Good afternoon. Welcome to Establishment Labs Third Quarter 2025 Earnings Call. [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, sir.

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 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 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 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 EBITDA, which we disclose on an adjusted EBITDA basis. 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 5, 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's my pleasure to turn the call over to Peter.

Good morning to everyone and thank you for joining today. Q3 2025 was a standout quarter for Establishment Labs. We grew global revenue 34% with the total revenue of $53.8 million, including $11.9 million in the U.S. We also exceeded 70% gross profit margin for the first time, coming in at 70.1%, and we achieved the first quarter of positive EBITDA in our company's history with $1.2 million in Q3. Getting to positive EBITDA ahead of the fourth quarter was an important goal for our company, and we now turn our focus towards reaching cash flow positive next year. While optimizing our business, we had meaningful revenue growth in the U.S. and our other direct markets. I'd like to thank all the employees that made this a priority and a reality and the sense of accomplishment has all our employees eager for our next milestone of cash flow positive. The U.S. business is our most important growth segment right now, and it continues to outperform. Q3 revenue was $11.9 million, up 16% sequentially in what is a seasonally slower quarter in breast procedures. Markets can be down 20% to 30% sequentially in Q3, making our results all the more impressive. For the first three quarters, U.S. revenue totaled $28.3 million, so we are clearly going to do quite a bit better than the $40 million we committed to last quarter. We are expecting considerable acceleration of the U.S. business in Q4, and we are already seeing a significant shift from Q3. But as it's our first full Q4, we are going to be prudent by raising our 2025 revenue guidance to exceed $210 million, where we previously had a range of $208 million to $212 million. Most interesting is what these results imply for 2026 because we should finish 2025…

Thank you, Peter. Total revenue for the third quarter was $53.8 million, an increase of 33.7% from last year. Excluding the positive impact of foreign exchange in the quarter, growth would have been approximately 31.4%. Sales for Motiva in the United States were $11.9 million. On a geographic basis, sales in Europe, Middle East and Africa were 35.6% of the global total. We saw strong sales in our direct markets in the region, while sales to distributors were lower on the timing of orders. Sales in the United States were 22.1% of the global total. Latin America was 21.7% of sales. Brazil remained stable, and we saw strong growth in our other direct market in the region, Argentina, as well as from our distributors. Asia-Pacific was 20.6% of sales. Results in the quarter rebounded sharply from last quarter as expected orders from our distributors were realized. Sequential growth in the region was 46%. Our gross profit for the third quarter was $37.7 million or 70.1% of revenue, a 620 basis point increase compared to 63.9% of revenue last year and 130 basis points higher than the 68.8% in the second quarter of this year. This is the first time we have crossed 70% gross margin, and the increase is primarily the result of the higher margin sales in the United States. We expect gross margins in 2025 will be approximately 300 basis points higher than in 2024. As it relates to tariffs, goods imported from Costa Rica to the United States are subject to duties. However, as we saw in 3Q, we are managing their impact and do not meaningfully change our trajectory for gross margin improvements this year. SG&A expenses of $37.2 million were approximately $3.1 million higher than the third quarter of 2024. R&D expenses for the third…

Third quarter of 2025 was in many ways, a turning point for our company. We achieved positive EBITDA for the first time, and we achieved this in a quarter where we grew revenue 34%. These results show that we can efficiently invest in and grow our business, and we will continue to do so. The next step is to achieve cash flow positive, which I am confident we will do next year. We expect our top line growth to remain above 20% for the next several years, and our profitability should expand at a much faster pace. I am looking forward to having conversations with our shareholders about our increasing EPS and how we can keep that momentum going for the next 5 to 10 years. Operator, we're ready to take questions.

[Operator Instructions] The first question comes from Anthony Petrone with Mizuho.

Congrats to the team all around here on strong execution. Maybe Pete and Raj, you could start with the comments on 2025 and just the implied outlook as we head into the end of the year. Just looking for some more inputs, puts and takes on the 4Q number, specifically, how should we think about O-U.S. trends? Obviously, there's strong momentum on the U.S. side, but maybe a little bit more detail on what we're thinking about for new account openings from here, Preserve uptake? And then lastly, just the EBITDA-positive, well ahead of expectations. How do you think about EBITDA trending from here just given the momentum on the U.S. side?

Yeah. Thanks for the question, Anthony. Clearly, a lot of momentum in the business heading into the fourth quarter. And as we noted, we're planning to exceed $210 million now for the year. And as it relates to the fourth quarter, the U.S. has quickly become our largest market, and we have a lot of momentum in the U.S. For us, though, we haven't yet seen a fourth quarter, right? And there are some nuances in the fourth quarter around reconstruction and some of the holidays and things. And so we just want to be prudent in terms of how we set the midpoint for the fourth quarter. But clearly, we have a lot of momentum, and we expect to meaningfully exceed the $40 million we previously provided. And so the U.S. is doing very well. Outside the U.S., we also have a lot of momentum, specifically in direct markets where we're seeing very strong growth. In Europe, we were north of 20% in direct markets this quarter. We have a really strong order book for the fourth quarter from our distributors. And so we're expecting a very strong finish to the year. And I think importantly, that sets us up really well for 2026, right? The momentum we're carrying in the business that will play forward in next year really is a nice place to be as we're entering the new year. As it relates to EBITDA, again, we're all very proud of what we've achieved here a quarter early, the $1.2 million. But as we also noted, it's just the beginning here, right? We have a lot of leverage we can still bring to this business as we're investing, and you'll see EBITDA continue to expand in the fourth quarter, and we expect to continue to show nice improvement overall in 2026. And so I think the business, again, has a lot of momentum. You're starting to see the profitability and the leverage in the model, and we expect that's going to continue from here forward.

