Establishment Labs Holdings Inc (ESTA) Reports Marginal Revenue Growth Amidst Global Demand Slowdown
Third quarter worldwide revenue increased slightly by 0.8% year-over-year to $38.5 million.
Updated 2023 revenue guidance to approximately $165 million, marking a 2% increase over 2022.
Loss from operations widened to $21.0 million from $10.5 million in the same quarter last year.
Net loss for the quarter expanded to $29.3 million compared to $18.6 million in the year-ago period.
On November 7, 2023, Establishment Labs Holdings Inc (NASDAQ:ESTA), a leader in medical technology for women's health, announced its financial results for the third quarter ended September 30, 2023. Despite a modest increase in revenue, the company faced a challenging quarter with a significant increase in operating losses and net losses compared to the same period last year. The financial details were disclosed in conjunction with the company's earnings release and will be further discussed in the quarterly report on Form 10-Q to be filed on November 8, 2023.
Financial Performance Overview
Establishment Labs reported a slight year-over-year revenue increase to $38.5 million in the third quarter, attributing the growth to its diverse product portfolio. However, the company experienced a downturn in demand for breast procedures globally, which impacted its financial performance. The updated revenue guidance for 2023 is set at approximately $165 million, a 2% increase over the previous year, reflecting cautious optimism amidst market challenges.
Operational Challenges and Strategic Focus
CEO Juan Jose Chacon-Quiros acknowledged the industry's cyclical nature and the transient reduced demand. He emphasized the company's strategic focus on growth initiatives, particularly the U.S. and China launch of Motiva and the global rollout of Mia Femtech. Chacon-Quiros expressed confidence in the company's foundation and its $500 million revenue target for 2026.
Our results in the third quarter and updated guidance reflect lower demand for breast procedures globally," said Juan Jose Chacon-Quiros, Chief Executive Officer. "With our core platform and our pipeline of new products, we are taking market share globally and this should continue through the remainder of 2023 and into 2024."
Detailed Financial Results
Gross profit for the third quarter remained relatively stable at $26.1 million, or 67.7% of revenue, compared to $26.0 million, or 68.1% of revenue, in the same period of 2022. However, total operating expenses saw a significant increase to $47.1 million, up from $36.6 million in the previous year's quarter. This rise was primarily due to investments in growth initiatives and expanding operations.
SG&A expenses rose by approximately $8.7 million to $40.0 million, while R&D expenses increased by about $1.8 million to $7.1 million. The net loss for the quarter expanded to $29.3 million, a substantial increase from an $18.6 million net loss in the year-ago period. The company's cash balance as of September 30, 2023, was reported at $52.2 million.
Balance Sheet and Cash Flow
Establishment Labs' balance sheet showed a cash position of $52.2 million, a decrease from the end of the previous year, mainly due to increases in inventory and accounts receivable, along with investments in new facility construction. The company's total assets stood at $270.5 million, with a notable increase in accounts receivable and inventory, reflecting the company's investment in growth despite the current market slowdown.
In summary, Establishment Labs is navigating through a period of reduced global demand for breast procedures while continuing to invest in strategic growth initiatives. The company's commitment to innovation and market expansion, as evidenced by the recent FDA clearance and clinical study results, positions it for potential long-term growth despite short-term headwinds.
For more detailed information on Establishment Labs' financial results, investors and interested parties are encouraged to access the full earnings report and listen to the conference call and webcast. Further insights will be available in the Investor Relations section of the company's website at www.establishmentlabs.com.
Explore the complete 8-K earnings release (here) from Establishment Labs Holdings Inc for further details.
This article first appeared on GuruFocus.
