Gustaf Meyer: Hi, everyone. Welcome to Redeye and today's live Q with Senzime. My name is Gustaf Meyer. I work as an Equity Research Analyst here at Redeye. Today, as I mentioned, Senzime will do a presentation first with the CEO, Philip Siberg, and then after that, we will have a Q&A session. Remember that you can send in your questions on our website for the Q&A session. Let's start with the presentation with Philip.
Philip Siberg: Good morning, and welcome to this presentation of the Q3 report for Senzime. Just as a little recap starter, Senzime, we are a medical device company. We are pioneers in the field of precision-based patient monitoring. Specifically what we do is what we have developed, and we have been pioneers in the field of neuromuscular monitoring.
Philip Siberg: We brought to market the TetraGraph. It is the world's first portable electromyography-based system. It is used by anesthesia clinicians to ensure the right timing of intubation, to ensure that every patient gets the right dose of paralytic drugs during surgery, and that each patient can wake up and breathe by themselves after surgery.
Philip Siberg: My phenomenal team has brought this system to the global market. As of now, we have about 6,000 systems delivered out to operating rooms around the world. The opportunity is far beyond 400,000 operating rooms.
Philip Siberg: We have about 800 hospitals in about 30 markets. By now, we have monitored over 1.3 million patients. Our business model is based on recurring revenues of sensors, and selling and placing monitors.
Philip Siberg: Today, about 80% of our business is recurring sales of disposable sensors. Last year, we did about SEK 100 million in sales. Since the market normalized after COVID, we have had an annualized growth rate of an average of 95% per year. To support our technology, we have a strong patent portfolio of about 109 patents. Let us look a little bit at Q3. Q3, I think, was a pretty good quarter. We reported growth in all our regions around the world. We regained growth and grew 14%. Specifically, what is important is that the disposables, the sensors, grew 43%. Our gross margin increased to 74% versus 61% last year. I will come back to this.
Philip Siberg: We continued to decrease our operating expenses. They were down by 15%, which led to ultimately our EBITDA moving in a very nice consecutive manner towards profitability. In September, we were almost breakeven. The cash flow also improved significantly, thanks to this. We disclosed to market that we once again have secured the financing needed to take us to long-term profitability. Let us look at some numbers. Let us start out looking at the sensors. As I said, the sensors continued to grow very nicely. We shipped out over 130,000 sensors in the quarter. If you look at the trailing rolling 12 months, the growth rate is 53%. If you look at the install base, how are we doing with the systems in the market? I want to continue to track this KPI to the market going forward and looking specifically at US accounts.
Philip Siberg: This is where we can control the business, and we are very close to our customers. If you look at the key accounts, which contribute to about 90% of the volume, you can see that the weekly average utilization rate continues to increase. If you look at over this year, it has actually grown by 60%. This is thanks to meticulous hard work. We are supporting our customers, we are training, we are providing them the tools, analytics, and various types of services to help them standardize their technology. What the utilization means here, it is the number of TetraSens sensors used per monitor and week. We still have a significant opportunity to grow this, but we are moving very nicely in the right direction.
Philip Siberg: If you want to look at one specific US case study, this was a study that was presented about two weeks ago at the big anesthesiology congress in the US. This is one of our customers. This is University of Miami, the big hospital system. They have been users and customers of ours since about 2023. What they reported here is that they have had a very interesting increase in utilization over time. What happened was that in mid-2025, we upgraded to the next generation TetraGraph, our current state-of-the-art monitor. That, including that the hospital system institutionalized or protocolized the usage of our products, really made them to the next level. Now today, they are at about 80% utilization rate. The right technology, the right supporting protocols, and the support from us and the clinicians, that is what drives up this usage.
Philip Siberg: One more number on utilization. Look at pediatrics. I reported this a couple of times, that there were European guidelines published that specifically talk about children, specifically talk about when they get paralytic drugs, they need to be monitored. These guidelines state that they should be using electromyography-based technology. When the guidelines were first announced about last summer, we saw an interesting kind of change in the growth trajectory curve. We went from a constant growth rate, and then suddenly the growth rate doubled. I am seeing that we are kind of winning and attracting pediatric hospitals around the world right now. Let us just look at three main events during the quarter. We started in mid-July. We announced the Philips OEM/commercial partnership. This is a landmark agreement for Senzime. It is the biggest and most important partnership we have signed so far.
