ESTABLISHMENT LABS HOLDINGS INC. Q3 FY2026 earnings call

• Financial Milestones: Achieved first-ever positive free cash flow ($5.1 million) and operating cash flow ($7.7 million). Adjusted EBITDA improved to $6.4 million with an 8.9% margin, reflecting significant operating leverage.
• U.S. Market Expansion: U.S. accounts grew to 2,100. Motiva holds an estimated 30% share of the U.S. augmentation market. Utilization among existing users is high, with 85% of Q2 Motiva reorderers continuing in Q3; current average utilization is 43%, with room for growth.
• Product Innovation & Adoption: Preserve represented 17% of U.S. revenue, with over 400 surgeons trained. Consumer awareness is rising, evidenced by industry awards and strong patient demand. FDA approval for smaller Motiva implant sizes (down to 105 cc) was obtained, expanding addressable market.
• International Growth: OUS revenue grew 9.7%, driven by 16% growth in direct markets (Europe) and strong distributor performance in Asia Pacific. Distributor sales accounted for ~60% of OUS revenue, slightly higher than the planned 50%.
• Strategic Developments: New long-term silicone supply agreement with Nusil secured. Commercial infrastructure for breast reconstruction is being built, with Motiva Flora tissue expanders available in >350 facilities. Regulatory submission for Motiva implants in reconstruction is progressing well, with BMO inspections completed.

Total revenue was $72 million, up 33.9% year-over-year. The United States business generated $26 million in revenue (up 119% YoY), representing 36.1% of total revenue. Outside the United States (OUS) business generated $46 million in revenue (up 9.7% YoY), representing 63.9% of total revenue. The minimally invasive platform contributed approximately $9 million in Q3 revenue (up 124% YoY), accounting for roughly 15% of year-to-date revenue.

• Full-year 2026 revenue guidance raised to more than $274 million, up from the previous range of $269–$271 million.
• Full-year 2026 adjusted gross margin expected to align with YTD performance of approximately 70.7%.
• Full-year 2026 adjusted operating expenses remain unchanged at $195–$200 million.
• Minimized invasive revenue full-year expectation raised to exceed $40 million, up from >$35 million.
• 2027 revenue growth expected to be 25%, supported by U.S. utilization, minimally invasive adoption, and OUS opportunities.
• Expectation of sustained positive free cash flow in fiscal 2027.

• Geopolitical Impact: Ongoing conflict in the Middle East has negatively impacted market performance and order levels in that region.
• Seasonality: Q3 historically represents the softest quarter due to summer seasonality, particularly affecting OUS direct markets and minimally invasive volumes.
• Regulatory Timing: While progress on reconstruction approval is strong, FDA timing remains unpredictable and cannot be precisely forecasted.
• Distributor Variability: Timing of distributor orders can vary, impacting quarterly revenue mix and potentially moderating gross margins compared to direct sales.

Q: Analyst asked if international market slowdowns or macro factors are driving the 10% OUS growth, or if Establishment Labs is simply outperforming a healthy market. / A: CEO stated that most global regions are stable, except for the Middle East where conflict has reduced order volumes. He emphasized that the core focus has been on direct markets, which saw 16% growth, marking the sixth consecutive quarter of double-digit expansion in those territories. The company feels well-positioned for continued growth into 2027 despite regional geopolitical headwinds.

Q: Analyst questioned why minimally invasive revenue dipped sequentially in Q3 ($9M vs $12M in Q2) despite strong YoY growth, asking if it was seasonality or price sensitivity. / A: CEO attributed the sequential decline entirely to normal summer seasonality in European direct markets, which typically see weaker procedure volumes in Q3. CFO Sandra Harris reinforced that despite this seasonal dip, the company raised its full-year minimally invasive revenue expectation to exceed $40 million, confirming the underlying trend remains robust.

Q: Analyst asked how the company plans to increase Motiva utilization beyond the current 43% among existing accounts and capture new doctors within those practices. / A: CEO explained that utilization increases naturally as surgeons adapt to scheduling and product differences, but the primary lever is commercial investment. The company increased its US sales force to 55 reps and added leadership roles to target specific accounts. Marketing activities are also focused on driving deeper adoption, with month-over-month data showing increasing average orders per account.

Q: Analyst sought clarity on 2027 margin and cash flow expectations given the 25% revenue growth target. / A: CFO indicated that gross margins should expand by 50-100 basis points in FY2027, driven by the growing mix of higher-margin US business (>35% of revenue) and minimally invasive products (>15%). This improvement depends on geographic and channel mix but reflects the scalable financial model. The company aims to sustain the positive free cash flow momentum achieved in Q3 throughout 2027.

Q: Analyst asked about the timeline for FDA approval of Motiva implants for reconstruction and whether the 25% 2027 growth guide includes reconstruction revenue. / A: CEO stated that while exact timing is unpredictable, approval is expected late 2026 or early 2027, with clinical inspections completed. CFO clarified that the 25% growth guide reflects confidence in core augmentation and minimally invasive trends. CEO added that reconstruction revenue will likely materialize in the back half of 2027 due to the slower VAC committee process, making it largely upside to the base case rather than baked into the immediate growth rate.