ewsba.se
Chief Executive Officer — Filippo Caldini
Chief Financial Officer — Cassandra Harris
Peter Caldini, our Chief Executive Officer; and Sandra Harris, our Chief Financial Officer. Following our prepared remarks, we'll take your questions. Before we begin, I would like to remind you that comments made by management during this call will include forward-looking statements within the meaning of federal securities law. These include statements of 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 establishmentlabs.com. I'd also like to remind you that our comments may include certain non-GAAP financial measures with respect to our performance, including, but not limited to, sales results, which can be stated on a constant currency basis or EBITDA, which we disclose on an adjusted EBITDA basis.
Reconciliations to comparable GAAP financial measures 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, May 6, 2026. 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.
Filippo Caldini: Good morning, and thank you for joining us. Q1 2026 was a strong start to the year with $59.9 million in revenue and adjusted EBITDA of $1.2 million, representing revenue growth of 45% over Q1 2025. The U.S. business continued to outperform with $19.6 million of revenue, a growth of 216% over Q1 2025 and quarter-over-quarter growth of 13.3%. It's worth noting that Q1 is a seasonally light quarter for breast augmentation and reconstruction, so to grow quarter-over-quarter is a testament to the strength and acceleration of our U.S. launch. Outside the U.S., we delivered 15% growth, driven by strong execution on both our direct and distributor markets.
Our minimally invasive platform is showing immense promise as well, generating $9.1 million in revenue in Q1. At the same time, we had our third quarter of positive adjusted EBITDA. Our gross margin improved by 350 basis points in Q1 2026 to 70.7%, up from 67.2% in Q1 2025. We refinanced our credit facility and expect to reach cash flow positive in the second half of the year. Our increasing profitability is demonstrating the operational leverage in our business as well as our ability to generate meaningful earnings per share in the coming years.
We continue to be conservative as we forecast our business due to the geopolitical landscape as well as our hyper focus on achieving and scaling a cash flowing positive business. As such, we are raising our guidance to $266.5 million to $268.5 million, up from a previous range of $264 million to $266 million. Our confidence comes from the strong start we are having in Q2, we are setting new weekly highs in our U.S. order counts. We expect our growth to continue throughout 2027 as well. As we've mentioned on prior calls, there is a good likelihood we may be included in several indices, beginning with the Russell 2000.
As we're seeing increased interest from firms that benchmark to these indices, we thought it would be helpful to provide an overview for those being introduced to our company for the first time. The robust growth we reported this quarter is a reflection of our work since 2011. Establishment Labs is a women's health company focused on transforming breast aesthetics and reconstruction through innovation. Since the moratorium on breast implants in the U.S. was imposed in 1992, this category has seen very little meaningful innovation. And as a result, patient behavior, surgeon adoption and overall market growth has remained relatively static.
Establishment Labs was founded on the belief that a deep investment in science could fundamentally improve existing technology and provide better options for women. From the beginning, we reexamined every aspect of the breast implant from surface technology to manufacturing, leveraging advances in material science, biomedical engineering and device design. This work is reflected in a robust intellectual property portfolio with more than 200 patents issued and pending worldwide. In 2015, we brought on Dr. Robert Langer to lead our Scientific Advisory Board. Bob Langer is one of the most accomplished scientists of the 21st century, and his contributions are behind the founding of several prominent companies. His work at MIT continues to impact science at the highest levels.
Our partnership resulted in a seminal paper for plastic surgery. Published in Nature Biomedical Engineering in 2021, this paper focused on breast implant surface technologies and highlighted that the 4-micron surface, which was intentionally designed to enhance biocompatibility, consistently demonstrated low inflammation. These results explain how Motiva implants outperformed the category. The U.S. FDA clinical trial matched both our research findings and clinical data from around the world and is quite frankly, game-changing. All these data points show device-related complication rates at new industry lows, including capsular contracture rates of less than 1%. To put this in perspective, the FDA trials for competitive products have device-related complications rates that are upward to 20%.
