Establishment Labs Holdings Inc. Q2 FY2025 Earnings Call

Good morning. Welcome to Establishment Labs' Second Quarter 2025 Earnings Call. As a reminder, today's call is being recorded. I will now 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 Peter Caldini, 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 establishlabs.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. The content of this conference call contains time-sensitive information accurate only as of the date of this live broadcast, August 7, 2025. 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.

Thank you, Raj. Revenue in the second quarter totaled $51.3 million, a growth of 16% over last year. Our second quarter sales included $10.3 million in the United States, exceeding the $9.5 million to $10 million range we provided at our Investor Day in early June. With Q2 behind us, we can now comfortably say that our U.S. revenue will exceed $40 million. And with this clarity, we are raising our revenue guidance to $208 million to $212 million for a growth of 25% to 28%. It's also worth noting that our U.S. sales momentum has carried into Q3, and we are expecting sequential growth from Q2 to Q3 in the United States despite the traditional Q3 lull in plastic surgeries. We continue to make good progress on improving our operating profitability and cash flow. Our adjusted EBITDA loss for the quarter was $8.5 million, an improvement from the $12.1 million in the first quarter. Our cash use fell to $14.5 million from $21.2 million last quarter. As discussed in our Q1 call, we expect cash use to reduce by approximately $5 million each quarter. Our U.S. business continues to do exceedingly well. We have assembled a best-in-class organization in the U.S. under the leadership of Jeff Ehrhardt, and we're seeing the results. Our team has successfully leveraged the superior product benefits of Motiva to drive account acquisition and the number of procedures continues to exceed our expectations. We are executing at a high level and should achieve a leadership position in the market. Outside the U.S., our results are improving as well. Growth in our direct markets has been a major focus for our team as we manage these markets within our own organization and have greater economics. We have restructured the OUS organization, reallocated resources and applied improved operational processes to support our direct markets. We're already seeing the benefits of these changes. Excluding the benefit of currency and the acquisition of the Benelux distributor, our European direct market sales increased by approximately 27% this quarter. This reflects a new sales record, and we believe these trends will continue. There is good early demand for Preservé, Mia is tracking to plan, and we're seeing an increase in the number of accounts in which we sell, all very positive signs for our trajectory. There are certainly continued areas for improvement. For example, China has been affected by a number of factors, and that is a particular focus for the team. We are working with our distribution partner and their investor to ensure success in China. Motiva is the leading implant across Asia, and we expect to achieve the same position in China. On the operational side, we are focusing our resources on the areas with the most financial potential like the U.S. and our minimally invasive portfolio. And we're reducing expenses in other areas that we can operate as efficiently as possible. This can be seen in the improvement in the EBITDA and cash use we posted this quarter. We expect our first positive EBITDA quarter later this year and remain on track to be cash flow breakeven in 2026. As noted, our progress in the United States is tracking well ahead of plan. At our investor meeting in June, we confirmed we had reached 1,000 accounts in the U.S., and that number continues to grow. It is important to remember, there's a difference between procedure share and surgeon share. While there are about 6,500 board-certified plastic surgeons in active practice, a much smaller percentage are responsible for the vast majority of the breast augmentation and revision procedures done each year. To put that in perspective, if the 1,000-plus accounts we currently have were to fully adopt Motiva, we would have approximately 50% of the breast augmentation market in the United States. The most important factor in increasing surgeon utilization is time and surgeons getting comfortable with the Motiva implant. Once a surgeon gets introduced to Motiva, they follow a typical adoption curve, completing a few cases at first and then waiting to see the results. Once past that, they will start building Motiva into their consultations. Remember, a busy plastic surgeon could be booking cases out for 6 months. Further, it's likely that a plastic surgeon will build Motiva into their practice over time. What starts as 2 initial cases could become 25% of their business after 4 months and then 50% after 6 months. This is what we're seeing. In short, while some plastic surgeons move their practice to 90% plus or minus Motiva immediately, most take several quarters to get comfortable and to work through previous consultations where a different implant was already selected. Our team is very focused on high-volume practices as well as industry leaders. Whereas industry leaders used to be defined as the key opinion leaders at conferences, it means some of these patients regularly come in asking for Motiva implants by name, something they have not seen before in the industry. Surgeons consistently tell us that patients are walking away from the competitor warranties that cover their previous surgeries, instead opting to pay for Motiva implants rather than get replacement implants for free. This behavior is