Good afternoon, and welcome to the Establishment Labs Reports Second Quarter 2024 Financial Results Call. At this time, all participants will be in a listen-only mode. At the end of this call, we will open the line for a question-and-answer session, and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Raj Denhoy, Chief Financial Officer. Please go ahead.

Thank you, operator, and thank you everyone for joining us. With me today is Juan Jose Chacon Quiros, our Chief Executive Officer. Following our prepared remarks, we’ll 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 laws. These include statements on Establishment Labs’ 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’d 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 profitability of the company’s business, which can be stated as EBITDA or adjusted EBITDA. 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. Please also note that Establishment Labs received an investigational device exemption from the FDA for Motiva Implants and is undergoing a clinical trial to support regulatory approval in the United States. We continually seek to expand the geographies in which our products are regulatory approved. Please check with your local authority for product availability. The content of this conference call contains time-sensitive information accurate only as of the date of this live broadcast, August 6, 2024. Except as required by law, Establishment Labs undertakes no obligation to revise or otherwise update any statement to reflect events or circumstances after the day of this call. With that, it is my pleasure to turn the call over to our CEO, Juan Jose.

Thank you, Raj, and good afternoon, everyone. Revenue in the second quarter of 2024 totaled $44.1 million. Global demand for our products continues to stabilize and was reflected in the strong sequential improvement we saw in revenue this quarter. Quarter-over-quarter our revenue improved by 18.7%, and this increases our confidence about our return to growth in current markets. I am sure a recent FDA pre-approval inspection is top of mind for many of you on the call, and I am pleased to tell you that during the week of July 22nd, the FDA conducted and completed their PMA pre-approval inspection of our manufacturing facility in Costa Rica. The investigator had three observations listed in a single 483 report, each of which are unrelated and non-systemic in nature. This is not unexpected for a PMA pre-approval inspection and should not meaningfully impact our timeline to launch in the United States. We have already submitted our responses to the FDA to address their observations. The process towards approval should now move forward to closure. As a reminder, we have already received an approvable letter where the FDA stated that pending a satisfactory review of our facility, our PMA would be approved. We are confident that after the inspection and our timely response we have satisfied that final step and we believe that the final approval will be issued soon. All regions showed sequential improvement in the second quarter with the exception of Latin America and in particular Brazil. As we noted in previous calls, the Brazilian market continues to suffer from softer underlying demand and we do not expect to see improvement this year. We have a number of initiatives to strengthen our market position in Brazil while making sure that during this slowdown we have a cost base that reflects our current demand. The rest of Latin America is stabilizing at a slower pace than other regions and we think the current environment in the region will continue to be challenging for aesthetics in general. EMEA, on the other hand, performed well and the second quarter was notable as there are markets that have fully recovered from the slowdown last year. We are also seeing a good recovery in demand from our distributors in the APAC region. Our second quarter results showed the tangible results of the cost reduction and efficiency improvement activities we undertook in the second half of last year. Adjusted EBITDA loss was approximately $4 million. This was similar to Q1 despite increasing investment in our US commercial organization in preparation for a launch. The loss this quarter was less than half of what we reported in the second quarter of last year, and we remain on a good trajectory to reach positive EBITDA over the coming quarters. Before Raj provides more on our financial results and outlook, it is worth highlighting several recent events. As we expect FDA approval is very near, we are moving forward with our preparations for entry into the US. While we are careful not to market Motiva Implants in the US until they are approved, the interest in our company and our technologies among US surgeons is reaching an inflection point. There are a good number of US plastic surgeons in our FDA study, and they have obviously talked with many of their colleagues about their experiences. Last month, we hosted a medical advisory board of US plastic surgeons at our headquarters and the feedback from this group has been nothing short of amazing. That there is such strong interest for a new breast implant in the US is not surprising. The US market has seen no real innovation in decades. Surgeons have had to adapt their practices to sell commodity devices developed decades ago. What we are bringing to the US is not a commodity offering and is designed with the knowledge gained from years of scientific and clinical studies. The four-year data from our Motiva US IDE Study presented earlier this year at the Aesthetic Society meeting showed less than 1% device-related complications with Motiva implants. These low complication rates are a confirmation of an entirely new standard for breast implants. It is worth noting that the FDA data from the two largest manufacturers in the US showed that between one in seven and one in 12 women developed a Grade three or Grade four capsular contracture at four years. These device-related complications are serious and in many cases require reoperation. In the Motiva study, it was only one in 200 women. This month, we will complete the fifth year of follow-up in the FDA study for breast augmentation and the buzz is palpable, and it is growing. Jeff Ehrhardt, who leads our North America business, has been moving quickly to build out a team that will support our commercial effort. We are receiving inbound calls daily from some of the most experienced and highly regarded people in our industry, which is another data point to suggest that the industry recognizes what a game changer the Motiva implant is going to be in the United States. With this kind of talent eager to come to Establishment Labs, Jeff continues to put together an absolutely all-star team. With this tailwind, we have our back office functions ready to go and we have a handful of reps already hired and trained, with the next group already identified. We will be ready to put our devices into surgeons' hands very quickly after approval. It is helpful as we prepare for the US that Flora, our unique tissue expanders, continues to gain traction. Flora's RFID-enabled nonmagnetic port is the first and only one of its kind in the industry. This, combined with our patented SmoothSilk surface technology, puts Flora into an entirely new class of tissue expanders. We have completed the VAC process at a number of the premier cancer centers in the US and more are pending. As the benefits of this device are demonstrated and shared in the clinical community, the number of hospitals offering Flora will grow. The momentum with Mia Femtech continues to build. Mia is creating an entirely new category within breast aesthetics where a plastic surgeon can shape the breast in a 15-minute minimally-invasive procedure, without the need for general anesthesia. The result is natural and discrete, with a one to two cup proportionate result. The procedure requires minimal downtime, with women returning to most activities on the same day. By providing a solution that overcomes many of the obstacles of traditional breast augmentation, we are opening up a whole new group of women to breast aesthetics. As the group of women who have experienced Mia grows, the level of activity on social media and in other channels is increasing. Consumers are sharing their experiences and highlighting the positive outcomes of their journey with Mia. This word of mouth, supported by our marketing activities, brings more women into the category. We then also share their positive experiences. This flywheel is picking up speed, and we are seeing it in the number of cases increasing quarter-over-quarter. We now offer Mia Femtech in 22 cities across the world, with 63 plastic surgeons now fully certified to provide the Mia experience. Seven Mia experience centers in the Middle East are now fully live, offering a tailored end-to-end experience for consumers in five cities across that region. We are in active negotiations with 41 clinics and we'll be able to considerably increase the number of cities by the end of this year. In China, we remain on track to achieve our targets this year and are building a foundation for continued growth. Medical education, training, and marketing events are taking place on a regular cadence across Tier 1 and Tier 2 cities with the support of our exclusive Chinese distribution partners and in collaboration with our global team. As a reminder, we have leading market share positions in surrounding countries across Asia including South Korea, Taiwan, Singapore, Thailand, Vietnam, and Japan. Our early experience in China suggests that we can achieve similar market share. And given the high ASPs and the fact that China is the second-largest market for breast implants globally, our success will meaningfully add to our profitability. I will now turn the call over to Raj.

