Establishment Labs Holdings Inc.

Good morning. Welcome to Establishment Labs' second quarter 2025 earnings call. At this time, all participants will be in 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 Dhanbhoi, Chief Financial Officer. Please go ahead.

Thank you, Operator, and thank you, everyone, for joining us. With me today is Peter Caldini, 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 meeting of federal securities laws. These include statements on Establishment Labs' 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 Establishelabs.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. Reconciliation 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, August 7, 2025. Except as required by law, Establishment 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 Peter.

Thank you, Raj. Revenue in the second quarter totaled $51.3 million, a growth of 16 percent over last year. Our second quarter sales included $10.3 million in the United States, exceeding the $9.5 to $10 million range we provided at our investor day in early June. With Q2 behind us, we can now comfortably say that our U.S. revenue will exceed $40 million, and with this clarity, we are raising our revenue guidance to $208 to $212 million for a growth of 25 to 28 percent. It's also worth noting that our U.S. sales momentum has carried into Q3, and we are expecting sequential growth from Q2 to Q3 in the United States, despite the traditional Q3 lull in plastic surgeries. We continue to make good progress on improving our operating profitability and cash flow. Our adjusted EBITDA loss for the quarter was $8.5 million, an improvement from the $12.1 million in the first quarter. Our cash use fell to $14.5 million from $21.2 million last quarter. As discussed in our Q1 call, we expect cash use to reduce by approximately $5 million each quarter. Our U.S. business continues to do exceedingly well. We have assembled a -in-class organization in the U.S. under the leadership of Jeff Erhart, and we're seeing the results. Our team has successfully leveraged the superior product benefits of Motiva to drive account acquisition, and the number of procedures continues to exceed our expectations. We are executing at a high level and should achieve a leadership position in the market. Outside the U.S., our results are improving as well. Growth in our direct markets has been a major focus for our team, as we manage these markets within our own organization and have greater economics. We have restructured the OUS organization, reallocated resources, and applied improved operational processes to support our direct markets. We're already seeing the benefits of these changes. Excluding the benefit of currency and the acquisition of the Benelux distributor, our European direct market sales increased by approximately 27 percent this quarter. This reflects a new sales record, and we believe these trends will continue. There is good early demand for Preserve, Mia's tracking to plan, and we're seeing an increase in the number of accounts in which we sell, all very good signs for our trajectory. There are certainly continued areas for improvement. For example, China has been affected by a number of factors, and that is a particular focus for the team. We are working with our distribution partner and their investor to ensure success in China. Motiva is the leading implant across Asia, and we expect to achieve the same position in China. On the operational side, we are focusing our resources on the areas with the most financial potential, like the U.S. and our minimally invasive portfolio. And we're reducing expenses in other areas that we can operate as efficiently as possible. This can be seen in the improvement in the EBITDA and cash use we posted this quarter. We expect our first positive EBITDA quarter later this year and remain on track to be cash flow break even in 2026. As noted, our progress in the United States is tracking well ahead of plan. At our investor meeting in June, we confirmed we had reached 1,000 accounts in the U.S., and that number continues to grow. It is important to remember there's a difference between procedure share and surgeon share. While there are about 6,500 board-certified plastic surgeons in active practice, a much smaller percentage are responsible for the vast majority of the breast augmentation and revision procedures done each year. So to put that in perspective, if the ,000-plus accounts we currently have were to fully adopt Motiva, we would have approximately 50 percent of the breast augmentation market in the United States. The most important factor in increasing surgeon utilization is time and surgeons getting comfortable with the Motiva implant. Once a surgeon gets introduced to Motiva, they follow a typical adoption curve, completing a few cases at first and then waiting to see the results. Once past that, they will start building Motiva into their consultations. But remember, a busy plastic surgeon could be booking cases out for six months. Further, it's likely that a plastic surgeon will build Motiva into their practice over time. So what starts as two initial cases could become 25 percent of their business after four months and then 50 percent after six months. This is what we're seeing. In short, while some plastic surgeons move their practice to 90 percent plus or minus Motiva immediately, most take several quarters to get comfortable and to work through previous consultations where a different implant was already selected. Our team is very focused on high volume practices as well as industry leaders. Whereas industry leaders used to be defined as the key opinion leaders who spoke frequently on podiums at conferences, it means something quite a bit broader today. There's a new group of surgeons whose podium is social media through platforms like Instagram and TikTok. Establishment Labs is attracting surgeons and patients through our digital and social media efforts, and we're seeing the results. Surgeons consistently tell us that patients regularly come in asking for Motiva implants by name, something they have not seen