InMode Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 13, 2024

There are 12 speakers on the call.

Operator

Good day, and welcome to InMode's 4th Quarter and Full Year 2023 Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Miri Sigl of MSIR. Please go ahead.

Speaker 1

Thank you, operator, and everyone for joining us today. Welcome to InMode's 4th Quarter and Full Year 2023 Earnings Call. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward looking statements And the Safe Harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please go to the Investor Relations section of the company's website. Changes in business, competitive, technological, regulatory and other factors could cause Actual results to differ materially from those expressed by the forward looking statements made today.

Speaker 1

Our historical results are not and assume no obligation to update them except as required by law. With that, I'd like to pass the call over Moshe Mizrahi, Chairman and CEO. Moshe, please go ahead.

Speaker 2

Thank you, Miri, and to everyone for joining us. With me today Doctor. Michael Kreindel, our Co Founder and Chief Technology Officer Yair Malka, our Chief Financial Officer Shakila Khani, our President in North America and Rafael Lickerman, our VP Finance. Following our prepared remarks, we will all be available to answer your questions. The second half of twenty twenty three presented challenges for InMode for the aesthetic industry as all and to the surgical aesthetic sector in particular.

Speaker 2

In the Q4, we revised our guidance for the first time in the history of the company due to the increased Impact of the industry slowdown. This resulted in 5% year over year decline in Q4 revenue, which amounted to $126,800,000 However, we are pleased to have grown Our full year revenue to a record of $492,000,000 reflecting an 8% increase compared to the full year of 2021. We take pride in being the only company in the industry that consistently generate over $100,000,000 per quarter, demonstrating growth even in the face of a challenging year. Moreover, we keep our gross margin the highest in the industry strong and steady at 84% for both Q4 and the full year, all while maintaining our established price structure for the platforms and for the consumable. As previously mentioned over 80% of the platform sales facilitated the true leasing agreement.

Speaker 2

Higher interest rate and longer lending approval Cycles have impacted in mode overall growth rate. This macroeconomics environment has also affected patients who are more sensitive to the price of the aesthetic treatment, resulting in lower underlying demand for our minimally invasive treatment. To address these challenges, we are in the process of establishing approval program with financial institution to improve and expedite the credit decision process. In some cases, we directly leverage our strong balance sheet to support physician by providing financing option ourselves. Additionally, capitalizing on this slower year and our robust balance sheet In 2023, we expanded our R and D activity by hiring more engineers and recruiting training professionals.

Speaker 2

Also we increased our sales team in our subsidiaries, expedited international expansion and increased investment in worldwide regulatory pathway. During 2023, we introduced 2 successful new platforms Envision for the ophthalmology market and Define for the hands free aesthetic market, which is the next generation of Evoque. We are encouraged by the results from the soft launch of our Envision platforms last year and we expect Envision to spend outside the U. S. During 2024.

Speaker 2

Inmont continued to innovate, bringing new and exciting product to the market. In 2024, we plan to launch 2 new platforms offering significant improvement in technology and energy levels, along with the new technology for our minimal invasive treatment and for Morpheus8. Finally, We remain committed to supporting all customers, distributors, employees, salespeople worldwide. Regarding the situation in Israel, we would like to reiterate that we have Establish a contingency plan with sufficient inventory globally, including in Israel, in the U. S.

Speaker 2

And in Europe. We continue to closely monitor the situation and are pleased to report that we are conducting business as usual. Now I would like to turn the call over to Shakil, our President in North America. Shakil?

Speaker 3

These challenges in North America during the Q4, despite the headwinds of lower platform sales, we are reporting a 20% increase in and service sales in Q4. Consumables and service revenue accounted for 16% of total Q4 revenues. As Moshe mentioned, we are pleased with the successful launches of Envision and Define. Both platforms have made significant progress in North America, gaining traction amongst practices and patients. Considering the anticipated slower market demand this year, we've implemented changes within our sales team in North America.

Speaker 3

We've adjusted our infrastructure to position ourselves for accelerated growth when market conditions improve. Lastly, I'd like to thank our entire North American team for their continued hard work. I'll now hand over the call to Yair for a review of the financial results in more detail. Yair?

