Q2 2025 Establishment Labs Holdings Inc Earnings Call
Mhm.
Good morning, welcome to establishments. Lab's second quarter 2025 earnings call. At this time, all participants will be in listen-only mode. At the end of this call, we will open the line for a question and answer session and instructions will follow at that time.
As a reminder, today's call is being recorded and will now turn the call over to Raj danoi Chief Financial Officer. Please go ahead.
Thank you for operator, and thank you for everyone for joining us.
With me today is Peter Caldini, our Chief Executive Officer. Following our prepared remarks, we will 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 meeting of federal Securities laws.
These include statements on established 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 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 10K and form 10q as well as other SEC filings which are available on our website at established labs.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 Evita or just at Evita,
Reconciliations to comparable, gaap Financial measures for non-gaap measures. If available may be found in today's press release, which is available on our website.
The content of this conference, call contains time-sensitive information, accurate, only, as of the date of this live broadcast, August 7th 2025, except as required, by law establishment Labs undertakes. No obligation to revise or otherwise update. Any statement to reflect events or circumstances after the date of this call.
With that. It is my pleasure to turn the call over to Peter.
Thank you, Raj.
Revenue in the second quarter totaled 51.3 million a growth of 16% over last year.
Our second quarter sales included $10.3 million in the United States, exceeding the $9.5 to $10 million range. We provided our investor day in early June.
With Q2 behind us, we can now comfortably say that our us for Revenue will exceed million dollars. And with this Clarity, we are raising our Revenue, guidance, to 208 to 212 million for a growth of 25 to 28%.
It's also worth noting that our Us sales momentum has carried into Q3 and we are expecting sequential growth from Q2 to Q3 and the United States, despite the traditional Q3 low and plastic surgeries.
We continue to make good progress on improving our operating profitability and cash flow.
Our adjusted day loss for the quarter was 8.5 million and improvement from the 12.1 million in the first quarter.
Our cashews fell to 14.5 million from 21.2 Million last quarter.
As discussed in our q1 call, we expect cashews to reduce by approximately 5 million each quarter.
Our us business continues to do exceedingly. Well, we have assembled a best-in-class organization in the US under the leadership of Jeff Airhart and we're seeing the results.
Our team has successfully leveraged, the superior product benefits of motiva to drive account acquisition and the number of procedures continues to exceed our expectations.
We are executing at a high level and should achieve a leadership position in the market.
Outside the US our results are improving as well. Growth in our direct markets has been a major Focus for our team. As we manage these markets, within our own organization and have greater economics.
We have restructured the US organization, reallocated resources, and applied improved operational processes to support our direct markets.
We're already seeing the benefits of these changes.
Currency and the acquisition of Benelux distributor, our European direct market sales increased by approximately 27% this quarter.
This reflects a new sales record and we believe these Trends will continue.
There is good early demand for Preserve, and Mia's tracking to plan. We're seeing an increase in the number of accounts in which we sell— all very good signs for a trajectory.
There is certainly continued areas for improvement.
For example, China has been affected by a number of factors and that is a particular Focus for the team.
We are working with our distribution partner and their investor to ensure a success in China.
Motiva is the leading implant across Asia and we expect to achieve the same position in China.
On the operational side, we are focusing. Our resources on the areas with the most Financial potential, like the us, and our minimally invasive portfolio, and we're reducing expenses in other areas that we can operate as efficiently as possible.
This can be seen in the Improvement in the ibeta and cash use. We posted this quarter
We expect our first positive VA quarter later this year and remain on track to be cash. Flow break even in 2026.
As noted our progress in the United States is tracking, well ahead of plan.
At our investor meeting. In June, we confirmed, we had reached 1,000 accounts in the US and that number continues to grow.
It is important to remember. There's a difference between procedure, share and surgeon share.
While there are about 6,500 board certified plastic surgeons and active. Practice a much smaller percentage are responsible for the vast majority of the breast augmentation and revision procedures, done each year.
So to put that in perspective, if the thousand plus accounts, we currently have were to fully adopt motiva. We would have approximately 50% of the breast augmentation Market in the United States.
