Q2 2024 InMode Ltd Earnings Call

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Operator: Good day and welcome to InMode's second quarter 2024 earnings results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: Good day, and welcome to Inmode's 2nd Quarter 2024 Earnings Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be 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 Miri Segal.

Speaker Change: Good day and welcome to Inmode's second quarter 2024 earnings results conference call.

Speaker Change: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be 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.

Speaker Change: After today's presentation, there will be an opportunity to ask questions.

Miri Segal: I would now like to turn the conference over to Mary Savel, CEO of MSIR. Please go ahead.

Moshe Mizrahy: Thank you, operator, and everyone for joining us today.

Miri Segal: Thank you, operator, and everyone, for joining us today. Welcome to Inmode's conference 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 applies to this call. If you have not received a copy of the release, please visit the investor relations section of the company's investor relations website. 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 Mizrahi, Inmode's CEO. Moshe, please go ahead.

Moshe Mizrahy: Welcome to InMode's conference 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 IR 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. Notes are not necessarily indicative of future performance.

Speaker Change: Changes in business, competitive, technological, regulatory and other factors could cause actual results differ materially from those expressed by the forward-looking statements made today. Our historical results are not necessarily indicative of future performance.

Moshe Mizrahy: 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.

Speaker Change: 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.

Moshe Mizrahy: With that, I'd like to pass the call over to Moshe Mizrahy, InMode CEO. Moshe, please go ahead.

Moshe Mizrahi: I would like to highlight the development of the second quarter. As we previously mentioned in Q1, we launched our two new advanced platforms, IgniteRF and Optimus Max. The macroeconomic trend that we discussed on our last call impacted market demand as well as our financial results.

Moshe Mizrahy: Thank you, Miri, and to everyone for joining us.

Moshe Mizrahy: With me today are Dr. Michael Cwinder, our co-founder and chief technology officer; Yair Malca, our CFO; Shakil Lakhani, our president in North America; our medical director and VP of medical affairs, Dr. Iran Krieger; and Wafer El-Likerman, our VP of Finance. Following our prepared remarks, we will all be available for question and answer.

Speaker Change: Thank you, Miri, and to everyone for joining us. With me today are Dr. Michael Kleindler, our co-founder and chief technology officer, Yair Malca, our CFO , Shakil Lakhani, our president in North America.

Speaker Change: our Medical Director and VP of Medical Affairs, Dr. Eran Krieger, and Rafael Liekerman, our VP of Finance. Following our prepared remarks, we will all be available for question and answer.

Moshe Mizrahy: I would like to highlight the development of the second quarter. As we previously mentioned in Q1, we launch our two new advanced platforms, Ignite our F and Optimus Marks. We are happy to report that we have begun deliveries of both platforms, and we believe we are on track to complete deliveries of pre-orders before the end of the year. We are happy to see strong demand, and we believe that these innovative platforms that offer several technologies and hand pieces will be solid contributors in the coming year. Once again, Ignite our F is the next generation of our legacy RFL technology, a minimum invasive platform with a new, more-fusate, burst hand piece, and the all-new Q1 to Mareth, a new version minimum invasive static surgical procedure in a box.

Speaker Change: We are happy to report that we have began deliveries of both platforms.

Speaker Change: A new version minimal invasive static surgical procedure in a box. The quantum RF handpiece has been recently cleared by the FDA.

Moshe Mizrahy: The Q1 to Mareth hand piece has been recently cleared by the FDA. With Ignite, physician may adjust the depth of the power, allowing for more effective treatment in less time. These features are highly valued by physicians that aspire to shorten treatment time while achieving good results. The Optimus Marks is a multi-application platform with more Fusate, non-invasive RF hand pieces, IPL, and laser-based treatment. It is the most complicated device we have ever manufactured, and it has many features that doctors and patients desire, such as the ability to deliver different energy levels at various depths, allowing for stronger results and less time and with less discomfort.

Speaker Change: These features are highly valued by physicians that aspire to shorten treatment time while achieving good results.

Speaker Change: It is the most complicated device we have ever developed.

Speaker Change: It has many features that doctors and patients desire, such as the ability to deliver different energy levels at various depths, allowing for stronger results in less time and with less discomfort.

Moshe Mizrahy: The macroeconomics trend that we discussed on our last call impacted the market demand as well as our financial results. The second quarter was a challenging one for us and for the aesthetic doctors. We have seen a major decrease in demand for treatment, mainly in the US. Our Israeli team working longer shift to ensure we maintain our commitment to timely delivery. Their dedication and hard work are crucial to our success while maintaining our leadership position in the market.

Speaker Change: The macroeconomic trend that we discussed on our last call impacted market demand as well as our financial results.

Moshe Mizrahi: The second quarter was a challenging one for us and for the aesthetic doctors. We have seen a major decrease in demand for treatment, mainly in the U.S. Earlier this month, we were happy to update that the FDA cleared Morpheus 8 for contraction soft tissue, the first and only of its kind. Our Morpheus 8 treatment has become the gold standard in aesthetic treatment and our most popular technology. Additionally, the new indication has enabled petitioners to expand their patient base.

Speaker Change: Our Israeli team working longer shifts to ensure we maintain our commitment to timely deliveries. Their dedication and hard work are crucial to our success while maintaining our leadership position in the market.

Moshe Mizrahy: Earlier this month, we were happy to update our FDA that the FDA cleared Morpheus 8 for contraction soft tissue, the first and only of its kind. Our Morpheus 8 treatment has become the goal standard in aesthetic treatment and our most popular technology. Additionally, we meet the new indication in able petitioner to expand the patient base. We continue to invest in R&D to provide medical professionals with the advancement they need to deliver the highest quality of care to achieve best results.

Speaker Change: Additionally, the new indication enables petitioners to expand their patient base.

Moshe Mizrahi: We continue to invest in R&D to provide medical professionals with the advancements they need to deliver the highest quality of care to achieve the best results. On the corporate level, I am pleased to introduce Dr. Ron Krieger as our Medical Director and VP of Medical Affairs. Dr. Krieger joined the company, joined Inmode four years ago. He has 30 years of experience in medical aesthetics and has worked for several Italian and Israeli companies in the field.

