Q3 2022 Establishment Labs Holdings Inc Earnings Call
Good afternoon, and welcome to establishment Labs' third quarter 2022 earnings conference call.
At this time, all participants will be in a listen only mode. At the end of this call. We will open the line for a question and answer session and instructions will be given at that time as a reminder, today's call's being recorded.
I'll now turn the call over to your host Raj, Dan Hart Chief Financial Officer. Please go ahead.
Thank you operator, and thank you everyone for joining US with me today is one is H you call I'm curious are 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 establish a 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 uncertainties that may affect our performance may 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 establishment labs Dot com.
I'd also like to remind you that our comments will 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 reconcile.
Reconciliations to the most directly comparable GAAP financial results can be found in today's press release, which is available on our website.
Please also note that establish a labs received an investigational device exemption from the F. D. A promote TV implants is undergoing a clinical trial to support regulatory approval in the United States, we continually seek to expand the geographies in which our products are regulatory approved.
Please check with your local authorities for specific product availability.
The content of this conference call contains time sensitive information accurate only as of the date of this live broadcast November seven 2022.
Except as required by law establish a labs undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances. After the date of this call.
With that it's my pleasure to turn the call over to our CEO Juan Jose.
Thank you Raj and good afternoon, everyone.
I hope everyone is healthy and continues to remain safe.
Revenue in the third quarter of 2022 totaled $38 2 million, 32% increase over the third quarter of 2021.
Excluding the negative impact of foreign currency changes our growth in the third quarter would have been approximately 38%.
Our strong market share gains continued to be driven by our singular focus on women's health and wellbeing, our commitment to bring highly differentiated technology to the breast aesthetics and reconstruction markets based on science and patient centric design, it's wholly unique in our industry.
With this commitment to innovation, we are expanding existing markets in creating new categories that will sustain our growth for many years to come.
Raj will provide additional detail on their third quarter performance and our updated outlook, including tightening our revenue guidance range to $158 million to $162 million.
But before I turn the call over to him I would like to highlight recent events over the past several months.
On Wednesday October 5th we presented an update on me authentic the new category, we are creating in breast aesthetics. During the presentation. We showed an update on the clinical progress with me at our expectations for commercialization in a video of the procedure as well as testimonials from women who have.
Had the Minneapolis easier if you haven't seen it a recording of the webcast is available on our website and I highly recommend taking the time to watch it.
We are creating a new category in aesthetics for women don't want a traditional breast augmentation, but are conscious about the shape and proportions of their breasts.
Yeah offers these women and minimally invasive procedure that can be performed without general anesthesia in less than 15 minutes with an easy returned to their daily activities.
The insights from the extensive consumer research we have completed show that many more women are interested in me than receiving a traditional augmentation today.
In Japan for example, our primary research showed a 155000 women are interested EMEA with 133000 Sandy are interested in getting the procedure in the next 12 months Japan.
Japan is a market where there are currently only about 5000 traditional breast augmentation is done every year.
By providing a solution that is more appealing to consumers. We are opening up a whole new group of women to breakfast stacks.
<unk> to commercialize <unk> in the first half of 2023.
The recent regulatory updates out of European Union on the common specifications around <unk> 16 are encouraging and our plans for market entry into Europe and other markets continue.
We look forward to providing more updates over the coming months.
As we announced in our second quarter call all cohorts of our U S. IDE study are fully enrolled and we are moving diligently through the follow up on.
The third cohort as we previously communicated we are pursuing and modular PMA submission back.
All patients in the cohorts past the three year Mark in August and we continue to expect we will submit the fourth and final module to the FDA this quarter.
And our aesthetic breast reconfirmed choice the launch of our Motiva flora tissue expander in Europe , and other CE Mark countries is ongoing.
Florida has many advances or other commercially available tissue expanders, including a first of its kind RFID enabled port which allows for MRI imaging without heart attacks during the time and expand or is used after my sector.
By being non magnetic Florida potentially opens new options for radiation oncology treatment during this stage of recovery.
