Establishment Labs Hldgs (NASDAQ:ESTA) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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Summary

Establishment Labs Hldgs reported Q1 2026 revenue of $59.9 million, marking a 44.7% increase from Q1 2025, with a significant 216% growth in the US market.

The company's minimally invasive platform, including the MIA and Preserve procedures, showed strong performance and contributed $9.1 million in Q1 revenue.

Gross margins improved to 70.7%, driven by higher US business contributions and the profitability of minimally invasive procedures.

Guidance for 2026 was raised to $266.5-$268.5 million in revenue, reflecting optimism based on strong Q1 performance and increased order volumes.

Strategic initiatives include plans to expand the US market presence, ongoing product innovation, and potential inclusion in the Russell 2000 index.

Management highlighted the transformative potential of their minimally invasive platform and its role in market expansion and patient interest.

Operational successes included exceeding training goals for US surgeons in the minimally invasive platform and refinancing debt to enhance financial flexibility.

Full Transcript

Operator

Peter, good morning. Welcome to Establishment Lab's first quarter 2026 earnings call. this time all participants will be in listen only mode. At the end of this call, we will open the line for a question and answer session and instructions will follow at that time. As a reminder, today's call is being recorded. I will now turn the call over to Malavika William, Global Head of Corporate Communications and Marketing. Please go ahead.

Malavika William (Global Head of Corporate Communications and Marketing)

Thank you Operator and thank you everyone for joining us. With me today is Peter Cialdini, 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 10K and Form 10Q as well as other SEC filings which are available on our website@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 Good

Peter Cialdini (Chief Executive Officer)

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 4.45percent over Q1 2025. The US 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 US launch. Outside the US 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 refinance 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 to $268.5 million, up from a previous range of 264 to 266 million. Our confidence comes from the strong start we are having in Q2, which we are setting new weekly highs in our US 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 US 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 re examined 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 the 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 US 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 contraction 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 RD 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 two 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 US Market. Both are built on tissue preserving practices which 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 Ergonomix II 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 reserve. A can feature either the Motiva Ergonomics 1 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 14 times. 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 two times higher than traditional breast augmentation and if our overseas growth is any indication, we can expect that minimal 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 three 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 two 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 6am and by 10:30am he had completed 10 minimal invasive surgeries. Scheduling a minimally invasive procedure day like this can generate more than two times 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 US 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 US 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 US 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 1700 accounts. We are seeing increased adoption from higher volume surgeons who are 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 with the first procedures being performed shortly after training. A surgeon in the Northeast recently shared that he began offering PRESERVE A 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 within minimal downtime. In a recent survey conducted with 94 preserve patients three 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 patients surveyed 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 two procedures as complements to each other and all MEIA accounts are offering PRESERVE showcasing the value of a minimally invasive procedure 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 uk, 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 US and OUS markets, we expect growth to continue to accelerate into 2027. We also expect to continue the innovation pipeline by expansion and 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 US Product matrix and thus expanding our reach within existing counts. Continue to develop our pipeline including gem, our gluteal 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

Sandra Harris (Chief Financial Officer)

to Sandra 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 US 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 cost associated with higher sales, including freight, as well as the impact of foreign exchange with continued investment in the US business. Excluding a one time item, adjusted SGA was 41 million or 68.4% of revenue representing approximately 50 basis points of leverage versus the prior year. As we begin to scale the business R and 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 US 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 US 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 US 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 30 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

Peter Cialdini (Chief Executive Officer)

to Peter 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 US Plastic surgeon delegations. Investors have found this trip very useful in validating our business and the overall opportunity. We're also hosting a small dinner in Boston around the Aesthetic Meat 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

Thank you sir. Ladies and gentlemen, we will now be conducting the question and answer session. Please note for participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the STAR keys. If you'd like to ask a question, please key in STAR and then one on your telephone keypad. A confirmation turn will indicate that your line is in the question queue. You may key in STAR and then two to leave the question queue. We further request that you limit yourself to one question and if time allows you, welcome to rejoin the question queue and for follow up questions. Our first question comes from Anthony Petrone of Mizoura Group. Please go ahead.

