Q1 2022 Inmode Ltd Earnings Call
Hello, and welcome to the NN mode Limited first quarter 2022 earnings results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation there will.
An opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mary Segall CEO of M. S. I R. Please go.
I had.
Thank you operator and everyone for joining us today welcome to IMO, It's first quarter 2022 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 out.
Client in todays 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 Emotes website changed.
Changes in business competitive technological regulatory and other factors could cause actual results to differ materially from those expressed by the forward looking statements.
Today, our historical results are not necessarily indicative of future performance.
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 MS. Xiaomi, Swahili, Chairman and CEO Ms. Shen. Please go ahead.
Thank you Mary and thanks to all of you for joining our first quarter 2022, earning call with me today are Doctor Microcline del <unk> cofounder and Chief Technology Officer. So Yeah, you Monica, Oh, Steve Chief Financial Officer, Shaquille Academy, our President in Norfolk.
America Doctor Spyro Bureau, our Chief Medical Officer, and Rafael Leeco Mountain, Oh, VP of finance, we will all be available for Q&A session. After our prepared remarks, we're pleased to report first quarter revenue of $85.9 million.
An increase of 31, 1% compared to the same period last year, we continued to achieve strong profitable growth. Despite the continued uncertainty in the global market net income for the quarter on a GAAP basis was $31 million and 34.
Point $1 million on the non-GAAP basis, reflecting year over year growth of 16%.
As a result of our strategy of focusing on selling more system on the global market.
Sales of capital equipment was strong representing 84% of our total revenue in the first quarter sales of consumables and services.
<unk> accounted for 16% of the total revenue in the first quarter by.
By launching the new platforms and innovative modalities and by expanding our installed base in the U S and around the globe. We continue to look forward to consistent growth in revenue from consumable, which will over time become a more significant portion or follow revenue mix once the.
Again, our growth engine, a minimally invasive and ablative technologies. These platforms are the core competitive advantage and the main differentiator between intermodal and other aesthetic companies are technology enabled patients to benefit from long lasting results similar to the one achieved in plastic.
So drew but with minimal downtime local anesthesia and minimally invasive procedures.
And invasive and ablative platforms accounted for 80%, 80% of our Q1 revenue compared to 69% in Q1 of last year, we achieved this.
We achieved this trend in the strong indication of the of the growing demand and now or not.
Our increasing brand recognition in the U S and globally have free devices generated 10% of our total revenue and non invasive and laser platforms represented the remaining 10% looking at the international side of the business first quarter sales outside the U S accounted for 30.
$2.3 million or 38, 38% of total says.
56% increase compared to the same quarter.
Last year in most currently operated operates in 77 countries in the first quarter, we opened subsidiary in Italy, and we are very happy with the level of demand in this day would go and we see most of the growth coming from regions, where we have already established our presence.
They are remain opportunity in UK, we always and we will expect to keep expanding our presence outside the U S. In the coming quarters, why don't we faced operational challenges due to global supply chain issue in the quarter and increased shipment and.
And the increased shipment our prices we were successfully in the in mitigating the impact of these challenges and we were able to meet the demand and ensure each platforms was delivered within 10 days, our high commitment to each physician or clinic.
The older platforms is stronger than ever and we have developed a different methodologies and mechanisms to cope with the current supply chain challenges.
We anticipated that the supply chain challenges will continue but we're monitoring the situation very closely and continue to proactively manage the process on a daily basis and yet you will emphasize we we we are we maintaining our 2022 guidance.
<unk> total revenue to be between $415 million to $425 million, we will continue to update you as the year.
Now I would like to turn the call over to Shaquille, Our President in North America Shaquille. Please.
Thanks, so much and everyone for joining us as Moshe indicated unmade reported another strong quarter, especially from a quarter that is traditionally a slower one in terms of revenue industry what.