The most important factor in increasing surge in utilization is time and surgeons getting comfortable with the motiva implant.
Once a surgeon gets introduced to motiva, they follow a typical adoption curve, completing a few cases at first and then waiting to see the results.
Once past that, they will start building motiva into their consultations.
But remember, a busy plastic surgeon could be booking cases out for 6 months.
Further. It's likely that a plastic surgeon will build motiva into their practice over time.
So, what starts, as 2 initial cases could become 25% of their business after 4 months, and then 50% after 6 months, this is what we're seeing in short while some plastic surgeons move their practice to 90%, plus or minus motiva immediately. Most take several quarters to get comfortable and to work through previous consultations where a different implant was already selected.
Our team is very focused on high volume practices as well as industry leaders.
Whereas industry leaders used to be defined as the key opinion leaders, who spoke frequently on podiums at conferences,
It means something quite a bit broader today.
There's a new group of Surgeons whose Podium is social media through platforms like Instagram and Tik Tok.
Establishment Labs is attracting surgeons and patients through our digital and social media efforts and we're seeing the results.
Surgeons consistently tell us that patients regularly. Come in asking for motiva implants by name, something they have not seen before in the industry.
Surgeons also, tell us that patients are walking away from the competitor warranties that that cover their previous surgeries instead opting to pay from motiva implants rather than get replacement implants for free.
This behavior is unprecedented in the Aesthetics and medical device industry.
Our team continues to add high volume practices and Industry leaders making motiva implants more and more available across America.
Early data. Suggests that surgeons? Who offer motiva implants? Are seeing an increase in their business?
In other words, as patients carefully choose their surgeon. A new factor in their decision process is the availability of motiva.
As of this call, the growth trajectory continues orders have increased each month from April through June. And that trend has continued into the third quarter.
Continued growth in our Core Business. Should continue for many years and are robust pipeline. Should add to that growth as well.
Our ultimate goal is to have surgeons prefer our implants in all their cases and our pipeline should help get us there.
In early 2026, we should have expanded range of sizes approved by the FDA and this will help Drive utilization as well as new surgeons to our products.
This is just the start of a cycle of innovation will bring to the US market over the next couple of years led by our minimally invasive portfolio, as well as our efforts and reconstruction.
In July, we hosted 36 us plastic surgeons in Costa Rica to introduce them to preserve.
Preserve is an advanced less invasive breast enhancement technique designed specifically to preserve natural, breast tissue functionality, including nipple, sensation and chest muscles.
It also provides for a fast post-procedure recovery.
The Preserve procedure is designed to be performed with minimal anesthesia and uses the motiva channel, separator to create a tunnel without cutting any tissue and the motiva inflatable balloon, which gently pushes the tissue structure, aside to create a precise pocket that matches the size and creates space for the breast implant.
Many surgeons who attended commented for the first time in decades, there is a fundamentally different way to perform breast augmentation surgery.
Preserve is not just a way to do an existing procedure differently. It is entirely new procedure with real advantages for many patients.
The reception from surgeons who are part of the this training has been overwhelmingly positive. It's hard to overstate how meaningful it was to bring together this specific group of Surgeons, which not only included, some of the highest volume surgeons in the United States, but also current and past leaders of major plastic surgeon societies. If you haven't, I would recommend following some of their social media, their enthusiasm, and content is already changing the narrative and conversation around breast implants.
We expect to begin shipping in August so that the early experience group can perform their first preservation.
We will collect their feedback to support the launch of preserve in the US, which we anticipate will be in the first half of 2026.
We expect preserved to command a premium, which will not only add to gross margins, but also expand our Tam on a dollar basis as well.
Preservation highlights perhaps the most important Point, all the technological advancement that has gone into motiva. Implants allows for new procedures and techniques that were previously technically inadvisable with competitive devices.
For example, we've seen a rise in the use of prepectoral implant procedures which can offer more natural outcomes and faster recovery time.
