybody wants to clinically evaluate it. They want to trial it. What I see now in the difference, we made a major U.S. trial last week. Instead of this taking three weeks, day after three days determined like this is exactly what we want. I see that our new technology is simplifying this so much that it will address and make buying processes shorter over time.
Okay. Has the next generation TetraGraph affected existing order backlog, or is it mainly new customers that you were anticipating that?
Yeah, it is mainly, I would say it is both. It's both that we were in lengthy buying processes, and then they said, "Okay, we want to shift to the new one," so we want to do a trial on that one as well. That kind of just shifted the process a little bit.
We should expect, of course, based on your guidance, we should expect strong growth.
There is a, but there's definitely a catch-up effect here. As I mentioned in the report, we've now secured hundreds of these new units already as we're in mid-February. Yeah, we're on good track.
Okay. I think from a market perspective, looking at your press release communication, previously you have had a lot of order intake, but it was a little bit light in Q4 and have started the year, even though you have press released some orders, but not in the same frequency.
No, I think Q4 effect was the next gen introduction. Yeah.
You should expect a more vibrant press release from your side. Did anything you want to highlight that was challenging except for the launch of the next gen?
I mean, Q4 is always a little bit of an odd quarter. You have Thanksgiving, you have Christmas, and we had a little bit of the IV fluid issue in the beginning of the quarter. There are a couple of things that happened. I wasn't really satisfied with the volume of sensors, and it goes up and down. I also saw feedback from the market that hospitals are trying to minimize stock inventory at the end of the year. I could see that, and I showed the graph and showing that we also had record all-time high sales in January.
It goes a bit up and down of that. I would also say that the classic Q4 effect that we had in the medical device industry in the past is no longer viable. There is no longer excess budgets for just wrapping up the year. This is all part of standard buying processes. Besides that, I do not think there is anything. We are on the trajectory we are expecting.
You think the sort of underlying market demand for your products are still as strong as it has ever been?
Yes. There is nothing that has changed. Science keeps getting stronger. More guidelines, as I said, are coming out this year. It is just about time and trying to change clinical practice.
I mean, the new guidelines was issued in late 2022. So more or less two years now. Has the sort of the customer that approaching you or you are approaching changed over these two years?
I think it started definitely with the top key kind of top tier hospital systems in the top, yes. That's what we quickly won, and that's now trickling down, as I've mentioned before. What I've seen is also a few of the hospital systems, I think for the whole industry, saw that, okay, we got to do this. It wasn't properly protocolized. They introduced it, but there was no standard of care in the hospital system. I've seen that change now over time to making it more, okay, we're making the investment, but now we need to make this happen as well and make it used. That shift is now happening quicker than before. We're helping hospitals now to really make this protocolized and standard of care.
You mentioned also that you would expand the U.S. salesforce somewhat. Is this the particular type of person that you are looking for to employ?
I mean, yes. I mean, when we started, we launched in the U.S. just a week before COVID hit. Bumpy start, new technology, pre-guidelines. It was hard to find the right salespeople. Now, as we grow and we look for people, we get hundreds of applications. People just love to be part of this growth story. We're getting really strong candidates to come in to help. What we're doing now is moving from a couple of spearheading salespeople to two big regions, nine territories, bringing in very strong.
I can see that the people that we're now hiring, they're coming in with a deck of contacts so we can immediately start rolling. Time from penetrating a new territory with a new sales manager, time to market is very rapid versus before.
I mean, you seem quite upbeat about the next generation TetraGraph.
Yes.
You sort of indicating that you have good responses from customers as well. Do you feel also that you are winning contracts in competition compared to Blink?
Yeah, definitely. We did not lose a major clinical evaluation or competitive trial in Q4 again. We keep on strengthening our market shares. I can't be everywhere, so I don't know every single deal that we were not addressing. By expanding the U.S. team now, I want to make sure we are absolutely everywhere where there is sourcing some type of neuromuscular monitoring technology.
That sounds good. Maybe we could talk a little bit about your forward guidance 2025. That indicates that sales would grow by about 100% or even more. You are growing with 65% in 2024. Why should we believe in such a strong growth?
No, I think it's good. I mean, if I just look at my kind of run rate three months or six months, etc., we're on that trajectory. I see it in my base of recurring business. I see it in the pipeline, and I see it in the opportunities out there. We are maturing. We are learning. When we've done kind of estimates in the past, we've known less. This is a way for us to really show and align the dots. We're strong believers in this. Of course, the pipeline and the estimate is very driven by U.S., but also just continued growth in other regions.
I guess this is sort of a more or less back-end loaded forecast.
Yes, typically. Also in line with expectations.
That sounds good. We have focused on the U.S. market. Maybe you could share some thoughts about what's happening in the European market as well.
I mean, Europe was a little bit challenging last year, as I mentioned. Typically, despite the guidelines being in effect, there's a very strong hold of AMG technology, which is well established. It's taking time for European hospital systems to shift from AMG to EMG. We're winning account after account. We're deeply penetrating specifically robotic surgery, pediatric surgery, and other segments. Capital goods, there's been a lack of budgets for new technology to come in like this. I can see a good recurring growth rate on the usage base. With the new monitor, we've also had multiple orders in the European markets even before we launched the device.
