Thank you for standing by, and welcome to Establishment Labs' First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]I would now like to turn the call over to our speaker today Juan José Chacón-Quirós, Chief Executive Officer. Juan José Chacón-Quirós: Thank you operator, and thank you everyone for joining us today. Before we begin, I would like to introduce David Erickson was recently joined Establishment Labs as Vice President of Investor Relations. Many of you already know David from his many years of experience in the medical device industry, and we are very pleased to have him on the team. David?

Thank you, Juan José. Let me just quickly say how excited I am to be working with the management team here at Establishment Labs and I look forward to engaging with our analysts and shareholders in the days and weeks ahead.Moving on, our presenters on today's call are Juan José; and our Chief Financial Officer, Renee Gaeta. Following their 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 Labs' financial outlook and the company's plans and timing for product development and sales. These forward-looking statements involve material risks and uncertainties and the company's actual results may differ materially. For a discussion of Risk Factors, I encourage you to review our quarterly report on Form 10-Q that we plan to file with the SEC tomorrow and will be available on our website at establishmentlabs.com.The content of this conference call contains time-sensitive information accurate only as of the date of this live broadcast, May 7, 2020. 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's my pleasure to turn the call over to our Chief Executive Officer, Juan José Chacón-Quirós. Juan José? Juan José Chacón-Quirós: Thank you, David, and good afternoon everyone. Thank you for joining us today. During these unprecedented times, our hearts go out to the families affected by this pandemic, and we applaud the health care workers and the other frontline responders for their selfless efforts to combat this crisis. As a women's health company, Establishment Labs is committed to helping our plastic surgeons and their patients around the…

Thank you, Juan José. As stated earlier, our first quarter reflected both strong sales growth and expense control and we are very pleased with the results. The expense reductions we have implemented in response to COVID-19 will provide sustained expense control during Q2 and Q3 of this year and gives us a solid financial footing as business conditions recover. You can find additional details about our first quarter financials in our earnings press release and Form 10-Q which we plan to file tomorrow.For the first quarter, total revenue was $24.5 million an 18% growth rate over the $20.8 million reported in the year ago period. This strong growth rate was despite the steep decline in breast enhancement procedures seen toward the end of March. Breast implant sales which accounts for over 90% of total sales grew 23%. Distributor sales were responsible for most of our growth this quarter led by the Latin America and Asia Pacific regions and represented approximately 60% of total sales.Growth in direct markets was down year-over-year, due almost entirely to softness in Brazil resulting from a strong year-over-year comparison and exchange rate pressures. In the year ago period, we recorded higher-than-expected sales, while a major competitor was temporarily off the market. From a regional perspective, sales in Europe comprised of 40%, Asia Pacific and Middle East was 30% and Latin America was 30%. Brazil accounted for 10% of sales this quarter as compared to 17.7% in the year ago period.Gross profit for the first quarter was $15.5 million or 63.2% of revenues, which is a significant improvement over gross profit of $11.3 million or 54.2% of revenues in the year ago period. The increase in gross margin percentage was driven primarily by the reduction in the amortization related to the fair value of inventory recorded from…

Thank you, sir. [Operator Instructions] And our first question comes from Josh Jennings with Cowen. Your line is open.

Good afternoon. Thank you, Juan José and Renee and it's great to hear David's voice on an earnings call again. I was hoping to just start off about 1Q results, the solid numbers -- clearly, strong numbers in the setting of this COVID storm in the back piece of the quarter. I was wondering if you could help us get a sense of the momentum in the business pre-COVID. I mean could the quarter have looked like a 30% growth quarter or 40% growth quarter if the COVID storm hadn't hit in March? Juan José Chacón-Quirós: Yes. Thank you, Josh, for that. Yes, we come off of significant momentum in Q4 of 2019 and we started the year very strongly. And like -- just like the rest of the world we got hit with this pandemic, most strongly, in March. So, yes, definitely, we think that the quarter could have been bigger and stronger without the effects of the pandemic, especially in the month of March.

