Establishment Labs (ESTA) Q3 2026 Earnings Call: Revenue Growth, Positive Free Cash Flow and Raised Guidance

Key Takeaways

• Q3 2026 revenue rose 33.9% year over year to $72 million, driven by U.S. market-share gains and growth outside the United States.
• U.S. revenue increased 119% to $26 million, while OUS revenue grew 9.7% to $46 million. The company ended the quarter with 2,100 U.S. accounts.
• Adjusted EBITDA reached $6.4 million, up from $1.2 million, with adjusted EBITDA margin expanding to 8.9% from 2.2%.
• Establishment Labs generated its first quarterly positive free cash flow: operating cash flow was $7.7 million and free cash flow was $5.1 million.
• Management raised full-year 2026 revenue guidance to more than $274 million and minimally invasive revenue guidance to more than $40 million.
• Management expects 25% revenue growth in 2027, supported by higher U.S. utilization, broader adoption of minimally invasive products and opportunities across the OUS and reconstruction businesses.

Core Financial Data

Business and Operating Performance

U.S. growth shifts toward utilization

Establishment Labs had more than 2,100 U.S. accounts at quarter-end. Management said its commercial focus is shifting from account additions toward increasing utilization within existing practices.

Among surgeons reporting Motiva usage, the product represented an average of 43% of implant procedures. In addition, 85% of accounts that ordered Motiva in Q2 reordered in Q3. Management estimated that Motiva held approximately 30% of the U.S. augmentation market exiting September.

The October FDA approval of additional Motiva sizes, including implants as small as 105 cc, addresses what management described as approximately 10% of the market. Commercial availability is expected before year-end.

Minimally invasive platform

Minimally invasive products generated approximately $9 million of Q3 revenue, up 124% year over year. The U.S. contributed nearly half of the platform’s quarterly revenue. Sequential revenue declined because of normal summer seasonality in European direct markets.

Preserve accounted for approximately 17% of U.S. revenue. More than 400 surgeons had been trained by quarter-end, and management expects that number to reach 500 by year-end.

In OUS markets, minimally invasive revenue increased 16%. Nearly half of new European accounts during the quarter entered the Motiva ecosystem through minimally invasive products. The company also plans to expand Mia sizes up to 300 cc and Preserve sizes up to 380 cc globally.

OUS performance

OUS revenue increased 9.7% to $46 million. Direct markets grew 16%, led by broad-based European growth, including contributions from Italy, the U.K. and Germany.

Distributor markets represented approximately 60% of OUS revenue, above the company’s planned 50%. This increased revenue and gross profit dollars but moderated gross margin percentage because distributor sales carry lower margins than direct sales.

Reconstruction opportunity

Motiva Flora was available in more than 350 U.S. facilities, up 14% during the quarter. Management said it had responded to the FDA’s current information request for Motiva implants in reconstruction, while BIMO inspections had occurred at multiple clinical sites and the sponsor site.

Management continues to expect potential reconstruction approval near term, either by the end of 2026 or in early 2027, while emphasizing that FDA timing cannot be predicted. The company identified roughly 130 U.S. hospital accounts as generating the majority of implant-based reconstruction volume.

Management Guidance

Management said the 2027 growth outlook reflects opportunities across the full portfolio, including reconstruction. Because hospital Value Analysis Committee processes can take three to six months, management expects most reconstruction-related revenue contribution to occur in the second half of 2027.

Risks and Points to Watch

• Q3 is historically the company’s weakest seasonal quarter, particularly in European direct markets.
• OUS distributor order timing remains variable and can affect quarterly revenue and gross-margin mix.
• Middle East demand remains below historical levels because of ongoing conflict, according to management.
• Stronger distributor sales benefit revenue and gross profit dollars but reduce consolidated gross-margin percentage relative to a higher direct-sales mix.
• Reconstruction approval timing remains subject to the FDA, and subsequent hospital committee reviews may take three to six months.
• The NuSil supply agreement includes pricing adjustments generally aligned with inflation. Management said the terms are broadly consistent with the prior contract and that pricing could help offset inflationary costs.

