Q3 2021 Inmode Ltd Earnings Call
Hello, and welcome to the inbound limited third quarter 2021 earnings conference call.
Participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star can you followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
To withdraw your question. Please press Star then two please.
Please note today's event is being recorded I would now like to turn the conference over to Mary Seagal President of M. S. IR. Please go ahead.
Thank you operator, and thank you all for joining US today welcome to <unk> third quarter 2021 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 outlook.
In today's earnings release also pertains to this call.
You have not received a copy of the press release. Please download one from the Investor Relations section of the company's website.
<unk> 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.
Therefore, we can give no assurance.
As to accuracy of our forward looking statements and assume no obligation to update them, except as required by law.
Today, we're joined by MS. Chamois Lafitte Emotes chairman of the board and CEO, who will start us off with a business update then he will turn the call over to Shaquille economy in most president of North America to discuss North American operation.
Finally, your ear Malka CFO will discuss the financials of the third quarter in some more detail.
With that I'd like to pass the call over to MS. Jamie Softly.
Jack Congratulations on another record quarter. Please go ahead.
Thank you Mary and thank you all everyone for joining us on our third quarter 2021 earnings call with me today, a doctor microcline than our cofounder and Chief Technology Officer, Mr. Yamanaka, Oh CFO, Mr. Shakil Lakhani our president.
North America Doctor Spyro Tau Dural, our Chief Medical Officer, Andrew <unk>, Our VP finance following our prepared remark, we will all be available for Q&A session.
We are happy to report again, a record quarter of profitable growth.
Two our innovative unique technology growing market demand, our excellent employees and collaborative work to our network around the world, We posted record revenue of $94 $2 million for the third quarter of 2021 and increased.
58% over the same quarter last year, we continue to closely control our expenses and our net income for the quarter on a GAAP basis reached a record of $44 $7 million, reflecting a 57% growth year over year.
Doing that during the third quarter of 2021 sales of capital equipment accounted for 90% of our total revenue.
Despite some slowdown since from consumable and services remain strong representing 10% of our total revenue at $9 1 million, a 68% increase over the same quarter last year.
A strong demand for our consumable show widespread market acceptance, indicating that physician by more platforms and perform more treatment every months.
Our minimally invasive surgical technology represent 73% of our revenue for the quarter compared to 59% in the third quarter last year hands free devices were 18% of total revenue, while our traditional laser and noninvasive RF platforms contributed.
9% the U S was once again, a major contributor to our top line with total sales reaching 62.
$62 6 million compared to $40 $9 million in the third quarter of 2020, reflecting a 53% 53% increase.
It's worth noting that empower Wes was recently lounge and discount been limited to the U S. As we focused on early adopters in the gynecology space. This tragedy. This strategy will lay the necessary groundwork for successful introduction to a global market.
Yeah.
O Olive W said, they continue to grow total sales outside the U S was 31, 6%, a 68% increase compared to the same period last year and a great results for what is usually slower summer quarter. This represents 34% of our total.
Revenue compared to 32 centers for the same quarter last year.
We currently operate in 72 countries and expect the numbers to rise as we seek to expand into new market. We are currently exploring establishing a new subsidiary in it.
Another major European market, which we hope will be able to begin operation in Q1, 2022.
Our ESG efforts continue everyday to ensure setup the standup for ESG protocols within our industry. Accordingly, we work with our supplier and subsequent doctors to ensure that they comply with the same ESD ESG standards set by email.
Prepared and ESG activity plan for the fourth quarter and for 2022 which will be published on our website now I would like to turn your attention to Shaquille our president of.
North America Shaquille.
Thanks to everyone joining us it's a pleasure to announce that we delivered a record breaking performance again this quarter just as it is to share the news with the launch of two new platforms evolve X and empower RF in the third quarter, our sales from capital equipment continues to be a driving force behind revenue, which reached $85 million.
As mentioned consumables and service revenue continued to contribute to the strong performance in the previous quarter. The third quarter of 2021 reason the bar for record attendance of our workshops enhancing our educational support network Vitalize. This is both our existing and new customer base. Despite the variation.
And Covid protocols across North America physician offices are becoming increasingly busy this reflects normalizing of elevated demand.
That positively impacts our financial results. Consequently, we see a lot of interest expressed in our existing and newer platforms accelerating marketing market acceptance our history of successful launches combined with market demand fortifies us to grow different revenue segments, even during seasonal and other.