Thank you, Juan Jose. Total revenue for the second quarter was $44.1 million, a decline of 9.3% from the year-ago period and 8.5% excluding the impact of foreign exchange. As Juan Jose mentioned, sequentially, this is 18.7% quarter-over-quarter growth. From a regional perspective, sales in Europe, Middle East, and Africa were approximately 48% of the global total, Asia-Pacific 32%, Latin America 20%, and North America was less than 1%. We saw improving demand in Asia-Pacific in the second quarter as our distributors in the region are reordering following a period of working down inventory. Europe is stable and as Juan Jose noted earlier, several markets have fully rebounded from the softness we saw in the second half of last year. Results in Latin America in the second quarter reflected the ongoing softness in Brazil and other markets in the region. Our gross profit in the second quarter was $28.9 million, or 65.6% of revenue compared to $30.3 million, or 62.3% of revenue from the same period in 2023. Our gross profit in the second quarter reflected an increase in average selling prices year-over-year. Foreign exchange rates between the U.S. dollar and Costa Rican Colón continue to be a headwind. As we report in U.S. dollars, the strengthening of the Colón results in higher reported costs. SG&A expenses for the second quarter declined approximately $4.2 million to $32.8 million compared to $37 million in the second quarter of 2023. R&D expenses for the second quarter declined approximately $1.4 million from the same quarter a year ago to $5.5 million. Total operating expenses for the second quarter were $38.3 million, a decrease of approximately $5.7 million from the year-ago period. The decrease in operating expenses in the second quarter were primarily the result of the cost reduction initiatives we undertook in the second half of 2023, offset by increasing investments in our U.S. commercial operation. Net loss from operations for the second quarter was $9.3 million compared to a net loss of $13.7 million in the same period of 2023. Adjusted EBITDA was a loss of $4.3 million in the quarter compared to a loss of $9.3 million in the second quarter of last year and was flat compared to the first quarter. We are pleased with the reduction in our operating expense loss as we are increasing investments in preparation for the launch of Motiva implants in the United States. Cash used in the second quarter was $18.4 million. In the second quarter, our inventory days improved to a more normalized level and days payable also came down. Accounts receivable were higher in the second quarter versus the first as we saw improving sales results and a higher proportion of sales through our distributors. Our DSOs were flat compared to the first quarter. Our cash position on June 30th was $54.6 million. As a reminder, we have two remaining tranches on our debt facility, which total $50 million. We can access the first $25 million on U.S. FDA approval of Motiva implants and the second with the additional milestone of achieving $195 million in trailing 12-month sales. Our revenue guidance this year remains $174 million to $184 million, representing growth of 5% to 11%. We are seeing good performance in most regions, however, as Juan Jose noted earlier, Latin America has not recovered to previous levels. Brazil remains our largest single market in terms of revenue, and revenue in Q2 was less than half of what it was a year ago, and we don't expect to recover meaningfully this year. Following the FDA inspection, our confidence in a U.S. approval for Motiva this year has increased, where we are comfortable including U.S. revenue in our outlook. The exact timing of approval is not certain, but we remain comfortable with the guidance range we provided for 2024. For 2025, we expect revenue growth to accelerate significantly as we expand in the United States. We continue to expect gross margins in 2024 to be approximately 100 basis points higher than 2023 to a range of 65.5% to 66%. We remain very focused on managing operating expenses, which can be seen in the more than $10 million reduction in operating expenses so far this year compared to last year. However, with the FDA approval of Motiva implants in the final stages, we will see increased commercial and operating activity in the United States. As such, overall operating expenses in the second half will increase modestly from first-half levels. Achieving positive adjusted EBITDA and positive cash flow remain important goals for us as a company and our targets are unchanged. With the favorable selling prices and overall economics that are generated in the US market, we expect to have our first positive EBITDA quarter soon after the US launch, expecting to be cash flow positive for the fiscal year of 2026. Importantly, the cash we currently have on hand and which is accessible to us under our credit facility can fund our business to profitability without the need for additional capital. I will now turn the call back to Juan Jose.