Analyst Q&A Highlights

• U.S. utilization: Management said average orders per account continue to rise month over month. The U.S. sales force has expanded to 55 representatives, with additional leadership and targeted marketing investments intended to increase utilization.
• 2027 margin outlook: Management expects a greater contribution from the higher-margin U.S. and minimally invasive businesses to support 50–100 basis points of adjusted gross-margin expansion, subject to geographic and channel mix.
• OUS demand: Management described most international markets as stable, with the Middle East as the principal exception. Direct markets have delivered six consecutive quarters of double-digit growth.
• Reconstruction commercialization: Establishment Labs is adding commercial and hospital-channel capabilities ahead of a potential approval. Its existing presence in more than 350 facilities through Motiva Flora provides established relationships, although implant approval and hospital reviews are still required.
• Silicone supply: Management characterized the NuSil agreement’s pricing and volume terms as consistent with the previous arrangement and does not anticipate a major cost impact.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Good morning. Welcome to the Establishment Labs Third Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded.

I would now turn the call over to Malavika William, VP, Global Head of Corporate Communications and Marketing. Please go ahead.

Malavika William

Thank you, operator, and thank you, everyone, for joining us. With me today is Peter Caldini, our Chief Executive Officer; and Sandra Harris, our Chief Financial Officer. Following our prepared remarks, we'll take your questions.

Before we begin, I would like to remind you that comments made by management during this call will include forward-looking statements within the meaning of federal securities law. These include statements of Establishment Labs' financial outlook and the company's plans and timing for product development and sales. These forward-looking statements are based on management's current expectations and involve risks and uncertainties.

For a discussion of the principal risk factors and uncertainties that may affect our performance or cause actual results to differ materially from these statements, I encourage you to review our most recent annual and quarterly reports on Form 10-K and Form 10-Q as well as other SEC filings, which are available on our website at establishmentlabs.com.

I'd also like to remind you that our comments may include certain non-GAAP financial measures with respect to our performance, including, but not limited to, sales results, which can be stated on a constant currency basis or EBITDA, which we disclose on an adjusted EBITDA basis. Reconciliations to comparable GAAP financial measures for non-GAAP measures, if available, may be found in today's press release, which is available on our website.

The content of this conference call contains time-sensitive information accurate only as of the date of this live broadcast, October 29, 2026. Except as required by law, Establishment Labs undertakes no obligation to revise or otherwise update any statement to reflect events or circumstances after the date of this call.

With that, it is my pleasure to turn the call over to Peter.

Filippo Caldini

Good morning, and thank you for joining us. Q3 was another strong quarter for Establishment Labs as we gained market share and expanded the breast aesthetics category through innovation. Q3 revenue was $72 million, an increase of 33.9% year-over-year, driven by U.S. market share gains and growth across our OUS business. Adjusted EBITDA increased to $6.4 million from $1.2 million a year ago, representing an 8.9% adjusted EBITDA margin and reflecting increasing operating leverage as we scale. Q3 marks our first quarter of positive free cash flow, a major milestone, and we are looking forward to our first year of positive free cash flow in 2027.

Our U.S. business generated $26 million in revenue, up 119% year-over-year. Revenue outside the United States increased 9.7% to $46 million. Both businesses contributed to our growth, demonstrating momentum across our global operations. Our minimally invasive platform is an important growth driver, generating approximately $9 million in third quarter revenue, an increase of 124% year-over-year, fueled by our U.S. expansion. Sequentially, revenue was lower, reflecting normal summer seasonality in our OUS direct markets.

Minimally invasive represented approximately 15% of our year-to-date revenue with the U.S. contributing nearly half of the platform's third quarter revenue, reflecting its growing adoption. We now expect minimally invasive revenue to exceed $40 million for the full year, up from our previous guidance of more than $35 million.

We achieved an important financial milestone in the third quarter, generating positive free cash flow for the first time in our company's history. Operating cash flow was $7.7 million and free cash flow was $5.1 million. This is a significant achievement, particularly as we are investing in our U.S. expansion and innovation pipeline. It demonstrates the increasing scalability of our financial model and our ability to translate revenue growth into cash generation.