And in some cases, the complication rates far exceed 20%. Perhaps most interesting is our extended global warranty data with over 49,000 warranties sold and only 377 claims submitted, the resulting complication rate is less than 1%. We publish this data annually on our post-market surveillance report and are the only company in the industry that publicly shares this information, which you can find readily available on our company website. Fear of complications are one of the top barriers for patients when considering a breast augmentation. Having a product that has an outstanding safety profile helps to diminish that concern and provides extra peace of mind for both patients and surgeons.
Less complications leads to happy patients and more referrals, which is the lifeblood for any plastic surgery practice. The significant technology moat that has been established is enhanced by our R&D pipeline of continuous innovation. Not only do we believe that we can take a substantial majority of breast implant market in time, we also believe we can significantly expand the market from where it is today. That is best evidenced by the launch of our Motiva minimally invasive platform. We have 2 minimally invasive procedures in market right now, Mia and Preserve.
A third is currently in development called GEM and is a revolutionary advancement for gluteal augmentation that should offer a safer, more predictable alternative to the Brazilian Butt Lift. Both Mia and Preserve are available outside the United States with a presence in more than 45 markets globally. While Mia is not yet available in the United States, we recently introduced Preserve to the U.S. market. Both are built on tissue-preserving practices, which Establishment Labs has pioneered, and they allow for the use of minimal anesthesia while preserving the patient's native breast tissue, nipple sensation and chest muscles.
Mia features the Motiva Ergonomix2 Diamond shaped implant, which has a unique shape that allows for greater projection than a conventional round implant as the shape creates more projection with less volume. It also includes a proprietary shell, which allows insertion through the smallest incision possible within the Motiva portfolio. These characteristics make for a true scarless breast augmentation done by a small incision in the underarm. This procedure is meant for patients looking for a subtle enhancement with 1 to 2 cup size increase.
Preserve can feature either the Motiva Ergonomix1 or 2 implants and accommodates both primary breast augmentation and primary breast augmentation mastopexy, offering patients smaller scars tucked under the breast crease and allows for larger sizes to be used. The launch of minimally invasive techniques into any specialty almost always dramatically increases the market. For example, there were approximately 95,000 total knee arthroplasty procedures in 1991. Between 2000 and 2005, minimally invasive knee procedures became the standard. And by 2010, there were approximately 250,000 procedures annually. In 2025 alone, this number rose to approximately 1.3 million, an increase of close to 14x.
This kind of growth exists in other major procedure types as well, such as LASIK eye surgery and fat reduction. In the United States, our minimally invasive technologies command a premium over 2x higher than traditional breast augmentation. And if our overseas growth is any indication, we can expect that minimally invasive will create significant market expansion and be a meaningful driver of growth. The value proposition for patients is well defined, smaller scars, minimal anesthesia, preservation of tissue and sensation and a faster recovery, combined with the safety and performance benefits of Motiva. Our initial 3-year study on Mia was published in the Aesthetic Surgery Journal in October 2025 and showed no device-related complications.
Like our FDA trial data, this is game-changing. It's clear that this procedure is fundamentally different from what has come before. Many women no longer view this as the traditional breast augmentation they once knew, but rather as a more accessible almost lunchtime procedure where they can return to normal social activities within hours. Women that have never considered breast augmentation before are now getting the procedure, and we are expanding the market. RealSelf, a popular online platform for aesthetic patients, published last week that breast augmentation page views were up 45% from Q4 and that breast implant revision page views were up 89%, indicating that patients' interest in the category is surging.
Not only do our patients benefit, our minimal invasive platform also has the potential to increase surgeon productivity, allowing surgeons to run 2 operating rooms, one where the patient is being prepped or the room is being cleaned and the other where the surgeon is operating. We had one plastic surgeon that started surgery at 6:00 a.m. and by 10:30 a.m., he had completed 10 minimal invasive surgeries. Scheduling a minimally invasive procedure day like this can generate more than 2x additional revenue for a practice. The introduction of our minimal invasive platform enhances the Motiva portfolio, creating a clear, good, better, best framework.