unprecedented in the aesthetics and medical device industry. Our team continues to add high-volume practices and industry leaders, making Motiva implants more available across America. Early data suggests that surgeons who offer Motiva implants are seeing an increase in their business. As patients carefully choose their surgeon, a new factor in their decision process is the availability of Motiva. Our efforts are working. As of this call, the growth trajectory continues. Orders have increased each month from April through June, and that trend has continued into the third quarter. Therefore, we expect to see sequential growth in the third quarter, a period that is seasonally down for the industry. Continued growth in our core business should continue for many years, and our robust pipeline should add to that growth as well. Our ultimate goal is to have surgeons prefer our implants in all their cases, and our pipeline should help get us there. In early 2026, we should have an expanded range of sizes approved by the FDA, and this will help drive utilization as well as attract new surgeons to our products. This is just the start of a cycle of innovation we'll bring to the U.S. market over the next couple of years, led by our minimally invasive portfolio as well as our efforts in reconstruction. In July, we hosted 36 U.S. plastic surgeons in Costa Rica to introduce them to Preservé. Preservé is an advanced, less invasive breast enhancement technique designed specifically to preserve natural breast tissue functionality, including nipple sensation and chest muscles and to provide a fast post-procedure recovery. The Preservé procedure is designed to be performed with minimal anesthesia and uses the Motiva channel separator to create a tunnel without cutting any tissue and the Motiva inflatable balloon, which gently pushes the tissue structure aside to create a precise pocket that matches the size and creates space for the breast implant. Many surgeons who attended commented that for the first time in decades, there is a fundamentally different way to perform breast augmentation surgery. Preservé is not just a way to do an existing procedure differently; it is an entirely new procedure with real advantages for many patients. The reception from surgeons who are part of this training has been overwhelmingly positive. It's hard to overstate how meaningful it was to bring together this specific group of surgeons, which included some of the highest volume surgeons in the United States, as well as current and past leaders of major plastic surgeon societies. I recommend following some of their social media. Their enthusiasm and content is already changing the narrative and conversation around breast implants. We expect to begin shipping in August so that the early experience group can perform their first Preservé cases. We will collect their feedback to support the launch of Preservé in the U.S., which we anticipate will be in the first half of 2026. We expect Preservé to command a premium, which will not only add to gross margins but also expand our total addressable market on a dollar basis as well. Preservé highlights the importance of the technological advancement that has gone into Motiva implants, allowing for new procedures and techniques that were previously technically inadvisable with competitor devices. For example, we've seen a rise in the use of prefectoral implant procedures, which can offer more natural outcomes and faster recovery time. This dovetails nicely with the increasing interest in smaller implants, a trend covered recently in an article in the Wall Street Journal. While Motiva implants have clear benefits across the board in breast procedures, the use of smaller implants in prefectoral positions is a segment which Motiva is uniquely able to support. In breast reconstruction, our Flora tissue expander is now in use at over 90 hospitals in the United States, with more being added every month. For Motiva implants in reconstruction, we are close to completing the 3-year follow-up on this cohort. We will lock the database for a supplement in September and expect to submit for approval in reconstruction before the end of the year. Outside the U.S., we saw sequential growth in all our geographic regions in the second quarter. As I indicated previously, we have taken a number of actions to improve the performance of our direct markets. We are seeing the benefit of these activities. As previously noted, our European direct markets grew approximately 27% versus last year. Core markets like the U.K., Spain, and Germany were key drivers for that growth. In our Latin American direct markets, we continue to see stabilization of our Brazilian affiliate and continued strong growth in Argentina. These results are being supported by our minimally invasive platforms and by the halo effect of the U.S. approval and initial success. The number of accounts we have in many markets is increasing, which is clearly a positive sign. Our distributor markets are generally doing well. Latin American distributors grew double digits in the second quarter. In other regions, the timing of orders to several of our partners impacted results. We believe these are short term and our market position overall globally continues to strengthen. For 2025, EMEA remains on track to achieve $8 million to $10 million in revenue. Mia is appealing to a new group of women who had not previously considered breast augmentation, and we continue to see strong interest from clinics to offer the procedure. Preservé also continues to build momentum outside the U.S. and is going to be a meaningful contributor this year and next. We have clinics in Europe and Latin America already routinely performing this procedure and more are being added regularly.