We posted a record number for consumable revenue, which is a good indicator of our growing utilization rates increase demand for our platforms and consistently growing installed base. We're happy to report another strong growth indicator over 30% of our customers in the U S purchase a second device.
The U S remains the leading market for in mode and was the biggest contributor to our top line with total first quarter sales amounting to $53 6 million compared to $44 1 million in the same quarter of 2021.
We are optimistic about the overall demand for our platforms and unique technology, we anticipate the north American business will continue to grow.
And be the main contributor revenue contributor for in mode. We're encouraged by the positive response to our empower RF platform. We believe that in most credibility and strong performance will support our expansion into the women's health space during the quarter, we noted marketing events and workshops, attracting and growing audiences more and more patients.
Shown they are eager to improve their wellbeing and England continues to be the leader in providing a wide array of aesthetic and wellness applications to help patients achieve their goals.
We will continue hiring new sales personnel for North America, the North American market, which we believe will boost topline growth just as in previous years, we are grateful to our team and their team and their continued commitment to our consistent growth I will now hand over the call to your ear for a review of our financial results in more detail there.
Thanks, again, and good day, everyone now I'd like to review, our quarterly financial results in greater detail.
So the total revenue in the first quarter of 2022 increased 31, 1% year over year to $85 $9 million with a gross margin of 83% on a GAAP basis.
Sales of minimally invasive and some demand ablative technologies in the first quarter grew 50% year over year to 80% of our quarterly revenues.
Did your graphical revenue mix in Q1 was 62% in the U S and 38% internationally compared to 67% and 33% for the same quarter in 2020 one.
Revenues outside the U S represented 38% with Canada, Europe , and Latin America being major contributors to the company's growth.
Our Q1 non-GAAP gross margin remained strong at 83%.
We reiterate our long term gross margin model of 84% to 86%, but assume that in the short term global supply chain challenges may continue to impact gross margins.
Capital equipment in the first quarter it accounted for 84% of our revenue while consumables and service revenues represented the remaining 16%.
GAAP operating expenses in the first quarter were $36 $1 million at 26% increase year over year.
Sales and marketing expenses increased at a similar rate of 26% in Q1 of 2022 compared to the first quarter of 2021.
This is a result of an increase in incentive related expenses.
As well as improvement in the Covid status in most countries and regions around the world, especially in the U S where we saw a significant increase in in person marketing events is Shaquille mentioned.
Share based compensation increased to $3 1 million daus.
In the first quarter of 2022 compared to $2 $7 million in the first quarter of 2021.
And then non-GAAP basis operating expenses totaled approximately $53 4 million daus in Q1 of 2022 compared to operating expenses of $26 2 million daus in the same quarter of 'twenty or 'twenty, one an increase of 27%.
GAAP operating margin was 41% in the first quarter of 2022.
The same as the first quarter of 2021.
non-GAAP operating margin for the first quarter of 2022 was 44% compared to operating margin of 45% in the first quarter of 2021.
The decrease in non-GAAP operating margin is primarily attributable to the change in gross margin.
GAAP diluted earnings per share for Q1, 2022 where 56 cents compared to 31 cents per diluted share in the first quarter of 2021.
non-GAAP diluted earnings per share for Q1, 2022, where 40 cents compared to 34 cents per diluted share in the first quarter of 2021.
We ended the first quarter was a very strong balance sheet.
As of March 31st 2022, the company had cash and cash equivalents marketable securities and deposits of $399 $5 million.
On the cash flow front, the company generated $51 9 million donuts from operating activities in the first quarter of 2022.
We are pleased to have announced another share repurchase program. During the first quarter of this year of up to 1 million shares.
We continue to evaluate different venues to use of cash and create shareholder value.
Before I turn the call back to Michelle I'd like to reiterate our guidance for 2022.
Revenues between $415 million and 425 million thereof.
non-GAAP gross margin between 84, and 86% non-GAAP income from operations between $199 million to $204 million.
non-GAAP earnings per diluted share between $2.06 and two daughters and 11 cents.