Speaker Change: We continue to invest in R&D to provide medical professionals with the advancement they need to deliver the highest quality of care to achieve best results.

Speaker Change: On the corporate level, I am pleased to introduce Dr. Ron Krieger as our Medical Director and VP of Medical Affairs. Dr. Krieger joined the company, joined Inmode four years ago.

Moshe Mizrahy: I would like to thank Dr. Spirato Dhrus for his time with Inmode and wish him best of luck in his future.

Moshe Mizrahi: I would like to thank Dr. Spero Theodorou for his time with Inmode and wish him the best of luck in his future. Now I would like to turn the call over to Michael, to Yair Malca, our CFO. Yair?

Yair Malca: Now I would like to turn the call over to Michael and to Jair Malca, our CFO. Jair?

Speaker Change: Best of luck in his future. Now I would like to turn the call over to Yair Malca, our CFO.

Yair Malca: Thank you, Mr. and hello everyone. Thank you for joining us. As Moshe mentioned, we launched two new platforms back in Q1 and started setting them on a pre-order basis.

Yair Malca: As Moshe mentioned, we launched two new platforms back in Q1 and started selling them on a pre-order basis. Once again, sales that have not yet been delivered could not be recognized as revenue.

Yair Malca: Thank you Moshe and hello everyone. Thank you for joining us.

Yair Malca: Once again, the says that if not yet been delivered, could not be recognized as revenue. Therefore, we continue to provide performance results, which adds to the non-GAAP results the pre-order sales and related expenses. We believe that the performance results better reflect our business activity during the quarter. Starting with total revenue, Inmode generated $86.4 million in the second quarter of 2024. However, performance revenue was $102.6 million, which includes pre-order of new platforms not yet delivered. Gap gross margin in Q2 was 80%, and non-GAAP gross margin was 81%, while performance margin was 82%, compared to 84% in Q2 of 2023.

Yair Malca: Therefore, we continue to provide pro forma results, which adds to the non-GAAP results, the pre-order sales, and related expenses. We believe that the performance results better reflect our business activity during the quarter. Gap gross margin in Q2 was 80%, and non-gap gross margin was 81%, while performer gross margin was 82%, compared to 84% in Q2 of 2023, a 17% decrease compared to Q2 last year. In Tier 2, Europe was the largest revenue contributor from outside the U.S. To support our operations and to ensure our future growth, we currently have a sales team of more than 250 direct reps and 83 distributors worldwide.

Speaker Change: Gap gross margin in Q2 was 80% and non-gap gross margin was 81% while performer gross margin was 82% compared to 84% in Q2 of 2023.

Yair Malca: In Q2, our minimally invasive technology platforms accounted for 87% of total revenues. Moving to our international operations, the second quarter says outside the US accounted for $40.9 million, representing 47% of total sales, a 17% decrease compared to Q2 last year. In Q2, Europe was the largest revenue contributor from outside the US. To support our operations and to ensure future growth, we currently have a system of more than 250 direct reps and 83 distributors worldwide. Gap operating expenses in the second quarter were 51 million dollars and 11% decrease year over year. Desert marketing expenses decreased to 45.1 million dollars in the second quarter compared to 51.1 million dollars in the same period last year.

Speaker Change: A 17% decrease compared to Q2 last year.

Yair Malca: Sales and marketing expenses decreased to $45.1 million in the second quarter, compared to $51.1 million in the same period last year. This decrease is due to the revenue shortfall in Q2 of 2024. Next, we looked at share-based compensation, which decreased to $5.2 million in the second quarter of 2024. Gap's operating margin for Q2 was 21% compared to an operating margin of 42% in the second quarter of 2023. Gap's diluted earnings per share for the second quarter were 0.28 compared to 0.65 per diluted share in Q2 of 2023.

Speaker Change: Sales and marketing expenses decreased to $45.1 million in the second quarter, compared to $51.1 million in the same period last year.

Yair Malca: This decrease is due to the revenue shortfall in Q2 of 2024. Next, we looked at share-based compensation, which decreased to 5.2 million dollars in the second quarter of 2024.

Speaker Change: This decrease is due to the revenue shortfall in Q2 of 2024.

Speaker Change: Next, we looked at share-based compensation, which decreased to $5.2 million in the second quarter of 2024.

Yair Malca: Gap operating margin for Q2 was 21% compared to an operating margin of 42% in the second quarter of 2023. NANGAP operating margin for the second quarter was 27%, and PERFORMA operating margin was 34% compared to a NANGAP operating margin of 47% in the second quarter of 2023. Gap denoted the earnings per share for the second quarter were 28% compared to 65 cents per diluted share in Q2 of 2023. NANGAP diluted earnings per share for this quarter were 34 cents, and PERFORMA diluted earnings per share for this quarter were 46 cents compared to 72 cents per diluted share in the second quarter of 2023 on a NANGAP basis.

Speaker Change: Gap operating margin for Q2 was 21% compared to an operating margin of 42% in the second quarter of 2023.

Speaker Change: Nangap operating margin for the second quarter was 27% and Proforma operating margin was 34% compared to a Nangap operating margin of 47% in the second quarter of 2023.

Speaker Change: Gap diluted earnings per share for the second quarter were $0.28 compared to $0.65 per diluted share in Q2 of 2023.

Yair Malca: Non-GAAP diluted earnings per share for this quarter were $0.34, and pro forma diluted earnings per share for this quarter were $0.46, compared to $0.72 per diluted share in the second quarter of 2023 on a non-GAAP basis. Once again, we ended the quarter with a strong balance sheet. As of June 30, 2024, the company had cash and cash equivalents, marketable securities, and deposits of $729.2 million. This quarter, Inmode generated $42.1 million from operating activities.

Speaker Change: non-GAAP diluted earnings per share for this quarter were $0.34 and pro forma diluted earnings per share for this quarter were $0.46 compared to $0.72 per diluted share in the second quarter of 2023 on a non-GAAP basis.