Anthony Petrone

Thanks and congratulations. Pete, Sandra and to the team on a strong start to the year here, maybe the US Momentum here. It looks like an inflection and you have really almost two simultaneous launches if you will. Ongoing. It's the US 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, you know, how much was just new accounts bringing in Motiva as a platform versus the Preserve Go live counts. I mean, by our estimate, you know, you're probably approaching somewhere between 75 and 100. You know, go live Preserve accounts. I'll start there and I'll have a quick follow up.

Peter Cialdini (Chief Executive Officer)

Thanks. Yeah, thanks Anthony. As you highlighted, I mean the progress in the US has been tremendous. I mean it's exceeded all our expectations. And you see that with all the different metrics that we look at, we've increased the number of accounts, we continue to grow the base Motiva business and and a lot of that is driven and it shouldn't be a surprise. We come to the market with what we believe to be the best implants from a performance as well as a safety standpoint. And we coupled 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 and the accounts that we're in. And clearly Preserve A 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, you know, 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. Well as a surgeon standpoint. So we're seeing good growth opportunities just on our base as well as on the present day launch.

Operator

The next question comes from Josh Jennings of TD Cohen. Please go ahead.

Josh Jennings

Hi, good morning. Great to see the strong start to the year. Wanted to ask about the minimum invasive platform. Follow up to Anthony's question and clearly gaining more and more traction. And 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 me attraction as well. And if you could tie it all in to just sound 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 how this all ties in. Sorry for the multilayer question, but appreciate you taking it.

Peter Cialdini (Chief Executive Officer)

Yeah, thanks, Josh. You know, as you highlighted, you know, 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 two where MIA is much more of in the premium segment, smaller scar to no scar, it's under the armpit, but it's somewhat restrictive in terms of the number of 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 price 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 US 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 you know, I think there's 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 Eber of ptig. Please go ahead.

Peter Cialdini (Chief Executive Officer)

Hi, good morning. Thanks for taking the questions here. Maybe I can stay on PRESERVE for a moment. You know, Peter would love your thoughts on, you know, if you think Preserve A can eventually become standard of care, you know, over traditional breast augmentation, at least here in the US and then maybe you can help explain why PRESERVE is something that, you know, beyond the tools is something that can only be done with motiva, whether it's, you know, the implant surface, whether it's the low complication rates we'll have. If you can explain that in a little bit more detail. Thank you. Yeah, I mean, I think in terms of the minimally invasive and Preserve, not only in the US but I think globally, it really makes sense. And if you look at different types of Procedures, surgical procedures, everything is minimally invasive. And I think bringing that technology and that capability, I think it's, you know, I think patients, that's what they're looking for. I mean, it's very clear what the benefits are for patients. You know, 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 US Prior to our entry, I think, you know, a lot of the categories behind, so we do believe that that's going to be, you know, 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, you know, 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 Carrickou of Stevens. Please come ahead.

Mason Carrickou

Hey, guys, thanks for taking the question here. I assume that most, if not all Preserve users were already Motiva users, but was curious to hear if that launch actually to increase conversation or maybe even conversion of accounts that previously hadn't adopted Motiva, maybe just simpler way. Question is, do you think that launch could actually accelerate the onboarding of new accounts moving forward? Yeah. So, Mason, I mean, we're pretty early in the launch, but what we've seen outside the US 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, you know, it's, it's still early. I believe you're going to see the same type of Trend in the U.S. but, you know, we're kind of in month two right now, and there's significant demands with the accounts that we do have. And it's very, you know, we're very focused on getting the training done. But I do believe to your question, I think it has the potential to drive, you know, certainly account acquisition.

Peter Cialdini (Chief Executive Officer)

The next question comes from Caitlin Roberts of Canaccord Genuity. Please go ahead.

Operator

Hi. Congrats on the quarter and thanks so much for taking the questions. Just a quick one. Have you added all the reps that you plan to add for Preserve A in the US and just appreciate the guidance on mis, but could you break out potentially Preserve A and. And any updates on the timeline for you guys to bring Ergo two into the US and eventually Mia?

Caitlin Roberts

Yeah, so thanks Caitlin. The split between the Preserve A and Mia, you know, a bulk of that is really driven by, you know, Preserve A is the key driver for us. We expect that to be a significant growth driver for us moving forward. And as it relates to Ergonomix II, I mean 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. You know, 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

Peter Cialdini (Chief Executive Officer)

that makes a big impact. And we've been able to do that.

