Hi, everyone, and welcome to this earnings call for Surgical Science for the second quarter of 2026. My name is Tom Englund, I'm the CEO, and with me today is our CFO, Anna Ahlberg.

We'll start with a walk-through of quarter two and the numbers, and then we'll open up for questions. Quarter two was a strong quarter, and I want to say that clearly up front.

We exceeded our financial targets on growth, profitability was in line with our financial target, and license revenues were strong. Revenue came in at 255 million SEK, up 22% reported and 25% in local currencies.

Adjusted EBIT reached 38 million SEK, with a margin of 15%, which is a significant recovery from quarter two last year, which was an unusually weak comparison quarter, and it's a clear sign that the actions that we've taken to improve profitability and our customer offering are working. The gross margin improved to 69%, up from 65% in the same period last year.

This reflects both the stronger mix of license revenues and the profitability improvements that we've seen and have been driving in the simulator business. Gross margin, excluding licenses, also improved several percentage points, and I'll come back to what's behind that later.

License revenues for the quarter were 85 million SEK, up 44% year-over-year, and that's a strong number and reflects the momentum in the robotics market and the breadth of our customer base beyond Intuitive. Looking at the first half as a whole, revenues are up 7% reported and 11% in local currencies.

Currency-adjusted EBIT for H1 was 15%, right at our target level, and operating cash flow for the first half was 81 million SEK, well ahead of the same period last year. The business is performing well, and I feel good about where we're headed.

Now, let me take you through the different parts of the business. Educational Products grew 19% year-over-year or 24% in local currencies.

That's a good result, and I'm genuinely pleased with what we're seeing across the different regions. All regions grew this quarter.

Americas were up 4% versus quarter two 2025, but I want to add some important context here: actually, Americas was up around 40% compared to quarter one of this year, driven by the strength of the important US market. The sequential momentum is strong, and the year-over-year figure alone doesn't capture the full picture.

China continues to be a market that we're managing carefully. The Chinese government's active support for locally operated and manufactured companies creates a structural headwind for our simulator business, and this has impacted our sales in China, and we're now taking concrete steps to navigate this.

That said, the broader APAC region is growing nicely and compensating for the headwind that we see in China. We remain committed to building our position in APAC and China over the long term.

A strategic milestone this quarter was the opening of our APAC service hub in Hong Kong, which is part of our deliberate strategy to get closer to our customers, improve our service delivery, and build a stronger local presence in the region. It's the kind of investment that takes time to show up in the numbers, but it's the right move for long-term customer relationships and growth.

Ultrasound had another strong quarter, growing 34%. That's a good number, and it reflects a genuine acceleration, I would say, in how healthcare systems are adopting ultrasound training.

The tailwind here is structural. Ultrasound is increasingly being used as a point-of-care diagnostic tool at the bedside in emergency settings, in primary care, and that means that the universe of clinicians who need training is expanding well beyond the traditional specialists.

Our POCUS customers, those that are using ultrasound as a diagnostic instrument at the bedside, continue to grow alongside our traditional customer base, and this is exactly the dynamic that we communicated when we made the Intelligent Ultrasound acquisition last year. Women's Health remains a strategic priority and continues to perform well.

Ultrasound is one of the primary clinical tools for diagnosing conditions that disproportionately affect women, and it has been historically under-resourced when it comes to training. Our solutions are genuinely making a difference here, helping clinicians diagnose earlier with more confidence.

That's directly aligned with the purpose of Surgical Science. This quarter, we also launched new software modules for obstetrics training on the Ultrasound Mentor platform.

Integration work with Surgical Science UK, the former Intelligent Ultrasound, continues to progress. We're realizing the synergies step by step, and we remain convinced that the combined technology platform represents a significant opportunity in the years ahead.

We believe that ultrasound simulation has the potential to represent a growing share of Surgical Science's total revenues, and Q2 gives us further confidence in that view. Moving over to Industry.

Industry revenues grew 24% this quarter or 27% in local currencies, driven primarily by the very strong performance in license revenues. License revenues came in at 85 million SEK, up significantly from the 59 million in quarter two last year.

The revenues came from a number of robotics customers, and this diversity is something that I want to highlight. We work with almost all of the leading robotic surgery companies, and this means that our robotics customer base is broad and it's growing, and the license revenues is a reflection of that.