We're seeing this as a positive outlook for the year. If I look at Asia, I mentioned it already a little bit, but fascinating growth rates in both South Korea and Japan. I anticipate it to continue to grow at a rapid pace.
Looking at the utilization rates in the installed base, is it the same utilization rate you see in the European and the Asian market as in the U.S., or is it different in some way?
Yeah. I mean, we've tried in the past to have good KPIs to show this to the market, but it's difficult because of the fluctuations a little bit. I don't know exactly what the utilization rate is. It's more the shipping. I'm seeing that some of the best accounts we have in the U.S., they are now reaching a compliance rate of about 90%. Despite them being protocolized, used in every single standard of care surgery, there's always going to be 10% that are not using the technology for legacy types of reasons. I do see that in the high-end European centers where they have installed this, the utilization rate is very high in line with this 90% compliance. It's hard to kind of give you a good answer to that if it's different rates between them. Yeah.
I think you see the European markets as more price sensitive perhaps to your sensors than compared to the U.S.
It's more sensitive to sensors, definitely. Americans are more prone to disposables, to sensors, while Europeans are more trying to minimize disposable and recurring costs.
What's your view on pricing and the rebates you have to share to customers?
I mean, we had a little bit of a dip of our gross margin in the U.S. specifically last year because of larger volume deals. We had some different ways of selling the hardware to really drive long-term sales of sensors. That affected a little bit of our gross margin. I continue to see with new products, I have margin improvement. I see that the sensor prices have definitely stabilized in the market.
With new types of business models that we're introducing as well, we're seeing various ways of actually increasing the sensor price. Yeah. We will tie it to compliance and usage and other types of metrics.
Okay. Sounds good. Also interesting to see that you have now a connection to Mindray stations. I'm just a little bit curious, is there any of these guys that you would like to sort of have deeper collaboration that perhaps could help you sell your systems and your sensors?
There could be. I mean, for us, it's very important to be independent. It's incredibly important to be able to have this non-exclusive connectivity with various types of players. We're looking at there's always various opportunities for us to scale this in parallel to our own direct efforts. Always looking for the best ways for the shareholders and the best way to get increase here. I'll keep you posted if things happen.
Yeah. Sounds good. As we're talking about the best interests of the shareholders, we could talk a little bit about your financial as well. SEK 101 million ending 2024.
Yes.
How far does it take you?
I mean, we shook hands with the auditors, and it's very clear that we have enough cash to take us through the next 12 months. That's all good. I did signal clearly as we did the directed shares issue in Q3 that there will be a little bit more funding needed to take us to cash flow profitability. We are looking at lots of different ways of long-term funding the company, which necessarily does not have to be equity. We're still looking at it.
As time goes, I'm seeing that the offers on the table are getting increasingly more competitive and better. I am very positive that we will find a very attractive long-term funding to take us the last mile to profitability.
That sounds very good. Maybe we should round this up. You touched upon this new administration in the U.S. It's, of course, very difficult to know exactly what will happen. What specific risks or opportunities have you noticed so far?
Yeah. I mean, we're working diligently to eliminate kind of the dependence of Chinese sub-suppliers. If you look at the next-gen device today, it's very driven by Nordic suppliers. That is one big step. As we now set up our facilities in St. Louis in the U.S., so we're in the middle of the U.S. continent, where we have the ability to do various types of assembly and manufacturing. We are looking at ways of doing parts of final assembly in that office and making it enough parts that we can say that the country of origin is actually the U.S. By doing that, having a labeling where it's made in the U.S.
We're keeping a close eye on that. The whole industry is in large very dependent on Chinese sensor supply and disposable technology, etc. I'm letting the big boys spearhead and take the hit in lobbyism. We have smart ways too. We have the readiness once and if this happens.
Okay. To sum this up, you are pretty confident that you will continue to grow the business very strongly.
Yes. I'm always bullish, but I think we have, like I said, we have the technology, we have the team, the drive is out there, the guidelines are there, and the underlying market pull and the science is backing this. I think we are a phenomenal strong and a very exciting year ahead of us.
We should just wait for more communication from your side to see this.
Yes. Promise to have more communication coming out and more exciting deals. I want to mention we packed some deals together here in a January release, which was a very large Southeast U.S. university hospital systems.
In total, 79 monitors, rigorous clinical evaluation, slightly also delayed because they shifted to the next gen that we've now shipped to them. We had also a number of other major U.S. hospital systems, including the number one ranked U.S. hospital system that took on the next gen also. That with orders now coming in into Europe and a very accelerated drive from our Asian partners to get this out in the Asian market during the year. Again, it summarizes our view on the market that we're on a good route to be the undisputed market leader in this clinical and technology change that's happening right now.
Great. Thank you so much, Philip. Looking forward to seeing your progress. Thank you.