Establishment Labs Holdings Inc.

Good afternoon, and welcome to the Establishment Labs Report's second quarter 2024 financial results call. At this time, all participants will be in a listen-only mode. At the end of this call, we will open the line for question-and-answer session, and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Raj Danhoy, Chief Financial Officer. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us. With me today is Juan Jose Chacon Quiroz, our Chief Executive Officer. Following our prepared remarks, we'll take your questions. Before we begin, I would like to remind you that comments made by management during this call will include forward-looking statements from the meeting of federal securities laws. These include statements on Establishment Lab's financial outlook and the company's plans and timing for product development and sales. These forward-looking statements are based on management's current expectations and involve risks and uncertainties. For discussion of the principal risk factors and uncertainties that may affect our performance or cause actual results to differ materially from these statements, I encourage you to review our most recent annual and quarterly reports on Form 10-K and Form 10-Q, as well as other SEC filings which are available on our website at establishmentlabs.com. I'd also like to remind you that our comments may include certain non-GAAP financial measures with respect to our performance, including but not limited to sales results, which can be stated on a constant currency basis. or profitability of the company's business, which can be stated as EBITDA or adjusted EBITDA. Reconciliations to comparable GAAP financial measures for non-GAAP measures, if available, may be found in today's press release, which is available on our website. Please also note that Establishment Labs received an investigational device exemption from the FDA for Motiva implants and is undergoing a clinical trial to support regulatory approval in the United States. We continually seek to expand the geographies in which our products are regulatory approved. Please check with your local authority for product availability. The content of this conference call contains time-sensitive information, accurate only as of the date of this live broadcast, August 6, 2024. Except as required by law, Establishment Labs undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. With that, it is my pleasure to turn the call over to our CEO, Juan Jose.

Thank you, Raj, and good afternoon, everyone. Revenue in the second quarter of 2024 totaled $44.1 million. Global demand for our products continues to stabilize and was reflected in the strong sequential improvement we saw in revenue this quarter. Quarter over quarter, our revenue improved by 18.7%, and this increases our confidence about our return to growth in current markets. I am sure a recent FDA pre-approval inspection is top of mind for many of you on the call. And I am pleased to tell you that during the week of July 22nd, the FDA conducted and completed their PMA pre-approval inspection of our manufacturing facility in Costa Rica. The investigator had three observations listed in a single 483 report, each of which are unrelated and not systemic in nature. This is not unexpected for a PMA pre-approval inspection and should not meaningfully impact our timeline to launch in the United States. We have already submitted our responses to the FDA to address their observations. The process towards approval should now move forward to closure. As a reminder, we have already received an approvable letter where the FDA stated that pending a satisfactory review of our facility, our PMA would be approved. We are confident that after the inspection and our timely response, we have satisfied that final step, and we believe that the final approval will be issued soon. All regions showed sequential improvement in the second quarter, with the exception of Latin America, and in particular, Brazil. As we noted in previous calls, the Brazilian market continues to suffer from softer underlying demand, and we do not expect to see improvement this year. We have a number of initiatives to strengthen our market position in Brazil while making sure that during this slowdown, we have a cost base that reflects our current demand. The rest of Latin America is stabilizing at a slower pace than other regions, and we think the current environment in the region will continue to be challenging for aesthetics in general. EMEA, on the other hand, performed well, and the second quarter was notable as there are markets that have fully recovered from the slowdown last year. We are also seeing a good recovery in demand from our distributors in the APAC region. Our second quarter results showed the tangible results of the cost reduction and efficiency improvement activities we undertook in the second half of last year. Adjusted EBITDA loss was approximately $4 million. This was similar to 1Q, despite increasing investment in our U.S. commercial organization in preparation for our launch. The loss this quarter was less than half of what we reported in the second quarter of last year. and we remain on a good trajectory to reach positive EBITDA over the coming quarters. Before Raj provides more on our financial results and outlook, it is worth highlighting