Establishment Labs Holdings Inc. (ESTA) Earnings Call Transcript & Summary

Good morning, and welcome to Establishment Labs Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded. I will now turn the call over to Malavika William, VP, Global Head of Corporate Communications and Marketing. Please go ahead.

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 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 with non-GAAP measures, if available, may be found in today's press release, which is available on our website. The content of this conference call contains time-sensitive information accurate only as of the date of this live broadcast, August 6, 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.

Good morning and thank you for joining us. Q2 was another strong quarter for Establishment Labs. We delivered revenue of $67.5 million and adjusted EBITDA of $3.7 million, representing revenue growth of 31.7% over the same period last year. The U.S. business once again outperformed, generating revenue of $24.7 million, an increase of over 140% compared to the same quarter last year, and an increase of 26% from Q1. Outside the United States, our business grew steadily at 4.4%, supported by strong execution in our direct markets and steady demand with our distributors. Our minimally invasive platform continued to emerge as an important growth driver globally, generating $12.1 million in revenue during the quarter. We're off to a good start in Q3, which is traditionally the seasonal low point of our industry. As a result of our first half performance, we are raising our full year revenue guidance to $269 million to $271 million, up from our previous range of $266.5 million and $268.5 million. Minimally invasive is approaching 15% of our global business for the year and is expanding our total addressable market. We should transition to free cash flow positive during the second half of 2026 and be free cash flow positive for fiscal 2027. With our recent inclusion in the Russell 2000 Index, we have quite a bit of new interest in our story, and this was a focus of our Q1 call, where we walked through the technological foundation of our business and what makes Establishment Labs different. If you're joining us for the first time, I'd encourage you to read the transcript from that call. It provides a good overview of our product differentiation, strategy, and the long-term opportunity we see ahead. We aren't just looking to take share from others in breast aesthetics and reconstruction. We're looking to meaningfully expand the market. Breast aesthetics has been heavily underinvested for years and we remain the only company bringing meaningful improvements and differentiated technologies to the market. Our goal has never been to be another implant company. Our goal is to be a major contributor to women's health. We started with Motiva Implant, a product developed through years of investment in science, engineering, and clinical research. It has shown the strongest safety data in the industry, and this has been the foundation for one of the fastest launches in the U.S. breast aesthetics. Our technology platform allows us to do so much more, and we are already seeing how it enables an entirely new category of procedures through the introduction of minimally invasive. Today, that platform consists of 2 procedures, Mia and Preservé. A third procedure called GEM is currently in development and represents a potential breakthrough in gluteal augmentation, offering what could be a safer and more predictable alternative to the Brazilian butt lift. Mia and Preservé are built on the tissue-preserving principles that Establishment Labs has pioneered and patented. The surgeries are designed to preserve native breast tissue, sensation, and chest muscles. The focus on preservation delivers clear benefits to the patient. Minimal anesthesia with barely noticeable scars and a significantly reduced recovery time compared to traditional breast augmentation. Preservé accommodates a broader range of patient needs, including larger augmentations and augmentation mastopexy procedures while maintaining the same principles of tissue preservation and faster recovery. Mia, which is currently available outside the U.S., is designed for women seeking a more subtle enhancement, typically 1 to 2 cup size increase. The procedure uses our Ergonomix2 Diamond implant, offering a scarless breast with a small incision made in the underarm. The implant is one of the major differences between Mia and Preservé. It is a patented new shape, breaking a decades-old dichotomy of round and teardrop implants. This shape, which is symmetrical, has more volume in the middle, creating more projection with a smaller volume implant. This shape is the first of its kind, truly innovative, and has many usage opportunities as we expand our efforts in minimally invasive. The softness and lightweight design allow for an augmentation that aims to integrate so well with the body that women forget they have implants. Also of note, we developed a patented automated injector for Mia, replacing the current manual insertion process used in traditional breast augmentations. Today, implants are generally placed either by hand or through a device known as a funnel. The injector offers a far more seamless process and simplifies what can be one of the more challenging parts of the surgery, and over time could become a new standard in the industry. As you learn about our technology, it's worth reading the supplement on Preservé that has been accepted and should be published later this year in the Aesthetic Surgery Journal. This is a compendium of peer-reviewed clinical data specifically on breast tissue preservation and the techniques. It focuses on the science, anatomy, and clinical outcomes of breast tissue preservation, and our hope is that it will become foundational learning for plastic surgeons as they adopt Preservé. Minimally invasive is being very well received by the market, with adoption even at higher price points. Two things are happening here. First, minimally invasive options are bringing new patients into the category that have never previously considered a breast augmentation. Second, patients already considering breast augmentation are opting for this procedure even though it's more expensive. For Establishment Labs in the United States, Preservé