Thank you, Peter. Total revenue for the fourth quarter was $51.3 million, an increase of 16.3% from the year-ago period. Excluding the positive impact of foreign exchange in the quarter, growth would have been approximately 14.3% versus a year ago. Sales from Motiva in the United States were $10.3 million. On a geographic basis, sales in the United States were 20% of the global total. Sales in Europe, the Middle East, and Africa were 40% of sales, and we saw double-digit year-over-year growth overall in the region. Latin America was 19% of sales with mid-single-digit growth, including stable results in Brazil compared to the first quarter. Asia Pacific was 15% of sales. And while we saw sequential growth in the region, results were down year-over-year, mostly due to China and some one-off timing of orders from other distributors. Our gross profit for the second quarter was $35.3 million or 68.8% of revenue, a 320 basis point increase compared to the 65.6% of revenue for the same period in 2024 and 160 basis points higher than the 67.2% in the first quarter of this year. The increase reflects the higher margin sales in the United States, and we continue to expect gross margins in 2025 will be approximately 200 basis points to 300 basis points higher compared to 2024. As it relates to tariffs, the duties on goods imported from Costa Rica to the United States are expected to result in less than a 50 basis point gross margin impact on a consolidated basis and do not change our trajectory for margin improvement this year. SG&A expenses of $44.2 million were approximately $11.4 million higher than in the second quarter of 2024. R&D expenses for the second quarter were $5.2 million. Total operating expenses for the second quarter increased approximately $11.1 million from the year-ago period to $49.4 million. The increase in operating expenses this quarter was due primarily to the ramp-up of commercial activity in the United States, including the Megan Trainer campaign, where the majority of the expenses fell in Q2, as well as higher shipping costs. Shipping costs were the result of shipments sent by air in the second quarter to the U.S. and other markets to match the stronger demand. We also saw higher last mile shipping costs in the U.S. on the higher volume of sales. We expect operating expenses will moderate in the second half of the year. For 2025, we continue to expect operating expenses will be approximately $45 million to $46 million on average per quarter, which is where we are trending through the first half of the year. So as we saw in the first and second quarters, there can be fluctuations based on the timing of expenses. Adjusted EBITDA was a loss of $8.5 million, an improvement from the $12.1 million in the first quarter. We expect to see further improvement into Q3 and to reach our first EBITDA positive quarter this year. Our cash in the second quarter was $14.5 million, which is down from $21.2 million in the first quarter. As we have noted previously, the first half of 2025 should be higher for us in terms of cash use, as we funded investments in the U.S. commercial platform as well as increases in working capital to support the strong demand. Cash use is expected to come down by approximately $5 million a quarter for the next several quarters, including an expectation of approximately $10 million in the third quarter. We expect to get to cash flow positive in 2026 without the need for any further equity raises. Our cash position on June 30 was $54.6 million. We have an additional $25 million still available under our credit facility, putting our total accessible cash balance at approximately $80 million. As a reminder, our current credit facility is approaching the last year of the term. We are exploring refinancing options that could further reduce our cash use over the coming quarters. We are increasing our revenue guidance for 2025 to a range of $208 million to $212 million from the previous $205 million to $210 million. Our new outlook represents growth of 25% to 28% and includes an expectation of at least $40 million in U.S. Motiva sales and single-digit growth outside the United States. The U.S. is the primary engine of growth this year, but our direct markets outside the United States are also doing well. We're making good progress in leveraging our operating expenses and improving cash flow. We continue to forecast our first EBITDA positive quarter this year and remain confident that we will reach cash flow breakeven in 2026.