<unk>.
The soft launch of empower RF has been instrumental in giving us necessary insight to create an effective strategy as doctors and patients learn how to better navigate life under Covid COVID-19 pandemic part of our marketing strategy is to increase the number of <unk>.
Below even for different disposable the REIT on the Morpheus ATV the form of <unk> and the Aviva all of them are one time use.
So it depends what treatment the doctor is doing on a patient but at least in every treatment will use one or two disposable and this is good because this will enlarge the number of disposables that we will sell.
Almost every system that we are now developing will have at least one disposable so the disposable number right now which is between 10% to 11% depending on the quarter I assume that one the installed base of platforms will reach 20000.
Platforms worldwide.
The numbers of disposable will probably go to I would say between 15% to 18% of the total revenue.
Does that answer your question.
It does thank you very much.
Thank you and the next question comes from Mike Matson with Needham <unk> Company.
Hi, good morning, Thanks for taking my questions.
I guess I'll I'll start with the International business. You mentioned you are looking at opening a subsidiary and a major European country.
Just wondering if you could provide more detail on that.
You talked about kind of the financial implications of doing that.
Yeah, Yeah of course of course.
Well I don't want I don't want to.
Tom mentioned the name of the country.
But it's one of the biggest right now we have Spain, UK and in France.
And you know, we have distributors in Italy and distributor in Germany.
Probably.
We will we will go and establish a subsidiary in one of those two.
And Thats will start operation in the beginning we already hired the team we're now training the team.
The team was trained in in Europe, and probably will come to equal to train in more detail on every system.
The team consist of.
Sure.
Sales manager.
One clinical manager and one I mean.
We are looking for space.
Operate from.
This is this all will be done in the next two months. So we would like to start general first.
Fresh in the in the in the country and and and.
And we will work and will work when we sell the west we get close to the Doctor.
So the customers, we know what the customer wants.
And we don't we don't need to depend on the loyalty of the distributors.
Around 81% of our sales today worldwide all direct and this is Dan.
We have.
Two subsidiaries in North America currently three subsidiaries in Europe, and two subsidiaries in.
In Asia, Australia, and India. So currently we are finishing the <unk> to establish the subsidiary.
In China and also in additional countries in Europe. So next year, we will have nine subsidiary.
And that will probably increase the percentage of what we sell direct compared to indirect.
When we sell direct we work organize the full value we know what the doctor want with servicing better and I have to say another thing doctors in every country would like to buy from the company and not from distributors, we realize that.
Because of distributors. They work for you and one day go to another company and they want to have.
London.
So this is this is this is the plan.
It did.
One more detail Matt.
No no that was great. Thanks, and then.
Just wanted to ask on and empower our apps.
I understand it's early days, but the launch here, but.
What are you seeing in terms of the different pieces and options there.
It.
What's the most popular.
Handpiece and is it really being driven primarily by the UI.
Option.
Yes so.
No.
Yeah, I'll hand, it over to spin around the secular machines.
Go ahead, sorry, yes no.
No problem I mean commercial aspect.
We only really have a month.
John did wrong and to really small sample size of course, its a little tough to to really figure out things like I said earlier, it's probably going to take us at least three to six months to get an idea of what the patterns are from an interest level, though.
Somebody.
It's very very.
Popular and prominent something.
There is not a major solution for us. So we do have a lot of excitement, but as I mentioned before we want to make sure that we have.
Significant clinical data behind it so that we can live up to what we are promising so I do think that the veto handpiece.
Morpheus, we are going to be significant drivers in terms of what's what's on the.
Workstation itself.
From from more of the clinical side of the physician's perspective, I'll hand, it over to Spiro.
Thank you Chuck that's a great question.
Within the gynecology youre going to cause your world right, everyone has a certain category and focus on what they're interested in so when we talked to the euro gynecologist. The whole fact about the intra vaginal microneedle he's a novel treatment.
It's something that we founded and thats, causing a lot of the excitement initially.
So far what you've seen.
Can you go over to gynecologist, who are are working still in delivering obese or delivering babies and theyre very excited about the treat the ability to treat women run after delivery, which includes all aspects of this rate includes Vietnam for pelvic floor rehabilitation in.
In addition to our EMS device for Diastasis closure, and they're looking at it selling it as a package to the patients.
