Good afternoon. Welcome to Establishment Labs Fourth Quarter 2024 Earnings Call. At this time, all participants will be in a listen only mode [Operator Instructions]. As a reminder, today's call is being recorded. I will now turn the call over to Raj Denhoy, Chief Financial Officer. Please go ahead.

Thank you, operator. And thank you everyone for joining us. With me today is Juan Chacón-Quirós, 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 meanings 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 a 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 Web site 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 Web site. The content of this conference call contains time sensitive information accurate only as of the date of this live broadcast, Februray 26, 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 our CEO, Juan José. Juan Chacón-Quirós: Thank you, Raj.…

Thank you, Juan José. This is my first call since joining Establishment Labs, and I am excited to be here at such an exciting time for the company. When I first looked at Establishment Labs, I had some preconceived notions of what the breast augmentation industry could be. However, on my first trip down to Costa Rica, I realized what an amazing company and opportunity existed. Our innovations are radically changing the breast augmentation and reconstruction industries, opening the procedure to many women who would not have considered it previously. Our Motiva implant has FDA data that is remarkably better than any data ever seen in a breast implant trial. These are not small differences and it creates a huge opportunity to build a best in class company and reshape an industry. Managing growth and opportunity of this skill has its own challenges and that is why I'm very excited to be part of the team. Marrying growth and opportunity with efficiency and productivity is where I can really add value and with it meet and exceed our cash flow and profitability targets. Over the last year, we have made a number of changes that is positively impacting our financials. We reduced our operating expenses by $12.5 million in 2024 while at the same time standing up a significant commercial operation in the United States. We have rightsized the global organization, eliminating headcount by more than 30% in some areas and streamlined departments to ensure greater alignment and efficiencies. We are focused not only on reducing costs but also improving our overall return on investment. In preparing for the US, we built a world class sales and marketing organization and have invested meaningfully in building inventory to support our launch. We've been able to fund a good portion of this…

Thank you, Peter. Total revenue for the fourth quarter was $44.5 million, an increase of 41% from the year ago period. Foreign exchange reduced sales by approximately 2 percentage points in the quarter. From a regional perspective, sales in Europe, Middle East and Africa were approximately 38% of the global total, Asia Pacific 35%, Latin America 18% and North America was 9%. As noted previously, North American sales included $3.3 million of Motiva sales in the United States. Our gross profit for the fourth quarter was $30.5 million or 68.5% of revenue compared to $20.6 million or 65.2% of revenue for the same period in 2023. The gross profit in the fourth quarter was positively impacted by higher production volumes, the decommissioning of our B15 manufacturing site and the early contribution of sales in the US. We expect this number to continue to improve as we ramp sales in the United States. SG&A expense for the fourth quarter increased approximately $7.1 million to $44 million. This compared to $36.9 million in the fourth quarter of 2023. The increase is due to the ramp up of commercial activity in the United States following approval of Motiva implants in late September, as well as the operating expenses in the Benelux subsidiary we acquired in fourth quarter. R&D expenses for the fourth quarter declined approximately $0.7 million from the same quarter a year ago to $5.1 million. The increase in operating expenses in the fourth quarter was primarily the result of the increased investment in our US operations. These were offset by the cost reduction initiatives we undertook in the second half of 2023 and which continued into 2024. Total operating expenses for the fourth quarter increased approximately $6.4 million from the year ago period. Net loss from operations for the fourth quarter…

[Operator Instructions] Our first question is from Anthony Petrone with Mizuho Group.

And first JJ, good luck into the transition and obviously, congratulations on building a great organization and Pete, good luck as interim and through the transitional process. Maybe first to go into the dynamics on the US Motiva launch, couple questions there and I'll have a quick follow up. Maybe just an update on how many accounts you're in? I think the number exiting last year was around 500. JJ you gave some good color on ordering patterns here. Through February, I'm just wondering how that matches up in terms of total live accounts in the US? And then when you think about the 35 million guide, wondering if FDA clearance of Ergonomix2 is baked into that number? And I'll have one quick follow up. Juan Chacón-Quirós: Yes, we're beyond happy with what we are seeing in the market with the US launch. And some of the color that we gave today is particularly important, because we have 650 accounts that have been fully onboarded and out of those 450 have already placed orders and almost 90% of them have been reordering. And when you look at those that have not ordered yet, those are accounts that we are recently on onboarded. So if you add to that, that we are signing up an average of five accounts per day, it gives you how this is going to scale up over the next few quarters. Remember, accounts that begin with Motiva doesn't mean they'll start using Motiva on day one. It means they'll start offering Motiva to their patients in their consultations after that. So they may be booking surgeries that are weeks away or sometimes months away. And the important thing for us at this point is to be focusing on the two things that matter, continuing to add new accounts but now it also shifts the focus as well to the reordering patterns. And when we look at some of our largest accounts to date, their reordering patterns is exactly what we want to see. On your other question, our $35 million does not include any new approval in the United States.