Philip Siberg: I have educated the market a little bit about this before, but what we are doing, we are co-developing, we are going to co-commercialize, and this is something that will scale the business of Senzime to a next level. Further, a couple of weeks later, we announced that we were awarded a sole source agreement from the U.S. Veterans Affairs. It is a five-year agreement. The U.S. Veterans Affairs is the largest U.S. hospital system with over 170 hospitals. Then we have continued throughout the quarter to win and secure more hospital contracts. We announced one of these, which is a major system in the eastern part of the U.S., and there we deployed 60 TetraGraph systems. This was just one of many opportunities. Let us look at overall sales. As I said, we are back to growth. We are growing in all regions.
Philip Siberg: The growth rate for the sensors was 43%, so that offset a weaker number, which was monitor sales. Monitor sales continue to have a little bit of a tougher year, specifically in the U.S. market. We are just seeing, like I reported in Q1, Q2, that it takes time to close the deals. I feel that the catch-up effect is coming. I feel we are increasing the opportunity to close the pipeline. We have a partly new leadership team in the U.S. that is doing a phenomenal job, and I am very positive about the outcome for the U.S. market. The important thing is here that if you look at the product mix of our company right now, in Q3, the sensors accounted for 83% of our business. We are building a very strong recurring revenue base in this company. U.S.
Philip Siberg: continues to be the strong driver with 70% of the business. Okay, let us look at the gross margin. As I said, it grew very nicely. It reached 74%. I think this is a new record level. It is up 13 percentage points from the same quarter last year. The improvement here comes from various sources. One is new products. I announced earlier in the year that we moved production. We redesigned our sensors. We now have a partly European-based operation, so that has really given us more favorable unit economics. We also have a nice product market mix with a heavyweight on sensors, and we were boosted a little bit from tariffs. As you can see, the 74% was the reported gross margin number. 73.2% is the green number to the right, which is if I net it from U.S. tariffs.
Philip Siberg: We had a repayment of $160,000, but we also had a number of payments that we actually paid in tariffs. I would say that the normalized gross margin level is probably 71%, 72%, but it continues to increase. This is what I have communicated constantly in the past, that we are driving innovation, we are working with pricing levels, and we are doing things to really drive up our gross margin to be in excess of 70%. Then let us look at the operating expense level. We have, this year, really worked hard. We have a meticulous cost control. We have lowered our operating expense level with 15% if I compare to the Q3 number last year. If I look at specifically at Q3, this is about SEK 6 million. We have reduced headcount. We have focused more into the commercial sector.
Philip Siberg: We are using AI, which is making productivity enhancements within specifically our technology team, and we just have a lower cost base level to the product. If I translate this to what does this mean with the sales, with the gross profit, and then the OPEX, okay, EBITDA, as I showed before, it is a nice trend. It is moving favorably month by month, and we are moving towards profitability. We also internally report how are we doing from a profitability point of view in our U.S. market and in our German market, which are separate entities, and both of them reported non-allocated head office expenses, but they reported EBITDA positive numbers. The Q3 EBITDA improved by 59%, and it is quite a difference where we are -8 million versus -19.4 last year. How does this transfer then into cash flow? Cash flow has also improved quarter over quarter.
Philip Siberg: It is actually improved by 70%, so the burn rate of the quarter was -SEK 8.7 million versus SEK 28.3 million last year. This is a major improvement, I would say. The improvement here is from increased sales, improved gross margin, reduced expenses, but also working a lot with our working capital. So we are optimizing, we are getting our inventory to move faster. We are getting our customers to pay us faster as well. Just look a little bit on the financing. We did report during the quarter that we refinanced our loan package. So what we have is a SEK 35 million credit line, which is provided by predominantly the Segulah Group and the Crafoord Group. We renegotiated it during the quarter to get a little bit better interest rate, and we extended it in time as well.
Philip Siberg: This facility I can call upon as needed, and it is a very smart way for the company to use as working capital needs are on. So we had SEK 28.7 million in cash at the end of the quarter. Then on top of that, we have the SEK 35 million in the credit line. So we have SEK 63.7 million in available funding. So it is important to kind of emphasize that we have the capital needed to take us to profitability. We also reiterated a few weeks ago that we still believe we are on path to reach positive cash flow within Q4. Okay, just to get an update on the shareholder base. There has been a lot of trading going on in our share during Q3. If you look at it from the top, a company like ours is constantly under restricted trading. There is always a logbook.
Philip Siberg: There is always something going on that restricts insiders from trading. But in these few spots, we had a couple of insiders that increased their share. But we also have a pretty massive outflow from two of our funds, the TIN Ny Teknik and also Lannebo Fonder. I think there was a couple of million shares that were flooded into the market, and this really were difficult to catch up by buyers. But all in all, we continue to have very strong support from our top 10 shareholders. Okay, to wrap up Q3 with three takeaways. One, our recurring revenues continue to grow very nicely. 43% growth in sensors. We are proving that the installed base is generating recurring revenues. Two, the operating model of our business is proving that it is scalable and that we are moving towards profitability.
