Establishment Labs Reports Fourth Quarter and Full Year 2023 Financial Results and Provides 2024 Guidance
- Revenue guidance of $174-184 million for 2024, a 5-11% increase over 2023.
- Q4 revenue of $31.6 million and a net loss of $22.1 million.
- Proforma cash balance of $90 million after a $50 million private placement.
- Positive amendment to Oaktree credit facility with access to $50 million after FDA approval.
- Launched Motiva Implants® in China and first U.S. commercial procedure with Motiva Flora® Tissue Expander.
- CEO's focus on expense reduction, shareholder value creation, and positive adjusted EBITDA in 2024.
- 20th-anniversary milestone with global expansion plans and innovative technologies for market leadership.
- Total revenue decreased in Q4 2023 compared to the same period in 2022.
- Gross profit margin slightly decreased in Q4 2023 compared to the same period in 2022.
- Net loss from operations increased in Q4 2023 compared to the year-ago period.
- Adjusted EBITDA showed a higher loss in Q4 2023 compared to the year-ago period.
- Cash balance decreased significantly from December 31, 2022, due to operating activities and investments.
The reported financial results by Establishment Labs Holdings Inc. indicate a mixed performance with several key takeaways for investors. The company's revenue guidance for 2024, projecting an increase of 5% to 11%, signals modest growth expectations. However, the exclusion of potential revenue from Motiva Implants® in the United States, which is anticipated in 2024, suggests that the actual growth could be more significant if FDA approval is granted. This exclusion could be a conservative approach to guidance, managing investor expectations while highlighting potential upside.
The fourth quarter net loss increase from $13.2 million to $22.1 million year-over-year is concerning, reflecting higher operating expenses not fully offset by revenue growth. This could raise questions about the company's cost management and scalability, especially since the gross margin remained relatively stable. The positive amendment to the Oaktree credit facility is a strategic move providing financial flexibility post-FDA approval, but it also indicates reliance on external financing to sustain operations.
Investors should note the company's strategic initiatives, such as the entry into the Chinese market and the first U.S. commercial procedure with Motiva Flora® Tissue Expander. These developments could be pivotal for long-term growth, positioning the company as a global player in the breast aesthetics and reconstruction industry. However, the near-term financial health of the company, as evidenced by the net loss and cash burn, remains a critical area for scrutiny.
The aesthetic medical technology sector is witnessing increased demand as markets stabilize post-pandemic. Establishment Labs' focus on reducing expenses and securing its balance sheet through private placement and credit facility amendments is a strategic response to this environment. The company's aim to achieve positive adjusted EBITDA and become cash flow positive by 2025 is an ambitious target that aligns with industry trends towards profitability and financial sustainability.
The launch of Motiva Implants® in China and the potential FDA approval in the U.S. represent significant market expansion opportunities. The company's emphasis on 'highly differentiated technologies' could resonate well with consumers and practitioners seeking innovation in a field that has seen little change over the years. Nevertheless, the company's ability to convert these technological advancements into profitable revenue streams will be critical in determining its market leadership potential and impact on shareholder value.
While the company's 20th anniversary marks a milestone, the actual impact of these strategic moves on the company's market share and competitive positioning will depend on effective execution and market reception. Investors should monitor the company's progress closely, particularly in terms of market penetration and consumer adoption rates of its new products.
Establishment Labs' performance must be contextualized within the broader medical device industry, which is characterized by high regulatory hurdles and significant R&D investments. The company's continued progress with the FDA on the approval of Motiva Implants® is a critical step, as regulatory clearance is a major barrier to entry and can significantly impact market access and revenue potential.
The company's R&D spending decline, while potentially beneficial for short-term cost savings, raises questions about the long-term commitment to innovation. R&D is the lifeblood of medical technology companies and sustained investment is necessary to maintain a competitive edge. The balance between cost management and investment in innovation will be crucial for Establishment Labs as it seeks to capitalize on its 'highly differentiated technologies' in the face of intense global competition.
Furthermore, the company's expansion into China, the world's second-largest economy and a rapidly growing healthcare market, is a strategic move. However, it also presents challenges such as navigating local regulations, cultural differences and competition from domestic and international players. The company's ability to leverage its technological differentiation while adapting to local market dynamics will be instrumental in its success in China and other international markets.