Thank you, Raj. Just last week, we announced that our Motiva Flora SmoothSilk Tissue Expander won both the Innovation and the Safety Awards in the 2025 Medical Device Network Excellence Awards. In its announcement, the organization noted this dual category win establishes Motiva Flora as a benchmark in breast reconstructive surgery. Our innovations are brought to market through years of hard work, and this recognition is a testament to the passion and dedication of the many people who work at Establishment Labs. Our company remains focused on four main priorities this year: driving growth in the U.S., ongoing launch of our minimally invasive portfolio, increasing efficiency and profitability across the organization, and advancing our innovation pipeline. We are making progress on all fronts. We are advancing to profitability through growth and continued operational efficiencies. We have a number of key growth drivers for the rest of 2025 and for many years to come. Higher surgeon utilization and adding accounts in the United States will drive growth for the rest of this year and into next. Approval of additional sizes will accelerate both these areas. Having our indication for breast reconstruction in the U.S. will also be a considerable growth driver. Preservé will create a premium offering around the world and help expand our total addressable market on a dollar basis as well as contribute to gross margin expansion. And Mia helps expand our total addressable market on a patient basis. Reaching profitability this year and cash flow breakeven next year are significant milestones for us as an organization. With our differentiated technologies and market position, being cash generating and self-sustaining affords us a very unique opportunity to drive significant shareholder value for many years to come. Operator, we're ready to take your questions.

The first question comes from Josh Jennings at TD Cowen.

It was a strong quarter, and it's encouraging to see the positive revenue guidance upgrade for 2025 and the ongoing momentum from the U.S. Motiva launch. You've covered most of the points in the guidance update, but could you provide more details about the assumptions involved in the upgrade, particularly regarding the expectation of at least $40 million in U.S. Motiva revenues and single-digit international sales? Additionally, any regional insights would be appreciated. Peter, you mentioned some challenges in China; I would like to hear more about that and your outlook for revenue in China in the second half of the year.

Josh, thanks for the question. Yes, as you noted, we are seeing very strong results in the U.S. The continued momentum we're witnessing in surgeon adoption and utilization is giving us the confidence to raise the U.S. outlook to at least $40 million. That's really the basis of the comfort in raising the global outlook to $208 million to $212 million, as I mentioned. Outside the U.S., the direct markets are doing very well. As we noted in the prepared remarks, our European direct markets were up about 27% on an underlying basis, so very strong results there. Our distributor markets are performing to expectations with the exception of China. As we highlighted in the prepared remarks, that market has been a little bit more challenging this year, and we have taken China out of the guidance for the second half of the year.

Yes. So Josh, thanks for the question. Just to add a little more context to the business in China. For us, I think the business is performing below expectations. A lot of that is driven by the market environment. You're seeing declines across a number of consumer segments, and aesthetics, in particular, is under pressure. Additionally, since we are positioned in the premium segment, we're facing a lot of challenges. We also feel that our distributors are experiencing some challenges in terms of scaling up their commercial operations. We expect to be further along at this point in the launch. So in terms of building out their commercial capabilities in terms of productivity in the hospitals they are in. This is a significant focus for us. We work very closely with our partner in China, and we're still very confident that we are going to achieve the same leadership position in China that we have throughout Asia; it's just that the ramp-up is going to be a bit slower. We're reflecting that in the guidance. But as Raj mentioned, we're continuing to do very well in the U.S. We're seeing that momentum in Q3. The direct markets are performing well, and that's been a priority for us. These markets hold significant growth opportunities, and we have our own organizations in place which we believe further add to our growth. So we're very pleased with those growth metrics, and I think that's reflected in the numbers. We're being cautious about the current situation in China.

