Establishment Labs Holdings Inc.

Good afternoon. Welcome to Establishment Labs' fourth quarter 2024 earnings 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 Raj Denhoi, Chief Financial Officer. Please go ahead.

Thank you, Rockbiter, and thank you, everyone, for joining us. With me today is Juan Jose Chacon Quiroz, our Chief Executive Officer, and Peter Caldini, our President. 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 meaning 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 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 FCC filings which are available on our website at EstablishmentLabs.com. I'd also like to remind you that comments may include 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, February 26, 2025. Acceptance required by law established in labs undertakes no obligation to revise or otherwise update any statement 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 fourth quarter of 2024 totaled $44.5 million, in line with our expectations and with what we preannounced in early January. For the full year, our sales were $166 million. We remain committed to our forecast with 2025 guidance between $205 and $210 million. At its midpoint, this is 25% growth over 2024. With our launch in the United States, the fourth quarter was easily one of the most important in our company's history. U.S. sales totaled $3.3 million in the first two months of the launch, a bit better than we pre-announced in early January. This is an incredibly strong start, and our U.S. commercial team one of the strongest teams ever put together in aesthetics deserves recognition for their efforts. This strong start has continued into Q1 and the activity and interest around Motiva continues to grow. In the fourth quarter, we continue to see the tangible results of the efforts we've undertaken over the past year to reduce our operating expenses and cash use. In 2024, our total operating expenses were $12.5 million lower than in 2023. And this includes our 2024 spend to build the commercial infrastructure for a rollout in the United States. EBITDA loss improved to $13.1 million this quarter from $17.4 million last year. Our successful launch in the United States and the gross margin expansion it brings along with our continued focus on operational efficiency, should take us to our first positive EBITDA quarter in 2025. Outside the United States, global demand remains uneven, but our data suggests that we are picking up market share as all aesthetic companies manage through this period. This lull in aesthetic demand has happened before, and it has always recovered. Specifically, we believe a number of countries in EMEA were down last year, in some cases meaningfully, and yet our revenue remained flat in that region. Asia Pacific in 2024 has been recovering from the sharp downturn we saw in the second half of 2023. This regional strength was offset by the continued weakness in Latin America. Excluding currency and other external items, Revenue in LATAM in the fourth quarter of 2024 was flat from the previous year, suggesting that our results are stabilizing in that region. 2025 should mark a gradual return to growth outside the United States. And while we are being conservative as markets and regions return, growth in the mid single digits in these markets looks very achievable. We have also not included any significant contribution from new products or regulatory approvals, which could provide an upside to our numbers. While OUS remains the largest segment for us, most important to our company's future is the United States, and our results continue to exceed our expectations. We have 40 sales reps active in the field. We continue to attract the best and brightest in the industry, and we'll expand this theme in 2025. As of last Friday, we have over 650 accounts fully onboarded and 450 have already placed orders with 88% reordering. These are all well ahead of our expectations. We continue to sign up an average of five new accounts every day. Momentum is building. In November, we averaged 32 orders per day. In December, we averaged 60 orders per day. In January, we averaged 70 orders per day. And in February, we should average about 90 orders per day. Since launch, we have had more than 5,000 orders. We expect to generate approximately $5.5 million in sales in the first quarter, putting us on a strong trajectory to exceed our guidance of 35 million in sales in 2025 for the United States. Please remember that breast augmentation is seasonal. Second and fourth quarters are the strongest. First and third are the weakest. We are on pace to have one of the best launches in the history of the aesthetics industry. As we study our initial rollout, we are seeing confirmation that the United States will likely mimic our initial rollout in Switzerland, South Korea, and Taiwan, markets that are relatively high-priced, smooth and planned markets. In Switzerland, we reached 50% market share after 5 years in the market and 70% market share at year 10. In South Korea, we reached 40% market share after 4 years in the market and 65% market share in year 8. In Taiwan, our