Speaker 4

Thanks, Shakir, and hello, everyone. Thank you for joining us. Starting with total revenue, InMode generated $126,800,000 in the Q4 of 2023 with a gross margin of 84% on a GAAP basis. For full year 2023, revenue record $492,000,000 an increase of 8% compared to 2022. Non GAAP gross margins remained the highest in the industry and within our target range at 84% for both the Q4 and the full year of 2023.

Speaker 4

In Q4 and in the full year of 2023, our minimally invasive technology platforms accounted for 83% of total revenues. For the full year of 2023, consumable accounted for 16% of revenue, an increase from 13% in 2022. Moving to our international operations, 4th quarter sales outside the U. S. Accounted for $46,000,000 or 36 percent of sales, a 9% increase compared to Q4 last year.

Speaker 4

For full year of 2023, sales outside the U. S. Accounted for $184,200,000 or 37% of sales, an 18% increase compared to 2022. InMode now operates in a total of 96 countries. Among our global contributors, Asia and Europe were the primary drivers fueling our growth rate.

Speaker 4

To support our operations and growth, we currently have a sales team of more than 256 direct reps and 82 distributors worldwide. GAAP operating expenses in the 4th quarter were $55,300,000 and $215,700,000 for the full year, a 5% and an 18% increase year over year respectively. Sales and marketing expenses increased slightly to $49,500,000 in the 4th quarter compared to $47,000,000 in the same period Sales and marketing expenses for the full year of 2023 were $193,000,000 compared to $160,600,000 for 2022. This increase is attributed to hiring more sales representatives, increasing our presence in the U. S.

Speaker 4

And globally. Next, we look at share based compensation, which decreased to $6,300,000 in the Q4 of 2023 $23,600,000 in the full year of 2023. On an non GAAP basis, operating expenses were $49,500,000 in the quarter compared to a total of $46,100,000 in the same quarter of 2022, representing a 7% increase. For 2023, non GAAP operating expenses were $194,100,000 compared to $160,400,000 For 2022, GAAP operating margin for Q4 and for 2023 was 40%. Non GAAP operating margins for the Q4 and for full year 2023 was 45% compared to 50% 49% for the Q4 of 2022 and full year 2022.

Speaker 4

GAAP diluted earnings per share for the 4th quarter was $0.64 compared to $0.44 per diluted share in Q4 of $2,024.30 in 2023 compared to $1.89 in 2022. Non GAAP diluted earnings per share for this quarter were $0.71 compared to $0.78 per diluted share in the Q4 of 2022 and $2.57 for 2023 compared to $2.42 for 2022. Once again, we ended the quarter with a strong balance sheet. As of December 31, 2023, the company had cash and cash equivalents, marketable securities and deposits of $741,600,000 This quarter, Inmoo generated $61,200,000 from operating activities. Before I turn the call back to Moshe, I'd like to reiterate our guidance for 2024.

Speaker 4

Revenues between $495,000,000 $505,000,000 non GAAP gross margins between 83% 85%, non GAAP income from operations between $217,000,000 $222,000,000 non GAAP earnings per diluted share between $2.53 $2.57 I will now turn over the call back to Moshe. Thank you, Eyir. Thank you, Shaquille. Operator, we

Speaker 2

are ready for Q and A, please.

Speaker 5

Our first question today comes from Matt Miksic with Barclays. Please go ahead.

Speaker 6

Hey, good morning. Thanks so much for taking the question And appreciate all the color. I wanted to maybe start off with just

Speaker 2

if you

Speaker 6

could talk a little bit about what you're Assuming in your current 2024 revenue guide and what kind of indication have you seen since December early January as to the trajectory of some of the major factors driving your current outlook for 2024?

Speaker 2

Yes. Thank you for the question. Well, as you can see, we try to be this is Moshe, we try to be very conservative. What happened In the last 6 months of 2023, in the macroeconomics, with the interest rate, with all the leasing problems that we encountered, it's continuing in Q1. It's not over yet.

Speaker 2

We don't know when what will happen during the quarters of 2024. We read a lot of microeconomics studies and research and we understand that it might get better in the second half of the year. And therefore, we have decided to be very conservative in the guidance. We want to meet the guidance and not change it like we did in the last 6 months in the last 3 months of 2023. What we see in December January is continued the situation that exists in the last 6 months of 2023.