Our third quarter performance is particularly noteworthy given the historical seasonality of our industry with Q3 typically representing the softest quarter of the year. Our fourth quarter is off to a strong start, giving us confidence to raise our full year 2026 revenue guidance to more than $274 million, up from a previous range of $269 million to $271 million. Our U.S. and OUS businesses are both delivering strong performance with increasing momentum and opportunities for further growth.

Our 2026 success should carry over into 2027, and we expect 25% revenue growth next year. Starting with the United States, we ended the quarter with 2,100 accounts. Although we are regularly adding new accounts, our focus is increasingly on utilization within our existing base. We have made substantial progress establishing Motiva in the U.S. market, including among many of the highest volume breast augmentation surgeons. With this foundation in place, our focus is shifting towards capturing a greater share of their business.

A recent industry survey reinforces this opportunity. Among surgeons reporting Motiva usage, Motiva represented an average of 43% of their implant procedures, highlighting both the adoption we have achieved and the runway for further growth. Importantly, 85% of the accounts that ordered Motiva in Q2 reordered in Q3, reinforcing that plastic surgeons aren't just trying Motiva implants. They are adopting it in their practices.

The October FDA approval of additional Motiva sizes, which we expect to make commercially available before year-end will give surgeons more options for their patients. Industry data is not well reported, but our estimates have Motiva at approximately 30% share of the U.S. augmentation market exiting September, significant progress in just 2 years. According to data from American Society of Plastic Surgeons, U.S. breast augmentation procedures grew 11% from 2024 to 2025, following years of relatively limited category growth.

The introduction of Motiva implants and Preserve are certainly helping to renew interest in the category alongside other market factors. Our strategy is not simply to take market share. It is to expand the market through innovation and broaden the number of patients considering the category. Preserve represented approximately 17% of our U.S. revenue in the quarter and more than 400 surgeons were trained by the end of the quarter. Demand for training remains strong, and we expect 500 surgeons trained by year-end.

Much like our core Motiva implant business, our focus is now shifting towards increasing utilization among plastic surgeons already trained on Preserve, creating additional growth potential within our existing surgeon network. Surgeon feedback provides further insight into adoption. In a survey of 78 Preserve trained surgeons, respondents reported that approximately 22% of their breast augmentation procedures had shifted to Preserve. 95% reported being satisfied or very satisfied. In addition, 88% said Preserve had attracted patients who previously were not considering augmentation and 98% reported patients asking for Preserve by name. These survey responses are consistent with the adoption trends we are seeing.

Let me share 2 examples that illustrate what we're seeing in the market. One surgeon in the Northeast reported that since the launch of Preserve, 89% of her primary breast augmentation patients have chosen the procedure. Another plastic surgeon who underwent Preserve herself shared that as a young mother and a practicing surgeon, she would not have considered breast augmentation after having children without this option. Following her procedure, she was able to fly 2 days later, returning the surgery 3 days later and attend a major conference by the end of the same week.

These examples illustrate not only how Preserve is gaining adoption within existing practices, but its potential to bring new patients into the breast augmentation market. Consumer awareness is building. Preserve received an Allure Best of Beauty Breakthrough Award this quarter. It was also featured in Forbes, positioning Preserve as the Rolls-Royce of breast augmentation. These recognitions reinforce the growing awareness of Preserve among surgeons and consumers.

Outside the United States, revenue increased 9.7% year-over-year to $46 million, with growth across both our direct and distributor markets. Our direct markets delivered year-over-year growth of 16% during the quarter, with particular strong performance across Europe. Growth was broad-based with Italy, the U.K. and Germany among the largest contributors. Sequential performance reflected a typical summer seasonality in these markets. We are seeing the benefits of the investment we have made in the direct businesses, including strengthening leadership, increased commercial focus and the growing contribution from our minimally invasive platform.

Our distributor business also performed well with strong contribution from Asia Pacific. Distributor markets represented approximately 60% of our OUS revenue in the quarter versus 50% that we expected, reflecting the variability in the timing of orders characteristic of these markets. Looking ahead, we see opportunities across both channels, supported by our established direct market presence, distributor relationships and the growing adoption of our minimally invasive platform. Together, these provide multiple avenues for sustained OUS growth.

