ESTA - Earnings call transcript Q3 2019 | Establishment Labs Holdings Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Establishment Labs' Third Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note, this conference is being recorded.

I will now turn the conference over to your host, Jeremy Feffer, Investor Relations. Sir, you may begin.

Jeremy Feffer

Jerry. you, Thank for you for on participating And -- call. today's thank everyone,

Juan the Gaeta, Quiros, from me Jose Chief company Officer. Renee Joining and are Chacon Officer; Chief Financial Executive

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

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

For review a call conference filed The on that discussion you on SEC. risk factors, this be the Form contains I encourage time-sensitive will later to the of report today this required broadcast, Except information with the circumstances company's accurate no live XXXX. date quarterly content any as XX-Q otherwise undertakes Labs or this of by Establishment to to call. XX, as revise obligation or after of statement update November the of events law, reflect date only

With my pleasure Jose the Chief Jose? the turn that said, to Executive Juan Juan Quiros. Chacon it's call company's Officer, over to

Juan Jose Chacon Quiros

Jeremy, and morning, Thank you, everyone. good

XXXX. continued During is made Implants, the this year, of increase of fifth record record revenue another of and global the consecutive XX% adoption over our third of possible same marks period $XX.X by million, quarter, the of performance. was quarter an This Motiva quarter

as drivers for revenue are innovative aesthetics important products a patients. capturing community safety new for strong outcomes the concern their accounts. support main the capture market company's implants breast and surgery offer the consistently and time has their reconstruction women and breast about differentiated plastic of At improved and allowed focused alternative and our With for on and patient of us safety growth drive share, to

the Our women's as main be to is our commitment transform and guiding we principle. health will industry, this continue paramount to

to Implants Motiva to superior its patient and continues Labs safety profile. add Establishment science data regarding

independent to also see verification, and an merits surgeons technology work increasing of both growth. the our proud number providing of contributes conferences publications our of their also are to We in and platform

momentum our the again, $XX million to in once range comfortable, $XX up million. to from a of our continued year are revenue $XX With $XX full QX, guidance range million, of prior million XXXX we to raising

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

Alongside were performance, was now of our breadth force Turning growth and Brazil QX in across The our specific direct by across growth Australia success and our direct impacted markets, double-digit Vietnam share performance. world. different markets. our driven of to the positively market our all underscore Europe and launch balanced drivers our in the of the of increased strong sales regions particularly

and third quarter for revenue total revenue Direct for the for market XX% the ending accounted XX% X months of XX. September

this that decline anticipated direct expected, the relative quarter, seasonally to an last by represents our in QX As is markets. softer driven fact

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

was the market, our strongest once During quarter, Brazil total year-to-date third XX.X% again revenue. generating of our

of year, new than entered plan Thailand. this markets X we earlier performing are are Taiwan and markets anticipated. These Additionally, distributor faster ahead ramping and

of one As aesthetic largest is the Asia. Thailand reminder, a breast markets in

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

comprehensive advanced we several the worldwide. progress continues the have work to regulatory Our smooth most towards of portfolio geographic expansion a of new current and with product make path In offerings. products, approval implants

for SmoothSilk product the submission month the our of tissue XXX(k) portfolio, announced In last expansion we expander. continuing anatomical

of our registration milestones tissue to and Mark quarter demonstrate filed end our our pipeline the are of for submissions at also important regulatory the for the commitment XXXX. global expander CE fourth breast These of We market. reconstruction

While a tissue breast products. a of of much used reconstruction our of is all Motiva product the total tissue adoption addressable by inclusion should market are of plastic by reconstruction, market the expander driven The sign part the Implants surgeons already in portfolio. advanced fuel being as for a breast expander of our in

tissue Our difference real is the industry. expander for a

that expander a a real undergo plastic board to shield and not use This of on our no only impact Smoothsilk magnets, and includes reduced with radiation therapy. enabling makes and creating oncologists, women's the expander with patients substantial this breast but tissue reconstruction. surgeons the safely difference product integrated be surface to will health MRI they innovation As have scanning only a the an will as alongside

