Q3 2024 Inmode Ltd Earnings Call

Thomson Reuters StreetEvents10-31

Participants Miri Segal; Investor Relations; MS-IR LLC Moshe Mizrahy; Chairman of the Board, Chief Executive Officer; Inmode Ltd Yair Malca; Chief Financial Officer; Inmode Ltd Matt Miksic; Analyst; ...

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Tommy Han; Analyst; Robert W. Baird & Co., Inc.Thank you, operator, and everyone for joining us today. Welcome to Inmode's third quarter 2024 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 visit 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. Our historical results are not necessarily indicative of future performance. As such we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them except as required ","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"INMD":"InMode Ltd."},"translate_title":"2024年第三季度Inmode Ltd收益看涨期权","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"INMD":0.9},"content_text":"Participants\nMiri Segal; Investor Relations; MS-IR LLC\nMoshe Mizrahy; Chairman of the Board, Chief Executive Officer; Inmode Ltd\nYair Malca; Chief Financial Officer; Inmode Ltd\nMatt Miksic; Analyst; Barclays Investment Bank\nUnidentified Participant\nCaitlin Cronin; Analyst; Canaccord Genuity\nTommy Han; Analyst; Robert W. Baird & Co., Inc.\nSam Eiber; Analyst; BTIG, LLC\nPresentation\nOperator\n Good day and welcome to the Inmode third quarter 2024 earnings conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Miri Segal, CEO of MS-IR. Please go ahead.\nMiri Segal\n Thank you, operator, and everyone for joining us today. Welcome to Inmode's third quarter 2024 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 visit 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. Our historical results are not necessarily indicative of future performance. As such we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them except as required by law. With that, I'd like to pass the call over to Moshe Mizrahy, CEO. Moshe. Please go ahead.\nMoshe Mizrahy\n Thank you, Miri and to everyone for joining us. With me today, Dr. Michael Kreindel, our Co-founder and Chief Technology Officer; Yair Malca, our CFO, our Medical Director and VP of Medical Affairs; Dr. Eran Krieger and Rafael Lickerman, our VP of Finance. Following our prepared remark, we will be available for Q&A. During the third quarter, macroeconomic headwinds continued to impact our performance as reflected in our financial results. A decrease in minimal invasive treatment and a slowdown in platform sales led to less than expected sales in consumable and platforms in Q3 which in turn led us to revise our full year guidance. We are optimistic about the early endorsement of our two new platforms, IgniteRF and Optimus Max. We hope that as macroeconomic environment improve, particularly in easing interest rate and faster financial approval from leasing companies, more physicians will recognize the benefit and efficacy of these new platforms. I would like to elaborate on our decision this quarter to reorganize some aspects of our corporate structure. As part of these management changes, we had to release some members of the management of the US and replace certain management in the UK, Spain and France. We believe these management changes are essential for aligning our target market with the right company structure. Additionally, we are segmenting the North American market into separate roles for the US and Canada allowing us to focus on specific needs each geographic area. We are making additional changes that will in ROW -- that will better reflect our activities. Finally, regarding the situation in Israel, we want to assure everyone that our top priority remains the safety of our employees. We have overcome challenges relating to production and we take pride in our employees dedication in working longer shifts to upload customers commitment. Now, I would like to turn the call to over Yair Malca, our CFO, to review the financial results in more detail.\nYair Malca\n Thank you, Moshe and hello everyone. Thank you for joining us. Starting with total revenue in more, generated $130.2 million in the third quarter of 2024 out of which $31.9 million was generated from pre-orders received in the first half of 2024. This leaves us with $98.3 million of net sales received in Q3. GAAP and non-GAAP gross margins in Q3 was 82%. Moving to our international operations, third quarter sales outside of the US accounted for $36.4 million representing 28% of total sales, a 19% decrease compared to Q3 last year. To support our operations and to ensure future growth, we currently have a sales team of more than 250 direct reps and 83 distributors worldwide. GAAP operating expenses in the third quarter were $57.9 million a 2% increase year-over-year. Sales and marketing expenses increased to $51.9 million in the third quarter compared to $50.8 million in the same period last year. This increase was primarily driven by our recent management change costs, higher commissions as well as additional spending on trade shows and workshops activities in Q3 of 2024. Next we look at share based compensation which decreased to $4 million in the third quarter of 2024. GAAP operating margin for Q3 was 37% compared to an operating margin of 38% in the third quarter of 2023. Non-GAAP operating margin for the third quarter was 40% compared to a non-GAAP operating margin of 43% in the third quarter of 2033. GAAP diluted earnings per share for the third quarter was $0.65 compared to $0.54 per diluted share in Q3 of 2023. Non-GAAP diluted earnings per share for this quarter were $0.70 compared to $0.61 per diluted share in the third quarter of 2023. Once again, we ended the quarter with a strong balance sheet. As of September 30, 2024, the company had cash and cash equivalents, marketable securities and deposits of $684.9 million. This quarter InMode generated $34 million from operating activities. Regarding our second share repurchase program for 2024, as of today, we have acquired 3.2 million shares at an average price of $15.86 per share. As for future capital allocation plans, we continue to carefully review and evaluate all options and we will provide updates as soon as we have news to report. Before I turn the call back to Moshe, I'd like to share with you our guidance for 2024 full year 2024 revenue to be between $410 million and to $420 million compared to prior guidance of $430 million to $440 million. Non-GAAP gross margin between 81% and 82% compared to prior guidance of 82% to 84%. Non-GAAP income from operations to be between $140 million and $145 million compared to prior guidance of $150 million to $155 million. Non-GAAP earnings per diluted share remains the same as in previous guidance at $1.92 to $1.96. I will now turn over the call back to Moshe.\nMoshe Mizrahy\n Thank you, Yair. Thank you very much. Operator we are ready for Q&A.\nQuestion and Answer Session\nOperator\n (Operator Instructions) Matt Miksic, Barclays.\nMatt Miksic\n Great. And I just want a question on the full year EPS guidance and understanding the impact of the buyback. You've talked often in the past about investing through this cycle and yet, obviously were able to kind of offset some of the reduction in sales with some element of cost control. So you can maybe talk a little bit about, where some of those cost controls are coming through and then I have one follow up.\nMoshe Mizrahy\n Well, in Q3 we did not have a lot of, we didn't do any cost cutting or cost control. Actually we continue business as usual in R&D, marketing, et cetera and we did not lay out any employee. In addition, we spent a little bit more on the manufacturing due to the war in Israel. So we need to work overtime and that cost us a little bit more money. I don't think we did any cost control or cost sharing or cost cutting in Q3. This is the structure of our profitability and although it went a little bit down the gross margin and the EBIT, but that's natural because of the slowdown and the war on Israel.\nMatt Miksic\n Well, it's impressive and congrats on managing through that the end of the year. Maybe just as a follow up, any color or comments you can provide or thoughts on the turn, the potential turn, the timing of a kind of improvement in some of the end markets, particularly in the US in this cycle that we're kind of managing through right now? Thanks.\nMoshe Mizrahy\n Well, in the beginning of this year we thought that in the third quarter we will start seeing some relief on the slowdown. But to be honest, unfortunately we don't see any change in the slowdown, especially not in the interest rate on lease packages and we don't see that on the fourth quarter as well. So I hope that it will start sometime next year. I don't think it will be on the first and maybe the second quarter. We don't know and we don't want to say anything on that because in the last two quarters earning calls we said we believe it will start in the third quarter, but as I said, we don't see it yet.\nMatt Miksic\n Thanks so much for the color.\nOperator\n Mike Matson, Needham and Company.\nUnidentified Participant\n Hi guys. This is Joseph on from Mike. If maybe you could give us a little color on how maybe the last rate cuts helped leasing in your business and looking forward into 2025, can you kind of frame us how another rate cut, maybe a similar size would help customers financing or do you think maybe the financing problem is going to be alleviated by multiple rate cuts from here, not just one?