License revenues are lumpy by nature, I wouldn't over-interpret any single quarter in isolation, but the direction is genuinely and clearly positive. On the market side, the picture continues to be genuinely exciting.

Intuitive had another very strong quarter, procedure volume grew 16%, and all Intuitive customers that have active My Intuitive Plus annual contracts chose to renew their contracts. That means 100% retention, which tells you something about how deeply the digital offering and simulation is embedded within the Intuitive ecosystem.

Given this continued positive response from end customers for simulation, we estimate that the revenue loss for '26 that was part of the changed commercial terms with Intuitive will be less than the 60 to 90 million that we initially estimated. Johnson & Johnson received FDA certification for its Ottava system across several general surgery procedures earlier than anticipated by analysts.

Medtronic started marketing its Hugo system in the United States, and these are large, credible MedTech companies entering robotic surgery at scale. Their entry into the US market, the world's largest surgical market, accelerates the broader training and simulation need across the entire ecosystem.

More robots means more training needs and more licenses for Surgical Science. This July, we also presented at the SRS—that's the Society for Robotic Surgery conference in Florida in July.

This conference had a record number of both participants and exhibitors, and we had a very strong interest in our product and services. We launched our new world-leading suturing module and procedure simulation for our Robotics Express platform that you can see on the top-left picture, and the reception from customers and opinion leaders were excellent.

During the quarter, we also reorganized our sales force focus on the Industry segment in the United States. The goal is to sharpen our commercial execution and get closer to customers in what remains the world's largest MedTech market, and we expect the effects of this change to become visible in the second half of 2026.

Robotics is clearly becoming a central part of surgical medicine. Robotic procedures are growing share of total surgical volume, and with many platforms now in the market and more on the way, the demand for scalable, high-quality simulation is going to grow in step with that.

We see no signs really of changes in competitive environment versus Surgical Science. There are no signs of robotics companies developing any advanced real-time procedural soft body simulation that the Surgical Science is world leader in.

Surgical Science is developing solutions for most of the top 20 robotic surgery companies. Our pipeline is the biggest it's ever been.

Our conviction about the long-term opportunity here is unchanged, and if anything, stronger than a year ago. Medical device simulation, then, finally, grew compared to the comparison quarter, and we see clear progress in both product development and customer dialogues.

While the segment's performance was not in line with other quarters during 2025, the underlying demand from our MedTech customers remains solid. More than 70% of customers in active development projects are repeat clients.

That's a retention and loyalty number that tells you about the quality of what we deliver. We work with many of the world's largest MedTech companies, and we're a critical supplier in their product development and delivery programs, and we continue to add new customers to the base.

This segment moves in lumps. Projects have long lead times, and the mix between development revenue, hardware, and service in any given quarter can vary significantly.

What I watch here is the lead indicators, and those remain very positive. We have a strong pipeline, and we expect to see meaningful growth from this segment in the coming quarters.

Let me talk about margins and what's driving the improvement that we see. The gross margin expansion to 69% this quarter reflects two things: the strong license revenue mix and the underlying work that we have done to improve our profitability in the simulator business itself.

Gross margin, excluding licenses, is now improved by several percentage points from previous quarters, and it reflects the pricing work and operational improvements that we have done. We implemented a further price increase on simulators in April this year, and these effects flow through gradually as sales cycles close, and we'll see more benefit from those price increases in the second half of the year.

We see that the underlying business profitability trend is positive and expect further improvements going forward. Let me take a step back and talk about where we're going.

The strategy that we laid out in December is about becoming the clear leader in five distinct market segments, all of which have very low penetration today. We're in the early innings of a long game, and quarter two shows us that the approach is working.

An example that I find particularly exciting is emergency medical simulation. The order and project that we announced in early 2025 to a Southeast Asian country is now just months from delivery, and we see similar opportunities across multiple countries.

This is a segment with real demand, serious customers, and genuinely differentiated technology from Surgical Science. From an operational standpoint, a significant milestone this quarter was the opening of our new production facility in Tel Aviv.

This facility is purpose-built for higher volumes and improved productivity, and it gives us real capacity to scale manufacturing without a proportional increase in cost per unit. It makes us also more resilient to supply chain pressures.