Fourth Quarter Highlights and Outlook
-
2024 revenue guidance of
$174 million $184 million 5% to11% over 2023. Guidance does not include revenue from Motiva Implants® inthe United States , which is expected in 2024. -
Fourth quarter revenue of
$31.6 million -
Fourth quarter net loss from operations of
$22.1 million $13.2 million -
Proforma cash balance of
$90 million $50 million -
Positive amendment to Oaktree credit facility on February 22 with access to up to
$50 million -
Launched Motiva Implants® in
China . -
First
U.S. Commercial Procedure with Motiva Flora® Tissue Expander. - Continued progress with FDA on approval of Motiva Implants®.
“Our markets are stabilizing and we are seeing improving demand,” said Juan José Chacón-Quirós, Chief Executive Officer. “Our global market checks suggest that we will have continued improvement throughout 2024. During this period, we have taken meaningful steps to reduce our expenses and cash use. We have also secured our balance sheet with the recent
“2024, the 20th anniversary of our founding, is a pivotal year for Establishment Labs," Mr. Chacón-Quirós continued. “With approval of our implants in
Fourth Quarter 2023 Financial Results
Total revenue for the quarter ended December 31, 2023 was
Gross profit for the fourth quarter was
Total operating expenses for the fourth quarter were
SG&A expenses for the fourth quarter increased approximately
R&D expenses declined approximately
Net loss from operations for the fourth quarter was
Adjusted EBITDA for the fourth quarter was a loss of
The Company’s cash balance on December 31, 2023 was
Conference Call and Webcast Information
Establishment Labs will host a conference call and webcast today at 4:30 p.m. Eastern Time to discuss its financial results. The conference call can be accessed by dialing (877) 407-8037 (
About Establishment Labs
Establishment Labs Holdings Inc. is a global medical technology company dedicated to improving women’s health and wellness through the power of science, engineering, and technology. The Company offers a portfolio of Femtech solutions for breast health, breast aesthetics and breast reconstruction. The over three million Motiva® devices Establishment Labs has delivered to plastic and reconstructive surgeons since 2010 have created a new standard for safety and patient satisfaction in the over 85 countries in which they are available. The Motiva Flora® tissue expander is used to improve outcomes in breast reconstruction following breast cancer and it is the only regulatory-approved expander in the world with an integrated port using radio-frequency technology that is MRI conditional. Mia Femtech™, Establishment Lab’s unique minimally invasive experience for breast harmony, is the Company’s most recent breakthrough innovation. These solutions are supported by over 200 patent applications in 25 separate patent families worldwide and over 50 scientific studies and publications in peer reviewed journals. Establishment Labs manufactures at two facilities in
Establishment Labs' Motiva silicone gel-filled implants are currently not approved for commercial distribution in
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: EBITDA and Adjusted EBITDA. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies.
EBITDA is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes; and (3) depreciation and amortization. We consider EBITDA useful to an investor in evaluating and facilitating comparisons of our operating performance between periods by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results.
We also present Adjusted EBITDA which includes additional adjustments for items such as other non-cash charges, gains or losses on extinguishment of debt, share-based compensation and foreign currency gains and losses. We believe that Adjusted EBITDA provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and EBITDA, is beneficial to an investor's understanding of our performance.
We believe disclosure of this information is also useful to investors as it provides insight into the earnings that management uses to make strategic decisions. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as prescribed by GAAP as a measure of our operating performance. EBITDA and Adjusted EBITDA do not represent cash generated from operating activities under GAAP and should not be considered as alternatives to cash flows from operations or any other operating performance measure prescribed by GAAP. These measures are not measures of our liquidity, nor are indicative of funds available to fund our cash needs. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. EBITDA and Adjusted EBITDA may include funds that may not be available for management’s discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties.
