ESTA - Earnings call transcript Q2 2019 | Establishment Labs Holdings Inc.

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Operator

Good morning. Welcome to Establishment Labs Second Quarter 2019 Earnings Call. At this time, all participants will be on mute. At the end of this call, we will open the lines for a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s call is being recorded.

the to turn LifeSci Feffer now Advisors. will call Jeremy over of I go Please ahead.

Jeremy Feffer

and everyone thank today's Jimmy, you, Thank you, call. for on participating

Executive Joining José Chief company the Officer. Officer; Chief Financial me Gaeta, and are Renee from Chacón-Quirós, Juan

for financial caution plans laws. Before made development that on These product will forward-looking include by like meaning and the Labs, call comments statements this statements listeners within we outlook, during of sales. would company's begin, include I timing and to the management federal and Establishment securities

These involve actual statements material forward-looking and risks the results and company's materially. uncertainties may differ

discussion encourage today company's that the risk the a For Form be will of factors, with you to XX-Q on Report I SEC. review later filed Quarterly

of XXXX. The broadcast no or this update content the statement of as conference Except obligation contains otherwise any this Establishment reflect as date to August to the live call Labs XX, time-sensitive by only required date call. events law, of or of undertakes this after revise accurate circumstances information

that Chacón-Quirós. call company's Juan over Officer, to Chief Executive it to José turn the is With the my pleasure said,

Juan José Chacón-Quirós

Thank you, good Jeremy, everyone. and morning,

that share, period by During XXXX. and performance consistently believe safety this quarter outcomes aesthetics as improved allowed we us With company’s Motiva revenue same was the the on the and force for revenue This million, sales drive patient’s direct drivers capturing Europe increase growth. the possible has of success over and the was of market second Brazil. across singular reconstruction main strong record an breast made continued our global high and focus year, Implants our XX.X% $XX.X of of adoption of

prior the guidance and ongoing body our the million, XXXX of to of will safety Implants’ regarding further range transformational clinical continued trial that million. U.S. our the momentum to million to up our aspects $XX to add of $XX million raising $XX demonstrate technology. revenue confident unique QX, comfortable are our range evidence $XX to are continue guidance from in we Motiva FDA growing We full-year With we a of profile

our to very conviction We a XXXX XX% with from that growth XXXX. full-year achieve and year-over-year pleased minimum this are reflects full-year growth of sales we our guidance will trajectory

have direct share As driven America, impacted Latin Middle regions by Brazil positively seen previous double Africa increased The in quarters, our growth sales we East in Europe across of across was all highlighted Pacific. and forces world, of and market our growth performance. the launch Asia digit by our Europe,

our Furthermore, for quarter, of revenue of more to with year-to-date total accounted total XX.X% strongest be market XX% total market For direct again worldwide the our than revenue. second Brazil revenue. continues our

percentage as that other our Our expectation in revenue total expand over revenue territories. the will grow we as of to our teams continue long-term, direct market particularly sales direct is a

invest our sales continue to expect direct contractors support of to adding We teams the end to at continue XX to this our to in XX quarter, resources and global successful first market the growth. up strategy, and expanding from employees

markets distributor two Taiwan the Motiva during Thailand, markets we launched key aesthetic quarter, Asia. new both Additionally, Implants in and breast second in

grow and are breast long-term into Implants our we and growth of strategy XX commercially key a portfolio countries. continue part will global standard Motiva Geographic the expansion available is now to and differentiated in aesthetics our reconstruction. product

execute Lisa joined of our and she during a am wealth has board brings level. Directors continue the Gersh. of appointment experience a to executive with growth that Board our strengthened of member. pleased Lisa us both we and an as look as quarter forward her will the I also contribution We to

global made portfolio. progress expansion regulatory our of product regulatory our and pipeline, product approvals to we with Turning additional and

enrollment Last cohorts in in Implants. cohort. progressing all date, clinical we completed of primary completed trial the trial. FDA the quarter, announced surgeries U.S. the are with Motiva aesthetic for augmentation the we that We To we have

revision surgeries augmentation completed in all have cohort. We the

progress We make enrollment the continue to in with reconstruction cohorts.

pursue As while bifurcation for we submission reconstruction the pursuing for to a to packaged that are keeps submission FDA strategy indication on timeline approval aesthetic the result, our allows indication sooner, us the implementing the separately. a This PMA track. of

the front, coverage regulatory With less was On outlets. and regulatory no QX. QX busy their media actions global than by

an implants. Health plans suspended Implant-Associated alert. Large of Breast textured competitors’ safety Administration, a in Goods for July, their BIA-ALCL. breast In for Australia’s implants lymphoma. license of Canada review rare A After Lymphoma, our proposed Anaplastic TGA Similarly, major Therapeutic Cell had May, increased found safety type non-hodgkin's the risk