\nMoshe Mizrahy\n Well the rate cuts or the interest cut, the general one did not affect yet the lease interest rate, the lease package that doctors buying with our equipment with. It's still very high and the process take much longer because leasing company want to make sure that they are giving money to the right people. As we said last quarter, we helped with doing some pool and sharing some of the risk with the leasing company. But as you can see the results on the third quarter we did less than $100 million when the expectation was to go to $104 million, $105 million or whatever and we did only $98 million which is less than what we expected. So and I don't want to guess and tell you that it will start slowing down or the interest rate will start coming down sometime in the beginning of next year. We really don't know.\nUnidentified Participant\n Okay. Yeah, that's helpful. And then I guess maybe around gross margin. How can you guys, or what is your expectation around returning to the mid-80s gross margin is at the current revenue level, is a lot of this being driven by overtime and what have you in the manufacturing facilities? Do you need consumable to really return to growth to get back to the mid-80s?\nMoshe Mizrahy\n I don't think we will go to the mid-80s, which what 85% or 86%? It would be very difficult. I still believe that 80% to 82%, it's a nice gross margin for a company like us being the size of InMode today. Cost of transportation goes up. The war in Israel which lasts too long does not help us with cost, does not help us with the manufacturing process. So going back to 85% maybe in the future, but we don't see 85% in the fourth quarter and not in 2025.\nUnidentified Participant\n Okay. Thank you very much.\nOperator\n Caitlin Cronin, Canaccord Genuity\nCaitlin Cronin\n Hi, thank you for taking the questions. Just a quick one. Not sure if I heard if you guys said, but if you could just give us the US consumables growth for the quarter that would be great.\nMoshe Mizrahy\n No, the contrary, we know the consumable in the US went down, not up and the total was again less what expected. And I said that in my speech because less minimally invasive treatment are being made right now. Now the reason for that is that our treatment with InMode equipment it's relatively expensive treatment. It's on thousands of dollars and not hundreds of dollars. So we believe the macroeconomics also reflect in that and also did not help doctors to do more treatment. And therefore we have realized that doctors in North America are making 40% less treatment than last year.\nCaitlin Cronin\n Okay, makes sense. And then I think you mentioned in your preannouncement press release about moving some operations away from Israel. Can you provide a little more color on what that means, the timing where, when?\nMoshe Mizrahy\n Currently we're manufacturing only in Israel. We have two major facilities and three smaller ones which makes subcomponent, but the two main one are assembling the product. We have all to remember that in order to manufacture medical platforms or medical device which has to be regulated by 27 different regulatory bodies around the world; it's not so easy to find a facility that can handle it. We try to explore several opportunities with some companies in Europe. Mainly in Europe, so it will be close to us. If we go to China, it's almost impossible to control, but unfortunately we have no facility that can handle our product with the right regulatory approval from those regulatory bodies and therefore even with the war in Israel, we believe we can manage from Israel. Although it's difficult and there's uncertainty. I agree, but no, we have no other alternative.\nOperator\n Tommy Han, Baird.\nTommy Han\n Great. Thanks so much for taking the questions. Your U.S. systems installation number this quarter jumped to 610 versus 350 last quarter by [RMATH]. Does that third quarter systems place number include all of the pre orders delivered in the third quarter or were those pre-orders booked in the first half of the year? And could you remind us how you counted the old system you placed in offices in anticipation of the delivery of the pre-orders? Thanks.\nMoshe Mizrahy\n I believe on the third quarter we delivered all the pre orders. We don't have more pre-orders to deliver.\nYair Malca\n Yeah, we exclude them from the install base installation in the first half of the year and we include everything in Q3.\nMoshe Mizrahy\n As you can see, the total gap number is $130.2 million, out of which $32 million are pre-ordered. The net sales of the fourth quarter, as I said before, was only $98 million less than expected, but we managed to deliver all the rest.\nTommy Han\n Perfect. Thanks for clearing that up. System ASP also jumped up to 140,000 from 115,000 previously. Were there any one timers driving that or have you been able to take price with your new systems? Thanks for the questions.