commands a premium of more than 2x that a traditional breast augmentation procedure. Not only are we expanding the market, but it appears that women are deciding to get the procedure much faster than they traditionally have. Historically, women could take years between their first thoughts of having breast augmentation and actually getting a surgery. The appeal of minimally invasive is shortening that consideration time. Since launch, we have seen any number of cases where women take months, and in some cases days, from consideration to surgery. We believe we're still in the very early stages of this opportunity. There is significant potential for market expansion, and we expect it to become an increasingly important driver for our growth in the years ahead. Turning to the quarter, the United States continues to be the primary growth engine for our business, now representing 36.6% of total company revenue, up from 20% a year ago. Another milestone, in Q2, we surpassed 100,000 Motiva implants in the U.S. market in under 21 months since launch. We are still early in our U.S. journey, but crossing 100,000 implants is an important reminder of how quickly the market has embraced our technology and how much opportunity remains ahead of us. What continues to stand out is the depth of adoption we're seeing. At the end of the quarter, we had surpassed 2,000 accounts in the United States. Many accounts have multiple surgeons using our implants. While we continue to open new accounts, an increasing percentage of our growth is now being driven by utilization within existing accounts. As surgeons become more familiar with the clinical data, products, differentiators, and patient outcomes, we are seeing adoption strengthen, particularly among early adopters and high volume accounts, where Motiva now represents a significant percentage of their practice. One surgeon who adopted Motiva immediately following FDA approval shared that he has completed approximately 300 Motiva cases in his first year and has now converted nearly his entire augmentation practice. Another surgeon shared that for the first time in his more than 25-year career, patients are actively requesting Motiva by name, and that increased demand is translating directly into higher surgery volumes. We're also seeing that even when women have a warranty from another company that offers a free replacement, they are paying for Motiva implants themselves. These experience seem to be representative of what we're increasingly hearing across our customer base. Late adopters are also beginning to show interest, particularly as patients' demand for Motiva continues to build. In a category where patients historically have rarely asked for a specific implant brand, 75% of surgeons now report that patients are asking, and 93% of the time, that brand is Motiva. That level of consumer awareness remains highly unusual in breast aesthetics and continues to be a powerful driver of adoption, making Motiva increasingly difficult for practices to ignore. Preservé is also emerging as an important growth driver in our U.S. business. We ended the quarter with over 300 surgeons trained and certified on their procedure, which is more than 50% above our original expectations for the year. There is no shortage of surgeon interest, and they now have multiple training pathways available both in the United States and our global innovation hub in Costa Rica. And we continue to see relatively quick adoption following certification. The benefits of Preservé are showing up across both traditional and digital media outlets. In the limited time that Preservé has been on the market, it has been mentioned as the new breast augmentation option, commonly discussed on social media platforms and in the media, including in feature articles from People Magazine and Allure, as well as The Zoe Report and The Washington Post, to name a few. Surgeons report they are charging between 30% to 50% more for Preservé procedure than for their traditional breast augmentations, confirming that patients value these benefits and are willing to pay for them. It is increasingly early in the launch to see this kind of market expansion and our success is suggestive that we are only in the early innings of something that could fundamentally change the category. Also interesting, we are hearing from some surgeons that because of the very limited downtime with Preservé, they have booked surgeries throughout the summer, which is unusual because the summer months are traditionally slower for breast augmentations. One of our earliest adopters performed 5 breast augmentations in July and August last year. This year, he's already scheduled for 50 in the same time period. As we have discussed previously, a major focus of our strategy is expanding and strengthening our direct markets outside the U.S., and we are pleased with the progress we continue to make. Over the past year, we have, not only strengthened leadership across several of our key markets, but also prioritized resources in those markets, and those investments are translating into stronger growth. Growth was broad-based across many of our regions, driven by strong execution and an increase in the number of accounts. Europe, where we have the most direct markets, delivered 16% growth and was especially strong in Italy, Germany, and the U.K. In Latin America, Argentina continued its positive trajectory from Q1, while Brazil maintained its path of stability, driven predominantly by our minimally invasive platform. Our minimally invasive platform remains an important contributor to growth outside the United States and continues to support adoption across the more than 40 markets worldwide. In general, demand trends remained stable throughout the quarter, despite continued macroeconomic and geopolitical uncertainty across several regions. Our exposure to the most volatile markets remains limited, and we continue to benefit from a highly diversified global business. As we look ahead, we continue to advance our innovation pipeline. This includes our reconstruction submission with the FDA, the expansion of our U.S. product matrix through smaller implant sizes, and the continued development of GEM. All of these will help us take market share and expand the market. With that, I'll turn the call over to Sandra to discuss our financial results in more detail.