Yair Malca: Once again, we ended the quarter with a storm balance sheet. As of June 30th, 2024, the company had cash and cash equivalent macro securities and deposits of 729.2 million dollars. This quarter in more generated is 42.1 million dollars from operating activities. Regarding our latest sharey purchase program, as of today we successfully completed acquiring all 8.37 million shares at an average price of $17.97 per share.

Speaker Change: This quarter, Inmode generated $42.1 million from operating activities.

Yair Malca: Regarding our latest share repurchase program, as of today, we successfully completed acquiring all 8.37 million shares at an average price of $17.97 per share. Non-GAAP gross margin between 82% and 84%, which is the same as previous guidance. Non-GAAP income from operations between $150 to $155 million compared to previous guidance of $169 to $174 million.

Speaker Change: Regarding our latest share repurchase program, as of today, we successfully completed acquiring all 8.37 million shares at an average price of $17.97 per share.

Yair Malca: As for future capital location plans, we continue to carefully evaluate all options, and we will provide updates as soon as we have used the report.

Speaker Change: As for future capital allocation plans, we continue to carefully evaluate all options.

Speaker Change: And we will provide updates as soon as we have news to report.

Yair Malca: Before I turn the code back to my share, I'd like to share with you our guidance for 2024. Pull year 2024 revenue to be 430 to 440 million dollars compared to previous guidance of 485 to 495 million dollars. NANGAP gross margin between 82% and 84%, which is the same as previous guidance. NANGAP income operations between 150 to 155 million dollars compared to previous guidance of 169 to 174 million dollars. NANGAP earnings further due to share between $1.92 to $1.96 compared to previous guidance of $2.01 to $2.05.

Speaker Change: Before I turn the call back to Moshe, I'd like to share with you our guidance for 2024.

Moshe: Pool year 2024 revenue to be $430 to $440 million compared to previous guidance of $485 to $495 million.

Moshe: non-GAAP gross margin between 82% and 84%, which is the same as previous guidance.

Moshe: Non-GAAP earnings per diluted share between $1.92 to $1.96 compared to previous guidance of $2.01 to $2.05.

Yair Malca: I will now turn over the code back to my share. Thank you, Year.

Miri Segal: Thank you, Yair. Operator, I believe we are ready for the Q&A session.

Moshe: I will now turn over the call back to Moshe.

Operator: Operator, I believe we are ready for the Q&A session. We will now begin the question in the answer session. To ask a question, you may press stars, then one on your telephone keyboard. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.

Moshe: Thank you Yair. Operator, I believe we are ready for the Q&A session.

Operator: To ask a question, you may press star, then 1 on your telephone's keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Danielle Antalffy with UBS; please go ahead.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone's keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: At this time, we will pause momentarily to assemble our roster.

Moshe: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Danielle Antalffy: The first question comes from Danielle Antalffy with UBS. Please go ahead.

Moshe Mizrahy: Hey, good morning, guys. Thanks so much for taking the question. Congrats on the product launches. My question is I appreciate the guidance you're giving for 2024, but looking ahead to 2025 and how we should be thinking about the evolution of the market here. I mean, it'll be off easier comps. Obviously, you'll have these new product launches, which will start getting delivered in the back half of this year. So we can sell digit growth, the return to double digit growth in your mind is a feasible thing in 2025 even if the market doesn't turn around or do we really need to see that market turn around in order to get back there.

Danielle Joy Antalffy: How we should be thinking about the evolution of the market here. I mean, it'll be off easier comps. Obviously, you'll have these new product launches, which will start getting delivered in the back half of this year.

Speaker Change: So, is double-digit growth, or urgent double-digit growth, in your mind, a feasible thing in 2025 even if the market doesn't turn around, or do we really need to see that market turn around in order to get back there? Thanks so much.

Moshe Mizrahy: Thanks so much.

Moshe Mizrahi: Hi, this is Moshe. How are you? I believe now that it's very early to judge what will happen next year. We have two quarters ahead of us. The third quarter, as you know, in medical aesthetics is usually the toughest one, and we believe that the fourth quarter probably will be a strong one following the election in the United States.

Moshe Mizrahy: Hi, this is Moshe. How are you? I believe it will be very now. It's very early to judge what will happen next year. We have two quarters ahead of us. The third quarter, as you know, in medical static is usually the toughest one. And we believe that the fourth quarter probably will be a strong one following the election in the United States. We're still waiting to see the interest rate go down on least packages that will enable doctors openly to buy more systems and not wait. Right now, it's not happening yet. In addition to that, we need to see how the two platforms that we just launched will succeed in the market.

Moshe: Hi this is Moshe, how are you? I believe it will be very, now it's very early to judge what will happen next year.

Moshe: We have two quarters ahead of us.

Moshe Mizrahi: We're still waiting to see the interest rate go down on lease packages that will enable doctors openly to buy more systems and not wait. Right now, that isn't happening yet. In addition to that, we need to see how the two platforms that we just launched will succeed in the market. We launched them only in the United States. We still have to launch them in Europe and other territories, but usually, that's what we do.

Moshe: We're still waiting to see the interest rate go down on lease packages that will enable doctors openly to buy more systems.

Moshe Mizrahy: We launched them only in the United States. We still have to launch them also in Europe and other territories. Usually, that's what we do. We started in the US. We continue. We all hope that all the changes that we do on the organization and the territories, the two companies that we have established in Japan and Germany will pick up in the second half of 2024 and will be ready in 2025.

Moshe Mizrahi: We started in the US, and we continue to do so. We all hope that all the changes that we make to the organization and the territories, the two companies that we have established in Japan and Germany will pick up in the second half of 2024 and will be ready in 2025. The plan, I can tell you, if everything goes well and the war in Israel will not escalate, and this is a major issue right now for us, as everybody knows.

Moshe: We still have to launch them also in Europe and other territories.

Moshe: We all hope that all the changes that we do on the organization and the territories

Moshe: The two companies that we have established in Japan and Germany will pick up in the second half of 2024 and will be ready in 2025.