\nMoshe Mizrahy\n I mean the new system, the Ignite and the Optimus Max, just because this is some early bird, we can charge a little bit more, we raise the prices a little bit and that helps us with the price per platforms. But I believe looking forward it will be difficult to maintain the same price per platforms. But we are raising prices a little bit on the new platforms. We cannot raise prices on the current portfolio.\nOperator\n Sam Eiber, BTIG.\nSam Eiber\n Hi, good morning everyone. Thanks so much for taking the questions here. Maybe I can start on some of the changes to the commercial organization. It sounded more of a realignment and maybe splitting up some territories a little bit differently, but I guess any changes to the go to market strategy? Is the selling approach any differently or is it really just a realignment in terms of territories?\nMoshe Mizrahy\n Well, it depends. In Europe we changed management in Spain, UK and France and the reason why we changed management in these two countries because we basically were not happy with the results and the dedication of the management on those territory. And therefore we have decided that we need to change them and we hire new management. And I believe that the new management are more dedicated and more eager to succeed. In the United States, it's a little bit different story. In the United States, we will leave two major VP Sales, one earlier in the year and one right now, and the President and the Chief Medical Officer, which was replaced with the VP Clinical Affairs in Israel. The President of North America, Shakil was with us for almost seven years. He did a great job. And after seven years of doing the same in the same position, I thought it will be we need to make some changes in order to realign the organization. So right now we don't have a President in North America. Canada reported directly to me, and the two new VPs for the East and for the West in the United States are also reporting to me. So actually in the meantime, I'm also the President of North America. I intend to spend at least week every month in Irvine in our office and visit doctors and the territories and work with them in order to realign the organization. In the meantime, I want to keep it that way. I'm not looking for President for the United States. Canada will continue to report to me until we found what exactly organizational changes we want to make with the new portfolio and with the current portfolio. It takes time, but we're in the process.\nSam Eiber\n Okay, that makes a lot of sense. And may be just following up on some of the newer products, we'd love to just hear any early feedback. Maybe you've heard from some of the early customers that adopted IgniteRF and Optimus Max. I guess, how many of these are upgrades versus new customers that that are now excited about the new platforms? And I guess just the third part of the question is that allowing you to maybe go beyond of the core plastic surgeons that you've typically gone after. Thanks for taking the questions.\nMoshe Mizrahy\n Well, the two platforms are different. The first one, there is IgniteRF. It's minimally invasive and ablative platforms mainly for surgeon, plastic surgeon, aesthetic surgeon, dermatologist, any doctor who can perform surgical procedure. The second platform, the Optimus Max, it's more, I would say a platforms with different type of hand pieces all the way from laser IPL and also ablative with the Morpheus. We did not do any upgrade yet or maybe very little. We sold most of them to new doctors or to doctors who wanted a second system. We will put together a promotion on the fourth quarter and maybe early next year to do some kind of an upgrade to doctors who are having the body type, which will be replaced with the IgniteRF and the Optimus, which will be replaced with the Optimus Max.\nSam Eiber\n Really helpful. Thanks for taking the questions.\nOperator\n This concludes our question and answer session. I would like to turn the call over to Moshe Mizrahy, Inmode's CEO, for any closing remarks.\nMoshe Mizrahy\n Well, thank you everybody. Thank you to all the shareholders, to all of InMode employees in Israel and worldwide, especially, I want to thank the Israeli employees that as everybody know, the headquarters and the two manufacturing facilities are -- I don't want to call it this way, but they are close to the border, to the north border and the war is here and they are still coming to work and everybody is dedicated so we can continue to serve our customers. I want to thank all InMode customers for the loyalty. I want to thank all the luminary doctors and looking forward to see you in the next earning call. Hopefully in Israel it will be a better day.\nOperator\n The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2479742697"}