Establishment Labs(US:ESTA)2025-08-07 21:24Part I. Financial Information Item 1. Financial Statements - Unaudited This section presents the unaudited condensed consolidated financial statements for Establishment Labs Holdings Inc. for the periods ended June 30, 2025, and 2024 Condensed Consolidated Balance Sheets Total assets decreased to $329.7 million by June 30, 2025, primarily due to reduced cash, while liabilities increased, significantly impacting shareholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $54,639 | $90,347 | | Accounts receivable, net | $70,092 | $65,002 | | Inventory, net | $94,683 | $78,766 | | Total current assets | $229,168 | $243,037 | | Total assets | $329,668 | $346,831 | | Liabilities & Shareholders' Equity | | | | Accounts payable | $55,806 | $44,760 | | Total current liabilities | $80,742 | $68,278 | | Note payable, long-term | $221,133 | $219,577 | | Total liabilities | $306,905 | $293,736 | | Total shareholders' equity | $22,763 | $53,095 | Condensed Consolidated Statements of Operations Revenue increased for Q2 2025 and the six-month period, but higher operating expenses led to increased operating and net losses Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $51,300 | $44,117 | $92,677 | $81,284 | | Gross Profit | $35,272 | $28,936 | $63,080 | $53,316 | | Loss from Operations | $(14,107) | $(9,344) | $(31,053) | $(18,178) | | Net Loss | $(16,593) | $(17,181) | $(37,303) | $(33,383) | | Net Loss Per Share | $(0.57) | $(0.62) | $(1.29) | $(1.21) | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $39.5 million, while financing cash flow decreased, resulting in a $35.7 million cash reduction Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(39,478) | $(25,306) | | Net cash used in investing activities | $(3,407) | $(11,027) | | Net cash provided by financing activities | $4,926 | $51,432 | | Net (decrease) increase in cash | $(35,708) | $14,565 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, revenue by geography, significant debt, recent acquisitions, and key customer and supplier concentration risks - The company's primary business is the manufacturing and marketing of Motiva Implants, with products approved for sale in Europe, Latin America, Asia, and the United States, where sales began in October 2024 after FDA approval4143 Revenue by Geographic Market for Six Months Ended June 30 (in thousands) | Region | 2025 | 2024 | | :--- | :--- | :--- | | EMEA | $45,371 | $41,558 | | Latin America | $16,621 | $17,491 | | Asia-Pacific | $14,338 | $22,048 | | North America | $16,347 | $187 | | Total Revenue | $92,677 | $81,284 | - The company has a credit agreement with Oaktree for term loans up to $225 million - As of June 30, 2025, $221.4 million was outstanding, including principal and accrued interest, with an effective interest rate of 10.4%143152153 - On October 1, 2024, the company acquired its distribution companies in Belgium and the Netherlands (Motiva Benelux BV and Motiva NL B.V.) for a total consideration of approximately $7.8 million, expanding its direct market presence in Europe195197 Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the 14.0% revenue increase driven by the U.S. launch, rising operating expenses, liquidity, and macroeconomic outlook Overview and Recent Developments The company provides a business overview, highlighting 14.0% revenue growth, widened net losses, and recent strategic developments Financial Highlights - Six Months Ended June 30 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | $92.7 million | $81.3 million | | Net Loss | $37.3 million | $33.4 million | | Cash Balance (as of June 30) | $54.6 million | N/A | - Key recent developments include: - Appointment of Peter Caldini as CEO (May 2025) - Partnership with singer Meghan Trainor (March 2025) - FDA approval for Motiva Implants in the U.S. (September 2024) and subsequent commercial launch - New Inventory Funding Agreement for up to $10.0 million to finance silicone purchases (May 2025)229233236 Results of Operations Revenue grew 14.0% to $92.7 million for the six-month period, gross margin improved, and SG&A expenses surged 36.0% Revenue Comparison - Six Months Ended June 30, 2025 vs 2024 | Metric | H1 2025 | H1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $92.7M | $81.3M | +$11.4M | +14.0% | - Gross margin increased to 68.1% for the first six months of 2025, up from 65.6% in the prior year, primarily due to the favorable impact of higher selling prices in the United States274 - SG&A expenses for the first six months of 2025 increased by $22.2 million (36.0%) to $83.9 million, driven by higher personnel costs (+$6.9M), shipping (+$3.7M), commissions (+$3.3M), and sales & marketing (+$3.0M) to support commercial expansion276 Liquidity and Capital Resources The company held $54.6 million in cash as of June 30, 2025, with management expecting sufficient liquidity for 12 months, supported by recent financing - The company had $54.6 million in cash as of June 30, 2025, down from $90.3 million at year-end 2024 - Management believes this is sufficient for at least the next 12 months282285 Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(39,478) | $(25,306) | | Net Cash Used in Investing Activities | $(3,407) | $(11,027) | | Net Cash Provided by Financing Activities | $4,926 | $51,432 | - The company has significant indebtedness under a Credit Agreement, with $221.4 million outstanding as of June 30, 2025 - This includes principal from three tranches and $21.4 million of accrued interest added to the principal balance297298 Quantitative and Qualitative Disclosures About Market Risk The company states that its exposure to market risk has not materially changed from its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - There have been no material changes in the company's