Q1 2024 Establishment Labs Holdings Inc Earnings Call
Operator: Good afternoon. Welcome to Establishment Labs' first quarter 2024 earnings call. At this time, all participants will be in a listen-only mode. At the end of this call, we will open up the line for question and answer, and instructions will follow at that time. As a reminder, today's call is being recorded. I will now turn the call over to Raj Denhoy, Chief Financial Officer. Please go ahead.
Good afternoon, welcome to establishment Labs' first quarter 'twenty 'twenty four earnings call. At this time, all participants will be in a listen only mode. At the end of this call. We will open up the line for a question and answer session and instructions will follow at that time.
Rajbir Singh Denhoy: Today's call is being recorded I will now turn the call over to Raj Jen Li Chief Financial Officer. Please go ahead.
Rajbir Singh Denhoy: Thank you, Operator, and thank you, everyone, for joining us. With me today is Juan Jose Chacon Quiros, our Chief Executive Officer. Following our prepared remarks, we'll take your questions. Before we begin, I would like to remind you that comments made by management during this call will include forward-looking statements within the meaning of federal securities laws. These include statements on Establishment Labs' financial outlook and the company's plans and timing for product development and sales.
Rajbir Singh Denhoy: Thank you operator, and thank you all for joining US with me today is one that's H Trs our chief Executive Officer.
Rajbir Singh Denhoy: Following our prepared remarks, we'll take your questions.
Rajbir Singh Denhoy: 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 establishlabs.com. I'd also like to remind you that our comments may include certain non-GAAP financial measures with respect to our performance, including but not limited to sales results, which can be stated on a constant currency basis, or profitability of the company's business, which can be stated as EBITDA or adjusted EBITDA.
Rajbir Singh Denhoy: 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.
Rajbir Singh Denhoy: 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. Please also note that Establishment Labs received an investigational device exemption from the FDA for Motiva implants and 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 authority for product availability.
Rajbir Singh Denhoy: These include statements on establishment Labs' financial outlook, and the company's plans and timing for product development and sales.
Rajbir Singh Denhoy: 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.
Rajbir Singh Denhoy: 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 establish a lapsed dot com.
Rajbir Singh Denhoy: 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, while profitability of the company's business, which can be stated as EBITDA or adjusted EBITDA.
Rajbir Singh Denhoy: Reconciliations to comparable GAAP financial measures for non-GAAP measures is available maybe found in today's press release, which is available on our website.
Rajbir Singh Denhoy: Please also note that establish allows received an investigational device exemption from the F. D. A from a team of implants and 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 authority for product availability.
Rajbir Singh Denhoy: The content of this conference call contains time-sensitive information accurate only as of the date of this live broadcast, May 8, 2024. 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 said, it is my pleasure to hand the call over to our CEO, Juan Jose.
Rajbir Singh Denhoy: The content of this conference call contains time sensitive information accurate only as of the date of this live broadcast may eight 2024, except as required by law establishes labs undertakes no obligation to revise or otherwise update any statement to reflect events or circumstances. After the date of this call.
Rajbir Singh Denhoy: With that is my pleasure to hand, the call over to our CEO Juan Jose.
Juan Jose Chacon Quiros: Thank you, Raj, and good afternoon, everyone. Revenue in the first quarter of 2024 totaled $37.2 million. Our markets continue to stabilize, and we are seeing improving demand. All of our global regions showed sequential improvement in the first quarter. We saw this in both our direct and distributor markets, and we expect to see continued improvement throughout 2024. Our first quarter also showed the tangible results of the cost reduction and efficiency improvement activities we undertook in the second half of last year. Adjusted EBITDA improved to a loss of less than $4 million.
Juan Jose Chacon Quiros: Thank you Raj and good afternoon, everyone.
Juan Jose Chacon Quiros: Revenue in the first quarter of 'twenty 'twenty four totaled $37.2 million our markets continue to stabilize and we are seeing improving demand.
Juan Jose Chacon Quiros: All of our global regions showed sequential improvement in the first quarter. We saw this in both our direct and distributor markets and we expect to see continued improvement throughout 2024. Our first quarter also showed the tangible results of the cost reduction and efficiency improvement activities. We undertook in the second half of last.
Juan Jose Chacon Quiros: Last year, adjusted EBITDA improved to a loss of less than $4 million. This was a notable improvement from the loss of $17 million last quarter.
Juan Jose Chacon Quiros: This was a notable improvement from the loss of $17 million last quarter. We are off to a busy start in 2024. Over the past several months, we launched Motiva implants in China and our Flora Tissue Expander in the United States. We are also making significant progress with our approval of Motiva implants in the United States. The number of clinics offering it around the world is growing, and the feedback on this transformative breast technology continues to surpass even our own expectations.
Juan Jose Chacon Quiros: We are off to a busy start in 'twenty 'twenty four over the past several months, we launched Motiva implants in China in our flora tissue expander in the United States. We are also making significant progress toward approval of Motiva implants in the United States. The number of clinics offering me around the world is growing and the feed.
Juan Jose Chacon Quiros: Back on this transformative breast technology continues to surpassed even our own expectations, we are well positioned for multiyear growth while steadily improving our margin structure in achieving the necessary scale to reach cash flow profitability in 2025.
Juan Jose Chacon Quiros: We are well-positioned for multi-year growth while steadily improving our margin structure to achieve the necessary scale to reach cash flow profitability in 2025. Raj will provide more on our financial results and outlook in a moment, but first, I want to highlight several recent events.
Juan Jose Chacon Quiros: Raj will provide more on our financial results and outlook in a moment, but first I want to highlight several recent events.
Juan Jose Chacon Quiros: Last week, we announced two important developments on our path to U.S. approval. The four-year data from our Motiva U.S. ID study was presented at an aesthetic meeting on May 2nd by Dr. Caroline Glixman, the medical director and a principal investigator of the study. As Dr. Glixman highlighted, it is particularly notable that our rates of Baker grade 3 and 4 capsule contracture and rupture have not changed for the past two years. At year 4, there continue to be only two patients with capsule contracture and only one patient with a suspected rupture, which were the exact same numbers at two years and at three years.
Juan Jose Chacon Quiros: Last week, we announced two important developments on their path to U S approval to four year data from our <unk> U S. IDE study was presented at the aesthetic meeting on May 2nd like Dr. Caroline Glicksman, the medical director and a principal investigator of the study.
Juan Jose Chacon Quiros: As Doctor Glicksman highlighted it is particularly notable that our rates of Baker grade three and four capsular contracture and rupture have not changed for the past two years at year. Four there continues to be only two patients with capsular contracture and only one patient with a suspected rupture which would the exact.
Juan Jose Chacon Quiros: Same numbers at two years and at three years. These.
Juan Jose Chacon Quiros: These low complication rates are a confirmation of a new standard for breast implants, and we expect plastic surgeons will adopt our products given their technological superiority and performance. While these are not comparative studies, it is worth noting that at four years, FDA data from the two largest competitors in the U.S. showed that between 1 in 7 and 1 in 12 women developed a Baker grade 3 or 4 capsular contracture. In the Motiva study, it was 1 in 200 women.
Juan Jose Chacon Quiros: These low complication rates are a confirmation of a new standard for breast implants, and we expect plastic surgeons will adopt our products given their technological superiority and performance.
Juan Jose Chacon Quiros: Well these are not comparative studies it is worth noting that at 40 years. The FDA data from the two largest competitors in the U S showed that between one in seven and one in 12 women developed Baker grade three or four capsular contracture in the Motiva study. It was one in 200 women.