Got you. And just thinking about the recovery period, I know, you said in your prepared remarks and you've talked with us historically about the potential for maybe a speedy recovery within aesthetics, but particularly in -- with breast implant procedure volumes, as most of these aesthetic cases are done in private clinics by plastic surgeons and I totally understand that.But as you discussed with your certain customers their plans in the recovery period, I mean, how are they thinking about ramping back up and increasing their daily volumes? Are they talking about accelerating back through their historic daily breast implant surgery numbers for a period of time to clear out their backlog? Are they expecting to get back to their historic run rate? Any help you can give us, just in terms of your discussions there. And I just have one last question. Juan José Chacón-Quirós: Yes, that is a complex subject, because we sell our products in more than 80 countries. And what we are seeing is that, a number of these countries are putting plans in place to come back slowly. But those things are going to happen at different dates and definitely at different rates of speed. We are seeing an improvement from April though.And I've been talking to plastic surgeons in Europe, Latin America and Asia over the last few weeks and I think they are seeing some promising signs of them going back to work. In some countries, we are seeing surgeons already beginning reoperations and follow-ups with certain patients that need a quicker access to surgery and some are expecting to have like primary augmentations and things like that coming on board later.But as I said before it's a very complex subject, because of the speed at which this is going to happen. It's going to vary like literally, not only country-to-country, but almost region-to-region. I will tell you though that, for instance, I spoke to a surgeon in Madrid, which is one of the cities that has been hit the hardest worldwide with this pandemic. And he performed his first primary breast augmentation this week and they have been putting in place very sophisticated protocols to ensure the safety of their patients. So we're going to be watching this very closely and we're going to be communicating with you as we get more information that is meaningful as it aggregates.

Excellent. Thanks for that color. And then just lastly, just on the FDA trial. The aesthetics cohort is fully enrolled and we're coming up, I believe, in August on one-year follow up data. Any update or further discussion with the FDA about whether that data will potentially be able to be released publicly? Or is that -- is it still too early to disclose that? Thanks a lot. Juan José Chacón-Quirós: Yes. Thank you, Josh. Well, one of the good things is that we have been able to work with the FDA's COVID-19 guidance. And we have resumed patient follow-up compliance and on-site monitoring visits virtually and that's a really good news for us, as we are following our patients of that aesthetic cohorts.Now, when it comes to the PMA submission and also other things regarding the one-year data sets being released, I will remind everyone that our trial endpoint for data readout is at 24 months and that is in the second half of next year. So we have still not been able to get to the point with the FDA where we can actually respond to that, but we will get there.

Thanks again.

Thank you. And our next question comes from Raj Denhoy with Jefferies. Your line is open.

Hi. Good evening. I hope everyone's safe and healthy. Just wanted to follow up on something you mentioned Juan José. I think you said 76% of cases in Brazil in April were postponed. One I want to confirm if that was correct. And I'm curious how that compares to what you saw in some of your other markets. Also Latin America, Europe, Asia, do you see similar levels of procedure deferrals in April? Juan José Chacón-Quirós: Yes. I think, as I said before, April was shut down pretty much all over the world. And one of the interesting things about this industry is that patients take a good amount of time to do their research. And once they've made the decision to go ahead with surgery, they're very committed to it. So one of the promising things that we see is, like those numbers from Brazil, where 76% of patients are just saying, well I'm going to have it later when things like social distancing and the ability to have elective surgery is again a possibility.Now we are seeing some of those same signs in other countries in Europe, so we do think that it's going to help the recovery to have these groups of patients that did not have their surgery in the previous months, have it as these markets start coming back online. So definitely it is one of those promising signs.

Understood. Another follow-up on Brazil as well. I think you also noted -- maybe it was actually Renee, about how as a percentage of your revenue it actually fell from 17% down to 10%, right, which implies about $1 million of lower revenue in Brazil this quarter versus a year ago.Appreciate that things were different there with the recalls and the like, but I'm curious what that says about your ability to hold that share. When clinicians moved away from the withdrawn implants to your implants, have they switched back now? Or what happened with that lost revenue?

Yes. Thanks, Raj. It definitely was sort of two factors in Q1 of 2019. We definitely benefited from sort of an uptick in competitor -- the competitor being temporarily off. And some of those have gone back or have now a mix in their practice but we were also detrimented by some of the fluctuation in the Brazilian real for the quarter.So our commercial team is definitely focused on maintaining new customer acquisition and very focused to it. I think it's just one of those market dynamics that is hitting us this time but we remain resilient and that those doctors and patients understand the benefits of our implants and especially when right now patients would definitely be looking for these safe alternatives. We're shining that message and it's resonating.

Understood. And maybe just one more for you Renee as well. I think you also noted in your commentary the plan to reduce operating expenses by 20%. I'm curious how we should think about that. So if operating expenses in the quarter were about $23 million, should we assume about a 20% reduction off of that in the second quarter and then kind of continuing until revenue picks up again? Or how to think about that cost reduction initiative?

Yes. So when we took a look at it, we took a detailed look at our full 2020 budget for the year and of course, focused the efforts for cost-cutting to Q2 and Q3 given what we expect initially for the impact and knew we were going to have in April and potentially in May.And so it is a 20% for the full year but it is, I would say loaded into Q2 and Q3. But we've also really taken a hard look at our business excellence programs and manufacturing volume adjustments just to make sure that we really are sort of leaner and stronger going forward and find efficiencies throughout.So it's been a really collaborative process with our organization and I'm really proud to say that we're making the correct adjustments now but also to be able to be -- maintain our ability to quickly adjust if things do come back online quicker than we expect.