Speaker 2

We don't see Any positive sign yet in the terms and the obstacle that we saw in the last 6 months of 2023. And therefore, I mean, we will not change it until we will be absolutely sure that we can meet the guidance that we will give. I don't know if I answered your question, but that's the situation currently.

Speaker 6

Yes. No, that's helpful. And then secondly, you mentioned a couple of new platforms that you're launching this year. And If we are going to think about sort of the cadence for the year and the potential for things to sort of stabilize and start to improve, What kind of factor might those play? Are those a back end loaded effect?

Speaker 6

And any additional color that you can share On those or any other actions you're able to take to sort of offset some of the market dynamics you're describing? Thanks.

Speaker 2

Okay. Basically the 2 platforms that we will introduce in 2024 are our 2nd generation technology for the minimally invasive, the RFAL, radiofrequency assisted lipolysis and the Morpheus 8 technology. These are basically the 2 main line of the surgical The surgical part of our portfolio. We have developed a very unique and very, I would say, break technology for new minimal invasive to be able to do plastic surgery with 1 incision point with revolutionary handpieces and we have improved dramatically the Performance of the Morpheus8 which is as everybody know one of the biggest brand name in the medical aesthetic. Both will come during the year when the final tuning of completing the R and D, The studies and the regulation for them, we will introduce them to the market not in Q1, but I would say more like end of Q2 beginning of Q3.

Speaker 2

And we believe that They will add to our revenue in the second half of the year. Of course taking into consideration is that the situation, the macroeconomics And the situation in the last 6 months of 2024 will get better. As far as R and D, we are not slowing down. There is no slowdown in R and D and InMode. We continue to develop business as usual and we will continue to bring 2 new platforms, 2 new indication either in the aesthetic field Or in the ophthalmology, women health with Empower, we have currently a pipeline of more than 5 major new platforms that we will bring to the market in the next few years.

Speaker 2

I mean this is our Bread and butter here in Israel and we will continue to develop product and bring new stuff to the doctor and to the patient.

Speaker 6

Very helpful. Thanks so much for the color.

Speaker 5

Our next question is from Matt Taylor with Jefferies.

Speaker 7

Hey, good morning. This is Mike Sarcone on for Matt Taylor, and thank you for So

Speaker 2

just to

Speaker 7

start, a follow-up on the guidance question. You talked about it from the macro perspective and some of the newer systems slated for 2024. So could you give any color on how you're thinking about contribution from Envision and the new Define system as you're thinking about 2024?

Speaker 2

Yes, yes. First, I want to say something, Matt. The macro analyst of Jefferies was the only one who predicted that the economy will start to do slowdown in the Q3 of 2023. And he was absolutely right. I read his microeconomics study and research in the beginning of the year, And he was quite right.

Speaker 2

Regarding the Envision, The Envision was launched to the market in the middle of the second quarter in the United States And we did well until the end of the year. We sold close to $30,000,000 of this platform in 2.5 quarter. So we're very, very encouraged, very, very encouraged. We see that the doctors And the users are happy with the results and we believe that the momentum will continue in 2024. We also intend to bring these platforms to Europe.

Speaker 2

We introduced the platforms during the during the distributor meeting in Paris during the IMCA show 10 days ago, close to 10 days or 2 weeks ago and everybody was excited. We need to find the right in Europe and train our salespeople in the subsidiaries that we have in Europe, So they can handle and sell this platform. We intend to bring some doctors from the United States and Canada were luminary for us in this particular category, ophthalmology, and bring them to do workshop in Europe So we can expedite the penetration process, but we are very encouraged with Envision. As we go to the Define, As you know the 1st generation of the Define was the Evoque, which was very successful When it was introduced during the COVID time because it enabled the doctor to do social distancing treatment without being in the room. But 2 years after we decided that we want to improve this platform and bring something a little bit more I would say more well designed especially with the mask that we put on the face And we redesigned it and we added to the platforms Morpheus for the face so the doctor can complement the hand free treatment With Morpheus Phase, which everybody know that the results are great, we developed a combination treatment for both The HandFree and the Morpheus for these platforms.

