Q1 2024 Establishment Labs Holdings Inc Earnings Call

Participants

Raj Denhoy; Chief Financial Officer; Establishment Labs Holdings Inc

Juan Jose Chacon Quiros; Chief Executive Officer, Founder, Director; Establishment Labs Holdings Inc

Harrison Parsons; Analyst; Stephens Inc.

Allen Gong; Analyst; JPMorgan

Marie Thibault; Analyst; BTIG

Anthony Petrone; Analyst; Mizuho Securities USA

Matt Taylor; Analyst; Jefferies

Joanne Wuensch; Analyst; Citi

Josh Jennings; Analyst; TD Cowen

Presentation

Operator

Good afternoon. Welcome to Establishment Labs First Quarter 2024 earnings call. (Operator Instructions) As a reminder, today's call is being recorded. I will now turn the call over to Ryan Dunlap, Chief Financial Officer. Please go ahead.

Raj Denhoy

Thank you, operator, that you're joining us with me today as one is each county rose 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 discussion of the principal risk factors and uncertainties that may affect our performance or cause actual results to differ materially from these statements. We 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 Establishment Labs.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 for 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.
Please also note that established labs received an investigational device exemption from the FDA for Motiva Implants and is undergoing a clinical trial to support regulatory approval in the United States, we continually seek to expand the geographies in which our products are regulatory approved. Please check with your local authority for product availability The content of this conference call contains time-sensitive information accurate only as of the date of this live broadcast May eighth, 2024. 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.
Without it is my pleasure to turn the call over to our CEO, Juan Jose.

Juan Jose Chacon Quiros

Thank you, Raj, and good afternoon. Everyone. revenue in the first quarter of 2024 totaled $37.2 million. Our markets continued to stabilize and we are seeing improving demand. All of our global regions showed sequential improvement in the first quarter. We saw this in both our direct and distributor markets, and we expect to see continued improvement throughout 2024. Our first quarter also showed the tangible results of the cost reduction and efficiency improvement activities we undertook in the second half of last year, adjusted EBITDA improved to a loss of less than $4 million. This was a notable improvement from the loss of $17 million last quarter. We are off to a busy start in 2024. Over the past several months, we launch with Eva implants in China in our Flora tissue expander in the United States. We are also making significant progress toward approval of Motiva implants in the United States. The number of clinics offering me around the world is growing, and the feedback on this transformative breast technology continues to surpass even our own expectations. We are well positioned for multiyear growth while steadily improving our margin structure in achieving the necessary scale to reach cash flow profitability in 2025, Raj will provide more on our financial results and outlook in a moment. But first, I want to highlight several recent events as we announced two important developments on our path to US approval to four year data from our Motiva US IDE study was presented at the aesthetic meeting on May second by Dr. Caroline Glickman, the medical director and a principal investigator of the study as Dr. Glickman highlighted, it is particularly notable that our rates of Baker Grade three and four capsular contracture and rupture have not changed for the past two years at year four there continues to be only two patients with capsular contracture and only one patient with a suspected rupture, which were the exact same numbers at two years and at three years, these low complication rates are a confirmation of a new standard for breast implants, and we expect plastic surgeons will adopt our products given their technological superiority and performance. While these are not comparative studies. It is worth noting that at four years, the FDA data from the two largest competitors in the US showed that between one and seven one in 12 women developed a baker Grade three or four capsular contracture in the multi-dose study, it was one in 200 women. We also announced last week that Jeff or Hart will lead our North American business. Jeff, most recently ran the plastic and reconstruction division of Allergan aesthetics and was responsible for the Breast Products portfolio. Jeff is a strong commercial leader with over 25 years of experience in this industry, I cannot imagine anyone better suited to introduce Motiva to the U.S. market. Jeff is already building an experienced team with a successful track record in this industry, including NPU, who will head our U.S. sales team and venue cut was Director of surgeon engagement and business development will lead our outreach to the plastic surgeon community. This is truly an all-star team at the annual meeting of the aesthetic society in Vancouver this past weekend Establishment Labs and with Diva Ward, the talk of the conference plastic surgeons are overwhelmingly enthusiastic about our new hires and the launch of Motiva in the United States might be the most anticipated launch of an aesthetic product in decades. Surgeons and investors alike want to know when with Ciba will be available in the United States. While the second quarter inspection of our facilities is a critical point in the process, we will continue not to predict an exact timeline for both competitor and regulatory reasons. That said, the conversations with the FDA are highly constructive and we have high confidence that we will be on market in 2024. While we wait for the approval of Motiva Flora, our unique tissue expander continues to gain traction in the U.S. market. Flora has many important and novel features, including our patented with Silk surface technology as well as an RFID-enabled non-magnetic port mislabeled as MR conditional by the FDA. This is a distinct advantage to Flora as all other commercially available breast tissue expanders include magnet. We had many surgeons come by our booth in Vancouver to learn about the advantages of Flora in reconstruction, and we expect adoption of this technology will continue throughout the course of 2024. We have completed the vac process at a number of the premier cancer centers in the United States and more are pending as the benefits of this device in breast reconstruction are being demonstrated and shared in the clinical community, the number of hospitals providing floor up to patients. We'll grow in the US BFM tech is creating an entirely new minimally invasive category within breast aesthetics and the list of cities across the world where MI is available continues to grow. In Q1, we added media centers into new geographies, Middle East and Latin America. We now have centers certified to provide them the experience in Riyadh, Jeddah, Dubai, Abu Dhabi, Beirut in our hometown of San Jose in total, we have 55 clinics signed up for Amea, authentic Partnership, of which 33 are operating in 22 new clinics in the process of being onboarded for medical education and practice develops. In addition, we have 37 clinics under negotiation. The consumers are sharing their experiences on social media, highlighting the convenience and aesthetic outcomes of their breath harmonization journey confirming our conviction that word of mouth will ultimately be the biggest growth driver for me, authentic. It is still early in the launch of Mia, but we are seeing proof points that we are creating and capturing new consumer demand in this new category in breast distance in China, the reception of our recent launch has been strong. Chinese plastic surgeons and consumers have a strong appreciation for Motiva as the latest in innovation, science and technology. And there is a willingness to pay a premium for such offerings in this market. Our exclusive distribution partner is pursuing an aggressive strategy of medical education and marketing events in Tier one and Tier two cities across China. The early results give us confidence that our market position in China over the next few years will match what we have seen in surrounding markets in Asia where we are market leaders.
I will now turn over the call to Rob.