We see further operational improvements ahead that will support continued cost efficiency improvements. Surgical Science has no debt, and we ended the quarter with 658 million SEK in cash.

We have a market-leading positions, the products, the customer relationships, and the clinical expertise. That combination is genuinely rare, and it gives us real options.

The tailwinds are real, and they are growing: an aging population, increasingly complex clinical procedures, higher standards for patient safety, a shortage of trained healthcare professionals. All of these are driving demand for simulation every single year.

We're building for that world, and I'm confident that we have the right strategy, the right team, and the right assets to get there. With that, I will hand over to Anna to walk through the financials.

Thank you, Tom. Yes, starting by underlining that we are very pleased to report another solid quarter and a good first-half year.

Again, then, we had sales of 255 million for the quarter, up 22% in SEK and 25% in local currencies. Really strong, even though, then, the comparison quarter was a weak quarter.

Talking first a bit about currencies, we have after Q1 2025 seen a significant negative effect from currencies on our overall sales and also on our results. I will come back to that later.

With our just below 80% of revenues in US dollars, for the first quarter against Q1 last year, the SEK/USD average rate was down 14%. Now then, for the first half-year, it was down 9%, and that means that we also had some slight positive effects on the numbers in Q2.

However, the Israeli shekel is also a very important currency for us, and then in terms of costs. Here, we saw the US dollar weakening considerably during the quarter, which then affects us negatively.

Looking at the two business areas then, the split for the quarter was 52% for Edu and 48% for Indu. Edu then up 19% or 24% in local currencies, and this is also the business area where we see the strongest growth for the first half-year.

When we look at regions then, sales in EMEA increased by 60%, and Eastern European countries accounted for the majority of this increase. EMEA is also the region where we see the strongest development for the first half-year, with an increase of 45%, and again, really strong sales for the half-year to Eastern Europe.

Revenue in the Americas region then up 4% compared with the same period last year. However, as Tom also mentioned, the US was up close to 40% compared with Q1, and we had higher revenues here than for any other quarter in 2025.

That's really nice to see the strength in the US market. Then the APAC region, up 10%, primarily attributable to orders to Pakistan and Taiwan, while China then continues to struggle a bit and was lower compared to Q2 last year.

As mentioned, all our product segments were up, and particularly then, Ultrasound with a 34% increase. Indu was up 24% or 27% excluding FX, and license revenues then 85 million, an increase of 44% compared with the same period in the preceding year.

Looking then at our revenue streams, that meant 33% of our total revenues for the quarter were license revenues. For the first half, our license revenues from Intuitive, our largest customer, are in line with those for the first half-year 2025 in US dollars.

This is better than what we expected, and this is because the attach rate for DV5s has been much higher than what we calculated with. Also, this is the first quarter with renewals of DV5 subscriptions.

The first customers that got their DV5s with the full digital package were in Q2 2025, and these packages were now up for renewal after one year, and for this quarter then, all customers have renewed their subscriptions. As I'm sure and as Tom talked about, we previously estimated that the announced memorandum of understanding cancellation meant reverting back to the old agreement between us and Intuitive starting January 1st this year.

Our estimate was that this would have a negative impact on our license revenues of between 60 and 90 million SEK for 2026 compared to 2025. It is still too early to say how, for example, renewals and also the attach rate will continue to develop, but for this year, we have then estimated now that we will be below this range when it comes to revenue loss.

We also had revenues from several other customers in the quarter. As Tom went through, a lot of very exciting things are happening on the robotics market right now.

Simulator sales then, as a whole, they were up 25% compared to Q2 last year, but more flat compared to Q1. For the first half-year, this revenue stream is up by just over 9%, more for Edu, which was positive, and less for Indu, which is negative.

This sales is, again, more lumpy since it's usually tied to larger projects where development is also involved. Development revenues were in line with the first quarter and weaker than during the second quarter of the previous year.

Again, the project that we have in the Southeast Asian country is proceeding very well. In July, we had a major acceptance test that was conducted and approved, and so it means that the plan is still to largely complete this project during this year.

Service revenues continue to be stable. Looking then at the cost side and margins, our gross margin for the quarter, 69% versus 65% in Q2 last year.

Of course, license revenues then having a positive effect since they were a larger share of total sales than in Q2 last year. Also, the proportion of direct sales within Educational Products, and primarily then in the US, that was higher, also had a positive effect.

