Hello, and welcome to DNB Carnegie and this Q2 presentation with Senzime and its CEO Philip Siberg. My name is Klas Palin , and I will be hosting the Q&A session. First, we will listen to a Q2 presentation, and please go ahead, Philip, with the presentation.
Okay, thank you, Klas. Nice to be here on Link. Let's start by a little bit of a summary of the kind of the first six months of 2025. Good momentum. Sales grew in local currencies with 90%. Strong boost by our new next-gen TetraGraph and the disposable sensors, the TetraSens. If we look at currency adjusted or the actual currency, growth was 82%, and we reached just under SEK 50 million or SEK 49.2 million. Deliveries of sensors, which is the important KPI here for seeing recurring use, grew over 100%. The installed base of TetraGraph is now over 4,100. Gross margin over the first six months has actually increased, and that's despite some hits we're going to take in Q2, or that we did take in Q2. I'll come back to it because of currencies and the U.S. tolls.
Our operating expenses remain stable, pretty much in line with last year, and that is despite significant investments in our commercial team and continued investments in innovation and R&D. Our EBITDA improved over the first six months with 23%, which is really driven by increased sales. If we look at some snapshots here, if we look at our rolling sales, we're continuing to be in this hockey stick phase, where one of the main triggers was in 2023 when the U.S. and European guidelines came out, which recommend using objective neuromuscular monitoring on all patients undergoing anesthesia and receiving paralytic drugs. We're continuing to grow very nicely. If you look at the curve to the right, this is the momentum of each quarter.
We did have that dip in Q4 last year, which was predominantly related to the launch of our new next-gen system, which delayed deliveries a little bit into Q1 of this year. Looking at the installed base of TetraGraph units, the monitors, we had very strong deliveries in the second quarter. We shipped out 727 units, which was a strong number. If we look at the full year, we shipped out over 1,150 units. During the first six months, we shipped way farther than we did the full of 2024. Good momentum. Remember, the TetraGraph units are the drivers of the TetraSens sales, which is the disposable sensors. As said, they grew over 100%, so volumes are very strong. You can see a little bit of a bumpiness in the curve, which relates typically to hospital purchasing patterns. We're seeing a good underlying growth in procedures and in utilization rates.
If we look at our different markets, again, over the first six months, there's a nice growth in all regions. The currency did take effect. I'll come back to it further. If I look at all margins in all regions, you know, I'm very content with this. We had a very strong product mix during the quarter towards TetraGraph. Again, important for building the installed base in the market. The U.S., during the year, is now 72% of our business. Very strong and very strong dependence on the U.S. market. If we make a little bit of just sort of a snapshot in the U.S., I mean, about two years ago, we made a strong strategic focus. That's, you know, the U.S., the largest market in the world. That's really made us have their own focus.
If we look at what we've done over the last two years, we've quadrupled the business. In local currencies in the U.S., sales grew over 100% in Q2. We have now nearly 200 hospital systems as customers. Last year, we signed our first GPO agreement. I think more is to come. I'm seeing continued progression and growth in utilization rates, and the pipeline is very strong for the coming year. There was a strong installed base. We had a number of important key wins during the quarter. Not all of these were published. Just to name a few, we had a strong big deal up in the Pacific Northwest of 65 units. We installed 122 units at a major high-profile Northern California hospital system. We had two major wins in the Texas region. We shipped out to a university hospital system in the Southeast, which is a statewide hospital system.
We had more wins to the Veterans Affairs. We keep on winning U.S. government deals, and we also installed and delivered quite a few monitors up in the North Midwest area. If we have a look at a little bit, if we move down the profit and loss here, let's look a little bit about the gross margin. We did take a little bit of a hit in the second quarter. If we look at the reported Q2 gross margin, it was 61.7%. The new U.S. tariff effect was 1.5% of that. There was a couple of one-time hits. The tariff was a little bit higher in the beginning of the quarter, but then flattened out to 10%.
On top of that, we did some on-purpose replacements of older TetraGraph to key accounts where we replaced units free of charge, which took a hit for the quarter of 1.6% on the gross margin. The strong Swedish krona hit the gross margin was 3.2%, and then there were some other one-time hits of 0.4%. The underlying adjusted gross margin was 68.4%. We are, as said, the year-to-date gross margin is better than last year. The driver of that is really the next-gen TetraGraph, which has a more favorable production cost. We are working in parallel to raise prices in the U.S. to stabilize versus the tariffs. I foresee that that's going to get, it will be more visible into our numbers later on this year and next year. Moving down again, the profit and loss.
If we look at our operating expenses, we've had a very clear strategy to try to keep the operating expenses as stable as possible. What Senzime is all about is growing this with hypergrowth, keeping a good stable gross margin, and then keeping a fixed cost base. I think we kept that as well, and we're relatively flat if we look at the first six months versus last year. That is, again, despite significant investments in the market. We're also moving towards profitability. The EBITDA in the second quarter increased, or the negative loss moved in a favorable manner. It was 18% better, and also was cash flow better. We're working a lot with the working capital. By the end of the quarter, we had SEK 132 million in cash in the bank.