I will now turn over the call back to Ms. Shang.
Thank you Yair. Thank you Shaquille operator, we're ready for Q&A session.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Any time your question has been addressed and you would like to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from Kyle Rose.
With Canaccord. Please go ahead.
Great. Good morning, this is djabran on for Kyle.
Grants on a strong quarter, maybe to start could you talk a little bit more about your China business, how that's being affected by the current resurgence of Covid and some of the scaling lockdowns and the major population centers, maybe what are your thoughts for the remainder of 2022 and secondarily do you think that the timeline for approval of your two platforms in China has maybe been pushed.
Out.
Yeah, Okay, I will answer that it's more share.
Well, we're monitoring on a daily basis the situation in China.
In China right now we cannot send people to do training, because anybody who enter China I need to go to a lockdown of three weeks in the hotel. So no one from Israel and no one from other territories that usually we send to China to do training to doctors.
Ah well it will not accept such a such restriction a certain area in China all in the locked down Shanghai was some high wasn't until up until this week and now they started to lock down the gene as well.
The area of <unk> is also locked down a company our distributor Syn <unk> is trying to do as much as they can they don't allow salespeople to travel from city to city, AR and AR and AR and as we go to the C. D E and regulation are.
The C. F D. A is now almost 100% occupied with the Covid and solution for the Covid and as everybody know they do not have good vaccination and this is the reason why the continued to do look to continue to looking to lock down there.
There are cities and citizen, we saw a less than 50% of what was in the budget in China in Q1.
We don't know where they're locked down and the situation will get better were getting surprised every day.
Hopefully towards the end of the second quarter are they they would have we would have a better I would say view and better clearance on what's our go to market. There. In addition to China also Hong Kong, which is today part of China has the same restriction and and and other.
Countries in Asia, Korea, and in Japan are getting better.
But not are not fully opened yet for example to Japan, you need to get what they call a coffee the visa in order to in order to enter and and they are making a lot of difficulties on people to come and and into the country.
Yeah, I mean, and the other part of the World things are getting better but are but as I as I describe it is the worst case.
Understood. That's helpful. Thank you Moshe and then if I could just follow up on empower maybe when could we see some data for empower RF in terms of efficacy for S U y.
Then in terms of expectations I know you had previously mentioned a $20 million for 2022 is that still relatively in line. Thanks again for taking the question Yeah, I would say, yes that the guidance that we gave for $20 million in 2022 are still valid Spiro would you like to add to them.
So the question regarding the Sci results.
Sure Brian we already in the process of a couple of our studies are already impressed so I'm happy to share those with you Oh Moshe can.
To show you some preliminary results of a ratio wise. So there as I said, we said on previous calls there are very very encouraging.
And the feedback we're getting from the field.
More importantly.
As you're giving us a huge base of data set where we are as doctors get push off up. So we're collecting data not just from our studies alone that we've been conducting we've engaged with a couple of universities.
To start doing some perspective big trials, which is great also based on these proof of concepts that we've already established so we can share with you I think we have in the past, but we can show you. These couple of obligations are impressed we're hoping it comes out in the next two to three months, but we're happy to show that.
Okay. The next question comes from Mike Matson with Needham and company. Please go ahead.
Yeah, good morning, or good afternoon. Thanks for taking my questions I guess I wanted to ask first about gross margin. So.
You're maintaining the 84% to 86% guidance for the year you did 83% in the first quarter, you mentioned kind of near term pressure. So just from a modeling perspective, you know I assume we should kind of habit gradually ramp up through the year and probably end up more sort of at the low.
We're end of that range is that a reasonable assumption.
This is Michele Yeah, who is here with me I are I would say, yes are we lost we lost one 5% in our in the first quarter, mainly due to the supply chain challenges as I as I describe I'm sure everybody knows that.