Flora also features our patented self friendly smooth silk surface technology and the early users have noted improved patient comfort and healthier capsule formation with this unique tissue expander.
We are expanding the markets in which Florida is available adoption will take time, but early efforts have been encouraging and add to our belief that we can help support women in their breast reconstruction journey surgeons, who are adopting our technology with many more making floor out their expander of choice.
Flora is only the first step in our static breast Recon initiative, where establishment labs will offer tools and techniques that allow women to receive reconstructive surgeries that achieved the aesthetic ideals, which day spire.
Our clinical and commercial efforts in China are ongoing and we continue to make progress in the regulatory process. We continue to expect approval for her to lead this market in the first half of 2023.
Before I turn the call over to Raj to cover our financial results I wanted to note. The publication last month of our annual post market surveillance report, which is available on our website.
The reports, which we update every year highlights to clinical safety performance up to $2 5 million Motiva implants in market over 12 years since we began commercialization in 2010.
After more than a decade on the market.
Implants continued to show less than 1% device related complications leading to re operation.
Including capsular contracture and implant rupture.
Also we have no reported cases of squamous cell carcinoma, which was recently noted by the F D. A.
These unprecedented clinical results are supported by the science behind our implants.
October establishment labs attended the American Society of plastic Surgeons meeting in Boston, We hosted a symposium for surgeons, where Dr. Robert Langer from it might be presented the results from the paper he coauthored on England surface. The paper, which was published last year in nature Biomedical Engineering show.
That our patented smooth silk surface produces the lowest rates of inflammation in the healthiest capsules compared to other commercially available smooth or textured implants.
Scientific research such as the work done by Dr. Langer and his lab provides the answer as to why our implants performed better than others.
Now more than 50 peer reviewed publications about Motiva and we look forward to more seminal papers like Doctor language over the coming months and years I will now turn it over to Raj.
Thank you Juan Jose.
Total revenue for the quarter was $38 $2 million reported revenue growth in the third quarter was 31.7% foreign currency changes reduced our third quarter revenue by approximately $1.7 million.
Excluding the impact of currency revenue growth in the quarter would've been six percentage points higher were 37, 7%.
Direct sales were approximately 38% of this total while distributor sales, which can fluctuate based on changes in inventory levels and the timing of Reorders made up the balance.
From a regional perspective sales in Europe comprised approximately 23% of global sales Asia Pacific and Middle East was 44% in Latin American made up the balance.
Brazil, which is our single largest market globally accounted for approximately 18.6% of total quarterly sales.
Our revenue distribution this quarter was impacted in part by foreign currency and more pronounced seasonality with the end of the pandemic.
Both of these factors disproportionately affect our revenues in Europe with surgeons and patients take vacations in the summer months, and where we price our products in local currencies like the euro and British pound.
And many of the markets around the world, we price in U S dollars.
Our reported gross profit in the third quarter was $26 million or 68, 1% of revenue this compared to 19.6 or 67, 6% of revenue for the same period in 2021, even with the negative effects of foreign currency exchange rates overall average selling prices in the third quarter up slightly from the second quarter of 2022.
SG&A expenses for the third quarter increased approximately $6 5 million to $31 $3 million.
This compared to $24 $8 million in the third quarter of 2021.
The increase in SG&A in the third quarter resulted from continued normalization of business practices. Following the disruption from the global pandemic and our prioritization of investments in new growth initiatives like Mia and preparations for our launch in the U S.
R&D expenses for the third quarter increased approximately $1.4 million from the same quarter, a year ago to $5 $3 million.
R&D expenses will fluctuate quarter to quarter based on the timing of clinical trial and other expenses.
Total operating expenses for the third quarter were $36 $6 million, an increase of approximately $7 $9 million from the year ago period the.
The increase this period was again due primarily to the normalization of activity in spending relative to a year ago as well as the investments in growth initiatives.
Loss from operations for the third quarter was $10 $5 million compared to a net loss of $9 million in the year ago period our.
Our cash position as of September 30th was $65 $3 million this compared to $53.4 million at the end of the previous year. The increase in cash. This quarter was the net result of the first $150 million tranche.