This is dubta nicely with the increasing interest in smaller implants. A trend that was covered recently in the article of Wall Street Journal.
while motiva implants, have clear benefits across the board in breast procedures, the use of smaller implants in pre-pro positions, is a segment, which motivates able to support
In breast reconstruction, our Flora tissue expander is now in use at over 90 hospitals. In the United States, with more being added every month.
For motiva implants in reconstruction. We are close to completing the 3-year follow-up. In this cohort, we will lock the database for a supplement in September and expect to submit for approval and reconstruction. Before the end of the year, outside the US, we saw sequential growth in all our geographic regions in the second quarter.
As I indicated, previously, we have taken a number of actions to improve the performance of our direct markets.
We are seeing the benefit of these activities. And as previously noted, our European direct markets, grew approximately 27% versus last year.
Key drivers for that growth.
In our Latin America direct markets, we continue to see stabilization of our Brazilian affiliate and continued strong growth in Argentina.
These results are being supported by minimally invasive platforms, and by the halo effect of the US approval and initial success.
The number of accounts we have in many markets is increasing clearly a positive sign.
Our distributive markets are generally doing well.
Latin American Distributors, grew double digits and the second quarter in other regions. The timing of orders to several of our partners impact, the results. We believe these are short term and are Market position overall globally continues to strengthen
for 2025 Mia remains on track to achieve 8 to 10 million in Revenue.
Mia is appealing to a new group of women who had not previously considered breast augmentation and we continue to see the strong interest from clinics to offer the procedure.
Reservee also continues to build a momentum outside the US and is going to be a meaningful contributor this year. And next,
We have clinics in Europe and Latin America. Already routinely performing this procedure and more being added regularly.
With that, I will now turn the call over to Raj.
Thank you, Peter total revenue for the fourth quarter was 51.3 Million, an increase of 16.3% from the year ago period, excluding the positive impact of Foreign Exchange in the quarter growth would have been approximately 14.3% versus a year ago.
Sales from motiv in the United States were 10.3 million.
on a geographic basis sales of the United States were 20% of the global total
Sales in Europe, Middle East and Africa over 40% of sales, and we saw double digit year-over-year growth overall in the region Latin America was 19% of sales with mid single-digit growth, including stable results, in Brazil, compared to the first quarter.
Asia-Pacific was 15% of sales, and while we saw sequential growth in the region, results were down year-over-year, mostly due to China and some one-off timing of orders from other distributors.
Our gross profit for the second quarter was 35.3 million or 68.8% of Revenue. A 320 basis point increase compared to the 65.6% of revenue for the same period in 2024 and 160 basis points higher than the 67.2%. In the first quarter of this year,
the increase reflects the higher margin sales in the United States, and we continue to expect gross margins in 2025 will be approximately 200 to 300 basis points, higher compared to 2024
As it relates to tariffs, the duties on Goods, imported from Costa Rica to the United States is expected to result in less than a 50 basis point. Gross margin impact on a Consolidated basis and do not change our trajectory for margin Improvement this year.
Scna, expenses of 44.2 million were approximately 11.4 million higher than in the second quarter of 2024.
R&D expenses for the second quarter were 5.2 million.
Total operating expenses for the second quarter, increased approximately 11.1 million from the year ago period to 49.4 million.
The increase in operating expenses this quarter was due primarily to the ramp of of commercial activity in the United States, including the Meghan Trainor campaign, where the majority of the expenses fell into Q.
As well as higher shipping costs.
Shipping costs with the results of shipments sent by are in the second quarter to the Us and other markets to match the stronger demand.
We also saw higher Last Mile shipping costs in the US on the higher volume of sales.
We expect operating expenses will moderate in the second half of the year for 2025. We continue to expect operating expenses will be approximately 45 to 46 million on average per quarter, which is where we are trending through the first half of the year.
So as we saw in the first and second quarters, that can be fluctuations based on the time and of expenses.
Adjusted IBA was a loss of 8.5 million in improvement from the 12.1 million in the first quarter.
We expect to see further Improvement into 3Q and to reach our first Eva do positive quarter this year.
For cash. In the second quarter was 14.5 million which was down from 21.2 million in the first quarter.