Right now our electronic component prices went up dramatically dramatically and some time. We are we were struggling to get them. Oh, we are as we said before we manage to develop our supply chain, which oh, we have at least.
Kris suppliers saw every component so we manage to get what we need but sometime we need to use a replacement component and change the printed circuit board and do all kind of a you know a maneuvering in order to be able not to shut down the production line and we manage to it.
We managed to achieve that.
And as I said before I don't see that I don't see we don't see the light at the end of the tunnel as regard to supply chain.
Of course, as we go to shipping cost I can tell you that the 40 foot containers for me as well to the U S used to cost.
<unk> $3500 now its $13000.
So this is also something Ah, but eventually eventually that I believe the market will will get back to stabilization and and things will be better we believe that our AR.
In the second quarter and the third quarter, we will do better and therefore, we have maintained the guidance of 84 to 86.
If you want to be on the safe side to use 84 is better than 86.
For your models.
That's helpful. Thank you and then I won't ask Shaquille mentioned that you've seen 30% of your I guess it was maybe U S customers buying a second device.
Can you maybe talk about are they buying.
The same type of device that they already had is that it is at a different system and then to what degree are these sort of replacement where they're not using the other one or are they continuing to use both devices.
Okay.
Sure Mike.
No actually no there they're completely different devices, so it's not because of anything.
Anything other than the fact that they are actually successful with their first device which is.
A big feather in our chapter.
You know in order to get them, our first device have them successful with its great.
Return on investment that we had promised I'm just kind of shows.
They do well with one device just like any other investment you do you do well with one thing then you want to go in and invest in something else, so because of our broad product portfolio.
Offering.
We can get in there with one device, helping them succeed and do well.
Then they come back in and do that so a big part of that is also our post sales support team, which has been which has been very helpful for our customers, but also they're in they're kind of talking and they work alongside with our reps on the field level in order to.
Hum.
Generally these needs.
Okay, Thanks, and just as far as the the surgical or I guess.
Minimally invasive system go is there any reason that one of the surgeon customers would want to have.
Multiple systems or is it just not feasible to need more multiple the same type of system I guess.
For efficiency reasons or something like that.
No good question.
So essentially.
For the products that we do have body types. For example, the surgeon has to obviously use that.
For some of our hands free technology or some of our other aesthetic applications, we're actually able to have them delegate some of these things, depending on which state, they're in or which province, there and in Canada. So essentially.
They want to have there the one device that they're using and that they can actually use the applications loan and then at the same time have something else that they can delegate so they're generating double the revenue in that period of time does that makes sense.
Yeah. It does thank you.
Okay and was there a follow up Mr. Mattson.
No no that's it. Thank you. Thank you.
Again, if you'd like to ask a question. Please press Star then one.
The next question comes from Jeff Johnson with Baird. Please go ahead.
Yes.
Hey, guys. Good morning, good afternoon, thanks for taking the questions. So, let's say I just wanted to start.
Asia, China, obviously as you mentioned a lot of headwinds, though in that market. What was maybe any way to quantify kind of the year over year impact of those markets.
Did it did it drag growth down by X number of points or even for the full year kind of what were you anticipating China and Asia might contribute and how much has come out of that even as you're still maintaining your full year guide any insight there would be helpful.
Ah well I believe China in 2020, one we had the same situation with the covered in general oriented March the country was Oh that was totally was totally close.
China right now in the first quarter of 2021 are we did one $9 million and in the first quarter offline.
2022 within two points nine point 901 point excuse me $1 $1 million.
We went down a little bit in China because of the situation on the first quarter.
Your question on whether or not we wouldn't maintain our the budget for China for the rest of the year. We hope so so far our Q2. The first months, we don't see a major change I mean, they just change and instead of that they they really.
<unk>, Shanghai, and now Theyre, putting restriction on Beijing.
And therefore, I don't anticipate the big jump there.
