Q3 2022 Inmode Ltd Earnings Call
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Good day.
And welcome to the Enbridge.
Third quarter 2022 earnings results conference call.
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I would now like to turn the conference over to Mary C. O P. O S. IR. Please go ahead.
Thank you operator, and everyone for joining us today before we begin I'd like to remind our listeners that certain information provided on this call may contain forward looking statements and the safe Harbor statement outlined 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 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.
As required by law.
With that I'd like to pass the call over to MS. Shimmies, Rafi, Chairman and CEO Ms. Shen. Please go ahead.
Thank you Marie and to everyone joining us for Q3, 2022 earnings call.
With me today are Dr. Michael Klein done, our cofounder and Chief Technology Officer, Yeah, even Monica, Oh, CFO Shakil Lakhani, how better than in North America Doctor Spyro Dural, our Chief Medical Officer, and Rafael lithium on Oh VP of finance following our prepared.
Mark we will all be available for Q&A session.
We're pleased to report another record quarter with revenue of $121 $2 million, an increase of 29% compared to the same period last year.
Additionally, we are happy to be back to gross margin of 85%.
Despite our expectation that Q3 should represent some a slow quarter demand for our innovative platforms remain strong around the world in Q3.
We expect this momentum to continue into next year.
Oh adult physician and patient and we tell them to brief corporate travel level.
People still visited clinics for treatment with our platform.
Our empower platform for women health and wellness, what's especially successful in the third quarter and we expect to continue to capture market share in this market going forward.
Primary goal is to expand our presence in women health and wellness space in general and we are encouraged by our early success in this market. We believe in what has proven an aesthetic company that's relying on strong technical technological offering.
Can successfully evolve and expand into new and important market, such as wellness and quality of life improvement.
We intend to continue this trend in the area of Ophthalmology E N T and others.
Our revenue continued to grow the mall if you say it is becoming the most popular minimally invasive device in the dairy category well driving this growth through brand awareness Dwight to genes and more day to day work focused on.
The consumer Oh.
Oh, I see efficient since team of more than 200 day wet grip and 70, plus distributors worldwide continued door excellent execution with sales of capital equipment represents 88% of our total revenue in the third quarter, while sales of consumables and services.
It counted for the remaining 12%.
And it's all installed base to grow and we expand our market share consumable and service will contribute a more significant portion to the revenue mix going forward.
Devices represent 11% of total revenue while non invasive.
And laser platforms accounted for 7% these figures represent normal level in our revenue mix moved.
Moving to our international operations third quarter sales outside the U S.
At 439.8 million <unk> million dollars or 33% of status at 26% increase compared to Q3 last year in Maus now operates in total of 80 countries. Our recently opened subsidiary in Italy is already very successful.
And we are planning to establish an additional stuff to do in Europe , and one in Asia in 'twenty to 'twenty three.
During the third quarter in more successfully lounge evolve eggs.
And empower in Asia as we continue to see growing demand from Europe Asia and Latin America. In addition to our active pipeline of New technology. We're also exploring potential acquisition that would complement our presence in the wellness market this could be companies with.
And established track record and then the existing customer base in the U S and globally in summary, we're proud to deliver another record another record record quarter and we believe this position this positive momentum will continue.
Now I would like to turn the call over to Shaquille O President in North America Shaquille. Please.
Thanks, Mike and everyone for joining us once again, we were pleased to report another record quarter with continued momentum bolstered by a growing demand as well as more frequent use of our technology sales from consumables and services remained at high levels due to the growing use of inmates platforms sales in North America continued to be the main contributor to our total revs.
New across all platforms total revenue generated this quarter amounted to $91 9 million.
As we look forward. This market is positioned to remain the leading growth driver for an mode as Moshe mentioned.
We have seen great success and extensive market acceptance of our empower our RF platform in the third quarter. In fact, we previously projected total sales from this platform to be $30 million for the year. However, we've already surpassed that number when it comes to the Morpheus <unk> technology, we're seeing that it is becoming one of the most popular aesthetic procedures in the March.
<unk>.
As part of our efforts to invest resources in raising and modes brand awareness among patients and physicians, we announced that even Laguardia The award winning actress director and producer will be and most global brand ambassador our ongoing commitment to investing in brand awareness by engaging with select brand ambassadors and gaining recognition.
