Establishment Labs Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 6, 2026

Key Takeaways

  • Positive Sentiment: Strong start and raised guidance: Q1 revenue grew 45% to $59.9M with adjusted EBITDA positive for the third consecutive quarter, and management raised full‑year revenue guidance to $266.5M–$268.5M.
  • Positive Sentiment: U.S. and minimally invasive momentum: U.S. revenue jumped 216% to $19.6M, the company surpassed 1,700 U.S. accounts and certified >260 U.S. surgeons, while minimally invasive sales were $9.1M in Q1 and management now expects >$35M for 2026.
  • Positive Sentiment: Margin expansion and path to cash‑flow positive: Gross margin improved to 70.7% (guidance 71.2%–72.2%) and a debt refinancing with Oaktree plus PIK interest support management’s expectation of reaching cash‑flow positive in H2 2026.
  • Negative Sentiment: Near‑term cash burn and elevated operating spend: cash fell $7.5M to $68.1M in Q1, Q2 will see higher cash use (Benelux acquisition final payment, incentives, U.S. investments), and operating expenses are guided to $195M–$200M for 2026.
  • Neutral Sentiment: Key growth and supply uncertainties remain: Motiva reconstruction submission to the FDA could materially expand the market if approved but timing is uncertain, and a long‑term supply agreement with silicone supplier NuSil is in active discussion but not finalized.
AI Generated. May Contain Errors.
Earnings Conference Call
Establishment Labs Q1 2026
00:00 / 00:00

There are 13 speakers on the call.

Speaker 10

Good morning. Welcome to Establishment Labs' first quarter 2026 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 Malavika William, Global Head of Corporate Communications and Marketing. Please go ahead.

Speaker 6

Thank you, operator, and thank you everyone for joining us. With me today is Peter Caldini, our Chief Executive Officer, and Sandra Harris, our Chief Financial 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 law. These include statements of 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.

Speaker 6

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.

Speaker 6

The content of this conference call contains time-sensitive information, accurate only as of the date of this live broadcast, May the sixth, 2026. 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.

Speaker 11

Good morning, and thank you for joining us. Q1 2026 was a strong start to the year, with $59.9 million in revenue and adjusted EBITDA of $1.2 million, representing revenue growth of 45% over Q1 2025. The U.S. business continued to outperform with $19.6 million of revenue, a growth of 216% over Q1 2025, and quarter-over-quarter growth of 13.3%. It's worth noting that Q1 is a seasonally light quarter for breast augmentation and reconstruction. To grow quarter-over-quarter is a testament to the strength and acceleration of our U.S. launch. Outside the U.S., we delivered 15% growth driven by strong execution on both our direct and distributor markets. Our minimally invasive platform is showing immense promise as well, generating $9.1 million in revenue in Q1.

Speaker 11

At the same time, we had our third quarter of positive adjusted EBITDA. Our gross margin improved by 350 basis points in Q1 2026 to 70.7%, up from 67.2% in Q1 2025. We refinanced our credit facility and expect to reach cash flow positive in the second half of the year. Our increasing profitability is demonstrating the operational leverage in our business, as well as our ability to generate meaningful earnings per share in the coming years. We continue to be conservative as we forecast our business due to the geopolitical landscape as well as our hyper-focus on achieving and scaling a cash flowing positive business.

Speaker 11

As such, we are raising our guidance to $266.5 million to $268.5 million, up from a previous range of $264 million-$266 million. Our confidence comes from the strong start we are having in Q2. We are setting new weekly highs in our U.S. order counts. We expect our growth to continue throughout 2027 as well. As we've mentioned on our prior calls, there is a good likelihood we may be included in several indices, beginning with the Russell 2000. As we're seeing increased interest from firms that benchmark to these indices, we thought it would be helpful to provide an overview for those being introduced to our company for the first time. The robust growth we reported this quarter is a reflection of our work since 2011.

Speaker 11

Establishment Labs is a woman's health company focused on transforming breast aesthetics and reconstruction through innovation. Since the moratorium on breast implants in the U.S. was imposed in 1992, this category has seen very little meaningful innovation, and as a result, patient behavior, surgeon adoption, and overall market growth has remained relatively static. Establishment Labs was founded on the belief that a deep investment in science could fundamentally improve existing technology and provide better options for women. From the beginning, we reexamined every aspect of the breast implant, from surface technology to manufacturing, leveraging advances in material science, biomedical engineering, and device design. This work is reflected in a robust intellectual property portfolio with more than 200 patents issued and pending worldwide. In 2015, we brought on Dr. Robert Langer to lead our scientific advisory board.

