Establishment Labs Holdings Inc. (NASDAQ:ESTA) Q2 2025 Earnings Call Transcript

Establishment Labs Holdings Inc. (NASDAQ:ESTA) Q2 2025 Earnings Call Transcript August 8, 2025

Operator: Good morning. Welcome to Establishment Labs’ Second Quarter 2025 Earnings Call. [Operator Instructions] 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.

Rajbir Singh Denhoy: 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.

Fillipo Peter Caldini: 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 good signs for our trajectory.

There is 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. So 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. But 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. So 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 lea ng quite a bit broader today. There is a new group of surgeons whose podium is social media through platforms like Instagram and TikTok. Establishment Labs is attracting surgeons and patients through our digital and social media efforts, and we’re seeing the results. Surgeons consistently tell us that ders who spoke frequently on podiums 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 also 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 and more available across America. Early data suggests that surgeons who offer Motiva implants are seeing an increase in their business. In other words, 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. As such, 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 expanded range of sizes approved by the FDA, and this will help drive utilization as well as 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. It also provides for 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 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 not only included some of the highest volume surgeons in the United States, but also current and past leaders of major plastic surgeon societies.

If you haven’t, I would 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 TAM on a dollar basis as well. Preservé highlights perhaps the most important point. All the technological advancement that has gone into Motiva implants allows 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 has dovetailed nicely with the increasing interest in smaller implants, a trend that was covered recently in the article of 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 in this cohort. We will lock the database for a supplement in September and expect to submit for approval and 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. And as previously noted, our European direct markets grew approximately 27% versus last year. Core markets like the U.K., Spain, 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, 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 the strong interest from clinics to offer the procedure. Preservé also continues to build the 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 being added regularly.

With that, I will now turn the call over to Raj.

Rajbir Singh Denhoy: 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, 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 is 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 2Q 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 3Q 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.

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. I will now turn the call back to Peter.

Fillipo Peter Caldini: 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 the breast reconstructive surgery. Our innovations are brought to market through years of hard work, and this is a recognition is a testament to the passion and dedication of the many people who work at Establishment Labs. Our company remains focused on 4 main priorities this year: driving growth in the U.S., the 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 in 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 TAM on a dollar basis as well as contribute gross margin expansion. And Mia helps expand our TAM 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.

Q&A Session

Operator: [Operator Instructions] First question comes from Josh Jennings at TD Cowen.

Joshua Thomas Jennings: Nice quarter, and it’s great to see the positive 2025 revenue guidance upgrade and hear about the continued momentum in the U.S. Motiva launch. I think you guys touched on most of the points in the guidance update. But maybe if you could fine-tune or share some more details around assumptions baked into the upgrade, $40-plus — at least $40 million in U.S. Motiva revenues and single-digit international sales. But anything regional you can share? And Peter, you shared — you talked about some headwinds in China. I would love to hear more about that and how we should be thinking about revenue in China in the second half.

Rajbir Singh Denhoy: Josh, thanks for the question. Yes, as you noted, we are seeing very strong results in the U.S. The continued momentum we’re seeing in surgeon adoption and the utilization is giving us the confidence to raise the U.S. outlook to at least $40 million. And 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. And our distributor markets are performing to expectations with the exception of China. And 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.

Fillipo Peter Caldini: Yes. So Josh, thanks for the question. Just to add a little bit 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. And basically also where we’re positioned in the premium segment, we’re seeing a lot of challenges there. But we also feel that our distributors experience 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 that they’re in.

So this is a big 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, just that the ramp-up is going to be a little bit slower. And we’re reflecting that in the guidance. But as Raj mentioned, continuing to do very well in the U.S. We’re continuing to see that momentum in Q3. The direct markets are doing well, and that’s been a priority for us. These are markets that we see significant growth opportunities, and these are areas where we have our own organizations and I think also opportunities for growth. So we’re very pleased with those growth, and I think that’s reflected in the numbers. And also, we’re being cautious about the current situation in China.

Operator: The next question comes from Sam Eiber at BTIG.

Sam Shimon Eiber: 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 timing of when that could happen?

Fillipo Peter Caldini: 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, we continue to build that momentum. I think as most accounts, I mean, it varies by account that I highlighted in the prepared statement. But we — what we are seeing is we’ve been able to capture a number of accounts. I think we have over 40 accounts that have already done over 100 orders year-to-date. Some have actually reached 200. So I think it’s going to continue to progress in the same type of trajectory. And as we add accounts, the original accounts that are moving up the adoption curve, which varies by clinic, you’re going to see acceleration as well.

So I don’t think there’s necessarily going to be a hockey stick per se. I think you’re just going to see continued gradual growth as we add new accounts as well as some of the accounts that we’ve already added are kind of moving up the adoption curve.

Operator: The next question comes from Anthony Petrone at Mizuho Group.

Anthony Charles Petrone: Congrats on a great quarter here and a solid launch on Motiva. One on U.S., one on OUS. On the U.S. side, when we think about just the rate of physician adds, it was — 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 — and 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.