Moshe Mizrahy: The plan, I can tell you, everything will go well and the war in Israel will not escalate, and this is a major issue right now for us as everybody knows. We track that on a daily basis, especially now. All of a sudden yesterday, most of the airlines discontinued flights to Israel, so hopefully we will not be short of supplies of all kinds of components in the near future or in the near few weeks. So there are several elements that we cannot foresee, and we need to wait and see what will happen in the third quarter before we can say something strongly about 2025.

Moshe Mizrahi: We track that on a daily basis, especially now. All of a sudden, yesterday, most of the airlines discontinued flights to Israel. Hopefully, we will not be short of supplies of all kinds of components in the near future or in the near few weeks. There are several elements that we cannot foresee, and we need to wait and see what will happen in the third quarter before we can say something strongly about 2025.

Moshe: So hopefully we will not be short of supplies of all kinds of components in the near future or in the near few weeks.

Moshe: So, there are several elements that we cannot foresee and we need to wait and see what will happen in the third quarter before we can say something strongly about 2025.

Danielle Joy Antalffy: Okay, that's helpful. I appreciate that.

Moshe Mizrahy: Okay, that's all. I appreciate that. And then just on the margin side of things, I mean, you guys have been pretty transparent about, you know, your willingness to continue to invest even in a tough, excuse me, an environment. I guess just how do we think about the potential drivers of margins here going forward, margin improvements, excuse me, going forward into 2025? Are these new platforms accretive to margin, dilutive to margin, in line? Any color there?

Danielle Joy Antalffy: And then just on the margin side of things, I mean, you guys have been pretty transparent about your willingness to continue to invest even in a tough, excuse me, environment. I guess, just how do we think about the potential drivers of margin here going forward, margin improvements, excuse me, going forward into 2025? Are these new platforms accretive to margin, dilutive to margin, inline, any color there? Thanks so much.

Speaker Change: In a tough, excuse me, environment, I guess just how do we think about the potential drivers of margins here going forward, margin improvements, excuse me, going forward?

Speaker Change: into 2025, are these new platforms accretive to margin, dilutive to margin, inline, any color there? Thanks so much.

Moshe Mizrahy: Thanks so much.

Moshe Mizrahi: Every product that we develop, and every platform that we develop, and every handpiece that we develop, we design it from the beginning, and we calculate what will be the margin. We will never develop a product that, on the drawing base, will show 60 or 65 percent gross margin.

Moshe Mizrahy: Every product that we develop and every platform that we develop and every handpiece that we develop, we design it from the beginning, and we calculate what will be the margin.

Moshe: Every product that we develop and every platform that we develop and every handpiece that we develop

Moshe Mizrahy: We will never develop a product that, on the drawing base, it will show 60 or 65 percent gross margin. The sales go down because of many reasons: micro-economics, a less demand for treatment, which we now see in the United States, as I said, the war in Israel, everything in the design phase, and we continue to invest in R&D. Everything is planned to be on the high margin, and that's the philosophy of the company.

Speaker Change: And as you can see, even when the sales go down, because of many reasons, microeconomics...

Speaker Change: Less demand for treatment, which we now see in the United States, as I said.

Caitlin Cronin: The next question comes from Caitlin Cronin with Canaccord Genuity. Please go ahead.

Speaker Change: Understood. Thanks so much.

Operator: The next question comes from Caitlin Cronin with Canaccord Genuity. Please go ahead.

Speaker Change: The next question comes from Caitlin Cronin with Canaccord Genuity. Please go ahead.

Caitlin Cronin: Hey, everyone. Good morning.

Moshe Mizrahy: Thanks for taking the questions. I guess maybe if you could provide some more color on why the environment was so much worse versus the prior quarters, was it really just this deterioration in patient demand? And then on that point, if you noted earlier if interest rates go down, but the patient demand remains lower. It would make sense that the providers would still, you know, not, would still be husband mode, buying systems. Do you think both of those really have to recover for demand to come back? Eventually, it will come back, but I know that the regular interest rate, yes, you're right, went down. But the interest rate on lease packages, especially for five years, the doctors are using lease companies in order to finance the purchase did not, did not come down enough to enable us to enable sell more system.

Caitlin Cronin: Thanks for taking the questions. I guess maybe you could provide some more color on, you know, why the environment was so much worse versus the prior quarters. Was it really just this deterioration in patient demand? And then on that point, if you noted earlier, if interest rates go down, but patient demand remains lower, it would make sense that the providers would still, you know, not, would still be hedging in those buying systems. Do you think both of those really have to recover for demand to come back?

Caitlin Cronin: Hey everyone, good morning. Thanks for taking the questions.

Caitlin Cronin: I guess just maybe if you could provide some more color on, you know, why the environment was so much worse versus the prior quarters. Was it really just this...

Yair Malcahi: deterioration in patient demand and and then on that point if you noted earlier if interest rates go down

Speaker Change: Eventually, it will come back.

Speaker Change: But I know that the regular interest rate, yes, you're right, went down.

Speaker Change: But the interest rate on lease packages, especially for five years, the doctors are using lease companies in order to finance the purchase, did not come down enough to enable us to sell more systems.

Moshe Mizrahy: And eventually it will come; I don't know when. I believe that it will take some time. The second half of this year is crucial to see what will happen on the demand. Regarding procedures, the way we know that the procedures numbers are coming down is because we sell less disposable in the United States. We sold 30% less disposable compared to Q2 2020, 2023. That's crucial, and we're investigating the main reason for that. I believe people are saving money and doing less treatment in a time like that. Hopefully, it will go back because, you know, static people want to continue to look nice and static eventually will go up again and the technology, the special technology that we are selling will be on demand.

Speaker Change: Regarding procedures, the way we know that the procedures numbers are coming down is because we sell less disposable. In the United States, we sold 30% less disposable compared to Q2 2023.

Moshe Mizrahy: If you want to judge by comparing us to some of our competitors like Yotera, which is a public company, or Venus on others, we're still selling, we're still making money, we still have a positive cash flow. Although it's a tough time, we keep all the employees; we don't lay down or fire people right now because this is the assets of the company.