Speaker 11

Robert Langer is one of the most accomplished scientists of the 21st century, and his contributions are behind the founding of several prominent companies. His work at MIT continues to impact science at the highest levels. Our partnership resulted in a seminal paper for plastic surgery. Published in Nature Biomedical Engineering in 2021, this paper focused on breast implant surface technologies and highlighted that the 4-micron surface, which was intentionally designed to enhance biocompatibility, consistently demonstrated low inflammation. These results explain how Motiva implants outperform the category. The U.S. FDA clinical trial matched both our research findings and clinical data from around the world and is, quite frankly, game-changing. All these data points show device-related complication rates at new industry lows, including capsular contracture rates of less than 1%.

Speaker 11

To put this in perspective, the FDA trials for competitive products have device-related complications rates that are upward to 20%, and in some cases, the complication rates far exceed 20%. Perhaps most interesting is our extended global warranty data. With over 49,000 warranties sold and only 377 claims submitted, the resulting complication rate is less than 1%. We publish this data annually on our post-market surveillance report and are the only company in the industry that publicly shares this information, which you can find readily available on our company website. Fear of complications are one of the top barriers for patients when considering a breast augmentation. Having a product that has an outstanding safety profile helps to diminish that concern and provides extra peace of mind for both patients and surgeons.

Speaker 11

Less complications leads to happy patients and more referrals, which is the lifeblood for any plastic surgery practice. The significant technology moat that has been established is enhanced by our R&D pipeline of continuous innovation. Not only do we believe that we can take a substantial majority of breast implant market in time, we also believe we can significantly expand the market from where it is today. That is best evidenced by the launch of our Motiva minimally invasive platform. We have 2 minimally invasive procedures in market right now, Mia and Preservé. A third is currently in development called GEM and is a revolutionary advancement for gluteal augmentation that should offer a safer, more predictable alternative to the Brazilian butt lift. Both Mia and Preservé are available outside the United States with a presence in more than 45 markets globally.

Speaker 11

While Mia is not yet available in the U.S., we recently introduced Preservé to the U.S. market. Both are built on tissue-preserving practices, which Establishment Labs has pioneered, and they allow for the use of minimal anesthesia while preserving the patient's native breast tissue, nipple sensation, and chest muscles. Mia features the Motiva Ergonomix2 diamond-shaped implant, which has a unique shape that allows for greater projection than a conventional round implant as the shape creates more projection with less volume. It also includes a proprietary shell, which allows insertion through the smallest incision possible within the Motiva portfolio. These characteristics make for a true scarless breast augmentation done by a small incision in the underarm. This procedure is meant for patients looking for a subtle enhancement with 1-2 cup size increase.

Speaker 11

Preservé can feature either the Motiva Ergonomix One or Two implants and accommodates both primary breast augmentation and primary breast augmentation mastopexy, offering patients smaller scars tucked under the breast crease and allows for larger sizes to be used. The launch of minimally invasive techniques into any specialty almost always dramatically increases the market. For example, there were approximately 95,000 total knee arthroplasty procedures in 1991. Between 2000 and 2005, minimally invasive knee procedures became the standard, and by 2010, there were approximately 250,000 procedures annually. In 2025 alone, this number rose to approximately 1.3 million, an increase of close to 14 times. This kind of growth exists in other major procedure types as well, such as LASIK eye surgery and fat reduction.

Speaker 11

In the U.S., our minimally invasive technologies command a premium over 2 times higher than traditional breast augmentation. If our overseas growth is any indication, we can expect that minimal invasive will create significant market expansion and be a meaningful driver of growth. The value proposition for patients is well defined: smaller scars, minimal anesthesia, preservation of tissue and sensation, and a faster recovery, combined with the safety and performance benefits of Motiva. Our initial 3-year study on Mia was published in the Aesthetic Surgery Journal in October 2025 and showed no device-related complications. Like our FDA trial data, this is game-changing. It's clear that this procedure is fundamentally different from what has come before. Many women no longer view this as the traditional breast augmentation they once knew, but rather as a more accessible, almost lunchtime procedure where they can return to normal social activities within hours.