This allows the plastic surgeon to address a broader range of patient needs across the aesthetics outcomes, lifestyle consideration and price points. This portfolio approach is not just about product breadth, it enables us to expand the category, increase procedure volumes and drive higher value per procedure while giving surgeons the flexibility to tailor their solutions to each patient. Patients are now engaging with surgeons very differently than before. In a category where it was historically very unusual for patients to ask about implant brands, 78% of surgeons now report being asked for a brand by name. And in those cases, 93% of the time, that brand is Motiva.
And now just 18 months into our U.S. launch, we are seeing the next step. Patients are not only asking for Motiva, they are actively seeking out surgeons who are trained in minimally invasive procedures. We expect to see a similar dynamic as we enter breast reconstruction in the United States, an opportunity that is equal in size to the breast augmentation market. We submitted Motiva implants to the U.S. FDA for approval in primary and revision breast reconstruction in December 2025 and are currently progressing through the review process. I hope that reintroduction to our business was helpful and that the context explains our success to date. The U.S. remains the most important driver for our growth.
Motiva continues to be one of the fastest launches in the history of breast aesthetics, and we continue to expand our footprint, recently surpassing 1,700 accounts. We are seeing increased adoption from higher-volume surgeons who have moved beyond initial evaluation and are now fully committed to Motiva. This is reflected in our order growth, where we have experienced 30% increase in average orders since the end of Q4. We officially launched our minimally invasive platform in the United States in March, and the response has been exceptional. While we initially trained surgeons on Preserve in our campus in Costa Rica, early demand was so strong, we began training in the United States as well.
This has allowed us to train surgeons at a much faster rate, and we have now certified more than 260 surgeons in the U.S. For context, our goal was to train 200 surgeons by the end of 2026, and we soared past that number by the end of the first quarter. Those trained have shown a strong intent to purchase, and we have seen relatively quick adoption with the first procedures being performed shortly after training. A surgeon in the Northeast recently shared that he began offering Preserve after being trained and promoted the procedure on social media. He now has 50 Preserve cases scheduled in Q2 at a 30% premium to his traditional breast augmentation price.
Another surgeon in Southern California was thrilled that Preserve has completely changed her practice and that she is consistently seeing patients that had previously deferred surgery due to the concerns around anesthesia and recovery. When you remove historic barriers, you bring new patients into the market. A recent Preserve patient who is a Pilates instructor got her procedure done on a Saturday, went to dinner with friends that night and was back teaching Pilates on Monday. This kind of recovery is traditionally unheard of. And for the first time, patients are truly returning to normal activity with a minimal downtime.
In a recent survey conducted with 94 Preserve patients, 3 months post-surgery, 98% stated that they experienced minimal disruption to their daily lives with 95% satisfied or extremely satisfied with the results. In addition, 15% of patients said they were new to the category and had not considered breast augmentation until they learned about Preserve. 84% of the Preserve patient survey said they were willing to pay a premium for the benefits of the procedure with 99% saying that they would choose this procedure again. Outside the United States, our business continues to perform well. We delivered approximately 15% growth with strong performance across our direct markets, which continues to be a major focus area for us.
Our minimally invasive platform continues to be a key driver for growth globally. It is interesting that surgeons generally view the 2 procedures as complements to each other and all Mia accounts are offering Preserve, showcasing the value of a minimally invasive portfolio approach that provides patients options to meet their aesthetic goals. Preserve continues to attract surgeons to the overall Motiva portfolio. In our OUS markets, we are seeing strong growth across European direct markets, including the U.K., Germany, Nordics and our newly acquired Benelux affiliate. Continued stabilization in Latin America with solid performance in Argentina due to the adoption of the Motiva minimally invasive platform as well as steady demand across all our distributor markets.