Thank you, Peter. The second quarter was another important step forward financially. We continued to deliver strong top line growth while expanding margins and generating positive adjusted EBITDA with improving cash flow. As our U.S. business and minimally invasive platform continue to scale, we're seeing increasing operating leverage across the organization. Total revenue for the second quarter was $67.5 million, an increase of 31.7% compared to the second quarter of 2025. In the United States, revenue was $24.7 million, representing growth of 140.9% compared to the prior year. The U.S. now represents 36.6% of total company revenue and continues to be our fastest-growing region. Growth was driven by continued adoption of Motiva and increasing contribution from our minimally invasive platform. Geographically, our business outside the United States continues to perform well. OUS revenue was $42.8 million during the quarter, representing growth of 4.4% over the second quarter of 2025. Our minimally invasive platform generated $12.1 million in revenue during the quarter and continues to perform ahead of our original expectations. Gross profit for the second quarter was $47.7 million, or 70.6% of revenue, compared to 68.8% in the prior year period. Gross margin expansion was primarily driven by the increasing contribution of our higher-margin U.S. and OUS direct markets, favorable product mix, and the continued growth of our minimally invasive platform. Operating expenses were $52 million for the quarter, including $2.2 million of onetime charges related to restructuring and debt refinancing. Excluding these charges, underlying operating expenses remained well controlled, increasing modestly despite revenue growth of nearly 32%, reflecting continued operating leverage across the business. Adjusted EBITDA improved by $12.2 million to income of $3.7 million, compared to a loss of $8.5 million in the prior year period. We ended the quarter with cash and cash equivalents of $71.2 million, a sequential increase of $3.1 million from Q1 and $16.5 million higher than the same quarter last year, and generated positive overall cash flow. This milestone reflects the strong progress we have made improving profitability, expanding margins, and driving greater operating efficiency throughout the organization. Importantly, we have sufficient liquidity to execute our strategy and continue investing in future growth opportunities without the need for future equity raises. Given our strong first half performance and continued momentum across the business, we are increasing our full year revenue guidance to between $269 million and $271 million. We expect the U.S. business to be the primary driver of growth, while our OUS business remains healthy and diversified. As we look to the third quarter, I'd like to remind investors it is historically the softest quarter in the industry, reflecting the summer vacation period. We expect the U.S. business to remain strong and our OUS business should reflect the normal seasonal pattern. As always, we expect our strongest quarter to be the fourth. We remain very encouraged by the performance of the business, the continued momentum in the United States, the growing contribution of our minimally invasive platform, and the increasing profitability profile of Establishment Labs. Now, I'll turn the call back over to Peter.

Thank you, Sandra. As you've heard today, we continue to execute well across the business. The U.S. remains a significant growth driver. Our OUS markets continue to perform well. Our minimally invasive platform is gaining momentum globally, and we have a clear path to being free cash flow positive. At the same time, we continue to advance a pipeline that should support growth for many years to come. While we are proud of what we've accomplished so far, we believe the opportunity ahead remains substantially larger than what we've achieved to date. Operator, we're now ready to take questions.

[Operator Instructions] Your first question comes from the line of Josh Jennings from TD Cowen.

Great to see another strong quarter, especially the U.S. momentum. Appreciate your comments on Mia during the call so far. Our checks have suggested that there's some optimism in U.S. plastic surgeons that Mia ultimately could produce an entire new category in the aesthetic space where you could transition breast augmentation from a surgery to an injectable procedure. And is there any plans to kind of drive that notion and just that segmentation here in the international markets where you've launched and then ultimately in the U.S.? And how does that all play out?