Speaker 2

We introduced all this during the sales meeting of North America in the beginning of at the end of January, and it was well accepted. We believe that right now We start to penetrate the market with the new protocol and the new device. I mean it's a hands free. HEM free, it's not the highest technology or the best seller of InMode, Because HandFree was never a best seller, it's a complementary product. But I believe that this complementary product is the best in the market as far as the HandFree category.

Speaker 2

Did I answer you, Matt?

Speaker 7

You did, Moshe. Thank you very much. And then just one more question. You talked about Baking in continuation of these macro headwinds into guidance and you also mentioned you're in the process of establishing an approval program To expedite the credit process and maybe use some of InMode's balance sheet, can you just talk about kind of Where you stand in that process in terms of when does that get off the ground and where you're going to focus that geographically and If that starts to make some headway or it becomes effective, can that drive upside to how you're thinking about 2024 sales or guidance Right now.

Speaker 4

Yes, this is Yair. Right now I would say it is back into our guidance already. We Have couple of programs, 1 in the U. S. And one outside of the U.

Speaker 4

S. And we are looking to expand those. Basically what we are doing is some sort of Risk sharing mechanism where we can take a very small portion of the risk off from our leasing partners And that would give them the incentives to what we call buy deeper and provide approval quicker. And I think that's definitely going to help us. But as we mentioned, there is also some slowdown in the Demand in the underlying market, and again, this will not help with this portion.

Speaker 4

So overall, we already implemented a couple of programs and we plan to expand those. However, this is already baked into the guidance, at least at the moment.

Speaker 7

Okay, great. Thank you, Yair.

Speaker 2

You're welcome.

Speaker 5

Our next question comes from Danielle Antalffy with UBS.

Speaker 8

Thank you so much. Good morning, everyone. Thanks for taking the question. Just Yair and Moshe on the underlying demand component here, curious, I know Moshe you mentioned January so far you haven't seen an improvement. I just want to confirm that that's true of the underlying demand Like what should we be looking for as it relates to the economy that could signal a potential uptick in improving demand.

Speaker 8

That's the first part of my question. And then the second part of your question, given that this is a capital business, How much of a lag is there once we see improving demand? Like do people start purchasing equipment more readily 3 months later, 6 months later, is it right away? Would just love some color on how to think about that. Thanks so much.

Speaker 2

Okay. Well, I will reallocate what I said. Right now, In the month of December January, we do not see any change in the outlook of the macro situation. Whether or not we can see 3 months in advance, we don't know. I mean, and I don't think that anybody can answer that.

Speaker 2

We see some slowdown not just in the equipment sales, but also we see some slowdown in the disposable sales, because we believe that The slowdown affect the consumer as well and less people are going right now to do minimally invasive procedures, which is a little bit more effective than non invasive procedure these days. So the only thing that we can say is we expect some improvement in the situation of the macro look Sometime in the second half of the year, not in the first half of the year, we see the same process happening in Europe right now, Especially in the major countries, the inflation in the United States already went down a little bit, but in Europe not yet. And therefore the process there will take some more time. But we are basically evaluating the situation on a daily basis, Almost on a daily basis, we see the behavior of the leasing company and this is Something that tell us exactly what's going in the market. The leasing companies right now are very tough In the time that take them to clear a transaction and also The interest rate that they are requiring and also the process and what kind of deals they expect to get and what kind of deal they don't want to get.

Speaker 2

So I mean we are monitoring it. So far we don't see any sign of improvement, but hopefully we can start seeing it at the end of the second quarter.

Speaker 8

Okay. That's helpful. And then you obviously have a very strong balance sheet. I appreciate the work you're doing to help take on risk as well. I assume that doesn't preclude you from continuing to search for potential M and A opportunities.

Speaker 8

Anything you can say On where you guys stand there, I mean, it feels like the market might be right given the difficulties and you guys are in a strong position there. Thanks so much.

Speaker 4

We are currently exploring

Speaker 2

a potential candidate for M and A, Something that complements our portfolio, not a laser company by the way. It's a company that also in the aesthetic field, but not similar to us. We're in the very early stage of evaluating the company. We don't have any bank. We're doing it ourselves.

