ESTABLISHMENT LABS HOLDINGS INC
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
ESTA$67.02+4.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001688757-24-000076
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001688757-24-000100
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 105 previous paragraphs and 106 current paragraphs.
57 unchanged; 38 reworded; 9 added; 9 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
In September 2024, we received PMA approval from the FDA for our Motiva Implants. Beginning in October 2024, we began selling Motiva Implants for use in breast augmentation for patients in the United States.
Current report
On November 7, 2024, we entered into a securities purchase agreement with a limited number of purchasers in connection with a registered direct offering of 765,696 common shares of the Company at a purchase price of $45.71 per share and, in lieu of common shares to certain purchasers who so chose, pre-funded warrants to purchase up to 328,154 common shares at a purchase price of $45.709 per pre-funded warrant, which represents the price per share at which the common shares are being sold to the purchasers in the offering, minus $0.001, which is the exercise price of each pre-funded warrant. We also agreed to issue up to 76,569 additional common shares and additional pre-funded warrants to purchase up to 32,814 common shares, which in the aggregate equals ten percent of the aggregate number of common shares and pre-funded warrants to purchase common shares being sold in the offering. These additional securities will be issuable for no additional consideration if the average closing price of our common shares on The Nasdaq Capital Market during the period from January 1, 2025 to August 31, 2025 does not exceed $45.71, which is the price per common share sold in the offering. The aggregate gross proceeds from the offering, before deducting offering expenses, will be approximately $50.0 million. The offering closed on November 12, 2024.
Current report
Also on November 7, 2024, we entered into a Third Amendment to the Credit Agreement and Guaranty, dated April 26, 2022, or the Credit Agreement, that we entered into together with certain of our subsidiaries party thereto as guarantors, the lenders from time to time party thereto, or the Lenders, and Oaktree Fund Administration, LLC, as administrative agent for the Lenders, or the Administrative Agent. The Third Amendment extended the commitment termination date, with respect to the commitments applicable to the Tranche D Term Loans, from June 30, 2025 to December 31, 2025, and modified the milestone triggering the availability of the Tranche D Term Loans to provide for availability of the Tranche D Term Loans upon achieving trailing twelve month gross sales of $195 million, including trailing twelve month gross sales of $30 million in the U.S. with respect to Motiva Implants and the Motiva Flora Tissue Expander product. The terms of the Tranche A Term Loans, Tranche B and Tranche C Term Loans were not modified.
Current report
Gross margin decreased to 63.9% for the three months ended September 30, 2024 as compared to 67.7% for the three months ended September 30, 2023, primarily attributable to a shift in geographic mix favoring distributor markets, which typically have lower selling prices compared to direct market revenue, as well as increased labor and overhead costs. Foreign currency exchange rate fluctuations also negatively impacted the gross profit margin for the three months ended September 30, 2024.
Current report
Comparison of the Nine Months Ended September 30, 2024 and 2023
Current report
Gross margin remained stable at 65.0% for the nine months ended September 30, 2024 compared to 64.7% for the nine months ended September 30, 2023.
Current report
R&D expense decreased $6.0 million, or 29.1%, to $14.6 million for the nine months ended September 30, 2024, compared to $20.6 million for the nine months ended September 30, 2023. The decrease in R&D expense was primarily due to a $5.9 million decrease in personnel cost.
Current report
As described above under “Recent Developments - Financing Activities,” in February 2024 and November 2024, we entered into amendments to the Credit Agreement, which, among other changes, extended the termination date for commitments for Tranche C and Tranche D Term Loans and modified the milestones triggering the availability of those loans. The Tranche C Term Loan of $25 million was advanced in October 2024. See Note 5 “Debt” and Note 14 “Subsequent Events” for additional information.
Current report
During 2024, we also engaged in capital markets financing activities. These included a registered direct offering of common shares and pre-funded warrants to purchase common shares that closed on November 12, 2024 and will generate approximately $50 million in gross proceeds before offering expenses, and a private offering of our common shares and pre-funded warrants to purchase our common shares that we completed in January 2024 resulting in net proceeds to us, after deducting offering expenses, of approximately $49.7 million. In 2023, we completed an underwritten public offering of common shares, resulting in net proceeds to us after deducting underwriting discounts and offering expenses of approximately $84.6 million. See Note 7 “Shareholders’ Equity” and Note 14 “Subsequent Events” for additional information.
Removed paragraphs (9)
Previous report
In April 2023, we presented three-year patient follow-up data for the primary augmentation cohort of the IDE clinical trial at The Aesthetic Meeting. The preliminary results for the primary augmentation cohort's four-year patient follow-up data, which we released in May 2024, indicated that our rates of capsular contracture and rupture have remained unchanged for the past two years. These preliminary results indicated that, at year four, there are still only two patients with capsular contracture, which equates to one in 200 women, and only one patient with a suspected rupture.
Previous report
In April 2024, we announced that the FDA had scheduled the PMA preapproval inspection of our manufacturing facilities in Costa Rica for Motiva Implants. The FDA completed the inspection at the end of July 2024. After completion, the FDA issued a Form 483 Notice with three observations, each unrelated to one another. The Company subsequently responded in writing to the FDA about the observations, indicating that it has fully remediated all three of them.
