Welcome to this Senzime Q1 2025 results interview. With me in the studio to discuss the outcome in the first quarter, I have Senzime CEO Philip Siberg. Welcome.
Thank you. Nice to be here.
This morning you reported really nice numbers with really strong and impressively strong sales growth. I wonder if you just could start off with just give us the highlights of the quarter.
Yeah, thank you. Yeah, it's been a good start of the year, good momentum. I think we're pretty much on the plans that we have set for the year. If we look at kind of the summary slide here, what you can see is that our net sales grew 94%, strongly boosted by our next generation, our new TetraGraph system that we launched in the fourth quarter of last year. The important deliveries of single-use sensors or TetraSens grew very nicely, above 100% in units as well. We are really delivering to our installed base of units. Our gross margin improved versus last year. I think we're getting better paid and reducing manufacturing costs. Our operating expenses were pretty much flat versus last year's first quarter. This is despite significant commercial investments that we're doing specifically in the U.S.
Our EBITDA remains negative, but we're making major improvements and moving towards profitability within the plan that we're on.
Perfect. Let's get back to each of these points. We just could start with the sales development.
Yeah.
Really strong sales. This follows a rather weaker Q4 last year. I mean, how much of your sales improvement is driven by sort of a backlog going into the year?
Yeah, good question. If we look at the next slide, then we can just see we had a little bit of a bump in the curve in Q4 of last year. That was, as I was very clear with in our Q4 report, we launched the next generation TetraGraph. It also meant it was in the midst of the fourth quarter, so it postponed a lot of the ordering and the sales processes we were in. People said, "Okay, we want to reevaluate. We want to look at your new system." We came into 2025 with a bit of a backlog, which was good. A part of the deliveries now in Q1 are a little bit of backlog from last year, but also a very nice underlying run rate of the business.
I think we had roughly $1 million and about $2 million SEK in backlog as we went into Q1. A relatively small number.
Yeah, maybe there were some customers that waited for.
There was definitely. We did our first shipments of the next generation TetraGraph just in the end of Q4. We started shipping. Now everything is smoothly working towards it.
Are your current shipments, particularly in the U.S., primarily the new version of the TetraGraph or is this a mix of them?
It's actually a mix. We are now really promoting more like a classic entry level or classic TetraGraph, but also promoting then the next generation, which is more state of the art, very advanced, yet simple to use, slightly higher price point, but a much broader kind of configuration, making it more actually acceptable for the mass audience.
You see any difference between the customers that are choosing the older version between the new version?
Yeah, I would say that the older version is more for price sensitive. You want the legacy technology, something that's already out there. You don't want to take any kind of new product opportunity and upside and risk. While the new system is more and more chosen by the users, by the nurses, by the people in the operating room who really love kind of the graphical interface and the ease of use and really understanding the level of block in a very intuitive way.
You showed quite nice sales growth in all markets this quarter, but let's stay particularly in the U.S. market, which is the largest market for you still. It's a little bit, I mean, a lot of political volatility, let's say, in the U.S. market during the first quarter. Do you see any, I mean, how is the underlying market demand?
Yeah, I wouldn't say that the underlying market demand is in any way affected by the political climate or tariffs or trade, etc. There's still a strong underlying growth for surgical procedures. Patients need anesthesia, and they need the type of technology that we offer. I am not seeing any of that as of yet, at least. The U.S. did not have triple-digit growth, but it was also we had a number of major deals that we have in the pipeline that simply didn't close in Q1 as planned. We continue to strengthen our market position. I don't see that we're losing any deals in Q1 to competition of major kind. All in all, very positive about the pipeline and the outlook for the rest of the year.
You have not noticed any changes to the selling processes getting more lengthy or something like that?
I wouldn't say so. I don't see anything around that. I mean, contracting, we're selling to large hospital systems. These processes always take time. That's a little bit of my challenge is mediating the time and the effort of getting to closing.
Yeah. You were out with a press release mentioning some of your thoughts about the tariffs and how it might impact your business. Maybe we could repeat just.
Yeah, yeah.
What kind of effect do you see from the proposed and implemented tariffs?
Yeah, so Senzime is in a pretty unique position where we have the majority of our production done in our head office in Uppsala. We source the vast amount of our components from European suppliers. We are not affected by any new TetraGraphs in terms of supply. We ship the majority of our products to the U.S. There is definitely an exposure on the tariff value as we ship it into the U.S. On the other hand, my industry peers in the U.S., many of them have major production sites in China and are reliant on importing from there. We are seeing companies who are now kind of addressing and flagging for, we're going to need to increase the prices to meet this. There may be an underlying increase that we can kind of hang on to.