Our exposure to the Middle East remains less than 5% of total revenue, limiting risk from regional volatility. In our U.S. and OUS markets, we expect growth to continue to accelerate into 2027. We also expect to continue the innovation pipeline by expansion in breast reconstruction in the United States, which effectively doubles our addressable market, gaining CE Mark for Zen temperature, marking our entrance into biosensing capabilities, introducing smaller sizes to our U.S. product matrix and thus expanding our reach within existing accounts, continue to develop our pipeline, including GEM, our glue augmentation solution. We also plan to submit for Health Canada medical device license for expansion in the Canadian market.
As part of our overall strategy, we are taking steps to secure our future growth. This includes our signed agreement with Oaktree that refinances our debt and enhances our financial flexibility. And finally, we are in active conversations with NuSil, our silicone supplier as we both look to establish a long-term agreement. We've had strong working relationship with NuSil for the last 15 years, and our ongoing conversations are very focused on what we can accomplish together as partners. I will now turn the call over to Sandra.
Cassandra Harris: Thank you, Peter. We delivered an exceptional start to 2026 with nearly 45% revenue growth, gross margin expansion over 70% and our third consecutive quarter of positive adjusted EBITDA, demonstrating the strength, scalability and operating leverage of our business. Total revenue for the first quarter was $59.9 million, an increase of 44.7% from Q1 2025. Starting with our geographic performance. Our business outside the United States remains the largest contributor to revenue and continues to perform well. In the first quarter, OUS revenue grew approximately 15% over Q1 2025, driven by strength across our distributor and direct markets with direct markets delivering double-digit growth. Our exposure to the Middle East remains limited at less than 5% of total annual revenue.
In the United States, we see strong momentum early in our expansion. U.S. revenue reached $19.6 million in the quarter and now represents 32.7% of total revenue, up from 26.8% in Q4 2025 and higher than the 15% from Q1 of 2025. This growth reflects both continued adoption of Motiva and the March launch of our minimally invasive platform, which is contributing to higher realized price points. Our gross profit for the first quarter was $42.3 million or 70.7% of revenue, a 350 basis point increase compared to 67.2% of revenue in Q1 of 2025.
This expansion was primarily driven by the increasing contribution of our higher-margin U.S. business, along with the growing impact of our minimally invasive platform, which carries higher average selling prices and margins. SG&A expenses increased $3.9 million to $43.6 million compared to $39.7 million in the first quarter of 2025. The increase was primarily driven by variable costs associated with higher sales, including freight as well as the impact of foreign exchange with continued investment in the U.S. business. Excluding a one-time item, adjusted SG&A was $41 million or 68.4% of revenue, representing approximately 50 basis points of leverage versus the prior year as we began to scale the business.
R&D expenses for the first quarter were $5.2 million, consistent with prior quarters. Adjusted EBITDA was positive $1.2 million in the first quarter compared to a loss of $12.1 million in the first quarter of last year. This is our third consecutive quarter of positive adjusted EBITDA. During the quarter, cash decreased $7.5 million to $68.1 million from December 31, 2025. The decrease was primarily driven by investments in the U.S. market. We recently completed a refinancing of our debt, which enhances our financial flexibility, improves our liquidity profile and introduces PIK interest that supports our path to cash flow generation.
We have enough cash on hand to reach cash flow positive and have no needs or plans to do any type of equity financing. Following our strong performance in the first quarter, we are increasing our full year revenue guidance to $266.5 million to $268.5 million, up from our prior range of $264 million to $266 million. This represents growth of approximately 26% to 27% over 2025. We expect our OUS business to grow in the single digits, while the U.S. is expected to exceed 30% of total revenue for the year, up from approximately 22% last year.
At $9.1 million in the quarter, our minimally invasive business is above expectations, and we now expect to exceed $35 million in 2026, up from the $30 million we guided to in February. We expect gross margins in the range of 71.2% to 72.2% for the full year. Operating expenses are expected to remain between $195 million and $200 million, with some variability in quarterly spending based on timing. We also expect to be adjusted EBITDA positive in each quarter of 2026. As it relates to cash flow, we are on track to achieve cash flow positive in the second half of the year, driven by improved profitability and greater working capital efficiency.