Speaker Change: We're still selling, we're still making money. We still have a positive cash flow, although it's a tough time. We keep all the employees. We don't lay down or fire people right now because this is the assets of the company. Hopefully that everything will get better and we will continue the momentum.

Moshe Mizrahy: Donald Trump. Got it. That makes sense. And then just pushing a little further, you lower guidance further than the Q2 myth. Is that really just to reflect conservatism into the back half of the year? Conservatism on what? I didn't understand the question. You lowered the guidance, which appeared further than the Q2 myth. So just wondering if you just expect you're just being more conservative with your guidance into the back half of the year. I understand the question. Thank you for repeating it. We always conservative on the guidance, always. I mean, we changed the guidance because the revenue in Q2, which usually is a strong quarter, which usually was a strong quarter over the last few years, not just for Inmode but for the entire industry, was not good enough.

Caitlin Cronin: Got it. That makes sense. And then just pushing a little further, you lowered diamonds further than, you know, the Q2 myth. Is that really just to reflect conservatism in the back half of the year?

Speaker Change: Got it, that makes sense. And then just pushing a little further, you lowered guidance further than, you know, the Q2 myth. Is that really just to reflect conservatism into the back half of the year?

Moshe Mizrahi: Conservatism on what? I didn't understand the question.

Moshe Mizrahi: You lowered the guidance, which appeared to be further than the Q2 miss. So I was wondering if you just expect you're just being more conservative with your guidance into the back half of the year. I understand the question. Thank you for repeating it. We're always conservative on the guidance. Always.

Speaker Change: We are always conservative on the guidance, always.

Moshe Mizrahi: I mean, we changed the guidance because the revenue in Q2, which is usually a strong quarter, which usually has been a strong quarter over the last few years, not just for Inmode, but for the entire industry, was not good enough. And we were not satisfied with the numbers that we showed. And in the two quarters on the performer base, we did something like $196 million. In order to meet the $230 million or $240 million, we still have to make $240 million in the next two quarters.

Speaker Change: I mean, we changed the guidance because the revenue in Q2, which is usually a strong quarter, which usually was a strong quarter over the last few years, not just for Inmode, for the entire industry.

Moshe Mizrahy: And we were not satisfied with the numbers that we show. And in the two quarters on the performer base, we did something like $196 million. In order to meet the $230 or $240, we still have to make $240 million in the next two quarters. As I said before, the third quarter is usually a slow one because in summer and people do less treatment during the summer. We all hope that we will do well in the third quarter compared to the regular numbers of the third quarter. And if that would be the case, I don't want to say absolutely sure, but we will be encouraged to see that the fourth quarter will be strong.

Speaker Change: It was not good enough, and we were not satisfied with the numbers that we showed.

Speaker Change: In order to meet the 230 or 240

Moshe Mizrahi: As I said before, the third quarter is usually a slow one because it's summer and people do less treatments during the summer. We all hope that we will do well in the third quarter compared to the usual numbers for that quarter. And if that is the case, we are, I don't want to say absolutely sure, but we will be encouraged to see that the fourth quarter will be strong, and then we will do this $240 million to meet the $440 million guidance.

Speaker Change: A slow one.

Speaker Change: We all hope that we will do well in the third quarter, compared to the regular numbers of the third quarter, and if that will be the case, we are, I don't want to say absolutely sure, but we are, we will be encouraged to see that the fourth quarter will be strong.

Moshe Mizrahy: And then we will do this $240 million to meet the $440 million guidance. Understood.

Moshe Mizrahy: Thanks so much.

Speaker Change: Shalom. Shalom.

Jeff Johnson: The next question is from Jeff Johnson with Baird. Please go ahead.

Operator: The next question is from Jeff Johnson with Baird. Please go ahead.

Speaker Change: The next question is from Jeff Johnson with Baird. Please go ahead.

Jeff Johnson: Thank you.

Jeff Johnson: Good morning, guys. A couple questions here, I guess. Moshe, you've got about 11,000, almost 11,000 systems now placed in the US, almost 25,000 globally.

Jeffrey D. Johnson: Good morning, guys. I have a couple questions here, I guess.

Jeffrey D. Johnson: Moshe, you've got about 11,000, almost 11,000 systems now placed in the U.S., almost 25,000 worldwide. Remind me, have any of those systems been upgraded over the years? And I think the answer is no on that. Are the new systems, Optimus Max and Ignite RF and those kind of systems, those systems that should have upgrade demand in addition to new system demand? Are the feature sets different enough from the older technology in the field? Will you be offering any kind of trade-in programs in that? Is that a focus, or is it really just focused on new system sales at this point?

Jeff Johnson: Thank you, good morning guys. A couple questions here, I guess. Moshe, you've got about 11,000, almost 11,000 systems now placed in the U.S., almost 25,000 globally.

Moshe Mizrahy: Remind me of any of those systems been upgraded over the years, and I think the answer is no. One that are the new systems Optimus Macs and Ignite RF and those kinds of systems are those systems that should have upgrade demand in addition to new system demand or the features that's different enough than the older technology in the field. And will you be offering kind of trade-in programs in that? Is that a focus, or is it really just focus on new system sales at this point? Thanks. At that point, we're focusing on new system sales.

Jeffrey D. Johnson: Thanks.

Speaker Change: At this point, we're focusing on your system cell.

Moshe Mizrahy: But, as we stated more than once, the Ignite is our second technology for minimal invasive OS. It's a little bit different than the body type, face type, the next type. It is not exactly replacing them because it's working with a different technology. So I believe the doctors who has the body type, face type, next type platforms, which were happy with the system, will buy the Ignite as well in order to have a comprehensive opportunity for different indications. Regarding the Optimus Macs, as you remember, we had the Optimus before the Optimus Macs, but the Optimus Macs had some different hand pieces with a little bit different energy levels and more user-friendly.

Moshe Mizrahi: But as we stated more than once, Ignite is our second technology for minimally invasive RF. It's a little bit different than the BodyTight, FaceTight, and NeckTight.

Speaker Change: But, as we stated more than once, the Ignite is our second technology for minimally invasive RF.