The next question comes from Josh Jennings with TD Cowen.

Congratulations on arriving in the EBITDA positive era a little bit earlier than expected. Pete and Raj, I was hoping to just start on thinking about 2026 and the international business, but specifically China. Any updates just in terms of the outlook there and the distributor relationships and when reordering could start to kick in? Should we be expecting Q1 2026? Is there any chance that there could be some China orders in the fourth quarter?

Yes. So thank you, Josh. In terms of the O-U.S. markets, I think in general, we've seen stabilization for the most part across all the markets. Our focus going into this year, Josh, was really driving growth in our direct markets. And I think we've been very successful in doing that. We have better economics. We have more upside potential in those markets. And as Raj mentioned, we had 20% growth, and that's following a quarter where we had 27% growth in our European markets. So we're [ gaining ] accounts. A lot of that growth is being fueled by Preserve, but very strong performance, and we're going to continue to focus on that going into 2026. And we see good momentum in the fourth quarter, and that's just going to continue into next year. Yeah, as it relates to China, I think we're working very closely with our partners there. We've actually seen some good progress, especially from a sell-out standpoint, and we're going to continue to work closely with them, and we're going to keep you updated, but we want to make sure we build the business there the right way.

The next question comes from Allen Gong with JPMorgan.

I have one on the broader market. When we look to some of your peers in aesthetics, I think some of the body language we were getting from them was definitely a bit more cautious on market dynamics, especially heading into fourth quarter, looking at your results and listening to your confidence, definitely sounds like you're not seeing that -- so I guess, are you not seeing that weakness? Are you just growing through it or is there a reason why those challenges are more company-specific than for the broader market?

Yeah. Thanks. First off, I mean, we can't really comment on their perspective in terms of the market. I can just tell you how we're seeing the market in the U.S. specific to breast aesthetics. I think we've created a lot of momentum in the marketplace. And I think what we mentioned in the prepared remarks in some of the accounts that have early adopters of Motiva, we're seeing an increase in the number of procedures. So what we are seeing and as it relates to our business, we're seeing growth. We're very positive in terms of the momentum we've been able to build in the Q4, and that's just going to continue into next year.

The next question comes from Sam Eiber with BTIG.

Maybe I can shift over to the minimally invasive platforms. You talked about the $30 million in revenue for next year. Can you just maybe help frame contribution this year, if there's any way to parse out Mia versus Preserve? And then what market development work needs to happen to get to those -- the at least $30 million target for next year?

Yeah. Thanks, Sam. We're -- I mean, we're very, very happy with the progress we're making with Preserve and the minimally invasive platform. Speaking specifically on Mia, we've doubled the number of accounts this year, and that was our goal. And then with Preserve, we're off to an outstanding start in Europe, and we're really focusing primarily on the direct markets, but we're also expanding it to some of our distributor markets. And that momentum is going to continue into 2026. We mentioned also that in the U.S., we're going to be launching early part of next year. So we're looking at the end of the first quarter. There's already significant demand. We've seen that with the early experienced surgeons. They're very excited. And I think once it's launched, I think it's going to be a pretty quick ramp-up. So we're very pleased with that platform and how it's performing.

The next question comes from Joanne Wuensch with Citi.

This is [ Anthony ] filling in for Joanne. Is there any chance you could provide -- either quantify or maybe provide a little bit more granularity around your expectation to -- for U.S. sales to meaningfully exceed $40 million this year?

Yeah, Anthony, as I tried to answer the first question, right, the fourth quarter, again, is we have -- we're carrying a lot of momentum into the fourth quarter, right? And so we will do quite a bit better than the $40 million we previously talked about. However, it is the first time we've had a fourth quarter in the United States, right? And so there is some holidays, some other elements to the quarter that make it difficult to kind of tell you exactly where we're going to land. And so again, it's a difficult question, but I think the reality is we're doing very well in the U.S., the number of accounts, the orders we're getting, all of it is really pushing in the right direction, and we just -- we think we have a lot of momentum that we're carrying right now.

The next question comes from Mason Carrico with Stephens.

So reiterating the single-digit growth in international revenue, it seems like you're seeing strength across a handful of markets, stability in others. Are you willing to quantify how at least preliminarily you're thinking about growth in the international market next year?