Philip Siberg: Number three, we are very well positioned to leverage on the next level of growth. We are going to do that by continued market adoption, but also working with leading OEM partners to find new markets and integrate our technology to grasp the mass market of this opportunity. So join us on our mission as we safeguard every patient's journey from anesthesia to safe recovery. Thank you.
Gustaf Meyer: Perfect. Thank you very much for the presentation.
Philip Siberg: Thank you.
Gustaf Meyer: Welcome. Let's dig into the report. Maybe we can first talk about the sales development, SEK 30.1 million in Q3, as you mentioned in your presentation. What would you say is the main drivers of the positive development if we compare it to the H1 of this year?
Philip Siberg: Yeah, I think it was a decent quarter in terms of sales. As an entrepreneur, it's a chronic disease that you always want more. I think it's good to see a positive traction. The drivers, of course, recurring sales of disposables, the single-use sensors that we use on each patient. So that had a nice growth rate. The US continues to be the main kind of locomotive of our business. So we're seeing that both new accounts, but also existing accounts continue to develop very nicely. So US is big, of course, as I mentioned, but also, we're seeing that the Asian markets and the European market are starting to kind of take off as well. The big driver is really the next generation TetraGraph system that we brought to market about 18 months ago.
Philip Siberg: We are seeing such very nice effects that it drives up utilization, the ease of use, and the integration and the attractiveness of the system really helps to drive up utilization.
Gustaf Meyer: If we look into the H1 of this year, you mentioned the challenges that you see in the US market. You also mentioned in this report that you continue to see some challenges.
Philip Siberg: Yeah.
Gustaf Meyer: Maybe you can elaborate. What are the challenges that you see, and do you see any kind of trend of a more positive development moving forward?
Philip Siberg: Sorry. It has definitely been a tougher year in the US. It takes longer time to close the deals. Deals can get approved, but continue to get stuck with purchasing, with legal. We have a lot of deals in the pipeline pending to close. I cannot control these processes. That is my challenge. I think in Q3, we are starting to see with the new US team, the very great leadership. We brought in more people to the US team now and commercial-wise, just seeing that I feel the catch-up effect is to come because it is getting easier to get it out there. I have also tried to mention that we have had about 800 hospitals we now have worldwide. Many of them were early adopters, technology freaks, drivers of, we want to be guideline compliant, et cetera.
Philip Siberg: Now we are probably a little bit at the chasm where we are reaching the mass market. Some of these budgets to get these more big mass market hospitals may take a little bit longer time. That is why we are elaborating with TetraGraph as a service and capital. We are meticulously working hard, and we will get there.
Gustaf Meyer: What is your view of the current pipeline if we look in the short term? Would you say that it is a strong pipeline?
Philip Siberg: Yes.
Gustaf Meyer: Yes.
Philip Siberg: We all say a strong pipeline. It is just controllable of when is it happening. In Q3, some of the stuff in the pipeline happened, but there was a lot that did not happen. More to come.
Gustaf Meyer: What about these larger agreements? First of all, the IDN contracts that we have seen during the year, also the U.S. Veterans Affairs agreements. When could we expect to see any sales contributions?
Philip Siberg: Yeah. One of the IDN contracts that we announced during the spring was that we started to win a number of hospitals within one of the, I think it is the second-largest IDN in the US. What has happened since then is that we keep now winning hospital after hospital. We had a win this week, where these hospitals may be more like 20 monitors. I do not feel it is press release worthy to go out with these, but one door opens another, that is exactly what I want to get to. So winning, having people driving it for us, then ultimately getting a corporate contract. That is working. The VA contracts, we have now a couple of VAs as customers. It is not happening overnight with this, but it is a framework agreement, we are positive to really ramp that up.
Gustaf Meyer: You also mentioned the TetraGraph as a service. When I look into the numbers, also my model, I get the sense that it is a relatively low level of that service.
Philip Siberg: Yeah.
Gustaf Meyer: I have also got a question about that.
Philip Siberg: We did not have any TetraGraph as a service contract during Q3.
Gustaf Meyer: No.
Philip Siberg: We do have a lot in the pipeline. I think we potentially have underestimated a little bit that we thought that it would go a lot faster because you do not have to buy the capital. But just the legals of the documentation and the framework agreement still take some time. So it will happen.