Raj Denhoy

Thank you, Juan Jose total revenue for the first quarter was 37.2 million, a decline of 20% from the year ago period. Direct sales in the first quarter were approximately 39% of implant sales. While distributors made up the balance from regional perspective, sales in Europe, Middle East and Africa were approximately 55% of the global total Asia-Pacific, 21% in Latin America, 23%. Brazil, which is our largest market globally, accounted for approximately 11% of total quarterly sales. Our gross profit for the first quarter was 24.4 million or 65.6% of revenue compared to $30.1 million or 64.7% of revenue for the same period in 2023. Our gross profit in the first quarter reflected an increase in average selling prices year over year, offset somewhat by higher overhead and labor costs change in foreign exchange rates between the USD and the Costa Rican colon also continued to be a headwind as reported USD to continued strengthening of the Cologne has resulted in higher operating costs.
Sg&a expenses for the first quarter declined approximately 2.8 million to 28.9 million compared to 31.7 million in the first quarter of 2023. Sg&a expenses also declined approximately 8 million from the 36.9 million reported in the fourth quarter. R&d expenses for the fourth quarter declined approximately 2.2 million in the same quarter a year ago to 4.3 million and were down 1.5 million sequentially. Total operating expenses for the first quarter were 33.2 million, a decrease of approximately 5 million in the year ago period and declined approximately $9.5 million from the first the fourth quarter due primarily to cost reduction initiatives. The decrease in operating expenses in the first quarter was primarily the result of the cost reduction initiatives we undertook in the second half of 2023 and into 2024, as well as the timing of certain planned expenses this year.
Net loss from operations for the first quarter was $8.8 million compared to a net loss of $8.2 million in the same period in 2023 and 22.1 million in the fourth quarter. Adjusted EBITDA was a loss of 3.7 million in the quarter. This compared to a loss of 17.3 million in the fourth quarter and a loss of 4 million in the year ago period. Our cash position on March 31st was 73 million compared to 40 million at the end of 2023. And excluding the proceeds from our January 50 million private placement underlying cash use in the first quarter was 16.8 million. As a reminder, we have two remaining tranches in our debt facility, which totaled 50 million. We can access the first 25 million on US FDA approval of Motiva implants in the second, with the additional milestone of achieving $195 million in 12 trailing 12 months sales for 2024. Revenue guidance continues to exclude the contribution of Motiva implants in the United States. Our guidance remains at 174 to $184 million, representing growth of 5% to 11%. We expect currency to have a minimal impact on our sales results this year. We do expect gross margins in 2024 to be approximately 100 basis points higher than 2023 to a range of 65.5% to 66%. Pacing of operating expenses this year is going to be fluid. Given the timing of approval of Motiva implants in the US, our increasing confidence in approval this year has led us to begin making some key hires to begin limited activities to prepare for the launch. As such, we expect operating expenses will increase modestly from first quarter levels. We remain focused on managing operating expenses and cash use and excluding investments investments in the U. S, we are targeting positive adjusted EBITDA by the end of 2024 and positive cash flow by the end of 2025. The timing of U.S. commercialization will affect when we achieve these targets. However, the additional capital which becomes available to us for more than fully support our current launch plans, also given the strong ASPs in the United States or North America business achieves profitability very quickly. We are very focused on ensuring that the cash we currently have on hand and which is accessible to us under our credit facility for properly fund our business profitability without the need for additional capital.
I will now turn the call back to Juan Jose.