Operator

The next question comes from Joanne Wedge of Citibank. Please go ahead.

Joanne Wedge

Good morning and thank you for taking the question. 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. Thank you so much.

Peter Cialdini (Chief Executive Officer)

Yeah, hi. Thanks Joanne. I think that's a great question. I mean obviously that's top of mind for, you know, anybody that's running a company. And you know, I think, you know, 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. You know, 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. You know, what is the potential overall macro impact? And you know, so far, Joanne, we have not seen an impact on the global demand for the number of procedures and, you know, that's something that we're going to continue to closely monitor as it relates to areas in terms of costs. 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 Harris (Chief Financial Officer)

Yeah, 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 silicone 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

Thank you. The next question comes from Alan Gong of JP Morgan. Please go ahead.

Alan Gong

Hi, Dean, thanks for the question. I just had a quick one on, you know, the guidance and just the momentum that you're seeing. You know, you talked about how orders are up, you know, 30% from 4Q to 1Q. I guess, you know, first quick one, is that, is that a U.S. comment? And also, you know, given that kind of momentum, how should we feel about, you know, the cadence for the balance of the year and particularly what you're seeing in the second quarter given the reiterated guide or guide by just the guide, by just a beat in the first quarter. Thank you.

Peter Cialdini (Chief Executive Officer)

Yeah, Alan, I'll kick it off. But just to clarify that, I mean, when we talk about the orders that was specific to, to the U.S. you know, we're, you know, as we highlighted in the prepared remarks, we're increasing the number of accounts, but also we're increasing the utilization rate, you know, 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 US I think in overall, globally, in a lot of markets, the demand has been stable. And I think the one outstanding question that we had going into as we managed 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 you know, we have not seen the impact, you know, in terms of global demand. But that's something we're going to monitor. So based on that, you know, gave us the comfort to raise the guidance. You know, we had a strong Q1 and then, you know, we're off to a good start in Q2. So that gave us the comfort around that.

Operator

The next question comes from Matt Baylor of Jefferies. Please go ahead.

Peter Cialdini (Chief Executive Officer)

Good morning. Thanks for taking the question. I wanted to follow up on the silicone supply comments. I know that this year the contract's 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? 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 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 you know, there's interest on the new SIL side to have an agreement as well as for us to have an agreement five years or more. And a lot of the conversations are less about pricing. It's much more about, you know, 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 you know, as I mentioned before, we are, you know, 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 you know, we haven't finalized the conversation, the discussions on the agreement, but there's strong intent to have a very long term agreement for with new Silly.

Operator

The next question comes from Mike Mattson of Needham and Company. Please go ahead.

Sandra Harris (Chief Financial Officer)

Yeah, thanks. 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 a million dollars a year. Is that right? Thanks. Yeah, 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 the ability to pick which gives us some near term cash availability which we take. So net, net net there is, you know, mutual to slightly up on the increase in the availability of the funds with the lower interest rate and then the exercise of the pic.

Operator

Thank you. The next question is a follow up from Anthony Petrone of Mzur Group. Please go ahead.

Anthony Petrone

Thanks. One for Sandra. Just on gross margin here, you know, guidance 71.2 to 72.2, you know, how much of that is just, you know, kind of 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?

Sandra Harris (Chief Financial Officer)

Yeah, Anthony, good question. So our gross margin improvement, and we do expect that it will continue to contribute is the growth of the US with the US business being a direct account, it improves our margin profile and you're seeing that in our numbers. And then obviously with OUS being being further along in the journey on minimally invasive, its growth in the direct business and then the launch of minimally invasive in the US 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 US and ous, as well as the minimally invasive. And at this juncture, we do not, you know, we can't necessarily time the FDA approval. So we've made no assumptions in regard to reconstruction.

Operator

Thank you, ladies and gentlemen. That is all the time we have for questions today. I will now turn the call back over to Peter Cialdini for closing remarks.

Peter Cialdini (Chief Executive Officer)

Thank you everybody for joining the call this morning. You know, I appreciate the time and really having everybody get to hear more about the progress we're making with establishment labs as we highlighted there, 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.

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