Gustaf Meyer: Yeah. Could we expect a bit more in 2027? Is that the case, or is it already in Q4?
Philip Siberg: I think we have some Q4 pipeline on it. The ones that we have running have shown very favorable numbers. So we are seeing that it pays off, that the business model works.
Philip Siberg: These are a couple of Ivy League hospitals on the East Coast of the US. So it is a good model, but I always want to sell if I can, because I might get a little bit better commitment from the hospital.
Gustaf Meyer: Also, we should definitely dig into the gross margin during the quarter.
Philip Siberg: Yeah.
Gustaf Meyer: Because it was very strong, 74%. There were some product mix and so on, and also this US tariff repayment.
Philip Siberg: Yeah.
Gustaf Meyer: I also noticed in your presentation that the repayment was of $116,000.
Philip Siberg: Dollars, yeah.
Gustaf Meyer: The whole repayment was SEK 350 or something like that.
Philip Siberg: We have something like $260,000 more to come. It might happen in Q4. It is with the US Customs agency.
Gustaf Meyer: Okay.
Philip Siberg: I have noted a lot of other public Swedish companies have started to get the money coming back. So we should be in line. I feel they are favorizing the big ones, and us smaller ones are second in line, but it will come. So that affected the gross margin. Yes, we got the money back, which I already reported in July, which made a positive peak on the July gross margin.
Philip Siberg: If you looked at my EBITDA development curve, it did not affect the September numbers where we were almost at breakeven point now.
Gustaf Meyer: And when we talk about the gross margin, of course, the product mix was favorable because of the high disposable sales. If you look into 2027, you mention in the report that you hope to have at least a 70% gross margin in the future.
Philip Siberg: Yeah.
Gustaf Meyer: But if you have a lot of monitor sales, maybe that could go down a bit. What do you say?
Philip Siberg: Yes. I keep on telling that we're driving innovation, we're driving smarter ways of designing, producing, and so we're getting the cost down, and it's happening for both sensors and monitors. As we have announced new products during the year, one was our new portfolio of sensors, where unit economics are a lot better. So that helps to drive up, but we're also working to keep price levels as high as we can, and despite product mix being changed, I think we're always going to be in the line of 70% to 80% of our business is going to be recurring revenues. I do think over time, it's going to be even higher than that.
Philip Siberg: There should be long-term favorable effects on the gross margin to be even higher than it is today.
Gustaf Meyer: Great. Also your target, reaching profitability or positive cash flow within Q4.
Philip Siberg: Yeah.
Gustaf Meyer: Looking at the report and the graph that you showed in this presentation, September looked really good. What actions are you doing to reach this target?
Philip Siberg: It is of course a number of actions.
Gustaf Meyer: Yeah, of course.
Philip Siberg: It's continuing to sell well, keeping the gross margin up. We've done a lot on our expense base this year, as you can see. Then working so hard with working capital. As a growth company, working capital is everything, making sure that we have good agreements, spinning around the inventory faster, and getting paid.
Gustaf Meyer: Yeah.
Philip Siberg: I have a tough team on my finance team who are making sure that the hospitals are paying in time.
Gustaf Meyer: Just to make this clear, the target is to reach it within the-
Philip Siberg: Yes. Within what I mean is what I've always said, that means November and December or November or-
Gustaf Meyer: Yeah
Philip Siberg: we will see what it is.
Gustaf Meyer: Yeah.
Philip Siberg: It is our first step.
Gustaf Meyer: Maybe we can also talk about the Philips partnership.
Philip Siberg: Yeah.
Gustaf Meyer: I know that you cannot say that much about it, but can you share any updates?
Philip Siberg: The projects are progressing as planned. It will be in a project development phase for the next mid short-term. We continue to do that. We are not disclosing anything when this is going to market yet, but I can just say that it is progressing as planned.
Gustaf Meyer: Because we also got a question about the partnership. Let us see here. Regarding the sales, could the demand for the monitors be affected by the-
Philip Siberg: No.
Gustaf Meyer: No. Okay, and why not?
Philip Siberg: Because the clinical market, we have not been clear on exactly what is it we are developing, what is the product, where it is going to suit, what markets, et cetera. That is one thing. The people at the pipeline we are talking now, they want solutions here and now. I do not see this. The Philips agreement is business that will complement what we are already doing. It is addressing new type of markets. So we are going to continue to lead and drive innovation with our own business, with our own handheld system, and then the Philips and potential other OEM agreements will target other markets.