exposure to market risk during the six months ended June 30, 2025304 Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of June 30, 2025305 - No material changes to internal control over financial reporting occurred during the quarter306 Part II. Other Information Legal Proceedings The company states that it is not currently a party to any material legal proceedings that would require disclosure under SEC regulations - The company is not a party to any material legal proceedings309 Risk Factors This section details significant risks across product commercialization, business operations, supply chain, intellectual property, and regulatory compliance Risks Related to Development and Commercialization Risks include limited U.S. operating history, dependence on costly product innovation, and the need to effectively educate clinicians - The company has a limited operating history in the U.S., which may lead to difficulties in implementing its business strategy and forecasting results312 - Future success depends on the ability to enhance existing products and develop new ones, which requires significant expense and faces competitive and regulatory hurdles314315 - Failure to properly educate clinicians on the use of products like Motiva Implants could lead to unsatisfactory patient outcomes, negative publicity, and product liability claims321 Risks Related to Business, Industry and Operations Operational risks include expected future losses, macroeconomic vulnerability, intense competition, and negative product safety publicity - The company expects to incur losses for the foreseeable future, and its ability to achieve profitability depends on the commercial success of its Motiva Implants326 - Unfavorable global economic conditions, such as inflation and recession, could reduce consumer demand for elective aesthetic procedures, adversely affecting sales329 - The company faces significant competition from large, well-resourced companies (e.g., divisions of Johnson & Johnson and AbbVie), which could negatively affect market share and pricing338339 - Negative publicity concerning breast implant safety, including reports of BIA-ALCL and other cancers linked to competitors' products, could reduce overall demand for all silicone breast implants353356 Risks Related to Manufacturing and Third-Party Relationships Manufacturing risks include reliance on a single silicone supplier, dependence on third-party distributors, and CRO control limitations - The company relies on Avantor as a single-source supplier for medical-grade silicone, creating significant risk of supply disruption, price increases, or quality issues that could halt production388 - A substantial portion of sales are made through third-party distributors, and the company has limited control over their sales efforts, performance, and compliance with regulations397 - Reliance on third parties like CROs for clinical studies means the company does not have full control over trial execution, which could lead to delays or issues with regulatory submissions385 Risks Related to Regulatory and Political Environment Regulatory risks involve costly and uncertain approval processes, ongoing compliance, and exposure to healthcare fraud and abuse laws - The regulatory approval process for medical devices is expensive, lengthy, and uncertain, and there is no guarantee that new products will be approved430 - Even after approval, the company is subject to ongoing regulatory obligations and review - Non-compliance can result in significant penalties, including fines, recalls, or withdrawal of approval441444 - The company's relationships with customers and healthcare providers are subject to anti-kickback, fraud, and abuse laws, violations of which can lead to criminal sanctions and exclusion from government healthcare programs457 Other Risks (Intellectual Property, Taxation, Ownership) Other risks include intellectual property protection, cybersecurity, data privacy, tax uncertainties, and BVI company ownership implications - The company's competitive position depends on its ability to protect its intellectual property, including trade secrets and patents, from infringement or disclosure402403 - Information systems are vulnerable to cybersecurity incidents, which could disrupt operations, lead to data loss, and result in significant liability and reputational harm416 - Being a British Virgin Islands company means shareholder rights and legal remedies differ from those under U.S. law, potentially offering fewer protections to investors486 - The company benefits from a tax holiday in Costa Rica through 2030; its expiration or a failure to maintain this treatment would significantly increase its tax rate478 Unregistered Sales of Equity Securities and Use of Proceeds The company issued 19,256 common shares valued at $0.9 million on June 30, 2025, as consideration for a business acquisition - On June 30, 2025, the company issued 19,256 common shares valued at $0.9 million as consideration for a business acquisition - This was an unregistered sale exempt under Regulation S or Section 4(a)(2) of the Securities Act492493 Other Information The company entered into separation and consulting agreements with its former CEO, including annual cash and equity compensation - The company entered into separation and consulting agreements with former CEO Juan José Chacón-Quirós after his retirement on March 1, 2025497 - The consulting agreement includes annual compensation of $750,000 in cash and a target of $750,000 in annual equity awards, for advisory and advocacy services497 Exhibits This section lists all exhibits filed with the Form 10-Q, including former CEO agreements and required certifications - The exhibits list includes newly filed separation and consulting agreements with the company's former CEO498