Currency effects, a slight positive effect then, as I talked about before, 0.2 percentage points. The US dollar for us has less impact on the cost of goods sold than on other cost items, since our input goods are primarily purchased in other currencies than the US dollar, and also our production and associated wage costs are not in US dollars.

Price increases then implemented in 2025 for simulators continue to have a positive impact, and then again, we saw a new price increase in April. We also had a good product mix in the quarter.

Regarding OPEX, the remuneration review process for 2026 for the group was completed during this quarter, during Q2. All units in our group have April 1st as the review date, except for Sweden, which has January 1st, and in total, this effect is approximately 3.5 million SEK per quarter.

Sales costs, 19% of sales, down from 28% last year. During this quarter, we received the first refund relating to custom duties in the US, approximately 1.2 million SEK, and that was for the corresponding quarter in 2025.

We will continue to apply for this as more periods open up. Admin costs also down, 9% of sales versus 11% last year.

This quarter's cost include consulting costs, approximately 1.1 million relating to the work that we are currently doing to change our listing to the Nasdaq main market, and that process is proceeding according to plan, and as we previously communicated, we expect relisting to take place next year. In the quarter, we also had costs attributable to the work to set up legal entities in Hong Kong and in China.

R&D costs, 23% of sales. We activated a bit more, approximately 14 million versus 10 in Q2 last year.

Again, the costs on this line, they vary depending on how much development revenue we have, because salaries for the portion of development department staff who work on projects that generate development revenues are transferred to cost of goods sold. Other operating income and costs, that mainly consists of revaluation of operating assets and liabilities in foreign currencies.

We had a negative impact here on results of 9 million SEK, compared to 25 in Q2 last year. As I previously mentioned then, during the quarter, the Israeli shekel strengthened against the dollar.

Exchange rate on June 30th was approximately 6% higher than going out of Q1. Since the majority of trade receivables in our Israeli company is in US dollars, this resulted in a revaluation loss, and that was approximately 6 million.

In the comparative quarter, profits were also negatively affected by large currency effects attributable to the same weakening of the US dollar against the shekel. Following this, our operating profit for the quarter was 33 million, corresponding to a margin of 13%, and for the first half-year, operating profit was 56 million or 11%.

If we then adjust our P&L for FX effects, EBIT for the first half-year was 68 million or 13%. The way we do this is that we use the average exchange rates then for the first half-year last year.

Balance sheet items, however, and their impact on other operating income and expenses that we just talked about, they have not been restated. Organization-wise, number of employees at the end of the period was 319, that was 8 less than going out of Q2 last year.

The majority of this change is attributable to the restructuring of the sales force that we did following the acquisition of Intelligent Ultrasound last year. As mentioned then, during the quarter, we have opened our new service hub in Hong Kong, and we are continuing to invest in this part of the world also in terms of people.

For adjusted EBIT then, where we have our financial goal of 15%, and that is then EBIT exclusive of amortizations on surplus values related to acquisitions, here, we saw 38 million for the quarter, and that is a margin of 15% and in line with our financial goals. If we adjust for FX effects the same way as we did for EBIT, it was 34 million or 14%.

For the first half-year, 77 million or 15%, again in line with our financial targets. Finance net and taxes: no loan financing, meaning net financial items mainly consist of interest income on bank deposits, and we also have the revaluation of internal loan liabilities to subsidiaries as well as the effect of IFRS 16 impacting the finance net.

Net profit for the quarter was 21 million SEK, and the tax expense for this quarter was higher than in Q1, that is largely attributable to taxes for the 2025 financial year in the US affecting this quarter. Also, we do have non-deductible amortizations in our P&L, and that's affecting the effective tax rate.

For the quarter, these were 5.5 million SEK. Cash flow: 15 million from operating activities, approximately the same as last year.

However, in this quarter, we saw negative working capital. For this quarter, both inventories and accounts receivable increased, and the increase in inventory here, it's partly attributable to a build-up due to the project in the Southeast Asian country.

This project is now entering a phase of hardware delivery. Accrued income has also increased, and this item then primarily relates to accrued license revenue that is invoiced and paid in the following quarter, and so this relates then to the fact that we had higher license revenues in the quarter.