Thank you, Raj. When we founded this company almost 20 years ago, we knew that entering the US market was the ultimate validation of our technology, but it was also the highest mountain we had to climb. We now find ourselves on the cusp of that achievement. The effect on our business will be transformative. The US has the highest ASPs in the world, in some cases 3x to 4x higher than we realize in other markets. As we ramp up our commercial efforts, the profitability of sales in the US will quickly move us down the path to becoming EBITDA positive and soon thereafter cash flow positive. The US approval will be a catalyst for our sales globally. The FDA remains the gold standard for regulatory clearances. Many surgeons in countries outside the US will only use products with the FDA stamp of approval. In some markets, this opportunity is significant. We cannot wait to introduce Motiva to women and surgeons in the U.S. As a company focused on women's health, access to the U.S. market will strengthen our foundation and further position Establishment Labs as a global leader in breast aesthetics and reconstruction. I will now turn the call over to the operator for your questions.

Thank you. Ladies and gentlemen, we will now begin our question-and-answer session. Your first question comes from the line of Allen Gong from JPMorgan. Please go ahead.

Thanks for the question. Definitely great to hear that the US approval looks like it's finally cleared that final hurdle. But I have a question on that. But first, I just want to touch on the guidance. You talked about how your guide now includes the incremental benefit from the US, pretty marginal given the time of approval. But you've now had two quarters where you beat by a little bit and chosen to reiterate the guide, and now you're adding on US revenues on top of that. So what are you seeing so far in the third quarter that makes you confident that this is still the right range to be using for the full year? And I guess like how much US is really in there right now?