Our intellectual property. incorporated into team technology RFID the existing our R&D product, new reinforcing strength our this of

hard work to Mía. on our augmentation continue We breast initiative, minimally invasive Motiva

carefully Japan a the before XXXX. sub-launch We're year, of scheduling clinical in cases with place the end to the planned in first take

market breast Class introduction competitor's Similar medical surgeries a regulatory associated around the agencies breast take breast breast believe expanders elevated the the minimally on tissue textured identify recall QX, minimally implants. lymphoma, September, action aesthetics. Notably, specialties, as type that implant of non-Hodgkin's a In augmentation to to the major cell implants the and grow polyurethane large in invasive worldwide we X may to lymphoma. to FDA a addressable rare due total of of textured anaplastic risk in bringing invasive a other world market and continue for

global the does time involve techniques. will have education. medical responsibly different to community, transitioning from transition implants surgical Textured is complete. the other, surgeon a believe smooth implants, and of And some which one we plastic smooth to For the this start take to

action, textured we expect using the continue for would using reaction into other initial As is to doctors implants, agencies in their available regulatory take quickly more many global move some implants but market. smooth to

more specifically, we our advanced and the implants education this around As provide accelerate. medical will smooth we transition smooth believe considerable implants world, to

to some we of we -- events sales growth. this released be While convened most factor a from a do its see the In see in continue of has yet our And you guidance to of pickup regulatory transition last believe draft their year, we FDA the as the did not come. our March. that in see this panel result moderate October, FDA advisory the while will

We in are in offerings full they our have in impact to doctors as should of actions all market. FDA markets. challenging portfolio remains support U.S. trial. these differentiation ongoing patients environment coverage, expect help Against regulatory their the negative on our media We clinical any and relative product available the negative to to our serve understand guidelines implants current and do the of this not

have strive our about taken we and to in in These surface opportunity surveillance and for regulatory of raised the our We this concerns confident global implants agencies, scientific unquestionably continue lead our safety Implants, and remain by as profile a our a technology. Motiva With to need development take industry, through another monitor and the and we medical demonstrate surgeons both be research education can efforts. about substantive our product the regulatory prospects of through provide the to post-market unique further long-term patients vigilantly these and the our concerns the details we with part industry to believe innovation metrics. product solution growth

we continue for patent our notice we surface a of In With mind, announced covering intellectual received that technology. that unique application allowance property we strengthen around key U.S. the in to a September, implant Motiva Implants.

develop We an in the patent continue applications innovation. and our to protect file effort around world to

We are for Motiva clinical progressing the with FDA trial implants.

trial. of we in During that the cohorts our the aesthetic surgeries last all call, completed we announced

new With for market, into market an a the U.S. constituting important Establishment on entering half is Labs the of opportunity. this world roughly market dollar basis,

to we in revision enrollment continue As a cohort, and to date, cohort, and in reconstruction completed we the all augmentation surgeries make reminder, progress primary all completed surgeries augmentation the have surgeries cohorts. the in with

and enrollment are We have cohort. second over over reconstruction XX% achieved revision pleased the XX% in stage to in the cohort enrollment very reconstruction

We progress to us on the one practical centers closer cohort enrolling single-stage reconstruction on some approval for CMS a reconstruction. approval amendment, FDA single-stage continue step important recently an to getting and from focused make received required the

strategy were to of and the for This on indications. a line augmentation keeps submission reconstruction track. pursue that time FDA submission complete the of the primary light ahead bifurcation for to the we our aesthetic which intend of we cohorts, fact a the to in the In revision have indications implemented PMA able submission augmentation we package

together and raise World aesthetic the breast Annual technology. To education awareness the and of on Symposium industry Lago from brings around world of and Motiva Di regarding discuss experts safety in surgical hundreds the implant sponsored This and techniques advantages of event to evolution the Implants, annual implants Fifth Garda, Italy. surgeons ergonomic we