An increasingly important component of our OUS growth strategy is minimally invasive, where we are seeing broad adoption of Preserve and Mia. Minimally invasive revenue, OUS grew 16% year-over-year during the quarter. Indications are that minimally invasive is becoming an important entry point into the Motiva ecosystem. Nearly half of all our new accounts in Europe during the quarter started with minimally invasive. At the same time, we are expanding within our existing customer base with the established accounts adopting minimally invasive as well. Mia and Preserve are not simply additional products being sold into an existing customer base. They are increasingly bringing new surgeons and practices to Establishment Labs while creating meaningful growth within established accounts.

The recent U.S. FDA approval of additional Motiva implant sizes, including sizes as small as 105 cc, expands the choices available to surgeons and patients. The growing ballerina or yoga breast trend reflects increasing demand for smaller, more natural-looking results. This approval expands the choices available to women seeking a more subtle aesthetic while representing an important step towards broadening our minimally invasive platform in the United States. We also announced plans to expand sizes for both Mia and Preserve globally. With this, Mia will be able to accommodate sizes of up to 300 cc, and Preserve will be able to accommodate up to 380 cc, allowing more patients the option to get a minimally invasive breast augmentation procedure.

Another important development is our recently disclosed agreement with NuSil, a strategic supplier. This agreement strengthens the foundation of our long-term silicone supply relationship and supports our ability to scale production. Pricing is structured around volume commitments with adjustments generally aligned with inflationary trends. It represents another important step in positioning Establishment Labs for sustained growth.

Ahead of our anticipated FDA approval for Motiva implants in reconstruction, we are building the commercial infrastructure and hospital relationships with our Motiva Flora tissue expander. Motiva Flora is now available in more than 350 facilities nationwide, an increase of 14% during the quarter. Our reconstruction submission is progressing. We have responded to the FDA's current information request and BIMO inspections have taken place at multiple clinical sites, including the sponsor site as part of the review process. These inspections are a routine part of the approval process and should be an indication we are closing in on an approval.

We are evaluating regulatory pathways for our Ergonomix2, Mia and GEM products in our biggest markets. Over time, broader availability of our portfolio will create further opportunities for growth.

With that, I'll turn the call over to Sandra to discuss our financial results in more detail.

Cassandra Harris

Thank you, Peter. Our third quarter financial results reflect revenue growth and improving adjusted profitability as we scale the business. Revenue for the quarter was $72 million, an increase of 33.9% compared with $53.8 million in the prior year period, with growth across both our U.S. and OUS businesses. In the United States, revenue increased 119% to $26 million, representing 36.1% of total revenue compared with 22.1% a year ago. Outside the United States, revenue increased 9.7% to $46 million.

Turning to gross margin. GAAP gross profit was $49.7 million, representing a gross margin of 69.1% compared with 70.1% in the prior year quarter. Excluding $1.3 million of restructuring-related inventory charges, adjusted gross margin was 70.8%, an improvement of 70 basis points year-over-year, driven by favorable U.S. and minimally invasive product mix.

Adjusted gross margin improved sequentially, supported by continued growth in the U.S. and minimally invasive platform with the benefit partially offset by a higher mix of OUS distributor sales, which represented approximately 60% of OUS revenue versus our planned 50%.

Turning to operating expenses. GAAP operating expenses were $52.3 million compared with $41.7 million in the prior year period. Third quarter operating expenses included litigation-related costs, restructuring and transition activities and other items we exclude from certain adjusted measures. These exclusions are detailed in our non-GAAP reconciliations. Excluding these items, adjusted operating expenses were $49.6 million, representing 68.8% of revenue compared with 77.6% in the prior year period. This represents 880 basis points of operating expense leverage.

On a GAAP basis, EBITDA was a loss of $0.9 million compared with a loss of $2.2 million a year ago. Adjusted EBITDA increased to $6.4 million compared with $1.2 million in the prior year quarter. Adjusted EBITDA margin expanded to 8.9% compared to 2.2% a year ago. These results reflect our ability to translate revenue into improved adjusted profitability. We remain focused on investing in commercial expansion while building an efficient and scalable operation model. On a GAAP basis, our preliminary net loss was $10.7 million or $0.35 per share compared with a net loss of $11.1 million or $0.38 per share in the prior year period.