Previous report
In response to the decrease in demand at the end of fiscal 2023, we implemented measures such as downsizing our global workforce, reducing operational expenditures, and effectively managing inventory levels. Our focus will be on investing in our primary growth initiatives, which include the launch of our products in the U.S., the development of the Chinese market and promoting our product, Mia Femtech.
Previous report
Gross margin increased to 65.6% for the three months ended June 30, 2024 as compared to 62.3% for the three months ended June 30, 2023, primarily due to the benefit of geographic mix and slight increases in average global selling prices in fiscal 2024, partially offset by a higher cost of labor and overhead, due, in part, to the revaluation of the Costa Rica colon.
Previous report
Comparison of the Six Months Ended June 30, 2024 and 2023
Previous report
Gross margin increased to 65.6% for the six months ended June 30, 2024 compared to 63.5% for the six months ended June 30, 2023, due to the benefit of geographic mix and slight increases in average global selling prices in fiscal 2024, partially offset by a higher cost of labor and overhead, due, in part, to the revaluation of the Costa Rica colon.
Previous report
R&D expense decreased $3.7 million, or 27.4%, to $9.8 million for the six months ended June 30, 2024, compared to $13.5 million for the six months ended June 30, 2023. The decrease in R&D expense was primarily due to a $3.2 million decrease in personnel cost and a $0.9 million decrease in expenditures related to our IDE clinical trial in the United States, partially offset by a $0.3 million increase in stock compensation costs and a $0.1 million increase in regulatory affairs costs.
Previous report
On April 27, 2023, we issued 1,100,000 common shares in an underwritten public offering, at a price to the public of $71.50 per share. The underwriters purchased the shares from the Company at a price of $67.21 per share and exercised the option to purchase an additional 165,000 common shares, at the public offering price per share. Net proceeds to us after deducting underwriting discounts and offering expenses were approximately $84.6 million. See Note 7 “Shareholders’ Equity” for additional information.
Previous report
In February 2024, we entered into an amendment to the Credit Agreement, which, among other changes, extends the termination date for commitments from March 31, 2024 to December 31, 2024 for Tranche C Term Loans and from December 31, 2024 to June 30, 2025 for Tranche D Term Loans, with a corresponding increase in the interest rate applicable to such loans from 9.0% per annum to 10.0% per annum. The milestones triggering the availability of the Tranche C Term Loans and Tranche D Term Loans was also modified by the amendment to (i) provide for availability of the Tranche C Term Loans upon FDA approval of Motiva Implants for augmentation use in the U.S. and removed the alternative to trigger availability of Tranche C Term Loans upon achieving trailing twelve month gross sales of $185 million, and (ii) provided for availability of the Tranche D Term Loans upon achieving trailing twelve month gross sales of $195 million, which was reduced from $225 million. See Note 5 “Debt” for additional information.
Reworded paragraphs (38)
Previous wording
Our line of silicone gel-filled breast implants, branded as Motiva Implants, is the centerpiece of our medical technology platform and, to date, are registered to be sold in 86 countries, including, most recently, in China. Our post-market surveillance data (which was not generated in connection with a United States Food and Drug Administration, or FDA, pre-market approval, or PMA, study collected at defined follow-ups but was patient or practitioner reported) and published third-party registries and data indicate that Motiva Implants have low rates of adverse events (including rupture, capsular contracture, and safety related reoperations) that we believe compare favorably with those of our competitors. We believe the proprietary technologies that differentiate our Motiva Implants enable improved safety and aesthetic outcomes and drive our revenue growth. We have developed other complementary products and services, which are aimed at further enhancing patient outcomes.
Current wording
Our line of silicone gel-filled breast implants, branded as Motiva Implants, is the centerpiece of our medical technology platform and, to date, are registered to be sold more than 85 countries, including, most recently, in the United States. Our post-market surveillance data (which was not generated in connection with a United States Food and Drug Administration, or FDA, pre-market approval, or PMA, study collected at defined follow-ups but was patient or practitioner reported) and published third-party registries and data indicate that Motiva Implants have low rates of adverse events (including rupture, capsular contracture, and safety related reoperations) that we believe compare favorably with those of our competitors. We believe the proprietary technologies that differentiate our Motiva Implants enable improved safety and aesthetic outcomes and drive our revenue growth. We have developed other complementary products and services, which are aimed at further enhancing patient outcomes.
Previous wording
We have devoted a majority of our resources since inception to developing our Motiva Implants, which we began selling in October 2010. We have incurred net losses in each year since inception, and we have financed our operations primarily through equity financings and debt financings. We are currently seeking FDA approval to sell Motiva Implants in the United States. We obtained an investigational device exemption, or IDE, from the FDA in March 2018 to conduct a clinical trial for the Motiva Implants and, in February 2023, we submitted the last of the four required modules to the FDA. At the end of July 2024, the FDA completed its PMA preapproval inspection of our manufacturing facility for Motiva Implants in Costa Rica.
Current wording
We have devoted a majority of our resources since inception to developing our Motiva Implants, which we began selling in October 2010. We have incurred net losses in each year since inception, and we have financed our operations primarily through equity financings and debt financings.