The world renowned celebrities is something we plan to continue to do in the future Lastly, I'd like to thank our entire North American team for their continued hard work I will now hand over the call to your ear for a review of our financial results in more detail.
Thanks, again, and Hello, everyone. Thank you for joining.
Starting with total revenue emo generated Honda in 'twenty 1.2 million daus in the third quarter of 2022.
And 29% year over year increase with a gross margin of 85% on a GAAP basis right.
Breaking this down we see says of the minimally invasive and some of them on ablative technologies in the third quarter grew 43% year over year to 82% of quarterly revenues.
Well the total sales in Q3, 67% came from the U S and.
And 33% came from the rest of the world compared to 66% and 34% respectively for the same quarter in 2021.
Well far into a national contributors, Canada, Europe , and Latin America, where the biggest markets driving our growth rate.
Q3, non-GAAP gross margin remained strong at 85%.
We are holding to our long term gross margin target of 83% to 85%. However, as a global supply chain challenges persist, we may see a potential short term implication for our gross margins.
Moving on capital equipment in the third quarter represented 88% of total revenue, while consumer business service revenues accounted for the remaining 12%.
GAAP operating expenses in the third quarter were 48.7 million Donuts, and 38% increase compared to Q3 in 2020 one.
Sales and marketing expenses increased to $43 1 million daus in the third quarter compared to $30.8 million in the same period last year.
This increase is attributed to hiring more sales representative increasing our presence in the U S and emphasizing our penetration strategy for new products.
Next we look at share based compensation.
Which increased to $7 $9 million in the third quarter of 2022 compared to $3 2 million daus in the third quarter of 2021.
On a non-GAAP basis operating expenses reached $41.4 million in this quarter compared to a total of $32 3 million daus in the same quarter of 2021.
Representing a 28, 1% increase.
GAAP operating margin was 44% in Q3 of 2022.
non-GAAP operating margin for the third quarter of 2022 was 51% similar to the same period last year.
Looking at GAAP diluted earnings per share for the third quarter. We saw an increase to 58 cents compared to 52 cents per diluted share in Q3 of 2021.
non-GAAP diluted earnings per share for this quarter was 66 cents compared to 55 cents per diluted share in the third quarter 2021.
Once again, we ended the quarter with a strong balance sheet as of September 30th 2022, The company had cash and cash equivalents marketable securities and deposits of $486 4 million.
This quarter in will generated $45 $6 million from operating activities.
Before I turn the call back to MS sure I'd like to reiterate our guidance for 2022.
Revenues between $445 million and $450 million.
non-GAAP gross margin between 83% 85%.
non-GAAP income from operations between $214 million and $217 million.
non-GAAP earnings per diluted share between $2.28 and to do that and 30 cents.
I will now turn over the call back to Moshe.
Thank you. Thank you Shaquille operator, I believe we're ready for Q&A.
Yeah.
We'll now begin the question and answer session.
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Our first question comes from Kyle Rose with Canaccord Genuity. Please go ahead.
Great. Thank you very much for taking the questions and congrats on another strong quarter. The biggest thing I wanted to start on was just your overall health of the consumer and what you're seeing on a procedural basis to me I think there's a there's a lot of worry out there just with the impacts of inflation and in your macroeconomic volatility.
Just maybe not what's happening right, now, but but but what's going to happen over the course of the next six to nine months from a potential recessionary impact what are you seeing from your customers both on the capital side as well as you know underlying demand for procedures.
Hi, Kyle that's more Shay I will answer it and then I'll, let our shaquille ER to ER to add up.
Basically in the last quarter, we did not feel that there was any recession or not even a slow down towards the very task with that very strong quarter, especially if you take into consideration that this is a summer quarter and as you know summer quarter and aesthetic is not the best one not just me.
Cause doctors send a patient out taking vacation and not available for treatment, but also because people don't want to get you know aesthetic treatment are doing the summertime, especially not in Europe , and and and also Latin America. This quarter, we were surprised it was.
Strong even compared to the third quarter of 'twenty 'twenty. One also the second quarter of 2022.
So far we don't see any recession, and we don't see a slowdown are we see the momentum continue.