Turning to cash flow and our balance sheet. We generated $7.7 million in operating cash flow and $5.1 million in free cash flow in the third quarter, marking our first quarter of positive free cash flow in the company's history. This milestone reflects strong revenue growth, improving profitability and our continued focus on working capital management.

We ended the quarter with $75.8 million in cash and cash equivalents. In addition, the payment-in-kind interest provision under our refinanced debt facility provides more than $5 million in quarterly cash interest savings during the initial PIK period, giving us additional flexibility to accelerate our U.S. expansion and invest in our innovation pipeline. Looking ahead, we remain focused on sustaining positive cash generation while maintaining a disciplined approach to working capital and strategic investments that support long-term growth.

Turning now to our outlook. As Peter mentioned, we now expect full year 2026 revenue to be more than $274 million compared with our prior guidance of $269 million to $271 million. Full year adjusted gross margin should be aligned with our year-to-date performance of approximately 70.7%. This reflects stronger-than-anticipated OUS distributor sales, which generate additional revenue and gross profit dollars, albeit at a lower margin percentage than our direct business.

Our full year adjusted operating expense guidance remains unchanged at $195 million to $200 million. Our updated guidance supports our expectation of positive adjusted EBITDA for the full year, reflecting the increasing operating leverage of our business as revenue grows. Having achieved our first quarter of positive free cash flow in Q3, we remain focused on sustaining this momentum and delivering positive free cash flow in fiscal 2027. We expect growth in 2027 to be 25%, supported by increasing utilization in the United States, broader adoption of our minimally invasive platform and opportunities across our OUS business.

I'll now turn it back to Peter for closing comments.

Filippo Caldini

Thank you, Sandra. Q3 was an important quarter for Establishment Labs and demonstrates the progress we are making across nearly every part of our business. We have always believed that innovation expands this category, and we're seeing that prove out in both our U.S. and OUS businesses. We have multiple avenues for growth and are building a highly scalable financial model.

As we look forward to 2027, we see meaningful opportunities to build on this year's progress. Increasing utilization across our U.S. account base, broader adoption of our minimally invasive platform and the potential expansion into reconstruction provides several paths for growth. We are encouraged by the opportunities ahead while remaining focused on execution and improving financial performance.

Operator, we're now ready to take questions.

Operator

[Operator Instructions] The first question comes from Mike Matson with Needham & Company.

Question-and-Answer Session

Michael Matson

I guess I wanted to start with the international markets. I think there had been some concern maybe among investors about kind of the outlook there with everything going on from a macro perspective. Obviously, 10% is really good growth. But I'm just curious what you're seeing in terms of the market performance for breast implants outside the U.S. Have you seen any sort of slowdown in the market growth and maybe Establishment is just outperforming? Or are the markets really healthy there?

Filippo Caldini

Yes. Thanks, Mike. I mean, regarding the OUS markets, I would say from a market performance overall, I would say the regions have been pretty stable, right, with a few exceptions. Obviously, the Middle East being one of them with the ongoing conflict. And clearly, that's had an impact on the market. It's also had an impact on our performance in that region. We are getting orders for the Middle East, but it's clearly not at the same level we've had historically.

But in general, the markets are very stable. And our focus, we're very pleased with the performance we've had in the OUS markets. A big focus for us was on the direct markets, and we again had 16% growth this quarter. This is like our sixth quarter of double-digit growth in our direct markets, and that's been a priority for us. We've optimized our leadership team, put more resources in those markets. And it's also -- we've really changed the way we've operated the relationships with our distributor markets. So the trends are very strong. We're well positioned to finish the year, and that's going to really continue into 2027.

Operator

The next question comes from Allen Gong with JPMorgan.

K. Gong

Congrats on the strong quarter. I had one question on minimally invasive to start, definitely seeing strong year-over-year growth. But if we look at second quarter and first quarter, we saw $9 million in the first quarter, increasing to $12 million or so in the second quarter. So it looks like it's taking a step back in the third quarter. Is that just a function of normal seasonality? Is that a function of the market maybe being a little bit more sensitive to more expensive products? Help me understand that dynamic.