In the near term, we expect higher cash usage in the second quarter compared to the first quarter, primarily due to the final $4.7 million payment related to the Benelux acquisition, the normal timing of the short-term incentive payouts and continued investment to support the U.S. commercial expansion, partially offset by $6 million of proceeds from our recent debt refinancing. We expect cash performance to improve meaningfully in the third and fourth quarters, supported by increased profitability and the benefit of PIK interest of more than $5 million per quarter. Historically, Q2 and Q4 are the strongest quarters in the industry with Q4 being the largest, while Q3 is typically softer due to summer seasonality.
Operating expenses will be elevated in Q2 as we continue to invest in the U.S. business. Despite this, we expect Q2 EBITDA to be approximately double that of Q1, reflecting the underlying operating leverage in the business. With respect to index inclusion, April 30th marked the Russell reconstitution rank date. And based on our current market capitalization, we believe we are well positioned to qualify for inclusion in the Russell indices with final membership to be confirmed in the coming months. With that, I'll turn the call back to Peter.
Filippo Caldini: Thank you, Sandra. As you think about our business, we hope we get a chance to interact with you at one of our many events we attend throughout the year. If you're interested in learning more, we selectively invite investors to visit us in Costa Rica at our innovation campus alongside our U.S. plastic surgeon delegations. Investors have found this trip very useful in validating our business and the overall opportunity. We are also hosting a small dinner in Boston around The Aesthetic MEET Plastic Surgery Conference from May 14 to May 17. If you're interested in either of these, please reach out as space is limited.
I appreciate you taking the time to listen, and I hope to see you on the next call soon. Operator, we're ready to take questions.
Operator: [Operator Instructions] Our first question comes from Anthony Petrone of Mizuho Group.
Anthony Petrone: Congratulations, Pete, Sandra and to the team on a strong start to the year here. Maybe the U.S. momentum here, it looks like an inflection and you have really almost 2 simultaneous launches, if you will, ongoing. It's the U.S. Motiva platform in and of itself. There's still a push into new accounts. And then, of course, we have the Preserve launch. So maybe how much was just new accounts bringing in Motiva as a platform versus the Preserve go-live counts? I mean, by our estimate, you're probably approaching somewhere between 75 and 100 go-live Preserve accounts. I'll start there, and I'll have a quick follow-up.
Filippo Caldini: Yes. Thanks, Anthony. As you highlighted, I mean, the progress in the U.S. has been tremendous. I mean it's exceeded all our expectations. And you see that with all the different metrics that we look at. I mean we've increased the number of accounts. We continue to grow the base Motiva business. And a lot of that is driven and it shouldn't be a surprise. I mean we've come to the market with what we believe to be the best implants from a performance as well as a safety standpoint, and we couple that with a best-in-class organization. So that's really helping to drive that growth.
And a lot of that currently is still based off of expanding the Motiva-based Motiva business and getting into more accounts, but we're also driving utilization in the accounts that we're in. And clearly, Preserve is a significant -- will be a significant driver for us in the future. I mean, it's not a surprise as well. I mean, there's very clear patient benefits with minimal anesthesia, with smaller scars, quicker recovery. And I think it's creating a lot of interest and excitement from a patient as well as a surgeon standpoint. So we're seeing good growth opportunities just on our base as well as on the Preserve launch.
Operator: The next question comes from Josh Jennings of TD Cowen.
Joshua Jennings: Great to see the strong start to the year. I wanted to ask about the minimally invasive platform, follow-up to Anthony's question and clearly gaining more and more traction. I'd love to just hear you build out more, Peter, on just how Preserve is not cannibalizing the Motiva business or Motiva cases, but it's actually incremental to kind of the traditional augmentation patient. And then maybe do the same for Preserve and Mia, and just help us understand how they may be complementary and how the Preserve launch internationally may be even boosting Mia traction as well.