Please see “Reconciliation of EBITDA and Adjusted EBITDA” for a reconciliation of these measures to net income (loss), the most directly comparable financial measure. This release also includes information about our expectations regarding Adjusted EBITDA on a forward-looking basis. We have not provided a reconciliation of such forward-looking Adjusted EBITDA information because a reconciliation of such measure to our expected GAAP net income (loss) on a forward-looking basis is not available without unreasonable efforts. The timing or amount of various reconciling items that would impact the forward-looking expectations for this non-GAAP financial measure are uncertain, depend on various factors and cannot be reasonable predicted. Such unavailable information could be material to our results computed in accordance with
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “intends to,” “would,” “will,” “may” or other similar expressions in this press release. Any statements that refer to projections of our future financial or operating performance, anticipated trends in our business, our goals, strategies, focus and plans, including related product development and commercialization and regulatory approvals, and other characterizations of future events or circumstances, including statements expressing general optimism about future operating results, related to the company’s performance are forward-looking statements. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements presented in this report, or that we may make orally or in writing from time to time, are expressions of our beliefs and expectations based on currently available information at the time such statements are made. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control. Although we believe that our assumptions are reasonable, we cannot guarantee future performance, and some will inevitably prove to be incorrect. As a result, our actual future results and the timing of events may differ from our expectations, and those differences may be material. Factors, among others, that could cause actual results and events to differ materially from those described in any forward-looking statements include risks and uncertainties relating to: our ability to successfully, timely and cost-effectively develop, seek and obtain regulatory clearance for and commercialize our product offerings; the rate of adoption of our products by healthcare providers or other customers; the success of our marketing initiatives; the safe and effective use of our products; our ability to protect our intellectual property; our future expansion plans and capital allocation; our ability to expand upon and/or secure sources of credit or capital; our ability to develop and maintain relationships with qualified suppliers to avoid a significant interruption in our supply chains; our ability to attract and retain key personnel; our ability to scale our operations to meet market demands; the effect on our business of existing and new regulatory requirements; and other economic and competitive factors. These and other factors that could cause or contribute to actual results differing materially from our expectations include, among others, those risks and uncertainties discussed in the company’s annual report on Form 10-Q filed on November 7, 2023 and will be discussed in the company's quarterly report on Form 10-K that will be filed on February 29, 2024, which risks and uncertainties may be updated in the future in other filings made by the company with the Securities and Exchange Commission. The risks included in those documents are not exhaustive, and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We are not undertaking any obligation to update any forward-looking statements. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends.
ESTABLISHMENT LABS HOLDINGS INC.
|
||||||||||||||||
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Revenue |
|
$ |
31,560 |
|
|
$ |
43,813 |
|
|
$ |
165,151 |
|
|
$ |
161,700 |
|
Cost of revenue |
|
|
10,975 |
|
|
|
15,648 |
|
|
|
58,174 |
|
|
|
55,105 |
|
Gross profit |
|
|
20,585 |
|
|
|
28,165 |
|
|
|
106,977 |
|
|
|
106,595 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
Sales, general and administrative |
|
|
36,880 |
|
|
|
34,846 |
|
|
|
145,575 |
|
|
|
125,984 |
|
Research and development |
|
|
5,820 |
|
|
|
6,479 |
|
|
|
26,428 |
|
|
|
20,269 |
|
Total operating expenses |
|
|
42,700 |
|
|
|
41,325 |
|
|
|
172,003 |
|
|
|
146,253 |
|
Loss from operations |
|
|
(22,115 |
) |
|
|
(13,160 |
) |
|
|
(65,026 |
) |
|
|
(39,658 |
) |
Interest income |
|
|
504 |
|
|
|
25 |
|
|
|
1,020 |
|
|
|
87 |
|
Interest expense |
|
|
(4,338 |
) |
|
|
(2,200 |
) |
|
|
(15,393 |
) |
|
|
(11,760 |
) |
Change in fair value of derivative instruments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
703 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,019 |
) |
Other income (expense), net |
|
|
2,902 |
|
|
|
2,592 |
|
|
|
816 |
|
|
|
(3,177 |
) |
Loss before income taxes |
|
|
(23,047 |
) |
|
|
(12,743 |
) |
|
|
(78,583 |
) |
|
|
(72,824 |
) |
Benefit (provision) for income taxes |
|
|
2,505 |
|
|
|
(819 |
) |
|
|
81 |
|
|
|
(2,385 |
) |
Net loss |
|
$ |
(20,542 |
) |
|
$ |
(13,562 |
) |
|
$ |
(78,502 |
) |
|
$ |
(75,209 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Basic and diluted net loss per share |
|
$ |
(0.79 |
) |
|
$ |
(0.55 |
) |
|
$ |
(3.07 |
) |
|
$ |
(3.08 |
) |
Weighted average outstanding shares used for basic and diluted net loss per share |
|
|
26,062,724 |
|
|
|
24,457,793 |
|
|
|
25,600,029 |
|
|
|
24,457,793 |
|
ESTABLISHMENT LABS HOLDINGS INC.
