Establishment Labs(ESTA) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenue for Q1 2024 was $37.2 million, a 20% decline year-over-year [75] - Gross profit for Q1 2024 was $24.4 million, or 65.6% of revenue, compared to $30.1 million or 64.7% in Q1 2023 [43] - Adjusted EBITDA improved to a loss of $3.7 million in Q1 2024, compared to a loss of $17.3 million in Q4 2023 and $4 million in Q1 2023 [50] - Operating expenses decreased to $33.2 million in Q1 2024, down $5 million year-over-year and $9.5 million sequentially [2] - SG&A expenses declined to $28.9 million in Q1 2024, down $2.8 million year-over-year and $8 million sequentially [49] - R&D expenses decreased to $4.3 million in Q1 2024, down $2.2 million year-over-year and $1.5 million sequentially [49] - Net loss from operations was $8.8 million in Q1 2024, compared to $8.2 million in Q1 2023 and $22.1 million in Q4 2023 [50] Business Line Data and Key Metrics - Direct sales accounted for 39% of implant sales in Q1 2024, with distributors making up the balance [75] - Mia Femtech has 55 clinics signed up, with 33 operating and 22 in the onboarding process [41] - Mia Femtech added centers in the Middle East and Latin America in Q1 2024, with clinics now in Riyadh, Jeddah, Dubai, Abu Dhabi, Beirut, and San Jose [41] - Flora tissue expander is gaining traction in the U.S. market, with adoption expected to grow throughout 2024 [46] - Motiva implants launched in China in Q1 2024, with strong early reception and aggressive marketing strategies in Tier 1 and Tier 2 cities [42] Market Data and Key Metrics - Europe, Middle East, and Africa accounted for 55% of global sales in Q1 2024, Asia Pacific 21%, and Latin America 23% [75] - Brazil, the largest market globally, accounted for 11% of total quarterly sales [75] - Demand in Latin America is lagging, with slower recovery expected compared to other regions [29] - China's market is recovering, with expectations to return to 2019 levels by 2025, potentially accelerated by stimulus packages [60] Company Strategy and Industry Competition - The company aims to achieve adjusted EBITDA positivity by the end of 2024 and cash flow positivity by the end of 2025, excluding U.S. investments [76] - The pending U.S. launch of Motiva implants is a key focus, with high confidence in approval in 2024 [74] - The company is building a strong commercial foundation for the U.S. launch, including hiring experienced leaders and expanding the sales force [79] - Mia Femtech is creating a new minimally invasive category in breast aesthetics, with significant market expansion potential [47] Management Commentary on Operating Environment and Future Outlook - The company sees steady recovery in markets, with improving demand in both direct and distributor channels [44] - Management expects sequential improvement in demand throughout 2024, with distributor orders returning to normalized levels [28] - The company is optimistic about achieving $1 million revenue per Mia clinic, with early clinics trending toward this goal [14] - The U.S. market for breast aesthetics is normalizing post-pandemic, with expectations for continued recovery [31] Other Important Information - The company received an investigational device exemption from the FDA for Motiva Implants and is undergoing a clinical trial for U.S. approval [24] - The 4-year data from the Motiva U.S. IDE study showed low complication rates, with only 2 cases of capsular contracture and 1 suspected rupture [45] - The company has $73 million in cash as of March 31, 2024, with access to an additional $50 million in debt facilities upon FDA approval and sales milestones [63] Q&A Session Question: Underlying assumptions and guidance [28] - The company expects sequential improvement in demand, with distributor orders returning to normalized levels and direct markets performing better [28] Question: Direct market trends and guidance assumptions [30] - Management feels confident about trending toward the upper end of the revenue guidance range for 2024, with similar sequential improvement expected in Q2 [30] Question: International distributor inventory levels [55] - Distributor inventory levels are normalizing, with demand improving globally, except in Latin America, where recovery is slower [29] Question: U.S. market health and Motiva launch [57] - The U.S. market is normalizing post-pandemic, with expectations for continued recovery, positioning the company well for the Motiva launch in late 2024 [31] Question: FDA inspection process and China stimulus impact [33] - The FDA inspection of the Costa Rica facility is scheduled within 30 days, with high confidence in U.S. approval in 2024 [7] - The China stimulus package is seen as a positive development, potentially accelerating market recovery [60] Question: Mia Femtech revenue contribution and clinic expansion [89] - The company has signed up 55 Mia clinics, with 33 operating and 37 under negotiation, aiming for 100 clinics by year-end [89] - Early clinics are trending toward $1 million revenue per clinic, with expectations for significant market expansion [14] Question: China market share and revenue expectations [67] - The company expects to match its market share in surrounding Asian countries (40%-70%) in China over the next few years [67] - Early results in China are tracking as expected, with strong reception for Motiva implants [42] Question: U.S. go-to-market strategy and sales force build-out [88] - The company is building a strong commercial foundation for the U.S. launch, including hiring experienced leaders and expanding the sales force [79] Question: International recon franchise traction [87] - Flora tissue expander is gaining traction in the U.S., with adoption expected to grow, while international recon traction is slower due to hospital tender processes [83] Question: Mia Femtech revenue breakout and clinic maturity [89] - The company is focused on qualitative growth for Mia Femtech, with revenue expected to become more material as the network of clinics expands [89]