The next question comes from Sam Eiber at BTIG.

Peter, really helpful commentary on the utilization trends in the U.S. As surgeons gain more experience and work through the existing consultations that they had prior. As I think about the growth trajectory going forward, is it fair to assume that we could actually see an acceleration, sort of a hockey stick type of an inflection at some point as that utilization starts to build and they work through their order book? And how should we think about the timing of when that could happen?

Yes. Thanks, Sam. As we highlighted in the prepared remarks, we continue to make great progress in the U.S. market. We continue to add additional accounts even going into Q3, which is a slower part of the season. Thus, we continue to build that momentum. I think as most accounts develop, it varies by account. That being highlighted in the prepared statement. But what we are seeing is we've been able to capture a number of accounts. We have over 40 accounts that have already placed more than 100 orders year-to-date. Some accounts have even reached 200. I believe growth will continue to progress in the same type of trajectory. As we add accounts, the original accounts that are moving up the adoption curve, which varies by clinic, will reflect increased acceleration as well. So I don't believe there's necessarily going to be a hockey stick per se; I think you'll just see continued gradual growth as we add new accounts and as some of the accounts we have already established continue to move up the adoption curve.

The next question comes from Anthony Petrone at Mizuho Group.

Congrats on a great quarter here and a solid launch on Motiva. One on U.S. and one on OUS. On the U.S. side, when we think about just the rate of physician adds, it's been quite rapid since the FDA clearance last year. What does the trajectory look like from here when we just think about new site openings? At what point do you think this turns into more of a penetration story into those accounts rather than new site adds? And then I'll have a follow-up question on OUS.

Yes. Thanks, Anthony. I mean, as we highlighted, we continue to get more accounts. We highlighted in our Investor Day, we've reached 1,000 accounts. We're continuing to add to that. In terms of the growth moving forward, I would say that our focus at this point is more on enhancing the utilization rate in the accounts that we currently have. However, we still see opportunities to add additional accounts, especially as we expand our sales force. But I think enhancing utilization will be our primary focus moving forward.

Just a quick follow-up there. Is it fair to assume — you've had some competitors report in the aesthetic space and there's a little bit of pressure on the consumer end, certainly not seeing it in the Motiva numbers here. But where do you think the underlying U.S. breast augmentation is? In other words, is there another leg here to unlock once the consumer stabilizes? And then quickly on the OUS, just wondering how much revenue was impacted by the shipping delays you referenced there in APAC specifically?

I think what we're seeing, Anthony, as it relates to the U.S. market is we haven't seen a slowdown in the breast aesthetics augmentation market. We're continuing to see good growth. I believe some of that is driven because we are gaining share and continuing to gain share in the marketplace. Furthermore, a lot of the activities that we're running in terms of social media campaigns around Meggan Trainer have increased some of the interest in patients seeking breast augmentation procedures. We are actively working to help remove some of the taboos related to this topic. While we don't have specific data on this, I believe we are contributing to driving growth in the category. Regarding the OUS numbers, Raj, do you want to cover that?

Sorry, Anthony, can you repeat the question? I think you were asking about shipping.

The revenue attached to the shipping day comment in APAC specifically.

Well, what we commented on was that we did incur higher shipping costs in the quarter relative to sending product via air as opposed to via sea freight. We didn't see any impact in our results relative to shipping days or anything related to that.

Yes. I think, Anthony, just to add, looking at the context, last year we had orders from China. We didn't have that this year. Some of it is related to the timing of these orders. Additionally, in a few cases, distributors are managing down inventory concerning a regulatory change that's coming. However, the quantification of that impact is somewhat marginal, and it's an issue we will address in the following quarters. It's more of a timing concern.