However, and as Tom mentioned before, for the first half-year, cash flow from working capital was positive, and we see AR decreasing, and we also see the gray line there that it's at a good level in relation to sales and continue to be at a good level. Investing activities: we invested approximately 6 million in the quarter in the construction in our new production facilities in Tel Aviv.

For the first half-year, we have invested 12 million, and in total, approximately 17, and as we talked about, these new facilities were commissioned at the end of the second quarter. Nothing to mention around financing activities, and so at June 30th, our cash position was 658 million.

Back to you, Tom.

Thank you, Anna. To wrap up: quarter quarter two was a strong quarter for Surgical Science.

We had strong growth of revenues, adjusted EBIT reached 15% margin, which is in line with our profitability target, and our license revenues were up 44% year-over-year. All of this demonstrates that the actions that we've taken to improve profitability and the customer offering are delivering results.

We have momentum now in Educational Products across all regions. We have a growing and increasingly diverse robotics ecosystem, with multiple platform companies entering the market at scale.

Our ultrasound business is growing and accelerating, and we opened up our APAC service hub and our new Tel Aviv production facility during this quarter. Our strategy is delivering both financial and operational results.

The opportunity in front of Surgical Science is significant. Simulation will become a central part for how healthcare trains its professionals, and we intend to lead that shift.

Finally, I want to take the opportunity to thank the entire Surgical Science team for their fantastic work and for their continued strong commitment. With that, I would like to open up the floor for questions.

Thank you. Good morning, Tom and Anna.

My two questions are basically related to the license revenues. The first one is if you could give us some color on the composition of license revenue in the second quarter, if you had any larger package deals contributing, or was it more broad-based across customers?

Would it be possible to quantify or give us some indication of how much of the revenues were driven by My Intuitive subscription renewals? That's my first.

Thank you.

Hi, Christian. I can answer that.

First, we don't comment on specific customers, as but we had a healthy mix of revenues from different customers in the quarter. If you take Intuitive aside, there was not one major license deal or package deal.

Then the second question is related to the renewals. It's a relatively small volume of renewals still.

Intuitive was clear about that in their earnings call, and the renewals did not have a significant effect on the total license revenues this quarter. It's of course a positive news.

Thank you. Okay.

My second question is now that you have indicated that Intuitive-related revenue loss will be below the initial 60 to 90 million estimate, does this mean that you're in a better position to hit your 2027 adjusted EBIT margin target of at least 15% already this year? Could you also more broadly give us some given the increasingly positive robotics outlook, do you think the more than 15% is too conservative as a long-term target?

Obviously, since we have communicated that the profitability for 2026 will be lower than our financial targets, the fact that we're now at our financial targets in terms of profitability means that we are ahead of the plan that we have set. Yes, that's a strong positive development, right?

However, it's a bit too early to say how the entire year will play out, and also whether the targets are set too conservatively. I think that we need to deliver at these levels not just one or two quarters, but consistently across quarters in order to be able to raise the ambition.

We have been clear also in the capital markets day that when we feel that we are at a situation where we meet the financial targets, then of course we'll revise them and have higher targets. We're not at that stage yet, and it's only two data points here now in the first half of the year.

Perfect. Thank you very much.

I will get back to the queue.

Thank you, Christian.

Yes. Good morning, Tom and Anna.

I would like to start off on both growth and margins, because if you look at H1 now, you've been posting 11% organic growth and 14% adjusted EBIT margin. It sounds, listening to you, Tom, that you're pretty positive on the outlook across basically all the business segments.

Would it be any reason for you to feel cautious now going into the second half with what you know today? Because as you also said, the '26 target of I think it's profitability and some growth looks increasingly conservative, at least to me.

Are there anything that we should be mindful of something that you're cautious about here going into the rest of the year?

Yes, I think it's important to have a balanced perspective here. There's definitely areas where we should be cautious.

One is around the license revenues and the development revenues that we have both said can be lumpy. We have said that both of them can be lumpy by nature.

That means that license revenues and development revenues can fluctuate between quarters quite a lot, as we have seen also historically. That's an area for caution, even though we believe that we have proof points now that the overall general long-term trend is very positive for our industrial market segments.

Then on the educational side, we also have, if you look at it from a kind of ASP per deal, we are dependent on many quite big deals that can fall between quarters differently, right? Whether one or a few deals fall on one side of the quarter or the other side of the quarter can have quite important effects on the revenue for educational.

