Establishment Labs Holdings (ESTA) 2025 Investor Day June 12, 2025 01:00 PM ET Speaker0 So, we're gonna have an introduction from Peter. And then Jeff Earhardt who heads up North America for us is gonna give us an overview of The United States and the progress we're making here. We have two panels of plastic surgeons to talk about aesthetics and reconstruction and their experience with Motiva in The United States. And in the half of the meeting, Roberto is going to talk a little bit about our innovation pip ...

Establishment Labs Holdings (ESTA) 2025 Conference June 04, 2025 07:35 AM ET Speaker0 Good morning, everybody. Thanks for joining us here for our first session in the med tech track. I'm Matt Taylor, the US medical supplies and devices analyst here at Jefferies. And I'm joined by the management team on my left here for Establishment Labs. So we have Pete Caldini, who's the CEO, and Raj Denhoy, the CFO. And we'll have about a half hour for moderated q and a. So I always like to start high level, especially f ...

Revenue and Financial Performance - Revenue for Q1 2025 was $41.4 million, an increase of 11.3% from $37.2 million in Q1 2024[217] - Revenue increased by $4.2 million, or 11.3%, to $41.4 million for the three months ended March 31, 2025, compared to $37.2 million for the same period in 2024[249] - Gross profit rose to $27.8 million with a gross margin of 67.2%, up from 65.6% in the prior year, attributed to improved manufacturing efficiencies[251] - Net losses for Q1 2025 were $20.7 million, compared to $16.2 million in Q1 2024, with an accumulated deficit of $465.4 million as of March 31, 2025[217] - Net loss for the three months ended March 31, 2025, was $20.7 million, compared to a net loss of $16.2 million for the same period in 2024[249] - Interest expense rose to $5.9 million, an increase of $1.5 million due to higher debt principal[256] - Other income increased by $5.8 million to a gain of $2.8 million, primarily due to foreign currency fluctuations[258] - Cash used in operating activities was $20.7 million for the three months ended March 31, 2025, compared to $11.2 million in the same period in 2024[266][267] - Cash of $69.2 million was reported as of March 31, 2025, down from $90.3 million at the end of 2024[259] Operational Developments - Motiva Implants accounted for over 95% of total revenues in Q1 2025, with $6.2 million generated from U.S. sales[229][244] - The company launched Preservé, a new breast tissue-preserving technology, in Brazil in February 2025, with plans for further international launches[219] - The FDA approved Motiva Implants for U.S. sales in September 2024, and the company began selling them in October 2024[216][222] - A new manufacturing facility in Costa Rica was completed in June 2024, increasing capacity by approximately 730,000 units per year[223] Expenses and Future Outlook - Operating expenses increased by $11.5 million, or 34.6%, to $44.8 million, driven primarily by a $10.8 million increase in sales, general and administrative expenses[252][253] - The company expects overall operating expenses to increase in 2025 due to heightened commercial and operational activities following FDA approval[245] - The company may need to raise additional capital to execute its business plan, with a shelf registration statement filed in April 2023 allowing for future offerings[264] - Future capital requirements will depend on market adoption of products, regulatory activities, and commercialization costs[263] Debt and Financial Obligations - As of March 31, 2025, $221.4 million was outstanding under the Credit Agreement, including $150 million for Tranche A, $25 million for Tranche B, $25 million for Tranche C, and $21.4 million of accrued interest[274] - The interest rates for the Term Loans are 9% per annum for Tranche A and B, 10% for Tranche C and D, and can be reduced to 8.25% upon meeting a gross sale threshold of $225 million[274] Accounting and Risk Management - The financial statements are prepared in accordance with GAAP, requiring estimates and judgments that affect reported amounts of assets, liabilities, revenue, and expenses[276] - No material changes have been made to critical accounting policies as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[277] - Market risk exposure has not materially changed from the previous disclosures in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[279]