I'd say that our if we would do 50% to 60% of the original budget. It will be good we did the original budget. The original budget for China are on 2022 was between $12 million to $13 million are we still waiting to get them.
Approval from the CFO da for that the other three platforms that we applied for we have not yet everything is slow because of the COVID-19.
As we go to other countries in a in a in Asia, Oh, I believe that Korea is doing is doing better than.
And then China, and we will do something similar to what we did last year.
Which was in the range of $10 million to $12 million, Japan are more difficult because of the COVID-19.
Australia and India are open now so we hope that these two subsidiaries will contribute we are not changing the guidance for 2022 because of that and we would like to.
We hope that we will be able to to sell more in other territories in order to cover the shortage in Asia.
Yeah that makes sense. Thank you and then just a follow up on the system sales themselves.
I think one thing that maybe getting lost in your numbers today minimally invasive RF number was strong again I think it was up over 50% year over year and improved on even a stacked comp basis that growth rate that it's the hands free stuff that was down and obviously <unk> was a fantastic product and in the early days of Covid recovery.
At $8 million a quarter. This quarter is that kind of a new run rate for that hands free does it still come down another few million dollars, but it seems like to me that that hands free again, a great product for its time back when we were first recovery from Covid.
But once we get through may be some year over year headwinds on that.
Does it start to stabilize here in the whole company number then can improve a little bit once we get through some of the headwinds that year over year at Asbury.
Issue.
Okay. Okay, I'll, let me expand on what's happened with the hands free and wide to hand free went down a little bit.
I mean as you know we came up with a new generation of the evolve.
We added a modality called transform which is a combination of Vms and RF and we believe that that are going well.
Doing the same with the evoke we plan to launch a second generation evoke on towards the end of this quarter or beginning of next quarter or the third quarter and therefore, we decided not to continue to sell they evoke on on on the first quarter.
But mainly we sold only that they book, we sold only they evolve hopefully by launching the second generation evoke.
Within within few months numbers will go back again to the same level it used to be in between 17% to 18% of the total revenue.
Okay, So youre not seeing necessarily a fundamental falloff in interest for the hands free stuff, it's more just product timing at this point.
Exactly.
And last question I am sorry for a few here.
I think when you when I spoke last Moshe you, we're not passing on some of those increased shipping costs. Some of the increased some component cost I think you could it feels like to me and in aesthetics. There has been some pricing power for other companies, but just maybe talk about your rationale for not doing that does that improve your standing in the eyes of customers.
Just your thoughts on why not passing through some of those are added great cost <unk> system cost.
Oh well.
Really we don't waste prices in the middle of the year.
And and we're trying to we're trying to fight the supply chain challenges not to fight, but try to overcome it.
Order to go back to the same gross margin I don't think it's necessary to raise our prices off of the platforms and the disposable just because we're having some you know Ah I would call. It temporarily maybe it will take longer than that are you know challenges with the supply chain.
We all believe that it will come back to normal Oh, you know, it's it's cannot walk like that forever and therefore, we have decided that we do not raise prices of the platforms.
We will we are we examine our decision sometime at the end of the year toward 2023, and decided again, whether we would like to do it or we would like to maintain the same.
Same price structure that we have today.
Okay, I think I remember you did not put even if freight surcharge and that was that correct. Just remind me on that you've been absorbing pretty much have everything and not asking anything on.
We do in Paas anything to our customers.
Yes. Thank you.
This concludes our question and answer session I would like to turn the conference back over to MS shape and as Rohit for CEO for any closing remarks.
Thank you operator.
Thank you. Thank you Shaquille. Thank you Spiro Thank you Michael.
And immediately of course.
For organizing this this this earning call I would like to thanks again to all of <unk> employees, we work very hard in the first quarter overcoming all the challenges that we have described.
We continue to work hard.
We will continue to service our customers in the best way and come up with new technologies and new platforms.
Every year again, thank you all and looking forward to see you in the next earning call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Yes.
[music].