The next question comes from Mike Matson at Needham & Company.

I have 2. They're sort of related. So I wanted to ask one on pricing trends in the U.S. I think you had priced your implants a bit higher than some of the competitors. Are you able to sustain that? Are you seeing any pushback? And then the second question would just be around competitive response. What are you seeing the two bigger competitors doing, if anything, to try to fight back as they lose share to Motiva?

Yes. Thanks, Mike. In terms of pricing, as you mentioned, we do have a premium price compared to our competitors because we believe we have a superior product in the marketplace. I think this is reflected by patient and surgeon acceptance. We have not really felt any pricing pressure. Naturally, as we gain scale with certain clinics, there will be volume discounts based on the number of orders they have. However, that's not driven by any competitive reaction. I would say from an overall competitive response, we see nothing that's majorly coordinated. Much of it is really on a market-by-market basis, with certain responses by individual sales reps, but nothing that I would classify as a concerted, organized, and strong reaction from the competitive set right now.

The next question comes from Allen Gong at JPMorgan.

Sorry if this has already been answered; I joined a little late. But just curious about the cadence for the balance of the year. I know the $40 million target for the U.S. is a bit open-ended. If we think about the incremental contribution implied by that, you're saying that you're going to generate at least $4 million or so in revenues in the second half, assuming we just straight-line the second quarter. So taking into account the continued ramp and some seasonality in the third quarter, how should we think about the cadence of growth for both U.S. and global in the second half of the year?

Yes. Thanks, Alan. Thanks for the question. We do expect the U.S. will see some sequential growth into the third quarter. It's usually a seasonally slow period, but given the momentum in the business, we do expect it will be up in the third quarter. We’ll, of course, see a nice resumption in the fourth quarter. The guidance is for at least $40 million, right? We're continually aiming for a conservative view on this. Clearly, the momentum in the business is quite strong and $40 million is really the low end of what we expect for the year. Outside the United States, as you know, the third quarter is seasonally slower, as I mentioned. We should see that in the OUS business, although given the timing of certain orders, we do expect that the third quarter might not be down as much as it is in historic periods. Then we should see a nice step-up into the fourth quarter.

And then just a follow-up on spend. SG&A came in a little higher than we were thinking. Is that just additional investment to support the U.S. launch? How should we predict the leverage you can get in the second half now that we're moving past the initial phases of the domestic launch?

Yes. As we noted in our prepared remarks, there were primarily two major factors in the quarter. As I mentioned, the shipping costs were higher, a result of sending more product via air versus sea freight to meet the demand in the U.S. and other markets. Additionally, in the United States, due to the higher volumes, we had increased last mile shipping costs when distributing the product to customers. Regarding how we expect to trend for the back half of the year, we do expect that operating expenses will trend down from where they were in the second quarter, allowing for a nice improvement into the third quarter. We have previously discussed that increases in revenue, primarily driven by the United States, provide the leverage. As we maintain operating expenses on a quarterly basis relatively consistent, the incoming revenues, particularly from the higher gross margin U.S. segments, will present the leverage we need. We're confident that we'll achieve an EBITDA positive quarter in the back half of the year and ultimately cash flow positive next year.

The next question comes from Matt Taylor at Jefferies.

I had a follow-up on China. I know that on the Q3 call last year, you announced that this partner in principle had committed to invest up to $50 million in the distributor. I was wondering if you could just give an update on how that investment is tracking? How much have they invested so far?

We don't have perfect visibility into the investments from that distributor from the investor into our distribution partner. They have been building activity in China. Our issue so far has been that they are experiencing challenges in scaling up the commercial operations there. They are a little bit behind where we would have hoped at this point in the launch. We’re doing what we can to support that distributor to obtain the outcomes we expect in the region. As we mentioned in the prepared remarks, we are the leading implant in all of the surrounding countries in Europe, and we expect to achieve a similar position in China; it's just that it is taking longer than we anticipated at this point.