Speaker 2

And we will know better sometime in the month in the beginning of March, Whether it's we can go to the next practical step or not, that's all what we do right now. As I said before, the Board of Directors decided not to do buyback because of many reasons that I have explained before, But rather to keep the money to try to do M and A, more strategic M and A, which we believe will benefit the company much better than buying our own stock. So this is the situation. I mean, I have to say something. The macroeconomics did not help to the M and A, I would say, process, Because all the sellers are waiting to see that the market will improve, maybe they can get a better price for their assets.

Speaker 2

But that's the situation. We cannot help it. But as I said, we are exploring one opportunity right now.

Speaker 8

Thank you so much. Great color.

Speaker 5

And our next question comes from Mike Matson with Needham and Company.

Speaker 9

Good morning. Thanks for taking my questions. Just wanted to start with kind of quarterly sequencing in 2024. So can you comment on whether or not you're comfortable with consensus in the Q1? I think it's around $100,000,000 or so.

Speaker 2

We do not give guidance per quarter. We only give guidance per year And we are updating the guidance if we are updating the guidance not always at the end of each quarter based on the performance of the quarter and what we see forward. And therefore we will not comment on any guidance on the Q1. But as you know this industry has some seasonality. The 4th quarter is the strongest one.

Speaker 2

The 3rd quarter is the slowest one because of the summer. The second quarter is also strong and the Q1 is in between. But during the last For a few years because of the COVID and because of some other reason, the seasonality did not exactly was the same as years ago and therefore we don't know what will happen in 2024 and therefore guidance per quarter is not something that we provide.

Speaker 9

Okay. I understand. And then your commentary around the patient demand, From what I remember, I don't remember you talking about that as much or commenting on that. I seem to remember the focus in the prior couple of quarters about the challenges you're facing being more kind of focused on the financing conditions, both interest rates and just tighter, So we're financing in general, some more on kind of the physician side of things. Am I correct in interpreting this patient demand issue as being something kind of a newer headwind or was that there all has that been there all along?

Speaker 9

Well,

Speaker 2

we have to distinguish between Non invasive treatment and minimally invasive treatment, okay? Non invasive treatment like hair removal, pigmentation, All kind of topical treatment, these treatment are type of commodity. The cost is not very high. And I don't know just because we're not exactly in this type of business, only 10% of Our products are commodity type. I don't know how much this segment of the market was affected.

Speaker 2

The minimal invasive mainly the minimal invasive radiofrequency assisted dipolysis mean doing Some kind of plastic surgical procedure with one incision point with all the benefit that we have presented to the market. And the Morpheus 8, which is also surgical because it penetrates the skin up to 7 millimeter deep are not cheap procedures. This procedure can range from, I don't know, dollars 2,000 to $5,000 $6,000 $7,000 per procedure. Although it's done in the doctor clinic and although it's much cheaper than a full surgical procedure, but yet it's expensive relatively to non invasive treatment. And we believe from the disposable part of our business, We see some slowdown, not a major slowdown.

Speaker 2

By the way, in the Q4, we sold more disposable than on the 3rd quarter. But the growth rate was not what we expected. Overall in 2023, we sold almost 1,000,000 disposable compared to 730,000 in 2022. So we see increase as far as total numbers of disposables and the total number of procedure. When I said we see some slowdown, I meant that we don't see the exact growth rate that we experienced in previous quarter and in previous year.

Speaker 2

But that will change hopefully when the market will not the market, when the economy will prosper again And the cost of capital will go down and people will continue to spend money on minimally invasive and plastic surgery as well. So that's the situation today. And this is the reason why we said we see some slowdown, but don't take it as a complete slowdown. It's a slowdown of the rate of growth. Am I expanding myself?

Speaker 7

Yes, that

Speaker 2

makes sense. Thank you, Marshy.

Speaker 5

Our next question comes from Caitlin Cronin with Canaccord Genuity.

Speaker 10

Hi, everyone. Thanks for taking the questions. I just want to focus on the U. S. For a moment.

Speaker 10

What was consumable growth in the U. S. In the Q4, was it still was it positive? Was it negative? And then just regarding the guidance for this year, what does that really assume from the U.

Speaker 10

S. Continued deceleration or some growth?

Speaker 2

Shaquille, would you answer that?