Hi, Allen. Thanks for the question. Generally, when we give guidance we try to provide an outlook that reflects the current dynamics in the market. As we noted on the call, Brazil is still weak. However, we are very confident now in the US approval, and so we've kind of baked those things into the guidance and hence the range that we're still comfortable with for the year. We do expect us to be back towards sort of a more normalized seasonal pattern here in the third quarter. But overall, I think the outlook in the back half of the year is sort of tracking with where we had thought again with the caveat that Brazil is tracking a bit lower, but now we're extremely confident in the US approval.

Got it. And then when it comes to the 483s, it's great to hear that you already have the responses in, but what gives you the confidence that you'll kind of be able to get this through the FDA in a first pass and this won't become a more drawn-out process? Are there any more specifics you can kind of provide? I know Juan Jose described them as being non-systemic, but any other color you could provide there would be really helpful. Thank you very much.

Yes. Thanks, Allen. No, I think it's the nature of those observations which gives us confidence that our quick response already tells you how we feel about them. One of them was the timing of the submission of 10 medical device reports from the Flora tissue expander that we sell outside of the United States. That's a different tissue expander than the one we sell in the United States, and of course it has no relevance to the safety of Motiva implants in our PMA. The second one was the tracking of the training of a production employee that was performing at validation. And the last one was the job description and role of an internal auditor. So as you can see, those are really isolated. They're minor, and we don't believe that's going to affect our timing for approval.

Your next question comes from the line of Anthony Petrone from Mizuho Group. Please go ahead.

Thanks and good afternoon everyone. Maybe to stay on US Motiva with the description now that FDA clearance potentially looks imminent, maybe walk us through what an early launch phase looks like. Will that happen sometime in the third quarter? Is that a reasonable expectation? And then you mentioned Juan Jose that there has been a build-out of the team in the United States. So just maybe an update there. How many sales reps are already hired, and how many will have to be hired going forward? And I'll have one quick follow-up. Thanks.

Yes. I think most importantly; it's the quality of the people that Jeff is bringing on board to lead our North America business. And I think when you put people like Anne and Ben and that team and some of the sales reps that are coming in, and some will come in the next few weeks, we will have really an all-star team for the US. The back office, as we've said before, is ready. We've been already shipping and invoicing the Flora tissue expander, so all of that is ready to go. In addition to that, I think it's important to say that we already began manufacturing the first batch of Motiva implants that are planned to be sent to the US after approval.

That's helpful. Maybe to flip over to just Mia and looking at some of the existing centers that are out there you mentioned 63 surgeons are active with Mia Femtech. Maybe just a little bit about the dynamics at those centers. How is their surgical capacity expanded? Is it the surgeries are being done in much less time? And when you think about those Femtech centers, how much share is Establishment able to sort of command once Femtech goes live at those centers? Thanks, again.

Yes. Thanks, Anthony. I think it's really important to backtrack to what we are trying to do in this first phase of the launch of Mia, which is to establish a list of clinics so that we are present with it in the most important cities around the world. So one of the important things that I think is looking well is the fact that we are now in 22 cities across Europe, the Middle East, and Japan. So, as we add more centers, the capillarity will get us to be more efficient with the awareness and then that leading to more Mia treatments taking place. One of the really important things I think from Q2 is the fact that 47% of women who received Mia in Q2 were not considering a breast augmentation, and that's real market expansion. And I think in a category like breast aesthetics that has been pretty much flat over the last two decades, those are really good news for plastic surgeons. Those are really good news, I think, for aesthetics in general, because we can get this category to be vibrant again. And when you see the number of centers that we have under negotiation, 41, that tells you also that there's a lot of interest. And the more they talk to their peers, these 63 surgeons, of course, are talking about what this is doing to their practices. So definitely I think that as we go into 2026, we will be able to give more specifics on the number of cases, market share, and things like that related to the traditional category of breast augmentation.

Your next question comes from the line of Josh Jennings from TD Cowen. Please go ahead.

