Establishment Labs Hldgs (NASDAQ:ESTA) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below.
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Summary
Full Transcript
OPERATOR
Good morning and welcome to Establishment Labs Hldgs' second quarter 2026 earnings 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, today's call is being recorded. I will now turn the call over to Malavika William, VP, Global Head of Corporate Communications and Marketing. Please go ahead.
Malavika William, VP, Global Head of Corporate Communications and Marketing
Thank you, operator, and thank you, everyone, for joining us. With me today is Peter Cialdini, our Chief Executive Officer, and Sandra Harris, our Chief Financial 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 Hldgs' 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 EBITDA, which we disclose on an adjusted EBITDA basis. Reconciliations to comparable GAAP financial measures with 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 6, 2026.
Except as required by law, Establishment Labs Hldgs 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.
Sandra Harris (Chief Financial Officer)
Thank you, Peter. The second quarter was another important step forward. Financially, we continue to deliver strong top line growth while expanding margins and generating positive adjusted EBITDA with improving cash flow. As our U.S. business and minimally invasive platform continue to scale, we're seeing increasing operating leverage across the organization. Total revenue for the second quarter was $67.5 million, an increase of 31.7% compared to the second quarter of 2025.
In the United States, revenue was $24.7 million, representing growth of 140.9% compared to the prior year. The U.S. now represents 36.6% of total company revenue and continues to be our fastest growing region. Growth was driven by continued adoption of Motiva and increasing contribution from our minimally invasive platform. Geographically, our business outside the United States continues to perform well. OUS revenue was $42.8 million during the quarter, representing growth of 4.4% over the second quarter 2025.
Our minimally invasive platform generated $12.1 million in revenue during the quarter and continues to perform ahead of our original expectations. Gross profit for the second quarter was $47.7 million, or 70.6% of revenue, compared to 68.8% in the prior year period. Gross margin expansion was primarily driven by the increasing contribution of our higher margin U.S. and OUS direct markets, favorable product mix, and the continued growth of our minimally invasive platform.
Operating expenses were $52 million for the quarter, including $2.2 million of one-time charges related to restructuring and debt refinancing. Excluding these charges, underlying operating expenses remain well controlled, increasing modestly despite revenue growth of nearly 32%, reflecting continued operating leverage across the business. Adjusted EBITDA improved by $12.2 million to income of $3.7 million compared to a loss of $8.5 million in the prior year period.
We ended the quarter with cash and cash equivalents of $71.2 million, a sequential increase of $3.1 million from Q1 and $16.5 million higher than the same quarter last year, and generated positive overall cash flow. This milestone reflects the strong progress we have made improving profitability, expanding margins, and driving greater operating efficiency throughout the organization. Importantly, we have sufficient liquidity to execute our strategy and continue investing in future growth opportunities without the need for future equity raises.
Given our strong first half performance and continued momentum across the business, we are increasing our full year revenue guidance to between $269 and $271 million. We expect the U.S. business to be the primary driver of growth, while our OUS business remains healthy and diversified. As we look to the third quarter, I'd like to remind investors it is historically the softest quarter in the industry, reflecting the summer vacation period. We expect the U.S. business to remain strong, and our OUS business should reflect the normal seasonal pattern. As always, we expect our strongest quarter to be the fourth. We remain very encouraged by the performance of the business, the continued momentum in the United States, the growing contribution of our minimally invasive platform, and the increasing profitability profile of Establishment Labs Hldgs. Now I'll turn the call back over to Peter.
Peter, CEO
Thank you, Sandra. As you've heard today, we continue to execute well across the business. The U.S. remains a significant growth driver. Our OUS markets continue to perform well. Our minimally invasive platform is gaining momentum globally and we have a clear path to being free cash flow positive. At the same time, we continue to advance a pipeline that should support growth for many years to come. While we are proud of what we've accomplished so far, we believe the opportunity ahead remains substantially larger than what we have achieved to date.
Operator, we're now ready to take questions.
OPERATOR
Thank you, ladies and gentlemen. We will now begin the question and answer session. If you have a question, please press star followed by the number one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Please limit yourself to one question. If you wish to do a follow-up, please. If you would like to cancel your request, please press star two. One moment please for your first question. Your first question comes from the line of Josh Jennings from TD Cowen.
Please go ahead.
Josh Jennings, Analyst at TD Cowen
Hi, good morning Peter and San. Thanks for taking the questions and great to see another strong quarter, especially the U.S. momentum. Wanted to appreciate your comments on MIA during the call so far. Our checks have suggested that there's some optimism in U.S. plastic surgeons that MIA ultimately could produce an entire new category in the aesthetic space where you could transition breast augmentation from a surgery to an injectable procedure. I mean, is there any plans to kind of drive that notion and just that segmentation here in the international markets where you've launched and ultimately in the U.S., and how does that all play out?