Speaker 3

Maher, did you want to go over

Speaker 4

the I will answer the overall consumable growth did grow around 15%, I would say. Obviously, it's lower than in the Q1 or Q2 or Q3. So as Moshe mentioned, we do see Some slowdown in the growth rate. So it's in the high teens, but it's definitely lower than 40% for 0% that we saw in the first half of the year. So in the second half of the year, we start seeing some slowdown in the growth rate.

Speaker 10

Got it. Okay. And then when do you expect the dry eye indication the U. S. For InVision?

Speaker 4

Say it again? Try an indication for InVision.

Speaker 2

Okay. We are in the process of finalizing the protocol with the FDA under IDE submission. They ask few questions. Hopefully by the end of this month we will answer them And they will give us the promotion to do a pivotal study for 510 clearance, which will probably start sometime at the end of this quarter. We already selected the site to do the study According to the protocol that will be approved, it's a process.

Speaker 2

But in the meantime, although we do not claim that, Because we don't have the clearance yet from the FDA, but we have preliminary study that we did showing the combination of treatment that helping dry eye and doctors are testing it themselves and the results as far as what we hear from the market is great.

Speaker 10

Great. Thank you.

Speaker 5

Our next question comes from Jeff Johnson with Baird.

Speaker 11

Thank you. Good morning, guys. Moshe, understanding you don't give quarterly guidance, but I guess I'll try one more time on it. You have said you don't expect an improvement in the first half that should come potentially in the second half. If we look back at 'twenty three, obviously the first half of 23 was still a very solid year, especially the Q1, but both quarters were solid.

Speaker 11

And you've said there's no improvement in December January off the kind of second half So if I put all that kind of in the mix, it would seem to me that it's just a logical statement to say the first half of the year probably down mid to upper single digits on a year over year basis from a revenue perspective. And then in the second half, the hope would be to get back to kind of mid to upper single digit growth. If I balance it that way, just is there any flaw in my logic there even though I know you don't give quarterly guidance?

Speaker 4

So this is Yair. So we do not give Quarter guidance, but you do see that overall guidance is pretty much flat year over year. I would say that Probably the sequence between the quarter, the allocations of this guidance between the quarter will either be similar to 2023 A little bit back ended because of all the factors that Moshe mentioned.

Speaker 7

Yes, I

Speaker 2

mean in 2023, the first two quarters, the growth compared to 2022 was 20% in the Q1 and the second quarter. If you ask me if we anticipate to have the same growth this year, absolutely no. The second half of twenty twenty three was slow And the first half of twenty twenty three was with the right momentum. I believe in 2024, it will be the opposite, If I'm right, so the first two quarters will be the slowest one and the second two quarters, I mean, will compensate.

Speaker 11

All right. Yes, we'll try again maybe offline. On the margin side, Moshe, if I look Back pre COVID your operating margin and I'm thinking more operating margin obviously your gross margin has stayed very nicely consistent here for many years in that low to mid-80s. If I look at the operating margin, pre COVID, you were kind of right around that 40% range. Obviously, in the really strong 21, 22 years, you picked up 50% this past year kind of 45% guiding to about 44% in 24%.

Speaker 11

So I guess my question is, Are we settling in a kind of that low to mid-40s, 44, 45? If I think out over the next 3 to 5 years and if we excluding any kind of M and A, do you think you can hold that low to mid-40s operating margin going forward and kind of grow earnings in line with revenue growth rates? That the way to think about kind of the algorithm to in mode over the next several years? Thank you.

Speaker 2

Absolutely, yes. I mean, we're trying very hard, I mean, to keep the margin steady, gross margin and operating. Although, if you notice, we are spending more money for marketing and this is Because of many reasons. We believe that during a slowdown period, we have to invest more in marketing. I know that many people think differently than me than in a crisis you need to slow down in expenses.

Speaker 2

We don't think the Same. We believe that when the market is slowing down or there is some crisis on the market, the opportunity for a company like us is continue spending, R and D, marketing, of course, no G and A, you noticed that, and capture market share. Then although, I mean, the total market went down a little bit, but as far as market share, I believe the market share of InMode grow in the last 6 months of the year. And you know we're waiting to see what Cutera will report, but I'm sure you will see that they did not grow this year, on the opposite they went down. Other companies in this industry are mostly private, but here and there we have some information.