Motiva. institutions, premier from to a interest of speaks record in attendees, growing top world's With scientists the some XXX this event rapidly including the

and an best breast the the this Lab scientists differentiation Langer research on update of surface. regarding SmoothSilk the some MIT, at me, For of our surface were of the conference giving year biocompatibility from moments implant implant

Surgeons providing patients. quality center in and from X life and of to the in in that including safety a with severity Switzerland, different countries significant capsular of Motiva reduction X Implants of improvement K-Series from up their with reconstruction, in breast years of information surgeries an the Europe delivering contracture demonstrate percentage

for and us industry use of planning Divina Plastic of Educational are to to surgeons minimal these on Implants, from breast next using giving understand with the surgeons' gatherings event. of algorithms suite. augmentation world, Implants the year Motiva forum grafting Motiva technology the fat the advanced XD our better already with we important scars, around lectures use like surgical in with and Motiva our an Implants looking ahead are experiences hybrid

with place quarter events across are education the alone. more conducting world, taking medical We than many XX this

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

Renee Gaeta

you, Juan Jose. Thank

into from record are stated revenue. we quarter again the report our QX, second Juan earlier, As carried Jose and pleased to momentum

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

million, revenue we third quarter over million the for represents total was increase reported XX% a $XX.X QX which $XX.X XXXX. of in the Our

growth double-digit We markets. $XX our million to year-over-year. up Alongside was be in $XX a to Jose million Juan revenues previous mentioned, growth revenue represents direct anticipate year XX% full to markets. by $XX than lower revenue range our strong this The performance from As XXXX guidance million. for $XX more of our in quarter of in of revised million growth end guidance our of driven distributor

required alongside This process QX. maintenance planned efficiencies implementation. in a reflects chain higher shutdown complete our a product distribution every This in guidance our our supply controls fourth growth. expected on shutdown to happened year planned in annual delivery ERP a that allows full critical revised the to year the we and addition milestone manufacturing quarter Our as in support for and perform we year, system

on based mention to a And achieving and we for a major achieve our like $XXX milestone to is milestone date, would performance million to that company I exceed that in run revenue expect XXXX. medtech any rate.

profit Gross last or $XX.X third compares the for XX% the revenue, is similar quarter to XX.X% quarter and of revenues was to million XXXX. third quarter favorably of which

The percentage sequential by increased margin increase was driven in primarily gross volume.

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

As the inventory required, this the impact sell-through remaining we of amortization dissipates.

to of third an and the future can XX.X% systems excellence ensure and the million ahead. investment quarter model, were Total organization quarter by to growth across our XX.X we we the our particular, $XX.X of with increase in continued are business for -- In driven of implement This operating current XXXX. compared third for scale continue increase our as that was million, building in expenses company efficiencies to $XX the XXXX our growth.

ERP is we It our our our to a exceptional For system with using scalability closer to them are with comprehensive providing across bring service global key digital system a upgrade tools. advanced and example, investment will us operations. multiyear to customers, SAP, our undertaking

and The employees, XX.X% in legal was a of increased or a consulting million. increase to in $X.X increase personnel SG&A sales hiring million in increase $X.X costs, primarily in additional due costs a marketing of increased expense $XXX,XXX as and million $X.X SG&A $XX.X $XXX,XXX expenses. commissions million marketing and administrative result and related sales, to

XX XX Our year from employees the contractors force driven period, to the new and direct ago additions grown by market from XXXX. has sales in QX

added accretive our they revenue have the expense, markets of course operations, are our margin. While SG&A they have to direct normal our their contributed to and our gross to

educate of XXXX the nuances example events are surgical plastic of in world our is smooth an to we around investment with the many advanced Another important organizing surgeons on educational implants. the them technique

plastic We surgery loyal will improve these continue to the and to well outcomes those community. make satisfaction investments patient with as relationships as creating