I'm seeing a little bit of a balance here. Yes, we need to pay some tariffs. On the other hand, there may be some price increases that we can adjust to as well. The balance is there, it's hard to say, but we think that the effects on this, which will be on our gross profit margin, is single-digit percentage plus minus.
What's your expectation when it comes to price increases, the magnitude and sort of?
It's hard to say. I mean, we've seen other companies in the industry go out and say, "Okay, we're going to increase prices by 20%." I think we have some contracts, so it's new customers. I think we're talking a couple of percentage points that we can increase. At the same time, the tariffs will hit a couple of 10 percentage points. There are strong advocates ongoing out there to try to exclude medical devices from the tariffs. This is driven by AdvaMed and big industry kind of consortium, specifically in the U.S. I'm hoping that we can hang on to that and there might be an exclusion.
Yeah. Just to follow up on the tariffs, I mean, do you see the same effect on the monitor production cost as well as the sensors? Or is this different how they play out?
It is the same. What we are evaluating now is if we should potentially move parts of our production to our U.S. facility or use U.S. sub-suppliers. We are quite competitive in Sweden, actually, in terms of cost of manufacture, believe it or not. We will continue to monitor this and we will move and do the changes as needed.
Let's suggest there will be 20% tariffs.
Yeah.
Would that affect you in a greater way than you are mentioning now, or is it in the same?
Yeah. Remember, the tariffs is something which is paid by the U.S. importer. It's not taxed of Sweden AB. The tariffs are applied to the actual value of the product which is shipped through customs. In the life science space, where you typically have quite high gross margins, meaning that the export value is relatively low, you apply a higher price in the end. The value that we are shipping things into the U.S. is, in relation to our big cost, a very marginal part. You're only hitting a tariff on the actual export-import pricing.
Okay. Perfect. Going back to the customers, looking at your press releases, there have not been that many press releases in the past month, but you seem to have a very good, strong underlying business.
Yeah.
Do you have any comments?
Yeah, let me show you a slide on that as well here. Just summarizing some of our key wins, I would say, in the Q1. We started by announcing kind of a major win down in the southeast of the US, which was over 60 units delivered to a large university hospital system. We announced a win up in the mountain region of the U.S. We also announced that we supplied the leading, the most highly prestigious, highly ranked hospital in the system in the U.S. with next-gen monitors. We announced in the end of March that we won a large evaluation up in the northeast part of the U.S. That was evaluation versus legacy technology as well as EMG technology, which is a pretty big win for us. In Europe, we've had wins specifically in Switzerland that has proven to be an early adopter.
We also installed the first university hospital in Germany. All in all, you know, these together amounted to about 440 TetraGraphs that we delivered during the quarter. We did not do press releases of all of them. We did the ones we felt had a material effect and that were important to disclose to market.
Okay. We should not expect the same intensity of press releases.
I mean, we will. Whenever we think it's an important win, we will definitely always disclose it. Yeah.
Okay. Great. Let's stay in the European market. That's quite strong numbers. You mentioned in the report that you did the launch of the new TetraGraph in mid-March and it's going to be well-received.
Yes.
For customers.
Yeah, yeah, yeah. Europe last year, 2024, had a little bit of a slower year, tougher for capital. Perfectly on time, we launched the next gen mid-March. Now it is all CE MDR approved and ready for sale. In just two weeks, we shipped out a higher volume than we did in the full year of last year, classics. A very good start of the year, very strong positive momentum. In Europe, we have distributors that we work with and very positive response from them. I am actually very bullish for the European market this year versus last year.
When you say bullish, what time frame are we talking about?
I mean, of course, some of these that we shipped were direct to hospitals and some were demo units, which kind of affects a little bit of the average price point. I mean, the feedback we're seeing from our European partners, the opportunities out there, the ease of use, the ease of sale, and that we're coming out with something that the market really wants, I think, is encouraging for the year this year.
You see a sort of growing acceptance of your technology, EMG technology and its.
I would say so.
Voxis over EMG.
Yeah. I mean, EMG, the legacy technology, has a very strong foothold in the European market, but we're winning robotic surgery, laparoscopic surgery. We're winning these niche areas. The pediatric market is also important. We know guidelines are to come in Europe. I think we're strengthening and we're kind of winning after winning.
You just described the competition. Is it different compared to the U.S. market?
I mean, the same players are here as they are in the U.S., but I would say the European market is more integrated, more big tender-based. The type of technology that we are promoting is more offered as a package offering. If it is easier to buy a big integrated system and you check the box for an old legacy technology, that sometimes wins.