But I'll, let you kill to complement my answer and maybe tell us a little bit about what's going on in North America.
Yeah, absolutely. Thanks, Michelle Yeah same thing golf, so where we haven't seen anything on the capital side.
Backing the business are being detrimental to us in any which ways as Moshe mentioned Q3 is typically a little slower than most quarters at least historically speaking.
We definitely did not experience that which is which is very encouraging from a consumer standpoint alone I'll actually pass that over to Spiro I think he might be able to shed some color. There for you it's Carl.
Sure Great questions, obviously, we talked to our offices every day across the country.
And we have not seen any any dip in customer demand.
It's important to point out that well.
Initially it was thought as a cobra to bump is not really just a covered bond one steward of new patients coming into practices. Once the new patients are actually never had plastic surgery. Before so this is a paradigm shift and we're seeing those types of patients coming to the offices that have finally considered to do what they wanted to do in the past we're not.
Part of that group so we.
We feel confident for the time being and as far as the future is concerned I don't see the demand slowing anytime soon.
Okay.
Great and then most area of your I think historically, you've you've always kind of message do you know absolute growth year over year is it's kind of been in the $50 million range I think that might that range might have increased a bit you know when you. When you recently moved into women's health. So I'm, just kind of a level set our expectations moving forward should we still think about this as a.
As an absolute floor on a revenue growth perspective, it's $50 million to $75 million a year or how should we think about that moving forward.
Well in 'twenty, two and 2021 compared to 2020 I think the growth was above $150 million. We went up from 206 to 258. So it's about 100 are more than $150 million. This year with the new target that we gave with the new tower.
For full year.
Which is around $450 million, then we hope to do a little bit more hopefully the graph will be around $100 million. So basically when.
When we gave that target Oh, a guidance of $50 million go off a year that was when the company was 150 or 100 or maybe $200 million doing the COVID-19 time right now well now 400. This year. If we will end up above $450 million is not the same company is.
Double the size, so and we have a better portfolio.
Entering new categories, which very successfully if you recall, we gave a target for empower for the women health at the beginning of the era. We said it would it be $20 million and then we raised it to $30 million and now we're raising it to $40 million.
Well, well, we're doing our best and I believe that the success.
The women health, which is a totally different category. It also it's also a steady but its a totally different medical community and welfare in college, So I would say that growing with you know 20% a year from now on Ah is a good is a good target for you to put in your model.
Thank you and the last question then I'll hop back in queue is obviously, yes.
Everyone's seen the impact of hurricane in AR at the end of the Q3 and to start to Q4.
Obviously, that's concentrated in.
One region of the country, but I just wanted to think how should we think about that as an impact to the Q4 I mean it does it does it have a is it a headwind because youre, losing days and you've got machines down or does it potentially pull forward. Some some capital placements given you've got you know new locations that might need to upgrade or replace thank you.
Okay and can you answer it yes sure no call, we don't see any effect.
Thank you for taking the questions.
Our next question comes from Matt Taylor with Jefferies. Please go ahead.
Hi, guys. Thanks for taking my question can you hear me okay.
Yeah.
Great Alright, so I had a couple of I guess I wanted to ask you. Your women's health has really done well this year in the first year of launch I know you really careful about how youre launching yet I was hoping to get your thoughts on how that franchise could evolve over the next couple of years.
I know you probably won't give numeric targets, but if you if you could or could just frame the size of the opportunity.
That would be really helpful for investors.
Oh man I didn't I didn't understand the question opportunities of what Sam Poland also empower.
Oh, Okay Spiro I believe that's a good that's a question that you should answer regarding who do we sell now and who do we sell in the future.
Sure Matt.
Excellent question here.
Here's how we look at empower when we enter these practices for example, gynecologists right, they're not used to marketing they don't know how to do cash based procedures. So going to these practices with a solution that's within their scope of practice such as stress urinary incontinence in the extraordinary costs and so forth.
It's very very important because at that point, we're able to talk on the call. Just look you already have these patients in your office, they're already coming in the solutions out there not great. So we have a solution for these pitches that you don't know has to go out there and market is your existing patient population and that alleviates a lot of anxiety within purchasing capital equipment. However.