And the quick follow up would just be maybe a recap on the macro front around the world. It sounds like we're still not quite out of the woods in terms of aesthetics, but there's some signs of green shoots. So maybe just the backdrop on aesthetics, key regions, US, China and Brazil? Thanks again. Juan Chacón-Quirós: Yes, I think it's important to realize that there's still microeconomic pressures. But when we think about Latin America where we're not expecting growth from Latin America this year, we are also seeing very good signs that the situation is no longer deteriorating in Latin America. We already saw that in Q4. And as we look into EMEA and APAC that's where the growth will come from. But we've guided, I think, in a very conservative way to about mid single digits. And that does not take into account any potential contributions from new regulatory approvals or launches like Preservé. So I think we're in a good place for a year of growth. And even though there will be macro pressures in different areas, I think we have enough evidence to feel that what we've said is totally achievable.

Our next question is from Allen Gong with JPMorgan.

Just to start off with one on the US launch. It definitely seems as though you've got good momentum and you provided really good color on kind of the order rate on a daily basis. But just doing some napkin math and fully understanding that it's not quite that straightforward to get to actual revenues, but it looks as though your momentum so far in January and February already implies that the three point -- the 5 million in first quarter looks like it could be really, really conservative given that the just the average daily orders you've seen so far. So why was 5 million the right target to start off the year and kind of what are you assuming in March? Juan Chacón-Quirós: For us, it's still early in the launch, right? So we had approval late September, as you know, we launched in October. Things are going exceedingly well as Juan already described with the order numbers that we're seeing and how it's ramping. We'd agree with you, right, that the numbers we've given could look conservative, but it's still early in the launch. So we want to give ourselves some room. And again, so far everything is tracking but we want to give ourselves a little bit of time to see how things develop.

And then when we think about kind of the trajectory of your operating expense, right, you provided the kind of quarterly value that you're kind of expecting it to fall into. But when we think about the fact that some of the big step up sequentially from third quarter into fourth quarter is to sort of stand up the US launch, you've reached that 40 rep target that you've kind of been talking about. How should we think about the trajectory of SG&A going forward given some of that spend should be one time in nature and arguably can come out of the model in maybe the back half of the year? Juan Chacón-Quirós: Well, I don't think you should look at it as one time in nature, right? So we have hired sales people, we've established the US commercial operation, that infrastructure is now in place, right? And as you move through the year, the leverage you'll see in the model is as we leverage that. And so the necessity to add on top of that will be opportunistic on our part and we're seeing really strong demand in the US. And so we could add more sales people as the year goes on but there is not a necessity to add a lot more to that sales base. And so you should see it sort of stabilize and then frankly it should be at a similar rate. Again, there will be fluctuations quarter in and quarter out but it should move much over the course of the year. And that's really how you start to get the leverage as you move through the year and the top line really starts to show this momentum we have in the United States.

Our next question is from Josh Jennings with TD Cowen.

Juan José, congratulations on quite the ride, and it's great to hear that we'll continue with your continued active involvement with the company. I wanted to just ask, I know you're not providing details on the Femtech minimal invasive portfolio regulatory pathway, but was hoping you may just help us think about what steps are required prior to those pathways being fully developed in the US and China for Mia and for Preservé. If you can just help us think about what boxes need to be checked before that's finalized? Juan Chacón-Quirós: I think, we've been trying to give as much color as possible in how we're going to bring the next generation of innovation into the US. And one of the things we've been saying is that really with the approval of the Motiva SmoothSilk Round and the Motiva SmoothSilk Ergonomix, it's already a different generation of implants from what you had available in the United States. Now one of the things we talked about today is the beginning of the process for the registration of tools necessary for Preservé. And I think that's very exciting, of course, given the excitement that breast tissue preservation is already having globally. If you look at what many of the surgeons even here in the United States are saying about breast tissue preservation, they're already very happy to put the implant above the muscle, saving the pectoralis muscle when and if possible, but there's a whole shift towards this movement we pioneered. So definitely having that process ongoing is going to help us with a potential launch of Preservé in the US. On top of that, you have the potential approval of the reconstruction indication for 2026. And remember, we recognize revenue at a much higher price when it comes to the reconstruction market, not only for Flora but eventually when approved for Motiva implants. Beyond that, there's the Ergonomix2 platform and that's what allows for, for me, which is basically those injectable implants that are done minimally invasive. So it really is about a super cycle of innovation. So you just think about like that you're going to be seeing approvals and launches of innovative, real differentiated products in the US market in '26, '27 and '28. So we're not giving the exact dates. But I think you can be sure that you'll be seeing every year an important development in terms of innovation from us.

