Welcome to the conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.
Good afternoon, everyone, and thank you for joining Stille's first quarterly conference call. My name is Ulrik Berthelsen, and I'm the Group CEO of Stille. I'm joined today by our Group CFO, Niklas Tyrén, who will take you through the financial overview shortly. I will start with the key highlights for the quarter and provide an update on the development of the business. Overall, we are pleased with the start of the year. In the first quarter, we delivered strong top-line development with revenue growing to SEK 179 million, corresponding to 39% growth, and organically, a growth of 19%. This reflects a strong underlying demand as well as improved execution across the business. We also saw a positive development in profitability with an increase in EBIT margin compared to last year, achieving 16.7%. This is encouraging and reflects both operational progress as well as good contribution across the portfolio.
If we look at the business more broadly across our two different business areas, we saw good performance across both surgical instruments and surgical tables. In surgical instruments, we continue to see solid momentum and demand across our core markets. At the same time, surgical tables also delivered solid numbers in the quarter, continuing the positive trend that we saw in Q4. This reflects good demand for especially imagiQ3 and a continued focus on commercial execution. This gives us a nice and balanced performance across the group, which is important both from a growth and profitability perspective. Surgical Holdings also contributed well to the growth during the quarter, and it's really encouraging to see the momentum at this early stage and also supports the strategic rationale for the acquisition that we made late last summer. Finally, and importantly, we are seeing clear signs of progress in our operational performance.
As you know, 2025 was characterized by challenges within the supply chain and delivery performance for surgical instruments. In Q1, we are seeing clear positive momentum. Delivery performance is improving, and we are making steady progress in strengthening our operational processes. In conclusion, we've had a strong start to the year with good performance across the business and continued progress on our key priorities. Now, let me briefly build on the operational progress behind the development in the quarter. We have strengthened the group structure and capabilities substantially with bringing in a new CFO and COO at the beginning of this year, as well as other key resources to improve the scalability of the business. I'm pleased with the continued professionalization of the group that we're seeing.
As we have talked about, 2025 was characterized by some challenges, particularly within the supply chain as well as our delivery performance. This is really a key priority for us to resolve to better be able to support our customers on time. In Q1, we're seeing clear signs of improvement. Delivery performance is improving, and we are making steady progress in strengthening our operational processes. That both includes planning, coordination with suppliers, as well as the overall efficiency of the organization. The results reflect a strong underlying demand and improved delivery performance while backorder levels remain elevated and continue to be an area of focus. While we're not where we ultimately want to be, the direction is clear, and we are seeing the benefits of the actions that we've taken previously.
We've also scaled the production of surgical tables to meet future growth and also make sure that we can respond swiftly to market demand. In summary, we are encouraged by the progress we're making across both operations and the commercial side of the business. With that, I will hand over to Niklas, who will take you through the financials in more detail.
Thank you, Ulrik. I will briefly comment on the financial development for the quarter. If we start with top line, we saw a strong revenue development in the quarter with a total revenue of SEK 179 million, corresponding to growth of 39% compared to the same period last year. This development was supported by strong organic growth of 19%, as well as the contribution from Surgical Holdings. At the same time, this reported growth should be seen in the light of a weaker SEK compared to the same period last year. While the SEK has strengthened during the quarter somewhat, it was still 14% weaker against the U.S. dollar of last year and 5% weaker against the euro. In constant currencies, this growth corresponds to 47% for the total and organic growth of 27%.
If we move on to profitability, we can start looking at the gross profit, where the gross margin was slightly down in the quarter at 49.1% compared to 51.1% in the same period last year. The lower gross margin reflects partly the integration of Surgical Holdings, but also currency headwinds as previously mentioned. This was then partly offset by operational improvements and positive segment mix. EBITDA increased by 53% and EBIT by 68%, with margin expansion on both levels. EBIT margin improved by 2.9 percentage points and by 3.6 percentage points organically. This reflects a combination of improved operational efficiency, a favorable mix, and continued focus on execution across the business. We also continue to maintain a disciplined approach to cost, while at the same time supporting the development of the business.