Peter, CEO
Yeah, thank you, Josh. You know, listen, I think what we've always highlighted around the minimally invasive platform—and this is truly an innovation in a category that hasn't seen innovation—and you know, MIA, as you highlighted, is just outside the U.S. We've had good traction. It's also, you know, a key driver for the development of PRESERVE. So part of this entire minimally invasive platform, you know, I think is a significant growth driver for us.
It brings in a number of new patients to the category. We've seen that through market research. In the U.S., it's about 15% with PRESERVE; outside the U.S., similar type of numbers because it does address a number of the barriers that are preventing women from doing a breast augmentation. When you talk about minimal anesthesia, you talk about also those smaller scars and quicker recovery. So it'll continue to be a key driver for us, and we're just in really the early stages of that development, and we're seeing that impact in the U.S. and also outside the U.S.
Josh Jennings, Analyst at TD Cowen
Thanks for that. And I know I'm focused on the pipeline here with my questions, but you referenced GEM on the call so far. You know, it seems like there's a potential for—We may be getting too aggressive with our assumptions—but a potential for initial U.S. kind of commercial—OUS, excuse me—commercial launch maybe next year. Any more details you can provide on where that development program stands and any kind of regulatory or commercial milestones we should have on our catalyst calendar?
Thanks for taking the questions.
Peter, CEO
Yeah. So, Josh, regarding GEM, you know, we see this as a tremendous opportunity, really leveraging a lot of the technology from the minimally invasive platform in really providing a safer alternative, also with more predictable results, to the traditional Brazilian butt lift. So where we are in that process is we're doing a clinical study in Costa Rica. We expect next year in the back half to do an early experience in Latin America. And right now we're really working through what that regulatory pathway is going to be for the U.S. as well as OUS, primarily in Europe. But we're very pleased with the progress we've made so far. I mean, it's a very differentiated technology and, you know, we see this as very much an untapped market. But in terms of timing for, let's say, the U.S., we have so many things that we're going to be driving growth over the next couple years. We don't see that really as a contributor in the U.S. until 2028 and beyond, but we're still working through what that regulatory pathway is going to be.
OPERATOR
Your next question comes from the line of Sam Eiber from U.S. Bancorp. Please go ahead.
Sam Eiber, Analyst at U.S. Bancorp
Hi, good morning. Thanks for taking the questions here and congrats on the nice quarter. I want to come back to PRESERVE in the U.S.—300 surgeons now certified. Curious what you're hearing from the field in terms of utilization and adoption, their own plans to expand PRESERVE within their practice, and generally thoughts around the procedure and what it can mean for the U.S. business over the back half of the year.
Peter, CEO
Yeah, thanks, Sam. I mean, it's pretty clear we're, you know, we're off to a great start with PRESERVE. There's significant demand. You know, I think our original target was around 200 surgeons. You know, we quickly surpassed that. We're really expanding our capacity in terms of training. So there's no shortage of surgeons that are interested. What we're finding is that, you know, as soon as they're certified, it's very quick adoption in terms of the initial ordering, and then it's a process of working through their schedules and getting the right patients.
And we fully expect that this is going to continue to be a key driver for our growth in the back half of this year. We're targeting to train approximately 500 surgeons for the full year 2026. And, you know, this is really driven by tremendous demand in the marketplace. And, you know, it is addressing a significant barrier that patients have with doing a breast augmentation. And that's really been playing out in what we're seeing in the marketplace.
Sam Eiber, Analyst at U.S. Bancorp
Okay, really helpful. Maybe if I could just squeeze in a quick follow-up. The global minimally invasive revenue for the quarter—$12 million—certainly passed our expectations. As I think about the prior $35 million guidance, it seems like you're on pace to achieve well beyond that. I guess any updated thoughts on how we should be thinking about that number?
Peter, CEO
Yeah, Sam, I think we said over $35 million. And, you know, what we said recently is that we're going to be approaching for the full year about 15% of our revenue. So I think that depending upon how you look at our guidance, that gives you the guide for minimally invasive going forward.
Sam Eiber, Analyst at U.S. Bancorp
Okay, great. Thanks for taking the questions.
OPERATOR
Your next question comes from the line of Mason Carricko from Stephens. Your line is now open.
Mason Carricko, Analyst at Stephens
Hey guys, thanks for taking the question here. Could you give a sense of Motiva mix among PRESERVE-trained surgeons compared to that of an untrained one? Have you seen PRESERVE certification lift overall Motiva mix or share at that account? And I guess longer term, what percentage of your U.S. volumes do you think could ultimately be PRESERVE?