Speaker 11

Women that have never considered breast augmentation before are now getting the procedure, and we are expanding the market. RealSelf, a popular online platform for aesthetic patients, published last week that breast augmentation page views were up 45% from Q4, and that breast implant revision page views were up 89%, indicating that patients' interest in the category is surging. Not only do our patients benefit, our minimally invasive platform also has the potential to increase surgeon productivity, allowing surgeons to run 2 operating rooms, one where the patient is being prepped or the room is being cleaned, and the other where the surgeon is operating. We had 1 plastic surgeon that started surgery at 6:00 A.M., and by 10:30 A.M., he had completed 10 minimally invasive surgeries. Scheduling a minimally invasive procedure day like this can generate more than 2 times additional revenue for a practice.

Speaker 11

The introduction of our minimal invasive platform enhances the Motiva portfolio, creating a clear good, better, best framework. This allows the plastic surgeon to address a broader range of patient needs across the aesthetics outcomes, lifestyle consideration, and price points. This portfolio approach is not just about product breadth, it enables us to expand the category, increase procedure volumes, and drive higher value per procedure while giving surgeons the flexibility to tailor their solutions to each patient. Patients are now engaging with surgeons very differently than before. In a category where it was historically very unusual for patients to ask about implant brands, 78% of surgeons now report being asked for a brand by name, and in those cases, 93% of the time, that brand is Motiva. Now, just 18 months into our U.S. launch, we are seeing the next step.

Speaker 11

Patients are not only asking for Motiva, they are actively seeking out surgeons who are trained in minimally invasive procedures. We expect to see a similar dynamic as we enter breast reconstruction in the U.S., an opportunity that is equal in size to the breast augmentation market. We submitted Motiva implants to the FDA for approval in primary and revision breast reconstruction in December 2025 and are currently progressing through the review process. I hope that reintroduction to our business was helpful and that the context explains our success to date. The U.S. remains the most important driver for our growth. Motiva continues to be one of the fastest launches in the history of breast aesthetics, and we continue to expand our footprint, recently surpassing 1,700 accounts.

Speaker 11

We are seeing increased adoption from higher volume surgeons who have moved beyond initial evaluation and are now fully committed to Motiva. This is reflected in our order growth, where we have experienced 30% increase in average orders since the end of Q4. We officially launched our minimally invasive platform in the U.S. in March. The response has been exceptional. While we initially trained surgeons on Preservé in our campus in Costa Rica, early demand was so strong we began training in the U.S. as well. This has allowed us to train surgeons at a much faster rate. We have now certified more than 260 surgeons in the U.S. For context, our goal was to train 200 surgeons by the end of 2026. We soared past that number by the end of the first quarter.

Speaker 11

Those trained have shown a strong intent to purchase, and we have seen relatively quick adoption with the first procedures being performed shortly after training. A surgeon in the Northeast recently shared that he began offering Preservé after being trained and promoted the procedure on social media. He now has 50 Preservé cases scheduled in Q2 at a 30% premium to his traditional breast augmentation price. Another surgeon in Southern California was thrilled that Preservé has completely changed her practice and that she is consistently seeing patients that had previously deferred surgery due to the concerns around anesthesia and recovery. When you remove historic barriers, you bring new patients into the market. A recent Preservé patient who is a Pilates instructor got her procedure done on a Saturday, went to dinner with friends that night, and was back teaching Pilates on Monday.

Speaker 11

This kind of recovery is traditionally unheard of, and for the first time, patients are truly returning to normal activity with minimal downtime. In a recent survey conducted with 94 Preservé patients, 3 months post-surgery, 98% stated that they experienced minimal disruption to their daily lives, with 95% satisfied or extremely satisfied with the results. In addition, 15% of patients said they were new to the category and had not considered breast augmentation until they learned about Preservé. 84% of the Preservé patient survey said they were willing to pay a premium for the benefits of the procedure, with 99% saying that they would choose this procedure again. Outside the U.S., our business continues to perform well. We delivered approximately 15% growth with strong performance across our direct markets, which continues to be a major focus area for us.