Speaker Change: It's a little bit, it's different than the body type, face type, the neck type.

Moshe Mizrahi: It is not exactly replacing them because it works with a different technology. So I believe that doctors who have the BodyTight, FaceTight, and NeckTight platforms, which were happy with the system, will buy the Ignite as well in order to have a comprehensive opportunity for different indications. Regarding the Optimus Max, as you remember, we had the Optimus before the Optimus Max, but the Optimus Max has some different hand pieces with a little bit different energy levels and is more user-friendly.

Speaker Change: It is not exactly replacing them because it's working with a different technology.

Speaker Change: So, I believe that doctors who have the body type, face type, neck type platforms...

Speaker Change: As you remember, we had the Optimus before the Optimus Max.

Speaker Change: But the Optimus Max has some different hand pieces with a little bit different energy levels.

Moshe Mizrahi: So yes, in the future, we will do some trade-in, but we will not do a program to do trade-in for everybody. But the plan is eventually to sell the Optimus Max to all the doctors who previously had the Optimus, and they have already paid in full the original lease, which, as you know, was between three to five years. Partially, it will be trade-in. Mostly, it will be a new system

Speaker Change: So, yes, in the future, we will do some trade-in, but we will not do a program to do trade-in for everybody.

Speaker Change: And they already paid in full their original lease, which, as you know, between three to five years. So, partially, it will be trading. Mostly, it will be new system.

Jeff Johnson: which says, you know, between three to five years. So partially it will be trade-in; mostly it will be new system. I'm going to ask them. Okay, that's helpful.

Jeffrey D. Johnson: Okay, that's helpful. And then, just on the procedural consumable sales down 30%, it sounds like you said you're over here in the U.S. Obviously, we saw the global number in the press release. Do you believe that's all just macro-driven? Any indication from the field the doctors are talking to about any kind of conversion to other technologies, share loss, anything there?

Jeff Johnson: And then two other follow-up questions, I guess. We won just on the procedural consumable sales down 30%. It sounds like you said you're over here in the US. Obviously, we saw the global number and the fresh release. Do you believe that's all just macro driven? Any indication from the field the doctors are talking to about any kind of conversion to other technologies, share loss, anything there. So that's one question. And then two, your placements this quarter did go up sequentially. And obviously I know 2Q tends to be a seasonally stronger quarter than 1Q. But that sequential increase from 1Q to 2Q was almost a fairly normal increase, like we've seen in some of the past years.

Speaker Change: Okay, that's helpful. And then two other follow-up questions I guess. One, just on the procedural consumable sales down 30%. It sounds like you said you're over here in the U.S. Obviously, we saw the global number in the press release.

Speaker Change: Thank you.

Speaker Change: Do you believe that's all just macro-driven, any indication from the field the doctors are talking to about any kind of conversion to other technologies, share loss, anything there? So that's one question, and then two,

Jeffrey D. Johnson: So that's one question. And then two, your placements this quarter did go up sequentially. And obviously, I know 2Q tends to be a seasonally stronger quarter than 1Q, but that sequential increase from 1Q to 2Q was almost a fairly normal increase, like we've seen in some of the past years. Is there anything to read there that, you know, on the margin, you're through the worst of it? Or am I being too optimistic there, which I might be?

Speaker Change: Your placements this quarter did go up sequentially, and obviously I know 2Q tends to be a seasonally stronger quarter than 1Q, but that sequential increase from 1Q to 2Q was almost a fairly normal increase like we've seen in some of the past years. Is there anything to read there that, you know, on the margin you're through the worst of it, or am I being too optimistic there, which I might be? Thanks.

Moshe Mizrahy: Is there anything to read there that on the margin here through the worst of it, or it might be too optimistic there, which I might be. Thanks. Okay, let's start with the disposables. I said that we see a drop in the disposable in the US, but we have some increase in other countries. So we have some offsetting numbers on the total, which were totally less than the second quarter of 2023. But the main decline or the main drop came from the US market. Now the reason for that can be we believe it's macro economics. People are saving money because our treatment are not $500 or $300.

Speaker Change: Okay, let's start with the disposables.

Speaker Change: I said that we see a drop in the disposable in the U.S.

Speaker Change: Now, the reason for that...

Speaker Change: We believe it's macroeconomics. People are saving money because our treatments are not $500 or $300.

Moshe Mizrahy: Like regular cosmetic treatment, hair removal, you know, vasculolision, etc. Doctors are charging on minimal invasive treatment. They charge in between I would say 3 to $6,000 to $7,000 per treatment. And therefore it seems relatively expensive to some people. And therefore I believe that drive the downtrend. And in addition to that, just because, for example, the Morpheus was very, very popular and became a gold standard, we started seeing some Chinese copies on the market with the same name, with the same logo, with the same label on the back. They claim that this is made by InMode or sometimes even with the same part number.

Speaker Change: Like regular cosmetic treatment, hair removal, you know, vascular lesion, etc. Doctors are charging on minimal invasive treatment. They charge in between, I would say, $3,000 to $6,000, $7,000 per treatment.

Speaker Change: And therefore, it seems relatively expensive to some people, and therefore, I believe that drives the downtrend. In addition to that...

Speaker Change: Just because, for example, the Morpheus was very, very popular and become a gold standard.

Speaker Change: We start seeing some Chinese copies on the market with the same name, with the same logo, with the same label on the back. They claim that this is made by Inmode, sometimes even with the same part number.

Moshe Mizrahy: We don't know how they got into the market, especially Europe and some in Asia. And now we see some in Latin America. And I'm sure that there are some in the United States as well. And Dr. get confused, and they make mistakes to buy a $10,000 system instead of buying. And $120,000 system from InMode, believing that is doing the same. But finally they realize that this is the fake. We try to fight it. And we do a lot of legal activity against those companies. I try to stop them for bringing them into their several territories.

Speaker Change: We don't know how they got into the market, especially Europe and some in Asia.

Speaker Change: and they make mistakes to buy a $10,000 system instead of buying a $120,000 system from Inmode, believing that it's doing the same.