Yeah. I think, Mason, it's a good question, right? We haven't yet provided the 2026 outlook. But from a high-level standpoint, we're seeing very good demand in our direct markets. It's been an area of focus for us. We spent a lot of time making sure we have the right team there, the right structure there. And you are seeing that play out now, and we don't expect that momentum will slow. And so that is going to carry us into 2026. The other part of the business is distributors. We don't have perfect visibility into how the distributor markets are doing. But generally, the tone in those markets remains very good. The end markets seem very similar to what we're seeing in our direct markets. And so overall, we're expecting in 2026, our international markets will perform well. And then you marry that with what we're seeing in the United States, and we commented that we expect to finish it at approximately 20%, which provides a very good stepping off point in the U.S. for 2026. And overall, we're expecting another year of very strong growth for the company.

Got it. Okay. And in terms of Motiva accounts in the U.S., what are you guys seeing in terms of trends among customers after adoption? How quickly are you seeing them ramp up? Is there an average amount of their practice they end up converting? Just any incremental detail you can provide there?

Yeah. I think as we mentioned before, I mean, the growth in the U.S. is really exceeding all our expectations. We've kind of overdelivered on most of the internal KPIs that we have. So we're very pleased with that. We continue to add additional accounts. The utilization rate continues to pick up, especially as a lot of the accounts are going through their scheduling process. What also helps quite a bit in terms of the utilization and also the penetration is the number of patients that are entering the accounts asking specifically for Motiva. So we're seeing a really good growth in the Q4, and it's somewhat of an inflection point for us, and we believe that momentum will finish this year, and then it's going to continue to grow next year, especially when we start layering over some of the Preserve launch, also the small sizes as well.

The next question comes from Mike Matson with Needham & Company.

So I wanted to get some clarification on the commentary around getting to 20% share exiting the year. So we had estimated that the U.S. market -- augmentation market is around $600 million, so about $150 million a quarter, if you flatline it and 20% of that would sort of imply about $30 million. I mean, is that math reasonable or am I missing something? Maybe you mean like as of the very last day of the quarter, you'll be ramping through the quarter, you'll be at 20% as of the very tail end of the quarter or something like that?

Yeah, Mike, I think just to level set, I think your expectation for the size of the market may be a little bit off. If you look at some of the data from the clinical societies, the market in the United States is estimated at approximately 300,000 procedures a year. Our ASPs, we've talked about are around $1,300, a little north of $1,300 per case. That puts you at a little bit below $400 million for the augmentation market. The reconstruction market is a market about that same size, right? So if you just think about the augmentation market, you're looking at a market closer to $390 million, $400 million in that range. And that is the market against which we expect to exit at about 20%.

Okay. So more like a $20 million number then.

But again, that's also an exit rate, right, as we're leaving 2025 and '26.

Okay. All right, understand. And then just as far as the fourth quarter goes, how much visibility do you feel you have? I mean we're over a month into the quarter now or I guess, sorry, two months into the quarter now. And then I know you have orders that you get. And so I don't know how much lead time there is between an order and a shipment and things like that, but.

We do. I mean we do see the daily orders, right? We know the number of customers we have. And so we have very -- we have quite a bit of visibility on how the business is tracking. And as we've noted, there's a lot of momentum right now. Those metrics all continue to go higher. And as we're leaving the third quarter and we've entered the fourth quarter here moving out of that seasonally slow period, there's a lot of acceleration in this business. Again, it's our first fourth quarter as a company in the United States. And so we just want to be prudent in terms of where we set the midpoint of where we think we end up. But you shouldn't think that there's anything behind that, right? The business is doing extremely well, and we're going to have a very strong finish to the year.

The next question comes from Matthew Taylor with Jefferies.

This is [ Matt ] on for Matt Taylor. I just wanted to ask a quick question on 2026. And assuming you're exiting 2025 with around 20% market share, looking at your kind of strategy into next year, do you anticipate driving your expansion primarily through penetration with these existing accounts or is it mainly blocking and tackling going after new accounts?

Yeah. So I mean, as we mentioned before, I mean, we're exiting 2025 with tremendous momentum. We keep on adding existing accounts or adding accounts, the utilization rate continues to pick up. And that momentum is going to continue into next year. Now what we're also doing is we -- and we mentioned this on the previous call, we're going to be adding additional reps up to about 15 reps for next year. And that will help increase the utilization, also the reach in some of those accounts that we can add into next year. We're also going to be launching Preserve at the end of the first quarter, and then we also have the launch of the small size, which we anticipate at the beginning of next year. So I think you're going to see a combination of continued growth in the accounts that we are in and as we continue to increase the utilization rate, we're going to be adding additional accounts. And then you also have with the expansion in terms of filling out our matrix as well as with the Preserve launch. So I think you're going to see a combination of both.

Okay. That's helpful. So I'd say like looking at your 5-year plan, you're still fairly confident in kind of reaching that goal of, I don't know, 40% to 70% that you've seen in other markets. Is that fair to assume?

Yes. Yes.

Thank you. This is all the time we have for questions today. I will now turn the call back over to Peter Caldini for closing remarks.

Okay. Thank you, everybody, for joining. Look forward to the next call and thank you very much for attending.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.