Speaker 11

Our minimally invasive platform continues to be a key driver for growth globally. It is interesting that surgeons generally view the two procedures as complements to each other, and all Mia accounts are offering Preservé, showcasing the value of a minimally invasive portfolio approach that provides patients options to meet their aesthetic goals. Preservé continues to attract surgeons to the overall Motiva portfolio. In our OUS markets, we are seeing strong growth across European direct markets, including the U.K., Germany, Nordics, and our newly acquired Benelux affiliate. Continued stabilization in Latin America was solid performance in Argentina due to the adoption of the Motiva minimally invasive platform, as well as steady demand across all our distributor markets. Our exposure to the Middle East remains less than 5% of total revenue, limiting risk from regional volatility.

Speaker 11

In our U.S. and OUS markets, we expect growth to continue to accelerate into 2027. We also expect to continue the innovation pipeline by expansion in breast reconstruction in the U.S., which effectively doubles our addressable market, gaining CE mark for Zenº temperature, marking our entrance into biosensing capabilities, introducing smaller sizes to our U.S. product matrix, and thus expanding our reach within existing accounts, continue to develop our pipeline, including GEM, our gluteal augmentation solution. We also plan to submit for Health Canada medical device license for expansion in the Canadian market. As part of our overall strategy, we are taking steps to secure our future growth. This includes our signed agreement with Oaktree that refinances our debt and enhances our financial flexibility. Finally, we are in active conversations with NuSil, our silicone supplier, as we both look to establish a long-term agreement.

Speaker 11

We've had strong working relationship with NuSil for the last 15 years, and our ongoing conversations are very focused on what we can accomplish together as partners. I will now turn the call over to Sandra.

Speaker 3

Thank you, Peter. We delivered an exceptional start to 2026 with nearly 45% revenue growth, gross margin expansion over 70%, and our third consecutive quarter of positive adjusted EBITDA, demonstrating the strength, scalability, and operating leverage of our business. Total revenue for the first quarter was $59.9 million, an increase of 44.7% from Q1 2025. Starting with our geographic performance, our business outside the U.S. remains the largest contributor to revenue and continues to perform well. In the first quarter, OUS revenue grew approximately 15% over Q1 2025, driven by strength across our distributor and direct markets, with direct markets delivering double-digit growth. Our exposure to the Middle East remains limited at less than 5% of total annual revenue. In the U.S., we see strong momentum early in our expansion.

Speaker 3

U.S. revenue reached $19.6 million in the quarter and now represents 32.7% of total revenue, up from 26.8% in Q4 2025 and higher than the 15% from Q1 of 2025. This growth reflects both continued adoption of Motiva and the March launch of our minimally invasive platform, which is contributing to higher realized price points. Our gross profit for the first quarter was $42.3 million, or 70.7% of revenue, a 350 basis point increase compared to 67.2% of revenue in Q1 of 2025. This expansion was primarily driven by the increasing contribution of our higher margin U.S. business, along with the growing impact of our minimally invasive platform, which carries higher average selling prices and margins.

Speaker 3

SG&A expenses increased $3.9 million to $43.6 million compared to $39.7 million in the first quarter of 2025. The increase was primarily driven by variable costs associated with higher sales, including freight, as well as the impact of foreign exchange with continued investment in the U.S. business. Excluding a one-time item, adjusted SG&A was $41 million or 68.4% of revenue, representing approximately 50 basis points of leverage versus the prior year as we begin to scale the business. R&D expenses for the first quarter were $5.2 million consistent with prior quarters. Adjusted EBITDA was positive $1.2 million in the first quarter compared to a loss of $12.1 million in the first quarter of last year. This is our third consecutive quarter of positive adjusted EBITDA.

Speaker 3

During the quarter, cash decreased $7.5 million to $68.1 million from December 31, 2025. The decrease was primarily driven by investments in the U.S. market. We recently completed a refinancing of our debt, which enhances our financial flexibility, improves our liquidity profile, and introduces PIK interest that supports our path to cash flow generation. We have enough cash on hand to reach cash flow positive and have no needs or plans to do any type of equity financing. Following our strong performance in the first quarter, we are increasing our full year revenue guidance to $266.5 million-$268.5 million, up from our prior range of $264 million-$266 million. This represents growth of approximately 26%-27% over 2025.

Speaker 3

We expect our OUS business to grow in the single digits, while the US is expected to exceed 30% of total revenue for the year, up from approximately 22% last year. At $9.1 million in the quarter, our minimally invasive business is above expectations, and we now expect to exceed $35 million in 2026, up from the $30 million we guided to in February. We expect gross margins in the range of 71.2%-72.2% for the full year. Operating expenses are expected to remain between $195 million and $200 million, with some variability in quarterly spending based on timing. We also expect to be adjusted EBITDA positive in each quarter of 2026.