Juan Jose Chacon Quiros: We also announced last week that Jeff Earhart will lead our North American business. Jeff most recently ran the Plastics and Reconstruction Division of Allergan Aesthetics and was responsible for the breast products portfolio. Jeff is a strong commercial leader with over 25 years of experience in this industry. I cannot imagine anyone better suited to introduce Motiva to the U.S. Jeff is already building an experienced team with a successful track record in this industry, including Ann Pugh, who will head our U.S. sales team, and Ben Newcutt, who is Director of Surgeon Engagement and Business Development, who will lead our outreach to the plastic surgeon community. This is truly an all-star team.
Juan Jose Chacon Quiros: We also announced last week that Jeff Erhardt will lead our North American business.
Juan Jose Chacon Quiros: Jeff Most recently ran the plastic and reconstruction division of Allergan aesthetics and was responsible for the breast products portfolio.
Juan Jose Chacon Quiros: Jeff is a strong commercial leader with over 25 years of experience in this industry I cannot imagine any one better suited to introduce motiva to the U S market.
Juan Jose Chacon Quiros: Jeff It's already building an experienced team with a successful track record in this industry, including an Pew, who will head our U S sales team and been new cut who is director of surgeon engagement and business development will lead our outreach to the plastic surgeon community. This is truly an all star team at the.
Juan Jose Chacon Quiros: At the annual meeting of the Aesthetics Society in Vancouver this past weekend, Establishment Labs and Motiva were the talk of the conference. Plastic surgeons are overwhelmingly enthusiastic about our new hire, and the launch of Motiva in the United States might be the most anticipated launch of an aesthetic product in decades. Surgeons and investors alike want to know when Motiva will be available in the United States. And while the second quarter inspection of our facilities is a critical point in the process, we will continue not to predict an exact timeline for both competitors and regulatory agencies. That said, the conversations with the FDA are highly constructive, and we have high confidence that we will be on the market in 2024.
Juan Jose Chacon Quiros: Annual meeting of the aesthetic society in Vancouver, This past weekend Stablish been labs, and Motiva Ward to talk of the conference.
Juan Jose Chacon Quiros: <unk> surgeons are overwhelmingly enthusiastic about our new hires and the launch of marquee event in the United States might be the most anticipated launch of an aesthetic product in decades.
Juan Jose Chacon Quiros: Surgeons and Investor like once you know win with Teva will be available in the United States and while the second quarter inspection of our facilities is a critical point in the process. We will continue not to predict an exact timeline for both competitor and regulatory reasons that said the conversations with the FDA are highly constructive and we have.
Juan Jose Chacon Quiros: High confidence that we will be on market in 'twenty 'twenty four.
Juan Jose Chacon Quiros: While we wait for the approval of Motiva, Flora, our unique tissue expander, continues to gain traction in the U.S. market. Flora has many important and novel features, including our patented Smooth Silk Surface technology, as well as an RFID-enabled non-magnetic port that is labeled as MR Conditional by the FDA.
Juan Jose Chacon Quiros: While we wait for the approval of Motiva flora our unique tissue expander continues to gain traction in the U S market.
Juan Jose Chacon Quiros: Laura has many important and novel features including our patented smooth silk surface technology as well as in RFID enabled non magnetic port Ms labeled as MRI conditional by the F. D. A this is a distinct advantage to Florida as all other commercially available breast tissue expanders include magnets.
Juan Jose Chacon Quiros: This is a distinct advantage to Flora, as all other commercially available breast tissue expanders include Magnum. We had many surgeons come by our booth in Vancouver to learn about the advantages of Flora in reconstruction, and we expect adoption of this technology will continue throughout the course of 2024. We have completed the VAC process at a number of the premier cancer centers in the United States, and more are pending. As the benefits of this device in breast reconstruction are being demonstrated and shared in the clinical community, the number of hospitals providing FLORA to patients will grow in the U.S. Mia Femtec is creating an entirely new minimally invasive category within breast aesthetics, and the list of cities across the world where Mia is available continues to grow
Juan Jose Chacon Quiros: We had many surgeons come by our booth and Vancouver to learn about the advantages of Florida in reconstruction and we expect adoption of this technology will continue throughout the course of 'twenty 'twenty four.
Juan Jose Chacon Quiros: We have completed the vac process at a number of the premier cancer centers in the United States and more are pending as the benefits of this device in breast reconstruction are being demonstrated and shared in the clinical community. The number of hospitals, providing floor at two patients will grow in the U S.
Juan Jose Chacon Quiros: My F. M. Tek is creating an entirely new minimally invasive category within breast aesthetics and the list of cities across the world where means available continues to grow in Q1, we added Mir centers into new geographies Middle East and Latin America. We now have centers certified to provide the <unk> experience.
Juan Jose Chacon Quiros: In Q1, we added MIA centers in two new geographies, Middle East and Latin America. We now have centers certified to provide the ME experience in Riyadh, Jeddah, Dubai, Abu Dhabi, Beirut, and our hometown of San Jose. In total, we have 55 clinics signed up for a MIA-FEMTIC partnership, of which 33 are operating in 22 new clinics in the process of being onboarded for medical education and practice development. In addition, we have 37 clinics under negotiation.
Juan Jose Chacon Quiros: In Riyadh, Jeddah, Dubai, Abu Dhabi Beirut in our hometown of San Jose.
Juan Jose Chacon Quiros: In total we have 55 clinic signed up for EMEA FMT partnership of which 33 are operating in 22, new clinics in the process of being on boarded for medical education and practice development. In addition, we have 37 clinics under negotiation.
Juan Jose Chacon Quiros: MIA consumers are sharing their experiences on social media, highlighting the convenience and aesthetic outcomes of their breast harmonization journey, confirming our conviction that word of mouth will ultimately be the biggest growth driver for MIA. It is still early in the launch of MIA, but we are seeing proof points that we are creating and capturing new consumer demand in this new category for breast cancer. In China, the reception of our recent launch has been strong.
Juan Jose Chacon Quiros: Consumers are sharing their experiences on social media, highlighting the convenience and aesthetic outcomes of their breath harmonization journey confirming our conviction that word of mouth will ultimately be the biggest growth driver for me F. M. Tech. It is still early in the launch of meal, but we are seeing proof points that we are creating and capturing.
Juan Jose Chacon Quiros: New consumer demand in this new category in breast aesthetics.
Juan Jose Chacon Quiros: In China the reception of our recent launch has been strong Chinese plastic surgeons and consumers have a strong appreciation for Motiva is the latest in innovation science and technology and there is a willingness to pay a premium for such offerings in this market.
Juan Jose Chacon Quiros: Chinese plastic surgeons and consumers have a strong appreciation for Motiva as the latest in innovation, science, and technology, and there is a willingness to pay a premium for such offerings in this market. Our exclusive distribution partner is pursuing an aggressive strategy of medical education and marketing events in Tier 1 and Tier 2 cities across the world. The early results give us confidence that our market position in China over the next few years will match what we have seen in surrounding markets in Asia, where we are market leaders. I will now turn over the call to Raj.
Raj: Our exclusive distribution partner is pursuing an aggressive strategy of medical education, and marketing events in tier one and tier two cities across China.
Raj: The early results give us confidence that our market position in China over the next few years will match, what we have seen in surrounding markets in Asia, where we are market leaders.
Juan Jose Chacon Quiros: I'll now turn over the call to Raj.
Raj: Thank you Juan Jose.
Rajbir Singh Denhoy: Total revenue for the first quarter was $37.2 million, a decline of 20% from the year-ago period. Direct sales in the first quarter were approximately 39% of implant sales, while distributors made up the balance. From a regional perspective, sales in Europe, the Middle East, and Africa were approximately 55% of the global total, Asia-Pacific 21%, and Latin America 23%.
Raj: Total revenue for the first quarter was $37.2 million a decline of 20% from the year ago period direct sales in the first quarter were approximately 39% of implant sales while distributors made up the balance from a regional perspective sales in Europe Middle East and Africa were approximately 55% of the global total Asia Pacific, 21% in Latin America, 23%.