latest launch, we have now reached 40% market share after 4 years. Beyond the strong financial results, The interest in Motiva among plastic surgeons, the media, and most importantly women, has been nothing short of remarkable. We hear a constant refrain from plastic surgeons. When given a choice between Motiva and other implants, patients almost always choose Motiva. This is true even though Motiva implants have a higher blended price point. In these first five months of the launch, we have seen Almost without exception, that plastic surgeons who convert to Motiva stay with Motiva. And for most of those who started early in our launch, Motiva has become the vast majority of their implant usage. In just a few months, there have been over 60 press articles mentioning Motiva and hundreds of social media posts from surgeons. We have had over 1.8 billion impressions from this activity. Importantly, all of this is happening organically. Without financial support, I would encourage you to follow the content being created by many plastic surgeons and clinics on Instagram, TikTok, and other digital platforms as it speaks to the viral nature of our launch. With the bus building, we have had a number of celebrities and influencers organically choosing Motiva, and I would expect this to continue. With a differentiated value proposition, these women seem more open to discussing their choices and timings. This is unusual in aesthetics. Plastic surgery decisions tend to be kept private. Even more unusual is a discussion around specific brand choices. With this interest, we have been working on a partnership with an A-listed celebrity who recently chose Motiva implants, and we hope to announce it in the very near future. This should be very impactful, not just in the United States, but globally. Women tend to do considerable research around breast augmentation before making a decision, and the social media and press coverage should help Motiva spark a conversation between patient and doctor. The partnership should also resonate with plastic surgeons, who often feel not supported by an aesthetic industry focused on other specialties. As we build the premier trusted company for plastic surgeons, these kinds of efforts will make a big difference. In reconstruction, Flora, our unique tissue expander, is gaining traction, and we have completed the VAC process at 35 of the premier cancer centers in the United States. 32 have already ordered, and the other three were opened in the last 30 days. The recent scientific publication from an interdisciplinary group devoted to treating breast cancer and performing breast reconstructions at the MD Anderson Cancer Center in Texas concluded that that the integration of MRI CTEs into radiation therapy planning has streamlined the process, reduced the need for artifact management, and improved the accuracy of those calculations, ultimately contributing to better clinical outcomes. As a women's health company, we are pleased to witness the positive impact of our technologies, like FLORA, in the process of treating breast cancer and helping women recover to their fullest after survival. This will be a busy year for regulatory team in the U.S. as we seek clearance for a number of products. In reconstruction, we are on track to reach the three-year follow-up in the third quarter of this year. This puts us on track to submit to the FDA this year with a potential approval for this indication in 2026. The reconstruction market is nearly as big as augmentation in the U.S., and we are excited to bring our technologies to this important segment. We are also working on approval for the tools necessary to launch Presurvey, including the submissions necessary for the Ergonomics II platform. The Ergo II platform will allow for us to bring MiaFemtech to the United States. We will provide some thoughts on the regulatory pathway and timing later in the year. MiaFemtech continues to build a new category in breast aesthetics. It is important to note that we launched NIA in Europe in late 2023. By the end of 2024, in less than 18 months, we already had more than 60 clinics become NIA-certified centers. As we see NIA sales ramp, it is becoming clear that a minimally invasive solution, which overcomes many of the obstacles of traditional breast augmentation, can open up a new group of women to breast aesthetics. We have moved beyond the proof-of-concept phase and expect to see a steady increase in results from MEA over the coming quarters. For 2025, we expect the number of MEA-certified clinics will at least double and that the number of MEA procedures globally will more than double. And we are forecasting approximately $8 to $10 million in revenue from MEA this year. One of the key learnings from the three-year data from the MEA IRB study and the outcomes we are seeing in the real world has been that preserving breast tissue has advantages beyond the periprocedural benefits of a minimally invasive procedure. By not cutting the breast tissue, but rather by preserving it as the MEA tools allow, the results can be much more predictable and stable over time. We pioneered