After post part them. So this is a very very unique this has never been done before to actually be able to offer a comprehensive <unk> solution. So far.
The doctors are doing a lot of Ob and I'm looking at this very differently. So within however globally. When you look at all of these groups everyone has a solution for something so so whether youre going to call just sort of general gynecologists, whether you do a combination of both treatments. This platform has such versatility that it offers a different.
Things that you can do in addition, let's not forget we're in aesthetics company and we're introducing aesthetics into this into this category through that so holding their hand, initially here's a medical indication here's where existing population of patients that you have.
And by the way Here's I can also enter the cash based business, which is aesthetics. So typical of this as this is our philosophy, how we move into these different categories.
Okay. Thanks, that's helpful. And then my final question is really just on the supply chain. So.
Obviously demand appears to be really strong in your business, but one thing that I worry a little bit about is that we're just going to see an announcement. One day that you had some kind of shortage in terms of semiconductors or some other component to your products.
So I just wanted to kind of.
<unk> your confidence level and your ability to meet the tremendous growth that youre seeing your volume growth that youre seeing in your business given everything that's happening out there.
Our supply chain.
Yes.
As far as supply chain and logistics, you're absolutely right Matt.
We're seeing a lot of.
I would say companies that we used to get component in four weeks today, we get delivery time of 14 weeks.
So basically I don't know if youll notice our inventory grew a little bit because we don't want to take any chance of shortage.
And we buy from everyone that can supply us on every component and sub assembly that we use in our manufacturing line, we have at least at least two suppliers.
And most of them three suppliers, we buy components from China U S. Europe, we buy from different territories as far as manufacturing capacity. Currently we are we have manufacturing capacity to 2500 system hundreds platforms per quarter, which is.
And today, we're using only 50% of it but we've prepared ourselves.
For the future.
I mean, unlike some of our competitors, we delivered everything everything in the third quarter. According to the plan and according to the orders no one.
Weighted more than I would say 10 days before we got the order either distributors or a doctor and we will continue to watch it we have a special engineering department that we established and built here.
The only thing they do is.
To check on alternative component whenever we have a problem with one component to one supplier.
So we do it all the time and this is a measure I would say effort in our park in Israel everything is manufacturing in Israel and shipping from here one issue, we have with the shipping and logistic.
The prices of sending either by <unk> or by air in the last year went up four times and this is why right now we're shipping mainly in containers and not to buy in order to save money. All this is done in order to maintain the 85% gross margin which for.
US as I said before it's a must it's not nice to have.
Okay.
The containers.
I'm hearing a lot about ports being backed up and things like that so you're not worried about getting stuck in a container somewhere.
Floating around waiting to get in a quarter in the back of an 18 Wheeler somewhere.
No we're not worried.
But you know you never know what will happen.
Actually people learn to live with the pandemic and everything will go back to normal in the next year. It will not take months it will take at least a full year.
Until everything from a manufacturing from the supply chain will go back to normal, but we have prepared ourselves very well to this time and I believe we are well.
Coping with that.
The right way.
Okay got it thanks.
Thank you and the next question comes from Jeff Johnson with Baird.
Yes, thanks, good morning, guys.
Moshe it's not too just similar from a question I've asked in the past, but I'd be interested in the quarter in the U S. What percentage of your revenues or even qualitatively. If you could talk about what how many of the systems of the hand pieces of the platforms.
That were sold in the U S. During the quarter went into current customers. So they were buying a second or third or fourth A&P.
System or versus how many went into brand new accounts, just trying to understand penetration and where we are on kind of penetration in the U S of the derm and the plastic side of the market.
Okay could you please answer that yes.
Yes sure.
So yes.
We unfortunately.
In some ways.
We're not.
The type of company that has.
But it's not going to be willing to stryker or something where you have these relationship type of sale per se, meaning.
Go in and sell something every month every quarter or anything like that these are six figure devices.
We definitely do go after our existing customers, but we do it once we know that they are successful right. So it's a lot easier for them to reinvest in what we have and because of our robust pipeline. We always have something new that's coming out and keep them kind of excited but our FERC task is to definitely get them. So that they are successful right. So it kind of starts.
In terms of what we're doing percentage wise on the I don't want to give you anything that I'm I'm not 100% certainty, but majority of our business is new business. So although we have a lot of existing customers who have you know.