From the new term loan we secured on April 26th.
As a reminder, the term loan has three additional tranches totaling $75 million of additional non dilutive capital. We can access on the achievement of revenue and regulatory milestones.
The revenue results in the third quarter, we have achieved the milestone necessary to drive the next $25 million tranche, bringing our currently accessible cash to approximately $90 million cash used in the third quarter included approximately $5 $2 million of investments in our new manufacturing facility that will expand our capacity to produce more than half of the world's breast implants.
We also increased inventories as we increase our purchase of raw materials overall changes in working capital investment activity, including expenditures in the new facility reduced our cash position by approximately $17 million in the third quarter.
Under our current forecast the cash we currently have on hand, as well as the additional capital available to us under our credit facility allows us to achieve cash flow profitability, while still funding our growth initiatives. We are tightening our sales guidance for 2022 to a range of $158 million to $162 million, representing estimated annual growth of 25% to 28%. This compares.
Our previous range of $155 million to $165 million.
As we saw in our third quarter results. There was considerable momentum in our business and we expect this will continue.
However, as we also saw in the third quarter, the steeper headwind from foreign currency is impacting our reported results.
At current rates, we estimate the year over year currency impact of fourth quarter sales of approximately $2 $5 million.
In total we now expect currency will negatively impact reported revenue this year by approximately $6 $5 million.
Or five percentage points to full year 2022 sales compared to 2021.
As you look down the rest of the P&L, we expect to see spending levels increase as we prioritize investments and a significant number of development and commercialization programs we have underway.
Preparing for the launch of <unk> and are interested in the U S remain top priorities cooperating spending over the near term is reflecting our investments in these opportunities. We expect expenses as a percentage of revenue will trend down over time.
Overall established lamps remains in a very strong financial position to execute on our growth initiatives.
And I will now turn the call back to Juan Jose.
Thank you Raj.
The launches of Motiva into the U S and China and the commercial launch of <unk> are some of the many opportunities we have to positively impact of women in the breast health checks.
Denise mission is not limited to Justice Statics, and we are equally focused on the work we are doing to democratize access to breast reconstruction.
One in eight women will experience breast cancer in their lifetime, while survival rates have improved the disease can still have a devastating impact on women's lives for those women, who seek breast reconstruction surgery.
Ability is low less than 10% of women globally approximately receive a breast reconstruction after him Stephanie and the waiting times in some countries can be as long as 10 years.
While our commitment to these initiatives is year round the month of October which is breast cancer awareness month is it trying to re double our efforts in awareness and understanding of breast cancer.
This year, we were involved in events across all continents, including awareness and educational campaigns program sponsorships and partnerships. For example, we ran our annual Pincus for power breast reconstruction program in Brazil.
In partnership with a network of plastic surgeons. This year establishment labs provided the resources to allow 310 women in 18 cities across Brazil to receive a breast reconstruction, providing them access to health care. They were unable to obtain for many years.
I personally traveled to Maui, we are helping to establish programs in Africa to promote access to breast reconstruction and generate awareness about the importance of breast health and early detection.
As a global medical device company focused in women's health establishment labs has the opportunity and the responsibility to democratize access to breast reconstruction, not only bringing to market technologies techniques and education that can improve clinical and the steady outcomes, but also promoting education and awareness.
We will continue to transform our markets and in doing so we will create new categories for growth.
But more importantly, we are creating new options for women around the world and solidifying our credentials as leading the industry to a sustainable future.
I will now turn the call over to the operator for your questions.
Thank you at this time, we'll be conducting a question and answer session.
If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one one moment, please while we poll for questions.
Okay.
Our first question comes from Anthony Petrone with Mizuho Group. Please proceed with your question.
Alright, Thanks, and congratulations on another strong performance here in three Q al.
Start with the Motiva U S timelines here J J and I'll have a couple of follow ups. Appreciate the updated timelines and confirming that the clinical module will be submitted before year end here.