And if you could tie it all into just -- it sounds like you're optimistic that the breast implant market globally, especially in the United States can actually see stronger growth here in the coming quarters, years and then how this all ties in. Sorry for the multilayer question, but I appreciate you taking it.
Filippo Caldini: Yes. Thanks, Josh. As you highlighted, the minimally invasive platform, we're seeing a lot of very strong growth. When you look at our OUS markets where we have both Mia and Preserve, what we've seen, and we've been very pleased to see this is they operate very complementary. So in all the accounts that we currently have Mia, which is close to 150 accounts, we have Preserve. There's clear distinction between the 2 where Mia is much more of in the premium segment, smaller scars to no scar, it's under the armpit. But it's somewhat restrictive in terms of the number of -- or the type of patients and the type of surgeons that would use that.
While Preserve is much more day-to-day and it's a premium versus our base, but it's less lower priced than Mia. So they work very complementary. What we've been able to see in a lot of markets in OUS is just with the minimally invasive rollout with Preserve as well as Mia. We've been able to expand our account base in a number of markets that's really helped to drive that. And then to answer your last question, and we're seeing this with some of the market research that in the U.S. with Preserve, 15% of women that have used the procedure were not currently considering breast augmentation.
So we believe that the minimally invasive, both Mia and Preserve has a real opportunity to drive category growth. And I think there is just increasing a lot more interest in the area of transparency with -- not only with the Preserve and Mia, but as well as just more openness and interest in breast augmentation, and we feel that we're a big part of that.
Operator: The next question comes from Sam Eiber of BTIG.
Sam Eiber: Maybe I can stay on Preserve for a moment. Peter, would love your thoughts on if you think Preserve can eventually become standard of care over traditional breast augmentation at least here in the U.S. And maybe you can help explain why Preserve is something that beyond the tools is something that can only be done with Motiva, whether it's the implant surface, whether it's the low complication rates. Would love if you can explain that in a little bit more detail.
Filippo Caldini: Yes. I mean, I think in terms of the minimally invasive and Preserve, not only in the U.S., but I think globally, it really makes sense. If you look at our different types of procedures, surgical procedures, everything is minimally invasive. And I think bringing that technology and that capability, I think it's -- I think patients, that's what they're looking for. I mean it's very clear what the benefits are for patients, smaller scars, quicker recovery, minimal anesthesia, which is very important for a number of women. So it really has the opportunity to be a significant growth driver, but it's the standard of care, I think, in the industry.
And I think in some respects, because of the lack of innovation we've seen in the U.S. prior to our entry, I think a lot of the category is behind. So we do believe that, that's going to be more standardized in the industry. And I think it's really our innovation with the unique implants that we have is very specific and beneficial for this type of procedure. And we'll continue to look at and continue to drive innovation that really shapes the category. And I think this is just the starting point for us.
Operator: The next question comes from Mason Carrico of Stephens.
Mason Carrico: I assume that most, if not all, Preserve users were already Motiva users. But I was curious to hear if that launch is actually to increased conversation or maybe even conversion of accounts that previously hadn't adopted Motiva. Maybe just a simpler question is, do you think that launch could actually accelerate the onboarding of new accounts moving forward?
Filippo Caldini: Yes. So Mason, I mean, we're pretty early in the launch, but what we've seen outside the U.S. is that the minimally invasive, specifically Preserve, has brought in a number of new accounts for us in our direct markets in Western Europe. So it has had that benefit, bringing new technology, bringing a new procedure, I think, has really resulted in our ability to drive account growth in a lot of our Western European markets. In the U.S., I mean, it's still early.
I believe you're going to see the same type of trend in the U.S., but we're kind of in month 2 right now, and there's significant demand with the accounts that we do have, and it's very -- we're very focused on getting the training done. But I do believe, to your question, I think it has the potential to drive, certainly account acquisition.