That excludes, we have some more money coming in from the directed share issue we did, and we have additional funds coming in from a directed share issue we did last year. That was a very important milestone of the quarter, the directed share issue. We raised SEK 110.4 million in an issue that was done at market price with strong interest. It was oversubscribed. We brought in a number of new investors, as well as continued strong commitment from existing investors. Among the new ones was Unionen, the large Swedish trade union. ShapeQ is a German investment company, and Protean Funds, which is a very strong, very successful Swedish fund manager. The continued strong support is also very favorable from the Crafoord family and the foundation, from Segulah , from Swedbank, and many others who supported us.
This funding really has the prerequisites to take the company to positive cash flow. A brief on the shareholding update. The strong change here is that the main shareholders continue to be strong. I think the significant change from, if we look at the last couple of quarters, is that Handelsbanken Fonder, which has been a main shareholder, has now exited, and only has a small stake in a small fund. Two other events that happened during the quarter: it was a pre-announcement of the European guidelines for pediatric patients. At the European Society of Anesthesia that was held in Lisbon, there was a pre-announcement done that children, who account for about 10% of the total market for paralytic drugs and use of this, they are typically very lack of monitoring.
Research has shown that about 40% of these patients leave the operating room still partly paralyzed and then are prone to post-operative complications. There's been a lack of good technology to be able to monitor children, but with the technology we have, the electromyography, EMG, it opens to totally new opportunities. The pre-announcement stated that EMG, which is our technology, is going to be the preferred choice and will be part of the guidelines that will be finalized and published later after summer this year. I think this has the building blocks to help really grow our pediatric business as well. Another important news announcement we did was expansion of the partnership with Fukuda Denshi. Fukuda is a large Japanese patient monitoring company.
They have an exclusive license agreement for us on the Japanese market where they sell our portable unit, but they also have an integrated module that plugs into their line of patient monitors in the operating room. They now received additional market clearances for the U.K. market and for the U.S. market. We are going to jointly work to commercialize our module through their channels. In the U.S., we will do it via our own sales team, and in the U.K., we will do it in partnership with our local distributor. This opened up for us for additional sensor sales and additional royalty revenues, which is the business model we have with Fukuda.
To summarize kind of the key takeaways of this and the Q2 in the first half year, I think we are a company in a hypergrowth phase, 90% growth in local currencies, OpEx remaining stable, and improving the EBITDA. We are winning big. I mean, there's a huge demand for our next-gen TetraGraph system, very well received in the markets. I see that because of the simplicity of our technology, we're truly expanding the market opportunity. We're making our advanced technology available to every single hospital in the world. I think we're winning contracts also based on our focus investments in the U.S. market, as well as in Germany with our distributors and in the Asian region. The building blocks are in place. We have the guidelines. There are more guidelines to come. We're backed by long-term research and a very strong clinical need for this.
Now we have the clinical and the cash and the funding to succeed with our business plan. That was a summary. Join us as we transform perioperative care and make sure that nobody leaves the operating room with any type of complications. Thank you.
Okay, thank you so much, Philip, for the presentation. Maybe we can have some additional discussions about the U.S. market where you perform very, very strongly again. How would you categorize the U.S. market right now? Do you feel it's still a very strong demand for your products out there?
I think there is an unchanged, very strong underlying demand for our products. Hospitals are still working to get guideline compliant. When guidelines come out, there is definitely a rubber band effect where it takes time for them to comply. We're seeing the drive from the hospitals from various perspectives. One is simply being guideline compliant. The other one is helping to reduce drug costs. Since we're monitoring the effects and making sure that you have the right dose of these paralytic drugs, it's very clear now that we can prove that by using our technology, you can reduce the amount of these expensive drugs. There is a case from the pharma departments of the hospitals who see a quite immediate return on investment by doing the investments in our technology. The third is that the underlying demand and the patient volumes continue to be strong.
Continue to be very biased and very positive for the U.S. market.
Yeah. You also mentioned in your CEO word that deals are being made even faster. Could you describe a little bit more what you mean by that?
I would say as we started and entered the U.S. market, it came in with a novel technology. The sales cycles could be up to 24 months. They have continuously reduced in time, and we've now had a number of deals and wins where there was no longer a need for clinical evaluations. The value committee part of the sales process was very quick. Hospitals are more relying on references and what's out there. We can move down to the timings of three to six months to win hospital systems. There's quite a change happening in our favor in the market.
You had recorded a very nice shipping during Q2, 727 units, but you also mentioned that perhaps some of these were replacements. Is it possible to give some sort of a sense how much the replacement was?
Yeah, I mean, there was a small part of these that were replacements. We decided that some of our key accounts who have been using our classic or older generation monitor, that we should swap them because either they were under a placement agreement or for other reasons we decided it was changed. That was part of the shipments. We're also doing it with the rationale that we believe that the new monitor has a higher utilization drive. Because of the simplicity of using it, we're seeing that the usage rate is higher. By swapping some of these units, it's going to ultimately drive sensor sales in our favor.
Would this replacement cycle continue into the next coming quarters as well?
Not with significance, no.
