Establishment Labs Holdings Inc.

Good afternoon. Welcome to Establishment Labs' third quarter 2024 earnings conference 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 a question and answer session, and instructions will follow at that time. As a reminder, today's call is being recorded. I will now turn the call over to your host, Raj Dhanoy, Chief Financial Officer. Please go ahead.

Thank you, Operator, and thank you, Rowan, for joining us. With me today is Juana Zay Chacon-Quiros, 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 within the meetings 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. The content of this conference call contains time-sensitive information, accurate only as of the date of this live broadcast, November 7, 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. The approval of Motiva Implants on September 26 was a watershed moment for our company and for the plastic surgery industry. The launch has exceeded even our high expectations. The pace at which we are onboarding new accounts and the orders we are seeing validates what we have shown in many other countries around the world. that safer and better technology that offers new options can move markets. I'll provide some additional details in a moment. With the launch in the United States going so well, we have taken this opportunity to strengthen our balance sheet. Following FDA approval, we accessed $25 million under an existing credit facility. Today, we are also announcing that we have completed a registered direct offering to invest $50 million at a 5% discount to our closing price. This equity raise was done in conjunction with an amendment to the Oak Tree credit facility, where we can now access the remaining $25 million until the end of 2025. With a capital infusion, Our Performa Cash position at the end of the third quarter was $114 million, and with the amendment, we have access to an additional $25 million through the end of next year. This will allow us to fully invest in our U.S. growth initiatives, as well as fund other programs that support the long-term vision of our company. In the third quarter, we again saw the tangible results of the efforts we've undertaken over the past year to reduce our operating expenses and cash use. Our cash loss in 3Q was $14.9 million, down more than 60% from a year ago. This is all the more significant considering that we have been stepping up our investments in the United States. Among the recent initiatives was the decommissioning of one of our three manufacturing facilities. On September 3rd, we closed B15, our first facility we opened 15 years ago. Our operations team has been working to move capacity to our other two manufacturing facilities in Costa Rica, including our new Sulaim campus. And these efforts are expected to drive additional cost savings. As a reminder, Peter Caldini joined us in August as president, and he's very focused on expanding our efforts to find efficiencies across the organization. EBITDA loss improved to $7 million this quarter from over $16 million last year. Our successful launch in the United States and the gross margin expansion it will bring, along with our continued focus on cost reductions, should take us to the first positive EBITDA quarter in 2025. Revenue in the third quarter of 2024 totaled $40.2 million, in line with our expectations and reflecting the normal seasonality we see in our markets. Overall global demand remains uneven, due primarily to macroeconomic pressures. The breast implant industry has seen periods where the market ebbs and flows, but is much more about the ability of women to pay for these procedures, not their willingness to get them. Over time, these trends invariably normalize, and we expect they will in this case as well. Once women make a decision to have a breast augmentation, they generally convert at some point. When there are microeconomic concerns pressuring demand, women that are considering augmentation but that do not have the money to do so will create demand in the future. Latin America, and Brazil in particular, continue to underperform right now. Demand for breast procedure is down as much as 50% in certain regions of Brazil. Despite the challenging macro conditions in some markets, we were able to successfully grow our OUS business behind the introduction of Motiva in China, continued growth in NIA procedures, and the market share gains afforded by our differentiated product portfolio. Most important to our company's future right now is the United States, and plastic surgeons in the US have welcomed a new entrant and new technology to the market with open arms. The community is incredibly active on social media, extolling the benefits of our technology to their patients. There has been a similar response in the press, all of which creates inbound calls to plastic surgeons, some of which have been trained on Motiva and some of which are now actively reaching out to us so they can offer Motiva as well. We began shipping to accounts two weeks after approval and as of last Friday, three weeks into the launch, we already had over 250 accounts on board and more than 70 had already placed