Juan Jose Chacon Quiros

Thank you, Raj. 2024 is off to a very good start. We are seeing steady recovery in our markets and our differentiated technologies continue to support our progress globally. The work we did at the end of last year in restructuring, refocusing organization is allowing us to invest in growth while we progress towards profitability. Our goals of being adjusted EBITDA positive by the end of the year and cash flow positive next year, excluding investments in the U.S. remain firmly intact and are a key focus for us as an organization and management team early this year we entered China, the second largest market for our technologies globally. Flora is pushing us deeper into breast reconstruction while establishing a new standard of care. Our most recent family of implants Ergonomix two supporting exciting new program offerings like joy and of course, BFM Tech, which is creating an entirely new category in breast aesthetics and which will lead to real market expansion over time, the rest of the year will be even more exciting. The pending launch of Motiva United States is a culmination of years of work at Establishment Labs, and we can not wait to introduce our story to women and surgeons in the largest market in the world. As a company focused on women's health, we are building on a solid foundation and have a clear path to further establish ourselves as the leader globally in breast aesthetics and reconstruction.
I will now turn the call over to the operator for your questions.

Question and Answer Session

Operator

(Operator Instructions) Harrison Parsons, Stephens, Inc.

Harrison Parsons

Hi, this is Harrison on for George. Good afternoon and thanks for taking our questions. I wanted to start with your underlying assumptions in your reiterated guidance guidance. I know you and the press release spoke to market demand stabilizing. I just wanted to wanted to dig in on kind of what you're assuming from a macro perspective in that.

Juan Jose Chacon Quiros

Got it. I'm sure I Harrison, you know, as you saw in this quarter, we saw a nice sequential improvement over where we were in the fourth quarter. And as we move into the second quarter, we expect to see a similar level of improvement in demand. Generally, we're seeing distributor orders come back. The direct markets are doing a bit better. And so generally, I think things are stabilizing. And so as we progress through the year, we expect that trend's going to continue.
Yes. Overall, we feel pretty good about where we are and how things are shaping up in and things are definitely getting better out there.

Harrison Parsons

Great. Yes. And then I know you just touched on it, but wanted to dig in a little bit on the and what you're hearing from your international distributors. Where do you think their inventory levels sit today? And I know obviously but that's out of your control. But what are your expectations for those inventory levels going throughout the year? And is that going to be a headwind or tailwind for the remainder thanks for the questions.

Juan Jose Chacon Quiros

What we hear from our distribution partners around the world is that demand is improving and that's very much in all regions of the world. They think Latin America is probably a lagger there. We don't expect demand there to come back as quickly as in the other regions. And as a result, of course, they're, you know, they're running through their inventories. And that's why they're ordering. Again, if you saw like the pattern of distribution demand this quarter, it was back to what we consider more normalized levels and around the 60 40 percentage.

Harrison Parsons

Great. That sounds good. Thanks for taking the questions.

Operator

Allen Gong, JPMorgan.