Ever we're still gonna statics companies on the same platform. Once we go in were able to introduce aesthetics to this to this group and that's a big winner for us because it increases our Tam in this respect.
As far as the future is concerned we have a lot of confidence right now because we have a lot of data that we're getting back over the year and thousands of patients being treated and what we're seeing is consistently across the board, we're seeing that the overactive bladder or mixed urinary incontinence segment, we're getting really really good results.
Surprisingly so because it's a very tough segment as you know so the ability to disrupt that.
That segment for the future is a big deal as you know, it's a it's a large market opportunity and we're investing a lot of time and effort and research into trying to figure out.
The details and the cost for this but on the on the clinical level and the experiences they're gonna ecologist and youre going to colleges and family practitioners out there aren't static. So we're very very optimistic for the future. We're taking it very seriously but at the same time, we're not forgetting that we were still instead X company. So that's important.
To balance that aspect does that answer your question Matt.
It does I guess I just had one follow up on apparel. So you know it's interesting to see kind of the pull through.
<unk> there could you frame how much pull through you're getting perhaps how much is that resonating with the obgyn to do more with the attach rate of getting actual aesthetics yonder.
On the women's health.
It's surprising we've engaged with some of the larger institutions for a lot of the research we're doing and.
Your typical gynecologist now having experienced so many different types of treatments for stress urinary incontinence and mixed is not necessarily receptive off the bat right they'll say, okay, well, let's just see how this works, but interestingly so because of the market pressures on these groups.
With the insurance reimbursement, they're dying to see how they can get the cash based procedures in their office. So the switch to statics seamless and I'm talking about you know this is happening at research institutions and academic institution. So you can imagine what happens on non affiliated groups.
Out there so that's even the pressures even higher so they're demanding that we teach them. These things immediately.
We're not waiting to see results on the stress urinary cons on the medical aspects. So yes, we have a long runway you know July ends with 40000 your wins across the country. So we have a long way to go but we're very encouraged at this point is that answer your question, Matt I understand that correctly, yeah. Yeah. That's great. That's great. Okay, great. Thank you.
I had one follow up to I mean, let's say I heard you talking about the 20% growth, which is encouraging and I think a lot of investors are.
Little worried about recession, and I was hoping maybe you could talk about.
The differences between this recession and the last one and maybe frame how.
Are you seeing any impact yet from recession, and how do you think about the impact it could have on your business based on where you are in their lifecycle.
Well, Matt as we as we as we discussed before we don't see any recession, yet not even a slowdown but I read and analysis made by your own bank that the recession, probably will start on the third quarter of 2023, So we're not there yet.
It's a full year from today it depends on how what kind of recession. It will be if it would be something similar to 2008 I'm sure that you know, we wouldnt, we wouldnt get tailed a little bit as well.
That we're coming with new technologies, and a new market will help us.
Because I believe that if a doctor has five different lasers and he is now in the middle of recession and.
He will not buy a new laser, but he might buy a new technology like minimally invasive like mall feels like you know faced iconix tight because we can come up with a different procedures to its customer base and that's what help us that's what help US you know overcoming at the.
Time, you know, we have a well where we have a very strong balance sheet. So we have been absolutely socials to overcome any recession or any slowdown and get even stronger after that because during the recession. When you are strong and you have the ability to invest and you don't have to cut down in order to save them cut.
Expenses in marketing people et cetera, you are getting stronger when they went through a recession.
I'll end and eventually the recession will and what it will start on the third quarter or in the middle of next year.
We put a pillow says, but we don't we don't cut down with that.
It was down on R&D, what double down on marketing are you know.
This year, we're spending twice as much direct to consumer and twice as much marketing are in the U S and in the other world. We continue to establish subsidiaries. Although you know when you establish a subsidiary on the first year or the second year East coast two more than the profit that you're generating but we believe that there is.
No reason why we should stop and we will continue to do it stop therefore, I would say that we don't have a special strategy for the recession time, we will continue business as usual, even if revenue and profit will go down a little bit it will not hurt us and we will get stronger after that.
Hey, Matt its shack here just to add to that real quick.
So thank you know, where there's a famous saying right, where there's chaos there's opportunity as we've seen historically in previous recessions a lot of the other you know as most of you mentioned are the strength of our balance sheet.