Rajbir Singh Denhoy: Brazil, which is our largest market globally, accounted for approximately 11% of total quarterly sales. Our gross profit for the first quarter was $24.4 million, or 65.6% of revenue, compared to $30.1 million, or 64.7% of revenue for the same period in 2023. Our gross profit in the first quarter reflected an increase in average selling prices year over year, offset somewhat by higher overhead and labor costs. Changes in foreign exchange rates between the U.S. dollar and the Costa Rican clone also continued to be a headwind.
Rajbir Singh Denhoy: Brazil, which is our largest market globally accounted for approximately 11% of total quarterly sales.
Rajbir Singh Denhoy: Our gross profit for the first quarter was $24 $4 million or 65, 6% of revenue compared to $30 1 million or 64, 7% of revenue for the same period in 2023.
Rajbir Singh Denhoy: Our gross profit in the first quarter flex and increase in average selling prices year over year offset somewhat by higher overhead and labor cost changes in foreign exchange rates between the U S dollar and the Costa Rican colon also continued to be a headwind as we report in U S dollars to continued strengthening of the clone has resulted in higher operating cost.
Rajbir Singh Denhoy: As reported in U.S. dollars, the continued strengthening of the clone has resulted in higher operating costs. SG&A expenses for the first quarter declined to approximately $2.8 million to $28.9 million, compared to $31.7 million in the first quarter of 2023. SG&A's expenses also declined to approximately $8 million from the $36.9 million reported in the fourth quarter. R&D expenses for the first quarter declined approximately $2.2 million from the same quarter a year ago to $4.3 million, and we're down $1.5 million sequentially.
Rajbir Singh Denhoy: SG&A expenses for the first quarter declined approximately $2.8 million to $28 $9 million compared to $31 $7 million in the first quarter of 2023.
Rajbir Singh Denhoy: SG&A expenses also declined approximately $8 million from the $36 $9 million reported in the fourth quarter.
Rajbir Singh Denhoy: R&D expenses for the fourth quarter declined approximately $2 $2 million from the same quarter, a year ago to $4 $3 million and were down $1.5 million sequentially.
Rajbir Singh Denhoy: Total opportunity expenses for the first quarter were $33.2 million, a decrease of approximately $5 million from the year-ago period and declined approximately $9.5 million from the fourth quarter due primarily to cost reduction initiatives. The decrease in operating expenses in the first quarter was primarily the result of the cost reduction initiatives we undertook in the second half of 2023 and into 2024, as well as the timing of certain planned expenses this year.
Rajbir Singh Denhoy: Total operating expenses for the first quarter with $33 $2 million, a decrease of approximately $5 million from the year ago period and declined approximately $9 $5 million from the first the fourth quarter due primarily to cost reduction initiatives.
Rajbir Singh Denhoy: The decrease in operating expenses in the first quarter was primarily the result of the cost reduction initiatives. We undertook in the second half of 2023 and into 2024 as well as the timing of certain planned expenses this year.
Rajbir Singh Denhoy: Net loss from operations for the first quarter was $8.8 million compared to a net loss of $8.2 million in the same period in 2023 and $22.1 million in the fourth quarter. Ajasthiti Bidad had a loss of $3.7 million in the quarter.
Rajbir Singh Denhoy: Net loss from operations for the first quarter was $8 $8 million compared to a net loss of $8 $2 million in the same period in 2023 and $22 $1 million in the fourth quarter.
Rajbir Singh Denhoy: Adjusted EBITDA was a loss of $3 $7 million in the quarter this compared to a loss of $17 $3 million in the fourth quarter and a loss of $4 million in the year ago period.
Rajbir Singh Denhoy: This compared to a loss of $17.3 million in the fourth quarter and a loss of $4 million in the year-ago period. Our cash position on March 31st was $73 million, compared to $40 million at the end of 2023. Excluding the proceeds from our January $50 million private placement, underlying cash use in the first quarter was $16.8 million.
Rajbir Singh Denhoy: Our cash position on March 31 was $73 million compared to $40 million at the end of 2023.
Rajbir Singh Denhoy: Excluding the proceeds from our January $50 million private placement underlying cash use in the first quarter was $16 $8 million.
Rajbir Singh Denhoy: As a reminder, we have two remaining tranches on our debt facility, which total $50 million. We can access the first $25 million on U.S. FDA approval of Motiva implants, and the second with the additional milestone of achieving $195 million in trailing 12-month sales. For 2024, our revenue guidance continues to exclude the contribution of Motiva implants in the United States. Our guidance remains at $174 to $184 million, representing growth of 5% to 11%. We expect currency to have a minimal impact on our sales results this year.
Rajbir Singh Denhoy: As a reminder, we have two remaining tranches on our debt facility, which totaled $50 million. We can access the first $25 million on U S. FDA approval of Motiva implants, and the second with the additional milestone of achieving $195 million in 12 trailing 12 months sales.
Rajbir Singh Denhoy: For 'twenty 'twenty four revenue guidance continues to exclude the contribution of Motiva implants in the United States.
Rajbir Singh Denhoy: Guidance remains at $174 million to $184 million, representing growth of 5% to 11%.
Rajbir Singh Denhoy: We expect currency to have a minimal impact on our sales results this year.
Rajbir Singh Denhoy: We continue to expect gross margins in 2024 to be approximately 100 basis points higher than 2023, to a range of 65.5 to 66%. The pacing of operating expenses this year is going to be fluid given the timing of approval of Motiva implants in the U.S. Our increasing confidence in approval this year has led us to begin making some key hires and to begin limited activities to prepare for the launch. As such, we expect operating expenses to increase modestly from the first quarter level.
Rajbir Singh Denhoy: Do you expect gross margins in the 'twenty 'twenty four to be approximately 100 basis points higher than 2023 to a range of 65.5% to 66%.
Rajbir Singh Denhoy: The pacing of operating expenses. This year is going to be fluid given the timing of approval of Motiva implants in the U S.
Rajbir Singh Denhoy: Our increasing confidence in approval. This year has led us to begin making some key hires in to begin limited activities to prepare for the launch as such we expect operating expenses will increase modestly from first quarter levels.
Rajbir Singh Denhoy: We remain focused on managing operating expenses and cash use and excluding investments in the U.S. We're targeting positive adjusted EBITDA by the end of 2024 and positive cash flow by the end of 2025. The timing of U.S. commercialization will affect when we achieve these targets. However, the additional capital which becomes available to us will more than fully support our current launch plan. Also, given the strong ASPs in the United States, our North American business will achieve profitability very quickly.
Rajbir Singh Denhoy: We remain focus on managing operating expenses and cashews and excluding investments investments in the U S. We're targeting positive adjusted EBITDA by the end of 'twenty 'twenty, four and positive cash flow by the end of 2025.
Rajbir Singh Denhoy: <unk> of U S commercialization will affect when we achieve these targets. However, the additional capital which becomes available to us we're more than fully support our current launch plans.
Rajbir Singh Denhoy: Also given the strong <unk> in the United States or North American business achieve profitability very quickly.
Rajbir Singh Denhoy: We are very focused on ensuring that the cash we currently have on hand and which is accessible to us under our credit facility will properly fund our business profitability without the need for additional capital. I will now turn the call back to Juan Jose.
Rajbir Singh Denhoy: We are very focused on ensuring that the cash. We currently have on hand, which is accessible to us under our credit facility were properly fund our business profitability without the need for additional capital.
Rajbir Singh Denhoy: I will now turn the call back to Juan Jose.
Juan Jose Chacon Quiros: Thank you, Raj. 2024 is off to a very good start. We are seeing steady recovery in our markets, and our differentiated technologies continue to support our progress globally. The work we did at the end of last year in restructuring and refocusing our organization is allowing us to invest in growth while we progress towards profitability. Our goals of being adjusted EBITDA positive by the end of the year and cash flow positive next year, excluding investments in the U.S., remain firmly intact and are a key focus for us as an organization in management.