Great. Just to put a finer point on it. So it's -- we should think about if you spent $85.8 million and roughly $86 million in operating expenses last year we should assume a 20% reduction for the full year of 2020? So we'll see a $17-ish million $18-ish million of savings this year versus last? And again I appreciate the load in the middle part of the year.

Yes that is correct. It's around that range. And we picked up a little bit that we mentioned about $1 million in Q1, but certainly the rest of it is going to primarily be in Q2 and Q3 and a slight tail of it still in Q4. And then as we mentioned, if we need to make further adjustments we're in a position where we could do that. But for right now that's how we're playing it out.

Understood. And maybe I could just squeeze one more in for Juan José. On the Mia implants the minimally invasive series you did in Japan, you noted you got -- you had very good outcomes or very positive results and you're looking to expand it. Anything more you can provide in terms of how many implants were actually done and what the plan is to do additional implants in Japan? Juan José Chacón-Quirós: Yes. Thank you. And of course, we are super excited with Mia, especially because the results of the proof-of-concept cases that we did have been phenomenal and we've had very good surgeon and patient feedback. But I have to tell you, at this point, we cannot give you the number of surgeries.Remember, these are case series and they're done by the surgeons in Japan themselves at their own responsibility. Now we are looking to expand our initial patient series in additional countries, especially in Asia and we are very strong believers in the potential market development opportunity with Mia.

Okay. Thank you.

Thank you. And our next question comes from Marie Thibault with BTIG. Your line is open.

Hi, thanks for taking the questions and great quarter. I did want to dig into a little bit more. You've kind of framed up the customer pretty well that they take several months or maybe years to do their research and are very determined to get the breast augmentations. But I'm curious about what your customers are hearing, the clinics themselves are hearing from patients in terms of hesitancy and I guess going back out for elective procedures. And also any concerns around discretionary purchasing? Is this patient group a little bit more immune to some of the concerns that we know are hitting kind of around the world like unemployment? Juan José Chacón-Quirós: Yes. Thank you, Marie. And I think that's one of the most interesting things about this industry. And as I said before and you noted the women in breast aesthetics do take quite some time to do the research and make that final decision. Usually by the time they've made that decision, they've looked at their different opportunities for their discretionary spending and they've realized that this is something that they've put at the top of their list.With everything going around with the pandemic we've been asking surgeons how do they see things moving forward. And I think they see it very similarly to what they have seen in previous economic crises. Remember that we sell in over 80 countries. Some of these countries have had very severe financial problems over the last decade and more. I'll give you the case of Greece. Probably compared to what they went through a few years ago, this pandemic is not hitting them as hard economically. So it really varies country-to-country.But what I can tell you is that the patient in aesthetics and what past recessions have shown us is that these patients are very resilient and will put at the top of their list when making their choices some of these procedures. So we remain confident in the strength of this market.

Okay. That's really helpful and great to hear. One thing you've said in the commentary, kind of, sparked my interest. I hadn't heard it before. You are helping surgeons restart their -- or who restarting their practices, you're actually linking them with patients that are interested. Can you tell us a little bit more about that program? It sounds like a pretty efficient, maybe digital feeder program. So I'd love to hear more on that. Juan José Chacón-Quirós: Yes, of course, and I have to start by saying that Motiva has a commanding presence in social media. And we've done this over the years. We've built a compelling story around improved safety and aesthetic outcomes. And that really resonates well with patients who are doing research and talking to influencers and other groups of women who have gone through these procedures. So definitely that is something that we are building on with additional efforts that come through our digital platform.So just to give you an example in April, we conducted several Motiva health and beauty sessions on Instagram that reached more than 280,000 women in different markets. We've been having around 20,000 unique users per week on Instagram. And that's the strength of our efforts that we plan to continue growing. But I have to say that we think that in the past in many countries, we have taken market share from others, not only because surgeons believe in our technology, but also because they see the excitement from women that come to their practices and ask them about our brand. So, of course, we are basing our efforts on our technology and the differentiation, but we have chosen to invest even more on them now.

Glad to hear and good luck out there. Juan José Chacón-Quirós: Thank you.

Thank you. I'm showing no further questions at this time. I would like to turn the call back over to the company for closing remarks. Juan José Chacón-Quirós: Thank you for joining us on today's call. We look forward to providing our next quarterly update in August. Have a good rest of the day and please stay healthy. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.