Allen Gong

So I just kind of want to dive deeper into, you know, direct markets, right? You talked about how it seems like trends are getting better. So when we think about the fact that you reiterated the guidance off of a quarter that at least relative to Street expectations, looks a little bit better. How should we think about, you know, the kind of assumptions that get you to the bottom more higher end of that range?

Raj Denhoy

Yes, I think, Alan, you know, we're only really through one quarter in the year. Right? And as we commented the last question, you think things are feeling better rates. You can see in the trends the sequential improvement this quarter, we're talking about a similar sequential improvement into the second quarter. So in terms of the range. You know, at this point in the year, we feel some early to be adjusting that. But overall, we're feeling pretty good about about where we are and really trending towards the upper end of that range this year.

Allen Gong

Got it. And then I guess just, you know, in anticipation of a U.S. launch later this year, can you talk to kind of the underlying health of the U.S. market. I know we're still kind of waiting for the societies to put out the volume data from 2023, but we saw that it really was bouncing around quite a bit during and in the wake of the pandemic. So can you just talk to the underlying health of the US and how that positions you for a launch in the back half of the year? Thank you.

Juan Jose Chacon Quiros

Yes. Thanks, Alan. So we were just at the American Society of Aesthetic Plastic Surgery meeting in Vancouver, and we had the opportunity to talk about this with many plastic surgeons from all over the US. And I think they did see a significant dip down in the level of procedures last year. And what they have said is that they see an improvement taking place. It is, of course, not close to the hype that they saw during the second part of the pandemic where they really saw, you know, above normal demand in nearly all over the United States, but are but it is starting to normalize according to what we heard from them over last week.

Operator

Marie Thibault, BTIG.

Marie Thibault

Thanks so much for taking the questions and congrats on a very nice start to the year. I wanted to ask here with the US approval expected this year. Hoping we can get a little bit more detail on how you're thinking about the sales force buildout with Jeff in place would love to hear a little bit about the go-to-market strategy. I know we'll have to wait to see some of the bigger spending and investment and would really love to just hear about, you know, a potential range for how many sales reps and and you know that selling strategy that you're going to be targeting?

Juan Jose Chacon Quiros

Yes. Thanks very well, we have been investing in the US for quite some time. We have been building the necessary foundation for the commercial organization, especially in the back office commercial ops. And we are also leveraging initiatives, leveraging a lot of the infrastructure we have built in areas like HR, legal, finance and regulatory from our global team. So that's been part of what we've done already and you can see it already why we're invoicing and shipping Flora tissue expanders to U.S. Now with having Jeff on board, I think it signals our conviction that we need to get preparation for the U.S. launch. And not only did we add, Jeff, we also add NPU, who will head our U.S. sales team and venue card, who's late basically Director of surgeon engagement and business development. As you know, their combined experience in the US market is, I would say, second to none. And with that, what we are building is a strong foundation for launch readiness. We are going to be very mindful of how we grow our sales force. But I think we're getting to the point where like that foundation that commercial foundations are already there. And you know, we've added a couple of sales reps already for the tissue expander and we continue to add more, you know, in the next few months as we feel that we are getting closer and closer to the launch for competitive reasons. I'm not going to share too much of the details, but but definitely we are at a point where we are going to start building up that on that sales force.

Marie Thibault

Okay. That's great to hear. Thanks for that detail. And then I wanted to ask my next question here on China. Any ability to offer more details on, you know, on the amount of revenue recognized in China this quarter or how we should think about that over the year is it going sort of according to expectations? And where can you eventually see market share going to in China? And thanks for taking the questions.

Raj Denhoy

Yes, I can start with that. And Jay can talk a little about the market share. We think as we've talked about China, right, we as we move through 2023, where we had expected in 23, we pushed into 2024. I can tell you that we are tracking to that. China is developing as we expected. We're seeing demand. It is building. And so I can tell you that we're on track in terms of our plans in China in terms of eventual market share and the size of that market. Jj, if you want to maybe take that?