Okay. Looking at the sensor sales, it was more or less flat in numbers compared to Q1. I guess there are lots of variation month to month, but are you satisfied with the utilization rate, how that develops?
Yes, it was a little bit flat towards Q1. It was very strong if we look at in the broader perspective, and as I showed, you know, it's sensor sales versus last year is doubling. There is always a little bit of a monthly, quarterly effect where orders come in depending on month and then closing. I'm not concerned in any way. I'm seeing, again, strong underlying utilization growth. We're seeing that the accounts that we monitored last year, you know, were up to double the amount of utilization. I mentioned one of the finer big, large university accounts in Germany that we have, you know, they're trading now at roughly seven patients a week. They just came back from the U.S. this week where we were also deep diving into the larger U.S. accounts, and we're seeing similar patterns in the large U.S.
hospital systems where utilization is really growing. That is a function of compliance. It's becoming standard of care, and it's clearly a protocolized monitoring technique within the hospital.
Switching to the European market and perhaps the rest of the world also, you sound quite positive about the development, but you don't see actually a large uptick in sales yet. What should we expect when it comes to these markets?
I think we, as I've said before, the markets are a little bit different. They're dominated by legacy technology that is already on the market. It's more a replacing analog to digital, and we're doing that really operating room by operating room. In Q1, we introduced the next-gen TetraGraph in Europe with immediate strong sales in March when we released it. A lot of units are now out for evaluations and in clinical trials. I think we're going to see strong effects of that. We're really focusing our distribution work to work with a few of them that typically dominate 90% of our business. We're seeing that this conversion is happening. We're really following one-to-one with the robotic surgery industry. That continues to be our strongest, we're told. Also saying that once we're in there, it leaks to the other operating rooms.
I just think that the U.S. continues to be a more rapid growth market where we are right now, and Europe and Asia will come to the same extent, slightly behind the curve.
Are you satisfied with the work that your distributors are doing in Europe?
I am. They are doing a good job. The European market is a little bit different, long sales cycles as well. Often it's tender-based. I'm quite satisfied with the results we had despite that we just launched it. Typically the sales cycles will be nine to 15 months as well in Europe before we're really seeing the momentum.
During Q2, your Japanese partner, Fukuda , got their systems approved in the U.S. as well. Do you expect this to have any material impact short term, or is it just positive from the longer term perspective?
I think it has more kind of a midterm. Fukuda is a very strong player in Asia, not as strong in their market shares in the U.K. and the U.S., but they do have a market. They've been very successful in Japan in selling the module that basically can place in as an accessory to the installed base. There had been strong market demand despite them not even launching this yet. I think we're going to pretty quickly see this module coming out in the U.S. and U.K. I think the true volumes will wait a little bit, but it opens up a good door for us.
Do they disclose the customers they have in the U.S. to you?
Yes, they do. We work together.
Yeah, perfect. Sounds good. Jumping to the gross margin, as you mentioned, it was affected by a numerous one-time issue, or at least sort of. You also mentioned that a way to improve the gross margin going forward would be through price hikes. Is it possible to give some sort of a detail what you're seeing?
We're in discussions with a lot of our hospital accounts where we have pricing agreements to add a little bit of an amendment for the tariffs. Hospitals have not, in general, if you look at our U.S. operating room, about 70% of all products in an operating room are made in China. In the anesthesia world, everybody is very dependent on Asia and on exports. There's quite a strong industry push for we need to adjust the pricing to settle for the tariff effects. Hospitals are understanding this, and ultimately, it's going to be the patients that pay for this. We have good dialogue with our main customers. We see that they are accepting an adjustment in the pricing. We have one finalized agreement where we have adjusted up the pricing. I foresee that we're going to see the effects of this in the coming quarters.
And such.
I hope this will ultimately stabilize the currency effects. That's what we also announced during the quarter, that the effects of this are ± 1% or ±2% on the gross margin. I think we will be able to see kind of neutral effects in the long term.
Would that be primarily sensors or?
Primarily sensors, yes.
Okay, great. In the report, you mentioned that you have increased your production capacity because of the strong demand. Could you say anything more? Have you made all the investments yet for this?
We brought in, you know, there's a full-blown speed in the production. We produced this year more than we've ever done in a year. It's just, you know, the underlying demand is strong. We have a very sustainable and scalable production model in our in-house offices in Uppsala. We can bring in capacity and very quickly expand up and down as demand fluctuates. Now we have the capacity, and we have the capacity to meet the business plan over the next five years.
Perfect. Maybe we could, in the final stage of this, have a discussion about your outlook guidance going forward. Do you feel confidence in what you have said before?
We do, absolutely. I mean, what concerns me the most is the currency effects here. As you saw in the report, the U.S. dollar does take a hit. It affects us both top line, gross margin, and of course the operating expenses as well. We remain confident that we can stay within our guidance for the year. If we look at where we are towards the guidance, we've come about halfway. I think, you know, with continued quarter- over -quarter growth and momentum and underlying kind of recurring business and a lot of the wins that we announced this year, I feel confident that we can reach the presented guidance.
Okay, sounds very good. That was all for me, but thank you so much for the interview.
Thank you very much. Nice to meet you.
Thanks.