And maybe the follow up, kind of it involves this pipeline but prior to some of the macro turmoil, your team had laid out this path to kind of medium to long range plan path to $500 million in revenue. And I was hoping to just -- I know that's not set in stone currently, but maybe just talk about your confidence in that march to $500 million in revenue from here. Thanks a lot. Juan Chacón-Quirós: I think, in terms of that, in the second half of '23 and pretty much a big part of '24, what we saw is all of these macro pressures have an effect in aesthetics overall, both in the United States and also OUS. But I think aesthetics is really showing signs of resilience. We're already seeing good signs in APAC and EMEA. And Latin America, I think, is the one lagging behind in that return to growth. But for us, with the US on board and all the dynamics that we are seeing that rich innovation pipeline, I think it becomes, first of all, going back to the type of strong growth that this company had been doing prior to that period. So already this year, you're at 25% at the midpoint and with possibilities for doing even more. Beyond that there's an important thing regarding our ability to get to that number eventually as a profitable company. And already this quarter, you see our gross margins at 68.5%. So it shows you how all the work that Pete has been doing in terms of rightsizing the company and all the efficiencies that we've been getting on top of selling our products at higher prices with higher revenue in the US and also into China. And as you go into those innovations, remember, Preservé kind of like is in the midpoint between Motiva implants and EMEA. So that also should add a lot of good high quality revenue for the company. So I think that's the difference, Josh, is that in the past we were just zeroed into let's get to $500 million and now we're like, well, we're going to get there as a profitable company.

Our next question is from Marie Thibault with BTIG.

Juan José just wanted to say good luck to you on your next phase. And Peter, it's nice to be working with you here going forward. I wanted to ask a question here about OUS revenue really. And when I think about this mid single digit guide for OUS, it appears that's going to include that $8 million to $10 million in EMEA revenue. If I back that out, assuming of course you had some EMEA revenue in 2024, it looks like all you're needing to achieve is low single digit growth OUS this year. Is that the right way to think about it? And if so, is there anything you can do to help us kind of think about the cadence throughout the year, things to think about in terms of seasonality, China distributor ordering, that sort of thing? Juan Chacón-Quirós: So a couple of things. We've been [indiscernible] the last year. The $8 million to $10 million we've given is first time we provided that number to give you some confidence that we're seeing [Technical Difficulty]. If you think about 2025, we do expect a gradual recovery in both [indiscernible] year, it's not as we expecting next year. The other important dynamic to really consider in your outlook is that China for us, so 2024 was a year where we had sales into that market in China, that distributor has now set up their distribution network into China. We are not expecting much reordering in the first half of this year but that will recover in the second half and we will start to see demand match kind of end market dynamics in China. We will see a little bit of currency in the first half of the year. But overall, you are correct. I mean, we should see growth over the course of the year gradually recover and we provided I think a pretty conservative start to the year in terms of what's needed to reach our numbers.

Conservative start to the year, that's good to hear. And then maybe my second question here on some of the EBITDA outlook you've given as well as the cash flow. Just want to quickly clarify, I think I heard for 2026 you're aiming for I think I heard both cash flow breakeven or cash flow positive. Can you just clarify which one that is? And then should we think about the EBITDA trajectory throughout the year very similar to what you talked about for the cash burn trajectory in terms of a bit higher in Q1 and then improving meaningfully throughout the year? Juan Chacón-Quirós: So we've talked about achieving a quarter of EBITDA positive and getting to EBITDA positive here in 2025, and then a similar crossing the threshold to cash flow positive in 2026. In terms of your question about EBITDA and cash flow, it is similar, right? So as the year progresses, we expect the cash used and really EBITDA loss in the first quarter to be pretty similar to what it was in the fourth quarter. And again, reflecting that stepping up of the commercial efforts in the United States and the inventory needed to support those efforts. And then as the year goes on, you start to see the leverage and we do, again, expect to achieve EBITDA positive in the second half of the year. And then you move into 2026 those dynamics continue and you cross over into cash flow positive.

Our next question is from Joanne Wuensch with Citibank.

It sounds like there's some good early momentum in the launch, and I'm curious what kind of physicians are adopting Motiva and what kind of patients are they targeting as the best patients for it? And I'll throw my second question out at the same time, which is, it sounds like you've started the year with about 40 active sales reps but you're looking to expand it throughout 2025. How do you think about exiting 2025 in terms of sales reps? Juan Chacón-Quirós: I think it's really important to see that the US market has been starving for innovation for the last two decades. So of course, one of the things that we are seeing is the excitement around the brand. Over 60 press articles, hundreds of social media posts from surgeons talking about having access to this amazing technology, having the ability to put this implant above the muscle safely, reducing device related complications and all of it. We've had over 1.8 billion impressions in social media and that has been organic. So when we see that what we have to do as a company is to make sure that women who were in the consideration phase for a breast augmentation but had not made their decision based on safety or is, am I going to have an unnatural result, are receiving the type of messaging that they need to cross over and make it to their clinic, and that's something that is really important to see. We talked about the celebrity campaign that we have upcoming and that's also going to make a difference, because for the last two decades, aesthetic companies have not been really exclusively involved with the plastic surgeon and we are. So what type of patients are they seeing? Patients who are excited about this technology and those come from different age groups but they're really going in there because of the innovation, the safety and definitely when we look at number of sales reps that we have today. We have what it takes. We will add probably selectively in big metro areas as the year progresses, but we have what it takes now.

