Establishment Labs (ESTA) 6 Aug 24 2024 Q2 Earnings call transcript

The Establishment Labs, a leading player in the breast aesthetics industry, recently held its second quarter 2024 financial results call, providing valuable insights into the company's financial performance and strategic direction. The call, led by Chief Financial Officer Raj Denhoy and CEO Juan Jose Chacon Quiros, highlighted several key themes and trends that are shaping the company's trajectory.

Financial Performance and Outlook

The company reported a revenue of $44.1 million for the second quarter, reflecting a decline of 9.3% from the year-ago period. However, the sequential improvement of 18.7% is a positive sign, indicating a return to growth in current markets. The company's efforts to improve efficiency and reduce costs, particularly in the second half of 2023, have contributed to a decline in adjusted EBITDA loss to approximately $4 million, which is less than half of what was reported in the second quarter of 2023.

Looking ahead, the company is confident about its financial outlook, with revenue guidance of $174 million to $184 million for 2024, representing growth of 5% to 11%. This optimism is largely driven by the anticipated FDA approval of Motiva Implants in the United States, which is expected to significantly boost sales and profitability.

Regulatory Approval and Market Expansion

The FDA pre-approval inspection of Establishment Labs' manufacturing facility in Costa Rica, although resulting in three observations, is not expected to significantly impact the company's timeline for launch in the United States. The company remains confident that the final approval will be issued soon, given the receipt of an approvable letter and the satisfactory response to the observations. This entry into the US market, with its high average selling prices, is expected to be transformative for the company, paving the way for EBITDA and cash flow positivity.

The company's expansion into the US market is not limited to breast implants. Flora, the unique tissue expander, is also gaining traction, with a growing number of premier cancer centers in the US adopting the technology. The company's Mia Femtech, a minimally-invasive procedure for breast aesthetics, is also creating a new category, offering women an alternative to traditional breast augmentation. With 63 plastic surgeons now certified to provide the Mia experience, the company is confident about its growth prospects.

Challenges and Strategic Initiatives

Despite the positive outlook, the company faces challenges, particularly in the Brazilian market, which continues to suffer from softer underlying demand. The company is taking steps to strengthen its market position in Brazil while ensuring a cost base that reflects the current demand. The rest of Latin America is stabilizing at a slower pace than other regions, reflecting the broader challenges in the aesthetics market.

The company's strategic initiatives, including the expansion into China and the development of new products like Mia Femtech, are aimed at diversifying revenue streams and enhancing competitiveness. The company's market leadership positions in surrounding Asian countries provide a solid foundation for growth.

Investor and Shareholder Engagement

The call also provided insights into the company's engagement with key shareholders and investors. Their questions and concerns highlighted the importance of the FDA approval and the company's ability to differentiate itself in the market. The company's responses demonstrated a high level of transparency and confidence, underscoring its commitment to shareholder value.

Conclusion

The Establishment Labs' second quarter 2024 financial results call provided a comprehensive overview of the company's financial performance, strategic initiatives, and market outlook. Despite facing challenges, particularly in Latin America, the company remains optimistic about its future prospects, driven by the anticipated FDA approval and the launch of new products. The company's strategic initiatives, coupled with its market leadership positions, position it well for growth and profitability.