Hi, good afternoon. Thanks for taking the questions and congratulations on getting the inspection completed. I wanted to just ask about your comments, Juan Jose, on the medical advisory board you hosted and the buzz that I think you suggested was kind of percolating in the plastic surgeon community. Any incremental color you can add to those prepared comments? And maybe just to ask from your team's checks, what do you think awareness stands within the US plastic surgeon community? Do you think there's 25%, 50%, 75% of plastic surgeons are aware of Motiva, aware of the four-year data and the premier safety profile?

Yeah. I think the fact that we hosted this first group of American surgeons for an advisory board was very telling to us, because what we wanted to do in this advisory board is to expose them to the technology and get their views on the potential adoption of Motiva implants. And it really went beyond our expectations, the way they understand that this is going to open up new ways of doing surgery, the fact that you can save the pectoralis muscle of so many active women who currently have no option because they would eventually have a capsular contracture in that anatomical placement. So, while we are being super careful not to promote Motiva implants ahead of the approval, I think this type of advisory board really gives us the confidence that we are on track with our strategy.

Thank you for that. I would like to follow up on your comment about how FDA approval could lead to greater international adoption. You mentioned that some countries use FDA approval as a benchmark for their own regulatory processes. In the CE Mark countries, do you believe there are surgeons who are waiting for FDA approval? Can you share any insights regarding the demand from surgeons in CE Mark countries, and whether FDA approval might facilitate increased adoption in those locations where Motiva is already approved? Thank you.

Yes, of course. There's a group of more traditional, more conservative surgeons outside of the United States that have always seen FDA approval as a gold standard that they should aspire to. And because of that, after Allergan pulled out of most markets around the world, all of these surgeons went to the only other option that they had. So this is going to basically give us the ability to start calling on these surgeons who before said, until you have FDA approval, please don't come in. But that's a really strong statement also to the rest of the industry, because it is not only the fact that we are going to get FDA approval; it's the numbers of our clinical trial for the U.S. approval that tell a completely different story. And that combined, I think is going to have eventually a lot of traction for our sales in many markets around the world, not just Europe. It's also true in Latin America, and it's also true in several areas of Asia.

Next question comes from the line of Joanne Wuensch from Citi. Please go ahead.

Good afternoon. And thank you for taking the question and congratulations on the FDA inspection. Two quick questions, the first is you've put some U.S. revenue in guidance as you pulled some Brazilian revenue out or revenue from Brazil out. Is there a way to quantify how much U.S. revenue is now in your guidance? And then the second question is, gross margins really improved nicely year-over-year. How do we think about the trajectory of those, not just this year but next year as Motiva in the U.S. gains traction? Thank you.

Hi, Joanne. Thanks for the question. Yeah. In terms of the U.S., there's still some uncertainty around the exact timing. We're extremely confident it is coming and coming soon, but the exact timing is still not known. And so we still left the range fairly wide for the balance of the year, which reflects that. We do expect there will be revenue this year, and as you noted, we did take Brazil or some of Brazil out given the softness we're continuing to see there. But overall, we're still very confident in the outlook in the back half of this year and in particular as we move into 2025 and the significant growth we expect to see as we start to expand in the United States. And then, on your second question relative to margins, we did see a nice step-up in the third quarter. Average selling prices were up, as we mentioned. We're still dealing with a little bit of headwind from the Costa Rican Colón, but that's also starting to turn as well. As you look out over the next couple of years, really even not just next year, everything we're doing as a company, the launch in the U.S., Mia, our expansion in China, even Flora the tissue expander, all of these are gross margin-accretive endeavors for us. And so I think that margin will continue to go higher over time. It's not going to be linear, but we should see nice improvement over that over the next couple of years.

Your next question comes from the line of George Sellers from Stephens. Please go ahead.

Hi. Good afternoon and thanks for taking the question. Maybe going back to Mia, and apologies if I missed this, but I was just curious if you could give us some color on the growth there driven by procedure volume versus any revenue you've received in the second quarter from licensing fees. And then also with the clinics that you're speaking with and maybe that have recently signed on to partnerships, could you give us any additional color on licensing fee revenue that you're expecting to see in the back half of this year and in early 2025?