Juan Jose Chacon Quiros: Thank you Raj 'twenty 'twenty four is off to a very good start we are seeing steady recovery in our markets and our differentiated technologies continue to support our progress globally to work with data at the end of last year and restructuring refocusing organization is allowing us to invest in growth, while we progress towards profitability.
Juan Jose Chacon Quiros: <unk> our goals of being adjusted EBITDA positive by the end of the year and cash flow positive next year, excluding investments in the U S remain firmly intact and there are a key focus for us as an organization and management team.
Juan Jose Chacon Quiros: Early this year, we entered China, the second largest market for our technologies globally. Flora is pushing us deeper into breast reconstruction while establishing a new standard of care. Our most recent family of implants, Ergonomics 2, is supporting exciting new program offerings like Joy and, of course, MiaFemtech, which is creating an entirely new category in breast aesthetics and will lead to real market expansion over time. The rest of the year will be even more exciting.
Juan Jose Chacon Quiros: Early this year, we entered China, the second largest market for our technologies globally flora is pushing us deeper into breast reconstruction, while establishing a new standard of care for.
Juan Jose Chacon Quiros: Our most recent family of implants ergonomics, two supporting exciting new program offerings like Joy and of course my F. M thick, which is creating an entirely new category in breast aesthetics, and which will lead to real market expansion over time.
Juan Jose Chacon Quiros: The rest of the year will be even more exciting the pending launch of La <unk> United States is the culmination of years of work at establishment labs, and we cannot wait to introduce our story to women and surgeons in the largest market in the world.
Juan Jose Chacon Quiros: The pending launch of Motiva in the United States is the culmination of years of work at Establishment Labs, and we cannot wait to introduce our story to women insurgents in the largest market in the world. As a company focused on women's health, we are building on a solid foundation and have a clear path to further establish ourselves as a leader globally in breast aesthetics and reconstruction. I will now turn the call over to the operator for your question.
Juan Jose Chacon Quiros: As a company focused on women's health, we are building on our solid foundation and have a clear path to further establish ourselves as the leader globally in breast aesthetics and reconstruction.
Juan Jose Chacon Quiros: I'll now turn the call over to the operator for your questions.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Harrison Parsons with Stevens, Inc. Please proceed.
Juan Jose Chacon Quiros: Thank you if he would like to ask a question. Please press star one on your telephone keypad.
Operator: <unk> tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Operator: Our first question is from Harrison Parsons with Stephens Inc. Please proceed.
Harrison Parsons: Great. Hi, this is Harrison. I'm for George.
Harrison Clark Parsons: Great Hi. This is this is harrison on for George Good afternoon, and thanks for taking our questions.
Harrison Parsons: Good afternoon, and thanks for taking our questions. I wanted to start with your underlying assumptions and your reiterated guidance. I know you spoke to market demand stabilizing, but I just wanted to dig in on kind of what you're assuming from a macro perspective and that kind of.
Harrison Clark Parsons: I wanted to start with.
Harrison Parsons: Your underlying assumptions in your reiterated guidance guidance I know you in the press release spoke to market demand.
Harrison Parsons: Stabilizing I just wanted to wanted to dig in on kind of what you're assuming from a macro perspective in that guidance.
Rajbir Singh Denhoy: Hi Harrison, as you saw in this quarter, we saw a nice sequential improvement over where we were in the fourth quarter. And as we move into the second quarter, we expect to see a similar level of improvement in demand. Generally, we're seeing distributor orders come back, and the direct markets are doing a bit better.
Speaker Change: Sure Hi, Harrison.
Rajbir Singh Denhoy: Congrats you saw in this quarter, we saw a nice sequential improvement over where we were in the fourth quarter and as you move into the second quarter, we expect to see a similar level of improvement.
Rajbir Singh Denhoy: In demand.
Rajbir Singh Denhoy: Generally were seeing distribution orders come back the direct market youre doing a bit better and so generally things things are stabilizing and should I assume the rest of the year. We expect that trend is going to continue.
Rajbir Singh Denhoy: And so generally, you know, things are stabilizing. And as we progress through the year, we expect that trend is going to continue. Yeah, so overall, we feel pretty good about where we are and how things are shaping up. And, and things are definitely getting better out there.
Rajbir Singh Denhoy: Yeah. So overall, we're switch feel pretty good about where we are and how things are shaping up.
Rajbir Singh Denhoy: And things are definitely getting better out there.
Harrison Parsons: Great. Yeah.
Harrison Clark Parsons: Great Yeah, and then I know you just touched on it but wanted to dig in a little bit on the what Youre hearing from your international distributors.
Harrison Parsons: And then I know you just touched on it, but wanted to dig in a little bit on what you're hearing from your international distributors. Where do you think their inventory levels sit today? I know, obviously, that's out of your control, but what are your expectations for those inventory levels going throughout the year, and is that going to be a headwind or a tailwind for the remainder? Thanks for the question.
Harrison Parsons: Where do you think their inventory levels sit today.
Harrison Parsons: That's that's out of your control, but what are your expectations for those inventory levels going throughout the year and is that going to be a headwind or tailwind for the remainder thanks for the questions.
Rajbir Singh Denhoy: Yeah, what we hear from our distribution partners around the world is that demand is improving, and that's true in all regions of the world. I think Latin America is probably a lagger there.
Speaker Change: Yes, what we hear from our distribution partners around the world is that demand is improving and that's very much in all regions of the world. They think Latin America is probably lag are there.
Rajbir Singh Denhoy: We don't expect demand there to come back as quickly as in the other regions. And, you know, and as a result, of course, they're, you know, they're running through their inventories. And that's why they're ordering again. If you saw the pattern of distribution demand this quarter, it was back to what we consider more normalized levels at around the 60-40 percent level.
Speaker Change: We don't expect.
Rajbir Singh Denhoy: Demand there to come back as quickly as in the other regions.
Rajbir Singh Denhoy: And you know and this is a result of course, there are running through their inventories and that's why they're ordering again, if you saw like the pattern of distribution demand. This quarter. It was back to what we consider more normalized levels in around the 60 40 percentage.
Harrison Parsons: Great. That sounds good. Thanks for taking the time to answer the question.
Speaker Change: Great that sounds good thanks for taking the questions.
Operator: Our next question is from Alan Gong with J.P. Morgan. Please proceed.
Harrison Parsons: Our next question is from Allen Gong with J P. Morgan. Please proceed.
Alan Gong: Thanks. So I just kind of want to dive deeper into, you know, direct markets, right? You talked about how it seems like trends are getting better. So when we think about, you know, the fact that you reiterated the guidance for the quarter that, at least relative to street expectations, it's a little bit better. How should we think about, you know, the kind of assumptions that get you to the bottom or higher end of that range?
Alan Gong: Thanks, So I just kind of want to dive deeper into you know direct markets right and you talked about how it seems like trends are getting better. So when we think about the fact that you reiterated the guidance off of a quarter that at least relative to street expectations look a little bit better how should we.
Alan Gong: We think about you know the kind of assumptions that get you to the bottom or a higher end of that range.
Rajbir Singh Denhoy: Yeah, I think, Alan, you know, we're only really through one quarter of the year, right? And as we discussed in the last question, things are feeling better, right? You can see it in the trends, the sequential improvement this quarter, and what we're talking about a similar sequential improvement into the second quarter. You know, so in terms of the range, you know, at this point in the year, we feel it's a little early to be adjusting that. But overall, we're feeling pretty good about where we are in really trending towards the upper end of that range.
Speaker Change: Yeah, I think I'll, let you know where we're at.