Rajbir Singh Denhoy: 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 continue to add to that. In terms of the growth moving forward, a little bit more of our focus, I would say, at this point, is actually enhancing the utilization rate in the accounts that we do have. But we still see opportunities to add additional accounts, especially as we expand our sales force. But I think that’s going to be the focus as we move forward.

Anthony Charles Petrone: Just a quick follow-up there. Is it fair — 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 just 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?

Fillipo Peter Caldini: Okay. So 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. And I think some of that is driven because we are driving share and we’re gaining — continue to gain share in the marketplace. But I think also with a lot of the activities that we’re doing in terms of social media, Meggan Trainer, I think we’ve been able to kind of increase some of the interest in terms of patients and looking for breast augmentation procedures. I think we’ve been working and helping to kind of remove some of that taboo related to it. So I think in some respects, and we don’t have specific data on this, we’re helping to drive growth in the category. As it relates to the OUS numbers, Raj.

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

Anthony Charles Petrone: The revenue attached to the shipping day comment in APAC specifically.

Rajbir Singh Denhoy: Well, I think 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 really relative to shipping days or anything related to that.

Fillipo Peter Caldini: Yes. I think, Anthony, just to add, I think specific to the — in terms of lapping versus last year, obviously, we had — last year, we had China orders. We didn’t have it this year. Some of it is just the timing of these orders. And I think in a couple of cases, distributors are managing down inventory as it relates to a regulatory change that’s coming. But the quantification of that impact, I think, is somewhat marginal, and it’s going to be really kind of something we address in the following quarters. It’s more of a timing issue.

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

Mike Matson: I have 2. They’re sort of related. So I’ll just go and ask them both now. 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 being able to sustain that? Are you seeing any pushback? And then the second question would just be around competitive response. Are you seeing — what are you seeing the 2 bigger competitors doing, if anything, to try to fight back as they lose share in Motiva?

Rajbir Singh Denhoy: Yes. Thanks, Mike. In terms of pricing, as you mentioned, we do have a premium price versus our competitors because we feel we have a superior product in the marketplace. And I think that’s reflected by the patients’ acceptance as well as the surgeons. We have not really felt any pricing pressure per se. I think as naturally, as we gain scale with certain clinics, there’s going to be volume discounts based on the number of procedure — number of the orders that they have. But that’s not really driven by any kind of competitive reaction. I would say from an overall competitive response, we see, I would say, nothing that’s major coordinated reaction. I think much of it is really on a market-by- market basis, certain responses by individual sales reps, but nothing that I would say, is a concerted, organized and strong reaction from the competitive set right now.

Operator: The next question comes from Allen Gong at JPMorgan.

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

Rajbir Singh Denhoy: Yes. Thanks, Alan. Thanks for the question. So 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. And then we’ll, of course, see a nice resumption in the fourth quarter. The guidance is for at least $40 million, right? And so we continue to look at it in terms of trying to offer a conservative view on it. But clearly, the momentum in the business is quite strong and $40 million is really the low end of where we expect to be for the year. As it relates to 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. And then we should see a nice step-up into the fourth quarter.

K. Gong: And then just a quick follow-up on spend. SG&A came in, I think, a little bit higher than we were thinking. Is that just additional investment to support the U.S. launch? And how should we think about the leverage you can maybe get in the back half now that we’re moving past the initial phases of the domestic launch?

Rajbir Singh Denhoy: Yes. So as we noted in the prepared remarks, there was primarily 2 major factors in the quarter. As I mentioned, the shipping costs were higher, and that was a combination of, again, sending more product via air versus sea freight in order to meet the demand that we’re seeing both in the United States and outside. And then there was in the United States, given the higher volumes that we’re moving, we did have higher last mile shipping costs actually getting the product from the warehouse to the customers. As we think about — and the second piece of that is the timing of certain expenses. And so we did have some higher marketing spending in the United States relative to some of the activities, the Megan Trainer campaign and the like, but that was really more of a timing question.

As we think about the back half of the year, we do expect that operating expenses will trend down from where they were here in the second quarter, and so we’ll see a nice improvement into the third quarter. And as we’ve spoken about previously, it is the increase in revenue primarily driven by the United States that is providing the leverage. So as we keep operating expenses on a quarterly basis relatively consistent, as those revenues come in and particularly the higher gross margin U.S. revenues, that’s where the leverage starts to flow from. And we remain confident that we’ll achieve EBITDA positive in the back half of the year and then ultimately cash flow positive next year.

Operator: The next question comes from Matt Taylor at Jefferies.

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

Fillipo Peter Caldini: We don’t have perfect visibility into the investments from that distributor — from the investor into our distribution partner. They have been building the activity in China. Our — the issue so far has been that just they’re experiencing some challenges in scaling the commercial operations there. And they’re a little bit behind where we would have expected at this point in the launch. We are doing what we can to support that distributor to help them achieve what we all expect we can in the region. As we mentioned on the prepared remarks, we’re the leading implant in all of the surrounding countries in Europe, and our expectation is we’ll achieve a similar position in China, but it is clearly going a bit slower than we had hoped at this point.