There is a timing element to that, and there actually you can't just look at one single quarter then to analyze the performance of the educational business. That's a dynamic that we've had in the past, it's nothing new, but it's definitely good that you bring it up, because it's going to be a kind of a watch-out item also here going forward.

The P&Ls for our five different segments are still relatively small if you look at them individually.

Understood. Is it also correct to read what you're saying in the report as things are looking pretty bright across the business segments, despite this dynamic that you're highlighting?

Yes, and we feel that long-term, we have a good probability to achieve good growth and solid profitability within each of the different business segments. Individually, it's a little bit difficult to time exactly how strong growth and when it will happen.

Then on a compound level, adding them together, that means that there will be a more stability and higher kind of probability that this will contribute quite well also in the short term to the overall growth of the company.

Understood. My final one would also be on Da Vinci 5 and Intuitive.

I think you wrote in the report that you've been a bit surprised by the proportion of new DV5 customers that have received simulation post the cancellation of the memorandum of understanding. Could you give us any feel or figure for the estimated attachment rate and maybe how much better the attachment rate has been versus your internal expectations, just for us to understand a bit the magnitude of that dynamic?

No, we can't really go into those details. We can just say that based on the information that we had back a year ago, we made assumptions for how the revenue would be impacted negatively by the changes in commercial terms between us and Intuitive.

It seems that those estimates were too pessimistic, and that the customers of Intuitive that have received simulation for Surgical Science is a considerably that proportion is higher than what we estimated. We will not go into any more details about exactly how much and so on.

That's why we're also not giving any specific numbers to how much lower than 60 million the revenue impact will be for the full year.

That's understood. Great.

I'll get back in line. Thank you.

Thank you, Simon.

Hi, Tom and Anna. Thanks for taking my question here.

My wonderful colleagues have had very good questions, my questions will hopefully be short. If we talk a little bit about China, you mentioned that it was slightly lower than comparative quarter, and that it's not going maybe as good as we all would have hoped there.

Tom, you did mention that you're taking some concrete steps. Could you just describe to us what steps can you take there, and how could that improve your situation?

It's a couple of different things concretely that we can do. We can invest in our sales team in China and in our local presence in China to be able to serve our customers more closely, and by that win more business.

That we're doing, and Hong Kong is an example, and the office there is an example for concrete actions that we take. Then, of course, on the innovation side and on the product side, there is a lot we can do, both in the innovation that we deliver to our customers versus the competing customers that many times are Chinese, and the price points that we offer to these customers.

Here, we are very agile, and we listen closely. We have the ear to the ground on the specific requirements from our Chinese customers.

Then, of course, there might be structural things, like you mentioned, and we also mentioned in the report, that there is certain policies in place that make customers need to choose a local and domestic manufacturer, and that's of course harder to fight against. We're putting several measures in place to try and minimize that effect.

There's also other things that you can do that I will not go into details that would have sort of effects on a slightly longer timescale, and those type of activities is also something that we review.

All right. Thanks for the comments on that.

Just to wrap up the discussion you had with my colleagues here just now on should Q2 be more of a true picture of demand going ahead for 2026 rather than Q1? Because now we see growth in all segments, and Q1 was a bit more mixed.

If you could just conclude with one short message going into H2.

I think you should judge the performance on the last two or three quarters, and then look at kind of some sort of average pictures across. I think that one of the things helping us this quarter is weak comparison quarter of last year, right, and that means that some of the growth numbers are quite considerable compared to that quarter.

Generally speaking, the picture that we paint in the report, which is a positive picture across our different segments and across our different geographies, we don't see any major things on the rise and that make a change of that positive view. Then of course, there will be ups and downs from quarter to quarter.

If you look at the picture on a slightly longer timescale, we're very positive.

Yeah. All right.

Thank you very much. I'll get back into the queue if I

Hello, everyone. Can I have quick three questions?

The first one is, given the higher-than-expected DV5 attachment rate, do you expect Intuitive to push its own simulation software more actively going forward? Could it be that they simply have not really done that so far?

The simulation software from Intuitive and the simulation software from Surgical Science are sold alongside each other together as a bundle, and they don't compete. They're complementary.