Moshe Mizrahy: But you know, it's just because of the success. Therefore, the Chinese said, "OK, this is a good product." Let's fake it. Let's try to develop something similar. Sometimes it looks the same. It's just a pure Chinese copy. Did I answer your question or you had another one?

Moshe Mizrahy: Yeah, I mean, that raises about five other questions, which maybe we'll add a lot of line in the callback. But I'm the sequential increase in placement. That was the question I asked. And again, I know 2Q tends to be seasonally stronger than 1Q. I get that. The sequential increase in the number of units you placed in the second quarter was hired in the first quarter. I don't want to over read that and say, oh, that means the market's getting better. But that sequential increase of units placed in 2Q did go up. It did follow a somewhat normal pattern.

Speaker Change: Yeah, I mean, that raises about five other questions, which maybe we'll handle offline in the callback. But on the sequential increase in placement, that was the question I asked, and again, I know 2Q tends to be seasonally stronger than 1Q, I get that. But the pattern, the increase...

Speaker Change: I don't want to over-read that and say, oh, that means the market's getting better, but that sequential increase of units placed in 2Q

Moshe Mizrahy: My question is just, does that tell us that we're kind of a little bit better placed than we were maybe a quarter ago? Or is that too optimistic of a read? Thank you. I understand that. I mean, the answer relates to the difference between the regular recognition and the performer. The system sometime, sometime, when a doctor and doctor older, optima smaks. And the deal is closed and finance. And we don't have the optima smaks. We send them an Optima regular. It's not the same system, but he can start working with an Optima. And once the Optima Smaks is available, we replace that.

Speaker Change: Sometimes, when a doctor orders Optimus Max,

Speaker Change: and the deal is closed and financed and we don't have the Optimus Max.

Speaker Change: We send them an Optimus.

Moshe Mizrahy: And therefore, it creates some confusion on the total system delivered. I will suggest to look on the numbers of few as dollars and not on the total. By the end of the year, everything will be balanced. Understood. Thank you.

Speaker Change: And once the Optimus Max is available, we replace that.

Speaker Change: And therefore, it creates some confusion on the total system delivered. I would suggest to look on the numbers of U.S. dollars and not on the total. By the end of the year, everything will be balanced.

Operator: Again, if you do have a question, please press star, then one to enter the queue.

Speaker Change: Again, if you do have a question, please press star then 1 to enter the queue.

Joseph Conway: The next question comes from Joseph Conway with Needham and Company.

Joseph Conway: Please go ahead. Hey guys, your day is going well.

Joseph Conway: Maybe just one question on the optimist. You had mentioned that this is the most complicated device you had manufactured at this day. I was just kind of curious to your thoughts on the laser or the IPO market in general.

Moshe Mizrahy: So if it's growing more than minimally invasive, if it's kind of an area, you guys are going after more. And maybe just a little bit more color, if you could kind of describe what portion of your business, a total business, is that laser, ITL technology.

Moshe Mizrahy: I assume you're talking about the optimal smarts and not the optimists. Yeah, but yeah, okay. On the optimist marks, for example, the IPL is much more powerful than the one on the optimist because we learn how to get more from the same energy level. The optimist marks has more power in the system itself, so it can deliver more energy. The optimist marks has a different type of software to enable all kinds of new procedures, which is not available or not possible on the optimist. The optimist marks can handle the two more fused 8 boosts with the scale and the boost technologies, which again was not often on the regular optimists.

Speaker Change: from the same energy level. The Optimus Max has more power in the system itself, so it can deliver more energy.

Moshe Mizrahy: On the Optimist marks, eventually we will be able to upgrade to other laser systems, which cannot be done on the regular Optimists.

Moshe Mizrahy: So overall, although it seems like the same name, it's a fully upgraded technology. With a better way to set up energy, depth, etc. is much more, as I said, powerful as new hand pieces of more fused. The regular hand pieces of non-invasive RF like the former are the same like in the optimists, but the outside design is a little bit different.

Speaker Change: With a better, I would say, with a better way to set up energy, depth, etc., is much more, as I said, powerful.

Speaker Change: The regular handpieces of non-invasive RF like the former are the same like in the Optimus, but the outside design is a little bit different.

Joseph Conway: The system is, I said, it's the most comprehensive system but the most complicated system that we ever manufactured. Look on the internet, and you see the system itself, and you realize for yourself. But we believe that there is nothing like that on the market for regular medical aesthetic treatment, not very invasive, and this system eventually will be a very successful one. Okay, yeah, thanks for that color. And then I guess two more, I'll just ask them together. You know, consumable and service revenue decline this quarter is kind of the first time it declined in our model.

Speaker Change: Eventually, it will be a very successful one.

Speaker Change: Okay, yeah, thanks for that color.

Speaker Change: And then I guess two more, I'll just ask them together.

Joseph Conway: Obviously, it's tough comp, and you laid out some of the reasons for that. Which is curious though, if the hand pieces are those supply constraint frame node, or is that more focused to the capital equipment? And then just a separate question.

Joseph Conway: In terms of the share repurchase program, the, you know, 8.7 million shares, is that kind of a target or, you know, for the, for a potential follow on or potential other share purchase program, which you target that similar level or it is, are you guys thinking kind of a higher level level level? I will start with your first question. Hand pieces is part of the system, and it's a capital equipment. Hand pieces is not disposable. Disposable is what you put on the hand piece in order to do the treatment or connect to the system like the body type, face type, or the quantum.

Speaker Change: I will start with your first question.

Speaker Change: Hand pieces are not disposable.

Moshe Mizrahy: So you can do the procedures. So hand pieces we felt to laser hand pieces, more fused hand piece, IPL hand piece, Lumeka, Form, body effects, mini effects, it's part of the capital equipment. It is not disposable. On your second question, we did a buyback of 8.37 million shares, which is exactly 10% of the total outstanding shares that we had. Why 10%? Because of some tax issues. If we do more than 10%, we will have to pay according to the Israeli IRS, and we will have to pay dividend tax. They allow us to do, and hopefully they will allow us to continue, but we ask for a pre-ruling from the Israeli IRS, and they allow us to do 8.37 million shares, which is about 10% of the total shares.