Speaker 3

As it relates to cash flow, we are on track to achieve cash flow positive in the second half of the year, driven by improved profitability and greater working capital efficiency. In the near term, we expect higher cash usage in the second quarter compared to the first quarter, primarily due to the final $4.7 million payment related to the Benelux acquisition, the normal timing of the short-term incentive payouts, and continued investment to support the U.S. commercial expansion, partially offset by $6 million of proceeds from our recent debt refinancing. We expect cash performance to improve meaningfully in the third and fourth quarters, supported by increased profitability and the benefit of PIK interest of more than $5 million per quarter. Historically, Q2 and Q4 are the strongest quarters in the industry, with Q4 being the largest, while Q3 is typically softer due to summer seasonality.

Speaker 3

Operating expenses will be elevated in Q2 as we continue to invest in the U.S. business. Despite this, we expect Q2 EBITDA to be approximately double that of Q1, reflecting the underlying operating leverage in the business. With respect to index inclusion, April 30th marked the Russell reconstitution rank date, and based on our current market capitalization, we believe we are well-positioned to qualify for inclusion in the Russell indices, with final membership to be confirmed in the coming months. With that, I'll turn the call back to Peter.

Speaker 11

Thank you, Sandra. As you think about our business, we hope we get a chance to interact with you at one of our many events we attend throughout the year. If you're interested in learning more, we selectively invite investors to visit us in Costa Rica at our innovation campus alongside our U.S. plastic surgeon delegations. Investors have found this trip very useful in validating our business and the overall opportunity. We're also hosting a small dinner in Boston around The Aesthetic Meeting from May 14th to May 17th. If you're interested in either of these, please reach out as space is limited. I appreciate you taking the time to listen, and I hope to see you on the next call soon. Operator, we're ready to take questions.

Speaker 10

Thank you, sir. Ladies and gentlemen, we will now be conducting the question and answer session. Please note for participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. If you'd like to ask a question, please key in star and then one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may key in star and then two to leave the question queue. We further request that you limit yourself to one question, and if time allows, you're welcome to rejoin the question queue for follow-up questions. Our first question comes from Anthony Petrone of Mizuho Group. Please go ahead.

Speaker 1

Thanks. Congratulations, Raji Sundar, and to the team on a strong start to the year here. You know, maybe the U.S. momentum here, it looks like an inflection. You have really, you know, almost two simultaneous launches, if you will, ongoing. It's the U.S. Motiva platform in and of itself. There's still a push into new accounts. Of course, we have the Preservé launch. Maybe, you know, how much was just new accounts bringing in Motiva as a platform versus the Preservé go-live accounts? I mean, by our estimate, you know, you're probably approaching somewhere between 75 and 100, you know, go-live Preservé accounts. I'll start there, and I'll have a quick follow-up. Thanks.

Speaker 11

Thanks, Anthony. As you highlighted, I mean, the progress in the U.S. has been tremendous. I mean, it's exceeded all our expectations. You see that with all the different metrics that we look at. I mean, we've increased the number of accounts. We continue to grow the base Motiva business. You know, a lot of that is driven. It shouldn't be a surprise. I mean, we've come to the market with what we believe to be the best implants from a performance as well as a safety standpoint, and we couple that with a best-in-class organization. That's really helping to drive that growth. You know, a lot of that currently is still based off of expanding and the Motiva business and getting into more accounts.

Speaker 11

We're also driving utilization in the accounts that we're in. Clearly, Preservé will be a significant driver for us in the future. I mean, it's not a surprise as well. I mean, there's very clear patient benefits, you know, with minimal anesthesia, with smaller scars, quicker recovery. I think it's creating a lot of interest and excitement from a patient as well as a surgeon standpoint. We're seeing good growth opportunities just on our base as well as on the Preservé launch.

Speaker 10

The next question comes from Josh Jennings of TD Cowen. Please go ahead.