Rajbir Singh Denhoy: Really really through one quarter of the year right in his comments. The last question you think things are feeling better right.
Rajbir Singh Denhoy: See in the trends the sequential improvement this quarter, what we're talking about a similar sequential improvement into the second quarter.
Rajbir Singh Denhoy: So in terms of the range at this point in the year, we feel still early to be adjusting that but overall, we're feeling pretty good about where we are in really trending towards the upper end of that range. This year.
Alan Gong: Got it. And then I guess just, you know, in anticipation of a US launch later this year, can you talk about the kind of underlying health of the US market? I know we're still kind of waiting for the societies to put out the volume data from 2023, but we saw that really bounced around quite a bit, you know, during and in the wake of the pandemic. So can you just talk about the underlying health of the US and, you know, how that positions you for a launch in the back half of the year? Thank you. Yeah, thanks, Alan.
Speaker Change: Got it and then I guess, just you know in anticipation of a U S. Launch later this year can you talk to your kind of the underlying health of the U S market I know, we're still kind of waiting for the societies to put out the volume data from 2023, but we saw that really was bouncing around quite a bit during.
Alan Gong: And in the wake of the pandemic. So can you just talk to the underlying health of the U S and how that positions you for a launch in the back half of the year. Thank you.
Juan Jose Chacon Quiros: Yeah, thanks, Alan. So we were just at the American Society of Aesthetic Plastic Surgery meeting in Vancouver. And we had the opportunity to talk about this with many plastic surgeons from all over the US, and I think they did see a significant dip in the level of procedures last year. And what they have said is that they see, you know, an improvement taking place. But it is, of course, not close to the, you know, like, hype that they saw during the second part of the pandemic, where they really saw, you know, above normal demand, you know, nearly all over the United States. But, but it is, you know, starting to normalize according to what we heard from them over the last week.
Speaker Change: Yes, thanks Alan.
Speaker Change: So we were just at the American Society of aesthetic plastic surgery meeting in Vancouver.
Juan Jose Chacon Quiros: And we had the opportunity to talk about this with many plastic surgeons from all over the U S and I think they did see a significant dip down in the level of procedures last year and what they have said is that they see and improvement taking place.
Juan Jose Chacon Quiros: Of course, not close today.
Juan Jose Chacon Quiros: Like hype that they saw during the second part of the pandemic, where they really saw.
Juan Jose Chacon Quiros: Normal demand.
Juan Jose Chacon Quiros: Nearly all over the United States, but but it is.
Juan Jose Chacon Quiros: Starting to normalize according to what we heard from them over last week.
Juan Jose Chacon Quiros: Yeah.
Operator: Our next question is from Marie Siebel with BTIG. Please proceed. Hi, thanks.
Juan Jose Chacon Quiros: Our next question is from Marie Thibault with <unk>. Please proceed.
Marie Siebel: Hi, thanks so much for taking the questions and congrats on a very nice start to the year. Wanted to ask here, you know, with U.S. approval expected this year, if we can get a little bit more detail on how you're thinking about the sales force buildout. You know, with Jeff in place, I would love to hear a little bit about the go-to-market strategy. I know we'll have to wait to see some of the bigger spending and investment, but I would really love to just hear about, you know, a potential range for how many sales reps and, you know, that selling strategy that you're going to be targeting.
Marie Yoko Thibault: Hi, Thanks, so much for taking the questions and congrats on a very nice start to the year.
Marie Siebel: I wanted to ask here with the U S approval expected. This year, hoping we can get a little bit more detail on how you're thinking about the sales force build out.
Marie Siebel: You know with Jeff in place would love to hear a little bit about the go to market strategy. I know, we'll have to wait to see some of the bigger spending and investment, but what really love to just hear about you know.
Marie Siebel: A potential rain for how many sales reps in and you know that selling strategy that youre going to be targeting.
Juan Jose Chacon Quiros: Yeah, thanks, Marie. Well, we have been investing in the US for quite some time. We have been building the necessary foundation for the commercial organization, especially the back office commercial ops. And we are also leveraging a lot of the infrastructure we have built in areas like HR, legal, finance, and regulatory from our global team. So, you know, that's been part of what we've done already. And, you know, you can see why, you know, we're invoicing and shipping Flora tissue expanders to the US.
Speaker Change: Yes, Thanks Marie.
Marie Siebel: We have been investing in the U S for quite some time.
Juan Jose Chacon Quiros: We have been building the necessary foundation for the commercial organization, especially the back office commercial ops and we're also levering leveraging a lot of the infrastructure. We have built in areas like HR legal finance and regulatory from a global.
Juan Jose Chacon Quiros: Team. So that's been part of what we've done already and considered already why.
Juan Jose Chacon Quiros: Now, having Jeff on board, I think it signals our conviction that, you know, we need to get prepared for the US launch. And not only did we add Jeff, but we also added Ann Pugh, who will head our US sales team, and Ben Newcutt, who's basically the Director of Surgeon Engagement and Business Development. You know, their combined experience in the US market is, you know, I would say second to none.
Juan Jose Chacon Quiros: Invoicing and shipping flora tissue Expanders to U S now with having Jeff on Board I think it signals our conviction that we need to get preparation for the U S launch and not only did we add Jeff. We also add an Pew, who will head our U S sales team and then you've got blue slate basically direct.
Juan Jose Chacon Quiros: A surgeon engagement and business development.
Juan Jose Chacon Quiros: Their combined experience in the U S market is I would say second to none.
Juan Jose Chacon Quiros: And with that, what we are building is this strong foundation for launch readiness. We are going to be very mindful of how we grow our sales force, but I think we're getting to the point where, like that foundation, the commercial foundation is already there. And, you know, we've already added a couple of sales reps for the tissue expander, and we will continue to add more in the next few months as we feel that, you know, we are getting closer and closer to the launch. For competitive reasons, I'm not going to share too much of the details, but definitely, you know, we are at a point where we are going to start building up that sales force. Okay.
Juan Jose Chacon Quiros: And with that what we're building is this strong foundation for launch readiness, we are going to be very mindful of how we grow our sales force, but I think we're getting to the point, where that foundation that commercial foundations already there and.
Juan Jose Chacon Quiros: We've added a couple of sales reps already for the tissue expander and we continue to add more in.
Juan Jose Chacon Quiros: In the next few months as we feel that we are getting closer and closer to the launch for.
Juan Jose Chacon Quiros: For competitive reasons, I'm not going to share too much of the details, but definitely we are at a point, where we are going to start building up that that sales force.
Marie Siebel: Okay. That's great to hear. Thanks for that detail.
Speaker Change: Okay, that's great to hear thanks for that detail.
Speaker Change: And then wanted to ask my next question here on China.
Marie Siebel: And then I wanted to ask my next question here on China. Any ability to offer more details on, you know, the amount of revenue recognized in China this quarter or how we should think about that over the year? Is it going sort of according to expectations? And where can you eventually see market share going in China? And thanks for taking the questions.
Speaker Change: Ability to offer more details on you know the amount of revenue recognized in China This quarter or how we should think about that over the year is it going sort of according to expectations and where can you eventually see market share going to China and thanks for taking the question.
Rajbir Singh Denhoy: Yeah, I can start with that. And JJ can talk a little about the market share. You know, we, I think, as we've talked about China, right, as we move through 2023, what we expected in 23, we pushed into 2024. I can tell you that we are tracking to that, you know, China is developing as we expected, we're seeing demand, it is building. And so I can tell you that we're on track in terms of our plans in China, in terms of eventual market share and, and, and the size of that market. JJ, if you want to maybe take this, Yeah, of course. So, you know, it's super.
Speaker Change: Yes, I can start with that and Jay Jay can talk about the market share.