Peter, CEO
Yeah, so thanks. So we are seeing in the accounts, I mean, there's such strong interest in PRESERVE. It's truly a unique innovation in the marketplace that's really been starving for innovation. So, you know, we're seeing strong interest and a number of surgeons are really—once they get trained and accustomed to using PRESERVE—a lot of them see this as really the future of the industry, and it will continue to be a bigger part of the practice. It certainly generates significant revenue opportunities for them. So we see that over time that will continue to be a bigger part of that market. In terms of the split, I don't— Yeah, I mean, in terms of the split, I don't know that we've really talked about the split between the U.S. and the OUS, but it's going to be a very important part of our ability to expand the market and to continue to take market share in the U.S.
OPERATOR
Your next question comes from the line of Caitlin Roberts from Canaccord Genuity. Please go ahead.
Caitlin Roberts, Analyst at Canaccord Genuity
Great. Thanks so much for taking the question and congrats on a great quarter. Would love to touch on recon. Have you had any convos with the FDA on the recon indication and updated expectations for this approval timeline? And how many hospitals are you now in with Flora? Thank you.
Peter, CEO
Yeah, thanks, Caitlin. You know, obviously recon is a tremendous opportunity for us. It doubles the TAM for us in the US and we fully expect to have the same level of success in recon in the US that we've experienced in augmentation. So in terms of the feedback we have heard back from the FDA, we're in the process of responding to what we consider some routine questions. You know, what I think is very positive, they have now started the BIMO audits of our clinical study sites, which I think is a normal part of the process.
And I think it's a good indication that things are progressing well. In terms of the actual approval timing, I mean, it's really up to the FDA, but what we're seeing, everything is positive, moving in the right direction. And just to remind everybody, we don't really expect from a planning standpoint to achieve material revenue in recon until 2020.
OPERATOR
Your next question comes from the line of Joanne Wunsch from Citi. Your line is now open.
Jane Marie Lai, Analyst at Citi
Hello, this is Jane Marie Lai on Sergio M. from Citi. Thanks for the question. At this half-year mark, could you provide more color on your expectations for the second half of the year? And I know it's a bit early, but for 2027, how should we think about that? And do you have any kind of color on that as well?
Peter, CEO
Yeah, so I'm not sure I fully heard the question. My understanding is what's our expectation in terms of the back half of the year. You know, listen, I think we're going to continue to see the strong momentum that we've experienced in the first half, especially with the US, but also in terms of how we're driving growth in our direct markets; we expect that momentum to continue in the back half of the year. And, you know, I think there's significant, you know, continued growth opportunities with our platforms and the different initiatives that we're driving.
We haven't really set any guidance as it relates to 2027, but I'll pass that over to Sandra.
Sandra Harris (Chief Financial Officer)
Yeah, just as it relates to this year, I'll just remind you of our seasonality, and we do anticipate that our fourth quarter is always the strongest quarter of the year, with the third quarter being impacted by some seasonal impact around the summer and vacation periods. In both our OUS business and our US business, what we did is we have raised our guidance to 269 to 271. And then in regard to 2027, the only information we have provided to date is that we do expect that revenue next year would be around the 25% growth.
OPERATOR
Your next question comes from the line of Anthony Petrone from Mizuho Financial Group. Please go ahead.
Anthony Petrone, Analyst at Mizuho Financial Group
Thanks, and congrats on the strong print here. Maybe one on Preserve, competitive dynamics, and then pricing. Just on Preserve, when you think about site adoption in the US specifically, one of the medtech phenomenons, for instance, with Da Vinci Surgical, you sort of have Da Vinci in your practice in the early days and it represents a competitive advantage for that site. That site then gained share from its competitors. So to what extent do you think Preserve is going to allow surgeon sites to have competitive advantages versus its competitors?
When do you think that tipping point actually happens? And then just on unit economics, can you remind us where Preserve sits per case versus Motiva and when you think about reconstruction, how pricing will settle out there. Thanks.
Peter, CEO
All right. So thanks, Anthony. In terms of Preserve, you know, as we highlighted, we're really in the early innings in the US, but the feedback has been incredibly positive from the surgeons. We continually get approached by surgeons and we expect that to continue to grow. You know, as I mentioned previously, we're building out or expanding our capacity to do the training. So, you know, for us, I think the surgeons that are using Preserve, it provides them a significant competitive advantage in the market.
And I think that's where such a strong interest is. I mean, we've seen from market research that 15% of women who have done Preserve were not initially considering doing a breast augmentation until they heard about Preserve. So it really has the potential to be a category driver and bring additional patients to the surgeon. So we see that as a competitive advantage and that's probably why we have such significant demand from different surgeons. In terms of the recon, we highlighted we're making good progress from a regulatory standpoint.