before in the industry. Surgeons also tell us that patients are walking away from the competitor warranties that cover their previous surgeries, instead opting to pay for Motiva implants rather than get replacement implants for free. This behavior is unprecedented in the aesthetics and medical device industry. Our team continues to add high volume practices and industry leaders, making Motiva implants more and more available across America. Early data suggests that surgeons who offer Motiva implants are seeing an increase in their business. In other words, as patients carefully choose their surgeon, a new factor in their decision process is the availability of Motiva. Our efforts are working. As of this call, the growth trajectory continues. Orders have increased each month from April through June, and that trend has continued into the third quarter. As such, we expect to see sequential growth in the third quarter, a period that is seasonally down for the industry. Continued growth in our core business should continue for many years, and a robust pipeline should add to that growth as well. Our ultimate goal is to have surgeons prefer our implants in all their cases, and our pipeline should help get us there. In early 2026, we should have expanded range of sizes approved by the FDA, and this will help drive utilization as well as new surgeons to our products. This is just the start of a cycle of innovation we'll bring to the U.S. market over the next couple years, led by our minimally invasive portfolio as well as our efforts in reconstruction. In July, we hosted 36 U.S. plastic surgeons in Costa Rica to introduce them to Preserve. Preserve is an advanced, less invasive breast enhancement technique designed specifically to preserve natural breast tissue functionality, including nipple sensation and chest muscles. It also provides for a fast post-procedure recovery. The Preserve procedure is designed to be performed with minimal anesthesia and uses the Motiva channel separator to create a tunnel without cutting any tissue, and the Motiva inflatable loon, which gently pushes the tissue structure aside to create a precise pocket that matches the size and creates space for the breast implant. Many surgeons who attended commented for the first time in decades, there is a fundamentally different way to perform breast augmentation surgery. Preserve is not just a way to do an existing procedure differently. It is entirely new procedure with real advantages for many patients. The reception from surgeons who are part of this training has been overwhelmingly positive. It is hard to overstate how meaningful it was to bring together this specific group of surgeons, which not only included some of the highest volume surgeons in the United States, but also current and past leaders of major plastic surgeon societies. If you haven't, I would recommend following some of their social media. Their enthusiasm and content is already changing the narrative and conversation around breast implants. We expect to begin shipping in August so that the early experience group can perform their first Preserve cases. We will collect their feedback to support the launch of Preserve in the US, which we anticipate will be in the first half of 2026. We expect Preserve to command a premium, which will not only add to gross margins, but also expand our TAM on a dollar basis as well. Preserve highlights perhaps the most important point. All the technological advancement that has gone into Motiva implants allows for new procedures and techniques that were previously technically inadvisable with competitive devices. For example, we've seen a rise in the use of pre-pectoral implant procedures, which can offer more natural outcomes and faster recovery time. This is dove-filled nicely with the increasing interest in smaller implants, a trend that was covered recently in the article Wall Street Journal. While Motiva implants have clear benefits across the board in breast procedures, the use of smaller implants in pre-pectoral positions is a segment which Motiva is uniquely able to support. In breast reconstruction, our Flora Tissue Expander is now in use at over 90 hospitals in the United States, with more being added every month. For Motiva implants in reconstruction, we are close to completing the three-year follow-up in this cohort. We will lock the database for a supplement in September and expect to submit for approval and reconstruction before the end of the year. Outside the U.S., we saw sequential growth in all our geographic regions in the second quarter. As I indicated previously, we have taken a number of actions to improve the performance of our direct markets. We are seeing the benefit of these activities, and as previously noted, our European direct markets grew approximately 27 percent versus last year. Poor markets like the U.K., Spain, Germany, were key drivers for that growth. In our Latin America direct markets, we continue to see stabilization of our Brazilian affiliate and continued strong growth in Argentina. These results are being supported by our minimally invasive platforms and by the halo effect of the U.S. approval and initial success. The number of accounts we have in many markets is increasing, clearly a positive sign. Our distributor markets are generally doing well. Latin American distributors grew double digits in the second quarter. In other regions, the timing of orders to several of our partners impacted results. We believe these are short-term, and our market position overall globally continues to strengthen. For 2025, MIA remains on track to achieve 8 to 10 million in revenue. MIA is appealing to a new group of women who had not previously considered breast augmentation, and we continue to see the strong interest from clinics to offer the procedure. Preserve also continues to build a momentum outside the U.S. and is going to be a meaningful contributor this year and next. We have clinics in Europe and Latin America already routinely performing this procedure and more being added regularly. With that, I will now turn the call over to Raj.