Previous wording
In October 2023, the FDA granted 510(k) clearance for the Motiva Flora SmoothSilk Tissue Expander.
Current wording
In September 2024, we received FDA approval to sell Motiva Implants in the United States. In October 2023, the FDA granted 510(k) clearance for the Motiva Flora SmoothSilk Tissue Expander.
Previous wording
Our revenue for the six months ended June 30, 2024 and 2023 was $81.3 million and $95.1 million, respectively, a decrease of $13.8 million, or 14.5%. Net losses were $33.4 million for the six months ended June 30, 2024 as compared to $28.7 million for the six months ended June 30, 2023. As of June 30, 2024 we had an accumulated deficit of $393.5 million.
Current wording
Our revenue for the nine months ended September 30, 2024 and 2023 was $121.5 million and $133.6 million, respectively, a decrease of $12.1 million, or 9.1%. Net losses were $50.1 million for the nine months ended September 30, 2024 as compared to $58.0 million for the nine months ended September 30, 2023. As of September 30, 2024 we had an accumulated deficit of $410.2 million.
Previous wording
Our cash balance as of June 30, 2024 was $54.6 million.
Current wording
Our cash balance as of September 30, 2024 was $39.7 million.
Previous wording
In addition, in October 2023, we completed and announced the results of the two-year 100-patient clinical study for Mia Femtech, our patented technologies that can increase breast shape by 1 to 2 cups in a 15-minute procedure without the need for general anesthesia. The single-center, Institutional Review Board approved study began in December 2020 and involved participation of fifteen board-certified plastic surgeons from Costa Rica, Sweden, England, Brazil, Austria, Italy, Belgium, and the United States. We have launched Mia Femtech globally through partnerships with clinics in a number of countries including Japan, Spain, Switzerland, Sweden, Germany, France, Costa Rica, Turkey and the Middle East. In October 2023, we also launched, in select geographies, Zen - the newest generation of our passive RFID technology that is now non-ferromagnetic. Zen is available with Motiva Ergonomix2 Round implants in the Joy program.
Current wording
In October 2024, we completed and announced the results of the three-year 100-patient clinical study for Mia Femtech, our patented technologies that can increase breast shape by 1 to 2 cups in a 15-minute procedure without the need for general anesthesia. The single-center, Institutional Review Board approved study began in December 2020 and involved participation of fifteen board-certified plastic surgeons in multiple geographies. We now offer Mia Femtech in over 30 cities across the world with over 80 plastic surgeons fully certified to provide the Mia experience.
Previous wording
In February 2024, we amended our credit agreement, or the Credit Agreement, with Oaktree Fund Administration, LLC, as administrative agent, which provides for term loans to the Company in an aggregate principal amount of up to $225 million. The amendment modified the access conditions, commitment termination dates and interest rates for the two remaining available tranches, Tranche C Term Loans and Tranche D Term Loans. See Note 5 “Debt” for additional information.
Current wording
In February 2024, we entered into a Second Amendment to the Credit Agreement, which provides for term loans to the Company in an aggregate principal amount of up to $225 million. The Second Amendment modified the access conditions, commitment termination dates and interest rates for the two remaining available tranches, Tranche C Term Loans and Tranche D Term Loans. See Note 5 “Debt” for additional information. The Tranche C Term Loan of $25 million was advanced in October 2024 at the Company’s election following the administrative agent’s receipt of evidence that the FDA’s approval of Motiva Implants for augmentation use in the United States had been issued, subject to the other terms and conditions of the Credit Agreement, as amended.
Previous wording
We commenced sales of our Motiva Implants in October 2010, which have historically accounted for the majority of our revenues. Sales of our Motiva Implants accounted for over 99% of our revenues for the six months ended June 30, 2024, and we expect our revenues to continue to be driven primarily by sales of these products. We primarily derive revenue from sales of our Motiva Implants to two types of customers: (1) medical distributors and (2) direct sales to physicians, hospitals, and clinics.
Current wording
We commenced sales of our Motiva Implants in October 2010, which have historically accounted for the majority of our revenues. Sales of our Motiva Implants accounted for over 95% of our revenues for the nine months ended September 30, 2024, and we expect our revenues to continue to be driven primarily by sales of these products.
Previous wording
We expect our revenue to increase as we enter new markets, launch Motiva Implants in the United States, if approved, expand awareness of our products in existing markets, and grow our distributor network and direct sales force. We also expect our revenue to fluctuate from quarter to quarter due to a variety of factors, including seasonal fluctuations in demand for Motiva Implants. We are also affected by foreign currency fluctuations.
Current wording
We expect our revenue to fluctuate from quarter to quarter due to a variety of factors, including seasonal fluctuations in demand for Motiva Implants and foreign currency fluctuations.
Previous wording
Our implants are manufactured at our two facilities in Costa Rica. Construction of our third facility in Costa Rica was completed in June 2024. Cost of revenue is primarily the cost of silicone but also includes other raw materials, packaging, components, quality assurance, labor costs, as well as manufacturing and overhead expenses. Cost of revenue also includes depreciation expense for production equipment, and amortization of certain intangible assets.