Core Insights - Establishment Labs Holdings Inc. reported a quarterly loss of $0.70 per share, which was better than the Zacks Consensus Estimate of a loss of $0.83, but worse than the loss of $0.58 per share from the previous year, indicating a 20.69% increase in loss year-over-year [1] - The company achieved an earnings surprise of 15.66% for the quarter, although it had a negative surprise of -58.06% in the previous quarter [1][2] - Revenue for the quarter was $41.38 million, slightly missing the Zacks Consensus Estimate by 0.06%, but showing a year-over-year increase from $37.17 million [2] Financial Performance - Over the last four quarters, Establishment Labs has surpassed consensus EPS estimates two times and topped revenue estimates only once [2] - The current consensus EPS estimate for the upcoming quarter is -$0.55, with expected revenues of $51.88 million, while the estimate for the current fiscal year is -$2.05 on revenues of $208.6 million [7] Market Position - Establishment Labs shares have declined approximately 28.3% since the beginning of the year, contrasting with the S&P 500's decline of -4.7% [3] - The company's Zacks Rank is currently 4 (Sell), indicating expectations of underperformance in the near future [6] Industry Context - The Medical Services industry, to which Establishment Labs belongs, is currently ranked in the top 27% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Another company in the same industry, PACS Group, Inc., is expected to report quarterly earnings of $0.42 per share, reflecting a year-over-year increase of +10.5% [9]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $41.4 million, an increase of 11% year-over-year, with a 13.5% growth excluding foreign exchange impacts [28][30] - Gross profit for Q1 was $27.8 million, representing 67.2% of revenue, a 160 basis point increase from 65.6% in Q1 2024 [30] - Adjusted EBITDA loss was $12.1 million, an improvement from a $13.1 million loss in the previous quarter [32] - Cash position as of March 31 was $69.2 million, with an additional $25 million available under a credit facility, totaling approximately $94 million in accessible cash [32] Business Line Data and Key Metrics Changes - U.S. revenue for Q1 was $6.2 million, exceeding the previous guidance of $5.5 million, indicating strong adoption of products [11][12] - Revenue growth outside the U.S. was approximately 5% in Q1, aligning with expectations, with Brazil showing stabilization but still lower than the previous year [29][30] - The launch of Motiva in the U.S. has seen over 900 accounts onboarded, with 84% of those placing reorders [14][16] Market Data and Key Metrics Changes - The U.S. market is expected to exceed the previously guided $35 million for the year, with single-digit growth anticipated for international markets [12][34] - The company has not observed any impact on sales from recent tariff-related concerns, with demand remaining stable [12][34] Company Strategy and Development Direction - The company aims to achieve profitability while continuing to expand its market share in the U.S. and internationally [9][38] - Focus areas include driving growth in the U.S., increasing operational efficiency, launching minimally invasive products, and advancing the innovation pipeline [38] - The company is committed to becoming the market share leader in the U.S. aesthetics market [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue and profitability targets despite macroeconomic uncertainties [34][35] - The outlook for 2025 remains conservative, with revenue guidance set between $205 million and $210 million, reflecting a growth of 23% to 26% [33][34] Other Important Information - The company announced the appointment of Peter Caldini as the permanent CEO, emphasizing a strong start to 2025 [6][11] - The partnership with Meghan Trainor has generated significant media impressions and positive feedback from the plastic surgeon community [20][21] Q&A Session Summary Question: OUS outlook and consumer sentiment by region - Management confirmed mid-single digit growth guidance for OUS markets, with Brazil stabilizing but still facing challenges [42][44] Question: Details on the positioning of Preserve versus Motiva - Preserve is positioned for day-to-day use, leveraging technology from Mia, with strong initial responses in various markets [45][46] Question: U.S. launch strategy and competitive response - The U.S. launch is exceeding expectations, with no significant competitive response noted, although some price discounting has occurred [53][58] Question: U.S. sales force expansion plans - The current sales force consists of 40 reps, with plans to expand in key markets as needed [63][64] Question: Gross margin outlook and tariff impact - Gross margins are expected to improve as U.S. sales grow, with minimal impact from tariffs anticipated [87][89] Question: Account penetration expectations in the U.S. - The company aims to reach a high penetration rate among top plastic surgeon accounts, with strong reorder rates being observed [102][104]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $41.4 million, an increase of 11% year-over-year, with a 13.5% growth excluding foreign exchange impacts [25][27] - Gross profit for Q1 was $27.8 million, representing 67.2% of revenue, a 160 basis point increase from 65.6% in Q1 2024 [27] - Adjusted EBITDA loss was $12.1 million, an improvement from a $13.1 million loss in the previous quarter [29] - Cash position as of March 31 was $69.2 million, with an additional $25 million available under a credit facility, totaling approximately $94 million in accessible cash [29][30] Business Line Data and Key Metrics Changes - U.S. revenue for Q1 was $6.2 million, exceeding the previous guidance of $5.5 million [10][25] - Outside the U.S., revenue growth was approximately 5% in Q1, in line with expectations [26][27] - The launch of Motiva in the U.S. has seen over 900 accounts onboarded, with 84% of those placing reorders [12][14] Market Data and Key Metrics Changes - The U.S. market is showing strong adoption, with daily orders exceeding 120 in April, up from 100 in March [13] - Brazil's revenue stabilized in Q1, but still showed a meaningful reduction compared to the same period last year [26] - The company is experiencing challenges in Latin America, particularly in Brazil, but has seen stabilization in other regions [41] Company Strategy and Development Direction - The company aims to become the market share leader in the U.S. and is focused on driving growth, increasing efficiency, and advancing its innovation pipeline [14][34] - The introduction of minimally invasive products like Mia and Preserve is expected to expand market opportunities and enhance patient outcomes [20][21][23] - The company is committed to achieving profitability and cash flow targets without the need for additional equity raises [30][31] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the revenue guidance of $205 million to $210 million for 2025, representing a growth of 23% to 26% [30][31] - There has been no observed impact on demand from recent trade policies, and the company is prepared to adjust expenses if necessary [31] - The company expects to reach cash flow breakeven in 2026, with a significant reduction in cash use anticipated throughout 2025 [30] Other Important Information - The appointment of Peter Caldini as permanent CEO was announced, with a focus on achieving the financial potential of the company [5][6] - The partnership with Meghan Trainor has generated over 4 billion impressions, significantly enhancing brand awareness [18][19] Q&A Session Summary Question: OUS outlook and consumer sentiment by region - Management confirmed mid-single digit growth guidance for OUS markets, with stabilization in Asia and Europe, while Brazil remains challenging [39][40] Question: Details on the launch of Preserve - The response to Preserve has been strong, positioned for day-to-day use, and expected to expand market share [42][43] Question: U.S. launch strategy and competitive response - The U.S. launch is exceeding expectations, with a conservative approach to guidance despite strong performance [49][50][54] Question: U.S. sales force expansion plans - The current sales force consists of 40 reps, with plans to expand in key markets as needed [57][58] Question: Gross margin outlook and tariff impact - Gross margins are expected to improve as U.S. sales grow, with minimal impact from tariffs anticipated [81][84] Question: Account penetration and market share expectations - The company aims for close to 100% penetration in engaged clinics, with expectations of achieving dominant market share over time [85][92]