JJ: I think as we've talked about China right as we move through 2023, what we expected in 'twenty three we pushed into 2024 I can tell you that we are tracking to that Chinese developing as we expected we're seeing demand. It is building and so I can tell you that we're on track in terms of our plants in China.
Rajbir Singh Denhoy: In terms of eventual market share in and the size of that market JJ. If you want to maybe take that.
Juan Jose Chacon Quiros: Yeah, of course. So, you know, it's super early on. It's just been a few months since we launched in China. We're at this point, basically hitting tier one and tier two cities with our events and medical education. So it's early.
JJ: Yeah of course, so you know it's super early on it's just been a few months since we launched in China, where a disappoint basically hitting tier one and tier two cities with our events medical education. So it's early but you know we have a very good.
Juan Jose Chacon Quiros: But, you know, we have had very good experience with the blueprint that we have used in other countries in Asia and surrounding countries where you have a strong Chinese population, like Singapore, you know, Taiwan, Hong Kong. And what we see is that, you know, they quickly realize that this is a superior technology. There's a, you know, willingness to pay. So we do expect, you know, our market share in the next few years to match some of the same leadership that we've seen in the surrounding countries, where we have, you know, between 40% and 70% market share.
JJ: <unk> experience in the blueprint that we have used in other countries in Asia and surrounding countries, where you have a strong Chinese population like Singapore, Taiwan, Hong Kong and.
Juan Jose Chacon Quiros: And what we see is that you know they quickly realize that this is a superior technology.
Juan Jose Chacon Quiros: Willingness to pay so we do expect.
Juan Jose Chacon Quiros: Our market share in the next few years to match some of the same leadership that we've seen in the surrounding countries, where we have you know between 40 and 70% market share.
Juan Jose Chacon Quiros: In China right now one of our competitors has 70% or more market share.
Juan Jose Chacon Quiros: In China right now, one of our competitors has 70% or more market share. So we have a very clear plan on how to go about that. And definitely, as we build on this, you know, initial launch activities, I think we'll be able to talk with more detail about, you know, how we are doing there.
Juan Jose Chacon Quiros: So we have a very clear plan on how to go about that and definitely as.
Juan Jose Chacon Quiros: As we build on this.
Juan Jose Chacon Quiros: Initial launch activities I think we will be able to talk with more detail about how we are doing there.
Operator: Our next question is from Anthony Petrone with Mizuho Securities. Please proceed. Thank you.
Juan Jose Chacon Quiros: Our next question is from Anthony Petrone with Mizuho Securities. Please proceed.
Anthony Charles Petrone: Thank you and good afternoon, everyone. So maybe one just on the process of the FDA inspection and how long that actually takes and what the range of turnaround time is. So just trying to get an idea of when the actual process will play out. And then, on China specifically, a follow-up question there would be on the stimulus package that was announced in March. There are some other healthcare consumer-related companies that do see this as a potential catalyst for the second half of the year. So do you think China's stimulus could actually lead to an upside as we get into the second half?
Anthony Charles Petrone: Thank you and good afternoon, everyone, maybe one just on the.
Anthony Charles Petrone: The process of the F T inspection and how long that actually takes in and you know with a range of turnaround time is they're just trying to get an idea of timing and how the actual process plays out and then on on on China, specifically the follow up question. There would be just on the stimulus package that was announced in March.
Anthony Charles Petrone: There are some other health care consumer related companies that do see this as a potential catalyst.
Anthony Charles Petrone: Into the second half of the year. So do you think Chinese stimulus could actually lead to upside as we get into the second half. Thanks again.
Anthony Charles Petrone: Thanks again.
Speaker Change: Yes, well. Thank you Anthony on the first one you know last time, we were able to speak.
Anthony Charles Petrone: Openly about it.
Anthony Charles Petrone: Well, we talked about is that the FDA had given us a date for Q2.
Juan Jose Chacon Quiros: Yeah, well, Anthony. On the first one, you know, last time, we were able to speak, you know, openly about it. What we talked about was that, you know, the FDA had given us a date for Q2. I can tell you now that the pre-approval inspection of our manufacturing facility in Costa Rica is scheduled to take place in less than 30 days, and our team is super well prepared and looking forward to it.
Anthony Charles Petrone: I can tell you now that preapproval inspection of our manufacturing facility in Costa Rica is scheduled to take place in less than 30 days and our team is super well prepared and looking forward for it in parallel we have been making good progress with labeling and post market approval studies.
Juan Jose Chacon Quiros: In parallel, we have been making good progress with labeling and post-market approval studies, and these are the last significant steps before FDA approval. So we are getting very close to the final stages on this, and we want you to be very mindful of not disrupting that process.
Juan Jose Chacon Quiros: These are the last significant steps before the FDA approval. So we are getting very close to final stages on this and we want just to be very mindful of not disrupting that process.
Juan Jose Chacon Quiros: And on China and the stimulus package, yes, we're very well aware of it, and we think it's a good development. You know, it will take time to get through so that it can really impact consumer demand, but, you know, we do see it as positive. Remember, the lowest of the Chinese market in breast aesthetics happened in 2022. And since then, it's been, you know, bouncing back. Our expectation was that it was going to be back to 2019 levels by 2025. But maybe that stimulus package will be able to, you know, get us there faster.
Juan Jose Chacon Quiros: And on China, and the stimulus package, yes, we're very well aware of it and we think it's a it's a good development it will take time to get through so.
Juan Jose Chacon Quiros: And it can really impact consumer demand, but you know.
Juan Jose Chacon Quiros: We do see it as a positive.
Juan Jose Chacon Quiros: Remember deep into the <unk>.
Juan Jose Chacon Quiros: Lowest of the Chinese market in breast aesthetics happening actually in 2022 and since then it's been bouncing back our expectation was that it was going to be back to 2019 levels by 2025, but maybe that stimulus package will be able to get us there faster.
Speaker Change: Thank you Ian.
Operator: Our next question is from Matt Taylor with Jeffreys. Please proceed.
Juan Jose Chacon Quiros: Our next question is from Matt Taylor with Jefferies. Please proceed.
Matt Taylor: Great. Thanks for taking the time to answer the question. Maybe I'll ask one on the MIA commentary that you gave. I mean, it's encouraging to see that you're signing up all these centers. I was wondering if you could talk about how material revenue contribution is going to be this year, and then maybe you could frame the centers that you're adding for MIA FemTech in terms of your overall centers, what percentage is that today, and what do you think it will be at maturity?
Matthew Charles Taylor: Great. Thanks for taking the question maybe I'll ask one on the media commentary that you gave.
Matt Taylor: I mean, it's encouraging to see that you're signing up all these centers I was wondering if you could excuse me talk about how material. The revenue contribution is going to be this year and then maybe you could frame the centers that you're adding for me if M. Tek in terms of your overall centers or you know what percentage of that today and what do you think it will be at maturity.
Matt Taylor: Yeah.
Juan Jose Chacon Quiros: Yeah, I think with that one, Matt, at this point, what I would tell you is what we are trying to do at the qualitative level, which is create the Network of Clinics and within those clinics, start bringing in all of our marketing assets, you know, practice development, all the things that we, you know, we provide, so that you can have the new category really coming to light in there. I can see that some clinics who started, you know, in Europe, for instance, in September and October of last year have started to get to the numbers where we would like to see them in terms of, you know, the number of procedures per month.
Speaker Change: Yeah, I think with that one Matt.
Juan Jose Chacon Quiros: At this point what he would tell you is that what we're trying to do at a qualitative level, which has created a network of clinics and within those clinics start bringing in all of our marketing assets. The practice development all the things that we we we provide so that you can have the new category.
Juan Jose Chacon Quiros: Coming to light in there.
Juan Jose Chacon Quiros: I can see that some clinics, who started in Europe for instance in the September October of last year has started to get to the numbers, where we would like to see them in terms of number of procedures per month, we still have work to do to see those numbers in every single one of the centers, but that's part.