Matthew Charles Taylor: Okay. And then second question was I wanted to ask about the difference between Mia and Preservé. I mean you talked a lot about Mia in the past and the excitement around that and it seems just maybe a recency bias, but now you’re talking a lot more about Preservé. I know there’s some similarities and some differences. Maybe I’ll just ask, if you look 5 years out, do you think Mia is going to be bigger than Preservé in terms of dollars or the other way around? Just help us think about the 2 approaches into the future.

Fillipo Peter Caldini: Yes. Thanks, Matt. Both Mia and Preservé are part of our minimally invasive platform, and they work very complementary. Mia is for procedures, 2 cup sizes, it’s transactxillary. It’s not for every patient or every surgeon. And I think when you look at Preservé, it’s much broader than what we call for everyday uses. You can have different or more types of procedures, you can go more cup sizes. So I think in general, I think you’re going to see both of them playing quite well together because you could have a Mia patient that — or something that’s interested in Mia that’s not going to be the right patient, and they easily shift to Preservé. And I think over time, I would suspect that Preservé would be larger than Mia because it attracts to more patients and also more surgeons.

But what we are very pleased about so far in the launch in Europe is not only have we gotten a very strong interest, but we’re also finding that it has not cannibalized our EMEA business. In fact, a number of clinics that are signed up for EA are also taking on Preservation. So they’re seeing the value of leveraging both types of procedures.

Operator: Next question comes from Mason Cariso at Stephens

Mason Owen Carrico: 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 is that initiative going? Have you seen any impact on utilization at accounts where you have placed that inventory?

Fillipo Peter Caldini: Yes. So that’s — I think that’s going very well. We’ve reached over 100 accounts where we have permanent consignment. And I think that’s really been a process for us to get the inventory into the U.S. And I think that’s one of the reasons why Raj highlighted earlier, there’s a lot more air shipments just to get the inventory into the U.S. And so we’ve been able to get that in the market, and it certainly helps in terms of enhancing the utilization rate, and it also improves our ability to kind of get products out to the clinics. in a timely manner. So it has been — it’s been a process kind of getting it to that level. We continue to expand the number of accounts as we get more products into the market and also as we sign up more clinics.

Mason Owen Carrico: 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 around pacing hires changed at all?

Fillipo Peter Caldini: Yes. So right now, as I mentioned in the last call, we are up to 43 reps in the U.S. As we are looking to go into next year, we’re probably going to be adding 10 to 15 reps — and then on top of that, management roles or leadership roles in the sales organization. But from a rep standpoint, 10 to 15, and a lot of that is to cover some of the areas as we enhance penetration in some of the geographies, we’re going to need a little bit more coverage there, but also in preparation for the Preservé launch. So some of that’s going to be starting in the back half of Q4, but also a majority of that’s going to be in the first quarter as we continue to ramp up our sales and in preparation for Preservé, we’re going to be enhancing our sales force.

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

Joshua Thomas Jennings: I wanted to build on Matt Taylor’s question. You can ask it already, but you talked about the potential for EMEA accounts to adopt Preservé. And I was just thinking about the U.S. strategy in terms of launching Preservé first here and then Mia kind of setting the stage and then introducing Mia. And internationally, you’ve had Mia commercialized now with the Preservé launch. I mean do you think Preservé ultimately can drive increased adoption and utilization of Mia? I think you talked about Mia accounts adopting Preservé and do you think it can go the other way as well? I mean we think it can. And then secondly, the last follow-up is just on the limited launch dynamics in the U.S. You had that training session down in Costa Rica with the U.S. Motiva revenue guidance update, we’re assuming minimal contribution from Preservé in the second half of ’25 and then more meaningful in 2026.

So maybe just refresh on whether Preservé is included in that update for the U.S. Motiva revenue.

Fillipo Peter Caldini: Yes. Thanks, Josh. In terms of the U.S. launch, we’re going to be launching Preservé first. As I mentioned, it’s in the first half of 2026. And I think it’s going to be a great introduction into our minimally invasive platform. I think it’s very consistent to the type of procedures that surgeons currently do in the U.S. And then I think once we have that established, I think the Mia business, the Mia opportunity, once we get the regulatory approval for Ergo2, which we plan on submitting the early part of 2026. So depending on that approval timing, we will really dictate our launch timing with Mia. But I think it’s going to be a great add-on to Preservé. And then I think your second question was the early experience for Preservé.

We’re not expecting really a significant or even really an impact in terms of our revenue guidance for Motiva in 2025. I think this is really, as we said, intended to be an opportunity for us to learn and really hone our strategy in terms of launching it in the U.S. So I think the revenue potential for Preservé in the U.S. is very small, and that’s not how we’re really kind of looking at that, and we don’t really have that as a part of — currently as part of the guidance.

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

Fillipo Peter Caldini: Yes. Thank you, operator, and thanks for everybody joining the call today. I look forward to seeing everybody in the next call. And hopefully, you get a chance to enjoy what a little bit left of the summer and look forward to getting together again in the near future. Thank you.

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