Our next question is for Matt Taylor with Jefferies.

I wanted to start with one just on Motiva. And I was wondering what you're seeing here early, it's kind of related to the types of surgeons. But which incumbent do you think it's going to be easier to take share from in these end markets, is there one that's easier than the other at this point? Juan Chacón-Quirós: In the United States, I think you've seen for market leader, AbbVie with Allergan Aesthetics, taking about 15% of the market and then Johnson & Johnson with Mentor in second place. And I think we're getting market share from everyone who believes in innovation in as a plastic surgeon. So they are the ones doing the first mover. But later on, we'll see people coming from all places. We're not selling our implants at a price point that attacks the low price market. So that's probably a place where we're not heading at this point. But definitely what we are seeing is that, for instance, when you look at Ergonomix, we were not expecting the share of Ergonomix in our total sales to be so high at this point. And Ergonomix is a more expensive product, truly differentiated from everything else that you see in the market. So those are the things that we'd like to see. Beyond that, I think over time we're going to be taking market share from everyone.

And can I ask a follow-up on Mia? I guess, I was just wondering your current thinking when you first introduced the concept years ago and had done market research, you talked about the potential for it to kind of double the TAM. And I know you've expressed in Europe, you're seeing kind of half those patients so far, so they weren't really in the market for augmentation until they saw this. So what do you think now in terms of what Mia could do for TAM expansion? Juan Chacón-Quirós: I think we remain very confident with that. I think it just happens over a longer period of time. The entire breast augmentation sector hasn't seen much growth in the last fifteen years. So having this real market expansion taking place over the next five to 10 years is going to make a big difference. And it happens at a high price point, by the way. So all of that is of course a positive. But again, Mia takes longer to develop. When you look at Preservé, think about like the 50% of patients that came in for interested in Mia but eventually they're not a good Mia patients. Then with Preservé and the potential launch of Preservé in different geographies, what we can do is provide to Mia interested patients who are not good candidates an option that is much superior and closer to what they were expecting. So I think the marriage of Mia and Preservé it's a powerful one, because not only we're working on the real market expansion piece but also with Preservé we're attacking the day to day needs of the plastic surgeon and that's why it can be so impactful.

Our next question is from Mason Carrico with Stephens Inc.

This is Harrison on for Mason. I wanted to ask about what is baked in from US Motiva revenue here in 2025. Could you specify how many accounts and orders per day and sales reps you expect to end the year with?

So we have given the number of $35 million, right, which we expect to meet or exceed we've noted. In terms of the number of accounts and the pace of accounts, we're not going to provide that level of detail in our forecast. Again, given some of the metrics, Juan José described, we're seeing very strong growth. We're seeing very strong development in those numbers. Nothing we've seen thus far has given us any pause in endorsing that kind of outlook. In terms of sales reps, we've noted as well that the 40 reps we have in the field is the team we need. We can drive towards those numbers and more with that team. That will be selective as the year goes on if we see certain markets where we need to add a sales rep or divide territories and those types of things, we will do that to keep things healthy. But again, we don't need to do much more to achieve the numbers that we've described.

And then a quick follow up here. I was wondering, or I just wanted to confirm, have you completely resolved all the supply challenges for Motiva, and was there any lingering impact we should expect in the first quarter? Juan Chacón-Quirós: As soon as we got the FDA approval, we've actually ramped up our capacity. We've added a third shift. So that enabled us to provide the amount of inventory that we needed for the launch in the US and we don't expect to have that -- any of those issues going into Q1 and beyond.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Juan José Chacón-Quirós for any closing comments. Juan Chacón-Quirós: After 23 earnings call, I did want to take the opportunity to thank all of the analysts who've been covering us for all these years and all the banks that have worked with us. I really see it as one of the great points of my career. And I want to thank you for joining us on today's call. We will be at several conferences over the next few weeks, including CDs, MedTech and Life Sciences Access Day, and the Cowen Annual Healthcare Conference. We'll also have a large presence at the upcoming Aesthetic Society Meeting in Austin, Texas and we look forward to seeing many of you at these events. We wish everyone continued good health and happiness.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.