As mentioned, we saw some impact from external factors, including currency headwinds and U.S. tariffs, and this partly offset the underlying improvement. Moving on to how it looks in the business segments. Both segments delivered strong sales growth and margin expansion despite currency headwinds. Instruments had a total sales growth of 41% and a year-on-year EBIT margin improvement of 1.4 percentage points. Organically, sales growth was 15% and the year-on-year EBIT margin improvement was 2.7 percentage points. The other segment tables had a sales growth of 30% and a year-on-year margin improvement of 7.4 percentage points, and we're happy to see a strength in profitability for the surgical tables business. Finally, moving on to the financial position. We continue to maintain a healthy financial position, which gives us financial flexibility to further evolve the group and pursue selective acquisitions as opportunities arise.
Cash flow from operating activities in the quarter was SEK 28 million, compared to SEK 14 million in Q1 of 2025. The year-on-year improvement here is primarily driven by the profit uplift with marginal changes in working capital. This cash flow led us to a net debt to EBITDA ratio at the end of the quarter of -0.1. Overall, we are pleased with the strong financial development in the quarter. With that, I hand back to you, Ulrik.
Thank you, Niklas. To conclude, we are pleased with the good start to the year and the progress that we are seeing across the business. We are seeing encouraging development both commercially and operationally, including improved performance compared to the challenges we faced in 2025 on the delivery side, supply chain side. The acquisition of Surgical Holdings last summer is contributing well to accelerating sales in the U.K., and we see further potential to strengthen our position in the U.K. market with the direct sales setup we have. We are implementing a series of operational improvements that we expect to take effect during 2026, helping us further solidify the momentum we have. With a clear focus on execution, we believe we can continue to drive organic growth for both surgical instruments and surgical tables.
M&A remains an important part of our strategy to complement the organic growth and further evolve the group. As we've talked about previously, we have strengthened the group lately, and with a strong financial position, we are ready to further evolve the group also with M&A. With that, we are happy to take your questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Filip Einarsson from Redeye. Please go ahead.
Hello, everybody. To start things off, congratulations to a solid quarter. My first question relates to sales, and more specifically on the surgical instrument side. It grew 15% organically with the improvement in the supply chain. Maybe you could elaborate a little bit of how much of that reflects backlog unwinding versus underlying demand, and also maybe a comment on when you expect the backlog to be fully normalized.
Absolutely. Thank you for your question, Filip. In terms of the sales growth that we're seeing on surgical instruments, it first and foremost reflects meeting the demand that we're seeing from our customers. Last year, at the same time period, we had a hard time keeping up. This year, we are meeting the demand with an improved delivery performance. That is the primary thing. When we then talk regarding the backorder, we are seeing some improvements on this. The primary reflection of our sales performance is meeting the demand that we are seeing during the quarter. As I mentioned previously, we remain with elevated backorder levels that we expect to gradually reduce during 2026.
Right. A short follow-up to that then as well would be, Q1 was quite a step up compared to Q1 last year. Would you say this current revenue run rate should be considered the new baseline?
Yeah, thanks. Just on that note, I think clearly when we look at Q1, we had a very high growth rate. The 39% growth rate we mentioned reflects a relatively soft quarter last year, combined then also with the acquisition of Surgical Holdings. If we look at it more with an absolute level, we think this is a strong start to the year, as we also put it in our press release. We believe that we can continue to deliver on a strong level when all stars align, and also that we had a strong contribution from the surgical tables business this quarter that, given the nature of it, tends to be a little bit more volatile.
Right. I'm also trying to grasp the supply chain disruption situation, just looking back at it. Maybe you could elaborate a little bit on if this was concentrated around the specific few suppliers or more broader in nature.
The supply chain situation that we had, I think, was a reflection on our internal planning and the forecasting ability and the partnership we both have with our suppliers, as well as our internal production set up. When you look at it going forward, it is across many of the brands, and therefore, of course, that's also why it has taken us a bit of time to resolve. That also means that this will be a gradual reduction, as we have talked about, where we will see a full normalization of delivery times here during the first half of 2026, and then gradual decline of the backorder as well.