Current wording
Our implants are manufactured at our facilities in Costa Rica. Construction of our third facility in Costa Rica was completed in June 2024. Subsequently, the smallest manufacturing facility ceased production in September 2024. Cost of revenue is primarily the cost of silicone but also includes other raw materials, packaging, components, quality assurance, labor costs, as well as manufacturing and overhead expenses. Cost of revenue also includes depreciation expense for production equipment, and amortization of certain intangible assets.
Previous wording
We calculate gross margin as revenue less cost of revenue for a given period divided by revenue. Our gross margin may fluctuate from period to period depending, in part, on the efficiency and utilization of our manufacturing facilities, targeted pricing programs, and sales volume based on geography, customer and product type.
Current wording
We calculate gross margin as revenue less cost of revenue for a given period divided by revenue. Our gross margin may fluctuate from period to period depending, in part, on the efficiency and utilization of our manufacturing facilities, fluctuations of foreign currency exchange rates, targeted pricing programs, and sales volume based on geography, customer and product type.
Previous wording
We expect our R&D expenses to remain elevated for the foreseeable future as we continue to advance our products under development, as well as initiate and prepare for additional clinical studies. We received an approval of an IDE from the FDA in March 2018 to initiate a clinical trial and enrolled the first patient in April 2018. The IDE clinical trial is expected to cost between $30.0 million and $40.0 million over ten years. As of June 30, 2024, approximately $31.5 million has been spent on the trial to date. We also have other products under development for which we may be required to conduct clinical trials in future periods in order to receive regulatory approval to market these products.
Current wording
We expect our R&D expenses to remain elevated for the foreseeable future as we continue to advance our products under development, as well as initiate and prepare for additional clinical studies. We received an approval of an IDE from the FDA in March 2018 to initiate a clinical trial and enrolled the first patient in April 2018. The IDE clinical trial is expected to cost between $30.0 million and $40.0 million over the duration of the clinical trial period of ten years. As of September 30, 2024, approximately $32.2 million has been spent on the trial to date. We also have other products under development for which we may be required to conduct clinical trials in future periods in order to receive regulatory approval to market these products.
Previous wording
•Financial Results: The second half of fiscal year 2023 showed a slowing in revenue growth as a result of an overall slowdown in demand for aesthetic procedures, which we believe was primarily due to general uncertainty about macroeconomic conditions and seasonality. The strong sequential improvement we observed in revenue this quarter, which resulted in an approximately 19% quarter-over-quarter increase in revenue, reflects the stabilization of global demand for our products. All regions showed sequential improvement in the second quarter. However, Brazil, which remains our largest single market, continues to suffer from weaker underlying demand for aesthetic and reconstructive plastic surgery, and we do not anticipate any improvement this year. To strengthen our market position in Brazil, we have implemented several initiatives that are designed to ensure our cost base aligns with the current demand during this slowdown. Conversely, our European region has improved, and in the second quarter some markets in that region have fully rebounded from last year's slowdown. Moreover, we are witnessing signs of a robust recovery in demand from our distributors in the Asia Pacific region. We have been managing our inventory levels to satisfy the current and projected global demand.
Current wording
•Financial Results: Demand in fiscal 2024 improved from the second half of fiscal 2023. Latin America, Brazil in particular, which remains our largest single market, continues to suffer from weaker underlying demand for aesthetic and reconstructive plastic surgery as compared to fiscal 2023.
Previous wording
•Outlook: Demand for our products is dependent on the relative strength of the global and regional medical device markets, which are sensitive to general macroeconomic conditions. The current global macroeconomic environment remains complex, with elevated inflation and interest rates driving reductions in discretionary spending in the markets we operate. These macroeconomic challenges, combined with geopolitical upheaval, have led to ongoing volatility within global markets. The Latin American market especially is experiencing a slower pace of stabilization compared to the rest of the world, and we hold the belief that the macroeconomic conditions in this region will pose challenges for aesthetics in general.
Current wording
•Outlook: Demand for our products is dependent on the relative strength of the global and regional medical device markets, which are sensitive to general macroeconomic conditions. The current global macroeconomic environment remains complex, with elevated inflation and interest rates driving reductions in discretionary spending in the markets we operate. While several regions are showing strong performance, the demand remains inconsistent, with Latin America, especially Brazil, underperforming. In September 2024, we received FDA approval to sell Motiva Implants in the United States and have seen strong demand from the plastic surgeon community and positive feedback in the press. We expect higher selling prices in the United States and the introduction of other new products will positively impact gross margins in 2025. While we are still very focused on managing operating expenses, our commercial and operational activities will increase following the FDA approval of Motiva Implants. As a result, we expect overall operating expenses will rise as compared to the previous quarters.
Previous wording
Revenue decreased $4.5 million, or 9.3%, to $44.1 million for the three months ended June 30, 2024 as compared to $48.6 million the three months ended June 30, 2023. The decrease was primarily due to a decrease in demand in Latin America, resulting in an approximately 46% decrease in revenue in this region as compared to the same period in fiscal 2023, and was partially offset by an increase in Asia-Pacific, resulting in an approximately 23% increase in revenue in this region compared to the same period in 2023, and slight increases in global selling prices. Revenue from our European markets remained stable. We believe the decrease in demand for aesthetic procedures in certain affected regions is a result of continuing general uncertainty about macroeconomic conditions, as well as seasonality. These conditions have continued in certain markets in 2024.