|
||||||
|
December 31, |
|||||
|
2023 |
|
2022 |
|||
|
|
|
|
|||
Assets |
|
|
|
|||
Current assets: |
|
|
|
|||
Cash |
$ |
40,035 |
|
$ |
66,355 |
|
Accounts receivable, net of allowance for doubtful accounts of |
|
46,918 |
|
|
35,423 |
|
Inventory, net |
|
79,471 |
|
|
36,583 |
|
Prepaid expenses and other current assets |
|
8,477 |
|
|
11,543 |
|
Total current assets |
|
174,901 |
|
|
149,904 |
|
Long-term assets: |
|
|
|
|||
Property and equipment, net of accumulated depreciation |
|
77,205 |
|
|
51,092 |
|
Goodwill |
|
465 |
|
|
465 |
|
Intangible assets, net of accumulated amortization |
|
7,987 |
|
|
4,608 |
|
Right-of-use operating lease assets, net |
|
3,381 |
|
|
3,702 |
|
Other non-current assets |
|
4,702 |
|
|
1,290 |
|
Total assets |
$ |
268,641 |
|
$ |
211,061 |
|
Liabilities and shareholders’ equity (deficit) |
|
|
|
|||
Current liabilities: |
|
|
|
|||
Accounts payable |
$ |
41,624 |
|
$ |
20,034 |
|
Accrued liabilities |
|
13,690 |
|
|
17,237 |
|
Other liabilities, short-term |
|
1,836 |
|
|
1,688 |
|
Total current liabilities |
|
57,150 |
|
|
38,959 |
|
Long-term liabilities: |
|
|
|
|||
Note payable, Oaktree, net of debt discount and issuance costs |
|
188,739 |
|
|
175,461 |
|
Madryn put option |
|
— |
|
|
— |
|
Operating lease liabilities, non-current |
|
2,712 |
|
|
3,200 |
|
Other liabilities, long-term |
|
1,645 |
|
|
1,626 |
|
Total liabilities |
|
250,246 |
|
|
219,246 |
|
Shareholders’ equity (deficit): |
|
|
|
|||
Total shareholders’ equity (deficit) |
|
18,395 |
|
|
(8,185 |
) |
Total liabilities and shareholders’ equity (deficit) |
$ |
268,641 |
|
$ |
211,061 |
|
|
|
|
|
|||
Reconciliation of EBITDA and Adjusted EBITDA
|
|||||||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
|
|
|
|
(in thousands) |
||||||||||
Net loss |
$ |
(20,542 |
) |
|
$ |
(13,562 |
) |
|
$ |
(78,502 |
) |
|
$ |
(75,209 |
) |
Interest expense |
|
(4,338 |
) |
|
|
(2,200 |
) |
|
|
(15,393 |
) |
|
|
(11,760 |
) |
Benefit (provision) for income taxes |
|
2,505 |
|
|
|
(819 |
) |
|
|
81 |
|
|
|
(2,385 |
) |
Depreciation and amortization |
|
(1,222 |
) |
|
|
(989 |
) |
|
|
(4,166 |
) |
|
|
(3,870 |
) |
EBITDA |
|
(17,487 |
) |
|
|
(9,554 |
) |
|
|
(59,024 |
) |
|
|
(57,194 |
) |
Stock compensation expense |
|
(3,452 |
) |
|
|
(3,261 |
) |
|
|
(14,362 |
) |
|
|
(13,358 |
) |
Change in fair value of derivative instruments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
703 |
|
Loss on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,019 |
) |
Foreign currency gains (losses) |
|
3,285 |
|
|
|
2,653 |
|
|
|
1,848 |
|
|
|
(2,982 |
) |
Adjusted EBITDA |
$ |
(17,320 |
) |
|
$ |
(8,946 |
) |
|
$ |
(46,510 |
) |
|
$ |
(22,538 |
) |
|
|
|
|
|
|
|
|
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View source version on businesswire.com: https://www.businesswire.com/news/home/20240228040413/en/
Investor/Media Contact:
Raj Denhoy
415-828-1044
rdenhoy@establishmentlabs.com
Source: Establishment Labs Holdings Inc.
FAQ
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