A lot of the competition or people that are in this space are playing in this space.
They are many of them are not fortunate enough to be in a position that we built ourselves to be in so I do think also that you know the staying power for our brand is staying power for our technology and the staying power for for the consumer awareness. So we're creating them. We will continue to create is a big thing and I think that will filter out some other people increasing our Tam overall.
And also you know our penetration into different markets that we're also looking at and we're currently looking at with R&D.
Yeah, if you recall, Matt in the beginning of 2021 because it started.
We were the only company, who decided not to fire and not too late.
People go because we are we decided that we don't want to talent to leave the company like other company. Other company did and you know when the market came back Ah.
In August 2020 July August 2020.
We were very strong and we capture market share in 2021 was that I would say as far as growth was more than 70% and this is only because we kept everything and we continue business as usual we have the resources and that's the strategy that we will implement.
Got it thanks, so much thanks for the thought thanks, yeah.
Thanks, Matt.
Thanks, Matt.
Our next question comes from Jeff Johnson with Bank. Please go ahead.
Thank you good morning, guys.
I wanted to focus maybe most of you if I could on this emerging focus maybe on wellness and our checks would suggest I think morpheus Adas really helping to fuel that move into the wellness side and I don't know if that's because enough petitions can do this procedure you don't necessarily have to have direct involvement from the physician if that's it or what else. It is but you know me.
Can you help us size that market are the kind of the wellness market. We focus so much on the surgical derm and the plastics market, but maybe help us size the wellness market, maybe where your penetration is right now in that market, where it could go over time and then maybe a couple of follow up questions on that thank you.
Okay.
Well.
The wireless market is new to us.
But when I said the wellness market, we do not mean spa market, although yes, we want to get into the spot market in Europe not in the United States.
Cosmos, if you say it is a doctor business, he's not announced business and not a doctor cannot dedicate that in the U S and not in many other countries. The only platform today that enable us to get into the wellness and improve quality of life is the empower because they empower is not is not pure steady.
It's a mistake of course in aesthetics gynecology, but also treatment, which are like got reasoning as to why valeant, a contraction Oh b a O U P et cetera, when we said wellness women medical wellness and not spa wellness and we want to do the same for example.
A&P snoring sleep apnea, improving quality of life in the Doctor clinic, but only by doctors not by our suspicions and not by you know power medical stuff.
I think that's important to understand every platforms that we will develop gynecology Emt ophthalmology. We'll include some hand pieces that will enable them to do aesthetic medical aesthetic and also to do something special for them. For example in the ophthalmology, we intend to bring to the market the platforms.
Which can do which can treat dry eye. In addition to Perry orbital Winkers a fuller face.
Ah Ah skin rejuvenation et cetera, but that's when we said wellness and when we said improve our quality of life doesn't mean, it's not medical it's a pure medical.
That that's helpful and thanks for clearing that up and then I guess the follow up on that is when you talk about potential M&A in the wellness space you would mean the same thing more on the medical side.
Of course.
Okay.
And then the last one just kind of bring it all that together. It's just you know morpheus eight we're hearing more and more about that and I'm almost hearing more about that even then like accu type body type phase type things like that I mean are we going into a you know.
A part of the market here, where patients are getting purely of morpheus eight procedure and not getting the acura tighter body tight on top of that kind of I'd say a year ago. Our checks would suggest you do an accurate titer of body tightened in an overlay of morpheus eight but it almost sounds like more recently, there's been an even more a move.
Towards even less invasive than just doing morpheus eight is that right and how does that help the company.
I mean Spiro can you answer that I think you have a sure sure Jeff. So it's important that we differentiate a little bit about our how our morpheus it what it entails right. So most companies did radiofrequency micro needling in the past we focused on the face.
And we were the first ones to introduce Morpheus to the body now the skin is the largest storage in the body. So you can imagine the opportunity that has opened up.
With fit Morpheus.
A body country, Morpheus, handpiece and that seems to be growing tremendously fast because of the fact that a lot of the plastic surgeons are using it in conjunction with each I'd imagine you correctly described.
As far as the press is concerned we're spending a lot of money in consumer advertising as well Laguardia had morpheus. So all these things contribute to the public awareness of it and it happens to be a very very effective.