orders. Right now, we are signing up to 50 new accounts every day and several accounts have already exceeded 25 orders. we may do as much as 3 million in the last two months of the quarter alone, putting us on a strong trajectory for growth in 2025. We now have 32 sales reps in the field supporting our commercial activities, and we expect to be at 40 by the end of the year. We are attracting the most experienced and highly regarded salespeople in our industry. The people closest to the markets are recognizing what a game-changer Motiva implants are going to be in the United States. and they are joining us at establishment labs. Flora, our unique tissue expander, continues to gain traction. We have completed the VAC process at 29 of the premier cancer centers in the U.S., and more are pending. It is notable that many of these centers have expressed interest in Motiva implants and have inquired about the potential approval dates for the breast reconstruction indications. This strong, broad interest we are seeing for Motiva in the United States is not surprising. The market has seen no real innovation in decades. Surgeons have been forced to adapt their practices and their surgical techniques to legacy devices developed with technology from last century. And U.S. surgeons and patients are recognizing the difference with Motiva. The success of the launch in the U.S. and the recent decommissioning of one of our manufacturing facilities have created some short-term supply challenges. We are scaling manufacturing and expect inventory pressures to abate in the first quarter. With this strong start to sales, we are confident that U.S. revenue in 2025 will exceed $35 million. Mia Femtech continues to build a new category in breast aesthetics. By providing a minimally invasive solution that overcomes many of the obstacles of traditional breast augmentation, we are opening up a new group of women to breast aesthetics. It has been important for us to roll out MIA in a way that establishes it as a new category that delivers on the significant potential it has for patients, clinics, and our company. We have collected a number of data points over the past few quarters showing that MIA is doing just that. The average consideration time for MIA Femtech is two months compared to three to seven years for traditional breast aesthetics. The premium price point at these clinics for Mia is 30 to 50% higher than the traditional breast augmentation at the same center. Throughout this year, over 40% of women who chose Mia were not seeking a traditional breast augmentation. With the experience to date, we now have proof that Mia is bringing new women into the category at higher price points and with a shorter consideration period. We are moving beyond the proof of concept phase and we expect to see a steady increase in the number of clinics globally over 2025. We now offer MIA Femtech in 29 cities across the world with 78 plastic surgeons fully certified to provide the MIA experience. 47 clinics are currently under negotiation to become MIA certified centers. This past week, at the 9th World Symposium on Ergonomic Implants in Barcelona, we shared the three-year data from the MEA Femtech study. This IRB-approved prospective study enrolled 100 MEA cases between December 2020 and April 2021. In the three-year analysis, there were no reports of capsular contracture and no ruptures. There continues to be no reports of infection, hematoma, or seroma. And more importantly, no reports of inferior implant malposition no changes in nipple or breast sensation this means that with Mia Femtech both device related and technique related complications are almost non-existent after three years Mia is ushering in a a new era of minimally invasive breast aesthetics. The three-year data and the outcomes we are seeing in the real world have proven that maintaining breast tissue has advantages beyond the periprocedural benefits of a minimally invasive procedure. By not cutting the breast tissue, but rather preserving it as the tools used in MIA allow, the results can be much more predictable and stable. This concept of breast tissue preservation is starting to resonate with plastic surgeons, and you will hear us talking more about it in the coming months. In China, we remain on track to achieve our targets this year as we are building a foundation for continued growth. Our exclusive Chinese partner, in coordination with our global team, is conducting medical education training and marketing events across Tier 1 and Tier 2 cities. Importantly, our Chinese partner has also signed an agreement in principle with our Bridge Fund, an affiliate of CBC Group, for a strategic financing of up to $50 million in known dilutive capital to fund commercial activities in support of the continuous growth of Motiva in China, as well as development towards regulatory approvals for our innovation pipeline, including Ergonomics 2 and MiaFemTech. We are very confident that this investment will help us become the leading technology in China. Subject to customary conditions, we anticipate this financing to close within the current quarter. I will now turn the call over to Raj.