As we have noted previously, the first half of 2025 should be higher for us. In terms of cashews, as we funded investments in the US, commercial platform, as well, as increases in working capital support. The strong demand cashews is expected to come down by approximately 5 million a quarter for the next several quarters, including an expectation of approximately 10 million in the third quarter.
We expect to get to cash flow positive in 2026 without the need for any further Equity raises.
Putting our total accessible cash balance at approximately 800 million.
As a reminder, our current credit facility is approaching the last year of the term. We are exploring refinancing options. That could further reduce our cashews, over the coming quarters.
We are increasing our Revenue guidance for 2025 to a range of 208 to 212 million from the previous 205 to 210 million.
Our new outlook represents growth of 25 to 28% and includes an expectation of at least 40 million in US, motiva sales and single digit growth outside the United States.
The US is the primary engine of growth this year, but our direct markets outside the United States are also doing well.
We're making good progress in leveraging, our operating expenses and improving cash flow. We continue to forecast. Our first Evita positive quarter this year and remain confident that we will reach cash flow break even in 2026.
I will now turn the call back to Peter.
Thank you, Raj. Just last week, we announced that our motiva Flora smooth silk tissue expander, won both The Innovation and the safety awards, in the 2025 medical device. Network excellence awards,
In its announcement, the organization, noted. This dual category when establishes motiva Flora as a benchmark in the breast reconstructive surgery.
Our Innovations are brought to Market through years of hard work. And this is a recognition is a testament to the passion and dedication of the many people who work at establishment labs.
Our company remains focused on 4 main priorities. This year driving growth, in the US, the ongoing launch of our minimally invasive portfolio, increasing efficiency and profitability across the organization and advancing our Innovation pipeline.
We are making progress on all fronts.
We are advancing to profitability through growth and continued operational efficiencies.
We have a number of key growth drivers for the rest of 2025 and for many years to come.
Higher surgeon utilization and adding account to the United States will drive growth for the rest of this year. And into next approval of additional sizes, will accelerate in both these areas,
Having our indication for breast reconstruction in the US will be a considerable growth driver.
Preserve will create a premium offering around the world and help expand our Tam on a dollar basis as well as contribute gross margin expansion.
And Mia helps expand our Tim on a patient basis.
Reaching profitability this year and cash flow break-even next year are significant milestones for us as an organization.
With our differentiated Technologies and Market position, being cash, generating and self-sustaining affords. Us a very unique opportunity to drive significant shareholder value for many years to come.
Operator, we're ready to take your questions.
Thank you.
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The first question comes from. Josh Jennings at TD Cowen. Please go ahead.
Hi, good morning, uh nice quarter and it's great to see the the positive 2025 Revenue. Guidance upgrade and and hear about the continued momentum in the US motiva launch. Uh, I think you you guys touched on most of the points in, in the, in the guidance update. But maybe if you could find tune or share some more details around assumptions, baked in into the upgrade 40, plus at least 40 million in US, motiva, revenues and single digit International sales. But any thing we
Regional you can share and and and you know, Peter you share, you talked about some headwinds in China would love to hear more about that and how we should be thinking about Revenue in China in the second half.
Hi, Josh, thanks for the question. Um, yeah, as you noted we are seeing very strong results in the US the continued momentum. We're seeing in certain adoption in the visualization is giving us the confidence to raise the US Outlook to at least $40 million, um, and, and that's really the basis of the comfort and raising the global Outlook to Charter me to 212. As you mentioned outside, the US, a direct markets are doing very well. As we noted in the prepared, remarks, our European direct markets were up about 27% on underlying basis, so very strong results there.
Prepared to March um, you know, that market has been a little bit more challenging this year and we have to take in China out of the guidance for the second half of the year.
Yeah, so uh Josh, thanks for the question. Just to add a little bit more context to to the the business in China.
