Establishment Labs’ Earnings Call: Mixed Sentiments and Optimistic Outlook

Establishment Labs Holdings ((ESTA)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Establishment Labs Holdings presented a mixed sentiment, highlighting strong revenue growth, particularly in the U.S. market, and successful product launches. However, challenges in China and Brazil, increased operating expenses, and a significant adjusted EBITDA loss painted a complex picture. Despite these hurdles, the company maintains a positive EBITDA outlook, suggesting a cautiously optimistic future.

Strong Revenue Growth

Total revenue for the first quarter was reported at $41.4 million, marking an 11% increase from the previous year. When excluding the negative impact of foreign exchange, the growth rate would have been 13.5%. This demonstrates a robust performance despite external economic challenges.

U.S. Market Success

Sales in the U.S. reached $6.2 million in the first quarter, surpassing the previous guidance of $5.5 million. This reflects strong adoption and continued momentum into the second quarter, underscoring the company’s successful penetration into the U.S. market.

Motiva Product Launch Success

The launch of Motiva in the U.S. exceeded expectations, with over 900 accounts fully onboard and an impressive reorder rate of 84%. Daily orders in April surpassed 120, up from 100 in March, highlighting the product’s strong market acceptance.

Positive EBITDA Outlook

Establishment Labs anticipates achieving its first positive EBITDA quarter in 2025, with cash flow breakeven expected in 2026. This outlook reflects the company’s strategic focus on financial health and operational efficiency.

Gross Margin Improvement

The gross profit for the first quarter was $27.8 million, or 67.2% of revenue, representing a 160 basis point increase from the same period in 2024. The company expects a further 200-300 basis point improvement in gross margins by 2025.

Challenges in China and Brazil

Sales in China were minimal as the distributor focused on selling existing inventory, while revenue from Brazil saw a significant reduction compared to the first quarter of last year. These challenges highlight the complexities of operating in diverse international markets.

Increased Operating Expenses

Operating expenses rose by approximately $11.5 million from the previous year, totaling $44.8 million. This increase was primarily due to the ramp-up of commercial activity in the U.S., reflecting the company’s investment in market expansion.

Adjusted EBITDA Loss

The adjusted EBITDA loss was $12.1 million, although this was $1 million lower than in the fourth quarter. This indicates a slight improvement, but the loss remains a concern for the company’s financial performance.

Cash Usage

Cash usage in the first quarter was $21.2 million, with expectations for sequential improvement. However, the high initial cash usage underscores the need for careful financial management as the company expands.

Forward-Looking Guidance

Establishment Labs provided optimistic guidance for the fiscal year, reiterating its revenue target of $205 million to $210 million, reflecting growth of 23% to 26%. The company anticipates its first positive EBITDA quarter in the second half of 2025 and cash flow breakeven in 2026. The successful launch of Motiva implants in the U.S. and the focus on expanding market share globally, particularly with its minimally invasive platforms Mia and Preserve, are expected to drive future growth.

In conclusion, Establishment Labs Holdings’ earnings call presented a mixed but cautiously optimistic outlook. While strong revenue growth and successful product launches are promising, challenges in international markets and increased expenses present hurdles. The company’s forward-looking guidance suggests a strategic focus on achieving financial stability and expanding its market presence.