Current wording
Revenue increased $1.7 million, or 4.4%, to $40.2 million for the three months ended September 30, 2024 as compared to $38.5 million the three months ended September 30, 2023. The increase was primarily due to an increase in demand in the Asia-Pacific region, resulting in an approximately 346% increase in revenue in this region as compared to the same period in fiscal 2023, and was partially offset by a decrease in the EMEA and Latin American regions, resulting in an approximately 19% decrease in revenue in these regions compared to the same period in 2023. We believe the decrease in demand for aesthetic procedures in certain affected regions is a result of continuing general uncertainty about macroeconomic conditions, as well as seasonality. These conditions have continued in certain markets in 2024.
Previous wording
Cost of revenue decreased $3.1 million, or 16.9%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in cost of revenue is in line with the decrease in revenue except as described below.
Current wording
Cost of revenue increased $2.0 million, or 16.0%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in cost of revenue is in line with the increase in revenue except as described below.
Previous wording
SG&A expense decreased $4.2 million, or 11.4%, to $32.8 million for the three months ended June 30, 2024, compared to $37.0 million for the three months ended June 30, 2023. The decrease in SG&A was primarily due to a $2.1 million decrease in consulting fees, a $1.8 million decrease in freight associated with lower sales, a $1.3 million decrease in personnel and related costs from decreased headcount, and a $0.6 million decrease in sales commissions, partially offset by a $0.5 million increase in depreciation and amortization expenses, a $0.5 million increase in insurance expenses and a $0.5 million increase in software implementation costs. In the fourth quarter of 2023, we implemented measures targeting a decrease in operating expenses, including headcount reduction to lower global personnel costs.
Current wording
SG&A expense decreased $5.9 million, or 14.8%, to $34.1 million for the three months ended September 30, 2024, compared to $40.0 million for the three months ended September 30, 2023. The decrease in SG&A was primarily due to a $3.0 million decrease in sales and marketing expenses, a $2.5 million decrease in consulting fees, a $0.7 million decrease in freight associated with lower sales, a $0.5 million decrease in sales commissions, a $0.4 million decrease in software implementation costs, and a $0.3 million decrease in facilities costs, partially offset by a $0.7 million increase in depreciation and amortization expenses. In the fourth quarter of 2023, we implemented measures targeting a decrease in operating expenses, including headcount reduction to lower global personnel costs.
Previous wording
R&D expense decreased $1.4 million, or 20.3%, to $5.5 million for the three months ended June 30, 2024, compared to $6.9 million for the three months ended June 30, 2023 primarily due to a $1.8 million decrease in personnel costs from decreased headcount, partially offset by a $0.3 million increase in stock compensation costs.
Current wording
R&D expense decreased $2.3 million, or 32.4%, to $4.8 million for the three months ended September 30, 2024, compared to $7.1 million for the three months ended September 30, 2023 primarily due to a $2.7 million decrease in personnel costs from decreased headcount, partially offset by a $0.4 million increase in stock compensation costs.
Previous wording
Interest expense for the three months ended June 30, 2024 was $5.2 million as compared to $3.6 million for the three months ended June 30, 2023. The increase was primarily due to an increase in debt principal.
Current wording
Interest expense for the three months ended September 30, 2024 was $5.3 million as compared to $3.7 million for the three months ended September 30, 2023. The increase was primarily due to an increase in debt principal.
Previous wording
Provision for income taxes decreased $0.5 million, or 55.6%, to $0.4 million for the three months ended June 30, 2024, compared to $0.9 million for the three months ended June 30, 2023. The change in the provision for income taxes is primarily due to the decrease in pre-tax income in certain U.S. and foreign jurisdictions.
Current wording
Provision for income taxes decreased $0.2 million, or 28.6%, to $0.5 million for the three months ended September 30, 2024, compared to $0.7 million for the three months ended September 30, 2023. The change in the provision for income taxes is primarily due to the decrease in pre-tax income in certain U.S. and foreign jurisdictions.
Previous wording
Other income (expense), net, decreased $4.1 million to a loss of $2.8 million for the three months ended June 30, 2024, compared to a gain of $1.3 million for the three months ended June 30, 2023. The decrease was primarily due to foreign currency fluctuations of the euro and the Brazilian real as compared to the U.S. dollar in the second quarter of 2024 compared to the second quarter of 2023, resulting in a foreign currency transaction loss of $2.8 million, the majority of which remains unrealized, for the three months ended June 30, 2024, compared to a $1.5 million gain for the three months ended June 30, 2023.
Current wording
Other income (expense), net, increased $6.2 million to a gain of $2.0 million for the three months ended September 30, 2024, compared to a loss of $4.2 million for the three months ended September 30, 2023. The increase was primarily due to foreign currency fluctuations of the euro and the Brazilian real as compared to the U.S. dollar in the third quarter of 2024 compared to the third quarter of 2023, resulting in a foreign currency transaction gain of $2.2 million, the majority of which remains unrealized, for the three months ended September 30, 2024, compared to a $3.8 million loss for the three months ended September 30, 2023.