Juan Jose Chacon Quiros: We still have work to do to see those numbers, you know, in every single one of the centers, but you know, that's part of the entire process of building a new category. So we're not in a rush.
Juan Jose Chacon Quiros: The <unk>.
Juan Jose Chacon Quiros: The entire process of building a new category. So we're not in a rush however.
Juan Jose Chacon Quiros: However, I think that, having signed up 55 clinics already, 33 of whom are, you know, active right now, of those, of course, the ones that have started in the fall of last year are the ones, of course, that are getting more cases at this point. In addition, we have 37 new clinics under negotiation. We have the aspirational goal of getting to 100 clinics by the end of this year.
Juan Jose Chacon Quiros: Did you know having signed up 55 clinics already.
Juan Jose Chacon Quiros: 33, who are.
Juan Jose Chacon Quiros: Active right now of dose of course.
Juan Jose Chacon Quiros: Ones that are that have started.
Juan Jose Chacon Quiros: And to follow up that last year are the ones of course are getting more cases at this point.
Juan Jose Chacon Quiros: In addition, we have 37, new clinics under negotiation, we have this aspirational goal of getting to 100 clinics by the end of this year and I think after that you would you know what our expectations are is that in every tier one city there'll be a few of these clinics and every tier two city there will be a couple of those and in some tier three Cds youll see.
Juan Jose Chacon Quiros: And I think after that, you know, what our expectations are is that in every tier one city, there will be a few of these clinics. In every tier two city, there will be a couple of those. And in some tier three cities, you'll see one.
Juan Jose Chacon Quiros: One and when you start putting those numbers in and you start getting to the levels at which we see the initial clinics I think we get.
Matt Taylor: And when you start putting those numbers in, and you start, you know, getting to the levels at which we see the initial clinics, I think we get an understanding of how quickly this can ramp up. But in 2024, it is mostly qualitative. But you will start seeing more revenue coming out of MIA. We are, you know, very dedicated to the qualitative part. It is not time yet to break out MIA revenue, but I think when it becomes material, we will be the first ones willing to do that.
Matt Taylor: Understanding of how quickly this can ramp up but in 'twenty 'twenty four it is mostly qualitative but you will start seeing more revenue coming out of me yet.
Matt Taylor: We are very dedicated to the qualitative part.
Matt Taylor: It is not time, yet to break out revenue, but I think when when it becomes material we will be the first one's willing to do that.
Matt Taylor: Okay.
Rajbir Singh Denhoy: Great. Thanks. Thanks, JJ. Maybe just one follow-up on China. Seems like everything's going well there. I just wanted to confirm more specifically that you had talked about just the $10 million in stocking revenue kind of spread out through the first half of the year, and that was it for the guidance. Is that still your assumption, and are you seeing any reordering yet?
Speaker Change: Great. Thanks, Thanks, J J, maybe just one follow up on on China. It seems like everything's going well there I just wanted to confirm.
Rajbir Singh Denhoy: Specifically, you talked about the $10 million in stocking revenue kind of spread out through the first half of the year and that was it for the guidance is that still your assumption and are you seeing any reordering yet.
Matt Taylor: It's still early. As Juan Jose mentioned, we've been there, you know, just a couple of months now, it launched, you know, in January, so it is tracking as we expected to the numbers you described. We'll see how the reordering starts to build in the back half of the year. But, you know, so far, things are tracking.
Speaker Change: It's still early as long as they are.
Rajbir Singh Denhoy: Mentioned.
Matt Taylor: We've been there just a couple of months now.
Matt Taylor: You know in January so it is tracking as we expect it to the numbers you described we'll see how the reordering starts to build in the back half of the year, but so far things are tracking.
Speaker Change: Okay, Alright, thank you thanks Raj.
Rajbir Singh Denhoy: All right. Thank you. Thanks, Raj.
Operator: Our next question is from Joanne Wuensch with Citibank. Please proceed.
Rajbir Singh Denhoy: Our next question is from Joe in wind with Citibank. Please proceed.
Joanne Karen Wuensch: Thank you for taking the question, and a very nice quarter. I appreciate the commentary on the guidance that it is early in the year, but you did exceed consensus, and I'm curious how you think about the next couple of quarters. I just want to make sure that the second, third, and fourth quarters are sort of set up appropriately.
Joanne Karen Wuensch: Hi, Thank you for taking my question and very nice quarter.
Joanne Karen Wuensch: Appreciate the commentary on the guidance that it is early in the year, but you did exceed.
Joanne Karen Wuensch: And I'm curious how you think about the next couple of quarters I just want to make sure that the second third and fourth quarter here are sort of set up appropriately.
Rajbir Singh Denhoy: Yeah, I think, Joanne, as we mentioned, you look at the sequential increase in the first quarter over the last quarter of about $6 million. I think a similar sequential increase into the second quarter is the right way to think about it. You know, the back half of the year, you know, again, we'll likely see a small sequential increase in the third quarter; it tends to be the weakest of the quarters for us as the year unfolds.
Speaker Change: Yes, I think Joanne as you mentioned here when you look at the sequential increase.
Rajbir Singh Denhoy: In the first quarter over last quarter and about $6 million I think a similar sequential increase into the second quarter.
Rajbir Singh Denhoy: The right way to think about it.
Rajbir Singh Denhoy: Half of the year.
Rajbir Singh Denhoy: Anvil will see likely a small sequential increase in the third it tends to be the weakest of the.
Rajbir Singh Denhoy: Quarters for us as the year unfolds, but do you have today the dynamic of the recovery in the market and so we will see growth into the third quarter as well.
Rajbir Singh Denhoy: But you have the dynamic of the recovery in the markets. And so we'll see growth into the third quarter as well. You know, so generally, it gets back to the commentary made about this recovery that we're seeing in the markets, the distributor orders improving, you know, so I think that that's probably a good way to think about it over the balance of the year.
Rajbir Singh Denhoy: Generally it gets back to the commentary we made about this recovery that we're seeing in the mall.
Rajbir Singh Denhoy: <unk> the distributor orders improving.
Rajbir Singh Denhoy: So I think that's probably a good way to think about it over the balance of the year.
Joanne Karen Wuensch: Thank you. And then, is there anything that you could share regarding your go-to-market strategy in the United States? I'm thinking pricing, the number of salespeople you would need, or anything else that you're comfortable sharing at this stage of the process?
Speaker Change: Thank you and then is there any way you can share regarding your go to market strategy in the United States.
Juan Jose Chacon Quiros: Thank you.
Speaker Change: Pricing number of salespeople, you need or anything else that you're comfortable sharing at this stage of the process. Thank you.
Juan Jose Chacon Quiros: Okay.
Joanne Karen Wuensch: Yeah, unfortunately, Joanne, for competitive reasons, this is exactly the type of thing that we cannot give out. We have a very clear understanding of how we want to price in the United States. We are coming in with two products, the Motiva Smooth Silk Round and the Motiva Smooth Silk Ergonomics. Those are some of our best-selling products in our international market and have been so for many years. And we will make the necessary investments to make sure that we provide the accounts, as we move into different quarters after the launch, the necessary service that they deserve. So at this point, that's all I can tell you. I appreciate that.
Speaker Change: Yeah. Unfortunately, Joanne it's for competitive reasons. This is exactly the type of things that we cannot give out we have a very clear understanding of how we want to price in the United States.
Joanne Karen Wuensch: We are coming in with two products.
Joanne Karen Wuensch: Tivo smooth silk round and the Motiva smooth silk ergonomics.
Joanne Karen Wuensch: Those are some of our best selling products in our international market and have been so for many years.
Joanne Karen Wuensch:
Joanne Karen Wuensch: We will make the necessary investments to make sure that you know.