Speaker 2

Alma, it's a public company. And as you noticed, they went down in the second half of the year. They did not report the second half, But in the first half of the year they went down. So for us keeping the margin is important, But we will not discontinue to invest not in marketing, not in R and D, we're not doing cost cutting.

Speaker 11

Thank you.

Speaker 5

Thank you. And our final question today comes from Anthony Petrone with Mizuho Financial Group.

Speaker 7

Thank you for taking the question. Fit me in here. Maybe one on macro, just as we think about it geographically, How do the pressures in the U. S. Stack up relative to Europe and the APAC region?

Speaker 7

So that would be the first question. And when you think about financing options, Moisha, do we think about again directly financing practices or will also be an option for patient finance. And so thinking about an entity in the U. S. Such as CareCredit that is providing financing for aesthetic procedures.

Speaker 7

Can you also step into that market as well or again is this just going to be capital financing? Thanks.

Speaker 2

Well, good question. As far as territories, I think we mentioned it in the PR. ROW in 2023 Growth by something like 18%. North America total was less than that. So and the reason for that is not because we're not investing in North America or in the United States.

Speaker 2

The reason for that is in North America or in the United States. The reason for that is that in 2024 in 2023, We have established 2 new subsidiaries in you and one in Japan and one in Germany, Austria. And we continue to Hire more people and more salespeople because the ROW market is important for us and we believe the ROW will grow in 2024. We have a plan to continue to invest in addition to what we're investing in the United States. So Our W in 2023 grow a little bit more than in the U.

Speaker 2

S, especially in platforms and new territories and new I would say regulatory clearances that we received for different countries. As far as financing customers, we've never been in this business. There are companies that are doing it And they work directly with the doctors. We don't intend to go to finance customers because This is not the business that we're in. We will help to using our strong balance sheet as Yair said and I said to help the leasing company or share the risk with them to expedite the process of clearing transaction for the doctors.

Speaker 2

But as far as customers, we do not intend to get into this business.

Speaker 5

Thank you. We've run out of time for questions today. This concludes our question and answer session. I would like to turn the conference back over to Moshe Mizrahi, Chairman and CEO, for any closing remarks.

Speaker 2

Thank you, operator. Again, I would like to say that although 2023 was a challenging year for us, But we keep the momentum and we know how to turn slowdown and prices into opportunities. And I believe we did that with all the new R and D, The new 2 subsidiaries that we build even in a tough time, adding more people all over the world In order to enlarge the sales force and the support force, I would like to thank all InMode employees worldwide For the hard work they gave in 2023. Especially I would like to thank the Israeli team.

Speaker 11

As everybody know we are facing

Speaker 2

a very challenging time in Israel. And I think that A very challenging time in Israel and I think that the effort that people in Israel did Since October when the war started to make sure that we will run the business as usual Although many of the team in the manufacturing and in the office went on reserve duty, everybody walked Over time as much as needed, we rescheduled the manufacturing line to make sure that we will be able to supply everything to everybody within 7 days and we did it very well and we continue to support and we continue to look for the cost, maintaining the margin. I hope 2024 will be a better year for us. Although 2023 was not I don't want to say that It was a tough year, but not a bad year. So thank you all and looking forward to see you at the end of the Q1.

Powered by Quartr

Key Takeaways

  • Q4 revenue was $126.8 million, down 5% year-over-year, while full-year record revenue reached $492 million, up 8%, with gross margins held at 84%, the highest in the industry.
  • Higher interest rates and prolonged loan approval cycles weighed on minimally invasive treatment demand, prompting InMode to establish expedited financing programs with banks and leverage its strong balance sheet to assist physician leasing.
  • Despite the slowdown, the company boosted R&D by hiring engineers, expanded its global sales team and regulatory pathways, and accelerated international growth, now operating in 96 countries.
  • InMode launched two new platforms in 2023—Envision for ophthalmology and Define for hands-free aesthetics—and plans two additional platform debuts in mid-2024 featuring next-generation RFAL and Morpheus8 upgrades.
  • With cash and marketable securities of $741.6 million and Q4 operating cash flow of $61.2 million, InMode issued 2024 guidance targeting $495 million–$505 million in revenue and non-GAAP EPS of $2.53–$2.57.
AI Generated. May Contain Errors.
Earnings Conference Call
InMode Q4 2023
00:00 / 00:00