Previous wording
Revenue decreased $13.8 million, or 14.5%, to $81.3 million for the six months ended June 30, 2024 as compared to $95.1 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease in overall demand in Latin America resulting in an approximately 37% decrease in revenue in this region as compared to the same period in fiscal 2023, and Asia Pacific, resulting in an approximately 14% decrease in revenue in this region as compared to the same period in fiscal 2023, partially offset by slight increases in global selling prices and demand in Europe. The second half of fiscal year 2023 showed a slowing in revenue growth as a result of an overall slowdown in demand for aesthetic procedures, primarily due to general uncertainty about macroeconomic conditions and seasonality. These conditions have continued in certain markets in 2024.
Current wording
Revenue decreased $12.1 million, or 9.1%, to $121.5 million for the nine months ended September 30, 2024 as compared to $133.6 million for the nine months ended September 30, 2023. The decrease was primarily due to a decrease in overall demand in Latin America resulting in an approximately 33% decrease in revenue in this region as compared to the same period in fiscal 2023, partially offset by an increase in the Asia Pacific region, resulting in an approximately 17% increase in revenue in this region as compared to the same period in fiscal 2023. Revenue from our EMEA market remained relatively stable. The second half of fiscal year 2023 showed a slowing in revenue growth as a result of an overall slowdown in demand for aesthetic procedures, primarily due to general uncertainty about macroeconomic conditions and seasonality. These conditions have continued in certain markets in 2024.
Previous wording
Cost of revenue decreased $6.7 million, or 19.3%, to $28.0 million for the six months ended June 30, 2024 compared to $34.7 million for the six months ended June 30, 2023. The decrease in cost of revenue is in line with the decrease in revenue except as described below.
Current wording
Cost of revenue decreased $4.7 million, or 10.0%, to $42.5 million for the nine months ended September 30, 2024 compared to $47.2 million for the nine months ended September 30, 2023. The decrease in cost of revenue is in line with the decrease in revenue.
Previous wording
SG&A expense decreased $7.0 million, or 10.2%, to $61.7 million for the six months ended June 30, 2024, compared to $68.7 million for the six months ended June 30, 2023. The decrease in SG&A was primarily due to a $2.7 million decrease in freight associated with lower sales, a $2.1 million decrease in consulting fees, a $1.5 million decrease in commissions, a $1.5 million decrease in personnel and related costs from decreased headcount, a $0.7 million decrease in sales and marketing expenses, and a $0.3 million decrease in costs in facilities, partially offset by a $0.7 million increase in depreciation and amortization expenses, a $0.7 million increase in insurance expenses, and a $0.6 million increase in software implementation costs. In the fourth quarter of 2023, we implemented measures targeting a decrease in operating expenses, including headcount reduction to lower global personnel costs.
Current wording
SG&A expense decreased $12.9 million, or 11.9%, to $95.8 million for the nine months ended September 30, 2024, compared to $108.7 million for the nine months ended September 30, 2023. The decrease in SG&A was primarily due to a $4.6 million decrease in consulting fees, a $3.7 million decrease in sales and marketing expenses, a $3.5 million decrease in freight associated with lower sales, a $2.0 million decrease in commissions, a $1.5 million decrease in personnel and related costs from decreased headcount, and a $0.6 million decrease in costs in facilities, partially offset by a $1.4 million increase in depreciation and amortization expenses, a $0.8 million increase in insurance expenses, and a $0.2 million increase in software implementation costs. In the fourth quarter of 2023, we implemented measures targeting a decrease in operating expenses, including headcount reduction to lower global personnel costs.
Previous wording
Interest expense was $9.6 million for the six months ended June 30, 2024, compared to $7.4 million for the six months ended June 30, 2023. The increase was primarily due to an increase in debt principal.
Current wording
Interest expense was $14.9 million for the nine months ended September 30, 2024, compared to $11.1 million for the nine months ended September 30, 2023. The increase was primarily due to an increase in debt principal.
Previous wording
Provision for income taxes decreased $0.9 million, or 50.0%, to $0.9 million for the six months ended June 30, 2024, compared to $1.8 million for the six months ended June 30, 2023. The change in the provision for income taxes is primarily due to the decrease in pre-tax income in certain US and foreign jurisdictions.
Current wording
Provision for income taxes decreased $1.0 million, or 41.7%, to $1.4 million for the nine months ended September 30, 2024, compared to $2.4 million for the nine months ended September 30, 2023. The change in the provision for income taxes is primarily due to the decrease in pre-tax income in certain US and foreign jurisdictions.
Previous wording
Other income (expense), net decreased $7.9 million to a loss of $5.8 million for the six months ended June 30, 2024, compared to an income of $2.1 million for the six months ended June 30, 2023. The decrease was primarily due to the foreign currency fluctuations of the Brazilian real and euro as compared to the U.S. dollar in fiscal 2024 and 2023, resulting in a foreign currency transaction loss of $5.8 million, the majority of which remains unrealized, for the six months ended June 30, 2024, compared to a $2.4 million gain for the six months ended June 30, 2023.