the concept of breast tissue preservation and it is resonating with plastic surgeons who already appreciate the reduction of device-related complications with Motiva, and now are also seeing a reduction of technique-related complications thanks to breast tissue preservation. With these fundamental concepts, we have developed Presurve, the next step in our minimally invasive portfolio. Nia's value proposition to patients is clear. It is intended for primary augmentations with a 1 to 2 cup size increase and for a scarless lift for women with mild breast ptosis. There are no scars on the breast and an imperceptible scar on the armpit. It is done under local anesthesia. As the MEA-IRB study shows, there is no loss of breast sensation, no inferior malposition of the implant, and it dramatically reduces patient recovery periods and complications traditionally associated with breast augmentations. It is also priced as our most premium product to reflect these aspects. Mia is designed to appeal to women who are not interested in breast augmentation but are using padded or push-up bras, and so, by definition, should be market expanding. Preserve is designed for the day-to-day procedures that make up the majority of breast augmentation. While Preserve should be market expanding over time, given its benefits, It is designed to be the premium choice for women who are already considering breast augmentation surgery. Preserve can be used for up to four cup sizes increase and can be used for primary augmentations, hybrid augmentations, and for mastopexy augmentations. Preserve uses some of the surgical tools developed with Mia to make a precise atraumatic pocket, but the incision is made under the breast, which is a more familiar surgical technique for most doctors. The technology platform allows plastic surgeons to create natural results by preserving breast anatomy and function. We have been talking about Presurvey with the plastic surgery community since last year, and they are eager to discuss with prospective patients. Presurvey is a new choice for women considering breast augmentations, as it speaks to many of their aspirations, including more natural results, smaller scars, and quicker recovery. By improving safety profiles, recovery times, and achieving the breasts aesthetic patients are looking for, Preserve has the potential to make breast augmentation more appealing to women and make the decision easier for many who are already in the consideration phase. We launched Preserve earlier this month in Brazil, and it is clearly resonating. In the first week post-launch, we have seen significant interest and have already received many orders for hundreds of systems at a price point more than double our most common SKUs in Brazil. We will continue our rollout into additional countries and regions over the coming quarters. We expect that both breast tissue preservation options, Mia and Preserve, will dramatically change surgeons approach to breast aesthetics and have a significant impact on future growth. Preserve will bridge the price gap between existing Motiva offerings and Mia and will be at the upper end of our pricing matrix. Finally, it is worth noting that GLP-1 usage is going to be a major tailwind for years to come. Much of this demand is market expanding. And while we are starting to see it now where GLP-1 adoption is more prevalent, we do expect this to be a global tailwind. Our products and messaging with Mian Preserve are particularly suited for women that are considering augmentation as a way to reverse some of the iatrogenic consequences of GLP-1 weight loss. And we expect to do very well in this new market segment. 2024 was an important year for us in China. we established our presence in the market with our exclusive distribution partner and began building the foundation for market share gains. As we have commented previously, the first year of any distributor market will be about sell-in as the distributor puts inventory into the field and begins commercial sales. We will now see the sell-out as our partner grows share in the market. Based on this dynamic, we do not expect to see revenue in the first part of 2025 with reorders beginning more meaningfully in the second half of the year. This is a natural cadence for distributor markets and allows us to maintain a healthy level of inventory in the channel. The ordering pattern is reflected in our guidance for this year. Importantly, our Chinese partner recently signed an agreement with CBC Group for strategic financing of up to $50 million to fund commercial activities in support of the continuous growth of Matiba in China. This investment is being used to increase the number of sales reps across China and adding more regional commercial dealers. We have already began to see the tangible results within consumer sales in the first part of this year increasing meaningfully from last year. We are very confident that this investment into our partner will help us become the leading technology in China in the next few years. That is already the case in the rest of Asia. I will now turn the call over to Peter.