You know, this clearly is a significant increase in terms of the ASP in the recon segment. It also really doubles our total addressable market in the US. So we're very pleased with the progress we're making there. I think we've already laid a decent foundation with the Flora, just getting our foot in the door in a number of facilities. But we still have to go through that back process.
OPERATOR
Your next question comes from the line of Mike Mattson from Needham and Company. Please go ahead.
Mike Mattson, Analyst at Needham & Company
Yeah, thanks. So, you know, I heard the growth kind of 4.4-ish percent outside the US, but just curious if you're seeing or saw any sort of impact from the Iran war in either the Middle East or the broader international business in the quarter.
Peter, CEO
So thanks, Mike. I mean, we've had, I think, very solid growth outside the US, and a lot of that's been driven by our direct markets, in particular in Europe. You know, we've achieved 16% growth this quarter versus the same quarter last year, so very pleased with that. And that's very important for us because we prioritize those markets. These are our markets. We have better economics. We've made a number of leadership changes. We're also increasing the resources, and it's really reflected in terms of our performance.
You know, what we're trying to do is de-emphasize our dependency on the distributors, and I think we're really establishing that and we've been very effective in doing it. Specifically, I would say across most of our distributor markets, I think demand has been steady. But the one outlier is what you highlighted: the Middle East. Obviously, with the conflict there, we have had orders, but it's at a much lower level than what we've experienced in the past.
And we don't expect that to change for the remainder of the year. But in terms of the spillover in other markets, we haven't really seen that, but we're going to continue to monitor that very closely and course correct where necessary.
Sandra Harris (Chief Financial Officer)
And Mike, just as a reminder, Middle East is less than 5% of our revenue.
OPERATOR
Your next question comes from the line of Alan Gong from JPMorgan. Please go ahead.
Alan Gong, Analyst at JPMorgan
Thanks for the question. I guess just on the cost front, you know, when we look at your operating spend for the quarter, you know, excluding the refinancing costs, it came in better than expected. But when we look forward, there's clearly a lot to invest into between continued launch of the minimally invasive platform and upcoming reconstruction, not to mention GEM. So how should we think about the trajectory of, you know, SG&A and R&D spend in the balance of the year?
Sandra Harris (Chief Financial Officer)
Yeah, thanks, Alan, for the question. And as you noted, we are making progress leveraging our operating expenses. As you noted, we had some one-time costs in the quarter that made our overall operating expenses around 52 million. But when you adjust for that, we're seeing that, you know, basically we have leveraged our operating expense in relation to our sales growth. So single-digit growth in operating expenses with strong double-digit growth in revenue.
As we look out, we have had a very healthy investment in our R&D efforts around our innovation pipeline, and I think we've been investing at the right rate to bring that innovation. So to date, we're not anticipating any major increases to what we've previously seen. We think we're pacing our innovation pipeline appropriately, and we continue to look for areas of opportunity to leverage our expenses as we grow the business across the organization.
OPERATOR
Your next question comes from the line of Matthew Taylor from Jefferies. Please go ahead.
Matthew Taylor, Analyst at Jefferies
Hi, good morning. Thanks for taking the question. I wanted to ask a follow-up on recon, and maybe I'll weave that into a '27 question. So I guess my question is, hypothetically, if you got recon approval on January 1st, I'm just interested in how quickly that would start to contribute and how quickly you can launch it. And when you talked about 25% growth-ish next year, does that include a lot of recon contribution or would you grow 25% without it?
Sandra Harris (Chief Financial Officer)
Thanks. Yeah, in regard to recon, I think what we've said in the past is that we don't anticipate we would grow as rapidly as we have with our launch of our minimally invasive platform. It does take longer periods of time as we work with the hospitals. And as far as what's in our guidance for this year, I think we've said that we don't have any anticipation for recon this year. And as we work toward 2027, we'll provide more color on that based upon what we know from the FDA.
OPERATOR
There are no further questions at this time. I will now turn the call over to Mr. Peter Maldini for closing comments.
Peter, CEO
Thank you, operator. And thank you, everybody, for joining the call today. Really appreciate the time. You know, as you see, we're making great progress in terms of the growth with Establishment Labs Hldgs, really applying a lot of financial discipline, but at the same time making sure we deliver in terms of the revenue expectations. We have a tremendous portfolio, tremendous opportunity of innovation, and we continue to capitalize on that in terms of great execution.
So once again, thanks, everybody, for joining the call today. Look forward to catching up in the follow-up calls as well as upcoming conferences. Thank you.
OPERATOR
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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