Speaker 5

Hi, good morning. Great to see the strong start to the year. I wanted to ask about the minimum invasive platform, follow-up to Anthony's question, and clearly gaining more and more traction. You know, love to just hear you build out more, Peter, on just how Preservé is not cannibalizing Motiva business or Motiva cases, but is actually, you know, incremental to kind of the traditional augmentation patient. Then maybe do the same for Preservé and Mia, and just help us understand how they may be complementary and how the Preservé launch internationally may be even boosting Mia traction as well.

Speaker 5

If you could tie it all into just, it sound like you're optimistic that the breast implant market globally, especially in the United States, can actually see stronger growth here in the coming quarters, years, and then how this all ties in. Sorry for the multilayer question, but appreciate you taking it.

Speaker 11

Thanks, Josh. You know, as you highlighted, you know, the minimally invasive platform, we're seeing a lot of very strong growth. When you look at our OUS markets, where we have both Mia and Preservé, what we've seen, and we've been very pleased to see this, is they operate very complementary. In all the accounts that we currently have, Mia, which is close to 150 accounts, we have Preservé. There's clear distinction between the two, where Mia is much more of in the premium segment, smaller scars to no scars. It's under the armpit. It's somewhat restrictive in terms of the number of or the type of patients and the type of surgeons that would use that.

Speaker 11

While Preservé is much more day-to-day, it's a premium versus our base, it's less, lower priced than Mia. They work very complementary. What we've been able to see in a lot of markets in OUS is just with the minimally invasive rollout with Preservé as well as Mia, we've been able to expand our account base in a number of markets that's really helped to drive that. To answer your last question, We're seeing this, you know, with some of the market research that, you know, in the U.S. with Preservé, you know, 15% of women that have used the procedure were not currently considering breast augmentation.

Speaker 11

We believe that the minimally invasive, you know, both Mia and Preservé has a real opportunity to drive category growth. You know, I think there is just increasing a lot more interest in the area of transparency with, not only with the Preservé and Mia, but as well as just more openness, and interest in breast augmentation, and we feel that we're a big part of that.

Speaker 10

The next question comes from Sam Eiber of BTIG. Please go ahead.

Speaker 12

Hi, good morning. Thanks for taking the questions here. Maybe I can stay on Preservé for a moment. You know, Peter, would love your thoughts on, you know, if you think Preservé can eventually become standard of care, you know, over traditional breast augmentation, at least here in the U.S. Maybe you can help explain why Preservé is something that, you know, beyond the tools, is something that can only be done with.

Speaker 12

Motiva, whether it's, you know, the implant surface, whether it's the low complication rates, would love if you can explain that in a little bit more detail. Thank you.

Speaker 11

I mean, I think it, in terms of the minimally invasive and Preservé, not only in the U.S., but I think globally, it really makes sense. If you look at, like, different types of procedures, surgical procedures, everything is minimally invasive. I think bringing that technology and that capability, I think it's, you know, patients, that's what they're looking for. I mean, it's very clear what the benefits are for patients. You know, smaller scars, quicker recovery, minimal anesthesia, which is very important for a number of women. It really has the opportunity to be a significant growth driver, but it's the standard of care, I think, in the industry.

Speaker 11

I think in some respects, because of the lack of innovation we've seen in the U.S. prior to our entry, I think, you know, a lot of the category is behind. We do believe that that's gonna be, you know, more standardized in the industry. I think it's really our innovation with the unique implants that we have is very specific and beneficial for this type of procedure. You know, we'll continue to look at and continue to drive innovation that really shapes the category, and I think this is just the starting point for us.

Speaker 10

The next question comes from Mason Carrico of Stephens. Please go ahead.

Speaker 7

Hey, guys. Thanks for taking the question here. I assume that most, if not all, Preservé users were already Motiva users, but was curious to hear if that launch has actually led to increased conversation or maybe even conversion of accounts that previously hadn't adopted Motiva. Maybe just a simpler way to the question is, do you think that launch could actually accelerate the onboarding of new accounts moving forward?

Speaker 11

Yeah. Mason, I mean, we're pretty early in the launch, but what we've seen outside the U.S. is that the minimally invasive, specifically Preservé, has brought in a number of new accounts for us in our direct markets in Western Europe. It has had that benefit. You know, bringing new technology, bringing a new procedure, I think, has really resulted in, you know, our ability to drive account growth in a lot of our Western European markets. In the U.S., I mean, it's, you know, it's still early. I believe you're gonna see the same type of trend in the U.S., but, you know, we're kind of in month 2 right now and there's significant demands with the accounts that we do have, and You know, we're very focused on getting the training done.

