Establishment Labs Holdings Inc. 2026 Q3 Earnings Call

Please go ahead. Thank you, operator, and thank you everyone for joining us.

With me today is Peter Caldini, our Chief Executive Officer, and Sandra Harris, our Chief Financial 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 meaning of federal securities law. These include statements of Establishment Labs's 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 a discussion of the principal risk factors and uncertainties that may affect our performance or cause actual results to differ materially from these statements, I encourage you to review our most recent annual and quarterly reports on Form 10-K and Form 10-Q, as well as other SEC filings, which are available on our website at establishmentlabs.com. I would 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 EBITDA, which we disclose on an adjusted EBITDA basis. 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, October 29, 2026.

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.

Good morning, and thank you for joining us. Q3 was another strong quarter for Establishment Labs as we gained market share and expanded the breast aesthetics category through innovation. Q3 revenue was $72 million, an increase of 33.9% year-over-year, driven by U.S. market share gains and growth across our OUS business. Adjusted EBITDA increased to $6.4 million from $1.2 million a year ago, representing an 8.9% adjusted EBITDA margin and reflecting increasing operating leverage as we scale. Q3 marks our first quarter of positive free cash flow, a major milestone, and we are looking forward to our first year of positive free cash flow in 2027. Our U.S. business generated $26 million in revenue, up 119% year-over-year. Revenue outside the United States increased 9.7% to $46 million. Both businesses contributed to our growth, demonstrating momentum across our global operations.

Our minimally invasive platform is an important growth driver, generating approximately $9 million in third quarter revenue, an increase of 124% year-over-year, fueled by our U.S. expansion. Sequentially, revenue was lower, reflecting normal summer seasonality in our OUS direct markets. Minimally invasive represented approximately 15% of our year-to-date revenue, with the U.S. contributing nearly half of the platform's third-quarter revenue, reflecting its growing adoption. We now expect minimally invasive revenue to exceed $40 million for the full year, up from our previous guidance of more than $35 million. We achieved an important financial milestone in the third quarter, generating positive free cash flow for the first time in our company's history. Operating cash flow was $7.7 million, and free cash flow was $5.1 million. This is a significant achievement, particularly as we are investing in our U.S. expansion and innovation pipeline.

It demonstrates the increasing scalability of our financial model and our ability to translate revenue growth into cash generation. Our third-quarter performance is particularly noteworthy given the historical seasonality of our industry, with Q3 typically representing the softest quarter of the year. Our fourth quarter is off to a strong start, giving us confidence to raise our full-year 2026 revenue guidance to more than $274 million, up from a previous range of $269 million-$271 million. Our U.S. and OUS businesses are both delivering strong performance with increasing momentum and opportunities for further growth. Our 2026 success should carry over into 2027, and we expect 25% revenue growth next year. Starting with the United States, we ended the quarter with 2,100 accounts. Although we are regularly adding new accounts, our focus is increasingly on utilization within our existing base.

We have made substantial progress establishing Motiva in the U.S. market, including among many of the highest volume breast augmentation surgeons. With this foundation in place, our focus is shifting towards capturing a greater share of their business. A recent industry survey reinforces this opportunity. Among surgeons reporting Motiva usage, Motiva represented an average of 43% of their implant procedures, highlighting both the adoption we have achieved and the runway for further growth. Importantly, 85% of the accounts that ordered Motiva in Q2 reordered in Q3, reinforcing that plastic surgeons aren't just trying Motiva implants, they're adopting it in their practices. The October FDA approval of additional Motiva sizes, which we expect to make commercially available before year-end, will give surgeons more options for their patients. Industry data is not well-reported, but our estimates have Motiva at approximately 30% share of the U.S. augmentation market exiting September.

Significant progress in just two years. According to data from the American Society of Plastic Surgeons, U.S. breast augmentation procedures grew 11% from 2024 to 2025, following years of relatively limited category growth. The introduction of Motiva implants and Preservé are certainly helping to renew interest in the category alongside other market factors. Our strategy is not simply to take market share. It is to expand the market through innovation and broaden the number of patients considering the category. Preservé represented approximately 17% of our U.S. revenue in the quarter, and more than 400 surgeons were trained by the end of the quarter. Demand for training remains strong, and we expect 500 surgeons trained by year-end. Much like our core Motiva implant business, our focus is now shifting towards increasing utilization among plastic surgeons already trained on Preservé, creating additional growth potential within our existing surgeon network.

Surgeon feedback provides further insight into adoption. In a survey of 78 Preservé-trained surgeons, respondents reported that approximately 22% of their breast augmentation procedures had shifted to Preservé. 95% reported being satisfied or very satisfied. In addition, 88% said Preservé had attracted patients who previously were not considering augmentation, and 98% reported patients asking for Preservé by name. These survey responses are consistent with the adoption trends we are seeing. Let me share two examples that illustrate what we're seeing in the market. One surgeon in the Northeast reported that since the launch of Preservé, 89% of her primary breast augmentation patients have chosen the procedure. Another plastic surgeon who underwent Preservé herself shared that as a young mother and a practicing surgeon, she would not have considered breast augmentation after having children without this option.

Following her procedure, she was able to fly two days later, returning to surgery three days later, and attend a major conference by the end of the same week. These examples illustrate not only how Preservé is gaining adoption within existing practices, but its potential to bring new patients into the breast augmentation market. Consumer awareness is building. Preservé received an Allure Best of Beauty Breakthrough award this quarter. It was also featured in Forbes, positioning Preservé as the Rolls Royce of breast augmentation. These recognitions reinforce the growing awareness of Preservé among surgeons and consumers. Outside the United States, revenue increased 9.7% year-over-year to $46 million, with growth across both our direct and distributor markets. Our direct markets delivered year-over-year growth of 16% during the quarter, with particular strong performance across Europe. Growth was broad-based with Italy, the U.K., and Germany among the largest contributors.

Sequential performance reflected a typical summer seasonality in these markets. We are seeing the benefits of the investment we have made in the direct businesses, including strengthening leadership, increased commercial focus, and the growing contribution from our minimally invasive platform. Our distributor business also performed well, with strong contribution from Asia Pacific. Distributor markets represented approximately 60% of our OUS revenue in the quarter versus 50% that we expected, reflecting the variability in the timing of orders characteristic of these markets. Looking ahead, we see opportunities across both channels, supported by our established direct market presence, distributor relationships, and the growing adoption of our minimally invasive platform. Together, these provide multiple avenues for sustained OUS growth. An increasingly important component of our OUS growth strategy is minimally invasive, where we are seeing broad adoption of Preservé and Mia. Minimally invasive revenue OUS grew 16% year-over-year during the quarter.

Indications are that minimally invasive is becoming an important entry point into the Motiva ecosystem. Nearly half of all our new accounts in Europe during the quarter started with minimally invasive. At the same time, we are expanding within our existing customer base, with the established accounts adopting minimally invasive as well. Mia and Preservé are not simply additional products being sold into an existing customer base. They are increasingly bringing new surgeons and practices to Establishment Labs while creating meaningful growth within established accounts. The recent U.S. FDA approval of additional Motiva implant sizes, including sizes as small as 105 cc, expands the choices available to surgeons and patients. The growing ballerina or yoga breast trend reflects increasing demand for smaller, more natural-looking results.