Current wording
Other income (expense), net decreased $1.7 million to a loss of $3.8 million for the nine months ended September 30, 2024, compared to a loss of $2.1 million for the nine months ended September 30, 2023. The decrease was primarily due to the foreign currency fluctuations of the Brazilian real and euro as compared to the U.S. dollar in fiscal 2024 and 2023, resulting in a foreign currency transaction loss of $3.6 million, the majority of which remains unrealized, for the nine months ended September 30, 2024, compared to a $1.4 million loss for the nine months ended September 30, 2023.
Previous wording
As of June 30, 2024, we had an accumulated deficit of $393.5 million. Since our inception, we have generated losses and expect to continue to generate losses in the near term. We have financed our operations through a combination of equity financings and debt financings, and from cash generated from operations, primarily from the collection of accounts receivable resulting from sales. Our historical cash outflows have primarily been associated with cash used for operating activities such as expansion of our sales and marketing and distributor infrastructure, investing in inventory, R&D activities, asset acquisitions, capital improvements, including our new manufacturing facility, and other working capital needs. As of June 30, 2024 and December 31, 2023, we had cash of $54.6 million and $40.0 million, respectively.
Current wording
As of September 30, 2024, we had an accumulated deficit of $410.2 million. Since our inception, we have generated losses and expect to continue to generate losses in the near term. We have financed our operations through a combination of equity financings and debt financings, and from cash generated from operations, primarily from the collection of accounts receivable resulting from sales. Our historical cash outflows have primarily been associated with cash used for operating activities such as expansion of our sales and marketing and distributor infrastructure, investing in inventory, R&D activities, asset acquisitions, capital improvements, including our new manufacturing facility, and other working capital needs. As of September 30, 2024 and December 31, 2023, we had cash of $39.7 million and $40.0 million, respectively.
Previous wording
Our short-term liquidity requirements consist primarily of operating expenses and interest payments on the Credit Agreement. We believe that our available cash and cash from operations will be sufficient to satisfy our liquidity requirements for at least the next 12 months, including our contractual and other obligations summarized in our Annual Report on Form 10-K for the year ended December 31, 2023 under “Material Cash Requirements”. Our long-term liquidity needs consist primarily of operating expenses, including SG&A and R&D expenses related to our IDE clinical trial, regulatory compliance and product development and funds necessary to pay for the interest and principal payment on our Term Loans. Our liquidity assumptions may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect.
Current wording
Our short-term liquidity requirements consist primarily of operating expenses and interest payments on the Credit Agreement. We believe that our available cash and cash from operations will be sufficient to satisfy our liquidity requirements for at least the next 12 months, including our contractual and other obligations summarized in our Annual Report on Form 10-K for the year ended December 31, 2023 under “Material Cash Requirements”, as updated below. Our long-term liquidity needs consist primarily of operating expenses, including SG&A and R&D expenses related to our IDE clinical trial, regulatory compliance and product development and funds necessary to pay for the interest and principal payment on our Term Loans. Our liquidity assumptions may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect.
Previous wording
▪the cost and timing of our regulatory activities, especially the IDE clinical trial, and the timing of regulatory approval for our Motiva Implants in the United States;
Current wording
▪the cost and timing of our regulatory activities;
Previous wording
Net cash used in operating activities of $25.3 million for the six months ended June 30, 2024 was primarily comprised of a net loss of $33.4 million, changes in operating assets and liabilities of $12.1 million and $0.6 million of interest capitalized for construction in progress, partially offset by $7.2 million of share-based compensation expense, $5.0 million of non-cash interest expense due to accretion of debt discounts, $4.4 million of unrealized foreign currency loss, $2.7 million of non-cash depreciation and amortization expense, a $0.5 million change in provision for inventory obsolescence, a $0.4 million change in allowance for credit losses and $0.3 million of right-to-use asset amortization.
Current wording
Net cash used in operating activities of $37.8 million for the nine months ended September 30, 2024 was primarily comprised of a net loss of $50.1 million, changes in operating assets and liabilities of $13.2 million and $0.6 million of interest capitalized for construction in progress, partially offset by $10.9 million of share-based compensation expense, $5.6 million of non-cash interest expense due to accretion of debt discounts, $4.7 million of non-cash depreciation and amortization expense, $1.9 million of unrealized foreign currency loss, a $1.0 million change in allowance for credit losses, a $0.8 million change in provision for inventory obsolescence, $0.9 million in stock compensation in lieu of cash fees, and $0.5 million of right-to-use asset amortization.
Previous wording
Net cash used in operating activities of $48.9 million for the six months ended June 30, 2023 was primarily comprised of a net loss of $28.7 million, changes in operating assets and liabilities of $31.3 million, $3.8 million of unrealized foreign currency gain and $1.9 million of interest capitalized for construction in progress, partially offset by $6.9 million of share-based compensation expense, $6.5 million of non-cash interest expense due to accretion of debt discounts, and a $1.9 million of non-cash depreciation and amortization expense.
Current wording
Net cash used in operating activities of $80.4 million for the nine months ended September 30, 2023 was primarily comprised of a net loss of $58.0 million, changes in operating assets and liabilities of $44.8 million, $0.6 million of unrealized foreign currency gain and $3.0 million of interest capitalized for construction in progress, partially offset by $10.9 million of share-based compensation expense, $9.9 million of non-cash interest expense due to accretion of debt discounts, $2.9 million of non-cash depreciation and amortization expense, a $1.1 million change in provision for inventory obsolescence, and a $0.7 million change in allowance for doubtful accounts.