Filippo Caldini

Yes. Thanks, Allen. Yes, it's really driven by seasonality. A big part of our minimally invasive platform OUS is in our direct markets in Europe. And as you know, the seasonality is very -- it's a very weak season in Q3. And so that's had an impact in terms of the level of procedures, not just within minimally invasive, but overall. So that's impacted it when you look at quarter-over-quarter. But when you look at versus a year ago, we've had significant growth in those markets. But it's really been driven just based on the seasonality.

Cassandra Harris

Yes. And Allen, just as a reminder, we've raised our expectation for minimally invasive as well to over $40 million.

Operator

The next question comes from Joshua Jennings with TD Cowen.

Colin Clark

This is Colin on for Josh. You guys have seen a lot of momentum in account additions in the U.S. I was hoping you could talk about how you plan to move that 43% Motiva utilization higher among existing users and maybe how much opportunity there is to reach new doctors in the practices you already have a foothold in?

Filippo Caldini

Yes. So thanks, Colin. We've been very happy with the penetration that we've had into the number of accounts. And we're in over 2,100 accounts. But as you mentioned, it's all about -- right now, it's about the utilization. We're making great progress in that area. That's been a focus for us. And a lot of it is really driven just by the normal scheduling pattern. Once you get into account, it can take some time before it actually they start using it based on the schedules, also getting accustomed because Preserve -- not Preserve, but Motiva performs a little bit differently than what they're accustomed to.

But from a sales standpoint, sales force standpoint, also our marketing activities is really focused to increase that utilization, and we're seeing that benefit. When you look at month-over-month, the average orders per account continues to increase, and that's a good indication that we're increasing that utilization. And that 43%, as you mentioned, we expect that to go up. We see that's good traction, but it's also good room for opportunity for us to grow.

Operator

The next question comes from Matt Taylor with Jefferies.

Matthew Taylor

Congrats on a nice quarter and generating some free cash flow. I guess I wanted to ask, you talked about 25% growth in 2027. I was wondering if you could provide any color on how to think about margins or cash flow next year as we update our models?

Cassandra Harris

Yes, absolutely, Matt. So as we think about next year, we've targeted an expectation of 25% revenue growth, and that's supported by our growth of our U.S. business and that minimally invasive platform. We also see that as opportunities for further gross margin expansion. As the U.S. grows beyond 35% of our revenue and our minimally invasive exceeds 15%, we still believe that, that 50 to 100 basis points is a reasonable improvement in our gross margin just based upon that geographical mix. So ultimately, we believe the 50 to 100 basis points for FY 2027, and that will be dependent somewhat on geographic and channel mix.

Operator

The next question comes from Sam Eiber with BTIG.

Sam Eiber

Maybe just coming back to the efforts to increase utilization at those existing 2,100 accounts. Maybe talk to me about some of the investments you need to make, whether it's on the commercial team or any sort of direct-to-consumer initiatives that you're really going to be focusing on here to get that number higher?

Filippo Caldini

Yes. Thanks, Sam. As I mentioned, part of it is just the natural progression once you do get an account as they work through their schedules and also as they start using it and have some experience with it. In terms of the investment, it's really about the additions to our sales force. We've increased the number of reps up to 55. We've also added additional leadership roles. And it's a big part of that is targeting and ensuring that we increase the utilization.

And the marketing activities is going to be what we've been doing in the past. We can do more targeted investments in certain accounts, and we've been doing that in the past, and I think that's something we're going to continue to do moving forward. So those are the kind of the type of levers that we're using to improve the utilization, and we're seeing the impact thus far.

Operator

The next question comes from Joe Federico with Stifel.

Joseph Federico

Maybe just to zoom in a little bit on gross margin in the quarter. And I understand that the geographic mix played a role with the strong international sales and distributor markets within that. But for the year, with the guide coming down, I'm just trying to understand maybe the impact a little bit on the 4Q margin given the implied revenue doesn't really change much. Is the margin there also mix dynamics with the international just total sales maybe being above current estimates? And then what does that mean for the U.S.? Any help with some of those moving parts would be great.