Okay. And then my second question was to inquire about the differences between Mia and Preservé. I know you've discussed Mia in the past and the excitement surrounding it, but it seems like now you're talking much more about Preservé. I know there are some similarities and some differences. Could you just outline, in your opinion, looking five years out, do you think Mia will be bigger in terms of dollars than Preservé, or the other way around? Just help us think about these two approaches moving into the future.

Both Mia and Preservé are part of our minimally invasive platform, and they complement each other. Mia is for procedures covering two cup sizes; it’s transaxillary. It's not for every patient or every surgeon. Looking at Preservé, its applicability is much broader for everyday use. You can have a range of procedures and more cup sizes offered. Overall, I suspect that Preservé will likely be larger than Mia over time because it appeals to a wider patient base and more surgeons. Nonetheless, we are very pleased with the strong interest shown so far in Europe, and we note that it has not cannibalized our EMEA business. In fact, several clinics signed up for Mia are also incorporating Preservé. They're recognizing the value in leveraging both types of procedures.

Next question comes from Mason Cariso at Stephens.

At your Investor Day, you called out an initiative to place permanent consignment inventory at some of your largest customers. I was just curious how that initiative is going. Have you seen any impact on utilization at accounts where you have placed that inventory?

I think that initiative is going very well. We have reached more than 100 accounts where we have permanent consignment. I believe this has helped enhance the utilization rate as it improves our ability to supply products to clinics timely. It has been a process to reach this level, and we continue to expand the number of accounts as we get more products on the market and sign up more clinics.

Got it. And then could you just update us on the U.S. sales force expansion? Where does that team stand today? Have your expectations surrounding pacing hires changed at all?

As I mentioned in the last call, we have reached 43 representatives in the U.S. Looking ahead to next year, we plan to add another 10 to 15 representatives, along with management roles or leadership within the sales organization. This expansion is partly aimed at enhancing penetration in various areas, considering we also have to prepare for the Preservé launch. Some of the recruitment will commence in the second half of Q4, while most will happen in the first quarter as we ramp up sales and prepare for the Preservé introduction.

The next question is a follow-up from Josh Jennings at TD Cowen.

I wanted to build on Matt Taylor's question. You had addressed it already, but you discussed the potential for EMEA accounts to adopt Preservé. Additionally, I thought about your U.S. strategy regarding launching Preservé first and then Mia, effectively setting the stage. You've commercialized Mia now while launching Preservé internationally. Do you think Preservé can drive increased adoption and utilization of Mia? I think you mentioned Mia accounts adopting Preservé, and do you think it can work the other way around as well? We believe that it could. And then lastly, just confirm the dynamics surrounding the limited launch in the U.S. You had that training session in Costa Rica and with the U.S. Motiva revenue guidance update; we are gauging minimal contribution from Preservé in the second half of '25 and then larger impacts in 2026. Could you refresh us on whether Preservé is included in that update for the U.S. Motiva revenue?

Thanks, Josh. Regarding the U.S. launch, we're set to introduce Preservé first in the first half of 2026. I believe this will serve as a significant entry into our minimally invasive platform, aligning well with the type of procedures that surgeons currently practice in the U.S. Once that's established, I think the Mia business—contingent on regulatory approval for Ergo2, which we are planning to submit in early 2026—will be a great follow-on. It will significantly enhance our offerings and complement Preservé. Regarding the early experience for Preservé, we aren’t expecting a significant or marked impact on our revenue guidance for Motiva in 2025; rather, we see this as an opportunity to learn and refine our strategy ahead of its U.S. launch. Thus far, we don’t anticipate much revenue potential for Preservé in the U.S. and it is not presently factored into our guidance.

We have no further questions. I will turn the call back over to Peter Caldini for closing comments.

Thank you, operator, and thanks to everyone for joining the call today. I look forward to seeing all of you in the next call. Hope you enjoy what remains of the summer and I look forward to getting together again soon. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.