The States. million. to related the and Our continues primarily our development XX% to of research our United $X.X clinical to cornerstone portfolio. increased in of in be FDA the Research and increase expenses a due trial R&D and growth development expenses is product future cost

both and to use the high capitalize of an on a where necessary term, long scrutiny, With short level are capital our we eye and on adjustments the we with growth. evaluate constantly of making

is cash in beyond. Our such today, that these and trial, make growth us product a is burn competitive and today level the are creates global brand become as investment reduce confident management, a leader with differentiated by we deliberate and of portfolio that both should XXXX steps to highly The will increase advantage. U.S. market clinical long-term allow and we a investments a and strategy

XXXX in scale. net same quarter loss highs investments, continue from of XXXX begin million $X.X these of should income in $XX.X XXXX. as third million the burn current as achieves business compared was the its we to As for see to for down Net cash our period come we

third a of was XXXX $XX.X net As income million. reminder, debt-related by of on the fair noncash effected derivative value quarter the of gain

position the at XXXX. of million end held XX, remains balance strong. cash a Our of $XX.X cash We September

used as We operations. to items rate the insurance average that occur due this know such seasonal our that During our found XXXX, we renewals than is part slightly $XX.X to quarter, in for million quarterly July. in higher run

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

Juan Jose Chacon Quiros

Renee. Thanks,

of performance, industry new environment, emerging and setting momentum by to commitment women's the aesthetics on standards We to pleased advantage the market continue the taking and by market. to and health, work continue of lead be regulatory a safety with opportunities. we this complicated current very maintaining reconstruction in middle In innovation breast we'll our a and work to through

safety position result unmatched industry improved is that aesthetic by in and and take technologies a commanding long-term bringing goal in to Our our outcomes. innovation superior

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

Operator

Instructions]. [Operator

from Denhoy The is question from first Raj Jefferies.

Rajbir Denhoy

and Maybe the I light. right? on some maybe that made sessions been you having and coming the bit things, training meetings I around something to training, could comments start a is of is, your So necessity think, to of

curious any about and demand the the implants? learn pace techniques seeing the for Are of want of pace physicians for and Motiva in I'm learn Implants to about training training. the acceleration So that you about

Juan Jose Chacon Quiros

these they think device Yes, hands have for question. used that things acquire next actually, important you, the first natural of we these amount into. can the process devices surgeons of to do of accounts. their think. to were Raj, get going a smooth by the the Thank logical of days in a in move think highly textured that it. we to whatever of devices, market most most the And the impulse mean But Allergan texture is most in reality, to be -- that, get are trained substantial this thing that have And can decades a new is which one for international never I and in loses you the use their that to because that understand recall, I would people impulse,

of the Some the devices old of have -- texture those really them do same it, potential is which see complications. initially reality that

our is Implants, job the science behind train So into to them techniques. into new the surgical Motiva

so we interest more many quarter. was your more think conducting that why are that's quarter, seeing it I we a are question, last mean XX. lot to So I every than events

implants. are are that their have early. put in coming do because Christmas their is This textured they and them me. this they the And on in how what more use we're do know then don't us scientific situation And currently being that I appropriately done. to by least have shutdown to quarter, want work patients patients if although smooth are XX, don't going doing contact we the at saying because we we should also surgeons most see implants put of the societies

the implants. use to smooth trainings surgeons most plastic advanced are the of doing on We of

but hard process us very to results. excellent immediate. happy are with involved these see more to aesthetic years for with we but surgeons not takes medical we the with And it yields this and surgeons accounts. we that and a more that come, So in long-term relationships education, our do hope work is It time, to get is to see safety

Rajbir Denhoy

any to regulatory And Are as any having while the mentioned demand or the you in helpful. slowdown that's have breast No, issues impact for your maybe any a textured you in that, procedures? seen implants. numbers, in-patient And market? follow-up not, seeing but obviously, with -- implant it's you

Juan Jose Chacon Quiros

by any to concern We have been What worldwide. have we seen able slowdown. increased patients to date not is quantify

the different for many are chatter giving, check concern. the And is and that there's social advocates concern. you of on If patient course, media there messages reason

to are I think they be right concerned.

one look it's we quarter. slowdown quantify But So for have not date, to every been market. significant to we that the of able things the any in

Rajbir Denhoy

well. as And just helpful last That's one maybe one.

the regulatory you the I are in for Will You that expander question what getting your -- Implants States Have approved? launch filing the you to is the United prior Motiva the United for States. the guess, plans, in tissue mentioned it product?