Following also its may [recall]. in a review of that textured result breast implants,

The associated continue textured we safety due coverage, to challenging silicone on alert alert similar implants. issue implants Against a breast certain environment a the this be U.S. negative global implants, all with also recent recall major bodies. this FDA And international from of regulatory the competitor textured on recently BIA-ALCL voluntary to news regulatory risks. to issued promoted breast safety by related bans and unaffected a

we safety While post-market Implants. are products of with believe profile we surveillance, monitor our further Motiva developments confirmation to continue of these [our] vigilantly the unique

seeing confident positive While team we reflect management earnings short-term a result, is about our are growth prospects. long-term entire the

experiences better and to from in shaping and over techniques Renee and like Ergonomic Implants meeting forum understand This will another annual attendees Italy. October to World Annual globe Implants to We Motiva look aesthetics reconstruction. of financials, Before XXX we industry brings The technologies hosting future to faculty gatherings these discuss forward turning the certain early breast us productive important the across the breast XX year. Xth that the Gardone, in review surgery. are be aesthetics like and an with call reconstructive mention to the the this event on in Symposium for over I together to

Renee like I in turn the that, discuss call to Renee? to the With details. financials over to

Renee Gaeta

José. Juan you, Thank

again pleased revenues. report As are Juan José the QX earlier, first record from once stated to our into and momentum carried we quarter

press our file our which XX-Q, to You financials plan Form our can release details on additional find today. second and earnings later we in quarter

Our XXXX. quarter of was $XX.X the the second total revenues for quarter a which represents XX.X% over second million, increase

again by compares gross in million with in XX.X% the driven of for all direct and Gross XXXX. by markets or revenues, The percentage average growth and the geographies. in and XX% volumes our was quarter of sequential was revenues favorably our by second increased in-line organic $XX growth higher key market improved selling which our of last European to of our strategy for profit Revenue and attributable average second to for across Brazil selling prices continued increase was direct-to-market. quarter quarter prices quarter margin driven second

quarters. percentage X.X% recorded the value in during to from due by amortization negatively acquisitions to a gross was asset quarter, impacted the distributors fair our profit from Our of inventory recent

inventory, this sales the this an to increase and of XX.X%, of expansion dissipate. required quarter second amortization XXXX, impact company, direct growth. markets the this investment sales sell-through compared we for across total XXXX into expenses The for will by operating – second quarter continued As our acquired our systems the million, European driven related $XX.X were including of the supporting

expenses. of XX.X% stock to was in consulting a in in including commissions SG&A increase increase employees, cost to a a and and million fees, increase hiring million. result administrative and sales sales, $X.X additional expenses due a increase a million The $XX.X personal associated sales $X.X marketing increased million marketing $XXX,XXX primarily expense, increase $X.X in compensation administrative as in SG&A $X.X or million

consisting increase research $XXX,XXX to in The for and in development increase research and was million. FDA and of personal expenditures to approximately $X.X total development increase management increased to fees the Our primarily U.S. and set-up X% and clinical of third-party trial. research in related our primarily $X trial, due development clinical million

the in in million due operations in the XXXX, the Net from quarter period required our for an second increase support same $X to loss our expected market million, growth was demand. the to increase $X.X for

of the remains cash Our XX, XXXX. of balance June as cash position $XX.X million held strong. We

to prudently continue throughout manage current trajectory. cash to drive maintain efficiencies and We our our providing necessary growth continuously look while to support the organizations, our

have considered announced Asset have that revised into long that June, with policy corporate entered we a in in had in we credit have reserves Mandarin with and – We good mind with asset to Management. agreement cash a

maturity X%. interest plus XX, capacity rate pleased additional the $XX from report under to agreement an from We also to reduces revised million XXXX. The LIBOR the loans were drew plus agreement this September the extends down X% On XX X% revised - XX, this LIBOR August to borrowing provides revised LIBOR down additional that for all became that plus available on agreement. and we million

original million range million. mentioned, we now to in be from full-year As $XX $XX increase an provided the last of guidance $XX Juan quarter anticipate to that we to XXXX $XX revenues million, José million our of the

for José Juan I turn Juan will over remarks. to the José? back call concluding now some

Juan José Chacón-Quirós

you, Thank Renee.

middle in standards this pleased aesthetics commitment a With lead the with environment, reconstruction we of In year of by we breast innovation, we’ll new to to now safety women’s are regulatory the on market complete, of very our and opportunities. performance the maintaining our taking the to momentum to industry by continue advantage aiming the half first and complicated are setting and markets. health, work

model industry into this markets, aesthetics existing into markets, by launch in it your leadership expanding and worth and improved geographies repeating, is organic and where superior better last our match in outcomes. driving but I surgeons position product we innovative technologies direct a growth on that entering new serve Our new and and focused quarter, result translate said in bringing reconstruction and to goal our sales aesthetic on commanding our this can new continuing to long-term patients, in is innovation laser breast

full-year our of for this sales and alike. quarter successfully record Our shareholders the are that our executing customers, guidance patients, revenue our strategies benefit we and demonstrate business increased

over for call the the hand Q&A. operator will I that, With to the

Operator

question Instructions] of Thank [Operator Jefferies. comes Our first Denhoy Raj you.