Speaker 11

I do believe, to your question, I think it has the potential to drive, you know, certainly account acquisition.

Speaker 10

The next question comes from Caitlin Roberts of Canaccord Genuity. Please go ahead.

Speaker 2

Hi. Congrats on the quarter, and thanks so much for taking the questions. Just a quick one. Have you added all the reps that you plan to add for Preservé in the U.S.? Just appreciate the guidance on MIS, but could you break out potentially Preservé and Mia, and any updates on the timeline for you guys to bring Ergo II into the U.S. and eventually Mia?

Speaker 11

Thanks, Caitlin. The split between the Preservé and Mia, you know, a bulk of that is really driven by, you know, Preservé is the key driver for us. You know, we expect that to be a significant growth driver for us moving forward. You know, as it relates to Ergonomix2, I mean, currently we've had good discussions with the FDA. You know, we're trying to really align on what the appropriate regulatory requirements are for us to get that approved with the FDA. We don't see that as a significant driver for us until probably around 2028. I mean, we have a lot of growth opportunities as it relates to Preservé currently.

Speaker 11

As you asked, I mean, we are expanding our sales force. Currently, we're at 50 reps, but we're gonna continue to expand that opportunistically when there's a geographical opportunity, but also more importantly, getting the right talent. You know, I think we've been very successful in what I consider to be a best-in-class organization and in this industry, bringing over high-quality sales reps that have the established relationship, and that makes a big impact, and we've been able to do that.

Speaker 10

The next question comes from Joanne Wuensch of Citibank. Please go ahead.

Speaker 4

Good morning, and thank you for taking the question. I've got a big picture one. What are you seeing in the macroeconomic environment? Specifically I'm concerned or thoughtful of the consumer and the impacts to the Middle East as it might relate either to sales or resin or oil prices or anything on the bigger landscape would be helpful. Thank you so much.

Speaker 11

Yeah. Hi. Thanks, Joanne. I think that's a great question. I mean, obviously that's top of mind for, you know, anybody that's running a company. You know, I think, you know, as you look at what's going on in the Middle East, I think first off, just looking at the Middle East, as we highlight in the prepared remarks, it represents 5% of our total sales. You know, not surprising in Q1, we didn't have any orders. We do have orders in the system in Q2, we expect to be shipping to the Middle East this quarter. There is some demand there. I think the key question is what you highlighted. You know, what is the potential overall macro impact?

Speaker 11

You know, so far, Joanne, we have not seen an impact on the global demand for the number of procedures. You know, that's something that we're gonna continue to closely monitor. As it relates to areas in terms of, you know, costs, I think we've seen some, and I can let Sandra answer this, but we've seen some impact in terms of outward freight. There has not been an impact in terms of our, you know, silicone costs, because those are locked in for the full year. I would say in general, we haven't seen a significant impact, but that's something we're gonna monitor very closely. Sandra?

Speaker 3

Yeah. No, I think Peter hit it. We're seeing some initial surcharges on outbound freight, but at this time, we've been able to navigate through and, you know, hold our margin profile. Our silicone provider, we recently have, you know, locked in volumes, and we have a contract with them through the end of the year. We'll monitor the situation and look to protect our margins with any type of price as it progresses.

Speaker 10

Thank you. The next question comes from Allen Gong of J.P. Morgan. Please go ahead.

Operator

Hi, team. Thanks for the question. I just had a quick one on, you know, the guidance and just the momentum that you're seeing. You talked about how orders are up, you know, 30% from 4Q to 1Q. First quick one, is that a U.S. comment? Given that kind of momentum, how should we feel about, you know, the cadence for the balance of the year, and particularly what you're seeing in the second quarter, given the reiterated guide or, you know, guide by just the beat in the first quarter? Thank you.

Speaker 11

Yeah. Allen, I'll kick it off. Just to clarify that, I mean, when we talk about the orders, that was specific to the U.S. You know, as we highlighted in the prepared remarks, we're increasing the number of accounts, but also we're increasing the utilization rate, you know, as the surgeons work through their schedule. It's a combination, and it's reflected in the average daily orders. We see very strong momentum going into Q2 as well. That's not just in the U.S. I think in overall, you know, globally, in a lot of markets, we've, you know, the demand has been stable.