Speaker Change: So you can do the procedures.

Speaker Change: On your second question, we did a buyback of 8.37 million shares.

Speaker Change: Why 10%? Because of some tax issues. If we do more than 10%, we'll have to pay, according to the Israeli IRS, we'll have to pay dividend tax.

Joseph Conway: And I mean, if we will decide in the future to continue with buyback, all the options are on the table right now. We will ask again, and hopefully it will be approved so we can do some more in addition to the 8.37 million shares. Okay, thank you for taking our questions.

Speaker Change: which is about 10% of the total shares.

Operator: At this time, there are no further questions in the question queue.

Moshe Mizrahy: So this concludes our question and answer session.

Moshe Mizrahy: I would like to turn the conference back over to Moshe Mizrahi, CEO of InMode, for any closing remarks. Thank you very much, Operator. Thank you, Mary. Thanks to all the employees of InMode in Israel, Europe, North America, Latin America, Asia, in all of our subsidiaries. Thanks to all the distributors in the 96 countries that we operate, thanks to the shareholders of InMode that are working with us for so many years. And if needed, even two shifts a day, in order to be able to supply everything. Very dedication, I would like to thank them specially.

Moshe Mizrahi: Thanks.

Speaker Change: So this concludes our question and answer session.

Speaker Change: I would like to turn the conference back over to Moshe Mizrahi, CEO of Inmode, for any closing remarks.

Moshe Mizrahi: OK, let's start with the disposables. I said that we see a drop in disposables in the U.S., but we have some increase in other countries. So we have some offsetting numbers on the total, which were totally less than the second quarter of 2023, but the main decline or the main drop came from the U.S. market. Now the reason for that can be, we believe it's macroeconomics. People are saving money because our treatment is not $500 or $300, like regular cosmetic treatment, hair removal, vascular lesions, etc. Doctors are charging for minimally invasive treatment; they charge in between, I would say, $3,000 to $7,000 per treatment, and therefore it seems relatively expensive to some people, and therefore I believe that drives the downtrend.

Moshe Mizrahi: In addition to that, just because, for example, the Morpheus was very, very popular and became a gold standard, we started seeing some Chinese copies on the market with the same name, with the same logo, with the same label on the back. They claim that this is made by InMod, or sometimes even with the same part number. We don't know how they got into the market, especially Europe and some in Asia, and now we see some in Latin America, and I'm sure that there are some in the United States as well, and doctors get confused, and they make mistakes like buying a $10,000 system instead of buying a $120,000 system from InMod, believing that it's doing the same, but finally, they realize that this is a fake.

Moshe Mizrahi: We try to fight it, and we do a lot of legal activity against those companies, trying to stop them from bringing them into their various territories, but it's just because of the success. Therefore, the Chinese said, okay, this is a good product, let's fake it, or let's try to develop something similar. Sometimes it looks the same; it's just a pure Chinese copy.

Moshe Mizrahi: Thank you very much, Operator. Thank you, Miri.

Jeffrey D. Johnson: Did I answer your question?

Jeffrey D. Johnson: Yeah, I mean, that raises about five other questions, which maybe we'll handle offline in the callback. But on the sequential increase in placements, that was the question I asked. And again, I know 2Q tends to be seasonally stronger than 1Q; I get that. But the pattern, the increase... Jim, I didn't... Yeah, the sequential increase in the number of units you placed in the second quarter was higher than the first quarter. I don't want to overread that and say, oh, that means the market's getting better.

Moshe Mizrahi: Thanks to all the employees of Inmode in Israel, Europe , North America, Latin America, Asia, in all of our subsidiaries. Thanks to all the distributors in the 96 countries that we operate.

Jeffrey D. Johnson: But that sequential increase of units placed in 2Q did go up; it did follow a somewhat normal pattern. My question is just, does that tell us that we're in kind of a little bit better place than we were maybe a quarter ago? Or is that too optimistic of a reading? Thank you.

Moshe Mizrahi: The system sometimes, when a doctor orders Optimus Max, and the deal is closed and financed, and we don't have Optimus Max, we send them an Optimus, a regular one, it's not the same system, but you can start working with an Optimus, and once Optimus Max is available, we replace that. And therefore, it creates some confusion about the total system delivered. I would suggest looking at the numbers of U.S. dollars and not on the total. By the end of the year, everything will be balanced.

Operator: Again, if you do have a question, please press star and then 1 to enter the queue. The next question comes from Joseph Conway with Needham and Company. Please go ahead.

Joseph Scott Conway: Hey guys, hope your day is going well. Maybe just one question on the option... You had mentioned that this was the most complicated device you had manufactured to date.

Joseph Scott Conway: I was just kind of curious about your thoughts. (inaudible]

Joseph Scott Conway: And then I guess two more. I'll just ask them all together.

Moshe Mizrahi: I will start with your first question. Disposable is what you put on the handpiece in order to do the treatment or connect to the system like the body type, face type, or the quantum so you can do the procedures. So handpieces refer to laser handpieces, Morpheus handpiece, IPL handpiece, Lumeca, Forma, body effects, mini effects, it's part of the capital equipment; it is not disposable.

Moshe Mizrahy: And we will see you all in the next quarter. Thank you very much.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: So this concludes our question and answer session. I would like to turn the conference back over to Moshe Mizrahi, CEO of Inmode, for any closing remarks.

Moshe Mizrahi: Thank you very much, operator. Thank you, Miri.

Moshe Mizrahi: Thanks to all the employees of Inmode in Israel, Europe, North America, Latin America, Asia, and at all of our subsidiaries. Thanks to all the distributors in the 96 countries that we operate in. Thanks to the shareholders of Inmode that have worked with us for so many years. Special thanks to the Israeli team, as I said before, that, you know, work in spite of the war that is now escalating, especially in the north of Israel where we are located, continue to come to work every day, and, if needed, even two shifts a day in order to be able to supply everything. Very dedication. I would like to thank them especially, and we'll see you all in the next quarter. Thank you very much.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: You may now disconnect.

Moshe Mizrahi: Afrikan