Juan Jose Chacon Quiros

Yes, of course. So it's super early on. It's just been a few months since we launched in China where at this point, basically hitting Tier one and Tier two cities with our events, medical education. So it's early, but we have a very good experience in the blueprint that we have used in other countries in Asia in surrounding countries where you have a strong Chinese population like Singapore or Taiwan, Hong Kong. And what we see is that they quickly realize that this is a superior technology. There is a willingness to pay. So we do expect, you know, our market share in the next few years to match some of the same leadership that we've seen in the surrounding countries where we have between 40% and 70% market share in China right now, one of our competitors has 70% or more market share. So we have a very clear plan on how to go about that. And definitely, you know, as we build on this some initial launch activities, I think we'll be able to talk with more detail about how we are doing there

Operator

Anthony Petrone, Mizuho Securities.

Anthony Petrone

Thank you, and good afternoon, everyone. Maybe one just on the in the process of the FDA inspection now, how long that actually takes and what the range of turnaround time is. I'm just trying to get an idea of timing and how the actual process plays out.
And then on on China specifically follow-up question there would be just on the stimulus package that was announced in March. There are some other healthcare consumer related companies that do see this as a potential catalyst into the second half of the year. So when do you think Chinese stimulus could actually lead to upside as we get into the second half? Thanks again.

Juan Jose Chacon Quiros

Yes, yes. Well, thank you, Anthony. On the first one, you know, last time we were able to speak openly about it. And what we talked about is that, you know, the FDA had given us a date for Q2. And I can tell you now that pre-approval inspection of our manufacturing facility in Costa Rica is scheduled to take place in less than 30 days and our team is super well prepared and looking forward for it. In parallel, we have been making good progress with labeling and post-market approval studies. And these are the last significant steps before the FDA approval. So we are getting very close to final stages on this. And we want just to be very mindful of not disrupting that process and on China and the stimulus package?
Yes, we're very well aware of it, and we think it's a good development. It will take time to get through so that it can really impact consumer demand but we do see it as a positive. And remember, deep build in the lowest of the Chinese market in breast aesthetics happening actually in 2022. And since then, it's been bouncing back, our expectation does was that it was going to be back to 2019 levels by 2025, but maybe that stimulus package will be able to get us there faster.

Operator

Matt Taylor, Jefferies.

Matt Taylor

Great. Thanks for taking the questions. Maybe I'll ask one on the media commentary that you gave me, it's encouraging to see that you're signing up all these centers. I was wondering if you could excuse me, talking about health material revenue contribution is going to be this year and then maybe you could frame the centers that you're adding for MEFM. tech in terms of your overall centers. So what percentage is that today? And what do you think will be at maturity?

Juan Jose Chacon Quiros

Yes, I think with that one, Matt, at this point, what I'd tell you is that what we are trying to do at a qualitative level which is create a network of clinics in within those clinics, start bringing in all of our marketing assets, the practice development, all the things that we we we provide, so that you can have the new category really coming to light in there. And I can see that some clinics who started in Europe, for instance, in September, October of last year, have started to get to the numbers where we would like to see them in terms of number of procedures per month. We still have work to do to see those numbers in every single one of the centers, but that's part of the entire process of building a new category. So we're not in a rush. However, I think that, you know, having signed up 55 clinics already 33 core active right now does, of course, you know the ones that are that have started, you know, in the fall of that last year, are the ones, of course, that are getting more cases at this point. And in addition, we have 37 new clinics under negotiation. We have this aspirational goal of getting to 100 clinics by the end of this year. And I think after that, you would know what our expectations are is that in every Tier one city there will be a few of these clinics in every Tier two city, there will be a couple of those. And in some Tier three cities, you'll see one. And then when you start putting those numbers in and you start getting to the levels at which we see the initial clinics. I think we get an understanding of how quickly this can ramp up. But in 2024. It is mostly qualitative, but you will start seeing more revenue coming out of MIA and we are very dedicated to the qualitative part. It is not time yet to breakout media revenue. But I think when when it becomes material, we will be the first ones willing to do that.

Matt Taylor

Great. Thanks, JJ. Maybe just one follow-up on China. It seems like everything's going well there. I just wanted to confirm more specifically, you talked about the $10 million in stocking revenue kind of spread out through the first half of the year now, is that for the guidance, is that still your assumption? And are you seeing any reordering?

Raj Denhoy

It's still early as one as I mentioned. I mean, we've been there are just a couple of months now launched in January. So it is tracking as we expected to the numbers you described. We'll see how the reordering starts to build in the back half of the year. But so far things are tracking.