Speaker Change: We provide.
Joanne Karen Wuensch: <unk> as we move into different quarters. After the launch the necessary service that they deserve. So at this point that's all I can tell you.
Juan Jose Chacon Quiros: I appreciate that. Thank you.
Speaker Change: I appreciate that thank you.
Operator: Our final question is from Josh Jennings with TD Cowen. Please proceed.
Juan Jose Chacon Quiros: Our final question is from Josh Jennings with Cowen. Please proceed.
Joshua Thomas Jennings: Hi, good afternoon. Thanks a lot.
Joshua Thomas Jennings: Hi, good afternoon. Thanks, a lot I was hoping to follow up on me a first and.
Joshua Thomas Jennings: I was hoping to follow up on Mia first, and just in the past, Juan Jose, your team has talked about your Mia partner clinics becoming million-dollar revenue generators for establishment labs. I mean, it sounds like these early launch trends are positive, but to get to that million-dollar per account, you had some relatively conservative assumptions. I just wanted to sanity check and make sure that your team is still optimistic that that revenue run rate per partner clinic is still in play.
Joshua Thomas Jennings: Just in the past.
Joshua Thomas Jennings: One is that your team has talked about.
Joshua Thomas Jennings: Mia partner clinics.
Joshua Thomas Jennings: Coming million dollar revenue generators for establishment labs, I mean, it sounds like these early launch trends are positive.
Joshua Thomas Jennings: But to get to that million dollar per account so let's see.
Joshua Thomas Jennings: You had some relatively conservative assumptions I just wanted to sanity check make sure that that's your team is still optimistic that that revenue run rate per.
Joshua Thomas Jennings: Partner Clinic is is still in play potentially.
Juan Jose Chacon Quiros: Yes, thank you, Josh. In the direct market, a Mia clinic that is doing an average of 24 cases per month for a year will eventually lead to approximately a million dollars that will be recognized by Establishment Labs. We think that number is achievable. Like I said, you know, a couple of the clinics that began last fall are starting to trend toward those numbers. So that's what gives us the conviction that those numbers can be achieved. And, you know, our job now is to expand the network of clinics to cities, for instance, across our direct markets in Europe. Some of the distributor markets have already kicked in.
Speaker Change: Yes, Thank you Josh in the direct market.
Juan Jose Chacon Quiros: A mere clinic.
Juan Jose Chacon Quiros: <unk> is doing an average four year 24 cases per months well deep will eventually lead to approximately $1 million that is recognized by establishment labs.
Juan Jose Chacon Quiros: We think that number is achievable.
Juan Jose Chacon Quiros: You said a.
Juan Jose Chacon Quiros: A couple of the clinics that began last fall are starting to trend to those numbers. So that's what gives us the conviction that those numbers can be achieved.
Juan Jose Chacon Quiros: And our.
Juan Jose Chacon Quiros: Our job now is to expand the network of clinics to cities for instance across our direct markets in Europe.
Juan Jose Chacon Quiros: Some of the distributor markets already kicked in.
Juan Jose Chacon Quiros: You can see on the social media handles of Mia FemTech a lot of the work that has been done, for instance, to launch in several cities, you know, across the Middle East. So all of that tells you, you know, that we are building something special. And when you think about, you know, the current market for breast aesthetics, it's a market that is growing, you know, at, you know, low single digits at best.
Juan Jose Chacon Quiros: We can see in the social media handle of me affirm check a lot of the work that has been done for instance to launch in several cities.
Juan Jose Chacon Quiros: Across the middle East. So all of that tells you that we are building something special and when you think about the current market for breast aesthetics to a market that is growing at.
Juan Jose Chacon Quiros: Low single digits at best.
Juan Jose Chacon Quiros: And, you know, what Mia brings is, you know, this new shiny object. And what we see is that, you know, those numbers are not something that, you know, we see as unachievable. And what we would like to see is that clinics, you know, in the first or second year, depending on them being tier one or tier two city clinics, can get there.
Juan Jose Chacon Quiros: And what <unk> brings us.
Juan Jose Chacon Quiros: New shiny object in and what we see is that those those numbers are not something that you know.
Juan Jose Chacon Quiros: We see as Unachievable and what we would like to seize their clinics.
Juan Jose Chacon Quiros: First or second year, depending on on them being tier one or tier two city clinics.
Juan Jose Chacon Quiros: Can get there.
Joshua Thomas Jennings: Great, and I appreciate some of the color on the U.S. Flora launch. I was hoping to just check in on the state of affairs of the recon franchise internationally, both on the tissue expander side and on the implant side. Any updates you can provide on traction there in Europe and other regions? Thanks for taking the time to answer my question.
Speaker Change: Great and I appreciate some of the color on the U S. Floral launch was hoping to just check in on the state of affairs of the Recon franchise internationally, both on the tissue expander side.
Joshua Thomas Jennings: And on the implant side I mean any updates you can provide just on traction there.
Joshua Thomas Jennings: In Europe and in other regions. Thanks for taking the questions.
Juan Jose Chacon Quiros: Yeah, on that one, Josh, again, like I think what we've said many times is that breast reconstruction is slower because you're not really convincing just a plastic surgeon; you have to convince the plastic surgeons in the reconstructive department of a hospital and then wait for a tender to take place. So that's why although we see great feedback from hospitals who have adopted you know, flora, and who have started to use it with our breast implants, you know, still not going at the same speed of adoption that we normally see when we go into a market purely on aesthetics. However, you know, over time, it will build. And I think it's a big demonstration of our technology and our, you know, women's health credentials in this industry.
Joshua Thomas Jennings: Yeah.
Speaker Change: That one Josh again like I think what we've said many times is that breast reconstruction is slower because you're not really convincing just the plastic surgeon and you have to convince the plastic surgeons of the reconstructive Department in a hospital and then wait for a tender to take place. So that's why it will do.
Juan Jose Chacon Quiros: We see great.
Juan Jose Chacon Quiros: Feedback from the hospitals, who have adopted.
Juan Jose Chacon Quiros: Flora and who have started to use with floor at our breast implants still you know not going at the same speed of adoption that we normally see when we go into a market on purely aesthetics. However over time, it will build and I think it's it's a big demonstration.
Juan Jose Chacon Quiros: Our technology and our.
Juan Jose Chacon Quiros: Women's health credentials in this industry.
Juan Jose Chacon Quiros: Yeah.
Speaker Change: Appreciate that thanks.
Juan Jose Chacon Quiros: That is all the time we have for questions today. I will now turn the call back over to Juan Jose for closing remarks.
Juan Jose Chacon Quiros: That is all the time, we have for questions today I will now turn the call back over to Juan Jose for closing remarks.
Juan Jose Chacon Quiros: Thank you for joining us on today's call. We look forward to providing our next quarterly update in August, and we wish everyone continued good health and happiness. Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.
Juan Jose Chacon Quiros: Thank you for joining us on today's call. We look forward to providing our next quarterly update in August and we wish everyone continued good health and happiness.
Juan Jose Chacon Quiros: Okay.
Juan Jose Chacon Quiros: Thank you. This concludes today's conference you may disconnect your lines at this time and thank you for your participation.
Juan Jose Chacon Quiros: Okay.
Juan Jose Chacon Quiros: Sure.
Juan Jose Chacon Quiros: No.
Juan Jose Chacon Quiros: [music].
Speaker Change: Uh huh.
Juan Jose Chacon Quiros: [music].
Juan Jose Chacon Quiros: Okay.
Juan Jose Chacon Quiros: Yeah.
Juan Jose Chacon Quiros: Yeah.
Juan Jose Chacon Quiros: [music].
Juan Jose Chacon Quiros: Yeah.
Juan Jose Chacon Quiros: Yes.
Juan Jose Chacon Quiros: [music].
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