You know, for for us, I think the, the business is performing below expectations. Uh, a lot of that is driven by the market environment. Um, you're seeing the clients across a number of consumer segments and it is that particulars on their under pressure. And, and basically, also where we're positioned in the premium segment, we're seeing a lot of challenges there. Um, but we also feel that, you know, our Distributors experiencing challenges in terms of scaling up their commercial, uh, operations. Uh, we expected to be further along at this point in in the launch. So, um, you know, in terms of building out their commercial capabilities in terms of the productivity in the hospitals that that they're in. So this is a big Focus for us. Uh, we work very closely with the our partner in China and we're still very confident that we are going to achieve the same leadership position in China that we have throughout Asia, just that the ramp UPS can be a little bit slower and, you know, we're reflecting that in in the guidance. Um, but as raj mentioned
You know, continually do very well in in the US for continuing to see that momentum in in Q3, um, the direct markets are are doing well and that's been a priority for us. Uh, these are markets that we see, uh, significant growth opportunities and and these are areas where we have our own organizations. And and I think also opportunities for growth so we're very pleased with with those uh those growth and I think that's reflected in the numbers. And also we're being cautious about the current situation in China.
Thank you. The next question comes.
From Sam Eber at btig, please go ahead.
Hi, good morning and thanks for taking the questions. Um, this morning. Um, Peter really helpful commentary on the utilization Trends in the US, um, as as urgent and getting more experience and work through, um, you know, the existing consultations that that they had prior
You know, as I think about the growth trajectory going forward, is it fair to assume that, you know, we could actually see an acceleration. Um, sort of a hockey stick type of an inflection at some point as that utilization, um, starts to build and they work through their order book. And, uh, you know, how should we think about timing of when that, that could happen?
All right, just give us 1 minute. We're having a bit of a background noise here.
Yeah. Thanks Sam. Um you know as we highlighted in in the uh the uh prepared remarks, you know we continue to make great progress in in the US.
Um, Market, we continue to add additional accounts um even going into Q3 which is a slower part of of the Season. We continue to build that momentum
Um, you know, I think as as most accounts I mean it it it varies by account that that I highlighted um, and prepared uh, statement. Um, but we what we are seeing is we've been able to capture a number of accounts. I think we have over 40 accounts that have already done, um, over 100 orders a year to date, some have actually reached 200. So I think it's going to continue to progress in in the same uh, type of trajectory and you know, as we had accounts, the original accounts that are moving up the adoption curve which varies by clinic and you're going to see acceleration as well. So I don't think there's necessarily going to be a hockey stick per se, I think you're just going to see continued gradual growth as we add new accounts as well as uh, some of the accounts that we've already added are, uh, kind of moving up their the adoption curve.
Thank you. The next question comes from, Anthony Patron, at Missoula group. Please go ahead.
Uh, great thanks. And congrats on uh, a great quarter here in the south of launch from motiva. Um, 1 on on US, 1 on us on the US side. Um when we think about, you know, just the the rate of of position and it was it's been quite rapid uh, since since the FDA clearance last year.
What is the the what is the trajectory look like from here when we just think about new site openings?
And at what point do you think this turns into more of a penetration story into those accounts rather than uh new site ads and then I'll have a follow-up question? Oh yes.
To get, uh, more accounts. Um, you know, we we highlighted an investor day.
We've reached a thousand accounts, and we continue to add to that.
you know, in terms of of the growth moving forward, um,
you know, a little bit more of our Focus. I would say at this point is actually enhancing the the the utilization rate in the accounts that we do have, um, you know, but we still see opportunities to to add additional accounts like, as we expand our sales force. Um, but you know, I think that's going to be the focus as we move forward.
Just a quick follow up there, is it fair? You you've had some competitors report in the aesthetic space and there's a little bit of pressure on the consumer end. Certainly not seeing it in the motiva numbers here, but just where do you think the underlying us breast augmentation is? In other words, is there another leg here to unlock once the consumer stabilizes and then quickly on the US, just just wondering, um, how much revenue was impacted by, by the shipping delays, you referenced there in Apex. Specifically. Thanks again.