Yes. Thank you, Josh. Listen, I think that what we've always highlighted around the minimally invasive platform, this is truly an innovation in a category that hasn't seen innovation. And Mia, as you highlighted, is just outside the U.S. We've had good traction. It's also a key driver for the development of Preservé. So part of this entire minimally invasive platform, I think is a significant growth driver for us. It brings in a number of new patients to the category. We've seen that through market research in the U.S., it's about 15% with Preservé. Outside the U.S., similar type of numbers. It does address a number of the barriers that are preventing women from doing a breast augmentation. When you talk about minimal anesthesia, you talk about also those smaller scars and quicker recovery. So it'll continue to be a key driver for us. And we're just in really the early stages of that development. And we're seeing that impact in the U.S. and also outside the U.S.

And I know I'm focused on the pipeline here with my questions, but you referenced GEM on the call so far. It seems like there's a potential for, we may be getting too aggressive with our assumptions, but a potential for initial U.S. kind of commercial -- OUS, excuse me, commercial launch maybe next year. Any more details you can provide on where that development program stands and any kind of regulatory or commercial milestones we should have on our catalyst calendar?

Yes. So, Josh, regarding GEM, we see this as a tremendous opportunity, really leveraging a lot of the technology from the minimally invasive platform in really providing a safer alternative, also with more predictable results to the traditional Brazilian butt lift. So where we are in that process is, we're doing a clinical study in Costa Rica. We expect next year in the back half to do an early experience in Latin America. And right now we're really working through what that regulatory pathway is going to be for the U.S. as well as OUS, primarily in Europe. But we're very pleased with the progress we've made so far. I mean, it's a very differentiated technology, and we see this as very much an untapped market. But in terms of timing for, let's say, the U.S., we have so many things that we're going to be driving growth over the next couple of years. We don't see that really as a contributor in the U.S. until 2028 and beyond. But we're still working through what that regulatory pathway is going to be.

Your next question comes from the line of Sam Eiber from U.S. Bancorp.

Congrats on the nice quarter. I want to come back to Preservé in the U.S., 300 surgeons now certified. Curious what you're hearing from the field in terms of utilization and adoption, their own plans to expand Preservé within their practice, and generally thoughts around the procedure and what it can mean for the U.S. business over the back half of the year.

Yes. Thanks, Sam. I mean, it's pretty clear we're off to a great start with Preservé. There's significant demand. I think our original target was around 200 surgeons. We quickly surpassed that. We're really expanding our capacity in terms of training. There's no shortage of surgeons that are interested. What we're finding is that, as soon as they're certified, it's very quick adoption in terms of the initial ordering, and then it's a process of working through their schedules and getting the right patients. We fully expect that this is going to be continually a key driver for our growth in the back half of this year. We're targeting to train approximately 500 surgeons for the full year 2026. And this is really driven by tremendous demand in the marketplace, and it is addressing a significant barrier that patients have with doing a breast augmentation, and that's really been playing out in what we're seeing in the marketplace.

Okay. Really helpful. Maybe if I could just squeeze in a quick follow-up. The global minimally invasive revenue for the quarter, $12 million, certainly passed our expectations. As I think about the prior $35 million guidance, it seems like you're on pace to achieve well beyond that. I guess, any updated thoughts on how we should be thinking about that number?

Yes, Sam, I think we said over $35 million, and what we've said recently is that, we're going to be approaching, for the full year, about 15% of our revenue. So I think that depending upon how you look at our guidance, that gives you the guide for minimally invasive going forward.

Your next question comes from the line of Mason Carrico from Stephens.

Could you give a sense of Motiva mix among Preservé-trained surgeons compared to that of an untrained one? Have you seen Preservé certification lift overall Motiva mix or share at that account? And I guess, longer term, what percentage of your U.S. volumes do you think could ultimately be Preservé?

Yes. We are seeing in the accounts, I mean, there's such strong interest in Preservé. It's truly a unique innovation in the marketplace that's really been starving for innovation. So we're seeing strong interest and a number of surgeons are really, once they get trained and accustomed to using Preservé, a lot of them see this as really the future of the industry, and it will continue to be a bigger part of the practice. It generates a significant revenue opportunity for them. So we see that over time, that will continue to be a bigger part of that market. In terms of the split, I don't -- Sandra?

Yes. I mean, in terms of the split, I don't know that we've really talked about the split between the U.S. and the OUS, but it's going to be a very important part of our ability to expand the market and to continue to take market share in the U.S.

Your next question comes from the line of Caitlin Roberts from Canaccord Genuity.

Congrats on a great quarter. Would love to touch on recon. Have you had any convos with the FDA on the recon indication and updated expectations for this approval time line? And how many hospitals are you now in the Flora?