Soft quarter, strong 2027 setup - Q3 initial comment

While the Q3 results were below our expectations, they demonstrated Y/Y growth. Preparatory costs ahead of the broader launch of OTS Hip in Europe and the US during the current quarter weighed on cash flow. However, we believe the rollout remains the key consideration, and the recently announced major order from DePuy Synthes outweighs any near-term concerns.

Q3 reflections. Q3 revenue grew 100% Y/Y to SEK4.8m but was below our expectations. Reported revenue was affected by a SEK1.0m negative adjustment relating to the licence period, as well as a SEK0.9m adjustment to part of a 2025 invoice. Excluding these items, net sales amounted to cSEK6.7m, closer to our forecast of SEK7.2m. The gross margin came in at c35%, which management again attributed to introductory pricing in Japan. EBITDA was SEK-15.9m, versus our estimate of SEK-14.5m, with the shortfall driven by slightly higher opex. Cash at end-September was SEK40.8m. However, 2027 deliveries may require additional working capital. Discussions with banks regarding loan financing are ongoing, with the outcome and terms yet to be settled.

Estimates. We believe the Q3 report warrants somewhat greater caution on revenue and the slightly higher costs; still, the opportunities for 2027 should outweigh these near-term changes.

Longer-term guidance remains. As previously communicated in its half-year report, the company expects it will be challenging to achieve its full-year target of operating revenue of cSEK80m. However, the strengthened order book for 2027 improves the prospects for meeting its long-term targets.

Share price reaction. Overall, we would expect a slightly negative reaction. That said, progress towards a much stronger 2027 should limit the downside.