Okay. So, um
you know, I think, uh, what what we're seeing Anthony or as it relates to, to the US market is
you know, we haven't seen a a Slowdown and and the, uh, the breath Aesthetics, um,
Augmentation Market. We, you know, we're continuing to see good growth and and I think some of that is driven because we are driving share, and we're gaining, you know, continue to gain share in the marketplace. But I think also, you know, with a lot of the activities that we're doing in terms of social media, Meghan Trainor, um I think we've been able to kind of increase some of the interest
Um, in terms of, you know, patients and and looking for um, a breast documentation procedures, I think we've been working and helping to kind of remove some of that taboo, uh, related to it. So I think getting in some respects and we don't have, you know, specific data on this. We're we're helping to drive growth in in the category.
Um, as it relates to the, the US. Uh, numbers Rush. Yeah, sorry. I think your repeat the question. I think you're asking about shipping.
No, I think we may have lost Anthony but this is phasing of of the shipping. Yeah, I think the revenue attached to the shipping date coming in Apex specifically.
Um, well I think what we commented on was that we didn't incur higher shipping costs in the quarter relative to sending product via air as opposed to via sea freight. Um, we didn't see any impact in our results really relative to.
Uh to shipping days or anything related to that. Yeah, I think um Anthony just to add I think specific to to the US
um, you know, in terms of lapping versus last year, obviously, we had, you know, last year, we had china orders, we didn't have us this year, um, some of it is just that the timing of these orders
And you know, I think in in in a couple cases Distributors are managing down inventory, as it relates to a regulatory change that's coming. Um, but the the quantification of that impact, you know I think is is somewhat marginal and it's going to be um, you know, really kind of something we address in the following course. It's more of a timing issue.
Thank you very much.
Thank you. The next question comes from Mike Matson at needam and Company. Please go ahead.
Yeah, thanks for taking my questions. Um, I have 2 there, there's sort of related so I'll just go and ask them both now. So uh I wanted to ask 1 on, on pricing Trends in the US I think you're you had priced your your implants a bit higher than some of the competitors. Um you know are you being able to sustain that are you seeing any push back and then the second question would just be around competitive response of you know are you seeing what are you seeing the 2? Big competitors doing if anything to try to fight back as they basically shared a motiva
Thanks.
Yeah, thanks. Uh, Mike in terms of pricing. Um you know as you mentioned we we do have a premium
Price, uh, versus, uh, our, our competitors. Because, you know, we feel we have a superior product in the marketplace and I think that's reflected, you know, by the the, the patients, um, acceptance as well as the, the surgeons
We have not really, uh, felt any pricing pressure, per se. I think as...
Accounts based on the number of procedure number, the orders that they have, but that's not really driven by any kind of competitive reaction. I would say from an overall competitive response, you know, we, we see, you know, I would say nothing, that's major coordinated. Um, reaction I think in much of it is, is really on a a market by market basis, certain, you know, responses by individual, um, sales reps. But nothing that I would say is a, a concerted organized, and and strong, uh, reaction, uh, from the competitive set right now,
Okay, got it. Thank you.
Thank you. The next.
Thanks for the question. Uh, sorry if this is been answered already. I join a little bit late but just curious on the Cadence for the balance of the year. You know, I know the 40 million Target for the US is a bit open-ended. But if we just think about the incremental contribution implied by that you're saying you know you're going to get at least 4 million or so revenues in the back half. Assuming we just the straight line, the second quarter, so taking into account, you know, the continued ramp and some seasonality in third quarter. How should we think about the Cadence of growth for both the US and Global and the balance of the year?
Yeah, thanks Ellen. Thanks for the question. So um,
We do expect the US will see some sequential growth into the third quarter. Um, it's usually a seasonally slow period but given the momentum in the business we do expect. It will be up in the third quarter, uh, and then we'll, of course. See, you know, a nice presumption in the fourth quarter, you know, the guidance is for at least 40 million, right? And so we we continue to look at it. In terms of, you know trying to operate a, a conservative view on it. But clearly the momentum in the business is is quite strong. And
And uh and 40 million is really the low end of where we expect to be for the year.
Um as it relates to outside the United States. Um as you know the third quarter is seasonally slower. As I mentioned, we should see that in the US business so they're giving the timing of certain orders. Um
Uh, you know, we do expect that the third quarter might not be down as much as it as it is in historic periods and then we should be a nice uh step up into the fourth quarter.