When they push simulation, let's say, they're going to push both Intuitive simulation as well as procedure simulation from Surgical Science. I think that every robotics surgery manufacturer right now are investing quite heavily into the digital offering, because that's an area where you can create differentiation between the different robotic platforms.

Simulation is a central piece of that digital offering. I think if one thing is that Intuitive and other players will invest more into the digital offering, such as simulation, such as tele-surgery, tele-presence, as well as case insights and those type of functionalities.

I think that that bodes well for the general adoption of simulation from Surgical Science across the entire robotics customer base.

Right. Okay.

Thanks. Then on the reorganization of the US sales force, I was just wondering if you can elaborate in more concrete terms what you have done, and if there are any risks to this reorganization or any bottlenecks that could impact sales negatively in the short term?

The sales dynamics between Industry and Educational Products are quite different, and we use different sales teams towards these two different segments. The Educational Products, they rely on regional sales managers, account managers, and distributors who are regionally based and sell our entire product offering towards hospitals and sim centers.

On the Industry side, we have key account managers that work with our much fewer customers, but usually much bigger customers. Here we're speaking about customers like Medtronic, Johnson & Johnson, Gore, some of the world's biggest MedTech companies.

What we have done is that we have restructured and changed personnel into the Industry sales team in the US in order to have a higher hit rate and success within those type of customers. Finding employees who have the necessary networks and relationships that can make us successful in these large companies, and of course also competence and background that can make us succeed better in this segment.

What we see now is that this restructured team, and new team, let's say, they are now busy building up the pipeline that will generate more revenues here in the coming quarters. We feel positive about the development and the results so far.

Thanks. Then for my final question that's more about general nature, really.

Just wondering, how do you ensure that you stay close enough to your OEM customers to pick up on any early signals that they might be considering developing parts or the entire software in-house? Because I know this is a question that a lot of investors are asking themselves.

Yeah. I think it's a very good question and a strong focus for us to stay close to our customers.

One challenge we have is that we have a diverse set of customers, both geographically, but also different types of customers. What we have done then is to make sure that we have personnel who are dedicated for the different types of customers.

That's the entire segment-based strategy that we have put in place where we have defined five different segments where robotics is one of five, right? For those segments, we treat them as market segments where we have dedicated personnel for product development and marketing and sometimes also sales, as I just mentioned.

That then makes it so that we can stay close to our customers, and we can also stay relevant and stay competent in front of our customers since we have this kind of differentiation in our internal organization. Then, of course, we just have to be very fast-footed, because there's a lot of development.

If you look at robotics market and the pictures that I showed there from the Society for Robotic Surgery, the innovation pace is just tremendous. We also have to stay very close and update ourselves very frequently, both with our customers, but also with the market demands.

It helps that we have a very high-capacity team at Surgical Science who is used to this kind of innovation, and is used to this fast pace, and has long experience from the different segments that we're in.

Okay. Thank you very much.

Yeah. Hi again.

Just maybe one or two follow-ups. As you mentioned, Tom, we have seen FDA approvals for both J&J and Medtronic's robots here during late last year and now in August for J&J.

Could you help us in any way to sort of try to depict, or for us to understand the financial impact from the launches of these two new robots? I suppose it maybe will be more material from next year onwards.

We know very little about the business model obviously with these customers, but could you give us anything to try to, yeah, make the picture a bit more clearer?

I think generally it's super positive that there's more strong players in the US market and in the global market, right, for robotics. It's going to drive robotics adoption, and it's going to drive volume of procedures and volume of robots.

Now it's going to take some time until the Hugo and the Ottava systems are kind of seen in high volumes in the US market, for example. They have also been very clear with that they are conservative in the rollout of these systems, because they want to do it in a patient-safe way, and they want to make sure that they get the approval from key opinion leaders and certifying bodies.

This means that these two announcements is not going to have a material impact on our license revenues for this year, and not much also for next year. It's going to be years where they establish their presence in order to build volume for the coming years.

Understood. No, it does.

It does. Maybe the final one, and something that you've been talking about previously, is the trade-in program that Intuitive's running with refurbished DV4 robots and reselling them into maybe more cost-sensitive markets, and something that you've been quite positive on your ability to sell simulation onto those systems.

I just noticed that the refurbished systems increased quite sharply for Intuitive in Q2, wondering if that's something that you've been seeing already this quarter, that that has affected your sales positively within licenses?