You're planning to launch the new TetraGraph version in Asian markets as well?
We are, yeah. We did a little bit of a pre-launch here in Q1 in Japan with extremely positive response. The formal launch will be happening in June. South Korea, an important market for us, is on track to follow. It's a little bit of timing on regulatory processes, but hoping for about Q3 time period.
Yeah. We saw really good sensor sales growth in the rest of the world. I guess it's.
Yeah, I can jump to that picture here. It is predominantly, yeah. The rest of the world region for us is Japan and South Korea. That's where we do the business predominantly. South Korea has, with the boost of local reimbursement for this and a very strong market penetration with our systems in Seoul and the big hospitals, it's really started to take off. In Japan, we have, as reported before, about 200 hospitals as customers. The integrated system that Fukuda markets is now doing very well. There we're simply supplying sensors and then invoicing them for the sensors as well as a royalty for their integrated modules.
Maybe the monitor launch now that you're about to do, we should expect perhaps to see a better footprint in the South Korean market than compared to the Japanese market.
I think the footprint will probably start faster in Japan. They are more into this kind of this type of niche technology, where in South Korea we have a strong penetration already with many, many hundreds of monitors. I think both markets will accept this very well, but Japan will be first.
Okay. Let's then jump to the cost side and the gross margin at least. You reported some improvements year over year. If you could comment, you have already mentioned that the tariffs might affect the gross margin, but you also have an exchange rate effect in the U.S.
Yeah, yeah. The dollar, which is an important currency for us, is hard to predict and hard to follow. I mean, the dollar affects us on the top line definitely, but it also affects us positively on the expense level. About half of our operating expenses are in U.S. dollars. There is an effect happening all the time. I don't want to speculate what's going to happen to the dollar remaining of the year. I mean, as is right now, we were able to keep our operating expenses in line with last year. There is a large currency effect. We did a little bit of a new, we introduced new bookkeeping principles. We moved a lot of the intercompany currency effects, which are non-cash flow related. We moved them down the P&L. This makes it a lot easier to follow our expenses.
There is quite a hit on how when the currencies change, there are bookings that change intercompany-wise, but we moved it to the financial level of the P&L.
That's good. I think it's easier to understand how your OpEx develops. You mentioned also that you might increase the sales force a bit more in the U.S. You're sticking to your previous guidance that you're with single digits.
Yes. The guidance remains both on top line and also on expense level. We said expense is going to potentially increase with a single digit, lower single digit over the year. This is despite, like I said before, major investments in our team. I'll show you a slide here on this. What we did during the first quarter is that we increased our production capacity in Uppsala, brought in more skilled operators. I expanded the U.S. commercial team, brought in more salespeople, divided into new regions. We created a new team, which is the medical affairs team, which is working to work with KOLs and drive studies. We're going to win this race by science. We're already well on that path.
The new manufacturing then capacity, how many instruments are you able to produce?
I mean, we have the ability to produce according to our five-year plan. Yeah, but I'm scaling it carefully in steps. We don't want to tie too much capital. I mean, a little bit of a negative effect on the Q1 report was we had a higher cash burn. That cash burn was because we built up some more inventory. We were just being ahead of the curve for U.S. changes. Since we had a lot of big sales to U.S. large hospital systems, they are not as good as paying as they should. They always pay, but it could take up to 85-90 days before they do. There's a pretty high increase in receivables during Q1. The last portion was we're continuing to drive innovation work. We have some very exciting things in the pipeline.
We are capitalizing those as part of our development efforts.
Yeah. Staying with the financing, you mentioned in the report that you have been looking at the SEK 75 million credit facility. You have on the balance sheet today about SEK 62 million cash.
Yeah. Yeah. We.
Should it be sufficient to drive you to positive cash flow? What is this?
Yeah. I mean, we did a directed shares issue Q3 last year. I was pretty clear in the press release that this is not enough money, but we want to take this in steps. We were looking at various kind of non-dilutive financing options. As time has progressed, terms have become a little bit more favorable. We have offers on the table. This is looking at right now a credit facility of around SEK 75 million. By bringing this in, this would give us enough capital to take the company to kind of the business plan and the cash flow profitability that we've announced.
How important is it for you to have a credit facility over a sort of a rights issue?
I think I want to be, I mean, the share price has taken definitely a hit in these kind of uncertain times. We think this is the best deal for the shareholders. We think the terms that are now being offered are getting more and more attractive. We think this is the best offer right now.
Okay. We will get a little bit more information during Q2 then, perhaps.