now open. line Your is

Raj Denhoy

market, of then that good on And guess some given the shifting the the with competitive terms the know market very in are anything quarter, for are in could front? whether you Hi, quarter, obviously some are demand more I in there seeing in secondly, you the so of Maybe shifting are procedures, in or Implants out terms you the couple I that result entertaining from scrutiny questions doctors one, whether on idea activity anything seeing front. a of of you there? off Motiva conversations putting broader is anything can you of you regulatory morning. the seen there start comments to mean, in but women other strong you offer just I noted have

Juan José Chacón-Quirós

thank Yes, Raj. you

that to the surface of via I technology produce confirmation, only regulatory a for. with is company the everything think is improves environment what’s Remember, were that confirmation of stands we Motiva type foresight years specific interesting ago, that is a it very the compatibility. current

Our been decade consistent and for a message with resonates surgeons that has worldwide.

trouble having we are idea better and themselves of are competitors outcomes. the explaining aesthetic safety While their technology our to many understand of our consistently improving pushing technologies, and

improved the think I be all we across implants Motiva is those but prudent seeing I need time, numbers that, same think what is yes, adoption to what are With we about geographies, of heard new have concerns at in a market going the in voice they we future. is on. in turn certain volumes and I the large down accounts the cycle be mean, negative may their the in that

we the put been see to future. we date have to move in a a a number this actually to However, just being or trend from to able that comment this not will

another we We from is Implant are in markets this for the doing our in events that’s why rest to and direct it and year and main Motiva about distributor of careful work which continue we to education, in both manufacturer the reason being markets. surgeons why medical planned have very many move expect

our as and as be social with will focus, well message. of women main digital continuing to that through So, about communicate our media safety one

Raj Denhoy

year ask and just bit you a expander, Yes, And June for show your as pipeline to that’s can kind in I enough up invasive work, second helpful. tissue us in open technology for product? be were said you, tissue the as question, updates year well the timelines back maybe is and any that in technologies? my are States launched minimally the expander, the outside particularly I little think the had could reasonable still potentially United you timing those States, terms there United this of on next those

Juan José Chacón-Quirós

with expander. [Flora] our filed likely in product the I to happen think the we approval obtain year tissue in most of regulatory this by what had we for authorities international had said is launch The market. differentiated that, will XXXX end the

U.S. are timelines We looking at the still in launching for

bring have the XXXX. through this is think added I ergonomics point also will also most thing in at revenue product a that were an to the we filings important implants believe and that regulatory that’s we going that,

products, of indication Japan on the promising taking operations of new we of the with first and suite at for track place continue our associated make tuning With invasive we end minimally our are fine to this progress that in the techniques year. in

Raj Denhoy

That’s great. you. Thank

Juan José Chacón-Quirós

you. Thank

Operator

our Josh from And you. question Cowen. next Thank comes Jennings with

line is Your open. now

Josh Jennings

Thanks on the to Hi, Japan hurdles questions details share? the and cleared congratulations And initial good revenue up of regulatory implants minimally just or branded left any from perspective a on be another year quarter. in in morning. surgery. those terms follow that was are just, later hoping you I taking commercial before for record this can perspective what maybe invasive

Juan José Chacón-Quirós

Yes. Thank you, George.

is think is I important validated. finalized, that and the thing fully itself the implant breast most

have will deadlines that So, we the set us that gives us we for Japan. comfort in meet that

technology new is most one point, techniques to breast a completely, of work the at on is that minimally human. the it’s side the introduce implant in possible makes a think this technical I taking on so place the meaning side indication a this

think that to minimally I work, of our in negative that important renewed very could tuning. the be it’s new invasive, of see is continue new that the breast one we transform, in procedure interest we industry. This aesthetics So, right now, sources cycle fine that bound

Josh Jennings

guess XXXX? if what’s ask Great. for was partner did four China you in sorry terms Sorry, question into perspective lastly, And from talk potential getting was in wondering actually. hear I just I repeat needed you the But question, you do of here. One. that’s could And about regulatory Two, But a about hoping And just then about to be need layered opportunity? in a three-tiered China the opportunity. I could them. I’ll you distribution there. China? that’s

perspective; XXXX? taking a just partner; questions. Again regulatory a from and Sorry for about distribution that. in need Thanks one, China two, the needed opportunity; you be you can what’s the in

Juan José Chacón-Quirós

you. Thank

year. that, was one higher prices at are of of XXX,XXX implant the there promising over most than worldwide. in is breast per It And China markets said China average getting selling So, women most breast the is augmentation world. that

So, great for opportunity this of creates course a us.

quite time the with some We now. that regulatory have for going a Chinese are with partner the FDA. we And had through hurdles partner

of timeline beginning market a of XXXX that the or brings XXXX. have end towards We to us

to So, we are make there be hard working timeline. able to with our partners that

of I may revenue are think the we establishment it in labs. Chinese important that for once we see market, an as source

as but closer gain when confident will get quarter that to will we launching be the are So, able will we there. we be we exact to regulatory approval, you update we

Josh Jennings

Great. Thanks, again.