Just wondering it sounds like in the aesthetic cohort the thresholds for at least three years of data follow up data post surgery is satisfied there and so when we think about that threshold being satisfied and all the other modules in place.
Is there a pathway, perhaps too you know me.
Mid to late 2023 U S clearance.
Just wondering if we can tighten up that timeline a bit and then I'll have a couple of follow ups. Thanks.
Yes, Thank you Anthony.
We are of course extremely happy that we have crossed the three year, Mark which is in the guidance from the FDA for approval.
Approval of silicone gel filled breast implants and we.
We have confirmed that we plan to submit that clinical module this quarter.
We are not going to speculate though on on date of approval. This is a process.
This communication with the FDA and of course, we will try to find the right scientific Forum.
The data to be shown.
The three year Mark however.
However.
Again, we cannot speculate on the timing of approval.
We are always.
Very good at responding as quick as possible and doing everything that we can not to slow down the process, but we are dependent on foreign.
External entity like the FDA.
No I appreciate that and a couple of follow ups, some pivot to Europe to.
Two part question for you Jay Jay would be.
Are you seeing any evidence of the demand slowed down just due to some economic constraints and in Europe as certain regions. There seem to be a few months ahead of let's say the U S. As it relates to.
Recessionary uneven inflation pressures, but on the flip side in Europe , it's still heavily tilted toward textured implants. So wondering if you have an update on the mix between textured and smooth.
As it relates to overall volumes as we get to the end of 'twenty two.
And how quickly do you think it could shift over to smooth.
Into twenty-three thanks again.
Okay.
Thank you and we are watching the developments in Europe closely.
Definitely there is concerned in Europe regarding what's going on with Ukraine, and all of that but there is no reason to believe at this point that this is going to have a significant impact in the aesthetic market.
I would say that in this last quarter, we were impacted on currency.
Dish bound.
And also the euro and just came even currencies being hit.
But.
On the other hand, just like you said, we do have a lot of accounts, who are still to be targeted.
Many of them are using textured and does this opportunity for us because you know when you look at our rate of growth so plus 30%.
Would you see is fundamentally a change in the shares of the market that we are taking in all of these markets. So if the market is growing at roughly 3% and we are growing at 30% plus.
That means is that we continue to do our job to be effective at it and.
Medical education being back is a big thing for us because that means that we can impact directly a lot more accounts than we did before so in most of Europe . We are direct and we plan to continue working hard to make sure that we are getting more market share.
I appreciate that I'll hop in queue. Thanks.
Our next question comes from Josh Jennings with Cowen. Please proceed with your question.
Hi, good afternoon, thanks for taking the questions and congrats on another strong quarter wanted to just ask a follow up on the U S. FDA approval process just to more of a structural question about the module submission process.
Once you have the first three modules submitted.
And the clinical module is the last module that you will submit and then kick off the CMA review time.
Can we assume that those first three miles have been reviewed by the FDA you will only with a few questions on the clinical data package where is this.
Is it a start from scratch, where the FDA would could come back and ask questions about the first few modules as well.
Thanks, Josh.
This process is continuous and they can always ask questions and we have had questions from different modules and different times.
I think the FDA is having a situation in which they have to deal with a lot of things at the same time. So what do we are seeing is.
Them trying to get all of these things done so we actually I appreciate a lot. The fact that they were moving on all three modules. So we expect that to continue and we expect to submit our fourth module and this weight get get going with it.
A final process of the PMA.
Understood. Thanks, and then just one follow up on just thinking about the U S commercial effort and build out of the sales infrastructure may not be ready to talk about it now but any high level.
Clues on the strategy, there or any timing about when when you'd be ready to share the commercial strategy for the U S. Thanks for taking the questions.
Yes on that one we actually started.
You know when we when we hired Heather Brendan as the head of our U S market and then Furthermore, when we've been adding other people to create the structure necessary for our U S launch would.
We have not done.
Yet is begin hiring.
Commercial.
People because we are cognizant of the process that we are undertaking with the FDA.
We will continue to work towards the launch you saw us.