We can't really comment on those specific details by customers, but I think it's a fantastic tool that Intuitive has at their disposal in order to create a differentiated market and have different offerings for different customer types. It also, of course, as you say, represents an opportunity to sell simulation also to the refurbished units.

In some cases, you could argue that you would not sell so much simulation because those refurbished units can be used as volume procedural robot that is not used for training. It doesn't mean necessarily that the attach rate for all refurbished units might be high.

It's a little bit early to tell exactly how this will play out, but we don't comment on the impact, and it's not significant.

No. All right.

Understood. I'll squeeze a final one in on price increases.

You've been hiking prices starting last year, I think, and another price increase here in April. How much has been implemented now across the Edu portfolio, and should we expect this tailwind with price to increase in the coming quarters, or what's that dynamic look like?

The price increases have affected the entire product portfolio. We have revised prices on all our products, both last year and this year.

The price increases impact when the proposals with revised prices are accepted by the customer. This time can take a couple of months, or it can take even longer time.

That's what I mean that there's a lag in the price increases. We are planning to revise prices every year now.

You're going to see a compound effect once again then of the price increases that we've done historically. With higher volume and lower prices, we will also be able to see shorter sales processes, and that means that price increases will carry through quicker than they do today.

It would be fair to assume then that the April price increases haven't fully been reflected in this quarter's numbers, basically?

Absolutely. You're absolutely right.

If possible to give us maybe the average price increase that you did materialize in Q2?

It's around 4%,

5%. Perfect.

Very good. Thanks so much.

Thank you.

Thank you. I have a question regarding your gross margin of 69% in the second quarter, and you had 68% for the first half of the year, including negative effects from currency headwinds of 1 percentage point.

Given that you have these price increase lag and also perhaps currency tailwinds in the second half, should we consider the 69% gross margin to be sustainable for the rest of the year?

The gross margin is impacted by so many factors that we went through. It has to do with the share of direct sales, it has to do with the revenue streams and their respective share.

As Tom said, if we exclude and look at the simulators, because that's where we said that we want to increase our profitability, we see that we have done so. Again, I think there was a comment also that we increased gross margin with more than license revenues were increased.

We definitely see a positive effect. Then how exactly the group gross margin will be for each quarter, that is then dependent on all these different factors.

For us, it's very important that we see the other segments, excluding then robotics, increasing their profitability. That's what we're working on, and we see that.

Okay. That's clear.

Thank you. My second question is regarding your R&D spending.

Do you intend to keep the level of capitalized development cost at a similar level going forward?

That is entirely depending on what type of projects we are working on. I think you've seen that it's been fairly flat, growing a bit with us growing, but that can definitely vary depending on what we work on.

We look at our also total R&D spending, including both capitalization as well as how much we then move to COGS, because when we have the paid projects. Again, depends on what type of projects.

Cannot give you a forecast going forward there. We don't see any dramatic changes right now in that.

Yeah.

You had capitalized development costs of 9 million in the first quarter, and then almost 14 in the second. What level do you think

Again, it can be a bit lumpy. If we have some products that are nearly finished that we launch that we invested in.

When they have been launched, it will go down for those projects, but then again, it depends on what new projects we have, and that is of course something that we don't sort of share in detail what we are working on.

Okay. Fair enough.

Thank you very much.

Thank you.

Thanks. Looking at the written questions, I think we covered everything.

There's one question around maybe just finish with that, how we see M&A opportunities and other thoughts on how to employ the strong cash position.

The M&A opportunities, we continue to work also to build the company just not organically, but also through M&A. The strategy that we have put forward to be an active acquisitor continues.

We work similar to previous quarters, or we work the same way. We see opportunities for M&A within all the different market segments that we have defined.

The cash position.

What was the question around cash position?

How we intend to deploy that, or if there are any Again, as we are cash flow positive, it's more event-driven, and going back to what Tom mentioned around M&A. As we are also in an uplift process, and also there are some new changed rules to when it comes to if we can do buybacks or not.

We do not currently have that possibility. There are different tools that we can then deploy.

Great. Thank you.

Then we have used up our hour together. Thank you for all your questions and for your interest in Surgical Science.

With that, I would like to conclude the meeting. Thank you.

Bye-bye.

Thank you. Bye-bye.