Right. Got it. My next one relates to the gross margin profile of Q1, and I'm thinking with the non-strategic product phase-out now being complete as of Q1, one could have maybe expected that the gross margins would be higher than it actually was. Maybe you could provide some color on the margin profile and trajectory moving forward.
Well, the gross margin, obviously there are a lot of moving pieces impacting gross margin. Looking at the levels we have in Q1 of this year is reflective of our current portfolio, and given the fact that exchange rates look the way they do now. I think that is a level that we can expect. Obviously, moving forward, on the long term, we will see opportunities of growing the gross margin as the business scales and we find more pockets of efficiency across the different business lines.
Right. I have two more, if that's okay, if I may.
Sure.
Given your efforts of increasing the after-market business of your offering, maybe you could help us understand a little bit the profitability levels of the after-market service compared to instrument sales?
The after-market service basically would be a repair and refurbishment of instruments. That is an important part of the business, yet a relatively small part of it. When you look at it for us, the way we see the business is that this is first and foremost an enabler and a customer service. When you sell a high-quality premium instrument, we want to make sure that product is well catered for and being serviced optimally for the customer. In terms of the overall gross margin for that business, that is not material in the impact on the business as a whole. What this reflects, again, what Niklas was saying, is basically the business mix as it looks today in terms of what we sell of our own products, what we distribute for some, as well as the mix between the business areas and the current FX landscape.
Okay. That's helpful. My last one. You maintain a net cash position and also in the report flagged readiness for selective M&A. I understand you don't want to be too transparent here, but maybe you could provide some context on the target profile you're looking at. Could it be direct sales channels in new geographies, or is it complementary product portfolios, or are you looking at both, or what can you give us?
Sure. Of course, you're right here, Filip. There's a limit to how precise we can be in answering this. We are first and foremost, looking at businesses that are complementary, where we can see some synergies with the business we have today, being that commercially or being that more from an operational standpoint. We like building on what made us successful so far. That means businesses that operate with high-quality premium products in niche segments and surgical specialties. In terms of the direct channel and more catering to customers directly, this is something we have spoken about also in the past, that we do see an increase in direct sales over time for the Stille group. I think we're really learning a lot also from having Surgical Holdings as part of the group, that this brings a number of benefits for us.
Definitely, direct sales is something we see as being an attractive part.
Okay, that's clear. Maybe just a very short follow-up then, and I hope you can answer it, but maybe not. I'm sure many of us are wondering if we should expect something along these lines to happen during 2026. What would you answer to that question?
Yeah. Unfortunately, I cannot go into too many details on timing. That depends on many things. I think the more you can be sure about the direction that we're taking, and again, that M&A activities is a fundamental part of our strategy.
Okay. That was all for me. Thanks a lot. I'll get back into the queue.
Super. Thanks, Filip.
The next question comes from Christian Lee from Pareto Securities. Please go ahead.
Thank you, Ulrik and Niklas. Congrats on a solid quarter. I have a couple of questions, please. Your order backlog is still above normal levels. Does this apply to both instruments and tables?
The order backlog that we are referring to, and we also commented extensively on during 2025, is for surgical instruments. There we have seen challenges in meeting demand. In surgical tables, we are in a solid position. We have seen strong sales in Q4. We have seen strong sales here in the first quarter of 2026, and we are satisfied with the position we are at in terms of being ready to meet customer demand. We do not experience extended delivery times or back orders for tables at the moment.
Okay, great. How sustainable is the current demand for imagiQ3? Are you gaining share or seeing a broader market uplift?
The table business behaves slightly different than the instrument business. Because it's capital equipment, it is more volatile and more affected also by other more macroeconomic trends. What we are seeing is solid demand in both North America and the rest of the world. That really reflects, I think, a good, strong product portfolio led with imagiQ3, but also for Medstone, we're seeing good demand and then strong commercial execution. Again, based on the Q4 and the Q1, we are seeing positive momentum that we expect to continue. Again, given the nature of the business, it might display slightly higher volatility, but we are encouraged with the positive momentum that we're seeing.