Thank you and then just a quick follow-up on spend, you know, sgna came in. I think a little bit higher than we were thinking is that just additional investment to support the US launched and how should we think about you know the leverage you can maybe get in the back half now that we're moving past the initial phases of the domestic launch. Thank you.
Yeah, so as we noted in the prepared remarks, there was uh, you know, primarily 2 major factors in the quarter, you know, as I mentioned, the shipping costs were higher and that was a combination of against sending more product via air versus sea Freight. In order to meet the demand that we're seeing both in the United States and outside,
And then there was uh, uh, in the United States given the higher volumes that were moving. We did have higher Last Mile shipping costs. You know, actually getting the product from the warehouse to the to the customers, um, as we think about, uh, and the the second piece of that is the timing of certain expenses. And so, uh, we did have some higher marketing spending in the United States relative to some of the activities that Meghan Trainor campaign and the like, um, but that was really more of a timing question. You know, as we think about the the back, half of the year, we do expect that operating expenses will, uh, Trend down from where they were here in the second quarter. And so, we'll see a nice Improvement in the third quarter. Um, and as we've spoken about previously, you know, that is the increase in Revenue, primarily driven by the United States. That is providing the leverage. So as we keep our operating expenses on a quarterly basis relatively consistent, as those revenues come in and particularly the higher gross margin us revenues, that's where the leverage starts to to flow from
And we remain confident that we'll achieve even without positive in the back, half of the year and then ultimately cash flow. Positive next year
Thank you. The next question comes from, Matt Taylor at Jeffrey's. Please go ahead.
Hi, thanks for taking the question. I had a follow-up on China. I know that last year, on the Q3 call, you mentioned that this partner in principle had committed to invest up to $50 million in the distributor. I was wondering if you could just give an update on how that investment is tracking and how much has been invested so far.
The activity in, in China. Um,
You know our our the issue so far has been that just their experiences some challenges and scaling the commercial operations there and they're a little bit behind where we would have expected at this point in the launch.
We are doing, you know what, we can to support, uh, that distributor to help them achieve, what, what we all expect we can in the region, you know, as we've mentioned on a prepared remarks. We're the leading, uh, implant in all of the surrounding countries in Europe, and our expectations will will achieve a similar, you know, similar position in China. But, but it is clearly going a bit slower than we had hoped at this point.
Okay. Um, and then second question was I wanted to ask
About the difference between Mia and preserve. I mean, you talked a lot about me in the past and the excitement around that and seems just maybe it's recency bias, but now you're talking a lot more about preserv. I know there's some similarities and some differences. Maybe I'll just ask, you know, if you look 5 years out, do you think Mia is going to be bigger than Preserve in terms of dollars or or the other way around and just help us think about the 2 approaches?
Uh, into the future.
Yeah, thanks. Thanks Matt. Uh you know both Mia and preserve are part of our minimally invasive um platform and they they work very uh complimentary uh Mia is uh for you know, procedures 2 cup sizes, it's transactionary. It's not for every patient.
Or for every surgeon, I think, when you look at preservation, it's much broader. And what we call for everyday uses. You can have.
Different or more types of procedures. You can go more cup sizes. So I think in in general
You know, I think you're going to see both of them playing quite well together because you could have me a patient that or somebody that's interested in me is just not going to be the right patient and that it easily shift to to present day. And I think over time I would expect that, uh, president would be larger than than Mia because it's attracts to more.
More, uh, patience. And and also more, uh, surgeons. Um, but you know what, we're very pleased about so far in the launch in in Europe is not only have we gotten a little very strong interest, but we're also finding that it has not cannibalized, our media business. In fact, a number of clinics that are signed up for me are also taking on preservation, they're seeing the value of
You know, leveraging, both types of procedures.
Great. Thanks so much.
Thank you. Next question. Comes from Mason Carissa at Stevens. Please go ahead.
Hey, thanks for the questions. Um, your investor day you called out an initiative to place permanent Consignment inventory, at some of your largest customers, I was just curious. How is that initiative going? Have you seen any impact on utilization at accounts where you have placed that inventory?