Operator: The next question comes from Caitlin Roberts of Canaccord Genuity.
Caitlin Cronin: Congrats on the quarter. Just a quick one. Have you added all the reps that you plan to add for Preserve in the U.S.? And just appreciate the guidance on MIS, but could you break out potentially Preserve and Mia? And any updates on the timeline for you guys to bring Ergo2 into the U.S. and eventually Mia?
Filippo Caldini: Yes. So thanks, Caitlin. The split between the Preserve and Mia, a bulk of that is really driven by Preserve is the key driver for us. We expect that to be a significant growth driver for us moving forward. And as it relates to Ergo2, I mean, we -- currently, we've had good discussions with the FDA. We're trying to really align on what the appropriate regulatory requirements are for us to get that approved with the FDA. But we don't see that as a significant driver for us until probably around 2028. I mean, we have a lot of growth opportunities as it relates to Preserve currently. As you asked, I mean, we are expanding our sales force.
Currently, we're at 50 reps, but we're going to continue to expand that opportunistically when there's a geographical opportunity, but also more importantly, getting the right talent. I think we've been very successful in what I consider to be a best-in-class organization. And in this industry, bringing over high-quality sales reps that have the established relationship, and that makes a big impact, and we've been able to do that.
Operator: The next question comes from Joanne Wuensch of Citibank.
Joanne Wuensch: I've got a big picture one. What are you seeing in the macroeconomic environment? And specifically, I'm concerned or thoughtful of the consumer and the impacts to the Middle East as it might relate either to sales or resin or oil prices or anything on the bigger landscape would be helpful.
Filippo Caldini: Yes. Thanks, Joanne. I think that's a great question. I mean, obviously, that's top of mind for anybody that's running a company. And I think as you look at what's going on in the Middle East, I think, first off, just looking at the Middle East, as we highlighted in the prepared remarks, it represents 5% of our total sales. Not surprising in Q1, we didn't have any orders. But we are -- we do have orders in the system in Q2, and we expect to be shipping to the Middle East this quarter. So there is some demand there. But I think the key question is what you highlighted, what is the potential overall macro impact?
And so far, Joanne, we have not seen an impact on the global demand for the number of procedures. And that's something that we're going to continue to closely monitor. As it relates to areas in terms of cost, I think we've seen some -- and I can let Sandra answer this, but we've seen some impact in terms of outward freight. There has not been an impact in terms of our silicone costs because those are locked in for the full year. So I would say, in general, we haven't seen a significant impact, but that's something we're going to monitor very closely. Sandra?
Cassandra Harris: Yes. I think Peter hit it. We're seeing some initial surcharges on outbound freight. But at this time, we've been able to navigate through and hold our margin profile. Our silicon provider, we recently have locked in volumes, and we have a contract with them through the end of the year. And we'll monitor the situation and look to protect our margins with any type of price as it progresses.
Operator: The next question comes from Allen Gong of JPMorgan.
K. Gong: I just had a quick one on the guidance and just the momentum that you're seeing. You talked about how orders are up 30% from 4Q to 1Q. I guess first quick one, is that a U.S. comment? And also, given that kind of momentum, how should we feel about the cadence for the balance of the year, particularly what you're seeing in the second quarter given the reiterated guide or guide just to beat in the first quarter?
Filippo Caldini: Yes. Allen, I'll kick it off. But just to clarify that, I mean, when we talk about the orders, that was specific to the U.S. We're -- as we highlighted in the prepared remarks, we're increasing the number of accounts, but also we're increasing the utilization rate as the surgeons work through their schedule. So it's a combination, and it's reflected in the average daily orders. So we see very strong momentum going into Q2 as well. And -- but that's not just in the U.S. I think in overall, globally in a lot of markets, we've -- the demand has been stable.