In Boston at the plastic surgery meeting and we hosted a E C.
Symposium for plastic surgeons and investigators we have Dr. Robert Langer, there speaking about his work on implant biocompatibility and that shows you that we are active but do we have to be mindful not to promote ahead of the approval of Motiva implants.
Thank you.
Our next question comes from the line of George Sellers with Stephens. Please proceed with your question.
Yeah.
Thanks for taking the question congrats on the quarter.
You mentioned expectations for me a commercialization to begin in Europe in the first half of 2023. So I just wanted to ask about any update on D. M. D. D. M D. Our transition in the annex 16 requirements and what your sort of incorporating as we think about that commercialization timeline.
Yeah.
Yes, Thanks, George we are moving on all fronts.
The only thing that was.
Pending was basically the publication of the <unk>, which is expected to happen. This month now that the common specifications have been approved.
By European authorities, so with that we do plan to move ahead full steam and get going with the different the different areas.
That are necessary for the CE mark of the tools, having had the approval for the implant. So a couple of years ago.
Now we are also making progress in other markets. We are currently in Japan.
Taking this call because we are continued continuing to work with our local partners here in Japan.
Local clinics towards the preparation of the launch so it's an exciting time.
Doing cases of EMEA. This week here in Japan. These are early experience cases, but it shows you how we continue to progress with me, we're very happy about that.
Okay. That's that's really helpful.
And then as we think about the approval and the commercialization of <unk> in Europe and elsewhere could you help us think about any additional infrastructure you need there in terms of the sales build out or anything else, we should be aware of.
You commercialize meal.
Okay.
Yeah, one of the great things about me.
It's that it's a true direct to consumer model. So there are no sales reps. We are adding is this consumer business unit that is.
Dedicated to communicating with consumers in different ways and this is something we've already built so we continue to progress with their work necessary for creating all the messaging and everything that makes our EMEA a new category in breast aesthetics.
For instance, again this week, we're here in Japan, we're working with a.
Local agency specialized in this type of messaging and we plan to make sure that we are messaging correctly enable every single market that is significant.
Okay. Thank you so much for the time I appreciate it.
Yeah.
Our next question comes down a lot it really it's about with B T. I G. Please proceed with your question.
Good evening or maybe good morning for you early morning, there in Japan, a congrats on a nice quarter I.
Wanted to hear a little bit about Asia. The APAC region. I know that you were just in Thailand recently for your World Symposium put so would love to hear how turnout was for that event and then which countries are strong on the recovery path and maybe which are lagging on the recovery path in APAC.
Yes.
Our annual World Symposium on ergonomic implants, we hosted it for the first time in Asia.
<unk> tells you you know, how we see the Asia region growing and.
The area with the fastest growth.
For Us it's also an area, where we see great opportunities with EMEA. So definitely we were very excited to see hundreds of plastic surgeons from around the Asia Pacific and also from other parts of the world, but mostly from Asia Pacific and what we see is that we continue to gain market share.
All over Asia in every single one of the markets that we are in our partners are strong they have a special relationship too.
The plastic surgery community in those markets and I think it really shows how our product offering really shines in this region.
Alright in terms of.
Yes, sorry in terms of country to country.
You know, we don't give specific data country to country, but what I would say Marie is it.
Either we are market leaders or impact leadership short term in every single one of the markets that we participate in.
Okay. That's very helpful. Thank you for that and then I wanted to touch briefly on your comments on the flora tissue Expander you mentioned some working in various countries can you tell us a little bit more about what that rollout has looked like so far any learnings. So far I know that it's a process to sort of change the break.
Breast reconstruction.
Markets, so any more detail there on on what countries and where you're thinking of expanding in any learnings thus far thanks. So much.
Yes, I think the focus for us is always on safety.
And that is more so in the breast reconstruction market. So the fact that we can bring.
Two women in breast reconstruction, the possibility of doing an MRI during the expansion process of the breast reconstruction that they have more comfort and less pain.
And the possibility of reducing.
Radiation oncology levels are all important to us just in this meeting in Thailand.