Okay, great. Thank you. You seem upbeat about the direct sales approach in the U.K. and the opportunities it opens up. Do you see any potential to replicate this model to other regions?
We, up until now, have been mainly selling direct in Sweden and then having different sort of hybrid models with agents and partnerships in some countries and otherwise distributors in others. The direct sales model definitely has its advantages for us. One thing is sort of a larger share of the value pool. Equally important is the ability to really drive demand and interact more directly with our customers. That is something we see potential for also looking at in other markets. Again, I think we're learning a lot from what we're seeing in the U.K. Based on that, we will also be evaluating how we, over time, can go direct in more markets. This will be a selective approach, market by market, based on the opportunities that we see.
Okay, great. Thank you. That's all for me.
Thanks, Christian.
Okay. We move over to some text questions that we received. The first being: Can you elaborate on the EBIT margin for instruments? Pre-Surgical Holdings instruments did 22%-25% EBIT with stability. Do you see yourselves coming back to those levels? On that, I think we've talked already quite extensively on the facts that are impacting our gross margin with FX and the acquisition impact that we've seen since the acquisition of Surgical Holdings. The future will obviously depend on similar factors, where FX is moving and our continued M&A journey that we just talked about. Having said that, we do see opportunities to improve as the business scales further. Also as we just talked about, if we move towards more direct sales, there should be opportunities to improve the margin.
We also have a question here regarding the tables' EBIT margin. The question is basically, the tables had a good quarter in terms of growth, but the EBIT margin is only reaching 10%. Will the table business ever be able to reach the same level as instruments? Here, I think the short answer is it's unlikely that we will reach the same gross margin, sorry, the same EBIT margin as for the surgical instruments, simply because of the nature of the business. When we look at surgical tables, it is a capital equipment business, and that behaves slightly different than the surgical instruments. With that said, we do believe that there is opportunity to further improve this with scale, and also of course, depending on what happens with the development in FX.
We have a quite considerable part of our business in North America that has been impacted by the recent FX development. There also was a further question, we have touched a little bit upon it, but how much of the organic growth in Q1 comes from delivering old orders on top of the underlying demand? Here, essentially, I would go back to what I said previously, that the primary growth driver here has been delivering on the underlying demand. Again, we were up against a relatively weak quarter last year, where we were not able to meet demand and therefore accumulated back orders. This year we are meeting demand, and then we're seeing a slight reduction in the back order levels. It's primarily, again, about meeting the demand. We also, on the same note, had a comment here that the organic momentum seems impressive.
If we can elaborate on how much of the order intake grew in the quarter. If it's fair to assume that Q1 order intake grew in line with our organic target of 10%. Again, I would sort of go back to what I just said, that we are delivering on the underlying demand, and we are seeing solid development of the incoming orders. We do not disclose exact numbers for how much that is. Again, strong development of the underlying demand, and we are positive about that momentum. That also means that as we spoke earlier about regarding the back order or order book, that yes, that is still elevated and we have a number of back orders on surgical instruments that we are looking to deliver on.
We have a question on gross margin. Gross margin took a step down here in the quarter, both year on year and compared to the Q4 level, and what is driving that, any temporary effects impacting this quarter? As I mentioned before, the main driver versus last year is the FX impact that we have. The first quarter of 2025 saw the top levels of the U.S. dollar, and that's what we're up against in this quarter. That is a contributing factor, and also as we mentioned, the impact from the acquisition.
We have a question here where we reflect on that we mentioned implementing operational improvements and if these will incur any non-recurring costs in the coming quarters. The short answer is that no, we do not expect that at this point in time. There was also a question regarding Surgical Holdings, how that has developed. As we commented on, it is basically just very positive. That has definitely been a strong acquisition for us, and we're excited about how it looks for the future. All right. I think those are the key questions that we have covered now.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
I would just say thank you everybody for participating. Thanks for some good questions. If there was anything we didn't cover, you're certainly welcome to reach out to us. We remain available and thanks for good discussion. We will repeat this setup also for the coming.