several recent events. As we expect FDA approval is very near, we are moving forward with our preparations for entry into the U.S. While we are careful not to market Motiva implants in the U.S. until they are approved, the interest in our company and our technologies among U.S. surgeons is reaching an inflection point. There are a good number of US plastic surgeons in our FDA study, and they have obviously talked with many of their colleagues about their experiences. Last month, we hosted a medical advisory board of US plastic surgeons at our headquarters, and the feedback from this group has been nothing short of amazing. That there is such strong interest for a new breast implant in the US is not surprising. The US market has seen no real innovation in decades. Surgeons have had to adapt their practices to sell commodity devices developed decades ago. What we are bringing to the U.S. is not a commodity offering and is designed with the knowledge gained from years of scientific and clinical studies. The four-year data from our Motiva USID study presented earlier this year at the Aesthetic Society meeting showed less than 1% device-related complications with Motiva implants. These low complication rates are a confirmation of an entirely new standard for breast implants. It is worth noting that the FDA data from the two largest manufacturers in the U.S. showed that between 1 in 7 and 1 in 12 women developed a grade 3 or grade 4 capsular contracture at 4 years. These device-related complications are serious and in many cases require re-operation. In the Motiva study, it was only 1 in 200 women. This month, we will complete the fifth year of follow-up in the FDA study for breast augmentation and the buzz is palpable. and it is growing. Jeff Earhart, who leads our North America business, has been moving quickly to build out a team that will support our commercial effort. We are receiving inbound calls daily from some of the most experienced and highly regarded people in our industry, which is another data point to suggest that the industry recognizes what a game changer the Motiva implant is going to be in the United States. With this kind of talent eager to come to establishment labs, Jeff continues to put together an absolutely all-star team. With this tailwind, we have our back office functions ready to go, and we have a handful of reps already hired and trained, with the next group already identified. We will be ready to put our devices into surgeons' hands very quickly after approval. It is helpful as we prepare for the U.S. that Flora, our unique tissue expanders, continues to gain traction. Flora's RFID-enabled non-magnetic port is the first and only one of its kind in the industry. This, combined with our patented smooth silk surface technology, puts Flora into an entirely new class of tissue expanders. We have completed the VAC process at a number of the premier cancer centers in the U.S., and more are pending. As the benefits of this device are demonstrated and shared in the clinical community, the number of hospitals offering Flora will grow. The momentum with Mia FEMTA continues to build. Mia is creating an entirely new category within breast aesthetics where a plastic surgeon can shave the breast in a 15-minute minimally invasive procedure without the need for general anesthesia. The result is natural and discreet with a one to two cup proportionate result. The procedure requires minimal downtime with women returning to most activities the same day. By providing a solution that overcomes many of the obstacles of traditional breast augmentation, we are opening up a whole new group of women to breast aesthetics. As the group of women who have experienced Mia grows, the level of activity on social media and in other channels is increasing. Consumers are sharing their experiences and highlighting the positive outcomes of their journey with Mia. This word of mouth, supported by our marketing activities, brings more women into the category. who then also share their positive experiences. This flywheel is picking up speed, and we are seeing it in the number of cases increasing quarter over quarter. We now offer MEA Femtech in 22 cities across the world, with 63 plastic surgeons now fully certified to provide the MEA experience. Seven MEA experience centers in the Middle East are now fully live, offering a tailored end-to-end experience for consumers in five cities across that region. We are in active negotiations with 41 clinics and will be able to increase considerably the number of cities by the end of this year. In China, we remain on track to achieve our targets this year and are building a foundation for continued growth. Medical education, training, and marketing events are taking place on a regular cadence across Tier 1 and Tier 2 cities with the support of our exclusive Chinese distribution partner and in collaboration with our global team. As a reminder, We have leading market share positions in surrounding countries across Asia, including South Korea, Taiwan, Singapore, Thailand, Vietnam, and Japan. Our early experience in China suggests that we can achieve similar market share. And given the high ASPs and the fact that China is the second largest market for breast implants globally, our success will meaningfully add to our profitability. I will now turn the call over to Raj.