One of the scientist.
That has been involved with me are conducting.
Conducting an independent study comparing our device to another Cmos device showed the results from the research in which patients are responding clearly that you know this is a much more comfortable option and that's the type of.
Of things, what we want you here because what we want is breast reconstruction.
In the future to be viewed through the eyes of women, who have suffered breast cancer and after a mastectomy can get better options for the rig construction.
Okay.
Our next question comes on the line of Matt Baylor with Jefferies. Please proceed with your question.
Hi, guys. Thanks for taking the question.
So I just wanted to ask a follow up in the press release reiterated the China approval and launch expectation in the first half 0.3 I was wondering if you could talk about your visibility into that and when we could see that start anything that youre doing to prepare for the launch there.
Yes, part of our trip here too.
Asia has been devoted to update on our different regulatory timelines around Asia net.
Not only on.
<unk> implants, but also on media and Florida, So we met with our.
Partners in China, and we have reinforced.
Our belief that we will get approval in the first half of next year.
In the process.
The Chinese regulatory authorities is is never fully transparent there's.
You know quite a degree of.
Of a passenger in the communication always but that's natural to.
To that process. So we're not concerned about it and I'm happy to hear from our regulatory experts in China that they stand by that date.
Okay.
Okay, Great and then I wanted to ask a follow up on you sort of mentioned in passing that the reminder of the facility that you're building is going to be able to produce.
Half the world breast implants, I think you said so.
I wanted to kind of tie that back into your.
Hi, good confidence in what you're seeing in some of these other markets, where you've been for a while we're starting to see market leadership. So I guess all of that said Hey could you give us some examples of where your market share. Your leadership is going today and some of these markets where you've been.
And to give you that confidence to I guess get to half the worlds share in that facility over time.
Okay.
Yes, I think the way to think about it is that this market.
For many decades was led by two big companies basically meant towards the breast division out of Johnson, <unk> Johnson and Allergan. So once allergan retreated from most of these markets, but the four markets where they compete with Motiva, then I think market leadership.
Tends to look different and I think you know and there are markets already where we have surpassed 50% and continuing to grow. So that shows you what technology that is substantially different can do and I think thats.
Our job is to make sure that you know.
Leadership can be as high as possible and remember one one of the biggest things that we do is expand markets and.
We have a lot more work to do but we actually believe that the fact that you improved safety levels has an impact in expanding markets.
Might take longer to see but it is there and then you have initiatives like EMEA, which really speak to new consumers and you know when we think about what we've been doing over the last couple of days.
Here in Japan.
Excitement level from.
The potential launch of Mia is high and you know the local partners in clinics understand very well that this can be a major gain.
Game changer in breast aesthetics in Japan.
And Matt I would just offer to that we are poised to enter the two largest markets in the world in the United States and China, So that capacity.
Needed for those initiatives along with the continued share gains we are doing in other markets around the world.
Okay. Thanks, Thanks, Raj Thanks, J J.
Our next question comes on the line of Neil Chatterji with B Riley. Please proceed with your question.
Got it.
For taking the questions. So.
Maybe just on me.
I'm sorry.
I guess what are the countries, where you've already started to receive the regulatory clearances I believe it might have been Latin American and Asia I'm. Just curious if you could talk about the the early experiences youre seeing there in those regions and then also perhaps if you have an update potentially on the.
The potential launch in Japan in your clinic partner strategy there.
Okay.
Yeah to be clear.
We have not launched in any country.
We have doing early experience cases, Latin America, and in Japan and Arps.
Our plan is to continue to use those insights.
From patients that have undergone to procedure as part of our work towards the launch.
To give you an example.
And.
An engineer who had the procedure on Tuesday, as you saw in EMEA Investor Day, and you know got married on Saturday.
And you know her testimonial is so strong because basically.
No Sigma of any type around the procedure.
And her enjoying a big day.
In the most profound way. So if this is you know like what we are about we are working towards expanding markets and you know we just have to be patient for the launch but when it happens I think you'll notice that this is a true new auction. The consumer insights that we are gathering are strong and we continue to have both qualitative and <unk>.