Philip Siberg: But there are hospitals that we have limited access to today. With being a small company with a single product portfolio, the ability to come in with big public tenders is the way to go via these OEM partners.
Gustaf Meyer: Looking forward mid long-term, how will you balance your own sales channels with this OEM strategy?
Philip Siberg: Yeah, I think they will help each other. So by driving our own innovation, that can help to drive our own business, but also help to catalyze OEM business and vice versa. We did make an announcement during the quarter also saying that we believe that about probably more than 50% of the business over the next 10 years is going to be OEM. So it's going to be a very important addition to our business.
Gustaf Meyer: Perfect. Also, another question I've got was, we have seen some software launches during the year.
Philip Siberg: Yeah.
Gustaf Meyer: Could you give us an update? How do they progress?
Philip Siberg: They do well, I think.
Philip Siberg: I have said it before, but I want us to stand out exactly as any other consumer electronics. As a customer, you expect to get innovations, upgrades, updates. You do not buy anything and then you have it for seven years. So customers of ours are so appreciative of always getting the latest updates and innovations, and the more data that we generate, the smarter features we can get. One of these features was the predictive recovery algorithm. So we are first in the industry to come out with an algorithm that helps to predict the onset of recovery, meaning that you can individualize the recovery phase, the last part of you waking up from surgery. By doing that, you can make sure that you get the right level of drugs. Some people might not even need drugs. They can actually wake up spontaneously, which is safer and cheaper for hospitals.
Philip Siberg: All in all, to answer your question, these software updates are very appreciated, and I think it is a highly competitive part of our portfolio that we can offer this.
Gustaf Meyer: I would also like to talk about the market in general, and also clinical guidelines. We saw in your presentation, if we looked at the pediatric segment, it has been a really strong growth since the guidelines over there. Could you give us any updates on other types of guidelines or anything that you look at?
Philip Siberg: Yeah. There's been a number of guidelines come out during the last couple of years. The last one was the pediatric, and that was the European one. I know there are initiatives ongoing in the US to mimic that and make US-based pediatric guidelines. Otherwise, they are there. During the summer, there was a survey that came out in the US about the guidelines, like three years later, what's the stance? The reality of the data was that there is still a lot work to do. There's a very high opportunity left to convert, and it just shows the numbness. It takes time to change healthcare.
Gustaf Meyer: Yeah.
Philip Siberg: Guidelines are an accelerator, and it's what's required to make the change. Beyond that, I'm seeing other countries who continue to develop this, and I'm seeing some initiatives that you're taking to the next level, which is to make it standard of care documentation. That will happen within the foreseeable future as well.
Gustaf Meyer: We can talk about other markets in the US for a bit. European markets, of course, very interesting. Also Latin America. Could you share any updates on those markets?
Philip Siberg: Latin America is exciting for us. We are approved in Brazil and Mexico. We have sold in a couple of other Central American countries, and it is progressing well. They mimic a lot what is going on in the US. We have some big initiatives going on in Brazil now in November, so I am positive about it. If we look at the Asian markets, which is predominantly South Korea and Japan has developed pretty well this year because during the spring, they rolled out the next gen, so they are building up a big dedicated sales force for Fukuda Denshi in Japan. A lot of trials, a lot of monitors starting to roll out, and also seeing increased utilization. In South Korea, we are still in regulatory submission mode. We believe there is a couple of months left.
Philip Siberg: South Korea otherwise has very high utilization, and I think there are strong opportunities once we get the next gen in there as well.
Gustaf Meyer: I guess that the main focus will, of course, continue to be on the US, but do you see any markets that you maybe would like to increase your resources in a bit in the future?
Philip Siberg: We will see. I think we are trying to be very focused, and I would rather say no to a lot of markets and then leverage what we have.
Gustaf Meyer: Perfect.
Philip Siberg: It is enough.
Gustaf Meyer: Maybe we can just have a last question. Maybe if you just could summarize the quarter, your expectations for the future, what should investors keep in mind, and so on.
Philip Siberg: Yeah. I think we did pretty well. The things that we can control, expenses, margins, to the extent, cash flow. We are showing the scale of our business. We are showing that we can take the company to profitability, and we are on that path. The massive investments we have done in the market over the years are starting to pay off, which is really exciting. I said sales, I am really happy that we are starting to show growth again. We are growing in all regions, and I feel we are on a very nice trajectory. With the right people I have, I have a fantastic team. We are well-positioned, great products, and I am very positive for the future.
Gustaf Meyer: Perfect. I look forward also to see the positive cash flow in Q4. Thank you very much, Philip, for today.
Philip Siberg: Thank you.