Matt Taylor

Okay. All right. Thank you. Thanks, Rusty.

Operator

Joanne Wuensch, Citibank.

Joanne Wuensch

Thank you for taking the question and very nice quarter. I appreciate the commentary on the guidance that it is early in the year, but you did exceed consensus. And I'm curious how you think about the next couple of quarters. I just want to make sure that the second third and fourth quarters are so set up appropriately.

Raj Denhoy

Yes. I think, Joanne, as you mentioned, you look at the sequential increase in the first quarter over last quarter and about 6 million. And I think a similar sequential increase into the second quarter is the right way to think about it the back half of the year, um, again, we'll see likely a small sequential increase in the third. It tends to be the weakest of the quarters for us as the year unfolds, but you have today the dynamic of the recovery in the markets. And so we'll see growth into the third quarter as well. So generally gets back to the commentary we made about this recovery that we're seeing in the markets, the distributor orders improving. So I think that's probably a good way to think about it over the balance of the year.

Joanne Wuensch

Thank you. And then is there anything you can share regarding your go-to-market strategy in the United States, something pricing number of salespeople you would need or anything else that you're comfortable sharing at this stage of the process? Thank you.

Juan Jose Chacon Quiros

Yes, unfortunately, Joanne, it's for competitive reasons. This is exactly the type of things that we cannot give out. We have a very clear understanding of how we want to price in United States. We are coming in with two products. You know, the motivation would seal ground and the Motiva smooth silk ergonomics. And those are some of our best selling products in our international market and have been so for many years to come in, we will make the necessary investments to make sure that, you know, we provide the accounts as we move into different quarters after the launch, the necessary service that they deserve. So at this point, that's all I can tell you.

Joanne Wuensch

I appreciate that. Thank you.

Operator

Josh Jennings, TD Cowen.

Josh Jennings

I was hoping to follow up on May first and just in the past one is that your team has talked about Amir partner clinics are becoming million revenue generators for Establishment Labs. And it sounds like these early launch trends are positive.
But to get to that million per account seat, you had some relatively conservative assumptions. I just wanted to sanity check, make sure that that's your team is still optimistic that revenue run rate per per partner clinic is still in play potentially?

Juan Jose Chacon Quiros

Yes. Thank you, Josh. In the direct market, a Mayo Clinic that is doing an average for a year 24 cases per month will be will eventually lead to approximately 1 million that was recognized by Establishment Labs. And we think that number is achievable. And like I said, in a couple of the clinics that began last fall are starting to trend to those numbers. So that's what gives us a conviction that those numbers can be achieved. And you know, our job now is to expand the network of clinics to cities, for instance, across our direct markets in Europe, some of the distributor markets have already kicked in. You can see in the social media handle of MEFM. tech, a lot of the work that has been done, for instance, to launch in several cities across the Middle East so all of that tells you that we are building something special. And when you think about, you know, the current market for breast aesthetics market that is growing at low single digits at best. And what media brings is this new shiny object in what we see is that, you know, those those numbers are not something that we see as unachievable and what we would like to see is that clinics are in the first or 2nd year, depending on them being Tier one or Tier two, Tier two city clinics can get there Great.

Josh Jennings

And I appreciate some of the color on the US Flora launch was hoping to just check in on the state of affairs of the recon franchise internationally, both on the tissue expander side and on the implant side, any any updates you can provide just on traction there in Europe and in other regions? Thanks for taking the questions.

Juan Jose Chacon Quiros

Yes, on that one, Josh, again, like I think what we've said many times is that breast reconstruction is lower because you're not really convincing just a plastic surgeon. You have to convince the plastic surgeons of a reconstructive department in a hospital and then wait for a tender to take place. So that's why, although we see great feedback from the hospitals who have adopted on a floor up in who have started to use with Flora, our breast implants, you know, still, you know, not going at the same speed of adoption that we normally see when we go into a market on purely aesthetics. However, over time it will build. And I think it's some it's a big demonstration of our technology, and our One is helped credentials in this industry.

Josh Jennings

Appreciate that. Thanks.

Operator

That is all the time we have for questions today. I will now turn the call back over to Juan Jose for closing remarks.

Juan Jose Chacon Quiros

Thank you, for joining us on today's call, and we look forward to providing our next quarterly update in August, and we wish everyone continued good health and how Thank you.

Operator

This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.