Yeah, so that's um I think that's going very well. We've uh, reached over a hundred accounts where we have permanent Consignment. And I think that's
Really been a process for us to get the inventory into the US and I think that's 1 of the reasons why you know, row rise highlighted earlier, you know, there's a lot more. Um there are air shipments just to get the inventory into the US and and so we've been able to get that in the markets and it's certainly, uh, helps in terms of enhancing the utilization uh, rate. And it also improves our ability to kind of get products out to the, to the, uh, to the clinics, um, in a timely manner. So, it, it has been, um, you know, it's been a process kind of getting it to that level. We continue to expand the number of accounts as we get more products, um, into the market. And, and also as we sign up more more clinics,
Got it. And then, could you just update us on the U.S. sales force expansion? Where does that team stand today? Have your expectations around the pacing of hires changed at all?
Yeah. So, uh, right now as I mentioned last call, we, we are up to, uh, 43 reps
In the US. Um, as we are looking to go into next year, we're probably going to be adding 10 to 15 reps and then on top of that management roles and our leadership roles in the sales organization. But from a rep standpoint, 10 to 15 and, and a lot of that is to cover. Um, some of the areas as we enhance penetration and some of the geographies, we're going to need a little bit more coverage there, but also in preparation.
You know, majority that's going to be in in the first quarter uh as we continue to ramp up our our, our sales, and in preparation, for pres uh we're going to be enhancing our sales force.
Understood, thank you.
Thank you. The next question.
Is a follow-up from Josh Jennings at TD.
thank you, give me back in and um, wanted to
Build on on Matt. Taylor's question. It can ask it already but you you talked about the potential for Mia accounts to adopt preserve and I was just thinking about the US strategy in terms of launching preservation first here and um and then Mia uh kind of setting the stage and then introducing Mia in in internationally. You have Mia commercialized. Now with the preserve a launch, I mean, do you think president Ray ultimately can drive increased adoption utilization of Mia? I think you talked about Mia, accounts, adopting, preserve and I think it can go the other way as well. I mean, we think it it, it can. And then and then secondly, the follow the last follow-up is is just on.
Um, The Limited launch Dynamics in the US, you had that training session down in Costa Rica, uh, with the US. Um,
Motiva Revenue guidance update. Uh, we're assuming minimal, uh, contributions from Preserve in the second half of 25 and then more meaningful in in 2026 or maybe just Refresh on on. Uh, whether it preserves included in that in that update for the US motiva Revenue, thank you for taking all the questions.
Yeah. Thanks. Uh Josh um in terms of the the US launch we're going to be launching preserve uh first. Um as I mentioned it's in the the the first half of uh 2026 and I think it's going to be
You know, it's going to be a great introduction into our minimally invasive platform. I think it's very consistent to the type of procedures that
Surgeons currently do in in the US. And then, I think, once we have that established, I think the the media business, uh, the media opportunity, once we get the regulatory approval for Ergo 2, um, which we plan on submitting, um, you know, the early part of 2026. So, depending on that approval time, it will will really dictate our our launch timing with Mia. But I think it's going to be a, a great add-on to preserve Bay.
And then I think your second question was the uh early experience for preserve? Um we're not expecting um really a a a significant.
Or even a really significant impact in terms of our revenue guidance from Motiva in 2025. I think, you know, this is really, as we said, intended to be.
Uh, an opportunity for us to learn and, uh, really hone our strategy in terms of launching it in the U.S.
So, I think that the revenue potential for preservation in the U.S. is very small, and you know, that's not how we're really kind of looking at that. We don't really have that as part of currently a part of the guidance.
Thanks again.
Thank you, we have no further questions. I will turn the call back over to Peter calini for closing comments.
Yeah. Thank you operator and and thanks for everybody uh, joining the call today. Um, you know, I look forward to seeing everybody in the next call and and hopefully you get a chance to enjoy what a little bit left of the the summer. And
I look forward to getting together again in the near future. Thank you.
ladies and gentlemen, this
disconnect your lines.