Speaker 11

I think the one outstanding question that we had going into as we're managing business, like a lot of different companies, is, you know, what's the impact of the Middle East? As I mentioned before, you know, it is a small part of our business. We do have orders in the system for Q2, so there is demand there. We have not seen the impact, you know, in terms of global demand, but that's something we're gonna monitor. Based on that, you know, gave us the comfort to raise the guidance. You know, we had a strong Q1, we're off to a good start in Q2, so that gave us the comfort around that.

Speaker 10

The next question comes from Matt Taylor of Jefferies. Please go ahead.

Speaker 8

Hi. Good morning. Thanks for taking the question. I wanted to follow up on the silicone supply comments. I know that this year the contract's set in stone, but could you address the potential for cost increases beyond that? Maybe give us an update on how negotiations are going and when we could expect an update.

Speaker 11

Yeah. Thanks. Thanks, Matt. It's a good question. I mean, you know, we have a very good relationship with NuSil. I mean, it goes back for a number of years. You know, obviously, as we continue to grow as a company, we become, you know, a more valuable customer to NuSil. We've had very productive conversations with NuSil, and we consider them very good partners. In fact, that we've aligned or we agreed on volume commitments for this year, just about a month ago. You know, the prices are locked in for this year. We've made that commitment. Obviously, you know, that's an increase in volume versus last year.

Speaker 11

We've started conversations around a long-term agreement and, you know, there's interest on the NuSil side to have an agreement as well as for us to have an agreement five years or more. A lot of the conversations are less about pricing. It's much more about, you know, co-development work. They're, you know, interested in exclusivity with us and looking at the length of the agreement. Generally around the price is more volume driven. The conversations are very productive. You know, as I mentioned before, we are, you know, continue to be a bigger part of their business. They've been good partners for us in the past, and we expect that to continue moving forward.

Speaker 11

You know, we haven't finalized the conversation, the discussions on the agreement, but there's strong intent to have a very long-term agreement for with NuSil.

Speaker 10

The next question comes from Mike Matson of Needham & Co. Please go ahead.

Speaker 9

Yeah, thanks. I just wanted to ask one on the refinancing. By our math, it seems like without the additional $35 million draw, there could be a slight increase in interest expense of maybe like $1 billion a year. Is that right? Thanks.

Speaker 3

Thanks, Mike. Yes. On the new debt agreement, we've increased it from $225 million. The current draw is $265 million. There is a lower interest rate at 8.75%. There's the ability to PIC, which gives us some near-term, you know, cash availability, which we take. Net, net, there is, you know, neutral to slightly up on the increase in the availability of the funds with the lower interest rate and then the exercise of the PIC.

Speaker 10

Thank you. The next question is a follow-up from Anthony Petrone of Mizuho Group. Please go ahead.

Speaker 1

Thanks. One for Sandra, just on gross margin here. Guidance 71.2% to 72.2%. How much of that is just, kind of reflection of Preservé at higher prices? Have you baked in an FDA clearance for reconstruction and just what that can bring to the table in terms of gross margin momentum? Thanks.

Speaker 3

Yeah. Anthony, good question. Our gross margin improvement, and we do expect that it'll continue to contribute is the growth of the U.S. You know, with the U.S. business being a direct account, it improves our margin profile, and you're seeing that in our numbers. Obviously with OUS being further along in the journey on minimally invasive, its growth in the direct business, then the launch of minimally invasive in the U.S., that also is a big contributor to the margin. As we look forward, we do expect that we will continue to improve that margin based upon the mix of that business, both U.S. and OUS, as well as the minimally invasive.

Speaker 3

At this juncture, we do not, you know, we can't necessarily time the FDA approval, so we've made no assumptions in regard to reconstruction.

Speaker 10

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

Speaker 11

Thank you, everybody, for joining the call this morning. You know, I appreciate the time and really having everybody get to hear more about the progress we're making with Establishment Labs. As we highlighted there, as I highlighted in the commentary, you know, it's a great opportunity. I hope to see you at some of the events, but also, you know, please take us up on the offer about visiting us in Costa Rica, and you really get an opportunity to really see the uniqueness of this company and the strengths that we have and just to build that partnership. Thanks again, everybody, for joining the call, and look forward to seeing you soon. Thank you.

Speaker 10

Thank you, sir. Ladies and gentlemen, that concludes this event. Thank you for attending. You may now disconnect your lines.

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