Purchased different devices I know earlier on I talked about some of our workshops and we've seen some record attendance and things like that we havent good mix of existing customers and new customers. However, what I do feel Spiro even mentioned talking about empower.
As we get a lot of these specialties into doing things that are not used to doing so we're going after the women's health and wellness they already have.
A large degree of or a large audience I should say have been captive patient base that they can now start talking about that to where a lot of those patients are getting cosmetic and aesthetic procedures done elsewhere. So the ideas.
Starting to charge cash pay.
For these procedures and then slowly be able to help them do that on the cosmetic side. So I know, it's not an exact answer that youre looking for but I do see a lot of our business.
America being newer customers, although we do still have a very.
Good existing customer base, but the main thing for US is we want to make sure that they succeed first and then it's so much easier for our sales force to go and talk to them about new technology that makes sense.
Yes, it does.
This is just to complement what I can tell you that at least in the U S over 70% of them.
He says.
Each year.
Were to new customers. So forgive you mentioned most of them are revenues coming from new customers.
Alright Thats helpful. Thank you and then I guess, the follow up to that and it kind of as an international question as well.
Should we think then that evolve and evoke get necessarily go into customers who own an appetite.
Uh huh.
Platform that those proceeds are those products going more into.
Things like that and Moshe you mentioned in China, getting IPL enhanced potentially next year does that move you in China in the us, whereas right now with the other <unk>.
Platforms, you've been more focused on.
The physician and hospital category more so I'm just trying to understand one does evolve evoke.
Are you are you doing well on the med side with some of those hands free technology and in China is the opportunity to go into.
In Q3, and IPL opening a new door that youre not necessarily in right now.
<unk> platform.
Well, let me answer regarding China.
David will answer you about the merch by North America, Oh by the way they Vulcan they evolve.
We will introduce in and all U S. Only this year.
And we're down just getting the first I would say approvals in certain countries. It's already been approved in Europe.
But not in Asia, yet and not in China.
The market in China, you're absolutely right is if you want to categorize it you'll have the hospital the private clinics and what they call the spot market.
Which is the biggest the.
The spot market is.
Now all the way from small shops to well organized the spot market.
Spot chain.
Yes, definitely once we get that.
Approval for the hand free devices in China, We will go to the spot market. We can also go to the doctors to the doctor clinics and sell them plastic surgeon and dermatologists, which are now become something very popular in China. It used to be only in the hospital, but right now the private clinics as well.
Definitely we will go to the spot market.
Also to those.
To those to those customers.
<unk> you want to say something about North America, yes.
Yes, sure absolutely so.
I think we've always kind of penetrated market going after physicians specifically.
The hands free technology does allow us into the med spa side of things when we do supplement spot.
Bumping medical directors and certain.
Physicians that can finance it. So that's the other thing is we're always going to be.
Medical medical Spa, the actual spot market itself, it's really tough to get people financed and things of that nature. When youre looking at just the small market right.
It's tough for a lot of those smaller places to afford it. So a lot of our focus is on the medical professionals.
But in terms of the med spas, yeah, I mean, the hands free technologies applicable to them, but also because you asked with someone who has vacuum tighter body tied or Facebook or whatever it is.
Just remember that the.
The hands free technology is kind of set it and forget it right. So youre able to delegate that so you're going to have that one patient room generating a bunch of revenue.
Office, while the physician is still out there doing their accurate or.
Bobby tied or whatever it is right. So we do have the passive income side of things from the hands free while they can still keep doing what they're doing.
If they are using different technologies, so I think as far as the hands free goes.
I don't think we really scratched the surface yet entries not new as we know with some of our formal competitors and things like that I do think that our offering is a lot more unique than anything else that's come into the marketplace between evoke and evolve ex U.
The things that we have.
But we're working on those platforms.
Understood. Thank you guys.
Yes.
Thank you and this concludes our question and answer session I would like to turn the call to mushroom Israhi, Chairman and CEO for closing comments.
Okay. Thank you operator again, thanks, everybody for joining us today.
I want also to express thanks to all of our employees worldwide I'm sure that some of them are on the line.
We had a very successful quarter, but.
Very tough one.
We work very hard.
On the logistic on the manufacturing sales marketing support training and I believe.
We did a very good job.
And we will continue the momentum for the benefit of the employees all the stakeholders and the shareholders stinker everybody Bye bye.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Okay.