<unk> analysis that we will share in detail.
Yeah.
Got it and maybe just one quick follow up just in terms of the.
Kind of the Asp's strategy I think in the slides.
You kind of give a range of like 2500 to 3500, or so just kind of curious around the world.
Assumptions around that.
You know that's kind of really the regional nuances or or what that's based on.
Well its based on willingness to pay analysis and this is conducted market to market.
We don't want to.
Under price or price out consumers. So that's that's the work around that of course, you know we're always going to.
Tried to do asbestos possible, but that's.
That's why we are always conservative on our pricing when it was given in this in this session.
And I think Neil.
You probably appreciate to it in the slides do we presented and talked about at that David.
If you look at the economics to the surgeon at those price points given the.
Speed at which they can do the procedure.
The efficiency with which they can run their practice if they have devoted time to me even at those price points are still represents quite a bit of value to the surgeon and so I think it's a question of finding that sweet spot that creates value for us as a company, but also for our partners and surgeons and actually for the women who received the procedure.
Our next question comes from the line of Amit <unk> with Goldman Sachs. Please proceed with your question.
Thanks. This is Phil on for Amit I thought I'd ask some kind of a directional kind of preliminary questions on 2023. So the first one hopefully we can.
Pretty pretty simple on the currency front, you know most of our giving at least a preliminary look for next year is that kind of six to seven range.
That's going to end up shaking out for this year a good a good place to start for the headwind for next year as you guys see it.
Yeah, well I mean, obviously, there's a lot of.
Currencies fluctuating rate, but I think as a start.
Not a bad place to be.
We'll see more pronounced impact obviously in the first part of the year.
But yes I would also suggest you know, we'll give a lot more detail a lot more guidance around 23 2023, when we report our fourth quarter numbers.
Yeah, absolutely that's.
That's helpful as a starting point and then on the Opex side.
You know it looks it looks like for the year, you're going to end up growing SG&A a bit ahead of where total sales numbers are going to be even on an underlying basis with all of the investments that youre, making for next year and in the U S and in China.
Is that you know growing SG&A similar or a head of sales a reasonable starting place for next year with all the investments that are going on.
It's and again all of these plans are in development right as we think about budgeting for 2023, and what the year looks like but I think you're directionally thinking about it correctly right that the next.
Several quarters are going to be periods of investment for us as a company right as we standup me as we stand up the U S operation.
This is not a time to we will see significant leverage from us however, as those opportunities start to materialize.
Next year the U S. You know hopefully not too long after that the leverage will start to show in our model, but I think youre thinking about it correctly in that the next few quarters or not quarters, where we're expected to show a lot of operating expense leverage.
That's helpful. If I could sneak one last one and Brian I believe you said, 23% European sales and 44% for the APAC region.
I know the questions have been asked about the regions already but I'm wondering if there's anything onetime to call out.
Either from a distributor standpoint in APAC that was a pull forward or from Europe that you would highlight kind of to the negative side I'm just kind of trend line I think it all thanks, Yeah that was one as I mentioned I mean, Europe , obviously that number is being impacted quite a bit of from currency. That's the major.
The major thing were pushing that number to that 23%.
We're also seeing stronger seasonality I think in Europe .
So really nothing one time I think the business is doing very well, we're still taking share in most of our markets. So yeah I wouldn't call out anything specific in terms of one time there and.
Pacific is one as I mentioned, we're seeing very strong growth the traction with of implants.
And and the move to Motiva and a lot of these markets continuous and so.
I think it's again currency kind of in fact in Europe , and then just really good growth in a lot of other markets good demand.
Okay. That's great. Thank you Roger.
That is all the time, we have today for questions I would now like to turn the call back over to Juan Jose Chacon Quiros for closing comments.
Thank you for joining us on today's call. We look forward to providing our next quarterly update in early 2023, and we wish everyone continued good health.
Okay.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
Yeah.
Great. Thank you Rob.
I don't know if you're still there but.
Yeah.
Right.