Yes, definitely. We'll come back to it. A little bit just comment on the shareholding while we're on that subject. Just an updated shareholding list. We've had some changes in our kind of top 10 shareholders. I would say that the top three remain strong. We've had some outflow. Handelsbanken Fonder has been selling. I think perhaps in a time of uncertainties, since Senzime has a high dependence on the U.S. market, we've had some movement in the shareholder base that has probably affected the share price negatively.
Yeah. You already mentioned that you're sticking to your financial goals, both the short and the long term. Maybe you can just remind us about the longer term financial goals.
I mean, the long-term goal of this company is to create a SEK 1 billion company with attractive profitability. I think we can do that by a high gross margin, a very fixed and controlled operating expense level, and by that having a nice profit margin. On the way to that goal, we've said we've indicated that we want to get to about SEK 300 million as a kind of a target number by next year. By this year, we're going to reach SEK 115-130. We need to grow this company at a very aggressive level. We need to pretty much double the business. That is why I said we open up the year according to plans.
Yeah. You feel confident about your financial guidance, even though the dollar has lost almost 15%?
Yeah. I mean, at least right now, if things change and we need to recalculate, we will announce that. For now, we are anticipating this.
I also have some questions from the investor audience that I received. One question is about the European market, where Bridion, a generic version of sugammadex, has been launched and how you see that affecting the demand for your products.
I mean, yes and no. I would say, I mean, in the U.S., the sugammadex, sugammadex is the reversal drug, which is used kind of in the end of part of surgery to help wake you up and make you spontaneously breathe again. There is a very clear kind of cost-benefit case because we can reduce the amount of drugs needed. Hopefully, you could drive it to spontaneous wake-up so you do not have to have any of these reversal drugs. While in Europe, the price of the drugs are now significantly lower because they are off-patent. That cost case. The importance here is making sure that you are dosing the patient right. There are numerous studies out there showing that people are getting overdosed because you do not know. You and I will have totally different doses of sugammadex or Bridion. Who wants to overdose a patient?
That is why as part of kind of the instructions for use of these drugs is that you carefully monitor the patient to make sure you can have the right dose. That is irrespective of the price point of the drug.
I also have a question about your adoption of artificial intelligence and what new possibilities it gives you.
Yeah, definitely. It's an interesting space. I mean, we introduced what we call adaptive intelligence, which is kind of a series of features to help guide and make the usage of this technology far more simple. We have some exciting things in the pipeline. This is always going to be we're helping, we're giving guidance. Whatever AI or things that we will bring in is more to help anesthesiologists and clinicians to make better decisions. We are not attempting to kind of take over or automate things. It's about making more informed decisions.
Perfect. Another question is about your acquisition of ExSpiron a couple of years ago or the ExSpiron system at least. I mean, what's going on with this?
I mean, yeah, it was acquired in 2022 in a time of pre-clinical guidelines, a little bit of post-COVID days. We were looking at that time, the company wanted to kind of broaden the portfolio. Then came the guidelines, full focus on the neuromuscular monitoring side of the business. It remains a small business. We've had some sales. We're selling to both research and also a few regular routine use clinical accounts in the U.S. So far, I don't really have the resources and the time and the effort to really target this. It is a little bit on a backburn. We're still defending the value of it. We made an intercompany write-down in the Q4 report. Longer term, I see that there are definite very exciting opportunities in this. There's a lot of IP and there's a lot of interesting technology that we can leverage from.
It's at the right time point.
It's not something you're about to sell to?
It's not on the radar. If somebody gave me an attractive offer, I would evaluate it. That is not the primary focus.
Okay. The last question is, I think it's quite good to summarize all this is that given the uncertainty in the U.S. market, what makes Senzime a compelling stock for investment, would you say?
Good question. Let me show a final slide here and try to summarize some key takeaways. I mean, Senzime, we're truly on this mission to make our technology standard of care in every operating room in the world. Behind all this is 40 years of long-term research. There are over 10,000 papers published on the area of neuromuscular block. We have been pioneering EMG, the new technology for this, and really driving a paradigm shift. So far, we have over 3,500 TetraGraph systems installed in operating rooms. It is driven by guidelines and very strong key opinion leader support. The total addressable market for this exceeds SEK 20 billion if it is fully penetrated in all operating rooms. We are penetrated right now in about 40 commercial markets, and we are growing at a speed of 94%.
We are on a path to really create a difference and join our mission because we're making a difference every day. We're getting closer to closer to a strong profitability in reaching our financial targets.
Perfect. Thank you so much, Dan.
Thank you.
Thank you for listening to this presentation.