Juan Jose Chacon Quiros

Yes. This, of this of to is a of for take a Implants. lightly. Labs course, market the is ahead in decision launch Establishment U.S. But cannot the we that be Motiva opportunity great

bringing going in breast to to looking when certainly a the we as that. it from be would the a important final we from of timing get decision me significant very are But I we that to options opportunity closer proper the see U.S. do and the company. the do of investments timing launch for the response FDA the tissue be for one have at. time reconstruction, ahead of say are market We products would expanders and could

Rajbir Denhoy

on good And a congratulations helpful. quarter. That's

Juan Jose Chacon Quiros

Thank you.

Operator

open? Cooley, from is Inc. Stephens Mr. Cooley, The is your Chris next question microphone

Christopher Cooley

hear you me I'm sorry. now? Can

Operator

you. hear can We

Christopher Cooley

back then get queue. for Okay. I'll just Maybe two Congratulations. in me

touched about on at only choice. the Following but what just the outset. about benefits bit talk Could also generally market, end consumer the about a how little selection Motiva you Raj on their not you there Implant, the the educate just to more of

work European positive the appreciated information forth. from we been patients of recent feedback done only survey that was received putting company not the there's our that also Now but had some practitioners we

a -- to about and clinical drive time, quick that so And and about strike follow-up. have about Then how you surge? information, talk the little at same I the well-trained skilled balance a bit

Juan Jose Chacon Quiros

you, Yes. Chris. Thank

is education patient us, For paramount.

We have But the direct cannot same of at we patients. regarding that Motiva the we rules health effectiveness with are because put care meaningful the to time, in be compliance contact in balance the can safety communications Implants international market. and

So it is to understand between products. for Motiva beginning substantial are is drivers patients that the of and key there are the us one legacy that differences Implants

that of that educate the example one of we part all far, is are market. doing about by we the that media presence So the largest have, in work social brands of on it. is population international And that the patient to

time At the this regulatory complex of environment.

we We news a are putting out what campaign. call good

channels. So in digital different media social and

to help complications trying the and them complications. rates, We to the the about those the balanced messages women can all contracture their of of qualities technology. can that this positive low-inflammatory innovate have commitment terms about implants and industry surface in to to do that out reducing potential our the work we are it, be understanding putting done Motiva how capsular reduce of and What we breast get with

these these commitment asking beyond. that breast surgeons using about the why time, At this And see why can bringing that that the of you surgeons am do asking to do complications themselves, that's we in patients the -- surgeons medical to having you they a Motiva of in to work are I patients in have see all without not same of then have and Motiva. solution have part all a augmentation they newspapers so quality education that who terms their to serve population Motiva,

Christopher Cooley

my That's Renee. just very helpful. as And then maybe follow-on for

and gross burn your leverage just P&L the expectations can to color scale XXXX. marketing bit maybe on you further a for you Is sales recent as middle margin little reducing continue in hires. the us function to the If getting more some that around of a leverage give

be Just cash extent just magnitude, over going to that yet. order XXXX And help is year? be don't how think of what in have us the that about guidance you we unless reduction to reduction But the thinking about or should burn. you driving the that course can, maybe of

Renee Gaeta

Thanks question. Chris. for Sure, the Yes.

both I those think a of combination it's of things.

as operating to XXXX be well markets to from improvement they the on and line and P&L the in going But to going in them it's expense optimization year the we expect do on top and continue direct of course, seeing side. course, especially gross growth perform come our beyond. Of also as margins, as revenue the current have of to

you're making cash on will this I'm now of for So top making tell year. the critical we will investments burn leverage I right will improvements down. we cash today year the explicit you XXXX. expect But allow we're to guidance going are leverage us for for right, that year help that provide for growth next that burn not with And for to that come next the

Christopher Cooley

Understood. Congrats on quarter. great a

Renee Gaeta

Thank you.