And I think the one outstanding question that we had going into as we're managing the business like a lot of different companies is what's the impact of the Middle East. And as I mentioned before, it is a small part of our business. We do have orders in the system for Q2. So there is demand there. And we have not seen the impact in terms of global demand, but that's something we're going to monitor. So based on that, gave us the comfort to raise the guidance. We had a strong Q1, and then we're off to a good start in Q2. So that gave us the comfort around that.
Operator: The next question comes from Matt Taylor of Jefferies.
Matthew Taylor: I wanted to follow up on the silicon supply comments. I know that this year, the contract is set in stone. But could you address the potential for cost increases beyond that? Maybe give us an update on how negotiations are going and when we could expect an update?
Filippo Caldini: Yes. Thanks, Matt. It's a good question. I mean, we have a very good relationship with NuSil. I mean, it goes back for a number of years. And obviously, as we continue to grow as a company, we become a more valuable customer to NuSil. And we've had very productive conversations with NuSil. I mean, we consider them very good partners. In fact, that we've aligned or we agreed on volume commitments for this year, just about a month ago. So the prices are locked in for this year. We've made that commitment. Obviously, that's an increase in volume versus last year. And we've started conversations around a long-term agreement.
And there's interest on the NuSil side to have an agreement as well as for us to have an agreement 5 years or more. And a lot of the conversations are less about pricing. It's much more about co-development work. They're interested in exclusivity with us and looking at the length of the agreement. Generally around the price is more volume driven. But the conversations are very productive. And as I mentioned before, we are -- continue to be a bigger part of their business. And they've been good partners for us in the past, and we expect that to continue moving forward.
So we haven't finalized the conversation, the discussions on the agreement, but there's strong intent to have a very -- a long-term agreement for -- with NuSil.
Operator: The next question comes from Mike Matson of Needham & Co.
Michael Matson: I just wanted to ask one on the refinancing. So by our math, it seems like without the additional $35 million draw, there could be a slight increase in interest expense of maybe like [ $1 million ] a year. Is that right?
Cassandra Harris: Yes. Thanks, Mike. So yes, so on the new debt agreement, we've increased it from $225 million. And the current draw is $265 million. There is a lower interest rate at 8.75%. There's ability to PIK, which gives us some near-term cash availability, which we take. So net-net-net, there is neutral to slightly up on the increase in the availability of the funds with the lower interest rate and then the exercise of the PIK.
Operator: The next question is a follow-up from Anthony Petrone of Mizuho.
Anthony Petrone: One for Sandra, just on gross margin here, guidance 71.2% to 72.2%. How much of that is just kind of a reflection of Preserve at higher prices? And have you baked in an FDA clearance for reconstruction and just what that can bring to the table in terms of gross margin momentum?
Cassandra Harris: Yes, Anthony, good question. So our gross margin improvement, and we do expect that it will continue to contribute is the growth of the U.S. With the U.S. business being a direct account, it improves our margin profile, and you're seeing that in our numbers. And then obviously, with OUS being further along in the journey on minimally invasive, its growth in the direct business and then the launch of minimally invasive in the U.S., that also is a big contributor to the margin. So as we look forward, we do expect that we will continue to improve that margin based upon the mix of that business, both U.S. and OUS as well as the minimally invasive.
And at this juncture, we do not -- we can't necessarily time the FDA approval. So we've made no assumptions in regard to reconstruction.
Operator: Ladies and gentlemen, that is all the time we have for questions today. I will now turn the call back over to Peter Caldini for closing remarks.
Filippo Caldini: Thank you, everybody, for joining the call this morning. I appreciate the time and really having everybody get to hear more about the progress we're making with Establishment Labs. As we highlighted or as I highlighted in the commentary, it's a great opportunity. I hope to see at some of the events, but also please take us up on the offer about visiting us in Costa Rica, and you really get an opportunity to really see the uniqueness of this company and the strengths that we have and just to build that partnership. So thanks again, everybody, for joining the call, and look forward to seeing you soon. Thank you.
Operator: Thank you, sir. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your lines.
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