Financial Performance - Establishment Labs Holdings Inc. announced preliminary revenue for Q1 2025, with specific figures to be detailed in the press release[4] - The company emphasizes that the preliminary financial estimates are forward-looking and may differ from actual results, cautioning against undue reliance on this information[6] - The financial information has not been audited or reviewed by the independent registered public accounting firm, CBIZ, Inc.[6]

Company Overview - Establishment Labs is a global medical device company focused on improving women's health and wellness in breast aesthetics and reconstruction through science, engineering, and technology [6] - The company has delivered over four million Motiva® devices to plastic and reconstructive surgeons since 2010, establishing a new standard for safety and patient satisfaction [6] Product Innovation - Motiva Implants® feature the patented SmoothSilk® surface, which enhances biocompatibility and promotes low inflammation, resulting in an industry low capsular contracture rate of 0.5% [1][2] - The implants are designed to adapt to body position changes, maintaining a round shape when lying down and a teardrop shape when standing [1] - Both Motiva SmoothSilk Ergonomix® and SmoothSilk® Round implants aim to provide a natural look and feel while ensuring a high safety profile, with less than 1% device-related complications reported [1][2] Market Presence - Motiva Implants® became available in the US in October 2024, with rapid adoption by top plastic surgeons across the country [2][3] - The company holds over 200 patent applications in 20 separate patent families worldwide, supported by over 100 clinical and scientific studies [2][6] Customer Satisfaction - The implants have achieved over 97% satisfaction rates among patients and surgeons, indicating strong acceptance and positive outcomes [1][2]