Operator

Thank question you. And Jacob from our next comes Hughes Fargo. with Wells

now is line open. Your

Jacob Hughes

on Nice Hi, question you good quarter. do the for strategy, expect the morning. in a I after acceleration aesthetic cohorts bifurcation bifurcation? had the the filing just quick the

Juan José Chacón-Quirós

be cohorts. is aesthetic What that our us not timeline over would we bifurcation to allow with the the expect

proposed expect already. don’t timeline that seen an So, of in you’ve be the that improvement to terms

I think it market. strategy to is our timeline our solidify to

Jacob Hughes

that I and you mean fund expect to secondly balance burn then do [indiscernible] facility, cash comment on the And rate Okay. on the through? the can when and cash you you

Renee Gaeta

draw believe have performed cash with that right this that forward-looking we’re we're burn. with quarters our especially healthy over that can additional that to the have a definitely not look on in We forward puts the now so balance but we a not cash sheet over we position and concern multiple time yesterday. course on information, At provide guidance balance going comfortable and flow sheet of cash Yes. the

Jacob Hughes

Okay. Thank you very much.

Operator

Stephens. Thank The next comes Cooley from you. question Chris [Operator Instructions] with

open. is now line Your

Chris Cooley

got of up, in capacity are think Good last and you into morning Renee I also us If and congratulations today update regards what just capital ramping maybe on type the can quarter. from about see where follow-up. of working additional help just may, just you as that other help a your current balance capacity opportunities could going where standpoint build are I've following questions, to up you initial line you quick record these support maybe markets? these you today, us as growth you inventory just one And that

Renee Gaeta

Chris, because capturing the and support on burn focused levels definitely marketplace which inventory looking at the opportunity the we’ve that are across we we’re share looking Yes, have that sufficient definitely at market great definitely that’s unprecedent, sure got a that of to globe. cash making sort in right now, and question is that

hyper management. been to we’ve focused So, inventory

I run are but last our that started prior this in think confident quarters. announcements ability levels rate future the November, and inventory plan we even to with the to at very capacity our out forecast and

Chris Cooley

Appreciate that additional color and may. J.J. if I

guess Brazil, you a to pricing that’s a in environment portion that about one in those are a those particular a to us talk increase Just kind of able price to just and may the think markets, realize premium the Really to Could assumption, an local for more seeing practices increase absorb their able [Indian incorrect are growth those message how rates price company's practices were out just in some their is peers? little so is marketplace] how relative the offset or that direct that’s playing that market this impressed help sensitive going ASP but them area. have helps the you about you into you. ASP of bit I in in Thank and be of much.

Juan José Chacón-Quirós

Chris. you, Thank

our since it I XXXX. I before plastic importance is all over to think this the of consistent and surgeons messaging mentioned

you industry coming to the importance we’ve of of nine telling when and of been many surgeons plastic years are So, in us they partner. last trusted over now our the them our are safety saying now

competitors. our than One our are prices of most higher the that things they understand of is

fair. we that value, done value to of they innovation has many them that that communicate have that agree work the have that with to we being women and all understand innovation the So, done, all

still making choices, you in factor also breast safety where price is aesthetics a that have certain so they understanding that. and women Brazil sensitivity, like their important reconstruction, understand are markets in So, very of degree

gain to be healthy. we do seeing that say how share. want than would is pricing, as selected but increase that average you price what our want We remain prices grow to market very in selling we course, total markets thoughtful are to our more I direct continue Of about a we

Chris Cooley

Understood. Congratulations again the quarter. great on

Juan José Chacón-Quirós

Chris. you, Thank

Operator

closing this is for the all over the José turn have Thank And questions will to we you. now for call any back Chacón-Quirós Juan time I today. remarks.

Juan José Chacón-Quirós

for providing very today's forward We Thank in update us look November. on you everyone day. to joining quarterly wish a earnings We you next our call. you good

Operator

for you Everyone, This may Ladies your and and day. a great have all today's program conference. participation on conclude you thank gentlemen, your disconnect. does

Establishment Labs (ESTA) 13 Aug 192019 Q2 Earnings call transcript