Thank you, George. It's important to highlight that as we integrate these centers, we offer medical education and practice development in return for license revenue, which requires time to align. Currently, one of our challenges is the speed of clinic onboarding. We have 41 clinics in negotiation and are focused on onboarding them more efficiently so they can begin operations sooner. We've noticed that some clinics launched last fall are on track to achieve the target of 24 cases per month. If we reach that target consistently over 12 months, it could result in approximately $1 million in revenue per center, which contributes significantly to Mia's growth. At this stage, our goal is to expand our presence; the number of clinics in each city is increasing, and we're performing more cases of Mia each month across various locations. I won't provide specific guidance on revenue for the second half of the year, but I anticipate that by 2026, as we grow, we'll be more precise about revenue expectations as it becomes more significant.

Okay. That's helpful color. And then maybe just one clarifying point on the accounts receivable line that you touched on in the opening remarks. There was a fairly significant step-up sequentially this quarter. I'm just curious if there's anything unique to read into there.

There is not. I mean, if you look at the days, it's flat on the first quarter. We did see a nice rebound, as we noted in the commentary in Asia-Pacific, which is all distributors, right? So we're seeing strong orders that channel, which typically have longer terms. So generally, I think it's just a recovery in the business is what you're seeing.

Your next question comes from the line of Matthew Taylor from Jefferies. Please go ahead.

Hi. It's Michael Toomey here covering for Matt. Thanks for taking my question and congrats on the quarter. You mentioned China remains on track. I just wondered what you have baked in for China in 2024, whether anything's changed there?

Nothing has changed. We've been discussing $10 million in revenue for this year, and we are still on track for that. We are two quarters into the launch, and everything is progressing as we anticipated.

Okay. Great. And can you give us any idea how we should think about 2025? Is ESTA's ramp in other markets in Asia a good way for us to think about the sales growth in China?

Yeah. The way I would put it is that China is a much bigger market. And although, in many of these markets with significant Chinese population like Singapore and Taiwan we have become market leaders after three to four years, China is different. So our aspiration is to get there in the next few years to that market leadership. But how it grows, I think, is part of the question at this point. We are happy with the way we are tracking for this year. It's been already two quarters of information that we have. But it's a little bit early to say that it's going to be the same. I think potentially it could be even quicker, but we're just beginning. At this point, I think we'll just leave it at that.

Your next question comes from the line of Marie Thibault from BTIG. Please go ahead.

Hi. Good evening. Thanks for taking the questions, and nice quarter. My first question really just has to do with seasonality and helping us think about how to model Q3. As I look at it, maybe Latin America remains weak. We think about US contribution maybe coming a little later in the year. I don't know if that's the right way to think about things, but if you can help us just think about getting a little more granular with the back half of this year.

Yeah, Marie, I think in a normal seasonal year we could see the third quarter down about 10% from the second quarter, and I think that's not a bad way to think about it. We saw a good recovery probably a little faster in the first half of the year. Now we're moving more towards sort of normal trends in the business, right? So I think down 10% in the third quarter is probably the right way to think about it. And then in the fourth quarter, again, it's a lot dependent on the timing of the U.S. approval, but we do expect a nice step-up in the fourth quarter to finish the year.

Thank you, Raj. I appreciate it. I’d like to delve deeper into the distributors' reordering. I’m glad to hear that things are improving. Are the distributors back to full inventory, or are they still gradually restocking? I'm curious if they placed larger reorders in the first half and might not be expected to do as much in the second half. How should we interpret these reordering trends?

I think it's important to understand that for distributors, it's always this balance between having the right product at the right place at the right time because you don't want to lose an account because you didn't have that. On the other hand, they're careful with their cash. But I think what we've been trying to comment today is basically that we are seeing, for instance, in Asia, a very healthy reordering cadence. And that tells you what is happening in those markets and how the recovery is going. I think Latin America is different. Latin America is having a lot of challenges in terms of the political cycle and what have you, Brazil especially. But I think it's good to see that our distributors feel the confidence to begin adding to those inventories again.

All right. That's very helpful. Thanks so much and good luck with things.

And that does conclude the question-and-answer session. I would like to turn the floor back over to Juan Jose Chacon Quiros for closing remarks.

Thank you for joining us on today's call. We look forward to providing our next quarterly update in November, and we wish everyone continued good health and happiness.

This concludes today's conference call. Thank you for your participation. You may now disconnect.