Cassandra Harris

Yes. Yes, [ Sam ]. So our adjusted gross margin was 70.8% in the third quarter. It actually was 70 basis points higher than last year. That really does reflect the growth of the higher-margin U.S. business, which increased from 22% last year to 35% this year. As you point out, the difference relative to our expectations, we had originally guided 71.2% to 72.2% was really the stronger contribution for this OUS distributor business. And with that distributor mix, we had planned for it to be around 50%. It actually ended up being 60% of the OUS business for the quarter. It's really positive from a gross profit dollar and revenue dollar perspective, but it does moderate our gross margin percent, which is what you see in the quarter.

As for our updated full year guidance, for the first 9 months, we're averaging around that 70.7%. So with 3 quarters of the year behind us, even a more favorable direct versus distributor mix in Q4 would have a relatively limited impact for our full year average, and that's why we've adjusted our guidance going forward for that. I mean, what's important is that the underlying margin drivers still remain intact. Our U.S. and minimally invasive businesses continue to grow. We see further opportunities for margin expansion. And then ultimately, our outcome is influenced by geographic and channel mix. But I'll just reiterate that we do believe that 50 to 100 basis points is there for the future.

Operator

Our next question comes from Anthony Petrone with Mizuho Group.

Anthony Petrone

Congrats on the quarter here. Maybe 2 quick ones. Pete, maybe on the implant sizes, you have FDA clearance here of smaller implant sizes. You're also looking to launch larger platforms. So how much of the U.S. market was not addressed with sort of where the portfolio was 90 days ago. And now that you have a broader suite of implant sizes, how much of the market in the U.S. has actually opened up?

And if you could just touch on what the funnel of hospitals looks like for reconstruction. How many VAC committee sort of processes do you think you can be involved with out of the gate post an FDA clearance for reconstruction?

Filippo Caldini

Yes. Thank you, Anthony. In terms of the smaller sizes, which we got approval recently, and we're expecting to be those sizes in the market by year's end. What we've historically said, it represents about 10% of the market. So I think it really opens up a significant opportunity for us in the U.S. market. And it's also another driver for that utilization in a number of accounts. So that's a key driver for us.

And then in terms of the VAC process, I mean, one thing to keep in mind that we've already in about 350 hospitals through the Flora. So that's a good starting point for us. You still have to go through that VAC process. And it depends on the different hospitals, what that timeline is. Some can be very quick, some can be shorter, but it's anywhere between 3 to 6 months is what we've seen in the past. And it's -- we've -- as I mentioned before, we're building out those capabilities to be in a position that we can accelerate through that process. So it's not going to be the number of committees. It's going to be more around the timing.

Cassandra Harris

And Anthony, just as a reminder, we're in over 350 facilities today with our Flora tissue expander. So even though we have to go through a VAC process for reconstruction on the implants, that's still a great start with the relationship.

Operator

Our next question comes from Caitlin Roberts with Canaccord Genuity.

Caitlin Cronin

Congrats on a great quarter. Just touching on recon a bit more. Are you gearing up from a commercial team standpoint already for the potential expansion there? And any thoughts on competitive dynamics as you look to potentially enter the recon market?

Filippo Caldini

Yes. Thanks, Caitlin. Yes, we've started the process of building out our commercial capabilities. I mean, as I mentioned before, we've increased the number of reps to 55. We're going to be doing that throughout the remainder of the year. So we expect that to increase. We've also built out some of the leadership position, specifically to address the requirements for the hospital network. Also some of the internal capabilities to address that channel. So we're really putting that investment because we see this really in the short term.

Operator

The next question comes from Joanne Wuensch with Citi.

Unknown Analyst

This is [ Anthony ] on for Joanne. Just a follow-up on the recon. I appreciate the update on the process. Are you able to provide an update on when you expect to get that approval and if those clinical site inspections are the last step or if there's any more steps in the process?

Filippo Caldini

Yes. Thanks for the question. I mean, first, I'd say we're very happy with the progress we're making through the recon approval process. It's going as expected. We've provided the responses, the FDA information request. The BIMO inspection have been undergone. And we've also had the sponsor site. So it is a normal part of that process. It's not -- we can't say that it's completed. But we're very confident that we are in a very good position to get that approval, and we can never predict the timing of the FDA, but we're confident that, that's going to be in the near term. And what we continue to believe is that it's going to be either the end of this year or the beginning of next. But everything is progressing as expected, and I think it's really showing good signs where we are.