Previous wording
Net cash used in investing activities of $11.0 million for the six months ended June 30, 2024 primarily reflected $4.8 million in costs incurred for intangible assets primarily driven by the development of an enterprise resource planning system for the anticipated U.S. launch of Motiva Implants, $4.1 million in purchases of property and equipment primarily related to the new manufacturing facility, and $2.2 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in the CFZ in Costa Rica.
Current wording
Net cash used in investing activities of $13.8 million for the nine months ended September 30, 2024 primarily reflected $5.9 million in costs incurred for intangible assets primarily driven by the development of an enterprise resource planning system for the anticipated U.S. launch of Motiva Implants, $5.6 million in purchases of property and equipment primarily related to the new manufacturing facility, and $2.3 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in the CFZ in Costa Rica.
Previous wording
Net cash used in investing activities of $13.3 million for the six months ended June 30, 2023 primarily consisted of $9.7 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in Costa Rica and $3.5 million in purchases of property and equipment.
Current wording
Net cash used in investing activities of $19.9 million for the nine months ended September 30, 2023 primarily consisted of $12.3 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in the CFZ in Costa Rica and $7.3 million in purchases of property and equipment primarily related to the new manufacturing facility.
Previous wording
Net cash provided by financing activities of $51.4 million for the six months ended June 30, 2024 primarily reflected $49.7 million of proceeds received for the issuance of common shares and pre-funded warrants, net of offering expenses, from our private placement offering in January 2024 and $2.0 million in proceeds received for stock option exercises partially offset by $0.3 million paid to satisfy tax withholding obligations upon the vesting of restricted stock.
Current wording
Net cash provided by financing activities of $51.4 million for the nine months ended September 30, 2024 primarily reflected $49.7 million of proceeds received for the issuance of common shares and pre-funded warrants, net of offering expenses, from our private placement offering in January 2024 and $2.1 million in proceeds received for stock option exercises partially offset by $0.4 million paid to satisfy tax withholding obligations upon the vesting of restricted stock.
Previous wording
Net cash provided by financing activities of $85.7 million for the six months ended June 30, 2023 primarily $84.5 million of proceeds received for the issuance of common shares, net of underwriters’ discount and issuance costs, from our public offering in April 2023 and $1.5 million in proceeds received for stock option exercises, partially offset by $0.3 million paid to satisfy tax withholding obligations upon the vesting of restricted stock.
Current wording
Net cash provided by financing activities of $86.2 million for the nine months ended September 30, 2023 primarily $84.5 million of proceeds received for the issuance of common shares, net of underwriters’ discount and issuance costs, from our public offering in April 2023 and $2.1 million in proceeds received for stock option exercises, partially offset by $0.5 million paid to satisfy tax withholding obligations upon the vesting of restricted stock.
Previous wording
Our material cash requirements have not changed materially from those included in our Annual Report on the Form 10-K filed with the SEC on March 4, 2024.
Current wording
Except as described above with respect to the advancement of the Tranche C Term Loan, our material cash requirements have not changed materially from those included in our Annual Report on the Form 10-K filed with the SEC on March 4, 2024.
Previous wording
In February 2024, we amended the Credit Agreement to modify the access conditions, commitment termination dates and interest rates for the two remaining available tranches, Tranche C Term Loans and Tranche D Term Loans. See “Liquidity and Capital Resources” above and Note 5 “Debt” for additional information. Our ability to draw down the third and fourth tranches of the Term Loans under the Credit Agreement will depend on our ability to satisfy the FDA regulatory approval and gross sales thresholds required to advance the tranches by the dates specified.
Current wording
In February 2024, we amended the Credit Agreement to modify the access conditions, commitment termination dates and interest rates for the two then-remaining available tranches, Tranche C Term Loans and Tranche D Term Loans. The Tranche C Term Loan of $25 million was advanced in October 2024. See “Liquidity and Capital Resources” above and Note 5 “Debt” and Note 14 “Subsequent Events” for additional information. Our ability to draw down the Tranche D Term Loan under the Credit Agreement will depend on our ability to satisfy the gross sales thresholds required to advance the tranches by the dates specified.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
In October 2023, we also launched, in select geographies, Zen - the newest generation of our passive RFID technology that is now non-ferromagnetic. Zen is available with Motiva Ergonomix2 Round implants in the Joy program.
Current report — wording carried from elsewhere
We primarily derive revenue from sales of our Motiva Implants to two types of customers: (1) medical distributors and (2) direct sales to physicians, hospitals, and clinics.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
On January 9, 2024, we entered into a securities purchase agreement with select institutional accredited investors to sell 1,101,565 common shares at a price of $25.00 per share and pre-funded warrants to purchase 898,435 common shares at a price of $24.999 per share. The pre-funded warrants are exercisable immediately, at a price of $0.001 per share, and until exercised in full. Net proceeds to us from the offering, after deducting offering expenses, were approximately $49.7 million. See Note 7 “Shareholders’ Equity” for additional information.