Tool.
In our in our momentary them so.
As far as procedures are concerned yes, morpheus is not just a stand alone, although it's definitely increasing as a stand alone, but as an adjunct to everything else. We found in our research and our studies that when you combine workers with value tied or I can tell you is certainly.
Increase is tightening so we have the scientific data to back that up as well does that answer your question, yes. It is.
It does and the last one I'm sorry to belabor this but how what percentage maybe most of your of your boxes out there in the U S or even globally have a morpheus aid hand piece and I would assume that's a you know a fairly easy upgrade to add to it if I've got body type face tight accu tight kind of already on the box to add of Morpheus aid Ann.
Pieces that kind of what's helping drive the revenue here is going back to those installed systems and adding morpheus eight.
I believe we gave the breakdown, we said 88% of our platforms, all surgical and ablative and almost each one of those platforms are which combined face tight tight next diet and embrace body type and Morpheus, it's always come with the Morpheus because most.
Doctors today, when they do face tight Oh next tight they combine it with Morpheus almost every doctor every doctor at the domain and I I just been yesterday in our conference in Tel Aviv, Israel, and they and they talk about very loudly about it they do a lot of molecules following X that neck type.
<unk> face tight tight.
Tight treatment of the I lead as a complementary to face tight.
But more of that more than 85% of our platforms in the surgical contain all include the morpheus is a body of face.
Alright, that's helpful. Thank you.
Our next question comes from Joseph <unk> with Needham. Please go ahead.
Hi, guys.
One for Mike just two quick ones I guess.
Looking into 2023 I was wondering if we could get maybe an expectation of new product launches.
And then we haven't envision on the horizon, whether that would be that at the end of this year the beginning of next year, but.
But if you could maybe talk about some of the new products that you know it is expecting to be.
Expecting to release in 2023 that'd be great. Thanks.
Well I don't know I'm sure you'll notice, but right now Q4 2022, we have lounge Oh.
What we called the Morpheus eight body three D, which is a you know an upgrade for the Morpheus eight body next year, it will be envision and the second generation of evoke which is a hands free device for the faith.
Okay.
Okay, Great and then I don't think I heard you guys give it but if it'd be possible to give an update on the installed base for platforms in the U S. And then rest of world.
Right.
Well, we don't give a break down of the installed base, but currently we have about worldwide 15500 system.
And in the U S 7300, Miss them I would say that you know you can take the same ratio of our revenue mix and these are the same as far as the mix between the surgical and nonsurgical.
Yeah.
Okay, Great. Yeah, that's very helpful. And then maybe lastly, just looking at empower.
When could we expect maybe published data and.
And power being used in one of these overactive bladder conditions.
Okay.
Spiro.
Sure.
We have a couple of publications and press and we have an ongoing study with overactive bladder with old graduate rather we have to be very careful to draw conclusions as you know the nature of it is definitely multifactorial in some aspects. So we're growing nice and slow and steady we know we know on the ground is having a huge effect that the urgency frequency.
Symptoms, which are typical of it are decreasing or going away completely and a lot of these patients. So we're encouraged by that but you know figuring out how and when and if this happens is our focus.
Impressed we certainly have what we've done so far and part of that is a mixed issue by so hopefully before the end of the year, we'll have something that we can send you.
Okay, great yeah, thanks, very much congrats on a great quarter.
Thanks, a lot.
This concludes our question and answer session.
Like to turn the conference back over to Moshe that's right and that's chairman and CEO for closing remarks.
Thank you operator.
Again, thank you everybody.
All of our shareholders I want to thanks, all of our employees worldwide.
We gave a lot of effort during the third quarter to make it another another record I'm sure. We will do the same on the fourth quarter.
We have a 437 people employed by the company worldwide.
By the way and I and I and I'm sure. It's very important to say are you.
You know are having $450 million revenue was 437 people. This is more than 1 million people $1 million per employee, which is difficult to software and not to hardware.
But we managed to do it we manage to go back to 85% again very hard work of our logistics supply chain manufacturing team are growing by close we will grow close to $100 million. This year again, thanks to all of our salespeople distributors in North America.
Elsewhere.
Again, thank you everybody and we'll see you again within three months. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.