Operator

The next question comes from Mason Carrico with Stephens.

Mason Carrico

On recon, you've called out that Flora is now in more than 350 facilities. How many U.S. hospitals and centers perform meaningful volume of implant-based reconstruction? And do you have any insight into the share of total recon procedures that take place in the facilities where Flora is already in use today?

Filippo Caldini

Yes. Thanks for the question. So what we see in terms of the real volume in terms of the number of accounts in the U.S. is probably close to 130 accounts in the U.S. And I think with the Flora has gotten us into a number of those accounts, but there's still a number that we can't get in until we get that -- the recon indication as they want to bring in the entire suite of products. But what we see is generally, to answer your question, about 130 accounts, hospital accounts that drives the majority of the volume.

Operator

The next question is from Anthony Petrone with Mizuho Group.

Anthony Petrone

I appreciate the follow-up. Just one on the 25% top line guide, Sandra, for next year. Just curious to what extent that actually does bake in reconstruction? Or is reconstruction upside to that 25%?

Cassandra Harris

Yes. I mean the 25% for 2027 is definitely showing our confidence in the continued momentum of our Motiva business, the minimally invasive, our utilization increase across the U.S. and the market share gains we've been talking about. We also see reconstruction as a very important part of our long-term growth opportunity, and we believe the timing of the regulatory approval remains aligned with our expectations later this year or first quarter of next year. So our 2027 outlook reflects our expectations for our business as a whole, including the opportunities across our portfolio.

Filippo Caldini

Yes. But Anthony, just to add to that, I mean, with the VAC process, I mean, it does take a little bit longer than what we've seen in augmentation, which can accelerate very quickly upfront. So when we look at the revenue, a bulk of it is going to be in the back half of the year as part of that 25% growth.

Operator

The next question from Joshua Jennings with TD Cowen.

Colin Clark

This is Colin on again for Josh. I just had a quick follow-up on the international business. I'm just curious, given the distributor strength, whether there was any international pull forward and whether that impacted guidance in any way?

Cassandra Harris

Yes, Colin, I think the pattern for our distributors, we saw early in the year, right? We had a 14.4% growth in the first quarter. It was 4.4% in the second. Now we've hit 10%. So we're still confident in our mid-single-digit growth for the year. And as part of that, we've talked about that the timing of distributor orders are always variable within our business. Again, we're very encouraged by the distributor orders. We've also been working with our distributors to get those orders closer to the demand in the market. We've talked about that more of a make-to-order program. And so I think what we believe is that it's going to follow a similar pattern that it did in the first half of the year.

Operator

The next question comes from Mike Matson with Needham & Company.

Michael Matson

Just want to ask one on the NuSil agreement. So you called out sort of an inflationary adjustment in the new agreement. Was there something like that in the prior agreement? And if not, I mean, is there a chance that this could lead to some additional costs depending on inflation?

And then maybe you can just put it into context by commenting on how much of the -- how much of your COGS is silicone, because I think there's just been a lot of focus on this from investors, and I'm not sure it's really that big of a part of the overall cost structure of the company. But...

Cassandra Harris

Yes, it's kind of business as usual. So it's very reflective, especially in the pricing terms and the volume tiers that we have to our previous contract. So we anticipate that to continue forward that there's not a major impact. And as we've talked about in our margins is that we do expect that any type of inflationary increases, we would look to pricing to help offset some of that margin as well. So from our perspective, the contract from pricing and volume is relatively consistent with the past.

Operator

At this time, I would like to turn the call back to management for closing comments.

Filippo Caldini

Yes. Thank you, operator, and thanks, everybody, for joining the call today. Really appreciate that you've spent the time with us, and you can see the great progress we're making with the business. We look forward to the continued momentum as we finish 2026, but I think where our eye is actually going into 2027. We see a lot of growth opportunities. So very happy that you can be a part of that, and we look forward to seeing you in future conferences and future earnings calls. Thank you very much.

Operator

Thank you, ladies and gentlemen. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.