Financial Position - As of December 31, 2024, the company had an accumulated deficit of $444.7 million and cash of $90.3 million, compared to $40.0 million in 2023[409]. - As of December 31, 2024, total material cash requirements were estimated at $282.4 million, including debt obligations and future lease payments[420]. - The company has outstanding debt obligations of $221.4 million under a Credit Agreement, with interest rates of 9% for the first two tranches and 10% for the third[422]. - Cash balances increased to $90.3 million as of December 31, 2024, from $40.0 million in 2023[445]. Operating Activities - The net cash used in operating activities for 2024 was $58.5 million, with a net loss of $84.6 million, while in 2023, it was $88.5 million with a net loss of $78.5 million[415][416]. - Cash flows from operating activities showed a decrease in cash of $50.3 million in 2024, compared to a decrease of $26.3 million in 2023[414]. Investing Activities - Net cash used in investing activities for 2024 was $15.6 million, primarily for purchases related to a new manufacturing facility, compared to $24.5 million in 2023[417]. Financing Activities - Net cash provided by financing activities in 2024 was $125.9 million, mainly from a public offering and borrowings under the Credit Agreement, compared to $86.2 million in 2023[418][419]. - The company completed a registered direct offering in November 2024, resulting in net proceeds of approximately $49.7 million[411]. Future Outlook - The company expects to continue generating losses in the near term and may need to raise additional capital to execute its business plan[409][413]. - Future capital requirements will depend on market adoption of products, regulatory activities, and costs associated with R&D and commercialization[413]. Research and Development - R&D costs include personnel, materials, clinical expenses, and consulting services, expensed as incurred[431]. Inventory and Obsolescence - Inventory obsolescence provision recorded was $4.2 million as of December 31, 2024, compared to $3.9 million in 2023[435]. Foreign Currency Impact - Foreign currency transaction loss for the year ended December 31, 2024, amounted to $8.8 million, compared to a gain of $1.8 million in 2023[441]. - An immediate 10% adverse change in foreign exchange rates would impact revenues by approximately 2.4% and net loss by a similar amount[446]. - The company has not engaged in any foreign currency hedging activities, reassessing its approach as international operations grow[446]. Tax and Impairment - No material uncertain tax positions were recorded as of December 31, 2024, and 2023[440]. - There were no impairment charges or changes in estimated useful lives for long-lived assets during the years ended December 31, 2024, and 2023[436]. Inflation and Compensation - Inflation did not significantly impact the results of operations for any periods presented in the consolidated financial statements[447]. - Share-based compensation expense is recognized ratably over the requisite service period based on fair value at grant date[442].

Financial Data and Key Metrics Changes - Revenue for Q4 2024 totaled $44.5 million, a 41% increase from the previous year [56] - Full year sales reached $166 million, with guidance for 2025 set between $205 million and $210 million, representing a 25% growth over 2024 [9][64] - EBITDA loss improved to $13.1 million in Q4 2024 from $17.4 million in the same quarter last year [12][60] - Total operating expenses for 2024 decreased by $12.5 million compared to 2023 [11][61] - Cash position at the end of Q4 2024 was $90.3 million, up from $39.7 million at the end of Q3 2024 [62] Business Line Data and Key Metrics Changes - US sales totaled $3.3 million in the first two months post-launch, exceeding expectations [10] - Global demand remains uneven, with market share gains noted despite a low in aesthetic demand [12][14] - Operating expenses in the US increased due to the ramp-up of commercial activities following the approval of Motiva implants [58] Market Data and Key Metrics Changes - Sales distribution: EMEA accounted for 38%, Asia Pacific 35%, Latin America 18%, and North America 9% of total sales [57] - Latin America showed flat revenue in Q4 2024 compared to the previous year, indicating stabilization [14] - The Asia Pacific region is recovering from a downturn experienced in the second half of 2023 [13] Company Strategy and Development Direction - The company aims to achieve EBITDA positivity by the end of 2025 and cash flow positivity in 2026 [55][64] - Focus on expanding the US market is critical, with plans to increase the number of sales representatives and accounts [16][120] - New product launches, including Mia and Preservé, are expected to drive future growth and market expansion [32][39] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing macroeconomic pressures but remains optimistic about growth in EMEA and APAC [82][83] - The company expects mid-single-digit growth in international markets, excluding the US [64] - The launch of Motiva has generated significant interest, with over 1.8 billion impressions from organic social media activity [22][120] Other Important Information - The CEO announced retirement effective March 1, 2025, transitioning to a role focused on innovation and surgeon engagement [68][70] - The company has completed the acquisition of its distributor in Benelux, aiming for operational synergies [54] Q&A Session Summary Question: Update on US Motiva launch dynamics and account numbers - The company has onboarded 650 accounts, with 450 placing orders and 88% reordering [78] Question: Macro environment impact on aesthetics - Management noted microeconomic pressures but indicated signs of stabilization in Latin America and growth potential in EMEA and APAC [82][83] Question: US launch revenue target rationale - The initial $5 million target for Q1 was set conservatively to allow for early launch dynamics [87] Question: Operating expense trajectory - Operating expenses are expected to stabilize as the company leverages its established US commercial operation [91] Question: Regulatory pathway for Femtech products - The company is in the process of registering tools for Preservé and anticipates significant developments in the coming years [96][99] Question: Confidence in reaching $500 million revenue target - Management expressed confidence in achieving strong growth with a focus on profitability, emphasizing the importance of innovation [101][104]