Operator

Instructions]. [Operator

We Josh Cowen Company. have from question a and Jennings,

Joshua Jennings

I Motiva of to Congratulations on Labs know there, been evolving just that presentations presented. potential the in data. on and the I on resonated? very the record that's another And early, as table? the ergonomic how that on science has I since the from particularly you how's customers some from and the data occurred on the MIT to do put that say some it's that want now as to just symposium the start off -- surgeon material but safety wanted But well quarter. market was benefits using been biocompatibility has it response biocompatibility plan been

Juan Jose Chacon Quiros

technology. the rates. Professor set And very collaboration the complication a at work the that effect a with proven it Langer has team. the low-inflammatory have his highlights is ergonomic have that fundamental of information and this Yes, work was important Thank And at we on you, And Josh. symposium. surface can MIT given new their and a this and

surface we is that and to time how have with Implants. is describes else explain this And technology, difference the our of cells. interaction architecture and with at first technology surface their Motiva trying the real scientific a its in a it a now industry, is So elicit everyone proof positive where something

is that subject. is significance this at explain so going different we I what in to would the can materials of in podium. the it it plastic the explaining of happen journal. complex go a what through publication And peer-reviewed we this So to a And Having but definitely, surgery importance think doing definitely are MIT experts most that is point, the of community, of our data. forward, we final information of as the the be more important is working that

Joshua Jennings

Great. also in first little you specifically, there bit can minimally share minimally today? and not Japan, women can position wanted expand opportunity in help approach a Mía. the then in soft about I the I just invasive approach or And follow-up maybe what Japan? is more And guess, just launch your globally? talk invasive on and the Japan whether frame in And XXXX. The in to

Juan Jose Chacon Quiros

Thank you.

have been in XXXX. in since We now control market Japanese present over of we Japan. And the breast market aesthetics XX% in the

minimally type invasive Union, States in do augmentation. the women big but of the this breast want countries, implants, while not hydrogels including of the done acid. a but for injection and European done augmentation That is it it the Japanese Japan procedure is So by total scars. in done significant, because is like United hyaluronic most not They market is with XX% of banned is breast want

have total every -- implant -- of with implants the approximate that breast you year have implanted XX,XXX we are XX%. implants women So breast silicone -- being

market, or hydrogels. X,XXX you are being So hyaluronic have are with women acid implanted the who the other share who lion of

to So to to industry. augmentation. breast how absolutely say, is use is slowly silicone time. take is would first surgeons I to this this our this This novel invasive Japanese implant new on minimally train objective And going

going current slow is So we And it time, it, hyaluronic in we Europe is that because part are are and completely other understand augmentation. augmentation, have for a in they invasive that, to keen want are to breast size which at acid so same patient, to and than from that breast have or of the other about other breast we that learn when customers best why or way there's are is It we in differentiated a further a it normally we is or market who talk to procedure to not of we right. size this we to go be of than go talk that the But to hydrogels new group safer or the to the China, get going minimally use augmentation. the is not to what countries move United like to looking a Asia, women Korea this and up a looking is breast X shape considered that. States, to

not also the that So grow we do think but Japan worldwide. this see We potential market, in a to lot only of this. the potential in has

going see So beyond accelerate in in because will and we very XXXX of in it you other before us geographies. slow XXXX

Operator

turn to will We question-and-answer session. now the have Juan of over reached the closing Jose I for the remarks. back end call

Juan Jose Chacon Quiros

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

Operator

This concludes conference. today's

time. your this Thank you for participation, good day. may a You your at disconnect and lines have

Establishment Labs (ESTA) 12 Nov 192019 Q3 Earnings call transcript